AGREEMENT AND PLAN OF MERGER
by and between
CNB BANCSHARES, INC.,
an Indiana corporation,
and
PINNACLE FINANCIAL SERVICES, INC.,
a Michigan corporation.
Dated as of October 14, 1997.
TABLE OF CONTENTS
PAGE
ARTICLE ONE TERMS OF MERGER AND CLOSING. . . . . . . . . . . . . . . . 1
Section 1.01. Merger. . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Merging Corporation . . . . . . . . . . . . . . . . . 2
Section 1.03. Surviving Corporation . . . . . . . . . . . . . . . . 2
Section 1.04. Effect of Merger. . . . . . . . . . . . . . . . . . . 2
Section 1.05. Conversion of Pinnacle Common . . . . . . . . . . . . 2
Section 1.06. Share Adjustments . . . . . . . . . . . . . . . . . . 3
Section 1.07. Closing . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.08. Exchange Procedures; Surrender of Certificates. . . . 3
Section 1.09. Closing Date. . . . . . . . . . . . . . . . . . . . . 4
Section 1.10. Closing Deliveries. . . . . . . . . . . . . . . . . . 4
Section 1.11. Disclosure Schedule; Standard . . . . . . . . . . . . 6
ARTICLE TWO REPRESENTATIONS AND WARRANTIES OF PINNACLE . . . . . . . . 7
Section 2.01. Organization and Capital Stock. . . . . . . . . . . . 7
Section 2.02. Authorization; No Defaults. . . . . . . . . . . . . . 8
Section 2.03. Subsidiaries. . . . . . . . . . . . . . . . . . . . . 8
Section 2.04. Financial Information . . . . . . . . . . . . . . . . 9
Section 2.05. Absence of Changes. . . . . . . . . . . . . . . . . . 10
Section 2.06. Regulatory Enforcement Matters. . . . . . . . . . . . 10
Section 2.07. Tax Matters . . . . . . . . . . . . . . . . . . . . . 10
Section 2.08. Litigation. . . . . . . . . . . . . . . . . . . . . . 11
Section 2.09. Employment Agreements . . . . . . . . . . . . . . . . 11
Section 2.10. Reports . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.11. Employee Matters and ERISA. . . . . . . . . . . . . . 12
Section 2.12. Title to Properties; Insurance. . . . . . . . . . . . 13
Section 2.13. Environmental Matters . . . . . . . . . . . . . . . . 14
Section 2.14. Compliance with Law . . . . . . . . . . . . . . . . . 15
Section 2.15. Brokerage . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.16. Non-Banking Activities of Pinnacle and Subsidiaries . 15
Section 2.17. Trust Administration. . . . . . . . . . . . . . . . . 15
Section 2.18. Pooling of Interests; Tax-Free Reorganization . . . . 15
Section 2.20. Material Contracts and Agreements . . . . . . . . . . 15
Section 2.21. No Undisclosed Liabilities. . . . . . . . . . . . . . 16
Section 2.22. Statements True and Correct . . . . . . . . . . . . . 16
Section 2.23. State Takeover Laws . . . . . . . . . . . . . . . . . 16
Section 2.24. Fair Lending; Community Reinvestment Act. . . . . . . 16
ARTICLE THREE REPRESENTATIONS AND WARRANTIES OF CNB. . . . . . . . . . . 17
Section 3.01. Organization and Capital Stock. . . . . . . . . . . . 17
Section 3.02. Authorization . . . . . . . . . . . . . . . . . . . . 17
Section 3.03. Subsidiaries. . . . . . . . . . . . . . . . . . . . . 17
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Section 3.04. Financial Information . . . . . . . . . . . . . . . . 18
Section 3.05. Absence of Changes. . . . . . . . . . . . . . . . . . 18
Section 3.06. Litigation. . . . . . . . . . . . . . . . . . . . . . 18
Section 3.07. Reports . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.08. Compliance With Law . . . . . . . . . . . . . . . . . 19
Section 3.09. Pooling of Interests; Tax-Free Reorganization . . . . 19
Section 3.10. Statements True and Correct . . . . . . . . . . . . . 19
Section 3.11. Regulatory Enforcement Matters. . . . . . . . . . . . 19
Section 3.12. Tax Matters . . . . . . . . . . . . . . . . . . . . . 19
Section 3.13. Brokerage . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.14. State Takeover Laws . . . . . . . . . . . . . . . . . 20
Section 3.15. No Undisclosed Liabilities. . . . . . . . . . . . . . 20
ARTICLE FOUR AGREEMENTS OF PINNACLE . . . . . . . . . . . . . . . . . . 20
Section 4.01. Business in Ordinary Course . . . . . . . . . . . . . 20
Section 4.02. Breaches. . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.03. Submission to Shareholders. . . . . . . . . . . . . . 23
Section 4.04. Consents to Contracts and Leases. . . . . . . . . . . 23
Section 4.05. Consummation of Agreement . . . . . . . . . . . . . . 24
Section 4.06. Environmental Reports . . . . . . . . . . . . . . . . 24
Section 4.07. Restriction on Resales. . . . . . . . . . . . . . . . 24
Section 4.08. Access to Information . . . . . . . . . . . . . . . . 25
Section 4.09. Subsidiary Bank Merger. . . . . . . . . . . . . . . . 25
Section 4.10. Plan of Merger. . . . . . . . . . . . . . . . . . . . 25
Section 4.11. Comfort Letters . . . . . . . . . . . . . . . . . . . 25
Section 4.12. Restated Pinnacle Financial Statements. . . . . . . . 25
ARTICLE FIVE AGREEMENTS OF CNB . . . . . . . . . . . . . . . . . . . . . 26
Section 5.01. Regulatory Approvals and Registration Statement . . . 26
Section 5.02. Breaches. . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.03. Consummation of Agreement . . . . . . . . . . . . . . 27
Section 5.05. Directors and Officers' Liability Insurance and
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.06. Employee Benefits . . . . . . . . . . . . . . . . . . 28
Section 5.07. Board Composition . . . . . . . . . . . . . . . . . . 29
Section 5.08. Access to Information . . . . . . . . . . . . . . . . 29
Section 5.09. Comfort Letters . . . . . . . . . . . . . . . . . . . 30
Section 5.10. Restriction on Resales. . . . . . . . . . . . . . . . 30
ARTICLE SIX CONDITIONS PRECEDENT TO MERGER . . . . . . . . . . . . . . 30
Section 6.01. Conditions to CNB's Obligations . . . . . . . . . . . 30
Section 6.02. Conditions to Pinnacle's Obligations. . . . . . . . . 32
ARTICLE SEVEN TERMINATION OR ABANDONMENT . . . . . . . . . . . . . . . . 33
Section 7.01. Mutual Agreement. . . . . . . . . . . . . . . . . . . 33
Section 7.02. Breach of Agreements. . . . . . . . . . . . . . . . . 33
Section 7.03. Environmental Reports . . . . . . . . . . . . . . . . 33
Section 7.04. Failure of Conditions . . . . . . . . . . . . . . . . 33
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Section 7.05. Regulatory Approval Denial; Burdensome Condition. . . 33
Section 7.06. Shareholder Approval Denial; Withdrawal/Modification of
Board Recommendation. . . . . . . . . . . . . . . . . . . . . . 34
Section 7.07. Regulatory Enforcement Matters. . . . . . . . . . . . 34
Section 7.08. Fall-Apart Date . . . . . . . . . . . . . . . . . . . 34
Section 7.09. Possible Purchase Price Adjustment. . . . . . . . . . 34
ARTICLE EIGHT GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.01. Confidential Information. . . . . . . . . . . . . . . 36
Section 8.02. Publicity . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.03. Return of Documents . . . . . . . . . . . . . . . . . 36
Section 8.04. Notices . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.05. Liabilities and Expenses. . . . . . . . . . . . . . . 37
Section 8.06. Nonsurvival of Representations, Warranties and
Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.07. Entire Agreement. . . . . . . . . . . . . . . . . . . 38
Section 8.08. Headings and Captions . . . . . . . . . . . . . . . . 38
Section 8.09. Waiver, Amendment or Modification . . . . . . . . . . 38
Section 8.10. Rules of Construction . . . . . . . . . . . . . . . . 38
Section 8.11. Counterparts. . . . . . . . . . . . . . . . . . . . . 38
Section 8.12. Successors and Assigns. . . . . . . . . . . . . . . . 39
Section 8.13. Severability. . . . . . . . . . . . . . . . . . . . . 39
Section 8.14. Governing Law; Assignment . . . . . . . . . . . . . . 39
Section 8.15. Enforcement of Agreement. . . . . . . . . . . . . . . 39
Section 8.16. Termination Fee . . . . . . . . . . . . . . . . . . . 39
EXHIBIT 1.01 - Form of Pinnacle Option Agreement
EXHIBIT 1.10(a) - Pinnacle's Legal Opinion Matters
EXHIBIT 1.10(b) - CNB's Legal Opinion Matters
EXHIBIT 4.07 - Form of Affiliate's Letter
EXHIBIT 7.09 - Index Group
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made as of
October 14, 1997, by and between CNB BANCSHARES, INC., an Indiana corporation
("Pinnacle"), and PINNACLE FINANCIAL SERVICES, INC., a Michigan corporation
("CNB").
RECITALS
A. The Boards of Directors of CNB and Pinnacle have approved, and deem it
advisable and in the best interests of their respective shareholders to
consummate, the business combination transaction provided for herein in which
Pinnacle shall, subject to the terms and conditions set forth herein, merge with
and into CNB (the "Merger").
B. The Boards of Directors of CNB and Pinnacle have each determined that the
Merger and the other transactions contemplated by this Agreement are consistent
with, and in furtherance of, their respective business strategies and goals.
C. Concurrently with the execution and delivery of this Agreement, and as a
condition and inducement to CNB's willingness to enter into this Agreement, CNB
and Pinnacle have executed a Stock Option Agreement (the "Pinnacle Option
Agreement"), dated as of the date hereof and in the form attached hereto as
Exhibit 1.01, pursuant to which Pinnacle has granted CNB an option exercisable
upon the occurrence of certain events.
D. For federal income tax purposes, it is intended that the Merger shall
constitute a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), and, as such, shareholders of
Pinnacle will receive certain federal income tax-deferral benefits with respect
to shares of CNB received in the Merger. This Agreement shall constitute a
"plan of reorganization" for purposes of the Code.
E. For accounting purposes, it is intended that the Merger shall be accounted
for under the "pooling of interests" method of accounting.
F. CNB and Pinnacle desire to make certain representations, warranties and
agreements in connection with the Merger and also to prescribe certain
conditions to the Merger.
G. In consideration of the foregoing and the respective representations,
warranties, covenants, and agreements set forth herein and in the Pinnacle
Option Agreement, CNB and Pinnacle hereby agree as follows:
ARTICLE ONE
TERMS OF MERGER AND CLOSING
SECTION 1.01. MERGER. Pursuant to the terms and provisions set forth
herein and the Indiana Business Corporation Law (the "IBCL") and the Michigan
Business Corporation Act (the "MBCA"), Pinnacle shall merge with and into CNB.
SECTION 1.02. MERGING CORPORATION. Pinnacle shall be the merging
corporation under the Merger and its corporate identity and existence, separate
and apart from CNB, shall cease on consummation of the Merger.
SECTION 1.03. SURVIVING CORPORATION. CNB shall be the surviving
corporation in the Merger. No changes in the Articles of Incorporation of CNB
shall be effected by the Merger.
SECTION 1.04. EFFECT OF MERGER. The Merger shall have all of the effects
provided for herein and the IBCL and the MBCA.
SECTION 1.05. CONVERSION OF PINNACLE COMMON.
(a) At the Effective Time (as defined in Section 1.09 hereof), by virtue
of the Merger and without any action on the part of CNB, Pinnacle or their
respective shareholders, each share of common stock, no par value per share, of
Pinnacle (the "Pinnacle Common") issued and outstanding immediately prior to the
Effective Time (other than shares of Pinnacle Common held in the treasury of
Pinnacle or by any direct or indirect subsidiary of Pinnacle) shall be converted
into the right to receive 1.0365 shares (the "Conversion Ratio") of common stock
of CNB, stated value $1.00 per share (the "CNB Common"). The Conversion Ratio
shall be subject to adjustment as set forth in Sections 1.06 and 7.09 hereof.
(b) The shares of CNB Common to be issued pursuant to Section 1.05(a),
together with any cash payment in lieu of fractional shares, as provided below
in this Section 1.05(b), is referred to herein as the "Merger Consideration."
No fractional shares of CNB Common shall be issued and, in lieu thereof, holders
of shares of Pinnacle Common who would otherwise be entitled to a fractional
share interest (after taking into account all shares of Pinnacle Common held by
such holder) shall be paid an amount in cash equal to the product of such
fractional share interest and the closing price of a share of CNB Common as
reported in THE WALL STREET JOURNAL (Midwest Edition) on the New York Stock
Exchange ("N.Y.S.E.") trading day immediately preceding the date on which the
Effective Time occurs.
(c) At the Effective Time, all of the shares of Pinnacle Common, by virtue
of the Merger and without any action on the part of the holders thereof, shall
no longer be outstanding and shall be canceled and retired and shall cease to
exist, and each holder of any certificate or certificates which immediately
prior to the Effective Time represented outstanding shares of Pinnacle Common
(the "Certificates") shall thereafter cease to have any rights with respect to
such shares, except the right of such holders to receive, without interest, the
Merger Consideration upon the surrender of such Certificate or Certificates in
accordance with Section 1.08 hereof.
(d) At the Effective Time, each share of Pinnacle Common, if any, held in
the treasury of Pinnacle or by any direct or indirect subsidiary of Pinnacle
(other than shares held in trust accounts for the benefit of others or in other
fiduciary, nominee or similar capacities and shares held by Pinnacle or any of
its subsidiaries in respect to a debt previously contracted) immediately prior
to the Effective Time shall be canceled.
(e) Each share of CNB Common outstanding immediately prior to the
Effective Time shall remain outstanding unaffected by the Merger.
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SECTION 1.06. SHARE ADJUSTMENTS. If between the date hereof and the
Effective Time a share of CNB Common shall be changed into a different number of
shares of CNB Common or a different class of shares (a "Share Adjustment") by
reason of reclassification, recapitalization, splitup, exchange of shares or
readjustment, or if a stock dividend thereon shall be declared with a record
date within such period, then the number of shares of CNB Common into which a
share of Pinnacle Common shall be converted pursuant to Section 1.05(a) hereof
shall be appropriately and proportionately adjusted so that each shareholder of
Pinnacle shall be entitled to receive such number of shares of CNB Common as
such shareholder would have received pursuant to such Share Adjustment had the
record date therefor been immediately following the Effective Time of the
Merger. In the event that the sum of (i) the number of shares of Pinnacle
Common presented for exchange pursuant to Section 1.08 hereof or otherwise
issued and outstanding at the Effective Time, and (ii) the number of shares of
Pinnacle Common issuable upon the exercise of options or warrants (whether
pursuant to Pinnacle Stock Options (as defined in Section 5.04 hereof) or
otherwise, including to the extent permitted under Section 4.01(b)(i) hereof) as
of the Effective Time, shall be greater than the sum of (x) the number of shares
of Pinnacle Common represented in Section 2.01(b) hereof as being outstanding as
of the date hereof, and (y) the number of shares of Pinnacle Common issuable
upon the exercise of Pinnacle Stock Options represented in Section 2.01(b)
hereof as being outstanding as of the date hereof or granted after April 30,
1998, in accordance with Section 4.01(b)(i) hereof, then the Conversion Ratio
shall be appropriately and proportionately decreased to take into account such
additional issued and outstanding, and issuable, shares of Pinnacle Common.
SECTION 1.07. CLOSING. The closing of the Merger (the "Closing") shall
take place at a location mutually agreeable to the parties at 10:00 a.m.,
Central Time, on the Closing Date described in Section 1.09 hereof.
SECTION 1.08. EXCHANGE PROCEDURES; SURRENDER OF CERTIFICATES.
(a) The Citizens National Bank of Evansville shall act as Exchange Agent
in the Merger (the "Exchange Agent").
(b) As soon as reasonably practicable after the Effective Time, but in no
event later than ten (10) business days after the Closing Date, the Exchange
Agent shall mail to each record holder of any Certificate or Certificates whose
shares were converted into the right to receive the Merger Consideration, a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon proper delivery
of the Certificates to the Exchange Agent and shall be in such form and have
such other provisions as CNB may reasonably specify) (each such letter, the
"Merger Letter of Transmittal") and instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration. Upon
surrender to the Exchange Agent of a Certificate, together with a Merger Letter
of Transmittal duly executed and any other required documents, the holder of
such Certificate shall be entitled to receive in exchange therefor solely the
Merger Consideration, plus dividends paid with respect to the Merger
Consideration having a record date after the Effective Time as provided in
Section 1.08(d) hereof. No interest on the Merger Consideration issuable upon
the surrender of the Certificates shall be paid or accrued for the benefit of
holders of Certificates. If the Merger Consideration is to be issued to a
person other than a person in whose name a surrendered Certificate is
registered, it shall be a condition of issuance that the surrendered Certificate
shall be properly endorsed or otherwise in proper form for transfer and that the
person requesting such issuance
3
shall pay to the Exchange Agent any required transfer taxes or other taxes or
establish to the satisfaction of the Exchange Agent that such tax has been
paid or is not applicable.
(c) Notwithstanding anything to the contrary contained herein, no Merger
Consideration shall be delivered to a person who is an "affiliate" (as such term
is used in Section 4.07 hereof) of Pinnacle unless such "affiliate" shall have
theretofore executed and delivered to CNB the agreement referred to in
Section 4.07 hereof.
(d) No dividends that are otherwise payable on shares of CNB Common
constituting the Merger Consideration shall be paid to persons entitled to
receive such shares of CNB Common until such persons surrender their
Certificates. Upon such surrender, there shall be paid to the person in whose
name the shares of CNB Common shall be issued any dividends which shall have
become payable with respect to such shares of CNB Common (without interest and
less the amount of taxes, if any, which may have been imposed thereon), between
the Effective Time and the time of such surrender.
(e) In the event that any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by CNB in its
sole discretion, the posting by such person of a bond in such amount as CNB may
determine is reasonably necessary as indemnity against any claim that may be
made against it with respect to such Certificate, the Exchange Agent shall issue
in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration deliverable in respect thereof pursuant hereto.
(f) At or after the Effective Time there shall be no transfers on the
stock transfer books of Pinnacle of any shares of Pinnacle Common. If, after
the Effective Time, Certificates are presented for transfer, they shall be
cancelled and exchanged for the Merger Consideration as provided in, and subject
to the provisions of, this Section 1.08.
SECTION 1.09. CLOSING DATE. At CNB's election, the Closing shall take
place on (i) the last business day of, or (ii) the first business day of the
month following, or (iii) the last business day of the earliest month which is
the second month of a calendar quarter following, in each case, the month during
which each of the conditions in Sections 6.01(d) and 6.02(d) hereof is satisfied
or waived by the appropriate party or on such other date after such satisfaction
or waiver as Pinnacle and CNB may agree (the "Closing Date"). The Merger shall
be effective upon the later to occur of filing of Articles of Merger with the
Secretary of State of the State of Indiana and the filing of a Certificate of
Merger with the Department of Consumer and Industry Services of the State of
Michigan (the "Effective Time"), which the parties shall use their best efforts
to cause to occur on the Closing Date.
SECTION 1.10. CLOSING DELIVERIES.
(a) At the Closing, Pinnacle shall deliver to CNB:
(i) a certified copy of the Articles of Incorporation and Bylaws of
Pinnacle and the Subsidiary Bank (as defined in Section 2.04 hereof); and
(ii) a Certificate signed by an appropriate officer of Pinnacle
stating that, to the best knowledge and belief of such officer, (A) each of
the representations and warranties contained in Article Two hereof (subject
to the standard in Section 1.11 hereof) is true and correct at the time
4
of the Closing with the same force and effect as if such representations
and warranties had been made at Closing, and (B) all of the conditions set
forth in Section 6.01(b) hereof have been satisfied or waived as provided
therein; and
(iii) a certified copy of the resolutions of Pinnacle's Board of
Directors and shareholders as required for valid approval of the execution
of this Agreement and the consummation of the Merger and the other
transactions contemplated by this Agreement; and
(iv) Certificate of the Department of Consumer and Industry Services
of the State of Michigan, dated a recent date, stating that Pinnacle is in
good standing; and
(v) Articles of Merger and Certificate of Merger executed by
Pinnacle, reflecting the terms and provisions hereof and in proper form for
filing with the Secretary of State of the State of Indiana and the
Department of Consumer and Industry Services of the State of Michigan,
respectively, in order to cause the Merger to become effective pursuant to
the IBCL and the MBCA; and
(vi) a legal opinion from counsel for Pinnacle, in form reasonably
acceptable to CNB's counsel, opining with respect to the matters listed on
Exhibit 1.10(a) hereto.
(b) At the Closing, CNB shall deliver to Pinnacle:
(i) a Certificate signed by an appropriate officer of CNB stating
that, to the best knowledge and belief of such officer, (A) each of the
representations and warranties contained in Article Three hereof (subject
to the standard in Section 1.11 hereof) is true and correct at the time of
the Closing with the same force and effect as if such representations and
warranties had been made at Closing, and (B) all of the conditions set
forth in Section 6.02(b) and 6.02(d) hereof (but excluding the approval of
Pinnacle's shareholders) have been satisfied or waived as provided therein;
and
(ii) a certified copy of the resolutions of CNB's Board of Directors
and shareholders, as required for valid approval of the execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement; and
(iii) a legal opinion from counsel for CNB, in form reasonable
acceptable to Pinnacle's counsel, opining with respect to the matters
listed on Exhibit 1.12(b) hereto; and
(iv) a certified copy of the Articles of Incorporation and Bylaws of
CNB; and
(v) Certificate of the Secretary of State of the State of Indiana,
dated a recent date, stating that CNB is in good standing; and
(vi) Articles of Merger and Certificate of Merger executed by CNB,
reflecting the terms and provisions hereof and in proper form for filing
with the Secretary of State of the State of Indiana and the Department of
Consumer and Industry Services of the State of Michigan, respectively, in
order to cause the Merger to become effective pursuant to the IBCL and the
MBCA; and
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(vii) Evidence that CNB shall have delivered the Merger
Consideration to the Exchange Agent for delivery to the shareholders of
Pinnacle as contemplated by Section 1.08 hereof.
SECTION 1.11. DISCLOSURE SCHEDULE; STANDARD.
(a) Pinnacle has delivered to CNB a confidential schedule (the "Disclosure
Schedule"), executed by both Pinnacle and CNB concurrently with the delivery and
execution hereof, setting forth, among other things, items the disclosure of
which shall be necessary or appropriate either in response to an express
disclosure requirement contained in a provision hereof or as an exception to one
or more representations or warranties contained in Article Two hereof; PROVIDED,
that (a) no such item shall be required to be set forth in the Disclosure
Schedule as an exception to a representation or warranty if its absence would
not be reasonably likely to result in the related representation or warranty
being deemed untrue or incorrect under the standard established by Section
1.11(b) hereof, and (b) the mere inclusion of an item in the Disclosure Schedule
as an exception to a representation or warranty shall not be deemed an admission
by Pinnacle that such item represents a material exception or fact, event or
circumstance or that such item is reasonably likely to result in a Material
Adverse Effect.
(b) No representation or warranty of Pinnacle contained in Article Two
hereof or CNB contained in Article Three hereof shall be deemed untrue or
incorrect, and Pinnacle and CNB, as the case may be, shall not be deemed to have
breached a representation or warranty, as a consequence of the existence of any
fact, event or circumstance unless such fact, circumstance or event,
individually or taken together with all other facts, events or circumstances
inconsistent with any representation or warranty contained in Article Two
hereof, in the case of Pinnacle, or Article Three hereof, in the case of CNB,
has had or is reasonably likely to have a Material Adverse Effect (as defined
below in this Section 1.11(b)) on the party making such representation or
warranty. As used herein, the term "Material Adverse Effect" means, with
respect to Pinnacle or CNB, any effect that (i) is, or is reasonably expected to
be, material and adverse to the financial position, results of operations or
business of Pinnacle and its subsidiaries taken as a whole, or CNB and its
subsidiaries taken as a whole, respectively, or (ii) would materially impair the
ability of either Pinnacle or CNB to perform its obligations under this
Agreement or otherwise materially threaten or materially impede the consummation
of the Merger and the other transactions contemplated by this Agreement;
PROVIDED, HOWEVER, that Material Adverse Effect shall not be deemed to include
the impact of (a) changes in banking and similar laws of general applicability
or interpretations thereof by courts or governmental authorities, (b) changes in
generally accepted accounting principles or regulatory accounting requirements
applicable to banks and their holding companies generally, and (c) any
modifications or changes to valuation or reserve policies and practices in
connection with or in anticipation of the Merger or restructuring charges taken
in connection with the Merger, in each case in accordance with generally
accepted accounting principles, or restructuring charges taken by Pinnacle in
connection with its prior acquisitions of Indiana Financial Corporation ("IFC")
and CB Bancorp, Inc. ("CBI"), as included in the financial statements included
in Pinnacle's Current Report on Form 8-K/A, dated October 14, 1997, as currently
on file with the Securities and Exchange Commission (the "S.E.C.").
(c) Pinnacle shall be permitted to update and supplement the Disclosure
Schedule so as to disclose exceptions to one or more representations or
warranties contained in Article Two hereof which shall have arisen between the
date hereof and the Closing Date; PROVIDED, HOWEVER, that, anything herein to
the contrary notwithstanding, the exceptions and other information set forth on
any such updated or
6
supplemented Disclosure Schedule shall not be taken into consideration in
determining, for purposes of this Agreement, whether the condition set forth
in Section 6.01(a) hereof shall have been satisfied.
ARTICLE TWO
REPRESENTATIONS AND WARRANTIES OF PINNACLE
Subject to Section 1.11 hereof and except as disclosed in a Section of the
Disclosure Schedule corresponding to the relevant Section in this Article Two,
Pinnacle hereby makes the following representations and warranties:
SECTION 2.01. ORGANIZATION AND CAPITAL STOCK.
(a) Pinnacle is a corporation duly organized, validly existing and in good
standing under the laws of the State of Michigan and has the corporate power to
own all of its property and assets, to incur all of its liabilities and to carry
on its business as now being conducted. Pinnacle is a bank holding company
registered with the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") under the Bank Holding Company Act of 1956, as amended
(the "B.H.C.A."). True, complete and correct copies of the Articles of
Incorporation and Bylaws of Pinnacle, as amended and as in effect on the date of
this Agreement, have been previously made available to CNB by Pinnacle.
(b) The authorized capital stock of Pinnacle consists only of 15,000,000
shares of Pinnacle Common, of which, as of the date hereof, 12,339,408 shares
are issued and outstanding. All of the issued and outstanding shares of
Pinnacle Common are duly and validly issued and outstanding and are fully paid
and non-assessable and free of preemptive rights. None of the outstanding
shares of Pinnacle Common has been issued in violation of any preemptive rights
of the current or past shareholders of Pinnacle. As of the date hereof,
Pinnacle had outstanding employee stock options representing the right to
acquire not more than 435,382 shares of Pinnacle Common pursuant to the Stock
Option Plans (as defined in Section 5.04 hereof). To the best knowledge of
Pinnacle, each Certificate issued by Pinnacle in replacement of any Certificate
theretofore issued by it which was claimed by the record holder thereof to have
been lost, stolen or destroyed was issued by Pinnacle only upon receipt of an
affidavit of lost stock certificate and indemnity agreement of such shareholder
indemnifying Pinnacle against any claim that may be made against it on account
of the alleged loss, theft or destruction of any such Certificate or the
issuance of such replacement Certificate.
(c) Except as set forth in subsection 2.01(b) above and except for the
Pinnacle Option Agreement and as permitted under Section 4.01(b)(i) hereof, (i)
there are no shares of capital stock or other equity securities of Pinnacle
outstanding and no outstanding options, warrants, rights to subscribe for,
calls, or commitments of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, shares of Pinnacle Common or other
capital stock of Pinnacle or contracts, commitments, understandings or
arrangements by which Pinnacle is or may be obligated to issue additional shares
of its capital stock or options, warrants or rights to purchase or acquire any
additional shares of its capital stock, and (ii) there are no outstanding stock
appreciation, phantom stock or similar rights.
7
(d) The minute books of Pinnacle accurately reflect all corporate actions
held or taken by its shareholders and Board of Directors (including committees
of the Board of Directors) since January 1, 1992.
SECTION 2.02. AUTHORIZATION; NO DEFAULTS. Pinnacle's Board of Directors
has, by all appropriate action, approved this Agreement, the Pinnacle Option
Agreement and the Merger and authorized the execution hereof and thereof on its
behalf by its duly authorized officers and the performance by Pinnacle of its
obligations hereunder. Pinnacle's Board of Directors has directed that the
agreement of merger (within the meaning of the MBCA) contained in this Agreement
and the transactions contemplated by this Agreement, including the Merger, be
submitted to the shareholders of Pinnacle for approval at the Pinnacle
Shareholders' Meeting (as defined in Section 4.03 hereof), and, except for the
adoption and approval of this Agreement by the affirmative vote of the holders
of a majority of the outstanding shares of Pinnacle Common, no other corporate
proceedings on the part of Pinnacle are necessary to approve this Agreement, the
Pinnacle Option Agreement and to consummate the transactions contemplated by
this Agreement, including the Merger, and by the Pinnacle Option Agreement.
Nothing in the Articles of Incorporation or Bylaws of Pinnacle, as amended, or
any other agreement, instrument, decree, proceeding, law or regulation (except
as specifically referred to in or contemplated by this Agreement) by or to which
it or any of its subsidiaries are bound or subject would prohibit or inhibit
Pinnacle from consummating this Agreement and the Merger on the terms and
conditions herein contained. This Agreement and the Pinnacle Option Agreement
have been duly and validly executed and delivered by Pinnacle and constitute a
legal, valid and binding obligation of Pinnacle, enforceable against Pinnacle in
accordance with their respective terms. Pinnacle and its subsidiaries are
neither in default under nor in violation of any provision of their Articles of
Incorporation or Association, as the case may be, Bylaws, or any promissory
note, indenture or any evidence of indebtedness or security therefor, lease,
contract, insurance policy, purchase or other commitment or any other agreement
or arrangement (however evidenced), whether written or oral, and there has not
occurred any event that, with the lapse of time or giving of notice or both,
would constitute such a default or violation. Holders of Pinnacle Common do not
have dissenters' rights under the MBCA in connection with the Merger.
SECTION 2.03. SUBSIDIARIES. Each of Pinnacle's banking subsidiaries and
its other direct or indirect subsidiaries (collectively, the "subsidiaries") the
name and jurisdiction of incorporation of which is disclosed in Section 2.03 of
the Disclosure Schedule, is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
corporate power to own its respective properties and assets, to incur its
respective liabilities and to carry on its respective business as now being
conducted. The deposits of each of Pinnacle's subsidiaries that is an insured
institution (within the meaning of the Federal Deposit Insurance Act) are
insured by the Federal Deposit Insurance Corporation (the "F.D.I.C.") in
accordance with the Federal Deposit Insurance Act, as amended, up to applicable
limits. The number of issued and outstanding shares of capital stock of each
such subsidiary is disclosed in Section 2.03 of the Disclosure Schedule, all of
which shares are owned by Pinnacle or Pinnacle's subsidiaries, as the case may
be, free and clear of all liens, encumbrances, rights of first refusal, options
or other restrictions of any nature whatsoever, except for directors' qualifying
shares, assessability under 12 U.S.C. Section 55 and comparable state laws, if
applicable. There are no options, warrants or rights outstanding to acquire any
capital stock of any of Pinnacle's wholly-owned subsidiaries and no person or
entity has any other right to purchase or acquire any unissued shares of stock
of any of Pinnacle's wholly-owned subsidiaries, nor does any such wholly-owned
subsidiary have any obligation of any nature with respect to its unissued shares
of stock. Neither Pinnacle nor any of Pinnacle's subsidiaries is a party to any
partnership or joint venture or owns an equity interest in any other business
8
or enterprise. The Articles of Incorporation and Bylaws of each subsidiary of
Pinnacle, as amended, copies of which have previously been made available to CNB
by Pinnacle, are true, complete and correct copies of such documents as in
effect on the date of this Agreement.
SECTION 2.04. FINANCIAL INFORMATION. The (i) audited consolidated
balance sheets of Pinnacle and its subsidiaries as of December 31, 1996 and
1995, and related consolidated income statements and statements of changes in
shareholders' equity and of cash flows for the three (3) years ended December
31, 1996, together with the notes thereto, included in Pinnacle's Annual
Report on Form 10-K for the year ended December 31, 1996, as currently on
file with the S.E.C., and the unaudited consolidated balance sheets of
Pinnacle and its subsidiaries as of March 31, 1997 and June 30, 1997, and the
related unaudited consolidated income statements and statements of changes in
shareholders' equity and cash flows for the three (3) months and six (6)
months, respectively, then ended included in Pinnacle's Quarterly Reports on
Form 10-Q for the quarters then ended, as currently on file with the S.E.C.,
(ii) the audited consolidated balance sheets of IFC and its subsidiaries as
of December 31, 1996 and 1995, and related consolidated income statements and
statements of changes in shareholders' equity and of cash flows of IFC and
its subsidiaries for the three (3) years ended December 31, 1996, together
with the notes thereto, and the unaudited consolidated balance sheets of IFC
and its subsidiaries as of June 30, 1997, and the related unaudited
consolidated income statements and statements of changes in shareholders'
equity and cash flows of IFC and its subsidiaries for the six (6) months then
ended each as included in Pinnacle's Current Report on Form 8-K/A dated
October 14, 1997, as currently on file with the S.E.C., (iii) the audited
consolidated balance sheets of CBI and its subsidiaries as of March 31, 1997
and 1996, and related consolidated income statements and statements of
changes in shareholders' equity and of cash flows of CBI and its subsidiaries
for the three (3) years ended March 31, 1997, together with the notes
thereto, and the unaudited consolidated balance sheets of CBI and its
subsidiaries as of June 30, 1997, and the related unaudited consolidated
income statements and statements of changes in shareholders' equity and cash
flows of CBI and its subsidiaries for the three (3) months then ended each as
included in Pinnacle's Current Report on Form 8-K/A dated October 14, 1997,
as currently on file with the S.E.C., (iv) the pro forma consolidated balance
sheet of Pinnacle and its subsidiaries as of June 30, 1997, and related
consolidated income statements of Pinnacle and its subsidiaries for the
twelve months ended December 31, 1996 and the six (6) months ended June 30,
1997, as included in Pinnacle's Current Report on Form 8-K/A dated October
14, 1997, as currently on file with the S.E.C., and (v) the year-end and
quarterly Reports of Condition and Reports of Income of Pinnacle Bank (the
"Subsidiary Bank") for 1996, March 31, 1997, and June 30, 1997, respectively,
as currently on file with the F.D.I.C., and the Thrift Financial Reports of
Indiana Federal Bank for Savings and Community Bank for 1996, March 31, 1997
and June 30, 1997, respectively, as filed with the Office of Thrift
Supervision (the "O.T.S.")(together, the "Pinnacle Financial Statements"),
have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis (except as may be disclosed therein
and except for regulatory reporting differences required by the reports of
the Subsidiary Bank and Indiana Federal Bank for Savings and Community Bank)
and fairly present the consolidated financial position and the consolidated
results of operations, changes in shareholders' equity and cash flows of the
respective entity and its respective consolidated subsidiaries as of the
dates and for the periods indicated (subject, in the case of interim
financial statements, to normal recurring year-end adjustments, none of which
shall be material). The books and records of Pinnacle and its subsidiaries
and IFC and CBI and their respective subsidiaries since January 1, 1992, have
been, and are being, maintained in accordance with generally accepted
accounting principles and any other applicable legal and accounting
requirements and reflect only actual transactions.
9
SECTION 2.05. ABSENCE OF CHANGES. Since December 31, 1996, there has not
been any change in the financial condition, the results of operations or the
business of Pinnacle and its subsidiaries taken as a whole which would have a
Material Adverse Effect on Pinnacle, except as disclosed by Pinnacle since
December 31, 1996 in its periodic reports filed with the S.E.C. under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
SECTION 2.06. REGULATORY ENFORCEMENT MATTERS. Neither Pinnacle, the
Subsidiary Bank nor any other subsidiaries is subject or is party to, or has
received any notice or advice that it may become subject or party to, any
investigation with respect to, any cease-and-desist order, agreement, consent
agreement, memorandum of understanding or other regulatory enforcement action,
proceeding or order with or by, or is a party to any commitment letter or
similar undertaking to, or is subject to any directive by, or has been a
recipient of any supervisory letter from, or has adopted any board resolutions
at the request of, any Regulatory Agency (as defined below in this Section 2.06)
that currently restricts the conduct of its business or that currently affects
its capital adequacy, its credit policies, its management or its business (each,
a "Regulatory Agreement"), nor has Pinnacle, the Subsidiary Bank or any other
subsidiaries been advised by any Regulatory Agency that it is considering
issuing or requesting any such Regulatory Agreement. Neither Indiana Federal
Bank for Savings and Community Bank was, prior to the effective date of their
respective mergers with the Subsidiary Bank, subject or party to, or received
any notice or advice that it may become subject or party to, any currently
effective Regulatory Agreement, nor had Indiana Federal Bank for Savings or
Community Bank been advised by any Regulatory Agency that it was considering
issuing or requesting any such Regulatory Agreement having any current effect.
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, the Subsidiary Bank, any other subsidiaries, or any corporations or
financial institutions merged with and into Pinnacle or the Subsidiary Bank.
Prior to the effective date of their respective mergers with the Subsidiary
Bank, there was no unresolved violation, criticism or exception by any
Regulatory Agency with respect to any report or statement relating to any
examinations of Indiana Federal Bank for Savings or Community Bank. As used
herein, the term "Regulatory Agency" means any federal or state agency charged
with the supervision or regulation of banks or bank holding companies, or
engaged in the insurance of bank deposits, or any court, administrative agency
or commission or other governmental agency, authority or instrumentality having
supervisory or regulatory authority with respect to Pinnacle or any of its
subsidiaries.
SECTION 2.07. TAX MATTERS.
(a) Each of Pinnacle and its subsidiaries has filed with the appropriate
governmental agencies all foreign, federal, state and local Tax (as defined
below in this Section 2.07) returns, declarations, estimates, information
returns, statements and reports (collectively, "Tax Returns") required to be
filed by it. Neither Pinnacle nor its subsidiaries are (a) delinquent in the
payment of any Taxes shown on such Tax Returns or on any assessments received
by it for such Taxes, (b) subject to any agreement extending the period for
assessment or collection of any Tax, or (c) a party to any action or
proceeding with, nor has any claim been asserted or threatened against any of
them by, any governmental authority for assessment or collection of Taxes or
for the refund of Taxes previously paid. The income Tax Returns of Pinnacle
and its subsidiaries have been audited by the Internal Revenue Service (the
"I.R.S.") and comparable state agencies and any liability with respect
thereto has been satisfied for all years to and including 1993, and either no
deficiencies were asserted as a result of such examination for which Pinnacle
does not have adequate reserves or all such deficiencies have been satisfied.
The reserve for Taxes in the financial statements of Pinnacle for the year
ended December 31, 1996, is adequate to cover
10
all of the liabilities for Taxes of Pinnacle and its subsidiaries that may
become payable in future years with respect to any transactions consummated
prior to December 31, 1996. As used herein, the term "Taxes" means any
federal, state, local, or foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental, customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated or other tax of any kind whatsoever,
including any interest, penalty or addition thereto, whether disputed or
undisputed.
(b) Any amount that could 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 Employee
Plan (as defined in Section 2.11(c) hereof) currently in effect would not be
characterized as an "excess parachute payment" (as such term is defined in
Section 280G(b)(1) of the Code).
(c) Pinnacle has not been subject to any disallowance of a deduction under
Section 162(m) of the Code nor does Pinnacle reasonably believe that such a
disallowance is reasonably likely to be applicable for any tax year of Pinnacle
ended on or before the Closing Date.
SECTION 2.08. LITIGATION AND RELATED MATTERS. Section 2.08 of the
Disclosure Schedule describes all litigation, claims or other proceedings or
investigations of any nature pending or, to the knowledge of Pinnacle,
threatened, against Pinnacle or any of its subsidiaries, or of which the
property of Pinnacle or any of its subsidiaries is or would be subject. There
is no injunction, order, judgment, decree or regulatory restriction imposed upon
Pinnacle, or any of its subsidiaries or the assets of Pinnacle of any of its
subsidiaries. Since January 1, 1992, Pinnacle and its subsidiaries have
continuously maintained fidelity bonds insuring them against acts of dishonesty
in such amounts as are customary, usual and prudent for organizations of their
size and business. There are no facts which would form the basis of a claim or
claims under such bonds. Neither Pinnacle nor any of its subsidiaries has
reason to believe that its respective fidelity coverage would not be renewed by
the carrier on substantially the same terms as the existing coverage, except for
possible premium increases unrelated to Pinnacle's and its subsidiaries' past
claim experience.
SECTION 2.09. EMPLOYMENT AGREEMENTS. Section 2.09 of the Disclosure
Schedule lists each agreement, arrangement, commitment or contract (whether
written or oral) for the employment, election, retention or engagement, or with
respect to the severance, of any present or former officer, employee, agent,
consultant or other person or entity to which Pinnacle or any of its
subsidiaries is a party to or bound by and which, by its terms, is not
terminable by Pinnacle or such subsidiary on thirty (30) days written notice or
less without the payment of any amount by reason of such termination. Copies of
each written (and summaries of each oral) agreement, arrangement, commitment or
contract listed in Section 2.09 of the Disclosure Schedule have been previously
made available to CNB by Pinnacle.
SECTION 2.10. REPORTS. Since January 1, 1992, Pinnacle and each of its
subsidiaries has filed all reports and statements, together with any amendments
required to be made with respect thereto, if any, that it was required to file
with (i) the Federal Reserve Board, (ii) the F.D.I.C., (iii) the S.E.C.,
(iv) any state securities authorities, (v) the Nasdaq Stock Market's National
Market ("Nasdaq"), and
11
(vi) any other Regulatory Agency with jurisdiction over Pinnacle or any of
its subsidiaries, and have paid all fees and assessments due and payable in
connection therewith. As of their respective dates, each of such reports and
documents, as amended, including any financial statements, exhibits and
schedules thereto, complied with the relevant statutes, rules and regulations
enforced or promulgated by the regulatory authority with which they were
filed, and did not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which
they were made, not misleading.
SECTION 2.11. EMPLOYEE MATTERS AND ERISA.
(a) Neither Pinnacle nor any of its subsidiaries has entered into any
collective bargaining agreement with any labor organization with respect to any
group of employees of Pinnacle or any of its subsidiaries and to the knowledge
of Pinnacle there is no present effort nor existing proposal to attempt to
unionize any group of employees of Pinnacle or any of its subsidiaries.
(b) (i) Pinnacle and its subsidiaries are and have been in compliance with
all applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including, without limitation, any
such laws respecting employment discrimination and occupational safety and
health requirements, and neither Pinnacle nor any of its subsidiaries is engaged
in any unfair labor practice, (ii) there is no unfair labor practice complaint
against Pinnacle or any subsidiary pending or, to the knowledge of Pinnacle,
threatened before the National Labor Relations Board, (iii) there is no labor
dispute, strike, slowdown or stoppage actually pending or, to the knowledge of
Pinnacle, threatened against or directly affecting Pinnacle or any subsidiary,
and (iv) neither Pinnacle nor any subsidiary has experienced any work stoppage
or other labor difficulty during the past five (5) years.
(c) Section 2.11(c) of the Disclosure Schedule describes each employee
benefit plan, as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and each nonqualified employee
benefit plan, deferred compensation, bonus, stock and incentive plan, and each
other employee benefit and fringe benefit program for the benefit of former or
current employees of Pinnacle or any subsidiary (the "Pinnacle Employee Plans")
which Pinnacle and its subsidiaries maintain, contribute to or participate in or
have any liability under. No present or former employee of Pinnacle or any
subsidiary has been charged with breaching, or to the knowledge of Pinnacle has
breached, a fiduciary duty under any of the Pinnacle Employee Plans. Neither
Pinnacle nor any of its subsidiaries participates in, nor has it in the past
five (5) years participated in, nor has it any present or future obligation or
liability under, any multiemployer plan (as defined at Section 3(37) of ERISA).
Section 2.11(c) of the Disclosure Schedule describes all plans that provides
health, major medical, disability or life insurance benefits to former employees
of Pinnacle or any subsidiary that Pinnacle and any subsidiary maintain,
contribute to, or participate in. Section 2.11(c) of the Disclosure Schedule
describes all of the employment related obligations of Pinnacle with respect to
its acquisitions of IFC and CBI.
(d) Neither Pinnacle nor any of its subsidiaries maintain, nor have any of
them maintained for the past ten years, any Pinnacle Employee Plans subject to
Title IV of ERISA or Section 412 of the Code. No reportable event (as defined
in Section 4043 of ERISA) has occurred with respect to any Pinnacle Employee
Plans as to which a notice would be required to be filed with the Pension
Benefit Guaranty Corporation. No claim is pending, and Pinnacle has not
received notice of any threatened or imminent
12
claim with respect to any Pinnacle Employee Plan (other than a routine claim
for benefits for which plan administrative review procedures have not been
exhausted) for which Pinnacle or any of its subsidiaries would be liable
after December 31, 1996, except as reflected on the Pinnacle Financial
Statements. All liabilities of the Pinnacle Employee Plans have been funded
on the basis of consistent methods in accordance with sound actuarial
assumptions and practices, and no Pinnacle Employee Plan, at the end of any
plan year, or at December 31, 1996, had or has had an accumulated funding
deficiency. No actuarial assumptions have been changed since the last
written report of actuaries on such Pinnacle Employee Plans. All insurance
premiums (including premiums to the Pension Benefit Guaranty Corporation)
have been paid in full, subject only to normal retrospective adjustments in
the ordinary course. Pinnacle and its subsidiaries have no contingent or
actual liabilities under Title IV of ERISA. No accumulated funding
deficiency (within the meaning of Section 302 of ERISA or Section 412 of the
Code) has been incurred with respect to any of the Pinnacle Employee Plans,
whether or not waived. No reportable event (as defined in Section 4043 of
ERISA) has occurred with respect to any of the Pinnacle Employee Plans as to
which a notice would be required to be filed with the Pension Benefit
Guaranty Corporation. After December 31, 1996, Pinnacle and its subsidiaries
do not have any liabilities for excise taxes under Sections 4971, 4975, 4976,
4977, 4979 or 4980B of the Code or for a fine under Section 502 of ERISA with
respect to any Pinnacle Employee Plan. All Pinnacle Employee Plans have been
operated, administered and maintained in accordance with the terms thereof
and in compliance with the requirements of all applicable laws, including,
without limitation, ERISA and the Code.
(e) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated by this Agreement (either alone or
upon the occurrence of any additional acts or events) would (i) result in any
payment (including, without limitation, severance, unemployment compensation,
golden parachute or otherwise) becoming due to any director, officer or employee
of Pinnacle or any of its affiliates from Pinnacle or any of its affiliates
under any Pinnacle Employee Plan or otherwise, (ii) increase any benefits
otherwise payable under any Pinnacle Employee Plan, or (iii) result in any
acceleration of the time of payment or vesting of any such benefits.
(f) Copies of each Pinnacle Employee Plan described in Section 2.11(c) of
the Disclosure Schedule, and all amendments or supplements thereto, have been
previously made available to CNB by Pinnacle. Section 2.11(f) of the Disclosure
Schedule lists, for each Pinnacle Employee Plan, all of the following with
respect thereto: (i) summary plan descriptions, (ii) lists of all current
participants and all participants with benefit entitlements, (iii) contracts
relating to plan documents, (iv) actuarial valuations for any defined benefit
plan, (v) valuations for any plan as of the most recent date, (vi) determination
letters from the I.R.S., (vii) the most recent annual report filed with the
I.R.S., (viii) registration statements and prospectuses, and (ix) trust
agreements. Copies of each of the documents described in the preceding sentence
have been previously made available to CNB by Pinnacle.
SECTION 2.12. TITLE TO PROPERTIES; INSURANCE. (i) Pinnacle and its
subsidiaries have marketable title, insurable at standard rates, free and clear
of all liens, charges and encumbrances (except Taxes which are a lien but not
yet payable and liens, charges or encumbrances reflected in the Pinnacle
Financial Statements and easements, rights-of-way, and other restrictions and
imperfections not material in nature, and further excepting in the case of Other
Real Estate Owned (as such real estate is internally classified on the books of
Pinnacle or its subsidiaries) rights of redemption under applicable law) to all
of their owned real properties, (ii) all leasehold interests for real property
and personal property used by Pinnacle and its subsidiaries in their businesses
are held pursuant to lease agreements which are valid and enforceable in
accordance with their terms, (iii) all such properties comply with all
applicable private
13
agreements, zoning requirements and other governmental laws and regulations
relating thereto and there are no condemnation proceedings pending or, to the
knowledge of Pinnacle, threatened with respect to such properties, (iv)
Pinnacle and its subsidiaries have valid title or other ownership rights
under licenses to all intangible personal or intellectual property necessary
to conduct the business and operations of Pinnacle and its subsidiaries as
presently conducted, free and clear of any claim, defense or right of any
other person or entity, subject only to rights of the licensors pursuant to
applicable license agreements, which rights do not adversely interfere with
the use of such property, (v) all insurable properties owned or held by
Pinnacle and its subsidiaries are adequately insured by financially sound and
reputable insurers in such amounts and against fire and other risks insured
against by extended coverage and public liability insurance, as is customary
with bank holding companies of similar size, and there are presently no
claims pending under such policies of insurance and no notices have been
given by Pinnacle or any of its subsidiaries under such policies, and (vi)
all tangible properties used in the businesses of Pinnacle and its
subsidiaries are in good condition, reasonable wear and tear excepted, and
are useable in the ordinary course of business consistent with past
practices. Section 2.12 of the Disclosure Schedule sets forth, for each
policy of insurance maintained by Pinnacle and its subsidiaries, the amount
and type of insurance, the name of the insurer and the amount of the annual
premium.
SECTION 2.13. ENVIRONMENTAL MATTERS.
(a) As used herein, the term "Environmental Laws" shall mean all local,
state and federal environmental, health and safety laws and regulations and
common law standards in all jurisdictions in which Pinnacle and its subsidiaries
have done business or owned, leased or operated property, including, without
limitation, the Federal Resource Conservation and Recovery Act, the Federal
Comprehensive Environmental Response, Compensation and Liability Act, the
Federal Clean Water Act, the Federal Clean Air Act, and the Federal Occupational
Safety and Health Act.
(b) Neither the conduct nor operation of Pinnacle or its subsidiaries nor
any condition of any property presently or previously owned, leased or operated
by any of them violates or violated or, to the knowledge of Pinnacle, may
violate, Environmental Laws in a manner or to any extent exposing Pinnacle or
its subsidiaries to liability or potential liability and no condition has
existed or event has occurred with respect to any of them or any such property
that, with notice or the passage of time, or both, would constitute or, to the
knowledge of Pinnacle, may constitute, a violation of Environmental Laws in a
manner or to any extent that would obligate (or potentially obligate) Pinnacle
or its subsidiaries to remedy, stabilize, neutralize or otherwise alter the
environmental condition of any such property. Neither Pinnacle nor any of its
subsidiaries has received any notice from any person or entity that Pinnacle or
its subsidiaries or the operation or condition of any property ever owned,
leased or operated by any of them are or were in violation of any Environmental
Laws in a manner or to any extent exposing Pinnacle or its subsidiaries to
liability or potential liability or that any of them are responsible (or
potentially responsible) for the cleanup or other remediation of any pollutants,
contaminants, or hazardous or toxic wastes, substances or materials at, on or
beneath any such property and, to the knowledge of Pinnacle, Pinnacle and its
subsidiaries and the operation and condition of any property ever owned, leased
or operated by any of them are not and were not in violation of any
Environmental Laws in a manner or to any extent exposing Pinnacle or its
subsidiaries to liability or potential liability and none of them are
responsible (or potentially responsible) for the cleanup or other remediation of
any pollutants, contaminants, or hazardous or toxic wastes, substances or
materials at, on or beneath any such property. Section 2.13(b) of the
Disclosure Schedule lists each property presently owned, leased or operated by
Pinnacle or any of its subsidiaries which, to the knowledge of Pinnacle,
contains any pollutants,
14
contaminants, or hazardous or toxic wastes, substances or materials at, on or
beneath any such property or which otherwise violates any Environmental Laws.
SECTION 2.14. COMPLIANCE WITH LAW. Pinnacle and its subsidiaries have all
licenses, franchises, permits and other governmental authorizations that are
legally required to enable them to conduct their respective businesses and are
in compliance with all applicable laws and regulations.
SECTION 2.15. BROKERAGE. There are no existing claims or agreements for
brokerage commissions, finders' fees, or similar compensation in connection with
the transactions contemplated by this Agreement payable by Pinnacle or its
subsidiaries, other than agreements with Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities
Corporation, PL Capital, L.L.C., and Friedman, Billings, Xxxxxx & Co., Inc., and
copies of such agreements have been previously made available to CNB by
Pinnacle.
SECTION 2.16. NON-BANKING ACTIVITIES OF PINNACLE AND SUBSIDIARIES.
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 B.H.C.A.
or which is not listed at 12 C.F.R. 225.25. Without limiting the generality of
the foregoing, any equity investment of Pinnacle and each of its subsidiaries
that is not a bank, a bank operating subsidiary or a bank service corporation,
is not prohibited by the Federal Reserve Board or the B.H.C.A.
SECTION 2.17. TRUST ADMINISTRATION. During the applicable statute of
limitations period, (i) the Subsidiary Bank and each other subsidiary of
Pinnacle which is a trust company or otherwise acts in a fiduciary capacity has
properly administered all accounts for which it acts as a fiduciary or agent,
including but not limited to accounts for which it serves as a trustee, agent,
custodian, personal representative, guardian, conservator or investment advisor,
in accordance with the terms of the governing documents and applicable state and
federal law and regulation and common law, and (ii) neither Pinnacle, any
subsidiary of Pinnacle, nor any director, officer or employee of Pinnacle or any
of its subsidiaries acting on behalf of Pinnacle or any of its subsidiaries, has
committed any breach of trust with respect to any such fiduciary or agency
account, and the accountings for each such fiduciary or agency account are true
and correct and accurately reflect the assets of such fiduciary or agency
account. There is no investigation or inquiry by any Regulatory Agency pending,
or to the knowledge of Pinnacle, threatened, against or affecting Pinnacle or
any of its subsidiaries relating to the compliance by Pinnacle or any such
subsidiary with sound fiduciary principles and applicable regulations.
SECTION 2.18. POOLING OF INTERESTS; TAX-FREE REORGANIZATION. Pinnacle has
no reason to believe that the Merger shall not qualify as a "pooling of
interests" for accounting purposes or a tax-free reorganization within the
meaning of Section 368(a) of the Code.
SECTION 2.20. MATERIAL CONTRACTS AND AGREEMENTS. Neither Pinnacle nor any
of its subsidiaries is a party to, or is bound by, any material contract (as
defined in Item 601(b)(10) of Regulation S-K of the S.E.C.) or any other
material contract or similar arrangement whether or not made in the ordinary
course of business (other than loans or loan commitments and funding
transactions in the ordinary course of business of Pinnacle's subsidiaries) that
has not been filed or incorporated by reference in periodic reports filed by
Pinnacle with the S.E.C. under the Exchange Act or is not otherwise listed in
Section 2.20 of the Disclosure Schedule. Section 2.20 of the Disclosure
Schedule lists (i) each agreement restricting the nature or geographic scope of
any line of business or activity of Pinnacle or its subsidiaries, and (ii) each
agreement, indenture or other instrument relating to the borrowing of money
15
by Pinnacle or any of its subsidiaries or the guarantee by Pinnacle or any of
its subsidiaries of any such obligation, other than instruments relating to
transactions entered into in the ordinary course of business. Copies of each
of the contracts and agreements listed in Section 2.20 of the Disclosure
Schedule have been previously furnished to CNB by Pinnacle.
SECTION 2.21. NO UNDISCLOSED LIABILITIES. Pinnacle and its subsidiaries
do not have any liability, whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due, including
any liability for Taxes (and there is no past or present fact, situation,
circumstance, condition or other basis for any present or future action, suit or
proceeding, hearing, charge, complaint, claim or demand against Pinnacle or its
subsidiaries giving rise to any such liability), except (i) for liabilities set
forth in the Pinnacle Financial Statements, and (ii) normal fluctuation in the
amount of the liabilities referred to in clause (i) above occurring in the
ordinary course of business of Pinnacle and its subsidiaries since the date of
the June 30, 1997 balance sheet included in the Pinnacle Financial Statements.
SECTION 2.22. STATEMENTS TRUE AND CORRECT. None of the information
supplied or to be supplied by Pinnacle or its subsidiaries for inclusion in
(i) the Registration Statement (as defined in Section 4.05 hereof), (ii) the
Joint Proxy Statement/Prospectus (as defined in Section 4.03 hereof), and
(iii) any other documents to be filed with the S.E.C., Nasdaq, the N.Y.S.E. or
any other Regulatory Agency in connection with the transactions contemplated by
this Agreement shall, at the respective times such documents are filed, and, in
the case of the Registration Statement, when it becomes effective, and, with
respect to the Joint Proxy Statement/Prospectus, when first mailed to the
shareholders of Pinnacle and at the time of the Shareholders' Meetings (as
defined in Section 5.01(c) hereof), contain any untrue statement of a material
fact, or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they are
made, not misleading. All documents that Pinnacle shall be responsible for
filing with the S.E.C., Nasdaq or any other Regulatory Agency in connection with
the transactions contemplated by this Agreement shall comply as to form in all
material respects with the provisions of applicable law and the applicable rules
and regulations thereunder.
SECTION 2.23. STATE TAKEOVER LAWS. The Board of Directors of Pinnacle has
taken all such action required to be taken by it to provide that this Agreement,
the Pinnacle Option Agreement and the transactions contemplated by this
Agreement and by the Pinnacle Option Agreement shall be exempt from the
requirements of any "moratorium," "control share," "fair price" or other
anti-takeover laws or regulations of any state.
SECTION 2.24. FAIR LENDING; COMMUNITY REINVESTMENT ACT. With the
exception of routine investigation of consumer complaints, neither Pinnacle nor
any of its subsidiaries has been advised by any Regulatory Agency that it is or
may be in violation of the Equal Credit Opportunity Act or the Fair Housing Act
or any similar federal or state statute. Each of Pinnacle's depository
institution subsidiaries received a Community Reinvestment Act ("CRA") rating of
"Outstanding" or "Satisfactory" in its most recent CRA examination.
16
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES OF CNB
Subject to Section 1.11 hereof, CNB hereby make the following
representations and warranties:
SECTION 3.01. ORGANIZATION AND CAPITAL STOCK.
(a) CNB is a corporation duly organized, validly existing and in good
standing under the laws of the State of Indiana and has the corporate power to
own all of its property and assets, to incur all of its liabilities and to carry
on its business as now being conducted. CNB is a bank holding company
registered with the Federal Reserve Board under the B.H.C.A.
(b) The authorized capital stock of CNB consists of (i) 50,000,000 shares
of CNB Common, of which, as of September 30, 1997, 20,463,204 shares were issued
and outstanding, and (ii) 2,000,000 shares of preferred stock, of which none are
issued and outstanding. All of the issued and outstanding shares of CNB Common
are duly and validly issued and outstanding and are fully paid and
non-assessable and free of preemptive rights. As of the date hereof, CNB had
outstanding employee stock options representing the right to acquire not more
than 1,074,000 shares of CNB Common pursuant to the stock option plans of CNB.
(c) The shares of CNB Common that are to be issued to the shareholders of
Pinnacle pursuant to the Merger have been duly authorized and, when so issued in
accordance with the terms hereof, shall be validly issued and outstanding, fully
paid and non-assessable, with no personal liability attaching to the ownership
thereof.
SECTION 3.02. AUTHORIZATION. The Board of Directors of CNB has, by all
appropriate action, approved this Agreement and the Merger and authorized the
execution hereof on its behalf by its duly authorized officers and the
performance by CNB of its obligations hereunder. Nothing in the Articles of
Incorporation or Bylaws of CNB, as amended, or any other agreement, instrument,
decree, proceeding, law or regulation (except as specifically referred to in or
contemplated by this Agreement) by or to which CNB or any of its subsidiaries
are bound or subject would prohibit or inhibit CNB from entering into and
consummating this Agreement and the Merger on the terms and conditions herein
contained. This Agreement has been duly and validly executed and delivered by
CNB and constitutes a legal, valid and binding obligation of CNB, enforceable
against CNB in accordance with its terms and, except for the approval of the
Merger by the affirmative vote of a majority of the issued and outstanding
shares of CNB Common at the CNB Shareholders' Meeting (as defined in Section
5.01(c) hereof), no other corporate acts or proceedings are required to be taken
by CNB to authorize the execution, delivery and performance of this Agreement.
Except for the requisite approval of the Federal Reserve Board, the Indiana
Department of Financial Institutions and the Michigan Financial Institutions
Bureau, no notice to, filing with, authorization by, or consent or approval of,
any federal or state bank regulatory authority is necessary for the execution
and delivery of this Agreement or consummation of the Merger by CNB.
SECTION 3.03. SUBSIDIARIES. Each of CNB's significant subsidiaries (as
such term is defined in Rule 1-02 of Regulation S-X promulgated by the S.E.C.)
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the corporate power to own its
17
respective properties and assets, to incur its respective liabilities and to
carry on its respective business as now being conducted.
SECTION 3.04. FINANCIAL INFORMATION. The consolidated balance sheets of
CNB and its subsidiaries as of December 31, 1996 and 1995, and related
consolidated statements of income, changes in shareholders' equity and cash
flows for the three (3) years ended December 31, 1996, together with the
notes thereto, included in CNB's Annual Report on Form 10-K for the year
ended December 31, 1996, as currently on file with the S.E.C., and the
unaudited consolidated balance sheets of CNB and its subsidiaries as of
March 31, 1997 and June 30, 1997, and the related unaudited consolidated income
statements and statements of changes in shareholders' equity and cash flows
for the three (3) months and six (6) months, respectively, then ended
included in CNB's Quarterly Reports on Form 10-Q for the quarters then ended,
as currently on file with the S.E.C., and the year-end and quarterly Reports
of Condition and Reports of Income of each of the subsidiary banks of CNB for
1996, March 31, 1997, and June 30, 1997, respectively, as currently on file
with the applicable Regulatory Agency (together, the "CNB Financial
Statements"), have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be
disclosed therein and except for regulatory reporting differences required by
the reports of the subsidiary banks of CNB) and fairly present in all
material respects the consolidated financial position and the consolidated
results of operations, changes in shareholders' equity and cash flows of CNB
and its consolidated subsidiaries as of the dates and for the periods
indicated (subject, in the case of interim financial statements, to normal
recurring year-end adjustments, none of which shall be material).
SECTION 3.05. ABSENCE OF CHANGES. Since December 31, 1996, there has not
been any change in the financial condition, the results of operations or the
business of CNB and its subsidiaries which would have a Material Adverse Effect
on CNB, except as disclosed by CNB since December 31, 1996 in its periodic
reports filed with the S.E.C. under the Exchange Act.
SECTION 3.06. LITIGATION. There is no litigation, claim or other
proceeding pending or, to the knowledge of CNB, threatened, against CNB or any
of its subsidiaries, or of which the property of CNB or any of its subsidiaries
is or would be subject, and there is no injunction, order, judgment, decree or
regulatory restriction imposed upon CNB, or any of its subsidiaries or the
assets of CNB of any of its subsidiaries, which would have a Material Adverse
Effect on CNB.
SECTION 3.07. REPORTS. CNB and each of its significant subsidiaries has
filed all material reports and statements, together with any amendments required
to be made with respect thereto, that it was required to file with (i) the
S.E.C., (ii) the Federal Reserve Board, (iii) the Office of the Comptroller of
the Currency (the "O.C.C."), (iv) the F.D.I.C., (v) the N.Y.S.E., and (vi) any
other Regulatory Agency with jurisdiction over CNB or any of its significant
subsidiaries, and have paid all fees and assessments due and payable in
connection therewith. As of their respective dates, each of such reports and
documents, as amended, including any financial statements, exhibits and
schedules thereto, complied with the relevant statutes, rules and regulations
enforced or promulgated by the regulatory authority with which they were filed
and did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
18
SECTION 3.08. COMPLIANCE WITH LAW. CNB and its significant subsidiaries
have all licenses, franchises, permits and other governmental authorizations
that are legally required to enable them to conduct their respective businesses
and are in compliance with all applicable laws and regulations.
SECTION 3.09. POOLING OF INTERESTS; TAX-FREE REORGANIZATION. CNB has no
reason to believe that the Merger shall not qualify as a "pooling of interests"
for accounting purposes or a tax-free reorganization within the meaning of
Section 368(a) of the Code.
SECTION 3.10. STATEMENTS TRUE AND CORRECT. None of the information
supplied or to be supplied by CNB for inclusion in (i) the Registration
Statement, (ii) the Joint Proxy Statement/Prospectus, and (iii) any other
documents to be filed with the S.E.C., the N.Y.S.E. or any other Regulatory
Agency in connection with the transactions contemplated by this Agreement shall,
at the respective times such documents are filed, and, in the case of the
Registration Statement, when it becomes effective, and with respect to the Joint
Proxy Statement/Prospectus, when first mailed to the shareholders of Pinnacle
and at the time of the Shareholders' Meetings, contain any untrue statement of a
material fact, or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they are
made, not misleading. All documents that CNB shall be responsible for filing
with the S.E.C., the N.Y.S.E. or any other Regulatory Agency in connection with
the transactions contemplated by this Agreement shall comply as to form in all
material respects with the provisions of applicable law and the applicable rules
and regulations thereunder.
SECTION 3.11. REGULATORY ENFORCEMENT MATTERS. Neither CNB nor any of its
significant subsidiaries is subject or is party to, or has received any notice
or advice that it may become subject or party to, any Regulatory Agreement, nor
has CNB or any of its significant subsidiaries been advised by any Regulatory
Agency that it is considering issuing or requesting any such Regulatory
Agreement.
SECTION 3.12. TAX MATTERS. Each of CNB and its subsidiaries has filed
with the appropriate governmental agencies all foreign, federal, state and local
Tax Returns required to be filed by it. Neither CNB nor its subsidiaries are
(a) delinquent in the payment of any Taxes shown on such Tax Returns or on any
assessments received by it for such Taxes, (b) subject to any agreement
extending the period for assessment or collection of any Tax, or (c) a party to
any action or proceeding with, nor has any claim been asserted or threatened
against any of them by, any governmental authority for assessment or collection
of Taxes or for the refund of Taxes previously paid. The income Tax Returns of
CNB and its subsidiaries have been audited or otherwise closed by the I.R.S. and
comparable state agencies and any liability with respect thereto has been
satisfied for all years to and including 1992 (except for the State of Indiana
which is 1990), and either no deficiencies were asserted as a result of such
examination for which CNB does not have adequate reserves or all such
deficiencies have been satisfied. The reserve for Taxes in the financial
statements of CNB for the year ended December 31, 1996, is adequate to cover all
of the liabilities for Taxes of CNB and its subsidiaries that may become payable
in future years with respect to any transactions consummated prior to December
31, 1996.
SECTION 3.13. BROKERAGE. There are no existing claims or agreements for
brokerage commissions, finders' fees, or similar compensation in connection with
the transactions contemplated by this Agreement payable by CNB or its
subsidiaries, other than an agreement with Xxxxxxxxxxx & Co., Inc., a copy of
which has been previously made available to Pinnacle by CNB.
19
SECTION 3.14. STATE TAKEOVER LAWS. The Board of Directors of CNB has
taken all such action required to be taken by it to provide that this Agreement,
the Pinnacle Option Agreement and the transactions contemplated by this
Agreement and by the Pinnacle Option Agreement shall be exempt from the
requirements of any "moratorium," "control share," "fair price" or other
anti-takeover laws or regulations of any state.
SECTION 3.15. NO UNDISCLOSED LIABILITIES. As of the date hereof, CNB and
its subsidiaries do not have any liability, whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become due,
including any liability for Taxes (and there is no past or present fact,
situation, circumstance, condition or other basis for any present or future
action, suit or proceeding, hearing, charge, complaint, claim or demand against
CNB or its subsidiaries giving rise to any such liability), except (i) for
liabilities set forth in the CNB Financial Statements, and (ii) normal
fluctuation in the amount of the liabilities referred to in clause (i) above
occurring in the ordinary course of business of CNB and its subsidiaries since
the date of the June 30, 1997 balance sheet included in the CNB Financial
Statements.
ARTICLE FOUR
AGREEMENTS OF PINNACLE
SECTION 4.01. BUSINESS IN ORDINARY COURSE.
(a) Pinnacle shall not declare or pay any dividend or make any other
distribution to shareholders, whether in cash, stock or other property, after
the date hereof, except that (i) in the case of dividends payable until June
30, 1998, Pinnacle may declare and pay its regular quarterly dividend on the
Pinnacle Common not to exceed $0.235 per share, at approximately the same
times during each quarter during such period which it has historically
declared and paid such dividends, and (ii) in the case of dividends payable
on or after July 1, 1998, Pinnacle may declare and pay its regular quarterly
dividend on the Pinnacle Common in an aggregate amount equal to the aggregate
amount that Pinnacle shareholders would have received on their shares of CNB
Common received in the Merger had the Effective Time been immediately before
the record date or dates for the payment of each such dividend, at
approximately the same times during each quarter during such period which it
has historically declared and paid such dividends; PROVIDED, HOWEVER, that
Pinnacle and CNB shall cooperate with each other to coordinate the record and
payment dates of their respective dividends for the quarter in which the
Effective Time occurs such that the Pinnacle shareholders shall receive a
quarterly dividend from either Pinnacle or CNB but not from both during or
with respect to such quarter.
(b) Pinnacle shall, and shall cause each of its subsidiaries to, (1)
continue to carry on after the date hereof its respective business and the
discharge or incurrence of obligations and liabilities, only in the usual,
regular and ordinary course of business, as heretofore conducted, (2) use
reasonable best efforts to maintain and preserve intact its respective business
organization, employees and advantageous business relationships and retain the
services of its officers and key employees, and (3) by way of amplification and
not limitation, Pinnacle and each of its subsidiaries shall not, without the
prior written consent of CNB (which shall not be unreasonably withheld):
20
(i) issue any Pinnacle Common or other capital stock or any options,
warrants, or other rights to subscribe for or purchase Pinnacle Common or
any other capital stock or any securities convertible into or exchangeable
for any capital stock of Pinnacle or any of its subsidiaries (except for
(i) the issuance of Pinnacle Common pursuant to the valid exercise of
Pinnacle Stock Options which are outstanding on the date hereof, (ii) the
issuance of Pinnacle Common pursuant to the Pinnacle Option Agreement, and
(iii) in the event that the Effective Time shall not have occurred on or
before April 30, 1998, grants of Pinnacle Stock Options after April 30,
1998, in accordance with the Stock Option Plans and in a manner and
pursuant to policies consistent with past practices; PROVIDED, HOWEVER,
that (1) such grants shall not be made if CNB shall have determined, in
consultation with its independent auditors, KPMG Peat Marwick, LLP, that
such grants would disqualify the Merger as a "pooling of interests" for
accounting purposes, and (2) any persons who shall receive such grants of
Pinnacle Stock Options from Pinnacle shall not be eligible to receive stock
options with respect to shares of CNB Common from CNB during 1998); or
(ii) directly or indirectly redeem, purchase or otherwise acquire any
Pinnacle Common or any other capital stock of Pinnacle or effect a
reclassification, recapitalization, splitup, exchange of shares,
readjustment or other similar change in or to any capital stock or
otherwise reorganize or recapitalize Pinnacle; or
(iii) directly or indirectly redeem, purchase or otherwise acquire
any capital stock of subsidiaries of the Pinnacle or effect a
reclassification, recapitalization, splitup, exchange of shares,
readjustment or other similar change in or to any capital stock or
otherwise reorganize or recapitalize any subsidiary of Pinnacle (other than
any of the foregoing all of the parties to which shall consist exclusively
of Pinnacle and the wholly-owned subsidiaries of Pinnacle); or
(iv) change its Articles of Incorporation or Association, as the case
may be, or Bylaws; or
(v) grant any increase, other than ordinary and normal increases
consistent with past practices, in the compensation payable or to become
payable to officers or salaried employees, grant any stock options (other
than grants of Pinnacle Stock Options after April 30, 1998, as provided in
Section 4.01(b)(i) hereof) or, except as required by law or as required by
existing contractual obligations which shall have been described in Section
2.11 of the Disclosure Schedule, adopt or make any material change in any
bonus, insurance, pension, or other Pinnacle Employee Plan, agreement,
payment or arrangement made to, for or with any of such officers or
employees; or
(vi) borrow or agree to borrow any material amount of funds except in
the ordinary course of business, or directly or indirectly guarantee or
agree to guarantee any material obligations of others, except in the
ordinary course of business; or
(vii) make or commit to make any new loan or letter of credit or
any new or additional discretionary advance under any existing line of
credit, including risk exposure in the mortgage repurchase program, in
principal amounts in excess of $5,000,000 or that would increase the
aggregate credit outstanding to any one borrower (or group of affiliated
borrowers) to more than $10,000,000 (excluding for this purpose any accrued
interest or overdrafts), without the prior
21
written consent of CNB, acting through its Senior Vice President and
Chief Credit Officer or such other designee as CNB may give notice of
to Pinnacle; or
(viii) purchase or otherwise acquire any investment security for
its own account, except in a manner and pursuant to policies consistent
with past practice; or
(ix) materially increase or decrease the rate of interest paid on time
deposits, or on certificates of deposit, except in a manner and pursuant to
policies consistent with past practices; or
(x) except as set forth in Section 4.01(b)(x) of the Disclosure
Schedule, enter into any agreement, contract or commitment of a material
nature out of the ordinary course of business; or
(xi) except in the ordinary course of business, place on any of its
material assets or properties any mortgage, pledge, lien, charge, or other
encumbrance of a material nature; or
(xii) except in the ordinary course of business, cancel or
accelerate any material indebtedness owing to Pinnacle or its subsidiaries
or any claims which Pinnacle or its subsidiaries may possess or waive any
material rights with respect thereto; or
(xiii) except as set forth in Section 4.01(b)(xiii) of the
Disclosure Schedule, sell or otherwise dispose of any material real
property or any material amount of any tangible or intangible personal
property other than in the ordinary course of business and other than
properties acquired in foreclosure or otherwise in the ordinary collection
of indebtedness to Pinnacle and its subsidiaries; or
(xiv) foreclose upon or otherwise take title to or possession or
control of any real property without first obtaining a phase one
environmental report thereon which indicates that the property is free of
pollutants, contaminants or hazardous or toxic waste materials; PROVIDED,
HOWEVER, that Pinnacle and its subsidiaries shall not be required to obtain
such a report with respect to single family, non-agricultural residential
property of one acre or less to be foreclosed upon unless it has reason to
believe that such property might contain any such waste materials or
otherwise might be contaminated; or
(xv) commit any act or fail to do any act which would cause a breach
of any agreement, contract or commitment and which would have a Material
Adverse Effect on Pinnacle; or
(xvi) purchase any real or personal property or make any other
capital expenditure, except in a manner and pursuant to policies consistent
with past practice; or
(xvii) affirmatively take, or cause to be taken, any action,
whether before or after the Effective Time, which would disqualify the
Merger as a "pooling of interests" for accounting purposes or as a
"reorganization" within the meaning of Section 368(a) of the Code; or
22
(xviii) take any action which would materially and adversely effect
or delay the ability of either CNB or Pinnacle to obtain any necessary
approvals of any Regulatory Agency or other governmental authority required
for the transactions contemplated by this Agreement or to perform its
covenants and agreements under this Agreement or the Pinnacle Option
Agreement.
(c) Pinnacle and its subsidiaries shall not, without the prior written
consent of CNB, engage in any transaction or take any action that would render
untrue (under the standard of Section 1.11 hereof) any of the representations
and warranties of Pinnacle contained in Article Two hereof, if such
representations and warranties were given as of the date of such transaction or
action.
(d) Pinnacle shall promptly notify CNB in writing of the occurrence of any
matter or event known to and directly involving Pinnacle, which would not
include any changes in conditions that affect the banking industry generally,
that would have, either individually or in the aggregate, a Material Adverse
Effect on Pinnacle.
(e) Pinnacle and its subsidiaries shall not, and shall not authorize or
permit any of their respective officers, directors, employees or agents to, on
or before the earlier of the Closing Date or the date of termination of this
Agreement, directly or indirectly solicit, initiate or encourage or (subject to
the fiduciary duties of its directors as advised by counsel) hold discussions or
negotiations with or provide any information to any person in connection with
any proposal from any person for the acquisition of all or any substantial
portion of the business, assets, shares of Pinnacle Common or other securities
of Pinnacle or its subsidiaries. Pinnacle shall promptly (which for this
purpose shall mean within twenty-four (24) hours) advise CNB of its receipt of
any such proposal or inquiry concerning any possible such proposal, the
substance of such proposal or inquiry, and the identity of such person.
SECTION 4.02. BREACHES. Pinnacle shall, in the event it has knowledge of
the occurrence, or impending or threatened occurrence, of any event or condition
which would cause or constitute a breach (or would have caused or constituted a
breach had such event occurred or been known prior to the date hereof) of any of
its representations or agreements contained or referred to herein, give prompt
written notice thereof to CNB and use its best efforts to prevent or promptly
remedy the same.
SECTION 4.03. SUBMISSION TO SHAREHOLDERS. Pinnacle shall cause to be duly
called and held, on a date selected by Pinnacle with the approval of CNB, a
special meeting of its shareholders (the "Pinnacle Shareholders' Meeting") for
submission of this Agreement and the Merger for approval of such Pinnacle
shareholders as required by the MBCA. In connection with the Pinnacle
Shareholders' Meeting, (i) Pinnacle shall cooperate and assist CNB in preparing
and filing a Joint Proxy Statement/Prospectus (the "Joint Proxy
Statement/Prospectus") with the S.E.C. and Pinnacle shall mail it to its
shareholders, (ii) Pinnacle shall furnish CNB all information concerning itself
that CNB may reasonably request in connection with such Joint Proxy
Statement/Prospectus, and (iii) the Board of Directors of Pinnacle (subject
to compliance with its fiduciary duties as advised by counsel) shall recommend
to its shareholders the approval of this Agreement and the Merger contemplated
by this Agreement and use its best efforts to obtain such shareholder approval.
SECTION 4.04. CONSENTS TO CONTRACTS AND LEASES. Pinnacle shall use its
best efforts to obtain all necessary consents with respect to all interests of
Pinnacle and its subsidiaries in any material leases, licenses, contracts,
instruments and rights which require the consent of another person for their
transfer or assumption pursuant to the Merger, if any.
23
SECTION 4.05. CONSUMMATION OF AGREEMENT. Pinnacle shall use its best
efforts to perform and fulfill all conditions and obligations on its part to be
performed or fulfilled under this Agreement and to effect the Merger and the
other transactions contemplated hereby in accordance with the terms and
provisions hereof and to effect the transition and integration of the business
and operations of Pinnacle and its subsidiaries with the business and operations
of CNB and its subsidiaries. Pinnacle shall furnish to CNB in a timely manner
all information, data and documents in the possession of Pinnacle requested by
CNB as may be required to obtain any necessary regulatory or other approvals of
the Merger and to file with the S.E.C. a registration statement on Form S-4 (the
"Registration Statement") relating to the shares of CNB Common to be issued to
the shareholders of Pinnacle pursuant to the Merger and this Agreement and shall
otherwise cooperate fully with CNB to carry out the purpose and intent of this
Agreement.
SECTION 4.06. ENVIRONMENTAL REPORTS. Pinnacle shall provide to CNB, as
soon as reasonably practical, but not later than forty-five (45) days after the
date hereof, a report of a phase one environmental investigation on the real
property identified on Section 2.13(b) of the Disclosure Schedule, if any, and
within ten (10) days after the acquisition or lease of any real property
acquired or leased by Pinnacle or its subsidiaries after the date hereof (but
excluding space in office or retail and similar establishments leased by
Pinnacle or its subsidiaries for automatic teller machines or bank branch
facilities or other office uses where the space leased comprises less than 50%
of the total space leased to all tenants of such property), except as otherwise
provided in Section 4.01(b)(xiv) hereof. If required by the phase one
investigation in CNB's reasonable opinion, Pinnacle shall provide to CNB, within
sixty (60) days of the receipt by Pinnacle of the request of CNB therefor, a
report of a phase two investigation on properties requiring such additional
study. CNB shall have fifteen (15) business days from the receipt of any such
phase two investigation report to notify Pinnacle of any dissatisfaction with
the contents of such report. Should the cost of taking all remedial or other
corrective actions and measures (i) required by applicable law or reasonably
likely to be required by applicable law, or (ii) recommended or suggested by
such report or reports or prudent in light of serious life, health or safety
concerns, in the aggregate, exceed the sum of $5,000,000 as reasonably estimated
by an environmental expert retained for such purpose by CNB and reasonably
acceptable to Pinnacle, or if the cost of such actions and measures cannot be so
reasonably estimated by such expert to be such amount or less with any
reasonable degree of certainty, then CNB shall have the right pursuant to
Section 7.03 hereof, for a period of fifteen (15) business days following
receipt of such estimate or indication that the cost of such actions and
measures can not be so reasonably estimated, to terminate this Agreement, which
shall be CNB's sole remedy in such event.
SECTION 4.07. RESTRICTION ON RESALES. Pinnacle shall deliver to CNB, at
least five (5) days prior to the mailing of the Joint Proxy Statement/Prospectus
to the shareholders of Pinnacle in connection with the Pinnacle Shareholders'
Meeting, a list of each person who may reasonably be deemed an "affiliate" of
Pinnacle within the meaning of such term as used in Rule 145 under the
Securities Act of 1933, as amended (the "Securities Act"), at the time the Joint
Proxy Statement/Prospectus is mailed to the shareholders of Pinnacle. Pinnacle
shall use its best efforts to obtain and deliver to CNB, at least thirty-one
(31) days prior to the Closing Date, the signed agreement, in the form of
Exhibit 4.07 hereto, of each person named on the list referred to in the
preceding sentence regarding compliance by such person with (i) the provisions
of such Rule 145, and (ii) the requirements of Accounting Principles Board
Opinion No. 16 regarding the disposition of shares (or reduction of risk with
respect thereto) of Pinnacle Common during the thirty (30) days preceding the
Closing Date, or CNB Common until such time as financial results covering at
least thirty (30) days of post-Merger combined operations have been published.
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SECTION 4.08. ACCESS TO INFORMATION. Pinnacle shall permit CNB reasonable
access in a manner which shall avoid undue disruption or interference with
Pinnacle's normal operations to its properties and shall disclose and make
available to CNB all books, documents, papers, records and computer systems
documentation and files relating to its assets, stock ownership, properties,
operations, obligations and liabilities, including, but not limited to, all
books of account (including the general ledger), tax records, minute books of
directors' and shareholders' meetings, organizational documents, material
contracts and agreements, loan files, filings with any regulatory authority,
accountants' workpapers (if available and subject to the respective independent
accountants' consent), litigation files (but only to the extent that such review
would not result in a material waiver of the attorney-client or attorney work
product privileges under the rules of evidence), Employee Benefit Plans, and any
other business activities or prospects in which CNB may have a reasonable and
legitimate interest in furtherance of the transactions contemplated by this
Agreement. CNB shall hold any such information which is nonpublic in confidence
in accordance with the provisions of Section 8.01 hereof.
SECTION 4.09. SUBSIDIARY BANK MERGER. Upon the request of CNB, Pinnacle
shall cause the Subsidiary Bank to enter into a merger agreement, subject to the
conditions of this Agreement, with a wholly-owned banking subsidiary of CNB, and
take all other actions and cooperate with CNB in causing such merger (the
"Subsidiary Bank Merger") to be effected. Such subsidiary bank merger agreement
shall provide, in addition to customary terms for the combination of subsidiary
bank operations in transactions such as this: (i) for consummation of any such
merger on a date on or after the Closing Date, as may be selected by CNB, and
(ii) that the obligations of the Subsidiary Bank thereunder are conditioned on
the prior or simultaneous consummation of the Merger pursuant to this Agreement.
SECTION 4.10. PLAN OF MERGER. At the request of CNB, Pinnacle shall enter
into a separate plan of merger or articles of merger or certificate of merger
reflecting the terms hereof for purposes of any filing requirement of the IBCL
and the MBCA.
SECTION 4.11. COMFORT LETTERS. Pinnacle shall use its reasonable best
efforts to cause to be delivered to CNB, and to CNB's directors and officers who
sign the Registration Statement, a letter of KPMG Peat Marwick, LLP, independent
auditors for Pinnacle, dated (i) the date on which the Registration Statement
shall become effective, and (ii) a date shortly prior to the Effective Date, and
addressed to CNB, and such directors and officers, in form and substance
customary for "comfort" letters delivered by independent accountants in
accordance with Statement of Accounting Standards No. 72.
SECTION 4.12. RESTATED PINNACLE FINANCIAL STATEMENTS. Pinnacle shall
prepare restated audited supplemental consolidated financial statements (the
"Restated Pinnacle Financial Statements"), giving retroactive effect to the
business combinations with IFC and CBI which were consummated on August 1, 1997.
Pinnacle shall prepare the Restated Pinnacle Financial Statements in accordance
with the requirements of Item 12(b)(2)(iv) of Form S-4 and Regulation S-X under
the Securities Act. Pinnacle shall include the Restated Pinnacle Financial
Statements as an exhibit to Pinnacle's Current Report on Form 8-K, which
Pinnacle shall file with the S.E.C. on or before the earlier to occur of (i) the
date upon which it shall have filed with the S.E.C. its Quarterly Report on
Form 10-Q for the quarter ended September 30, 1997, or (ii) November 14, 1997.
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ARTICLE FIVE
AGREEMENTS OF CNB
SECTION 5.01. REGULATORY APPROVALS AND REGISTRATION STATEMENT; OTHER
AGREEMENTS.
(a) CNB shall file all regulatory applications required in order to
consummate the Merger, including but not limited to the necessary applications
for the prior approval of the Federal Reserve Board. CNB shall keep Pinnacle
reasonably informed as to the status of such applications and make available to
Pinnacle for review prior to filing with the applicable Regulatory Agencies from
time to time copies of such applications and any supplementally filed materials.
(b) CNB shall file with the S.E.C. the Registration Statement relating to
the shares of CNB Common to be issued to the shareholders of Pinnacle pursuant
hereto, and shall use its best efforts to cause the Registration Statement to
become effective. At the time the Registration Statement becomes effective, CNB
shall cause the Registration Statement to comply in all material respects with
the provisions of the Securities Act and the published rules and regulations
thereunder, and not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not false or misleading. CNB covenants with Pinnacle that at
the time of mailing thereof to the shareholders of Pinnacle, at the time of the
Shareholders' Meetings and at the Effective Time, the Joint Proxy
Statement/Prospectus included as part of the Registration Statement, as amended
or supplemented by any amendment or supplement, shall not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not false or misleading. CNB shall timely file all
documents required to obtain all necessary Blue Sky permits and approvals, if
any, required to carry out the transactions contemplated by this Agreement,
shall pay all expenses incident thereto and shall use its best efforts to obtain
such permits and approvals on a timely basis. CNB shall promptly and properly
prepare and file (i) any application required to list on the N.Y.S.E. the shares
of CNB Common to be issued pursuant to the Merger, and (ii) any filings required
under the Exchange Act relating to the Merger and the transactions contemplated
herein.
(c) CNB shall cause to be duly called and held, on a date selected by CNB
and approved by Pinnacle, a special meeting of its shareholders (the "CNB
Shareholders' Meeting" and, together with the Pinnacle Shareholder Meeting, the
"Shareholders' Meetings") for submission of the transactions contemplated by
this Agreement for approval of such CNB shareholders. In connection with the
CNB Shareholders' Meeting, (i) CNB shall prepare and file the Joint Proxy
Statement/Prospectus with the S.E.C. and mail it to its shareholders, and
(ii) the Board of Directors of CNB shall (subject to compliance with its
fiduciary duties as advised by counsel) recommend to its shareholders the
approval of the issuance by CNB of the shares of CNB Common as provided herein
and use its best efforts to obtain such shareholder approval.
(d) CNB shall not (i) between the date hereof and the Effective Time,
except in a manner and pursuant to policies consistent with past practice, grant
any employee or director stock options to acquire CNB Common, (ii) between the
date hereof and the Effective Time, commit any act or fail to do any act which
would cause a breach of any agreement, contract or commitment and which would
have a Material Adverse Effect on CNB, (iii) affirmatively take, or cause to be
taken, any action, whether before or after the Effective Time, which would
disqualify the Merger as a "pooling of interests" for accounting purposes or as
a "reorganization" within the meaning of Section 368(a) of the Code, (iv)
without the prior
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written consent of Pinnacle, engage in any transaction or take any action that
would render untrue (under the standard of Section 1.11 hereof) any of the
representations and warranties of CNB contained in Article Three hereof (except
for any such representations and warranties made only as of a specified date),
if such representations and warranties were given as of the date of such
transaction or action. CNB shall promptly notify Pinnacle in writing of the
occurrence of any matter or event known to and directly involving CNB, which
would not include any changes in conditions that affect the banking industry
generally, that would have, either individually or in the aggregate, a Material
Adverse Effect on CNB.
SECTION 5.02. BREACHES. CNB shall, in the event it has knowledge of the
occurrence, or impending or threatened occurrence, of any event or condition
which would cause or constitute a breach (or would have caused or constituted a
breach had such event occurred or been known prior to the date hereof) of any of
its representations or agreements contained or referred to herein, give prompt
written notice thereof to Pinnacle and use its best efforts to prevent or
promptly remedy the same.
SECTION 5.03. CONSUMMATION OF AGREEMENT. CNB shall use its best efforts
to perform and fulfill all conditions and obligations on its part to be
performed or fulfilled under this Agreement and to effect the Merger in
accordance with the terms and conditions of this Agreement.
SECTION 5.04. STOCK OPTIONS.
(a) At the Effective Time, each outstanding option to purchase shares of
Pinnacle Common (a "Pinnacle Stock Option") issued pursuant to the Pinnacle
Financial Services, Inc. Executive Long Term Incentive Plan (also known as the
Pinnacle Financial Services, Inc. 1993 Stock Option Plan), as amended, and the
Indiana Financial Corporation 1986 Stock Option and Incentive Plan (together,
the "Stock Option Plans"), whether or not exercisable or vested, shall cease to
represent a right to acquire shares of Pinnacle Common and shall be converted
automatically into an option to acquire, from and after the Effective Time, on
the same terms and conditions as were applicable under such Pinnacle Stock
Option (including the immediate vesting of such Pinnacle Stock Option to the
extent that the terms thereof shall provide for such immediate vesting upon the
consummation of the Merger), the number of full shares of CNB Common as the
holder of such Pinnacle Stock Option would have been entitled to receive
pursuant to the Merger had such holder exercised such option in full immediately
prior to the Effective Time (determined by multiplying the aggregate number of
shares of Pinnacle Common covered by such Pinnacle Stock Option by the
Conversion Ratio), at a price per share equal to (y) the aggregate amount of the
exercise prices for Pinnacle Common otherwise purchasable pursuant to such
Pinnacle Stock Option, divided by (z) the number of full shares (and, subject to
Section 5.04(d) hereof, for these purposes, any fractional share amount shall be
rounded upwards to the next higher full share amount) of CNB Common deemed
purchasable pursuant to such Pinnacle Stock Option (determined as provided above
in this Section 5.04(a)). In no event shall CNB be required to issue fractional
shares of CNB Common.
(b) As soon as practicable after the Effective Time, CNB shall deliver to
each holder of Pinnacle Stock Options appropriate notices setting forth such
holders' rights pursuant to the Stock Option Plans, and the agreements
evidencing the grants of such Pinnacle Stock Options shall continue in effect on
the same terms and conditions (subject to the conversion required by this
Section 5.04 after giving effect to the Merger and the assumption by CNB as set
forth above). To the extent necessary to effectuate the provisions of this
Section 5.04, CNB shall deliver new or amended agreements reflecting the terms
of each Pinnacle Stock Option assumed by CNB and amend the Stock Option Plans to
reflect the terms hereof.
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(c) As soon as practicable after the Effective Time, CNB shall file with
the S.E.C. a registration statement on an appropriate form with respect to the
shares of CNB Common subject to such options and shall use its best efforts to
maintain the effectiveness of such registration statement or registration
statements (and maintain the current status of the prospectus or prospectuses
with respect thereto) for so long as such options remain outstanding.
(d) The adjustment provided in this Section 5.04 with respect to any
Pinnacle Stock Options which are "incentive stock options" (as defined in
Section 422 of the Code) shall be and is intended to be effected in a manner
which is consistent with Section 424(a) of the Code and, to the extent it is not
so consistent, such Section 424(a) of the Code shall override anything to the
contrary contained herein.
SECTION 5.05. DIRECTORS AND OFFICERS' LIABILITY INSURANCE AND
INDEMNIFICATION.
(a) For a period of six (6) years after the Effective Time, CNB shall use
its reasonable best efforts to cause to be maintained in effect the current
policies of directors' and officers' liability insurance maintained by Pinnacle
(provided that CNB may substitute therefor policies of comparable coverage with
respect to claims arising from facts or events which occurred before the
Effective Time); PROVIDED, HOWEVER, that in no event shall CNB be obligated to
expend, in order to maintain or provide insurance coverage pursuant to this
Section 5.05(a), any amount per annum in excess of 150% of the amount of the
annual premiums paid as of the date hereof by Pinnacle for such insurance (the
"Maximum Amount"). If the amount of the annual premiums necessary to maintain
or procure such insurance coverage exceeds the Maximum Amount, CNB shall use all
reasonable efforts to maintain the most advantageous policies of directors' and
officers' insurance obtainable for an annual premium equal to the Maximum
Amount. Notwithstanding the foregoing, prior to the Effective Time, CNB may
request Pinnacle to, and Pinnacle shall, purchase insurance coverage, on such
terms and conditions as shall be acceptable to CNB, extending for a period of
six (6) years Pinnacle's directors' and officers' liability insurance coverage
in effect as of the date hereof (covering past or future claims with respect to
periods before the Effective Time) and such coverage shall satisfy CNB's
obligations under this Section 5.05(a).
(b) For the applicable statute of limitations period, CNB shall indemnify,
defend and hold harmless the present and former officers, directors, employees
and agents of Pinnacle and its subsidiaries (each, an "Indemnified Party")
against all losses, expenses, claims, damages or liabilities arising out of
actions or omissions occurring on or prior to the Effective Time (including,
without limitation, the transactions contemplated by this Agreement and the
Pinnacle Option Agreement) to the full extent then permitted under the MBCA and
by Pinnacle's Articles of Incorporation as in effect on the date hereof (and,
with respect to predecessors of Pinnacle, the applicable laws, articles of
incorporation and bylaws pertaining thereto), including provisions relating to
advances of expenses incurred in the defense of any action or suit.
(c) Notwithstanding anything to the contrary, CNB shall acknowledge and
assume, upon consummation of the Merger, the obligations of Pinnacle relating to
the subject matter of this Section 5.05 with respect to its prior acquisitions
of IFC and CBI.
SECTION 5.06. EMPLOYEE BENEFITS.
(a) CNB shall, with respect to each employee of Pinnacle or its
subsidiaries at the Effective Time who shall continue in employment with
Pinnacle, CNB or their respective subsidiaries (each a
28
"Continued Employee"), provide the benefits described in this Section 5.06.
Subject to the right of subsequent amendment, modification or termination in
CNB's sole discretion, each Continued Employee shall be entitled, as a new
employee of a subsidiary of CNB, to participate in such employee benefit
plans, as defined in Section 3(3) of ERISA, or any non-qualified employee
benefit plans or deferred compensation, stock option, bonus or incentive
plans, or other employee benefit or fringe benefit programs that may be in
effect generally for employees of all of CNB's subsidiaries (the "CNB
Employee Plans"), if and as a Continued Employee shall be eligible and, if
required, selected for participation therein under the terms thereof and
otherwise shall not be participating in a similar plan maintained by Pinnacle
after the Effective Time. Pinnacle employees shall be eligible to
participate on the same basis as similarly situated employees of other CNB
subsidiaries. All such participation shall be subject to such terms of such
CNB Employee Plans as may be in effect from time to time and this Section
5.06 is not intended to give Continued Employees any rights or privileges
superior to those of other employees of CNB's subsidiaries (except as
provided in the following sentence with respect to credit for past service).
CNB may terminate or modify all Pinnacle Employee Plans except insofar as
benefits thereunder shall have vested at the Effective Time and cannot be
modified and CNB's obligation under this Section 5.06 shall not be deemed or
construed so as to provide duplication of similar benefits but, subject to
that qualification, CNB shall, for purposes of vesting and any age or period
of service requirements for commencement of participation with respect to any
CNB Employee Plans in which Continued Employees may participate (but not for
benefit accruals under any defined benefit plan), credit each Continued
Employee with his or her term of service with Pinnacle and its subsidiaries
and its and their predecessors. Notwithstanding anything to the contrary, CNB
shall acknowledge and assume, upon consummation of the Merger, the
obligations of Pinnacle relating to the subject matter of this Section 5.06
resulting from its prior acquisitions of IFC and CBI, as such obligations are
described in Section 2.11(c) of the Disclosure Schedule.
(b) Notwithstanding anything to the contrary, CNB shall acknowledge and
assume, upon consummation of the Merger, the obligations of Pinnacle under its
severance agreements, supplemental retirement plans and arrangements, deferred
compensation plans and arrangements, and related trusts including, without
limitation, all of the same maintained or provided by any subsidiary of Pinnacle
and any predecessor of Pinnacle or any of its subsidiaries, as such obligations
are described in Section 2.11(c) of the Disclosure Schedule.
SECTION 5.07. BOARD COMPOSITION. CNB's Board of Directors shall take all
requisite action to elect three (3) persons as directors of CNB (and divided
among the three (3) classes of CNB's Board of Directors) effective as of the
first meeting of CNB's Board of Directors after the Effective Time, which
persons shall be mutually selected by Pinnacle and CNB.
SECTION 5.08. ACCESS TO INFORMATION. CNB shall permit Pinnacle
reasonable access in a manner which shall avoid undue disruption or
interference with CNB's normal operations to its properties and shall
disclose and make available to Pinnacle all books, documents, papers and
records relating to its assets, stock ownership, properties, operations,
obligations and liabilities, including, but not limited to, all books of
account (including the general ledger), tax records, minute books of
directors' and shareholders' meetings, organizational documents, material
contracts and agreements, loan files, filings with any regulatory authority,
accountants' workpapers (if available and subject to the respective
independent accountants' consent), litigation files (but only to the extent
that such review would not result in a material waiver of the attorney-client
or attorney work product privileges under the rules of evidence), plans
affecting employees, and any other business activities or prospects in which
Pinnacle
29
may have a reasonable and legitimate interest in furtherance of the
transactions contemplated by this Agreement. Pinnacle shall hold any such
information which is nonpublic in confidence in accordance with the
provisions of Section 8.01 hereof.
SECTION 5.09. COMFORT LETTERS. CNB shall use its reasonable best efforts
to cause to be delivered to Pinnacle, a letter of KPMG Peat Marwick, LLP,
independent auditors for CNB, dated (i) the date on which the Registration
Statement shall become effective, and (ii) a date shortly prior to the Effective
Date, and addressed to Pinnacle, in form and substance customary for "comfort"
letters delivered by independent accountants in accordance with Statement of
Accounting Standards No. 72.
SECTION 5.10. RESTRICTION ON RESALES; PUBLICATION OF POST-MERGER RESULTS.
(a) CNB shall deliver to Pinnacle, at least five (5) days prior to the
mailing of the Joint Proxy Statement/Prospectus to the shareholders of CNB in
connection with the CNB Shareholders' Meeting, a list of each person who may
reasonably be deemed an "affiliate" of CNB within the meaning of such term as
used in Rule 145 under the Securities Act, at the time the Joint Proxy
Statement/Prospectus is mailed to the shareholders of CNB. CNB shall use its
best efforts to obtain and deliver to Pinnacle, at least thirty-one (31) days
prior to the Closing Date, the signed agreement of each person named on the list
referred to in the preceding sentence regarding compliance by such person with
the requirements of Accounting Principles Board Opinion No. 16 regarding the
disposition of shares (or reduction of risk with respect thereto) of CNB Common
during the thirty (30) days preceding the Closing Date and until such time as
financial results covering at least thirty (30) days of post-Merger combined
operations have been published.
(b) CNB shall publish financial results covering at least thirty (30) days
of post-Merger combined operations not later than forty-five (45) days following
the end of the calendar quarter which shall first occur following the Closing
Date which shall include thirty (30) or more days of post-Merger combined
operations.
ARTICLE SIX
CONDITIONS PRECEDENT TO MERGER
SECTION 6.01. CONDITIONS TO CNB'S OBLIGATIONS. The obligations of CNB to
effect the Merger shall be subject to the satisfaction (or waiver by CNB) prior
to or on the Closing Date of the following conditions:
(a) The representations and warranties made by Pinnacle in this Agreement
shall be true and correct (subject to the standard in Section 1.11 hereof) on
and as of the Closing Date with the same effect as though such representations
and warranties had been made or given on and as of the Closing Date (except for
any such representations and warranties made only as of a specified date which
shall be true and correct (subject to the standard in Section 1.11 hereof) as of
such date); and
(b) Pinnacle shall have performed and complied in all material respects
with all of its obligations and agreements required to be performed on or prior
to the Closing Date under this Agreement; and
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(c) No temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal
restraint or prohibition (an "Injunction") preventing the consummation of the
Merger shall be in effect, nor shall any proceeding by any Regulatory Agency or
other person seeking any of the foregoing be pending. There shall not be any
action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Merger which makes the consummation of the
Merger illegal; and
(d) All necessary regulatory approvals, consents, authorizations and other
approvals, including the requisite approval of this Agreement and the Merger by
the shareholders of Pinnacle and CNB, required by law or the N.Y.S.E. for
consummation of the Merger shall have been obtained and all waiting periods
required by law shall have expired, and no regulatory approval shall have
imposed any condition, requirement or restriction which the Board of Directors
of CNB reasonably determines in good faith would so materially adversely impact
the economic or business benefits of the transactions contemplated by this
Agreement to CNB and its shareholders as to render inadvisable the consummation
of the Merger (any such condition, requirement or restriction, a "Burdensome
Condition"); and
(e) CNB shall have received all documents required to be received from
Pinnacle on or prior to the Closing Date, all in form and substance reasonably
satisfactory to CNB; and
(f) The Merger shall qualify for pooling of interests accounting treatment
under Accounting Principles Board Opinion No. 16 if closed and consummated in
accordance with this Agreement and CNB shall have received an opinion letter,
dated as of the Closing Date, from KPMG Peat Marwick, LLP, its independent
public accountants, to such effect; and
(g) The Registration Statement shall be effective under the Securities Act
and no stop orders suspending the effectiveness of the Registration Statement
shall be in effect or proceedings for such purpose pending before or threatened
by the S.E.C. or any state securities agency; and
(h) CNB shall have received an opinion of its counsel, Xxxxx, Xxxx &
Xxxxxxxx, X.X., to the effect that if the Merger is consummated in accordance
with the terms set forth in this Agreement (i) the Merger shall constitute a
reorganization within the meaning of Section 368(a) of the Code, (ii) no gain or
loss shall be recognized by the holders of shares of Pinnacle Common upon
receipt of Merger Consideration (except for cash received in lieu of fractional
shares), (iii) the basis of shares of CNB Common received by the shareholders of
Pinnacle shall be the same as the basis of shares of Pinnacle Common exchanged
therefor, and (iv) the holding period of the shares of CNB Common received by
such shareholders shall include the holding period of the shares of Pinnacle
Common exchanged therefor, provided such shares were held as capital assets as
of the Effective Time; and
(i) CNB shall have received the letters referred to in Section 4.11 from
KPMG Peat Marwick, LLP, Pinnacle's independent auditors; and
(j) CNB shall have received, on or before the date of the mailing of the
Joint Proxy Statement/Prospectus, from its investment banker, Xxxxxxxxxxx & Co.,
Inc., the reaffirmation of the opinion of such investment banker, originally
rendered and delivered to CNB at the meeting of the Board of Directors of CNB at
which this Agreement was approved by such Board of Directors, to the effect that
the transactions contemplated by this Agreement are fair to CNB and its
shareholders from a financial point of view.
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SECTION 6.02. CONDITIONS TO PINNACLE'S OBLIGATIONS. The obligations of
Pinnacle to effect the Merger shall be subject to the satisfaction (or waiver by
Pinnacle) prior to or on the Closing Date of the following conditions:
(a) The representations and warranties made by CNB in this Agreement shall
be true and correct (subject to the standard in Section 1.11 hereof) on and as
of the Closing Date with the same effect as though such representations and
warranties had been made or given on and as of the Closing Date (except for any
such representations and warranties made only as of a specified date which shall
be true and correct (subject to the standard in Section 1.11 hereof) as of such
date); and
(b) CNB shall have performed and complied in all material respects with
all of its obligations and agreements hereunder required to be performed on or
prior to the Closing Date under this Agreement; and
(c) No Injunction preventing the consummation of the Merger shall be in
effect, nor shall any proceeding by any Regulatory Agency or any other person
seeking any of the foregoing be pending. There shall not be any action taken,
or any statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger which makes the consummation of the Merger illegal; and
(d) All necessary regulatory approvals, consents, authorizations and other
approvals, including the requisite approval of this Agreement and the Merger by
the shareholders of Pinnacle and CNB, required by law or the N.Y.S.E. for
consummation of the Merger shall have been obtained and all waiting periods
required by law shall have expired; and
(e) Pinnacle shall have received all documents required to be received
from CNB on or prior to the Closing Date, all in form and substance reasonably
satisfactory to Pinnacle; and
(f) The Registration Statement shall be effective under the Securities Act
and no stop orders suspending the effectiveness of the Registration Statement
shall be in effect or proceedings for such purpose pending before or threatened
by the S.E.C. or any state securities agency; and
(g) Pinnacle shall have received a copy of the opinion of CNB's counsel,
addressed to Pinnacle, contemplated by Section 6.01(h) hereof; and
(h) Pinnacle shall have received the letters referred to in Section 5.09
from KPMG Peat Marwick, LLP, CNB's independent auditors; and
(i) Pinnacle shall have received, on or before the date of the mailing of
the Joint Proxy Statement/Prospectus, from its investment banker, Friedman,
Billings, Xxxxxx & Co., Inc., the reaffirmation of the opinion of such
investment banker, originally rendered and delivered to Pinnacle at the meeting
of the Board of Directors of Pinnacle at which this Agreement was approved by
such Board of Directors, to the effect that the transactions contemplated by
this Agreement, including the Merger, are fair to Pinnacle and its shareholders
from a financial point of view; and
(j) The Merger shall qualify for pooling of interests accounting treatment
under Accounting Principles Board Opinion No. 16 if closed and consummated in
accordance with this Agreement and
32
Pinnacle shall have received an opinion letter, dated as of the Closing Date,
from KPMG Peat Marwick, LLP, CNB's independent public accountants, to such
effect; and
(k) The shares of CNB Common issuable pursuant to this Agreement shall
have been approved for listing on the N.Y.S.E., subject to official notice of
issuance.
ARTICLE SEVEN
TERMINATION OR ABANDONMENT
SECTION 7.01. MUTUAL AGREEMENT. This Agreement may be terminated by the
mutual written agreement of CNB and Pinnacle at any time prior to the Closing
Date, regardless of whether approval of this Agreement and the Merger by the
shareholders of Pinnacle and CNB shall have been previously obtained.
SECTION 7.02. BREACH OF AGREEMENTS. In the event that there is a breach
in any of the representations and warranties (subject to the standard in
Section 1.11 hereof) or a material breach of any of the agreements of CNB or
Pinnacle, which breach is not cured within thirty (30) days after written
notice to cure such breach is given to the breaching party by the
non-breaching party, then the non-breaching party, regardless of whether
shareholder approval of this Agreement and the Merger shall have been
previously obtained, may terminate and cancel this Agreement by providing
written notice of such action to the other party hereto.
SECTION 7.03. ENVIRONMENTAL REPORTS. CNB may terminate this Agreement to
the extent provided by Section 4.06 hereof and this Section 7.03 by giving
timely written notice thereof to Pinnacle.
SECTION 7.04. FAILURE OF CONDITIONS. In the event any of the conditions
to the obligations of either party are not satisfied or waived on or prior to
the Closing Date, and if any applicable cure period provided in Section 7.02
hereof has lapsed, then such party may, regardless of whether approval of this
Agreement and the Merger by the shareholders of Pinnacle and CNB shall has been
previously obtained, terminate and cancel this Agreement by delivery of written
notice of such action to the other party on such date.
SECTION 7.05. REGULATORY APPROVAL DENIAL; BURDENSOME CONDITION. If any
regulatory application filed pursuant to Section 5.01(a) hereof should be
finally denied or disapproved by the respective regulatory authority, then this
Agreement thereupon shall be deemed terminated and canceled; PROVIDED, HOWEVER,
that a request for additional information or undertaking by CNB, as a condition
for approval, shall not be deemed to be a denial or disapproval so long as CNB
diligently provides the requested information or undertaking. In the event an
application is denied pending an appeal, petition for review, or similar such
act on the part of CNB (hereinafter referred to as the "appeal") then the
application shall be deemed denied unless CNB prepares and timely files such
appeal and continues the appellate process for purposes of obtaining the
necessary approval. CNB may terminate this Agreement if its Board of Directors
shall have reasonably determined in good faith that any of the requisite
regulatory approvals imposes a Burdensome Condition, and CNB shall deliver
written notice of such determination to Pinnacle not later than thirty (30) days
after receipt by CNB of notice of the imposition of such Burdensome Condition
from the applicable Regulatory Agency (unless an appeal of such
33
determination is being pursued by CNB, in which event the foregoing notice
shall be given within thirty (30) days of the termination of any such appeal
by CNB or the denial of such appeal by the appropriate Regulatory Agency).
SECTION 7.06. SHAREHOLDER APPROVAL DENIAL; WITHDRAWAL/MODIFICATION OF
BOARD RECOMMENDATION. If this Agreement and the relevant transactions
contemplated by this Agreement, including the Merger, are not approved by the
requisite vote of the shareholders of Pinnacle and CNB at the respective
Shareholders' Meetings, then either party may terminate this Agreement. CNB may
terminate this Agreement if Pinnacle's Board of Directors shall have failed to
approve or recommend this Agreement or the Merger, or shall have withdrawn or
modified in any manner adverse to CNB its approval or recommendation of this
Agreement or the Merger, or shall have resolved or publicly announced an
intention to do either of the foregoing. Pinnacle may terminate this Agreement
if CNB's Board of Directors shall have failed to approve or recommend this
Agreement or the Merger, or shall have withdrawn or modified in any manner
adverse to Pinnacle its approval or recommendation of this Agreement or the
Merger, or shall have resolved or publicly announced an intention to do either
of the foregoing.
SECTION 7.07. REGULATORY ENFORCEMENT MATTERS. In the event that Pinnacle
or any of its subsidiaries shall, after the date hereof, become a party or
subject to any new or amended written agreement, memorandum of understanding,
cease and desist order, imposition of civil money penalties or other regulatory
enforcement action or proceeding with a Regulatory Agency, which would have a
Material Adverse Effect on Pinnacle, then CNB may terminate this Agreement. In
the event that CNB or any of its subsidiaries shall, after the date hereof,
become a party or subject to any new or amended written agreement, memorandum of
understanding, cease and desist order, imposition of civil money penalties or
other regulatory enforcement action or proceeding with a Regulatory Agency,
which would have a Material Adverse Effect on CNB, then Pinnacle may terminate
this Agreement.
SECTION 7.08. FALL-APART DATE. If the Closing Date does not occur on or
prior to September 30, 1998, then this Agreement may be terminated by either
party by giving written notice thereof to the other, unless the failure of the
Closing 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 in this Agreement.
SECTION 7.09. POSSIBLE PURCHASE PRICE ADJUSTMENT.
(a) As used in this Section 7.09, the following terms shall have the
following meanings:
(i) "CNB Average Price" shall mean the average of the daily closing
prices of CNB Common as reported in THE WALL STREET JOURNAL (Midwest Edition)
for the twenty (20) N.Y.S.E. trading days preceding the fifth (5th) calendar day
prior to the Closing Date (the "Determination Date"). The CNB Average Price
shall be appropriately and proportionately adjusted to reflect any Share
Adjustment, as contemplated by Section 1.06 hereof.
(ii) "CNB Starting Price" shall mean the average of the daily closing
prices of CNB Common as reported in THE WALL STREET JOURNAL (Midwest Edition)
for the ten (10) consecutive full N.Y.S.E. trading days commencing on the day
five (5) full N.Y.S.E. trading days before the first public announcement of the
Merger.
34
(iii) "Index Average Price" shall mean the weighted average
(weighted in accordance with the factors listed on Exhibit 7.09 hereto) of the
Stock Prices for all of the companies comprising the Index Group for the twenty
(20) consecutive full N.Y.S.E. trading days ending on the Determination Date.
(iv) "Index Group" shall mean all of those companies listed on
Exhibit 7.09 hereto, the common stock of which is publicly traded and as to
which there is no pending publicly announced agreement or proposal at any time
during the period of ten (10) N.Y.S.E. trading days ending on the Determination
Date for such company to be acquired or to acquire another company in exchange
for its stock where, in such later case, such company to be acquired would be a
significant subsidiary of such acquiring company (as such term is defined in
Section 3.03 hereof). In the event that any such company or companies are so
removed from the Index Group, the weights attributed to the remaining companies
shall be adjusted accordingly.
(v) "Index Starting Price" shall mean the weighted average (weighted
in accordance with the factors listed on Exhibit 7.09 hereto) of the Stock
Prices for all of the companies comprising the Index Group for the ten (10)
consecutive full N.Y.S.E. trading days commencing on the day five (5) full
N.Y.S.E. trading days before the first public announcement of the Merger.
(vi) "Stock Price" shall mean, for any company belonging to the
Index Group, the average of the daily closing sale prices of a share of common
stock of such company, as reported in the consolidated transaction reporting
system for the market or exchange on which such common stock is principally
traded during the applicable period. The Stock Price, for any company belonging
to the Index Group, shall be appropriately and proportionately adjusted to
reflect any Share Adjustment effected by such company during the applicable
period.
(b) Pinnacle may terminate this Agreement if its Board of Directors so
determines by a vote of a majority of the members of its entire Board, if both
of the following conditions are satisfied:
(i) The CNB Average Price shall be less than the $36.00; and
(ii) (1) the number obtained by dividing the CNB Average Price by the
CNB Starting Price shall be less than (2) the number obtained by dividing the
Index Average Price by the Index Starting Price and multiplying the quotient in
this clause (ii)(2) by 0.82:
SUBJECT, HOWEVER, to the following two sentences. If Pinnacle elects to
exercise its termination right pursuant to the immediately preceding sentence,
it shall give written notice to CNB within two (2) business days of the
Determination Date. Within two (2) business days after the date of receipt of
such notice, CNB shall have the option of adjusting the Conversion Ratio to
equal a number equal to a quotient, the numerator of which is the product of
$36.00 and the Conversion Ratio (as then in effect) and the denominator of which
is the CNB Average Price. If CNB makes an election contemplated by the
preceding sentence, it shall give prompt written notice to Pinnacle of such
election and the revised Conversion Ratio, whereupon no termination shall have
occurred pursuant to this Section 7.09(b) and this Agreement shall remain in
effect in accordance with its terms (except as the Conversion Ratio shall have
been so modified), and any references in this Agreement to "Conversion Ratio"
shall thereafter be deemed to refer to the Conversion Ratio as adjusted pursuant
to this Section 7.09(b).
35
ARTICLE EIGHT
GENERAL
SECTION 8.01. CONFIDENTIAL INFORMATION. The parties acknowledge the
confidential and proprietary nature of the "Information" (as described below in
this Section 8.01) which has heretofore been exchanged and which shall be
received from each other hereunder and agree to hold and keep the same
confidential. Such Information shall include any and all financial, technical,
commercial, marketing, customer or other information concerning the business,
operations and affairs of a party that may be provided to the other,
irrespective of the form of the communications, by such party's employees or
agents. Such Information shall not include information which is or becomes
generally available to the public other than as a result of a disclosure by a
party or its representatives in violation of this Agreement. The parties agree
that the Information shall be used solely for the purposes contemplated by this
Agreement and that such Information shall not be disclosed to any person other
than employees and agents of a party who are directly involved in evaluating the
transaction. The Information shall not be used in any way detrimental to a
party, including use directly or indirectly in the conduct of the other party's
business or any business or enterprise in which such party may have an interest,
now or in the future, and whether or not now in competition with such other
party.
SECTION 8.02. PUBLICITY. CNB and Pinnacle shall cooperate with each other
in the development and distribution of all news releases and other public
disclosures concerning this Agreement and the Merger and shall not issue any
news release or make any other public disclosure without the prior consent of
the other party, unless it reasonably believes such is required by law upon the
advice of counsel or is in response to published newspaper or other mass media
reports regarding the transactions contemplated by this Agreement, in which such
latter event the parties shall give reasonable notice, and to the extent
practicable, consult with each other regarding such responsive public
disclosure.
SECTION 8.03. RETURN OF DOCUMENTS. Upon termination of this Agreement
without the Merger becoming effective, each party (i) shall deliver to the other
originals and all copies of all Information made available to such party,
(ii) shall not retain any copies, extracts or other reproductions in whole or in
part of such Information, and (iii) shall destroy all memoranda, notes and other
writings prepared by any party based on the Information.
SECTION 8.04. NOTICES. Any notice or other communication shall be in
writing and shall be deemed to have been given or made on the date of delivery,
in the case of hand delivery, or three (3) business days after deposit in the
United States Registered Mail, postage prepaid, or upon receipt if transmitted
by facsimile telecopy or any other means, addressed (in any case) as follows:
(a) if to CNB:
CNB Bancshares, Inc.
00 X.X. Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxxx, Chief Executive Officer
Facsimile: 812/464-3496
36
with a copy to:
Xxxxx, Rice & Xxxxxxxx, X.X.
000 X. Xxxxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxx, Esq.
Facsimile: 314/444-7788
and
(b) if to Pinnacle:
Pinnacle Financial Services, Inc.
000 Xxxxxxxx Xxxxxx
Xx. Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Chairman and Chief Executive
Officer
Facsimile: 616/983-5567
-and-
Pinnacle Financial Services, Inc.
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxx, Vice Chairman and President
Facsimile: 219/464-2041
with a copy to:
Miller, Canfield, Paddock and Stone, P.L.C.
0000 X. Xxxxxxxx Xxx., Xxxxx 000
Xxxxxxxxxx Xxxxx, Xxxxxxxx 00000
Attention: J. Xxxxx Xxxxxxx, Esq.
Facsimile: 248/258-3036
or to such other address as any party may from time to time designate by notice
to the others.
SECTION 8.05. LIABILITIES AND EXPENSES. Except as provided in the
Pinnacle Option Agreement, in the event that this Agreement is terminated
pursuant to the provisions of Article Seven hereof, no party hereto shall have
any liability to any other party for costs, expenses, damages or otherwise;
PROVIDED, HOWEVER, that, notwithstanding the foregoing, in the event that this
Agreement is terminated pursuant to Article Seven hereof on account of a willful
breach of any of the representations and warranties set forth herein or any
willful breach of any of the agreements set forth herein, then the non-breaching
party shall be entitled to recover appropriate damages from the breaching party,
including, without limitation, reimbursement to the non-breaching party of its
costs, fees and expenses (including attorneys', accountants' and advisors' fees
and expenses) incident to the negotiation, preparation, execution and
performance of this Agreement and related documentation; PROVIDED, HOWEVER, that
nothing in this proviso
37
shall be deemed to constitute liquidated damages for the willful breach by a
party of the terms of this Agreement or otherwise limit the rights of the
non-breaching party.
SECTION 8.06. NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Except for, and as provided in, this Section 8.06 and the Pinnacle Option
Agreement, no representation, warranty or agreement contained herein shall
survive the Effective Time or the earlier termination of this Agreement;
PROVIDED, HOWEVER, that no such representation, warranty or covenant shall be
deemed to be terminated or extinguished so as to deprive CNB or Pinnacle (or any
director, officer or controlling person thereof) of any defense in law or equity
which otherwise would be available against the claims of any person, including,
without limitation, any shareholder or former shareholder of either CNB or
Pinnacle, the aforesaid representations, warranties and covenants being material
inducements to the consummation by CNB and Pinnacle of the transactions
contemplated herein. The agreements set forth in Sections 5.04, 5.05, 5.06,
5.07 and 5.10(b) hereof shall survive the Effective Time and the agreements set
forth in Sections 8.01, 8.02, 8.03, 8.05 and 8.16 hereof and this Section 8.06
shall survive the Effective Time or the earlier termination of this Agreement.
SECTION 8.07. ENTIRE AGREEMENT. This Agreement and the Pinnacle Option
Agreement constitute the entire agreement between the parties and supersede and
cancel any and all prior discussions, negotiations, undertakings, agreements in
principle or other agreements between the parties relating to the subject matter
hereof.
SECTION 8.08. HEADINGS AND CAPTIONS. The captions of Articles and
Sections hereof are for convenience only and shall not control or affect the
meaning or construction of any of the provisions of this Agreement.
SECTION 8.09. WAIVER, AMENDMENT OR MODIFICATION. The conditions of this
Agreement which may be waived may only be waived by notice to the other party
waiving such condition. The failure of any party at any time or times to
require performance of any provision hereof shall in no manner affect the right
at a later time to enforce the same. This Agreement may be amended or modified
by the parties hereto, at any time before or after shareholder approval of the
Agreement; PROVIDED, HOWEVER, that after any such approval no such amendment or
modification shall alter the amount or change the form of the Merger
Consideration contemplated by this Agreement to be received by shareholders of
Pinnacle. This Agreement not be amended or modified except by a written
document duly executed by the parties hereto.
SECTION 8.10. RULES OF CONSTRUCTION. Unless the context otherwise
requires: (i) a term has the meaning assigned to it, (ii) an accounting term
not otherwise defined has the meaning assigned to it in accordance with
generally accepted accounting principles, (iii) "or" is not exclusive,
(iv) words in the singular may include the plural and in the plural include the
singular, and (v) "knowledge" of a party means the actual or constructive
knowledge of any director or executive officer of such party or any of its
subsidiaries.
SECTION 8.11. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which shall
be deemed one and the same instrument. For purposes of executing this
Agreement, a document (or signature page thereto) signed and transmitted by
facsimile machine or telecopier is to be treated as an original document. The
signature of any party thereon, for purposes hereof, is to be considered as an
original signature, and the document transmitted is to be considered to have the
same binding effect as an original signature on an original document. At
38
the request of any party, any facsimile or telecopy document shall be
re-executed in original form by the parties who executed the facsimile or
telecopy document. No party may raise the use of a facsimile machine or
telecopier or the fact that any signature was transmitted through the use of
a facsimile or telecopier machine as a defense to the enforcement of this
Agreement or any amendment or other document executed in compliance with this
Section 8.11.
SECTION 8.12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. There shall be no third party beneficiaries hereof,
except for the intended third party beneficiaries of Sections 5.04, 5.05,
5.06(b) and 5.10(b) hereof.
SECTION 8.13. SEVERABILITY. In the event that any provisions of this
Agreement or any portion thereof shall be finally determined to be unlawful or
unenforceable, such provision or portion thereof shall be deemed to be severed
from this Agreement, and every other provision, and any portion of a provision,
that is not invalidated by such determination, shall remain in full force and
effect. To the extent that a provision is deemed unenforceable by virtue of its
scope but may be made enforceable by limitation thereof, such provision shall be
enforceable to the fullest extent permitted under the laws and public policies
of the State whose laws are deemed to govern enforceability. It is declared to
be the intention of the parties that they would have executed the remaining
provisions without including any that may be declared unenforceable.
SECTION 8.14. GOVERNING LAW; ASSIGNMENT. This Agreement shall be governed
by the laws of the State of Indiana, except to the extent that the MBCA must
govern the Merger procedures, and applicable federal laws and regulations. This
Agreement may not be assigned by either of the parties hereto.
SECTION 8.15. ENFORCEMENT OF AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties hereto shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction and such right shall be in
addition to any other remedy to which they shall be entitled at law or in
equity.
SECTION 8.16. TERMINATION FEE. Pinnacle shall pay CNB $4,700,000 in
immediately available funds within two (2) days after the occurrence of a
Purchase Event (as defined in Section 2(c) of the Stock Option Agreement),
provided that such Purchase Event shall have occurred prior to the occurrence of
an Exercise Termination Event (as defined in Section 2(a) of the Stock Option
Agreement).
39
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
PINNACLE FINANCIAL SERVICES, INC.
By _______________________________________
Xxxxxxx X. Xxxxxxx
Chairman and Chief Executive Officer
CNB BANCSHARES, INC.
By __________________________________________
Xxxxx X. Xxxxxxxx
Chief Executive Officer
40
EXHIBIT 1.01
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT (this "Agreement"), is made as of the 14th day
of October, 1997, between CNB BANCSHARES, INC., an Indiana corporation
("Grantee"), and PINNACLE FINANCIAL SERVICES, INC., a Michigan corporation
("Issuer").
RECITALS
A. Grantee and Issuer are entering into an Agreement and Plan of Merger,
dated as of the date hereof (the "Plan"), which is being executed by the parties
hereto simultaneously with the execution of this Agreement.
B. As a condition and inducement to Grantee's entering into the Plan and
in consideration therefor, Issuer has agreed to grant Grantee the Option (as
defined below).
C. In consideration of the foregoing and the mutual covenants and
agreements set forth herein and in the Plan, the parties hereto agree as
follows:
SECTION 1. GRANT OF OPTION. (a) Issuer hereby grants to Grantee an
unconditional, irrevocable option (the "Option") to purchase, subject to the
terms hereof, up to 2,000,000 fully paid and nonassessable shares of Common
Stock, no par value per share (the "Common Stock"), of Issuer at a price per
share equal to $37.00 per share (the "Initial Price"); PROVIDED, HOWEVER, that
in the event Issuer issues or agrees to issue (other than pursuant to options
and warrants to issue Common Stock or shares of convertible stock convertible
into shares of Common Stock in effect or outstanding as of the date hereof or
permitted to be granted under Section 4.01(b)(i) of the Plan) any shares of
Common Stock at a price less than the Initial Price (as adjusted pursuant to
Section 5(b)), such price shall be equal to such lesser price (such price, as
adjusted as hereinafter provided, the "Option Price"). The number of shares of
Common Stock that may be received upon the exercise of the Option and the Option
Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued
or otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement and the Plan and other than pursuant to an event
described in Section 5(a) hereof), the number of shares of Common Stock subject
to the Option shall be increased so that, after such issuance, such number
together with any shares of Common Stock previously issued pursuant hereto,
represents the same proportion of the number of shares of Common Stock then
issued and outstanding as such proportion before the event referred to above
(without giving effect to any shares subject or issued pursuant to the Option).
Nothing contained in this Section l(b) or elsewhere in this Agreement shall be
deemed to authorize Issuer to issue shares in breach of any provision of the
Plan.
SECTION 2. EXERCISE OF OPTION.
(A) TIMING OF EXERCISE, TERMINATION. Grantee may exercise the
Option, in whole or part, at any time and from time to time following the
occurrence of a Purchase Event (as defined below); PROVIDED that the Option
shall terminate and be of no further force and effect upon the earliest to occur
Ex.-1.01-1
of (i) the time immediately prior to the Effective Time, (ii) 12 months after
the first occurrence of a Purchase Event, (iii) 18 months after the termination
of the Plan following the occurrence of a Preliminary Purchase Event (as defined
below), (iv) termination of the Plan in accordance with the terms thereof prior
to the occurrence of a Purchase Event or a Preliminary Purchase Event (other
than a termination of the Plan by Grantee pursuant to Section 7.02 thereof or by
Grantee and Issuer pursuant to Section 7.01 thereof if Grantee shall at that
time have been entitled to terminate the Plan pursuant to Section 7.02 thereof
(provided that the breach of Issuer giving rise to such termination or such
right to terminate was willful)) or (v) 18 months after the termination of the
Plan by Grantee pursuant to Section 7.02 thereof or by Grantee and Issuer
pursuant to Section 7.01 thereof if Grantee shall at that time have been
entitled to terminate the Plan pursuant to Section 7.02 thereof (provided that
the breach of Issuer giving rise to such termination or such right to terminate
was willful). The events described in clauses (i) - (v) in the preceding
sentence are hereinafter collectively referred to as an "Exercise Termination
Event."
(B) PRELIMINARY PURCHASE EVENT. The term "Preliminary Purchase Event"
shall mean any of the following events or transactions occurring after the date
hereof:
(i) Issuer or any of its subsidiaries (each, an "Issuer Subsidiary"),
without having received Grantee's prior written consent, shall have entered
into an agreement to engage in an Acquisition Transaction (as defined
below) with any Person (the term "Person" for purposes of this Agreement
having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations thereunder) other than Grantee or any of its
subsidiaries (each a "Grantee Subsidiary") or the Board of Directors of
Issuer shall have recommended that the shareholders of Issuer approve or
accept any Acquisition Transaction with any Person other than Grantee or
any Grantee Subsidiary. For purposes of this Agreement, "Acquisition
Transaction" shall mean (x) a merger or consolidation, or any similar
transaction, involving Issuer or any Issuer Subsidiary that is a
significant subsidiary as defined in Rule 1-02 of Regulation S-X by the
Securities and Exchange Commission (and the term "significant subsidiary"
shall include, wherever used in this Agreement, any bank or other financial
institution subsidiary of Issuer), (y) a purchase, lease or other
acquisition of all or substantially all of the assets of or assumption of
all or substantially all the deposits of Issuer or any Issuer Subsidiary
that is a significant subsidiary, or (z) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of
securities representing 10% or more of the voting power of Issuer or any
Issuer Subsidiary that is a significant subsidiary, provided that the term
"Acquisition Transaction" does not include any internal merger or
consolidation, transfer or lease of assets or voting securities involving
only Issuer and/or Issuer Subsidiaries;
(ii) Any Person (other than Grantee or any Grantee Subsidiary, or any
Issuer Subsidiary acting in a fiduciary capacity in the ordinary course of
business, or any other Person who as of the date hereof Beneficially Owns
(the term "Beneficial Ownership" for purposes of this Agreement having the
meaning assigned thereto in Section 13(d) of the Exchange Act, and the
rules and regulations thereunder) 10% or more of the outstanding shares of
Common Stock) shall have acquired Beneficial Ownership or the right to
acquire Beneficial Ownership, of shares of Common Stock such that, upon the
consummation of such acquisition, such Person would have Beneficial
Ownership, in the aggregate, of 10% or more of the then outstanding shares
of Common Stock, or, with respect to any Person who as of the date hereof
Beneficially Owns 10%
Ex.-1.01-2
or more of the outstanding shares of Common Stock, such Person shall have
acquired Beneficial Ownership or the right to acquire Beneficial Ownership,
of shares of Common Stock such that, upon the consummation of such
acquisition, such Person would have Beneficial Ownership, in the aggregate,
of 15% or more of the then outstanding shares of Common Stock;
(iii) Any Person other than Grantee or any Grantee Subsidiary shall
have made a BONA FIDE proposal to Issuer or its shareholders, by public
announcement or written communication that is or becomes the subject of
public disclosure, to engage in an Acquisition Transaction (including,
without limitation, any situation in which any Person other than Grantee or
any Grantee Subsidiary shall have commenced (as such term is defined in
Rule 14d-2 under the Exchange Act) or shall have filed a registration
statement under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to, a tender offer or exchange offer to purchase any
shares of Common Stock such that, upon consummation of such offer, such
Person would own or control 10% or more of the then outstanding shares of
Common Stock (such an offer being referred to herein as a "Tender Offer" or
an "Exchange Offer", respectively));
(iv) After a proposal is made by a third party to Issuer or its
shareholders to engage in an Acquisition Transaction, or such third party
states its intention to make such a proposal if the Plan terminates and/or
the Option expires, Issuer shall have breached any covenant or obligation
contained in the Plan and such breach would entitle Grantee to terminate
the Plan (without regard to the cure period provided for therein unless
such cure is promptly effected without jeopardizing consummation of the
Merger pursuant to the terms of the Plan);
(v) The holders of Common Stock shall not have approved the Plan by
the requisite vote at the meeting of such stockholders held for the purpose
of voting on the Plan, or such meeting shall not have been held or shall
have been canceled prior to termination of the Plan, in each case after it
shall have been publicly announced that any Person (other than Grantee or
any Grantee Subsidiary) shall have (A) made, or disclosed an intention to
make, a proposal to engage in an Acquisition Transaction, (B) commenced a
Tender Offer or filed a registration statement under the Securities Act
with respect to an Exchange Offer, or (C) filed an application (or given a
notice) with, whether in draft or final form, the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") or any other
governmental authority or regulatory or administrative agency or commission
(each, a "Governmental Authority"), for approval to engage in an
Acquisition Transaction;
(vi) Any Person (other than Grantee or any Grantee Subsidiary), other
than in connection with a transaction to which Grantee has given its prior
written consent, shall have filed an application or notice with the Federal
Reserve Board or other Governmental Authority for approval to engage in an
Acquisition Transaction; or
(vii) Issuer's Board of Directors shall have withdrawn or modified
(or publicly announced its intention to withdraw or modify) in any manner
adverse in any respect to Grantee its recommendation that the stockholders
of Issuer approve the transactions contemplated by the Plan, or Issuer or
any significant Issuer Subsidiary shall have authorized, recommended,
proposed (or publicly announced its intention to authorize, recommend or
propose) an agreement to engage in an Acquisition Transaction between the
Issuer or any significant Issuer Subsidiary with any person other than
Grantee or a Grantee Subsidiary.
Ex.-1.01-3
(C) PURCHASE EVENT. The term "Purchase Event" shall mean either of
the following events or transactions occurring after the date hereof:
(i) The acquisition by any Person (other than Grantee or any Grantee
Subsidiary or any Issuer Subsidiary acting in a fiduciary capacity in the
ordinary course of business (provided that the foregoing exception shall
not apply to any Person for whom or which such Issuer Subsidiary is acting
in such fiduciary capacity)) of Beneficial Ownership of shares of Common
Stock, such that, upon the consummation of such acquisition, such Person
would have Beneficial Ownership, in the aggregate, of 20% or more of the
then outstanding shares of Common Stock; or
(ii) The occurrence of a Preliminary Purchase Event described in
Section 2(b)(i) hereof except that the percentage referred to in clause (z)
shall be 20%.
(D) NOTICE BY ISSUER. Issuer shall notify Grantee promptly in
writing of the occurrence of any Preliminary Purchase Event or Purchase Event;
PROVIDED, HOWEVER, that the giving of such notice by Issuer shall not be a
condition to the right of Grantee to exercise the Option.
(E) NOTICE OF EXERCISE. In the event that Grantee is entitled to and
wishes to exercise the Option, it shall send to Issuer a written notice (the
"Option Notice" and the date of which being hereinafter referred to as the
"Notice Date") specifying (i) the total number of shares of Common Stock it will
purchase pursuant to such exercise, (ii) the aggregate purchase price as
provided herein, and (iii) a period of time (that shall not be less than three
business days nor more than thirty business days) running from the Notice Date
(the "Closing Date") and a place at which the closing of such purchase shall
take place; PROVIDED, THAT, if prior notification to or approval of the Federal
Reserve Board or any other Governmental Authority is required in connection with
such purchase (each, a "Notification" or an "Approval," as the case may be),
(a) Grantee shall promptly file, or cause to be filed, the required notice or
application for approval ("Notice/Application"), (b) Grantee shall expeditiously
process, or cause to be expeditiously processed, the Notice/Application, and
(c) for the purpose of determining the Closing Date pursuant to clause (iii) of
this sentence, the period of time that otherwise would run from the Notice Date
shall instead run from the later of (x) in connection with any Notification, the
date on which any required notification periods have expired or been terminated,
and (y) in connection with any Approval, the date on which such approval has
been obtained and any requisite waiting period or periods shall have expired.
For purposes of Section 2(a) hereof, any exercise of the Option shall be deemed
to occur on the Notice Date relating thereto. On or prior to the Closing Date,
Grantee shall have the right to revoke its exercise of the Option in the event
that the transaction constituting a Purchase Event that gives rise to such right
to exercise shall not have been consummated.
(F) PAYMENTS. At the closing referred to in Section 2(e) hereof,
Grantee shall pay to Issuer the aggregate Option Price for the shares of Common
Stock specified in the Option Notice in immediately available funds by wire
transfer to a bank account designated by Issuer; PROVIDED, HOWEVER, that failure
or refusal of Issuer to designate such a bank account shall not preclude Grantee
from exercising the Option.
(G) DELIVERY OF COMMON STOCK. At such closing, subject to any
requisite Notification and/or Approval having been made or given and being in
full force and effect, Issuer shall deliver to Grantee a certificate or
certificates representing the number of shares of Common Stock specified in the
Ex.-1.01-4
Option Notice and, if the Option should be exercised in part only, a new Option
evidencing the rights of Grantee thereof to purchase the balance of the shares
of Common Stock purchasable hereunder.
(H) COMMON STOCK CERTIFICATES. Certificates for Common Stock
delivered at a closing hereunder shall be endorsed with a restrictive legend
substantially as follows:
The transfer of the shares represented by this certificate is subject
to resale restrictions arising under the Securities Act of 1933, as
amended, and to certain provisions of an agreement between CNB
Bancshares, Inc. and Pinnacle Financial Services, Inc. ("Issuer")
dated as of the 14th day of October, 1997. A copy of such agreement
is on file at the principal office of Issuer and will be provided to
the holder hereof without charge upon receipt by Issuer of a written
request therefor.
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if Grantee shall have delivered
to Issuer a copy of a letter from the staff of the Securities and Exchange
Commission, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the Securities Act; (ii) the reference to the provisions of this
Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference; and (iii) the
legend shall be removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such certificates shall
bear any other legend as may be required by law.
(I) HOLDER OF RECORD. Upon the giving by Grantee to Issuer of an
Option Notice and the tender of the applicable purchase price in immediately
available funds on the Closing Date, subject to any requisite Notification
and/or Approval having been made or given and being in full force and effect,
Grantee shall be deemed to be the holder of record of the number of shares of
Common Stock specified in the Option Notice, notwithstanding that the stock
transfer books of Issuer shall then be closed or that certificates representing
such shares of Common Stock shall not then actually be delivered to Grantee.
Issuer shall pay all expenses and any and all United States federal, state and
local taxes and other charges that may be payable in connection with the
preparation, issue and delivery of stock certificates under this Section 2 in
the name of Grantee.
SECTION 3. ISSUER'S COVENANTS.
(A) AVAILABLE SHARES. Issuer agrees that it shall at all times until
the termination of this Agreement have reserved for issuance upon the exercise
of the Option that number of authorized and reserved shares of Common Stock
equal to the maximum number of shares of Common Stock at any time and from time
to time issuable hereunder, all of which shares shall, upon issuance pursuant
hereto, be duly authorized, validly issued, fully paid, nonassessable, and
delivered free and clear of all claims, liens, encumbrances and security
interests and not subject to any preemptive rights.
(B) COMPLIANCE. Issuer agrees that it shall not, by amendment of its
articles of incorporation or through reorganization, consolidation, merger,
dissolution or sale of assets, or by any other voluntary act, avoid or seek to
avoid the observance or performance of any of the covenants, stipulations or
conditions to be observed or performed hereunder by Issuer.
Ex.-1.01-5
(C) CERTAIN ACTIONS, APPLICATIONS AND ARRANGEMENTS. Issuer shall
promptly take all action as may from time to time be required (including (i)
complying with all premerger notification, reporting and waiting period
requirements specified in 15 U.S.C. Section 18a and regulations promulgated
thereunder, and (ii) in the event, under the Bank Holding Company Act of 1956,
as amended (the "B.H.C. Act"), or the Change in Bank Control Act of 1978, as
amended, or any state banking law, prior approval of or notice to the Federal
Reserve Board or to any other Governmental Authority is necessary before the
Option may be exercised, cooperating with Grantee in preparing such applications
or notices and providing such information to each such Governmental Authority as
it may require) in order to permit Grantee to exercise the Option and Issuer
duly and effectively to issue shares of Common Stock pursuant hereto, and to
protect the rights of Grantee against dilution.
SECTION 4. EXCHANGE OF OPTION. This Agreement and the Option granted
hereby are exchangeable, without expense, at the option of Grantee, upon
presentation and surrender of this Agreement at the principal office of Issuer,
for other agreements providing for Options of different denominations entitling
the holder thereof to purchase, on the same terms and subject to the same
conditions as are set forth herein, in the aggregate the same number of shares
of Common Stock purchasable hereunder. The terms "Agreement" and "Option" as
used in this Section 4 include any agreements and related options for which this
Agreement and the Option granted hereby may be exchanged. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft, destruction
or mutilation of this Agreement, and (in the case of loss, theft or destruction)
of reasonably satisfactory indemnification, and upon surrender and cancellation
of this Agreement, if mutilated, Issuer shall execute and deliver a new
Agreement of like tenor and date. Any such new Agreement executed and delivered
shall constitute an additional contractual obligation on the part of Issuer,
whether or not the Agreement so lost, stolen, destroyed or mutilated shall at
any time be enforceable by anyone.
SECTION 5. ADJUSTMENTS. The number of shares of Common Stock purchasable
upon the exercise of the Option shall be subject to adjustment from time to time
as follows:
(a) In the event of any change in the Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares or the like, the type and number of shares of
Common Stock purchasable upon exercise hereof shall be appropriately adjusted
and proper provision shall be made so that, in the event that any additional
shares of Common Stock are to be issued or otherwise to become outstanding as a
result of any such change (other than pursuant to an exercise of the Option),
the number of shares of Common Stock that remain subject to the Option shall be
increased so that, after such issuance and together with shares of Common Stock
previously issued pursuant to the exercise of the Option (as adjusted on account
of any of the foregoing changes in the Common Stock), it represents the same
proportion of the number of shares of Common Stock then issued and outstanding
as such proportion before the applicable event described in this Section 5(a).
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the numerator
of which shall be equal to the number of shares of Common Stock purchasable
prior to the adjustment and the denominator of which shall be equal to the
number of shares of Common Stock purchasable after the adjustment.
Ex.-1.01-6
SECTION 6. REGISTRATION RIGHTS. (a) Upon the occurrence of a Purchase
Event that occurs prior to an Exercise Termination Event, Issuer shall, at the
request of Grantee (whether on its own behalf or on behalf of any subsequent
holder of the Option (or part thereof) or any holder of the shares of Common
Stock issued pursuant hereto), promptly prepare, file and keep current a
registration statement under the Securities Act covering any shares issued and
issuable pursuant to the Option and shall use its best efforts to cause such
registration statement to become effective and remain current in order to permit
the sale or other disposition of any shares of Common Stock issued upon total or
partial exercise of the Option (the "Option Shares") in accordance with any plan
of disposition requested by Grantee. Issuer shall use its best efforts to cause
such registration statement first to become effective and then to remain
effective for such period not in excess of 180 days from the day such
registration statement first becomes effective. Grantee shall have the right to
demand two such registrations at Issuer's expense. The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
Option Shares as provided above, Issuer is in the process of registration with
respect to an underwritten public offering of shares of Common Stock, and if in
the good faith judgment of the managing underwriter or managing underwriters,
or, if none, the sole underwriter or underwriters, of such offering, the
offering or inclusion of the Option Shares would interfere materially with the
successful marketing of the shares of Common Stock offered by Issuer, the number
of Option Shares otherwise to be covered in the registration statement
contemplated hereby may be reduced; PROVIDED, HOWEVER, that after any such
required reduction, the number of Option Shares to be included in such offering
for the account of Grantee shall constitute at least 25% of the total number of
shares of Common Stock held by Grantee and Issuer covered in such registration
statement; PROVIDED FURTHER, HOWEVER, that if such reduction occurs, then Issuer
shall file a registration statement for the balance as promptly as practicable
thereafter as to which no reduction shall thereafter occur. In addition, if
Issuer proposes to register its Common Stock or any other securities on a form
that would permit the registration of the Option Shares for public sale under
the Securities Act (whether proposed to be offered for sale by Issuer or any
other Person) it shall give prompt written notice to Grantee of its intention to
do so, specifying the relevant terms of such proposal, including the proposed
maximum offering price thereof. Upon the written notice of Grantee (whether on
its own behalf or on behalf of any subsequent holder of the Option (or part
thereof) or any holder of the shares of Common Stock issued pursuant hereto)
delivered to Issuer within 20 business days after the giving of any such notice,
which request shall specify the number of Option Shares desired to be disposed
by Grantee, Issuer shall use its best efforts to effect, in connection with its
proposed registration, the registration under the Securities Act of the Option
Shares set forth in such request. Grantee shall provide all information
reasonably requested by Issuer for inclusion in any registration statement to be
filed hereunder. In connection with any such registration, Issuer and Grantee
shall provide each other with representations, warranties, indemnities and other
agreements customarily given in connection with such registrations. If
requested by Grantee in connection with such registration, Issuer and Grantee
shall become a party to any underwriting agreement relating to the sale of such
shares, but only to the extent of obligating themselves in respect of
representations, warranties, indemnities and other agreements customarily
included in such underwriting agreements.
(b) In the event that Grantee requests Issuer to file a registration
statement following the failure to obtain any approval required to exercise the
Option as described in Section 9 hereof, the closing of the sale or other
disposition of the Common Stock or other securities pursuant to such
registration statement shall occur substantially simultaneously with the
exercise of the Option.
(c) Except where applicable state law prohibits such payments, Issuer
shall pay all expenses (including without limitation registration fees,
qualification fees, blue sky fees and expenses
Ex.-1.01-7
(including the fees and expenses of counsel), legal expenses, including the
reasonable fees and expenses of one counsel to the holders whose Option
Shares are being registered, printing expenses and the costs of special
audits or "cold comfort" letters, expenses of underwriters, excluding
discounts and commissions but including liability insurance if Issuer so
desires or the underwriters so require, and the reasonable fees and expenses
of any necessary special experts) in connection with each registration
pursuant to this Section 6 (including the related offerings and sales by
holders of Option Shares) and all other qualifications, notification or
exemptions pursuant to this Section 6.
(d) In connection with any registration under this Section 6, Issuer
hereby indemnifies Grantee, and each officer, director and controlling person of
Grantee, and each underwriter thereof, including each person, if any, who
controls such holder or underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, losses, claims, damages and liabilities
caused by any untrue, or alleged untrue, statement contained in any registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) or any preliminary prospectus, or caused by
any omission, or alleged omission, to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except insofar as such expenses, losses, claims, damages or liabilities of such
indemnified party are caused by any untrue statement or alleged untrue statement
that was included by Issuer in any such registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto) in reliance upon and in conformity with, information furnished in
writing to Issuer by such indemnified party expressly for use therein, and
Issuer and each officer, director and controlling person of Issuer shall be
indemnified by such Grantee, or by such underwriter, as the case may be, for all
such expenses, losses, claims, damages and liabilities caused by any untrue, or
alleged untrue, statement, that was included by Issuer in any such registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) in reliance upon, and in conformity with,
information furnished in writing to Issuer by such holder or such underwriter,
as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this Section 6(d)
of notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 6(d), such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
Section 6(d). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and reasonably satisfactory
to such indemnified party. The indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the indemnified party unless (i) the
indemnifying party either agrees to pay the same, (ii) the indemnifying party
fails to assume the defense of such action with counsel reasonably satisfactory
to the indemnified party, or (iii) the indemnified party has been advised by
counsel that one or more legal defenses may be available to the indemnifying
party that may be contrary to the interests of the indemnified party. No
indemnifying party shall be liable for the fees and expenses of more than one
separate counsel for all indemnified parties or for any settlement entered into
without its consent, which consent may not be unreasonably withheld.
Ex.-1.01-8
If the indemnification provided for in this Section 6(d) is
unavailable to a party otherwise entitled to be indemnified in respect of any
expenses, losses, claims, damages or liabilities referred to herein, then the
indemnifying party, in lieu of indemnifying such party otherwise entitled to be
indemnified, shall contribute to the amount paid or payable by such party to be
indemnified as a result of such expenses, losses, claims, damages or liabilities
in such proportion as is appropriate to reflect the relative fault of Issuer,
Grantee and the underwriters in connection with the statements or omissions
which resulted in such expenses, losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The amount paid or payable by a
party as a result of the expenses, losses, claims, damages and liabilities
referred to above shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or defending
any action or claim; PROVIDED, HOWEVER, that in no case shall Grantee be
responsible, in the aggregate, for any amount in excess of the net offering
proceeds attributable to its Option Shares included in the offering. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. Any obligation by any Grantee
to indemnify shall be several and not joint with other holders of Option Shares.
SECTION 7. OPTION REPURCHASE. (a) Upon the occurrence of a Purchase Event
that occurs prior to an Exercise Termination Event, (i) at the request (the date
of such request being the "Request Date") of Grantee, delivered within 30 days
of the Purchase Event (or such later period as may be provided pursuant to
Section 9 hereof), Issuer shall repurchase the Option from Grantee at a price
(the "Option Repurchase Price") equal to the amount by which (A) the
market/offer price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which the Option may then be exercised, and (ii) at
the request (the date of such request being the "Request Date") of the owner of
Option Shares from time to time (the "Owner"), delivered within 30 days of a
Purchase Event (or such later period as may be provided pursuant to Section 9
hereof), Issuer shall repurchase such number of the Option Shares from the Owner
as the Owner shall designate at a price (the "Option Share Repurchase Price")
equal to the market/offer price multiplied by the number of Option Shares so
designated. The term "market/offer price" shall mean the highest of (i) the
price per share of Common Stock at which a tender offer or exchange offer
therefor has been made after the date hereof and on or prior to the Request
Date, (ii) the price per share of Common Stock paid or to be paid by any third
party pursuant to an agreement with Issuer (whether by way of a merger,
consolidation or otherwise), (iii) the highest closing price for shares of
Common Stock within the 90-day period ending on the Request Date as reported on
The Nasdaq Stock Market's National Market (as reported in THE WALL STREET
JOURNAL (Midwest Edition) or, if not reported therein, in another mutually
agreed upon authoritative source), or (iv) in the event of a sale of all or
substantially all of Issuer's assets, the sum of the price paid in such sale for
such assets and the current market value of the remaining assets of Issuer as
determined by a nationally-recognized independent investment banking firm
mutually selected by Grantee or the Owner, as the case may be, on the one hand,
and Issuer, on the other hand, divided by the number of shares of Common Stock
of Issuer outstanding at the time of such sale. In determining the market/offer
price, the value of consideration other than cash shall be determined by a
nationally-recognized independent investment banking firm mutually selected by
Grantee or Owner, as the case may be, on the one hand, and Issuer, on the other
hand, whose determination shall be conclusive and binding on all parties.
(b) Grantee or the Owner, as the case may be, may exercise its right
to require Issuer to repurchase the Option and/or any Option Shares pursuant to
this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that Grantee or
the Owner, as the case may
Ex.-1.01-9
be, elects to require Issuer to repurchase the Option and/or the Option
Shares in accordance with the provisions of this Section 7. As immediately as
practicable, and in any event within five business days after the surrender
of the Option and/or certificates representing Option Shares and the receipt
of such notice or notices relating thereto, Issuer shall deliver or cause to
be delivered to Grantee the Option Repurchase Price or to the Owner the
Option Share Repurchase Price or the portion thereof that Issuer is not then
prohibited from so delivering under applicable law and regulation or as a
consequence of administrative policy.
(c) Issuer hereby undertakes to use its best efforts to obtain all
required regulatory and legal approvals and to file any required notices as
promptly as practicable in order to accomplish any repurchase contemplated by
this Section 7. Nonetheless, to the extent that Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
repurchasing the Option and/or the Option Shares in full, Issuer shall
immediately so notify Grantee and/or the Owner and thereafter deliver or cause
to be delivered, from time to time, to Grantee and/or the Owner, as appropriate,
the portion of the Option Repurchase Price and the Option Share Repurchase
Price, respectively, that it is no longer prohibited from delivering, within
five business days after the date on which Issuer is no longer so prohibited;
PROVIDED, HOWEVER, that if Issuer at any time after delivery of a notice of
repurchase pursuant to Section 7(b) is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to
Grantee and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full Grantee or Owner may revoke
its notice of repurchase of the Option or the Option Shares either in whole or
in part whereupon, in the case of a revocation in part, Issuer shall promptly
(i) deliver to Grantee and/or the Owner, as appropriate, that portion of the
Option Purchase Price or the Option Share Repurchase Price that Issuer is not
prohibited from delivering after taking into account any such revocation, and
(ii) deliver, as appropriate, either (A) to Grantee, a new Agreement evidencing
the right of Grantee to purchase that number of shares of Common Stock equal to
the number of shares of Common Stock purchasable immediately prior to the
delivery of the notice of repurchase less the number of shares of Common Stock
covered by the portion of the Option repurchased, or (B) to the Owner, a
certificate for the number of Option Shares covered by the revocation.
(d) Issuer shall not enter into any agreement with any party (other
than Grantee or a Grantee Subsidiary) for an Acquisition Transaction unless the
other party thereto assumes all the obligations of Issuer pursuant to this
Section 7 in the event that a Grantee or Owner elects, in its sole discretion,
to require such other party to perform such obligations.
SECTION 8. SUBSTITUTE OPTION.
(A) GRANT OF SUBSTITUTE OPTION. In the event that prior to an
Exercise Termination Event, Issuer shall enter into an agreement (i) to
consolidate or merge with any Person, other than Grantee or a Grantee
Subsidiary, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any Person, other than Grantee or a
Grantee Subsidiary, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then outstanding
shares of Common Stock shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property or the then
outstanding shares of Common Stock shall after such merger represent less than
50% of the outstanding shares and share equivalents of the merged company, or
(iii) to sell or otherwise transfer all or substantially all of its or any
significant Issuer Subsidiary's assets to any Person, other than Grantee or a
Grantee Subsidiary, then, and in each
Ex.-1.01-10
such case, the agreement governing such transaction shall make proper
provision so that the Option shall, upon the consummation of such transaction
and upon the terms and conditions set forth herein, be converted into, or
exchanged for, an option (the "Substitute Option"), at the election of
Grantee, of either (x) the Acquiring Corporation (as defined below), or (y)
any Person that controls the Acquiring Corporation (the Acquiring Corporation
and any such controlling Person being hereinafter referred to as the
"Substitute Option Issuer").
(B) EXERCISE OF SUBSTITUTE OPTION. The Substitute Option shall be
exercisable for such number of shares of the Substitute Common Stock (as is
hereinafter defined) as is equal to the market/offer price (as defined in
Section 7 hereof), MULTIPLIED by the number of shares of the Common Stock for
which the Option was theretofore exercisable, DIVIDED by the Average Price (as
is hereinafter defined). The exercise price of the Substitute Option per share
of the Substitute Common Stock (the "Substitute Purchase Price") shall then be
equal to the product of the Option Price MULTIPLIED by a fraction in which the
numerator is the number of shares of Common Stock for which the Option was
theretofore exercisable and the denominator is the number of shares for which
the Substitute Option is exercisable.
(C) TERMS OF SUBSTITUTE OPTION. The Substitute Option shall
otherwise have the same terms as the Option, PROVIDED, HOWEVER, that if the
terms of the Substitute Option cannot, for legal reasons, be the same as the
Option, such terms shall be as similar as possible and in no event less
advantageous to Grantee.
(D) SUBSTITUTE OPTION DEFINITIONS. The following terms have the
meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving Person, and (iii) the transferee of all or any substantial part
of Issuer's assets (or the assets of any significant Issuer Subsidiary);
(ii) "Substitute Common Stock" shall mean the common stock issued by
the Substitute Option Issuer upon exercise of the Substitute Option; and
(iii) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of the Substitute Common Stock on the day
preceding such consolidation, merger or sale; PROVIDED, HOWEVER, that if
such closing price is not ascertainable due to an absence of a public
market for the Substitute Common Stock, "Average Price" shall mean the
higher of (i) the price per share of Substitute Common Stock paid or to be
paid by any third party pursuant to an agreement with the issuer of the
Substitute Common Stock and (ii) the book value per share, calculated in
accordance with generally accepted accounting principles, of the Substitute
Common Stock immediately prior to exercise of the Substitute Option;
PROVIDED, FURTHER, that if Issuer is the issuer of the Substitute Option,
the Average Price shall be computed with respect to a share of common stock
issued by Issuer, the Person merging into Issuer or by any company which
controls or is controlled by such merging Person, as Grantee may elect.
(E) CAP ON SUBSTITUTE OPTION. In no event, pursuant to any of the
foregoing paragraphs, shall the Substitute Option be exercisable for more than
that proportion of the outstanding Substitute
Ex.-1.01-11
Common Stock equal to the proportion of the outstanding Common Stock of
Issuer which Grantee had the right to acquire immediately prior to the
issuance of the Substitute Option. In the event that the Substitute Option
would be exercisable for more than the proportion of the outstanding
Substitute Common Stock referred to in the immediately preceding paragraph
but for this clause (e), the Substitute Option Issuer shall make a cash
payment to Grantee equal to the excess of (i) the value of the Substitute
Option without giving effect to the limitation in this clause (e) over (ii)
the value of the Substitute Option after giving effect to the limitation in
this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm mutually selected by Grantee,
on the one hand, and Issuer, on the other hand.
SECTION 9. EXTENSION OF EXERCISE RIGHT. Notwithstanding Sections 2, 6 and
7 and 11 hereof, if Grantee has given the notice referred to in one or more of
such Sections, the exercise of the rights specified in any such Section shall be
extended (a) if the exercise of such rights requires obtaining regulatory
approvals (including any required waiting periods) to the extent necessary to
obtain all regulatory approvals for the exercise of such rights, and (b) to the
extent necessary to avoid liability under Section 16(b) of the Exchange Act by
reason of such exercise; PROVIDED, HOWEVER, that in no event shall any closing
date occur more than 6 months after the related Notice Date, and, if the closing
date shall not have occurred within such period due to the failure to obtain any
required approval by the Federal Reserve Board or any other Governmental
Authority despite the best efforts of Issuer or the Substitute Option Issuer, as
the case may be, to obtain such approvals, the exercise of the Option shall be
deemed to have been rescinded as of the related Notice Date. In the event
(a) Grantee receives official notice that an approval of the Federal Reserve
Board or any other Governmental Authority required for the purchase and sale of
the Option Shares shall not be issued or granted, or (b) a closing date has not
occurred within 6 months after the related Notice Date due to the failure to
obtain any such required approval, Grantee shall be entitled to exercise the
Option in connection with the resale of the Option Shares pursuant to a
registration statement as provided in Section 6.
SECTION 10. ISSUER'S REPRESENTATIONS AND WARRANTIES. Issuer hereby
represents and warrants to Grantee as follows:
(A) CORPORATE AUTHORITY. Issuer 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
authorized by the Board of Directors of Issuer and no other corporate
proceedings on the part of Issuer are necessary to authorize this Agreement or
to consummate the transactions so contemplated. This Agreement has been duly
executed and delivered by, and constitutes a valid and binding obligation of,
Issuer, enforceable against Issuer in accordance with its terms, except as
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought; and
(B) AVAILABILITY OF SHARES. Issuer has taken all necessary corporate
action to authorize and reserve and to permit it to issue, and at all times from
the date hereof through the termination of this Agreement in accordance with its
terms shall have reserved for issuance upon the exercise of the Option, that
number of shares of Common Stock equal to the maximum number of shares of Common
Stock at any time and from time to time issuable hereunder, and all such shares,
upon issuance pursuant hereto,
Ex.-1.01-12
shall be duly authorized, validly issued, fully paid, non-assessable, and
shall be delivered free and clear of all claims, liens, encumbrances and
security interests and not subject to any preemptive rights.
(C) NO VIOLATIONS. The execution, delivery and performance of this
Agreement does not or shall not, and the consummation by Issuer of any of the
transactions contemplated hereby shall not, constitute or result in (A) a breach
or violation of, or a default under, its articles of incorporation or by-laws,
or the comparable governing instruments of any of the Issuer Subsidiaries, or
(B) a breach or violation of, or a default under, any agreement, lease,
contract, note, mortgage, indenture, arrangement or other obligation of it or
any of the Issuer Subsidiaries (with or without the giving of notice, the lapse
of time or both) or under any law, rule, ordinance or regulation or judgment,
decree, order, award or governmental or non-governmental permit or license to
which it or any of the Issuer Subsidiaries is subject, that would, in any case
give any other person the ability to prevent or enjoin Issuer's performance
under this Agreement in any material respect.
SECTION 11. ASSIGNMENT. Neither of the parties hereto may assign any of
its rights or delegate any of its obligations under this Agreement or the Option
created hereunder to any other Person without the express written consent of the
other party, except that Grantee may assign this Agreement to a wholly owned
subsidiary of Grantee and Grantee may assign its rights hereunder in whole or in
part after the occurrence of a Preliminary Purchase Event; PROVIDED, HOWEVER,
that until the date at which the Federal Reserve Board has approved an
application by Grantee under the B.H.C. Act to acquire the shares of Common
Stock subject to the Option, other than to a wholly owned subsidiary of Grantee,
Grantee may not assign its rights under the Option except in (i) a widely
dispersed public distribution, (ii) a private placement in which no one party
acquires the right to purchase in excess of 2% of the voting shares of Issuer,
(iii) an assignment to a single party (e.g., a broker or investment banker) for
the purpose of conducting a widely dispersed public distribution on Grantee's
behalf, or (iv) any other manner approved by the Federal Reserve Board. The
term "Grantee," as used in this Agreement, shall also be deemed to refer to
Grantee's permitted assigns. Any attempted assignment prohibited by this
Section 11 is void and without effect.
SECTION 12. FILINGS AND CONSENTS. Each of Grantee and Issuer shall use
its reasonable efforts to make all filings with, and to obtain consents of, all
third parties and Governmental Authorities necessary to the consummation of the
transactions contemplated by this Agreement, including, without limitation,
making application if necessary, for listing of the shares of Common Stock
issuable hereunder on any exchange or quotation system and applying to the
Federal Reserve Board under the B.H.C. Act and to state banking authorities for
approval to acquire the shares issuable hereunder.
SECTION 13. REMEDIES. The parties hereto acknowledge that damages would
be an inadequate remedy for a breach of this Agreement by either party hereto
and that the obligations of the parties shall hereto be enforceable by either
party hereto through injunctive or other equitable relief. Both parties further
agree to waive any requirement for the securing or posting of any bond in
connection with the obtaining of any such equitable relief and that this
provision is without prejudice to any other rights that the parties hereto may
have for any failure to perform this Agreement.
SECTION 14. SEVERABILITY. If any term, provision, covenant or restriction
contained in this Agreement is held by a court or a federal or state regulatory
agency of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions and covenants and restrictions
Ex.-1.01-13
contained in this Agreement shall remain in full force and effect, and shall
in no way be affected, impaired or invalidated.
SECTION 15. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in Person, by cable, telegram, telecopy or telex, or by registered or certified
mail (postage prepaid, return receipt requested) at the respective addresses of
the parties set forth in the Plan.
SECTION 16. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement and shall be effective at the time
of execution.
SECTION 17. EXPENSES. Except as otherwise expressly provided herein, each
of the parties hereto shall bear and pay all costs and expenses incurred by it
or on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
SECTION 18. ENTIRE AGREEMENT. Except as otherwise expressly provided
herein or in the Plan, this Agreement contains the entire agreement between the
parties with respect to the transactions contemplated hereunder and supersedes
all prior arrangements or understandings with respect thereof, written or oral.
The terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns. Nothing in this Agreement, expressed or implied, is intended to confer
upon any party, other than the parties hereto, and their respective successors
except as assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided herein.
SECTION 19. DEFINITIONS. Capitalized terms used in this Agreement and not
defined herein but defined in the Plan shall have the meanings assigned thereto
in the Plan.
SECTION 20. EFFECT ON PLAN. Nothing contained in this Agreement shall be
deemed to authorize Issuer or Grantee to breach any provision of the Plan.
SECTION 21. SELECTIONS. In the event that any selection or determination
is to be made by Grantee hereunder and at the time of such selection or
determination there is more than one Grantee, such selection shall be made by a
majority in interest of such Grantees.
SECTION 22. FURTHER ASSURANCES. In the event of any exercise of the
option by Grantee, Issuer and such Grantee shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such exercise.
SECTION 23. VOTING. Except to the extent Grantee exercises the Option,
Grantee shall have no rights to vote or receive dividends or have any other
rights as a shareholder with respect to shares of Common Stock covered hereby.
SECTION 24. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Indiana.
Ex.-1.01-14
IN WITNESS WHEREOF, each of the parties has caused this Stock Option
Agreement to be executed on its behalf by their officers thereunto duly
authorized, all as of the date first above written.
PINNACLE FINANCIAL SERVICES, INC.
By _____________________________________
Xxxxxxx X. Xxxxxxx
Chairman and Chief Executive Officer
CNB BANCSHARES, INC.
By _____________________________________
Xxxxx X. Xxxxxxxx
Chief Executive Officer
Ex.-1.01-15
EXHIBIT 1.10(A)
PINNACLE'S LEGAL OPINION MATTERS
1. The due incorporation, valid existence and good standing of Pinnacle
under the laws of the State of Michigan, its power and authority to own and
operate its properties and to carry on its business as now conducted, and its
power and authority to enter into the Agreement, to merge with CNB in accordance
with the terms of the Agreement and to consummate the transactions contemplated
by the Agreement.
2. The due incorporation or organization, valid existence and good
standing of the Subsidiary Bank and its power and authority to own and operate
its properties.
3. The due and proper performance of all corporate acts and other
proceedings necessary or required to be taken by Pinnacle to authorize the
execution, delivery and performance of the Agreement, the due execution and
delivery of the Agreement by Pinnacle, and the Agreement as a valid and binding
obligation of Pinnacle, enforceable against Pinnacle in accordance with its
terms (subject to the provisions of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar laws affecting the
enforceability of creditors' rights generally from time to time in effect, and
equitable principles relating to the granting of specific performance and other
equitable remedies as a matter of judicial discretion).
4. The execution of the Agreement by Pinnacle, and the consummation of
the Merger and the other transactions contemplated therein, does not violate or
cause a default under Pinnacle's Articles of Incorporation or Bylaws, or, to the
best knowledge of counsel, any statute, regulation or rule or any judgment,
order or decree against or any material agreement binding upon Pinnacle or its
subsidiaries.
5. To the best knowledge of such counsel, the receipt of all required
consents, approvals (including the requisite approval of the shareholders of
Pinnacle), orders or authorizations of, or registrations, declarations or
filings with or notices to, any court, administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign, or any
other person or entity required to be obtained or made by Pinnacle or its
subsidiaries in connection with the execution and delivery of the Agreement or
the consummation of the transactions contemplated therein.
6. To the best knowledge of counsel, the nonexistence of any material
actions, suits, proceedings, orders, investigations or claims pending against
Pinnacle or the Subsidiary Bank which, if adversely determined, would have a
material adverse effect upon their respective properties or assets or the
transactions contemplated by the Agreement.
Ex.-1.10(b)-1
EXHIBIT 1.10(B)
CNB'S LEGAL OPINION MATTERS
1. The due incorporation, valid existence and good standing of CNB
under the laws of the State of Indiana, its power and authority to own and
operate its properties and to carry on its business as presently conducted
and its power and authority to enter into the Agreement to merge with
Pinnacle in accordance with the terms of the Agreement and to consummate the
transactions contemplated thereby.
2. The due and proper performance of all corporate acts and other
proceedings required to be taken by CNB to authorize the execution, delivery
and performance of the Agreement, its due execution and delivery of the
Agreement, and the Agreement as a valid and binding obligation of CNB
enforceable against CNB in accordance with its terms (subject to the
provisions of bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforceability of creditors' rights generally from time to
time in effect, and equitable principles relating to the granting of specific
performance and other equitable remedies as a matter of judicial discretion).
3. The due authorization and, when issued to the shareholders of
Pinnacle in accordance with the terms of the Agreement, the valid issuance of
the shares of CNB Common to be issued pursuant to the Merger, such shares
being fully paid and non-assessable, with no personal liability attaching to
the ownership thereof.
4. The execution and delivery of the Agreement by CNB and the
consummation of the transactions contemplated therein, as neither conflicting
with, in breach of or in default under, resulting in the acceleration of,
creating in any party the right to accelerate, terminate, modify or cancel,
or violate, any provision of CNB's Articles of Incorporation or Bylaws, or
any statute, regulation, rule, judgment, order or decree binding upon CNB
which would be materially adverse to the business of CNB and its subsidiaries
taken as a whole.
5. To the best knowledge of such counsel, the receipt of all required
consents, approvals, orders or authorizations of, or registrations,
declarations or filings with or without notices to, any court, administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign, or any other person or entity required to be obtained or
made by or with respect to CNB in connection with the execution and delivery
of the Agreement or the consummation of the transactions contemplated by the
Agreement.
6. To the knowledge of counsel, the nonexistence of any material
actions, suits, proceedings, orders, investigations or claims pending against
CNB or any of its significant subsidiaries which, if adversely determined,
would have a material adverse effect upon their respective properties or
assets or the transactions contemplated by the Agreement.
Ex.-1.10(b)-1
EXHIBIT 4.07
___________________, 199__
CNB Bancshares, Inc.
00 X.X. Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxxx
Chief Executive Officer
Re: Agreement and Plan of Merger, dated as of October 14, 1997 (the
"Merger Agreement"), by and between Pinnacle Financial Services, Inc.
("Pinnacle") and CNB Bancshares, Inc. ("CNB")
Gentlemen:
I have been advised that I may be deemed to be an affiliate of Pinnacle, as
that term is defined for purposes of paragraphs (c) and (d) of Rule 145
("Rule 145") of the Rules and Regulations of the Securities and Exchange
Commission (the "Commission") promulgated under the Securities Act of 1933, as
amended (the "Securities Act").
Pursuant to the terms and conditions of the Merger Agreement, each share of
common stock of Pinnacle owned by me as of the effective time of the merger
contemplated by the Merger Agreement (the "Merger") may be converted into the
right to receive shares of common stock of CNB and cash in lieu of any
fractional share. As used in this letter, the shares of common stock of
Pinnacle owned by me as of _________________________ (the date 30 days prior to
the anticipated effective time of the Merger) are referred to as the "Pre-Merger
Shares" and the shares of common stock of CNB which may be received by me in the
Merger in exchange for my Pre-Merger Shares are referred to as the "Post-Merger
Shares." This letter is delivered to CNB pursuant to Section 4.07 of the Merger
Agreement.
A. I represent and warrant to CNB and agree that:
1. I shall not make any sale, transfer or other disposition of the
Post-Merger Shares I receive pursuant to the Merger in violation of the
Securities Act or the Rules and Regulations of the Commission promulgated
thereunder.
2. I understand that the issuance of the Post-Merger Shares to me
pursuant to the Merger shall be registered with the Commission under the
Securities Act. I also understand that because I may be deemed an
"affiliate" of Pinnacle and because any distributions by me of the
Post-Merger Shares shall not be registered under the Securities Act,
such Post-Merger Shares must be held by me unless (i) the sale, transfer
or other distribution has been registered under the Securities Act,
(ii) the sale, transfer or other distribution of such Post-Merger Shares
is made in accordance with the provisions of Rule 145, or (iii) in the
opinion of counsel acceptable to CNB
Ex.-4.08-1
____________________
___________________, 19___
Page 2
some other exemption from registration under the Securities Act is
available with respect to any such proposed distribution,
sale, transfer or other disposition of such Post-Merger Shares.
3. In no event shall I sell the Pre-Merger Shares or the Post-Merger
Shares, as the case may be, or otherwise transfer or reduce my risk
relative to the Pre-Merger Shares or Post-Merger Shares, as the case may
be, during the period beginning 30 days prior to the date on which the
Merger is consummated and ending on the date that CNB has published
financial results covering at least 30 days of the combined operations of
CNB and Pinnacle. I understand that CNB has agreed to publish said results
not later than 45 days following the end of the first quarter of the year
that includes 30 days or more of combined operations following the Merger,
any my commitment is conditioned upon the CNB's agreement to so publish
said results.
B. I understand and agree that:
1. Stop transfer instructions shall be issued with respect to the
Post-Merger Shares and there shall be placed on the certificates
representing such Post-Merger Shares, or any certificate delivered in
substitution therefor, a legend stating in substance:
"The shares represented by this Certificate have been issued
to an affiliate of a party to a transaction with CNB
Bancshares, Inc. pursuant to the provisions of Rule 145
under the Securities Act of 1933. A stop transfer order
with respect to this Certificate has been issued to the
Transfer Agent. The shares represented hereby will be
transferred on the books of CNB Bancshares, Inc. only upon
delivery to the Transfer Agent of evidence, reasonably
satisfactory to CNB Bancshares, Inc., that such transfer
complies in all material respects with the provisions of the
Securities Act of 1933 and the rules and regulations
thereunder."
2. Unless the transfer by me of Post-Merger Shares is a sale made in
compliance with the provisions of Rule 145(d) or made pursuant to an
effective registration statement under the Securities Act, CNB reserves the
right to place the following legend on the Certificates issued to my
transferee:
"The shares represented by this Certificate have not been
registered under the Securities Act of 1933, as amended, and
were acquired from a person who received such shares in a
transaction to which Rule 145 under the Securities Act of
1933, as amended, applied. The shares have not been
acquired by the holder with a view to, or for resale in
connection with, any distribution thereof within the meaning
of the Securities Act of 1933, as amended, and may not be
sold or otherwise transferred unless the shares have been
registered under the Securities Act of 1933, as amended, or
an exemption from registration is available."
Ex.-4.08-2
____________________
___________________, 19___
Page 3
I understand and agree that the legends set forth in paragraphs 1 and 2
above shall be removed by delivery of substitute Certificates without any legend
if I deliver to CNB a copy of a letter from the staff of the Commission, or an
opinion of counsel in form and substance satisfactory to CNB, to the effect that
no such legend is required for the purpose of the Securities Act.
I have carefully read this letter and the Merger Agreement and understand
the requirements of each and the limitations imposed upon the distribution,
sale, transfer or other disposition of Pre-Merger Shares or Post-Merger Shares
by me.
Very truly yours,
Ex.-4.08-3
EXHIBIT 7.09
INDEX GROUP
COMPANY INDEX WEIGHT (%)
Provident Financial Group Inc. (OH) 11.10%
FirstMerit Corp. (OH) 9.39
First Commercial Corp. (AR) 9.06
National Commerce Bancorp. (TN) 8.19
Magna Group Inc. (MO) 7.23
Old National Bancorp (IN) 6.55
One Valley Bancorp Inc. (WV) 5.47
UMB Financial Corp. (MO) 5.65
First Financial Bancorp. (OH) 4.38
Park National Corp. (OH) 4.37
United Bankshares Inc. (WV) 3.85
Fort Xxxxx National Corp. (IN) 3.48
First Midwest Bancorp Inc. (IL) 3.35
Citizens Banking Corp. (MI) 3.49
AMCORE Financial Inc. (IL) 3.24
Corus Bankshares Inc. (IL) 3.02
Mid Am Inc. (OH) 2.88
Firstbank of Illinois Co. (IL) 2.80
1st Source Corp. (IN) 2.51
______
100.00%
==========
Ex.-7.09-1
