<PAGE>
Registration No. 33-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
_____________________________
CNB BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
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INDIANA 6022 35-1568731
(State or other jurisdiction of (Primary Standard Industrial (IRS Emsployer
incorporation or organization) Classification Code Number) Identification Number)
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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)
_____________________________
JOHN R. SPRUILL
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. Thomas A. Litz, Esq.
Lewis, Rice & Fingersh, L.C. Thompson & Mitchell
500 N. Broadway One Mercantile Center, Suite 3400
St. Louis, Missouri 63102 St. Louis, Missouri 63101
(314) 444-7600 (314) 342-7676
_____________________________
Approximate date of commencement of proposed sale of the securities to the
public:
As soon as practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box.[_]
_____________________________
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED/(1)/ OFFERING PRICE PER UNIT AGGREGATE OFFERING PRICE/(2)/ REGISTRATION FEE
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Common stock, $1.00 stated value.. 499,252 $13.496 $6,738,000 $2,323.45
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(1) Based upon the assumed maximum number of shares of common stock of the
Registrant issuable to holders of common stock of DuQuoin Bancorp, Inc., an
Illinois corporation ("DBI"), in the proposed merger of DBI into HBI
Acquisition Company, an Illinois corporation and wholly owned subsidiary of
the Registrant ("HBI").
(2) Solely for purposes of calculating the registration fee in accordance with
Rule 457(f)(2), this figure represents, as of January 31, 1996, the book
value of the DBI securities to be received by the Registrant in the
proposed merger of DBI into HBI.
_____________________________
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
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FORM S-4 HEADING PROSPECTUS LOCATION
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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 Cover Page 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; Merger; Description of CNB's
Capital Stock; Comparison of Shareholder
Rights; Appendices A, B and C
5. Pro Forma Financial Information....................... Selected Financial Data; Pro Forma Financial Data
6. Material Contacts with the Company Being
Acquired............................................ Summary Information; Merger
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to Be Underwriters....... *
8. Interests of Named Experts and Counsel................ 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;
Summary Information; Selected Financial Data;
Parties; 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..... *
14. Information with Respect to Registrants Other than S-3
or S-2 Registrants.................................. *
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__________________________________________
* Indicates items not applicable
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FORM S-4 HEADING PROSPECTUS LOCATION
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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; Comparative Stock Prices;
Selected Financial Data; Parties; Merger; Information
About DBI; Financial Statements of DBI
18. Information if Proxies, Consents or Authorizations are to
be Solicited........................................ Incorporation of Certain Documents By Reference;
Summary Information; Special Meeting; Merger;
Shareholder Proposals
19. Information if Proxies, Consents or Authorizations are
not to be Solicited or in an Exchange Offer......... *
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______________________________________
*Indicates item not applicable
<PAGE>
On letterhead of:
DuQuoin Bancorp, Inc.
____________, 1996
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders (the
"Special Meeting") of DuQuoin Bancorp, Inc., an Illinois corporation ("DBI"), to
be held on ____________, 1996. The Special Meeting will be held at
____________________________ commencing at ____________ __.m. local time.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve an Agreement and Plan of Merger (the "Merger Agreement"),
dated November 17, 1995, as amended January 31, 1996, and the transactions
contemplated thereby, including the acquisition of DBI by CNB Bancshares, Inc.,
an Indiana corporation ("CNB"), by means of the merger of DBI with and into a
wholly-owned subsidiary of CNB (the "Merger").
If the Merger is approved and consummated, each issued and outstanding
share of common stock of DBI, par value $25.00 per share, other than shares held
by shareholders properly exercising dissenter's rights, will be converted into
the right to receive 17.96 shares of common stock, stated value $1.00 per share,
of CNB, subject to possible downward adjustment as provided in the Merger
Agreement and described in the accompanying Prospectus/Proxy Statement.
Your Board of Directors submits the proposed Merger to you after careful
review and consideration. We believe that the proposed Merger will provide
significant value to all shareholders, enabling shareholders of DBI to
participate in the expanded opportunities for growth that association with a
larger, more geographically-diversified financial institution makes possible.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF
THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY AT THE SPECIAL
MEETING.
You are urged to carefully read in full the accompanying Prospectus/Proxy
Statement, including the Appendices, which describes the Merger and related
matters in more detail.
Your participation in the Special Meeting, in person or by proxy, is
important. Therefore, please mark, 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 revoke your proxy and vote your shares in person if you wish,
even if you have previously mailed in your proxy card.
If you need assistance in completing your proxy card or if you have
questions about the Prospectus/Proxy Statement, please feel free to contact me
at (618) 542-2142.
Sincerely,
DUQUOIN BANCORP, INC.
By: ______________________________________
Daniel H. Eaves
President and Chief Executive Officer
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DUQUOIN BANCORP, INC.
AN ILLINOIS CORPORATION
_________________________________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON ____________, 1996
_________________________________________
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "Special
Meeting") of DuQuoin Bancorp, Inc., an Illinois corporation ("DBI"), will be
held on _______________, 1996, at _______ __.m., local time, at
__________________________, for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement and Plan
of Merger (the "Merger Agreement"), dated November 17, 1995, as
amended January 31, 1996, among DBI, CNB Bancshares, Inc., an Indiana
corporation ("CNB"), and HBI Acquisition Company, an Illinois
corporation and wholly-owned subsidiary of CNB ("HBI"), and the
transactions contemplated thereby, pursuant to which DBI will be
merged (the "Merger") with and into HBI and DuQuoin National Bank, a
wholly-owned subsidiary of DBI, will be merged with and into Citizens
Bank of Illinois, National Association, a wholly-owned subsidiary of
HBI, upon the terms and conditions set forth in the Merger Agreement,
as more fully described in the accompanying Prospectus/Proxy
Statement.
2. To consider and vote upon a 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 Merger Agreement and the transactions contemplated
thereby.
A copy of the Merger Agreement is attached as Appendix A to the
accompanying Prospectus/Proxy Statement and is incorporated by reference in this
Notice.
The Board of Directors of DBI has fixed the close of business on
____________, 1996, as the record date for determination of shareholders
entitled to notice of and to vote at the Special Meeting or at any adjournments
or postponements thereof.
THE BOARD OF DIRECTORS OF DBI HAS APPROVED THE MERGER AGREEMENT AND
BELIEVES THAT THE MERGER IS FAIR TO, AND IS IN THE BEST INTERESTS OF, ITS
SHAREHOLDERS. THE BOARD, THEREFORE, UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS
OF DBI VOTE "FOR" APPROVAL OF THE PROPOSALS DESCRIBED ABOVE.
EACH SHAREHOLDER IS URGED TO COMPLETE AND RETURN PROMPTLY THE ACCOMPANYING
PROXY WHETHER OR NOT HE OR SHE PLANS TO ATTEND THE SPECIAL MEETING. The prompt
return of each shareholder's signed proxy will help assure a quorum and aid DBI
in reducing the expense of additional proxy solicitation. The giving of such
proxy does not affect a shareholder's right to vote in person in the event the
shareholder attends the Special Meeting.
By Order of the Board of Directors
________________________________________
JoAnn E. Isom, Secretary
DuQuoin, Illinois
____________, 1996
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CNB BANCSHARES, INC.
PROSPECTUS
______________________
DUQUOIN BANCORP, INC.
PROXY STATEMENT
This Prospectus/Proxy Statement relates to the proposed acquisition of
DuQuoin Bancorp, Inc., an Illinois corporation ("DBI"), by CNB Bancshares, Inc.,
an Indiana corporation ("CNB"), by means of the merger (the "Merger") of DBI
with and into HBI Acquisition Company, an Illinois corporation and wholly-owned
subsidiary of CNB ("HBI"), pursuant to the terms of an Agreement and Plan of
Merger (the "Merger Agreement"), dated November 17, 1995, as amended January 31,
1996, among DBI, CNB and HBI. A copy of the Merger Agreement is attached hereto
as Appendix A and is incorporated by reference herein.
This Prospectus/Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of DBI to be used at the
Special Meeting of Shareholders (the "Special Meeting") of DBI to be held on
___________, 1996. At the Special Meeting, holders of the common stock, par
value $25.00 per share, of DBI (the "DBI Common") will be asked to consider and
vote upon approval of the Merger Agreement and the transactions contemplated
thereby. Any proxy given pursuant to this solicitation may be revoked by the
grantor at any time prior to the voting thereof at the Special Meeting.
Shareholders of DBI will be entitled to dissenters' rights in connection with
the Merger as described herein. See "SPECIAL MEETING" and "MERGER -- Dissenters'
Rights."
Pursuant to the Merger Agreement and in connection with the Merger, each
issued and outstanding share of DBI Common, other than shares held by
shareholders properly exercising dissenters' rights, will be converted into the
right to receive 17.96 shares of common stock, stated value $1.00 per share, of
CNB (the "CNB Common"), subject to possible downward adjustment as provided in
the Merger Agreement and described in this Prospectus/Proxy Statement, and cash
in lieu of fractional shares. See "MERGER -- Conversion Ratio."
This Prospectus/Proxy Statement also constitutes a prospectus of CNB with
respect to up to 499,252 shares of CNB Common issuable in the Merger to the
holders of DBI 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 ________ __, 1996 was $________.
This Prospectus/Proxy Statement and the accompanying form of proxy are
first being mailed to shareholders of DBI on or about ________ __, 1996.
The Merger is intended to qualify as a reorganization under the Internal
Revenue Code of 1986, as amended (the "Code"), and generally is intended to
achieve certain tax-deferral benefits for federal income tax purposes for DBI
shareholders. See "SUMMARY INFORMATION -- Merger -- Federal Income Tax
Consequences" and "MERGER -- Federal Income Tax Consequences."
This Prospectus/Proxy Statement does not cover any resales of the CNB
Common offered hereby to be received by the shareholders of DBI deemed to be
"affiliates" of CNB or DBI immediately prior to consummation of the Merger. No
person is authorized to make use of this Prospectus/Proxy Statement in
connection with such resales, although such securities may be traded without the
use of this Prospectus/Proxy Statement by those shareholders of DBI not deemed
to be "affiliates" of CNB or DBI. See "MERGER -- Resale of CNB Common."
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 ________ __, 1996
<PAGE>
TABLE OF CONTENTS
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PAGE
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AVAILABLE INFORMATION....................................................................... 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................................. 1
SUMMARY INFORMATION......................................................................... 3
Introduction............................................................................ 3
Parties................................................................................. 3
Special Meeting......................................................................... 4
Merger.................................................................................. 5
COMPARATIVE STOCK PRICES.................................................................... 13
SELECTED COMPARATIVE PER SHARE DATA......................................................... 15
SELECTED FINANCIAL DATA..................................................................... 16
SPECIAL MEETING............................................................................. 19
Date, Time and Place.................................................................... 19
Matters to be Considered................................................................ 19
Record Date............................................................................. 19
Vote Required........................................................................... 19
Security Ownership of Management........................................................ 20
Voting and Revocation of Proxies........................................................ 20
Solicitation of Proxies................................................................. 21
PARTIES..................................................................................... 21
CNB..................................................................................... 21
DBI..................................................................................... 22
MERGER...................................................................................... 23
General................................................................................. 23
Background of Merger.................................................................... 23
Reasons for Merger; Recommendation of DBI's Board of Directors.......................... 26
Opinion of Financial Advisor............................................................ 27
Form of Merger.......................................................................... 30
Conversion Ratio........................................................................ 31
Fractional Shares....................................................................... 32
Share Adjustments....................................................................... 32
Effective Time.......................................................................... 32
Resale of DBI Common Prior to Effective Time............................................ 33
Regulatory Approvals.................................................................... 33
Federal Reserve Board.............................................................. 33
Illinois Commissioner.............................................................. 33
O.C.C.............................................................................. 33
Conditions to Consummation of Merger.................................................... 33
Termination of Merger Agreement......................................................... 35
Termination Fee......................................................................... 35
Exchange of Stock Certificates.......................................................... 36
</TABLE>
i
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Representations and Warranties.......................................................... 37
Certain Other Agreements................................................................ 38
Business of DBI in Ordinary Course................................................. 38
Dividends.......................................................................... 39
Environmental Inspections.......................................................... 40
Other DBI Agreements............................................................... 41
CNB Agreements..................................................................... 41
Effect on Employee Benefit Plans........................................................ 42
Expenses and Fees....................................................................... 42
No Solicitation......................................................................... 43
Interests of Certain Persons in Merger.................................................. 43
Indemnification and Insurance...................................................... 43
Employee Benefits.................................................................. 44
Board Composition.................................................................. 44
Employment and Severance Agreements................................................ 44
Executive Salary Continuation Agreements........................................... 44
Interests of CNB's Management and Board............................................ 45
Waiver and Amendment.................................................................... 45
Dissenters' Rights...................................................................... 45
Federal Income Tax Consequences......................................................... 46
Accounting Treatment.................................................................... 47
Management and Operations After Merger.................................................. 48
Resale of CNB Common.................................................................... 48
PRO FORMA FINANCIAL DATA.................................................................... 50
DESCRIPTION OF CNB'S CAPITAL STOCK.......................................................... 56
General................................................................................. 56
CNB Common.............................................................................. 56
Dividend Rights.................................................................... 56
Voting Rights...................................................................... 56
Classification of Board of Directors............................................... 56
Liquidation Rights................................................................. 57
Preemptive Rights.................................................................. 57
Assessment and Redemption.......................................................... 57
Transfer Agent..................................................................... 57
Dividend Restrictions under Loan Agreement......................................... 57
COMPARISON OF SHAREHOLDER RIGHTS............................................................ 58
Shareholder Vote Required for Certain Transactions...................................... 58
Business Combinations.............................................................. 58
Removal of Directors............................................................... 59
Amendments to Articles of Incorporation............................................ 59
Voting Rights...................................................................... 60
</TABLE>
ii
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Special Meeting of Shareholders; Shareholder Action by Written Consent.................. 61
Dissenters' Rights...................................................................... 61
Takeover Statutes....................................................................... 62
Indemnification......................................................................... 63
Limitation of Liability of Directors.................................................... 64
Consideration of Non-Shareholder Interests.............................................. 65
INFORMATION ABOUT DBI....................................................................... 65
Business of DBI......................................................................... 65
Management's Discussion and Analysis of Financial Condition and Results of Operations... 66
Security Ownership of Certain Beneficial Owners and Management.......................... 80
LEGAL OPINION............................................................................... 81
EXPERTS..................................................................................... 81
Independent Auditors for CNB............................................................ 81
Independent Auditors for DBI............................................................ 81
Presence at Special Meeting............................................................. 81
SHAREHOLDER PROPOSALS....................................................................... 81
INDEX TO FINANCIAL STATEMENTS OF DBI........................................................ F-1
FINANCIAL STATEMENTS OF DBI................................................................. F-1
APPENDICES
Agreement and Plan of Merger............................................................ A-1
Fairness Opinion of The Chicago Corporation............................................. B-1
Excerpts of Illinois Business Corporation Act of 1983, as amended (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
DBI. 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 Seven World Trade Center, New York, New York
10048, and Suite 1400, Citicorp 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, 1995;
and
2. 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).
All documents and reports filed by CNB pursuant to Section 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
<PAGE>
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, TO ANY
PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROSPECTUS/PROXY STATEMENT
IS DELIVERED, UPON WRITTEN OR ORAL REQUEST, TO DAVID L. KNAPP, EXECUTIVE VICE
PRESIDENT AND SECRETARY, 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 ________ __, 1996.
2
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SUMMARY INFORMATION
The following is a brief summary of certain information contained elsewhere
in this Prospectus/Proxy Statement. Although the following summary addresses all
material information regarding the Merger, it 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 Appendices
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 DBI and its subsidiaries has
been supplied by DBI. Shareholders are urged to read this Prospectus/Proxy
Statement and the Appendices hereto in their entirety. All share and per share
information with respect to CNB Common has been adjusted to reflect a 5% stock
dividend (the "Stock Dividend") paid by CNB in November 1995.
INTRODUCTION
This Prospectus/Proxy Statement relates to the Merger Agreement among DBI,
CNB and HBI. The Merger Agreement provides for, among other things, CNB's
acquisition of DBI by means of the Merger of DBI with and into HBI, a wholly-
owned subsidiary of CNB. Upon consummation of the Merger, HBI will continue to
be a wholly-owned subsidiary of CNB and DBI will cease to exist as a separate
entity. The full text of the Merger Agreement is attached hereto as Appendix A
and is incorporated by reference herein.
PARTIES
CNB
CNB is a multi-bank holding company headquartered in Evansville, Indiana.
At December 31, 1995, CNB had consolidated assets of $3.6 billion, deposits of
$2.8 billion, loans of $2.0 billion and shareholders' equity of $298 million.
Through the 92 full-service banking offices, 29 consumer finance offices and one
insurance agency office of its financial subsidiaries 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. The address of the principal offices of CNB
and HBI is 20 N.W. Third Street, Evansville, Indiana 47739 (telephone number
(812) 464-3400).
For additional information regarding CNB, see "PARTIES -- CNB" and the
documents under "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
DBI
DBI is an Illinois corporation headquartered in DuQuoin, Illinois. DBI's
wholly-owned subsidiary, DuQuoin National Bank ("DuQuoin Bank"), provides full
banking services through its two offices in DuQuoin, Illinois. At December 31,
1995, DBI had assets of $83.3 million, deposits of $72.9 million, loans of $45.7
million and shareholders' equity of $6.6 million. The address of the principal
office of DBI is 124 West Main Street, DuQuoin, Illinois 62832 (telephone number
(618) 542-2142).
3
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For additional information regarding DBI, see "PARTIES -- DBI" and
"INFORMATION ABOUT DBI."
SPECIAL MEETING
DATE, TIME AND PLACE OF SPECIAL MEETING
The Special Meeting will be held at ____________________, DuQuoin
Illinois on________ __, 1996, at ________ a.m., local time. See "SPECIAL
MEETING -- Date, Time and Place."
MATTERS TO BE CONSIDERED
At the Special Meeting, holders of DBI Common will be asked to consider and
vote to approve the Merger Agreement and the transactions contemplated thereby,
including the Merger. (Shareholders of DBI also may be asked to vote upon a
proposal to adjourn or postpone the Special Meeting, which adjournment or
postponement could be for the purpose of, among other things, allowing time for
the solicitation of additional votes to approve the Merger Agreement and the
transactions contemplated thereby.) See "SPECIAL MEETING -- Matters to be
Considered."
RECORD DATE
The record date (the "Record Date") for the Special Meeting is ________ __,
1996. Only holders of record of the outstanding shares of DBI Common at the
close of business on the Record Date will be entitled to notice of, and to vote
at, the Special Meeting. See "SPECIAL MEETING -- Record Date."
VOTE REQUIRED
The presence, in person or by proxy, of holders of a majority of the issued
and outstanding shares of DBI Common entitled to vote on the Record Date is
necessary to constitute a quorum at the Special Meeting. Pursuant to the
Illinois Business Corporation Act of 1983, as amended (the "Illinois Law"), the
affirmative vote of the holders of at least two-thirds of all of the issued and
outstanding shares of DBI Common is required to adopt the Merger Agreement and
the transactions contemplated thereby, including the Merger. Approval of the
Merger Agreement by the requisite vote of the holders of DBI Common is a
condition to, and required for, consummation of the Merger. The failure to
submit a proxy card (or to vote in person at the Special Meeting), the
abstention from voting at the Special Meeting and, in the case of shares held in
street name, the failure of the beneficial owner thereof to give specific voting
instructions to the broker holding such shares (i.e., broker nonvotes), will
have the same effect as a vote against the approval of the Merger Agreement and
the transactions contemplated thereby. See "SPECIAL MEETING -- Vote Required"
and "MERGER -- Conditions to Consummation of Merger." The proposal to authorize
the proxies to adjourn the Special Meeting to permit further solicitation of
proxies, if necessary, requires the affirmative of holders of a majority of the
DBI Common present in person or represented by proxy and entitled to vote at the
Special Meeting. If there are insufficient shares represented at the Special
Meeting to constitute a quorum or to approve the Merger Agreement and the
transactions contemplated thereby at the Special Meeting, it is contemplated
that such meeting would be adjourned in order to permit further solicitation of
proxies.
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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 matters to be considered at the
Special Meeting by filing with the Secretary of DBI a written revocation or a
duly executed proxy bearing a later date; however, attendance at the Special
Meeting will not in and of itself constitute a revocation of the proxy. See
"SPECIAL MEETING -- Voting and Revocation of Proxies."
SECURITY OWNERSHIP OF DBI MANAGEMENT
As of the close of business on the Record Date, 27,798 shares of DBI Common
were issued and outstanding and 9,171 shares, or 32.99%, of DBI Common were
beneficially owned by directors and executive officers of DBI and their
affiliates. It is currently expected that each such director and executive
officer of DBI will vote the shares of DBI Common beneficially owned by him or
her for approval of the Merger Agreement and the transactions contemplated
thereby, including the Merger. As of the close of business on the Record Date,
DuQuoin Bank, in various fiduciary capacities, held a total of 200 shares, or
0.7%, of DBI Common under trust agreements and other instruments and agreements.
It is the practice of DuQuoin Bank, when holding shares as sole trustee or sole
executor, to vote said shares but, where shares are held as co-executor or
co-trustee, approval is obtained from the co-fiduciary before voting. As of the
Record Date, neither CNB nor any of its directors and executive officers or
their affiliates owned any shares of DBI Common. See "SPECIAL MEETING
- -- Security Ownership of Management."
MERGER
The following summary is qualified in its entirety by reference to the full
text of the Merger Agreement, which is attached as Appendix A hereto and
incorporated by reference herein.
EFFECTS OF MERGER
Subject to the terms and conditions of the Merger Agreement and in
accordance with the Illinois Law, at the time the Merger is consummated (the
"Effective Time"), DBI will merge with and into HBI, and HBI will be the
surviving corporation in the Merger. At the Effective Time, the separate
corporate existence of DBI will terminate.
As a result of the Merger, each share of DBI Common issued and outstanding
immediately prior to the Effective Time, other than shares any holders of which
have properly exercised their dissenters' rights under the Illinois Law, will be
converted into the right to receive the number of shares of CNB Common that
equals the product of A multiplied by B multiplied by C, where A equals 17.96; B
equals the quotient of the Closing Book Value (as defined in the following
paragraph) of DBI divided by $7,032,000; and C equals the quotient of $30.76
divided by the CNB Average Price (as defined in the following paragraph) (the
"Conversion Ratio"). In no event may either quotient described in the preceding
sentence exceed one and, therefore, in no event will the Conversion Ratio exceed
17.96 shares of CNB Common for each share of DBI Common. See "MERGER --
Conversion Ratio."
The term "Closing Book Value" means the amount of the consolidated
shareholders' equity accounts of DBI, as of the end of the month immediately
preceding the Effective Time, determined in accordance with
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generally accepted accounting principles ("GAAP") consistently applied with the
year ended December 31, 1994, but excluding for this purpose any adjustments to
the consolidated shareholders' equity accounts solely as a result of marketable
securities classified as "Available for Sale" in accordance with Statement of
Financial Accounting Statements ("SFAS") No. 115, less (i) the amount of any
increase in the shareholders' equity accounts of DBI resulting from or
attributable to the sale of securities held on and sold after June 30, 1995, or
any transactions or accounting adjustments not in the ordinary course of
business effected or completed after June 30, 1995, plus (ii) any reduction of
shareholders' equity theretofore recorded solely as a result of accruals or
charges taken by DBI at the written request of CNB pursuant to the Merger
Agreement or any provision for loan losses taken by DBI and its subsidiaries
with the written concurrence of CNB. The term "CNB Average Price" means the
average closing price of a share of CNB Common as reported on Nasdaq for the
twenty business days preceding the fifth calendar day prior to the closing date
of the Merger (the "Closing Date").
No fractional shares of CNB Common will be issued in the Merger and, in
lieu thereof, holders of shares of DBI Common who would otherwise be entitled to
a fractional share interest (after taking into account all shares of DBI 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. See "MERGER --Fractional Shares."
As the Closing Book Value will be calculated based upon amounts at the end
of the month immediately preceding the Effective Time and the CNB Average Price
will be calculated based upon the price of CNB Common for a twenty business day
period ending five days before the Closing Date, it is not possible, as of the
date of this Prospectus/Proxy Statement, to determine the actual Conversion
Ratio. For purposes of illustration, however, if the Effective Time and the
Closing Date both would have occurred on ________ __, 1996, the Closing Book
Value would have been $________ and the CNB Average Price would have been
$________ and, based upon those amounts, shareholders of DBI would have received
17.96 shares of CNB Common for each share of DBI Common (and cash in lieu of
fractional shares). In the event, however, that the actual Closing Book Value
should be less than $7,032,000 and/or the actual CNB Average Price should be
greater than $30.76, then the Conversion Ratio would be less than 17.96 shares
of CNB Common for each share of DBI Common. In no event, however, will the
Conversion Ratio exceed 17.96 shares of CNB Common for each share of DBI Common.
The obligation of DBI to consummate the Merger is conditioned upon the CNB
Average Price being not less than $22.74. See "MERGER --Conditions to
Consummation of Merger."
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."
For information on how shareholders of DBI will be able to exchange
certificates representing shares of DBI Common for certificates representing
shares of CNB Common after the Effective Time, see "MERGER -- Exchange of Stock
Certificates."
VALUE OF MERGER
As of ________ __, 1996, 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
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value of $________ to holders of DBI Common, and the approximate total value of
the Merger Consideration to DBI shareholders was $________ million. The market
value of the Merger Consideration as stated above may materially increase or
decrease depending on the market price of CNB Common. No assurance can be given
as to the future market price of CNB Common.
REASONS FOR MERGER AND RECOMMENDATION OF BOARD OF DIRECTORS
The Board of Directors of DBI believes that the terms of the Merger
Agreement are fair and in the best interests of DBI and its shareholders. The
terms of the Merger Agreement were reached on the basis of arms' length
negotiations between CNB and DBI. In the course of reaching its decision to
approve the Merger Agreement, the Board of Directors of DBI consulted with its
financial advisor, The Chicago Corporation ("TCC"), regarding the financial
terms of the Merger Agreement and the fairness of the Conversion Ratio to the
holders of DBI Common from a financial point of view. See "MERGER -- Opinion of
Financial Advisor."
Members of the Board of Directors and management of DBI own shares of DBI
Common and, therefore, have a financial interest in the Merger similar to the
interests of other shareholders of DBI generally. Certain members of the Board
of Directors and management of DBI may, however, also be deemed to have certain
interests in the Merger that are in addition to their interests as shareholders
of DBI generally. See "MERGER -- Interests of Certain Persons in Merger."
THE BOARD OF DIRECTORS OF DBI HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND UNANIMOUSLY RECOMMENDS APPROVAL OF THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE MERGER.
For a discussion of the background of the Merger and the factors considered
by the Board of Directors of DBI in reaching its decision to approve the Merger
Agreement, see "MERGER -- Background of Merger," "-- Reasons for Merger;
Recommendation of DBI's Board of Directors."
OPINION OF FINANCIAL ADVISOR
On November 17, 1995, upon completion of negotiations by DBI with CNB, TCC,
DBI's advisor with respect to financial aspects of the Merger, rendered its oral
opinion and, as of the date hereof, has rendered its written opinion to the
Board of Directors of DBI that, as of November 17, 1995 and as of the date
hereof, respectively, the Conversion Ratio is fair, from a financial point of
view, to the holders of DBI Common. For TCC's services in connection with the
Merger, including the rendering of its opinions, DBI: (i) has agreed to pay TCC
(a) a $10,000 advisory fee, which was paid on July 28, 1995, (b) $40,000, which
was paid contemporaneous with the mailing of this Prospectus/Proxy Statement,
and (c) $50,000, which will be payable upon consummation of the Merger; and (ii)
has agreed to pay TCC its reasonable out-of-pocket expenses and to indemnify TCC
against certain liabilities.
The opinion of TCC is attached hereto as Appendix B and should be read in
its entirety with respect to the assumptions made, matters considered and limits
of the reviews undertaken by TCC in rendering its opinion. See "MERGER --
Opinion of Financial Advisor" for a further description of the opinion of TCC
and of the fees payable to TCC by DBI.
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CONDITIONS TO MERGER
The parties' obligations to consummate the Merger are subject to various
conditions including, among other things: (i) approval of the Merger Agreement
and the transactions contemplated thereby by the holders of DBI Common (see
"SPECIAL MEETING -- Vote Required"); (ii) receipt of regulatory approvals (see
"MERGER -- Regulatory Approvals"); (iii) receipt of a legal opinion on certain
tax aspects of the Merger (see "MERGER -- Federal Income Tax Consequences");
(iv) receipt of an accounting opinion to the effect that the Merger qualifies
for "pooling of interests" accounting treatment (see "MERGER --Accounting
Treatment"); (v) the consummation on the Closing Date of the merger (the
"Subsidiary Bank Merger") of DuQuoin Bank and Citizens Bank of Illinois,
National Association ("CNB Bank"), a wholly-owned subsidiary of HBI (see "MERGER
- -- Management and Operations After Merger"); (vi) the continued force and effect
of the Amended and Restated Employment Agreement (the "Eaves Amended Employment
Agreement") among CNB, DuQuoin Bank and Daniel H. Eaves, the President and Chief
Executive Officer of DBI and DuQuoin Bank (see "MERGER -- Interests of Certain
Persons in Merger -- Employment and Severance Agreements"); and (vii) the sum of
the amount of the consolidated allowance for loan losses of DBI, as of December
31, 1995, determined in accordance with GAAP, and the amount of the charge-offs
taken by DBI and its subsidiaries from the date of the Merger Agreement to
December 31, 1995, being not less than $1,550,000. The conditions described in
clauses (i) and (ii) above (the receipt of shareholder and regulatory approvals)
may not be waived by either party. Although the remaining conditions to effect
the Merger may be waived by the party entitled to the benefit thereof, neither
CNB nor DBI intends to waive any such conditions, except in those circumstances
where the Board of Directors of CNB or DBI, as the case may be, deems such
waiver to be in the best interests of CNB or DBI, as the case may be, and its
respective shareholders. The conditions described above in clauses (ii)
(regulatory approvals), (iii) (tax opinion), and (vii) (minimum consolidated
allowance for loan losses) have been satisfied. There can be no assurances as
to when and if such other conditions to the Merger will be satisfied (or, where
permissible, waived) or that the Merger will be consummated. See "MERGER --
Conditions to Consummation of Merger."
REGULATORY APPROVALS
The Merger is subject to approval by the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") pursuant to Section 3 of the Bank
Holding Company Act of 1956, as amended ("B.H.C.A."), and by the Illinois
Commissioner of Banks and Trust Companies (the "Illinois Commissioner"). The
Subsidiary Bank Merger is subject to approval by the Office of the Comptroller
of the Currency (the "O.C.C."). The Merger was approved by the Federal Reserve
Board on January 23, 1996, and by the Illinois Commissioner on February 22, 1996
and all applicable waiting periods have expired. The Subsidiary Bank Merger was
approved by the O.C.C. on January 26, 1996, and all applicable waiting periods
have expired.
BUSINESS OF DBI IN ORDINARY COURSE; DIVIDENDS
Pursuant to the Merger Agreement, DBI has agreed to, and has agreed to
cause each of its subsidiaries to, carry on its respective business and the
discharge or incurrence of its obligations and liabilities only in the usual,
regular and ordinary course of business, subject to obtaining CNB's prior
approval of certain specified actions. See "MERGER -- Certain Other Agreements
- -- Business of DBI in Ordinary Course."
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The Merger Agreement provides that DBI may declare and pay its regular
semi-annual dividend on the DBI Common not to exceed $5.00 per share at
approximately the same time during the year which it has historically declared
and paid such dividend (i.e., declare each December and June and pay each
January and July, respectively). CNB and DBI 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 DBI shareholders
would receive the applicable portion of the semi-annual dividend from DBI or the
regular quarterly dividend from CNB, but not from both with respect to any such
quarter. See "MERGER --Certain Other Agreements -- Dividends."
TERMINATION OF MERGER AGREEMENT
The Merger Agreement may be terminated, at any time prior to the Effective
Time: (i) by mutual agreement of CNB and DBI; (ii) by CNB or DBI in the event of
a material uncured breach by the other of any of its representations and
warranties or agreements under the Merger Agreement; (iii) by CNB following
written notice to DBI if certain reports of environmental inspection on the real
properties of DBI to be obtained pursuant to the Merger Agreement should
disclose any matters requiring remedial or corrective measures the cost of which
exceed $200,000 (see "MERGER -- Certain Other Agreements -- Environmental
Inspections"); (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) (see "MERGER -- Conditions to Consummation of Merger"); (v) by
either party if any regulatory application is finally denied or disapproved by
the respective regulatory authority (see "MERGER -- Regulatory Approvals"); (vi)
by either party if the Merger Agreement and the transactions contemplated
thereby, including the Merger, are not approved by the shareholders of DBI (see
"SPECIAL MEETING -- Vote Required"); (vii) by CNB in the event that DBI 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 Merger Agreement; and (viii) by either party if the Merger is not
consummated on or prior to June 30, 1996. See "MERGER -- Termination of Merger
Agreement."
TERMINATION FEE
The Merger Agreement provides that upon the occurrence of one or more
Triggering Events (as defined below in this paragraph), DBI will pay to CNB the
sum of $1,000,000. The term "Triggering Event" means any of the following
events or transactions occurring after the date of the Merger Agreement: (i)
the termination of the Merger Agreement by CNB upon a material breach thereof by
DBI (including, without limitation, an agreement between DBI or any subsidiary
of DBI and any third party which is inconsistent in a material respect with the
transactions contemplated by the Merger Agreement), if within eighteen months
after the date of such termination, an event described in clause (ii) or (iii)
below has occurred (notwithstanding the qualification that such event shall have
occurred prior to the termination of the Merger Agreement); or (ii) prior to
termination of the Merger Agreement, any person (other than CNB) will have
acquired beneficial ownership or the right to acquire beneficial ownership of
50% or more of the voting power of DBI; or (iii) prior to termination of the
Merger Agreement, DBI or any material subsidiary of DBI, without having received
prior written consent from CNB, will have completed (1) a merger, consolidation
or similar transaction involving DBI or any material subsidiary of DBI, (2) a
transaction whereby any person (other than CNB) will have purchased, leased or
otherwise acquired 30% or more of the assets of DBI or any material subsidiary
of DBI, or (3) a transaction whereby any person (other than
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CNB) will have purchased or otherwise acquired (including by way of merger,
consolidation, share exchange or similar transaction) beneficial ownership of
securities representing 50% or more of the voting power of DBI or any material
subsidiary of DBI (the transactions described above in clauses (1), (2) and (3)
are individually referred to herein as an "Acquisition Transaction"); or (iv)
the holders of DBI Common will not have approved the Merger Agreement at the
Special Meeting, or DBI's Board of Directors will have withdrawn or modified in
a manner materially adverse to CNB such Board's recommendation to the DBI
shareholders for the approval of the Merger Agreement, or will not have
recommended to the shareholders of DBI the approval of the Merger Agreement,
and, in any such case, an Acquisition Transaction will have occurred within
eighteen months after the Special Meeting or any adjournment thereof. 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 DBI's shareholders
entitled to vote on the Merger were resolicited if such failure to qualify for
pooling of interests was deemed material to the financial condition and results
of operations of CNB on a pro forma basis assuming completion of the Merger. As
of the date of this Prospectus/Proxy Statement, CNB and DBI are not aware, after
consultation with Geo. S. Olive & Co. L.L.C., of any existing facts or
circumstances which would preclude such a pooling opinion from being issued by
Geo. S. Olive & Co. L.L.C. See "MERGER -- Accounting Treatment."
EFFECTIVE TIME
The Merger Agreement provides that the Merger will be effective at such
time as Articles of Merger are filed with the Illinois Secretary of State.
Assuming that the Merger is approved by the requisite vote of the shareholders
of DBI and that the other conditions to the Merger are satisfied or waived
(where permissible) (see "MERGER -- Conditions to Consummation of Merger"), it
is presently anticipated that the Merger will be consummated during the second
quarter of 1996, 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). See "MERGER -- Effective Time."
RESALE OF DBI COMMON PRIOR TO EFFECTIVE TIME
With the exception of those shareholders of DBI who may be deemed to be
"affiliates" of DBI for purposes of Rule 145 under the Securities Act, the
Merger Agreement does not prohibit shareholders of DBI from selling their shares
prior to the Effective Time. The Merger Agreement provides, however, that each
affiliate of DBI 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 DBI Common during the period commencing on the 30th day prior to the
Effective Time and ending when financial results covering at least 30 days of
post-Merger operations of CNB have been published. Persons who may be deemed to
be affiliates of DBI generally include individuals who (or entities which)
control, are controlled by or are under common control
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with DBI and will include directors and certain officers of DBI and may include
principal shareholders of DBI. See "MERGER -- Resale of CNB Common."
INTERESTS OF CERTAIN PERSONS IN MERGER
Certain members of DBI's management and Board of Directors have material
interests in the Merger that are in addition to and separate from the interests
of shareholders of DBI generally. These material interests are provisions in
the Merger Agreement providing that: (i) CNB will provide officers and
directors of DBI and its subsidiaries, 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 (without the payment of any special premium or other
charge or expense) an endorsement to its directors' and officers' liability
insurance policy to cover acts and omissions of the directors and officers of
DBI and its subsidiaries occurring or failing to occur prior to the Closing
Date, DBI may purchase such coverage under its existing directors' and officers'
liability insurance on such terms and conditions as DBI deems appropriate
provided the total cost thereof does not exceed $30,000, and that CNB will cause
HBI or its successor, for six years after the Effective Time, to indemnify the
officers and directors of DBI against any liability arising out of actions
occurring prior to the Effective Time, to the extent that such indemnification
is then permitted by the Illinois Law and by DBI's Articles of Incorporation and
Bylaws as in effect as of the date of the Merger Agreement (see "MERGER --
Interests of Persons in Merger --Indemnification and Insurance"); (ii) each
employee (including an officer) of DBI and its subsidiaries 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"); (iii) each director of DuQuoin Bank will be elected to the regional
advisory Board of Directors of CNB Bank (for the DuQuoin Region) after the
Subsidiary Bank Merger and one or two of the directors of DuQuoin Bank, as
designated by DBI in consultation with CNB, will be elected to the Board of
Directors of CNB Bank (see "MERGER -- Interests of Certain Persons in Merger --
Board Composition"); and (iv) Mr. Daniel H. Eaves, President and Chief Executive
Officer of DBI and DuQuoin Bank, will serve as Chief Executive Officer of the
DuQuoin Region of CNB Bank after the Subsidiary Bank Merger pursuant to the
terms of the Eaves Amended Employment Agreement (see "MERGER -- Interests of
Certain Persons -- Employment and Severance Agreements" and "-- Management and
Operations After Merger"). In addition, Mr. Eaves and Ms. Jo Ann E. Isom,
Senior Vice President and Cashier of DuQuoin Bank, have certain rights under
their respective Executive Salary Continuation Agreements with DuQuoin Bank (see
"MERGER -- Interests of Certain Persons in Merger -- Executive Salary
Continuation Agreements").
For information about the percentage of DBI Common owned by the directors
and executive officers of DBI, see "INFORMATION ABOUT DBI -- Security Ownership
of Management." None of the directors or executive officers of DBI would own,
on a pro forma basis giving effect to the Merger, more than 1% of the issued and
outstanding shares of CNB Common.
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 DBI, and no gain or loss will be recognized by
shareholders of DBI, except in respect of cash received for fractional shares
and except for any cash payments which might be received by shareholders
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of DBI 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
Merger 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 DBI Common upon receipt of Merger Consideration
(except for cash received in lieu of fractional shares and by shareholders
properly exercising their dissenters' rights); (iii) the basis of CNB Common
received by the shareholders of DBI will be the same as the basis of DBI Common
exchanged therefor; and (iv) the holding period of the shares of CNB Common
received by the shareholders of DBI will include the holding period of the
shares of DBI Common exchanged therefor, provided such shares were held as
capital assets as of the Effective Time.
THE FOREGOING IS A GENERAL SUMMARY OF ALL OF THE MATERIAL FEDERAL INCOME
TAX CONSEQUENCES OF THE MERGER TO SHAREHOLDERS OF DBI WITHOUT REGARD TO THE
PARTICULAR FACTS AND CIRCUMSTANCES OF EACH SHAREHOLDER'S TAX SITUATION AND
STATUS. EACH SHAREHOLDER OF DBI 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 DBI are governed by the Illinois
Law. Under the Illinois Law, the applicable portions of which are attached
hereto as Appendix C, a shareholder will be entitled to receive, in cash, the
fair value of his or her shares of DBI Common held immediately before the Merger
is consummated if such shareholder delivers to DBI, prior to the Special
Meeting, a written demand for payment for his or her shares if the Merger is
consummated and the shareholder does not vote in favor of the Merger Agreement
and the transactions contemplated thereby. If holders of more than
approximately 10% of the outstanding shares of DBI Common should properly
exercise their dissenters' rights, the Merger would not qualify as a "pooling of
interests" for accounting and financial reporting purposes, which qualification
is a condition to the obligation of CNB to proceed with the Merger. See "MERGER
- --Dissenters' Rights" and "-- Conditions to Consummation of Merger."
MANAGEMENT AND OPERATIONS AFTER MERGER
The Merger is conditioned upon the concurrent merger of DuQuoin Bank with
and into CNB Bank. Following the Subsidiary Bank Merger: (i) CNB Bank will
continue to serve the DuQuoin community, under the name "Citizens Bank of
Illinois, National Association," in substantially the same manner as DuQuoin
Bank has done historically; (ii) Mr. Daniel H. Eaves, President and Chief
Executive Officer of DBI and DuQuoin Bank, will serve as Chief Executive Officer
of the DuQuoin Region of CNB Bank; (iii) one or two of the directors of DuQuoin
Bank, as designated by DBI in consultation with CNB, will be elected as
directors of CNB Bank; and (iv) each of the directors of DuQuoin Bank will be
elected as regional advisory directors of CNB Bank for the DuQuoin Region. The
management and Board of Directors of HBI and CNB will not be affected as a
result of the Merger. See "MERGER -- Management and Operations After Merger"
and "-- Interests of Certain Persons in Merger."
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COMPARISON OF SHAREHOLDER RIGHTS
The rights of the shareholders of DBI Common and CNB Common differ in
certain respects. The rights of the shareholders of DBI who receive shares of
CNB Common in the Merger will be governed by the corporate law of Indiana (the
"Indiana Law"), as CNB is incorporated in Indiana, and by the Articles of
Incorporation, Bylaws and other corporate documents of CNB. The governing law
and documents of CNB differ, in several respects, from those which apply to DBI,
which is an Illinois corporation, of which the material differences, as
hereafter described under "COMPARISON OF SHAREHOLDER RIGHTS," are the
shareholder votes required for certain business combinations, removal of
directors, 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 the rights of CNB and its shareholders pursuant to
certain corporate takeover statutes. See "COMPARISON OF SHAREHOLDER RIGHTS."
Certain provisions of the Articles of Incorporation and the Bylaws of CNB
reduce the vulnerability of CNB 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 the Board of Directors of CNB and that these provisions
will encourage such negotiations and discourage nonnegotiated takeover attempts.
It is also the view of the Board of Directors of CNB 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 the Board
of Directors of CNB, 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 the Board
of Directors and management of CNB more difficult.
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.
There is no established public trading market for the shares of DBI Common.
Management of DBI 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 DBI Common, the prices indicated may
not reflect the prices which would be paid for such shares on an active market.
13
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<PAGE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CNB COMMON DBI COMMON
------------------------------ ----------------------
Cash Cash
Dividend Dividend
High Low Declared/(1)/ High Low Declared
---- --- ------------ ---- --- --------
<S> <C> <C> <C> <C> <C> <C>
1994 First Quarter................. $29.07 $26.51 $0.18 $ 275 $ 260 $ --
Second Quarter................ 29.28 26.93 0.19 275 275 5.00
Third Quarter................. 30.14 28.64 0.19 275 275 --
Fourth Quarter................ 30.16 26.84 0.19 /(2)/ /(2)/ 5.00
1995 First Quarter................. $30.52 $27.79 $0.19 $ 300 $ 275 --
Second Quarter................ 28.74 27.79 0.20 /(2)/ /(2)/ 5.00
Third Quarter................. 28.50 26.60 0.20 /(2)/ /(2)/ --
Fourth Quarter................ 28.50 25.00 -- /(2)/ /(2)/ 5.00
1996 First Quarter................. $29.00 $27.75 $0.21 /(2)/ /(2)/ --
Second Quarter................ ___ ___ ___ /(2)/ /(2)/ __
(through ____________, 1996)
</TABLE>
_____________
/(1)/ During the fourth quarter of 1995, CNB changed its dividend policy and
began declaring and paying its quarterly dividends in the first month
immediately following the quarter for which the dividend was payable.
CNB's prior policy had been to declare its quarterly dividends in the
last month of the quarter for which the dividend was payable and to pay
the dividend in the first month of the following quarter.
/(2)/ No trades known to management.
On November 16, 1995, the last trading day before the announcement of the
execution of the Merger Agreement, the closing sale price of CNB Common, as
reported on Nasdaq, was $26.25 per share. On such date, the equivalent per
share price for DBI Common, which is calculated by multiplying the specified
closing sale price of CNB Common by the Conversion Ratio of 17.96 shares of CNB
Common for each share of DBI Common (assuming no downward adjustment of the
Conversion Ratio; see "MERGER --Conversion Ratio"), was $471.45.
The most recent transaction reported to management of DBI involving
shares of DBI Common took place on January 24, 1995, at a price per share of
$300.
On ________ __, 1996, the closing sale price of CNB Common, as reported
on Nasdaq, was $________ per share and the equivalent per share price for DBI
Common (assuming no downward adjustment of the Conversion Ratio; see "MERGER --
Conversion Ratio"), was $________ per share, and there were, as of such date,
approximately ________ and 117 holders of record of CNB Common and DBI Common,
respectively.
Shareholders of DBI are advised to obtain current market quotations for
CNB Common.
14
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<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 DBI. 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 pro forma amounts may
not be indicative of the results that actually would have occurred if the Merger
had been in effect on the dates indicated.
The amounts designated "Historical" represent the historical financial
results of CNB and DBI. The amounts designated "Pro Forma Combined Per Share"
represent the pro forma results of the Merger. The amounts designated
"Equivalent Pro Forma Per Share" are computed by multiplying the Pro Forma
Combined Per Share amounts by the Conversion Ratio of 17.96 shares of CNB Common
for each share of DBI 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 DBI."
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
NET INCOME PER COMMON SHARE:/(1)/
Historical:
CNB
Primary................................ $ 1.96 $ 1.68 $ 1.74
Fully-Diluted.......................... 1.96 1.66 1.71
DBI..................................... 4.29 38.83 48.79
Pro forma combined per share:
Primary.................................. 1.91 1.69 1.77
Fully-Diluted............................ 1.91 1.68 1.74
Equivalent pro forma per share:
Primary.................................. 34.30 30.35 31.79
Fully-Diluted............................ 34.30 30.17 31.25
DIVIDENDS DECLARED PER COMMON SHARE:/(2)/
Historical:
CNB/(3)/................................. 0.59 0.75 0.70
DBI...................................... 10.00 10.00 8.00
Pro forma combined per share............... 0.59 0.75 0.70
Equivalent pro forma per share............. 10.60 13.47 12.57
BOOK VALUE PER COMMON SHARE AT YEAR END:
Historical:
CNB...................................... 16.64 15.16 15.48
DBI...................................... 236.33 212.28 229.75
Pro forma combined per share............... 16.54 15.07 15.42
Equivalent pro forma per share............. 297.06 270.66 276.94
</TABLE>
______________
/(1)/ Net income of CNB and of DBI is before change in accounting for income
taxes (FAS 109), which, for CNB increased primary and fully-diluted net
income per share in 1993 by $0.11 and $0.10, respectively, and, for DBI
increased net income per share in 1994 by $11.79.
/(2)/ CNB's pro forma and DBI's pro forma equivalent dividends per share
represent historical dividends per share declared by CNB multiplied by
the Conversion Ratio of 17.96 (assuming no downward adjustment of the
Conversion Ratio; see "MERGER -- Conversion Ratio").
/(3)/ During the fourth quarter of 1995, CNB changed its dividend policy and
began declaring and paying its quarterly dividends in the first month
immediately following the quarter for which the dividend was payable.
CNB's prior policy had been to declare its quarterly dividends in the
last month of the quarter for which the dividend was payable and to pay
the dividend in the first month of the following quarter.
15
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<PAGE>
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SELECTED FINANCIAL DATA
(unaudited)
The following tables present selected unaudited consolidated historical
financial data for CNB and DBI 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 DBI 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. The pro forma amounts may not be indicative of the
results that actually would have occurred if the Merger had been in effect on
the dates indicated. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE,"
"PRO FORMA FINANCIAL DATA" and "FINANCIAL STATEMENTS OF DBI."
CNB
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
(dollars in thousands, except per share data)
INCOME STATEMENT DATA:
Interest income...................................... $ 273,785 $ 227,050 $ 212,887 $ 227,540 $ 253,014
Interest expense..................................... 140,350 105,777 101,493 122,307 155,570
Net interest income.................................. 133,435 121,273 111,394 105,233 97,444
Provision for loan losses............................ 6,939 7,234 3,890 9,191 15,431
Noninterest income................................... 46,669 46,805 43,113 37,809 30,059
Noninterest expense.................................. 116,804 113,539 103,662 96,457 89,405
Net income/(1)/...................................... 35,651 30,512 30,916 26,121 16,038
PER COMMON SHARE DATA:
Net income/(1)/
Primary.......................................... $ 1.96 $ 1.68 $ 1.74 $ 1.49 $ 0.92
Fully diluted.................................... 1.96 1.66 1.71 1.47 0.92
Dividends declared/(2)/.............................. 0.59 0.75 0.70 0.68 0.65
Book value........................................... 16.64 15.16 15.48 13.83 11.89
BALANCE SHEET DATA AT YEAR END:
Loans................................................ $1,971,454 $2,118,126 $1,841,457 $1,596,427 $1,725,186
Total earning assets................................. 3,372,717 3,226,142 2,914,302 2,683,226 2,652,591
Total deposits....................................... 2,789,989 2,595,456 2,590,790 2,454,234 2,431,887
Total shareholders' equity........................... 297,693 273,828 271,778 238,759 207,331
Total assets......................................... 3,628,682 3,461,339 3,145,264 2,918,357 2,887,952
Total long-term debt................................. 158,046 210,061 108,111 91,477 107,731
FINANCIAL RATIOS(3):
Return on average assets............................. 1.01% 0.93% 1.02% 0.90% 0.56%
Return on average common equity/(4)/................. 12.47 11.01 12.30 11.58 7.77
Net interest margin/(5)/............................. 4.13 4.07 4.08 4.05 3.87
Core capital (tier 1) leverage ratio/(6)/............ 7.60 7.39 8.04 7.54 6.47
Core capital (tier 1) risk-based capital ratio/(7)/.. 12.21 12.22 12.99 12.45 11.83
Net charge-offs to average loans..................... 0.35 0.20 0.22 0.45 0.69
Allowance for losses to loans........................ 1.46 1.35 1.27 1.40 1.20
Nonperforming loans to loans/(8)/.................... 1.17 0.75 0.88 0.89 1.23
Allowance for losses to nonperforming loans/(8)/..... 124.77 178.37 144.77 156.44 97.24
Nonperforming assets to total assets/(9)/............ 0.68 0.57 0.74 0.78 0.99
</TABLE>
______________________________
/(1)/ Net income for 1993 is before change in accounting for income taxes (FAS
109), which increased net income by $1,868 to $32,784 and increased
primary and fully-diluted net income per share by $0.11 and $0.10,
respectively.
/(2)/ During the fourth quarter of 1995, CNB changed its dividend policy and
began declaring and paying its quarterly dividends in the first month
immediately following the quarter for which the dividend was payable.
CNB's prior policy had been to declare its quarterly dividends in the
last month of the quarter for which the dividend was payable and to pay
the dividend in the first month of the following quarter.
/(3)/ For 1993, based on net income before change in accounting for income
taxes.
/(4)/ Computed by dividing net income by average common equity.
/(5)/ Computed by dividing net interest income by average interest-earning
assets and stated on a fully taxable equivalent basis.
/(6)/ Computed by dividing period-end core capital (tangible equity) by period-
end tangible assets.
/(7)/ Based on final 1992 standards.
/(8)/ Nonperforming loans include nonaccrual and restructured loans and loans
past due 90 days or more.
/(9)/ Nonperforming assets include nonperforming loans and other real estate
owned.
16
<PAGE>
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DBI
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
(dollars in thousands, except per share data)
INCOME STATEMENT DATA:
Interest income......................................... $ 6,204 $ 5,867 $ 5,995 $ 6,314 $ 6,771
Interest expense........................................ 3,230 2,619 2,549 3,160 4,109
Net interest income..................................... 2,974 3,248 3,446 3,154 2,662
Provision for loan losses............................... 1,000 198 120 135 107
Noninterest income...................................... 529 459 486 386 118
Noninterest expense..................................... 2,697 2,136 2,115 2,074 1,945
Net income/(1)/......................................... 119 1,054 1,270 992 542
PER COMMON SHARE DATA:
Net income/(1)/......................................... $ 4.29 $ 38.83 $ 48.79 $ 38.82 $ 20.39
Dividends declared...................................... 10.00 10.00 8.00 6.00 4.00
Book value.............................................. 236.33 212.28 229.75 198.77 167.88
BALANCE SHEET DATA AT YEAR END:
Loans................................................... $45,693 $45,607 $43,235 $42,817 $41,545
Total earning assets.................................... 78,385 78,597 75,975 73,286 71,300
Total deposits.......................................... 72,915 73,068 70,769 68,889 67,112
Total shareholders' equity.............................. 6,570 5,900 5,417 5,182 4,324
Total assets............................................ 83,279 84,423 81,334 77,487 73,298
Total long-term debt.................................... -- -- 1,065 500 --
FINANCIAL RATIOS/(2)/:
Return on average assets................................ 0.14% 1.25% 1.58% 1.29% 0.72%
Return on average common equity/(3)/.................... 1.77 16.70 20.93 17.73 10.04
Net interest margin/(4)/................................ 4.10 4.58 4.61 4.44 3.85
Core capital (tier 1) leverage ratio/(5)/............... 7.97 7.97 6.66 6.69 5.90
Core capital (tier 1) risk-based capital ratio/(6)/..... 11.55 10.84 10.37 8.39
Net charge-offs to average loans........................ 1.21 0.29 0.07 0.14 0.38
Allowance for losses to loans........................... 2.41 1.45 1.37 1.18 1.03
Nonperforming loans to loans/(7)/....................... 2.93 1.44 2.61 0.68 0.64
Allowance for loan losses to nonperforming loans/(7)/... 82.36 101.22 52.71 175.17 162.03
Nonperforming assets to total assets/(8)/............... 1.67 1.00 1.70 0.93 1.23
</TABLE>
___________________
/(1)/ Net income for 1994 is before change in accounting for income taxes
(FAS 109), which increased net income by $320 to $1,374 and increased net
income per share by $11.79.
/(2)/ For 1994, based on net income before change in accounting for income
taxes.
/(3)/ Computed by dividing net income by average common equity.
/(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
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<PAGE>
------------------------------------------------------------------------------
CNB/DBI
PRO FORMA COMBINED SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
(in thousands, except per share data)
INCOME STATEMENT DATA:
Interest income..................................... $ 279,989 $ 232,917 $ 218,882
Interest expense.................................... 143,580 108,396 104,042
Net interest income................................. 136,409 124,521 114,840
Provision for loan losses........................... 7,939 7,432 4,010
Non-interest income................................. 47,198 47,264 43,599
Non-interest expense................................ 119,501 115,675 105,777
Net income/(1)/..................................... 35,770 31,566 32,186
PER COMMON SHARE DATA:
Net income/(1)/
Primary........................................... $ 1.91 $ 1.69 $ 1.77
Fully diluted..................................... 1.91 1.68 1.74
Dividends declared/(2)/............................. 0.59 0.75 0.70
Book value.......................................... 16.54 15.07 15.42
BALANCE SHEET DATA AT YEAR END:
Loans............................................... $2,017,147 $2,163,733 $1,884,692
Total earning assets................................ 3,451,102 3,304,739 2,990,277
Total deposits...................................... 2,862,904 2,668,524 2,661,559
Total shareholders' equity.......................... 304,263 279,728 277,195
Total assets........................................ 3,711,961 3,545,762 3,226,598
Total long-term debt................................ 158,046 210,061 109,176
FINANCIAL RATIOS/(3)/:
Return on average assets............................ 0.99% 0.94% 1.03%
Return on average common equity/(4)/................ 12.22 11.14 12.51
Net interest margin/(5)/............................ 4.13 4.09 4.09
Core capital (tier 1) leverage ratio/(6)/........... 7.61 7.38 8.01
Core capital (tier 1) risk-based capital ratio...... 12.22 12.20 12.94
Net charge-offs to average loans.................... 0.36 0.20 0.21
Allowance for losses to loans....................... 1.48 1.35 1.28
Nonperforming loans to loans/(7)/................... 1.21 0.77 0.92
Allowance for losses to nonperforming loans/(7)/.... 122.44 175.33 138.77
Nonperforming assets to total assets/(8)/........... 0.71 0.58 0.76
</TABLE>
___________________________
/(1)/ Net income of CNB and of DBI is before change in accounting for income
taxes (FAS 109), which, for CNB increased 1993 net income by $1,868 to
$32,784 and increased primary and fully-diluted net income per share by
$0.11 and $0.10, respectively, and, for DBI increased 1994 net income by
$320 to $1,374 and increased net income per share by $11.79.
/(2)/ During the fourth quarter of 1995, CNB changed its dividend policy and
began declaring and paying its quarterly dividends in the first month
immediately following the quarter for which the dividend was payable.
CNB's prior policy had been to declare its quarterly dividends in the
last month of the quarter for which the dividend was payable and to pay
the dividend in the first month of the following quarter.
/(3)/ For CNB, in 1993, and DBI, in 1994, based on net income before change in
accounting for income taxes.
/(4)/ Computed by dividing net income by average common equity.
/(5)/ Computed by dividing net interest income by average interest-earning
assets and stated on a fully taxable equivalent basis.
/(6)/ Computed by dividing period-end core capital (tangible equity) by period-
end tangible assets.
/(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.
18
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<PAGE>
SPECIAL MEETING
DATE, TIME AND PLACE
This Prospectus/Proxy Statement is being furnished to shareholders of DBI
in connection with the solicitation of proxies by the Board of Directors of DBI
for use at the Special Meeting to be held at___________________________________
_________________________________________________________________________ on
_________, 1996, at _____ __.m., local time, and at any adjournment or
postponement thereof.
MATTERS TO BE CONSIDERED
At the Special Meeting, the shareholders of DBI will be asked to consider
and vote upon the approval of the Merger Agreement and the transactions
contemplated thereby, including, among other things, the Merger of DBI with and
into HBI. (Shareholders of DBI also may be asked to vote upon a proposal to
adjourn or postpone the Special Meeting, which adjournment or postponement could
be for the purpose of, among other things, allowing time for the solicitation of
additional votes to approve the Merger Agreement and the transactions
contemplated thereby.)
This Prospectus/Proxy Statement, the attached Notice of Special Meeting and
the Proxy Card are first being sent to shareholders of DBI on or about ______,
1996.
RECORD DATE
The Board of Directors of DBI has fixed _____________, 1996, as the Record
Date for the determination of shareholders of DBI to receive notice of and to
vote at the Special Meeting. As of the close of business on the Record Date,
there were 27,798 shares of DBI Common issued and outstanding. Only holders of
shares of DBI Common of record at the close of business on the Record Date are
entitled to notice of and to vote at the Special Meeting. No shares of DBI
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 presence, in person or by proxy, of holders of a majority of the issued
and outstanding shares of DBI Common entitled to vote on the Record Date is
necessary to constitute a quorum at the Special Meeting. Pursuant to the
Illinois Law, the affirmative vote of the holders of at least two-thirds of all
of the issued and outstanding shares of DBI Common is required to approve the
Merger Agreement and the transactions contemplated thereby, including the
Merger. Each holder of DBI Common is entitled to one vote per share of DBI
Common held at the close of business on the Record Date.
In the event sufficient votes in favor of approving the Merger Agreement
and the transactions contemplated thereby are not received by the time scheduled
for the Special Meeting, the individuals named in the enclosed proxies intend to
recommend that the Special Meeting be adjourned to permit the further
solicitation of proxies. A resolution will be proposed at the Special Meeting
authorizing the proxies, at their discretion, to adjourn the Special Meeting for
the purpose of further soliciting proxies, if necessary, to obtain a sufficient
number of votes in favor of approving the Merger Agreement. The proposal to
authorize the proxies to adjourn the Special Meeting in order to permit the
further solicitation of proxies, if necessary, must be approved by an
affirmative vote of holders of a majority of the shares of DBI Common present in
person or represented by proxy and entitled to vote at the Special Meeting.
19
<PAGE>
The Board of Directors of DBI believes that such proposal is in the best
interests of DBI and the DBI shareholders and recommends that the DBI
Shareholders vote FOR approval of such proposal.
SECURITY OWNERSHIP OF MANAGEMENT
As of the close of business on the Record Date, 27,798 shares of DBI Common
were issued and outstanding and 9,171 shares, or 32.99%, of DBI Common were
beneficially owned by directors and executive officers of DBI and their
affiliates. It is currently expected that each such director and executive
officer of DBI will vote the shares of DBI Common beneficially owned by him or
her for approval of the Merger Agreement and the transactions contemplated
thereby, including the Merger. As of the Record Date, DuQuoin Bank, in various
fiduciary capacities, held a total of 200 shares, or 0.7%, of outstanding DBI
Common under trust agreements and other instruments and agreements. It is the
practice of DuQuoin Bank, when holding shares as sole trustee or sole executor,
to vote said shares but, where shares are held as co-executor or co-trustee,
approval is obtained from the co-fiduciary before voting. As of the Record
Date, neither CNB nor any of its directors and executive officers or their
affiliates owned any shares of DBI Common.
For additional information regarding the shares of DBI Common beneficially
owned, directly or indirectly, by each director and executive officer of DBI and
by all directors and executive officers of DBI as a group, see "INFORMATION
ABOUT DBI -- Security Ownership of Management."
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 DBI
Common represented by a proxy properly signed and returned to DBI 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 DBI Common represented by such proxy will be voted FOR approval of the
Merger Agreement and the transactions contemplated thereby, including the
Merger, and FOR the proposal regarding any 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 matters to be considered at the Special
Meeting by filing with the Secretary of DBI a written revocation or a duly
executed proxy bearing a later date. All written notices of revocation and
other communications with respect to revocation of DBI proxies should be
addressed to DuQuoin Bancorp, Inc., 124 West Main Street, DuQuoin, Illinois
62832, Attention: Corporate Secretary. A holder of DBI Common who previously
signed and returned a proxy and who elects to attend the Special Meeting and
vote in person may withdraw his or her proxy at any time before it is exercised
by giving notice of such revocation to the Secretary of DBI at the Special
Meeting and voting in person by ballot at the Special Meeting; however,
attendance at the Special Meeting will not in and of itself constitute a
revocation of the proxy.
DBI intends to count holders of shares of DBI Common present in person at
the Special Meeting but not voting, and holders of shares of DBI Common for
which DBI has received proxies but with respect to which holders of shares have
abstained, as present at the Special Meeting for purposes of determining the
presence or absence of a quorum for the transaction of business. Brokers who
hold shares in street name for customers who are the beneficial owners of such
shares are prohibited from giving a proxy to vote shares held for such customers
with respect to the approval of the Merger Agreement and the transactions
contemplated thereby, including the Merger, without specific instructions
20
<PAGE>
from such customers. Since the affirmative vote of the holders of at least two-
thirds of the issued and outstanding shares of DBI Common entitled to vote at
the close of business on the Record Date is required to approve the Merger
Agreement and the transactions contemplated thereby, including the Merger, such
non-voting shares and abstentions and the failure of such customers to provide
specific instructions with respect to their shares of DBI Common will have the
effect of a vote against the approval of the Merger Agreement.
SOLICITATION OF PROXIES
In addition to solicitation of proxies from shareholders of DBI Common by
use of the mail, proxies also may be solicited by personal interview, telephone
and wire by directors, officers and employees of DBI, who will not be
specifically compensated for such services, and it is expected that banks,
brokerage houses and other institutions, nominees or fiduciaries will be
requested to forward the soliciting materials to their principals and obtain
authorization for the execution of proxies. All costs of soliciting proxies,
assembling and mailing this Prospectus/Proxy Statement and all papers which now
accompany or hereafter may supplement the same, as well as reasonable out-of-
pocket expenses incurred by the above-mentioned banks, brokerage houses and
other institutions, nominees or fiduciaries for forwarding proxy materials to
and obtaining proxies from their principals, will be borne by DBI. DBI reserves
the right to engage an outside party to solicit proxies and to pay special
compensation for that purpose.
CNB and DBI 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
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 December 31, 1995, CNB had consolidated assets of
$3.6 billion, deposits of $2.8 billion, loans of $2.0 billion and shareholders'
equity of $298 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 92 full-service banking offices, 29 consumer finance
offices and one insurance agency office 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 direct and indirect subsidiaries include: Citizens Trust Company of
Indiana, National Association; 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., d/b/a Citizens Insurance
of Evansville, which sells property and casualty insurance as an independent
agent.
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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.
HBI is a wholly-owned subsidiary of CNB which owns all of the outstanding
common stock of CNB Bank.
Additional information concerning CNB is included in the documents of
incorporated by reference herein. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
DBI
DBI was organized in June 1983 and is a one-bank holding company registered
with the Federal Reserve Board under the B.H.C.A. DBI currently owns all of the
issued and outstanding shares of capital stock of DuQuoin National Bank, a
national banking association chartered under the laws of the United States. As
of December 31, 1995, on a consolidated basis, DBI had assets of $83.3 million,
deposits of $72.9 million, loans of $45.7 million and shareholders' equity of
$6.6 million.
DuQuoin Bank is a full-service community bank that provides a full
complement of banking services to its customers, primarily individuals and small
businesses in Perry County, Illinois. DuQuoin Bank accepts demand, savings and
time deposits, makes commercial, agricultural, consumer and real estate loans
and provides trust and other customary commercial banking services.
The activities in which DuQuoin Bank engages are highly competitive and the
communities in which it provides services are also served by other banks.
Competition among these financial institutions is based upon interest rates
offered on deposit accounts, interest rates charged on loans, other credit and
service charges, the convenience of banking facilities and the quality of
services rendered. DuQuoin Bank believes that it has successfully competed in
its marketplace by providing superior service to its customers. Additional
competition for depositors' funds may come from a variety of sources, including
United States Government securities, private issues of debt obligations, mutual
funds and suppliers of other investment alternatives.
For additional information concerning DBI and DuQuoin Bank, see
"INFORMATION ABOUT DBI."
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<PAGE>
MERGER
GENERAL
This section of the Prospectus/Proxy Statement describes certain aspects of
the proposed Merger, including the principal provisions of the Merger Agreement.
The following information relating to the Merger is qualified in its entirety by
reference to the other information contained elsewhere in this Prospectus/Proxy
Statement, including the Appendices hereto and the documents incorporated herein
by reference. A copy of the Merger Agreement (excluding the Disclosure Schedule
thereto) is attached hereto as Appendix A and is incorporated by reference
herein and reference is made thereto for a complete description of the terms of
the Merger. ALL SHAREHOLDERS OF DBI ARE URGED TO READ THE MERGER AGREEMENT IN
ITS ENTIRETY.
BACKGROUND OF MERGER
Although from time to time, DBI had received unsolicited indications of
interest from third parties regarding a possible business combination involving
DBI, DBI's Board of Directors had a longstanding policy that shareholder value
would be maximized by a strategic focus on efficiently operating a community
banking organization which met the needs of customers in DuQuoin Bank's service
area. The Board believed that DuQuoin Bank's franchise was desirable to larger
organizations, but had determined that ranges of values suggested by indications
of interest which had been received represented less favorable alternatives for
shareholders than continued independent operation of DuQuoin Bank.
On April 26, 1995, James J. Giancola, President and Chief Operating Officer
of CNB, met with Daniel H. Eaves, President and Chief Executive Officer of DBI,
at DuQuoin Bank to discuss, at Mr. Giancola's suggestion, business matters of
mutual interest. At the meeting, Mr. Giancola indicated that CNB was interested
in a possible acquisition of DBI and he explained CNB's philosophy regarding
community banking and how CNB might approach valuing DBI for purposes of
determining an appropriate exchange ratio in a stock-for-stock transaction.
Mr. Eaves called a special meeting of DBI's Board of Directors on April 28,
1995, at which he reported on the matters discussed with Mr. Giancola. It
appeared to Mr. Eaves and the other directors that the range of values suggested
by Mr. Giancola placed a premium valuation on the DBI Common which was greater
than values suggested from time to time in the past by other parties'
unsolicited indications of interest. The consensus of the Board was that DBI's
shareholders could benefit from a combination with a larger, publicly-traded
banking company such as CNB in a transaction which placed a premium valuation on
DBI's shares. Accordingly, the DBI Board authorized Mr. Eaves to proceed with
exploratory discussions with representatives of CNB to assess the possibility of
attaining a transaction acceptable to CNB and which DBI's Board could recommend
to its shareholders.
On May 5, 1995, Mr. Eaves and Jo Ann Isom, a director of DBI and Senior
Vice President--Cashier of DuQuoin Bank, met at CNB's offices in Evansville,
Indiana with several of CNB's executive officers to review DBI's business and to
explore how a possible transaction could be effected.
On May 10, 1995, CNB submitted to DBI's Board a proposed non-binding letter
of intent for a possible transaction. The non-binding proposal contemplated: (i)
an exchange ratio of 15.365 shares of CNB Common for each share of DBI Common
outstanding (subject to possible downward adjustment based upon DBI's net book
value at closing), indicating a value of $432 per share of DBI Common based upon
CNB's then current stock price (or slightly more than 1.7 times the net book
value of outstanding
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DBI Common as of March 31, 1995); (ii) the Board of DBI serving as the advisory
board of the DuQuoin Region subsequent to the transaction; (iii) one or possibly
two DBI directors serving as directors of CNB Bank subsequent to the
transaction; (iv) a three-day on site due diligence review by CNB staff to
confirm CNB's understanding of DBI's financial condition and business; (v) the
rights of CNB, on the one hand, and DBI, on the other, to terminate the
agreement if the average market price of CNB Common over a prescribed period was
greater than $33.72 or less than $22.48, respectively; (vi) Mr. Eaves's entering
into an amended and restated employment agreement acceptable to CNB; (vii) a
closing not later than June 30, 1996; and (viii) a mutually acceptable "lock up"
agreement relating to a possible acquisition of DBI by a third party. DBI's
Board discussed the proposed letter of intent at its regular monthly meeting on
May 12, 1995, and unanimously concluded that the proposal should be rejected due
to the perceived inadequacy of the proposed exchange ratio.
On June 1, 1995, DBI's Board met in Harrisburg, Illinois with Mr. Giancola
and other officers of CNB at which the CNB representatives presented a revised
non-binding letter of intent. The revised letter of intent was similar to the
initial letter of intent with the exception of the exchange ratio, which was
increased by 0.645 shares of CNB Common for each share of DBI Common, indicating
a value of $450 per share of DBI Common based upon CNB's then current stock
price. At such time, CNB also indicated that it would consider increasing the
exchange ratio if the results of its due diligence justified a higher valuation.
The DBI Board continued its consideration of the CNB proposal at its regular
monthly meeting held June 9, 1995. By unanimous written consent dated June 16,
1995, the DBI Board accepted CNB's revised non-binding letter of intent which
then was executed by Mr. Eaves on behalf of DBI.
The DBI Board discussed the transactions contemplated by the letter of
intent at its regular monthly meeting held July 14, 1995. Mr. Eaves was
authorized on behalf of DBI to engage TCC as financial advisor to assist in
analyzing and negotiating a possible transaction. In addition, it was determined
that CNB should be permitted to conduct its proposed due diligence review to
assist the parties in attaining a prompt determination as to whether further
discussions were likely to produce a definitive agreement. Representatives of
CNB conducted an on-site due diligence review of DBI on July 26 through 28,
1995. On July 28, 1995, DBI entered into the engagement agreement with TCC.
Also on July 28, 1995, the DBI Board held a special meeting at which James
F. Hemmer, Vice President of TCC, gave a financial presentation. Mr. Hemmer
analyzed various financial information regarding DBI, CNB and comparable banking
companies and merger and acquisition transactions. He also presented a detailed
financial analysis of the CNB proposal. Thereupon, the Board discussed at length
DBI's current status and future prospects, the CNB proposal and other strategic
business considerations. At the conclusion of the discussion, the Board's
consensus was that management should continue to engage in discussions with CNB
to determine if its due diligence warranted an increase in the exchange ratio.
On August 10, 1995, Mr. Eaves, Ms. Isom and Mr. Hemmer, on behalf of DBI,
and Mr. Giancola and another officer, on behalf of CNB, met in Evansville to
discuss the results of CNB's due diligence and to discuss a possible increase in
the exchange ratio. At such meeting, representatives of CNB indicated that, as a
result of their due diligence investigation of DBI, they would consider a
transaction in which CNB Common with a value of approximately $13.36 million
(based upon the then current price of such shares) would be issued to DBI
shareholders. This amount represented approximately 1.9 times the net book value
of the DBI Common as of March 31, 1995 and slightly more than 1.7 times the net
book value of the DBI Common as of June 30, 1995.
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<PAGE>
Mr. Eaves reported on the developments of the August 10 meeting at the
regular monthly meeting of DBI's Board held August 11, 1995. Also at such
meeting a representative of DBI's special counsel which had been engaged to
advise the Board in connection with the proposed CNB transaction, was present
and reviewed selected legal aspects of a possible transaction with CNB,
including the Board's fiduciary duties. After a discussion of the status of the
matter by the directors, no action was taken.
On August 21, 1995, the DBI Board held a special meeting to determine
whether it was advisable at such time to proceed with the negotiations with CNB.
Present at such meeting at the invitation of the Board were Mr. Hemmer, on
behalf of TCC, and a representative of DBI's special counsel. Mr. Hemmer updated
his financial presentation based upon the most recently available data. He also
analyzed an unsolicited proposal which recently had been received by DBI for a
business combination between DBI and a privately held banking organization in
the region, concluding that such proposal appeared to be substantially less
favorable than the pending proposal from CNB. Counsel also reviewed selected
legal aspects of a possible transaction with CNB. The Board engaged in a lengthy
discussion of the various business and legal issues presented by the CNB
proposal. At the conclusion of the discussion, the Board authorized management
and DBI's financial and legal advisors to negotiate with representatives of CNB
to develop a definitive agreement based upon the most recent economic terms
proposed by CNB, which definitive agreement was to be presented to the Board for
its approval prior to execution.
On September 6, 1995, CNB's counsel circulated drafts of a proposed
definitive agreement. At regular monthly DBI Board meetings held in September
and October 1995, Mr. Eaves updated the Board on the status of the preparation
of the definitive agreement and related matters regarding the proposed
transaction. During such period, the market price of CNB Common trended
downward, thereby decreasing the value of the consideration payable to DBI
shareholders under the proposed exchange ratio.
In light of the trend in price of CNB Common, Mr. Eaves called a special
Board meeting on October 23, 1995. At such meeting, Mr. Eaves sought a sense of
the Board regarding the advisability of the proposed transaction given the
current value of the CNB's shares to be received pursuant to the exchange ratio
under consideration. Representatives of TCC updated their firm's previous
financial presentation to the Board and counsel reported on the status of
negotiation and drafting of a definitive agreement. The Board also engaged in a
discussion of numerous aspects of the proposed transaction. At the conclusion of
the meeting, the Board determined that it was advisable for management to
continue to pursue the transaction, with a view toward achieving a proposed
definitive agreement which could be presented to the Board for its approval.
At the regular monthly meeting of the DBI Board on November 10, 1995, Mr.
Eaves reported on the status of the proposed transaction.
A special meeting of the DBI Board was held on November 17, 1995, to
consider a proposed definitive agreement which had been negotiated by the
parties' representatives. The proposed agreement was generally in accordance
with the terms of the revised non-binding letter of intent, except that, (i) as
a result of the downward trend of the CNB Common during the preceding weeks, the
exchange ratio had been increased to 17.96 shares of CNB Common for each share
of DBI Common outstanding (subject to possible downward adjustment based upon
DBI's net book value at closing), indicating a value of $471 per share of DBI
Common based upon CNB's then current stock price (or slightly more than 1.7
times the net book value of outstanding DBI Common as of June 30, 1995); (ii) as
a "lock up" agreement, the definitive agreement contemplated that a termination
fee would be payable by DBI if the Merger were not consummated and DBI effected
specified transactions within eighteen months after termination of the
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Merger Agreement; and (iii) the right of CNB to terminate the agreement if the
average market price of CNB Common over a prescribed period was greater than a
certain amount was deleted and the formula for determining the exchange ratio
was revised to take the average market price of CNB Common into consideration.
At the special meeting, Mr. Hemmer again updated TCC's financial presentation.
He also advised the Board that TCC was of the opinion that the Merger
Consideration to be received in the transaction was fair, from a financial point
of view, to DBI shareholders. It was anticipated that TCC's written opinion
would be included in DBI's proxy statement issued in connection with soliciting
shareholder approval of the Merger Agreement and the transactions contemplated
thereby. DBI's special counsel also reviewed the proposed definitive agreement
and the Eaves Amended Employment Agreement. The Board then engaged in a lengthy
discussion of various aspects of the proposed transaction, including the reasons
for the Merger set forth below. At the conclusion of the discussion, the Board
voted unanimously to approve the Merger Agreement and the transactions
contemplated thereby and recommend that DBI shareholders approve the same and to
redeem the Shareholder Rights in order to facilitate the proposed transaction.
Immediately after the special meeting, the parties executed the Merger
Agreement and the Eaves Amended Employment Agreement and the proposed
transaction was publicly announced.
REASONS FOR MERGER; RECOMMENDATION OF DBI'S BOARD OF DIRECTORS
DBI's Board of Directors has determined that the Merger Agreement and the
transactions contemplated thereby are in the best interest of the shareholders
of DBI. In reaching its conclusion, the Board considered, among other things:
the value of the consideration receivable by DBI's shareholders pursuant to the
Merger; anticipated uncertainties and risks to DBI shareholder value of
remaining independent (including those which relate to trends in the economy of
DBI's service area); present trends toward consolidation in the commercial
banking industry; competitive advantages which could result from a combination
of DBI's resources with those of CNB; the historical dividend policies of DBI
and CNB in light of the Conversion Ratio; assessment of the future prospects of
DBI and CNB; the tax-free treatment of the transaction to DBI's shareholders;
the fact the CNB Common Stock receivable by DBI shareholders in the Merger will
be traded on Nasdaq; and the verbal opinion of the board's financial advisor,
TCC, that the Merger Consideration is fair, from a financial point of view, to
DBI's shareholders.
Effective immediately prior to the execution of the Merger Agreement, the
Board of Directors redeemed DBI's outstanding Shareholder Rights. Such
redemption was necessary to permit the transactions contemplated by the Merger
Agreement to proceed by preventing the Rights from being triggered due to the
fact that CNB may be deemed to beneficially own shares of DBI Common by virtue
of its right to acquire such shares pursuant to the Merger Agreement.
THE BOARD OF DIRECTORS OF DBI BELIEVES THAT THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY ARE IN THE BEST INTERESTS OF DBI AND ITS
SHAREHOLDERS. THE BOARD OF DIRECTORS OF DBI UNANIMOUSLY RECOMMENDS THAT DBI'S
SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE THE MERGER AGREEMENT AND THE
---
TRANSACTIONS CONTEMPLATED THEREBY.
Certain members of the management and Board of Directors of DBI have
interests in the Merger that are in addition to the interests of shareholders of
DBI generally. See "-- Interests of Certain Persons in Merger."
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<PAGE>
OPINION OF FINANCIAL ADVISOR
As described above, the Board of Directors of DBI entered into an agreement
with TCC in July 1995, to provide various financial advisory and investment
banking services to DBI and its Board of Directors in connection with the
possible acquisition of DBI. As part of TCC's engagement, TCC agreed, if
requested by DBI's Board of Directors, to render an opinion as to the fairness,
from a financial point of view, of the consideration to be received by the
shareholders of DBI in connection with any such acquisition.
TCC delivered an oral opinion prior to DBI's entering into the Merger
Agreement, and a written opinion (the "Opinion") to the Board of Directors,
dated as of the date of this Prospectus/Proxy Statement, that, based upon and
subject to the various considerations set forth in the written Opinion, the
consideration to be received by the shareholders of DBI on consummation of the
Merger is fair, from a financial point of view, to the shareholders of DBI.
The full text of the Opinion, which sets forth assumptions made, matters
considered and limitations on the review undertaken, is attached as Appendix B
to this Prospectus/Proxy Statement. DBI shareholders are urged to read the
Opinion in its entirety. The oral opinion of TCC was based on substantially
similar assumptions, matters and limitations and was substantially similar with
regard to the conclusion stated in the Opinion.
During the course of its engagement, and as a basis for arriving at its
written Opinion, TCC reviewed and analyzed material bearing upon the financial
and operating condition of DBI and CNB and material prepared in connection with
the Merger, including, among other things, the following: (i) the Merger
Agreement; (ii) certain publicly available information concerning DBI and CNB,
including consolidated financial statements and reports of condition and income
for each of three fiscal years in the period ended December 31, 1994 and interim
financial statements through September 30, 1995; (iii) the operating
characteristics of certain other financial institutions deemed relevant to the
contemplated Merger; (iv) the nature and terms of recent sale and merger
transactions involving banks and bank holding companies and other financial
institutions that TCC considered relevant; (v) historical and current market
data for DBI Common and CNB Common and financial and other information provided
to TCC by management of DBI and CNB; and (vi) drafts of the Registration
Statement and this Prospectus/Proxy Statement. In addition, TCC conducted
meetings with members of senior management of DBI and CNB for the purpose of
reviewing the future prospects of DBI and CNB. TCC evaluated the pro forma
ownership of CNB Common by DBI shareholders, relative to the pro forma
contribution of DBI's assets, liabilities, equity and earnings to the pro forma
company. TCC also took into account its experience in other transactions, as
well as its knowledge of the banking industry and its general experience in
securities valuations.
In preparing the Opinion, TCC assumed and relied upon the accuracy and
completeness of all financial and other information reviewed by it for purposes
of the Opinion, and did not independently verify such information or undertake
an independent evaluation or appraisal of the assets or liabilities of DBI or
CNB nor was it furnished with any such evaluation or appraisal. TCC is not an
expert in the evaluation of allowances for loan losses, and it has not made an
independent evaluation of the adequacy of the allowance for loan losses of DBI
or CNB nor has it reviewed any individual credit files, and it assumed that the
aggregate allowances for loan losses is adequate to cover such losses. TCC
assumed and relied upon the senior managements of DBI and CNB referred to above
as to the reasonableness and achievability of the financial and operating
forecasts furnished by DBI and CNB (and the assumptions and
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<PAGE>
the bases therefor). The Opinion is necessarily based on economic, market and
other conditions as in effect on, and the information made available to it as
of, the date of the Opinion.
THE OPINION IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF
VIEW, OF THE FINANCIAL CONSIDERATION TO BE PAID TO DBI SHAREHOLDERS AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY DBI SHAREHOLDER AS TO HOW SUCH SHAREHOLDER
SHOULD VOTE AT THE SPECIAL MEETING, NOR DOES IT CONSTITUTE A RECOMMENDATION TO
DBI SHAREHOLDERS WITH RESPECT TO THE ADVISABILITY OF RETAINING OR DISPOSING OF
SHARES OF CNB COMMON RECEIVED PURSUANT TO THE MERGER.
Generally, TCC's preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of those methods to particular circumstances.
Therefore, such an opinion is not readily susceptible to summary description.
Furthermore, in arriving at the Opinion, TCC did not attribute any particular
weight to any analysis or factor considered by it, but rather made qualitative
judgments as to the significance and relevance of each analysis and factor. Any
estimates contained in these analyses are not necessarily indicative of actual
values or predictive of future results or value, which may be significantly more
or less favorable than as set forth herein.
NET PRESENT VALUE ANALYSIS. TCC prepared a net present value analysis which
indicated theoretical values for DBI based on return on average assets ranging
between 1.0% and 1.5% and asset growth rates ranging between 0.0% and 8.0%. The
results of this analysis indicated a range of theoretical values for DBI between
$277.83 per share (1.0% return on average assets; 0.0% asset growth rate) and
$541.50 per share (1.5% return on average assets; 8.0% asset growth rate). At a
return on average asset ratio of 1.3%, which approximated DBI's recent
historical performance, theoretical values ranged from $361.18 (0.0% asset
growth rate) to $469.30 (8.0% asset growth rate). At an asset growth rate of
4.0%, which approximated DBI's recent historical performance, theoretical values
ranged from $317.38 (1.0% return on average assets) to $476.08 (1.5% return on
average assets). The market value of the Merger Consideration was $____________
based on a closing price of CNB Common of $____________ as reported by Nasdaq on
_______________, 1996.
CONTRIBUTION ANALYSIS. TCC prepared a contribution analysis showing the
percentages of assets, deposits, tangible equity, 1994 and estimated 1995 and
1996 net income contributed to the combined company on a pro forma basis by DBI
and CNB, and compared these percentages to the pro forma ownership of CNB. This
analysis showed that DBI, as of September 30, 1995, would contribute 2.33% of
pro forma consolidated total assets, 2.65% of deposits, 2.63% of tangible
equity, 4.35% of 1994 net income, 2.99% of estimated 1995 net income and 3.03%
of estimated 1996 net income. Based on a Conversion Ratio of 17.96 shares of CNB
Common for each share of DBI Common outstanding, upon consummation of the
Merger, shareholders of DBI would own approximately 2.72% of the pro forma
common shares outstanding of CNB.
COMPARABLE TRANSACTION ANALYSIS. TCC reviewed selected comparable merger
and acquisition transactions. The following merger transactions were reviewed
based on publicly available data (the acquiror is named first and underlined,
followed by the seller): Magna Group, Inc., River Bend Bancshares, Inc.;
-----------------
Heritage Financial Services, FNB of Lockport; ISB Financial Corp., WSB, Inc.;
- --------------------------- -------------------
Mercantile Bancorporation Inc., First Sterling Bancorp, Inc.; Citizens
- ------------------------------ --------
Bancshares, Western Reserve Bank; Firstbank of Illinois Co., Confluence
- ---------- -------------------------
Bancshares Corporation; Central Bancompany, Pleasant Hope Bancshares; First
------------------ -----
Financial Bancorp, F&M Bancorp; Merchants Bancorp, Valley Banc Services; F&M
- ----------------- ----------------- ---
Bancorporation, Peoples State Bank; Old National Bancorp, City National Bancorp;
- -------------- --------------------
AMBANC
- ------
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Corporation, First Robinson Bancorp; First Financial Bancorp, Bright Financial
- ----------- -----------------------
Services; Norwest Corporation, Dickinson Bancorp; CNB Bancshares, Inc., Bank of
------------------- --------------------
Orleans; Associated Banc-Corp., GN Bancorp, Inc.; Mercantile Bancorporation
--------------------- -------------------------
Inc., AmeriFirst Bancorporation, Inc.; Mercantile Bancorporation Inc., Southwest
------------------------------
Bancshares, Inc.; First Financial Bancorp, Peoples B&T Company; Marshall &
----------------------- ----------
Ilsley, Citizens Bancorp; Pikeville National Corporation, Commercial Bank;
- ------ ------------------------------
National City Bancshares, White County Bank; Pikeville National Corporation,
- ------------------------ ------------------------------
Woodford Bancorp; AMCORE Financial, NBM Bancorp; Frandsen Financial Corporation,
---------------- ------------------------------
Minnesota Banc HC; Old National Bancorp, Citizens National Bank; Norwest
-------------------- -------
Corporation, Babbscha Company; Old National Bancorp, Oblong Bancshares; First
- ----------- -------------------- -----
Michigan, Superior Financial Corp.; Mid Am, Inc., ASB Bankcorp; Commerce
- -------- ------------ --------
Bancshares, Cotton Exchange Bancshares; Boatmen's Bancshares, Salem Community
- ---------- --------------------
Bancorp; CNB, Harrisburg Bancshares, Inc.; Marshall & Ilsley, Bank of
--- -----------------
Burlington; Indiana Federal Corp., NCB Corporation; Fourth Financial
--------------------- ----------------
Corporation, Standard Bancorp; F&M Bancorporation, Union State Bank; and
------------------
Pinnacle Banc Group, Acorn Financial Corp. Transactions were selected on the
- -------------------
basis of comparability of absolute transaction value and the perceived
comparability of the markets served by the acquired institutions to those of
DBI. For the comparable transactions, the multiple of purchase price to trailing
12 months earnings ranged from 7.93 to 20.74 with a median of 14.38. The value
of the Merger Consideration represented a multiple of price to trailing 12
months earnings through September 30, 1995 of 12.21.
For the comparable transactions, the multiple of purchase price to tangible
book value ranged from 1.23 to 3.28 with a median of 1.69. The value of the
Merger Consideration represented a multiple of price to September 30, 1995
tangible book value of 1.85.
FINANCIAL IMPLICATIONS TO DBI SHAREHOLDERS. TCC prepared an analysis of the
financial implications of CNB's offer to a DBI shareholder. This analysis
indicated that on a pro forma equivalent basis a shareholder of DBI would
achieve an increase in dividends per share and book value per share, but a
decrease in earnings per share as a result of the consummation of the Merger.
COMPARATIVE SHAREHOLDER RETURNS. TCC presented an analysis of comparative
theoretical shareholder returns under several scenarios, including DBI's
remaining independent, DBI being acquired by CNB in the proposed transaction and
DBI being acquired in 1998. This analysis, which was based on the net present
value of projected dividend streams and projected 1998 common stock valuations
(using current price-to-earnings multiples), indicated total shareholders
returns of 11.13% for DBI remaining independent, 24.03% for a business
combination in 1998 and 26.46% based on the Merger Consideration.
TCC also prepared an analysis of the possible pricing of a merger
transaction with certain other midwest-based thrift and bank holding companies
using estimated 1996 net income for DBI and stock prices of selected companies
and assuming no earnings per share dilution for the acquiror. The holding
companies reviewed included: Mercantile Bancorporation Inc.; Commerce
Bancshares, Inc.; UMB Financial Corporation; Magna Group, Inc.; Old National
Bancorp; Mark Twain Bancshares, Inc.; Firstbank of Illinois Co.; First Financial
Corporation; Peoples First Corporation; Mississippi Valley Bancshares; CBT
Corporation; National City Bancshares, Inc.; and Ambanc Corp. Based upon certain
assumptions, the analysis indicated that these companies could pay a high of
$646.40 per share and a low of $439.68 per share for all of the shares of DBI.
While these prices indicated the ability of a potential acquiror to pay a
particular price, based upon certain assumptions, they do not reflect any
indications of interest or the willingness of a potential acquiror to pay such a
price.
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TCC compared the market price, market-to-book value and price-to-earnings
multiples, among other market and operating data ratios, of CNB Common with the
individual market multiples and averages of the companies utilized in the
aforementioned merger pricing analysis. This comparison indicated that CNB
Common sold at a price of 1.75 times September 30, 1995 tangible book value and
the comparables identified by TCC sold at a median price of 1.71 times tangible
book value. CNB Common sold at a multiple of price to trailing 12-month earnings
of 13.47, while the comparable group's median price-to-earnings multiple was
13.56.
The summary of TCC's analysis set forth above is a fair summary thereof but
does not purport to be a complete description of the presentations by TCC to the
Board of Directors of DBI or of the analyses performed by TCC. TCC believes that
its analysis and the summary set forth above must be considered as a whole and
that selecting portions of analysis, without considering all factors and
analyses, could create an incomplete view of the process by which a fairness
opinion is rendered. The matters considered by TCC in its analyses are based
upon numerous macroeconomic, operating and financial assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of CNB and DBI. In connection with
its analyses, TCC assumed that there would be no material adverse change in
general economic, business, market and/or regulatory conditions, all of which
are beyond the control of CNB and DBI. The analyses performed by TCC are not
necessarily indicative of actual values of future results, which may be
significantly more or less favorable than suggested by such analyses. Estimated
values do not purport to be appraisals and do not necessarily reflect the prices
at which businesses or companies may be sold in the future, and such estimates
are inherently subject to uncertainty.
The Board of Directors of DBI retained TCC based upon its experience and
expertise with regard to the banking industry and merger and acquisition
transactions. TCC is an investment banking and securities firm with membership
on all principal U.S. securities exchanges. As part of its investment banking
services, TCC is regularly engaged in the independent valuation of securities in
connection with negotiated underwritings, private placements, merger and
acquisition transactions and recapitalizations. TCC is familiar with DBI having
acted as DBI's financial advisor in connection with the implementation of its
Shareholder Rights Plan.
Pursuant to its engagement of TCC, DBI agreed to pay TCC the following fees
for its services: (i) a $10,000 retainer fee; (ii) a cash fee of $40,000 for
each written opinion; and (iii) a cash fee of $50,000, payable on the Closing
Date, for advisory services rendered in connection with advising DBI and its
Board of Directors with respect to the Merger Agreement. TCC also will receive
reimbursement for certain out-of-pocket expenses, and DBI has agreed to
indemnify TCC against certain liabilities, including liabilities which may arise
under the securities laws.
FORM OF MERGER
The Merger Agreement provides that, subject to the satisfaction or waiver
(where permissible) of the conditions set forth therein (see "--Conditions to
Consummation of Merger") and in accordance with the Illinois Law, at the
Effective Time, DBI will merge with and into HBI and HBI will be the surviving
corporation in the Merger. At the Effective Time, the separate corporate
existence of DBI will terminate.
Immediately following the Merger, shareholders of CNB and the former
shareholders of DBI will own approximately 97.28% and 2.72%, respectively, of
the then outstanding shares of CNB Common.
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CONVERSION RATIO
As a result of the Merger, each share of DBI Common issued and outstanding
immediately prior to the Effective Time, other than shares any holders of which
have properly exercised their dissenters' rights under the Illinois Law, will be
converted into the right to receive the number of shares of CNB Common equal to
the Conversion Ratio. The Conversion Ratio is the product of A multiplied by B
multiplied by C, where A equals 17.96; B equals the quotient of the Closing Book
Value (as defined in the following paragraph) of DBI divided by $7,032,000; and
C equals the quotient of $30.76 divided by the CNB Average Price (as defined in
the following paragraph). In no event may either quotient described in the
preceding sentence exceed 1.00 and, therefore, in no event will the Conversion
Ratio exceed 17.96 shares of CNB Common for each share of DBI Common.
The term "Closing Book Value" means the amount of the consolidated
shareholders' equity accounts of DBI, 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, 1994, but excluding for this purpose
any adjustments to the consolidated shareholders' equity accounts solely as a
result of marketable securities classified as "Available for Sale" in accordance
with SFAS 115, less (i) the amount of any increase in the shareholders' equity
accounts of DBI resulting from or attributable to the sale of securities held on
and sold after June 30, 1995, or any transactions or accounting adjustments not
in the ordinary course of business effected or completed after June 30, 1995,
plus (ii) any reduction of shareholders' equity theretofore recorded solely as a
result of accruals or charges taken by DBI at the written request of CNB
pursuant to the Merger Agreement or any provision for loan losses taken by DBI
and its subsidiaries with the written concurrence of CNB. The term "CNB Average
Price" means the average closing price of a share of CNB Common as reported on
Nasdaq for the twenty business days preceding the fifth calendar day prior to
the Closing Date.
As the Closing Book Value will be calculated based upon amounts at the end
of the month immediately preceding the Effective Time and the CNB Average Price
will be calculated based upon the price of CNB Common for a twenty business day
period ending five days before the Closing Date, it is not possible, as of the
date of this Prospectus/Proxy Statement, to determine the actual Conversion
Ratio. For purposes of illustration, however, if the Effective Time and the
Closing Date both would have occurred on ________ __, 1996, the Closing Book
Value would have been $________ and the CNB Average Price would have been
$________ and, based upon those amounts, shareholders of DBI would have received
17.96 shares of CNB Common for each share of DBI Common (and cash in lieu of
fractional shares, as described under "-- Fractional Shares"). In the event,
however, that the actual Closing Book Value should be less than $7,032,000
and/or the actual CNB Average Price should be greater than $30.76, then the
Conversion Ratio would be less than 17.96 shares of CNB Common for each share of
DBI Common. In no event, however, will the Conversion Ratio exceed 17.96 shares
of CNB Common for each share of DBI Common. The obligation of DBI to consummate
the Merger is conditioned upon the CNB Average Price being not less than $22.74.
See "-- Conditions to Consummation of Merger."
The shares of CNB Common to be issued in the Merger, together with any cash
payment in lieu of fractional shares, as described under "-- Fractional Shares,"
are hereinafter referred to as the "Merger Consideration."
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The Merger Consideration was determined through negotiations, taking into
account the relative value of DBI Common and CNB Common, and DBI was advised
with respect to such negotiations by its financial advisor, TCC. See "-- Opinion
of Financial Advisor."
FRACTIONAL SHARES
No fractional shares of CNB Common will be issued and, in lieu thereof,
holders of shares of DBI Common who would otherwise be entitled to a fractional
share interest (after taking into account all shares of DBI 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 Merger 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
shareholder of DBI will be entitled to receive such number of shares of CNB
Common as such shareholder would have received pursuant to such Share Adjustment
had the record date therefor been immediately following the Effective Time;
provided, however, that the Stock Dividend paid by CNB to shareholders of record
on October 30, 1995, was taken into account by CNB and DBI 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.
EFFECTIVE TIME
The Merger Agreement provides that the Merger will become effective upon
the filing of Articles of Merger with the Illinois Secretary of State, which is
expected to occur on the Closing Date. The Closing Date will occur, at the
option of CNB, on (i) the last business day of, or (ii) the first business day
of the month following, in each case, the month during which all necessary
regulatory approvals, consents, authorizations and approvals, including approval
of the shareholders of DBI, required by law for consummation of the Merger have
been obtained and all waiting periods required by law have expired. See "--
Regulatory Approvals" and "SPECIAL MEETING -- Vote Required."
Assuming that the Merger is approved by the requisite vote of the
shareholders of DBI and the other conditions to the Merger are satisfied or
waived (where permissible) (see "-- Conditions to Consummation of Merger"), it
is presently anticipated that the Merger will be consummated during the second
quarter of 1996, but no assurance can be given that such timetable will be met.
If the Merger is not effected on or before June 30, 1996, the Merger Agreement
may be terminated by either CNB or DBI. See "-- Termination of Merger
Agreement."
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RESALE OF DBI COMMON PRIOR TO EFFECTIVE TIME
With the exception of those shareholders of DBI who may be deemed to be
"affiliates" of DBI for purposes of Rule 145 under the Securities Act, the
Merger Agreement does not prohibit shareholders of DBI from selling their shares
prior to the Effective Time. The Merger Agreement provides, however, that each
affiliate of DBI 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 DBI Common during the period commencing on the 30th day prior to the
Effective Time and ending when financial results covering at least 30 days of
post-Merger operations of CNB have been published. Persons who may be deemed to
be affiliates of DBI generally include individuals who (or entities which)
control, are controlled by, or are under common control with, DBI and will
include directors and certain officers of DBI and may include principal
shareholders of DBI. See "MERGER -- Resale of CNB Common."
REGULATORY APPROVALS
CNB agreed, in the Merger Agreement, to file, within 30 days after the date
of the Merger Agreement, all regulatory applications to obtain the requisite
regulatory approvals from the Federal Reserve Board, the Illinois Commissioner
and the O.C.C. The Merger cannot proceed in the absence of the foregoing
regulatory approvals.
CNB and DBI are not aware of any other governmental approvals or actions
that are required prior to the parties' consummation of the Merger other than
those described herein. It is presently contemplated that if any such additional
governmental approvals or actions are required, such approvals or actions will
be sought. There can be no assurance, however, that any such additional
approvals or actions will be obtained.
FEDERAL RESERVE BOARD
The Merger is subject to approval by the Federal Reserve Board pursuant to
Section 3 of the B.H.C.A. The Federal Reserve Board approved the Merger on
January 23, 1996, and all waiting periods associated therewith have expired.
ILLINOIS COMMISSIONER
The Merger is also subject to approval by the Illinois Commissioner. The
Illinois Commissioner approved the Merger on February 22, 1996.
O.C.C.
The Subsidiary Bank Merger is subject to approval by the O.C.C. The O.C.C.
approved the Subsidiary Bank Merger on January 26, 1996, and all waiting periods
associated therewith have expired.
CONDITIONS TO CONSUMMATION OF MERGER
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 each
party set forth in the Merger Agreement (see "-- Representations and
Warranties")
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will be true in all material respects on the date thereof and as of the Closing
Date; (ii) each party will have performed and complied in all material respects
with all of its obligations and agreements required to be performed under the
Merger Agreement prior to the Closing Date; (iii) no temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger or the Subsidiary Bank Merger will be in effect, nor
will any proceedings by any bank regulatory authority or other governmental
agency seeking any of the foregoing be pending and there will not have been 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 or the Subsidiary Bank Merger illegal; (iv) all necessary regulatory
approvals, consents, authorizations and other approvals required by law to
consummate the Merger and the Subsidiary Bank Merger (including the approval of
the Merger by the shareholders of DBI; see "SPECIAL MEETING -- Vote Required")
will have been obtained and all waiting periods will have expired; (v) the
Registration Statement will have become effective under the Securities Act and
no stop order suspending the effectiveness of the Registration Statement will be
in effect or proceedings for that purpose will have been pending before or
threatened by the S.E.C.; (vi) each party will have received all required
documents from the other party on or prior to the Closing Date, in form and
substance reasonably satisfactory to such party; and (vii) each party will have
received an opinion of Lewis, Rice & Fingersh, L.C., counsel for CNB, to the
effect that, if the Merger is consummated in accordance with the terms set forth
in the Merger Agreement, (1) the Merger will constitute a reorganization within
the meaning of Section 368(a) of the Code, (2) no gain or loss will be
recognized by the holders of DBI Common upon receipt of the Merger Consideration
(except for cash received in lieu of fractional shares), (3) the basis of shares
of CNB Common received by the shareholders of DBI will be the same as the basis
of shares of DBI Common exchanged therefor, and (4) the holding period of the
shares of CNB Common received by the shareholders of DBI will include the
holding period of the shares of DBI Common exchanged therefor, provided such
shares were held as capital assets as of the Effective Time (see "-- Federal
Income Tax Consequences"). The conditions described above in clauses (iv) (with
respect to the receipt of regulatory approvals only) and (vii) (receipt of tax
opinion) have been satisfied.
The obligation of CNB to effect the Merger is further subject to the
fulfillment, or waiver by CNB, at or prior to the Closing Date, of the following
conditions: (a) CNB will have received an opinion letter, dated as of the
Closing Date, from Geo. S. Olive & Co. L.L.C., the independent public
accountants for CNB, to the effect that the Merger qualifies for "pooling of
interests" accounting treatment (see "-- Accounting Treatment"); (b) CNB shall
have received one or more environmental reports on certain real properties of
DBI and CNB will not have elected to exercise its termination rights in
connection therewith (which rights are described under "-- Termination of Merger
Agreement" and "-- Certain Other Agreements -- Environmental Inspections"); (c)
the Subsidiary Bank Merger will have been consummated on the Closing Date; (d)
the Eaves Amended Employment Agreement will continue to be in full force and
effect on the Closing Date (see "-- Interests of Certain Persons in Merger --
Employment and Severance Agreements"); and (e) the sum of the amount of the
consolidated allowance for loan losses of DBI, as of December 31, 1995,
determined in accordance with GAAP, and the amount of charge-offs taken by DBI
and its subsidiaries from the date of the Merger Agreement to December 31, 1995,
being not less than $1,550,000. The conditions described above in clauses (b)
and (e) have been satisfied.
The obligation of DBI to effect the Merger is further subject to the
fulfillment, or waiver by DBI, at or prior to the Closing, of the following
conditions: (a) the CNB Average Price will not be less than $22.74; and (b) the
shares of CNB Common to be issued in the Merger will be listed for trading on
Nasdaq. As the CNB Average Price will be calculated based upon the price of CNB
Common for a
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twenty-day period ending five business days before the Closing Date, it is not
possible, as of the date of this Prospectus/Proxy Statement, to determine
whether the condition described in clause (a) of this paragraph has been
satisfied. For purposes of illustration, however, if the Closing Date would have
occurred on _________, 1996, the CNB Average Price would have been $____ such
that the condition would have been satisfied.
The conditions described in clause (iv) above (the receipt of shareholder
and regulatory approvals) may not be waived by CNB or DBI. Although the
remaining conditions to effect the Merger may be waived by the party entitled to
the benefit thereof, neither CNB nor DBI intends to waive any such conditions
except in those circumstances where the Board of Directors of CNB or DBI, as the
case may be, deems such waiver to be in the best interests of CNB or DBI, as the
case may be, and its respective shareholders. No assurance can be provided as to
if or when all of the foregoing conditions precedent to the Merger will be
satisfied or waived (where permissible) by the party permitted to do so. If the
Merger is not effected on or before June 30, 1996, the Merger Agreement may be
terminated by either CNB or DBI. See "-- Termination of Merger Agreement."
TERMINATION OF MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to the Closing
Date: (i) by mutual written agreement of CNB and DBI (regardless of whether
approval by the shareholders of DBI of the Merger Agreement previously has been
obtained); (ii) by CNB and HBI or DBI in the event of a material breach by the
other of any of its representations and warranties or agreements under the
Merger Agreement not cured within 30 days after notice to cure such breach is
given to the breaching party by the non-breaching party (regardless of whether
approval by the shareholders of DBI of the Merger Agreement previously has been
obtained); (iii) by CNB if certain reports of environmental inspection on the
real properties of DBI to be obtained pursuant to the Merger Agreement should
disclose any matters requiring remedial or corrective measures the cost of which
exceeds $200,000 (as described under "--Certain Other Agreements --Environmental
Inspections"); (iv) by either party in the event that all the conditions to its
obligations are not satisfied or waived (and not cured within any applicable
cure period) (see "-- Conditions to Consummation of Merger"); (v) if any
regulatory application is finally denied or disapproved by the respective
regulatory authority (see "-- Regulatory Approvals"); (vi) by either party if
the Merger Agreement and the transactions contemplated thereby, including the
Merger, are not approved by the shareholders of DBI (see "SPECIAL MEETING
- -- Vote Required"); (vii) by CNB in the event that DBI or any of its
subsidiaries becomes a party or subject to any new or amended written agreement,
memorandum of understanding, cease and desist order, imposition of civil money
penalties or other regulatory enforcement action or proceeding with any
Regulatory Agency after the date of the Merger Agreement; and (viii) by either
party if the Merger is not consummated on or prior to June 30, 1996.
TERMINATION FEE
The Merger Agreement provides that upon the occurrence of one or more
Triggering Events, DBI will pay to CNB the sum of $1,000,000. The term
"Triggering Event" means any of the following events or transactions occurring
after the date of the Merger Agreement: (i) the termination of the Merger
Agreement by CNB upon a material breach thereof by DBI (including, without
limitation, an agreement between DBI or any subsidiary of DBI and any third
party which is inconsistent in a material respect with the transactions
contemplated by the Merger Agreement), if within eighteen months after the date
of such
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termination, an event described in clause (ii) or (iii) of below has occurred
(notwithstanding the qualification that such event shall have occurred prior to
the termination of the Merger Agreement); (ii) prior to termination of the
Merger Agreement, any person (other than CNB) will have acquired beneficial
ownership or the right to acquire beneficial ownership of 50% or more of the
voting power of DBI; (iii) prior to termination of the Merger Agreement, DBI or
any material subsidiary of DBI, without having received prior written consent
from CNB, will have completed (1) a merger, consolidation or similar transaction
involving DBI or any material subsidiary of DBI, (2) a transaction whereby any
person (other than CNB) will have purchased, leased or otherwise acquired 30% or
more of the assets of DBI or any material subsidiary of DBI, or (3) a
transaction whereby any person (other than CNB) will have purchased or otherwise
acquired (including by way of merger, consolidation, share exchange or similar
transaction) beneficial ownership of securities representing 50% or more of the
voting power of DBI or any material subsidiary of DBI (the transactions
described above in clauses (1), (2) and (3) are individually referred to herein
as an "Acquisition Transaction"); or (iv) the holders of DBI Common will not
have approved the Merger Agreement at the Special Meeting, or DBI's Board of
Directors will have withdrawn or modified in a manner materially adverse to CNB
such Board's recommendation to the DBI shareholders for the approval of the
Merger Agreement, or will not have recommended to the shareholders of DBI the
approval of the Merger Agreement, and, in any such case, an Acquisition
Transaction will have occurred within eighteen months after the Special Meeting
or any adjournment thereof.
EXCHANGE OF STOCK CERTIFICATES
The conversion of DBI Common into CNB Common (other than any shares as to
which dissenters' rights are properly exercised; see "-- Dissenters' Rights")
will occur by operation of law at the Effective Time. After the Effective Time,
certificates theretofore evidencing shares of DBI 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.
Within five business days following 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 DBI 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 DBI Common will pass, only upon proper delivery of the
certificates for DBI Common to the Exchange Agent and will be in such form and
have such other provisions as CNB may reasonably specify. After the receipt by
the Exchange Agent of a holder's certificates for DBI 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 Merger Agreement. SHAREHOLDERS OF DBI 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
DBI Common will be converted in the Merger will be deemed to have been issued at
the Effective Time. Unless and until the certificates for DBI Common are
surrendered, together with a letter of transmittal duly executed and any other
required documents, dividends on the shares of CNB Common issuable with respect
to such DBI Common which would
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otherwise be payable will not be paid to the holders of such certificates and,
in such case, upon surrender of the certificates for DBI 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.
Notwithstanding the foregoing, the Merger Agreement provides that no Merger
Consideration will be delivered to a person who is an "affiliate" of DBI (as
such term is hereafter defined under "-- Resale of CNB Common") unless such
affiliate has theretofore executed and delivered to CNB the agreement referred
to in the Merger Agreement. See "-- Resale of CNB Common."
If a certificate for DBI Common has been lost, stolen or destroyed, the
Exchange Agent will issue the Merger Consideration properly payable in
accordance with the Merger Agreement upon receipt of an affidavit as to such
loss, theft or destruction and, if required by CNB, the posting of a bond in an
amount reasonably determined by CNB.
For a description of the differences between the rights of the holders of
CNB Common and DBI Common, see "COMPARISON OF SHAREHOLDER RIGHTS." For a
description of the CNB Common, see "DESCRIPTION OF CNB'S CAPITAL STOCK."
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of the
parties thereto. The representations and warranties by DBI include, among other
things, except as otherwise disclosed to CNB, those as to: (i) the due
organization and good standing of DBI; (ii) the capitalization of DBI; (iii) the
due authorization and execution of the Merger Agreement by DBI; (iv) the due
organization, good standing and ownership of subsidiaries of DBI; (v) the
presentation in accordance with GAAP applied on a consistent basis and the fair
presentation in all material respects of financial statements and filings by DBI
with The Federal Reserve Bank of St. Louis and by DuQuoin Bank with the O.C.C.;
(vi) the absence of any changes in the financial condition, results of
operations or business or prospects of DBI and its subsidiaries taken as a whole
since December 31, 1994, which would have a material adverse effect on DBI and
its subsidiaries taken as a whole (except as disclosed by DuQuoin Bank since
December 31, 1994, in its reports with the O.C.C. and except for any provision
for loan losses taken by DBI and its subsidiaries with the written concurrence
of CNB); (vii) the absence of any cease-and-desist order, agreement, consent
agreement, memorandum of understanding, or other regulatory enforcement action,
proceeding or order between DBI and its subsidiaries and any federal or state
agency charged with the supervision or regulation of banks or bank holding
companies or engaged in the insurance of bank deposits, or any court,
administrative agency or commission or other governmental agency, authority or
instrumentality (a "Regulatory Agency") having supervisory or regulatory
authority with respect to DBI or any of its subsidiaries; (viii) the filing of
tax returns and reports and payment of taxes by DBI and its subsidiaries; (ix)
the absence of pending or threatened litigation or other such actions involving
DBI or its subsidiaries (except for foreclosure and other collection proceedings
commenced in the ordinary course of business by DuQuoin Bank with respect to
loans in default with respect to which no claims have been asserted against
DuQuoin Bank); (x) the existence of agreements with employees of DBI and its
subsidiaries, including certain employment and severance agreements; (xi) the
filing and material compliance of certain reports required to be filed by DBI
and its subsidiaries with various Regulatory Agencies, including the Federal
Reserve Board, the F.D.I.C. and the O.C.C.; (xii) the investment portfolio of
DBI and its subsidiaries; (xiii) the loan portfolio of DBI and its subsidiaries;
(xiv) certain
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employee matters and matters under the Employee Retirement Income Security Act
of 1974, as amended; (xv) the title to the properties of DBI and its
subsidiaries, the absence of liens (except as specified) and insurance matters;
(xvi) certain environmental matters with respect to real properties owned,
leased or operated by DBI and its subsidiaries; (xvii) the compliance by DBI and
its subsidiaries with applicable laws and regulations; (xviii) the absence of
undisclosed liabilities of DBI and its subsidiaries; (xix) the absence of
brokerage commissions or similar finder's fees (except as specified) in
connection with the Merger payable by DBI or its subsidiaries; (xx) the payment
of dividends by either DBI or any of its subsidiaries and other distributions
and actions taken by DBI; (xxi) the non-banking activities of DBI and its
subsidiaries; (xxii) certain properties, contracts and other agreements of DBI
and its subsidiaries; (xxiii) the trust administration of DBI and its
subsidiaries; (xxiv) the inapplicability of certain state takeover laws and
provisions of DBI's Articles of Incorporation; (xxv) certain actions taken by
DBI with respect to the redemption of certain Shareholder Rights previously
issued by DBI (see "-- Background of Merger"); and (xxvi) the accuracy of
information supplied by DBI or its subsidiaries in connection with the
Registration Statement, this Prospectus/Proxy Statement and any other documents
to be filed with the S.E.C., Nasdaq or any banking or other Regulatory Agency in
connection with the transactions contemplated by the Merger Agreement.
The representations and warranties of CNB and HBI include, among other
things, those as to: (i) the due organization and good standing of CNB and HBI;
(ii) the capitalization of CNB and HBI; (iii) the due authorization and
execution of the Merger Agreement by each of CNB and HBI, and the absence of the
need (except as specified) for governmental or third party consents to the
Merger or the Subsidiary Bank Merger; (iv) the significant subsidiaries of CNB;
(v) the presentation in accordance with GAAP applied on a consistent basis and
the fair presentation in all material respects of CNB's financial statements and
filings with the S.E.C.; (vi) the absence of any material adverse changes since
December 31, 1994, in the financial condition, results of operations or business
or prospects of CNB and its subsidiaries taken as a whole; (vii) the absence of
any pending or threatened litigation, claim or other proceeding against CNB or
any of its subsidiaries which would have a material adverse effect on the
business of CNB and its subsidiaries taken as a whole; (viii) the filing and
material compliance of certain reports required to be filed by CNB and its
significant subsidiaries with various Regulatory Agencies, including the S.E.C.,
the Federal Reserve Board, the O.C.C., the F.D.I.C. and Nasdaq; (ix) the
compliance by CNB and its significant subsidiaries with applicable laws and
regulations; (x) the accuracy of information supplied by CNB and HBI in
connection with the Registration Statement, this Prospectus/Proxy Statement and
any other documents to be filed with the S.E.C., Nasdaq, or any banking or other
Regulatory Agency in connection with the transactions contemplated by the Merger
Agreement; and (xi) certain tax-free reorganization matters.
CERTAIN OTHER AGREEMENTS
BUSINESS OF DBI IN ORDINARY COURSE
Pursuant to the Merger Agreement, DBI has agreed, among other things, that
it will, and that it will cause each of its subsidiaries to, continue to carry
on, after the date of the Merger Agreement, its respective business and the
discharge or incurrence of obligations and liabilities only in the usual,
regular and ordinary course as previously conducted, and that neither it nor its
subsidiaries will, without the prior written consent of CNB (which will not be
unreasonably withheld): (i) issue additional DBI Common or other capital stock,
options, warrants or other rights to subscribe for or purchase DBI Common or any
other capital stock or any other securities convertible into or exchangeable for
any capital stock; (ii) directly or indirectly redeem, purchase or otherwise
acquire DBI Common or any other capital stock
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of DBI or its subsidiaries; (iii) effect a reclassification, recapitalization,
splitup, exchange of shares, readjustment or other similar change in any capital
stock or otherwise reorganize or recapitalize; (iv) change its articles of
incorporation or association, as the case may be, or bylaws; (v) grant any
increase (other than (a) ordinary and normal increases consistent with past
practices, or (b) 1995 performance bonuses to designated officers of DuQuoin
Bank not to exceed $19,000 in the aggregate) 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 $150,000, or that would increase the
aggregate credit outstanding to any one borrower (or group of affiliated
borrowers) to more than $150,000; (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 material indebtedness, claims or rights owing to DBI or
its subsidiaries 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 possession or control of 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 earnings of DBI and its
subsidiaries taken as a whole; (xvi) purchase any real or personal property or
make any capital expenditure in excess of $5,000; (xvii) take any action which
would adversely affect or delay the ability of either CNB or DBI to obtain any
necessary approvals of any Regulatory Agency or other governmental authority
required for the transactions contemplated by the Merger Agreement or to perform
its covenants and agreements under the Merger Agreement; and (xviii) engage in
any transaction or take any action that would render untrue in any material
respect any of the representations and warranties made by DBI in the Merger
Agreement, if such representations or warranties were given as of the date of
such transaction or action.
DIVIDENDS
The Merger Agreement provides that DBI may declare and pay its regular
semi-annual dividend on the DBI Common not to exceed $5.00 per share at
approximately the same time during the year which it has historically declared
and paid such dividend (i.e., declare each December and June and pay each
January and July, respectively). CNB and DBI 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 DBI shareholders
would receive the applicable portion of the semi-annual dividend from DBI or a
regular quarterly dividend from CNB, but not from both with respect to any such
quarter.
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ENVIRONMENTAL INSPECTIONS
DBI has agreed to permit CNB, within 60 days after the date of the Merger
Agreement, to: (i) cause to be prepared a report of a phase one environmental
investigation on all real property owned, leased or operated by DBI or its
subsidiaries (excluding space in retail and similar establishments leased by DBI
for automatic teller machines); and (ii) if required by the phase one
investigation in CNB's reasonable opinion, cause to be prepared a report of a
phase two investigation on properties requiring such additional study. The
Merger Agreement also provides that, notwithstanding the foregoing, with respect
to three properties identified by DBI on the Disclosure Schedule to the Merger
Agreement, CNB may, in its discretion, cause a phase two investigation to be
prepared in conjunction with the preparation of a phase one investigation with
respect to such properties. If the cost of taking all remedial or other
corrective actions and measures (a) required by applicable law, or (b)
recommended or suggested by such report or reports or prudent in light of
serious life, health or safety concerns, in the aggregate, exceed the sum of
$150,000 as reasonably estimated by an environmental expert retained for such
purpose by CNB and reasonably acceptable to DBI, or if the cost of such actions
and measures cannot be so reasonably estimated by such expert to be such amount
or less with any reasonable degree of certainty, then CNB will have the right,
for a period of fifteen business days following receipt of such estimate or
indication that the cost of such actions and measures cannot be so reasonably
estimated, to terminate the Merger Agreement, which will be CNB's sole remedy in
such event. See "-- Termination of Merger Agreement." Except as described under
"-- Expenses and Fees," all costs and expenses associated with such
environmental reports will be paid by DBI.
CNB and DBI agreed, on January 31, 1996, to extend to February 29, 1996,
the period during which CNB would conduct the environmental investigations and
have the right to exercise the termination rights described in the preceding
paragraph, and to increase from $150,000 to $200,000 the termination threshold
amount described in the preceding paragraph. As described in footnote number 11
to the FINANCIAL STATEMENTS OF DBI attached to this Prospectus/Proxy Statement,
DBI has accrued a $200,000 liability which management of DBI believes is a
reasonable estimate of the cost of remediation efforts which might ultimately be
required with respect to the subject properties. The right of CNB to terminate
the Merger Agreement based upon the results of the environmental investigations
as described herein has expired unexercised.
Environmental investigations routinely are conducted by CNB in connection
with transactions involving the acquisition of real property, whether in its
ongoing business operations or pursuant to the acquisition of a bank or other
business. 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 phase one
environmental investigations of real property to ensure that environmental
problems do not exist which could result in unacceptably high risk to CNB and
its shareholders.
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OTHER DBI AGREEMENTS
DBI has also 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 DBI's representations or
agreements in the Merger Agreement or of the occurrence of any matter or event
known to and directly involving DBI, other than any changes in conditions that
affect the banking industry generally, that is materially adverse to the
business, operations, properties, assets or condition (financial or otherwise)
of DBI and its subsidiaries taken as a whole; (ii) cause the Special Meeting to
be duly called and held; (iii) submit to CNB, monthly financial statements for
DBI as soon as practicable after such financial statements are prepared by DBI;
(iv) use its reasonable 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 or the
Subsidiary Bank Merger; (v) consult and cooperate with CNB with respect to
determining 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; (vi) use its best efforts to
perform and fulfill all conditions and obligations on its part to be performed
or fulfilled under the Merger Agreement and to effect the Merger; (vii) permit
CNB reasonable access to DBI's 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 Merger Agreement; and (viii) cooperate with CNB in causing
the Subsidiary Bank Merger to be effected at the Effective Time.
CNB AGREEMENTS
CNB has agreed, among other things, to: (i) file, within 30 days after the
date of the Merger Agreement, all regulatory applications required in order to
consummate the Merger and keep DBI reasonably informed as to the status of such
applications (see "-- Regulatory Approvals"); (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 Merger Agreement; (v) give DBI 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 CNB's
representations or agreements in the Merger Agreement or of the occurrence of
any matter or event known to and directly involving CNB, other than any changes
in conditions that affect the banking industry generally, that is materially
adverse to the business, operations, properties, assets or condition (financial
or otherwise) of CNB and its subsidiaries taken as a whole; (vi) not, without
the prior written consent of DBI, engage in any transaction or take any action
that would render untrue in any material respect any of the representations and
warranties made by CNB in the Merger Agreement, if such representations or
warranties were given as of the date of such transaction or action; (vii) use
its reasonable best efforts to perform and fulfill all conditions and
obligations to be performed or fulfilled under the Merger Agreement and to
effect the Merger and the Subsidiary Bank Merger; (viii) indemnify and provide
the directors and officers of DBI with certain directors' and officers'
liability insurance coverage after the Effective Time (see "-- Interests of
Certain Persons in Merger -- Indemnification and Insurance"); (ix) provide
certain employee benefit plans and programs to the employees of DBI who continue
their employment after the Effective Time (see "-- Effect on Employee Benefit
Plans"); (x) cooperate with DBI in causing the Subsidiary Bank Merger to be
effected at the Effective Time; (xi) cause each of the directors of DuQuoin Bank
to be elected to the regional advisory Board of Directors of CNB Bank (for the
DuQuoin Region) after the Subsidiary Bank Merger and cause one or two of the
directors of DuQuoin Bank, as designated by DBI in consultation with CNB, to be
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elected to the Board of Directors of CNB Bank after the Subsidiary Bank Merger
(see "-- Interests of Certain Persons in Merger -- Board Composition" and "--
Management and Operations After Merger"); and (x) permit DBI reasonable access
to CNB's 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 DBI may have a reasonable and legitimate
interest in furtherance of the transactions contemplated by the Merger
Agreement.
EFFECT ON EMPLOYEE BENEFIT PLANS
The Merger Agreement provides that each employee of DBI or its subsidiaries
who continues as an employee of CNB or any subsidiary thereof following the
Closing Date will be entitled, as a new employee of a subsidiary of CNB, to
participate in such employee benefit plans or deferred compensation, stock
option, bonus or incentive plans or other employee benefit or fringe benefit
programs that may be in effect generally for employees of all of CNB's
subsidiaries, on the same basis as similarly situated employees of other CNB
subsidiaries if and as such employee is eligible and, if required, selected for
participation therein under the terms thereof, subject to the right of CNB to
amend, modify or terminate, in its sole discretion, any such plans or programs
and provided that such employee shall not be participating in a similar plan
which is maintained by DBI after the Closing Date. CNB will, for purposes of
vesting and any age or period of service requirements for commencement of
participation with respect to any such plans or programs in which former
employees of DBI may participate (but not for benefit accruals under any defined
benefit plan), credit each such employee with his or her term of service with
DBI and its subsidiaries and, with respect to participants and beneficiaries in
DBI employee benefit plans or programs as of the Effective Time, grant credit
under CNB's corresponding plans or programs for co-payments and deductibles paid
under the corresponding DBI employee benefit plans or programs as of the
Effective Time, and grant credit for the employee's term of service with DBI and
its subsidiaries for purposes of waiting periods and pre-existing condition
exclusions or penalties under CNB's plans or programs.
EXPENSES AND FEES
Except as provided below and under "-- Termination Fee," in the event the
Merger Agreement is terminated or the Merger is abandoned, all costs and
expenses incurred in connection with the Merger Agreement will be paid by the
party incurring such costs and expenses, and no party will have any liability to
the other party for costs, expenses, damages or otherwise, except that: (i) in
the event the Merger 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; and (ii) in the event that the Merger is not consummated
for any reason other than on account of: (a) a termination of the Merger
Agreement by CNB on account of a breach by DBI; (b) the failure of DBI's
shareholders to approve the Merger Agreement and the Merger; (c) the inability
to obtain the pooling opinion from CNB's independent public accountants due to
the actions of DBI, its affiliates or shareholders; (d) a termination of the
Merger Agreement by CNB in the event DBI or its subsidiaries should become a
party to certain regulatory enforcement actions or proceedings; or (e) a
termination of the Merger Agreement by CNB under certain conditions as a result
of certain environmental conditions with respect to certain of DBI's real
properties, then CNB will reimburse DBI for: (1) all of its out-of-pocket
expenses incurred in obtaining the phase one environmental investigations
pursuant to the Merger Agreement; (2) 50% of its out-of-pocket expenses incurred
in obtaining any phase two environmental investigation pursuant to the Merger
Agreement which does not recommend or suggest as being appropriate the taking of
any material remedial or corrective actions; and
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(3) the reasonable out-of-pocket expenses incurred by DBI to facilitate and
effectuate the conversion of its data processing system as may be requested by
CNB pursuant to the Merger Agreement. See "MERGER -- Termination of Merger
Agreement" and "-- Certain Other Agreements -- Environmental Inspections."
NO SOLICITATION
The Merger Agreement provides that, unless and until the Merger Agreement
has been terminated, DBI will not solicit or encourage or (subject to the
fiduciary duties of its directors as advised by counsel) 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 DBI or its subsidiaries. DBI 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 DBI have interests in the
Merger that are in addition to and separate from interests of shareholders of
DBI generally. The Board of Directors of DBI was aware of these interests and
considered them, among other matters, in approving the Merger Agreement and the
transactions contemplated thereby, including the Merger. For information about
the percentage of DBI Common owned by the directors and executive officers of
DBI, see "INFORMATION ABOUT DBI -- Security Ownership of Management." None of
the directors or executive officers of DBI would own, on a pro forma basis
giving effect to the Merger, more than 1% of the issued and outstanding shares
of CNB Common. Adoption and approval of the Merger Agreement and the
transactions contemplated thereby by the shareholders of DBI will also
constitute approval of the following benefits to be received by directors,
executive officers and employees of DBI.
INDEMNIFICATION AND INSURANCE
Following the Effective Time, CNB will provide the directors and officers
of DBI and its subsidiaries with the same directors' and officers' liability
insurance coverage that CNB provides to directors and officers of its other
banking subsidiaries generally and 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 DBI and its subsidiaries occurring or failing to occur prior to the
Closing Date; provided, however, that if CNB is unable to obtain such
endorsement, then DBI may purchase coverage under its existing directors' and
officers' liability insurance on such terms and provisions as DBI deems
appropriate provided that the total cost does not exceed $30,000.
CNB has agreed, for a period of six years after the Effective Time, to
cause HBI, as the surviving corporation in the Merger, to indemnify the present
and former directors, officers, employees and agents of DBI and its subsidiaries
against any liability arising out of actions occurring prior to the Effective
Time, to the extent that such indemnification is then permitted under the
Illinois Law and by DBI's Articles of Incorporation and Bylaws as in effect on
the date of the Merger Agreement, including provisions relating to advances of
expenses incurred in the defense of any action or suit. CNB also has agreed to
cause any successor or assignee of HBI, after the Effective Time, to assume the
obligations of
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HBI described in this paragraph or, if HBI should liquidate, dissolve or
otherwise wind up its business after the Effective Time, CNB has agreed to
assume such obligations.
EMPLOYEE BENEFITS
The Merger Agreement contains certain provisions regarding employee
benefits which are described under "-- Effect on Employee Benefit Plans."
BOARD COMPOSITION
CNB will cause CNB Bank to elect each of the directors of DuQuoin Bank to
the Regional Board of Directors of CNB Bank (for the DuQuoin Region) after the
Subsidiary Bank Merger and cause one or two of the directors of DuQuoin Bank, as
designated by DBI in consultation with CNB, to be elected to the Board of
Directors of CNB Bank after the Subsidiary Bank Merger. It has not yet been
determined, as of the date of this Prospectus/Proxy Statement, which person or
persons will be appointed as new Directors of CNB Bank following the Subsidiary
Bank Merger. Directors whose principal occupations are with CNB or any of its
subsidiaries receive no Director's fees, non-employee directors on the Board of
Directors of CNB Bank receive $500 per meeting attended (meetings are held
quarterly) and non-employee directors on the regional advisory Boards of
Directors of CNB Bank receive $600 per meeting attended (meetings are held each
month, except February and August). See "-- Management and Operations After
Merger."
EMPLOYMENT AND SEVERANCE AGREEMENTS
On November 17, 1995, and in connection with the execution of the Merger
Agreement, CNB and DuQuoin Bank entered into the Eaves Amended Employment
Agreement with Daniel H. Eaves, the President and Chief Executive Officer of DBI
and DuQuoin Bank. The Eaves Amended Employment Agreement, which amends and
restates an Employment Agreement between DBI, DuQuoin Bank and Mr. Eaves dated
February 11, 1994, provides that Mr. Eaves's term of employment will be from the
date of the Eaves Amended Employment Agreement until the third anniversary of
the Closing Date at an initial base salary of $128,357. The base salary was
automatically increased, pursuant to the terms of the Eaves Amended Employment
Agreement, by 3% as of January 1, 1996 and, after the consummation of the
Subsidiary Bank Merger, the base salary may be increased (but not decreased)
from time to time in accordance with the normal business practices of CNB Bank
as determined by its Board of Directors. Mr. Eaves is also entitled to
participate in all benefits plans maintained for employees of CNB Bank
generally. The Eaves Amended Agreement also provides that, in the event that Mr.
Eaves's employment is terminated upon specified circumstances prior to the end
of the term of the Eaves Amended Employment Agreement, Mr. Eaves will be
entitled to receive, over the remaining term of the Eaves Amended Employment
Agreement, his then-applicable base salary, subject to certain adjustments.
EXECUTIVE SALARY CONTINUATION AGREEMENTS
DuQuoin Bank has entered into a separate Executive Salary Continuation
Agreement (collectively, the "Continuation Agreements") with each of Daniel H.
Eaves, President and Chief Executive Officer of DuQuoin Bank, and Jo Ann E.
Isom, Senior Vice President - Cashier DuQuoin Bank. The Continuation Agreements
provide for the payment of retirement benefits of $50,000 and $20,000 per annum
for a period of ten years (subject to cost-of-living adjustments at the option
of DuQuoin Bank or any successor thereto) to Mr. Eaves and Ms. Isom,
respectively, if such officers are employed by DuQuoin Bank, or any successor
thereto, when he or she, respectively, attains the age of 62. Each
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Continuation Agreement terminates with no benefits payable thereunder if the
officer should voluntarily terminate employment or is discharged by DuQuoin Bank
or any successor thereto under certain circumstances described therein.
Pursuant to a "change of control" provision in each of their respective
Continuation Agreements, Mr. Eaves and Ms. Isom would be entitled to receive the
retirement benefits described above, at the age of 62, if they are terminated by
DuQuoin Bank or any successor thereto after the 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 Merger 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 receipt of the approval of
shareholders of DBI; provided, however, that the provisions relating to the
conversion of the shares of DBI Common into shares of CNB Common will not be
amended after the receipt of the approval of shareholders of DBI unless the
approval of such shareholders is resolicited. It is anticipated that a condition
to the obligations of CNB and DBI to consummate the Merger would be waived only
in those circumstances where the Board of Directors of CNB or DBI, as the case
may be, deems such waiver to be in the best interests of such company and its
shareholders.
DISSENTERS' RIGHTS
The rights of DBI shareholders who choose to dissent from the Merger are
governed by the provisions of the Illinois Law. An excerpt of the Illinois Law
(Sections 11.65 and 11.70) governing dissenters' rights is attached hereto as
Appendix C.
Pursuant to Section 11.70 of the Illinois Law, a shareholder may assert
dissenters' rights only if the shareholder delivers to DBI prior to the Special
Meeting a written demand for payment for his or her shares of DBI Common if the
Merger is consummated and the shareholder does not vote in favor of the Merger.
Within ten days after the Closing Date, or 30 days after the shareholder
delivers to HBI the written demand for payment, whichever is later, HBI will
send each shareholder who has delivered a written demand for payment a statement
setting forth the opinion of HBI as to the estimated value of the shares of DBI
Common, DBI's balance sheet as of the most recently completed fiscal year ending
not earlier than sixteen months prior to delivery of the statement, together
with the statement of income for that year and the latest available interim
financial statements, and a commitment to pay the estimated value for the shares
of DBI Common of the dissenting shareholder upon transmittal to HBI of the
certificate(s), or other evidence of ownership, with respect to such shares of
DBI Common.
If the dissenting shareholder does not agree with the opinion of HBI as to
the estimated value of the shares, the shareholder, within 30 days after the
delivery of DBI's statement of value, will notify HBI
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in writing of his or her estimate of value and demand payment for the difference
between the shareholder's estimate of value and the amount of the payment by
HBI.
If, within 60 days from delivery to DBI of the shareholder notification of
estimate of value of the shares, HBI and the dissenting shareholder have not
agreed in writing upon the value of the shares of DBI Common, HBI must either
pay the difference in value demanded or file a petition in the circuit court of
Perry County, Illinois requesting the court to determine the fair value of the
shares. HBI must make all dissenters, whether or not residents of Illinois,
whose demands remain unsettled parties to such proceeding and all parties will
be served with a copy of the petition. Failure of HBI to commence an action will
not limit or affect the right of dissenting shareholders to otherwise commence
an action as permitted by law. In an appraisal proceeding, the court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value.
Each dissenter made a party to an appraisal proceeding is entitled to
judgment for the amount, if any, by which the court finds that the fair value of
the shares exceeds the amount paid by HBI. The judgment will include an
allowance for interest at such rate as the court may find to be fair and
equitable from the Closing Date to the date of payment.
The court, in an appraisal proceeding, will determine all costs of the
proceeding, including the reasonable compensation and expenses of the
appraisers, if any, and experts employed by any party, but will exclude the fees
and expenses of counsel for any party. If the fair value of the shares as
determined by the court materially exceeds the amount offered by HBI, or if no
offer was made, then all or any part of such expenses may be assessed against
HBI.
If the holders of more than approximately 10% of the outstanding shares of
DBI Common should properly exercise their dissenters' rights, the Merger would
not qualify as a "pooling of interests" for accounting and financial reporting
purposes, which qualification is a condition to the obligation of CNB to proceed
with the Merger. See "-- Accounting Treatment" and "-- Conditions to
Consummation of Merger."
THE FOREGOING SUMMARY DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE
PROVISIONS OF THE ILLINOIS LAW RELATING TO THE RIGHTS OF DISSENTING SHAREHOLDERS
OF DBI, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE EXCERPTS FROM THE
ILLINOIS LAW INCLUDED HEREIN AS APPENDIX C.
FEDERAL INCOME TAX CONSEQUENCES
The Merger is expected to qualify as a reorganization under Section 368(a)
of the Code. Except for shareholders properly exercising their dissenters'
rights, and cash received in lieu of a fractional share interest in CNB Common,
holders of shares of DBI 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 DBI 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 DBI Common converted
in the Merger. Cash received in lieu of fractional share interests and cash
received by shareholders properly exercising their dissenters' rights will be
treated as (i) a distribution in full payment of such fractional
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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. If the Merger is consummated in accordance with the terms set forth
in the Merger 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 DBI Common upon receipt of Merger
Consideration (except for cash received in lieu of fractional shares and by
shareholders properly exercising their dissenters' rights); (iii) the basis of
CNB Common received by the shareholders of DBI will be the same as the basis of
DBI Common exchanged therefor; and (iv) the holding period of the shares of CNB
Common received by the shareholders of DBI will include the holding period of
the shares of DBI Common exchanged therefor, provided such shares were held as
capital assets as of the Effective Time.
THE FOREGOING IS A GENERAL SUMMARY OF ALL OF THE MATERIAL FEDERAL INCOME
TAX CONSEQUENCES OF THE MERGER TO SHAREHOLDERS OF DBI WITHOUT REGARD TO THE
PARTICULAR FACTS AND CIRCUMSTANCES OF EACH SHAREHOLDER'S TAX SITUATION AND
STATUS. EACH SHAREHOLDER OF DBI 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
The Merger is expected to qualify as a "pooling of interests" for
accounting and financial reporting purposes. Under this method of accounting,
the assets and liabilities of CNB and DBI 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
DBI for the entire fiscal year in which the Merger occurs, the separately
reported income of CNB and DBI for prior periods will be combined and restated
as consolidated income of CNB, and no goodwill will be recognized.
The Merger Agreement provides that a condition to the obligation of CNB to
consummate the Merger is its receipt of an opinion from Geo. S. Olive & Co.
L.L.C., 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 consummated in accordance with the Merger
Agreement. In the event such condition is not met, the Merger would not be
consummated unless the condition was waived by CNB (which CNB has indicated it
does not intend to do) and the approval of the shareholders of DBI was
resolicited if such change in accounting treatment were deemed material to the
consolidated financial condition and results of operations of CNB on a pro forma
basis assuming consummation of the Merger. As of the date of this
Prospectus/Proxy Statement, CNB and DBI are not aware, after consultation with
Geo. S. Olive & Co. L.L.C., of any existing facts or circumstances which would
preclude such a pooling opinion from being issued by Geo. S. Olive & Co. L.L.C.
The unaudited pro forma financial information contained in this
Prospectus/Proxy Statement has been prepared using the pooling of interests
accounting method to account for the Merger. See "SELECTED COMPARATIVE PER SHARE
DATA," "SELECTED FINANCIAL DATA" and "PRO FORMA FINANCIAL DATA."
47
<PAGE>
MANAGEMENT AND OPERATIONS AFTER MERGER
The Merger is conditioned upon the concurrent merger of DuQuoin Bank with
and into CNB Bank. Following the Subsidiary Bank Merger: (i) CNB Bank will
continue to serve the DuQuoin community, under the name "Citizens Bank of
Illinois, National Association," in substantially the same manner as DuQuoin
Bank has done historically; (ii) Mr. Daniel H. Eaves, President and Chief
Executive Officer of DBI and DuQuoin Bank, will serve as Chief Executive Officer
of the DuQuoin Region of CNB Bank; (iii) one or two of the directors of DuQuoin
Bank, as designated by DBI in consultation with CNB, will be elected as
directors of CNB Bank; and (iv) each of the directors of DuQuoin Bank will be
elected as regional advisory directors of CNB Bank for the DuQuoin Region. The
management and Board of Directors of HBI and CNB will not be affected as a
result of the Merger. See "-- Interests of Certain Persons in Merger."
RESALE OF CNB COMMON
The shares of CNB Common issuable pursuant to the Merger will be freely
transferable under the Securities Act except for shares issued to any DBI
shareholder who may be deemed to be an "affiliate" of CNB for purposes of Rule
144 under the Securities Act or an "affiliate" of DBI for purposes of Rule 145
under the Securities Act. Persons who may be deemed to be affiliates of DBI or
CNB generally include individuals who, or entities which, control, are
controlled by or are under common control with DBI or CNB and will include
directors and certain officers of DBI and CNB and may include principal
shareholders of DBI and CNB, if any.
Rules 144 and 145 under the Securities Act will restrict the sale of CNB
Common received in the Merger by affiliates and certain of their family members
and related interests. Generally, during the two years following the Effective
Time, those persons who are affiliates of DBI at the time of the Special
Meeting, provided they are not affiliates of CNB at or following the Effective
Time, may publicly resell any CNB received by them in the Merger, subject to
certain limitations as to, among other things, the amount of CNB Common sold by
them in any three-month period and as to the manner of sale. After the two-year
period, such affiliates may resell their shares without such restrictions so
long as there is adequate current public information with respect to CNB as
required by Rule 144 under the Securities Act.
The ability of affiliates to resell shares of CNB Common received in the
Merger under Rule 144 or 145 under the Securities Act as summarized herein
generally will be subject to CNB's having satisfied its Exchange Act reporting
requirements for specified periods prior to the time of sale. Affiliates also
would be permitted to resell shares of CNB Common received in the Merger
pursuant to an effective registration statement under the Securities Act or
another available exemption from the Securities Act registration requirements.
Guidelines of the S.E.C. regarding qualifying for the pooling of interests
method of accounting also limit sales of shares of the acquiring and acquired
company by affiliates of either company in a business combination. Guidelines of
the S.E.C. indicate further that the pooling of interests method of accounting
will generally not be challenged on the basis of sales by affiliates of the
acquiring or acquired company if they do not dispose of any of the shares of the
corporation they own or shares of a corporation they receive in connection with
a merger during the period beginning 30 days before the merger and ending when
financial results covering at least 30 days of post-merger operations of the
combined entity have been published.
48
<PAGE>
The Merger Agreement provides that DBI will use its best efforts to obtain
and deliver to CNB an agreement from each such affiliate providing that such
affiliate will not transfer any shares of CNB Common received in the Merger
except in compliance with the Securities Act and in compliance with the
requirements described in the preceding paragraph regarding the non-disposition
of any shares of DBI Common or CNB Common (or any interest therein) during the
period commencing 30 days prior to the Closing Date through the date on which
financial results covering at least 30 days of combined operations of CNB and
DBI after the Merger have been published. No Merger Consideration will be
delivered to an affiliate of DBI or CNB until such affiliate has executed and
delivered the aforementioned agreement to CNB and satisfied the other
requirements described above under "-- Exchange of Stock Certificates."
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 DBI or
CNB.
49
<PAGE>
PRO FORMA FINANCIAL DATA
The following unaudited pro forma combined consolidated condensed balance
sheet as of December 31, 1995, and the pro forma combined consolidated condensed
statements of income for each of the years in the three-year period ended
December 31, 1995, give effect to the Merger based on the historical
consolidated financial statements of CNB and DBI and their respective
subsidiaries 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 DBI based upon their respective financial statements. These pro forma
statements, which include results of operations as if the Merger had been
effected on the first day of the periods presented and had been accounted for
under the pooling of interests method of accounting, 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 DBI contained
elsewhere in this Prospectus/Proxy Statement. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE" and "FINANCIAL STATEMENTS OF DBI."
50
<PAGE>
PRO FORMA COMBINED CONDENSED BALANCE SHEET
December 31, 1995
(unaudited)
<TABLE>
<CAPTION>
(A) (B) (C)
PRO FORMA CNB/DBI
CNB DBI ADJUSTMENTS PRO FORMA
----------- ----------- ----------------- --------------
Increase
(Decrease)
(in thousands)
<S> <C> <C> <C> <C>
ASSETS:
Cash and due from banks $130,239 $2,135 $132,374
Interest bearing deposits in banks 296 195 491
Federal funds sold 8,250 137 8,387
Real estate loans held for sale 222,157 -- 222,157
Investments available for sale 972,320 22,048 994,368
Investment securities 198,240 10,312 208,552
-----------------------------------------------------------------------
Loans 1,971,454 45,693 2,017,147
Allowance for loan losses (28,806) (1,102) (29,908)
-----------------------------------------------------------------------
Net loans 1,942,648 44,591 -- 1,987,239
Premises and equipment 66,224 2,060 68,284
Other real estate owned 1,727 51 1,778
Goodwill 23,741 -- 23,741
Other assets 62,840 1,750 64,590
-----------------------------------------------------------------------
Total Assets $3,628,682 $83,279 $ -- $3,711,961
=======================================================================
LIABILITIES:
Deposits 2,789,989 72,915 2,862,904
Repurchase agreements 325,271 2,831 328,102
Federal funds purchased 18,370 -- 18,370
Short-term borrowings 7,441 -- 7,441
Long-term debt 158,046 -- 158,046
Other liabilities 31,872 963 32,835
-----------------------------------------------------------------------
Total Liabilities 3,330,989 76,709 -- 3,407,698
-----------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Common stock 17,895 695 (196)/(1)/ 18,394
Capital surplus 246,492 706 (196)/(1)/ 247,394
Retained earnings 29,672 5,239 34,911
Net unrealized security gains (losses) 3,634 (70) 3,564
-----------------------------------------------------------------------
Total Shareholders' Equity 297,693 6,570 -- 304,263
-----------------------------------------------------------------------
Total Liabilities and Equity $3,628,682 $83,279 $ -- $3,711,961
=======================================================================
</TABLE>
51
<PAGE>
NOTES TO PRO FORMA COMBINED CONDENSED BALANCE SHEET
(unaudited)
The following pro forma adjustments are necessary to record the Merger.
(1) To reflect the exchange of shares of DBI Common for shares of CNB Common,
retaining the historical cost basis of assets, liabilities and equity
through the treatment as a pooling of interest. Assuming no downward
adjustment of the Conversion Ratio, a total of 499,252 shares of CNB Common
will be issued at the Conversion Ratio of 17.96 shares of CNB Common for
each of the 27,798 issued and outstanding shares of DBI Common, resulting
in a transfer from Common Stock to Capital Surplus of $195,698 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 DBI Common.
Common stock (196)
Capital surplus 196
52
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
Year Ended December 31, 1995
(unaudited)
<TABLE>
<CAPTION>
(A) (B) (C)
PRO FORMA CNB/DBI
CNB DBI ADJUSTMENTS PRO FORMA
----------- ----------- --------------- ---------------
Increase
(Decrease)
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income $273,785 $6,204 $279,989
Interest expense 140,350 3,230 143,580
------------------------------------------------------------------------------
Net interest income 133,435 2,974 -- 136,409
Provision for loan losses 6,939 1,000 7,939
------------------------------------------------------------------------------
Net interest income after
provision for losses 126,496 1,974 -- 128,470
Non-interest income 46,669 529 47,198
Non-interest expense 116,804 2,697 119,501
------------------------------------------------------------------------------
Income before income taxes 56,361 (194) -- 56,167
Income taxes 20,710 (313) 20,397
------------------------------------------------------------------------------
Net income $ 35,651 $ 119 $ -- $ 35,770
==============================================================================
Net income per common share
Primary: $1.96 $1.91
Fully diluted: 1.96 1.91
Average common and equivalent
shares outstanding 18,212 18,710
Fully diluted shares outstanding 18,212 18,710
</TABLE>
53
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
Year Ended December 31, 1994
(unaudited)
<TABLE>
<CAPTION>
(A) (B) (C)
PRO FORMA CNB/DBI
CNB DBI ADJUSTMENTS PRO FORMA
--------- ---------- ---------------- --------------
Increase
(Decrease)
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income $227,050 $5,867 $232,917
Interest expense 105,777 2,619 108,396
-------------------------------------------------------------------------------
Net interest income 121,273 3,248 -- 124,521
Provision for loan losses 7,234 198 7,432
-------------------------------------------------------------------------------
Net interest income after
provision for loan losses 114,039 3,050 -- 117,089
Non-interest income 46,805 459 47,264
Non-interest expense 113,539 2,136 115,675
-------------------------------------------------------------------------------
Income before income taxes 47,305 1,373 -- 48,678
Income taxes 16,793 319 17,112
-------------------------------------------------------------------------------
Net income (1) $ 30,512 $1,054 $ -- $ 31,566
===============================================================================
Net income per common share
Primary: $1.68 $1.69
Fully diluted: 1.66 1.68
Average common and equivalent
shares outstanding 18,136 18,624
Fully diluted shares outstanding 18,556 19,044
</TABLE>
54
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
Year Ended December 31, 1993
(unaudited)
<TABLE>
<CAPTION>
(A) (B) (C)
PRO FORMA CNB/DBI
CNB DBI ADJUSTMENTS PRO FORMA
------- ------- ------------- ---------
Increase
(Decrease)
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income $212,887 $5,995 $218,882
Interest expense 101,493 2,549 104,042
-------------------------------------------------------------------------------
Net interest income 111,394 3,446 -- 114,840
Provision for loan losses 3,890 120 4,010
-------------------------------------------------------------------------------
Net interest income after
provision for loan losses 107,504 3,326 -- 110,830
Non-interest income 43,113 486 43,599
Non-interest expense 103,662 2,115 105,777
-------------------------------------------------------------------------------
Income before income taxes 46,955 1,697 -- 48,652
Income taxes 16,039 427 16,466
-------------------------------------------------------------------------------
Net income/(1)/ $ 30,916 $1,270 $ -- $ 32,186
===============================================================================
Net income per common share/(2)/
Primary: $1.74 $1.77
Fully diluted: 1.71 1.74
Average common and equivalent shares
outstanding 17,714 18,182
Fully diluted shares outstanding 18,430 18,897
</TABLE>
__________________________
Notes to Pro Forma Combined Condensed Statements of Income:
/(1)/ Net income of CNB and of DBI is before change in accounting for income
taxes (FAS 109), which, for CNB increased 1993 net income by $1,868 to
$32,784, and for DBI increased 1994 net income by $320 to $1,374.
/(2)/ Net income per common share of CNB in 1993 before change in accounting
for income taxes (FAS 109), which increased primary and fully-diluted net
income per share by $0.11 and $0.10, respectively.
55
<PAGE>
DESCRIPTION OF CNB'S CAPITAL STOCK
GENERAL
CNB's Articles of Incorporation presently authorize the issuance of
50,000,000 shares of common stock, $1.00 stated value per share, and 2,000,000
shares of preferred stock, without par value. As of ____________, 1996,
__________ shares of CNB Common were issued and outstanding and no shares of
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 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, holders of a majority of the
shares of CNB Common outstanding 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
holders of 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.
56
<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 to be issued by CNB pursuant to the Merger will be, when issued and
delivered pursuant to the Merger 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 December 31, 1995, $7.5 million was available for
payment of dividends, purchases of CNB Common and payments or distributions in
respect of CNB Common under the Loan Agreement.
57
<PAGE>
COMPARISON OF SHAREHOLDER RIGHTS
The rights of holders of shares of CNB Common are governed by the Indiana
Law and by CNB's Articles of Incorporation, By-laws and other corporate
documents. The rights of holders of shares of DBI Common are governed by the
Illinois Law and by DBI's Articles of Incorporation, By-laws and other corporate
documents. The rights of holders of shares of DBI 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 DBI 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
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 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 major 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 to
accepting such price unless they choose to follow the statutory procedures for
appraisal rights as a dissenting shareholder or to bring legal action against
the controlling shareholder 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
58
<PAGE>
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.
DBI
DBI's Articles of Incorporation contain provisions which are generally
similar to those described above for CNB, except that, among other things, the
provisions of DBI's Articles of Incorporation apply to Business Combinations (as
defined in DBI's Articles of Incorporation) with beneficial owners of more than
5% (not 10% as under CNB's Articles of Incorporation) of DBI Common. Because
the Merger Agreement and the transactions contemplated thereby have been
approved by DBI's Board of Directors, the normal shareholder vote requirements
of the Illinois Law (i.e., approval of holders of at least two-thirds of the
issued and outstanding shares of DBI Common) and not the 80% requirement
described above, apply to the Merger. See "SPECIAL MEETING -- Vote Required."
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.
DBI
DBI's Articles of Incorporation are the same as CNB's Articles of
Incorporation with respect to the removal of directors with and without cause,
except that, unlike CNB's Articles of Incorporation, DBI's Articles of
Incorporation do not define what constitutes "cause."
AMENDMENTS TO ARTICLES OF INCORPORATION
CNB
The Indiana Law provides that, unless a greater vote is required under a
specific provision of the Indiana Law or by a corporation's articles of
incorporation or its board of directors, a corporation may amend its articles of
incorporation upon the affirmative vote of the holders of a greater number of
shares
59
<PAGE>
cast in favor of the amendment than the holders of shares 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 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
holders of a greater percentage of the voting shares of the corporation than
otherwise would be required under the Indiana 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
under "-- Business Combinations"), may be altered, amended or repealed only with
the affirmative vote of the holders of at least 80% of CNB Common then entitled
to vote in an election of directors.
DBI
The Illinois Law provides that, unless a greater or lesser vote (provided
that it is not less than holders of a majority of the shares entitled to vote)
is required by the corporation's articles of incorporation, a corporation may
amend its articles of incorporation upon receiving the affirmative vote of
holders of at least two-thirds of its voting shares.
DBI's Articles of Incorporation provide that, notwithstanding any other
provision of the Articles of Incorporation or any provision of law, the
provisions of Article VII (relating to the number, election, terms, removal of
directors and newly created directorships and vacancies) and Article XI
(relating to the "fair price" provisions discussed under "-- Business
Combinations"), may be altered, amended or repealed only with the affirmative
vote of holders of at least 80% of DBI Common then entitled to vote in an
election of directors.
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, holders of a majority of the shares of
CNB Common can elect the entire Board of Directors.
DBI
Holders of shares of DBI 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 DBI are elected by the holders of a
majority of the shares represented at a meeting and shareholders of DBI are not
entitled to cumulative voting in the election of directors. Therefore, holders
of a majority of the shares of DBI Common can elect the entire Board of
Directors.
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<PAGE>
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 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.
DBI
The Illinois Law provides that special meetings of the shareholders of a
corporation may be called at any time, for any purpose or purposes, by the
President, the Board of Directors or by the holders of not less than one-fifth
of all shares entitled to vote on the matter for which the meeting is called or
by such officer or persons as may be provided in the articles of incorporation
or the by-laws. Pursuant to the Illinois Law, any action required to be taken
at a meeting of the shareholders, or any other action which may be taken at a
meeting of shareholders, may be taken without a meeting if a consent in writing,
setting forth the action so taken, is signed by: (a) the holders of outstanding
shares having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voting; or (b) all of the shareholders entitled to
vote with respect to the subject matter. If such consent is signed by less than
all of the shareholders entitled to vote, then such consent will become
effective only if at least five days prior to the execution of the consent a
notice in writing is delivered to all the shareholders entitled to vote with
respect to the subject matter thereof. After the effective date of the consent,
prompt notice of the taking of the action without a meeting by less than
unanimous written consent must be delivered in writing to those shareholders who
have not consented in writing. DBI's By-laws provide any such shareholder
action may be taken without a meeting if a consent, in writing, setting forth
the action so taken is signed by all of the shareholders entitled to vote with
respect to the subject matter thereof.
DISSENTERS' RIGHTS
CNB
Under the Indiana 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 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 DBI, CNB's shareholders are not
entitled to assert such rights in connection with the Merger.
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<PAGE>
DBI
Under the Illinois Law, a shareholder of a corporation who dissents from,
among other things, a plan of merger, consolidation, plan of share exchange, or
sale, lease or exchange of all or substantially all of the property of the
corporation has the right (subject to certain exceptions) to demand payment of
the fair value of such shareholder's stock. Shareholders of DBI are entitled to
assert such rights in connection with the Merger. See "MERGER -- Dissenters'
Rights."
TAKEOVER STATUTES
CNB
The Indiana Law prohibits, in general, 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 that makes an election under the
Indiana Law, and an "interested shareholder" (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 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 or more 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 of the corporation's voting stock, and
those shares are granted full voting rights, shareholders are granted
dissenters' rights.
DBI
The Illinois Law contains a provision similar to the Indiana Law
restricting business combinations with an "interested shareholder" except that,
among other distinctions, the Illinois Law provides for a "three-year freeze"
period and the Illinois Law defines an "interested shareholder" as a person who
is the owner of 15% or more of the outstanding voting shares of the corporation.
This provision of the Illinois Law does not apply to DBI because, among other
things, DBI does not have any equity securities registered under Section 12 of
the Exchange Act and is not subject to Section 15 of the Exchange Act.
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INDEMNIFICATION
CNB
Pursuant to the Indiana 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.
The Indiana Law provides for mandatory indemnification of directors and
officers of Indiana corporations and permissive indemnification of directors,
officers, employees and agents of corporations who are made parties to
proceedings as a result of their relationship with such corporation. The
Indiana Law also applies to individuals who are serving at such corporation's
request as directors, officers, employees and agents of such corporation's
subsidiaries. The Indiana Law requires 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. The
Indiana Law authorizes 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 or her
conduct was in the corporation's best interests and in all other cases that his
or her conduct was not opposed to the best interests of such corporation. The
Indiana Law 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 a corporation is entitled to
mandatory indemnification or is otherwise fairly and reasonably entitled to
indemnification in view of all the relevant circumstances. The Indiana Law also
authorizes 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, the Indiana Law 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 holders 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 the Indiana Law.
DBI
The Illinois Law permits a corporation to indemnify a person who, by reason
of his or her relationship with the corporation, was or is a party, or is
threatened to be made a party, to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
including any action by or in the right of the corporation, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding, if such person acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful; provided, however,
that in the case of actions by or in the right of the corporation, no
indemnification may be made in respect of any claim, issue or matter as to which
such person has been adjudged to be liable for negligence or misconduct in the
performance of his or her duty to the
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<PAGE>
corporation unless, and only to the extent, that the court in which such action
or suit was brought determines upon application that despite the adjudication of
liability, but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper. Notwithstanding the foregoing, the Illinois Law provides that, to the
extent that such person has been successful, on the merits or otherwise, in the
defense of any action, suit or proceeding referred to above, or in defense of
any claim, issue or matter therein, such person must be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection therewith. The Illinois Law also authorizes corporations
to pay expenses in advance of final disposition of a proceeding, as specifically
authorized by the board of directors, if the person in question undertakes to
repay such amount, unless it shall ultimately be determined that he or she is
entitled to be indemnified by the corporation. The Illinois Law provides that
the indemnification provided for therein is not exclusive of any other rights to
which those seeking indemnification may be entitled under any by-law, agreement,
vote of shareholders or disinterested directors, or otherwise. The By-laws of
DBI include indemnification provisions that are generally similar to those
described above in the Illinois Law.
LIMITATION OF LIABILITY OF DIRECTORS
CNB
The Indiana Law provides that no director of a 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 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.
DBI
The Illinois Law provides that a corporation may include in its articles of
incorporation a provision eliminating or limiting the personal liability of a
director to the corporation or its shareholders for monetary damages for breach
of fiduciary duty as a director, provided that the provision does not eliminate
or limit the liability of a director: (i) for any breach of the director's duty
of loyalty to the corporation or its shareholders; (ii) for acts or omissions
not in good faith or that involve intentional misconduct or a violation of law;
(iii) under certain provisions of the Illinois Law; or (iv) for any transaction
in which the director derived an improper personal benefit. No such provision
may eliminate or limit the liability of any director for any act or omission
occurring before the date when the provision is included in the articles of
incorporation. The By-laws (and not the Articles of Incorporation) of DBI
contain provisions comparable to those described above.
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<PAGE>
CONSIDERATION OF NON-SHAREHOLDER INTERESTS
CNB
The Indiana 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 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 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 Law explicitly provides that the different or higher
degree of scrutiny imposed under the Delaware General Corporation Law with
respect to Delaware corporations 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.
DBI
The Illinois Law provides that, in discharging the duties of their
respective positions, the board of directors and individual directors may, in
considering the best long-term and short-term interests of the corporation,
consider the effects of any action upon employees, suppliers and customers of
the corporation or its subsidiaries, communities in which offices or other
establishments of the corporation or its subsidiaries are located, and all other
pertinent factors.
INFORMATION ABOUT DBI
BUSINESS OF DBI
DBI was organized in June 1983 and is a one-bank holding company registered
with the Federal Reserve Board under the B.H.C.A. DBI currently owns all of the
issued and outstanding shares of capital stock of DuQuoin National Bank, a
national banking association chartered under the laws of the United States. As
of December 31, 1995, on a consolidated basis, DBI had assets of $83.3 million,
deposits of $72.9 million, net loans of $44.6 million and shareholders' equity
of $6.6 million.
DuQuoin Bank is a full-service community bank that provides a full
complement of banking services to its customers, primarily individuals and small
businesses in Perry County, Illinois. DuQuoin Bank accepts demand, savings and
time deposits, makes commercial, agricultural, consumer and real estate loans
and provides trust and other customary commercial banking services.
The activities in which DuQuoin Bank engages are highly competitive and the
communities in which it provides services are also served by other banks.
Competition among these financial institutions is based upon interest rates
offered on deposit accounts, interest rates charged on loans, other credit and
service charges, the convenience of banking facilities and the quality of
services rendered. DuQuoin
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Bank believes that it has successfully competed in its marketplace by providing
superior service to its customers. Additional competition for depositors' funds
may come from a variety of sources, including United States Government
securities, private issues of debt obligations, mutual funds and suppliers of
other investment alternatives.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion provides information regarding the major
components of financial condition and results of operations, liquidity and
capital resources of DBI. This discussion and analysis should be read in
conjunction with the "SELECTED FINANCIAL DATA" and "FINANCIAL STATEMENTS OF DBI"
appearing elsewhere in this Prospectus/Proxy Statement.
RESULTS OF OPERATIONS
Net income for 1995 was $119,364 as compared to $1,054,606 for 1994, a
decrease of $935,242, or 88.7%. This decrease resulted primarily from a
$1,000,000 provision for loan losses as compared to a provision of $198,000 in
1994, Merger-related expenses of approximately $335,000 and an accrual of a
$200,000 reserve for environmental remediation costs. All of these increases in
expenses were offset by a related reduction in income tax expense.
Net income for 1994 was $1,054,606 compared to $1,270,498 for 1993, a
decrease of $215,892, or 17.0%. Income declined due to a decrease in net
interest income of $198,395 and a decrease in gains resulting from the sale of
investment securities of $76,370. Expenses increased slightly due to a $49,472
increase in salaries and employee benefits and a $10,870 increase in net
occupancy expenses, offset by a $55,093 decrease in other expenses.
DBI's return on average assets was .14% for 1995 compared to 1.25% for
1994, principally due to an increase in the provision for loan losses and an
accrual of merger related expenses as discussed above. Return on average assets
for 1993 was 1.58%. DBI's 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 DBI cannot predict and which are beyond its control.
Shareholders' equity increased to $6,569,587 at December 31, 1995, or
$236.33 per share, from $5,900,063 at December 31, 1994, or $212.28 per share.
The increase was primarily a result of a increase in the estimated fair value of
investment securities available-for- sale offset by dividends paid in excess of
net income. Shareholders' equity grew to $5,900,063 at December 31, 1994, or
$212.28 per share, from $5,416,515 at December 31, 1993, or $229.75 per share,
representing an 8.93% increase in total shareholders' equity. DBI achieved a
1.77% return on average equity for 1995 compared to 16.7% for 1994, as a result
of the factors mentioned previously. SFAS No. 115 (see Notes to Consolidated
Financial Statements of DBI) reduced shareholders' equity by $69,730, or $2.51
per share, and $897,048, or $32.27 per share, at December 31, 1995 and December
31, 1994, respectively.
DBI paid dividends of $10.00 per share in 1995 and 1994.
NET INTEREST INCOME. Net interest income is the difference between
interest income and interest expense. It is the largest and usually the most
critical component of DBI's earnings and is affected by both rates and the
volume of earning assets and interest-bearing liabilities. Net interest income
of $2,974,326 for 1995 decreased 8.42% from $3,247,910 for 1994. This decrease
was primarily the result
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of an increase in interest rates paid on interest-bearing deposits, offset by
slightly higher rates charged on loans. Net interest income in 1994 was
slightly lower than 1993, due to interest rates declining more rapidly on
interest-earning assets than interest-bearing deposits.
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The following table presents each significant category of interest earning
assets and interest bearing liabilities.
Average balance sheet and net interest analysis.
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1995
---------------------------- -------------------------------
AVERAGE AVERAGE
AVERAGE YIELD AVERAGE YIELD
BALANCES INTEREST RATE BALANCES INTEREST RATE
-------- -------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
(Dollars in thousands; prepared on a fully taxable equivalent basis)
Earning Assets
Investment securities
Taxable $ 21,184 $ 1,281 6.04% $ 21,109 $ 1,350 6.39%
Tax-exempt/(1)/ 12,064 1,002 8.30 12,243 994 8.11
Federal funds sold 662 25 3.70 333 22 6.61
Loans/(2)/(3)/ 44,700 3,915 8.76 46,260 4,139 8.95
-------- ------- ---- --------- ------- ----
Total Earning Assets 78,610 6,223 7.91 79,945 6,505 8.13
------- ---- ------ ----
Less allowance for loan losses 642 636
-------- ---------
77,968 79,309 /(4)/
Non-Earning Assets
Cash and due from banks 2,110 2,137
Bank premises and equipment 2,155 2,090
Other assets 1,843 1,908
-------- --------
Total Assets $ 84,076 $ 85,444
======== ========
Interest-Bearing Liabilities
Deposits
Interest-bearing demand deposits $ 16,206 $ 479 2.96% $ 14,765 $ 498 3.37%
Savings 11,745 324 2.76 10,869 344 3.16
Other time and repurchase agreements 41,115 1,741 4.23 43,678 2,305 5.27
Federal funds purchased and other 1,881 75 3.99 1,294 83 6.41
-------- ------- ---- -------- ------ ----
Total Interest-Bearing Liabilities 70,947 2,619 3.69 70,606 3,230 4.57
------- ---- ------ ----
Non-interest-Bearing Liabilities
Demand Deposits 6,761 7,268
Other Liabilities 710 833
-------- --------
Total Liabilities 78,418 78,707
Shareholders' Equity 5,658 6,737 /(5)/
-------- --------
Total Liabilities and Shareholders'
Equity $ 84,076 $ 85,444
======== ========
Recap/(5)/
Interest Income $ 6,223 7.91% $6,505 8.14%
Interest Expense 2,619 3.33 3,230 4.04
-------- ---- ------ ----
Net Interest Income/Margin $ 3,604 4.58% $3,275 4.10%
======== ==== ====== ====
</TABLE>
[Footnotes on next page.]
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/(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 balances exceed year-end balances due to adjustments to the
allowance for loan losses and accruals of non-recurring expenses made in
December 1995.
/(5)/ Average rates have been computed by dividing interest income and expense
by total earning assets.
Earning assets, which includes loans, federal funds sold, and investment
securities, decreased by $211,924 during 1995 to $78,385,397 while interest-
bearing liabilities decreased by $1,916,675 to $69,006,806. Earning assets were
$78,597,321 and interest-bearing liabilities were $70,923,481 in 1994, increases
of $2,622,551 and $1,817,177, respectively, from 1993.
PROVISION FOR LOAN LOSSES. The provision for loan losses represents a
charge against income and a corresponding increase to the allowance for loan
losses. The provision was $1,000,000 in 1995 as compared to $198,000 and
$120,000 in 1994 and 1993, respectively. The 1995 provision was a result of
replenishing the allowance after recognizing approximately $450,000 of charge-
offs in December of 1995 plus an additional provision of $500,000. The most
significant charge-off was approximately $300,000 on loans to a borrower in the
furniture manufacturing industry. For the year ended December 31, 1995, charge-
offs totaled $588,905 which were offset by recoveries of $28,765 for net charge-
offs of $560,140.
During 1995, DuQuoin Bank revised its loan rating system and increased the
percentage of reserve applied to various rating categories. In addition,
DuQuoin Bank revised its estimate of the reserve for losses on several larger
loans based on a more conservative evaluation of the risks associated with those
loans.
See "--Loans" below for additional analysis of loan losses.
NON-INTEREST INCOME. Non-interest income increased from $459,012 to
$528,840 from 1994 to 1995 due to an increase in various service charges and an
increase of $18,488 in net securities gains.
Non-interest income decreased by $26,978 to $459,012 in 1994 from $485,990
in 1993. The decrease in 1994 was a result of a decrease of $76,370 in gains on
the sale of securities offset by an increase in service charge fees of
approximately $53,000.
NON-INTEREST EXPENSE. Operating expenses, other than interest and the
provision for loan losses, were $2,697,802 in 1995 compared to $2,135,909 and
$2,114,604 in 1994 and 1993, respectively. Approximately $335,000 of the
increase in 1995 was attributable to professional fees payable to accountants,
attorneys and DBI's financial advisor relative to the pending acquisition by
CNB. In addition, DBI accrued a reserve for environmental remediation costs of
$200,000 in December 1995. These expenses were partially offset by a $74,000
decrease in FDIC assessments in 1995.
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The following table analyzes the changes in operating expenses:
CHANGE FROM PRIOR YEAR
----------------------
<TABLE>
<CAPTION>
AMOUNT 1995 1994
-------------------- -------- --------
1995 1994 1993 AMOUNT PERCENT AMOUNT PERCENT
---- ---- ---- ------ ------- ------ -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Salaries and
employee benefits $1,173 $1,084 $1,034 $ 89 8.2% $ 50 4.8%
Net occupancy expenses 343 276 265 67 24.2 11 4.2
Blanket bond 23 28 34 (5) (17.9) (6) (17.6)
Audit, tax and directors fees 193 125 82 68 54.4 43 52.4
Legal 32 11 66 21 190.9 (55) (83.3)
Other professional fees 43 40 42 3 7.5 (2) (4.7)
Data processing fees 89 87 73 2 2.3 14 19.2
Advertising 41 39 43 2 5.1 (4) (9.3)
FDIC assessment 84 157 155 (73) (46.5) 2 1.3
Postage, freight and courier 49 44 38 5 11.4 6 15.8
Other/(1)/ 627 245 282 382 156.0 (37) (13.1)
------ ------ ------ ----- ----- ----- -----
Total operating expenses $2,697 $2,136 $2,114 $ 561 26.3% $ (22) 1.0%
====== ====== ====== ===== ===== ===== =====
</TABLE>
________________________
(1) Including Merger-related and environmental expenses.
INCOME TAXES. The income tax benefit for 1995 was $314,000, as
compared to a provision of $318,407 in 1994 and $427,193 in 1993. The
effective tax rate for 1995 is not meaningful. The effective tax rates for
1994 and 1993 were 23.2% and 25.2%, respectively. Income taxes for each
year were positively affected by the large proportion of tax-exempt
interest. Income taxes are also discussed in Note 5 of the FINANCIAL
STATEMENTS OF DBI, attached to this Prospectus/Proxy Statement.
FINANCIAL CONDITION
At December 31, 1995, DBI's total assets decreased to $83,278,839
compared to $84,422,752 at December 31, 1994, a 1.35% decrease. Average
assets were $85,444,175 during 1995, which represented an increase of 1.63%
over 1994 averages.
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The financial condition of DBI at December 31, 1995 and December 31, 1994,
is presented in the comparative balance sheets of DBI's financial statements
(see FINANCIAL STATEMENTS OF DBI). The following discussion addresses loans and
other components of earning assets, sources of funds, capital resources,
liquidity and interest rate sensitivity.
During 1995, DuQuoin Bank revised its loan rating system and increased the
percentage of reserve applied to various rating categories. In addition,
DuQuoin Bank revised its estimate of the reserve for losses on several larger
loans based on a more conservative evaluation of the risks associated with those
loans.
LOANS. Average loan balances were $46,260,000 in 1995, an increase of
$1,560,000, or 3.49%, from 1994. Average loan balances in 1994 were $44,700,000
an increase of $556,000, or 1.26%, from 1993. The increases in 1995 were a
result of an increased demand for consumer loans. The increases in 1994 were
primarily a result of an increased demand for residential real estate loans due
to lower interest rates.
Commercial loans, including agricultural loans, generally provide for
adjustable interest rates responsive to the variable cost of funding, and
totaled $15,637,000 at December 31, 1995, a decrease of $795,000 from December
31, 1994.
Real estate mortgage loans, which consist of residential, commercial loans
collateralized by real estate, construction, and agricultural loans
collateralized by real estate, totaled $23,889,000 at December 31, 1995 compared
to $23,792,000 at December 31, 1994, an increase of $97,000. Residential real
estate accounted for approximately $14,183,000, or 59.6%, of the real estate
loans at December 31, 1994, and approximately $14,422,000, or 60.4%, of the real
estate loans at December 31, 1995. Interest rates on real estate loans are
generally adjusted in one-, three- or five-year intervals.
DBI reported consumer loans of $6,167,000 at December 31, 1995, including
installment loans, personal lines of credit, student loans and various other
consumer loans. These loans increased by $784,000 from $5,383,000 at December
31, 1994. Growth was experienced during 1995 and 1994 in installment loans for
purchase of automobiles and other consumer goods.
The DBI 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% of total loans.
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The following table sets forth loans outstanding:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1995 1994
-------- --------
(In thousands)
<S> <C> <C>
Commercial and agriculture $ 15,637 $ 16,432
Real estate
Construction 364 160
Commercial 9,103 9,449
Residential 14,422 14,183
Consumer 6,097 5,355
Other 70 28
--------- ---------
Total Loans $ 45,693 $ 45,607
========= =========
</TABLE>
The following table sets forth loan maturities at December 31, 1995:
<TABLE>
<CAPTION>
WITHIN 1 - 5 OVER 5
1 YEAR YEARS YEARS TOTALS
------- ------- ------ -------
(In thousands)
<S> <C> <C> <C> <C>
Commercial and agriculture $10,401 $ 3,855 $1,381 $15,637
Real estate 10,346 6,779 6,764 23,889
Consumer 2,044 4,226 50 6,320
Other 70 - - 70
------- ------- ------ -------
Total $22,861 $14,860 $8,195 45,916
======= ======= ======
Less: Unearned discounts and fees (223)
-------
$45,693
=======
</TABLE>
The allowance for loan losses is maintained at a level considered adequate
by management of DBI to absorb potential loan losses as determined by
evaluations of the loan portfolio on a continuing basis. This evaluation by
management of DBI 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 non-accrual
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.
72
<PAGE>
DBI recorded a provision of $950,000 during the fourth quarter, of which
$450,000 was to replenish the allowance for loan losses due to charge-offs
recognized in the fourth quarter of 1995. For the year ended December 31, 1995,
charge-offs totalled $588,905 which were offset by recoveries of $28,765,
resulting in net charge-offs of $560,140.
A summary of loan loss experience and management's allocation of the
allowance for loan losses to the various loan categories for the year are as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Balance at January 1, $ 662,570 $ 594,346 $ 507,730
---------- --------- ----------
Charge-offs:
Commercial and agriculture 373,419 61,015 18,070
Real estate 121,558 58,411 108,757
Consumer 84,736 20,433 2,130
Other 9,192 7,679 13,255
---------- --------- ----------
Total Charge-offs 588,905 147,538 142,212
---------- --------- ----------
Recoveries:
Commercial and agriculture 1,077 1,055 483
Real estate 4,744 3,048 103,035
Consumer 19,084 5,485 2,442
Other 3,860 8,174 2,868
---------- --------- ----------
Total Recoveries 28,765 17,762 108,828
---------- --------- ----------
Net recoveries (charge-offs) (560,140) (129,776) (33,384)
---------- --------- ----------
Balance before provision 102,430 464,570 474,346
Provision for loan losses 1,000,000 198,000 120,000
---------- --------- ----------
Balance at December 31, $1,102,430 $ 662,570 $ 594,346
========== ========= ==========
</TABLE>
Management's allocation of the allowance for loan losses as of December
31 of the indicated year is as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF LOANS TO
ALLOWANCE AMOUNT TOTAL LOANS
------------------------------------ -----------------------------
1995 1994 1993 1995 1994
------ ------ ------ ------ ------
(In thousands)
<S> <C> <C> <C> <C> <C>
Commercial
and agriculture $ 428 $ 430 $ 386 34% 36%
Real estate 647 131 118 53 52
Consumer 21 73 65 13 12
Unallocated 6 28 25 - -
------- ------- -------- ------- --------
Total $ 1,102 $ 662 $ 594 100% 100%
======= ======= ======== ======= ========
</TABLE>
73
<PAGE>
The previous allocation is made for analytical purposes and, at December
31, 1995, reflected 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 would be available
to absorb losses from any portion of the portfolio.
Non-performing loans consist of 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 of DBI 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 DBI's future operating
results, liquidity or capital resources.
74
<PAGE>
The following table presents a summary of non-performing loans:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1994
------ ------
(In thousands)
<S> <C> <C>
Nonaccrual loans $1,338 $ 655
90 days or more past due - -
Restructured loans - -
------ -----
Total $1,338 $ 655
====== =====
Percent of total loans 2.9% 1.4%
</TABLE>
INVESTMENT SECURITIES. DBI adopted SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" effective January 1, 1994. Under the
provisions of SFAS No. 115, debt securities that DBI 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, 1995 and 1994. 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. At December 31, 1995, DBI
included a net unrealized loss of $69,730, net of the related income tax
benefit, in shareholders' equity. At December 31, 1994, a net unrealized loss in
the amount of $897,048 was included in shareholders' equity.
Total investment securities represented 41.3% and 41.2% of earning assets
at December 31, 1995 and 1994, respectively. In 1995, DBI maintained consistency
within the classifications of investment securities. That is, the proceeds from
sales and maturities were used to purchase similar type securities and no
significant shifts between classifications have occurred.
Maturities of investment securities at December 31, 1995:
AVAILABLE-FOR-SALE
AT DECEMBER 31, 1995:
- --------------------
<TABLE>
<CAPTION>
Greater
1 YEAR 1 - 5 5 - 10 Than 10
OR LESS YEARS YEARS YEARS TOTAL
------- ----- ------ ------- -------
(In thousands)
<S> <C> <C> <C> <C> <C>
U.S. Treasury $ 588 $ 403 $ - $ - $ 991
U.S. Government agencies - 1,757 892 - 2,649
Mortgage-backed securities 5 2,250 5,496 5,870 13,621
State and municipal 307 3,165 - - 3,472
Other securities 555 760 - - 1,315
------ ------ ------- ------ -------
Total $1,455 $8,335 $ 6,388 $5,870 $22,048
====== ====== ======= ====== =======
Percent of Total 6.60% 37.80% 28.97% 26.63% 100%
====== ====== ======= ====== =======
</TABLE>
75
<PAGE>
<TABLE>
<CAPTION>
HELD-TO-MATURITY
AT DECEMBER 31, 1995:
- ---------------------
<S> <C> <C> <C> <C> <C>
State and municipal $ - $1,789 $ 5,346 $3,177 $10,312
====== ====== ======= ====== =======
Percent of Total - 17.35% 51.84% 30.81% 100%
====== ====== ======= ===== =======
</TABLE>
Note: The above maturity analysis is based on contract maturities which could
vary significantly for mortgaged-backed securities.
SOURCES OF FUNDS. DBI generally relies on customers deposits along
with retained earnings to fund its earning assets. An analysis of deposits
is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
-------- --------
<S> <C> <C>
(In thousands)
Demand $ 6,739 $ 7,181
Interest-bearing transaction accounts 7,830 7,459
Money market investment accounts 6,311 8,050
Savings 10,377 11,002
Certificates of deposit and other time 41,657 39,376
--------- ---------
Total $72,914 $73,068
========= =========
</TABLE>
Maturities of certificates of deposits of $100,000 or more are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
-------- -------
<S> <C> <C>
(In thousands)
3 months or less $1,461 $2,797
3 - 6 months 3,747 2,863
6 -12 months 1,219 924
Over 12 months 2,485 1,794
-------- --------
Total $8,912 $8,378
======== ========
</TABLE>
76
<PAGE>
Total deposits decreased by .21% to $72,914,764 at December 31, 1995 from
$73,068,364 at December 31, 1994. The mix of deposits shifted slightly from
demand and interest-bearing demand accounts to higher interest-bearing
certificates of deposits and other time deposits during 1995.
CAPITAL RESOURCES. DBI continues to maintain a strong capital position
which provides a sound foundation to support current and future needs. At
December 31, 1995, shareholders' equity was $6,569,587 compared to $5,900,063 at
December 31, 1994, an increase of 11.3%. Book value per share was $236.33 at
December 31, 1995 compared to $212.28 at December 31, 1994. The dividend payout
ratio (dividends as a percentage of net income) was 233.1% in 1995 and 26.4% in
1994. The higher 1995 dividend payout ratio was due to the decline in earnings
as discussed previously. The amount of dividends per share in 1995 was the same
as 1994. The dividend payout for 1994 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. DBI historically has paid dividends in January and July of each year.
The Federal Reserve has established a minimum leverage ratio of 4% to 5%
depending on bank's particular circumstances and risk profile. This ratio is
defined as shareholders' equity less goodwill, as a percentage of total assets
less goodwill. DBI's tangible equity to tangible assets ratio was 7.97% at both
December 31, 1995 and 1994. DBI's capital was considered satisfactory by the
F.D.I.C. at year-end 1995. DBI 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, DBI has several sources
of funds available on a daily basis which can be used for liquidity purposes.
Those sources include: (i) core deposits of both business and non-business
customers; (ii) cash flows generated by the repayment of loans and investment
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. Increases in 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. DBI
continues to attempt to offset such increases through the growth of net earning
assets, particularly loans, and earnings related thereto.
LIQUIDITY AND INTEREST RATE SENSITIVITY
Liquidity is a measure of DBI's 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 DBI's 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. DBI has provided for its liquidity needs through core
deposits, maturing loans and investments in its securities portfolio.
77
<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 DBI's 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 net interest
income. DBI seeks to manage its rate sensitivity position through the use of
floating-rate loans and by matching acquired funds 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 sets forth DBI's interest rate sensitivity analysis as
of December 31, 1995. Although rate sensitivity gaps constantly change as funds
are acquired and invested, DBI's negative gap of $16,710,000 at one year or less
as of December 31, 1995, was 20.1% of total assets at that date. This negative
gap position indicates that DBI's net interest margin would be adversely
affected by a near-term increase in interest rates. Conversely, DBI could be
positively affected by a near-term decrease in interest rates.
78
<PAGE>
<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 $ 599 $ 855 $ 10,124 $ 20,782 $ 32,360
Loans, net of unearned interest 6,654 16,207 14,637 8,195 45,693
Federal funds sold and
deposits with banks 332 - - - 332
Non-earning assets - - - 4,893 4,893
--------- --------- --------- --------- ---------
Total Assets $ 7,585 $ 17,062 $ 24,761 $ 33,870 $ 83,278
========= ========= ========= ========= =========
Liabilities and Shareholders'
Equity:
Interest-bearing transaction
accounts $ 7,830 $ - $ - $ - $ 7,830
Money market and other
savings 6,311 - - 10,377 16,688
Certificates of deposit and
other time deposits 7,865 19,351 17,272 - 44,488
Non-interest bearing deposits - - - 6,739 6,739
Non-interest bearing liabilities
and shareholders' equity - - - 7,533 7,533
--------- --------- --------- --------- ---------
Total liabilities and equity $ 22,006 $ 19,351 $ 17,272 $ 24,649 $ 83,278
========= ========= ========= ========= =========
Interest sensitivity gap $ (14,421) $ (2,289) $ 7,489 $ 9,221
========= ========= ========= =========
Cumulative interest sensitivity
gap $ (14,421) $ (16,710) $ (9,221)
Cumulative gap as a percentage
of total assets (17.3%) (20.1%) (11.1%)
</TABLE>
79
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of the Record Date the number of shares
of DBI Common beneficially owned and the percentage of ownership of outstanding
shares of DBI Common by: (a) each director and executive officer of DBI; (b)
each person who is known by DBI to own beneficially 5% or more of such stock;
and (c) all directors and executive officers of DBI as a group:
<TABLE>
<CAPTION>
NAME OF BENEFICIALLY PERCENT OF
BENEFICIAL OWNER ADDRESS OWNED CLASS
- ---------------------------------- ------------------------- ---------------- -----------
<S> <C> <C> <C>
Daniel H. Eaves/(1)/ 124 West Main Street 3,434 12.4%
President, Chairman of the Board DuQuoin, Illinois 62832
and Chief Executive Officer
Jo Ann E. Isom/(2)/ 123 West Main Street 2,409 8.7
Secretary and Director DuQuoin, Illinois 62832
Dominic P. Riggio/(3)/ 115 North Walnut 1,799 6.5
DuQuoin, Illinois 62832
Ninfa Riggio/(4)/ 115 North Walnut 1,798 6.5
DuQuoin, Illinois 62832
Harold E. Rice/(5)/ 1,210 4.4
Director
Vallie D. West/(6)/ 1,003 3.6
Director
Joseph N. Morris/(7)/ 703 2.5
Director
R. K. Peek/(8)/ 228 *
Director
Bob Dyel/(9)/ 134 *
Director
David C. Marsden 50 *
Director
Directors and Executive 9,171 32.9
Officers as a group (8 persons)
</TABLE>
___________________
* Less than 1%
/(1)/ Includes 1,000 shares of DBI Common that Mr. Eaves owns jointly with his
wife.
/(2)/ Includes 409 shares of DBI Common that Ms. Isom owns jointly with her
husband, 751 shares of DBI Common that Ms. Isom owns jointly with her
mother and 1,249 shares of DBI Common subject to the West Side Trust for
which Ms. Isom is the trustee and beneficiary.
/(3)/ Does not include 1,798 shares of DBI Common owned by Mr. Riggio's wife as
to which he disclaims beneficial ownership.
/(4)/ Does not include 1,799 shares of DBI Common owned by Ms. Riggio's husband
as to which she disclaims beneficial ownership.
/(5)/ Includes 55 shares of DBI Common that Mr. Rice owns jointly with each of
his sons.
/(6)/ Such shares of DBI Common are subject to the West Living Trust dated
January 11, 1991 for which Mr. West is the trustee and beneficiary.
/(7)/ Does not include 10 shares of DBI Common owned by Mr. Morris' wife as to
which he disclaims beneficial ownership.
/(8)/ Does not include 228 shares of DBI Common owned by Mr. Peek's wife as to
which he disclaims beneficial ownership.
/(9)/ Such shares of DBI Common are owned jointly by Mr. Dyel and his wife.
Does not include 91 shares of DBI Common owned by Mr. Dyel's wife as to
which he disclaims beneficial ownership.
80
<PAGE>
For purposes of the above table, a person is deemed to be a beneficial owner
of shares of DBI Common if the person has or shares the power to vote or to
dispose of such shares. Unless otherwise indicated in the footnotes, each person
has sole voting and investment power with respect to shares shown in the table
as beneficially owned by such person.
LEGAL OPINION
The legality of the securities offered hereby and certain tax
consequences of the Merger 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, 1995, incorporated by reference in CNB's Annual Report (Form
10-K), 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 DBI
The balance sheet as of December 31, 1995 and the statements of
income, changes in shareholders' equity and cash flows for the year then
ended of DBI, are included in the Registration Statement and in this
Prospectus/Proxy Statement in reliance on the report of Baird, Kurtz &
Dobson, independent certified public accountants, given on the authority of
that firm as experts in accounting and auditing.
PRESENCE AT SPECIAL MEETING
Representatives of Baird, Kurtz & Dobson 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 1997 annual meeting of CNB's
shareholders must meet the requirements established by the S.E.C. for
shareholder proposals and must be received by CNB no later than November
22, 1996, in order to be considered for inclusion in the 1997 proxy
statement. Upon receipt of any such proposal, CNB will determine whether or
not to include such proposal in the proxy statement and proxy in accordance
with the S.E.C.'s regulations governing the solicitation of proxies.
_______________
81
<PAGE>
INDEX TO FINANCIAL STATEMENTS OF DBI
------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEPENDENT ACCOUNTANTS' REPORT..................................... F-2
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheets of December 31, 1995 and 1994 (unaudited).......... F-3
Statements of Income for the Years ended December 31, 1995, 1994
(unaudited) and 1993 (unaudited)................................ F-5
Statements of Changes in Stockholders' Equity for the Years
ended December 31, 1995, 1994 (unaudited) and 1993 (unaudited).. F-6
Statements of Cash Flows for the Years ended
December 31, 1995, 1994 (unaudited) and 1993 (unaudited)........ F-8
Notes to Consolidated Financial Statements........................ F-9
</TABLE>
F-1
<PAGE>
Independent Accountants' Report
-------------------------------
Board of Directors
DuQuoin Bancorp, Inc.
DuQuoin, Illinois
We have audited the accompanying consolidated balance sheet of
DUQUOIN BANCORP, INC., as of December 31, 1995, and the related
consolidated statements of income, changes in stockholders' equity,
and cash flows for the year 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
audit.
We conducted our audit 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 significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides 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 DUQUOIN
BANCORP, INC. as of December 31, 1995, and the results of its
operations and its cash flows for the year then ended in conformity
with generally accepted accounting principles.
/s/ Baird, Kurtz & Dobson
St. Louis, Missouri
January 19, 1996
F-2
<PAGE>
DUQUOIN BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS
------
<TABLE>
<CAPTION>
1994
1995 UNAUDITED
---- ---------
<S> <C> <C>
Cash and due from banks $ 2,135,429 $ 2,231,459
Interest bearing deposits with banks 195,236 388,942
Federal funds sold 137,000 178,000
----------- -----------
Cash and Cash Equivalents 2,467,665 2,798,401
----------- -----------
Held-to-maturity securities 10,312,473 12,030,396
Available-for-sale securities 22,047,854 20,392,869
----------- -----------
32,360,327 32,423,265
----------- -----------
Loans 45,692,834 45,607,114
Less allowance for loan losses (1,102,430) (662,570)
----------- -----------
Net Loans 44,590,404 44,944,544
----------- -----------
Premises and equipment 2,060,061 2,123,004
Foreclosed assets held for sale, net 51,106 188,548
Interest receivable 936,758 976,569
Deferred income taxes 315,060 488,260
Other 497,458 480,161
----------- -----------
3,860,443 4,256,542
----------- -----------
Total Assets $83,278,839 $84,422,752
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
F-3
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
1994
1995 UNAUDITED
---- ---------
<S> <C> <C>
LIABILITIES
Deposits
Demand deposits $ 6,739,312 $ 7,181,429
Savings, NOW, and money market deposits 24,518,310 26,510,502
Time deposits, $100,000 and over 8,911,844 8,377,876
Other time deposits 32,745,298 30,998,557
------------- -------------
Total Deposits 72,914,764 73,068,364
Federal funds purchased and securities sold
under agreements to repurchase 2,831,354 5,036,546
Accrued interest and other liabilities 963,134 417,779
------------- -------------
Total Liabilities 76,709,252 78,522,689
------------- -------------
STOCKHOLDERS' EQUITY
Common stock, par value $25 per share, authorized
150,000 shares, issued and outstanding
1995 - 27,798 shares, 1994 - 27,794 shares 694,950 694,850
Additional paid-in capital 705,748 704,748
Retained earnings 5,238,619 5,397,513
------------- -------------
6,639,317 6,797,111
Unrealized depreciation on
available-for-sale securities, net of
income taxes of $49,060 and $631,143
in 1995 and 1994, respectively (69,730) (897,048)
------------- -------------
Total Stockholders' Equity 6,569,587 5,900,063
------------- -------------
Total Liabilities and Stockholders' Equity $ 83,278,839 $ 84,422,752
============= =============
</TABLE>
See Notes to Consolidated Financial Statements
F-4
<PAGE>
DUQUOIN BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1994 1993
1995 UNAUDITED UNAUDITED
---- --------- ---------
<S> <C> <C> <C>
INTEREST INCOME
Loans $4,176,196 $3,900,250 $4,030,985
Investment securities-taxable 1,334,445 1,252,218 1,283,955
Investment securities-non-taxable 656,015 661,383 634,807
Federal funds sold 22,243 24,556 13,749
Deposits with banks 15,429 28,655 31,572
---------- ---------- ----------
Total Interest Income 6,204,328 5,867,062 5,995,068
---------- ---------- ----------
INTEREST EXPENSE
Deposits 2,931,484 2,355,484 2,328,341
Federal funds purchased and securities sold
under agreements to repurchase 298,518 248,034 193,339
Long-term debt - 15,634 27,083
---------- ---------- ----------
Total Interest Expense 3,230,002 2,619,152 2,548,763
---------- ---------- ----------
NET INTEREST INCOME 2,974,326 3,247,910 3,446,305
PROVISION FOR LOAN LOSSES 1,000,000 198,000 120,000
---------- ---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,974,326 3,049,910 3,326,305
---------- ---------- ----------
NON-INTEREST INCOME
Service charges on deposit accounts 151,439 128,601 118,900
Other service charges on deposit accounts 236,344 206,649 181,896
Net realized gains on sales of
available-for-sale securities 30,107 11,619 87,989
Credit card fees 48,409 36,792 17,768
Other income 62,541 75,351 79,437
---------- ---------- ----------
Total Non-Interest Income 528,840 459,012 485,990
---------- ---------- ----------
NON-INTEREST EXPENSE
Salaries and employee benefits 1,173,262 1,083,797 1,034,325
Net occupancy expense 342,855 275,983 265,113
Data processing expense 88,994 86,930 73,398
Deposit insurance premium 83,816 157,580 155,056
Other operating expense 1,008,875 531,619 586,712
---------- ---------- ----------
Total Non-Interest Expense 2,697,802 2,135,909 2,114,604
---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES (194,636) 1,373,013 1,697,691
PROVISION (CREDIT) FOR INCOME TAXES (314,000) 318,407 427,193
---------- ---------- ----------
NET INCOME $ 119,364 $1,054,606 $1,270,498
========== ========== ==========
NET INCOME PER SHARE $4.29 $38.83 $48.79
</TABLE>
See Notes to Consolidated Financial Statements
F-5
<PAGE>
DUQUOIN BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION)
ADDITIONAL ON AVAILABLE-
COMMON PAID-IN RETAINED FOR-SALE
STOCK CAPITAL EARNINGS SECURITIES, NET TOTAL
---------- -------------- -------------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE,
JANUARY 1, 1993
$651,800 $ 978,518 $ 3,551,961 $ - $ 5,182,279
Net income - - 1,270,498 - 1,270,498
Dividends on common stock,
$8.00 per share - - (200,812) - (200,812)
Purchase of common stock (108,075) (995,955) - - (1,104,030)
Sale of common stock 45,675 222,905 - - 268,580
--------- ------------- ------------- --------------- -----------
BALANCE,
DECEMBER 31, 1993
589,400 205,468 4,621,647 - 5,416,515
Net income - - 1,054,606 - 1,054,606
Dividends on
common stock,
$10.00 per share - - (278,740) - (278,740)
Purchase of common stock (8,725) (95,500) - - (104,225)
Sale of common stock 114,175 594,780 - - 708,955
Cumulative effect, at
January 1, 1994, of
change in accounting
for available-for-sale
securities, net of income
taxes of $320,311 - - - 455,240 455,240
Change in unrealized
appreciation on
available-for-sale
securities, net of income
taxes of $951,454 - - - (1,352,288) (1,352,288)
--------- ------------- ------------- -------------- -----------
BALANCE,
DECEMBER 31, 1994 $ 694,850 $ 704,748 $5,397,513 $ (897,048) $ 5,900,063
========= ============= ============= ============= ============
</TABLE>
See Notes to Consolidated Financial Statements
F-6
<PAGE>
DUQUOIN BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION)
ADDITIONAL ON AVAILABLE-
COMMON PAID-IN RETAINED FOR-SALE
STOCK CAPITAL EARNINGS SECURITIES, NET TOTAL
-------- ----------- ------------ ----------------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE,
DECEMBER 31, 1994 $ 694,850 $ 704,748 $ 5,397,513 $ (897,048) $ 5,900,063
Net income - - 119,364 - 119,364
Dividends on common
stock, $10.00 per share - - (278,258) - (278,258)
Sale of common stock 100 1,000 - - 1,100
Change in unrealized
appreciation on
available-for-sale
securities, net of income
taxes of $582,083 - - - 827,318 827,318
---------- ---------- ----------- ------------ -------------
BALANCE,
DECEMBER 31, 1995 $ 694,950 $ 705,748 $ 5,238,619 $ (69,730) $ 6,569,587
=========== ========== =========== ============ =============
</TABLE>
See Notes to Consolidated Financial Statements
F-7
<PAGE>
DUQUOIN BANCORP, INC,
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1994 1993
1995 UNAUDITED UNAUDITED
---- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 119,364 $ 1,054,606 $ 1,270,498
Items not requiring (providing) cash:
Depreciation and amortization 140,887 151,039 141,298
Provision for loan losses 1,000,000 198,000 120,000
Amortization of premiums and discounts on securities 55,680 133,544 113,727
Deferred income taxes (409,000) (12,319) (20,251)
Provision for losses on foreclosed assets 42,231 58,814 10,290
Net realized gains on sale of available-for-sale securities (30,107) (11,619) (87,989)
Changes in:
Interest receivable 39,811 (12,282) 10,987
Other assets (17,297) (15,912) 63,809
Accrued interest and other liabilities 552,845 65,920 (39,291)
Income taxes payable (7,373) (279,896) 31,227
----------- ----------- ------------
Net cash provided by operating activities 1,487,041 1,329,895 1,614,305
----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net originations of loans (766,602) (2,736,587) (716,747)
Purchase of premises and equipment (88,224) (110,019) (43,288)
Proceeds from sales of premises and equipment 10,280 - -
Proceeds from the sale of foreclosed assets 215,953 242,191 439,264
Proceeds from sales of available-for-sale securities 7,266,789 7,559,820 8,800,535
Proceeds from maturities of available-for-sale securities 1,237,973 2,711,277 -
Purchases of available-for-sale securities (6,251,952) (9,759,765) -
Proceeds from maturities of held-to-maturity securities 2,301,116 1,545,000 5,377,582
Purchases of held-to-maturity securities (3,107,160) (5,932,295) (13,307,293)
----------- ----------- ------------
Net cash provided by (used in) investing activities 818,173 (6,480,378) 550,053
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand, NOW, money market
and savings deposits (2,434,309) 1,328,918 1,084,078
Net increase in certificates of deposits 2,280,709 908,559 857,586
Net repayments of other borrowings - (1,065,000) 565,000
Purchases of common stock - (104,225) (1,104,030)
Proceeds from sale of common stock 1,100 708,955 268,580
Dividends paid (278,258) (278,740) (200,812)
Net increase (decrease) in federal funds purchased (2,205,192) 1,801,546 (1,240,000)
----------- ----------- ------------
Net cash provided by (used in) financing activities (2,635,950) 3,300,013 230,402
----------- ----------- ------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (330,736) (1,850,470) 2,394,760
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 2,798,401 4,648,871 2,254,111
----------- ----------- ------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 2,467,665 $ 2,798,401 $ 4,648,871
=========== =========== ============
</TABLE>
See Notes to Consolidated Financial Statements
F-8
<PAGE>
DUQUOIN BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Nature of Operations
- --------------------
DuQuoin Bancorp, Inc. is primarily engaged in providing a full range of
banking and mortgage services to individual and corporate customers through its
subsidiary bank, DuQuoin National Bank (the "Bank") in DuQuoin, Illinois. The
Bank is subject to competition from other financial institutions. The Bank is
also subject to the regulations of certain federal and state agencies and
undergoes periodic examinations by those regulatory authorities.
USE OF ESTIMATES
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for loan losses and the valuation
of real estate acquired in connection with foreclosures or in satisfaction of
loans. In connection with the determination of the allowances for loan losses
and the valuation of foreclosed assets held for sale, management obtains
independent appraisals for significant properties.
Management believes that the allowances for losses on loans and the valuation
of foreclosed assets held for sale are adequate. While management uses
available information to recognize losses on loans and foreclosed assets held
for sale, changes in economic conditions may necessitate revision of these
estimates in future years. In addition, various regulatory agencies, as an
integral part of their examination process, periodically review the Bank's
allowances for losses on loans and valuation of foreclosed assets held for sale.
Such agencies may require the Bank to recognize additional losses to the
allowances based on their judgment of information available to them at the time
of their examination.
PRINCIPLES OF CONSOLIDATION
- ---------------------------
The consolidated financial statements include the accounts of the DuQuoin
Bancorp, Inc. and its 100% owned subsidiary, the Bank. Significant intercompany
accounts and transactions have been eliminated in consolidation.
F-9
<PAGE>
DUQUOIN BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES, Continued
CASH EQUIVALENTS
- ----------------
The Bank considers all liquid investments with original maturities of three
months or less to be cash equivalents. At December 31, 1995 and 1994, cash
equivalents consisted of federal funds sold.
INVESTMENTS IN DEBT AND EQUITY SECURITIES
- -----------------------------------------
Available-for-sale securities, which include any security for which the Bank
has no immediate plan to sell but which may be sold in the future, are carried
at fair value. Realized gains and losses, based on specifically identified
amortized cost of the specific security, are included in other income.
Unrealized gains and losses are recorded, net of related income tax effects, in
stockholders' equity. Premiums and discounts are amortized and accreted,
respectively, to interest income using the level-yield method over the period to
maturity.
Held-to-maturity securities, which include any security which the Bank has the
positive intent and ability to hold until maturity, are carried at historical
cost adjusted for amortization of premiums and accretion of discounts. Premiums
and discounts are amortized and accreted, respectively, to interest income using
the level-yield method over the period to maturity.
Interest and dividends on investments in debt and equity securities are
included in income when earned.
LOANS
- -----
Loans that management has the intent and ability to hold for the foreseeable
future or until maturity or pay-offs are reported at their outstanding principal
adjusted for any charge-offs and the allowance for loan losses.
ALLOWANCE FOR LOAN LOSSES
- -------------------------
The allowance for loan losses is increased by provisions charged to expense
and reduced by loans charged off, net of recoveries. The allowance is
maintained at a level considered adequate to provide for potential loan losses,
based on management's evaluation of the loan portfolio, as well as on prevailing
and anticipated economic conditions and historical losses by loan category.
General allowances have been established, based upon the aforementioned factors,
and allocated to the individual loan categories. Allowances are accrued on
specific loans evaluated for impairment for which the basis of each loan,
including accrued interest, exceeds, the discounted amount of expected future
collections of interest and principal or, alternatively, the fair value of loan
collateral.
F-10
<PAGE>
DUQUOIN BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES, Continued
LOANS, CONTINUED
- ----------------
A loan is considered impaired when it is probable that the Bank will not
receive all amounts due according to the contractual terms of the loan. This
includes loans that are delinquent 90 days or more (nonaccrual loans) and
certain other loans identified by management. Accrual of interest is
discontinued, and interest accrued and unpaid is removed, at the time such
amounts are delinquent 90 days. Interest is recognized for nonaccrual loans
only upon receipt, and only after all principal amounts are current according to
the terms of the contract.
PREMISES AND EQUIPMENT
- ----------------------
Depreciable assets are stated at cost less accumulated depreciation.
Depreciation is charged to expense using the straight-line method over the
estimated useful lives of the assets.
FORECLOSED ASSETS HELD FOR SALE
- -------------------------------
Assets acquired by foreclosure or in settlement of debt and held for sale are
valued at estimated fair value as of the date of foreclosure and a related
valuation allowance is provided for estimated costs to sell the assets.
Management evaluates the value of foreclosed assets held for sale periodically
and increases the valuation allowance for any subsequent declines in estimated
fair value. Changes in the valuation allowance are charged or credited to other
expense.
UNAUDITED INFORMATION
- ---------------------
The Bank's financial statements and disclosures as of December 31, 1994 and
for the two years then ended are unaudited. Accordingly, the following
disclosures related to 1994 and 1993 are also unaudited. In the opinion of
management, the unaudited information reflects all adjustments which are
necessary for a fair statement of the results for the unaudited periods. All
such adjustments are of a normal recurring nature.
INCOME TAXES
- ------------
Deferred tax liabilities and assets are recognized for the tax effect of
differences between the financial statement and tax bases of assets and
liabilities. A valuation allowance is established to reduce deferred tax assets
if it is more likely than not that a deferred tax asset will not be realized.
F-11
<PAGE>
DUQUOIN BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES, Continued
NET INCOME PER SHARE
- --------------------
Net Income per share is based on the weighted average number of shares
outstanding during the period, which totaled 27,797, 27,158 and 26,042 for the
years ended December 31, 1995, 1994 and 1993, respectively.
NOTE 2: INVESTMENTS IN DEBT AND EQUITY SECURITIES
The amortized cost and approximate fair value of available-for-sale securities
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
--------------------------------------------------
APPROXI-
GROSS GROSS MATE
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS (LOSSES) VALUE
----------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
U.S. Treasury $ 984,734 $ 5,926 $ (219) $ 990,441
U.S. Government agencies 2,639,085 17,203 (7,091) 2,649,197
Mortgage-backed securities 13,834,996 87,799 (301,839) 13,620,956
State and political subdivisions 3,408,506 72,976 (9,152) 3,472,330
Other securities 1,299,323 16,330 (723) 1,314,930
----------- -------- ----------- -----------
$22,166,644 $200,234 $ (319,024) $22,047,854
=========== ======== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1994
--------------------------------------------------
UNAUDITED
----------
APPROXI-
GROSS GROSS MATE
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS (LOSSES) VALUE
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury $ 846,893 $ - $ (9,073) $ 837,820
U.S. Government agencies 1,906,360 - (69,205) 1,837,155
Mortgage-backed securities 14,165,132 1,285 (1,383,488) 12,782,929
State and political subdivisions 4,391,412 52,848 (87,717) 4,356,543
Other securities 610,966 - (32,544) 578,422
----------- -------- ----------- -----------
$21,920,763 $ 54,133 $(1,582,027) $20,392,869
=========== ======== =========== ===========
</TABLE>
F-12
<PAGE>
DUQUOIN BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 2: INVESTMENTS IN DEBT AND EQUITY SECURITIES, Continued
Maturities of available-for-sale securities at December 31, 1995:
<TABLE>
<CAPTION>
APPROXIMATE
AMORTIZED FAIR
COST VALUE
---------- -----------
<S> <C> <C>
One year or less $ 1,441,734 $ 1,449,768
After one through five years 6,002,856 6,084,870
After five through ten years 887,058 892,260
After ten years - -
Mortgage-backed securities not
due on a single maturity date 13,834,996 13,620,956
----------- ------------
$22,166,644 $ 22,047,854
=========== =============
</TABLE>
The amortized cost and approximate fair value of held-to-maturity securities
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
--------------------------------------------------
APPROXI-
GROSS GROSS MATE
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS (LOSSES) VALUE
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
State and political
subdivisions $10,312,473 $ 358,828 $(11,849) $10,659,452
=========== =========== ========== ===========
</TABLE>
F-13
<PAGE>
DUQUOIN BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 2: INVESTMENTS IN DEBT AND EQUITY SECURITIES, Continued
<TABLE>
<CAPTION>
DECEMBER 31, 1994
--------------------------------------------------
UNAUDITED
-----------
APPROXI-
GROSS GROSS MATE
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS (LOSSES) VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury $ 443,863 $ 6,304 $ (408) $ 449,759
U.S. Government agencies 250,679 - (7,329) 243,350
State and political subdivisions 9,735,149 7,929 (674,996) 9,068,082
Other securities 1,600,705 - (15,457) 1,585,248
----------- ----------- ---------- ------------
$ 12,030,396 $ 14,233 $(698,190) $ 11,346,439
============ =========== ========== ============
</TABLE>
Maturities of held-to-maturity securities at December 31, 1995:
<TABLE>
<CAPTION>
APPROXIMATE
AMORTIZED FAIR
COST VALUE
---------- -----------
<S> <C> <C>
One year or less $ - $ -
After one through five years 1,789,417 1,833,683
After five through ten years 5,346,459 5,488,794
After ten years 3,176,597 3,336,975
------------ ------------
$ 10,312,473 $ 10,659,452
============ ============
</TABLE>
The book value of securities pledged as collateral to secure public deposits
amounted to $6,978,182 at December 31, 1995 and $9,454,909 at December 31, 1994.
The approximate fair value of pledged securities amounted to $6,869,625 at
December 31, 1995 and $8,659,190 at December 31, 1994.
Gross gains of $69,962, $79,450 and $119,574 and gross losses of $39,855,
$67,831 and $31,585 resulting from sales of available-for-sale securities were
realized in 1995, 1994 and 1993, respectively.
Income taxes related to net gains on sales of available-for-sale securities
amounted to $12,040, $4,650 and $35,190 for 1995, 1994 and 1993, respectively.
F-14
<PAGE>
DUQUOIN BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 2: INVESTMENTS IN DEBT AND EQUITY SECURITIES, Continued
As of December 11, 1995, the Bank redesignated held-to-maturity securities
with an aggregate amortized cost of $2,039,820 and net unrealized gains of
$7,541 to the available-for-sale portfolio. The redesignation was prompted by
the recent announcement by the Financial Accounting Standards Board to allow a
one-time redesignation and reflects management's revised expectations of
liquidity needs.
NOTE 3: LOANS AND ALLOWANCE FOR LOAN LOSSES
Categories of loans at December 31, 1995 and 1994 included:
<TABLE>
<CAPTION>
1994
1995 UNAUDITED
---- ---------
<S> <C> <C>
Commercial and agricultural $ 15,637,009 $ 16,431,480
Real estate construction 364,272 159,642
Commercial real estate 9,103,084 9,449,027
Residential real estate 14,421,670 14,183,084
Consumer 6,319,776 5,498,242
Other 69,617 27,638
------------ ------------
Total Loans 45,915,428 45,749,113
Less:
Unearned discount and fees 222,594 141,999
Allowance for loan losses 1,102,430 662,570
------------ ------------
Net Loans $ 44,590,404 $ 44,944,544
============ ============
</TABLE>
Loans on which the accrual of interest has been discontinued aggregated
$1,338,357 and $655,108 at December 31, 1995 and 1994, respectively. If
interest on those loans had been accrued, such interest income would have
approximated $16,710 and $31,979, in 1995 and 1994, respectively.
F-15
<PAGE>
DUQUOIN BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 3: LOANS AND ALLOWANCE FOR LOAN LOSSES, Continued
Transactions in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
1994 1993
1995 UNAUDITED UNAUDITED
---- --------- ---------
<S> <C> <C> <C>
Balance, beginning of year $ 662,570 $ 594,346 $ 507,730
Provision charged to expense 1,000,000 198,000 120,000
Losses charged off, net of recoveries
of $28,765 in 1995, $17,762 in
1994 and $108,829 in 1993 (560,140) (129,776) (33,384)
----------- ---------- ---------
Balance, end of year $ 1,102,430 $ 662,570 $ 594,346
=========== ========== ==========
</TABLE>
As of January 1, 1995, the Bank adopted Statement No. 114 issued by the
Financial Accounting Standards Board regarding accounting by creditors for
impairment of a loan. This new statement requires discounting expected future
cash flows to measure impairment of certain loans or, as a practical expedient,
impairment measurements based on the loan's observable market price or the fair
value of collateral if the loan is collateral dependent. The adoption of
Statement No. 114 required no adjustment to the Bank's financial statements.
Impaired loans totaled approximately $5,950,000 at December 31, 1995. An
allowance for loan losses of $670,000 relates to impaired loans of $5,590,000,
at December 31, 1995. At December 31, 1995, impaired loans of $360,000 had no
related allowance for loan losses.
Interest income of $445,000 was recognized on average impaired loans of
$5,520,000 for 1995, including interest of $37,000 recognized using the cash
basis method of accounting on nonaccrual loans.
For financial reporting purposes, "impaired loans" includes all loans for
which the Bank's loan rating system provides a specific reserve and loans for
which the accrual of interest has been discontinued.
F-16
<PAGE>
DUQUOIN BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 4: PREMISES AND EQUIPMENT
Major classifications of premises and equipment, stated at cost, at December
31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1994
1995 UNAUDITED
---- ---------
<S> <C> <C>
Land $ 541,969 $ 541,969
Building and improvements 1,848,789 1,828,326
Equipment 1,216,427 1,178,650
Automobile 29,983 22,705
---------- ----------
3,637,168 3,571,650
Less accumulated depreciation 1,577,107 1,448,646
---------- ----------
Total premises and equipment $2,060,061 $2,123,004
========== ==========
</TABLE>
Depreciation expense for the years ended December 31, 1995, 1994 and 1993 was
$140,887, $151,039 and $141,298, respectively.
NOTE 5: INCOME TAXES
<TABLE>
<CAPTION>
The provision for income taxes consists of:
1994 1993
1995 UNAUDITED UNAUDITED
---- --------- ---------
<S> <C> <C> <C>
Taxes currently payable $ 95,000 $ 330,726 $ 447,444
Deferred income taxes (409,000) (12,319) (20,251)
------------ ---------- ----------
$ (314,000) $ 318,407 $ 427,193
============ ========== ==========
</TABLE>
F-17
<PAGE>
DUQUOIN BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 5: INCOME TAXES, Continued
A reconciliation of income tax expense at the statutory rate to the Company's
actual income tax expense is shown below:
<TABLE>
<CAPTION>
1994 1993
1995 UNAUDITED UNAUDITED
---- --------- ---------
<S> <C> <C> <C>
Computed at the statutory rate (34%) $ (66,000) $ 466,800 $ 577,200
Increase (decrease) resulting from:
Tax-exempt municipal interest (210,700) (200,600) (194,800)
Officers' life insurance (6,000) (4,100) (5,007)
State income taxes - net of federal tax benefits (18,000) 59,800 76,800
Other (13,300) (3,493) (27,000)
--------- --------- ---------
Actual tax provision (credit) $(314,000) $ 318,407 $ 427,193
========= ========= =========
</TABLE>
As of December 31, 1995, the Company had approximately $100,000 of alternative
minimum tax credits available to offset future federal income taxes. The
credits have no expiration date.
The tax effects of temporary differences related to deferred taxes shown on
the balance sheets are:
<TABLE>
<CAPTION>
1994
1995 UNAUDITED
---- ---------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $ 303,000 $ 121,700
Valuation of foreclosed assets 2,000 44,800
Deferred compensation liability 27,000 19,500
Other accrued expenses 112,000 -
Unrealized loss on available-for-sale
securities 49,060 631,100
Alternative minimum tax credits 100,000 -
Net operating loss carryforward 48,000 -
--------- ---------
641,060 817,100
--------- ---------
Deferred tax liabilities:
Other (13,000) (5,340)
Accumulated depreciation (313,000) (323,500)
--------- ---------
(326,000) (328,840)
--------- ---------
Net deferred tax asset $ 315,060 $ 488,260
========= =========
</TABLE>
F-18
<PAGE>
DUQUOIN BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 5: INCOME TAXES, Continued
Deferred income taxes related to the change in unrealized appreciation
(depreciation) on available-for-sale securities, shown in stockholders' equity,
were $582,083 and $951,454 in 1995 and 1994, respectively.
NOTE 6: STOCKHOLDERS' EQUITY
At December 31, 1995, federal regulatory agencies generally required member
banks to maintain core (Tier 1) capital of at least 3% of total assets plus an
additional cushion of 1% to 2%. Tier 1 capital generally consists of total
stockholders' equity. Additionally, these agencies require member banks to
maintain total risk-based capital of at least 8% of risk-weighted assets, with
at least one-half of that total capital amount consisting of Tier 1 capital.
Total capital for risk-based purposes includes Tier 1 capital plus the allowance
for loan losses.
At December 31, 1995 and 1994, the Bank exceeded its minimum capital
requirements. Additionally, the Bank is subject to certain restrictions on the
amount of dividends that it may pay without prior regulatory approval.
NOTE 7: TRANSACTIONS WITH RELATED PARTIES
At December 31, 1995 and 1994, the Bank had loans outstanding to executive
officers, directors, and companies in which the Banks' executive officers or
directors were principal owners, in the amount of $3,111,160 and $2,709,565,
respectively.
In management's opinion, such loans and other extensions of credit and
deposits were made in the ordinary course of business, and were made on
substantially the same terms (including interest rates and collateral) as those
prevailing at the time for comparable transactions with other persons. Further,
in management's opinion, these loans did not involve more than normal risk of
collectibility or present other unfavorable features.
F-19
<PAGE>
DUQUOIN BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 8: EMPLOYEE BENEFIT PLANS
The Bank maintains a 401(k) defined contribution pension plan covering
substantially all employees. Employees may contribute up to 15% of their
compensations with the Bank making matching and other discretionary
contributions which are determined each plan year. Employer contributions
charged to expense in 1995, 1994 and 1993 were $44,214, $52,500 and $41,936,
respectively.
The Bank has deferred compensation agreements with two of its executive
officers which provide for payments aggregating $70,000 annually upon
retirement, death or involuntary termination. In the event of permanent
disability, the executives receive all amounts due within three months of
disability. The Bank recognizes the cost of the agreements over the period to
eligibility (age 62) by recording the present value of expected future payments,
and has purchased life insurance on the lives of the officers to partially fund
the present and future liabilities. Accrued deferred compensation liability was
$65,489 and $47,183 in 1995 and 1994, respectively. Expense was $18,306,
$13,556 and $10,687 in 1995, 1994 and 1993, respectively.
NOTE 9: ADDITIONAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1994 1993
1995 UNAUDITED UNAUDITED
---- --------- ---------
<S> <C> <C> <C>
NONCASH INVESTING AND FINANCING ACTIVITIES
------------------------------------------
Real estate acquired in settlement of loans $ 120,742 $ 234,762 $ 265,531
ADDITIONAL CASH INFORMATION
---------------------------
Interest paid $3,169,853 $2,597,193 $2,608,876
Income taxes paid $ 110,272 $ 613,123 $ 440,448
</TABLE>
F-20
<PAGE>
DUQUOIN BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 10: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
CASH AND CASH EQUIVALENTS
- -------------------------
For these short-term instruments, the carrying amount approximates fair value.
AVAILABLE-FOR-SALE AND HELD-TO-MATURITY SECURITIES
- --------------------------------------------------
Fair values for available-for-sale securities, which also are the amounts
recognized in the balance sheet, equal quoted market prices, if available. If
quoted market prices are not available, fair values are estimated based on
quoted market prices of similar securities.
LOANS
- -----
The fair value of loans is estimated by discounting the future cash flows
using the current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities. Loans with
similar characteristics were aggregated for purposes of the calculations. The
carrying amount of accrued interest approximates its fair value.
DEPOSITS
- --------
The fair value of demand deposits, savings accounts, NOW accounts and certain
money market deposits is the amount payable on demand at the reporting date
(i.e., their carrying amount). The fair value of fixed-maturity time deposits
is estimated using a discounted cash flow calculation that applies the rates
currently offered for deposits of similar remaining maturities. The carrying
amount of accrued interest payable approximates its fair value.
SECURITIES SOLD UNDER AGREEMENT TO REPURCHASE AND OTHER BORROWINGS
- ------------------------------------------------------------------
For these short-term instruments, the carrying amount is a reasonable estimate
of fair value.
F-21
<PAGE>
DUQUOIN BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 10: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS,
Continued
COMMITMENTS TO EXTEND CREDIT, LETTERS OF CREDIT AND LINES OF CREDIT
- -------------------------------------------------------------------
The fair value of commitments is estimated using the fees currently charged to
enter into similar agreements, taking into account the remaining terms of the
agreements and the present creditworthiness of the counterparties. For fixed-
rate loan commitments, fair value also considers the difference between current
levels of interest rates and the committed rates. The fair value of letters of
credit and lines of credit is based on fees currently charged for similar
agreements or on the estimated cost to terminate or otherwise settle the
obligations with the counterparties at the reporting date.
The following table presents estimated fair values of the Bank's financial
instruments. The fair values of certain of these instruments were calculated by
discounting expected cash flows, which involves significant judgments by
management and uncertainties. Fair value is the estimated amount at which
financial assets or liabilities could be exchanged in a current transaction
between willing parties, other than in a forced or liquidation sale. Because no
market exists for certain of these financial instruments and because management
does not intend to sell these financial instruments, the Bank does not know
whether the fair values shown below represent values at which the respective
financial instruments could be sold individually or in the aggregate.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------------
CARRYING FAIR
AMOUNT VALUE
----------- -----------
<S> <C> <C>
Financial assets:
Cash and cash equivalents $ 2,467,665 $ 2,467,665
Available-for-sale securities 22,047,854 22,047,854
Held-to-maturity securities 10,312,473 10,659,452
Interest receivable 936,758 936,758
Loans, net of allowance for loan losses 44,590,404 43,985,485
</TABLE>
F-22
<PAGE>
DUQUOIN BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 10: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS,
Continued
COMMITMENTS TO EXTEND CREDIT, LETTERS OF CREDIT AND LINES OF CREDIT, CONTINUED
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------------
CARRYING FAIR
AMOUNT VALUE
----------- -----------
<S> <C> <C>
Financial liabilities:
Deposits $72,914,764 $73,025,829
Federal funds purchased and securities
sold under agreements to repurchase 2,831,354 2,831,354
Interest payable 377,160 377,160
Unrecognized financial instruments
(net of contract amount):
Letters of credit - -
Lines of credit - -
</TABLE>
NOTE 11: SIGNIFICANT ESTIMATES AND CONCENTRATIONS
Generally accepted accounting principles require disclosure of certain
significant estimates and current vulnerabilities due to certain concentrations.
Estimates related to the allowance for loan losses are reflected in the footnote
regarding loans. Current vulnerabilities due to certain concentrations of
credit risk are discussed in the footnote on commitments and credit risk.
In connection with the merger agreement discussed in Note 15, the Bank
performed environmental site assessments of Bank-owned and operated properties.
These assessments identified certain levels of contamination, which are not
attributable to the Bank's use of the properties. However, environmental
engineers have estimated remediation costs ranging between $115,000 and
$380,000, depending on the cleanup methods which might be required by regulatory
authorities. The Bank has accrued a $200,000 liability, which management
believes is a reasonable estimate of the cost of remediation efforts which might
ultimately be required. Actual results could differ from current estimates.
F-23
<PAGE>
DUQUOIN BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 12: FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Bank is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include lines-of-credit, commitments to extend
credit and standby letters of credit. When viewed in terms of the maximum
exposure, those instruments may involve varying degrees of credit risk in excess
of the amounts recognized in the statement of financial position.
Commitments to extend credit and lines of credit are agreements to lend to a
customer so long as there is no violation of any condition established in the
contract. Lines of credit and commitments to extend credit generally have fixed
expiration dates or other termination clauses and may require payment of a fee.
Since some of the commitments may expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements.
Management does not anticipate any material losses as a result of these
transactions. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to customers.
At December 31, 1995, all of the Bank's credit commitments renewed at various
times through 1996.
The Bank's maximum exposure to credit loss under lines of credit, commitments
to extend credit and standby letters of credit is represented by the contractual
amount of those instruments. The Bank uses the same credit policies in making
commitments and conditional obligations as it does for on-balance-sheet
instruments.
<TABLE>
<CAPTION>
1995 1994
---- -----
UNAUDITED
---------
<S> <C> <C>
Financial instruments whose contract
amounts represent potential credit risk:
Lines of credit and commitments to extend credit $1,614,325 $1,750,517
Standby letters of credit $ 162,300 $ 130,900
</TABLE>
F-24
<PAGE>
DUQUOIN BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 12: FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK, Continued
The Bank requires collateral to support financial instruments when it is
deemed necessary. The Bank evaluates each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained upon extension of credit
is based on management's credit evaluation of the counterparty. Collateral held
varies, but may include income-producing and other commercial properties;
accounts receivable; property, plant and equipment; inventory; residential real
estate; and personal property.
NOTE 13: FEDERAL FUNDS SOLD AND PURCHASED
From time to time the Bank has excess deposits or a need for additional funds.
Excess deposits are loaned to other banks as federal funds sold, which
represents overnight lending to other member banks of the Federal Reserve
System. Additional funds are borrowed from other member banks as federal funds
purchased, which represents overnight borrowings from other member banks of the
Federal Reserve System.
At December 31, 1995 and 1994, $137,000 and $2,228,000, respectively, was
sold to banks in the St. Louis, Missouri and Springfield, Illinois areas.
NOTE 14: SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
The Bank enters into sales of securities under agreements to repurchase.
Repurchase agreements are treated as financings, and the obligations to
repurchase securities sold are reflected as a liability in the statement of
financial condition. The securities underlying the agreements are book-entry
securities. At December 31, 1995 and 1994, these agreements had a weighted-
average interest rate of 5.87% and 4.80%, respectively, and matured within 24
months. At December 31, 1995 and 1994, all of the agreements were agreements to
repurchase the same securities. Securities sold under agreements to repurchase
averaged $3,022,537 and $3,091,489 in 1995 and 1994, respectively, and the
maximum amount outstanding at any month-end in 1995 and 1994, was $3,186,180 and
$3,297,000, respectively.
Securities sold under agreements to repurchase consist of U.S. treasury and
U.S. agency securities with book values of $4,057,558 and $3,765,870 and fair
values of $4,064,662 and $3,432,368 at December 31, 1995 and 1994, respectively.
F-25
<PAGE>
DUQUOIN BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 15: MERGER AGREEMENT WITH CNB BANCSHARES, INC.
In November, 1995, DuQuoin Bancorp, Inc. and CNB Bancshares, Inc., Evansville,
Indiana ("CNB"), entered into an agreement and plan of merger pursuant to which
DuQuoin Bancorp, Inc. would be merged into a subsidiary of CNB and of the Bank
would be merged with a bank subsidiary of CNB. Terms of the agreement call for
the Company's shareholders to receive 17.96 shares of CNB common stock for each
share of DuQuoin Bancorp, Inc. stock, subject to certain adjustments. 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, DuQuoin Bancorp, Inc. may be required to pay CNB a
termination fee of $1,000,000.
NOTE 16: ADOPTION OF STATEMENT OF FINANCIAL ACCOUNTING STANDARDS
NO. 115
At January 1, 1994, the Bank adopted Statement of Financial Accounting
Standards No. 115 regarding investments in debt and equity securities. As
described in Note 1, this statement creates categories of securities based upon
management's intent. Securities meeting the criteria for the "available-for-
sale" category were adjusted to their fair values as of January 1, 1994, with a
corresponding valuation reserve, net of income taxes, reported in stockholders'
equity. The cumulative effect of adopting FAS 115 at January 1, 1994 increased
stockholders' equity by $455,240.
F-26
<PAGE>
APPENDIX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
by and among
DUQUOIN BANCORP, INC.
an Illinois corporation,
and
CNB BANCSHARES, INC.,
an Indiana corporation,
and
HBI ACQUISITION COMPANY,
an Illinois corporation,
Dated November 17, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE ONE TERMS OF THE MERGER AND CLOSING................................. A-1
- ----------- -------------------------------
Section 1.01. The Merger....................................... A-1
Section 1.02. Merging Corporation.............................. A-1
Section 1.03. Surviving Corporation............................ A-1
Section 1.04. Effect of the Merger............................. A-1
Section 1.05. Conversion of Shares............................. A-1
Section 1.06. The Closing...................................... A-3
Section 1.07. Exchange Procedures; Surrender of Certificates... A-3
Section 1.08. Closing Date..................................... A-4
Section 1.09. Actions At Closing............................... A-4
ARTICLE TWO REPRESENTATIONS OF DBI.......................................... A-6
- ----------- ----------------------
Section 2.01. Organization and Capital Stock................... A-6
Section 2.02. Authorization; No Defaults....................... A-7
Section 2.03. Subsidiaries..................................... A-7
Section 2.04. Financial Information............................ A-7
Section 2.05. Absence of Changes............................... A-8
Section 2.06. Regulatory Enforcement Matters................... A-8
Section 2.07. Tax Matters...................................... A-8
Section 2.08. Litigation....................................... A-9
Section 2.09. Employment Agreements............................ A-9
Section 2.10. Reports.......................................... A-9
Section 2.11. Investment Portfolio............................. A-10
Section 2.12. Loan Portfolio................................... A-10
Section 2.13. Employee Matters and ERISA....................... A-10
Section 2.14. Title to Properties; Insurance................... A-12
Section 2.15. Environmental Matters............................ A-12
Section 2.16. Compliance with Law.............................. A-13
Section 2.17. Undisclosed Liabilities.......................... A-13
Section 2.18. Brokerage........................................ A-13
Section 2.19. Interim Events................................... A-13
Section 2.20. Non-Banking Activities........................... A-13
Section 2.21. Properties, Contracts and Other Agreements....... A-13
Section 2.22. Trust Administration............................. A-14
Section 2.23. State Takeover Laws.............................. A-15
Section 2.24. Rights Agreement................................. A-15
Section 2.25. Statements True and Correct...................... A-15
</TABLE>
A-i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE THREE REPRESENTATIONS OF CNB AND CNB-ILL............................. A-16
- ------------- ----------------------------------
Section 3.01. Organization and Capital Stock.................. A-16
Section 3.02. Authorization................................... A-17
Section 3.03. Subsidiaries.................................... A-17
Section 3.04. Financial Information........................... A-17
Section 3.05. Absence of Changes.............................. A-17
Section 3.06. Litigation...................................... A-18
Section 3.07. Reports......................................... A-18
Section 3.08. Compliance With Law............................. A-18
Section 3.09. Statements True and Correct..................... A-18
Section 3.10. Tax Matters..................................... A-18
ARTICLE FOUR AGREEMENTS OF DBI.............................................. A-19
- ------------ -----------------
Section 4.01. Business in Ordinary Course..................... A-19
Section 4.02. Breaches........................................ A-21
Section 4.03. Submission to Shareholders...................... A-21
Section 4.04. Consents to Contracts and Leases................ A-22
Section 4.05. Restructuring Charges and Expenses.............. A-22
Section 4.06. Consummation of Agreement....................... A-22
Section 4.07. Environmental Reports........................... A-22
Section 4.08. Restriction on Resales.......................... A-23
Section 4.09. Access to Information........................... A-23
Section 4.10. Subsidiary Bank Merger.......................... A-24
Section 4.11. Monthly Financial Statements.................... A-24
ARTICLE FIVE AGREEMENTS OF CNB AND CNB-ILL.................................. A-24
- ------------ -----------------------------
Section 5.01. Regulatory Approvals and Registration Statement. A-24
Section 5.02. Breaches and Other Matters...................... A-25
Section 5.03. Consummation of Agreement....................... A-25
Section 5.04. Directors and Officers' Liability Insurance and
Indemnification................................ A-25
Section 5.05. Employee Benefits............................... A-26
Section 5.06. Subsidiary Bank Merger.......................... A-27
Section 5.07. Access to Information........................... A-27
ARTICLE SIX CONDITIONS PRECEDENT TO THE MERGER............................. A-27
- ----------- ----------------------------------
Section 6.01. Conditions to CNB's Obligations................. A-27
Section 6.02. Conditions to DBI's Obligations................. A-29
ARTICLE SEVEN TERMINATION OR ABANDONMENT..................................... A-30
- ------------- --------------------------
Section 7.01. Mutual Agreement................................ A-30
Section 7.02. Breach of Agreements............................ A-30
Section 7.03. Environmental Reports........................... A-30
</TABLE>
A-ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 7.04. Failure of Conditions........................... A-30
Section 7.05. Approval Denial................................. A-30
Section 7.06. Shareholder Approval Denial..................... A-30
Section 7.07. Regulatory Enforcement Matters.................. A-31
Section 7.08. Fall-Apart Date................................. A-31
Section 7.09. Termination Fee................................. A-31
ARTICLE EIGHT GENERAL........................................................ A-32
- ------------- -------
Section 8.01. Confidential Information........................ A-32
Section 8.02. Publicity....................................... A-32
Section 8.03. Return of Documents............................. A-32
Section 8.04. Notices......................................... A-33
Section 8.05. Liabilities..................................... A-34
Section 8.06. Nonsurvival of Representations, Warranties and
Agreements..................................... A-34
Section 8.07. Entire Agreement................................ A-35
Section 8.08. Headings and Captions........................... A-35
Section 8.09. Waiver, Amendment or Modification............... A-35
Section 8.10. Rules of Construction........................... A-35
Section 8.11. Counterparts.................................... A-35
Section 8.12. Successors and Assigns.......................... A-35
Section 8.13. Severability.................................... A-35
Section 8.14. Governing Law; Assignment....................... A-36
</TABLE>
EXHIBIT 1.09(a) - DBI's Legal Opinion Matters
EXHIBIT 1.09(b) - CNB's Legal Opinion Matters
EXHIBIT 4.08 - Form of Affiliate Agreement
EXHIBIT 4.10 - Subsidiary Bank Merger Agreement
A-iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
This is an AGREEMENT AND PLAN OF MERGER (this "Agreement") made November 17,
1995, by and among CNB BANCSHARES, INC., an Indiana corporation ("CNB"), HBI
ACQUISITION COMPANY, an Illinois corporation and wholly-owned subsidiary of CNB
("CNB-ILL"), and DUQUOIN BANCORP, INC., an Illinois corporation ("DBI").
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. THE MERGER. Pursuant to the terms and provisions of this
------------ ----------
Agreement and the Illinois Business Corporation Act of 1983, as amended (the
"Corporate Law"), DBI shall merge with and into CNB-ILL (the "Merger").
SECTION 1.02. MERGING CORPORATION. DBI shall be the merging corporation
------------ -------------------
under the Merger and its corporate identity and existence, separate and apart
from CNB-ILL, shall cease on consummation of the Merger.
SECTION 1.03. SURVIVING CORPORATION. CNB-ILL shall be the surviving
------------ ---------------------
corporation in the Merger. No changes in the Articles of Incorporation of CNB-
ILL shall be effected by the Merger.
SECTION 1.04. EFFECT OF THE MERGER. The Merger shall have all of the
------------ --------------------
effects provided by this Agreement and the Corporate Law.
SECTION 1.05. CONVERSION OF SHARES.
------------ --------------------
(a) At the Effective Time (as defined in Section 1.08 hereof), each share of
common stock, par value $25.00, of DBI (the "DBI 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 such number of shares of
common stock, stated value $1.00 per share, of CNB (the "CNB Common") as equals
the product of A multiplied by B multiplied by C (the "Conversion Ratio"), where
A equals 17.96, and where B equals the quotient of the Closing Book Value (as
defined in Section 1.05(b) hereof) divided by $7,032,000, but in no event shall
such quotient exceed one (1) for this purpose, and where C equals the quotient
of $30.76 divided by the CNB Average Price (as defined in Section 1.05(b)
hereof), but in no event shall such quotient exceed one (1) for this purpose.
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 DBI
Common who would otherwise be entitled to a fractional share
A-1
<PAGE>
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"), as reported in the Wall
----
Street Journal, Midwest Edition, 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 consolidated
shareholders' equity accounts of DBI, 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, 1994, but excluding for this purpose any adjustments to the shareholders'
equity accounts solely as a result of marketable securities classified as
Available for Sale in accordance with FAS 115, less (i) the amount of any
increase in the shareholders' equity accounts of DBI resulting from or
attributable to the sale of securities held on and sold after June 30, 1995 or
any transactions or accounting adjustments not in the ordinary course of
business effected or completed after June 30, 1995, plus (ii) any reduction of
shareholders' equity theretofore recorded solely as a result of accruals or
charges taken by DBI at the written request of CNB pursuant to Section 4.05
hereof or any provision for loan losses taken by DBI and its subsidiaries with
the written concurrence of CNB. The term "CNB Average Price" shall mean the
average closing price of a share of CNB Common as reported on Nasdaq for the
twenty (20) business days preceding the fifth (5th) calendar day prior to the
Closing Date. The CNB Average Price shall be appropriately and proportionately
adjusted to reflect any Share Adjustment, as contemplated by Section 1.05(f)
hereof.
(c) At the Effective Time, all of the shares of DBI 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 DBI 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 1.07 hereof.
(d) At the Effective Time, each share of DBI Common, if any, held in the
treasury of DBI or by any direct or indirect subsidiary of DBI (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 CNB-ILL
outstanding immediately prior to the Effective Time shall remain outstanding
unaffected by the Merger.
(f) 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 (each, a "Share Adjustment"),
then the number of shares of CNB Common into which a share of DBI Common will be
converted pursuant to
A-2
<PAGE>
subsection (a) above, and the $30.76 amount used in Section 1.05(a) hereof and
the $22.74 amount used in Section 6.02(h) hereof, will be appropriately and
proportionately adjusted so that each shareholder of DBI shall be entitled to
receive pursuant to subsection (a) above such fraction of a share or such number
of shares of CNB Common as such shareholder would have received pursuant to such
Share Adjustment had the record date therefor been immediately following the
Effective Time of the Merger. (The 5% stock dividend declared by CNB and paid
to shareholders of record of CNB on October 30, 1995 shall not be deemed a Share
Adjustment for purposes of this Agreement.)
(g) If holders of DBI 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 DBI Common held by an objecting holder shall not be
converted as described in Section 1.05(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 DBI 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.
SECTION 1.06. 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 described in Section 1.08 hereof.
SECTION 1.07. 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) Within five (5) business days following 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. Upon
surrender to the Exchange Agent of a Certificate, together with a Merger Letter
of Transmittal duly executed and any other reasonably 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 taxes 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) 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.
(d) At any time following one (1) year 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.
(e) Notwithstanding anything to the contrary contained herein, no Merger
Consideration shall be delivered to a person who is an "affiliate" (as such term
is defined in Section 4.08 hereof) of DBI unless such "affiliate" shall have
theretofore executed and delivered to CNB the agreement referred to in Section
4.08 hereof.
(f) In the event that any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by CNB in its
reasonable discretion, the posting by such person of a bond in such amount as
CNB may determine is reasonably necessary as indemnity against any claim that
may be made against it with respect to such Certificate, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed Certificate the
Merger Consideration deliverable in respect thereof pursuant to this Agreement.
SECTION 1.08. CLOSING DATE. At CNB's election, which shall be communicated
------------ ------------
to DBI not later than ten (10) days prior to the scheduled date for Closing, the
Closing shall take place on (i) the last business day of, or (ii) the first
business day of the month following, the month during which each of the
conditions in Sections 6.01(d) and 6.02(d) hereof is satisfied or waived by the
appropriate party or on such other date after such satisfaction or waiver as DBI
and CNB may agree (the "Closing Date"). The Merger shall be effective upon the
filing of Articles of Merger with the Secretary of State of the State of
Illinois (the "Effective Time"), which CNB and DBI shall use their best efforts
to cause to occur on the Closing Date.
SECTION 1.09. ACTIONS AT CLOSING.
------------ ------------------
(a) At the Closing, DBI shall deliver to CNB and CNB-ILL:
(i) a certified copy of the Articles of Incorporation or
Association, as the case may be, of DBI and each of its subsidiaries;
(ii) a Certificate signed by an appropriate officer of DBI 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
A-4
<PAGE>
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;
(iii) a certified copy of the resolutions of the Board of Directors
and shareholders of DBI, as required for valid approval of the execution of
this Agreement and the consummation of the Merger and the other transactions
contemplated hereby;
(iv) a Certificate of the Illinois Secretary of State, dated a
recent date, stating that DBI is in good standing;
(v) Articles of Merger executed by DBI, reflecting the terms and
provisions of this Agreement and in proper form for filing with the
Secretary of State of the State of Illinois in order to cause the Merger to
become effective pursuant to the Corporate Law; and
(vi) a legal opinion from counsel for DBI, in form reasonably
acceptable to counsel for CNB, opining with respect to the matters listed on
Exhibit 1.09(a) hereto.
(b) At the Closing, CNB shall deliver to DBI:
(i) a Certificate signed by an appropriate officer of CNB and CNB-
ILL 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 Sections 6.02(b) and 6.02(d) hereof (but only with respect to approvals
other than those by DBI's shareholders) have been satisfied;
(ii) a certified copy of the resolutions of the Board of Directors
of CNB authorizing the execution of this Agreement and the consummation of
the transactions contemplated hereby;
(iii) a certified copy of the resolutions of the Board of Directors
and shareholder of CNB-ILL, as required for valid approval of the execution
of this Agreement and the consummation of the transactions contemplated
hereby;
(iv) Articles of Merger executed by CNB-ILL, reflecting the terms
and provisions of this Agreement and in proper form for filing with the
Secretary of State of the State of Illinois in order to cause the Merger to
become effective pursuant to the Corporate Law;
(v) a legal opinion from counsel for CNB, in form reasonably
acceptable to counsel for DBI, opining with respect to the matters listed on
Exhibit 1.09(b) hereto;
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(vi) a tax opinion dated the Closing Date from counsel to CNB and
addressed to DBI, in form reasonably acceptable to counsel for DBI, opining
with respect to matters listed in Section 6.01(i) hereto; and
(vii) evidence that the shares of CNB Common to be issued in the
Merger are listed for trading on the Nasdaq National Market.
ARTICLE TWO
-----------
REPRESENTATIONS OF DBI
----------------------
DBI hereby makes the following representations and warranties:
SECTION 2.01. ORGANIZATION AND CAPITAL STOCK.
------------ ------------------------------
(a) DBI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Illinois 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. DBI is a bank holding company
registered with the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") under the Bank Holding Company Act of 1956, as amended.
(b) The authorized capital stock of DBI consists of 150,000 shares of DBI
Common, of which, as of the date hereof, 27,798 shares are issued and
outstanding. All of the issued and outstanding shares of DBI Common are duly
and validly issued and outstanding, are held of record by the persons and
entities disclosed in Section 2.01(b) of that certain confidential writing
delivered by DBI to CNB and executed by both DBI and CNB concurrently with the
delivery and execution of this Agreement (the "Disclosure Schedule") and are
fully paid and non-assessable. None of the outstanding shares of DBI Common has
been issued in violation of any preemptive rights of the current or past
shareholders of DBI. Except as disclosed in Section 2.01(b) of the Disclosure
Schedule, each Certificate representing shares of DBI Common issued by DBI 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 DBI
only upon receipt of an affidavit of lost stock certificate and a bond or
undertaking sufficient to indemnify DBI against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
Certificate or the issuance of such replacement Certificate.
(c) There are no shares of capital stock or other equity securities of DBI
issued or outstanding and no outstanding options, warrants, rights to subscribe
for, calls, or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of the capital
stock of DBI or contracts, commitments, understandings or arrangements by which
DBI is or may be obligated to issue additional shares of its capital stock or
options, warrants or rights to purchase or acquire any additional shares of its
capital stock.
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SECTION 2.02. AUTHORIZATION; NO DEFAULTS. The Board of Directors of DBI
------------ --------------------------
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 DBI of its obligations hereunder. Nothing in the
Articles of Incorporation or Bylaws of DBI, 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 DBI 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
DBI and constitutes a legal, valid and binding obligation of DBI, enforceable
against DBI in accordance with its terms. DBI and its subsidiaries are neither
in default under nor in violation of any material provision of their Articles of
Incorporation or Association, as the case may be, Bylaws, or any promissory
note, indenture or any evidence of indebtedness or security therefor, lease,
contract, insurance policy, purchase or other commitment or any other agreement
or arrangement, whether written or oral, which is material to DBI and its
subsidiaries taken as a whole, and there has not occurred any event that, with
the lapse of time or giving of notice or both, would constitute such a default
or violation.
SECTION 2.03. SUBSIDIARIES. Each of the banking subsidiaries and other
------------ ------------
direct or indirect subsidiaries, if any, of DBI (collectively, the
"subsidiaries") the name and jurisdiction of incorporation of which is disclosed
in Section 2.03 of the Disclosure Schedule, is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has the corporate power to own its respective properties and assets, to incur
its respective liabilities and to carry on its respective business as now being
conducted. The number of issued and outstanding shares of capital stock of each
such subsidiary is set forth in Section 2.03 of the Disclosure Schedule, all of
which shares (except as may be otherwise specified in Section 2.03 of the
Disclosure Schedule) are owned by DBI or DBI's subsidiaries, as the case may be,
free and clear of all liens, encumbrances, rights of first refusal, options or
other restrictions of any nature whatsoever. There are no options, warrants or
rights outstanding to acquire any capital stock of any of DBI's subsidiaries and
no person or entity has any other right to purchase or acquire any unissued
shares of stock of any of DBI's subsidiaries, nor does any such subsidiary have
any obligation of any nature with respect to its unissued shares of stock.
Except as may be disclosed in Section 2.03 of the Disclosure Schedule, neither
DBI nor any of DBI's subsidiaries is a party to any partnership or joint venture
or owns an equity interest in any other business or enterprise.
SECTION 2.04. FINANCIAL INFORMATION. The form FR Y-9LP of DBI as of
------------ ---------------------
December 31, 1994, as filed with The Federal Reserve Bank of St. Louis, and the
year-end and quarterly Reports of Condition and Report of Income of DuQuoin
National Bank (the "Bank") as of and for the periods ended December 31, 1994 and
March 31, 1995, June 30, 1995, and September 30, 1995, as filed with the Office
of the Comptroller of the Currency (the "O.C.C."), copies of each of which are
included in Section 2.04 of the Disclosure Schedule (together, the "DBI
Financial Statements"), have been prepared in accordance with GAAP applied on a
consistent basis (except (i) as may be disclosed therein; (ii) for footnotes
required by GAAP; and (iii) for regulatory reporting differences required by
Bank's reports) and fairly present the consolidated financial position and the
consolidated results of operations, changes in shareholders' equity and cash
flows of the respective entity and its respective consolidated subsidiaries as
of the dates
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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. Since December 31, 1994, there has not
------------ ------------------
been any material adverse change in the financial condition, the results of
operations or the business or prospects of DBI and its subsidiaries taken as a
whole, nor have there been any events or transactions having such a material
adverse effect which should be disclosed in order to make the DBI Financial
Statements not misleading. Since December 12, 1994, there has been no material
adverse change in the financial condition, the results of operations or the
business of the Bank, except for any such changes as may be disclosed in Bank's
Reports of Condition and Income filed with the O.C.C. since such date and prior
to the date hereof. Notwithstanding the foregoing, any provision for loan
losses taken by DBI and its subsidiaries with the written concurrence of CNB
shall not, in and of itself, be deemed to be a material adverse change in the
financial condition, the results of operations or the business or prospects of
DBI and its subsidiaries taken as a whole.
SECTION 2.06. REGULATORY ENFORCEMENT MATTERS. Except as may be disclosed
------------ ------------------------------
in Section 2.06 of the Disclosure Schedule, neither DBI nor any of its
subsidiaries is subject or is party to, or has received any notice or advice
that it may become subject or party to, any cease-and-desist order, agreement,
consent agreement, memorandum of understanding or other regulatory enforcement
action, proceeding or order with or by, or is a party to any commitment letter
or similar undertaking to, or is subject to any directive by, or has been since
January 1, 1993, a recipient of any supervisory letter from, or since January 1,
1993, has adopted any board resolutions at the request of, any Regulatory Agency
(as defined below in this Section 2.06) that currently restricts in any material
respect the conduct of its business or that in any material manner relates to
its capital adequacy, its credit policies, its management or its business (each,
a "Regulatory Agreement"), nor has DBI or any of its subsidiaries been advised
since January 1, 1993, by any Regulatory Agency that it is considering issuing
or requesting any such Regulatory Agreement. As used in this Agreement, the
term "Regulatory Agency" means any federal or state agency charged with the
supervision or regulation of banks or bank holding companies, or engaged in the
insurance of bank deposits, or any court, administrative agency or commission or
other governmental agency, authority or instrumentality having supervisory or
regulatory authority with respect to DBI or any of its subsidiaries.
SECTION 2.07. TAX MATTERS.
------------ -----------
(a) Each of DBI and its subsidiaries has filed with the appropriate
governmental agencies all federal, state and local income, franchise, excise,
sales, use, real and personal property and other tax returns and reports
required to be filed by it. Except as set forth in Section 2.07(a) of the
Disclosure Schedule, neither DBI nor its subsidiaries are (a) delinquent in the
payment of any Taxes (as defined below in this Section 2.07) shown on such
returns or reports or on any assessments received by it for such Taxes, (b)
subject to any agreement extending the period for assessment or collection of
any Tax, or (c) a party to any action or proceeding with, nor has any claim been
asserted or, to the best of its knowledge, threatened against any of them by,
any governmental authority for assessment or collection of Taxes. The income
tax returns of DBI and its subsidiaries have not been examined by the Internal
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<PAGE>
Revenue Service (the "I.R.S."). The allowance for Taxes in the financial
statements of DBI as of December 31, 1994, is adequate to cover all of the
liabilities for Taxes of DBI and its subsidiaries that may become payable in
future years with respect to any transactions consummated prior to December 31,
1994. As used in this Agreement, the term "Taxes" means any federal, state,
local, or foreign income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental, customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated or other tax of any kind whatsoever, including any interest, penalty
or addition thereto, whether disputed or undisputed.
(b) Except as set forth in Section 2.07(b) of the Disclosure Schedule, any
amount that could be received (whether in cash or property or the vesting of
property) as a result of any of the transactions contemplated by this Agreement
by any employee, officer or director of DBI or any of its affiliates who is a
"Disqualified Individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) under any employment, severance or termination
agreement, other compensation arrangement or Employee Plan (as defined in
Section 2.13(c) hereof) currently in effect would not be characterized as an
"excess parachute payment" (as such term is defined in Section 280G(b)(1) of the
Internal Revenue Code of 1986, as amended (the "Code")).
(c) Neither DBI nor any of its subsidiaries has taken or agreed to take any
action or has any knowledge of any fact or circumstance that would prevent the
transactions contemplated hereby from qualifying as a reorganization within the
meaning of Section 368(a) of the Code.
SECTION 2.08. LITIGATION. Except as may be disclosed in Section 2.08 of
------------ ----------
the Disclosure Schedule and except for foreclosure and other collection
proceedings commenced in the ordinary course of business by the Bank with
respect to loans in default with respect to which no claims have been asserted
against the Bank, there is no litigation, claim or other proceeding pending or,
to the knowledge of DBI, threatened, against DBI or any of its subsidiaries, or
of which the property of DBI or any of its subsidiaries is or is reasonably
likely to be subject.
SECTION 2.09. EMPLOYMENT AGREEMENTS. Except as may be disclosed in Section
------------ ---------------------
2.09 of the Disclosure Schedule, neither DBI nor any of its subsidiaries is a
party to or bound by any contract for the employment, retention or engagement,
or with respect to the severance, of any officer, employee, agent, consultant or
other person or entity which, by its terms, is not terminable by DBI or such
subsidiary on thirty (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 written agreement disclosed in Section 2.09 of the Disclosure Schedule and
any and all amendments or supplements thereto is included as an exhibit thereto.
SECTION 2.10. REPORTS. Except as may be disclosed in Section 2.10 of the
------------ -------
Disclosure Schedule, DBI and each of its subsidiaries 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 Federal Reserve Board; (ii)
the Federal Deposit Insurance Corporation (the "F.D.I.C."); (iii) the O.C.C.;
(iv) any state securities
A-9
<PAGE>
or banking authorities having jurisdiction; and (v) any other Regulatory Agency
with jurisdiction over DBI or any of its subsidiaries. As of their respective
dates, each of such reports and documents, as amended, including any financial
statements, exhibits and schedules thereto, complied in all material respects
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 DBI or its subsidiaries, as reflected in the
latest consolidated balance sheet of DBI included in the DBI 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 DBI
Financial Statements or which were entered into after the date of the most
recent balance sheet included in the DBI Financial Statements were made in all
material respects for good, valuable and adequate consideration in the ordinary
course of the business of DBI and its subsidiaries, in accordance in all
material respects with sound banking practices, and are not subject to any
material 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; (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, in all material respects, enforceable, valid, true and genuine
and what they purport to be; and (iii) DBI and its subsidiaries have complied
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 materially interfere
with the collection of any such loan. All loans and loan commitments extended
by the Bank and any extensions, renewals or continuations of such loans and loan
commitments were made in accordance with customary lending standards of the Bank
in the ordinary course of business. Such loans are evidenced by appropriate and
sufficient documentation based upon customary and ordinary past practices of
Bank.
SECTION 2.13. EMPLOYEE MATTERS AND ERISA.
------------ --------------------------
(a) Except as may be disclosed in Section 2.13(a) of the Disclosure
Schedule, neither DBI nor any of its subsidiaries has entered into any
collective bargaining agreement with any labor organization with respect to any
group of employees of DBI or any of its subsidiaries and, to the knowledge of
DBI, there is no present effort nor existing proposal to attempt to unionize any
group of employees of DBI or any of its subsidiaries.
(b) Except as may be disclosed in Section 2.13(b) of the Disclosure
Schedule, (i) DBI and its subsidiaries are and have been in compliance in all
material respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours,
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including, without limitation, any such laws respecting employment
discrimination and occupational safety and health requirements, and neither DBI
nor any of its subsidiaries is engaged in any unfair labor practice; (ii) there
is no unfair labor practice complaint against DBI or any subsidiary pending or,
to the knowledge of DBI, threatened before the National Labor Relations Board;
(iii) there is no labor dispute, strike, slowdown or stoppage actually pending
or, to the knowledge of DBI, threatened against or directly affecting DBI or any
subsidiary; and (iv) neither DBI nor any subsidiary has 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, neither DBI nor any subsidiary maintains, contributes to or
participates in or has 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 DBI or
any subsidiary (the "Employee Plans"). To the knowledge of DBI, no present or
former employee of DBI or any subsidiary has been charged with breaching nor has
breached a fiduciary duty under any of the Employee Plans. Neither DBI nor any
of its subsidiaries participates 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
separately disclosed in Section 2.13(c) of the Disclosure Schedule, neither DBI
nor any subsidiary maintains, contributes to, or participates in, any plan that
provides health, major medical, disability or life insurance benefits to former
employees of DBI or any subsidiary.
(d) Neither DBI nor any of its subsidiaries maintain, nor have any of them
maintained, any Employee Plans subject to Title IV of ERISA or Section 412 of
the Code. No claim is pending, and DBI 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 DBI or any of its subsidiaries would be liable
after December 31, 1994, except as reflected on the DBI Financial Statements.
DBI and its subsidiaries do not have any liabilities for excise taxes under
Sections 4971, 4975, 4976, 4977, 4979 or 4980B of the Code or for a fine under
Section 502 of ERISA with respect to any Employee Plan. All Employee Plans have
in all material respects been operated, administered and maintained in
accordance with the terms thereof and in compliance with the requirements of all
applicable laws, including, without limitation, ERISA and the Code.
(e) Except as may be disclosed in Section 2.13(e) of the Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby (either alone or upon the
occurrence of any additional acts or events) will (i) result in any material
payment (including, without limitation, severance, unemployment compensation,
golden parachute or otherwise) becoming due to any director, officer or employee
of DBI or any of its affiliates from DBI or any of its affiliates under any
Employee Plan or otherwise, (ii) materially increase any benefits otherwise
payable under any Employee Plan, or (iii) result in any acceleration of the time
of payment or vesting of any such benefits to any material extent.
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SECTION 2.14. TITLE TO PROPERTIES; INSURANCE. Except as may be disclosed
------------ ------------------------------
in Section 2.14 of the Disclosure Schedule, (i) DBI and its subsidiaries have
marketable title, insurable at standard rates, free and clear of all liens,
charges and encumbrances (except taxes which are a lien but not yet payable and
liens, charges or encumbrances reflected in the DBI 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 ("O.R.E.O."), as such
real estate is internally classified on the books of DBI or its subsidiaries,
rights of redemption under applicable law) to all of their real properties; (ii)
all leasehold interests for real property and any material personal property
used by DBI and its subsidiaries in their businesses are held pursuant to lease
agreements which are valid and enforceable in accordance with their terms; (iii)
all such properties comply in all material respects 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 DBI, threatened with respect to such properties; (iv) DBI and its
subsidiaries have valid title or other ownership rights under licenses to all
material intangible personal or intellectual property necessary to conduct the
business and operations of DBI and its subsidiaries, 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; and (v) all material insurable properties owned or held by DBI
and its subsidiaries are adequately insured by financially sound and reputable
insurers in such amounts and against fire and other risks insured against by
extended coverage and public liability insurance, as is customary for bank
holding companies of similar size. Section 2.14 of the Disclosure Schedule sets
forth, for each policy of insurance maintained by DBI and its subsidiaries, the
amount and type of insurance, the name of the insurer and the amount of the
annual premium.
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 DBI and its subsidiaries have done business or owned,
leased or operated property, including, without limitation, the Federal Resource
Conservation and Recovery Act, the Federal Comprehensive Environmental Response,
Compensation and Liability Act, the Federal Clean Water Act, the Federal Clean
Air Act, and the Federal Occupational Safety and Health Act.
(b) Except as may be disclosed in Section 2.15 of the Disclosure Schedule,
(i) neither the conduct nor operation of DBI or its subsidiaries nor any
condition of any property presently or previously owned, leased or operated by
any of them violates or violated Environmental Laws in any respect material to
the business of DBI and its subsidiaries taken as a whole; and (ii) no condition
has existed or event has occurred with respect to any of them or any such
property that, with notice or the passage of time, or both, would constitute a
violation material to the business of DBI and its subsidiaries taken as a whole
of Environmental Laws or obligate (or potentially obligate) DBI or its
subsidiaries to remedy, stabilize, neutralize or otherwise alter the
environmental condition of any such property where the aggregate cost of such
actions would be material to DBI and its subsidiaries taken as a whole. Except
as may be disclosed in Section 2.15 of the Disclosure Schedule, neither DBI nor
any of its subsidiaries has received any notice from any person or entity that
DBI or its subsidiaries or the operation or
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condition of any property ever owned, leased or operated by any of them are or
were in violation of any Environmental Laws in any respect material to the
business of DBI and its subsidiaries taken as a whole or that any of them are
responsible (or potentially responsible) for the cleanup of or other remediation
in any respect material to the business of DBI and its subsidiaries taken as a
whole 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. DBI and its 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 2.17. UNDISCLOSED LIABILITIES. DBI and its subsidiaries do not
------------ -----------------------
have any material liability, whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due (and there
is no past or present fact, situation, circumstance, condition or other basis
for any present or future action, suit or proceeding, hearing, charge,
complaint, claim or demand against DBI or its subsidiaries giving rise to any
such liability), except (i) for liabilities set forth in the DBI Financial
Statements; (ii) immaterial fluctuation in the amount of the liabilities
referred to in clause (i) above occurring in the ordinary course of business of
DBI and its subsidiaries since the date of the most recent balance sheet
included in the DBI Financial Statements; and (iii) as may be disclosed in
Section 2.17 of the Disclosure Schedule.
SECTION 2.18. BROKERAGE. Except as may be disclosed in Section 2.18 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 DBI or its subsidiaries.
SECTION 2.19. INTERIM EVENTS. Except as disclosed in Section 2.19 of the
------------ --------------
Disclosure Schedule, since December 31, 1994, neither DBI nor its subsidiaries
has paid or declared any dividend (other than dividends paid to DBI by any
subsidiary of DBI) or made any other distribution to shareholders or taken any
action which if taken after the date of this Agreement would require the prior
written consent of CNB pursuant to Section 4.01(b) hereof.
SECTION 2.20. NON-BANKING ACTIVITIES. Except as disclosed in Section 2.20
------------ ----------------------
of the Disclosure Schedule, neither DBI nor any of its subsidiaries engages in
or controls, directly or indirectly, any business or activity which is not
listed at 12 C.F.R. (S)225.25.
SECTION 2.21. PROPERTIES, CONTRACTS AND OTHER AGREEMENTS. Section 2.21 of
------------ ------------------------------------------
the Disclosure Schedule lists or describes the following:
(a) Each parcel of real property owned by DBI or its subsidiaries and the
principal buildings and structures located thereon;
A-13
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(b) Each lease of real property to which DBI or its subsidiaries is a party,
identifying the parties thereto, the annual rental payable, the term and
expiration date thereof and a brief description of the property covered;
(c) Each loan and credit agreement, conditional sales contract, indenture or
other title retention agreement or security agreement relating to money borrowed
by DBI or its subsidiaries;
(d) Each guaranty by DBI or any of its subsidiaries of any obligation for
the borrowing of money or otherwise (excluding any endorsements and guarantees
in the ordinary course of business and letters of credit issued by the Bank in
the ordinary course of its business) or any warranty or indemnification
agreement;
(e) Each agreement between DBI or any of its subsidiaries and any present or
former officer, director or shareholder of DBI or any of its subsidiaries
(except for deposit or loan agreements entered into in the ordinary course of
Bank's business);
(f) Each lease or license with respect to personal property involving DBI or
any of its subsidiaries, whether as lessee or lessor or licensee or licensor,
with annual rental or other payments due thereunder in excess of $5,000;
(g) The name and annual salary as of September 30, 1995, of each director or
employee of DBI or its subsidiaries and any employment agreement or arrangement
with respect to each such person; and
(h) Each agreement, loan, contract, lease, guaranty, letter of credit, line
of credit or commitment of DBI or its subsidiaries not referred to elsewhere in
this Section 2.21 which (i) involves payment by DBI or its subsidiaries (other
than as disbursement of loan proceeds to customers) of more than $10,000; (ii)
involves payments based on profits of DBI or its subsidiaries; (iii) relates to
the future purchase of goods or services in excess of the requirements of its
respective business at current levels or for normal operating purposes; or (iv)
were not made in the ordinary course of business.
Copies of each document, plan or contract listed and described in Section 2.21
of the Disclosure Schedule are appended to such Schedule and included in the
Disclosure Schedule.
SECTION 2.22. TRUST ADMINISTRATION. The Bank has properly administered all
------------ --------------------
accounts for which it acts as a fiduciary or agent, including but not limited to
accounts for which it serves as a trustee, agent, custodian, personal
representative, guardian, conservator or investment advisor, in accordance with
the terms of the governing documents and applicable state and federal law and
regulation and common law, except where the failure to do so would not,
individually or in the aggregate, have a material adverse effect on the
financial condition, the results of operations or the business of DBI and its
subsidiaries taken as a whole. Neither DBI, any subsidiary of DBI, nor any
director, officer or employee of DBI or any of its subsidiaries acting on behalf
of DBI or any of its subsidiaries, has committed any breach of trust with
respect to any such fiduciary or agency account, and the accountings for each
such fiduciary or
A-14
<PAGE>
agency account are true and correct in all material respects and accurately
reflect the assets of such fiduciary or agency account, except for such breaches
and failures to be true, correct and accurate which would not, individually or
in the aggregate, have a material adverse effect on the financial condition, the
results of operations or the business of DBI and its subsidiaries taken as a
whole. There is no investigation or inquiry by any Regulatory Agency pending,
or to the knowledge of DBI, threatened, against or affecting DBI or any of its
subsidiaries relating to the compliance by DBI or any such subsidiary with sound
fiduciary principles and applicable regulations.
SECTION 2.23. STATE TAKEOVER LAWS. The Board of Directors of DBI has
------------ -------------------
approved the transactions contemplated by this Agreement such that the
provisions of Section 11.75 of the Corporate Law or Article Eleven of the
Articles of Incorporation, as amended, of DBI will not apply to this Agreement
or any of the transactions contemplated hereby.
SECTION 2.24. RIGHTS AGREEMENT. DBI has taken all action (including, if
------------ ----------------
required, redeeming all of the outstanding stock purchase rights issued pursuant
to the Rights Agreement between DBI and Boatmen's Trust Company, dated as of
August 9, 1993, or amending or terminating the Rights Agreement) so that the
entering into of this Agreement, the Merger and the other transactions
contemplated hereby do not and will not result in the grant of any rights to any
person under the Rights Agreement or enable or require the rights to be
exercised, distributed or triggered.
SECTION 2.25. STATEMENTS TRUE AND CORRECT. None of the information
------------ ---------------------------
supplied or to be supplied by DBI or its subsidiaries 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 S.E.C. (as defined in Section 3.03 hereof),
Nasdaq or any banking or other Regulatory Agency 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 shareholders of DBI and at the time of the Shareholders' Meeting (as
defined in Section 4.03 hereof), contain any untrue statement of a material
fact, or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they are
made, not misleading. All documents that DBI is responsible for filing with any
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.
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<PAGE>
ARTICLE THREE
-------------
REPRESENTATIONS OF CNB AND CNB-ILL
----------------------------------
CNB and CNB-ILL hereby make the following representations and warranties:
SECTION 3.01. ORGANIZATION AND CAPITAL STOCK.
------------ ------------------------------
(a) CNB is a corporation duly organized, validly existing and in good
standing under the laws of the State of Indiana and has the corporate power to
own all of its property and assets, to incur all of its liabilities and to carry
on its business as now being conducted. CNB is duly qualified as a foreign
corporation in all jurisdictions except those jurisdictions in which the failure
to be so qualified would not have a material adverse effect on CNB and its
subsidiaries taken as a whole. CNB is a bank holding company registered with
the Federal Reserve Board under the Bank Holding Company Act of 1956, as
amended. CNB-ILL is a corporation duly incorporated and validly existing under
the laws of the State of Illinois with full corporate power and authority to
carry on its business as it is now being conducted.
(b) The authorized capital stock of CNB consists of (i) fifty million
(50,000,000) shares of CNB Common, of which, as of September 30, 1995,
17,003,041 shares were issued and outstanding, and (ii) two million (2,000,000)
shares of preferred stock, of which none are issued and outstanding. All of the
issued and outstanding shares of CNB Common are duly and validly issued and
outstanding and are fully paid and non-assessable and have not been issued in
violation of any preemptive right of any shareholder of CNB.
(c) CNB-ILL has authorized capital of ten thousand (10,000) shares of common
stock, par value one dollar ($1.00) per share (the "CNB-ILL Common"). As of the
date hereof, one hundred (100) shares of CNB-ILL Common are issued and
outstanding, fully paid and non-assessable and owned by CNB.
(d) The shares of CNB Common that are to be issued to the shareholders of
DBI 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, and will not be issued in violation of any preemptive
right of any shareholder of CNB.
SECTION 3.02. AUTHORIZATION. The Board of Directors of CNB and the Board
------------ -------------
of Directors and sole shareholder of CNB-ILL will have by November 21, 1995, by
all appropriate action, approved this Agreement and the Merger and authorized
the execution hereof on their behalf by their respective duly authorized
officers and the performance by such respective entity of their obligations
hereunder. Nothing in the Articles of Incorporation or Bylaws of CNB or CNB-
ILL, 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 either of them or any of their subsidiaries are bound
or subject would prohibit or inhibit CNB or CNB-ILL from entering into and
consummating this Agreement and the
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<PAGE>
Merger on the terms and conditions herein contained. By November 21, 1995, this
Agreement will have been duly and validly executed and delivered by CNB and CNB-
ILL and will constitute a legal, valid and binding obligation of CNB and CNB-
ILL, enforceable against CNB and CNB-ILL in accordance with its terms, and no
other corporate acts or proceedings will be required to be taken by CNB or CNB-
ILL (including any approvals by the shareholders of CNB or further approval of
the shareholder of CNB-ILL) to authorize the execution, delivery and performance
of this Agreement. Except for the requisite approvals of the Federal Reserve
Board and the Illinois Commissioner of Banks and Trust Companies, no notice to,
filing with, authorization by, or consent or approval of, any federal or state
bank regulatory authority is necessary for the execution and delivery of this
Agreement or consummation of the Merger by CNB or CNB-ILL. Except for the
requisite approvals of the O.C.C., no notice to, filing with, authorization by,
or consent or approval of, any federal or state bank regulatory authority is
necessary for the execution and delivery of the Subsidiary Bank Merger Agreement
(as defined in Section 4.10 hereof) or consummation of the Subsidiary Bank
Merger (as defined in Section 4.10 hereof) by CNB Bank (as defined in Section
4.10 hereof).
SECTION 3.03. SUBSIDIARIES. Each of CNB's significant subsidiaries (as
------------ ------------
such term is defined under regulations of the Securities and Exchange Commission
(the "S.E.C.")) and CNB-ILL 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, 1993 and 1994 and related
consolidated statements of income, changes in shareholders' equity and cash
flows for the three (3) years in the period ended December 31, 1994, together
with the notes thereto, included in CNB's Form 10-K/A for the year ended
December 31, 1994, as currently on file with the S.E.C., and the unaudited
consolidated balance sheets of CNB and its subsidiaries as of September 30, 1995
and the related unaudited consolidated income statements and statements of
changes in shareholders' equity and cash flows and the notes thereto for the
nine (9) months then ended included in CNB's Quarterly Report on Form 10-Q for
the quarter then ended, as currently on file with the S.E.C. (together, the "CNB
Financial Statements"), have been prepared in accordance with GAAP applied on a
consistent basis (except as may be disclosed therein) and fairly present in all
material respects the consolidated financial position and the consolidated
results of operations, changes in shareholders' equity and cash flows of CNB and
its consolidated subsidiaries as of the dates and for the periods indicated
(subject, in the case of interim financial statements, to normal recurring year-
end adjustments, none of which will be material).
SECTION 3.05. ABSENCE OF CHANGES. Since December 31, 1994, there has not
------------ ------------------
been any material adverse change in the financial condition, the results of
operations or the business or prospects of CNB and its subsidiaries taken as a
whole, 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.
A-17
<PAGE>
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 would have a material adverse effect on the
business of CNB and its subsidiaries taken as a whole.
SECTION 3.07. REPORTS. CNB and each of its significant subsidiaries has
------------ -------
filed all material reports and statements, together with any amendments required
to be made with respect thereto, that it was required to file with (i) the
S.E.C.; (ii) the Federal Reserve Board; (iii) the O.C.C.; (iv) the F.D.I.C.; (v)
any applicable state securities or banking authorities having jurisdiction; (vi)
Nasdaq; and (vii) any other Regulatory Agency with jurisdiction over CNB or any
of its significant subsidiaries. As of their respective dates, each of such
reports and documents, as amended, including the financial statements, exhibits
and schedules and notes thereto, complied in all material respects 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 3.08. COMPLIANCE WITH LAW. CNB and its significant subsidiaries
------------ -------------------
have all licenses, franchises, permits and other governmental authorizations
that are legally required to enable them to conduct their respective businesses
in all material respects and are in compliance in all material respects with all
applicable laws and regulations.
SECTION 3.09. STATEMENTS TRUE AND CORRECT. None of the information
------------ ---------------------------
supplied or to be supplied by CNB or CNB-ILL for inclusion in (i) the
Registration Statement; (ii) the Prospectus/Proxy Statement; and (iii) any other
documents to be filed with the S.E.C., Nasdaq or any banking or other Regulatory
Agency 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 shareholders of DBI and at the time of the
Shareholders' Meeting, contain any untrue statement of a material fact, or omit
to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they are made, not
misleading. All documents that CNB is responsible for filing with the S.E.C.,
Nasdaq or any other banking or Regulatory Agency 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.
SECTION 3.10. TAX MATTERS. Neither CNB nor any of its subsidiaries has
------------ -----------
taken or agreed to take any action or has any knowledge of any fact or
circumstance that would prevent the transactions contemplated hereby from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
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<PAGE>
ARTICLE FOUR
------------
AGREEMENTS OF DBI
-----------------
SECTION 4.01. BUSINESS IN ORDINARY COURSE.
------------ ---------------------------
(a) DBI 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 DBI may declare and pay its regular semi-annual
dividend on the DBI Common not to exceed $5.00 per share at approximately the
same time during the year which it has historically declared and paid such
dividend (i.e., declare each December and June and pay each January and July,
respectively); provided, however, that DBI and CNB shall cooperate with each
other to coordinate the record and payment dates of their respective dividends
for the quarter in which the Effective Time occurs such that the DBI
shareholders shall receive a portion of their semi-annual dividend from DBI or
CNB's regular dividend, but not dividends from both CNB and DBI with respect to
such quarter.
(b) DBI shall, and shall cause each of its subsidiaries to, continue to
carry on after the date hereof its respective business and the discharge or
incurrence of obligations and liabilities, only in the usual, regular and
ordinary course of business, as heretofore conducted, and by way of
amplification and not limitation, DBI and each of its subsidiaries will not,
without the prior written consent of CNB (which shall not be unreasonably
withheld):
(i) issue any DBI Common or other capital stock or any options,
warrants, or other rights to subscribe for or purchase DBI 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 DBI Common or any other capital stock of DBI or its subsidiaries; 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 certificate or Articles of Incorporation or
Association, as the case may be, or Bylaws; or
(v) grant any increase (other than (i) ordinary and normal
increases consistent with past practices, and (ii) 1995 performance bonuses
to designated officers of the Bank not to exceed $19,000 in the aggregate,
which bonuses shall be payable in the sole discretion of the Board of
Directors of Bank) 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, agreement, payment or arrangement made to, for or
with any of such officers or employees; or
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<PAGE>
(vi) borrow or agree to borrow any amount of 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 $150,000 or that would increase the
aggregate credit outstanding to any one borrower (or group of affiliated
borrowers) to more than $150,000 (excluding for this purpose any accrued
interest or overdrafts); or
(viii) purchase or otherwise acquire any investment security for
its own account having an average remaining life to maturity greater than
five (5) 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
(and DBI shall consult and confer with CNB with respect to all securities
transactions, even in situations where approval is not required hereunder);
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 (3) months
other than letters of credit, loan agreements, deposit agreements, and other
lending, credit and deposit agreements and documents made in the ordinary
course of business, except any agreement with respect to accounting, legal
or investment banking services in connection with the Merger; 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 material indebtedness owing to DBI or its subsidiaries or any claims
which DBI or its subsidiaries may possess or waive any material rights with
respect thereto; 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 DBI and its subsidiaries; or
(xiv) foreclose upon or otherwise take title to or possession or
control of any real property without first obtaining a phase one
environmental report thereon which indicates that the property is free of
pollutants, contaminants or hazardous or toxic waste materials; provided,
however, that DBI and its subsidiaries shall not be required to obtain such
a report with respect to single family, non-agricultural residential
property of one acre or less to be foreclosed upon unless it has reason to
believe that such property might contain any such waste materials or
otherwise might be contaminated; or
A-20
<PAGE>
(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 DBI's and its subsidiaries' business, financial condition,
or earnings taken as a whole; or
(xvi) violate any law, statute, rule, governmental regulation, or
order, which violation might have a material adverse effect on DBI's and its
subsidiaries' business, financial condition, or earnings taken as a whole;
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 $5,000; or
(xviii) take any action which would adversely effect or delay the
ability of either CNB or DBI to obtain any necessary approvals of any
Regulatory Agency or other governmental authority required for the
transactions contemplated hereby or to perform its covenants and agreements
under this Agreement.
(c) DBI and its subsidiaries 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 DBI contained
in Article Two hereof, if such representations and warranties were given as of
the date of such transaction or action.
(d) DBI shall promptly notify CNB in writing of the occurrence of any matter
or event known to and directly involving DBI, other than any changes in
conditions that affect the banking industry generally, that is materially
adverse to the business, operations, properties, assets, or condition (financial
or otherwise) of DBI and its subsidiaries taken as a whole.
(e) DBI shall not, on or before the earlier of the Closing Date or the date
of termination of this Agreement, solicit or encourage, or, subject to the
fiduciary duties of its directors as advised by counsel, hold discussions or
negotiations with or provide any information to, any person in connection with,
any proposal from any person for the acquisition of all or any substantial
portion of the business, assets, shares of DBI Common or other securities of DBI
and its subsidiaries. DBI shall promptly (which for this purpose shall mean
within twenty-four (24) hours) advise CNB of its receipt of any such proposal or
inquiry concerning any possible such proposal, the substance of such proposal or
inquiry, and the identity of such person.
SECTION 4.02. BREACHES. DBI 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 reasonable best efforts to prevent or
promptly remedy the same.
SECTION 4.03. SUBMISSION TO SHAREHOLDERS. DBI shall cause to be duly
------------ --------------------------
called and held, on a date mutually selected by CNB and DBI, a special meeting
of the shareholders of DBI (the "Shareholders'
A-21
<PAGE>
Meeting") for submission of this Agreement and the Merger and the transactions
contemplated hereby for approval of such shareholders as required by the
Corporate Law. In connection with the Shareholders' Meeting, (i) DBI shall
cooperate and assist CNB in preparing and filing a Prospectus/Proxy Statement
(the "Prospectus/Proxy Statement") with the S.E.C. and DBI shall mail it to its
shareholders; (ii) DBI 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 DBI shall (subject to compliance with its
fiduciary duties as advised by counsel) recommend to its shareholders the
approval of this Agreement and the Merger and use its reasonable best efforts to
obtain such shareholder approvals.
SECTION 4.04. CONSENTS TO CONTRACTS AND LEASES. DBI shall use its
------------ --------------------------------
reasonable best efforts to obtain all necessary consents with respect to all
interests of DBI and its subsidiaries in any material leases, licenses,
contracts, instruments and rights which require the consent of another person
for their transfer or assumption pursuant to the Merger or the Subsidiary Bank
Merger, if any.
SECTION 4.05. RESTRUCTURING CHARGES AND EXPENSES. DBI and CNB shall
------------ ----------------------------------
consult and cooperate with each other with respect to determining, as specified
in a written notice from CNB to DBI, 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. At the request of
CNB, DBI shall establish and take, on or before or as of December 31, 1995, such
reserves and accruals as CNB shall reasonably request 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 DBI shall not be required to take any such action that is not consistent
with GAAP or regulatory accounting principles.
SECTION 4.06. CONSUMMATION OF AGREEMENT. DBI 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 effect the Merger and the other
transactions contemplated hereby in accordance with the terms and provisions
hereof and to facilitate and effectuate the transition and integration of the
business and operations of DBI and its subsidiaries with the business and
operations of CNB and its subsidiaries. By way of amplification, and not
limitation, of the foregoing agreements of DBI, DBI shall cooperate with CNB as
reasonably appropriate under the circumstances to facilitate and effectuate the
conversion of its data processing system as requested by CNB. DBI shall furnish
to CNB in a timely manner all information, data and documents in the possession
of DBI requested by CNB as may be required to obtain any necessary regulatory or
other approvals of the Merger or to file with the S.E.C. a registration
statement on Form S-4 (the "Registration Statement") relating to the shares of
CNB Common to be issued to the shareholders of DBI 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 REPORTS. Within sixty (60) days after the date
------------ ---------------------
hereof, CNB may (i) cause to be prepared a report of a phase one environmental
investigation on all real property owned, leased or operated by DBI or its
subsidiaries as of the date hereof (but excluding space in retail and similar
establishments leased by DBI for automatic teller machines) and may also cause
such a report to be prepared on all real property acquired or leased by DBI or
its subsidiaries after the date hereof (but
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<PAGE>
excluding space in retail and similar establishments leased or operated by DBI
for automatic teller machines), except as otherwise provided in Section
4.01(b)(xiv) hereof, and (ii) if required by the phase one investigation in
CNB's reasonable opinion, CNB may cause to be prepared a report of a phase two
investigation on properties requiring such additional study; provided, however,
that, with respect to those properties identified on Section 4.07 of the
Disclosure Schedule, CNB may, in its discretion, cause a phase two investigation
to be prepared in conjunction with the preparation of a phase one investigation.
DBI shall provide CNB and its representatives with access to all real property
now or hereafter owned, leased or operated by DBI or its subsidiaries and shall
otherwise cooperate with CNB and its representatives in connection with such
environmental investigations. The person conducting such investigation shall be
a qualified and reputable environmental expert mutually selected by CNB and DBI
and shall provide CNB and DBI with a written estimate of all fees and expenses
to be charged by such person for performing such phase one investigations before
any work is commenced. Such person (or CNB) shall provide DBI with all written
information which it provides to CNB. CNB shall have fifteen (15) business days
from the receipt of any such phase two investigation report to notify DBI of any
dissatisfaction with the contents of such report. Should the cost of taking all
remedial or other corrective actions and measures (i) required by applicable
law, or (ii) recommended or suggested by such report or reports or prudent in
light of serious life, health or safety concerns, in the aggregate, exceed the
sum of $150,000 as reasonably estimated by an environmental expert retained for
such purpose by CNB and reasonably acceptable to DBI, or if the cost of such
actions and measures cannot be so reasonably estimated by such expert to be such
amount or less with any reasonable degree of certainty, then CNB shall have the
right pursuant to Section 7.03 hereof, for a period of fifteen (15) business
days following receipt of such estimate or indication that the cost of such
actions and measures cannot be so reasonably estimated, to terminate this
Agreement, which shall be CNB's sole remedy in such event. Subject to the
provisions of Section 8.05 hereof, all costs and expenses associated with such
environmental reports shall be paid by DBI.
SECTION 4.08. RESTRICTION ON RESALES. DBI shall use its best efforts to
------------ ----------------------
obtain and deliver to CNB, at least thirty-one (31) days prior to the Closing
Date, the signed agreement, in the form of Exhibit 4.08 hereto, of each person
who may reasonably be deemed an "affiliate" of DBI 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 No. 16 regarding the disposition of shares of DBI Common or CNB Common
(or reduction of risk with respect thereto) until such time as financial results
covering at least thirty (30) days of post-Merger combined operations have been
published.
SECTION 4.09. ACCESS TO INFORMATION. DBI shall permit CNB reasonable
------------ ---------------------
access in a manner which will avoid undue disruption or interference with DBI's
normal operations to its and its subsidiaries' properties and shall disclose and
make available to CNB all books, documents, papers and records relating to its
and its subsidiaries' assets, stock ownership, properties, operations,
obligations and liabilities, including, but not limited to, all books of account
(including the general ledger), tax records, minute books of directors' and
shareholders' meetings, organizational documents, material contracts and
agreements, loan files, filings with any regulatory authority, accountants'
workpapers (if available and subject to the respective independent accountants'
consent), litigation files (but only to the extent that such
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<PAGE>
review would not result in a material waiver of the attorney-client or attorney
work product privileges under the rules of evidence), plans affecting employees,
and any other business activities or prospects in which CNB may have a
reasonable and legitimate interest in furtherance of the transactions
contemplated by this Agreement. DBI shall deliver to CNB within ten (10) days
after the date hereof a true, accurate and complete copy of each written plan or
program disclosed in Section 2.13(c) of the Disclosure Schedule and, with
respect to each such plan or program, all (i) amendments or supplements thereto;
(ii) summary plan descriptions; (iii) lists of all current participants and all
participants with benefit entitlements; (iv) contracts relating to plan
documents; (v) actuarial valuations for any defined benefit plan; (vi)
valuations for any plan as of the most recent date; (vii) determination letters
from the Internal Revenue Service; (viii) the most recent annual report filed
with the Internal Revenue Service; and (ix) trust agreements. CNB will hold any
such information which is nonpublic in confidence in accordance with the
provisions of Section 8.01 hereof.
SECTION 4.10. SUBSIDIARY BANK MERGER. DBI shall cause the Bank to enter
------------ ----------------------
into the Subsidiary Bank Merger Agreement, in substantially the form attached
hereto as Exhibit 4.10, with Citizens Bank of Illinois, National Association, a
wholly-owned subsidiary of CNB-ILL ("CNB Bank"), and take all other actions
(including voting its shares of the Bank in favor of the Subsidiary Bank Merger
Agreement) and cooperate with CNB and CNB Bank in causing the merger of the Bank
and CNB Bank (the "Subsidiary Bank Merger") to be effected at the Effective
Time.
SECTION 4.11. MONTHLY FINANCIAL STATEMENTS. DBI shall submit to CNB, on a
------------ ----------------------------
monthly basis, monthly financial statements for DBI as soon as practicable after
such financial statements are prepared by DBI. CNB shall hold such information
which is nonpublic in confidence in accordance with the provisions of Section
8.01 hereof.
ARTICLE FIVE
------------
AGREEMENTS OF CNB AND CNB-ILL
-----------------------------
SECTION 5.01. REGULATORY APPROVALS AND REGISTRATION STATEMENT.
------------ -----------------------------------------------
(a) Within thirty (30) days after the date hereof, CNB shall prepare and,
subject to the review and consent of DBI with respect to matters relating to
DBI, file all regulatory applications required in order to consummate the Merger
and the Subsidiary Bank Merger including, but not limited to, (i) an application
on form FR Y-3 to be filed with the Federal Reserve Board with respect to the
acquisition of the DBI Common, and (ii) an Application to Merge to be filed with
the O.C.C. with respect to the Subsidiary Bank Merger. CNB shall keep DBI
reasonably informed as to the status of such applications and shall provide DBI
and its counsel with copies of all materials filed with or received from the
regulatory authorities with respect to such applications.
(b) CNB shall prepare and, subject to the review and consent of DBI with
respect to matters relating to DBI, file with the S.E.C. the Registration
Statement relating to the shares of CNB Common
A-24
<PAGE>
to be issued to the shareholders of DBI pursuant to this Agreement, and shall
use its best efforts to cause the Registration Statement to become effective as
soon as practicable after filing the Registration Statement. 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 shareholders of DBI, at
the time of the Shareholders' 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 (i) any application required to list on Nasdaq the shares of
CNB Common to be issued pursuant to the Merger, and (ii) any filings required
under the Securities Exchange Act of 1934 (the "Exchange Act") relating to the
Merger and the transactions contemplated herein.
SECTION 5.02. BREACHES AND OTHER MATTERS. 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 DBI and use its reasonable best
efforts to prevent or promptly remedy the same. CNB and its subsidiaries shall
not, without the prior written consent of DBI, engage in any transaction or take
any action that would render untrue in any material respect any of the
representations and warranties of CNB contained in Article Three hereof, if such
representations and warranties were given as of the date of such transaction or
action. CNB shall promptly notify DBI in writing of the occurrence of any
matter or event known to and directly involving CNB, other than any changes in
conditions that affect the banking industry generally, that is materially
adverse to the business, operations, properties, assets, or condition (financial
or otherwise) of CNB and its subsidiaries taken as a whole.
SECTION 5.03. CONSUMMATION OF AGREEMENT. CNB and CNB-ILL shall use their
------------ -------------------------
respective reasonable best efforts to perform and fulfill all conditions and
obligations on their part to be performed or fulfilled under this Agreement and
to effect the Merger and the Subsidiary Bank Merger in accordance with the terms
and conditions of this Agreement and the Subsidiary Bank Merger Agreement.
SECTION 5.04. DIRECTORS AND OFFICERS' LIABILITY INSURANCE AND
------------ -----------------------------------------------
INDEMNIFICATION.
---------------
(a) Following the Effective Time, CNB will provide the directors and
officers of DBI and its subsidiaries 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
A-25
<PAGE>
omissions of the directors and officers of DBI and its subsidiaries occurring or
failing to occur prior to the Closing Date; provided, however, that if CNB is
unable to obtain such endorsement, then DBI may purchase tail coverage under its
existing director's and officer's liability insurance on such terms and
provisions as DBI deems appropriate provided that the total cost thereof shall
not exceed $30,000.
(b) For six years after the Effective Time, CNB shall cause the Surviving
Corporation (the survivor of the Merger of DBI and CNB-ILL following the
Effective Time, the "Surviving Corporation") to indemnify, defend and hold
harmless the present and former officers, directors, employees and agents of DBI
and its subsidiaries (each, an "Indemnified Party") against all losses,
expenses, claims, damages or liabilities arising out of actions or omissions
occurring on or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement and the Subsidiary Bank Merger
Agreement) to the full extent then permitted under the Corporate Law and by
DBI's Articles of Incorporation and Bylaws 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 Corporation or any of its
successors or assigns (i) shall consolidate with or merge into any other
corporation or entity and shall not be the continuing or surviving corporation
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 Corporation shall assume any
remaining obligations set forth in this Section 5.04. If the Surviving
Corporation 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 Corporation 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 DBI or its subsidiaries following the Closing Date
(each a "Continued Employee"), provide the benefits described in this Section
5.05. Subject to the right of subsequent amendment, modification or termination
in CNB's sole discretion, each Continued Employee shall be entitled, as a new
employee of a subsidiary of CNB, to participate in such employee benefit plans,
as defined in Section 3(3) of ERISA, or any non-qualified employee benefit plans
or deferred compensation, stock option, bonus or incentive plans, or other
employee benefit or fringe benefit programs that may be in effect generally for
employees of all of CNB subsidiaries (the "CNB Plans"), if and as a Continued
Employee shall be eligible and, if required, selected for participation therein
under the terms thereof and otherwise shall not be participating in a similar
plan maintained by DBI after the Effective Time. DBI 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 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. 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, (i) for purposes of vesting and any
age or period of service requirements for commencement of participation with
respect to any CNB Plans in which
A-26
<PAGE>
Continued Employees may participate (but not for benefit accruals under any
defined benefit plan), credit each Continued Employee with his or her term of
service with DBI and its subsidiaries, and (ii) with respect to participants and
beneficiaries in the Employee Plans as of the Effective Time, grant credit under
a CNB Plan for co-payments and deductibles paid under the corresponding Employee
Plan as of the Effective Time, and grant credit for the Continued Employee's
term of service with DBI and its subsidiaries for purposes of waiting periods
and pre-existing condition exclusions or penalties under the CNB Plans.
SECTION 5.06. SUBSIDIARY BANK MERGER; BOARD COMPOSITION. CNB-ILL shall
------------ -----------------------------------------
cause CNB Bank to enter into the Subsidiary Bank Merger Agreement, in
substantially the form attached hereto as Exhibit 4.10, with the Bank and take
all other actions (including voting its shares of CNB Bank in favor of the
Subsidiary Bank Merger) and cooperate with the Bank in causing the Subsidiary
Bank Merger to be effected. Upon consummation of the Subsidiary Bank Merger, CNB
shall cause each of the then current directors of the Bank to be elected to the
Regional Board of Directors of CNB Bank (for the DuQuoin Region) and cause one
or two of the then current directors of the Bank to be elected to the Board of
Directors of CNB Bank as designated by DBI in consultation with CNB.
SECTION 5.07. ACCESS TO INFORMATION. CNB shall permit DBI and its
------------ ---------------------
shareholders or other representatives reasonable access in a manner which will
avoid undue disruption or interference with CNB's normal operations to its
properties and shall disclose and make available to DBI all books, documents,
papers and records relating to its assets, stock ownership, properties,
operations, obligations and liabilities, including, but not limited to, all
books of account (including the general ledger), tax records, minute books of
directors' and shareholders' meetings, organizational documents, material
contracts and agreements, loan files, filings with any regulatory authority,
accountants' workpapers (if available and subject to the respective independent
accountants' consent), litigation files (but only to the extent that such review
would not result in a material waiver of the attorney-client or attorney work
product privileges under the rules of evidence), plans affecting employees, and
any other business activities or prospects in which DBI may have a reasonable
and legitimate interest in furtherance of the transactions contemplated by this
Agreement. DBI will hold any such information which is nonpublic in confidence
in accordance with the provisions of Section 8.01 hereof.
ARTICLE SIX
-----------
CONDITIONS PRECEDENT TO THE MERGER
----------------------------------
SECTION 6.01. CONDITIONS TO CNB'S OBLIGATIONS. CNB's and CNB-ILL'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 DBI 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;
A-27
<PAGE>
(b) DBI 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 or the Subsidiary Bank 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 or the Subsidiary Bank Merger which makes the consummation of the Merger
or the Subsidiary Bank Merger illegal;
(d) All necessary regulatory approvals, consents, authorizations and other
approvals required by law for consummation of the Merger and the Subsidiary Bank
Merger shall have been obtained and all waiting periods required by law shall
have expired;
(e) CNB shall have received an opinion letter, dated as of the Closing
Date, from 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;
(f) CNB shall have received one or more environmental reports required by
Section 4.07 hereof, and shall not have elected, pursuant to Section 7.03
hereof, to terminate and cancel this Agreement in accordance with Section 7.03
hereof;
(g) The Registration Statement shall be effective under the Securities Act
and no stop orders suspending the effectiveness of the Registration Statement
shall be in effect or proceedings for such purpose pending before or threatened
by the S.E.C. or any state securities agency;
(h) CNB shall have received all documents required to be received from DBI
on or prior to the Closing Date, all in form and substance reasonably
satisfactory to CNB;
(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 DBI Common upon receipt of Merger Consideration (except for
cash received in lieu of fractional shares); (iii) the basis of shares of CNB
Common received by the shareholders of DBI will be the same as the basis of
shares of DBI Common exchanged therefor; and (iv) the holding period of the
shares of CNB Common received by the shareholders of DBI will include the
holding period of the shares of DBI Common exchanged therefor, provided such
shares were held as capital assets as of the Effective Time;
(j) The Subsidiary Bank Merger shall have been consummated on the Closing
Date;
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<PAGE>
(k) That certain Amended and Restated Employment Agreement, of even date
herewith, among CNB, the Bank and Daniel H. Eaves, shall remain in full force
and effect as of the Closing Date enforceable by the parties thereto in
accordance with its terms; and
(l) The sum of the amount of the consolidated allowance for loan losses of
DBI, as of December 31, 1995, determined in accordance with GAAP, and the amount
of charge-offs taken by DBI and its subsidiaries from the date hereof to
December 31, 1995, shall not be less than $1,550,000.
SECTION 6.02. CONDITIONS TO DBI'S OBLIGATIONS. DBI's obligation to effect
------------ -------------------------------
the Merger shall be subject to the satisfaction (or waiver by DBI) prior to or
on the Closing Date of the following conditions:
(a) The representations and warranties made by CNB and CNB-ILL 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 and CNB-ILL shall have performed and complied in all material
respects with all of their 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 or the
Subsidiary Bank 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 or the Subsidiary Bank Merger which makes the consummation of the Merger
or the Subsidiary Bank Merger illegal;
(d) All necessary regulatory approvals, consents, authorizations and other
approvals required by law for consummation of the Merger and the Subsidiary Bank
Merger shall have been obtained and all waiting periods required by law shall
have expired;
(e) The Registration Statement shall be effective under the Securities Act
and no stop orders suspending the effectiveness of the Registration Statement
shall be in effect or proceedings for such purpose pending before or threatened
by the S.E.C. or any state securities agency;
(f) DBI 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 DBI;
(g) DBI shall have received the opinion of CNB counsel addressed to DBI
contemplated by Section 6.01(i) hereof;
(h) The CNB Average Price shall not be less than $22.74. The CNB Average
Price shall be appropriately and proportionately adjusted to reflect any Share
Adjustment, as contemplated by Section 1.05(f) hereof; and
A-29
<PAGE>
(i) DBI shall have received evidence that the shares of CNB Common to be
issued in the Merger are listed for trading on the Nasdaq National Market.
ARTICLE SEVEN
-------------
TERMINATION OR ABANDONMENT
--------------------------
SECTION 7.01. MUTUAL AGREEMENT. This Agreement may be terminated by the
------------ ----------------
mutual written agreement of CNB and DBI at any time prior to the Closing Date,
regardless of whether approval of this Agreement and the Merger by the
shareholders of DBI 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, CNB-IL
or DBI, which breach is not cured within thirty (30) days after notice to cure
such breach is given to the breaching party by the non-breaching party, then the
non-breaching party, regardless of whether approval of this Agreement and the
Merger by the shareholders of DBI shall have been previously obtained, may
terminate and cancel this Agreement by providing written notice of such action
to the other party hereto.
SECTION 7.03. ENVIRONMENTAL REPORTS. CNB may terminate this Agreement to
------------ ---------------------
the extent provided by Section 4.07 hereof by giving written notice thereof to
DBI.
SECTION 7.04. FAILURE OF CONDITIONS. In the event that any of the
------------ ---------------------
conditions to the obligations of CNB and CNB-ILL, on the one hand, or DBI, on
the other hand, are not satisfied or waived on or prior to the Closing Date, and
if any applicable cure period provided in Section 7.02 hereof has lapsed, then
the non-breaching party may terminate and cancel this Agreement by delivery of
written notice of such action to the other party on such date.
SECTION 7.05. 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; provided, however, that a request for additional
information or undertaking by CNB, as a condition for approval, shall not be
deemed to be a denial or disapproval so long as CNB diligently provides the
requested information or undertaking. In the event an application is denied
pending an appeal, petition for review, or similar such act on the part of CNB
(hereinafter referred to as the "appeal") then the application 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 7.06. SHAREHOLDER APPROVAL DENIAL. If this Agreement and the
------------ ---------------------------
Merger is not approved by the requisite vote of the shareholders of DBI at the
Shareholders' Meeting, including any adjournment thereof, then either party may
terminate this Agreement.
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<PAGE>
SECTION 7.07. REGULATORY ENFORCEMENT MATTERS. In the event that DBI or
------------ ------------------------------
any of its subsidiaries shall become a party or subject to any new or amended
written agreement, memorandum of understanding, cease and desist order,
imposition of civil money penalties or other regulatory enforcement action or
proceeding with any Regulatory Agency after the date of this Agreement, then CNB
may terminate this Agreement.
SECTION 7.08. FALL-APART DATE. If the Closing Date does not occur on or
------------ ---------------
prior to June 30, 1996, then this Agreement may be terminated by either party by
giving written notice thereof to the other.
SECTION 7.09. TERMINATION FEE.
------------ ---------------
(a) If CNB is not then in material breach of this Agreement, upon the
first Triggering Event (as defined in Section 7.09(b) hereof) to occur, DBI
shall pay to CNB the sum of $1,000,000.
(b) As used in this Agreement, the term "Triggering Event" shall mean any
of the following events or transactions occurring after the date hereof:
(i) the termination of this Agreement by CNB upon a material breach
hereof by DBI (including, without limitation, an agreement between DBI or any
subsidiary of DBI and any third party which is inconsistent in a material
respect with the transactions contemplated by this Agreement); if within 18
months after the date of such termination, an event described in clause (ii) or
(iii) of this Section 7.09(b) shall have occurred (notwithstanding the
qualification that such event shall have occurred prior to the termination of
this Agreement); or
(ii) prior to termination of this Agreement, any person (other than
CNB) shall have acquired beneficial ownership or the right to acquire beneficial
ownership of 50% or more of the voting power of DBI; or
(iii) prior to termination of this Agreement, DBI or any material
subsidiary of DBI, without having received prior written consent from CNB, shall
have completed (1) a merger, consolidation or similar transaction involving DBI
or any material subsidiary of DBI, (2) a transaction whereby any person (other
than CNB) shall have purchased, leased or otherwise acquired 30% or more of the
assets of DBI or any material subsidiary of DBI or (3) a transaction whereby any
person (other than CNB) shall have purchased or otherwise acquired (including by
way of merger, consolidation, share exchange or similar transaction) beneficial
ownership of securities representing 50% or more of the voting power of DBI or
any material subsidiary of DBI (the transactions described in clauses (1), (2)
and (3) hereof are individually referred to herein as an "Acquisition
Transaction"); or
(iv) the holders of DBI Common Stock shall not have approved this
Agreement at the meeting of such shareholders held for the purpose of voting on
this Agreement or any adjournment thereof, or DBI's Board of Directors shall
have withdrawn or modified in a manner materially adverse to CNB such Board's
recommendation to the DBI shareholders for the approval of this Agreement, or
shall not have recommended to the shareholders of DBI the approval of this
Agreement, and, in any such
A-31
<PAGE>
case, an Acquisition Transaction shall have occurred within 18 months after such
Shareholders' Meeting or any adjournment thereof.
(c) As used in this Agreement, the term "person" shall have the meaning
conferred thereon by Sections 3(a)(9) and 13(d)(3) of the Exchange Act and the
regulations promulgated thereunder and the term "beneficial ownership" shall
have the meaning conferred thereon by Section 13(d) of the Exchange Act and the
regulations promulgated thereunder.
(d) DBI shall notify CNB promptly in writing upon its becoming aware of
the occurrence of any Triggering Event, it being understood, however, that the
giving of such notice shall not be a condition to the rights of CNB under this
Section 7.09.
ARTICLE EIGHT
-------------
GENERAL
-------
SECTION 8.01. CONFIDENTIAL INFORMATION. The parties acknowledge the
------------ ------------------------
confidential and proprietary nature of the "Information" (as herein 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 DBI shall cooperate with each other in
------------ ---------
the development and distribution of all news releases and other public
disclosures concerning this Agreement and the Merger and shall not issue any
news release or make any other public disclosure without the prior consent of
the other party, unless it reasonably believes such is required by law upon the
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 give reasonable notice and, to the extent
practicable, consult with each other regarding such responsive public
disclosure.
SECTION 8.03. RETURN OF DOCUMENTS. Upon termination of this Agreement
------------ -------------------
without the Merger becoming effective, each party shall deliver to the other
originals and all copies of all Information made
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<PAGE>
available to such party and will not retain any copies, extracts or other
reproductions in whole or in part of such Information.
SECTION 8.04. NOTICES. Any notice or other communication shall be in
------------ -------
writing and shall be deemed to have been given or made on the date of delivery,
in the case of hand delivery, or three (3) business days after deposit in the
United States Registered Mail, postage prepaid, or upon receipt if transmitted
by facsimile telecopy or any other means, addressed (in any case) as follows:
(a) if to CNB:
CNB Bancshares, Inc.
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
500 North Broadway, Suite 2000
St. Louis, Missouri 63102
Attention: Thomas C. Erb, Esq.
Telecopy No. (314) 444-7788
and
(b) if to DBI:
DuQuoin Bancorp, Inc.
124 West Main Street
DuQuoin, Illinois 62832
Attention: Daniel H. Eaves, President
Facsimile: (618) 542-5755
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<PAGE>
with copies to:
Thompson & Mitchell
One Mercantile Center, Suite 3400
St. Louis, Missouri 63101
Attention: Thomas A. Litz, Esq.
Facsimile: (314) 342-1717
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 7.09 hereof, in
------------ -----------
the event that this Agree ment is terminated pursuant to the provisions of
Article Seven hereof, no party hereto shall have any liability to any other
party for costs, expenses, damages or otherwise; provided, however, that,
notwithstanding the foregoing, in the event that this Agreement is terminated
pursuant to 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; provided further, however,
that, notwithstanding the foregoing, if the Merger is not consummated for any
reason other than (i) on account of a termination of this Agreement pursuant to
Section 7.02 hereof on account of a breach by DBI, (ii) the failure of DBI's
shareholders to approve this Agreement and the Merger, (iii) the inability to
obtain the pooling opinion contemplated by Section 6.01(e) hereof due to the
actions of DBI, its affiliates or shareholders, (iv) on account of a termination
of this Agreement by CNB pursuant to Section 7.07 hereof, or (v) by CNB pursuant
to Section 7.03 hereof, then CNB shall reimburse DBI for (a) all of its out-of-
pocket expenses incurred in obtaining the phase one environmental investigations
pursuant to Section 4.07 hereof, and (b) fifty percent (50%) of its out-of-
pocket expenses incurred in obtaining any phase two environmental investigation
pursuant to Section 4.07 hereof which does not recommend or suggest as being
appropriate the taking of any material remedial or corrective actions, and (c)
the reasonable out-of-pocket expenses incurred by DBI to facilitate and
effectuate the conversion of its data processing system as requested by CNB
pursuant to Section 4.06 hereof.
SECTION 8.06. NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
------------ ---------------------------------------------------------
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; provided, however, that no such
representation, warranty or covenant shall be deemed to be terminated or
extinguished so as to deprive CNB, CNB-ILL or DBI (or any director, officer or
controlling person thereof) of any defense in law or equity which otherwise
would be available against the claims of any person, including, without
limitation, any shareholder or former shareholder of either CNB or DBI, the
aforesaid representations, warranties and covenants being material inducements
to the consummation by CNB, CNB-ILL and DBI of the transactions contemplated
herein. In the event of consummation of the Merger, the agreements set forth in
Sections 1.07, 5.04 and 5.05 hereof shall survive the Effective Time. In the
event of termination of this Agreement in accordance with its terms, the
agreements set forth in Sections 7.09, 8.01, 8.02, 8.03 and 8.05 hereof shall
survive such termination.
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<PAGE>
SECTION 8.07. ENTIRE AGREEMENT. This Agreement and the Subsidiary Bank
------------ ----------------
Merger Agreement constitute the entire agreement between the parties and
supersede and cancel any and all prior discussions, negotiations, undertakings,
agreements in principle and other agreements between the parties relating to the
subject matter hereof.
SECTION 8.08. HEADINGS AND CAPTIONS. The captions of Articles and
----------- ---------------------
Sections hereof are for convenience only and shall not control or affect the
meaning or construction of any of the provisions of this Agreement.
SECTION 8.09. WAIVER, AMENDMENT OR MODIFICATION. The conditions of this
------------ ---------------------------------
Agreement which may be waived may only be waived by notice to the other party
waiving such condition. The failure of any party at any time or times to require
performance of any provision hereof shall in no manner affect the right at a
later time to enforce the same. This Agreement may be amended or modified by the
parties hereto, at any time before or after approval of the Agreement by the
shareholders of DBI; provided, however, that after any such approval no such
amendment or modification shall reduce the amount or change the form of the
Merger Consideration contemplated by this Agreement to be received by
shareholders of DBI. 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. (a) A term has the meaning assigned
------------ ---------------------
to it herein; (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. For purposes of executing this Agreement,
a document (or signature page thereto) signed and transmitted by facsimile
machine or telecopier is to be treated as an original document. The signature of
any party thereon, for purposes hereof, is to be considered as an original
signature, and the document transmitted is to be considered to have the same
binding effect as an original signature on an original document. At the request
of any party, any facsimile or telecopy document shall be re-executed in
original form by the parties who executed the facsimile or telecopy document. No
party may raise the use of a facsimile machine or telecopier or the fact that
any signature was transmitted through the use of a facsimile or telecopier
machine as a defense to the enforcement of this Agreement or any amendment or
other document executed in compliance with this Section 8.11.
SECTION 8.12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
------------ ----------------------
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. There shall be no third party beneficiaries
hereof, except for Section 5.04 and the last sentence of Section 5.05 which may
be enforced by the parties therein identified.
SECTION 8.13. SEVERABILITY. In the event that any provisions of this
------------ ------------
Agreement or any portion thereof shall be finally determined to be unlawful or
unenforceable, such provision or portion thereof
A-35
<PAGE>
shall be deemed to be severed from this Agreement, and every other provision,
and any portion of a provision, that is not invalidated by such determination,
shall remain in full force and effect. To the extent that a provision is deemed
unenforceable by virtue of its scope but may be made enforceable by limitation
thereof, such provision shall be enforceable to the fullest extent permitted
under the laws and public policies of the State whose laws are deemed to govern
enforceability. It is declared to be the intention of the parties that they
would have executed the remaining provisions without including any that may be
declared unenforceable.
SECTION 8.14. GOVERNING LAW; ASSIGNMENT. This Agreement shall be governed
------------ -------------------------
by the laws of the State of Illinois and applicable federal laws and
regulations. This Agreement may not be assigned by either of the parties hereto.
[Remainder of this page intentionally left blank]
A-36
<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
------------------------------------------
H. Lee Cooper III
Chairman and Chief Executive Officer
HBI ACQUISITION COMPANY
By: /s/ H. Lee Cooper III
-----------------------------------------
H. Lee Cooper III
Chairman
DUQUOIN BANCORP, INC.
By: /s/ Daniel H. Eaves
----------------------------------------
Daniel H. Eaves
President and Chief Executive Officer
A-37
<PAGE>
EXHIBIT 1.09(A)
---------------
DBI'S LEGAL OPINION MATTERS
1. The due incorporation, valid existence and good standing of DBI under
the laws of the State of Illinois, its power and authority to own and operate
its properties and to carry on its business as now conducted, and its power and
authority to enter into the Agreement, to merge with CNB-ILL in accordance with
the terms of the Agreement and to consummate the transactions contemplated by
the Agreement.
2. The due incorporation or organization, valid existence and good
standing of each of the other subsidiaries of DBI and any subsidiary of any such
subsidiary listed in Section 2.03 of the Disclosure Schedule, their corporate
power and authority to own and operate their properties, the possession of all
licenses, permits and authorizations necessary to carry on their respective
businesses as now conducted.
3. With respect to DBI, (i) the number of authorized, issued and
outstanding shares of capital stock of DBI on the Closing Date; (ii) the
nonexistence of any violation of the preemptive or subscription rights of any
person; (iii) the nonexistence of any stock options, warrants, or other rights
to acquire, or securities convertible into, any equity security of DBI, except
as disclosed in the Agreement; (iv) the nonexistence of any obligation,
contingent or otherwise, to reacquire any shares of capital stock of DBI; and
(v) the nonexistence of any outstanding stock appreciation, phantom stock or
similar rights, except as disclosed in the Agreement.
4. With respect to DBI's subsidiaries, (i) the number of authorized,
issued and outstanding shares of capital stock on the Closing Date and the
ownership of all issued shares by DBI or its subsidiaries; (ii) the nonexistence
of any violation of the preemptive or subscription rights of any person; (iii)
the nonexistence of any outstanding options, warrants, or other rights to
acquire, or securities convertible into, any equity securities of such
subsidiary; (iv) the nonexistence of any obligation, contingent or otherwise, to
reacquire any shares of capital stock of such subsidiary; and (v) the
nonexistence of any outstanding stock appreciation, phantom stock or similar
rights.
5. The due and proper performance of all corporate acts and other
proceedings necessary or required to be taken by DBI to authorize the execution,
delivery and performance of the Agreement, the due execution and delivery of the
Agreement by DBI, and the Agreement as a valid and binding obligation of DBI,
enforceable against DBI 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).
6. The due and proper performance of all corporate acts and other
proceedings necessary or required to be taken by the Bank to authorize the
execution, delivery and performance of the Subsidiary
A-Ex.-1.09(a)-1
<PAGE>
Bank Merger Agreement, the due execution and delivery of the Subsidiary Bank
Merger Agreement by the Bank and the Subsidiary Bank Merger Agreement as a valid
and binding obligations of Bank, enforceable against the Bank 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).
7. The execution of the Agreement by DBI, and the consummation of the
Merger and the other transactions contemplated therein, does not violate or
cause a default under DBI's Articles of Incorporation or Bylaws, or any statute,
regulation or rule or, to the best knowledge of such counsel, any judgment,
order or decree against or any material agreement binding upon DBI or its
subsidiaries.
8. The execution of the Subsidiary Bank Merger Agreement by Bank, and the
consummation of the Subsidiary Bank Merger and the other transactions
contemplated therein, does not violate or cause a default under Bank's articles
of association or bylaws, or any statute, regulation or rule or, to the best
knowledge of such counsel, any judgment, order or decree against or any material
agreement binding upon the Bank or its subsidiaries.
9. To the best knowledge of such counsel, the receipt of all required
consents, approvals (including the requisite approval of the shareholders of
DBI), orders or authorizations of, or registrations, declarations or filings
with or notices to, any court, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, or any other
person or entity required to be obtained or made by DBI or its subsidiaries in
connection with the execution and delivery of the Agreement or the consummation
of the transactions contemplated therein.
10. To the best knowledge of such counsel, the nonexistence of any
material actions, suits, proceedings, orders, investigations or claims pending
or threatened against or affecting DBI 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.-1.09(a)-2
<PAGE>
EXHIBIT 1.10(B)
---------------
CNB'S 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 to
consummate the transactions contemplated thereby.
2. The due incorporation and valid existence of CNB-ILL under the laws of
the State of Illinois and its power and authority to enter into the Agreement,
to merge with CNB-ILL in accordance with the terms of the 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 and CNB-ILL to authorize the execution,
delivery and performance of the Agreement, their due execution and delivery of
the Agreement, and the Agreement as a valid and binding obligation of CNB and
CNB-ILL enforceable against CNB and CNB-ILL in accordance with its terms
(subject to the provisions of bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforceability of creditors' rights generally from
time to time in effect, and equitable principles relating to the granting of
specific performance and other equitable remedies as a matter of judicial
discretion).
4. The due authorization and, when issued to the shareholders of DBI in
accordance with the terms of the Agreement, the valid issuance of the shares of
CNB Common to be issued pursuant to the Merger, such shares being fully paid and
nonassessable, with no personal liability attaching to the ownership thereof.
5. The execution and delivery of the Agreement by CNB and CNB-ILL 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 or CNB-ILL'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.
6. 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 CNB-ILL in connection with the execution and delivery of
the Agreement or the consummation of the transactions contemplated by the
Agreement.
7. The nonoccurrence, except as may be disclosed, of any Share
Adjustment.
A-Ex.-1.09(b)-1
<PAGE>
8. To the best knowledge of such counsel, the nonexistence of any
material actions, suits, proceedings, orders, investigations or claims pending
or threatened against or affecting CNB 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.
9. The due and proper performance of all corporate acts and other
proceedings necessary or required to be taken by CNB Bank to authorize the
execution, delivery and performance of the Subsidiary Bank Merger Agreement, the
due execution and delivery of the Subsidiary Bank Merger Agreement by CNB Bank
and the Subsidiary Bank Merger Agreement as a valid and binding obligations of
CNB Bank, enforceable against CNB Bank 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).
A-Ex.-1.09(b)-2
<PAGE>
EXHIBIT 4.08
------------
FORM OF AFFILIATE LETTER
___________________, 199__
CNB Bancshares, Inc.
20 N.W. Third Street
Evansville, Indiana 47739
Attention: Mr. H. Lee Cooper
Re: Agreement and Plan of Merger, dated November 17, 1995 (the "Merger
Agreement"), by and among DuQuoin Bancorp, Inc. ("DBI"), CNB
Bancshares, Inc. ("CNB") and HBI Acquisition Company ("CNB-ILL")
Gentlemen:
I have been advised that I may be deemed to be an affiliate of DBI, as that
term is defined for purposes of paragraphs (c) and (d) of Rule 145 ("Rule 145")
of the Rules and Regulations of the Securities and Exchange Commission (the
"Commission") promulgated under the Securities Act of 1933, as amended (the
"Securities Act").
Pursuant to the terms and conditions of the Merger Agreement, each share of
common stock of DBI owned by me as of the effective time of the merger
contemplated by the Merger Agreement (the "Merger") may be converted into the
right to receive shares of common stock of CNB and cash in lieu of any
fractional share. As used in this letter, the shares of common stock of DBI
owned by me as of _________________________ (the date 30 days prior to the
anticipated effective time of the Merger) are referred to as the "Pre-Merger
Shares" and the shares of common stock of CNB which may be received by me in the
Merger in exchange for my Pre-Merger Shares are referred to as the "Post-Merger
Shares." This letter is delivered to CNB pursuant to Section 4.08 of the Merger
Agreement.
A. I represent and warrant to CNB and agree that:
1. I shall not make any sale, transfer or other disposition of the
Post-Merger Shares I receive pursuant to the Merger in violation of the
Securities Act or the Rules and Regulations of the Commission promulgated
thereunder.
2. I understand that the issuance of the Post-Merger Shares to me
pursuant to the Merger will be registered with the Commission under the
Securities Act. I also understand that because I may be deemed an
"affiliate" of DBI 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
A-Ex.-4.08-1
<PAGE>
held by me unless (i) the sale, transfer or other distribution has been
registered under the Securities Act, (ii) the sale, transfer or other
distribution of such Post-Merger Shares is made in accordance with the
provisions of Rule 145, or (iii) in the opinion of counsel reasonably
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. 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 DBI.
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, as amended, and were acquired from a
person who received such shares in a transaction to which Rule 145
under the Securities Act of 1933, as amended, applied. The shares have
not been acquired by the holder with a view to, or for resale in
connection with, any distribution thereof within the meaning of the
Securities Act of 1933, as amended, and may not be sold, pledged or
otherwise transferred unless the shares have been registered under the
Securities Act of 1933, as amended, or an exemption from registration
is available."
A-Ex.-4.08-2
<PAGE>
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 reasonably satisfactory to CNB, to the
effect that no such legend is required for the purpose of the Securities Act.
I have carefully read this letter and the Merger Agreement and understand
the requirements of each and the limitations imposed upon the distribution,
sale, transfer or other disposition of Pre-Merger Shares or Post-Merger Shares
by me.
Very truly yours,
A-Ex.-4.08-3
<PAGE>
EXHIBIT 4.10
------------
FORM OF SUBSIDIARY BANK MERGER AGREEMENT
AGREEMENT TO MERGE
BETWEEN
CITIZENS BANK OF ILLINOIS, NATIONAL ASSOCIATION
AND
DUQUOIN NATIONAL BANK
UNDER THE CHARTER OF
CITIZENS BANK OF ILLINOIS, NATIONAL ASSOCIATION
WITH THE TITLE OF
CITIZENS BANK OF ILLINOIS, NATIONAL ASSOCIATION
THIS AGREEMENT TO MERGE (this "Agreement") made between CITIZENS BANK OF
ILLINOIS, NATIONAL ASSOCIATION (hereinafter referred to as "Citizens Bank"), a
banking association organized under the laws of the United States, being located
at 117 North Tenth Street, Mt. Vernon, County of Jefferson, in the State of
Illinois, with capital of $__________ divided into ____________ shares of common
stock, each of $______ par value, surplus of $________________ and undivided
profits, including capital reserves, of $________________, as of __________,
199__, and DUQUOIN NATIONAL BANK (hereinafter referred to as "DuQuoin Bank"), a
banking association organized under the laws of the United States, being located
at 124 West Main Street, DuQuoin, County of Perry, in the State of Illinois,
with capital of $_________ divided into ___________ shares of common stock, each
of $______ par value, surplus of $_____________, and undivided profits,
including capital reserves, of $_______, as of ___________, 199__, each acting
pursuant to a resolution of its board of directors adopted by the vote of a
majority of its directors, pursuant to the authority given by and in accordance
with the provisions of the Act of November 7, 1918, as amended (12 U.S.C.
215(a)), witnessed as follows:
A-Ex. 4.10-1
<PAGE>
SECTION 1.
DuQuoin Bank shall be merged with and into Citizens Bank under the charter of
the latter (the "Merger").
SECTION 2.
The name of the receiving association (hereinafter referred to as the
"association") shall be Citizens Bank of Illinois, National Association.
SECTION 3.
The business of the association shall be that of a national banking association.
This business shall be conducted by the association at its main office which
shall be located at 117 North Tenth Street, Mt. Vernon, Illinois, and at its
legally established branches.
SECTION 4.
The amount of the capital stock of the association shall be $______________,
divided into ___________ shares of common stock, each of $______ par value, and
at the time the Merger shall become effective, the association shall have a
surplus of $______________, and undivided profits, including capital reserves,
which when combined with the capital and surplus will be equal to the combined
capital structures of the merging banks as stated in the preamble of this
Agreement; adjusted however, for normal earnings and expenses (including, if
applicable, purchase accounting adjustments) and dividends permitted under this
Agreement between December 31, 1994 and the effective time of the Merger.
SECTION 5.
All assets of Citizens Bank and DuQuoin Bank as they exist at the effective time
of the Merger shall pass to and vest in the association without any conveyance
or other transfer. The association shall be responsible for all of the
liabilities of every kind and description, including liabilities arising from
the operation of the trust departments of Citizens Bank and DuQuoin Bank, of
each of the merging banks existing as of the effective time of the Merger.
SECTION 6.
DuQuoin Bank shall contribute to the association acceptable assets having a book
value, over and above its liability to its creditors, of at least $____________,
and having an estimated fair value over and above
A-Ex. 4.10-2
<PAGE>
its liability to its creditors of at least $____________, or _________% of the
estimated fair value of excess acceptable assets and above liabilities to
creditors, of the association; adjusted, however, for normal earnings and
expenses between December 31, 1994, and the effective time of the Merger, and
for allowances of cash payments, if any, permitted under this Agreement. The
difference between the book value and the estimated fair value of the assets to
be contributed is $____________ of unrecognized loss held-to-maturity investment
securities net of income taxes.
At the effective time of the Merger, Citizens Bank shall have on hand acceptable
assets having a book value, over and above its liability to its creditors, of at
least $____________ and having an estimated fair value, over and above its
liability to its creditors, of at least $____________ or _________% of the
estimated fair value of excess acceptable assets, over and above its liability
to its creditors, of the association; adjusted, however, for normal earnings and
expenses between December 31, 1994, and the effective time of the Merger, and
for allowances of cash payments, if any, permitted under this Agreement. The
difference between the book value and the estimated fair value of the assets to
be contributed is $____________ of unrecognized loss held-to-maturity investment
securities net of income taxes.
SECTION 7.
Of the capital stock of the association, the sole shareholder of the presently
outstanding ____________ shares of common stock of Citizens Bank, each of
$_______ par value, shall retain its present rights, and the sole shareholder of
DuQuoin Bank, in exchange for the excess acceptable assets contributed by
DuQuoin Bank to the association, shall be entitled to receive _________ shares
of common stock of the association, each of $_______ par value, being
approximately ___% of the total outstanding common stock of the association, to
be distributed on the basis of _____ shares, each of $_______ par value, for
each share of common stock of DuQuoin Bank, each of $_______ par value, now held
by it. No fractional shares shall be issued.
SECTION 8.
DuQuoin Bank shall not declare or pay any dividend to its sole shareholder
between the date of this Agreement and the time at which the merger shall become
effective except such amount as would permit DuQuoin Bancorp, Inc. ("DBI") to
pay the dividends contemplated by Section 4.01(a) of that certain Agreement and
Plan of Merger (the "Holding Company Merger Agreement") dated November 17, 1995
among CNB Bancshares, Inc., HBI Acquisition Company ("CNB-ILL") and DBI. Except
as expressly permitted in Section 4.01(b) of the Holding Company Merger
Agreement, DuQuoin Bank shall not take any actions or sell or otherwise dispose
of any of its assets in any manner.
A-Ex. 4.10-3
<PAGE>
SECTION 9.
The present members of the board of directors of Citizens Bank shall continue to
serve as the Board of Directors of the association at and after the effective
time of the Merger until the next annual meeting or until such time as their
successors have been elected and have qualified. In addition, the following
directors of DuQuoin Bank shall also serve as the Board of Directors of the
association at and after the effective time of the Merger until the next annual
meeting or until such time as their successors have been elected and have
qualified:
SECTION 10.
Effective as of the time this Merger shall become effective as specified in the
merger approval to be issued by the Comptroller of the Currency, the articles of
association of the resulting bank shall read in their entirety as set forth in
Exhibit A attached hereto and incorporated herein by reference.
SECTION 10.
This Agreement may be terminated by the mutual consent of the board of directors
of Citizens Bank and DuQuoin Bank. Notwithstanding the foregoing, in the event
that the Holding Company Merger Agreement is terminated without the transactions
contemplated thereby being consummated as provided therein, then this Agreement
shall also be terminated and shall be of no further force and effect.
SECTION 11.
This Agreement shall be approved by the sole shareholder of each of the merging
banks as required by law; and, subject to Section 12 of this Agreement, the
merger shall become effective at the time specified in a merger approval issued
by the Comptroller of the Currency of the United States.
SECTION 12.
Anything herein to the contrary notwithstanding, the obligations of the merging
banks under this Agreement are subject to and expressly conditioned upon the
concurrent consummation of the merger of DBI and CNB-ILL as described in the
Holding Company Merger Agreement.
WITNESS, the signatures and seals of said merging banks this ____ day of
____________, 1995, each set by its President and attested to by its Cashier or
Secretary, pursuant to a resolution of its board of directors, acting by a
majority and the signatures of a majority of each of its board of directors.
A-Ex. 4.10-4
<PAGE>
CITIZENS BANK OF ILLINOIS, NATIONAL ASSOCIATION
Attest:
_______________________________________
______________________
Secretary
(Seal of Bank)
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
DIRECTORS OF CITIZENS BANK OF ILLINOIS, NATIONAL ASSOCIATION
A-Ex. 4.10-5
<PAGE>
DUQUOIN NATIONAL BANK
Attest:
By: _______________________________________
President
______________________
Secretary
(Seal of Bank)
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
DIRECTORS OF DUQUOIN NATIONAL BANK
A-Ex. 4.10-6
<PAGE>
STATE OF ILLINOIS )
) ss:
COUNTY OF ________ )
On this ______ day of ______________, 1995, before me, a notary public for this
state and county, personally came ________________ as President and Chief
Executive Officer, and ______________, as Secretary, of Citizens Bank of
Illinois, National Association and each in his capacity acknowledged this
instrument to be the act and deed of the bank and the seal affixed to it to be
its seal; and also came:
being a majority of the board of directors of the bank and each of them
acknowledged this instrument to be the act and deed of the bank and of
himself/herself as director of it.
WITNESS my official seal and signature this day and year.
________________________________________
(Seal of Notary) Notary Public, _________________ County.
My commission expires __________________
A-Ex. 4.10-7
<PAGE>
STATE OF ILLINOIS )
) ss:
COUNTY OF ________ )
On this ______ day of ______________, 1995, before me, a notary public for this
state and county, personally came ________________ as President and Chief
Executive Officer, and ______________, as Secretary, of DuQuoin National Bank
and each in his capacity acknowledged this instrument to be the act and deed of
the bank and the seal affixed to it to be its seal; and also came:
being a majority of the board of directors of the bank and each of them
acknowledged this instrument to be the act and deed of the bank and of
himself/herself as director of it.
WITNESS my official seal and signature this day and year.
_______________________________________
(Seal of Notary) Notary Public, ________________ County.
My commission expires _________________
A-Ex. 4.10-8
<PAGE>
EXHIBIT A
---------
ARTICLES OF ASSOCIATION OF RESULTING BANK
A-Ex. 4.10-9
<PAGE>
January 30, 1996
DuQuoin Bancorp, Inc.
124 West Main Street
DuQuoin, Illinois 62832
Attention: Daniel H. Eaves
President
RE: Agreement and Plan of Merger ("Merger Agreement"), dated November 17, 1995,
among CNB Bancshares, Inc. ("CNB"), HBI Acquisition Company and DuQuoin
Bancorp, Inc. ("DBI")
Dear Dan:
By letter dated January 12, 1996, CNB delivered to DBI copies of the
environmental reports for certain properties of DBI prepared by Schreiber Grana
& Yonley. Based upon our review of these reports and conversations with the
environmental consultants, we do not believe that it is possible for an
environmental expert to reasonably estimate, pursuant to Section 4.07 of the
Merger Agreement, that the cost of taking all remedial or other corrective
actions and measures specified in clauses (i) and (ii) of said Section 4.07 with
respect to these properties would be less than $150,000. We are hopeful,
however, that such a conclusion could be reached after further testing and
analyses on certain properties.
In light of the foregoing, we request that the time period and the termination
threshold amount in Section 4.07 of the Merger Agreement be amended, by means of
this letter, to provide that:
(i) CNB will have until February 29, 1996 to pursue additional testing and
analyses with respect to these properties (and, if warranted based upon the
results, exercise its rights under Section 4.07 to terminate the Merger
Agreement); and
(ii) the termination threshold amount with respect to taking remedial or other
corrective actions and measures as specified is hereby increased from $150,000
to $200,000.
We trust that you will find this proposal to extend the time period for
environmental investigation and increase the termination threshold amount
reasonable under the circumstances.
In connection with the proposed Merger, DBI has recorded a $200,000
environmental contingency liability in its year-end 1995 financial statements to
cover anticipated corrective or remediation costs with respect to these
properties. The existence of these accruals, which were based upon preliminary
estimates of the environmental experts and consultation with CNB, will not be
deemed to be a waiver of, or otherwise prevent CNB from exercising any of its
rights under, Section 4.07 of the Merger Agreement, as amended by this letter,
or any other provision of the Merger Agreement. In addition, the existence
AA-1
<PAGE>
DuQuoin Bancorp, Inc.
January 30, 1996
Page 2
of these accruals will not be deemed a waiver of, or otherwise prevent DBI from
exercising any of its rights under the Merger Agreement.
Please indicate DBI's agreement to the foregoing Amendment of the Merger
Agreement by signing this letter on behalf of DBI where indicated below and
return this letter to me. You may keep the duplicate original of this letter
enclosed herewith for your files.
Please call me to discuss this Amendment if you have any questions.
Sincerely,
/s/ Randall L. Braun
Randall L. Braun
Vice President
RLB/sb
THIS AGREEMENT OF THE MERGER AGREEMENT IS ACCEPTED AND AGREED TO THIS 31ST DAY
OF JANUARY, 1996.
DUQUOIN BANCORP, INC.
/s/ Daniel H. Eaves
- -------------------
Daniel H. Eaves
President
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<PAGE>
APPENDIX B
_______________, 1996
Board of Directors
DuQuoin Bancorp, Inc.
124 West Main Street
DuQuoin, IL 63832
Members of the Board:
You have requested our opinion as to the fairness of the merger consideration
(the "Merger Consideration"), from a financial point of view, to the
shareholders of DuQuoin Bancorp, Inc. ("DuQuoin") with respect to the proposed
acquisition (the "Merger") of DuQuoin by CNB Bancshares, Inc. ("CNB"). DuQuoin
has entered into an Agreement and Plan of Merger (the "Agreement"), dated
November 17, 1995, among CNB, DuQuoin and HBI Acquisition Company, a wholly-
owned subsidiary of CNB. As is set forth in the Agreement, at the effective time
of the Merger, each outstanding share of Common Stock of DuQuoin shall be
exchanged for 17.96 shares of CNB Common Stock, $1.00 par value per share,
subject to possible changes due to the closing book value of DuQuoin or the
market value of CNB Common Stock. If DuQuoin's book value at closing is less
than $7,032,000, the exchange ratio shall be multiplied by the quotient of
DuQuoin's closing book value at the effective time of the Merger divided by
$7,032,000, and if the CNB average price is greater than $30.76, then the
exchange ratio shall be multiplied by the quotient of $30.76 divided by the CNB
average price. The CNB average price shall be the average closing price of CNB
Common Stock as reported on the Nasdaq Stock Market for the 20 business days
preceding the fifth calendar day prior to the closing date of the Merger.
During the course of our engagement, we have, among other things:
1) reviewed and analyzed material bearing upon the financial and operating
condition of CNB and DuQuoin and material prepared in connection with the
proposed transaction;
2) reviewed the operating characteristics of certain other financial
institutions deemed relevant to the contemplated transaction;
3) reviewed the nature and terms of recent sale and merger transactions
involving banks and bank holding companies and other financial institutions
that we consider relevant;
4) reviewed historical and current market data for CNB and DuQuoin common
stock;
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_______________, 1996
Board of Directors
DuQuoin Financial Corp.
Page 2
5) reviewed financial and other information provided to us by the managements
of CNB and DuQuoin;
6) conducted meetings with members of the senior management of CNB and DuQuoin
for the purpose of reviewing the future prospects of CNB and DuQuoin;
7) reviewed certain information including forecasts pertaining to prospective
cost savings and revenue enhancements relative to the proposed
transactions; and
8) evaluated the pro forma ownership of CNB Common Stock by DuQuoin
shareholders, relative to the pro forma contribution of DuQuoin's assets,
liabilities, equity and earnings to the pro forma company.
The Chicago Corporation, as part of its investment banking business, is
continually engaged in the valuation of banks and bank holding companies and
thrifts and thrift holding companies in connection with mergers and acquisitions
as well as initial and secondary offerings of securities, as well as valuations
for other purposes. The Chicago Corporation is a member of all principal U.S.
securities exchanges and in the conduct of our broker-dealer activities may from
time to time purchase securities from, and sell securities to, DuQuoin and CNB.
In rendering this fairness opinion we have acted exclusively on behalf of the
Board of Directors of DuQuoin and will receive a fee from DuQuoin for our
services.
In rendering this opinion, we have relied upon, without independent
verification, the accuracy and completeness of the financial and other
information and representations provided to us by CNB and DuQuoin. We have
relied upon the management of DuQuoin and CNB as to the reasonableness and
achievability of the financial forecasts and projections (and the assumptions
and basis therefor) provided to us, and have assumed that such forecasts and
projections are the best available estimates of management.
Based on the foregoing and our experience as investment bankers, we are of the
opinion that, as of the date hereof, the Merger Consideration to be paid to the
shareholders of DuQuoin as described in the Agreement, is fair from a financial
point of view.
Sincerely,
THE CHICAGO CORPORATION
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APPENDIX C
EXCERPTS OF THE ILLINOIS BUSINESS CORPORATION ACT
(DISSENTERS' RIGHTS)
11.65 RIGHT TO DISSENT.--(a) A shareholder of a corporation is entitled
to dissent from, and obtain payment for his or her shares in the event of any of
the following corporate actions:
(1) consummation of a plan of merger or consolidation or a plan of share
exchange to which the corporation is a party if (i) shareholder authorization is
required for the merger or consolidation or the share exchange by Section 11.20
or the articles of incorporation or (ii) the corporation is a subsidiary that is
merged with its parent or another subsidiary under Section 11.30;
(2) consummation of a sale, lease or exchange of all, or substantially
all, of the property and assets of the corporation other than in the usual and
regular course of business;
(3) an amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(i) alters or abolishes a preferential right of such shares;
(ii) alters or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of such
shares;
(iii) in the case of a corporation incorporated prior to January 1, 1982,
limits or eliminates cumulative voting rights with respect to such shares; or
(4) any other corporate action taken pursuant to a shareholder vote if
the articles of incorporation, by-laws, or a resolution of the board of
directors provide that shareholders are entitled to dissent and obtain payment
for their shares in accordance with the procedures set forth in Section 11.70 or
as may be otherwise provided in the articles, by-laws or resolution.
(b) A shareholder entitled to dissent and obtain payment for his or her
shares under this Section may not challenge the corporate action creating his or
her entitlement unless the action is fraudulent with respect to the shareholder
or the corporation or constitutes a breach of a fiduciary duty owed to the
shareholder.
(c) A record owner of shares may assert dissenters' rights as to fewer
than all the shares recorded in such person's name only if such person dissents
with respect to all shares beneficially owned by any one person and notifies the
corporation in writing of the name and address of each person on whose behalf
the record owner asserts dissenters' rights. The rights of a partial dissenter
are determined as if the shares as to which dissent is made and the other shares
recorded in the names of different shareholders. A beneficial owner of shares
who is not the record owner may assert dissenters' rights as to shares held on
such person's behalf only if the beneficial owner submits to the corporation the
record
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<PAGE>
owner's written consent to the dissent before or at the same time the beneficial
owner asserts dissenters' rights.
11.70 PROCEDURE TO DISSENT.--(a) If the corporate action giving rise to
the right to dissent is to be approved at a meeting of shareholders, the notice
of meeting shall inform the shareholders of their right to dissent and the
procedure to dissent. If, prior to the meeting, the corporation furnishes to the
shareholders such material information with respect to the transaction as will
objectively enable a shareholder to vote on the transaction and to determine
whether or not to exercise dissenters' rights, a shareholder may assert
dissenters' rights only if the shareholder delivers to the corporation before
the vote is taken a written demand for payment for his or her shares if the
proposed action is consummated, and the shareholder does not vote in favor of
the proposed action.
(b) If the corporation action giving rise to the right to dissent is not
to be approved at a meeting of shareholders, the notice to shareholders
describing the action taken under Section 11.30 or Section 7.10 shall inform the
shareholders of their right to dissent and the procedure to dissent. If, prior
to or concurrently with such notice, the corporation furnishes to the
shareholders such material information with respect to the transaction as will
objectively enable a shareholder to determine whether or not to exercise
dissenters' rights, a shareholder may assert dissenter's rights only if he or
she delivers to the corporation within thirty days from the date of mailing said
notice a written demand for payment for his or her shares.
(c) Within ten days after the date on which the corporate action giving
rise to the right to dissent is effective or thirty days after the shareholder
delivers to the corporation the written demand for payment, whichever is later,
the corporation shall send each shareholder who has delivered a written demand
for payment a statement setting forth the opinion of the corporation as to the
estimated value of the shares, the corporation's latest balance sheet as of the
end of a fiscal year ending not earlier than sixteen months before the delivery
of the statement, together with the statement of income for that year and the
latest available interim financial statements, and either a commitment to pay
for the shares of the dissenting shareholder at the estimated value thereof upon
transmittal to the corporation of the certificate or certificates, or other
evidence of ownership, with respect to such shares, or instructions to the
dissenting shareholder to sell his or her shares within ten days after delivery
of the corporation's statement to the shareholder. The corporation may instruct
the shareholder to sell only if there is a public market for the shares at which
the shares may be readily sold. If the shareholder does not sell within such ten
day period after being so instructed by the corporation, for purposes of this
Section the shareholder shall be deemed to have sold his or her shares at the
average closing price of such shares, if listed on a national exchange, or the
average of the bid and asked price with respect to such shares quoted by a
principal market maker, if not listed on a national exchange, during such ten
day period.
(d) If the shareholder does not agree with the opinion of the
corporation as to the estimated value of the shares, the shareholder, within
thirty days from the delivery of the corporation's statement of value, shall
notify the corporation in writing of the shareholder's estimate of value and
demand payment for the difference between the shareholder's estimate of value
and the amount of the payment by the corporation or the proceeds of sale by the
shareholder, whichever is applicable because of the procedure for which the
corporation opted pursuant to subsection (c).
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<PAGE>
(e) If, within 60 days from delivery to the corporation of the
shareholder notification of estimate of value of the shares, the corporation and
the dissenting shareholder have not agreed in writing upon the value of the
shares, the corporation shall either pay the difference in value demanded by the
shareholder or file a petition in the circuit court of the county in which
either the registered office or the principal office of the corporation is
located, requesting the court to determine the fair value of the shares. The
corporation shall make all dissenters, whether or not residents of this State,
whose demands remain unsettled parties to the proceeding as an action against
their shares and all parties should be served with a copy of the petition.
Nonresidents may be served by registered or certified mail or by publication as
provided by law. Failure of the corporation to commence an action pursuant to
this Section shall not limit or affect the right of the dissenting shareholders
to otherwise commence an action as permitted by law.
(f) The jurisdiction of the court in which the proceeding is commenced
under subsection (e) by a corporation is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the power described
in the order appointing them, or in any amendment to it.
(g) Each dissenter made a party to the proceeding is entitled to
judgment for the amount, if any, by which the court finds that the fair value of
his or her share exceeds the amount paid by the corporation or the proceeds of
sale by the shareholder, whichever amount is applicable. The judgment shall
include an allowance for interest at such rate as the court may find to be fair
and equitable in all the circumstances, from the date on which the corporate
action giving rise to the right to dissent is approved to the date of payment.
(h) The court, in an appraisal proceeding commenced under subsection
(e), shall determine all costs of the proceeding, including the reasonable
compensation and expenses of the appraisers, if any, and experts employed by any
party, but shall exclude the fees and expenses of counsel for any party. If the
fair value of the shares as determined by the court materially exceeds the
amount which the corporation offered to pay for those shares, or if no offer was
made, then all or any part of such expenses may be assessed against the
corporation. Except as otherwise provided in this Section, the practice,
procedure, judgment and costs shall be governed by the Code of Civil Procedure.
C-3
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The By-laws 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 By-laws 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 and other 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 By-laws 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 By-laws or the Indiana
Law. Pursuant to a policy of directors' and officers' liability insurance with
total annual limits of $15,000,000, 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,
II-1
<PAGE>
neglect, error, misstatement, misleading statement, omission or other act done
or wrongfully attempted while acting in their capacities as directors or
officers of CNB.
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 Merger, dated November 17, 1995, by
and among CNB Bancshares, Inc., HBI Acquisition Company
and DuQuoin Bancorp. Inc. (Exhibit A to Prospectus/Proxy
Statement);
(2)(b) Letter Agreement between CNB Bancshares, Inc. and DuQuoin
Bancorp, Inc., dated January 30, 1996, amending Agreement
and Plan of Merger (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 Baird, Kurtz & Dobson;
(23)(c) Consent of Lewis, Rice & Fingersh, L.C. (in opinion re
legality);
(23)(d) Consent of Lewis, Rice & Fingersh, L.C. (in opinion re
federal income tax consequences);
(23)(e) Consent of The Chicago Corporation;
(24) Powers of Attorney;
(99)(a) Form of Proxy Card;
(99)(b) Fairness Opinion of The Chicago Corporation (Exhibit B to
Prospectus/Proxy Statement); and
(99)(c) Excerpts of The Illinois Business Corporation Act of
1983, as amended (Dissenters' Rights) (Exhibit C to
Prospectus/Proxy Statement).
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<PAGE>
(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:
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(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(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 March 6, 1996.
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 March 6, 1996 by the following
persons in the capacities indicated.
Name Title/Position
- ---- --------------
/s/ H. Lee Cooper III Chairman of the Board and
- ----------------------------------
H. Lee Cooper III Chief Executive Officer
(principal executive officer)
/s/ James J. Giancola President, Chief Operating Officer
- ----------------------------------
James J. Giancola and Director
/s/ John R. Spruill Executive Vice President
- ----------------------------------
John R. Spruill (principal financial officer)
/s/ Ralph L. Alley Senior Vice President and Comptroller,
- ----------------------------------
Ralph L. Alley Treasurer (principal accounting officer)
* Director
- ----------------------------------
John D. Engelbrecht
II-5
<PAGE>
* Director
- -----------------------------------
L. C. Kremer
* Director
- ----------------------------------
Robert L. Koch II
* Director
- ----------------------------------
Jerry A. Lamb
* Director
- ----------------------------------
Burkley F. McCarthy
* Director
- ----------------------------------
Robert K. Ruxer
* Director
- ----------------------------------
Thomas W. Traylor
* Director
- ----------------------------------
Paul G. Wade
* By /s/ John R. Spruill
---------------------
Attorney-in-fact
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<PAGE>
INDEX TO EXHIBITS
Number Exhibit
- ------ -------
(2)(a) Agreement and Plan of Merger, dated November 17, 1995, by and
among CNB Bancshares, Inc., HBI Acquisition Company and DuQuoin
Bancorp, Inc. (Exhibit A to Prospectus/Proxy Statement).
(2)(b) Letter Agreement between CNB Bancshares, Inc. and DuQuoin
Bancorp, Inc., dated January 30, 1996, amending Agreement and
Plan of Merger (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 Baird, Kurtz & Dobson.
(23)(c) Consent of Lewis, Rice & Fingersh, L.C. (in opinion re legality).
(23)(d) Consent of Lewis, Rice & Fingersh, L.C. (in opinion re federal
income tax consequences).
(23)(e) Consent of The Chicago Corporation.
(24) Powers of Attorney.
(99)(a) Form of Proxy Card.
(99)(b) Fairness Opinion of The Chicago Corporation (Exhibit B to
Prospectus/Proxy Statement).
(99)(c) Excerpts of The Illinois Business Corporation Act of 1983, as
amended (Dissenters' Rights) (Exhibit C to Prospectus/Proxy
Statement).
<PAGE>
EXHIBIT (5)
-----------
<PAGE>
[LETTERHEAD OF LEWIS, RICE & FINGERSH]
March 6, 1996
CNB Bancshares, Inc.
20 N.W. Third Street
Evansville, Indiana 47739
Re: Registration Statement on Form S-4
Gentlemen:
In connection with a certain Registration Statement on Form S-4 (the
"Registration Statement") to be filed with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder, you have requested that we furnish you our
opinion as to the legality of the shares of the common stock, $1.00 stated value
(the "Common Stock"), of CNB Bancshares, Inc. (the "Company") registered
thereunder, which Common Stock is to be issued pursuant to a Plan and Agreement
of Merger (the "Merger Agreement"), dated November 17, 1995, among the Company,
HBI Acquisition Company and DuQuoin Bancorp, Inc.
As counsel to the Company, we have participated in the preparation of the
Registration Statement. We have examined and are familiar with the Company's
Restated Articles of Incorporation, By-laws, as amended, records of corporate
proceedings and such other information and documents as we have deemed necessary
or appropriate.
Based upon the foregoing, we are of the opinion that the Common Stock has
been duly authorized and will, when issued as contemplated in the Registration
Statement and the Merger Agreement, be validly issued, fully paid and non-
assessable.
We consent to the use of this opinion as an Exhibit to the Registration
Statement.
Very truly yours,
LEWIS, RICE & FINGERSH, L.C.
/s/ Lewis, Rice & Fingersh, L.C.
<PAGE>
EXHIBIT (8)
-----------
<PAGE>
[LETTERHEAD OF LEWIS, RICE & FINGERSH]
February 28, 1996
Board of Directors
CNB Bancshares, Inc.
20 N.W. Third Street, 12th Floor
Evansville, IN 47739
Attention: H. Lee Cooper, Chairman
Board of Directors
Du Quoin Bancorp, Inc.
124 West Main Street
Du Quoin, Illinois 62832
Attention: Daniel H. Eaves, Chairman and President
RE: MERGER OF DU QUOIN BANCORP, INC. INTO HBI ACQUISITION COMPANY
Gentlemen:
You have requested our opinions as to the federal income tax consequences
of the proposed merger (the "Merger") of Du Quoin Bancorp, Inc. ("Du Quoin")
into HBI Acquisition Company ("Holding Company") pursuant to the Agreement and
Plan of Merger, dated November 17, 1995 ("Merger Agreement"), by and among CNB
Bancshares, Inc. ("CNB"), Du Quoin and Holding Company.
In issuing the opinions set forth in this letter, we have relied upon (1)
the accuracy of factual representations requested from CNB, Holding Company,
Citizens Bank of Illinois, National Association ("Subsidiary"), and the accuracy
of factual representations requested from Du Quoin and Du Quoin National Bank
("Bank") (the "Representations"), (2) the Merger Agreement, (3) the Agreement to
Merge to be executed by Bank and Subsidiary and joined in by CNB, ("Subsidiary
Merger Agreement") and (4) the facts, information and documentation set forth in
the Registration Statement on Form S-4 of CNB filed with the Securities and
Exchange Commission in connection with the Merger ("Registration Statement").
<PAGE>
LEWIS, RICE & FINGERSH
February 28, 1996
Page 2
The opinions set forth in this letter are predicated upon our understanding
of the facts set forth in the Merger Agreement, the Subsidiary Merger Agreement,
the Representations, and the Registration Statement. Any change in such facts
may adversely affect our opinions. Furthermore, as explained below, our opinions
are based upon our understanding of the existing provisions of the Internal
Revenue Code of 1986, as amended ("Code"), currently applicable regulations
promulgated under the Code, current published administrative positions of the
Internal Revenue Service such as revenue rulings and revenue procedures, and
existing judicial decisions, all of which are subject to change either
prospectively or retroactively. Any change in such authorities may adversely
affect our opinions. We assume no obligation to update our opinions for any
deletions or additions to or modification of any law applicable to the Merger.
The following opinions reflect our legal judgment solely on the issues
discussed herein. The issues in this matter are complex. There are no published
cases, rulings, regulations or administrative positions directly on point to
support the opinions set forth herein. The Internal Revenue Service, however,
has issued private letter rulings to taxpayers in substantially similar
situations which held favorably for the taxpayers. While private letter rulings
provide guidance on the Internal Revenue Service position on issues, they cannot
be relied on by other taxpayers and do not extend to transactions other than the
transactions described therein. Accordingly, we cannot assure you that the
Internal Revenue Service will agree with the opinions expressed herein, nor can
we assure you that a court of competent jurisdiction will agree with such
opinions.
Based on the authority described above and on our review of the Merger
Agreement, the Subsidiary Merger Agreement, the Representations, and the
Registration Statement, and assuming that the Subsidiary Merger Agreement is
executed in substantially the form we have reviewed and that the transactions
described therein are completed as described, our opinions as to the federal
income tax consequences of the Merger are as follows.
1. The Merger will constitute a reorganization within the meaning of
Sections 368(a) of the Code.
2. Pursuant to Section 354(a)(1) of the Code, no gain or loss will be
recognized by shareholders of Du Quoin who exchange all of their Du Quoin common
stock solely for shares of CNB voting common stock.
3. Pursuant to Section 358(a)(1) of the Code, the basis of the CNB common
stock received by those shareholders of Du Quoin receiving solely CNB common
stock (including any fractional share interest to which such shareholder would
be entitled) will be the same, in each instance, as the basis of the Du Quoin
common stock surrendered in exchange therefor.
4. Pursuant to Section 1223(1) of the Code, the holding period of CNB
common stock received by the shareholders of Du Quoin (including any fractional
shares to which they may be entitled)
<PAGE>
LEWIS, RICE & FINGERSH
February 28, 1996
Page 3
will include, in each instance, the period during which the Du Quoin common
stock surrendered in exchange therefor was held, provided that such stock is
held as a capital asset in the hands of such shareholders on the date of the
exchange.
We express no opinion with regard to the federal income tax consequences of
the Merger not addressed expressly by the above opinions. In addition, we
express no opinion as to any state or local tax consequences with respect to the
Merger. We express no opinion with respect to any tax consequences relating to
the merger of Bank into Subsidiary.
The shareholders of Du Quoin should consult with a qualified tax advisor
with respect to any reporting requirements which may be applicable, or any other
tax considerations not expressly mentioned herein.
We consent to the use of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
LEWIS, RICE & FINGERSH, L.C.
/s/ Lewis, Rice & Fingersh, L.C.
----------------------------------------
<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 26, 1996, appearing
in the Annual Report, which will be incorporated by reference in Form 10-K of
CNB Bancshares, Inc. for the year ended December 31, 1995, 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
March 6, 1996
<PAGE>
EXHIBIT (23)(B)
---------------
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form S-4 of our
report dated January 19, 1996 on our audit of the consolidated financial
statements of DuQuoin Bancorp, Inc. as of and for the year ended December 31,
1995. We also consent to the reference to our firm under the caption "Experts."
BAIRD, KURTZ & DOBSON
/s/ Baird, Kurtz & Dobson
St. Louis, Missouri
March 6, 1996
<PAGE>
EXHIBIT (23)(E)
---------------
<PAGE>
CONSENT OF THE CHICAGO CORPORATION
We hereby consent to the summarization of our fairness opinion letter and
references to our firm under the captions "SUMMARY - Opinion of Financial
Advisor" and "THE MERGER" and to the inclusion of such letter as an Appendix to
the Proxy Statement - Prospectus which is part of this Registration Statement on
Form S-4 of CNB Bancshares, Inc. By giving such consent, we do not thereby admit
that we are experts with respect to any part of such Registration Statement
within the meaning of the term "expert" as used in the Securities Act of 1933,
as amended, or the rules and regulations of the Securities and Exchange
Commission promulgated thereunder.
THE CHICAGO CORPORATION
/s/ The Chicago Corporation
Chicago, Illinois
March 6, 1996
<PAGE>
EXHIBIT (24)
------------
<PAGE>
POWER OF ATTORNEY
1933 ACT REGISTRATION STATEMENT
of
CNB BANCSHARES, INC.
KNOW ALL MEN BY THESE PRESENTS, That the person whose signature appears
below hereby constitutes and appoints H. LEE COOPER III, JAMES J. GIANCOLA and
JOHN R. SPRUILL, and each of them, the true and lawful attorneys-in-fact and
agents for him and in his name, place or stead, in any and all capacities, to
sign and file, or cause to be signed and filed, with the Securities and Exchange
Commission (the "Commission"), any registration statement or statements on Form
S-4 under the Securities Act of 1933, as amended, relating to the issuance of
common stock of CNB Bancshares, Inc. in connection with the Agreement and Plan
of Merger, dated November 17, 1995, among CNB Bancshares, Inc., HBI Acquisition
Company and DuQuoin Bancorp, Inc., and any and all amendments and supplements
thereto, before or after effectiveness of such statements, and any and all other
documents required to be filed with the Commission in connection therewith,
granting unto said attorneys-in-fact and agents, full power and authority to do
and perform each and every act and thing requisite and necessary to be done as
fully and to all intents and purposes as the undersigned might or could do in
person, and ratifying and confirming all that said attorneys-in-fact and agents
may lawfully do or cause to be done by virtue thereof.
Dated: February 17, 1996
/s/ H. Lee Cooper III
-------------------------------------
H. Lee Cooper III
<PAGE>
POWER OF ATTORNEY
1933 ACT REGISTRATION STATEMENT
of
CNB BANCSHARES, INC.
KNOW ALL MEN BY THESE PRESENTS, That the person whose signature appears
below hereby constitutes and appoints H. LEE COOPER III, JAMES J. GIANCOLA and
JOHN R. SPRUILL, and each of them, the true and lawful attorneys-in-fact and
agents for him and in his name, place or stead, in any and all capacities, to
sign and file, or cause to be signed and filed, with the Securities and Exchange
Commission (the "Commission"), any registration statement or statements on Form
S-4 under the Securities Act of 1933, as amended, relating to the issuance of
common stock of CNB Bancshares, Inc. in connection with the Agreement and Plan
of Merger, dated November 17, 1995, among CNB Bancshares, Inc., HBI Acquisition
Company and DuQuoin Bancorp, Inc., and any and all amendments and supplements
thereto, before or after effectiveness of such statements, and any and all other
documents required to be filed with the Commission in connection therewith,
granting unto said attorneys-in-fact and agents, full power and authority to do
and perform each and every act and thing requisite and necessary to be done as
fully and to all intents and purposes as the undersigned might or could do in
person, and ratifying and confirming all that said attorneys-in-fact and agents
may lawfully do or cause to be done by virtue thereof.
Dated: February 17, 1996
/s/ James J. Giancola
-------------------------------------
James J. Giancola
<PAGE>
POWER OF ATTORNEY
1933 ACT REGISTRATION STATEMENT
of
CNB BANCSHARES, INC.
KNOW ALL MEN BY THESE PRESENTS, That the person whose signature appears
below hereby constitutes and appoints H. LEE COOPER III, JAMES J. GIANCOLA and
JOHN R. SPRUILL, and each of them, the true and lawful attorneys-in-fact and
agents for him and in his name, place or stead, in any and all capacities, to
sign and file, or cause to be signed and filed, with the Securities and Exchange
Commission (the "Commission"), any registration statement or statements on Form
S-4 under the Securities Act of 1933, as amended, relating to the issuance of
common stock of CNB Bancshares, Inc. in connection with the Agreement and Plan
of Merger, dated November 17, 1995, among CNB Bancshares, Inc., HBI Acquisition
Company and DuQuoin Bancorp, Inc., and any and all amendments and supplements
thereto, before or after effectiveness of such statements, and any and all other
documents required to be filed with the Commission in connection therewith,
granting unto said attorneys-in-fact and agents, full power and authority to do
and perform each and every act and thing requisite and necessary to be done as
fully and to all intents and purposes as the undersigned might or could do in
person, and ratifying and confirming all that said attorneys-in-fact and agents
may lawfully do or cause to be done by virtue thereof.
Dated: February 16, 1996
/s/ John R. Spruill
-------------------------------------
John R. Spruill
<PAGE>
POWER OF ATTORNEY
1933 ACT REGISTRATION STATEMENT
of
CNB BANCSHARES, INC.
KNOW ALL MEN BY THESE PRESENTS, That the person whose signature appears
below hereby constitutes and appoints H. LEE COOPER III, JAMES J. GIANCOLA and
JOHN R. SPRUILL, and each of them, the true and lawful attorneys-in-fact and
agents for him and in his name, place or stead, in any and all capacities, to
sign and file, or cause to be signed and filed, with the Securities and Exchange
Commission (the "Commission"), any registration statement or statements on Form
S-4 under the Securities Act of 1933, as amended, relating to the issuance of
common stock of CNB Bancshares, Inc. in connection with the Agreement and Plan
of Merger, dated November 17, 1995, among CNB Bancshares, Inc., HBI Acquisition
Company and DuQuoin Bancorp, Inc., and any and all amendments and supplements
thereto, before or after effectiveness of such statements, and any and all other
documents required to be filed with the Commission in connection therewith,
granting unto said attorneys-in-fact and agents, full power and authority to do
and perform each and every act and thing requisite and necessary to be done as
fully and to all intents and purposes as the undersigned might or could do in
person, and ratifying and confirming all that said attorneys-in-fact and agents
may lawfully do or cause to be done by virtue thereof.
Dated: February 16, 1996
/s/ Ralph L. Alley
-----------------------------------
Ralph L. Alley
<PAGE>
POWER OF ATTORNEY
1933 ACT REGISTRATION STATEMENT
of
CNB BANCSHARES, INC.
KNOW ALL MEN BY THESE PRESENTS, That the person whose signature appears
below hereby constitutes and appoints H. LEE COOPER III, JAMES J. GIANCOLA and
JOHN R. SPRUILL, and each of them, the true and lawful attorneys-in-fact and
agents for him and in his name, place or stead, in any and all capacities, to
sign and file, or cause to be signed and filed, with the Securities and Exchange
Commission (the "Commission"), any registration statement or statements on Form
S-4 under the Securities Act of 1933, as amended, relating to the issuance of
common stock of CNB Bancshares, Inc. in connection with the Agreement and Plan
of Merger, dated November 17, 1995, among CNB Bancshares, Inc., HBI Acquisition
Company and DuQuoin Bancorp, Inc., and any and all amendments and supplements
thereto, before or after effectiveness of such statements, and any and all other
documents required to be filed with the Commission in connection therewith,
granting unto said attorneys-in-fact and agents, full power and authority to do
and perform each and every act and thing requisite and necessary to be done as
fully and to all intents and purposes as the undersigned might or could do in
person, and ratifying and confirming all that said attorneys-in-fact and agents
may lawfully do or cause to be done by virtue thereof.
Dated: February 23, 1996
/s/ John D. Engelbrecht
-----------------------------
John D. Engelbrecht
<PAGE>
POWER OF ATTORNEY
1933 ACT REGISTRATION STATEMENT
of
CNB BANCSHARES, INC.
KNOW ALL MEN BY THESE PRESENTS, That the person whose signature appears
below hereby constitutes and appoints H. LEE COOPER III, JAMES J. GIANCOLA and
JOHN R. SPRUILL, and each of them, the true and lawful attorneys-in-fact and
agents for him and in his name, place or stead, in any and all capacities, to
sign and file, or cause to be signed and filed, with the Securities and Exchange
Commission (the "Commission"), any registration statement or statements on Form
S-4 under the Securities Act of 1933, as amended, relating to the issuance of
common stock of CNB Bancshares, Inc. in connection with the Agreement and Plan
of Merger, dated November 17, 1995, among CNB Bancshares, Inc., HBI Acquisition
Company and DuQuoin Bancorp, Inc., and any and all amendments and supplements
thereto, before or after effectiveness of such statements, and any and all other
documents required to be filed with the Commission in connection therewith,
granting unto said attorneys-in-fact and agents, full power and authority to do
and perform each and every act and thing requisite and necessary to be done as
fully and to all intents and purposes as the undersigned might or could do in
person, and ratifying and confirming all that said attorneys-in-fact and agents
may lawfully do or cause to be done by virtue thereof.
Dated: March 5, 1996
/s/ L. C. Kremer
-----------------------------
L. C. Kremer
<PAGE>
POWER OF ATTORNEY
1933 ACT REGISTRATION STATEMENT
of
CNB BANCSHARES, INC.
KNOW ALL MEN BY THESE PRESENTS, That the person whose signature appears
below hereby constitutes and appoints H. LEE COOPER III, JAMES J. GIANCOLA and
JOHN R. SPRUILL, and each of them, the true and lawful attorneys-in-fact and
agents for him and in his name, place or stead, in any and all capacities, to
sign and file, or cause to be signed and filed, with the Securities and Exchange
Commission (the "Commission"), any registration statement or statements on Form
S-4 under the Securities Act of 1933, as amended, relating to the issuance of
common stock of CNB Bancshares, Inc. in connection with the Agreement and Plan
of Merger, dated November 17, 1995, among CNB Bancshares, Inc., HBI Acquisition
Company and DuQuoin Bancorp, Inc., and any and all amendments and supplements
thereto, before or after effectiveness of such statements, and any and all other
documents required to be filed with the Commission in connection therewith,
granting unto said attorneys-in-fact and agents, full power and authority to do
and perform each and every act and thing requisite and necessary to be done as
fully and to all intents and purposes as the undersigned might or could do in
person, and ratifying and confirming all that said attorneys-in-fact and agents
may lawfully do or cause to be done by virtue thereof.
Dated: February 22, 1996
/s/ Robert L. Koch II
--------------------------------
Robert L. Koch II
<PAGE>
POWER OF ATTORNEY
1933 ACT REGISTRATION STATEMENT
of
CNB BANCSHARES, INC.
KNOW ALL MEN BY THESE PRESENTS, That the person whose signature appears
below hereby constitutes and appoints H. LEE COOPER III, JAMES J. GIANCOLA and
JOHN R. SPRUILL, and each of them, the true and lawful attorneys-in-fact and
agents for him and in his name, place or stead, in any and all capacities, to
sign and file, or cause to be signed and filed, with the Securities and Exchange
Commission (the "Commission"), any registration statement or statements on Form
S-4 under the Securities Act of 1933, as amended, relating to the issuance of
common stock of CNB Bancshares, Inc. in connection with the Agreement and Plan
of Merger, dated November 17, 1995, among CNB Bancshares, Inc., HBI Acquisition
Company and DuQuoin Bancorp, Inc., and any and all amendments and supplements
thereto, before or after effectiveness of such statements, and any and all other
documents required to be filed with the Commission in connection therewith,
granting unto said attorneys-in-fact and agents, full power and authority to do
and perform each and every act and thing requisite and necessary to be done as
fully and to all intents and purposes as the undersigned might or could do in
person, and ratifying and confirming all that said attorneys-in-fact and agents
may lawfully do or cause to be done by virtue thereof.
Dated: February 23, 1996
/s/ Jerry A. Lamb
------------------------------
Jerry A. Lamb
<PAGE>
POWER OF ATTORNEY
1933 ACT REGISTRATION STATEMENT
of
CNB BANCSHARES, INC.
KNOW ALL MEN BY THESE PRESENTS, That the person whose signature appears
below hereby constitutes and appoints H. LEE COOPER III, JAMES J. GIANCOLA and
JOHN R. SPRUILL, and each of them, the true and lawful attorneys-in-fact and
agents for him and in his name, place or stead, in any and all capacities, to
sign and file, or cause to be signed and filed, with the Securities and Exchange
Commission (the "Commission"), any registration statement or statements on Form
S-4 under the Securities Act of 1933, as amended, relating to the issuance of
common stock of CNB Bancshares, Inc. in connection with the Agreement and Plan
of Merger, dated November 17, 1995, among CNB Bancshares, Inc., HBI Acquisition
Company and DuQuoin Bancorp, Inc., and any and all amendments and supplements
thereto, before or after effectiveness of such statements, and any and all other
documents required to be filed with the Commission in connection therewith,
granting unto said attorneys-in-fact and agents, full power and authority to do
and perform each and every act and thing requisite and necessary to be done as
fully and to all intents and purposes as the undersigned might or could do in
person, and ratifying and confirming all that said attorneys-in-fact and agents
may lawfully do or cause to be done by virtue thereof.
Dated: February 29, 1996
/s/ Burkley F. McCarthy
-----------------------------
Burkley F. McCarthy
<PAGE>
POWER OF ATTORNEY
1933 ACT REGISTRATION STATEMENT
of
CNB BANCSHARES, INC.
KNOW ALL MEN BY THESE PRESENTS, That the person whose signature appears
below hereby constitutes and appoints H. LEE COOPER III, JAMES J. GIANCOLA and
JOHN R. SPRUILL, and each of them, the true and lawful attorneys-in-fact and
agents for him and in his name, place or stead, in any and all capacities, to
sign and file, or cause to be signed and filed, with the Securities and Exchange
Commission (the "Commission"), any registration statement or statements on Form
S-4 under the Securities Act of 1933, as amended, relating to the issuance of
common stock of CNB Bancshares, Inc. in connection with the Agreement and Plan
of Merger, dated November 17, 1995, among CNB Bancshares, Inc., HBI Acquisition
Company and DuQuoin Bancorp, Inc., and any and all amendments and supplements
thereto, before or after effectiveness of such statements, and any and all other
documents required to be filed with the Commission in connection therewith,
granting unto said attorneys-in-fact and agents, full power and authority to do
and perform each and every act and thing requisite and necessary to be done as
fully and to all intents and purposes as the undersigned might or could do in
person, and ratifying and confirming all that said attorneys-in-fact and agents
may lawfully do or cause to be done by virtue thereof.
Dated: March 1, 1996
/s/ Robert K. Ruxer
-------------------------------------
Robert K. Ruxer
<PAGE>
POWER OF ATTORNEY
1933 ACT REGISTRATION STATEMENT
of
CNB BANCSHARES, INC.
KNOW ALL MEN BY THESE PRESENTS, That the person whose signature appears
below hereby constitutes and appoints H. LEE COOPER III, JAMES J. GIANCOLA and
JOHN R. SPRUILL, and each of them, the true and lawful attorneys-in-fact and
agents for him and in his name, place or stead, in any and all capacities, to
sign and file, or cause to be signed and filed, with the Securities and Exchange
Commission (the "Commission'), any registration statement or statements on Form
S-4 under the Securities Act of 1933, as amended, relating to the issuance of
common stock of CNB Bancshares, Inc. in connection with the Agreement and Plan
of Merger, dated November 17, 1995, among CNB Bancshares, Inc., HBI Acquisition
Co0mpany and DuQuoin Bancorp, Inc., and any and all amendments and supplements
thereto, before or after effectiveness of such statements, and any and all other
documents required to be filed with the Commission in connection therewith,
granting unto said attorneys-in-fact and agents, full power and authority to do
and perform each and every act and thing requisite and necessary to be done as
fully and to all intents and purposes as the undersigned might or could do in
person, and ratifying and confirming all that said attorneys-in-fact and agents
may lawfully do or cause to be done by virtue thereof.
Dated: March 5, 1996
/s/ Thomas W. Traylor
---------------------------------
Thomas W. Traylor
<PAGE>
POWER OF ATTORNEY
1933 ACT REGISTRATION STATEMENT
of
CNB BANCSHARES, INC.
KNOW ALL MEN BY THESE PRESENTS, That the person whose signature appears
below hereby constitutes and appoints H. LEE COOPER III, JAMES J. GIANCOLA and
JOHN R. SPRUILL, and each of them, the true and lawful attorneys-in-fact and
agents for him and in his name, place or stead, in any and all capacities, to
sign and file, or cause to be signed and filed, with the Securities and Exchange
Commission (the "Commission"), any registration statement or statements on Form
S-4 under the Securities Act of 1933, as amended, relating to the issuance of
common stock of CNB Bancshares, Inc. in connection with the Agreement and Plan
of Merger, dated November 17, 1995, among CNB Bancshares, Inc., HBI Acquisition
Company and DuQuoin Bancorp, Inc., and any and all amendments and supplements
thereto, before or after effectiveness of such statements, and any and all other
documents required to be filed with the Commission in connection therewith,
granting unto said attorneys-in-fact and agents, full power and authority to do
and perform each and every act and thing requisite and necessary to be done as
fully and to all intents and purposes as the undersigned might or could do in
person, and ratifying and confirming all that said attorneys-in-fact and agents
may lawfully do or cause to be done by virtue thereof.
Dated: March 4, 1996
/s/ Paul G. Wade
-------------------------------------
Paul G. Wade
<PAGE>
EXHIBIT (99)(A)
---------------
<PAGE>
PROXY
SPECIAL MEETING OF SHAREHOLDERS
DUQUOIN BANCORP, INC.
____________, 1996
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
DUQUOIN BANCORP, INC.
The undersigned shareholder of DuQuoin Bancorp, Inc., an Illinois
corporation ("DBI"), hereby appoints Daniel H. Evans and Jo Ann E. Isom, and
either 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 DBI which
the undersigned is entitled to vote at the Special Meeting of Shareholders of
DBI (the "Special Meeting") to be held at ____________, on ____________, 1996,
at ____________ __.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 Merger, dated November 17,
1995, by and among DBI, CNB Bancshares, Inc., an Indiana corporation
("CNB"), and HBI Acquisition Company, an Illinois corporation and wholly
owned subsidiary of CNB ("HBI"), and the transactions contemplated thereby,
including CNB's acquisition of DBI by means of the merger of DBI with and
into HBI.
[_] 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 Merger.
[_] 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 the Special 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 _________________, 1996
______________________________________
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.
