[R]
Registration No. 333-17699
[/R]
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________
[R]
Pre-Effective Amendment No. 1
to
[/R]
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
_____________________________
CNB BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
INDIANA 6022 35-1568731
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification
Number)
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. Robert H. Wexler, Esq.
Lewis, Rice & Fingersh, L.C. Gallop, Johnson & Neuman, L.C.
500 N. Broadway Suite 1600
St. Louis, Missouri 63102 101 South Hanley Road
(314) 444-7600 St. Louis, Missouri 63105
(314) 862-1200
_____________________________
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. [ ]
_____________________________
[R] [/R]
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
On letterhead of:
BMC Bancshares, Inc.
[R]
December 31, 1996
[/R]
Dear Shareholder:
[R]
You are cordially invited to attend the Special Meeting of shareholders of
BMC Bancshares, Inc. ("BMC") to be held at 10:00 a.m., local time, on
February 5, 1997 at the main office of Bank of Mt. Carmel located at 601 Market
Street, Mt. Carmel, Illinois.
[/R]
You will be asked at the Special Meeting to consider and vote upon a
proposal to approve an Agreement and Plan of Merger (the "Merger Agreement"),
dated October 11, 1996, which provides for the acquisition of BMC by CNB
Bancshares, Inc. ("CNB"), by means of the merger (the "Merger") of BMC with and
into a wholly-owned subsidiary of CNB.
[R]
If the Merger is approved and consummated, each issued and outstanding
share of common stock of BMC, other than shares held by shareholders properly
exercising dissenter's rights, will be converted into the right to receive a
certain number of shares of CNB common stock (the "Conversion Ratio") to be
determined based (1) upon the average closing prices of CNB common stock on the
New York Stock Exchange during a certain valuation period preceding the closing
date (the "Closing Date") of the Merger and (2) the number of shares of BMC
common stock outstanding on the Closing Date. Although it is not possible to
determine the actual Conversion Ratio until the Closing Date, for purposes of
illustration only, if the Closing Date would have occurred on December 31, 1996,
each share of BMC common stock would have been converted into 11.87 shares of
CNB common stock. The formula for determining the actual Conversion Ratio is
set forth in the Merger Agreement and described in the accompanying
Prospectus/Proxy Statement.
[/R]
After careful review and consideration, your Board of Directors believes
that the proposed Merger is in the best interests of BMC and its shareholders.
ACCORDINGLY, YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY AT THE SPECIAL
MEETING.
Pauli & Company, Incorporated, an investment banking firm, has issued its
written opinion to your Board of Directors regarding the fairness, from a
financial point of view, of the consideration to be received by the BMC
shareholders pursuant to the Merger Agreement. A copy of the opinion is
attached as Appendix B to the accompanying Prospectus/Proxy Statement.
You are urged to carefully read the accompanying Prospectus/Proxy Statement
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, please contact me at (618) 263-3833.
Sincerely,
W. Gene Guisewite
President and Chief Executive Officer
Page
BMC BANCSHARES, INC.
an Illinois corporation
__________________________________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
[R]
To be held on February 5, 1997
[/R]
__________________________________________
TO THE SHAREHOLDERS OF BMC BANCSHARES, INC.:
[R]
NOTICE IS HEREBY GIVEN that a Special Meeting of shareholders (the "Special
Meeting") of BMC Bancshares, Inc., an Illinois corporation ("BMC"), will be held
on February 5, 1997, at 10:00 a.m., local time, at the main office of Bank of
Mt. Carmel located at 601 Market Street, Mt. Carmel, Illinois, for the following
purposes:
[/R]
1. To consider and vote upon a proposal to approve the
Agreement and Plan of Merger (the "Merger Agreement"), dated
October 11, 1996, among BMC, 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, among other
things, BMC will be merged (the "Merger") with and into 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.
[R]
The Board of Directors of BMC has fixed the close of business on
December 24, 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.
[/R]
THE BOARD OF DIRECTORS OF BMC 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, RECOMMENDS THAT THE SHAREHOLDERS OF BMC
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 BMC
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.
THE ACCOMPANYING PROSPECTUS/PROXY STATEMENT DESCRIBES THE RIGHTS OF BMC
SHAREHOLDERS TO DISSENT FROM THE MERGER AND THE PROCEDURES WHICH MUST BE
FOLLOWED IN ORDER TO PERFECT SUCH RIGHTS.
By Order of the Board of Directors,
[R]
Mt. Carmel, Illinois
December 31, 1996 Secretary
[/R]
Page
CNB BANCSHARES, INC.
PROSPECTUS
______________________
BMC BANCSHARES, INC.
PROXY STATEMENT
This Prospectus/Proxy Statement relates to the proposed acquisition of BMC
Bancshares, Inc., an Illinois corporation ("BMC"), by CNB Bancshares, Inc., an
Indiana corporation ("CNB"), by means of the merger (the "Merger") of BMC 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 October 11, 1996, among BMC, CNB and HBI.
A copy of the Merger Agreement is attached hereto as Appendix A and is
incorporated by reference herein.
[R]
This Prospectus/Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of BMC to be used at the
Special Meeting of shareholders (the "Special Meeting") of BMC to be held on
February 5, 1997. At the Special Meeting, holders of the common stock, no par
value per share, of BMC (the "BMC Common") will be asked to consider and vote
upon approval of the Merger Agreement and the transactions contemplated thereby,
including the Merger. 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 BMC will be entitled to dissenters' rights in
connection with the Merger as described herein. See "SPECIAL MEETING" and
"MERGER -- Dissenters' Rights."
[/R]
Pursuant to the Merger Agreement and in connection with the Merger, each
issued and outstanding share of BMC Common, other than shares held by
shareholders properly exercising dissenters' rights, will be converted into the
right to receive a certain number of shares of common stock, stated value $1.00
per share, of CNB (the "CNB Common"), and cash in lieu of fractional shares.
The actual number of shares of CNB Common to be received in the Merger in
exchange for each share of BMC Common (the "Conversion Ratio") will be
determined based upon (1) the average closing price of CNB Common on the New
York Stock Exchange (the "NYSE") during a certain time period preceding the date
of the closing of the Merger (the "Closing Date") and (2) the number of shares
of BMC Common issued and outstanding immediately prior to the effective time of
the Merger (the "Effective Time"). See "MERGER -- Conversion Ratio."
This Prospectus/Proxy Statement also constitutes the prospectus of CNB with
respect to up to 1,180,960 shares of CNB Common issuable in the Merger to the
holders of BMC Common.
[R]
The outstanding shares of CNB Common are traded on the NYSE. The last
reported sale price of CNB Common as reported in The Wall Street Journal
(Midwest Edition) on December 30, 1996 was $39.125.
This Prospectus/Proxy Statement and the accompanying form of proxy are
first being mailed to shareholders of BMC on or about January 7, 1997.
[/R]
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 BMC
shareholders. See "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 BMC deemed to be
"affiliates" of CNB or BMC 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
se of this Prospectus/Proxy Statement by those shareholders of BMC not deemed
to be "affiliates" of CNB or BMC. 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.
___________________________________
[R]
The date of this Prospectus/Proxy Statement is December 31, 1996
[/R]
Page
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 1
SUMMARY INFORMATION 3
Introduction 3
Parties 3
CNB 3
BMC 3
Special Meeting 4
Date, Time and Place of Special Meeting 4
Matters to be Considered 4
Record Date 4
Vote Required 4
Revocation of Proxies 5
Security Ownership of BMC Management 5
Merger 5
Effects of Merger 5
Value of Merger 6
Reasons for Merger and Recommendation of Board of
Directors 7
Opinion of Financial Advisor 7
Conditions to Merger 7
Regulatory Approvals 8
Business of BMC in Ordinary Course; Dividends 8
Termination of Merger Agreement 9
Termination Fee 9
Accounting Treatment 11
Effective Time 11
Resale of BMC Common Prior to Effective Time 11
Interests of Certain Persons in Merger 12
Federal Income Tax Consequences 12
Dissenters' Rights 13
Management and Operations After Merger 13
Comparison of Shareholder Rights 13
COMPARATIVE STOCK PRICES 14
SELECTED COMPARATIVE PER SHARE DATA 16
SELECTED FINANCIAL DATA 17
SPECIAL MEETING 20
Date, Time and Place 20
Matters to be Considered 20
Record Date 20
Vote Required 20
Security Ownership of Management 21
Page
Voting and Revocation of Proxies 21
Solicitation of Proxies 22
CNB 22
BMC 23
General 23
Background of Merger 23
Reasons for Merger; Recommendation of BMC's Board
of Directors 24
Opinion of Financial Advisor 25
Form of Merger 27
Conversion Ratio 27
Fractional Shares 28
Share Adjustments 28
Effective Time 28
Resale of BMC Common Prior to Effective Time 29
Regulatory Approvals 29
Conditions to Consummation of Merger 30
Termination of Merger Agreement 31
Termination Fee 32
Exchange of Stock Certificates 33
Representations and Warranties 34
Certain Other Agreements 36
Business of BMC in Ordinary Course 36
Dividends 37
Environmental Inspections 37
Other BMC Agreements 38
CNB Agreements 38
Effect on Employee Benefit Plans 39
Expenses and Fees 39
No Solicitation 40
Interests of Certain Persons in Merger 40
Indemnification and Insurance 40
Employee Benefits 41
Board Composition 41
Employment Agreements 41
Interests of CNB's Management and Board 42
Waiver and Amendment 42
Dissenters' Rights 42
Federal Income Tax Consequences 44
Accounting Treatment 44
Management and Operations After Merger 45
Resale of CNB Common 45
PRO FORMA FINANCIAL DATA 47
DESCRIPTION OF CNB'S CAPITAL STOCK 55
General 55
CNB Common 55
Dividend Rights 55
Voting Rights 55
Page
Classification of Board of Directors 55
Liquidation Rights 56
Preemptive Rights 56
Assessment and Redemption 56
Transfer Agent 56
Dividend Restrictions under Loan Agreement 56
COMPARISON OF SHAREHOLDER RIGHTS 57
Shareholder Vote Required for Certain Transactions 57
Business Combinations 57
Removal of Directors 58
Amendments to Articles of Incorporation 58
Voting Rights 59
Special Meeting of Shareholders; Shareholder Action by
Written Consent 59
Dissenters' Rights 60
Takeover Statutes 61
Indemnification 61
Limitation of Liability of Directors 63
Consideration of Non-Shareholder Interests 63
INFORMATION ABOUT BMC 65
Business of BMC 65
Management's Discussion and Analysis of Financial Condition
and Results of Operations 65
Security Ownership of Certain Beneficial Owners
and Management 75
Security Ownership of Certain Beneficial Owners 75
Security Ownership of Management 77
LEGAL OPINION 78
EXPERTS 78
Independent Auditors for CNB 78
Independent Auditors for BMC 78
Presence at Special Meeting 78
SHAREHOLDER PROPOSALS 78
FINANCIAL STATEMENTS OF BMC F-1
APPENDICES
Agreement and Plan of Merger A-1
Fairness Opinion of Pauli & Co. B-1
Excerpts of Illinois Business Corporation Act of 1983,
as amended (Dissenters' Rights) C-1
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
BMC. 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 "SEC"). The reports, proxy statements and other information can
be inspected and copied at the public reference facilities of the SEC,
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional
offices of the SEC 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 SEC at 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. The SEC also maintains an Internet web site that contains
reports, proxy and information statements and other information regarding
issuers who file electronically with the SEC. The address of that site is
http://www.sec.gov. In addition, reports, proxy statements and other
information concerning CNB may be inspected at the offices of the NYSE, 20 Broad
Street, New York, New York, 10005.
CNB has filed with the SEC 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 SEC'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 SEC 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;
2. CNB's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996;
3. The description of the CNB Common contained in CNB's Registration
Statement on Form 8-A under the Exchange Act, dated April 1, 1996; and
Page
4. CNB's Current Report on Form 8-K, dated September 11, 1996.
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 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.
[R]
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 JANUARY 29, 1997.
[/R]
THIS PROSPECTUS/PROXY STATEMENT CONTAINS CERTAIN FORWARD LOOKING STATEMENTS
WITH RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND THE BUSINESS
OF CNB FOLLOWING THE CONSUMMATION OF THE MERGER. SEE "SUMMARY INFORMATION,"
"MERGER -- REASONS FOR MERGER; AND RECOMMENDATION OF BMC'S BOARD OF DIRECTORS;"
"-- OPINION OF FINANCIAL ADVISER," AND "PRO FORMA FINANCIAL DATA." THESE
FORWARD LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND UNCERTAINTIES. FACTORS
THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY
SUCH FORWARD LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE FOLLOWING
POSSIBILITIES: (1) EXPECTED COST SAVINGS FROM THE MERGER CANNOT BE FULLY
REALIZED; (2) DEPOSIT ATTRITION, CUSTOMER LOSS OR REVENUE LOSS FOLLOWING THE
MERGER IS GREATER THAN EXPECTED; (3) COSTS OR DIFFICULTIES RELATED TO THE
INTEGRATION OF THE BUSINESSES OF CNB AND BMC ARE GREATER THAN EXPECTED;
(4) CHANGES IN THE INTEREST RATE ENVIRONMENT AND REDUCED MARGINS; (5) THE IMPACT
OF REGULATORY CHANGES IS OTHER THAN AS EXPECTED; AND (6) GENERAL ECONOMIC
CONDITIONS, EITHER NATIONALLY OR REGIONALLY, ARE LESS FAVORABLE THAN EXPECTED
RESULTING IN A DETERIORATION OF CREDIT QUALITY.
Page
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 BMC and its subsidiary has been
supplied by BMC. Shareholders are urged to read this Prospectus/Proxy Statement
and the Appendices hereto in their entirety.
Introduction
This Prospectus/Proxy Statement relates to the Merger Agreement among BMC,
CNB and HBI. The Merger Agreement provides for, among other things, CNB's
acquisition of BMC by means of the Merger of BMC 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 BMC 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 September 30, 1996, CNB had consolidated assets of $4.0 billion, deposits of
$2.9 billion, loans of $2.1 billion and shareholders' equity of $304 million.
Through the 93 full-service banking offices and 34 consumer finance offices and
the offices of its non-banking subsidiaries, CNB provides commercial, retail and
correspondent banking, mortgage servicing, trust, data processing, cash
management and related financial services, property and casualty insurance and
third party administrative services for employee benefit plans 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."
BMC
BMC is a one-bank holding company headquartered in Mt. Carmel, Illinois.
At September 30, 1996, BMC, together with its banking subsidiary, Bank of
Mt. Carmel, an Illinois banking corporation, had consolidated assets of
$99.8 million, deposits of $85.5 million, loans of $53.7 million and
shareholders' equity of $13.5 million. The address of the principal office of
BMC is 601 Market Street, Mt. Carmel, Illinois 62863 (telephone number (618)
263-3833).
For additional information regarding BMC, see "PARTIES -- BMC" and
"INFORMATION ABOUT BMC."
Special Meeting
Date, Time and Place of Special Meeting
[R]
The Special Meeting will be held at the main office of Bank of Mt. Carmel
located at 601 Market Street, Mt. Carmel, Illinois on February 5, 1997, at
10:00 a.m., local time. See "SPECIAL MEETING -- Date, Time and Place."
[/R]
Matters to be Considered
At the Special Meeting, holders of BMC Common will be asked to consider and
vote to approve the Merger Agreement and the transactions contemplated thereby,
including the Merger. (Shareholders of BMC 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
[R]
The record date (the "Record Date") for the Special Meeting is December 24,
1996. Only holders of record of the outstanding shares of BMC 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."
[/R]
Vote Required
The presence, in person or by proxy, of holders of a majority of the issued
and outstanding shares of BMC 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 BMC 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 BMC 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 (if
any) 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 vote of
holders of a majority of the BMC 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.
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 BMC 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 BMC Management
As of the close of business on the Record Date, 60,803 shares of BMC Common
were issued and outstanding and 11,532 shares, or 18.97%, of BMC Common were
beneficially owned by directors and executive officers of BMC and their
affiliates. As of the Record Date, neither CNB nor any of its directors and
executive officers or their affiliates owned any shares of BMC 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"), BMC 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 BMC will terminate.
As a result of the Merger, each share of BMC 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, by
virtue of the Merger and without any action on the part of CNB, BMC, HBI or
their respective shareholders, will be converted into the right to receive the
number of shares of CNB Common equal to the Conversion Ratio and, as described
below, cash in lieu of fractional shares.
The Conversion Ratio is equal to the quotient of (a) the total number of
shares of CNB Common issuable to holders of BMC Common in the Merger (the
"Maximum CNB Common Amount"), divided by (b) the Fully-Diluted BMC Common Amount
(as defined below in this paragraph). The Maximum CNB Common Amount is equal to
884,227; provided, however, that (a) if the CNB Average Price (as defined below
in this paragraph) is less than $25.71, then the Maximum CNB Common Amount will
be increased to equal the product of (i) 884,227, and (ii) the quotient of
$25.71 divided by the CNB Average Price (but in no event will the Maximum CNB
Common amount exceed 1,180,960), and (b) if the CNB Average Price is greater
than $28.57, then the Maximum CNB Common Amount will be decreased to equal to
the product of (i) 884,227, and (ii) the quotient of $28.57 divided by the CNB
Average Price (but in no event will the Maximum CNB Common Amount be less than
721,782). The term "CNB Average Price," as used herein, means the average of
the daily closing prices of CNB Common as reported in The Wall Street Journal
(Midwest Edition) for the twenty business days preceding the fifth calendar day
prior to the Closing Date. The term "Fully-Diluted BMC Common Amount," as used
herein, means the sum of (i) the number of issued and outstanding shares of BMC
Common as of immediately prior to the Effective Time, and (ii) the number of
shares of BMC Common issuable, whether at the Effective Time or upon the passage
of time or the occurrence of future events, upon the exercise, conversion, or
exchange of all then-outstanding options, warrants, rights to subscribe for or
acquire, calls, or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of BMC Common.
BMC has represented, in the Merger Agreement, that the Fully-Diluted BMC Common
Amount equals 60,803.
BMC will have no obligation to consummate the Merger if the CNB Average
Price is less than $19.25; provided, however, that as described in the preceding
paragraph, in no event will the number of shares issued in the Merger exceed
1,180,960. CNB will have no obligation to consummate the Merger if the CNB
Average Price is more than $35.00; provided, however, that as described in the
preceding paragraph, in no event will the number of shares issued in the Merger
be less than 721,782. See "MERGER -- Conditions to Merger."
No fractional shares of CNB Common will be issued in the Merger and, in
lieu thereof, holders of shares of BMC Common who would otherwise be entitled to
a fractional share interest (after taking into account all shares of BMC 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 CNB Common as reported in The
Wall Street Journal (Midwest Edition) on the business day immediately preceding
the date on which the Effective Time occurs.
The shares of CNB Common to be issued to holders of BMC Common in the
Merger, together with any cash payment in lieu of fractional shares, are
referred to herein as the "Merger Consideration."
[R]
As the CNB Average Price will be calculated based upon the closing price of
CNB Common for the twenty business days preceding the fifth calendar day prior
to the Closing Date, it is not possible, as of the date of this Prospectus/Proxy
Statement, to determine the actual Conversion Ratio. Assuming, however, for
purposes of illustration, that the Closing Date would have occurred on
December 31, 1996, and the Fully-Diluted BMC Common Amount would have been, as
represented by BMC in the Merger Agreement, 60,803, then the CNB Average Price
would have been $36.26 and the Conversion Ratio would have been 11.87.
[/R]
For information on how shareholders of BMC will be able to exchange
certificates representing shares of BMC Common for certificates representing
shares of CNB Common after the Effective Time, see "MERGER -- Exchange of Stock
Certificates."
Value of Merger
[R]
As of December 30, 1996, based upon a Conversion Ratio of 11.87 (which, as
described elsewhere herein, is subject to adjustment) and the closing sale price
of CNB Common as reported in The Wall Street Journal (Midwest Edition) on such
date, the Merger had a per share value of $464.41 to holders of BMC Common, and
the approximate total value of the Merger Consideration to BMC shareholders was
$28.2 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.
[/R]
Reasons for Merger and Recommendation of Board of Directors
The recommendation of BMC's Board of Directors is based upon a number of
factors, including, but not limited to, (i) the financial terms of the Merger;
(ii) information concerning the business, financial condition, results of
operations, and prospects of BMC and CNB; (iii) the strength of CNB's
management; (iv) the historic market prices and book values of shares of BMC
Common and CNB Common; (v) the terms of other reported acquisitions of
comparably sized banks in the midwestern United States; (vi) the tax-free nature
of the Merger; (vii) the trading market for the shares of CNB Common; (viii) the
potential enhancement of customer service; (ix) the increased ability to deal
with future technological challenges; and (x) the financial advice and opinion
rendered by BMC's financial advisor, Pauli & Company, Incorporated ("Pauli").
Members of the Board of Directors and management of BMC own shares of BMC
Common and, therefore, have a financial interest in the Merger similar to the
interests of other shareholders of BMC generally. Certain members of the Board
of Directors and management of BMC may, however, also be deemed to have certain
interests in the Merger that are in addition to their interests as shareholders
of BMC generally. See "MERGER -- Interests of Certain Persons in Merger."
THE BOARD OF DIRECTORS OF BMC HAS APPROVED THE MERGER AGREEMENT AND
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 BMC in reaching its decision to approve the Merger
Agreement, see "MERGER -- Background of Merger" and "-- Reasons for Merger;
Recommendation of BMC's Board of Directors."
Opinion of Financial Advisor
Pauli, BMC's financial advisor, has delivered its written opinion, dated
October 4, 1996, to the Board of Directors of BMC stating that, as of October 4,
1996, and based on the matters set forth in such opinion, the consideration to
be paid by CNB pursuant to the Merger Agreement is fair, from a financial point
of view, to the holders of BMC Common. The full text of the written opinion of
Pauli, which sets forth the assumptions made, the procedures followed, the
matters considered and the limits on the review undertaken by Pauli, is attached
as Appendix B to this Proxy Statement/Prospectus and the holders of BMC Common
are urged to read carefully the opinion in its entirety. See "MERGER -- Opinion
of Financial Advisor."
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 two-thirds of the
issued and outstanding shares of BMC 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) the qualification
of the Merger for "pooling of interests" accounting treatment (see "MERGER --
Accounting Treatment"); (v) BMC having delivered to CNB, on or prior to
November 15, 1996, audited financial statements for BMC for the year ended
December 31, 1995, which evidence no material differences in reported income and
equity between the amounts set forth in such audited financial statements and
the amounts set forth in the unaudited financial statements previously delivered
to CNB; and (vi) the CNB Average Price being not more than $35.00 or less than
$19.25. 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 BMC intends to waive any
such conditions, except in those circumstances where the Board of Directors of
CNB or BMC, as the case may be, deems such waiver to be in the best interests of
CNB or BMC, as the case may be, and its respective shareholders. The conditions
set forth in clauses (iii) and (v) above have been satisfied as of the date of
this Prospectus/Proxy Statement. There can be no assurances as to when and if
the 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
[R]
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 ("BHCA"). The Federal Reserve Board
approved the Merger on December 17, 1996. See "MERGER -- Regulatory Approvals."
[/R]
Business of BMC in Ordinary Course; Dividends
Pursuant to the Merger Agreement, BMC 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 -- Agreements of BMC --
Business in Ordinary Course."
The Merger Agreement provides that BMC may, during 1996, declare and pay
its regular quarterly dividends and special annual dividends on the BMC Common
not to exceed $3.50 per share in the aggregate for 1996 (taking into account all
dividends theretofore paid in 1996) at approximately the same times during the
year which it has historically declared and paid such dividends and, during
1997, declare and pay quarterly dividends of $0.875 per share (which equates, on
an annualized basis, to $3.50 which is expected to be the aggregate annual
dividend amount of BMC for 1996) at approximately the same times during the year
which it has historically declared and paid its quarterly dividends. BMC and
CNB 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 the BMC shareholders would receive a quarterly
dividend from either BMC or CNB but not from both during or with respect to such
quarter. See "MERGER -- Agreements of BMC -- Business in Ordinary Course."
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 BMC; (ii) by CNB or BMC 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 if certain
reports of environmental inspection on the real properties of BMC to be obtained
pursuant to the Merger Agreement should disclose any matters requiring remedial
or corrective measures the cost of which exceed $150,000 (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 BMC (see "SPECIAL MEETING -- Vote Required");
(vii) by CNB if BMC's Board of Directors fail to approve or recommend the Merger
Agreement or the Merger, or withdraw or modify in a manner adverse to CNB its
recommendation or approval of the Merger Agreement or resolve or publicly
announce such an intention; (viii) by CNB in the event that BMC 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 the first anniversary of the Merger Agreement. See
"MERGER -- Termination of Merger Agreement."
Termination Fee
The Merger Agreement provides that if the Merger Agreement is terminated
(by CNB or BMC) and prior to or concurrently therewith a First Trigger Event (as
defined below) has occurred, then, unless a Nullifying Event (as defined below)
has occurred and is then continuing, BMC must, on or before the second business
day following the termination of the Merger Agreement, pay $200,000 to CNB.
The Merger Agreement also provides that, unless a Nullifying Event occurred
and was continuing at the time the Merger Agreement was terminated, in the event
that (i) the Merger Agreement is terminated (by CNB or BMC), and (ii) prior to
or concurrently with such termination either (1) a First Trigger Event has
occurred, or (2) an event described in either clause (iii) or (iv) of the
definition of a First Trigger Event has occurred which, but for its failure to
satisfy the applicable proviso in such clause, would have qualified as a First
Trigger Event, and (iii) prior to, concurrently with or within 24 months after
such termination an Acquisition Event (as defined below) has occurred, BMC must,
on or before the second business day following the occurrence of such
Acquisition Event, pay $1,000,000 to CNB, less any amount previously paid by BMC
to CNB pursuant to the preceding paragraph hereof.
The term "First Trigger Event," as used herein, means the occurrence of any
of the following events: (i) the failure of BMC's Board of Directors to approve
or recommend the Merger Agreement or the Merger, or the withdrawal or
modification in any manner adverse to CNB of its approval or recommendation of
the Merger Agreement or the Merger, or the resolution or public announcement of
its intention to do either of the foregoing; (ii) the recommendation by BMC or
any of its significant subsidiaries, or the Board of Directors of BMC or any or
its significant subsidiaries, that the shareholders of BMC approve any
Acquisition Proposal (as defined below), or the entering into by BMC or any of
its significant subsidiaries of an agreement with respect to any Acquisition
Proposal, or the authorization, approval, proposal or public announcement by BMC
or any of its significant subsidiaries of its intention to enter into any
Acquisition Proposal; (iii) the failure of the shareholders to approve the
Merger Agreement or the Merger at the Special Meeting if, prior thereto, it was
publicly announced that any person (other than CNB) has made, or publicly
disclosed an intention to make, an Acquisition Proposal; provided, however,
that, to constitute a First Trigger Event, all of the shares of BMC Common
beneficially owned (as such term is used in the Exchange Act) by a Director of
BMC (or any person who served as a Director of BMC at any time between the date
of the Merger Agreement and the date of the Special Meeting) as of the later of
the date of the Merger Agreement or the date such person was appointed or
elected a Director of BMC must not have been voted in favor of the Merger
Agreement and the Merger at the Special Meeting; (iv) any person (together with
its affiliates and associates) or group (as such terms are used in the Exchange
Act) (other than CNB and its subsidiaries) acquires beneficial ownership or the
right to acquire beneficial ownership of 20% or more of the then outstanding
shares of the stock then entitled to vote generally in the election of directors
of BMC or any of its significant subsidiaries; provided, however, that, to
constitute a First Trigger Event, a Director of BMC (or any person who served as
a Director of BMC at any time between the date of the Merger Agreement and the
date of such acquisition) must have sold or otherwise tendered any shares of BMC
Common beneficially owned by him to either such person or group of persons or to
a third party who thereafter sold or otherwise tendered such shares to such
person or group of persons; or (v) following the making of an Acquisition
Proposal, BMC breaches any covenant or agreement set forth in the Merger
Agreement such that CNB would be entitled to terminate the Merger Agreement
(without regard to any grace period provided for therein) unless such breach is
promptly cured without jeopardizing consummation of the Merger pursuant to the
terms of the Merger Agreement.
The term "Acquisition Proposal," as used herein, means any: (i) publicly
announced proposal; (ii) regulatory application or notice (whether in draft or
final form); (iii) agreement or written understanding, (iv) public disclosure of
an intention to make a proposal; or (v) amendment to any of the foregoing, made
or filed on or after the date of the Merger Agreement, in each case with respect
to any of the following transactions with a counterparty other than CNB or any
of its subsidiaries: (A) a merger or consolidation, or any similar transaction,
involving BMC or any of its significant subsidiaries; (B) a purchase, lease or
other acquisition of all or substantially all of the assets or deposits of BMC
or any of its significant subsidiaries; or (C) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of
securities representing 20% or more of the voting power of BMC or any of its
significant subsidiaries.
The term "Acquisition Event," as used herein, means the consummation of any
event described above in the definition of "Acquisition Proposal," except that
the percentage references contained in clause (C) of such definition are 50%
instead of 20%.
The term "Nullifying Event," as used herein, means a breach by CNB of any
of its covenants or agreements contained in the Merger Agreement such that BMC
would be entitled to terminate the Merger Agreement (without regard to any grace
period provided for therein) and such event occurs and continues at a time when
BMC is not in material breach of any of its covenants or agreements contained in
the Merger Agreement.
Accounting Treatment
The Merger is expected to qualify as a "pooling of interests" for
accounting and financial reporting purposes. The qualification of the Merger
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 BMC'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 BMC are not aware, after
consultation with KPMG Peat Marwick LLP, the independent certified public
accountants for CNB, of any existing facts or circumstances which would preclude
the Merger from qualifying for pooling of interests accounting treatment. 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 BMC 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 first
quarter of 1997, 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 -- Closing Date."
Resale of BMC Common Prior to Effective Time
With the exception of those shareholders of BMC who may be deemed to be
"affiliates" of BMC for purposes of Rule 145 under the Securities Act, the
Merger Agreement does not prohibit shareholders of BMC from selling their shares
prior to the Effective Time. The Merger Agreement provides, however, that each
affiliate of BMC 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 BMC 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 BMC generally include individuals who (or entities which)
control, are controlled by or are under common control with BMC and will include
directors and certain officers of BMC and may include principal shareholders of
BMC. See "MERGER -- Resale of BMC Common Prior to Effective Time" and "--
Resale of CNB Common."
Interests of Certain Persons in Merger
Certain members of the management and Board of Directors of BMC have
certain arrangements with CNB and interests in the Merger which are in addition
to the interests of shareholders of BMC generally, including those related to:
(i) the election of the current members of the Board of Directors of BMC as
regional directors of the to-be-created Mt. Carmel region of Citizens Bank of
Illinois, N.A., a wholly-owned indirect subsidiary of CNB ("Citizens Bank-
Illinois"); (ii) post-Merger employment arrangements with W. Gene Guisewite,
President and Chief Executive Officer of BMC and Bank of Mt. Carmel, to serve,
on a part-time basis, as an executive officer of the Mt. Carmel region of
Citizens Bank-Illinois, with Daniel R. Schonert, Executive Vice President of
Bank of Mt. Carmel and Secretary of BMC, to serve as President of the Mt. Carmel
region of Citizens Bank-Illinois, and with Mina Nolan, Chief Financial Officer
of Bank of Mt. Carmel, to serve as Executive Vice President of the Mt. Carmel
region of Citizens Bank-Illinois; (iii) the agreement by CNB to provide officers
and directors of BMC 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, to provide
(subject to certain conditions) insurance coverage to such individuals covering
acts and omissions which may have occurred prior to the Closing Date, and to
indemnify such individuals, for three years after the Effective Time, against
any liability arising out of actions occurring prior to the Effective Time (to
the extent then permitted by the Illinois Law and by the Articles of
Incorporation and Bylaws of BMC as in effect as of the date of the Merger
Agreement); and (iv) the agreement by CNB to permit each employee of BMC
(including officers) and its subsidiaries who continues as an employee of CNB or
any of its subsidiaries following the Effective Time 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 -- Interests of Certain
Persons" and "-- Management and Operations After Merger".
For information about the percentage of BMC Common owned by the directors
and executive officers of BMC, see "INFORMATION ABOUT BMC -- Security Ownership
of Management." None of the directors or executive officers of BMC 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 BMC, and no gain or loss will be recognized by
shareholders of BMC, except in respect of cash received for fractional shares
and except for any cash payments which might be received by shareholders of BMC
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 BMC 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
(including any fractional share interest to which such shareholder would be
entitled) received by the shareholders of BMC will be the same as the basis of
BMC Common exchanged therefor; and (iv) the holding period of the shares of CNB
Common received by the shareholders of BMC will include the holding period of
the shares of BMC 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 BMC WITHOUT REGARD TO THE
PARTICULAR FACTS AND CIRCUMSTANCES OF EACH SHAREHOLDER'S TAX SITUATION AND
STATUS. EACH SHAREHOLDER OF BMC 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 BMC 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 BMC Common held immediately before the Merger
is consummated if such shareholder delivers to BMC, 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 9% of the outstanding shares of BMC 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
CNB intends, effective as of the Closing Date, to merge Bank of Mt. Carmel
and Citizens Bank-Illinois (the "Subsidiary Bank Merger"). Following the
Subsidiary Bank Merger, (i) the resulting bank will continue to serve the
Mt. Carmel community, under the name "Citizens Bank of Illinois, National
Association," in substantially the same manner as Bank of Mt. Carmel has done
historically; (ii) the current directors of BMC will serve as regional directors
of the Mt. Carmel region of the resulting bank; (iii) W. Gene Guisewite,
President and Chief Executive Officer of BMC and Bank of Mt. Carmel, will serve,
on a part-time basis, as an executive officer of the Mt. Carmel region of the
resulting bank, (iv) Daniel R. Schonert, Executive Vice President of Bank of
Mt. Carmel and Secretary of BMC, will serve as President of the Mt. Carmel
region of the resulting bank, and (v) Mina Nolan, Chief Financial Officer of
Bank of Mt. Carmel, will serve as Executive Vice President of the Mt. Carmel
region of the resulting bank. 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."
Comparison of Shareholder Rights
The rights of the shareholders of BMC Common and CNB Common differ in
certain respects. The rights of the shareholders of BMC 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 BMC,
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 publicly traded on the NYSE under the symbol BNK.
Prior to April, 1996, shares of CNB Common were included for quotation on The
Nasdaq Stock Market's National Market ("Nasdaq") under the symbol CNBE. The
following table sets forth, for the periods indicated, the high and low closing
prices of CNB Common as reported in The Wall Street Journal (Midwest Edition).
There is no established public trading market for the shares of BMC Common.
Management of BMC 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 BMC Common, the prices indicated may
not reflect the prices which would be paid for such shares on an active market.
Page
<TABLE>
<CAPTION>
CNB Common BMC Common
----------------------- ------------------------
Cash Cash
Dividend Dividend
High Low Declared High Low Declared
(1)
[R]
<C> <S> <C> <C> <C> <C> <C> <C>
1994 First Quarter... $28.031 $25.672 $.17 $100.00 $100.00 $.30
Second Quarter.. 28.234 25.969 .18 127.50 112.50 .30
Third Quarter... 29.063 27.625 .18 125.00 125.00 .30
Fourth Quarter.. 28.796 25.625 .18 125.00 125.00 2.10
1995 First Quarter... 29.031 26.531 .18 (2) (2) .30
Second Quarter.. 27.437 26.531 .19 (2) (2) .30
Third Quarter... 27.203 25.625 .19 140.00 125.00 .30
Fourth Quarter.. 27.140 24.281 -- (2) (2) 1.60
1996 First Quarter... 27.969 26.672 .20 180.00 180.00 .30
Second Quarter.. 27.625 26.672 .20 250.00 250.00 .50
Third Quarter... 29.500 25.953 .20 (2) (2) .50
Fourth Quarter
(through 12/30/96) 39.125 29.375 .22 (2) (2) 2.20
[/R]
</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)Although there may have been private trades of BMC Common during these
periods, BMC was not a party to such transactions and management of BMC does
not, therefore, have knowledge of the prices paid in such transactions.
[R]
On October 10, 1996, the last trading day before the announcement of the
execution of the Merger Agreement, the closing sale price of CNB Common, as
reported in The Wall Street Journal (Midwest Edition), was $29.50 per share.
Based upon the per share price of CNB Common on such date, the equivalent per
share price for BMC Common was $425.39. The equivalent per share price for BMC
Common is calculated by multiplying the specified closing sale price of CNB
Common by the Conversion Ratio. For purposes of the foregoing illustration,
the Conversion Ratio was determined based upon the assumption that the Closing
Date would have occurred on October 10, 1996. The Conversion Ratio, as
described elsewhere herein, is subject to adjustment. See "MERGER -- Conversion
Ratio."
On December 30, 1996, the closing sale price of CNB Common, as reported in
The Wall Street Journal (Midwest Edition), was $39.125 per share and the
equivalent per share price for BMC Common (assuming a Conversion Ratio of
11.87, which was determined based upon the assumption that the Closing Date
would have occurred on December 31, 1996), was $464.41 per share. As of
December 31, 1996, there were 9,542 and 314 holders of record of CNB Common and
BMC Common, respectively.
[/R]
Shareholders of BMC are advised to obtain current market quotations for CNB
Common.
The shares of CNB Common issuable in the Merger will have been approved for
listing on the NYSE, subject to official notice of issuance.
Page
SELECTED COMPARATIVE PER SHARE DATA
(unaudited)
The following summary presents, for the periods indicated, selected
comparative historical, pro forma and pro forma equivalent unaudited per share
data for CNB and BMC. 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."
[R]
The amounts designated "Historical" represent the historical financial
results of CNB and BMC. The amounts designated "Pro Forma Combined Per CNB
Share" represent the pro forma results of the Merger. The amounts designated
"Equivalent Pro Forma Per BMC Share" are computed by multiplying the Pro Forma
Combined Per Share amounts by an assumed Conversion Ratio of 11.87 shares of CNB
Common for each share of BMC Common. The Conversion Ratio, as described
elsewhere herein, is subject to adjustment. See "MERGER -- Conversion Ratio".
[/R]
The data presented is not necessarily indicative of the results of the
future operation of the combined organization or the actual results that would
have occurred if the Merger had been consummated prior to the periods indicated.
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 BMC."
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
------------- -------------------------
1996 1995 1995 1994 1993
[R]
<S> <C> <C> <C> <C> <C>
Net Income Per Common Share:(1)
Historical:
CNB .........................
Primary ................... $ 1.40 $ 1.37 $ 1.86 $ 1.60 $ 1.66
Fully Diluted ............. 1.40 1.37 1.86 1.58 1.63
BMC ......................... 1.62 12.04 19.71 20.05 18.53
Pro forma combined per CNB share:
Primary ..................... 1.36 1.36 1.86 1.61 1.66
Fully Diluted ............... 1.36 1.36 1.86 1.59 1.63
Equivalent pro forma per BMC share:
Primary ..................... 16.14 16.14 22.08 19.11 19.71
Fully Diluted ............... 16.14 16.14 22.08 18.87 19.35
Dividends Per Common Share:
Historical:
CNB(2) ...................... $ 0.60 $ 0.56 $ 0.56 $ 0.71 $ 0.67
BMC ......................... 1.30 0.90 2.50 3.00 2.40
Pro forma combined per CNB share(3) 0.60 0.56 0.56 0.71 0.67
Equivalent pro forma per BMC share(4) 7.12 6.65 6.65 8.43 7.95
Book Value per Common Share
Historical:
CNB ......................... $ 15.79 $ 15.38 $ 15.84 $ 14.44 $ 14.74
BMC ......................... 221.98 220.29 229.72 190.46 206.07
Pro forma combined per CNB share 15.90 15.50 15.97 14.50 14.85
Equivalent pro forma per BMC
share ....................... 188.75 184.00 189.58 172.13 176.28
</TABLE>
(1) Net income in 1993 excludes the cumulative effect of change in accounting
for income taxes.
(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) CNB's pro forma combined dividends per share represent historical dividends
per share declared by CNB.
(4) BMC's pro forma equivalent dividends per share represent historical
dividends per share declared by CNB multiplied by an assumed Conversion
Ratio of 11.87. The Conversion Ratio, as described elsewhere herein, is
subject to adjustment. See "MERGER -- Conversion Ratio."
[/R]
Page
SELECTED FINANCIAL DATA
(unaudited)
The following tables present selected unaudited consolidated historical
financial data for CNB and BMC 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 BMC 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 BMC."
CNB
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
------------------ --------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
($ in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Interest Income.......$ 218,890 $ 202,988 $ 273,785 $ 227,050 $ 212,887 $ 227,540 $ 253,014
Interest Expense...... 111,002 103,801 140,350 105,777 101,493 122,307 155,570
Net Interest Income... 107,888 99,187 133,435 121,273 111,394 105,233 97,444
Provision for Loan
Losses ............. 5,921 4,030 6,939 7,234 3,890 9,191 15,431
Noninterest Income.... 41,712 34,556 46,669 46,805 43,113 37,809 30,059
Noninterest Expense... 102,865 88,025 116,804 113,539 103,662 96,457 89,405
Net Income(1)......... 26,920 26,281 35,651 30,512 30,916 26,121 16,038
Per Common Share Data:
Net Income (1)........
Primary.............$ 1.40 $ 1.37 $ 1.86 $ 1.60 $ 1.66 $ 1.42 $ 0.88
Fully diluted....... 1.40 1.37 1.86 1.58 1.63 1.40 0.88
Dividends Declared.... 0.60 0.56 0.56 0.71 0.67 0.65 0.62
Book Value............ 15.79 15.38 15.84 14.44 14.74 13.17 11.32
Balance Sheet Data at Period End:
Loans.................$2,139,247 $2,179,234 $1,971,454 $2,118,126 $1,841,457 $1,596,427 $1,725,186
Total Earning Assets.. 3,700,644 3,377,152 3,372,717 3,226,142 2,914,302 2,683,226 2,652,591
Total Deposits........ 2,877,416 2,788,898 2,789,989 2,595,456 2,590,790 2,454,234 2,431,887
Total Shareholders'
Equity............. 304,034 288,387 297,693 273,828 271,778 238,759 207,331
Total Assets.......... 3,982,140 3,609,638 3,628,682 3,461,339 3,145,264 2,918,357 2,887,952
Total Long-Term Debt.. 206,282 153,954 158,046 210,061 108,111 91,477 107,731
Financial Ratios:
Return on Average
Assets............. 0.95% 1.00% 1.01% 0.93% 1.02% 0.90% 0.56%
Return on Average
Common Equity (3)... 11.91% 12.30% 12.47% 11.01% 12.30% 11.58% 7.77%
Net Interest Margin (2) 4.18% 4.13% 4.13% 4.07% 4.08% 4.05% 3.87%
Core Capital (Tier 1)
Leverage Ratio(4)... 7.21% 7.42% 7.56% 7.79% 8.12% 7.56% 6.55%
Core Capital (Tier 1)
Risk-Based Capital
Ratio(5)............ 11.97% 11.85% 12.21% 12.22% 12.99% 12.45% 11.83%
Net Charge-Offs to
Average Loans....... 0.42% 0.29% 0.35% 0.20% 0.22% 0.45% 0.69%
Allowance for Losses
to Loans............ 1.41% 1.31% 1.46% 1.35% 1.27% 1.40% 1.20%
Nonperforming Loans to
Loans(6............. 1.11% 1.10% 1.17% 0.75% 0.88% 0.89% 1.23%
Allowance to Nonperforming
Loans(6)............ 126.74% 118.53% 124.77% 178.37% 144.77% 156.44% 97.24%
Nonperforming Assets to
Total Assets(7)..... 0.66% 0.73% 0.68% 0.57% 0.74% 0.78% 0.99%
</TABLE>
___________________________
(1) Net income in 1993 excludes the cumulative effect of change in
accounting for income taxes.
(2) Computed by dividing net interest income by average interest earning
assets and stated on a fully taxable equivalent basis.
(3) Computed by dividing net income by average common equity.
(4) Computed by dividing period end core capital (tangible equity) by
quarter-to-date average tangible assets.
(5) Based on final 1992 standards.
(6) Nonperforming loans include nonaccrual and restructured loans and loans
past due 90 days or more.
(7) Nonperforming assets include nonperforming loans and other real estate
owned.
Page
BMC
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
----------------- ---------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
($ in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Interest Income.......$ 5,482 $ 4,394 $ 6,179 $ 5,297 $ 5,299 $ 5,880 $ 6,466
Interest Expense...... 3,069 2,010 3,029 2,194 2,287 2,920 3,892
Net Interest Income... 2,413 2,384 3,150 3,103 3,012 2,960 2,574
Provision for Loan Losses 957 135 (12) (78) 229 251 271
Noninterest Income.... 190 185 315 250 411 258 141
Noninterest Expense... 1,440 1,191 1,654 1,599 1,590 1,443 1,335
Net Income(1)......... 99 733 1,200 1,230 1,151 1,160 838
Per Common Share Data:
Net Income (1)........$ 1.62 $ 12.04 $ 19.71 $ 20.05 $ 18.53 $ 18.40 $ 12.97
Dividends Declared.... 1.30 0.90 2.50 3.00 2.40 1.50 1.20
Book Value............ 221.98 220.29 229.72 190.46 206.07 176.05 156.66
Balance Sheet Data at Period End:
Loans.................$ 53,698 $ 43,270 $ 45,506 $ 42,789 $ 36,486 $ 36,325 $ 37,665
Total Earning Assets.. 92,268 75,300 100,986 71,689 72,701 71,535 71,632
Total Deposits........ 85,488 64,608 92,770 63,505 62,523 63,284 64,817
Total Shareholders'
Equity.............. 13,497 13,394 13,968 11,608 12,784 10,962 10,108
Total Assets.......... 99,778 79,019 107,482 75,653 76,090 74,718 75,566
Total Long-Term Debt.. - - - - - - -
Financial Ratios:
Return on Average
Assets.............. 0.13% 1.26% 1.44% 1.61% 1.53% 1.55% 1.12%
Return on Average
Common Equity (3)... 0.92% 7.35% 9.00% 9.97% 9.67% 11.14% 8.74%
Net Interest Margin (2) 3.18% 4.24% 4.07% 4.38% 4.30% 4.37% 3.97%
Core Capital (Tier 1)
Leverage Ratio(4)... 10.43% 16.89% 14.15% 13.45% 16.80% 14.67% 13.38%
Core Capital (Tier 1)
Risk-Based Capital
Ratio(5)............ 19.83% 129.37% 25.69% 25.33% 31.74% 27.24% 24.00%
Net Charge-Offs to
Average Loans...... 2.50% 0.41% (0.03)% (0.20)% 0.61% 0.67% 0.73%
Allowance for Losses
to Loans........... 1.12% 1.78% 1.32% 1.40% 1.64% 1.64% 1.58%
Nonperforming Loans to
Loans(6............. 0.75% 1.01% 0.61% 0.69% 1.12% 1.37% 2.38%
Allowance to Nonperforming
Loans(6)............. 147.78% 175.63% 215.05% 204.08% 146.70% 120.48% 66.82%
Nonperforming Assets to
Total Assets(7)..... 0.41% 0.59% 0.26% 0.39% 0.58% 0.78% 1.23%
</TABLE>
___________________________
(1) Computed by dividing net interest income by average interest earning
assets and stated on a fully taxable equivalent basis.
(2) Computed by dividing net income by average common equity.
(3) Computed by dividing period end core capital (tangible equity) by quarter
-to-date average tangible assets.
(4) Based on final 1992 standards.
(5) Nonperforming loans include nonaccrual and restructured loans and loans
past due 90 days or more.
(6) Nonperforming assets include nonperforming loans and other real estate
owned.
Page
<TABLE>
CNB/BMC
PRO FORMA COMBINED SELECTED FINANCIAL DATA
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
----------------- ------------------------------
1996 1995 1995 1994 1993
($ in thousands, except per share data)
[R]
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Interest Income.......$ 224,372 $ 207,382 $ 279,964 $ 232,347 $ 218,186
Interest Expense...... 114,071 105,811 143,379 107,971 103,780
Net Interest Income... 110,301 101,571 136,585 124,376 114.406
Provision for Loan
Losses.............. 6,878 4,165 6,927 7,156 4,119
Noninterest Income.... 41,902 34,741 46,984 47,055 43,524
Noninterest Expense... 104,305 89,216 118,458 115,138 105,252
Net Income(1)......... 27,019 27,014 36,851 31,742 32,067
Per Common Share Data:
Net Income (1)........
Primary.............$ 1.36 $ 1.36 $ 1.86 $ 1.61 $ 1.66
Fully diluted....... 1.36 1.36 1.86 1.59 1.63
Dividends Declared.... 0.60 0.56 0.56 0.71 0.67
Book Value............ 15.90 15.50 15.97 14.50 14.85
Balance Sheet Data at Period End:
Loans.................$2,192,945 $2,222,504 $2,016,960 $2,160,915 $ 1,877,943
Total Earning Assets.. 3,792,912 3,452,452 3,473,703 3,297,831 2,987,003
Total Deposits........ 2,962,904 2,853,506 2,882,759 2,658,961 2,653,313
Total Shareholders'
Equity............. 317,531 301,781 311,661 285,436 284,562
Total Assets.......... 4,081,918 3,688,657 3,736,164 3,536,992 3,221,354
Total Long-Term Debt.. 206,282 153,954 158,046 210,061 108,111
Financial Ratios:
Return on Average
Assets............. 0.93% 1.01% 1.02% 0.95% 1.03%
Return on Average
Common Equity (3)... 11.41% 12.08% 12.32% 10.97% 12.18%
Net Interest Margin (2) 4.15% 4.13% 4.13% 4.08% 4.08%
Core Capital (Tier 1)
Leverage Ratio(4)... 7.27% 7.54% 7.76% 7.56% 8.25%
Core Capital (Tier 1)
Risk-Based Capital
Ratio(5)............ 12.16% 12.20% 12.53% 12.50% 13.37%
Net Charge-Offs to
Average Loans....... 0.47% 0.30% 0.34% 0.19% 0.22%
Allowance for Losses
to Loans............ 1.40% 1.31% 1.46% 1.35% 1.28%
Nonperforming Loans to
Loans(6............. 1.10% 1.10% 1.16% 0.75% 0.88%
Allowance to Nonperforming
Loans(6)............ 127.09% 119.56% 125.84% 178.84% 144.82%
Nonperforming Assets to
Total Assets(7)..... 0.65% 0.73% 0.63% 0.46% 0.52%
[/R]
</TABLE>
___________________________
(1) Net income in 1993 excludes the cumulative effect of the change in
accounting for income taxes.
(2) Computed by dividing net interest income by average interest-earning
assets and stated on a fully taxable equivalent basis.
(3) Computed by dividing net income by average common equity.
(4) Computed by dividing period end core capital (tangible equity) by
quarter-to-date average tangible assets.
(5) Based on final 1992 standards.
(6) Nonperforming loans include nonaccrual and restructured loans and loans
past due 90 days or more.
(7) Nonperforming assets include nonperforming loans and other real estate
owned.
Page
SPECIAL MEETING
Date, Time and Place
[R]
This Prospectus/Proxy Statement is being furnished to shareholders of BMC
in connection with the solicitation of proxies by the Board of Directors of BMC
for use at the Special Meeting to be held at the main office of Bank of
Mt. Carmel located at 601 Market Street, Mt. Carmel, Illinois, on February 5,
1997, at 10:00 a.m., local time, and at any adjournment or postponement thereof.
[/R]
Matters to be Considered
At the Special Meeting, the shareholders of BMC 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 BMC with and
into HBI. (Shareholders of BMC 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.)
[R]
This Prospectus/Proxy Statement, the attached Notice of Special Meeting and
the Proxy Card are first being sent to shareholders of BMC on or about
January 7, 1997.
Record Date
The Board of Directors of BMC has fixed December 24, 1996, as the Record
Date for the determination of shareholders of BMC to receive notice of and to
vote at the Special Meeting. As of the close of business on the Record Date,
there were 60,803 shares of BMC Common issued and outstanding. Only holders of
shares of BMC 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 BMC
Common can be voted at the Special Meeting, unless the record holder is present
in person or represented by proxy at the Special Meeting.
[/R]
Vote Required
The presence, in person or by proxy, of holders of a majority of the issued
and outstanding shares of BMC 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 BMC Common is required to approve the
Merger Agreement and the transactions contemplated thereby, including the
Merger. Each holder of BMC Common is entitled to one vote per share of BMC
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 BMC Board of Directors intends 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 BMC Common present in person or represented by proxy
and entitled to vote at the Special Meeting. The Board of Directors of BMC
believes that such proposal would be in the best interests of BMC and the BMC
shareholders and recommends that the BMC Shareholders vote FOR approval of such
proposal.
Security Ownership of Management
As of the close of business on the Record Date, 60,803 shares of BMC Common
were issued and outstanding, of which 11,532 shares, or 18.97%, of BMC Common
were beneficially owned by directors and executive officers of BMC and their
affiliates. As of the Record Date, neither CNB nor any of its directors and
executive officers or their affiliates owned any shares of BMC Common.
For additional information regarding the shares of BMC Common beneficially
owned, directly or indirectly, by each director and executive officer of BMC and
by all directors and executive officers of BMC as a group, see "INFORMATION
ABOUT BMC -- 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 BMC
Common represented by a proxy properly signed and returned to BMC 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 BMC 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 BMC 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 BMC proxies should be
addressed to BMC Bancshares, Inc., 601 Market Street, P.O. Box 10, Mt. Carmel,
Illinois 62863, Attention: Corporate Secretary. A holder of BMC 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 BMC 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.
BMC intends to count holders of shares of BMC Common present in person at
the Special Meeting but not voting, and holders of shares of BMC Common for
which BMC 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, if
any, 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 from such customers. Since the affirmative vote of the holders of
at least two-thirds of the issued and outstanding shares of BMC 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 BMC 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 BMC Common by
use of the mail, proxies also may be solicited by personal interview, telephone
and wire by directors, officers and employees of BMC, who will not be
specifically compensated for such services, and it is expected that, if
applicable, 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
BMC. BMC reserves the right to engage an outside party to solicit proxies and
to pay special compensation for that purpose.
CNB and BMC 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 SEC and other regulatory filing fees incurred
in connection therewith.
PARTIES
CNB
CNB was organized in May 1983, 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 September 30, 1996, CNB had consolidated assets of
$4.0 billion, deposits of $2.9 billion, loans of $2.1 billion and shareholders'
equity of $304 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 93 full-service banking offices, 34 consumer finance
offices and the offices of its 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 other 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; Citizens Realty and Insurance Inc.,
d/b/a Citizens Insurance of Evansville, which sells property and casualty
insurance as an independent agent; and Small, Parker & Blossom, Inc., which
provides third party administrative services for employee benefit plans.
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
shares of Citizens Bank-Illinois.
Additional information concerning CNB is included in the documents
incorporated by reference herein. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
BMC
BMC, an Illinois corporation organized in 1986, is a registered one-bank
holding company under BHCA, as amended. BMC owns all the capital stock of Bank
of Mt. Carmel, an Illinois banking corporation. At September 30, 1996, BMC had
consolidated total assets of $99.8 million, total loans of $53.7 million, total
deposits of $85.5 million, and stockholder's equity of $13.5 million.
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 BMC are urged to read the Merger Agreement in
its entirety.
Background of Merger
After reviewing the effect of legal, regulatory, and other factors upon
competition among commercial banks, particularly smaller midwestern banks
serving predominantly rural banking markets, and after evaluation of financial,
economic, technological, and market considerations, the Board of Directors of
BMC concluded that an affiliation with a larger, more diversified banking
organization would be in the best interest of BMC, the shareholders of BMC, Bank
of Mt. Carmel, the employees of BMC and Bank of Mt. Carmel, and the communities
served by BMC.
In March, 1996, after concluding that a sale or affiliation of BMC should
be considered, the BMC Board of Directors explored the possibility for such a
sale to or merger with a larger banking organization. Representatives of BMC
had informal discussions with several such organizations regarding their
interest in pursuing such a transaction. All of these discussions were merely
exploratory in nature and the BMC Board of Directors did not then reach a
decision with regard to the sale or merger of BMC.
In July, 1996, in response to informal overtures received from
representatives of BMC, CNB expressed its interest in meeting with
representatives of BMC in order to submit a proposal calling for CNB's
acquisition of BMC in a stock-for-stock merger transaction providing for a
premium over the book value of BMC Common, subject to completion of each party's
due diligence review. In response to this expression of interest,
representatives of BMC met with representatives of CNB to discuss, among other
things, the exchange ratio, other specific terms of the proposed transaction,
and the scope of their respective due diligence review. It was determined at
that time that CNB's proposal be submitted to the BMC Board of Directors.
On August 12, 1996, the written proposal of CNB was presented to, reviewed
and analyzed by the BMC Board of Directors. The BMC Board determined to
continue discussion with CNB and recommended that CNB submit a revised proposal
based upon the comments and concerns of the BMC Board of Directors.
On October 4, 1996, CNB submitted to the BMC Board of Directors a revised
proposal letter. After discussion and analysis of the revised proposal, the BMC
Board of Directors approved the proposal in substance and determined to move
forward toward a definitive agreement, to be approved after CNB completed its
due diligence review.
On October 4, 1996, the BMC Board of Directors met with legal counsel and
its financial advisor to discuss and review the proposal of CNB to acquire BMC
as set forth in the draft of the definitive agreement which had been submitted
to the BMC Board of Directors and distributed to each of the BMC directors. The
BMC directors reviewed and discussed CNB's proposal in detail and discussed
other potential alternatives to the CNB proposal, including the prospects of
remaining independent. During the course of the meeting of the BMC Board of
Directors certain questions and issues were raised with regard to CNB's
proposal, and, in order to permit the directors of BMC sufficient time to study
CNB's proposal and to obtain answers to such questions, it was determined to
adjourn the meeting to October 8, 1996.
At a reconvened meeting of the BMC Board of Directors on October 8, 1996,
W. Gene Guisewite, the President and Chief Executive Officer of BMC and Bank of
Mt. Carmel, reported upon the resolution of the questions and issues raised.
The Board of Directors determined that the value of the CNB Common to be
received in exchange for the BMC Common in the Merger represents a fair price to
the BMC shareholders. After further discussion and review of the proposal, the
BMC Board of Directors, with 8 directors voting in favor and 1 director voting
against, approved the proposed definitive agreement and authorized its execution
on behalf of BMC. The Merger Agreement was executed and publicly announced on
October 11, 1996.
Reasons for Merger; Recommendation of BMC's Board of Directors
Among the factors considered by the Board of Directors of BMC in approving
the Merger Agreement and recommending to BMC shareholders the approval of the
Merger Agreement and Merger were: (1) the amount and form of consideration
offered by CNB for the shares of BMC Common; (2) the financial condition, recent
results of operations and prospects of BMC and CNB; (3) the strength of CNB's
management; (4) the historic market prices and book values of shares of BMC
Common and CNB Common; (5) the terms of other reported acquisitions of
comparably sized banks in the Midwestern United States; (6) the tax-free nature
of the Merger; (7) the more active and established trading market for the shares
of CNB Common; (8) the future prospects of CNB as a larger and more diversified
provider of financial products and services; and (9) the prospect of enhanced
service to BMC's customers and increased ability to deal with the technological
challenges of the future.
For the foregoing reasons, the Board of Directors of BMC has concluded
that, at this time, the affiliation through the Merger of BMC with CNB is in the
best interest of BMC and its shareholders and in the best interest of Bank of
Mt. Carmel and the customers and communities that the Bank of Mt. Carmel serves.
FOR THESE REASONS, THE BOARD OF DIRECTORS OF BMC RECOMMENDS THAT HOLDERS OF
BMC COMMON VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT AND THE MERGER.
Certain members of the management and Board of Directors of BMC have
interests in the Merger that are in addition to the interests of shareholders of
BMC generally. See "-- Interests of Certain Persons in Merger."
Opinion of Financial Advisor
On August 21, 1996, the Board of Directors of BMC entered into an agreement
with Pauli, pursuant to which Pauli agreed to provide financial advisory and
investment banking services to BMC and the BMC Board of Directors in connection
with the possible acquisition of BMC. As part of Pauli's engagement, Pauli
agreed, if requested by the BMC Board, to render an opinion as to the fairness,
from a financial point of view, of the consideration to be received by the
shareholders of BMC in connection with any such acquisition.
Pauli delivered a written opinion (the "Opinion") to the BMC Board of
Directors on October 4, 1996 that, based upon and subject to the considerations
set forth in the opinion, the consideration to be paid to the shareholders of
BMC in the Merger is fair, from a financial point of view. The full text of the
Opinion, dated October 4, 1996, which sets forth assumptions made, matters
considered, and limitations on the review undertaken, is attached as Appendix B
to this Proxy Statement/Prospectus. BMC shareholders are urged to read the
Opinion in its entirety.
During the course of its engagement, and as a basis for arriving at the
Opinion, Pauli reviewed and analyzed material bearing upon the financial and
operating condition of BMC and CNB and materials prepared in connection with the
Merger, including, among other things, the following: (i) the Merger Agreement;
(ii) historical unaudited consolidated financial statements and operating
statistics of BMC; (iii) financial and operating forecasts with respect to BMC
provided by management representatives of BMC; (iv) public information regarding
selected companies comparable to BMC; (v) the terms, to the extent publicly
available, of selected transactions comparable to the Merger; and (vi) market
price and volume data and trading activities for BMC Common and CNB Common. In
addition, Pauli held discussions with management representatives concerning the
business and prospects of BMC and the strategic and operating benefits
anticipated to be derived from the Merger. Pauli also took into account its
experience in other transactions, as well as its knowledge of the banking
industry and its general experience in securities valuation.
Comparable Company Analysis. Comparable Company Analysis analyzes a
company's operating performance relative to a group of publicly traded peers.
Based on relative performance and outlook for a company versus its peers, this
analysis enables an implied unaffected market trading value to be determined.
Pauli compared the merger value of BMC with a group of six other publicly traded
bank holding companies that it believed to be appropriate for comparisons: ANB
Bancorp, Heritage Financial Services, Indiana United Bancorp, Merchants Bancorp,
Old Second Bancorp, and Princeton National Bancorp. Such information included
market capitalization, book equity and net income. The merger value was the
current price of CNB multiplied by the Conversion Ratio as defined in the Merger
Agreement. The merger value was computed, as of the date of the Opinion, to be
$414. The merger value to book value was 1.8x compared to a peer group average
of 1.5x. The merger value to earnings was 25.4x compared to a peer group
average of 13.3x.
Comparable Merger and Acquisition Analysis. Comparable Merger and
Acquisition Analysis provides an analysis of multiples of market value to
trailing twelve month earnings and multiples of market values to book value of
recent mergers. The research by Pauli indicated nine comparable acquisitions
over the last two and a half years based on asset size or location. The
acquired companies were: Midlothian State Bank, First State Bank, Indiana State
Bank of Terra Haute, BMC Bancorp, Union County National Bancorp, River Bend
Bancshares, First Sterling Bancorp, NBM Bancorp, and Harrisburg Bancshares. The
average transaction was for 1.8x book value and 17.5x trailing twelve month
earnings as opposed to 1.8x market value to book value and 22.8x trailing twelve
month earnings in the Merger. (Harrisburg Bancshares referred to above was
acquired by CNB for a price equal to 2.3x book value and 35.0x trailing twelve
month earnings.)
In preparing the Opinion, Pauli 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 BMC or
CNB, nor was it furnished with any such evaluation or appraisal. Pauli assumed
and relied upon the management representatives of BMC referred to above
as to the reasonableness and achievability of the financial and operating
forecasts and the assumptions furnished by BMC. The Opinion is
necessarily based on economic market, and other conditions as in effect on, and
the information made available to Pauli as of, October 4, 1996.
THE OPINION IS DIRECTED ONLY TO THE FINANCIAL CONSIDERATION TO BE PAID TO
THE BMC SHAREHOLDERS AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY BMC
SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE SPECIAL MEETING OR AS
TO THE ADVISABILITY OF RETAINING OR DISPOSING OF SHARES OF CNB COMMON RECEIVED
PURSUANT TO THE MERGER.
The BMC Board of Directors retained Pauli based upon its experience and
expertise with regard to the banking industry and merger and acquisition
transactions. Pauli is an investment banking and securities firm. As part of
its investment banking services, Pauli is regularly engaged in the independent
valuation of businesses and securities in connection with mergers, acquisitions,
sales and distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes.
Pursuant to its engagement of Pauli to provide financial advisory and
investment banking service, BMC agreed to pay Pauli a fee of $10,000. Pauli
will also receive reimbursement for certain out-of-pocket expenses, and BMC has
agreed to indemnify Pauli 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, BMC 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 BMC will terminate.
[R]
Immediately following the Merger, shareholders of CNB and the former
shareholders of BMC will own approximately 96.4% and 3.6%, respectively, of the
then outstanding shares of CNB Common.
[/R]
Conversion Ratio
As a result of the Merger, each share of BMC 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, by
virtue of the Merger and without any action on the part of CNB, BMC, HBI or
their respective shareholders, will be converted into the right to receive the
number of shares of CNB Common equal to the Conversion Ratio and, as described
below, cash in lieu of fractional shares.
The Conversion Ratio is equal to the quotient of (a) the Maximum CNB Common
Amount (which is the total number of shares of CNB Common issuable to holders of
BMC Common in the Merger), divided by (b) the Fully-Diluted BMC Common Amount.
The Maximum CNB Common Amount is equal to 884,227; provided, however, that
(a) if the CNB Average Price is less than $25.71, then the Maximum CNB Common
Amount will be increased to equal the product of (i) 884,227, and (ii) the
quotient of $25.71 divided by the CNB Average Price (but in no event will the
Maximum CNB Common amount exceed 1,180,960), and (b) if the CNB Average Price is
greater than $28.57, then the Maximum CNB Common Amount will be decreased to
equal to the product of (i) 884,227, and (ii) the quotient of $28.57 divided by
the CNB Average Price (but in no event will the Maximum CNB Common Amount be
less than 721,782). The term "CNB Average Price", as used herein, means the
average of the daily closing prices of CNB Common as reported in The Wall Street
Journal (Midwest Edition) for the twenty business days preceding the fifth
calendar day prior to the Closing Date. The term "Fully-Diluted BMC Common
Amount," as used herein, means the sum of (i) the number of issued and
outstanding shares of BMC Common as of immediately prior to the Effective Time,
and (ii) the number of shares of BMC Common issuable, whether at the Effective
Time or upon the passage of time or the occurrence of future events, upon the
exercise, conversion, or exchange of all then-outstanding options, warrants,
rights to subscribe for or acquire, calls, or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for, shares of BMC Common. BMC has represented, in the Merger Agreement, that
the Fully-Diluted BMC Common Amount equals 60,803.
BMC will have no obligation to consummate the Merger if the CNB Average
Price is less than $19.25; provided, however, that as described in the preceding
paragraph, in no event will the number of shares issued in the Merger exceed
1,180,960. CNB will have no obligation to consummate the Merger if the CNB
Average Price is more than $35.00; provided, however, that as described in the
preceding paragraph, in no event will the number of shares issued in the Merger
be less than 721,782. See "-- Conditions to Merger."
The shares of CNB Common to be issued to holders of BMC Common in the
Merger, together with any cash payment in lieu of fractional shares as described
under "-- Fractional Shares," are referred to herein as the "Merger
Consideration."
[R]
As the CNB Average Price will be calculated based upon the closing price of
CNB Common for the twenty business days preceding the fifth calendar day prior
to the Closing Date, it is not possible, as of the date of this Prospectus/Proxy
Statement, to determine the actual Conversion Ratio. Assuming, however, for
purposes of illustration, that the Closing Date would have occurred on
December 31, 1996, and the Fully-Diluted BMC Common Amount would have been, as
represented by BMC in the Merger Agreement, 60,803, then the CNB Average Price
would have been $36.26 and the Conversion Ratio would have been 11.87.
[/R]
The amount of the Merger Consideration was determined through negotiations,
taking into account the relative value of BMC Common and CNB Common.
Fractional Shares
No fractional shares of CNB Common will be issued in the Merger and, in
lieu thereof, holders of shares of BMC Common who would otherwise be entitled to
a fractional share interest (after taking into account all shares of BMC 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 CNB Common as reported in The
Wall Street Journal (Midwest Edition) on the 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 (a "Share Adjustment") 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, then the
Conversion Ratio will be appropriately and proportionately adjusted so that each
shareholder of BMC 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 of
the Merger; provided, however, that the 5% stock dividend payable by CNB on
October 11, 1996, to shareholders of record on September 20, 1996, is not deemed
to be a Share Adjustment for the foregoing purposes and no adjustments to the
Conversion Ratio will be made 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, (ii) the first business day of
the month following, or (iii) the last business day of the earliest month which
is the second month of a calendar quarter following, in each case, the month
during which all necessary regulatory approvals, consents, authorizations and
approvals, including approval of the shareholders of BMC, 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 BMC 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 first
quarter of 1997, but no assurance can be given that such timetable will be met.
If the Merger is not effected on or before October 11, 1997, the Merger
Agreement may be terminated by either CNB or BMC. See "-- Termination of Merger
Agreement."
Resale of BMC Common Prior to Effective Time
With the exception of those shareholders of BMC who may be deemed to be
"affiliates" of BMC for purposes of Rule 145 under the Securities Act, the
Merger Agreement does not prohibit shareholders of BMC from selling their shares
prior to the Effective Time. The Merger Agreement provides, however, that each
affiliate of BMC 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 BMC 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 BMC generally include individuals who (or entities which)
control, are controlled by, or are under common control with, BMC and will
include directors and certain officers of BMC and may include principal
shareholders of BMC. See "MERGER -- Resale of CNB Common."
Regulatory Approvals
CNB agreed, in the Merger Agreement, to file all regulatory applications to
obtain the requisite regulatory approvals from the Federal Reserve Board. The
Merger cannot proceed in the absence of such regulatory approvals.
[R]
The Merger is subject to approval by the Federal Reserve Board pursuant to
Section 3 of the BHCA. The Federal Reserve Board approved the Merger on
December 17, 1996.
The Merger may not be consummated until 30 days after Federal Reserve Board
approval, during which time the Department of Justice ("DOJ") may challenge the
Merger on antitrust grounds and seek the divestiture of certain assets and
liabilities. With the approval of the Federal Reserve Board and the DOJ, the
waiting period may be reduced to no less than fifteen days. The approval of the
Federal Reserve Board provided that the Merger may not be consummated before
January 1, 1997. The commencement of an antitrust action by the DOJ would stay
the effectiveness of Federal Reserve Board approval of the Merger unless a court
specifically orders otherwise. In reviewing the Merger, the DOJ could analyze
the effect of the Merger on competition differently than the Federal Reserve
Board and, thus, it is possible that the DOJ could reach a different conclusion
than the Federal Reserve Board regarding the competitive effects of the Merger.
[/R]
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") 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 on or 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 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 illegal; (iv) all necessary regulatory approvals, consents,
authorizations and other approvals required by law to consummate the Merger
(including the approval of the Merger by the shareholders of BMC; 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 SEC; (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 BMC 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 BMC will
be the same as the basis of shares of BMC Common exchanged therefor, and (4) the
holding period of the shares of CNB Common received by the shareholders of BMC
will include the holding period of the shares of BMC 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) BMC shall have delivered to CNB, by November 15, 1996, audited
financial statements for the year ended December 31, 1995, which evidence no
material differences in reported income and equity between the amounts set forth
in such audited financial statements and the amounts set forth in the unaudited
financial statements previously delivered by BMC to CNB; (b) in the reasonable
opinion of CNB, after consultation with its independent certified public
accountants, the Merger will qualify for pooling of interests accounting
treatment if closed and consummated in accordance with the Merger Agreement; and
(c) the CNB Average Price is not greater than $35.00 (as appropriately and
proportionately adjusted to reflect any Share Adjustments). The condition
described above in clause (a) has been satisfied.
The obligation of BMC to effect the Merger is further subject to the
fulfillment, or waiver by BMC, at or prior to the Closing Date, of the condition
that the CNB Average Price is not less than $19.25 (as appropriately and
proportionately adjusted to reflect any Share Adjustments).
The conditions described in clause (iv) above (the receipt of shareholder
and regulatory approvals) may not be waived by CNB or BMC. Although the
remaining conditions to effect the Merger may be waived by the party entitled to
the benefit thereof, neither CNB nor BMC intends to waive any such conditions
except in those circumstances where the Board of Directors of CNB or BMC, as the
case may be, deems such waiver to be in the best interests of CNB or BMC, 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 October 11, 1997, the Merger Agreement may
be terminated by either CNB or BMC. 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 BMC (regardless of whether
approval by the shareholders of BMC of the Merger Agreement previously has been
obtained); (ii) by CNB or BMC 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 BMC of the Merger Agreement previously has been
obtained); (iii) by CNB if certain reports of environmental inspection on the
real properties of BMC to be obtained pursuant to the Merger Agreement should
disclose any matters requiring remedial or corrective measures the cost of which
exceeds $150,000 (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")
(regardless of whether approval by the shareholders of BMC of the Merger
Agreement has been obtained); (v) by either party 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 BMC (see "SPECIAL MEETING -- Vote Required"); (vii) by CNB if
the Board of Directors of BMC fails to approve or recommend the Merger Agreement
or the Merger, or withdraws or modifies in any manner adverse to CNB its
approval or recommendation of the Merger Agreement or the Merger, or resolves or
publicly announces an intention to do either of the foregoing; (viii) by CNB in
the event that BMC 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 (ix) by either party if the Merger is not consummated on or prior
to October 11, 1997.
Termination Fee
The Merger Agreement provides that if the Merger Agreement is terminated
(by CNB or BMC) and prior to or concurrently therewith a First Trigger Event has
occurred, then, unless a Nullifying Event has occurred and is then continuing,
BMC must, on or before the second business day following the termination of the
Merger Agreement, pay $200,000 to CNB.
The Merger Agreement also provides that, unless a Nullifying Event occurred
and was continuing at the time the Merger Agreement was terminated, in the event
that: (i) the Merger Agreement is terminated (by CNB or BMC); and (ii) prior to
or concurrently with such termination either (1) a First Trigger Event has
occurred, or (2) an event described in either clause (iii) or (iv) of the
definition of a First Trigger Event has occurred which, but for its failure to
satisfy the applicable proviso in such clause, would have qualified as a First
Trigger Event; and (iii) prior to, concurrently with or within 24 months after
such termination an Acquisition Event has occurred, BMC must, on or before the
second business day following the occurrence of such Acquisition Event, pay
$1,000,000 to CNB, less any amount previously paid by BMC to CNB pursuant to the
preceding paragraph hereof.
The term "First Trigger Event," as used herein, means the occurrence of any
of the following events: (i) the failure of BMC's Board of Directors to approve
or recommend the Merger Agreement or the Merger, or the withdrawal or
modification in any manner adverse to CNB of its approval or recommendation of
the Merger Agreement or the Merger, or the resolution or public announcement of
its intention to do either of the foregoing; (ii) the recommendation by BMC or
any of its significant subsidiaries, or the Board of Directors of BMC or any or
its significant subsidiaries, that the shareholders of BMC approve any
Acquisition Proposal (as defined below), or the entering into by BMC or any of
its significant subsidiaries of an agreement with respect to any Acquisition
Proposal, or the authorization, approval, proposal or public announcement by BMC
or any of its significant subsidiaries of its intention to enter into any
Acquisition Proposal; (iii) the failure of the shareholders to approve the
Merger Agreement or the Merger at the Special Meeting if, prior thereto, it was
publicly announced that any person (other than CNB) has made, or publicly
disclosed an intention to make, an Acquisition Proposal; provided, however,
that, to constitute a First Trigger Event, all of the shares of BMC Common
beneficially owned (as such term is used in the Exchange Act) by a Director of
BMC (or any person who served as a Director of BMC at any time between the date
of the Merger Agreement and the date of the Special Meeting) as of the later of
the date of the Merger Agreement or the date such person was appointed or
elected a Director of BMC must not have been voted in favor of the Merger
Agreement and the Merger at the Special Meeting; (iv) any person (together with
its affiliates and associates) or group (as such terms are used in the Exchange
Act) (other than CNB and its subsidiaries) acquires beneficial ownership or the
right to acquire beneficial ownership of 20% or more of the then outstanding
shares of the stock then entitled to vote generally in the election of directors
of BMC or any of its significant subsidiaries; provided, however, that, to
constitute a First Trigger Event, a Director of BMC (or any person who served as
a Director of BMC at any time between the date of the Merger Agreement and the
date of such acquisition) must have sold or otherwise tendered any shares of BMC
Common beneficially owned by him to either such person or group of persons or to
a third party who thereafter sold or otherwise tendered such shares to such
person or group of persons; or (v) following the making of an Acquisition
Proposal, BMC breaches any covenant or agreement set forth in the Merger
Agreement such that CNB would be entitled to terminate the Merger Agreement
(without regard to any grace period provided for therein) unless such breach is
promptly cured without jeopardizing consummation of the Merger pursuant to the
terms of the Merger Agreement.
The term "Acquisition Proposal," as used herein, means any: (i) publicly
announced proposal; (ii) regulatory application or notice (whether in draft or
final form); (iii) agreement or written understanding; (iv) public disclosure of
an intention to make a proposal; or (v) amendment to any of the foregoing, made
or filed on or after the date of the Merger Agreement, in each case with respect
to any of the following transactions with a counterparty other than CNB or any
of its subsidiaries: (A) a merger or consolidation, or any similar transaction,
involving BMC or any of its significant subsidiaries; (B) a purchase, lease or
other acquisition of all or substantially all of the assets or deposits of BMC
or any of its significant subsidiaries; or (C) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of
securities representing 20% or more of the voting power of BMC or any of its
significant subsidiaries.
The term "Acquisition Event," as used herein, means the consummation of any
event described above in the definition of "Acquisition Proposal," except that
the percentage references contained in clause (C) of such definition are 50%
instead of 20%.
The term "Nullifying Event," as used herein, means a breach by CNB of any
of its covenants or agreements contained in the Merger Agreement such that BMC
would be entitled to terminate the Merger Agreement (without regard to any grace
period provided for therein) and such event occurs and continues at a time when
BMC is not in material breach of any of its covenants or agreements contained in
the Merger Agreement.
The Merger Agreement requires that BMC notify CNB promptly in writing upon
its becoming aware of the occurrence of any First Trigger Event, Acquisition
Proposal or Acquisition Event, although the giving of such notice is not a
condition to the rights of CNB described above.
Exchange of Stock Certificates
The conversion of BMC 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 BMC Common which may be exchanged
for shares of CNB Common will be deemed, for all corporate purposes other than
the payment of dividends and other distributions on such shares, to evidence
ownership of and entitlement to receive such shares of CNB Common.
As soon as reasonably practicable following the Effective Time, The
Citizens National Bank of Evansville, the exchange agent in the Merger (the
"Exchange Agent"), will send a transmittal letter and instructions to each
record holder of certificates for BMC 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 BMC Common
will pass, only upon proper delivery of the certificates for BMC 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 BMC 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 BMC 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 BMC Common will be converted in
the Merger will be deemed to have been issued at the Effective Time. Unless and
until the certificates for BMC 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 BMC Common which would
otherwise be payable will not be paid to the holders of such certificates and,
in such case, upon surrender of the certificates for BMC 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 BMC (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 BMC 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 BMC 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 BMC include, among other
things, except as otherwise disclosed to CNB, those as to: (i) due organization
and good standing of BMC; (ii) capitalization of BMC; (iii) due authorization
and execution of the Merger Agreement by BMC; (iv) due organization, good
standing and ownership of subsidiaries of BMC; (v) presentation in accordance
with generally accepted accounting principles applied on a consistent basis of
the financial statements of BMC and Bank of Mt. Carmel; (vi) absence of any
changes in the financial condition, results of operations or business or
prospects of BMC and its subsidiaries taken as a whole since December 31, 1995,
which would have a material adverse effect on BMC and its subsidiaries taken as
a whole; (vii) absence of any agreement, memorandum of understanding, or other
regulatory enforcement action, proceeding or order between BMC 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 BMC or any of its
subsidiaries; (viii) filing of tax returns and reports and payment of taxes by
BMC and its subsidiaries; (ix) absence of pending or threatened litigation or
other such actions involving BMC or its subsidiaries; (x) existence of
agreements with employees of BMC and its subsidiaries, including certain
employment and severance agreements; (xi) filing and material compliance of
certain reports required to be filed by BMC and its subsidiaries with various
Regulatory Agencies; (xii) interest rate risk management instruments of BMC and
its subsidiaries; (xiii) investment portfolio of BMC and its subsidiaries; (xiv)
loan portfolio of BMC and its subsidiaries; (xv) certain employee matters and
matters under the Employee Retirement Income Security Act of 1974, as amended;
(xvi) title to the properties of BMC and its subsidiaries, the absence of liens
(except as specified) and insurance matters; (xvii) certain environmental
matters with respect to real properties owned, leased or operated by BMC and its
subsidiaries; (xviii) compliance by BMC and its subsidiaries with applicable
laws and regulations; (xix) absence of undisclosed liabilities of BMC and its
subsidiaries; (xx) absence of brokerage commissions or similar finder's fees
(except as specified) in connection with the Merger payable by BMC or its
subsidiaries; (xxi) payment of dividends by either BMC or any of its
subsidiaries and other distributions and actions taken by BMC; (xxii) non-
banking activities of BMC and its subsidiaries; (xxiii) qualification of the
Merger for "pooling of interests" accounting treatment; (xxiv) certain
properties, contracts and other agreements of BMC and its subsidiaries;
(xxv) trust administration of BMC and its subsidiaries; (xxvi) inapplicability
of certain state takeover laws; (xxvii) accuracy of information supplied by BMC
or its subsidiaries in connection with the Registration Statement, this
Prospectus/Proxy Statement and any other documents to be filed with the SEC,
Nasdaq or any banking or other Regulatory Agency in connection with the
transactions contemplated by the Merger Agreement; (xxviii) lack of knowledge of
a violation of the Equal Credit Opportunity Act or the Fair Housing Act or
similar state statute; (xxix) assets necessary to BMC's business.
The representations and warranties of CNB and HBI include, among other
things, those as to: (i) due organization and good standing of CNB and HBI;
(ii) capitalization of CNB and HBI; (iii) 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;
(iv) significant subsidiaries of CNB; (v) presentation in accordance with
generally accepted accounting principles applied on a consistent basis of CNB's
financial statements and filings with the SEC; (vi) absence of any material
adverse changes since December 31, 1995, in the financial condition, results of
operations or business or prospects of CNB and its subsidiaries taken as a
whole; (vii) 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) filing and material compliance of certain reports required to be filed by
CNB and its significant subsidiaries with various Regulatory Agencies;
(ix) compliance by CNB and its significant subsidiaries with applicable laws and
regulations; (x) certain tax-free reorganization and qualification of the Merger
for "pooling of interests" accounting treatment; and (xi) 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 SEC, NYSE, or any banking or other Regulatory Agency in connection with
the transactions contemplated by the Merger Agreement.
CERTAIN OTHER AGREEMENTS
BUSINESS OF BMC IN ORDINARY COURSE
Pursuant to the Merger Agreement, BMC 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, use reasonable best efforts
to maintain and preserve intact its respective business organization, employees
and advantageous business relationships and retain the services of its officers
and key employees and that neither it nor its subsidiaries will, without the
prior written consent of CNB (which will not be unreasonably withheld):
(i) issue additional BMC Common or other capital stock, options, warrants or
other rights to subscribe for or purchase BMC 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 BMC Common or
any other capital stock of BMC 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 certificate or articles of incorporation or
association, as the case may be, or bylaws; (v) grant any increase, other than
ordinary and normal increases consistent with past practices, in the
compensation payable or to become payable to officers or salaried employees,
grant any stock options or, except as required by law, adopt or change any
bonus, insurance, pension, or other employee plan, payment or arrangement made
to, for or with any such officers or employees; (vi) borrow or agree to borrow
funds other than in the ordinary course of business or directly or indirectly
guarantee or agree to guarantee any obligations of others; (vii) make or commit
to make any new loan or letter of credit or any new or additional discretionary
advance under any existing line of credit, in excess of $250,000, or that would
increase the aggregate credit outstanding to any one borrower (or group of
affiliated borrowers) to more than $250,000; (viii) purchase or otherwise
acquire any investment security for its own account having an average remaining
life to maturity greater than five years or any asset-backed securities other
than those issued or guaranteed by the Government National Mortgage Association,
the Federal National Mortgage Association or the Federal Home Loan Mortgage
Corporation; (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
six 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 BMC 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
have a material adverse effect on BMC and its subsidiaries taken as a whole;
(xvi) purchase any real or personal property or make any capital expenditure in
excess of $25,000; (xvii) take any action which would disqualify the Merger as a
"pooling of interests" or as a "reorganization" under Section 368 of the Code;
(xviii) take any action which would adversely affect or delay the ability of
either CNB or BMC 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 (xix) engage in any transaction or take any action that would
render untrue in any material respect any of the representations and warranties
made by BMC 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 BMC may, during 1996, declare and pay
its regular quarterly dividends and special annual dividends on the BMC Common
not to exceed $3.50 per share in the aggregate for 1996 (taking into account all
dividends theretofore paid in 1996) at approximately the same times during the
year which it has historically declared and paid such dividends and, during
1997, declare and pay quarterly dividends of $0.875 per share (which equates, on
an annualized basis, to $3.50 which is expected to be the aggregate annual
dividend amount of BMC for 1996) at approximately the same times during the year
which it has historically declared and paid its quarterly dividends. BMC and
CNB 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 the BMC shareholders will receive a quarterly
dividend from either BMC or CNB but not from both during or with respect to such
quarter.
Environmental Inspections
BMC has agreed to provide to CNB, within sixty days after the date of the
Merger Agreement, (i) a report of a phase one environmental investigation on all
real property owned, leased or operated by BMC or its subsidiaries as of the
date of the Merger Agreement (excluding space in retail and similar
establishments leased by BMC for automatic teller machines) and on all real
property acquired or leased by BMC or its subsidiaries after the date of the
Merger Agreement (excluding space in retail and similar establishments leased or
operated by BMC for automatic teller machines) and (ii) if required by the phase
one investigation in CNB's reasonable opinion, a report of a phase two
investigation on properties requiring such additional study. If the cost of
taking all remedial or other corrective actions and measures (i) required by
applicable law or reasonably likely to be required by applicable law, or
(ii) recommended or suggested by such report or reports or prudent in light of
serious life, health or safety concerns, in the aggregate, exceeds the sum of
$150,000 as reasonably estimated by an environmental expert retained for such
purpose by CNB and reasonably acceptable to BMC, 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 may, within fifteen
business days following receipt of such estimate or indication that the cost of
such actions and measures cannot be so reasonably estimated, terminate the
Merger Agreement, which would be CNB's sole remedy in such event. Except as
described under "-- Expenses and Fees," all costs and expenses associated with
such environmental reports will be paid by BMC. BMC has delivered the required
phase one investigations to CNB and CNB has determined not to request phase two
investigations with respect to the subject properties.
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.
Other BMC Agreements
BMC 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 BMC's representations or
agreements in the Merger Agreement or of the occurrence of any matter or event
known to and directly involving BMC, 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 BMC and its subsidiaries taken as a whole; (ii) cause the Special Meeting to
be duly called and held; (iii) BMC shall deliver to CNB, on or before
November 15, 1996, an unqualified audit opinion on the consolidated balance
sheet of BMC as of December 31, 1995, and the related consolidated statement of
income, changes in stockholders' equity and cash flows of BMC for the year ended
December 31, 1995; (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; (v) 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; (vi) deliver to CNB, at least 40 days prior
to the Closing Date, a list of each person who may reasonably be deemed an
"affiliate" of BMC and use its best efforts to obtain and deliver to CNB, at
least 31 days prior to the Closing Date, the signed agreement of each affiliate
regarding compliance by such person with the restrictions set forth under "--
Resale of CNB Common"; and (vii) permit CNB reasonable access to BMC'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;
(viii) cooperate with CNB in causing the Subsidiary Bank Merger to be effected.
CNB Agreements
CNB has agreed, among other things, to: (i) file all regulatory
applications required in order to consummate the Merger and keep BMC reasonably
informed as to the status of such applications (see "-- Regulatory Approvals");
(ii) file the Registration Statement with the SEC 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
required to carry out the Agreement and shall pay all expenses incident thereto
and use its best efforts to obtain such permits and approvals on a timely basis;
(iv) prepare and file any other (a) applications required to list on the NYSE
the shares of CNB Common to be issued pursuant to the Merger, and (b) filings
required under the Exchange Act relating to the Merger and the transactions
contemplated in the Merger Agreement; (v) give BMC 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 BMC, 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;
(viii) indemnify and provide the directors and officers of BMC 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 BMC who continue their employment after the Effective Time (see "--
Effect on Employee Benefit Plans"); and (x) permit BMC 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 BMC 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 BMC or its subsidiaries
who continues as an employee following the Effective Time 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 BMC 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 BMC may participate (but not for benefit accruals
under and defined benefit plan), credit each such employee with his or her term
of service with BMC and its subsidiaries.
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 from the
breaching party, including, without limitation, reimbursement to the non-
breaching party of its costs, fees and expenses (including attorneys',
accountants' and advisors' fees and expenses) incident to the negotiation,
preparation and execution of the Merger Agreement and related documentation
(provided that it will not be deemed to constitute liquidated damages for the
willful breach by a party of the terms of the Agreement or otherwise limit the
rights of the non-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 BMC; (b) the failure of BMC's
shareholders to approve the Merger Agreement and the Merger; (c) the failure of
the Merger to qualify as a pooling of interests due to the actions of BMC, its
affiliates or shareholders; (d) the termination of the Merger Agreement by CNB
in the event BMC or its subsidiaries 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 BMC's real properties, then CNB will reimburse BMC
for (1) all of its out-of-pocket expenses incurred in obtaining the phase one
environmental investigations pursuant to the Merger Agreement; and (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. 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, BMC and its subsidiaries will not, and will not authorize
or permit any of their respective officers, directors, employees or agents to,
solicit or encourage or (subject to the fiduciary duties of the directors of
BMC) 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
BMC or its subsidiaries. BMC 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 BMC have interests in the
Merger that are in addition to and separate from interests of shareholders of
BMC generally. The Board of Directors of BMC 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 BMC Common owned by the directors and executive officers of
BMC, see "INFORMATION ABOUT BMC -- Security Ownership of Management." None of
the directors or executive officers of BMC 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 BMC will also
constitute approval of the following benefits to be received by directors,
executive officers and employees of BMC.
Indemnification and Insurance
Following the Effective Time, CNB will provide the directors and officers
of BMC 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 will use its best efforts (which will not
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 BMC 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 BMC may purchase
such coverage under its existing directors' and officers' liability insurance
policy on such terms and provisions as BMC deems appropriate provided that the
total cost thereof may not exceed $30,000.
CNB has agreed, for a period of three years after the Effective Time, to
cause HBI, the surviving corporation of the Merger, to indemnify, defend and
hold harmless the present and former officers, directors, employees and agents
of BMC and its subsidiaries 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
the Merger Agreement) to the full extent then permitted under the Illinois Law
and by BMC's Articles of Incorporation 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 has also agreed to cause any successor or
assignee of HBI, after the Effective Time, to assume the obligations of 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 Citizens Bank-Illinois to elect each of the directors of BMC
as directors of the Regional Board of Directors of Citizens Bank-Illinois (for
the Mt. Carmel region) after the Subsidiary Bank Merger. Directors whose
principal occupations are with CNB or any of its subsidiaries receive no
Director's fees and regional directors of the Mt. Carmel region of Citizens
Bank-Illinois will receive $800 per month. See "MERGER -- Management and
Operations After Merger."
Employment Agreements
On October 11, 1996, and in connection with the execution of the Merger
Agreement, CNB and Bank of Mt. Carmel entered into an Employment and Non-Compete
Agreement with W. Gene Guisewite, President and Chief Executive Officer of BMC
and Bank of Mt. Carmel, and Employment Agreements with each of Daniel R.
Schonert, Secretary of BMC and Executive Vice President and Bank of Mt. Carmel,
and Mina Nolan, Chief Financial Officer of Bank of Mt. Carmel.
The Employment and Non-Compete Agreement with Mr. Guisewite (the "Guisewite
Agreement") provides that Mr. Guisewite will be employed, on a part-time basis,
as an executive officer of the Mt. Carmel region of Citizens Bank-Illinois for
five years following the Closing Date and that, during that period, he will not
compete with Citizens Bank-Illinois or CNB or their respective subsidiaries and
affiliates within a 50 mile radius of Mt. Carmel, Illinois. Mr. Guisewite will
receive $50,000 per year as compensation for his services as an executive
officer and $50,000 per year as consideration for his covenant not to compete.
Mr. Guisewite and his spouse will also be entitled to participate in the CNB
Bancshares, Inc. Early Retiree Health Care Plan and he will be paid an
additional amount each month necessary to reimburse him for the premiums he pays
to participate in such Plan. In addition, Mr. Guisewite will also receive title
to the vehicle he presently uses which is owned by Bank of Mt. Carmel.
Mr. Guisewite may terminate the Guisewite Agreement at any time upon 30 days
notice and the Guisewite Agreement will terminate automatically upon the death
of Mr. Guisewite. CNB and Citizens Bank-Illinois may only terminate the
Guisewite Agreement for "cause" (as such term in used in the Guisewite
Agreement).
The Employment Agreement with Mr. Schonert (the "Schonert Agreement")
provides for a one year term commencing on the Closing Date. Mr. Schonert will
be employed as President and Chief Executive Officer of the Mt. Carmel region of
Citizens Bank-Illinois with an annual salary of $75,000 and he will be entitled
to participate in all benefit plans maintained for employees of CNB generally as
provided in the Merger Agreement. Mr. Schonert may not, during the period in
which he is employed by CNB or Citizens Bank-Illinois (and their respective
subsidiaries and affiliates), and for two years thereafter, compete with
Citizens Bank-Illinois or CNB (and their respective subsidiaries and affiliates)
within a 50 mile radius of Mt. Carmel, Illinois. If during the term of the
Schonert Agreement, the employment of Mr. Schonert is terminated for any reason
other than his death, then he will receive, as consideration for his covenant
not to compete, $150,000, in two equal annual installments payable on the date
of his termination and on the first anniversary of the date of his termination,
subject to certain conditions set forth in the Schonert Agreement.
The Employment Agreement with Ms. Nolan (the "Nolan Agreement") provides
for a one year term commencing on the Closing Date. Ms. Nolan will be employed
as Executive Vice President of the Mt. Carmel region of Citizens Bank-Illinois
with an annual salary of $60,000 and she will be entitled to participate in all
benefit plans maintained for employees of CNB generally as provided in the
Merger Agreement. Ms. Nolan may not, during the period in which she is employed
by CNB or Citizens Bank-Illinois (and their respective subsidiaries and
affiliates), and for two years thereafter compete with Citizens Bank-Illinois or
CNB (and their respective subsidiaries and affiliates) within a 50 mile radius
of Mt. Carmel, Illinois. If during the term of the Nolan Agreement, the
employment of Ms. Nolan is terminated for any reason other than her death, then
she will receive, as consideration for her covenant not to compete, $120,000, in
two equal annual installments payable on the date of her termination and on the
first anniversary of the date of her termination, subject to certain conditions
set forth in the Nolan Agreement.
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 BMC; provided, however, that the provisions relating to the
conversion of the shares of BMC Common into shares of CNB Common will not be
amended after the receipt of the approval of shareholders of BMC unless the
approval of such shareholders is resolicited. It is anticipated that a
condition to the obligations of CNB and BMC to consummate the Merger would be
waived only in those circumstances where the Board of Directors of CNB or BMC,
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 BMC 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 BMC prior to the vote
taken with respect to the Merger at the Special Meeting a written demand for
payment for his or her shares of BMC 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 BMC 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 BMC
Common, BMC'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 BMC Common of the dissenting shareholder upon transmittal to HBI of the
certificate(s), or other evidence of ownership, with respect to such shares of
BMC 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 the statement of value, must notify HBI 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 HBI 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 BMC Common, HBI must either
pay the difference in value demanded or file a petition in the circuit court of
Wabash 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, but will exclude the fees and expenses of counsel and
experts 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
amount by which any dissenter estimated the value of the shares materially
exceeds the value as determined by the court, then all or any part of the costs
may be assessed against the dissenter.
If the holders of more than approximately 9% of the outstanding shares of
BMC 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 BMC, 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 BMC 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 BMC 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 BMC 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 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 BMC 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 (including any fractional share interest to which such shareholder
would be entitled) received by the shareholders of BMC will be the same as the
basis of BMC Common exchanged therefor; and (iv) the holding period of the
shares of CNB Common received by the shareholders of BMC will include the
holding period of the shares of BMC 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 BMC WITHOUT REGARD TO THE
PARTICULAR FACTS AND CIRCUMSTANCES OF EACH SHAREHOLDER'S TAX SITUATION AND
STATUS. EACH SHAREHOLDER OF BMC 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 BMC 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
BMC for the entire fiscal year in which the Merger occurs, the separately
reported income of CNB and BMC 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 that, in the reasonable opinion of CNB after
consultation with its independent certified public accountants, 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 BMC 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 BMC are not aware of any existing facts or
circumstances which would preclude the Merger from qualifying for "pooling of
interests" accounting treatment.
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."
Management and Operations After Merger
CNB intends, effective as of the Closing Date, to merge Bank of Mt. Carmel
and Citizens Bank-Illinois. Following the Subsidiary Bank Merger, (i) the
resulting bank will continue to serve the Mt. Carmel community, under the name
"Citizens Bank of Illinois, National Association," in substantially the same
manner as Bank of Mt. Carmel has done historically; (ii) the current directors
of BMC and Bank of Mt. Carmel will serve as regional directors of the Mt. Carmel
region of the resulting bank; (iii) W. Gene Guisewite, President and Chief
Executive Officer of BMC and Bank of Mt. Carmel, will serve, on a part-time
basis, as an executive officer of the Mt. Carmel region of the resulting bank;
(iv) Daniel R. Schonert, Secretary of BMC and Executive Vice President of Bank
of Mt. Carmel, will serve as President of the Mt. Carmel region of the resulting
bank; and (v) Mina Nolan, Chief Financial Officer Bank of Mt. Carmel, will serve
as Executive Vice President of the Mt. Carmel region of the resulting bank. The
management and Board of Directors of HBI and CNB will not be affected as a
result of the Merger. See "-- Management and Operations After Merger" and
"-- 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 BMC
shareholder who may be deemed to be an "affiliate" of CNB for purposes of
Rule 144 under the Securities Act or an "affiliate" of BMC for purposes of
Rule 145 under the Securities Act. Persons who may be deemed to be affiliates
of BMC or CNB generally include individuals who, or entities which, control, are
controlled by or are under common control with BMC or CNB and will include
directors and certain officers of BMC and CNB and may include principal
shareholders of BMC 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 BMC 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 Common 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 SEC 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 SEC 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.
The Merger Agreement provides that BMC 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 BMC 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
BMC after the Merger have been published. No Merger Consideration will be
delivered to an affiliate of BMC 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 BMC or
CNB.
Page
PRO FORMA FINANCIAL DATA
The following unaudited pro forma combined consolidated condensed balance
sheet as of September 30, 1996, and the pro forma combined consolidated
condensed statements of income for the nine months ended September 30, 1996 and
1995, and 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 BMC 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 BMC 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 BMC contained
elsewhere in this Prospectus/Proxy Statement. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE" and "FINANCIAL STATEMENTS OF BMC."
Page
<TABLE>
PRO FORMA COMBINED CONDENSED BALANCE SHEET
September 30, 1996
(unaudited)
<CAPTION>
(a) (b) (c)
Pro Forma CNB/BMC
CNB (1) BMC(1) Adjustments Pro Forma
-------- ------ ----------- ----------
Increase
(Decrease)
(in thousands)
[R]
<S> <C> <C> <C> <C>
Assets:
Cash and due from banks $ 120,386 $ 2,470 $ 122,856
Interest bearing deposits
in banks 262 0 262
Federal funds sold 525 13,050 13,575
Investment securities
available for sale 1,303,800 26,120 29,920
Investment securities 252,056 0 252,056
Loans held for sale 4,754 0 4,754
Loans 2,139,247 53,698 2,192,945
Allowance for loan losses (30,106) (600) (30,706)
---------- ------- ------ ----------
Net loans 2,109,141 53,098 0 2,162,239
Premises and equipment 69,680 1,093 70,773
Other real estate owned 2,456 0 2,456
Goodwill 31,509 2,246 33,755
Interest receivable and other
assets 87,571 1,701 89,222
---------- ------- ------ ----------
Total Assets $3,982,140 $99,778 $0 $4,081,918
========== ======= ====== ==========
Liabilities:
Deposits 2,877,416 85,488 2,962,904
Repurchase agreements 503,738 0 503,738
Federal funds purchased 38,315 0 38,315
Other short-term borrowings 9,474 0 9,474
Long-term debt 206,282 0 206,282
Other liabilities 42,881 793 43,674
---------- ------- ------ ----------
Total Liabilities 3,678,106 86,281 0 3,764,387
Shareholders' Equity:
Common stock 19,255 837 (115) (2) 19,977
Capital surplus 267,429 7,984 115 (2) 275,528
Retained earnings 23,528 5,081 28,609
Net unrealized gains (losses)
on investment securities
available for sale (6,178) (405) (6,583)
----------- -------- ------ ---------
Total Shareholders'
Equity 304,034 13,497 0 317,531
----------- -------- ------ ---------
Total Liabilities
and Equity $3,982,140 $99,778 $0 $4,081,918
[/R]
</TABLE>
Page
NOTES TO PRO FORMA COMBINED CONDENSED BALANCE SHEET
(unaudited)
Notes to Pro Forma Combined Condensed Balance Sheet
(1) The Merger will be accounted for under the pooling of interests method of
accounting whereby the historical basis of the assets and liabilities of
both CNB and BMC will be retained.
[R]
(2) To reflect the exchange of shares of BMC Common for shares of CNB Common,
retaining the historical cost basis of assets, liabilities, and equity
through the treatment as a pooling of interests. A total of 721,782
shares of CNB Common (stated value $1.00) will be issued assuming a CNB
Average Price of $36.26 (using the average of the 20-day period ending
December 24, 1996), resulting in a transfer from common stock to capital
surplus of $115,000 to reflect the decrease in aggregate par value of the
issued and outstanding shares of CNB common stock under the aggregate par
value of the currently outstanding shares of BMC common stock. The
Conversion Ratio, as described elsewhere herein, is subject to adjustment.
See "MERGER -- Conversion Ratio."
Capital Surplus 115
Common Stock 115
[/R]
Page
<TABLE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
Nine Months Ended September 30, 1996
(unaudited)
<CAPTION>
(a) (b) (c)
Pro Forma CNB/BMC
CNB BMC Adjustments Pro Forma
------ ------ ----------- ---------
Increase
(Decrease)
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income $218,890 $5,482 $224,372
Interest expense 111,002 3,069 114,071
-------- ------ ----- --------
Net interest income 107,888 2,413 - 110,301
Provision for loan losses 5,921 957 6,878
-------- ------ ----- --------
Net interest income after
provision for losses 101,967 1,456 - 103,423
Noninterest income 41,712 190 41,902
Noninterest expense 102,865 1,440 104,305
-------- ------- --------
Income before income taxes 40,814 206 - 41,020
Income taxes 13,894 107 - 14,001
-------- ------- ------ --------
Net income $ 26,920 $ 99 $ - $ 27,019
======== ======= ====== ========
[R]
Net income per common share
Primary $ 1.40 $ 1.36
Fully diluted 1.40 1.36
Average Shares Outstanding 19,167 19,889
Average Fully Diluted
Shares Outstanding 19,167 19,889
[/R]
</TABLE>
Page
<TABLE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
Nine Months Ended September 30, 1995
(unaudited)
<CAPTION>
(a) (b) (c)
Pro Forma CNB/BMC
CNB BMC Adjustments Pro Forma
----- ----- ----------- ---------
Increase
(Decrease)
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income $202,988 $4,394 $207,382
Interest expense 103,801 2,010 105,811
-------- ------ ------ --------
Net interest income 99,187 2,384 - 101,571
Provision for loan losses 4,030 135 4,165
-------- ------ ------ --------
Net interest income after
provision for losses 95,157 2,249 - 97,406
Noninterest income 34,556 185 34,741
Noninterest expense 88,025 1,191 89,216
--------- ------- ------ --------
Income before income taxes 41,688 1,243 42,931
Income taxes 15,407 510 - 15,917
--------- ------- ------ --------
Net income $ 26,281 $ 733 $ - $27,014
========= ======= ====== ========
[R]
Net income per common
share
Primary $ 1.37 $ 1.36
Fully diluted 1.37 1.36
Average Shares Outstanding 19,181 19,904
Average Fully Diluted
Shares Outstanding 19,181 19,904
[/R]
</TABLE>
Page
<TABLE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
Year Ended December 31, 1995
(unaudited)
<CAPTION>
(a) (b) (c)
Pro Forma CNB/BMC
CNB BMC Adjustments Pro Forma
----- ----- ----------- ---------
Increase
(Decrease)
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income $273,785 $6,179 $279,964
Interest expense 140,350 3,029 143,379
-------- ------ ----- --------
Net interest income 133,435 3,150 - 136,585
Provision for loan losses 6,939 (12) 6,927
-------- ------ ----- --------
Net interest income after
provision for losses 126,496 3,162 - 129,658
Noninterest income 46,669 315 46,984
Noninterest expense 116,804 1,654 118,458
-------- ------ ----- --------
Income before income taxes 56,361 1,823 - 58,184
Income taxes 20,710 623 - 21,333
-------- ------ ----- --------
Net income $ 35,651 $1,200 $ - $36,851
======== ====== ===== ========
[R]
Net income per common share
Primary $ 1.86 $ 1.86
Fully diluted 1.86 1.86
Average Shares Outstanding 19,123 19,846
Average Fully Diluted
Shares Outstanding 19,123 19,846
[/R]
</TABLE>
Page
<TABLE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
Year Ended December 31, 1994
(unaudited)
<CAPTION>
(a) (b) (c)
Pro Forma CNB/BMC
CNB BMC Adjustments Pro Forma
----- ----- ----------- ---------
Increase
(Decrease)
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income $227,050 $5,297 $232,347
Interest expense 105,777 2,194 107,971
-------- ------ ----- --------
Net interest income 121,273 3,103 - 124,376
Provision for loan losses 7,234 (78) 7,156
-------- ------ ----- --------
Net interest income after
provision for losses 114,039 3,181 - 117,220
Noninterest income 46,805 250 47,055
Noninterest expense 113,539 1,599 115,138
-------- ------ ----- --------
Income before income taxes 47,305 1,832 - 49,137
Income taxes 16,793 602 - 17,395
-------- ------- ----- --------
Net income $ 30,512 $ 1,230 $ - $31,742
======== ======= ===== ========
[R]
Net income per common share
Primary $ 1.60 $ 1.61
Fully diluted 1.58 1.59
Average Shares Outstanding 19,043 19,771
Average Fully Diluted
Shares Outstanding 19,484 20,212
[/R]
</TABLE>
Page
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
Year Ended December 31, 1993
(unaudited)
<TABLE>
<CAPTION>
(a) (b) (c)
Pro Forma CNB/BMC
CNB BMC Adjustments Pro Forma
----- ----- ----------- ---------
Increase
(Decrease)
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income $212,887 $5,299 $218,186
Interest expense 101,493 2,287 103,780
-------- ------ ------ --------
Net interest income 111,394 3,012 - 114,406
Provision for loan losses 3,890 229 4,119
Net interest income after
provision for losses 107,504 2,783 - 110,287
Noninterest income 43,113 411 43,524
Noninterest expense 103,662 1,590 105,252
-------- ----- ------ --------
Income before income taxes 46,955 1,604 - 48,559
Income taxes 16,039 453 - 16,492
-------- ------- ------ --------
Net income $ 30,916 $ 1,151 $ - $32,067
======== ======= ====== ========
[R]
Net income per common share
Primary $ 1.66 $ 1.66
Fully diluted 1.63 1.63
Average Shares Outstanding 18,600 19,337
Average Fully Diluted
Shares Outstanding 19,351 20,089
[/R]
</TABLE>
Notes to Pro Forma Combined Condensed Statements of Income
(1) Net income in 1993 excludes the cumulative effect of change in accounting
for income taxes.
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 September 30, 1996,
19,255,000 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.
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
The Citizens National Bank of Evansville, Evansville, Indiana 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 September 30, 1996, $1.5 million was available for
payment of dividends, purchases of CNB Common and payments or distributions in
respect of CNB Common under the Loan Agreement.
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 BMC Common are governed by the
Illinois Law and by BMC's Articles of Incorporation, By-laws and other corporate
documents. The rights of holders of shares of BMC 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 BMC 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 bringing 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 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.
BMC
Under Illinois Law, the affirmative vote of at least two-thirds of the
shares entitled to vote on a proposed plan of merger is required for approval
unless any class or series of shares is entitled to vote as a class on the plan.
If any class is entitled to vote on the plan, the proposed plan must be approved
by an affirmative vote of (i) at least two-thirds of the shares of each class or
series of shares entitled to vote as a class and (ii) at least two-thirds of the
total number of shares entitled to vote on the proposed plan. The articles of
incorporation of any corporation may supersede the two-thirds vote requirement
by specifying any smaller or larger vote requirement; provided, however, that
the vote requirement may not be less than a majority of the shares entitled to
vote. BMC's Articles of Incorporation and By-laws do not contain such
provisions.
Removal of Directors
CNB
CNB's Articles of Incorporation provide that at a meeting called expressly
for that purpose, a director or the entire Board of Directors may be removed
without cause only upon the affirmative vote of the holders of not less than 80%
of the shares entitled to vote generally in an election of directors. At a
meeting called expressly for that purpose, a director may be removed by the
shareholders for cause by the affirmative vote of the holders of a majority of
the shares entitled to vote upon his election. The Articles of Incorporation
provide that, except as may be otherwise provided by law, cause for removal will
be construed to exist only if the director whose removal is proposed: (i) has
been convicted of a felony by a court of competent jurisdiction and such
conviction is no longer subject to direct appeal; or (ii) has been adjudged by a
court of competent jurisdiction to be liable for negligence or misconduct in the
performance of his duty to CNB in a manner of substantial importance to CNB, and
such adjudication is no longer subject to direct appeal. CNB's 80% shareholder
vote requirement for removal of directors without cause precludes a majority
shareholder from circumventing the classified Board by decreasing the size of
the Board until its nominees have a numerical majority or by removing directors
not up for election, filling the resulting vacancy with its nominees, and
thereby gaining control of the Board. The removal provisions would make it more
difficult for shareholders of CNB to change the composition of the Board of
Directors even if the shareholders believe such a change would be desirable.
BMC
BMC's By-Laws provide that a majority of shareholders may remove a director
with or without cause if the notice of the meeting names the director or
directors to be removed at such meeting. Neither BMC's Articles of
Incorporation, By-Laws or Illinois Law defines 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 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.
BMC
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 at
least two-thirds of its voting shares. BMC's Articles of Incorporation do not
contain a greater or lesser vote requirement.
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.
BMC
Holders of shares of BMC 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 BMC are elected by the holders of a
majority of the shares represented at a meeting and shareholders of BMC are not
entitled to cumulative voting in the election of directors. Therefore, holders
of a majority of the shares of BMC Common can elect the entire Board of
Directors.
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.
BMC
BMC's By-Laws provide 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 a majority
of all the outstanding shares entitled to vote on the matter for which the
meeting is called. 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.
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 BMC, CNB's shareholders are not
entitled to assert such rights in connection with the Merger.
BMC
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 BMC 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.
BMC
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 BMC because, among other
things, BMC 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.
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.
BMC
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 to the 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 if the person in
question undertakes to repay such amount, if it shall ultimately be determined
that he or she is not entitled to be indemnified by the corporation. The
Illinois Law provides that the indemnification and advancement of expenses
provided for therein is not exclusive of any other rights to which those seeking
indemnification and advancement of expenses may be entitled under any by-law,
agreement, vote of shareholders or disinterested directors, or otherwise. The
By-laws of BMC 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.
BMC
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 knowing 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 the Articles of Incorporation of BMC
do not contain provisions limiting the liability of directors.
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.
BMC
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.
Page
INFORMATION ABOUT BMC
Business of BMC
BMC was incorporated under the laws of the State of Illinois on
December 31, 1986 to serve as a holding company for the Bank of Mt. Carmel. The
Bank of Mt. Carmel is chartered under the laws of the State of Illinois and
commenced business as an Illinois banking corporation in 1959. The business of
BMC consists primarily of the ownership, supervision and control of its wholly
owned subsidiary, the Bank of Mt. Carmel. On September 30, 1996, BMC had, on a
consolidated basis, total assets of $99.8 million, total loans of $53.7 million,
total deposits of $85.5 million, and total stockholders' equity of $13.5
million.
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 BMC. This discussion and analysis should be read in
conjunction with the "SELECTED FINANCIAL DATA" and "FINANCIAL STATEMENTS OF BMC"
appearing elsewhere in this Prospectus/Proxy Statement.
Results of Operations
Net income for 1995 was $1,200,204 as compared to $1,230,220 for 1994, a
decrease of $30,016 or 2.44%. BMC's return on average assets was 1.44% for 1995
compared to 1.61% for 1994, primarily due to acquiring approximately $28,000,000
in deposits during 1995. The additional deposits were acquired in the fourth
quarter and were therefore not reinvested in loans in 1995. Further discussion
of the 1995 acquisition is noted in the section titled "Sources of Funds". Net
income for 1994 was $1,230,220 as compared to $1,150,824 for 1993, an increase
of $79,396 or 6.90%. Return on assets for 1993 was 1.53%. Interest rates were
relatively stable during 1995 and 1994.
Net income for the nine months ended September 30, 1996 was $98,761
compared to $732,956 for the nine months ended September 30, 1995, a decrease of
$634,195 or 86.53%. The decrease in net income was due to the Bank of Mt.
Carmel charging off a related group of loans, which totaled approximately
$1,006,000 during the third quarter of 1996. See section titled "Provision for
Loan Losses." As a result of this charge off, return on assets for the nine
months of 1996 declined to .13% on an annualized basis from 1.26% on an
annualized basis for the nine months ended September 30, 1995. BMC's return on
assets is significantly influenced by loan demand and the actual and perceived
condition of the local and regional economy, factors which BMC cannot predict
and which are beyond its control.
Shareholders' equity increased to $13,967,581 at December 31, 1995, or
$229.72 per share, from $11,607,672 at December 31, 1994, or $190.46 per share.
The increase was a result of net income for 1995 reduced by dividends paid
during 1995, as well as an increase in the estimated fair value of investment
securities classified as available-for-sale. SFAS 115 (see Note 1 to Financial
Statements of BMC) had the effect of increasing shareholders' equity by $84,100,
or $1.38 per share, at December 31, 1995. Shareholders' equity declined to
$11,607,672 at December 31, 1994, or $190.46 per share, from $12,783,549, or
$206.07 per share, at December 31, 1993, representing a 9.20% decrease in total
shareholders' equity. The decrease in shareholders' equity at December 31, 1994
was due primarily to SFAS 115, which had the effect of decreasing shareholders'
equity by $1,245,658, or $20.44 per share.
BMC achieved a 9.00% return on average common equity for 1995 compared to
9.97% for 1994, as a result of the factors mentioned previously. BMC declared
dividends of $152,093, or $2.50 per share, and $183,247, or $3.00 per share, in
1995 and 1994 respectively.
Shareholders' equity decreased during the nine months of 1996 to
$13,497,415, a decrease of 3.37%, or $7.73 per share. SFAS 115 reduced
shareholders' equity by $405,100, or $6.66 per share, at September 30, 1996. In
the first nine months of 1996, BMC had declared dividends of $79,044, or $1.30
per share.
Net Interest Income
Net interest income is the difference between interest income and interest
expense. It has historically been the single most critical component of BMC's
annual earnings. This calculation is affected by both the prevailing interest
rate and outstanding volume of both earning assets and interest bearing
liabilities. Net interest income for 1995 was $3,149,608, which is an increase
of 1.50% from $3,103,068 earned in 1994. This increase was a result of a slight
movement in interest rates in 1995. BMC was positioned such that its assets
repriced slightly faster than its liabilities and therefore a resulting increase
in the net interest income. The net interest margin for the twelve month period
ended December 31, 1995 was 4.07% as compared to 4.38% for the same period ended
December 31, 1994, a decrease of .31%. This decrease is attributable, in part,
to the two branch acquisitions (see section titled "Sources of Funds"), which
increased deposits by approximately $28,000,000. The additional deposits were
acquired in the fourth quarter of 1995 and were invested in federal funds sold
with a lower interest rate than what would have been earned if the funds had
been invested in loans. 1994 net interest income was slightly higher than 1993,
for the same reasoning as the previously discussed increase from 1994 to 1995.
The net interest margin in 1994 was 4.38% as compared to 4.30% in 1993, an
increase of .08%.
Net interest income for the nine months ended September 30, 1996 increased
by $29,021, or 1.22%, to $2,413,112 compared to the nine months ended
September 30, 1995. In contrast, the net interest margin for the nine months
ended September 30, 1996 was 3.18% as compared to 4.24% for the same period
ended September 30, 1995, a decrease of 1.06%. The decrease in the net interest
margin was primarily due to the rate at which federal funds sold were reinvested
in loans, which was substantially slower than anticipated at the beginning of
1996, and interest rate competition to maintain larger deposits.
Page
The following table presents each significant category of interest earning
assets and interest bearing liabilities.
Average balance sheet and net interest analysis (dollars in thousands on fully
taxable equivalent basis)
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
----------------- -----------------
Average Average Average Average
Balances Interest Rate Balances Interest Rate
<S> <C> <C> <C> <C> <C> <C>
Earning assets
Investment securities
Taxable $22,936 $1,513 6.60 $24,989 $1,594 6.38
Tax exempt(1) 5,479 431 7.86 5,453 450 8.25
Federal funds sold 7,752 427 5.51 3,939 139 3.53
Loans (2)(3) 43,831 3,917 8.94 39,054 3,228 8.27
------- ------ ---- ------- ------ ----
Total earning assets 79,998 6,288 7.86 73,435 5,411 7.37
Less allowance for loan
losses 707 802
------- -------
79,291 72,633
Non-earning assets
Cash and due from banks 1,657 1,987
Bank premises and
equipment 771 724
Other assets 1,536 927
------- -------
Total assets $83,255 $76,271
======= =======
Interest bearing liabilities
Deposits
Interest bearing demand
deposits $17,459 $ 521 2.98 $16,522 $ 493 2.98
Savings 3,335 92 2.76 3,949 107 2.71
Other time 44,800 2,416 5.39 37,191 1,594 4.29
Federal funds purchased 80 6 7.50 8
------- ------ ---- ------- ------ -----
Total interest bearing
liabilities 65,674 3,035 4.62 57,670 2,194 3.80
Non-interest bearing
liabilities
Demand deposits 3,465 5,652
Other liabilities 783 611
------- -------
Total liabilities 69,922 63,933
Shareholders' equity 13,333 12,338
Total liabilities and ------- -------
shareholders' equity $83,255 $76,271
======= =======
Recap:(4)
Interest income $6,288 7.86 $5,411 7.37
Interest expense 3,035 3.79 2,194 2.99
------ ---- ------ ----
Net interest income/margin $3,253 4.07 $3,217 4.38
</TABLE>
(1) Income on tax exempt securities has been adjusted to a fully taxable
equivalent basis using a marginal tax rate of 34%.
(2) Nonaccrual loans have been included in the average loan balance.
(3) Loan income includes interest and loan fees.
(4) Average rates have been computed by dividing by total average earning
assets.
The amount of net interest income is affected by changes in volume and mix
of earning assets and interest bearing deposits and liabilities, and the
interest rates on these assets and liabilities.
Earning assets, which include loans, federal funds sold and investment
securities increased by $29,296,892 during 1995 to $100,985,891, while interest
bearing liabilities increased by $28,839,053 to $86,900,436. The increase in
1995 in both earning assets and interest bearing liabilities is attributed to
the two branch acquisitions described previously. Earning assets were
$71,688,999 and interest bearing liabilities were $58,061,383 at year end 1994,
a decrease of $1,072,070 in earning assets and an increase in interest bearing
liabilities of $485,683 from year end 1993.
Earning assets decreased by $8,718,169 to $92,267,722 and interest bearing
liabilities decreased by $6,543,737 to $80,356,699 during the nine months ended
September 30, 1996. These decreases are mainly due to interest rate competition
primarily on deposits acquired in the two branch acquisitions.
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 1995 provision was
a result of reducing the allowance by $11,951 which represented excess
recoveries over loans charged off. For the year ended December 31, 1995, charge
offs totaled $34,801, which were offset by recoveries of $46,752 for net charge
offs of ($11,951).
During the nine months ended September 30, 1996 and 1995, provisions of
$956,992 and $135,000, respectively, were made. During September, 1996 the most
significant charge off for approximately $1,006,000 on a group of loans to a
single borrower in the equipment leasing industry was recorded. The customer
and its related companies had filed for bankruptcy in March of 1996. Due to,
among other things, the complexity of the bankruptcy, management of BMC believes
it prudent to charge off the loans. The provision for the nine months ended
September 30, 1995 was necessary for ordinary losses. Further analysis of loan
losses is contained in the loan section of this discussion.
Non Interest Income
Non interest income increased from $249,737 to $315,267 from 1994 to 1995.
The increase was due to an increase in gains from the disposition of investment
securities during 1995. Non interest income decreased by $161,587 to $249,737
in 1994, from $411,324 in 1993. The decrease in 1994 was a result of a decrease
of $182,080 in gains on the sale of investment securities.
Non interest income during the nine months ended September 30, 1996
increased slightly to $190,166 from $185,343 for the nine months ended
September 30, 1995.
Non Interest Expense
Operating expenses, other than interest and the provision for loan losses,
were $1,653,860 in 1995, as compared to $1,598,886 and $1,590,075 in 1994 and
1993, respectively. The increase in 1995 of $54,974 is attributed primarily to
acquiring the deposits of two additional branches and the payroll costs incurred
to staff the Albion, Illinois facility.
Operating expenses for the nine months ended September 30, 1996 were
$1,439,893, as compared to $1,191,461 for the nine months ended September 30,
1995. The increase of $248,432, or 20.85%, primarily relates to the acquisition
of the Albion facility during October of 1995, as previously discussed. The
majority of the acquisition expenses are classified as "other expenses" in the
following table.
The following table analyzes the changes in operating expenses (in thousands):
<TABLE>
<CAPTION>
Change from prior year
Amount 1995 1994
---- ----
1995 1994 1993 Amount Percent Amount Percent
---- ---- ---- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Salaries and benefits $ 977 $ 899 $ 861 $78 8.6% $38 4.4%
Net occupancy 101 101 111 0 0 (10) ( 9.0)
Supplies 45 30 38 15 50.0 ( 8) (21.1)
Insurance 22 22 20 0 0 2 10.0
Audit, tax, accounting 12 8 11 4 50.0 ( 3) (27.3)
Legal 19 8 4 11 137.5 4 100.0
Data processing 5 5 7 0 0 ( 2) (28.6)
Advertising 51 53 47 ( 2) ( 3.8) 6 12.8
Directors fees 68 77 77 ( 9) (11.7) 0 0
FDIC assessment 80 140 141 (60) (42.9) ( 1) (.7)
Postage 40 33 34 7 21.2 ( 1) (2.9)
Other 234 223 239 11 4.9 (16) (6.7)
------ ------ ------ --- ---- ---- -----
Total operating expense $1,654 $1,599 $1,590 $55 3.4% $ 9 .6%
</TABLE>
<TABLE>
<CAPTION>
Amount Change
September 30, from prior year
1996 1995 Amount Percent
---- ---- ------ -------
<S> <C> <C> <C> <C>
Salaries and benefits $776 $686 $90 13.1
Net occupancy 81 69 12 17.4
Supplies 37 27 10 37.0
Insurance 15 16 ( 1) (6.3)
Audit, tax, accounting 7 9 ( 2) (22.2)
Data processing 2 4 ( 2) (50.0)
Legal 25 16 9 56.3
Advertising 48 41 7 17.1
Directors fees 65 52 13 25.0
FDIC assessment 8 106 (98) (92.5)
Postage 34 30 4 13.3
Other 342 135 207 153.3
------ ------ ----- -----
Total operating expense $1,440 $1,191 $ 249 20.9%
====== ====== ===== =====
</TABLE>
Income Taxes
The effective tax rate for 1995 and 1994 was 34% and 33%, respectively.
Income taxes for each year were positively affected by the amount of tax exempt
interest income earned. Income tax expense for the nine months ended
September 30, 1996 was $107,632, as compared to $510,017 for the nine months
ended September 30, 1995, for an effective tax rate of 24% and 32%,
respectively. Income taxes are also discussed in Note 5 of the Financial
Statements of BMC.
Financial Condition
At December 31, 1995, BMC's total assets increased to $107,481,732, as
compared to $75,653,350 at December 31, 1994, a 42.07% increase. As discussed
previously, this increase is primarily attributed to the acquisition of the
First of America branch in Albion, Illinois and the acquisition of the Citizens
Bank of Illinois, NA branch in Mt. Carmel, Illinois during the fourth quarter of
1995. Total assets were $99,777,958 at September 30, 1996, an increase of
$20,757,982 or 26.27% from September 30, 1995.
The financial condition of BMC at September 30, 1996 and December 31, 1995,
is presented in the comparative balance sheet of BMC's financial statements (see
"FINANCIAL STATEMENTS OF BMC"). The following discussion addresses loans and
other components of earning assets, sources of funds, capital resources,
liquidity and interest rate sensitivity.
Loans
Loan balances, net of the loan loss allowance, were $44,905,689 as of
December 31, 1995, an increase of $2,716,103, or 6.44%, from December 31, 1994.
Loans as of December 31, 1994 were $42,189,586, an increase of $6,303,081, or
17.56%, over December 31, 1993. The increase in loans during 1995 was due
primarily to an increase in residential real estate lending which increased
$2,555,000 over December 31, 1994. The 1994 increase was reflected in all loan
types. Real estate mortgage loans, which consist of residential loans,
commercial loans collateralized by real estate, construction loans and
agricultural loans collateralized by real estate, totaled $28,280,000 at
December 31, 1995, compared to $26,406,000 at December 31, 1994, an increase of
$1,874,000. Residential real estate accounted for approximately $17,264,000, or
61.05%, of the real estate loans at December 31, 1995 and approximately
$14,709,000, or 55.70%, of the real estate loans at December 31, 1994. Interest
rates on real estate loans are generally adjusted in three year intervals.
BMC's commercial loan portfolio as of December 31, 1995 was $11,095,000, an
increase over December 31, 1994 of $219,000. Consumer loans at December 31,
1995 were $6,130,000, an increase of $623,000, from $5,507,000 at December 31,
1994. Growth in consumer loans experienced during 1995 was due primarily from
consumer marketing promotions initiated by BMC.
Loan balances as of September 30, 1996 increased $8,192,416 to $53,098,105,
as compared to December 31, 1995, an increase of 18.24%. Real estate mortgage
loans increased by $4,423,512, to $32,703,512, from December 31, 1995.
Residential real estate accounted for approximately $18,068,000, or 55.25%, of
the real estate loans at September 30, 1996. Consumer loans increased
$1,413,630 to $7,543,630 from December 31, 1995 to September 30, 1996, due
primarily to consumer marketing promotions of BMC. Commercial loans increased
by $2,357,369, to $13,452,369, due, in part, to a strong business economy in the
BMC lending area.
The BMC loan portfolio contains no loans to foreign governments, foreign
enterprises, foreign operations of domestic companies, or highly leveraged
transactions, nor any concentration to borrowers engaged in the same or similar
industries that exceeded 10% of total loans.
The following shows loans outstanding (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Commercial and agricultural $ 13,452 $11,095 $10,876
Real Estate 32,703 28,280 26,406
Consumer 7,543 6,130 5,507
-------- ------- -------
Total Loans $ 53,698 $45,505 $42,789
</TABLE>
The following shows loan maturities at December 31, 1995 (in thousands):
<TABLE>
<CAPTION>
Within 1-5 Over 5
1 Year Years Years Total
------ ----- ----- -----
<S> <C> <C> <C> <C>
Commercial and agricultural $ 8,695 $ 2,193 $ 207 $11,095
Real estate 2,341 22,502 3,437 28,280
Consumer 549 3,365 2,216 6,130
------- ------- ------ -------
Total $11,585 $28,060 $5,860 $45,505
</TABLE>
In the above table, loans with maturities of over one year totaled
$33,920,000. Of this total, $7,006,000 have floating interest rates and the
remainder have fixed interest rates.
The allowance for loan losses is maintained at a level considered adequate
by management of BMC to absorb potential loan losses as determined by
evaluations of the loan portfolio on a continuing basis. This evaluation by
management of BMC 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 contractually past due but not yet paid are
reviewed at regular intervals by management and are placed on nonaccrual status
when scheduled payments remain unpaid for 90 days, unless the loan is adequately
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 interest 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.
BMC recorded a provision of ($11,951) during the calendar year of 1995. For
the year ended December 31, 1995, charge offs totaled $34,801, which were offset
by recoveries of $46,752, resulting in net recoveries of $11,951.
A summary of loan loss experience and management's allocation of the
allowance for loan losses to the various loan categories for the years indicated
is as follows:
Summary of loan losses:
<TABLE>
<CAPTION>
Nine months ended Years ended December 31,
September 30, 1996 1995 1994 1993
------------------ ---- ---- ----
<S> <C> <C> <C> <C>
Balance at beginning
of period $ 600,000 $600,000 $600,000 $600,000
---------- -------- -------- --------
Charge offs
Commercial and
agricultural 1,005,997 11,143 32,008 329,583
Real estate 0 0 15,000 0
Consumer 25,055 23,658 49,324 34,153
---------- -------- ------- --------
Total charge offs $1,031,052 $ 34,801 $ 96,352 $363,736
Recoveries:
Commercial and
agricultural $ 64,487 $ 41,741 $164,044 $ 98,326
Real estate 0 1,207 913 19,015
Consumer 9,573 3,804 9,528 17,726
---------- -------- -------- --------
Total recoveries 74,060 46,752 174,485 135,067
---------- -------- -------- --------
Net recoveries (charge offs) (956,992) (11,951) (78,133) 228,669
---------- -------- -------- --------
Provision for loan losses 956,992 11,951 78,133 228,669
--------- -------- -------- --------
Balance at end of period $600,000 $600,000 $600,000 $600,000
========= ======== ======== ========
</TABLE>
Management's allocation of the allowance for loan losses at year end and
September 30, 1995 as follows (in thousands):
<TABLE>
<CAPTION>
Allowance amount Percent of loans to
total loans
9/96 1995 1994 1993 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Commercial and
agricultural $112 $102 $299 $ 44 24% 25% 24%
Real estate 184 159 39 69 62% 62% 61%
Consumer 89 69 77 57 14% 13% 15%
Unallocated 215 270 185 430 - - -
---- ---- ---- ---- ---- ---- ----
Total $600 $600 $600 $600 100% 100% 100%
==== ==== ==== ==== ==== ==== ====
</TABLE>
The previous allocation is made for analytical purposes. Because the
allocations are based on estimates and subjective judgment, it is not reasonably
indicative of the specific amounts or loan categories in which losses may occur.
The total allowance for loan losses is available to absorb losses from any
portion of the portfolio.
Non performing loans consist of loans 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. Nonaccrual loans as of
December 31, 1995 were $88,575, as compared to $90,241 at December 31, 1994.
The following table presents nonaccrual loans and 90 days or more past due
loans (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Nonaccrual loans $ 57 $ 88 $ 90
90 days or more past due 349 191 204
Restructured loans 0 0 0
----- ---- ----
Total $406 $279 $294
==== ==== ====
Percent of total loans .75% .61% .69%
==== ==== ====
</TABLE>
In addition to the non performing loans, there was one loan totaling
$500,000 at September 30, 1996, related to the $1,006,000 charge off in
September of 1996, with respect to which management is closely monitoring the
borrower's ability to comply with payment terms. Conditions at this time,
however, do not, in the view of management, warrant its classification as a non
performing loan.
Investment Securities
BMC adopted SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" effective January 1, 1994. All 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, BMC included a net unrealized gain of $84,100, net of
related income tax expense, in shareholders' equity. At December 31, 1994, a
net unrealized loss of $1,245,658 was included in shareholders' equity. The
amount included in shareholders' equity at September 30, 1996 was a net
unrealized loss in the amount of $405,100.
Total investment securities represented 26.78% and 40.53% of earning assets
at December 31, 1995 and 1994, respectively. The large percentage decrease from
1994 to 1995 was due primarily to the acquisition of the two branches and the
investment of the deposits acquired in federal funds sold. In 1995, BMC
maintained consistency within the classification of investment securities.
Specifically, proceeds from sales, maturities and calls were used to purchase
similar types of securities and no significant deviations between
classifications have occurred. Investment securities represented 28.44% of
earning assets at September 30, 1996.
Maturities and weighted average yields of investment securities at
December 31, 1995 (in thousands):
Page
<TABLE>
<CAPTION>
1 year or less 1-5 years 5-10 years over 10 years Total
-------------- --------- ---------- ------------- -----
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ ----- ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Federal Agencies
Mortgage backed $ 369 7.36% $1,445 7.39% $1,836 5.12% $ 8,517 5.80% $12,166 6.12%
US agencies 2,152 6.47% 4,079 6.59% 2,054 7.25% 8,285 6.64%
Municipals 150 7.65% 1,155 7.80% 2,100 5.77% 3,097 5.72% 6,502 6.15%
----- ----- ------ ----- ------ ----- ------- ----- ------- -----
Total $ 519 7.45% $4,752 6.86% $8,015 5.77% $13,667 6.51% $26,953 6.28%
===== ===== ====== ===== ====== ===== ======= ===== ======= =====
Percent of total 1.97% 17.6% 29.7% 50.8%
===== ===== ===== =====
</TABLE>
Note: The above maturity analysis is based on contract maturities and is
on a fully taxable equivalent basis.
Sources of Funds
BMC generally relies on customer deposits along with retained earnings to
fund its earning assets.
Total deposits increased $29,264,753, or 46.08%, to $92,770,230 at
December 31, 1995, from $63,505,477 at December 31, 1994. The mix of the
deposits shifted dramatically from demand and interest bearing demand
accounts to interest bearing certificates of deposits. Certificates of
deposit increased $25,675,322, or 67.87%, at December 31, 1995, to
$63,506,843, as compared to $37,831,521 at December 31, 1994. The increase
at December 31, 1995 is directly related to BMC's acquisition of two branch
facilities from other financial institutions during 1995. On October 6,
1995, BMC purchased from First of America, a branch in Albion, Illinois,
which represented $20,640,034 in deposits. On December 15, 1995, BMC
purchased from Citizens Bank of Illinois, NA, a branch in Mt. Carmel,
Illinois, which represented $7,618,973 in deposits. BMC purchased total
deposits of $28,259,007 in 1995.
Total deposits declined 7.85% to $85,488,322 at September 30, 1996. The
decrease was mainly the result of deposit runoff from the acquisition of the
two branches.
Capital Resources
BMC continues to maintain a very strong capital position, which provides
a sound foundation to support current and future needs. At December 31,
1995, shareholders' equity was $13,967,581, compared to $11,607,672 at
December 31, 1994, an increase of 20.33%. Book value per share was $229.72
at December 31, 1995, as compared to $190.46 at December 31, 1994. The
dividend payout ratio (dividends as a percentage of net income) was 12.67% in
1995 and 14.90% in 1994. The decrease in the dividend payout ratio was due
to cash dividends of $2.50 per share paid in 1995 as compared to $3.00 per
share paid in 1994. BMC has historically paid dividends in January, April,
July and October of each year.
Shareholders' equity decreased by 3.37%, to $13,497,415, at September 30,
1996 as compared to December 31, 1995. This decrease is attributed to the
increase in the net unrealized loss on investment securities at September 30,
1996, as discussed previously.
BMC's capital was considered satisfactory by the FDIC at year end 1995.
BMC 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, BMC has several sources
of funds available on a daily basis which can be used for liquidity purposes.
These sources include: (1) core deposits of both business and non-business
customers; (2) cash flows generated by the repayment of loans and investment
principal and interest; and (3) 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 have exceeded
the rate of inflation as measured by the consumer price index on each of the
last three years. BMC 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 BMC'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 BMC's interest income.
Liquidity is provided by projecting credit demand and other financial needs
and maintaining sufficient cash and assets readily convertible into cash to
meet these requirements. BMC has provided for its liquidity needs through
core deposits, federal funds sold, maturing loans and investments in its
security portfolio.
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 BMC's assets/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. BMC seeks to manage its rate
sensitivity position through the use of floating rate loans. The rate
sensitivity position is computed for various repricing intervals by
calculating rate sensitivity gaps. Although rate sensitivity gaps constantly
change as funds are acquired and invested, BMC's negative gap of $3,026,440
at the one year gap or less at December 31, 1995, was less than 3% of total
assets at that date and, in the opinion of management, represents a
relatively balanced position.
Security Ownership of Certain Beneficial Owners and Management
Security Ownership of Certain Beneficial Owners
As of the Record Date, the following persons were known to BMC to be the
beneficial owners of more than five percent (5%) of the issued and
outstanding shares of BMC Common. Except as otherwise noted, each person or
group identified below holds sole voting and sole investment power with
respect to the shares identified as beneficially owned.
Name and Address Amount and Nature of Percentage of Shares
Beneficial Ownership Outstanding
John Dersch 4,593 7.55%
127 Greenview Ave.
P.O. Box 217
Mt. Carmel, Illinois 62863
Juanita E. Hayes (1) 5,490 9.03%
209 W. Eubanks
Oklahoma City, Oklahoma 73118
Virginia Rose McKibben 3,799 6.25%
118 E. 12th Street
Mt. Carmel, Illinois 62863
[R]
Rebstock Oil Company 3,585 5.90%
East Main
Carmi, Illinois 62821
[/R]
_________________________
(1) Includes 2,745 shares held by Juanita E. Hayes, trustee of the Juanita E.
Hayes Living Trust dated September 17, 1990 and 2,745 shares held by Juanita
E. Hayes and James Phillip Shield, co-trustees of the Granville R. Hayes
Marital Trust.
Security Ownership of Management
As of the Record Date, the following directors and executive officers of BMC
were known to BMC, individually and as a group, to be the beneficial owners,
respectively, of the issued and outstanding shares of BMC Common as set forth
below. Except as otherwise noted, each person or group identified below
holds sole voting and sole investment power with respect to the shares
identified as beneficially owned.
Name and Address Amount and Nature of Percentage of Shares
Beneficial Ownership Outstanding
Robert D. Cunningham, Jr. (1) 1,010 1.66%
John Dersch 4,500 7.40%
Ray H. Farrar 2,600 4.28%
Jack D. Fowler 500 .82%
W. Gene Guisewite (2) 1,124 1.85%
Donald L. Hayes (3) 349 0.57%
Clyde Olds 773 1.27%
Daniel R. Schonert 100 .16%
Kevin C. Williams (4) 343 .56%
Mina Nolan (5) 233 .38%
Directors and Executive Officers
as a Group (10 persons) 11,532 18.97%
_________________
(1) Includes 161 shares owned by Mary V. Cunningham - IRA.
[R]
(2) Includes 936 shares owned by the Warren Gene Guisewite Revocable Grantor
Trust, 148 shares owned by W. Gene Guisewite - IRA, 20 shares owned jointly
by W. Gene Guisewite and Jeffrey G. Guisewite, his adult son, and 20 shares
owned jointly by W. Gene Guisewite and Michael W. Guisewite, his adult son.
[/R]
(3) Includes 32 shares owned by Marilyn Z. Hayes, the wife of Donald L. Hayes.
(4) Includes 16 shares owned by Kevin C. Williams - IRA, and 15 shares owned by
Teresa J. Williams - IRA. Teresa J. Williams is the wife of Kevin C.
Williams.
(5) Includes 193 shares owned by John M. Nolan, the husband of Mina Nolan, 20
shares owned by J. Matthew Nolan, her minor son, and 20 shares owned by
Cory Michael Nolan, her minor son.
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 BMC
The financial statements of BMC at December 31, 1995 appearing in this
Prospectus/Proxy Statement and the Registration Statement have been audited
by Gaither, Rutherford & Co., L.L.P., independent auditors, as set forth in a
report thereon appearing elsewhere herein and in the Registration Statement,
and are included in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
Presence at Special Meeting
Representatives of Gaither, Rutherford & Co., L.L.P., are expected to be
present at the Special Meeting with the opportunity to make a statement if
they desire to do so and to respond to appropriate questions.
SHAREHOLDER PROPOSALS
Shareholder proposals for the 1997 annual meeting of CNB's shareholders must
meet the requirements established by the SEC 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 SEC's regulations
governing the solicitation of proxies.
_______________
Page
BMC BANCSHARES, INC.
AND SUBSIDIARY
Financial Statements
September 30, 1996 and 1995
Financial Statements
December 31, 1995
Page
Table of Contents
Accountants' Compilation Report F-3
Financial Statements - September 30, 1996 and 1995
Consolidated Balance Sheets F-4
Consolidated Statements of Earnings F-5
Consolidated Statements of Cash Flows F-6
Consolidated Statements of Changes in Stockholders'
Equity F-8
Selected Information F-9
Independent Accountants' Report F-10
Financial Statements - December 31, 1995
Consolidated Balance Sheet F-11
Consolidated Statements of Earnings F-12
Consolidated Statements of Cash Flows F-13
Consolidated Statements of Changes in Stockholders'
Equity F-15
Significant Accounting Policies F-16
Notes to Consolidated Financial Statements F-21
Page
Accountants' Compilation Report
To the Board of Directors
BMC Bancshares, Inc. and Subsidiary
Mt. Carmel, Illinois
We compiled the accompanying balance sheets of BMC Bancshares, Inc. and
Subsidiary at September 30, 1996 and 1995, and the related consolidated
statements of earnings and cash flows and changes in stockholders' equity for
each of the nine month periods then ended, in accordance with Statements on
Standards for Accounting and Review Services issued by the American Institute of
Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other form of assurance on them.
Management has elected to omit all of the disclosures required by generally
accepted accounting principles. If the omitted disclosures were included in the
financial statements, they might influence the user's conclusions about the
Company's financial position, results of operations, cash flows and changes in
stockholders' equity. Accordingly, the financial statements should be read in
conjunction with information included in the December 31, 1995, annual report to
shareholders.
GAITHER RUTHERFORD & CO., LLP
/s/ Gaither Rutherford & Co.
Certified Public Accountants
November 26, 1996
Page
<TABLE>
Consolidated Balance Sheets
<CAPTION>
At September 30, 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and due from banks $ 2 470 416 $ 1 748 544
Federal funds sold 13 050 000 6 150 000
Securities available for sale 26 119 617 26 651 171
Loans, net of unearned discount
of $319,672 and $203,413,
respectively 53 698 105 43 269 987
Less allowance for credit losses (600 000) (770 851)
- ------------------------------------------------------------------------------
Net loans 53 098 105 42 499 136
Office buildings and equipment, net 1 093 208 643 010
Accrued interest receivable 890 990 768 589
Other assets 3 055 622 559 526
- ------------------------------------------------------------------------------
Total Assets $ 99 777 958 $ 79 019 976
==============================================================================
Liabilities and Stockholders' Equity
Liabilities
Demand deposits $ 5 131 623 $ 4 125 573
Savings and NOW deposits 22 325 283 18 834 642
Other time deposits 58 031 416 41 647 686
- ------------------------------------------------------------------------------
Total Deposits 85 488 322 64 607 901
Accrued interest payable 501 226 359 890
Other liabilities 290 995 657 425
- ------------------------------------------------------------------------------
Total Liabilities 86 280 543 65 625 216
- ------------------------------------------------------------------------------
Stockholders' Equity
Common stock, no par value, 250,000
shares authorized 73,589 shares
issued, and 60,803 and 60,803
shares outstanding, respectively 837 350 837 350
Capital surplus 7 984 268 7 984 268
Retained earnings 6 269 174 5 898 419
Less treasury stock, at cost
(12,791 and 12,791 shares,
respectively) (1 188 277) (1 188 277)
Net unrealized appreciation
(depreciation) on securities
available for sale, net of tax
of $(173,000) and $(59,000) in
1996 and 1995, respectively (405 100) (137 000)
- ------------------------------------------------------------------------------
Total Stockholders' Equity 13 497 415 13 394 760
- ------------------------------------------------------------------------------
Total Liabilities and Stockholders'
Equity $ 99 777 958 $ 79 019 976
==============================================================================
</TABLE>
See accompanying accountants' compilation report.
Page
<TABLE>
Consolidated Statements of Earnings
<CAPTION>
Nine Months Ended September 30, 1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C>
Interest Income
Interest and fees on loans $3 342 373 $2 906 412
Interest on investment securities:
Taxable 1 015 142 1 288 296
Exempt from federal income tax 244 253 103 989
- -----------------------------------------------------------------------------
4 601 768 4 298 697
Interest on federal funds sold 880 539 95 120
- -----------------------------------------------------------------------------
5 482 307 4 393 817
Interest Expense
Interest on deposits 3 069 195 2 009 726
- -----------------------------------------------------------------------------
Net Interest Income 2 413 112 2 384 091
Provision for loan losses 956 992 135 000
- -----------------------------------------------------------------------------
Net interest income after provision
for loan losses 1 456 120 2 249 091
- -----------------------------------------------------------------------------
Other Income
Income from fiduciary activities 25 50
Service charges on deposit accounts 106 522 88 306
Net investment securities gains (losses) 14 433 46 169
Other income 69 186 50 818
- -----------------------------------------------------------------------------
190 166 185 343
- -----------------------------------------------------------------------------
Other Expense
Salaries and employee benefits 776 473 685 872
Occupancy expense 81 303 68 534
Equipment expense 94 648 82 533
Other expense 487 469 354 522
- -----------------------------------------------------------------------------
1 439 893 1 191 461
- -----------------------------------------------------------------------------
Income Before Income Taxes 206 393 1 242 973
Income Tax Provision 107 632 510 017
- -----------------------------------------------------------------------------
Net Income $ 98 761 $ 732 956
=============================================================================
Net Income Per Share of Common Stock $ 1.62 $ 12.04
=============================================================================
Average Shares Outstanding 60 803 60 877
=============================================================================
</TABLE>
See accompanying accountants' compilation report.
Page
<TABLE>
Consolidated Statements of Cash Flows
<CAPTION>
Nine Months Ended September 30, 1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C>
Operating Activities
Net income $ 98 761 $ 732 956
Adjustment to reconcile net income
to net cash provided by operating
activities:
Provision for loan losses 956 992 135 000
Provision for depreciation 88 844 67 904
Provision for amortization 120 151 _
Net (gain) or loss on sale of
investment securities (14 433) (46 169)
Loss on sale of building and
equipment 39 721
Change in:
Interest receivable (124 864) (78 810)
Interest payable (13 471) 118 448
Other assets (599 841) (529 783)
Other liabilities 171 296 358 666
- ---------------------------------------------------------------------------
Net cash provided by operating activities 723 156 758 212
- ---------------------------------------------------------------------------
Investing Activities
Purchase of investment securities (4 297 500) (3 359 688)
Proceeds from sales or maturities of
investment securities 4 566 994 7 216 048
Net decrease (increase) in loans (9 149 408) (309 550)
Proceeds from sale of building of equipment 157 000
Purchases of buildings and equipment (18 655) (28 757)
- ---------------------------------------------------------------------------
Net cash provided (used) by investing
activities (8 741 569) 3 518 053
- ---------------------------------------------------------------------------
Financing Activities
Net increase (decrease) in demand deposits,
NOW and savings accounts (1 806 481) (2 713 740)
Net increase (decrease) in certificates
of deposit (5 475 427) 3 816 165
Cash dividends (145 928) (164 552)
Purchase of treasury stock _ (17 960)
- ---------------------------------------------------------------------------
Net cash provided (used) by financing
activities (7 427 836) 919 913
- ---------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash
Equivalents (15 446 249) 5 196 178
Cash and Cash Equivalents,
beginning of year 30 966 665 2 702 366
- ---------------------------------------------------------------------------
Cash and Cash Equivalents,
at September 30 $15 520 416 $ 7 898 544
===========================================================================
</TABLE>
See accompanying accountants' compilation report.
Page
<TABLE>
Consolidated Statements of Cash Flows
<CAPTION>
Nine Months Ended September 30, 1996 1995
- ----------------------------------------------------------------------------
<S> <C> <C>
Reconciliation of Cash and Cash Equivalents
At the End of the Year
Cash and due from banks $ 2 470 416 $ 1 748 544
Federal funds sold 13 050 000 6 150 000
- ----------------------------------------------------------------------------
$ 15 520 416 $ 7 898 544
============================================================================
Supplemental Disclosures of Cash Flow Information
Cash paid for:
Interest $ 2 927 859 $ 1 891 278
Income taxes 457 653 529 784
Supplemental Disclosures of Non Cash Investing Activities
Change in unrealized appreciation
(depreciation) on securities available
for sale $ (489 200) $ 1 108 658
</TABLE>
See accompanying accountants' compilation report.
Page
BMC Bancshares, Inc. and Subsidiary
<TABLE>
Consolidated Statements of Changes in Stockholders' Equity
<CAPTION>
Par Capital Retained
Nine Months Ended September 30, Shares Value Surplus Earnings
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1994 60 945 $ 837 350 $ 7 984 268 $ 5 202 029
Net income, period ended
September 30, 1995 _ _ _ 732 956
Cash dividends, $.90 per share _ _ _ (36 566)
Treasury stock, at cost (142) _ _ _
Net change in unrealized
appreciation on securities
available for sale, net of
taxes of $59,000 _ _ _ _
- ---------------------------------------------------------------------------------------
Balance, September 30, 1995 60 803 $ 837 350 $ 7 984 268 $ 5 898 419
=======================================================================================
Balance, December 31, 1995 60 803 $ 837 350 $ 7 984 268 $ 6 250 140
Net income, period ended
September 30, 1996 _ _ _ 98 761
Cash dividends, $1.30 per share _ _ _ (79 727)
Net change in unrealized
appreciation (depreciation)
on securities available for
sale, net of taxes of
$(173 000) _ _ _ _
- ---------------------------------------------------------------------------------------
Balance, September 30, 1996 60 803 $ 837 350 $ 7 984 268 $ 6 269 174
=======================================================================================
</TABLE>
<TABLE>
<CAPTION>
Net
Unrealized
Appreciation
(Depreciation) Total
Treasury On Securities Stockholders'
Nine Months Ended September 30 Stock Available for Sale Equity
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, December 31, 1994 $ (1 170 317) $1 245 658 $11 607 672
Net income, period ended
September 30, 1995 _ _ 732 956
Cash dividends, $.90 per share _ _ (36 566)
Treasury stock, at cost (17 960) _ (17 960)
Net change in unrealized
appreciation (depreciation)
on securities available for
sale, net of taxes of $59,000 _ 1 108 658 1 108 658
- -------------------------------------------------------------------------------------
Balance, September 30, 1995 $ (1 188 277) $ (137 000) $13 394 760
=====================================================================================
Balance, December 31, 1995 $ (1 188 277) $ 84 100 $13 967 581
Net income, period ended
September 30, 1996 _ _ 98 761
Cash dividends, $1.30 per share _ _ (79 727)
Net change in unrealized
appreciation (depreciation)
on securities available for
sale, net of taxes of $(173,000) _ (489 200) (489 200)
- -------------------------------------------------------------------------------------
Balance, September 30, 1996 $ (1 188 277) (405 100) $13 497 415
=====================================================================================
</TABLE>
See accompanying accountants' compilation report
and notes to financial statements.
Page
Selected Information
Consolidation
The consolidated balance sheets as of September 30, 1996 and 1995,
consolidated statements of income for each of the nine month periods ended
September 30, 1996 and 1995, and the consolidated statements of cash flows for
each of the nine month periods ended September 30, 1996 and 1995, have been
prepared by the Company, without audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and changes in cash
flows at September 30, 1996 and 1995, and all periods presented, have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these consolidated
financial statements be read in conjunction with the financial statements and
notes thereto included in the Company's December 31, 1995 annual report to
shareholders. The results of operations for the periods ended September 30,
1996 and 1995, are not necessarily indicative of the operating results for the
full year.
Commitments and Contingent Liabilities
Other than ordinary routine litigation incidental to the business, there
are no material pending legal proceedings to which the Company or its subsidiary
are a party or of which any of their property is the subject as of September 30,
1996.
Proposed Merger
BMC Bancshares, Inc. has entered into a definitive agreement to merge with
CNB Bancshares, Inc. Upon consummation of the merger, each issued and
outstanding share of common stock of BMC Bancshares, Inc., would be converted
into the right to receive shares of CNB calculated in accordance with formula
set forth in the merger agreement.
Page
Independent Accountants' Report
To the Board of Directors
BMC Bancshares, Inc. and Subsidiary
Mt. Carmel, Illinois
We have audited the accompanying consolidated balance sheet of BMC Bancshares,
Inc. and Subsidiary as of December 31, 1995, and the related consolidated
statements of earnings, changes in stockholders' equity and cash flows for the
year then ended. These financial statements are the responsibility of the
Company'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 BMC Bancshares, Inc. and
Subsidiary 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.
We have compiled the accompanying consolidated balance sheet of BMC Bancshares,
Inc. and Subsidiary as of December 31, 1994, and the consolidated statements of
earnings, stockholders' equity and cash flows for the years ended December 31,
1994 and 1993, in accordance with Statements on Standards for Accounting and
Review Services issued by the American Institute of Certified Public
Accountants. A compilation is limited to presenting in the form of financial
statements information that is the representation of management. We have not
audited or reviewed the accompanying consolidated balance sheet at December 31,
1994, or the consolidated statements of earnings, cash flows and stockholders'
equity for the years ended December 31, 1994 and 1993, and accordingly, do not
express an opinion or any other form of assurance on them.
Gaither Rutherford & Co., LLP
/s/ Gaither Rutherford & Co.
Certified Public Accountants
November 1, 1996
Page
<TABLE>
Consolidated Balance Sheet
<CAPTION>
Unaudited
At December 31, 1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and due from banks $ 1 966 665 $ 2 002 366
Federal funds sold 29 000 000 700 000
Securities available for sale 27 080 202 28 799 413
Loans, net of unearned discount of
$192,213 and $226,263, respectively 45 505 689 42 789 586
Less allowance for credit losses (600 000) (600 000)
- ----------------------------------------------------------------------------
Net loans 44 905 689 42 189 586
Office buildings and equipment, net 1 360 118 812 761
Accrued interest receivable 766 126 689 779
Other assets 2 402 932 459 445
- ----------------------------------------------------------------------------
Total Assets $ 107 481 732 $ 75 653 350
============================================================================
Liabilities and Stockholders' Equity
Liabilities
Demand deposits $ 5 869 794 $ 5 444 094
Savings and NOW deposits 23 393 593 20 229 862
Other time deposits 63 506 843 37 831 521
- ----------------------------------------------------------------------------
Total Deposits 92 770 230 63 505 477
Accrued interest payable 514 697 241 442
Other liabilities 229 224 298 759
- ----------------------------------------------------------------------------
Total Liabilities 93 514 151 64 045 678
- ----------------------------------------------------------------------------
Stockholders' Equity
Common stock, no par value, 250,000
shares authorized 73,589 shares
issued, and 60,803 and 60,945 shares
outstanding, respectively 837 350 837 350
Capital surplus 7 984 268 7 984 268
Retained earnings 6 250 140 5 202 029
Less treasury stock, at cost
(12,786 and 12,644 shares,
respectively) (1 188 277) (1 170 317)
Net unrealized appreciation (depreciation)
on securities available for sale, net
of tax of $43,324 and $(429,702) in
1995 and 1994, respectively 84 100 (1 245 658)
- ----------------------------------------------------------------------------
Total Stockholders' Equity 13 967 581 11 607 672
- ----------------------------------------------------------------------------
Total Liabilities and Stockholders'
Equity $ 107 481 732 $ 75 653 350
============================================================================
</TABLE>
See accompanying significant accounting policies
and notes to financial statements.
See Independent Accountants' Report
Page
<TABLE>
Consolidated Statements of Earnings
<CAPTION>
Unaudited Unaudited
Years Ended December 31, 1995 1994 1993
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest Income
Interest and fees on loans $ 3 917 057 $ 3 228 455 $ 3 166 795
Interest on investment securities:
Taxable 1 512 759 1 593 860 1 668 862
Exempt from federal income tax 321 127 335 811 310 760
- ----------------------------------------------------------------------------------
5 750 943 5 158 126 5 146 417
Interest on trading account securities _ _ 10 688
Interest on federal funds sold 427 757 139 241 142 052
- ----------------------------------------------------------------------------------
6 178 700 5 297 367 5 299 157
- ----------------------------------------------------------------------------------
Interest Expense
Interest on deposits of $100,000
or more 784 319 558 123 556 573
Interest on other deposits 2 244 773 1 636 176 1 730 871
- ----------------------------------------------------------------------------------
3 029 092 2 194 299 2 287 444
- ----------------------------------------------------------------------------------
Net Interest Income 3 149 608 3 103 068 3 011 713
Provision for loan losses (11 951) (78 133) 228 669
- ----------------------------------------------------------------------------------
Net interest income after provision
for loan losses 3 161 559 3 181 201 2 783 044
- ----------------------------------------------------------------------------------
Other Income
Income from fiduciary activities 1 675 3 936 11 939
Service charges on deposit accounts 109 265 101 987 109 366
Other income 88 727 124 170 88 295
Net investment securities gains
(losses) 115 600 19 644 184 769
Net trading account profits _ _ 16 955
- ----------------------------------------------------------------------------------
315 267 249 737 411 324
- ----------------------------------------------------------------------------------
Other Expense
Salaries and employee benefits 976 969 899 450 860 946
Occupancy expense 101 422 100 620 111 323
Equipment expense 106 152 121 704 131 716
Other expense 469 317 477 112 486 090
- ----------------------------------------------------------------------------------
1 653 860 1 598 886 1 590 075
- ----------------------------------------------------------------------------------
Income Before Income Taxes 1 822 966 1 832 052 1 604 293
Income Tax Provision 622 762 601 832 453 469
- ----------------------------------------------------------------------------------
Net Income $ 1 200 204 $ 1 230 220 $ 1 150 824
==================================================================================
Net Income Per Share of Common Stock $ 19.71 $ 20.05 $ 18.53
==================================================================================
Average Shares Outstanding 60 877 61 336 62 117
==================================================================================
</TABLE>
See accompanying significant accounting policies
and notes to financial statements.
See Independent Accountants' Report
Page
<TABLE>
Consolidated Statements of Cash Flows
<CAPTION>
Unaudited Unaudited
Years Ended December 31, 1995 1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net income $ 1 200 204 $ 1 230 220 $ 1 150 824
Adjustment to reconcile net
income to net cash provided
by operating activities:
Provision for loan losses (11 951) (78 133) 228 669
Provision for depreciation 88 103 103 799 130 272
Provision for amortization 36 135 _ _
Gain on sale of investment
securities (115 600) (19 644) (201 724)
Gain on sale of building and
equipment (2 000) _ _
Change in:
Interest receivable (72 454) (105 915) 80 219
Interest payable 441 533 (29 969) (77 473)
Other assets 7 696 22 569 (18 979)
Other liabilities (433 022) 86 234 89 513
- -------------------------------------------------------------------------------------
Net cash provided by operating
activities 1 138 644 1 209 161 1 381 321
- -------------------------------------------------------------------------------------
Investing Activities
Purchase of investment
securities (3 359 687) (9 157 076) (22 889 419)
Proceeds from sales or maturities
of investment securities 6 997 282 7 689 317 23 285 837
Net decrease (increase) in
loans (2 064 048) (6 303 081) (161 122)
Purchases of buildings and
equipment (127 454) (60 416) (140 157)
Proceeds from sale of building
and equipment 114 649 _ _
- -------------------------------------------------------------------------------------
Net cash provided (used) by
investing activities 1 560 742 (7 831 256) 95 139
- -------------------------------------------------------------------------------------
Financing Activities
Net increase (decrease) in
demand deposits, NOW and
savings accounts 475 662 400 440 (256 889)
Net increase (decrease) in
certificates of deposit 631 542 581 499 (504 164)
Net cash received in branch
purchase agreements 24 658 461 _ _
Cash dividends (182 792) (183 247) (148 986)
Purchase of treasury stock (17 960) (134 615) (22 417)
- -------------------------------------------------------------------------------------
Net cash provided (used) by
financing activities 25 564 913 664 077 (932 456)
- -------------------------------------------------------------------------------------
Increase (Decrease) in Cash
and Cash Equivalents 28 264 299 (5 958 018) 544 004
Cash and Cash Equivalents,
beginning of year 2 702 366 8 660 384 8 116 380
- -------------------------------------------------------------------------------------
Cash and Cash Equivalents,
end of year $ 30 966 665 $ 2 702 366 $ 8 660 384
=====================================================================================
</TABLE>
See accompanying significant accounting policies
and notes to financial statements.
See Accountants' Compilation Report
Page
<TABLE>
Consolidated Statements of Cash Flows
<CAPTION>
Unaudited Unaudited
Years Ended December 31, 1995 1994 1993
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Reconciliation of Cash and Cash
Equivalents At the End of the Year
Cash and due from banks $ 1 966 665 $ 2 002 366 $ 1 660 384
Federal funds sold 29 000 000 700 000 7 000 000
$ 30 966 665 $ 2 702 366 $ 8 660 384
===================================================================================
Supplemental Disclosures of Cash
Flow Information
Cash paid for:
Interest $ 2 879 040 $ 2 224 268 $ 2 364 917
Income taxes 498 602 517 816 425 246
Supplemental Disclosures of Non Cash Investing Activities
Change in net unrealized
appreciation (depreciation)
on securities available for
sale $ 1 329 758 $ (2 088 235) $ 842 577
</TABLE>
See accompanying significant accounting policies
and notes to financial statements.
See Independent Accountants' Report
Page
BMC Bancshares, Inc. and Subsidiary
<TABLE>
Consolidated Statements of Changes in Stockholders' Equity
<CAPTION>
Common Capital Retained
Shares Stock Surplus Earnings
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Unaudited
Balance, December 31, 1992 62 265 $ 837 350 $ 7 984 268 $ 3 153 218
Net income, December 31, 1993 _ _ _ 1 150 824
Cash dividends, $2.40 per share _ _ _ (148 986)
Treasury stock, at cost (231) _ _ _
Transfer from retained earnings _ _ _ _
Net change in unrealized
appreciation on securities
available for sale, net of
taxes of $213,788 _ _ _ _
- --------------------------------------------------------------------------------------------
Unaudited
Balance, December 31, 1993 62 034 837 350 7 984 268 4 155 056
Net income, December 31, 1994 _ _ _ 1 230 220
Cash dividends, $3.00 per share _ _ _ (183 247)
Treasury stock, at cost (1 089) _ _ _
Transfer from retained earnings _ _ _ _
Net change in unrealized
appreciation on securities
available for sale, net of
taxes of $(429,702) _ _ _ _
- --------------------------------------------------------------------------------------------
Balance, December 31, 1994 60 945 837 350 7 984 268 5 202 029
Net income, December 31, 1995 _ _ _ 1 200 204
Cash dividends, $2.50 per share _ _ _ (152 093)
Treasury stock, at cost (142) _ _
Net change in unrealized
appreciation on securities
a Net change in unrealized
appreciation on securities
available for sale, net of
taxes of $(43,324) _ _ _ _
- --------------------------------------------------------------------------------------------
Balance, December 31, 1995 60 803 $ 837 350 $ 7 984 268 $ 6 250 140
============================================================================================
</TABLE>
<TABLE>
<CAPTION>
Net
Unrealized
Appreciation
(Depreciation) Total
Treasury On Securities Stockholders'
Stock Available for Sale Equity
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Unaudited
Balance, December 31, 1992 $ (1 013 285) $ _ $10 961 551
Net income, December 31, 1993 _ _ 1 150 824
Cash dividends, $2.40 per share _ _ (148 986)
Treasury stock, at cost (22 417) _ (22 417)
Transfer from retained earnings _ _ _
Net change in unrealized
appreciation on securities
available for sale, net of
taxes of $213,788 _ 842 577 842 577
- ---------------------------------------------------------------------------------------
Unaudited
Balance, December 31, 1993 (1 035 702) 842 577 12 783 549
Net income, December 31, 1994 _ _ 1 230 220
Cash dividends, $3.00 per share _ _ (183 247)
Treasury stock, at cost (134 615) _ (134 615)
Transfer from retained earnings _ _ _
Net change in unrealized
appreciation on securities
available for sale, net of
taxes of $(429,702) _ (2 088 235) (2 088 235)
- ---------------------------------------------------------------------------------------
Balance, December 31, 1994 (1 170 317) (1 245 658) 11 607 672
Net income, December 31, 1995 _ _ 1 200 204
Cash dividends, $2.50 per share _ _ (152 093)
Treasury stock, at cost (17 960) _ (17 960)
Net change in unrealized
appreciation on securities
available for sale, net of
taxes of $(43,324) _ 1 329 758 1 329 758
- ---------------------------------------------------------------------------------------
Balance, December 31, 1995 $ (1 188 277) $ 84 100 $13 967 581
=======================================================================================
</TABLE>
See accompanying significant accounting policies
and notes to financial statements.
See Independent Accountants' Report
Page
Significant Accounting Policies
Consolidation
The consolidated financial statements of BMC Bancshares, Inc. include
the accounts of the Company and its wholly owned subsidiary, the Bank of
Mt. Carmel (Bank), which owns all of the Bank's premises. Significant
intercompany transactions and amounts have been eliminated.
Nature of Operations
The Bank provides a full range of banking services to individuals,
agricultural businesses, commercial businesses and industries located in its
service area. It maintains a diversified loan portfolio, including loans to
individuals for home mortgages, automobiles and personal expenditures, and loans
to business enterprises for current operations and expansion. The Bank offers a
variety of deposit vehicles, including checking, savings, individual retirement
accounts and certificates of deposit.
The principal markets for the Bank's financial services are the
Illinois communities in which the Bank is located and the areas immediately
surrounding these communities. The Bank serves these markets through offices
located in Mt. Carmel and Albion.
Use of Estimates in the Preparation of Financial Statements
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.
Investments in Securities
The Bank's investments in securities are all classified as available
for sale.
Securities Available for Sale - Securities available for sale consist
of bonds, notes, debentures, and certain equity securities not classified as
trading securities nor as securities to be held to maturity.
Declines in the fair value of individual available-for-sale
securities below their cost, that are other than temporary, have resulted in
write-downs of the individual securities to their fair value. The related
write-downs have been included in earnings as realized losses.
Gains and losses on the sale of investment securities are computed on
the basis of specific identification of the adjusted cost of each security.
Unrealized holding gains and losses, net of tax, on securities
available for sale are reported as a net amount in a separate component of
shareholders' equity until realized.
Page
Reserve Requirements
At December 31, 1995, the Bank was required to have $100,000 on
deposit with the Federal Reserve Bank or as cash on hand. These reserves do not
earn interest.
Interest Income on Loans
Interest on loans is accrued and credited to income based on the
principal amount outstanding. For impaired loans that are on non-accrual
status, cash payments received are generally applied to reduce the outstanding
principal balance. However, all or a portion of a cash payment received on a
non-accrual loan may be recognized as interest income to the extent allowed by
the loan contract, assuming management expects to fully collect the remaining
principal balance of the loan.
Allowance for Credit Losses
The allowance is maintained at a level adequate to absorb probable
losses. Management determines the adequacy of the allowance based upon reviews
of individual credits, recent loss experience, current economic conditions, the
risk characteristics of the various categories of loans and other pertinent
factors. Credits deemed uncollectible are charged to the allowance. Provisions
for credit losses and recoveries on loans previously charged off are added to
the allowance.
Loans are placed on nonaccrual status when management believes that
the borrower's financial condition, after giving consideration to economic and
business conditions and collection efforts, is such that collection of interest
is doubtful.
Effective January 1, 1995, the Corporation adopted Statement of
Financial Accounting Standards (SFAS) No. 114, Accounting by Creditors for
Impairment of a Loan, as amended by SFAS No. 118, Accounting for Creditors for
Impairment of a Loan - Income Recognition and Disclosures (collectively referred
to as "SFAS No. 114").
Under SFAS No. 114, a loan is considered to be impaired when it is
probable that the Corporation will be unable to collect all principal and
interest amounts according to the contractual terms of the loan agreement. The
allowance for loan losses related to loans identified as impaired is primarily
based on the excess of the loan's current outstanding principal balance over the
estimated fair market value of the related collateral. For impaired loans that
are not collateral dependent, the allowance for loan losses is recorded at the
amount by which the outstanding recorded principal balance exceeds the current
best estimate of the future cash flows on the loan, discounted at the loan's
effective interest rate. Prior to 1995, the allowance for loan losses for loans
which would have qualified as impaired under SFAS No. 114 was primarily based
upon the estimated fair market value of the related collateral. The effect of
adopting SFAS No. 114 was immaterial to the 1995 operating results of the
Corporation. Prior financial statements have not been restated to apply the
provisions of SFAS No. 114.
Other Real Estate Owned
Real estate acquired by foreclosure is carried in other assets at the
lower of the recorded investment in the property or its fair value. Prior to
foreclosure, the value of the underlying loan is
Page
written down to the fair market value of the real estate to be acquired by a
charge to the allowance for loan losses, if necessary. Any subsequent write-
downs are charged against operating expenses. Operating expenses of such
properties, net of related income, and gains and losses on their disposition are
included in other expenses.
Properties and Equipment
Properties and equipment are stated at cost, less accumulated
depreciation. The provision for depreciation is computed on the basis described
in the following table:
Estimate Useful Depreciation
Life Method
- ------------------------------------------------------------------------
Bank premises 15 - 40 SL
Furniture and fixtures 5 - 20 DB
Vehicles 5 DB
Other real estate 30 SL
Other real estate is carried at cost less accumulated depreciation
computed on the straight-line method.
Expenditures for maintenance and repairs are charged against income
as incurred. Costs of major additions and improvements are capitalized. Upon
retirement or disposal of premises and equipment, the cost and accumulated
depreciation are eliminated from the accounts, and any gain or loss is reflected
in the statement of earnings.
Pension Costs
Pension costs are charged to salaries and employee benefits expense
and are funded as accrued.
Trust Assets and Income
Property, other than cash deposits, held by the Bank as fiduciary or
in an agency capacity for its customers is not included in the balance sheet
since such assets are not assets of the Bank. Income from trust services is
reported on the cash basis. Reporting such income under this method, rather
than the accrual method, does not materially affect net income.
Income Taxes
Provisions for income taxes are based on amounts reported in the
statements of income (after exclusion of non-taxable income such as interest on
state and municipal securities) and include deferred
Page
taxes on temporary differences in the recognition of income and expense for tax
and financial statement purposes. Deferred taxes are computed on the liability
method as prescribed in SFAS No. 109, Accounting for Income Taxes.
Net Income Per Share of Common Stock
Net income per share of common stock is computed by dividing net
income by the weighted average number of shares of common stock outstanding
during the period, after giving retroactive effect to stock dividends.
Off Balance Sheet Financial Instruments
In the ordinary course of business the Bank has entered into off
balance sheet financial instruments consisting of commercial letters of credit
and standby letters of credit. Such financial instruments are recorded in the
financial statements when they become payable.
Fair Values of Financial Instruments
The following methods and assumptions were used by the Bank in
estimating fair values of financial instruments as disclosed herein:
Cash and Cash Equivalent - The carrying amounts of cash and short-
term instruments approximate their fair value.
Securities Available for Sale - Fair values for investment securities
are based on quoted market prices.
Loans Receivable - For variable-rate loans that reprice frequently
and have no significant change in credit risk, fair values are based on carrying
values. Fair values for certain mortgage loans (e.g., one-to-four family
residential), credit card loans, and other consumer loans are based on quoted
market prices of similar loans sold in conjunction with securitization
transactions, adjusted for differences in loan characteristics. Fair values for
commercial real estate and commercial loans are estimated using discounted cash
flow analyses, using interest rates currently being offered for loans with
similar terms to borrowers of similar credit quality. Fair values for impaired
loans are estimated using discounted cash flow analyses or underlying collateral
values, where applicable.
Deposit Liabilities - The fair values disclosed for demand deposits
are, by definition, equal to the amount payable on demand at the reporting date
(that is, their carrying amounts). The carrying amounts of variable-rate,
fixed-term money market accounts and certificates of deposit approximate
their fair values at the reporting date. Fair values for fixed-rate
certificates of deposit are estimated using a discounted cash flow calculation
that applies interest rates currently being offered on certificates to a
schedule of aggregated expected monthly maturities on time deposits.
Short-term Borrowings - The carrying amounts of federal funds
purchased approximate their fair values.
Page
Accrued Interest - The carrying amounts of accrued interest
approximate their fair values.
Off-balance-sheet Instruments - Fair values for off-balance-sheet
lending commitments are based on fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and the
counter parties' credit standing.
Cash and Cash Equivalents
For the purpose of presentation in the Statements of Cash Flows, cash
and cash equivalents include cash on hand, amounts due from banks, and federal
funds sold. Generally, federal funds are purchased and sold for one-day
periods.
Page
Notes to Consolidated Financial Statements
1. Investment Securities
The carrying amounts of investment securities as shown in
consolidated balance sheets of the Bank and their approximate market values at
December 31 were as follows:
<TABLE>
<CAPTION>
At December 31, 1995
- ------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government and agency
securities $ 19 426 937 $ 101 530 $ 213 536 $ 19 314 931
State and municipal
securities 5 449 845 251 736 19 786 5 681 795
Other securities 2 075 996 7 480 _ 2 083 476
- ------------------------------------------------------------------------------------
$ 26 952 778 $ 360 746 $ 233 322 $ 27 080 202
====================================================================================
At December 31, 1994 (Unaudited)
- ------------------------------------------------------------------------------------
U.S. Government and agency
securities $ 22 504 347 $ 5 043 $ 1 397 989 $ 21 111 401
State and municipal
securities 5 705 424 89 294 347 043 5 447 675
Other securities 2 265 001 31 882 56 546 2 240 337
- ------------------------------------------------------------------------------------
$ 30 474 772 $ 126 219 $ 1 801 578 $ 28 799 413
====================================================================================
</TABLE>
Assets, principally securities, carried at approximately $6,616,877
at December 31, 1995, were pledged to secure public deposits and for other
purposes required or permitted by law.
Gross realized gains and gross realized losses on sales of securities
were:
<TABLE>
<CAPTION>
Unaudited Unaudited
December 31, 1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross realized gains:
U.S. Government and agency
securities $ 1 718 $ 36 735 $ 184 309
State and municipal
securities 6 500 2 525 12 825
Other securities 108 578 _ 4 590
- ------------------------------------------------------------------------------
$116 796 $ 39 260 $ 201 724
==============================================================================
</TABLE>
Page
<TABLE>
<CAPTION>
Unaudited Unaudited
December 31, 1995 1994 1993
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Gross realized losses:
U.S. Government and agency
securities $ 196 $ _ $ _
State and municipal
securities _ 19 616 _
Other securities 1 000 _ _
- ----------------------------------------------------------------------------
$ 1 196 $19 616 $ _
============================================================================
</TABLE>
The maturities of investment securities at December 31, 1995, were as
follows:
<TABLE>
<CAPTION>
Fair
Amortized Cost Value
- ----------------------------------------------------------------------------
<S> <C> <C>
Securities available for sale
Due in one year or less $ 3 206 413 $ 3 174 486
Due from one to five years 5 964 606 6 074 526
Due from five to ten years 7 958 487 8 028 586
Due after ten years 9 823 272 9 802 604
- ----------------------------------------------------------------------------
$ 26 952 778 $ 27 080 202
============================================================================
</TABLE>
Securities not due at a single maturity date have been allocated to
security groups based on their estimated average lives.
There are no other significant concentrations of investments (greater
than 10 percent of stockholders' equity) in any individual security issuer.
Page
2. Loans
The components of loans in the consolidated balance sheets were as
follows:
<TABLE>
<CAPTION>
In thousands
-------------------------
Unaudited
December 31, 1995 1994
- --------------------------------------------------------------
<S> <C> <C>
Commercial $ 11 095 $ 10 876
Real estate construction 268 62
Commercial real estate 10 748 11 635
Residential real estate 17 264 14 709
Consumer 6 130 5 507
- --------------------------------------------------------------
$ 45 505 $ 42 789
==============================================================
</TABLE>
Changes in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
Unaudited Unaudited
December 31, 1995 1994 1993
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of year $600 000 $600 000 $ 600 000
Provision (11 951) (78 133) 228 669
Loans charged off (34 801) (96 352) (363 736)
Recoveries 46 752 174 485 135 067
- -----------------------------------------------------------------------------
Balance, end of year $600 000 $600 000 $ 600 000
=============================================================================
</TABLE>
The allowance for loan losses is based on estimated losses. In the
opinion of management, the allowance at December 31, 1995, was adequate to
absorb anticipated losses that may be incurred in the collection of the existing
loan portfolio. It is reasonably possible that ultimate losses in the near term
may vary materially from these estimates.
As described in the accompanying significant accounting policies, the
Bank adopted SFAS No. 114 effective January 1, 1995. Included in impaired loans
under that standard are loans on which the accrual of interest has been
discontinued or reduced amounting to $88,575 and $90,241 at December 31, 1995
and 1994, respectively. Income which would have been recorded on these loans
during 1995 and 1994 had they been accruing all year was $10,847 and $14,090,
respectively.
Loan Maturity Projection - Final loan maturities and rate sensitivity
of the loan portfolio excluding installment loans at December 31, 1995, are as
follows (in thousands):
Page
<TABLE>
<CAPTION>
Within One - Five After
One Year Years Five Years Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Domestic Operations:
Commercial and industrial $ 8 695 $ 2 193 $ 207 $11 095
Real estate mortgage 2 341 22 502 3 437 28 280
- --------------------------------------------------------------------------------
$ 11 036 $24 695 $3 644 $39 375
================================================================================
Variable rate loans $ 7 006
Fixed rate loans 32 369
-----------
$39 375
===========
</TABLE>
3. Bank Premises, Furniture and Fixtures, Vehicles and Other Real Estate
Major classifications of fixed assets are summarized as follows:
<TABLE>
<CAPTION>
(Unaudited)
December 31, 1995 1994
- ---------------------------------------------------------------
<S> <C> <C>
Bank premises $ 1 541 817 $ 1 005 759
Furniture and fixtures 959 435 793 926
Vehicles 65 498 53 782
Other real estate 68 258 178 258
- ---------------------------------------------------------------
2 635 008 2 031 725
Less accumulated depreciation (1 274 890) (1 218 964)
- ---------------------------------------------------------------
$ 1 360 118 $ 812 761
===============================================================
</TABLE>
Depreciation expense included in operations amounted to $88,103,
$103,799 and $130,272 for 1995, 1994 and 1993, respectively.
4. Intangible Assets
During 1995 the Bank entered into an agreement to acquire certain
assets and deposit liabilities from other financial institutions. Included as a
part of these transactions were intangible deposit premiums totaling $2,396,620.
These intangibles are being amortized over a fifteen-year period with $34,230
being included in operations for 1995.
Page
5. Income Taxes
The consolidated provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
Unaudited Unaudited
December 31, 1995 1994 1993
- ----------------------------------------------------------------
<S> <C> <C> <C>
Current payable
Federal $ 483 231 $ 467 357 $ 336 789
State 139 531 134 475 116 680
- ----------------------------------------------------------------
$ 622 762 $ 601 832 $ 453 469
================================================================
</TABLE>
Deferred income taxes relating to the unrealized gains/losses on
securities available for sale have been included in the accompanying balance
sheets. The change in these deferred tax amounts had no effect on operations
since these unrealized amounts are included as a separate component of
stockholders' equity.
The provision for federal income taxes is less than that computed by
applying the federal statutory rate of 34 percent in 1995 and 1994 as indicated
in the following analysis:
<TABLE>
<CAPTION>
Unaudited Unaudited
December 31, 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax based on statutory rate $ 619 808 $ 577 237 $ 391 280
Effect of tax-exempt income (109 183) (102 276) (105 998)
Other (net) (27 394) (7 424) 51 507
- -------------------------------------------------------------------------------
$ 483 231 $ 467 537 $ 336 789
===============================================================================
</TABLE>
6. Commitments and Contingent Liabilities
The Bank's consolidated financial statements do not reflect various
commitments and contingent liabilities which arise in the normal course of
business and which involve elements of credit risk, interest rate risk and
liquidity risk. These commitments and contingent liabilities are commitments to
extend credit, commercial letters of credit and standby letters of credit. A
summary of the Bank's commitments and contingent liabilities at December 31,
1995, is as follows:
Commitments to extend credit $ 1 702 561
Commercial letters of credit 1 750 000
Standby letters of credit 171 803
- -----------------------------------------------------------------
$ 3 624 364
=================================================================
Page
Commitments to extend credit, credit card arrangements, commercial
letters of credit and standby letters of credit all include exposure to some
credit loss in the event of nonperformance of the customer. The Bank's credit
policies and procedures for credit commitments and financial guarantees are the
same as those for extension of credit that are recorded on the consolidated
statements of condition. Because these instruments have fixed maturity dates,
and because many of them expire without being drawn upon, they do not generally
present any significant liquidity risk to the Bank. The Bank's experience has
been that approximately 90 percent of loan commitments are drawn upon by
customers. While approximately 5 percent of commercial letters of credit are
utilized, a portion of such utilization is on an immediate payment basis. The
remainder is secured by the goods acquired by the customer with the letter of
credit. The Bank has not been required to perform on any financial guarantees
during the past two years. The Bank has not incurred any losses on its
commitments in either 1995 and 1994.
The Bank and its subsidiaries were not parties to any litigation or
claims at December 31, 1995.
7. Related Parties
The Bank has entered into transactions with its directors,
significant shareholders and their affiliates (Related Parties). Such
transactions were made in the ordinary course of business on substantially the
same terms and conditions, including interest rates and collateral, as those
prevailing at the same times for comparable transactions with other customers,
and did not, in the opinion of management, involve more than normal credit risk
or present other unfavorable features. The aggregate amount of loans to such
related parties is as follows:
<TABLE>
<CAPTION>
Unaudited Unaudited
Years Ended December 31, 1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of year $ 2 895 398 $ 1 449 472 $ 985 342
New loans 607 545 2 275 869 635 685
Payments (1 013 517) (829 943) (171 555)
- ------------------------------------------------------------------------------
Balance, end of year $ 2 489 426 $ 2 895 398 $1 449 472
==============================================================================
</TABLE>
8. Dividend Restrictions
Dividends from the Bank are restricted as required by state law and
regulatory agencies. The requirements generally limit the amount of dividends
that can be paid within prior approval to the income of the current and two
previous years not previously paid out or transferred to capital surplus. At
December 31, 1995, $2,976,207 was available under these provisions. As a
practical matter, actual dividends are further restricted based on prudent and
sound management.
9. Employee Benefits
The Bank has a 401(K) retirement plan in effect for substantially all
full time employees. Salaries and employee benefits expense includes $72,602,
$69,483 and $60,131 in 1995, 1994 and 1993,
Page
respectively, for such plans. Contributions under the plan are made at the
discretion of the Board of Directors. The plan was approved and implemented
January 1, 1991.
10. Deposits
Included in interest-bearing deposits are certificates of deposit
issued in amounts of $100,000 or more. These certificates and their remaining
maturities at December 31, 1995 and 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
Unaudited
December 31, 1995 1994
- ---------------------------------------------------------
<S> <C> <C>
Three months or less $ 4 983 $ 4 647
Three through six months 3 288 2 907
Six through twelve months 4 434 3 175
Over twelve months 3 104 2 613
- ---------------------------------------------------------
$ 15 809 $ 13 342
=========================================================
</TABLE>
11. Parent Company Statements
<TABLE>
Condensed Balance Sheets
<CAPTION>
Unaudited
December 31, 1995 1994
- -----------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash on deposit with subsidiary $ 125 496 $ 156 544
Investments in bank subsidiary 13 928 384 11 569 862
Other assets 10 986 10 753
- -----------------------------------------------------------------------------
Total Assets $14 064 866 $11 737 159
=============================================================================
Liabilities and Stockholders' Equity
Other liabilities $ 97 285 $ 129 487
- -----------------------------------------------------------------------------
Stockholders' equity 13 967 581 11 607 672
- -----------------------------------------------------------------------------
Total Liabilities and
Stockholders' Equity $14 064 866 $11 737 159
=============================================================================
</TABLE>
Page
<TABLE>
Condensed Statements of Earnings
<CAPTION>
Unaudited Unaudited
Years Ended December 31, 1995 1994 1993
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Commissions $ 1 589 $ 2 129 $ 2 459
Dividends from subsidiary 175 000 300 000 170 000
- -----------------------------------------------------------------------------
Total Income 176 589 302 129 172 459
Franchise tax expense 7 653 7 625 7 921
- -----------------------------------------------------------------------------
Income and equity in undistributed
income of subsidiary 168 936 294 504 164 538
Applicable income tax benefit 2 504 2 270 2 290
- -----------------------------------------------------------------------------
Income before equity in undistributed
income of subsidiary 171 440 296 774 166 828
Equity in undistributed income of
subsidiary 1 028 764 933 446 983 996
- -----------------------------------------------------------------------------
Net Income $1 200 204 $1 230 220 $1 150 824
=============================================================================
</TABLE>
Page
<TABLE>
Condensed Statements of Cash Flow
<CAPTION>
(Unaudited) (Unaudited)
Years Ended December 31, 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net income $1 200 204 $1 230 220 $1 150 824
Adjustment to reconcile net income
to net cash provided by operating
activities:
Equity in undistributed earnings
of subsidiary (1 028 764) (933 446) (983 996)
(Increase) decrease in other assets (233) 18 510
Increase (decrease) in other
liabilities (1 503) 35 456 55 215
- -------------------------------------------------------------------------------
Net cash provided by operating
activities 169 704 332 248 222 553
- -------------------------------------------------------------------------------
Financing Activities
Cash dividends (182 792) (183 247) (148 986)
Purchase of treasury stock (net) (17 960) (134 615) (22 415)
- -------------------------------------------------------------------------------
Net cash used by financing activities (200 752) (317 862) (171 401)
- -------------------------------------------------------------------------------
Increase in cash and cash equivalents (31 048) 14 386 51 152
Cash and cash equivalents, at
beginning of year 156 544 142 158 91 006
- -------------------------------------------------------------------------------
Cash and Cash Equivalents, at end of
year $ 125 496 $ 156 544 $ 142 158
===============================================================================
</TABLE>
Page
<TABLE>
Condensed Statement of Changes in Stockholders' Equity
<CAPTION>
Total
- --------------------------------------------------------------
<S> <C>
Unaudited
Balance, December 31, 1992 $ 10 961 551
Net income, December 31, 1993 1 150 824
Cash dividends, $2.40 per share (148 986)
Treasury stock, at cost (22 417)
Net change in unrealized appreciation
(depreciation) on securities available
for sale 842 577
- --------------------------------------------------------------
Unaudited
Balance, December 31, 1993 12 783 549
Net income, December 31, 1994 1 230 220
Cash dividends, $3.00 per share (183 247)
Treasury stock, at cost (134 615)
Net change in unrealized appreciation
(depreciation) on securities available
for sale (2 088 235)
- --------------------------------------------------------------
Balance, December 31, 1994 11 607 672
Net income, December 31, 1995 1 200 204
Cash dividends, $2.50 per share (152 093)
Treasury stock, at cost (17 960)
Net change in unrealized appreciation
(depreciation) on securities available
for sale 1 329 758
- --------------------------------------------------------------
Balance, December 31, 1995 $ 13 967 581
==============================================================
</TABLE>
12. Concentrations of Credit
All of the Bank's loans, commitments, and commercial and standby
letters of credit have been granted to customers in the Bank's market area. All
such customers are depositors of the Bank. Investments in state and municipal
securities also involve governmental entities within the Bank's market area.
The concentrations of credit by type of loan are set forth in Note 2. The
distribution of commitments to extend credit approximates the distribution of
loans outstanding. Commercial and standby letters of credit were granted
primarily to commercial borrowers. The Bank, as a matter of policy, does not
extend credit to any single borrower or group of related borrowers in excess of
the Bank's legal lending limit.
Page
13. Disclosure About Fair Value of Financial Statements
The following table reflects a comparison of the carrying amounts and
fair values of financial instruments of the Corporation and its Subsidiary Bank
at December 31, 1995:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
- ----------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and short-term investments $ 30 966 665 $ 30 966 665
Securities 26 952 778 27 036 878
Loans - net of allowance 44 505 689 44 238 655
Liabilities
Deposits 92 770 230 92 491 919
============================================================================
</TABLE>
14. Subsequent Events
During September, 1996, the Bank recorded approximately $1,024,000 in
loan charge-offs. The majority of these loans were related to a larger pool of
financings involving a number of lending institutions nationwide. Approximately
$652,000 of these loans were outstanding at December 31, 1995. Information
available to the Bank indicates that a portion of the credits included in these
pools represented fraudulent transactions which, ultimately, resulted in the
financial collapse of the underwriting entity. Based upon investigations and
inquiries performed on behalf of the Bank and other similar creditors, it is
believed that none of the loans held by the Bank are fraudulent. Because of the
results of this investigation and the fact that the subject loans are performing
(payments being credited to an escrow account), the Bank believes a substantial
recovery is possible. The degree and timing of any such recovery is currently
unclear.
On October 11, 1996, the Company entered into an agreement and plan
of merger with CNB Bancshares, Inc. Under this agreement, shares of the Company
will be exchange for shares on CNB. Included in the agreement are provisions,
under defined circumstances, for termination fees to be paid by the Company to
CNB. These fees, were the circumstances to occur, range from $200,000 to
$1,000,000. The proposed merger is subject to the approval of the shareholders
of the company and of bank regulators.
Page
APPENDIX A
AGREEMENT AND PLAN OF MERGER
by and among
BMC BANCSHARES, INC.
an Illinois corporation,
and
CNB BANCSHARES, INC.
an Indiana corporation,
and
HBI ACQUISITION COMPANY
an Illinois corporation,
Dated October 11, 1996.
Page
TABLE OF CONTENTS
Page
ARTICLE ONE TERMS OF MERGER AND CLOSING A-1
Section 1.01. Merger A-1
Section 1.02. Merging Corporation A-1
Section 1.03. Surviving Corporation A-2
Section 1.04. Effect of Merger A-2
Section 1.05. Conversion of BMC Common A-2
Section 1.06. Share Adjustments A-3
Section 1.07. Closing A-3
Section 1.08. Exchange Procedures; Surrender of
Certificates A-4
Section 1.09. Closing Date A-5
Section 1.10. Closing Deliveries A-5
ARTICLE TWO REPRESENTATIONS AND WARRANTIES OF BMC A-6
Section 2.01. Organization and Capital Stock A-6
Section 2.02. Authorization; No Defaults A-7
Section 2.03. Subsidiaries A-8
Section 2.04. Financial Information A-8
Section 2.05. Absence of Changes A-8
Section 2.06. Regulatory Enforcement Matters A-9
Section 2.07. Tax Matters A-9
Section 2.08. Litigation A-10
Section 2.09. Employment Agreements A-10
Section 2.10. Reports A-11
Section 2.11. Loan Portfolio A-11
Section 2.12. Investment Portfolio A-11
Section 2.13. Interest Rate Risk Management
Instruments A-11
Section 2.14. Employee Matters and ERISA A-12
Section 2.15. Title to Properties; Insurance A-13
Section 2.16. Environmental Matters A-14
Section 2.17. Compliance with Law A-14
Section 2.18. Brokerage A-14
Section 2.19. Interim Events A-14
Section 2.20. Non-Banking Activities of BMC
and Subsidiaries A-14
Section 2.21. Trust Administration A-15
Section 2.22. Pooling of Interests; Tax-Free
Reorganization A-15
Section 2.23. Properties, Contracts and Other
Agreements A-15
Section 2.24. No Undisclosed Liabilities A-16
Section 2.25. Statements True and Correct A-16
Section 2.26. State Takeover Laws A-16
Section 2.27. Fair Lending; Community
Reinvestment Act A-17
Section 2.28. Assets Necessary to BMC's Business A-17
Page
ARTICLE THREE REPRESENTATIONS AND WARRANTIES OF CNB
AND ACQUISITION SUB A-17
Section 3.01. Organization and Capital Stock A-17
Section 3.02. Authorization A-17
Section 3.03. Subsidiaries A-18
Section 3.04. Financial Information A-18
Section 3.05. Absence of Changes A-18
Section 3.06. Litigation A-18
Section 3.07. Reports A-19
Section 3.08. Compliance With Law A-19
Section 3.09. Pooling of Interests; Tax-Free
Reorganization A-19
Section 3.10. Statements True and Correct A-19
ARTICLE FOUR AGREEMENTS OF BMC A-19
Section 4.01. Business in Ordinary Course A-19
Section 4.02. Breaches A-22
Section 4.03. Submission to Shareholders A-22
Section 4.04. Consents to Contracts and Leases A-22
Section 4.05. Audited Financial Statements A-22
Section 4.06. Consummation of Agreement A-23
Section 4.07. Environmental Reports A-23
Section 4.08. Restriction on Resales A-23
Section 4.09. Access to Information A-24
Section 4.10. Subsidiary Bank Mergers A-24
ARTICLE FIVE AGREEMENTS OF CNB AND ACQUISITION SUB A-24
Section 5.01. Regulatory Approvals and
Registration Statement A-24
Section 5.02. Breaches 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. Access to Information A-26
ARTICLE SIX CONDITIONS PRECEDENT TO MERGER A-27
Section 6.01. Conditions to CNB's Obligations A-27
Section 6.02. Conditions to BMC's Obligations A-28
ARTICLE SEVEN TERMINATION OR ABANDONMENT A-29
Section 7.01. Mutual Agreement A-29
Section 7.02. Breach of Agreements A-29
Section 7.03. Environmental Reports A-29
Section 7.04. Failure of Conditions A-29
Section 7.05. Regulatory Approval Denial A-29
Section 7.06. Shareholder Approval Denial;
Withdrawal/Modification of
Board Recommendation A-30
Section 7.07. Regulatory Enforcement Matters A-30
Section 7.08. Fall-Apart Date A-30
Section 7.09. Termination Fee A-30
Page
ARTICLE EIGHT GENERAL A-32
Section 8.01. Confidential Information A-32
Section 8.02. Publicity A-33
Section 8.03. Return of Documents A-33
Section 8.04. Notices A-33
Section 8.05. Liabilities and Expenses 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
Section 8.15. Enforcement of Agreement A-36
EXHIBIT 1.10(a) - BMC's Legal Opinion Matters
EXHIBIT 1.10(b) - CNB's Legal Opinion Matters
EXHIBIT 4.08 - Form of Affiliate's Letter
Page
AGREEMENT AND PLAN OF MERGER
This is an AGREEMENT AND PLAN OF MERGER (this "Agreement") made October 11,
1996, by and among BMC BANCSHARES, INC., an Illinois corporation ("BMC"), CNB
BANCSHARES, INC., an Indiana corporation ("CNB"), and HBI ACQUISITION COMPANY,
an Illinois corporation and wholly-owned subsidiary of CNB ("Acquisition Sub").
RECITALS
A. The Boards of Directors of CNB and BMC have approved, and deem it advisable
and in the best interests of their respective shareholders to consummate, the
business combination transaction provided for herein in which BMC shall, subject
to the terms and conditions set forth herein, merge with and into Acquisition
Sub (the "Merger").
B. The Boards of Directors of CNB and BMC have each determined that the Merger
and the other transactions contemplated by this Agreement are consistent with,
and in furtherance of, their respective business strategies and goals.
C. For federal income tax purposes, it is intended that the Merger shall
constitute a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), and, as such, shareholders of BMC
will receive certain federal income tax tax-deferral benefits with respect to
shares of CNB received in the Merger. This Agreement shall constitute a "plan
of reorganization" for purposes of the Code.
D. For accounting purposes, it is intended that the Merger shall be accounted
for under the "pooling of interests" method of accounting.
E. CNB, Acquisition Sub and BMC desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
certain conditions to the Merger.
F. In consideration of the foregoing and the respective representations,
warranties, covenants, and agreements set forth herein, CNB, Acquisition Sub and
BMC hereby agree as follows:
ARTICLE ONE
TERMS OF MERGER AND CLOSING
Section 1.01. Merger. Pursuant to the terms and provisions set forth
herein and the Illinois Business Corporation Act of 1983, as amended (the
"Corporate Law"), BMC shall merge with and into Acquisition Sub.
Section 1.02. Merging Corporation. BMC shall be the merging corporation
under the Merger and its corporate identity and existence, separate and apart
from Acquisition Sub, shall cease on consummation of the Merger.
Page
Section 1.03. Surviving Corporation. Acquisition Sub shall be the
surviving corporation in the Merger. No changes in the articles of
incorporation of Acquisition Sub shall be effected by the Merger.
Section 1.04. Effect of Merger. The Merger shall have all of the effects
provided for herein and the Corporate Law.
Section 1.05. Conversion of BMC Common.
(a) The total consideration payable to the shareholders of BMC in the
Merger (the "Maximum CNB Common Amount") shall be 884,227 shares of common
stock, stated value $1.00 per share, of CNB (the "CNB Common"). If the CNB
Average Price (as defined below in Section 1.05(c) hereof) is less than $25.71,
then the Maximum CNB Common Amount shall be increased to equal the product of
(i) 884,227, and (ii) the quotient of $25.71 divided by the CNB Average Price,
provided that in no event shall the Maximum CNB Common Amount be greater than
1,180,960. If the CNB Average Price is greater than $28.57, then the Maximum
CNB Common Amount shall be decreased to equal to the product of (i) 884,227, and
(ii) the quotient of $28.57 divided by the CNB Average Price, provided that in
no event shall the Maximum CNB Common Amount be less than 721,782.
(b) At the Effective Time (as defined in Section 1.09 hereof), by virtue of
the Merger and without any action on the part of CNB, BMC, Acquisition Sub or
their respective shareholders, each share of common stock, no par value per
share, of BMC (the "BMC 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, if any, under the Corporate Law) shall be
converted into the right to receive the number of shares of CNB Common equal to
the quotient of the Maximum CNB Common Amount divided by the Fully-Diluted BMC
Common Amount (as defined below in Section 1.05(d) hereof). The shares of CNB
Common to be issued pursuant to this Section 1.05, together with any cash
payment in lieu of fractional shares, as provided below in Section 1.05(e)
hereof, is referred to herein as the "Merger Consideration."
(c) As used herein, the term "CNB Average Price" shall mean the average of
the daily closing prices of CNB Common as reported in The Wall Street Journal
(Midwest Edition) for the twenty (20) 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 1.06 hereof.
(d) As used herein, the term "Fully-Diluted BMC Common Amount" shall mean
the sum of (i) the number of issued and outstanding shares of BMC Common as of
immediately prior to the Effective Time, and (ii) the number of shares of BMC
Common issuable, whether at the Effective Time or upon the passage of time or
the occurrence of future events, upon the exercise, conversion, or exchange of
all then-outstanding options, warrants, rights to subscribe for or acquire,
calls, or commitments of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, shares of BMC Common.
(e) No fractional shares of CNB Common shall be issued and, in lieu
thereof, holders of shares of BMC Common who would otherwise be entitled to a
fractional share interest (after taking into account all shares of BMC Common
held by such holder) shall be paid an amount in cash equal to the product of
such fractional share interest and the closing price of CNB Common as reported
in The Wall Street
Page
Journal (Midwest Edition) on the business day immediately preceding the date on
which the Effective Time occurs.
(f) At the Effective Time, all of the shares of BMC 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 BMC Common (the
"Certificates") shall thereafter cease to have any rights with respect to such
shares, except the right of such holders to receive, without interest, the
Merger Consideration upon the surrender of such Certificate or Certificates in
accordance with Section 1.08 hereof.
(g) At the Effective Time, each share of BMC Common, if any, held in the
treasury of BMC or by any direct or indirect subsidiary of BMC (other than
shares held in trust accounts for the benefit of others or in other fiduciary,
nominee or similar capacities and shares held by BMC or any of its subsidiaries
in respect to a debt previously contracted) immediately prior to the Effective
Time shall be canceled.
(h) Each share of common stock, par value $1.00 per share, of Acquisition
Sub and each share of CNB Common outstanding immediately prior to the Effective
Time shall remain outstanding unaffected by the Merger.
(i) If holders of BMC Common shall be entitled to dissent from this
Agreement and the Merger and demand payment of fair value of their shares under
the Corporate Law, any issued and outstanding shares of BMC Common held by a
dissenting holder shall not be converted as described in this Section 1.05 but
from and after the Effective Time shall represent only the right to receive such
consideration as may be determined to be due to such dissenting holder pursuant
to the Corporate Law; provided, however, that each share of BMC Common
outstanding immediately prior to the Effective Time and held by a dissenting
holder who shall, after the Effective Time, withdraw his or her or its demand to
receive fair value or otherwise lose his or her or its right of dissent shall
have only such rights as are provided under the Corporate Law.
Section 1.06. Share Adjustments. If between the date hereof and the
Effective Time a share of CNB Common shall be changed into a different number of
shares of CNB Common or a different class of shares (a "Share Adjustment") by
reason of reclassification, recapitalization, splitup, exchange of shares or
readjustment, or if a stock dividend thereon shall be declared with a record
date within such period, then the number of shares of CNB Common into which a
share of BMC Common shall be converted pursuant to Section 1.05 hereof shall be
appropriately and proportionately adjusted so that each shareholder of BMC shall
be entitled to receive such number of shares of CNB Common as such shareholder
would have received pursuant to such Share Adjustment had the record date
therefor been immediately following the Effective Time of the Merger; provided,
however, that the 5% stock dividend payable by CNB on October 11, 1996, to
shareholder of record on September 20, 1996, shall not be deemed a Share
Adjustment for purposes of this Section 1.06 and no adjustments shall be made as
a result thereof.
Section 1.07. Closing. The closing of the Merger (the "Closing") shall
take place at a location mutually agreeable to the parties at 10:00 a.m.,
Central Time, on the Closing Date described in Section 1.09 hereof.
Page
Section 1.08. Exchange Procedures; Surrender of Certificates.
(a) The Citizens National Bank of Evansville shall act as Exchange Agent in
the Merger (the "Exchange Agent").
(b) As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each record holder of any Certificate or
Certificates whose shares were converted into the right to receive the Merger
Consideration, a letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon proper delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as CNB may reasonably specify) (each
such letter, the "Merger Letter of Transmittal") and instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender to the Exchange Agent of a Certificate, together
with a Merger Letter of Transmittal duly executed and any other required
documents, the holder of such Certificate shall be entitled to receive in
exchange therefor solely the Merger Consideration. 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.
(c) Notwithstanding anything to the contrary contained herein, no Merger
Consideration shall be delivered to a person who is an "affiliate" (as such term
is used in Section 4.08 hereof) of BMC unless such "affiliate" shall have
theretofore executed and delivered to CNB the agreement referred to in
Section 4.08 hereof.
(d) No dividends that are otherwise payable on shares of CNB Common
constituting the Merger Consideration shall be paid to persons entitled to
receive such shares of CNB Common until such persons surrender their
Certificates. Upon such surrender, there shall be paid to the person in whose
name the shares of CNB Common shall be issued any dividends which shall have
become payable with respect to such shares of CNB Common (without interest and
less the amount of taxes, if any, which may have been imposed thereon), between
the Effective Time and the time of such surrender.
(e) Holders of unsurrendered Certificates shall not be entitled to vote the
shares represented by such unsurrendered Certificates at any meeting of CNB's
shareholders.
(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
sole discretion, the posting by such person of a bond in such amount as CNB may
determine is reasonably necessary as indemnity against any claim that may be
made against it with respect to such Certificate, the Exchange Agent shall issue
in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration deliverable in respect thereof pursuant hereto.
(g) At or after the Effective Time there shall be no transfers on the stock
transfer books of BMC of any shares of BMC Common. If, after the Effective
Time, Certificates are presented for
Page
transfer, they shall be cancelled and exchanged for the Merger Consideration as
provided in, and subject to the provisions of, this Section 1.08.
Section 1.09. Closing Date. At CNB's election, the Closing shall take
place on (i) the last business day of, or (ii) the first business day of the
month following, or (iii) the last business day of the earliest month which is
the second month of a calendar quarter following, in each case, the month during
which each of the conditions in Sections 6.01(d) and 6.02(d) hereof is satisfied
or waived by the appropriate party or on such other date after such satisfaction
or waiver as BMC 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 the parties shall use their
best efforts to cause to occur on the Closing Date.
Section 1.10. Closing Deliveries.
(a) At the Closing, BMC shall deliver to CNB and Acquisition Sub:
(i) a certified copy of the Articles of Incorporation and Bylaws of
BMC and each of its subsidiaries; and
(ii) a Certificate signed by an appropriate officer of BMC stating that
(A) each of the representations and warranties contained in Article Two is
true and correct in all material respects at the time of the Closing with
the same force and effect as if such representations and warranties had
been made at Closing, and (B) all of the conditions set forth in
Section 6.01(b) hereof have been satisfied or waived as provided therein;
and
(iii) a certified copy of the resolutions of BMC's Board of Directors
and shareholders as required for valid approval of the execution of this
Agreement and the consummation of the Merger and the other transactions
contemplated by this Agreement; and
(iv) Certificate of the Secretary of State of the State of Illinois,
dated a recent date, stating that BMC and each of its subsidiaries is in
good standing; and
(v) Articles of Merger executed by BMC, reflecting the terms and
provisions hereof and in proper form for filing in the appropriate
jurisdictions in order to cause the Merger to become effective pursuant to
the Corporate Law; and
(vi) a legal opinion from counsel for BMC, in form reasonably
acceptable to CNB's counsel, opining with respect to the matters listed on
Exhibit 1.10(a) hereto.
(b) At the Closing, CNB and Acquisition Sub shall deliver to BMC:
(i) a Certificate signed by an appropriate officer of CNB and
Acquisition Sub stating that (A) each of the representations and warranties
contained in Article Three is true and correct in all material respects at
the time of the Closing with the same force and effect as if such
representations and warranties had been made at Closing, and (B) all of the
conditions set forth in Section 6.02(b) and 6.02(d) hereof (but excluding
the approval of BMC's shareholders) have been satisfied; and
Page
(ii) a certified copy of the resolutions of CNB's Board of Directors,
as required for valid approval of the execution of this Agreement and the
consummation of the transactions contemplated by this Agreement; and
(iii) a certified copy of the resolutions of Acquisition Sub's Board of
Directors and shareholder, as required for valid approval of the execution
of this Agreement and the consummation of the transactions contemplated by
this Agreement; and
(iv) a legal opinion from counsel for CNB, in form reasonable
acceptable to BMC's counsel, opining with respect to the matters listed on
Exhibit 1.10(b) hereto; and
(v) copies of all regulatory approvals for the Merger received by CNB.
Section 1.11. Reservation of Right to Revise Transaction. CNB may, at any
time, change the method of effecting the Merger (including, without limitation,
the provisions of this Article One) if and to the extent CNB deems such change
to be desirable, including, without limitation, to provide for the merger of
Acquisition Sub with and into BMC, in which BMC is the surviving corporation;
provided, however, that no such change shall (A) alter or change the amount or
kind of the Merger Consideration to be received by the shareholders of BMC in
the Merger, (B) adversely affect the tax treatment to shareholders of BMC, as
generally described in Section 6.01(i) hereof, or (C) materially impede or delay
receipt of any approvals referred to in Section 6.01(d) hereof or the
consummation of the transactions contemplated by this Agreement.
ARTICLE TWO
REPRESENTATIONS AND WARRANTIES OF BMC
BMC hereby makes the following representations and warranties:
Section 2.01. Organization and Capital Stock.
(a) BMC 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. BMC is a bank holding company
registered with the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") under the Bank Holding Company Act of 1956, as amended
(the "B.H.C.A."). True, complete and correct copies of the Articles of
Incorporation and Bylaws of BMC, as amended and as in effect on the date of this
Agreement, are included as exhibits to Section 2.01(a) of that certain
confidential writing delivered by BMC to CNB and executed by both BMC and CNB
concurrently with the delivery and execution hereof (the "Disclosure Schedule").
(b) The authorized capital stock of BMC consists of 250,000 shares of BMC
Common, of which, as of the date hereof, 60,803 shares are issued and
outstanding. All of the issued and outstanding shares of BMC Common are duly
and validly issued and outstanding and are fully paid and non-assessable and
free of preemptive rights. None of the outstanding shares of BMC Common has
been issued in violation of any preemptive rights of the current or past
shareholders of BMC.
Page
Except as may be otherwise specifically disclosed in Section 2.01(b) of the
Disclosure Schedule, each Certificate issued by BMC 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 BMC only upon
receipt of an affidavit of lost stock certificate and indemnity agreement of
such shareholder indemnifying BMC against any claim that may be made against it
on account of the alleged loss, theft or destruction of any such Certificate or
the issuance of such replacement Certificate.
(c) Except as set forth in subsection 2.01(b) above, (i) there are no
shares of capital stock or other equity securities of BMC 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 BMC Common or other capital stock of BMC or
contracts, commitments, understandings or arrangements by which BMC is or may be
obligated to issue additional shares of its capital stock or options, warrants
or rights to purchase or acquire any additional shares of its capital stock, and
(ii) there are no outstanding stock appreciation, phantom stock or similar
rights.
(d) The minute books of BMC accurately reflect in all material respects all
corporate actions held or taken of its shareholders and Board of Directors
(including committees of the Board of Directors).
Section 2.02. Authorization; No Defaults. BMC's Board of Directors has, by
all appropriate action, approved this Agreement and the Merger and authorized
the execution hereof on its behalf by its duly authorized officers and the
performance by BMC of its obligations hereunder. BMC's Board of Directors has
directed that the agreement of merger (within the meaning of the Corporate Law)
contained in this Agreement and the transactions contemplated by this Agreement,
including the Merger, be submitted to the shareholders of BMC for approval at
the BMC Shareholders Meeting (as defined in Section 4.03 hereof), and, except
for the adoption and approval of this Agreement by the affirmative vote of the
holders of two-thirds of the outstanding shares of BMC Common, no other
corporate proceedings on the part of BMC are necessary to approve this Agreement
and to consummate the transactions contemplated by this Agreement, including the
Merger. Nothing in the Articles of Incorporation or Bylaws of BMC, 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 BMC 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 BMC and constitutes a legal, valid and binding obligation of
BMC, enforceable against BMC in accordance with its terms. BMC and its
subsidiaries are neither in default under nor in violation of any provision of
their Articles of Incorporation or Association, as the case may be, Bylaws, or
any promissory note, indenture or any evidence of indebtedness or security
therefor, lease, contract, insurance policy, purchase or other commitment or any
other agreement or arrangement (however evidenced), whether written or oral,
which default or violation would, individually or in the aggregate with other
defaults or violations, have a Material Adverse Effect (as defined below in this
Section 2.02) on BMC, 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. As used herein, the term "Material Adverse Effect," with respect to
either CNB or BMC, means any condition, event, change or occurrence that has or
shall have a material adverse effect upon (A) the financial condition, business
or results of operations of CNB or BMC and their respective subsidiaries taken
as a whole, or (B) the ability of CNB or BMC to perform its respective
obligations under, and to consummate the transactions contemplated by, this
Agreement.
Page
Section 2.03. Subsidiaries. Each of BMC's banking subsidiaries and its
other direct or indirect subsidiaries (collectively, the "subsidiaries") the
name and jurisdiction of incorporation of which is disclosed in Section 2.03 of
the Disclosure Schedule, is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
corporate power to own its respective properties and assets, to incur its
respective liabilities and to carry on its respective business as now being
conducted. The deposits of each of BMC's subsidiaries that is an insured
institution are insured by the Federal Deposit Insurance Corporation (the
"F.D.I.C.") in accordance with the Federal Deposit Insurance Act as amended, up
to applicable limits. The number of issued and outstanding shares of capital
stock of each such subsidiary is disclosed in Section 2.03 of the Disclosure
Schedule, all of which shares (except as may be otherwise specified in
Section 2.03 of the Disclosure Schedule) are owned by BMC or BMC's subsidiaries,
as the case may be, free and clear of all liens, encumbrances, rights of first
refusal, options or other restrictions of any nature whatsoever, except for
directors' qualifying shares, assessability under 12 U.S.C. 55 and comparable
state laws, if applicable. There are no options, warrants or rights outstanding
to acquire any capital stock of any of BMC's subsidiaries and no person or
entity has any other right to purchase or acquire any unissued shares of stock
of any of BMC'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
otherwise specifically disclosed in Section 2.03 of the Disclosure Schedule,
neither BMC nor any of BMC's subsidiaries is a party to any partnership or joint
venture or owns an equity interest in any other business or enterprise. The
Articles of Incorporation and Bylaws of each subsidiary of BMC, as amended,
copies of which were previously furnished to CNB, are true, complete and correct
copies of such documents as in effect on the date of this Agreement.
Section 2.04. Financial Information. The consolidated balance sheets of
BMC and its subsidiaries as of December 31, 1995 and 1994 and related
consolidated income statements and statements of changes in shareholders' equity
for the three (3) years ended December 31, 1995 as included in BMC's Form FR Y-9
for the year ended December 31, 1995, as currently on file with the Federal
Reserve Board, together with the notes thereto, and the consolidated balance
sheets of BMC and its subsidiaries as of March 31, 1996 and June 30, 1996, and
the related consolidated income statements and statements of changes in
shareholders' equity for the three (3) months and six (6) months, respectively,
then ended, copies of each of which are included in Section 2.04 of the
Disclosure Schedule, and the year-end and quarterly Reports of Condition and
Reports of Income of Bank of Mt. Carmel (the "Subsidiary Bank") for 1995 and
June 30, 1996, respectively, as currently on file with the F.D.I.C., copies of
each of which are included in Section 2.04 of the Disclosure Schedule (together,
the "BMC Financial Statements"), have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis (except as may be
disclosed therein and except for regulatory reporting differences required by
the Subsidiary Bank's reports) and fairly present in all material respects the
financial position and the results of operations and changes in shareholders'
equity of the respective entity and its respective subsidiaries as of the dates
and for the periods indicated (subject, in the case of interim financial
statements, to normal recurring year-end adjustments, none of which shall be
material). The books and records of BMC and its subsidiaries have been, and are
being, maintained in all material respects in accordance with generally accepted
accounting principles and any other applicable legal and accounting requirements
and reflect only actual transactions.
Section 2.05. Absence of Changes. Since December 31, 1995, there has not
been any change in the financial condition, the results of operations or the
business of BMC and its subsidiaries taken as a whole which would have a
Material Adverse Effect on BMC, except as may be otherwise specifically
disclosed by BMC in Section 2.05 of the Disclosure Schedule. Since the date of
their respective most
Page
recent F.D.I.C. examination report, there has been no change in the financial
condition, the results of operations or the business of the Subsidiary Bank
which would have a Material Adverse Effect on the Subsidiary Bank, except as
disclosed by such Subsidiary Bank since December 31, 1995 in its quarterly
Reports of Condition and Reports of Income filed with the F.D.I.C.
Section 2.06. Regulatory Enforcement Matters. Except as may be otherwise
specifically disclosed in Section 2.06 of the Disclosure Schedule, neither BMC
nor the Subsidiary Bank or any other 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 investigation with respect to, any cease-and-desist order, agreement,
consent agreement, memorandum of understanding or other regulatory enforcement
action, proceeding or order with or by, or is a party to any commitment letter
or similar undertaking to, or is subject to any directive by, or has been since
January 1, 1990, a recipient of any supervisory letter from, or since January 1,
1990, 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 BMC or any of its subsidiaries been advised
since January 1, 1990, by any Regulatory Agency that it is considering issuing
or requesting any such Regulatory Agreement. Except as may be otherwise
specifically disclosed in Section 2.06 of the Disclosure Schedule, there is no
material unresolved violation, criticism or exception by any Regulatory Agency
with respect to any report or statement relating to any examinations of BMC or
any of its subsidiaries. As used herein, the term "Regulatory Agency" means any
federal or state agency charged with the supervision or regulation of banks or
bank holding companies, or engaged in the insurance of bank deposits, or any
court, administrative agency or commission or other governmental agency,
authority or instrumentality having supervisory or regulatory authority with
respect to BMC or any of its subsidiaries.
Section 2.07. Tax Matters.
(a) Each of BMC and its subsidiaries has filed with the appropriate
governmental agencies all foreign, federal, state and local Tax (as defined
below in this Section 2.07) returns, declarations, estimates, information
returns, statements and reports (collectively, "Tax Returns") required to be
filed by it. Except as may be otherwise specifically disclosed in
Section 2.07(a) of the Disclosure Schedule, neither BMC nor its subsidiaries are
(a) delinquent in the payment of any Taxes shown on such Tax Returns or on any
assessments received by it for such Taxes, (b) subject to any agreement
extending the period for assessment or collection of any Tax, or (c) a party to
any action or proceeding with, nor has any claim been asserted or threatened
against any of them by, any governmental authority for assessment or collection
of Taxes or for the refund of Taxes previously paid. The income Tax Returns of
BMC and its subsidiaries have been audited by the Internal Revenue Service (the
"I.R.S.") and comparable state agencies and any liability with respect thereto
has been satisfied for all years to and including 1989, and either no material
deficiencies were asserted as a result of such examination for which BMC does
not have adequate reserves or all such deficiencies have been satisfied. The
reserve for Taxes in the financial statements of BMC for the year ended December
31, 1995, is adequate to cover all of the liabilities for Taxes of BMC and its
subsidiaries that may become payable in future years with respect to any
transactions consummated prior to December 31, 1995. As used herein, the term
"Taxes" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental, customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated or
Page
other tax of any kind whatsoever, including any interest, penalty or addition
thereto, whether disputed or undisputed.
(b) Except as may be otherwise specifically disclosed 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 BMC 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 BMC
Employee Plan (as defined in Section 2.14(c) hereof) currently in effect would
not be characterized as an "excess parachute payment" (as such term is defined
in Section 280G(b)(1) of the Code).
(c) Except as may be otherwise specifically disclosed in Section 2.07(c) of
the Disclosure Schedule, BMC has not been subject to any disallowance of a
deduction under Section 162(m) of the Code nor does BMC reasonably believe that
such a disallowance is reasonably likely to be applicable for any tax year of
BMC ended on or before the Closing Date.
Section 2.08. Litigation and Related Matters. Except as may be otherwise
specifically disclosed in Section 2.08 of the Disclosure Schedule, there is no
litigation, claim or other proceeding or investigation of any nature pending or,
to the knowledge of BMC, threatened, against BMC or any of its subsidiaries, or
of which the property of BMC or any of its subsidiaries is or would be subject.
There is no injunction, order, judgment, decree or regulatory restriction
imposed upon BMC, or any of its subsidiaries or the assets of BMC of any of its
subsidiaries. Since at least January 1, 1990, BMC and its subsidiaries have
continuously maintained fidelity bonds insuring them against acts of dishonesty
in such amounts as are customary, usual and prudent for organizations of their
size and business. There are no facts which would form the basis of a claim or
claims under such bonds. Neither BMC nor any of its subsidiaries has reason to
believe that its respective fidelity coverage would not be renewed by the
carrier on substantially the same terms as the existing coverage, except for
possible premium increases unrelated to BMC's and its subsidiaries' past claim
experience.
Section 2.09. Employment Agreements. Except as may be otherwise
specifically disclosed in Section 2.09 of the Disclosure Schedule, neither BMC
nor any of its subsidiaries is a party to or bound by any agreement,
arrangement, commitment or contract (whether written or oral) for the
employment, election, retention or engagement, or with respect to the severance,
of any present or former officer, employee, agent, consultant or other person or
entity which, by its terms, is not terminable by BMC 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 such
agreement and any and all amendments or supplements thereto which is in writing,
and a summary of each such agreement which is not in writing, is included in
Section 2.09 of the Disclosure Schedule.
Section 2.10. Reports. Except as may be otherwise specifically disclosed
in Section 2.10 of the Disclosure Schedule, BMC and each of its subsidiaries has
filed all reports and statements, together with any amendments required to be
made with respect thereto, if any, that it was required to file with (i) the
Federal Reserve Board, (ii) the F.D.I.C., (iii) the Securities and Exchange
Commission (the "S.E.C."), (iv) any state securities authorities, and (v) any
other Regulatory Agency with jurisdiction over BMC or any of its subsidiaries,
and have paid all fees and assessments due and payable in connection therewith.
As of their respective dates, each of such reports and documents, including any
financial statements,
Page
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. Loan Portfolio. Except as may be otherwise specifically
disclosed in Section 2.11 of the Disclosure Schedule, (i) all loans and
discounts shown on the BMC Financial Statements or which were entered into after
the date of the most recent balance sheet included in the BMC Financial
Statements were and shall be made in all material respects for good, valuable
and adequate consideration in the ordinary course of the business of BMC 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 and shall
be, in all material respects, enforceable, valid, true and genuine and what they
purport to be, and (iii) BMC and its subsidiaries have complied and shall prior
to the Closing Date comply with all laws and regulations relating to such loans,
or to the extent there has not been such compliance, such failure to comply
shall not materially interfere with the collection of any such loan.
Section 2.12. 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 BMC or its subsidiaries, as reflected in the
latest consolidated balance sheet of BMC included in the BMC Financial
Statements, are (i) in the case of investment securities held to maturity,
carried in the aggregate at no more than cost adjusted for amortization of
premiums and accretion of discounts, and (ii) in the case of investment
securities classified as available for sale, carried in the aggregate at fair
market value, in accordance with generally accepted accounting principles,
specifically including but not limited to Statement of Financial Accounting
Standards No. 115.
Section 2.13. Interest Rate Risk Management Instruments. Except as may be
otherwise specifically disclosed in Section 2.13 of the Disclosure Schedule,
there are no interest rate swaps, caps, floors, option agreements or other
interest rate risk management arrangements or agreements, whether entered into
for the account of BMC or its subsidiaries or for the account of a customer of
BMC or one of its subsidiaries. All such arrangements and agreements disclosed
in Section 2.13 of the Disclosure Schedule were entered into in the ordinary
course of business and in accordance with prudent banking practice and
applicable rules, regulations and policies and with counterparties believed to
be financially responsible at the time and are legal, valid and binding
obligations of BMC or one of its subsidiaries enforceable in accordance with
their 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), and are in full force
and effect. BMC and each of its subsidiaries have duly performed in all
material respects all of their material obligations thereunder to the extent
that such obligations to perform have accrued; and, to BMC's knowledge, there
are no material breaches, violations or defaults or allegations or assertions of
such by any party thereunder.
Page
Section 2.14. Employee Matters and ERISA.
(a) Except as may be otherwise specifically disclosed in Section 2.14(a) of
the Disclosure Schedule, neither BMC nor any of its subsidiaries has entered
into any collective bargaining agreement with any labor organization with
respect to any group of employees of BMC or any of its subsidiaries and to the
knowledge of BMC there is no present effort nor existing proposal to attempt to
unionize any group of employees of BMC or any of its subsidiaries.
(b) Except as may be otherwise specifically disclosed in Section 2.14(b) of
the Disclosure Schedule, (i) BMC and its subsidiaries are and have been in
material compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and hours,
including, without limitation, any such laws respecting employment
discrimination and occupational safety and health requirements, and neither BMC
nor any of its subsidiaries is engaged in any unfair labor practice, (ii) there
is no material unfair labor practice complaint against BMC or any subsidiary
pending or, to the knowledge of BMC, threatened before the National Labor
Relations Board, (iii) there is no labor dispute, strike, slowdown or stoppage
actually pending or, to the knowledge of BMC, threatened against or directly
affecting BMC or any subsidiary, and (iv) neither BMC nor any subsidiary has
experienced any material work stoppage or other material labor difficulty during
the past five (5) years.
(c) Except as may be otherwise specifically disclosed in Section 2.14(c) of
the Disclosure Schedule, neither BMC 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 BMC or
any subsidiary (the "BMC Employee Plans"). To the knowledge of BMC, no present
or former employee of BMC or any subsidiary has been charged with breaching nor
has breached a fiduciary duty under any of the BMC Employee Plans. Neither BMC
nor any of its subsidiaries participates in, nor has it in the past five (5)
years participated in, nor has it any present or future obligation or liability
under, any multiemployer plan (as defined at Section 3(37) of ERISA). Except as
may be otherwise specifically and separately disclosed in Section 2.14(c) of the
Disclosure Schedule, neither BMC 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 BMC or any subsidiary.
(d) Neither BMC nor any of its subsidiaries maintain, nor have any of them
maintained for the past ten years, any BMC Employee Plans subject to Title IV of
ERISA or Section 412 of the Code. No reportable event (as defined in
Section 4043 of ERISA) has occurred with respect to any BMC Employee Plans as to
which a notice would be required to be filed with the Pension Benefit Guaranty
Corporation. No claim is pending, and BMC has not received notice of any
threatened or imminent claim with respect to any BMC Employee Plan (other than a
routine claim for benefits for which plan administrative review procedures have
not been exhausted) for which BMC or any of its subsidiaries would be liable
after December 31, 1995, except as reflected on the BMC Financial Statements.
After December 31, 1995, BMC 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 BMC Employee
Plan. All BMC Employee Plans have in all material respects been
Page
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 otherwise specifically disclosed in Section 2.14(e) of
the Disclosure Schedule, neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated by this Agreement (either
alone or upon the occurrence of any additional acts or events) would (i) result
in any material payment (including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any director,
officer or employee of BMC or any of its affiliates from BMC or any of its
affiliates under any BMC Employee Plan or otherwise, (ii) materially increase
any benefits otherwise payable under any BMC Employee Plan, or (iii) result in
any acceleration of the time of payment or vesting of any such benefits to any
material extent.
(f) Attached to Section 2.14 of the Disclosure Schedule are, in addition to
copies of each BMC Employee Plan and all amendments or supplements thereto,
(i) summary plan descriptions, (ii) lists of all current participants and all
participants with benefit entitlements, (iii) contracts relating to plan
documents, (iv) actuarial valuations for any defined benefit plan,
(v) valuations for any plan as of the most recent date, (vi) determination
letters from the I.R.S., (vii) the most recent annual report filed with the
I.R.S., (viii) registration statements and prospectuses, and (ix) trust
agreements.
Section 2.15. Title to Properties; Insurance. Except as may be otherwise
specifically disclosed in Section 2.15 of the Disclosure Schedule, (i) BMC 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 BMC
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
(as such real estate is internally classified on the books of BMC 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 BMC 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 BMC, threatened with respect to such properties,
(iv) BMC 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 BMC and its subsidiaries as presently
conducted, 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, (v) all material
insurable properties owned or held by BMC and its subsidiaries are adequately
insured by financially sound and reputable insurers in such amounts and against
fire and other risks insured against by extended coverage and public liability
insurance, as is customary with bank holding companies of similar size, and
there are presently no claims pending under such policies of insurance and no
notices have been given by BMC or any of its subsidiaries under such policies,
and (vi) all tangible properties used in the businesses of BMC and its
subsidiaries are in good condition, reasonable wear and tear excepted, and are
useable in the ordinary course of business consistent with past practices.
Section 2.15 of the Disclosure Schedule sets forth, for each policy of insurance
maintained by BMC and its subsidiaries, the amount and type of insurance, the
name of the insurer and the amount of the annual premium.
Page
Section 2.16. Environmental Matters.
(a) As used herein, the term "Environmental Laws" shall mean all local,
state and federal environmental, health and safety laws and regulations and
common law standards in all jurisdictions in which BMC 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 otherwise specifically disclosed in Section 2.16(b) of
the Disclosure Schedule, neither the conduct nor operation of BMC 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 that would have a Material Adverse Effect on BMC and no condition has
existed or event has occurred with respect to any of them or any such property
that, with notice or the passage of time, or both, would constitute a violation
of Environmental Laws or obligate (or potentially obligate) BMC 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 have a Material Adverse Effect on BMC. Except as may be otherwise
specifically disclosed in Section 2.16(b) of the Disclosure Schedule, neither
BMC nor any of its subsidiaries has received any notice from any person or
entity that BMC or its subsidiaries or the operation or condition of any
property ever owned, leased or operated by any of them are or were in violation
of any Environmental Laws or that any of them are responsible (or potentially
responsible) for the cleanup or other remediation of any pollutants,
contaminants, or hazardous or toxic wastes, substances or materials at, on or
beneath any such property.
Section 2.17. Compliance with Law. BMC 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 2.18. 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 BMC or its subsidiaries.
Section 2.19. Interim Events. Except as may be otherwise specifically
disclosed in Section 2.19 of the Disclosure Schedule, since December 31, 1995,
neither BMC nor its subsidiaries has paid or declared any dividend or made any
other distribution to shareholders or taken any action which if taken after the
date hereof would require the prior written consent of CNB pursuant to
Section 4.01(b) hereof.
Section 2.20. Non-Banking Activities of BMC and Subsidiaries. Neither BMC
nor any of its subsidiaries that is neither a bank, a bank operating subsidiary
or a bank service corporation, directly or indirectly, engages in any activity
prohibited by the Federal Reserve Board or the B.H.C.A. or which is not listed
at 12 C.F.R. 225.25. Without limiting the generality of the foregoing, any
equity investment of BMC and each of its subsidiaries that is not a bank, a bank
operating subsidiary or a bank service corporation, is not prohibited by the
Federal Reserve Board or the B.H.C.A.
Page
Section 2.21. Trust Administration. The Subsidiary Bank and each other
subsidiary of BMC which is a trust company or otherwise acts in a fiduciary
capacity has properly administered all accounts for which it acts as a fiduciary
or agent, including but not limited to accounts for which it serves as a
trustee, agent, custodian, personal representative, guardian, conservator or
investment advisor, in accordance with the terms of the governing documents and
applicable state and federal law and regulation and common law, except where the
failure to do so would not, individually or in the aggregate, have a Material
Adverse Effect on BMC. Neither BMC, any subsidiary of BMC, nor any director,
officer or employee of BMC or any of its subsidiaries acting on behalf of BMC or
any of its subsidiaries, has committed any breach of trust with respect to any
such fiduciary or agency account, and the accountings for each such fiduciary or
agency account are true and correct 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 BMC. There is no
investigation or inquiry by any Regulatory Agency pending, or to the knowledge
of BMC, threatened, against or affecting BMC or any of its subsidiaries relating
to the compliance by BMC or any such subsidiary with sound fiduciary principles
and applicable regulations.
Section 2.22. Pooling of Interests; Tax-Free Reorganization. BMC has no
reason to believe that the Merger shall not qualify as a "pooling of interests"
for accounting purposes or a tax-free reorganization within the meaning of
Section 368(a) of the Code.
Section 2.23. Properties, Contracts and Other Agreements. Section 2.23 of
the Disclosure Schedule lists or describes the following:
(a) Each parcel of real property owned by BMC or its subsidiaries and the
principal buildings and structures located thereon; and
(b) Each lease of real property to which BMC 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; and
(c) Each loan and credit agreement, conditional sales contract, indenture
or other title retention agreement or security agreement relating to money
borrowed by BMC or its subsidiaries; and
(d) Each guaranty by BMC 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
Subsidiary Bank in the ordinary course of its business) or any warranty or
indemnification agreement; and
(e) Each agreement between BMC or any of its subsidiaries and any present
or former officer, director or shareholder of BMC or any of its subsidiaries
(except for deposit or loan agreements entered into in the ordinary course of
the Subsidiary Bank's business); and
(f) Each lease or license with respect to personal property involving BMC
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 $10,000; and
Page
(g) The name and annual salary as of July 31, 1996, of each director or
employee of BMC and 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 BMC or its subsidiaries not referred to elsewhere in
this Section 2.23 which (i) involves payment by BMC or its subsidiaries (other
than as disbursement of loan proceeds to customers) of more than $10,000, (ii)
involves payments based on profits of BMC 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 2.23
of the Disclosure Schedule are appended to such Schedule and included in the
Disclosure Schedule.
Section 2.24. No Undisclosed Liabilities. BMC 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, including
any liability for Taxes (and there is no past or present fact, situation,
circumstance, condition or other basis for any present or future action, suit or
proceeding, hearing, charge, complaint, claim or demand against BMC or its
subsidiaries giving rise to any such liability), except (i) for liabilities set
forth in the BMC Financial Statements, (ii) normal fluctuation in the amount of
the liabilities referred to in clause (i) above occurring in the ordinary course
of business of BMC and its subsidiaries since the date of the most recent
balance sheet included in the BMC Financial Statements, and (iii) as may be
specifically disclosed in Section 2.24 of the Disclosure Schedule.
Section 2.25. Statements True and Correct. None of the information
supplied or to be supplied by BMC or its subsidiaries for inclusion in (i) the
Registration Statement (as defined in Section 4.06 hereof), (ii) the Proxy
Statement/Prospectus (as defined in Section 4.03 hereof), and (iii) any other
documents to be filed with the S.E.C., the New York Stock Exchange, Inc. (the
"N.Y.S.E.") or any other Regulatory Agency in connection with the transactions
contemplated by this Agreement shall, at the respective times such documents are
filed, and, in the case of the Registration Statement, when it becomes
effective, and, with respect to the Proxy Statement/Prospectus, when first
mailed to the shareholders of BMC and at the time of the BMC 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 BMC shall be responsible for filing with the S.E.C., the N.Y.S.E. or any
other Regulatory Agency in connection with the transactions contemplated by this
Agreement shall comply as to form in all material respects with the provisions
of applicable law and the applicable rules and regulations thereunder.
Section 2.26. State Takeover Laws. The Board of Directors of BMC has
approved the Merger and the other transactions contemplated by this Agreement
(prior to the execution by BMC of this Agreement) such that the provisions of
Section 11.75 of the Corporate Law shall not apply to this Agreement or any of
the transactions contemplated by this Agreement. The Board of Directors of BMC
has taken all such action required to be taken by it to provide that this
Agreement and the transactions contemplated by this Agreement shall be exempt
from the requirements of any "moratorium," "control share," "fair price" or
other anti-takeover laws or regulations of Illinois.
Page
Section 2.27. Fair Lending; Community Reinvestment Act. As of the date
hereof, with the exception of routine investigation of consumer complaints,
neither BMC nor any of its subsidiaries has been advised by any Regulatory
Agency that it is or may be in violation of the Equal Credit Opportunity Act or
the Fair Housing Act or any similar federal or state statute. As of the date
hereof, each of BMC's depository institution subsidiaries received a Community
Reinvestment Act ("CRA") rating of "1" or "2" in its most recent CRA
examination.
Section 2.28. Assets Necessary to BMC's Business. The assets of BMC and
its subsidiaries constitute all of the assets used or employed by BMC and its
subsidiaries, directly or indirectly, in their business as heretofore conducted
and there are no other material assets, whether real or personal, tangible or
intangible, choate or inchoate, which are necessary to conduct the business and
operations of BMC and its subsidiaries as heretofore conducted.
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES OF CNB AND ACQUISITION SUB
CNB and Acquisition Sub hereby make the following representations and
warranties:
Section 3.01. Organization and Capital Stock.
(a) CNB is a corporation duly incorporated, validly existing, and in good
standing under the laws of the State of Indiana with full corporate power and
authority to carry on its business as it is now being conducted. CNB is a bank
holding company registered with the Federal Reserve Board under the B.H.C.A.
Acquisition Sub is a corporation duly incorporated, validly existing, and in
good standing 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) 50,000,000 shares
of CNB Common, of which, as of June 30, 1996, approximately 18,339,000 shares
were issued and outstanding, and (ii) 2,000,000 shares of preferred stock, of
which none are issued and outstanding. All of the issued and outstanding shares
of CNB Common are duly and validly issued and outstanding and are fully paid and
non-assessable and free of preemptive rights.
(c) Acquisition Sub has authorized capital of 10,000 shares of common
stock, par value $1.00 per share (the "Acquisition Sub Common"). As of the date
hereof, 100 shares of Acquisition Sub 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
BMC pursuant to the Merger have been duly authorized and, when so issued in
accordance with the terms hereof, shall be validly issued and outstanding, fully
paid and non-assessable, with no personal liability attaching to the ownership
thereof.
Section 3.02. Authorization. The Board of Directors of CNB and the Board
of Directors and sole shareholder of Acquisition Sub have, by all appropriate
action, approved this Agreement and the Merger and authorized the execution
hereof on their behalf by their respective duly authorized officers
Page
and the performance by such respective entity of their obligations hereunder.
Nothing in the Articles of Incorporation or Bylaws of CNB or Acquisition Sub, 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 Acquisition Sub from entering into
and consummating this Agreement and the Merger on the terms and conditions
herein contained. This Agreement has been duly and validly executed and
delivered by CNB and Acquisition Sub and constitutes a legal, valid and binding
obligation of CNB and Acquisition Sub, enforceable against CNB and Acquisition
Sub in accordance with its terms and, no other corporate acts or proceedings are
required to be taken by CNB or Acquisition Sub to authorize the execution,
delivery and performance of this Agreement. Except for the requisite approval
of the Federal Reserve Board and the Illinois Office of Banks and Real Estate
(Bureau 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 Acquisition Sub.
Section 3.03. Subsidiaries. Each of CNB's significant subsidiaries (as
such term is defined in Rule 1-02 of Regulation S-X promulgated by the S.E.C.)
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the corporate power to own its
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, 1995 and 1994 and related
consolidated statements of income, changes in shareholders' equity and cash
flows for the three (3) years ended December 31, 1995, together with the notes
thereto, included in CNB's Annual Report on Form 10-K for the year ended
December 31, 1995, as currently on file with the S.E.C., and the unaudited
consolidated balance sheets of CNB and its subsidiaries as of March 31, 1996 and
June 30, 1996, and the related unaudited consolidated income statements and
statements of changes in shareholders' equity and cash flows for the three (3)
months and six (6) months, respectively, then ended included in CNB's Quarterly
Reports on Form 10-Q for the quarters then ended, as currently on file with the
S.E.C. (together, the "CNB Financial Statements"), have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis (except as may be disclosed therein) and fairly present in all material
respects the consolidated financial position and the consolidated results of
operations, changes in shareholders' equity and cash flows of CNB and its
consolidated subsidiaries as of the dates and for the periods indicated
(subject, in the case of interim financial statements, to normal recurring year-
end adjustments, none of which shall be material).
Section 3.05. Absence of Changes. Since December 31, 1995, there has not
been any change in the financial condition, the results of operations or the
business of CNB and its subsidiaries which would have a Material Adverse Effect
on CNB, except as disclosed by CNB since December 31, 1995 in its periodic
reports filed with the S.E.C. under the Exchange Act.
Section 3.06. Litigation. There is no litigation, claim or other
proceeding pending or, to the knowledge of CNB, threatened, against CNB or any
of its subsidiaries, or of which the property of CNB or any of its subsidiaries
is or would be subject which would have a Material Adverse Effect on CNB.
Page
Section 3.07. Reports. CNB and each of its significant subsidiaries has
filed all material reports and statements, together with any amendments required
to be made with respect thereto, that it was required to file with (i) the
S.E.C., (ii) the Federal Reserve Board, (iii) the Office of the Comptroller of
the Currency (the "O.C.C."), (iv) the F.D.I.C., (v) the N.Y.S.E., and (vi) any
other Regulatory Agency with jurisdiction over CNB or any of its significant
subsidiaries. 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 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. Pooling of Interests; Tax-Free Reorganization. CNB has no
reason to believe that the Merger shall not qualify as a "pooling of interests"
for accounting purposes or a tax-free reorganization within the meaning of
Section 368(a) of the Code.
Section 3.10. Statements True and Correct. None of the information
supplied or to be supplied by CNB or Acquisition Sub for inclusion in (i) the
Registration Statement, (ii) the Proxy Statement/Prospectus, and (iii) any other
documents to be filed with the S.E.C., the N.Y.S.E. or any other Regulatory
Agency in connection with the transactions contemplated by this Agreement shall,
at the respective times such documents are filed, and, in the case of the
Registration Statement, when it becomes effective, and with respect to the Proxy
Statement/Prospectus, when first mailed to the shareholders of BMC and at the
time of the BMC 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 shall be responsible for filing
with the S.E.C., the N.Y.S.E. or any other Regulatory Agency in connection with
the transactions contemplated by this Agreement shall comply as to form in all
material respects with the provisions of applicable law and the applicable rules
and regulations thereunder.
ARTICLE FOUR
AGREEMENTS OF BMC
Section 4.01. Business in Ordinary Course.
(a) BMC shall not declare or pay any dividend or make any other
distribution to shareholders, whether in cash, stock or other property, after
the date hereof, except that BMC may, during 1996, declare and pay its regular
quarterly dividends and special annual dividends on the BMC Common not to exceed
$3.50 per share in the aggregate for 1996 (taking into account all dividends
theretofore paid in 1996) at approximately the same times during the year which
it has historically declared and paid such dividends and, during 1997, declare
and pay quarterly dividends of $0.875 per share (which equates, on
Page
an annualized basis, to $3.50 which is expected to be the aggregate annual
dividend amount of BMC for 1996) at approximately the same times during the year
which it has historically declared and paid its quarterly dividends; provided,
however, that BMC 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 BMC shareholders shall receive a
quarterly dividend from either BMC or CNB but not from both during or with
respect to such quarter.
(b) BMC shall, and shall cause each of its subsidiaries to, (1) continue to
carry on after the date hereof its respective business and the discharge or
incurrence of obligations and liabilities, only in the usual, regular and
ordinary course of business, as heretofore conducted, (2) use reasonable best
efforts to maintain and preserve intact its respective business organization,
employees and advantageous business relationships and retain the services of its
officers and key employees, and (3) by way of amplification and not limitation,
BMC and each of its subsidiaries shall not, without the prior written consent of
CNB (which shall not be unreasonably withheld):
(i) issue any BMC Common or other capital stock or any options,
warrants, or other rights to subscribe for or purchase BMC Common or any
other capital stock or any securities convertible into or exchangeable for
any capital stock of BMC or any of its subsidiaries; or
(ii) directly or indirectly redeem, purchase or otherwise acquire any
BMC Common or any other capital stock of BMC 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 ordinary and normal increases
consistent with past practices, in the compensation payable or to become
payable to officers or salaried employees, grant any stock options or,
except as required by law, adopt or make any change in any bonus,
insurance, pension, or other BMC Employee Plan, agreement, payment or
arrangement made to, for or with any of such officers or employees; or
(vi) borrow or agree to borrow any 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 $250,000 or that would increase the
aggregate credit outstanding to any one borrower (or group of affiliated
borrowers) to more than $250,000 (excluding for this purpose any accrued
interest or overdrafts), without the prior written consent of CNB, acting
through its Senior Vice President and Chief Credit Officer or such other
designee as CNB may give notice of to BMC; 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
Page
other than those issued or guaranteed by the Government National Mortgage
Association, the Federal National Mortgage Association or the Federal Home
Loan Mortgage Corporation; or
(ix) increase or decrease the rate of interest paid on time deposits,
or on certificates of deposit, except in a manner and pursuant to policies
consistent with past practices; or
(x) enter into any agreement, contract or commitment out of the
ordinary course of business or having a term in excess of six (6) 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; 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 BMC or its subsidiaries or any claims
which BMC 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 BMC 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
BMC and its subsidiaries shall not be required to obtain such a report with
respect to single family, non-agricultural residential property of one acre
or less to be foreclosed upon unless it has reason to believe that such
property might contain any such waste materials or otherwise might be
contaminated; or
(xv) commit any act or fail to do any act which would cause a breach of
any agreement, contract or commitment and which would have a Material
Adverse Effect on BMC; or
(xvi) violate any law, statute, rule, governmental regulation, or order,
which violation might have a Material Adverse Effect on BMC; 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
$25,000; or
(xviii) take, or cause to be taken, any action, whether before or after
the Effective Time, which would disqualify the Merger as a "pooling of
interests" for accounting purposes or as a "reorganization" within the
meaning of Section 368(a) of the Code; or
(xix) take any action which would adversely effect or delay the ability
of either CNB or BMC to obtain any necessary approvals of any Regulatory
Agency or other governmental
Page
authority required for the transactions contemplated by this Agreement or
to perform its covenants and agreements under this Agreement.
(c) BMC 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 BMC contained
in Article Two hereof, if such representations and warranties were given as of
the date of such transaction or action.
(d) BMC shall promptly notify CNB in writing of the occurrence of any
matter or event known to and directly involving BMC, which would not include any
changes in conditions that affect the banking industry generally, that would
have, either individually or in the aggregate, a Material Adverse Effect on BMC.
(e) BMC and its subsidiaries shall not, and shall not authorize or permit
any of their respective officers, directors, employees or agents to, on or
before the earlier of the Closing Date or the date of termination of this
Agreement, directly or indirectly solicit, initiate or encourage or, unless
required to comply with the fiduciary duties of the Board of Directors of BMC as
determined by such Board of Directors, in good faith, after consultation with
its financial and legal advisors, 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 BMC Common or other securities of BMC or its subsidiaries.
BMC 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. BMC shall, in the event it has knowledge of the
occurrence, or impending or threatened occurrence, of any event or condition
which would cause or constitute a breach (or would have caused or constituted a
breach had such event occurred or been known prior to the date hereof) of any of
its representations or agreements contained or referred to herein, give prompt
written notice thereof to CNB and use its best efforts to prevent or promptly
remedy the same.
Section 4.03. Submission to Shareholders. BMC shall cause to be duly
called and held, on a date mutually selected by CNB and BMC, a special meeting
of its shareholders (the "BMC Shareholders Meeting") for submission of this
Agreement and the Merger for approval of such BMC shareholders as required by
the Corporate Law. In connection with the BMC Shareholders Meeting, (i) BMC
shall cooperate and assist CNB in preparing and filing a Proxy
Statement/Prospectus (the "Proxy Statement/Prospectus") with the S.E.C. and BMC
shall mail it to its shareholders, (ii) BMC shall furnish CNB all information
concerning itself that CNB may reasonably request in connection with such Proxy
Statement/Prospectus, and (iii) the Board of Directors of BMC (subject to
compliance with its fiduciary duties as advised by counsel) shall recommend to
its shareholders the approval of this Agreement and the Merger contemplated by
this Agreement and use its best efforts to obtain such shareholder approval.
Section 4.04. Consents to Contracts and Leases. BMC shall use its best
efforts to obtain all necessary consents with respect to all interests of BMC
and its subsidiaries in any material leases, licenses, contracts, instruments
and rights which require the consent of another person for their transfer or
assumption pursuant to the Merger, if any.
Page
Section 4.05. Audited Financial Statements. BMC shall deliver to CNB, on
or before November 15, 1996, an unqualified audit opinion on the consolidated
balance sheet of BMC as of December 31, 1995, and the related consolidated
statement of income, changes in stockholders' equity and cash flows of BMC for
the year ended December 31, 1995 (the "1995 Audited Financial Statements"). If
required for the completion of the Registration Statement under the regulations
of the S.E.C., BMC shall also deliver to CNB, as soon as practicable after
December 31, 1996, an unqualified audit opinion on the consolidated balance
sheet of BMC as of December 31, 1996, and the related consolidated statement of
income, changes in stockholders' equity and cash flows of BMC for the year ended
December 31, 1996.
Section 4.06. Consummation of Agreement. BMC shall use its best efforts to
perform and fulfill all conditions and obligations on its part to be performed
or fulfilled under this Agreement and to effect the Merger and the other
transactions contemplated hereby in accordance with the terms and provisions
hereof and to effect the transition and integration of the business and
operations of BMC and its subsidiaries with the business and operations of CNB
and its subsidiaries. BMC shall furnish to CNB in a timely manner all
information, data and documents in the possession of BMC 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 BMC 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. BMC shall provide to CNB, within
sixty (60) days after the date hereof, (i) a report of a phase one environmental
investigation on all real property owned, leased or operated by BMC or its
subsidiaries as of the date hereof (but excluding space in retail and similar
establishments leased by BMC for automatic teller machines) and on all real
property acquired or leased by BMC or its subsidiaries after the date hereof
(but excluding space in retail and similar establishments leased or operated by
BMC 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, a report of a phase two investigation on properties
requiring such additional study. The person conducting such investigation shall
be a qualified and reputable environmental expert mutually selected by CNB and
BMC and shall provide CNB and BMC 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. CNB shall have fifteen (15)
business days from the receipt of any such phase two investigation report to
notify BMC of any dissatisfaction with the contents of such report. Should the
cost of taking all remedial or other corrective actions and measures
(i) required by applicable law or reasonably likely to be required by applicable
law, or (ii) recommended or suggested by such report or reports or prudent in
light of serious life, health or safety concerns, in the aggregate, exceed the
sum of $150,000 as reasonably estimated by an environmental expert retained for
such purpose by CNB and reasonably acceptable to BMC, 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 BMC.
Section 4.08. Restriction on Resales. BMC shall deliver to CNB, at least
forty (40) days prior to the Closing Date, a list of each person who may
reasonably be deemed an "affiliate" of BMC within
Page
the meaning of such term as used in Rule 145 under the Securities Act at the
time the Proxy Statement/Prospectus is mailed to the shareholders of BMC. BMC
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 named on the list referred to in the
preceding sentence regarding compliance by such person with (i) the provisions
of such Rule 145, and (ii) the requirements of Accounting Principles Board
Opinion No. 16 regarding the disposition of shares of BMC 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. BMC shall permit CNB reasonable
access in a manner which shall avoid undue disruption or interference with BMC's
normal operations to its properties and shall disclose and make available to CNB
all books, documents, papers and records relating to its assets, stock
ownership, properties, operations, obligations and liabilities, including, but
not limited to, all books of account (including the general ledger), tax
records, minute books of directors' and 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 CNB
may have a reasonable and legitimate interest in furtherance of the transactions
contemplated by this Agreement.
Section 4.10. Subsidiary Bank Mergers. Upon the request of CNB, BMC shall
cause the Subsidiary Bank to enter into a merger agreement with a wholly-owned
banking subsidiary of CNB, and take all other actions and cooperate with CNB in
causing such merger (the "Subsidiary Bank Merger") to be effected. Such
subsidiary bank merger agreement shall provide, in addition to customary terms
for the combination of subsidiary bank operations in transactions such as this:
(i) for consummation of any such merger on a date on or after the Closing Date,
as may be selected by CNB, and (ii) that the obligations of the Subsidiary Bank
thereunder are conditioned on the prior or simultaneous consummation of the
Merger pursuant to this Agreement.
ARTICLE FIVE
AGREEMENTS OF CNB AND ACQUISITION SUB
Section 5.01. Regulatory Approvals and Registration Statement.
(a) CNB shall file all regulatory applications required in order to
consummate the Merger, including but not limited to the necessary applications
for the prior approval of the Federal Reserve Board and the Illinois Office of
Banks and Real Estate (Bureau of Banks and Trust Companies). CNB shall keep BMC
reasonably informed as to the status of such applications and make available to
BMC, upon reasonable request by BMC from time to time, copies of such
applications and any supplementally filed materials.
(b) CNB shall file with the S.E.C. the Registration Statement relating to
the shares of CNB Common to be issued to the shareholders of BMC pursuant
hereto, and shall use its best efforts to cause the Registration Statement to
become effective. At the time the Registration Statement becomes effective,
Page
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 BMC, at the time of the BMC Shareholders Meeting
and at the Effective Time, the Proxy Statement/Prospectus included as part of
the Registration Statement, as amended or supplemented by any amendment or
supplement, shall not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not false or
misleading. CNB shall timely file all documents required to obtain all
necessary Blue Sky permits and approvals, if any, required to carry out the
transactions contemplated by this Agreement, shall pay all expenses incident
thereto and shall use its best efforts to obtain such permits and approvals on a
timely basis. CNB shall promptly prepare and file (i) any application required
to list on the N.Y.S.E. the shares of CNB Common to be issued pursuant to the
Merger, and (ii) any filings required under the Exchange Act relating to the
Merger and the transactions contemplated herein.
Section 5.02. Breaches. CNB shall, in the event it has knowledge of the
occurrence, or impending or threatened occurrence, of any event or condition
which would cause or constitute a breach (or would have caused or constituted a
breach had such event occurred or been known prior to the date hereof) of any of
its representations or agreements contained or referred to herein, give prompt
written notice thereof to BMC and use its best efforts to prevent or promptly
remedy the same.
Section 5.03. Consummation of Agreement. CNB and Acquisition Sub shall use
their respective 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 in accordance with the terms and conditions of this
Agreement.
Section 5.04. Directors and Officers' Liability Insurance and
Indemnification.
(a) Following the Effective Time, CNB shall provide the directors and
officers of BMC 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 act and omissions of the directors
and officers of BMC 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 BMC may purchase such coverage under its existing directors'
and officers' liability insurance policy on such terms and provisions as BMC
deems appropriate provided that the total cost thereof shall not exceed $30,000.
(b) For three (3) years after the Effective Time, CNB shall cause the
survivor of the Merger of BMC and Acquisition Sub (the "Surviving Corporation")
to indemnify, defend and hold harmless the present and former officers,
directors, employees and agents of BMC 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) to the full extent then permitted under the Corporate Law and by
BMC's Articles of Incorporation as in effect on the date hereof, including
provisions relating to advances of expenses incurred in the defense of any
action or suit.
Page
(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 employee
of BMC or its subsidiaries at the Effective Time who shall continue in
employment with BMC, CNB or their respective subsidiaries (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's subsidiaries (the "CNB Employee Plans"), if and as a Continued Employee
shall be eligible and, if required, selected for participation therein under the
terms thereof and otherwise shall not be participating in a similar plan
maintained by BMC after the Effective Time. BMC employees shall be eligible to
participate on the same basis as similarly situated employees of other CNB
subsidiaries. All such participation shall be subject to such terms of such
plans as may be in effect from time to time and this Section 5.05 is not
intended to give Continued Employees any rights or privileges superior to those
of other employees of CNB's subsidiaries. CNB may terminate or modify all BMC
Employee Plans except insofar as benefits thereunder shall have vested at the
Effective Time and cannot be modified and CNB's obligation under this
Section 5.05 shall not be deemed or construed so as to provide duplication of
similar benefits but, subject to that qualification, CNB shall, for purposes of
vesting and any age or period of service requirements for commencement of
participation with respect to any CNB Employee Plans in which Continued
Employees may participate (but not for benefit accruals under any defined
benefit plan), credit each Continued Employee with his or her term of service
with BMC and its subsidiaries. No Continued Employee or other person shall be,
or shall be deemed to be, a third party beneficiary or have or acquire any right
to enforce the provisions of this Section 5.05.
Section 5.06. Access to Information. CNB shall permit BMC reasonable
access in a manner which shall avoid undue disruption or interference with CNB's
normal operations to its properties and shall disclose and make available to BMC
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 BMC
may have a reasonable and legitimate interest in furtherance of the transactions
contemplated by this Agreement. BMC shall hold any such information which is
nonpublic in confidence in accordance with the provisions of Section 8.01
hereof.
Page
ARTICLE SIX
CONDITIONS PRECEDENT TO MERGER
Section 6.01. Conditions to CNB's Obligations. The obligations of CNB and
Acquisition Sub to effect the Merger shall be subject to the satisfaction (or
waiver by the Board of Directors of CNB) prior to or on the Closing Date of the
following conditions:
(a) The representations and warranties made by BMC in this Agreement shall
be true and correct on and as of the Closing Date with the same effect as though
such representations and warranties had been made or given on and as of the
Closing Date (except for any such representations and warranties made as of a
specified date which shall be true and correct as of such date); provided,
however, that with the exception of the representations and warranties set forth
in Sections 2.01(b), 2.22 and 2.26 hereof, which shall be true and correct in
all respects on and as of the Closing Date, (i) in determining whether or not
the condition contained in this Section 6.01(a) shall be satisfied, no effect
shall be given to any exceptions in such representations and warranties relating
to materiality or Material Adverse Effect, and (ii) the condition contained in
this Section 6.01(a) shall be deemed to be satisfied unless the failure of such
representations and warranties to be so true and correct shall constitute,
individually or in the aggregate, a Material Adverse Effect on BMC; and
(b) BMC shall have performed and complied in all material respects with all
of its obligations and agreements required to be performed on or prior to the
Closing Date under this Agreement; and
(c) No temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal
restraint or prohibition (an "Injunction") preventing the consummation of the
Merger shall be in effect, nor shall any proceeding by any Regulatory Agency
seeking any of the foregoing be pending. No proceeding by any other person
seeking an Injunction shall be pending; provided, however, that BMC shall have
thirty (30) days to cause any such proceeding by any other person to be
dismissed with prejudice or otherwise quashed before the condition set forth in
this sentence may be deemed by CNB to have been unsatisfied. There shall not be
any action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Merger which makes the consummation of the
Merger illegal; and
(d) All necessary regulatory approvals, consents, authorizations and other
approvals, including the requisite approval of this Agreement and the Merger by
the shareholders of BMC, required by law for consummation of the Merger shall
have been obtained and all waiting periods required by law shall have expired;
and
(e) CNB shall have received all documents required to be received from BMC
on or prior to the Closing Date, all in form and substance reasonably
satisfactory to CNB; and
(f) BMC shall have delivered to CNB the 1995 Audited Financial Statements
within the time period provided therefor in Section 4.05 hereof and there shall
be no material differences in reported income and equity between the amounts set
forth in the 1995 Audited Financial Statements and the amounts set forth in the
BMC Financial Statements included in the Disclosure Schedule; and
Page
(g) In the reasonable opinion of CNB, after consultation with its
independent certified public accountants, the Merger shall qualify for pooling
of interests accounting treatment under Accounting Principles Board Opinion No.
16 if closed and consummated in accordance with this Agreement; and
(h) The Registration Statement shall be effective under the Securities Act
and no stop orders suspending the effectiveness of the Registration Statement
shall be in effect or proceedings for such purpose pending before or threatened
by the S.E.C. or any state securities agency; and
(i) CNB shall have received an opinion of its counsel, Lewis, Rice &
Fingersh, L.C., to the effect that if the Merger is consummated in accordance
with the terms set forth in this Agreement (i) the Merger shall constitute a
reorganization within the meaning of Section 368(a) of the Code, (ii) no gain or
loss shall be recognized by the holders of shares of BMC Common upon receipt of
Merger Consideration (except for cash received in lieu of fractional shares and
cash paid to shareholders of BMC, if any, who shall have properly exercised
their dissenters' rights under the Corporate Law), (iii) the basis of shares of
CNB Common received by the shareholders of BMC shall be the same as the basis of
shares of BMC Common exchanged therefor, and (iv) the holding period of the
shares of CNB Common received by such shareholders shall include the holding
period of the shares of BMC Common exchanged therefor, provided such shares were
held as capital assets as of the Effective Time; and
(j) The CNB Average Price shall not be greater than $35.00. The $35.00
amount used in this Section 6.01(j) shall be appropriately and proportionately
adjusted to reflect any Share Adjustments.
Section 6.02. Conditions to BMC's Obligations. The obligations of BMC to
effect the Merger shall be subject to the satisfaction (or waiver by the Board
of Directors of BMC) prior to or on the Closing Date of the following
conditions:
(a) The representations and warranties made by CNB and Acquisition Sub in
this Agreement shall be true and correct 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 (except for any such representations and warranties made as
of a specified date which shall be true and correct as of such date); provided,
however, (i) in determining whether or not the condition contained in this
Section 6.02(a) shall be satisfied, no effect shall be given to any exceptions
in such representations and warranties relating to materiality or Material
Adverse Effect, and (ii) the condition contained in this Section 6.02(a) shall
be deemed to be satisfied unless the failure of such representations and
warranties to be so true and correct shall constitute, individually or in the
aggregate, a Material Adverse Effect on CNB; and
(b) CNB and Acquisition Sub shall have performed and complied in all
material respects with all of their obligations and agreements hereunder
required to be performed on or prior to the Closing Date under this Agreement;
and
(c) No Injunction preventing the consummation of the Merger shall be in
effect, nor shall any proceeding by any Regulatory Agency seeking any of the
foregoing be pending. There shall not be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to the
Merger which makes the consummation of the Merger illegal; and
(d) All necessary regulatory approvals, consents, authorizations and other
approvals, including the requisite approval of this Agreement and the Merger by
the shareholders of BMC, required by law
Page
for consummation of the Merger shall have been obtained and all waiting periods
required by law shall have expired; and
(e) BMC 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 BMC; and
(f) The Registration Statement shall be effective under the Securities Act
and no stop orders suspending the effectiveness of the Registration Statement
shall be in effect or proceedings for such purpose pending before or threatened
by the S.E.C. or any state securities agency; and
(g) BMC shall have received, addressed to its Board of Directors, the
opinion of CNB's counsel contemplated by Section 6.01(i) hereof; and
(h) The CNB Average Price shall not be less than $19.25. The $19.25 amount
used in this Section 6.02(h) shall be appropriately and proportionately adjusted
to reflect any Share Adjustments.
ARTICLE SEVEN
TERMINATION OR ABANDONMENT
Section 7.01. Mutual Agreement. This Agreement may be terminated by the
mutual written agreement of CNB and BMC at any time prior to the Closing Date,
regardless of whether approval of this Agreement and the Merger by the
shareholders of BMC shall have been previously obtained.
Section 7.02. Breach of Agreements. In the event that there is a material
breach in any of the representations and warranties or agreements of CNB or BMC,
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 shareholder approval of this Agreement
and the Merger shall have been previously obtained, may terminate and cancel
this Agreement by providing written notice of such action to the other party
hereto.
Section 7.03. Environmental Reports. CNB may terminate this Agreement to
the extent provided by Section 4.07 hereof and this Section 7.03 by giving
written notice thereof to BMC.
Section 7.04. Failure of Conditions. In the event any of the conditions to
the obligations of either party are not satisfied or waived on or prior to the
Closing Date, and if any applicable cure period provided in Section 7.02 hereof
has lapsed, then such party may, regardless of whether approval of this
Agreement and the Merger by the shareholders of BMC shall has been previously
obtained, terminate and cancel this Agreement by delivery of written notice of
such action to the other party on such date.
Section 7.05. Regulatory Approval Denial. If any regulatory application
filed pursuant to Section 5.01(a) hereof should be finally denied or disapproved
by the respective regulatory authority, then this Agreement thereupon shall be
deemed terminated and canceled; provided, however, that a request for additional
information or undertaking by CNB, as a condition for approval, shall not be
deemed to be a denial or disapproval so long as CNB diligently provides the
requested information or undertaking. In the event an application is denied
pending an appeal, petition for review, or similar such act on the
Page
part of CNB (hereinafter referred to as the "appeal") then the application shall
be deemed denied unless CNB prepares and timely files such appeal and continues
the appellate process for purposes of obtaining the necessary approval.
Section 7.06. Shareholder Approval Denial; Withdrawal/Modification of Board
Recommendation. If this Agreement and the relevant transactions contemplated by
this Agreement, including the Merger, are not approved by the requisite vote of
the shareholders of BMC at the BMC Shareholders Meeting, then either party may
terminate this Agreement. CNB may terminate this Agreement if BMC's Board of
Directors shall have failed to approve or recommend this Agreement or the
Merger, or shall have withdrawn or modified in any manner adverse to CNB its
approval or recommendation of this Agreement or the Merger, or shall have
resolved or publicly announced an intention to do either of the foregoing.
Section 7.07. Regulatory Enforcement Matters. In the event that BMC or any
of its subsidiaries shall, after the date hereof, become a party or subject to
any new or amended written agreement, memorandum of understanding, cease and
desist order, imposition of civil money penalties or other regulatory
enforcement action or proceeding with Regulatory Agency, which would have a
Material Adverse Effect on BMC, then CNB may terminate this Agreement.
Section 7.08. Fall-Apart Date. If the Closing Date does not occur on or
prior to the first anniversary of the date hereof, then this Agreement may be
terminated by either party by giving written notice thereof to the other, unless
the failure of the Closing to occur by such date shall be due to the failure of
the party seeking to terminate this Agreement to perform or observe the
covenants and agreements of such party set forth in this Agreement.
Section 7.09. Termination Fee.
(a) Unless a Nullifying Event (as defined in Section 7.09(f) hereof) shall
have occurred and be continuing at the time this Agreement shall have been
terminated pursuant to Article Seven hereof, in the event that this Agreement
shall have been terminated pursuant to Article Seven hereof (regardless of
whether such termination shall have been by CNB or BMC) and prior to or
concurrently with such termination a First Trigger Event (as defined in Section
7.09(c) hereof) shall have occurred, BMC shall pay to CNB a cash fee of
$200,000, payable in immediately available funds on or before the second
business day following such termination of this Agreement.
(b) Unless a Nullifying Event shall have occurred and be continuing at the
time this Agreement shall have been terminated pursuant to Article Seven hereof,
in the event that (i) this Agreement shall have been terminated pursuant to
Article Seven hereof (regardless of whether such termination shall have been by
CNB or BMC), (ii) prior to or concurrently with such termination either (1) a
First Trigger Event shall have occurred, or (2) an event described in either
Section 7.09(c)(iii) or Section 7.09(c)(iv) hereof shall have occurred which,
but for its failure to satisfy the applicable proviso in such Section, would
have qualified as a First Trigger Event, and (iii) prior to, concurrently with
or within twenty-four (24) months after such termination an Acquisition Event
(as defined in Section 7.09(d) hereof) shall have occurred, BMC shall pay to CNB
a cash fee of (a) $1,000,000, less (b) any amount theretofore paid by BMC
pursuant to Section 7.09(a) hereof. Such fee shall be payable in immediately
available funds on or before the second business day following the occurrence of
such Acquisition Event.
Page
(c) As used herein, the term "First Trigger Event" shall mean the
occurrence of any of the following events:
(i) BMC's Board of Directors shall have failed to approve or recommend
this Agreement or the Merger, or shall have withdrawn or modified in any manner
adverse to CNB its approval or recommendation of this Agreement or the Merger,
or shall have resolved or publicly announced an intention to do either of the
foregoing; or
(ii) BMC or any of its significant subsidiaries (as such term is
defined in Rule 1-02 of Regulation S-X promulgated by the S.E.C.), or the Board
of Directors of BMC or any or its significant subsidiaries, shall have
recommended that the shareholders of BMC approve any Acquisition Proposal (as
defined in Section 7.09(e) hereof) or shall have entered into an agreement with
respect to, authorized, approved, proposed or publicly announced its intention
to enter into, any Acquisition Proposal; or
(iii) this Agreement or the Merger shall not have been approved at
the BMC Shareholders Meeting, which shall have been held for that purpose prior
to the termination of this Agreement in accordance with its terms, if prior
thereto it shall have been publicly announced that any person (other than CNB)
shall have made, or publicly disclosed an intention to make, an Acquisition
Proposal; provided, however, that, to constitute a First Trigger Event, all of
the shares of BMC Common beneficially owned (as such term is used for purposes
of Section 13(d) of the Exchange Act) by a Director of BMC (or any person who
shall have served as a Director of BMC at any time between the date hereof and
the date of the BMC Special Meeting) as of the later of the date hereof or the
date such person was appointed or elected a Director of BMC shall not have been
voted in favor of this Agreement and the Merger at the BMC Shareholders Meeting;
(iv) any person (together with its affiliates and associates) or
group (as such terms are used for purposes of Section 13(d) of the Exchange Act)
(other than CNB and its subsidiaries) shall have acquired beneficial ownership
or the right to acquire beneficial ownership of 20% or more of the then
outstanding shares of the stock then entitled to vote generally in the election
of directors of BMC or any of its significant subsidiaries; provided, however,
that, to constitute a First Trigger Event, a Director of BMC (or any person who
shall have served as a Director of BMC at any time between the date hereof and
the date of such acquisition) shall have sold or otherwise tendered any shares
of BMC Common beneficially owned by him to either such person or group of
persons or to a third party who shall have thereafter sold or otherwise tendered
such shares to such person or group of persons; or
(v) following the making of an Acquisition Proposal, BMC shall have
breached any covenant or agreement set forth herein such that CNB would be
entitled to terminate this Agreement under Section 7.02 hereof (without regard
to any grace period provided for therein) unless such breach shall be promptly
cured without jeopardizing consummation of the Merger pursuant to the terms
hereof.
(d) As used herein, the term "Acquisition Event" shall mean the
consummation of any event described in the definition of "Acquisition Proposal"
(as defined in Section 7.09(e) hereof), except that the percentage references
contained in clause (C) of such definition shall be 50% instead of 20%.
(e) As used herein, the term "Acquisition Proposal" shall mean any (i)
publicly announced proposal, (ii) regulatory application or notice (whether in
draft or final form), (iii) agreement or written understanding, (iv) public
disclosure of an intention to make a proposal, or (v) amendment to any of the
Page
foregoing, made or filed on or after the date hereof, in each case with respect
to any of the following transactions with a counterparty other than CNB or any
of its subsidiaries: (A) a merger or consolidation, or any similar transaction,
involving BMC or any of its significant subsidiaries; (B) a purchase, lease or
other acquisition of all or substantially all of the assets or deposits of BMC
or any of its significant subsidiaries; or (C) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of
securities representing 20% or more of the voting power of BMC or any of its
significant subsidiaries.
(f) As used herein, the term "Nullifying Event" shall mean a breach by CNB
of any of its covenants or agreements contained herein such that BMC shall be
entitled to terminate this Agreement pursuant to Section 7.02 hereof (without
regard to any grace period provided for therein) and such event shall have
occurred and be continuing at a time when BMC shall not be in material breach of
any of its covenants or agreements contained herein.
(g) To the extent that BMC shall be prohibited by applicable law or
regulation, or by administrative actions or policy of any Regulatory Agency,
from making the payments required to be paid by BMC hereunder in full, it shall
immediately so notify CNB and shall thereafter deliver or cause to be delivered,
from time to time, to CNB, the portion of the payments required to be paid by it
hereunder that it shall no longer be prohibited from paying, within five (5)
business days after the date on which BMC shall no longer be so prohibited;
provided, however, that if BMC at any time shall be prohibited by applicable law
or regulation, or by administrative actions or policy of any Regulatory Agency,
from making the payments required hereunder in full, it shall (i) use its
reasonable best efforts to obtain all required regulatory and legal approvals
and to file any required notices as promptly as practicable in order to make
such payments, (ii) within five (5) days of the submission or receipt of any
documents relating to any such regulatory and legal approvals, provide CNB with
copies of the same, and (iii) keep CNB advised of both the status of any such
request for regulatory and legal approvals, as well as any discussions with any
relevant regulatory or other third party reasonably related to the same.
(h) Nothing contained in this Section 7.09 shall be deemed to authorize BMC
or CNB to breach any provision of this Agreement.
(i) BMC shall notify CNB promptly in writing upon its becoming aware of the
occurrence of any First Trigger Event, Acquisition Proposal or Acquisition
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 described below in
this Section 8.01) which has heretofore been exchanged and which shall be
received from each other hereunder and agree to hold and keep the same
confidential. Such Information shall include any and all financial, technical,
commercial, marketing, customer or other information concerning the business,
operations and affairs of a party that may be provided to the other,
irrespective of the form of the communications, by such party's employees or
agents. Such Information shall not include information which is or becomes
generally available to the
Page
public other than as a result of a disclosure by a party or its representatives
in violation of this Agreement. The parties agree that the Information shall be
used solely for the purposes contemplated by this Agreement and that such
Information shall not be disclosed to any person other than employees and agents
of a party who are directly involved in evaluating the transaction. The
Information shall not be used in any way detrimental to a party, including use
directly or indirectly in the conduct of the other party's business or any
business or enterprise in which such party may have an interest, now or in the
future, and whether or not now in competition with such other party.
Section 8.02. Publicity. CNB and BMC shall cooperate with each other in
the development and distribution of all news releases and other public
disclosures concerning this Agreement and the Merger and shall not issue any
news release or make any other public disclosure without the prior consent of
the other party, unless it reasonably believes such is required by law upon the
advice of counsel or is in response to published newspaper or other mass media
reports regarding the transactions contemplated by this Agreement, in which such
latter event the parties shall give reasonable notice, and to the extent
practicable, consult with each other regarding such responsive public
disclosure.
Section 8.03. Return of Documents. Upon termination of this Agreement
without the Merger becoming effective, each party (i) shall deliver to the other
originals and all copies of all Information made available to such party,
(ii) shall not retain any copies, extracts or other reproductions in whole or in
part of such Information, and (iii) shall destroy all memoranda, notes and other
writings prepared by any party based on the Information.
Section 8.04. Notices. Any notice or other communication shall be in
writing and shall be deemed to have been given or made on the date of delivery,
in the case of hand delivery, or three (3) business days after deposit in the
United States Registered Mail, postage prepaid, or upon receipt if transmitted
by facsimile telecopy or any other means, addressed (in any case) as follows:
(a) if to CNB and Acquisition Sub:
CNB Bancshares, Inc.
20 N.W. Third Street
Evansville, Indiana 47739
Attention: Mr. H. Lee Cooper III, Chairman
Telecopy No. (812) 464-3496
with a copy to:
Lewis, Rice & Fingersh, L.C.
500 North Broadway, Suite 2000
St. Louis, Missouri 63102
Attention: Thomas C. Erb, Esq.
Telecopy No. (314) 444-7788
and
Page
(b) if to BMC:
BMC Bancshares, Inc.
601 Market Street
Mt. Carmel, Illinois 62863
Attention: Mr. W. Gene Guisewite, President and Chief Executive
Officer
Telecopy No. (618) 262-5186
with a copy to:
Gallop, Johnson & Neuman, LC
Suite 1600
101 S. Hanley Road
St. Louis, Missouri 63105
Attention: Robert H. Wexler
Facsimile: (314) 862-1219
or to such other address as any party may from time to time designate by notice
to the others.
Section 8.05. Liabilities and Expenses. Except as provided in Section 7.09
hereof, in the event that this Agreement is terminated pursuant to the
provisions of Article Seven hereof, no party hereto shall have any liability to
any other party for costs, expenses, damages or otherwise; provided, however,
that, notwithstanding the foregoing, in the event that this Agreement is
terminated pursuant to Article Seven hereof on account of a willful breach of
any of the representations and warranties set forth herein or any breach of any
of the agreements set forth herein, then the non-breaching party shall be
entitled to recover appropriate damages from the breaching party, including,
without limitation, reimbursement to the non-breaching party of its costs, fees
and expenses (including attorneys', accountants' and advisors' fees and
expenses) incident to the negotiation, preparation and execution of this
Agreement and related documentation; provided, however, that nothing in this
proviso shall be deemed to constitute liquidated damages for the willful breach
by a party of the terms of this Agreement or otherwise limit the rights of the
non-breaching party. Notwithstanding the foregoing, if the Merger is not
consummated for any reason other than on account of (i) the termination of this
Agreement pursuant to Section 7.02 hereof on account of a breach by BMC,
(ii) the failure of BMC's shareholders to approve this Agreement and the Merger,
(iii) the failure of the Merger to qualify as a pooling of interests as
contemplated by Section 6.01(g) hereof due to the actions of BMC, its affiliates
or shareholders, (iv) the termination of this Agreement pursuant to Section 7.03
hereof, or (v) the termination of this Agreement pursuant to Section 7.07
hereof, then CNB shall reimburse BMC 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.
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 herein shall survive the Effective Time or the earlier
termination of this Agreement; provided, however, that no such representation,
warranty or covenant shall be deemed to be terminated or extinguished so as to
deprive CNB, Acquisition Sub or BMC (or any director, officer or controlling
person thereof) of any defense in
Page
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 BMC, the aforesaid representations, warranties and covenants being
material inducements to the consummation by CNB, Acquisition Sub and BMC of the
transactions contemplated herein. The agreements set forth in Sections 5.04 and
5.05 hereof shall survive the Effective Time and the agreements set forth in
Sections 7.09, 8.01, 8.02, 8.03 and 8.05 hereof and this Section 8.06 shall
survive the Effective Time or the earlier termination of this Agreement.
Section 8.07. Entire Agreement. This Agreement constitutes the entire
agreement between the parties and supersede and cancel any and all prior
discussions, negotiations, undertakings, agreements in principle or other
agreements between the parties relating to the subject matter hereof.
Section 8.08. Headings and Captions. The captions of Articles and Sections
hereof are for convenience only and shall not control or affect the meaning or
construction of any of the provisions of this Agreement.
Section 8.09. Waiver, Amendment or Modification. The conditions of this
Agreement which may be waived may only be waived by notice to the other party
waiving such condition. The failure of any party at any time or times to
require performance of any provision hereof shall in no manner affect the right
at a later time to enforce the same. This Agreement may be amended or modified
by the parties hereto, at any time before or after shareholder approval of the
Agreement; provided, however, that after any such approval no such amendment or
modification shall alter the amount or change the form of the Merger
Consideration contemplated by this Agreement to be received by shareholders of
BMC. This Agreement not be amended or modified except by a written document
duly executed by the parties hereto.
Section 8.10. Rules of Construction. Unless the context otherwise
requires: (i) a term has the meaning assigned to it, (ii) an accounting term
not otherwise defined has the meaning assigned to it in accordance with
generally accepted accounting principles, (iii) "or" is not exclusive, and
(iv) 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 assigns. There shall be no third party beneficiaries hereof.
Section 8.13. Severability. In the event that any provisions of this
Agreement or any portion thereof shall be finally determined to be unlawful or
unenforceable, such provision or portion thereof
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.
Section 8.15. Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties hereto shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction and such right shall be in
addition to any other remedy to which they shall be entitled at law or in
equity.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
BMC BANCSHARES, INC.
By /s/ W. Gene Guisewite
W. Gene Guisewite
President and Chief Executive Officer
CNB BANCSHARES, INC.
By /s/ James J. Giancola
James J. Giancola
President and Chief Executive Officer
HBI ACQUISITION COMPANY
By /s/ James J. Giancola
James J. Giancola
President
Page
EXHIBIT 1.10(a)
BMC'S LEGAL OPINION MATTERS
1. The due incorporation, valid existence and good standing of BMC 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 Acquisition Sub 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 BMC and any subsidiary of any such
subsidiary listed in Section 2.03 of the Disclosure Schedule, their 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 BMC, (i) the number of authorized, issued and
outstanding shares of capital stock of BMC on the Closing Date, (ii) the
nonexistence of any violation of the preemptive or subscription rights of any
person, (iii) the nonexistence of any obligation, contingent or otherwise, to
reacquire any shares of capital stock of BMC or any warrants, or other rights to
acquire, or securities convertible into, any equity security of BMC or any
outstanding stock appreciation, phantom stock or similar rights, except as
disclosed in the Agreement.
4. With respect to BMC'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 BMC of a subsidiary of BMC, (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, or any obligation, contingent or otherwise, to reacquire any shares
of capital stock of such subsidiary, or 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 BMC to authorize the execution,
delivery and performance of the Agreement, the due execution and delivery of the
Agreement by BMC, and the Agreement as a valid and binding obligation of BMC,
enforceable against BMC 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 execution of the Agreement by BMC, and the consummation of the
Merger and the other transactions contemplated therein, does not violate or
cause a default under BMC's Articles of Incorporation or Bylaws, or any statute,
regulation or rule or any judgment, order or decree against or any material
agreement binding upon BMC or its subsidiaries.
7. To the best knowledge of such counsel, the receipt of all required
consents, approvals (including the requisite approval of the shareholders of
BMC), orders or authorizations of,
Page
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 BMC or its subsidiaries in connection with the execution
and delivery of the Agreement or the consummation of the transactions
contemplated therein.
8. The nonexistence of any material actions, suits, proceedings, orders,
investigations or claims pending or threatened against or affecting BMC 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.
EXHIBIT 1.10(b)
CNB'S LEGAL OPINION MATTERS
1. The due incorporation, valid existence and good standing of CNB and
Acquisition Sub under the laws of the States of Indiana and Illinois,
respectively, and their respective power and authority to enter into the
Agreement and to consummate the transactions contemplated thereby.
2. The due and proper performance of all corporate acts and other
proceedings required to be taken by each of CNB and Acquisition Sub 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 Acquisition Sub enforceable against CNB and Acquisition
Sub in accordance with its terms (subject to the provisions of bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforceability of creditors' rights generally from time to time in effect, and
equitable principles relating to the granting of specific performance and other
equitable remedies as a matter of judicial discretion).
3. The due authorization and, when issued to the shareholders of BMC in
accordance with the terms of the Agreement, the valid issuance of the shares of
CNB Common to be issued pursuant to the Merger, such shares being fully paid and
non-assessable, with no personal liability attaching to the ownership thereof.
4. The execution and delivery of the Agreement by CNB and the
consummation of the transactions contemplated therein, as neither conflicting
with, in breach of or in default under, resulting in the acceleration of,
creating in any party the right to accelerate, terminate, modify or cancel, or
violate, any provision of CNB's Articles of Incorporation or Bylaws, or any
statute, regulation, rule, judgment, order or decree binding upon CNB which
would be materially adverse to the business of CNB and its subsidiaries taken as
a whole.
5. To the best knowledge of such counsel, the receipt of all required
consents, approvals, orders or authorizations of, or registrations, declarations
or filings with or without notices to, any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, or any other person or entity required to be obtained or made by or
with respect to CNB or Acquisition Sub in connection with the execution and
delivery of the Agreement or the consummation of the transactions contemplated
by the Agreement.
Page
EXHIBIT 4.08
___________________, 199__
CNB Bancshares, Inc.
20 N.W. Third Street
Evansville, Indiana 47739
Attention: Mr. H. Lee Cooper III
Chairman
Re:Agreement and Plan of Merger, dated October 11, 1996 (the "Merger
Agreement"), by and among BMC Bancshares, Inc. ("BMC"), CNB
Bancshares, Inc. ("CNB"), and HBI Acquisition Company ("Acquisition
Sub")
Gentlemen:
I have been advised that I may be deemed to be an affiliate of BMC, 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 BMC 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 BMC
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 shall be registered with the Commission under the
Securities Act. I also understand that because I may be deemed an
"affiliate" of BMC and because any distributions by me of the Post-Merger
Shares shall not be registered under the Securities Act, such Post-Merger
Shares must be held by me unless (i) the sale, transfer or other
distribution has been registered under the Securities Act, (ii) the sale,
transfer or other distribution of such Post-Merger Shares is made in
accordance with the provisions of Rule 145, or (iii) in the opinion of
counsel acceptable to CNB
Page
some other exemption from registration under the Securities Act is
available with respect to any such proposed distribution, sale, transfer or
other disposition of such Post-Merger Shares.
3. In no event shall I sell the Pre-Merger Shares or the Post-Merger
Shares, as the case may be, or otherwise transfer or reduce my risk
relative to the Pre-Merger Shares or Post-Merger Shares, as the case may
be, during the period beginning 30 days prior to the date on which the
Merger is consummated and ending on the date that CNB has published
financial results covering at least 30 days of the combined operations of
CNB and BMC.
B. I understand and agree that:
1. Stop transfer instructions shall be issued with respect to the
Post-Merger Shares and there shall be placed on the certificates
representing such Post-Merger Shares, or any certificate delivered in
substitution therefor, a legend stating in substance:
"The shares represented by this Certificate have been
issued to an affiliate of a party to a transaction with CNB
Bancshares, Inc. pursuant to the provisions of Rule 145 under
the Securities Act of 1933. A stop transfer order with
respect to this Certificate has been issued to the Transfer
Agent. The shares represented hereby will be transferred on
the books of CNB Bancshares, Inc. only upon delivery to the
Transfer Agent of evidence, reasonably satisfactory to CNB
Bancshares, Inc., that such transfer complies in all material
respects with the provisions of the Securities Act of 1933
and the rules and regulations thereunder."
2. Unless the transfer by me of Post-Merger Shares is a sale made in
compliance with the provisions of Rule 145(d) or made pursuant to an
effective registration statement under the Securities Act, CNB reserves the
right to place the following legend on the Certificates issued to my
transferee:
"The shares represented by this Certificate have not been
registered under the Securities Act of 1933, as amended, and
were acquired from a person who received such shares in a
transaction to which Rule 145 under the Securities Act of
1933, as amended, applied. The shares have not been acquired
by the holder with a view to, or for resale in connection
with, any distribution thereof within the meaning of the
Securities Act of 1933, as amended, and may not be sold or
otherwise transferred unless the shares have been registered
under the Securities Act of 1933, as amended, or an exemption
from registration is available."
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
Page
staff of the Commission, or an opinion of counsel in form and substance
satisfactory to CNB, to the effect that no such legend is required for the
purpose of the Securities Act.
I have carefully read this letter and the Merger Agreement and understand
the requirements of each and the limitations imposed upon the distribution,
sale, transfer or other disposition of Pre-Merger Shares or Post-Merger Shares
by me.
Very truly yours,
Page
APPENDIX B
[LETTERHEAD OF PAULI & COMPANY, INCORPORATED]
October 4, 1996
CONFIDENTIAL
[R]
BMC Bancshares, Inc.
601 Market Street
Mt. Carmel, IL 62683
[/R]
Gentlemen:
[R]
You have requested our opinion as to the fairness, from a financial point of
view, to the shareholders of the Common Stock of BMC Bancshares, Inc. ("BMC" or
the "Company") of the consideration to be received by such holders from CNB
Bancshares ("CNB") pursuant to the proposed Agreement and Plan of Merger among
the Company, CNB, and HBI Acquisition Company, a wholly owned subsidiary of CNB
("HBI") to be dated on or about October 11, 1996 (the "Merger Agreement"),
pursuant to which the Company is to be merged into HBI (the "Merger").
It is our understanding that each shareholder of the issued and outstanding
shares of the Common Stock of BMC will receive the right to have each of such
holder's shares converted as of the Effective Time (as defined in the Merger
Agreement) of the Merger into a certain number of shares of Common Stock of CNB
("CNB Common Stock") for each share of Common Stock based upon (i) the average
closing price of CNB Common Stock on the New York Stock Exchange during a
certain time period preceding the Closing Date (as defined in the Merger
Agreement), and (ii) the number of shares of Common Stock issued and outstanding
immediately prior to the Effective Time, subject to certain collars, with
respect to the maximum and minimum number of shares of CNB Common Stock to be
issued in the Merger and adjustments for stock splits, etc., occurring after
the date of the Merger Agreement, as set forth in the Merger Agreement. Each
share of Common Stock that is owned by BMC shall be canceled immediately prior
to the Effective Time. The terms and conditions of the Merger are more fully
set forth in the Merger Agreement.
In arriving at our opinion, we have: (1) held discussions with management
representatives concerning the business and prospects of BMC and the strategic
and operating benefits anticipated to be derived from the Merger; (2) reviewed
the Merger Agreement; (3) reviewed historical consolidated financial statements
and operating statistics of the Company, the former being audited in the case of
data for the year ended December 31, 1995, and unaudited in the case of other
annual data and in the case of interim data; (4) reviewed financial
and operating forecasts with respect to BMC provided to us by management
representatives of the Company; (5) considered public information regarding
selected comparable companies and compared BMC, from a financial point of view,
with such companies; (6) considered the terms, to the extent publicly available,
of selected transactions comparable to the Merger and compared the consideration
to be paid to the Company's shareholders with the consideration involved in such
transactions; (7) reviewed market price and volume data and trading activities
for the Common Stock and CNB's Common Stock; and (8) conducted such other
financial studies, analyses and investigations as we deemed appropriate to
rendering our opinion for the purposes provided herein.
[/R]
We were not engaged to independently verify the accuracy or completeness of any
information which we reviewed in arriving at our opinion. We relied upon the
accuracy and completeness of all such information without independent
verification.
With respect to the financial and operating forecasts provided to us, we
assumed, with your approval, that such forecasts were reasonably prepared on
basis reflecting the best currently available estimates and good faith judgments
of the management of the Company as to the future financial and operating
performance of BMC, consistent with historical data. We also assumed, with your
approval, that a reasonable likelihood exists that the strategic and operating
benefits anticipated to be derived from the Merger will be realized.
We were not engaged to conduct a physical inspection of any properties or make
an independent valuation or appraisal of any assets or liabilities of BMC and we
were not furnished with any such valuations or appraisals. We were not engaged
to review any legal, accounting, actuarial or tax aspects of the Merger.
Our opinion herein is based on our assessment of economic, market, regulatory
and other conditions as they exist and can be evaluated as of the date of this
letter. Our opinion herein is provided solely for the information of the Board
of Directors of BMC in its evaluation of the Merger and is not intended to
constitute a recommendation to any shareholder as to how such shareholder should
vote on the proposed merger or confer rights or remedies upon any shareholders
of the Company or any other persons.
Pauli & Company, Incorporated ("Pauli"), as part of its investment banking
services, is regularly engaged in the valuation of businesses and securities in
connection with mergers, acquisitions, sales and distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. Pauli will receive a fee for rendering this opinion. In the ordinary
course of business, Pauli may trade the securities of the Company and CNB for
its own account and the accounts of its customers and, accordingly, may at any
time hold a long or short position in such securities. We may also provide
investment banking and financial advisory services to the Company, CNB or
competing institutions in the future.
It is understood that except as required by law, this letter may not be quoted
or referred to in any filing, report, document, release or other communication,
whether written or oral, made, prepared, issued or transmitted by the Company
without Pauli's prior written consent, which will not be unreasonably withheld.
On the basis of and subject to the matters set forth herein, we are of the
opinion that, as of the date hereof, the consideration to be paid to the
Company's shareholders pursuant to the Merger Agreement is fair to the Company's
shareholders, from a financial point of view.
Very truly yours,
/s/ Pauli & Company, Inc.
PAULI & COMPANY, INCORPORATED
[R] [/R]
Page
APPENDIX C
Excerpts of the Illinois Business Corporation Act
(Dissenters' Rights)
5/11.65 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 owner's written consent to the dissent before or at the same time the
beneficial owner asserts dissenters' rights.
Page
5/11.70 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 material information with respect to the transaction that 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 corporate 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 the notice, the corporation furnishes to the
shareholders material information with respect to the transaction that 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 30 days from the date of mailing the
notice a written demand for payment for his or her shares.
(c) Within 10 days after the date on which the corporate action giving rise
to the right to dissent is effective or 30 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 fair value of the shares, the corporation's latest balance sheet as of
the end of a fiscal year ending not earlier than 16 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 fair value thereof
upon transmittal to the corporation of the certificate or certificates, or other
evidence of ownership, with respect to the shares, or instructions to the
dissenting shareholder to sell his or her shares within 10 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 that
10 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 the shares, if listed on a national exchange, or the
average of the bid and asked price with respect to the shares quoted by a
principal market maker, if not listed on a national exchange, during that 10 day
period.
(d) A shareholder who makes written demand for payment under this Section
retains all other rights of a shareholder until those rights are cancelled or
modified by the consummation of the proposed corporate action. Upon
consummation of that action, the corporation shall pay to each dissenter who
transmits to the corporation the certificate or other evidence of ownership of
the shares the amount the corporation estimates to be the fair value of the
shares, plus accrued interest, accompanied by a written explanation of how the
interest was calculated.
(e) If the shareholder does not agree with the opinion of the corporation
as to the estimated fair value of the shares or the amount of interest due, the
shareholder, within 30 days from the delivery of the corporation's statement of
value, shall notify the corporation in writing of the shareholder's estimated
fair value and amount of interest due and demand payment for the difference
between the shareholder's estimate of fair value and interest due and the amount
of the payment by the corporation
Page
or the proceeds of sale by the shareholder, whichever is applicable because of
the procedure for which the corporation opted pursuant to subsection (c).
(f) If, within 60 days from delivery to the corporation of the shareholder
notification of estimate of fair value of the shares and interest due, the
corporation and the dissenting shareholder have not agreed in writing upon the
fair value of the shares and interest due, the corporation shall either pay the
difference in value demanded by the shareholder, with interest, 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 and interest due. 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 shall 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.
(g) The jurisdiction of the court in which the proceeding is commenced
under subsection (f) 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.
(h) 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 shares, plus interest, exceeds the amount paid by the corporation or the
proceeds of sale by the shareholder, whichever amount is applicable.
(i) The court, in a proceeding commenced under subsection (f), shall
determine all costs of the proceeding, including the reasonable compensation and
expenses of the appraisers, if any, appointed by the court under subsection (g),
but shall exclude the fees and expenses of counsel and experts for the
respective parties. If the fair value of the shares as determined by the court
materially exceeds the amount which the corporation estimated to be the fair
value of the shares or if no estimate was made in accordance with
subsection (c), then all or any part of the costs may be assessed against the
corporation. If the amount which any dissenter estimated to be the fair value
of the shares materially exceeds the fair value of the shares as determined by
the court, then all or any part of the costs may be assessed against that
dissenter. The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable, as
follows:
(1) Against the corporation and in favor of any or all dissenters if the
court finds that the corporation did not substantially comply with the
requirements of subsections (a), (b), (c), (d), or (f).
(2) Against either the corporation or a dissenter and in favor of any other
party if the court finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously, or not in good faith with respect to
the rights provided by this Section.
If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated and that the fees for
those services should not be assessed against the corporation, the court may
award to that counsel reasonable fees to be paid out of the amounts awarded to
the dissenters who are benefitted. Except as otherwise provided in this
Section, the practice, procedure, judgment and costs shall be governed by the
Code of Civil Procedure.
Page
(j) As used in this Section:
(1) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the consummation of the corporate action to which
the dissenter objects excluding any appreciation or depreciation in anticipation
of the corporate action, unless exclusion would be inequitable.
(2) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
Page
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The Bylaws of CNB provide that CNB shall indemnify any director or officer
of CNB against any and all liability and reasonable expense that said director
or officer may incur in connection with or resulting from any claim, action,
suit or proceeding, or civil, criminal, administrative or investigative action,
or threat thereof, by reason of said director's or officer's being or having
been a director or officer of CNB, or serving or having served at the request of
CNB as a director or officer of another corporation, partnership, joint venture,
trust or other enterprise, if either (i) the officer or director is wholly
successful in any such claim, action, suit or proceeding, or (ii) the officer or
director is not wholly successful but it is nevertheless determined that such
officer or director acted in good faith in what he reasonably believed to be in,
or not opposed to, the best interests of the corporation and, with respect to
any criminal action or proceeding, either said officer or director had
reasonable cause to believe his conduct was lawful or had no reasonable cause to
believe his conduct was unlawful. The Bylaws further provide that the board of
directors may (i) authorize like indemnification of persons who are not
directors or officers of CNB but are employees of CNB or are officers, directors
or employees of any subsidiary of CNB, and (ii) approve indemnification of
directors, officers persons to the full extent permitted by the Indiana Business
Corporation Law (the "Indiana Law") in effect at such time.
Section 23-1-37-9 of the Indiana Law provides for "mandatory
indemnification," unless limited by the articles of incorporation, by a
corporation against reasonable expenses incurred by a director who is wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which the director was a party by reason of the director being or having been a
director of the corporation. Section 23-1-37-10 of the Indiana Law states that
a corporation may, in advance of the final disposition of a proceeding,
reimburse reasonable expenses incurred by a director who is a party to a
proceeding if the director furnishes the corporation with a written affirmation
of the director's good faith belief that the director has met the standard of
conduct required by Section 23-1-37-8 of the Indiana Law, that the director will
repay the advance if it is ultimately determined that he did not meet the
standard of conduct required by Section 23-1-37-8 of the Indiana Law, and that
those making the decision to reimburse the director determine that the facts
then known would not preclude indemnification under the Indiana Law.
CNB's Bylaws further provide, in accordance with the Indiana Law, that CNB
shall have the power to purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of CNB, or is or was
serving at the request of CNB as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not CNB would have
power to indemnify him against such liability under the Bylaws or the Indiana
Law. Pursuant to a policy of directors' and officers' liability insurance with
total annual limits of $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,
neglect, error, misstatement, misleading statement, omission or other act done
or wrongfully attempted while acting in their capacities as directors or
officers of CNB.
Page
Item 21. Exhibits and Financial Statement Schedules.
(a) The following exhibits are filed as part of this Registration
Statement or incorporated by reference herein:
[R]
(2)(a) Agreement and Plan of Merger, dated
October 11, 1996, by and among CNB
Bancshares, Inc., HBI Acquisition
Company and BMC Bancshares, Inc.
(Exhibit A to Prospectus/Proxy
Statement);
(3)(a) Restated Articles of Incorporation of
CNB Bancshares, Inc.;
(3)(b) Amended By-laws of CNB Bancshares, Inc.;
(5)* Opinion of Lewis, Rice & Fingersh, L.C.
re legality;
(8)* Opinion of Lewis, Rice & Fingersh, L.C.
re federal income tax consequences;
(23)(a) Consent of Geo. S. Olive & Co. L.L.C.;
(23)(b) Consent of Gaither, Rutherford & Co.,
L.L.P.;
(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 Pauli & Company,
Incorporated;
(24)* Powers of Attorney;
(99)(a) Form of Proxy Card;
(99)(b) Fairness Opinion of Pauli & Company,
Incorporated (Appendix 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).
-----------------------------------
* Previously filed.
[/R]
(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
Page
registration statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes that such
reoffering prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items of
the applicable form.
(2) The undersigned Registrant undertakes that every prospectus (i) that
is filed pursuant to paragraph (1) immediately preceding, or (ii) that purports
to meet the requirements of Section 10(a)(3) of the Securities Act of 1933, as
amended, and is used in connection with an offering of securities subject to
Rule 415, will be filed as a part of an amendment to the registration statement
and will not be used until such amendment is effective, and that, for purposes
of determining any liability under the Securities Act of 1933, as amended, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(3) The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated document by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(4) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(5) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934, as amended (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934, as amended) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(6) The undersigned Registrant hereby undertakes to file, during any
period in which offers or sales are being made, a post-effective amendment to
this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) 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;
Page
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.
Page
SIGNATURES
[R]
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Pre-Effective Amendment No. 1 to Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Evansville, State of Indiana, on December 26, 1996.
[/R]
CNB BANCSHARES, INC.
By /s/ James J. Giancola
------------------------
James J. Giancola
Chief Executive Officer
[R]
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 1 to Registration Statement has been signed on
December 26, 1996, by the following persons in the capacities indicated.
[/R]
Name Title/Position
* Chairman of the Board
- ------------------------- (principal executive officer)
H. Lee Cooper III
/s/ James J. Giancola President, Chief Executive Officer
- ------------------------- and Director
James J. Giancola
* Executive Vice President
- ------------------------- (principal financial officer
John R. Spruill
* Senior Vice President and Comptroller,
- ------------------------- Treasurer (principal accounting officer)
Ralph L. Alley
* Director
- -------------------------
John D. Engelbrecht
* Director
- -------------------------
Robert L. Koch II
* Director
- -------------------------
L. J. Kremer
Page
* Director
- -------------------------
Jerry A. Lamb
* Director
- -------------------------
Burkley F. McCarthy
* Director
- -------------------------
Robert K. Ruxer
* Director
- -------------------------
Thomas W. Traylor
* Director
- -------------------------
Paul G. Wade
* By /s/ James J. Giancola
-------------------------
Attorney-in-fact
Page
INDEX TO EXHIBITS
Number Exhibit
[R]
(2)(a) Agreement and Plan of Merger, dated October 11, 1996, by
and among CNB Bancshares, Inc., HBI Acquisition Company
and BMC Bancshares, Inc. (Appendix 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 Gaither, Rutherford & Co., L.L.P.
(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 Pauli & Company, Incorporated
(24)* Powers of Attorney.
(99)(a) Form of Proxy Card.
(99)(b) Fairness Opinion of Pauli & Company, Incorporated
(Appendix 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).
- ----------------------------------
* Previously filed.
[/R]
INDEPENDENT AUDITOR'S CONSENT
[R]
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., L.C.C.
Evansville, Indiana
December 24, 1996
[/R]
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the inclusion
of our report dated November 1, 1996, on the financial statements of BMC
Bancshares, Inc. as of December 31, 1995, and for the year then ended in the
Registration Statement on Form S-4 filed by CNB Bancshares, Inc. (Commission
File No. O-11510) and the reference to our firm under the heading "Experts" in
such Registration Statement.
[R]
GAITHER RUTHERFORD & CO., LLP
/s/ Gaither Rutherford & Co., LLP
Certified Public Accountants
Evansville, Indiana
December 26, 1996
[/R]
CONSENT
OF
PAULI & COMPANY INCORPORATED
We hereby consent to (i) the inclusion of our opinion letter, dated
October 4, 1996, to BMC Bancshares, Inc. ("BMC") at Appendix B to the Proxy
Statement/Prospectus of BMC and CNB Bancshares, Inc. ("CNB") relating to the
proposed merger of BMC with and into HBI Acquisition Company, a wholly owned
subsidiary of CNB, and (ii) all references made to our firm and our opinion
letter in such Joint Proxy Statement/Prospectus. In giving such consent, we do
not admit that we come within the category of persons whose consent is required
under, and we do not admit that we are "experts" for purposes of, the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder.
PAULI & COMPANY
INCORPORATED
[R]
By: /s/ Selman Akyol
----------------
Print Name: Selman Akyol
----------------
St. Louis, Missouri
December 26, 1996
[/R]
PROXY
SPECIAL MEETING OF SHAREHOLDERS
BMC BANCSHARES, INC.
[R]
February 5, 1997
[/R]
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
BMC BANCSHARES, INC.
[R]
The undersigned shareholder of BMC Bancshares, Inc., an Illinois
corporation ("BMC"), hereby appoints W. Gene Guisewite, Jack D. Fowler and
Daniel R. Schonert, and any of them, with full power to act alone, as proxies,
each with full power of substitution and revocation, to vote all shares of
Common Stock of BMC which the undersigned is entitled to vote at the Special
Meeting of Shareholders of BMC (the "Special Meeting") to be held at the main
office of Bank of Mt. Carmel located at 601 Market Street, Mt. Carmel, Illinois,
on February 5, 1997, at 10:00 a.m., local time, and at any adjournment or
adjournments thereof, with all powers the undersigned would possess if
personally present, on the following:
[/R]
Proposal to approve an Agreement and Plan of Merger, dated October 11,
1996, by and among BMC, CNB Bancshares, Inc., an Indiana corporation
("CNB"), and HBI Acquisition Company, an Illinois corporation and
wholly-owned subsidiary of CNB ("HBI"), providing for CNB's
acquisition of BMC by means of the merger of BMC 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.
[R]
Dated _________________, 1997. SIGN HERE:
[/R] -------------------------------------------
-------------------------------------------
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.
