<PAGE> 1
[ANB CORPORATION LETTERHEAD]
Your Board of Directors and the Board of Directors of Old National Bancorp
have agreed that Old National will acquire ANB in a merger. Your Board of
Directors believes that the merger is in the best interests of ANB as a whole,
including your interests, and that it will result in a combined company with
expanded opportunities for profitable growth and enhancement of shareholder
value.
If the merger is approved by the shareholders of ANB and all other closing
conditions are satisfied, you will receive 1.3125 shares of Old National common
stock, as adjusted for the 5% stock dividend declared by Old National on
December 9, 1999, for each share of ANB common stock you own on the date the
merger is completed. If this exchange results in you owning a fractional share
of Old National common stock, Old National will pay you cash for the fractional
share. The number of shares of Old National common stock you receive as a result
of the merger will be proportionally increased or decreased if Old National
issues a stock dividend or stock split between now and the closing date of the
merger. Old National's common stock is traded on the Nasdaq National Market
System under the symbol "OLDB."
ANB's financial advisor, Sandler O'Neill & Partners, L.P., has issued its
opinion to the Board of Directors of ANB that the 1.3125 exchange ratio in the
proposed merger is fair, from a financial point of view, to ANB's shareholders.
Your Board of Directors unanimously approved the merger agreement and recommends
that the shareholders of ANB approve it. The merger cannot be completed unless
the holders of at least a majority of the outstanding shares of ANB approve it.
The special meeting of ANB shareholders to vote on the merger will be held on:
Friday, March 10, 2000
9:00 a.m. (local time)
Horizon Convention Center
Interurban Hall
401 South High Street
Muncie, Indiana 47305
Your vote is very important. Whether or not you plan to attend the special
meeting, please take the time to vote by completing and mailing the enclosed
proxy card to us. This document provides you with detailed information about the
meeting and the merger. We encourage you to read this entire document carefully.
Sincerely,
/s/ JAMES R. SHRECONGOST
James R. Schrecongost
Vice Chairman, President and CEO
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES
COMMISSION NOR THE INDIANA DEPARTMENT OF FINANCIAL INSTITUTIONS HAS APPROVED OF
THE SECURITIES TO BE ISSUED UNDER THIS PROXY STATEMENT-PROSPECTUS OR DETERMINED
IF THIS PROXY STATEMENT-PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
SHARES OF OLD NATIONAL COMMON STOCK ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR
OTHER OBLIGATIONS OF ANY BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE BANK INSURANCE FUND OR ANY OTHER GOVERNMENT AGENCY.
---------------------
THE DATE OF THIS PROXY STATEMENT-PROSPECTUS IS FEBRUARY 10, 2000
AND IS BEING MAILED TO ANB SHAREHOLDERS ON FEBRUARY 10, 2000.
<PAGE> 2
ANB CORPORATION
120 WEST CHARLES STREET
MUNCIE, INDIANA 47305
(765) 747-7575
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 10, 2000
To Our Shareholders:
We will hold a Special Meeting of Shareholders of ANB Corporation on:
Friday, March 10, 2000
9:00 a.m. (local time)
Horizon Convention Center
Interurban Hall
401 South High Street
Muncie, Indiana 47305
The purposes of the special meeting are:
1. To consider and vote upon the Agreement of Affiliation and Merger, dated as
of July 29, 1999, by and between Old National Bancorp and ANB, pursuant to
which ANB will merge with Old National. Under the terms of the merger
agreement, each outstanding share of ANB common stock will be converted into
the right to receive 1.3125 shares of Old National common stock, as adjusted
for the 5% stock dividend declared by Old National on December 9, 1999; and
2. To transact such other business which may properly be presented at the
special meeting or any adjournment thereof.
We have fixed the close of business on February 4, 2000 as the record date
for determining those shareholders who are entitled to notice of, and to vote
at, the special meeting and any adjournment or postponement of it. Approval and
adoption of the merger agreement requires the affirmative vote of at least the
majority of the outstanding shares of ANB common stock.
The merger agreement, which describes the terms of the merger in great
detail, is attached as Appendix A to the accompanying Proxy
Statement-Prospectus.
Please do not send your stock certificates at this time. If the merger is
completed, we will send you instructions regarding the surrender of your stock
certificates.
BY ORDER OF THE BOARD OF DIRECTORS
James W. Convy
Secretary
February 10, 2000
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
APPROVAL OF THE MERGER AGREEMENT.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU
ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE
PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Questions and Answers About the ANB/Old National Merger..... iii
Summary..................................................... 1
The Parties to the Merger................................. 1
The Merger................................................ 1
Interests of Certain Persons in the Merger................ 3
Special Shareholders' Meeting............................. 4
Comparative Per Share Market Price Information............ 4
Recent Developments....................................... 5
Comparative Per Share Data................................ 6
Summary of Selected Financial Data -- Old National.......... 7
Summary of Selected Financial Data -- ANB................... 9
Special Meeting............................................. 11
General................................................... 11
Matters to be Considered.................................. 11
Proxies................................................... 11
Solicitation of Proxies................................... 11
Record Date and Voting Rights............................. 11
Recommendation of ANB Board of Directors.................. 12
Proposed Merger............................................. 12
General................................................... 12
Description of the Merger................................. 13
Background of the Merger.................................. 13
Reasons for the Merger.................................... 14
Fairness Opinion of ANB's Financial Advisor............... 15
Recommendation of the ANB Board of Directors.............. 21
Conversion of ANB Common Stock............................ 21
Treatment of ANB Stock Options............................ 22
Exchange of Certificates; Fractional Shares............... 22
No Dissenters' or Appraisal Rights........................ 23
Resale of Old National Common Stock by Affiliates of
ANB.................................................... 23
Conditions to the Completion of the Merger................ 24
Termination of the Merger Agreement....................... 24
Restrictions Affecting ANB................................ 26
Regulatory Approvals Required for the Merger.............. 27
Accounting Treatment for the Merger....................... 28
Effective Time............................................ 29
Management, Personnel and Employee Benefits After the
Merger................................................. 29
Employment Agreement...................................... 31
Agreement with Larry E. Thomas............................ 31
Stock Option Agreement.................................... 32
Indemnification; Directors' and Officers' Liability
Insurance.............................................. 33
Federal Income Tax Consequences............................. 34
Tax Opinion............................................... 34
Tax Consequences to Old National and ANB.................. 34
Tax Consequences to ANB Shareholders...................... 34
Comparative Per Share Data.................................. 36
Nature of Trading Market.................................. 36
Dividends................................................. 37
Existing and Pro Forma Per Share Information.............. 37
</TABLE>
i
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Pro Forma Condensed Combined Financial Information.......... 39
Notes to Pro Forma Condensed Combined Financial
Information............................................... 45
Description of Old National................................. 46
Overview.................................................. 46
Supervision and Regulation................................ 46
Recent Developments....................................... 47
Incorporation of Certain Information by Reference......... 47
Description of ANB.......................................... 48
Business.................................................. 48
Incorporation of Certain Information by Reference......... 48
Comparison of Common Stock.................................. 48
Authorized But Unissued Shares............................ 48
Preemptive Rights......................................... 49
Dividend Rights........................................... 49
Voting Rights............................................. 50
Dissenters' Rights........................................ 50
Liquidation Rights........................................ 51
Redemption and Assessment................................. 51
Anti-Takeover Provisions.................................. 51
Director Liability........................................ 53
Director Nominations...................................... 53
Legal Opinions.............................................. 54
Experts..................................................... 54
Other Matters............................................... 54
Forward-Looking Statements.................................. 55
Where You Can Find More Information......................... 55
APPENDIX A.................................................. A-1
APPENDIX B.................................................. B-1
APPENDIX C.................................................. C-1
</TABLE>
ii
<PAGE> 5
QUESTIONS AND ANSWERS ABOUT THE ANB/OLD NATIONAL MERGER
Q: WHAT DO I NEED TO DO NOW?
A: After you carefully read this document, indicate on your proxy card how you
want to vote, sign it and mail it in the enclosed envelope as soon as
possible. The instructions on the accompanying proxy card will give you
more information on how to vote by mail. This will enable your shares to be
represented at the ANB special meeting.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will not be able to vote your shares without instructions from
you. You should instruct your broker to vote your shares by following the
directions your broker provides. Your failure to instruct your broker to
vote your shares will result in your shares not being voted. If you fail to
return a proxy card or abstain from voting, the effect will be a vote
against the merger.
Q: CAN I CHANGE MY VOTE AFTER I SUBMIT MY PROXY WITH VOTING INSTRUCTIONS?
A: Yes. There are three ways you can change your vote. First, you may send a
written notice to the person to whom you submitted your proxy stating that
you would like to revoke your proxy. Second, you may complete and submit a
new proxy card by mail or submit your proxy with new voting instructions.
Your shares will be voted in accordance with the latest proxy actually
received by ANB prior to the shareholders' meeting. Any earlier proxies
will be revoked. Third, you may attend the ANB special meeting and vote in
person. Any earlier proxies will be revoked. Simply attending the meeting
without voting, however, will not revoke your proxy. If you have instructed
a broker to vote your shares, you must follow directions you will receive
from your broker to change or revoke your proxy.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. You should not send in your stock certificates at this time.
ANB shareholders will exchange their ANB common stock certificates for Old
National common stock certificates after Old National and ANB complete the
merger. Old National will send you instructions for exchanging your ANB
common stock certificates promptly after the merger is completed.
Q: WHAT IS THE "EXCHANGE RATIO?"
A: The exchange ratio is the number of shares of Old National common stock
into which each share of ANB common stock will be converted when the merger
is completed. The exchange ratio is 1.3125 shares of Old National common
stock for each share of ANB common stock. Please note that the share price
of Old National common stock may fluctuate before and after the merger is
completed. As a result of the exchange ratio being fixed, you will not be
sure of the market value of the Old National common stock you will receive
until the time the merger is completed.
Q: WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER?
A: For U.S. federal income tax purposes, the conversion of your ANB common
stock into Old National common stock will not cause you to recognize any
gain or loss. You will, however, recognize income gain or loss in
connection with any cash received for fractional shares of Old National
common stock. Your tax basis for the Old National common stock received in
the merger including the fractional shares you are deemed to have received
and then are redeemed for cash will be the same as the tax basis for your
ANB common stock and your holding period for the Old National common stock
received in the merger including the fractional shares you are deemed to
have received and then are redeemed for cash generally will include the
holding period of your ANB common stock exchanged in the merger. For a more
complete description of federal income tax considerations, see page 34.
This tax treatment may not apply to certain ANB shareholders, including
shareholders who are non-U.S. persons or dealers in securities. Determining
the actual tax consequences of the merger to
iii
<PAGE> 6
you may be complex. The tax consequences will depend on your specific
situation and on variables not within your control. You should consult your
own tax advisor for a full understanding of the merger's tax consequences.
Q: WHAT OTHER MATTERS WILL BE VOTED ON AT THE MEETING?
A: ANB does not expect that any matter other than the merger will be voted on
at the meeting.
Q: WILL MY SHAREHOLDER RIGHTS CHANGE AS A RESULT OF THE MERGER?
A: Yes. ANB and Old National are corporations organized under Indiana law.
Therefore, your rights as a shareholder will continue to be governed by
Indiana law. However, after the merger, you will become an Old National
shareholder, and therefore your rights will be governed by Old National's
Articles of Incorporation and By-Laws. For a summary of some of the
differences between the rights of ANB shareholders and the rights of Old
National shareholders, see page 48.
Q: WHOM SHOULD I CALL WITH QUESTIONS?
A: You should call Larry E. Thomas, Chief Financial Officer of ANB, at (765)
747-7575.
iv
<PAGE> 7
SUMMARY
This summary highlights some of the information contained in this document.
Because this is a summary, it does not contain all the information that may be
important to you. To understand the merger fully and for a more complete
description of the legal terms of the merger, you should read carefully this
entire document and the documents to which we have referred you.
THE PARTIES TO THE MERGER
OLD NATIONAL BANCORP
420 Main Street
Evansville, Indiana 47708
(812) 464-1434
Old National is a bank holding company, incorporated under Indiana law and
headquartered in Evansville, Indiana. Through its full-service banking
subsidiaries, Old National operates a general banking business from 119 banking
offices and 174 ATM locations located throughout Indiana, Illinois and Kentucky.
In addition, Old National provides trust services and additional financial
services through other subsidiaries. At September 30, 1999, on a consolidated
basis, Old National had assets of approximately $6.963 billion, deposits of
approximately $5.025 billion, and shareholders' equity of approximately $514.9
million. Old National's common stock is traded on the Nasdaq National Market
under the symbol "OLDB."
ANB CORPORATION
120 West Charles Street
Muncie, Indiana 47305
(765) 747-7600
ANB is a bank holding company, incorporated under Indiana law and headquartered
in Muncie, Indiana. ANB owns and operates three affiliate banks and a trust
company with 33 affiliated offices and 16 ATM locations in Indiana and Ohio. At
September 30, 1999, ANB, on a consolidated basis, had assets of approximately
$834 million, deposits of approximately $677 million and shareholders' equity of
approximately $74 million. ANB's common stock is traded on the Nasdaq National
Market under the symbol "ANBC."
THE MERGER
Description of the merger. We propose a merger in which ANB will merge with Old
National, and Old National will survive the merger. Old National will issue
shares of its common stock to shareholders of ANB in exchange for their shares
of ANB common stock.
Recommendation of the Board of Directors of ANB. The Board of Directors of ANB
believes that the merger is in the best interests of ANB as a whole, including
your interests, and unanimously recommends that you vote "FOR" the proposal to
approve the merger. See "Special Meeting -- Recommendation of the Board of
Directors" on page 12.
ANB shareholders will receive Old National common stock in the merger. If the
merger is completed, you will have the right to receive 1.3125 shares of Old
National common stock for each share of ANB common stock that you own as of the
effective time of the merger. Because the number of shares of common stock of
Old National that you will receive in the merger is fixed at 1.3125, subject to
adjustments that will not decrease the economic value of the exchange ratio, the
value of the shares of Old National common stock you will receive in the merger
will fluctuate as the price of Old National common stock changes. Based upon the
closing price of Old National common stock on the Nasdaq National Market on
February 3, 2000, the market value of shares of Old National common stock you
will receive in the merger would be $35.44 per share of ANB common stock.
You will have to surrender your ANB common stock certificates to receive new
stock certificates representing Old National common stock. This will not be
necessary, however, until you receive written instructions after we complete the
merger. See "Proposed Merger -- Conversion of ANB Common Stock" on page 16 and
"Proposed Merger -- Exchange of Certificates; Fractional Shares" on page 22.
Payments of dividends on shares of ANB common stock. After the merger becomes
effective, your stock certificates for shares of ANB common stock will represent
only the right to receive shares of Old National common stock and cash for
fractional shares. You will not receive payments of
1
<PAGE> 8
dividends declared on shares of Old National common stock until you surrender
your ANB common stock certificates to receive new stock certificates
representing Old National common stock.
Old National will not issue fractional shares. Old National will not issue any
fractional shares of its common stock as a result of the exchange ratio.
Instead, you will receive the value of any fractional share in cash, based upon
the market value of Old National's common stock.
Merger generally tax-free for ANB shareholders. ANB and Old National expect that
your exchange of shares of ANB common stock for shares of Old National common
stock generally will not cause you to recognize any gain or loss for U.S.
federal income tax purposes. You will, however, have to recognize income gain or
loss for any cash received instead of fractional shares. The expected material
federal income tax consequences are set out in greater detail on page 34.
Old National and ANB will not be obligated to complete the merger unless they
receive legal opinions, dated as of the closing date, from their respective
legal counsel that the merger will be treated as a transaction of a type that is
generally tax-free for U.S. federal income tax purposes. In that case, the U.S.
federal income tax treatment of the merger will be as described above. However,
these legal opinions will not bind the Internal Revenue Service, which could
take a different view.
Tax matters are very complicated, and the tax consequences of the merger to you
will depend on the facts of your own situation. Old National and ANB urge you to
consult with your tax advisor for a full understanding of the tax consequences
of the merger to you.
No Dissenters' rights. As a shareholder of ANB, you do not have any rights under
Indiana law to dissent from, or obtain payment of the "fair value" of your
shares as a result of, the merger.
Our reasons for the merger. ANB and Old National are proposing to merge because
they believe that by combining the companies they can create a stronger and more
diversified company that will provide significant benefits to ANB's shareholders
and customers. The Board of Directors of ANB believes that by bringing its
customers and banking products together with those of Old National, the
companies can do a better job of growing their combined revenue than if they did
not merge. The ANB Board of Directors also believes that in the rapidly changing
environment of the banking industry, ANB's long-term goal of enhancing
shareholder value will be reached by merging with Old National. You can find a
more detailed discussion of the background to the merger agreement and ANB's and
Old National's reasons for the merger under "Proposed Merger -- Reasons for the
Merger" on page 14.
ANB's financial advisor believes the exchange ratio is fair, from a financial
point of view, to ANB's shareholders. Among other factors considered in deciding
to approve the merger, the ANB Board of Directors received the oral opinion,
which was subsequently delivered in writing, of its financial advisor, Sandler
O'Neill & Partners, L.P., that, as of July 29, 1999, the exchange ratio was fair
to the holders of ANB common stock from a financial point of view. ANB has
received a written opinion from Sandler O'Neill dated as of the date of this
document. The opinion is attached to this document as Appendix C. You should
read this opinion completely to understand the assumptions made, matters
considered and limitations of the review undertaken by Sandler O'Neill. See
"Proposed Merger -- Fairness Opinion of ANB's Financial Advisor" on page 15.
Conditions to completion of the merger. The completion of the merger depends on
a number of conditions being met. Some of the conditions are:
- - The merger agreement is approved by the holders of at least a majority of the
outstanding shares of ANB common stock.
- - Regulatory approvals required under federal and state banking laws are
received and the waiting periods have expired.
- - Old National has received a letter from its independent auditors stating its
opinion that the merger will qualify for pooling of interests accounting
treatment.
See "Proposed Merger -- Conditions to Completion of the Merger" on page 24.
2
<PAGE> 9
We may decide not to complete the merger. Old National and ANB can agree at any
time not to complete the merger, even if the shareholders of ANB have approved
it. Also, either party can decide, without the consent of the other, to
terminate the merger agreement if, among other reasons:
- - The other party breaches any representation or any warranty contained in the
merger agreement.
- - The other party breaches any covenant contained in the merger agreement.
- - Certain claims, proceedings or litigation are commenced or threatened.
- - Old National experiences a material adverse change in financial condition from
March 31, 1999.
- - ANB experiences a material adverse change in financial condition from July 29,
1999.
- - The merger is not completed by March 31, 2000.
Additionally, ANB may terminate the merger agreement if the price of Old
National common stock fluctuates sufficiently resulting in the merger no longer
being in the best interests of ANB as a whole, including its shareholders. If
this occurs, Old National has the right to adjust the exchange ratio. This right
to terminate is based upon a complex formula that compares any decrease in the
value of Old National common stock to the change in value of an index of bank
stocks.
This formula provides that before ANB may terminate the merger because of a
decline in the value of Old National common stock, the value of Old National's
common stock must have declined by approximately 20% since the signing of the
merger agreement, and Old National's stock must be valued approximately 15% less
than the Nasdaq Bank Index during the period for valuing the stock. Assuming the
last regulatory approval was received on the date of this document, ANB would
not have the right to terminate the merger agreement on the basis of the price
of Old National's common stock. See "Proposed Merger -- Termination of the
Merger Agreement" on page 24.
Effective time of the merger. Old National and ANB anticipate that the merger
will be completed in March, 2000. See "Proposed Merger -- Effective Time" on
page 29.
Comparative shareholder rights. If the merger is completed, you will become a
shareholder of Old National. Both Old National and ANB are Indiana corporations.
Therefore, your rights as a shareholder will continue to be governed by Indiana
law. However, your rights as a shareholder, which are now governed by the
Articles of Incorporation and By-laws of ANB, will be governed by Old National's
Articles of Incorporation and By-laws. See "Comparison of Common Stock" on page
48.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Interest of Mr. James R. Schrecongost. Old National and James R. Schrecongost
entered into an employment agreement which provides for Mr. Schrecongost to
serve as Chairman of Old National Trust Company, Old National Trust
Company-Illinois, Old National Trust Company-Kentucky, and American National
Trust and Investment Management Company. The agreement is effective at the time
the merger is completed, is for a term of two years and provides for a signing
bonus of $875,000, salary, incentive compensation awards, and a retention bonus
as well as a variety of other standard employee benefits. See "Proposed
Merger -- Employment Agreement" on page 31.
Interest of Kelly Stanley. Following the completion of the merger, Kelly
Stanley, Chairman of ANB, will be a director of Old National.
Interest of Larry E. Thomas. Old National and Larry E. Thomas entered into an
agreement which provides for Mr. Thomas to continue as an employee of Old
National for a period of 90 days following the completion of the merger. This
agreement also requires Old National to pay to Mr. Thomas in a lump sum the
money owed to him under his current employment agreement with ANB. See "Proposed
Merger -- Agreement with Larry E. Thomas" on page 31.
Stock options. At the time the merger is effective, all outstanding options to
purchase ANB common stock under ANB's stock option plans become options to
purchase Old National common stock.
3
<PAGE> 10
Stock Option Agreement. As an inducement and condition to Old National's
willingness to enter into the merger agreement, ANB entered into a stock option
agreement with Old National. Under the stock option agreement, ANB granted Old
National an option that permits Old National to purchase up to 1,083,753 shares
of ANB common stock, which is approximately 19.9% of the outstanding shares of
ANB common stock. The number of shares Old National may purchase will be
increased if ANB has any change in the number of shares of its common stock
outstanding so that Old National may purchase an amount of shares equal to 19.9%
of the outstanding shares of common stock of ANB. The exercise price of the
option is $27.70 per share. Old National may exercise the option only upon the
occurrence of certain specified events. These events generally relate to the
acquisition of ANB or of a substantial portion of its stock or assets by a party
other than Old National. We have attached the Stock Option Agreement to this
document as Appendix B. See "Proposed Merger -- Stock Option Agreement" on page
32.
SPECIAL SHAREHOLDERS' MEETING
Date, time and place of special meeting. The special shareholders' meeting will
be held on Friday, March 10, 2000, at 9:00 a.m., local time, at the Horizon
Convention Center, Interurban Hall, 401 South High Street, Muncie, Indiana
47305.
Purposes of special meeting. At the ANB special meeting, you will be asked:
- - to approve the merger agreement between ANB and Old National; and
- - to act upon any other items that may be submitted to a vote at the special
meeting.
As of the date of this document the ANB Board of Directors does not know of any
other matters that will be presented at the special meeting. See "Notice of
Special Meeting of Shareholders" and the discussions under the captions "Special
Meeting" and "Proposed Merger" on pages 11 and 12, respectively.
Required shareholder vote. In order to approve the merger, the holders of at
least a majority of the issued and outstanding shares of ANB common stock must
vote in its favor.
Proxies. You can revoke your proxy at any time before it is exercised by
delivering a later dated proxy to ANB, by written notice delivered to the
Secretary of ANB, or by attending the special meeting and voting in person. See
"Special Meeting -- Proxies" on page 11.
Shares outstanding and entitled to vote. As of February 4, 2000, there were
5,513,924 shares of ANB common stock outstanding. You can vote at the special
meeting of ANB if you owned ANB common stock at the close of business on that
date. You can cast one vote for each share of ANB common stock you owned on that
date. See "Special Meeting -- Record Date and Voting Rights" on page 11.
Old National and ANB expect pooling of interests accounting treatment. Old
National and ANB expect the merger to qualify as a pooling of interests. This
means that, for accounting and financial reporting purposes, Old National will
treat Old National and ANB as if they had always been one. Old National is not
required to complete the merger unless it receives a letter from its independent
accountants telling it that the merger will qualify as a "pooling of interests."
See "Proposed Merger -- Accounting Treatment for the Merger" on page 28.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION
Old National common stock and ANB common stock trade on the Nasdaq National
Market System. Some examples of recent closing prices for Old National common
stock and ANB common stock are as follows:
<TABLE>
<CAPTION>
OLD NATIONAL ANB
------------ ------
<S> <C> <C>
July 29, 1999........... $28.63 $28.25
February 3, 2000........ $27.00 $34.88
</TABLE>
Based on the exchange ratio in the merger, which is 1.3125, the market value of
the consideration that ANB shareholders will receive in the merger for each
share of ANB common stock would be:
<TABLE>
<S> <C>
July 29, 1999...................... $37.58
February 3, 2000................... $35.44
</TABLE>
4
<PAGE> 11
In addition, recently declared per share dividend information for Old National
common stock and ANB common stock is as follows:
<TABLE>
<CAPTION>
OLD NATIONAL ANB
------------ -----
<S> <C> <C>
1st Quarter 1999......... $0.15 $0.19
2nd Quarter 1999......... $0.16 $0.19
3rd Quarter 1999......... $0.16 $0.19
4th Quarter 1999......... $0.16 $0.19
</TABLE>
Of course, the market price of Old National common stock will fluctuate prior to
the completion of the merger, while the exchange ratio is fixed. You should
obtain current stock price quotations for Old National common stock and ANB
common stock. You can get these quotations from a newspaper, on the Internet or
by calling your broker.
RECENT DEVELOPMENTS
Old National registered $200 million of trust preferred securities.
Old National completed the acquisition of Sycamore Agency, Inc., a general
insurance agency, located in Terre Haute, Indiana.
Old National declared on December 9, 1999 a 5% stock dividend to its
shareholders payable on January 28, 2000. The exchange ratio has been adjusted
from 1.25 to 1.3125 pursuant to the merger agreement to give effect to the stock
dividend. Additionally, all references in this document to Old National's per
share information has been adjusted to give effect to the stock dividend.
On December 20, 1999, Old National agreed to acquire Permanent Bancorp, Inc. and
Permanent Bank, each of Evansville, Indiana, in a transaction valued at
approximately $92 million. Old National expects this acquisition to be completed
during the third quarter of 2000.
See "Description of Old National -- Recent Developments" on page 47.
5
<PAGE> 12
COMPARATIVE PER SHARE DATA
The table below shows historical information about Old National's and ANB's
earnings per share, cash dividends per share and book value per share, and
similar information reflecting the merger, which is referred to as pro forma
information. In presenting the comparative pro forma information for the time
periods shown in the table, Old National and ANB assumed that the companies had
been merged throughout those periods. See "Old National Bancorp Pro Forma
Condensed Combined Financial Information" on page 39.
Old National also assumed that it will treat Old National and ANB as if
they had always been combined for accounting and financial reporting purposes, a
method known as pooling of interests accounting. The information listed as
equivalent share basis was obtained by multiplying the pro forma amounts by the
exchange ratio of 1.3125. Old National and ANB present this information to
reflect the fact that ANB shareholders will receive more than one share of Old
National common stock for each share of ANB common stock exchanged in the
merger.
Old National expects that it will incur merger and restructuring expenses
as a result of combining the companies. Old National also anticipates that the
merger will provide Old National with financial benefits that include reduced
operating expenses and enhanced opportunities to earn more revenue. The pro
forma information, while helpful in illustrating the financial characteristics
of Old National under one set of assumptions, does not reflect these anticipated
financial benefits and, accordingly, does not attempt to predict or suggest
future results.
The information in the following table is based on the historical financial
information that Old National and ANB have presented in their prior SEC filings.
Old National and ANB are incorporating this material into this document by
reference. See "Where You Can Find More Information" on page 62.
<TABLE>
<CAPTION>
OLD NATIONAL ANB
------------------------- -----------------------------
EQUIVALENT SHARE
HISTORICAL PRO FORMA(1) HISTORICAL BASIS(1)
---------- ------------ ---------- ----------------
<S> <C> <C> <C> <C>
EARNINGS PER SHARE(2)
Nine months ended September 30, 1999....... $ 1.30 $ 1.24 $ 1.15 $ 1.63
Twelve months ended December 31:
1998.................................... $ 1.54 $ 1.49 $ 1.57 $ 1.96
1997.................................... 1.40 1.37 1.50 1.80
1996.................................... 1.25 1.22 1.31 1.60
DIVIDENDS DECLARED PER SHARE
Nine months ended September 30, 1999....... $ 0.47 $ 0.47 $ 0.57 $ 0.62
Twelve months ended December 31:
1998.................................... $ 0.55 $ 0.55 $ 0.72 $ 0.72
1997.................................... 0.53 0.53 0.64 0.70
1996.................................... 0.50 0.50 0.55 0.66
BOOK VALUE PER SHARE
At September 30, 1999...................... $10.75 $10.64 $13.41 $13.96
At December 31, 1998....................... 10.86 10.63 13.04 13.95
</TABLE>
- ---------------
(1) Considers the pending merger with ANB as well as the pending merger as of
September 30, 1999 with Heritage Financial Services, Inc. See "Pro Forma
Condensed Combined Financial Information."
(2) Old National's and ANB's basic earnings per share.
6
<PAGE> 13
SUMMARY OF SELECTED FINANCIAL DATA -- OLD NATIONAL
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
The following summary sets forth selected consolidated financial
information relating to Old National. This information should be read in
conjunction with the financial statements and notes incorporated herein by
reference.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Interest income................ $ 470,915 $ 448,875 $ 419,483 $ 402,793 $ 353,983
Interest expense............... 231,613 216,868 196,289 191,835 149,809
---------- ---------- ---------- ---------- ----------
Net interest income............ 239,302 232,007 223,194 210,958 204,174
Provision for loan losses...... 12,160 13,562 11,082 7,491 7,886
---------- ---------- ---------- ---------- ----------
Net interest income after
provision for loan losses... 227,142 218,445 212,112 203,467 196,288
Noninterest income............. 58,891 51,104 47,402 42,044 36,680
Noninterest expense............ 167,937 158,631 156,720 153,345 152,093
---------- ---------- ---------- ---------- ----------
Income before income taxes..... 118,096 110,918 102,794 92,166 80,875
Income taxes................... 43,961 42,835 40,107 35,222 29,550
---------- ---------- ---------- ---------- ----------
Net income from continuing
operation................... 74,135 68,083 62,687 56,944 51,325
Discontinued operations........ (9,854) (5,005) 494 0 --
---------- ---------- ---------- ---------- ----------
Net income..................... $ 64,281 $ 63,078 $ 63,181 $ 56,944 $ 51,325
========== ========== ========== ========== ==========
PERIOD-END BALANCES
Total assets................... $6,416,611 $5,933,321 $5,602,460 $5,281,387 $5,081,088
Investment securities.......... 1,636,674 1,606,930 1,573,708 1,481,267 1,419,378
Loans, net of unearned
income...................... 4,354,256 3,915,841 3,627,592 3,375,915 3,205,097
Deposits....................... 4,668,858 4,521,010 4,479,357 4,336,406 4,028,932
Shareholders' equity........... 519,645 500,609 480,435 481,511 457,971
PER SHARE DATA (on continuing
operations)(1)
Net income -- basic............ $ 1.54 $ 1.40 $ 1.25 $ 1.10 $ 0.97
Net income -- diluted(2)....... 1.49 1.36 1.22 1.08 0.95
Cash dividends paid............ 0.55 0.53 0.50 0.49 0.46
Book value at year-end......... 10.86 10.41 9.77 9.43 8.72
SELECTED PERFORMANCE RATIOS (on
continuing operations)
Return on assets............... 1.21% 1.19% 1.17% 1.11% 1.04%
Return on equity(3)............ 14.95 14.28 13.23 12.20 11.07
Net interest margin............ 4.17 4.31 4.42 4.38 4.38
Average equity to average
assets...................... 8.38 8.46 8.95 9.02 9.36
Dividend payout................ 35.15 36.74 38.96 43.90 47.36
Primary capital to assets...... 9.22 9.27 9.77 9.88 10.26
Net charge-offs to average
loans....................... 0.23 0.21 0.30 0.25 0.27
End of period allowance for
loan losses to end of period
loans....................... 1.19 1.25 1.20 1.27 1.36
Non-performing loans to total
loans....................... 0.45 0.39 0.46 0.31 0.39
Leverage ratio................. 7.72 7.95 8.28 8.83 9.13
Tier 1 capital to risk adjusted
assets...................... 11.40 12.17 12.90 13.92 14.20
Efficiency ratio(4)............ 56.32 56.03 57.92 60.61 63.15
</TABLE>
- ---------------
(1) Restated for all stock dividends.
(2) Assumes the conversion of Old National's subordinated debentures.
(3) Excludes unrealized gains (losses) on investment securities.
(4) Excludes One Bank related security gains (losses) and expenses.
7
<PAGE> 14
SUMMARY OF SELECTED FINANCIAL DATA -- OLD NATIONAL -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1999 1998
---------- ----------
<S> <C> <C>
RESULTS OF OPERATIONS
(Taxable equivalent basis)
Interest income........................................... $ 374,906 $ 351,426
Interest expense.......................................... 183,723 172,930
---------- ----------
Net interest income....................................... 191,183 178,496
Provision for loan losses................................. 8,437 9,189
---------- ----------
Net interest income after provision for loan losses....... 182,746 169,307
Noninterest income........................................ 50,186 42,879
Noninterest expense....................................... 134,695 122,442
---------- ----------
Income before income taxes................................ 98,237 89,744
Income taxes.............................................. 35,389 33,603
---------- ----------
Net income from continuing operation...................... 62,848 56,141
Discontinued operations................................... 3,483 (9,854)
---------- ----------
Net Income................................................ $ 66,331 $ 46,287
========== ==========
PERIOD-END BALANCES
Total assets.............................................. $6,963,307 $6,235,978
Investment securities..................................... 1,725,378 1,611,085
Loans, net of unearned income............................. 4,796,556 4,228,864
Deposits.................................................. 5,025,330 4,592,992
Shareholders' equity...................................... 514,935 518,083
PER SHARE DATA (on continuing operations)(1)
Net income -- basic....................................... $ 1.30 $ 1.16
Net income -- diluted(2).................................. 1.26 1.13
Cash dividends paid....................................... 0.47 0.42
Book value at period-end.................................. 10.75 10.76
SELECTED PERFORMANCE RATIOS (on continuing operations)
Return on assets.......................................... 1.25% 1.23%
Return on equity(3)....................................... 15.91 15.13
Net interest margin....................................... 4.02 4.19
Average equity to average assets.......................... 7.91 8.42
Dividend payout........................................... 36.03 36.07
Primary capital to assets................................. 8.73 9.26
Net charge-offs to average loans.......................... 0.09 0.21
End of period allowance for loans losses to end of period
loans.................................................. 1.21 1.23
Non-performing loans to total loans....................... 0.40 0.38
Leverage ratio............................................ 7.51 7.80
Tier 1 capital to risk adjusted assets.................... 11.58 11.58
Efficiency ratio(4)....................................... 55.03 55.31
</TABLE>
- ---------------
(1) Restated for all stock dividends.
(2) Assumes the conversion of Old National's subordinated debentures.
(3) Excludes unrealized gains (losses) on investment securities.
(4) Excludes One Bank related security gains (losses) and expenses.
8
<PAGE> 15
SUMMARY OF SELECTED FINANCIAL DATA -- ANB
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
The following table presents financial data for ANB. The financial data
below includes amounts previously reported by ANB. This summary should be read
in conjunction with the consolidated financial statements and the notes thereto
of ANB which are incorporated herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Interest income -- tax
equivalent(1)...................... $ 51,575 $ 48,202 $ 45,794 $ 43,402 $ 36,550
Interest expense...................... 22,665 20,785 19,848 18,926 14,296
-------- -------- -------- -------- --------
Net interest income -- tax
equivalent(1)...................... 28,910 27,417 25,946 24,476 22,254
Tax equivalent adjustment(1).......... 1,401 1,340 1,363 1,286 1,348
-------- -------- -------- -------- --------
Net interest income................... 27,509 26,077 24,583 23,190 20,906
Provision for loan losses............. 1,502 1,027 1,156 1,144 402
-------- -------- -------- -------- --------
Net interest income after provision
for loan losses.................... 26,007 25,050 23,427 22,046 20,504
Noninterest income.................... 10,282 7,944 7,362 6,891 6,876
Noninterest expense................... 23,628 20,851 20,344 19,692 19,174
-------- -------- -------- -------- --------
Income before income taxes............ 12,661 12,143 10,445 9,245 8,206
Income taxes.......................... 4,205 4,102 3,375 3,019 2,480
-------- -------- -------- -------- --------
Net income............................ $ 8,456 $ 8,041 $ 7,070 $ 6,226 $ 5,726
======== ======== ======== ======== ========
BALANCE SHEET DATA
Total assets.......................... $708,564 $616,383 $584,944 $573,226 $527,207
Total loans, net...................... 531,414 470,457 435,699 402,190 375,876
Total deposits........................ 590,800 491,881 486,106 495,832 456,721
Federal Home Loan Bank advances....... 36,145 39,615 14,000 2,395 395
Shareholders' equity.................. 70,409 65,737 60,735 58,381 53,366
PER SHARE DATA
Net income -- basic................... $ 1.57 $ 1.50 $ 1.31 $ 1.14 $ 1.04
Net income -- diluted................. 1.54 1.48 1.29 1.12 1.03
Cash dividends paid................... 0.72 0.64 0.55 0.46 0.41
Book value at year-end................ 13.04 12.26 11.30 10.75 9.72
SELECTED PERFORMANCE RATIOS
Return on assets...................... 1.31% 1.37% 1.26% 1.16% 1.15%
Return on equity...................... 12.56 12.98 12.18 11.26 11.10
Equity to assets...................... 9.94 10.66 10.38 10.18 10.12
Net charge-offs to average loans...... 0.26 0.20 0.15 0.23 0.06
Allowance for loan losses to average
loans.............................. 0.98 1.01 1.07 1.01 1.07
</TABLE>
- ---------------
(1) Net interest income has been presented on both a tax equivalent and non-tax
equivalent basis. The tax equivalent basis was calculated using a 34% tax
rate for all periods presented. The tax equivalent adjustment reverses the
tax equivalent basis in order to present net interest income in accordance
with GAAP, as reflected in the consolidated financial statements.
9
<PAGE> 16
SUMMARY OF SELECTED FINANCIAL DATA -- ANB -- (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1999 1998
-------- --------
<S> <C> <C>
RESULTS OF OPERATIONS
Interest income -- tax equivalent(1)...................... $ 42,665 $ 38,054
Interest expense.......................................... 18,402 16,583
-------- --------
Net interest income -- tax equivalent(1).................. 24,263 21,471
Tax equivalent adjustment(1).............................. 718 1,061
-------- --------
Net interest income....................................... 23,545 20,410
Provision for loan losses................................. 1,090 432
-------- --------
Net interest income after provision for loan losses....... 22,455 19,978
Noninterest income........................................ 8,299 6,988
Noninterest expense....................................... 20,941 16,890
-------- --------
Income before income taxes................................ 9,813 10,076
Income taxes.............................................. 3,568 3,369
-------- --------
Net income................................................ $ 6,245 $ 6,707
======== ========
BALANCE SHEET DATA
Total assets.............................................. $833,876 $705,317
Total loans, net.......................................... 648,146 499,096
Total deposits............................................ 676,642 580,067
Federal Home Loan Bank advances........................... 56,718 42,145
Shareholders' equity...................................... 73,575 70,157
PER SHARE DATA
Net income -- basic....................................... $ 1.15 $ 1.25
Net income -- diluted..................................... 1.13 1.22
Cash dividends paid....................................... 0.57 0.53
Book value at period-end.................................. 13.41 13.02
SELECTED PERFORMANCE RATIOS
Return on assets.......................................... 1.10% 1.43%
Return on equity.......................................... 11.70 13.47
Equity to assets.......................................... 8.82 9.95
Net charge-offs to average loans.......................... 0.06 0.09
Allowance for loan losses to average loans................ 0.93 0.95
</TABLE>
- ---------------
(1) Net interest income has been presented on both a tax equivalent and non-tax
equivalent basis. The tax equivalent basis was calculated using a 34% tax
rate for all periods presented. The tax equivalent adjustment reverses the
tax equivalent basis in order to present net interest income in accordance
with GAAP, as reflected in the consolidated financial statements.
10
<PAGE> 17
SPECIAL MEETING
GENERAL
This document is first being mailed by ANB to the holders of ANB common
stock on February 10, 2000 and is accompanied by the notice of the ANB special
meeting and a form of proxy that is solicited by the Board of Directors of ANB
for use at the special meeting. The special meeting will be held on Friday,
March 10, 2000 at 9:00 a.m., local time, at the Horizon Convention Center,
Interurban Hall, 401 South High Street, Muncie, Indiana 47305.
MATTERS TO BE CONSIDERED
The purposes of the special meeting are to consider and vote upon the
merger agreement, dated July 29, 1999, between Old National Bancorp and ANB,
which provides for the merger of ANB into Old National, and to consider and vote
upon any other matters that may properly come before the special meeting.
PROXIES
The accompanying form of proxy is for your use at the special meeting if
you are unable or do not wish to attend the meeting in person. You may revoke
your proxy at any time before it is exercised by delivering to the Secretary of
ANB a written notice of revocation, a properly executed proxy having a later
date, or by attending the special meeting and voting in person. Written notices
of revocation should be addressed to ANB Corporation, 120 West Charles Street,
Muncie, Indiana 47305, Attn: James Convy, Secretary. To be effective, ANB must
receive the revocation before the shares are voted. The shares represented by
proxies properly signed and returned will be voted at the special meeting as
instructed by the shareholders of ANB giving the proxies. If you make no
specification as to your vote on the proxy, your proxy will be voted in favor of
approval of the merger agreement.
The ANB Board is unaware of any other matters that may be presented for
action at the special meeting. However, if other matters do properly come before
the special meeting, the shares represented by properly executed proxies will be
voted in accordance with the best judgment of the person named in the proxy.
SOLICITATION OF PROXIES
ANB will bear the entire cost of soliciting proxies from shareholders. In
addition to the solicitation of proxies by mail, ANB will request that banks,
brokers and other record holders send proxies and proxy material to the
beneficial owners of stock held by them and secure their voting instructions, if
necessary. Additionally, proxies may be solicited personally or by telephone by
directors, officers and certain employees of ANB, who will not be specifically
compensated for such soliciting.
RECORD DATE AND VOTING RIGHTS
ANB has fixed February 4, 2000 as the record date for determining those ANB
shareholders entitled to notice of, and to vote at, the special meeting.
Accordingly, only ANB shareholders of record at the close of business on
February 4, 2000 will be entitled to notice of and to vote at the special
meeting. Each share of ANB common stock you own on the record date entitles you
to one vote on each matter presented for a vote at the special meeting. At the
close of business on the record date, there were approximately 5,513,924 shares
of ANB common stock outstanding held by approximately 1,000 holders of record.
The presence, in person or by proxy, of shares of ANB common stock representing
a majority of those shares outstanding and entitled to vote on the record date
is necessary to constitute a quorum at the special meeting.
Shares of ANB common stock held by persons attending the special meeting
but not voting, and shares of ANB common stock for which ANB has received
proxies but with respect to which the holders
11
<PAGE> 18
have abstained from voting, will be counted as present at the special meeting
for purposes of determining the presence or absence of a quorum for the
transaction of business at the special meeting. Brokers who hold shares of ANB
common stock in nominee or "street" name for customers who are the beneficial
owners of those shares are prohibited from giving a proxy to vote shares held
for those customers on matters to be considered and voted upon at the special
meeting without specific instructions from those customers. These so-called
"broker non-votes" will be counted for purposes of determining whether a quorum
exists.
The merger agreement must be approved by the affirmative vote of the
holders of at least a majority of the outstanding shares of ANB common stock
entitled to vote at the special meeting.
BECAUSE APPROVAL OF THE MERGER AGREEMENT REQUIRES THE AFFIRMATIVE VOTE OF
THE HOLDERS OF AT LEAST A MAJORITY OF THE OUTSTANDING SHARES OF ANB COMMON STOCK
ENTITLED TO VOTE AT THE SPECIAL MEETING, ABSTENTIONS AND BROKER NON-VOTES WILL
HAVE THE SAME EFFECT AS VOTES AGAINST APPROVAL OF THE MERGER AGREEMENT.
ACCORDINGLY, THE ANB BOARD URGES YOU TO COMPLETE, DATE AND SIGN THE ACCOMPANYING
PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE-PAID ENVELOPE.
As of the record date, directors and executive officers of ANB owned
approximately 222,821 shares of ANB common stock, entitling them to exercise
4.04% of the voting power of the ANB common stock entitled to vote at the
special meeting. On the basis of the unanimous approval of the merger agreement
by the ANB Board, we currently expect that each director and executive officer
of ANB will vote the shares of ANB common stock owned by him or her for approval
of the merger agreement and the transactions contemplated by the merger
agreement. As of the record date, the banking, trust and investment management
subsidiaries of ANB, as fiduciaries, custodians or agents, held a total of
703,091 shares of ANB common stock. These entities maintained sole or shared
voting power with respect to 489,353 of these shares of ANB common stock.
Additional information with respect to the beneficial ownership of ANB
common stock by individuals and entities owning more than 5% of that stock and
more detailed information with respect to beneficial ownership of ANB common
stock by directors and executive officers of ANB is incorporated by reference to
the Annual Report on Form 10-K of ANB for the year ended December 31, 1998. See
"Where You Can Find More Information."
RECOMMENDATION OF ANB BOARD OF DIRECTORS
The ANB Board has unanimously approved the merger agreement and the
transactions contemplated by the merger agreement. The ANB Board believes that
the merger agreement is in the best interests of ANB as a whole, including the
interests of ANB shareholders, and recommends that the ANB shareholders vote
"FOR" approval of the merger agreement. See "Proposed Merger -- Background of
the Merger, -- Reasons for the Merger, -- Recommendation of the ANB Board of
Directors."
PROPOSED MERGER
At the special meeting, the shareholders of ANB will consider and vote upon
approval of the merger, certain features of which are summarized below. The
following summary of aspects of the merger is not a complete description of the
terms and conditions of the merger and is qualified in its entirety by reference
to the merger agreement, which is attached to this document as Appendix A and is
incorporated herein by reference.
GENERAL
The Board of Directors of Old National and ANB each have unanimously
approved the merger agreement, which provides for the merger. Old National and
ANB expect to complete the merger in March, 2000. Each share of ANB common stock
issued and outstanding at the effective time of the merger will be converted
into the right to receive 1.3125 shares of Old National common stock, as
12
<PAGE> 19
adjusted for the 5% stock dividend declared by Old National on December 9, 1999,
and subject to further adjustment as discussed in this document.
DESCRIPTION OF THE MERGER
In the merger, ANB will merge with Old National. Old National will be the
surviving corporation in the merger and the separate corporate existence of ANB
will cease.
As of September 30, 1999, ANB had consolidated assets of approximately $834
million, consolidated deposits of approximately $677 million, consolidated
shareholders' equity of approximately $74 million and consolidated net income
for the nine months then ended of approximately $6.2 million. Based upon the pro
forma financial information included elsewhere in this document and assuming
that the merger had been consummated on September 30, 1999, ANB represented as
of such date 10.69% of the consolidated assets of Old National, 11.68% of its
consolidated deposits, 12.50% of its consolidated shareholders' equity and, for
the nine month period then ended, 8.60% of its consolidated net income. See "Pro
Forma Condensed Combined Financial Information".
BACKGROUND OF THE MERGER
Historically banking laws in Indiana and many other states prohibited banks
from expanding outside of their home counties. Many changes to Indiana's law
have occurred since 1985, first permitting in-state acquisitions by bank holding
companies, then permitting regional interstate acquisitions and currently
permitting virtual nationwide and international expansion opportunities. These
developments stimulated aggressive acquisition activity among financial
institutions located in Indiana and neighboring states, resulting in the entry
of large bank holding companies into virtually every attractive market in the
Midwestern United States. Moreover, developments and deregulation in the
financial services industry generally have led to further increases in
competition for bank services. Compounded by the significant increase in bank
regulatory burdens over the past several years, these competitive factors have
created an environment in which it is increasingly difficult for regional bank
holding companies such as ANB to compete effectively.
In analyzing how to address the increasing competition and continuing
consolidation in the banking industry, the Board of Directors considered several
strategic alternatives including remaining independent, growing through
acquisitions, and seeking a merger partner. A sub-committee of the Board of
Directors was organized on May 10, 1999 to study these strategic alternatives.
On May 26, 1999, the sub-committee presented a report to the Board of Directors.
After evaluation of the report and financial, economic, legal and market
considerations, the Board of Directors concluded that the sub-committee should
continue to give serious attention to seeking a merger partner.
On June 21 and 22, 1999 and at the request of the sub-committee, Sandler
O'Neill & Partners, L.P., ANB's financial advisors, contacted five regional bank
holding companies, including Old National, seeking to determine the level of
market interest in a potential affiliation with ANB. As a result of the
responses to Sandler O'Neill's inquiries, on June 30, 1999, members of the
sub-committee discussed the merits of a potential affiliation with senior
executives of Old National. Beginning on July 7, 1999, ANB and Old National
began to exchange information and conduct preliminary due diligence reviews for
the purpose of evaluating a potential business combination.
Following the receipt by ANB of Old National's formal letter of interest to
discuss an affiliation with ANB, the Board of Directors met on July 19, 1999 to
review with ANB's financial advisors available strategic alternatives and the
rationale for ANB to consider a merger at this time. The Board of Directors
concluded that an affiliation with Old National was in the interest of ANB as a
whole, and that it would be appropriate to begin negotiations with Old National.
Following the July 19, 1999 board meeting, ANB, Old National and their
respective advisors continued their due diligence review and initiated
negotiations of the terms of a business combination. These discussions
culminated in the submission of the merger agreement for consideration by the
Board of
13
<PAGE> 20
Directors at a meeting held on July 29, 1999. After consideration of the factors
described under "Reasons for the Merger", the Board of Directors determined that
a merger with Old National was in the best interest of ANB and its shareholders,
and unanimously approved the merger agreement and the transactions contemplated
therein.
REASONS FOR THE MERGER
In reaching its decision to approve the merger agreement and the stock
option agreement, the ANB Board consulted with management of ANB, as well as its
financial and legal advisors, and it considered a variety of factors, including
the following:
- The ANB Board's knowledge and analysis of the current environment of the
financial services industry, which is characterized by rapid
consolidation, increased opportunities for cross-industry expansion,
evolving trends in technology and increasing nationwide and Internet
competition;
- The ANB Board's evaluation of the financial terms of the merger and the
effect of the financial terms on ANB's shareholders, including the
exchange ratio which represented a 32.99% premium over the closing price
of ANB common stock on July 29, 1999 and a 54.70% premium to the average
closing price of ANB common stock for the 30 trading days preceding the
approval of the merger agreement by ANB's Board;
- The ANB Board's belief that the financial terms of the merger are fair
and in the best interests of ANB as a whole and ANB's shareholders and
are consistent with ANB's long term strategy of maximizing shareholder
value;
- The business, operations, financial condition, earnings and prospects of
ANB and Old National. In making its determination, the ANB Board took
into account the results of ANB's due diligence review of Old National;
- The scale, scope, strength and diversity of operations, product lines and
delivery systems that can be achieved by combining ANB and Old National;
- The complimentary nature of the businesses of ANB and Old National and
the earnings in varying economic and market climates relative to ANB on a
stand-alone basis as a result of greater geographic, asset and
line-of-business diversification;
- The ANB Board's belief that the merger represents:
- an opportunity to leverage ANB's management, infrastructure, products,
marketing and business lines over a larger consumer, business and
corporate customer base through Old National's geographically diverse
network; and
- the possibility of achieving expense savings and operating efficiencies
through, among other things, the elimination of duplicative efforts;
- The structure of the merger and the terms of the merger agreement,
including the fact that the fixed exchange ratio provides certainty as to
the number of shares of common stock of Old National to be issued in the
merger, and that the merger is intended to qualify as a transaction of a
type that is tax-free for U.S. federal income tax purposes and as a
pooling of interests for accounting purposes;
- The opinion of Sandler O'Neill to the ANB Board that, based upon and
subject to the considerations set forth in the opinion, the exchange
ratio was fair, from a financial point of view, to ANB shareholders (see
"-- Fairness Opinion of ANB's Financial Advisor");
- The ANB Board's belief that, while no assurances could be given, the
business and financial advantages contemplated in connection with the
merger were likely to be achieved within a reasonable time frame;
- The likelihood of the merger being approved by the appropriate regulatory
authorities;
14
<PAGE> 21
- Consideration of the effect of the merger on ANB's other constituencies,
including ANB's employees and the customers and communities served by
ANB, including consideration of Old National's historical practice of
retaining employees of acquired institutions with competitive salary and
benefit programs, and the opportunity for training, education and
advancement of employees within Old National or one of its affiliated
companies; and
- The ANB Board's analysis of alternatives to merging with Old National,
including merging with other potential acquirors and its analysis of
relevant price information from recent comparable bank mergers which
occurred in the Midwest and across the United States.
This discussion of the information and factors considered by the ANB Board
is not intended to be exhaustive, but it does include all material factors
considered by the ANB Board. In reaching its decision to approve and recommend
the merger, the ANB Board of Directors did not assign any relative or specific
weights to these factors, and individual directors may have given differing
weights to different factors. Based upon the foregoing and other factors, the
Board of Directors of ANB concluded that it was in the best interests of ANB and
its shareholders to merge with Old National.
FAIRNESS OPINION OF ANB'S FINANCIAL ADVISOR
By letter agreement dated as of June 18, 1999, ANB retained Sandler O'Neill
as an independent financial advisor in connection with ANB's consideration of a
possible business combination with a second party. Sandler O'Neill is a
nationally recognized investment banking firm whose principal business specialty
is financial institutions. In the ordinary course of its investment banking
business, Sandler O'Neill is regularly engaged in the valuation of financial
institutions and their securities in connection with mergers and acquisitions
and other corporate transactions.
Sandler O'Neill acted as financial advisor to ANB in connection with the
merger and participated in certain of the negotiations leading to the merger
agreement. At the request of the ANB Board, representatives of Sandler O'Neill
attended the July 29, 1999 meeting of the ANB Board at which the Board
considered and approved the merger agreement. At the meeting, Sandler O'Neill
delivered to the ANB Board its oral opinion, subsequently confirmed in writing,
that as of such date, the exchange ratio was fair to the ANB shareholders from a
financial point of view. Sandler O'Neill has also delivered to the ANB Board a
written opinion dated the date of this document which is substantially identical
to the July 29, 1999 opinion, except for the adjustment of the exchange ratio
from 1.25 to 1.3125 shares to reflect the effect of the 5% stock dividend
declared by Old National on December 9, 1999. The full text of the Sandler
Opinion is attached as Appendix C to this document. The Sandler Opinion outlines
the procedures followed, assumptions made, matters considered and qualifications
and limitations on the review undertaken by Sandler O'Neill in rendering the
opinion. The Sandler Opinion is incorporated by reference into this description
of the opinion and this description is qualified in its entirety by reference to
the Sandler Opinion. ANB shareholders are urged to carefully read the Sandler
Opinion in connection with their consideration of the proposed merger.
The Sandler Opinion was directed to the ANB Board and was provided to ANB
for its information in considering the merger. The Sandler Opinion is directed
only to the fairness of the exchange ratio to ANB shareholders from a financial
point of view. It does not address the underlying business decision of ANB to
engage in the merger or any other aspect of the merger and is not a
recommendation to any ANB shareholder as to how such shareholder should vote at
the special meeting with respect to the merger or any other related matter.
In rendering its July 29, 1999 opinion, Sandler O'Neill performed a variety
of financial analyses. The following is a summary of the material analyses
performed by Sandler O'Neill, but is not a complete description of all the
analyses underlying Sandler O'Neill's opinion. The preparation of a fairness
opinion is a complex process involving subjective judgments as to the most
appropriate and relevant methods of financial analysis and the application of
those methods to the particular circumstances. The process, therefore, is not
necessarily susceptible to a partial analysis or summary description. Sandler
O'Neill
15
<PAGE> 22
believes that its analyses must be considered as a whole and that selecting
portions of the factors and analyses considered without considering all factors
and analyses, or attempting to ascribe relative weights to some or all such
factors and analyses, could create an incomplete view of the evaluation process
underlying its opinion. Also, no company included in Sandler O'Neill's
comparative analyses described below is identical to Old National or ANB and no
transaction is identical to the merger of Old National and ANB. Accordingly, an
analysis of comparable companies or transactions is not mathematical; rather, it
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the companies and other factors that
could affect the public trading values or merger transaction values, as the case
may be, of Old National and ANB and the companies to which they are being
compared.
The earnings projections for ANB and Old National relied upon by Sandler
O'Neill in its analyses were reviewed with management and were based upon 1999
internal projections of ANB and Old National provided to Sandler O'Neill and on
published IBES consensus earnings estimates for 2000. For periods after 2000,
Sandler O'Neill assumed an annual growth rate on earning assets of 5.00% in the
case of ANB and 6.50% in the case of Old National. The 1999 earnings projections
furnished to Sandler O'Neill were prepared by the senior managements of ANB and
Old National for internal purposes only and not with a view towards public
disclosure. Those projections, as well as the other earnings estimates relied
upon by Sandler O'Neill in its analyses, were based on numerous variables and
assumptions which are inherently uncertain and accordingly, actual results could
vary materially from those set forth in such projections.
In performing its analyses, Sandler O'Neill also made numerous assumptions
with respect to industry performance, business and economic conditions and
various other matters, many of which cannot be predicted and are beyond the
control of ANB, Old National and Sandler O'Neill. The analyses performed by
Sandler O'Neill are not necessarily indicative of actual values or future
results, which may be significantly more or less favorable than suggested by
such analyses. Sandler O'Neill prepared its analyses solely for purposes of
rendering its opinion and provided such analyses to the ANB Board at the July
29th meeting. Estimates on the values of companies do not purport to be
appraisals or necessarily reflect the prices at which companies or their
securities may actually be sold. Such estimates are inherently subject to
uncertainty and actual values may be materially different. Accordingly, Sandler
O'Neill's analyses do not necessarily reflect the value of ANB common stock or
Old National common stock or the prices at which ANB common stock or Old
National common stock may be sold at any time.
Summary of Proposal. Sandler O'Neill reviewed the financial terms of the
proposed transaction. Based on the closing price of Old National common stock on
July 28, 1999 of $30.00 and an exchange ratio of 1.25, Sandler O'Neill
calculated an implied transaction value per share of ANB common stock of $37.50.
The implied aggregate transaction value was approximately $212 million, based
upon 5,653,026 fully diluted shares of ANB common stock outstanding, which was
determined using the treasury stock method at the implied value of $37.50. Based
upon ANB's June 30, 1999 financial information, Sandler O'Neill calculated the
following ratios:
<TABLE>
<S> <C>
Implied value/Tangible book value........................... 3.39x
Implied value/Book value.................................... 2.85x
Implied value/Last twelve month full-diluted EPS(1)......... 24.61x
Implied value/Projected twelve months ended 1999............ 22.19x
Tangible book premium/core deposits(1)(2)................... 22.68%
Implied value/Total deposits................................ 32.55%
Implied value/Total assets.................................. 27.05%
</TABLE>
- ---------------
(1) LTM EPS excluded one-time merger related charges
(2) Assumes 5% non-core deposits
16
<PAGE> 23
For purposes of Sandler O'Neill's analyses, earnings per share were based
on fully diluted earnings per share, normalized for non-recurring merger
charges. Sandler O'Neill noted that the implied transaction value represented a
30% premium over the July 28, 1999 closing price of ANB common stock of $28.75.
Stock Trading History. Sandler O'Neill reviewed the history of the reported
trading prices and volume of ANB common stock and Old National common stock, and
the relationship between the movements in the prices of ANB common stock and Old
National common stock, respectively, to movements in certain stock indices,
including the Standard & Poor's 500 Index, the Nasdaq Bank Index and, in the
case of ANB, the median performance of a composite group of publicly traded
regional commercial banks selected by Sandler O'Neill and, in the case of Old
National, the median performance of a composite group of regional commercial
banks selected by Sandler O'Neill. During the one year period ended July 27,
1999, the ANB common stock outperformed the Nasdaq Bank Index and its composite
index, and underperformed the S&P Index. During the one year period ended July
27, 1999, Old National common stock outperformed the Nasdaq Bank Index and its
composite index, and underperformed the S&P Index.
Comparable Company Analysis. Sandler O'Neill used publicly available
information to compare selected financial and market trading information for ANB
and two groups of selected financial institutions. The first group consisted of
ANB and the following 11 publicly traded regional commercial banks (the
"Regional Group"): BancFirst Ohio Corp., Peoples Bancorp, Inc., Lakeland
Financial Corp., Indiana United Bancorp, German American Bancorp, Premier
Financial Bancorp, Inc., S.Y. Bancorp, Inc., UnionBancorp, Inc., Wayne Bancorp,
Inc., Oak Hill Financial, Inc., and Belmont Bancorp. Sandler O'Neill also
compared ANB to a group of 12 publicly traded commercial banks which had a
return on average equity (based on last twelve months' earnings) of greater than
15% and a price-to-tangible book value of greater than 200% (the "Highly Valued
Group"). The Highly Valued Group was comprised of Mid-State Bancshares, Prime
Bancshares, Inc., Independent Bank Corp., Arrow Financial Corp., Suffolk
Bancorp, Great Southern Bancorp, Inc., Glacier Bancorp, Inc., Tompkins Trustco,
Inc., S.Y. Bancorp, Inc., Summit Bancshares, Inc., City Bank and Oak Hill
Financial, Inc. The analysis compared publicly available financial information
for ANB and the median data for each of the Regional Group and Highly Valued
Group as of and for each of the years ended December 31, 1994 through 1998 and
as of and for the twelve months ended March 31, 1999 or June 30, 1999, as
applicable. Sandler O'Neill also used publicly available information to perform
a similar comparison of selected financial and market trading information for
Old National and two different groups of commercial banks. The first group
consisted of Old National and the following 12 publicly traded regional
commercial banks (the "Midwestern Group"): Associated Banc-Corp, Commerce
Bancshares, Inc., TCF Financial Corp., FirstMerit Corp., Provident Financial
Group, Inc., UMB Financial Corp., Community First Bankshares, First Midwest
Bancorp, Inc., Citizens Banking Corp., Sky Financial Group, Inc., AMCORE
Financial, Inc. and Republic Bancorp, Inc. Sandler O'Neill also compared Old
National to a group of 11 publicly traded commercial banks which had a return on
equity of greater than 17% (based on last twelve months' earnings) and a
price-to-tangible book value of greater than 290% ("The High Performing Group").
The High Performing Group consisted of the following 11 publicly traded
commercial banks: Associated Banc-Corp, North Fork Bancorp, Synovus Financial
Corp., TCF Financial Corp., CCB Financial Corp., Cullen/Frost Bankers, Inc.,
National Commerce Bancorp, City National Corp., Valley National Bancorp,
Commerce Bancorp, Inc. and Westamerica Bancorp. The analysis compared publicly
available financial information for Old National and the median data for the
Midwestern Group and the High Performing Group as of and for each of the years
ended December 31, 1994 through 1998 and as of and for the twelve months ended
March 31, 1999
17
<PAGE> 24
or June 30, 1999, as applicable. The table below sets forth the comparative data
as of and for the twelve months ended June 30, 1999.
<TABLE>
<CAPTION>
HIGH
REGIONAL HIGHLY OLD MIDWESTERN PERFORMING
ANB GROUP VALUED NATIONAL GROUP GROUP
-------- -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Total assets................... $783,677 $791,685 $788,931 $6,898,400 $6,898,400 $6,902,000
Annual growth rate of total
assets....................... 10.60% 14.72% 10.60% 10.81% 7.26% 10.06%
Tangible equity/assets......... 7.68% 7.25% 8.82% 7.46% 7.25% 7.80%
Intangible assets/total
equity....................... 16.00% 14.55% 1.19% 2.75% 7.73% 3.40%
Net loans/total assets......... 78.48% 63.96% 71.32% 66.98% 66.98% 65.51%
Cash & securities/total
assets....................... 16.32% 30.13% 23.19% 28.67% 30.82% 27.24%
Gross loans/total deposits..... 95.24% 83.39% 88.72% 97.34% 90.91% 85.40%
Total borrowings/total
assets....................... 7.35% 7.96% 8.28% 21.61% 17.43% 12.09%
Non-performing assets/total
assets....................... 0.22% 0.40% 0.34% 0.28% 0.41% 0.24%
Loan loss reserve/gross
loans........................ 0.86% 1.19% 1.25% 1.20% 1.34% 1.34%
Net interest margin............ 4.47% 4.03% 4.88% 4.07% 4.15% 4.62%
Loan loss provision/average
assets....................... 0.23% 0.22% 0.22% 0.17% 0.29% 0.17%
Non-interest income/average
assets....................... 1.42% 0.78% 1.39% 0.95% 1.50% 1.50%
Non-interest expense/average
assets....................... 3.32% 2.78% 3.13% 2.66% 3.41% 3.10%
Efficiency ratio............... 63.51% 57.81% 52.82% 55.38% 57.53% 54.86%
Return on average assets....... 1.12% 0.96% 1.59% 1.26% 1.26% 1.70%
Price/tangible book value per
share........................ 255.08% 250.49% 261.50% 269.03% 276.85% 377.46%
Price/earnings per share....... 18.54x 17.29x 14.86x 17.55x 16.73x 16.31x
Dividend yield................. 2.69% 2.25% 1.78% 2.05% 2.33% 2.01%
Dividend payout ratio.......... 49.87% 38.58% 24.80% 35.68% 39.59% 38.92%
</TABLE>
Analysis of Selected Merger Transactions. Sandler O'Neill reviewed certain
other transactions involving publicly traded commercial banks as acquired
institutions with transaction values greater than $15 million. Sandler O'Neill
reviewed 77 transactions announced nationwide from January 1, 1999 to July 26,
1999 ("Nationwide Transactions") and 30 transactions announced from January 1,
1999 to July 26, 1999 in the Midwestern region, comprised of Illinois, Indiana,
Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, North Dakota, Ohio, South
Dakota, and Wisconsin ("Midwestern Transactions"). Sandler O'Neill reviewed the
multiples of transaction value to last four quarters' earnings, transaction
value to book value, transaction value to tangible book value, tangible book
premium to core deposits, transaction value to total assets transaction value to
total deposits and computed high, low, mean, and median multiples and premiums
for the respective groups of transactions. These multiples were applied to ANB's
financial information as of and for the twelve months ended June 30, 1999. As
illustrated in the following table, Sandler O'Neill derived an imputed range of
values per share of ANB common stock of $32.84 to $36.18 based upon the median
multiples for Nationwide Transactions and $33.42 to $37.72
18
<PAGE> 25
based upon the median multiples for Midwestern Transactions. As calculated by
Sandler O'Neill, the implied transaction value per share of ANB common stock in
the merger was $37.50.
<TABLE>
<CAPTION>
NATIONWIDE TRANSACTIONS MIDWESTERN TRANSACTIONS
----------------------- -----------------------
MEDIAN IMPLIED MEDIAN IMPLIED
MULTIPLE VALUE MULTIPLE VALUE
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Deal price/LTM EPS(1)...................... 21.65x $33.01 21.92x $33.42
Deal price/Book Value...................... 2.74x 36.03 2.87x 37.72
Deal price/Tangible book value............. 2.97x 32.84 3.04x 33.58
Tangible book premium/Core deposits........ 22.46% 36.18 21.28% 34.85
Deal price/Total assets.................... 24.49% 34.86 24.43% 34.78
Deal price/Total deposits.................. 30.28% 35.83 30.03% 35.54
</TABLE>
- ---------------
(1) Based on a normalized EPS of $1.52.
Discounted Dividend Stream and Terminal Value Analysis. Sandler O'Neill
also performed an analysis which estimated the future stream of after-tax
dividend flows of ANB through December 31, 2004 under various circumstances,
assuming ANB's current dividend payout ratio and that ANB performed in
accordance with the earnings forecasts reviewed with management. To approximate
the terminal value of ANB common stock at December 31, 2004, Sandler O'Neill
applied price/earnings multiples ranging from 10x to 25x and applied multiples
of tangible book value ranging from 150% to 400%. The dividend income streams
and terminal values were then discounted to present values using different
discount rates ranging from 9% to 15% chosen to reflect different assumptions
regarding required rates of return of holders or prospective buyers of ANB
common stock. As illustrated in the following table, this analysis indicated an
imputed range of values per share of ANB common stock of $15.68 to $43.60 when
applying the price/earnings multiples and $17.51 to $54.05 when applying
multiples of tangible book value. As calculated by Sandler O'Neill, the implied
transaction value per share of ANB common stock in the merger was $37.50.
<TABLE>
<CAPTION>
PRICE/EARNINGS MULTIPLES TANGIBLE BOOK VALUE MULTIPLES
------------------------ -----------------------------
DISCOUNT RATE 10X 25X 1.50X 4.00X
- ------------- -------- -------- --------- ---------
<S> <C> <C> <C> <C>
9%...................................... $19.51 $43.60 $23.06 $54.05
11....................................... 18.11 40.30 21.00 48.83
13....................................... 16.84 37.32 19.16 44.15
15....................................... 15.68 34.61 17.51 39.95
</TABLE>
In connection with its analysis, Sandler O'Neill considered and discussed
with the ANB Board how the present value analysis would be affected by changes
in the underlying assumptions, including variations with respect to the growth
rate of assets, net interest spread, non-interest income, non-interest expenses
and dividend payout ratio. Sandler O'Neill noted that the discounted dividend
stream and terminal value analysis is a widely used valuation methodology, but
the results of such methodology are highly dependent upon the numerous
assumptions that must be made, and the results thereof are not necessarily
indicative of actual values or future results.
Pro Forma Merger Analysis. Sandler O'Neill analyzed certain potential pro
forma effects of the merger, based upon an exchange ratio of 1.25, Old
National's and ANB's current and projected income statements and balance sheets,
and assumptions regarding the economic environment, accounting and tax treatment
of the merger, charges associated with the merger, operating efficiencies and
other adjustments discussed with the senior managements of ANB and Old National.
As illustrated in the following table, this analysis indicated that the merger
would be accretive to ANB's projected earnings per share, tangible book value
per share and dividend as of December 31, 2000. Also, the analysis indicated
that the merger would be dilutive to Old National's earnings and tangible book
value per share for the year ended
19
<PAGE> 26
December 31, 2000. The actual results achieved by Old National and ANB may vary
from projected results and the variations may be material.
<TABLE>
<CAPTION>
OLD NATIONAL ANB
-------------------------- -----------------------------
YEAR ENDING DECEMBER 31, 2000 STAND-ALONE PRO FORMA STAND-ALONE PRO FORMA(1)
- ----------------------------- ----------- --------- ----------- ------------
<S> <C> <C> <C> <C>
Projected EPS......................... $ 1.94 $ 1.93 $ 1.88 $ 2.41
Projected tangible book value......... 13.06 12.60 13.04 15.75
Projected dividend.................... .76 .76 .79 .95
Projected leveraged capital ratio..... 8.18% 7.86% NM NM
</TABLE>
- ---------------
(1) Determined by multiplying the Old National values by the exchange ratio of
1.25.
In connection with rendering the Sandler Opinion, Sandler O'Neill confirmed
the appropriateness of its reliance on the analyses used to render its July 29,
1999 opinion by performing procedures to update certain of such analyses and by
reviewing the assumptions upon which such analyses were based and the other
factors considered in rendering its opinion. In particular, Sander O'Neill
considered the adjustment of the exchange ratio from 1.25 to 1.3125 shares to
reflect the effect of the 5% stock dividend declared by Old National on December
9, 1999.
In connection with rendering its opinions, Sandler O'Neill reviewed, among
other things: (1) the merger agreement and exhibits thereto; (2) the Stock
Option Agreement, dated July 29, 1999, by and between ANB and Old National; (3)
certain publicly available financial statements of ANB and other historical
financial information provided by ANB that they deemed relevant; (4) certain
publicly available financial statements of Old National and other historical
financial information provided by Old National that they deemed relevant; (5)
certain internal financial analyses and forecasts of ANB prepared by and
reviewed with management of ANB and the views of senior management of ANB, based
on certain limited discussions with certain members of senior management,
regarding ANB's past and current business, financial condition, results of
operations and future prospects, including, in the case of its opinion dated the
date hereof, the impact of Old National's acquisition of Sycamore Agency, Inc.,
Heritage Financial Services, Inc. and Permanent Bancorp, Inc.; (6) certain
internal financial analyses and forecasts of Old National prepared by and
reviewed with management of Old National, (7) the views of senior management of
Old National, based on certain limited discussions with certain members of
senior management, regarding Old National's past and current business, financial
condition, results of operations and future prospects; (8) the pro forma impact
of the merger; (9) the publicly reported historical price and trading activity
for ANB's and Old National's common stock, including a comparison of certain
financial and stock market information for ANB and Old National with similar
publicly available information for certain other companies the securities of
which are publicly traded; (10) the financial terms of recent business
combinations in the commercial banking industry, to the extent publicly
available; (11) the current market environment generally and the banking
environment in particular; and (12) such other information, financial studies,
analyses and investigations and financial, economic and market criteria as they
considered relevant.
In performing its reviews and analyses, Sandler O'Neill assumed and relied
upon the accuracy and completeness of all the financial information, analyses
and other information that was publicly available or otherwise furnished to,
reviewed by or discussed with it, and Sandler O'Neill did not assume any
responsibility or liability for independently verifying the accuracy or
completeness of any of such information. Sandler O'Neill did not make an
independent evaluation or appraisal of the assets, the collateral securing
assets or the liabilities, contingent or otherwise, of ANB or Old National or
any of their respective subsidiaries, or the collectibility of any such assets,
nor was it furnished with any such evaluations or appraisals. Sandler O'Neill is
not an expert in the evaluation of allowances for loan losses and it has not
made an independent evaluation of the adequacy of the allowance for loan losses
of ANB or Old National, nor has it reviewed any individual credit files relating
to ANB or Old National. With ANB's consent, Sandler O'Neill has assumed that the
respective allowances for loan losses for both ANB and Old National are adequate
to cover such losses and will be adequate on a pro forma basis for the combined
20
<PAGE> 27
entity. In addition, Sandler O'Neill has not conducted any physical inspection
of the properties or facilities of ANB or Old National. With respect to all
financial projections reviewed with each company's management and used by
Sandler O'Neill in its analyses, Sandler O'Neill assumed that they reflected the
best currently available estimates and judgments of the respective managements
of the respective future financial performances of ANB and Old National and that
such performances will be achieved. Sandler O'Neill expressed no opinion as to
such financial projections or the assumptions on which they were based.
Sandler O'Neill's opinion was necessarily based upon market, economic and
other conditions as they existed on, and could be evaluated as of, the date of
its opinion. Sandler O'Neill assumed, in all respects material to its analysis,
that all of the representations and warranties contained in the merger agreement
and all related agreements are true and correct, that each party to such
agreements will perform all of the covenants required to be performed by such
party under such agreements and that the conditions precedent in the merger
agreement are not waived. Sandler O'Neill also assumed, with ANB's consent, that
there has been no material change in ANB's and Old National's assets, financial
condition, results of operations, business or prospects since the date of the
last publicly filed financial statements available to them, that ANB and Old
National will remain as going concerns for all periods relevant to its analyses,
and that the merger will be accounted for as a pooling of interests and will
qualify as a tax-free reorganization for federal income tax purposes.
ANB has agreed to pay Sandler O'Neill a transaction fee in connection with
the merger, a substantial portion of which is contingent upon the closing of the
merger. Based on the closing price of ANB common stock on February 3, 2000 (the
latest practicable date prior to the date of this document), ANB would pay
Sandler O'Neill a transaction fee of approximately $2.01 million, of which
approximately $529,287 has been paid and the balance will be paid when the
merger is closed. ANB paid Sandler O'Neill a fee of $250,000 for rendering its
fairness opinion, which will be credited against that portion of the transaction
fee due upon closing of the merger. ANB has also agreed to indemnify Sandler
O'Neill and its affiliates and their respective partners, directors, officers,
employees, agents, and controlling persons against certain expenses and
liabilities, including liabilities under securities laws.
Sandler O'Neill has in the past provided certain other investment banking
services to ANB and has received compensation for such services. In the ordinary
course of its business as a broker-dealer, Sandler O'Neill may also purchase
securities from and sell securities to ANB and Old National and may actively
trade the equity or debt securities of ANB and Old National and their respective
affiliates for its own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
RECOMMENDATION OF THE ANB BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF ANB HAS CAREFULLY CONSIDERED AND UNANIMOUSLY
APPROVED THE MERGER AGREEMENT AND THE MERGER AND UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS OF ANB VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED BY THE AGREEMENT.
CONVERSION OF ANB COMMON STOCK
Under the terms of the merger agreement, shareholders of ANB of record when
the merger is completed will be entitled to receive 1.3125 shares of Old
National common stock, as adjusted for the 5% stock dividend declared by Old
National on December 9, 1999 and subject to further adjustment, if any, for
stock splits, stock dividends or any similar recapitalization of Old National or
if Old National elects to adjust the exchange ratio following ANB's exercise of
its right to terminate the merger agreement due to a decline in the value of Old
National common stock. Because the exchange ratio is fixed and because the
market price of Old National common stock prior to the effective time of the
merger may fluctuate, the value of the shares of Old National common stock that
you will receive if and when the merger is completed may increase or decrease
prior to and following the merger.
As of February 3, 2000, the closing price of Old National common stock was
$27.00 per share, as reported by the Nasdaq National Market System. If the
merger had been consummated on that date, the
21
<PAGE> 28
number of shares of Old National common stock exchanged in the merger would have
been 7,237,025, with an aggregate market value of approximately $195,399,675.
TREATMENT OF ANB STOCK OPTIONS
Each stock option to acquire ANB common stock granted under ANB's stock
option and incentive plans outstanding and unexercised immediately prior to the
effective time of the merger will be converted automatically at the effective
time into a stock option to purchase Old National common stock on the same terms
that were applicable to the stock option at the effective time of the merger.
Old National will assume the obligations of ANB with respect to each outstanding
option to purchase ANB common stock. The number of shares of Old National common
stock subject to the new Old National options will be equal to the product of
the number of shares of ANB common stock subject to the ANB stock options times
the exchange ratio as then in effect, rounded to the nearest whole share. The
exercise price per share of Old National common stock subject to the new Old
National stock options will be equal to the aggregate exercise price for shares
of ANB common stock divided by the number of shares of Old National common
stock, rounded to the nearest whole share, deemed purchasable pursuant to the
stock options. Additionally, stock options that are incentive stock options
under the Internal Revenue Code will be adjusted in the manner required by the
Code.
EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES
Immediately after the effective time of the merger, Old National will mail
a letter of transmittal to ANB shareholders. This transmittal letter will
contain instructions with respect to the surrender of certificates representing
shares of ANB common stock. YOU SHOULD NOT RETURN YOUR ANB STOCK CERTIFICATES
WITH THE ENCLOSED PROXY AND SHOULD NOT FORWARD THEM TO OLD NATIONAL UNTIL YOU
RECEIVE A LETTER OF TRANSMITTAL FROM OLD NATIONAL.
If your certificate for your shares of ANB common stock has been lost,
stolen or destroyed, Old National will issue the Old National common stock and
pay cash for any fractional shares after Old National receives from you an
agreement to indemnify Old National against loss from such lost, stolen or
destroyed certificate and appropriate evidence of the loss, theft or
destruction, such as an affidavit.
After the effective time of the merger, stock certificates previously
representing ANB common stock will represent only the right to receive shares of
Old National common stock and cash for any fractional shares. Following the
effective time of the merger and prior to the surrender by holders of ANB of
their stock certificates to Old National in exchange for Old National common
stock, the holders will not be entitled to receive payment of dividends or other
distributions declared on shares of Old National common stock. Upon the
subsequent exchange of such certificates, however, Old National will pay,
without interest, any accumulated dividends or other distributions previously
declared and withheld on the shares of Old National common stock. After the
effective time of the merger, there will be no transfers on the stock transfer
books of ANB of shares of ANB issued and outstanding immediately prior to the
effective time. Following the effective time of the merger, the shares of ANB
common stock will no longer be traded on the Nasdaq National Market. If, after
the effective time of the merger, you present certificates representing shares
of ANB common stock for registration or transfer, the certificates will be
canceled and exchanged for shares of Old National common stock.
No fractional shares of Old National common stock will be issued to
shareholders of ANB in connection with the merger. Each shareholder of ANB who
otherwise would be entitled to a fractional interest in a share of Old National
common stock as a result of the exchange ratio will be paid a cash amount equal
to the fractional interest multiplied by the average of the per share closing
price of Old National common stock as reported on the Nasdaq National Market
System for the five days on which shares of Old National common stock were
traded immediately before the effective time of the merger.
Old National will distribute stock certificates representing shares of Old
National common stock and will pay any cash payment for fractional shares
(without interest) to each former shareholder of ANB as
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soon as practical following the shareholder's delivery to Old National of his or
her certificate(s) representing shares of ANB common stock.
NO DISSENTERS' OR APPRAISAL RIGHTS
In connection with the merger, under Indiana law, shareholders of ANB do
not have the statutory right to dissent and require appraisal of their shares of
ANB common stock.
RESALE OF OLD NATIONAL COMMON STOCK BY AFFILIATES OF ANB
Shares of Old National common stock to be issued to ANB shareholders in the
merger have been registered under the Securities Act of 1933, as amended. Shares
of Old National common stock issued in the merger may be traded freely and
without restriction by those shareholders not considered to be affiliates (as
that term is defined by the Securities Act) of ANB. However, shares by any
person who is an affiliate of ANB at the time of the merger is submitted for a
vote at the special meeting will, under existing law, require:
- the further registration under the Securities Act of the shares of Old
National common stock to be transferred;
- compliance with Rule 145 promulgated under the Securities Act, which
permits limited sales in certain circumstances; or
- the availability of another exemption from registration.
An "affiliate" of ANB is a person who directly, or indirectly through one
or more intermediaries, controls, is controlled by, or is under common control
with, ANB. These restrictions are expected to apply to the directors and
executive officers of ANB and the holders of 10% or more of the ANB common
stock. The same restrictions apply to certain relatives or the spouse of those
persons and any trusts, estates, corporations or other entities in which those
persons have a 10% or greater beneficial or equity interest. Old National will
give stop transfer instructions to the transfer agent with respect to the shares
of ANB common stock to be received by persons subject to these restrictions, and
the certificates for their shares may contain a legend indicating the resale
restrictions.
SEC guidelines regarding qualifying for the pooling of interests method of
accounting also limit sales of shares of the acquiring and acquired company by
affiliates of either company in a business combination. SEC guidelines indicate
that the pooling of interests method of accounting will generally not be
challenged on the basis of sales by affiliates of the acquiring or acquired
company if those affiliates do not dispose of any of the shares of the
corporation they own or shares of a corporation they receive in connection with
a merger during the period beginning 30 days before the merger and ending when
financial results covering at least 30 days of post-merger operations of the
combined entity have been published.
Each affiliate of ANB delivered to Old National on July 29, 1999, a written
agreement to the effect that the affiliate (1) will not sell, pledge, transfer,
dispose of or otherwise reduce the affiliate's market risk with respect to the
shares of ANB common stock directly or indirectly owned or held by such person
during the thirty day period prior to the effective time of the merger, and (2)
will not sell, pledge, transfer or otherwise dispose of or reduce the
affiliate's market risk with respect to the shares of Old National common stock
to be received by such person pursuant to the merger agreement (i) until such
time as financial results covering at least thirty days of combined operations
of ANB and Old National have been published within the meaning of Section 201.01
of the Securities and Exchange Commission's Codification of Financial Reporting
Policies and (ii) unless done pursuant to an effective registration statement
under the Securities Act or pursuant to Rule 145 or another exemption from the
registration requirements under the Securities Act. The merger agreement
requires that any person who becomes an affiliate of ANB after July 29, 1999
deliver a similar agreement to Old National, and that all persons who have
delivered these agreements confirm, at the effective time of the merger, that
they have complied with the terms of the agreements.
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This is only a general statement of certain restrictions regarding the sale
or transfer of the shares of Old National common stock to be issued in the
merger. Therefore, those shareholders of ANB who may be deemed to be affiliates
of ANB should consult with their legal counsel regarding the resale restrictions
that may apply to them.
CONDITIONS TO THE COMPLETION OF THE MERGER
ANB's and Old National's obligations to complete the merger are subject to
the satisfaction of the following conditions at or prior to the effective time
of the merger:
- The merger agreement has been approved by the affirmative vote of the
holders of at least a majority of the outstanding shares of ANB common
stock;
- Old National and ANB have received all regulatory approvals required for
the merger;
- Old National and ANB have received the opinions of their respective
counsel dated as of the effective time of the merger, with respect to the
fact that the merger will be treated as tax-free for U.S. federal income
tax purposes;
- The registration statement of which this document is a part is effective
and no stop order suspending its effectiveness is issued or threatened;
- Old National and ANB have received certain officers' certificates and
other closing documents;
- The representations and warranties contained in the merger agreement are
accurate at the effective time of the merger; and
- Certain covenants set forth in the merger agreement have been fulfilled.
Old National's obligation to complete the merger also is subject to the
condition that it has received an opinion from its independent auditors dated as
of the effective time of the merger, to the effect that the merger will qualify
for pooling of interests accounting treatment.
The conditions to consummation of the merger, which are more fully
enumerated in the merger agreement, are requirements subject to waiver by the
party entitled to the benefit of such conditions, as set forth in the merger
agreement. See "Proposed Merger -- Resale of Old National Common Stock by
Affiliates of ANB," "-- Regulatory Approvals Required for the Merger", "Federal
Income Tax Consequences" and Appendix A.
TERMINATION OF THE MERGER AGREEMENT
The merger agreement contains provisions allowing Old National and ANB to
terminate the merger agreement and the merger for various reasons. The merger
may be terminated by Old National or ANB before or after the shareholders of ANB
have approved the merger if one of the events which gives a party the right to
terminate occurs. The merger agreement may be terminated:
- by the mutual, written consent of the Board of Directors of Old National
and ANB;
- by either Old National or ANB if the merger has not been completed by
March 31, 2000;
- by either the Old National Board or the ANB Board if there has been a
breach of any representation or warranty contained in the merger
agreement by ANB, in the case of termination by Old National, or by Old
National, in the case of termination by ANB, and the breach has not been
cured within 30 days after written notice to the breaching party of the
breach;
- by either the Old National Board or the ANB Board if there has been a
breach of any of the covenants or agreements contained in the merger
agreement by ANB, in the case of termination by Old National, or by Old
National, in the case of termination by ANB, and (1) the breach has not
been cured within 30 days written notice to the breach party of the
breach; and (2) the breach will be likely, individually or in the
aggregate with other breaches, to result in a material adverse effect;
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- by either Old National or ANB if the terminating party reasonably
determines that the merger has become impracticable because of (1) the
commencement or threat of any claim or litigation against Old National,
ANB, any subsidiary of Old National or ANB, or any director or officer of
any of these companies relating to the merger or merger agreement, if Old
National is the terminating party or (2) the commencement, a threat of
any material claim, litigation or proceeding against Old National which
relates to the merger or merger agreement or which is likely to have a
material adverse effect on Old National, if the terminating party is ANB;
or
- by either Old National or ANB if the shareholders of ANB do not approve
the merger and the merger agreement and ANB has satisfied its obligation
to obtain shareholder approval.
Additionally, Old National may terminate the merger if:
- the merger will not qualify for pooling of interests accounting
treatment; or
- there has been a material adverse change in the business, assets,
capitalization, financial condition or results of operations of ANB and
its subsidiaries (considered as a whole) as of the effective time of the
merger compared to that in existence as of July 29, 1999 (the date of the
merger agreement) other than changes that occur as a result of changes in
banking laws, accounting principles, actions approved by Old National,
changes such as interest rates that affect the banking industry generally
and changes and charges that are a result of the merger.
Further, ANB may terminate the merger if:
- there has been a material adverse change in the financial condition,
results of operations, business, assets or capitalization of Old National
on a consolidated basis as of the effective time as compared to that in
existence on March 31, 1999 other than changes that occur as a result of
changes in banking laws, accounting principles, changes such as interest
rates that affect the banking industry generally and changes and charges
that are a result of the merger;
- prior to approval of the shareholders of ANB of the merger, without
breaching its covenant relating to negotiations with other potential
acquirors, ANB enters into a definitive agreement with a third party that
provides for an acquisition of ANB or a subsidiary of ANB on terms
determined in good faith by the ANB Board to be more favorable to the
shareholders of ANB than the merger with Old National and that the ANB
Board has determined that to proceed with the merger with Old National
would violate their fiduciary duties to ANB's shareholders; or
- at any time during the five-day period beginning on the date on which the
last required regulatory approval is obtained, both of the following
conditions are satisfied:
(1) the number obtained by dividing the average of the closing price of a
share of Old National common stock on the Nasdaq National Market
System for the 20 consecutive trading days ending on the day prior to
the day the last required regulatory approval is obtained by $28.51
(the "Old National Ratio") is less than 0.80; and
(2) the Old National Ratio is less than a number obtained by dividing two
index numbers derived from the Nasdaq Bank Index as reported in the
Bloomberg News Service ("the Index Ratio"). The Index Ratio is
calculated by dividing the average of the index value of the Nasdaq
Bank Index for the 20 consecutive trading days ending on the trading
day prior to the day the last regulatory approval is obtained by
$28.51 and then subtracting 0.15.
If ANB elects to terminate the merger for this reason, it must give
written notice to Old National of its desire to terminate the merger
within a five day period, which begins on the day the last regulatory
approval is received. After Old National receives the notice of
termination, Old National has five days to determine, at its option, to
increase the
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consideration to be received by ANB shareholders by adjusting the
exchange ratio of 1.3125. The exchange ratio would be adjusted to equal
the lesser of:
(a) a number obtained by dividing the product of $28.51, 0.80 and the
exchange ratio by the average of the closing price of a share of
Old National common stock on the Nasdaq National Market System
during the period of 20 consecutive trading days ending on the day
before the day the last regulatory approval is obtained; and
(b) a number obtained by dividing the product of the Index Ratio by the
exchange ratio (as then in effect) by the Old National Ratio.
If Old National elects to adjust the exchange ratio, it must give ANB
prompt notice of this election and of the revised exchange ratio.
Assuming the last regulatory approval was received February 4, 2000,
the average of the closing price of a share of Old National common
stock for the above calculation would be $29.00. The Old National Ratio
would equal 1.02 ($29.00 divided by $28.51). As a result of the Old
National Ratio being greater than .80, ANB would not have the right to
terminate the merger agreement on the basis of the price of Old
National's common stock.
Upon termination for any of these reasons, the merger agreement will be of no
further force or effect.
RESTRICTIONS AFFECTING ANB
The merger agreement contains a number of restrictions regarding the
conduct of business of ANB until the merger is completed. Among other items, ANB
or any subsidiary of ANB may not, without the prior written consent of Old
National:
- change its capital stock accounts, except for the ANB's Dividend
Reinvestment and Stock Purchase Plan and the issuance of up to 391,624
shares of ANB common stock under the 1996 Directors' Stock Option Plan,
ANB Corporation Stock Option Plan and ANB Corporation 1995 Stock Option
Plan;
- authorize any additional class of stock or issue securities other than or
in addition to the securities which were issued and outstanding as of the
date of the merger agreement;
- distribute or pay any dividends or make any other distributions to its
shareholders except that (1) American National Bank and Trust Company of
Muncie, Peoples Loan and Trust Bank, Farmers State Bank of Union City,
Ohio and American National Trust and Investment Management Company may
pay cash dividends to ANB in the ordinary course of business and to
provide funds for ANB's dividends to its shareholders; and (2) ANB may
pay a quarterly cash dividend of no more than $0.19 per share for any
quarter prior to the quarter in which the merger is completed; provided
that no dividend may be paid for the quarterly period in which the merger
is completed, if, during this quarter, ANB shareholders will be entitled
to receive dividends on their shares of Old National common stock
received pursuant to the merger;
- redeem any of its outstanding shares of common stock;
- merge, consolidate or sell its assets or securities to any other person
or entity;
- purchase any assets or securities or assume any liabilities of another
bank, bank holding company or other entity, except in the ordinary course
of business;
- make any loan or commitment to lend money or accept any deposit except in
accordance with existing banking practices;
- amend or restate its Articles of Incorporation or By-Laws or the Articles
of Incorporation or By-Laws of any of its subsidiaries;
- open, close or alter any of its offices or facilities;
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- fail to maintain the reserve for loan and lease losses of its
subsidiaries financial institutions;
- elect or appoint any new executive officers or directors of ANB or any of
its subsidiaries;
- hire or employ additional employees of ANB or any subsidiary, except
those which are reasonably necessary for the proper operation of their
businesses; or
- negotiate or discuss with third parties a possible sale, merger or
combination of ANB, unless the failure to do so would be breach of the
fiduciary duties of the ANB Board.
This discussion of the restrictions imposed by the merger agreement is not
intended to be exhaustive, but includes the material restrictions imposed on
ANB. Please refer to Appendix A for a complete listing of the restrictions.
REGULATORY APPROVALS REQUIRED FOR THE MERGER
Old National and ANB have agreed to use their best efforts to obtain all
regulatory approvals required to complete the transactions contemplated in the
merger agreement. The merger requires the prior approval of the Board of
Governors of the Federal Reserve System ("Federal Reserve"), the Indiana
Department of Financial Institutions and the Ohio Division of Financial
Institutions. The merger cannot be completed without these approvals. It is
possible we may not obtain the required regulatory approvals and, if we do, we
do not know when the regulators will give approvals. As of the date of this
document, only the Federal Reserve has approved the merger.
Approval of the merger by the Federal Reserve and the state regulators is
not to be interpreted as the opinion of the regulatory authorities that the
merger is favorable to the shareholders of ANB from a financial point of view or
that the regulatory authorities have considered the adequacy of the terms of the
merger. An approval by the Federal Reserve or a state regulatory agency in no
way constitutes an endorsement or a recommendation of the merger by such
regulatory authority.
- FEDERAL RESERVE
The merger is subject to approval by the Federal Reserve. Old National has
filed the required application and notification with the Federal Reserve for
approval of the merger. Old National and ANB may not complete the merger until
30 days after that approval. During that time, the Department of Justice may
challenge the merger on antitrust grounds. With the approval of the Federal
Reserve and the Department of Justice, the waiting period may be reduced to no
fewer than 15 days. The commencement of an antitrust action by the Department of
Justice would stay the effectiveness of Federal Reserve approval of the merger,
unless a court specifically orders otherwise.
The Federal Reserve is prohibited from approving any transaction under the
applicable statutes that (1) would result in a monopoly, (2) would be in
furtherance of any combination or conspiracy to monopolize or to attempt to
monopolize the business of banking in any party of the United States, or (3) may
have the effect in any section of the Unites States of substantially lessening
competition, tending to create a monopoly or resulting in a restraint of trade,
unless it finds that the anti-competitive effects of the transaction are clearly
outweighed in the public interest by the probable effect of the transaction in
meeting the convenience and needs of the communities to be served.
In reviewing a transaction under the applicable statutes, the Federal
Reserve will consider the financial and managerial resources of the companies
and their subsidiary banks and the convenience and needs of the communities to
be served. As part of, or in addition to, consideration of these facts, Old
National and ANB anticipate that the Federal Reserve will consider the
regulatory status of Old National and ANB, current and projected economic
conditions in the areas of the Midwestern United States where Old National and
ANB operate, and the overall capital and safety and soundness standards
established by the Federal Deposit Insurance Corporation Improvement Act of 1991
(the "FDICIA") and the regulations promulgated under the FDICIA.
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Furthermore, the Federal Reserve will assess the degree to which Old
National and ANB and their subsidiaries have taken appropriate steps to assure
that electronic data processing systems and those of their vendors are year 2000
compliant. Additional information about Old National's and ANB's year 2000
compliance efforts to date may be found in each company's Annual Report on Form
10-K for the year ended December 31, 1998. See "Where You Can Find More
Information."
Under the Community Reinvestment Act of 1977, as amended (the "CRA"), the
Federal Reserve must take into account the record of performance of each Old
National and ANB in meeting the credit needs of the entire community, including
low and moderate-income neighborhoods, served by each company and their
subsidiaries. Each of Old National's and ANB's subsidiary depository
institutions has either an outstanding or satisfactory CRA rating with the
appropriate federal regulator. None of the subsidiary banks of Old National or
ANB received any negative comments from its respective federal regulator in its
last CRA examination relating to those ratings that were material and remain
unresolved.
The BHC Act and Federal Reserve regulations require publication or notice
of, and the opportunity for public comment on, the application submitted by Old
National for approval of the merger, and authorize the Federal Reserve to hold a
public meeting in connection with the application if the Federal Reserve
determines that a meeting would be appropriate. Any meeting or comments provided
by third parties could prolong the period during which the application is
subject to review by the Federal Reserve.
Old National's rights to exercise its options under the option agreement
are also subject to the prior approval of the Federal Reserve, to the extent
that the exercise of the options under the option agreement would result in Old
National owning more than 5% of the outstanding shares of ANB common stock. In
considering whether to approve Old National's right to exercise its option,
including its right to purchase more than 5% of the outstanding shares of ANB
common stock, the Federal Reserve would generally apply the same statutory
criteria it will apply to its consideration of the merger.
- INDIANA DEPARTMENT OF FINANCIAL INSTITUTIONS
The merger requires the approval of the Indiana Department of Financial
institutions ("DFI") under Chapter 28-2-14 of the Indiana Financial Institutions
Act. In determining whether to approve the merger, the DFI will consider, among
other factors, whether the merger will jeopardize the interests of depositors,
creditors and the public, whether Old National proposes to provide adequate
services in the communities served by ANB and whether the banks already
controlled by Old National are operated in a safe, sound and prudent manner. Old
National has filed the appropriate application with DFI.
- OHIO DIVISION OF FINANCIAL INSTITUTIONS
The merger also requires the approval of the Ohio Division of Financial
Institutions pursuant to Section 1115.06 of the Ohio Revised Code. The Ohio
Division of Financial Institutiones will consider, among other factors, whether
the merger would result in a monopoly in any of the markets served by ANB in
Ohio and whether the financial condition of Old National might jeopardize the
financial stability of ANB, in determining whether to approve the merger. Old
National has filed a copy of the Federal Reserve notice with the Ohio DFI in
satisfaction of its application requirements.
ACCOUNTING TREATMENT FOR THE MERGER
Old National and ANB anticipate that the merger will be accounted for as a
pooling of interests transaction under GAAP. Under this method of accounting,
shareholders of Old National and ANB will be deemed to have combined their
existing voting common stock interests by virtue of the exchange of shares of
ANB common stock for shares of Old National common stock. Accordingly, the book
value of the assets, liabilities and shareholders' equity of each of ANB, as
reported on its consolidated balance sheet, will be carried over to the balance
sheet of Old National and no goodwill will be created. The parties have prepared
the unaudited, pro forma financial information contained in this document using
the pooling of interests accounting method to account for the merger. See "Old
National Bancorp Pro Forma Condensed Combined Financial Information".
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EFFECTIVE TIME
The merger will become effective at the close of business on the day and at
the time specified in the Articles of Merger of ANB with and into Old National
as filed with the Indiana Secretary of State. The effective time of the merger
will occur on the later of (1) January 31, 2000 or (2) the last business day of
the month following (a) the fulfillment of all conditions precedent to the
merger set forth in the merger agreement and (b) the expiration of all waiting
periods in connection with the bank regulatory applications filed for approval
of the merger, unless, in each case, otherwise mutually agreed to by Old
National and ANB.
Old National and ANB currently anticipate that merger will be consummated
in March, 2000. However, completion of the merger could be delayed if there is a
delay in obtaining the required regulatory approvals or in satisfying other
conditions to the merger.
MANAGEMENT, PERSONNEL AND EMPLOYEE BENEFITS AFTER THE MERGER
Old National will be the surviving corporation in the merger and, upon
consummation of the merger, the separate corporate existence of ANB will cease.
Consequently, the directors and officers of ANB will no longer serve in such
capacities after the effective time of the merger, except Kelly Stanley will
become a director of Old National.
American National Bank, Peoples Bank, Farmers State Bank and American
National Trust will become wholly-owned subsidiaries of Old National. ANB
Financial Planning will remain a wholly-owned subsidiary of American National
Bank. The Boards of Directors and officers of all of ANB's subsidiaries serving
at the effective time of the merger will continue as the Boards of Directors and
officers of the respective subsidiary after the effective time of the merger.
Following the effective time of the merger, Old National, as the sole
shareholder of each of the subsidiaries, will have the ability to elect the
Boards of Directors and officers of the subsidiaries. The current officers of
the subsidiaries of ANB will continue in their respective positions after the
merger, until the Board of Directors of each of the subsidiaries determines
otherwise. Additionally, Old National has agreed to honor and abide by the terms
of the employment agreements of ANB or its subsidiaries, which were in effect as
of the date of the merger agreement.
Those persons who are full-time officers or employees of the subsidiaries
of ANB as of the effective time of the merger, provided that these persons
continue as full-time officers or employees of the former subsidiaries of ANB or
any other subsidiary of Old National after the effective time of the merger,
will receive substantially the same employee benefits on substantially the same
terms and conditions that Old National may offer to similarly situated officers
and employees of its banking subsidiaries from time to time. In addition, years
of service of an employee of ANB or any of its subsidiaries prior to the
effective time of the merger will be credited to each such employee for purposes
of eligibility under Old National's employee welfare benefit plans and for
purposes of eligibility and vesting, but not for accrual or contributions, under
the Old National Employees' Retirement Plan ("Old National Pension Plan"), the
Old National Employees' Savings and Profit Sharing Plan ("Old National Profit
Sharing Plan"), and the Old National Employee Stock Ownership Plan ("Old
National ESOP").
Those officers and employees of ANB or any of its subsidiaries who
otherwise meet the eligibility requirements of the Old National Pension Plan,
Old National Profit Sharing Plan and the Old National ESOP, based upon their age
and years of service to ANB or any of its subsidiaries, will become participants
under the Old National Pension Plan on the January 1st which coincides with or
next follows the effective time of the merger, and will become participants
under the Old National Profit Sharing Plan and the Old National ESOP on the
first day of the calendar month which coincides with or next follows the
effective time of the merger. Those officers and employees who do not meet the
eligibility requirements of the Old National Pension Plan, Old National Profit
Sharing Plan or the Old National ESOP on such date will become participants in
these plans on the on the first "plan entry date" (as defined in the Old
National Pension Plan, the Old National Profit Sharing Plan or the Old National
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ESOP, as the case may be) which coincides with or next follows the date on which
such eligibility requirements are satisfied.
The ANB Corporation Savings and Incentive Plan ("ANB 401(k)") will be
merged with the Old National Profit Sharing Plan. All account balances
maintained under the ANB 401(k) Plan will become fully vested on the day on
which the 401(k) Plan merger occurs. Until such 401(k) Plans are merged, ANB and
its subsidiaries may continue to make contributions to the ANB 401(k) Plan so
long as the contributions are in comparable amounts to past contributions to
such plan.
The ANB Corporation Employee's Pension Plan will be merged with the Old
National Pension Plan as of the January 1 or July 1 that coincides with or next
follows the effective time of the merger, or as soon as feasible after these
dates. All benefits accrued under the ANB Pension Plan will become fully vested
on the day on which the plan merger occurs. Until the date the pension plans are
merged, ANB and its subsidiaries will contribute to the ANB Pension Plan at
least the amounts necessary to prevent an accumulated funding deficiency, within
the meaning of the Internal Revenue Code.
The ANB Corporation Long Term Disability Plan will be terminated as of the
effective time of the merger or as soon as administratively feasible after the
effective time. The termination will not affect the benefits payable to
employees entitled to disability benefits under the plan.
The ANB Corporation Group Health Plan will be terminated as of the last day
of the month in which the effective time of the merger occurs. Through the date
of the termination of the Group Health Plan, ANB and it subsidiaries will
continue to fund all expenses of the plan attributable to claims incurred on or
prior to the date the Group Health Plan terminates. The ANB Corporation Sec. 125
Plan ("ANB Cafeteria Plan") will be terminated on the same day the ANB
Corporation Group Health Plan is terminated. Until the date the ANB Cafeteria
Plan terminates, ANB and its subsidiaries will continue to contribute to the
plan the pre-tax amounts which the plan participants elect to defer from
compensation in order to pay his or her portion of the cost of coverage under
the ANB's Group Health Plan.
The ANB Corporation Supplemental Executive Retirement Plan ("ANB SERP")
will be terminated as of the effective time of the merger. The accumulated
benefit obligations in the ANB SERP will be transferred to and become benefit
obligations under the Old National Non-Qualified Defined Contribution Plan for
Executive Employees of Old National.
The ANB Corporation Group Term Life Insurance Plan will be terminated as of
the first day of the first month following the effective time of the merger or
as soon as administratively feasible after the effective time. ANB and its
subsidiaries will continue to pay the insurance premiums necessary to continue
the plan's death benefits until the plan is terminated.
The ANB Corporation Directors' Deferred Compensation Plan will be merged
with Old National's Directors' Deferred Compensation Plan as of the effective
time of the merger or as administratively feasible thereafter. Until the plans
are merged, ANB and its subsidiaries may continue to allow plan participants to
elect to defer all or a portion of the director fees he or she would receive and
to credit the fees to the director's individual account under the plan.
The Stock Investment Plan of ANB will remain in effect and continue to be
funded by employee and employer contributions through the effective time of the
merger. As of the effective time of the merger, the shares of ANB common stock
owned by each participant will be converted into whole shares of Old National
common stock in the same manner as outstanding shares of ANB common stock held
outside the plan by application of the exchange ratio. Fractional share
interests resulting from the conversion will be paid in cash. The administrator
of the ANB Stock Investment Plan will transfer the shares of Old National common
stock held on behalf of each participant in the plan to the administrator of the
Old National Direct Stock Purchase Plan and Dividend Reinvestment Plan. The
converted shares will be held, administered and distributed or surrendered
pursuant to the terms of the Old National Direct Stock Purchase Plan. However,
the ANB participants' distribution rights cannot be materially adversely
affected by the transfer of the converted shares to the Old National Plan.
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The ANB Corporation Severance Policy will be terminated as of the effective
time of the merger. Individuals covered by the severance policy on the date of
its termination will receive a severance benefit, if within twelve months after
the effective time of the merger (a) his or her employment is terminated
involuntarily without cause, (b) his or her compensation is materially reduced,
or (c) he or she is assigned duties, without his or her consent, that are
materially inconsistent with his or her duties prior to the date of the merger
agreement. The individual's severance benefit will be a salary continuation,
which will be the greater of (a) the amount the individual would have received
under the terminated ANB Corporation Severance Policy had the policy not been
terminated, or (b) the amount the individual would received under the Old
National Severance Policy, if any, applicable to the individual.
EMPLOYMENT AGREEMENT
James R. Schrecongost, Vice Chairman, President and CEO of ANB, entered
into a two-year employment agreement with Old National which becomes effective
when the merger is completed. This employment agreement with Old National
terminates Mr. Schrecongost's current employment agreement with ANB at the
closing of the merger without any further payments or obligations thereunder.
After the effective time of the merger, Mr. Schrecongost will be employed as the
Chairman of Old National Trust Company; Old National Trust Company-Illinois; Old
National Trust Company-Kentucky; and American National Trust and Investment
Management Company, with an initial annual base salary of $255,000. Mr.
Schrecongost also will serve as a member of the Chairman's Committee of Old
National while employed by Old National.
When the merger is completed, Old National will pay Mr. Schrecongost a
signing bonus of $875,000. Additionally, Old National will grant to Mr.
Schrecongost executive performance awards, stock options, stock appreciation
rights, bonuses and other incentive grants at least in equal amounts and
substantially the same as those awarded to other executives of Old National
during the term of Mr. Schrecongost's employment agreement.
In addition to this compensation, if Mr. Schrecongost (1) remains employed
by Old National until the expiration of the employment agreement, (2) is
terminated by Old National without "cause" (as defined in the employment
agreement) during the term of the agreement, or (3) Mr. Schrecongost terminates
his employment for any reason after the first anniversary of the agreement, Old
National will pay Mr. Schrecongost a retention bonus of $65,000. However, if Old
National terminates Mr. Schrecongost's employment for "cause" during the first
year of the employment agreement, Mr. Schrecongost is not entitled to receive
the retention bonus.
If Old National terminates Mr. Schrecongost's employment with Old National,
with or without cause, Old National must pay to Mr. Schrecongost, among other
items, any unpaid portion of his base salary through the term of the agreement
and a single lump sum payment of the amounts he is entitled to receive under Old
National's Short Term Incentive Plan that are earned but unpaid for the year
preceding termination and for the year during which termination occur.
Additionally, Old National must cause all of Mr. Schrecongost's incentive
compensation awards to be nonforfeitable and vested.
Under the terms of the employment agreement, Mr. Schrecongost agrees not
solicit any of Old National's customers or employees for a term of one year
after his employment with Old National ends or the expiration of the term of the
employment agreement. Additionally, Mr. Schrecongost agrees not to compete with
Old National or be employed by Old National's competitors within Indiana and the
counties in other states in which ANB has offices. This restriction is for a
period of one year after Mr. Schrecongost's employment with Old National ends or
the term of the employment agreement ends.
AGREEMENT WITH LARRY E. THOMAS
Larry E. Thomas, CFO of ANB, entered into an agreement with Old National
which becomes effective when the merger is completed. Mr. Thomas is to continue
his employment for a period of 90 days following the closing of the merger and
Old National will pay him at his current rate of salary. This agreement also
provides that Old National will pay to Mr. Thomas $488,219 in a lump sum in
31
<PAGE> 38
satisfaction of the amounts owed under his current employment agreement with ANB
due to the change of control of ANB resulting from the merger. Additionally, Old
National will pay Mr. Thomas cash in an amount necessary to pay for the income
taxes associated with the transfer to him of his split-dollar life insurance
plan.
STOCK OPTION AGREEMENT
General. At the time of the execution of the merger agreement, ANB entered
into a stock option agreement which ANB granted Old National an irrevocable
option to purchase from ANB up to 1,083,753 shares of ANB common stock or a
lesser or greater amount of shares that is equal to 19.9% of the outstanding ANB
common stock at the time the option is exercised, subject to certain
adjustments. The exercise price of the ANB option is $27.70 per share, subject
to certain adjustments. The following summary of aspects of the stock option
agreement, which presents its material terms and conditions, is not a complete
description of the terms and conditions of the stock option agreement and is
qualified in its entirety by reference to the stock option agreement, which is
attached to this document as Appendix B and is incorporated herein by reference.
Exercise. The option becomes exercisable, in whole or in part and subject
to regulatory approval, only if one of the following "exercise events" occurs or
has occurred without the prior approval of Old National:
- ANB or any of its subsidiaries accepts a proposal from, regardless of how
conditional the proposal may be, or ANB or any of its subsidiaries
executes a letter of intent, agreement in principle or other agreement
(whether or not binding) with, any entity, person or group other than Old
National to:
1. acquire ANB by merger, consolidation, purchase of all or substantially
all of ANB's or any of its subsidiaries assets or capital stock or any
other similar transaction; or
2. make a tender or exchange offer for any shares of ANB common stock or
the capital stock of any of its subsidiaries.
- Any entity, person or group, other than Old National, acquires the
beneficial ownership of 15% or more of the shares of ANB common stock or
the capital stock of any of its subsidiaries, and if:
1. the entity, person or group (a) has publicly announced its opposition
to the merger agreement or the merger or its intention not to vote the
shares of ANB common stock it owns in favor of the merger agreement or
merger and (b) has solicited or indicated its intention to solicit
proxies or votes against the merger agreement or the merger; or
2. the entity, person or group has proposed, indicated an intention to
propose or entered into an agreement to merge, consolidate or otherwise
combine with ANB or any of its subsidiaries.
Instead of exercising the option if any of the events listed above occur,
Old National may require ANB to pay it an amount equal to the difference between
the highest price paid or to be paid by any entity, person or group for any
share of ANB common stock (or the total amount of consideration paid for the
assets of ANB or any subsidiary of ANB divided by the number of shares of ANB
common stock outstanding) and Old National's purchase price for the shares
covered by the option agreement.
As of the date of this document, to the knowledge of Old National and ANB,
no event has occurred that would allow Old National to exercise its option.
Repurchase of the Option Shares. The option agreement permits Old National
to require that ANB repurchase any shares issued to Old National under the
option agreement. The repurchase price is an amount which is equal to the
highest price paid or to be paid by any entity, person or group for any share of
ANB common stock in a transaction that triggers Old National's right to exercise
the option (or the total amount of consideration paid for the assets of ANB
divided by the number of shares of ANB common stock then outstanding) multiplied
by the total number of shares to be repurchased. Additionally,
32
<PAGE> 39
ANB must pay Old National interest at the rate of 8% per annum from the date Old
National purchases shares under the option agreement through the date of the
repurchase of the shares.
If Old National has purchased any shares under the option agreement and the
merger agreement is terminated in accordance with its terms, ANB has the right
to purchase, and Old National must sell to ANB, all of the shares of ANB
purchased by Old National pursuant to the option agreement. The purchase price
for each share held by Old National is computed in the same manner as if Old
National required ANB to repurchase shares pursuant to the option agreement.
Expiration of the Option. Old National's ability to purchase shares of ANB
common stock under the option agreement automatically expires:
- at the effective time of the merger with ANB;
- 12 months after the first occurrence of an exercise event listed above;
or
- at the termination of the merger agreement prior to the occurrence of an
exercise event; however, if Old National terminates the merger agreement
in accordance with its terms, the option expires 12 months from the date
of the termination of the merger agreement if Old National is not in
wilful and material breach of any representation, warranty or covenant in
the merger agreement.
Adjustment. The option agreement provides for the adjustment to the number
of shares and the exercise price of the option upon the occurrence of various
changes to the capital structure of ANB or certain events or transactions.
Regulatory Matters. Some rights and obligations of Old National as the
optionee and ANB as the issuer under the option agreement are subject to the
receipt of the necessary regulatory approvals. Old National must obtain the
approvals of the Federal Reserve Board and the Indiana Department of Financial
Institutions to acquire more than 5% of the outstanding shares of ANB common
stock.
Registration Rights. If Old National exercises its option and desires to
sell any of the shares it purchased by exercise of the option, ANB must use its
reasonable best efforts to assist Old National in complying with the federal and
state laws that govern the sale of the shares no later than thirty days after
Old National requests assistance. If ANB receives an opinion from its legal
counsel that a registration statement is not required for the proposed sale of
the shares, it then is not required to provide Old National with assistance in
complying with the laws. Old National has additional rights if, at any time
after it has exercised its option for all of the shares covered by the option
agreement, ANB proposes to offer any of its equity securities for sale to the
public. If ANB makes a public offering, it must give notice to Old National of
its intent to do so. If Old National requests ANB to do so, ANB must include in
ANB's registration statement the number of shares of ANB common stock Old
National has acquired through exercise of the option which Old National
identifies in the request. However, ANB does not need to include these shares in
the registration statement if it receives an opinion of its legal counsel the
shares do not need to be included in the registration statement in order for Old
National to sell or distribute the shares.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
The merger agreement provides that Old National will indemnify, defend and
hold harmless any person who is or has been a director or officer of ANB or was
serving at the request of ANB as a director or officer of any corporation, joint
venture, trust employee benefit plan or other enterprise against all losses
arising out of any claim that is based upon or in any way relates to any act or
omission occurring at or prior to the effective time of the merger in the
person's capacity as a director or officer. Old National will indemnify officers
and directors of the subsidiaries of ANB following the effective time of the
merger to the same extent it indemnifies other persons working in similar
capacities for Old National or its subsidiaries. The merger agreement also
provides that Old National will maintain in effect for not less than two years
from the effective time of the merger the directors' and officers' liability
insurance policies carried by ANB. However, Old National may substitute other
liability insurance policies if the policies provide substantially similar
coverage.
33
<PAGE> 40
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material federal income tax consequences
to holders of ANB common stock who hold such stock as a "capital asset" within
the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended.
Special tax consequences may be applicable to particular classes of taxpayers,
such as financial institutions, insurance companies, tax-exempt organizations,
broker-dealers, traders in securities that elect to apply a mark-to-market
method of accounting, persons that hold ANB common stock as part of a hedge,
straddle or conversion transaction, persons who are not citizens or residents of
the United States and shareholders who acquired their shares of ANB common stock
through the exercise of an employee stock option or otherwise received as
compensation. The following represents general information only and is based on
the Code, its legislative history, existing and proposed regulations thereunder,
published rulings and decisions, all as currently in effect as of the date
hereof, and all of which are subject to change possibly with retroactive effect.
Tax considerations under state, local and foreign laws are not addressed in this
document.
TAX OPINION
Old National has requested the law firm of Krieg DeVault Alexander &
Capehart, LLP and ANB has requested the law firm of Sullivan & Cromwell to
render opinions that the merger to be effected pursuant to the merger agreement
constitutes a tax-free reorganization under the Code to each party thereto and
to the shareholders of ANB, except with respect to cash received by ANB's
shareholders for fractional share interests of Old National common stock.
In rendering their opinions, Krieg DeVault Alexander & Capehart, LLP and
Sullivan & Cromwell may require and rely upon representations contained in
letters received from Old National and ANB, and may rely on customary
assumptions of certain facts. Under the merger agreement, the obligations of
each of Old National and ANB to consummate the merger is conditioned upon the
receipt of an opinion of their respective counsel substantially to the effect as
set forth above. However, these legal opinions will not bind the Internal
Revenue Service, which could take a different view.
TAX CONSEQUENCES TO OLD NATIONAL AND ANB
Assuming the merger of ANB with and into Old National is consummated as
described in the merger agreement and constitutes a statutory merger under
Indiana law, then for United States federal income tax purposes, the merger of
ANB with and into Old National will constitute a tax-free reorganization. As a
result, Old National and ANB will recognize neither gain nor loss as a result of
the merger for federal income tax purposes.
TAX CONSEQUENCES TO ANB SHAREHOLDERS
- ANB SHAREHOLDERS RECEIVING SOLELY OLD NATIONAL COMMON STOCK
An ANB shareholder who receives solely Old National common stock in
exchange for shares of ANB common stock will not recognize any gain or loss upon
such exchange for federal income tax purposes. See the later paragraph for a
discussion of the tax consequences of the receipt of cash in lieu of fractional
share interests of Old National common stock.
The aggregate adjusted tax basis of the shares of Old National common stock
received in the exchange (including fractional shares deemed received and
redeemed as described below) will be equal to the aggregate adjusted tax basis
of the shares of ANB common stock surrendered, and the holding period of the Old
National common stock (including fractional shares deemed received and redeemed
as described below) will include the holding period of such surrendered shares.
- CASH RECEIVED FOR FRACTIONAL SHARES
An ANB shareholder who receives cash for a fractional share interest of Old
National common stock will be treated as having received such fraction of a
share of Old National common stock and then as
34
<PAGE> 41
having received cash in redemption of the fractional share interest, subject to
the provisions of Section 302 of the Code. That deemed redemption will be
treated as a sale of the fractional share, unless it is both "essentially
equivalent to a dividend" and is not "substantially disproportionate" with
respect to the ANB shareholder. If treated as a sale and not a dividend, the ANB
shareholder will recognize capital gain or loss equal to the difference between
the amount of cash received and the portion of the basis of the shares of ANB
common stock allocable to the fractional interest. This capital gain or loss
will be long term gain or loss if, as of the date of the merger, the holding
period for the shares of ANB common stock is greater than one year.
- BACKUP WITHHOLDING AND INFORMATION REPORTING
Payments of cash to a person surrendering shares of ANB common stock may be
subject to information reporting and "backup" withholding at a rate of 31% of
the cash payable, unless such person furnishes its taxpayer identification
number in the manner prescribed in applicable Treasury regulations, certifies
that the number is correct, certifies as to no loss of exemption from backup
withholding and meets certain other conditions. Any amounts withheld from
payments under the backup withholding rules will be allowed as a refund or
credit against federal income tax liability, provided the required information
is furnished to the Internal Revenue Service.
THE INTERNAL REVENUE SERVICE HAS NOT VERIFIED THE FEDERAL INCOME TAX
CONSEQUENCES DISCUSSION SET FORTH ABOVE. THE DISCUSSION IS INCLUDED FOR GENERAL
INFORMATION ONLY. OLD NATIONAL AND ANB URGE SHAREHOLDERS TO CONSULT WITH THEIR
TAX ADVISOR WITH RESPECT TO ALL TAX CONSEQUENCES OF THE MERGER TO THEM,
INCLUDING THE EFFECT OF FEDERAL, STATE AND LOCAL TAX LAWS AND ANY OTHER TAX
CONSEQUENCES.
35
<PAGE> 42
COMPARATIVE PER SHARE DATA
NATURE OF TRADING MARKET
- OLD NATIONAL
Shares of Old National common stock are traded in the over-the-counter
market and share prices are reported by the Nasdaq National Market System under
the symbol OLDB. On July 29, 1999, the business day immediately preceding the
public announcement of the merger, the closing price of Old National common
stock reported by the Nasdaq National Market System was $28.51 per share. On
February 3, 2000, the closing price of Old National common stock reported by the
Nasdaq National Market System was $27.00 per share. The following table sets
forth, for the periods indicated, the high and low per share closing prices of
Old National common stock as reported by the Nasdaq National Market System. The
prices shown below have been adjusted for all stock splits and stock dividends
paid by Old National.
<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
---------------
HIGH LOW
------ ------
<S> <C> <C>
1997
First Quarter............................................... $21.74 $20.88
Second Quarter.............................................. 25.63 21.59
Third Quarter............................................... 26.21 25.19
Fourth Quarter.............................................. 28.65 25.63
1998
First Quarter............................................... $28.87 $27.22
Second Quarter.............................................. 29.63 28.87
Third Quarter............................................... 33.70 28.91
Fourth Quarter.............................................. 35.37 30.39
1999
First Quarter............................................... $35.00 $28.57
Second Quarter.............................................. 33.57 28.57
Third Quarter............................................... 30.00 26.43
Fourth Quarter.............................................. 32.08 27.50
</TABLE>
- ANB
Shares of ANB common stock also are traded in the over-the-counter market
and share prices are reported by the Nasdaq National Market System under the
symbol ANBC. On July 29, 1999, the closing price of ANB common stock reported by
the Nasdaq National Market System was $28.25. On February 3, 2000, the closing
price of ANB common stock was $34.88, as reported by the Nasdaq National Market
System. The table below sets forth, for the periods indicated, the high and low
per share closing prices of ANB common stock as reported by the Nasdaq National
Market System.
<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
---------------
HIGH LOW
------ ------
<S> <C> <C>
1997
First Quarter............................................... $19.75 $18.50
Second Quarter.............................................. 19.50 18.00
Third Quarter............................................... 21.88 19.50
Fourth Quarter.............................................. 26.25 21.50
1998
First Quarter............................................... $28.63 $26.00
Second Quarter.............................................. 29.00 27.88
Third Quarter............................................... 28.13 25.63
Fourth Quarter.............................................. 25.75 22.50
1999
First Quarter............................................... $23.88 $20.00
Second Quarter.............................................. 23.13 19.44
Third Quarter............................................... 35.75 23.38
Fourth Quarter.............................................. 40.75 34.19
</TABLE>
36
<PAGE> 43
DIVIDENDS
The following table sets forth the per share cash dividends paid on shares
of Old National common stock and ANB common stock since January 1, 1997. All
dividends have been adjusted to give effect to their respective stock dividends
and stock splits (if any).
<TABLE>
<CAPTION>
OLD NATIONAL ANB
COMMON COMMON
STOCK(1) STOCK(2)
------------ --------
<S> <C> <C>
1997
First Quarter............................................... $0.13 $0.15
Second Quarter.............................................. 0.13 0.15
Third Quarter............................................... 0.13 0.17
Fourth Quarter.............................................. 0.14 0.17
1998
First Quarter............................................... 0.13 $0.17
Second Quarter.............................................. 0.14 0.17
Third Quarter............................................... 0.14 0.19
Fourth Quarter.............................................. 0.14 0.19
1999
First Quarter............................................... 0.15 $0.19
Second Quarter.............................................. 0.16 0.19
Third Quarter............................................... 0.16 0.19
Fourth Quarter.............................................. 0.16 0.19
</TABLE>
- ---------------
(1) The timing and amount of future dividends will depend upon earnings, cash
requirements, the financial condition of Old National and its subsidiaries,
applicable government regulations and other factors the Old National Board
considers relevant. The dividend policies are subject to the discretion of
the Old National Board. For certain restrictions on the payment of dividends
on shares of Old National common stock, see "Comparison of Common
Stock -- Dividend Rights."
(2) The merger agreement provides that ANB may continue to pay its customary
quarterly dividends of up to $0.19 per share. Certain subsidiaries may pay
cash dividends to ANB in the ordinary course of business for payment of
reasonable and necessary business and operating expenses of ANB and to
provide funds for ANB's dividends.
EXISTING AND PRO FORMA PER SHARE INFORMATION
The following table sets forth certain historical, pro forma and equivalent
information. The data is based on historical financial statements and the pro
forma financial information included on pages 39 through 45 and has been
restated to give effect to all stock dividends, including the 5% stock dividend
issued by Old National on January 28, 1999, the 5% stock dividend declared by
Old National on December 9, 1999 and a three-for-two stock split paid on May 24,
1999. Equivalent per share data is calculated by multiplying the pro forma Old
National information by the exchange ratio of 1.3125 provided by the merger
agreement.
<TABLE>
<CAPTION>
AS REPORTED
-----------------------------------------
CASH BOOK VALUE
OLD NATIONAL NET INCOME(1) DIVIDENDS AT PERIOD END
- ------------ ------------- --------- -------------
<S> <C> <C> <C>
Nine months ended September 30, 1999..................... $1.30 $0.47 $10.75
Year Ended December 31,
1998................................................... 1.54 0.55 10.86
1997................................................... 1.40 0.53 10.41
1996................................................... 1.25 0.50 9.77
</TABLE>
37
<PAGE> 44
<TABLE>
<CAPTION>
AS REPORTED
-----------------------------------------
CASH BOOK VALUE
ANB NET INCOME(1) DIVIDENDS AT PERIOD END
- --- ------------- --------- -------------
<S> <C> <C> <C>
Nine months ended September 30, 1999..................... $1.15 $0.57 $13.41
Year ended December 31,
1998................................................... 1.57 0.72 13.04
1997................................................... 1.50 0.64 12.26
1996................................................... 1.31 0.55 11.30
</TABLE>
<TABLE>
<CAPTION>
NET INCOME(1)
-----------------------------------------------------------
OLD NATIONAL ANB OLD NATIONAL ANB
PRO FORMA(2) EQUIVALENT(2) PRO FORMA(3) EQUIVALENT(3)
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Nine months ended September 30, 1999...... $1.24 $1.63 $1.24 $1.63
Year ended December 31,
1998.................................... 1.49 1.96 1.49 1.96
1997.................................... 1.37 1.80 1.37 1.80
1996.................................... 1.22 1.60 1.22 1.60
</TABLE>
<TABLE>
<CAPTION>
CASH DIVIDENDS
-----------------------------------------------------------
OLD NATIONAL ANB OLD NATIONAL ANB
PRO FORMA(2) EQUIVALENT(2) PRO FORMA(3) EQUIVALENT(3)
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Nine months ended September 30, 1999...... $0.47 $0.62 $0.47 $0.62
Year ended December 31,
1998.................................... 0.55 0.72 0.55 0.72
1997.................................... 0.53 0.70 0.53 0.70
1996.................................... 0.50 0.66 0.50 0.66
</TABLE>
<TABLE>
<CAPTION>
SHAREHOLDERS' EQUITY
-----------------------------------------------------------
OLD NATIONAL ANB OLD NATIONAL ANB
PRO FORMA(2) EQUIVALENT(2) PRO FORMA(3) EQUIVALENT(3)
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
As of September 30, 1999.................. $10.68 $14.02 $10.64 $13.96
As of December 31, 1998................... 10.71 14.06 10.63 13.95
</TABLE>
<TABLE>
<CAPTION>
MARKET VALUE OF COMMON STOCK
-----------------------------
OLD NATIONAL ANB EQUIVALENT
------------ --------------
<S> <C> <C>
As of July 29, 1999(4)...................................... $28.63 $37.58
</TABLE>
- ---------------
(1) Only includes net income from continuing operations for Old National. Old
National's and ANB's basic earnings per share.
(2) Considers the pending merger with ANB. See "Pro Forma Condensed Combined
Financial Information."
(3) Considers the pending merger with ANB and the pending merger as of September
30, 1999 with Heritage Financial Services, Inc. See "Pro Forma Condensed
Combined Financial Information."
(4) Represents the last business day prior to the public announcement of the
proposed merger of ANB and Old National.
38
<PAGE> 45
OLD NATIONAL BANCORP
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(UNAUDITED)
The accompanying financial statements present a Pro Forma Condensed
Combined Balance Sheet of Old National as of September 30, 1999 and Pro Forma
Condensed Combined Statements of Income for the nine months ended September 30,
1999 and for the years ended December 31, 1998, 1997, and 1996.
The Pro Forma Condensed Combined Statements of Income for the nine months
ended September 30, 1999 and the years ended December 31, 1998, 1997 and 1996
are presented giving effect to the pending merger as of January 1 of each of the
years presented.
The pro forma information is based upon historical financial statements.
The assumptions give effect to the proposed merger under the pooling of
interests method of accounting. The information has been prepared in accordance
with the rules and regulations of the SEC and is provided for comparative
purposes only. The information does not purport to be indicative of the results
that actually would have occurred had the merger been effected on January 1 of
the years presented.
39
<PAGE> 46
OLD NATIONAL BANCORP
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
(UNAUDITED -- DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
ANB
OLD NATIONAL CORPORATION ADJUSTMENTS PRO FORMA HERITAGE ADJUSTMENTS PRO FORMA
------------ ----------- ----------- ---------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and due from banks... $ 156,439 $ 27,104 $ 183,543 $ 9,063 $ 192,606
Money market
investments............. 11,917 5,877 17,794 2,040 19,834
Investment securities..... 1,725,378 116,832 1,842,210 27,649 1,869,859
Loans..................... 4,796,556 653,678 5,450,234 182,777 5,633,011
Reserve for loan losses... (58,117) (5,532) (63,649) (2,650) (66,299)
Excess cost over assets
acquired................ 14,077 11,220 25,297 16 25,313
Other intangibles......... 0 0 0 412 412
Premises and equipment.... 90,880 13,601 104,481 11,187 115,668
Other assets.............. 226,177 11,096 237,273 3,540 240,813
---------- -------- ------- ---------- -------- ----- ----------
$6,963,307 $833,876 $ 0 $7,797,183 $234,034 $ 0 $8,031,217
========== ======== ======= ========== ======== ===== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits.................. $5,025,330 $676,642 $5,791,972 $198,861 $5,900,833
Medium term notes......... 96,300 0 96,300 0 96,300
Subordinated debentures... 17,808 0 17,808 0 17,808
Other borrowings.......... 1,220,824 77,991 1,298,815 13,701 1,312,516
Other liabilities......... 88,110 5,668 93,778 2,533 96,311
---------- -------- ------- ---------- -------- ----- ----------
Total
liabilities... 6,448,372 760,301 0 7,208,673 215,095 0 7,423,768
---------- -------- ------- ---------- -------- ----- ----------
Common stock.............. 45,635 5,485 1,714(a) 52,834 1,210 791(b) 54,835
Capital surplus........... 331,711 13,622 (1,714)(a) 343,619 6,671 (791)(b) 349,499
Retained earnings......... 154,632 55,097 209,729 11,305 221,034
Net unrealized gain....... (17,043) (629) (17,672) (247) (17,919)
---------- -------- ------- ---------- -------- ----- ----------
Total
shareholders'
equity........ 514,935 73,575 0 588,510 18,939 0 607,449
---------- -------- ------- ---------- -------- ----- ----------
$6,963,307 $833,876 $ 0 $7,797,183 $234,034 $ 0 $8,031,217
========== ======== ======= ========== ======== ===== ==========
Outstanding common
shares.................. 47,917 55,116 57,117
========== ========== ==========
Shareholders' equity per
share................... $ 10.75 $ 10.68 $ 10.64
========== ========== ==========
</TABLE>
See "Notes to Pro Forma Condensed Combined Financial Information."
40
<PAGE> 47
OLD NATIONAL BANCORP
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED -- DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
AS REPORTED
-------------------------- AS REPORTED
ANB --------------------------------
OLD NATIONAL CORPORATION PRO FORMA HERITAGE PRO FORMA
------------ ----------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Interest income........................ $362,574 $41,947 $404,521 $13,905 $418,426
Interest expense....................... 183,722 18,402 202,124 5,930 208,054
-------- ------- -------- ------- --------
Net interest income.................... 178,852 23,545 202,397 7,975 210,372
Provision for loan losses.............. 8,437 1,090 9,527 1,079 10,606
-------- ------- -------- ------- --------
Net interest income after provision for
loan losses.......................... 170,415 22,455 192,870 6,896 199,766
Noninterest income..................... 50,186 8,299 58,485 3,063 61,548
Noninterest expense.................... 134,696 20,941 155,637 6,464 162,101
-------- ------- -------- ------- --------
Income before income taxes............. 85,905 9,813 95,718 3,495 99,213
Provision for income taxes............. 23,057 3,568 26,625 1,209 27,834
-------- ------- -------- ------- --------
Net income from continuing
operations........................... 62,848 6,245 69,093 2,286 71,379
Discontinued operations................ 3,483 0 3,483 0 3,483
-------- ------- -------- ------- --------
Net income............................. $ 66,331 $ 6,245 $ 72,576 $ 2,286 $ 74,862
======== ======= ======== ======= ========
Net income from continuing operations
per common share:(c)
Assuming no dilution................. $ 1.30 $ 1.24 $ 1.24
======== ======== ========
Assuming full dilution............... $ 1.26 $ 1.21 $ 1.21
======== ======== ========
Weighted average common shares
outstanding:(c)
Assuming no dilution................. 48,393 55,526 57,450
======== ======== ========
Assuming full dilution............... 50,232 57,486 59,413
======== ======== ========
</TABLE>
See "Notes to Pro Forma Condensed Combined financial Information."
41
<PAGE> 48
OLD NATIONAL BANCORP
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED -- DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
AS REPORTED AS REPORTED
-------------------------- -----------------------------------
ANB
OLD NATIONAL CORPORATION PRO FORMA HERITAGE PRO FORMA
------------ ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Interest income...................... $456,528 $50,174 $506,702 $16,813 $523,515
Interest expense..................... 231,614 22,665 254,279 7,411 261,690
-------- ------- -------- ------- --------
Net interest income.................. 224,914 27,509 252,423 9,402 261,825
Provision for loan losses............ 12,160 1,502 13,662 1,325 14,987
-------- ------- -------- ------- --------
Net interest income after provision
for loan losses.................... 212,754 26,007 238,761 8,077 246,838
Noninterest income................... 58,891 10,282 69,173 3,952 73,125
Noninterest expense.................. 167,937 23,628 191,565 7,553 199,118
-------- ------- -------- ------- --------
Income before income taxes........... 103,708 12,661 116,369 4,476 120,845
Provision for income taxes........... 29,573 4,205 33,778 1,624 35,402
-------- ------- -------- ------- --------
Net income from continuing
operations......................... 74,135 8,456 82,591 2,852 85,443
Discontinued operations.............. (9,854) 0 (9,854) 0 (9,854)
-------- ------- -------- ------- --------
Net income........................... $ 64,281 $ 8,456 $ 72,737 $ 2,852 $ 75,589
======== ======= ======== ======= ========
Net income from continuing operations
per common share:(c)
Assuming no dilution............... $ 1.54 $ 1.49 $ 1.49
======== ======== ========
Assuming full dilution............. $ 1.49 $ 1.45 $ 1.46
======== ======== ========
Weighted average common shares
outstanding:(c)
Assuming no dilution............... 48,204 55,274 57,161
======== ======== ========
Assuming full dilution............. 50,373 57,594 59,489
======== ======== ========
</TABLE>
See "Notes to Pro Forma Condensed Combined financial Information."
42
<PAGE> 49
OLD NATIONAL BANCORP
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED -- DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
AS REPORTED AS REPORTED
-------------------------- --------------------------------
ANB
OLD NATIONAL CORPORATION PRO FORMA HERITAGE PRO FORMA
------------ ----------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Interest income........................ $435,038 $46,862 $481,900 $13,616 $495,516
Interest expense....................... 216,868 20,785 237,653 5,922 243,575
-------- ------- -------- ------- --------
Net interest income.................... 218,170 26,077 244,247 7,694 251,941
Provision for loan losses.............. 13,562 1,027 14,589 676 15,265
-------- ------- -------- ------- --------
Net interest income after provision for
loan losses.......................... 204,608 25,050 229,658 7,018 236,676
Noninterest income..................... 51,104 7,944 59,048 3,476 62,524
Noninterest expense.................... 158,631 20,851 179,482 6,869 186,351
-------- ------- -------- ------- --------
Income before income taxes............. 97,081 12,143 109,224 3,625 112,849
Provision for income taxes............. 28,998 4,102 33,100 1,323 34,423
-------- ------- -------- ------- --------
Net income from continuing
operations........................... 68,083 8,041 76,124 2,302 78,426
Discontinued operations................ (5,005) 0 (5,005) 0 (5,005)
-------- ------- -------- ------- --------
Net income............................. $ 63,078 $ 8,041 $ 71,119 $ 2,302 $ 73,421
======== ======= ======== ======= ========
Net income from continuing operations
per common share:(c)
Assuming no dilution................. $ 1.40 $ 1.37 $ 1.37
======== ======== ========
Assuming full dilution............... $ 1.36 $ 1.33 $ 1.33
======== ======== ========
Weighted average common shares
outstanding:(c)
Assuming no dilution................. 48,488 55,510 57,343
======== ======== ========
Assuming full dilution............... 51,135 58,290 60,143
======== ======== ========
</TABLE>
See "Notes to Pro Forma Condensed Combined financial Information."
43
<PAGE> 50
OLD NATIONAL BANCORP
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED -- DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
AS REPORTED AS REPORTED
-------------------------- --------------------------------
ANB
OLD NATIONAL CORPORATION PRO FORMA HERITAGE PRO FORMA
------------ ----------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Interest income........................ $405,669 $44,431 $450,100 $10,846 $460,946
Interest expense....................... 196,289 19,848 216,137 4,629 220,766
-------- ------- -------- ------- --------
Net interest income.................... 209,380 24,583 233,963 6,217 240,180
Provision for loan losses.............. 11,082 1,156 12,238 485 12,723
-------- ------- -------- ------- --------
Net interest income after provision for
loan losses.......................... 198,298 23,427 221,725 5,732 227,457
Noninterest income..................... 47,402 7,362 54,764 3,372 58,136
Noninterest expense.................... 156,720 20,344 177,064 5,780 182,844
-------- ------- -------- ------- --------
Income before income taxes............. 88,980 10,445 99,425 3,324 102,749
Provision for income taxes............. 26,293 3,375 29,668 1,219 30,887
-------- ------- -------- ------- --------
Net income from continuing
operations........................... 62,687 7,070 69,757 2,105 71,862
Discontinued operations................ 494 0 494 0 494
-------- ------- -------- ------- --------
Net income............................. $ 63,181 $ 7,070 $ 70,251 $ 2,105 $ 72,356
======== ======= ======== ======= ========
Net income from continuing operations
per common share:(c)
Assuming no dilution................. $ 1.25 $ 1.22 $ 1.22
======== ======== ========
Assuming full dilution............... $ 1.22 $ 1.19 $ 1.19
======== ======== ========
Weighted average common shares
outstanding:(c)
Assuming no dilution................. 50,134 57,211 58,982
======== ======== ========
Assuming full dilution............... 52,772 59,973 61,785
======== ======== ========
</TABLE>
See "Notes to Pro Forma Condensed Combined financial Information."
44
<PAGE> 51
OLD NATIONAL BANCORP
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(a) Exchange of 100% of ANB common stock for 7,198,671 shares of Old
National common stock.
(b) Exchange of 100% of Heritage Financial Services, Inc. common stock for
2,001,166 of Old National common stock.
(c) Net income per share on a fully diluted basis assumes the conversion of
Old National's convertible subordinated debentures.
45
<PAGE> 52
DESCRIPTION OF OLD NATIONAL
OVERVIEW
Old National is a bank holding company that operates 119 banking offices
and 174 ATM locations in Indiana, Illinois and Kentucky through its bank
subsidiaries. These banks provide a wide range of financial services, including:
- commercial, consumer and real estate loans;
- deposit products;
- issuing and servicing credit cards;
- leasing;
- letters of credit; and
- safe deposit facilities.
Old National also owns nonbank subsidiaries which provide additional
financial services incidental to its operations, including:
- securities brokerage services;
- fiduciary and trust services;
- investment services; and
- issuance and reinsurance of credit life, accident, health, life, property
and casualty insurance.
Old National was incorporated in 1982 in the State of Indiana. It began its
acquisition program in 1985 and has acquired 38 financial institutions since
that time. Old National continues to explore opportunities to acquire banks,
savings associations and nonbank companies and is currently reviewing and
analyzing potential acquisitions, as well as engaging in discussions or
negotiations concerning potential acquisitions. It is possible that none of
these discussions or negotiations will result in definitive agreements or
consummated acquisitions. Any acquisitions may be pending or completed prior to
the completion of the merger.
Old National's principal office is located at 420 Main Street, Evansville,
Indiana 47708. Its telephone number is (812) 464-1434.
SUPERVISION AND REGULATION
As a bank holding company, Old National is subject to regulation,
supervision and examination by the Board of Governors of the Federal Reserve
System under the Bank Holding Company Act of 1956, as amended. For a discussion
of certain of the material elements of the regulatory framework applicable to
bank holding companies and their subsidiaries and certain specific information
relevant to Old National, see Old National's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 which is incorporated by referenced into
this document.
This regulatory framework is intended primarily for the protection of
depositors and the federal deposit insurance funds and not for the protection of
security holders or creditors. The various government rules, regulations and
requirements that apply to Old National impact its business and activities. A
change in applicable statutes, rules, regulations and requirements that apply to
Old National impact its business and activities may have a material effect on
Old National's business and earnings. In addition, Old National's business and
earnings are affected by general economic conditions, legislation and actions of
regulatory authorities.
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<PAGE> 53
Under policy of the Federal Reserve, a bank holding company is expected to
act as a source of financial strength for its bank subsidiaries and to commit
resources to support such banks. As a result, the Federal Reserve may require
Old National to commit resources to its bank subsidiaries.
On November 12, 1999, the President signed into law comprehensive
legislation that modernizes the financial services industry for the first time
in decades. The legislation permits bank holding companies to conduct
essentially unlimited securities and insurance activities, in addition to other
activities determined by the Federal Reserve to be related to financial
services. As a result, Old National would be able to underwrite and sell
securities and insurance. It would also be able to acquire, or be acquired by,
brokerage firms and insurance underwriters. Old National has not had an
opportunity to assess the impact of the legislation on its operations, but at
the present time does not anticipate significant changes in its products or
services.
RECENT DEVELOPMENTS
On September 22, 1999, Old National registered $200 million in capital
securities of wholly-owned business trusts. Following the effective date of the
registration statement related to those securities, Old National may begin
selling these securities.
On December 9, 1999, Old National declared a 5% stock dividend to its
shareholders of record on January 7, 2000 and payable on January 28, 2000.
References to the exchange ratio contained in this document have been adjusted
from 1.25 to 1.3125 pursuant to the merger agreement to give effect to the stock
dividend and references to Old National's per share information have been
adjusted to give effect to the stock dividend.
On December 20, 1999, Old National announced that it had agreed to acquire
Permanent Bancorp and Permanent Bank, each located in Evansville, Indiana, in a
stock exchange for stock transaction valued at approximately $92 million.
Permanent Bancorp has assets of approximately $500 million.
On December 31, 1999, Old National, through a subsidiary bank of Old
National, acquired Sycamore Agency, located in Terre Haute, Indiana, through a
share exchange valued at approximately $10.8 million. Sycamore operates a
general insurance agency with a focus on commercial property and casualty
business.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The foregoing information concerning Old National does not purport to be
complete. Certain information relating to the executive compensation, various
benefit plans (including stock option plans), voting securities, including the
principal holders of those securities, certain relationships and related
transactions and other matters as to Old National is incorporated by reference
from or set forth in Old National's Annual Report on Form 10-K for the year
ended December 31, 1998 and other documents filed by Old National and listed
under "Where You Can Find More Information" in this document, which are
specifically incorporated herein by reference. If you desire copies of any of
these documents, you may contact Old National at its address or telephone number
indicated under "Where You Can Find More Information."
47
<PAGE> 54
DESCRIPTION OF ANB
BUSINESS
ANB is a multibank company with a trust company and three affiliate banks
located in Indiana and Ohio and engages in the business of commercial banking
and trust and asset management. ANB provides its commercial banking, trust and
asset management products and services through 33 affiliated offices throughout
northeastern Indiana and western Ohio. As of September 30, 1999, ANB had
consolidated assets of approximately $834 million. ANB conducts its business
through its financial institutions and trust subsidiaries, American National
Bank and Trust, American National Trust and Investment Management Company,
Peoples Loan and Trust Bank and Farmers State Bank. These subsidiaries provide a
broad range of financial services to their customers.
ANB's principal office is located at 120 West Charles Street, Muncie,
Indiana 47305. Its telephone number is (765) 747-7600.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The foregoing information concerning ANB does not purport to be complete.
Certain information relating to the executive compensation, various benefit
plans (including stock option plans), voting securities, including the principal
holders of those securities, certain relationships and related transactions and
other matters as to ANB is incorporated by reference from or set forth in ANB's
Annual Report on Form 10-K for the year ended December 31, 1998 and other
documents filed by ANB and listed under "Where You Can Find More Information" in
this document, which are specifically incorporated herein by reference. If you
desire copies of any of these documents, you may contact ANB at its address or
telephone number indicated under "Where You Can Find More Information."
COMPARISON OF COMMON STOCK
Following the merger, the rights of former ANB shareholders will be
governed by the laws of the State of Indiana, the state in which Old National is
incorporated, and by Old National's Articles of Incorporation, as amended and
Old National's By-Laws, as amended. The rights of the shareholders of ANB are
presently governed by the laws of the State of Indiana, the state in which ANB
is incorporated, and by ANB's Articles of Incorporation, as amended and By-Laws,
as amended. The rights of the shareholders of ANB differ in certain respects
from the rights they will have as Old National shareholders, including for
anti-takeover measures and the vote required for the amendment of significant
provisions of the articles of incorporation and for the approval of significant
corporate transactions. The following summary comparison of Old National common
stock and ANB common stock includes all material differences in the rights
accruing to holders of such shares but does not purport to be complete and is
qualified in its entirety by reference to Old National's and ANB's Articles of
Incorporation and their By-Laws.
AUTHORIZED BUT UNISSUED SHARES
- OLD NATIONAL
Old National's Articles of Incorporation authorize the issuance of
75,000,000 shares of Old National Common Stock, of which approximately 47.9
million shares were outstanding as of September 30, 1999. The remaining
authorized but unissued shares of common stock may be issued upon authorization
of the Board of Directors of Old National without prior shareholder approval.
Old National has 2,000,000 shares of preferred stock authorized. These shares
are available to be issued, without prior shareholder approval, in classes with
relative rights, privileges and preferences determined for each class by the
Board of Directors of Old National. No shares of preferred stock are presently
outstanding.
The Board of Directors of Old National has authorized a series of preferred
stock designated as Series A preferred stock. The Board of Directors of Old
National has designated 200,000 shares of
48
<PAGE> 55
Series A preferred stock in connection with the shareholder rights plan of Old
National. The Old National Series A preferred stock may not be issued except
upon exercise of certain rights ("Rights") pursuant to such shareholder rights
plan. No shares of Series A preferred stock have been issued as of the date of
this Proxy Statement. See "Comparison of Common Stock -- Anti-Takeover
Provisions -- Old National's Shareholder Rights Plan" below.
As of September 30, 1999, Old National had approximately 500,000 shares of
Old National common stock reserved for issuance under Old National's Stock
Purchase and Discounted Dividend Reinvestment Plan and 1.4 million shares of its
common stock reserved for issuance upon conversion of its outstanding 8%
convertible subordinated debentures. Such debentures are convertible at any time
prior to maturity, unless previously redeemed, into shares of Old National
common stock at a conversion rate of 81.39 shares per $1,000 principal amount of
debentures (equivalent to a conversion price of approximately $12.29 per share),
subject to adjustment in certain events.
The issuance of additional shares of Old National common stock or the
issuance of Old National preferred stock may adversely affect the interests of
Old National shareholders.
- ANB
ANB's Articles of Incorporation authorizes the issuance of 20,000,000
shares of ANB common stock, of which 5,484,702 were issued and outstanding as of
September 30, 1999. ANB has 250,000 shares of preferred stock authorized. No
shares of preferred stock are presently outstanding. Following the merger, each
outstanding share of ANB common stock will convert to the right to receive
1.3125 shares of Old National common stock, as adjusted for the 5% stock
dividend declared by Old National on December 9, 1999, and subject to further
adjustment for stock dividends and stock splits. See "Proposed Merger --
Conversion of ANB Common Stock."
PREEMPTIVE RIGHTS
As permitted by Indiana law, Old National's Articles of Incorporation do
not provide for preemptive rights to subscribe for any new or additional Old
National common stock or other securities. Preemptive rights may be granted to
Old National's shareholders if Old National's Articles of Incorporation are
amended accordingly. Under ANB's Articles of Incorporation, shareholders of ANB
do not have preemptive rights to subscribe for any new or additional ANB common
stock or other securities.
DIVIDEND RIGHTS
The holders of common stock of Old National and ANB are entitled to
dividends and other distributions when, as and if declared by their respective
boards of directors out of funds legally available therefor. Old National or ANB
may not pay a dividend if, after giving it effect, (1) Old National or ANB,
respectively, would not be able to pay its debts as they become due in the usual
course of business, or (2) Old National's or ANB's respective total assets would
be less than the sum of its total liabilities plus, unless Old National's or
ANB's respective Articles of Incorporation permitted otherwise, the amount that
would be needed to satisfy the preferential rights upon dissolution of
shareholders whose preferential rights are superior to those receiving the
dividend if Old National or ANB respectively were to be dissolved at the time of
the dividend.
The amount of dividends, if any, that may be declared by Old National in
the future will necessarily depend upon many factors, including, without
limitation, future earnings, capital requirements, business conditions and
capital levels of subsidiaries (since Old National is primarily dependent upon
dividends paid by its subsidiaries for its revenues), the discretion of Old
National's Board of Directors and other factors that may be appropriate in
determining dividend policies.
Cash dividends paid to Old National by its Illinois-chartered affiliate
banks are limited by Illinois law to the bank's net profits then on hand, less
losses and statutorily-defined bad debts. Cash dividends paid to Old National by
its Kentucky-chartered affiliate banks are limited by Kentucky law to so much of
the net
49
<PAGE> 56
profits of the banks, after deducting all expenses, losses, bad or suspended
debts and interest and taxes accrued or due from the banks, as the boards of
directors of the banks deem expedient. In addition, the approval of the Kentucky
Commissioner of Banks is required if the total of all dividends declared by a
Kentucky bank in any calendar year exceeds the bank's net profit for that year
and the net retained profits from the preceding two years, less any transfers to
surplus or a fund for retirement of preferred stock or debt. Old National's
national affiliate banks and Indiana-chartered affiliate banks may pay cash
dividends on their common stock only out of adjusted retained net profits for
the year in which the dividend is paid and the two preceding years. Cash
dividends paid to ANB by Farmers State Bank, as an Ohio-chartered bank, are
limited by Ohio law to the undivided profits of the Farmers. However, prior to
the declaration of any dividend, the Bank must have made all required
allocations to reserves for losses or contingencies. In addition, the approval
of the Ohio Superintendent of Financial Institutions is required if the total
dividends declared by Farmers in any year exceeds the total of its net income
for that year combined with its retained net income of the preceding two years.
Dividends paid by Old National's affiliate banks will ordinarily be
restricted to a lesser amount than is legally permissible because of the need
for the banks to maintain adequate capital consistent with the capital adequacy
guidelines promulgated by the banks' principal federal regulatory authorities.
If a bank's capital levels are deemed inadequate by the regulatory authorities,
payment of dividends to its parent holding company may be prohibited without
prior regulatory approval. None of Old National's affiliate banks are currently
subject to such a restriction.
VOTING RIGHTS
The holders of the outstanding shares of Old National common stock and ANB
common stock are entitled to one vote per share on all matters presented for
shareholder vote. Shareholders of Old National and ANB do not have cumulative
voting rights in the election of directors. Under cumulative voting, the number
of shares a shareholder is entitled to vote is multiplied by the number of
directors to be elected to the Board, which number represents the number of
votes a shareholder may cast at such election. A shareholder may cast all his or
her votes for one candidate or distribute them among any two or more candidates.
The absence of cumulative voting rights in the election of directors may make it
more difficult for a minority shareholder to elect a nominee as a director.
Indiana law generally require that mergers, consolidations, sales, leases,
exchanges or other dispositions of all or substantially all of the assets of a
corporation be approved by the affirmative vote of a majority of the issued and
outstanding shares entitled to vote at the shareholders meeting, subject in each
case to provisions in the corporation's articles of incorporation requiring a
higher percentage vote for certain transactions. Old National's Articles of
Incorporation and ANB's Articles of Incorporation provide that certain business
combinations may, under certain circumstances, require approval of more than a
simple majority of the issued and outstanding shares of Old National common
stock. See "Comparison of Common Stock -- Anti-Takeover Provisions".
Indiana law requires shareholder approval by a majority of a quorum present
at a shareholders' meeting (and, in certain cases, a majority of all shares held
by any voting group entitled to vote) for most amendments to a corporation's
articles of incorporation. Indiana law permits a corporation in its articles of
incorporation to prescribe a higher shareholder vote for certain amendments to
the articles of incorporation. Old National's Articles of Incorporation require
a super-majority shareholder vote of eighty percent (80%) of the outstanding
shares of Old National common stock for the amendment of certain significant
provisions.
DISSENTERS' RIGHTS
The holders of shares of Indiana business corporations possess dissenters'
rights in connection with certain mergers and other significant corporate
actions. Under Indiana law, a shareholder is entitled to dissent from and obtain
payment of the fair value of the shareholder's shares in the event of (1)
consummation of a plan of merger, if shareholder approval is required and the
shareholder is entitled
50
<PAGE> 57
to vote thereon, (2) consummation of a plan of share exchange by which the
shareholder's shares will be acquired, if the shareholder is entitled to vote
thereon, (3) consummation of a sale or exchange of all, or substantially all,
the property of the corporation other than in the usual course of business, if
the shareholder is entitled to vote thereon, (4) approval of a control share
acquisition under Indiana law, and (5) any corporate action taken pursuant to a
shareholder vote to the extent the articles of incorporation, by-laws or a
resolution of the board of directors provides that voting or non-voting
shareholders are entitled to dissent and obtain payment for their shares.
The dissenters' rights provisions described above do not apply, however, to
the holders of shares of any class or series with respect to a merger, share
exchange or sale or exchange of property if the shares of that class or series
were registered on a United States securities exchange registered under the
Exchange Act or traded on the Nasdaq National Market System or a similar market.
As of the date of this Proxy Statement, shares of Old National common stock and
ANB common stock are traded on the Nasdaq National Market System and, therefore,
Old National and ANB shareholders presently are not entitled to assert
dissenters' rights under Indiana law with respect to any of the transactions
discussed above.
LIQUIDATION RIGHTS
In the event of any liquidation or dissolution of Old National, the holders
of shares of Old National common stock are entitled to receive pro rata with
respect to the number of shares held by them any assets distributable to
shareholders, subject to the payment of Old National's liabilities and any
rights of creditors and holders of shares of Old National preferred stock then
outstanding. Shareholders of ANB have similar liquidation rights.
REDEMPTION AND ASSESSMENT
Under Indiana law, shares of Old National common stock and ANB common stock
are not liable to further assessment. Old National may redeem or acquire shares
of Old National common stock with funds legally available therefor, and shares
so acquired constitute authorized but unissued shares. The Old National Board of
Directors authorized the purchase or redemption of up to the number of shares to
be issued to the shareholders of Permanent Bancorp relating to Old National's
acquisition of Permanent Bancorp. Old National may not redeem or acquire shares
of Old National common stock if, after giving such redemption or acquisition
effect, Old National would not be able to pay its debts as they become due in
the usual course of business, or Old National's total assets would be less than
the sum of its total liabilities plus, unless Old National's Articles of
Incorporation permitted otherwise, the amount that would be needed to satisfy
the preferential rights upon dissolution of shareholders whose preferential
rights are superior to those whose stock is being redeemed or acquired if Old
National were to be dissolved at the time of the redemption or acquisition. ANB
has similar redemption rights and limitations under Indiana law.
In addition, Old National and ANB must give prior notice to the Federal
Reserve if the consideration to be paid by them for any redemption or
acquisition of their respective shares, when aggregated with the consideration
paid for all redemptions or acquisitions for the preceding twelve (12) months,
equals or exceeds 10% of their respective consolidated net worth.
ANTI-TAKEOVER PROVISIONS
The anti-takeover measures applicable to Old National as described below,
may have the effect of discouraging or rendering it more difficult for a person
or other entity to acquire control of Old National. These measures may have the
effect of discouraging certain tender offers for shares of Old National common
stock which might otherwise be made at premium prices or certain other
acquisition transactions which might be viewed favorably by a significant number
of shareholders.
Indiana Law. Under the business combinations provision of Indiana law, any
10% shareholder of an Indiana corporation, with a class of voting shares
registered under Section 12 of the Exchange Act or which has specifically
adopted this provision in the corporation's articles of incorporation, is
prohibited for
51
<PAGE> 58
a period of five (5) years from completing a business combination with the
corporation unless, prior to the acquisition of such 10% interest, the board of
directors of the corporation approved either the acquisition of such interest or
the proposed business combination. Further, the corporation and a 10%
shareholder may not consummate a business combination unless all provisions of
the articles of incorporation of the corporation are complied with and a
majority of disinterested shareholders approve the transaction or all
shareholders receive a price per share determined in accordance with the
business combinations provision of Indiana law.
An Indiana corporation may elect to remove itself from the protection
provided by the Indiana business combinations provision, but such an election
remains ineffective for eighteen (18) months and does not apply to a combination
with a shareholder who acquired a 10% ownership position prior to the effective
time of the election. Old National and ANB are subject to the business
combinations provision of Indiana law, but such provision does not apply to the
merger between Old National and ANB. The constitutional validity of the business
combinations provision of Indiana law has in the past been challenged and has
been upheld by the United States Supreme Court.
In addition to the business combinations provision, Indiana law also
contains a "control share acquisition" provision which, although different in
structure from the business combinations provision, may have a similar effect of
discouraging or making more difficult a hostile takeover of an Indiana
corporation. This provision also may have the effect of discouraging premium
bids for outstanding shares. Indiana law provides that, unless otherwise
provided in an Indiana corporation's articles of incorporation or by-laws,
certain acquisitions of shares of the corporation's common stock will be
accorded voting rights only if a majority of the disinterested shareholders
approves a resolution granting the potential acquiror the ability to vote such
shares. Upon disapproval of the resolution, the shares held by the acquiror
shall be redeemed by the corporation at the fair value of the shares as
determined by the control share acquisition provision.
This provision does not apply to a plan of merger or share exchange, if the
corporation complies with the applicable merger or exchange provisions and is a
party to the plan of merger or plan of share exchange. Old National and ANB are
subject to the control share acquisition provision, but such provision does not
apply to the merger between Old National and ANB.
Old National's Articles of Incorporation. In addition to the protections
provided by Indiana law, Old National's Articles of Incorporation require the
affirmative vote of the holders of at least eighty percent (80%) of the issued
and outstanding shares of capital stock for any business combination which is
not recommended by the vote of two-thirds or more of the members of the Board of
Directors of Old National. For purposes of Old National's Articles of
Incorporation, "business combination" is defined to include: (1) a merger or
consolidation of Old National with or into any other corporation, (2) any sale,
lease, exchange or other disposition of any material part of the assets of Old
National, or (3) any liquidation or dissolution of Old National or any material
subsidiary of Old National. Further, this provision cannot be altered, amended
or repealed without the affirmative vote of the holders of at least eighty
percent (80%) of the issued and outstanding shares of Old National common stock
entitled to vote thereon.
Old National's Articles of Incorporation also include provisions requiring
(1) the Board of Directors to consider non-financial factors in the evaluation
of business combinations and tender or exchange offers, and (2) any person
acquiring fifteen percent (15%) of the then issued and outstanding stock of Old
National to pay equal consideration in connection with the acquisition of any
further shares. These provisions require an eighty percent (80%) affirmative
vote of the issued and outstanding shares of Old National common stock entitled
to vote thereon in order to be altered, amended or repealed.
Old National Preferred Stock. The shares of Old National Series A preferred
stock are nonredeemable and, unless otherwise provided in connection with the
creation of a subsequent series of preferred stock, are subordinate to all other
series of preferred stock of Old National. Each share of Old National Series A
preferred stock will be entitled to receive, when, as and if declared, a
quarterly dividend in an amount equal to the greater of $1.00 per share or 100
times the quarterly cash dividend declared on Old National common stock. In
addition, the Old National Series A preferred stock is entitled to
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100 times any non-cash dividends (other than dividends payable in equity
securities) declared on the Old National common stock, in like kind. In the
event of liquidation, the holders of Old National Series A preferred stock will
be entitled to receive a liquidation payment in an amount equal to the greater
of $100.00 per share or 100 times the liquidation payment made per share of Old
National common stock. Each share of Old National Series A preferred stock will
have 100 votes, subject to adjustment, voting together with the Old National
common stock and not as a separate class unless otherwise required by law or Old
National's Articles of Incorporation. In the event of any merger, consolidation
or other transaction in which common shares are exchanged, each share of Old
National Series A preferred stock will be entitled to receive 100 times the
amount received per share of Old National common stock. The rights of the Old
National Series A preferred stock as to dividends, voting rights and liquidation
are protected by antidilution provisions.
Old National's Shareholder Rights Plan. On January 25, 1990, the Board of
Directors of Old National declared a dividend of one (1) right for each issued
and outstanding share of Old National common stock ("Right"). See "Comparison of
Common Stock -- Authorized But Unissued Shares". The dividend was payable on
March 15, 1990 to holders of record of Old National common stock at the close of
business on March 1, 1990. Each Right entitles the registered holder to purchase
from Old National one-hundredth (1/100) of a share of Old National Series A
preferred stock at an initial Purchase Price of $60.00, subject to adjustment.
The terms and conditions of the Rights are contained in a Rights Agreement
between Old National and Old National Bank in Evansville, as Rights Agent.
The foregoing information concerning Old National's shareholder Rights Plan
does not purport to be complete. For additional information, see The Rights
Agreement, dated March 1, 1990, between Old National and Old National Bank in
Evansville, as Trustee, which is specifically incorporated herein by reference.
See "Where You Can Find More Information." The shares of Old National common
stock to be received by ANB shareholders in the merger will be subject to the
rights under the Old National Shareholder Rights Plan.
ANB's Articles of Incorporation. In addition to the protections provided by
Indiana law, ANB's Articles of Incorporation include the business combinations
provision of Indiana law which was discussed above. This provision cannot be
altered, amended or repealed without the affirmative vote of the holders of at
least two-thirds of the issued and outstanding shares of ANB common stock
entitled to vote thereon, unless the Board of Directors unanimously approves the
amendment.
ANB's Articles of Incorporation also include a provision requiring the ANB
Board of Directors to consider non-financial factors in the evaluation of
business combinations and tender or exchange offers. This provision requires
two-thirds affirmative vote of the issued and outstanding shares of ANB common
stock entitled to vote thereon in order to be altered, amended or repealed,
unless the ANB Board of Directors unanimously recommends the amendment.
DIRECTOR LIABILITY
Under Indiana law, a director of Old National or ANB will not be liable to
shareholders for any action taken as a director, or any failure to take any
action, unless (1) the director has breached or failed to perform his duties as
a director in good faith with the care an ordinarily prudent person in a like
position would exercise under similar circumstances and in a manner the director
reasonably believes to be in the best interests of the corporation and (2) such
breach or failure to perform constitutes willful misconduct or recklessness.
DIRECTOR NOMINATIONS
Old National's By-Laws require that all nominations for election as
directors of Old National shall be made by the Board of Directors of Old
National in accordance with the By-Laws. Under the By-Laws, the Nominating
Committee of the Board of Directors of Old National ("Nominating Committee") is
required to submit to the entire Board of Directors its recommendation of
nominees for election as directors of Old National prior to each annual or
special meeting of shareholders at which directors will be elected.
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The Nominating Committee is comprised of five (5) directors of Old
National, none of whom is an officer or employee of Old National. The Nominating
Committee maintains the responsibility to recruit potential director candidates,
recommend changes to the entire Board of Directors concerning the size,
composition and responsibilities of the Board of Directors, review proxy
documents received from shareholders relating to the Board of Directors and
review suggestions of shareholders regarding nominees for election as directors.
All such suggestions of shareholders with respect to director nominations must
be submitted in writing to the Nominating Committee not less than 120 days prior
to the date of the annual or special meeting of shareholders at which directors
will be elected.
ANB's By-Laws require that all nominations for election as directors of ANB
will be made in accordance with the By-Laws. Under the By-Laws, a shareholder
who desires to nominate an individual for election to the Board of Directors
must make the nomination in writing and deliver or mail the nomination to ANB's
President not less than 10 days nor more than 50 days prior to any meeting at
which directors will be elected.
LEGAL OPINIONS
The validity of the shares of Old National common stock to be issued in the
merger will be passed upon by Krieg DeVault Alexander & Capehart, LLP, One
Indiana Square, Suite 2800, Indianapolis, Indiana 46204. Certain tax
consequences of the merger will be passed upon for Old National by Krieg DeVault
Alexander & Capehart, LLP and for ANB by Sullivan & Cromwell, 125 Broad Street,
New York, New York 10004-2490.
EXPERTS
The consolidated financial statements of Old National and affiliates
incorporated into this document have been audited by Arthur Andersen LLP,
independent public accountants, to the extent and for the years indicated in
their report thereon, and have been so incorporated into this document in
reliance upon the report of Arthur Andersen LLP and upon the authority of such
firm as experts in auditing and accounting.
The consolidated financial statements of ANB incorporated into this
document have been audited by Olive LLP, independent auditors, to the extent and
for the years indicated in their report thereon. Such consolidated financial
statements have been so incorporated into this document in reliance upon the
report of Olive LLP and upon the authority of such firm as experts in auditing
and accounting.
Representatives of Olive LLP are not expected to be at the special meeting.
OTHER MATTERS
The special meeting is called for the purposes set forth in the Notice
attached to this Proxy Statement. The Board of Directors of ANB knows of no
other matters for action by shareholders at the special meeting other than the
matters described in the Notice. However, the enclosed proxy will confer
discretionary authority to the persons named therein with respect to any such
matters, none of which are known to the Board of Directors of ANB as of the date
hereof, which may properly come before the Special Meeting. It is the intention
of the persons named in the proxy to vote pursuant to the proxy with respect to
such matters in accordance with the best judgment of the person named in the
proxy.
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FORWARD-LOOKING STATEMENTS
This document (including information included or incorporated by reference
herein) contains certain forward-looking statements with respect to the
financial condition, results of operations, plans, objectives, future
performance and business of each of Old National and ANB, as well as certain
information relating to the merger, including, without limitation statements
preceded by, followed by or that include the words "believes," "expects,"
"anticipates," "estimates" or similar expressions. These forward-looking
statements involve certain risks and uncertainties. Actual results may differ
materially from those contemplated by such forward-looking statements due to,
among others, the following factors: (a) expected cost savings from the merger
may not be fully realized or realized within the expected time frame; (b)
revenues following the merger may be lower than expected, or deposit attrition,
operating costs or customer loss and business disruption following the merger
may be greater than expected; (c) competitive pressures among depository and
other financial institutions may increase significantly; (d) changes in the
interest rate environment may reduce margins; (e) general economic or business
conditions, either nationally or in the states in which Old National is doing
business, may be less favorable than expected resulting in, among other things,
a deterioration in credit quality or a reduced demand for credit; (f)
legislative or regulatory changes may adversely affect the business in which Old
National is engaged; (g) technological changes (including "Year 2000" data
systems compliance issues) may be more difficult or expensive than anticipated;
and (h) changes may occur in the securities markets.
WHERE YOU CAN FIND MORE INFORMATION
Old National and ANB are subject to the reporting requirements of the
Exchange Act and in accordance therewith file reports, proxy statements and
other information with the SEC. Such reports, proxy statements and other
information may be inspected and copied at prescribed rates at the following
locations of the SEC:
<TABLE>
<S> <C>
Public Reference Room Midwest Regional Office
450 Fifth Street, N.W. 500 West Madison Street
Room 1024 Suite 1400
Washington, D.C. 20549 Chicago, IL 60661-2511
</TABLE>
Copies of such material may also be obtained at prescribed rates from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549. You may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an
Internet site that contains reports, proxy and information statements, and other
information regarding Old National and ANB, and the address of that site is
http://www.sec.gov. You may obtain information about Old National on its
Internet site. The address of the site is http://www.oldnational.com. Old
National and ANB common stock is quoted on the Nasdaq National Market System and
reports, proxy statements and other information concerning Old National and ANB
are available for inspection and copying at prescribed rates at the office of
the National Association of Securities Dealers, Inc., 1735 K Street, Washington,
D.C. 20006.
Old National has filed with the SEC a Registration Statement on Form S-4
under the Securities Act with respect to the shares of Old National common stock
to be issued in connection with its merger with ANB. This Proxy
Statement -- Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the SEC. Reference is made to the Registration
Statement, including the exhibits filed as a part thereof or incorporated
therein by reference, which can be inspected and copied at prescribed rates at
the public reference facilities maintained by the SEC at the addresses set forth
above.
The SEC allows Old National and ANB to "incorporate by reference"
information into this document. This means that the companies can disclose
important information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is considered
to be a part of this document, except for any information that is superseded by
information that is
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included directly in this document. This document incorporates by reference the
documents listed below that Old National and ANB have previously filed with the
SEC. They contain important information about the companies and their financial
condition.
The following documents previously filed by Old National (SEC File No.
0-10888) with the SEC pursuant to the Exchange Act are incorporated herein by
reference:
- Old National's Quarterly Report on Form 10-Q for the quarters ended March
31, 1999, June 30, 1999 and September 30, 1999.
- Old National's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998.
- Old National's Annual Report to Shareholders for the fiscal year ended
December 31, 1998.
- The description of Old National's common stock contained in Old
National's Current Report on Form 8-K, dated January 6, 1983, and the
description of Old National's Preferred Stock Purchase Rights contained
in Old National's Form 8-A, dated March 1, 1990, including the Rights
Agreement, dated March 1, 1990, between Old National and Old National
Bank in Evansville, as Trustee.
- The Current Report on Form 8-K filed on July 29, 1999.
- The Current Report on Form 8-K filed on December 1, 1999.
The following documents previously filed by ANB (SEC File No. 0-18925) with
the SEC pursuant to the Exchange Act are incorporated herein by reference:
- ANB's Quarterly Report on Form 10-Q for the quarters ended March 31,
1999, June 30, 1999 and September 30, 1999.
- ANB's Annual Report on Form 10-K, as amended, for the fiscal year ended
December 31, 1998.
- ANB's Annual Report to Shareholders for the fiscal year ended December
31, 1998.
- ANB's Current Report on Form 8-K filed on May 7, 1999.
- ANB's Current Report on Form 8-K filed on January 6, 2000.
Old National and ANB incorporate by reference additional documents that
either company may file with the SEC between the date of this document and the
dates of the ANB special meeting. These documents include periodic reports, such
as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K, as well as proxy statements.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein will be deemed to be modified or superseded for
purposes of this document to the extent that a statement contained herein or in
any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this document.
Old National has supplied all information contained or incorporated by
reference in this Old National Proxy Statement-Prospectus relating to Old
National, as well as all pro forma financial information, and ANB has supplied
all relevant information relating to ANB.
You can obtain any of the documents incorporated by reference in this
document through Old National or ANB, as the case may be, or from the SEC
through the SEC's Internet world wide web site at the address listed above.
Documents incorporated by reference are available from the companies without
charge, excluding any exhibits to those documents, unless the exhibit is
specifically incorporated by reference as an exhibit in this document. You can
obtain documents incorporated by reference in this
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document by requesting them in writing or by telephone from the appropriate
company at the following addresses:
<TABLE>
<S> <C>
Old National Bancorp ANB Corporation
420 Main Street 120 West Charles Street
P. O. Box 718 Muncie, Indiana 47305
Evansville, Indiana 47705 Attn: Larry E. Thomas, Chief
Attn: Jeffrey L. Knight, Corporate Financial Officer
Secretary and General Counsel (765) 747-7575
(812) 464-1363
</TABLE>
If you would like to request documents, please do so by March 3, 2000 to receive
them before the special meeting. If you request any incorporated documents from
us, we will mail them to you by first class mail, or another equally prompt
means, promptly after we receive your request.
Old National and ANB have not authorized anyone to give any information or
make any representation about the merger or our companies that is different
from, or in addition to, that contained in this document or any of the materials
that we have incorporated into this document. Therefore, if anyone does give you
information of this sort, you should not rely on it. If you are in a
jurisdiction where offers to exchange or sell, or solicitations of offers to
exchange or purchase, the securities offered by this document or the
solicitation of proxies is unlawful, or if you are a person to whom it is
unlawful to direct these types of activities, then the offer presented in this
document does not extend to you. The information contained in this document
speaks only as of the date of this document unless the information specifically
indicates that another date applies.
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LIST OF APPENDICES
<TABLE>
<S> <C>
Agreement of Affiliation and Merger, dated July 29, 1999, Appendix A
between Old National Bancorp and ANB Corporation..........
Stock Option Agreement, dated July 29, 1999 between Old Appendix B
National Bancorp and ANB Corporation......................
Fairness Opinion of Sandler O'Neill & Partners, L.P......... Appendix C
</TABLE>
<PAGE> 65
APPENDIX A
AGREEMENT OF AFFILIATION AND MERGER
THIS AGREEMENT OF AFFILIATION AND MERGER ("Agreement") is made and entered
into effective as of the 29th day of July, 1999, by and between OLD NATIONAL
BANCORP ("ONB") and ANB CORPORATION ("ANB").
WITNESSETH:
WHEREAS, ONB is an Indiana corporation registered as a bank holding company
under the federal Bank Holding Company Act of 1956, as amended ("BHC Act"), with
its principal office located in Evansville, Vanderburgh County, Indiana; and
WHEREAS, ANB is an Indiana corporation registered as a bank holding company
under the BHC Act, with its principal office located in Muncie, Delaware County,
Indiana; and
WHEREAS, ANB is the sole owner of all of the outstanding capital stock of
(i) American National Bank and Trust Company of Muncie, a national banking
association ("American National Bank"), (ii) Peoples Loan & Trust Bank, an
Indiana state-chartered bank ("Peoples Bank"), (iii) Farmers State Bank of Union
City, Ohio, an Ohio state-chartered bank ("Farmers State Bank") and (iv)
American National Trust and Investment Management Company, a national trust
company ("ANTIM"); and
WHEREAS, ONB and ANB seek to affiliate through a corporate reorganization
whereby ANB will merge with and into ONB and each of American National Bank,
Peoples Bank, Farmers State Bank and ANTIM will thereby become a wholly-owned
subsidiary of ONB, and ANB Financial Planning Services, Inc. ("ANB Financial")
(American National Bank, Peoples Bank, Farmers State Bank, ANTIM and ANB
Financial are herein referred to collectively as the "Subsidiaries") will
continue to be a wholly-owned subsidiary of American National Bank; and
WHEREAS, ONB and ANB intend that the Merger (as hereinafter defined)
constitute a tax-free reorganization pursuant to Section 368 of the Internal
Revenue Code of 1986, as amended ("Code"); and
WHEREAS, as a condition to, and concurrently with the execution of, this
Agreement, ONB and ANB are entering into a certain Stock Option Agreement (the
"Stock Option Agreement"), attached hereto as Exhibit A; and
WHEREAS, the Board of Directors of each of ONB and ANB has determined that
it is in the best interests of its respective corporation to consummate the
strategic business combination provided for herein and has approved this
Agreement, authorized its execution and designated this Agreement a plan of
reorganization and a plan of merger.
NOW, THEREFORE, in consideration of the foregoing premises, the
representations, warranties, covenants and agreements herein contained and other
good and valuable consideration, the sufficiency of which is hereby
acknowledged, ONB and ANB hereby make this Agreement and prescribe the terms and
conditions of the affiliation of ONB and ANB and the mode of carrying such
merger into effect as follows:
SECTION 1
THE MERGER
1.01. General Description. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time (as defined in Section 10 hereof), ANB
shall merge with and into and under the Articles of Incorporation of ONB
("Merger"). ONB shall survive the Merger ("Surviving Corporation") and shall
continue its corporate existence under the laws of the State of Indiana pursuant
to the provisions of and with the effect provided in the Indiana Business
Corporation Law, as amended. Upon consummation of
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the Merger, each of American National Bank, Peoples Bank, Farmers State Bank and
ANTIM shall become a wholly-owned subsidiary of ONB.
1.02. Name, Officers, Directors and Management. (a) The name of the
Surviving Corporation shall be "Old National Bancorp." Its principal office
shall be located at 420 Main Street, Evansville, Indiana 47708.
(b) The officers of ONB serving at the Effective Time shall continue to
serve as the officers of the Surviving Corporation, until such time as their
successors shall have been duly elected and have qualified or until their
earlier resignation, death or removal from office. At the Effective Time, James
R. Schrecongost shall become the Chairman of each of following wholly-owned
subsidiaries of ONB: Old National Trust Company, Old National Trust
Company -- Illinois and Old National Trust Company -- Kentucky.
(c) The directors of ONB as of the Effective Time and Kelly Stanley shall
be the directors of the Surviving Corporation, until such time as their
successors have been duly elected and have been qualified or until their earlier
resignation, death or removal from office.
1.03. Capital Structure. The capital of the Surviving Corporation shall be
not less than the capital of ONB immediately prior to the Effective Time.
1.04. Articles of Incorporation and By-Laws. The Articles of Incorporation
and By-Laws of ONB in existence at the Effective Time shall remain the Articles
of Incorporation and By-Laws of the Surviving Corporation following the
Effective Time, until such Articles of Incorporation and By-Laws shall be
further amended as provided by applicable law.
1.05. Assets and Liabilities. At the Effective Time, the title to all
assets, real estate and other property owned by ANB shall vest in ONB without
reversion or impairment. At the Effective Time, all liabilities of ANB shall be
assumed by ONB.
1.06. Tax-Free Reorganization and Accounting Treatment. ONB and ANB intend
for the Merger to qualify as a reorganization within the meaning of Section 368
and related sections of the Code, and for the Merger to be accounted for as a
pooling of interests transaction. ONB and ANB agree to cooperate and to take
such action as may be reasonably necessary to achieve such results.
SECTION 2
MANNER AND BASIS OF EXCHANGE OF STOCK
2.01. Exchange Ratio. Upon and by virtue of the Merger becoming effective
at the Effective Time, each issued and outstanding share of ANB Common Stock (as
defined in Section 5.03 hereof) shall be converted into the right to receive One
and Twenty-Five One-Hundredths (1.25) shares of ONB common stock ("Exchange
Ratio"), subject to adjustment, if any, pursuant to the provisions of Section
2.03 hereof.
2.02. No Fractional Shares. Certificates for fractional shares of ONB
common stock shall not be issued for fractional interests resulting from
application of the Exchange Ratio. Each shareholder of ANB who would otherwise
have been entitled to a fraction of a share of ONB common stock shall be paid in
cash following the Effective Time an amount equal to such fraction multiplied by
the average of the per share closing price of ONB common stock as reported on
the Nasdaq National Market System for the final five (5) business days on which
shares of ONB common stock were traded immediately preceding the Effective Time.
2.03. Recapitalization. If, between the date of this Agreement and the
Effective Time, the record date occurs for the distribution or issuance by ONB
of a stock dividend with respect to its shares of common stock, or a
combination, subdivision, reclassification or split of ONB's issued and
outstanding shares of common stock, such that the number of issued and
outstanding shares of ONB common stock is increased or decreased, then the
Exchange Ratio shall be adjusted so that ANB's shareholders shall receive, in
the aggregate, such number of shares of ONB common stock representing the same
percentage
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of outstanding shares of ONB common stock at the Effective Time as would have
been represented by the number of shares of ONB common stock such shareholders
would have received if any of the foregoing actions had not occurred.
2.04. Distribution of ONB Common Stock and Cash. (a) Immediately following
the Effective Time, ONB shall mail to each ANB shareholder a letter of
transmittal providing instructions as to the transmittal to ONB of certificates
representing shares of ANB Common Stock and the issuance of shares of ONB common
stock in exchange therefor pursuant to the terms of this Agreement.
(b) Following the Effective Time, distribution of stock certificates
representing shares of ONB common stock and any cash payment, without interest,
for fractional shares, if any, shall be made by ONB to each former shareholder
of ANB as soon as practical following delivery to ONB of the shareholder's
certificate(s) representing its shares of ANB Common Stock accompanied by a
properly completed and executed letter of transmittal, all in form and substance
reasonably satisfactory to ONB.
(c) As of the Effective Time, stock certificates representing shares of ANB
Common Stock shall be deemed to evidence ownership of ONB common stock for all
corporate purposes other than the payment of dividends or other distributions.
No dividends or other distributions otherwise payable subsequent to the
Effective Time on shares of ONB common stock shall be paid to any ANB
shareholder entitled to receive the same until such shareholder has surrendered
to ONB his or her certificate or certificates representing ANB Common Stock in
exchange for a certificate or certificates representing ONB common stock. Upon
surrender of the certificates representing shares of ANB Common Stock, there
shall be paid in cash to the record holder of the new certificate or
certificates evidencing shares of ONB common stock the amount of all dividends
and other distributions, without interest thereon, withheld with respect to such
shares of ONB common stock.
(d) ONB shall be entitled to rely upon the stock transfer books of ANB to
establish the persons entitled to receive shares of ONB common stock pursuant to
this Agreement, which books shall be conclusive with respect to the ownership of
shares of ANB Common Stock.
(e) With respect to any certificate for shares of ANB Common Stock which
has been lost, stolen or destroyed, ONB shall be authorized to issue common
stock (and to pay cash as to fractional shares) to the registered owner of such
certificate upon receipt by ONB of an agreement to indemnify ONB against loss
from such lost, stolen or destroyed certificate and an affidavit of lost, stolen
or destroyed stock certificate, both in form and substance reasonably
satisfactory to ONB, and upon compliance by the ANB shareholder with all other
reasonable requirements of ONB in connection with lost, stolen or destroyed
stock certificates.
SECTION 3
DISSENTING SHAREHOLDERS
Shareholders of ANB are not entitled to any dissenters' rights under
Chapter 44 of the Indiana Business Corporation Law, as amended, since ANB Common
Stock is quoted and traded on Nasdaq. ANB shall take no action which would
result in the loss of such listing prior to the Effective Time.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF ANB
On or prior to the date hereof, ANB has delivered to ONB a schedule (the
"Disclosure Schedule") setting forth, among other things, items the disclosure
of which is 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 this Section 4 or to one or more of
its covenants contained in Section 6; provided, that 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 ANB that such item represents a material
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exception or fact, event or circumstance or that such item is reasonably likely
to result in a Material Adverse Effect (as defined below).
For the purpose of this Agreement, and in relation to ANB and the
Subsidiaries, a "Material Adverse Effect" means any effect that (i) is material
and adverse to the financial position, results of operations or business of ANB
and the Subsidiaries taken as a whole, or (ii) would materially impair the
ability of ANB 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, (c) any modifications or changes to
valuation policies and practices in connection with the Merger or restructuring
charges taken in connection with the Merger, in each case in accordance with
generally accepted accounting principles, (d) effects of any action taken with
the prior written consent of ONB and (e) changes in general level of interest
rate or conditions or circumstances that affect the banking industry generally.
No representation or warranty of ANB contained in this Section 4, except
Sections 4.03 and 4.21, shall be deemed untrue or incorrect, and ANB 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, circumstances or
event, individually or taken together with all other facts, events or
circumstances inconsistent with any representation or warranty contained in this
Section 4, has had or is reasonably likely to have a Material Adverse Effect on
ANB.
ANB accordingly hereby represents and warrants to ONB as follows:
4.01. Organization and Authority. (a) ANB is a corporation duly organized
and validly existing under the laws of the State of Indiana. ANB has full power
and authority (corporate and otherwise) to own and lease its properties as
presently owned and leased and to conduct its business in the manner and by the
means utilized as of the date hereof. ANB has a class of stock registered
pursuant to Section 12, and is subject to the reporting requirements, of the
Securities Exchange Act of 1934, as amended ("1934 Act"). Except as set forth in
the Disclosure Schedule, ANB's only direct subsidiaries are American National
Bank, Peoples Bank, Farmers State Bank and ANTIM and it has no other
subsidiaries and owns no voting stock or equity securities of any corporation,
partnership, association or other entity.
(b) American National Bank is a national banking association duly organized
and validly existing under the laws of the United States of America. American
National Bank has no subsidiaries, except for ANB Financial. American National
Bank is subject to primary regulatory supervision and examination by the Office
of the Comptroller of the Currency ("OCC"). American National Bank has full
power and authority (corporate and otherwise) to own and lease its properties as
presently owned and leased and to conduct its business in the manner and by the
means utilized as of the date hereof.
(c) Peoples Bank is an Indiana state-chartered bank duly organized and
validly existing under the laws of the State of Indiana. Peoples Bank has no
subsidiaries. Peoples Bank is subject to primary regulatory supervision and
examination by the Indiana Department of Financial Institutions ("DFI"). Peoples
Bank has full power and authority (corporate and otherwise) to own and lease its
properties as presently owned and leased and to conduct its business in the
manner and by the means utilized as of the date hereof.
(d) Farmers State Bank is an Ohio state-chartered bank duly organized and
validly existing under the laws of the State of Ohio. Farmers State Bank has no
subsidiaries. Farmers State Bank is subject to primary regulatory supervision
and examination by the Ohio Division of Financial Institutions ("ODFI"). Farmers
State Bank has full power and authority (corporate and otherwise) to own and
lease its properties as presently owned and leased and to conduct its business
in the manner and by the means utilized as of the date hereof.
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(e) ANTIM is a national trust association duly organized and validly
existing under the laws of the United States of America. ANTIM has no
subsidiaries, except ANTIM owns 3,531 shares (15%) of the common stock of
Indiana Trust & Investment Management Company, an Indiana state-chartered trust
company, and has the obligation, subject to conditions, to purchase the
remaining shares in accordance with the terms of a Stock Acquisition Agreement
dated August 8, 1997. Under the terms of such agreement, assuming ONB is a
Permitted Successor to ANB, ONB shall succeed to its rights and obligations
thereunder subject to the price adjustment contemplated by Section 2.4(c) of the
Stock Acquisition Agreement. ANTIM is subject to primary regulatory supervision
and examination by the OCC. ANTIM has full power and authority (corporate and
otherwise) to own and lease its properties as presently owned and leased and to
conduct its business in the manner and by the means utilized as of the date
hereof.
(f) ANB Financial is an Indiana corporation duly organized and validly
existing under the laws of the State of Indiana. ANB Financial has no
subsidiaries. ANB Financial has full power and authority (corporate and
otherwise) to own and lease its properties as presently owned and leased and to
conduct its business in the manner and by the means utilized as of the date
hereof.
4.02. Authorization. (a) ANB has the requisite corporate power and
authority to enter into this Agreement and to perform its obligations hereunder,
subject to the fulfillment of the conditions precedent set forth in Section
8.02(e) and (f) hereof. As of the date hereof, ANB is not aware of any reason
why the approvals set forth in Section 8.02(e) will not be received in a timely
manner and without the imposition of a condition, restriction or requirement of
the type described in Section 8.02(e). This Agreement and its execution and
delivery by ANB have been duly authorized and approved by the Board of Directors
of ANB and, assuming due execution and delivery by ONB, constitutes a valid and
binding obligation of ANB, subject to the fulfillment of the conditions
precedent set forth in Section 8.02 hereof, and is enforceable in accordance
with its terms, except to the extent limited by general principles of equity and
public policy and by bankruptcy, insolvency, fraudulent transfer,
reorganization, liquidation, moratorium, readjustment of debt or other laws of
general application relating to or affecting the enforcement of creditors'
rights.
(b) Except as set forth in the Disclosure Schedule, neither the execution
of this Agreement nor consummation of the Merger contemplated hereby: (i)
conflicts with or violates ANB's Articles of Incorporation or By-Laws; (ii)
conflicts with or violates any local, state, federal or foreign law, statute,
ordinance, rule or regulation (provided that the approvals of or filings with
applicable government regulatory agencies or authorities required for
consummation of the Merger are obtained) or any court or administrative
judgment, order, injunction, writ or decree; (iii) conflicts with, results in a
breach of or constitutes a default under any note, bond, indenture, mortgage,
deed of trust, license, lease, contract, agreement, arrangement, commitment or
other instrument to which ANB or any Subsidiary is a party or by which ANB or
any Subsidiary is subject or bound; (iv) results in the creation of or gives any
person, corporation or entity the right to create any lien, charge, claim,
encumbrance or security interest, or results in the creation of any other rights
or claims of any other party (other than ONB) or any other adverse interest,
upon any right, property or asset of ANB or any Subsidiary; or (v) terminates or
gives any person, corporation or entity the right to terminate, accelerate,
amend, modify or refuse to perform under any note, bond, indenture, mortgage,
agreement, contract, lease, license, arrangement, deed of trust, commitment or
other instrument to which ANB or any Subsidiary is bound or with respect to
which ANB or any Subsidiary is to perform any duties or obligations or receive
any rights or benefits.
(c) Other than in connection or in compliance with the provisions of the
applicable federal and state banking, securities, and corporation statutes, all
as amended, and the rules and regulations promulgated thereunder, no notice to,
filing with, exemption by or consent, authorization or approval of any
governmental agency or body is necessary for consummation of the Merger by ANB
or any Subsidiary.
4.03. Capitalization. (a) The authorized capital stock of ANB as of the
date hereof consists, and at the Effective Time will consist, of 250,000 shares
of preferred stock, no par value, none of which shares are issued or outstanding
and 20,000,000 shares of common stock, $1.00 par value per share, 5,445,995 of
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which shares are issued and outstanding, which number of issued shares of ANB
Common Stock is subject to increase to a total of 5,837,619 shares (not
including any shares of ANB Common Stock which may be granted under the Stock
Option Agreement and ANB (1994) Dividend Reinvestment and Stock Purchase Plan
(the "DRIP")) pursuant to the exercise of options (collectively, the "Stock
Options") granted under the ANB Corporation 1996 Directors' Stock Option Plan,
ANB Corporation Stock Option Plan and ANB Corporation 1995 Stock Option Plan
(collectively, the "Stock Option Plans") to purchase an aggregate of 391,624
shares of common stock of ANB (such issued and outstanding shares are referred
to herein as "ANB Common Stock"). Such issued and outstanding shares of ANB
Common Stock have been duly and validly authorized by all necessary corporate
action of ANB, are validly issued, fully paid and nonassessable and have not
been issued in violation of any pre-emptive rights of any present or former ANB
shareholder. ANB has no capital stock authorized, issued or outstanding other
than as described in this Section 4.03(a) and has no intention or obligation to
authorize or issue any other capital stock or any additional shares of ANB
Common Stock, except pursuant to the terms (as of the date of this Agreement) of
the ANB DRIP.
(b) The authorized capital stock of American National Bank as of the date
hereof consists, and at the Effective Time will consist, of 160,000 shares of
common stock, $20.00 par value per share, all of which shares are issued and
outstanding (such issued and outstanding shares are referred to herein as
"American National Bank Common Stock"). Such issued and outstanding shares of
American National Bank Common Stock have been duly and validly authorized by all
necessary corporate action of American National Bank, are validly issued, fully
paid and nonassessable (except to the extent provided by 12 U.S.C. sec. 55, as
amended), and have not been issued in violation of any pre-emptive rights of any
present or former American National Bank shareholder. All of the issued and
outstanding shares of American National Bank Common Stock are owned by ANB free
and clear of all liens, pledges, charges, claims, encumbrances, restrictions,
security interests, options and pre-emptive rights and of all other rights or
claims of any other person, corporation or entity with respect thereto. American
National Bank has no capital stock authorized, issued or outstanding other than
as described in this Section 4.03(b) and has no intention or obligation to
authorize or issue any other capital stock or any additional shares of American
National Bank Common Stock.
(c) The authorized capital stock of Peoples Bank as of the date hereof
consists, and at the Effective Time will consist, of 130,000 shares of common
stock, $10.00 par value per share, all of which shares are issued and
outstanding (such issued and outstanding shares are referred to herein as
"Peoples Bank Common Stock"). Such issued and outstanding shares of Peoples Bank
Common Stock have been duly and validly authorized by all necessary corporate
action of Peoples Bank, are validly issued, fully paid and nonassessable, and
have not been issued in violation of any pre-emptive rights of any present or
former Peoples Bank shareholder. All of the issued and outstanding shares of
Peoples Bank Common Stock are owned by ANB free and clear of all liens, pledges,
charges, claims, encumbrances, restrictions, security interests, options and
pre-emptive rights and of all other rights or claims of any other person,
corporation or entity with respect thereto. Peoples Bank has no capital stock
authorized, issued or outstanding other than as described in this Section
4.03(c) and has no intention or obligation to authorize or issue any other
capital stock or any additional shares of Peoples Bank Common Stock.
(d) The authorized capital stock of Farmers State Bank as of the date
hereof consists, and at the Effective Time will consist, of 1,000 shares of
common stock, $2,500.00 par value per share, all of which shares are issued and
outstanding (such issued and outstanding shares are referred to herein as
"Farmers State Bank Common Stock"). Such issued and outstanding shares of
Farmers State Bank Common Stock have been duly and validly authorized by all
necessary corporate action of Farmers State Bank, are validly issued, fully paid
and nonassessable, and have not been issued in violation of any pre-emptive
rights of any present or former Farmers State Bank shareholder. All of the
issued and outstanding shares of Farmers State Bank Common Stock are owned by
ANB free and clear of all liens, pledges, charges, claims, encumbrances,
restrictions, security interests, options and pre-emptive rights and of all
other rights or claims of any other person, corporation or entity with respect
thereto. Farmers State Bank has no capital stock authorized, issued or
outstanding other than as described in this Section 4.03(d) and has no
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intention or obligation to authorize or issue any other capital stock or any
additional shares of Farmers State Bank Common Stock.
(e) The authorized capital stock of ANTIM as of the date hereof consists,
and at the Effective Time will consist, of 100,000 shares of common stock,
$100.00 par value per share, 21,000 of which shares are issued and outstanding
(such issued and outstanding shares are referred to herein as "ANTIM Common
Stock"). Such issued and outstanding shares of ANTIM Common Stock have been duly
and validly authorized by all necessary corporate action of ANTIM, are validly
issued, fully paid and nonassessable (except to the extent provided by 12 U.S.C.
sec. 55, as amended), and have not been issued in violation of any pre-emptive
rights of any present or former ANTIM shareholder. All of the issued and
outstanding shares of ANTIM Common Stock are owned by ANB free and clear of all
liens, pledges, charges, claims, encumbrances, restrictions, security interests,
options and pre-emptive rights and of all other rights or claims of any other
person, corporation or entity with respect thereto. ANTIM has no capital stock
authorized, issued or outstanding other than as described in this Section
4.03(e) and has no intention or obligation to authorize or issue any other
capital stock or any additional shares of ANTIM Common Stock.
(f) The authorized capital stock of ANB Financial as of the date hereof
consists, and at the Effective Time will consist, of 1,000 shares of common
stock, no par value, all of which shares are issued and outstanding (such issued
and outstanding shares are referred to herein as "ANB Financial Common Stock").
Such issued and outstanding shares of ANB Financial Common Stock have been duly
and validly authorized by all necessary corporate action of ANB Financial, are
validly issued, fully paid and nonassessable, and have not been issued in
violation of any pre-emptive rights of any present or former ANB Financial
shareholder. All of the issued and outstanding shares of ANB Financial Common
Stock are owned by American National Bank free and clear of all liens, pledges,
charges, claims, encumbrances, restrictions, security interests, options and
pre-emptive rights and of all other rights or claims of any other person,
corporation or entity with respect thereto. ANB Financial has no capital stock
authorized, issued or outstanding other than as described in this Section
4.03(f) and has no intention or obligation to authorize or issue any other
capital stock or any additional shares of ANB Financial Common Stock.
(g) Except as set forth in the Disclosure Schedule and except for options
granted under the Stock Option Agreement and the Stock Option Plans, there are
no options, warrants, commitments, calls, puts, agreements, understandings,
arrangements or subscription rights relating to any shares of ANB Common Stock,
or any securities convertible into or representing the right to purchase or
otherwise acquire any common stock or debt securities of ANB, by which ANB is or
may become bound. ANB does not have any outstanding contractual or other
obligation to repurchase, redeem or otherwise acquire any of the issued and
outstanding shares of ANB Common Stock.
(h) There are no options, warrants, commitments, calls, puts, agreements,
understandings, arrangements or subscription rights relating to any shares of
common stock of the Subsidiaries, or any securities convertible into or
representing the right to purchase or otherwise acquire any common stock or debt
securities of a Subsidiary, by which a Subsidiary is or may become bound. None
of the Subsidiaries has any outstanding contractual or other obligation to
repurchase, redeem or otherwise acquire any of the issued and outstanding shares
of its common stock.
(m) Except as set forth in the Disclosure Schedule, ANB has no knowledge of
any person or entity which beneficially owns 5% or more of its outstanding
shares of common stock.
4.04. Organizational Documents. The respective Articles of Incorporation
and By-Laws of ANB, Peoples Bank, Farmers State Bank and ANB Financial, and the
respective Articles of Association and By-Laws of American National Bank and
ANTIM, representing true, accurate and complete copies of such corporate
documents in effect as of the date of this Agreement, have been delivered to
ONB.
4.05. Compliance with Law. (a) Neither ANB nor any Subsidiary has engaged
in any activity nor taken or omitted to take any action which has resulted in
the violation of any local, state, federal or foreign law, statute, regulation,
rule, ordinance, order, restriction or requirement, nor are they in violation
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of any order, injunction, judgment, writ or decree of any court or government
agency or body. ANB and each Subsidiary possess and hold all licenses,
franchises, permits, certificates and other authorizations necessary for the
continued conduct of their business without interference or interruption, and
such licenses, franchises, permits, certificates and authorizations are
transferable (to the extent required) to ONB at the Effective Time without any
restrictions or limitations thereon or the need to obtain any consents of
government agencies or other third parties other than as set forth in this
Agreement.
(b) Except as set forth in the Disclosure Schedule, neither ANB nor any of
the Subsidiaries or properties is a party to or is subject to any order, decree,
agreement, memorandum of understanding or similar arrangement with, or a
commitment letter or similar submission to, or extraordinary supervisory letter
from, any federal or state governmental agency or authority charged with the
supervision or regulation of financial institutions or issuers of securities or
engaged in the insurance of deposits (including, without limitation, the OCC,
the Federal Reserve Board and Federal Deposit Insurance Corporation) or the
supervision or regulation of ANB or any of its Subsidiaries. There are no
uncured violations, or violations with respect to which refunds or restitutions
may be required, cited in any examination report of ANB or any Subsidiary as a
result of an examination by any regulatory agency or body, or set forth in any
accountant's or auditor's report to ANB or any Subsidiary.
4.06. Accuracy of Statements Made and Materials Provided to ONB. (a) No
representation, warranty in this Section 4 or other statement made, or any
information provided, by ANB or any Subsidiary in this Agreement or the
Disclosure Schedule (and any update thereto), and no written report, statement,
list, certificate, materials or other information furnished or to be furnished
by ANB or any Subsidiary to ONB through and including the Effective Time in
connection with this Agreement or the Merger contemplated hereby (including,
without limitation, any written information which has been or shall be supplied
by ANB and the Subsidiaries with respect to their financial condition, results
of operations, business, assets, capital or directors and officers for inclusion
in the proxy statement-prospectus and registration statement relating to the
Merger), contains or shall contain (in the case of information relating to the
proxy statement-prospectus at the time it is mailed to ANB's shareholders) any
untrue statement of material fact or omits or shall omit to state a material
fact necessary to make the statements contained herein or therein, in light of
the circumstances in which they are made, not false or misleading.
4.07. Litigation and Pending Proceedings. (a) Except as set forth in the
Disclosure Schedule and lawsuits involving collection of delinquent accounts,
there are no claims, actions, suits, proceedings, mediations, arbitrations or
investigations pending or to the best knowledge of ANB after due inquiry,
threatened in any court or before any government agency or authority,
arbitration panel or otherwise (nor does ANB have any knowledge of a basis for
any claim, action, suit, proceeding, litigation, arbitration or investigation)
against, by or affecting ANB or any Subsidiary or which would prevent the
performance of this Agreement, declare the same unlawful or cause the rescission
hereof.
(b) Except as set forth in the Disclosure Schedule, neither ANB nor any
Subsidiary is: (i) subject to any outstanding judgment, order, writ, injunction
or decree of any court, arbitration panel or governmental agency or authority;
(ii) presently charged with or, to the best knowledge of ANB after due inquiry,
under governmental investigation with respect to any actual or alleged
violations of any law, statute, rule, regulation or ordinance; or (iii) the
subject of any pending or, to the best knowledge of ANB after due inquiry,
threatened proceeding by any government regulatory agency or authority having
jurisdiction over its respective business, assets, capital, properties or
operations.
4.08. Financial Statements and Reports. ANB has delivered to ONB copies of
the following financial statements and reports of ANB and the Subsidiaries,
including the notes thereto (collectively, the "ANB Financial Statements"):
(a) Consolidated Balance Sheets and the related Consolidated Statements of
Income and Consolidated Statements of Changes in Shareholders' Equity of ANB as
of and for the years ended December 31, 1996, 1997 and 1998, and as of and for
the fiscal quarter ended March 31, 1999;
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(b) Consolidated Statements of Cash Flows of ANB for the years ended
December 31, 1996, 1997 and 1998, and for the fiscal quarter ended March 31,
1999;
(c) Consolidated Statements of Changes in Financial Position of ANB for the
years ended December 31, 1997 and 1998, and for the fiscal quarter ended March
31, 1999;
(d) Reports of Condition and Income ("Call Reports") for American National
Bank and Peoples Bank as of the close of business on December 31, 1995, 1996,
1997 and 1998; and
(e) Financial Statements of ANB on Form FRY-9LP and Form FRY-9C filed with
the Board of Governors of the Federal Reserve System at the close of business on
December 31, 1997 and 1998.
The ANB Financial Statements present fairly the consolidated financial
position of ANB as of and at the dates shown and the consolidated results of
operations for the periods covered thereby. The ANB Financial Statements
described in clauses (a), (b) and (c) above for completed fiscal years are
audited financial statements and have been prepared in conformance with
generally accepted accounting principles applied on a consistent basis, except
as may otherwise be indicated in any accountants' notes or reports with respect
to such financial statements. The ANB Financial Statements do not include any
assets, liabilities or obligations or omit to state any assets, liabilities or
obligations, absolute or contingent, or any other facts which inclusion or
omission would render any of the ANB Financial Statements false, misleading or
inaccurate in any respect.
4.09. Properties, Contracts, Employees and Other Agreements. (a) Set forth
in the Disclosure Schedule are a true, accurate and complete copy of the
following:
(i) A brief description and the location of all real property owned by
ANB and the Subsidiaries and the principal buildings and structures located
thereon and each lease of real property to which ANB or any Subsidiary is a
party, identifying the parties thereto, the annual rental payable, the
expiration date of the lease and a brief description of the property
covered;
(ii) a list of all agreements, contracts, leases, licenses, lines of
credit, understandings, commitments or obligations of ANB or any Subsidiary
which individually or in the aggregate:
(A) involve payment or receipt by ANB or any Subsidiary (other than
as disbursements of loan proceeds to customers, loan payments by
customers or customer deposits) of more than $100,000;
(B) involve payments based on profits of ANB or any Subsidiary;
(C) relate to the purchase of goods, products, supplies or services
in excess of $100,000;
(D) were not made in the ordinary course of business; or
(E) may not be terminated without penalty within one (1) year from
the date of this Agreement; and
(iii) The name and current annual salary of each director, officer and
employee of ANB or any Subsidiary whose current annual salary is in excess
of $50,000, and the profit sharing, bonus or other form of compensation
(other than salary) paid or payable by ANB or any Subsidiary to or for the
benefit of each such person for the year ended December 31, 1998, and any
employment, severance or deferred compensation agreement or arrangement
with respect to each such person.
(b) Each of the agreements, contracts, commitments, leases, instruments and
documents set forth in the Disclosure Schedule relating to this Section 4.09 is
valid and enforceable in accordance with its terms, except to the extent limited
by general principles of equity and public policy or by bankruptcy, insolvency,
fraudulent transfer, readjustment of debt or other laws of general application
relative to or affecting the enforcement of creditor's rights, and ANB and the
Subsidiaries are, and, to the best knowledge of ANB after due inquiry, all other
parties thereto are, in compliance with the provisions thereof, and ANB and the
Subsidiaries are not in default in the performance, observance or fulfillment of
any obligation, covenant or
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provision contained therein. None of the foregoing requires the consent of any
party to its assignment in connection with the Merger contemplated by this
Agreement. Other than as disclosed pursuant to this Section 4.09, to the best
knowledge of ANB after due inquiry, no circumstances exist resulting from
transactions effected or to be effected, from events which have occurred or may
occur or from any action taken or omitted to be taken which could reasonably be
expected to result in the creation of any agreement, contract, obligation,
commitment, arrangement, lease or document described in or contemplated by this
Section 4.09.
(c) Neither ANB nor any Subsidiary is, to the best knowledge of ANB after
due inquiry, in default under or in breach of or, alleged to be in default under
or in breach of, any loan or credit agreement, conditional sales contract or
other title retention agreement, security agreement, bond, indenture, mortgage,
license, contract, lease, commitment or any other instrument or obligation.
4.10. Absence of Undisclosed Liabilities. Except as provided in the ANB
Financial Statements, Subsequent ANB Financial Statements and in the Disclosure
Schedule, except for unfunded loan commitments and obligations on letters of
credit to customers of American National Bank, Peoples Bank and Farmers State
Bank (collectively, the "Banks"), except for trade payables incurred in the
ordinary course of ANB's and the Banks' business, and except for the transaction
contemplated by this Agreement, neither ANB nor any Subsidiary has, nor will
have at the Effective Time, any obligation, agreement, contract, commitment,
liability, lease or license which exceeds $50,000 individually, or any
obligation, agreement, contract, commitment, liability, lease or license made
outside of the ordinary course of business, nor does there exist any
circumstances resulting from transactions effected or events occurring on or
prior to the date of this Agreement or from any action omitted to be taken
during such period which could reasonably be expected to result in any such
obligation, agreement, contract, commitment, liability, lease or license.
4.11. Title to Assets. Except as described in this Section 4.11: (a) ANB or
the Subsidiaries, as the case may be, has good and marketable title in fee
simple absolute to all real property (including, without limitation, all real
property used as bank premises and all other real estate owned) which is
reflected in the ANB Financial Statements as of March 31, 1999; good title to
all personal property reflected in the ANB Financial Statements as of March 31,
1999, other than personal property disposed of in the ordinary course of
business since March 31, 1999; good title to or right to use by valid and
enforceable lease or contract all other properties and assets (whether real or
personal, tangible or intangible) which ANB and the Subsidiaries purports to own
or which ANB or any Subsidiary uses in its business; good title to, or right to
use by terms of a valid and enforceable lease or contract, all other property
used in their respective businesses; and good title to all property and assets
acquired and not disposed of or leased since March 31, 1999. All of such
properties and assets are owned by ANB or a Subsidiary free and clear of all
land or conditional sales contracts, mortgages, liens, pledges, restrictions,
security interests, charges, claims, rights of third parties or encumbrances of
any nature except: (i) as set forth in the Disclosure Schedule; (ii) as
specifically noted in the ANB Financial Statements; (iii) statutory liens for
taxes not yet delinquent or being contested in good faith by appropriate
proceedings; (iv) pledges or liens required to be granted in connection with the
acceptance of government deposits or granted in connection with repurchase or
reverse repurchase agreements; and (v) easements, encumbrances and liens of
record, imperfections of title and other limitations which are not material in
amounts to ANB on a consolidated basis and which do not materially detract from
the value or materially interfere with the present or contemplated use of any of
the properties subject thereto or impair the use thereof for the purposes for
which they are held or used. All real property owned or leased by ANB or any
Subsidiary is in compliance with all applicable zoning and land use laws.
(b) ANB and the Subsidiaries have conducted their respective business in
compliance with all federal, state, county and municipal laws, statutes,
regulations, rules, ordinances, orders, directives, restrictions and
requirements relating to, without limitation, responsible property transfer,
underground storage tanks, petroleum products, air pollutants, water pollutants
or storm water or process waste water or otherwise relating to the environment
or toxic or hazardous substances or to the manufacturing, recycling, handling,
processing, distribution, use, generation, treatment, storage, disposal or
transport of any
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hazardous or toxic substances or petroleum products (including polychlorinated
biphenyls, whether contained or uncontained, and asbestos-containing materials,
whether friable or not), including, without limitation, the Federal Solid Waste
Disposal Act, the Hazardous and Solid Waste Amendments, the Federal Clean Air
Act, the Federal Clean Water Act, the Occupational Health and Safety Act, the
Federal Resource Conservation and Recovery Act, the Toxic Substances Control
Act, the Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980 and the Superfund Amendments and Reauthorization Act of
1986, all as amended, and regulations of the Environmental Protection Agency,
the Nuclear Regulatory Agency, the Army Corp of Engineers, the Department of
Interior, the United States Fish and Wildlife Service and any state department
of natural resources or state environmental protection agency now (collectively,
"Environmental Laws"). Except as set forth in the Disclosure Schedule, there are
no pending or, to the best knowledge of ANB after due inquiry, threatened,
claims, actions or proceedings by any local municipality, sewage district or
other governmental entity against ANB or any Subsidiary with respect to the
Environmental Laws. No environmental clearances or other governmental approvals
are required for the conduct of the business of ANB or any Subsidiary as
presently conducted. Neither ANB nor any Subsidiary is the owner, and has not
been in the chain of title or the operator or lessee, of any property on which
any substances have been released, which substances if known to be present on,
at or under such property would require clean-up, removal or any other remedial
action under any Environmental Law, and there is no reasonable basis or grounds
for any such claim, action or proceeding. ANB and the Subsidiaries own, operate,
lease and control, and have owned, operated, leased and controlled, all real
property in compliance with the Environmental Laws. Neither ANB nor any
Subsidiary has any liability for any clean-up or remediation under any of the
Environmental Laws with respect to any real property.
4.12. Loans. (a) Except as set forth in the Disclosure Schedule, there is
no loan by any Bank in excess of $50,000 that has been classified by bank
regulatory examiners or management as "Other Loans Specially Mentioned,"
"Substandard," "Doubtful" or "Loss" or in excess of $50,000 that has been
identified by accountants or auditors (internal or external) as having a
significant risk of uncollectability. The most recent loan watch list of each
Bank and a list of all loans in excess of $50,000 which any Bank has determined
to be thirty (30) days or more past due with respect to principal or interest
payments or has placed on nonaccrual status has been provided to ONB.
(b) All loans reflected in the ANB Financial Statements as of March 31,
1999 and which have been made, extended, renewed, restructured, approved,
amended or acquired since March 31, 1999: (i) to the best knowledge of ANB after
due inquiry, constitute the legal, valid and binding obligation of the obligor
and any guarantor named therein, except to the extent limited by general
principles of equity and public policy or by bankruptcy, insolvency, fraudulent
transfer, reorganization, liquidation, moratorium, readjustment of debt or other
laws of general application relative to or affecting the enforcement of
creditors' rights; (ii) are evidenced by notes, instruments or other evidences
of indebtedness which are true, genuine and what they purport to be; and (iii)
are secured, to the extent that ANB or any Subsidiary has a security interest in
collateral or a mortgage securing such loans, by perfected security interests or
recorded mortgages naming ANB or a Subsidiary as the secured party or mortgagee
(unless by written agreement to the contrary).
(c) The reserves, the allowance for possible loan and lease losses and the
carrying value for real estate owned which are shown on the ANB Financial
Statements are adequate in all respects under the requirements of generally
accepted accounting principles applied on a consistent basis to provide for
possible losses on items for which reserves were made, on loans and leases
outstanding and real estate owned as of the respective dates.
4.13. Shareholder Rights Plan. Except as otherwise provided in this
Agreement, the Disclosure Schedule and ANB's Articles of Incorporation and
By-Laws, ANB has no shareholder rights plan or any other plan, program or
agreement involving, restricting, prohibiting or discouraging a change in
control or merger of ANB or which may be considered an anti-takeover mechanism.
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4.14. Employee Benefit Plans. (a) With respect to the employee benefit
plans, as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), sponsored or otherwise maintained by ANB or any
Subsidiary, whether written or oral, in which ANB or any Subsidiary participates
as a participating employer; to which ANB or any Subsidiary contributes and
including any such plans which within the preceding six years have been
terminated, merged into another plan of ANB or any Subsidiary, frozen or
discontinued (collectively, "ANB Plans") except as set forth on the Disclosure
Schedule: (i) all such ANB Plans have been, in all respects, maintained in
compliance with the requirements prescribed by all applicable statutes, orders
and governmental rules or regulations, including, without limitation, ERISA, the
Code, and Treasury and Labor Regulations promulgated thereunder, (ii) all ANB
Plans intended to constitute tax-qualified plans under Section 401(a) of the
Code have received favorable determination letters from the Internal Revenue
Service ("Service") with respect to "TRA" (as defined in Section 1 of Rev. Proc.
93-39), and ANB is not aware of any circumstances likely to result in revocation
of any such favorable determination letter; (iii) except for the ANB Common
Stock held by its trustee as an asset of the ANB Pension Plan, no ANB Plan (or
its related trust) holds any stock or other securities of ANB or any related or
affiliated person or entity; (iv) ANB has not engaged in any transaction that
may subject ANB, or any ANB Plan, to a civil penalty imposed by Section 502 of
ERISA; (v) no prohibited transaction (as defined in Section 406 of ERISA and as
defined in Section 4975(c) of the Code) has occurred with respect to any ANB
Plan; (vi) there are no actions, suits, proceedings or claims pending (other
than routine claims for benefits) or, to the best knowledge of ANB after due
inquiry, threatened, against ANB, any Subsidiary, any ANB Plan, any fiduciary of
any ANB Plan or the assets of any ANB Plan as to which ANB or any Subsidiary
would have liability.
(b) ANB has made available to ONB true, accurate and complete copies of the
following (including all plans and programs which have been terminated): (i)
pension, retirement, profit-sharing, savings, stock purchase, stock bonus, stock
ownership, stock option and stock appreciation right plans and all amendments
thereto and all summary plan descriptions thereof (including any modifications
thereto); (ii) all employment, deferred compensation (whether funded or
unfunded), salary continuation, consulting, bonus, severance and collective
bargaining agreements, arrangements or understandings; (iii) all executive and
other incentive compensation plans, programs and agreements; (iv) all group
insurance and health insurance contracts, policies or plans; and (v) all other
incentive, welfare or employee benefit plans, or agreements, maintained or
sponsored, participated in, or contributed to by ANB or any Subsidiary for its
current or former directors, officers or employees.
(c) Except as set forth on the Disclosure Schedule, no current or former
director, officer or employee of ANB or any Subsidiary is entitled to any
benefit under any welfare benefit plans (as defined in Section 3(1) of ERISA)
after termination of employment with ANB, except that such individuals may be
entitled to continue their group health care coverage pursuant to the retiree
health coverage provisions of the ANB Corporation Group Health Plan or pursuant
to Section 4980B of the Code if they pay the cost of such coverage pursuant to
the applicable requirements of the Plan or the Code with respect thereto,
whichever is applicable.
(d) With respect to any group health plan (as defined in Section 607(1) of
ERISA) sponsored or maintained by ANB or any Subsidiary, in which ANB or any
Subsidiary participates as a participating employer or to which ANB or any
Subsidiary contributes, no director, officer, employee or agent of ANB or any
Subsidiary has engaged in any action or failed to act in such a manner that, as
a result of such action or failure to act, would cause a tax to be imposed on
ANB or any Subsidiary under Code Section 4980B(a). With respect to all such
plans, all applicable provisions of Section 4980B of the Code and Section 601 of
ERISA have been complied with in all respects by ANB and the Subsidiaries.
(e) Except as set forth on the Disclosure Schedule, there are no collective
bargaining, employment, management, consulting, deferred compensation,
reimbursement, indemnity, retirement, early retirement, severance or similar
plans or agreements, under discussion or negotiation by management with any
employee or group of employees, any member of management or any other person.
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4.15. Obligations to Employees. All contributions required to be made under
the terms of any ANB Plan have been timely made or have been reflected on the
Audited Financial Statements or the Preliminary Financial Statements. Neither
any ANB Plan which is an "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA (a "Pension Plan") nor any single-employer plan or any
entity which is considered one employer with ANB under Section 4001 of ERISA or
section 414 of the Code (an "ERISA Affiliate") has an "accumulated funding
deficiency" (whether or not waived) within the meaning of Section 412 of the
Code or Section 302 of ERISA and no ERISA Affiliate has an outstanding funding
waiver. Neither ANB nor any of its Subsidiaries has provided, or is required to
provide, security to any Pension Plan or to any single-employer plan of any
ERISA Affiliate pursuant to Section 401(a)(29) of the Code.
4.16. Taxes, Returns and Reports. Except as set forth in the Disclosure
Schedule, ANB and each Subsidiary has since January 1, 1995 (a) duly filed all
federal, state, local and foreign tax returns of every type and kind required to
be filed, and each such return is true, accurate and complete in all respects;
(b) paid or otherwise adequately reserved in accordance with generally accepted
accounting principles for all taxes, assessments and other governmental charges
due or claimed to be due upon ANB or any Subsidiary or any of their income,
properties or assets; and (c) not requested an extension of time for any such
payments (which extension is still in force). ANB has established, and shall
establish in the Subsequent ANB Financial Statements, in accordance with
generally accepted accounting principles, a reserve for taxes in the ANB
Financial Statements adequate to cover all of ANB's and the Subsidiaries' tax
liabilities (including, without limitation, income taxes, payroll taxes and
withholding, and franchise fees) for the periods then ending. Neither ANB nor
any Subsidiary has, nor will any one of them have, any liability for taxes of
any nature for or with respect to the operation of their respective businesses,
including the business of any subsidiary, or ownership of their assets,
including the assets of any subsidiary, from the date hereof up to and including
the Effective Time, except to the extent set forth in the Subsequent ANB
Financial Statements (as hereinafter defined) or as accrued or reserved for on
the books and records of ANB. Neither ANB nor any Subsidiary is currently under
audit by any state or federal taxing authority. No federal, state or local tax
returns of ANB have been audited by any taxing authority during the past five
(5) years.
4.17. Deposit Insurance. The deposits of the Banks are insured by the FDIC
in accordance with the Federal Deposit Insurance Act, as amended, and ANB and
each Bank have paid or properly reserved or accrued for all current premiums and
assessments with respect to such deposit insurance.
4.18. Insurance. Set forth in the Disclosure Schedule is a list and brief
description of all policies of insurance (including, without limitation,
bankers' blanket bond, directors' and officers' liability insurance, property
and casualty insurance, group health or hospitalization insurance and insurance
providing benefits for employees) owned or held by ANB or any Subsidiary on the
date hereof or with respect to which ANB or any Subsidiary pays any premiums.
Each such policy is in full force and effect and all premiums due thereon have
been paid when due, and a true, accurate and complete copy thereof has been made
available to ONB prior to the date hereof.
4.19. Books and Records. The books and records of ANB and the Subsidiaries
have been fully, properly and accurately maintained.
4.20. Broker's, Finder's or Other Fees. Except for reasonable fees of ANB's
attorneys, accountants and investment bankers, all of which shall be paid by ANB
prior to the Effective Time, no agent, broker or other person acting on behalf
of ANB or any Subsidiary or under any authority of ANB or any Subsidiary is or
shall be entitled to any commission, broker's or finder's fee or any other form
of compensation or payment from any of the parties hereto relating to this
Agreement and the Merger contemplated hereby.
4.21. Interim Events. (a) Except as set forth in the Disclosure Schedule,
between the period from March 31, 1999 to the date of this Agreement, no event
has occurred and no fact or circumstance shall have come to exist or come to be
known which, directly or indirectly, individually or taken together with
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all other facts, circumstances and events, has had, or is reasonably likely to
have, a Material Adverse Effect.
(b) Except as set forth in the Disclosure Schedule, between the period from
March 31, 1999 to the date of this Agreement, ANB and the Subsidiaries have
carried on their respective businesses in the ordinary and usual course
consistent with their past practices (excluding the incurrence of fees and
expenses of professional advisors related to this Agreement and the transactions
contemplated hereby) and there has not been:
(i)) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to ANB
Common Stock; or
(ii) any split, combination or reclassification of any capital stock
of ANB or any subsidiary or any issuance or the authorization of any
issuance of any other securities in respect of, or in lieu of or in
substitution for shares of ANB Common Stock, except for issuances of ANB
Common Stock upon the exercise of the Options awarded prior to the date
hereof in accordance with the terms of the Stock Option Plans.
4.22. Regulatory Filings. ANB and the Subsidiaries have filed and will
continue to file in a timely manner all required filings with the Securities and
Exchange Commission ("SEC"), including, but not limited to, all reports on Form
8-K, Form 10-K and Form 10-Q and proxy statements, and with all federal and
state regulatory agencies and authorities as required by applicable law. All
such filings with the SEC and with all other federal and state regulatory
agencies were and will be true, accurate and complete as of the dates of the
filings and have been complied or will comply in all respects as to form with
the applicable requirements and prepared in conformity with generally accepted
regulatory accounting principles applied on a consistent basis, and no such
filing contained or will contain any untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements, at
the time and in light of the circumstances under which they were made, not false
or misleading.
4.23. Indemnification Agreements. (a) Neither ANB nor any Subsidiary is a
party to any indemnification, indemnity or reimbursement agreement, contract,
commitment or understanding to indemnify any present or former director,
officer, employee, shareholder or agent against liability or hold the same
harmless from liability other than as expressly provided in the Articles of
Incorporation or By-Laws of ANB, Peoples Bank, Farmers State Bank and ANB
Financial and the Articles of Association and By-Laws of American National Bank
and ANTIM.
(b) No claims have been made against or filed with ANB or any Subsidiary
nor have, to the best knowledge of ANB after due inquiry, any claims been
threatened against ANB or any Subsidiary, for indemnification against liability
or for reimbursement of any costs or expenses incurred in connection with any
legal or regulatory proceeding by any present or former director, officer,
shareholder, employee or agent of ANB or any Subsidiary.
4.24. Year 2000. (a) All devices, systems, machinery, information
technology, computer software and hardware, and other date sensitive technology
(collectively, the "Systems") necessary for ANB to carry on its business as
presently conducted and as contemplated to be conducted in the future are Year
2000 Compliant or will be Year 2000 Compliant within a period of time calculated
to result in no disruption of any of ANB's business operations. Neither ANB nor
any of the Subsidiary has received, or reasonably expects to receive, a
deficiency notice for any federal or state regulator relating to their failure
to be Year 2000 Compliant. For purposes of this Section 4.24, "Year 2000
Compliant" means that such Systems are designed to be used prior to, during and
after the Gregorian calendar year 2000 A.D. and will operate during each such
time period without error relating to date data, specifically including any
error relating to, or the product of, date data which represents or references
different centuries or more than one century.
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(b) ANB has:
(i) undertaken a detailed inventory, review, and assessment of all
areas within its business and operations that could be adversely affected
by the failure of ANB to be Year 2000 Compliant on a timely basis;
(ii) developed a detailed plan and timeline for becoming Year 2000
Compliant on a timely basis; and
(iii) to date, implemented that plan in accordance with that
timetable.
4.25. Shareholder Approval. The affirmative vote of the holders of a
majority of the ANB Common Stock (which are issued and outstanding on the record
date relating to the meeting of shareholders) is required for shareholder
approval of this Agreement and the Merger.
4.26. Nonsurvival of Representations and Warranties. The representations
and warranties of ANB contained in this Agreement shall expire at the earlier of
the termination of this Agreement and the Effective Time, and thereafter ANB and
all directors, officers and employees of ANB shall have no further liability
with respect thereto, except for fraud or for false or misleading statements
made intentionally or knowingly in connection with such representations and
warranties.
SECTION 5
REPRESENTATIONS AND WARRANTIES OF ONB
On or prior to the date hereof, ONB has delivered to ANB a schedule (the
"ONB Disclosure Schedule") setting forth, among other things, items the
disclosure of which is necessary or appropriate as an exception to one or more
representations or warranties contained in this Section 5 or to one or more of
its covenants contained in Section 7; provided, that the mere inclusion of an
item in the ONB Disclosure Schedule as an exception to a representation or
warranty shall not be deemed an admission by ONB 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 (as defined below).
For the purpose of this Agreement, and in relation to ONB and its
subsidiaries, a Material Adverse Effect means any effect that (i) is material
and adverse to the financial position, results of operations or business of ONB
and its subsidiaries taken as a whole, or (ii) would materially impair the
ability of ONB 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, (c) any modifications or changes to
valuation policies and practices in connection with the Merger or restructuring
charges taken in connection with the Merger, in each case in accordance with
generally accepted accounting principles, and (d) changes in general level of
interest rate or conditions or circumstances that affect the banking industry
generally.
No representation or warranty of ONB contained in this Section 5, shall
deemed untrue or incorrect, and ONB 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, circumstances or event, individually or taken
together with all other facts, events or circumstances inconsistent with any
representation or warranty contained in this Section 5, has had or is reasonably
likely to have a Material Adverse Effect on ONB.
ONB accordingly hereby represents and warrants to ANB as follows:
5.01. Organization and Authority. ONB is a corporation duly organized and
validly existing under the laws of the State of Indiana, is a registered bank
holding company under the BHC Act, and has full power and authority (corporate
and otherwise) to own and lease its properties as presently owned and
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leased and to conduct its business in the manner and by the means utilized as of
the date hereof. ONB's common stock is registered pursuant to Section 12, and
ONB is subject to the reporting requirements, of the 1934 Act. Each of ONB's
direct subsidiaries has been duly organized and is validly existing in good
standing under the laws of the jurisdiction of its organization, and has full
power and authority to own and lease its properties as presently owned and
leased and to conduct its business in the manner and by the means utilized as of
the date hereof.
5.02. Authorization. (a) ONB has the requisite corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder, subject to the fulfillment of the conditions precedent set forth in
Section 8.01(d), (e) and (f) hereof. As of the date hereof, ONB is not aware of
any reason why the approvals set forth in Section 8.01(e) will not be received
in a timely manner and without the imposition of a condition, restriction or
requirement of the type described in Section 8.01(e). This Agreement and its
execution and delivery by ONB have been duly authorized by its Board of
Directors. Assuming due execution and delivery by ANB, this Agreement
constitutes a valid and binding obligation of ONB, subject to the conditions
precedent set forth in Section 8.01 hereof, and is enforceable in accordance
with its terms, except to the extent limited by general principles of equity and
public policy and by bankruptcy, insolvency, reorganization, liquidation,
moratorium, readjustment of debt or other laws of general application relating
to or affecting the enforcement of creditors' rights.
(b) Neither the execution of this Agreement nor consummation of the Merger
contemplated hereby: (i) conflicts with or violates ONB's Articles of
Incorporation or By-Laws; (ii) conflicts with or violates in any respect any
local, state, federal or foreign law, statute, ordinance, rule or regulation
(provided that the approvals of or filings with applicable government regulatory
agencies or authorities required for consummation of the Merger are obtained) or
any court or administrative judgment, order, injunction, writ or decree; (iii)
conflicts with, results in a breach of or constitutes a default under any note,
bond, indenture, mortgage, deed of trust, license, contract, lease, agreement,
arrangement, commitment or other instrument to which ONB is a party or by which
ONB is subject or bound; (iv) results in the creation of or gives any person,
corporation or entity the right to create any lien, charge, claim, encumbrance
or security interest, or results in the creation of any other rights or claims
of any other party (other than ANB) or any other adverse interest, upon any
right, property or asset of ONB; or (v) terminates or gives any person,
corporation or entity the right to terminate, accelerate, amend, modify or
refuse to perform under any note, bond, indenture, mortgage, agreement,
contract, lease, license, arrangement, deed of trust, commitment or other
instrument to which ONB is bound or with respect to which ONB is to perform any
duties or obligations or receive any rights or benefits.
(c) Other than in connection or in compliance with applicable federal and
state banking, securities and corporation statutes, all as amended, and the
rules and regulations promulgated thereunder, no notice to, filing with,
exemption by or consent, authorization or approval of any governmental agency or
body is necessary for the consummation by ONB of the Merger contemplated by this
Agreement.
5.03. Capitalization. (a) The authorized capital stock of ONB as of the
date hereof consists of (i) 75,000,000 shares of common stock, no par value per
share, of which approximately 46,158,663 shares were issued and outstanding as
of June 30, 1999, and (ii) 2,000,000 shares of preferred stock, no shares of
which have been or are presently intended to be issued, other than in connection
with any obligations of ONB to issue such preferred stock under its
shareholders' rights plan. Such issued and outstanding shares of ONB capital
stock have been duly and validly authorized by all necessary corporate action of
ONB, are validly issued, fully paid and nonassessable, and have not been issued
in violation of any pre-emptive rights of any present or former ONB shareholder.
All of the issued and outstanding shares of common stock of ONB's subsidiaries
are owned by ONB free and clear of all liens, pledges, charges, claims,
encumbrances, restrictions, security interests, options and pre-emptive rights
and of all other rights or claims of any other person, corporation or entity
with respect thereto. Except as described in this Section 5.03, ONB has no other
authorized capital stock. Except for shares of ONB common stock to be issued in
connection with: (i) ONB's dividend reinvestment and stock purchase plan; (ii)
ONB's outstanding convertible subordinated debentures; (iii) acquisitions by ONB
of other financial institutions or holding companies;
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and (iv) ONB's restricted stock plan and other employee benefit plans, ONB has
no intention or obligation to authorize or issue any other capital stock or any
additional shares of ONB capital stock.
(b) Except for shares of ONB common stock beneficially owned by its trust
affiliates, ONB has no knowledge of any person or entity who beneficially owns
5% or more of its issued and outstanding shares of common stock.
5.04. Organizational Documents. The Articles of Incorporation and By-Laws
of ONB in force as of the date of this Agreement have been delivered to ANB and
represent true, accurate and complete copies of such corporate documents of ONB
in effect as of the date of this Agreement.
5.05. Compliance With Law. Neither ONB nor any of its subsidiaries has
engaged in any activity nor taken or omitted to take any action which has
resulted or could result in the violation of any local, state, federal or
foreign law, statute, rule, regulation, ordinance, order, restriction or
requirement or of any order, injunction, judgment, writ or decree of any court
or government agency or body. ONB and each of its subsidiaries possesses and
holds all licenses, franchises, permits, certificates and other authorizations
necessary for the continued conduct of their business without interference or
interruption.
5.06. Regulatory Filings. ONB and each of its subsidiaries have filed and
will continue to file in a timely manner all required filings with the SEC,
including, but not limited to, all reports on Form 8-K, Form 10-K and Form 10-Q
and proxy statements, and with all other federal and state regulatory agencies
as required by applicable law. All filings by ONB with the SEC and with all
other federal and state regulatory agencies complied or will comply in all
respects as to form with the applicable requirements and were and will be true,
accurate and complete in all respects as of the dates of the filings, and no
such filings contained or will contain any untrue statement of a material fact
or omitted to state a material fact necessary in order to make the statements,
at the time and in the light of the circumstances under which they were made,
not false or misleading.
5.07. Litigation and Pending Proceedings. (a) There are no claims, actions,
suits, proceedings, investigations or arbitrations pending or, to the best
knowledge of ONB after due inquiry, threatened in any court or before or by any
government agency or authority, arbitration panel or otherwise (nor is there any
basis for any claim, action, suit, proceeding, litigation, investigation or
arbitration) against, by or affecting ONB or its subsidiaries which would
prevent the performance of this Agreement, declare the same unlawful or cause
the rescission hereof.
(b) Neither ONB nor any of its subsidiaries is: (i) subject to any
outstanding judgment, order, writ, injunction or decree of any court,
arbitration panel or governmental agency or authority; (ii) presently charged
with or, to the best knowledge of ONB, under governmental investigation with
respect to any actual or alleged violations of any law, statute, rule,
regulation or ordinance; or (iii) the subject of any pending or, to the best
knowledge of ONB after due inquiry, threatened proceeding by any government
regulatory agency or authority having jurisdiction over its business, assets,
capital, properties or operations.
5.08. Financial Statements and Reports. (a) ONB or its agents have
delivered to ANB copies of the following financial statements and reports of ONB
and its subsidiaries, including the notes thereto (collectively, the "ONB
Financial Statements"):
(i) Consolidated Balance Sheets and related Consolidated Statements of
Income and Consolidated Statements of Changes in Shareholders' Equity of
ONB as of and for the years ended December 31, 1996, 1997 and 1998, and for
the fiscal quarter ended March 31, 1999; and
(ii) Consolidated Statements of Cash Flows of ONB for the years ended
December 31, 1996, 1997 and 1998 and for the fiscal quarter ended March 31,
1999.
(b) The ONB Financial Statements present fairly the consolidated financial
position of ONB and its subsidiaries as of and at the dates shown and the
consolidated results of operations for the periods covered thereby. The ONB
Financial Statements described in clauses (i) and (ii) above, which consist of
fiscal year-end information, are audited financial statements and have been
prepared in conformance with
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generally accepted accounting principles applied on a consistent basis except as
may otherwise be indicated in any accountants' notes or reports with respect to
such financial statements. The ONB Financial Statements do not include any
assets, liabilities or obligations or omit to state any assets, liabilities or
obligations, absolute or contingent, or any other facts, which inclusion or
omission would render any of the ONB Financial Statements false, misleading or
inaccurate in any respect.
5.09. Shares to be Issued in Merger. The shares of ONB common stock which
ANB shareholders will be entitled to receive upon consummation of the Merger
pursuant to this Agreement will, at the Effective Time, be duly authorized and
will, when issued in accordance with this Agreement, be validly issued, fully
paid and nonassessable and will have been registered under the Securities Act of
1933, as amended ("1933 Act") and listed for trading on the Nasdaq National
Market System.
5.10. Shareholder Approval. Approval by ONB's shareholders of the Merger or
for any other actions contemplated by this Agreement is not required.
5.11. Accuracy of Statements Made to ANB. No representation, warranty or
other statement made, or any information provided or to be provided, by ONB in
this Agreement, and no written report, statement, list, certificate, materials
or other information furnished or to be furnished by ONB to ANB through and
including the Effective Time in connection with this Agreement or the Merger
contemplated hereby (including, without limitation, any written information
which has been or shall be supplied by ONB with respect to its financial
condition, results of operations, business, assets, capital or directors and
officers for inclusion in the proxy statement-prospectus and registration
statement relating to the Merger), contains or shall contain (in the case of
information relating to the proxy statement-prospectus at the time it is mailed
to ANB's shareholders) any untrue or misleading statement of material fact or
omits or shall omit to state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances in which they are
made, not false or misleading.
5.12. Broker's, Finder's or Other Fees. Except for reasonable fees of ONB's
attorneys and accountants and investment bankers, no agent, broker or other
person acting on behalf of ONB or under any authority of ONB is or shall be
entitled to any commission, broker's or finder's fee or any other form of
compensation or payment from any of the parties hereto relating to this
Agreement and the Merger contemplated hereby.
5.13. Accounting Treatment. As of the date of this Agreement, it is aware
of no reason why the Merger will fail to qualify for "pooling of interests"
accounting treatment.
5.14. Taxes, Returns and Reports. Except as set forth in the Disclosure
Schedule, ONB has since January 1, 1995 (a) duly filed all federal, state, local
and foreign tax returns of every type and kind required to be filed, and each
such return is true, accurate and complete in all respects; (b) paid or
otherwise adequately reserved in accordance with generally accepted accounting
principles for all taxes, assessments and other governmental charges due or
claimed to be due upon ONB or its income, properties or assets; and (c) not
requested an extension of time for any such payments (which extension is still
in force). ONB has established, and shall establish in its subsequent financial
statements, in accordance with generally accepted accounting principles, a
reserve for taxes in the ONB Financial Statements adequate to cover all of its
tax liabilities (including, without limitation, income taxes, payroll taxes and
withholding, and franchise fees) for the periods then ending. ONB does not have,
nor will it have, any liability for taxes of any nature for or with respect to
the operation of their respective businesses, including the business of any
subsidiary, or ownership of their assets, including the assets of any
subsidiary, from the date hereof up to and including the Effective Time, except
to the extent set forth in its subsequent financial statements or as accrued or
reserved for on the books and records of ONB. ONB is not currently under audit
by any state or federal taxing authority. No federal, state or local tax returns
of ONB have been audited by any taxing authority during the past five (5) years.
5.15. Employee Benefit Plans. (a) With respect to the employee benefit
plans, as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), sponsored or otherwise maintained by ONB or any
of its subsidiaries, whether written or oral, in which
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ONB or any of its subsidiaries participates as a participating employer; to
which ONB or any of its subsidiaries contributes and including any such plans
which within the preceding six years have been terminated, merged into another
plan of ONB or any of its subsidiaries, frozen or discontinued (collectively,
"ONB Plans"): (i) all such ONB Plans have been, in all respects, maintained in
compliance with the requirements prescribed by all applicable statutes, orders
and governmental rules or regulations, including, without limitation, ERISA, the
Code, and Treasury and Labor Regulations promulgated thereunder, (ii) all ONB
Plans intended to constitute tax-qualified plans under Section 401(a) of the
Code have received favorable determination letters from the Internal Revenue
Service ("Service") with respect to "TRA" (as defined in Section 1 of Rev. Proc.
93-39), and ONB is not aware of any circumstances likely to result in revocation
of any such favorable determination letter; (iii) except for the ONB common
stock held by its trustee as an asset of the ONB Employee Stock Ownership Plan
and the ONB Employees' Retirement Plan, no ONB Plan (or its related trust) holds
any stock or other securities of ONB or any related or affiliated person or
entity; (iv) ONB has not engaged in any transaction that may subject ONB, or any
ONB Plan, to a civil penalty imposed by Section 502 of ERISA; (v) no prohibited
transaction (as defined in Section 406 of ERISA and as defined in Section
4975(c) of the Code) has occurred with respect to any ONB Plan; (vi) to the best
knowledge of ONB, there are no actions, suits, proceedings or claims pending
(other than routine claims for benefits) or threatened, against ONB, any of its
subsidiaries, any ONB Plan, any fiduciary of any ONB Plan or the assets of any
ONB Plan as to which ONB would have liability.
(b) ONB has made available to ANB true, accurate and complete copies of the
following (including all plans and programs which have been terminated): (i)
pension, retirement, profit-sharing, savings, stock purchase, stock bonus, stock
ownership, stock option and stock appreciation right plans and all amendments
thereto and all summary plan descriptions thereof (including any modifications
thereto); (ii) all employment, deferred compensation (whether funded or
unfunded), salary continuation, consulting, bonus, severance and collective
bargaining agreements, arrangements or understandings; (iii) all executive and
other incentive compensation plans, programs and agreements; (iv) all group
insurance and health insurance contracts, policies or plans; and (v) all other
incentive, welfare or employee benefit plans, or agreements, maintained or
sponsored, participated in, or contributed to by ONB or any of its subsidiaries
for its current or former directors, officers or employees.
(c) No current or former director, officer or employee of ONB or any of its
subsidiaries is entitled to any benefit under any welfare benefit plans (as
defined in Section 3(1) of ERISA) after termination of employment with ANB,
except that such individuals may be entitled to continue their group health care
coverage pursuant to the retiree health coverage provisions of the ONB
Corporation Group Health Plan or pursuant to Section 4980B of the Code if they
pay the cost of such coverage pursuant to the applicable requirements of the
Plan or the Code with respect thereto, whichever is applicable.
(d) With respect to any group health plan (as defined in Section 607(1) of
ERISA) sponsored or maintained by ONB or any of its subsidiaries, in which ONB
or any of its subsidiaries participates as a participating employer or to which
ONB or any of its subsidiaries contributes, no director, officer, employee or
agent of ONB or any of its subsidiaries has engaged in any action or failed to
act in such a manner that, as a result of such action or failure to act, would
cause a tax to be imposed on ONB or any of its subsidiaries under Code Section
4980B(a). With respect to all such plans, all applicable provisions of Section
4980B of the Code and Section 601 of ERISA have been complied with in all
respects by ONB and its subsidiaries.
5.16 Books and Records. The books and records of ONB have been fully,
properly and accurately maintained.
5.17 Year 2000. (a) All devices, systems, machinery, information
technology, computer software and hardware, and other date sensitive technology
(collectively, the "Systems") necessary for ONB to carry on its business as
presently conducted and as contemplated to be conducted in the future are Year
2000 Compliant or will be Year 2000 Compliant within a period of time calculated
to result in no disruption of any of ONB's business operations. Neither ONB nor
any of its banking subsidiaries has
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received, or reasonably expects to receive, a deficiency notice for any federal
or state regulator relating to their failure to be Year 2000 Compliant. For
purposes of this Section 5.17, "Year 2000 Compliant" means that such Systems are
designed to be used prior to, during and after the Gregorian calendar year 2000
A.D. and will operate during each such time period without error relating to
date data, specifically including any error relating to, or the product of, date
data which represents or references different centuries or more than one
century.
(b) ONB has:
(i) undertaken a detailed inventory, review, and assessment of all
areas within its business and operations that could be adversely affected
by the failure of ONB to be Year 2000 Compliant on a timely basis;
(ii) developed a detailed plan and timeline for becoming Year 2000
Compliant on a timely basis; and
(iii) to date, implemented that plan in accordance with that
timetable.
5.18. Nonsurvival of Representations and Warranties. The representations
and warranties of ONB contained in this Agreement shall expire at the earlier of
the termination of this Agreement and the Effective Time and, thereafter, ONB
and all directors, officers and employees of ONB shall have no further liability
with respect thereto, except for fraud or for false or misleading statements
made intentionally or knowingly in connection with such representations and
warranties.
SECTION 6
COVENANTS OF ANB
ANB covenants and agrees with ONB, and covenants and agrees to cause the
Subsidiaries, to act as follows:
6.01. Shareholder Approval. Subject to Section 6.06 hereof, ANB shall
submit this Agreement to its shareholders for approval and adoption at a meeting
to be called and held in accordance with applicable law and the Articles of
Incorporation and By-Laws of ANB at the earliest possible reasonable date.
Subject to Section 6.06 hereof, the Board of Directors of ANB shall recommend to
ANB's shareholders that such shareholders approve and adopt this Agreement and
the Merger contemplated hereby and shall solicit proxies voting in favor of this
Agreement from ANB's shareholders.
6.02. Other Approvals. (a) ANB and the Subsidiaries shall proceed
expeditiously, cooperate fully and use its best efforts to assist ONB in
procuring upon reasonable terms and conditions all consents, authorizations,
approvals, registrations and certificates, in completing all filings and
applications and in satisfying all other requirements prescribed by law which
are necessary for consummation of the Merger on the terms and conditions
provided in this Agreement at the earliest possible reasonable date.
(b) Any materials or information provided by ANB or any Subsidiary to ONB
for use by ONB in any filing with any state or federal regulatory agency or
authority shall not contain any untrue or misleading statement of material fact
or shall omit to state a material fact necessary to make the statements
contained therein, in light of the circumstances in which they are made, not
false or misleading.
6.03. Conduct of Business. (a) On and after the date of this Agreement and
until the Effective Time or until this Agreement shall be terminated as herein
provided, neither ANB nor any Subsidiary shall, without the prior written
consent of ONB:
(i) make any changes in its capital stock accounts (including, without
limitation, any stock split, stock dividend, recapitalization or
reclassification), except for the ANB DRIP and the issuance of up to
391,624 shares of ANB Common Stock under the Stock Option Plans;
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(ii) authorize a class of stock or issue, or authorize the issuance
of, securities other than or in addition to the issued and outstanding
common stock as set forth in Section 4.03 hereof;
(iii) distribute or pay any dividends on its shares of common stock,
or make any other distribution to its shareholders except that (A) American
National Bank, Peoples Bank, Farmers State Bank and ANTIM may pay cash
dividends to ANB in the ordinary course of business for payment of
reasonable and necessary business and operating expenses of ANB and to
provide funds for ANB's dividends to its shareholders in accordance with
this Agreement, and (B) ANB may pay to its shareholders its usual and
customary quarterly cash dividend of no greater than nineteen cents ($0.19)
per share for any quarterly period, provided that no dividend may be paid
for the quarterly period in which the Merger is consummated if, during such
period, ANB shareholders will become entitled to receive dividends on their
shares of ONB common stock received pursuant to this Agreement;
(iv) redeem any of its outstanding shares of common stock;
(v) merge, combine or consolidate or effect a share exchange with or
sell its assets or any of its securities to any other person, corporation
or entity or enter into any other similar transaction not in the ordinary
course of business;
(vi) purchase any assets or securities or assume any liabilities of
another bank holding company, bank, corporation or other entity, except in
the ordinary course of business necessary to manage their investment
portfolios;
(vii) make any loan or commitment to lend money, issue any letter of
credit or accept any deposit, except in the ordinary course of business in
accordance with its existing banking practices;
(viii) except for the acquisition or disposition in the ordinary
course of business of other real estate owned, acquire or dispose of any
real or personal property (excluding the investment portfolio of the Banks)
or fixed asset constituting a capital investment in excess of $100,000
individually or $200,000 in the aggregate;
(ix) subject any of its properties or assets to a mortgage, lien,
claim, charge, option, restriction, security interest or encumbrance,
except for tax and other liens which arise by operation of law and with
respect to which payment is not past due or is being contested in good
faith by appropriate proceedings and except for pledges or liens: (i)
required to be granted in connection with acceptance by ANB or any
Subsidiary of government deposits; (ii) granted in connection with
repurchase or reverse repurchase agreements; or (iii) otherwise incurred in
the ordinary course of the conduct of its business;
(x) promote to a new position or increase the rate of compensation or
enter into any agreement to promote to a new position or increase the rate
of compensation, of any director, officer or employee of ANB or any
Subsidiary (except for promotions and compensation increases in the
ordinary course of business and in accordance with past practices and
established employment policies of ANB and the Subsidiaries and other than
pursuant to an employee retention program, which has been disclosed to
ONB);
(xi) execute, create, institute, modify, amend or terminate (except
with respect to any amendments to the ANB Plans required by law, rule or
regulation) any pension, retirement, savings, stock purchase, stock bonus,
stock ownership, stock option, stock appreciation or depreciation rights or
profit sharing plans; any employment, deferred compensation, consulting,
bonus or collective bargaining agreement; any group insurance or health
contract or policy; or any other incentive, retirement, welfare or employee
welfare benefit plan, agreement or understanding for current or former
directors, officers or employees of ANB or any Subsidiary; or change the
level of benefits or payments under any of the foregoing or increase or
decrease any severance or termination of pay benefits or any other fringe
or employee benefits other than as required by law or regulatory
authorities or the terms of any of the foregoing;
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(xii) modify, amend or institute new employment policies or practices,
or enter into, renew or extend any employment, indemnity, reimbursement,
consulting, compensation or severance agreements with respect to any
present or former directors, officers or employees of ANB or any
Subsidiary;
(xiii) hire or employ any new or additional employees of ANB or any
Subsidiary, except those which are reasonably necessary for the proper
operation of their respective businesses;
(xiv) elect or appoint any executive officers or directors of ANB or
any Subsidiary who are not presently serving in such capacities;
(xv) amend, modify or restate ANB's, Peoples Bank's, Farmers State
Bank's, or ANB Financial's Articles of Incorporation or By-Laws or American
National Bank's or ANTIM's Articles of Association or By-Laws from those in
effect on the date of this Agreement and as delivered to ONB hereunder;
(xvi) give, dispose of, sell, convey or transfer; assign, hypothecate,
pledge or encumber; or grant a security interest in or option to or right
to acquire any shares of common stock or substantially all of the assets,
of ANB or any Subsidiary, or enter into any agreement or commitment
relative to the foregoing;
(xvii) fail to continue to make additions to in accordance with the
Banks' past practices and to otherwise maintain in all respects the Banks'
reserve for loan and lease losses, or any other reserve account, in
accordance with safe, sound, and prudent banking practices and in
accordance with generally accepted accounting principles applied on a
consistent basis;
(xviii) fail to accrue, pay, discharge and satisfy all debts,
liabilities, obligations and expenses, including, but not limited to, trade
payables, incurred in the regular and ordinary course of business as such
debts, liabilities, obligations and expenses become due;
(xix) except for obligations disclosed within this Agreement or the
Disclosure Statement, trade payables and similar liabilities and
obligations incurred in the ordinary course of business and the payment,
discharge or satisfaction in the ordinary course of business of liabilities
reflected in the ANB Financial Statements or the Subsequent ANB Financial
Statements, (A) borrow any money (except for capital purposes related to
the Subsidiaries), (B) incur any indebtedness including, without
limitation, through the issuance of debentures, or (C) incur any liability
or obligation (whether absolute, accrued, contingent or otherwise), in an
aggregate amount exceeding $50,000 (other than as contemplated by Section
6.03(a)(vii) hereof and legal, accounting and fees related to the Merger);
(xx) open, close, move or, in any material respect, expand, diminish,
renovate, alter or change any of its offices or branches; or
(xxi) pay or commit to pay any management or consulting or other
similar type of fees other than in the ordinary course of business.
(b) ANB and the Subsidiaries shall maintain, or cause to be maintained, in
full force and effect, insurance on their assets, properties and operations,
fidelity coverage and directors' and officers' liability insurance on their
directors, officers and employees in such amounts and with regard to such
liabilities and hazards as are currently insured by ANB and the Subsidiaries as
of the date of this Agreement.
6.04. Preservation of Business. On and after the date of this Agreement and
until the Effective Time or until this Agreement is terminated as herein
provided, ANB and the Subsidiaries shall: (a) carry on their business
substantially in the manner as is presently being conducted and in the ordinary
course of business; (b) use their reasonable best efforts to preserve their
business organization intact, keep available the services of the present
officers and employees and preserve their present relationships with customers
and persons having business dealings with it; (c) maintain all of the properties
and assets that each of them owns or utilizes in good operating condition and
repair, reasonable wear and tear excepted, and maintain insurance upon such
properties and assets in amounts and kinds comparable to that in effect on the
date of this Agreement; (d) maintain their books, records and accounts in the
usual, regular and
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ordinary manner, on a basis consistent with prior years and in compliance with
all material respects with all statutes, laws, rules and regulations applicable
to them and to the conduct of their business; and (e) not knowingly do or fail
to do anything which will cause a breach of, or default in, any contract,
agreement, commitment, obligation, understanding, arrangement, lease or license
to which any one of them is a party or by which any one of them is or may be
subject or bound.
6.05. Restrictions Regarding Affiliates. ANB shall, within thirty (30) days
after the date of this Agreement and promptly thereafter until the Effective
Time to reflect any changes, provide ONB with a list identifying each person who
may be deemed to be an affiliate of ANB for purposes of Rule 145 under the 1933
Act. On or prior to the date of this Agreement, and thereafter as may be
required for a person who may be deemed an affiliate of ANB following the date
of this Agreement, ANB shall obtain from each director, executive officer and
other person who may be deemed to be such an affiliate of ANB to deliver to ONB
on or prior to the date of this Agreement, and thereafter as may be required for
any other person who may be deemed an affiliate of ANB following the date of
this Agreement, a written agreement, substantially in the form as attached
hereto as Exhibit B, providing that such person: (a) shall not sell, pledge,
transfer, dispose of or otherwise reduce his or her market risk with respect to
the shares of ANB Common Stock directly or indirectly owned or held by such
person during the thirty (30) day period prior to the Effective Time; and (b)
will not sell, pledge, transfer, dispose of or otherwise reduce his or her
market risk with respect to the shares of ONB common stock to be received by
such person pursuant to this Agreement: (i) until such time as financial results
covering at least 30 days of combined operations of ONB and ANB have been
published as and when required and within the meaning of Section 201.01 of the
SEC's Codification of Financial Reporting Policies, and (ii) unless such sales
are pursuant to an effective Registration Statement under the 1933 Act or
pursuant to Rule 145 under the 1933 Act or another exemption from registration
under the 1933 Act. On or prior to the Effective Time, ANB shall use its best
efforts to obtain from each director, executive officer and other person who may
be deemed to be an affiliate of ANB for purposes of Rule 145 under the 1933 Act
to deliver to ONB at the Effective Time a certificate signed by each such person
certifying to the effect that such person has complied with the terms and
conditions of their written agreement delivered to ONB pursuant to this Section
6.05.
6.06. Other Negotiations. (a) On and after the date of this Agreement and
until the Effective Time or until this Agreement is terminated as herein
provided, except with the prior written approval of ONB, neither ANB nor any
Subsidiary shall permit or authorize their respective directors, officers,
employees, agents or representatives to, directly or indirectly, initiate,
solicit or encourage, or provide information to, any corporation, association,
partnership, person or other entity or group concerning any merger,
consolidation, share exchange, combination, purchase or sale of substantial
assets, sale of shares of common stock (or securities convertible or
exchangeable into or otherwise evidencing, or any agreement or instrument
evidencing the right to acquire, capital stock) or similar transaction relating
to ANB or any Subsidiary or to which ANB or any Subsidiary may become a party
(all such transactions are hereinafter referred to as "Acquisition
Transactions").
(b) ANB and the Subsidiaries shall promptly communicate to ONB the terms of
any proposal or offer which any one of them may receive with respect to an
Acquisition Transaction. ANB or any Subsidiary may, in response to an
unsolicited written proposal with respect to an Acquisition Transaction from a
third party, furnish information to, and negotiate, explore or otherwise engage
in substantive discussions with such third party, and enter into any such
agreement, arrangement or understandings, in each case only if ANB's Board of
Directors determines in good faith by majority vote, after consultation with its
financial advisors and outside legal counsel, that failing to take such action
would be a breach of the fiduciary duties of ANB's Board of Directors.
6.07. Press Releases. Except as required by law, neither ANB nor any
Subsidiary shall issue any press releases or make any other public announcements
or disclosures relating to the Merger without the prior consent of ONB, which
consent shall not be unreasonably withheld.
6.08. Disclosure Schedule Update. ANB shall promptly supplement, amend and
update, upon the occurrence of any change prior to the Effective Time, and as of
the Effective Time, the Disclosure
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Schedule with respect to any matters or events hereafter arising which, if in
existence or having occurred as of the date of this Agreement, would have been
required to be set forth or described in the Disclosure Schedule or this
Agreement and including, without limitation, any fact which, if existing or
known as of the date hereof, would have made any of the representations or
warranties of ANB contained herein incorrect, untrue or misleading.
6.09. Information, Access Thereto, Confidentiality. ONB and its respective
representatives and agents shall, on reasonable notice and during normal
business hours prior to the Effective Time, have full and continuing access to
the properties, facilities, operations, books and records of ANB and the
Subsidiaries. ONB and its respective representatives and agents may, prior to
the Effective Time, make or cause to be made such reasonable investigation of
the operations, books, records and properties of ANB and the Subsidiaries and of
their financial and legal condition as deemed necessary or advisable to
familiarize themselves with such operations, books, records, properties and
other matters; provided, however, that such access or investigation shall not
interfere with the normal business operations of ANB and the Subsidiaries. Upon
request, ANB and the Subsidiaries shall furnish ONB or its respective
representatives or agents, their attorneys' responses to external auditors
requests for information, management letters received from their external
auditors and such financial, loan and operating data and other information
reasonably requested by ONB which has been or is developed by ANB or any
Subsidiary, their auditors, accountants or attorneys (provided with respect to
attorneys, such disclosure would not result in the waiver by ANB or any
Subsidiary of any claim of attorney-client privilege), and will permit ONB and
its respective representatives or agents to discuss such information directly
with any individual or firm performing auditing or accounting functions for ANB
and the Subsidiaries, and such auditors and accountants shall be directed to
furnish copies of any reports or financial information as developed to ONB or
its respective representatives or agents. No investigation by ONB shall affect
the representations and warranties made by ANB herein. ONB shall not use any
such information obtained pursuant to this Agreement for any purpose unrelated
to the Merger. Any confidential information or trade secrets received by ONB or
its representatives or agents in the course of such examination (whether
conducted prior to or after the date of this Agreement) shall be treated
confidentially, and any correspondence, memoranda, records, copies, documents
and electronic or other media of any kind containing such confidential
information or trade secrets or both shall be destroyed by ONB or, at ANB's
request, returned to ANB in the event this Agreement is terminated as provided
in Section 9 hereof. This Section 6.09 shall not require the disclosure of any
information to ONB which would be prohibited by law.
6.10. Subsequent ANB Financial Statements. As soon as reasonably available
after the date of this Agreement, ANB shall deliver to ONB the monthly unaudited
consolidated balance sheets and profit and loss statements of ANB prepared for
its internal use, Call Reports of the Banks and ANTIM for each quarterly period
completed prior to the Effective Time, and all other financial reports or
statements submitted to regulatory authorities after the date hereof, to the
extent permitted by law (collectively, "Subsequent ANB Financial Statements").
The Subsequent ANB Financial Statements shall be prepared on a basis consistent
with past accounting practices and generally accepted accounting principles
applied on a consistent basis to the extent applicable and shall present fairly
the financial condition and results of operations as of the dates and for the
periods presented, subject to year end audit adjustments and the absence of
footnotes for interim statements. The Subsequent ANB Financial Statements,
including the notes thereto, will not include any assets, liabilities or
obligations or omit to state any assets, liabilities or obligations, absolute or
contingent, or any other facts, which inclusion or omission would render such
financial statements inaccurate, incomplete or misleading in any respect.
6.11. Employee Benefits. Neither the terms of Section 7.03 hereof nor the
provision of any employee benefits by ONB or any of its subsidiaries to
employees of ANB shall: (a) create any employment contract, agreement or
understanding with or employment rights for, or constitute a commitment or
obligation of employment to, any of the officers or employees of ANB; or (b)
prohibit or restrict ONB or its subsidiaries, whether before or after the
Effective Time, from changing, amending or terminating any employee benefits
provided to its employees from time to time.
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6.12. Merger of ANB Corporation Savings and Incentive Plan. As soon as
administratively feasible after the Effective Time, the ANB Corporation Savings
and Incentive Plan ("ANB 401(k) Plan") shall be merged with and into the ONB
Savings Plan. All account balances maintained under the ANB 401(k) Plan shall
become fully vested and nonforfeitable on the day on which the plan merger
occurs. From the date of this Agreement through the date on which the ANB 401(k)
Plan is merged into the ONB Savings Plan, ANB and the Subsidiaries may continue
to make contributions to the ANB 401(k) Plan so long as such contributions are
comparable in amount to any past contributions to such plan.
6.13. Merger of ANB Corporation Employees' Pension Plan. As of the first
January 1 or July 1 coinciding with or next following the Effective Time, or as
soon as administratively feasible thereafter, the ANB Corporation Employee's
Pension Plan ("ANB Pension Plan") shall be merged with and into the ONB
Employees' Retirement Plan ("ONB Pension Plan"). All benefits accrued under the
ANB Pension Plan shall be fully vested and non-forfeitable on the day on which
the plan merger occurs. From the date of this Agreement through the date on
which the ANB Pension Plan is merged into the ONB Pension Plan, ANB and its
Subsidiaries shall contribute to the ANB Pension Plan at least the amounts
calculated by the plan's actuary to be necessary to prevent an accumulated
funding deficiency within the meaning of the Section 412 of the Code.
6.14 Termination of Group Health Plan. The ANB Corporation Group Health
Plan ("ANB Health Plan") shall be terminated as of the last day of the calendar
month in which the Effective Time occurs. From the date of this Agreement
through the date as of which the ANB Health Plan terminates, ANB and the
Subsidiaries shall continue to fund all expenses of the plan, including but not
limited to, benefits, stop loss insurance premiums and administrative fees,
attributable to claims incurred on or prior to the date the ANB Health Plan
terminates. As of the date the ANB Health Plan terminates, ANB and the
Subsidiaries shall have funded a reserve account for the purpose of paying
covered claims incurred, but not yet paid, as of the plan termination date. The
amount of such reserve account shall not be less than twenty-five percent (25%)
of the total claims paid for the plan year ending September 30, 1999.
6.15 Termination of Long Term Disability Plan. The ANB Corporation Long
Term Disability Plan ("ANB LTD Plan") shall be terminated as of the Effective
Time, or as soon as administratively feasible thereafter, but such termination
shall not affect the benefits payable to any ANB covered employee who became
entitled to a disability benefit under the ANB LTD Plan prior to the termination
of said plan. From the date of this Agreement through the date as of which the
ANB LTD Plan terminates, ANB and the Subsidiaries shall continue to pay the
insurance premiums necessary to continue the ANB LTD Plan benefits.
6.16 Termination of Sec. 125 Plan. The ANB Corporation Sec. 125 Plan ("ANB
Cafeteria Plan") shall be terminated as of same date the ANB Health Plan is
terminated. From the date of this Agreement through the date as of which the ANB
Cafeteria Plan terminates, ANB and the Subsidiaries shall continue to contribute
to such plan the pre-tax amounts which the ANB Cafeteria Plan participants elect
to defer from compensation in order to pay the employee portion of the cost of
coverage under the ANB Health Plan.
6.17 Termination of ANB Corporation Group Life Plan. The ANB Corporation
Group Term Life Insurance Plan ("ANB Group Life Plan") shall be terminated as of
the first day of the first calendar month following the Effective Time or as
soon as administratively feasible thereafter. From the date of this Agreement
through the date on which the ANB Group Life Plan terminates, ANB and the
Subsidiaries shall continue to pay the insurance premiums necessary to continue
the death benefits provided by such plan.
6.18 Termination of the ANB Corporation SERP. The ANB Corporation
Supplemental Executive Retirement Plan (the "ANB SERP") shall be terminated as
of the day on which the Effective Time occurs. No employee of ANB or the
Subsidiaries who has been designated as an eligible participant under the ANB
SERP shall accrue any additional benefits thereunder subsequent to the December
31 coincident with or next preceding the date the ANB SERP terminates. The
accumulated benefit obligations in the ANB Corporation SERP shall, upon the
Effective Time, be transferred to, and shall become a benefit
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obligation under the ONB Non-Qualified Defined Contribution Plan For Executive
Employees of ONB. Such transferred benefit shall thereafter be administered
pursuant to the terms and conditions of the transferee plan.
6.19 Termination of the ANB Corporation Directors' Plan. The ANB
Corporation Directors' Deferred Compensation Plan (the "ANB Directors' Plan"),
and all participation agreements in effect thereunder, shall be terminated as of
the Effective Time. From the date of this Agreement through the date on which
the ANB Directors' Plan is terminated, ANB and the Subsidiaries may continue to
allow participants thereunder to elect to defer the receipt of all or a portion
of the director fees he or she would otherwise receive and to credit such fees
to the director's individual account under the plan. Upon the termination of the
ANB Directors' Plan the balance in each individual account thereunder shall be
distributed in a lump sum payment to the participant entitled thereto. The Board
of Directors of ANB, and the Board of Directors of each of the Subsidiaries
which is participating in the ANB Directors' Plan, shall, prior to the day on
which the Effective Time occurs, amend or cause the amendment of such plan to
provide that upon the termination of such plan the accrued benefits thereunder
shall be immediately paid in a lump sum payment to the individuals entitled to
such accrued benefits, subject, however, to the terms of the ANB Directors'
Plan.
6.20 Disposition of the ANB Corporation Stock Investment Plan. From the
date of this Agreement through the day on which the Effective Time occurs, the
Stock Investment Plan of ANB Corporation ("ANB Stock Investment Plan") shall
remain in effect, shall continue to be funded by both employer and employee
contributions, and shall continue to be administered, all in accordance with its
current provisions. As of the day on which the Effective Time occurs, the shares
of ANB Common Stock owned by each participant under said plan shall be converted
into whole shares of ONB common stock pursuant to the applicable provisions of
Section 2 of this Agreement. Fractional share interests resulting from such
conversion shall be paid in cash at such time and in such amount determined
under Section 2.02 of this Agreement. ANB shall cause the administrator of the
ANB Stock Investment Plan to thereafter transfer the shares of ONB common stock
held on behalf of each participant in the ANB Stock Investment Plan to the
administrator of the ONB Direct Stock Purchase Plan and Dividend Reinvestment
Plan ("ONB Stock Purchase Plan"). Upon receipt of such shares the administrator
of the ONB Stock Purchase Plan shall credit the number of such shares, on a per
participant basis, to the individual account established on the participant's
behalf under the ONB Stock Purchase Plan by the administrator thereof.
Thereafter such converted shares shall be held, administered and distributed or
surrendered pursuant to the applicable provisions of the ONB Stock Purchase
Plan; provided, however, that the distribution rights of the participants under
the ANB Stock Investment Plan shall not be materially adversely affected by the
transfer of the converted shares to the ONB Stock Purchase Plan.
6.21 Termination of ANB Corporation Severance Policy. The ANB Corporation
Severance Policy, covering eligible employees of ANB, American National Bank and
ANTIM, shall be terminated as of the Effective Time. With respect to an
individual covered by such severance policy on the date of its termination, in
the event that he or she incurs, within twelve months from the Effective Time,
(i) the involuntary termination of employment for reasons other than cause, (ii)
a material reduction in compensation or (iii) without the prior written consent
of such person, the assignment to him or her of any duties materially
inconsistent with his or her duties and responsibilities prior to the date of
this Agreement, he or she shall be entitled to receive a severance benefit. The
severance benefit shall be a salary continuation the amount of which shall be
the greater of (i) the amount payable to such individual under the salary
continuation provisions of the terminated ANB Corporation Severance Policy had
such policy not been terminated, or (ii) the amount payable to such individual
under the salary continuation provisions of the ONB Severance Policy, if any,
then applicable to such individual. An individual who is entitled to a benefit
under the ONB Severance Policy shall also be entitled to a continuation of
employee benefits as determined solely by the applicable provisions of the ONB
Severance Policy. The Board of Directors of each of ANB, American National Bank
and ANTIM, shall, prior to the execution of this Agreement, amend, or cause the
amendment of, the ANB Severance Policy to provide that the sole events for which
a severance benefit is payable thereunder shall be (i) the involuntary
termination of a covered
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individual's employment for reasons other than cause, (ii) a material reduction
in compensation or (iii) without the prior written consent of an employee, the
assignment to him or her of any duties materially inconsistent with his or her
duties and responsibilities prior to the date of this Agreement.
6.22. Disposition of Farmers State Bank Plans. ANB shall use its best
efforts to complete the merger of the Farmers State Bank of Union City, Ohio,
Employees' 401(k) Plan with and into the ANB 401(k) Plan, and shall complete the
merger of the Farmers State Bank of Union City, Ohio Employees' Pension Plan
with and into the ANB Pension Plan, no later than December 31, 1999 with respect
to each such plan merger.
6.23 Disposition of ANB Stock Option Plans. At or prior to the Effective
Time, ANB shall use its best efforts, including using its best efforts to obtain
any necessary consents from optionees, with respect to the Stock Option Plans to
permit the conversion of each outstanding option to acquire shares of common
stock of ANB Corporation which was properly granted pursuant to a stock option
agreement executed in accordance with the provisions of the Stock Option Plans
by ONB pursuant to Section 7.05 of this Agreement, and to permit ONB to assume
the sponsorship and administration of the Stock Option Plans. ANB shall also
take all action necessary to amend the Stock Option Plans to eliminate
additional automatic or discretionary grants or awards under such plans
subsequent to the Effective Time.
6.24. Year 2000. ANB shall:
(a) Additional Information. Furnish such additional information, statements
and other reports with respect to ANB's Year 2000 compliance (and its approach
to and progress towards achieving compliance) discussed in Section 4.24 hereof
as ONB may reasonably request from time to time.
(b) Notice of Changes. In the event of any change in circumstances that
causes or will likely cause any of ANB's representations and warranties set
forth in Section 4.24 hereof ("Year 2000 Compliance") to no longer be true and
would result in a Material Adverse Effect (hereinafter referred to as a "Change
in Circumstances"), then ANB shall promptly, and in any event within ten (10)
days of receipt of information regarding a Change in Circumstances, provide ONB
with written notice ("Notice") that describes in reasonable detail the Change in
Circumstances and how such Change in Circumstances caused or will likely cause
ANB's representations and warranties set forth in Section 4.24 hereof to no
longer be true. ANB shall, within ten (10) days of a request, also provide ONB
with any additional information ONB reasonably requests of ANB in connection
with the Notice and/or a Change in Circumstances.
(c) Audits. Give any representative of ONB reasonable access during all
business hours to, and permit such representative to examine, copy or make
excerpts from, any and all books, records and documents in the possession of ANB
and the Subsidiaries and relating to their affairs, and to inspect any of the
properties and Systems of ANB and the Subsidiaries, and to project test the
Systems to determine if they are Year 2000 Compliant in an integrated
environment, all at the sole cost and expense of ONB.
6.25. SEC and Other Reports. Promptly upon its becoming available, furnish
to ONB one (1) copy of each financial statement, report, notice, or proxy
statement sent by ANB to its shareholders generally and of each regular or
periodic report, registration statement or prospectus filed by ANB with Nasdaq
or the SEC or any successor agency, and of any order issued by any Governmental
Authority in any proceeding to which ANB is a party. For purposes of this
provision, "Governmental Authority" shall mean any government (or any political
subdivision or jurisdiction thereof), court, bureau, agency or other
governmental entity having or asserting jurisdiction over ANB or any of its
business, operations or properties.
6.26. Adverse Actions. ANB shall not (a) take any action while knowing
that such action would, or is reasonably likely to, prevent or impede the Merger
from qualifying (i) for "pooling of interests" accounting treatment or (ii) as a
reorganization within the meaning of Section 368 of the Code; or (b) knowingly
take any action that is intended or is reasonably likely to result in (i) any of
its representations and warranties set forth in this Agreement being or becoming
untrue, subject to the standard set out in the second paragraph to Section 4, in
any respect at any time at or prior to the
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Effective Time, (ii) any of the conditions to the Merger set forth in Section 8
not being satisfied, (iii) a material violation of any provision of this
Agreement or (iv) a delay in the consummation of the Merger except, in each
case, as may be required by applicable law or regulation.
SECTION 7
COVENANTS OF ONB
ONB covenants and agrees with ANB as follows:
7.01. Approvals. ONB shall have primary responsibility for the
preparation, filing and costs of all bank holding company and bank regulatory
applications required for consummation of the Merger. ONB shall file all bank
holding company and bank regulatory applications as soon as practicable after
the execution of this Agreement. ONB shall provide to ANB's legal counsel a
reasonable opportunity to review such applications prior to their filing and
shall provide to ANB's legal counsel copies of all applications filed and copies
of all material written communications with all state and federal bank
regulatory agencies relating to such applications. ONB shall proceed
expeditiously, cooperate fully and use its best efforts to procure, upon terms
and conditions reasonably acceptable to ONB, all consents, authorizations,
approvals, registrations and certificates, to complete all filings and
applications and to satisfy all other requirements prescribed by law which are
necessary for consummation of the Merger on the terms and conditions provided in
this Agreement at the earliest possible reasonable date.
7.02. SEC Registration. (a) ONB shall file with the SEC as soon as
practicable after the execution of this Agreement a Registration Statement on an
appropriate form under the 1933 Act covering the shares of ONB common stock to
be issued pursuant to this Agreement and shall use its best efforts to cause the
same to become effective and thereafter, until the Effective Time or termination
of this Agreement, to keep the same effective and, if necessary, amend and
supplement the same. Such Registration Statement and any amendments and
supplements thereto are referred to in this Agreement as the "Registration
Statement". The Registration Statement shall include a proxy
statement-prospectus reasonably acceptable to ONB and ANB, prepared for use in
connection with the meeting of shareholders of ANB referred to in Section 6.01
hereof, all in accordance with the rules and regulations of the SEC. ONB shall,
as soon as practicable after filing the Registration Statement, make all filings
required to obtain all Blue Sky exemptions, authorizations, consents or
approvals required for the issuance of ONB common stock. In advance of filing
the Registration Statement and all other filings described in Section 7.01
hereof, ONB shall provide ANB and its counsel with a copy of the Registration
Statement and each such other filing and provide an opportunity to comment
thereon.
(b) Any materials or information provided by ONB in any filing with any
state or federal regulatory agency or authority shall not contain any untrue or
misleading statement of material fact or shall omit to state a material fact
necessary to make the statements contained therein, in light of the
circumstances in which they are made, not false or misleading.
(c) All filings by ONB with the SEC and with all other federal and state
regulatory agencies shall be true, accurate and complete in all material
respects as of the dates of the filings, and no such filings shall contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements, at the time and in light of the circumstances
under which they were made, not false or misleading.
(d) ONB will use reasonable best efforts to list for trading on the Nasdaq
National Market System (subject to official notice of issuance) prior to the
Effective Time, the shares of ONB common stock to be issued in the Merger.
7.03. Employee Benefit Plans. (a) As of the Effective Time, ONB will make
available to the employees of ANB and the Subsidiaries who continue as employees
of ONB or any subsidiary of ONB after the Effective Time and, further, subject
to Section 7.03(b), (c) and (d) hereof, substantially the same employee benefits
on substantially the same terms and conditions as ONB offers to similarly
situated
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officers and employees. Until such time as the employees of ANB and the
Subsidiaries become covered by the ONB welfare benefit plans, the employees of
ANB and the Subsidiaries shall remain covered by the ANB Plans which cover such
employees, subject to the terms of such plans. Except as otherwise provided in
Sections 6.13, 6.18 and 6.21, ONB will honor in accordance with their terms (i)
all employee benefit obligations to current and former officers and employers
and employees of ANB and the Subsidiaries accrued as of the Effective Time and
(ii) to the extent set forth in the Disclosure Schedule, all employee severance
plans in existence on the date hereof and all employment or severance agreements
entered into prior to the date hereof to the extent set forth in the Disclosure
Schedule.
(b) Subject to the provisions of subsection (c) hereof, years of service
(as defined in the applicable ONB plan) of an officer or employee of ANB or any
Subsidiary prior to the Effective Time shall be credited, effective as of the
date on which such employees become covered by a particular ONB plan, to each
such officer or employee eligible for coverage under Section 7.03(a) hereof for
purposes of: (i) eligibility under ONB's employee welfare benefit plans; (ii)
eligibility and vesting, but not for purposes of benefit accrual or
contributions, under the ONB Employees' Retirement Plan ("ONB Pension Plan") or
under the ONB Employees' Savings and Profit Sharing Plan ("ONB Profit Sharing
Plan"); and (iii) eligibility and vesting, but not for purposes of benefit
accrual or contributions, under the ONB Employee Stock Ownership Plan ("ESOP").
Those officers and employees of ANB or any Subsidiary who otherwise meet the
eligibility requirements of the ONB Profit Sharing Plan and ESOP, based on their
age and years of service to ANB or any Subsidiary, shall become participants
thereunder on the first day of the calendar month which coincides with or next
follows the Effective Time. Those officers and employees of ANB or any
Subsidiary who otherwise meet the eligibility requirements of the ONB Pension
Plan, based upon their age and years of ANB or any Subsidiary service, shall
become participants thereunder no later than the January 1st which coincides
with or next follows the Effective Time. Those officers or employees who do not
meet the eligibility requirements of the ONB Pension Plan, ONB Profit Sharing
Plan or ESOP on such dates shall become participants thereunder on the first
plan entry date under the ONB Pension Plan, the ONB Profit Sharing Plan or ESOP,
as the case may be, which coincides with or next follows the date on which such
eligibility requirements are satisfied.
(c) No full-time officer or employee of ANB or any Subsidiary serving as of
the Effective Time shall be subject to any pre-existing condition exclusions
under any of ONB's welfare benefit plans if such officer, employee or individual
was covered by the corresponding ANB welfare benefit plan on the day immediately
preceding the Effective Time.
(d) Neither the terms of this Section 7.03 nor the provision of any
employee benefits by ONB or any of its subsidiaries to employees of ANB or any
Subsidiary shall: (i) create any employment contract, agreement or understanding
with or employment rights for, or constitute a commitment or obligation of
employment to, any of the officers or employees of ANB or any Subsidiary; or
(ii) prohibit or restrict ONB or its subsidiaries, whether before or after the
Effective Time, from changing, amending or terminating any employee benefits
provided to its employees from time to time.
(e) ONB shall take any and all actions reasonably necessary to effectuate
the disposition of the ANB Plans provided by Section 6.12 through 6.23.
7.04. Employment Agreements. Following the Effective Time, ONB agrees to
honor and abide by the terms of the written employment agreements set forth in
the Disclosure Schedule, except as may be otherwise required by any government
regulatory agency.
7.05. Stock Options. (a) At the Effective Time, the obligations of ANB with
respect to each outstanding option to purchase shares of ANB Common Stock
(pursuant to the Stock Options) which was properly granted pursuant to a stock
option agreement executed in accordance with a Stock Option Plan shall be
assumed by ONB as hereinafter provided. In connection therewith, each Stock
Option shall be deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such Stock Option at the Effective Time,
that number of shares of ONB common stock, rounded to the nearest whole share,
as the holder of such Stock Option would have been entitled to receive pursuant
to the Merger had such holder exercised such Option in full (after giving effect
to accelerated vesting)
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immediately prior to the Effective Time and, immediately thereafter, exchanged
such shares solely for ONB common stock based upon the Exchange Ratio at an
exercise price per share equal to (A) the aggregate exercise price for ANB
Common Stock otherwise purchasable pursuant to such Stock Option divided by (B)
the number of shares of ONB common stock, rounded to the nearest whole share,
deemed purchasable pursuant to such Stock Option; provided, however, that in the
case of any Stock Option to which Section 422 of the Code applies, the option
price, the number of shares purchasable pursuant to such option and the terms
and conditions of exercise of such option shall be determined in accordance with
the foregoing, subject to such adjustments as are necessary in order to satisfy
the requirements of Section 424(a) of the Code. By way of example and
illustration only, if any option holder has been granted and is vested in
options to acquire 1,000 shares of ANB Common Stock for $20.00 per share, then
after the Effective Time, such option holder's same option would be converted
into the option to acquire, 1250 shares of ONB common stock at $16.00 per share.
In no event shall ONB be required to issue fractional shares of ONB common stock
pursuant to the Stock Options.
(b) As soon as practicable after the Effective Time, ONB shall deliver to
each holder of a Stock Option an appropriate notice or agreement which sets
forth such holder's rights pursuant to the Stock Option, and the agreements
evidencing the grants of such Stock Options shall continue in effect on the same
terms and conditions (subject to the conversion required by this Section 7.05
after giving effect to the Merger and the assumption by ONB as set forth above);
provided, however, to the extent necessary to effectuate the provisions of this
Section 7.05, ONB may deliver new or amended Stock Option agreements which
reflect the terms of each Stock Option assumed by ONB. With respect to each
Stock Option, the optionee shall be solely responsible for any and all tax
liability (other than the employer's one-half share of any employment taxes)
which may be imposed upon the optionee as a result of the provisions of this
Section 7.05 and as a result of the grant and exercise of such Stock Options.
(c) As soon as practicable after the Effective Time, ONB shall file with
the SEC a registration statement on an appropriate form with respect to the
shares of ONB common stock 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.
7.06. Press Releases. Except as required by law, ONB shall not issue any
press releases or make any other public announcements or disclosures relating
primarily to ANB with respect to the Merger without the prior consent of ANB,
which consent shall not be unreasonably withheld.
7.07. Indemnification. (a) From and after the Effective Time, ONB shall
indemnify, defend and hold harmless to the fullest extent permitted by
applicable federal and state law each person who is on the date hereof, or has
been at any time prior to the date hereof or who becomes prior to the Effective
Time, a director or officer of ANB or was serving at the request of ANB as a
director or officer of any domestic or foreign corporation, joint venture,
trust, employee benefit plan or other enterprise (collectively, the
"Indemnitees") arising out of ANB's Articles of Incorporation or By-Laws in
effect at the Effective Time against any and all losses in connection with or
arising out of any claim which is based upon, arises out of or in any way
relates to any actual or alleged act or omission occurring at or prior to the
Effective Time in the Indemnitee's capacity as a director or officer (whether
elected or appointed), of ANB. Indemnification of officers and directors of the
Subsidiaries following the Effective Time will be provided to the same extent it
is provided from time to time to other persons working in similar capacities for
ONB or its subsidiaries following the Effective Time.
(b) In the event ONB or any of its successors or assigns (i) consolidates
with or merges into any other corporation or entity and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any person or entity, then, and in each case, to the extent necessary,
proper provision shall be made so that the successors and assigns of ONB assume
the obligations set forth in this Section 7.07.
(c) ONB shall maintain in effect for not less than two (2) years from the
Effective Time the policies of directors' and officers' liability insurance most
recently maintained by ANB; provided, however, that
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ONB may substitute therefor policies with reputable and financially sound
carriers for substantially similar coverage containing terms and conditions
which are no less advantageous for so long as such substitution does not result
in gaps or lapses in coverage with respect to claims arising from or relating to
matters occurring prior to the Effective Time. ONB shall pay all expenses,
including attorneys' fees, that may be incurred by any Indemnitee in enforcing
the indemnity and other obligations provided for in this Section 7.07. (d) The
provisions of this Section 7.07 are intended to be for the benefit of, and shall
be enforceable by, each Indemnitee and their respective heirs and
representatives.
7.08 Adverse Actions. ONB shall not (a) take any action while knowing that
such action would, or is reasonably likely to, prevent or impede the Merger from
qualifying (i) for "pooling of interests" accounting treatment or (ii) as a
reorganization within the meaning of Section 368 of the Code; or (b) knowingly
take any action that is intended or is reasonably likely to result in (i) any of
its representations and warranties set forth in this Agreement being or becoming
untrue, subject to the standard set out in the second paragraph to Section 5, in
any respect at any time at or prior to the Effective Time, (ii) any of the
conditions to the Merger set forth in Section 8 not being satisfied, (iii) a
material violation of any provision of this Agreement or (iv) a delay in the
consummation of the Merger except, in each case, as may be required by
applicable low or regulation.
SECTION 8
CONDITIONS PRECEDENT TO THE MERGER
8.01. ONB. The obligation of ONB to consummate the Merger is subject to the
satisfaction and fulfillment of each of the following conditions on or prior to
the Effective Time, unless waived in writing by ONB:
(a) Representations and Warranties at Effective Time. Each of the
representations and warranties of ANB with respect to itself and the
Subsidiaries contained in this Agreement shall, subject to the standard set out
in the second paragraph to Section 4, be true, and correct at and as of the
Effective Time as though such representations and warranties had been made or
given on and as of the Effective Time.
(b) Covenants. Each of the covenants and agreements of ANB shall have been
fulfilled or complied with from the date of this Agreement through and as of the
Effective Time.
(c) Deliveries at Closing. ONB shall have received from ANB at the Closing
(as hereinafter defined) the items and documents, in form and content reasonably
satisfactory to ONB, set forth in Section 11.02(b) hereof.
(d) Registration Statement Effective. ONB shall have registered its shares
of common stock to be issued to shareholders of ANB in accordance with this
Agreement with the SEC pursuant to the 1933 Act, and all state securities and
Blue Sky approvals, authorizations and exemptions required to offer and sell
such shares shall have been received by ONB. The Registration Statement with
respect thereto shall have been declared effective by the SEC and no stop order
shall have been issued or threatened.
(e) Regulatory Approvals. All regulatory approvals required to consummate
the transactions contemplated hereby, shall have been obtained and shall remain
in full force and effect and all statutory waiting periods in respect thereof
shall have expired and no such approvals shall contain any conditions,
restrictions or requirements which the board of directors of ONB reasonably
determines in good faith would (i) following the Effective Time, have a Material
Adverse Effect on ONB and its subsidiaries taken as a whole or (ii) reduce the
benefits of the transactions contemplated hereby to such a degree that ONB would
not have entered into this Agreement had such conditions, restrictions or
requirements been known at the date hereof.
(f) Shareholder Approval. The shareholders of ANB shall have approved and
adopted this Agreement as required by applicable law and its Articles of
Incorporation.
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(g) Officers' Certificate. ANB shall have delivered to ONB a certificate
signed by its Chairman or President and its Secretary, dated as of the Effective
Time, certifying: (i) to the effect set out in Section 8.01(a); (ii) that all
the covenants of ANB have been complied with from the date of this Agreement
through and as of the Effective Time; and (iii) that ANB has satisfied and fully
complied with all conditions necessary to make this Agreement effective as to
ANB.
(h) Tax Opinion. The Board of Directors of ONB shall have received a
written opinion of the law firm of Krieg DeVault Alexander & Capehart, LLP,
dated as of the Effective Time, in form and content satisfactory to ONB, to the
effect that the Merger to be effected pursuant to this Agreement will constitute
a tax-free reorganization under the Code (as described in Section 1.06 hereof)
to each party hereto and to the shareholders of ANB, except with respect to cash
received by ANB's shareholders for fractional shares resulting from application
of the Exchange Ratio. In rendering such opinion, counsel may require and rely
upon customary representation letters of ONB and ANB and rely upon customary
assumptions.
(i) Pooling of Interests Opinion. The Board of Directors of ONB shall have
received a written opinion from its independent auditors, dated as of the
Effective Time, in form and content satisfactory to ONB, to the effect that the
Merger to be effected pursuant to this Agreement will qualify for pooling of
interests accounting treatment for ONB.
8.02. ANB. The obligation of ANB to consummate the Merger is subject to the
satisfaction and fulfillment of each of the following conditions on or prior to
the Effective Time, unless waived in writing by ANB:
(a) Representations and Warranties at Effective Time. Each of the
representations and warranties of ONB contained in this Agreement shall, subject
to the standards set out in the second paragraph of Section 5, be true and
correct on and as of the Effective Time as though the representations and
warranties had been made or given at and as of the Effective Time.
(b) Covenants. Each of the covenants and agreements of ONB shall have been
fulfilled or complied with from the date of this Agreement through and as of the
Effective Time.
(c) Deliveries at Closing. ANB shall have received from ONB at the Closing
the items and documents, in form and content reasonably satisfactory to ANB,
listed in Section 11.02(a) hereof.
(d) Registration Statement Effective. ONB shall have registered its shares
of common stock to be issued to shareholders of ANB in accordance with this
Agreement with the SEC pursuant to the 1933 Act, and all state securities and
Blue Sky approvals, authorizations and exemptions required to offer and sell
such shares shall have been received by ONB. The Registration Statement with
respect thereto shall have been declared effective by the SEC and no stop order
shall have been issued or threatened. In addition, such shares of ONB common
stock shall be listed on the Nasdaq National Market System.
(e) Regulatory Approvals. All regulatory approvals required to consummate
the transactions contemplated hereby, shall have been obtained and shall remain
in full force and effect and all statutory waiting periods in respect thereof
shall have expired and no such approvals shall contain any conditions,
restrictions or requirements which the board of directors of ANB reasonably
determines in good faith would (i) following the Effective Time, have a Material
Adverse Effect on ANB and its subsidiaries taken as a whole or (ii) reduce the
benefits of the transactions contemplated hereby to such a degree that ANB would
not have entered into this Agreement had such conditions, restrictions or
requirements been known at the date hereof.
(f) Shareholder Approval. The shareholders of ANB shall have approved and
adopted this Agreement as required by applicable law and its Articles of
Incorporation.
(g) Officers' Certificate. ONB shall have delivered to ANB a certificate
signed by its Chairman or President and its Secretary, dated as of the Effective
Time, certifying that: (i) to the effect set out in Section 8.02(a); (ii) that
all the covenants of ONB have been complied with from the date of this
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Agreement through and as of the Effective Time; and (iii) ONB has satisfied and
fully complied with all conditions necessary to make this Agreement effective as
to it.
(h) Tax Opinion. The Board of Directors of ANB shall have received a
written opinion of the law firm of Sullivan & Cromwell, dated as of the
Effective Time, in form and content satisfactory to ANB, to the effect that the
Merger to be effected pursuant to this Agreement will constitute a tax-free
reorganization under the Code (as described in Section 1.06 hereof) to each
party hereto and to the shareholders of ANB, except with respect to cash
received by ANB's shareholders for fractional shares resulting from application
of the Exchange Ratio. In rendering such opinion, counsel may require and rely
upon customary representation letters of ONB and ANB and rely upon customary
assumptions.
(i) Fairness Opinion. ANB's investment bank shall have issued its written
fairness opinion stating that the Exchange Ratio relating to the Merger is fair
to the shareholders of ANB from a financial point of view. Such written fairness
opinion shall be (i) in form and substance reasonably satisfactory to ANB and
(ii) dated as of a date not later than the mailing date of the proxy
statement-prospectus relating to the Merger to be mailed to shareholders of ANB.
SECTION 9
TERMINATION OF MERGER
9.01. Manner of Termination. This Agreement and the Merger may be
terminated at any time prior to the Effective Time by written notice delivered
by ONB to ANB, or by ANB to ONB as follows:
(a) By ONB or ANB, if:
(i) the Merger contemplated by this Agreement has not been consummated
by March 31, 2000; or
(ii) the respective Boards of Directors of ONB and ANB mutually agree
to terminate this Agreement.
(b) By ONB, if:
(i) the Merger will not qualify for pooling of interests accounting
treatment for ONB; or
(ii) at any time prior to the Effective Time, ONB's Board of Directors
so determines, in the event of either
(A) a breach by ANB of any representation or warranty contained
herein, which breach cannot be or has not been cured within
thirty (30) days after the giving of written notice to ANB of
such breach; or
(B) a breach by ANB of any of the covenants or agreements contained
herein, which breach cannot be or has not been cured within
thirty (30) days after the giving of written notice to ANB of
such breach; provided that a breach under this clause (B) would
be reasonably likely, individually or in the aggregate with other
breaches, to result in a Material Adverse Effect; or
(iii) it shall reasonably determine that the Merger contemplated by
this Agreement has become impracticable by reason of commencement or threat
of any claim, litigation or proceeding against ONB, ANB, any Subsidiary or
any subsidiary of ONB, or any director or officer of any of such entities
relating to this Agreement or the Merger; or
(iv) there has been a material adverse change in the business, assets,
capitalization, financial condition or results of operations of ANB and its
Subsidiaries taken as a whole subsidiary as of the Effective Time as
compared to that in existence as of the date of this Agreement other than
any change resulting primarily by reason of changes in banking and similar
laws of general applicability or interpretations thereof by courts or
governmental authorities, changes in generally accepted accounting
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principles or regulatory accounting requirements applicable to banks and
their holding companies generally, any modifications or changes to
valuation policies and practices in connection with the Merger or
restructuring charges taken in connection with the Merger, in each case in
accordance with generally accepted accounting principles, effects of any
action taken with the prior written consent of ONB and changes in the
general level of interest rate or conditions or circumstances that affect
the banking industry generally; or
(v) ANB fulfills the requirements of Section 6.01 hereof but the
shareholders of ANB do not approve and adopt the Merger and this Agreement.
(c) By ANB, if:
(i) at any time prior to the Effective Time, ANB's Board of Directors
so determines, in the event of either
(A) a breach by ONB of any representation or warranty contained
herein, which breach cannot be or has not been cured within
thirty (30) days after the giving of written notice to ONB of
such breach; or
(B) a breach by ONB of any of the covenants or agreements contained
herein, which breach cannot be or has not been cured within
thirty (30) days after the giving of written notice to ONB of
such breach; provided that a breach under this clause (B) would
be reasonably likely, individually or in the aggregate with other
breaches, to result in a Material Adverse Effect; or
(ii) there has been a material adverse change in the financial
condition, results of operations, business, assets or capitalization of ANB
on a consolidated basis as of the Effective Time as compared to that in
existence on March 31, 1999, other than any change resulting primarily by
reason of changes in banking laws or regulations (or interpretations
thereof), changes in banking and similar laws of general applicability or
interpretations thereof by courts or governmental authorities, changes in
generally accepted accounting principles or regulatory accounting
requirements applicable to banks and their holding companies generally, any
modifications or changes to valuation policies and practices in connection
with the Merger or restructuring charges taken in connection with the
Merger, in each case in accordance with generally accepted accounting
principles, effects of any action taken with the prior written consent of
ANB and changes in the general level of interest rate or conditions or
circumstances that affect the banking industry generally; or
(iii) it shall reasonably determine that the Merger contemplated by
this Agreement has become impracticable by reason of commencement or threat
of any material claim, litigation or proceeding against ONB (A) relating to
this Agreement or the Merger or (B) which is likely to have a Material
Adverse Effect on ONB; or
(iv) ANB fulfills the requirements of Section 6.01 hereof but the
shareholders of ANB do not approve and adopt the Merger and this Agreement;
or
(v) prior to the approval by the shareholders of ANB of the Merger
contemplated in this Agreement, if, without breaching Section 6.06, ANB
shall contemporaneously enter into a definitive agreement with a third
party providing for an Acquisition Transaction on terms determined in good
faith by the board of directors of ANB, after consulting with and
considering the advice of ANB's independent counsel and financial advisors,
to be more favorable to the shareholders of ANB than the Merger and with
respect to which the board of directors has determined after such
consultation and consideration that to proceed with the Merger would
violate the fiduciary duties of the board of directors to the ANB's
shareholders; or
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(vi) at any time during the five-day period commencing with the
Determination Date if both of the following conditions are satisfied:
(A) the number obtained by dividing the Average Closing Price by
the Starting Price (the "ONB Ratio") shall be less than 0.80; and
(B) the ONB Ratio shall be less than the number obtained by
dividing the Final Index Value by the Index Value on the Starting Date
and subtracting 0.15 from the quotient in this clause (B) (such number
being referred to herein as the "Index Ratio");
subject, however, to the following three sentences. If ANB elects to exercise
its termination right pursuant to this Section 9.01(c)(vi), it shall give
written notice to ONB (provided that such notice of election to terminate may be
withdrawn at any time within the aforementioned five-day period). During the
five-day period commencing with its receipt of such notice, ONB shall have the
option to increase the consideration to be received by the holders of ANB Common
Stock hereunder, by adjusting the Exchange Ratio (calculated to the nearest one
one-thousandth) to equal the lesser of (x) a number (rounded to the nearest
thousandth) obtained by dividing (A) the product of the Starting Price, 0.80 and
the Exchange Ratio (as then in effect) by (B) the Average Closing Price and (y)
a number (rounded to the nearest one one-thousandth) obtained by dividing (A)
the product of the Index Ratio and the Exchange Ratio (as then in effect) by (B)
the ONB Ratio. If ONB so elects within such five-day period, it shall give
prompt written notice to ANB of such election and the revised Exchange Ratio.
Whereupon no termination shall have occurred pursuant to this Section
9.01(c)(vi) and this Agreement shall remain in effect in accordance with its
terms (except as the Exchange Ratio shall have been so modified).
For purposes of Section 9.01(c)(vi), the following terms shall have the
meanings indicated:
"Average Closing Price" shall mean the average of the closing price of
a share of ONB Common Stock on the Nasdaq National Market System (as
reported in The Wall Street Journal, or if not reported therein, in another
authoritative source) during the period of 20 consecutive trading days
ending on the trading day prior to the Determination Date, rounded to the
nearest whole cent.
"Determination Date" shall mean the date on which the last required
approval required under Section 8.01(e) and 8.02(e) hereof is obtained,
without regard to any requisite waiting period in respect thereof.
"Final Index Value" shall mean the average of the Index Value for the
20 consecutive trading days ending on the trading day prior to the
Determination Date.
"Index Value," on a given date, shall mean the index value on such
date of the Nasdaq Bank Index, as such index value is reported by Bloomberg
News Service on such date.
"Starting Date" shall mean the last trading day immediately preceding
the date of the first public announcement of entry to this Agreement.
"Starting Price" shall mean the closing price of a share of ONB common
stock on the Nasdaq National Market System (as reported in The Wall Street
Journal, or if not reported therein, in another authoritative source) on
the Starting Date.
9.02. Effect of Termination. Upon termination by written notice, this
Agreement shall be of no further force or effect, and there shall be no further
obligations or restrictions on future activities on the part of ONB or ANB and
their respective directors, officers, employees, agents and shareholders, except
as provided in compliance with the confidentiality provisions of this Agreement
set forth in Section 6.09 hereof and the payment of expenses set forth in
Section 12.09 hereof; provided, however, that termination will not in any way
release a breaching party from liability for any willful breach of this
Agreement giving rise to such termination.
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SECTION 10
EFFECTIVE TIME OF THE MERGER
Upon the terms and subject to the conditions specified in this Agreement,
the Merger shall become effective at the close of business on the day and at the
time specified in the Articles of Merger of ANB with and into ONB as filed with
the Indiana Secretary of State ("Effective Time"). Unless otherwise mutually
agreed to by the parties hereto, the Effective Time shall occur on the later of
(i) January 31, 2000 or (ii) the last business day of the month following (a)
the fulfillment of all conditions precedent to the Merger set forth in Section 8
of this Agreement and (b) the expiration of all waiting periods in connection
with the bank regulatory applications filed for the approval of the Merger.
SECTION 11
CLOSING
11.01. Closing Date and Place. So long as all conditions precedent set
forth in Section 8 hereof have been satisfied and fulfilled, the closing of the
Merger ("Closing") shall take place on the Effective Time at the law offices of
Krieg DeVault Alexander & Capehart, LLP, One Indiana Square, Suite 2800,
Indianapolis, Indiana 46204.
11.02. Deliveries. (a) At the Closing, ONB shall deliver to ANB the
following:
(i) the officers' certificate contemplated by Section 8.02(g) hereof;
(ii) copies of all approvals by government regulatory agencies
necessary to consummate the Merger;
(iii) copies of the resolutions of the Board of Directors of ONB
certified by the Secretary of ONB, relative to the approval of this
Agreement and the Merger; and
(iv) such other documents as ANB or its legal counsel may reasonably
request.
(b) At the Closing, ANB shall deliver to ONB the following:
(i) the officers' certificate contemplated by Section 8.01(g) hereof;
(ii) a list of ANB's shareholders as of the Effective Time certified
by the President and Secretary of ANB;
(iii) copies of the resolutions adopted by the Board of Directors of
ANB certified by the Secretary of ANB, relative to the approval of this
Agreement and the Merger; and
(iv) such other documents as ONB or its legal counsel may reasonably
request.
SECTION 12
MISCELLANEOUS
12.01. Effective Agreement. This Agreement shall be binding upon and inure
to the benefit of the respective parties hereto and their respective successors
and assigns; provided, however, that this Agreement may not be assigned by any
party hereto without the prior written consent of the other parties hereto;
provided, further, that no such extension, waiver or amendment agreed to after
authorization of this Agreement by the shareholders of ANB shall affect the
rights of such shareholders in any manner which is materially adverse to such
shareholders. The representations, warranties, covenants and agreements
contained in this Agreement are for the sole benefit of the parties hereto and
their successors and assigns, and they shall not be construed as conferring any
rights on any other persons except as specifically set forth in Sections 7.03,
7.04, 7.05 and 7.07 hereof.
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12.02. Waiver; Amendment. (a) The parties hereto may by an instrument in
writing: (i) extend the time for the performance of or otherwise amend any of
the covenants, conditions or agreements of the other parties under this
Agreement, except that the consideration to be received by the ANB shareholders
shall not be decreased by such an amendment following the adoption and approval
of the Merger and this Agreement by the ANB shareholders; (ii) waive any
inaccuracies in the representations or warranties of the other party contained
in this Agreement or in any document delivered pursuant hereto or thereto; (iii)
waive the performance by the other party of any of the covenants or agreements
to be performed by it or them under this Agreement; or (iv) waive the
satisfaction or fulfillment of any condition, the nonsatisfaction or
nonfulfillment of which is a condition to the right of the party so waiving to
consummate the Merger. The waiver by any party hereto of a breach of or
noncompliance with any provision of this Agreement shall not operate or be
construed as a continuing waiver or a waiver of any other or subsequent breach
or noncompliance hereunder.
(b) This Agreement may be amended, modified or supplemented only by a
written agreement executed by the parties hereto.
12.03. Notices. All notices, requests and other communications hereunder
shall be in writing (which shall include telecopier communication) and shall be
deemed to have been duly given if delivered by hand and receipted for, sent by
certified United States Mail, return receipt requested, first class postage pre-
paid, delivered by overnight express receipted delivery service or telecopied if
confirmed immediately thereafter by also mailing a copy of such notice, request
or other communication by certified United States Mail, return receipt
requested, with first class postage pre-paid as follows:
<TABLE>
<S> <C>
If to ONB: with a copy to (which shall not
constitute notice):
Old National Bancorp Krieg DeVault Alexander &
420 Main Street Capehart, LLP
P.O. Box 718 One Indiana Square, Suite 2800
Evansville, Indiana 47705 Indianapolis, Indiana 46204-2017
ATTN: Jeffrey L. Knight, ATTN: Karol K. Sparks, Esq.
Secretary Telephone: (716) 264-0118
and General Counsel Telecopier: (317) 636-1507
Telephone: (812) 464-1363
Telecopier: (812) 464-1567
If to ANB: with a copy to (which shall not
constitute notice):
ANB Corporation Sullivan & Cromwell
ATTN: James R. Schrecongost, 125 Broad Street
President New York, New York 10004
120 W. Charles Street ATTN: David M. Huggin, Esq.
Muncie, Indiana 47305 Telephone: (212) 558-3526
Telephone: (765) 747-7600 Telecopier: (212) 558-3588
Telecopier: (765) 741-0290
</TABLE>
or such substituted address or person as any of them have given to the other in
writing. All such notices, requests or other communications shall be effective:
(a) if delivered by hand, when delivered; (b) if mailed in the manner provided
herein, five (5) business days after deposit with the United States Postal
Service; (c) if delivered by overnight express delivery service, on the next
business day after deposit with such service; and (d) if by telecopier, on the
next business day if also confirmed by mail in the manner provided herein.
12.04. Headings. The headings in this Agreement have been inserted solely
for ease of reference and should not be considered in the interpretation or
construction of this Agreement.
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<PAGE> 102
12.05. Severability. In case any one or more of the provisions contained
herein shall, for any reason, be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement, but this Agreement shall be construed as
if such invalid, illegal or unenforceable provision or provisions had never been
contained herein.
12.06. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall
together constitute one and the same instrument.
12.07. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Indiana and applicable federal laws,
without regard to principles of conflicts of law.
12.08. Entire Agreement. This Agreement supersedes all other prior or
contemporaneous understandings, commitments, representations, negotiations or
agreements, whether oral or written, among the parties hereto relating to the
Merger or matters contemplated herein and constitutes the entire agreement
between the parties hereto. Upon the execution of this Agreement by all the
parties hereto, the preliminary non-binding Indication of Interest letter, dated
July 14, 1999, from ONB and any and all other prior writings of either party
relating to the Merger, except for the Confidentiality Agreement dated July 28,
1999 by and between ONB and ANB, shall terminate and shall be rendered of no
further force or effect. The parties hereto agree that each party and its
counsel reviewed and revised this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any amendments or exhibits hereto.
12.09. Expenses. ONB shall pay its expenses incidental to the Merger
contemplated hereby. ANB shall pay its expenses incidental to the Merger
contemplated hereby.
12.10 Certain References. Whenever in this Agreement a singular word is
used, it also shall include the plural wherever required by the context and
vice-versa. Except expressly stated otherwise, all references in this Agreement
to periods of days shall be construed to refer to calendar, not business, days.
The term "business day" shall mean any day except Saturday and Sunday when Old
National Bank in Evansville, the lead bank of ONB, is open for the transaction
of business.
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<PAGE> 103
IN WITNESS WHEREOF, ONB and ANB have made and entered into this Agreement
as of the day and year first above written and have caused this Agreement to be
executed, attested in counterparts and delivered by their duly authorized
officers.
OLD NATIONAL BANCORP
By: /s/ RONALD B. LANKFORD
----------------------------------
Ronald B. Lankford, President
and
Chief Operating Officer
ATTEST:
By: /s/ JEFFREY L. KNIGHT
--------------------------------
Jeffrey L. Knight, Corporate
Secretary
ANB CORPORATION
By: /s/ JAMES R. SCHRECONGOST
----------------------------------
James R. Schrecongost, President
ATTEST:
By: /s/ JAMES W. CONVY
--------------------------------
James W. Convy, Secretary
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<PAGE> 104
APPENDIX B
STOCK OPTION AGREEMENT
THIS OPTION HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
THIS STOCK OPTION AGREEMENT ("Agreement"), is made and entered into as of
the 29th day of July, 1999, by and between OLD NATIONAL BANCORP ("ONB"), an
Indiana corporation, and ANB CORPORATION ("ANB"), an Indiana corporation,
W I T N E S S E T H:
WHEREAS, ONB and ANB have entered into an Agreement of Affiliation and
Merger ("Merger Agreement") dated of even date herewith contemporaneously with
the execution of this Agreement. The Merger Agreement provides for, among other
items, the conversion of each issued and outstanding share of common stock of
ANB at the Effective Time (as defined in the Merger Agreement) into the right to
receive one and twenty-five one-hundredths (1.25) shares of common stock of ONB,
as may be adjusted under the Agreement, from ONB; and
WHEREAS, ONB has paid to ANB the sum of One Thousand Dollars ($1,000) in
consideration for the grant of the Option (as hereinafter defined) by ANB to
ONB, which has been granted to further induce ONB to enter into the Merger
Agreement; and
WHEREAS, ONB has advised ANB that the grant by ANB of the Option pursuant
to this Agreement is a condition to ONB agreeing to the terms of the Merger
Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the cash
payment referenced therein, the receipt of which is hereby acknowledged, the
mutual covenants and obligations set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. Grant of Option.
ANB hereby grants to ONB an irrevocable option (the "Option") to purchase
up to 1,083,753 shares ("Option Shares") of common stock of ANB (the "Common
Stock") at a price per Option Share of $27.70 (the "Purchase Price"); provided,
however, that this Agreement and the Option shall automatically expire and be of
no further force or effect (i) at the Effective Time (as defined in the Merger
Agreement); (ii) 12 months after the first occurrence of an event set forth in
Section 3 hereof (an "Exercise Event"); and (iii) at the termination of the
Merger Agreement in accordance with the terms thereof prior to the occurrence of
an Exercise Event (provided that if the Merger Agreement is terminated by ONB
pursuant to Section 9.01 of the Merger Agreement, then the Option shall expire
12 months from the date of termination of the Merger Agreement and provided
further that if ONB is in willful and material breach of any representation,
warranty or covenant in the Merger Agreement then the Option shall expire
immediately).
SECTION 2. Exercise of Option. Subject to Sections 1 and 3 hereof, the
Option may be exercised by ONB, in whole or in part, at any time, and from time
to time, prior to its expiration pursuant to Section 1 hereof. In the event ONB
wishes to exercise the Option, ONB shall deliver a written notice(s) to ANB
specifying the total number of Option Shares that it will purchase and a place
and date not earlier than ten (10) days and not later than sixty (60) days from
the date of delivery of such notice for the closing ("Closing") of such
purchase; provided, however, that if the approval of any governmental authority
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<PAGE> 105
required for purchasing the Option Shares shall not have been obtained prior to
the Closing, the date of the Closing shall be postponed to a date five (5)
business days following receipt of all such required governmental approvals;
provided, further, that ONB, at any time prior to the Closing, may rescind such
notice of intent to purchase the Option Shares and shall not thereafter be
obligated to purchase any or all of the Option Shares.
SECTION 3. Conditions to Exercise of Option. ONB may exercise the Option
only if any of the following events occurs or has occurred without the prior
written consent of ONB:
(a) The acquisition, following the date of this Agreement, by any entity,
person or group, other than ONB, of beneficial ownership of fifteen percent
(15%) or more (in the aggregate) of the shares of ANB Common Stock or the
capital stock of any Subsidiary (as defined in the Merger Agreement) (for
purposes of this Section 3, the terms "group" and "beneficial ownership" shall
have the same meanings ascribed to them in Section 13(d) of the Securities
Exchange Act of 1934, as amended, and the regulations promulgated thereunder),
but only if (i) such entity, person or group has publicly announced its
opposition to the Merger Agreement or the Merger (as defined in the Merger
Agreement) or its intention not to vote the common stock beneficially owned by
the entity, person or group in favor of the Merger Agreement or the Merger and
has solicited or indicated its intention to solicit proxies or votes against the
Merger Agreement or the Merger; or (ii) such entity, person or group has
proposed, indicated an intention to propose, or entered into an agreement to
effect a merger, consolidation, share exchange or other combination with ANB or
any Subsidiary.
(b) The acceptance by ANB or any Subsidiary of any proposal (however
conditional or future) of, or the execution by ANB or any Subsidiary of any
letter of intent, agreement in principle or other agreement (whether binding or
non-binding) with, any entity, person or group, other than ONB, to (i) acquire
ANB by merger, consolidation, share exchange, combination, purchase of all or
substantially all of ANB's or any of the Subsidiaries' assets or capital stock
or any other similar transaction, or (ii) make a tender or exchange offer for
any shares of ANB Common Stock or the capital stock of any Subsidiary.
SECTION 4. Payment and Delivery of Certificate(s). At any Closing hereunder
(a) ONB shall pay to ANB the aggregate purchase price for the Option Shares so
purchased by delivery of a cashier's or certified check or other immediately
available funds payable to the order of ANB, and (b) ANB shall promptly
thereafter issue the Option Shares in compliance with all applicable laws and
regulations and deliver to ONB a certificate or certificates representing Option
Shares as purchased, free and clear of all liens, claims, pledges, security
interests, charges and rights of any third parties.
SECTION 5. Representations, Warranties and Covenants of ANB. ANB hereby
represents, warrants and covenants to ONB as follows:
(a) This Agreement and the consummation by ANB of the transactions
contemplated hereby have been duly authorized and approved by all necessary
corporate action on the part of ANB, have been duly executed and delivered by an
authorized officer of ANB and constitute a valid and binding obligation of ANB.
ANB is an Indiana corporation duly organized and validly existing under the laws
of the State of Indiana and has all requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby.
(b) ANB has taken all necessary corporate and other action to authorize and
reserve and to permit it to issue the Option Shares pursuant hereto. At all
times from the date hereof until such time as the obligation to deliver the
Option Shares hereunder terminates, ANB will have reserved for issuance upon
exercise of the Option by ONB sufficient shares of common stock of ANB, all of
which, upon issuance pursuant hereto, shall be duly authorized, validly issued,
fully paid and nonassessable, shall be free and clear of all liens, claims,
pledges, security interests, charges and rights of any third parties.
(c) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will violate or result in
any violation of or be in conflict with, result in acceleration or termination
of or constitute a default under any term or provision of the Articles of
Incorporation or By-
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<PAGE> 106
Laws of ANB or of any agreement, note, bond, indenture, instrument, obligation,
judgment, decree, order, binding upon or applicable to ANB or any Subsidiary or
any of their respective properties or assets.
(d) Upon any exercise of the Option, whether in whole or in part, the
Option Shares (i) shall be entitled to vote on all matters to come before the
shareholders of ANB at any meeting thereof, (ii) shall be entitled to the same
preferences, limitations and relative voting and other rights (including
dividend and distribution rights) as possessed by all other holders of ANB
Common Stock.
(e) The representations and warranties of ANB contained herein are true,
accurate and complete on and as of the date hereof in all material respects,
shall survive the execution of this Agreement and shall continue to be true,
accurate and complete during the period that the Option may be exercised by ONB.
ANB shall comply with the covenants applicable to it contained herein from the
date of this Agreement through and until such time as the Option terminates.
SECTION 6. Representations and Warranties of ONB. ONB hereby represents and
warrants to ANB as follows:
(a) This Agreement and the consummation by ONB of the transactions
contemplated hereby have been duly authorized and approved by all necessary
corporate action on the part of ONB, have been duly executed and delivered by an
authorized officer of ONB and constitute a valid and binding obligation of ONB.
ONB is a corporation duly organized and validly existing under the laws of the
State of Indiana and has all requisite corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby.
(b) ONB is purchasing the Option, and any shares of common stock of ANB
issued upon exercise of the Option, for its own account and not with a view to
the public distribution thereof and will not sell, assign or transfer the Option
or any such shares of common stock issued to ONB upon exercise of the Option
except in compliance with all applicable laws and regulations and a legend to
such effect shall be noted on the certificate or certificates representing the
Option Shares issued upon exercise of the Option and stock transfer restrictions
may be given will respond thereto any transfer agent.
(c) The representations and warranties of ONB contained herein are true,
accurate and complete on and as of the date hereof, shall survive the execution
of this Agreement and shall continue to be true, accurate and complete during
the period that the Option may be exercised by ONB.
SECTION 7. Certain Rights.
(a) In the event that ONB exercises the Option and desires to sell any of
the Option Shares, and so requests in writing, ANB agrees to use its reasonable
best efforts to assist ONB (at ONB's expense) in complying with all applicable
federal laws relating to such sale and any applicable state laws (including,
without limitation, providing ONB with appropriate information relating to ANB
to be included in no more than one registration statement filed by ONB), not
later than thirty (30) days after ONB requests such assistance, with respect to
that number of the Option Shares beneficially owned by ONB for which ONB
requests such assistance, unless, in the opinion of counsel to ANB addressed to
ONB, which opinion shall be in form and substance reasonably satisfactory to ONB
and its counsel, a registration statement is not required for the proposed sale
or distribution of such Option Shares. All registration statements and all
actions relating to compliance with federal and state law pursuant to this
Section 7(a) shall be completed at ONB's expense except for any fees and
disbursements of counsel for ANB, which shall be paid by ANB.
(b) In addition to the foregoing rights, if at any time after exercise by
ONB of the Option for all of the Option Shares, ANB proposes to offer for sale
for cash in an offering to the general public any of its equity securities, ANB
at such time will provide written notice to ONB of its intention to do so. Upon
written request of ONB, given within fifteen (15) days after the providing of
any such notice to ONB by ANB (which request shall state the intended method of
disposition of such shares), ANB shall cause that number of the Option Shares as
to which ONB identifies in such request to be included in ANB's registration
statement in compliance with all applicable federal and state securities laws.
Such Option
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Shares so identified by ONB shall be included in ANB's registration statement
proposed to be filed by ANB, unless, in the opinion of counsel to ANB addressed
to ONB, which opinion shall be in form and substance reasonably satisfactory to
ONB and its counsel, inclusion of such shares in such registration statement is
not required for any proposed sale or distribution of such Option Shares by ONB.
All registration statements and all actions relating to compliance with federal
and state law pursuant to this Section 7(b) shall be completed at ANB's expense
except for any fees and disbursements of counsel for ONB, which shall be paid by
ONB. ANB would have the right not to include such shares if in the reasonable
opinion of the underwriters to do so would adversely affect the proposed
offering by ANB.
SECTION 8. Adjustment Upon Changes in Capitalization. (a) In the event of
any change in, or distributions in respect of, the Common Stock by reason of
stock dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares, issuance of additional shares or
the like (including any stock dividend split-up or subdivision announced prior
to the date hereof but not yet effective), 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 become outstanding as a
result of any such change (other than pursuant to an exercise of the Option),
the number of Option Shares that remain subject to the Option shall be increased
so that, after such issuance and together with Option Shares previously issued
pursuant to the exercise of the Option (as adjusted on account of any of the
foregoing changes in the Common Stock), it equals 19.9% of the number of shares
of Common Stock then issued and outstanding. Nothing contained in this Section
8(b) or elsewhere in this Agreement shall be deemed to authorize ANB to breach
any provision of the Merger Agreement.
(b) Whenever the number of Option Shares purchasable upon exercise hereof
is adjusted as provided in this Section 8, the Purchase Price shall be adjusted
by multiplying the Purchase Price by a fraction, the numerator of which shall be
equal to the number of Option Shares purchasable prior to the adjustment and the
denominator of which shall be equal to the number of shares purchasable after
the adjustment.
SECTION 9. Right of Repurchase.
(a) In the event that ONB has purchased any of the Option Shares pursuant
to this Agreement, and ONB so requests in writing, ANB shall repurchase all the
Option Shares held by ONB at a price equal to the highest price paid or to be
paid by any entity, person or group referenced in Section 3 hereof for any share
of ANB Common Stock (or the aggregate consideration paid for the assets of ANB
divided by the number of shares of ANB Common Stock then outstanding), as the
case may be, multiplied by the total number of Option Shares to be redeemed
under this Section 9(a), plus interest at the rate of 8% per annum from the date
of the purchase of the Option Shares through the repurchase contemplated hereby
(the value of any such price or consideration other than cash to be determined,
in the case of consideration with a readily-ascertainable market value, on the
basis of such market value and, in the case of any other consideration, by
mutual agreement of ONB and ANB in good faith less the amount of any dividends
received or to be received on the Option Shares).
(b) In the event that (i) ONB has purchased any of the Option Shares
pursuant to this Agreement and (ii) the Merger Agreement has been duly executed
and delivered but subsequently has been terminated in accordance with the terms
thereof, then ANB shall have the right to purchase, and ONB shall be obligated
to sell to ANB, for cash, all, but not less than all, of the Option Shares
theretofore purchased by ONB pursuant to this Agreement. If ANB exercises its
right to purchase, the Option Shares so held ANB shall give written notice of
its intention to so exercise its right to ONB within fifteen (15) days after the
event giving rise to such right. The purchase price for each Option Share held
by ONB shall be a cash amount equal to the highest price paid or to be paid by
any entity, person or group referenced in Section 3 hereof for any share of ANB
Common Stock (or the aggregate consideration paid for the assets of ANB divided
by the number of shares of ANB Common Stock then outstanding), as the case may
be, multiplied by the total number of Option Shares to be redeemed under this
Section 9(b), plus interest at the rate of 8% per annum from the date of the
purchase of the Option Shares through the repurchase contemplated hereby (the
value of any such price or consideration other than cash to be
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determined, in the case of consideration with a readily-ascertainable market
value, on the basis of such market value and, in the case of any other
consideration, by ONB in good faith).
(c) In lieu of exercising the Option if any of the events specified in
Section 3 hereof shall occur during the period in which ONB is entitled to
exercise the Option, ONB may, upon not less than 90 days written notice, require
ANB to pay to ONB an amount in cash equal to the difference between the highest
price paid or to be paid by any entity, person or group for any share of ANB
Common Stock (or the aggregate consideration paid for the assets of ANB or any
Subsidiary divided by the number of shares of ANB Common Stock then outstanding)
and the Purchase Price, multiplied by the total number of Option Shares to be
redeemed under this Section 9(c) (the value of any such price or consideration
other than cash to be determined, in the case of consideration with a
readily-attainable market value, on the basis of such market value and, in the
case of any other consideration, by determination by ONB in good faith). If ONB
exercises its rights under this Section 9(c), then the rights granted to ONB
under Sections 9(a) and 9(b) hereof and the rights to exercise the Option shall
terminate.
(d) The closing of any of the transactions contemplated by this Section 9
shall be made within ten (10) business days of any request made pursuant to this
Section 9. Payment for the Option Shares shall be made by ANB to ONB at the
closing by delivery of cash or immediately available funds. Any closing pursuant
to this Section 9 may be delayed to a date no later than ten (10) business days
after the receipt of any applicable regulatory clearance, and ANB shall promptly
file any notice or application for such clearance simultaneously with such
closing this Agreement shall terminate.
SECTION 10. Injunction; Specific Performance. Each of the parties hereto
hereby acknowledges that the other party will suffer irreparable damage and
injury and will not have an adequate remedy at law in the event of any breach of
any of its obligations under this Agreement. Accordingly, in the event of such a
breach or of a threatened or attempted breach, in addition to all other remedies
to which each party hereto is entitled to at law, each party shall be entitled
to a temporary and permanent injunction (without the necessity of showing any
actual damage) or a decree of specific performance of the provisions hereof, and
no bond or other security shall be required in that connection. The remedies
described in this Section 10 shall not be exhaustive and shall be in addition to
all other remedies that either party may have at law, in equity or otherwise.
SECTION 11. Miscellaneous.
(a) This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns; provided, however,
that neither party may assign this Agreement without the prior written consent
of the other party.
(b) This Agreement may be modified, amended or supplemented only by a
written agreement executed by the parties hereto.
(c) All notices, requests and other communications hereunder shall be in
writing and shall be delivered by hand, by certified United States mail (return
receipt requested, first-class postage pre-paid) or by overnight express
receipted delivery service (i) to Old National Bancorp, at 420 Main Street,
Evansville, Indiana 47708, attention: Jeffrey L. Knight, Corporate Secretary and
General Counsel, and (ii) to ANB Corporation, at 120 W. Charles Street, Muncie,
Indiana 47305, attention: James R. Schrecongost, President.
(d) In case any one or more of the provisions contained herein shall, for
any reason, be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement, but this Agreement shall be construed as if such invalid,
illegal or unenforceable provision or provisions had never been contained
herein.
(e) This Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same agreement.
(f) The headings in this Agreement have been inserted solely for
convenience and ease of reference and shall not be considered in the
interpretation or construction of this Agreement.
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(g) This Agreement shall be governed by and construed in accordance with
the laws of the State of Indiana without giving effect to the choice of law
principles thereof.
(h) This Agreement supersedes all other prior understandings, commitments,
representations, negotiations or agreements, whether oral or written, between
the parties hereto relating to the matters contemplated by this Agreement and
constitutes the entire agreement between the parties hereto relating to the
subject matter hereof.
(i) No waiver by any party hereto of any right or provision of this
Agreement shall be effective unless the same shall be in writing and signed by
the waiving party. The failure in one or more instances of any party to enforce
any term or provision of this Agreement or to exercise any right or remedy shall
not prohibit any subsequent enforcement or exercise thereof or constitute a
waiver of any such term, provision, right or remedy. The waiver by any party
hereto of a breach of or noncompliance with any term, covenant, restriction or
provision of this Agreement shall not operate or be construed as a continuing
waiver or as a waiver of any other or subsequent breach or noncompliance
hereunder.
IN WITNESS WHEREOF, the undersigned have executed, entered into and
delivered this Agreement as of the day and year first above written.
OLD NATIONAL BANCORP
By: /s/ RONALD B. LANKFORD
----------------------------------
Ronald B. Lankford, President
ATTEST:
By: /s/ JEFFREY L. KNIGHT
-----------------------------------------------------
Jeffrey L. Knight, Corporate Secretary
ANB CORPORATION
By: /s/ JAMES R. SCHRECONGOST
----------------------------------
James R. Schrecongost, President
ATTEST:
By: /s/ JAMES W. CONVY
-----------------------------------------------------
James W. Convy, Secretary
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<PAGE> 110
[SANDLER LETTERHEAD]
APPENDIX C
February 10, 2000
Board of Directors
ANB Corporation
120 West Charles Street
Muncie, IN 47305
Ladies and Gentlemen:
ANB Corporation ("ANB") and Old National Bancorp ("ONB") have entered into
an Agreement of Affiliation and Merger, dated as of July 29, 1999 (the
"Agreement"), pursuant to which ANB will be merged with and into ONB (the
"Merger"). Upon consummation of the Merger, each share of ANB common stock, par
value $1.00 per share, issued and outstanding immediately prior to the Merger
(the "ANB Shares") will be converted into the right to receive 1.3125 shares
(the "Exchange Ratio") of ONB common stock, no par value (together with the
rights attached thereto issued pursuant to the Rights Agreement, dated as of
March 1, 1990, between ONB and Old National Bank in Evansville, as Rights
Agent). The terms and conditions of the Merger are more fully set forth in the
Agreement. You have requested our opinion as to the fairness, from a financial
point of view, of the Exchange Ratio to the holders of ANB Shares.
Sandler O'Neill & Partners, L.P., as part of its investment banking
business, is regularly engaged in the valuation of financial institutions and
their securities in connection with mergers and acquisitions and other corporate
transactions. In connection with this opinion, we have reviewed, among other
things: (i) the Agreement and exhibits thereto; (ii) the Stock Option Agreement,
dated as of July 29, 1999, by and between ANB and ONB; (iii) certain publicly
available financial statements of ANB and other historical financial information
provided by ANB that we deemed relevant; (iv) certain publicly available
financial statements of ONB and other historical financial information provided
by ONB that we deemed relevant; (v) certain internal financial analyses and
forecasts of ANB prepared by and reviewed with management of ANB and the views
of senior management of ANB, based on certain limited discussions with certain
members of senior management, regarding ANB's past and current business,
financial condition, results of operations and future prospects; (vi) certain
internal financial analyses and forecasts of ONB prepared by and reviewed with
management of ONB, (vii) the views of senior management of ONB, based on certain
limited discussions with certain members of senior management, regarding ONB's
past and current business, financial condition, results of operations and future
prospects, including the impact of ONB's acquisitions of Sycamore Agency, Inc.,
Permanent Bancorp, Inc. and Heritage Financial Services; (viii) the pro forma
impact of the Merger; (ix) the publicly reported historical price and trading
activity for ANB's and ONB's common stock, including a comparison of certain
financial and stock market information for ANB and ONB with similar publicly
available information for certain other companies the securities of which are
publicly traded; (x) the financial terms of recent business combinations in the
commercial banking industry, to the extent publicly available; (xi) the current
market environment generally and the banking environment in particular; and
(xii) such other information, financial studies, analyses and investigations and
financial, economic and market criteria as we considered relevant.
In performing our review, we have assumed and relied upon the accuracy and
completeness of all the financial information, analyses and other information
that was publicly available or otherwise furnished to,
[SANDLER LETTERHEAD]
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reviewed by or discussed with us, and we do not assume any responsibility or
liability for independently verifying the accuracy or completeness thereof. We
did not make an independent evaluation or appraisal of the specific assets, the
collateral securing assets or the liabilities (contingent or otherwise) of ANB
or ONB or any of their subsidiaries, or the collectibility of any such assets,
nor have we been furnished with any such evaluations or appraisals. We did not
make an independent evaluation of the adequacy of the allowance for loan losses
of ANB or ONB nor have we reviewed any individual credit files relating to ANB
and ONB and, with your permission, we have assumed that the respective
allowances for loan losses for both ANB and ONB are adequate to cover such
losses and will be adequate on a pro forma basis for the combined entity. With
respect to the financial projections reviewed with management, we have assumed
that they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the respective managements of the
respective future financial performance of ANB and ONB and that such
performances will be achieved, and we express no opinion as to such financial
projections or the assumptions on which they are based. We have also assumed
that there has been no material change in ANB's or ONB's assets, financial
condition, results of operations, business or prospects since the date of the
most recent financial statements made available to us. We have assumed in all
respects material to our analysis that ANB and ONB will remain as going concerns
for all periods relevant to our analyses, that all of the representations and
warranties contained in the Agreement and all related agreements are true and
correct, that each party to such agreements will perform all of the covenants
required to be performed by such party under such agreements, that the
conditions precedent in the Agreement are not waived and that the Merger will be
accounted for as a pooling of interests and will qualify as a tax-free
reorganization for federal income tax purposes.
Our opinion is necessarily based on financial, economic, market and other
conditions as in effect on, and the information made available to us as of, the
date hereof. Events occurring after the date hereof could materially affect this
opinion. We have not undertaken to update, revise or reaffirm this opinion or
otherwise comment upon events occurring after the date hereof. We are expressing
no opinion herein as to what the value of ONB common stock will be when issued
to ANB's shareholders pursuant to the Agreement or the prices at which ANB's or
ONB's common stock will trade at any time.
We have acted as ANB's financial advisor in connection with the Merger and
will receive a fee for our services, a significant portion of which is
contingent upon consummation of the Merger. We have also received a fee for
rendering this opinion. In the past, we have also provided certain other
investment banking services for ANB and have received compensation for such
services.
In the ordinary course of our business as a broker-dealer, we may purchase
securities from and sell securities to ANB and ONB. We may also actively trade
the debt and equity securities of ANB and ONB for our own account and for the
accounts of our customers and, accordingly, may at any time hold a long or short
position in such securities.
Our opinion is directed to the Board of Directors of ANB in connection with
its consideration of the Merger and does not constitute a recommendation to any
shareholder of ANB as to how such shareholder should vote at any meeting of
shareholders called to consider and vote upon the Merger. Our opinion is not to
be quoted or referred to, in whole or in part, in a registration statement,
prospectus, proxy statement or in any other document, nor shall this opinion be
used for any other purposes, without Sandler O'Neill's prior written consent;
provided, however, that we hereby consent to the inclusion of this opinion as an
appendix to ANB's and ONB's Joint Proxy Statement/Prospectus dated the date
hereof and to the references to this opinion therein.
Based upon and subject to the foregoing, it is our opinion, as of the date
hereof, that the Exchange Ratio is fair, from a financial point of view, to the
holders of ANB Shares.
Very truly yours,
/s/ Sandler O'Neill & Patners, L.P.
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