SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
CNB Bancshares, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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Page
[CNB Bancshares, Inc. logo]
Notice of
Annual Meeting
and Proxy Statement
Annual Meeting of Shareholders
April 21, 1998
Page
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
March 23, 1998
To the Shareholders
of CNB Bancshares, Inc.
Notice is hereby given that the Annual Meeting of Shareholders of CNB
Bancshares, Inc. will be held at Roberts Municipal Stadium, 2600 Division
Street, Evansville, Indiana on April 21, 1998, at 5:00 p.m., Central Daylight
Savings Time, for the purpose of considering and voting upon the following
matters:
1. The election of three Directors to Class I of the Company's Board of
Directors, each to serve a term of three years, until a successor shall
have been duly elected and qualified;
2. The adoption of an amendment to the Restated Articles of Incorporation of
the Company to increase the number of authorized shares of common stock
from 50,000,000 to 100,000,000; and
3. Any other business which may be brought before the meeting or any
continuation, postponement or adjournment thereof.
DAVID L. KNAPP
Secretary
PLEASE SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE, WHETHER
YOU PLAN TO ATTEND THE MEETING IN PERSON OR NOT. IF YOU DO ATTEND THE MEETING,
YOU MAY THEN WITHDRAW YOUR PROXY, IF YOU WISH.
Page 1
CNB BANCSHARES, INC.
20 N.W. THIRD STREET
EVANSVILLE, INDIANA 47739-0001
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
APRIL 21, 1998
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of CNB Bancshares, Inc.(the "Company") of proxies to be
voted at the Annual Meeting of Shareholders of the Company (the "Meeting") to be
held on April 21, 1998, at 5:00 p.m., Central Daylight Savings Time, at
Roberts Municipal Stadium, 2600 Division Street, Evansville, Indiana, and
at any continuation, postponement or adjournment thereof. This Proxy
Statement and the form of proxy were first mailed to shareholders on
March 23, 1998. Any shareholder executing a proxy which is solicited hereby
has the power to revoke it. Revocation may be made effective by giving
written notice to the Company at any time prior to exercise of the proxy.
Proxies will be solicited by mail. They also may be solicited by officers
and employees of the Company, personally or by telephone, or by other electronic
means, but such persons will not be specially compensated for their services.
All expenses of solicitation will be paid by the Company.
As of March 5, 1998, there were _________ outstanding shares of the
Company's common stock, no par value (the "Common Stock"). The Common Stock is
the Company's only class of stock outstanding. Only holders of record of such
Common Stock at the close of business on March 5, 1998, are entitled to notice
of and to vote at the Meeting. Each holder of Common Stock of record on that
date is entitled to one vote for each share of Common Stock held.
With respect to each matter to be acted upon at the Meeting, abstentions on
properly executed proxy cards will be counted for purposes of determining a
quorum at the Meeting; however, such abstentions and shares not voted by brokers
and other entities holding shares on behalf of beneficial owners will not be
counted in calculating voting results on those matters for which the shareholder
has abstained or the broker has not voted.
CERTAIN BENEFICIAL OWNERSHIP
The following table sets forth, as of December 31, 1997, the name and
address of the only person or entity known to management of the Company to
beneficially own more than 5 percent of the Company's Common Stock:
<TABLE>
VOTING POWER INVESTMENT POWER TOTAL SHARES PERCENT
NAME & ADDRESS OF ----------------- ----------------- BENEFICIALLY OF
BENEFICIAL OWNER SOLE SHARED SOLE SHARED OWNED CLASS
- ---------------- ---- ------ ---- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
CNB Bancshares, Inc. 1,743,726 104,400 2,197,230 200,000 2,619,822(a) 12.8
</TABLE>
(a) The Company (20 N. W. Third Street, Evansville, Indiana 47739-0001) itself
holds no shares as record owner. Subsidiaries of the Company, however,
hold shares in various fiduciary capacities and, by virtue of sole or
shared voting or investment power with respect to such shares, are deemed
to own them beneficially. As parent of its subsidiaries, the Company may
be deemed to share voting power or investment power, or both, as to all
shares beneficially owned by those subsidiaries and, therefore, may be
deemed a beneficial owner of all such shares. It is the practice of the
subsidiaries when holding shares as sole trustee or sole executor to vote
said shares but, where shares are held as co-executor or co-trustee,
approval is obtained from the co-fiduciary prior to voting.
Page 2
ITEM 1. ELECTION OF DIRECTORS AND
INFORMATION WITH RESPECT TO DIRECTORS AND EXECUTIVE OFFICERS
In accordance with the provisions of the Company's Restated Articles of
Incorporation, the Board of Directors is divided into three classes, as nearly
equal in number as possible, with all Directors to serve three-year terms, and
one class to be elected at each Annual Meeting of Shareholders.
The first item scheduled to be acted upon at the Meeting is the election of
three Directors to Class I of the Board of Directors, each to hold office for
three years (until the 2001 Annual Meeting of Shareholders) and until his
successor shall have been duly elected and qualified. The Indiana Business
Corporation Law requires that Directors be elected by a plurality of the votes
cast and, therefore, the three nominees receiving the greatest number of votes
cast will be elected as Class I Directors.
All proxies which are received by the Secretary in proper form prior to the
election of Directors at the Meeting, and which have not been revoked, will be
voted "FOR" the Board of Directors' three nominees for Class I, subject to any
specific voting instructions contained therein. All nominees have consented to
being named as candidates in this Proxy Statement and have agreed to serve if
elected. In the event any nominee declines or is unable to serve, it is
intended that the proxies will be voted for a successor nominee designated by
the Board of Directors. The Board of Directors knows of no reason to believe
that any nominee will decline or be unable to serve, if elected. Each of
the nominees listed herein currently serves as a Director of the Company.
The following information is provided with respect to each nominee for
Director and each present continuing Director whose term of office extends
beyond the Meeting:
<TABLE>
INFORMATION REGARDING NOMINEES FOR
CLASS I DIRECTORS
-----------------
(Term Expiring 2001)
SHARES OF COMPANY STOCK
BENEFICIALLY OWNED AS OF
PRINCIPAL OCCUPATION(S) DECEMBER 31, 1997
FOR PAST 5 YEARS AND -----------------
NAME, AGE OTHER DIRECTORSHIPS NUMBER % (a)
- --------- ------------------- ------ -
<S> <C> <C> <C>
EDMUND L. HAFER, JR., 55 President, Edmund L. Hafer 2,910 *
Director of Company since & Associates, P.C.
1997 (architectural and
engineering services firm).
BURKLEY F. MCCARTHY, 67 President, Fendrich 16,842 (c) *
Director of Company since Industries, Inc.
1983 (diversified manufacturer).
THOMAS W. TRAYLOR, 58 President, Traylor Bros., 222,376 (c) 1.0
Director of Company since Inc. (underground and
1983 marine construction).
</TABLE>
Page 3
<TABLE>
INFORMATION REGARDING DIRECTORS CONTINUING IN OFFICE
CLASS II DIRECTORS
------------------
(Term Expiring 1999)
SHARES OF COMPANY STOCK
BENEFICIALLY OWNED AS OF
PRINCIPAL OCCUPATION(S) DECEMBER 31, 1997
FOR PAST 5 YEARS -----------------
NAME, AGE OTHER DIRECTORSHIPS NUMBER % (a)
- --------- ------------------- ------ -
<S> <C> <C> <C>
H. LEE COOPER III, 59 Chairman of the Board of the 133,060 (b) *
Director of Company since Company; prior to March, 1996,
1983 Chairman of the Board and
Chief Executive Officer of the
Company.
JOHN D. ENGELBRECHT 46 President, South Central 33,134 (c) *
Director of Company since Communications Corporation (a
1983 broadcasting and communications
company). Mr. Engelbrecht also
serves as a director of SIGCORP,
Inc. (gas and electric utility
holding company).
ROBERT K. RUXER, 48 President, Ruxer Farms, Inc. 277,884 (c) 1.3
Director of Company since and Rolling Fields, Inc.
1991 (agricultural farming and
apartment rental)
</TABLE>
<TABLE>
CLASS III DIRECTORS
-------------------
(Term Expiring 2000)
<S> <C> <C> <C>
JAMES J. GIANCOLA, 49 President and Chief Executive 84,470 (b) *
Director of Company since Officer of the Company since
1994 March, 1996; President and
Chief Operating Officer of the
Company from 1994 to March, 1996;
prior to 1994, Executive Vice
President and Chief Operating
Officer of the Company.
ROBERT L. KOCH II, 59 President and Chief Executive 185,808 (c) *
Director of Company since Officer, George Koch Sons, Inc.
1983 (manufacturing). Mr. Koch also
serves as a director of SIGCORP,
Inc.(gas and electric utility
holding company) and Bindley
Western Industries (national
wholesale distributor of
pharmaceutical and related
products).
LAWRENCE J. KREMER, 56 Corporate Vice President, 4,370 *
Director of Company since Materials, Emerson Electric
1995 Company (manufacturer of
electronic products and
systems) since 1993; prior to
1993, Senior Vice President,
Whirlpool Corp.(manufacturer of
major home appliances)
</TABLE>
_________________________________________________
* Represents holdings of less than 1 percent.
(a) The total number of outstanding shares of the Company's Common Stock used
to compute the percent of class assumes the exercise of options for
the purchase of 1,008,430 shares.
(b) The number of shares listed for Messrs. Cooper and Giancola includes the
number of exercisable stock options disclosed in the table on page 9 of the
Aggregated Option Exercises in Last Fiscal Year Table.
(c) The number of shares listed for Messrs. McCarthy, Traylor, Engelbrecht,
Ruxer and Koch includes 1,158 exercisable stock options.
Unless otherwise indicated, each of the nominees and Directors has had the
same position or another executive position with the same employer during the
past five years. Beneficial ownership of shares, as determined in accordance
with applicable Securities and Exchange Commission rules, includes shares as to
which a person directly or indirectly has or shares voting power and/or
investment power.
Page 4
INFORMATION REGARDING OTHER DIRECTORS
The Company and Pinnacle Financial Services, Inc., a Michigan corporation
("Pinnacle"), are parties to a certain Agreement and Plan of Reorganization
dated as of October 14, 1997 (the "Reorganization Agreement"), pursuant to which
Pinnacle will merge (the "Merger") with and into the Company. The Company has
agreed, pursuant to the Reorganization Agreement, to cause its Board of
Directors to take all requisite action to increase the number of the Company's
Directors by three and to fill the three newly created positions with three
persons to be mutually selected by the Company and Pinnacle.
The following information is provided with respect to the three individuals
selected by the Company and Pinnacle to serve as Directors of the Company
pursuant to the Reorganization Agreement. It is expected that, based upon the
anticipated effective time of the Merger, these three individuals will commence
service as Directors immediately following the Meeting. If the Merger should
not occur for any reason, these individuals will not be appointed Directors of
the Company. Shareholders of the Company are not being asked to vote upon or
otherwise approve these individuals as Directors of the Company.
Terrence A. Friedman, age 60, is Chairman of the Board of Trelleborg, a
manufacturer of rubber components primarily for the auto industry. Assuming
the consummation of the Merger and the conversion of Pinnacle common stock
into Company Common Stock in connection therewith, Mr. Friedman would have
had beneficial ownership of 36,576 shares of Common Stock based upon the number
of shares of Pinnacle common stock he owned as of December 31, 1997. Mr.
Friedman will serve as a Class I director.
James E. Hutton, age 59, has served, since June 1993, as Vice President
in charge of operations for Burrell Professional Labs, Inc., a professional
photo processing company with operations throughout the United States. Prior
thereto, Mr. Hutton was Managing Partner of the Northern Indiana office of Geo.
S. Olive and Co., an accounting firm. Mr. Hutton is a certified public
accountant. Assuming the consummation of the Merger and the conversion of
Pinnacle common stock into Company Common Stock in connection therewith, Mr.
Hutton would have had beneficial ownership of 57,587 shares of Common Stock
based upon the number of shares of Pinnacle common stock he owned as of
December 31, 1997. Mr. Hutton will serve as a Class II director.
Alton C. Wendzel, age 67, is President of Greg Farms, Inc., Greg
Orchards and Produce, Inc., and Coloma Frozen Foods, Inc., growers and
processors of fresh and frozen produce. Assuming consummation of the Merger
and the conversion of Pinnacle common stock into Company Common Stock in
connection therewith, Mr. Wendzel would have had beneficial ownership of 87,816
shares of Common Stock based upon the number of shares of Pinnacle common stock
he owned as of December 31, 1997. Mr. Wendzel will serve as a Class III
director.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company held ten regular meetings and two
special meetings during the fiscal year ended December 31, 1997. During 1997,
each Director attended 75 percent or more of the aggregate number of meetings of
the Board of Directors and of any committee of which he was a member.
Directors, other than those who also serve as officers of the Company or its
subsidiaries, receive for their services a fee of $5,000 per year and $500 per
meeting attended, plus $500 per meeting of other committees attended, with the
exception of joint committee meetings held with the Directors of The Citizens
National Bank of Evansville, for which a fee of $375 per meeting is paid. Under
the terms of the Company's 1995 Stock Incentive Plan, the non-employee Directors
of the Company automatically receive 1,000 non-qualified stock options each year
on the first business day following each Annual Meeting of Stockholders of the
Company at which he or she is elected, reelected, or continues as a Director.
The exercise price per share of Common Stock subject to such options equals the
market value of a share of Common Stock as of the date of grant and the options
become exercisable on the second anniversary of the date of grant. During 1997,
each of the non-employee Directors of the Company received 1,050 options each
with an exercise price of $40.24 per share of Common Stock, as adjusted to
reflect the 5 percent stock dividend issued on September 18, 1997.
Page 5
The Board of Directors has an Audit Committee. During 1997, the Audit
Committee, consisting of Burkley F. McCarthy (Chairman), Robert K. Ruxer, and
Robert L. Koch II, met four times. The Audit Committee is responsible for
monitoring the accounting, auditing and financial reporting practices of the
Company and its subsidiaries. The Audit Committee also recommends to the Board
of Directors the appointment of the Company's independent auditors.
The Board of Directors has a Nominating and Corporate Governance Committee
(the "Nominating Committee") consisting of Robert L. Koch II (Chairman), John D.
Engelbrecht, Burkley F. McCarthy, Robert K. Ruxer, H. Lee Cooper III, and James
J. Giancola. The Nominating Committee, which is responsible for promoting
effective recruiting, staffing, and organization of the Company's Board of
Directors as well as managing the Board's selfappraisal, process met two times
during 1997. The Nominating Committee will consider nominees for Director
submitted in writing to the Secretary of the Company.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of December 31, 1997, the number of
shares of Common Stock of the Company owned beneficially, including currently
exercisable options and options which become exercisable within 60 days, by
certain executive officers including those officers named in the Summary
Compensation Table and by Directors and executive officers as a group.
<TABLE>
BENEFICIAL OWNERS NUMBER (a) PERCENT OF CLASS (b)
----------------- ------- ----------------
<S> <C> <C>
H. Lee Cooper III 133,060 *
James J. Giancola 84,470 *
David L. Knapp 66,922 *
John R. Spruill 26,874 *
M. Lynn Cooper 39,842 *
All Directors, Nominees and Executive
Officers as a group................ 1,263,723 5.9%
</TABLE>
______________________________________
* Represents holdings of less than 1 percent.
(a) The number of shares listed for each named executive officer includes the
number of exercisable stock options disclosed in the table on page 10 of
the Aggregated Option Exercises in Last Fiscal Year.
(b) The total number of outstanding shares of the Company's Common Stock used
to compute the percent of class assumes the exercise of options for the
purchase of 1,008,430 shares.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Federal securities laws, the Company's Directors, its executive
officers, and any persons holding more than 10 percent of the Company's Common
Stock, if any, are required to report their initial ownership of the Company's
Common Stock and any subsequent changes in that ownership to the Company, the
Securities and Exchange Commission and the New York Stock Exchange. Specific
due dates for these reports have been established, and the Company is required
to disclose in this Proxy Statement any failure to file such reports by these
dates during 1997. To the Company's knowledge, based solely on written
representations of its Directors and executive officers and a review of copies
of the reports that they have filed with the Securities and Exchange Commission,
all of these filing requirements were satisfied during the fiscal year ended
December 31, 1997 except for Mr. Cecil, a former executive officer, and
Mr. Traylor, a director, each of whom had one filing that was made one month
late.
Page 6
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
awarded or paid during each of the Company's last three fiscal years to the
Company's Chief Executive Officer and each of the Company's four other most
highly compensated executive officers, based on salary and bonus earned during
1997.
<TABLE>
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation
Compensation Awards
----------------- ------------
Option All Other
Name & Principal Position Year Salary Bonus Shares Compensation
- --------------------------------------------------------------------------------
(a) (b) (c)
<S> <C> <C> <C> <C> <C>
H. Lee Cooper III 1997 $189,600 $128,928 10,920 $105,688 (d)
Chairman of the Board; 1996 316,680 236,877 16,538 9,500
Chief Executive Officer 1995 301,600 60,320 18,873 8,783
until March, 1996
James J. Giancola 1997 345,000 234,600 19,845 10,350
President and 1996 283,985 212,421 16,538 8,520
Chief Executive Officer 1995 222,425 44,485 10,184 6,408
David L. Knapp 1997 208,845 117,162 9,450 6,265
Executive Vice President 1996 198,900 101,439 8,820 5,967
1995 182,450 27,368 8,354 5,209
John R. Spruill 1997 194,670 109,210 9,450 5,840
Executive Vice President and 1996 185,400 104,009 8,820 5,562
Chief Financial Officer 1995 60,000 9,000 6,946 1,575
M. Lynn Cooper 1997 183,929 93,804 8,925 4,730
Executive Vice President 1996 174,772 80,220 8,820 4,500
1995 157,410 23,612 5,841 4,245
- ------------------------------------------------------------------------------------
</TABLE>
(a) These amounts represent bonuses payable pursuant to the Company's Short
Term Incentive Plan (STIP) described elsewhere in this Proxy Statement.
(b) The options listed have been adjusted to reflect stock dividends
(c) These amounts, except as described in footnote (d) below, represent the
Company's contribution to the Company's 401(k) Plan and Savings
Equalization Plan ("SEP"). The purpose of the SEP is to provide a
supplemental savings program for eligible employees who are limited in the
amount of contributions to the Company's 401(k) Plan because of Internal
Revenue Service regulations.
(d) The Board of Directors approved a one time retirement bonus of $100,000 to
Mr. Cooper upon his retirement on January 2, 1998.
Page 7
STOCK OPTIONS
The following tables summarize option grants to and exercises by the named
executive officers during 1997 as well as the value of options held by such
persons at the end of the year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
Individual Grants
- ------------------------------------------------------------------ Potential
Number % of Realizable Value
of Total at Assumed Annual
Securities Options Exercise Rates of Stock
Underlying Granted to or Base Price Appreciation
Options Employees Price For Option Term (b)
Granted in ($ Per Expiration ------------------------
Name (a) Fiscal Year Share) Date 5% 10%
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
H. Lee Cooper III 10,920 2.34% $38.57 6/30/07 $264,885 $ 671,275
James J. Giancola 19,845 4.25 38.57 6/30/07 481,378 1,219,914
David L. Knapp 9,450 2.02 38.57 6/30/07 229,227 580,910
John R. Spruill 9,450 2.02 38.57 6/30/07 229,227 580,910
M. Lynn Cooper 8,925 1.91 38.57 6/30/07 216,492 548,638
============================================================================================
</TABLE>
(a) All options were granted on June 30, 1997, and the exercise price was
established at the then current market value of the Common Stock. One
third of each option grant becomes exercisable on December 30, 1997,
June 30, 1998 and June 30, 1999. The options reflect the 5 percent
stock dividend issued on September 18, 1997.
(b) The dollar amounts under these columns represent potential realizable
value on a pre-tax basis in at the end of the 10-year option term,
assuming annual appreciation in the Common Stock price of 5 percent and
10 percent, respectively, less the exercise price. The appreciation
rates are set by the Securities and Exchange Commission and, therefore,
are not intended to forecast possible future appreciation in the Common
Stock price.
Page 8
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
Number of Securities Underlying
Shares Unexercised Options
Acquired at Fiscal Year-End
on Value --------------------------------
Name Exercise Realized Exercisable Unexercisable
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
H. Lee Cooper III 3,375 $79,201 65,690 30,263
James J. Giancola --- --- 59,835 13,229
David L. Knapp --- --- 42,420 6,300
John R. Spruill --- --- 18,918 6,300
M. Lynn Cooper --- --- 30,434 5,951
================================================================================
</TABLE>
<TABLE>
Value of Unexercised
In-The-Money Options
at Fiscal Year-End (a)
----------------------------
Name Exercisable Unexercisable
- --------------------------------------------------------------------------------
<S> <C> <C>
H. Lee Cooper III $1,581,314 $618,855
James J. Giancola 1,365,326 127,216
David L. Knapp 999,909 60,583
John R. Spruill 395,533 60,583
M. Lynn Cooper 693,495 57,227
================================================================================
</TABLE>
(a) These two columns represent the pre-tax gain calculated at the fair market
value of Common Stock at year-end 1997 of $48.19 per share less the
exercise price.
CHANGE OF CONTROL
Messrs. Giancola, Knapp, Spruill, and M. Lynn Cooper each have entered into
a change of control agreement with the Company that provides certain benefits as
described below upon a "change of control" of the Company (as defined in the
agreements). If, during the six months prior to or eighteen months subsequent
to a change in control of the Company, the executive officer terminates his
employment for "good reason" (as defined in the agreements) or the Company
terminates the executive officer's employment for a reason other than "cause"
(as defined in the agreements), then the executive officer will receive (i) a
lump-sum payment equal to his Termination Compensation (as defined below)
multiplied by the Payment Period (as defined below) and (ii) certain family
medical, life insurance and other welfare benefits (subject to certain
limitations and at the same cost as charged to active executive employees
receiving similar coverage). The "Termination Compensation" for the executive
officer is defined in the agreements as the sum of (a) his highest rate of base
salary during the previous twelve months, plus (b) one twelfth of his average
annual incentive compensation. The "Payment Period" is defined in the
agreements as 36 months, which is subject to reduction by one for each full
calendar month in which the executive officer remains in the employ of CNB
after the change of control date. The pending merger with Pinnacle constitutes
a change of control under the agreements. The agreements further provide that
during the executive officer's employment or Payment Period the executive
officer may not compete with CNB or its successors within 100 miles from
Evansville, Indiana or 50 miles from its nearest banking office.
PENSION PLAN
On an ongoing basis, the Company combines the various pension plans of its
newly-acquired subsidiaries into one noncontributory pension plan, the CNB
Bancshares, Inc. Employee Pension Plan (the "Pension Plan"). The Pension Plan
is for the benefit of all full-time and eligible part-time employees.
Additionally, certain executive officers (including four of the executive
officers named in the Summary Compensation Table) of the Company participate in
the CNB Bancshares, Inc. Pension Equalization Plan (the "PEP"). The purpose of
the PEP is to supplement the benefits payable under the Pension Plan to the
extent they are reduced by the maximum compensation and maximum benefit
limitations imposed by the Internal Revenue Code.
Page 9
Full-time employees become eligible to participate in the Pension Plan when
they have reached the age of 21 and have one year of continuous service.
Participants are fully vested after five years of continuous service in the
Pension Plan. The Pension Plan provides for full monthly benefits upon reaching
age 65, the normal retirement age. Early retirement becomes available at age 55
with reduced monthly benefits. The cost of the Pension Plan is based on
actuarial valuations in accordance with the requirements of the Internal Revenue
Service and the Department of Labor.
Benefits under the Pension Plan and the PEP are based upon (a) the
participant's average base compensation (annual salary as reported in the
Summary Compensation Table excluding bonuses) during the five consecutive years
in which his compensation was the highest, (b) the number of years of service,
and (c) the years in which that service was credited. On January 1, 1994 the
benefits under the Pension Plan and the PEP were amended such that all years of
service credited after January 1, 1994 result in annual retirement benefits as
listed in Pension Table B. All years of service credited prior to January 1,
1994 result in annual retirement benefits as listed in Pension Table A.
Eligible compensation under the Pension Plan is limited to the amount on which a
pension expense deduction may be based under current Internal Revenue Service
regulations (which amount was $160,000 in 1997). Compensation in excess of the
Internal Revenue Service limitations is taken into account under the PEP. The
years of service factor under the Pension Plan reaches its peak after 25 years
of service. The annual retirement benefits are not subject to any deduction for
Social Security or other offset amounts.
The executive officers named in the Summary Compensation Table of the
Company during 1997 have accumulated the following number of years of credited
service under Pension Plan A: H. Lee Cooper III, 25; Giancola, 1; Knapp, 25; and
M. Lynn Cooper, 7. Under Pension Plan B, Messrs. Giancola and M. Lynn Cooper
have each earned five years and Mr. Spruill has earned two years of credited
service.
The following tables present combined annual retirement benefits upon
reaching age 65 under the Pension Plan and the PEP based upon the highest five
years' average earnings and years of service indicated and when those years of
service were credited.
<TABLE>
PENSION PLAN TABLE A
Estimated Annual Pension
Average Annual Earnings for Based upon Years of Service Indicated
the Highest Compensated Five -----------------------------------------------
Years of Service 5 Years 10 Years 15 Years 20 Years 25 Years
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 50,000 . . . . . . . $5,375 $10,750 $16,125 $21,500 $26,875
100,000 . . . . . . . 11,000 22,000 33,000 44,000 55,000
150,000 . . . . . . . 16,625 33,250 49,875 66,500 83,125
200,000 . . . . . . . 22,250 44,500 66,750 89,000 111,250
250,000 . . . . . . . 27,875 55,750 83,625 111,500 139,375
300,000 . . . . . . . 33,500 67,000 100,500 134,000 167,500
350,000 . . . . . . . 39,125 78,250 117,375 156,500 195,625
400,000 . . . . . . . 44,750 89,500 134,250 179,000 223,750
450,000 . . . . . . . 50,375 100,750 151,125 201,500 251,875
- -------------------------------------------------------------------------------------
</TABLE>
Page 10
<TABLE>
PENSION PLAN TABLE B
Estimated Annual Pension
Average Annual Earnings for Based Upon Years of Service Indicated
the Highest Compensated Five ------------------------------------------------
Years of Service 5 Years 10 Years 15 Years 20 Years 25 Years
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 50,000 . . . . . . . . $3,602 $7,204 $10,806 $14,408 $18,010
100,000 . . . . . . . . 7,852 15,704 23,556 31,408 39,260
150,000 . . . . . . . . 12,102 24,204 36,306 48,408 60,510
200,000 . . . . . . . . 16,352 32,704 48,056 65,408 81,760
250,000 . . . . . . . . 20,602 41,204 61,806 82,408 103,010
300,000 . . . . . . . . 24,852 49,704 74,556 99,408 124,260
350,000 . . . . . . . . 29,102 58,204 87,306 116,408 145,510
400,000 . . . . . . . . 33,352 66,704 100,056 133,408 166,760
450,000 . . . . . . . . 37,602 75,204 112,806 150,408 188,010
- -------------------------------------------------------------------------------------
</TABLE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation and Corporate Structure Committee (the "Compensation
Committee") of the Board of Directors, which consists solely of the non-employee
Directors named below, met five times in 1997. The Compensation Committee is
responsible for establishing and administering an equitable salary and benefits
program for all officers. The Compensation Committee also administers the
Company's Executive Compensation Program, which was originally adopted in 1988
to support long and short-term objectives critical to the success of the
Company. These objectives are to:
- attract and retain a pool of high caliber executive talent;
- motivate and reward outstanding executive and corporate
performance; and
- link shareholder related performance measures of earnings per
share and return on average equity with Company and individual
performance goals.
In order to achieve these objectives, the Executive Compensation Program
consists of three elements: 1) a Base Salary Plan, 2) a Short-Term Incentive
Plan, and 3) a Long-Term Stock Incentive Plan. The overall program is reviewed
at least annually by the Compensation Committee, and any modifications are
approved by the entire Board of Directors of the Company.
The Compensation Committee believes the Executive Compensation Program
should be based on maintaining base salaries at sufficient levels to attract and
retain qualified executive talent. Further, the Compensation Committee believes
that a substantial portion of cash compensation should be related to specific
annual performance criteria such as earnings per share growth and return on
average equity, thereby emphasizing achievement of near-term results that
directly affect shareholder value. In order to appropriately align management's
objectives with the long-term financial interests of shareholders, and to
maintain a balance between short-term and long-term goals, the Compensation
Committee encourages management to have a proprietary interest in the Company
through increased stock ownership. The Compensation Committee has not
established target equity ownership levels for its executives, but it does
achieve increased stock ownership through the annual grant of stock options and
the payment of incentive awards through a combination of cash and Common Stock.
The Compensation Committee believes the annual award of stock options and the
payment of incentive awards to be an important part of the Executive
Compensation Program.
Page 11
BASE SALARY PLAN
The Compensation Committee determines the annual base salaries and salary
ranges for the top executive officers. The Compensation Committee also approves
the salary ranges for other officers of the Company. The determination of base
salaries and ranges is based upon competitive norms for similar positions in a
comparison group of similar regional bank holding companies. The companies in
the comparison group are similar to the Company in either asset size, earnings
performance, or geographic location. In order to assist in this process, the
Company retains independent consultants to provide such information to the
Compensation Committee. Actual base salaries are tied to the performance of the
individual executives against standards established for each officer at the
beginning of each year, as well as the relationship of actual salary to the
midpoint of the applicable salary range. These standards were considered by the
Compensation Committee in establishing the base salary of the Chairman of the
Board and Chief Executive Officer. In setting the salary of the Chief Executive
Officer, the Committee evaluated his performance on the basis of the Company's
earnings and revenue growth, his major contribution to the Company's operations
and support systems, and the expanded products and services the Company now
offers. The base salaries of the Chief Executive Officer and the other officers
as provided in the Summary Compensation Table were set at or near the midpoints
of the respective salary ranges by the Compensation Committee.
SHORT-TERM INCENTIVE PLAN
Since 1989, the Company has maintained an annual Short-Term Incentive Plan
(the "STIP") for certain key officers. There were 102 officers, including those
named in the Summary Compensation Table, participating in the STIP during 1997.
The STIP provides for the payment of additional compensation contingent upon the
achievement of certain corporate and shareholder-related performance goals and
the participant's achievement of certain individual performance goals. The
awards are based upon a percentage of the participant's base salary. STIP
participants are required to receive at least 30 percent of their award in
Common Stock, which is valued at its market price on the award date. The annual
corporate and shareholder-related goals are intended to stretch the efforts of
management to achieve higher performance levels given the facts and
circumstances known to the Compensation Committee at the time the goals are
established. At the beginning of each plan year, participants establish
individual goals which are linked to the Company's business and strategic plans.
The individual goals relate to the specific business segments for which the
participant has responsibility and are intended to challenge the participants to
perform beyond expected levels of performance.
The Compensation Committee established four payout matrices based on
specific corporate and shareholder-related performance goals relating to the
Company's growth of earnings per share and reaching a targeted level of return
on average equity. Participants have been assigned to one of the four payout
matrices based upon their level of responsibility and expected level of
contribution to the Company's achievement of its corporate and
shareholder-related performance goals. The payout matrices used to determine
the amount of awards based solely upon the Company's performance range from 5
percent to 80 percent of a participant's base salary. The actual amount of
a participant's award under the STIP is calculated as follows. First, the
corporate component of the participant's award is determined by reference to
the tier to which the participant had been assigned under the payout matrix and
the performance of the Company in relation to the pre-established corporate and
shareholder-related performance goals. Second, the amount of the participant's
award, determined under the first step, may be increased or decreased (up to
a maximum of 50 percent of the award) based upon the participant's
achievement of his or her individual goals during the plan year. The STIP
allows for the payment of awards of up to 5 percent of a participant's
base salary in the event the participant achieves his or her individual
performance goals, but the Company fails to achieve its corporate and
shareholder-related performance goals.
Page 12
For 1997, the lowest earnings level at which STIP bonuses would be paid was
$2.23 per share provided that return on equity exceeded 13 percent. The maximum
STIP bonuses would have been paid once the Company's earnings per share exceeded
$2.42. The Company's return on average equity was 15.38 percent exceeding the
minimum target. Based upon the 18 percent increase in operating earnings per
share and the pre-determined payout matrix, the President and Chief Executive
Officer, Mr. Giancola, was to be awarded an incentive bonus equal to 68 percent
of his base salary. The Compensation Committee reviewed Mr. Giancola's
accomplishments toward his 1997 goals and made no adjustment to the base award.
LONG-TERM STOCK INCENTIVE PLANS
The Company maintains the Long-Term Incentive Stock Option Plan
and the 1995 Stock Incentive Plan (the "Plan"). The Board and the
Compensation Committee believe that this flexible long-term, stock-based
incentive plan enhances the Company's ability to attract, retain and reward
management with exceptional talent and provides the Company with the ability
to develop incentive programs which are responsive to the demands of the
marketplace. The Compensation Committee also believes that the stock option
grants afford a desirable longterm compensation method because they closely
align the interests of management with those of shareholders. Sixty-one
officers, including those listed in the Summary Compensation Table, received
grants under the Plan during 1997. In determining the grants of stock options
to the Chief Executive Officer, as well as other named officers in the
Summary Compensation Table, the Compensation Committee took into account the
respective scope of responsibility, performance requirements, and recent and
expected contributions of the Plan participants to the Company's achievement of
its long-term performance objectives.
In 1997, the Company adopted a broad based stock option plan to reward each
associate of the Company for their significant contributions to the Company and
to intensify the focus on team performance. "Options 2000" was designed to
foster an entrepreneurial spirit in all associates and align the interests of
associates and shareholders. Officers receiving stock option grants from the
1995 Stock Incentive Plan are excluded from Options 2000. A total of 285,000
options were granted to associates under the Options 2000 program. Options 2000
grants are not exercisable for three years from the grant date or until the
price of the Company's Common Stock exceeds $61.90 for ten consecutive trading
days.
1997 Compensation Committee Robert L. Koch II, Chairman
John D. Engelbrecht
Burkley F. McCarthy
Page 13
SHAREHOLDER RETURN PERFORMANCE COMPARISONS
Set forth below is a line graph comparing the cumulative total shareholder
return on the Company's Common Stock against the cumulative total return of the
S&P 500, the SNL NYSE Bank Index, and the SNL Midwest Bank Index over the past
five years based on an initial $100 investment on December 31, 1992. This
analysis assumes that all dividends are reinvested. The compound annual total
return for CNB Bancshares, Inc. from 1992 through 1997 was 21 percent.
<TABLE>
Comparison of Five Year Cumulative
Total Return of CNB Bancshares, Inc. Versus
S&P 500, SNL NYSE Bank, and SNL Midwest Bank Indices
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
CNB 100 122 130 134 212 263
S&P 500 100 110 112 153 189 251
SNL Midwest Banks Index 100 105 101 149 203 329
SNL NYSE Banks Index 100 109 105 166 235 346
Source: SNL Securities, LC
</TABLE>
TRANSACTIONS WITH DIRECTORS, OFFICERS AND ASSOCIATES
Directors and officers of the Company, and some of the corporations and
firms with which certain Directors and officers are associated, have been
indebted to the Company's subsidiary banks for loans of $60,000 or more, and it
is anticipated that some of these persons, corporations and firms will continue
to be indebted to the subsidiary banks on a similar basis in the future.
All loans extended to such persons, corporations and firms, since the beginning
of the last full fiscal year, were made in the ordinary course of business and
did not involve more than normal risk of collectibility or present other
unfavorable features. All such loans were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the same
time for comparable bank transactions with unaffiliated persons.
Outside of normal customer relationships, none of the Directors or officers
of the Company, or the corporations and firms with which such persons are
associated, currently maintains or has maintained since the beginning of the
last full fiscal year, any significant business or personal relationship with
the Company or its subsidiaries, except for the following instance. During
1997, the Company and its subsidiaries paid $408,000 to Edmund L. Hafer &
Associates, P.C. for architectural and engineering services. These services
represent more than five percent of the gross revenues of Edmund L. Hafer &
Associates. Director Hafer is the President and majority shareholder of the
firm. The Company and its subsidiaries expect to have now, and in the future,
similar transactions in the ordinary course of business with the firm.
Page 14
ITEM 2. AMENDMENT OF RESTATED ARTICLES OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK FROM FIFTY MILLION TO ONE HUNDRED MILLION
The second Item to be acted upon at the Annual Meeting is an amendment (the
"Amendment") to Article V, Section 1(b) of the Restated Articles of
Incorporation of the Company. Approval of this proposal requires the
affirmative vote of a majority of the outstanding shares of the Company's
Common Stock. A vote against this Item gives rise to no rights on the part
of the shareholder casting such vote.
GENERAL
The Board of Directors has determined that amending Article V, Section 1(b)
of the Company's Restated Articles of Incorporation to increase the number of
authorized shares of Common Stock is advisable and has voted unanimously to
recommend that the shareholders adopt the Amendment. The Amendment will
increase the number of authorized shares of the Company's Common Stock, no par
value, from fifty million (50,000,000) to one hundred million (100,000,000).
The Company last increased the number of authorized shares of Common Stock in
1993 from fifteen million (15,000,000) to fifty million (50,000,000). The newly
authorized shares will be available for possible use in connection with future
financings, investment opportunities, acquisitions, employee benefit or dividend
reinvestment plan distribution, other distributions such as stock dividends or
stock splits, or for other corporate purposes. The Company does not presently
have any definite plans or commitments that would require the issuance of any of
the additional shares to be authorized by the Amendment, but wants to place
itself in a position to do so when needs arise and market conditions warrant.
The Board of Directors believes that the Amendment is in the best interests
of the Company and its shareholders. Before voting on the proposal to approve
the Amendment, however, shareholders are urged to read carefully the following
sections of this Proxy Statement, which further describe the Amendment and its
purposes.
REASON FOR THE AMENDMENT
As of March 5, 1998, there were _____ million shares of Common Stock issued
and outstanding. The Company expects to issue an additional 14.3 million shares
during the second quarter of 1998 in connection with its pending mergers with
Pinnacle and National Bancorp of Tell City, Indiana. In addition, the Company
has reserved 2.3 million shares for issuance under the Company's Dividend
Reinvestment and Stock Purchase Plan and stock option plans. In the opinion of
the Board of Directors, the remaining 13 million authorized and unissued shares
of Common Stock are insufficient to meet the capital needs of the Company.
The newly authorized shares of Common Stock, which will be identical to the
shares of Common Stock presently authorized, may be issued for such
consideration as shall be authorized from time to time by the Board of
Directors, subject to any required regulatory approvals, but without further
action by the shareholders unless specifically required by applicable law or New
York Stock Exchange rules. In connection with any issue and sale of such
shares, the number of shares to be issued and sold and the terms upon which they
may be issued and sold will necessarily be determined by conditions existing at
the time of such issue and sale. Shareholders of the Company do not have the
preemptive right to subscribe on a pro-rata basis to any future issuance of
shares.
Page 15
The Board of Directors believes that the authorization of additional shares
of Common Stock will provide the flexibility required to meet future capital
needs of the Company, whether as a result of internal growth on the part of the
Company and its present subsidiaries, or as a result of external growth from the
acquisition or formation by the Company of additional financial institutions or
business entities of the types permitted to be acquired or formed by a bank
holding company. The Board of Directors does not presently have any definite
plans or commitments with respect to the issuance of the additional shares
of Common Stock to be authorized by the Amendment, other than in connection
with the Company's Dividend Reinvestment and Stock Purchase Plan, and stock
option plans. In this regard, however, the Board of Directors explores, on an
ongoing basis, potential opportunities for expanding the Company by way of
future acquisitions of financial institutions and related entities where
the consideration may be shares of Common Stock and evaluates, from time to
time, the necessity or desire for additional capital funds through issuances of
Common Stock or securities convertible into Common Stock. The Board of
Directors believes that the ability to issue additional shares of Common Stock
in any future expansion transaction or capital raising endeavor, without the
costs and delays incident to obtaining shareholder approval at the time of such
issuance, is vital to the continuing success of the Company in an increasingly
competitive marketplace for financial institutions.
In addition, the Board of Directors has declared a stock dividend each year
since 1990. It is currently anticipated that the Board of Directors will
continue to declare annual stock dividends similar to those paid in past years
creating a need for additional authorized shares.
OTHER CONSIDERATIONS
POSSIBLE ANTI-TAKEOVER EFFECT OF PROPOSED AMENDMENT. Although the proposed
Amendment to Article V of the Company's Restated Articles of Incorporation is
being proposed by the Company's Board of Directors for reasons other than as an
"anti-takeover" device, the additional authorized shares, if issued, could make
it more difficult for a person or group of persons to acquire the requisite
amount of stock needed to control the Company. The issuance of additional
shares thus could have the effect of making it more difficult to remove
incumbent management. The Amendment is not part of a plan by the Company's
Board of Directors to propose a series of new anti-takeover measures and the
Board of Directors does not presently intend to propose additional anti-takeover
measures in future proxy solicitations.
POTENTIAL ANTI-TAKEOVER PROVISIONS PRESENTLY IN THE COMPANY'S RESTATED
ARTICLES OF INCORPORATION. Certain provisions of the Company's Restated
Articles of Incorporation may be viewed as having an "anti-takeover" effect in
that they may reduce the Company's vulnerability to takeover attempts and
certain other transactions which have not been negotiated with and approved by
the Company's Board of Directors. The Board of Directors of the Company
believes that it is in the best interests of the Company and its shareholders to
encourage potential acquirers to negotiate directly with the Company's Board of
Directors and that these provisions will encourage such negotiations and
discourage non-negotiated takeover attempts. It is also the view of the
Company's Board of Directors that these provisions should not discourage persons
from proposing a merger or other transaction at prices reflective of the true
value of the Company and which is in the best interest of all shareholders.
These provisions may, however, also have the effect of discouraging a future
takeover attempt which would not be approved by the Company's Board of
Directors, but pursuant to which shareholders may receive a premium for their
shares over the then current market prices. As a result, shareholders who
might desire to participate in such a transaction may not have an opportunity
to do so. Such provisions will also render the removal of the Company's
Board of Directors and management more difficult. These provisions are
summarized below.
Page 16
CLASSIFICATION OF BOARD OF DIRECTORS. The Board of Directors of the
Company is divided into three classes, and the directors are elected by classes
to three-year terms. Approximately one-third of the directors of the Company
are elected at each Annual Meeting of Shareholders. Although it promotes
stability and continuity of the Board of Directors, classification of the Board
of Directors (combined with the fact that shares of the Company's Common Stock
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 the Company's Common Stock and
thereby could impede a change in control of the Company 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.
BUSINESS COMBINATIONS. The Company's Restated 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 percent of total assets
involving the Company or any of its subsidiaries and any person or entity
beneficially owning directly or indirectly more than 10 percent of the
outstanding voting stock of the Company, or affiliates or associates of such an
entity (a "CNB 10 percent Shareholder"), may not be consummated without the
approval of the holders of at least 80 percent of the voting stock of the
Company, unless either (a) the transaction is approved by a majority of the
members of the Board of Directors of the Company who are not affiliated with the
CNB 10 percent Shareholder; or (b) the transaction meets certain minimum ("fair
price") price requirements (in either of which cases, only the normal
shareholder and director approval requirements of Indiana corporate law would
govern the transaction).
The primary purpose of the Company's "fair price" provision is to provide
additional safeguards for the remaining shareholders in the event that an
individual or entity becomes a majority shareholder of the Company. If
the Company 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
transaction 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. Yet, the minority shareholders may have no alternative unless
they choose to follow the statutory procedures for appraisal rights as a
dissenting shareholder or to bring legal action against the controlling
shareholder for breach of fiduciary duty, either of which procedures may be
costly and time consuming.
The Company's higher shareholder vote requirements make it more
difficult for a single shareholder to obtain ultimate "control" over the
Company 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 the Company 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 the Company's Common Stock than if normal
shareholder vote requirements were in effect. As a result, premium offers for
the Company's Common Stock from outside parties interested in acquiring
control may be somewhat less likely from such parties than premium offers
for other similar companies without such voting requirements. In
addition, because outside parties may be somewhat less likely to attempt to
acquire control over the Company due to its higher shareholder vote
requirements, the management of the Company may be somewhat less vulnerable
to removal in the future than would be the case if such provisions were not in
effect.
Page 17
REMOVAL OF DIRECTORS. The Company's Restated 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 percent 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 Restated 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 (a) has been convicted of a
felony by a court of competent jurisdiction and such conviction is no longer
subject to direct appeal; or (b) has been adjudicated by a court of competent
jurisdiction to be liable for negligence or misconduct in the performance of his
duty to the Company in a manner of substantial importance to the Company, and
such adjudication is no longer subject to direct appeal. The Company's 80
percent shareholder vote requirement for removal of directors without cause
precludes a majority shareholder from circumventing the classified Board of
Directors by decreasing the size of the Board of Directors 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 of Directors. The removal provisions would make it
more difficult for shareholders of the Company to change the composition of
the Board of Directors even if the shareholders believe such a change would be
desirable.
AMENDMENT OF RESTATED ARTICLES OF INCORPORATION. The Company's
Restated Articles of Incorporation provide that, notwithstanding any other
provision of the Restated Articles of Incorporation or any provision of law or
any preferred stock designations, the provisions of Article VII (relating to
the classification, number, terms, removal of directors and newly created
directorship and vacancies), Article IX (relating to special meeting of
shareholders) and Article X (relating to the "fair price" provisions discussed
above) may be altered, amended or repealed only with the affirmative vote of the
holders of 80 percent of the Company's Common Stock then entitled to vote in
an election of directors.
SPECIAL MEETING OF SHAREHOLDERS. The Company's Restated Articles of
Incorporation require that shareholders must hold at least 80 percent of the
outstanding voting shares of the Company in order to call a special meeting of
shareholders. This provision is intended to discourage attempts by the holders
of less than 80 percent of the outstanding voting stock of the Company from
disrupting the business of the Company between Annual Meetings of Shareholders
by calling special meetings. Such a provision, however, 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 the Company;
and it may delay the removal of directors, even if cause exists for such
removal.
VOTE REQUIRED
The Amendment will be adopted if it is approved by the affirmative vote of
the holders of at least a majority of the outstanding shares of the Company's
Common Stock. It will become effective upon the filing of a Certificate of
Amendment with the Secretary of State of the State of Indiana.
The Board of Directors believes this action will be in the best interests
of the shareholders and, accordingly, recommends a vote "FOR" this proposal,
which is ITEM 2 on the proxy. Any properly executed proxy received by the
Secretary will be voted "FOR" this proposal unless otherwise indicated on the
proxy.
INDEPENDENT AUDITORS
During the year ended December 31, 1997, KPMG Peat Marwick LLP was employed
to perform the annual audit and to render other services. KPMG Peat Marwick LLP
has served as independent auditors of the Company for the last two years.
Representatives of KPMG Peat Marwick LLP will be present at the Meeting and will
be available to answer questions and discuss matters pertaining to the
Independent Auditors' Report contained in the 1997 Annual Report to
Shareholders, and they will have the opportunity to make a statement, if they so
desire.
Page 18
SHAREHOLDER PROPOSALS
Shareholder proposals to be considered for inclusion in the proxy statement
and considered at the Meeting must be submitted on a timely basis. Proposals
for the 1999 Annual Meeting of Shareholders must be received by the Company no
later than November 26, 1998. Any such proposals, together with supporting
statements, should be directed to the Secretary of the Company.
OTHER MATTERS
The Company will provide without charge to each shareholder, upon written
request, a copy of the Company's 1997 Annual Report on Form 10-K, including the
financial statements and schedules thereto, required to be filed with the
Securities and Exchange Commission. All written requests should be directed to
Mr. Ralph L. Alley, Senior Vice President and Controller, CNB Bancshares, Inc.,
P.O. Box 778, Evansville, Indiana, 47705-0778.
The Board of Directors of the Company is not aware of any other matters
which will be presented for consideration at the Meeting. The proxies may,
however, be voted with discretionary authority with respect to any other matters
that may properly come before the Meeting.
By Order of the Board of Directors
DAVID L. KNAPP
Secretary
March 23, 1998
Page 19
