EXHIBIT(2)/(10)(a)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 14, 1996, by and between
PINNACLE FINANCIAL SERVICES, INC., a Michigan corporation ("Pinnacle"), and
INDIANA FEDERAL CORPORATION, a Delaware corporation ("IFC").
WITNESSETH:
WHEREAS, the Boards of Directors of Pinnacle and IFC have determined that it
is in the best interests of their respective companies and their stockholders to
consummate the business combination transaction provided for herein in which IFC
will, subject to the terms and conditions set forth herein, merge with and into
Pinnacle (the "Merger"), so that Pinnacle is the surviving corporation
(hereinafter sometimes called the "Surviving Corporation") in the Merger; and
WHEREAS, it is the intent of the respective Boards of Directors of Pinnacle
and IFC that the Merger be structured as a "merger of equals" of Pinnacle and
IFC and that the Surviving Corporation be governed and operated on this basis;
and
WHEREAS, as a condition to, and immediately after the execution of, this
Agreement, Pinnacle and IFC are entering into a Pinnacle stock option agreement
(the "Pinnacle Option Agreement") attached hereto as Exhibit A; and
WHEREAS, as a condition to, and immediately after the execution of, this
Agreement, Pinnacle and IFC are entering into an IFC stock option agreement (the
"IFC Option Agreement"; and together with the Pinnacle Option Agreement, the
"Option Agreements") attached hereto as Exhibit B; and
WHEREAS, the parties desire to make certain representations, warranties and
agreements in connection with the Merger and also to prescribe certain
conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Subject to the terms and conditions of this Agreement, in
accordance with the Michigan Business Corporation Act, as amended (the "MBCA"),
the Delaware General Corporation Law, as amended (the "DGCL"), at the Effective
Time (as defined in Section 1.2), IFC shall merge with and into Pinnacle.
Pinnacle shall be the Surviving Corporation in the Merger, and shall continue
its corporate existence under the laws of the State of Michigan. Upon
consummation of the Merger, the separate corporate existence of IFC shall
terminate.
1.2 EFFECTIVE TIME. The Merger shall become effective as set forth in
certificates of merger (each, a "Certificate of Merger"), which shall specify an
effective date and time no earlier than the filing thereof with the appropriate
authorities of the State of Michigan, and with the appropriate authorities of
the State of Delaware, on the Closing Date (as defined in Section 9.1), or as
soon thereafter as practicable. The term "Effective Time" shall be the date and
time when the Merger becomes effective, as set forth in each Certificate of
Merger having been filed in accordance with the MBCA and DGCL.
1.3 EFFECTS OF THE MERGER. At and after the Effective Time, the Merger
shall have the effects set forth in the MBCA and the DGCL.
1.4 CONVERSION OF IFC COMMON STOCK. At the Effective Time, in each case,
subject to Section 2.2(e), by virtue of the Merger and without any action on the
part of Pinnacle, IFC or the holder of any of the following securities:
(a) Each share of the common stock, par value $0.01 per share, of IFC
(the "IFC Common Stock") issued and outstanding immediately prior to the
Effective Time (other than shares of IFC
Common Stock held (x) in IFC's treasury or (y) directly or indirectly by IFC
or Pinnacle or any of their respective wholly-owned Subsidiaries (as defined
in Section 3.1) (except for Trust Account Shares and DPC shares, as such
terms are defined in Section 1.4(c) and as set forth in the IFC Disclosure
Schedule)), shall be converted into the right to receive one (1) share (the
"Exchange Ratio") of the common stock, without par value, of Pinnacle (the
"Pinnacle Common Stock").
(b) All of the shares of IFC Common Stock converted into Pinnacle Common
Stock pursuant to this Article I shall no longer be outstanding and shall
automatically be cancelled and shall cease to exist as of the Effective
Time, and each certificate (each a "Common Certificate") previously
representing any such shares of IFC Common Stock shall thereafter represent
the right to receive a certificate representing the number of whole shares
of Pinnacle Common Stock into which the shares of IFC Common Stock
represented by such Common Certificate have been converted pursuant to this
Section 1.4 and Section 2.2. Common Certificates previously representing
shares of IFC Common Stock shall be exchanged for certificates representing
whole shares of Pinnacle Common Stock issued in consideration therefor upon
the surrender of such Common Certificates in accordance with Section 2.2,
without any interest thereon. If, prior to the Effective Time, the
outstanding shares of Pinnacle Common Stock or IFC Common Stock shall have
been increased, decreased, changed into or exchanged for a different number
or kind of shares or securities as a result of a reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse
stock split, or other similar change in capitalization, then an appropriate
and proportionate adjustment shall be made to the Exchange Ratio.
(c) At the Effective Time, all shares of IFC Common Stock that are owned
by IFC as treasury stock and all shares of IFC Common Stock that are owned,
directly or indirectly, by IFC or Pinnacle or any of their respective
wholly-owned Subsidiaries (other than shares of IFC Common Stock held,
directly or indirectly, in trust accounts, managed accounts and the like or
otherwise held in a fiduciary capacity that are beneficially owned by third
parties (any such shares, and shares of Pinnacle Common Stock which are
similarly held, whether held directly or indirectly by IFC or Pinnacle, as
the case may be, being referred to herein as "Trust Account Shares") and
other than any shares of IFC Common Stock held by IFC or Pinnacle or any of
their respective Subsidiaries in respect of a debt previously contracted
(any such shares of IFC Common Stock, and shares of Pinnacle Common Stock
which are similarly held, whether held directly or indirectly by IFC or
Pinnacle or any of their respective Subsidiaries, being referred to herein
as "DPC Shares") and as set forth in the IFC Disclosure Schedule) shall be
cancelled and shall cease to exist and no stock of Pinnacle or other
consideration shall be delivered in exchange therefor.
1.5 PINNACLE COMMON STOCK. At and after the Effective Time, each share of
Pinnacle Common Stock issued and outstanding immediately prior to the Closing
Date shall remain an issued and outstanding share of common stock of the
Surviving Corporation and shall not be affected by the Merger. All shares of
Pinnacle Common Stock that are owned by IFC or any of its wholly-owned
Subsidiaries (other than Trust Account Shares and DPC Shares) shall become
treasury stock of Pinnacle.
1.6 OPTIONS.
(a) At the Effective Time, each option granted by IFC to purchase shares of
IFC Common Stock which is outstanding and unexercised immediately prior thereto
(excluding any and all IFC Rights (as hereinafter defined), all of which shall
have been redeemed, and thereby extinguished, terminated and cancelled without
any right of exercise, prior to the Effective Time) shall cease to represent a
right to acquire shares of IFC Common Stock and shall be converted automatically
into an option to purchase shares of Pinnacle Common Stock in an amount and at
an exercise price determined as provided below
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(and subject to the terms of the IFC benefit plans under which they were issued
(collectively, the "IFC Stock Plans") and the agreements evidencing grants
thereunder):
(i) The number of shares of Pinnacle Common Stock to be subject to the
new option shall be equal to the number of shares of IFC Common Stock
subject to the original option; and
(ii) The exercise price per share of Pinnacle Common Stock under the new
option shall be equal to the exercise price per share of IFC Common Stock
under the original option.
The adjustment provided herein with respect to any options which are "incentive
stock options" (as defined in Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code")) shall be and is intended to be effected in a manner
which is consistent with Section 424(a) of the Code. The duration and other
terms of the new option shall be the same as the original option except that all
references to IFC shall be deemed to be references to Pinnacle.
(b) At the Effective Time, each option granted by Pinnacle to purchase
shares of Pinnacle Common Stock which is outstanding and unexercised immediately
prior thereto shall continue to represent a right to acquire shares of Pinnacle
Common Stock and shall remain an issued and outstanding option to purchase from
the Surviving Corporation shares of Pinnacle Common Stock in the same amount and
at the same exercise price subject to the terms of the Pinnacle benefit plans
under which they were issued (collectively, the "Pinnacle Stock Plans") and the
agreements evidencing grants thereunder, and shall not be affected by the
Merger.
1.7 ARTICLES OF INCORPORATION. Subject to the terms and conditions of this
Agreement, at the Effective Time, the Articles of Incorporation of Pinnacle
shall be the Articles of Incorporation of the Surviving Corporation, until
thereafter amended in accordance with applicable law.
1.8 BYLAWS. Subject to the terms and conditions of this Agreement, at the
Effective Time, the Bylaws of Pinnacle, with appropriate amendments to
incorporate the provisions of Section 1.11 of this Agreement, shall be the
Bylaws of the Surviving Corporation until thereafter amended in accordance with
applicable law.
1.9 TAX CONSEQUENCES; ACCOUNTING TREATMENT. It is intended that (i) the
Merger shall constitute a reorganization within the meaning of Section
368(a)(i)(A) of the Code, (ii) this Agreement shall constitute a "plan of
reorganization" for the purposes of Section 368 of the Code, and (iii) the
Merger shall qualify for "pooling of interests" accounting treatment under
Accounting Principles Board Opinion No. 16 and SEC Accounting Series Releases
130 and 135, as amended.
1.10 MANAGEMENT. At the Effective Time, Xx. Xxxxxxx X. Xxxxxxx shall be
the Chairman of the Board and the Chief Executive Officer of the Surviving
Corporation, and Xx. Xxxxxx X. Xxxxx shall be the Vice Chairman, President and
Chief Operating Officer of the Surviving Corporation.
1.11 BOARD OF DIRECTORS. At the Effective Time, the Board of Directors of
the Surviving Corporation shall consist of ten (10) persons, with Xx. Xxxxxxx,
as well as Xx. Xxxxxx X. Xxxxxx and three (3) other persons, to be named as
directors of the Surviving Corporation on behalf of the Board of Directors of
Pinnacle, and with Xx. Xxxxx, as well as Mr. Xxxxxx Xxxxxxxxx and three (3)
other persons, to be named as directors of the Surviving Corporation on behalf
of the Board of Directors of IFC. Under the terms of the Standstill Agreement
dated as of December 1, 1995, between Pinnacle and Xx. Xxxxx X. Xxxxxx, Pinnacle
has certain obligations to nominate Xx. Xxxxxx for election as a director of
Pinnacle. In the event that Pinnacle, as the Surviving Corporation, becomes
obligated to nominate Xx. Xxxxxx as a director of the Surviving Corporation,
then the Board of Directors shall be increased in size to a total of twelve (12)
persons, and Xx. Xxxxxx shall be nominated as a director of the Surviving
Corporation pursuant to the terms of the Standstill Agreement dated as of
December 1, 1995, between Pinnacle and Xx. Xxxxxx, and the Chairman shall
nominate for approval by the Board of Directors a twelfth person as a director
of the Surviving Corporation. Whenever the Board of Directors is comprised of
ten (10) or fewer persons, action
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of the Board within the meaning of Section 523 of the MBCA, and for all other
purposes, shall require the favorable vote of six (6) or more of the directors,
and whenever the Board of Directors is comprised of eleven (11) or twelve (12)
persons, action of the Board within the meaning of Section 523 of the MBCA, and
for all other purposes, shall require the favorable vote of seven (7) or more of
the directors.
1.12 HEADQUARTERS OF SURVIVING CORPORATION. At the Effective Time, the
headquarters and principal executive offices of the Surviving Corporation shall
be located in Valparaiso, Indiana.
1.13 BANK MERGER. At the Bank Merger Effective Time (as hereinafter
defined), Indiana Federal Bank for Savings, a federal savings bank ("IndFed
Bank"), the wholly-owned subsidiary of IFC, shall be merged (the "Bank Merger")
with and into Pinnacle Bank, a Michigan banking corporation ("Pinnacle Bank"),
the wholly-owned subsidiary of Pinnacle, pursuant to the terms and conditions
set forth herein and in the Agreement and Plan of Merger and Consolidation
substantially in the form attached hereto as Exhibit C (the "Bank Merger
Agreement"). Upon consummation of the Bank Merger, the separate existence of
IndFed Bank shall cease, and Pinnacle Bank shall continue as the surviving
institution of the Bank Merger. The name of Pinnacle Bank, as the surviving
institution of the Bank Merger, shall be "Pinnacle Bank". From and after the
Bank Merger Effective Time (as hereinafter defined), Pinnacle Bank as the
surviving institution of the Bank Merger shall possess all of the properties and
rights and be subject to all of the liabilities and obligations of Pinnacle Bank
and IndFed Bank. The Bank Merger shall become effective at the time the Bank
Merger Agreement for such merger is endorsed and declared effective by the
Financial Institutions Bureau of the State of Michigan (the "Bank Merger
Effective Time"). The parties shall cause the Bank Merger to become effective as
soon as practical following the Merger. At the Bank Merger Effective Time:
(a) each share of IndFed Bank common stock issued and outstanding
immediately prior thereto shall, by virtue of the Bank Merger, be cancelled.
No new shares of the capital stock or other securities or obligations of
IndFed Bank shall be issued or be deemed issued with respect to or in
exchange for such cancelled shares, and such cancelled shares of common
stock of IndFed Bank shall not be converted into any shares or other
securities or obligations of any other entity;
(b) each share of Pinnacle Bank common stock issued and outstanding
immediately prior thereto shall remain an issued and outstanding share of
common stock of Pinnacle Bank as the surviving institution and shall not be
affected by the Bank Merger;
(c) the charter and bylaws of Pinnacle Bank, as then in effect, shall be
the Charter and Bylaws of Pinnacle Bank as the surviving institution of the
Bank Merger, and may thereafter be amended in accordance with applicable
law; and
(d) the directors of Pinnacle Bank as the surviving institution
following the Bank Merger shall consist of eighteen (18) persons, with nine
(9) persons to be named as directors by the Board of Directors of Pinnacle
Bank and nine (9) persons to be named as directors by the Board of Directors
of IndFed Bank; and the executive officers of Pinnacle Bank as the surviving
institution following the Bank Merger shall be those appointed by the Board
of Directors of the surviving institution upon consummation of the Bank
Merger, on the basis of recommendations made by Xx. Xxxxxxx, as the Chairman
of the parent Surviving Corporation, Xx. Xxxxx, as the Vice Chairman of the
parent Surviving Corporation, and an outside consulting service to be
engaged and charged with reviewing and evaluating the qualifications of
candidates.
ARTICLE II
EXCHANGE OF SHARES
2.1 PINNACLE TO MAKE SHARES AVAILABLE. At or prior to the Effective Time,
Pinnacle shall deposit, or shall cause to be deposited, with Xxxxxx Trust and
Savings Bank, Chicago, Illinois, or another bank or trust company reasonably
acceptable to each of Pinnacle and IFC (the "Exchange Agent"), for the benefit
of
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the holders of Common Certificates, for exchange in accordance with this Article
II, certificates representing the shares of Pinnacle Common Stock (such
certificates for shares of Pinnacle Common Stock, together with any dividends or
distributions with respect thereto, being hereinafter referred to as the
"Exchange Fund") to be issued pursuant to Section 1.4 and Section 2.2(a) in
exchange for outstanding shares of IFC Common Stock.
2.2 EXCHANGE OF SHARES.
(a) As soon as practicable after the Effective Time, and in no event later
than five (5) business days thereafter, the Exchange Agent shall mail to each
holder of record of one or more Common Certificates a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Common Certificates shall pass, only upon delivery of the Common
Certificates to the Exchange Agent) and instructions for use in effecting the
surrender of the Common Certificates in exchange for certificates representing
the shares of Pinnacle Common Stock into which the shares of IFC Common Stock
represented by such Common Certificate or Common Certificates shall have been
converted pursuant to this Agreement. Upon proper surrender of a Common
Certificate for exchange and cancellation to the Exchange Agent, together with
such properly completed letter of transmittal, duly executed, the holder of such
Common Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Pinnacle Common Stock to
which such holder of IFC Common Stock shall have become entitled pursuant to the
provisions of Article I, and the Common Certificate so surrendered shall
forthwith be cancelled. No interest will be paid or accrued on any unpaid
dividends and distributions payable to holders of Common Certificates.
(b) No dividends or other distributions declared with respect to Pinnacle
Common Stock with a record date following the Effective Time shall be paid to
the holder of any unsurrendered Common Certificate until the holder thereof
shall surrender such Common Certificate in accordance with this Article II.
(c) If any certificate representing shares of Pinnacle Common Stock is to be
issued in a name other than that in which the Common Certificate surrendered in
exchange therefor is registered, it shall be a condition of the issuance thereof
that the Common Certificate so surrendered shall be properly endorsed (or
accompanied by an appropriate instrument of transfer) and otherwise in proper
form for transfer, and that the person requesting such exchange shall pay to the
Exchange Agent in advance any transfer or other taxes required by reason of the
issuance of a certificate representing shares of Pinnacle Common Stock in any
name other than that of the registered holder of the Common Certificate
surrendered, or required for any other reason, or shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of IFC of shares of IFC Common Stock which were issued and
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Common Certificates representing such shares are presented for transfer to
the Exchange Agent, they shall be cancelled and exchanged for certificates
representing shares of Pinnacle Common Stock as provided in this Article II.
(e) Notwithstanding anything to the contrary contained herein, no
certificates or scrip representing fractional shares of Pinnacle Common Stock
shall be issued upon the surrender for exchange of Common Certificates.
(f) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of IFC for 12 months after the Effective Time shall be paid to
Pinnacle. Any stockholders of IFC who have not theretofore complied with this
Article II shall thereafter look only to Pinnacle for payment of the shares of
Pinnacle Common Stock and any unpaid dividends and distributions on the Pinnacle
Common Stock deliverable in respect of each share of IFC Common Stock such
stockholder holds as determined pursuant to this Agreement, in each case,
without any interest thereon. Notwithstanding the foregoing, none of IFC,
Pinnacle, the Exchange Agent or any other person shall be liable to any former
holder of shares of IFC
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Common Stock for any amount delivered in good faith to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(g) In the event any Common Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Common Certificate to be lost, stolen or destroyed and, if reasonably
required by Pinnacle or the Exchange Agent, the posting by such person of a bond
in such amount as Pinnacle may determine is reasonably necessary as indemnity
against any claim that may be made against it with respect to such Common
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Common Certificate the shares of Pinnacle Common Stock deliverable in
respect thereof pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PINNACLE
Except as disclosed in the Pinnacle disclosure schedule delivered to IFC
concurrently herewith (the "Pinnacle Disclosure Schedule"), Pinnacle hereby
represents and warrants to IFC as follows:
3.1 CORPORATE ORGANIZATION.
(a) Pinnacle is a corporation duly organized, validly existing and in good
standing under the laws of the State of Michigan. Pinnacle has the corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as it is now being conducted, and is duly licensed or
qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed or qualified would not have a
Material Adverse Effect on Pinnacle. As used in this Agreement, the term
"Material Adverse Effect" means, with respect to IFC, Pinnacle or the Surviving
Corporation, as the case may be, a material adverse effect on the business,
results of operations, financial condition, or (insofar as they can reasonably
be foreseen) prospects of such party and its Subsidiaries taken as a whole,
excluding for this purpose only, however, the payment and/or incurrence of (i)
the one-time special assessment on institutions holding deposits subject to
assessment by the Savings Association Insurance Fund ("SAIF") pursuant to The
Deposit Insurance Funds Act of 1996 ("Funds Act") intended to increase SAIF's
net worth as of October 1, 1996 to 1.25 percent of SAIF-insured deposits, and
(ii) transactional expenses by IFC or Pinnacle in connection with the Merger, to
the extent having such an effect. As used in this Agreement, the word
"Subsidiary" when used with respect to any party means any bank, savings and
loan institution, corporation, partnership, limited liability company, or other
organization, whether incorporated or unincorporated, which is consolidated with
such party for financial reporting purposes. Pinnacle is duly registered as a
bank holding company under the Bank Holding Company Act of 1956, as amended (the
"BHC Act") and as a savings and loan holding company under the Home Owners' Loan
Act ("HOLA"). True and complete copies of the Articles of Incorporation and
Bylaws of Pinnacle, as in effect as of the date of this Agreement, have
previously been made available by Pinnacle to IFC.
(b) Each Pinnacle Subsidiary (i) is duly organized and validly existing as a
bank, savings and loan institution, corporation, partnership or limited
liability company under the laws of its jurisdiction of organization, (ii) is
duly qualified to do business and in good standing in all jurisdictions (whether
federal, state, local or foreign) where its ownership or leasing of property or
the conduct of its business requires it to be so qualified and in which the
failure to be so qualified would have a Material Adverse Effect on Pinnacle, and
(iii) has all requisite corporate power and authority to own or lease its
properties and assets and to carry on its business as now conducted.
(c) The minute books of Pinnacle accurately reflect in all material respects
all corporate actions held or taken since January 1, 1994 of its stockholders
and Board of Directors (including committees of the Board of Directors of
Pinnacle).
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3.2 CAPITALIZATION.
(a) The authorized capital stock of Pinnacle consists of (i) 15,000,000
shares of Pinnacle Common Stock, of which as of November 11, 1996, 5,976,548
shares were issued and outstanding and no shares were held in treasury. All of
the issued and outstanding shares of Pinnacle Common Stock have been duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof. As of the date of this Agreement, except pursuant to the terms of the
Pinnacle Option Agreement and the Pinnacle Stock Plans, Pinnacle does not have
and is not bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase or issuance
of any shares of Pinnacle Common Stock or any other equity securities of
Pinnacle or any securities representing the right to purchase or otherwise
receive any shares of Pinnacle Common Stock or any other equity securities of
Pinnacle. As of November 11, 1996, no shares of Pinnacle Common Stock were
reserved for issuance, except for (i) 496,261 shares reserved for issuance upon
the exercise of stock options pursuant to the Pinnacle Stock Plans. Since
January 1, 1996, Pinnacle has not issued any shares of Pinnacle Common Stock or
other equity securities of Pinnacle, or any securities convertible into or
exercisable for any shares of Pinnacle Common Stock or other equity securities
of Pinnacle, other than pursuant to the exercise of employee stock options
granted prior to such date. The shares of Pinnacle Common Stock to be issued
pursuant to the Merger will be duly authorized and validly issued and, at the
Effective Time, all such shares will be fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof.
(b) Pinnacle owns, directly or indirectly, all of the issued and outstanding
shares of capital stock of each of the Pinnacle Subsidiaries, free and clear of
any liens, pledges, charges, encumbrances and security interests whatsoever
("Liens"), and all of such shares are duly authorized and validly issued and are
fully paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. No Pinnacle Subsidiary has or is
bound by any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any shares
of capital stock or any other equity security of such Subsidiary or any
securities representing the right to purchase or otherwise receive any shares of
capital stock or any other equity security of such Subsidiary.
3.3 AUTHORITY; NO VIOLATION.
(a) Pinnacle has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of Pinnacle. The Board of Directors of Pinnacle has directed
that this Agreement and the transactions contemplated hereby be submitted to
Pinnacle's stockholders for approval at a meeting of such stockholders and,
except for the adoption of this Agreement by the affirmative vote of the holders
of a majority of the outstanding shares of Pinnacle Common Stock, no other
corporate proceedings on the part of Pinnacle are necessary to approve this
Agreement and to consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by Pinnacle and (assuming due
authorization, execution and delivery by IFC) constitutes a valid and binding
obligation of Pinnacle, enforceable against Pinnacle in accordance with its
terms.
(b) Neither the execution and delivery of this Agreement by Pinnacle nor the
consummation by Pinnacle of the transactions contemplated hereby, nor compliance
by Pinnacle with any of the terms or provisions hereof, will (i) violate any
provision of the Articles of Incorporation or Bylaws of Pinnacle or (ii)
assuming that the consents and approvals referred to in Section 3.4 are duly
obtained, (x) violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to Pinnacle or any of its
Subsidiaries or any of their respective properties or assets, or (y) violate,
conflict with, result in a breach of any provision of or the loss of any benefit
under, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of or a right
of termination or cancellation under, accelerate the performance required by, or
result in the creation of any Lien upon any of the respective properties or
assets of Pinnacle or any of its Subsidiaries under, any of the
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terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to which
Pinnacle or any of its Subsidiaries is a party, or by which they or any of their
respective properties or assets may be bound or affected, except (in the case of
clause (y) above) for such violations, conflicts, breaches or defaults which,
either individually or in the aggregate, will not have or be reasonably likely
to have a Material Adverse Effect on Pinnacle or the Surviving Corporation.
3.4 CONSENTS AND APPROVALS. Except for (i) the filing of applications and
notices, as applicable, with the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") under the BHC Act and approval of such
applications and notices, (ii) the filing of any required applications with the
Office of Thrift Supervision (the "OTS"), (iii) the filing of any required
applications or notices with any state or foreign agencies and approval of such
applications and notices (the "State Approvals"), (iv) the filing with the
Securities and Exchange Commission (the "SEC") of a joint proxy statement in
definitive form relating to the meetings of Pinnacle's and IFC's stockholders to
be held in connection with this Agreement and the transactions contemplated
hereby (the "Joint Proxy Statement") and the registration statement on Form S-4
(the "S-4") in which the Joint Proxy Statement will be included as a prospectus,
(v) the filing of Certificates of Merger with the appropriate authorities of the
State of Michigan pursuant to the MBCA and with the appropriate officials of the
State of Delaware pursuant to the DGCL, (vi) any notices to or filings with the
Small Business Administration ("SBA"), (vii) any consent, authorizations,
approvals, filings or exemptions in connection with compliance with the
applicable provisions of federal and state securities laws relating to the
regulation of broker-dealers or investment advisers, and federal commodities
laws relating to the regulation of futures commission merchants and the rules
and regulations thereunder and of any applicable industry self-regulatory
organization ("SRO"), and the rules of NASDAQ, or which are required under
consumer finance, mortgage banking and other similar laws, (viii) such filings
and approvals as are required to be made or obtained under the securities or
"Blue Sky" laws of various states in connection with the issuance of the shares
of Pinnacle Common Stock pursuant to this Agreement, and (ix) the approval of
this Agreement by the requisite vote of the stockholders of Pinnacle and IFC, no
consents or approvals of or filings or registrations with any court,
administrative agency or commission or other governmental authority or
instrumentality (each a "Governmental Entity") or with any third party are
necessary in connection with (A) the execution and delivery by Pinnacle of this
Agreement and (B) the consummation by Pinnacle of the Merger and the other
transactions contemplated hereby.
3.5 REPORTS. Pinnacle and each of its Subsidiaries have timely filed all
reports, registrations and statements, together with any amendments required to
be made with respect thereto, that they were required to file since January 1,
1994 with (i) the Federal Reserve Board, (ii) the Federal Deposit Insurance
Corporation, (iii) any state regulatory authority (each a "State Regulator"),
(iv) the Office of the Comptroller of the Currency (the "OCC"), (v) the OTS,
(vi) the SEC and (vii) any SRO (collectively "Regulatory Agencies"), and all
other reports and statements required to be filed by them since January 1, 1994,
including, without limitation, any report or statement required to be filed
pursuant to the laws, rules or regulations of the United States, any state, or
any Regulatory Agency and have paid all fees and assessments due and payable in
connection therewith, except where the failure to file such report, registration
or statement or to pay such fees and assessments, either individually or in the
aggregate, will not have a Material Adverse Effect on Pinnacle. Except for
normal examinations conducted by a Regulatory Agency in the regular course of
the business of Pinnacle and its Subsidiaries, no Regulatory Agency has
initiated any proceeding or, to the best knowledge of Pinnacle, investigation
into the business or operations of Pinnacle or any of its Subsidiaries since
January 1, 1994, except where such proceedings or investigation are not likely,
either individually or in the aggregate, to have a Material Adverse Effect on
Pinnacle. There is no unresolved violation, criticism, or exception by any
Regulatory Agency with respect to any report or statement relating to any
examinations of Pinnacle or any of its Subsidiaries which, in the reasonable
judgment of Pinnacle, is likely, either individually or in the aggregate, to
have a Material Adverse Effect on Pinnacle.
8
3.9 LEGAL PROCEEDINGS.
(a) Neither Pinnacle nor any of its Subsidiaries is a party to any, and
there are no pending or, to the best of Pinnacle's knowledge, threatened,
material legal, administrative, arbitral or other proceedings, claims, actions
or governmental or regulatory investigations of any nature against Pinnacle or
any of its Subsidiaries or challenging the validity or propriety of the
transactions contemplated by this Agreement or the Pinnacle Option Agreement as
to which there is a reasonable probability of an adverse determination and
which, if adversely determined, would, individually or in the aggregate, have a
Material Adverse Effect on Pinnacle.
(b) There is no injunction, order, judgment, decree, or regulatory
restriction (other than those that apply to similarly situated bank holding
companies, savings and loan holding companies banks, or savings institutions)
imposed upon Pinnacle, any of its Subsidiaries or the assets of Pinnacle or any
of its Subsidiaries which has had, or might reasonably be expected to have, a
Material Adverse Effect on Pinnacle.
3.10 TAXES AND TAX RETURNS.
(a) Each of Pinnacle and its Subsidiaries has duly filed all federal, state,
county, foreign and, to the best of Pinnacle's knowledge, local information
returns and tax returns required to be filed by it on or prior to the date
hereof (all such returns being accurate and complete in all material respects)
and has duly paid or made provisions for the payment of all Taxes (as defined in
Section 3.10(b)) and other governmental charges which have been incurred or are
due or claimed to be due from it by federal, state, county, foreign or local
taxing authorities on or prior to the date of this Agreement (including, without
limitation, if and to the extent applicable, those due in respect of its
properties, income, business, capital stock, deposits, franchises, licenses,
sales and payrolls) other than (i) Taxes or other charges which are not yet
delinquent or are being contested in good faith and have not been finally
determined, or (ii) information returns, tax returns, Taxes or other
governmental charges the failure to file, pay or make provision for, either
individually or in the aggregate, are not likely, in the reasonable judgment of
Pinnacle, to have a Material Adverse Effect on Pinnacle. The income tax returns
of Pinnacle and its Subsidiaries have been examined by the Internal Revenue
Service (the "IRS") and any liability with respect thereto has been satisfied
for all years to and including 1993, and either no material deficiencies were
asserted as a result of such examination for which Pinnacle does not have
adequate reserves or all such deficiencies were satisfied. To the best of
Pinnacle's knowledge, there are no material disputes pending, or claims asserted
for, Taxes or assessments upon Pinnacle or any of its Subsidiaries for which
Pinnacle does not have adequate reserves, nor has Pinnacle or any of its
Subsidiaries given any currently effective waivers extending the statutory
period of limitation applicable to any federal, state, county or local income
tax return for any period. In addition, (A) proper and accurate amounts have
been withheld by Pinnacle and its Subsidiaries from their employees for all
prior periods in compliance in all material respects with the tax withholding
provisions of applicable federal, state and local laws, except where failure to
do so would not have a Material Adverse Effect on Pinnacle, (B) federal, state,
county and local returns which are accurate and complete in all material
respects have been filed by Pinnacle and its Subsidiaries for all periods for
which returns were due with respect to income tax withholding, Social Security
and unemployment taxes, except where failure to do so would not have a Material
Adverse Effect on Pinnacle, (C) the amounts shown on such federal, state, local
or county returns to be due and payable have been paid in full or adequate
provision therefor has been included by Pinnacle in its consolidated financial
statements as of December 31, 1995, except where failure to do so would not have
a Material Adverse Effect on Pinnacle and (D) there are no Tax liens upon any
property or assets of Pinnacle or its Subsidiaries except liens for current
taxes not yet due or liens that would not have a Material Adverse Effect on
Pinnacle. Neither Pinnacle nor any of its Subsidiaries has been required to
include in income any adjustment pursuant to Section 481 of the Code by reason
of a voluntary change in accounting method initiated by Pinnacle or any of its
Subsidiaries, and the IRS has not initiated or proposed any such adjustment or
change in accounting method, in either case which has had or is reasonably
likely to have a Material Adverse Effect on Pinnacle. Except as set forth in the
financial
10
statements described in Section 3.6, neither Pinnacle nor any of its
Subsidiaries has entered into a transaction which is being accounted for as an
installment obligation under Section 453 of the Code, which would be reasonably
likely to have a Material Adverse Effect on Pinnacle.
(b) As used in this Agreement, the term "Tax" or "Taxes" means all federal,
state, county, local, and foreign income, excise, gross receipts, gross income,
ad valorem, profits, gains, property, capital, sales, transfer, use, payroll,
employment, severance, withholding, duties, intangibles, franchise, backup
withholding, and other taxes, charges, levies or like assessments together with
all penalties and additions to tax and interest thereon.
(c) Any amount that is reasonably likely to be received (whether in cash or
property or the vesting of property) as a result of any of the transactions
contemplated by this Agreement by any employee, officer or director of Pinnacle
or any of its affiliates who is a "Disqualified Individual" (as such term is
defined in proposed Treasury Regulation Section 1.280G-1) under any employment,
severance or termination agreement, other compensation arrangement or Pinnacle
Benefit Plan (as defined in Section 3.11(a)) currently in effect should not be
characterized as an "excess parachute payment" (as such term is defined in
Section 280G(b)(1) of the Code).
(d) No disallowance of a deduction under Section 162(m) of the Code for
employee remuneration of any amount paid or payable by Pinnacle or any
Subsidiary of Pinnacle under any contract, plan, program, arrangement or
understanding would be reasonably likely to have a Material Adverse Effect on
Pinnacle.
3.11 EMPLOYEES.
(a) The Pinnacle Disclosure Schedule sets forth a true and complete list of
each material employee benefit plan, arrangement or agreement that is maintained
as of the date of this Agreement (the "Pinnacle Benefit Plans") by Pinnacle or
any of its Subsidiaries or by any affiliated trade or business, whether or not
incorporated (an "ERISA Affiliate"), all of which together with Pinnacle would
be deemed a "single employer" within the meaning of Section 4001 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
(b) Pinnacle has heretofore delivered to IFC true and complete copies of
each of the Pinnacle Benefit Plans and certain related documents, including, but
not limited to, (i) the actuarial report for such Pinnacle Benefit Plan (if
applicable) for each of the last two years, and (ii) the most recent
determination letter from the IRS (if applicable) for such Plan.
(c) (i) Each of the Pinnacle Benefit Plans has been operated and
administered in all material respects in compliance with applicable laws,
including, but not limited to, ERISA and the Code, (ii) each of the Pinnacle
Benefit Plans intended to be "qualified" within the meaning of Section 401(a) of
the Code is so qualified, (iii) with respect to each Plan which is subject to
Title IV of ERISA, the present value of accrued benefits under such Plan, based
upon the actuarial assumptions used for funding purposes in the most recent
actuarial report prepared by such Plan's actuary with respect to such Plan, did
not, as of its latest valuation date, exceed the then current value of the
assets of such Plan allocable to such accrued benefits, (iv) no Pinnacle Benefit
Plan provides benefits, including, without limitation, death or medical benefits
(whether or not insured), with respect to current or former employees of
Pinnacle, its Subsidiaries or any ERISA Affiliate beyond their retirement or
other termination of service, other than (A) coverage mandated by applicable
law, (B) death benefits or retirement benefits under any "employee pension plan"
(as such term is defined in Section 3(2) of ERISA), (C) deferred compensation
benefits accrued as liabilities on the books of Pinnacle, its Subsidiaries or
the ERISA Affiliates or (D) benefits the full cost of which is borne by the
current or former employee (or his beneficiary), (v) no material liability under
Title IV of ERISA has been incurred by Pinnacle, its Subsidiaries or any ERISA
Affiliate that has not been satisfied in full, and no condition exists that
presents a material risk to Pinnacle, its Subsidiaries or any ERISA Affiliate of
incurring a material liability thereunder, (vi) no Plan is a "multiemployer
pension plan" (as such term is defined in Section 3(37) of ERISA), (vii) all
contributions or other amounts payable by Pinnacle or its Subsidiaries as of the
Effective Time with respect to each Pinnacle Benefit Plan in respect of
11
current or prior plan years have been paid or accrued in accordance with GAAP
and Section 412 of the Code, (viii) neither Pinnacle, its Subsidiaries nor any
ERISA Affiliate has engaged in a transaction in connection with which Pinnacle,
its Subsidiaries or any ERISA Affiliate reasonably could be subject to either a
material civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a
material tax imposed pursuant to Section 4975 or 4976 of the Code, and (ix) to
the best knowledge of Pinnacle there are no pending, threatened or anticipated
claims (other than routine claims for benefits) by, on behalf of or against any
of the Pinnacle Benefit Plans or any trusts related thereto which are, in the
reasonable judgment of Pinnacle, likely, either individually or in the
aggregate, to have a Material Adverse Effect on Pinnacle.
(d) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
material payment (including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any director or any
employee of Pinnacle or any of its affiliates from Pinnacle or any of its
affiliates under any Pinnacle Benefit Plan or otherwise, (ii) materially
increase any benefits otherwise payable under any Pinnacle Benefit Plan or (iii)
result in any acceleration of the time of payment or vesting of any such
benefits to any material extent.
3.12 SEC REPORTS. Pinnacle has previously made available to IFC an
accurate and complete copy of each (a) final registration statement, prospectus,
report, schedule and definitive proxy statement filed since January 1, 1994 by
Pinnacle with the SEC pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), or the Exchange Act (the "Pinnacle Reports") and prior to the
date hereof and (b) communication mailed by Pinnacle to its stockholders since
January 1, 1994 and prior to the date hereof, and no such registration
statement, prospectus, report, schedule, proxy statement or communication
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances in which they were made, not
misleading, except that information as of a later date shall be deemed to modify
information as of an earlier date. Since January 1, 1994, Pinnacle has timely
filed all Pinnacle Reports and other documents required to be filed by it under
the Securities Act and the Exchange Act, and, as of their respective dates, all
Pinnacle Reports complied in all material respects with the published rules and
regulations of the SEC with respect thereto.
3.13 COMPLIANCE WITH APPLICABLE LAW. Pinnacle and each of its Subsidiaries
hold all material licenses, franchises, permits and authorizations necessary for
the lawful conduct of their respective businesses under and pursuant to all, and
have complied in all material respects with and are not in default in any
material respect under any, applicable law, statute, order, rule, regulation,
policy and/or guideline of any Governmental Entity relating to Pinnacle or any
of its Subsidiaries, except where the failure to hold such license, franchise,
permit or authorization or such noncompliance or default would not, individually
or in the aggregate, have a Material Adverse Effect on Pinnacle.
3.14 CERTAIN CONTRACTS.
(a) Neither Pinnacle nor any of its Subsidiaries is a party to or bound by
any contract, arrangement, commitment or understanding (whether written or oral)
(i) with respect to the employment of any directors, officers or employees other
than in the ordinary course of business consistent with past practice, (ii)
which, upon the consummation of the transactions contemplated by this Agreement
will (either alone or upon the occurrence of any additional acts or events)
result in any payment (whether of severance pay or otherwise) becoming due from
IFC, Pinnacle, the Surviving Corporation, or any of their respective
Subsidiaries to any officer or employee thereof, (iii) which is a "material
contract" (as such term is defined in Item 601(b)(10) of Regulation S-K of the
SEC) to be performed after the date of this Agreement that has not been filed or
incorporated by reference in the Pinnacle Reports, (iv) which materially
restricts the conduct of any line of business by Pinnacle, (v) with or to a
labor union or guild (including any collective bargaining agreement) or (vi)
(including any stock option plan, stock appreciation rights plan, restricted
stock plan or stock purchase plan) any of the benefits of which will be
increased, or the vesting of the
12
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement, or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement. Pinnacle has previously made available to IFC true and
correct copies of all employment and deferred compensation agreements which are
in writing and to which Pinnacle is a party. Each contract, arrangement,
commitment or understanding of the type described in this Section 3.14(a),
whether or not set forth in the Pinnacle Disclosure Schedule, is referred to
herein as a "Pinnacle Contract", and neither Pinnacle nor any of its
Subsidiaries knows of, or has received notice of, any violation of the above by
any of the other parties thereto which, individually or in the aggregate, would
have a Material Adverse Effect on Pinnacle.
(b) (i) Each Pinnacle Contract is valid and binding on Pinnacle or any of
its Subsidiaries, as applicable, and in full force and effect, (ii) Pinnacle and
each of its Subsidiaries has in all material respects performed all obligations
required to be performed by it to date under each Pinnacle Contract, except
where such noncompliance, individually or in the aggregate, would not have a
Material Adverse Effect on Pinnacle, and (iii) no event or condition exists
which constitutes or, after notice or lapse of time or both, would constitute, a
material default on the part of Pinnacle or any of its Subsidiaries under any
such Pinnacle Contract, except where such default, individually or in the
aggregate, would not have a Material Adverse Effect on Pinnacle.
3.15 AGREEMENTS WITH REGULATORY AGENCIES. Neither Pinnacle nor any of its
Subsidiaries is subject to any cease-and-desist or other order issued by, or is
a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or has been since
January 1, 1994, a recipient of any supervisory letter from, or since January 1,
1994, has adopted any board resolutions at the request of any Regulatory Agency
or other Governmental Entity that currently restricts in any material respect
the conduct of its business or that in any material manner relates to its
capital adequacy, its credit policies, its management or its business (each,
whether or not set forth in the Pinnacle Disclosure Schedule, a "Pinnacle
Regulatory Agreement"), nor has Pinnacle or any of its Subsidiaries been advised
since January 1, 1994, by any Regulatory Agency or other Governmental Entity
that it is considering issuing or requesting any such Regulatory Agreement.
3.16 OTHER ACTIVITIES OF PINNACLE AND ITS SUBSIDIARIES.
(a) Neither Pinnacle nor any of its Subsidiaries that is neither a bank, a
bank operating subsidiary or a bank service corporation, directly or indirectly,
engages in any activity prohibited by the Federal Reserve Board or the OTS.
Without limiting the generality of the foregoing, any equity investment of
Pinnacle and each Subsidiary that is not a bank, a bank operating subsidiary or
a bank service corporation is not prohibited by the Federal Reserve Board or the
OTS.
(b) To Pinnacle's knowledge, each Pinnacle Subsidiary which is a federally
insured bank or savings institution (a "Pinnacle Bank Subsidiary") currently
performs all personal trust, corporate trust and other fiduciary activities
("Trust Activities") with requisite authority under applicable law of
Governmental Entities and in accordance in all material respects with the
agreed-upon terms of the agreements and instruments governing such Trust
Activities, sound fiduciary principles and applicable law and regulation
(specifically including, but not limited to, Section 9 of Title 12 of the Code
of Federal Regulations); there is no investigation or inquiry by any
Governmental Entity pending, or to the knowledge of Pinnacle, threatened,
against or affecting Pinnacle, or any Significant Subsidiary thereof relating to
the compliance by Pinnacle or any such Significant Subsidiary (as such term is
defined in Rule 1-02(w) of Regulation S-X of the SEC) with sound fiduciary
principles and applicable regulations; and except where any such failure would
not have a Material Adverse Effect on Pinnacle, each employee of a Pinnacle Bank
Subsidiary had the authority to act in the capacity in which he or she acted
with respect to Trust Activities, in each case, in which such employee held
himself or herself out as a representative of a Pinnacle Bank Subsidiary; and
each Pinnacle Bank Subsidiary has established policies and procedures for the
purpose of complying with
13
applicable laws of Governmental Entities relating to Trust Activities, has
followed such policies and procedures in all material respects and has performed
appropriate internal audit reviews of, and has engaged independent accountants
to perform audits of, Trust Activities, which audits since January 1, 1994 have
disclosed no material violations of applicable laws of Governmental Entities or
such policies and procedures.
3.17 INVESTMENT SECURITIES. Each of Pinnacle and its Subsidiaries has good
and marketable title to all securities held by it (except securities sold under
repurchase agreements or held in any fiduciary or agency capacity), free and
clear of any Lien, except to the extent such securities are pledged in the
ordinary course of business consistent with prudent banking practices to secure
obligations of Pinnacle or any of its Subsidiaries. Such securities are valued
on the books of Pinnacle in accordance with GAAP.
3.18 INTEREST RATE RISK MANAGEMENT INSTRUMENTS. All interest rate swaps,
caps, floors and option agreements and other interest rate risk management
arrangements, whether entered into for the account of Pinnacle or for the
account of a customer of Pinnacle or one of its Subsidiaries, were entered into
in the ordinary course of business and, to Pinnacle's knowledge, in accordance
with prudent banking practice and applicable rules, regulations and policies of
any Regulatory Authority and with counterparties believed to be financially
responsible at the time and are legal, valid and binding obligations of Pinnacle
or one of its Subsidiaries enforceable in accordance with their terms (except as
may be limited by bankruptcy, insolvency, moratorium, reorganization or similar
laws affecting the rights of creditors generally and the availability of
equitable remedies), and are in full force and effect. Pinnacle and each of its
Subsidiaries have duly performed in all material respects all of their material
obligations thereunder to the extent that such obligations to perform have
accrued; and, to Pinnacle's knowledge, there are no material breaches,
violations or defaults or allegations or assertions of such by any party
thereunder.
3.19 UNDISCLOSED LIABILITIES. Except for those liabilities that are fully
reflected or reserved against on the consolidated balance sheet of Pinnacle
included in the Pinnacle June 30, 1996 Form 10-Q and for liabilities incurred in
the ordinary course of business consistent with past practice since June 30,
1996, neither Pinnacle nor any of its Subsidiaries has incurred any liability of
any nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether due or to become due) that, either alone or when combined with all
similar liabilities, has had, or could reasonably be expected to have, a
Material Adverse Effect on Pinnacle.
3.20 ENVIRONMENTAL LIABILITY. Except as set forth in the Pinnacle
Disclosure Schedule, there are no legal, administrative, arbitral or other
proceedings, claims, actions, causes of action, private environmental
investigations or remediation activities or governmental investigations of any
nature seeking to impose, or that could reasonably be expected to result in the
imposition, on Pinnacle or any of the Pinnacle Subsidiaries of any liability or
obligation arising under common law or under any local, state or federal
environmental statute, regulation or ordinance including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), pending or threatened against Pinnacle or any of
the Pinnacle Subsidiaries, which liability or obligation could reasonably be
expected to have a Material Adverse Effect on Pinnacle. To the knowledge of
Pinnacle, there is no reasonable basis for any such proceeding, claim, action or
governmental investigation that would impose any material liability or
obligation that could reasonably be expected to have a Material Adverse Effect
on Pinnacle. Neither Pinnacle nor any of the Pinnacle Subsidiaries is subject to
any agreement, order, judgment, decree, letter or memorandum by or with any
court, governmental authority, regulatory agency or third party imposing any
material liability or obligation that could reasonably be expected to have a
Material Adverse Effect on Pinnacle.
3.21 STATE TAKEOVER LAWS. The Board of Directors of Pinnacle has approved
the transactions contemplated by this Agreement and the Option Agreements and
taken such action such that the provisions of Chapter 7A of the MBCA and any
other provisions of any state or local "takeover" law
14
applicable to Pinnacle will not apply to this Agreement or the Option Agreements
or any of the transactions contemplated hereby or thereby.
3.22 POOLING OF INTERESTS. Pinnacle has no reason to believe that the
Merger will not qualify as a "pooling of interests" for accounting purposes.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF IFC
Except as disclosed in the IFC disclosure schedule delivered to Pinnacle
concurrently herewith (the "IFC Disclosure Schedule") IFC hereby represents and
warrants to Pinnacle as follows:
4.1 CORPORATE ORGANIZATION.
(a) IFC is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. IFC has the corporate power
and authority to own or lease all of its properties and assets and to carry on
its business as it is now being conducted, and is duly licensed or qualified to
do business in each jurisdiction in which the nature of the business conducted
by it or the character or location of the properties and assets owned or leased
by it makes such licensing or qualification necessary, except where the failure
to be so licensed or qualified would not have a Material Adverse Effect on IFC.
IFC is duly registered as a savings and loan holding company under the HOLA.
True and complete copies of the Certificate of Incorporation and Bylaws of IFC,
as in effect as of the date of this Agreement, have previously been made
available by IFC to Pinnacle.
(b) Each IFC Subsidiary (i) is duly organized and validly existing as a
bank, savings and loan institution, corporation, partnership or limited
liability company under the laws of its jurisdiction of organization, (ii) is
duly qualified to do business and in good standing in all jurisdictions (whether
federal, state, local or foreign) where its ownership or leasing of property or
the conduct of its business requires it to be so qualified and in which the
failure to be so qualified would have a Material Adverse Effect on IFC, and
(iii) has all requisite corporate power and authority to own or lease its
properties and assets and to carry on its business as now conducted.
(c) The minute books of IFC accurately reflect in all material respects all
corporate actions held or taken since January 1, 1994 of its stockholders and
Board of Directors (including committees of the Board of Directors of IFC).
4.2 CAPITALIZATION.
(a) The authorized capital stock of IFC consists of (i) 5,000,000 shares of
serial preferred stock, par value $0.01 per share, none of which as of November
11, 1996 were issued or outstanding; and (ii) 10,000,000 shares of IFC Common
Stock, of which as of November 11, 1996, 4,751,131 shares were issued and
outstanding and 1,110,000 shares were held in treasury. All of the issued and
outstanding shares of IFC Common Stock have been duly authorized and validly
issued and are fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof. As of the date of this
Agreement, except pursuant to the terms of the IFC Option Agreement (as
hereinafter defined), the IFC Rights Agreement and the IFC Stock Plans, IFC does
not have and is not bound by any outstanding subscriptions, options, warrants,
calls, commitments or agreements of any character calling for the purchase or
issuance of any shares of IFC Common Stock or any other equity securities of IFC
or any securities representing the right to purchase or otherwise receive any
shares of IFC Common Stock or any other equity securities of IFC. As of November
11, 1996, no shares of IFC Common Stock were reserved for issuance, except for
(i) 253,089 shares reserved for issuance upon the exercise of stock options
pursuant to the IFC Stock Plans, and (ii) shares reserved for issuance pursuant
to the IFC Rights Agreement. Since January 1, 1996, IFC has not issued any
shares of IFC Common Stock or other equity securities of IFC, or any securities
convertible into or exercisable for any shares of IFC Common Stock or other
equity securities of IFC, other than pursuant to the exercise of employee stock
options granted prior to such date.
15
(b) As of November 11, 1996, there are issued and outstanding up to
4,751,131 rights in respect of shares of IFC Common Stock (the "IFC Rights"),
subject to terms and conditions of the Stockholder Protection Rights Agreement
dated as of February 26, 1992, as amended by the Amendment to Stockholder
Protection Rights Agreement dated as of November 14, 1996 (the "IFC Rights
Agreement"), between IFC and Xxxxxx Trust and Savings Bank, as Rights Agent. As
of the date of this Agreement, the Separation Time (as defined in the IFC Rights
Agreement) has not occurred, the Amendment to Stockholder Protection Rights
Agreement dated as of November 14, 1996, has been entered into and is effective
and in full force and effect, the entering into of this Agreement and/or the IFC
Stock Option Agreement and/or the consummation of the transactions contemplated
hereby and/or thereby have been exempted from the application of the IFC Rights
Agreement and do not and will not cause a Separation Time to occur, and all IFC
Rights are redeemable by IFC at a cost to IFC of not more than $0.01 per each of
the shares of IFC Common Stock issued and outstanding.
(c) IFC owns, directly or indirectly, all of the issued and outstanding
shares of capital stock of each of the IFC Subsidiaries, free and clear of any
Liens, and all of such shares are duly authorized and validly issued and are
fully paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. No IFC Subsidiary has or is bound
by any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any shares
of capital stock or any other equity security of such Subsidiary or any
securities representing the right to purchase or otherwise receive any shares of
capital stock or any other equity security of such Subsidiary.
4.3 AUTHORITY; NO VIOLATION.
(a) IFC has full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly approved by the Board of
Directors of IFC. The Board of Directors of IFC has directed that this Agreement
and the transactions contemplated hereby be submitted to IFC's stockholders for
approval at a meeting of such stockholders and, except for the adoption of this
Agreement by the affirmative vote of the holders of a majority of the
outstanding shares of IFC Common Stock, no other corporate proceedings on the
part of IFC are necessary to approve this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by IFC and (assuming due authorization, execution and
delivery by Pinnacle) constitutes a valid and binding obligation of IFC,
enforceable against IFC in accordance with its terms.
(b) Neither the execution and delivery of this Agreement by IFC nor the
consummation by IFC of the transactions contemplated hereby, nor compliance by
IFC with any of the terms or provisions hereof, will (i) violate any provision
of the Certificate of Incorporation or Bylaws of IFC or (ii) assuming that the
consents and approvals referred to in Section 4.4 are duly obtained, (x) violate
any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to IFC or any of its Subsidiaries or any of their
respective properties or assets, or (y) violate, conflict with, result in a
breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any Lien upon any of the respective properties or
assets of IFC or any of its Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which IFC or any of its
Subsidiaries is a party, or by which they or any of their respective properties
or assets may be bound or affected, except (in the case of clause (y) above) for
such violations, conflicts, breaches or defaults which, either individually or
in the aggregate, will not have or be reasonably likely to have a Material
Adverse Effect on IFC or the Surviving Corporation; provided, however, that
prior to the date hereof, IFC has secured a waiver of Xxxxxx Trust and Savings
Bank under the loan, security agreement and guaranty for the benefit of the IFC
Employee
16
Stock Ownership Plan ("ESOP") so that this Agreement and the Merger shall not
cause any breach, default or acceleration under said IFC ESOP loan arrangement.
4.4 CONSENTS AND APPROVALS. Except for (i) the filing of applications and
notices, as applicable, with the Federal Reserve Board under the BHC Act and
approval of such applications and notices, (ii) the filing of any required
applications with the OTS, (iii) the filing of any required applications or
notices for, and the receipt of, the State Approvals, (iv) the filing with the
SEC of the Joint Proxy Statement and the S-4 in which the Joint Proxy Statement
will be included as a prospectus, (v) the filing of Certificates of Merger with
the appropriate authorities of the State of Michigan pursuant to the MBCA and
with the appropriate officials of the State of Delaware pursuant to the DGCL,
(vi) any notices to or filings with the SBA, (vii) any consent, authorizations,
approvals, filings or exemptions in connection with compliance with the
applicable provisions of federal and state securities laws relating to the
regulation of broker-dealers or investment advisers, and federal commodities
laws relating to the regulation of futures commission merchants and the rules
and regulations thereunder and of any applicable industry SRO, and the rules of
NASDAQ, or which are required under consumer finance, mortgage banking and other
similar laws, (viii) such filings and approvals as are required to be made or
obtained under the securities or "Blue Sky" laws of various states in connection
with the issuance of the shares of Pinnacle Common Stock pursuant to this
Agreement, and (ix) the approval of this Agreement by the requisite vote of the
stockholders of Pinnacle and IFC, no consents or approvals of or filings or
registrations with any Governmental Entity or with any third party are necessary
in connection with (A) the execution and delivery by IFC of this Agreement and
(B) the consummation by IFC of the Merger and the other transactions
contemplated hereby.
4.5 REPORTS. IFC and each of its Subsidiaries have timely filed all
reports, registrations and statements, together with any amendments required to
be made with respect thereto, that they were required to file since January 1,
1994 with any of the Regulatory Agencies, and all other reports and statements
required to be filed by them since January 1, 1994, including, without
limitation, any report or statement required to be filed pursuant to the laws,
rules or regulations of the United States, any state, or any Regulatory Agency
and have paid all fees and assessments due and payable in connection therewith,
except where the failure to file such report, registration or statement or to
pay such fees and assessments, either individually or in the aggregate, will not
have a Material Adverse Effect on IFC. Except for normal examinations conducted
by a Regulatory Agency in the regular course of the business of IFC and its
Subsidiaries, no Regulatory Agency has initiated any proceeding or, to the best
knowledge of IFC, investigation into the business or operations of IFC or any of
its Subsidiaries since January 1, 1994, except where such proceedings or
investigation are not likely, either individually or in the aggregate, to have a
Material Adverse Effect on IFC. There is no unresolved violation, criticism, or
exception by any Regulatory Agency with respect to any report or statement
relating to any examinations of IFC or any of its Subsidiaries which, in the
reasonable judgment of IFC, is likely, either individually or in the aggregate,
to have a Material Adverse Effect on IFC.
4.6 FINANCIAL STATEMENTS. IFC has previously made available to Pinnacle
copies of (a) the consolidated balance sheets of IFC and its Subsidiaries as of
December 31, for the fiscal years 1994 and 1995, and the related consolidated
statements of income, changes in stockholders' equity and cash flows for the
fiscal years 1993 through 1995, inclusive, as reported in IFC's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995 filed with the SEC under
the Exchange Act, in each case accompanied by the audit report of Ernst & Young
LLP, independent public accountants with respect to IFC, and (b) the unaudited
consolidated balance sheet of IFC and its Subsidiaries as of June 30, 1996 and
the related unaudited consolidated statements of income and cash flows for the
six-month period then ended as reported in IFC's Quarterly Report on Form 10-Q
for the period ended June 30, 1996 filed with the SEC under the Exchange Act
(the "IFC June 30, 1996 Form 10-Q"). The December 31, 1995 consolidated balance
sheet of IFC (including the related notes, where applicable) fairly presents the
consolidated financial position of IFC and its Subsidiaries as of the date
thereof, and the other financial statements
17
referred to in this Section 4.6 (including the related notes, where applicable)
fairly present (subject, in the case of the unaudited statements, to recurring
audit adjustments normal in nature and amount) the results of the consolidated
operations and changes in stockholders' equity and consolidated financial
position of IFC and its Subsidiaries for the respective fiscal periods or as of
the respective dates therein set forth; each of such statements (including the
related notes, where applicable) comply in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto; and each of such statements (including the related notes,
where applicable) has been prepared in all material respects in accordance with
GAAP consistently applied during the periods involved, except, in each case, as
indicated in such statements or in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10-Q. The books and records of IFC
and its Subsidiaries have been, and are being, maintained in all material
respects in accordance with GAAP and any other applicable legal and accounting
requirements and reflect only actual transactions.
4.7 BROKER'S FEES. Neither IFC nor any IFC Subsidiary nor any of their
respective officers or directors has employed any broker or finder or incurred
any liability for any broker's fees, commissions or finder's fees in connection
with the Merger or related transactions contemplated by this Agreement or the
Option Agreements, other than Sandler X'Xxxxx & Partners, L.P. ("Sandler
X'Xxxxx") (a copy of which engagement agreement has been disclosed by IFC to
Pinnacle) whose fees, commissions and expenses shall be paid by IFC.
4.8 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Except as publicly disclosed in IFC Reports (as defined in Section 4.12)
filed prior to the date hereof, since December 31, 1995, (i) IFC and its
Subsidiaries taken as a whole have not incurred any material liability, except
in the ordinary course of their business, and (ii) no event has occurred which
has had, individually or in the aggregate, a Material Adverse Effect on IFC or
the Surviving Corporation.
(b) Except as publicly disclosed in IFC Reports filed prior to the date
hereof, since December 31, 1995, IFC and its Subsidiaries have carried on their
respective businesses in all material respects in the ordinary and usual course.
(c) Since December 31, 1995, neither IFC nor any of its Subsidiaries has (i)
except for such actions as are in the ordinary course of business consistent
with past practice or except as required by applicable law, (A) increased the
wages, salaries, compensation, pension, or other fringe benefits or perquisites
payable to any executive officer, employee, or director from the amount thereof
in effect as of December 31, 1995, or (B) granted any severance or termination
pay, entered into any contract to make or grant any severance or termination
pay, or paid any bonuses in excess of IFC's 1995 salary and employee benefits
expenses, or (ii) suffered any strike, work stoppage, slowdown, or other labor
disturbance which, in the reasonable judgment of IFC, is likely, either
individually or in the aggregate, to have a Material Adverse Effect on IFC.
4.9 LEGAL PROCEEDINGS.
(a) Neither IFC nor any of its Subsidiaries is a party to any, and there are
no pending or, to the best of IFC's knowledge, threatened, material legal,
administrative, arbitral or other proceedings, claims, actions or governmental
or regulatory investigations of any nature against IFC or any of its
Subsidiaries or challenging the validity or propriety of the transactions
contemplated by this Agreement or the IFC Option Agreement as to which there is
a reasonable probability of an adverse determination and which, if adversely
determined, would, individually or in the aggregate, have a Material Adverse
Effect on IFC.
(b) There is no injunction, order, judgment, decree, or regulatory
restriction (other than those that apply to similarly situated bank holding
companies, savings and loan holding companies banks, or savings institutions)
imposed upon IFC, any of its Subsidiaries or the assets of IFC or any of its
Subsidiaries which has had, or might reasonably be expected to have, a Material
Adverse Effect on IFC.
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4.10 TAXES AND TAX RETURNS.
(a) Each of IFC and its Subsidiaries has duly filed all federal, state,
county, foreign and, to the best of IFC's knowledge, local information returns
and tax returns required to be filed by it on or prior to the date hereof (all
such returns being accurate and complete in all material respects) and has duly
paid or made provisions for the payment of all Taxes and other governmental
charges which have been incurred or are due or claimed to be due from it by
federal, state, county, foreign or local taxing authorities on or prior to the
date of this Agreement (including, without limitation, if and to the extent
applicable, those due in respect of its properties, income, business, capital
stock, deposits, franchises, licenses, sales and payrolls) other than (i) Taxes
or other charges which are not yet delinquent or are being contested in good
faith and have not been finally determined, or (ii) information returns, tax
returns, Taxes or other governmental charges the failure to file, pay or make
provision for, either individually or in the aggregate, are not likely, in the
reasonable judgment of IFC, to have a Material Adverse Effect on IFC. The income
tax returns of IFC and its Subsidiaries have been examined by the IRS and any
liability with respect thereto has been satisfied for all years to and including
1993, and either no material deficiencies were asserted as a result of such
examination for which IFC does not have adequate reserves or all such
deficiencies were satisfied. To the best of IFC's knowledge, there are no
material disputes pending, or claims asserted for, Taxes or assessments upon IFC
or any of its Subsidiaries for which IFC does not have adequate reserves, nor
has IFC or any of its Subsidiaries given any currently effective waivers
extending the statutory period of limitation applicable to any federal, state,
county or local income tax return for any period. In addition, (A) proper and
accurate amounts have been withheld by IFC and its Subsidiaries from their
employees for all prior periods in compliance in all material respects with the
tax withholding provisions of applicable federal, state and local laws, except
where failure to do so would not have a Material Adverse Effect on IFC, (B)
federal, state, county and local returns which are accurate and complete in all
material respects have been filed by IFC and its Subsidiaries for all periods
for which returns were due with respect to income tax withholding, Social
Security and unemployment taxes, except where failure to do so would not have a
Material Adverse Effect on IFC, (C) the amounts shown on such federal, state,
local or county returns to be due and payable have been paid in full or adequate
provision therefor has been included by IFC in its consolidated financial
statements as of December 31, 1995, except where failure to do so would not have
a Material Adverse Effect on IFC and (D) there are no Tax liens upon any
property or assets of IFC or its Subsidiaries except liens for current taxes not
yet due or liens that would not have a Material Adverse Effect on IFC. Neither
IFC nor any of its Subsidiaries has been required to include in income any
adjustment pursuant to Section 481 of the Code by reason of a voluntary change
in accounting method initiated by IFC or any of its Subsidiaries, and the IRS
has not initiated or proposed any such adjustment or change in accounting
method, in either case which has had or is reasonably likely to have a Material
Adverse Effect on IFC. Except as set forth in the financial statements described
in Section 4.6, neither IFC nor any of its Subsidiaries has entered into a
transaction which is being accounted for as an installment obligation under
Section 453 of the Code, which would be reasonably likely to have a Material
Adverse Effect on IFC.
(b) Any amount that is reasonably likely to be received (whether in cash or
property or the vesting of property) as a result of any of the transactions
contemplated by this Agreement by any employee, officer or director of IFC or
any of its affiliates who is a "Disqualified Individual" (as such term is
defined in proposed Treasury Regulation Section 1.280G-1) under any employment,
severance or termination agreement, other compensation arrangement or IFC
Benefit Plan (as defined in Section 4.11(a)) currently in effect should not be
characterized as an "excess parachute payment" (as such term is defined in
Section 280G(b)(1) of the Code).
(c) No disallowance of a deduction under Section 162(m) of the Code for
employee remuneration of any amount paid or payable by IFC or any Subsidiary of
IFC under any contract, plan, program, arrangement or understanding would be
reasonably likely to have a Material Adverse Effect on IFC.
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4.11 EMPLOYEES.
(a) The IFC Disclosure Schedule sets forth a true and complete list of each
material employee benefit plan, arrangement or agreement that is maintained as
of the date of this Agreement (the "IFC Benefit Plans") by IFC or any of its
Subsidiaries or by any ERISA Affiliate, all of which together with IFC would be
deemed a "single employer" within the meaning of Section 4001 of ERISA.
(b) IFC has heretofore delivered to Pinnacle true and complete copies of
each of the IFC Benefit Plans and certain related documents, including, but not
limited to, (i) the actuarial report for such IFC Benefit Plan (if applicable)
for each of the last two years, and (ii) the most recent determination letter
from the IRS (if applicable) for such Plan.
(c) (i) Each of the IFC Benefit Plans has been operated and administered in
all material respects in compliance with applicable laws, including, but not
limited to, ERISA and the Code, (ii) each of the IFC Benefit Plans intended to
be "qualified" within the meaning of Section 401(a) of the Code is so qualified,
(iii) with respect to each Plan which is subject to Title IV of ERISA, the
present value of accrued benefits under such Plan, based upon the actuarial
assumptions used for funding purposes in the most recent actuarial report
prepared by such Plan's actuary with respect to such Plan, did not, as of its
latest valuation date, exceed the then current value of the assets of such Plan
allocable to such accrued benefits, (iv) no IFC Benefit Plan provides benefits,
including, without limitation, death or medical benefits (whether or not
insured), with respect to current or former employees of IFC, its Subsidiaries
or any ERISA Affiliate beyond their retirement or other termination of service,
other than (A) coverage mandated by applicable law, (B) death benefits or
retirement benefits under any "employee pension plan" (as such term is defined
in Section 3(2) of ERISA), (C) deferred compensation benefits accrued as
liabilities on the books of IFC, its Subsidiaries or the ERISA Affiliates or (D)
benefits the full cost of which is borne by the current or former employee (or
his beneficiary), (v) no material liability under Title IV of ERISA has been
incurred by IFC, its Subsidiaries or any ERISA Affiliate that has not been
satisfied in full, and no condition exists that presents a material risk to IFC,
its Subsidiaries or any ERISA Affiliate of incurring a material liability
thereunder, (vi) no Plan is a "multiemployer pension plan" (as such term is
defined in Section 3(37) of ERISA), (vii) all contributions or other amounts
payable by IFC or its Subsidiaries as of the Effective Time with respect to each
IFC Benefit Plan in respect of current or prior plan years have been paid or
accrued in accordance with GAAP and Section 412 of the Code, (viii) neither IFC,
its Subsidiaries nor any ERISA Affiliate has engaged in a transaction in
connection with which IFC, its Subsidiaries or any ERISA Affiliate reasonably
could be subject to either a material civil penalty assessed pursuant to Section
409 or 502(i) of ERISA or a material tax imposed pursuant to Section 4975 or
4976 of the Code, and (ix) to the best knowledge of IFC there are no pending,
threatened or anticipated claims (other than routine claims for benefits) by, on
behalf of or against any of the IFC Benefit Plans or any trusts related thereto
which are, in the reasonable judgment of IFC, likely, either individually or in
the aggregate, to have a Material Adverse Effect on IFC.
(d) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
material payment (including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any director or any
employee of IFC or any of its affiliates from IFC or any of its affiliates under
any IFC Benefit Plan or otherwise, (ii) materially increase any benefits
otherwise payable under any IFC Benefit Plan or (iii) result in any acceleration
of the time of payment or vesting of any such benefits to any material extent.
4.12 SEC REPORTS. IFC has previously made available to Pinnacle an
accurate and complete copy of each (a) final registration statement, prospectus,
report, schedule and definitive proxy statement filed since January 1, 1994 by
IFC with the SEC pursuant to the Securities Act or the Exchange Act (the "IFC
Reports") and prior to the date hereof and (b) communication mailed by IFC to
its stockholders since January 1, 1994 and prior to the date hereof, and no such
registration statement, prospectus, report, schedule, proxy statement or
communication contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary in order to
make the statements
20
therein, in light of the circumstances in which they were made, not misleading,
except that information as of a later date shall be deemed to modify information
as of an earlier date. Since January 1, 1994, IFC has timely filed all IFC
Reports and other documents required to be filed by it under the Securities Act
and the Exchange Act, and, as of their respective dates, all IFC Reports
complied in all material respects with the published rules and regulations of
the SEC with respect thereto.
4.13 COMPLIANCE WITH APPLICABLE LAW. IFC and each of its Subsidiaries hold
all material licenses, franchises, permits and authorizations necessary for the
lawful conduct of their respective businesses under and pursuant to all, and
have complied in all material respects with and are not in default in any
material respect under any, applicable law, statute, order, rule, regulation,
policy and/or guideline of any Governmental Entity relating to IFC or any of its
Subsidiaries, except where the failure to hold such license, franchise, permit
or authorization or such noncompliance or default would not, individually or in
the aggregate, have a Material Adverse Effect on IFC.
4.14 CERTAIN CONTRACTS.
(a) Neither IFC nor any of its Subsidiaries is a party to or bound by any
contract, arrangement, commitment or understanding (whether written or oral) (i)
with respect to the employment of any directors, officers or employees other
than in the ordinary course of business consistent with past practice, (ii)
which, upon the consummation of the transactions contemplated by this Agreement
will (either alone or upon the occurrence of any additional acts or events)
result in any payment (whether of severance pay or otherwise) becoming due from
IFC, Pinnacle, the Surviving Corporation, or any of their respective
Subsidiaries to any officer or employee thereof, (iii) which is a "material
contract" (as such term is defined in Item 601(b)(10) of Regulation S-K of the
SEC) to be performed after the date of this Agreement that has not been filed or
incorporated by reference in the IFC Reports, (iv) which materially restricts
the conduct of any line of business by IFC, (v) with or to a labor union or
guild (including any collective bargaining agreement) or (vi) (including any
stock option plan, stock appreciation rights plan, restricted stock plan or
stock purchase plan) any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement, or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement. IFC has previously made available to Pinnacle
true and correct copies of all employment and deferred compensation agreements
which are in writing and to which IFC is a party. Each contract, arrangement,
commitment or understanding of the type described in this Section 4.14(a),
whether or not set forth in the IFC Disclosure Schedule, is referred to herein
as an "IFC Contract", and neither IFC nor any of its Subsidiaries knows of, or
has received notice of, any violation of the above by any of the other parties
thereto which, individually or in the aggregate, would have a Material Adverse
Effect on IFC.
(b) (i) Each IFC Contract is valid and binding on IFC or any of its
Subsidiaries, as applicable, and in full force and effect, (ii) IFC and each of
its Subsidiaries has in all material respects performed all obligations required
to be performed by it to date under each IFC Contract, except where such
noncompliance, individually or in the aggregate, would not have a Material
Adverse Effect on IFC, and (iii) no event or condition exists which constitutes
or, after notice or lapse of time or both, would constitute, a material default
on the part of IFC or any of its Subsidiaries under any such IFC Contract,
except where such default, individually or in the aggregate, would not have a
Material Adverse Effect on IFC.
4.15 AGREEMENTS WITH REGULATORY AGENCIES. Neither IFC nor any of its
Subsidiaries is subject to any cease-and-desist or other order issued by, or is
a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or has been since
January 1, 1994, a recipient of any supervisory letter from, or since January 1,
1994, has adopted any board resolutions at the request of any Regulatory Agency
or other Governmental Entity that currently restricts in any material respect
the conduct of its business or that in any material manner relates to its
capital adequacy, its credit policies, its management or its business (each,
whether or not set forth in the IFC Disclosure Schedule, an "IFC Regulatory
Agreement"),
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nor has IFC or any of its Subsidiaries been advised since January 1, 1994, by
any Regulatory Agency or other Governmental Entity that it is considering
issuing or requesting any such Regulatory Agreement.
4.16 OTHER ACTIVITIES OF IFC AND ITS SUBSIDIARIES.
(a) Neither IFC nor any of its Subsidiaries that is neither a bank, a bank
operating subsidiary or a bank service corporation, directly or indirectly,
engages in any activity prohibited by the Federal Reserve Board or the OTS.
Without limiting the generality of the foregoing, any equity investment of IFC
and each Subsidiary that is not a bank, a bank operating subsidiary or a bank
service corporation is not prohibited by the Federal Reserve Board or the OTS.
(b) To IFC's knowledge, each IFC Subsidiary which is a federally insured
bank or savings institution (an "IFC Bank Subsidiary") currently performs all
Trust Activities with requisite authority under applicable law of Governmental
Entities and in accordance in all material respects with the agreed-upon terms
of the agreements and instruments governing such Trust Activities, sound
fiduciary principles and applicable law and regulation (specifically including,
but not limited to, Section 9 of Title 12 of the Code of Federal Regulations);
there is no investigation or inquiry by any Governmental Entity pending, or to
the knowledge of IFC, threatened, against or affecting IFC, or any Significant
Subsidiary thereof relating to the compliance by IFC or any such Significant
Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X of the
SEC) with sound fiduciary principles and applicable regulations; and except
where any such failure would not have a Material Adverse Effect on IFC, each
employee of a IFC Bank Subsidiary had the authority to act in the capacity in
which he or she acted with respect to Trust Activities, in each case, in which
such employee held himself or herself out as a representative of a IFC Bank
Subsidiary; and each IFC Bank Subsidiary has established policies and procedures
for the purpose of complying with applicable laws of Governmental Entities
relating to Trust Activities, has followed such policies and procedures in all
material respects and has performed appropriate internal audit reviews of, and
has engaged independent accountants to perform audits of, Trust Activities,
which audits since January 1, 1994 have disclosed no material violations of
applicable laws of Governmental Entities or such policies and procedures.
4.17 INVESTMENT SECURITIES. Each of IFC and its Subsidiaries has good and
marketable title to all securities held by it (except securities sold under
repurchase agreements or held in any fiduciary or agency capacity), free and
clear of any Lien, except to the extent such securities are pledged in the
ordinary course of business consistent with prudent banking practices to secure
obligations of IFC or any of its Subsidiaries. Such securities are valued on the
books of IFC in accordance with GAAP.
4.18 INTEREST RATE RISK MANAGEMENT INSTRUMENTS. All interest rate swaps,
caps, floors and option agreements and other interest rate risk management
arrangements, whether entered into for the account of IFC or for the account of
a customer of IFC or one of its Subsidiaries, were entered into in the ordinary
course of business and, to IFC's knowledge, in accordance with prudent banking
practice and applicable rules, regulations and policies of any Regulatory
Authority and with counterparties believed to be financially responsible at the
time and are legal, valid and binding obligations of IFC or one of its
Subsidiaries enforceable in accordance with their terms (except as may be
limited by bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting the rights of creditors generally and the availability of equitable
remedies), and are in full force and effect. IFC and each of its Subsidiaries
have duly performed in all material respects all of their material obligations
thereunder to the extent that such obligations to perform have accrued; and, to
IFC's knowledge, there are no material breaches, violations or defaults or
allegations or assertions of such by any party thereunder.
4.19 UNDISCLOSED LIABILITIES. Except for those liabilities that are fully
reflected or reserved against on the consolidated balance sheet of IFC included
in the IFC June 30, 1996 Form 10-Q and for liabilities incurred in the ordinary
course of business consistent with past practice since June 30, 1996, neither
IFC nor any of its Subsidiaries has incurred any liability of any nature
whatsoever (whether absolute, accrued,
22
contingent or otherwise and whether due or to become due) that, either alone or
when combined with all similar liabilities, has had, or could reasonably be
expected to have, a Material Adverse Effect on IFC.
4.20 ENVIRONMENTAL LIABILITY. Except as set forth in the IFC Disclosure
Schedule, there are no legal, administrative, arbitral or other proceedings,
claims, actions, causes of action, private environmental investigations or
remediation activities or governmental investigations of any nature seeking to
impose, or that could reasonably be expected to result in the imposition, on IFC
or any of the IFC Subsidiaries of any liability or obligation arising under
common law or under any local, state or federal environmental statute,
regulation or ordinance including, without limitation, CERCLA, pending or
threatened against IFC or any of the IFC Subsidiaries, which liability or
obligation could reasonably be expected to have a Material Adverse Effect on
IFC. To the knowledge of IFC, there is no reasonable basis for any such
proceeding, claim, action or governmental investigation that would impose any
material liability or obligation that could reasonably be expected to have a
Material Adverse Effect on IFC. Neither IFC nor any of the IFC Subsidiaries is
subject to any agreement, order, judgment, decree, letter or memorandum by or
with any court, governmental authority, regulatory agency or third party
imposing any material liability or obligation that could reasonably be expected
to have a Material Adverse Effect on IFC.
4.21 STATE TAKEOVER LAWS; REDEMPTION OF IFC RIGHTS. The Board of Directors
of IFC has approved the transactions contemplated by this Agreement and the
Option Agreements and taken such action (i) such that the provisions of Section
9 of the Certificate of Incorporation of IFC pertaining to certain "Business
Combinations" shall not be applicable to the transactions contemplated by this
Agreement and the Option Agreements, and the provisions of Section 203 of the
DGCL and any other provision of any state or local "takeover" law applicable to
IFC will not apply to this Agreement or the Option Agreements or any of the
transactions contemplated hereby or thereby, and (ii) to redeem the IFC Rights
prior to the Effective Time at a cost to IFC of not more than $0.01 (the
"Redemption Price") per each of the shares of IFC Common Stock issued and
outstanding, such that all of said IFC Rights will have been extinguished,
terminated and cancelled prior to the Effective Time, without any right of
exercise, and shall only represent the right to receive the Redemption Price in
cash from IFC or the Surviving Corporation following the Merger.
4.22 POOLING OF INTERESTS. IFC has no reason to believe that the Merger
will not qualify as a "pooling of interests" for accounting purposes.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME. During the period
from the date of this Agreement to the Effective Time, except as expressly
contemplated or permitted by this Agreement (including the Pinnacle Disclosure
Schedule and the IFC Disclosure Schedule) or the Option Agreements, each of
Pinnacle and IFC shall, and shall cause each of their respective Subsidiaries
to, (a) conduct its business in the usual, regular and ordinary course
consistent with past practice, (b) use reasonable best efforts to maintain and
preserve intact its business organization, employees and advantageous business
relationships and retain the services of its key officers and key employees and
(c) take no action which would adversely affect or delay the ability of either
Pinnacle or IFC to obtain any necessary approvals of any Regulatory Agency or
other governmental authority required for the transactions contemplated hereby
or to perform its covenants and agreements under this Agreement or the Option
Agreements.
5.2 FORBEARANCES. During the period from the date of this Agreement to the
Effective Time, except as set forth in the Pinnacle Disclosure Schedule or the
IFC Disclosure Schedule, as the case may be, and, except as expressly
contemplated or permitted by this Agreement or the Option Agreements, neither
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Pinnacle nor IFC shall, and neither Pinnacle nor IFC shall permit any of their
respective Subsidiaries to, without the prior written consent of the other:
(a) other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money (other than short-term
indebtedness incurred to refinance short-term indebtedness and indebtedness
of Pinnacle or any of its Subsidiaries to Pinnacle or any of its
Subsidiaries, on the one hand, or of IFC or any of its Subsidiaries to IFC
or any of its Subsidiaries, on the other hand), assume, guarantee, endorse
or otherwise as an accommodation become responsible for the obligations of
any other individual, corporation or other entity, or make any loan or
advance (it being understood and agreed that incurrence of indebtedness in
the ordinary course of business shall include, without limitation, the
creation of deposit liabilities, purchases of Federal funds, sales of
certificates of deposit and entering into repurchase agreements);
(b) (i) adjust, split, combine or reclassify any capital stock; (ii)
make, declare or pay any dividend or make any other distribution on, or
directly or indirectly redeem, purchase or otherwise acquire, any shares of
its capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock (except, (A) in the case of
Pinnacle, for regular quarterly cash dividends on Pinnacle Common Stock at a
rate not in excess of $0.25 per share of Pinnacle Common Stock, (B) in the
case of IFC, for regular quarterly cash dividends on IFC Common Stock at a
rate not in excess of $0.21 per share of IFC Common Stock, (C) for dividends
paid by any of the Subsidiaries of each of Pinnacle and IFC to Pinnacle or
IFC or any of their Subsidiaries, respectively, and (D) for dividends paid
in the ordinary course of business by any subsidiaries (whether or not
wholly owned) of each of Pinnacle and IFC), (iii) grant any stock
appreciation rights or grant any individual, corporation or other entity any
right to acquire any shares of its capital stock (and no further or
additional options to purchase stock shall be granted pursuant to the
Pinnacle Stock Plans or the IFC Stock Plans, except as otherwise agreed in
writing by Pinnacle and IFC) or (iv) issue any additional shares of capital
stock except pursuant to (A) the exercise of stock options or warrants
outstanding as of the date hereof, (B) the Option Agreements, or (C) as
permitted unless clause (iii) above;
(c) sell, transfer, mortgage, encumber or otherwise dispose of any of
its properties or assets to any individual, corporation or other entity
other than a Subsidiary, or cancel, release or assign any indebtedness to
any such person or any claims held by any such person, except in the
ordinary course of business consistent with past practice or pursuant to
contracts or agreements in force at the date of this Agreement;
(d) except for transactions in the ordinary course of business
consistent with past practice or pursuant to contracts or agreements in
force at the date of this Agreement, make any material investment either by
purchase of stock or securities, contributions to capital, property
transfers, or purchase of any property or assets of any other individual,
corporation or other entity other than a Subsidiary thereof;
(e) except for transactions in the ordinary course of business
consistent with past practice, enter into or terminate any material contract
or agreement, or make any change in any of its material leases or contracts,
other than renewals of contracts and leases without material adverse changes
of terms;
(f) increase in any manner the compensation or fringe benefits of any of
its employees or pay any pension or retirement allowance not required by any
existing plan or agreement to any such employees or become a party to, amend
or commit itself to any pension, retirement, profit-sharing or welfare
benefit plan or agreement or employment agreement with or for the benefit of
any employee other than in the ordinary course of business consistent with
past practice or accelerate the vesting of any stock options or other
stock-based compensation;
(g) solicit, encourage or authorize or permit any individual,
corporation or other entity to solicit from any third party any inquiries or
proposals relating to the disposition of its business or assets, or
24
the acquisition of its voting securities, or the merger or business
combination of it or any of its Subsidiaries with any corporation or other
entity other than as provided by this Agreement (and each party shall
promptly notify the other of all of the relevant details relating to all
inquiries and proposals which it may receive relating to any of such
matters);
(h) settle any claim, action or proceeding involving money damages,
except in the ordinary course of business consistent with past practice;
(i) take any action that would prevent or impede the Merger from
qualifying (i) for "pooling of interests" accounting treatment or (ii) as a
reorganization within the meaning of Section 368 of the Code; provided,
however, that nothing contained herein shall limit the ability of Pinnacle
or IFC to exercise its rights under the Pinnacle Option Agreement or the IFC
Option Agreement, as the case may be;
(j) amend its Certificate of Incorporation or Articles of Incorporation,
as the case may be, or its Bylaws, except as contemplated by this Agreement;
(k) other than in prior consultation with the other party to this
Agreement, restructure or materially change its investment securities
portfolio or its gap position, through purchases, sales or otherwise, or the
manner in which the portfolio is classified or reported;
(l) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect at any time prior
to the Effective Time, or in any of the conditions to the Merger set forth
in Article VII not being satisfied or in a violation of any provision of
this Agreement, except, in every case, as may be required by applicable law;
or
(m) agree to, or make any commitment to, take any of the actions
prohibited by this Section 5.2.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 REGULATORY MATTERS.
(a) Pinnacle and IFC shall promptly prepare and file with the SEC the Joint
Proxy Statement and Pinnacle shall promptly prepare and file with the SEC the
S-4, in which the Joint Proxy Statement will be included as a prospectus. Each
of Pinnacle and IFC shall use all reasonable efforts to have the S-4 declared
effective under the Securities Act as promptly as practicable after such filing,
and Pinnacle and IFC shall thereafter mail or deliver the Joint Proxy Statement
to their respective stockholders. Pinnacle shall also use all reasonable efforts
to obtain all necessary state securities law or "Blue Sky" permits and approvals
required to carry out the transactions contemplated by this Agreement, and IFC
shall furnish all information concerning IFC and the holders of IFC Common Stock
as may be reasonably requested in connection with any such action.
(b) The parties hereto shall cooperate with each other and use their best
efforts to promptly prepare and file all necessary documentation, to effect all
applications, notices, petitions and filings, to obtain as promptly as
practicable all permits, consents, approvals and authorizations of all third
parties and Governmental Entities which are necessary or advisable to consummate
the transactions contemplated by this Agreement (including, without limitation,
the Merger), and to comply with the terms and conditions of all such permits,
consents, approvals and authorizations of all such Governmental Entities.
Pinnacle and IFC shall have the right to review in advance, and, to the extent
practicable, each will consult the other on, in each case subject to applicable
laws relating to the exchange of information, all the information relating to
Pinnacle or IFC, as the case may be, and any of their respective Subsidiaries,
which appear in any filing made with, or written materials submitted to, any
third party or any Governmental Entity in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right, each of the
parties
25
hereto shall act reasonably and as promptly as practicable. The parties hereto
agree that they will consult with each other with respect to the obtaining of
all permits, consents, approvals and authorizations of all third parties and
Governmental Entities necessary or advisable to consummate the transactions
contemplated by this Agreement and each party will keep the other apprised of
the status of matters relating to completion of the transactions contemplated
herein.
(c) Pinnacle and IFC shall, upon request, furnish each other with all
information concerning themselves, their Subsidiaries, directors, officers and
stockholders and such other matters as may be reasonably necessary or advisable
in connection with the Joint Proxy Statement, the S-4 or any other statement,
filing, notice or application made by or on behalf of Pinnacle, IFC or any of
their respective Subsidiaries to any Governmental Entity in connection with the
Merger and the other transactions contemplated by this Agreement.
(d) Pinnacle and IFC shall promptly advise each other upon receiving any
communication from any Governmental Entity whose consent or approval is required
for consummation of the transactions contemplated by this Agreement which causes
such party to believe that there is a reasonable likelihood that any Requisite
Regulatory Approval will not be obtained or that the receipt of any such
approval will be materially delayed.
6.2 ACCESS TO INFORMATION.
(a) Upon reasonable notice and subject to applicable laws relating to the
exchange of information, each of Pinnacle and IFC shall, and shall cause each of
their respective Subsidiaries to, afford to the officers, employees,
accountants, counsel and other representatives of the other party, access,
during normal business hours during the period prior to the Effective Time, to
all its properties, books, contracts, commitments and records and, during such
period, each of Pinnacle and IFC shall, and shall cause their respective
Subsidiaries to, make available to the other party (i) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of federal securities laws or
federal or state banking laws, savings and loan or savings association laws
(other than reports or documents which Pinnacle or IFC, as the case may be, is
not permitted to disclose under applicable law) and (ii) all other information
concerning its business, properties and personnel as such party may reasonably
request. Neither Pinnacle nor IFC nor any of their respective Subsidiaries shall
be required to provide access to or to disclose information where such access or
disclosure would violate or prejudice the rights of Pinnacle's or IFC's, as the
case may be, customers, jeopardize the attorney-client privilege of the
institution in possession or control of such information or contravene any law,
rule, regulation, order, judgment, decree, fiduciary duty or binding agreement
entered into prior to the date of this Agreement. The parties hereto will make
appropriate substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply.
(b) Each of Pinnacle and IFC agrees to keep confidential, and not divulge to
any other party or person (other than employees of, and attorneys, accountants,
financial advisors and other representatives for, any said party), all
non-public documents, information, records and financial statements received
from the other and, in addition, any and all reports, information and financial
information obtained through audits or other reviews conducted pursuant to this
Agreement (unless readily ascertainable from public or published information, or
trade sources, or already known or subsequently developed by a party
independently of any investigation or received from a third party not under an
obligation to the other party to keep such information confidential), and to use
the same only in connection with the transactions contemplated by this
Agreement; and if the transactions contemplated hereby are not consummated for
any reason, each party agrees to promptly return to the other party all written
materials furnished by the other party, and all copies thereof, in connection
with such investigation, and to destroy all documents and records in its
possession containing extracts or summaries of any such non-public information.
(c) No investigation by either of the parties or their respective
representatives shall affect the representations, warranties, covenants or
conditions of the other set forth herein.
26
6.3 STOCKHOLDERS' APPROVALS. Each of Pinnacle and IFC shall call a meeting
of its stockholders to be held as soon as reasonably practicable for the purpose
of voting upon the requisite stockholder approvals required in connection with
this Agreement and the Merger, and each shall use its best efforts to cause such
meetings to occur on the same date. Pinnacle and IFC will, through their
respective Boards of Directors, subject to their respective fiduciary
obligations as determined by the respective Boards of Directors, recommend to
their respective stockholders approval of this Agreement and the Merger.
6.4 LEGAL CONDITIONS TO MERGER. Each of Pinnacle and IFC shall, and shall
cause its Subsidiaries to, use their best efforts (a) to take, or cause to be
taken, all actions necessary, proper or advisable to comply promptly with all
legal requirements which may be imposed on such party or its Subsidiaries with
respect to the Merger and, subject to the conditions set forth in Article VII
hereof, to consummate the transactions contemplated by this Agreement and (b) to
obtain (and to cooperate with the other party to obtain) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Entity and any other third party which is required to be obtained by Pinnacle or
IFC or any of their respective Subsidiaries in connection with the Merger and
the other transactions contemplated by this Agreement.
6.5 AFFILIATES; PUBLICATION OF COMBINED FINANCIAL RESULTS.
(a) Each of Pinnacle and IFC shall use its best efforts to cause each
director, executive officer and other person who is an "affiliate" (for purposes
of Rule 145 under the Securities Act and for purposes of qualifying the Merger
for "pooling of interests" accounting treatment) of such party to deliver to the
other party hereto, as soon as practicable after the date of this Agreement, and
prior to the date of the stockholders' meetings called by Pinnacle and IFC to
approve this Agreement, a written agreement, in the form of Exhibit D hereto,
providing that such person will not sell, pledge, transfer or otherwise dispose
of any shares of Pinnacle Common Stock or IFC Common Stock held by such
"affiliate" and, in the case of the "affiliates" of IFC, the shares of Pinnacle
Common Stock to be received by such "affiliate" in the Merger: (i) in the case
of shares of Pinnacle Common Stock to be received by "affiliates" of IFC in the
Merger, except in compliance with the applicable provisions of the Securities
Act and the rules and regulations thereunder; and (ii) except to the extent and
under the conditions permitted therein, during the period commencing 30 days
prior to the Merger and ending at the time of the publication of financial
results covering at least 30 days of combined operations of Pinnacle and IFC.
(b) The Surviving Corporation shall use its best efforts to publish as
promptly as reasonably practical but in no event later than 90 days after the
end of the first month after the Effective Time in which there are at least 30
days of post-Merger combined operations (which month may be the month in which
the Effective Time occurs), combined sales and net income figures as
contemplated by and in accordance with the terms of SEC Accounting Series
Release No. 135.
6.6 NASDAQ LISTING. Pinnacle shall cause the shares of Pinnacle Common
Stock to be issued in the Merger to be approved for trading and reporting on
NASDAQ, National Market System, subject to official notice of issuance, prior to
the Effective Time.
6.7 EMPLOYEE BENEFIT PLANS.
(a) From and after the Effective Time, unless otherwise mutually determined,
the Pinnacle Benefit Plans and IFC Benefit Plans in effect as of the date of
this Agreement shall remain in effect with respect to employees of Pinnacle or
IFC (or their Subsidiaries) covered by such plans at the Effective Time until
such time as the Surviving Corporation shall, subject to applicable law, the
terms of this Agreement and the terms of such plans, adopt new benefit plans
with respect to employees of the Surviving Corporation and its Subsidiaries in
substantial conformance with the Pinnacle Benefit Plans in effect as of the
Effective Time, in replacement and substitution for the IFC Benefit Plans
(including, without limitation, non-qualified stock option agreements, incentive
stock option agreements, the IFC ESOP, deferred compensation plans and
agreements, supplemental retirement income agreements, severance agreements,
employment agreements and stock option and incentive plans benfitting current or
former directors, officers or employees of IFC or its Subsidiaries, or their
predecessors) which shall be cancelled, terminated or frozen
27
to the extent permitted by applicable law (the "New Benefit Plans"). Prior to
the Closing Date, Pinnacle and IFC shall cooperate in reviewing, evaluating and
analyzing the Pinnacle Benefit Plans and IFC Benefit Plans with a view towards
developing appropriate New Benefit Plans for the employees covered thereby
subsequent to the Merger in substantial conformance with the Pinnacle Benefit
Plans in effect as of the Effective Time, in replacement and substitution for
the IFC Benefit Plans which shall be cancelled, terminated or frozen to the
extent permitted by applicable law. It is the intention of Pinnacle and IFC to
develop New Benefit Plans, effective as of the Effective Time, which, among
other things, (i) treat similarly situated employees on a substantially
equivalent basis, taking into account all relevant factors, including, without
limitation, duties, geographic location, tenure, qualifications and abilities,
and (ii) do not discriminate between employees of the Surviving Corporation who
were covered by Pinnacle Benefit Plans, on the one hand, and those covered by
IFC Benefit Plans, on the other, prior to the Effective Time, but (iii) with the
overall view that the IFC Benefit Plans would be cancelled, terminated or
frozen, and replaced by the Pinnacle Benefit Plans for times following the
Effective Time to the extent permitted by applicable law.
(b) The foregoing notwithstanding, the Surviving Corporation agrees to honor
in accordance with their terms all benefits vested as of the date hereof under
the Pinnacle Benefit Plans or the IFC Benefit Plans or under other contracts,
arrangements, commitments, or understandings described in the Pinnacle
Disclosure Schedule and the IFC Disclosure Schedule.
(c) Nothing in this Section 6.7 shall be interpreted as preventing the
Surviving Corporation from amending, modifying or terminating any Pinnacle
Benefit Plans, IFC Benefit Plans, or other contracts, arrangements, commitments
or understandings, in accordance with their terms and applicable law.
6.8 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
(a) In the event of any threatened or actual claim, action, suit, proceeding
or investigation, whether civil, criminal or administrative, including, without
limitation, any such claim, action, suit, proceeding or investigation in which
any individual who is now, or has been at any time prior to the date of this
Agreement, or who becomes prior to the Effective Time, a director or officer or
employee of IFC or any of its Subsidiaries, including any entity specified in
the IFC Disclosure Schedule (the "Indemnified Parties"), is, or is threatened to
be, made a party based in whole or in part on, or arising in whole or in part
out of, or pertaining to (i) the fact that he is or was a director, officer or
employee of IFC, any of the IFC Subsidiaries or any entity specified in the IFC
Disclosure Schedule, or any of their respective predecessors or (ii) this
Agreement, the Option Agreements or any of the transactions contemplated hereby
or thereby, whether in any case asserted or arising before or after the
Effective Time, the parties hereto agree to cooperate and use their best efforts
to defend against and respond thereto. It is understood and agreed that after
the Effective Time, Pinnacle shall indemnify and hold harmless, as and to the
fullest extent permitted by law (and, as relates to acts or times prior to the
Effective Time, to the fullest extent permitted by law pertaining to IFC or any
of its Subsidiaries at such time, including the provisions of Section 11 of
IFC's Certificate of Incorporation), each such Indemnified Party against any
losses, claims, damages, liabilities, costs, expenses (including reasonable
attorney's fees and expenses in advance of the final disposition of any claim,
suit, proceeding or investigation to each Indemnified Party to the fullest
extent permitted by law upon receipt of any undertaking required by applicable
law), judgments, fines and amounts paid in settlement in connection with any
such threatened or actual claim, action, suit, proceeding or investigation, and
in the event of any such threatened or actual claim, action, suit, proceeding or
investigation (whether asserted of arising before or after the Effective Time),
the Indemnified Parties may retain counsel reasonably satisfactory to them after
consultation with Pinnacle; provided, however, that (A) Pinnacle shall have the
right to assume the defense thereof and upon such assumption Pinnacle shall not
be liable to any Indemnified Party for any legal expenses of other counsel or
any other expenses subsequently incurred by any Indemnified Party in connection
with the defense thereof, except that if Pinnacle elects not to assume such
defense or counsel for the Indemnified Parties reasonably advises the
Indemnified Parties that there are issues which raise conflicts of interest
between Pinnacle and the Indemnified Parties, the Indemnified Parties may retain
counsel reasonably satisfactory to them after
28
consultation with Pinnacle, and Pinnacle shall pay the reasonable fees and
expenses of such counsel for the Indemnified Parties, (B) Pinnacle shall be
obligated pursuant to this paragraph to pay for only one firm of counsel for all
Indemnified Parties, unless an Indemnified Party shall have reasonably
concluded, based on the advice of counsel, that in order to be adequately
represented, separate counsel is necessary for such Indemnified Party, in which
case, Pinnacle shall be obligated to pay for such separate counsel, (C) Pinnacle
shall not be liable for any settlement effected without its prior written
consent (which consent shall not be unreasonably withheld) and (D) Pinnacle
shall have no obligation hereunder to any Indemnified Party when and if a court
of competent jurisdiction shall ultimately determine, and such determination
shall have become final and nonappealable, that indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
law. Any Indemnified Party wishing to claim Indemnification under this Section
6.8, upon learning of any such claim, action, suit, proceeding or investigation,
shall notify Pinnacle thereof, provided that the failure to so notify shall not
affect the obligations of Pinnacle under this Section 6.8 except to the extent
such failure to notify materially prejudices Pinnacle. Pinnacle's obligations
under this Section 6.8 continue in full force and effect for a period of six
years from the Effective Time (or the period of the applicable statute of
limitations, if longer); provided, however, that all rights to indemnification
in respect of any claim (a "Claim") asserted or made within such period shall
continue until the final disposition of such Claim.
(b) Pinnacle shall use its best efforts to cause the individuals serving as
officers and directors of IFC, its Subsidiaries or any entity specified in the
IFC Disclosure Schedule immediately prior to the Effective Time to be covered
for a period of six (6) years from the Effective Time (or the period of the
applicable statute of limitations, if longer) by the directors' and officers'
liability insurance policy maintained by IFC or any of the IFC Subsidiaries
(provided that Pinnacle may substitute therefor policies of the same or
substantially similar coverage and amounts containing terms and conditions which
are not less advantageous in any material respect than such policy) with respect
to acts or omissions occurring prior to the Effective Time which were committed
by such officers and directors in their capacity as such; provided, however,
that in no event shall Pinnacle be required to expend more than 150% of the
current amount expended by IFC or any of the IFC Subsidiaries (the "Insurance
Amount") to maintain or procure insurance coverage pursuant hereto; and
provided, further, that if Pinnacle is unable to maintain or obtain the
insurance called for by this Section 6.8(b), Pinnacle shall use its best efforts
to obtain as much comparable insurance as available for the Insurance Amount.
(c) In the event Pinnacle or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Pinnacle
assume the obligations set forth in this Section 6.8.
(d) The provisions of this Section 6.8 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs and
representatives.
6.9 ADDITIONAL AGREEMENTS. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement (including, without limitation, any merger between a Subsidiary of
Pinnacle and a Subsidiary of IFC) or to vest the Surviving Corporation with full
title to all properties, assets, rights, approvals, immunities and franchises of
any of the parties to the Merger, the proper officers and directors of each
party to this Agreement and their respective Subsidiaries shall take all such
necessary action as may be reasonably requested by, and at the sole expense of,
Pinnacle.
6.10 ADVICE OF CHANGES. Pinnacle and IFC shall promptly advise the other
party of any change or event having a Material Adverse Effect on it or which it
believes would or would be reasonably likely to cause or constitute a material
breach of any of its representations, warranties or covenants contained herein.
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6.11 DIVIDENDS. After the date of this Agreement, each of Pinnacle and IFC
shall coordinate with the other the declaration of any dividends in respect of
Pinnacle Common Stock and IFC Common Stock and the record dates and payment
dates relating thereto, it being the intention of the parties hereto that
holders of Pinnacle Common Stock or IFC Common Stock shall not receive two
dividends, or fail to receive one dividend, for any quarter with respect to
their shares of Pinnacle Common Stock and/or IFC Common Stock and any shares of
Pinnacle Common Stock any such holder receives in exchange therefor in the
Merger.
6.12 NEGOTIATIONS WITH OTHER PARTIES. So long as this Agreement remains in
effect and no notice of termination has been given under this Agreement, neither
Pinnacle, on the one hand, nor IFC, on the other hand, shall authorize or
knowingly permit any of its representatives, directly or indirectly, to
entertain, solicit or encourage negotiations with any person or entity or any
group of persons or entities other than the other party to this Agreement or any
of its affiliates (a "Potential Acquiror") concerning any "Acquisition Proposal"
(as hereinafter defined) other than pursuant to this Agreement. The preceding
sentence shall not be construed to prohibit the Board of Directors of Pinnacle,
on the one hand, or IFC, on the other hand, from providing, or authorizing or
permitting their respective representatives to provide, to any person making an
unsolicited Acquisition Proposal, any information that is public or published
information or readily ascertainable from such information, or from discussing
and considering any such unsolicited Acquisition Proposal if it is advised in
writing by legal counsel that such actions are advisable under applicable law in
order to discharge their fiduciary duties to stockholders. As used in this
Agreement, "Acquisition Proposal" means any (i) proposal pursuant to which any
corporation, partnership, person or other entity or group, other than Pinnacle
or IFC, would acquire or participate in a merger or other business combination
involving Pinnacle or any of the Pinnacle Bank Subsidiaries, on the one hand, or
IFC or any of the IFC Bank Subsidiaries, on the other hand, directly or
indirectly; (ii) proposal by which any corporation, partnership, person or other
entity or group, other than Pinnacle or IFC, would acquire the right to vote 10%
or more of the capital stock of Pinnacle or any of the Pinnacle Bank
Subsidiaries, on the one hand, or IFC or any of the IFC Bank Subsidiaries, on
the other hand, entitled to vote thereon for the election of directors; (iii)
acquisition of 10% or more of the assets of Pinnacle or any of the Pinnacle Bank
Subsidiaries, on the one hand, or IFC or any of the IFC Bank Subsidiaries, on
the other hand, other than in the ordinary course of business; or (iv)
acquisition in excess of 10% of the outstanding capital stock of Pinnacle or any
of the Pinnacle Bank Subsidiaries, on the one hand, or IFC or any of the IFC
Bank Subsidiaries, on the other hand, other than as contemplated by this
Agreement.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement and the transactions
contemplated hereby shall have been approved and adopted by the respective
requisite affirmative votes of the holders of Pinnacle Common Stock and IFC
Common Stock entitled to vote thereon.
(b) NASDAQ LISTING. The shares of Pinnacle Common Stock which shall be
issued to the stockholders of IFC upon consummation of the Merger shall have
been authorized for trading and reporting on the NASDAQ, National Market
System, subject to official notice of issuance.
(c) OTHER APPROVALS. All regulatory approvals required to consummate
the transactions contemplated hereby shall have been obtained and shall
remain in full force and effect and all statutory waiting periods in respect
thereof shall have expired (all such approvals and the expiration of all
such waiting periods being referred to herein as the "Requisite Regulatory
Approvals").
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(d) S-4. The S-4 shall have become effective under the Securities Act
and no stop order suspending the effectiveness of the S-4 shall have been
issued and no proceedings for that purpose shall have been initiated or
threatened by the SEC.
(e) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No order, injunction or
decree issued by any court or agency of competent jurisdiction or other
legal restraint or prohibition (an "Injunction") preventing the consummation
of the Merger or any of the other transactions contemplated by this
Agreement shall be in effect. No statute, rule, regulation, order,
injunction or decree shall have been enacted, entered, promulgated or
enforced by any Governmental Entity which prohibits, materially restricts or
makes illegal consummation of the Merger.
(f) FEDERAL TAX OPINION. Pinnacle and IFC each shall have received an
opinion of their respective tax counsel, addressed to Pinnacle or IFC, as
the case may be, in form and substance reasonably satisfactory to Pinnacle
and IFC, dated as of the Effective Time, substantially to the effect that,
on the basis of facts, representations and assumptions set forth in such
opinion which are consistent with the state of facts existing at the
Effective Time:
(i) The Merger will constitute a tax free reorganization under
Section 368(a)(1)(A) of the Code and Pinnacle and IFC will each be a
party to the reorganization;
(ii) No gain or loss will be recognized by Pinnacle or IFC as a
result of the Merger;
(iii) No gain or loss will be recognized by the stockholders of IFC
who exchange their IFC Common Stock solely for Pinnacle Common Stock
pursuant to the Merger (except with respect to cash received in lieu of a
fractional share interest in Pinnacle Common Stock);
(iv) The tax basis of the Pinnacle Common Stock received by
stockholders who exchange all of their IFC Common Stock solely for
Pinnacle Common Stock in the Merger will be the same as the tax basis of
the IFC Common Stock surrendered in exchange therefor (reduced by any
amount allocable to a fractional share interest for which cash is
received); and
(v) The holding period of Pinnacle Common Stock received by
stockholders of IFC in the Merger will include the period during which
the shares of IFC Common Stock surrendered in exchange therefor were
held; provided, such IFC Common Stock was held as a capital asset by the
holder of such IFC Common Stock at the Effective Time. In rendering such
opinion, counsel may require and rely upon representations contained in
certificates of officers of Pinnacle, IFC and others.
(g) POOLING OF INTERESTS. Pinnacle and IFC shall each have received a
letter, effective as of the Effective Time, from their respective
independent accountants addressed to Pinnacle or IFC, as the case may be, to
the effect that the Merger will qualify for "pooling of interests"
accounting treatment.
7.2 CONDITIONS TO OBLIGATION OF PINNACLE. The obligation of Pinnacle to
effect the Merger is also subject to the satisfaction or waiver by Pinnacle at
or prior to the Effective Time of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of IFC set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and (except (i) to the extent such
representations and warranties speak as of an earlier date and (ii) for any
changes to the IFC Disclosure Schedule that are disclosed by IFC to Pinnacle
in the form of an updated IFC disclosure schedule delivered to Pinnacle as
of the Closing Date (the "Closing Date IFC Disclosure Schedule")) as of the
Closing Date as though made on and as of the Closing Date. Pinnacle shall
have received a certificate signed on behalf of IFC by the Chief Executive
Officer and the Chief Financial Officer of IFC to the foregoing effect, and
to which any Closing Date IFC Disclosure Schedule shall be appended.
31
(b) PERFORMANCE OF OBLIGATIONS OF IFC. IFC shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and Pinnacle shall have received
a certificate signed on behalf of IFC by the Chief Executive Officer and the
Chief Financial Officer of IFC to such effect.
(c) IFC RIGHTS REDEEMED. The IFC Rights shall have been redeemed at a
cost to IFC of not more than $0.01 (the "Redemption Price") per each of the
shares of the IFC Common Stock issued and outstanding, such that all of said
IFC Rights have been extinguished, terminated and cancelled, without any
right of exercise, and shall only represent the rights to receive the
Redemption Price in cash from IFC or the Surviving Corporation following the
Merger.
(d) COMFORT LETTERS. Pinnacle shall have received "comfort" letters
from Ernst & Young, L.L.P., dated (x) the effective date of the S-4 and (y)
not earlier than five (5) days preceding the Closing Date, in each case
substantially to the effect that: (i) based upon a review (and audit of
year-end statements) of IFC's consolidated financial statements dated as of
December 31, 1995, June 30, 1996, each subsequent year-end and quarter-end
and the most recent interim month-end consolidated financial statements of
IFC available prior to the date of any said letter, nothing has come to
their attention that has caused them to believe that any adjustments would
be required to be made to restate said financial statements in a manner
conforming to GAAP, other than such adjustments, if any, as are specifically
noted and disclosed, none of which adjustments shall be materially adverse;
(ii) they are independent public accountants with respect to IFC and the IFC
Subsidiaries within the meaning of the Securities Act and the Exchange Act
and the applicable published rules and regulations thereunder; (iii) in
their opinion, the audited consolidated financial statements of IFC examined
by them and included or incorporated by reference in the S-4 and the
prospectus and reported therein by them, comply as to form in all material
respects with the applicable accounting requirements of the Exchange Act,
the Securities Act and the applicable published rules and regulations
thereunder, as appropriate; (iv) on the basis of certain procedures and
inquiries including a reading of the latest available unaudited interim
consolidated financial statements of IFC, inquiries of officials of IFC
responsible for financial and accounting matters, and a reading of the
minutes of the Boards of Directors and stockholders of IFC and the IFC
Subsidiaries (which procedures and inquiries do not constitute an
examination made in accordance with generally accepted auditing standards
and would not necessarily reveal material adverse changes in the
consolidated financial position or results of operations of IFC), nothing
came to their attention that caused them to believe that (A) the unaudited
consolidated financial statements of IFC included or incorporated by
reference in the S-4 and the prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the
Exchange Act and the Securities Act, as appropriate, or that the unaudited
consolidated financial statements are not in conformity with GAAP applied on
a basis consistent with that of the audited consolidated financial
statements or that as of the most recent month-end preceding the Closing
Date there has been any material change in the capital stock of IFC, except
as a result of the exercise of employee stock options granted prior to June
30, 1996, or the IFC Subsidiaries or any increase in consolidated long-term
debt of IFC or the IFC Subsidiaries or any reduction in consolidated
stockholders' equity as compared with the amounts of those items set out in
the audited consolidated statement of condition at December 31, 1995 and
with any subsequent unaudited consolidated statement of condition included
or incorporated by reference in the S-4 and the prospectus, except for
changes and the amount of such reduction, if any, derived from IFC's
accounts and records, which are described in such letter or are set forth in
the S-4 and the prospectus, or (B) since December 31, 1995 any dividends
were paid on the IFC Common Stock except as described in such letter; and
(v) in addition to the limited procedures referred to in clause (iv) above,
they have carried out certain specified procedures with respect to certain
accounts or percentages and financial information which appear in the S-4
and the prospectus and which have been reasonably specified by Pinnacle, as
described in such letter.
32
(e) LEGAL OPINION. IFC shall have delivered to Pinnacle an opinion,
dated the Closing Date, of counsel for IFC, satisfactory to Pinnacle and its
counsel, to the effect set forth on Exhibit E. Such opinion shall also cover
such other matters incident to the transactions herein contemplated as
Pinnacle and its counsel may reasonably request. In rendering their opinion,
counsel to IFC may rely on certificates of officers of IFC, opinions of
other counsel, the authenticity of all signatures on documents believed to
be genuine and such other evidence as they may deem necessary or desirable.
(f) FAIRNESS OPINION. Pinnacle shall have received the favorable
opinion from The Chicago Corporation in connection with the deliberations of
its Board of Directors approving this Agreement and the Option Agreements
and confirmed at or about the time the S-4 is declared effective and the
Joint Proxy Statement is distributed that consummation of the Merger
transaction contemplated by this Agreement upon the terms and conditions
provided in this Agreement is fair to the stockholders of Pinnacle from a
financial point of view.
(g) NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred which has, or is likely to have, a Materially Adverse Effect on IFC
or upon the right of IFC or any of the IFC Subsidiaries to conduct their
businesses as presently conducted.
7.3 CONDITIONS TO OBLIGATION OF IFC. The obligation of IFC to effect the
Merger is also subject to the satisfaction or waiver by IFC at or prior to the
Effective Time of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Pinnacle set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and (except (i) to the
extent such representations and warranties speak as of an earlier date and
(ii) for any changes to the Pinnacle Disclosure Schedule that are disclosed
by Pinnacle to IFC in the form of an updated Pinnacle disclosure schedule
delivered to IFC as of the Closing Date (the "Closing Date Pinnacle
Disclosure Schedule")) as of the Closing Date as though made on and as of
the Closing Date. IFC shall have received a certificate signed on behalf of
Pinnacle by the Chief Executive Officer and the Chief Financial Officer of
Pinnacle to the foregoing effect, and to which any Closing Date Pinnacle
Disclosure Schedule shall be appended.
(b) PERFORMANCE OF OBLIGATIONS OF PINNACLE. Pinnacle shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and IFC shall
have received a certificate signed on behalf of Pinnacle by the Chief
Executive Officer and the Chief Financial Officer of Pinnacle to such
effect.
(c) COMFORT LETTERS. IFC shall have received "comfort" letters from
KPMG Peat Marwick, L.L.P., dated (x) the effective date of the S-4 and (y)
not earlier than five (5) days preceding the Closing Date, in each case
substantially to the effect that: (i) based upon a review (and audit of
year-end statements) of Pinnacle's consolidated financial statements dated
as of December 31, 1995, June 30, 1996, each subsequent year-end and
quarter-end and the most recent interim month-end consolidated financial
statements of Pinnacle available prior to the date of any said letter,
nothing has come to their attention that has caused them to believe that any
adjustments would be required to be made to restate said financial
statements in a manner conforming to GAAP, other than such adjustments, if
any, as are specifically noted and disclosed, none of which adjustments
shall be materially adverse; (ii) they are independent public accountants
with respect to Pinnacle and the Pinnacle Subsidiaries within the meaning of
the Securities Act and the Exchange Act and the applicable published rules
and regulations thereunder; (iii) in their opinion, the audited consolidated
financial statements of Pinnacle examined by them and included or
incorporated by reference in the S-4 and the prospectus and reported therein
by them, comply as to form in all material respects with the applicable
accounting requirements of the Exchange Act, the Securities Act and the
applicable published rules and regulations thereunder, as appropriate; (iv)
on the basis of certain procedures and inquiries including a reading of the
latest available unaudited interim consolidated financial statements of
Pinnacle, inquiries of officials of Pinnacle responsible for financial and
accounting matters,
33
and a reading of the minutes of the Boards of Directors and stockholders of
Pinnacle and the Pinnacle Subsidiaries (which procedures and inquiries do
not constitute an examination made in accordance with generally accepted
auditing standards and would not necessarily reveal material adverse changes
in the consolidated financial position or results of operations of
Pinnacle), nothing came to their attention that caused them to believe that
(A) the unaudited consolidated financial statements of Pinnacle included or
incorporated by reference in the S-4 and the prospectus do not comply as to
form in all material respects with the applicable accounting requirements of
the Exchange Act and the Securities Act, as appropriate, or that the
unaudited consolidated financial statements are not in conformity with GAAP
applied on a basis consistent with that of the audited consolidated
financial statements or that as of the most recent month-end preceding the
Closing Date there has been any material change in the capital stock of
Pinnacle, except as a result of the exercise of employee stock options
granted prior to June 30, 1996, or the Pinnacle Subsidiaries or any increase
in consolidated long-term debt of Pinnacle or the Pinnacle Subsidiaries or
any reduction in consolidated stockholders' equity as compared with the
amounts of those items set out in the audited consolidated statement of
condition at December 31, 1995 and with any subsequent unaudited
consolidated statement of condition included or incorporated by reference in
the S-4 and the prospectus, except for changes and the amount of such
reduction, if any, derived from Pinnacle's accounts and records, which are
described in such letter or are set forth in the S-4 and the prospectus, or
(B) since December 31, 1995 any dividends were paid on the Pinnacle Common
Stock except as described in such letter; and (v) in addition to the limited
procedures referred to in clause (iv) above, they have carried out certain
specified procedures with respect to certain accounts or percentages and
financial information which appear in the S-4 and the prospectus and which
have been reasonably specified by IFC, as described in such letter.
(d) LEGAL OPINION. Pinnacle shall have delivered to IFC an opinion,
dated the Closing Date, of counsel for Pinnacle, satisfactory to IFC and its
counsel, to the effect set forth on Exhibit F. Such opinion shall also cover
such other matters incident to the transactions herein contemplated as IFC
and its counsel may reasonably request. In rendering their opinion, counsel
to Pinnacle may rely on certificates of officers of Pinnacle, opinions of
other counsel, the authenticity of all signatures on documents believed to
be genuine and such other evidence as they may deem necessary or desirable.
(e) FAIRNESS OPINION. IFC shall have received the favorable opinion
from Sandler X'Xxxxx in connection with the deliberations of its Board of
Directors approving this Agreement and the Option Agreements and confirmed
at or about the time the S-4 is declared effective and the Joint Proxy
Statement is distributed that consummation of the Merger transaction
contemplated by this Agreement upon the terms and conditions provided in
this Agreement is fair to the stockholders of IFC from a financial point of
view.
(f) NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred which has, or is likely to have, a Materially Adverse Effect on
Pinnacle or upon the right of Pinnacle or any of the Pinnacle Subsidiaries
to conduct their businesses as presently conducted.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the matters presented in
connection with the Merger by the stockholders of Pinnacle or IFC:
(a) by mutual consent of Pinnacle and IFC in a written instrument, if
the Board of Directors of each so determines by a vote of a majority of the
members of its entire Board;
34
(b) by either the Board of Directors of Pinnacle or the Board of
Directors of IFC if any Governmental Entity which must grant a Requisite
Regulatory Approval has denied approval of the Merger and such denial has
become final and nonappealable or any Governmental Entity of competent
jurisdiction shall have issued a final nonappealable order permanently
enjoining or otherwise prohibiting the consummation of the transactions
contemplated by this Agreement;
(c) by either the Board of Directors of Pinnacle or the Board of
Directors of IFC if the Merger shall not have been consummated on or before
the first anniversary of the date of this Agreement, unless the failure of
the Closing (as defined in Section 9.1) to occur by such date shall be due
to the failure of the party seeking to terminate this Agreement to perform
or observe the covenants and agreements of such party set forth herein;
(d) by either the Board of Directors of Pinnacle or the Board of
Directors of IFC (provided that the terminating party is not then in
material breach of any representation, warranty, covenant or other agreement
contained herein) if there shall have been a material breach of any of the
covenants or agreements or any of the representations or warranties set
forth in this Agreement on the part of the other party, which breach is not
cured within forty-five (45) days following written notice to the party
committing such breach, or which breach, by its nature or timing, cannot be
cured prior to the Closing Date;
(e) by either Pinnacle or IFC if any approval of the stockholders of
Pinnacle or IFC required for the consummation of the Merger shall not have
been obtained by reason of the failure to obtain the required vote at a duly
held meeting of stockholders or at any adjournment or postponement thereof;
(f) by either Pinnacle or IFC if any of the conditions specified by
Article VII to the obligation of the terminating party have not been
satisfied on the Closing Date; or
(g) by Pinnacle if the Closing Date IFC Disclosure Schedule discloses
any change from the IFC Disclosure Schedule which has, or is likely to have,
a Material Adverse Effect on IFC or any of the IFC Subsidiaries; or by IFC
if the Closing Date Pinnacle Disclosure Schedule discloses any change from
the Pinnacle Disclosure Schedule which has, or is likely to have, a Material
Adverse Effect on Pinnacle or any of the Pinnacle Subsidiaries.
8.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
by either Pinnacle or IFC as provided in Section 8.1, this Agreement shall
forthwith become void and have no effect, and none of Pinnacle, IFC, any of
their respective Subsidiaries or any of the officers or directors of any of them
shall have any liability of any nature whatsoever hereunder, or in connection
with the transactions contemplated hereby, except that (i) Sections 6.2(b), 8.2,
9.2 and 9.3, shall survive any termination of this Agreement, and (ii)
notwithstanding anything to the contrary contained in this Agreement, neither
Pinnacle nor IFC shall be relieved or released from any liabilities or damages
arising out of its willful breach of any provision of this Agreement.
8.3 AMENDMENT. Subject to compliance with applicable law, this Agreement
may be amended by the parties hereto, by action taken or authorized by their
respective Boards of Directors, at any time before or after approval of the
matters presented in connection with the Merger by the stockholders of Pinnacle
or IFC; provided, however, that after any approval of the transactions
contemplated by this Agreement by the respective stockholders of Pinnacle or
IFC, there may not be, without further approval of such stockholders, any
amendment of this Agreement which changes the amount or the form of the
consideration to be delivered to the holders of IFC Common Stock hereunder other
than as contemplated by this Agreement. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties hereto.
8.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any
35
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein; provided, however, that after any
approval of the transactions contemplated by this Agreement by the respective
stockholders of Pinnacle or IFC, there may not be, without further approval of
such stockholders, any extension or waiver of this Agreement or any portion
thereof which reduces the amount or changes the form of the consideration to be
delivered to the holders of IFC Common Stock hereunder other than as
contemplated by this Agreement. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party, but such extension or waiver or
failure to insist on strict compliance with an obligation, covenant, agreement
or condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
ARTICLE IX
GENERAL PROVISIONS
9.1 CLOSING. Subject to the terms and conditions of this Agreement and the
Option Agreements, the closing of the Merger (the "Closing") will take place at
10:00 a.m. on a date and at a place to be specified by the parties, which shall
be no later than five (5) business days after the satisfaction or waiver
(subject to applicable law) of the latest to occur of the conditions set forth
in Article VII hereof, unless extended by mutual agreement of the parties (the
"Closing Date").
9.2 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. None of the
representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement (other than pursuant to the
Option Agreements, which shall terminate in accordance with their terms) shall
survive the Effective Time, except for those covenants and agreements contained
herein and therein which by their terms apply in whole or in part after the
Effective Time.
9.3 EXPENSES. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expense; provided, however, that the costs and expenses of
printing and mailing the Joint Proxy Statement, and all filing and other fees
paid to the SEC in connection with the Merger, shall be borne equally by
Pinnacle and IFC.
9.4 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt requested)
or delivered by an express courier (with confirmation) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to Pinnacle to:
Pinnacle Financial Services, Inc.
000 Xxxxxxxx Xxxxxx
Xx. Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Chairman and CEO
Fax: (000) 000-0000
with copies to:
Miller, Canfield, Paddock and Stone, P.L.C.
0000 X. Xxxxxxxx Xxx., Xxxxx 000
Xxxxxxxxxx Xxxxx, Xxxxxxxx 00000
Attention: J. Xxxxx Xxxxxxx, Esq.
Fax: (000) 000-0000
36
and
(b) if to IFC, to:
Indiana Federal Corporation
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, Chairman and CEO
Fax: (000) 000-0000
with copies to:
Silver, Xxxxxxxx & Taff, L.L.P.
0000 Xxx Xxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000-0000
Attention: Xxxxx X. Xxxxxxxxx Esq.
Fax: (000) 000-0000
9.5 INTERPRETATION. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". No provision of this Agreement shall be construed to require
Pinnacle, IFC or any of their respective Subsidiaries or affiliates to take any
action which would violate any applicable law, rule or regulation.
9.6 COUNTERPARTS. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
9.7 ENTIRE AGREEMENT. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof other than the Option
Agreements and the Confidentiality Agreement.
9.8 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without regard to any
applicable conflicts of law.
9.9 SEVERABILITY. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
9.10 PUBLICITY. Except as otherwise required by applicable law or the
rules of NASDAQ, neither Pinnacle nor IFC shall, or shall permit any of its
Subsidiaries to, issue or cause the publication of any press release or other
public announcement with respect to, or otherwise make any public statement
concerning, the transactions contemplated by this Agreement without the consent
of the other party, which consent shall not be unreasonably withheld.
9.11 ASSIGNMENT; THIRD PARTY BENEFICIARIES. Neither this Agreement nor any
of the rights, interests or obligations shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
37
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns. Except as otherwise specifically
provided in Section 6.8, this Agreement (including the documents and instruments
referred to herein) is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
IN WITNESS WHEREOF, Pinnacle and IFC have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
PINNACLE FINANCIAL SERVICES, INC.
By:
-----------------------------------------
Xxxxxxx X. Xxxxxxx
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
INDIANA FEDERAL CORPORATION
By:
-----------------------------------------
Xxxxxx X. Xxxxx
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
38
SCHEDULE OF EXHIBITS
Exhibit A -- Pinnacle Option Agreement
Exhibit B -- IFC Option Agreement
Exhibit C -- Bank Merger Agreement
Exhibit D -- Affiliate Letter Agreement
Exhibit E -- Opinion of IFC Counsel
Exhibit F -- Opinion of Pinnacle Counsel
39
