<PAGE>
Registration No. 33-88726
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________
AMENDMENT NO. 3
TO
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
_____________________________
CNB BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
INDIANA 6022 35-1568731
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
20 N.W. Third Street
Evansville, Indiana 47739
(812) 464-3400
(Address, including zip code and telephone number, including area code, of
Registrant's principal executive offices)
_____________________________
DAVID L. KNAPP
Executive Vice President
CNB Bancshares, Inc.
20 N.W. Third Street
Evansville, Indiana 47739
(812) 464-3400
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
_____________________________
Copies to:
Thomas C. Erb, Esq. Stephen J. Smith, Esq.
Lewis, Rice & Fingersh, L.C. Krieg, DeVault, Alexander & Capehart
500 N. Broadway One Indiana Square, Suite 2800
St. Louis, Missouri 63102 Indianapolis, Indiana 46204
(314) 444-7600 (317) 636-4341
_____________________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
CNB BANCSHARES, INC.
CROSS REFERENCE SHEET TO PROSPECTUS
<TABLE>
<CAPTION>
FORM S-4 HEADING PROSPECTUS LOCATION
- -----------------------------------------------------------------------------------------------------
<S> <C>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus..................... Forepart of Registration Statement and
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus......................................... Inside Front and Outside Back Cover Pages
of Prospectus; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information.................................. Summary Information
4. Terms of the Transaction............................ Summary Information; The Merger; Description of
CNB Capital Stock; Comparison of Shareholder Rights
5. Pro Forma Financial Information..................... Pro Forma Financial Data
6. Material Contacts with the Company Being
Acquired........................................... Summary Information; The Merger
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to Be Underwriters...... *
8. Interests of Named Experts and Counsel.............. The Merger; Legal Opinion; Experts
9. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities..................... *
10. Information with Respect to S-3 Registrants......... Incorporation of Certain Documents by Reference; The
Merger
11. Incorporation of Certain Information by Reference... Incorporation of Certain Documents by Reference
12. Information with Respect to S-2 or S-3 Registrants.. *
13. Incorporation of Certain Information by Reference... *
</TABLE>
______________________________________
*Indicates item not applicable.
<PAGE>
<TABLE>
<CAPTION>
FORM S-4 HEADING PROSPECTUS LOCATION
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
14. Information with Respect to Registrants Other than S-3
or S-2 Registrants...................................... *
15. Information with Respect to S-3 Companies................ *
16. Information with Respect to S-2 or S-3 Companies......... *
17. Information with Respect to Companies Other than S-3
or S-2 Companies........................................ Summary Information; The Merger; Information About
Orleans; Financial Statements of Orleans
18. Information if Proxies, Consents or Authorizations are to
be Solicited............................................ Incorporation of Certain Documents By Reference;
Summary Information; The Special Meeting; The
Merger; Shareholder Proposals
19. Information if Proxies, Consents or Authorizations are
not to be Solicited or in an Exchange Offer............. *
</TABLE>
______________________________________
*Indicates item not applicable.
<PAGE>
CNB BANCSHARES, INC.
PROSPECTUS
_______________________
THE BANK OF ORLEANS
PROXY STATEMENT
This Prospectus/Proxy Statement ("Prospectus/Proxy Statement") is being
furnished to shareholders of The Bank of Orleans, an Indiana state bank
("Orleans"), in connection with the solicitation of proxies by the Board of
Directors of Orleans for use at a Special Meeting of shareholders of Orleans
(the "Special Meeting") to be held at 10:00 a.m., local time, on August 3,
1995, at the office of Orleans located at 200 South Maple Street, Orleans,
Indiana, and any adjournments or postponements thereof.
At the Special Meeting, shareholders of Orleans will consider and vote upon
the proposed merger (the "Merger") of Orleans Interim Bank ("Interim Bank"), an
Indiana state bank and wholly owned subsidiary of CNB Bancshares, Inc. ("CNB"),
into Orleans, pursuant to the Agreement and Plan of Reorganization dated
October 18, 1994, as amended May 5, 1995, between Orleans and CNB (the
"Reorganization Agreement"). Upon consummation of the Merger, each issued and
outstanding share of common stock of Orleans, par value $10.00 per share (the
"Orleans Common"), other than shares held by any shareholder properly exercising
dissenters' rights, will be converted into the right to receive 6.37 shares of
common stock of CNB, stated value $1.00 per share (the "CNB Common"), subject to
possible downward adjustment based upon the closing book value of Orleans as of
the end of the month immediately preceding the consummation of the Merger, as
set forth in the Reorganization Agreement and described in this Prospectus/Proxy
Statement. See "MERGER -- Conversion Ratio."
This Prospectus/Proxy Statement also constitutes a prospectus of CNB with
respect to up to 318,500 shares of CNB Common issuable in the Merger to the
holders of Orleans Common.
The outstanding shares of CNB Common are, and the shares of CNB Common to be
issued in the Merger will be, included for quotation on the Nasdaq Stock
Market's National Market ("Nasdaq"). The last reported sale price of CNB Common
on Nasdaq on June 27, 1995, was $29.75.
This Prospectus/Proxy Statement and the accompanying form of proxy are first
being mailed to shareholders of Orleans on or about July 5, 1995.
THE SHARES OF CNB COMMON HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/
PROXY STATEMENT. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
___________________________________
THE SHARES OF CNB COMMON OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR
SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE
FUND OR ANY OTHER GOVERNMENTAL AGENCY.
___________________________________
THE DATE OF THIS PROSPECTUS/PROXY STATEMENT IS JUNE 30, 1995
<PAGE>
TABLE OF CONTENTS
PAGE
----
<TABLE>
<CAPTION>
<S> <C>
AVAILABLE INFORMATION................................................... 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE......................... 1
SUMMARY INFORMATION..................................................... 3
Introduction......................................................... 3
Parties.............................................................. 3
Special Meeting...................................................... 4
Merger............................................................... 5
Management and Operations After Merger............................... 12
Comparison of Shareholder Rights..................................... 12
COMPARATIVE STOCK PRICES................................................ 13
SELECTED COMPARATIVE PER SHARE DATA..................................... 14
SELECTED FINANCIAL DATA................................................. 16
SPECIAL MEETING......................................................... 19
Date, Time and Place................................................. 19
Matters to be Considered at the Special Meeting...................... 19
Record Date.......................................................... 19
Vote Required........................................................ 19
Voting and Revocation of Proxies..................................... 20
Solicitation of Proxies.............................................. 20
PARTIES................................................................. 20
CNB.................................................................. 20
Orleans.............................................................. 23
MERGER.................................................................. 23
Background of Merger................................................. 23
Reasons for Merger................................................... 25
Recommendation of Orleans Board of Directors......................... 26
Opinion of Financial Advisor......................................... 26
Form of Merger....................................................... 29
Conversion Ratio..................................................... 30
Fractional Shares.................................................... 31
Share Adjustments.................................................... 31
Closing Date; Effective Time......................................... 31
Regulatory Approvals................................................. 32
Conditions to Consummation of Merger................................. 32
Termination or Abandonment........................................... 33
Termination Fee...................................................... 33
Exchange of Stock Certificates....................................... 34
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
____
<S> <C>
Representations and Warranties of CNB and Orleans..................................... 35
Certain Other Agreements.............................................................. 35
Conduct of Business Pending Merger................................................ 35
Dividends......................................................................... 36
Environmental Investigation and Remediation....................................... 37
Other Orleans Agreements.......................................................... 38
CNB Agreements.................................................................... 38
Effect on Employee Benefit Plans...................................................... 38
Expenses and Fees..................................................................... 39
No Solicitation....................................................................... 39
Interests of Certain Persons in Merger................................................ 39
Indemnification and Insurance..................................................... 39
Employee Benefits................................................................. 40
Board Composition................................................................. 40
Interests of CNB's Management and Board........................................... 40
Waiver and Amendment.................................................................. 40
Dissenters' Rights.................................................................... 40
Federal Income Tax Consequences....................................................... 42
Accounting Treatment.................................................................. 42
Management and Operations After Merger................................................ 43
Resale of CNB Common.................................................................. 43
PRO FORMA FINANCIAL DATA................................................................. 44
DESCRIPTION OF CNB'S CAPITAL STOCK....................................................... 52
General............................................................................... 52
CNB Common............................................................................ 52
COMPARISON OF SHAREHOLDER RIGHTS......................................................... 54
Shareholder Vote Required for Certain Transactions.................................... 54
Business Combinations............................................................. 54
Removal of Directors.............................................................. 55
Amendments to Articles of Incorporation........................................... 56
Voting Rights..................................................................... 57
Special Meeting of Shareholders; Shareholder Action by Written Consent................ 57
Dissenters' Rights.................................................................... 57
Takeover Statutes..................................................................... 58
Indemnification....................................................................... 59
Limitation of Liability of Directors.................................................. 60
Consideration of Non-Shareholder Interests............................................ 61
INFORMATION ABOUT ORLEANS................................................................ 61
Business of Orleans................................................................... 61
Management's Discussion and Analysis of Financial Condition and Results of Operation.. 63
Security Ownership of Management...................................................... 76
Security Ownership of Certain Beneficial Owners....................................... 77
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
LEGAL OPINION............................................................. 78
EXPERTS................................................................... 78
Independent Auditors for CNB........................................... 78
Independent Auditors for Orleans....................................... 78
Presence at Special Meeting............................................ 78
SHAREHOLDER PROPOSALS..................................................... 78
FINANCIAL STATEMENTS OF ORLEANS........................................... F-1
EXHIBITS
Agreement and Plan of Reorganization, as amended....................... A-1
Fairness Opinion of David A. Noyes & Company........................... B-1
Excerpts of Indiana Banking Law (Dissenters' Rights)................... C-1
</TABLE>
iii
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS/PROXY STATEMENT IN CONNECTION
WITH THE OFFERING DESCRIBED HEREIN AND ANY SUCH INFORMATION OR REPRESENTATION,
IF GIVEN OR MADE, MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY CNB OR
ORLEANS. THIS PROSPECTUS/PROXY STATEMENT DOES NOT CONSTITUTE A SOLICITATION OR
AN OFFERING OF ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES OR IN ANY JURISDICTION TO ANY PERSON TO WHOM IT WOULD BE UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. THE DELIVERY OF THIS
PROSPECTUS/PROXY STATEMENT AT ANY TIME DOES NOT IMPLY THAT ANY INFORMATION
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
AVAILABLE INFORMATION
CNB is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "S.E.C."). The reports, proxy statements and other information
can be inspected and copied at the public reference facilities of the S.E.C.,
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional
offices of the S.E.C. located at 7 World Trade Center, New York, New York 10048,
and Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661, and copies of such materials can be obtained from the public
reference section of the S.E.C. at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. In addition, reports, proxy statements and other
information concerning CNB may be inspected at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
CNB has filed with the S.E.C. a Registration Statement on Form S-4 (together
with any amendments thereto, the "Registration Statement") under the Securities
Act of 1933, as amended (the "Securities Act"), with respect to the CNB Common
to be issued pursuant to the Merger described herein. This Prospectus/Proxy
Statement does not contain all the information set forth in the Registration
Statement and the exhibits thereto. Such additional information may be obtained
from the S.E.C.'s principal office in Washington, D.C. Statements contained in
this Prospectus/Proxy Statement or in any document incorporated in this
Prospectus/Proxy Statement by reference as to the contents of any contract or
other document referred to herein or therein are not necessarily complete, and
in each instance where reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement or such other
document, each such statement is qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the S.E.C. by CNB (File No. 0-11510)
pursuant to the Exchange Act are incorporated by reference in this
Prospectus/Proxy Statement:
1. CNB's Annual Report on Form 10-K for the year ended December 31, 1994 as
amended by its Annual Report on Form 10-K/A for the year ended December
31, 1994;
2. CNB's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995;
3. The description of the common stock of CNB contained in CNB's
Registration Statement on Form S-2 under the Securities Act (S.E.C. File
No. 33-36017); and
4. CNB's Current Reports on Form 8-K, dated February 15, 1995, May 23,
1995, June 15, 1995 and June 26, 1995.
1
<PAGE>
All documents and reports filed by CNB pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus/Proxy Statement
and prior to the date of the Special Meeting shall be deemed to be incorporated
by reference in this Prospectus/Proxy Statement and to be a part hereof from the
dates of filing of such documents or reports. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus/Proxy
Statement to the extent that a statement contained herein or in any other
subsequently filed document which also 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 Prospectus/Proxy Statement.
THIS PROSPECTUS/PROXY STATEMENT INCORPORATES DOCUMENTS RELATING TO CNB BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS
(EXCLUDING UNINCORPORATED EXHIBITS) ARE AVAILABLE, WITHOUT CHARGE UPON WRITTEN
OR ORAL REQUEST, TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS
PROSPECTUS/PROXY STATEMENT IS DELIVERED, TO DAVID L. KNAPP, EXECUTIVE VICE
PRESIDENT, CNB BANCSHARES, INC., 20 N.W. THIRD STREET, EVANSVILLE, INDIANA 47739
(TELEPHONE NUMBER (812) 464-3400). IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY JULY 27, 1995.
2
<PAGE>
SUMMARY INFORMATION
The following is a brief summary of certain information contained elsewhere in
this Prospectus/Proxy Statement. The following summary is not intended to be
complete and is qualified in all respects by the information appearing elsewhere
herein or incorporated by reference into this Prospectus/Proxy Statement, the
Exhibits hereto and the documents referred to herein. All information contained
in this Prospectus/Proxy Statement relating to CNB and its subsidiaries has been
supplied by CNB and all information relating to Orleans has been supplied by
Orleans. Shareholders are urged to read this Prospectus/Proxy Statement and the
Exhibits hereto in their entirety.
INTRODUCTION
This Prospectus/Proxy Statement relates to the Reorganization Agreement
between Orleans and CNB which provides for, among other things, CNB's
acquisition of Orleans by means of the Merger of Interim Bank, a wholly owned
subsidiary of CNB, with and into Orleans. As a result of the Merger, CNB will
acquire all of the issued and outstanding common stock of Orleans and Orleans
will become a wholly owned subsidiary of CNB.
The summary set forth in this Prospectus/Proxy Statement of certain provisions
of the Reorganization Agreement is qualified in its entirety by reference to the
full text of the Reorganization Agreement, which is incorporated by reference
herein and attached as Exhibit A to this Prospectus/Proxy Statement.
PARTIES
CNB is a multi-bank holding company headquartered in Evansville, Indiana. At
March 31, 1995, CNB had consolidated assets of $2.9 billion, deposits of $2.2
billion, loans of $1.9 billion and shareholders' equity of $242 million. Through
the 81 full-service banking offices and 25 consumer finance offices of its
financial and non-banking subsidiaries, CNB provides commercial, retail and
correspondent banking, mortgage servicing, trust, data processing, cash
management and related financial services and property and casualty insurance to
customers in southern, west central and central Indiana, western Kentucky,
southern Illinois and the suburban Louisville, Kentucky area.
CNB has received the required regulatory approvals to form Interim Bank as a
wholly owned subsidiary of CNB solely to facilitate the acquisition of Orleans.
Interim Bank engages in no other business.
On February 1, 1995, CNB acquired King City Federal Savings Bank, a federally
chartered savings bank ("King City"). At December 31, 1994, King City had total
assets of $172.1 million, deposits of $161.0 million and shareholders equity of
$8.2 million. On February 10, 1995, CNB acquired Harrisburg Bancshares, Inc.,
an Illinois corporation ("HBI"), and its subsidiary bank, The Harrisburg
National Bank ("Harrisburg National"). At December 31, 1994, HBI had total
assets of $110.4 million, total deposits of $95.3 million and total shareholders
equity of $5.7 million.
On December 12, 1994, CNB entered into an Agreement and Plan of Merger to
acquire UF Bancorp, Inc. ("UFB"), a Delaware corporation. At March 31, 1995,
UFB, which is the parent savings and loan holding company for Union Federal
Savings Bank, Evansville, Indiana, had total assets of $553.0 million, deposits
of $359.2 million, net loans receivable of $200.5 million and shareholders
equity of $38.7 million. There can be no assurance that the acquisition of UFB
will be consummated. On April 7, 1995, Citizens
3
<PAGE>
Bank of Western Indiana, a wholly owned subsidiary of CNB headquartered in Terre
Haute, Indiana, entered into a Purchase and Assumption Agreement to acquire
certain assets and assume certain liabilities of four branch offices of
Household Bank, f.s.b., located in west-central Indiana. The total amount of
deposits to be assumed is approximately $80 million. There can be no assurance
that the purchase and assumption transaction will be consummated.
For additional information regarding CNB, see "PARTIES -- CNB."
The principal offices of CNB and Interim Bank are at 20 N.W. Third Street,
Evansville, Indiana 47739 (telephone number (812) 464-3400).
Orleans is an Indiana state chartered bank which provides full banking
services through its one office in Orleans, Indiana. At March 31, 1995, Orleans
had assets of $57.8 million, deposits of $51.8 million, loans of $28.9 million
and shareholders' equity of $5.7 million. For additional information regarding
Orleans, see "PARTIES -- Orleans" and "INFORMATION ABOUT ORLEANS."
The principal office of Orleans is at 200 South Maple Street, Orleans, Indiana
47452 (telephone number (812) 865-2374).
SPECIAL MEETING
Date, Time and Place of Special Meeting
The Special Meeting will be held at the office of Orleans located at 200 South
Maple Street, Orleans, Indiana on August 3, 1995, at 10:00 a.m., local
time.
Matters to be Considered at Special Meeting
At the Special Meeting, holders of Orleans Common will consider and vote upon
approving the Reorganization Agreement providing for the Merger of Interim Bank
with and into Orleans. In addition, shareholders of Orleans may be asked to
vote on a proposal to adjourn or postpone the Special Meeting, which adjournment
or postponement could be used for the purpose, among others, of allowing time
for the solicitation of additional votes to approve the Reorganization
Agreement.
Record Date
The record date for the Special Meeting is June 19, 1995.
Vote Required
Approval and adoption of the Merger and the Reorganization Agreement will
require the affirmative vote of a majority of the outstanding shares of Orleans
Common entitled to vote thereon. Holders of Orleans Common will be entitled to
one vote per share. In the event that the Merger and the Reorganization
Agreement are not approved by the requisite vote of the shareholders of Orleans,
Orleans must pay to CNB the sum of $500,000. See "MERGER -- Termination Fee."
4
<PAGE>
Revocation of Proxies
Any proxy given pursuant to this solicitation may be revoked by the grantor at
any time prior to the voting thereof on the Reorganization Agreement by filing
with the Cashier of Orleans a written revocation or a duly executed proxy
bearing a later date. A holder of Orleans Common may withdraw his or her proxy
at the Special Meeting at any time before it is exercised by electing to vote in
person; however, attendance at the Special Meeting will not in and of itself
constitute a revocation of the proxy.
Security Ownership of Orleans Management
As of the record date, executive officers and directors of Orleans and their
affiliates may be deemed to have owned beneficially 25,550 shares (51.1%) of
Orleans Common. Although the executive officers and directors of Orleans and
their affiliates are not contractually obligated to vote their shares of Orleans
Common in favor of the Reorganization Agreement, if, as management of Orleans
expects, all such shares are voted in favor of the Reorganization Agreement, the
executive officers and directors of Orleans and their affiliates will have the
ability to approve the Merger without the vote of the remaining shareholders of
Orleans. See "INFORMATION ABOUT ORLEANS -- Security Ownership of Management of
Orleans."
MERGER
The following summary is qualified in its entirety by reference to the full
text of the Reorganization Agreement, which is attached as Exhibit A hereto and
incorporated by reference herein.
Effects of Merger
At the time the Merger is consummated (the "Effective Time"), Interim Bank
will merge into Orleans and as a result thereof each share of Orleans Common,
other than shares any holders of which have duly exercised and perfected their
dissenters' rights under The Indiana Financial Institutions Act (the "Indiana
Banking Law"), will be converted into the right to receive 6.37 shares of CNB
Common (the "Conversion Ratio"); provided, however, that if the Orleans Closing
Book Value (as defined below) is less than $6,167,000, then the Conversion Ratio
will be reduced so as to equal the product of (i) 6.37 and (ii) the quotient of
the Orleans Closing Book Value divided by $6,167,000. In no event will the
Conversion Ratio exceed 6.37 shares of CNB Common for each share of Orleans
Common.
The term "Orleans Closing Book Value" means the amount of the shareholders'
equity accounts of Orleans, as of the end of the month immediately preceding the
Effective Time, determined in accordance with generally accepted accounting
principles ("GAAP") consistently applied with the year ended December 31, 1993,
but excluding for this purpose any adjustments to the shareholders' equity
accounts solely as a result of (A) marketable securities classified as Available
for Sale in accordance with FAS 115, and (B) the Structured Notes Divestiture
(as defined below; see "MERGER -- Certain Other Agreements --Other Orleans
Agreements"), less (i) the amount, if any, by which the allowance for credit
losses account of Orleans, as of the end of the month immediately preceding the
Effective Time, is less than $391,000 (which will be determined exclusive of any
increase in the allowance taken by Orleans at the written request of CNB
pursuant to the Reorganization Agreement), less (ii) the amount of any increase
in the shareholders' equity accounts of Orleans resulting from or attributable
to the sale of securities held on and sold after June 30, 1994 or any
transactions or accounting adjustments not in the ordinary course of business
effected or completed after June 30, 1994, plus (iii) any reduction of
shareholders' equity theretofore
5
<PAGE>
recorded solely as a result of accruals, reserves or charges taken by Orleans at
the written request of CNB pursuant to the Reorganization Agreement (other than
any reduction of shareholders' equity resulting from (a) audit fees incurred and
expended by Orleans between the date of the Reorganization Agreement and the
Closing Date, (b) fees incurred and expended by Orleans to obtain the
environmental investigations referred to in the Reorganization Agreement (see
"MERGER -- Certain Other Agreements -- Environmental Investigation and
Remediation"), and (c) fees incurred and expended by Orleans to purchase tail
coverage pursuant to the Reorganization Agreement (see "MERGER -- Interests of
Certain Persons in Merger -- Indemnification and Insurance")), plus (iv) the
amount of each quarterly dividend paid by Orleans pursuant to Section 4.01 of
the Reorganization Agreement after March 15, 1995 (see "MERGER -- Dividends").
As used above, the term "tail coverage" means directors' and officers' liability
insurance which covers actions or inactions of Orleans' directors and officers
occurring prior to the Effective Time.
No fractional shares of CNB Common will be issued and, in lieu thereof,
holders of shares of Orleans Common who would otherwise be entitled to a
fractional share interest (after taking into account all shares of Orleans
Common to be received in the Merger by such holder) will be paid an amount in
cash equal to the product of such fractional share interest and the closing
price of a share of CNB Common on Nasdaq on the fifth business day immediately
preceding the date on which the Effective Time occurs.
As the Orleans Closing Book Value will be calculated based upon amounts at the
end of the month immediately preceding the Effective Time, it is not possible,
as of the date of this Prospectus/Proxy Statement, to determine the Orleans
Closing Book Value and the definitive Conversion Ratio. For purposes of
illustration, however, if the Effective Time and the Closing Date both would
have occurred on June 1, 1995, the Orleans Closing Book Value would have
been $6,314,000 and shareholders of Orleans would have received 6.37 shares of
CNB Common for each share of Orleans Common held (plus cash in lieu of
fractional shares). The foregoing information is provided solely for purposes
of illustration. In the event that the actual Orleans Closing Book Value should
be less than $6,167,000, the actual Conversion Ratio would be less than 6.37
shares of CNB Common for each share of Orleans Common. In no event, however,
will the Conversion Ratio exceed 6.37 shares of CNB Common for each share of
Orleans Common.
The shares of CNB Common to be issued in the Merger, together with any cash
payment in lieu of fractional shares, are hereinafter referred to as the "Merger
Consideration."
Value of Merger
As of June 27, 1995, based on the Conversion Ratio (assuming no downward
adjustment) and the closing sale price of CNB Common as reported on Nasdaq on
such date, the Merger had a per share value of $189.51 to holders of Orleans
Common, and the approximate total value of the Merger Consideration to Orleans
shareholders was $9.476 million. The market value of the Merger Consideration
as stated above may materially increase or decrease depending on the closing
sale price of CNB Common as reported on Nasdaq on the date on which the
Effective Time occurs. No assurance can be given as to the market price of CNB
Common on the date on which the Effective Time occurs.
6
<PAGE>
Reasons for Merger
Orleans
The Board of Directors of Orleans believes that the Merger is in the best
interests of Orleans and its shareholders and has approved and declared
advisable the Merger. The Board of Directors' recommendation is based on a
number of factors discussed in this Prospectus/Proxy Statement. See "MERGER --
Reasons for Merger -- Orleans."
CNB
The Board of Directors of CNB believes that the acquisition of Orleans would
be a natural and desirable addition to CNB's banking franchise in southern and
central Indiana.
Recommendation of Board of Directors of Orleans
THE BOARD OF DIRECTORS OF ORLEANS BELIEVES THAT THE MERGER IS IN THE BEST
INTERESTS OF THE SHAREHOLDERS OF ORLEANS AND, ACCORDINGLY, RECOMMENDS THAT
HOLDERS OF ORLEANS COMMON VOTE "FOR" APPROVAL OF THE REORGANIZATION AGREEMENT
AND "FOR" THE PROPOSAL REGARDING ADJOURNMENT OR POSTPONEMENT.
Certain members of the management and Board of Directors of Orleans have
interests in the Merger that are in addition to the interests of shareholders of
Orleans generally. See "MERGER -- Interests of Certain Persons in Merger."
Opinion of Financial Advisor
David A. Noyes & Company has rendered an opinion to the Board of Directors of
Orleans to the effect that, as of October 18, 1994, the Merger Consideration to
be received by the shareholders of Orleans pursuant to the Reorganization
Agreement is fair from a financial point of view to such shareholders. One of
the conditions to the obligation of Orleans to consummate the Merger is that
David A. Noyes & Company has not withdrawn the aforementioned opinion prior to
the mailing of this Prospectus/ Proxy Statement. See "MERGER -- Conditions to
Consummation of Merger." A copy of the opinion of David A. Noyes & Company,
dated as of the date of this Prospectus/Proxy Statement, is attached hereto as
Exhibit B and the condition to Orleans' obligation described above has been
satisfied.
Conditions to Merger; Regulatory Approvals
The Merger is subject to various conditions including, among other things,
approval of the Reorganization Agreement by the requisite majority vote of the
shareholders of Orleans (see "SPECIAL MEETING -- Vote Required"), receipt of
regulatory approvals of the Merger from the Board of Governors of the Federal
Reserve System (the "Federal Reserve"), the Federal Deposit Insurance
Corporation (the "F.D.I.C.") and the Indiana Department of Financial
Institutions (the "I.D.F.I.") (the foregoing regulatory approvals have been
received and this condition has been satisfied; see "MERGER -- Regulatory
Approvals"), receipt of a legal opinion on certain tax aspects of the Merger
(the foregoing legal opinion has been received and this condition has been
satisfied; see "MERGER -- Federal Income Tax Consequences"), receipt of an
accounting opinion to the effect that the Merger qualifies for "pooling of
interests" accounting treatment (see "MERGER -- Accounting Treatment"), the
occurrence of no material adverse changes in the businesses of CNB or Orleans,
the environmental remediation and correction of certain real property upon
7
<PAGE>
which the banking office of Orleans is located and certain real property owned
by Orleans adjacent thereto (this condition has been satisfied; see "MERGER --
Certain Other Agreements -- Environmental Investigation and Remediation"), and
no withdrawal, prior to the mailing of this Prospectus/Proxy Statement, by
Orleans' financial advisor, David A. Noyes & Company, of its fairness opinion
dated October 18, 1994, that the Merger Consideration to be received by the
shareholders of Orleans in the Merger is fair to such shareholders from a
financial point of view (the opinion, dated the date hereof, is attached hereto
as Exhibit B and this condition has been satisfied; see "MERGER -- Opinion of
Financial Advisor"). See "MERGER -- Conditions to Consummation of Merger."
The Federal Reserve, the F.D.I.C. and the I.D.F.I. approved the Merger on
January 11, 1995, February 14, 1995 and February 2, 1995, respectively.
Conduct of Business Pending Merger; Dividends
Pursuant to the Reorganization Agreement, Orleans has agreed to carry on its
business and the discharge or incurrence of its obligations and liabilities only
in the usual, regular and ordinary course of business as conducted prior to the
execution of the Reorganization Agreement. See "MERGER -- Certain Other
Agreements -- Conduct of Business Pending Merger."
The Reorganization Agreement provides that Orleans may declare and pay its
regular annual dividend on the Orleans Common for 1994 not to exceed $2.50 per
share at approximately the same time during 1994 which it has historically
declared and paid such annual dividend; provided, however, that, if the
Effective Time has not occurred by March 15, 1995 (which is the record date for
CNB's first quarter 1995 dividend), Orleans may thereafter declare and pay a
quarterly dividend (including a first quarter 1995 dividend) on the Orleans
Common at the same time as the quarterly dividends declared and paid by CNB and
in the per share amount Orleans shareholders would have received had the
Effective Time been immediately before such dividend payment. In this regard,
CNB and Orleans have agreed to cooperate with each other to coordinate the
record and payment dates of their respective dividends for the quarter in which
the Effective Time occurs such that Orleans shareholders would receive the
aforesaid dividend from Orleans or a regular quarterly dividend from CNB, but
not from both with respect to any such quarter. See "MERGER -- Certain Other
Agreements -- Dividends."
Termination of Reorganization Agreement
The Reorganization Agreement may be terminated at any time prior to the
Effective Time (i) if the Merger is not consummated on or prior to September 30,
1995; (ii) by mutual agreement of CNB and Orleans; (iii) by CNB or Orleans in
the event of a material breach by the other of any of its representations and
warranties or agreements under the Reorganization Agreement not cured within 30
days after notice of such breach is given by the non-breaching party; (iv) by
either party in the event all the conditions to its obligations are not
satisfied or waived (and not cured within any applicable cure period); (v) by
CNB in the event that Orleans becomes a party or subject to any written
agreement, memorandum of understanding, cease and desist order, imposition of
civil money penalties or other regulatory enforcement action or proceeding with
any federal or state agency charged with the supervision or regulation of banks
or bank holding companies after the date of the Reorganization Agreement; and
(vi) by CNB if the cost of taking all remedial and corrective actions with
respect to certain real property upon which the banking office of Orleans is
located and certain real property owned by Orleans adjacent thereto exceeds
$400,000 (see "MERGER -- Certain Other Agreements -- Environmental Investigation
and Remediation"). See "MERGER -- Termination or Abandonment."
8
<PAGE>
Termination Fee
The Reorganization Agreement provides that upon the occurrence of one or more
Triggering Events (as defined below), Orleans will pay to CNB the sum of
$500,000.
The term "Triggering Event" means any of the following events (a) upon
termination of the Reorganization Agreement by CNB upon a breach thereof by
Orleans (including, without limitation, the entering into of an agreement
between Orleans and any third party which is inconsistent with the transactions
contemplated by the Reorganization Agreement or the Agreement and Plan of Merger
to be entered into between Orleans and Interim Bank as provided in the
Reorganization Agreement (the "Merger Agreement")), provided that within one
year of the date of such termination, either an event described in clauses (c)
or (d) below shall have occurred or Orleans or shareholders of Orleans shall
have entered into an agreement with any third party whereby such third party
will acquire, merge or consolidate with Orleans, purchase all or substantially
all of Orleans' assets or acquire 50% or more of the outstanding shares of
Orleans Common; (b) the failure of Orleans' shareholders to approve the Merger
and the Reorganization Agreement at the Special Meeting; (c) any person or group
of persons (other than CNB) acquires, or has the right to acquire, 50% or more
of the Orleans Common, exclusive of shares of Orleans Common sold directly or
indirectly to such person or group of persons by CNB; (d) expiration of the
fifth day preceding the scheduled expiration date of a tender or exchange offer
by any person or group of persons (other than CNB and/or its affiliates) to
purchase or acquire securities of Orleans if upon consummation of such offer,
such person or group of persons would own, control or have the right to acquire
50% or more of the Orleans Common; or (e) upon the entry by Orleans into an
agreement or other understanding with a person or group of persons (other than
CNB and/or its affiliates) for such person or group of persons to acquire, merge
or consolidate with Orleans or to purchase all or substantially all of Orleans'
assets. See "MERGER -- Termination Fee."
Accounting Treatment
The Merger is expected to qualify as a "pooling of interests" for accounting
and financial reporting purposes. The receipt of an opinion from Geo. S. Olive
& Co., L.L.C., the independent accountants of CNB, confirming that the Merger
will qualify for "pooling of interests" accounting, is a condition to CNB's
obligation to consummate the Merger. See "MERGER -- Conditions to Consummation
of Merger." If such condition is not met, the Merger would not be consummated
unless the condition were waived by CNB and the approval of Orleans'
shareholders entitled to vote on the Merger were resolicited if such change in
accounting treatment were deemed material to the financial condition and results
of operations of CNB on a pro forma basis. See "MERGER -- Accounting
Treatment."
Closing Date; Effective Time of Merger
The Reorganization Agreement provides that the closing of the Merger (the
"Closing") will take place, at CNB's election, on (i) the last business day of,
or (ii) the first business day of the month following, or (iii) the last
business day of the earliest month which is the second month of a calendar
quarter following, in each case, the month during which all necessary regulatory
approvals required by law for the Merger have been obtained and all waiting
periods required by law have expired (see "MERGER -- Regulatory Approvals") and
the environmental remediation and correction of certain real property upon which
the banking office of Orleans is located and certain real property owned by
Orleans adjacent thereto has been completed (see "MERGER -- Certain Other
Agreements -- Environmental Investigation and Remediation") or such other time
thereafter as Orleans and CNB may agree.
9
<PAGE>
The Reorganization Agreement provides that the Effective Time of the Merger
will be such time as the Secretary of State of the State of Indiana issues a
Certificate of Merger. Assuming that the Merger is approved by the requisite
vote of the shareholders of Orleans and that the other conditions to the Merger
are satisfied or waived (where permissible), it is presently anticipated that
the Effective Time of the Merger will be in the third quarter of 1995, but no
assurance can be given that such timetable will be met or that the conditions to
the Merger will be satisfied or waived (where permissible).
With the exception of those shareholders of Orleans who may be deemed to be an
"affiliate" of Orleans for purposes of Rule 145 under the Securities Act, the
Reorganization Agreement does not prohibit shareholders of Orleans from selling
their shares prior to the Effective Time. The Reorganization Agreement
provides, however, that each affiliate of Orleans must enter into an agreement
with CNB providing, among other things, that such affiliate will not make any
sale or other disposition of any shares of Orleans Common during the 30 day
period commencing on the 30th day prior to the Effective Time. Persons who may
be deemed to be affiliates of Orleans generally include individuals who (or
entities which) control, are controlled by or are under common control with
Orleans and will include directors and certain officers of Orleans and may
include principal shareholders of Orleans. See "MERGER -- Resale of CNB
Common."
Interests of Certain Persons in Merger
Certain members of Orleans' management and Board of Directors have material
interests in the Merger that are in addition to the interests of shareholders of
Orleans generally. These material interests are provisions in the
Reorganization Agreement providing that (i) each director of Orleans immediately
prior to the Effective Time will continue to serve as a director of the bank
resulting from the Merger (see "MERGER -- Interests of Persons in Merger --
Board Composition"), (ii) CNB will provide officers and directors of Orleans,
after the Merger, with the same directors' and officers' liability insurance
coverage that it provides to directors and officers of its other banking
subsidiaries generally, and that, if CNB is unable to obtain an endorsement to
its directors' and officers' liability insurance policy to cover acts and
omissions of the directors and officers of Orleans occurring or failing to occur
prior to the Closing Date, Orleans may purchase tail coverage under its existing
directors' and officers' liability insurance on such terms and conditions as
Orleans deems appropriate, and that CNB will cause Orleans or its successor, for
six years after the Effective Time, to indemnify the officers and directors of
Orleans against any liability arising out of actions occurring prior to the
Effective Time, to the extent that such indemnification is then permitted by the
Indiana Banking Law and by Orleans' Articles of Incorporation as in effect as of
the date of the Reorganization Agreement (see "MERGER -- Interests of Persons in
Merger -- Indemnification and Insurance"), and (iii) each employee (including an
officer) of Orleans who continues as an employee following the Effective Time,
will be entitled to participate in certain employee benefit and stock plans that
may be in effect for employees of all of CNB's subsidiaries, from time to time,
on the same basis as similarly situated employees of other CNB subsidiaries (see
"MERGER -- Effect on Employee Benefit Plans"). See "MERGER -- Interests of
Certain Persons in Merger."
For information about the percentage of Orleans Common owned by the directors
and executive officers of Orleans, see "INFORMATION ABOUT ORLEANS -- Security
Ownership of Management." None of the directors or executive officers of
Orleans would own, on a pro forma basis giving effect to the Merger, more than
1% of the issued and outstanding shares of CNB Common.
10
<PAGE>
Federal Income Tax Consequences
The Merger is intended to be a tax-free reorganization so that no gain or loss
will be recognized by CNB or Orleans, and no gain or loss will be recognized by
Orleans shareholders, except in respect of cash received for fractional shares
and except for any cash payments which might be received by Orleans shareholders
properly exercising their dissenters' rights. The following is a summary of a
tax opinion issued by Lewis, Rice & Fingersh, L.C., counsel for CNB, and
included as an exhibit to the Registration Statement.
If the Merger is consummated in accordance with the terms set forth in the
Reorganization Agreement, (i) the Merger will constitute a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"); (ii) no gain or loss will be recognized by the holders of shares
of Orleans Common upon receipt of Merger Consideration (except for cash received
in lieu of fractional shares and by shareholders exercising their dissenters'
rights); (iii) the basis of CNB Common received by the stockholders of Orleans
will be the same as the basis of Orleans Common exchanged therefor; (iv) the
holding period of the shares of CNB Common received by the shareholders of
Orleans will include the holding period of the shares of Orleans Common
exchanged therefor, provided such shares were held as capital assets as of the
Effective Time; (v) pursuant to Revenue Ruling 66-365, 1966-2 C.B. 116, and
Revenue Procedure 77-41, 1977-2 C.B. 574, if a cash payment is received by a
shareholder of Orleans in lieu of a fractional share interest of CNB Common, the
cash payment will be treated as received by the shareholder as a distribution in
redemption of that fractional share interest and will be treated as a
distribution in full payment in exchange for the fractional share redeemed
subject to the provisions and limitations of Section 302 of the Code and
considering the application of Section 318 of the Code; and (vi) where a
shareholder dissents from the Merger and receives solely cash in exchange for
his Orleans Common, such cash will be treated as received by the dissenting
shareholder as a distribution in redemption of such Orleans Common subject to
the provisions and limitations of Section 302 of the Code and considering the
application of Section 318 of the Code.
THE FOREGOING IS A GENERAL SUMMARY OF ALL OF THE MATERIAL FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER TO SHAREHOLDERS OF ORLEANS WITHOUT REGARD TO THE
PARTICULAR FACTS AND CIRCUMSTANCES OF EACH SHAREHOLDER'S TAX SITUATION AND
STATUS. EACH SHAREHOLDER OF ORLEANS SHOULD CONSULT HIS OR HER OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO HIM OR HER, INCLUDING
THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN LAWS AND THE
POSSIBLE EFFECT OF CHANGES IN FEDERAL AND OTHER TAX LAWS.
Dissenters' Rights
The rights of dissenting shareholders of Orleans are governed by the Indiana
Banking Law which provides that a shareholder is entitled to demand the fair
value of his shares of Orleans Common if such shareholder (i) delivers to
Orleans, before the Special Meeting, written notice of his or her intent to
demand payment for his or her shares of Orleans Common; and (ii) does not vote
in favor of the Merger. The written notice referred to above should be sent to
The Bank of Orleans, 200 South Maple Street, Orleans, Indiana 47452, Attention:
William H. Tegarden, Chief Executive Officer. If the holders of more than
approximately 10% of the shares of Orleans Common should exercise their
dissenters' rights, the Merger would not qualify as a "pooling of interests" for
accounting and financial reporting purposes and, therefore, CNB would not be
obligated to consummate the Merger (see "MERGER -- Accounting Treatment"). See
"MERGER -- Dissenters' Rights."
11
<PAGE>
MANAGEMENT AND OPERATIONS AFTER MERGER
After the Effective Time, Orleans will change its name to "Citizens Bank of
Orleans" and, as a wholly owned subsidiary of CNB, will continue to serve its
community in substantially the same manner as it has historically. The Board of
Directors and officers of Orleans, after the Effective Time, will consist of the
persons presently serving in such positions, with, in the case of the Board of
Directors, one representative of CNB. The management, Board of Directors and
operations of CNB will not be affected as a result of the Merger. See "MERGER
- -- Management and Operations After Merger."
COMPARISON OF SHAREHOLDER RIGHTS
The rights of the shareholders of Orleans Common and CNB Common differ in
certain respects. The rights of the shareholders of Orleans who receive shares
of CNB Common in the Merger will be governed by the corporate law of Indiana
(the "Indiana Corporate Law"), the state in which CNB is incorporated, and by
CNB's Articles of Incorporation, Bylaws and other corporate documents. The
governing law and documents of CNB differ from those which apply to Orleans in
several respects, including the shareholder votes required for certain business
combinations, removal of directors and amendments to the Articles of
Incorporation, the circumstances under which a shareholder may dissent from
corporate action and receive fair value for his or her shares, and rights of CNB
and its shareholders pursuant to certain corporate takeover statutes. See
"COMPARISON OF SHAREHOLDER RIGHTS."
Certain provisions of CNB's Articles of Incorporation and Bylaws reduce CNB's
vulnerability to takeover attempts and certain other transactions which have
not been negotiated with and approved by its Board of Directors. The Board of
Directors of CNB believes that it is in the best interests of CNB and its
shareholders to encourage potential acquirors to negotiate directly with CNB's
Board of Directors and that these provisions will encourage such negotiations
and discourage nonnegotiated takeover attempts. It is also the view of CNB's
Board of Directors that these provisions should not discourage persons from
proposing a merger or other transaction at prices reflective of the true value
of CNB and which is in the best interests of all shareholders. These
provisions may, however, also have the effect of discouraging a future takeover
attempt which would not be approved by CNB's Board of Directors, but pursuant to
which shareholders may receive a premium for their shares over the then current
market prices. As a result, shareholders who might desire to participate in
such a transaction may not have an opportunity to do so. Such provisions will
also render the removal of CNB's Board of Directors and management more
difficult.
12
<PAGE>
COMPARATIVE STOCK PRICES
Shares of CNB Common are traded in the over-the-counter market and are listed
on Nasdaq under the symbol CNBE. The following table sets forth, for the
periods indicated, the high and low closing bid prices of CNB Common as reported
on Nasdaq. The bid prices for shares of CNB Common reflect interdealer prices,
without retail markup, markdown or commission and do not necessarily represent
actual transactions. The prices for CNB Common have been adjusted for a one for
ten stock dividend paid by CNB on December 9, 1994 (the "Stock Dividend"), and
rounded to the nearest one-eighth.
There is no established public trading market for the shares of Orleans
Common. Management of Orleans does not have knowledge of the prices paid in all
transactions involving its shares and has not necessarily verified the prices
indicated in the table with both parties to the relevant transaction. Because
of the lack of an established public market for shares of Orleans Common, the
prices indicated may not reflect the prices which would be paid for such shares
on an active market.
<TABLE>
<CAPTION>
CNB Orleans
Common Stock Common Stock
------------------- ------------
High Low High Low
-------- -------- ----- ----
<S> <C> <C> <C> <C> <C>
1993 First Quarter............ $26-1/8 $23-7/8 $86 $86
Second Quarter........... 28 24-7/8 * *
Third Quarter............ 29-1/2 26-7/8 86 86
Fourth Quarter........... 28-3/4 27 86 86
1994 First Quarter............ $30-1/4 $28-1/8 $86 $86
Second Quarter........... 30-1/2 28-5/8 * *
Third Quarter............ 31-1/8 30-1/2 * *
Fourth Quarter........... 31-1/4 28-1/4 * *
1995 First Quarter............ $32 $29-1/4 * *
Second Quarter........... 29-3/4 29-1/4 * *
(through June 27, 1995)
</TABLE>
____________________________________
* No trades known to management.
On October 19, 1994, the last trading day before the announcement of the
execution of the Reorganization Agreement, the closing sale price of CNB Common,
as reported on Nasdaq, was $31.625 per share (as adjusted to reflect the Stock
Dividend). On such date, the equivalent per share price for Orleans Common,
which is calculated by multiplying the specified closing sale price of CNB
Common by the Conversion Ratio of 6.37 shares of CNB Common for each share of
Orleans Common (assuming no downward adjustment of the Conversion Ratio; see
"MERGER -- Conversion Ratio"), was $201.45.
The most recent transaction reported to management of Orleans involving
shares of Orleans Common took place on January 15, 1994, at a price per share of
$86.00.
On June 27, 1995, the closing sale price of CNB Common, as reported on
Nasdaq, was $29.75 per share and the equivalent per share price for Orleans
Common (assuming no downward adjustment of the Conversion Ratio), was $189.51
per share, and there were approximately 7,387 and approximately 40 holders
of record of CNB Common and Orleans Common, respectively.
13
<PAGE>
SELECTED COMPARATIVE PER SHARE DATA
(unaudited)
The following summary presents comparative historical, pro forma and pro
forma equivalent unaudited per share data for CNB and Orleans. The pro forma
amounts assume that the Merger had been effective during the periods presented
and had been accounted for under the pooling of interests method of accounting.
For a description of the pooling of interests method of accounting with respect
to the Merger, see "Merger -- Accounting Treatment."
The amounts designated "Historical" represent, for CNB, the historical
financial results of CNB and also give effect to two separate transactions which
were completed after December 31, 1994, and before the date of this
Prospectus/Proxy Statement and which were accounted for under the pooling of
interests method (the "Recent Acquisitions") (see "PARTIES -- CNB -- Recent
Acquisitions"). The amounts designated "Pro Forma Combined Per CNB/Orleans
Share" represent the pro forma results of the Merger and also give effect to the
Recent Acquisitions. The amounts designated "Equivalent Pro Forma Per
CNB/Orleans Share" are computed by multiplying the Pro-Forma Combined Per
CNB/Orleans Share amounts by the Conversion Ratio of 6.37 shares of CNB Common
for each share of Orleans Common (assuming no downward adjustment of the
Conversion Ratio; see "MERGER -- Conversion Ratio"). The amounts designated "Pro
Forma Combined Per CNB Share" represent the pro forma results of the Merger and
also give effect to the Recent Acquisitions and one additional separate
transaction, the acquisition of UFB, which is presently pending and which is
expected to be accounted under the pooling of interests method (see "PARTIES --
CNB -- Pending Acquisitions"). The amounts designated "Equivalent Pro Forma Per
Orleans Share" are computed by multiplying the Pro Forma Combined Per CNB Share
amounts by the Conversion Ratio of 6.37 shares of CNB Common for each share of
Orleans Common (assuming no downward adjustment of the Conversion Ratio; see
"MERGER -- Conversion Ratio").
The data presented should be read in conjunction with the more detailed
information and financial statements included herein or incorporated by
reference in this Prospectus/Proxy Statement and with the unaudited pro forma
financial statements included elsewhere in this Prospectus/Proxy Statement. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE," "PRO FORMA FINANCIAL DATA"
and "FINANCIAL STATEMENTS OF ORLEANS."
<TABLE>
<CAPTION>
Three Months Ended March 31, Year Ended December 31,
---------------------------- -------------------------
1995 1994 1994 1993 1992
------------- ------------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET INCOME PER COMMON SHARE:/(1)/
Historical:
CNB
Primary............................. $ 0.47 $ 0.44 $ 1.82 $ 1.82 $ 1.52
Fully diluted....................... 0.47 0.42 1.78 1.76 1.48
Orleans.................................. 3.60 3.91 1.03 11.21 13.89
Pro-Forma Combined Per CNB/Orleans Share:
Primary............................. 0.47 0.44 1.79 1.82 1.53
Fully diluted....................... 0.47 0.43 1.74 1.76 1.49
Equivalent Pro-Forma Per CNB/Orleans Share:
Primary............................. 2.99 2.80 11.40 11.59 9.75
Fully diluted....................... 2.99 2.74 11.08 11.21 9.49
Pro-Forma Combined Per CNB Share:/(2)/
Primary............................. 0.46 0.44 1.35 1.87 1.60
Fully diluted....................... 0.46 0.43 1.33 1.82 1.56
Equivalent Pro-Forma Per Orleans Share:
Primary............................. 2.93 2.80 8.60 11.91 10.19
Fully diluted....................... 2.93 2.74 8.47 11.59 9.94
DIVIDENDS PER COMMON SHARE:/(3)/
Historical:
CNB..................................... $ 0.20 $ 0.19 $ 0.79 $ 0.73 $ 0.71
Orleans................................. 1.27 - 2.50 2.50 2.00
Pro-Forma Combined Per CNB Share........... 0.20 0.19 0.79 0.73 0.71
Equivalent Pro-Forma Per Orleans Share..... 1.27 1.21 5.03 4.65 4.52
BOOK VALUE PER COMMON SHARE:
Historical:
CNB..................................... $ 16.16 $ 15.61 $ 15.81 $ 15.55 $ 13.90
Orleans................................. 114.70 120.30 111.31 116.96 104.85
Pro-Forma Combined Per CNB/Orleans Share... 16.20 15.68 15.84 15.61 14.49
Equivalent Pro-Forma Per CNB/Orleans Share. 103.19 99.88 100.90 99.44 92.30
Pro-Forma Combined Per CNB Share/(2)/...... 16.32 16.42 15.95 16.28 14.74
Equivalent Pro-Forma Per Orleans Share..... 103.96 104.60 101.60 103.70 93.89
- --------------
</TABLE>
/(1)/ Excludes the cumulative effect of the adoption of SFAS 109, Accounting for
Income Taxes, which was adopted by CNB and Orleans on January 1, 1993.
/(2)/ The pro forma financial information of UFB, the fiscal year-end of which
is June 30, has been restated to conform with CNB's fiscal year-end of
December 31 by adding the results of UFB for the six-month period ended
December 31 to the most recent fiscal year-end information and deducting
the results of UFB for the six-month period ended December 31 of the
preceding fiscal year.
/(3)/ CNB's pro forma and Orleans' pro forma equivalent dividends per share
represent historical dividends per share declared by CNB multiplied by the
Conversion Ratio of 6.37 (assuming no downward adjustment).
14
<PAGE>
SELECTED FINANCIAL DATA
The following tables present selected unaudited consolidated historical
financial data for CNB and unaudited historical financial data for Orleans and
pro forma combined amounts reflecting the Merger. The pro forma amounts assume
that the Merger had been effective during the periods presented. The data
presented is derived from the consolidated financial statements of CNB and the
financial statements of Orleans and should be read in conjunction with the more
detailed information and financial statements included herein or incorporated by
reference in this Prospectus/Proxy Statement and with the unaudited pro forma
financial statements included elsewhere in this Prospectus/Proxy Statement. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE," "PRO FORMA FINANCIAL DATA"
and "FINANCIAL STATEMENTS OF ORLEANS."
CNB/(1)/
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
----------------------- --------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
- ----------------------
Interest Income........................ $ 55,953 $ 44,086 $ 195,467 $ 177,206 $ 187,882 $ 212,831 $ 205,025
Interest Expense....................... 26,361 19,699 87,255 86,764 95,950 125,797 129,329
Net Interest Income.................... 29,592 24,387 108,212 96,442 91,932 87,034 75,696
Provision for Loan Losses.............. 1,504 1,302 6,319 3,605 8,960 15,040 8,081
Noninterest Income..................... 8,893 10,262 37,352 33,910 28,313 26,106 21,927
Noninterest Expense.................... 25,938 23,983 97,707 87,867 81,359 78,963 64,598
Net Income/(2)/........................ 6,985 6,311 26,833 25,966 21,376 13,780 18,414
Per Common Share Data:
- ----------------------
Net Income/(2)/
Primary.............................. $ 0.47 $ 0.44 $ 1.82 $ 1.82 $ 1.52 $ 0.98 $ 1.33
Fully diluted........................ 0.47 0.42 1.78 1.76 1.48 0.98 1.33
Dividends Declared...................... 0.20 0.19 0.79 0.73 0.71 0.68 0.65
Book Value.............................. 16.16 15.61 15.81 15.55 13.90 13.05 12.70
Balance Sheet Data at Period End:
- ---------------------------------
Loans.................................. $1,909,409 $1,681,639 $1,917,982 $1,661,561 $1,401,981 $1,514,317 $1,570,512
Total Earning Assets................... 2,713,176 2,466,416 2,711,892 2,456,235 2,243,750 2,220,880 2,234,614
Total Deposits......................... 2,252,341 2,195,719 2,242,643 2,209,078 2,064,367 2,031,312 2,070,083
Total Shareholders' Equity............. 242,074 226,304 237,260 224,303 195,318 183,974 179,389
Total Assets........................... 2,904,397 2,658,975 2,919,087 2,654,188 2,450,578 2,427,200 2,451,766
Total Long-Term Debt................... 60,824 47,057 58,077 50,111 60,477 75,730 61,910
Financial Ratios:
- -----------------
Return on Average Assets/(3)/......... 0.96% 0.95% 0.96% 1.02% 0.88% 0.57% 0.84%
Return on Average Common Equity/(3)/.. 11.56 11.36 11.52 12.47 11.20 7.48 10.86
Net Interest Margin/(3)(4)/........... 4.53 4.17 4.30 4.23 4.25 4.13 4.03
Core Capital (Tier 1) Leverage
Ratio/(5)/........................... 7.73 7.84 7.51 7.56 7.31 6.74 6.48
Core Capital (Tier 1) Risk-Based
Capital Ratio/(6)/................... 11.84 12.06 11.63 11.86 11.47 10.60 9.06
Net Charge-Offs to Average Loans/(3)/. 0.44 0.21 0.21 0.23 0.50 0.77 0.61
Allowance for Losses to Loans......... 1.36 1.37 1.39 1.36 1.55 1.33 1.08
Nonperforming Loans to Loans/(7)/..... 0.81 1.00 0.78 0.95 1.00 1.27 1.19
Allowance for Losses to
Nonperforming Loans/(7)/............. 168.51 137.70 177.85 143.69 154.33 104.06 90.43
Nonperforming Assets to Total
Assets/(8)/........................ 0.61 0.79 0.61 0.80 0.86 1.03 1.13
- -----------
</TABLE>
/(1)/ The historical information set forth in the table gives effect to the
Recent Acquisitions which were completed after December 31, 1994, and
before the date of this Prospectus/Proxy Statement (which were accounted
for under the pooling of interests method). See "THE PARTIES -- CNB --
Recent Acquisitions."
/(2)/ Net income excludes the cumulative effect of the change in accounting for
income taxes.
/(3)/ Annualized in the case of interim financial information.
/(4)/ Computed by dividing net interest income by average interest earning
assets and stated on a fully taxable equivalent basis.
/(5)/ Computed by dividing period-end core capital (tangible equity) by period-
end tangible assets.
/(6)/ Based on final 1992 standards.
/(7)/ Nonperforming loans include nonaccrual and restructured loans and loans
past due 90 days or more.
/(8)/ Nonperforming assets include nonperforming loans and other real estate
owned.
15
<PAGE>
ORLEANS
<TABLE>
<CAPTION>
Three Months Ended March 31, Year Ended December 31,
------------------------------ --------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
-------------- -------------- ---------- -------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
- ---------------------
Interest Income............................ $ 1,065 $ 915 $ 3,833 $ 3,754 $ 4,174 $ 4,636 $ 4,816
Interest Expense........................... 522 403 1,756 1,752 2,147 2,873 3,086
Net Interest Income........................ 543 512 2,077 2,002 2,027 1,763 1,730
Provision for Loan Losses.................. -- -- 300 -- -- 500 36
Noninterest Income......................... 28 30 (132) 42 116 93 85
Noninterest Expense........................ 338 310 1,656 1,303 1,222 1,134 981
Net Income/(1)/............................ 180 195 51 561 695 185 560
Per Common Share Data:
- ----------------------
Net Income/(1)/............................ $ 3.60 $ 3.91 $ 1.03 $ 11.21 $ 13.89 $ 3.70 $ 11.21
Dividends Declared......................... 1.27 -- 2.50 2.50 2.00 2.00 2.00
Book Value................................. 114.70 120.30 111.31 116.96 104.85 93.85 90.20
Balance Sheet Data at Period End:
- --------------------------------
Loans...................................... $28,954 $ 27,368 $ 28,696 $27,827 $26,154 $24,180 $22,609
Total Earning Assets....................... 55,765 54,550 56,401 55,044 53,448 52,302 50,992
Total Deposits............................. 51,801 50,491 53,185 50,454 50,711 49,401 48,502
Total Shareholders' Equity................. 5,735 6,015 5,565 5,848 5,242 4,692 4,510
Total Assets............................... 57,832 56,682 58,965 57,238 56,120 54,358 53,381
Total Long-Term Debt....................... -- -- -- -- -- -- --
Financial Ratios:
- ----------------
Return on Average Assets/(2)/.............. 1.23% 1.37% 0.09% 1.04% 1.26% 0.34% 1.09%
Return on Average Common Equity/(2)/....... 12.62 12.95 0.83 10.44 13.83 3.91 12.91
Net Interest Margin/(2)(3)/................ 4.38 4.28 4.29 4.23 4.34 3.85 4.04
Core Capital (Tier 1) Leverage Ratio/(4)/.. 9.92 10.61 9.44 10.22 9.34 8.63 8.45
Core Capital (Tier 1) Risk-Based
Capital Ratio/(5)/....................... 17.26 18.39 16.46 19.74 18.11 17.20 17.17
Net Charge-Offs to Average Loans/(2)/...... (0.28) 0.07 0.50 (0.14) (0.37) 2.25 0.12
Allowance for Losses to Loans.............. 2.03 1.47 1.98 1.47 1.43 1.19 1.29
Nonperforming Loans to Loans/(6)/.......... 0.47 0.12 0.07 0.68 0.79 1.34 4.11
Allowance for Loan Losses to
Nonperforming Loans/(6)/................. 435.56 1185.29 2,704.76 215.87 180.19 88.89 31.32
Nonperforming Assets to Total
Assets/(7)/.............................. 0.23 0.17 0.04 0.40 0.59 0.63 1.78
- ---------------------------
</TABLE>
/(1)/ Net income excludes the cumulative effect of change in accounting for
income taxes.
/(2)/ Annualized in the case of interim financial data.
/(3)/ Computed by dividing net interest income by average interest-earning
assets and stated on a fully taxable equivalent basis.
/(4)/ Computed by dividing period-end core capital (tangible equity) by period-
end tangible assets.
/(5)/ Based on final 1992 standards.
/(6)/ Nonperforming loans include nonaccrual and restructured loans and loans
past due 90 days or more.
/(7)/ Nonperforming assets include nonperforming loans and other real estate
owned.
16
<PAGE>
PRO FORMA COMBINED SELECTED FINANCIAL DATA/(1)/
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
------------------------ -------------------------------------
1995 1994 1994 1993 1992
<S> <C> <C> <C> <C> <C>
(dollars in thousands, except per share data)
INCOME STATEMENT DATA: $ 66,652 $ 52,570 $ 231,926 $ 215,435 $ 229,930
Interest Income...................................... 33,196 24,497 108,378 102,339 121,208
Interest Expense..................................... 33,456 28,073 123,548 113,096 108,722
Net Interest Income.................................. 1,554 1,385 8,384 3,934 9,200
Provision for Loan Losses............................ 10,043 12,074 41,685 43,213 36,564
Non-interest Income.................................. 29,338 27,654 116,690 103,905 97,584
Non-interest Expense................................. 8,059 7,531 23,492 31,840 26,954
Net Income /(2)/.....................................
Per Common Share Data:
- ----------------------
Net Income/(2)/
Primary.......................................... $ 0.46 $ 0.44 $ 1.35 $ 1.87 $ 1.60
Fully diluted.................................... 0.46 0.43 1.33 1.82 1.56
Dividends Declared................................... 0.20 0.19 0.79 0.73 0.71
Book Value........................................... 16.32 16.42 15.95 16.28 14.74
Balance Sheet Data at Period End:
- ---------------------------------
Loans................................................ $2,140,810 $1,884,604 $2,140,380 $1,867,869 $1,616,644
Total Earning Assets................................. 3,291,020 2,957,747 3,280,681 2,984,161 2,742,669
Total Deposits....................................... 2,663,293 2,636,517 2,649,910 2,643,300 2,494,378
Total Shareholders' Equity........................... 285,582 278,899 279,509 275,479 244,667
Total Assets......................................... 3,514,770 3,184,918 3,528,498 3,219,196 2,981,956
Total Long-Term Debt................................. 60,824 47,057 58,077 50,111 60,477
Financial Ratios:
- -----------------
Return on Average Assets/(3)/........................ 0.91% 0.95% 0.70% 1.02% 0.91%
Return on Average Common Equity/(3)/................. 11.24 10.99 8.30 12.33 11.36
Net Interest Margin/(3)(4)/.......................... 4.21 3.97 4.07 4.04 4.09
Core Capital (Tier 1) Leverage Ratio/(5)/............ 7.74 8.13 7.61 7.82 7.66
Core Capital (Tier 1) Risk-Based Capital Ratio/(6)/.. 12.72 13.38 12.54 13.06 12.71
Net Charge-Offs to Average Loans/(3)/................ 0.39 0.20 0.23 0.21 0.44
Allowance for Losses to Loans........................ 1.33 1.29 1.36 1.28 1.41
Nonperforming Loans to Loans/(7)/.................... 0.74 0.90 0.71 0.87 0.90
Allowance for Loan Losses to
Nonperforming Loans/(7)/......................... 180.68 144.03 191.88 147.41 156.87
Nonperforming Assets to Total Assets/(8)/............ 0.53 0.70 0.54 0.72 0.77
</TABLE>
___________________________
/(1)/ The pro forma information set forth in this table gives effect to the
Recent Acquisitions which were completed after December 31, 1994, and
before the date of this Prospectus/Proxy Statement and which were
accounted for under the pooling of interests method (see "PARTIES --CNB--
Recent Acquisitions") and to one additional separate transaction, the
acquisition of UFB, that is presently pending which is expected to be
accounted for under the pooling of interest method (see "PARTIES -- CNB --
Pending Acquisitions"). The information for UFB, the fiscal year-end of
which is June 30, has been restated to conform with CNB's fiscal year-end
of December 31 by adding the results of UFB for the six-month period ended
December 31 to the most recent fiscal year-end information and deducting
the results of UFB for the six-month period ended December 31 of the
preceding fiscal year.
/(2)/ Net income excludes the cumulative effect of the change in accounting for
income taxes.
/(3)/ Annualized in the case of interim financial information.
/(4)/ Computed by dividing net interest income by average interest-earning
assets and stated on a fully taxable equivalent basis.
/(5)/ Computed by dividing period-end core capital (tangible equity) by period-
end tangible assets.
/(6)/ Based on final 1992 standards.
/(7)/ Nonperforming loans include nonaccrual and restructured loans and loans
past due 90 days or more.
/(8)/ Nonperforming assets include nonperforming loans and other real estate
owned.
17
<PAGE>
SPECIAL MEETING
DATE, TIME AND PLACE
This Prospectus/Proxy Statement is being furnished to shareholders of
Orleans in connection with the solicitation of proxies by the Board of Directors
of Orleans for use at the Special Meeting to be held at the office of Orleans
located at 200 South Maple Street, Orleans, Indiana on August 3, 1995, at
10:00 a.m., local time, and at any adjournment or postponement thereof.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, the shareholders of Orleans will consider and vote
upon the Reorganization Agreement providing for the Merger of Interim Bank with
and into Orleans. In addition, shareholders of Orleans may be asked to vote on
a proposal to adjourn or postpone the Special Meeting, which adjournment or
postponement could be used for the purpose, among others, of allowing time for
the solicitation of additional votes to approve the Reorganization Agreement.
This Prospectus/Proxy Statement, the attached Notice of Special Meeting and
the Proxy Card are first being sent to shareholders of Orleans on or about
July 5, 1995.
RECORD DATE
The Board of Directors of Orleans has fixed the close of business on
June 19, 1995, as the record date for the determination of shareholders of
Orleans Common to receive notice of and to vote at the Special Meeting. On the
record date there were 50,000 shares of Orleans Common outstanding. Only
holders of shares of Orleans Common of record on the record date are entitled to
vote at the Special Meeting. No shares of Orleans Common can be voted at the
Special Meeting unless the record holder is present in person or represented by
proxy at the Special Meeting.
VOTE REQUIRED
The affirmative vote of a majority of the outstanding shares of Orleans
Common entitled to vote thereon is required to approve the Merger and the
Reorganization Agreement. As a result, abstentions from voting will have the
same effect as votes against the Merger and the Reorganization Agreement. Each
holder of Orleans Common is entitled to one vote per share of Orleans Common.
As of the record date, the directors and executive officers of Orleans and their
affiliates have the power to vote a total of 25,550 shares of Orleans Common, or
51.1% of the shares outstanding. Although the executive officers and directors
of Orleans and their affiliates are not contractually obligated to vote their
shares of Orleans Common in favor of the Reorganization Agreement, if, as
management of Orleans expects, all such shares are voted in favor of the
Reorganization Agreement, the executive officers and directors of Orleans and
their affiliates will have the ability to approve the Merger without the vote of
the remaining shareholders of Orleans.
For information regarding the shares of Orleans Common beneficially owned,
directly or indirectly, by each director and executive officer of Orleans and by
all directors and officers of Orleans as a group, see "INFORMATION ABOUT ORLEANS
- -- Security Ownership of Management of Orleans."
18
<PAGE>
In the event that the Merger and Reorganization Agreement are not approved
by the requisite vote of the shareholders of Orleans, Orleans must pay to CNB
the sum of $500,000. See "MERGER --Termination Fee."
As of the record date, directors and executive officers of CNB did not own
beneficially any shares of Orleans Common.
VOTING AND REVOCATION OF PROXIES
Proxies for use at the Special Meeting accompany this Prospectus/Proxy
Statement. A shareholder may use his or her proxy if he or she is unable to
attend the Special Meeting in person or wishes to have his or her shares voted
by proxy even if he or she does attend the Special Meeting. Shares of Orleans
Common represented by a proxy properly signed and returned to Orleans at, or
prior to, the Special Meeting, unless subsequently revoked, will be voted at the
Special Meeting in accordance with instructions thereon. If a proxy is properly
signed and returned and the manner of voting is not indicated on the proxy, any
shares of Orleans Common represented by such proxy will be voted FOR the Merger
and the Reorganization Agreement and FOR the proposal regarding adjournment or
postponement. Any proxy given pursuant to this solicitation may be revoked by
the grantor at any time prior to the voting thereof on the Merger and the
Reorganization Agreement, by filing with the Cashier of Orleans a written
revocation or a duly executed proxy bearing a later date. A holder of Orleans
Common may withdraw his or her proxy at the Special Meeting at any time before
it is exercised by electing to vote in person; however, attendance at the
Special Meeting will not in and of itself constitute a revocation of the proxy.
SOLICITATION OF PROXIES
In addition to solicitation of proxies from shareholders of Orleans Common
by use of the mail, proxies also may be solicited by personal interview,
telephone and wire by directors, officers and employees of Orleans, who will not
be specifically compensated for such services. All costs of soliciting proxies,
assembling and mailing this Prospectus/Proxy Statement and all papers which now
accompany or hereafter may supplement the same will be borne by Orleans.
Orleans reserves the right to engage an outside party to solicit proxies and to
pay special compensation for that purpose.
CNB and Orleans have agreed to share in the expense of preparation of this
Prospectus/Proxy Statement and CNB will bear the entire cost of printing this
Prospectus/Proxy Statement and all S.E.C. and other regulatory filing fees
incurred in connection therewith.
PARTIES
CNB
GENERAL
CNB was organized in January 1984, as a one-bank holding company for The
Citizens National Bank of Evansville ("Citizens Bank"). CNB is a multi-bank
holding company headquartered in Evansville, Indiana, where Citizens Bank, which
remains the largest and lead bank of CNB's financial subsidiaries, conducts its
principal operations. As of March 31, 1995, CNB had
19
<PAGE>
consolidated assets of $2.9 billion, deposits of $2.2 billion, loans of $1.9
billion and shareholders' equity of $242 million.
The business of CNB consists primarily of the ownership, supervision and
control of its subsidiaries. CNB provides its subsidiaries with advice, counsel
and specialized services in various fields of financial and banking policy and
operations. Through the 81 full-service banking offices and 25 consumer finance
offices of its financial and non-banking subsidiaries, CNB provides commercial,
retail and correspondent banking, mortgage servicing, trust, data processing,
cash management and related financial services to customers in southern, west
central and central Indiana, western Kentucky, southern Illinois and the
suburban Louisville, Kentucky area. CNB's non-banking subsidiaries include
Citizens Information Systems, Inc., which provides data processing and
information services to banks and businesses in Indiana, Kentucky and Illinois;
Citizens Life Assurance Company, which underwrites credit life and disability
insurance for CNB's financial subsidiaries and Citizens Realty and Insurance
Inc., which sells property and casualty insurance as an independent agent.
While CNB continues to standardize its corporate policies and procedures
and centralize administrative functions to provide more efficient and cost-
effective operations support for its financial subsidiaries, its management
philosophy is to afford its financial subsidiaries adequate flexibility to
respond to varying local market conditions and local customers and community
needs. This philosophy allows the management of CNB's financial subsidiaries to
better meet the banking needs of their customers by taking advantage of the
additional resources, services and efficiencies available to them as members of
CNB's multi-bank organization, but in the manner best suited for their local
conditions.
CNB's growth since its formation has resulted principally from
acquisitions. Management anticipates that CNB will continue to pursue expansion
through future acquisitions. It is anticipated that potential candidates for
acquisition in the near term would be located in southern and central Indiana,
western Kentucky and southern Illinois. In addition, CNB may engage in new
activities as law and regulations permit.
Interim Bank is a recently formed wholly owned subsidiary of CNB which will
be used to facilitate the Merger. Interim Bank engages in no other business.
RECENT ACQUISITIONS
King City Federal Savings Bank
On February 1, 1995, CNB acquired, for shares of CNB Common, all of the
issued and outstanding shares of King City, a federally chartered savings bank
headquartered in Mount Vernon, Illinois. The acquisition was accounted for
under the pooling of interests method of accounting. As of December 31, 1994,
King City had assets of $172.1 million, deposits of $161.0 million and
shareholders' equity of $8.2 million.
Harrisburg Bancshares, Inc.
On February 10, 1995, CNB acquired, for shares of CNB Common, all of the
issued and outstanding shares of HBI and all of the issued and outstanding
shares of its subsidiary bank, Harrisburg National. The acquisition was
accounted for under the pooling of interests method of accounting. As
20
<PAGE>
of December 31, 1994, HBI had assets of $110.4 million, deposits of $95.3
million and shareholders' equity of $5.7 million.
PENDING ACQUISITIONS
UF Bancorp, Inc.
On December 12, 1994, CNB entered into an Agreement and Plan of Merger (the
"UFB Agreement") to acquire UFB. UFB is a publicly held, savings and loan
holding company headquartered in Evansville, Indiana, that, through its wholly
owned subsidiary, Union Federal Savings Bank ("Union Federal"), operates 16
offices in Indiana, Illinois and Kentucky and engages in mortgage banking
activities through Union Financial Corp., which is a wholly owned subsidiary of
Union Federal. At March 31, 1995, UFB had assets of $553.0 million, deposits of
$359.2 million, net loans receivable of $200.5 million and shareholders' equity
of $38.7 million. CNB anticipates that Union Federal would be merged with
Citizens Bank and that the offices of Union Federal located outside of the
Evansville, Indiana area would be combined with bank subsidiaries of CNB in
those markets. The Board of Directors of CNB believes that the acquisition of
UFB would be a natural and desirable extension of its banking franchise in
Indiana, Illinois and Kentucky.
Under the terms of the UFB Agreement, each share of UFB common stock will
be converted into the right to receive 1.366 shares of CNB Common (the "UFB
Conversion Ratio"), subject to possible adjustments as described below, plus
cash in lieu of fractional shares. The UFB Agreement provides that if the CNB
Average Price (as described below) is less than $26.66, then the UFB Conversion
Ratio will be increased to equal the product of (i) 1.366 and (ii) the quotient
of $26.66 divided by the CNB Average Price, and if the CNB Average Price is more
than $36.06, then the UFB Conversion Ratio will be decreased to equal the
product of (i) 1.366 and (ii) the quotient of $36.06 divided by the CNB Average
Price. As used in the UFB Agreement, the term "CNB Average Price" means the
average of the per share closing prices of a share of CNB Common as reported on
Nasdaq during the twenty business day period preceding the fifth calendar day
preceding the date on which the transactions described in the UFB Agreement are
consummated. CNB would exchange approximately 2.4 million shares of CNB Common
for all of the stock of UFB (including shares issued for stock options).
Assuming the UFB Conversion Ratio is 1.366 shares of CNB Common for each share
of UFB common stock (which number is subject to possible adjustment as described
above), the shares of CNB Common to be issued in connection with the acquisition
of UFB would constitute approximately 13.8% of the outstanding shares of CNB
Common, assuming consummation of the Merger and the consummation of the UFB
acquisition.
The acquisition of UFB, which is expected to be completed in the third
quarter of 1995, is subject to various conditions, including approval of the UFB
Agreement by the requisite vote of the shareholders of UFB and approval of the
acquisition by various federal and state bank regulatory agencies. Regulatory
applications have been filed. The UFB Agreement also contains certain
provisions pursuant to which, under certain circumstances, either CNB or UFB may
terminate the UFB Agreement.
There can be no assurance that all necessary regulatory approvals will be
obtained or that all conditions to the UFB Agreement will be satisfied such that
the acquisition of UFB will be consummated. The Merger is not conditioned upon
consummation of the UFB acquisition.
UFB's audited balance sheets for the years ended June 30, 1994 and 1993 and
audited statements of income and cash flows for the three years ended June 30,
1994, as contained in UFB's Annual
21
<PAGE>
Report on Form 10-K/A for the fiscal year ended June 30, 1994, are incorporated
herein by reference to CNB's Current Report on Form 8-K, dated June 15, 1995 and
UFB's interim period balance sheets and statements of income and cash flows for
the nine-month periods ended March 31, 1995 and 1994, as contained in UFB's
Quarterly Report on Form 10-Q/A (Second Amendment) for the quarter ended March
31, 1995, are incorporated herein by reference to CNB's Current Report on Form
8-K, dated June 26, 1995. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
Household Bank, f.s.b. Branches
On April 7, 1995, Citizens Bank of Western Indiana, a wholly owned
subsidiary of CNB headquartered in Terre Haute, Indiana, entered into a Purchase
and Assumption Agreement to acquire certain assets and assume certain
liabilities of four branch offices of Household Bank, f.s.b., located in west-
central Indiana. The total amount of deposits to be assumed is approximately
$80 million. There can be no assurance that all necessary regulatory approvals
will be obtained or that all conditions to the Purchase and Assumption Agreement
will be satisfied such that the purchase and assumption transaction will be
consummated. The Merger is not conditioned upon consummation of the purchase
and assumption transaction.
Additional information concerning CNB is included in the CNB documents
incorporated by reference herein. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
ORLEANS
Orleans is an Indiana chartered commercial bank which assumed all of the
assets of the National Bank of Orleans on January 14, 1933 and has since
continued in business without interruption. Orleans provides commercial and
retail banking services from its office in Orleans, Indiana to the Orleans,
Indiana community and surrounding area. These services include accepting
demand, savings and time deposits; making commercial, agricultural, consumer and
real estate loans; administering trusts and estates; and providing other
services relating to the general commercial banking business. At March 31,
1995, Orleans had assets of $57.8 million, deposits of $51.8 million, loans of
$28.9 million and shareholders' equity of $5.7 million. See "INFORMATION ABOUT
ORLEANS."
MERGER
The following summary is qualified in its entirety by reference to the full
text of the Reorganization Agreement, which is attached as Exhibit A hereto and
incorporated by reference herein.
BACKGROUND OF MERGER
During June, 1994, after Orleans was notified that its data processing
service provider had determined to discontinue providing such services to
Orleans, Orleans' management formed a committee and began searching for
alternative data processing service providers. During this search, the
President of Orleans was introduced to a senior officer of CNB by a relative of
one of the Orleans directors. During this meeting, CNB expressed an interest in
pursuing a possible business combination with Orleans.
The President of Orleans discussed CNB's expression of interest with the
Board of Directors of Orleans on July 12, 1994. The Board authorized the
President to continue discussions with CNB
22
<PAGE>
concerning a possible business combination. On July 14, 1994, representatives
of CNB conducted preliminary due diligence in Orleans, Indiana. Following its
preliminary due diligence, on August 24, 1994, CNB sent Orleans a non-binding
letter of intent outlining the terms of a proposed business combination with
Orleans. The Board of Directors of Orleans reviewed the non-binding letter of
intent on August 29, 1994.
At its meeting on August 29, 1994, the Board of Directors of Orleans
determined that, in order to fully assess CNB's offer and compare it to similar
transactions, it was in the best interests of Orleans' shareholders to retain
the services of an investment banking firm. After interviewing two investment
banking firms, on September 8, 1994, Orleans retained David A. Noyes & Company
to provide an opinion of Orleans estimated value in a merger. Further, if
Orleans decided to proceed with a merger transaction, David A. Noyes & Company
agreed to assist Orleans in negotiating the price and terms with CNB as well as
to provide a fairness opinion concerning CNB's offer. See "MERGER -- Opinion of
Financial Advisor."
The Board of Directors of Orleans sought the advice of David A. Noyes &
Company on various aspects of CNB's August 24, 1994 non-binding letter of
intent. The activities of David A. Noyes & Company included (i) on-site due
diligence at Orleans and CNB including review of Orleans' off-balance sheet
items which may not have been fully considered by CNB in its initial offer
(which included certain charged-off loans, the perceived excess of fair value of
premises and equipment over book value, and tax credit carry forwards); (ii)
discussions with members of the Board of Directors and management of Orleans
with respect to desired pricing and terms, including advice on accepting a fixed
exchange ratio as opposed to a fixed market value per share, timing of events
leading to consummation of the acquisition, handling of personnel,
environmental, audit and other transitional issues; (iii) a review of comparable
transactions in the Midwest from January 1, 1992 through September 8, 1994; (iv)
a review of other potential acquirors; (v) consideration of the structure and
terms of prior CNB acquisitions, including CNB's requirement for pooling of
interests accounting treatment; and (vi) calculation of the impact of the merger
on CNB's earnings per share and dividends to Orleans shareholders.
On September 13, 1994, Orleans received David A. Noyes & Company's opinion
concerning the estimated value of Orleans. The opinion indicated that Orleans'
value in an acquisition would be in a range of $190 to $205 per share, and that
the financial terms of the non-binding letter of intent submitted by CNB on
August 24, 1994, were within that range. The Board thereafter authorized
management to contact CNB and pursue negotiating the terms of a definitive
merger agreement.
Orleans and its respective advisors, including David A. Noyes & Company,
met representatives of CNB in Evansville, Indiana, on September 16, 1994 to
commence negotiation of the terms of a definitive merger agreement.
Negotiations continued for several weeks thereafter. During these negotiations,
representatives of Orleans, including David A. Noyes & Company, and CNB
discussed the amount of the Conversion Ratio (see "MERGER -- Conversion Ratio")
and several issues which were not specifically addressed in the non-binding
letter of intent submitted by CNB. These other issues included (i) the amount
of dividends payable by Orleans to its shareholders during the pendency of the
transaction (see "MERGER -- Certain Other Agreements -- Dividends"); (ii) the
terms of the environmental remediation of certain of Orleans' real property (see
"MERGER -- Certain Other Agreements -- Environmental Remediation and
Investigation"); (iii) the amount and method of calculating the Orleans Closing
Book Value (see "MERGER -- Conversion Ratio"); (iv) the post-closing status of
employees and officers of Orleans (see "MERGER -- Effect on Employee Benefit
Plans"), and (iv) the possibility of employment and/or severance agreements for
the Chief Executive Officer and Executive
23
<PAGE>
Vice President of Orleans (although no such employment or severance agreements
were entered into in connection with the Merger). On October 18, 1994, the
Orleans Board of Directors approved and executed the Reorganization Agreement
and on May 5, 1995, the Reorganization Agreement was amended to extend the date
by which either party may terminate the Reorganization Agreement from July 31,
1995 to September 30, 1995. See "MERGER -- Termination or Abandonment."
REASONS FOR MERGER
ORLEANS
Among other things, the substantial and rapid changes in the banking
industry in general, and in Indiana specifically, prompted Orleans'
consideration of CNB's merger proposal. The significant increase in bank
regulatory burdens in the recent past has made it increasingly difficult for
Orleans to generate a reasonable profit or to achieve the economies of scale
necessary to adequately or efficiently bear these increasing regulatory costs.
Developments in the financial services industry generally have led to
further increases in competition for bank and financial services. Indiana
banking laws historically restricted the rights of bank holding companies with
principal offices in Indiana from owning banks located throughout the state and
from acquiring or affiliating with banks or bank holding companies located in
other states. In recent years, however, Indiana laws have been amended to
expand the intrastate and interstate acquisition rights of Indiana banks and
bank holding companies, subject to certain limitations. These statutory and
other changes have contributed to increased acquisition activity among financial
institutions located in Indiana and other states, resulting in greater
competition for community banks.
In response to these competitive and regulatory factors and after
evaluation of financial, economic, legal and market considerations, the Orleans
Board of Directors unanimously approved the Merger as being in the best
interests of Orleans and its shareholders. In taking such action Orleans Board
of Directors specifically considered, without limitation, the following factors:
the adequacy, past levels and stability of the per share market value, book
value, earnings and dividends of CNB Common; the anticipated tax-free nature of
the Merger to Orleans shareholders who receive CNB Common in exchange for their
shares of Orleans Common; the possibility of increased liquidity through
ownership of CNB Common as compared to Orleans Common because CNB Common is
traded in the over-the-counter market and is reported on Nasdaq; the timeliness
of a merger given the state of the economy and the stock markets and anticipated
trends in both; information concerning the financial condition, earnings,
dividend payment records and business management prospects of Orleans and CNB,
as separate institutions and as combined; the amount and form of consideration
offered by CNB for Orleans Common; regulatory requirements and the length of
time required to complete the proposed merger; the terms of other reported bank
acquisitions which occurred in the midwestern United States in the prior year;
and the fairness opinion of the firm of David A. Noyes & Company.
The Board of Directors of Orleans also considered the impact of the
proposed transaction on its customers and employees and the community served by
Orleans. CNB's continuing commitment to the communities served by institutions
CNB previously acquired was also examined. From the standpoint of Orleans'
customers, more products and services would become available because of CNB's
greater resources.
24
<PAGE>
Based upon the foregoing factors, the Board of Directors concluded that it
was advantageous to affiliate with CNB. The importance of the various factors
relative to one another cannot precisely be determined or stated.
Certain members of the management and Boards of Directors of Orleans have
interests in the Merger that are in addition to the interests of shareholders of
Orleans generally. See "MERGER--Interests of Certain Persons in Merger."
CNB
The Board of Directors of CNB believes that the acquisition of Orleans
would be a natural and desirable addition to CNB's banking franchise in southern
and central Indiana.
RECOMMENDATION OF ORLEANS BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF ORLEANS BELIEVES THAT THE MERGER IS IN THE BEST
INTERESTS OF THE SHAREHOLDERS OF ORLEANS AND, ACCORDINGLY, RECOMMENDS THAT
HOLDERS OF ORLEANS COMMON VOTE "FOR" APPROVAL OF THE REORGANIZATION AGREEMENT.
OPINION OF FINANCIAL ADVISOR
David A. Noyes & Company was engaged in September 1994 to act as Orleans'
financial advisor in connection with Orleans' interest in evaluating an offer
that had been received from CNB and negotiating a merger or acquisition. In
connection with that engagement, David A. Noyes & Company agreed to provide to
Orleans, among other things, (i) its estimation of Orleans' value in a merger or
acquisition; (ii) its assistance in negotiating the price and terms of a
proposed affiliation with CNB; and (iii) in the event of a transaction with CNB,
an opinion as to the fairness, from a financial perspective, of the terms of the
Merger with respect to the shareholders of Orleans.
David A. Noyes & Company, established in 1908, is a member of the New York
Stock Exchange and has offices located in Chicago and Indianapolis. Through its
network of five offices and 65 brokers, the firm maintains Nasdaq markets and
investment services for individual and institutional clients. As a part of its
investment banking business, David A. Noyes & Company/Capital Markets Group, a
division of David A. Noyes & Company, is regularly engaged in reviewing the
fairness of bank acquisition transactions from a financial perspective and in
the valuation of banks and other businesses and their securities in connection
with mergers, acquisitions, and other transactions. Neither David A. Noyes &
Company nor any of its principals has a material financial interest in Orleans
or CNB. David A. Noyes & Company was selected to advise the Orleans Board of
Directors based upon its familiarity and experience with Indiana financial
institutions and its knowledge of the banking industry as a whole.
David A. Noyes & Company has acted and continues to act as a market maker
in the stock of CNB. It has also pursued certain acquisitions for CNB, although
no acquisitions have resulted from such pursuits. David A. Noyes & Company
represented an organization in connection with its 1992 sale to CNB and was one
of the underwriters involved in CNB's sale of debt securities in 1991. David A.
Noyes & Company does not believe that its past and present business
relationships with CNB, which are in the ordinary course of its business and, in
terms of revenue, are insignificant to the firm's gross revenues, constitute a
conflict of interest in connection with its representation of Orleans in the
Merger.
25
<PAGE>
David A. Noyes & Company performed certain valuation analyses, as described
below, in connection with its determination, as discussed with the Directors of
Orleans at their September 13, 1994 meeting, that the value of Orleans in an
acquisition would be within a range of $190 and $205 per share. David A. Noyes
& Company confirmed the continued accuracy of these valuation analyses, and
relied upon such analyses, in connection with the issuance of its written
fairness opinions dated October 18, 1994 (the date of the Reorganization
Agreement) and reaffirmed as of the date of mailing of this Prospectus/Proxy
Statement, to the effect that the terms of the Merger are fair to Orleans'
shareholders from a financial point of view. One of the conditions to the
obligation of Orleans to consummate the Merger is that David A. Noyes & Company
shall not have withdrawn, on or before the date of this Prospectus/Proxy
Statement, its fairness opinion dated October 18, 1994. See "MERGER--
Conditions to Consummation of Merger." After (i) reviewing its analyses
described below (using the same data (through September 8, 1994)), (ii)
evaluating the performance of CNB's common stock and the performance of other
bank and bank holding company stocks generally from the date of the original
fairness opinion to the date of this Prospectus/Proxy Statement, and (iii)
reviewing, in the ordinary course of its investment banking business, bank and
bank holding company acquisitions subsequent to September 8, 1994, David A.
Noyes & Company reaffirmed its previous fairness opinion by issuing a fairness
opinion dated as of the date of this Prospectus/Proxy Statement. As a result,
the condition to the Merger described above has been satisfied. The fairness
opinion dated as of the date of this Prospectus/Proxy Statement, which is
attached as Exhibit B to this Prospectus/Proxy Statement, is substantively
identical to the fairness opinion dated October 18, 1994, and should be read in
its entirety.
In connection with determining the valuation range of Orleans, rendering
the fairness opinions and preparing its various written and oral presentations
to Orleans' Board of Directors, David A. Noyes & Company performed a variety of
financial analyses, including those summarized below. In connection with the
foregoing, David A. Noyes & Company reviewed (i) the Reorganization Agreement
between Orleans and CNB; (ii) the most recent external auditor's reports to the
Boards of Directors of each organization; (iii) CNB's annual report for the year
ended December 31, 1994 and interim SEC reports; (iv) interim balance sheets and
income statements for each organization; (v) loan, investment, and deposit
summaries for each organization; (vi) rate sensitivity analysis reports for each
organization; (vii) analysis of the adequacy of the allowance for loan losses
for each organization; (viii) each organization's internal loan classification
list; (ix) a listing of unfunded letters of credit and any other off-balance
sheet risks for each organization; (x) Orleans' budget and tax returns; (xi)
Board of Director minutes for each organization; and (x) other documents deemed
relevant.
In addition, David A. Noyes & Company discussed with Orleans' and CNB's
management the relative operating performance and future prospects of each
organization. David A. Noyes & Company considered certain financial and stock
market data of Orleans and CNB, and compared that data with similar data for
certain other Indiana-based, publicly-held banks and bank holding companies.
David A. Noyes & Company also considered the financial terms of selected Midwest
bank and bank holding company transactions that have recently been announced.
David A. Noyes & Company also considered such other information, financial
studies, analyses and investigations and financial, economic and market criteria
that it deemed relevant. In connection with its review, David A. Noyes &
Company did not independently verify the foregoing information and relied on
such information being complete and accurate in all material respects.
Financial forecasts prepared by David A. Noyes & Company were based on
assumptions believed by David A. Noyes & Company to be reasonable and to reflect
currently available information. David A. Noyes & Company did not make
independent evaluation or appraisal of the assets of Orleans or CNB. David A.
Noyes & Company was not requested to, and did not, solicit third party
indications of interest in acquiring all or any part of Orleans.
26
<PAGE>
The summary set forth below does not purport to be a complete description
of the analyses performed by David A. Noyes & Company. The preparation of the
fairness opinion involves various determinations as to the most appropriate and
relevant methods of financial analysis and the applications of these methods to
the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Accordingly, notwithstanding the separate
factors summarized below, David A. Noyes & Company believes that its analyses
must be considered as a whole and that selecting portions of its analyses, and
the facts considered by it, without considering all analyses and factors, could
create an incomplete view of the evaluation process underlying its opinion. In
performing its analyses, David A. Noyes & Company made numerous assumptions with
respect to industry performance, business and economic conditions and other
matters, many of which are beyond Orleans' or CNB's control. The analyses
performed by David A. Noyes & Company are not necessarily indicative of actual
values or future results, which may be significantly more or less favorable than
suggested by such analyses.
Acquisition Market Comparison Analysis. David A. Noyes & Company reviewed
all Midwest bank and bank holding company acquisition transactions announced
between January 1, 1992 and September 8, 1994 in which the seller's assets were
under $100 million, which specifically included 145 transactions in 13 states.
The purpose of the analysis was to obtain a valuation range based on these other
Midwest bank and bank holding company acquisition transactions. Because the
reasons for and circumstances surrounding each of the transactions analyzed were
diverse and because of the inherent differences between the operations of
Orleans, CNB and the selected companies, David A. Noyes & Company focused on the
median acquisition prices in these selected transactions. Multiples of earnings
and book values implied by the selected transactions were utilized in obtaining
a range for the acquisition value of Orleans. The median acquisition prices for
the 145 Midwest bank and bank holding company acquisition transactions,
expressed as multiples of book value, tangible book value and earnings, were
1.50, 1.51 and 13.17, respectively. Based on Orleans' book and tangible book
value per share of $125.83 and four quarter trailing earnings of $15.55, the
median multiples of book value, tangible book value and earnings would indicate
a value of $189.36, $190.41 and $204.79 per share, respectively.
Of the 145 Midwest bank and bank holding company transactions reviewed, 55
involved seller's assets between $35 million and $75 million. The median
acquisition prices for the 55 Midwest bank and bank holding company
acquisitions, expressed as multiples of book value, tangible book value and
earnings, were 1.63, 1.67 and 13.14, respectively. Based on Orleans' book and
tangible book value per share of $125.83 and four quarter trailing earnings of
$15.55, the median multiples of book value, tangible book value and earnings
would indicate a value of $204.94, $209.57 and $204.33 per share, respectively.
In addition to comparing the relationship of price to book value and
earnings, David A. Noyes & Company compared measures of financial performance,
financial strength and asset quality. Orleans' relative financial performance
is indicated by its return on average assets and equity of 1.23% and 11.97%,
respectively, compared to 1.02% and 12.29% for the 55 Midwest bank and bank
holding company transactions with sellers assets between $35 million and $75
million. Orleans' relative financial strength is indicated by its tangible
equity to assets percentage of 10.91% compared to 8.61% for the 55 Midwest bank
and bank holding company transactions with sellers' assets between $35 million
and $75 million. Orleans' relative asset quality is indicated by its non-
performing assets to assets percentage of 0.35% compared to 0.95% for the 55
Midwest bank and bank holding company transactions with sellers' assets between
$35 million and $75 million.
27
<PAGE>
David A. Noyes & Company believes that, while the results of each analyses
described above with respect to the selected Midwest bank and bank holding
company transactions are consistent with its opinion that the value of Orleans
in an acquisition would be between $190 and $205, a purely quantitative
comparable transaction analysis would not be particularly meaningful in the
context of the Merger because no organization or transaction used in the above
analyses as a comparison is identical to Orleans, CNB or the contemplated
transaction. Therefore, an analysis of the results of the foregoing necessarily
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the organizations and other factors
that could affect the value of such organizations.
Specific Acquisition Analysis. David A. Noyes & Company valued Orleans
based on an acquisition analysis assuming a "breakeven" scenario to CNB as to
earnings dilution, given certain assumptions. Based on this analysis CNB could
have been expected to be able to pay $200 per share of Orleans Common, which is
within the valuation range for Orleans determined by David A. Noyes & Company.
This analysis was based on the assumption that CNB was willing to accept no
earnings impact to consolidated net income in the initial year, a funding cost
of 7%, a 35% tax rate, amortization of the acquisition premium over fifteen
years and a projected earnings level for Orleans of $626,000 in 1994.
The fairness opinion is directed only to the questions of whether the
consideration to be received by Orleans shareholders under the Reorganization
Agreement is fair and equitable from a financial perspective and does not
constitute a recommendation to any Orleans shareholder to vote in favor of the
Merger. No limitations were imposed on David A. Noyes & Company regarding the
scope of its investigation or otherwise by Orleans.
Based on the results of the various analyses described above, the
Conversion Ratio and the market value of CNB Common, David A. Noyes & Company
concluded that the consideration to be received by Orleans shareholders under
the Reorganization Agreement is fair and equitable from a financial perspective.
As compensation for its services in connection with the Merger, including
the rendering of the fairness opinions, Orleans paid David A. Noyes & Company
$5,000 on engagement, $49,378.69 upon the signing of the Reorganization
Agreement and has agreed to pay David A. Noyes & Company an additional
$49,378.69 upon consummation of the Merger. Orleans has agreed to reimburse
David A. Noyes & Company for its reasonable out-of-pocket expenses. Orleans and
David A. Noyes & Company have agreed to indemnify and hold each other harmless
against certain liabilities arising from or relating to the advice given or
services rendered in connection with the Merger. Although approximately one-
half of the compensation payable by Orleans to David A. Noyes & Company in
connection with the Merger is payable only upon the successful completion of the
transaction, David A. Noyes & Company believes that such a fee structure, which
is customary in transactions such as the Merger where an investment banking firm
has been retained, does not constitute a conflict of interest, or would
otherwise affect the objectivity of David A. Noyes & Company, in connection with
its representation of Orleans in the Merger.
FORM OF MERGER
The Reorganization Agreement provides that Interim Bank, which is a wholly
owned subsidiary of CNB, will merge into Orleans, and Orleans will be the
surviving bank. Upon consummation of the Merger, Orleans will be a wholly owned
subsidiary of CNB.
28
<PAGE>
CONVERSION RATIO
The Reorganization Agreement provides that each share of Orleans Common,
other than any shares held by any shareholder properly exercising dissenters'
rights under the Indiana Banking Law, will be converted, in the Merger, into the
right to receive the number of shares of CNB Common equal to the Conversion
Ratio (together with any cash payment in lieu of fractional shares, as described
below). The Conversion Ratio is equal to 6.37 shares of CNB Common for each
share of Orleans Common, provided, however, that if the Orleans Closing Book
Value is less than $6,167,000, then the Conversion Ratio will be reduced so as
to equal the product of (i) 6.37 and (ii) the quotient of the Orleans Closing
Book Value divided by $6,167,000. In no event will the Conversion Ratio exceed
6.37 shares of CNB Common for each share of Orleans Common.
The term "Orleans Closing Book Value" means the amount of the shareholders'
equity accounts of Orleans, as of the end of the month immediately preceding the
Effective Time, determined in accordance with GAAP consistently applied with the
year ended December 31, 1993, but excluding for this purpose any adjustments to
the shareholders' equity accounts solely as a result of (A) marketable
securities classified as Available for Sale in accordance with FAS 115, and (B)
the Structured Notes Divestiture (as defined below; see "MERGER -- Certain Other
Agreements -- Other Orleans Agreements"), less (i) the amount, if any, by which
the allowance for credit losses account of Orleans, as of the end of the month
immediately preceding the Effective Time, is less than $391,000 (which will be
determined exclusive of any increase in the allowance taken by Orleans at the
written request of CNB pursuant to the Reorganization Agreement), less (ii) the
amount of any increase in the shareholders' equity accounts of Orleans resulting
from or attributable to the sale of securities held on and sold after June 30,
1994 or any transactions or accounting adjustments not in the ordinary course of
business effected or completed after June 30, 1994, plus (iii) any reduction of
shareholders' equity theretofore recorded solely as a result of accruals,
reserves or charges taken by Orleans at the written request of CNB pursuant to
the Reorganization Agreement (other than any reduction of shareholders' equity
resulting from (a) audit fees incurred and expended by Orleans between the date
of the Reorganization Agreement and the Closing Date, (b) fees incurred and
expended by Orleans to obtain the environmental investigations referred to in
the Reorganization Agreement (see "MERGER -- Certain Other Agreements --
Environmental Investigation and Remediation"), and (c) fees incurred and
expended by Orleans to purchase tail coverage pursuant to the Reorganization
Agreement (see "MERGER -- Interests of Certain Persons in Merger --
Indemnification and Insurance")), plus (iv) the amount of each quarterly
dividend paid by Orleans pursuant to the Reorganization Agreement after March
15, 1995 (see "MERGER --Dividends"). As used above, the term "tail coverage"
means directors' and officers' liability insurance which covers actions or
inactions of Orleans' directors and officers occurring prior to the Effective
Time.
The shares of CNB Common to be issued in the Merger, together with any cash
payment in lieu of fractional shares, as provided below (see "MERGER --
Fractional Shares"), are referred to herein as the "Merger Consideration."
As the Orleans Closing Book Value will be calculated based upon amounts at
the end of the month immediately preceding the Effective Time, it is not
possible, as of the date of this Prospectus/Proxy Statement, to precisely
determine the Orleans Closing Book Value and the definitive Conversion Ratio.
For purposes of illustration, however, if the Effective Time and the Closing
Date both
29
<PAGE>
would have occurred on June 1, 1995, the Orleans Closing Book Value would
have been $6,314,000 and shareholders of Orleans would have received 6.37
shares of CNB Common for each share of Orleans Common held (plus cash in lieu of
fractional shares). The foregoing information is provided solely for purposes
of illustration. In the event that the actual Orleans Closing Book Value should
be less than $6,167,000, the actual Conversion Ratio would be less than 6.37
shares of CNB Common for each share of Orleans Common. In no event, however,
will the Conversion Ratio exceed 6.37 shares of CNB Common for each share of
Orleans Common.
FRACTIONAL SHARES
No fractional shares of CNB Common will be issued and, in lieu thereof,
holders of shares of Orleans Common who would otherwise be entitled to a
fractional share interest (after taking into account all shares of Orleans
Common held by such holder) will be paid an amount in cash equal to the product
of such fractional share interest and the closing price of a share of CNB Common
on Nasdaq on the fifth business day immediately preceding the date on which the
Effective Time occurs.
SHARE ADJUSTMENTS
If, between the date of the Reorganization Agreement and the Effective
Time, a share of CNB Common is changed into a different number of shares of CNB
Common or a different class of shares by reason of reclassification,
recapitalization, splitup, exchange of shares or readjustment, or if a stock
dividend thereon is declared with a record date within such period (a "Share
Adjustment"), then the Conversion Ratio will be appropriately and
proportionately adjusted so that each stockholder of Orleans will be entitled to
receive such number of shares of CNB Common as such stockholder would have
received pursuant to such Share Adjustment had the record date therefor been
immediately following the Effective Time of the Merger; provided, however, that
the one for ten stock dividend paid by CNB on December 9, 1994, was taken into
account by CNB and Orleans in determining the Conversion Ratio and, therefore,
such stock dividend is not deemed a Share Adjustment and the Conversion Ratio
has not been, and will not be, adjusted as a result thereof.
CLOSING DATE; EFFECTIVE TIME
The Reorganization Agreement provides that the Closing of the Merger will
take place, at CNB's election, on (i) the last business day of, or (ii) the
first business day of the month following, or (iii) the last business day of the
earliest month which is the second month of a calendar quarter following, in
each case, the month during which all necessary regulatory approvals required by
law for the Merger have been obtained and all waiting periods required by law
have expired (see "MERGER -- Regulatory Approvals") and the environmental
remediation and correction of certain real property upon which the banking
office of Orleans is located and certain real property owned by Orleans adjacent
thereto has been completed (see "MERGER -- Certain Other Agreements --
Environmental Investigation and Remediation") or such other time thereafter as
Orleans and CNB may agree.
The Reorganization Agreement provides that the Effective Time of the Merger
will be such time as the Secretary of State of the State of Indiana issues a
Certificate of Merger. Assuming that the Merger is approved by the requisite
vote of the shareholders of Orleans and that the other conditions to the Merger
are satisfied or waived (where permissible), it is presently anticipated that
the Effective Time of the Merger will be in the third quarter of 1995, but no
assurance can be given that such timetable will be met or that the conditions to
the Merger will be satisfied or waived (where permissible).
30
<PAGE>
With the exception of those shareholders of Orleans who may be deemed to be
an "affiliate" of Orleans for purposes of Rule 145 under the Securities Act, the
Reorganization Agreement does not prohibit shareholders of Orleans from selling
their shares prior to the Effective Time. The Reorganization Agreement
provides, however, that each affiliate of Orleans must enter into an agreement
with CNB providing, among other things, that such affiliate will not make any
sale or other disposition of any shares of Orleans Common during the 30 day
period commencing on the 30th day prior to the Effective Time. Persons who may
be deemed to be affiliates of Orleans generally include individuals who (or
entities which) control, are controlled by or are under common control with
Orleans and will include directors and certain officers of Orleans and may
include principal shareholders of Orleans. See "MERGER -- Resale of CNB
Common."
REGULATORY APPROVALS
The Merger is subject to the prior approval of the Federal Reserve, the
F.D.I.C. and the I.D.F.I. The Federal Reserve, the F.D.I.C. and the I.D.F.I.
approved the Merger on January 11, 1995, February 14, 1995 and February 2, 1995,
respectively.
The Merger may not be consummated until the 15th day following the date of
Federal Reserve and the F.D.I.C. approval, during which time the United States
Department of Justice (the "D.O.J.") may challenge the Merger on antitrust
grounds. The commencement of an antitrust action would stay the effectiveness
of the Federal Reserve's and F.D.I.C.'s approval unless a court specifically
orders otherwise. The period during which the D.O.J. could have challenged the
Merger on anti-trust grounds expired on March 1, 1995.
CONDITIONS TO CONSUMMATION OF MERGER
The Merger is subject to various conditions. Specifically, the obligations
of each party to effect the Merger are subject to the fulfillment or waiver by
each of the parties, at or prior to the Closing Date, of the following
conditions (i) the representations and warranties of the other party set forth
in the Reorganization Agreement will be true and correct in all material
respects on the date thereof and as of the Closing Date (see "MERGER --
Representations and Warranties of CNB and Orleans"); (ii) the other party will
have performed and complied in all material respects with all of its obligations
and agreements required to be performed prior to the Closing Date; (iii) no
party to the Reorganization Agreement will be subject to any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of the Merger and no proceeding by any bank
regulatory authority or person for any of the foregoing will be pending; (iv)
all necessary regulatory approvals and consents and other approvals (including
the requisite approval of the Merger and the Reorganization Agreement by the
shareholders of Orleans) required to consummate the Merger will have been
obtained and all waiting periods in respect thereof will have expired (all
required regulatory approvals have been received; see "MERGER -- Regulatory
Approvals" and "SPECIAL MEETING -- Vote Required"); (v) each party will have
received all required documents from the other party; (vi) the Registration
Statement relating to the CNB Common to be issued pursuant to the Merger will
have become effective, and no stop order suspending the effectiveness of the
Registration Statement will have been issued and no proceedings for that purpose
will have been initiated or threatened by the S.E.C.; and (vii) each party will
have received an opinion of counsel for CNB that if the Merger is consummated in
accordance with the terms set forth in the Reorganization Agreement, (a) the
Merger will constitute a reorganization within the meaning of Section 368(a) of
the Code; (b) no gain or loss will be recognized by the holders of shares of
Orleans Common upon receipt of Merger Consideration (except for cash received in
lieu of fractional shares);
31
<PAGE>
(c) the basis of CNB Common received by the shareholders of Orleans will be the
same as the basis of Orleans Common exchanged therefor; and (d) the holding
period of the shares of CNB Common received by the shareholders of Orleans will
include the holding period of the shares of Orleans Common exchanged therefor,
provided such shares were held as capital assets as of the Effective Time (the
foregoing opinion has been received by CNB and Orleans and the condition
described in this subparagraph (vii) has been satisfied; see "MERGER -- Federal
Income Tax Consequences").
The obligation of CNB to effect the Merger is further subject to the
fulfillment, or waiver by CNB, at or prior to the Closing, of the following
conditions (i) CNB will have received a letter from its independent public
accountants, Geo. S. Olive & Co., L.L.C., to the effect that the Merger
qualifies for "pooling of interests" accounting treatment (see "MERGER --
Accounting Treatment"); and (ii) the environmental remediation and correction of
certain real property upon which the banking office of Orleans is located and
certain real property owned by Orleans adjacent thereto (the foregoing condition
has been satisfied; see "MERGER -- Certain Other Agreements -- Environmental
Investigation and Remediation").
The obligation of Orleans to effect the Merger is further subject to the
fulfillment, or waiver by Orleans at or prior to the Closing, of the condition
that Orleans' investment banker, David A. Noyes & Company, not withdraw, prior
to the date of this Prospectus/Proxy Statement, its fairness opinion originally
rendered and delivered to Orleans as of the date of the Reorganization
Agreement, to the effect that the Merger is fair to the Orleans shareholders
from a financial point of view. The fairness opinion, a copy of which, dated as
of the date of this Prospectus/Proxy Statement, is attached hereto as Exhibit B,
has not been withdrawn and the foregoing condition has been satisfied. See
"MERGER -- Opinion of Financial Advisor."
TERMINATION OR ABANDONMENT
The Reorganization Agreement may be terminated at any time prior to the
Effective Time (i) if the Merger is not consummated on or prior to September 30,
1995; (ii) by mutual agreement of CNB and Orleans; (iii) by CNB or Orleans in
the event of a material breach by the other of any of its representations and
warranties or agreements under the Reorganization Agreement not cured within 30
days after notice of such breach is given by the non-breaching party; (iv) by
either party in the event all the conditions to its obligations are not
satisfied or waived (and not cured within any applicable cure period); (v) by
CNB in the event that Orleans becomes a party or subject to any written
agreement, memorandum of understanding, cease and desist order, imposition of
civil money penalties or other regulatory enforcement action or proceeding with
any federal or state agency charged with the supervision or regulation of banks
or bank holding companies after the date of the Reorganization Agreement; and
(vi) by CNB if the cost of taking all remedial and corrective actions required
by applicable law or recommended or suggested by an environmental expert
retained by CNB and reasonably acceptable to Orleans with respect to the real
property upon which the banking office of Orleans is located and property owned
by Orleans adjacent thereto exceeds $400,000 (see "MERGER -- Certain Other
Agreements --Environmental Investigation and Remediation").
TERMINATION FEE
The Reorganization Agreement provides that upon the occurrence of one or
more Triggering Events, Orleans will pay to CNB the sum of Five Hundred Thousand
Dollars ($500,000).
32
<PAGE>
The term "Triggering Event" means any of the following events (a) upon
termination of the Reorganization Agreement by CNB upon a breach thereof by
Orleans (including, without limitation, the entering into of an agreement
between Orleans and any third party which is inconsistent with the transactions
contemplated by the Reorganization Agreement or the Merger Agreement to be
entered into between Orleans and Interim Bank as provided in the Reorganization
Agreement), provided that within one year of the date of such termination,
either an event described in clauses (c) or (d) below shall have occurred or
Orleans or shareholders of Orleans shall have entered into an agreement with any
third party whereby such third party will acquire, merge or consolidate with
Orleans, purchase all or substantially all of Orleans' assets or acquire 50% or
more of the outstanding shares of Orleans Common; (b) the failure of Orleans'
shareholders to approve the Merger and the Reorganization Agreement at the
Special Meeting; (c) any person or group of persons (other than CNB) acquires,
or has the right to acquire, 50% or more of the Orleans Common, exclusive of
shares of Orleans Common sold directly or indirectly to such person or group of
persons by CNB; (d) expiration of the fifth day preceding the scheduled
expiration date of a tender or exchange offer by any person or group of persons
(other than CNB and/or its affiliates) to purchase or acquire securities of
Orleans if upon consummation of such offer, such person or group of persons
would own, control or have the right to acquire 50% or more of the Orleans
Common; or (e) upon the entry by Orleans into an agreement or other
understanding with a person or group of persons (other than CNB and/or its
affiliates) for such person or group of persons to acquire, merge or consolidate
with Orleans or to purchase all or substantially all of Orleans' assets.
EXCHANGE OF STOCK CERTIFICATES
The conversion of Orleans Common into CNB Common (other than any shares as
to which dissenters' rights are properly exercised) will occur by operation of
law at the Effective Time. After the Effective Time, certificates theretofore
evidencing shares of Orleans Common which may be exchanged for shares of CNB
Common will be deemed, for all corporate purposes other than the payment of
dividends and other distributions on such shares, to evidence ownership of and
entitlement to receive such shares of CNB Common.
As soon as reasonably practicable, but in no event more than five business
days, after the Effective Time, Citizens Bank, the exchange agent in the Merger
(the "Exchange Agent"), will send a transmittal letter and instructions to each
record holder of certificates for Orleans Common whose shares were converted
into the right to receive the Merger Consideration, advising such holder of the
number of shares of CNB Common such holder is entitled to receive pursuant to
the Merger, of the amount of cash such holder is due in lieu of a fractional
share of CNB Common, and of the procedures for surrendering such certificates in
exchange for a certificate for the number of whole shares of CNB Common, and a
check for the cash amount (if any) such holder is entitled to receive in lieu of
a fractional share. The letter of transmittal will also specify that delivery
will be effected, and risk of loss and title to the certificates for Orleans
Common will pass, only upon proper delivery of the certificates for Orleans
Common to the Exchange Agent and will be in such form and have such other
provisions as CNB may reasonably specify. Within ten business days after the
Exchange Agent's receipt of a holder's certificates for Orleans Common, together
with a letter of transmittal duly executed and any other required documents, the
Exchange Agent will deliver to such holder the Merger Consideration such holder
is entitled to receive under the Reorganization Agreement. SHAREHOLDERS OF
ORLEANS ARE REQUESTED NOT TO SURRENDER THEIR CERTIFICATES FOR EXCHANGE UNTIL
SUCH LETTER OF TRANSMITTAL AND INSTRUCTIONS ARE RECEIVED. The shares of CNB
Common into which Orleans Common will be converted in the Merger will be deemed
to have been issued at the Effective Time. Unless and until the certificates
for Orleans Common are surrendered, together with a letter of transmittal duly
executed and any other required
33
<PAGE>
documents, dividends on the shares of CNB Common issuable with respect to such
Orleans Common which would otherwise be payable will not be paid to the holders
of such certificates and, in such case, upon surrender of the certificates for
Orleans Common, together with a letter of transmittal duly executed and any
other required documents, there will be paid any dividends on such shares of CNB
Common which became payable between the Effective Time and the time of such
surrender. No interest on any such dividends will accrue or be paid.
REPRESENTATIONS AND WARRANTIES OF CNB AND ORLEANS
The Reorganization Agreement contains various representations and
warranties of Orleans and CNB. These include, among other things,
representations and warranties by Orleans, except as otherwise disclosed to CNB,
as to (i) organization and good standing; (ii) capitalization; (iii) the due
authorization and execution of the Reorganization Agreement; (iv) the identity
and ownership of any subsidiaries; (v) the accuracy of its financial statements
and its filings with the F.D.I.C.; (vi) the absence of material adverse changes
in its financial condition, results of operations or business; (vii) the absence
of certain orders, agreements, imposition of civil money penalties or memoranda
of understanding between it or any of its officers and directors and any federal
or state agency charged with the supervision or regulation of banks; (viii) the
filing of tax returns and payment of taxes; (ix) the absence of pending or
threatened litigation or other such actions; (x) agreements with employees,
including employment agreements; (xi) certain reports required to be filed with
various regulatory agencies; (xii) investment portfolio; (xiii) loan portfolio;
(xiv) employee matters and matters relating to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"); (xv) good title to properties, the
absence of liens (except as specified) and insurance matters; (xvi)
environmental matters; (xvii) compliance with applicable laws and regulations;
(xviii) the absence of brokerage commissions or similar finder's fees in
connection with the Merger; (xix) material contracts; and (xx) the accuracy of
information supplied by it in connection with the Registration Statement, this
Prospectus/Proxy Statement and any other documents to be filed with the S.E.C.
or any banking or other regulatory authority in connection with the transactions
contemplated by the Reorganization Agreement.
CNB's representations and warranties include, among other things, those as
to (i) organization and good standing; (ii) capitalization; (iii) the due
authorization and execution of the Reorganization Agreement and the absence of
the need (except as specified) for governmental or third party consents to the
Merger; (iv) subsidiaries of CNB; (v) the accuracy of CNB's financial
statements and filings with the S.E.C.; (vi) the absence of material adverse
changes in the financial condition, results of operations or business of CNB and
its subsidiaries; (vii) the absence of material pending or threatened litigation
or other such actions; (viii) compliance with applicable laws and regulations;
and (ix) the accuracy of information supplied by it in connection with the
Registration Statement, this Prospectus/Proxy Statement and any other documents
to be filed with the S.E.C. or any banking or other regulatory authority in
connection with the transactions contemplated by the Reorganization Agreement.
CERTAIN OTHER AGREEMENTS
CONDUCT OF BUSINESS PENDING MERGER
Pursuant to the Reorganization Agreement, Orleans has agreed, among other
things, that it will continue to carry on, after the date of the Reorganization
Agreement, its business and the discharge or incurrence of its obligations and
liabilities only in the usual, regular and ordinary course as previously
conducted, and that it will not, without the prior written consent of CNB (which
will not be unreasonably
34
<PAGE>
withheld) (i) issue additional Orleans Common or other capital stock, options,
warrants or other rights to subscribe for or purchase Orleans Common or any
other capital stock or any other securities convertible into or exchangeable for
any capital stock of Orleans; (ii) directly or indirectly redeem, purchase or
otherwise acquire Orleans Common or any other capital stock of Orleans; (iii)
effect a reclassification, recapitalization, splitup, exchange of shares,
readjustment or other similar change in any Orleans capital stock or otherwise
reorganize or recapitalize; (iv) change its articles of incorporation or bylaws;
(v) grant any increase (other than ordinary and normal increases consistent with
past practices) in the compensation payable or to become payable to officers or
salaried employees, grant any stock options or, except as required by law, adopt
or change any bonus, insurance, pension, or other employee plan, payment or
arrangement made to, for or with any such officers or employees; (vi) borrow or
agree to borrow funds other than in the ordinary course of business or directly
or indirectly guarantee or agree to guarantee any obligations of others; (vii)
make or commit to make any new loan or letter of credit or any new or additional
discretionary advance under any existing line of credit, in excess of $125,000,
or that would increase the aggregate credit outstanding to any one borrower to
more than $125,000; (viii) purchase or otherwise acquire any investment security
for its own account having an average remaining life maturity greater than five
years or any asset-backed securities other than those issued or guaranteed by
the Government National Mortgage Association, the Federal National Mortgage
Association or the Federal Home Loan Mortgage Corporation; (ix) increase or
decrease the rate of interest paid on time deposits or certificates of deposit
except in accordance with past practices; (x) enter into any agreement, contract
or commitment having a term in excess of three months other than letters of
credit, loan agreements, and other lending, credit and deposit agreements and
documents made in the ordinary course of business; (xi) mortgage, pledge, lien,
charge or otherwise encumber any of its assets or properties except in the
ordinary course of business; (xii) cancel, accelerate or waive any indebtedness,
claims or rights owing to Orleans except in the ordinary course of business;
(xiii) sell or otherwise dispose of any real property or any material amount of
personal property other than property acquired in foreclosure or otherwise in
the ordinary collection of indebtedness; (xiv) foreclose or otherwise take title
to or possess any real property, other than single family, non-agricultural
residential property of one acre or less, without first obtaining a phase one
environmental report which indicates that the property is free of hazardous,
toxic or polluting waste materials; (xv) commit any act or fail to do any act
which will result in a breach of any agreement, contract or commitment, or
violate any law, statute, rule, governmental regulation or order, which will
adversely affect the business, financial condition or results of operations of
Orleans; (xvi) purchase any real or personal property or make any capital
expenditure in excess of $10,000; or (xvii) engage in any transaction or take
any action that would render untrue in any material respect any of the
representations and warranties made by Orleans in the Reorganization Agreement,
if such representations or warranties were given as of the date of such
transaction or action.
DIVIDENDS
The Reorganization Agreement provides that Orleans may declare and pay its
regular annual dividend on the Orleans Common for 1994 not to exceed $2.50 per
share at approximately the same time during 1994 which it has historically
declared and paid such annual dividend; provided, however, that, if the
Effective Time has not occurred by March 15, 1995 (which is the record date for
CNB's first quarter 1995 dividend), Orleans may thereafter declare and pay a
quarterly dividend (including a first quarter 1995 dividend) on the Orleans
Common at the same time as the quarterly dividends declared and paid by CNB and
in the per share amount Orleans stockholders would have received had the
Effective Time been immediately before such dividend payment. In this regard,
CNB and Orleans have agreed to cooperate with each other to coordinate the
record and payment dates of their respective dividends for the quarter in which
the Effective Time occurs such that Orleans shareholders would receive the
aforesaid
35
<PAGE>
dividend from Orleans or a regular quarterly dividend from CNB, but not from
both with respect to any such quarter.
ENVIRONMENTAL INVESTIGATION AND REMEDIATION
Environmental investigations routinely are conducted by CNB in connection
with transactions involving the acquisition of real property, whether pursuant
to the acquisition of a bank or other business or in its ongoing business
operations. These investigations are intended to identify and quantify
potential environmental risks of ownership, such as contamination, which could
lead to liability for clean-up costs under the federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, and
other applicable laws. A "phase one" investigation is an initial environmental
inquiry intended to identify areas of concern which might require more in-depth
assessment. The scope of a phase one investigation varies depending on the
environmental consultant utilized and the property assessed, but will typically
include: (i) visual inspection of the property; (ii) review of governmental
records to ascertain the presence of such things as "Superfund" sites,
underground storage tanks or landfills, etc. on or near the site; (iii) review
of all relevant site records such as air or water discharge permits and
hazardous waste manifests; and (iv) research regarding previous owners and uses
of the property as well as those of surrounding properties. In bank or other
business acquisition transactions, CNB's policy is to obtain environmental
investigations of real property to ensure that environmental problems do not
exist which could result in unacceptably high or unquantifiable risk to CNB and
its shareholders.
Pursuant to the Reorganization Agreement, Orleans has agreed to take, or
cause to be taken, prior to the Closing Date, all remedial and corrective
actions (i) required by applicable law, or (ii) recommended in the AEC Report
(as defined below), and to accrue, on or before December 31, 1994, the cost of
taking all such actions. If the cost of taking all such actions should exceed
$400,000, then CNB may, in its sole discretion, terminate the Reorganization
Agreement, which will be CNB's sole remedy in such event. See "MERGER --
Termination or Abandonment."
In connection with the negotiation of the Reorganization Agreement, Orleans
retained American Environmental Corporation ("AEC"), an environmental consulting
firm, to conduct a phase one and subsurface environmental investigation of the
real property upon which the banking office of Orleans is located and certain
real property owned by Orleans adjacent thereto. The adjacent property, which
is used as an employee parking lot and commonly known as "Lot 139," is the site
of a former gasoline service station which ceased operations in the mid-1970s.
AEC conducted the investigation on October 12-14, 1994, and issued a written
report summarizing its findings on October 26, 1994 (the "AEC Report"). The AEC
Report concluded that Lot 139, as a result of its former use as a gasoline
service station, had certain sub-surface contamination. AEC reported the
contamination to the Indiana Department of Environmental Management ("IDEM") on
October 19, 1994. At the request of Orleans, AEC took corrective action to
remediate the contamination at Lot 139 through soil removal and disposal
conducted on November 4, 1994. A total of 600 cubic yards of petroleum imparted
soil was excavated from the site and transported to a landfill for disposal. On
December 2, 1994, AEC issued a LUST Site Investigation and Corrective Action
Report reporting that all petroleum impacted soils were successfully removed
from Lot 139 and the remediation was "totally effective" in removing all
contaminated soils from the site. AEC recommended no further action with
respect to the site. The cost of all remedial and corrective actions taken by
Orleans was approximately $55,000. The foregoing amount paid by Orleans will be
deducted from the shareholders' equity accounts of Orleans in determining the
Orleans Closing Book Value and the Conversion Ratio. See "MERGER -- Conversion
Ratio." Based upon the foregoing,
36
<PAGE>
CNB has determined not to terminate the Reorganization Agreement in accordance
with the preceding paragraph.
OTHER ORLEANS AGREEMENTS
Orleans has agreed to (i) give CNB prompt written notice of any occurrence,
or impending or threatened occurrence, of any event or condition which would
cause or constitute a breach of any of Orleans' representations or agreements in
the Reorganization Agreement or of the occurrence of any matter or event known
to and directly involving Orleans that is materially adverse to the business,
operations, properties, assets or condition (financial or otherwise) of Orleans;
(ii) use its best efforts to obtain all necessary consents in any leases,
licenses, contracts, instruments and rights which require the consent of another
person for their transfer or assumption pursuant to the Merger; (iii) use its
best efforts to perform and fulfill all conditions and obligations to be
performed or fulfilled under the Reorganization Agreement and to effect the
Merger; (iv) permit CNB reasonable access to Orleans' properties and to disclose
and make available all books, documents, papers and records relating to assets,
stock ownership, properties, operations, obligations and liabilities in which
CNB may have a reasonable and legitimate interest in furtherance of the
transactions contemplated by the Reorganization Agreement; (v) cause the Special
Meeting to be duly called and held; (vi) at CNB's request, on or before December
31, 1994, sell, upon terms satisfactory to CNB, certain structured notes owned
by Orleans in the approximate face amount of $2,200,000 (the "Structured Notes
Divestiture"); and (vii) submit to CNB, not later than fifteen days after the
end of each month, a report detailing all expenditures resulting from the
extraordinary, non-recurring costs associated with the transactions contemplated
by the Reorganization Agreement which have been incurred or otherwise accrued by
Orleans during the preceding month. On December 16, 1994, Orleans completed the
Structured Notes Divestiture, resulting in a loss of $272,000. The
Reorganization Agreement provides that the amount of any reduction of the
shareholders' equity accounts of Orleans solely as a result of the Structured
Notes Divestiture will be added back to the shareholders' equity accounts of
Orleans to determine the Orleans Closing Book Value. See "MERGER -- Conversion
Ratio."
37
<PAGE>
CNB AGREEMENTS
Pursuant to the Reorganization Agreement, CNB has agreed, among other
things, to (i) file all regulatory applications required in order to consummate
the Merger and keep Orleans reasonably informed as to the status of such
applications; (ii) file the Registration Statement with the S.E.C. and use its
best efforts to cause the Registration Statement to become effective; (iii)
timely file all documents required to obtain all necessary blue sky permits and
approvals; (iv) prepare and file any other filings required under the Exchange
Act relating to the Merger and the transactions contemplated in the
Reorganization Agreement; (v) promptly notify Orleans in writing should CNB have
knowledge of any event or condition which would cause or constitute a breach of
any of its representations or agreements contained in the Reorganization
Agreement; and (vi) use its best efforts to perform and fulfill all conditions
and obligations to be performed or fulfilled under the Reorganization Agreement,
to assist Orleans with the Structured Notes Divestiture and to effect the
Merger. In addition, the Reorganization Agreement states that CNB will provide
certain employee benefit plans and programs to the employees of Orleans who
continue their employment after the Effective Time. See "MERGER -- Effect on
Employee Benefit Plans."
EFFECT ON EMPLOYEE BENEFIT PLANS
The Reorganization Agreement provides that each employee of Orleans who
continues as an employee following the Effective Time will be entitled, as a new
employee of a subsidiary of CNB, to participate in certain employee benefit and
stock plans that may be in effect for employees of all of CNB's subsidiaries,
from time to time, on the same basis as similarly situated employees of other
CNB subsidiaries, subject to the right of CNB to amend or terminate any such
plans or programs in its discretion. CNB will, for purposes of vesting and
eligibility to begin participation with respect to any employee benefit plans in
which former employees of Orleans may participate, credit each such employee
with his or her term of service with Orleans.
EXPENSES AND FEES
Except as provided under "MERGER -- Termination Fee," in the event the
Reorganization Agreement is terminated or the Merger is abandoned, all costs and
expenses incurred in connection with the Reorganization Agreement will be paid
by the party incurring such costs and expenses, and no party shall have any
liability to the other party for costs, expenses, damages or otherwise, except
that in the event the Reorganization Agreement is terminated on account of a
willful breach of any of the representations or warranties therein or any breach
of the agreements set forth therein, the non-breaching party is entitled to seek
damages against the breaching party.
38
<PAGE>
NO SOLICITATION
The Reorganization Agreement provides that, unless and until the
Reorganization Agreement has been terminated, Orleans will not solicit,
encourage or hold discussions or negotiations with, or provide information to,
any person in connection with any proposal from any person relating to the
acquisition of all or a substantial portion of the business, assets or stock of
Orleans. Orleans is required to promptly advise CNB of its receipt of any such
proposal or inquiry and the substance of such proposal or inquiry.
INTERESTS OF CERTAIN PERSONS IN MERGER
Certain directors and executive officers of Orleans have certain interests
in the Merger in addition to their interests as shareholders of Orleans
generally. The Board of Directors of Orleans was aware of these interests and
considered them, among other matters, in approving the Reorganization Agreement
and the transactions contemplated thereby. For information about the percentage
of Orleans Common owned by the directors and executive officers of Orleans, see
"INFORMATION ABOUT ORLEANS --Security Ownership of Management." None of the
directors or executive officers of Orleans would own, on a pro forma basis
giving effect to the Merger, more than 1% of the issued and outstanding shares
of CNB Common.
INDEMNIFICATION AND INSURANCE
The Reorganization Agreement provides that CNB will provide the directors
and officers of Orleans, after the Merger, with the same directors' and
officers' liability insurance coverage that CNB provides to directors and
officers of its other banking subsidiaries generally and that CNB will use its
best efforts (which will not be deemed to require, however, the payment of any
special premium or other charge or expense) to obtain an endorsement to its
directors' and officers' liability insurance policy to cover acts and omissions
of the directors and officers of Orleans occurring or failing to occur prior to
the Closing Date; provided, however, that if CNB is unable to obtain such
endorsement, then Orleans may purchase tail coverage under its existing
directors' and officers' liability insurance on such terms and provisions as
Orleans deems appropriate. The amount paid by Orleans in obtaining such tail
coverage will be deducted from the shareholders' equity accounts of Orleans in
determining the Orleans Closing Book Value. See "MERGER -- Conversion Ratio."
The Reorganization Agreement also provides that for a period of six years
after the Effective Time CNB will cause Orleans, as the surviving bank in the
Merger, or any successor of Orleans, to indemnify the present and former
directors, officers, employees and agents of Orleans against any liability
arising out of actions occurring prior to the Effective Time, to the extent that
such indemnification is then permitted under the Indiana Banking Law and by
Orleans' Articles of Incorporation as in effect on the date of the
Reorganization Agreement, including provisions relating to advances of expenses
incurred in the defense of any action or suit.
Pursuant to the Reorganization Agreement, CNB has agreed to cause any
successor or assignee of Orleans, after the Effective Time, to assume the
obligations of Orleans described in the two preceding paragraphs or, if Orleans
should liquidate, dissolve or otherwise wind up its business after the Effective
Time, CNB has agreed to assume such obligations.
39
<PAGE>
EMPLOYEE BENEFITS
The Reorganization Agreement contains certain provisions regarding employee
benefits which are described under "MERGER -- Effect on Employee Benefit Plans."
BOARD COMPOSITION
The Reorganization Agreement provides that the Board of Directors of
Orleans following the Merger will consist of each of the directors of Orleans
serving on the Board immediately prior to the Effective Time and one designee of
CNB. See "MERGER -- Management and Operations After Merger."
INTERESTS OF CNB'S MANAGEMENT AND BOARD
No member of CNB's management or Board of Directors or any other affiliate
of CNB has an interest in the Merger, other than as a shareholder of CNB
generally.
WAIVER AND AMENDMENT
Prior to or at the Effective Time, any provision of the Reorganization
Agreement, including, without limitation, the conditions to consummation of the
Merger, may be (i) waived, to the extent permitted under law, in writing by the
party which is entitled to the benefits thereof; or (ii) amended at any time by
written agreement of the parties, whether before or after the Special Meeting;
provided, however, that the provisions relating to the conversion of the shares
of Orleans Common into shares of CNB Common will not be amended after the
Special Meeting unless approval of Orleans shareholders entitled to vote on the
Merger were resolicited. It is anticipated that a condition to the obligations
of Orleans and CNB to consummate the Merger will be waived only in those
circumstances where the Board of Directors of Orleans or CNB, as the case may
be, deems such waiver to be in the best interests of such company and its
shareholders.
DISSENTERS' RIGHTS
Section 28-1-7-21 of the Indiana Banking Law provides that a shareholder of
Orleans has the right to dissent from the Merger and obtain payment of the value
of his or her shares of Orleans Common. To claim this right, the shareholder
must (a) deliver to Orleans, before the vote is taken, written notice of his
demand for payment for his or her shares if the Merger is effected; and (b) not
vote his shares in favor of the Merger. The written notice referred to above
should be sent to The Bank of Orleans, 200 South Maple Street, Orleans, Indiana
47452, Attention: William H. Tegarden, Chief Executive Officer. Orleans'
notice of the shareholders' meeting at which a vote will be taken on the Merger
must state that shareholders are entitled to assert dissenters' rights.
A SHAREHOLDER WHO DOES NOT DELIVER WRITTEN NOTICE OF HIS OR HER DEMAND FOR
PAYMENT AND WHO FAILS TO REFRAIN FROM VOTING HIS OR HER SHARES IN FAVOR OF THE
MERGER WILL NOT BE ENTITLED TO RIGHTS UNDER (S)28-1-7-21 OF THE INDIANA BANKING
LAW.
Immediately after the vote is taken approving the Merger, a dissenting
shareholder who has complied with the requirements of (S)28-1-7-21 of the
Indiana Banking Law is entitled to payment by CNB
40
<PAGE>
of the value of his shares as of the day before the date on which the vote was
taken, and such shareholder ceases to be a shareholder and is not entitled to
vote or exercise any other rights of a shareholder. A shareholder's demand for
payment may not be withdrawn unless (a) the shareholder's request to withdraw
his or her demand for payment is consented to by Orleans; (b) the Merger is
abandoned; (c) the shareholders revoke the authority to effect the Merger; (d) a
petition for the determination of value by a court is not filed within the time
provided under Indiana Banking Law; or (5) the court determines that the
shareholder is not entitled to dissenting shareholder's rights.
If the Merger is approved, CNB will mail written notice within ten days
after the Merger is effected to each dissenting shareholder offering to pay for
the shareholder's shares at a specified price considered by CNB to be the value
of the shares. If the dissenting shareholder and CNB agree on the value of the
shares within 30 days of the date the Merger is effected, then CNB will pay the
shareholder for the shares within 90 days of the date the Merger is effected and
upon surrender of the certificates representing the shares, at which time the
dissenting shareholder ceases to have any interest in the shares. If the
dissenting shareholder and CNB disagree on the value of the shares within 30
days of the date the Merger is effected, then within 90 days of the date the
Merger is effected either the dissenting shareholder or CNB may file a petition
in an Indiana court requesting the court to determine the value of the shares of
Orleans Common. The court will then render a judgment against CNB for payment
of the value, as determined by the court, of the dissenting shareholder's shares
for which the dissenting shareholder has demanded payment. Any party may
appeal.
Within twenty days of the date the Merger is effected, the dissenting
shareholder must submit the certificates representing his shares to CNB for
notation on the certificates that a demand for payment has been made. Failure
to do so gives CNB the option to terminate the shareholder's dissenting rights
unless a court directs otherwise.
THE FOREGOING SUMMARY DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE
PROVISIONS OF THE INDIANA BANKING LAW RELATING TO THE RIGHTS OF DISSENTING
SHAREHOLDERS OF ORLEANS, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
EXCERPTS FROM THE INDIANA BANKING LAW INCLUDED HEREIN AS EXHIBIT C.
FEDERAL INCOME TAX CONSEQUENCES
The Merger is expected to qualify as a reorganization under Section 368(a)
of the Code. Except for shareholders perfecting their dissenters' rights, and
cash received in lieu of a fractional share interest in CNB Common, holders of
shares of Orleans Common will recognize no gain or loss on the receipt of CNB
Common in the Merger, their aggregate basis in the shares of CNB Common received
in the Merger will be the same as their aggregate basis in their shares of
Orleans Common converted in the Merger and, provided the shares surrendered are
held as a capital asset, the holding period of the shares of CNB Common received
by them will include the holding period of their shares of Orleans Common
converted in the Merger. Cash received in lieu of fractional share interests
and cash received by shareholders exercising their dissenters' rights will be
treated as (i) a distribution in full payment of such fractional share interests
or shares surrendered in exercise of dissenters' rights, resulting in capital
gain or loss or (ii) ordinary income, as the case may be, depending upon each
shareholder's particular situation. The following is a summary of a tax opinion
issued by Lewis, Rice & Fingersh, L.C., counsel for CNB, and included as an
exhibit to the Registration Statement.
41
<PAGE>
If the Merger is consummated in accordance with the terms set forth in the
Reorganization Agreement, (i) the Merger will constitute a reorganization within
the meaning of Section 368(a) of the Code; (ii) no gain or loss will be
recognized by the holders of shares of Orleans Common upon receipt of Merger
Consideration (except for cash received in lieu of fractional shares and by
shareholders exercising their dissenters' rights); (iii) the basis of CNB Common
received by the stockholders of Orleans will be the same as the basis of Orleans
Common exchanged therefor; (iv) the holding period of the shares of CNB Common
received by the shareholders of Orleans will include the holding period of the
shares of Orleans Common exchanged therefor, provided such shares were held as
capital assets as of the Effective Time; (v) pursuant to Revenue Ruling 66-365,
1966-2 C.B. 116, and Revenue Procedure 77-41, 1977-2 C.B. 574, if a cash payment
is received by a shareholder of Orleans in lieu of a fractional share interest
of CNB Common, the cash payment will be treated as received by the shareholder
as a distribution in redemption of that fractional share interest and will be
treated as a distribution in full payment in exchange for the fractional share
redeemed subject to the provisions and limitations of Section 302 of the Code
and considering the application of Section 318 of the Code; and (vi) where a
shareholder dissents from the Merger and receives solely cash in exchange for
his Orleans Common, such cash will be treated as received by the dissenting
shareholder as a distribution in redemption of such Orleans Common subject to
the provisions and limitations of Section 302 of the Code and considering the
application of Section 318 of the Code.
THE FOREGOING IS A GENERAL SUMMARY OF ALL OF THE MATERIAL FEDERAL INCOME
TAX CONSEQUENCES OF THE MERGER TO SHAREHOLDERS OF ORLEANS WITHOUT REGARD TO THE
PARTICULAR FACTS AND CIRCUMSTANCES OF EACH SHAREHOLDER'S TAX SITUATION AND
STATUS. EACH SHAREHOLDER OF ORLEANS SHOULD CONSULT HIS OR HER OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO HIM OR HER, INCLUDING
THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN LAWS AND THE
POSSIBLE EFFECT OF CHANGES IN FEDERAL AND OTHER TAX LAWS.
ACCOUNTING TREATMENT
It is anticipated that the Merger will qualify as a "pooling of interests"
for accounting and financial reporting purposes. Under this method of
accounting, the assets and liabilities of CNB and Orleans will be carried
forward after the Effective Time into the consolidated financial statements of
CNB at their recorded amounts, the consolidated income of CNB will include
income of CNB and Orleans for the entire fiscal year in which the Merger occurs,
and the separately reported income of CNB and Orleans for prior periods will be
combined and restated as consolidated income of CNB.
The Reorganization Agreement provides that a condition to CNB's obligation
to consummate the Merger is its receipt of an opinion from Geo. S. Olive & Co.
L.L.C., the independent public accountants for CNB, to the effect that the
Merger will qualify for "pooling of interests" accounting treatment under
Accounting Principles Board Opinion No. 16 if consummated in accordance with the
Reorganization Agreement. In the event such condition is not met, the Merger
would not be consummated unless the condition was waived by CNB and the approval
of Orleans' shareholders entitled to vote on the Merger was resolicited if such
change in accounting treatment were deemed material to the financial condition
and results of operations of CNB on a pro forma basis.
42
<PAGE>
MANAGEMENT AND OPERATIONS AFTER MERGER
After the Effective Time, Orleans will continue, as a wholly owned
subsidiary of CNB and with the name "Citizens Bank of Orleans," to serve its
community in substantially the same manner as it has historically. The Board of
Directors and officers of Orleans, after the Effective Time, will consist of the
persons presently serving in such positions with, in the case of the Board of
Directors, one representative of CNB. The management, Board of Directors and
operations of CNB will not be affected as a result of the Merger.
RESALE OF CNB COMMON
The shares of CNB Common issued pursuant to the Merger will be freely
transferable under the Securities Act except for shares issued to any Orleans
shareholder who may be deemed to be an "affiliate" of Orleans or CNB for
purposes of Rule 145 under the Securities Act. The Reorganization Agreement
provides that each such affiliate will enter into an agreement with CNB
providing that such affiliate will not transfer any shares of CNB Common
received in the Merger except in compliance with the Securities Act and will
make no disposition of any shares of Orleans Common or CNB Common (or any
interest therein) during the period commencing 30 days prior to the Effective
Time through the date on which financial results covering at least 30 days of
combined operations of CNB and Orleans after the Merger have been published.
This Prospectus/Proxy Statement does not cover resales of shares of CNB Common
received by any person who may be deemed to be an affiliate of Orleans. Persons
who may be deemed to be affiliates of Orleans generally include individuals who
(or entities which) control, are controlled by or are under common control with
Orleans and will include directors and certain officers of Orleans and may
include principal shareholders of Orleans.
43
<PAGE>
PRO FORMA FINANCIAL DATA
The following unaudited pro forma combined condensed balance sheet as of
March 31, 1995, and the pro forma combined condensed statements of income for
the three-month periods ended March 31, 1995 and 1994 and each of the years in
the three-year period ended December 31, 1994, give effect to the Merger based
on the historical consolidated financial statements of CNB and its subsidiaries
and the historical financial statements of Orleans under the assumptions and
adjustments set forth in the accompanying notes to the pro forma financial
statements.
The pro forma financial statements have been prepared by the managements of
CNB and Orleans based upon their respective financial statements. These pro
forma statements, which include results of operations as if the Merger had been
consummated at the beginning of each period presented, may not be indicative of
the results that actually would have occurred if the Merger had been in effect
on the dates indicated or which may be obtained in the future. The pro forma
financial statements should be read in conjunction with the historical
consolidated financial statements and notes thereto of CNB incorporated by
reference herein and the historical financial statements of Orleans contained
elsewhere in this Prospectus/Proxy Statement.
The following pro forma combined condensed balance sheet and condensed
statements of income include:
(a) CNB's historical consolidated financial information, which includes the
two Recent Acquisitions. Each of the Recent Acquisitions was accounted
for as a pooling of interests; accordingly, historical financial data
for the Recent Acquisitions is included for all periods presented. The
Recent Acquisitions are King City, which was acquired on February 1,
1995, and HBI and Harrisburg National, which were acquired on
February 10, 1995. See "PARTIES -- CNB -- Recent Acquisitions."
(b) Orleans' historical financial information, which has been designated
herein as "Orleans."
(c) The combined statements of CNB and Orleans, which have been designated
herein as "CNB/Orleans Pro Forma".
(d) UFB's historical consolidated financial information, which has been
designated herein as "UFB." CNB has entered into a definitive
agreement, dated December 12, 1994, to acquire, for shares of CNB
Common, all of the issued and outstanding common stock of UFB. The
proposed transaction would be accounted for as a pooling of interests;
accordingly, historical financial data for UFB is included for all
periods presented. There can be no assurance at this stage of the
process that the transaction will be completed. See "PARTIES -- CNB --
Pending Acquisitions." The pro forma financial information of UFB, the
fiscal year-end of which is June 30, has been restated to conform with
CNB's fiscal year-end of December 31 by adding the results of UFB for
the six-month period ended December 31 to the most recent fiscal year-
end information and deducting the results of UFB for the six-month
period ended December 31 of the preceding fiscal year.
(e) The combined statements of CNB, Orleans and UFB, which have been
designated herein as "Pro Forma Combined".
44
<PAGE>
PRO FORMA COMBINED CONDENSED BALANCE SHEET
March 31, 1995
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Pro Forma CNB/Orleans Pro Forma Pro Forma
CNB Orleans Adjustments Pro Forma UFB Adjustments Combined
----------- -------- ---------------- ------------ --------- ------------ -------------
Increase Increase
(Decrease) (Decrease)
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Cash and due from banks $ 92,415 $ 1,297 $ 93,712 $ 10,542 $ 104,254
Interest bearing deposits
in banks 3,717 -- 3,717 1,014 4,731
Federal funds sold 11,700 1,300 13,000 5,200 18,200
Real estate loans held for
sale 2,397 -- 2,397 8,913 11,310
Investments available for
sale 271,392 6,741 278,133 304,506 582,639
Investment securities 514,561 18,769 533,330 -- 533,330
Loans 1,909,409 28,954 1,938,363 202,447 2,140,810
Allowance for loan losses (26,035) (588) (26,623) (1,942) (28,565)
-----------------------------------------------------------------------------------------------
Net loans 1,883,374 28,366 1,911,740 200,505 2,112,245
Premises and equipment 59,413 277 59,690 8,748 (500) [3] 67,938
Other real estate owned 2,150 -- 2,150 828 2,978
Goodwill 19,058 -- 19,058 -- 19,058
Other assets 44,220 1,082 45,302 12,785 58,087
-----------------------------------------------------------------------------------------------
Total Assets $2,904,397 $57,832 $ $2,962,229 $553,041 $ (500) $3,514,770
===============================================================================================
Liabilities:
Deposits 2,252,341 51,801 2,304,142 359,150 2,663,292
Repurchase agreements 299,366 -- 299,366 -- 299,366
Federal Funds purchased 18,220 -- 18,220 -- 18,220
Short-term borrowings 4,065 -- 4,065 146,926 150,991
Long-term debt 60,824 -- 60,824 -- 60,824
Other liabilities 27,507 296 27,803 8,246 445 [3] 36,494
-----------------------------------------------------------------------------------------------
Total Liabilities 2,662,323 52,097 -- 2,714,420 514,322 445 3,229,187
-----------------------------------------------------------------------------------------------
Shareholders' equity:
Common stock 14,980 500 (182) [1] 15,298 19 2,177 [2][3] 17,494
Capital surplus 203,010 1,200 182 [1] 204,392 17,810 (4,650) [2][3] 217,552
Retained earnings 23,973 4,164 28,137 30,815 (3,780) [2][3] 55,172
Treasury stock -- (5,308) 5,308 [3] --
ESOP loan guarantee -- (133) (133)
Unearned compensation -- (150) (150)
Net unrealized security
gains (losses) 111 (129) (18) (4,334) (4,352)
-----------------------------------------------------------------------------------------------
Total Shareholders'
Equity 242,074 5,735 $ -- 247,809 38,719 (945) 285,583
-----------------------------------------------------------------------------------------------
Total Liabilities and
Equity $2,904,397 $57,832 $ -- $2,962,229 $553,041 $ (500) $3,514,770
===============================================================================================
</TABLE>
45
<PAGE>
NOTES TO PRO FORMA COMBINED CONDENSED BALANCE SHEET (Unaudited)
The following pro forma adjustments are necessary to record the Merger and
pending merger.
[1] To reflect exchange of shares of Orleans Common for shares of CNB Common,
retaining the historical cost basis of assets, liabilities and equity
through the treatment as a pooling of interest. A total of 318,500 shares
of CNB Common will be issued at the exchange ratio of 6.37 shares of CNB
Common for each of the 50,000 issued and outstanding shares of Orleans
common stock (assuming no downward adjustment of the Conversion Ratio, see
"MERGER--"Conversion Ratio"), resulting in a transfer from Common Stock to
Capital Surplus of $181,500 to reflect the decrease in the aggregate par
value of the issued and outstanding shares of CNB Common relative to the
aggregate par value of the currently outstanding shares of Orleans common
stock.
Common stock (182)
Capital surplus 182
[2] To reflect exchange of shares of UFB common stock for shares of CNB Common,
retaining the historical cost basis of assets, liabilities and equity
through the treatment as a pooling of interest. A total of 2,196,109 shares
of CNB Common will be issued at the exchange ratio of 1.366 shares of CNB
Common for each of the 1,607,693 issued and outstanding shares of UFB
common stock (assuming no upward or downward adjustment of the Conversion
Ratio, see "PARTIES--CNB--Pending Acquisitions"), resulting in a transfer
from Capital Surplus to Common Stock of $2,180,000 to reflect the increase
in the aggregate par value of the issued and outstanding shares of CNB
Common over the aggregate par value of the currently outstanding shares of
UFB common stock.
Common stock 2,180
Capital surplus (2,180)
To reflect the cancellation of UFB Treasury Stock.
Capital stock (3)
Capital surplus (2,470)
Retained earnings (2,835)
Treasury stock 5,308
[3] Upon consummation of the UFB merger, CNB will recognize certain expenses
related to the merger. These expenses will be nonrecurring charges for
restructuring and termination costs related to closing of certain duplicate
facilities and severance pay related to certain employment contracts and
separated employees in connection with the merger. Duplicate premises and
data processing equipment are expected to be written down by approximately
$500,000. Severance benefits to honor existing employment contracts and
benefits for other employees are estimated to be $950,000. The net after-
tax adjustment of these items is $945,000. The Pro Forma Combined Statement
of Income does not reflect these nonrecurring merger related expenses.
Premises and equipment (500)
Other liabilities 445
Retained earnings (945)
46
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1995
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Pro Forma CNB/Orleans Pro Forma Pro Forma
CNB Orleans Adjustments Pro Forma UFB Adjustments Combined
------- ------- ----------- ----------- ------ ----------- ----------
Increase Increase
(Decrease) (Decrease)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income $55,953 $1,065 $57,018 $9,634 $66,652
Interest expense 26,361 522 26,883 6,313 33,196
--------------------------------------------------------------------------------------
Net interest income 29,592 543 -- 30,135 3,321 -- 33,456
Provision for losses 1,504 -- 1,504 50 1,554
--------------------------------------------------------------------------------------
Net interest income after
provision for losses 28,088 543 -- 28,631 3,271 -- 31,902
Non-interest income 8,893 28 8,921 1,122 10,043
Non-interest expense 25,938 338 26,276 3,062 29,338
--------------------------------------------------------------------------------------
Income before income taxes 11,043 233 -- 11,276 1,331 -- 12,607
Income taxes 4,058 53 4,111 437 -- 4,548
--------------------------------------------------------------------------------------
Net Income $ 6,985 $ 180 $ -- $ 7,165 $ 894 $ -- $ 8,059
======================================================================================
Net Income per common share
Primary $ 0.47 $ 0.47 $ 0.46
Fully diluted $ 0.47 $ 0.47 $ 0.46
Average Shares Outstanding 15,002 15,321 17,676
Fully Diluted Shares Outstanding 15,492 15,811 18,166
</TABLE>
47
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1994
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Pro Forma CNB/Orleans Pro Forma Pro Forma
CNB Orleans Adjustments Pro Forma UFB Adjustments Combined
-------- -------- ------------ ------------ ------- ----------- ----------
Increase Increase
(Decrease) (Decrease)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income $44,086 $915 $45,001 $7,569 $52,570
Interest expense 19,699 403 20,102 4,395 24,497
-------------------------------------------------------------------------------
Net interest income 24,387 512 -- 24,899 3,174 -- 28,073
Provision for losses 1,302 -- 1,302 83 1,385
-------------------------------------------------------------------------------
Net interest income after
provision for losses 23,085 512 -- 23,597 3,091 -- 26,688
Non-interest income 10,262 30 10,292 1,782 12,074
Non-interest expense 23,983 310 24,293 3,361 27,654
-------------------------------------------------------------------------------
Income before income taxes 9,364 232 -- 9,596 1,512 -- 11,108
Income taxes 3,053 37 3,090 487 -- 3,577
-------------------------------------------------------------------------------
Net Income $ 6,311 $195 $-- $ 6,506 $1,025 $-- $ 7,531
===============================================================================
Net Income per common share
Primary $0.44 $0.44 $0.44
Fully diluted $0.42 $0.43 $0.43
Average Shares Outstanding 14,445 14,764 17,068
Fully Diluted Shares Outstanding 15,080 15,399 17,703
</TABLE>
48
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1994
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Pro Forma CNB/Orleans Pro Forma Pro Forma
CNB Orleans Adjustments Pro Forma UFB Adjustments Combined
--------- -------- ------------ ------------ -------- ----------- ----------
Increase Increase
(Decrease) (Decrease)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income $195,467 $3,833 $199,300 $32,626 $231,926
Interest expense 87,255 1,756 89,011 19,367 108,378
---------------------------------------------------------------------------------
Net interest income 108,212 2,077 -- 110,289 13,259 -- 123,548
Provision for losses 6,319 300 6,619 1,765 8,384
---------------------------------------------------------------------------------
Net interest income after
provision for losses 101,893 1,777 -- 103,670 11,494 -- 115,164
Non-interest income 37,352 (132) 37,220 4,465 41,685
Non-interest expense 97,707 1,656 99,363 17,327 116,690
---------------------------------------------------------------------------------
Income before income taxes 41,538 (11) -- 41,527 (1,368) -- 40,159
Income taxes 14,705 (62) 14,643 2,024 -- 16,667
---------------------------------------------------------------------------------
Net Income $ 26,833 $ 51 $ -- $ 26,884 $(3,392) $ -- $ 23,492
=================================================================================
Net Income per common share
Primary $1.82 $1.79 $1.35
Fully diluted $1.78 $1.74 $1.33
Average Shares Outstanding 14,717 15,036 17,352
Fully Diluted Shares Outstanding 15,291 15,610 17,926
</TABLE>
49
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1993
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Pro Forma CNB/Orleans Pro Forma Pro Forma
CNB Orleans Adjustments Pro Forma UFB Adjustments Combined
--------- -------- ------------ ------------ -------- ----------- ----------
Increase Increase
(Decrease) (Decrease)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income $177,206 $3,754 $180,960 $34,475 $215,435
Interest expense 80,764 1,752 82,516 19,823 102,339
---------------------------------------------------------------------------------
Net interest income 96,442 2,002 -- 98,444 14,652 -- 113,096
Provision for losses 3,605 -- 3,605 329 3,934
---------------------------------------------------------------------------------
Net interest income after
provision for losses 92,837 2,002 -- 94,839 14,323 -- 109,162
Non-interest income 33,910 42 33,952 9,261 43,213
Non-interest expense 87,867 1,303 89,170 14,735 103,905
---------------------------------------------------------------------------------
Income before income taxes 38,880 741 -- 39,621 8,849 -- 48,470
Income taxes 12,914 180 13,094 3,536 -- 16,630
---------------------------------------------------------------------------------
Net Income/(1)/ $ 25,966 $ 561 $ -- $ 26,527 $ 5,313 $ -- $ 31,840
=================================================================================
Net Income per common share
Primary $1.82 $1.82 $1.87
Fully diluted $1.76 $1.76 $1.82
Average Shares Outstanding 14,270 14,589 16,999
Fully Diluted Shares Outstanding 15,084 15,403 17,787
</TABLE>
_____________________________
/(1)/ Net income excludes the cumulative effect of the change in accounting
for income taxes.
50
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1992
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Pro Forma CNB/Orleans Pro Forma Pro Forma
CNB Orleans Adjustments Pro Forma UFB Adjustments Combined
--------- -------- ------------ ------------ -------- ----------- ----------
Increase Increase
(Decrease) (Decrease)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income $187,882 $4,174 $192,056 $37,874 $229,930
Interest expense 95,950 2,147 98,097 23,111 121,208
-------- ------ -------- ------- ---------
Net interest income 91,932 2,027 -- 93,959 14,763 -- 108,722
Provision for losses 8,960 -- 8,960 240 9,200
-------- ------ -------- ------- ---------
Net interest income after
provision for losses 82,972 2,027 -- 84,999 14,523 -- 99,522
Non-interest income 28,313 116 28,429 8,135 36,564
Non-interest expense 81,359 1,221 82,580 15,004 97,584
-------- ------ -------- ------- ---------
Income before income 29,926 922 -- 30,848 7,654 -- 38,502
Income taxes 8,550 227 8,777 2,771 -- 11,548
-------- ------ -------- ------- ----------- ---------
Net Income $ 21,376 $ 695 $ -- $ 22,071 $ 4,883 $ -- $ 26,954
======== ====== =========== ======== ======= =========== =========
Net Income per common share
Primary $1.52 $1.53 $1.60
Fully diluted $1.48 $1.49 $1.56
Average Shares Outstanding 14,077 14,396 16,881
Fully Diluted Shares Outstanding 14,931 15,250 17,745
</TABLE>
51
<PAGE>
DESCRIPTION OF CNB'S CAPITAL STOCK
GENERAL
CNB's Articles of Incorporation presently authorize the issuance of fifty
million shares of common stock, $1.00 stated value per share, and two million
shares of preferred stock, without par value. As of May 30, 1995, 14,818,767
shares of CNB Common were issued and outstanding and no shares of CNB's
preferred stock were issued and outstanding. The Board of Directors of CNB is
authorized to cause the preferred stock to be issued from time to time, in
series, by resolution adopted prior to the issue of shares of a particular
series, and to fix and determine in the resolution the designation, relative
rights, preferences and limitations of the shares of each series, including
voting, dividend and liquidation rights and all other matters with respect to
such shares as are permitted to be fixed and determined by the Board of
Directors under the Indiana Corporate Law.
CNB COMMON
The following is a brief description of the terms of CNB Common.
Dividend Rights
Holders of CNB Common are entitled to receive dividends when, as and if
declared by CNB's Board of Directors out of funds legally available therefor,
subject to any preferential dividend rights which may attach to preferred stock
which may be issued by CNB in the future. The ability of the subsidiary banks of
CNB to pay cash dividends, which are expected to be CNB's principal source of
income, is restricted by applicable banking laws. Such dividends have previously
been CNB's principal source of income.
Voting Rights
Holders of shares of CNB Common are entitled to one vote per share in the
election of directors and in all other matters to be voted upon by the
shareholders generally. Shareholders of CNB do not have cumulative voting rights
in the election of directors. Therefore, a majority of the shares of CNB Common
can elect the entire Board of Directors.
Classification of Board of Directors
The Board of Directors of CNB is divided into three classes, and the
directors are elected by classes to three-year terms. Approximately one-third of
the directors of CNB are elected at each annual meeting of the shareholders. The
primary goal of CNB's staggered Board is to encourage well-financed bidders who
are interested in acquiring CNB to negotiate directly with CNB's Board of
Directors. Although it promotes stability and continuity of the Board of
Directors, classification of the Board of Directors (combined with the fact that
shares of CNB Common do not have cumulative voting rights in the election of
directors) may have the effect of decreasing the number of directors that could
otherwise be elected by anyone who obtains a controlling interest in CNB Common
and thereby could impede a change in control of CNB or discourage certain offers
(possibly including some offers which shareholders may feel would be in their
best interest). Because of the additional time required to change control of the
Board of Directors, a staggered Board of Directors also tends to perpetuate
present management.
52
<PAGE>
Liquidation Rights
In the event of liquidation, dissolution or winding up of CNB, whether
voluntary or involuntary, the holders of CNB Common would be entitled to share
ratably in any of its assets or funds that are available for distribution to its
shareholders after the satisfaction of its liabilities (or after adequate
provision is made therefor) and after preferences on any outstanding preferred
stock.
Preemptive Rights
Holders of shares of CNB Common do not have the preemptive right to
subscribe on a pro-rata basis for any presently or subsequently authorized
shares of CNB Common.
Assessment and Redemption
The shares of CNB Common presently outstanding are, and the shares of CNB
Common issued by CNB pursuant to the Merger will be, when issued and delivered
pursuant to the Reorganization Agreement and as described herein, duly
authorized, validly issued, fully paid and non-assessable. There are no
redemption or sinking fund provisions applicable to the shares of CNB Common.
Transfer Agent
Citizens Bank is the transfer agent for shares of CNB Common.
Dividend Restrictions under Loan Agreement
Pursuant to the terms of a Term Loan Agreement (the "Loan Agreement"), CNB
may not, until October 31, 1997, in any fiscal year, purchase or redeem any
shares of CNB Common in an amount that exceeds 7.5% of its tangible net worth in
the immediately preceding fiscal year. The Loan Agreement also provides that CNB
may not, until October 31, 1997, pay or declare any dividend (other than stock
dividends payable in shares of CNB Common) on CNB Common or make any other
distribution in respect of CNB Common, except that, provided that no "Event of
Default" or "Unmatured Event of Default" (as such terms are defined in the Loan
Agreement) exists or would exist as a result thereof, CNB may declare or pay
cash dividends to the holders of CNB Common not to exceed for all fiscal years
of CNB on a cumulative basis beginning with the 1991 fiscal year (x) $5 million
in the aggregate for all years beginning with the 1991 fiscal year, plus (y) the
net proceeds received by CNB from the sale after December 31, 1990 of shares of
CNB Common or convertible debt securities subsequently converted into CNB
Common, plus (z) 50% of CNB's net income on a cumulative basis beginning with
the 1991 fiscal year. As of March 31, 1995, $1.165 million was available for
payment of dividends, purchases of CNB Common and payments or distributions in
respect of CNB Common under the Loan Agreement.
53
<PAGE>
COMPARISON OF SHAREHOLDER RIGHTS
The rights of holders of shares of CNB Common are governed by the Indiana
Corporate Law and by CNB's Articles of Incorporation, By-laws and other
corporate documents. The rights of holders of shares of Orleans Common are
governed by the Indiana Banking Law and by Orleans' Articles of Incorporation,
By-laws and other corporate documents. The rights of holders of shares of
Orleans differ in certain respects from the rights which they would have as
shareholders of CNB. A summary of the material differences between the
respective rights of the common shareholders of CNB and Orleans is set forth
below.
SHAREHOLDER VOTE REQUIRED FOR CERTAIN TRANSACTIONS
BUSINESS COMBINATIONS
CNB
CNB's Articles of Incorporation include a so-called "fair price" provision.
This provision generally provides that mergers, other business combinations and
similar transactions and the sale, lease, mortgage or other disposition of more
than 10% of total assets involving CNB or any of its subsidiaries and any person
or entity beneficially owning directly or indirectly more than 10% of the
outstanding voting stock of CNB, or affiliates or associates of such an entity
(a "CNB 10% shareholder"), may not be consummated without the approval of the
holders of at least 80% of the voting stock of CNB, unless either (i) the
transaction is approved by a majority of the members of the Board of Directors
of CNB who are not affiliated with the CNB 10% shareholder; or (ii) the
transaction meets certain minimum ("fair price") price requirements (in either
of which cases, the shareholder and director approval requirements of the "fair
price" provision would no longer apply and only the normal shareholder and
director approval requirements of the Indiana Corporate Law would govern the
transaction). The primary purpose of CNB's "fair price" provision is to provide
additional safeguards for the remaining shareholders in the event that an
individual or entity becomes a majority shareholder of CNB. If CNB comes under
the control of a single person or entity, substantial inequities could befall
the minority shareholders. A bid for control of a target company is often
followed, in time, by a complete business combination that eliminates minority
interests in the target company on terms often unfavorable to the minority -- a
so-called "two-tier" structured takeover. Minority shareholders in these
circumstances may be forced out by the controlling shareholder in a business
combination transaction at a time and for a price (cash or other types of
consideration, often including debt instruments) not to their liking. The price
per share in such transactions often is lower than the price per share
previously paid by the controlling shareholder for its controlling block of
stock in the first tier of the takeover. The minority shareholders, in such
event, may have no alternative unless they choose to follow the statutory
procedures for appraisal rights as a dissenting shareholder or to bring legal
action against the controlling shareholder
54
<PAGE>
for breach of fiduciary duty, either of which procedures may be costly and time-
consuming. CNB's higher shareholder vote requirements make it more difficult
for a single shareholder to obtain ultimate "control" over CNB in the sense of
being able unilaterally to effect a completed business combination on the
controlling shareholder's own terms. A disadvantage of these higher shareholder
vote requirements, however, is that outside parties contemplating an attempt to
acquire control over CNB by acquiring less than all of its outstanding stock may
be discouraged from making such an attempt, because ultimate "control" will
require obtaining a higher percentage of the outstanding shares of CNB Common
than if normal shareholder vote requirements were in effect. As a result,
premium offers for CNB Common from outside parties interested in acquiring
control may be somewhat less likely from such parties than premium offers for
other similar companies without such high voting requirements. In addition,
because outside parties may be somewhat less likely to attempt to acquire
control over CNB due to its higher shareholder vote requirements, the management
of CNB may be somewhat less vulnerable to removal in the future than would be
the case if such provisions were not in effect.
Orleans
Neither the Indiana Banking Law nor Orleans' Articles of Incorporation or
Bylaws contain similar provisions.
REMOVAL OF DIRECTORS
CNB
CNB's Articles of Incorporation provide that at a meeting called expressly
for that purpose, a director or the entire Board of Directors may be removed
without cause only upon the affirmative vote of the holders of not less than 80%
of the shares entitled to vote generally in an election of directors. At a
meeting called expressly for that purpose, a director may be removed by the
shareholders for cause by the affirmative vote of the holders of a majority of
the shares entitled to vote upon his election. The Articles of Incorporation
provide that, except as may be otherwise provided by law, cause for removal will
be construed to exist only if the director whose removal is proposed (i) has
been convicted of a felony by a court of competent jurisdiction and such
conviction is no longer subject to direct appeal; or (ii) has been adjudged by a
court of competent jurisdiction to be liable for negligence or misconduct in the
performance of his duty to CNB in a manner of substantial importance to CNB, and
such adjudication is no longer subject to direct appeal. CNB's 80% shareholder
vote requirement for removal of directors without cause precludes a majority
shareholder from circumventing the classified Board by decreasing the size of
the Board until its nominees have a numerical majority or by removing directors
not up for election, filling the resulting vacancy with its nominees, and
thereby gaining control of the Board. The removal provisions would make it more
difficult for shareholders of CNB to change the composition of the Board of
Directors even if the shareholders believe such a change would be desirable.
Orleans
The Indiana Banking Law provides that in addition to being removed in any
manner provided in the articles of incorporation of an Indiana bank, the
shareholders or directors of an Indiana bank may remove one or more directors
for cause or, unless the articles of incorporation provide otherwise, without
cause. If a director is elected by a voting group of shareholders, only the
shareholders of that voting group may participate in the vote to remove that
director. A director may be removed only if the number of votes cast to remove
the director exceed the number of votes cast not to remove that director.
Authorized shareholders may remove a director only at a meeting called for the
purpose of removing the
55
<PAGE>
director and the purpose must be set forth in the notice of the meeting.
Neither Orleans' Articles of Incorporation nor Bylaws contain provisions
regarding the removal of directors.
AMENDMENTS TO ARTICLES OF INCORPORATION
CNB
The Indiana Law provides that, unless a greater vote is required under a
specific provision of the Indiana Corporate Law or by a corporation's articles
of incorporation or its board of directors, a corporation may amend its articles
of incorporation upon receiving more votes of holders in favor of the amendment
than votes cast against the amendment, unless the amendment creates dissenters'
rights in which case a favorable vote of the holders of a majority of the
outstanding shares is required. Under the Indiana Corporate Law, a corporation's
board of directors may condition its submission of a proposed amendment to the
shareholders of the corporation on any basis, including the requirement of the
affirmative vote of a greater percentage of the voting shares of the corporation
than otherwise required under the Indiana Corporate Law.
CNB's Articles of Incorporation provide that, notwithstanding any other
provision of the Articles of Incorporation or any provision of law or any
preferred stock designation, the provisions of Article VII (relating to the
classification, number, terms, removal of directors and newly created
directorships and vacancies), Article IX (relating to special meetings of
shareholders) and Article X (relating to the "fair price" provisions discussed
above), may be altered, amended or repealed only with the affirmative vote of
the holders of 80% of CNB Common then entitled to vote in an election of
directors.
Orleans
The Indiana Banking Law provides that an Indiana bank may amend its articles
of incorporation to add or change a provision that is required or permitted to
be in the articles of incorporation or delete a provision not required to be in
the articles of incorporation. A shareholder does not have a vested property
right resulting from any provision in the articles of incorporation. Unless
otherwise provided in the articles of incorporation of an Indiana bank, the
bank's board of directors may adopt at least one amendment to the bank's
articles of incorporation without shareholder action to (i) extend the duration
of the bank if it was incorporated when limited duration was required by law;
(ii) delete the names and addresses of the initial directors; (iii) change each
issued and unissued authorized share of an outstanding class into a greater
number of whole shares and fractional shares if the bank has only shares of that
class outstanding; (iv) reduce the number of authorized shares solely as the
result of cancellation of treasury shares; or (v) make any other change
expressly permitted by Indiana Banking Law to be made without shareholder
action. Generally, for other amendments, the following must occur (a) the board
of directors must adopt a resolution directing that the proposed amendment be
submitted to a vote of the shareholders, and the resolution must be approved by
the directors either before or after the proposed amendments are submitted to
the shareholders; (b) the board of directors must recommend the amendment to the
shareholders, unless they determine that because of a conflict of interest or
other special circumstance the board should make no recommendation; and (c)
generally, unless the bank's articles of incorporation provide otherwise, the
amendment must be approved by a majority of votes entitled to be cast on the
amendment. The board of directors may condition the board's submission of the
proposed amendment on any basis. Each shareholder must be notified of the
shareholders' meeting in accordance with the Indiana Banking Law, and articles
of amendment must be properly filed to evidence the amendment. Neither Orleans'
Articles of Incorporation nor Bylaws contain provisions regarding amendments to
Orleans' Articles of Incorporation.
56
<PAGE>
VOTING RIGHTS
CNB
Holders of shares of CNB Common are entitled to one vote per share in the
election of directors and in all other matters to be voted upon by the
shareholders generally. Directors of CNB are elected by the majority vote of
the shareholders and shareholders of CNB are not entitled to cumulative voting
in the election of directors. Therefore, a majority of the shares of CNB Common
can elect the entire Board of Directors.
Orleans
In accordance with the Indiana Banking Law and as provided in Orleans'
Bylaws, each outstanding share of Orleans Common is entitled to one vote on each
matter voted on at a shareholders meeting. A shareholder or Orleans may vote in
person or by proxy. Generally, directors are elected by a plurality of votes
cast by the shareholders entitled to vote at a meeting in which a quorum is
present (i.e., the nominees receiving the highest number of votes are elected
regardless of whether such votes constitute a majority of the shares represented
at the meeting).
SPECIAL MEETING OF SHAREHOLDERS; SHAREHOLDER ACTION BY WRITTEN CONSENT
CNB
CNB's Articles of Incorporation require that shareholders must hold at least
80% of the outstanding voting shares of CNB in order to call a special meeting
of shareholders. This provision is intended to discourage attempts by the
holders of less than 80% of the outstanding voting stock of CNB from disrupting
the business of the corporation between annual shareholders meetings by calling
special meetings. Possible disadvantages of this provision is that it makes it
more difficult for a shareholder or shareholder group to take action where such
action is opposed by a majority of the Board of Directors and management of CNB
and it may delay the removal of directors, even if cause exists for such
removal. The Indiana Corporate Law provides that any action required or
permitted to be taken at a meeting of shareholders may be taken without a
meeting if a consent, in writing, setting forth the action taken is signed by
the holders of all of the shares entitled to vote on the subject matter.
Orleans
Orleans' Bylaws provide that shareholders owning, in the aggregate, not less
than one-quarter (1/4) of the outstanding shares of Orleans Common may call a
special meeting. The Indiana Banking Law provides that action may be taken
without a shareholders meeting if the action is taken by all who are entitled to
vote on the action and there is, delivered to the bank, a written consent signed
by all the shareholders entitled to vote on the action. The action is effective
when the last shareholder signs the consent. The record date is the date the
first shareholder signs the consent.
DISSENTERS' RIGHTS
CNB
Under the Indiana Corporate Law, a shareholder of a corporation is entitled
(subject to certain exceptions) to receive payment for the fair value of his
shares if, among other things, such shareholder
57
<PAGE>
dissents from a plan of share exchange, sale or exchange of all or substantially
all of the property of the corporation, or a merger or control share acquisition
to which such corporation is a party. Because CNB is not merging directly with
Orleans, CNB's shareholders are not entitled to assert such rights in connection
with the Merger. Orleans' Articles of Association and By-Laws do not contain
provisions relating to dissenter's rights. Orleans shareholders are entitled to
assert such rights in connection with the Merger.
Orleans
Under the Indiana Banking Law, a shareholder of a bank entitled to vote on
an agreement of merger or consolidation may dissent from the merger or
consolidation and obtain the payment of the value of his or her shares provided
he or she makes a written demand for payment of his or her shares and does not
vote in favor of the proposed action. See "MERGER -- Dissenters' Rights."
TAKEOVER STATUTES
CNB
In general, the Indiana Corporate Law prohibits any business combination,
such as a merger or consolidation between an Indiana corporation with shares of
its stock registered under the federal securities laws or who make an election
under the Indiana Corporate Law, and an "interested shareholder" (which is
defined as any owner of 10% or more of the corporation's stock) for five years
after the date on which such shareholder became an interested shareholder,
unless the stock acquisition which caused the person to become an interested
shareholder was approved in advance by the corporation's board of directors.
This so-called "five-year freeze" provision of the Indiana Law is effective even
if all parties should subsequently decide that they wish to engage in the
business combination. The Indiana Corporate Law also contains a "control share
acquisition" provision which effectively denies voting rights to shares of an
"issuing public corporation" acquired in control share acquisitions unless the
grant of such voting right is approved by a majority vote of disinterested
shareholders. An issuing public corporation is a corporation that (i) has 100
or more shareholders; (ii) has its principal place of business, its principal
office or substantial assets within Indiana and (iii) either (a) more than 10%
of its shareholders are Indiana residents; (b) more than 10% of its shares are
owned by Indiana residents or (c) 10,000 shareholders resident in Indiana. CNB
is an "issuing public corporation." A control share acquisition is one by which
a purchasing shareholder acquires more than one-fifth, one-third, or one-half of
the voting power of the stock of an Indiana corporation whose stock is
registered under the federal securities laws. In addition, if any person
proposing to make or who has made "control share acquisitions" does not file an
"acquiring person statement" with the issuing corporation or if the control
shares are not accorded full voting rights by other shareholders, and if the
articles of incorporation or by-laws of the corporation whose shares are
acquired authorize such redemption (CNB's By-laws do), the acquired shares are
subject to redemption by the corporation. Finally, if a control share
acquisition should be made of a majority or more of the corporation's voting
stock, and those shares are granted full voting rights, shareholders are granted
dissenters' rights.
Orleans
Neither the Indiana Banking Law nor Orleans' Articles of Incorporation
or Bylaws contain a similar provision.
58
<PAGE>
INDEMNIFICATION
CNB
Pursuant to the Indiana Corporate Law, and the Articles of Incorporation and
By-laws of CNB, CNB is obligated to indemnify certain officers and directors in
connection with liabilities arising from legal proceedings resulting from such
person's service to CNB in certain circumstances. CNB may also voluntarily
undertake to indemnify certain persons acting on CNB's behalf in certain
circumstances.
Chapter 37 of the Indiana Corporate Law provides for mandatory
indemnification of directors and officers of Indiana corporations and permissive
indemnification of directors, officers, employees and agents of Indiana
corporations who are made parties to proceedings as a result of their
relationship with such corporation. Chapter 37 also applies to individuals who
are serving at such corporation's request as directors, officers, employees and
agents of such corporation's subsidiaries. Chapter 37 requires Indiana
corporations, unless limited by their articles of incorporation, to indemnify
any director or officer against reasonable expenses incurred in connection with
any proceeding to which such person was a party if the individual is wholly
successful on the merits. Chapter 37 authorizes Indiana corporations to
indemnify any director, officer, employee or agent against liability incurred in
such a proceeding generally if the individual's conduct was in good faith and
the individual reasonably believed, in the case of conduct in the individual's
official capacity, that his conduct was in the corporation's best interests and
in all other cases that his conduct was not opposed to the best interests of
such corporation. Chapter 37 further authorizes any court of competent
jurisdiction, unless the articles of incorporation provide otherwise, to order
indemnification generally if the court determines a director or officer of an
Indiana corporation is entitled to mandatory indemnification or is otherwise
fairly and reasonably entitled to indemnification in view of all the relevant
circumstances. Chapter 37 also authorizes Indiana corporations to advance
reasonable expenses in advance of final disposition of a proceeding generally if
the individual affirms in writing a good faith belief that he satisfies the
standard of conduct for permissive indemnification, the individual undertakes in
a signed writing to repay the advance if it is determined he does not satisfy
the standard of conduct for permissive indemnification and the corporation
determines that the facts then known do not preclude indemnification. Finally,
Chapter 37 authorizes further indemnification to the extent that the corporation
may provide in its articles of incorporation, by-laws, a resolution of the board
of directors or the shareholders or any other authorization, whenever adopted,
after notice, by a majority vote of all the voting shares then issued and
outstanding. Except with respect to the advancement of expenses, CNB's By-laws
generally provide for the indemnification of CNB's directors, officers,
employees and agents to the extent permitted by Chapter 37.
Orleans
The Indiana Banking Law provides for mandatory indemnification of a director
who is wholly successful, on the merits or otherwise, in the defense of any
proceeding to which the director was a party because the director is or was the
director of the corporation. The Indiana Banking Law provides for conditional
indemnification of a director if the director's conduct was in good faith and
the director reasonably believed (i) in the case of conduct in his official
capacity with the bank, that his conduct was in the bank's best interest; and
(ii) in all other cases that his conduct was at least not opposed to the bank's
best interest. If the case involves a criminal proceeding, then in addition to
the above requirements, the director must also reasonably believe his conduct
was lawful or have no reason to believe his conduct was unlawful. Prior to
final disposition of a case, a bank may pay for or reimburse a director's
expenses if the director provides a written affirmation of his good faith belief
that he met the required standard of conduct, the director furnishes a written
undertaking to repay the advance if it is
59
<PAGE>
ultimately determined that he did not meet the standard of conduct, and if a
determination is made that the facts then known to those making the
determination would not preclude indemnification under the Indiana Banking Law.
A director may apply for indemnification to the court conducting the proceeding
or any court of competent jurisdiction unless the bank's articles of
incorporation provide otherwise. The court may order indemnification if the
court determines the director is entitled to mandatory indemnification or the
director is fairly and reasonably entitled to indemnification in view of all the
relevant circumstances whether or not the director met the standard of conduct
required. The bank cannot indemnify a director under the conditional
indemnification provisions unless authorized after a determination has been made
that the indemnification of the director is permissible in the circumstances.
The determination is made (i) by a majority vote of a quorum of non-party
directors; (ii) if that is not possible, a majority vote of a committee designed
by the board of directors in which party directors may participate; (iii) by
special legal counsel; or (iv) by the shareholders, excluding shares owned or
voted under the control of directors who are parties. The Indiana Banking Law
provides that officers and employees are entitled to mandatory indemnification
and entitled to apply for court-ordered indemnification in the same manner as
directors. The bank may advance expenses for an officer to the same extent it
could do for a director. A bank may advance expenses to an officer, employee or
agent, whether or not a director, to the extent consistent with public policy,
and provided by the bank's articles of incorporation, by-laws, specific action
of the corporate board of directors or contract. Neither Orleans' Articles of
Incorporation nor Bylaws contain provisions regarding indemnification.
LIMITATION OF LIABILITY OF DIRECTORS
CNB
The Indiana Corporate Law provides that no director of an Indiana
corporation will be subject to liability for any action taken as a director, or
any failure to take any action as a director, unless the director has both
breached or failed to perform the duties of the director's office in compliance
with the Indiana Corporate Law and the breach or failure to perform constitutes
willful misconduct or recklessness. This provision eliminates the potential
liability of a corporation's directors for failure, except through willful
misconduct or recklessness, to satisfy their duty of care, which requires each
director to carry out his duties 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. This provision may thus reduce the likelihood of derivative
litigation against directors and discourage or deter shareholders or management
from bringing a lawsuit against directors for breach of their duty of care, even
though such an action, if successful, might otherwise have been beneficial to
the corporation and its shareholders. Shareholders therefore will not have a
cause of action based upon negligent business decisions, including those
relating to attempts to acquire control of the corporation. This provision does
not, however, preclude all equitable remedies for breach of the duty of care,
although such remedies might not be available as a practical matter.
Orleans
The Indiana Banking Law provides that a director of an Indiana bank is not
liable for an act or omission if the director (i) acted in good faith with
ordinary prudence and (ii) in a manner he reasonably believed was in the best
interests of the bank. In carrying out his duties, a director may rely on data
or other information prepared by an officer or employee of the bank reasonably
believed to be competent, legal counsel, other professionals or a committee of
the board of directors of which the director is not a member. The director will
be liable if the director does not meet the requirements of (i) or (ii) and the
act or omission constitutes willful misconduct or recklessness. This exemption
from liability does
60
<PAGE>
not extend to any proceeding brought by the department against a director. The
purpose of this provision is to reaffirm that directors, in exercising their
business judgment, are not required to approve a corporate action if they
determined in good faith that the action is not in the best interests of the
bank. Neither Orleans' Articles of Incorporation nor the Bylaws contain
provisions which limit the liability of its directors.
CONSIDERATION OF NON-SHAREHOLDER INTERESTS
CNB
The Indiana Corporate Law specifically authorizes directors, in considering
the best interests of a corporation, to consider the short-term and long-term
interests of the corporation as well as the effects of any action on
shareholders, employees, suppliers and customers of the corporation and
communities in which offices or other facilities of the corporation are located,
and any other factors the directors consider pertinent. Under the Indiana
Corporate Law, directors are not required to approve a proposed corporate action
if the directors determine in good faith after considering and weighing as they
deem appropriate the effect of such action on the corporation's constituents
that such approval is not in the best interest of the corporation. In addition,
the Indiana Corporate Law states that directors are not required to redeem any
rights under or render inapplicable a shareholder rights plan or to take or
decline to take any other action solely because of the effect such action might
have on a proposed acquisition of control of a corporation or the amounts to be
paid to shareholders under such an acquisition. The Indiana Corporate Law
explicitly provides that the different or higher degree of scrutiny imposed in
Delaware and certain other jurisdictions upon director actions taken in response
to potential changes in control will not apply. Any determination made with
respect to the foregoing by a majority of the disinterested directors will
conclusively be presumed to be valid unless it can be demonstrated that such
determination was not made in good faith.
Orleans
The Indiana Banking Law provides that in considering the best interests of
an Indiana bank, a director may consider the effects of any action on employees,
suppliers, customers of the bank and the communities in which the bank's offices
are housed as well as the effects on shareholders. Additionally, in taking or
declining to take any action, a board of directors of a bank may also consider
both the short and long term best interests of the bank and consider the effects
on other corporate constituents in addition to the shareholders. Directors may
also consider any other factors they consider pertinent. Directors are not
required to take or decline any action solely because of the effect such action
might have on a proposed acquisition of control of the bank or the amounts that
might be paid to shareholders under the acquisition. Neither Orleans' Articles
of Incorporation nor Bylaws contain provisions regarding the consideration of
non-shareholder interests.
61
<PAGE>
INFORMATION ABOUT ORLEANS
BUSINESS OF ORLEANS
GENERAL
Orleans is an Indiana state chartered bank founded in 1933. The main
and only office of Orleans is located at 200 South Maple Street, Orleans,
Indiana 47452, and its telephone number is (812) 865-2374. Orleans' deposits
are insured by the F.D.I.C.
The business of Orleans primarily consists of attracting demand,
savings, certificate of deposit and other time deposits from the general public
and investing such deposits in real estate, commercial and personal loans. To a
lesser extent, Orleans invests in investment securities, including U. S.
Government and agency securities, municipal securities and mortgage-backed
securities. Orleans concentrates its loan practice on the origination of loans
with adjustable interest rates because of the more frequent repricing
characteristics of such loans. This practice enables Orleans' assets to be more
responsive to changes in interest rates and to more closely match the maturities
of Orleans' assets and liabilities. At March 31, 1995, Orleans had total assets
of $57.8 million, total deposits of $51.8 million and shareholders' equity of
$5.7 million. As of March 31, 1995, Orleans was the third largest financial
institution in Orange County, Indiana, in terms of total assets and total
deposits.
Orleans considers its primary market area to be Orange County and the
southern part of Lawrence County in Indiana. The local economy depends
primarily on (i) local industrial facilities, such as the local manufacturing
operations for such major companies as Paoli, Inc., Essex International, Inc.
and White Castle Systems, Inc., and (ii) general agricultural activity in the
area.
COMPETITION
Orleans experiences substantial competition both in attracting and
retaining deposits and in making mortgage and other loans. Direct competition
for deposits primarily comes from commercial banks and a credit union located in
or near Orleans' primary market area. Additional significant competition for
deposits comes from money market mutual funds and corporate and governmental
debt securities. The primary factors in competition for loans are interest
rates, loan origination fees and the range of services offered by the various
financial institutions. Competition for loans normally comes from thrift
institutions, commercial banks, mortgage bankers and credit unions. Some of the
commercial banks in the market area of Orange and Lawrence Counties are
affiliated with large bank holding companies. These commercial banks along with
locally owned commercial banks (of which Orleans is the largest), constitute
Orleans' primary competition. Orleans' operating strategies are directed
towards providing a range of financial services for customers in its primary
market area. Orleans' major deposit and lending markets are dominated by
commercial banks, which are extremely competitive. Commercial banks
traditionally have dominated Orleans' deposit market.
Indiana law permits banks and their holding companies in Indiana to be
acquired by out-of-state banks or their holding companies. Indiana law also
permits Indiana banks and their holding companies to acquire out-of-state banks.
The effect of this legislation is to possibly increase competition within the
State of Indiana among banks located in Indiana and from out-of-state
institutions.
62
<PAGE>
PROPERTIES
Orleans' building, built in 1972, has approximately 6,300 square feet
of floor space and one drive-up teller window with two lanes. Orleans also owns
an adjacent piece of property that is used primarily as a parking lot for
employees. At March 31, 1995, the net book value of Orleans' land and building
was $133,800 and the net book value of its furniture and equipment was $143,600.
For more information, see Notes 1 and 5 of FINANCIAL STATEMENTS OF ORLEANS.
EMPLOYEES
At March 31, 1995, Orleans had 20 full-time and no part-time
employees. None of Orleans' employees is represented by a collective bargaining
agreement. Orleans believes that it enjoys good relations with its
personnel.
LEGAL PROCEEDINGS
Although Orleans, from time to time, is involved in various legal
proceedings in the normal course of business, there are no material legal
proceedings to which Orleans is a party or to which any of their property is
subject.
SUPERVISION AND REGULATION
As a state chartered bank and a member of the F.D.I.C., Orleans is
subject to extensive regulation by the I.D.F.I. and the F.D.I.C., an agency
within the U. S. Department of Treasury. The lending activities and other
investments of Orleans must comply with various state and federal regulatory
requirements. The I.D.F.I. and the F.D.I.C. periodically examine Orleans for
compliance with various regulatory requirements. Orleans must file reports with
the I.D.F.I. and the F.D.I.C. describing its activities and financial condition,
and is subject to certain reserve requirements promulgated by the Federal
Reserve. This supervision and regulation is intended primarily for the
protection of depositors.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
The following discussion provides information about the major
components of the results of operations and financial condition, liquidity and
capital resources of Orleans. This discussion and analysis should be read in
conjunction with the "SELECTED FINANCIAL DATA" and "FINANCIAL STATEMENTS OF
ORLEANS appearing elsewhere in this Prospectus/Proxy Statement.
RESULTS OF OPERATIONS
Net income for 1994 was $51,430 as compared to $588,661 for 1993, a
decrease of $537,231 or 91.3%. This decrease was the result of a $300,000
provision for loan losses, $272,000 of securities losses as compared to $105,000
in 1993, and merger related expenses of approximately $230,000. The provision
for loan losses replenished the allowance for loan losses for approximately
$300,000 taken in the fourth quarter of 1994. The $272,000 of securities losses
was a result of Orleans' compliance with CNB's request pursuant to the
Reorganization Agreement, as described further in the "Net Interest Income"
section of this discussion.
63
<PAGE>
Net income for 1993 was $588,661 compared to $694,551 for 1992, a
decrease of $105,890 or 15.2%. Income decreased due to a decrease in net
interest income of $24,918, a $104,905 loss resulting from the sale of
investment securities, offset by a bankruptcy award of $33,000. Expenses
increased due to a $43,313 increase in salaries and employee benefits and a
$34,955 increase in other expenses. Net income was favorably impacted by the
cumulative effect of adopting SFAS No. 109, "Accounting for Income Taxes,"
effective January 1, 1993 which resulted in an increase to net income of
$27,910.
Net income for the three months ended March 31, 1995 was $179,821
compared to $195,256 for the three months ended March 31, 1994, a decrease of
$15,435 or 7.9%. Income decreased primarily due to an increase in merger
related expenses of approximately $19,000 for legal and accounting fees and
increased income taxes due to the nondeductible merger related expenses and
reduced tax exempt income which were offset by an improved net interest margin.
Orleans' return on average assets was 0.09% for 1994 compared to 1.04%
for 1993, which change was principally due to the provision for loan losses, the
increased loss on sale of investment securities and merger related expenses as
discussed above. Return on average assets for 1992 was 1.26%. Return on
average assets for the first three months of 1995 was 1.23%, on an annualized
basis. Orleans' return on average total assets is greatly influenced by loan
demand and the actual and perceived condition of the local and regional economy,
factors which Orleans cannot predict.
Shareholders' equity decreased to $5,565,416 at December 31, 1994, or
$111.31 per share, from $5,847,866 at December 31, 1993, or $116.96 per share.
The decrease was primarily a result of a decline in the estimated fair value of
investment securities available for sale and dividends paid in excess of net
income. Shareholders' equity grew to $5,847,866 at December 31, 1993, or
$116.96 per share from $5,242,492 at December 31, 1992, or $104.85 per share,
representing an 11.5% increase. Orleans achieved a 0.83% return on average
equity for 1994 compared to 10.44% for 1993, as a result of the factors
mentioned previously. Shareholders' equity grew during the three months of 1995
to $5,734,819 at March 31, 1995, an increase of 3.0% or $3.39 per share. SFAS
No. 115 (see Note 1 to Financial Statements of Orleans) reduced shareholders'
equity by $129,435 or $2.59 per share and $182,717 or $3.65 per share at March
31, 1995, and December 31, 1994, respectively. SFAS No. 115, which was adopted
on December 31, 1993, had the effect of increasing shareholders' equity by
$26,163 or $0.52 per share on such date.
Orleans paid dividends of $2.50 per share in 1994 and 1993. In the
first quarter of 1995 and pursuant to the Reorganization Agreement, Orleans
adopted CNB's dividend rate, as adjusted for the Conversion Ratio, and declared
dividends of $1.27 per share. See "MERGER -- Certain Other Agreements --
Dividends."
Net Interest Income
Net interest income is the difference between interest income and
interest expense. It is the largest and most critical component of Orleans'
earnings and is affected by both rates and the volume of earning assets and
interest-bearing liabilities. Net interest income of $2,076,825 for 1994
increased 3.7% from $2,002,225 for 1993. This increase was primarily the result
of improved loan demand which yielded higher rates than investment securities.
Net interest income in 1993 was slightly lower than 1992 due to interest rates
declining more rapidly in interest earning assets as compared to interest
bearing deposits.
Net interest income for the three months ended March 31, 1995
increased by $31,573 or 6.2% to $543,494 compared to the three months ended
March 31, 1994. The increased net interest income
64
<PAGE>
was a result of interest rates rising more quickly in interest earning assets as
compared to interest bearing deposits, and an improved yield on investment
securities from reinvestment in January 1995 of the proceeds received from the
sale of investment securities as more fully discussed under "Financial Condition
- -- Investment Securities."
The following table presents each significant category of interest
earning assets and interest bearing liabilities.
Average balance sheet and net interest analysis
(In thousands on fully taxable equivalent basis)
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
---------------------------- ----------------------------
Average Average Average Average
Balances Interest Rate Balances Interest Rate
-------- -------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Earning Assets
Investment securities
Taxable $15,649 $ 901 5.76% $17,363 $1,037 5.97%
Tax exempt(1) 10,311 855 8.29 8,701 783 9.00
Federal Funds sold 830 37 4.46 1,931 54 2.80
Loans(2)(3) 28,408 2,330 8.20 26,171 2,146 8.20
------- ------ ---- ------- ------ ----
Total Earning Assets 55,198 4,123 7.47 54,166 4,020 7.42
Less allowance for loan losses 405 ------ ---- 396 ------ ----
------- -------
54,793 53,770
Non-Earning Assets
Cash and due from banks 1,535 1,723
Bank Premises and equipment 232 237
Other Assets 865 692
------- -------
Total Assets $57,425 $56,422
======= =======
Interest Bearing Liabilities
Deposits
Interest bearing demand $11,998 $ 295 2.46% $11,821 $ 282 2.39%
Savings 4,990 140 2.81 4,789 134 2.80
Other time 29,616 1,320 4.46 30,127 1,336 4.43
Federal funds purchased 13 1 7.69 20 1 5.00
------- ------ ---- ------- ------ ----
Total Interest Bearing Liabilities 46,617 1,756 3.77 46,757 1,753 3.75
------ ---- ------ ----
Non-Interest Bearing Liabilities
Demand deposits 4,410 3,772
Other liabilities 236 252
------- -------
Total liabilities 51,263 50,781
Shareholders' Equity 6,162 5,641
------- -------
Total Liabilities and Shareholders' Equity $57,425 $56,422
======= =======
Recap(4):
Interest income $4,123 7.47% $4,020 7.42%
Interest expense 1,756 3.18 1,753 3.24
------ ---- ------ ----
Net interest Income/Margin $2,367 4.29% $2,267 4.18%
====== ==== ====== ====
</TABLE>
(1) Tax exempt securities have been adjusted to a fully taxable equivalent basis
using a marginal tax rate of 34%.
(2) Nonaccrual loans have been included in the average balances.
(3) Loan income includes interest and fees on loans.
(4) Average rates have been computed by dividing by total earning assets.
65
<PAGE>
The amount of net interest income is affected by changes in the volume and
mix of earning assets and interest bearing deposits and liabilities, and the
interest rates on these assets and liabilities. An analysis of how changes in
volumes and rates have affected net interest income since 1992 is presented
below.
<TABLE>
<CAPTION>
Comparison of Comparison of
March 31, December 31,
-------------------- ---------------------------------------------------
1995 over 1994 1994 over 1993 1993 over 1992
-------------------- ------------------------- ------------------------
Volume Rate Total Volume Rate Total Volume Rate Total
------- ---- ----- ------- ------- ------- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income:
Loans $ 32 $ 60 $ 92 $198 $(14) $184 $ 232 $(295) $ (63)
Investment securities (23) 65 42 (6) (83) (89) (125) (257) (382)
Federal funds sold 16 1 17 (49) 32 (17) 31 (5) 26
---------------------------------------------------------------------------
Total interest income 25 126 151 143 (65) 78 138 (557) (419)
---------------------------------------------------------------------------
Interest Expense:
Money market investment accounts 4 4 8 4 9 13 26 (107) (81)
Savings deposits (6) 7 1 3 2 5 14 (38) (24)
Certificates of deposit 41 70 111 (20) 5 (15) (29) (260) (289)
---------------------------------------------------------------------------
Total interest expense 39 81 120 (13) 16 3 11 (405) (394)
---------------------------------------------------------------------------
Changes in net interest income $(14) $ 45 $ 31 $156 $(81) $ 75 $ 127 $(152) $ (25)
===========================================================================
</TABLE>
Earning assets, which includes loans, federal funds sold, and investment
securities, increased by $1,357,161 during 1994 to $56,401,378 while interest
bearing liabilities increased by $1,716,372. Earning assets were $55,044,217
and interest bearing liabilities were $45,535,567 in 1993, increases and
decreases of $1,596,120 and $39,989, respectively, from 1992. Additionally,
earning assets decreased by $636,829 to $55,764,549 and interest bearing
liabilities decreased by $348,817 to $46,903,122 during the first three months
of 1995.
Provision for Loan Losses
The provision for loan losses represents a charge against income and a
corresponding increase to the allowance for loan losses. This provision was
$300,000 in 1994 as compared to none in 1993 and 1992. The 1994 provision was a
result of replenishing the allowance after recognizing approximately $200,000 of
charge-offs in the fourth quarter of 1994 of which $129,000 were specifically
requested by the F.D.I.C. in their November 1994 examination as well as an
additional $71,000 of charge-offs identified by management and an additional
provision of $100,000. The most significant charge-off was for approximately
$86,000 on loans to a borrower in a computer related industry which subsequently
filed bankruptcy in the first quarter of 1995. For the year ended December 31,
1994, charge-offs totalled $232,198 which were offset by recoveries of $91,777
for net charge-offs of $140,421.
No provision was provided during 1993 and 1992 as recoveries exceeded
charge-offs by $34,930 and $85,461, respectively. During the three months ended
March 31, 1995 and 1994, no provision was provided as net charge-offs
(recoveries) were ($20,236) and $4,822, respectively. Further analysis of loan
losses is contained in the Loans section of this discussion.
66
<PAGE>
Non-Interest Income
Non-interest income decreased from $41,628 to $(131,924) between 1993 and
1994 due to an increase in net securities losses of $167,439. The securities
losses in 1994 were the result of selling approximately $2.2 million of
structured notes at CNB's request pursuant to provisions in the Reorganization
Agreement. See "MERGER -- Certain Other Agreements -- Other Orleans
Agreements." Those structured notes were purchased between March and December
of 1993. Two of the securities, with a book value of approximately $700,000,
were dual interest securities. These issues were priced from two different
points of the yield curve (10 year, 1 month LIBOR). Such a combination made it
very difficult to forecast the pricing and performance of the security.
The three remaining securities, with an approximate book value of $1.5
million, were de-leveraged securities. These securities paid investors
according to a formula based upon a fraction of the change in the specific index
and the interest rate on the securities lagged overall movements in the market
yields.
These securities did not conform with CNB's investment and interest rate
risk policies and, therefore, were sold by Orleans in the marketplace to an
unrelated third party at a loss of approximately $272,000.
Non-interest income decreased by $74,471 to $41,628 in 1993 from 1992. The
decrease in 1993 was a result of the $104,905 loss on sale of marketable equity
securities offset by a bankruptcy award for approximately $33,000. Non-interest
income during the three months ended March 31, 1995 declined slightly to $27,813
from $30,218 for the three months ended March 31, 1994.
Non-Interest Expense
Operating expenses, other than interest and the provision for loan losses,
were $1,656,305 in 1994 as compared to $1,303,304 and $1,221,693 in 1993 and
1992, respectively. Approximately $230,000 of the increase in 1994 was for
professional fees paid to accountants, attorneys and investment advisors
relating to the pending Merger with CNB. Other expenses for 1994 also included
$55,000 for the cleanup of an environmental problem on the employee parking lot
adjacent to the banking office of Orleans and commonly known as Lot 139, as more
fully described in "MERGER -- Certain Other Agreements -- Environmental
Investigation and Remediation." Operating expenses for the three months ended
March 31, 1995 were $338,213 as compared to $309,701 for the three months ended
March 31, 1994.
67
<PAGE>
The following table analyzes (in thousands) the changes in operating
expenses:
<TABLE>
<CAPTION>
Change from prior year
-------------------------------------
Amount 1994 1993
----------------------- ------------------ -----------------
1994 1993 1992 Amount Percent Amount Percent
------ ------ ------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Salaries and employee benefits $ 760 $ 710 $ 667 $ 50 7.0% $43 6.4%
Net occupancy expense 66 71 68 (5) (7.0) 3 4.4
Supplies 34 50 36 (16) (32.0) 14 38.9
Blanket bond 19 27 28 (8) (29.6) (1) (3.6)
Audit, tax and accounting 99 23 21 76 330.4 2 9.5
Legal 66 14 11 52 371.4 3 27.3
Other professional fees 104 -- -- 104 100.0 -- --
Data processing fees 101 92 83 9 9.8 9 10.8
Advertising 58 53 53 5 9.4 -- --
Directors fees 66 53 51 13 24.5 2 3.9
FDIC assessment 121 113 111 8 7.1 2 1.8
Postage, freight and courier 39 35 35 4 11.4 -- --
Other 123 62 58 61 98.4 4 6.9
---------------------------------------------------------------
Total operating expenses $1,656 $1,303 $1,222 $ 353 27.1% $81 6.6%
===============================================================
Amount March 31, Change
---------------- -------
1995 1994 Amount Percent
------- ----- ------- -------
Salaries and employee benefits $ 176 $ 172 $ 4 2.3%
Net occupancy expense 21 13 8 61.5
Supplies 12 6 6 100.0
Blanket bond 5 6 (1) (16.7)
Audit, tax and accounting 14 5 9 180.0
Data processing fees 31 25 6 24.0
Advertising 9 10 (1) (10.0)
Directors fees 8 10 (2) (20.0)
FDIC assessment 31 16 15 93.8
Postage, freight and courier 12 8 4 50.0
Other 19 39 (20) (51.3)
---------------------------------
Total operating expenses $ 338 $ 310 $28 9.0%
==================================
</TABLE>
Income Taxes
Income tax benefit for 1994 was $62,834, as compared to a provision of
$179,798 in 1993 and $226,998 in 1992. The effective tax rate for 1994 is not
meaningful. The effective tax rates for 1993 and 1992 were 24.3% and 24.6%.
Income taxes for 1994 were positively effected by the large amount of tax-exempt
interest relative to taxable interest but negatively effected by the
nondeductible merger related expenses. The effective tax rate is lower than the
federal income tax rate in 1993 and 1992 primarily due to the large amount of
tax-exempt interest. Income tax expense for the three months ended March 31,
1995 was $53,273 compared to $37,182 for the three months ended March 31, 1994
for
68
<PAGE>
effective tax rates of 22.9% and 16.0%, respectively. Income taxes are also
discussed in Note 6 of the FINANCIAL STATEMENTS OF ORLEANS, attached to this
Prospectus/Proxy Statement.
As previously discussed, Orleans adopted SFAS No. 109, "Accounting for
Income Taxes," on a prospective basis effective January 1, 1993.
FINANCIAL CONDITION
At December 31, 1994, Orleans' total assets increased to $58,965,019
compared to $57,237,773 at December 31, 1993, a 3.0% increase. Average assets
were $57,425,000 during 1994, which represents an increase of 1.8% over 1993
averages. Total assets were $57,832,495 at March 31, 1995, an increase of 2.0%
from March 31, 1994.
The financial condition of Orleans at March 31, 1995 and December 31, 1994,
is presented in the comparative balance sheets of Orleans' financial statements,
see FINANCIAL STATEMENTS OF ORLEANS. The following discussion addresses loans
and other components of earning assets, sources of funds, capital resources, and
liquidity and interest rate sensitivity.
Loans
Average loan balances were $28,408,000 in 1994, an increase of $2,237,000,
or 8.5% from 1993. Average loan balances in 1993 were $26,171,000, an increase
of $1,987,000, or 8.2% from 1992. The increases in 1994 were a result of a
strong demand in commercial and consumer loans. The increases in 1993 were
primarily a result of strong demand for residential real estate loans due to
lower interest rates. Loan balances have remained fairly steady between
December 31, 1994 and March 31, 1995.
Commercial loans, including agricultural production loans, generally provide
for adjustable interest rates responsive to the variable cost of funding and
totaled $7,638,000 at December 31, 1994, an increase of $343,000 from December
31, 1993. Balances decreased at March 31, 1995 by $385,000 to $7,253,000 due to
the cyclical agricultural demand.
Real estate mortgage loans, which consist of residential, commercial loans
collateralized by real estate, construction, and agricultural loans
collateralized by real estate, totaled $16,335,000 at December 31, 1994 compared
to $16,571,000 at December 31, 1993, a decrease of $236,000. The March 31, 1995
balance increased by $644,000 to $16,979,000 from December 31, 1994. Owner
occupied residential real estate loans accounted for approximately $12,546,000,
or 77%, of the balance at December 31, 1994 and approximately $12,589,000, or
74%, of the real estate loans at March 31, 1995. Interest rates on real estate
loans are generally adjusted annually.
Consumer loans increased to $4,723,000 at December 31, 1994, and included
installment loans, personal lines of credit and student loans. These loans
increased by $762,000 from $3,961,000 at December 31, 1993. These loans
decreased slightly by $1,000 from December 31, 1994 to $4,722,000 at March 31,
1995. Strong growth was experienced during 1994 and 1993 in installment loans
for the purchase of automobiles and other consumer goods. This trend leveled
off during the first three months of 1995.
The Orleans' loan portfolio contains no loans to foreign governments,
foreign enterprises, foreign operations of domestic companies, or highly
leveraged transactions, nor any concentrations to borrowers engaged in the same
or similar industries that exceed 10 percent of total loans.
69
<PAGE>
The following shows loans outstanding (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994 1993
--------- ------- -------
<S> <C> <C> <C>
Commercial and agricultural $ 7,253 $ 7,638 $ 7,295
Real estate 16,979 16,335 16,571
Consumer 4,722 4,723 3,961
------- ------- -------
Total loans $28,954 $28,696 $27,827
======= ======= =======
</TABLE>
The following shows loan maturities (in thousands) at December 31, 1994:
<TABLE>
<S> <C> <C> <C> <C>
Within 1-5 Over 5
1 Year Years Years Totals
------- ------ ------ -------
Commercial and agricultural $ 5,958 $ 833 $ 847 $ 7,638
Real estate 14,925 1,018 392 16,335
Consumer 274 4,235 214 4,723
------- ------ ------ -------
Total $21,157 $6,086 $1,453 $28,696
======= ====== ====== =======
</TABLE>
In the above table, loans with maturities of over one year totaled $7,539,000.
Of this total, $856,000 have floating interest rates and the remainder have
fixed interest rates.
An allowance for loan losses is maintained at a level considered adequate by
management to absorb potential loan losses as determined by evaluations of the
loan portfolio on a continuing basis. This evaluation by management includes
consideration of past loan loss experience, changes in the composition of the
loan portfolio, the volume and condition of the loan portfolio, as well as the
financial condition of specific borrowers and current economic conditions.
Loans with principal or interest payments contractually due but not yet paid
are reviewed weekly by senior management and are placed on nonaccrual status
when scheduled payments remain unpaid for 90 days or more, unless the loan is
both well secured and in the process of collection. Interest income on
nonaccrual loans is recorded when actually received (cash basis) in contrast to
the accrual basis, which records income over the period in which it is earned,
regardless of when it is received. Loans are charged to the allowance for loan
losses when deemed uncollectible by management, unless sufficient collateral
exists to adequately secure the loan.
Orleans recorded provisions of $300,000 during the fourth quarter, of which
$200,000 was to replenish the allowance for loan losses due to charge-offs taken
in the fourth quarter of 1994. These charge-offs consisted of $129,000 as
directed by the F.D.I.C. in its November 1994 examination plus an additional
$71,000 of charge-offs identified by management. For the year ended December 31,
1994, charge-offs totalled $232,198 which were offset by recoveries of $91,777
for net charge-offs of $140,421.
70
<PAGE>
A summary of loan loss experience and management's allocation of the
allowance for loan losses to the various loan categories for the years indicated
follow:
Summary of loan losses:
<TABLE>
<CAPTION>
1994 1993 1992
---------- -------- --------
<S> <C> <C> <C>
Balance at January 1, $ 408,311 $373,381 $287,920
Charge-offs: --------- -------- --------
Commercial and agricultural
Real estate 159,444 4,750 3,691
Consumer 14,261 20,787 42,850
58,493 35,227 62,787
Total charge-offs --------- -------- --------
Recoveries: 232,198 60,764 109,328
Commercial and agricultural --------- -------- --------
Real estate
Consumer 55,486 19,260 21,910
24,496 57,680 159,374
Total recoveries 11,795 18,754 13,505
--------- -------- --------
Net recoveries (charge-offs) 91,777 95,694 194,789
--------- -------- --------
Provision for loan losses (140,421) 34,930 85,461
--------- -------- --------
Balance at December 31, 300,000 0 0
--------- -------- --------
$ 567,890 $408,311 $373,381
========= ======== ========
</TABLE>
Management's allocation of allowance for loan losses at December 31 follows:
<TABLE>
<CAPTION>
Percent of loans to
Allowance Amount total loans
------------------- -------------------
1994 1993 1992 1994 1993 1992
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Commercial and agricultural $ 172 $ 73 $ 77 27% 26% 33%
Real estate 179 166 138 57 60 54
Consumer 91 80 69 16 14 13
Unallocated 126 89 89
----- ----- ----- ----- ----- -----
Total $ 568 $ 408 $ 373 100% 100% 100%
===== ===== ===== ===== ===== =====
</TABLE>
The previous allocation is made for analytical purposes and the allocation
at December 31, 1994 reflects the adoption of CNB's loan classification and
reserve policies. Because the allocation is based on estimates and subjective
judgment, it is not reasonably indicative of the specific amounts or loan
categories in which losses may occur. The total allowance for loan losses is
available to absorb losses from any portion of the portfolio.
Non-performing loans consist of loans past due 90 days or more, and loans on
nonaccrual status. Although these loans have more than a normal risk of loss,
they will not necessarily result in a higher level of charge-offs in the future.
Management is not aware of any loans that have not been disclosed that represent
or result from trends or uncertainties which may have a material impact on
Orleans' future operating results, liquidity or capital resources.
71
<PAGE>
The following table presents (in thousands) non-performing loans:
<TABLE>
<CAPTION>
March 31, December 31,
--------- ------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Nonaccrual loans $ 17 $ 18 $111
90 days or more past due 118 3 79
Restructured loans -- -- --
----- ---- ----
Total loans $ 135 $ 21 $190
===== ==== ====
Percent of total loans 0.47% 0.07% 0.68%
</TABLE>
Investment securities
Orleans adopted SFAS No. 115, "Accounting for Certain Investments in Debt
and Equity Securities" effective December 31, 1993. Under the provisions of SFAS
No. 115, debt securities that Orleans has the positive intent and ability to
hold to maturity were classified as "held-to-maturity" and reported at amortized
cost. All other investment securities were classified as "available-for-sale"
and have been reported at their estimated fair value at December 31, 1994 and
1993. In accordance with SFAS No. 115, unrealized gains and losses, net of
related taxes, have been included in shareholders' equity. Net unrealized losses
can be expected to decrease should interest rates decline, and conversely,
increase should interest rates rise. Prior to adoption of SFAS No. 115,
investment securities were accounted for under SFAS No. 12, "Accounting for
Certain Marketable Securities," which required marketable equity securities to
be carried at the lower of cost or market and required net unrealized losses for
these securities to be deducted from shareholders' equity. At December 31, 1994,
Orleans included a net unrealized loss of $182,717 in shareholders' equity,
while at March 31, 1995, because of a decline in interest rates, a $129,435 net
unrealized loss was included. At December 31, 1993, a net unrealized gain in the
amount of $26,163 was included in shareholders' equity.
Total investment securities represented 45.7%, 42.9% and 49.4% of earning
assets at March 31, 1995 and December 31, 1994 and 1993, respectively. In 1993
the portfolio shifted toward investment in fixed rate municipal bonds and
floating rate mortgage-backed securities, predominately underwritten to the
standards of, and guaranteed by, government sponsored agencies. In 1994, the
investments in structured notes were sold as previously discussed. The proceeds
of the sales were reinvested in U.S. Treasury and agency notes and bonds with
remaining maturities of one to five years. The overall decline in investment
securities from December 31, 1993 to 1994 was due to the sale in late December
1994 of the structured notes with the proceeds invested in federal funds sold
until January 1995.
72
<PAGE>
Maturities and weighted average yields of investment securities at
December 31, 1994:
MATURITIES AND WEIGHTED AVERAGE YIELDS OF INVESTMENT SECURITIES
AVAILABLE FOR SALE AT DECEMBER 31, 1994:
<TABLE>
<CAPTION>
1 year or less 1-5 Years 5-10 Years Over 10 Years Total
--------------- -------------- -------------- -------------- -------
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
------- ----- ------ ----- ------ ----- ------ ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
US treasury $1,174 4.08% $1,182 6.72% $ 2,356 5.42%
Federal agencies:
Mortgage-backed securities 544 5.81 $3,400 6.01% 3,944 4.49
------ ---- ------ ---- ------ ---- ----- ----- ------- ----
Total $1,174 4.08% $1,726 6.43% $3,400 6.01% $ 6,300 4.84%
====== ==== ====== ==== ====== ---- ===== ===== ======= ====
Percent of total 18.64% 27.40% 53.96% 100%
====== ====== =======
</TABLE>
MATURITIES AND WEIGHTED AVERAGE YIELDS OF INVESTMENT
SECURITIES HELD TO MATURITY AT DECEMBER 31, 1994:
<TABLE>
<CAPTION>
1 year or less 1-5 Years 5-10 Years Over 10 Years Total
--------------- -------------- -------------- -------------- -------
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ ----- ------ ----- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Federal agencies:
Bonds and notes $ 700 5.25% $1,100 6.47% $ 1,800 6.00%
Mortgage-backed securities 3,707 5.91 1,056 7.10 $ 907 8.37% 5,670 6.53
State and municipal 1,380 6.36 6,446 8.36 2,430 9.89 $ 180 6.38 10,436 8.42
------ ---- ------ ---- ------ ---- ----- ----- ------- ----
Total $5,787 5.94% $8,602 7.96% $3,337 9.48% $ 180 6.38% $17,906 7.57%
====== ==== ====== ==== ====== ==== ===== ===== ======= ====
Percent of total 32.32% 48.04% 18.64% 1.00% 100%
====== ====== ===== ===== =======
Note: The above maturity analysis is based on contract maturities and is on a fully taxable equivalent basis.
</TABLE>
Sources of Funds
Orleans generally relies on customers deposits along with shareholders' equity
to fund its earning assets. An analysis of deposits (in thousands) follows:
<TABLE>
<CAPTION>
March 31, December 31,
--------- ---------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Demand $ 4,898 $ 5,933 $ 5,718
Interest bearing transaction accounts 6,898 8,949 8,529
Money market investment accounts 2,823 3,298 3,219
Savings 4,537 4,517 4,978
Certificates of deposit and other time 32,645 30,488 28,010
----------------------------------
Total $51,801 $53,185 $50,454
==================================
</TABLE>
Maturities of certificates of deposit of $100,000 or more (in thousands)
follow:
<TABLE>
<CAPTION>
March 31, December 31,
---------- -------------
1995 1994
---- ----
<S> <C> <C>
3 months or less $ 1,816 $ 1,519
3-6 months 1,639 617
6-12 months 215 957
Over 12 months 764 1,064
--------- ------------
Total $ 4,434 $ 4,157
========= ============
</TABLE>
Total deposits increased by 5.4% to $53,185,356 at December 31, 1994 from
$50,453,674 at December 31, 1993. Total deposits, however, declined 2.6% at
March 31, 1995 to $51,801,408 from the balance at December 31, 1994. The mix of
deposits has shifted from demand and interest-bearing demand accounts to higher
interest bearing certificates of deposits and other time deposits during 1994
and the first quarter of 1995.
73
<PAGE>
CAPITAL RESOURCES
Orleans continues to maintain a strong capital position which supports its
current needs and provides a sound foundation to support future needs. At
December 31, 1994, shareholders' equity was $5,565,416 as compared to $5,847,866
at December 31, 1993. Shareholders' equity increased by 3.0%, to $5,734,819, at
March 31, 1995 as compared to December 31, 1994. The dividend payout ratio of
dividends to net income, was 243.1% in 1994 and 21.2% in 1993. The dividend
paid in 1994 was greater than earnings due to lower earnings as discussed above.
The 1994 dividend rate was the same as 1993. The dividend payout for 1993 was
consistent with management's policy of maintaining an appropriate balance
between earnings distributed to shareholders in the form of dividends and
earnings retained for internal capital growth. Orleans historically paid
dividends in December of each year. Pursuant to the Reorganization Agreement,
Orleans adopted CNB's dividend rate, as adjusted for the Conversion Ratio,
during the first quarter of 1995. See "MERGER -- Certain Other Agreements --
Dividends." The quarterly dividend was $1.27 per share. Book value per share
was $111.31 at December 31, 1994 compared to $116.96 at December 31, 1993, a
decrease of 4.8%, and $114.70 at March 31, 1995, an increase of 3.1% compared to
December 31, 1994.
The Federal Reserve has established a minimum leverage ratio of 4% to 5%
depending on the particular circumstances and risk profile for most banks. This
ratio is defined as shareholders' equity less goodwill, as a percentage of total
assets less goodwill. The tangible equity to tangible assets ratio was 9.92%,
9.44% and 10.22% at March 31, 1995 and December 31, 1994 and 1993, respectively.
Orleans' capital was considered satisfactory by the F.D.I.C. at year end 1994.
Orleans is not aware of any current recommendations by its regulatory
authorities or any other known trends, events or uncertainties that would have
or that are reasonably likely to have a material effect on its liquidity or
capital resources.
In order to maintain a proper level of liquidity, Orleans has several
sources of funds available on a daily basis which can be used for liquidity
purposes. Those sources are (i) core deposits consisting of both business and
non-business deposits, (ii) cash flow generated by repayment of loan principal
and interest, and (iii) federal funds purchased.
EFFECTS OF INFLATION
Inflation has a minor effect on banking concerns since most of the assets
and liabilities are monetary in nature. Operating costs, the largest components
of which are salaries and employee benefits, occupancy expenses and F.D.I.C.
assessments, have exceeded the rate of inflation as measured by the consumer
price index in each of the last three years. Orleans continues to attempt to
offset such increases through the growth of net earning assets and additional
earnings related thereto.
LIQUIDITY AND INTEREST RATE SENSITIVITY
Liquidity is a measure of Orleans' ability to meet its customers' present
and future deposit withdrawals and/or increased loan demand without unduly
penalizing earnings. Interest rate sensitivity involves the relationship
between rate sensitive assets and liabilities and is an indication of the
probable effects of interest rate movements on Orleans' interest income.
Liquidity is provided by projecting credit demand and other financial needs and
then maintaining sufficient cash and assets readily convertible into cash to
meet these requirements. Orleans has provided for its liquidity needs through
growth in core deposits, maturing loans and investments in its security
portfolio.
74
<PAGE>
Interest rate sensitive assets and liabilities are those which have yields
or rates subject to change within a future period due to maturity or changes in
market rates. An ongoing objective of Orleans' asset/liability policy is to
match rate-adjustable assets and liabilities at similar maturity horizons so
that changes in interest rates will not result in wide fluctuations in the net
interest income. Orleans manages its rate sensitivity position through the use
of floating-rate loans and by matching funds acquired having a specific maturity
with loans or securities with similar maturities. The rate sensitivity
position is computed for various repricing intervals by calculating rate
sensitivity gaps. The following table (in thousands) shows Orleans' interest
rate sensitivity analysis as of December 31, 1994. Although rate sensitivity
gaps constantly change as funds are acquired and invested, Orleans' positive gap
of $407,000 at one year or less as of December 31, 1994, was less than 1% of
total assets at that date and, in the opinion of management, represents a
relatively balanced position.
<TABLE>
<CAPTION>
Non-
Sensitive
1-90 90 Days Over 1 Year and Over
Days to 1 Year to 5 Years 5 Years Total
-------- --------- ----------- --------- -----
<S> <C> <C> <C> <C> <C>
Assets:
Investment securities $ 7,395 $ 5,020 $ 7,618 $ 4,173 $24,206
Loans, net of unearned interest 4,370 16,803 6,184 1,339 28,696
Federal funds sold 3,500 3,500
Non-earning assets 2,563 2,563
----------------------------------------------------------
Total assets $ 15,265 $21,823 $13,802 $ 8,075 $58,965
==========================================================
Liabilities and Shareholders' equity:
Interest bearing transaction accounts $ 8,949 $ 8,949
Money market and other savings 3,298 $ 4,517 7,815
Certificates of deposit and other time 14,644 $ 9,790 $ 6,054 30,488
Non-interest bearing deposits 5,933 5,933
Non-interest bearing liabilities and
shareholders' equity 5,780 5,780
----------------------------------------------------------
Total liabilities and equity $ 26,891 $ 9,790 $ 6,054 $ 16,230 $58,965
==========================================================
Interest sensitivity gap ($11,626) $12,033 $ 7,748 ($8,155)
================================================
Cumulative interest sensitivity gap ($11,626) 407 $ 8,155
====================================
Cumulative gap as a percentage of total assets (19.7)% .69% 13.8%
====================================
</TABLE>
OTHER
SFAS No. 119, "Disclosure About Derivative Financial Investments and Fair
Value of Financial Investments" requires expanded disclosures of investments in
derivative financial investments. The statement is effective for financial
statements ending on or after December 15, 1995 for companies with less than
$150 million in total assets, which includes Orleans. Management believes that
the adoption of the statement will not have a material effect on Orleans'
financial position or results of operations.
75
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of the record date, the number of shares
of Orleans Common owned beneficially by each director and executive officer of
Orleans, and all directors and executive officers of Orleans as a group. None of
the individuals listed below would own, on a pro forma basis giving effect to
the Merger, more than one percent (1%) of the issued and outstanding shares of
CNB Common.
<TABLE>
<CAPTION>
Shares
Beneficially Percent of
Name of Beneficial Owner Owned Class
- ------------------------ ------------ ----------
<S> <C> <C>
Mary Katherine Burton 500 1.00%
Denzil F. Chatham 850 1.70
M. Dale Hawkins 250 .50
Charles W. Lamb 700 1.40
Kermit A. Lamb 200/(1)/ .40
William H. Tegarden 13,700 27.40
James C. Tucker 500 1.00
James C. Warren 8,750/(2)/ 17.50
Ralph C. Warren 100 .20
All Directors and Executive Officers as a 25,500 51.10%
group (9 individuals)
</TABLE>
- -----------------------
/(1)/ Executive Officer, not a director.
/(2)/ Includes 8,250 shares held by Orleans as Trustee for the Emily Warren
Revocable Trust. Mrs. Warren is the wife of Director James C. Warren.
76
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of the record date, the name and address of
each beneficial owner of more than five percent (5%) of the outstanding shares
of Orleans Common known to the Board of Directors of Orleans, showing the amount
and nature of such beneficial ownership. None of the shareholders listed below
would own, on a pro forma basis giving effect to the Merger, more than one
percent (1%) of the issued and outstanding shares of CNB Common.
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percent of
Name and Address of Beneficial Owner Ownership Class
- ------------------------------------ ---------- -----------
<S> <C> <C>
William P. Jenkins 7,650 15.30%
1412 Maryfield Court
High Point, NC 27260-2663
Victoria E. Tegarden 4,550 9.10
4305 Hillside Lane
Jeffersonville, IN 47130
William H. Tegarden 13,700 27.40
P.O. Box 232
Orleans, IN 47452-0232
James C. Warren 8,750/(1)/ 17.50
416 Rolling Lane
Louisville, KY 40207
</TABLE>
- ----------------------
/(1)/ Includes 8,250 shares held by Orleans as Trustee for the Emily Warren
Revocable Trust. Mrs. Warren is the wife of Mr. Warren.
77
<PAGE>
LEGAL OPINION
The legality of the securities offered hereby will be passed upon by Lewis,
Rice & Fingersh, L.C.
EXPERTS
INDEPENDENT AUDITORS FOR CNB
The consolidated financial statements of CNB for the year ended December 31,
1994, incorporated by reference in CNB's Annual Report (Form 10-K) and as
restated for the February, 1995 acquisitions of King City and HBI and
incorporated by reference in CNB's Current Report on Form 8-K dated May 23,
1995, have been audited by Geo. S. Olive & Co. L.L.C., independent auditors, as
set forth in their reports included therein and incorporated herein by
reference. The financial statements referred to above are incorporated herein by
reference in reliance upon such reports and upon the authority of such firm as
experts in auditing and accounting.
INDEPENDENT AUDITORS FOR ORLEANS
The balance sheets as of December 31, 1994 and 1993 and the statements of
income, changes in shareholders' equity, and cash flows for the years then ended
of Orleans, are included in the Registration Statement and in this
Prospectus/Proxy Statement in reliance on the report, which includes an
explanatory paragraph regarding a change in the method of accounting for income
taxes and a change in the method of accounting for investment securities, of
Coopers & Lybrand L.L.P., independent certified public accountants, given on the
authority of that firm as experts in accounting and auditing.
PRESENCE AT SPECIAL MEETING
Representatives of Coopers & Lybrand L.L.P. are expected to be present at the
Special Meeting with the opportunity to make a statement if they desire to do so
and to respond to appropriate questions.
SHAREHOLDER PROPOSALS
Shareholder proposals for the annual meeting of CNB's shareholders to be held
in April, 1996 must be received by CNB no later than November 24, 1995, and must
have met the requirements established by the S.E.C. for shareholder proposals.
Upon receipt of any such proposal CNB will determine whether or not to include
such proposal in the Proxy Statement and proxies in accordance with the S.E.C.'s
regulations governing the solicitation of proxies.
_______________
78
<PAGE>
INDEX TO FINANCIAL STATEMENTS OF THE BANK OF ORLEANS
Page No.
--------
Report of Independent Accountants.......................................F-2
Balance Sheets as of March 31, 1995 (Unaudited)
and 1994 (Unaudited) and December 31, 1994,
and 1993...............................................................F-3
Statements of Income For The Three Months Ended
March 31, 1995 (Unaudited) and 1994 (Unaudited)
and The Years Ended December 31, 1994, 1993
and 1992 (Unaudited)...................................................F-4
Statements of Changes In Shareholders' Equity For The Three Months
Ended March 31, 1995 (Unaudited) and 1994 (Unaudited)
and The Years Ended December 31, 1994, 1993
and 1992 (Unaudited)...................................................F-5
Statements of Cash Flows For The Three Months
Ended March 31, 1995 (Unaudited) and 1994 (Unaudited)
and The Years Ended December 31, 1994, 1993
and 1992 (Unaudited)...................................................F-6
Notes To Financial Statements For The Three Months
Ended March 31, 1995 (Unaudited) and 1994 (Unaudited)
and The Years Ended December 31, 1994, 1993
and 1992 (Unaudited)............................................F-7 - F-16
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
The Board of Directors
The Bank of Orleans
Orleans, Indiana
We have audited the balance sheets of The Bank of Orleans as of December 31,
1994 and 1993, and the related statements of income, changes in shareholders'
equity and cash flows for the years then ended. These financial statements are
the responsibility of the Bank's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Bank of Orleans as of
December 31, 1994 and 1993, and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted principles.
As discussed in Note 1 to the financial statements, effective January 1, 1993
and December 31, 1993, respectively, the Bank adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," and Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities."
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L. L. P.
Louisville, Kentucky
April 13, 1995
F-2
<PAGE>
THE BANK OF ORLEANS
BALANCE SHEETS
--------
<TABLE>
<CAPTION>
March 31, December 31,
----------------------- -----------------------
ASSETS 1995 1994 1994 1993
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Cash and due from banks $ 1,297,140 $ 1,608,290 $ 1,744,980 $ 1,648,951
Federal funds sold 1,300,000 700,000 3,500,000 -
----------- ----------- ----------- -----------
Total cash and cash equivalents 2,597,140 2,308,290 5,244,980 1,648,951
Investment securities available for sale, at estimate fair value 6,741,473 6,169,350 6,299,530 6,581,195
Investment securities held to maturity, at amortized cost (estimated
fair value $18,233,000 and $21,438,000 at
December 31, 1994 and 1993, respectively) 18,768,930 20,311,700 17,905,957 20,636,313
Loans 28,955,756 27,390,889 28,702,779 27,853,306
Less unearned income 1,610 22,406 6,888 26,597
----------- ----------- ----------- -----------
28,954,146 27,368,483 28,695,891 27,826,709
Less allowance for loan losses 588,126 403,489 567,890 408,311
----------- ----------- ----------- -----------
Net loans 28,366,020 26,964,994 28,128,001 27,418,398
Bank premises and equipment 277,446 226,116 277,263 228,346
Interest receivable 690,417 518,540 699,221 602,144
Other assets 391,069 182,837 410,067 122,426
----------- ----------- ----------- -----------
Total assets $57,832,495 $56,681,827 $58,965,019 $57,237,773
=========== =========== =========== ===========
LIABILITIES
Deposits:
Demand, noninterest-bearing $ 4,898,286 $ 5,277,044 $ 5,933,417 $ 5,718,107
Savings and interest-bearing demand accounts 14,257,885 16,276,570 16,763,599 16,726,040
Other time 32,645,237 28,937,127 30,488,340 28,009,527
----------- ----------- ----------- -----------
Total deposits 51,801,408 50,490,741 53,185,356 50,453,674
Federal funds purchased - - - 800,000
Accrued interest and other liabilities 296,268 175,700 214,247 136,233
----------- ----------- ----------- -----------
Total liabilities 52,097,676 50,666,441 53,399,603 51,389,907
----------- ----------- ----------- -----------
SHAREHOLDERS' EQUITY
Common stock, $10 par value; 50,000 shares
authorized, issued and outstanding 500,000 500,000 500,000 500,000
Capital surplus 1,200,000 1,200,000 1,200,000 1,200,000
Retained earnings 4,164,254 4,316,959 4,048,133 4,121,703
Unrealized gain(loss) on investment securities
available for sale (129,435) (1,573) (182,717) 26,163
----------- ----------- ----------- -----------
Total shareholders' equity 5,734,819 6,015,386 5,565,416 5,847,866
----------- ----------- ----------- -----------
Total liabilities and shareholders' equity $57,832,495 $56,681,827 $58,965,019 $57,237,773
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part
of the financial statements.
F-3
<PAGE>
THE BANK OF ORLEANS
STATEMENTS OF INCOME
---------
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
------------------------ -----------------------------------
1995 1994 1994 1993 1992
---- ---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Interest Income
Loans, including fees $638,145 $546,666 $2,330,498 $2,146,055 $2,209,633
Investment Securities:
Taxable 274,163 217,231 901,323 1,037,559 1,500,839
Tax exempt 132,802 147,388 564,360 517,204 436,094
Federal funds sold 20,471 3,218 36,763 53,821 27,889
--------- -------- --------- --------- ---------
Total interest income 1,065,581 914,503 3,832,944 3,754,639 4,174,455
Interest Expense On Deposits 522,087 402,582 1,756,119 1,752,414 2,147,312
--------- -------- --------- --------- ---------
Net Interest Income 543,494 511,921 2,076,825 2,002,225 2,027,143
Provision for loan losses - - 300,000 - -
--------- -------- --------- --------- ---------
Net Interest Income After Provision for
Loan Losses 543,494 511,921 1,776,825 2,002,225 2,027,143
========= ======== ========= ========= =========
Non-Interest Income
Service charges on deposit accounts 17,292 17,492 72,981 69,306 70,190
Trust fees 1,493 53 2,907 4,922 5,214
Net securities gains (losses) - - (272,344) (104,905) -
Other 9,028 12,673 64,532 72,305 40,695
--------- -------- --------- --------- ---------
Total non-interest income 27,813 30,218 (131,924) 41,628 116,099
========= ======== ========= ========= =========
Non-Interest Expense
Salaries and employee benefits 175,810 172,178 760,042 710,332 667,019
Net occupancy expense 20,879 12,726 65,905 71,062 67,719
Other 141,524 124,797 830,358 521,910 486,955
========= ======== ========= ========= =========
Total non-interest expense 338,213 309,701 1,656,305 1,303,304 1,221,693
--------- -------- --------- --------- ---------
Income Before Income Taxes and Cumulative
Effect of Accounting Change 233,094 232,438 (11,404) 740,549 921,549
Provision for (benefit from) income taxes 53,273 37,182 (62,834) 179,798 226,998
--------- -------- --------- --------- ---------
Income Before Cumulative Effect of
Accounting Change 179,821 195,256 51,430 560,751 694,551
Cumulative Effect of Change in Accounting
For Income Taxes - - 27,910 -
--------- -------- --------- --------- ---------
Net Income $179,821 $195,256 $51,430 $588,661 $694,551
========= ======== ========= ========= =========
Earnings Per Share:
Income Before Cumulative Effect of Change
in Accounting For Income Taxes $3.60 $3.91 $1.03 $11.21 $13.89
Cumulative Effect of Change in Accounting
For Income Taxes - - - 0.56 -
--------- -------- --------- --------- ---------
Earnings Per Share $3.60 $3.91 $1.03 $11.77 $13.89
========= ======== ========= ========= =========
</TABLE>
The accompanying notes are an integral part
of the financial statements.
F-4
<PAGE>
THE BANK OF ORLEANS
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
----------
<TABLE>
<CAPTION>
Common Stock Capital Retained Unrealized
Shares Amount Surplus Earnings Gain(Loss) Total
------ ------ ------- -------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1992 (Unaudited) 50,000 $500,000 $1,200,000 $3,063,491 $(71,219) $4,692,272
Net income for 1992 (unaudited) 694,551 694,551
Cash dividends, $2.00 per share (unaudited) (100,000) (100,000)
Unrealized loss on investment securities (unaudited) (44,331) (44,331)
-------------------------------------------------------------------
Balances, December 31, 1992 (Unaudited) 50,000 500,000 1,200,000 3,658,042 (115,550) 5,242,492
Net income for 1993 588,661 588,661
Cash dividends, $2.50 per share (125,000) (125,000)
Unrealized gain on investments available for sale 141,713 141,713
-------------------------------------------------------------------
Balances, December 31, 1993 50,000 500,000 1,200,000 4,121,703 26,163 5,847,866
Net income for 1994 51,430 51,430
Cash dividends, $2.50 per share (125,000) (125,000)
Unrealized loss on investment securities available for sale (208,880) (208,880)
-------------------------------------------------------------------
Balances, December 31, 1994 50,000 $500,000 $1,200,000 4,048,133 $(182,717) $5,565,416
===================================================================
Balances, January 1, 1994 50,000 $500,000 $1,200,000 4,121,703 26,163 $5,847,866
Net income for the three months ended March 31, 1994
(unaudited) 195,256 195,256
Unrealized loss on investment securities available
for sale (unaudited) (27,736) (27,736)
-------------------------------------------------------------------
Balances, March 31, 1994 (Unaudited) 50,000 $500,000 $1,200,000 4,316,959 $(1573) $6,015,386
===================================================================
Balances, January 1, 1995 50,000 $500,000 $1,200,000 4,048,133 $(182,717) $5,565,416
Net income for the three months ended March 31, 1995
(unaudited) 179,821 179,821
Cash dividends, $1.27 per share (unaudited) (63,700) (63,700)
Unrealized gain on investment securities available
for sale (unaudited) 53,282 53,282
-------------------------------------------------------------------
Balances, March 31, 1995 (Unaudited) 50,000 $500,000 $1,200,000 4,164,254 $(129,435) $5,734,819
===================================================================
</TABLE>
The accompanying notes for an integral part of the financial statements.
F-5
<PAGE>
THE BANK OF ORLEANS
STATEMENTS OF CASH FLOWS
----------
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
----------------------- ------------------------------------
1995 1994 1994 1993 1992
---- ---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited)
----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Operating Activities:
Net income $179,821 $195,256 $51,430 $588,661 $694,551
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 7,620 2,230 30,888 26,303 24,945
Provision for loan losses 300,000
Amortization of securities premiums and
discounts (183) 241 (324) 8,852 11,701
Deferred income tax (177,725) (27,966) (1,754)
Cumulative effect of change in accounting for
income taxes (27,910)
Loss on sale of securities 272,344 104,905
Decrease (increase) in interest receivable 8,804 83,604 (97,077) 29,826 108,204
Decrease (increase) in other assets (8,449) (46,123) (2,312) 100,655 (48,788)
Increase (decrease) in interest payable
and other liabilities 82,021 39,467 78,014 (29,815) (98,427)
----------------------------------------------------------------
Net Cash Provided by Operating Activities 269,634 274,675 455,238 773,511 690,432
----------------------------------------------------------------
Investing Activities:
Proceeds from the sale of investment
securities held to maturity 1,927,656
Proceeds from the sale of investment
securities available for sale 38,461 369,580 1,165,505
Purchase of investment securities available
for sale (399,492) (1,200,000)
Proceeds from the maturity of investment
securities held to maturity 637,027 984,613 2,190,356
Purchase of investment securities held to
maturity (1,500,000) (660,000) (1,660,000)
Proceeds from sale or maturity of
investment securities 11,369,547 7,154,366
Purchase of investment securities (11,451,356) (6,880,937)
Net increase in loans (238,019) 453,404 (1,009,603) (1,637,952 (1,890,443)
Purchase of bank premises and equipment (7,803) (79,805) (31,638) (33,085)
----------------------------------------------------------------
Net Cash Provided by (Used in) Investing
Activities (1,469,826) 1,147,597 1,334,109 (1,751,395) (1,650,099)
----------------------------------------------------------------
Financing Activities:
Net increase (decrease) in deposits (1,383,948) 37,067 2,731,682 (257,290) 1,310,169
Increase (decrease) in federal funds
purchased (800,000) (800,000) 800,000
Payment of cash dividends (63,700) (125,000) (125,000) (100,000)
----------------------------------------------------------------
Net Cash Provided by (Used in) Financing
Activities (1,447,648) (762,933) 1,806,682 417,710 1,210,169
----------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash
Equivalents (2,647,840) 659,339 3,596,029 (560,174) 250,502
Cash and Cash Equivalents at Beginning
of Period 5,244,980 1,648,951 1,648,951 2,209,125 1,958,623
----------------------------------------------------------------
Cash and Cash Equivalents at End of Period $2,597,140 $2,308,290 $5,244,980 $1,648,951 $2,209,125
================================================================
</TABLE>
The accompanying notes are an integral part
of the financial statements.
F-6
<PAGE>
THE BANK OF ORLEANS
NOTES TO FINANCIAL STATEMENTS
(All references and information as of and for the three-months ended
March 31, 1995 and 1994 and as of and for the year ended December 31, 1992
are unaudited)
_______
1. Accounting Policies:
--------------------
The more significant accounting policies of The Bank of Orleans (the
"Bank") are as follows:
Investment Securities:
----------------------
Effective December 31, 1993, the Bank adopted Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments
in Debt and Equity Securities." Under the provisions of SFAS No. 115,
investment securities should be classified upon acquisition into one of
three categories: held-to-maturity, available- for-sale, or trading.
Held-to-maturity securities are those securities that the Bank has the
positive intent and ability to hold to maturity and are recorded at
amortized cost. Available-for-sale securities are those securities that
would be available to be sold in the future in response to the Bank's
liquidity needs, changes in market interest rates, and asset-liability
management strategies, among others. Available-for-sale securities are
reported at fair value, with unrealized holding gains and losses excluded
from earnings and reported as a separate component of shareholders' equity,
net of applicable taxes. At December 31, 1994 and 1993, the Bank did not
hold any trading securities.
The impact of adopting SFAS No. 115 increased the carrying value of
investments by $39,641 and stockholders' equity by $26,163 at December 31,
1993. Prior to adoption of SFAS No. 115, investment securities were
accounted for under SFAS No. 12, which required marketable equity
securities to be carried at the lower of cost or market and required net
unrealized losses for these securities to be deducted from shareholders'
equity. At December 31, 1992, unrealized losses related to marketable
equity securities were $115,550. Such securities were sold at a realized
loss of $104,905 in 1993.
The identified security method is used to determine gains and losses on
sales of investment securities.
F-7
<PAGE>
Loans:
------
Loans are stated at the principle amount outstanding, net of unearned
income. Interest income on loans not made on a discount basis is
recognized based on loan principle amounts outstanding during the period.
Income on discount-basis installment loans is recognized using a method
that approximates the interest method. Accrual of interest income is
adjusted or discontinued when, in the opinion of management, its collection
becomes doubtful.
Allowance for Loan Losses:
--------------------------
The provision for loan losses charged to operating expenses is based on
management's judgment of the amount necessary to provide an adequate
allowance to cover possible losses in the loan portfolio.
Bank Premises and Equipment:
----------------------------
Bank premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed on the straight-line and
accelerated methods over the estimated useful lives of the assets.
Maintenance, repairs and minor replacements are charged to expense as
incurred; major improvements are capitalized. The cost of assets sold or
retired and the related accumulated depreciation are eliminated from the
accounts and any resulting gain or loss is included in operations.
Income Taxes:
-------------
Effective January 1, 1993, the Bank adopted SFAS No. 109, "Accounting for
Income Taxes," the adoption of which had the effect of increasing net
income and the deferred tax asset by $27,910, and has been reflected as a
cumulative effect adjustment on the statement of income. Under SFAS No.
109, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to the temporary differences between the
financial statement carrying amounts of existing assets and liabilities and
their tax basis. Deferred tax expense or benefit is then recognized for
the change in deferred tax liabilities or assets between periods.
Previously, deferred taxes were accounted for under Accounting Principles
Board Opinion No. 11.
Statements of Cash Flows:
-------------------------
For the purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks, and federal funds sold.
Cash paid for interest was $1,728,302, $1,782,229 and $2,245,739 during
1994, 1993 and 1992, respectively. Cash paid for income taxes was
$154,732, $120,368 and $148,000 during 1994, 1993 and 1992, respectively.
F-8
<PAGE>
Earnings Per Share:
-------------------
Earnings per share is computed by dividing net income per period by 50,000
shares, the total outstanding shares for all periods presented.
Reclassifications:
------------------
Certain amounts from the prior years have been reclassified to conform with
current year presentation. Such reclassifications had no effect on net
income or retained earnings as previously reported.
2. Investment Securities:
----------------------
The amortized cost and estimated fair value of investment securities are as
follows:
<TABLE>
<CAPTION>
March 31, 1995 (Unaudited)
------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Securities available-for-sale
-----------------------------
U.S. Treasury securities $ 2,799,145 $ 11,098 $ 15,371 $ 2,794,872
Mortgage-backed securities 4,138,551 7,449 199,399 3,946,601
----------- -------- -------- -----------
$ 6,937,696 $ 18,547 $214,770 $ 6,741,473
=========== ======== ======== ===========
Securities held-to-maturity
---------------------------
Obligations of other U.S.
Government agencies $ 3,300,000 $ 34,836 $ 30,979 $ 3,303,857
Obligations of states and
political subdivisions 9,898,332 304,873 73,648 10,129,557
Mortgage-backed securities 5,570,598 456,921 39,965 5,987,554
----------- -------- -------- -----------
$18,768,930 $796,630 $144,592 $19,420,968
=========== ======== ======== ===========
December 31, 1994
------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ---------- -----------
Securities available-for-sale
-----------------------------
U.S. Treasury securities $ 2,399,470 -- $ 43,666 $ 2,355,804
Mortgage-backed securities 4,176,903 8,505 241,682 3,943,726
----------- -------- -------- -----------
$ 6,576,373 $ 8,505 $285,348 $ 6,299,530
=========== ======== ======== ===========
Securities held-to-maturity
---------------------------
Obligations of other U.S.
Government agencies $ 1,800,000 -- $ 52,477 $ 1,747,523
Obligations of states and
political subdivisions 10,435,832 $212,695 116,334 10,532,193
Mortgage-backed securities 5,670,125 404,507 121,728 5,952,904
----------- -------- -------- -----------
$17,905,957 $617,202 $290,539 $18,232,620
=========== ======== ======== ===========
</TABLE>
F-9
<PAGE>
<TABLE>
<CAPTION>
December 31, 1993
------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Securities available-for-sale
-----------------------------
U.S. Treasury securities $1,599,387 $11,659 $1,046 $1,610,000
Mortgage-backed securities 4,942,167 30,317 1,289 4,971,195
---------- ------- ------ ----------
$6,541,554 $41,976 $2,335 $6,581,195
========== ======= ====== ==========
</TABLE>
<TABLE>
<CAPTION>
Securities held-to-maturity
---------------------------
<S> <C> <C> <C> <C>
Obligations of other U.S.
Government agencies $ 3,400,000 $ 2,262 $ 561 $ 3,401,701
Obligations of states and
political subdivisions 10,800,832 600,932 18,046 11,383,718
Mortgage-backed securities 6,435,481 217,029 - 6,652,510
----------- -------- ------- -----------
$20,636,313 $820,223 $18,607 $21,437,929
=========== ======== ======= ===========
</TABLE>
The amortized cost and estimated fair value of debt securities by
contractual maturity are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
March 31, 1995 (Unaudited)
--------------------------
Amortized Estimated
Cost Fair Value
------------ ------------
<S> <C> <C>
Securities available-for-sale
-----------------------------
Due in one year or less $ 1,199,804 $ 1,186,936
Due after one year through five years 1,599,341 1,607,936
Mortgage-backed securities 4,138,551 3,946,601
----------- -----------
$ 6,937,696 $ 6,741,473
=========== ===========
Securities held-to-maturity
---------------------------
Due in one year or less $ 3,665,000 $ 3,644,945
Due after one year through five years 7,443,332 7,589,272
Due after five years through ten years 1,910,000 2,014,293
Due after ten years 180,000 184,904
Mortgage-backed securities 5,570,598 5,987,554
----------- -----------
$18,768,930 $19,420,968
=========== ===========
</TABLE>
F-10
<PAGE>
<TABLE>
<CAPTION>
December 31, 1994
------------------------
Amortized Estimated
Cost Fair Value
----------- -----------
<S> <C> <C>
Securities available-for-sale
-----------------------------
Due in one year or less $ 1,199,724 $ 1,174,316
Due after one year through five years 1,199,746 1,181,488
Mortgage-backed securities 4,176,903 3,943,726
----------- -----------
$ 6,576,373 $ 6,299,530
=========== ===========
Securities held-to-maturity
---------------------------
Due in one year or less $ 2,080,000 $ 2,063,261
Due after one year through five years 7,545,832 7,555,214
Due after five years through ten years 2,430,000 2,484,267
Due after ten years 180,000 176,974
Mortgage-backed securities 5,670,125 5,952,904
----------- -----------
$17,905,957 $18,232,620
=========== ===========
December 31, 1993
-----------------------
Amortized Estimated
Cost Fair Value
----------- ----------
Securities available-for-sale
-----------------------------
Due in one year or less $ 399,987 $ 409,624
Due after one year through five years 1,199,400 1,200,376
Mortgage-backed securities 4,942,167 4,971,195
---------- ----------
$6,541,554 $6,581,195
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Securities held-to-maturity
---------------------------
<S> <C> <C>
Due in one year or less $ 1,415,000 $ 1,415,787
Due after one year through five years 9,105,832 9,278,512
Due after five years through ten years 3,500,000 3,901,321
Due after ten years 180,000 189,799
Mortgage-backed securities 6,435,481 6,652,510
----------- -----------
$20,636,313 $21,437,929
=========== ===========
</TABLE>
Proceeds from sales or maturity of investment securities during 1994, 1993
and 1992 were $5,283,517, $11,369,547 and $7,154,366, respectively. Gross
losses of $272,344 and $104,905 were realized in 1994 and 1993,
respectively.
F-11
<PAGE>
3. Loans:
------
Loans outstanding at December 31, 1994 and 1993 are summarized as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Commercial and agricultural $ 7,638,304 $ 7,294,789
Real Estate 16,335,002 16,571,122
Installment 4,722,585 3,960,798
----------- -----------
$28,695,891 $27,826,709
=========== ===========
</TABLE>
4. Allowance for Loan Losses:
--------------------------
Transactions in the allowance for loan losses for the years ended
December 31, 1994, 1993 and 1992, respectively, were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Balance, January 1 $ 408,311 $373,381 $ 287,920
--------- -------- ---------
Loans charged off (232,198) (60,764) (109,328)
Recoveries 91,777 95,694 194,789
--------- -------- ---------
Net recoveries (charge offs) (140,421) 34,930 85,461
--------- -------- ---------
Provision charged to operating expense 300,000 - -
--------- -------- ---------
Balance, December 31 $ 567,890 $ 408,311 $ 373,381
========= ========= =========
</TABLE>
On January 1, 1995, the Bank adopted SFAS No. 114, "Accounting by Creditors
for Impairment of a Loan," as amended by SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan - Income Recognition and Disclosures."
This statement requires that impaired loans be measured based on the
present value of the loan's expected future cash flows discounted at the
loan's effective interest rate. If the present value is less than the
recorded investment of the loan, an impairment will be recognized. The
adoption of this statement did not have a material effect on the Bank's
financial position or results of operations.
5. Bank Premises and Equipment:
----------------------------
Bank premises and equipment at December 31, 1994 and 1993 are summarized as
follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Land and building $301,319 $301,319
Furniture and equipment 489,904 410,099
-------- --------
791,223 711,418
Less accumulated depreciation 513,960 483,072
-------- --------
$277,263 $228,346
======== ========
</TABLE>
F-12
<PAGE>
6. Income Taxes:
-------------
Effective January 1, 1993, the Bank adopted SFAS No. 109, "Accounting for
Income Taxes," which requires the use of the liability method to account
for deferred income taxes.
The provision for (benefit from) income taxes consisted of the following:
<TABLE>
<CAPTION>
1994 1993 1992
----------- --------- -----------
(Unaudited)
<S> <C> <C> <C>
Currently payable:
Federal $ 66,627 $134,002 $149,392
State 48,264 73,762 79,360
Deferred expense (benefit)-Federal (177,725) (27,966) (1,754)
--------- -------- --------
$ (62,834) $179,798 $226,998
========= ======== ========
</TABLE>
The following reconciles the federal statutory tax rate of 34% to the
effective rate in 1994, 1993 and 1992:
<TABLE>
<CAPTION>
1994 1993 1992
---- ------ ----
(Unaudited)
<S> <C> <C> <C>
Federal income tax (benefit) at statutory rate $ (3,877) $ 251,787 $ 313,326
Tax exempt interest (191,882) (176,163) (149,612)
Nondeductible capital loss - 35,668 -
Nondeductible interest expense 20,573 16,449 14,701
Nondeductible merger expenses 79,567 - -
State tax, net of federal tax benefit 31,854 48,683 52,378
Other 931 3,374 761
Alternate minimum tax - - (4,556)
--------- --------- ---------
$ (62,834) $ 179,798 $ 226,998
========= ========= =========
</TABLE>
The tax effect of temporary differences that give rise to the Bank's
deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
December 31, December 31, January 1,
1994 1993 1993
------------ ------------ ----------
<S> <C> <C> <C>
Deferred tax assets:
Unrealized loss on securities available for sale $ 94,127
Alternate minimum tax 121,219 $38,920 $12,341
Difference in accounting for loan losses 121,885 26,695 26,695
-------- ------- -------
Total deferred tax asset 337,231 65,615 39,036
-------- ------- -------
Deferred tax liabilities:
Accretion of investment discounts 153 389 1,776
Unrealized gain on securities available-for-sale - 13,478 -
-------- ------- -------
Total deferred tax liabilities 153 13,867 1,776
-------- ------- -------
Net deferred tax asset $337,078 $51,748 $37,260
======== ======= =======
</TABLE>
Management has determined that a valuation allowance for the net deferred
tax assets is not necessary as of December 31, 1994 and 1993, based on the
reversal period of existing temporary differences and expected future
income.
F-13
<PAGE>
7. Financial Instruments with Off-Balance-Sheet Risk:
--------------------------------------------------
The Bank is party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers
and to reduce its own exposure to fluctuations in interest rates. These
financial instruments include commitments to extend credit. Those
instruments involve, to varying degrees, elements of credit and interest
rate risk in excess of the amount recognized in the balance sheet. The
contract or notional amounts of those instruments reflect the extent of
involvement the Bank has in particular classes of financial instruments.
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit is
represented by the contractual notional amount of those instruments. The
Bank uses the same credit policies in making commitments and conditions
obligations as it does for on-balance-sheet instruments.
Unless noted otherwise, the Bank does not require collateral or other
security to support financial instruments with credit risk.
Financial instruments whose contract amounts represent credit risk at
December 3l, l994 and 1993 include commitments to extend credit of
approximately $1,705,000 and $l,730,000, respectively.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and normally do not require payment of a fee. Since many of the
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements.
The Bank evaluates each customer's creditworthiness on a case-by-case
basis. The amount of collateral obtained, if deemed necessary by the Bank
upon extension of credit, is based on management's credit evaluation of the
counter-party. Collateral held varies but may include accounts receivable,
marketable securities, inventory, property, plant and equipment, and real
estate, including income-producing commercial properties.
8. Significant Group Concentrations of Credit Risk:
------------------------------------------------
Most of the Bank's business activity is with customers located in Orange
County, Indiana and surrounding areas. The Bank grants commercial and
residential loans to customers primarily in this area. Although they have
diversified loan portfolios, a substantial portion of their debtors'
ability to honor their contracts is dependent upon the general economic
conditions of this region. Generally, the loans are collateralized by
assets, including real estate, marketable securities, tangible property and
personal guarantees. The loans are expected to be repaid from cash flow or
proceeds from the sale of selected assets of the borrower.
F-14
<PAGE>
9. Related Party Transactions:
---------------------------
In the normal course of business, the Bank makes loans to its directors,
officers and entities in which such parties are principal owners. As of
December 3l, l994, balances of loans to such parties totaled approximately
$381,000. During 1994, new loans to such parties amounted to approximately
$48,000 and repayments amounted to approximately $38,000.
10. Defined Contribution 40l(k) Plan:
---------------------------------
The Bank provides a defined contribution 40l(k) plan to substantially all
employees. Contributions to the plan by the Bank are at the discretion of
the Board of Directors. Expense charged to operations was $39,788, $34,257
and $33,272 in 1994, 1993 and 1992, respectively.
11. Commitments and Contingent Liabilities:
---------------------------------------
In the normal course of business, there are outstanding various commitments
and contingent liabilities, such as guarantees, commitments to extend
credit, legal claims, etc., which are not reflected in the Balance Sheet.
There were none at December 3l, l994 which, in the opinion of management,
will result in any significant losses.
12. Limitation on Payment of Dividends:
-----------------------------------
Banking regulations limit the amount of dividends the Bank may pay without
prior approval of bank regulatory authorities. At December 3l, l994,
undivided profits available for dividends without such approval
approximated $1,070,000.
13. Other Non-Interest Expense:
---------------------------
Components of other non-interest expense that exceeded one percent of total
revenue for the years ended December 31 follow:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Professional fees $322,744 $ 38,212 $ 32,368
Supplies 34,199 50,445 35,949
Data processing fees 100,692 91,686 83,336
Advertising 57,961 52,663 52,694
Directors fees 65,650 52,750 50,750
FDIC assessment 121,370 112,749 111,157
Other 127,742 123,405 120,701
-------- -------- --------
Total other non-interest expense $830,358 $521,910 $486,955
======== ======== ========
</TABLE>
F-15
<PAGE>
14. Merger Agreement With CNB Bancshares, Inc.:
-------------------------------------------
On October l8, l994, the Bank and CNB Bancshares, Inc. (Evansville,
Indiana) ("CNB") entered into an agreement of merger of the Bank with a
subsidiary of CNB. Terms of the agreement call for the Bank's shareholders
to receive 6.37 shares of CNB stock for each share of The Bank of Orleans
stock, subject to certain modifications. The agreement is subject to
shareholder approval and regulatory approvals. In the event the agreement
is terminated as a result of certain specific events as defined in the
agreement, The Bank of Orleans may be required to pay CNB a termination fee
of $500,000.
15. Significant Fourth Quarter Adjustments and Transactions:
--------------------------------------------------------
In connection with the merger agreement described in Note 14, the Bank
retained an environmental consulting firm in October, 1994 to conduct an
environmental investigation of certain real property owned by the Bank. In
connection therewith, the Bank charged to operations in the fourth quarter
of 1994 approximately $55,000 to take such actions as prescribed by the
environmental consulting firm. In addition, the Bank charged to operations
in the fourth quarter of 1994 approximately $230,000 of other professional
fees related to the proposed merger.
In connection with the merger agreement, the Bank sold approximately
$2,200,000 of certain investment securities which the management of the
Bank has previously classified as held-to-maturity. The sale of these
securities generated a loss of approximately $272,000.
Additionally, as a result of a regulatory examination, the Bank charged
against the allowance for loan losses approximately $200,000 of loans in
December 1994, which was offset by approximately $65,000 of recoveries
during the fourth quarter of 1994. The Bank recorded an additional
provision of $300,000 to the allowance for loan losses in December
1994.
16. Information Pertaining to Financial Statements as of and for the Three
----------------------------------------------------------------------
Months Ended March 31, 1995 and 1994 (unaudited):
-------------------------------------------------
In the opinion of management, the unaudited financial statements as of and
for the three months ended March 31, 1995 and 1994 contain all adjustments
necessary (all of which are normal and recurring) to present fairly the
financial position of the Bank and results of its operations and cash flows
in conformity with generally accepted accounting principles.
F-16
<PAGE>
EXHIBIT A
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION
by and between
THE BANK OF ORLEANS
an Indiana state chartered bank,
and
CNB BANCSHARES, INC.,
an Indiana corporation.
Dated as of October 18, 1994.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE ONE - TERMS OF THE MERGER AND CLOSING................................................. A-1
Section 1.01 Formation of Interim Bank.............................................. A-1
Section 1.02 The Merger............................................................. A-1
Section 1.03 Merging Bank........................................................... A-1
Section 1.04 Surviving Bank......................................................... A-1
Section 1.05 Effect of the Merger................................................... A-1
Section 1.06 Conversion of Shares................................................... A-1
Section 1.07 The Closing............................................................ A-3
Section 1.08 Exchange Procedures; Surrender of Certificates......................... A-3
Section 1.09 Closing Date........................................................... A-4
Section 1.10 Actions At Closing..................................................... A-4
ARTICLE TWO - REPRESENTATIONS OF ORLEANS...................................................... A-5
Section 2.01 Organization and Capital Stock......................................... A-5
Section 2.02 Authorization; No Defaults............................................. A-6
Section 2.03 Subsidiaries........................................................... A-6
Section 2.04 Financial Information.................................................. A-6
Section 2.05 Absence of Changes..................................................... A-6
Section 2.06 Regulatory Enforcement Matters......................................... A-6
Section 2.07 Tax Matters............................................................ A-6
Section 2.08 Litigation............................................................. A-7
Section 2.09 Employment Agreements.................................................. A-7
Section 2.10 Reports................................................................ A-7
Section 2.11 Investment Portfolio................................................... A-7
Section 2.12 Loan Portfolio......................................................... A-7
Section 2.13 Employee Matters and ERISA............................................. A-8
Section 2.14 Title to Properties; Insurance......................................... A-8
Section 2.15 Environmental Matters.................................................. A-9
Section 2.16 Compliance with Law.................................................... A-9
Section 2.17 Brokerage.............................................................. A-9
Section 2.18 Material Contracts..................................................... A-9
Section 2.19 Statements True and Correct............................................ A-10
ARTICLE THREE - REPRESENTATIONS OF CNB........................................................ A-10
Section 3.01 Organization and Capital Stock......................................... A-10
Section 3.02 Authorization.......................................................... A-11
Section 3.03 Subsidiaries........................................................... A-11
Section 3.04 Financial Information.................................................. A-11
Section 3.05 Absence of Changes..................................................... A-11
</TABLE>
A-i
<PAGE>
<TABLE>
<C> <S> <C>
Section 3.06 Litigation............................................................. A-11
Section 3.07 Compliance With Law.................................................... A-12
Section 3.08 Statements True and Correct............................................ A-12
ARTICLE FOUR - AGREEMENTS OF ORLEANS.......................................................... A-12
Section 4.01 Business in Ordinary Course............................................ A-12
Section 4.02 Breaches............................................................... A-14
Section 4.03 Submission to Shareholders............................................. A-14
Section 4.04 Consents to Contracts and Leases....................................... A-15
Section 4.05 Conforming Accounting and Reserve Policies; Restructuring Expenses..... A-15
Section 4.06 Consummation of Agreement.............................................. A-15
Section 4.07 Environmental Investigation and Remediation............................ A-16
Section 4.08 Restriction on Resales................................................. A-16
Section 4.09 Access to Information.................................................. A-16
Section 4.10 Divestiture of Structured Notes........................................ A-17
Section 4.11 Expense Report......................................................... A-17
ARTICLE FIVE - AGREEMENTS OF CNB.............................................................. A-17
Section 5.01 Regulatory Approvals and Registration Statement........................ A-17
Section 5.02 Breaches............................................................... A-17
Section 5.03 Consummation of Agreement.............................................. A-18
Section 5.04 Directors and Officers' Liability Insurance and Indemnification........ A-18
Section 5.05 Employee Benefits...................................................... A-18
ARTICLE SIX - CONDITIONS PRECEDENT TO THE MERGER.............................................. A-19
Section 6.01 Conditions to CNB's Obligations........................................ A-19
Section 6.02 Conditions to Orleans' Obligations..................................... A-20
ARTICLE SEVEN - TERMINATION OR ABANDONMENT.................................................... A-21
Section 7.01 Mutual Agreement....................................................... A-21
Section 7.02 Breach of Agreements................................................... A-21
Section 7.03 Failure of Conditions.................................................. A-22
Section 7.04 Approval Denial........................................................ A-22
Section 7.05 Shareholder Approval Denial............................................ A-22
Section 7.06 Regulatory Enforcement Matters......................................... A-22
Section 7.07 Termination Date....................................................... A-22
Section 7.08 Termination Fee........................................................ A-22
Section 7.09 Environmental Matters.................................................. A-22
ARTICLE EIGHT - GENERAL....................................................................... A-23
Section 8.01 Confidential Information............................................... A-23
Section 8.02 Publicity.............................................................. A-23
</TABLE>
A-ii
<PAGE>
<TABLE>
<C> <S> <C>
Section 8.03 Return of Documents.................................................... A-23
Section 8.04 Notices................................................................ A-23
Section 8.05 Liabilities............................................................ A-24
Section 8.06 Nonsurvival of Representations and Warranties.......................... A-25
Section 8.07 Entire Agreement....................................................... A-25
Section 8.08 Headings and Captions.................................................. A-25
Section 8.09 Waiver, Amendment or Modification...................................... A-25
Section 8.10 Rules of Construction.................................................. A-25
Section 8.11 Counterparts........................................................... A-25
Section 8.12 Successors............................................................. A-25
Section 8.13 Governing Law; Assignment.............................................. A-25
</TABLE>
EXHIBIT 1.02 - Form of Agreement and Plan of Merger
EXHIBIT 1.10(a) - Legal opinion matters for Orleans
EXHIBIT 1.10(b) - Legal opinion matters for CNB
EXHIBIT 4.08 - Form of Affiliate Agreement
A-iii
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
This is an AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") made as
of October 18, 1994, by and between CNB BANCSHARES, INC., an Indiana
corporation, ("CNB"), and THE BANK OF ORLEANS, an Indiana state chartered bank,
("Orleans").
In consideration of the premises and the mutual terms and provisions set
forth in this Agreement, the parties agree as follows.
ARTICLE ONE
-----------
TERMS OF THE MERGER AND CLOSING
-------------------------------
SECTION 1.01. FORMATION OF INTERIM BANK. CNB shall organize Orleans Interim
Bank ("Interim Bank") as an Indiana state chartered bank and subsidiary of CNB.
SECTION 1.02. THE MERGER. Pursuant to the terms and provisions of this
Agreement and The Indiana Financial Institutions Act (the "Corporate Law"),
Orleans and Interim Bank, at such time as it shall be lawful to do so, shall
duly authorize and execute the Agreement and Plan of Merger (the "Merger
Agreement") in the form attached hereto as Exhibit 1.02, and, as provided herein
and therein, Interim Bank shall merge with and into Orleans (the "Merger").
SECTION 1.03. MERGING BANK. Interim Bank shall be the merging bank under
the Merger and its corporate identity and existence, separate and apart from
Orleans, shall cease on consummation of the Merger.
SECTION 1.04. SURVIVING BANK. Orleans shall be the surviving bank in the
Merger. No changes in the Articles of Incorporation or Bylaws of Orleans shall
be effected by the Merger, except that the name of Orleans shall be changed to
"Citizens Bank of Orleans." The Board of Directors of the Surviving Bank (as
defined in Section 5.04(b) hereof) immediately after the Closing (as defined in
Section 1.07 hereof) shall consist of the persons serving as directors of
Orleans as of the Closing Date (as defined in Section 1.09 hereof) and one
representative of CNB.
SECTION 1.05. EFFECT OF THE MERGER. The Merger shall have all of the
effects provided by the Corporate Law.
SECTION 1.06. CONVERSION OF SHARES.
(a) At the Effective Time (as defined in Section 1.09 hereof), each share of
common stock, par value $10.00 per share, of Orleans (the "Orleans Common")
issued and outstanding immediately prior to the Effective Time, other than
shares the holders of which have duly exercised and perfected their dissenters'
rights under the Corporate Law, shall be converted into the right to receive
6.37 shares (the "Conversion Ratio") of common stock, stated value $1.00 per
share, of CNB (the "CNB Common"); provided, however, that if the Closing Book
Value (as defined in Section 1.06(b) hereof) is less than $6,167,000, then the
Conversion Ratio shall equal the product of (i) 6.37 and (ii) the quotient of
the Closing Book Value divided by $6,167,000. The shares of CNB Common to be
issued pursuant to the
A-1
<PAGE>
foregoing sentence, together with any cash payment in lieu of fractional shares,
as provided below, are hereinafter referred to as the "Merger Consideration".
No fractional shares of CNB Common shall be issued and, in lieu thereof, holders
of shares of Orleans Common who would otherwise be entitled to a fractional
share interest (after taking into account all shares of CNB Common to be
received in the Merger by such holder) shall be paid an amount in cash equal to
the product of such fractional share interest and the closing price of a share
of CNB Common on the Nasdaq Stock Market's National Market ("Nasdaq") on the
fifth business day immediately preceding the date on which the Effective Time
occurs.
(b) The term "Closing Book Value" shall mean the amount of the shareholders'
equity accounts of Orleans, as of the end of the month immediately preceding the
Effective Time, determined in accordance with generally accepted accounting
principles ("GAAP") consistently applied with the year ended December 31, 1993,
but excluding for this purpose any adjustments to the shareholders' equity
accounts solely as a result of (A) marketable securities classified as Available
for Sale in accordance with FAS 115, and (B) the Structured Notes Divestiture
(as defined in Section 4.10 hereof), less (i) the amount, if any, by which the
allowance for credit losses account of Orleans, as of the end of the month
immediately preceding the Effective Time, is less than $391,000 (which shall be
determined exclusive of any increase in the allowance taken by Orleans at the
written request of CNB pursuant to Section 4.05 hereof), less (ii) the amount of
any increase in the shareholders' equity accounts of Orleans resulting from or
attributable to the sale of securities held on and sold after June 30, 1994 or
any transactions or accounting adjustments not in the ordinary course of
business effected or completed after June 30, 1994, plus (iii) any reduction of
shareholders' equity theretofore recorded solely as a result of accruals,
reserves or charges taken by Orleans at the written request of CNB pursuant to
Section 4.05 hereof (other than any reduction of shareholders' equity resulting
from (a) audit fees incurred and expensed by Orleans between the date hereof and
the Closing Date, (b) fees incurred and expensed by Orleans to obtain the
environmental investigations referred to in Section 4.07 hereof, and (c) fees
incurred and expensed by Orleans to purchase tail coverage pursuant to Section
5.04 hereof), plus (iv) the amount of each quarterly dividend paid by Orleans
pursuant to Section 4.01 hereof after March 15, 1995.
(c) At the Effective Time, all of the shares of Orleans Common, by virtue of
the Merger and without any action on the part of the holders thereof, shall no
longer be outstanding and shall be canceled and retired and shall cease to
exist, and each holder of any certificate or certificates which immediately
prior to the Effective Time represented outstanding shares of Orleans Common
(the "Certificates") shall thereafter cease to have any rights with respect to
such shares, except the right of such holders to receive, without interest, the
Merger Consideration upon the surrender of such Certificate or Certificates in
accordance with Section 1.08 hereof or the right provided under Section 1.06(f)
hereof, as applicable.
(d) At the Effective Time, each share of Orleans Common, if any, held in the
treasury of Orleans (other than shares held in trust accounts for the benefit of
others or in other fiduciary, nominee or similar capacities) immediately prior
to the Effective Time shall be canceled.
(e) Each share of common stock, par value $1.00 per share, of Interim Bank
outstanding immediately prior to the Effective Time shall be converted into and
become one share of Orleans Common.
(f) If holders of Orleans Common are entitled to and do object to the Merger
and demand payment of the value of their shares under the Corporate Law, any
issued and outstanding shares of Orleans Common held by an objecting holder
shall not be converted as described in Section 1.06(a)
A-2
<PAGE>
hereof but from and after the Effective Time shall represent only the right to
receive such value as may be determined to be due to such objecting holder
pursuant to the Corporate Law; provided, however, that each share of Orleans
Common outstanding immediately prior to the Effective Time and held by an
objecting holder who shall, after the Effective Time, withdraw his or her demand
for payment of value or lose his or her right to so object shall have only such
rights as are provided under the Corporate Law.
(g) If between the date hereof and the Effective Time a share of CNB Common
shall be changed into a different number of shares of CNB Common or a different
class of shares by reason of reclassification, recapitalization, splitup,
exchange of shares or readjustment, or if a stock dividend thereon shall be
declared with a record date within such period (a "Share Adjustment"), then the
number of shares of CNB Common or a different class of shares into which a share
of Orleans Common shall be converted pursuant to subsection (a) above shall be
appropriately and proportionately adjusted so that each stockholder of Orleans
shall be entitled to receive such number of shares of CNB Common as such
stockholder would have received pursuant to such Share Adjustment had the record
date therefor been immediately following the Effective Time of the Merger;
provided, however, that the one for ten stock dividend declared by CNB on
October 18, 1994, shall not be deemed a Share Adjustment for purposes of this
subsection (g) and the Conversion Ratio shall not be adjusted as a result
thereof.
SECTION 1.07. THE CLOSING. The closing of the Merger (the "Closing") shall
take place at the main offices of CNB at 10:00 A.M. Central Time on the Closing
Date.
SECTION 1.08. EXCHANGE PROCEDURES; SURRENDER OF CERTIFICATES.
(a) The Citizens National Bank of Evansville, Evansville, Indiana, shall act
as Exchange Agent in the Merger (the "Exchange Agent").
(b) As soon as reasonably practicable, but in no event more than five
business days, after the Effective Time, the Exchange Agent shall mail to each
record holder of any Certificate or Certificates whose shares were converted
into the right to receive the Merger Consideration, a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon proper delivery of the Certificates to
the Exchange Agent and shall be in such form and have such other provisions as
CNB may reasonably specify) (each such letter, the "Merger Letter of
Transmittal") and instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Within ten business days
after the Exchange Agent's receipt from a holder of the items described in the
preceding sentence, the Exchange Agent shall deliver to such holder the Merger
Consideration to which such holder shall be entitled to receive hereunder. Upon
surrender to the Exchange Agent of a Certificate, together with a Merger Letter
of Transmittal duly executed and any other required documents, the holder of
such Certificate shall be entitled to receive in exchange therefor solely the
Merger Consideration. No interest on the Merger Consideration issuable upon the
surrender of the Certificates shall be paid or accrued for the benefit of
holders of Certificates. If the Merger Consideration is to be issued to a
person other than a person in whose name a surrendered Certificate is
registered, it shall be a condition of issuance that the surrendered Certificate
shall be properly endorsed or otherwise in proper form for transfer and that the
person requesting such issuance shall pay to the Exchange Agent any required
transfer or other taxes or establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not applicable.
A-3
<PAGE>
(c) At any time following six months after the Effective Time, CNB shall be
entitled to terminate the Exchange Agent relationship, and thereafter holders of
Certificates shall be entitled to look only to CNB (subject to abandoned
property, escheat or other similar laws) with respect to the Merger
Consideration issuable upon surrender of their Certificates.
(d) No dividends that are otherwise payable on shares of CNB Common
constituting the Merger Consideration shall be paid to persons entitled to
receive such shares of CNB Common until such persons surrender their
Certificates. Upon such surrender, there shall be paid to the person in whose
name the shares of CNB Common shall be issued any dividends which shall have
become payable with respect to such shares of CNB Common (without interest and
less the amount of taxes, if any, which may have been imposed thereon), between
the Effective Time and the time of such surrender.
SECTION 1.09. CLOSING DATE. At CNB's election, the Closing shall take place
on (i) the last business day of, or (ii) the first business day of the month
following, or (iii) the last business day of the earliest month which is the
second month of a calendar quarter following, in each case, the month during
which each of the conditions in Sections 6.01(d) and (e) and 6.02(d) is
satisfied or waived by the appropriate party or on such other date after such
satisfaction or waiver as Orleans and CNB may agree (the "Closing Date");
provided, however, that the Closing Date may be postponed by CNB in its
discretion for up to fifteen business days in order to allow adequate time to
determine and verify the amount of the Closing Book Value pursuant to Section
1.06(b) hereof. The Merger shall be effective upon the issuance by the
Secretary of State of the State of Indiana of a Certificate of Merger (the
"Effective Time"), which CNB and Orleans shall use their best efforts to cause
to occur on the Closing Date.
SECTION 1.10. ACTIONS AT CLOSING.
(a) At the Closing, Orleans shall deliver to CNB:
(i) a certified copy of the Articles of Incorporation and Bylaws of
Orleans;
(ii) Stock Certificate representing the Orleans Common issued to
CNB;
(iii) a Certificate signed by an appropriate officer of Orleans
stating that (A) each of the representations and warranties contained in
Article Two is true and correct in all material respects at the time of the
Closing with the same force and effect as if such representations and
warranties had been made at Closing, and (B) all of the conditions set forth
in Section 6.01(b) hereof have been satisfied or waived as provided therein;
(iv) a certified copy of the resolutions of Orleans' Board of
Directors and shareholders, as required for valid approval of the execution
of this Agreement and the consummation of the Merger and the other
transactions contemplated hereby;
(v) Certificate of the Secretary of State of the State of Indiana,
dated a recent date, stating that Orleans is in existence; and
(vi) Articles of Merger executed by Orleans, reflecting the terms
and provisions of this Agreement and the Merger Agreement, and in
proper form for filing with the Secretary of State
A-4
<PAGE>
of the State of Indiana in order to cause the Merger to become effective
pursuant to the Corporate Law; and
(vii) a legal opinion from counsel for Orleans, in form reasonably
acceptable to CNB's counsel, opining with respect to the matters listed on
Exhibit 1.10(a) hereto.
(b) At the Closing, CNB shall deliver to Orleans:
(i) a Certificate signed by an appropriate officer of CNB and
Interim Bank stating that (A) each of the representations and warranties
contained in Article Three is true and correct in all material respects at
the time of the Closing with the same force and effect as if such
representations and warranties had been made at Closing and (B) all of the
conditions set forth in Section 6.02(b) and 6.02(d) hereof (but excluding
the approval of Orleans' shareholders) have been satisfied;
(ii) a certified copy of the resolutions of CNB's Board of
Directors authorizing the execution of this Agreement and the consummation
of the transactions contemplated hereby;
(iii) a certified copy of the resolutions of Interim Bank's Board
of Directors and shareholder, as required for valid approval of the
execution of this Agreement and the consummation of the transactions
contemplated hereby;
(iv) a legal opinion from counsel for CNB, in form reasonably
acceptable to Orleans' counsel, opining with respect to the matters listed
on Exhibit 1.10(b) hereto; and
(v) copies of all regulatory approvals for the Merger received by
CNB.
ARTICLE TWO
-----------
REPRESENTATIONS OF ORLEANS
--------------------------
Orleans hereby makes the following representations and warranties:
SECTION 2.01. ORGANIZATION AND CAPITAL STOCK.
(a) Orleans is a state banking corporation duly organized and validly
existing under the laws of the State of Indiana and has the corporate power to
own all of its property and assets, to incur all of its liabilities and to carry
on its business as now being conducted.
(b) The authorized capital stock of Orleans consists of 50,000 shares of
Orleans Common, of which, as of the date hereof, 50,000 shares are issued and
outstanding. All of the issued and outstanding shares of Orleans Common are
duly and validly issued and outstanding and are fully paid and non-assessable.
None of the outstanding shares of Orleans Common has been issued in violation of
any preemptive rights of the current or past stockholders of Orleans. Except as
described in Section 2.01(b) of that certain confidential writing delivered by
Orleans to CNB and executed by both Orleans and CNB concurrently with the
delivery and execution of this Agreement (the "Disclosure Schedule"), each
A-5
<PAGE>
Certificate representing shares of Orleans Common issued by Orleans in
replacement of any Certificate theretofore issued by it which was claimed by the
record holder thereof to have been lost, stolen or destroyed was issued by
Orleans only upon receipt of an affidavit of lost stock certificate and a bond
sufficient to indemnify Orleans against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such Certificate or the
issuance of such replacement Certificate.
SECTION 2.02. AUTHORIZATION; NO DEFAULTS. Orleans' Board of Directors has,
by all appropriate action, approved this Agreement and the Merger and authorized
the execution hereof on its behalf by its duly authorized officers and the
performance by Orleans of its obligations hereunder. Nothing in the articles of
incorporation or bylaws of Orleans, as amended, or any other agreement,
instrument, decree, proceeding, law or regulation (except as specifically
referred to in or contemplated by this Agreement) by or to which it is bound or
subject which is material to Orleans or to the Merger would prohibit or inhibit
Orleans from consummating this Agreement and the Merger on the terms and
conditions herein contained. This Agreement has been duly and validly executed
and delivered by Orleans and constitutes a legal, valid and binding obligation
of Orleans, enforceable against Orleans in accordance with its terms. Orleans
is not in default under or in violation of any provision of its articles of
incorporation, bylaws, or any promissory note, indenture or any evidence of
indebtedness or security therefor, lease, contract, purchase or other commitment
or any other agreement which is material to Orleans.
SECTION 2.03. SUBSIDIARIES. Orleans has no direct or indirect subsidiaries.
Except as described in Section 2.03 of the Disclosure Schedule, Orleans is not a
party to any partnership or joint venture and does not own an equity interest in
any other business or enterprise.
SECTION 2.04. FINANCIAL INFORMATION. The unaudited balance sheets of
Orleans as of December 31, 1992 and 1993 and related consolidated income
statements for the three years ended December 31, 1993, and the unaudited
balance sheets of Orleans as of June 30, 1993 and June 30, 1994 and the related
unaudited income statements for the six months then ended, and the year-end and
quarterly Reports of Condition and Report of Income of Orleans for 1993 and
March 31, 1994 and June 30, 1994, as filed with the Federal Deposit Insurance
Corporation (the "FDIC"), copies of all of which are included as Exhibit 2.04 of
the Disclosure Schedule (together, the "Orleans Financial Statements"), have
been prepared in accordance with GAAP applied on a consistent basis (except as
may be disclosed therein and except for regulatory reporting differences) and
fairly present the financial position and the results of operations, changes in
shareholders' equity and cash flows of Orleans as of the dates and for the
periods indicated (subject, in the case of interim financial statements, to
normal recurring year-end adjustments, none of which will be material).
SECTION 2.05. ABSENCE OF CHANGES. Except as may be disclosed in Section
2.05 of the Disclosure Schedule, since December 31, 1993, there has not been any
material adverse change in the financial condition, the results of operations or
the business of Orleans, nor have there been any events or transactions having
such a material adverse effect which should be disclosed in order to make the
Orleans Financial Statements not misleading.
SECTION 2.06. REGULATORY ENFORCEMENT MATTERS. Except as may be disclosed in
Section 2.06 of the Disclosure Schedule, neither Orleans nor any of its officers
and directors is subject to, and has not received any notice or advice that it
may become subject to, any order, agreement, imposition of civil money penalties
or memorandum of understanding with any federal or state agency charged with the
A-6
<PAGE>
supervision or regulation of banks or engaged in the insurance of bank deposits
or any other governmental agency having supervisory or regulatory authority with
respect to Orleans.
SECTION 2.07. TAX MATTERS. Orleans' federal income tax returns have not
been audited since 1965. Except as set forth in Section 2.07 of the Disclosure
Schedule, Orleans has filed all federal, state and material local tax returns
due in respect of its businesses or properties in a timely fashion and has paid
or made provision for all amounts due shown on such returns. All such returns
fairly reflect the information required to be presented therein. All provisions
for accrued but unpaid taxes contained in the Orleans Financial Statements were
made in accordance with GAAP and in the aggregate adequately provide for
potential tax liabilities.
SECTION 2.08. LITIGATION. Except as may be disclosed in Section 2.08 of the
Disclosure Schedule, there is no litigation, claim or other proceeding pending,
or to the knowledge of Orleans threatened, against Orleans, or of which the
property of Orleans is or would be subject.
SECTION 2.09. EMPLOYMENT AGREEMENTS. Except as may be disclosed in Section
2.09 of the Disclosure Schedule, Orleans is not a party to or bound by any
written contract for the employment, retention or engagement of any officer,
employee, agent, consultant or other person or entity which, by its terms, is
not terminable by Orleans on 30 days written notice or less without the payment
of any amount by reason of such termination. A true, accurate and complete copy
of each such agreement disclosed in Section 2.09 of the Disclosure Schedule is
included therewith.
SECTION 2.10. REPORTS. Since January 1, 1991, Orleans has filed all reports
and statements, together with any amendments required to be made with respect
thereto, that it was required to file with (i) the FDIC, (ii) the Indiana
Department of Financial Institutions (the "IDFI") and any other applicable state
securities or banking authorities, and (iii) any other governmental authority
with jurisdiction over Orleans, except as may be disclosed in Section 2.10 of
the Disclosure Schedule. As of their respective dates, each of such reports and
documents, including the financial statements, exhibits and schedules thereto,
complied with the relevant statutes, rules and regulations enforced or
promulgated by the regulatory authority with which they were filed, and did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
SECTION 2.11. INVESTMENT PORTFOLIO. All United States Treasury securities,
obligations of other United States Government agencies and corporations,
obligations of States and political subdivisions of the United States and other
investment securities held by Orleans, as reflected in the latest consolidated
balance sheet of Orleans included in the Orleans Financial Statements, are
carried in the aggregate at no more than cost adjusted for amortization of
premiums and accretion of discounts in accordance with GAAP, specifically
including but not limited to FAS 115.
SECTION 2.12. LOAN PORTFOLIO. Except as may be disclosed in Section 2.12 of
the Disclosure Schedule, (i) all loans and discounts shown on the Orleans
Financial Statements at December 31, 1993 or which were entered into after
December 31, 1993, but before the Closing Date were and will be made for good,
valuable and adequate consideration in the ordinary course of the business of
Orleans, in accordance with sound banking practices, and are not subject to any
known defenses, setoffs or counterclaims, including without limitation any such
as are afforded by usury or truth in lending laws, except as may be provided by
bankruptcy, insolvency or similar laws or by general principles of equity;
A-7
<PAGE>
(ii) the notes or other evidences of indebtedness evidencing such loans and all
forms of pledges, mortgages and other collateral documents and security
agreements are and will be enforceable, valid, true and genuine and what they
purport to be; and (iii) Orleans has complied and will prior to the Closing Date
comply with all laws and regulations relating to such loans, or to the extent
there has not been such compliance, such failure to comply will not interfere
with the collection of any such loan.
SECTION 2.13. EMPLOYEE MATTERS AND ERISA.
(a) Orleans has not entered into any collective bargaining agreement with
any labor organization with respect to any group of employees of Orleans and to
the knowledge of Orleans there is no present effort nor existing proposal to
attempt to unionize any group of employees of Orleans.
(b) Except as may be disclosed in Section 2.13(b) of the Disclosure
Schedule, (i) Orleans is and has been in compliance with all applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, including, without limitation, any such laws
respecting employment discrimination and occupational safety and health
requirements, and Orleans is not engaged in any unfair labor practice; (ii)
there is no unfair labor practice complaint against Orleans or, to the knowledge
of Orleans, threatened before the National Labor Relations Board; (iii) there is
no labor dispute, strike, slowdown or stoppage actually pending or, to the
knowledge of Orleans, threatened against or directly affecting Orleans; and (iv)
Orleans has not experienced any work stoppage or other labor difficulty during
the past five years.
(c) Except as may be disclosed in Section 2.13(c) of the Disclosure
Schedule, Orleans does not maintain, contribute to or participate in or have any
liability under any employee benefit plans, as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or any
nonqualified employee benefit plans or deferred compensation, bonus, stock or
incentive plans, or other employee benefit or fringe benefit programs for the
benefit of former or current employees of Orleans (the "Employee Plans"). To
the knowledge of Orleans, no present or former employee of Orleans has been
charged with breaching nor has breached a fiduciary duty under any of the
Employee Plans. Orleans does not participate in, nor has it in the past five
years participated in, nor has it any present or future obligation or liability
under, any multiemployer plan (as defined at Section 3(37) of ERISA). Except as
may be disclosed in Section 2.13(c) of the Disclosure Schedule, Orleans does not
maintain, contribute to, or participate in, any plan that provides health, major
medical, disability or life insurance benefits to former employees of Orleans
except as otherwise required by Section 4980B of the Internal Revenue Code of
1986, as amended (the "Code").
(d) Orleans does not maintain, nor has it ever maintained, any
Employee Plans subject to Title IV of ERISA or Section 412 of the Code. No
claim is pending, and Orleans has not received notice of any threatened or
imminent claim with respect to any Employee Plan (other than a routine claim for
benefits for which plan administrative review procedures have not been
exhausted) for which Orleans would be liable after December 31, 1993, except as
will be reflected on the Orleans Financial Statements. After December 31, 1993,
Orleans will not have any liabilities for excise taxes under Sections 4971,
4975, 4976, 4977, 4979 or 4980B of the Code or for a fine under Section 502 of
ERISA with respect to any Employee Plan. All Employee Plans have been operated,
administered and maintained in accordance with the terms thereof and in
compliance with the requirements of all applicable laws, including, without
limitation, ERISA and the Code.
A-8
<PAGE>
SECTION 2.14. TITLE TO PROPERTIES; INSURANCE. Orleans has marketable title,
insurable at standard rates, free and clear of all liens, charges and
encumbrances (except taxes which are a lien but not yet payable and liens,
charges or encumbrances reflected in the Orleans Financial Statements and
easements, rights-of-way, and other restrictions which are not material and
further excepting in the case of Other Real Estate Owned ("OREO"), as such real
estate is internally classified on the books of Orleans, rights of redemption
under applicable law) to all real properties used by Orleans in its main banking
office and branch facility operations and all other real properties reflected on
the Orleans Financial Statements as being owned by Orleans. All leasehold
interests used by Orleans in its banking operations are held pursuant to lease
agreements which are valid and enforceable in accordance with their terms. All
such properties comply with all applicable private agreements, zoning
requirements and other governmental laws and regulations relating thereto and
there are no condemnation proceedings pending or, to the knowledge of Orleans,
threatened with respect to such properties. Orleans has valid title or other
ownership rights under licenses to all intangible personal or intellectual
property used by Orleans in its business, free and clear of any claim, defense
or right of any other person or entity which is material to such property,
subject only to rights of the licensors pursuant to applicable license
agreements, which rights do not materially adversely interfere with the use of
such property. Section 2.14 of the Disclosure Schedule sets forth, for each of
the insurable properties owned or held by Orleans, the amount and type of
insurance, the name of the insurer and the amount of the annual premium. The
only real property owned, leased or operated by Orleans are the three parcels of
real estate in Orleans, Indiana commonly known as Lots 139, 141 and 142.
SECTION 2.15. ENVIRONMENTAL MATTERS.
(a) As used in this Agreement, "Environmental Laws" means all local, state
and federal environmental, health and safety laws and regulations in all
jurisdictions in which Orleans has done business or owned property, including,
without limitation, the Federal Resource Conservation and Recovery Act, the
Federal Comprehensive Environmental Response, Compensation and Liability Act,
the Federal Clean Water Act, the Federal Clean Air Act, and the Federal
Occupational Safety and Health Act.
(b) Except as disclosed in Section 2.15(b) of the Disclosure Schedule,
neither the conduct nor operation of Orleans nor any condition of any property
ever owned, leased or operated by Orleans violates or violated Environmental
Laws and no condition or event has occurred with respect to Orleans or any such
property that, with notice or the passage of time, or both, would constitute a
violation of Environmental Laws or obligate (or potentially obligate) Orleans to
remedy, stabilize, neutralize or otherwise alter the environmental condition of
any such property. Orleans has not received any notice from any person or
entity that Orleans or the operation of any facilities or any property ever
owned, leased or operated by Orleans are or were in violation of any
Environmental Laws or Orleans is responsible (or potentially responsible) for
the cleanup of any pollutants, contaminants, or hazardous or toxic wastes,
substances or materials at, on or beneath any such property.
SECTION 2.16. COMPLIANCE WITH LAW. Orleans has all licenses, franchises,
permits and other governmental authorizations that are legally required to
enable it to conduct its business and is in compliance with all applicable laws
and regulations.
A-9
<PAGE>
SECTION 2.17. BROKERAGE. Except as may be disclosed in Section 2.17 of the
Disclosure Schedule, there are no existing claims or agreements for brokerage
commissions, finders' fees, or similar compensation in connection with the
transactions contemplated by this Agreement payable by Orleans.
SECTION 2.18. MATERIAL CONTRACTS. Except as may be disclosed in Section
2.18 of the Disclosure Schedule, Orleans is not a party to or bound by any oral
or written (i) agreement, contract or indenture under which it has borrowed or
will borrow money (not including federal funds and money deposited, including
without limitation, checking and savings accounts and certificates of deposit);
(ii) guaranty of any obligation for the borrowing of money or otherwise,
excluding endorsements made for collection and guarantees made in the ordinary
course of business and letters of credit issued in the ordinary course of
business; (iii) agreement with any present or former officer, director or
stockholder (except for deposit or loan agreements entered into in the ordinary
course of business); (iv) license, whether as licensor or licensee, material to
the business of Orleans; (v) contract or commitment for the purchase of
materials, supplies or other real or personal property in an amount in excess of
$10,000 or for the performance of services over a period of more than 30 days
and involving an amount in excess of $10,000; or (vi) contract, agreement or
other commitment not made in the ordinary course of business.
SECTION 2.19. STATEMENTS TRUE AND CORRECT. None of the information supplied
or to be supplied by Orleans for inclusion in (i) the Registration Statement (as
defined in Section 4.06 hereof), (ii) the Prospectus/Proxy Statement (as defined
in Section 4.03 hereof) and (iii) any other documents to be filed with the
Securities and Exchange Commission (the "SEC") or any banking or other
regulatory authority in connection with the transactions contemplated hereby,
will, at the respective times such documents are filed, and, in the case of the
Registration Statement, when it becomes effective, and with respect to the
Prospectus/Proxy Statement, when first mailed to the stockholders of Orleans, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements therein not misleading
or, in the case of the Prospectus/Proxy Statement or any amendment thereof or
supplement thereto, at the time of the Stockholders' Meeting (as defined in
Section 4.03 hereof), be false or misleading with respect to any material fact,
or omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of any proxy for the
Stockholders' Meeting. All documents that Orleans is responsible for filing
with the SEC or any other regulatory authority in connection with the
transactions contemplated hereby will comply as to form in all material respects
with the provisions of applicable law and the applicable rules and regulations
thereunder.
ARTICLE THREE
-------------
REPRESENTATIONS OF CNB
----------------------
CNB hereby makes the following representations and warranties:
SECTION 3.01. ORGANIZATION AND CAPITAL STOCK.
(a) CNB is a corporation duly incorporated, validly existing, and in good
standing under the laws of the State of Indiana with full corporate power and
authority to carry on its business as it is now being conducted.
A-10
<PAGE>
(b) The authorized capital stock of CNB consists of (i) 15,000,000 shares of
CNB Common, of which, as of October 1, 1994, 12,254,729 shares are issued and
outstanding, and (ii) 2,000,000 shares of preferred stock, of which none are
issued and outstanding. All of the issued and outstanding shares of CNB Common
are duly and validly issued and outstanding and are fully paid and non-
assessable.
(c) The shares of CNB Common that are to be issued to the stockholders of
Orleans pursuant to the Merger have been duly authorized and, when so issued in
accordance with the terms of this Agreement, will be validly issued and
outstanding, fully paid and nonassessable, with no personal liability attaching
to the ownership thereof.
SECTION 3.02. AUTHORIZATION. The Board of Directors of CNB has, by all
appropriate action, approved this Agreement and the Merger and authorized the
execution hereof on its behalf by its duly authorized officers and the
performance by CNB of its obligations hereunder. Nothing in the articles of
incorporation or bylaws of CNB, as amended, or any other agreement, instrument,
decree, proceeding, law or regulation (except as specifically referred to in or
contemplated by this Agreement) by or to which it or any of its subsidiaries are
bound or subject would prohibit or inhibit CNB from entering into and
consummating this Agreement and the Merger on the terms and conditions herein
contained. This Agreement has been duly and validly executed and delivered by
CNB and constitutes a legal, valid and binding obligation of CNB, enforceable
against CNB in accordance with its terms and no other corporate acts or
proceedings are required to be taken by CNB to authorize the execution, delivery
and performance of this Agreement. Except for the requisite approvals of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
the IDFI and the FDIC, no notice to, filing with, authorization by, or consent
or approval of, any federal or state regulatory authority is necessary for the
execution and delivery of this Agreement or consummation of the Merger by CNB or
Interim Bank.
SECTION 3.03. SUBSIDIARIES. Each of CNB's significant subsidiaries (as such
term is defined under SEC regulations) is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation and has
the corporate power to own its respective properties and assets, to incur its
respective liabilities and to carry on its respective business as now being
conducted.
SECTION 3.04. FINANCIAL INFORMATION. The consolidated balance sheets of CNB
and its subsidiaries as of December 31, 1992 and 1993 and related consolidated
statements of income, changes in stockholders' equity and cash flows for the
three years ended December 31, 1993, together with the notes thereto, included
in CNB's Annual Report on Form 10-K for the year ended 1993, as currently on
file with the SEC, and the unaudited consolidated balance sheets of CNB and its
subsidiaries as of June 30, 1993 and June 30, 1994 and the related unaudited
consolidated income statements and statements of changes in shareholders' equity
and cash flows for the six months then ended included in CNB's Quarterly Report
on Form 10-Q for the quarter then ended, as currently on file with the SEC,
(together, the "CNB Financial Statements"), have been prepared in accordance
with GAAP applied on a consistent basis (except as disclosed therein) and fairly
present in all material respects the consolidated financial position and the
consolidated results of operations, changes in stockholders' equity and cash
flows of CNB and its consolidated subsidiaries as of the dates and for the
periods indicated (subject, in the case of interim financial statements, to
normal recurring year-end adjustments, none of which will be material).
SECTION 3.05. ABSENCE OF CHANGES. Since December 31, 1993, there has not
been any material adverse change in the financial condition, the results of
operations or the business of CNB and its
A-11
<PAGE>
subsidiaries, nor have there been any events or transactions having such a
material adverse effect which should be disclosed in order to make the CNB
Financial Statements not misleading.
SECTION 3.06. LITIGATION. There is no litigation, claim or other proceeding
pending or, to the knowledge of CNB, threatened, against CNB or any of its
subsidiaries, or of which the property of CNB or any of its subsidiaries is or
would be subject which if adversely determined would have a material adverse
effect on the business of CNB and its subsidiaries taken as a whole.
SECTION 3.07. COMPLIANCE WITH LAW. CNB and its significant subsidiaries
have all licenses, franchises, permits and other governmental authorizations
that are legally required to enable them to conduct their respective businesses
in all material respects and are in compliance in all material respects with all
applicable laws and regulations.
SECTION 3.08. STATEMENTS TRUE AND CORRECT. None of the information supplied
or to be supplied by CNB for inclusion in (i) the Registration Statement, (ii)
the Prospectus/Proxy Statement, (iii) any other documents to be filed with the
SEC or any banking or other regulatory authority in connection with the
transactions contemplated hereby, and (iv) any other documents to be filed by
CNB under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
between the date hereof and the Closing Date, will, at the respective times such
documents are filed, and, in the case of the Registration Statement, when it
becomes effective, and with respect to the Prospectus/Proxy Statement, when
first mailed to the stockholders of Orleans, be false or misleading with respect
to any material fact, or omit to state any material fact necessary in order to
make the statements therein not misleading, or, in the case of the
Prospectus/Proxy Statement or any amendment thereof or supplement thereto, at
the time of the Stockholders' Meeting, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for the Stockholders' Meeting. All documents that CNB is responsible for
filing with the SEC or any other regulatory authority in connection with the
transactions contemplated hereby will comply as to form in all material respects
with the provisions of applicable law and any rules and regulations thereunder.
ARTICLE FOUR
------------
AGREEMENTS OF ORLEANS
---------------------
SECTION 4.01. BUSINESS IN ORDINARY COURSE.
(a) Orleans shall not declare or pay any dividend or make any other
distribution to shareholders, whether in cash, stock or other property, after
the date of this Agreement, except that Orleans may declare and pay its regular
annual dividend on the Orleans Common for 1994 not to exceed $2.50 per share at
approximately the same time during 1994 which it has historically declared and
paid such annual dividend; provided, however, that, if the Effective Time shall
not have occurred by March 15, 1995 (which is the record date for CNB's first
quarter 1995 dividend), Orleans may thereafter declare and pay a quarterly
dividend (including a first quarter 1995 dividend) on the Orleans Common at the
same time as the quarterly dividends declared and paid by CNB and in the per
share amount Orleans stockholders would have received had the Effective Time
been immediately before such dividend payment; and provided further, however,
that Orleans and CNB shall cooperate with each other to
A-12
<PAGE>
coordinate the record and payment dates of their respective dividends for the
quarter in which the Effective Time occurs such that the Orleans shareholders
shall receive a quarterly dividend from either Orleans or CNB but not from both
with respect to such quarter.
(b) Orleans shall continue to carry on, after the date hereof, its business
and the discharge or incurrence of obligations and liabilities, only in the
usual, regular and ordinary course of business, as heretofore conducted, and by
way of amplification and not limitation, Orleans will not, without the prior
written consent of CNB (which shall not be unreasonably withheld):
(i) issue any Orleans Common or other capital stock or any options,
warrants, or other rights to subscribe for or purchase Orleans Common or any
other capital stock or any securities convertible into or exchangeable for
any capital stock; or
(ii) directly or indirectly redeem, purchase or otherwise acquire
any Orleans Common or any other capital stock of Orleans; or
(iii) effect a reclassification, recapitalization, splitup,
exchange of shares, readjustment or other similar change in or to any
capital stock or otherwise reorganize or recapitalize; or
(iv) change its articles of incorporation or association or bylaws; or
(v) grant any increase (other than ordinary and normal increases
consistent with past practices) in the compensation payable or to become
payable to officers or salaried employees, grant any stock options or,
except as required by law, adopt or make any change in any bonus, insurance,
pension, or other Employee Plan, payment or arrangement made to, for or with
any of such officers or employees; or
(vi) borrow or agree to borrow funds except in the ordinary course
of business, or directly or indirectly guarantee or agree to guarantee any
obligations of others; or
(vii) make or commit to make any new loan or letter of credit or
any new or additional discretionary advance under any existing line of
credit, in principal amounts in excess of $125,000 or that would increase
the aggregate credit outstanding to any one borrower (or group of affiliated
borrowers) to more than $125,000 (excluding for this purpose any accrued
interest or overdrafts), without the prior written consent of CNB; or
(viii) purchase or otherwise acquire any investment security for
its own account having an average remaining life to maturity greater than
five years or any asset-backed securities other than those issued or
guaranteed by the Government National Mortgage Association, the Federal
National Mortgage Association or the Federal Home Loan Mortgage Corporation;
or
(ix) increase or decrease the rate of interest paid on time
deposits, or on certificates of deposit, except in a manner and pursuant to
policies consistent with past practices; or
(x) enter into any agreement, contract or commitment out of the
ordinary course of business or having a term in excess of three months other
than letters of credit, loan agreements,
A-13
<PAGE>
deposit agreements, and other lending, credit and deposit agreements and
documents made in the ordinary course of business; or
(xi) except in the ordinary course of business, place on any of its
assets or properties any mortgage, pledge, lien, charge, or other
encumbrance; or
(xii) except in the ordinary course of business, cancel or
accelerate any indebtedness owing to Orleans or any claims which Orleans may
possess or waive any rights of substantial value; or
(xiii) sell or otherwise dispose of any real property or any
material amount of any tangible or intangible personal property other than
properties acquired in foreclosure or otherwise in the ordinary collection
of indebtedness to Orleans; or
(xiv) foreclose upon or otherwise take title to or possession or
control of any real property without first obtaining a phase one
environmental report thereon which indicates that the property is free of
pollutants, contaminants or hazardous or toxic waste materials; provided,
however, that Orleans shall not be required to obtain such a report with
respect to single family, non-agricultural residential property of one acre
or less to be foreclosed upon unless it has reason to believe that such
property might contain any such waste materials or otherwise might be
contaminated; or
(xv) commit any act or fail to do any act which will cause a breach
of any agreement, contract or commitment and which will have a material
adverse effect on Orleans' business, financial condition, or earnings; or
(xvi) violate any law, statute, rule, governmental regulation, or
order, which violation might have a material adverse effect on Orleans'
business, financial condition, or earnings; or
(xvii) purchase any real or personal property or make any other
capital expenditure where the amount paid or committed therefor is in excess
of $10,000.
(c) Orleans shall not, without the prior written consent of CNB, engage in
any transaction or take any action that would render untrue in any material
respect any of the representations and warranties of Orleans contained in
Article Two hereof, if such representations and warranties were given as of the
date of such transaction or action.
(d) Orleans shall promptly notify CNB in writing of the occurrence of any
matter or event known to and directly involving Orleans that is materially
adverse to the business, operations, properties, assets, or condition (financial
or otherwise) of Orleans.
(e) Orleans shall not, on or before the earlier of the Closing Date or the
date of termination of this Agreement, solicit, encourage or hold discussions or
negotiations with or provide any information to, any person in connection with,
any proposal from any person for the acquisition of all or any substantial
portion of the business, assets, shares of Orleans Common or other securities of
Orleans. Orleans shall promptly advise CNB of its receipt of any such proposal
or inquiry concerning any possible such proposal, and the substance of such
proposal or inquiry.
A-14
<PAGE>
SECTION 4.02. BREACHES. Orleans shall, in the event it has knowledge of the
occurrence, or impending or threatened occurrence, of any event or condition
which would cause or constitute a breach (or would have caused or constituted a
breach had such event occurred or been known prior to the date hereof) of any of
its representations or agreements contained or referred to herein, give prompt
written notice thereof to CNB and use its best efforts to prevent or promptly
remedy the same.
SECTION 4.03. SUBMISSION TO SHAREHOLDERS. Orleans shall cause to be duly
called and held, on a date mutually selected by CNB and Orleans, a special
meeting of its shareholders (the "Stockholders' Meeting") for submission of this
Agreement and the Merger for approval of such shareholders as required by the
Corporate Law. In connection with the Stockholders' Meeting, (i) Orleans shall
cooperate and assist CNB in preparing and filing a Prospectus/Proxy Statement
(the "Prospectus/Proxy Statement") with the SEC and Orleans shall mail it to its
stockholders, (ii) Orleans shall furnish CNB all information concerning itself
that CNB may reasonably request in connection with such Prospectus/Proxy
Statement, and (iii) the Board of Directors of Orleans shall (subject to
compliance with its fiduciary duties as advised by counsel) recommend to its
stockholders the approval of this Agreement and the Merger contemplated hereby
and use its best efforts to obtain such stockholder approval.
SECTION 4.04. CONSENTS TO CONTRACTS AND LEASES. Orleans shall use its best
efforts to obtain all necessary consents with respect to all interests of
Orleans in any leases, licenses, contracts, instruments and rights which require
the consent of another person for their transfer or assumption pursuant to the
Merger, if any.
SECTION 4.05. CONFORMING ACCOUNTING AND RESERVE POLICIES; RESTRUCTURING
EXPENSES.
(a) Notwithstanding that Orleans believes that it has established all
reserves and taken all provisions for possible loan losses required by GAAP and
applicable laws, rules and regulations, Orleans recognizes that CNB has adopted
different loan, accrual and reserve policies (including loan classifications and
levels of reserves for possible loan losses). From and after the date of this
Agreement to the Effective Time, Orleans and CNB shall consult and cooperate
with each other with respect to conforming, as specified in a written notice
from CNB to Orleans, based upon such consultation and as hereinafter provided,
Orleans' loan, accrual and reserve policies to those policies of CNB.
(b) In addition, from and after the date of this Agreement to the Effective
Time, Orleans and CNB shall consult and cooperate with each other with respect
to determining, as specified in a written notice from CNB to Orleans, based upon
such consultation and as hereinafter provided, appropriate accruals, reserves
and charges to establish and take in respect of excess equipment write-off or
write-down of various assets and other appropriate charges and accounting
adjustments taking into account the parties' business plans following the
Merger.
(c) Orleans and CNB shall consult and cooperate with each other with respect
to determining, as specified in a written notice from CNB to Orleans, based upon
such consultation and as hereinafter provided, the amount and the timing for
recognizing for financial accounting purposes the expenses of the Merger and the
restructuring charges related to or to be incurred in connection with the
Merger.
(d) At the request of CNB, Orleans shall, on or before December 31, 1994,
establish and take such reserves and accruals as CNB shall request to conform
Orleans' loan, accrual and reserve policies to CNB's policies, shall establish
and take such accruals, reserves and charges in order to implement such
A-15
<PAGE>
policies in respect of excess facilities and equipment capacity, severance
costs, litigation matters, write-off or write-down of various assets and other
appropriate accounting adjustments, and to recognize for financial accounting
purposes such expenses of the Merger and restructuring charges related to or to
be incurred in connection with the Merger; provided, however, that Orleans shall
not be required to take any such action that is not consistent with GAAP.
SECTION 4.06. CONSUMMATION OF AGREEMENT. Orleans shall use its best efforts
to perform and fulfill all conditions and obligations on its part to be
performed or fulfilled under this Agreement and to effect the Merger in
accordance with the terms and provisions hereof. Orleans shall furnish to CNB
in a timely manner all information, data and documents in the possession of
Orleans requested by CNB as may be required to obtain any necessary regulatory
or other approvals of the Merger or to file with the SEC a registration
statement on Form S-4 (the "Registration Statement") relating to the shares of
CNB Common to be issued to the shareholders of Orleans pursuant to the Merger
and this Agreement and shall otherwise cooperate fully with CNB to carry out the
purpose and intent of this Agreement.
SECTION 4.07. ENVIRONMENTAL INVESTIGATION AND REMEDIATION. Orleans shall
take or cause to be taken, prior to the Closing Date, all remedial and
corrective actions and measures (i) required by applicable law, or (ii)
recommended or suggested by American Environmental Corporation ("AEC") as a
result of its environmental investigation conducted on October 12-14, 1994, with
respect to the three parcels of real estate in Orleans, Indiana commonly known
as Lots 139, 141 and 142. Orleans shall, on or before December 31, 1994, accrue
the cost of all environmental investigations obtained pursuant to this Section
4.07 and the cost of taking all remedial and corrective actions and measures
described in the immediately preceding sentence and, notwithstanding anything
herein to the contrary, such accrual shall not be deemed to have been made
pursuant to Section 4.05 hereof. Should the cost of taking all remedial and
corrective actions and measures described in the first sentence of this Section
4.07 exceed the sum of $400,000 as reasonably estimated by AEC or another
environmental expert retained for such purpose by CNB and reasonably acceptable
to Orleans, or if the cost of such actions and measures cannot be so reasonably
estimated by such expert to be $400,000 or less with any reasonable degree of
certainty, then CNB shall have the right pursuant to Section 7.09 hereof, for a
period of ten business days following receipt of such estimate or indication
that the cost of such actions and measures can not be so reasonably estimated,
to terminate this Agreement, which shall be CNB's sole remedy in such event.
SECTION 4.08. RESTRICTION ON RESALES. Orleans shall obtain and deliver to
CNB, at least 31 days prior to the Closing Date, signed representations, in the
form attached hereto as Exhibit 4.08, of each stockholder who may reasonably be
deemed an "affiliate" of Orleans within the meaning of such term as used in Rule
145 under the Securities Act of 1933, as amended (the "Securities Act"),
regarding (i) compliance with the provisions of such Rule 145, and (ii)
compliance with the requirements of Accounting Principles Board Opinion 16
regarding disposition of shares of Orleans Common or CNB Common (or reduction of
risk with respect thereto) until such time as financial results covering at
least 30 days of post-Merger combined operations have been published.
SECTION 4.09. ACCESS TO INFORMATION. Orleans shall permit CNB reasonable
access in a manner which will avoid undue disruption or interference with
Orleans' normal operations to its properties and shall disclose and make
available to CNB all books, documents, papers and records relating to its
assets, stock, ownership, properties, operations, obligations and liabilities,
including, but not limited to, all books of account (including the general
ledger), tax records, minute books of directors' and stockholders' meetings,
organizational documents, material contracts and agreements, loan files, filings
with any
A-16
<PAGE>
regulatory authority, accountants' workpapers (if available and subject to the
respective independent accountants' consent), litigation files, plans affecting
employees, and any other business activities or prospects in which CNB may have
a reasonable and legitimate interest in furtherance of the transactions
contemplated by this Agreement. CNB will hold any such information which is
nonpublic in confidence in accordance with the provisions of Section 8.01
hereof.
SECTION 4.10. DIVESTITURE OF STRUCTURED NOTES. On or before December 31,
1994, at CNB's request, Orleans shall sell, upon terms satisfactory to CNB,
those certain structured notes identified in the Orleans Financial Statements in
the approximate face amount of $2,200,000 (the "Structured Notes") in an all
cash transaction in which Orleans shall not accept any contingent payout
arrangement or extend any loan, letter of credit or other financing or credit
arrangement to the purchaser of the Structured Notes (the "Structured Notes
Divestiture").
SECTION 4.11. EXPENSE REPORT. Orleans shall submit to CNB, not later than
fifteen days after the end of each month, a monthly report (in a form and with
such specificity as is reasonably satisfactory to CNB) detailing all
expenditures resulting from the extraordinary, non-recurring costs associated
with the transactions contemplated by this Agreement, including but not limited
to legal and accounting fees, which have been incurred or otherwise accrued by
Orleans during the preceding month.
ARTICLE FIVE
------------
AGREEMENTS OF CNB
-----------------
SECTION 5.01. REGULATORY APPROVALS AND REGISTRATION STATEMENT. CNB shall
file all regulatory applications required in order to consummate the Merger,
including but not limited to the necessary applications for the prior approval
of the Federal Reserve Board, the FDIC and the IDFI. CNB shall keep Orleans
reasonably informed as to the status of such applications and shall deliver
copies of such applications and any supplementally filed materials to Orleans
promptly upon the filing thereof. CNB shall file with the SEC the Registration
Statement relating to the shares of CNB Common to be delivered to the
stockholders of Orleans pursuant to this Agreement, and shall use its best
efforts to cause the Registration Statement to become effective. CNB shall
deliver a copy of the Registration Statement to Orleans promptly after it is
filed with the SEC. At the time the Registration Statement becomes effective,
the Registration Statement shall comply in all material respects with the
provisions of the Securities Act and the published rules and regulations
thereunder, and shall not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not false or misleading, and at the time of mailing
thereof to the stockholders of Orleans, at the time of the Stockholders' Meeting
and at the Effective Time the Prospectus/Proxy Statement included as part of the
Registration Statement, as amended or supplemented by any amendment or
supplement, shall not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not false or
misleading. CNB shall timely file all documents required to obtain all
necessary Blue Sky permits and approvals, if any, required to carry out the
transactions contemplated by this Agreement, shall pay all expenses incident
thereto and shall use its best efforts to obtain such permits and approvals on a
timely basis. CNB shall promptly and properly prepare and file any other
filings required under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") relating to the Merger and the transactions contemplated herein.
A-17
<PAGE>
SECTION 5.02. BREACHES. CNB shall, in the event it has knowledge of the
occurrence, or impending or threatened occurrence, of any event or condition
which would cause or constitute a breach (or would have caused or constituted a
breach had such event occurred or been known prior to the date hereof) of any of
its representations or agreements contained or referred to herein, give prompt
written notice thereof to Orleans and use its best efforts to prevent or
promptly remedy the same.
SECTION 5.03. CONSUMMATION OF AGREEMENT. CNB shall use its best efforts to
perform and fulfill all conditions and obligations on its part to be performed
or fulfilled under this Agreement, to assist Orleans with the Structured Notes
Divestiture and to effect the Merger in accordance with the terms and conditions
of this Agreement.
SECTION 5.04. DIRECTORS' AND OFFICERS' LIABILITY INSURANCE AND
INDEMNIFICATION.
(a) Following the Effective Time, CNB will provide the directors and
officers of Orleans with the same directors' and officers' liability insurance
coverage that CNB provides to directors and officers of its other banking
subsidiaries generally. CNB shall use its best efforts (which shall not be
deemed to require, however, the payment of any special premium or other charge
or expense) to obtain an endorsement to its directors' and officers' liability
insurance policy to cover acts and omissions of the directors and officers of
Orleans occurring or failing to occur prior to the Closing Date; provided,
however, that if CNB is unable to obtain such endorsement, then Orleans may
purchase tail coverage under its existing director's and officer's liability
insurance on such terms and provisions as Orleans deems appropriate.
(b) For six years after the Effective Time, CNB shall cause the surviving
bank of the Merger of Orleans and Interim Bank following the Effective Time (the
"Surviving Bank") to indemnify, defend and hold harmless the present and former
officers, directors, employees and agents of Orleans (each, an "Indemnified
Party") against all losses, expenses, claims, damages or liabilities arising out
of actions or omissions occurring on or prior to the Effective Time (including,
without limitation, the transactions contemplated by this Agreement) to the full
extent then permitted under the Corporate Law and by Orleans' Certificate of
Incorporation as in effect on the date hereof, including provisions relating to
advances of expenses incurred in the defense of any action or suit.
(c) If after the Effective Time the Surviving Bank or any of its successors
or assigns (i) shall consolidate with or merge into any other bank or entity and
shall not be the continuing or surviving bank or entity of such consolidation or
merger or (ii) shall transfer all or substantially all of its properties and
assets to any individual, corporation or other entity, then and in each such
case, proper provision shall be made so that the successors and assigns of the
Surviving Bank shall assume any remaining obligations set forth in this Section
5.04. If the Surviving Bank shall liquidate, dissolve or otherwise wind up its
business, then CNB shall indemnify, defend and hold harmless each Indemnified
Party to the same extent and on the same terms that the Surviving Bank was so
obligated pursuant to this Section 5.04.
SECTION 5.05. EMPLOYEE BENEFITS. CNB shall, with respect to each person who
remains an employee of Orleans following the Closing Date (each a "Continued
Employee"), provide the benefits described in this Section 5.05. Subject to the
right of subsequent amendment or termination in CNB discretion, each Continued
Employee shall be entitled, as a new employee of a subsidiary or subsidiaries of
CNB, to participate in whatever employee benefit plans, as defined in Section
3(3) of ERISA, or any non-qualified employee benefit plans or deferred
compensation, stock option, bonus or incentive plans
A-18
<PAGE>
or other employee benefit or fringe benefit programs that may be in effect
generally for employees of CNB's subsidiaries from time to time (the "CNB
Plans"), if and as a Continued Employee shall be eligible or selected for
participation therein and otherwise shall not be participating in a similar plan
maintained by Orleans after the Effective Time. For this purpose, the defined
benefit pension plan sponsored by CNB and the 401(k) Plan sponsored by Orleans
shall not constitute similar plans. Orleans employees will be eligible to
participate on the same basis as similarly situated employees of other CNB
subsidiaries. All such participation shall be subject to such terms of such
plans as may be in effect from time to time and this Section 5.05 is not
intended to give Continued Employees any rights or privileges superior to those
of other employees of CNB's subsidiaries. CNB may terminate or modify all
Employee Plans except insofar as benefits thereunder shall have vested on the
closing date and cannot be modified and CNB's obligation under this Section 5.05
shall not be deemed or construed so as to provide duplication of similar
benefits but, subject to that qualification, CNB shall, for purposes of vesting
and eligibility to begin participation with respect to any CNB Plans in which
Continued Employees may participate, credit each Continued Employee with his or
her term of service with Orleans. Notwithstanding the foregoing, (A) in the
case of vacation days, each Continued Employee shall be entitled to such number
of vacation days as equals the greater of (i) the number of vacation days he or
she had earned, as of the Effective Time, under the Orleans vacation policy or
(ii) the number of vacation days he or she would have earned, as of the
Effective Time, had the Orleans vacation policy been identical to the vacation
policy for CNB's subsidiaries, and (B) CNB shall cause Orleans, for so long as
the 401(k) Plan sponsored by Orleans shall continue in effect after the Closing
Date, to continue making contributions to such 401(k) Plan at the same times and
in the same amounts which it has historically made such contributions, provided
such contributions shall be in accordance with the written terms of such 401(k)
Plan as in effect on the date hereof.
ARTICLE SIX
-----------
CONDITIONS PRECEDENT TO THE MERGER
----------------------------------
SECTION 6.01. CONDITIONS TO CNB'S OBLIGATIONS. CNB's obligations to effect
the Merger shall be subject to the satisfaction (or waiver by CNB) prior to or
on the Closing Date of the following conditions:
(a) The representations and warranties made by Orleans in this Agreement
shall be true in all material respects on and as of the Closing Date with the
same effect as though such representations and warranties had been made or given
on and as of the Closing Date;
(b) Orleans shall have performed and complied in all material respects with
all of its obligations and agreements required to be performed prior to the
Closing Date under this Agreement;
(c) No temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal
restraint or prohibition (an "Injunction") preventing the consummation of the
Merger shall be in effect, nor shall any proceeding by any bank regulatory
authority or other person seeking any of the foregoing be pending. There shall
not be any action taken, or any statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to the Merger which makes the
consummation of the Merger illegal;
A-19
<PAGE>
(d) All necessary regulatory approvals, consents, authorizations and other
approvals required by law for consummation of the Merger shall have been
obtained and all waiting periods required by law shall have expired;
(e) Orleans shall have taken all remedial and corrective actions and
measures required by Section 4.07 hereof;
(f) CNB shall have received all documents required to be received from
Orleans on or prior to the Closing Date, all in form and substance reasonably
satisfactory to CNB;
(g) CNB shall have received a letter, dated as of the Closing Date, from
George S. Olive & Co., its independent public accountants, to the effect that
the Merger will qualify for pooling of interests accounting treatment under
Accounting Principles Board Opinion No. 16 if closed and consummated in
accordance with this Agreement;
(h) The Registration Statement shall be effective under the Securities Act
and no stop orders suspending the effectiveness of the Registration Statement
shall be in effect or proceedings for such purpose pending before or threatened
by the SEC; and
(i) CNB shall have received from its counsel an opinion to the effect that
if the Merger is consummated in accordance with the terms set forth in this
Agreement, (i) the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code; (ii) no gain or loss will be recognized by the
holders of shares of Orleans Common upon receipt of Merger Consideration (except
for cash received in lieu of fractional shares); (iii) the basis of shares of
CNB Common received by the stockholders of Orleans will be the same as the basis
of shares of Orleans Common exchanged therefor; and (iv) the holding period of
the shares of CNB Common received by the stockholders of Orleans will include
the holding period of the shares of Orleans Common exchanged therefor, provided
such shares were held as capital assets as of the Effective Time.
SECTION 6.02. CONDITIONS TO ORLEANS' OBLIGATIONS. Orleans' obligation to
effect the Merger shall be subject to the satisfaction (or waiver by Orleans)
prior to or on the Closing Date of the following conditions:
(a) The representations and warranties made by CNB in this Agreement shall
be true in all material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made or given on
the Closing Date;
(b) CNB shall have performed and complied in all material respects with all
of its obligations and agreements hereunder required to be performed prior to
the Closing Date under this Agreement;
(c) No Injunction preventing the consummation of the Merger shall be in
effect, nor shall any proceeding by any bank regulatory authority or other
governmental agency seeking any of the foregoing be pending. There shall not be
any action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Merger which makes the consummation of the
Merger illegal;
A-20
<PAGE>
(d) All necessary regulatory approvals, consents, authorizations and other
approvals, including the requisite approval of this Agreement and the Merger by
the shareholders of Orleans, required by law for consummation of the Merger
shall have been obtained and all waiting periods required by law shall have
expired;
(e) Orleans shall have received all documents required to be received from
CNB on or prior to the Closing Date, all in form and substance reasonably
satisfactory to Orleans;
(f) The Registration Statement shall be effective under the Securities Act
and no stop orders suspending the effectiveness of the Registration Statement
shall be in effect or proceedings for such purpose pending before or threatened
by the SEC;
(g) Orleans shall have received from counsel for CNB an opinion in form and
substance reasonably satisfactory to Orleans and its counsel to the effect that
if the Merger is consummated in accordance with the terms set forth in this
Agreement, (i) the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code; (ii) no gain or loss will be recognized by the
holders of shares of Orleans Common upon receipt of Merger Consideration (except
for cash received in lieu of fractional shares); (iii) the basis of CNB Common
received by the stockholders of Orleans will be the same as the basis of Orleans
Common exchanged therefor; and (iv) the holding period of the shares of CNB
Common received by the stockholders of Orleans will include the holding period
of the shares of Orleans Common exchanged therefor, provided such shares were
held as capital assets as of the Effective Time; and
(h) That certain opinion of Orleans' investment banker, David A. Noyes &
Company, originally rendered and delivered to Orleans as of the date hereof, to
the effect that the transaction contemplated hereby is fair to the Orleans
shareholders from a financial point of view, shall not have been withdrawn by
such investment banker on or before the date of the mailing of the
Prospectus/Proxy Statement.
ARTICLE SEVEN
-------------
TERMINATION OR ABANDONMENT
--------------------------
SECTION 7.01. MUTUAL AGREEMENT. This Agreement may be terminated by the
mutual written agreement of the parties at any time prior to the Closing Date,
regardless of whether shareholder approval of this Agreement and the Merger by
the shareholders of Orleans shall have been previously obtained.
SECTION 7.02. BREACH OF AGREEMENTS. In the event that there is a material
breach in any of the representations and warranties or agreements of CNB or
Orleans, which breach is not cured within 30 days after notice to cure such
breach is given by the non-breaching party, then the non-breaching party,
regardless of whether shareholder approval of this Agreement and the Merger
shall have been previously obtained, may terminate and cancel this Agreement by
providing written notice of such action to the other party hereto.
SECTION 7.03. FAILURE OF CONDITIONS. In the event any of the conditions to
the obligations of either party are not satisfied or waived on or prior to the
Closing Date, and if any applicable cure period
A-21
<PAGE>
provided in Section 7.02 hereof has lapsed, then such party may, regardless of
whether shareholder approval of this Agreement and the Merger shall have been
previously obtained, terminate and cancel this Agreement by delivery of written
notice of such action to the other party on such date.
SECTION 7.04. APPROVAL DENIAL. If any regulatory application filed pursuant
to Section 5.01 hereof should be finally denied or disapproved by the respective
regulatory authority, then this Agreement thereupon shall be deemed terminated
and canceled. It is understood, however, that a request for additional
information or undertaking by CNB, as a condition for approval, shall not be
deemed to be a denial or disapproval so long as CNB diligently provides the
requested information or undertaking. In the event an application is denied
pending an appeal, petition for review, or similar such act on the part of CNB
(hereinafter referred to as the "appeal") then the application will be deemed
denied unless CNB prepares and timely files such appeal and continues the
appellate process for purposes of obtaining the necessary approval.
SECTION 7.05. SHAREHOLDER APPROVAL DENIAL. If the Merger is not approved by
the requisite vote of the stockholders of Orleans at the Stockholders' Meeting,
then either party may terminate this Agreement.
SECTION 7.06. REGULATORY ENFORCEMENT MATTERS. In the event that Orleans
shall become a party or subject to any written agreement, memorandum of
understanding, cease and desist order, imposition of civil money penalties or
other regulatory enforcement action or proceeding with any federal or state
agency charged with the supervision or regulation of banks after the date of
this Agreement, then CNB may terminate this Agreement.
SECTION 7.07. TERMINATION DATE. If the Closing Date does not occur on or
prior to July 31, 1995, then this Agreement may be terminated by either party by
giving written notice to the other.
SECTION 7.08. TERMINATION FEE. Upon the occurrence of one or more of the
following events (a "Triggering Event"), Orleans shall pay to CNB the sum of
$500,000:
(a) upon termination of this Agreement by CNB pursuant to Section 7.02
hereof (including, without limitation, the entering into of an agreement between
Orleans and any third party which is inconsistent with the transactions
contemplated by this Agreement or the Merger Agreement), provided that within
one (1) year of the date of such termination, either an event described in
clauses (c) or (d) below shall have occurred or Orleans or shareholders of
Orleans shall have entered into an agreement with any third party whereby such
third party will acquire, merge or consolidate with Orleans, purchase all or
substantially all of Orleans' assets or acquire 50% or more of the outstanding
shares of Orleans Common;
(b) the failure of Orleans' stockholders to approve the Merger and this
Agreement at the Stockholder's Meeting;
(c) any person or group of persons (other than CNB) shall acquire, or have
the right to acquire, 50% or more of the Orleans Common, exclusive of shares of
Orleans Common sold directly or indirectly to such person or group of persons by
CNB;
A-22
<PAGE>
(d) expiration of the fifth (5th) day preceding the scheduled expiration
date of a tender or exchange offer by any person or group of persons (other than
CNB and/or its affiliates) to purchase or acquire securities of Orleans if upon
consummation of such offer, such person or group of persons would own, control
or have the right to acquire 50% or more of the Orleans Common; or
(e) upon the entry by Orleans into an agreement or other understanding with
a person or group of persons (other than CNB and/or its affiliates) for such
person or group of persons to acquire, merge or consolidate with Orleans or to
purchase all or substantially all of Orleans' assets.
As used in this Section 7.08, "person" and "group of persons" shall have the
meanings conferred thereon by Section 13(d) of the Exchange Act. Orleans shall
notify CNB promptly in writing upon its becoming aware of the occurrence of any
Triggering Event.
SECTION 7.09. ENVIRONMENTAL MATTERS. CNB may terminate this Agreement to
the extent provided by Section 4.07 hereof and this Section 7.09 by giving
written notice thereof to Orleans.
ARTICLE EIGHT
-------------
GENERAL
-------
SECTION 8.01. CONFIDENTIAL INFORMATION. The parties acknowledge the
confidential and proprietary nature of the "Information" (as hereinafter
described) which has heretofore been exchanged and which will be received from
each other hereunder and agree to hold and keep the same confidential. Such
Information will include any and all financial, technical, commercial,
marketing, customer or other information concerning the business, operations and
affairs of a party that may be provided to the other, irrespective of the form
of the communications, by such party's employees or agents. Such Information
shall not include information which is or becomes generally available to the
public other than as a result of a disclosure by a party or its representatives
in violation of this Agreement. The parties agree that the Information will be
used solely for the purposes contemplated by this Agreement and that such
Information will not be disclosed to any person other than employees and agents
of a party who are directly involved in evaluating the transaction. The
Information shall not be used in any way detrimental to a party, including use
directly or indirectly in the conduct of the other party's business or any
business or enterprise in which such party may have an interest, now or in the
future, and whether or not now in competition with such other party.
SECTION 8.02. PUBLICITY. CNB and Orleans shall cooperate with each other in
the development and distribution of all news releases and other public
disclosures concerning this Agreement and the Merger and shall not issue any
news release or make any other public disclosure without the prior consent of
the other party, unless such is required by law upon the written advice of
counsel or is in response to published newspaper or other mass media reports
regarding the transaction contemplated hereby, in which such latter event the
parties shall consult with each other regarding such responsive public
disclosure.
SECTION 8.03. RETURN OF DOCUMENTS. Upon termination of this Agreement
without the Merger becoming effective, each party shall deliver to the other
originals and all copies of all Information made available to such party and
will not retain any copies, extracts or other reproductions in whole or in part
of such Information.
A-23
<PAGE>
SECTION 8.04. NOTICES. Any notice or other communication given by a party
to the other party hereunder shall be in writing and shall be deemed to have
been given or made on the date of delivery, in the case of hand delivery, or
three business days after deposit in the United States Registered or Certified
Mail, postage prepaid, or upon receipt if transmitted by facsimile telecopy or
any other means, addressed (in any case) as follows:
(a) if to CNB:
CNB Bancshares, Inc.
20 N.W. Third Street
Evansville, Indiana 47739
Attention: H. Lee Cooper
Chief Executive Officer
Telecopy No. (812) 464-3496
with a copy to:
Lewis, Rice & Fingersh
611 Olive Street, Suite 1400
St. Louis, Missouri 63101
Attention: Thomas C. Erb, Esq.
Telecopy No. (314) 444-7788
and
(b) if to Orleans:
The Bank of Orleans
200 S. Washington
Orleans, Indiana 47452
Attention: William H. Tegarden
Chief Executive Officer
Telecopy No. (812) 865-2374
with copies to:
Krieg, Devault, Alexander and Capehart
One Indiana Square, Suite 2800
Indianapolis, Indiana 46204
Attention: Stephen D. Smith, Esq.
Telecopy No. (317) 636-1507
or to such other address as any party may from time to time designate by notice
to the others.
SECTION 8.05. LIABILITIES. Except as provided in Section 7.08 hereof, in
the event that this Agreement is terminated pursuant to the provisions of
Article Seven hereof, no party hereto shall have any liability to any other
party for costs, expenses, damages or otherwise; provided, however, that,
A-24
<PAGE>
notwithstanding the foregoing, in the event that this Agreement is terminated
pursuant to Section 7.02 hereof on account of a willful breach of any of the
representations and warranties set forth herein or any breach of any of the
agreements set forth herein, then the non-breaching party shall be entitled to
recover appropriate damages from the breaching party.
SECTION 8.06. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except for and
as provided in this Section 8.06, no representation, warranty or agreement
contained in this Agreement shall survive the Effective Time or the earlier
termination of this Agreement. The agreements set forth in Sections 1.08, 5.04
and 5.05 shall survive the Effective Time and the agreements set forth in
Sections 7.08, 8.01, 8.02, 8.03 and 8.05 shall survive the Effective Time or the
earlier termination of this Agreement.
SECTION 8.07. ENTIRE AGREEMENT. This Agreement, including all schedules and
exhibits hereto, constitutes the entire agreement between the parties and
supersedes and cancels any and all prior discussions, negotiations, undertakings
and agreements between the parties relating to the subject matter hereof.
SECTION 8.08. HEADINGS AND CAPTIONS. The captions of Articles and Sections
hereof are for convenience only and shall not control or affect the meaning or
construction of any of the provisions of this Agreement.
SECTION 8.09. WAIVER, AMENDMENT OR MODIFICATION. The conditions of this
Agreement which may be waived may only be waived by notice to the other party
waiving such condition. The failure of any party at any time or times to
require performance of any provision hereof shall in no manner affect the right
at a later time to enforce the same. This Agreement may not be amended or
modified except by a written document duly executed by the parties hereto.
SECTION 8.10. RULES OF CONSTRUCTION. Unless the context otherwise requires:
(a) a term has the meaning assigned to it; (b) an accounting term not otherwise
defined has the meaning assigned to it in accordance with GAAP; (c) "or" is not
exclusive; and (d) words in the singular may include the plural and in the
plural include the singular.
SECTION 8.11. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which shall
be deemed one and the same instrument.
SECTION 8.12. SUCCESSORS. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors. Except for
the shareholders of Orleans pursuant to and as contemplated by Section 1.08(b)
and (d) hereof, there shall be no third party beneficiaries hereof.
SECTION 8.13. GOVERNING LAW; ASSIGNMENT. This Agreement shall be governed
by the laws of the State of Indiana and applicable federal laws and regulations.
This Agreement may not be assigned by either of the parties hereto.
A-25
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
CNB BANCSHARES, INC.
By /s/ H. Lee Cooper III
-----------------------------
THE BANK OF ORLEANS
By:/s/ William H. Tegarden
-----------------------------
A-26
<PAGE>
Exhibit 1.02
------------
AGREEMENT AND PLAN OF MERGER
OF
ORLEANS INTERIM BANK
WITH AND INTO
THE BANK OF ORLEANS
This is an AGREEMENT AND PLAN OF MERGER (this "Agreement") made ___________,
19__, by and between ORLEANS INTERIM BANK, an Indiana state chartered bank
("Interim Bank"), and THE BANK OF ORLEANS, an Indiana state chartered bank
("Orleans"), and joined into by CNB Bancshares, Inc., an Indiana corporation
("CNB").
This Agreement is being entered into pursuant to that certain Agreement and
Plan of Reorganization, dated as of October 18, 1994, by and between CNB and
Orleans (the "Reorganization Agreement") which is incorporated herein by
reference.
In consideration of the premises and the mutual terms and provisions set
forth in this Agreement, the parties agree as follows.
SECTION 1.
---------
Subject to the terms of the Reorganization Agreement, Interim Bank shall merge
with and into Orleans (the "Merger"). Orleans shall be the surviving entity of
such Merger ("Resulting Bank").
SECTION 2.
---------
The name of Resulting Bank shall be "Citizens Bank of Orleans" and the Articles
of Incorporation shall be amended, as of the Closing Date (as defined in the
Reorganization Agreement) to evidence such change.
SECTION 3.
---------
As of the Effective Time (as defined in the Reorganization Agreement), the
Articles of Incorporation of Resulting Bank shall be amended and restated to
read in its entirety as set forth on Exhibit A attached hereto, and the Bylaws
of Orleans as in effect immediately prior to the Effective Time shall be the
Bylaws of Resulting Bank.
A-Ex.1.02-1
<PAGE>
SECTION 4.
---------
The business of Resulting Bank shall be that of an Indiana state chartered bank.
This business shall be conducted by Resulting Bank at its main office which
shall be located at the existing main office location of Orleans, and at its
legally established branches.
SECTION 5.
---------
The number of directors which Resulting Bank shall have shall be _____, the
terms which the directors shall serve shall be as provided in Orleans' Bylaws or
until their respective successors are duly elected and qualified, and the
directors who shall serve as of the Effective Time of the Merger shall be as
follows:
NAME ADDRESS
---- -------
SECTION 6.
---------
At the Effective Time, Resulting Bank shall be considered the same business and
corporate entity as each of Interim Bank and Orleans (collectively, the
"Constituent Banks") and thereupon and thereafter all the property, rights,
privileges, powers and franchises of each of the Constituent Banks shall vest in
Resulting Bank and Resulting Bank shall be subject to and be deemed to have
assumed all of the debts, liabilities, obligations and duties of each of the
Constituent Banks and shall have succeeded to all of each of their
relationships, fiduciary or otherwise, as fully and to the same extent as if
such property, rights, privileges, powers, franchises, debts, liabilities,
obligations, duties and relationships had been originally acquired, incurred or
entered into by Resulting Bank. In addition, any reference to either of the
Constituent Banks in any contract or document, whether executed or taking effect
before or after the Effective Time, shall be considered a reference to Resulting
Bank if not inconsistent with the other provisions of the contract or document;
and any pending action or other judicial proceedings to which either of the
Constituent Banks is a party shall not be deemed to have been abated and shall
have the same force and effect as if the Merger had not occurred; or Resulting
Bank may be substituted as a party to such action or proceedings, and any
judgment, order or decree may be rendered for or against it that might have been
rendered for or against either of the Constituent Banks as if the Merger had not
occurred.
A-Ex.1.02-2
<PAGE>
SECTION 7.
---------
(a) At the Effective Time (as defined in Section 1.09 of the Reorganization
Agreement), each share of common stock, par value $___ per share, of Orleans
(the "Orleans Common") issued and outstanding immediately prior to the
Effective Time, other than shares the holders of which have duly exercised
and perfected their dissenters' rights under the Corporate Law (as defined
in the Reorganization Agreement), shall be converted into the right to
receive 6.37 shares (the "Conversion Ratio") of common stock, stated value
$1.00 per share, of CNB (the "CNB Common"); provided, however, that if the
Closing Book Value (as defined in Section 7(b) hereof) is less than
$6,167,000, then the Conversion Ratio shall equal the product of (i) 6.37
and (ii) the quotient of the Closing Book Value divided by $6,167,000. The
shares of CNB Common to be issued pursuant to the foregoing sentence,
together with any cash payment in lieu of fractional shares, as provided
below, are hereinafter referred to as the "Merger Consideration". No
fractional shares of CNB Common shall be issued and, in lieu thereof,
holders of shares of Orleans Common who would otherwise be entitled to a
fractional share interest (after taking into account all shares of Orleans
Common to be received in the Merger by such holder) shall be paid an amount
in cash equal to the product of such fractional share interest and the
closing price of a share of CNB Common on the Nasdaq Stock Market's National
Market ("Nasdaq") on the fifth business day immediately preceding the date
on which the Effective Time occurs.
(b) The term "Closing Book Value" shall mean the amount of the shareholders'
equity accounts of Orleans, as of the end of the month immediately preceding
the Effective Time, determined in accordance with generally accepted
accounting principles consistently applied with the year ended December 31,
1993, but excluding for this purpose any adjustments to the shareholders'
equity accounts solely as a result of (A) marketable securities classified
as Available for Sale in accordance with FAS 115, and (B) the Structured
Notes Divestiture (as defined in Section 4.10 of the Reorganization
Agreement), less (i) the amount, if any, by which the allowance for credit
losses account of Orleans, as of the end of the month immediately preceding
the Effective Time, is less than $391,000 (which shall be determined
exclusive of any increase in the allowance taken by Orleans at the written
request of CNB pursuant to Section 4.05 of the Reorganization Agreement),
less (ii) the amount of any increase in the shareholders' equity accounts of
Orleans resulting from or attributable to the sale of securities held on and
sold after June 30, 1994 or any transactions or accounting adjustments not
in the ordinary course of business effected or completed after June 30,
1994, plus (iii) any reduction of shareholders' equity theretofore recorded
solely as a result of accruals, reserves or charges taken by Orleans at the
written request of CNB pursuant to Section 4.05 of the Reorganization
Agreement (other than any reduction of shareholders' equity resulting from
(a) audit fees incurred and expensed by Orleans between the date hereof and
the Closing Date, (b) fees incurred and expensed by Orleans to obtain the
environmental investigations referred to in Section 4.07 of the
Reorganization Agreement, and (c) fees incurred and expensed by Orleans to
purchase tail coverage pursuant to Section 5.04 of the Reorganization
Agreement), plus (iv) the amount of each quarterly dividend paid by Orleans
pursuant to Section 4.01 hereof after March 15, 1995.
(c) At the Effective Time, all of the shares of Orleans Common, by virtue
of the Merger and without any action on the part of the holders
thereof, shall no longer be outstanding and shall be canceled
A-Ex.1.02-3
<PAGE>
and retired and shall cease to exist, and each holder of any certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of Orleans Common (the "Certificates") shall thereafter
cease to have any rights with respect to such shares, except the right of
such holders to receive, without interest, the Merger Consideration upon the
surrender of such Certificate or Certificates in accordance with Section
1.08 of the Reorganization Agreement or the right provided under Section
7(f) hereof, as applicable.
(d) At the Effective Time, each share of Orleans Common, if any, held in the
treasury of Orleans (other than shares held in trust accounts for the
benefit of others or in other fiduciary, nominee or similar capacities)
immediately prior to the Effective Time shall be canceled.
(e) Each share of common stock, par value $1.00 per share, of Interim Bank
outstanding immediately prior to the Effective Time shall be converted into
and become one share of Orleans Common.
(f) If holders of Orleans Common are entitled to and do object to the Merger and
demand payment of the value of their shares under the Corporate Law, any
issued and outstanding shares of Orleans Common held by an objecting holder
shall not be converted as described in Section 7(a) hereof but from and
after the Effective Time shall represent only the right to receive such
value as may be determined to be due to such objecting holder pursuant to
the Corporate Law; provided, however, that each share of Orleans Common
outstanding immediately prior to the Effective Time and held by an objecting
holder who shall, after the Effective Time, withdraw his or her demand for
payment of value or lose his or her right to so object shall have only such
rights as are provided under the Corporate Law.
(g) If between the date hereof and the Effective Time a share of CNB Common
shall be changed into a different number of shares of CNB Common or a
different class of shares by reason of reclassification, recapitalization,
splitup, exchange of shares or readjustment, or if a stock dividend thereon
shall be declared with a record date within such period (a "Share
Adjustment"), then the number of shares of CNB Common or a different class
of shares into which a share of Orleans Common shall be converted pursuant
to subsection (a) above shall be appropriately and proportionately adjusted
so that each stockholder of Orleans shall be entitled to receive such number
of shares of CNB Common as such stockholder would have received pursuant to
such Share Adjustment had the record date therefor been immediately
following the Effective Time of the Merger; provided, however, that the one
for ten stock dividend declared by CNB on October 18, 1994, shall not be
deemed a Share Adjustment for purposes of this subsection (g) and the
Conversion Ratio shall not be adjusted as a result thereof.
SECTION 8.
---------
In the event the Reorganization Agreement is terminated pursuant to Article
Seven thereof, this Agreement shall also be terminated and the Merger provided
for herein shall thereby be abandoned automatically without further act or deed
by the parties hereto.
A-Ex.1.02-4
<PAGE>
SECTION 9.
---------
Consummation of this Agreement and the Merger is subject to the satisfaction of
the conditions set forth in the Reorganization Agreement.
SECTION 10.
----------
This Agreement must be ratified and confirmed by the affirmative vote of the
shareholders of Interim Bank and Orleans owning the requisite percentage of
their respective capital stock outstanding as required by law, at meetings to be
held on the call of the respective Boards of Directors; and the Merger shall
become effective upon such date as is provided in the Reorganization Agreement.
IN WITNESS WHEREOF, Interim Bank and Orleans have caused this Merger
Agreement to be executed in multiple copies by their duly authorized officers,
and have caused their seals to be hereunto affixed, as of the date first above
written.
ORLEANS INTERIM BANK
(SEAL) By
-------------------------------
ATTEST:
By:
------------------------
Cashier
THE BANK OF ORLEANS
(SEAL) By
-------------------------------
ATTEST:
By:
------------------------
Cashier
A-Ex.1.02-5
<PAGE>
CNB BANCSHARES, INC.
(SEAL) By
------------------------------
ATTEST:
By: ----------------------------
Secretary
A-Ex.1.02-6
<PAGE>
EXHIBIT 1.10(a)
---------------
ORLEANS' LEGAL OPINION MATTERS
1. The due incorporation and valid existence of Orleans under the laws of
the State of Indiana, its power and authority to own and operate its properties
and to carry on its business as now conducted, and its power and authority to
enter into the Agreement, to merge with Interim Bank in accordance with the
terms of the Agreement and to consummate the transactions contemplated by the
Agreement.
2. Orleans does not have any subsidiaries.
3. (i) the number of authorized, issued and outstanding shares of capital
stock of Orleans on the Closing Date, (ii) the nonexistence of any violation of
the preemptive or subscription rights of any person, (iii) the number of
outstanding stock options, warrants, or other rights to acquire, or securities
convertible into, any equity security of Orleans, (iv) the nonexistence of any
obligation, contingent or otherwise, to reacquire any shares of capital stock of
Orleans, and (v) the nonexistence of any outstanding stock appreciation, phantom
stock or similar rights, except as disclosed in the Agreement.
4. The due and proper performance of all corporate acts and other
proceedings necessary or required to be taken by Orleans to authorize the
execution, delivery and performance of the Agreement, the due execution and
delivery of the Agreement by Orleans, and the Agreement as a valid and binding
obligation of Orleans, enforceable against Orleans in accordance with its terms
(subject to the provisions of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or similar laws affecting the enforceability of
creditors' rights generally from time to time in effect, and equitable
principles relating to the granting of specific performance and other equitable
remedies as a matter of judicial discretion).
5. The execution of the Agreement by Orleans, and the consummation of the
Merger and the other transactions contemplated therein, does not violate or
cause a default under Orleans's articles of incorporation or bylaws, or any
statute, regulation or rule or any judgment, order or decree against or any
material agreement binding upon Orleans or its subsidiaries.
6. To the best knowledge of such counsel, the receipt of all required
consents, approvals (including the requisite approval of the shareholders of
Orleans), orders or authorizations of, or registrations, declaration or filings
with or notices to, any court, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, or any other
person or entity required to be obtained or made by Orleans or its subsidiaries
in connection with the execution and delivery of the Agreement or the
consummation of the transactions contemplated therein.
7. The nonexistence of any material actions, suits, proceedings,
orders, investigations or claims pending or threatened against or affecting
Orleans or its subsidiaries which, if adversely determined, would have a
material adverse effect upon their respective properties or assets or the
transactions contemplated by the Agreement.
A-Ex-1.10(a)-1
<PAGE>
EXHIBIT 1.10(b)
---------------
CNB LEGAL OPINION MATTERS
1. The due incorporation and valid existence of CNB under the laws of the
State of Indiana and its power and authority to enter into the Agreement and the
Merger Agreement and to consummate the transactions contemplated thereby.
2. The due incorporation, valid existence and good standing of Interim
Bank under the laws of the State of Indiana and its power and authority to enter
into the Merger Agreement and to consummate the transactions contemplated
thereby.
3. The due and proper performance of all corporate acts and other
proceedings required to be taken by CNB to authorize the execution, delivery and
performance of the Agreement and the Merger Agreement, its due execution and
delivery of the Agreement and the Merger Agreement, and the Agreement and the
Merger Agreement as a valid and binding obligation of CNB enforceable against
CNB in accordance with their respective terms (subject to the provisions of
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforceability of creditors' rights generally from time to time in effect, and
equitable principles relating to the granting of specific performance and other
equitable remedies as a matter of judicial discretion).
4. The due and proper performance of all corporate acts and other
proceedings required to be taken by Interim Bank to authorize the execution,
delivery and performance of the Merger Agreement, its due execution and delivery
of the Merger Agreement, and the Merger Agreement as a valid and binding
obligation of Interim Bank enforceable against Interim Bank in accordance with
their respective terms (subject to the provisions of bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforceability of
creditors' rights generally from time to time in effect, and equitable
principles relating to the granting of specific performance and other equitable
remedies as a matter of judicial discretion).
5. The due authorization and, when issued to the shareholders of Orleans
in accordance with the terms of the Agreement and the Merger Agreement, the
valid issuance of the shares of CNB Common to be issued pursuant to the Merger,
such shares being fully paid and nonassessable, with no personal liability
attaching to the ownership thereof.
6. The execution and delivery of the Agreement and the Merger Agreement by
CNB and the consummation of the transactions contemplated therein, as neither
conflicting with, in breach of or in default under, resulting in the
acceleration of, creating in any party the right to accelerate, terminate,
modify or cancel, or violate, any provision of CNB's articles of incorporation
or bylaws, or any statute, regulation, rule, judgment, order or decree binding
upon CNB which would be materially adverse to the business of CNB and its
subsidiaries taken as a whole.
7. The execution and delivery of the Merger Agreement by Interim Bank and
the consummation of the transactions contemplated therein, as neither
conflicting with, in breach of or in default under, resulting in the
acceleration of, creating in any party the right to accelerate, terminate,
modify or cancel, or violate, any provision of Interim Bank's articles of
incorporation or bylaws.
A-Ex-1.10(b)-1
<PAGE>
8. To the best knowledge of such counsel, the receipt of all required
consents, approvals, orders or authorizations of, or registrations, declarations
or filings with or without notices to, any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, or any other person or entity required to be obtained or made by or
with respect to CNB or Interim Bank in connection with the execution and
delivery of the Agreement and the Merger Agreement or the consummation of the
transactions contemplated by the Agreement and the Merger Agreement.
<PAGE>
EXHIBIT 4.08
------------
______________, 199__
CNB Bancshares, Inc.
20 N.W. Third Street
Evansville, Indiana 47739
Attention: Mr. David L. Knapp
Re: Agreement and Plan of Reorganization, dated as of October 18, 1994 (the
"Agreement"), by and between CNB Bancshares, Inc. ("CNB") and The Bank
of Orleans ("Orleans")
Gentlemen:
I have been advised that I may be deemed to be an affiliate of Orleans, as
that term is defined for purposes of paragraphs (c) and (d) of Rule 145 ("Rule
145") of the Rules and Regulations of the Securities and Exchange Commission
(the "Commission") promulgated under the Securities Act of 1933, as amended (the
"Securities Act").
Pursuant to the terms and conditions of the Agreement, each share of common
stock of Orleans owned by me as of the effective time of the merger contemplated
by the Agreement (the "Merger") shall be converted into the right to receive the
number of shares of common stock, stated value $1.00 per share, of CNB equal to
the Conversion Ratio (as defined in the Agreement) and cash in lieu of any
fractional share. As used in this letter, the shares of common stock of Orleans
owned by me as of _________, 199 (the date 30 days prior to the anticipated
effective time of the Merger) are referred to as the "Pre-Merger Shares" and the
shares of common stock of CNB to be received by me in the Merger in exchange for
my Pre-Merger Shares are referred to as the "Post-Merger Shares." This letter
is delivered to CNB pursuant to Section 4.08 of the Agreement.
A. I represent and warrant to CNB that:
1. I shall not make any sale, transfer or other disposition of the
Post-Merger Shares I receive pursuant to the Merger in violation of the
Securities Act or the Rules and Regulations of the Commission promulgated
thereunder.
2. I understand that the issuance of the Post-Merger Shares to me
pursuant to the Merger will be registered with the Commission under the
Securities Act. I also understand that because I may be deemed an
"affiliate" of Orleans and because any distributions by me of the Post-
Merger Shares will not be registered under the Securities Act, such Post-
Merger Shares must be held by me unless (i) the sale, transfer or other
distribution has been registered under the Securities Act, (ii) the sale,
transfer or other distribution of such Post-Merger Shares is made in
accordance with
A-Ex-4.08-1
<PAGE>
the provisions of Rule 145, or (iii) in the opinion of counsel acceptable to
CNB some other exemption from registration under the Securities Act is
available with respect to any such proposed distribution, sale, transfer or
other disposition of such Post-Merger Shares.
3. I have not, as of the date hereof, sold or otherwise transferred or
reduced my risk relative to the Pre-Merger Shares, and in no event will I
sell the Pre-Merger Shares or the Post-Merger Shares, as the case may be, or
otherwise transfer or reduce my risk relative to the Pre-Merger Shares or
Post-Merger Shares, as the case may be, during the period beginning 30 days
prior to the date on which the Merger is consummated and ending on the date
that CNB has published financial results covering at least 30 days of the
combined operations of CNB and Orleans.
B. I understand and agree that:
1. Stop transfer instructions will be issued with respect to the Post-
Merger Shares and there will be placed on the certificates representing such
Post-Merger Shares, or any certificate delivered in substitution therefor, a
legend stating in substance:
"The shares represented by this Certificate have been issued to an
affiliate of a party to a transaction with CNB Bancshares, Inc. pursuant
to the provisions of Rule 145 under the Securities Act of 1933. A stop
transfer order with respect to this Certificate has been issued to the
Transfer Agent. The shares represented hereby will be transferred on
the books of CNB Bancshares, Inc. only upon delivery to the Transfer
Agent of evidence, reasonably satisfactory to CNB Bancshares, Inc., that
such transfer complies in all material respects with the provisions of
the Securities Act of 1933 and the rules and regulations thereunder."
2. Unless the transfer by me of Post-Merger Shares is a sale made in
compliance with the provisions of Rule 145(d) or made pursuant to an
effective registration statement under the Securities Act, CNB reserves the
right to place the following legend on the certificates issued to my
transferee:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 and were acquired from a person who
received such shares in a transaction to which Rule 145 of the
Securities Act of 1933 applies. The shares have not been acquired by
the holder with a view to, or for resale in connection with, any
distribution thereof within the meaning of the Securities Act of 1933
and may not be sold, pledged or otherwise transferred except in
accordance with an exemption from the registration requirements of the
Securities Act of 1933."
I understand and agree that the legends set forth in paragraphs 1 and 2
above shall be removed by delivery of substitute certificates without any legend
if I deliver to CNB a copy of a letter from the staff of the Commission, or an
opinion of counsel in form and substance satisfactory to CNB, to the effect that
no such legend is required for the purpose of the Securities Act.
A-Ex-4.08-2
<PAGE>
I have carefully read this letter and the Agreement and understand the
requirements of each and the limitations imposed upon the distribution, sale,
transfer or other disposition of Pre-Merger Shares or Post-Merger Shares by me.
Sincerely,
A-Ex-4.08-3
<PAGE>
AMENDMENT TO REORGANIZATION AGREEMENT
-------------------------------------
This AMENDMENT TO REORGANIZATION AGREEMENT (this "Amendment") made this 5th
day of May, 1995, by and between CNB BANCSHARES, INC., an Indiana corporation
("CNB"), and THE BANK OF ORLEANS, an Indiana state chartered bank ("Orleans").
RECITALS
--------
A. CNB and Orleans are parties to a certain Agreement and Plan of
Reorganization dated October 18, 1994 (the "Agreement"). The Agreement
generally provides for CNB's acquisition of Orleans by means of the merger of
Orleans and Orleans Interim Bank, a wholly-owned subsidiary of CNB.
B. CNB and Orleans desire to amend the Agreement as provided herein.
C. All terms used in this Amendment with initial capital letters that are
not otherwise defined herein shall have the meaning ascribed to them in the
Agreement.
In consideration of the premises and the mutual terms and provisions set
forth in this Amendment and the Agreement, the parties agree as follows.
AMENDMENT
---------
SECTION 1. AMENDMENT. Section 7.07 of the Agreement is hereby amended to
read in its entirety as follows:
"SECTION 7.07. TERMINATION DATE. If the Closing Date does not occur on or
prior to September 30, 1995, then this Agreement may be terminated by either
party by giving written notice to the other."
SECTION 2. CONTINUED FORCE AND EFFECT. Except as expressly amended or
modified hereby, each of the terms, provisions, covenants, representations and
warranties contained in the Agreement and the Schedules thereto shall remain in
full force and effect.
SECTION 3. MULTIPLE COUNTERPARTS. This Amendment may be executed in multiple
counterparts, each of which shall constitute an original and all of which taken
together shall constitute but one and the same document.
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment
as of the day and year first above written.
CNB BANCSHARES, INC.
By /s/ H. Lee Copper III
--------------------------------------
H. Lee Cooper, III
Chairman and Chief Executive Officer
THE BANK OF ORLEANS
By /s/ William H. Tegarden
--------------------------------------
William H. Tegarden
President and Chief Executive Officer
AA-1
<PAGE>
EXHIBIT B
June 30, 1995
Board of Directors
The Bank of Orleans
200 South Maple Street
Orleans, IN 47452
Members of the Board of Directors:
You have requested David A. Noyes & Company ("Noyes") to review and analyze the
financial terms (the "Terms") of the proposed merger (the "Merger") of The Bank
of Orleans ("ORLEANS") with a wholly owned subsidiary of CNB Bancshares, Inc.
("CNB") and to express an opinion as to the fairness, from a financial point of
view, of the Terms of the Merger with respect to the shareholders of ORLEANS.
The Terms of the Merger are set forth in the Agreement and Plan of
Reorganization dated October 18, 1994, as amended May 5, 1995 (the "Agreement"),
between ORLEANS and CNB, whereby at the time the Merger becomes effective (the
"Effective Date"), each share of ORLEANS common stock will be converted into the
right to receive 6.37 shares of CNB common stock.
Noyes as part of its investment banking business is regularly engaged in the
valuation of commercial bank and thrift securities in connection with mergers
and acquisitions, negotiated underwritings and valuations for estate, corporate
and other purposes. As specialists in the securities of commercial banking and
thrift organizations, Noyes has extensive experience in, and knowledge of, the
banking and thrift industries and its participants.
In carrying out its engagement, Noyes has reviewed and analyzed material bearing
upon the financial and operating condition of ORLEANS and CNB and material
prepared in connection with the Merger, including, among other things, the
following: (i) the Agreement; (ii) certain publicly available information
concerning ORLEANS, including annual Call Reports for the two years ended
December 31, 1994 and certain quarterly Call Reports for the three months ended
March 31, 1995; (iii) certain publicly available information concerning CNB,
including Annual Reports for each of the three years ended December 31, 1994,
and certain interim reports on Form 10-Q for the three months ended March 31,
1995; (iv) other financial information concerning the businesses and operations
of ORLEANS and of CNB, including information furnished to Noyes by ORLEANS and
CNB for purposes of Noyes' analysis; (v) certain publicly available information
concerning the trading of, and the trading market for, the stock of ORLEANS and
CNB; and (vi) certain publicly available information with respect to certain
other banks, bank holding companies, thrifts and thrift holding companies and
the nature and terms of certain other transactions that Noyes considered
relevant. Noyes also has met with certain principal officers and other members
of ORLEANS and CNB management to discuss the foregoing as well as other matters
relevant to the Merger.
In its review and analysis, Noyes has relied upon and assumed the accuracy and
completeness of the financial and other information provided to it or publicly
available, and has not attempted to verify the same. However, it is important
to state that neither ORLEANS nor CNB restricted Noyes as to the material it was
permitted to review. Noyes has not made or obtained any independent evaluations
or appraisals of the assets and potential and/or contingent liabilities of
either ORLEANS or CNB.
B-1
<PAGE>
Board of Directors
June 30, 1995
This opinion is based upon the Merger in its present form and is necessarily
based upon conditions as they exist and can be evaluated on the date hereof.
Based upon the foregoing, it is Noyes' opinion that the Terms of the Merger are
fair to ORLEANS and its shareholders from a financial point of view.
Respectfully submitted,
DAVID A. NOYES & COMPANY
By: /s/ John C. Reed
--------------------------------------
John C. Reed
President/Capital Markets Group
B-2
<PAGE>
EXHIBIT C
INDIANA BANKING LAW
(DISSENTERS' RIGHTS)
28-1-7-21 DISSENTERS' RIGHTS; NOTICE; METHOD OF ASSERTING RIGHTS; PAYMENT FOR
SHAREHOLDER'S SHARES; WITHDRAWAL OF DEMAND; DETERMINATION OF VALUE;
SUBMISSION OF CERTIFICATES
Sec. 21. (a) A shareholder entitled to vote on the adoption of an agreement
of merger or consolidation may dissent from the merger or consolidation and
obtain payment of the value of the shareholder's shares in the manner provided
in this section.
(b) If a proposed merger or consolidation is submitted to a vote at a
shareholder's meeting, the meeting notice must state that shareholders are or
may be entitled to assert dissenters' rights under this section.
(c) A shareholder who desires to assert dissenters' rights under this section
must:
(1) deliver to the corporation before the vote is taken written notice
of the shareholder's demand for payment for the shareholder's shares if the
proposed action is effected; and
(2) not vote the shareholder's shares in favor of the proposed action.
(d) If the merger or consolidation is effected, the surviving or new
corporation shall pay to the shareholder, upon surrender of the certificate or
certificates representing the shareholder's shares, the value of the shares as
of the day before the date on which the vote was taken approving the merger or
consolidation. A shareholder failing to satisfy the requirements of subsection
(c) is not entitled to payment for the shareholder's shares under this section.
Immediately after the vote is taken approving the merger or consolidation, the
shareholder, except as otherwise provided in subsection (e), is entitled to
payment only as provided in this section, ceases to be a shareholder, and is not
entitled to vote or to exercise any other rights of a shareholder.
(e) A demand for payment made under subsection (c) may not be withdrawn
unless the corporation consents to the withdrawal. With respect to a
shareholder who has made a demand for payment, the right of the shareholder to
be paid the value of his shares ceases and his status as a shareholder is
restored without prejudice to any corporate proceedings which may have been
taken during the interim, and the shares held by the shareholder shall be
treated for all purposes as if no objection and demand had been made by the
shareholder, if:
(1) the shareholder's request to withdraw the shareholder's demand is
consented to by the bank or trust company;
(2) the merger or consolidation is abandoned;
(3) the shareholders revoke the authority to effect the merger or
consolidation;
(4) a petition for the determination of value by a court is not filed
within the time provided in this section; or
C-1
<PAGE>
(5) a court of competent jurisdiction determines that the shareholder
is not entitled to the relief provided by this section.
(f) Within ten (10) days after the merger or consolidation is effected, the
surviving or new corporation shall mail or deliver written notice of the date of
that action to each dissenting shareholder who has made demand under this
section. For purposes of giving this notice, the bank or trust company shall
use the shareholder's address which appears on the corporate records. In the
notice the bank or trust company shall include a written offer to the
shareholder to pay for the shareholder's shares at a specified price considered
by the corporation to be the value of them. If within thirty (30) days after
the date on which the merger or consolidation was effected the value of the
shares is agreed upon between a dissenting shareholder and the surviving or new
corporation, the surviving or new corporation shall make payment to the
shareholder for the shares. The surviving or new corporation shall make the
payment within ninety (90) days after the date on which the merger or
consolidation was effected, upon surrender of the certificate or certificates
representing the shares. Upon payment of the agreed value, the dissenting
shareholder ceases to have any interest in the shares.
(g) If within the period of thirty (30) days a dissenting shareholder and the
surviving or new corporation do not so agree, then either the corporation or the
dissenting shareholder may file a petition in any circuit or superior court in
the county in Indiana where the principal office of the corporation is located
requesting that the court determine the value of the shares. However, the
petition must be filed within ninety (90) days after the effective date of the
merger or consolidation. Two (2) or more dissenting shareholders may join as
plaintiffs or be joined as defendants in the action, and two (2) or more actions
may be transferred and consolidated to avoid inconsistent results and promote
judicial economy. The jurisdiction of the court is plenary and exclusive.
(h) The court shall render judgment against the surviving or new corporation
for payment of an amount equal to the value of each dissenting share multiplied
by the number of dissenting shares that any dissenting shareholder who is a
party is entitled to require the surviving or new corporation to purchase. The
judgment is payable only upon the endorsement and delivery to the surviving or
new corporation of the certificates for the shares described in the judgment.
Any party may appeal from the judgment.
(i) Within twenty (20) days after the merger or consolidation is effected,
the shareholder shall submit the certificate or certificates representing the
shareholder's shares to the corporation for notation on the certificate or
certificates that demand for payment has been made. The shareholder's failure
to do so, at the option of the corporation, terminates the shareholder's rights
under this section unless a court of competent jurisdiction, for good and
sufficient cause shown, otherwise directs. If shares represented by a
certificate on which notation has been so made are transferred, each new
certificate issued for those shares shall bear a similar notation together with
the name of the original dissenting holder of the shares, and a transferee of
the shares acquires by the transfer no rights in the corporation other than
those which the original dissenting shareholder had after making demand for
payment of the value of the shares.
C-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Bylaws of CNB provide that CNB shall indemnify any director or officer of
CNB against any and all liability and reasonable expense that said director or
officer may incur in connection with or resulting from any claim, action, suit
or proceeding, or civil, criminal, administrative or investigative action, or
threat thereof, by reason of said director's or officer's being or having been a
director or officer of CNB, or serving or having served at the request of CNB as
a director or officer of another corporation, partnership, joint venture, trust
or other enterprise, if either (i) the officer or director is wholly successful
in any such claim, action, suit or proceeding, or (ii) the officer or director
is not wholly successful but it is nevertheless determined that such officer or
director acted in good faith in what he reasonably believed to be in, or not
opposed to, the best interests of the corporation and, with respect to any
criminal action or proceeding, either said officer or director had reasonable
cause to believe his conduct was lawful or had no reasonable cause to believe
his conduct was unlawful. The Bylaws further provide that the board of
directors may (i) authorize like indemnification of persons who are not
directors or officers of CNB but are employees of CNB or are officers, directors
or employees of any subsidiary of CNB, and (ii) approve indemnification of
directors, officers persons to the full extent permitted by the Indiana Business
Corporation Law (the "Indiana Law") in effect at such time.
Section 23-1-37-9 of the Indiana Law provides for "mandatory
indemnification," unless limited by the articles of incorporation, by a
corporation against reasonable expenses incurred by a director who is wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which the director was a party by reason of the director being or having been a
director of the corporation. Section 23-1-37-10 of the Indiana Law states that
a corporation may, in advance of the final disposition of a proceeding,
reimburse reasonable expenses incurred by a director who is a party to a
proceeding if the director furnishes the corporation with a written affirmation
of the director's good faith belief that the director has met the standard of
conduct required by Section 23-1-37-8 of the Indiana Law, that the director will
repay the advance if it is ultimately determined that he did not meet the
standard of conduct required by Section 23-1-37-8 of the Indiana Law, and that
those making the decision to reimburse the director determine that the facts
then known would not preclude indemnification under the Indiana Law.
CNB's Bylaws further provide, in accordance with the Indiana Law, that CNB
shall have the power to purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of CNB, or is or was
serving at the request of CNB as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not CNB would have
power to indemnify him against such liability under the Bylaws or the Indiana
Law. Pursuant to a policy of directors' and officers' liability insurance with
total annual limits of $10,000,000, CNB's directors and officers are insured,
subject to the limits, retention, exceptions and other terms and conditions of
such policy, against liability for any actual or alleged breach of duty,
neglect, error, misstatement, misleading statement, omission or other act done
or wrongfully attempted while acting in their capacities as directors or
officers of CNB.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed as part of this Registration
Statement or incorporated by reference herein:
(2)(a) Agreement and Plan of Reorganization, dated October 18, 1994,
by and between The Bank of Orleans and CNB Bancshares, Inc.
(Exhibit A to Prospectus/Proxy Statement);
(2)(b) Agreement and Plan of Merger, dated December 12, 1994, among
CNB Bancshares, Inc., Citizens Bancshares, Inc. and UF
Bancorp, Inc.;
(2)(c) Amendment to Reorganization Agreement, dated May 5, 1995, by
and between The Bank of Orleans and CNB Bancshares, Inc.
(Exhibit A to Prospectus/Proxy Statement);
(3)(a) Restated Articles of Incorporation of CNB Bancshares, Inc.;
(3)(b) Amended By-laws of CNB Bancshares, Inc.;
(5) Opinion of Lewis, Rice & Fingersh, L.C. re legality;
(8) Opinion of Lewis, Rice & Fingersh, L.C. re federal income tax
consequences;
(23)(a) Consent of Geo. S. Olive & Co. L.L.C.;
(23)(b) Consent of Coopers & Lybrand L.L.P.;
(23)(c) Consent of Geo. S. Olive & Co. L.L.C.
(23)(d) Consent of Lewis, Rice & Fingersh, L.C. (in opinion re
legality);
(23)(e) Consent of Lewis, Rice & Fingersh, L.C. (in opinion re federal
income tax consequences);
(23)(f) Consent of David A. Noyes & Company;
(23)(g) Consent of American Environmental Consultants;
(24) Powers of Attorney;
(99)(a) Form of Proxy Card;
(99)(b) Form of Letter to Shareholders to Accompany Prospectus/Proxy
Statement;
(99)(c) Notice of Special Meeting;
(99)(d) Excerpts of The Indiana Financial Institutions Act
(Dissenters' Rights) (Exhibit C to Prospectus/Proxy
Statement).
II-2
<PAGE>
(99)(e) Fairness Opinion of David A. Noyes & Company (Exhibit B to
Prospectus/Proxy Statement)
(b) No financial statement schedules are required to be filed herewith
pursuant to Item 21(b) or (c) of this Form.
ITEM 22. UNDERTAKINGS.
(1) The undersigned Registrant hereby undertakes as follows: That prior to
any public reoffering of the securities registered hereunder through the use of
a prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(2) The undersigned Registrant undertakes that every prospectus (i) that is
filed pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Securities Act of 1933, as
amended, and is used in connection with an offering of securities subject to
Rule 415, will be filed as a part of an amendment to the registration statement
and will not be used until such amendment is effective, and that, for purposes
of determining any liability under the Securities Act of 1933, as amended, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(3) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated document by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(4) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(5) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934, as amended (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934, as amended) that is incorporated
by reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(6) The undersigned Registrant hereby undertakes to file, during any period
in which offers or sales are being made, a post-effective amendment to this
registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
II-3
<PAGE>
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
that, for the purpose of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and to remove from registration by means of a post-
effective amendment any of the securities being registered which remain unsold
at the termination of the offering.
(7) Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy expressed in
the Securities Act of 1933, as amended, and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the act and
will be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Evansville, State of
Indiana, on June 27, 1995.
CNB BANCSHARES, INC.
By /s/ H. Lee Cooper III
------------------------
H. Lee Cooper III
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed on June 27, 1995 by the following persons in the
capacities indicated.
Name Title/Position
- ---- --------------
/s/ H. Lee Cooper III Chairman of the Board and
- --------------------- Chief Executive Officer
H. Lee Cooper III (principal executive officer)
/s/ * President, Chief Operating Officer
- --------------------- and Director
James J. Giancola
/s/ David L. Knapp Executive Vice President
- --------------------- and Secretary (principal
David L. Knapp financial officer)
/s/ Ralph L. Alley Senior Vice President and Comptroller,
- --------------------- Treasurer (principal accounting officer)
Ralph L. Alley
* Director
- ---------------------
John D. Engelbrecht
* Director
- ---------------------
Robert L. Koch, II
<PAGE>
* Director
- ---------------------
Jerry A. Lamb
* Director
- ---------------------
Burkley F. McCarthy
* Director
- ---------------------
Robert K. Ruxer
* Director
- ---------------------
Thomas W. Traylor
* Director
- ---------------------
Paul G. Wade
* By /s/ David L. Knapp
-------------------------
Attorney-in-fact
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Number Exhibit Page
- ------ ------- ----
<C> <S> <C>
(2)(a) Agreement and Plan of Reorganization, dated October 18, 1994, by
and between The Bank of Orleans and CNB Bancshares, Inc. (Exhibit A to
Prospectus/Proxy Statement)..............................................
(2)(b) Agreement and Plan of Merger, dated December 12, 1994, among CNB
Bancshares, Inc., Citizens Bancshares, Inc. and UF Bancorp, Inc. is
incorporated by reference herein from UF Bancorp, Inc.'s Current Report
on Form 8-K dated December 14, 1994......................................
(2)(c) Amendment to Reorganization Agreement, dated May 5, 1995, by and
between The Bank of Orleans and CNB Bancshares, Inc. (Exhibit A to
Prospectus/Proxy Statement)..............................................
(3)(a) Restated Articles of Incorporation of CNB Bancshares, Inc. is
incorporated by reference herein from CNB Bancshares, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1993.................
(3)(b) Amended By-laws of CNB Bancshares, Inc. is incorporated by
reference herein from CNB Bancshares, Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1993.....................................
(5) Opinion of Lewis, Rice & Fingersh, L.C. re legality...................... **
(8) Opinion of Lewis, Rice & Fingersh, L.C. re federal income tax
consequences............................................................. **
(23)(a) Consent of Geo. S. Olive & Co., L.L.C....................................
(23)(b) Consent of Coopers & Lybrand L.L.P.......................................
(23)(c) Consent of Geo. S. Olive & Co., L.L.C....................................
(23)(d) Consent of Lewis, Rice & Fingersh, L.C. (in opinion re legality)......... **
(23)(e) Consent of Lewis, Rice & Fingersh, L.C. (in opinion re federal
income tax consequences)................................................. **
(23)(f) Consent of David A. Noyes & Company...................................... **
(23)(g) Consent of American Environmental Consultants............................ **
(24) Powers of Attorney....................................................... **
(99)(a) Form of Proxy Card.......................................................
(99)(b) Form of Letter to Shareholders to Accompany Prospectus/Proxy Statement...
(99)(c) Notice of Special Meeting................................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number Exhibit Page
- ------ ------- ----
<C> <S> <C>
(99)(d) Excerpts of The Indiana Financial Institution Act (Dissenters' Rights)
(Exhibit C to Prospectus/Proxy Statement)................................
(99)(e) Fairness Opinion of David A. Noyes & Company (Exhibit B to
Prospectus/Proxy Statement)..............................................
</TABLE>
- ----------------
*Only pages of the manually signed original of the Registration Statement are
numbered sequentially.
**Previously filed.
<PAGE>
EXHIBIT (23)(a)
---------------
<PAGE>
INDEPENDENT AUDITOR'S CONSENT
-----------------------------
We consent to the incorporation by reference in this Registration Statement of
CNB Bancshares, Inc. on Form S-4 of our report dated January 25, 1995, appearing
in the Annual Report, which is incorporated by reference in Form 10-K of CNB
Bancshares, Inc. for the year ended December 31, 1994; of our report dated May
15, 1995, on the consolidated financial statements of CNB Bancshares, Inc. (as
restated for the February, 1995 acquisitions of Harrisburg Bancshares, Inc. and
King City Federal Savings Bank) for the year ended December 31, 1994 in the
Current Report on Form 8-K dated May 23, 1995 of CNB Bancshares, Inc., and to
the reference to us under the heading "Experts" in the Prospectus, which is part
of this Registration Statement.
/s/ Geo. S. Olive & Co. LLC
Geo. S. Olive & Co. LLC
Evansville, Indiana
June 27, 1995
<PAGE>
EXHIBIT (23)(b)
---------------
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in the Registration Statement of CNB Bancshares,
Inc. on Form S-4 (File No. 0-11510) of our report, which includes an explanatory
paragraph regarding a change in the method of accounting for income taxes and a
change in the method of accounting for investment securities, dated April 13,
1995, on our audits of the financial statements of The Bank of Orleans as of
December 31, 1994 and 1993 and for the years then ended. We also consent to the
reference of our firm under the caption "Experts".
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Louisville, Kentucky
June 26, 1995
<PAGE>
EXHIBIT (23)(c)
---------------
<PAGE>
INDEPENDENT AUDITOR'S CONSENT
-----------------------------
We consent to the use of our report dated August 6, 1994, except for the
restatement and subsequent events note for which the date is June 7, 1995, on
the consolidated financial statements of UF Bancorp, Inc. for the year ended
June 30, 1994 in the Registration Statement on Form S-4 filed by CNB Bancshares,
Inc.
/s/ Geo. S. Olive & Co. LLC
Geo. S. Olive & Co. LLC
Evansville, Indiana
June 27, 1995
<PAGE>
EXHIBIT (99)(a)
---------------
<PAGE>
PROXY
SPECIAL MEETING OF SHAREHOLDERS
THE BANK OF ORLEANS
August 3, 1995
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
THE BANK OF ORLEANS
The undersigned shareholder of The Bank of Orleans, an Indiana state bank
("Orleans"), hereby appoints William H. Tegarden, Charles W. Lamb and Ralph C.
Warren, and any of them, with full power to act alone, as proxies, each with
full power of substitution and revocation, to vote all shares of Common Stock of
Orleans which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held at the office of Orleans located at 200 South Maple
Street, Orleans, Indiana on August 3, 1995, at 10:00 a.m., local time, and at
any adjournment or adjournments thereof, with all powers the undersigned would
possess if personally present, on the following:
Proposal to approve an Agreement and Plan of Reorganization, dated October
18, 1994, as amended May 5, 1995, by and between Orleans and CNB Bancshares,
Inc. ("CNB"), providing for CNB's acquisition of Orleans by means of the
merger of Orleans Interim Bank, an Indiana state bank and a wholly owned
subsidiary of CNB, with and into Orleans.
______ FOR ______ AGAINST ______ ABSTAIN
Proposal to permit the Special Meeting to be adjourned or postponed, in the
discretion of the proxies, which adjournment or postponement could be used
for the purpose, among others, of allowing time for the solicitation of
additional votes to approve the referenced Agreement and Plan of
Reorganization.
______ FOR ______ AGAINST ______ ABSTAIN
The undersigned hereby ratifies and confirms that all said proxies, or any of
them or their substitutes, may lawfully do or cause to be done by virtue hereof,
and acknowledges receipt of the notice of said meeting and the Prospectus/Proxy
Statement accompanying it.
THIS PROXY WILL BE VOTED AS SPECIFIED BY YOU ABOVE. IF NO SPECIFICATION IS
MADE, YOUR SHARES WILL BE VOTED "FOR" THE PROPOSALS DESCRIBED ABOVE.
Dated _________________, 1995
-----------------------------------------------
Please insert date of signing. Sign exactly as
name appears at left. Where stock is issued
in two or more names, all should sign. If
signing as attorney, administrator, executor,
trustee or guardian, give full title as such.
A corporation should sign by an authorized
officer and affix seal.
<PAGE>
EXHIBIT (99)(b)
---------------
<PAGE>
On letterhead of:
The Bank of Orleans
July 5, 1995
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders (the
"Special Meeting") of The Bank of Orleans ("Orleans") on August 3, 1995.
The Special Meeting will be held at the office of Orleans located at 200 South
Maple Street, Orleans, Indiana commencing at 10:00 a.m. local time.
At the Special Meeting, shareholders will be asked to consider and vote upon a
proposal to approve an Agreement and Plan of Reorganization (the "Reorganization
Agreement") providing for the acquisition of Orleans by CNB Bancshares, Inc.
("CNB") by means of the merger of Orleans Interim Bank, a wholly owned
subsidiary of CNB, into Orleans (the "Merger"). As a result of the Merger, each
outstanding share of Orleans common stock, other than shares held by any
shareholder properly exercising dissenters' rights, will be converted into the
right to receive 6.37 shares of common stock of CNB, subject to possible
downward adjustment based upon the closing book value of Orleans as of the end
of the month immediately preceding the consummation of the Merger as set forth
in the Reorganization Agreement and described in the accompanying
Prospectus/Proxy Statement. Shareholders are urged to read carefully the
accompanying Prospectus/Proxy Statement which describes the Merger and related
matters in more detail.
The Board of Directors of Orleans approved the Reorganization Agreement and
recommends that you vote for approval of the Reorganization Agreement.
The affirmative vote of the holders of a majority of the outstanding shares of
Orleans common stock is required to approve the Reorganization Agreement. In
addition to the approval of the Reorganization Agreement by the shareholders of
Orleans, the Merger is subject to certain other conditions as described in the
accompanying Prospectus/Proxy Statement.
It is important that your shares be represented at the Special Meeting,
whether or not you plan to attend in person. Therefore, we ask that you please
sign and date the enclosed proxy card and mail it as soon as possible in the
enclosed postage-paid envelope so that your shares will be represented at the
Special Meeting. If you attend the Special Meeting, you may vote in person if
you wish, even if you have previously mailed in your proxy card.
Sincerely,
William H. Tegarden
President and Chief Executive Officer
<PAGE>
EXHIBIT 99(c)
-------------
<PAGE>
THE BANK OF ORLEANS
AN INDIANA STATE BANK
----------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 3, 1995
----------------------
The Special Meeting of Shareholders of The Bank of Orleans, and Indiana state
bank ("Orleans"), will be held on August 3, 1995, at 10:00 a.m., local time, at
the office of Orleans located at 200 Maple Street, Orleans, Indiana, for the
following purpose:
1. Proposal to approve an Agreement and Plan of Reorganization, dated
October 18, 1994, as amended May 5, 1995, by and between Orleans and CNB
Bancshares, Inc., an Indiana corporation ("CNB"), attached as Exhibit A
to the accompanying Prospectus/Proxy Statement, providing for CNB's
acquisition of Orleans by means of the merger of Orleans Interim Bank,
an Indiana state bank and wholly owned subsidiary of CNB, with and into
Orleans.
2. Proposal to permit the Special Meeting to be adjourned or postponed,
in the discretion of the proxies, which adjournment or postponement
could be used for the purpose, among others, of allowing time for the
solicitation of additional votes to approve the referenced Agreement and
Plan of Reorganization.
Only the holders of common stock of Orleans of record at the close of
business on June 19, 1995, are entitled to notice of and to vote at the
Special Meeting or at any adjournments or postponements thereof.
EACH SHAREHOLDER IS URGED TO COMPLETE AND RETURN PROMPTLY THE ACCOMPANYING
PROXY WHETHER OR NOT HE OR SHE PLANS TO ATTEND THE MEETING. The prompt return
of your signed proxy will help assure a quorum and aid Orleans in reducing the
expense of additional proxy solicitation. The giving of such proxy does not
affect your right to vote in person in the event you attend the meeting.
By Order of the Board of Directors
Cashier
Orleans, Indiana
July 5, 1995
ORLEANS SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL THEY
RECEIVE THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS FOR SUBMITTING SUCH
CERTIFICATES.
THE ACCOMPANYING PROSPECTUS/PROXY STATEMENT DESCRIBES THE RIGHTS OF ORLEANS
SHAREHOLDERS TO DISSENT FROM THE MERGER AND THE PROCEDURES WHICH MUST BE
FOLLOWED IN ORDER TO PERFECT SUCH RIGHTS.
