NATIONAL BANK OF INDIANAPOLIS CORP
The Corporation. The National Bank of Indianapolis Corporation (the "Corporation") was formed as an Indiana corporation on January 29, 1993, for the purpose of forming a banking institution in the Indianapolis, Indiana metropolitan area and holding all of the shares of common stock of such banking institution. The Corporation formed a national banking association named "The National Bank of Indianapolis" (the "Bank") as a wholly-owned subsidiary.           The Bank was officially chartered by the OCC on December 8, 1993 and opened for business to the public on December 21, 1993. The Bank's deposits are insured by the FDIC. The Bank currently conducts its business through nine offices, including its downtown headquarters located at 107 North Pennsylvania Street in Indianapolis, and its neighborhood bank offices located at 84th Street and Ditch Road in northwestern Marion County; 82nd Street and Bash Road in northeastern Marion County; the Chamber of Commerce Building and AUL Office Complex in downtown Indianapolis; 49th Street and North Pennsylvania Street in northern Marion County; Keystone Avenue and East Carmel Drive in Hamilton County; 106th Street and Michigan Road in Hamilton County; and Smith Valley Road and S.R. 135 in Johnson County.           The Bank provides a full range of deposit, credit, and money management services to its targeted market, which is small to medium size businesses, affluent executive and professional individuals, and not-for-profit organizations and has full trust powers.           Management initially sought to position the Bank to capitalize on the customer disruption, dissatisfaction, and turn-over which it believed has resulted from the acquisition of the three largest commercial banks located in Indianapolis by out-of-state holding companies. Management is now focused on serving the local markets with an organization which is not owned by an out-of-state company whose decisions are made locally. On December 31, 2005, the Corporation had consolidated total assets of $928 million and total deposits of $774 million.           Management believes that the key ingredients in the growth of the Bank have been a well-executed business plan, an experienced Board of Directors and management team and a seasoned group of bank employees. The basic strategy of the Bank continues to emphasize the delivery of highly personalized services to the target client base with an emphasis on quick response and financial expertise.           Business Plan Overview. The business plan of the Bank is based on being a strong, locally owned bank providing superior service to a defined group of customers, which are primarily corporations with annual sales under $50 million, executives, professionals, and not-for-profit organizations. The Bank provides highly personalized banking services with an emphasis on knowledge of the particular financial needs and objectives of its clients and quick response to customer requests. Because the management of the Bank is located in Indianapolis, all credit and related decisions are made locally, thereby facilitating prompt response. The Bank emphasizes both highly personalized service at the customer's convenience and non-traditional delivery services that do not require customers to frequent the Bank. This personal contact has become a trademark of the Bank and a key means of differentiating the Bank from other financial service providers.                                         1            The Bank offers a broad range of deposit services typically available from most banks and savings associations, including interest and non-interest bearing checking accounts, savings and other kinds of deposits of various types (ranging from daily money market accounts to longer term certificates of deposit). The Bank also offers a full range of credit services, including commercial loans (such as lines of credit, term loans, refinancings, etc.), personal lines of credit, direct installment consumer loans, credit card loans, residential mortgage loans, construction loans, and letters of credit. In addition, the Bank offers full Wealth Management services.           The Bank's growth in deposits is attributable in part to the efforts of its staff who provide personal banking services to the Bank's customers. In addition, the Bank has emphasized paying competitive interest rates on deposit products. Finally, the Bank has offered savings and certificate of deposit products with competitive rates to larger depositors in an effort to minimize the operating costs of obtaining these deposits. Lending strategies focus primarily on commercial loans to small and medium size businesses as well as personal loans to executives and professionals.           The residential mortgage lending area of the Bank offers conforming, jumbo, portfolio, and CRA mortgage products. The Bank utilizes secondary market channels it has developed for sale of those mortgage products described above. Secondary market channels include FNMA, as well as private investors identified through wholesale entities. Consumer lending is directed to executive and professional clients through residential mortgages, credit cards, and personal lines of credit to include home equity loans.           The Market. The Bank derives a substantial proportion of its business from the Indianapolis Metropolitan Statistical Area ("MSA"), Indiana area. Indianapolis has been ranked by a number of national publications as a "top" Midwestern city.           Competition. The Bank's service area is highly competitive. There are numerous financial institutions operating in the Indianapolis MSA marketplace, which provide strong competition to the Bank. In addition to the challenge of attracting and retaining customers for traditional banking services offered by commercial bank competitors, significant competition also comes from savings and loans associations, credit unions, finance companies, insurance companies, mortgage companies, securities and brokerage firms, money market mutual funds, loan production offices, and other providers of financial services in the area. These competitors, with focused products targeted at highly profitable customer segments, compete across geographic boundaries and provide customers increasing access to meaningful alternatives to banking services in nearly all significant products. The increasingly competitive environment is a result primarily of changes in regulations, changes in technology, product delivery systems and the accelerating pace of consolidation among financial service providers. These competitive trends are likely to continue. The Bank's ability to maintain its history of strong financial performance will depend in part on the Bank's ability over time to expand its scope of available financial services as needed to meet the needs and demands of its customers. The Bank competes in this marketplace primarily on the basis of highly personalized service, responsive decision making, and competitive pricing.                                           2            Employees. The Corporation and the Bank has 211 employees, of which 201 are full-time equivalent employees. The Bank has employed persons with substantial experience in the Indianapolis MSA banking market. The average banking experience level for all Bank employees is in excess of 13 years.           Lending Activity. The Bank's lending strategy emphasizes a high quality, well-diversified loan portfolio. The Bank's principal lending categories are commercial, commercial mortgage, residential mortgage, private banking/personal, and home equity. Commercial loans include loans for working capital, machinery and equipment purchases, premises and equipment acquisitions and other corporate needs. Residential mortgage lending includes loans on first mortgage residential properties. Private banking loans include secured and unsecured personal lines of credit as well as home equity loans.           Commercial loans typically entail a thorough analysis of the borrower, its industry, current and projected economic conditions and other factors. Credit analysis involves collateral, the type of loan, loan maturity, terms and conditions, and various loan to value ratios as they relate to loan policy. The Bank typically requires commercial borrowers to have annual financial statements prepared by independent accountants and may require such financial statements to be audited or reviewed by accountants. The Bank generally requires appraisals or evaluations in connection with loans secured by real estate. Such appraisals or evaluations are usually obtained prior to the time funds are advanced. The Bank also often requires personal guarantees from principals involved with closely-held corporate borrowers.           The Bank requires loan applications and personal financial statements from its personal borrowers on loans that the Bank originates. Loan officers complete a debt to income analysis that should meet established standards of lending policy.           The Bank maintains a comprehensive loan policy that establishes guidelines with respect to all categories of lending. In addition, loan policy sets forth lending authority for each loan officer. The Loan Committee of the Bank reviews all loans in excess of $350,000. Any loan in excess of a lending officer's lending authority, up to $1,500,000, must receive the approval of the Chief Executive Officer ("CEO"), Chief Lending Officer ("CLO"), or Senior Vice President - Corporate Banking ("SVP"). Loans in excess of $1,500,000 but less than $5,000,000 must be approved by the Loan Committee prior to the Bank making such loan. The Board of Directors Loan Policy Committee is not required to approve loans unless they are above $5,000,000 or are loans to directors or executive officers. All loans are assigned a numerical rating based on creditworthiness and are monitored for improvement or deterioration.           Loans are made primarily in the Bank's designated market area.                                            3   Regulation And Supervision           Both the Corporation and the Bank operate in highly regulated environments and are subject to supervision and regulation by several governmental regulatory agencies, including the Board of Governors of the Federal Reserve System (the "Federal Reserve"), the Office of the Comptroller of the Currency (the "OCC"), and the Federal Deposit Insurance Corporation (the "FDIC"). The laws and regulations established by these agencies are generally intended to protect depositors, not shareholders. Changes in applicable laws, regulations, governmental policies, income tax laws and accounting principles may have a material effect on our business and prospects. The following summary is qualified by reference to the statutory and regulatory provisions discussed.           The Corporation           The Bank Holding Company Act. Because the Corporation owns all of the outstanding capital stock of the Bank, it is registered as a bank holding company under the federal Bank Holding Company Act of 1956 and is subject to periodic examination by the Federal Reserve and required to file periodic reports of its operations and any additional information that the Federal Reserve may require.           Investments, Control, and Activities. With some limited exceptions, the Bank Holding Company Act requires every bank holding company to obtain the prior approval of the Federal Reserve before acquiring another bank holding company or acquiring more than five percent of the voting shares of a bank (unless it already owns or controls the majority of such shares).           Bank holding companies are prohibited, with certain limited exceptions, from engaging in activities other than those of banking or of managing or controlling banks. They are also prohibited from acquiring or retaining direct or indirect ownership or control of voting shares or assets of any company which is not a bank or bank holding company, other than subsidiary companies furnishing services to or performing services for their subsidiaries, and other subsidiaries engaged in activities which the Federal Reserve Board determines to be so closely related to banking or managing or controlling banks as to be incidental to these operations. The Bank Holding Company Act does not place territorial restrictions on the activities of such nonbanking-related activities.           Bank holding companies which meet certain management, capital, and CRA standards may elect to become a financial holding company, which would allow them to engage in a substantially broader range of nonbanking activities than is permitted for a bank holding company, including insurance underwriting and making merchant banking investments in commercial and financial companies.           The Corporation does not currently plan to engage in any activity other than owning the stock of the Bank.                                          4            Capital Adequacy Guidelines for Bank Holding Companies. The Federal Reserve, as the regulatory authority for bank holding companies, has adopted capital adequacy guidelines for bank holding companies. Bank holding companies with assets in excess of $150 million must comply with the Federal Reserve's risk-based capital guidelines which require a minimum ratio of total capital to risk-weighted assets (including certain off-balance sheet activities such as standby letters of credit) of 8%. At least half of the total required capital must be "Tier 1 capital," consisting principally of common stockholders' equity, noncumulative perpetual preferred stock, a limited amount of cumulative perpetual preferred stock and minority interest in the equity accounts of consolidated subsidiaries, less certain goodwill items. The remainder ("Tier 2 capital") may consist of a limited amount of subordinated debt and intermediate-term preferred stock, certain hybrid capital instruments and other debt securities, cumulative perpetual preferred stock, and a limited amount of the general loan loss allowance. In addition to the risk-based capital guidelines, the Federal Reserve has adopted a Tier 1 (leverage) capital ratio under which the bank holding company must maintain a minimum level of Tier 1 capital to average total consolidated assets of 3% in the case of bank holding companies which have the highest regulatory examination ratings and are not contemplating significant growth or expansion. All other bank holding companies are expected to maintain a ratio of at least 1% to 2% above the stated minimum.           Certain regulatory capital ratios for the Corporation as of December 31, 2005 are shown below:                Tier 1 Capital to Risk-Weighted Assets                    9.3%               Total Risk Based Capital to Risk-Weighted Assets         11.2%               Tier 1 Leverage Ratio                                     6.8%           Dividends. The Federal Reserve's policy is that a bank holding company experiencing earnings weakness should not pay cash dividends exceeding its net income or which could only be funded in ways that weaken the bank holding company's financial health, such as by borrowing. Additionally, the Federal Reserve possesses enforcement powers over bank holding companies and their non-bank subsidiaries to prevent or remedy actions that represent unsafe or unsound practices or violations of applicable statutes and regulations. Among these powers is the ability to proscribe the payment of dividends by banks and bank holding companies.           Source of Strength. In accordance with Federal Reserve Board policy, the Corporation is expected to act as a source of financial strength to the Bank and to commit resources to support the Bank in circumstances in which the Corporation might not otherwise do so.                                          5            The Bank           General Regulatory Supervision. The Bank is a national bank organized under the laws of the United States of America and is subject to the supervision of the OCC, whose examiners conduct periodic examinations of national banks. The Bank must undergo regular on-site examinations by the OCC and must submit quarterly and annual reports to the OCC concerning its activities and financial condition.          The deposits of the Bank are insured by the Bank Insurance Fund ("BIF") administered by the FDIC and are subject to the FDIC's rules and regulations respecting the insurance of deposits. See "--Deposit Insurance."           Lending Limits. Under federal law, the total loans and extensions of credit by a national bank to a borrower outstanding at one time and not fully secured may not exceed 15 percent of the bank's capital and unimpaired surplus. In addition, the total amount of outstanding loans and extensions of credit to any borrower outstanding at one time and fully secured by readily marketable collateral may not exceed ten percent of the unimpaired capital and unimpaired surplus of the bank (this limitation is separate from and in addition to the above limitation). If a loan is secured by United States obligations, such as treasury bills, it is not subject to the bank's legal lending limit.           Deposit Insurance. Deposits in the Bank are insured by the FDIC up to a maximum amount, which is generally $100,000 per depositor subject to aggregation rules. The Bank is subject to deposit insurance assessment by the FDIC pursuant to its regulations establishing a risk-related deposit insurance assessment system, based upon the institution's capital levels and risk profile. The Bank is also subject to assessment for the Financial Corporation ("FICO") to service the interest on its bond obligations. The amount assessed on individual institutions, including the Bank, by FICO is in addition to the amount paid for deposit insurance according to the risk-related assessment rate schedule. Increases in deposit insurance premiums or changes in risk classification will increase the Bank's cost of funds, and it may not be able to pass these costs on to its customers. The Bank is not currently paying deposit insurance premiums to the FDIC, but was required to pay $24,315 for the FICO assessment for the first quarter in 2006.           Transactions with Affiliates and Insiders. The Bank is subject to limitations on the amount of loans or extensions of credit to, or investments in, or certain other transactions with, affiliates and insiders on the amount of advances to third parties collateralized by the securities or obligations of affiliates. Furthermore, within the foregoing limitations as to amount, each covered transaction must meet specified collateral requirements. Compliance is also required with certain provisions designed to avoid the taking of low quality assets. The Bank is also prohibited from engaging in certain transactions with certain affiliates and insiders unless the transactions are on terms substantially the same, or at least as favorable to such institution or its subsidiaries, as those prevailing at the time for comparable transactions with nonaffiliated companies.                                          6            Extensions of credit by the Bank to its executive officers, directors, certain principal shareholders, and their related interests must:           o        be made on substantially the same terms, including interest                   rates and collateral, as those prevailing at the time for                   comparable transactions with third parties; and           o        not involve more than the normal risk of repayment or present                   other unfavorable features.           Dividends. Under federal law, the Bank may pay dividends from its undivided profits in an amount declared by its Board of Directors, subject to prior approval of the OCC if the proposed dividend, when added to all prior dividends declared during the current calendar year, would be greater than the current year's net income and retained earnings for the previous two calendar years.          Federal law generally prohibits the Bank from paying a dividend to the Corporation if the depository institution would thereafter be undercapitalized. The FDIC may prevent an insured bank from paying dividends if the bank is in default of payment of any assessment due to the FDIC. In addition, payment of dividends by a bank may be prevented by the applicable federal regulatory authority if such payment is determined, by reason of the financial condition of such bank, to be an unsafe and unsound banking practice. In addition, the Bank is subject to certain restrictions imposed by the Federal Reserve on extensions of credit to the Corporation, on investments in the stock or other securities of the Corporation, and in taking such stock or securities as collateral for loans.           Branching and Acquisitions. Under federal and Indiana law, the Bank may establish an additional banking location anywhere in Indiana. Federal law also allows bank holding companies to acquire banks anywhere in the United States subject to certain state restrictions, and permits an insured bank to merge with an insured bank in another state without regard to whether such merger is prohibited by state law. Additionally, an out-of-state bank may acquire the branches of an insured bank in another state without acquiring the entire bank if the law of the state where the branch is located permits such an acquisition. Bank holding companies may merge existing bank subsidiaries located in different states into one bank.           Community Reinvestment Act. The Community Reinvestment Act requires that the OCC evaluate the records of the Bank in meeting the credit needs of its local community, including low and moderate income neighborhoods. These factors are also considered in evaluating mergers, acquisitions, and applications to open a branch or facility. Failure to adequately meet these criteria could result in the imposition of additional requirements and limitations on the Bank.                                          7            Capital Regulations. The OCC has adopted risk-based capital ratio guidelines to which the Bank is subject. The guidelines establish a systematic analytical framework that makes regulatory capital requirements more sensitive to differences in risk profiles among banking organizations. Risk-based capital ratios are determined by allocating assets and specified off-balance sheet commitments to four risk weighted categories, with higher levels of capital being required for the categories perceived as representing greater risk.           These guidelines divide a bank's capital into two tiers. The first tier (Tier 1) includes common equity, certain non-cumulative perpetual preferred stock (excluding auction rate issues) and minority interests in equity accounts of consolidated subsidiaries, less goodwill and certain other intangible assets (except mortgage servicing rights and purchased credit card relationships, subject to certain limitations). Supplementary (Tier 2) capital includes, among other items, cumulative perpetual and long-term limited-life preferred stock, mandatory convertible securities, certain hybrid capital instruments, term subordinated debt and the allowance for loan and lease losses, subject to certain limitations, less required deductions. Banks are required to maintain a total risk-based capital ratio of 8%, of which 4% must be Tier 1 capital. The OCC may, however, set higher capital requirements when a bank's particular circumstances warrant. Banks experiencing or anticipating significant growth are expected to maintain capital ratios, including tangible capital positions, well above the minimum levels.           In addition, the OCC established guidelines prescribing a minimum Tier 1 leverage ratio (Tier 1 capital to adjusted total assets as specified in the guidelines). These guidelines provide for a minimum Tier 1 leverage ratio of 3% for banks that meet certain specified criteria, including that they have the highest regulatory rating and are not experiencing or anticipating significant growth. All other banks are required to maintain a Tier 1 leverage ratio of 3% plus an additional cushion of at least 100 to 200 basis points.           Certain regulatory capital ratios under the OCC's risk-based capital guidelines for the Bank at December 31, 2005 are shown below:            Tier 1 Capital to Risk-Weighted Assets......................  9.0%           Total Risk-Based Capital to Risk-Weighted Assets............ 10.9%           Tier 1 Leverage Ratio.......................................  6.8%            The federal bank regulators, including the OCC, also have issued a joint policy statement to provide guidance on sound practices for managing interest rate risk. The statement sets forth the factors the federal regulatory examiners will use to determine the adequacy of a bank's capital for interest rate risk. These qualitative factors include the adequacy and effectiveness of the bank's internal interest rate risk management process and the level of interest rate exposure. Other qualitative factors that will be considered include the size of the bank, the nature and complexity of its activities, the adequacy of its capital and earnings in relation to the bank's overall risk profile, and its earning exposure to interest rate movements. The interagency supervisory policy statement describes the responsibilities of a bank's board of directors in implementing a risk management process and the requirements of the bank's senior management in ensuring the effective                                          8   management of interest rate risk. Further, the statement specifies the elements that a risk management process must contain.           The OCC has also issued final regulations further revising its risk-based capital standards to include a supervisory framework for measuring market risk. The effect of these regulations is that any bank holding company or bank which has significant exposure to market risk must measure such risk using its own internal model, subject to the requirements contained in the regulations, and must maintain adequate capital to support that exposure. These regulations apply to any bank holding company or bank whose trading activity equals 10% or more of its total assets, or whose trading activity equals $1 billion or more. Examiners may require a bank holding company or bank that does not meet the applicability criteria to comply with the capital requirements if necessary for safety and soundness purposes. These regulations contain supplemental rules to determine qualifying and excess capital, calculate risk-weighted assets, calculate market risk equivalent assets and calculate risk-based capital ratios adjusted for market risk.           The Bank is also subject to the "prompt corrective action" regulations, which implement a capital-based regulatory scheme designed to promote early intervention for troubled banks. This framework contains five categories of compliance with regulatory capital requirements, including "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized," and "critically undercapitalized." As of December 31, 2005, the Bank was qualified as "well capitalized." It should be noted that a bank's capital category is determined solely for the purpose of applying the "prompt corrective action" regulations and that the capital category may not constitute an accurate representation of the bank's overall financial condition or prospects. The degree of regulatory scrutiny of a financial institution increases, and the permissible activities of the institution decrease, as it moves downward through the capital categories. Bank holding companies controlling financial institutions can be required to boost the institutions' capital and to partially guarantee the institutions' performance.           Check Clearing for the 21st Century Act. The Federal Reserve adopted final amendments to Regulation CC and its commentary to implement the Check Clearing for the 21st Century Act (the "Check 21 Act"). To facilitate check truncation and electronic check exchange, the Check 21 Act authorizes a new negotiable instrument called a "substitute check" and provides that a properly prepared substitute check is the legal equivalent of the original check for all purposes. A substitute check is a paper reproduction of the original check that can be processed just like the original check. The Check 21 Act does not require any bank to create substitute checks or to accept checks electronically. The Federal Reserve's amendments: (i) set forth the requirements of the Check 21 Act that apply to all banks, including those that choose not to create substitute checks; (ii) provide a model disclosure and model notices relating to substitute checks; and (iii) set forth bank endorsement and identification requirements for substitute checks. The amendments also clarify some existing provisions of the rule and commentary.                                           9            USA Patriot Act. The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the "USA Patriot Act") is intended to strengthen the ability of U. S. Law Enforcement to combat terrorism on a variety of fronts. The potential impact of the USA Patriot Act on financial institutions is significant and wide-ranging. The USA Patriot Act contains sweeping anti-money laundering and financial transparency laws and requires financial institutions to implement additional policies and procedures with respect to, or additional measures designed to address, any or all of the following matters, among others: money laundering and currency crimes, customer identification verification, cooperation among financial institutions, suspicious activities and currency transaction reporting.           Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") represents a comprehensive revision of laws affecting corporate governance, accounting obligations and corporate reporting. Among other requirements, the Sarbanes-Oxley Act established: (i) new requirements for audit committees of public companies, including independence, expertise, and responsibilities; (ii) additional responsibilities regarding financial statements for the chief executive officers and chief financial officers of reporting companies; (iii) new standards for auditors and regulation of audits; (iv) increased disclosure and reporting obligations for reporting companies regarding various matters relating to corporate governance, and (v) new and increased civil and criminal penalties for violation of the securities laws.           Other Regulations.           Federal law extensively regulates other various aspects of the banking business such as reserve requirements. Current federal law also requires banks, among other things to make deposited funds available within specified time periods. In addition, with certain exceptions, a bank and a subsidiary may not extend credit, lease or sell property or furnish any services or fix or vary the consideration for the foregoing on the condition that (i) the customer must obtain or provide some additional credit, property or services from, or to, any of them, or (ii) the customer may not obtain some other credit, property or service from a competitor, except to the extent reasonable conditions are imposed to assure the soundness of credit extended.           An insured bank subsidiary may act as an agent for an affiliated bank or thrift in offering limited banking services (receive deposits, renew time deposits, close loans, service loans and receive payments on loan obligations) both within the same state and across state lines.           Interest and other charges collected or contracted by the Bank are subject to state usury laws and federal laws concerning interest rates. The Bank's loan operations are also subject to federal and state laws applicable to credit transactions, such as the:           o        Truth-In-Lending Act and state consumer protection laws                   governing disclosures of credit terms and prohibiting certain                   practices with regard to consumer borrowers;                                          10            o        Home Mortgage Disclosure Act of 1975, requiring financial                   institutions to provide information to enable the public and                   public officials to determine whether a financial institution                   is fulfilling its obligation to help meet the housing needs of                   the community it serves;           o        Equal Credit Opportunity Act and other fair lending laws,                   prohibiting discrimination on the basis of race, creed or                   other prohibited factors in extending credit;           o        Fair Credit Reporting Act of 1978 and Fair and Accurate Credit                   Transactions Act of 2003, governing the use and provision of                   information to credit reporting agencies;           o        Fair Debt Collection Practices Act, governing the manner in                   which consumer debts may be collected by collection agencies;                   and rules and regulations of the various federal agencies                   charged with the responsibility of implementing such federal                   laws.           The deposit operations of the Bank also are subject to the:           o        Customer Information Security Guidelines. The federal bank                   regulatory agencies have adopted final guidelines (the                   "Guidelines") for safeguarding confidential customer                   information. The Guidelines require each financial                   institution, under the supervision and ongoing oversight of                   its Board of Directors, to create a comprehensive written                   information security program designed to ensure the security                   and confidentiality of customer information, protect against                   any anticipated threats or hazards to the security or                   integrity of such information; protect against unauthorized                   access to or use of such information that could result in                   substantial harm or inconvenience to any customer; and                   implement response programs for security breaches.           o        Electronic Funds Transfer Act, and Regulation E. The                   Electronic Funds Transfer Act, which is implemented by                   Regulation E, governs automatic deposits to and withdrawals                   from deposit accounts and customers' rights and liabilities                   arising from the use of automated teller machines and other                   electronic banking service.           o        Gramm-Leach-Bliley Act, Fair and Accurate Credit Transactions                   Act. The Gramm-Leach-Bliley Act and the Fair and Accurate                   Credit Transactions Act and the implementing regulations                   govern consumer financial privacy, provide disclosure                   requirements and restrict the sharing of certain consumer                   financial information with other parties.           The federal banking agencies have established guidelines which prescribe standards for depository institutions relating to internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, asset quality, earnings, compensation fees and benefits, and management compensation. The agencies may require an institution which fails to meet the standards set forth in the guidelines to submit a compliance plan. Failure to submit an acceptable plan or adhere to an accepted plan may be grounds for further enforcement action.           Enforcement Powers. Federal regulatory agencies may assess civil and criminal penalties against depository institutions and certain "institution-affiliated parties," including management, employees, and agents of a financial institution, as well as independent contractors and consultants such as attorneys and accountants and others who                                          11   participate in the conduct of the financial institution's affairs. In addition, regulators may commence enforcement actions against institutions and institution-affiliated parties. Possible enforcement actions include the termination of deposit insurance. Furthermore, regulators may issue cease-and-desist orders to, among other things, require affirmative action to correct any harm resulting from a violation or practice, including restitution, reimbursement, indemnifications or guarantees against loss. A financial institution may also be ordered to restrict its growth, dispose of certain assets, rescind agreements or contracts, or take other actions as determined by the regulator to be appropriate.           Effect of Governmental Monetary Policies. The Corporation's earnings are affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. The Federal Reserve Bank's monetary policies have had, and are likely to continue to have, an important impact on the operating results of commercial banks through its power to implement national monetary policy in order, among other things, to curb inflation or combat a recession. The monetary policies of the Federal Reserve Board have major effects upon the levels of bank loans, investments and deposits through its open market operations in United States government securities and through its regulation of the discount rate on borrowings of member banks and the reserve requirements against member bank deposits. It is not possible to predict the nature or impact of future changes in monetary and fiscal policies.  Available Information - ---------------------           The Corporation files annual reports on Form 10-K, quarterly reports on Form 10-Q, proxy statements and other information with the Securities and Exchange Commission. Such reports, proxy statements and other information can be read and copied at the public reference facilities maintained by the Securities and Exchange Commission at the Public Reference Room, 100 F Street, NE, Washington, D.C. 20549. Information regarding the operation of the Public Reference Room may be obtained by calling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission maintains a web site (http://www.sec.gov) that contains reports, proxy and information. The Corporation's filings are also accessible at no cost on the Corporation's website at www.nbofi.com.                                                12
The Corporation Is Subject To Interest Rate Risk - ------------------------------------------------           Interest and fees on loans and securities, net of interest paid on deposits and borrowings, are a large part of the Corporation's net income. Interest rates are key drivers of the Corporation's net interest margin and subject to many factors beyond the control of management. As interest rates change, net interest income is affected. Rapid increases in interest rates in the future could result in interest expense increasing faster than interest income because of mismatches in financial instrument maturities. Further, substantially higher interest rates generally reduce loan demand and may result in slower loan growth. Decreases or increases in interest rates could have a negative effect on the spreads between the interest rates earned on assets and the rates of interest paid on liabilities, and therefore decrease net interest income.  The Corporation Is Subject To Lending Risk - ------------------------------------------           There are inherent risks associated with the Corporation's lending activities. These risks include, among other things, the impact of changes in interest rates and changes in the economic conditions in the markets where the Corporation operates as well as those across Indiana and the United States. Increases in interest rates and/or weakening economic conditions could adversely impact the ability of borrowers to repay outstanding loans or the value of the collateral securing these loans. The Corporation is also subject to various laws and regulations that affect its lending activities. Failure to comply with applicable laws and regulations could subject the Corporation to regulatory enforcement action that could result in the assessment of significant civil money penalties against the Corporation.  The Corporation's Allowance for  Loan Losses May Be Insufficient - ----------------------------------------------------------------           The Corporation maintains an allowance for possible loan losses, which is a reserve established through a provision for possible loan losses charged to expense, that represents management's best estimate of probable losses that have been incurred within the existing portfolio of loans. The level of the allowance reflects management's continuing evaluation of industry concentrations; specific credit risks; loan loss experience; current loan portfolio quality; present economic, political and regulatory conditions and unidentified losses inherent in the current loan portfolio. The determination of the appropriate level of the allowance for possible loan losses inherently involves a high degree of subjectivity and requires the Corporation to make significant estimates of current credit risks and future trends, all of which may undergo material changes. Changes in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of the Corporation's control, may require an increase in the allowance for possible loan losses. In addition, bank regulatory agencies periodically review the Corporation's allowance for loan losses and may require an increase in the provision for possible loan losses or the recognition of further loan charge-offs, based on judgments different than those of management. In addition, if charge-offs in future periods exceed the allowance for possible loan losses, the Corporation will need additional provisions to increase the allowance for possible loan losses. Any increases in the allowance for possible loan losses will result in a decrease in net income and, possibly, capital, and may have a material adverse effect on the Corporation's financial condition and results of operations.                                          13   The Corporation Operates In A Highly Competitive Industry And Market Area - -------------------------------------------------------------------------           The Corporation faces substantial competition in all areas of its operations from a variety of different competitors, many of which are larger and may have more financial resources. Such competitors include banks and many other types of financial institutions, including, without limitation, savings and loans, credit unions, finance companies, brokerage firms, insurance companies, factoring companies and other financial intermediaries. The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation. Banks, securities firms and insurance companies can merge under the umbrella of a financial holding company, which can offer virtually any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting) and merchant banking. Also, technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. Many of the Corporation's competitors have fewer regulatory constraints and may have lower cost structures. Additionally, due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing for those products and services than the Corporation can.  The Corporation's ability to compete successfully depends on a number of factors, including, among other things:           o        The ability to develop, maintain and build upon long-term                   customer relationships based on top quality service, and safe,                   sound assets.           o        The ability to expand the Corporation's market position.           o        The scope, relevance and pricing of products and services                   offered to meet customer needs and demands.           o        The rate at which the Corporation introduces new products and                   services relative to its competitors.           o        Customer satisfaction with the Corporation's level of service.           o        Industry and general economic trends.  Failure to perform in any of these areas could significantly weaken the Corporation's competitive position, which could adversely affect the Corporation's growth and profitability, which, in turn, could have a material adverse effect on the Corporation's financial condition and results of operations.                                          14   The Corporation Is Subject To Extensive Government Regulation And Supervision - -----------------------------------------------------------------------------           The Corporation, primarily through the Bank, is subject to extensive federal regulation and supervision. Banking regulations are primarily intended to protect depositors' funds, federal deposit insurance funds and the banking system as a whole, not shareholders. These regulations affect the Corporation's lending practices, capital structure, investment practices, and growth, among other things. Congress and federal regulatory agencies continually review banking laws, regulations and policies for possible changes. Changes to statutes, regulations or regulatory policies, including changes in interpretation or implementation of statutes, regulations or policies, could affect the Corporation in substantial and unpredictable ways. Such changes could subject the Corporation to additional costs, limit the types of financial services and products the Corporation may offer and/or increase the ability of non-banks to offer competing financial services and products, among other things. Failure to comply with laws, regulations or policies could result in sanctions by regulatory agencies, civil money penalties and/or reputation damage, which could have a material adverse effect on the Corporation's business, financial condition and results of operations. While the Corporation has policies and procedures designed to prevent any such violations, there can be no assurance that such violations will not occur.  The Corporation's Controls And Procedures May Fail Or Be Circumvented - ---------------------------------------------------------------------           Management regularly reviews and updates the Corporation's internal controls, disclosure controls and procedures, and corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any failure or circumvention of the Corporation's controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on the Corporation's business, results of operations and financial condition.  The Corporation Is Dependent On Certain Key Management And Staff - ----------------------------------------------------------------           The Corporation relies on key personnel to manage and operate its business. The loss of key staff may adversely affect our ability to maintain and manage these portfolios effectively, which could negatively affect our revenues. In addition, loss of key personnel could result in increased recruiting and hiring expenses, which could cause a decrease in the Corporation's net income.  The Corporation's Information Systems May Experience An Interruption Or Breach - ------------------------------------------------------------------------------ In Security - -----------           The Corporation relies heavily on communications and information systems to conduct its business. Any failure, interruption or breach in security of these systems could result in failures or disruptions in the Corporation's customer relationship management, general ledger, deposit, loan and other systems. While the Corporation has policies and procedures designed to prevent or limit the effect of the failure, interruption or security breach of its information systems, there can be no assurance that any such failures, interruptions or security breaches will not occur or, if they do occur, that they will be adequately addressed. The occurrence of any failures, interruptions or security breaches of the Corporation's information systems could damage the Corporation's reputation, result in a loss of customer business, subject the                                          15   Corporation to additional regulatory scrutiny, or expose the Corporation to civil litigation and possible financial liability, any of which could have a material adverse effect on the Corporation's financial condition and results of operations.  The Corporation Has Opened New Offices - --------------------------------------           The Corporation has placed a strategic emphasis on expanding the Bank's banking office network. Executing this strategy carries risks of slower than anticipated growth in the new offices, which require a significant investment of both financial and personnel resources. Lower than expected loan and deposit growth in new offices can decrease anticipated revenues and net income generated by those offices, and opening new offices could result in more additional expenses than anticipated and divert resources from current core operations.  The Corporation Continually Encounters Technological Change - -----------------------------------------------------------           The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. The Corporation's future success depends, in part, upon its ability to address the needs of its customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in the Corporation's operations. Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse impact on the Corporation's business and, in turn, the Corporation's financial condition and results of operations.
Not Applicable.
The Bank owns the downtown office building which houses its main office as well as the Corporation's main office at 107 North Pennsylvania Street, Indianapolis, Indiana. The Bank and the Corporation utilize seven floors of this ten-story building, and lease the remainder to other business enterprises.           The Bank opened its first neighborhood bank office in February 1995 at 84th and Ditch Road. The Bank also opened a neighborhood bank office at 82nd and Bash Road on the northeast side of Indianapolis in December 1995. The Bank owns the land and the premises for both of these offices. In March 1996, the Bank opened an office in the Chamber of Commerce building at 320 N. Meridian Street in the downtown Indianapolis area. The Bank leases the premises at this banking office. In March 1998, the Bank opened an office at 4930 North Pennsylvania Street and leases the premises at this banking office. In June 1999, the Bank opened an office in the AUL Office Complex located at One American Square in the downtown Indianapolis area. The Bank leases the premises at this banking office. In September 2000, the Bank opened an office at 650 East Carmel Drive in Carmel. This office is located in Hamilton County which is north of                                          16   Indianapolis. The Bank leases the premises at this banking office. In October 2001, the Bank opened an office at 1675 West Smith Valley Road in Greenwood, which was leased. During 2005, the Bank upgraded the Greenwood Bank Office to a full-size, freestanding building located at 1689 West Smith Valley Road. The Bank owns the land and the premises for this office. In January 2005, the Bank opened an office located at 106th and Michigan Road and the Bank owns the premises for this office and leases the land on which the building is constructed.           The Bank has installed a remote ATM at the Indianapolis City Market, Parkwood Crossing, and Meridian Mark II Office Complex. These remote ATMs provide additional banking convenience for the customers of the Bank, and generate an additional source of fee income for the Bank.           The Corporation's properties are in good physical condition and are considered by the Corporation to be adequate to meet the needs of the Corporation and the Bank and the banking needs of the customers in the communities served.
Neither the Corporation nor the Bank are involved in any material pending legal proceedings at this time, other than routine litigation incidental to its business.
None.                                              17   PART II
Shares of the common stock of the Corporation are not traded on any national or regional exchange or in the over-the-counter market. Accordingly, there is no established market for the common stock. There are occasional trades as a result of private negotiations which do not always involve a broker or a dealer. The table below lists the high and low prices per share of which management is aware of during 2005 and 2004.   - -------------------------------------------------------------------------------                                               Price per Share - -------------------------------------------------------------------------------       Quarter                       High                          Low - -------------------------------------------------------------------------------                             2005           2004           2005           2004 - -------------------------------------------------------------------------------    First Quarter           $36.55         $33.00         $34.50         $31.25 - -------------------------------------------------------------------------------    Second Quarter          $37.69         $33.00         $36.49         $32.50 - -------------------------------------------------------------------------------    Third Quarter           $38.77         $33.75         $38.06         $32.75 - -------------------------------------------------------------------------------    Fourth Quarter          $42.00         $34.50         $38.77         $33.19 - -------------------------------------------------------------------------------   There may have been other trades at other prices of which management is not aware. Management does not have knowledge of the price paid in all transactions and has not verified the accuracy of those prices that have been reported to it. Because of the lack of an established market for the common shares of the Corporation, these prices would not necessarily reflect the prices which the shares would trade in an active in an active market.           The Corporation had 601 shareholders on record as of March 24, 2006.           The Corporation has not declared or paid any cash dividends on its shares of common stock since its organization in 1993. The Corporation and the Bank anticipate that earnings will be retained to finance the Bank's growth in the immediate future. Future dividend payments by the Corporation, if any, will be dependent upon dividends paid by the Bank, which are subject to regulatory limitations, earnings, general economic conditions, financial condition, capital requirements, and other factors as may be appropriate in determining dividend policy.           During the fourth quarter of 2005 the Corporation sold no shares of common stock to any director or employee of the Corporation pursuant to the exercise of stock options. As previously reported in the Corporation's prior filings with the Securities and Exchange Commission, the Corporation sold pursuant to the exercise by employees and directors of stock options an aggregate of 7,831 shares for $128,123 during the third quarter of 2005, an aggregate of 7,200 shares for $95,970 during the second quarter of 2005, and an aggregate of 4,500 shares for $63,000 during the first quarter of 2005. All of these shares were sold in private placements pursuant to Section 4(2) of the Securities Act of 1933.                                          18        In 2003, the Board of Directors of the Corporation authorized and announced a repurchase program entitled "Program One" and "Program Two". Program One covers employees and directors and was initially set to expire December 2005. During the fourth quarter of 2005, the Board authorized the extension of Program One until December 31, 2008 unless terminated earlier by the Board of Directors. The Board of Directors also authorized an addition $1,900,000 to be allocated to Program One. Under Program One, the Corporation may spend up to $7,400,000 in individually negotiated transactions to repurchase its shares from employees and directors who wish to sell their stock, of which $2,396,187 is still available. Program Two covers all other shareholders and was set to expire December 2005 unless terminated earlier by the Board of Directors. During the fourth quarter of 2005, the Board authorized the extension of Program Two until December 31, 2008 unless terminated earlier by the Board of Directors. The Board of Directors also authorized an additional $2,600,000 to be allocated to Program Two. Under Program Two, the Corporation may spend up to $10,200,000 in individually negotiated transactions to repurchase its shares from shareholders who wish to sell, of which $4,706,270 is available.           During 2005, the Corporation repurchased in the aggregate, 45,073 shares for an aggregate cost of $1,693,222. The following table provides information with respect to shares repurchased by the Corporation during fourth quarter 2005:    - ---------------------------------------------------------------------------------------------                                                                          Maximum Number (or                                                                          Approximate Dollar                                                      Total Number of     Value) of Shares               Total Number of                        Shares Purchased as that May Yet Be               Shares Purchased                       Part of Publicly    Purchased Under the               during 4th quarter Average Price Paid  Announced Plans or  Plans or Programs Period        2005               per Share           Programs** - ---------------------------------------------------------------------------------------------      10/01/05 - 10/31/05              8,600             $38.818              8,600            $2,695,302 - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- 11/01/05 - 11/30/05              1,360              $39.32              1,360            $2,641,827 - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- 12/01/05 - 12/31/05              1,000              $39.37              1,000            $7,102,457 - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- Total                 10,960                *               10,960 - ---------------------------------------------------------------------------------------------    *        The weighted average price per share for the period October 2005          through December 2005 was $38.93. **       All shares repurchased by the Corporation in 2005 were completed          pursuant to Program One and Program Two.                                            19
The following table sets forth certain consolidated information concerning the Corporation for the periods and dates indicated and should be read in connection with, and is qualified in its entirety by, the detailed information and consolidated financial statements and related notes set forth in the Corporation's audited financial statements included elsewhere herein (in 000's), except per share data.                                                                                     Year Ended December 31                                                               2005          2004          2003          2002          2001                                                            -----------------------------------------------------------------       Consolidated Operating Data:      Interest income                                       $  50,847     $  38,524     $  34,560     $  35,095     $  38,801      Interest expense                                         20,906        12,962        11,950        14,061        20,953           Net interest income                                 29,941        25,561        22,610        21,034        17,848      Provision for loan losses                                 2,085         1,320         1,200         1,500         1,440           Net interest income after provision for             loan losses                                       27,856        24,241        21,410        19,534        16,408      Losses on sale of securities, (net)                          --           (84)          (37)           --            --      Other operating income                                    7,461         7,272         7,422         6,985         5,742      Other operating expenses                                 25,176        22,613        20,418        18,962        16,640      Income before taxes                                      10,141         8,816         8,377         7,557         5,510      Federal and state income tax                              3,878         3,135         3,213         3,000         2,140      Net income                                                6,263         5,681         5,164         4,557         3,370  Consolidated Balance Sheet Data (at end of period):      Total assets                                          $ 928,462     $ 880,914     $ 812,599     $ 726,514     $ 670,697      Total investment securities (including stock in        Federal Banks)                                        157,471       151,799       125,247       117,485        39,049      Total loans                                             684,488       656,453       597,063       528,911       452,060      Allowance for loan losses                                (8,346)       (7,796)       (8,030)       (7,227)       (5,987)      Deposits                                                774,316       693,431       637,537       544,343       506,125      Shareholders' equity                                     51,583        46,544        42,678        41,247        28,470      Weighted basic average shares outstanding                 2,299         2,303         2,343         2,289         1,917  Per Share Data:      Diluted net income per common share (1)               $    2.62     $    2.37     $    2.08     $    1.88     $    1.55      Cash dividends declared                                       0             0             0             0             0      Book value (2)                                            22.11         19.81         18.14         16.89         14.48  Other Statistics and Operating Data:      Return on average assets                                    0.7%          0.7%          0.7%          0.7%          0.5%      Return on average equity                                   12.8%         12.8%         12.1%         12.2%         12.7%      Net interest margin (3)                                     3.3%          3.1%          3.1%          3.2%          3.0%      Average loans to average deposits                          85.0%         89.0%         95.7%         90.8%         90.8%      Allowance for loan losses to loans at end of period         1.2%          1.2%          1.3%          1.4%          1.3%      Allowance for loan losses to non-performing loans         228.8%        255.1%        164.8%        223.8%        717.0%      Non-performing loans to loans at end of period              0.5%          0.5%          0.8%          0.6%          0.2%      Net charge-offs to average loans                            0.2%          0.3%          0.1%          0.1%          0.0%      Number of offices                                             9             9             8             8             8      Number of full and part-time employees                      211           196           180           176           165      Number of Shareholders of Record                            601           632           645           647           634  Capital Ratios:      Average shareholders' equity to average assets              5.2%          5.2%          5.6%          5.4%          4.3%      Equity to assets                                            5.6%          5.3%          5.3%          5.7%          4.2%      Total risk-based capital ratio (Bank only)                 10.9%         10.5%         10.2%         10.1%         10.6%  (1)  Based upon weighted average shares outstanding during the period. (2)  Based on Common Stock outstanding at the end of the period. (3)  Net interest income as a percentage of average interest-earning assets.                                          20
Management's Discussion and Analysis of Financial Condition and Results of - -------------------------------------------------------------------------- Operations - ----------  The following discussion and analysis of the Corporation relates to the years ended December 31, 2005, 2004 and 2003 and should be read in conjunction with the Corporation's Consolidated Financial Statements and Notes thereto included elsewhere herein.  Overview           The primary source of the Bank's revenue is net interest income from loans and deposits and fees from financial services provided to customers. Overall economic factors including market interest rates, business spending, and consumer confidence, as well as competitive conditions within the marketplace tend to influence business volumes.           The Corporation monitors the impact of changes in interest rates on its net interest income. One of the primary goals of asset/liability management is to maximize net interest income and the net value of future cash flows within authorized risk limits. At December 31, 2005 the interest rate risk position of the Corporation was liability sensitive. Maintaining a liability sensitive interest rate risk position means that net income should decrease as rates rise and increase as rates fall.           Due to record low interest rates in 2003, there was an increase in refinancing activity and mortgage loan sales by the Corporation. There was a significant decrease in mortgage loan refinancing during 2004 and 2005 resulting in less sales by the Corporation causing a decrease in mortgage banking income.           Net income is affected by the provision for loan losses. Management performs an evaluation as to the amounts required to maintain an allowance adequate to provide for potential losses inherent in the loan portfolio. The level of this allowance is dependent upon the total amount of past due and non-performing loans, general economic conditions and management's assessment of potential losses based upon internal credit evaluations of loan portfolios and particular loans. It has been our experience that improved economic strength generally will translate into better credit quality in the banking industry. Management believes that the reserve for loan losses are adequate.           The risks and challenges that management believes will be important during 2006 are price competition for loans and deposits by new market entrants as well as established competitors, and continued lower mortgage loan volume as compared to 2005, 2004 and 2003, leading to lower gains on sales of mortgage loans.                                            21   Results of Operations  Year Ended December 31, 2005 Compared to the Year Ended December 31, 2004 and Year Ended December 31, 2004 Compared to the Year Ended December 31, 2003           The Corporation's results of operations depend primarily on the level of its net interest income, its non-interest income and its operating expenses. Net interest income depends on the volume of and rates associated with interest earning assets and interest bearing liabilities which results in the net interest spread. The Corporation had net income of $6,262,526 for the year ended December 31, 2005 compared to net income of $5,681,049 for the year ended December 31, 2004 and net income of $5,164,200 for the year ended December 31, 2003. This change is primarily due to the growth of the Bank allowing for more interest earning assets and net interest income compared to the same period during 2004 and 2003, thereby offsetting more of the operating expenses.           The Bank experienced growth during the past three years. Total assets increased $47,548,075 or 5.4% to $928,461,854 for the year ended December 31, 2005 from $880,913,779 for the year ended December 31, 2004 and total assets increased from $812,598,814 for the year ended December 31, 2003. This growth is in part due to an increase in customers as a result of local bank mergers/consolidations and the addition of experienced corporate and private bankers to the staff.  Net Interest Income - -------------------           The following table details the components of net interest income for the years ended December 31, 2005, 2004, and 2003 (in 000's):                                                         Year ended                                  Year ended                                                      December 31           $         %           December 31          $        %                                                   2005        2004      Change    Change      2004        2003     Change   Change                                                ------------------------------------------  -----------------------------------------          Interest income:     Interest and fees on loans                  $ 43,256    $ 33,306    $ 9,950    29.9%    $ 33,306    $ 31,010   $ 2,296     7.4%     Interest on investment securities              6,154       4,403      1,751    39.8%       4,403       3,020     1,383    45.8%     Interest on federal funds sold                 1,291         725        566    78.1%         725         432       293    67.8%     Interest on reverse repurchase agreements        146          90         56    62.2%          90          98        (8)   -8.2%                                                ------------------------------------------  ----------------------------------------- Total interest income                           $ 50,847    $ 38,524    $12,323    32.0%    $ 38,524    $ 34,560   $ 3,964    11.5%  Interest expense:     Interest on deposits                        $ 16,110     $ 8,975    $ 7,135    79.5%     $ 8,975     $ 7,668   $ 1,307    17.0%     Interest on repurchase agreements              1,528         570        958   168.1%         570         381       189    49.6%     Interest on FHLB advances                      1,497       1,775       (278)  -15.7%       1,775       2,414      (639)  -26.5%     Interest on long term debt                     1,771       1,642        128     7.8%       1,642       1,487       155    10.4%                                                ------------------------------------------  ----------------------------------------- Total interest expense                          $ 20,906    $ 12,962    $ 7,944    61.3%    $ 12,963    $ 11,950   $ 1,013     8.5%                                                ------------------------------------------  ----------------------------------------- Net interest income                             $ 29,941    $ 25,562    $ 4,379    17.1%    $ 25,562    $ 22,610   $ 2,952    13.1%                                                ==========================================  =========================================            The increase in interest income is due to the growth in the investment securities and loan portfolios and higher yields on federal funds sold as well as on the investment securities and loan portfolios. Over the course of 2005, the prime interest rate increased by 200 basis points to 7.25% as of December 31, 2005 from 5.25% as of December 31, 2004.           The increase in interest expense is due to an overall increase in yield paid as well as a growth of deposits, repurchase agreements and subordinated debt during 2005 as compared to the same period in 2004 and 2003.                                          22            The following table shows the prime rate in effect as of each year end and also shows the interest rate increases by the Federal Reserve since 2003:                  Date                          Prime Rate                 ----                          ----------         December 31, 2003                        4.00%          December 31, 2004                        5.25%          December 31, 2005                        7.25%            Net interest income increased for the year ended December 31, 2005 compared to the years ended December 31, 2004 and 2003. The overall increase was 17.1% and 13.1% between 2005 and 2004 and between 2004 and 2003, respectively. The overall increase was lower between 2004 and 2003 because the prime rate did not begin to increase until June 30, 2004 resulting in an overall lower interest rate environment and the compression of the spread between the yield earned on loans and the cost paid on deposits.                                                      23            The following table details average balances, interest income / expense and average rates / yields for the Bank's earning assets and interest bearing liabilities for the years ended December 31, 2005, 2004 and 2003 (in 000's):                                                      2005                            2004                             2003                                                 Interest  Average               Interest   Average               Interest  Average                                       Average    Income/    Rate/     Average    Income/     Rate/    Average     Income/    Rate/                                       Balance    Expense    Yield     Balance    Expense     Yield    Balance     Expense    Yield                                    -------------------------------  ------------------------------- -------------------------------           Assets: Federal Funds                        $ 43,508    $ 1,291    2.97%    $ 42,637      $ 725     1.70%   $ 39,961       $ 432    1.08% Reverse Repurchase Agreements           5,000        146    2.92%       9,180         90     0.98%     10,986          98    0.89% Investments                           186,971      6,154    3.29%     159,795      4,403     2.76%    115,597       3,020    2.61% Loans (gross)                         668,317     43,256    6.47%     612,096     33,306     5.44%    562,587      31,010    5.51%                                     -------------------------------  ------------------------------- ------------------------------- Total earning assets                $ 903,796   $ 50,847    5.63%   $ 823,708   $ 38,524     4.68%  $ 729,131    $ 34,560    4.74% Non-earning assets                     42,777                          39,950                          37,076                                     -----------                      ----------                      ---------- Total assets                        $ 946,573                       $ 863,658                       $ 766,207                                    ===========                      ==========                      ==========   Liabilities: Interest bearing DDA                 $ 94,578    $ 1,076    1.14%    $ 84,954      $ 665     0.78%   $ 69,194       $ 576    0.83% Savings                               402,131     10,891    2.71%     333,840      4,910     1.47%    275,108       3,764    1.37% CD's under $100,000                    56,876      1,887    3.32%      56,540      1,695     3.00%     54,146       1,752    3.24% CD's over $100,000                     54,524      1,805    3.31%      49,265      1,323     2.69%     40,430       1,186    2.93% Individual Retirement Accounts         13,277        451    3.40%      12,705        382     3.01%     11,848         390    3.29% Repurchase Agreements                  62,166      1,528    2.46%      74,794        570     0.76%     71,352         381    0.53% FHLB Advances/Other                    29,170      1,497    5.13%      34,317      1,775     5.17%     46,052       2,414    5.24% Subordinated Debt                       5,000        283    5.66%       3,992        154     3.86%      1,145          43    3.76% Long Term Debt                         13,918      1,488   10.69%      13,918      1,488    10.69%     13,500       1,444   10.70%                                     -------------------------------  ------------------------------- ------------------------------- Total Interest Bearing Liabilities  $ 731,640   $ 20,906    2.86%   $ 664,325   $ 12,962     1.95%  $ 582,775    $ 11,950    2.05% Non-Interest Bearing Liabilities      160,713                         150,357                         136,846 Other Liabilities                       5,287                           4,460                           3,841                                     -----------                      ----------                      ---------- Total Liabilities                   $ 897,640                       $ 819,142                       $ 723,462 Equity                                 48,933                          44,516                          42,745                                     -----------                      ----------                      ---------- Total Liabilities & Equity          $ 946,573                       $ 863,658                       $ 766,207                                    ===========                      ==========                      ==========   Recap: Interest Income                                 $ 50,847    5.63%               $ 38,524     4.68%               $ 34,560    4.74% Interest Expense                                  20,906    2.86%                 12,962     1.95%                 11,950    2.05%                                                --------------------            ---------------------           --------------------- Net Interest Income/Spread                      $ 29,941    2.77%               $ 25,562     2.73%               $ 22,610    2.69%                                               ====================            =====================           =====================  Contribution of Non-Interest   Bearing Funds                                             0.54%                            0.38%                           0.41%  Net Interest Margin                                         3.31%                            3.10%                           3.10%                                                          =========                       ==========                       =========    NOTE: Average balances computed using daily actual balances. The average loan balance includes non-accrual loans and the interest recognized prior to becoming non-accrual is reflected in the interest income for loans.                                          24             The following table sets forth an analysis of volume and rate changes in interest income and interest expense of the Corporation's average earning assets and average interest-bearing liabilities. The table distinguishes between the changes related to average outstanding balances of assets and liabilities (changes in volume holding the initial average interest rate constant) and the changes related to average interest rates (changes in average rate holding the initial average outstanding balance constant). The change in interest due to both volume and rate has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.   Net Interest Income Changes Due to Volume and Rates (in 000's): - -----------------------------------------------------------------                                                                       Year Ended December 31                                          2005 Changes from 2004         2004 Changes from 2003          2003 Changes from 2002                                        Net      Due to    Due to        Net     Due to   Due to       Net      Due to    Due to                                       Change     Rate     Volume      Change     Rate    Volume      Change     Rate     Volume                                     -------------------------------  ----------------------------  -------------------------------           Interest earning assets:       Federal funds sold                 $ 566     $ 540      $ 26       $ 293    $ 247     $ 46       $ (141)   $ (195)     $ 54       Reverse repurchase agreements         56       178      (122)         (8)      10      (18)        (147)     (106)      (41)       Investment securities              1,751       857       894       1,383      165    1,218         (663)     (265)     (398)       Loans                              9,950     6,311     3,639       2,296     (398)   2,694          417    (3,939)    4,356                                      -------------------------------  ----------------------------  -------------------------------           TOTAL                       $ 12,323   $ 7,886   $ 4,437     $ 3,964     $ 24   $3,940       $ (534)  $(4,505)  $ 3,971  Interest bearing liabilities:       Demand deposits                    $ 411     $ 302     $ 109        $ 89     $(34)   $ 123          $ 2     $ (96)     $ 98       Savings deposits                   5,981     4,131     1,850       1,146      282      864         (398)     (762)      364       CDs under $100,000                   192       181        11         (57)    (129)      72         (744)     (621)     (123)       CDs over $100,000                    482       308       174         137     (100)     237         (235)     (340)      105       Individual retirement accounts        69        50        19          (8)     (34)      26         (102)     (134)       32       Repurchase agreements                958     1,268      (310)        189      163       26         (371)     (378)        7       FHLB Advances                       (278)      (14)     (264)       (639)     (32)    (607)        (307)     (156)     (151)       Subordinated Debt                    129        72        57         111        1      110           43         -        43       Long term debt                         -         -         -          44       (1)      45            -         -         -                                      -------------------------------  ----------------------------  -------------------------------           TOTAL                        $ 7,944   $ 6,298   $ 1,646     $ 1,012    $ 116    $ 896      $(2,112)  $(2,487)    $ 375                                     -------------------------------  ----------------------------  -------------------------------  Net change in Net Interest Income      $ 4,379   $ 1,588   $ 2,791     $ 2,952     $(92)  $3,044       $1,578   $(2,018)  $ 3,596                                     ===============================  ============================  ===============================   NOTE: Due to Rate Increase was calculated by taking the change in the rate times the prior year average balance. Due to volume increase was calculated by taking the change in average balance times the prior year rate.            Interest on federal funds sold increased for the year ended December 31, 2005 compared to the year ended December 31, 2004 and year ended December 31, 2003. The increase is due to rising interest rates during 2005 as compared to previous years. The weighted average rate was 2.97% for the year ended December 31, 2005 compared to a weighted average rate of 1.70% and 1.08% for the years ended December 31, 2004 and 2003, respectively. The average                                           25   balance for federal funds sold increased for the year ended December 31, 2005 compared to the years ended December 31, 2004 and 2003.           Interest on reverse repurchase agreements increased for the year ended December 31, 2005 compared to the years ended December 31, 2004 and 2003. The change is the result of an increase in interest rates for the year ended December 31, 2005 compared to the years ended December 31, 2004 and 2003. The weighted average rate was approximately 2.92% for the year ended December 31, 2005 compared to a weighted average rate of .98% and .89% for the years ended December 31, 2004 and 2003, respectively.           Investment portfolio income increased for the year ended December 31, 2005 compared to the years ended December 31, 2004 and 2003. The increase is due to an increase in volume and an increase in interest rates in 2005 as compared to previous years. The weighted average rate of the investment portfolio was 3.29% for the year ended December 31, 2005 compared to 2.76% and 2.61% for the years ended December 31, 2004 and 2003, respectively.           Interest on loans increased for the year ended December 31, 2005 compared to the years ended December 31, 2004 and 2003. Average total loans for the year ended December 31, 2005 increased compared to the years ended December 31, 2004 and 2003. The loan portfolio produces the highest yield of all earning assets, the weighed average yield of the loan portfolio for the year ended December 31, 2005 was 6.47% compared to 5.44% and 5.51% for the years ended December 31, 2004 and 2003, respectively. The increased loan growth is the result of new clients and the addition of experienced corporate bankers to the staff.           Total interest expense increased for the year ended December 31, 2005 compared to the years ended December 31, 2004 and 2003. The increase in 2005 as compared to 2004 and 2003 is due primarily to an increase in the interest rates during the 2005 and an increase in the average balances.           Total average interest bearing liabilities for the year ended December 31, 2005 increased compared to the years ended December 31, 2004 and 2003. The average cost of interest bearing liabilities for the year ended December 31, 2005 was approximately 2.86% as compared to 1.95% for the year ended December 31, 2004 and 2.05% for December 31, 2003. This rate increase is due to an overall interest rate increase in the market and due to higher priced deposits being replaced by lower priced deposits.                                            26   Provision for Loan Losses - -------------------------           The amount charged to the provision for loan losses by the Bank is based on management's evaluation as to the amounts required to maintain an allowance adequate to provide for potential losses inherent in the loan portfolio. The level of this allowance is dependent upon the total amount of past due and non-performing loans, general economic conditions and management's assessment of probable losses based upon internal credit evaluations of loan portfolios and particular loans. Loans are principally to borrowers in central Indiana.           The provision for loan losses was $2,085,000 for the year ended December 31, 2005 compared to $1,320,000 and $1,200,000 for the years ended December 31, 2004 and 2003 respectively. The increase in the provision for loan losses is due to the increase in commercial and real estate loan charge offs. These charge offs relate to specific commercial and real estate loans and management does not believe that this is indicative of systematic problems within the loan portfolio. Based on management's risk assessment and evaluation of the probable losses of the loan portfolio, management believes that the current allowance for loan losses is adequate to provide for probable losses in the loan portfolio.                                                                   Tweleve months ended                                                                     December 31,                                           2005           2004           2003           2002           2001                                        ----------     ----------     ----------     ----------     ----------       Beginning of Period                    $7,795,803     $8,029,596     $7,227,000     $5,986,965     $4,700,672      Provision for loan losses          2,085,000      1,320,000      1,200,000      1,500,000      1,440,000       Losses charged to the reserve          Commercial                     1,317,743      1,133,994        506,413        207,716        102,315          Real Estate                      447,182        280,394          1,297         21,800         18,772          Consumer                           5,070        132,993          2,185          2,052         10,766          Credit Cards                      50,125         65,420         26,922         53,661         46,468                                        ----------     ----------     ----------     ----------     ----------                                         1,820,120      1,612,802        536,816        285,229        178,321       Recoveries          Commercial                       258,920         16,247        121,918         17,024         23,868          Real Estate                       26,000         26,836         16,438             --             --          Consumer                             787         12,354            105            266            463          Credit Cards                          --          3,572            950          7,974            283                                        ----------     ----------     ----------     ----------     ----------                                           285,707         59,009        139,412         25,264         24,614                                         ----------     ----------     ----------     ----------     ---------- End of Period                          $8,346,390     $7,795,803     $8,029,596     $7,227,000     $5,986,965                                        ==========     ==========     ==========     ==========     ==========  Allowance as a % of Loans                   1.22%          1.19%          1.34%          1.37%          1.32%                                                 27   Other Operating Income - ----------------------           The following table details the components of other operating income for the years ended December 31, 2005, 2004, and 2003 (in 000's):                                                         Year ended                                Year ended                                                      December 31          $         %          December 31        $         %                                                    2005      2004       Change    Change     2004      2003     Change    Change                                                  ----------------------------------------  --------------------------------------             Wealth Management                              $3,097    $2,464       $633      25.7%    $2,464    $1,971     $493      25.0%    Service charges and fees on deposit accounts    1,834     2,131       (297)    -13.9%     2,131     2,410     (279)    -11.6%    Building rental income                            450       485        (35)     -7.2%       485       548      (63)    -11.5%    Mortgage banking income                           313       564       (251)    -44.5%       564       872     (308)    -35.3%    Interchange income                                671       594         77      13.0%       594       542       52       9.6%    Net losses on securities                            -       (84)        84     100.0%       (84)      (37)     (47)    127.0%    Other                                           1,096     1,034         62       6.0%     1,034     1,079      (46)     -4.3%                                                  ----------------------------------------  -------------------------------------- Total operating income                            $7,461    $7,188       $273       3.8%    $7,188   $ 7,385   $ (198)     -2.7%                                                  ----------------------------------------  --------------------------------------            Other operating income increased for the year ended December 31, 2005 compared to the years ended December 31, 2004 and 2003. There are several factors to the overall increase.           Wealth Management fees increased for the year ended December 31, 2005 compared to the years ended December 31, 2004 and 2003. The increase is attributable to the overall price appreciation in the stock and treasury markets, an increase in assets under management and a change in accounting estimate related to the accrual of fees during 2003.            Service charges and fees on deposit accounts decreased for the year ended December 31, 2005 compared to the years ended December 31, 2004 and 2003. The decrease is attributable to lower overdraft and NSF fees assessed. Also, contributing to the decrease was an increase in the earnings credit rate paid on business demand deposits which decreases the service charges accessed.           Building rental income from the other tenants in the Corporation's main office building decreased for the year ended December 31, 2005 compared to the years ended December 31, 2004 and 2003. The decrease is attributable to fewer tenants in the building and the Corporation occupying more space in the building.           Mortgage banking income decreased for the year ended December 31, 2005 compared to the years ended December 31, 2004 and 2003. This decrease can be attributed to many different factors. Net gain on sale of mortgage loans decreased for the years ended December 31, 2005 to $82,493 compared to $157,145 and $1,056,418 for the years ended December 31, 2004 and 2003 respectively. During 2003, as a result of lower interest rates, mortgage originations increased causing the sale of bulk mortgages to increase. During 2004 and 2005, long term the interest rates remained steady and mortgage originations decreased resulting in decreased mortgage sales. The Mortgage Division originated in excess of $33 million in mortgage loans, while selling over $18 million to the secondary market during 2005. During 2004, the Mortgage Division originated in excess of $46 million in mortgage loans, while selling over $32 million to the secondary market. When a mortgage loan is sold, a mortgage servicing right ("MSR") is recorded as an asset on the balance sheet. The value of the MSRs is sensitive to changes in interest                                          28   rates. In a low rate environment, mortgage loan refinancings generally increase, causing actual and expected loan prepayments to increase, which drives down the value of existing MSRs. Conversely, as interest rates rise, mortgage loan refinancings generally decline, causing actual and expected loan prepayments to decrease, which drives up the value of the MSRs. As of December 31, 2004, a valuation reserve of $350,136 was recognized for mortgage servicing rights. The valuation reserve for mortgage servicing rights decreased to $181,218 as of December 31, 2005. The Corporation recorded a partial recovery of previous period market value adjustments of the mortgage servicing rights due to higher interest rates which caused a significant slow down in mortgage refinances and prepayments of existing mortgages.           During 2005, there was no net loss recorded on the sale of available for sale securities compared to a net loss on the sale of two available for sale securities recorded during the first quarter of 2004. During the third quarter of 2003, a net loss on the sale of four available for sale securities was recorded. The securities were replaced with higher yielding investments to place the portfolio in a better position for rising interest rates for asset/liability purposes.           Other Operating Expenses          ------------------------           The following table details the components of other operating expenses for the years ended December 31, 2005, 2004, and 2003 (in 000's):                                               Twelve Months                                  Twelve Months                                             December 31,          $          %             December 31,          $          %                                          2005        2004       Change     Change      2004          2003      Change     Change                                       --------------------------------------------  ---------------------------------------------          Salaries, wages and employee benefits  $15,284     $14,133      $1,151       8.1%    $14,133       $12,122     $2,011      16.6% Occupancy                                1,705       1,391         314      22.6%      1,391         1,409        (18)     -1.3% Furniture and equipment                    898         804          94      11.7%        804           891        (87)     -9.7% Professional services                    1,425       1,169         256      21.9%      1,169           886        283      32.0% Data processing                          1,572       1,439         133       9.2%      1,439         1,362         77       5.7% Business development                     1,072         898         174      19.3%        898           838         60       7.2% Other                                    3,220       2,779         441      15.9%      2,779         2,909       (130)     -4.5%                                       --------------------------------------------  --------------------------------------------- Total other operating expenses         $25,176     $22,613      $2,563      11.3%    $22,613       $20,417     $2,196      10.8%                                       ============================================  =============================================             Other operating expenses increased for the year ended December 31, 2005 compared to the years ended December 31, 2004 and 2003.           Salaries, wages and employee benefits increased for the year ended December 31, 2005 compared to the years ended December 31, 2004 and 2003. This increase is primarily due to annual merit increases of employees, training expenses, and the increase in the number of employees to 201 full time equivalents at December 31, 2005 from 181 full time equivalents at December 31, 2004 and from 173 full time equivalents at December 31, 2003.           Occupancy expense increased for the year ended December 31, 2005 compared to the years ended December 31, 2004 and 2003. This is attributable to the opening of a new banking center at 10590 North Michigan Road in January 2005 and the relocation of the Greenwood banking office from leased space at 1675 West Smith Valley Road to a new full-size freestanding building at 1689 West Smith Valley Road in September 2005.                                          29            Furniture and equipment expense increased for the year ended December 31, 2005 compared to the years ended December 31, 2004 and 2003. This increase is primarily due to the opening of two new banking offices, acquiring new assets at the banking centers and main office and repair expense for older assets.           Professional services expense increased for the year ended December 31, 2005 compared to the years ended December 31, 2004 and 2003. The increase is primarily due to additional expense incurred for accounting fees related to new regulations mandated by the Sarbanes-Oxley Act of 2002 and advertising agency fees. Attorney fees were lower for the year ended December 31, 2005 compared to the year ended 2004 but remained higher than the year ended December 31, 2003. The increase in attorney fees during 2004 and 2005 relates to delinquency in specific commercial and real estate loans and management does not believe that this is indicative of systematic problems within the loan portfolio.           Data processing expenses increased for the year ended December 31, 2005 compared to the years ended December 31, 2004 and 2003 primarily due to increased service bureau fees relating to increased transaction activity by the Bank and the Wealth Management department.           Business development expenses increased for the year ended December 31, 2005 compared to the years ended December 31, 2004 and 2003 due to increased advertising, public relations, customer promotion and premium items expense.  Tax (Benefit)/Expense - ---------------------           The Corporation applies a federal income tax rate of 34% and a state tax rate of 8.5% in the computation of tax expense. The provision for income taxes consisted of the following:                                               2005          2004         2003                                           --------------------------------------            Current tax expense            $4,300,157    $2,940,441   $3,592,053             Deferred tax (benefit)/expense   (421,841)      194,557     (379,263)                                           --------------------------------------                                            $3,878,316   $3,134,998   $3,212,790                                           ======================================            Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets are recognized for the estimated tax effects attributable to deductible temporary differences net of any valuation allowances for amounts which may not be realized by the Corporation.                                          30            The components of the Corporation's net deferred tax assets in the consolidated balance sheet as of December 31, 2005 and 2004 are as follows:                                                      2005            2004                                                 ---------------------------          Deferred tax assets:             Allowance for loan losses           $ 3,306,005     $ 3,087,918             Other                                 1,785,184       1,145,500                                                 ---------------------------               Total deferred tax assets           5,091,189       4,233,418          Deferred tax liability:             Mortgage servicing rights              (515,063)       (483,866)                                                 ---------------------------               Total deferred tax liabilities       (515,063)       (483,866)                                                 ---------------------------               Net deferred tax assets           $ 4,576,126     $ 3,749,552                                                 ===========================   Effects of Inflation           Inflation can have a significant effect on the operating results of all industries. This is especially true in industries with a high proportion of fixed assets and inventory. However, management believes that these factors are not as critical in the banking industry. Inflation does, however, have an impact on the growth of total assets and the need to maintain a proper level of equity capital.           Interest rates are significantly affected by inflation, but it is difficult to assess the impact since neither the timing nor the magnitude of the changes in the various inflation indices coincides with changes in interest rates. There is, of course, an impact on longer-term earning assets; however, this effect continues to diminish as investment maturities are shortened and interest-earning assets and interest-bearing liabilities shift from fixed rate, long-term to rate-sensitive, short-term.  Liquidity and Interest Rate Sensitivity           The Corporation must maintain an adequate liquidity position in order to respond to the short-term demand for funds caused by withdrawals from deposit accounts, extensions of credit and for the payment of operating expenses. Maintaining an adequate liquidity position is accomplished through the management of the liquid assets - those which can be converted into cash - and access to additional sources of funds. The Corporation must monitor its liquidity ratios as established in the Asset/Liability Committee ("ALCO") Policy. In addition, the Corporation has established a contingency funding plan to address liquidity needs in the event of depressed economic conditions. The liquidity position is continually monitored and reviewed by ALCO.           The Corporation has many sources of funds available, they include: overnight federal funds sold, investments available for sale, maturity of investments held for sale, deposits, Federal Home Loan Bank ("FHLB") advances, and issuance of debt. Funding sources did not change significantly during 2005. Deposits are the most significant funding source and loans are the most significant use of funds for the years ended December 31, 2005, 2004, and 2003. The                                          31   Corporation maintains a $5,000,000 revolving credit agreement with Harris Trust and Savings Bank to provide additional liquidity support to the Bank, if needed. There were no borrowings under this agreement at December 31, 2005 or 2004.           Primary liquid assets of the Corporation are cash and due from banks, federal funds sold, investments held as available for sale, and maturing loans. Federal funds sold represent the Corporation's primary source of immediate liquidity and were maintained at a level adequate to meet immediate needs. Federal funds sold averaged approximately $44,000,000, $43,000,000, and $40,000,000 for the years ended December 31, 2005, 2004 and 2003 respectively. Reverse repurchase agreements may serve as a source of liquidity, but are primarily used as collateral for customer balances in overnight repurchase agreements. Maturities in the Corporation's loan and investment portfolios are monitored regularly to avoid matching short-term deposits with long-term loans and investments. Other assets and liabilities are also monitored to provide the proper balance between liquidity, safety, and profitability. This monitoring process must be continuous due to the constant flow of cash which is inherent in a financial institution.           The Corporation's management believes its liquidity sources are adequate to meet its operating needs and does not know of any trends, events or uncertainties that may result in a significant adverse effect on the Corporation's liquidity position.           The Corporation actively manages its interest rate sensitive assets and liabilities to reduce the impact of interest rate fluctuations. At December 31, 2005, the Corporation's rate sensitive liabilities exceeded rate sensitive assets due within one year by $63,614,220. At December 31, 2004, the Corporation's rate sensitive assets exceeded rate sensitive liabilities due within one year by $21,623,861.           The purpose of the Bank's Investment Committee is to manage and balance interest rate risk, to provide a readily available source of liquidity to cover deposit runoff and loan growth, and to provide a portfolio of safe, secure assets of high quality that generate a supplemental source of income in concert with the overall asset/liability policies and strategies of the Bank.           The Bank holds securities of the U.S. Government and its agencies along with asset-backed securities, collateralized mortgage obligations, municipals, and Federal Home Loan Bank and Federal Reserve Bank stock. In order to properly manage market risk, credit risk and interest rate risk, the Bank has guidelines it must follow when purchasing investments for the portfolio and adherence to these policy guidelines are reported monthly to the board of directors.           A portion of the Bank's investment securities consist of collateralized mortgage obligations. The Bank limits the level of these securities that can be held in the portfolio to a specified percentage of total average assets.           All mortgage-related securities must pass the FFIEC stress test. This stress test determines if price volatility under a 200 basis point interest rate shock for each security exceeds a benchmark 30 year mortgage-backed security. If the security fails the test, it is considered high risk and the Bank will not purchase it. All mortgage-related securities purchased and included in the investment portfolio will be subject to the FFIEC test as of December 31 each year to determine if they have become high risk holdings. If a mortgage-related security becomes high risk, it will be evaluated                                           32   by the Bank's Investment Committee to determine if the security should be liquidated. At December 31, 2005 and 2004, the Bank did not hold any high risk mortgage-related securities           The Bank's investment portfolio also consists of bank-qualified municipal securities. Municipal securities purchased are limited to the first three (3) grades of the rating agencies. The grade is reviewed each December 31 to verify that the grade has not deteriorated below the first three (3) grades. The Bank may purchase non-rated general obligation municipals, but the credit strength of the municipality must be evaluated by the Bank's Credit Department. Generally, municipal securities from each issuer will be limited to $2 million, never to exceed 10% of the Bank's tier 1 capital and will not have a stated final maturity date of greater than fifteen (15) years.           The average yield (FTE) on the Bank's investment portfolio is as follows as of December 31,                                                   2005      2004      2003                                                 ----      ----      ----          U.S. Treasuries                        2.40%     1.70%     1.99%          U.S. Government agencies               3.09%     2.65%     2.72%          Collateralized mortgage obligations    3.42%     3.41%     1.87%          Municipals                             6.61%     7.76%     7.32%          Other securities                       3.33%     1.71%     1.91%   With the exception of securities of the U.S. Government and U.S. Government agencies and corporations, the Corporation had no other securities with a book or market value greater than 10% of shareholders' equity as of December 31, 2005, 2004 and 2003.                                                 33         The following is a summary of available-for-sale securities and held-to-maturity securities:                                                              Available-for-Sale Securities                                       ---------------------------------------------------------------------                                                              Gross              Gross           Estimated                                           Amortized        Unrealized         Unrealized          Fair                                             Cost              Gain              Loss              Value                                       ---------------------------------------------------------------------      December 31, 2005 U.S. Treasury securities                 $  1,494,394      $         --      $      2,009      $  1,492,385 U.S. Government agencies                   70,000,000                --         1,525,300        68,474,700 Collateralized mortgage obligations            35,052                --                12            35,040                                       ---------------------------------------------------------------------                                          $ 71,529,446      $         --      $  1,527,321      $ 70,002,125                                       ===================================================================== December 31, 2004 U.S. Treasury securities                 $  2,016,184                --      $      7,704      $  2,008,480 U.S. Government agencies                   91,000,000           112,700           769,680        90,343,020 Collateralized mortgage obligations            62,486                58                --            62,544                                       ---------------------------------------------------------------------                                          $ 93,078,670      $    112,758      $    777,384      $ 92,414,044                                       ===================================================================== December 31, 2003 U.S. Treasury securities                 $ 21,840,685             5,646      $        954      $ 21,845,377 U.S. Government agencies                   93,904,140           829,297           815,799        93,917,638 Collateralized mortgage obligations            99,203               154                --            99,357                                       ---------------------------------------------------------------------                                          $115,844,028      $    835,097      $    816,753      $115,862,372                                       =====================================================================                                                                Held-to-Maturity Securities                                       ---------------------------------------------------------------------                                                              Gross              Gross           Estimated                                           Amortized        Unrealized         Unrealized          Fair                                             Cost              Gain              Loss              Value                                       ---------------------------------------------------------------------  December 31, 2005 Municipals                               $ 35,715,981      $    315,262      $    582,213      $ 35,449,030 Collateralized mortgage obligations        47,791,685                --         1,400,263        46,391,422 Other securities                              225,000             2,202             1,598           225,604                                       ---------------------------------------------------------------------                                          $ 83,732,666      $    317,464      $  1,984,074      $ 82,066,056                                       ===================================================================== December 31, 2004 Municipals                                  5,444,198      $    484,166                --      $  5,928,364 Collateralized mortgage obligations        50,012,255                --           836,980        49,175,275 Other securities                              250,000             4,584               221           254,562                                       ---------------------------------------------------------------------                                          $ 55,706,453      $    488,750      $    837,201      $ 55,358,002                                       ===================================================================== December 31, 2003 Municipals                                  5,576,468      $    531,499                --      $  6,107,967 Other securities                              250,000             7,082                --           257,082                                       ---------------------------------------------------------------------                                          $  5,826,468      $    538,581      $         --      $  6,365,049                                       =====================================================================                                           34             The Corporation held eighty-two investment securities as of December 31, 2005 of which the amortized cost was greater than market value. The majority of these investment securities were purchased during 2004 and 2005. Management does not believe any individual unrealized loss as of December 31, 2005 represents an other-than-temporary impairment. The unrealized losses relate primarily to securities issued by the U.S. Treasury, FHLMC and Municipals. These unrealized losses are primarily attributable to changes in interest rates and individually were 4.2% or less of their respective amortized cost basis. The Corporation has both the intent and ability to hold these securities for a time necessary to recover the amortized cost.           As part of managing liquidity, the Corporation monitors its loan to deposit ratio on a daily basis. At December 31, 2005 the ratio was 88.4 percent and as of December 31, 2004 the ratio was 94.7 percent which is within the Corporation's acceptable range.           The following table shows the composition of the Bank's loan portfolio as of the dates indicated (in 000's):                                                                     December 31,                                                                  ------------                                 2005                  2004                 2003                2002                  2001                                 ----                  ----                 ----                ----                  ----                                     % of                  % of                 % of                 % of                 % of                           Amount    Total       Amount    Total       Amount   Total      Amount    Total      Amount    Total                        -------------------   -------------------   ------------------  -------------------   ------------------            TYPES OF LOANS Commercial              $ 252,528   36.9%     $ 235,705   35.7%     $ 221,846  37.2%    $ 182,994   34.6%     $150,101   33.2% Construction               50,173    7.3%        37,119    5.7%        35,305   5.9%       21,107    4.0%       17,027    3.8% Commercial Mortgage       138,075   20.2%       127,773   19.5%       120,135  20.1%      113,399   21.4%       82,256   18.2% Residential Mortgage      195,766   28.6%       206,599   31.5%       183,095  30.7%      163,034   30.8%      151,874   33.6% Consumer                   45,188    6.6%        40,534    6.2%        25,183   4.2%       35,934    6.8%       37,493    8.3% Credit Card                 2,737    0.4%         2,480    0.4%         2,360   0.4%        2,056    0.4%        1,811    0.4% Other                          20    0.0%         6,243    1.0%         9,139   1.5%       10,387    2.0%       11,498    2.5%                         -------------------   -------------------   ------------------  -------------------   ------------------       Total - Gross     $ 684,487  100.0%     $ 656,453  100.0%     $ 597,063 100.0%    $ 528,911  100.0%     $452,060  100.0%                                   ========              ========              =======             ========             ========        Allowance            (8,346)               (7,796)               (8,030)             (7,227)              (5,987)                         ----------            ----------            ----------          ----------            ---------       Total - Net       $ 676,141             $ 648,657             $ 589,033           $ 521,684             $446,073                        ==========            ==========            ==========          ==========            =========                                               35            The following table shows the composition of the commercial loan category by industry type as of the dates indicated (in $000's):                                                                                        December 31,                                                                                     ------------                                                               2005                      2004                     2003                                                               ----                      ----                     ---- Type                                                  Amount           %       Amount           %       Amount           % - ----                                                  ------           -       ------           -       ------           -         Agriculture, Foresty & Fishing                       $ 1,136        0.4%        $ 258        0.1%      $ 1,297        0.6% Mining                                                 2,574        1.0%        2,615        1.1%        1,939        0.9% Construction                                           9,714        3.8%       13,417        5.7%       17,480        7.9% Manufacturing                                         38,178       15.1%       30,570       13.0%       18,996        8.6% Wholesale Trade                                       32,287       12.8%       29,965       12.7%       26,778       12.1% Retail Trade                                           6,215        2.5%        4,870        2.1%        6,387        2.9% Transportation                                         8,473        3.4%        9,966        4.2%        5,423        2.4% Information                                              945        0.4%        1,141        0.5%        1,348        0.6% Finance & Insurance                                    3,997        1.6%        4,091        1.7%        6,066        2.7% Real Estate and Rental & Leasing                      55,906       22.1%       46,134       19.6%       38,430       17.3% Professional, Scientific & Technical Services         31,604       12.5%       30,522       12.9%       33,808       15.2% Management of Companies & Enterprises                  1,576        0.6%        2,199        0.9%            -        0.0% Administrative and Support, Waste Management &      Remediation Services                              1,476        0.6%            -        0.0%        1,180        0.5% Educational Services                                   4,680        1.9%        4,158        1.8%        2,760        1.2% Health Care & Social Assistance                       21,028        8.3%       21,253        9.0%       19,912        9.0% Arts, Entertainment & Recreation                       1,759        0.7%        5,333        2.3%        1,628        0.7% Accommodation & Food Services                          8,788        3.5%        9,026        3.8%       10,752        4.8% Other Services                                        22,192        8.8%       20,187        8.6%       27,662       12.5%                                                    -----------------------  -----------------------  -----------------------                                                    $ 252,528      100.0%    $ 235,705      100.0%    $ 221,846      100.0%                                                   =======================  ======================  =======================   The following table shows the composition of the Bank's deposit portfolio as of the dates indicated (in 000's):                                                                            December 31,                                                                         ------------                                                2005                         2004                         2003                                                ----                         ----                         ----                                                      % of                         % of                         % of                                        Amount        Total          Amount        Total          Amount        Total                                    -------------------------    -------------------------   --------------------------        TYPES OF DEPOSITS Demand                               $ 171,858       26.98%       $ 153,674       26.64%       $ 138,087       26.52% MMDA/Savings                           465,220       73.02%         423,255       73.36%         382,574       73.48%                                     -------------------------    -------------------------   --------------------------      Total Demand Deposits             637,078      100.00%         576,929      100.00%         520,661      100.00%                                                =============                =============                =============  CDs < $100,000                          59,258       43.18%          55,969       48.04%          57,329       49.05% CDs > $100,000                          64,021       46.65%          47,502       40.77%          47,051       40.26% Individual Retirement Accounts          13,959       10.17%          13,031       11.19%          12,496       10.69%                                     -------------------------    -------------------------   --------------------------      Total Certificates of Deposit     137,238      100.00%         116,502      100.00%         116,876      100.00%                                                =============                =============                =============                                     ------------                 ------------                -------------      Total Deposits                  $ 774,316                    $ 693,431                    $ 637,537                                    ============                 ============                =============                                            36           The following table illustrates the projected maturities and the repricing mechanisms of the major asset/liabilities categories of the Corporation as of December 31, 2005, based on certain assumptions. Prepayment rate assumptions have been made for the residential loans secured by real estate portfolio. Maturity and repricing dates for investments have been projected by applying the assumptions set forth below to contractual maturity and repricing dates.                                 0 - 180     181 - 365        1 - 2       2 - 3        3 -5          5 +     Non-interest                                days          days          years       years        years        years       Earning      Total                                ----          ----          -----       -----        -----        -----       -------      -----          Interest Earning Assets:  Fed Funds/ Overnight   Time                     $ 35,536,365                                                                                 $ 35,536,365  Reverse repurchase   agreements                  5,000,000                                                                                    5,000,000  Investments                 19,591,754    26,235,795    30,539,764   29,013,280  14,541,077   37,548,921                157,470,591  Loans    Commercial & Industrial       Fixed                  28,706,725    11,135,699    14,412,461   13,922,664  16,560,385    9,739,669        25,587   94,503,190       Variable              155,011,109        51,992       547,098    1,195,374      23,597      165,970     1,029,752  158,024,892    Commercial Loans Secured     by Real Estate       Fixed                  16,134,737    13,868,136    18,557,993   13,074,542  14,154,610    7,436,538       285,028   83,511,584       Variable               52,476,991       127,211     1,012,365      146,684     455,996                    344,292   54,563,539    Residential Loans Secured     by Real Estate       Fixed                   2,844,406     3,215,677     6,371,425    5,696,179   9,588,009   21,043,773       688,212   49,447,681       Variable              162,001,938     3,816,903     5,352,878   12,158,306   8,311,620    3,760,772     1,089,001  196,491,418    Other       Fixed                   1,082,912       990,625     1,824,817    1,566,248   2,799,320                    482,720    8,746,642       Variable               39,196,160                                                                           2,696   39,198,856                             --------------------------------------------------------------------------------------------------------- Total Interest Earning  Assets                    $517,583,097  $ 59,442,038  $ 78,618,801  $76,773,277 $66,434,614 $ 79,695,643  $  3,947,288 $882,494,758                            ---------------------------------------------------------------------------------------------------------  Non-Interest Earning Assets                                                                                  45,967,096   45,967,096                             --------------------------------------------------------------------------------------------------------- Total Assets               $517,583,097  $ 59,442,038  $ 78,618,801  $76,773,277 $66,434,614 $ 79,695,643  $ 49,914,384 $928,461,854                            =========================================================================================================   Interest Bearing Liabilities:   Demand Deposits          $ 10,426,213  $  9,476,047  $ 17,320,935  $15,353,014 $25,671,207 $ 93,251,207  $    358,823 $171,857,446   Interest Bearing Demand   105,265,553                                                                                  105,265,553   Savings Deposits           11,158,554                                                                                   11,158,554   Money Market Accounts     348,796,150                                                                                  348,796,150   Certificate of Deposits    23,268,668    16,877,267    16,492,867    5,655,044   4,867,027    3,867,300                 71,028,173   Jumbo CDs                  26,963,656    19,858,460    11,913,132    2,242,375   2,522,052    2,710,164                 66,209,839   Repurchase Agreements      53,556,402                                                                                   53,556,402   FHLB Advances              10,000,000                  11,000,000    3,000,000                                          24,000,000   Subordinated Debt           5,000,000                                                                                    5,000,000   Company obligated    mandatorily redeemable    preferred capital    securities of    subsidiary trust    holding solely the    junior subordinated    debentures of the    parent company            13,918,000                                                                                   13,918,000                            --------------------------------------------------------------------------------------------------------- Total Interest Bearing  Liabilities               $594,435,196  $ 46,211,774  $ 56,726,934  $26,250,433 $33,060,286 $113,746,671  $    358,823 $870,790,117  Non-Interest Bearing   Liabilities                                                                                                 6,089,215    6,089,215  Equity                                                                                                       51,582,522   51,582,522                            --------------------------------------------------------------------------------------------------------- Total Liabilities &  Shareholders'  Equity                    $594,435,196  $ 46,211,774  $ 56,726,934  $26,250,433 $33,060,286 $113,746,671  $ 58,030,560 $928,461,854                            =========================================================================================================  Interest Sensitivy Gap per  Period                    $(76,852,099) $ 13,230,264  $ 21,891,867  $50,522,844 $33,374,328 $(34,051,028) $ (8,116,176)  Cumulative Interest  Sensitivity Gap           $(76,852,099) $(63,621,835) $(41,729,968) $ 8,792,876 $42,167,204 $  8,116,176  $         (0)  Interest Sensitivity Gap  as a  Percentage of  Earning Assets                   -8.71%         1.50%         2.48%        5.73%       3.78%       -3.86%        -0.92%  Cumulative Sensitivity Gap   as a Percentage of   Earning Assets                  -8.71%        -7.21%        -4.73%        1.00%       4.78%        0.92%         0.00%           Of the $26,963,656 Jumbo CDs maturing in 0 - 180 days, $17,234,147 will mature in three months or less.                                          37   Contractual Obligations           The following table presents, as of December 31, 2005, significant fixed and determinable contractual obligations to third parties by payment date. Further discussion of the nature of each obligation is included in the referenced notes to the Consolidated Financial Statements under Item 8 of this report.                                                Note       One Year       One to      Three to       Over           (In Thousands)                  Reference    or Less     Three Years   Five Years    Five Years     Total - ---------------------------------------------------------------------------------------------------------------------        Deposits without a stated maturity(a)        10       $ 637,078     $    --       $    --       $    --     $637,078 Consumer certificates of deposits (a)        10          86,968      36,303         7,390         6,577      137,238 FHLB Advances(a)                             11          10,000      14,000            --            --       24,000 Security repurchase agreements(a)            11          53,556          --            --            --       53,556 Long-term debt (a)                        4, 11              --          --            --        18,918       18,918 Operating leases                             8              357         640           417           937        2,351 - ---------------------------------------------------------------------------------------------------------------------  (a) Excludes Interest              The Corporation's operating lease obligations represent rental payments for banking center offices.  Critical Accounting Policies           The Corporation's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States and follow general practices within the industries in which it operates. Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates, assumptions, and judgments. Certain policies inherently have a greater reliance on the use of estimates, assumptions, and judgments and as such have a greater possibility of producing results that could be materially different than originally reported. Estimates, assumptions, and judgments are necessary when assets and liabilities are required to be recorded at fair value, when a decline in the value of an asset not carried on the financial statements at fair value warrants an impairment write-down or valuation reserve to be established, or when an asset or liability needs to be recorded contingent upon a future event. Carrying assets and liabilities at fair value inherently results in more financial statement volatility. The fair values and the information used to record valuation adjustments for certain assets are based either on quoted market prices or are provided by other third-party sources, when available. When third-party information is not available, valuation adjustments are estimated in good faith by management primarily through the use of internal cash flow modeling techniques.           Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, management has identified the determination of the allowance for loan losses and the valuation of the mortgage servicing asset, to be the accounting areas that require the most subjective or complex judgments, and as such could be most subject to revision as new information becomes available.                                          38   Mortgage Servicing Assets - -------------------------           Mortgage servicing rights are recognized as separate assets when rights are acquired through sale of mortgage loans. Capitalized servicing rights are reported in other assets and are amortized into other operating expenses and reported net in the mortgage banking income section in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Mortgage servicing rights are evaluated for impairment based upon the fair value of the rights as compared to amortized cost. Impairment is determined by stratifying rights by predominant characteristics, such as loan type, interest rates, maturities, and other terms. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions. Estimates of fair value include assumptions about loan prepayment speeds, servicing costs and revenues, interest rates, and other factors which may change over time. Impairment is recognized through a valuation allowance for an individual stratum, to the extent that fair value is less than the cost of the rights for each stratum.  Off Balance Sheet Arrangements - ------------------------------           During the first quarter of 2004, the Corporation adopted Financial Accounting Standard Board (FASB) Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46), which governs when certain variable interest entities should be consolidated in the financial statements of the Corporation. As a result, the Corporation deconsolidated the Trust from its financial statements. See Note 4 "Trust Preferred Securities" in the notes to consolidated financial statements of this report for further information.  Derivative Instruments and Hedging Activities - ---------------------------------------------           During the second quarter of 2004, the Corporation entered into a 3-year interest rate swap to mitigate the risk of adverse interest rate movements on the value of future cash flows related to its investment in overnight Federal Funds sold. Pursuant to FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities", cash flow hedges are accounted for by recording the fair value of the derivative instrument on the balance sheet as either an asset or liability, with a corresponding offset recorded in other comprehensive income within shareholders' equity, net of tax. See Note 6 Derivative Instruments and Hedging Activities in the Notes to the Consolidated Financial Statements under Item 8 of this report for further information.           Under the cash flow hedge accounting method, derivative gains and losses not effective in hedging the change in expected cash flows of the hedged item are recognized immediately in the income statement. At the hedge's inception and quarterly thereafter, a formal assessment is performed to determine whether changes in cash flows of the derivative instrument have been highly effective in offsetting changes in the cash flows of the hedged item and whether they are expected to be highly effective in the future. If it is determined a derivative instrument has not been or will not continue to be highly effective as a hedge, hedge accounting is discontinued.                                           39   Allowance for Loan Losses - -------------------------           The allowance for loan losses is established through provisions for loan losses charged against income. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance. The allowance for loan losses allocated to loans that are identified as impaired is based on cash flows using the loan's initial effective interest rate or the fair value of the collateral for collateral dependent loans.           The allowance for loan losses is maintained at a level believed adequate by management to absorb inherent losses in the loan portfolio. The determination of the allowance is based on factors which, in management's judgment, deserve recognition under existing economic conditions in estimating probable loan losses. This evaluation is inherently subjective as it requires material estimates including the amounts and timing of future cash flows expected to be received on impaired loans that may be susceptible to significant change. The allowance is increased by provisions for loan losses charged against income and reduced by net charge-offs.           The allowance for loan losses is allocated to each loan category based on specific loss allocation, management's estimate of expected losses, based on the Bank's historical loss experience, and a qualitative analysis. Although the loan loss reserve is allocated by loan category, the entire allowance is available to cover any loan loss that may occur.           The following table shows the dollar amount of the allowance for loan losses using management's estimate by loan category (in $000's):                                                              December 31,                             2005            2004            2003            2002            2001                             ----            ----            ----            ----            ----       Commercial                $ 4,204         $ 5,094         $ 6,519         $ 5,173         $ 4,792 Construction                  404             155              77              82              21 Commercial Mortgage         1,319             618             261             437             104 Residential Mortgage        1,758           1,108             639             906             499 Consumer                      586             745             318             391             322 Credit Card                    74              11              63              61              55 Other                           1              65             153             177             194                          --------------------------------------------------------------------------                           $ 8,346         $ 7,796         $ 8,030         $ 7,227         $ 5,987                         ==========================================================================            Management considers the present allowance to be appropriate and adequate to cover losses inherent in the loan portfolio based on the current economic environment. However, future economic changes cannot be predicted. Deterioration in economic conditions could result in an increase in the risk characteristics of the loan portfolio and an increase in the provision for loan losses.                                           40            The following table presents a summary of non-performing assets as of December 31, (in 000's):    Non-Performing Assets ($ 000)                                       2005              2004              2003              2002            2001                                       ----              ----              ----              ----            ----                                            % of              % of              % of              % of             % of                                  Amount   Total    Amount   Total    Amount   Total    Amount   Total  Amount    Total                               ------------------ ----------------- ----------------- ----------------- ----------------            Non-Accrual Loans Commercial                      $ 1,055   28.9%   $ 1,800   57.7%   $ 4,063   83.4%   $ 1,605   49.7%   $ 335    40.1% Construction                          -    0.0%         -    0.0%         -    0.0%         -    0.0%       -     0.0% Commercial Mortgage                 629   17.2%         -    0.0%         -    0.0%         -    0.0%     184    22.0% Residential Mortgage              1,777   48.8%       815   26.1%       808   16.6%     1,624   50.3%     303    36.3% Consumer                            187    5.1%         -    0.0%         -    0.0%         -    0.0%      13     1.6% Credit Card                           -    0.0%         -    0.0%         -    0.0%         -    0.0%       -     0.0% Other                                 -    0.0%       504   16.2%         -    0.0%         -    0.0%       -     0.0%                                ------------------ ----------------- ----------------- ----------------- ----------------      Total                      $ 3,648  100.0%   $ 3,119  100.0%   $ 4,871  100.0%   $ 3,229  100.0%   $ 835   100.0%                               ================== ================= ================= ================= ================   Loans 90 Days Past Due - Still Accruing                  $    --           $    73           $   517           $     9           $   5   Restructured due to troubled conditions of the borrower      $    --           $    --           $    --           $ 2,902           $  --             The following table presents a summary of non-performing loans as of December 31:                                                                      2005         2004         2003         2002        2001                                                                   ----         ----         ----         ----         ----       Loan Type Commercial        # of loans                                                     15           14           28           11            7        Interest income recognized                             $   57,110   $   73,795   $  112,102   $  111,591   $    9,534        Additional interest income if loan had been accruing   $  165,475   $  101,190   $  168,426   $   54,952   $   25,191   Consumer        # of loans                                                      3            3           --           --            1        Interest income recognized                             $      382   $   20,155   $       --   $       --   $       --        Additional interest income if loan had been accruing   $   22,461   $   36,531   $       --   $       --   $    1,545   Residential mortgage loans        # of loans                                                     20           15           13           12            6        Interest income recognized                             $   52,430   $    8,737   $   42,539   $   18,650   $    1,925        Additional interest income if loan had been accruing   $   73,499   $   68,942   $   22,527   $   34,598   $   24,785   Credit cards        # of loans                                                     --           --           --           --           --        Interest income recognized                             $       --   $       --   $       --   $       --   $       --        Additional interest income if loan had been accruing   $       --   $       --   $       --   $       --   $       --  Restructured loans                                                    --           --           --   $2,901,600   $       --                                           41   Capital Resources           The Corporation's only source of capital since commencing operations has been from issuance of common stock, results of operations, issuance of long term debt to a non-affiliated third party, and the issuance of junior subordinated debentures.           The Corporation maintains a Revolving Credit Agreement with Harris Trust and Savings Bank in the amount of $5,000,000, of which none has been drawn, that will mature September 30, 2006.           The Bank entered into an agreement in the amount of $5,000,000 pursuant to a Subordinated Term Loan Agreement with Harris Trust and Savings Bank dated June 6, 2003. Under the agreement the Bank can make up to two advances against the term loan prior to June 6, 2004. The first advance was made in the amount of $2,000,000 on June 6, 2003. The second advance was made in the amount of $3,000,000 on May 3, 2004. The final maturity date of the loan is June 6, 2012. The outstanding principal balance is due at maturity; however, prepayment of the principal balance is permitted prior to maturity with prior consent from the Federal Reserve.           There are many different interest rate options available. Each floating rate option is available for a fixed term of 1-3 months. The Bank is currently paying adjusted 3-month LIBOR plus 2.0% which equates to 6.42% at December 31, 2005. Interest payments are due at the expiration of the fixed term option.           In September 2000, the Trust, which is wholly owned by the Corporation, issued $13,500,000 of company obligated mandatorily redeemable capital securities. The proceeds from the issuance of the capital securities and the proceeds from the issuance of the common securities of $418,000 were used by the Trust to purchase from the Corporation $13,918,000 Fixed Rate Junior Subordinated Debentures. The capital securities mature September 7, 2030, or upon earlier redemption as provided by the Indenture. The Corporation has the right to redeem the capital securities, in whole or in part, but in all cases in a principal amount with integral multiples of $1,000, on any March 7 or September 7 on or after September 7, 2010 at a premium, declining ratably to par on September 7, 2020. The capital securities and the debentures have a fixed interest rate of 10.60%, and are guaranteed by the Bank. The net proceeds received by the Corporation from the sale of capital securities were used for general corporate purposes.           The Bank has incurred indebtedness pursuant to FHLB advances as follows:                           Amount             Rate              Maturity                          ------             ----              --------                        5,000,000             5.43%             03/16/2006                        5,000,000             5.32%             05/08/2006                        8,000,000             4.19%             07/24/2007                        3,000,000             5.57%             08/13/2007                        3,000,000             5.55%             10/02/2008                   -------------                      $24,000,000                   =============                                          42            During 2005, the maximum amount outstanding at any month-end during the year for FHLB Advances was $32,000,000. The Bank may add indebtedness of this nature in the future if determined to be in the best interest of the Bank.           Security repurchase agreements are short-term borrowings that generally mature within one to three days from the transaction date. At December 31, 2005 and 2004 the weighted average interest rate on these borrowings was 2.51% and 0.74%, respectively. During 2005, the maximum amount outstanding at any month-end during the year was $91,111,736.           Capital for the Bank is above well-capitalized regulatory requirements at December 31, 2005. Pertinent capital ratios for the Bank as of December 31, 2005 are as follows:                                                            Well     Adequately                                          Actual     Capitalized    Capitalized                                         ------     -----------    ----------- Tier 1 risk-based capital ratio           9.0%            6.0%           4.0%  Total risk-based capital ratio           10.9%           10.0%           8.0%  Leverage ratio                            6.8%            5.0%           4.0%            Dividends from the Bank to the Corporation may not exceed the net undivided profits of the Bank (included in consolidated retained earnings) for the current calendar year and the two previous calendar years without prior approval of the OCC. In addition, Federal banking laws limit the amount of loans the Bank may make to the Corporation, subject to certain collateral requirements. No loans were made during 2005 or 2004 by the Bank to the Corporation. A dividend of $1,300,000 was declared and made during 2005 and a dividend of $1,000,000 was declared and made during 2004 by the Bank to the Corporation.           In January 2003, the Board of Directors of the Corporation authorized a repurchase program entitled "Program One" which covers employees and directors and was set to expire on December 31, 2005 unless terminated earlier by the Board. However, during the fourth quarter of 2005, the Board of Directors of the Corporation authorized the effective date to be extended until December 31, 2008 unless terminated earlier by the Board of Directors.           During the fourth quarter of 2005 Board of Directors of the Corporation also authorized an additional $1,900,000 to be allocated to Program One. Under Program One, the Corporation may spend up to $7,400,000 in individually negotiated transactions to repurchase its shares from employees and directors who wish to sell. The repurchase program may be suspended or discontinued at any time if management determines that additional purchases are not warranted or if the cost of the repurchase program reaches $7,400,000.           The amount and timing of shares repurchased under the repurchase program, as well as the specific price, will be determined by management after considering market conditions, company performance and other factors.           At December 31, 2005, the remaining authority under Program One was approximately $2,396,187.                                          43            In January 2003, the Board of the Corporation authorized a separate repurchase program entitled "Program Two" which covers all other shareholders and was set to expire at December 31, 2005, however, during the fourth quarter of 2005, the Board of the Corporation authorized the effective date to be extended until December 31, 2008 unless terminated earlier by the Board.           During the fourth quarter of 2005 Board of Directors of the Corporation also authorized an additional $2,600,000 to be allocated to Program Two. Under Program Two, the Corporation may spend up to $10,200,000 in individually negotiated transactions to repurchase its shares from shareholders who wish to sell. The repurchase program may be suspended or discontinued at any time if management determines that additional purchases are not warranted or if the cost of the repurchase program reaches $10,200,000.           The amount and timing of shares repurchased under the repurchase program, as well as the specific price, will be determined by management after considering market conditions, company performance and other factors.           At December 31, 2005, the remaining authority under Program Two was approximately $4,706,270.   Recent Accounting Pronouncements and Developments           Note 2 to the Consolidated Financial Statements under Item 8 discusses new accounting policies adopted by the Corporation during 2005 and the expected impact of accounting policies. Note 2 also discusses recently issued or proposed new accounting policies but not yet required to be adopted and the impact of the accounting policies if known. To the extent the adoption of new accounting standards materially affects financial conditions; results of operations, or liquidity, the impacts if known are discussed in the applicable section(s) of notes to consolidated financial statements.   CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION           This discussion contains certain forward-looking statements that are subject to risks and uncertainties and includes information about possible or assumed future results of operations. Many possible events or factors could affect our future financial results and performance. This could cause results or performance to differ materially from those expressed in our forward-looking statements. Words such as "expects," "anticipates," "believes," "estimates," variations of such words and other similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in, or implied by, such forward-looking statements. Readers should not rely solely on the forward-looking statements and should consider all uncertainties and risks discussed throughout this discussion. These statements are representative only on the date hereof.           The possible events or factors include, but are not limited to, the following matters. Our loan growth is dependent on economic conditions, as well as various discretionary factors, such as decisions to sell or purchase certain                                          44   loans or loan portfolios; participations of loans; retention of residential mortgage loans; the management of a borrower; industry, product and geographic concentrations and the mix of the loan portfolio. The rate of charge-offs and provision expense can be affected by local, regional and international economic and market conditions, concentrations of borrowers, industries, products and geographic locations, the mix of the loan portfolio and management's judgments regarding the collectibility of loans. Liquidity requirements may change as a result of fluctuations in assets and liabilities and off-balance sheet exposures, which will impact our capital and debt financing needs and the mix of funding sources. Decisions to purchase, hold or sell securities are also dependent on liquidity requirements and market volatility, as well as on- and off-balance sheet positions. Factors that may impact interest rate risk include local, regional and international economic conditions, levels, mix, maturities, yields or rates of assets and liabilities, and the wholesale and retail funding sources of the Bank. We are also exposed to the potential of losses arising from adverse changes in market rates and prices which can adversely impact the value of financial products, including securities, loans, deposits, debt and derivative financial instruments, such as futures, forwards, swaps, options and other financial instruments with similar characteristics.           In addition, the banking industry in general is subject to various monetary and fiscal policies and regulations, which include those determined by the Federal Reserve Board, the Office of the Comptroller of the Currency ("OCC"), and the Federal Deposit Insurance Corporation ("FDIC"), whose policies and regulations could affect our results. Other factors that may cause actual results to differ from the forward-looking statements include the following: competition with other local, regional and international banks, thrifts, credit unions and other non-bank financial institutions, such as investment banking firms, investment advisory firms, brokerage firms, investment companies and insurance companies, as well as other entities which offer financial services, located both within and outside the United States and through alternative delivery channels such as the World Wide Web; interest rate, market and monetary fluctuations; inflation; market volatility; general economic conditions and economic conditions in the geographic regions and industries in which we operate; introduction and acceptance of new banking-related products, services and enhancements; fee pricing strategies, mergers and acquisitions and our ability to manage these and other risks.                                             45
Market risk is the risk of loss due to adverse changes in market prices and rates. The Corporation's market risk arises primarily from interest rate risk inherent in its lending and deposit taking activities. Management actively monitors and manages its interest rate exposure and makes monthly reports to the Asset Liability Committee (the "ALCO"). The ALCO is responsible for reviewing the interest rate sensitivity position and establishing policies to monitor and limit exposure to interest rate risk. The guidelines established by ALCO are reviewed by the ALCO/Investment Committee of the Corporation's Board of Directors.           The Corporation's profitability is affected by fluctuations in interest rates. A sudden and substantial increase in interest rates may adversely impact the Corporation's earnings to the extent that the interest rates earned by assets and paid on liabilities do not change at the same speed, to the same extent, or on the same basis. The Corporation monitors the impact of changes in interest rates on its net interest income. The Corporation attempts to maintain a relatively neutral gap between earning assets and liabilities at various time intervals to minimize the effects of interest rate risk.           One of the primary goals of asset/liability management is to maximize net interest income and the net value of future cash flows within authorized risk limits. Net interest income is affected by changes in the absolute level of interest rates. Net interest income is also subject to changes in the shape of the yield curve. In general, a flattening of the yield curve would result in a decline in earnings due to the compression of earning asset yields and funding rates, while a steepening would result in increased earnings as investment margins widen. Earnings are also affected by changes in spread relationships between certain rate indices, such as prime rate.           Interest rate risk is monitored through earnings simulation modeling. The earnings simulation model projects changes in net interest income caused by the effect of changes in interest rates. The model requires management to make assumptions about how the balance sheet is likely to behave through time in different interest rate environments. Loan and deposit balances remain static and maturities reprice at the current market rate. The investment portfolio maturities and prepayments are assumed to be reinvested in similar instruments. Mortgage loan prepayment assumptions are developed from industry median estimates of prepayment speeds. Non-maturity deposit pricing is modeled on historical patterns. The Corporation performs a 200 basis point upward and downward interest rate shock to determine whether there would be an adverse impact on its annual net interest income and that it is within the established policy limits. The earnings simulation model as of December 31, 2005 projects an approximate decrease of 2.0% in net interest income in a 200 basis point downward interest rate shock and an approximate decrease of .60% in net interest income in a 200 basis point upward interest rate shock. The upward and downward change is well within the policy limits established by the ALCO policy.           During 2005, the interest rate position of the Corporation was liability sensitive, meaning net income should decrease as rates rise and increase as rates fall. Due to the mix and timing of the repricing of the Corporation's assets and liabilities, interest income is not materially impacted whether rates increase or decrease in a 200 basis point interest rate shock. See further discussion on interest rate sensitivity on page 31.                                          46
Report of Independent Registered Public Accounting Firm  The Board of Directors The National Bank of Indianapolis Corporation  We have audited the accompanying consolidated balance sheets of The National Bank of Indianapolis Corporation and subsidiary as of December 31, 2005 and 2004, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2005. These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits.  We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Corporation's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Corporation's internal control over financial reporting. Accordingly we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.  In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of The National Bank of Indianapolis Corporation and subsidiary at December 31, 2005 and 2004, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.    February 3, 2006                                                           /s/ Ernst & Young, LLP                                          47                     The National Bank of Indianapolis Corporation                             Consolidated Balance Sheets                                                                                            December 31                                                                                  2005                 2004                                                                          ------------------------------------------    Assets Cash and due from banks                                                           $ 32,223,665        $ 22,824,622 Reverse repurchase agreements                                                        5,000,000           5,000,000 Federal funds sold                                                                  33,214,446          31,766,783  Available-for-sale securities                                                       70,002,125          92,414,044 Held-to-maturity securities                                                         83,732,666          55,706,453                                                                          ------------------------------------------ Total investment securities                                                        153,734,791         148,120,497  Loans                                                                              684,487,802         656,452,569 Less:  Allowance for loan losses                                                    (8,346,390)         (7,795,803)                                                                          ------------------------------------------ Net loans                                                                          676,141,412         648,656,766 Premises and equipment                                                              11,872,396           9,676,268 Accrued interest receivable                                                          4,602,045           4,000,738 Stock in federal banks                                                               3,735,800           3,678,300 Other assets                                                                         7,937,299           7,189,805                                                                          ------------------------------------------ Total assets                                                                     $ 928,461,854       $ 880,913,779                                                                          ==========================================  Liabilities and shareholders' equity Deposits: Noninterest-bearing demand deposits                                              $ 171,857,446       $ 153,674,215 Money market and savings deposits                                                  465,220,257         423,254,826 Time deposits over $100,000                                                         66,209,839          49,039,847 Other time deposits                                                                 71,028,173          67,462,157                                                                          ------------------------------------------ Total deposits                                                                     774,315,715         693,431,045 Security repurchase agreements                                                      53,556,402          84,162,626 FHLB advances                                                                       24,000,000          32,000,000 Subordinated debt                                                                    5,000,000           5,000,000 Junior subordinated debentures owed to unconsolidated subsidiary trust              13,918,000          13,918,000 Other liabilities                                                                    6,089,215           5,858,421                                                                          ------------------------------------------ Total liabilities                                                                  876,879,332         834,370,092  Shareholders' equity: Common stock, no par value: Authorized shares; 2005 and 2004 3,000,000 shares; issued 2,657,802 in 2005 and 2,628,497 in 2004; outstanding 2,333,406 in 2005 and 2,349,174 in 2004                                 19,549,673          20,595,989 Unearned compensation                                                                 (357,507)           (624,543) Additional paid-in capital                                                           4,009,263           3,836,613 Retained earnings                                                                   29,627,677          23,365,151 Accumulated other comprehensive loss                                                (1,246,584)           (629,523)                                                                          ------------------------------------------ Total shareholders' equity                                                          51,582,522          46,543,687                                                                          ------------------------------------------ Total liabilities and shareholders' equity                                       $ 928,461,854       $ 880,913,779                                                                          ==========================================   See accompanying notes.                                          48                     The National Bank of Indianapolis Corporation                          Consolidated Statements of Income                                                                                        Years Ended December 31                                                                          2005                  2004                  2003                                                                  -----------------------------------------------------------------     Interest income: Interest and fees on loans                                                $ 43,255,856          $ 33,305,992         $ 31,010,185 Interest on investment securities                                            6,154,277             4,402,788            3,020,337 Interest on federal funds sold                                               1,291,306               725,134              432,019 Interest on reverse repurchase agreements                                      145,668                89,643               97,600                                                                  ----------------------------------------------------------------- Total interest income                                                       50,847,107            38,523,557           34,560,141  Interest expense: Interest on deposits                                                        16,109,423             8,974,585            7,668,136 Interest on repurchase agreements                                            1,527,886               570,295              381,077 Interest on FHLB advances and overnight borrowings                           1,497,247             1,775,010            2,414,070 Interest on long-term debt                                                   1,771,259             1,642,416            1,486,637                                                                  ----------------------------------------------------------------- Total interest expense                                                      20,905,815            12,962,306           11,949,920                                                                  ----------------------------------------------------------------- Net interest income                                                         29,941,292            25,561,251           22,610,221  Provision for loan losses                                                    2,085,000             1,320,000            1,200,000                                                                  ----------------------------------------------------------------- Net interest income after provision for loan losses                         27,856,292            24,241,251           21,410,221  Other operating income: Wealth management fees                                                       3,096,847             2,464,266            1,971,262 Service charges and fees on deposit accounts                                 1,833,825             2,130,994            2,409,577 Rental income                                                                  449,715               485,241              548,060 Mortgage banking income                                                        313,588               563,901              871,659 Interchange income                                                             670,725               594,093              542,221 Losses on sale of securities, net                                                    -               (83,739)             (36,891) Other income                                                                 1,096,173             1,033,031            1,078,631                                                                  ----------------------------------------------------------------- Total other operating income                                                 7,460,873             7,187,787            7,384,519  Other operating expenses: Salaries, wages, and employee benefits                                      15,283,832            14,132,773           12,122,238 Occupancy                                                                    1,704,720             1,390,658            1,409,226 Furniture and equipment                                                        898,355               804,492              891,328 Professional services                                                        1,424,921             1,169,109              885,595 Data processing                                                              1,571,855             1,439,248            1,362,202 Business development                                                         1,071,823               898,072              838,132 Other                                                                        3,220,817             2,778,639            2,909,029                                                                  ----------------------------------------------------------------- Total other operating expenses                                              25,176,323            22,612,991           20,417,750                                                                  ----------------------------------------------------------------- Income before tax                                                           10,140,842             8,816,047            8,376,990 Federal and state income tax                                                 3,878,316             3,134,998            3,212,790                                                                  ----------------------------------------------------------------- Net income                                                                 $ 6,262,526           $ 5,681,049          $ 5,164,200                                                                  =================================================================  Basic earnings per share                                                         $2.72                 $2.47                $2.20                                                                  =================================================================  Diluted earnings per share                                                       $2.62                 $2.37                $2.08                                                                  =================================================================  See accompanying notes.                                          49                     The National Bank of Indianapolis Corporation                   Consolidated Statements of Shareholders' Equity                                                                                                   Accumulated                                                                      Additional                     Other                                           Common        Unearned       Paid-In      Retained    Comprehensive                                            Stock      Compensation     Capital      Earnings     Income (Loss)     Total                                        -------------------------------------------------------------------------------------        Balance at December 31, 2002            $ 26,862,276   $(1,218,746)   $2,562,990  $ 12,519,902      $ 520,729  $ 41,247,151  Comprehensive income: Net income                                         -             -             -     5,164,200              -     5,164,200 Other comprehensive income: Net unrealized loss on investments, net of tax of $334,282                                        -             -             -             -       (509,651)     (509,651)                                                                                                               -------------- Total comprehensive income                                                                                        4,654,549  Income tax benefit from exercise of warrants and options                               -             -       456,013             -              -       456,013 Issuance of stock (69,907 shares)          1,051,171       (72,025)            -             -              -       979,146 Repurchase of stock (160,002 shares)      (5,054,547)            -             -             -              -    (5,054,547) Compensation earned                                -       396,092             -             -              -       396,092                                        ------------------------------------------------------------------------------------- Balance at December 31, 2003              22,858,900      (894,679)    3,019,003    17,684,102         11,078    42,678,404  Comprehensive income: Net income                                         -             -             -     5,681,049              -     5,681,049 Other comprehensive income: Net unrealized loss on investments, net of tax of $270,524                                        -             -             -             -       (412,445)     (412,445) Net unrealized loss on swap, net of tax of $149,648                                        -             -             -             -       (228,156)     (228,156)                                                                                                               -------------- Total comprehensive income                                                                                        5,040,448  Income tax benefit from exercise of warrants and options                               -             -       817,610             -              -       817,610 Issuance of stock (111,366 shares)         1,516,423       (29,859)            -             -              -     1,486,564 Repurchase of stock (114,421 shares)      (3,779,334)            -             -             -              -    (3,779,334) Compensation earned                                -       299,995             -             -              -       299,995                                        ------------------------------------------------------------------------------------- Balance at December 31, 2004              20,595,989      (624,543)    3,836,613    23,365,151       (629,523)   46,543,687  Comprehensive income: Net income                                         -             -             -     6,262,526              -     6,262,526 Other comprehensive income: Net unrealized loss on investments, net of tax of $341,714                                        -             -             -             -       (520,982)     (520,982) Net unrealized loss on swap, net of tax of $63,019                                         -             -             -             -        (96,079)      (96,079)                                                                                                               -------------- Total comprehensive income                                                                                        5,645,465  Income tax benefit from exercise of warrants and options                               -             -       172,650             -              -       172,650 Issuance of stock (29,305 shares)            646,906         9,809             -             -              -       656,715 Repurchase of stock (45,073 shares)       (1,693,222)            -             -             -              -    (1,693,222) Compensation earned                                -       257,227             -             -              -       257,227                                        ------------------------------------------------------------------------------------- Balance at December 31, 2005            $ 19,549,673    $ (357,507)   $4,009,263  $ 29,627,677   $ (1,246,584) $ 51,582,522                                        =====================================================================================  See accompanying notes.                                          50                     The National Bank of Indianapolis Corporation                        Consolidated Statements of Cash Flows                                                                                      Years Ended December 31                                                                            2005              2004              2003                                                                      -----------------------------------------------------     Operating activities Net income                                                                 $ 6,262,526       $ 5,681,049      $ 5,164,200 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses                                                    2,085,000         1,320,000        1,200,000 Depreciation and amortization                                                1,413,527         1,281,526        1,099,026 Mortgage servicing rights impairment (recoveries) charges                     (167,918)         (256,140)         345,102 Loss on sale of investment securities available-for-sale                             -            83,739           36,891 Gain on sale of loans                                                          (82,493)         (157,145)      (1,056,418) Gain on disposal of premises and equipment                                     (23,100)           (2,150)               - Income tax benefit from exercise of warrants and options                       172,650           817,610          456,013 Stock compensation                                                              99,793            99,990          110,000 Net accretion of investments                                                   314,501           294,755          841,086 Unearned compensation amortization                                             257,227           299,995          396,092 (Increase) decrease in: Accrued interest receivable                                                   (601,307)         (497,337)         470,857 Other assets                                                                  (596,426)       (1,355,428)        (735,424) Increase (decrease) in: Other liabilities                                                              230,794         2,950,137       (1,824,744)                                                                      ----------------------------------------------------- Net cash provided by operating activities                                    9,364,774        10,560,601        6,502,681  Investing activities Net change in federal funds sold                                            (1,447,663)      (11,264,397)      (2,324,923) Net change in reverse repurchase agreements                                          -        10,000,000      (10,000,000) Proceeds from maturities of investment securities held-to-maturity                                                  1,921,232         1,165,586       24,124,021 Proceeds from maturities of investment securities available-for-sale                                               42,527,411        24,186,692       48,297,884 Proceeds from sales of investment securities available-for-sale                      -        19,952,500       25,330,500 Purchases of investment securities held-to-maturity                        (30,311,560)      (51,426,350)        (181,700) Purchases of investment securities available-for-sale                      (20,986,074)      (21,491,649)    (107,055,082) Net increase in loans                                                      (47,859,537)      (93,781,818)    (143,204,249) Proceeds from sale of loans                                                 18,372,384        32,995,345       75,711,736 Purchases of premises and equipment                                         (3,324,070)       (1,562,075)        (999,445)                                                                      ----------------------------------------------------- Net cash used in investing activities                                      (41,107,877)      (91,226,166)     (90,301,258)  Financing activities Net increase in deposits                                                    80,884,670        55,893,965       93,194,560 Net change in security repurchase agreements                               (30,606,224)       12,605,580       (2,716,728) Net change in FHLB advances                                                 (8,000,000)      (10,000,000)      (6,000,000) Proceeds from issuance of long-term debt                                             -         3,000,000        2,000,000 Repurchase of stock                                                         (1,693,222)       (3,779,334)      (5,054,547) Proceeds from issuance of stock                                                556,922         1,386,574          869,146                                                                      ----------------------------------------------------- Net cash provided by financing activities                                   41,142,146        59,106,785       82,292,431                                                                      -----------------------------------------------------  Increase (decrease) in cash and cash equivalents                             9,399,043       (21,558,780)      (1,506,146) Cash and cash equivalents at beginning of year                              22,824,622        44,383,402       45,889,548                                                                      ----------------------------------------------------- Cash and cash equivalents at end of year                                  $ 32,223,665      $ 22,824,622     $ 44,383,402                                                                      =====================================================  Interest paid                                                             $ 20,394,928      $ 12,959,914     $ 12,149,305                                                                      ===================================================== Income taxes paid                                                          $ 4,293,994       $ 1,368,989      $ 4,268,861                                                                      =====================================================  See accompanying notes.                                          51   1. Organization and Significant Accounting Policies  Organization  The National Bank of Indianapolis Corporation (the Corporation) was incorporated in the State of Indiana on January 29, 1993. The Corporation subsequently formed a de novo national bank, The National Bank of Indianapolis (the Bank), and a statutory trust, NBIN Statutory Trust I (the Trust). The Bank is a wholly owned subsidiary and commenced operations in December 1993. The Trust was formed in September 2000 as part of the issuance of trust preferred capital securities. The Corporation and the Bank engage in a wide range of commercial, personal banking, and trust activities primarily in central Indiana.  The consolidated financial statements include the accounts of the Corporation and the Bank. During the first quarter of 2004, as a result of applying Financial Accounting Standards Board (FASB) Interpretation No. 46, Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51 (FIN 46), the Corporation was required to deconsolidate the Trust from its financial statements. See Note 4, "Trust Preferred Securities" in the notes to the consolidated financial statements of this report for further information. All intercompany accounts and transactions have been eliminated in consolidation  Cash and Cash Equivalents  Cash and cash equivalents consist of cash and interest-bearing deposits. Interest-bearing deposits are available on demand.  Investment Securities  Investments in debt securities are classified as held-to-maturity or available-for-sale. Management determines the appropriate classification of the securities at the time of purchase per Board-approved policy.  When the Corporation classifies debt securities as held-to-maturity, it has the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are stated at cost, adjusted for amortization of premiums and accretion of discounts on the constant effective yield method.                                                 52   1. Organization and Significant Accounting Policies (continued)  Debt securities not classified as held-to-maturity are classified as available-for-sale. Available-for-sale securities are stated at fair value, with the unrealized gains and losses, net of tax, reported as a component of other comprehensive income, net of taxes.  The amortized cost of debt securities classified as held-to-maturity or available-for-sale is adjusted for amortization of premiums and accretion of discounts on the constant effective yield method to maturity, or in the case of mortgage-backed securities, over the estimated life of the security. Such amortization is included in interest income from investments. Interest and dividends are included in interest income from investments. Realized gains and losses, and declines in value judged to be other-than-temporary are included in losses on sale of securities, net. The cost of securities sold is based on the specific identification method.  Loans  Interest income on commercial, mortgage, and certain installment loans are accrued on the principal amount of such loans outstanding. Loans are placed on nonaccrual status when significant doubt exists as to the collectibility of principal or interest. Interest continues to accrue on the loan, but no income is recognized. All payments, principal, and interest received are applied to the outstanding principal balance.  Deferred loan fees are amortized over the life of the loan.  Allowance for Loan Losses  The allowance for loan losses is established through provisions for loan losses charged against income. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance. The allowance for loan losses allocated to loans that are identified as impaired is based on cash flows using the loan's initial effective interest rate or the fair value of the collateral for collateral dependent loans.                                              53   1.  Organization and Significant Accounting Policies (continued)  The allowance for loan losses is maintained at a level believed adequate by management to absorb inherent losses in the loan portfolio. The determination of the allowance is based on factors which, in management's judgment, deserve recognition under existing economic conditions in estimating possible loan losses. This evaluation is inherently subjective as it requires material estimates including the amounts and timing of future cash flows expected to be received on impaired loans that may be susceptible to significant change. The allowance is increased by provisions for loan losses charged against income and reduced by net charge-offs.  The allowance for loan losses is allocated to each loan category based on specific loss allocation, management's estimate of expected losses, based on the Bank's historical loss experience, and a qualitative analysis. Although the loan loss reserve is allocated by loan category, the entire allowance is available to cover any loan loss that may occur.  Mortgage Servicing Rights  Mortgage servicing rights are recognized as separate assets when rights are acquired through sale of mortgage loans. Capitalized servicing rights are reported in other assets and are amortized into other operating expenses in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Mortgage servicing rights are evaluated for impairment based upon the fair value of the rights as compared to amortized cost. Impairment is determined by stratifying rights by predominant characteristics, such as loan type, interest rates, maturities, and other terms. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions. Estimates of fair value include assumptions about loan prepayment speeds, servicing costs and revenues, interest rates, and other factors which may change over time. Impairment is recognized through a valuation allowance for an individual stratum, to the extent that fair value is less than the cost of the rights for each stratum.                                               54    1. Organization and Significant Accounting Policies (continued)  Off-Balance Sheet Arrangements  During the first quarter of 2004, the Corporation adopted FASB Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46), which governs when certain variable interest entities should be consolidated in the financial statements of the Corporation. As a result, the Corporation deconsolidated the Trust from its financial statements. See Note 4 "Trust Preferred Securities" in the notes to consolidated financial statements of this report for further information.  Derivative Instruments and Hedging Activities  During the second quarter of 2004, the Corporation entered into a three-year interest rate swap to mitigate the risk of adverse interest rate movements on the value of future cash flows related to its investment in overnight federal funds sold. Pursuant to FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, (Statement 133) cash flow hedges are accounted for by recording the fair value of the derivative instrument on the consolidated balance sheets as either an asset or liability, with a corresponding offset recorded in other comprehensive income within shareholders' equity, net of tax. See Note 6, "Derivative Instruments and Hedging Activities" in the notes to consolidated financial statements of this report for further information.  Under the cash flow hedge accounting method, derivative gains and losses not effective in hedging the change in expected cash flows of the hedged item are recognized immediately in the consolidated income statements. At the hedge's inception and quarterly thereafter, a formal assessment is performed to determine whether changes in cash flows of the derivative instrument have been highly effective in offsetting changes in the cash flows of the hedged item and whether they are expected to be highly effective in the future. If it is determined a derivative instrument has not been or will not continue to be highly effective as a hedge, hedge accounting is discontinued.  Premises and Equipment  Premises and equipment are stated at cost less accumulated depreciation computed by the straight-line method over their useful lives or, for leasehold improvements, the remaining lease term.                                               55    1. Organization and Significant Accounting Policies (continued)  Comprehensive Income  Comprehensive income is defined as net income plus other comprehensive income, which, under existing accounting standards includes unrealized gains and losses on certain investments in debt securities and unrealized gains or losses on interest rate swaps. Comprehensive income is reported by the Corporation in the consolidated statements of shareholders' equity.  Earnings Per Share  Basic earnings per share is computed by dividing net income applicable to common shareholders by the weighted-average number of shares of common shares outstanding for the period. Diluted earnings per share is computed by dividing an adjusted net income by the sum of the weighted-average number of shares and the potentially dilutive shares that could be issued through stock award programs or convertible securities.  Fair Values of Financial Instruments  The fair values of financial instruments are estimated using relevant market information and other assumptions. Fair value estimates involve uncertainties and matters of significant judgment concerning several factors, especially in the absence of broad markets for particular items.  Stock-Based Compensation  The Corporation has granted stock options to certain employees and directors. The stock options are for a fixed number of shares with an exercise price which approximates the fair value of shares at the date of grant. As discussed further in Note 12, "Stock Option and Award and Employee Benefit Programs", the expense for director and employee compensation under stock option plans is based on Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, (APB 25), with expense reported only if options are granted with an exercise price below the market price on the grant date. Pro forma disclosures of net income and earnings per share are provided as if the fair value method of FASB Statement No. 123, Accounting for Stock-Based Compensation, as amended by FASB Statement No. 148, were used for stock-based compensation.                                              56    1. Organization and Significant Accounting Policies (continued)  For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over their vesting periods. The following table illustrates the effect on net income and earnings per share if the fair value recognition provisions of FASB Statement No. 123, as amended by FASB Statement No. 148, to stock-based compensation had been applied.                                                                      2005             2004             2003                                                            ----------------------------------------------------          Net income, as reported                               $    6,262,526  $     5,681,049   $     5,164,200      Add: stock-based compensation expense, net of related         taxes                                                     155,340         181,167           239,200      Less: total stock-based compensation expense         determined under fair-value-based method, net of         taxes                                                    (286,764)       (358,475)         (459,052)                                                            ----------------------------------------------------      Pro forma net income                                  $    6,131,102  $     5,503,741   $    4,944,348                                                            ====================================================       Earnings per share:         Basic, as reported                                     $     2.72     $      2.47        $     2.20         Basic, pro forma                                       $     2.67     $      2.39        $     2.11          Diluted, as reported                                   $     2.62     $      2.37        $     2.08         Diluted, pro forma                                     $     2.57     $      2.30        $     1.99   Reportable Segments  The Corporation has determined that it has one reportable segment, banking services. The Bank provides a full range of deposit, credit, and money management services to its target markets, which are small to medium size businesses, affluent executive and professional individuals, and not-for-profit organizations.                                              57   1. Organization and Significant Accounting Policies (continued)  Reclassifications  Certain amounts in the 2004 and 2003 consolidated financial statements have been reclassified to conform with the 2005 presentation.  Use of Estimates  The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.  2. New Accounting Pronouncements  In December 2004, the FASB issued Statement No. 123(R) (revised 2004), Share-Based Payment, (Statement 123 (R)) which is a revision of Statement No. 123, Accounting for Stock-Based Compensation. Statement 123(R) supersedes APB 25 and amends FASB Statement No. 95, Statement of Cash Flows. Statement 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized on the balance sheet at their fair values with a corresponding charge to expense. Pro forma disclosure will no longer be an alternative.  In April 2005, the Securities and Exchange Commission (SEC) announced that it would provide for a phased-in implementation process for Statement 123(R). The SEC would require that registrants that are not small business issuers adopt Statement 123 (R)'s fair value method of accounting for share-based payments to employees no later than the beginning of the first fiscal year beginning after June 15, 2005.                                               58   2. New Accounting Pronouncements (continued)  Statement 123(R) permits public companies to adopt its requirements using one of two methods:  1.            A "modified prospective" method in which compensation cost is               recognized beginning with the effective date (a) based on the               requirements of Statement 123(R) for all share-based payments               granted after the effective date and (b) based on the requirements               of Statement 123 for all awards granted to employees prior to the               effective date of Statement 123(R) that remain unvested on the               effective date.  2.            A "modified retrospective" method which includes the requirements               of the modified prospective method described above, but also               permits entities to restate based on the amounts previously               recognized under Statement 123 for purposes of pro forma               disclosures either (a) all prior periods presented or (b) prior               interim periods of the year of adoption.  As permitted by Statement 123, the Corporation currently accounts for share-based payments to employees using APB 25's intrinsic value method and, as such, generally recognizes no compensation cost for employee stock options. Had the Corporation adopted Statement 123(R) in prior periods, the impact of that standard would have approximated the impact of Statement 123 as described in the disclosure of pro forma net income and earnings per share in Note 1 to the consolidated financial statements. Statement 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will have the effect of reducing reported net operating cash flows and increasing reported net financing cash flows in periods after adoption. While the Corporation cannot estimate what those amounts will be in the future (because they depend on, among other things, when employees exercise stock options), the amount of operating cash flows recognized in prior periods for such excess tax deductions were $172,650, $817,610, and $456,013 in 2005, 2004, and 2003, respectively.                                              59   2. New Accounting Pronouncements (continued)  In September 2005, SEC voted to extend for an additional one year the compliance dates regarding its internal control reporting requirements rules for companies that are not accelerated filers. Under the new compliance schedule, a company that is not an accelerated filer will begin to be required to comply with the Section 404 requirements for its first fiscal year ending on or after July 15, 2007.  3. Restrictions on Cash and Due from Bank Accounts  The Corporation is required to maintain average reserve balances with the Federal Reserve Bank or as cash on hand or on deposit with a correspondent bank. The required amount of reserve was approximately $25,000 at December 31, 2005 and 2004.  4. Trust Preferred Securities  In September 2000, the Corporation established the Trust, a Connecticut statutory business trust, which subsequently issued $13,500,000 of company obligated mandatorily redeemable capital securities and $418,000 of common securities. The proceeds from the issuance of both the capital and common securities were used by the Trust to purchase from the Corporation $13,918,000 fixed rate junior subordinated debentures. The capital securities and debentures mature September 7, 2030, or upon earlier redemption as provided by the Indenture. The Corporation has the right to redeem the capital securities, in whole or in part, but in all cases in a principal amount with integral multiples of $1,000, on any March 7 or September 7 on or after September 7, 2010 at a premium, declining ratably to par on September 7, 2020. The capital securities and the debentures have a fixed interest rate of 10.60%, and are guaranteed by the Bank. The subordinated debentures are the sole assets of the Trust and the Corporation owns all of the common securities of the Trust. The net proceeds received by the Corporation from the sale of capital securities were used for general corporate purposes. The indenture, dated September 7, 2000, requires compliance with certain non-financial covenants.  In January of 2003, the FASB issued FIN 46 which requires the consolidation of entities in which an enterprise absorbs a majority of the entity's expected losses, receives a majority of the entity's expected residual returns, or both, as a result of ownership, contractual, or other variable interests in the entity.                                              60    4. Trust Preferred Securities (continued)  In the first quarter of 2004, as a result of applying the provisions of FIN 46, the Corporation was required to deconsolidate the Trust from its financial statements. The deconsolidation of the net assets and results of operations of the Trust had virtually no impact on the Corporation's consolidated financial statements or liquidity position since the Corporation continues to be obligated to repay the debentures held by the Trust and guarantees repayment of the capital securities issued by the Trust. The junior subordinated debt obligation issued to the Trust of $13,918,000 for December 31, 2005 and 2004, respectively, is reflected in the Corporation's consolidated balance sheets.  The junior subordinated debentures owed to the Trust and held by the Corporation qualify as Tier 1 capital for the Corporation under Federal Reserve Board guidelines. As a result of the issuance of FIN 46, the Federal Reserve Board determined that the deconsolidation of the Trust will not affect the qualifications of the capital securities as Tier 1 capital.  5. Investment Securities  The following is a summary of available-for-sale and held-to-maturity securities:                                                            Available-for-Sale Securities                                       -------------------------------------------------------------                                                            Gross           Gross         Estimated                                          Amortized       Unrealized      Unrealized        Fair                                            Cost             Gain            Loss           Value                                       -------------------------------------------------------------      December 31, 2005 U.S. treasury securities                $ 1,494,394     $        --     $     2,009     $ 1,492,385 U.S. government agencies                 70,000,000              --       1,525,300      68,474,700 Collateralized mortgage obligations          35,052              --              12          35,040                                       -------------------------------------------------------------                                         $71,529,446     $        --     $ 1,527,321     $70,002,125                                       ============================================================= December 31, 2004 U.S. treasury securities                $ 2,016,184     $        --     $     7,704     $ 2,008,480 U.S. government agencies                 91,000,000         112,700         769,680      90,343,020 Collateralized mortgage obligations          62,486              58              --          62,544                                       -------------------------------------------------------------                                         $93,078,670     $   112,758     $   777,384     $92,414,044                                       =============================================================                                           61   5. Investment Securities (continued)                                                             Held-to-Maturity Securities                                      --------------------------------------------------------------                                                           Gross            Gross         Estimated                                         Amortized       Unrealized       Unrealized         Fair                                           Cost             Gain             Loss           Value                                      --------------------------------------------------------------      December 31, 2005 Municipals                              $35,715,981     $   315,262     $   582,213     $35,449,030 Collateralized mortgage obligations      47,791,685              --       1,400,263      46,391,422 Other securities                            225,000           2,202           1,598         225,604                                      --------------------------------------------------------------                                         $83,732,666     $   317,464     $ 1,984,074     $82,066,056                                      ============================================================== December 31, 2004 Municipals                              $ 5,444,198     $   484,166     $        --     $ 5,928,364 Collateralized mortgage obligations      50,012,255              --         836,980      49,175,275 Other securities                            250,000           4,584             221         254,363                                      --------------------------------------------------------------                                         $55,706,453     $   488,750     $   837,201     $55,358,002                                      ==============================================================   The amortized cost, fair value, and weighted-average yield of investment securities at December 31, 2005, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because the issuers of the securities may have the right to call and/or prepay obligations prior to maturity.                                                               Available-for-Sale Securities                                       --------------------------------------------------------------------                                                                                                 Weighted-                                        Within 1                        5 to 10                   Average                                          Year        1 to 5 Years       Years         Total       Yield                                       --------------------------------------------------------------------       U.S. treasury and U.S. government          agency debentures            $ 1,494,394    $ 70,000,000      $    --     $71,494,394    3.32% Collateralized mortgage obligations            --          35,052                       35,052    4.56%                                       ---------------------------------------------------------- Amortized cost                        $ 1,494,394    $ 70,035,052      $    --     $71,529,446                                        ========================================================== Fair value                            $ 1,492,385    $ 68,509,740      $    --     $70,002,125                                       ========================================================== Weighted-average yield                      3.02%           3.33%           --           3.33%                                       ==========================================================                                                62   5. Investment Securities (continued)                                                            Held-to-Maturity Securities                                                                                                     Weighted-                                 Within 1                     5 to 10    Greater than                 Average                                   Year      1 to 5 Years      Years       10 Years        Total       Yield                               --------------------------------------------------------------------------------        Other securities              $    25,000     $  175,000    $   25,000  $        --    $   225,000    4.79% Municipals                             --      3,274,675     7,119,947   25,321,359     35,715,981    3.96% Collateral mortgage    obligations                         --             --     7,397,485   40,394,200     47,791,685    3.44%                               ===================================================================== Amortized costs               $    25,000     $3,449,675   $14,542,432  $65,715,559    $83,732,666                               ===================================================================== Fair value                    $    25,000     $3,645,344   $14,303,467  $64,092,245    $82,066,056                               ===================================================================== Weighted-average yield              6.98%          4.95%         3.93%        3.65%          3.67%                               =====================================================================    The Corporation held 82 investment securities as of December 31, 2005, of which the amortized cost was greater than market value. The majority of these investment securities were purchased during 2004 and 2005. Management does not believe any individual unrealized loss as of December 31, 2005, represents an other-than-temporary impairment. The unrealized losses relate primarily to securities issued by the U.S. treasury, FHLMC and Municipals. These unrealized losses are primarily attributable to changes in interest rates and individually were 4.2% or less of their respective amortized cost basis. The Corporation has both the intent and ability to hold these securities for a time necessary to recover the amortized cost.                                                          Available for Sale Securities                               ---------------------------------------------------------------------------                                         Less than 12 months                   Greater than 12 months                                   In an unrealized loss position         In an unrealized loss position                               -------------------------------------  ------------------------------------                                                                                                              Total                                Unrealized    Number                   Unrealized    Number                 Unrealized      Total                                   Loss         of       Estimated        Loss         of       Estimated      Loss       Estimated                                  Amount    Securities   Fair Value      Amount    Securities   Fair Value    Amount      Fair Value                               -------------------------------------  --------------------------------------------------------------          Investment securities:    U.S. treasury securities   $       949           2  $   991,055   $     1,060           1  $   501,330   $    2,009  $ 1,492,385    U. S. government agencies      337,399           1   19,662,601     1,187,901           3   48,812,099    1,525,300   68,474,700    Collateralized mortgage     obligations                        --          --           --            12           1       35,040           12       35,040                               ----------------------------------------------------------------------------------------------------- Total                         $   338,348  $        3  $20,653,656   $ 1,188,973  $        5  $49,348,469   $1,527,321  $70,002,125                               =====================================================================================================                                           63   5. Investment Securities (continued)                                           Held-to-Maturity Securities                     ------------------------------------------------------------------------                             Less than 12 Months                Greater than 12 Months                       In an Unrealized Loss Position       In an Unrealized Loss Position                     -----------------------------------   ----------------------------------                                                                                                 Total         Total                      Unrealized    Number                 Unrealized    Number                Unrealized    Estimated                         Loss         of       Estimated      Loss         of      Estimated      Loss         Fair                        Amount    Securities  Fair Value     Amount    Securities  Fair Value    Amount        Value                     --------------------------------------------------------------------------------------------------          Collateralized Mortgage Obligations          $        --      --     $        --  $ 1,400,263       3    $46,391,422  $1,400,263   $46,391,422 Municipal Bonds          582,213      66      29,643,479           --      --             --     582,213    29,643,479 Other securities              --      --              --        1,598       5        123,402       1,598       123,402                      -------------------------------------------------------------------------------------------------                      $   582,213      66     $29,643,479  $ 1,401,861       8    $46,514,824  $1,984,074   $76,158,303                      =================================================================================================    Investment securities with a carrying value of approximately $51,000,000 and $81,000,000 at December 31, 2005 and 2004, respectively, were pledged as collateral for bankruptcy accounts to the U.S. Department of Justice, Treasury Tax and Loan, and securities sold under agreements to repurchase.  6. Derivative Instruments and Hedging Activities  During the second quarter of 2004, the Corporation entered into a three-year interest rate swap to reduce the volatility of variable interest payments received on a portion of its overnight federal funds sold. This interest rate swap qualified as and is being accounted for as a cash flow hedge pursuant to Statement 133. Statement 133 requires changes in the fair value of cash flow hedges to be reported as a component of other comprehensive income, net of taxes to the extent that the hedge is effective.                                            December 31, 2005                          December 31, 2004                            ---------------------------------------------------------------------------------------                                                              Net                                       Net                               Notional    Derivative   Ineffectiveness   Notional    Derivative  Ineffectiveness                                Amount      Liability     Hedge Gains      Amount      Liability    Hedge Gains                                                           (Losses)                                   (Losses)                            ---------------------------------------------------------------------------------------           Receive fixed interest      rate swap                $20,000,000     $536,902       $ -         $20,000,000     $377,804      $ -                            =======================================================================================                                             64    7. Loans and Allowance for Loan Losses  Loans consist of the following at December 31:                                                      2005            2004                                                 -------------------------------       Residential loans secured by real estate    $ 245,939,099  $ 243,717,433      Commercial loans secured by real estate       138,075,123    127,772,683      Other commercial and industrial loans         252,528,082    235,704,551      Consumer loans                                 47,945,498     49,257,902                                                 -------------------------------      Total loans                                   684,487,802    656,452,569      Less allowance for loan losses                (8,346,390)     (7,795,803)                                                 -------------------------------      Total loans, net                            $ 676,141,412  $ 648,656,766                                                 ===============================  Activity in the allowance for loan losses was as follows:                                          2005            2004          2003                                     -------------------------------------------       Beginning balance                $7,795,803     $ 8,029,596    $7,227,000      Loans charged off (net)          (1,534,413)     (1,553,793)     (397,404)      Provision for loan losses         2,085,000       1,320,000     1,200,000                                     -------------------------------------------      Ending balance                   $8,346,390     $ 7,795,803    $8,029,596                                     ===========================================  A loan is considered delinquent when a payment has not been made more than 30 days past its contractual due date.  Loans past due over 30 days totaled $4,417,657 or .65% of total loans at December 31, 2005 compared to $3,019,524, or .46% of total loans at December 31, 2004.  Loans are considered to be impaired when it is determined that the obligor will not pay all contractual principal and interest when due. At December 31, 2005, 38 loans with a total balance of $3,648,491 were considered to be impaired. At December 31, 2004, 32 loans with a total balance of $3,119,000 were considered to be impaired. The average combined balance of impaired loans during 2005 and 2004 was $2,964,000 and $3,542,000, respectively. For loans classified as impaired at December 31, 2005, the contractual interest due and the actual accrued interest recorded and paid on those loans during 2005 was $371,357 and $109,922, respectively. The related allowance on impaired loans at December 31, 2005 was $865,268.                                             65   7. Loans and Allowance for Loan Losses (continued)  At December 31, 2005 and 2004, there were approximately $0 and $73,000 of loans greater than 90 days past due and still accruing interest.  Loans are made principally to borrowers in the central Indiana area.  8. Premises and Equipment  Premises and equipment consist of the following at December 31:                                                           2005           2004                                                     ----------------------------       Land and improvements                          $  2,270,444    $ 2,270,444      Building and improvements                         8,516,806      5,426,385      Construction in progress                            101,405      1,109,187      Leasehold improvements                            1,628,213      1,628,213      Furniture and equipment                           8,449,483      7,276,869                                                     ----------------------------                                                       20,966,351     17,711,098      Less accumulated depreciation and amortization   (9,093,955)    (8,034,830)                                                     ----------------------------      Net premises and equipment                     $ 11,872,396    $ 9,676,268                                                     ============================  Certain Corporation facilities and equipment are leased under various operating leases. Rental expense under these leases was $363,640, $260,378, and $247,822 for 2005, 2004, and 2003, respectively.  Future minimum rental commitments under noncancelable leases are:       2006                                              $   357,130      2007                                                  336,262      2008                                                  303,808      2009                                                  256,853      2010                                                  160,465      Thereafter                                            936,612                                                        -----------                                                         $2,351,130                                                        ===========                                             66   9. Mortgage Banking Activities  The Corporation may sell certain originated mortgage loans into the secondary market as part of its overall risk management and liquidity strategy. The Corporation typically retains the responsibility for servicing these mortgage loans in return for a servicing fee received from the purchaser. Mortgage loans sales of $18,372,384 and $32,995,345 occurred during 2005 and 2004 and gains of $82,493 and $157,145 were recognized on these loan sales in the respective periods. Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets. However, an asset representing the allocated basis of the mortgage servicing rights is recognized upon the sale of the underlying mortgage loan. The unpaid principal balances of mortgage loans serviced for others were $99,128,860 and $96,362,758 at December 31, 2005 and 2004, respectively.  Gains and losses on the sales of mortgage loans, along with the amortization of mortgage servicing rights is included in mortgage banking income on the statement of income.  The following table is a breakdown of mortgage servicing rights:                                                       2005              2004                                                  ------------------------------       Balance at January 1                        $ 1,571,712       $ 1,505,241      Plus: additions                                 173,327           311,332      Less: amortization                             (262,485)         (244,861)                                                  ------------------------------      Balance at December 31                        1,482,554         1,571,712      Less: valuation allowance                      (182,218)         (350,136)                                                  ------------------------------      Balance, net                                $ 1,300,336       $ 1,221,576                                                 ==============================  Mortgage servicing rights are amortized in proportion to and over the period of estimated net servicing income. Future amortization expense may be different depending on changes in the mortgage servicing pool, interest rates, and market conditions.                                                 67   10. Deposits  Deposits are summarized as follows:                                                          December 31                                                 2005                  2004                                           -----------------------------------      Demand accounts:         Noninterest-bearing               $ 171,857,446         $ 153,674,215         Interest bearing                    105,265,553            96,248,216                                           -----------------------------------      Total demand accounts                  277,122,999           249,922,431       Money market accounts                  348,796,150           316,175,384      Savings accounts                        11,158,554            10,831,226      Certificate accounts:         Over $100,000                        66,209,839            49,039,847         Under $100,000                       71,028,173            67,462,157                                           -----------------------------------      Total deposits                       $ 774,315,715         $ 693,431,045                                           ===================================   At December 31, 2005, the stated maturities of time deposits are as follows:                                                                      Greater                                                     Less Than         Than                                                      $100,000       $100,000                                                    ---------------------------       Mature in three months or less                  $13,826,565   $17,234,147      Mature after three months through six months      9,442,103     9,729,509      Mature after six months through twelve months    16,877,266    19,858,460      Mature in 2007                                   16,492,867    11,913,132      Mature in 2008                                    5,655,044     2,242,375      Thereafter                                        8,734,328     5,232,216                                                    ---------------------------                                                      $71,028,173   $66,209,839                                                    ===========================                                             68   11. Other Borrowings  Security repurchase agreements are short-term borrowings that generally mature within one to three days from the transaction date. At December 31, 2005 and 2004, the weighted-average interest rate on these borrowings was 2.51% and 0.74%, respectively.  All of the FHLB advances have a fixed interest rate and require monthly interest payments. The principal balances for each of the advances is due at maturity. The advances are collateralized by a pledge covering certain of the Corporation's mortgage loans.  A schedule of the FHLB advances as of December 31, 2005 and 2004 is as follows:                               2005                                                       2004   --------------------------------------------------------   -------------------------------------------------------           Amount             Rate          Maturity                   Amount             Rate         Maturity   --------------------------------------------------------   -------------------------------------------------------                $       5,000,000      5.43%         03/16/2006              $     5,000,000       5.14%        08/01/2005              5,000,000      5.32%         05/08/2006                    3,000,000       5.39%        10/03/2005              8,000,000      4.19%         07/24/2007                    5,000,000       5.43%        03/16/2006              3,000,000      5.57%         08/13/2007                    5,000,000       5.32%        05/08/2006              3,000,000      5.55%         10/02/2008                    8,000,000       4.19%        07/24/2007                                                                         3,000,000       5.57%        08/13/2007                                                                         3,000,000       5.55%        10/02/2008     ------------------------                                   -------------------------      $    24,000,000                                              $    32,000,000   ========================                                   =========================   The Corporation maintains a revolving credit agreement with Harris Trust and Savings Bank in the amount of $5,000,000 that will mature on September 30, 2006. At December 31, 2005 and 2004, $0 was outstanding. The Corporation pays a commitment fee of .25% per annum on the average daily unused portion of the line of credit.  The Bank entered into a $5,000,000 subordinated term loan agreement with Harris Trust and Savings Bank dated June 6, 2003. The first advance was made in the amount of $2,000,000 on June 6, 2003. The second advance was made in the amount of $3,000,000 on May 3, 2004. The final maturity date of the loan is June 6, 2012. The outstanding principal balance is permitted to be repaid prior to maturity with prior consent from the Federal Reserve. There are many different interest rate options available. Each floating rate option is available for a fixed term of 1-3 months. The Bank is currently                                              69   11. Other Borrowings (continued)  paying adjusted three-month LIBOR plus 2.0% which equates to 6.42% at December 31, 2005. Interest payments are due at the expiration of the fixed term option.  12. Stock Option and Award and Employee Benefit Programs  The Board of Directors and the shareholders of the Corporation adopted stock option plans for directors and key employees at the initial formation of the Bank in 1993. The Board of Directors authorized 130,000 shares in 1993, 90,000 shares in 1996, 150,000 shares in 1999, and an additional 120,000 during 2002 to be reserved for issuance under the Corporation's stock option plan. In May 2003, the director stock option plan was dissolved, and in June 2005, the key employee stock option plan was dissolved; however, all of the options in these plans remain exercisable for a period of ten years from the date of issuance, subject to the terms and conditions of the plans.  Shares subject to outstanding options are summarized as follows:                                         2005                          2004                          2003                          -----------------------------------------------------------------------------------------                                          Weighted-                       Weighted-                   Weighted-                                           Average                         Average                     Average                                           Exercise                       Exercise                     Exercise                             Options        Price          Options          Price        Options        Price                          -----------------------------------------------------------------------------------------        Options outstanding at    beginning of year                              278,056       $21.99         379,695         $19.15        391,557       $18.75 New options    granted                         -         -              6,892          33.92          5,800        29.98 Options exercised            (19,531)       14.70        (101,931)         11.70        (17,662)       13.79 Options forfeited             (1,000)       27.75          (6,600)         28.52              -         -                          ------------                 ------------                  ------------ Options outstanding at    end of year               257,525       $22.52         278,056         $21.99        379,695       $19.15                          ============                 ============                  ============  Exercisable at year end      173,820       $19.77         187,321         $19.17        266,881       $16.25                                             70   12. Stock Option and Award and Employee Benefit Programs (continued)  There were no options granted during 2005. The weighted-average fair value of the options granted during 2004 and 2003 was $12.19, and $10.43, respectively.  As of December 31, 2005, total shares which may be purchased under the plans is 257,525 with option prices ranging from $12.50 to $34.50. The weighted-average remaining contractual life of those options is five years.  The following table is a breakdown of the available options which can be exercised with their respective weighted-average exercise price and weighted-average contractual life:                                                                 Weighted-Average        Number of Options                    Weighted-Average   Contractual Life           Outstanding          Range         Exercise Price        (Years)      --------------------------------------------------------------------------              107,700        $12.50-$19.00        $16.87              2.7              142,933        $20.00-$29.50        $26.23              6.0                6,892        $31.25-$34.50        $33.75              8.6      --------------------------------------------------------------------------              257,525        $12.50-$34.50        $22.52              4.7  The Board of Directors also approved a restricted stock plan in 1993. Shares reserved by the Corporation for the restricted stock plan include 50,000 shares in 1993, 20,000 shares in 1996, 40,000 in 1999, and an additional 55,000 shares in 2002. Under this plan, shares were issued in the proceeding years as detailed in the following table. The Corporation recorded each stock issuance in shareholders' equity at an amount equal to the fair market value of the shares at the grant date with an offsetting amount recorded to unearned compensation (contra-equity). The unearned compensation is amortized to salary expense over the vesting period. In June 2005, the restricted stock plan was dissolved and no additional restricted stock will be issued from this plan.                                                   71   12. Stock Option and Award and Employee Benefit Programs (continued)     Fiscal Year    Number of        Shares         Unearned     Ended     Shares Issued     Forfeited     Compensation     Vesting Schedule  Date Fully Vested - ---------------------------------------------------------------------------------------------------            1997          19,500            700         $242,332         20% per year    January 1, 2002     1998           1,000              -           14,000         20% per year    January 1, 2003     1999          36,000          2,000          646,000         5 year cliff    June 30, 2004     2000           5,000              -          100,000         5 year cliff    March 16, 2005     2001           3,000              -           69,000         5 year cliff    January 26, 2006     2002           1,500              -           37,500         5 year cliff    June 11, 2006     2002           6,500              -          178,750         4 year cliff    August 31, 2006     2002          30,800            500          845,200         5 year cliff    June 20, 2007     2003           1,700              -           50,150         5 year cliff    January 8, 2008     2003             700              -           21,875         5 year cliff    July 17, 2008     2004           3,100            700           82,800         5 year cliff    December 16, 2009     2005               -           (300)               -                    -           -   During 2005, certain officers/directors of the Corporation exercised their options to purchase 19,531 shares of common stock. The exercise price ranged from $10.00 to $27.50 with a weighted-average exercise price of $14.70 and a weighted-average fair market value of the stock was $37.30.  During 2004, certain officers/directors of the Corporation exercised their options to purchase 101,931 shares of common stock. The exercise price ranged from $10.00 to $27.50 with a weighted-average exercise price of $11.70 and a weighted-average fair market value of the stock was $32.99.  During 2003, certain officers/directors of the Corporation exercised their warrants/options to purchase 55,662 shares of common stock. The exercise price ranged from $10.00 to $27.50 with a weighted average exercise price of $11.20 and a weighted average fair market value of the stock was $31.40.  Due to the exercise of the options, the Corporation received a deduction for tax purposes for the difference between the fair value of the stock at the date of the exercise and the exercise price. In accordance with APB 25, the Corporation has recorded an income tax benefit of $172,650 and $817,610, 456,013 as additional paid-in capital during 2005, 2004 and 2003, respectively.                                                72   12.  Stock Option and Award and Employee Benefit Programs (continued)  The Corporation has elected to follow APB 25 and related Interpretations in accounting for its director and employee stock options and restricted stock. Under APB 25, because the exercise price of the Corporation's director and employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized.  The fair value for the options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions: a dividend yield; a volatility factor of the expected market price of the Corporation's common stock; an expected life of the options of ten years; and the risk-free interest rate. The fair value for the restricted stock is estimated to equal the fair value of unrestricted stock and to be restricted for five years.  During 2005, the Board of Directors and the shareholders of the Corporation adopted The National Bank of Indianapolis Corporation 2005 Equity Incentive Plan. The maximum number of shares to be delivered upon exercise of all options and restricted stock awarded under the Plan will not exceed 333,000 shares. There were no grants during 2005 under this plan.  The following is a summary of the weighted-average assumptions used in the Black-Scholes pricing model:          Year    Dividend Yield     Volatility Factor      Risk Free Rate        -------------------------------------------------------------------         2005          -                    -                    -         2004          0%               0.054485                4.4%         2003          0%                 0.001               4.3%-4.4%   The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility.  The Corporation has a trusteed 401(k) retirement savings plan covering substantially all employees and encouraging employee contributions. Employer contributions include Board of Director discretionary contributions and the matching of a portion of employee contributions. The Corporation expensed approximately $264,000, $201,000, and $211,000 for employer contributions to the plan during 2005, 2004, and 2003, respectively.                                                 73   13. Dividend and Loan Limitation and Regulatory Capital Ratios  Dividends from the Bank to the Corporation may not exceed the undivided profits of the Bank (included in consolidated retained earnings) without prior approval of a federal regulatory agency. In addition, federal banking laws limit the amount of loans the Bank may make to the Corporation, subject to certain collateral requirements. No loans were made during 2005 or 2004 by the Bank to the Corporation. The Bank declared a $1,300,000 and $1,000,000 dividend to the Corporation during 2005 and 2004, respectively.  The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory-and possibly additional discretionary-actions by regulators that, if undertaken, could have a direct material effect on the Bank's consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.  Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of total qualifying capital to total adjusted asset (as defined). Management believes, as of December 31, 2005 and 2004, that the Bank meets all capital adequacy requirements to which it is subject.  As of December 31, 2005, the most recent notification from the comptroller of the currency categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based, and leveraged capital ratios as set forth in the following table. There are no conditions or events since that notification that management believes have changed the institution's category.                                                74   13. Dividend and Loan Limitation and Regulatory Capital Ratios (continued)  The Bank's actual capital amounts and ratios are also presented in the following table:                                                                                                 To be well                                                                                       Capitalized under Prompt                                                                      For Capital          Corrective Action                                              Actual                Adequacy Purposes           Provisions                                 ------------------------------------------------------------------------------ As of December 31, 2005               Amount        Ratio          Amount      Ratio      Amount        Ratio                                 ------------------------------------------------------------------------------        Tier 1 risk-based capital           $64,121,192      9.0%        $28,491,721    4.0%    $42,737,581      6.0%  Total risk-based capital             77,467,582     10.9%         56,983,441    8.0%    $71,229,301     10.0%  Leveraged capital                    64,121,192      6.8%         37,563,394    4.0%    $46,954,242      5.0%  As of December 31, 2004  Tier 1 risk-based capital           $57,978,004      8.6%        $26,995,059    4.0%    $40,492,588      6.0%  Total risk-based capital             70,773,807     10.5%        $53,990,118    8.0%    $67,487,647     10.0%  Leveraged capital                    57,978,004      6.5%        $35,705,850    4.0%    $44,632,312      5.0%                                                   75   14. Related Parties  Certain directors and principal shareholders of the Corporation, including their families and companies in which they are principal owners, are loan customers of and have other transactions with the Corporation or its subsidiary in the ordinary course of business. The aggregate dollar amount of these loans was approximately $13,673,699 and $7,129,516 on December 31, 2005 and 2004, respectively. All of the loans made were on substantially the same terms, including interest rate and collateral, as those prevailing at the time for comparable transactions with unrelated parties. The amounts do not include loans made in the ordinary course of business to companies in which officers or directors of the Corporation are either officers or directors, but are not principal owners, of such companies. During 2005, new loans to these parties amounted to $3,560,997, draws amounted to $3,083,015, and repayments amounted to $99,829.  15. Income Taxes  The Corporation applies a federal income tax rate of 34% and a state tax rate of 8.5% in the computation of tax expense or benefit. The provision for income taxes consisted of the following:                                              2005          2004          2003                                        -----------------------------------------       Current tax expense                 $4,300,157    $2,940,441    $3,592,053      Deferred tax (benefit) expense        (421,841)      194,557      (379,263)                                        -----------------------------------------                                          $3,878,316    $3,134,998    $3,212,790                                        =========================================                                                    76   15. Income Taxes (continued)  The statutory tax rate reconciliation is as follows:                                                                  2005                2004                2003                                                       --------------------------------------------------------          Income before provision for income tax                $10,140,842         $8,816,047          $8,376,990                                                       ========================================================       Tax expense at federal statutory rate                 $ 3,447,886         $2,997,456          $2,848,177       Increase (decrease) in taxes resulting from:           State income taxes                                   524,884            454,644             485,239           Deferred compensation                                (28,135)          (154,275)                  -           Tax-exempt interest                                 (135,688)           (95,303)            (96,360)           Other                                                 69,369            (67,524)            (24,266)                                                       --------------------------------------------------------                                                            $ 3,878,316         $3,134,998          $3,212,790                                                       ========================================================       Effective tax rate                                      38.24%             35.56%              38.35%    Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets are recognized for the estimated tax effects attributable to deductible temporary differences and operating loss carryforwards, net of any valuation allowances for amounts which may not be realized by the Corporation.                                               77   15. Income Taxes (continued)  The components of the Corporation's net deferred tax assets in the consolidated balance sheets as of December 31 are as follows:                                        2005             2004                                 -------------------------------  Deferred tax assets:    Allowance for loan losses       $ 3,306,005      $ 3,087,918    Other                             1,785,184        1,145,500                                 ------------------------------- Total deferred tax assets            5,091,189        4,233,418 Deferred tax liability:    Mortgage servicing rights          (515,063)        (483,866)                                 ------------------------------- Total deferred tax liabilities        (515,063)        (483,866)                                 ------------------------------- Net deferred tax assets            $ 4,576,126      $ 3,749,552                                 ===============================  16. Commitments and Contingencies  A summary of the contractual amount of commitments to extend credit is as follows:                                                     2005             2004                                              -------------------------------- Commercial credit lines                         $167,641,092     $181,996,327 Revolving home equity and credit card lines       85,400,798       82,362,909 Standby letters of credit                         10,867,093       13,538,965 Other loans                                        2,860,892        2,811,446                                              --------------------------------                                                 $266,769,875     $280,709,647                                              ================================  Commitments to extend credit are agreements to lend. Since many of the commitments to extend credit may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash-flow requirements.  Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of the underlying contract with the third party.                                          78   16. Commitments and Contingencies (continued)  The credit risk associated with loan commitments and standby letters of credit is essentially the same as that involved in extending loans to customers and is subject to normal credit policies. Collateral may be obtained based on management's credit assessment of the customer.  17. Fair Value of Financial Instruments  FASB Statement No. 107, Disclosures About Fair Value of Financial Instruments, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. Statement No. 107 excludes certain financial instruments and all non financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Corporation.  The following methods and assumptions were used by the Corporation in estimating its fair value disclosures for financial instruments:       Cash and short-term investments: The carrying amounts reported in the      consolidated balance sheets for cash and short-term investments approximate      those assets' fair values due to the short maturity of those assets.       Investment securities (including collateralized mortgage obligations and      stock in federal banks): Fair values for investment securities are based on      quoted market prices, where available. If quoted market prices are not      available, fair values are based on quoted market prices of comparable      instruments.       Loans receivable: For variable-rate loans that re-price frequently and with      no significant change in credit risk, fair values are based on carrying      values. The fair values for all other loans are estimated using discounted      cash flow analyses, using interest rates currently being offered for loans      with similar terms to borrowers of similar credit quality. The carrying      amount of accrued interest approximates its fair value.                                          79    17. Fair Value of Financial Instruments (continued)       Deposits: The fair values disclosed for demand deposits, including      interest-bearing and non-interest bearing accounts, passbook savings, and      certain types of money market accounts are, by definition, equal to the      amount payable on demand at the reporting date (i.e., their carrying      amounts). Fair values for fixed-rate certificates of deposit are estimated      using a discounted cash flow calculation that applies interest rates      currently being offered on certificates to a schedule of aggregated      expected monthly maturities on time deposits.       Security repurchase agreements: The carrying amounts of borrowings under      repurchase agreements approximate their fair values due to variable      interest rates.       FHLB advances: The fair value of FHLB advances are based upon discounted      cash flows using rates for similar advances with the same maturities.       Subordinated debt: The carrying amounts of borrowings under subordinated      debt approximate their fair values due to variable interest rates.       Capital securities: The fair value of the preferred capital securities are      based upon discounted cash flows using rates for similar securities with      the same maturities.       Junior subordinated debt: The fair value of the preferred capital      securities are based upon discounted cash flows using rates for similar      securities with the same maturities.       Off-balances-sheet instruments: Due to variable interest rates, the fair      value of commitments to extend credit approximate the carrying value. Fair      values for derivative instruments are based on cash flow projection models      acquired from third parties.                                          80    17. Fair Value of Financial Instruments (continued)  The estimated fair values of the Corporation's financial instruments at December 31 are as follows:                                                    2005                               2004                                    ---------------------------------------------------------------                                      Carrying          Fair            Carrying          Fair                                       Amount           Value             Amount          Value                                    ---------------------------------------------------------------      Assets Cash and due from banks            $ 32,223,665     $ 32,223,665     $ 22,824,622     $ 22,824,622 Federal funds sold                   33,214,446       33,214,446       31,766,783       31,766,783 Reverse repurchase agreements                                       5,000,000        5,000,000        5,000,000        5,000,000 Investment securities    available-for-sale                70,002,125       70,002,125       92,414,044       92,414,044 Investment securities    held-to-maturity                  83,732,666       82,066,056       55,706,453       55,358,002 Net loans                           676,141,412      669,912,825      648,656,766      650,492,553 Stock in federal banks                3,735,800        3,735,800        3,678,300        3,678,300  Liabilities Deposits                            774,315,715      772,895,870      693,431,045      692,209,547 Security repurchase agreements                                      53,556,402       53,556,402       84,162,626       84,162,626 FHLB advances                        24,000,000       24,020,353       32,000,000       32,753,126 Subordinated debt                     5,000,000        4,492,063        5,000,000        4,997,851 Capital securities                           --               --               --               -- Junior subordinated debentures       13,918,000       17,464,789       13,918,000       15,571,225 Interest rate swap                      536,902          536,902          377,804          377,804 Off-balance-sheet instruments Commitments to extend credit                 --               --               --               --                                            81   18. Shareholders' Equity  The following is a summary of activity in accumulated other comprehensive income:                                                              2005           2004           2003                                                     -------------------------------------------     Accumulated unrealized gains (losses) on securities   $  (401,367)   $    11,078    $   520,729    available for sale at January 1, net of tax Net unrealized losses for period                         (862,696)      (599,230)      (807,042) Tax benefit                                               341,714        237,355        319,669 Reclassification adjustment of losses included in    net income                                                  --        (83,739)       (36,891) Tax benefit                                                    --         33,169         14,613                                                     ------------------------------------------- Ending other comprehensive income (loss) at           $  (922,349)   $  (401,367)   $    11,078    December 31, net of tax                                                     ===========================================  Accumulated unrealized gains on swap at January 1,    net of tax                                         $  (228,156)   $        --    $        -- Net unrealized loss for period                           (159,098)      (377,804)            -- Tax benefit                                                63,019        149,648             --                                                     ------------------------------------------- Ending other comprehensive loss at December 31, net   $  (324,235)   $  (228,156)   $        --    of tax                                                     ===========================================  Accumulated other comprehensive income (loss) at    January 1, net of tax                              $  (629,523)   $    11,078    $   520,729 Other comprehensive loss, net of tax                     (617,061)      (640,601)      (509,651)                                                     ------------------------------------------- Accumulated other comprehensive income (loss) at      $(1,246,584)   $  (629,523)   $    11,078    December 31, net of tax                                                     ===========================================                                           82   19. Earnings Per Share  Basic net income per common share is computed by dividing net income applicable to common stock by the weighted average number of shares of common stock outstanding during the period. Diluted net income per common share is computed by dividing net income applicable to common stock by the weighted average number of shares, nonvested stock and dilutive common stock equivalents outstanding during the period. Common stock equivalents consist of common stock issuable under the assumed exercise of warrants and stock options granted under the Corporation's stock plans, using the treasury stock method. A computation of earnings per share follows:                                                             2005         2004         2003                                                      -------------------------------------     Basic EPS Calculation: Basic average shares outstanding                       2,298,593    2,302,522    2,343,460                                                      =====================================  Net income                                            $6,262,526   $5,681,049   $5,164,200                                                      =====================================  Basic earnings per common share                       $     2.72   $     2.47   $     2.20                                                      =====================================  Diluted EPS Calculation: Average shares outstanding                             2,298,593    2,302,522    2,343,460 Nonvested restricted stock                                26,820       30,206       49,620 Net effect of the assumed exercise of stock options                                                           62,025       61,643       89,919                                                      ------------------------------------- Diluted average shares                                 2,387,438    2,394,371    2,482,999                                                      =====================================  Net income                                            $6,262,526   $5,681,049   $5,164,200                                                      =====================================  Diluted earnings per common share                     $     2.62   $     2.37   $     2.08                                                      =====================================                                            83   20. Parent Company Financial Statements  The condensed financial statements of the Corporation, prepared on a parent company unconsolidated basis, are presented as follows:  Balance Sheet                                                                                    December 31                                                                             2005           2004                                                                         --------------------------    Assets Cash                                                                     $ 1,871,388   $ 2,449,327 Investment in subsidiary                                                  63,004,642    57,470,639 Other assets                                                               1,350,305     1,296,944                                                                         -------------------------- Total assets                                                              66,226,335   $61,216,910                                                                         ==========================  Liabilities and shareholders' equity Other liabilities                                                        $   725,813   $   755,223 Junior subordinated debentures owed to unconsolidated subsidiary trust    13,918,000    13,918,000                                                                         -------------------------- Total liabilities                                                         14,643,813    14,673,223  Shareholders' equity                                                      51,582,522    46,543,687                                                                         -------------------------- Total liabilities and shareholders' equity                               $66,226,335   $61,216,910                                                                         ==========================                                            84   20. Parent Company Financial Statements (continued)  Statements of Income                                                            Years Ended December 31                                                   2005           2004           2003                                              ------------------------------------------     Interest income                               $    32,879    $    26,579    $    76,863 Interest expense                                1,487,982      1,488,053      1,590,506                                              ------------------------------------------ Net interest income                            (1,455,103)    (1,461,474)    (1,513,643)                                              ------------------------------------------ Other income                                       44,308         44,308             -- Other operating expenses: Unearned compensation amortization                257,227        299,995        396,092 Other expenses                                    334,703        306,430        305,923                                              ------------------------------------------ Total other operating expenses                    591,930        606,425        702,015                                              ------------------------------------------ Net loss before tax benefit and equity in    undistributed net income of subsidiary                                                (2,002,725)    (2,023,591)    (2,215,658) Tax benefit                                       814,187        949,289        817,343                                              ------------------------------------------  Net loss before equity in undistributed net    income of subsidiary                                                (1,188,538)    (1,074,302)    (1,398,315)  Equity in undistributed net income of    subsidiary                                   7,451,064      6,755,351      6,562,515                                              ------------------------------------------ Net income                                    $ 6,262,526    $ 5,681,049    $ 5,164,200                                              ==========================================                                              85   20. Parent Financial Statements (continued)  Statements of Cash Flows                                                                             Years Ended December 31                                                                     2005           2004           2003                                                             ---------------------------------------------      Operating activities Net income                                                      $ 6,262,526    $ 5,681,049    $ 5,164,200 Adjustments to reconcile net income to net cash provided by    (used by) operating activities:      Undistributed net income of subsidiary                      (7,451,064)    (6,755,351)    (6,562,516)      Income tax benefit from exercise of options and warrants       172,650        817,610        456,013      Stock compensation                                              99,793         99,990        110,000      Unearned compensation amortization                             257,227        299,995        396,092      Increase(decrease) in other assets                             (53,361)           830       (337,378)      Increase (decrease) in other liabilities                       (29,410)       113,087       (419,942)                                                             --------------------------------------------- Net cash provided by (used by) operating activities                (741,639)       257,210     (1,193,531)  Investing activities Dividends from The National Bank of Indianapolis                  1,300,000      1,000,000      1,650,000                                                             --------------------------------------------- Net cash provided by investing activities                         1,300,000      1,000,000      1,650,000  Financing activities Proceeds from issuance of stock                                     556,922      1,386,574        869,146 Repurchase of stock                                              (1,693,222)    (3,779,334)    (5,054,547)                                                             --------------------------------------------- Net cash used by financing activities                            (1,136,300)    (2,392,760)    (4,185,401)                                                             ---------------------------------------------  Decrease in cash and cash equivalents                              (577,939)    (1,135,550)    (3,728,932)  Cash and cash equivalents at beginning of year                    2,449,327      3,584,877      7,313,809                                                             --------------------------------------------- Cash and cash equivalents at end of year                        $ 1,871,388    $ 2,449,327    $ 3,584,877                                                             =============================================                                               86   21. Quarterly Results of Operations (Unaudited)  The following is a summary of the unaudited quarterly results of operations for the years ended December 31, 2005 and 2004:                                     March 31         June 30       September 30    December 31                                 -------------------------------------------------------------      2005  Interest income                  $11,257,015     $12,360,413     $13,429,898     $13,799,781 Interest expense                   4,244,692       5,086,617       5,572,173       6,002,333                                 -------------------------------------------------------------  Net interest income                7,012,323       7,273,796       7,857,725       7,797,448  Provision for loan losses            425,000         495,000         565,000         600,000 Other operating income             1,747,392       1,909,241       1,937,129       1,961,678 Other operating expense            6,041,241       6,232,053       6,505,891       6,491,705                                 -------------------------------------------------------------  Net income before tax              2,293,474       2,455,984       2,723,963       2,667,421  Federal and state income tax         864,141         967,939       1,058,942         987,294                                 -------------------------------------------------------------  Net income after tax             $ 1,429,333     $ 1,488,045     $ 1,665,021     $ 1,680,127                                 ============================================================  Basic earnings per share         $      0.62     $      0.65     $      0.72     $      0.73  Diluted earnings per share       $      0.60     $      0.62     $      0.70     $      0.70   2004  Interest income                  $ 8,758,927     $ 9,057,485     $ 9,894,386     $10,812,759 Interest expense                   2,980,095       2,902,881       3,323,504       3,755,826                                 -------------------------------------------------------------  Net interest income                5,778,832       6,154,604       6,570,882       7,056,933  Provision for loan losses            300,000         300,000         330,000         390,000 Other operating income             1,732,917       1,832,407       1,816,372       1,794,812 Other operating expense            5,476,831       5,725,926       5,672,721       5,726,234                                 -------------------------------------------------------------  Net income before tax              1,734,918       1,961,085       2,384,533       2,735,511  Federal and state income tax         685,628         439,384         910,503       1,099,483                                 -------------------------------------------------------------  Net income after tax             $ 1,049,290     $ 1,521,701     $ 1,474,030     $ 1,636,028                                 ============================================================  Basic earnings per share         $      0.46     $      0.66     $      0.64     $      0.71 Diluted earnings per share       $      0.43     $      0.64     $      0.61     $      0.69                                             87
None.
(a)      Evaluation of Disclosure Controls and Procedures. The Corporation's          principal executive officer and principal financial officer have          concluded that the Corporation's disclosure controls and procedures (as          defined under Rules 13(a)-15(e) or Rules 15d-15(e) under the Securities          Exchange Act of 1934, as amended), based on their evaluation of these          controls and procedures as of the period covered by this Form 10-K, are          effective.  (b)      Changes in Internal Controls. There has been no change in the          Corporation's internal controls over financial reporting that has          occurred during the Corporation's last fiscal quarter that has          materially affected or is reasonable likely to materially affect, the          Corporation's internal control over financial reporting.            The Corporation's management, including its principal executive officer          and principal financial officer, does not expect that the Corporation's          disclosure controls and procedures and other internal controls will          prevent all error and all fraud. A control system, no matter how well          conceived and operated, can provide only reasonable, not absolute,          assurance that the objectives of the control system are met. Further,          the design of a control system must reflect the fact that there are          resource constraints, and the benefits of controls must be considered          relative to their costs. Because of the inherent limitations in all          control systems, no evaluation of controls can provide absolute          assurance that all control issues and instances of fraud, if any,          within the company have been detected. These inherent limitations          include the realities that judgments in decision-making can be faulty,          and that breakdowns can occur because of simple error or mistake.          Additionally, controls can be circumvented by the individual acts of          some persons, by collusion of two or more people, or by management          override of the control.            The design of any system of controls also is based in part upon certain          assumptions about the likelihood of future events, and there can only          be reasonable assurance that any design will succeed in achieving its          stated goals under all potential future conditions; over time, control          may become inadequate because of changes in conditions, or the degree          of compliance with the policies or procedures may deteriorate. Because          of the inherent limitations in a cost-effective control system,          misstatements due to error or fraud may occur and not be detected.            Appearing immediately following the Signatures section of this report          there are Certifications of the Corporation's principal executive          officer and principal financial officer. The Certifications are          required in accord with Section 302 of the Sarbanes-Oxley Act of 2002          (the "Section 302 Certifications"). This Item of this report which you          are currently reading is the information concerning the Evaluation          referred to in the Section 302 Certifications and this information          should be read in conjunction with the Section 302 Certifications for a          more complete understanding of the topics presented.                                          88
Not Applicable                                                                        89   PART III  Items 10.  11, 12, 13 and 14 - ----------------------------           In accordance with the provisions of General Instruction G to Form 10-K, the information required for the required disclosures under Items 10, 11, 12, 13 and 14 are not set forth herein because the Corporation intends to file with the Securities and Exchange Commission a definitive Proxy Statement pursuant to Regulation 14A not later than 120 days following the end of its 2005 fiscal year, which Proxy Statement will contain such information. The information required by Items 10, 11, 12, 13 and 14 is incorporated herein by reference to such Proxy Statement.                                                                    90   Part IV
Item 11.          Executive Compensation                                                    90
Item 13.          Certain Relationships and Related Transactions                            90
PART IV
(a)      (1) The following consolidated financial statements are included in              Item 8:                                                                                   Page Number in                                                                                        10-K             Independent Auditors' Report on Consolidated Financial Statements               47           Consolidated Balance Sheets December 31, 2005 and 2004                          48           Consolidated Statements of Income                                               49          For the years ended December 31, 2005, 2004 and 2003           Consolidated Statements of Shareholders' Equity                                 50          For the years ended December 31, 2005, 2004 and 2003           Consolidated Statements of Cash Flows                                           51          For the years ended December 31, 2005, 2004, and 2003           Notes to consolidated Financial Statements                                      52            (2)      See response to Item 15 (a)(1). All other financial statement                   schedules have been omitted because they are not applicable,                   or the required information is shown in the consolidated                   financial statements or notes thereto.           (3)      List of Exhibits                                            91   EXHIBIT INDEX           3.01     Articles of Incorporation of the Corporation, filed as Exhibit                   3(i) to the Corporation's Form 10-QSB as of September 30, 1995                   are incorporated by reference and Articles of Amendment filed                   as Exhibit 3(i) to the Form 10-K for the fiscal year ended                   December 31, 2001           3.02     Bylaws of the Corporation, filed as Exhibit 3(ii) to the                   Corporation's Form 10-Q as of September 30, 1996 are                   incorporated by reference           10.01*   1993 Key Employees' Stock Option Plan of the Corporation, as                   amended, filed as Exhibit 10(a) to the Form 10-K for the                   fiscal year ended December 31, 2004 is incorporated by                   reference           10.02*   1993 Directors' Stock Option Plan of the Corporation, as                   amended, filed as Exhibit 10(b) to the Corporation's Form 10-Q                   as of June 30, 2001 is incorporated by reference           10.03*   1993 Restricted Stock Plan of the Corporation, as amended,                   filed as Exhibit 10(c) to the Form 10-K for the fiscal year                   ended December 31, 2004 is incorporated by reference           10.04*   Form of agreement under the 1993 Key Employees Stock Option                   Plan, filed as Exhibit 10(d) to the Form 10-K for the fiscal                   year ended December 31, 2004 is incorporated by reference           10.05*   Form of agreement under the 1993 Restricted Stock Plan, filed                   as Exhibit 10(e) to the Form 10-K for the fiscal year ended                   December 31, 2004 is incorporated by reference           10.06*   Schedule of Directors Compensation Arrangements, filed as                   Exhibit 10(f) to the Form 10-K for the fiscal year ended                   December 31, 2004 is incorporated by reference           10.07*   Schedule of Named Executive Officers Compensation                   Arrangements, as amended           10.08*   The National Bank of Indianapolis Corporation 2005 Equity                   Incentive Plan, filed as Exhibit 10.01 to the Corporation's                   Form 8-K dated June 22, 2005 is incorporated by reference           10.09*   Form of Restricted Stock Award Agreement for The National Bank                   of Indianapolis Corporation 2005 Equity Incentive Plan, filed                   as Exhibit 10.02 to the Corporation's Form 8-K dated June 22,                   2005 is incorporated by reference           10.10*   Form of Stock Option Award Agreement for The National Bank of                   Indianapolis Corporation 2005 Equity Incentive Plan, filed as                   Exhibit 10.03 to the Corporation's Form 8-K dated June 22,                   2005 is incorporated by reference           10.11*   Employment Agreement dated December 15, 2005 between Morris L.                   Maurer and the Corporation, filed as Exhibit 10.06 to the                   Corporation's Form 8-K dated December 21, 2005 is incorporated                   by reference           10.12*   Employment Agreement dated December 15, 2005 between Philip B.                   Roby and the Corporation, filed as Exhibit 10.07 to the                   Corporation's Form 8-K dated December 21, 2005 is incorporated                   by reference           10.13*   The National Bank of Indianapolis Corporation Executive's                   Deferred Compensation Plan, filed as Exhibit 10.08 to the                   Corporation's Form 8-K dated December 21, 2005 is incorporated                   by reference           10.14*   The National Bank of Indianapolis Corporation 401(K) Savings                   Plan (as amended and restated generally effective January 1,                   2006)           21.00    Subsidiaries of The National Bank of Indianapolis Corporation                                          92            31.1     Certificate of Chief Executive Officer pursuant to Rule                   13a-14(a)/Rule 15d-14(a) of the Securities Exchange Act of                   1934, as amended           31.2     Certificate of Chief Financial Officer pursuant to Rule                   13a-14(a)/Rule 15d-14(a) of the Securities Exchange Act of                   1934, as amended           32.1     Chief Executive Officer Certification pursuant to 18 U.S.C.                   Section 1350           32.2     Chief Financial Officer Certification pursuant to 18 U.S.C.                   Section 1350                                                          93   Signatures  In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.  (Registrant)    The National Bank of Indianapolis Corporation                 -------------------------------------------------------------- By (Signature and Title)  /S/ Morris L. Maurer                  March 24, 2006                           ------------------------------------  --------------                               Morris L. Maurer, President            Date                               (Principal Executive Officer)  In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.   By (Signature and Title) /S/ Morris L. Maurer                  March 24, 2006                           ------------------------------------  --------------                           Morris L. Maurer, President                Date                           (Principal Executive Officer)   By (Signature and Title) /S/ Philip B. Roby                    March 24, 2006                           ------------------------------------  --------------                           Philip B. Roby, Executive Vice President   Date                           Executive Vice President   By (Signature and Title) /S/ Debra L. Ross                     March 24, 2006                           ------------------------------------  --------------                           Debra L. Ross, Senior Vice President       Date                           (Principal Financial and Accounting Officer)   By (Signature and Title) /S/ Michael S. Maurer                 March 24, 2006                           ------------------------------------  --------------                           Michael S. Maurer, Chairman of the Board   Date   By (Signature and Title) /S/ Kathryn G. Betley                 March 24, 2006                           ------------------------------------  --------------                           Kathryn G. Betley, Director                Date   By (Signature and Title) /S/ James M. Cornelius                March 24, 2006                           ------------------------------------  --------------                           James M. Cornelius, Director               Date   By (Signature and Title) /S/ David R. Frick                    March 24, 2006                           ------------------------------------  --------------                           David R. Frick, Director                   Date   By (Signature and Title) /S/ Andre B. Lacy                     March 24, 2006                           ------------------------------------  --------------                           Andre B. Lacy, Director                    Date   By (Signature and Title) /S/ G. Benjamin Lantz                 March 24, 2006                           ------------------------------------  --------------                           G. Benjamin Lantz, Director                Date   By (Signature and Title) /S/ Todd H. Stuart                    March 24, 2006                           ------------------------------------  --------------                           Todd H. Stuart, Director                   Date   By (Signature and Title) /S/ John T. Thompson                  March 24, 2006                           ------------------------------------  --------------                           John T. Thompson, Director                 Date                                          94    EX-10.07 2 ex10-07.txt  Exhibit 10.07 - -------------  Compensation of Named Executive Officers           Base Salary          -----------           Each executive officer is reviewed individually by the Compensation Committee, which review includes an analysis of the performance of the Corporation and the Bank. In addition, the review includes, among other things, an analysis of the individual's performance during the past fiscal year, focusing primarily upon the following aspects of the individual's job or characteristics of the individual exhibited during the most recent fiscal year: quality and quantity of work; supervisory skills; dependability; initiative; attendance; overall skill level; and overall value to the Corporation.           As previously reported on the Corporation's Form 8-K dated July 29, 2005, Morris L. Maurer, the President and Chief Executive Officer of the Corporation and the Bank, will receive a base salary of $295,000 from July 1, 2005 through June 30, 2006. Philip B. Roby, the Executive Vice President and Chief Operating Officer of the Corporation and the Bank, will receive a base salary of $261,000 from July 1, 2005 through June 30, 2006. The salaries of Messrs. Maurer and Roby have historically been adjusted on July 1 of each year. At that time, the Compensation Committee may determine to adjust the respective salaries.           As previously reported on the Corporation's Form 8-K dated January 9, 2006, Debra L. Ross, the Chief Financial Officer of the Corporation, will receive a base salary of $150,000 for 2006. On February 16, 2006, the Bank appointed Mark E. Bruin as Senior Vice President & Chief Client Officer and Terry K. Scott as First Vice President and Chief Credit Officer. Messrs. Bruin and Scott will receive a base salary of $200,000 and $120,000, respectively, for 2006.           Bonus Amounts          -------------           For 2006 the Board of Directors expects to approve an incentive bonus plan ("Incentive Bonus Plan") for all employees of the Bank. Under the terms of the Incentive Bonus Plan, all employees will be entitled to receive a bonus of up to certain percentage of their salary, depending upon the amount, if any, by which the Bank exceeded its profit plan.           The Board of Directors also expects to approve a discretionary bonus plan for 2006 (the "2006 Discretionary Bonus Plan"). Employees, other than Morris L. Maurer and Philip B. Roby, will also be entitled to participate in the 2006 Discretionary Bonus Plan. Under this plan, all eligible employees, including Debra L. Ross, Mark E. Bruin and Terry K. Scott may receive a bonus as determined in the discretion of Messrs. Maurer and Roby. These amounts are determined by a comparison of the specific employee's goals and objectives with actual performance.                                          1             The Board of Directors also expects to approve a separate bonus plan for Morris L. Maurer and Philip B. Roby (the "2006 Top Management Bonus Plan"). Bonuses are paid from this plan for exceptional individual performance in areas considered critical to the success of the Corporation and the Bank. This bonus will be based upon a review of compensation levels in other financial institutions similar in size to the Corporation and the Bank; a comparison of the Corporation's performance compared to the 2006 goals for growth in assets, loans, "wealth management" assets under management, and net income; and, consideration of non-financial performance, including the results of regulatory examinations.           Stock Plans          -----------           2005 Plan. On April 21, 2005, the Board of Directors of the Corporation approved The National Bank of Indianapolis Corporation 2005 Equity Incentive Plan (the "2005 Plan"), which was approved by shareholders on June 16, 2005 at the Annual Meeting of Shareholders of the Corporation. All employees of the Corporation or its subsidiaries are eligible to become participants in the 2005 Plan. The Compensation Committee will administer the 2005 Plan and will determine the specific employees who will be granted awards under the 2005 Plan and the type and amount of any such awards.           The 2005 Plan authorizes the issuance of up to 333,000 shares of the Corporation's common stock to participants pursuant to the award of shares of restricted stock or the grant of options. The 2005 Plan's effective date is July 1, 2005 and it will continue in effect until terminated by the Board of Directors; provided, however, no awards of "incentive stock options" may be granted under the 2005 Plan after the ten-year anniversary of its approval by the shareholders. Any awards that are outstanding after the 2005 Plan terminates will remain subject to the terms of the 2005 Plan.           The Administrative Committee of the 2005 Plan may grant an incentive stock option or non-qualified stock option to purchase stock at a specified exercise price. The exercise price for an option cannot be less than the fair market value of the stock to which the option relates at the time the option is granted. The exercise price of an option may not be decreased after the date of grant nor may an option be surrendered to Corporation as consideration for the grant of a replacement option with a lower exercise price, except as approved by our shareholders or as adjusted for corporate transactions described above.           Options will be exercisable in accordance with the terms established by the Administrative Committee. The full purchase price of each share of stock purchased on the exercise of any option will be paid at the time of exercise. Except as otherwise determined by the Administrative Committee, the exercise price will be payable in cash, by promissory note (as permitted by law), in shares of stock owned by the optionee (valued at fair market value as of the day of exercise), or a combination thereof. The Committee, in its discretion, may impose such conditions, restriction, and contingencies on stock acquired pursuant to the exercise of an option as it determines to be desirable.                                          2            Terminated 1993 Plans. On April 21, 2005, the Board of Directors of the Corporation terminated the Amended and Restated 1993 Key Employees' Stock Option Plan and the Amended and Restated 1993 Restricted Stock Plan (collectively, the "1993 Plans") subject to the shareholders of the Corporation approving the 2005 Plan, which approval was received on June 16, 2005, at the Annual Meeting of Shareholders of the Corporation. The effective date of the termination of the 1993 Plans was June 30, 2005. The awards which are outstanding under the 1993 Plans will remain outstanding following the termination of the 1993 Plans subject to their terms, until they are expired, are forfeited or otherwise lapse or expire.           Other Compensation Plans          ------------------------           On December 15, 2005, the Board of Directors of the Corporation adopted The National Bank of Indianapolis Corporation Executives' Deferred Compensation Plan (the "Deferred Compensation Plan"). Morris L. Maurer and Philip B. Roby are the only two executives currently eligible to participate in the Plan. Under the terms of the Deferred Compensation Plan, participants may defer up to 50% of total cash compensation, and the Corporation will match 50% of the executive's deferral. The Plan is unfunded and accruals and earnings on the deferrals will be recorded as a liability on the Corporation's financial statements. The Plan will be administered by the Compensation Committee of the Board of Directors. Earnings will accrue interest at a rate equal to the interest rate on 10-year Treasury securities for the 12-month period ended on September 30 of the year prior to the plan year to which the earnings rate will apply, plus 150 basis points. The Corporation may also make additional matching contribution in any amount as may be determined by the Committee in its sole discretion. In addition, the Committee may make supplemental contributions. Matching and supplemental contributions under the plan will vest upon the first to occur of the following events: five years of service, the participant attaining age 62, the death of the participant, the total and permanent disability of the participant, or the date on which there is a change of control of the Corporation.           The Corporation also has adopted certain broad-based employee benefit plans for all employees. Senior executives are permitted to participate in these plans on the same terms as non-executive employees who meet applicable eligibility criteria, subject to any legal limitations on the amount that may be contributed or the benefits that may be payable under the plans. These plans include such customary employee benefit plans as medical insurance, life insurance, and a 401(k) plan.           The Corporation sponsors The National Bank of Indianapolis Corporation 401(k) Savings Plan for the benefit of substantially all of the employees of the Corporation and its subsidiaries. All employees of the Corporation and its subsidiaries become participants in the 401(k) Plan after completing one year of service for the Corporation or its subsidiaries and attaining age 21.                                          3    EX-10.14 3 ex10-14.txt  Exhibit 10.14 - -------------                              THE NATIONAL BANK OF INDIANAPOLIS CORPORATION                                 401(k) SAVINGS PLAN          (As Amended and Restated Generally Effective as of January 1, 2006)                                                       Krieg DeVault LLP                               Indianapolis, Indiana                                                CONTENTS                                           -------- SECTION                                                                               Page - -------                                                                               ----   ARTICLE I              INTRODUCTION......................................................1         Section 1.1    Purpose...........................................................1          Section 1.2    Effective Date....................................................1          Section 1.3    Employers and Affiliates..........................................1          Section 1.4    Plan Administration; Plan Year....................................1          Section 1.5    Funding of Benefits...............................................2          Section 1.6    Examination of Documents..........................................2          Section 1.7    Contributions Not Dependent Upon Benefits.........................2          Section 1.8    Plan Supplements..................................................2          Section 1.9    Definition References.............................................2   ARTICLE II             PARTICIPATION AND SERVICE.........................................5         Section 2.1    Eligibility for Participation.....................................5          Section 2.2    Commencement of Participation.....................................5          Section 2.3    Duration of Participation.........................................5          Section 2.4    Restricted Participation and Reemployment.........................5          Section 2.5    Service...........................................................6          Section 2.6    Military Service..................................................7          Section 2.7    Notice of Participation...........................................7   ARTICLE III            DEFERRALS.........................................................8         Section 3.1    Compensation Deferrals............................................8          Section 3.2    Catch-Up Contributions............................................8          Section 3.3    Earnings..........................................................8          Section 3.4    Changes in Rate of Deferrals......................................8          Section 3.5    Deferral Elections................................................8   i    SECTION                                                                               Page - -------                                                                               ----  ARTICLE IV             CONTRIBUTIONS.....................................................9         Section 4.1    Deferral Contributions............................................9          Section 4.2    Safe Harbor Matching Contributions................................9          Section 4.3    Matching Contributions............................................9          Section 4.4    Profit Sharing Contributions......................................10          Section 4.5    Limitations on Contributions......................................10          Section 4.6    Payment of Contributions..........................................10          Section 4.7    Rollover Contributions............................................10          Section 4.8    Investment of Rollover Contribution in Employer Stock.............10          Section 4.9    Voting Employer Stock.............................................12          Section 4.10   Direct Transfers..................................................13          Section 4.11   Participant After-tax Contributions...............................13  ARTICLE V              ALLOCATIONS TO PARTICIPANTS.......................................14         Section 5.1    Individual Accounts...............................................14          Section 5.2    Accounting Date...................................................14          Section 5.3    Account Adjustments...............................................14          Section 5.4    Crediting of Deferral Contributions...............................15          Section 5.5    Crediting of Safe Harbor Matching Contributions...................16          Section 5.6    Allocation of Matching Contributions..............................16          Section 5.7    Allocation of Profit Sharing Contributions........................16          Section 5.8    Compensation......................................................16          Section 5.9    Maximum Additions.................................................17          Section 5.10   Investment Funds..................................................17          Section 5.11   Annual Statement to Participants..................................18   ARTICLE VI             DISTRIBUTION OF BENEFITS..........................................19         Section 6.1    Retirement or Disability..........................................19   ii    SECTION                                                                               Page - -------                                                                               ----         Section 6.2    Death.............................................................19          Section 6.3    Resignation or Dismissal..........................................19          Section 6.4    Remainders and Reinstatement of Remainders........................20          Section 6.5    Payment of Benefits...............................................21          Section 6.6    Manner and Timing of Payment......................................22          Section 6.7    Death Distribution Provisions.....................................23          Section 6.8    Spousal Death Benefit.............................................23          Section 6.9    Designation of Beneficiary........................................24          Section 6.10   Direct Rollovers..................................................24          Section 6.11   Loans.............................................................25   ARTICLE VII            DIVERSIFICATION OF INVESTMENT IN EMPLOYER STOCK...................26         Section 7.1    Election by Qualified Participant.................................26          Section 7.2    Method of Diversifying Investment.................................26   ARTICLE VIII           PLAN ADMINISTRATION...............................................27         Section 8.1    Plan Administrator................................................27          Section 8.2    Committee Membership..............................................27          Section 8.3    Appointment, Resignation, Removal of Committee Members............27          Section 8.4    Committee Procedures..............................................27          Section 8.5    Committee Powers and Duties.......................................27          Section 8.6    Committee Rules and Decisions.....................................28          Section 8.7    Interested Committee Member.......................................28          Section 8.8    Facility of Payment...............................................28          Section 8.9    Missing Participants and Beneficiaries............................28          Section 8.10   Claims and Review Procedures......................................29          Section 8.11   Plan Expenses.....................................................29   iii    SECTION                                                                               Page - -------                                                                               ----          Section 8.12   Fiduciary Responsibilities........................................29  ARTICLE IX             MISCELLANEOUS.....................................................30         Section 9.1    Nonguarantee of Employment........................................30          Section 9.2    Rights to Trust Assets............................................30          Section 9.3    Nonalienation of Benefits.........................................30          Section 9.4    Applicable State Law..............................................30          Section 9.5    Illegal or Invalid Provisions.....................................30          Section 9.6    Gender and Number.................................................30          Section 9.7    Execution in Counterparts.........................................30          Section 9.8    Waiver of Notice..................................................30          Section 9.9    Action by the Employers...........................................30          Section 9.10   Indemnification...................................................31          Section 9.11   Nonguarantee of Funds.............................................31          Section 9.12   Qualified Domestic Relations Orders...............................31   ARTICLE X              AMENDMENT AND TERMINATION.........................................32         Section 10.1   Amendment.........................................................32          Section 10.2   Termination.......................................................32          Section 10.3   Termination Procedures............................................32    ARTICLE XI             SUCCESSORS, MERGERS AND PLAN ASSETS...............................33         Section 11.1   Successors........................................................33          Section 11.2   Plan Mergers, Consolidations and Transfers........................33          Section 11.3   Plan Assets.......................................................33   ARTICLE XII            PARTICIPATION BY AFFILIATES.......................................34         Article 12.1   Affiliate Participation...........................................34          Article 12.2   Company Action Binding on Other Employees.........................34    SUPPLEMENT A           Claims and Review Procedures......................................A-1   iv    SECTION                                                                               Page - -------                                                                               ----   SUPPLEMENT B           Limitations on Compensation Deferral and Matching Contributions...B-1  SUPPLEMENT C           Top-Heavy Provisions..............................................C-1  SUPPLEMENT D           Loans.............................................................D-1  SUPPLEMENT E           Minimum Distribution Requirements................................E-1                           v                      THE NATIONAL BANK OF INDIANAPOLIS CORPORATION                                401(k) SAVINGS PLAN         (As Amended and Restated Generally Effective as of January 1, 2006)                                     ARTICLE I                                    ---------                                    Introduction                                   ------------       Section 1.1 Purpose. The National Bank of Indianapolis Corporation 401(k) Savings Plan (the "Plan") is maintained by The National Bank of Indianapolis Corporation (the "Company") to assist its eligible employees, and the eligible employees of any other Employer under the Plan, in providing for their future financial security by deferring a portion of their Earnings and having those funds accumulated under the Plan, and by sharing in the contributions from the Employers. The Plan is intended to meet the provisions of Sections 401(a) and 401(k) of the Internal Revenue Code of 1986, as amended (the "Code") and is intended to be an eligible individual account plan which will acquire and hold qualifying employer securities as defined in Section 407(d)(5) of the Employee Retirement Income Security Act of 1974 ("ERISA").       Section 1.2 Effective Date. The Plan was originally established by the Company effective January 1, 1994 (the "Original Effective Date"). The "Effective Date" of the Plan, as amended and restated, is January 1, 2006, unless otherwise specified in the Plan or required by applicable law. The provisions of the Plan as restated only apply to an individual employed by an Employer on or after the Effective Date. The rights and benefits, if any, of an employee whose employment with the an Employer terminated before the Effective Date will be determined in accordance with the terms of the Plan as of the date of his termination; provided, however, that if a Participant's benefits were not fully distributed prior to the Effective Date, then the provisions of the Plan as restated herein will govern the subsequent investment and distribution of those benefits.       Section 1.3 Employers and Affiliates. Any Affiliate may adopt the Plan for the benefit of its employees with the Company's consent in accordance with Section 12.1. For purposes of this Plan, the term "Affiliate" means the Company and any other corporation or trade or business whose employees are treated as being employed by the Company under Code Section 414(b), 414(c), 414(m) or 414(o). The Company and each other Affiliate that adopts the Plan are referred to as the "Employers" and sometimes individually as an "Employer."       Section 1.4 Plan Administration; Plan Year. The Plan is administered by the Benefits Committee (the "Committee"), as described in Article VII. Such administration is carried out on the basis of a "Plan Year" which is the twelve-month period commencing on each January 1 and ending on the following December 31. Any notice or document required to be given to or filed with an Employer or the Committee will be properly given or filed if delivered or mailed, by registered mail, postage prepaid, to:   1                                 The Benefits Committee              c/o Susan A. Engledow, Vice President and Trust Officer                         The National Bank of Indianapolis                     107 North Pennsylvania Street, Suite 700                            Indianapolis, Indiana 46204       Section 1.5 Funding of Benefits. Funds contributed under the Plan will be held and invested, until distribution, by one or more trustees (the "Trustee") appointed by the Company, in accordance with the terms of one or more Trust agreements (the "Trust") between the Company and the Trustee which implement and form a part of the Plan. The provisions of and benefits under the Plan are subject to the terms and provisions of the Trust.       Section 1.6 Examination of Documents. Copies of the Plan and Trust, and any amendments of either document, will be made available at the principal office of each Employer where they may be examined by any Participant or other person entitled to benefits under the Plan.       Section 1.7 Contributions Not Dependent Upon Profits . The Plan is intended to qualify as a profit sharing plan under Code Section 401(a). However, contributions under the Plan may be made without regard to an Employer's current or accumulated profits.       Section 1.8 Plan Supplements. The provisions of the Plan may be modified by supplements to the Plan. The terms and provisions of each supplement are a part of the Plan and supersede any other provisions of the Plan to the extent necessary to eliminate any inconsistencies between the supplement and any other Plan provisions.       Section 1.9 Definition References The following terms are defined in the Plan in the following sections:               Term                                                 Plan Section              ----                                                 ------------              Account ..................................................5.1              Accounting Date...........................................5.2              Accounting Period.........................................5.2              Adverse Benefit Determination.............................A-3              Affiliate.................................................1.3              Aggregated Plan...........................................C-5(a)              Alternate Payee...........................................9.12              Annual Addition...........................................5.9              Annual Dollar Limitation..................................B-2(a)              Authorized Leave of Absence...............................2.5(e)              Beneficiary...............................................6.9              Benefit Claim.............................................A-1              Board                     ...................................................4.2              Catch-Up Contribution Account.............................5.1(b)              Catch-Up Contributions....................................3.2              Claimant..................................................A-1                                         2                Code......................................................1.1              Committee.................................................1.4              Company...................................................1.1              Compensation..............................................5.8              Compensation Cap..........................................5.8              Compensation Deferral Contribution........................4.1              Compensation Deferral Contribution Account................5.1(a)              Compensation Deferrals....................................3.1              Covered Employee..........................................2.1(b)              Determination Date........................................C-2              Direct Rollover...........................................6.10              Distributee...............................................6.10              Earnings..................................................3.3              Effective Date............................................1.2              Elective Deferral.........................................B-2(c)              Eligible Participant......................................5.7              Eligible Retirement Plan..................................6.10              Eligible Rollover Distribution............................6.10              Eligibility Period........................................2.5(a)              Employer..................................................1.3              Employer Stock............................................4.8              Entry Date................................................2.2              ERISA.....................................................1.1              Highly Compensated Employee...............................B-5              Hour of Service...........................................2.5(b)              Inactive Participant......................................2.4              Investment Funds..........................................5.10              Key Employee..............................................C-3(a)              Married Participant.......................................6.8              Matching Contribution.....................................4.3              Matching Contribution Account.............................5.1(d)              Non-Key Employee..........................................C-3(b)              Normal Retirement Age.....................................6.1              One-Year Break in Service.................................2.5(d)              Original Effective Date...................................1.2              Participant...............................................2.2              Plan   ...................................................1.1              Plan Termination Date.....................................10.3              Plan Year.................................................1.3              Predecessor Employer......................................2.5(c)              Profit Sharing Contribution...............................4.4              Profit Sharing Contribution Account.......................5.1(e)              Qualified Domestic Relations Order........................9.12              Qualified Election Period.................................7.1              Qualified Participant.....................................7.1              Reemployed Participant....................................6.3  3                 Remainder.................................................6.4              Rollover Account..........................................5.1              Rollover Contribution.....................................4.7              Safe Harbor Matching Contribution Account.................5.1(c)              Safe Harbor Matching Contribution.........................4.2              Separation Period.........................................6.3(a)              Successor Plan............................................10.3              Surviving Spouse..........................................6.8(c)              Top-Heavy Group...........................................C-5(a)              Top-Heavy Plan............................................C-1              Total and Permanent Disability............................6.1              Trust.....................................................1.5              Trustee...................................................1.5              Vested Percentage.........................................6.3              Years of Service..........................................6.3                 4                                      ARTICLE II                                    ----------                              Participation and Service                             -------------------------       Section 2.1 Eligibility for Participation. Every person employed by an Employer is eligible to participate in the Plan provided that:       (a)  He has attained age 21; and       (b)  He is a Covered Employee. The term "Covered Employee" means a person           employed by an Employer and classified by the Employer as a common-law           employee (regardless of the individual's actual employment status),           except that term does not include an employee employed in a unit of           employees subject to a collective bargaining agreement where           retirement benefits were negotiated in good faith by an Employer and           that unit's bargaining representative.       Section 2.2 Commencement of Participation. Subject to the conditions and limitations of the Plan, each Covered Employee who was a Participant in the Plan on December 31, 2005 will continue as a Participant on and after January 1, 2006. Any other Covered Employee will become a "Participant" in the Plan on the first day of January, April, July or October (an "Entry Date") coincident with or next following the date he satisfies the eligibility requirements of Section 2.1, or if later, the date the employee's Employer becomes an Employer under the Plan pursuant to Section 12.1. If an employee satisfies the requirements of subsection 2.1(a) before satisfying the requirements of subsection 2.1(b), he will become a Participant in the Plan on the date he meets the requirements of subsection 2.1(b).       Section 2.3 Duration of Participation. Subject to Section 2.4, an employee will continue as a Participant until the later of his termination of employment with all of the Affiliates or the complete distribution of his Plan benefits.       Section 2.4 Restricted Participation and Reemployment. A Participant who (i) has ceased to be employed by an Employer but has not received a complete distribution of his Plan benefits or (ii) remains in the employ of an Employer but has ceased to be a Covered Employee will, upon either such event, become an "Inactive Participant." An Inactive Participant (including the Beneficiary of a deceased Participant) will be treated as a Participant for all purposes of the Plan, except as follows:       (a)  An Inactive Participant is not permitted to defer any portion of his           Earnings under Sections 3.1 and 3.2 and will not share in any Employer           contributions, under Section 4.2, 4.3 or 4.4, except as provided in           Section 5.5, 5.6 or 5.7.       (b)  The Beneficiary of a deceased Participant cannot designate a           Beneficiary under Section 6.9.       An Inactive Participant who has not terminated employment with the all of the Affiliates will become an active Participant upon his return to status as a Covered Employee. An employee who was a Participant and who has terminated employment with all of the Affiliates will, in the event he is subsequently reemployed by an Employer, become an active Participant upon his                                          5    reemployment as a Covered Employee. An employee who was never a Participant and has terminated employment with all of the Affiliates and is subsequently reemployed by an Employer will be treated as a new employee and will become a Participant upon satisfying the requirements of Section 2.1. An employee who satisfied the requirements of Section 2.1 but did not become a Participant under Section 2.2 will be treated as a former Participant eligible for active participation in accordance with the foregoing provisions of this Section.       Section 2.5 Service. The following terms and provisions apply in determining a Participant's service under the Plan:       (a)  An "Eligibility Period" is (i) the 12 consecutive month period           commencing on the date the employee first performs an Hour of Service           and (ii) each Plan Year beginning on or after that date.       (b)  The term "Hour of Service" means each hour for which an employee is           directly or indirectly paid or entitled to payment by an Affiliate for           the performance of duties and for reasons other than the performance           of duties (such as vacation, sickness, disability, back pay or           Authorized Leave of Absence) determined and credited in accordance           with Section 2530.200b-2 of the Department of Labor regulations which           are incorporated herein by reference. No more than 501 Hours of           Service will be credited under this subsection (b) for any computation           period in which no duties are performed by the employee. Full-time           employees who are not compensated on an hourly basis will be credited           with 10 Hours of Service per day, but not to exceed 45 Hours of           Service for any week of employment. Hours of Service by an individual           considered to be an employee of an Affiliate under Code Section 414(n)           or (o) will be treated as Hours of Service under this subsection (b).       (c)  Unless otherwise provided by the Company, Hours of Service with a           Predecessor Employer will be disregarded. A "Predecessor Employer"           means any entity of which the stock, assets or business was acquired           by an Employer by merger, consolidation or purchase.       (d)  The term "One-Year Break in Service" means any Plan Year in which the           employee is not credited with more than 500 Hours of Service.       (e)  An Authorized Leave of Absence does not constitute a termination of           employment. However, except as otherwise provided by applicable           federal law, a Participant who is on Authorized Leave of Absence will           not be eligible to make Compensation Deferrals or Catch-Up           Contributions under Article III during the leave of absence. For           purposes of this Plan an "Authorized Leave of Absence" means:            (i)  An absence authorized by an Employer under its standard personnel                practices applied uniformly to all similarly situated employees;                and            (ii) An absence due to service in the Armed Forces of the United                States described in any applicable statute granting reemployment                rights to employees engaged in such service.   6        (f)  Solely for purposes of determining whether a One-Year Break in Service           has occurred, an individual who is absent from work for maternity or           paternity reasons will receive credit for the Hours of Service which           would otherwise have been credited to such individual but for such           absence, or in any case in which such hours cannot be determined,           eight Hours of Service per day of such absence. For purposes of this           subsection, an absence from work for maternity or paternity reasons           means an absence (i) by reason of the pregnancy of the individual,           (ii) by reason of a birth of a child of the individual, (iii) by           reason of the placement of a child with the individual in connection           with the adoption of such child by such individual, or (iv) for           purposes of caring for such child for a period beginning immediately           following such birth or placement. The Hours of Service credited under           this subsection will be credited (1) in the computation period in           which the absence begins if the crediting is necessary to prevent a           One-Year Break in Service in that period, or (2) in all other cases,           in the following computation period. No more than 501 Hours of Service           will be credited under this subsection in any computation period. The           Committee may require an employee to furnish any information the           Committee may need to establish that the employee's absence was for           one of the reasons specified above.       Section 2.6 Military Service. Notwithstanding any provision of this Plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with Code Section 414(u).       Section 2.7 Notice of Participation. The Committee will notify each Covered Employee of the date he becomes a Participant in the Plan and will furnish each Participant with a summary plan description and such other reports required by the applicable governmental rules and regulations.           7                                     ARTICLE III                                   -----------                                      Deferrals                                     ---------       Section 3.1 Compensation Deferrals. Each Participant may elect to defer from one to 50 percent of his Earnings (as defined in Section 3.3) each Plan Year in multiples of one percent; provided that the amount so deferred, together with any Catch-Up Contributions and any other voluntary and any mandatory withholding, will not reduce a Participant's cash compensation to less than $0.00. Any amount so deferred (referred to as a Participant's "Compensation Deferrals") under this Section will be withheld from the Participant's Earnings and contributed to the Plan under Section 4.1.       Section 3.2 Catch-Up Contributions. All Participants who are eligible to make Compensation Deferrals under the Plan and who have attained age 50 before the close of the Plan Year will be eligible to make "Catch-Up Contributions" in accordance with, and subject to the limitations of, Code Section 414(v). Such Catch-Up Contributions will not be taken into account for purposes of the provisions of the Plan implementing the required limitations of Code Sections 401(a)(30) and 415. The Plan will not be treated as failing to satisfy the provisions of the Plan implementing the requirements of Code Section 401(a)(4), 401(k)(3), 401(k)(11), 401(k)(12), 410(b) or 416, as applicable, by reason of the making of such Catch-Up Contributions.       Section 3.3 Earnings. Effective January 1, 2005, subject to the limitations described in Section 5.8, a Participant's "Earnings" for purposes of Sections 3.1, 4.2 and 4.3 means the total compensation paid to the Participant during a Plan Year which is treated as wages within the meaning of Code Section 3401(a) (determined without regard to any rules which limit the remuneration included in wages based on the nature or location of employment or the services performed) plus the compensation that, but for the Compensation Deferral election made under Section 3.1, the Catch-Up Contributions election made under Section 3.2, or an election made under Code Section 125, or 132(f)(4), would have been paid to the Participant by an Employer for services rendered to an Employer as an employee, but excluding fringe benefits (cash and non-cash), welfare benefits, deferred compensation and reimbursements (including moving expenses) and expense allowances.       Section 3.4 Changes in Rate of Deferrals. A Participant who has elected to make Compensation Deferrals or Catch-Up Contributions may elect to increase or decrease the rate of his Compensation Deferrals and Catch-Up Contributions (or to suspend or resume deferrals) within the limits specified in Section 3.1 and 3.2, in accordance with Section 3.5.       Section 3.5 Deferral Elections . A Participant's deferral election will be effective until his termination of employment with all the Employers or until changed or suspended in accordance with Section 3.4 and this Section. Compensation Deferrals and Catch-Up Contributions will normally be made through equal payroll deductions. However, the Committee may establish other nondiscriminatory methods for permitting Compensation Deferrals and Catch-Up Contributions. Any elections or notices that are to be made or given under this Article III must be made at the time, in the manner and on such forms as established by the Committee. The Committee may also prescribe additional rules and procedures consistent with the foregoing to govern Compensation Deferral and Catch-Up Contributions elections under this Article III.   8                                      ARTICLE IV                                    ----------                                    Contributions                                   -------------       Section 4.1 Deferral Contributions. Subject to the conditions and limitations of this Article IV, Article V and Supplement B, each Employer will contribute an amount equal to the Compensation Deferrals made under Section 3.1 for each Plan Year by a Participant employed by that Employer to the Trustee in the name of the Participant (referred to as a "Compensation Deferral Contribution"). If all or any portion of a Participant's Compensation Deferrals for any Plan Year may not be contributed due to the limitations or conditions of Section 4.5 or Section 5.9, the amount that may not be contributed will be paid to the Participant. If that amount has already been contributed, the excess contribution will be returned directly to the Participant. Each Employer will contribute an amount equal to the Catch-Up Contribution made under Section 3.2 for each Plan Year by a Participant employed by the Employer to the Trustee in the name of the Participant.       Section 4.2 Safe Harbor Matching Contributions . Subject to the conditions and limitations of this Article IV, Article V and Supplement B, each Plan Year the Employer will contribute to the Trustee an amount designated as a "Safe Harbor Matching Contribution" equal to 100 percent of the sum of each Participant's Compensation Deferral Contributions and Catch-Up Contributions for the Plan Year up to three percent of his Earnings plus 50 percent of such Participant's Compensation Deferral Contributions and Catch-Up Contributions for the Plan Year to the extent that such Compensation Deferral Contributions and Catch-Up Contributions exceed three percent but do not exceed five percent of his Earnings. All or any portion of an Employer's Safe Harbor Matching Contribution may, subject to the discretion of the Board of Directors of the Company (the "Board"), and acceptance thereof by the Trustee, be made in the form of whole and fractional shares of Employer Stock, as defined in Section 4.8. Any such contributions will be valued at their fair market value on the date of the contribution as provided in ERISA Section 3(18). Any contribution under this section not made in the form of shares of Employer Stock will be made in cash. Safe Harbor Matching Contributions are nonforfeitable within the meaning of Treasury Regulation Section 1.401(k)-1(c) and are subject to the withdrawal restrictions of Code Section 401(k)(2)(B) and Treasury Regulation Section 1.401(k)-1(d). A contribution made by an Employer under this Section will be allocated in accordance with Section 5.5 to Participants employed by an Employer during that Plan Year.       Section 4.3 Matching Contributions. Subject to the conditions and limitations of this Article IV, Article V and Supplement B, each Plan Year an Employer may contribute to the Trustee an amount in addition to the Safe Harbor Matching Contribution designated as a "Matching Contribution" determined in the sole discretion of the Board. All or any portion of an Employer's Matching Contribution may, subject to the discretion of the Board, and acceptance thereof by the Trustee, be made in the form of whole and fractional shares of Employer Stock, as defined in Section 4.8. Any such contributions will be valued at their fair market value on the date of the contribution as provided in ERISA Section 3(18). Any contribution under this Section not made in the form of shares of Employer Stock will be made in cash. A Matching Contribution made by an Employer under this Section will be allocated in accordance with Section 5.6 to Participants who had Compensation Deferral Contributions and Catch-Up Contributions made on their behalf by the Employer for that Plan Year.   9        Section 4.4 Profit Sharing Contributions. Subject to the conditions and limitations of this Article IV and Article V, each Plan Year an Employer may contribute to the Trustee an amount designated as a "Profit Sharing Contribution" determined in its sole discretion. A Profit Sharing Contribution made by an Employer under this Section will be allocated to Eligible Participants employed by the Employer during that Plan Year in accordance with Section 5.7.       Section 4.5 Limitations on Contributions. An Employer's contributions made under Sections 4.1 through 4.4 above for any taxable year of the Employer (that is, for a Plan Year that begins with or within that taxable year) may not, unless the Employer specifies otherwise, exceed an amount equal to the maximum amount deductible by the Employer on account of these contributions for federal income tax purposes for that taxable year.       Section 4.6 Payment of Contributions. Compensation Deferral Contributions and Catch-Up Contributions to be made under Section 4.1 are to be paid to the Trustee as soon as practicable after the date the Compensation Deferrals and Catch-Up Contributions would have been paid to the Participants but for their deferral elections under Sections 3.1 and 3.2. Contributions to be made under Sections 4.2 through 4.4 are to be paid to the Trustee no later than the date prescribed by law for filing the Employer's federal income tax return, including extensions. Any contributions paid with respect to a Plan Year under this Section will be considered to have been paid by the last day of that year, regardless of when actually paid to the Trustee.       Section 4.7 Rollover Contributions.. Subject to rules and procedures established by the Committee, a Participant or a Covered Employee may at any time contribute all or any part of an amount that is eligible for rollover to a qualified plan as determined under the applicable provisions of the Code (a "Rollover Contribution") if such Rollover Contribution is (i) a Direct Rollover of an Eligible Rollover Distribution from a qualified plan described in Code Section 401(a) or 403(a), including after-tax employee contributions; (ii) a Participant contribution of an Eligible Rollover Distribution from a qualified plan described in Code Section 401(a) or 403(a); and (iii) a Participant Rollover Contribution of the portion of a distribution from an individual retirement account or annuity described in Code Section 408(a) or 408(b) that is eligible to be rolled over and would otherwise be includible in gross income. However, if the contribution is not a direct rollover from another eligible plan, the contribution must be made within 60 days after the date the Participant receives that amount. Any rollover of after-tax employee contributions will only be allowed if the Covered Employee who is attempting to roll such funds provides the Committee with information sufficient for the Committee to determine the amount of after-tax contributions. After-tax contributions may not be used to purchase Employer Stock under Section 4.8 of the Plan. A Rollover Contribution will be credited to an account established under Section 5.1 in the name of the Participant or the Covered Employee and any amount credited to that account will be fully vested and nonforfeitable at all times.       Section 4.8 Investment of Rollover Contribution in Employer Stock. A Participant or Covered Employee who has made a Rollover Contribution to the Plan may request the Trustee to invest a portion of his Rollover Account in whole shares of Employer Stock in accordance with the provisions of this Section 4.8. "Employer Stock" means any qualifying employer security within the meaning of Code Section 409(l) and ERISA Section 407(d)(1) and the Treasury and Department of Labor Regulations promulgated thereunder.   10        (a)  Each individual who has a Rollover Account which has not previously           been invested in Employer Stock will, on an annual basis, be provided           the opportunity to request the Trustee, on forms provided by the           Committee, to invest not less than 25% and not more than the lesser of           50% of the fair market value, or $200,000, of the individual's           Rollover Account in Employer Stock.       (b)  Each individual who has a Rollover Account which has not previously           been invested in Employer Stock in an amount equal to maximum level           prescribed by this Section 4.8 will, on an annual basis, be provided           the opportunity to request the Trustee, on forms provided by the           Committee, to invest up to the lesser of 50%, expressed as a whole           percentage, of the fair market value, or $200,000, of the individual's           Rollover Account in Employer Stock. Once an individual's Rollover           Account has been invested in Employer Stock in an amount equal to the           maximum level prescribed by this Section 4.8, the individual will not           be entitled to make further requests, even if, due to fluctuations in           value, the percentage of his Rollover Account investment in Employer           Stock falls below such maximum level.       (c)  Each year, in connection with its determination of the fair market           value of Employer Stock, the Committee will notify each individual           described in (a) and (b) of his eligibility to make a request to the           Trustee under this Section 4.8. For purposes of determining the amount           of an individual's Rollover Account which is eligible to be invested           in Employer Stock, the fair market value thereof will be determined by           the Committee as of the Accounting Date immediately preceding the date           on which the purchase will be made.       (d)  The Committee will provide individuals described in subsections (a)           and (b) with such information the Committee determines to be           appropriate to enable them to determine whether to make the election           provided by this Section 4.8. The Committee will also have the final           discretion to determine whether a Covered Employee's request to the           Trustee under this Section 4.8 will be given effect.       (e)  All purchases of Employer Stock by the Trustee will be made at a           price, or at prices, which, in the judgment of the Committee, do not           exceed the fair market value of such Employer Stock as of the date on           which the Employer Stock is purchased. Provided, further, any sale of           Employer Stock by the Trustee will be made at no less than the fair           market value thereof, as determined under this Section 4.8. No           commission will be charged with respect to any such purchase or sale.           Any purchase or sale will also be made in conformance with ERISA           Section 408(e) and the Department of Labor Regulations promulgated           thereunder. The determination of fair market value of Employer Stock           for all purposes under the Plan will be made by the Committee which           will consider the following criteria:            (i)  Any current and historical practices which have been consistently                and uniformly utilized to value Employer Stock in sales                transactions between the Employer and the stockholders, or among                and between stockholders;   11             (ii) Any agreements, restrictions or limitations with respect to or                imposed upon the sale or transfer of Employer Stock which                establish or stipulate the price at which the Company or Trust                may or must purchase such stock under the provisions of the                Articles of Incorporation or By-Laws of the Company, or written                agreements, including, but not limited to, buy-sell or redemption                agreements; provided the same or similar restrictions are                applicable to substantially all of the outstanding Employer Stock                and are uniformly and consistently complied with;            (iii) Such other information concerning the Company and its condition                and prospects, financial and otherwise, generally used in the                determination of the fair market value of corporate stock of                comparable public or private companies engaged in the same or                similar business;            (iv) Such other evaluation techniques, such as use of capitalization                ratios, deemed appropriate by the Committee and executed by                independent and recognized analysts having expertise in rendering                such evaluations; and            (v)  If the Employer Stock is not readily tradable on an established                securities market, with respect to activities carried on by the                Plan, all valuations of Employer Stock will be made by an                independent appraiser meeting requirements similar to those                contained in the Treasury Regulations promulgated under Code                Section 170(a)(1). All such appraisals will also satisfy the                requirements of the Proposed Department of Labor Regulations                promulgated under Section 3(18) of ERISA. The Committee will have                the exclusive responsibility for selecting the independent                appraiser.       (f)  Except as otherwise provided in Article VII, all amounts invested in           Employer Stock under this Section 4.8 will remain so invested until           the Rollover Account to which such stock has been allocated is           distributed. Provided, however, the Committee may, in its sole           discretion and at any time, direct the Trustee to sell or resell           shares of Employer Stock allocated to Rollover, Matching and Safe           Harbor Matching Contribution Accounts to any person, including the           Employer.       Section 4.9 Voting Employer Stock . A Participant, Inactive Participant or Beneficiary will be entitled to direct the Trustee as to the manner in which voting rights of shares of Employer Stock which are acquired by the Trust and allocated to his Account as of the applicable record date are to be exercised with respect to all matters with respect to which such shares of Employer Stock are entitled to vote. The Committee will, at least 20 days prior to each meeting of the shareholders of the Employer, provide each individual entitled, under the preceding sentence, to direct the voting of Employer Stock with notice of such meeting and of those matters which at the time of the mailing of such notice are subject to direction, and are expected to be presented at such meeting for action by the shareholders, together with an appropriate form with which the manner of voting on such matters can be directed. If instructions on such matters are received by the Trustee with respect to any Employer Stock at least 5 days prior to such meeting, the Trustee will vote the allocated shares of Employer Stock with respect to which such instructions were received in accordance with such instructions. The Trustee will also vote any   12    Employer Stock in the Trust (i) as to which instructions have not been received, (ii) as to which instructions have not been received by the date specified in the preceding sentence, and (iii) which have not been allocated to any Participant's Account. The Trustee will vote such shares of Employer Stock in the same proportion and in the same manner as the shares allocated to Participants' Accounts with respect to which timely and proper instructions by Participants have been received. The Trustee will vote all shares as provided in this Section, subject to the fiduciary obligation imposed on it by ERISA.       Section 4.10 Direct Transfers. At the direction of and in accordance with rules prescribed by the Committee, a Participant's or a Covered Employee's benefits under another plan which meets the requirements of Code Section 401(a) may be received by the Trustee from the trustee of that other plan; provided that the benefits are exempt from the requirements of Code Section 401(a)(11). Any amount so received will be credited to an account established under Section 5.1 in the name of the Participant or Covered Employee and any amount credited to such an account will be fully vested and nonforfeitable at all times.       Section 4.11 Participant After-tax Contributions. Participants are not required or permitted to make after-tax contributions under the Plan.           13                                      ARTICLE V                                    ---------                             Allocations to Participants                            ---------------------------       Section 5.1 Individual Accounts. The Committee will create and maintain the following accounts on behalf of each Participant (or Covered Employee who makes a Rollover Contribution):        (a)  A "Compensation Deferral Contribution Account" to reflect the           Compensation Deferral Contributions made on behalf of the Participant           under Section 4.1;       (b)  A "Catch-Up Contribution Account" to reflect the Catch-Up           Contributions made on behalf of the Participant under Section 4.1;       (c)  A "Safe Harbor Matching Contribution Account" to reflect the Safe           Harbor Matching Contributions made on behalf of the Participant under           Section 4.2;       (d)  A "Matching Contribution Account" to reflect the Matching           Contributions made on behalf of the Participant under Section 4.3; and       (e)  A "Profit Sharing Contribution Account" to reflect the Profit Sharing           Contributions made on behalf of the Participant under Section 4.4.       Each account will also reflect the credits and charges to be made to that account under this Article V. The Committee may also maintain any other account or subaccount as it deems advisable, including a "Rollover Account" to reflect Rollover Contributions made under Section 4.7. Unless the context indicates otherwise, references to a Participant's "Account" means all accounts maintained in his name under the Plan. The maintenance of these accounts is only for accounting purposes, and no assets of the Trust fund need be segregated to any account.       Section 5.2 Accounting Date. The term "Accounting Date" means, with respect to the portion of the Participant's Account which is not invested in Employer Stock, each day on which the securities markets of the United States are generally in operation. With respect to the portion of a Participant's Account that is invested in Employer Stock, "Accounting Date" means each December 31st and the date, if any, declared each spring by the Committee, following receipt of a valuation report prepared by an independent valuation firm, in connection with the purchase by the Trustee of Employer Stock with Rollover Contributions as described in Section 4.8 and the distribution of Participants' Accounts which are invested in Employer Stock as described in Section 6.6. "Allocation Date" also means any other date selected by the Committee, including any date the Plan is terminated or partially terminated. Any reference to an "Accounting Period" ending on an Accounting Date means the period since the last preceding Accounting Date.       Section 5.3 Account Adjustments. The Accounts of Participants and Beneficiaries will be adjusted by the recordkeeper, at the direction of the Committee, as of each Accounting Date in accordance with the following:       (a)  Withdrawals. Any distributions, loans or other withdrawals from the           Trust fund will be debited from the Participants' Accounts.   14         (b)  Adjustments to Investment Funds.             (i)  The net asset value of the securities and/or other assets                comprising each Investment Fund (as defined in Section 5.10) will                be computed. This net asset value will be equal to the market                price of the securities and other assets comprising the                Investment Fund as of the close of business on the current                Accounting Date.            (ii) Following the computation of the net asset value for each                Investment Fund, a gain or loss will be assigned to each Account                invested in the Investment Fund based on the net asset value of                the Investment Fund on the previous Accounting Date.            (iii) Any requests for transfers to be made to or from an Investment                Fund by any Participant, received prior to the stated deadline on                such Accounting Date will be made. In completing the valuation                procedure described above, such adjustments in the amount                credited to such Accounts will be made on the Accounting Date to                which the investment activity relates. It is intended that this                Section operate to distribute among the Participant's Accounts                all income of the Investment Funds and changes in the value of                the Investment Funds' assets.            (iv) In addition to the above paragraph (iii), in the event a pooled                Investment Fund is created as a designated fund for Participant                investment election in the Plan, valuation of the pooled                Investment Fund will be governed by the administrative services                agreement for that pooled Investment Fund.       (c)  Adjustments to Employer Stock. The change in value of Employer Stock           will only be reflected on an Accounting Date for Employer Stock as           provided in Section 5.2.       (d)  Crediting Contributions. Contributions will be credited to the           Participants' Accounts as set forth in Sections 5.4 through 5.7.       (e)  Deemed Date of Allocation. All credits or deductions made under this           Article to Participant's Accounts will, for all purposes other than           the allocation of income, be deemed to have been made no later than           the last day of the Plan Year though actually determined thereafter.           For any period in which one or more Investment Funds are maintained           under Section 5.8, the foregoing provisions of this Section 5.3 will           be applied to the Account balances invested in each Investment Fund           and to any withdrawals or contributions to be allocated to an           Investment Fund as if each Investment Fund were a separate trust fund.           No credit to an Investment Fund will be taken into account under this           Section 5.3 until the Accounting Date the contribution was both paid           to the Trustee and credited to the Investment Fund by the Investment           Fund recordkeeper.       Section 5.4 Crediting of Deferral Contributions. Subject to the conditions and limitations of this Article V and Supplement B, as of each Accounting Date, any Compensation   15   Deferral and Catch-Up Contributions made on behalf of a Participant under Section 4.1 that are not returned to the Participant under that Section 4.1, will be credited to that Participant's Compensation Deferral and Catch-Up Contribution Accounts, respectively.       Section 5.5 Crediting of Safe Harbor Matching Contributions. Subject to the conditions and limitations of this Article V and Supplement B, as of the December 31st Accounting Date, any Safe Harbor Matching Contributions made under Section 4.2 for that Plan Year will be allocated and credited to the Safe Harbor Matching Contribution Account of each Participant in an amount equal to 100 percent of the sum of that Participant's Compensation Deferral and Catch-Up Contributions made to the Plan for that Plan Year up to three percent of the Participant's Earnings plus 50 percent of such Participant's Compensation Deferral and Catch-Up Contributions for the Plan Year to the extent that such Compensation Deferral and Catch-Up Contributions exceed three percent but do not exceed five percent of the Participant's Earnings for the Plan Year.       Section 5.6 Allocation of Matching Contributions. Subject to the conditions and limitations of this Article V and Supplement B, as of the December 31st Accounting Date, any Matching Contributions made under Section 4.3 for that Plan Year will be allocated and credited to the Matching Contribution Accounts of all Participants, pro rata, according to the Compensation Deferral and Catch-Up Contributions credited to those Participants under Section 5.4 above for that Plan Year. Notwithstanding the foregoing, an Employer may limit the Compensation Deferral and Catch-Up Contributions to be used with respect to the Participants for allocation purposes by specifying that limit (in either dollar or percentage terms or both) prior to the end of the Plan Year for which the Matching Contributions are being made.       Section 5.7 Allocation of Profit Sharing Contributions. Subject to the limitations of this Article V, as of the December 31st Accounting Date, any Profit Sharing Contributions made under Section 4.4 for the Plan Year will be allocated as of that date to the Profit Sharing Contribution Accounts of all Eligible Participants, pro rata, according to those Participants' Earnings for that year. An "Eligible Participant" means a Participant who is:       (a)  Employed by an Employer (or on an Authorized Leave of Absence) on the           last day of the Plan Year and who is credited with 1,000 or more Hours           of Service for that year; or       (b)  Employed by an Employer during the Plan Year who terminated his           employment during that year due to his death or Total and Permanent           Disability (as defined in Section 6.1) or after reaching his Normal           Retirement Age.       Section 5.8 Compensation. A Participant's "Compensation" for any Plan Year means the total amount paid to the Participant by the Employers for that year as reported on the Participant's federal wage and tax statement (Form W-2), plus the amount of Compensation Deferral and Catch-Up Contributions made on his behalf that would have been reported as taxable income on Form W-2 for that year but for his Compensation Deferral or Catch-Up Contributions election and the amount that was not reported as taxable income on Form W-2 by an Employer as a result of an election made by the Participant under a Code Section 125 plan or by reason of Code Section 132(f)(4). For purposes of allocating contributions under this Article   16   V only, a Participant's Earnings and Compensation does not include any amount paid to the Participant prior to the date on which he became a Participant in the Plan. In addition, a Participant's Earnings and Compensation does not include any amount in excess of the Compensation Cap in effect for that year. The term "Compensation Cap" means the sum of (i) $210,000, and (ii) any adjustments permitted under Code Section 401(a)(17)(B).       Section 5.9 Maximum Additions. Notwithstanding anything contained in the Plan to the contrary, the Annual Addition (as defined below) made to a Participant's Account for any Plan Year will not exceed the lesser of $42,000 (as adjusted pursuant to Code Section 415(d)(1)(C)) or 100 percent of the Participant's Compensation. The term "Annual Addition" means the sum of the Compensation Deferral Contributions, Matching Contributions, Safe Harbor Matching Contributions and Profit Sharing Contributions that are to be credited to a Participant's Account for a Plan Year. All defined contribution plans maintained by an Affiliate will be aggregated with this Plan for purposes of determining the limitation on Annual Additions. For purposes of the preceding sentence, the term "Annual Addition" includes the sum of any Employer contributions, employee contributions, forfeitures and allocations made on behalf of a Participant to an individual medical benefit account, as defined in Code Section 415(l)(2), or to a separate post-retirement medical benefit account (if the Participant is a Key Employee under Code Section 419A(d)(3)) under a welfare benefit fund, as defined in Code Section 419(e). The compensation limit will not apply to any contributions for medical benefits after separation from service (within the meaning of Code Section 401(h) or 419A(f)(2)) which is otherwise treated as an Annual Addition. If an Annual Addition exceeds this limitation due to a reasonable error in estimating a Participant's Compensation, or due to a reasonable error in determining the amount of Compensation Deferrals that may be made under the limits of Code Section 415, the excess will be held unallocated in a suspense account until it is used to reduce future contributions of the Participant's Employer under Section 4.2, 4.3 or 4.4 in the next Plan Year and each succeeding Plan Year, if necessary. If a suspense account is in existence at any time during the Plan Year pursuant to this Section, it will not participate in the allocation of the Trust's income or investment gains and losses. Notwithstanding the foregoing, the Committee may direct the distribution of Compensation Deferral Contributions to a Participant to the extent needed to meet the limits of Section 5.9.       Any amount returned will be disregarded for purposes of the limits of Supplement B. The Committee may also direct the distribution of any investment earnings on the returned contributions to avoid a violation of the limits of Section 5.9.       Section 5.10 Investment Funds. The Trust fund may include one or more "Investment Funds" established by the Trustee at the direction of the Committee. Each Participant may elect the manner in which his Account (which is not held in Employer Stock) is to be invested among the Investment Funds. The Committee will adopt rules concerning the investment of amounts for which it receives no election and inform Participants of those rules from time to time. A Participant may also elect to have amounts in his Accounts that are invested in an Investment Fund transferred to another Investment Fund or Funds. A Participant's election to invest his Account, to change the investment of future contributions or to transfer amounts from one Investment Fund to another will be made in accordance with any rules established by the Committee in accordance with this Section on forms or pursuant to procedures established by the Committee for that purpose.   17        Section 5.11 Annual Statement to Participants. As soon as practicable after the end of each Plan Year and at such other times as the Committee determines in its sole discretion, the Committee will furnish each Participant with a statement reflecting the status of the Participant's Account as of that date.                                                                   18                                      ARTICLE VI                                    ----------                              Distribution of Benefits                             ------------------------       Section 6.1 Retirement or Disability. If a Participant's employment with all of the Affiliates terminates on or after the date the Participant has attained age 65 (his "Normal Retirement Age"), or if his employment terminates because of his Total and Permanent Disability, the Participant will be entitled to receive the entire amount credited to his Account, determined as of the date specified in Section 6.6, distributable in accordance with this Article VI. For purposes of this Plan, a Participant will be deemed to have incurred a "Total and Permanent Disability" if the Participant has a disability as determined for purposes of the Federal Social Security Act which qualifies the Participant for permanent disability insurance payments in accordance with that Act. A minimal level of earnings in restricted activity during any period of disability will not disqualify a Participant from receiving disability benefits for such period if the disabled Participant receives disability benefits under the Social Security Act for the same period.       Section 6.2 Death. If a Participant's employment with all of the Affiliates terminates because of his death, the entire amount in his Account, determined as of the date specified in Section 6.6, will be paid to his Beneficiary in accordance with this Article VI after receipt by the Committee of acceptable proof of death.       Section 6.3 Resignation or Dismissal. If a Participant's employment with all of the Affiliates terminates prior to his satisfying the requirements of Section 6.1 and for a reason other than his death, the Participant will be entitled to receive the entire amount in his Compensation Deferral Contribution Account, his Catch-Up Contribution Account, his Safe Harbor Matching Contribution Account, and his Rollover Account, determined as of the date specified in Section 6.6, distributable in accordance with this Article VI. The Participant will also be entitled to receive the "Vested Percentage" of his Matching Contribution and Profit Sharing Contribution Accounts, determined as of the date specified in Section 6.6, distributable in accordance with this Article VI. The Vested Percentage of a Participant's Matching and Profit Sharing Contributions Accounts will be determined in accordance with the following schedule based on his Years of Service (as defined below) at his termination date:                                  Vested            Forfeited         Years of Service      Percentage         Percentage         ----------------      ----------         ----------          Less than 1               0%                100%         1                         20%                80%         2                         40%                60%         3                         60%                40%         4                         80%                20%         5 or more                100%                0%       The term "Years of Service" means the sum of the Plan Years beginning on or after the Original Effective Date in which the Participant was credited with at least 1,000 Hours of Service (as determined under Section 2.5). However, the following rules apply to a Participant   19    who terminates employment with the Affiliates and is subsequently reemployed by an Affiliate (a "Reemployed Participant"):       (a)  If the Reemployed Participant incurs a One-Year Break in Service (as           determined under Section 2.5) during the period between his           termination and subsequent reemployment (the "Separation Period"),           Years of Service accrued by the Reemployed Participant prior to the           Separation Period will not be taken into account to determine his           Vested Percentage until he has completed one Year of Service following           his reemployment.       (b)  No Years of Service accrued by the Reemployed Participant before the           Separation Period will be taken into account if the Reemployed           Participant:            (i)  Had no vested right to any amount in his Account prior to the                Separation Period; and            (ii) Incurred five or more consecutive One-Year Breaks in Service                during the Separation Period.       (c)  No Years of Service accrued by the Reemployed Participant after he has           incurred five consecutive One-Year Breaks in Service will be taken           into account to determine the Vested Percentage of his Matching           Contribution or Profit Sharing Contribution Account as of a prior           termination date.       Section 6.4 Remainders and Reinstatement of Remainders. The portion of a Participant's Matching Contribution or Profit Sharing Contribution Account that is not distributable to the Participant or his Beneficiary under Section 6.3 will be treated as a "Remainder" and forfeited in accordance with the following provisions. A Remainder will be forfeited by the Participant as of the earlier of (i) the end of the Plan Year in which the Participant receives distribution of his Account (other than the Remainder) or (ii) the end of the Plan Year in which the Participant incurs five consecutive One-Year Breaks in Service. Forfeited amounts will be used to reduce any Employer contributions to be made for the Plan Year in which the forfeiture occurs or as soon as practicable in subsequent Plan Years. If the Participant is reemployed after his Remainder has been forfeited but before he has incurred five consecutive One-Year Breaks in Service, he may repay to the Trustee (within five years of the Participant's reemployment date) the total amount that had been distributed to him as a result of his earlier termination of employment. If the Participant makes such a repayment, both the amount of the repayment and the Remainder will be credited to his Matching and Profit Sharing Contribution Accounts as of the Accounting Date occurring on the last day of a Plan Year that is coincident with or next following the date of repayment (after all other adjustments required under the Plan as of that date have been made). A Participant who has no vested benefit under the Plan will be deemed to have been paid a vested benefit at the time of his termination of employment for purposes of this Section. He will also be deemed to have repaid that distribution on the date of his reemployment if he is reemployed before incurring five consecutive One-Year Breaks in Service. If the Company must reinstate a Remainder under the preceding sentences, the reinstatement will be made by utilizing Remainders forfeited by other participants. If no forfeited Remainders are available for this purpose, the Company may use any income of the   20   Trust fund to be credited as of that date under Section 5.3 or may require the Participant's Employer to make a special Employer contribution, as determined by the Company, to the extent needed to reinstate the required amount.       Section 6.5 Payment of Benefits. The balance of a Participant's Account that is distributable under Section 6.1, 6.2 or 6.3 will be paid in cash or, if applicable and elected by the Participant or Beneficiary, in the form of whole shares of Employer Stock in the manner and at the time specified in Section 6.6. Except as otherwise provided below, payment will be made within a reasonable time after the last day of the Plan Year coincident with or next following the Participant's termination date, but in no event later than 60 days after the latest of (i) the end of the Plan Year in which his termination occurs, (ii) the end of the Plan Year in which the Participant attains Normal Retirement Age, or (iii) the date on which the amount of the payment can be ascertained by the Committee. If the Participant is reemployed by an Employer before payment is made or begun under this Section, no payment will be made until the Participant terminates employment again and is eligible for a distribution under Section 6.1, 6.2 or 6.3.       (a)  Accounts of $5,000 or Less. If the Participant's vested Account           balance does not exceed $5,000 on the date payment is to be made, he           will be paid in a single payment -------------------------- under           Section 6.6 in accordance with the previous provisions of this           Section. Effective with respect to distributions made on or after           March 28, 2005, if the Participant's vested Account balance exceeds           $1,000 but does not exceed $5,000 and the Participant does not elect           to have the distribution paid to an Eligible Retirement Plan specified           by the Participant in a direct rollover or to receive the distribution           directly, then the Committee will pay the distribution in a direct           rollover to an individual retirement plan designated by the Committee.           If the benefit is payable to the Participant's Surviving Spouse,           Beneficiary or Alternate Payee, the benefit will be paid directly to           the Surviving Spouse, Beneficiary or Alternate Payee.       (b)  Accounts of More than $5,000. If the Participant's vested Account           balance to be distributed under this Section exceeds $5,000 on the           date payment is to be made and the Participant has attained Normal           Retirement Age, payment will be made as soon as practicable, as           described above and in Section 6.6. If the Participant's vested           Account balance exceeds $5,000 and the Participant has not attained           Normal Retirement Age by the time the distribution is to be made,           payment will be made on the first day of the month following the           Participant's Normal Retirement Age or death, whichever is earlier.           Notwithstanding the foregoing, any Participant with a distributable           benefit in excess of $5,000 may elect, in accordance with procedures           established by the Committee, to accelerate or defer the payment of           his benefits in accordance with the provisions of this Section. An           election under the preceding sentence to accelerate payment prior to           his Normal Retirement Age must be made by the Participant at least 30           days after (but no more than 90 days after) the Participant receives           the election form and a description of his benefit payment options.           The 30-day election period may be waived by the Participant (so that           benefit payment may be made immediately following receipt of the form           and notice) if the Committee has clearly informed                                          21   the Participant that he has at least 30 days to consider the timing and form of his benefit payment.       (c)  Rollovers Disregarded in Involuntary Cash-outs. For purposes of           Section 6.5(a), with respect to Participants who separate from service           after December 31, 2000, the value of a Participant's nonforfeitable           Account balance will be determined without regard to that portion of           the Account balance that is attributable to Rollover Contributions           (and earnings allocable thereto) within the meaning of Code Sections           402(c), 403(a)(4) and 408(d)(3)(A)(ii). If the value of the           Participant's nonforfeitable Account balance, as so determined, is           $5,000 or less, the Plan will distribute the Participant's entire           nonforfeitable Account balance at the same time and in the same manner           as provided in this Article for Account balances of $5,000 or less.       (d)  Minimum Required Distributions. Distribution of a single payment with           respect to a Participant who has terminated employment may not be           deferred beyond April 1 of the calendar year that follows the calendar           year in which the Participant attains age 70 1/2. Participants who are           five percent or more owners of an Affiliate (as defined in Code           Section 416) at any time during the Plan Year ending with or within           the calendar year in which they attain age 70 1/2, must receive or           begin to receive payment of their Accounts by that April 1 date,           regardless of their employment status.       Section 6.6 Manner and Timing of Payment. Subject to the provisions of Section 6.8, payment of a Participant's benefit that is distributable under Section 6.5 will be made to or for the benefit of the Participant, or in the event of his death, to or for the benefit of his Beneficiary, in a single payment as provided in this Section 6.6.       (a)  Payment of all distributable Accounts will be made as soon as           reasonably practicable following the last day of the Plan Year in           which the Participant terminated employment. The portion of a           Participant's distributable Account which does not consist of Employer           Stock will be valued as of the Accounting Date that immediately           precedes the date of distribution. The portion of a Participant's           distributable Account which consists of Employer Stock will be valued           as of the Accounting Date described in Section 5.2 which coincides           with or immediately precedes the date of distribution.       (b)  A Participant may elect, on a form provided by the Committee, to           receive the portion of his Account which consists of Employer Stock in           any one of the following three forms:            (i)  Whole shares of Employer Stock with any fractional share                interests distributed in cash;            (ii) Cash; or            (iii) A combination of cash and whole shares of Employer Stock.    22        (c)  If the Participant elects to receive any portion of his Account which           consists of Employer Stock in the form of cash, those shares of           Employer Stock which are to be distributed in cash will be liquidated,           as of the Accounting Date specified in subsection (a), in the           following manner:            (i)  The use by the Trustee of cash from Rollover Contributions as                described in Section 4.8; and, if necessary            (ii) The use by the Trustee of the Employer's cash Safe Harbor                Matching Contributions and Matching Contributions as described in                Sections 4.2 and 4.3; and, if necessary            (iii) The purchase of any remaining shares of Employer Stock from the                Trustee by the Employer, subject to the requirements of Section                4.8(e).       Section 6.7 Death Distribution Provisions. Upon the death of the Participant, the following distribution provisions shall apply:       (a)  If the Participant dies after the distribution of his Account no           further payments will be made.       (b)  If the Participant dies before the distribution of his Account           commences, the Participant's entire Account will be distributed as           provided in Section 6.6 subject to the minimum required distribution           rules of Supplement E.       Section 6.8 Spousal Death Benefit. Notwithstanding anything in this Article to the contrary, the Account of a Participant who is married at the time of his death and dies before any benefit payments have been made or who is married on the date benefit payments commence and dies before the complete distribution of his benefits (a "Married Participant") will be distributed in accordance with the following provisions:       (a)  Spousal Death Benefit. If the Married Participant has not received the           entire balance payable to him under Section 6.5 prior to his death,           the remaining portion of his Account balance will be paid to his           Surviving Spouse in accordance with Section 6.6, unless the           Participant has designated another person or persons as his           Beneficiary and his Surviving Spouse has consented to the designation           as provided in subsection (b) below.       (b)  Spousal Consent. A Surviving Spouse's consent under this Section will           be effective only if:            (i)  The Married Participant designates another Beneficiary and that                designation cannot be changed without the Surviving Spouse's                consent (unless the original consent expressly permits a change                to be made without the Surviving Spouse's subsequent consent);            (ii) The Surviving Spouse consents to the designation in a writing                witnessed by a Notary Public or Committee member; and   23             (iii) The consent acknowledges the effect of the Married Participant's                designation.       (c)  Surviving Spouse. For purposes of this Section, a Married           Participant's "Surviving Spouse" is the person to whom the Married           Participant was married on the day of his death.       Section 6.9 Designation of Beneficiary. Each Participant from time to time may designate any person or persons (who may be designated contingently or successively and who may be an entity other than a natural person) as his "Beneficiary" to whom his Plan benefits will be paid if he dies before he receives all his benefits. Each Beneficiary designation shall be in the form prescribed by the Committee and will be effective only if filed with the Committee during the Participant's lifetime. Each Beneficiary designation filed with the Committee will cancel all previously filed Beneficiary designations. The revocation of a Beneficiary designation, no matter how effected, will not require the consent of any designated Beneficiary, except where spousal consent may be required under Section 6.8. If any Participant fails to designate a Beneficiary in the manner provided above or if the designated Beneficiary does not survive the Participant, the Committee will direct the Trustee to distribute the Participant's benefits to the Participant's estate. If the Beneficiary survives the Participant, but dies before the complete distribution of the Participant's benefits, the Committee will direct the Trustee to distribute the balance of the Participant's benefits to the Beneficiary's estate.       Section 6.10 Direct Rollovers. Notwithstanding any provision of the Plan to the contrary, a Distributee may elect, at the times and in the manner prescribed by the Committee, to have any portion of an Eligible Rollover Distribution paid to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover. The term "Eligible Rollover Distribution" means any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee's designated Beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Code Section 401(a)(9); and any distribution to the extent paid from the Participant's Account as a "hardship withdrawal." A portion of a distribution will not fail to be an eligible rollover distribution merely because the portion consists of after-tax contributions which are not includible in gross income. However, such portion may be transferred only to an individual retirement account or annuity described in Code Section 408(a) or (b), or to a qualified defined contribution plan described in Code Section 401(a) or 403(a) that agrees to separately account for amounts so transferred, including separately accounting for the portion of the distribution which is includible in gross income and the portion which is not so includible. "Eligible Retirement Plan" means an individual retirement account described in Code Section 408(a), an individual retirement annuity described in Code Section 408(b), an annuity plan described in Code Section 403(a), a qualified trust described in Code Section 401(a), an annuity contract described in Code Section 403(b) and an eligible plan under Code Section 457(b) which is maintained by a state, political subdivision of a state or any agency or instrumentality of a state or political subdivision of a state, that accepts the Distributee's Eligible Rollover Distribution. "Distributee" means an employee or former employee. In addition, the employee's or former employee's Surviving Spouse and the   24   employee's or former employee's spouse or former spouse who is the Alternate Payee under a Qualified Domestic Relations Order, as defined in Code Section 414(p), are Distributees with regard to the interest of the spouse or former spouse. "Direct Rollover" means a payment by the Plan to the Eligible Retirement Plan specified by the Distributee. If a Participant is employed by a business entity after he terminates employment with the Employers and that entity maintains an Eligible Retirement Plan, the Committee, upon the Participant's request, may direct the Trustee to transfer the Participant's vested Account balances under this Plan to the trustees or custodian of the other plan; provided that the other plan permits such a transfer. Upon completion of a transfer under this Section, all rights of the Participant to any benefit under this Plan will cease.       Section 6.11 Loans. The Trustee may loan a portion of the Trust fund to a Participant at the Committee's direction in accordance with the provisions of Supplement D.             25                                     ARTICLE VII                                   -----------                   Diversification of Investment in Employer Stock                  -----------------------------------------------       Section 7.1 Election by Qualified Participant. Each Qualified Participant will be permitted to direct the Trustee as to the diversification of the Employer Stock held in his Account within 90 days after the last day of each Plan Year during the Participant's Qualified Election Period. The term "Qualified Participant" means a Participant or Inactive Participant who has attained age 55. The term "Qualified Election Period" means the ten Plan Years commencing with the first Plan Year during which the Participant first becomes a Qualified Participant. Such election may be modified, revoked or superseded by a new election at any time during the ninety 90 day election period after which it will be irrevocable. The portion of a Qualified Participant's Account subject to the diversification election in each of the years during the Qualified Election Period will be equal to 25 percent of the total number of whole shares of Employer Stock held in the Participant's Account as of the Applicable Accounting Dates. With respect to the last year of the Qualified Election Period, "100 percent" will be substituted for "25 percent" in determining the amount subject to the diversification election.       Section 7.2 Method of Diversifying Investment. A Qualified Participant's election to diversify a portion of the Employer Stock held in his Account will be provided to the Trustee in writing and will be effective no later than 180 days after the close of the Plan Year to which the direction applies.       (a)  A Qualified Participant may direct the Trustee to transfer the portion           of his Account to which the election to diversify relates in cash to           the Investment Funds selected by the Participant. The amount of cash           to be transferred will be equal to the fair market value of the shares           of Employer Stock to which the election relates, as determined under           Section 4.8, based on the per share fair market value as of the           Accounting Date immediately preceding the date on which the transfer           is to be made. The transfer will be made no later than 90 days after           the last day of the period during which the election can be made. The           amount of cash necessary to implement the Qualified Participant's           election may, to the extent necessary to comply with such election, be           funded by the Committee in the same manner as provided for           distributions under Section 6.6(c).       (b)  A Qualified Participant may elect not to diversify any portion of his           Account held in Employer Stock. The failure by a Qualified Participant           to make a timely or proper election under this Article will be treated           for all purposes as an election not to exercise his diversification           rights.   26                                     ARTICLE VIII                                   ------------                                 Plan Administration                                -------------------       Section 8.1 Plan Administrator. The Company will act as the Plan administrator and as the Plan's agent for service of legal process. However, the Company's Board may appoint a Committee under Section 8.2 to perform the day-to-day administration of the Plan as provided in this Article VII. If no Committee is appointed, the Company will perform the duties assigned to the Committee.       Section 8.2 Committee Membership. The Committee appointed by the Company's Board of Directors will consist of three or more persons who may but need not be employees of an Affiliate. The Company will notify the Trustee, any other Employers and Participants of the Committee's membership.       Section 8.3 Appointment, Resignation, Removal of Committee Members. The Company may remove a member of the Committee at any time by written notice to him, the other Committee members, any other Employers and the Trustee. A Committee member may resign at any time by written notice to the Company's Board, the other Committee members, any other Employers and the Trustee. The Company may fill any vacancy in the Committee's membership and will give written notice thereof to the other Committee members, any other Employers and the Trustee. While there is a vacancy in the Committee's membership, the remaining Committee members will have the same powers as the full Committee until the vacancy is filled.       Section 8.4 Committee Procedures. The Committee may act at a meeting or in writing without a meeting. The Committee may elect one of its members as chairman and appoint a secretary, who may or may not be a Committee member, as it deems advisable. The Committee may authorize any one or more of its members to execute any directive or certification on behalf of the Committee. The Trustee, upon receipt of such authorization, may rely on any directive or certification issued by the authorized member or members until notified to the contrary. The Committee may also adopt such bylaws and regulations as it deems desirable for the conduct of its affairs. All decisions of the Committee will be made by the vote of the majority including actions in writing taken without a meeting. If because of the number of members qualified to act there is no majority on a particular matter, a disinterested party selected by the Committee will decide the matter.       Section 8.5 Committee Powers and Duties. The Committee has the duties and powers necessary to discharge its obligations under the Plan and Trust, including, but not limited to, the following:       (a)  To construe and interpret the Plan and decide all questions arising in           the administration, interpretation and application of the Plan and           Trust;       (b)  To receive from the Employers and from Participants the information           necessary for the proper administration of the Plan;   27        (c)  To keep, and to furnish an Employer upon its request, such records and           reports with respect to the administration of the Plan as are           reasonable and appropriate;       (d)  To receive, review and keep on file (as it deems convenient or proper)           reports of the financial condition, and of the receipts and           disbursements, of the Trust fund from the Trustee;       (e)  To direct the Trustee in the payments or distributions to be made from           the Trust fund in accordance with the provisions of the Plan; and       (f)  To appoint or employ individuals to assist in the administration of           the Plan and any other agents it deems advisable, including legal,           accounting and actuarial counsel.       Section 8.6 Committee Rules and Decisions. The Committee may adopt such rules and procedures as it deems necessary or desirable to provide for the proper administration of the Plan. All rules and decisions of the Committee will be consistent with the terms of the Plan and Trust and will be uniformly and consistently applied to all Participants in similar circumstances. When making a determination or calculation, the Committee is entitled to rely upon information furnished by a Participant or Beneficiary, the Employers, the legal counsel of the Company or the Trustee. The Committee will make any adjustments it considers equitable and practicable to correct a mistake of fact once the mistake becomes known. Subject to applicable law, any determination made in good faith by the Committee under this Article VIII will be binding on all persons. Consequently, benefits under this Plan will be paid only if the Committee decides in its discretion that the applicant is entitled to them.       Section 8.7 Interested Committee Member. If a Committee member (or that member's spouse) is a Plan Participant, that member will be ineligible to participate in any decision concerning his eligibility for the amount, method or timing of a distribution under the Plan to be made on his behalf (or on behalf of his spouse).       Section 8.8 Facility of Payment. Whenever, in the Committee's opinion, a person entitled to receive any payment under the Plan is under a legal disability or incapacitated in any way so as to be unable to manage his financial affairs, the Committee may direct the Trustee to make payments to his legal representative or to a relative or friend of such person for his benefit, or to apply the payment for the benefit of the person in a manner the Committee considers appropriate. Any benefit payment made in accordance with this Section will constitute a complete discharge of any liability for the making of such payment under the Plan.       Section 8.9 Missing Participants and Beneficiaries. Each Participant must file his and his Beneficiary's post office address (and any change of address) with the Committee. Any communication sent to a Participant or Beneficiary at the address last filed with the Committee, or at the address shown on the Employer's records if no address was filed with the Committee, will be binding on the Participant and Beneficiary for all purposes of the Plan. Neither the Committee nor an Employer is required to search for or locate a Participant or Beneficiary. If a payment cannot be made within three years of the date the payment was originally due because the Participant's or Beneficiary's whereabouts is unknown, the benefit will be forfeited and the   28   forfeited amount will be utilized in one of the following ways, as determined by the Committee in its sole and absolute discretion:       (a)  By paying the forfeited amount to the Beneficiary.       (b)  By paying the forfeited amount to the Participant's spouse (if then           living).       (c)  If there is no known Beneficiary or surviving spouse by paying the           forfeited amount to one or more of the Participant's relatives (if           then living) in any proportion the Committee determines to be           equitable.       (d)  By treating the forfeited amount as a Remainder under Section 6.4.       Section 8.10 Claims and Review Procedures. While a Participant or Beneficiary need not file a claim to receive a benefit under the Plan, such a person may submit a written claim to the Committee or seek a review of the Committee's benefit determination. The Committee will afford the Participant or Beneficiary a full and fair review of such a request as provided in Supplement A.       Section 8.11 Plan Expenses. All usual and reasonable expenses of the Plan, including expenses incurred by the Committee, may be paid in whole or in part by Employers (in the proportion determined by the Company), and any expenses not paid by the Employers may be paid by the Trustee out of the principal or income of the Trust fund. To the extent expenses are paid by the Trustee from the Trust fund, the Committee may allocate those expenses to an individual Participant's Account in accordance with nondiscriminatory rules established by the Committee and communicated to Participants. Any member of the Committee who is an employee of an Affiliate may not receive compensation with respect to his services for the Committee.       Section 8.12 Fiduciary Responsibilities. A fiduciary with respect to the Plan or Trust shall discharge his fiduciary duties solely in the interest of Plan Participants and their Beneficiaries with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of like character and with like aims. It is intended under the Plan and Trust that a fiduciary will be responsible only for the proper exercise of its own fiduciary duties and obligations to the extent not properly allocated or delegated to other persons.   29                                      ARTICLE IX                                    ----------                                    Miscellaneous                                   -------------       Section 9.1 Nonguarantee of Employment. Nothing contained in this Plan may be construed as a contract of employment between an Employer and any employee, or as a right to be engaged or continued in the employment of an Employer, or as a limitation of the right of an Employer to discharge any of its employees, with or without cause.       Section 9.2 Rights to Trust Assets. No employee or Beneficiary has any right to, or interest in, any assets of the Trust, except as provided from time to time under this Plan. Benefits payable under the Plan to any person are to be paid solely out of the assets of the Trust fund and the liability of the Employers and the Trustee to make a benefit payment under the Plan is limited to the Trust assets available for that purpose.       Section 9.3 Nonalienation of Benefits. Except as may be required by the tax withholding provisions of a federal, state or municipal tax act or pursuant to a qualified domestic relations order (as that term is defined in Code Section 414(p)) or pursuant to a judgment or settlement described in Code Section 401(a)(13)(C) entered into on or after August 5, 1997, benefits payable under this Plan are not subject in any manner to sale, transfer, assignment, pledge, encumbrance, garnishment, or levy of any kind, either voluntary or involuntary, prior to actually being received by the person entitled to the benefit under the terms of the Plan; and any attempt to sell, transfer, assign, pledge, encumber, or otherwise dispose of any right to benefits payable hereunder will be void. The Trust fund will not be liable for, or subject to, the debts, contracts, liabilities, engagements or torts of any person entitled to benefits hereunder.       Section 9.4 Applicable State Law. To the extent not superseded by the laws of the United States, this Plan will be administered and construed and its validity determined under the laws of the State of Indiana, without regard to that state's choice of law principles.       Section 9.5 Illegal or Invalid Provisions. In the event any provision of this Plan is held illegal or invalid for any reason, such illegality or invalidity will not affect the remaining parts of this Plan, and the Plan will be construed and enforced as if such illegal or invalid provision had never been inserted herein.       Section 9.6 Gender and Number. Words in the masculine gender are to be construed to include the feminine gender in all cases where appropriate and words in the singular or plural are to be construed as being in the plural or singular where appropriate.       Section 9.7 Execution in Counterparts. This Plan may be executed in any number of counterparts each of which will be deemed to be an original. All the counterparts will constitute but one and the same instrument and may be sufficiently evidenced by any one counterpart.       Section 9.8 Waiver of Notice. Any notice required under the Plan may be waived by the party entitled to such notice.       Section 9.9 Action by the Employers. Any action required or permitted to be taken by an Employer under the Plan or Trust must be by resolution of its Board of Directors, by a duly   30   authorized committee of its Board of Directors or by a person or persons duly authorized by its Board of Directors or such committee.       Section 9.10 Indemnification. To the extent permitted by law, the Employers will indemnify each current and former employee or director of an Employer and each current and former Committee member against any and all liability or claim of liability (to the extent not indemnified under any liability insurance contract or other indemnification agreement) which the person incurs on account of any act or failure to act in connection with the good faith administration of the Plan, including all expenses incurred in the person's defense if the Employers fail to provide a defense after having been requested to do so in writing. The right to indemnification under this Section is conditioned upon the person notifying the Company of the claim of liability within 30 days of the notice of that claim and offering the Company the right to participate in and control the settlement and defense of the claim.       Section 9.11 Nonguarantee of Funds. Neither the Trustee nor the Employers in any way guarantee the Trust fund from loss or depreciation.       Section 9.12 Qualified Domestic Relations Orders. Notwithstanding the provisions of Article VI, payments from a Participant's Account may be made (to the extent vested under Section 6.3) to an "Alternate Payee" under a "Qualified Domestic Relations Order" (as those terms are defined under Code Section 414(p)) prior to the Participant's retirement or other termination of employment.      31                                      ARTICLE X                                    ---------                               Amendment and Termination                             -------------------------       Section 10.1 Amendment. The Company reserves the right to amend the Plan from time to time in its sole discretion, provided that the amendment:       (a)  Except as provided in Section 11.3, does not cause any part of the           Trust fund to be used for, or diverted to, any purpose other than the           exclusive benefit of Participants or their Beneficiaries.       (b)  Does not eliminate or reduce a Participant's accrued benefit under the           Plan.       Section 10.2 Termination. While the Employers expect and intend to continue the Plan, the Company reserves the right to terminate the Plan with respect to all Employers at any time in its sole discretion. In addition, the Plan will terminate with respect to an individual Employer (a) by resolution of the Employer's Board of Directors, provided that 30 days advance written notice is given to the Committee and the Company, (b) upon the dissolution, merger, consolidation or reorganization of the Employer or the sale by the Employer of all or substantially all of its assets (unless a successor is substituted for the Employer under Section 11.1), or (c) upon the Employer's complete discontinuance of contributions under the Plan. A partial termination of the Plan may occur with respect to a group of Participants on any date specified by the Company or required by law.       Section 10.3 Termination Procedures. The date of a termination or partial termination (a "Plan Termination Date") will constitute a special Accounting Date under Section 5.2. After the adjustments required under Section 5.3 have been made, the Committee may reserve a sum it deems to be reasonably necessary to pay any absolute or contingent liabilities of the Plan or Trust and may charge that sum to each Participant's Account on a pro rata basis according to the Account balances as adjusted under the preceding sentence. The Account balances of affected Participants and Beneficiaries, as adjusted, will be fully vested and nonforfeitable as of the Plan Termination Date and will be distributed in a single payment as soon as practicable to each such Participant or Beneficiary (unless the Participant is employed by another Employer as to which the Plan has not terminated). Notwithstanding the foregoing, no distribution will be made under this Section if an Affiliate (determined at the time of the termination) maintains a "Successor Plan" as that term is defined under Code Section 401(k)(2)(B)(i)(II) and the final regulations issued under that section. All provisions of the Plan which are not inconsistent with this Article will continue in effect, including all the powers and duties of the Committee, the Company and the Trustee, until a complete distribution of the Trust fund has been made.   32                                      ARTICLE XI                                    ----------                          Successors, Mergers and Plan Assets                        -----------------------------------       Section 11.1 Successors. In the event of the dissolution, merger, consolidation or reorganization of an Employer or the sale by an Employer of all or substantially all of its assets, provision may be made with the consent of the Company by which the Plan and Trust will be continued by the Employer's successor; and, in that event, the successor will be substituted for the Employer under the Plan. Upon the substitution, the successor will assume all Plan liabilities and will assume all of the powers, duties and responsibilities of that Employer under the Plan.       Section 11.2 Plan Mergers, Consolidations and Transfers. The Plan will not, in whole or in part, be merged or consolidated with or have its assets or liabilities transferred to any other plan, unless each Participant of this Plan would be entitled to receive a benefit immediately after the merger, consolidation or transfer (if the Plan terminated on that date) equal to or greater than the benefit he would have been entitled to immediately before the merger, consolidation or transfer (if the Plan terminated on that date).       Section 11.3 Plan Assets. The Employers will have no right, title or interest in any portion of the Trust fund, nor may any portion of the Trust fund be returned to an Employer, directly or indirectly, except:       (a)  If the Internal Revenue Service determines that the Plan as initially           adopted by an Employer does not meet the requirements of Code Section           401(a) and the Company determines that the Plan should not be amended           to meet the Internal Revenue Service's requirements, a contribution           made before the Internal Revenue Service's determination, provided           that (i) the contribution is returned to the Employer within one-year           of the determination and (ii) the qualification application is made by           the time prescribed by law for filing the Employer's return for the           taxable year in which the Plan is adopted or such later date as the           Secretary of the Treasury may prescribe.       (b)  A contribution made by a mistake of fact, provided that the           contribution is returned to the Employer within one year of the           original contribution date.       (c)  The portion of a contribution that is disallowed as an expense for           federal income tax purposes, provided that such amount is returned to           the Employer within one year of the disallowance.  Any amount returned under subsection (b) or (c) above must first be reduced by any amount previously distributed from the Trust fund and then by any Trust fund losses allocable to that amount, and in no event may the return of the contribution under those subsections cause any Participant's Account balance to be less than the Account balance he would have been credited with had the contribution not been made.   33                                     ARTICLE XII                                   -----------                              Participation By Affiliates                            ---------------------------       Section 12.1 Affiliate Participation. Any Affiliate may adopt the Plan and become an Employer under the Plan and a party to the Trust by filing:       (a)  A certified copy of a resolution of its Board of Directors to that           effect with the Company, the Committee and the Trustee; and       (b)  A written document signed by an officer of the Company which indicates           the Company's consent to that action with the Committee and the           Trustee.       Section 12.2 Company Action Binding on Other Employers. As long as the Company is an Employer under the Plan, it is empowered to act for any other Employer in all matters relating to the Plan, the Committee or the Trustee.           34                                     SUPPLEMENT A                                   ------------                             Claims and Review Procedures                           ----------------------------       Section A-1 Procedures Governing the Filing of Benefit Claims. All Benefit Claims must be filed on the appropriate claim forms available from the Committee or in accordance with the procedures established by the Committee for claim purposes. A "Benefit Claim" means a request for a Plan benefit or benefits, made by a Claimant or by an authorized representative of a Claimant, which complies with the Plan's procedures for making benefit claims. "Claimant" means a Participant, a surviving spouse of a Participant, a Beneficiary, or an Alternate Payee, who is claiming entitlement to the payment of any benefit under the Plan.       Section A-2 Notification of Benefit Determinations. The Committee will notify a Claimant, in accordance with Section A-3 below, of the Plan's benefit determination within a reasonable period of time after receipt of a Benefit Claim, but not later than 90 days after receipt of the Benefit Claim by the Plan.       If special circumstances require an extension of time for processing the Benefit Claim, the Committee will notify the Claimant of the extension prior to the termination of the initial period described above. The notice will indicate the special circumstances requiring the extension of time and the date by which the Plan expects to make the benefit determination. In no event will the extension exceed a period of 90 days from the end of the initial period.       Section A-3 Manner And Content of Notification of Benefit Determinations. All notices given by the Committee under the Plan will be given to a Claimant, or to his authorized representative, in a manner that satisfies the standards of 29 CFR 2520.104b-1(b) as appropriate with respect to the particular material required to be furnished or made available to that individual. The Committee may provide a Claimant with either a written or an electronic notice of the Plan's benefit determination. Any electronic notification will comply with the standards imposed by 29 CFR 2520.104b-1(c)(1)(i), (iii) and (iv). In the case of an Adverse Benefit Determination, the notice will set forth, in a manner calculated to be understood by the Claimant:       (a)  The specific reasons for the adverse determination;       (b)  Reference to the specific Plan provisions (including any internal           rules, guidelines, protocols, criteria, etc.) on which the           determination is based;       (c)  A description of any additional material or information necessary for           the Claimant to complete the claim and an explanation of why such           material or information is necessary; and       (d)  A description of the Plan's review procedures and the time limits           applicable to such procedures.       The term "Adverse Benefit Determination" means a denial, reduction, or termination of, or a failure to provide or make payment (in whole or in part) for, any benefit claimed to be payable under the Plan.   A-1        Section A-4 Appeal of Adverse Benefit Determinations. A Claimant who receives an Adverse Benefit Determination and desires a review of that determination must file, or his authorized representative must file on his behalf, a written request for a review of the Adverse Benefit Determination, not later than 60 days after receiving the determination.       The written request for a review must be filed with the Committee. Upon receiving the written request for review, the Committee will advise the Claimant, or his authorized representative, in writing that:       (a)  The Claimant, or his authorized representative, may submit written           comments, documents, records, and any other information relating to           the claim for benefits; and       (b)  The Claimant will be provided, upon request of the Claimant or his           authorized representative, reasonable access to, and copies of, all           documents, records, and other information relevant to the Claimant's           Benefit Claim, without regard to whether those documents, records, and           information were considered or relied upon in making the Adverse           Benefit Determination that is the subject of the appeal.       Section A-5 Benefit Determination on Review. All appeals by a Claimant of an Adverse Benefit Determination will receive a full and fair review by an appropriate named fiduciary of the Plan.       Section A-6 Notification of Benefit Determination on Review. The Committee will notify a Claimant, in accordance with Section A-7, of the Plan's benefit determination on review within a reasonable period of time, but not later than 60 days after the Plan's receipt of the Claimant's request for review of an Adverse Benefit Determination. If, however, special circumstances require an extension of time for processing the review by the named fiduciary, the Claimant will be notified, prior to the termination of the initial 60 day period, of the special circumstances requiring the extension and the date by which the Plan expects to render the Plan's benefit determination on review, which will not be later than 120 days after receipt of a request for review. Provided, however, in the case of a Plan with a Committee or other group designated as the appropriate named fiduciary that holds regularly scheduled meetings at least quarterly, the time limit of this Section will be modified in accordance with 29 CFR 2560.503-1(i)(1)(ii) or 29 CFR 2560.503-1(i)(3)(ii), whichever is applicable.       Section A-7 Manner and Content of Notification of Benefit Determination on Review. The Committee will provide a Claimant with notification of its benefit determination on review in a method described in Section A-3.       In the case of an Adverse Benefit Determination on review, the notification must set forth, in a manner calculated to be understood by the Claimant:       (a)  The specific reasons for the adverse determination on review;       (b)  Reference to the specific Plan provisions (including any internal           rules, guidelines, protocols, criteria, etc.) on which the benefit           determination on review is based;   A-2        (c)  A statement that the Claimant is entitled to receive, upon request and           free of charge, reasonable access to, and copies of, all documents,           records and other information relevant to the Claimant's Benefit           Claim, without regard to whether those records were considered or           relied upon in making the Adverse Benefit Determination on review,           including any reports, and the identities, of any experts whose advice           was obtained.                   A-3                                     SUPPLEMENT B                                   ------------           Limitations on Compensation Deferral and Matching Contributions          ---------------------------------------------------------------       Section B-1 Purpose. The purpose of this Supplement B is to satisfy the requirements of Code Sections 401(k), 401(m) and 402(g). Consequently, the Compensation Deferral, Safe Harbor Matching and Matching Contributions made on behalf of a Participant will be limited each year in accordance with the following provisions.       Section B-2 Annual Dollar Limitation on Compensation Deferral Contributions. Notwithstanding any other Plan provision:       (a)  Except to the extent permitted under Code Section 414(v), a           Participant may not defer more than $15,000 (or the amount determined           under Code Section 402(g) (the "Annual Dollar Limitation") of his           Earnings in any one calendar year under Section 3.1 of the Plan (or           under a comparable provision of any other plan maintained by an           Affiliate). If a Participant's Compensation Deferrals exceed the           Annual Dollar Limitation in effect for any calendar year, the excess           deferrals (plus the Trust fund earnings or minus the Trust fund losses           attributable to the excess deferrals) will be distributed to the           Participant by April 15 of the next calendar year.       (b)  If a Participant's Elective Deferrals (as defined in subsection (c)           below) exceed the Annual Dollar Limitation (or, if greater, the amount           determined under Code Section 402(g)(8)) in effect for any calendar           year, the Participant may notify the Committee in writing of the           excess and may elect to treat all or a portion of his Compensation           Deferrals under this Plan, to the extent of the excess, as an excess           Elective Deferral. If this notice is received by the Committee prior           to March 1 of the calendar year following the calendar year in which           the excess Elective Deferrals were made, the Committee may, in its           sole discretion and without regard to any other provision of the Plan,           direct the Trustee to distribute the amount designated by the           Participant as excess Elective Deferrals (plus any Trust fund earnings           or minus any Trust fund losses attributable to that amount for the           calendar year in which the excess Elective Deferrals were made) prior           to April 15 of that same year. The excess Elective Deferrals           distributed under this subsection (b) will not be treated as a           contribution for purposes of the limitations under Section 5.9.       (c)  The term "Elective Deferral" means the sum of any contributions made           on behalf of a Participant by any entity (including any Compensation           Deferral Contributions and excluding Catch-Up Contributions made under           this Plan or any other plan) for a calendar year:            (i)  Under a qualified cash or deferred arrangement (as defined in                Code Section 401(k)) to the extent not includible in the                Participant's gross   B-1                  income for that calendar year under Code Section 402(e)(3)                (determined without regard to Code Section 402(g));            (ii) Under a simplified employee pension plan to the extent not                includible in the Participant's gross income for that calendar                year under Code Section 402(h)(1)(B) (determined without regard                to Code Section 402(g));            (iii) Applied toward the purchase of an annuity contract under Code                Section 403(b) pursuant to a salary reduction agreement (within                the meaning of Code Sections 3121(a)(5)(D) and 402(g)(3) and any                regulations issued under those sections); or            (iv) Under a simple retirement account established under Code Section                408(p)(2)(A)(i).       Section B-3 Actual Deferral Percentage Test Safe Harbor Provisions. The Plan is treated as satisfying the Actual Deferral Percentage test under Code Section 401(k)(3)(A)(ii) and Treasury Regulation Section 1.401(k)-1(b)(2) for the Plan Year, if the following conditions are met:       (a)  For the entire Plan Year the Company contributes to the Plan a Safe           Harbor Matching Contribution which is allocated and credited to the           Safe Harbor Matching Contribution Accounts of all Participants in the           amount provided for in Section 5.5;       (b)  Safe Harbor Matching Contributions contributed on behalf of           Participants are nonforfeitable within the meaning of Treasury           Regulation Section 1.401(k)-1(c);       (c)  Safe Harbor Matching Contributions contributed on behalf of           Participants are subject to the withdrawal restrictions of Code           Section 401(k)(2)(B) and Treasury Regulation Section 1.401(k)-1(d);           and       (d)  Each Participant for the Plan Year receives a written notice that           satisfies the following requirements:            (i)  The notice is sufficiently accurate and comprehensive to inform                the Participant of the Participant's rights and obligations under                the Plan;            (ii) The notice is written in a manner calculated to be understood by                the average Participant; and            (iii) At least 30 days (and no more than 90 days) before the beginning                of each Plan Year (or prior to a Participant's Entry Date, if                later), the notice is given to Participants for that Plan Year                specifically stating that the Employer will make a Safe Harbor                Matching Contribution for the Plan Year.   B-2        For purposes of subsection (d), the notice is considered sufficiently accurate and comprehensive if the notice accurately describes (i) the Safe Harbor Matching Contribution formula including the fully vested nature of such contributions, (ii) any other contributions under the Plan (including the potential for discretionary Matching Contributions) and the conditions under which such contributions are made, (iii) the type and amount of compensation that may be deferred under the Plan, (iv) how to elect to make Compensation Deferral Contributions and Catch-Up Contributions under the Plan, (v) the periods available under the Plan for making Compensation Deferral Contributions and Catch-Up Contributions, and (vi) withdrawal and vesting provisions applicable to all contributions under the Plan. The Plan will satisfy the content requirement for the notice without providing the information in (ii), (iii) and (vi) above provided that the notice cross-references relevant portions of a summary plan description previously or currently provided to the Participant.       Section B-4 Contribution Percentage Test Safe Harbor Provisions. The Plan is treated as satisfying the Contribution Percentage test under Code Section 401(m)(2) and Treasury Regulation Section 1.401(m)-1(b) with respect to Matching Contributions for the Plan Year if the following conditions are met:       (a)  The Employer makes a Safe Harbor Matching Contribution to the Plan for           that Plan Year and meets the notice requirement of Section B-3; and       (b)  The Employer contributes to the Trustee an amount designated as a           "Matching Contribution" which (i) does not match Earnings in excess of           six percent of Earnings, (ii) does not increase as the rate of           Compensation Deferrals increase, and (iii) at any rate of Compensation           Deferrals, the rate of Matching Contributions with respect to any           Highly Compensated Employee is no greater than the rate of Matching           Contributions that would apply to a non-Highly Compensated Employee           who is eligible to receive a Matching Contribution and who has the           same rate of Compensation Deferrals. In addition, discretionary           Matching Contributions may not exceed four percent of Compensation.       Section B-5 Highly Compensated Employees. For purposes of this Supplement B, a "Highly Compensated Employee" means an individual described in Code Section 414(q), which includes an employee who:       (a)  At any time during the current or the preceding Plan Year, was a five           percent owner of an Affiliate; or       (b)  During the preceding Plan Year, received Compensation from the           Affiliates in excess of $95,000 (as adjusted under Code Section           414(q)(1)) and was in the top 20 percent of the employees when ranked           on the basis of compensation paid during such year.       Section B-6 Aggregation of Plans. For purposes of applying the Annual Dollar Limitation of Section B-2, all compensation deferrals made under any plan maintained by an Affiliate will be aggregated with the Compensation Deferral Contributions made under this Plan. In addition, if any Highly Compensated Employee is a Participant in any other plan maintained   B-3   by an Affiliate that permits compensation deferrals, the Highly Compensated Employee's deferrals to the Plan will be aggregated with the Compensation Deferrals under this Plan.                          B-4                                     SUPPLEMENT C                                   ------------                                Top-Heavy Provisions                               --------------------       Section C-1 Application. The purpose of this Supplement C is to satisfy the requirements of Code Section 416. Consequently, the provisions of Sections C-6 will apply for each Plan Year the Plan is determined to be a "Top-Heavy Plan" under Section C-2.       Section C-2 Top-Heavy Plan. Subject to the provisions of Section C-5, the Plan will be a Top-Heavy Plan for a Plan Year if on that Plan Year's Determination Date the sum of the Account balances of Participants who are Key Employees (as defined in Section C-3) exceeds 60 percent of the sum of the Account balances of all Participants. For purposes of the preceding sentence, the "Determination Date" for a Plan Year means the last day of the preceding Plan Year.       Section C-3 Key Employees. For purposes of this Supplement C:       (a)  The term "Key Employee" means any employee or former employee           (including any deceased employee) who at any time during the Plan Year           that includes the Determination Date was an officer of an Affiliate           having annual compensation greater than $130,000 (as adjusted under           Code Section 416(i)(1)), a five-percent owner of an Affiliate, or a           one-percent owner of an Affiliate having annual compensation of more           than $150,000. For this purpose, annual compensation means           compensation within the meaning of Code Section 415(c)(3). The           determination of who is a Key Employee will be made in accordance with           Code Section 416(i)(1) and the applicable regulations and other           guidance of general applicability issued thereunder.       (b)  The term "Non-Key Employee" means any employee who is not a Key           Employee.  The terms "Key Employee" and "Non-Key Employee" include the beneficiaries of such employees, respectively.       Section C-4 Determination of Account Balances. For purposes of determining Participants' Account balances as of any Determination Date under Section C-2, the following rules apply:       (a)  A Participant's Account balance will be increased by any amounts           distributed to the Participant or his Beneficiary during the one-year           period ending on the Determination Date. In the case of a distribution           made for a reason other than separation from service, death or Total           and Permanent Disability, this subsection will be applied by           substituting "five-year period" for "one-year period."       (b)  Notwithstanding subsection (a) above, the account balance of a           Participant who has not performed any services for an Affiliate during           the one-year period ending on the Determination Date will be           disregarded.   C-1        (c)  The account balance of a Non-Key Employee who was a Key Employee with           respect to any prior Plan Year will be disregarded.       (d)  A Participant's Account balance will be decreased by any amount rolled           over into the Plan if the rollover was initiated by the Participant           and the amount came from a plan other than a plan maintained by an           Affiliate.       Section C-5 Aggregation of Plans. The Plan will be a Top-Heavy Plan under Section C-2 if it is part of a Top-Heavy Group for that Plan Year.       (a)  Top-Heavy Group. The term "Top-Heavy Group" means each plan maintained           by an Affiliate in which a Key Employee participates and each other           plan which enables such a plan to meet the requirements of Code           Section 401(a)(4) or 410 (either type of plan is referred to below as           an "Aggregated Plan") where as of a Determination Date the sum of (i)           and (ii) exceeds 60 percent of a similar sum determined for all           employees:            (i)  The total of the account balances of Key Employees under any                defined contribution plan that constitutes an Aggregated Plan,                and            (ii) The present value of the cumulative accrued benefits of Key                Employees under any defined benefit plan that constitutes an                Aggregated Plan.       (b)  Additional Plans. The Company may treat any other plan it or any other           Affiliate maintains as an Aggregated Plan under subsection (a) above,           provided that the Aggregated Plans would in combination with that plan           or plans continue to meet the requirements of Code Sections 401(a)(4)           and 410. If the Aggregated Plans which include this Plan do not           comprise a Top-Heavy Group, this Plan will not be a Top-Heavy Plan           under Section C-2.       (c)  Other Rules. The rules of Section C-4 will apply to determine the           account balances of employees under this Section (and the term           "accrued benefit" will be substituted for the term "Account balance"           to determine benefits under a defined benefit plan). Any plan           (including a terminated plan) that was maintained by an Affiliate           within the one-year period ending on the Determination Date will be           treated as an Aggregated Plan if it is otherwise described in           subsection (a) above.       Section C-6 Minimum Benefit. For any Plan Year in which the Plan is determined to be a Top-Heavy Plan, the contribution allocated under Sections 4.2, 4.3 and 4.4 to the Account of any Participant who is a Non-Key Employee may not be less than an amount equal to three percent (or, if lesser, the highest contribution rate of any Key Employee for that year) of the Participant's Compensation. For purposes of determining a Key Employee's contribution rate under the preceding sentence, Compensation Deferral Contributions made by that individual will be counted. A Participant will be entitled to receive an allocation under this Section if he is employed by an Employer on the last day of the Plan Year regardless of the number of Hours of Service he accrued in that year. If the Company or an Affiliate maintains a defined benefit plan that is part of a Top-Heavy Group for any Plan Year under Section C-5, any Non-Key Employee who participates under both this Plan and the defined benefit plan will be entitled to a minimum   C-2   benefit equal to five percent of his Compensation. Notwithstanding the foregoing, if the Company or an Affiliate maintains any other plan, the minimum benefit required under this Section will be adjusted in accordance with regulations issued under Code Section 416(f) to prevent an inappropriate duplication or omission of required minimum benefits or contributions. In this regard, if the other plan is a defined contribution pension plan, the minimum benefit will be provided under that plan.                         C-3                                     SUPPLEMENT D                                   ------------                                        Loans                                       -----       Section D-1 Purpose. The purpose of this Supplement D is to set forth the rules and procedures for a Participant to request and the Committee to grant a loan under Section 6.11 of the Plan.       Section D-2 Loan Policy. The Committee will establish a nondiscriminatory policy which the Committee or a member thereof must observe in making loans to Participants; such policy will be in a written document and will include:       (a)  The identity of the person(s) authorized to administer the Participant           Loan Program;       (b)  A procedure for applying for a loan;       (c)  The criteria for approving or denying a loan;       (d)  The limitations, if any, on the types and amounts of loans available;       (e)  The procedure for determining a reasonable rate of interest;       (f)  The types of collateral which may secure the loan; and       (g)  The events constituting default and the steps the Plan will take to           preserve Plan assets in the event of default.       Section D-3 Limitation on Loans to Compensation Deferral Contribution and Rollover Accounts. Loans will be made available solely from the Participant's Compensation Deferral Contribution, Catch-Up Contributions and Rollover Accounts.       Section D-4 Minimum Loan Requirements. All loans will be made on a nondiscriminatory basis to Participants in accordance with the loan policy, provided that each loan must:       (a)  Be secured by the Participant's Account and bear a reasonable rate of           interest;       (b)  Be repaid in substantially equal quarterly, monthly, semi-monthly or           bi-weekly installments over a period specified in a promissory note           not to exceed five years (except that a loan used by the Participant           to purchase or construct his principal residence may be repaid over a           period not to exceed 20 years);       (c)  Contain provisions in the note which prohibit the offset of the           Participant's Account prior to the time the Committee would otherwise           direct the Trustee to distribute the Participant's vested Account;   D-1        (d)  Not exceed (at the time the Plan extends the loan) the lesser of 50%           of the present value of the Participant's Compensation Deferral           Contribution, Catch-Up Contribution and Rollover Accounts; or $50,000           (reduced by the excess of (i) the Participant's highest outstanding           loan balance during the 12-month period immediately preceding the date           of the new loan, over (ii) the outstanding balance of loans from the           Plan to the Participant on the date the new loan is made); and       (e)  Otherwise conform to the exemption provided by Code Section           4975(d)(1).       Section D-5 Limitation on Loans. Notwithstanding any other provision of this Supplement D or of the loan policy adopted under Section D-2, the minimum amount of any loan made hereunder will be $1,000 and no loan will be made to a Participant while there is outstanding any other loan to such Participant under the Plan. Provided, further, no loan will be made for any purpose other than the following:       (a)  To purchase or construct (excluding mortgage payments) a principal           residence for the Participant;       (b)  To pay medical expenses described in Code Section 213(d) incurred by           or to be incurred by the Participant, the Participant's spouse or any           dependents (as defined in Code Section 152 and effective January 1,           2005, as modified by Code Section 105(b)) of the Participant;       (c)  To pay tuition, related educational fees and room and board expenses           for up to the next 12 months of post-secondary education for the           Participant, the Participant's spouse, the Participant's children or           the Participant's dependents (as defined in Code Section 152 and,           effective January 1, 2005, without regard to Code Section 152(b)(1),           (b)(2) and (d)(1)(B));       (d)  To prevent eviction or foreclosure proceedings against the Participant           in connection with his principal residence or the mortgage on that           residence;       (e)  To pay the burial or funeral expenses for the Participant's parent,           spouse, child or dependent; or       (f)  To pay expenses for the repair of damages to the Participant's           principal residence that would qualify as a casualty deduction,           without regard to the extent of the loss.       Section D-6 Default. In the event the Participant fails to make a loan payment when due, the unpaid balance of the loan (including any accrued interest) will become due and payable immediately without demand or notice. The Company in its sole discretion and at its option may then demand payment of the balance due under the preceding sentence. The Participant will also be required to pay any reasonable costs incurred by the Committee to collect any amount due and payable under this Section D-6. Neither a delay or omission by the Committee to exercise any right or remedy nor a single or partial exercise of a right or remedy will operate as a waiver of that right or remedy or will preclude the further exercise of that or any other right or remedy.   D-2        Section D-7 Other Requirements and Procedures. The application and grant of any loan will be subject to the rules established by the Committee and communicated to Participants in writing to administer the loan program of this Supplement D, subject to the following:       (a)  A loan to a Participant will be made from that Participant's Account           and will be treated as an investment of that account. Consequently,           the loan balance will be treated as if it were a separate Trust fund           under Section 5.3, with the interest payments treated as earnings to           be credited to the Participant's Account under subsection 5.3.       (b)  If any portion of a loan (including any accrued interest) is unpaid at           the time the Participant or his Beneficiary is to receive a           distribution under Section 6.5, the Participant's Account balance will           be reduced prior to the distribution by the lesser of (i) the           outstanding loan balance (including any accrued but unpaid interest)           or (ii) amount of the distribution to be made.                   D-3                                     SUPPLEMENT E                                   ------------                           Minimum Distribution Requirements                         ---------------------------------       Section E-1 General Rules. The provisions of this Supplement will apply for purposes of determining required minimum distributions and will take precedence over any inconsistent provisions of the Plan. All distributions required under this Supplement will be determined and made in accordance with the Treasury regulations under Code Section 401(a)(9).       Section E-2 Time and Manner of Distribution       (a)  The Participant's entire Account will be distributed to the           Participant no later than the Participant's required beginning date as           specified in Section 6.5(d).       (b)  If the Participant dies before distribution is made, the Participant's           entire Account will be distributed no later than as follows:            (i)  If the Participant's Surviving Spouse is the Participant's sole                designated Beneficiary (that is the individual who is designated                as the Beneficiary under Section 6.9 and is the designated                Beneficiary under Code Section 401(a)(9) and the regulations                thereunder), distributions to the Surviving Spouse will begin by                December 31 of the calendar year immediately following the                calendar year in which the Participant died, or by December 31 of                the calendar year in which the Participant would have attained                age 70 1/2, if later.            (ii) If the Participant's Surviving Spouse is not the Participant's                sole designated Beneficiary, distributions to the designated                Beneficiary will begin by December 31 of the calendar year                immediately following the calendar year in which the Participant                died.            (iii) For purposes of calculating the minimum distribution on the                death of a Participant for purposes of this Supplement, whether                the Participant has a designated Beneficiary will be determined                as of September 30 of the year following the year of the                Participant's death. If a designated Beneficiary disclaims his                Plan benefit or has received his entire Plan benefit prior to                such September 30, he will not be considered a designated                Beneficiary as of such date. If there is no designated                Beneficiary as of September 30 of the year following the year of                the Participant's death, the Participant's entire Account will be                distributed by December 31 of the calendar year containing the                fifth anniversary of the Participant's death.            (iv) If the Participant's Surviving Spouse is the Participant's sole                designated Beneficiary and the Surviving Spouse dies after the                Participant but before distributions to the Surviving Spouse                begin,   E-1                  this subsection (b), other than subsection (b)(i), will apply as                if the Surviving Spouse were the Participant.       For purposes of this subsection (b), unless subsection (b)(iv) applies, distributions are considered to begin on the Participant's required beginning date. If subsection (b)(iv) applies, distributions are considered to begin on the date distributions are required to begin to the Surviving Spouse under subsection (b)(i).                          E-2    EX-21 4 ex21.txt  Exhibit 21 - ----------  Subsidiaries of The National Bank of Indianapolis Corporation           1.       The National Bank of Indianapolis, an Indiana corporation           2.       NBIN Statutory Trust I, a Connecticut statutory business trust                   (unconsolidated)      EX-31.1 5 ex31-1.txt                                                                      Exhibit 31.1                                                                     ------------                                   CERTIFICATION                                   -------------  I, Morris L. Maurer, certify that:  1.   I have reviewed this annual report on Form 10-K of The National Bank of      Indianapolis Corporation;  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 officers 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)) 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)   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       c)   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(s) 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.   Date: March 24, 2006                             /s/ Morris L. Maurer       --------------                             -------------------------------                                                  Morris L. Maurer, President and                                                  Chief Executive Officer    EX-31.2 6 ex31-2.txt                                                                      Exhibit 31.2                                                                     ------------                                   CERTIFICATION                                   -------------  I, Debra L. Ross, certify that:  1.   I have reviewed this annual report on Form 10-K of The National Bank of      Indianapolis Corporation;  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 officers 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)) 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 subsidiary, is made known to us           by others within those entities, particularly during the period in           which this report is being prepared;       b)   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       c)   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(s) 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.     Date:  March 24, 2006                     /s/   Debra L. Ross        --------------                     --------------------------------------                                           Debra L. Ross, Chief Financial Officer    EX-32.1 7 ex32-1.txt                                                                      Exhibit 32.1                                                                     ------------                              CERTIFICATION PURSUANT TO                              18 U.S.C. SECTION 1350,                              AS ADOPTED PURSUANT TO                   SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002   In connection with the Annual Report of The National Bank of Indianapolis Corporation (the "Company") on Form 10-K for the period ending December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Morris L. Maurer, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:       (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and       (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.  /s/ Morris L. Maurer - ----------------------------------- Morris L. Maurer Chief Executive Officer March 24, 2006   The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and not for any other purpose, and is subject to the knowledge standard contained in 18 U.S.C. Section 1350.      EX-32.2 8 ex32-2.txt                                                                      Exhibit 32.2                                                                     ------------                              CERTIFICATION PURSUANT TO                              18 U.S.C. SECTION 1350,                              AS ADOPTED PURSUANT TO                   SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002   In connection with the Annual Report of The National Bank of Indianapolis Corporation (the "Company") on Form 10-K for the period ending December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Debra L. Ross, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:       (3) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and       (4) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.   /s/   Debra L. Ross - ----------------------------------- Debra L. Ross Chief Financial Officer March 24, 2006   The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and not for any other purpose, and is subject to the knowledge standard contained in 18 U.S.C. Section 1350.      -----END PRIVACY-ENHANCED MESSAGE-----