<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 24, 1998
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
CNB BANCSHARES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
INDIANA 6022 35-1568731
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
OF INCORPORATION OR CLASSIFICATION CODE NUMBER) IDENTIFICATION
ORGANIZATION) NUMBER)
20 N.W. THIRD STREET
EVANSVILLE, INDIANA 47739
(812) 456-3400
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
JOHN R. SPRUILL
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
CNB BANCSHARES, INC.
20 N.W. THIRD STREET
EVANSVILLE, INDIANA 47739
(812) 456-3400
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
THOMAS C. ERB, ESQ. J. KEVIN TRIMMER, ESQ.
LEWIS, RICE & FINGERSH, L.C. MILLER, CANFIELD, PADDOCK & STONE, P.L.C.
500 N. BROADWAY, SUITE 2000 1400 NORTH WOODWARD AVENUE, SUITE 100
ST. LOUIS, MISSOURI 63102 BLOOMFIELD HILLS, MICHIGAN 48304
(314) 444-7600 (248) 645-5000
----------------
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 and the effective time of the merger described in the enclosed Joint
Proxy Statement/Prospectus.
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. [_]
----------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
stated value $1.00 per share.. 13,241,070(1) $45.875(2) $586,043,492(2) $172,883(3)
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) This Registration Statement covers the maximum number of shares of common
stock of the Registrant issuable to holders of common stock of Pinnacle
Financial Services, Inc., a Michigan corporation ("Pinnacle"), in the
proposed merger of Pinnacle with and into the Registrant.
(2) The registration fee was computed pursuant to Rule 457(f)(1) and Rule
457(c) under the Securities Act of 1933, as amended, based upon the
average of the high ($46.125) and low ($45.625) price of a share of common
stock of Pinnacle on The Nasdaq Stock Market's National Market on February
19, 1998, multiplied by the maximum number of shares to be canceled in the
Merger (12,774,790, consisting of 12,339,408 shares of common stock
outstanding on October 14, 1997, and 435,382 shares of common stock
issuable upon the exercise of stock options outstanding on October 14,
1997).
(3) $123,597 of the registration fee was previously paid in connection with
the Registrant's Joint Proxy Statement/Prospectus filed with the
Securities and Exchange Commission on Schedule 14A on January 8, 1998.
----------------
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>
[LOGO OF CNB BANCSHARES, INC. APPEARS HERE]
, 1998
Dear Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders of
CNB Bancshares, Inc., an Indiana corporation ("CNB"), to be held on , 1998
(the "CNB Meeting"). The CNB Meeting will be held at , commencing at
.m., local time.
At the CNB Meeting, you will be asked to consider and vote upon a proposal
to approve and adopt the Agreement and Plan of Merger (the "Merger
Agreement"), dated as of October 14, 1997, between CNB and Pinnacle Financial
Services, Inc., a Michigan corporation ("Pinnacle"), which provides for the
merger of Pinnacle with and into CNB (the "Merger"), upon the terms and
subject to the conditions set forth in the Merger Agreement.
If the Merger is approved and consummated, (i) each issued and outstanding
share of common stock of Pinnacle, no par value per share (the "Pinnacle
Common"), other than shares of Pinnacle Common held in the treasury of
Pinnacle or by any direct or indirect subsidiary of Pinnacle, will be
converted into the right to receive 1.0365 shares of common stock of CNB (the
"Conversion Ratio"), stated value $1.00 per share (the "CNB Common"), and cash
in lieu of fractional shares, and (ii) each issued and outstanding share of
CNB Common will remain issued and outstanding, unaffected by the Merger. The
Conversion Ratio is subject to adjustment under certain circumstances
described in the accompanying Joint Proxy Statement/Prospectus.
The Merger will be a historic event for CNB. It is our first entry into the
northwest Indiana and southwest Michigan markets, and it will create the
largest banking organization based in Indiana--and one of the seventy largest
bank holding companies in the United States (based on total assets).
YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER IS IN THE BEST
INTERESTS OF CNB AND ITS SHAREHOLDERS. ACCORDINGLY, YOUR BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THE MERGER AGREEMENT AT THE
CNB MEETING.
The accompanying Notice and Joint Proxy Statement/Prospectus set forth the
voting rights of holders of CNB Common with respect to these matters and
describe the matters to be acted upon at the CNB Meeting. Shareholders are
urged to review carefully the attached Joint Proxy Statement/Prospectus, which
contains a description of the Merger Agreement and its terms and conditions
and the transactions contemplated by the Merger Agreement.
Your continuing interest in the business of CNB is appreciated. Because of
the significance of the Merger to CNB, your participation in the CNB Meeting,
in person or by proxy, is especially important. Accordingly, whether or not
you plan to attend the CNB Meeting, please sign, date and mail the enclosed
Proxy promptly in the postage-paid envelope that has been provided to you for
your convenience. If you wish to vote in accordance with the recommendations
of the CNB Board, it is not necessary to specify your choices; you may merely
sign, date and return the enclosed Proxy.
Sincerely,
/s/ James J. Giancola
James J. Giancola
President and Chief Executive
Officer
<PAGE>
CNB BANCSHARES, INC.
AN INDIANA CORPORATION
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 1998
----------------
TO THE SHAREHOLDERS OF CNB BANCSHARES, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "CNB
Meeting") of CNB Bancshares, Inc., an Indiana corporation ("CNB"), will be
held on , 1998, at .m., local time, at , for the
following purposes:
(1) To consider and vote upon a proposal to approve and adopt the Agreement
and Plan of Merger (the "Merger Agreement"), dated as of October 14,
1997, by and between CNB and Pinnacle Financial Services, Inc., a
Michigan corporation ("Pinnacle"), and the transactions contemplated
thereby, pursuant to which, among other things, Pinnacle will be merged
with and into CNB (the "Merger"), upon the terms and conditions set forth
in the Merger Agreement, as more fully described in the accompanying
Joint Proxy Statement/Prospectus.
(2) To transact such other business as may properly come before the CNB
Meeting, or any adjournments or postponements thereof. The Board of
Directors of CNB is not aware of any other business to come before the
CNB Meeting.
A copy of the Merger Agreement is attached as Appendix A to the accompanying
Joint Proxy Statement/Prospectus.
The Board of Directors of CNB has fixed the close of business on , 1998,
as the record date for determination of shareholders entitled to notice of and
to vote at the CNB Meeting or at any adjournments or postponements thereof.
THE BOARD OF DIRECTORS OF CNB HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND BELIEVES THAT THE MERGER IS IN THE BEST INTERESTS OF CNB AND ITS
SHAREHOLDERS. THE BOARD, THEREFORE, RECOMMENDS THAT THE SHAREHOLDERS OF CNB
VOTE "FOR" THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
EACH SHAREHOLDER IS URGED TO COMPLETE AND PROMPTLY RETURN THE ACCOMPANYING
PROXY WHETHER OR NOT HE OR SHE PLANS TO ATTEND THE CNB MEETING. The prompt
return of each shareholder's signed proxy will help assure a quorum and aid
CNB 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 that the shareholder attends the CNB Meeting.
By Order of the Board of Directors
/s/ David L. Knapp
David L. Knapp
Secretary
Evansville, Indiana
, 1998
<PAGE>
[LOGO OF PINNACLE FINANCIAL SERVICES APPEARS HERE]
, 1998
Dear Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders (the
"Pinnacle Meeting") of Pinnacle Financial Services, Inc. ("Pinnacle"), to be
held at , at .m., local time, on , 1998.
At the Pinnacle Meeting, shareholders of Pinnacle will be asked to consider
and vote upon a proposal to approve and adopt (i) the Agreement and Plan of
Merger (the "Merger Agreement"), dated as of October 14, 1997, by and between
Pinnacle and CNB Bancshares, Inc., an Indiana corporation ("CNB"), and (ii)
all of the transactions contemplated by the Merger Agreement, including the
merger of Pinnacle with and into CNB (the "Merger").
If the Merger is approved and consummated, each issued and outstanding share
of common stock of Pinnacle, no par value per share (the "Pinnacle Common"),
other than shares of Pinnacle Common held in the treasury of Pinnacle or by
any direct or indirect subsidiary of Pinnacle, will be converted into the
right to receive 1.0365 shares of common stock of CNB (the "Conversion
Ratio"), stated value $1.00 per share (the "CNB Common"). The Conversion Ratio
is subject to adjustment under certain circumstances described in the
accompanying Joint Proxy Statement/Prospectus.
The Board of Directors of Pinnacle (the "Pinnacle Board") submits the
proposed Merger to you after careful review and consideration. We believe that
the proposed Merger will provide significant value to all shareholders.
THE PINNACLE BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
RECOMMENDS THAT YOU VOTE FOR THE MERGER PROPOSAL AT THE PINNACLE MEETING.
The accompanying Notice and Joint Proxy Statement/Prospectus set forth the
voting rights of holders of Pinnacle Common with respect to these matters and
describe the matters to be acted upon at the Pinnacle Meeting. Shareholders
are urged to review carefully the attached Joint Proxy Statement/Prospectus,
which contains a description of the Merger Agreement and its terms and
conditions and the transactions contemplated by the Merger Agreement.
Your continuing interest in the business of Pinnacle is appreciated. Because
of the significance of the Merger to Pinnacle, your participation in the
Pinnacle Meeting, in person or by proxy, is especially important. Accordingly,
whether or not you plan to attend the Pinnacle Meeting, please sign, date and
mail the enclosed Proxy promptly in the postage-paid envelope that has been
provided to you for your convenience. If you wish to vote in accordance with
the recommendations of the Pinnacle Board, it is not necessary to specify your
choices; you may merely sign, date and return the enclosed Proxy.
Sincerely,
/s/ Richard L. Schanze
Richard L. Schanze
Chairman and Chief Executive Officer
<PAGE>
PINNACLE FINANCIAL SERVICES, INC.
A MICHIGAN CORPORATION
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 1998
----------------
TO THE SHAREHOLDERS OF PINNACLE FINANCIAL SERVICES, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "Pinnacle
Meeting") of Pinnacle Financial Services, Inc., a Michigan corporation
("Pinnacle"), will be held on , 1998, at .m., local time, at ,
for the following purposes:
1. To consider and vote upon a proposal to approve and adopt (i) the
Agreement and Plan of Merger (the "Merger Agreement"), dated as of
October 14, 1997, by and between Pinnacle and CNB Bancshares, Inc., an
Indiana corporation ("CNB"), and (ii) all of the transactions
contemplated by the Merger Agreement. Such transactions include the
merger of Pinnacle with and into CNB (the "Merger"), with CNB being the
surviving corporation. Upon consummation of the Merger, each issued and
outstanding share of common stock of Pinnacle, no par value per share
(the "Pinnacle Common"), other than shares of Pinnacle Common held in the
treasury of Pinnacle or by any direct or indirect subsidiary of Pinnacle,
will be converted into the right to receive 1.0365 shares of common stock
of CNB (the "Conversion Ratio"), stated value $1.00 per share (the "CNB
Common"), and cash in lieu of fractional shares. The Conversion Ratio is
subject to adjustment under certain circumstances described in the
accompanying Joint Proxy Statement/Prospectus.
2. To transact such other business as may properly come before the Pinnacle
Meeting, or any adjournments or postponements thereof. The Board of
Directors of Pinnacle is not aware of any other business to come before
the Pinnacle Meeting.
A copy of the Merger Agreement is attached as Appendix A to the accompanying
Joint Proxy Statement/Prospectus.
The Board of Directors of Pinnacle has fixed the close of business on ,
1998, as the record date for determination of shareholders entitled to notice
of and to vote at the Pinnacle Meeting and at any adjournments or
postponements thereof.
Only shareholders of record at the close of business on such date are
entitled to notice of and to vote at the Pinnacle Meeting and any adjournments
or postponements thereof.
Your vote is important regardless of the number of shares you own. Each
shareholder is requested to sign, date and return the enclosed Proxy without
delay in the enclosed postage-paid envelope. You may revoke your Proxy at any
time prior to its exercise. Any shareholder of record present at the Pinnacle
Meeting or any adjournments or postponements thereof may revoke his or her
Proxy and vote personally on each matter brought before the Pinnacle Meeting.
/s/ Donald E. Radde
Donald E. Radde
Secretary
St. Joseph, Michigan
, 1998
<PAGE>
[CNB BANCSHARES, INC. LOGO] [PINNACLE FINANCIAL
SERVICES, INC. LOGO]
PROXY STATEMENT PROXY STATEMENT
FOR FOR
CNB BANCSHARES, INC. PINNACLE FINANCIAL SERVICES, INC.
PROSPECTUS
OF
CNB BANCSHARES, INC.
This Joint Proxy Statement/Prospectus relates to the proposed merger (the
"Merger") of Pinnacle Financial Services, Inc., a Michigan corporation
("Pinnacle"), with and into CNB Bancshares, Inc., an Indiana corporation
("CNB"), pursuant to the terms of the Agreement and Plan of Merger (the
"Merger Agreement"), dated as of October 14, 1997, by and between CNB and
Pinnacle. The Merger Agreement is attached hereto as Appendix A and is
incorporated by reference herein.
This Joint Proxy Statement/Prospectus is being furnished in connection with
the solicitation of proxies by the Board of Directors of CNB (the "CNB Board")
to be used at the Special Meeting of Shareholders of CNB to be held on ,
1998 (including any adjournments or postponements thereof, the "CNB Meeting").
At the CNB Meeting, holders of the common stock of CNB, stated value $1.00 per
share (the "CNB Common"), will be asked to consider and vote upon approval and
adoption of the Merger Agreement and the transactions contemplated thereby,
including the Merger. Any proxy given pursuant to this solicitation by a
holder of CNB Common may be revoked by the grantor at any time prior to the
voting of such proxy at the CNB Meeting. See "CNB MEETING."
THE SHARES OF CNB COMMON OFFERED HEREBY 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 JOINT PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
THE SHARES OF CNB COMMON OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR
OTHER OBLIGATIONS OF ANY BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE FUND OR ANY OTHER
GOVERNMENTAL AGENCY.
----------------
The date of this Joint Proxy Statement/Prospectus is , 1998.
(continued on next page)
<PAGE>
(continued from previous page)
This Joint Proxy Statement/Prospectus is also being furnished in connection
with the solicitation of proxies by the Board of Directors of Pinnacle (the
"Pinnacle Board") to be used at the Special Meeting of Shareholders of
Pinnacle to be held on , 1998 (including any adjournments or
postponements thereof, the "Pinnacle Meeting"). At the Pinnacle Meeting,
holders of the common stock of Pinnacle, no par value per share (the "Pinnacle
Common"), will be asked to consider and vote upon approval and adoption of the
Merger Agreement and the transactions contemplated thereby, including the
Merger. Any proxy given pursuant to this solicitation by a holder of Pinnacle
Common may be revoked by the grantor at any time prior to the voting of such
proxy at the Pinnacle Meeting. See "PINNACLE MEETING."
Pursuant to the Merger Agreement and in connection with the Merger, each
issued and outstanding share of Pinnacle Common, other than shares held in the
treasury of Pinnacle or by any direct or indirect subsidiary of Pinnacle, will
be converted into the right to receive 1.0365 shares of CNB Common (the
"Conversion Ratio") and cash in lieu of fractional shares (together, the
"Merger Consideration"). See "MERGER--Merger Consideration," "--Fractional
Shares" and "DESCRIPTION OF CNB COMMON STOCK." The Conversion Ratio is subject
to adjustment under certain circumstances described herein. See "MERGER--
Termination of Merger Agreement--Conversion Ratio Adjustment." Shares of CNB
Common issued and outstanding immediately prior to the Merger will be
unaffected by the Merger and will remain issued and outstanding immediately
after the Merger.
This Joint Proxy Statement/Prospectus also constitutes the Prospectus of
CNB, filed as part of the Registration Statement (as such term is hereafter
defined under "AVAILABLE INFORMATION"), covering a maximum of 13,241,070
shares of CNB Common issuable to holders of Pinnacle Common pursuant to the
Merger (based upon the Conversion Ratio of 1.0365).
The issued and outstanding shares of CNB Common are, and the shares of CNB
Common to be issued in connection with the Merger will be, included for
quotation on the New York Stock Exchange (the "N.Y.S.E."). The issued and
outstanding shares of Pinnacle Common are traded on The Nasdaq Stock Market's
National Market ("Nasdaq"). On , 1998, the closing sale price of CNB
Common was $ per share, and the closing sale price of Pinnacle Common was
$ per share.
This Joint Proxy Statement/Prospectus and the accompanying form of proxy for
use in connection with the CNB Meeting are first being mailed to shareholders
of CNB on or about , 1998. This Joint Proxy Statement/Prospectus and the
accompanying form of proxy for use in connection with the Pinnacle Meeting are
first being mailed to shareholders of Pinnacle on or about , 1998.
This Joint Proxy Statement/Prospectus does not cover any resales of the CNB
Common offered hereby to be received by the shareholders of Pinnacle deemed to
be "affiliates" of CNB or Pinnacle upon consummation of the Merger. No person
is authorized to make use of this Joint Proxy Statement/Prospectus in
connection with such resales, although such securities may be traded without
the use of this Joint Proxy Statement/Prospectus by those shareholders of
Pinnacle not deemed to be "affiliates" of CNB or Pinnacle. See "MERGER--Resale
of Pinnacle Common."
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION...................................................... 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................ 1
FORWARD-LOOKING STATEMENTS................................................. 3
SUMMARY INFORMATION........................................................ 4
Introduction............................................................. 4
Parties to Merger........................................................ 4
CNB.................................................................... 4
Pinnacle............................................................... 4
Special Meetings......................................................... 4
Date, Time and Place of Special Meetings............................... 4
Matters to be Considered............................................... 5
Record Dates........................................................... 5
Votes Required......................................................... 5
Security Ownership of Management....................................... 5
Voting and Revocation of Proxies....................................... 6
Merger................................................................... 6
Effects of Merger...................................................... 6
Value of Merger........................................................ 7
Reasons for Merger and Recommendation of Boards of Directors........... 7
Fairness Opinions of Financial Advisors................................ 8
Management and Operations After Merger................................. 8
Conditions to Consummation of Merger................................... 8
Regulatory Approvals................................................... 9
Federal Income Tax Consequences........................................ 9
Accounting Treatment................................................... 10
Business of Pinnacle in Ordinary Course................................ 10
Dividends.............................................................. 10
Interests of Certain Persons in Merger................................. 10
Termination of Merger Agreement; Conversion Ratio Adjustment........... 11
Termination Fee........................................................ 12
No Appraisal Rights of Dissenting Shareholders......................... 12
Waiver and Amendment................................................... 12
Pinnacle Stock Option Agreement.......................................... 13
Comparison of Shareholder Rights......................................... 13
Comparative Stock Prices................................................. 14
SELECTED COMPARATIVE PER SHARE DATA........................................ 15
SELECTED FINANCIAL DATA.................................................... 17
RECENT DEVELOPMENTS........................................................ 20
PARTIES TO MERGER.......................................................... 26
CNB...................................................................... 26
Pinnacle................................................................. 27
CNB MEETING................................................................ 27
Date, Time and Place of CNB Meeting...................................... 27
Matters to be Considered................................................. 27
Record Date.............................................................. 28
Vote Required............................................................ 28
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Security Ownership of Management......................................... 28
Voting and Revocation of Proxies......................................... 28
Solicitation of Proxies.................................................. 29
PINNACLE MEETING........................................................... 30
Date, Time and Place of Pinnacle Meeting................................. 30
Matters to be Considered................................................. 30
Record Date.............................................................. 30
Vote Required............................................................ 30
Security Ownership of Management......................................... 30
Voting and Revocation of Proxies......................................... 31
Solicitation of Proxies.................................................. 32
MERGER..................................................................... 33
General.................................................................. 33
Background of Merger..................................................... 33
Reasons for Merger; Recommendation of CNB Board.......................... 35
Reasons for Merger; Recommendation of Pinnacle Board..................... 36
Fairness Opinions of Financial Advisors.................................. 38
CNB.................................................................... 38
Pinnacle............................................................... 41
Form of Merger........................................................... 45
Merger Consideration..................................................... 45
Fractional Shares........................................................ 46
Exchange of Stock Certificates........................................... 46
Effective Time........................................................... 47
Share Adjustments........................................................ 47
Dividends................................................................ 48
Conditions to Consummation of Merger..................................... 48
Regulatory Approvals..................................................... 49
Representations and Warranties........................................... 50
Certain Other Agreements................................................. 51
CNB.................................................................... 51
Pinnacle............................................................... 52
Business of Pinnacle in Ordinary Course.............................. 52
Environmental Inspections............................................ 53
Other Agreements..................................................... 54
Effect of Merger on Employee Benefit and Employee Stock Option Plans..... 55
Employee Benefit Plans................................................. 55
Employee Stock Option Plans............................................ 55
Management and Operations After Merger................................... 56
Interests of Certain Persons in Merger................................... 56
Indemnification and Insurance.......................................... 56
Employment and Employee Benefits....................................... 57
Employee Stock Option Plans............................................ 57
Change of Control and Severance Agreements............................. 57
Board Composition...................................................... 58
Interests of CNB Board and Management.................................. 58
Accounting Treatment..................................................... 59
Federal Income Tax Consequences.......................................... 59
Termination of Merger Agreement.......................................... 60
Termination............................................................ 60
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Conversion Ratio Adjustment............................................ 61
Termination Fee.......................................................... 62
No Appraisal Rights of Dissenting Shareholders........................... 63
No Solicitation.......................................................... 63
Waiver and Amendment..................................................... 63
Expenses and Fees........................................................ 63
Resale of CNB Common..................................................... 63
PINNACLE STOCK OPTION AGREEMENT............................................ 64
General.................................................................. 64
The Pinnacle Option...................................................... 64
Termination of Pinnacle Option........................................... 65
PRO FORMA FINANCIAL DATA................................................... 67
DESCRIPTION OF CNB COMMON STOCK............................................ 75
General.................................................................. 75
Dividend Rights.......................................................... 75
Voting Rights............................................................ 75
Liquidation Rights....................................................... 75
No Preemptive Rights..................................................... 75
Assessment and Redemption................................................ 75
Transfer Agent........................................................... 75
COMPARISON OF SHAREHOLDER RIGHTS........................................... 76
Shareholder Vote Required for Certain Transactions....................... 76
Business Combinations.................................................. 76
Removal of Directors................................................... 77
Amendments to Articles of Incorporation................................ 77
Voting Rights.......................................................... 78
Special Meeting of Shareholders; Shareholder Action by Written Consent... 78
Dissenters' Rights....................................................... 79
Takeover Statutes........................................................ 79
Indemnification.......................................................... 80
Limitation of Liability of Directors..................................... 82
Consideration of Non-Shareholder Interests............................... 82
LEGAL OPINION.............................................................. 82
BENEFICIAL OWNERSHIP OF PINNACLE COMMON.................................... 83
EXPERTS.................................................................... 84
Independent Auditors for CNB............................................. 84
Independent Auditors for Pinnacle........................................ 84
SHAREHOLDER PROPOSALS...................................................... 85
APPENDICES
Appendix A Agreement and Plan of Merger.................................... A-1
Appendix B Pinnacle Stock Option Agreement................................. B-1
Appendix C Opinion of CIBC Oppenheimer Corp................................ C-1
Appendix D Opinion of Friedman, Billings, Ramsey & Co., Inc................ D-1
</TABLE>
iii
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS 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 PINNACLE. THIS JOINT PROXY STATEMENT/PROSPECTUS 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 JOINT PROXY STATEMENT/PROSPECTUS AT ANY
TIME DOES NOT IMPLY THAT ANY INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
AVAILABLE INFORMATION
CNB and Pinnacle are each subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Securities and Exchange Commission (the "S.E.C."). The reports, proxy
statements and other information can be inspected and copied at the public
reference facilities of the S.E.C., Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
S.E.C. located at Suite 1300, Seven World Trade Center, New York, New York
10048, and Suite 1400, Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60661, and copies of such materials can be obtained from the public
reference section of the S.E.C. at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The S.E.C. maintains a Web site
(http://www.sec.gov) that contains reports, proxy statements and other
information regarding CNB and Pinnacle. Reports, proxy statements and other
information concerning CNB may be inspected at the offices of the N.Y.S.E., 20
Broad Street, New York, New York 10005. Reports, proxy statements and other
information concerning Pinnacle may also be inspected at the offices of the
National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
CNB has filed with the S.E.C. under the Securities Act of 1933, as amended
(the "Securities Act"), a Registration Statement on Form S-4 (together with
any amendments thereto, the "Registration Statement") with respect to the CNB
Common to be issued pursuant to the Merger Agreement. Pursuant to S.E.C.
Regulations, this Joint Proxy Statement/Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits thereto.
Such additional information may be obtained from the S.E.C.'s principal office
in Washington, D.C. Statements contained in this Joint Proxy
Statement/Prospectus or in any document incorporated in this Joint Proxy
Statement/Prospectus by reference as to the contents of any contract or other
document referred to herein or therein are not necessarily complete, and in
each instance where reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement or such other
document, each such statement is qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the S.E.C. by CNB (File No. 0-11510)
pursuant to the Exchange Act are incorporated by reference in this Joint Proxy
Statement/Prospectus: (i) CNB's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996; (ii) CNB's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1997, June 30, 1997 and September 30, 1997; (iii) the
description of CNB's Common Stock contained in CNB's Registration Statement on
Form 8-A, dated April 1, 1996, filed pursuant to Section 12 of the Exchange
Act; and (iv) CNB's Current Report on Form 8-K dated October 22, 1997.
The following documents filed with the S.E.C. by Pinnacle (File No. 0-17937)
pursuant to the Exchange Act are incorporated by reference in this Joint Proxy
Statement/Prospectus: (i) Pinnacle's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996; (ii) Pinnacle's Quarterly Reports on Form 10-Q
for the quarters ended March 31, 1997, June 30, 1997 and September 30, 1997
(as amended by Amendment No. 1 to Form 10-Q/A as filed on November 21, 1997
and Amendment No. 2 to Form 10-Q/A as filed on January 7, 1998); (iii) the
description of Pinnacle's Common Stock contained in Pinnacle's Registration
Statement on Form
1
<PAGE>
8-A, dated August 22, 1989, filed pursuant to Section 12 of the Exchange Act;
and (iv) Pinnacle's Current Reports on Form 8-K dated March 4, 1997, August 4,
1997 (as amended by Amendment No. 1 to Form 8-K/A as filed on October 14, 1997
and Amendment No. 2 to Form 8-K/A as filed on January 8, 1998) and February
12, 1998.
On August 1, 1997, Indiana Federal Corporation, a Delaware corporation
("IFC") (File No. 0-17379), and CB Bancorp, Inc., a Delaware corporation
("CB") (File No. 0-20742), each merged with and into Pinnacle. The following
documents filed with the S.E.C. by IFC and CB pursuant to the Exchange Act are
incorporated by reference in this Joint Proxy Statement/Prospectus: (i) IFC's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996; (ii)
IFC's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997;
(iii) CB's Annual Report on Form 10-K for the fiscal year ended March 31,
1997; and (iv) CB's Current Report on Form 8-K dated March 12, 1997.
All documents and reports filed by CNB and Pinnacle pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of effectiveness
of the Registration Statement of which this Joint Proxy Statement/Prospectus
forms a part and prior to the date of the CNB Meeting and the Pinnacle Meeting
shall be deemed to be incorporated by reference in this Joint Proxy
Statement/Prospectus and to be a part hereof from the dates of filing of such
documents or reports. Any statement contained in this Joint Proxy
Statement/Prospectus or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Joint Proxy Statement/Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Joint Proxy Statement/Prospectus.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS
RELATING TO CNB AND PINNACLE 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
JOINT PROXY STATEMENT/PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST TO
THE FOLLOWING:
CNB DOCUMENTS: PINNACLE DOCUMENTS:
CNB BANCSHARES, INC. PINNACLE FINANCIAL SERVICES, INC.
20 N.W. THIRD STREET 830 PLEASANT STREET
EVANSVILLE, INDIANA 47739 ST. JOSEPH, MICHIGAN 49085
(812) 456-3400 (616) 983-6311
ATTN: DAVID L. KNAPP, EXECUTIVE ATTN: JOHN A. NEWCOMER, VICE
VICE PRESIDENT AND SECRETARY PRESIDENT
AND CORPORATE AFFAIRS OFFICER
In order to ensure timely delivery of the documents,
any request should be made by , 1998.
2
<PAGE>
FORWARD-LOOKING STATEMENTS
THIS JOINT PROXY STATEMENT/PROSPECTUS CONTAINS CERTAIN FORWARD LOOKING
STATEMENTS WITH RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND
THE BUSINESS OF CNB AND PINNACLE ON A STAND-ALONE AND PRO FORMA COMBINED BASIS
FOLLOWING THE CONSUMMATION OF THE MERGER. SEE "SUMMARY INFORMATION," "RECENT
DEVELOPMENTS," "PARTIES TO MERGER--CNB," "MERGER--REASONS FOR MERGER;
RECOMMENDATION OF CNB BOARD," "--REASONS FOR MERGER; RECOMMENDATION OF
PINNACLE BOARD," "--OPINION OF FINANCIAL ADVISORS" AND "PRO FORMA FINANCIAL
DATA." THESE STATEMENTS CONSTITUTE FORWARD LOOKING STATEMENTS WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THESE FORWARD
LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND UNCERTAINTIES AND ACTUAL RESULTS
MAY DIFFER MATERIALLY FROM THE PROJECTIONS. 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 AND/OR REVENUES
FOLLOWING THE MERGER ARE LOWER THAN EXPECTED AND/OR EXPENSES FOLLOWING THE
MERGER ARE HIGHER THAN EXPECTED; (2) GREATER THAN EXPECTED DEPOSIT ATTRITION
OR CUSTOMER LOSS FOLLOWING THE MERGER; (3) COSTS OR DIFFICULTIES RELATED TO
THE INTEGRATION OF THE BUSINESSES OF CNB AND PINNACLE ARE GREATER THAN
EXPECTED; (4) CHANGES IN THE INTEREST RATE ENVIRONMENT REDUCE MARGINS; (5)
LEGISLATION OR REGULATORY REQUIREMENTS OR CHANGES ADVERSELY AFFECT THE
BUSINESSES IN WHICH THE COMBINED COMPANY WOULD BE ENGAGED; (6) CHANGES IN
BUSINESS CONDITIONS AND INFLATION; (7) GENERAL ECONOMIC CONDITIONS, EITHER
NATIONALLY OR REGIONALLY, ARE LESS FAVORABLE THAN EXPECTED RESULTING IN, AMONG
OTHER THINGS, A DETERIORATION IN CREDIT QUALITY; (8) COMPETITIVE PRESSURES
AMONG FINANCIAL INSTITUTIONS INCREASE SIGNIFICANTLY; AND (9) CHANGES IN THE
SECURITIES MARKETS.
3
<PAGE>
SUMMARY INFORMATION
The following is a brief summary of certain information contained elsewhere
in this Joint Proxy Statement/Prospectus. 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 Joint Proxy
Statement/Prospectus, the Appendices hereto and the documents referred to
herein. All information contained in this Joint Proxy Statement/Prospectus
relating to CNB and its subsidiaries has been supplied by CNB, and all
information relating to Pinnacle and its subsidiaries has been supplied by
Pinnacle. Shareholders of CNB and Pinnacle are urged to read this Joint Proxy
Statement/Prospectus and the Appendices hereto in their entirety.
INTRODUCTION
This Joint Proxy Statement/Prospectus relates to the Merger Agreement entered
into by and between CNB and Pinnacle which provides for, among other things,
the Merger of Pinnacle with and into CNB. Upon consummation of the Merger, CNB
will be the surviving corporation, and Pinnacle 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 TO MERGER
CNB
CNB is a multi-bank holding company headquartered in Evansville, Indiana. At
September 30, 1997, CNB had consolidated assets of $4.4 billion, deposits of
$3.1 billion, net loans of $2.4 billion and shareholders' equity of $330
million. Through its 95 full-service banking offices, 33 consumer finance
offices and various 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. CNB's
executive offices are located at 20 N.W. Third Street, Evansville, Indiana
47739 (telephone number (812) 456-3400).
For additional information regarding CNB, see "PARTIES TO MERGER--CNB" and
the documents listed under "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
Pinnacle
Pinnacle is a bank holding company headquartered in St. Joseph, Michigan.
Through its wholly-owned subsidiary, Pinnacle Bank, a Michigan state banking
corporation ("Pinnacle Bank"), Pinnacle conducts full-service commercial and
retail banking through 14 branch offices located in southwestern Michigan and
30 branch offices and two loan production offices located in northern Indiana.
Pinnacle's principal executive offices are located at 830 Pleasant Street, St.
Joseph, Michigan 49085 (telephone number (616) 983-6311).
For additional information regarding Pinnacle, see "PARTIES TO MERGER--
PINNACLE" and the documents listed under "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
SPECIAL MEETINGS
Date, Time and Place of Special Meetings
CNB Meeting. The CNB Meeting will be held at , commencing at
.m., local time, on , 1998. See "CNB MEETING--Date, Time and Place."
4
<PAGE>
Pinnacle Meeting. The Pinnacle Meeting will be held at , commencing
at .m., local time, on , 1998. See "PINNACLE MEETING--Date, Time
and Place."
Matters to be Considered
CNB. At the CNB Meeting, the holders of CNB Common will be asked to consider
and vote upon a proposal to approve and adopt the Merger Agreement and the
transactions contemplated thereby, including the Merger. See "CNB MEETING--
Matters to be Considered."
Pinnacle. At the Pinnacle Meeting, the holders of Pinnacle Common will be
asked to consider and vote upon a proposal to approve and adopt the Merger
Agreement and the transactions contemplated thereby, including the Merger. See
"PINNACLE MEETING--Matters to be Considered."
Record Dates
CNB. The record date for the CNB Meeting is , 1998 (the "CNB Record
Date"). Only the holders of record of outstanding shares of CNB Common on the
CNB Record Date will be entitled to notice of and to vote at the CNB Meeting.
See "CNB MEETING--Record Date."
Pinnacle. The record date for the Pinnacle Meeting is , 1998 (the
"Pinnacle Record Date"). Only the holders of record of outstanding shares of
Pinnacle Common on the Pinnacle Record Date will be entitled to notice of and
to vote at the Pinnacle Meeting. See "PINNACLE MEETING--Record Date."
Votes Required
CNB. The presence, in person or by proxy, of a majority of the issued and
outstanding shares of CNB Common entitled to vote as of the CNB Record Date is
necessary to constitute a quorum at the CNB Meeting. Pursuant to the Indiana
Business Corporation Law (the "Indiana Corporate Law"), the affirmative vote of
the holders of a majority of all of the issued and outstanding shares of CNB
Common is required to approve and 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 CNB Common is a condition to,
and required for, consummation of the Merger. See "CNB MEETING--Vote Required"
and "MERGER--Conditions to Consummation of Merger."
Pinnacle. The presence, in person or by proxy, of a majority of the issued
and outstanding shares of Pinnacle Common entitled to vote as of the Pinnacle
Record Date is necessary to constitute a quorum at the Pinnacle Meeting.
Pursuant to the Michigan Business Corporation Act (the "Michigan Corporate
Law"), the affirmative vote of the holders of a majority of all of the issued
and outstanding shares of Pinnacle Common is required to approve and 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 Pinnacle Common is a condition to, and required for, consummation of the
Merger. See "PINNACLE MEETING--Vote Required" and "MERGER--Conditions to
Consummation of Merger."
Security Ownership of Management
CNB. As of the CNB Record Date, shares of CNB Common were issued,
outstanding and entitled to vote at the CNB Meeting, of which approximately
shares, or approximately %, were beneficially owned by directors and executive
officers of CNB and their affiliates. It is currently expected that each such
director and executive officer of CNB will vote the shares of CNB Common that
he or she beneficially owns for adoption and approval of the Merger Agreement
and the consummation of the transactions contemplated thereby, including the
Merger. As of the CNB Record Date, subsidiaries of CNB held approximately
shares, or approximately %, of CNB Common, in various fiduciary capacities
and, by virtue of sole or shared voting or
5
<PAGE>
investment power in respect of such shares, were deemed to own them
beneficially. It is the practice of these entities when holding shares as sole
trustee or sole executor to vote such shares but, where shares are held as co-
executor or co-trustee, approval is obtained from the co-fiduciary before
voting. As of the CNB Record Date, directors and executive officers of Pinnacle
and their affiliates did not beneficially own any shares of CNB Common. As of
the CNB Record Date, Pinnacle Bank, as fiduciary, custodian or agent, held
approximately shares, or less than %, of CNB Common under trust agreements
and other instruments and agreements. See "CNB MEETING--Security Ownership of
Management."
Pinnacle. As of the Pinnacle Record Date, shares of Pinnacle Common were
issued, outstanding and entitled to vote, of which approximately shares, or
approximately %, were beneficially owned by directors and executive officers
of Pinnacle and their affiliates. It is currently expected that each such
director and executive officer of Pinnacle will vote the shares of Pinnacle
Common beneficially owned by him or her for approval of the Merger Agreement
and the consummation of the transactions contemplated thereby, including the
Merger. As of the Pinnacle Record Date, Pinnacle Bank, in various fiduciary
capacities, held approximately shares, or approximately %, of Pinnacle
Common under trust agreements and other instruments and agreements. It is the
practice of Pinnacle Bank when holding shares as sole trustee or sole executor,
to vote such shares but, where shares are held as co-executor or co-trustee,
approval is obtained from the co-fiduciary before voting. As of the Pinnacle
Record Date, directors and executive officers of CNB and their affiliates
beneficially owned shares, or less than %, of Pinnacle Common. As of the
Pinnacle Record Date, subsidiaries of CNB held approximately , or less than
%, of Pinnacle Common in various fiduciary capacities and, by virtue of sole
or shared voting or investment power in respect of such shares, were deemed to
own them beneficially. See "PINNACLE MEETING--Security Ownership of
Management."
Voting and Revocation of Proxies
A proxy to vote at the CNB Meeting or the Pinnacle Meeting, as the case may
be, accompanies this Joint Proxy Statement/Prospectus. Any proxy given pursuant
to this solicitation may be revoked by the grantor thereof at any time prior to
the voting of such proxy at the CNB Meeting or Pinnacle Meeting, as the case
may be, by filing a written revocation or a duly executed proxy bearing a later
date with the Secretary of CNB or Pinnacle, as appropriate. See "CNB MEETING--
Voting and Revocation of Proxies" and "PINNACLE MEETING--Voting and Revocation
of Proxies."
A holder of CNB Common or Pinnacle Common, as the case may be, may withdraw
his or her proxy at the CNB Meeting or the Pinnacle Meeting, as the case may
be, at any time before it is exercised by electing to vote in person. A holder
of CNB Common or Pinnacle Common does not, however, revoke his or her proxy
simply by attending the CNB Meeting or the Pinnacle Meeting, as the case may
be. See "CNB MEETING--Voting and Revocation of Proxies" and "PINNACLE MEETING--
Voting and Revocation of Proxies."
MERGER
Effects of Merger
At the time that the Merger is consummated (the "Effective Time") (see
"MERGER--Effective Time"), Pinnacle will merge directly with and into CNB. CNB
will be the surviving corporation in the Merger, and the separate corporate
existence of Pinnacle will terminate.
As a result of the Merger, (i) each share of Pinnacle Common issued and
outstanding immediately prior to the Effective Time, other than shares held in
the treasury of Pinnacle or by any direct or indirect subsidiary of Pinnacle,
will be converted into the right to receive 1.0365 shares of CNB Common (the
"Conversion Ratio"), and (ii) each issued and outstanding share of CNB Common
will remain outstanding, unaffected by the Merger. See "MERGER--Merger
Consideration" and "DESCRIPTION OF CNB COMMON STOCK." The
6
<PAGE>
Conversion Ratio is subject to adjustment under certain circumstances. See
"MERGER--Termination of Merger Agreement--Conversion Ratio Adjustment."
No fractional shares of CNB Common will be issued as a result of the Merger.
In lieu thereof, Pinnacle shareholders who would otherwise be entitled to a
fractional share interest in CNB Common (after taking into account all shares
of Pinnacle Common held by such shareholder) will be paid an amount in cash
equal to the product of such fractional share interest and the closing sale
price of a share of CNB Common on the N.Y.S.E. as reported in The Wall Street
Journal (Midwest Edition) on the trading day immediately preceding the date on
which the Effective Time occurs. See "MERGER--Fractional Shares."
The maximum number of shares of CNB Common to be issued to the shareholders
of Pinnacle in the Merger (on a fully-diluted basis assuming the exercise of
all Pinnacle Employee Stock Options (as such term is hereafter defined under
"--Effect of Merger on Employee Benefit and Employee Stock Option Plans--
Employee Stock Option Plans") prior to the Effective Time) is 13,241,070.
Immediately following the Merger, shareholders of CNB and Pinnacle will own
approximately 60% and 40%, respectively, of the then outstanding shares of CNB
Common.
For information on how Pinnacle shareholders will be able to exchange
certificates representing shares of Pinnacle Common for certificates
representing shares of CNB Common after the Effective Time, see "MERGER--
Exchange of Stock Certificates."
Value of Merger
As of , 1998, based on the Conversion Ratio of 1.0365 and the closing
sale price of CNB Common as reported on the N.Y.S.E. for that date, the Merger
had a per share value of $ to holders of Pinnacle Common, and the
approximate total value of the Merger Consideration to the shareholders of
Pinnacle was $ million. The total value of the Merger Consideration as
stated above may increase or decrease depending on the market price of CNB
Common.
Reasons for Merger and Recommendation of Boards of Directors
The CNB Board and the Pinnacle Board believe that the terms of the Merger
Agreement are fair to and in the best interests of CNB and its shareholders and
Pinnacle and its shareholders, respectively. The terms of the Merger Agreement
were reached on the basis of arm's-length negotiations between CNB and
Pinnacle. In the course of reaching their respective decisions to approve the
Merger Agreement, the CNB Board consulted with its financial advisor, CIBC
Oppenheimer Corp. ("CIBC Oppenheimer"), regarding the financial terms of the
Merger Agreement and the fairness of the Conversion Ratio to CNB from a
financial point of view. Likewise, the Pinnacle Board consulted with its
financial advisors, Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ"), Friedman, Billings, Ramsey & Co., Inc. ("FBR") and PL Capital, L.L.C.
("PLC"), regarding the financial terms of the Merger Agreement, and the
Pinnacle Board consulted with FBR concerning the fairness of the Conversion
Ratio to the holders of Pinnacle Common from a financial point of view. See
"MERGER--Fairness Opinions of Financial Advisors."
THE CNB BOARD AND THE PINNACLE BOARD HAVE EACH UNANIMOUSLY APPROVED THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE
MERGER, AND THE CNB BOARD AND THE PINNACLE BOARD EACH UNANIMOUSLY RECOMMEND
ADOPTION OF THE MERGER AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE MERGER.
For a discussion of the background of the Merger and the factors considered
by the CNB Board and the Pinnacle Board in reaching their respective decisions
to approve the Merger Agreement, see "MERGER
7
<PAGE>
- --Background of Merger," "--Reasons for Merger; Recommendation of CNB Board"
and "--Reasons for Merger; Recommendation of Pinnacle Board."
Fairness Opinions of Financial Advisors
CIBC Oppenheimer, CNB's advisor with respect to the financial aspects of the
Merger, has rendered its opinions to the CNB Board that, as of October 14,
1997, and as of the date of this Joint Proxy Statement/Prospectus, based upon
the matters set forth in such opinions, the Conversion Ratio is fair to CNB
from a financial point of view.
FBR, one of Pinnacle's advisors with respect to the financial aspects of the
Merger, has rendered its written opinions to the Pinnacle Board that, as of
October 14, 1997, and as of the date of this Joint Proxy Statement/Prospectus,
based upon the matters set forth in such opinions, the Conversion Ratio is fair
to the holders of Pinnacle Common from a financial point of view.
The opinions of CIBC Oppenheimer and FBR, dated as of the date of this Joint
Proxy Statement/Prospectus, are attached hereto as Appendices C and D,
respectively, and should be read in their entirety with respect to the
assumptions made, matters considered and limits of the reviews undertaken by
CIBC Oppenheimer and FBR in rendering their respective opinions. The opinions
of CIBC Oppenheimer and FBR are directed to the CNB Board and the Pinnacle
Board, respectively, and do not constitute recommendations to shareholders of
CNB or Pinnacle as to how they should vote at the CNB Meeting or the Pinnacle
Meeting, as the case may be. CNB and Pinnacle have agreed to pay certain fees
to CIBC Oppenheimer and FBR, respectively, for the opinions that they have
rendered in conjunction with the Merger, and Pinnacle has agreed to pay certain
fees to DLJ and PLC for their advisory services in connection with the Merger.
See "MERGER--Background of Merger" and "--Fairness Opinions of Financial
Advisors" for a further description of the opinions of CIBC Oppenheimer and FBR
and of the fees payable by CNB to CIBC Oppenheimer and by Pinnacle to FBR, DLJ
and PLC.
Management and Operations After Merger
As a consequence of the Merger, Pinnacle will cease to exist as a separate
entity and its subsidiaries, including Pinnacle Bank, will become subsidiaries
of CNB. With the exception of Pinnacle Bank, which CNB intends to operate as a
separate subsidiary bank, CNB intends to ultimately combine the operations of
certain CNB and Pinnacle subsidiaries which provide similar services.
Following the Merger, Arnold L. Weaver, currently Vice Chairman of Pinnacle
and President and Chief Operating Officer of Pinnacle Bank, will become
President and Chief Executive Officer of Pinnacle Bank, and three persons, to
be mutually selected by CNB and Pinnacle, will be appointed to the CNB Board.
It has not yet been determined, as of the date of this Joint Proxy
Statement/Prospectus, which three persons will be appointed as new directors of
CNB following the Merger. Except as provided above, it is not anticipated that
the management of CNB or the CNB Board will be affected as a result of the
Merger.
See "MERGER--Management and Operations After Merger" and "--Interests of
Certain Persons in Merger."
Conditions to Consummation of Merger
Consummation of the Merger is subject to certain conditions including, among
other things, (i) approval of the Merger Agreement by the holders of CNB Common
(see "CNB MEETING--Vote Required") and by the holders of Pinnacle Common (see
"PINNACLE MEETING--Vote Required"); (ii) receipt of certain regulatory
approvals (see "MERGER--Regulatory Approvals"); (iii) receipt of a legal
opinion on certain tax aspects of the Merger (see "MERGER--Federal Income Tax
Consequences"); (iv) receipt of accounting opinions to the effect that the
Merger qualifies for "pooling of interests" accounting treatment (see "MERGER--
Accounting
8
<PAGE>
Treatment"); (v) receipt, in the case of CNB, of a reaffirmation of the opinion
of CIBC Oppenheimer to the effect that the Merger is fair to CNB from a
financial point of view; (vi) receipt, in the case of Pinnacle, of a
reaffirmation of the opinion of FBR to the effect that the Merger is fair to
the Pinnacle shareholders from a financial point of view; and (vii) certain
other customary closing conditions (see "MERGER--Conditions to Consummation of
Merger"). The conditions described in clauses (i) and (ii) above (the receipt
of shareholder and regulatory approvals) may not be waived by either party, and
the conditions described in clauses (v) and (vi) above have been satisfied as
of the date hereof. See Appendices C and D hereto. Although the remaining
conditions to the Merger may be waived by the party entitled to the benefit
thereof, neither CNB nor Pinnacle intends to waive any such condition except as
described under "MERGER --Conditions to Consummation of Merger" and except in
those circumstances where the CNB Board or the Pinnacle Board, as the case may
be, deems such waiver to be in the best interests of CNB and Pinnacle, as the
case may be, and its respective shareholders. There can be no assurances as to
when and if such conditions will be satisfied (or, where permissible, waived)
or that the Merger will be consummated. If the condition described in clause
(iii) above is not satisfied (the tax-free reorganization status of the
Merger), the Merger will not be consummated unless this Joint Proxy
Statement/Prospectus is amended to reflect such revised tax treatment and the
approval of the Merger by the shareholders of CNB and Pinnacle is resolicited.
See "MERGER--Conditions to Consummation of Merger."
Regulatory Approvals
The Merger is subject to approval by the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") pursuant to Sections 3 and 4 of
the Bank Holding Company Act of 1956, as amended (the "B.H.C.A."). Assuming
that the Federal Reserve Board approves the Merger, the Merger may not be
consummated until 30 days after such approval is granted (or fifteen days in
certain circumstances described more fully under "MERGER--Regulatory
Approvals"), during which time the United States Department of Justice (the
"D.O.J.") may challenge the Merger on antitrust grounds and seek the
divestiture of assets and liabilities. The Federal Reserve Board approved the
Merger on February 6, 1998. The Merger will not proceed until all regulatory
approvals required to consummate the Merger have been obtained, such approvals
are in full force and effect and all statutory waiting periods in respect
thereof have expired. There can be no assurance that the Merger will receive
all requisite regulatory approvals. See "MERGER--Regulatory Approvals."
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 Pinnacle, and no gain or loss will be
recognized by shareholders of Pinnacle, except in respect of cash received for
fractional shares. Consummation of the Merger is conditioned upon the receipt
by CNB and Pinnacle of an opinion of Lewis, Rice & Fingersh, L.C. that 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 Internal Revenue Code of 1986, as amended (the
"Code"); (ii) no gain or loss will be recognized by the holders of shares of
Pinnacle Common upon receipt of Merger Consideration (except for cash received
in lieu of fractional shares); (iii) the basis of shares of CNB Common
(including any fractional share interest to which such shareholder would be
entitled) received by the shareholders of Pinnacle will be the same as the
basis of Pinnacle Common exchanged therefor; and (iv) the holding period of the
shares of CNB Common received by the shareholders of Pinnacle will include the
holding period of the shares of Pinnacle Common exchanged therefor, provided
such shares were held as capital assets as of the Effective Time. See "MERGER--
Federal Income Tax Consequences."
THE FOREGOING IS A GENERAL SUMMARY OF ALL OF THE MATERIAL FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER TO SHAREHOLDERS OF PINNACLE WITHOUT REGARD TO THE
PARTICULAR FACTS AND CIRCUMSTANCES OF EACH SHAREHOLDER'S TAX SITUATION AND
STATUS. EACH SHAREHOLDER OF PINNACLE
9
<PAGE>
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 be accounted for as a "pooling of interests" under
generally accepted accounting principles. The receipt of an opinion from KPMG
Peat Marwick LLP, the independent public accountants of both CNB and Pinnacle,
confirming that the Merger will qualify for "pooling of interests" accounting
is a condition to CNB's and Pinnacle's respective obligations to consummate the
Merger. See "MERGER--Conditions to Consummation of Merger." If such condition
is not met, the Merger will not be consummated unless such condition is waived
by CNB and Pinnacle (which CNB and Pinnacle have each indicated that it does
not intend to do should such an event arise), and the approval of the Merger by
the shareholders of CNB and Pinnacle entitled to vote on the Merger is
resolicited, if such failure to qualify for pooling of interests is deemed to
be material to the financial condition and results of operations of CNB on a
pro forma basis assuming the completion of the Merger.
As of the date of this Joint Proxy Statement/Prospectus, the managements of
CNB and Pinnacle are not aware of any existing facts or circumstances which
would preclude accounting for the transaction as a pooling of interests. See
"MERGER--Accounting Treatment."
Business of Pinnacle in Ordinary Course
Pursuant to the Merger Agreement, Pinnacle has agreed to, and has agreed to
cause each of its subsidiaries to, carry on its respective business and to
discharge or incur obligations and liabilities only in the usual, regular and
ordinary course of business, subject to obtaining CNB's prior approval before
undertaking certain specified actions. See "MERGER--Certain Other Agreements--
Pinnacle--Business of Pinnacle in Ordinary Course."
Dividends
The Merger Agreement provides that, (i) in the case of dividends payable
until June 30, 1998, Pinnacle may declare and pay its regular quarterly
dividend on the Pinnacle Common in an amount not to exceed $0.235 per share, at
approximately the same times during each quarter during such period which it
has historically declared and paid such dividends, and (ii) in the case of
dividends payable on or after July 1, 1998, Pinnacle may declare and pay its
regular quarterly dividend on the Pinnacle Common in an aggregate amount equal
to the aggregate amount that Pinnacle shareholders would have received on their
shares of CNB Common received in the Merger had the Effective Time been
immediately before the record date or dates for the payment of each such
dividend, at approximately the same times during each quarter during such
period which it has historically declared and paid such dividends. Pinnacle and
CNB will, pursuant to the Merger Agreement, 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 Pinnacle shareholders
will receive a quarterly dividend from either Pinnacle or CNB but not from both
during or with respect to such quarter. Based upon the anticipated Effective
Time, shareholders of record of Pinnacle on March 28, 1998, will receive a
quarterly dividend from Pinnacle on April 1, 1998, but shareholders of Pinnacle
will not receive a dividend from CNB during or with respect to the second
quarter of 1998. See "MERGER--Dividends."
Interests of Certain Persons in Merger
Certain members of the Pinnacle Board and certain members of management of
Pinnacle and/or its subsidiaries have interests in the Merger that are in
addition to and separate from the interests of shareholders of Pinnacle
generally. These include, among others, provisions in the Merger Agreement
relating to director and officer indemnification and insurance, employment and
employee benefits after the Merger, the conversion of employee and director
stock options, the election of three persons mutually selected by Pinnacle and
CNB to the CNB Board and the assumption by CNB, as a result of the Merger, of
employment, severance and change of
10
<PAGE>
control agreements between Pinnacle and certain executive officers of Pinnacle
and its subsidiaries. Pinnacle currently has in effect severance agreements
(the "Severance Agreements") with seven executive officers (the "Executives"),
which include, among other things, provisions regarding payments under certain
circumstances following a "change in control." The Executives with Severance
Agreements include Richard L. Schanze, Chairman and Chief Executive Officer,
Donald A. Lesch, Vice Chairman, President and Chief Operating Officer, Arnold
L. Weaver, Vice Chairman of Pinnacle and President and Chief Operating Officer
of Pinnacle Bank, Donald E. Radde, Executive Vice President, and David W.
Kolhagen, Senior Vice President and Chief Financial Officer. As discussed under
"MERGER--Interests of Certain Persons in Merger--Change of Control and
Severance Agreements," the Merger will constitute a "change of control" under
each of the Severance Agreements and the Executives will be entitled to receive
the following estimated amounts in the event that their employment is
terminated within 24 months following the Merger either by CNB (as the
successor by Merger with Pinnacle) for other than "cause" or by the Executive
for "good reason": Mr. Schanze $2,202,212, Mr. Lesch $1,182,049, Mr. Weaver
$1,316,946, Mr. Radde $860,136, and Mr. Kolhagen $744,489. The aggregate amount
payable in the aggregate to the Executives if the employment of each Executive
is terminated following the Merger as provided in the preceding sentence is
estimated to be $6,729,290. In addition, the Merger will constitute a "change
of control" under various Change of Control Agreements between CNB and certain
of its executive officers, and, as a result, such executive officers may be
entitled to receive certain benefits from CNB if their employment terminates
for certain reasons after the Merger as described herein. The CNB Board and the
Pinnacle Board were aware of these interests and considered them, among other
matters, in approving the Merger Agreement and the transactions contemplated
thereby. See "MERGER--Management and Operations After Merger" and "--Interests
of Certain Persons in Merger."
Termination of Merger Agreement; Conversion Ratio Adjustment
The Merger Agreement may be terminated at any time prior to the date on which
the Merger is consummated (the "Closing Date") (i) by mutual written agreement
of CNB and Pinnacle; (ii) by either party in the event of a material, uncured
breach by the other party of any of such other party's representations and
warranties or agreements under the Merger Agreement; (iii) by CNB, following
written notice to Pinnacle, if certain reports of environmental inspection on
the real properties of Pinnacle to be obtained pursuant to the Merger Agreement
disclose any matters requiring remedial or corrective measures the cost of
which exceeds $5 million (as determined in accordance with the Merger Agreement
and described under "MERGER--Certain Other Agreements--Pinnacle--Environmental
Inspections;" the subject reports have been obtained and, given the results
thereof, CNB has determined to waive its right to terminate the Merger
Agreement on account thereof); (iv) by either party in the event that any of
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) 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 CNB or
Pinnacle (see "CNB MEETING--Vote Required" and "PINNACLE MEETING--Vote
Required") or if the CNB Board or Pinnacle Board withdraw or modify their
respective recommendations and approvals of the Merger Agreement; (vii) by
either party in the event that the other party or any of such other party's
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 (as such term is hereafter defined under "MERGER--
Representations and Warranties") after the date of the Merger Agreement which
would have a Material Adverse Effect (as such term is hereafter defined under
"MERGER--Representations and Warranties") on such other party; and (viii) by
either party following written notice if the Merger is not consummated on or
prior to September 30, 1998. See "MERGER--Termination of Merger Agreement--
Termination."
In addition, the Pinnacle Board may terminate the Merger Agreement if each of
the following conditions are met: (i) the CNB Average Price (as such term is
hereafter defined under "MERGER--Termination of Merger
11
<PAGE>
Agreement--Conversion Ratio Adjustment") is less than $36.00, and (ii) the
number obtained by dividing the CNB Average Price by the CNB Starting Price (as
such term is hereafter defined under "MERGER--Termination of Merger Agreement--
Conversion Ratio Adjustment") is less than the number obtained by dividing the
Index Average Price (as such term is hereafter defined under "MERGER--
Termination of Merger Agreement--Conversion Ratio Adjustment") by the Index
Starting Price (as such term is hereafter defined under "MERGER--Termination of
Merger Agreement--Conversion Ratio Adjustment") and multiplying such quotient
by 0.82 (a "Price Termination Event").
Assuming that the Effective Time of the Merger was February 13, 1998, neither
of the conditions set forth in the preceding paragraph would have been
satisfied and a Price Termination Event would not have occurred. Under the
condition set forth in clause (i) in the preceding paragraph, the CNB Average
Price would have been $43.02, well above the $36.00 requirement. Under the
condition set forth in clause (ii) in the preceding paragraph, the CNB Average
Price ($43.02) divided by the CNB Starting Price ($43.41) would have been 0.99,
which would have exceeded 0.86 (which is the number obtained by dividing the
Index Average Price ($42.01) by the Index Starting Price ($39.85) and
multiplying such quotient by 0.82). Although as set forth under "SUMMARY--
Comparative Stock Prices" the closing price of CNB Common was below $36.00
during the first quarter of 1997, CNB has no reason to expect that the CNB
Average Price would be less than $36.00 between the date hereof and the
Effective Time or that the other condition to a Price Termination Event
(described in clause (ii) in the preceding paragraph) would occur between the
date hereof and the Effective Time.
If a Price Termination Event occurs and Pinnacle notifies CNB of its
intention to terminate the Merger Agreement, CNB may, within a specified period
of time, increase the Conversion Ratio as more fully described herein, in which
event the Merger Agreement will continue in effect as so adjusted. See
"MERGER--Termination of Merger Agreement--Conversion Ratio Adjustment."
Termination Fee
The Merger Agreement provides that Pinnacle must pay CNB $4.7 million in
immediately available funds within two days after the occurrence of a Purchase
Event (as such term is hereafter defined under "PINNACLE STOCK OPTION
AGREEMENT"), provided that such Purchase Event occurs prior to the occurrence
of an Exercise Termination Event (as such term is hereafter defined under
"PINNACLE STOCK OPTION AGREEMENT"). See "PINNACLE STOCK OPTION AGREEMENT."
No Appraisal Rights of Dissenting Shareholders
No holder of CNB Common will have appraisal rights under the Indiana
Corporate Law in connection with, or as a result of, the matters to be acted
upon at the CNB Meeting. Similarly, no holder of Pinnacle Common will have
appraisal rights under the Michigan Corporate Law in connection with, or as a
result of, the matters to be acted upon at the Pinnacle Meeting. See "MERGER--
No Appraisal Rights of Dissenting Shareholders."
Waiver and Amendment
Prior to the Effective Time, CNB and Pinnacle, by action taken or authorized
by their respective Boards of Directors, may, to the extent legally allowed,
(i) extend the time for the performance of any of the obligations or other acts
required of the other party contained in the Merger Agreement; (ii) waive any
inaccuracies in the representations and warranties of the other party contained
in the Merger Agreement or in any document delivered pursuant to the Merger
Agreement; or (iii) waive compliance by the other party of any of its
agreements or conditions contained in the Merger Agreement.
Subject to compliance with applicable law, the Merger Agreement may be
amended by CNB and Pinnacle by action taken or authorized by their respective
Boards of Directors at any time, except that after approval by
12
<PAGE>
the respective shareholders of either CNB or Pinnacle, no amendment will change
the amount or form of the Merger Consideration to be delivered to the holders
of Pinnacle Common other than as contemplated by the Merger Agreement. See
"MERGER--Waiver and Amendment."
PINNACLE STOCK OPTION AGREEMENT
As an inducement to CNB to enter into the Merger Agreement, Pinnacle (as
issuer) and CNB (as grantee) entered into a Stock Option Agreement (the
"Pinnacle Stock Option Agreement"), dated October 14, 1997, pursuant to which
Pinnacle granted CNB an irrevocable option (the "Pinnacle Option") to purchase
from Pinnacle, at a price of $37.00 per share, up to 2,000,000 shares of
Pinnacle Common (subject to adjustment in certain circumstances), which
constituted approximately 16.2% of the issued and outstanding shares of
Pinnacle Common as of the date of the Merger Agreement, without giving effect
to the exercise of the Pinnacle Option. CNB may exercise the Pinnacle Option
only under certain limited and specifically defined circumstances (none of
which, to the best knowledge of CNB and Pinnacle, has occurred as of the date
hereof). The Pinnacle Stock Option Agreement is attached hereto as Appendix B
and is incorporated by reference herein.
The Pinnacle Stock Option Agreement is intended to increase the likelihood
that the Merger will be consummated in accordance with the terms set forth in
the Merger Agreement. Consequently, certain aspects of the Pinnacle Stock
Option Agreement may have the effect of discouraging persons who might now, or
prior to the Effective Time, be interested in acquiring all of or a significant
interest in Pinnacle from considering or proposing such an acquisition, even if
such persons were prepared to offer to pay to shareholders of Pinnacle
consideration which had a higher current market price than the shares of CNB
Common to be received for each share of Pinnacle Common pursuant to the Merger
Agreement. See "PINNACLE STOCK OPTION AGREEMENT."
COMPARISON OF SHAREHOLDER RIGHTS
The rights of the shareholders of Pinnacle Common and CNB Common differ in
certain respects. The rights of the shareholders of Pinnacle who receive shares
of CNB Common in the Merger will be governed by the Indiana Corporate 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 from those which apply to Pinnacle, which is a Michigan corporation, in
several respects, of which the material differences as hereafter described
under "COMPARISON OF SHAREHOLDER RIGHTS" include the shareholder votes required
for certain business combinations, removal of directors, amendments to the
Articles of Incorporation, and the ability of shareholders to call special
shareholder meetings. See "DESCRIPTION OF CNB COMMON STOCK" and "COMPARISON OF
SHAREHOLDER RIGHTS."
13
<PAGE>
COMPARATIVE STOCK PRICES
Shares of CNB Common are publicly traded on the N.Y.S.E. under the symbol
BNK. Prior to April 1996, shares of CNB Common were included for quotation on
Nasdaq under the symbol CNBE. Shares of Pinnacle Common are traded over-the-
counter and are listed on Nasdaq under the symbol PNFI. The following table
sets forth, for the periods indicated, the high and low closing sale prices of
CNB Common and the high and low sale prices of Pinnacle Common.
<TABLE>
<CAPTION>
CNB COMMON PINNACLE COMMON
---------------------- ----------------------
CASH CASH
DIVIDEND DIVIDEND
HIGH LOW DECLARED HIGH LOW DECLARED
------ ------ -------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
1996
First Quarter.................... $26.64 $25.39 $.19 $20.50 $17.75 $ .19
Second Quarter................... 26.30 25.39 .19 21.75 20.00 .21
Third Quarter.................... 28.09 24.72 .19 24.75 19.50 .21
Fourth Quarter................... 39.77 27.97 .21 25.00 23.25 .21
1997
First Quarter.................... $38.09 $34.77 $.21 $28.00 $23.25 $.235
Second Quarter................... 42.38 37.63 .21 29.00 25.13 .235
Third Quarter.................... 43.00 38.33 .21 36.00 28.50 .235
Fourth Quarter................... 48.19 39.81 .23 49.38 35.00 .235
1998
First Quarter (through--)........ $ $ $.23 $ $ $
</TABLE>
- --------
The following table sets forth the closing sale price of CNB Common as
reported on the N.Y.S.E. on October 14, 1997, the last trading day before the
announcement of the Merger Agreement, and on , 1998. The following table
also sets forth the closing sale price of Pinnacle Common as reported on Nasdaq
on October 14, 1997 and on , 1998. The Pinnacle Common Equivalent
represents the closing sale price of CNB Common on such date multiplied by the
Conversion Ratio of 1.0365.
<TABLE>
<CAPTION>
CNB COMMON PINNACLE COMMON PINNACLE COMMON EQUIVALENT
---------- --------------- --------------------------
<S> <C> <C> <C>
October 14, 1997...... $44.75 $40.13 $46.38
, 1998.......... $ $ $
</TABLE>
Shareholders are advised to obtain current market quotations for CNB Common
and Pinnacle Common.
14
<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 Pinnacle. The amounts designated "Historical" represent the
historical financial results of CNB and Pinnacle. CNB's historical financial
data has been restated for the periods presented to reflect the merger with BMC
Bancshares, Inc., which was consummated on February 14, 1997 and was accounted
for under the pooling of interests method of accounting. Pinnacle's historical
financial data has been restated for the periods presented to reflect the
mergers with Indiana Federal Corporation and CB Bancorp, Inc., each of which
was consummated on August 1, 1997 and each of which was accounted for under the
pooling of interests method of accounting. See "PARTIES TO MERGER--Pinnacle."
The amounts designated "Pro Forma Combined Per CNB Share" represent the pro
forma results of the Merger. The pro forma amounts assume that the Merger had
been effective during the periods presented and had been accounted for under
the pooling of interests method of accounting. For a description of the pooling
of interests method of accounting with respect to the Merger, see "MERGER--
Accounting Treatment." The amounts designated "Equivalent Pro Forma Per
Pinnacle Share" are computed by multiplying the Pro Forma Combined Per Share
amounts by the Conversion Ratio of 1.0365 shares of CNB Common for each share
of Pinnacle Common. See "MERGER--Merger Consideration." The Conversion Ratio is
subject to adjustment under certain circumstances. See "MERGER--Termination of
Merger Agreement--Conversion Ratio Adjustment."
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 historical financial statements and the notes thereto incorporated by
reference in this Joint Proxy Statement/Prospectus and with the unaudited pro
forma financial statements included elsewhere in this Joint Proxy
Statement/Prospectus. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and
"PRO FORMA FINANCIAL DATA."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------- -----------------------
1997 1996 1996 1995 1994
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET INCOME PER SHARE:
Historical:
CNB............................... $ 1.75 $ 1.30 $ 1.80 $ 1.76 $ 1.53
Pinnacle(1)....................... 0.40 0.92 1.32 1.58 1.39
Pro forma combined per CNB share.... 1.23 1.14 1.60 1.68 1.47
Equivalent pro forma per Pinnacle
share.............................. 1.27 1.18 1.66 1.74 1.52
DIVIDENDS PER SHARE:(2)
Historical:
CNB(3)............................ $ 0.63 $ 0.57 $ 0.78 $ 0.53 $ 0.68
Pinnacle.......................... 0.71 0.61 0.82 0.76 0.62
Pro forma combined per CNB share.... 0.63 0.57 0.78 0.53 0.68
Equivalent pro forma per Pinnacle
share.............................. 0.65 0.59 0.81 0.55 0.70
BOOK VALUE PER SHARE:
Historical:
CNB............................... $ 16.12 $ 15.13 $ 15.58 $ 15.20 $ 13.81
Pinnacle.......................... 13.76 13.60 14.01 13.67 11.68
Pro forma combined per CNB share.... 14.54 14.24 14.72 14.30 12.00
Equivalent pro forma per Pinnacle
share.............................. 15.07 14.76 15.26 14.82 12.44
</TABLE>
15
<PAGE>
- --------
(1) Pinnacle's financial results for the nine months ended September 30, 1997
were impacted by $11.1 million of pre-tax restructuring charges and a $10.0
million pre-tax increase in the provision for loan losses recognized by
Pinnacle in connection with its mergers with IFC and CB.
(2) CNB's pro forma and Pinnacle's pro forma equivalent dividends per share
represent historical dividends per share declared by CNB multiplied by the
Conversion Ratio of 1.0365.
(3) In the past years, CNB declared a dividend in one quarter and paid it in
the next quarter. During 1995, CNB changed this policy and began declaring
and paying dividends in the same quarter. The fourth quarter dividend for
1995 was declared and paid in January 1996.
16
<PAGE>
SELECTED FINANCIAL DATA
The following tables present selected consolidated historical financial data
for CNB and Pinnacle 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, which have been restated to reflect the merger with BMC
Bancshares, Inc., and the consolidated financial statements of Pinnacle, which
have been restated to reflect the mergers with IFC and CB, and should be read
in conjunction with the more detailed information and consolidated financial
statements incorporated by reference in this Joint Proxy Statement/Prospectus
and with the unaudited pro forma financial statements included elsewhere in
this Joint Proxy Statement/Prospectus. 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" and "PRO FORMA FINANCIAL DATA."
CNB
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------------- ----------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income........ $ 247,730 $ 224,372 $ 303,825 $ 279,964 $ 232,347 $ 218,186 $ 233,420
Interest expense....... 129,903 114,071 154,897 143,379 107,971 103,780 125,227
Net interest income.... 117,827 110,301 148,928 136,585 124,376 114,406 108,193
Provision for loan
losses................ 8,554 6,878 10,602 6,927 7,156 4,119 9,442
Non-interest income.... 43,774 41,903 55,833 46,628 47,055 43,524 38,067
Non-interest expense... 98,217 104,289 136,994 118,448 115,138 105,252 97,900
Net income(1).......... 36,368 27,062 37,595 36,626 31,742 32,067 27,281
PER SHARE DATA:
Net income(1).......... $ 1.75 $ 1.30 $ 1.80 $ 1.76 $ 1.53 $ 1.58 $ 1.37
Dividends declared(2).. 0.63 0.57 0.78 0.53 0.68 0.64 0.62
Book value............. 16.12 15.13 15.58 15.20 13.81 14.11 12.60
BALANCE SHEET DATA AT
PERIOD END:
Loans.................. $2,436,103 $2,192,945 $2,275,089 $2,016,960 $2,160,916 $1,877,944 $1,632,752
Earning assets......... 4,147,989 3,793,685 3,944,134 3,474,303 3,298,431 2,987,390 2,683,226
Assets................. 4,416,571 4,080,318 4,216,575 3,734,963 3,535,728 3,219,071 2,993,075
Deposits............... 3,054,444 2,961,575 3,114,730 2,881,828 2,657,541 2,651,764 2,517,518
FHLB advances and long-
term debt............. 257,826 206,282 176,730 158,046 210,061 108,111 91,477
Shareholders' equity... 329,804 317,277 325,414 311,331 285,489 284,024 249,721
FINANCIAL RATIOS:
Return on average
assets(3)............. 1.13% 0.93% 0.95% 1.01% 0.95% 1.03% 0.94%
Return on average
equity(3)............. 15.05% 11.44% 11.84% 12.24% 10.97% 12.20% 12.09%
Net interest
margin(3)............. 4.04% 4.15% 4.15% 4.13% 4.08% 4.08% 4.16%
Equity to assets....... 7.47% 7.78% 7.72% 8.34% 8.07% 8.82% 8.34%
Tier 1 risk-based
capital ratio......... 10.91% 12.15% 11.83% 12.53% 12.50% 13.37% 12.45%
Net charge-offs to
average loans(3)...... 0.32% 0.47% 0.50% 0.34% 0.19% 0.22% 0.45%
Allowance for loan
losses to loans....... 1.40% 1.40% 1.37% 1.46% 1.35% 1.28% 1.40%
Non-performing loans to
loans................. 0.83% 0.95% 0.96% 1.04% 0.61% 0.74% 0.80%
Allowance for loan
losses to non-
performing loans...... 168% 147% 144% 140% 222% 173% 176%
Risk assets to loan-
related assets(4)..... 1.01% 1.26% 1.20% 1.24% 0.93% 1.25% 1.43%
</TABLE>
- --------
(1) Net income for 1993 excludes the cumulative effect of the change in
accounting for income taxes.
(2) In the past years, CNB declared a dividend in one quarter and paid it in
the next quarter. During 1995, CNB changed this policy and began declaring
and paying dividends in the same quarter. The fourth quarter dividend for
1995 was declared and paid in January 1996.
(3) Annualized in the case of interim financial information.
(4) Risk assets include non-performing loans, loans past due 90 days and still
accruing interest and foreclosed properties. Loan-related assets include
loans and foreclosed properties.
17
<PAGE>
PINNACLE(1)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------------- ----------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income........ $ 124,331 $ 107,777 $ 147,903 $ 107,916 $ 82,067 $ 87,562 $ 84,458
Interest expense....... 68,774 57,648 79,599 55,069 38,371 43,414 45,674
Net interest income.... 55,557 50,129 68,304 52,847 43,696 44,148 38,784
Provision for loan
losses................ 12,520 1,571 2,681 1,422 382 1,560 2,767
Non-interest income.... 13,799 9,198 12,853 9,809 9,071 9,727 8,271
Non-interest expense... 48,918 41,866 54,946 38,660 31,804 30,602 25,814
Net income(2)(3)....... 4,869 11,052 16,087 16,221 14,212 14,976 11,731
PER SHARE DATA:
Net income(2)(3)....... $ 0.40 $ 0.92 $ 1.32 $ 1.58 $ 1.39 $ 1.45 $ 1.15
Dividends declared..... 0.71 0.61 0.82 0.76 0.62 0.53 0.48
Book value............. 13.76 13.60 14.01 13.67 11.68 11.25 10.24
BALANCE SHEET DATA AT
PERIOD END:
Loans.................. $1,524,195 $1,370,249 $1,415,855 $1,210,272 $ 920,398 $ 796,633 $ 776,757
Earning assets......... 2,036,177 1,908,450 1,984,045 1,703,124 1,181,265 1,047,153 1,073,479
Assets................. 2,180,331 2,056,189 2,135,210 1,841,351 1,270,447 1,194,724 1,137,364
Deposits............... 1,471,956 1,455,237 1,478,711 1,373,307 974,416 908,719 884,687
FHLB advances and long-
term debt............. 428,571 344,863 369,238 239,224 100,959 153,253 126,274
Shareholders' equity... 169,747 163,446 170,259 164,458 116,141 112,067 103,448
FINANCIAL RATIOS:
Return on average
assets(4)............. 0.30% 0.78% 0.83% 1.17% 1.24% 1.26% 1.14%
Return on average
equity(4)............. 3.78% 9.03% 9.83% 12.85% 12.39% 13.87% 12.30%
Net interest
margin(4)............. 3.71% 3.83% 3. 80% 4.15% 4.10% 3.98% 4.02%
Equity to assets....... 7.79% 7.95% 7.97% 8.93% 9.14% 9.38% 9.10%
Tier 1 risk-based
capital ratio......... 12.72% 12.32% 12.12% 10.86% 10.61% 11.10% 10.14%
Net charge-offs to
average loans(4)...... 0.32% 0.08% 0.14% 0.12% 0.05% 0.15% 0.21%
Allowance for loan
losses to loans....... 1.60% 1.08% 1.05% 1.14% 1.28% 1.40% 1.39%
Non-performing loans to
loans................. 1.33% 1.28% 1.27% 1.14% 0.90% 1.17% 2.27%
Allowance for loan
losses to non-
performing loans...... 121% 85% 83% 100% 142% 120% 61%
Risk assets to loan-
related assets(5)..... 1.50% 1.66% 1.64% 1.63% 1.57% 1.59% 2.95%
</TABLE>
- --------
(1) The financial results for the years ended December 31, 1996, 1995 and 1994
are audited. The financial results for all other periods presented are
unaudited.
(2) The financial results for the nine months ended September 30, 1997 were
impacted by $11.1 million of pre-tax restructuring charges and $10.0
million pre-tax increase in the provision for loan losses recognized by
Pinnacle in connection with its mergers with IFC and CB.
(3) Net income excludes the cumulative effect of the change in accounting for
income taxes in 1993 and an extraordinary item for the early extinguishment
of debt in 1992.
(4) Annualized in the case of interim financial information.
(5) Risk assets include nonperforming loans, loans past due 90 days and still
accruing interest, and foreclosed properties. Loan-related assets include
loans and foreclosed properties.
18
<PAGE>
CNB AND PINNACLE
PRO FORMA COMBINED SELECTED FINANCIAL DATA
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------------- ----------------------------------
1997 1996 1996 1995 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income........ $ 372,061 $ 332,149 $ 451,728 $ 387,880 $ 314,414
Interest expense....... 198,677 171,719 234,496 198,448 146,342
Net interest income.... 173,384 160,430 217,232 189,432 168,072
Provision for loan
losses................ 21,074 8,449 13,283 8,349 7,538
Non-interest income.... 57,573 51,101 68,686 56,437 56,126
Non-interest expense... 147,135 146,155 191,940 157,108 146,942
Net income(1).......... 41,237 38,114 53,682 52,847 45,954
PER SHARE DATA:
Net income(1).......... $ 1.23 $ 1.14 $ 1.60 $ 1.68 $ 1.47
Dividends declared(2).. 0.63 0.57 0.78 0.53 0.68
Book value............. 14.54 14.24 14.72 14.30 12.00
BALANCE SHEET DATA AT
PERIOD END:
Loans.................. $3,960,298 $3,563,194 $3,690,944 $3,227,232 $3,081,314
Earning assets......... 6,184,166 5,702,135 5,928,180 5,177,427 4,479,696
Assets................. 6,598,502 6,136,507 6,351,785 5,576,314 4,806,175
Deposits............... 4,526,400 4,416,812 4,593,441 4,255,135 3,631,957
FHLB advances and long-
term debt............. 686,397 551,145 545,968 397,270 311,020
Shareholders' equity... 483,551 480,723 495,673 475,789 401,630
FINANCIAL RATIOS:
Return on average
assets(3)............. 0.86% 0.88% 0.91% 1.06% 1.02%
Return on average
equity(3)............. 11.12% 10.61% 11.16% 12.43% 11.37%
Net interest
margin(3)............. 3.93% 4.05% 4.04% 4.14% 4.09%
Equity to assets....... 7.33% 7.83% 7.80% 8.53% 8.36%
Tier 1 risk-based
capital ratio......... 11.06% 12.21% 11.93% 11.93% 11.87%
Net charge-offs to
average loans(3)...... 0.32% 0.32% 0.36% 0.27% 0.15%
Allowance for loan
losses to loans....... 1.48% 1.28% 1.25% 1.34% 1.33%
Non-performing loans to
loans................. 1.02% 1.08% 1.08% 1.08% 0.70%
Allowance for loan
losses to non-
performing loans...... 144% 118% 116% 124% 191%
Risk assets to loan-
related assets(4)..... 0.72% 0.82% 0.63% 0.62% 0.45%
</TABLE>
- --------
(1) The financial results for the nine months ended September 30, 1997 were
impacted by $11.1 million of pre-tax restructuring charges and $10.0
million pre-tax increase in the provision for loan losses recognized by
Pinnacle in connection with its mergers with IFC and CB.
(2) In the past years, CNB declared a dividend in one quarter and paid it in
the next quarter. During 1995, CNB changed this policy and began declaring
and paying dividends in the same quarter. The fourth quarter dividend for
1995 was declared and paid in January 1996.
(3) Annualized in the case of interim financial information.
(4) Risk assets include nonperforming loans, loans past due 90 days and still
accruing, and foreclosed properties. Loan-related assets include loans and
foreclosed properties.
19
<PAGE>
RECENT DEVELOPMENTS
CNB
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31, YEAR ENDED DECEMBER 31,
-------------------- ------------------------
1997 1996 1997 1996
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income.............. $ 85,892 $ 79,453 $ 333,622 $ 303,825
Interest expense............. 45,723 40,826 175,626 154,897
Net interest income.......... 40,169 38,627 157,996 148,928
Provision for loan losses.... 3,012 3,724 11,566 10,602
Non-interest income.......... 16,797 13,930 60,571 55,833
Non-interest expense......... 33,996 32,705 132,213 136,994
Net income................... 13,290 10,533 49,658 37,595
PER SHARE DATA:
Net income--basic............ $ 0.65 $ 0.50 $ 2.42 $ 1.81
Net income--diluted.......... 0.64 0.50 2.37 1.78
Dividends declared........... 0.23 0.21 .86 0.78
Book value................... 16.39 15.58 16.39 15.58
BALANCE SHEET DATA AT PERIOD
END:
Loans........................ $ 2,479,651 $ 2,275,089
Earning assets............... 4,196,644 3,944,134
Assets....................... 4,480,223 4,216,575
Deposits..................... 3,181,447 3,114,730
FHLB advances and long term
debt........................ 308,028 176,730
Shareholders' equity......... 334,468 325,414
FINANCIAL RATIOS:
Return on average assets(1).. 1.20% 1.03% 1.15% 0.95%
Return on average equity(1).. 16.38% 13.02% 15.38% 11.84%
Net interest margin(1)....... 3.99% 4.15% 4.03% 4.15%
Equity to assets............. 7.47% 7.72% 7.47% 7.72%
Tier 1 risk-based capital
ratio....................... 10.70% 11.83% 10.70% 11.83%
Net charge-offs to average
loans(1).................... 0.39% 0.57% 0.34% 0.50%
Allowance for loan losses to
loans....................... 1.40% 1.37% 1.40% 1.37%
Non-performing loans to
loans....................... 0.69% 0.96% 0.69% 0.96%
Allowance for loan losses to
non-performing loans........ 204% 144% 204% 144%
Risk assets to loan-related
assets(2)................... 0.87% 1.20% 0.87% 1.20%
</TABLE>
- --------
(1) Annualized in the case of quarterly information.
(2) Risk assets include non-performing loans, loans past due 90 days and still
accruing interest and foreclosed properties. Loan-related assets include
loans and foreclosed properties.
20
<PAGE>
OVERVIEW
CNB achieved record quarterly and full year earnings for the periods ended
December 31, 1997. Fourth quarter diluted net income per share was $.64, which
exceeded third quarter earnings of $.61. This marks the fifth consecutive
quarter that CNB has set new earnings records. The fourth quarter's diluted net
income per share exceeded 1996 fourth quarter by 28%. Full year 1997 diluted
net income per share of $2.37 also surpassed previous records and was 23% above
1996 earnings of $1.92, excluding the 1996 one-time SAIF special assessment
(described below). Third quarter 1996 included a one-time assessment, required
of all financial institutions with deposits insured by the Savings Association
Insurance Fund (SAIF), which reduced net income and diluted income per share by
$3.0 million and $.14 respectively. All per share income has been restated in
accordance with the Financial Accounting Standards Board's Statement No. 128
"Earnings per Share" which requires the presentation of basic and diluted
income per share in lieu of primary income per share previously reported by
CNB. Basic income per share was $.65 and $2.42 for the fourth quarter and full
year 1997. Primary income per share using the previous methodology would have
been $.64 and $2.39, respectively, for the fourth quarter and year. Net income
of $13.3 million for the quarter and $49.7 million for the full year also
exceeded previous records.
The record earnings levels resulted from strong loan growth, double digit
increases in core fee income and continued progress in controlling operating
expenses. Asset quality ratios also improved with charge--offs for the year
declining to .34% of average loans and the allowance for loan losses increasing
to $34.7 million or 1.40% of loans at year-end compared to $31.3 million and
1.37% of loans last year-end. Non-performing loans declined $4.7 million from
last year-end to .69% of loans at December 31. The allowance for loan losses to
loans was 2.0 times non-performing loans compared to 1.4 times at the end of
1996. Loans past due 30 days or more were only .79% this year-end compared to
1.12% last year.
Progress was also made on key profitability ratios. The return on average
assets increased throughout the year and was 1.20% for the fourth quarter.
Return on average equity increased to 16.38% for the fourth quarter compared to
13.02% for the fourth quarter of 1996. The efficiency ratio also improved to
58% for the most recent quarter compared to 61% one-year ago. Returns on
assets, equity and the efficiency ratio were 1.15%, 15.38% and 59%,
respectively, for the full year.
LOANS AND NET INTEREST INCOME
Average loans grew $51.8 million from third quarter, an annualized growth
rate of 9%, and increased $231.2 million or 10% from the fourth quarter of
1996. CNB plans to reduce residential mortgage loans from the current 30% of
total loans to 25%. Consequently, most residential mortgage production has been
sold or securitized. CNB sold or securitized $65.9 and $165.7 million of
residential mortgages during the three month and twelve month periods ended
December 31, 1997, respectively. Excluding residential mortgages, average loans
increased from the third quarter by $81.5 million or 20% annually. Commercial,
commercial real estate, home equity revolving and other consumer loans all grew
at double digit rates during the fourth quarter and year.
CNB continues to benefit from strong economies in its key markets. The recent
unemployment rate for Indiana was 3.2% and rates at key CNB markets were:
Indianapolis/Greenwood, 2.6%; Lafayette, 2.4%; Louisville, 3.7%; and
Evansville, 3.6%. Construction and other activities associated with the new
Toyota and AK Steel plants in the Evansville area continue to positively affect
the local economy.
The net interest margin was 3.99% for the fourth quarter versus 4.02% for the
third. The strong loan growth has come at marginally lower rates and
consequently, average loan yields fell to 9.23% in the fourth quarter from
9.36% in the third. Overall earning asset yields fell 7 basis points which was
partially offset by a 4 basis point decline in the cost to fund earning assets.
The net interest margin declined earlier in the year after the sale of CNB's
credit card portfolio and additional investment in corporate-owned life
insurance, which income is recorded as non-interest.
21
<PAGE>
NON-INTEREST INCOME
Non-interest income, which is traditionally strong in the fourth quarter, was
$900 thousand and $3.3 million above third quarter 1997 and fourth quarter
1996, respectively, excluding net securities gains. The increases represented
annualized growth rates of 23% from third quarter 1997 and 25% from fourth
quarter 1996. Double-digit growth was recorded for service charges on deposit
fees due to increased transaction volumes, trust and plan administration fees
which are cyclical in nature, and mortgage banking revenue due to strong
production volumes and continued sales of mortgage loans with servicing
retained. Investment product fees were also strong for the quarter. Net
securities gains were $400 thousand for the fourth quarter and included $222
thousand from covered call options written.
NON-INTEREST EXPENSE
Salaries and employee benefits increased $405 thousand from the third quarter
due to increased incentive pay and commissions and one-time early retirement
accruals. All other non-interest expenses declined $67 thousand from the third
quarter. Total non-interest expenses increased 4% from fourth quarter 1996.
Full-time equivalent associates was reduced to 1,924 at year-end compared to
1,931 at the end of the third quarter and 1,947 one year ago. The efficiency
ratio improved to 58% for the fourth quarter compared to 59% for third quarter
1997 and 61% for fourth quarter 1996.
22
<PAGE>
PINNACLE
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31, YEAR ENDED DECEMBER 31,
-------------------- ------------------------
1997 1996 1997 1996
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income.............. $ 42,677 $ 40,126 $ 167,008 $ 147,903
Interest expense............. 22,797 21,951 91,571 79,599
Net interest income.......... 19,880 18,175 75,437 68,304
Provision for loan losses.... 800 1,110 13,320 2,681
Non-interest income.......... 4,515 3,655 18,314 12,853
Non-interest expense......... 15,728 13,080 64,646 54,946
Net income................... 5,657 5,034 10,526 16,087
PER SHARE DATA:
Net income--basic............ $ 0.46 $ 0.41 $ 0.86 $ 1.33
Net income--diluted.......... .45 .41 .85 1.32
Dividends declared........... 0.235 0.21 .94 0.82
Book value................... 14.37 14.01 14.37 14.01
BALANCE SHEET DATA AT PERIOD
END:
Loans........................ $ 1,508,365 $ 1,415,855
Earning assets............... 1,948,348 1,984,045
Assets....................... 2,116,449 2,135,210
Deposits..................... 1,430,775 1,478,711
FHLB advances and long term
debt........................ 404,765 369,238
Shareholders' equity......... 181,305 170,259
FINANCIAL RATIOS:
Return on average assets(1).. 1.03% 0.96% 0.49% 0.83%
Return on average equity(1).. 12.41% 12.20% 6.04% 9.83%
Net interest margin(1)....... 3.89% 3.70% 3.72% 3.76%
Equity to assets............. 8.57% 7.97% 8.57% 7.97%
Tier 1 risk-based capital
ratio....................... 13.17% 12.12% 13.17% 12.12%
Net charge-offs to average
loans(1).................... 1.19% 0.29% 0.55% 0.14%
Allowance for loan losses to
loans....................... 1.35% 1.05% 1.35% 1.05%
Non-performing loans to
loans....................... 1.18% 1.27% 1.18% 1.27%
Allowance for loan losses to
non-performing loans........ 114% 83% 114% 83%
Risk assets to loan-related
assets(2)................... 1.48% 1.64% 1.48% 1.64%
</TABLE>
- --------
(1) Annualized in the case of quarterly information.
(2) Risk assets include non-performing loans, loans past due 90 days and still
accruing interest and foreclosed properties. Loan-related assets include
loans and foreclosed properties.
OVERVIEW
For the three months ended December 31, 1997, Pinnacle reported net income of
$5.7 million or basic earnings per share of $.46 as compared to net income of
$5.0 million or basic earnings per share of $.41 for the three months ended
December 31, 1996, an increase of $623,000 or 12.4% in net income and 12.2% on
a per share basis. Net income for the three months ended December 31, 1997 was
negatively effected by after tax charges of $790,000 or $.06 per share related
to compensation expense of the former IFC Employee Stock Option Plan (ESOP) and
the expenses associated with other deferred compensation plans as further
described below. On
23
<PAGE>
a diluted basis, earnings per share was $.45 for the fourth quarter of 1997 as
compared to $.41 for the fourth quarter of 1996. For the year ended December
31, 1997, net income was $10.5 million or basic earnings per share of $.86 as
compared to net income of $16.1 million or basic earnings per share of $1.33.
The decrease was largely the result of the restructuring charges of $8.4
million after tax and the $6.0 million after tax ($10.0 million pre-tax)
increase in the provision for loan losses in connection with conforming loan
loss reserve methodologies as a result of the acquisitions of IFC and CB in the
third quarter of 1997, offset by the one-time SAIF charge in the third quarter
of 1996 of $3.6 million after tax. On a diluted basis, earnings per share was
$.85 for the year ended December 31, 1997 as compared to $1.32 for the year
ended December 31, 1996. All per share income has been restated in accordance
with the Financial Accounting Standards Board's Statement No. 128 "Earnings per
Share" which requires the presentation of basic and diluted income per share in
lieu of primary income per share previously reported by Pinnacle. Net income
without the restructuring charges of $8.4 million after tax would have been
$18.9 million or basic earnings per share of $1.54 for the year ended December
31, 1997 as compared to $1.64 for the year ended December 31, 1996 without the
$3.6 million after tax SAIF charge in 1996, a decrease of 6.1%.
The return on average assets for the three months ended December 31, 1997 was
1.03% as compared to .96% for the same period in 1996 and for the year ended
December 31, 1997 was .49% as compared to .83% for the year ended December 31,
1996. Without the restructuring and SAIF charges, return on average assets
would have been .88% and 1.02%, respectively, for the years ended December 31,
1997 and 1996. The return on average equity for the three months ended December
31, 1997 was 12.41% as compared to 12.20% for the same period in 1996 and for
the year ended December 31, 1997 was 6.04% as compared to 9.83% for the year
ended December 31, 1996. Without the restructuring and SAIF charges, return on
average equity would have been 10.84% and 12.05%, respectively, for the years
ended December 31, 1997 and 1996.
Total assets of Pinnacle were $2.1 billion at December 31, 1997 and 1996.
Total loans increased $92.5 million or 6.5% to $1.5 billion at December 31,
1997. Total deposits decreased $47.9 million or 3.2% to $1.4 billion at
December 31, 1997. Total stockholders equity increased $11.0 million or 6.5% to
$181.3 million at December 31, 1997. The allowance for loan losses increased
$5.6 million or 37.7% to $20.5 million at December 31, 1997 and equaled 1.35%
of total loans, up from $14.9 million at December 31, 1996 or 1.05% of total
loans.
AVERAGE ASSETS AND NET INTEREST INCOME
For the three months ended December 31, 1997, average assets increased $110.6
million or 5.3% to $2.2 billion as compared to $2.1 billion for the three
months ended December 31, 1996. Average loans increased $152.4 million for the
three months ended December 31, 1997 to $1.6 billion as compared to $1.4
billion for the same period in 1996. The increase in average assets and average
loans in the fourth quarter helped increase net interest income $1.7 million or
9.4% for the three months ended December 31, 1997 as compared to the same
period ended December 31, 1996. The net interest margin on a tax equivalent
basis for the three months ended December 31, 1997 increased to 3.89% as
compared to 3.70% for the same period ended December 31, 1996, primarily as a
result of the growth in average loans for the period. Average deposits for the
three months ended December 31, 1997 increased $28.7 million or 2.0% to $1.5
billion. Average Federal Home Loan Bank advances increased $64.4 million or
17.9% for the three months ended December 31, 1997 to $423.7 million, as
Pinnacle used this funding to support loan growth.
Average assets increased $221.9 million to $2.2 billion or 11.4% for the year
ended December 31, 1997. Average loans increased $171.7 million to $1.5 billion
or 13.0% for the year ended December 31, 1997. The increase in average assets
and average loans helped to increase net interest income $7.1 million or 10.4%
for the year ended December 31, 1997 as compared to the year ended December 31,
1996. Net interest margin on a tax equivalent basis was fairly consistent for
the year ended December 31, 1997 at 3.72% as compared to 3.76% for the year
ended December 31, 1996. Average deposits increased $49.2 million to $1.5
billion for the year ended December 31, 1997 as compared to $1.4 billion for
the year ended December 31, 1996. Average Federal Home Loan Bank advances
increased $138.9
24
<PAGE>
million to $417.3 million for the year ended December 31, 1997 as compared to
$278.4 million for the year ended December 31, 1996 as Pinnacle used this
funding to support loan growth in 1997.
ASSET QUALITY AND PROVISION FOR LOAN LOSSES
The allowance for loan losses to non-performing loans increased to 114% at
December 31, 1997 as compared to 83% on December 31, 1996. Net charge-offs for
the three months ended December 31, 1997 totaled $4.7 million or 1.19% of
average loans on an annualized basis as compared to $1.0 million or 0.29% of
average loans on an annualized basis in net charge-offs for the three months
ended December 31, 1996. Of the $4.7 million in net charge-offs for the three
months ended December 31, 1997, commercial real estate net charge-offs totaled
$2.6 million and commercial loans totaled $941,000 as Pinnacle realized losses
on those loans that had specific reserves established. Consumer loans had net
charge-offs for the three months ended December 31, 1997 of $867,000, primarily
as a result of increased delinquencies. Net charge-offs for the year ended
December 31, 1997 totaled $8.2 million or 0.55% of average loans as compared to
$1.8 million or 0.14% of average loans for the year ended December 31, 1996.
The provision for loan losses for the three months ended December 31, 1997 was
$800,000 as compared to $1.1 million in the same period ended December 31,
1996. The provision for loan losses for the year ended December 31, 1997 was
$13.3 million as compared to $2.7 million for the year ended December 31, 1996,
an increase of $10.6 million as additional provisions were made to conform loan
loss reserve methodologies as a result of the acquisitions of IFC and CB.
NON-INTEREST INCOME
Non-interest income for the three months ended December 31, 1997 totaled $4.5
million as compared to $3.7 million for the same period ended December 31,
1996, an increase of $860,000 or 23.5%. The increase was primarily due to
growth in trust fees, loan servicing fees and other fees associated with the
sale of mortgage and home equity loans. For the year ended December 31, 1997,
non-interest income increased $5.5 million or 42.5% to $18.3 million as
compared to $12.9 million for the year ended December 31, 1996. Deposit service
charges and fees associated with the sale of loans contributed to this growth.
NON-INTEREST EXPENSE
Non-interest expense for the three months ended December 31, 1997 was $15.7
million as compared to $13.1 million for the three months ended December 31,
1996, an increase of $2.6 million or 20.2%. Salary and benefits expense totaled
$6.2 million for the three months ended December 31, 1997 as compared to $5.9
million for the same period ended December 31, 1996, an increase of $361,000 or
6.2%. The increase was primarily associated with compensation expense of the
former IFC ESOP of $728,000 offset by a reduction in salary expense associated
with lower levels of full-time equivalent employees. Equipment expense
increased $355,000 or 36.9% for the three months ended December 31, 1997 as
compared to the same period ended December 31, 1996, primarily from computer
equipment upgrades needed to support a larger company. Non-interest expense was
also impacted by an increase in costs associated with the former IFC's director
deferred stock plan of $600,000 as a result of the increase in Pinnacle's stock
price. For the year ended December 31, 1997, non-interest expense was
approximately $64.6 million as compared to $54.9 million for the year ended
December 31, 1996, an increase of $9.7 million or 17.7%. Restructuring charges
associated with the acquisitions of IFC and CB in the third quarter of 1997 of
$11.5 million, offset by $6.0 million in charges related to SAIF in the third
quarter of 1996, accounted for $5.5 million of the increase. Salary and
benefits increased $2.2 million or 10.0% for the year ended December 31, 1997
as compared to the year ended December 31, 1996. Professional expense increased
$519,000 or 26.4% for the year ended December 31, 1997, primarily from
consulting expenses incurred to assist in organizational design to facilitate a
larger organization. Occupancy expense and equipment related expenses increased
$788,000 or 10.4% for the year ended December 31, 1997 as compared to December
31, 1996 as additional space and equipment upgrades were needed to facilitate
the growth in the combined entities. Non-interest expense as a percent of
average assets actually decreased to 2.46% for the year ended December 31, 1997
as compared to 2.53% for the year ended December 31, 1996, before the one-time
restructuring charges.
25
<PAGE>
PARTIES TO MERGER
CNB
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, 1997, CNB had consolidated
assets of $4.4 billion, deposits of $3.1 billion, net loans of $2.4 billion
and shareholders' equity of $330 million.
CNB's growth since its formation is principally a result of acquisitions. As
part of its ongoing operations, CNB continually is presented with and seeks
out acquisition opportunities to enhance its banking franchise. On February
13, 1998, CNB and National Bancorp announced the execution of an Agreement and
Plan of Merger pursuant to which CNB will acquire, for shares of CNB Common,
all of the issued and outstanding shares of National Bancorp. National Bancorp
owns TCB Bank which operates five banking offices in Tell City, Cannelton and
Santa Claus, Indiana. As of December 31, 1997, National Bancorp had assets of
$191 million, deposits of $155 million and shareholder's equity of $18
million. National Bancorp also operates Zoercher, Kennedy, and Minor insurance
agencies, which sells property and casualty insurance, and The Investment
Center, a full service brokerage company. The shares of CNB Common to be
issued in connection with the acquisition of National Bancorp would constitute
approximately 3.2% of the outstanding shares of CNB Common, assuming
consummation of the Merger. The acquisition, which is subject to, among other
things, approval of National Bancorp's shareholders, is expected to be
completed in the second quarter of 1998. There can be no assurance, however,
that the acquisition will be consummated. The Merger is not conditioned upon
consummation of the National Bancorp acquisition. Although CNB does not have
any acquisitions currently proposed or pending other than Pinnacle and
National Bancorp, CNB intends to respond to acquisition opportunities that may
arise in the future (including during the remainder of 1998) that are
consistent with its commitment to enhance value for its shareholders, and
management of CNB has stated, in response to a media inquiry, that it would
consider exploring such future acquisition opportunities of institutions as
large as $3 billion to $4 billion in total assets, provided that they are on
appropriate terms and conditions.
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 its 95 full-service banking offices, 33
consumer finance offices and various 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,
N.A., which is a national trust company; 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; Citizens Banc Leasing Co., which provides commercial leasing services
to companies and municipalities primarily in Indiana, Kentucky, Ohio and
Florida; and Small, Parker & Blossom, Inc., which provides third party
administrative services for employee benefit plans. In addition, effective
January 1, 1998, CNB acquired Wedgewood Partners, Inc., a full-service
broker/dealer and asset management firm based in St. Louis, Missouri with
approximately $85 million of assets under management.
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.
26
<PAGE>
Management of CNB has recently stated that, in light of recent earnings
trends in the banking industry, an appropriate goal for the organization is to
achieve earnings increases of at least ten percent each year and that, if such
goals are not achieved, the business strategies and alternatives of the
organization should be reevaluated.
For additional information concerning CNB, see "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
PINNACLE
Pinnacle is a bank holding company that was organized under the laws of the
State of Michigan in 1986 in connection with the June 30, 1986 reorganization
of Pinnacle Bank (then known as "The Peoples State Bank of St. Joseph") into a
wholly-owned subsidiary of Pinnacle. Pinnacle Bank, which is headquartered in
St. Joseph, Michigan, currently operates through 14 branch offices located
throughout southwestern Michigan, 30 branch offices located throughout
northwestern Indiana and through two loan production offices that are located
in Merrillville and Indianapolis, Indiana.
Pinnacle's growth since its formation has resulted principally from
acquisitions. On August 1, 1997, Pinnacle increased its assets by more than
95% through its acquisitions of Indiana Federal Corporation and CB Bancorp,
Inc. IFC, headquartered in Valparaiso, Indiana, was the parent corporation of
Indiana Federal Bank for Savings, a federal savings bank ("Infed Bank"), with
assets of $835 million. CB, headquartered in Michigan City, Indiana, was the
parent corporation of Community Bank, a federal savings bank ("Community
Bank"), with assets of $288 million. Infed Bank and Community Bank have been
merged into Pinnacle Bank. As of September 30, 1997, Pinnacle had consolidated
assets of $2.2 billion, deposits of $1.5 billion, net loans of $1.5 billion
and shareholders' equity of $170 million.
Through its wholly-owned subsidiary, Pinnacle Bank, Pinnacle offers
financial service products which include domestic banking services such as
consumer, commercial and real estate loans, personal and business checking
accounts, savings accounts, time deposits, safe deposit services, cash
management services, and transmission of funds, as well as trust and other
fiduciary services, full-service brokerage services and insurance products.
Commercial customers include retailers, commercial developers, professionals,
and small manufacturers. Retail customers cover a broad spectrum with focus on
providing personalized, high quality and comprehensive service in order to
develop and maintain long-term, multiple account relationships with customers.
For additional information concerning Pinnacle, see "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE."
CNB MEETING
DATE, TIME AND PLACE OF CNB MEETING
This Joint Proxy Statement/Prospectus is being furnished in connection with
the solicitation of proxies by the CNB Board for use at the CNB Meeting. The
CNB Meeting will be held at on , 1998, beginning at
.m., local time.
MATTERS TO BE CONSIDERED
At the CNB Meeting, holders of CNB Common will be asked to consider and vote
upon approval and adoption of the Merger Agreement and the transactions
contemplated thereby, including the Merger.
Management of CNB knows of no matters to be brought before the CNB Meeting
other than those referred to herein. If any other business should properly
come before the CNB Meeting, the persons named in the proxy will vote in
accordance with their best judgment.
27
<PAGE>
THE CNB BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND RECOMMENDS
THAT SHAREHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER.
RECORD DATE
The CNB Board has fixed the close of business on , 1998 as the CNB
Record Date. Only holders of record of CNB Common on the CNB Record Date will
be entitled to notice of and will be entitled to vote at the CNB Meeting. On
the CNB Record Date, shares of CNB Common were issued and outstanding and
entitled to vote and held by approximately holders of record.
VOTE REQUIRED
Holders of record of CNB Common on the CNB Record Date are entitled to one
vote per share on each matter to be voted upon at the CNB Meeting. The
approval and adoption of the Merger Agreement and the transactions
contemplated thereby, including the Merger, requires the affirmative vote of
the holders of record of a majority of the shares of CNB Common issued and
outstanding and entitled to vote on the CNB Record Date. The approval of the
Merger Agreement by holders of CNB Common is a condition to the consummation
of the Merger. See "MERGER--Conditions to Consummation of Merger."
SECURITY OWNERSHIP OF MANAGEMENT
As of the CNB Record Date, shares of CNB Common were issued, outstanding
and entitled to vote at the CNB Meeting, of which approximately shares, or
approximately %, were beneficially owned by directors and executive officers
of CNB and their affiliates. It is currently expected that each such director
and executive officer of CNB will vote the shares of CNB Common beneficially
owned by him or her for adoption and approval of the Merger Agreement.
As of the CNB Record Date, subsidiaries of CNB held approximately
shares, or approximately %, of CNB Common in various fiduciary capacities
and, by virtue of sole or shared voting or investment power in respect of such
shares, were deemed to own them beneficially. It is the practice of these
entities when holding shares as sole trustee or sole executor to vote such
shares but, where shares are held as co-executor or co-trustee, approval is
obtained from the co-fiduciary before voting.
As of the CNB Record Date, directors and executive officers of Pinnacle and
their affiliates did not beneficially own any shares of CNB Common. As of the
CNB Record Date, Pinnacle Bank, as fiduciary, custodian or agent, held
approximately shares, or less than %, of CNB Common under trust
agreements and other instruments and agreements. It is the practice of
Pinnacle Bank, when holding shares as sole trustee or sole executor, to vote
such shares but, where shares are held as co-executor or co-trustee, approval
is obtained from the co-fiduciary before voting.
Information with respect to beneficial ownership of CNB Common by entities
owning more than 5% of such stock and more detailed information with respect
to beneficial ownership of CNB Common by CNB directors and executive officers
is incorporated by reference to CNB's 1996 Annual Report on Form 10-K, which
is incorporated by reference herein. See "INFORMATION INCORPORATED BY
REFERENCE."
VOTING AND REVOCATION OF PROXIES
A proxy to vote at the CNB Meeting accompanies this Joint Proxy
Statement/Prospectus. A shareholder may use his or her proxy if he or she is
unable to attend the CNB Meeting in person or wishes to have his or her shares
voted by proxy even if he or she attends the CNB Meeting. The presence, in
person or by proxy, of a majority of the aggregate number of shares of CNB
Common outstanding and entitled to vote on the CNB Record Date is necessary to
constitute a quorum at the CNB Meeting.
28
<PAGE>
Shares of CNB Common represented by a proxy properly signed and returned to
CNB at or prior to the CNB Meeting, unless subsequently revoked, will be voted
at the CNB Meeting in accordance with the instructions thereon. If a proxy is
properly signed and returned but the manner of voting is not indicated on the
proxy, the shares of CNB Common represented by such proxy will be voted FOR
approval and adoption of the Merger Agreement and the transactions
contemplated thereby, including the Merger, and FOR any proposal regarding any
adjournment or postponement of the CNB Meeting.
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
CNB Meeting by filing a written revocation or a duly executed proxy bearing a
later date with the Secretary of CNB. All written notices of revocation and
other communications with respect to revocation of CNB proxies should be
addressed to CNB Bancshares, Inc., 20 N.W. Third Street, Evansville, Indiana
47739, Attention: Corporate Secretary. A holder of CNB Common who previously
signed and returned a proxy but who elects to attend the CNB 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 CNB at the CNB Meeting
and voting in person by ballot at the CNB Meeting; attendance at the CNB
Meeting, however, will not in and of itself constitute a revocation of the
proxy.
For purposes of determining the presence or absence of a quorum for the
transaction of business at the CNB Meeting, CNB intends to count as present at
the CNB Meeting shares of CNB Common present in person at the CNB Meeting but
not voting and shares of CNB Common present by proxy at the CNB Meeting but
which have abstained from voting. Because, however, the affirmative vote of
the holders of a majority of the outstanding shares of CNB Common entitled to
vote on the Merger is required to approve and adopt the Merger Agreement and
the transactions contemplated thereby, including the Merger, such non-voting
shares and abstentions will have the effect of a vote against approval of the
Merger Agreement. In addition, brokers who hold shares in street name for
customers who are the beneficial owners of such shares are prohibited from
giving a proxy to vote shares held for such customers with respect to the
matters to be considered and voted upon at the CNB Meeting without specific
instructions from such customers. The failure of such customers to provide
specific instructions to their broker with respect to their shares of CNB
Common will have the effect of a vote against approval of the Merger
Agreement.
The persons named as proxies by a shareholder may propose and vote for one
or more adjournments or postponements of the CNB Meeting to permit further
solicitation of proxies in favor of such proposal; provided, however, that no
proxy which is voted against the proposal to approve and adopt the Merger
Agreement will be voted in favor of any such adjournment or postponement.
SOLICITATION OF PROXIES
In addition to solicitation of proxies from holders of CNB Common by use of
the mail, proxies also may be solicited by personal interview, telephone or
other electronic means by directors, officers and employees of CNB, who will
not be specifically compensated for such services, and it is expected that
banks, brokerage houses and other institutions, nominees or fiduciaries will
be requested to forward the soliciting materials to their principals and
obtain authorization for the execution of proxies. All costs of soliciting
proxies, assembling and mailing this Joint Proxy Statement/Prospectus 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 CNB. CNB reserves the right to retain a third party to assist in
the solicitation of proxies in the event that such a solicitation shall
hereafter be deemed necessary.
29
<PAGE>
PINNACLE MEETING
DATE, TIME AND PLACE OF PINNACLE MEETING
This Joint Proxy Statement/Prospectus is being furnished in connection with
the solicitation of proxies by the Pinnacle Board for use at the Pinnacle
Meeting. The Pinnacle Meeting will be held at on , 1998,
commencing at .m. local time.
MATTERS TO BE CONSIDERED
At the Pinnacle Meeting, holders of Pinnacle Common will be asked to
consider and vote upon the approval and adoption of the Merger Agreement and
the transactions contemplated thereby, including the Merger, and such other
matters as may properly be brought before the Pinnacle Meeting.
Management of Pinnacle knows of no matters to be brought before the Pinnacle
Meeting other than those referred to herein. If any other business should
properly come before the Pinnacle Meeting, the persons named in the proxy will
vote on such matters in accordance with their best judgment.
THE PINNACLE BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE
MERGER.
RECORD DATE
The Pinnacle Board has fixed the close of business on , 1998 as the
Pinnacle Record Date. Only holders of record of Pinnacle Common on the
Pinnacle Record Date will be entitled to notice of and will be entitled to
vote at the Pinnacle Meeting. On the Pinnacle Record Date, shares of
Pinnacle Common were issued and outstanding and were held by approximately
holders of record.
VOTE REQUIRED
Holders of record of Pinnacle Common on the Pinnacle Record Date are
entitled to one vote per share on each matter to be considered at the Pinnacle
Meeting. The approval and adoption of the Merger Agreement, and the
transactions contemplated thereby, including the Merger, requires the
affirmative vote of the holders of record of a majority of the shares of
Pinnacle Common issued and outstanding on the Pinnacle Record Date. The
approval of the Merger Agreement by the holders of Pinnacle Common is a
condition to consummation of the Merger. See "MERGER--Conditions to
Consummation of Merger."
SECURITY OWNERSHIP OF MANAGEMENT
As of the Pinnacle Record Date, shares of Pinnacle Common were issued,
outstanding, and entitled to vote at the Pinnacle Meeting, of which
approximately shares, or approximately %, were beneficially owned by
directors and executive officers of Pinnacle and their affiliates. It is
currently expected that each such director and executive officer of Pinnacle
will vote the shares of Pinnacle Common beneficially owned by him or her for
approval of the Merger Agreement and the consummation of the transactions
contemplated thereby, including the Merger.
As of the Pinnacle Record Date, Pinnacle Bank, in various fiduciary
capacities, held approximately shares of Pinnacle Common, or approximately
%, under trust agreements and other instruments and agreements. It is the
practice of Pinnacle Bank when holding shares as sole trustee or sole executor
to vote said shares but, where shares are held as co-executor or co-trustee,
approval is obtained from the co-fiduciary before voting.
30
<PAGE>
As of the Pinnacle Record Date, directors and executive officers of CNB and
their affiliates beneficially owned shares, or less than %, of Pinnacle
Common. As of the Pinnacle Record Date, subsidiaries of CNB held approximately
, or less than %, of Pinnacle Common in various fiduciary capacities and,
by virtue of sole or shared voting or investment power in respect of such
shares, were deemed to own them beneficially.
Information with respect to beneficial ownership of Pinnacle Common by
persons and entities owning more than 5% of such stock and more detailed
information with respect to beneficial ownership of Pinnacle Common by
Pinnacle directors and executive officers is set forth herein under
"BENEFICIAL OWNERSHIP OF PINNACLE COMMON."
VOTING AND REVOCATION OF PROXIES
A proxy for use at the Pinnacle Meeting accompanies this Joint Proxy
Statement/Prospectus. A shareholder may use his or her proxy if he or she is
unable to attend the Pinnacle Meeting in person or wishes to have his or her
shares voted by proxy even if he or she attends the Pinnacle Meeting. A
majority of the shares of Pinnacle Common outstanding on the Pinnacle Record
Date must be represented in person or by proxy at the Pinnacle Meeting in
order for a quorum to be present for purposes of voting on approval of the
Merger Agreement.
Shares of Pinnacle Common represented by a proxy properly signed and
returned to Pinnacle at or prior to the Pinnacle Meeting, unless subsequently
revoked, will be voted at the Pinnacle Meeting in accordance with instructions
thereon. If a proxy is properly signed and returned but the manner of voting
is not indicated on the proxy, any shares of Pinnacle Common represented by
such proxy will be voted FOR approval and adoption of the Merger Agreement and
the transactions contemplated thereby, including the Merger, and FOR any
proposal regarding any adjournment or postponement of the Pinnacle Meeting.
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
Pinnacle Meeting by filing with the Secretary of Pinnacle 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 Pinnacle
proxies should be addressed to Pinnacle Financial Services, Inc., 830 Pleasant
Street, St. Joseph, Michigan 49085, Attention: Corporate Secretary. A holder
of Pinnacle Common who previously signed and returned a proxy but who elects
to attend the Pinnacle 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 Corporate Secretary of Pinnacle at the Pinnacle Meeting and voting in
person by ballot at the Pinnacle Meeting; however, attendance at the Pinnacle
Meeting will not in and of itself constitute a revocation of the proxy.
For purposes of determining the presence or absence of a quorum for the
transaction of business at the Pinnacle Meeting, Pinnacle intends to count as
present at the Pinnacle Meeting shares of Pinnacle Common present in person at
the Pinnacle Meeting but not voting and shares of Pinnacle Common present by
proxy at the Pinnacle Meeting but which have abstained from voting. Because,
however, the affirmative vote of the holders of a majority of the outstanding
shares of Pinnacle Common entitled to vote on the Merger is required to
approve and adopt the Merger Agreement and the transactions contemplated
thereby, including the Merger, such non-voting shares and abstentions will
have the effect of a vote against approval of the Merger Agreement. In
addition, brokers who hold shares in street name for customers who are the
beneficial owners of such shares are prohibited from giving a proxy to vote
shares held for such customers with respect to the matters to be considered
and voted upon at the Pinnacle Meeting without specific instructions from such
customers. The failure of such customers to provide specific instructions with
respect to their shares of Pinnacle Common to their broker will have the
effect of a vote against approval of the Merger Agreement.
The persons named as proxies by a shareholder may propose and vote for one
or more adjournments or postponements of the Pinnacle Meeting to permit
further solicitation of proxies in favor of such proposal;
31
<PAGE>
provided, however, that no proxy which is voted against the proposal to
approve and adopt the Merger Agreement will be voted in favor of any such
adjournment or postponement.
SOLICITATION OF PROXIES
In addition to solicitation of proxies from shareholders of Pinnacle Common
by use of the mail, proxies also may be solicited by personal interview,
telephone or other electronic means by directors, officers and employees of
Pinnacle, who will not be specifically compensated for such services, and it
is expected that banks, brokerage houses and other institutions, nominees or
fiduciaries will be requested to forward the soliciting materials to their
principals and obtain authorization for the execution of proxies. All costs of
soliciting proxies, assembling and mailing this Joint Proxy
Statement/Prospectus 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 Pinnacle. Pinnacle has retained Morrow and
Co. to assist in the solicitation of proxies for an estimated fee of $7,500,
plus reasonable out-of-pocket expenses.
32
<PAGE>
MERGER
GENERAL
The CNB Board and the Pinnacle Board have each unanimously approved the
Merger Agreement which provides for, among other things, the Merger of
Pinnacle with and into CNB at the Effective Time. With certain limited
exceptions discussed below, each share of Pinnacle Common issued and
outstanding at the Effective Time will be converted into the right to receive
1.0365 shares of CNB Common and cash in lieu of fractional shares. See "--
Merger Consideration." Shares of CNB Common issued and outstanding immediately
prior to the Effective Time will remain issued and outstanding after the
Effective Time, unaffected by the Merger.
The CNB Board and the Pinnacle Board each believe that the terms of the
Merger and the Merger Agreement are fair to and in the best interest of CNB
and Pinnacle and their respective shareholders. The CNB Board and the Pinnacle
Board each unanimously recommend that their respective shareholders vote to
approve and adopt the Merger Agreement and the transactions contemplated
thereby, including the Merger. See""--Reasons for Merger; Recommendation of
CNB Board" and "--Reasons for Merger; Recommendation of Pinnacle Board."
The following portion of this Joint Proxy Statement/Prospectus describes
certain aspects of the Merger, including the principal provisions of the
Merger Agreement and the Pinnacle Stock Option Agreement. The following
information relating to the Merger is qualified in its entirety by reference
to the other information contained elsewhere in this Joint Proxy
Statement/Prospectus, including the Appendices hereto and the documents
incorporated herein by reference. Copies of the Merger Agreement (excluding
the Exhibits thereto) and the Pinnacle Stock Option Agreement are attached
hereto as Appendices A and B, respectively, and are incorporated by reference
herein and reference is made thereto for a complete description of the terms
of the Merger. All shareholders of CNB and Pinnacle are urged to read the
Merger Agreement and the Pinnacle Stock Option Agreement in their entirety.
BACKGROUND OF MERGER
In recent years, both CNB and Pinnacle have achieved substantial growth,
primarily through mergers and acquisitions. Through these mergers and
acquisitions, CNB and Pinnacle have attempted to diversify and expand their
respective market areas and asset bases and to increase profitability by
combining with financial institutions that conduct business in areas where CNB
or Pinnacle, as the case may be, already had or expected to gain a significant
market position. The Merger represents a continuation of these acquisition
strategies.
On August 1, 1997, IFC and CB merged with and into Pinnacle and each of
IFC's and CB's respective principal operating subsidiaries, Indiana Federal
Bank for Savings and Community Bank, merged into Pinnacle Bank. As a result of
these mergers, Pinnacle Bank's assets increased by 95% to approximately $2.2
billion.
While Pinnacle was in the process of completing the transactions with IFC
and CB, merger and acquisition activity within the financial services industry
as a whole continued at a rapid pace. The combination with IFC and CB was
believed by the Pinnacle Board to have increased the attractiveness of the
Pinnacle franchise to a potential merger partner.
In August 1997, representatives of DLJ contacted Mr. Richard L. Schanze,
Chairman and Chief Executive Officer of Pinnacle, to suggest a meeting with
Mr. James J. Giancola, President and Chief Executive Officer of CNB. Based
upon prior discussions from time to time with Pinnacle's management concerning
possible transactions, these representatives of DLJ had become aware that the
Pinnacle Board reviewed its strategic alternatives in the normal course of its
business. Prior to such time, DLJ had been retained by CNB to identify
possible strategic alternatives for CNB, although at the time these
representatives of DLJ contacted Mr. Schanze, it was unclear what advisory
role DLJ would serve in any potential transaction. As a result, during the
middle of August 1997, Mr. Schanze met with Mr. Giancola and a representative
of DLJ in Chicago. This meeting was of
33
<PAGE>
a general nature, exploring the overall state of the banking industry, the
markets of both Pinnacle and CNB and whether there were advantages to be had
by combining the two institutions.
In early September 1997, Mr. Schanze met with Mr. Giancola and other senior
management personnel of CNB along with representatives of DLJ in Evansville,
Indiana. The meeting was a preliminary information session focusing on the
strengths of each organization and the benefits of a possible combination.
Shortly thereafter, both Mr. Schanze and Mr. Giancola signed a Confidentiality
Agreement authorizing the exchange of confidential information. Additionally,
Pinnacle's Mergers and Acquisition Committee considered and gave preliminary
approval to Mr. Schanze's request to formally engage PLC and FBR to act as
Pinnacle's financial advisors. On September 18, 1997, Pinnacle's Board
approved the engagements.
Mr. Schanze asked PLC to make discreet inquiries of institutions with whom
PLC was familiar and who were familiar with Pinnacle's operations, as to the
existence of any serious interest in a possible combination with Pinnacle. PLC
contacted two institutions with a presence in Michigan during the period of
September 17 through September 30, 1997. Neither institution indicated a
present desire to pursue a possible business combination with Pinnacle.
On September 26, 1997, representatives of Pinnacle met with representatives
from PLC and FBR and Pinnacle's outside counsel in Chicago to discuss the
possibility of a transaction with CNB and to discuss the level of interest on
the part of other financial institutions (the "First Meeting"). Later that
same day, the same representatives from Pinnacle, having excused themselves
from the First Meeting, met with representatives from CNB and DLJ to determine
whether CNB was still interested in pursuing a possible business combination
with Pinnacle (the "Second Meeting"). At the Second Meeting, representatives
of CNB confirmed their continued interest in such a transaction. The two
parties then agreed to begin due diligence the following week. At the Second
Meeting, CNB and Pinnacle discussed, in general terms and subject to the
completion of due diligence, a possible price level in a business combination.
Pursuant to engagement letters, DLJ, PLC and FBR were employed as the
financial advisors and agents for Pinnacle to provide financial advisory and
investment banking services in connection with a potential business
combination involving Pinnacle. The engagement letters enumerated a number of
specific services to be provided by the firms (including, in the case of FBR,
the rendering by FBR of an opinion regarding the fairness, from a financial
point of view, of any potential business combination involving Pinnacle) and
certain limitations on the manner in which DLJ, PLC and FBR were to conduct
their activities on behalf of Pinnacle. The agreements also provided for
compensation of DLJ, PLC and FBR as follows: should the proposed Merger be
completed, DLJ would receive a fee equal to 0.52% of the value of the
transaction; PLC would receive a fee of 0.10% of the value of the transaction;
and FBR would receive a fee of $1,250,000, and DLJ, PLC and FBR will all
receive reimbursable expenses and indemnification.
On October 1, 1997, after signing an engagement letter with Pinnacle the
previous day (and after receiving a waiver from CNB enabling it to represent
Pinnacle in the transaction), representatives of DLJ contacted four bank
holding companies that, in DLJ's view, would be in a position to make
competitive offers to Pinnacle. None of these four companies chose to submit
indications of interest to Pinnacle.
From October 2 to October 7, 1997, due diligence work was undertaken by
Pinnacle and CNB in Evansville, Indiana, Michigan City, Indiana and St.
Joseph, Michigan. During this period, Pinnacle furnished CNB historical data
concerning Pinnacle's earnings, dividends and stock price. Representatives of
CNB and their counsel met with representatives of Pinnacle and their financial
advisors to conduct due diligence on Pinnacle. Concurrently, representatives
of Pinnacle and their financial advisors conducted due diligence on CNB.
On October 9, 1997, negotiating teams from both institutions met in Chicago
to discuss details of the proposed transaction structure. Representatives of
DLJ, PL and FBR participated on behalf of Pinnacle in the negotiating sessions.
Both parties reached a preliminary understanding of the exchange ratio and
Board composition in the event of a transaction. During the week of October 11,
1997, attorneys representing both sides
34
<PAGE>
worked to document the proposed agreement and plan of merger on the basis of
the decisions reached by the negotiating teams.
On October 14, 1997, the Pinnacle Board again met with its financial and
legal advisors. All Pinnacle Board members were present in person or by
telephone. Members of the management of Pinnacle and its legal counsel
reviewed with the Pinnacle Board the results of Pinnacle's due diligence
review of CNB, and Pinnacle's legal counsel gave an overview of the proposed
Merger Agreement and the Pinnacle Stock Option Agreement. Representatives of
the financial advisors reviewed with the Pinnacle Board the financial terms of
the Merger Agreement and FBR rendered its written opinion that, as of October
14, the proposed merger consideration was fair, from a financial point of
view, to Pinnacle's shareholders. Following discussion, the Pinnacle Board
concluded that the transaction contemplated by the Merger Agreement was in the
best interests of Pinnacle and its shareholders and, by unanimous vote of the
directors, the Pinnacle Board adopted the Merger Agreement and Pinnacle Stock
Option Agreement and directed that the Merger Agreement be submitted to a vote
of the shareholders of Pinnacle with the favorable recommendation of the
Board.
At the meeting of the CNB Board on October 14, 1997, senior management of
CNB, together with its legal and financial advisors, reviewed for the CNB
Board the discussions and contacts with Pinnacle to date, the results of CNB's
due diligence review of Pinnacle, the financial terms of the proposed
transaction with Pinnacle and the other terms of the Merger Agreement and the
Pinnacle Stock Option Agreement. Representatives of CIBC Oppenheimer rendered
their opinion that, as of such date, the Conversion Ratio was fair to CNB from
a financial point of view. Following discussion of and questions by the CNB
Board to CNB senior management and its financial and legal advisors, the
members of the CNB Board voted unanimously to approve the Merger Agreement,
the Pinnacle Stock Option Agreement and related matters.
On October 14, 1997, following the meetings of the Pinnacle Board and the
CNB Board, Pinnacle and CNB executed the Merger Agreement and the Pinnacle
Stock Option Agreement. On October 15, 1997, the parties issued a press
release announcing the execution of the Merger Agreement, the Pinnacle Stock
Option Agreement and related matters.
REASONS FOR MERGER; RECOMMENDATION OF CNB BOARD
In reaching its determination to approve the Merger Agreement and recommend
the Merger to the CNB shareholders, the CNB Board considered various factors,
including, without limitation, the following:
(i) Strategic Expansion. The consistency of the Merger with CNB's
strategy for enhancing long-term shareholder value through external
expansion. Relevant considerations included (a) the location and market
share of Pinnacle's franchise in northwest Indiana and southwest Michigan
and CNB's desire to enter into such markets; (b) increased revenue
opportunities from the sale of CNB's products and services to Pinnacle
customers; and (c) opportunities to leverage capacity in technological
advances over a larger customer base and to realize important synergies in
key business lines.
(ii) Certain Financial Information. Certain financial information about
the Merger, CNB and Pinnacle. This information included, but was not
limited to, information with regard to valuation analyses, pro forma
analyses, comparative financial data, and efficiencies and cost savings
opportunities. CNB has previously estimated that cost savings of 10% to 15%
of Pinnacle's costs are possible in connection with the Merger. CNB
believes that its estimates of projected cost savings, which are less than
the cost savings estimated by other acquirors in several recent larger bank
acquisitions, are appropriate because (i) the Merger constitutes a market
expansion for CNB (rather than an in-market transaction in which cost
savings may be more readily identifiable), (ii) the estimates are
consistent with CNB's strategy to focus on revenue growth rather than
solely on a more short-term strategy of cost cutting, and (iii) the
estimates take into consideration that Pinnacle has recently completed two
acquisitions (IFC and CB) in which it increased its asset size by
approximately 95% and, in connection therewith, is currently realizing cost
savings.
(iii) Certain Other Information. Certain terms and other aspects of the
Merger, including information about the terms of the Merger Agreement and
the Pinnacle Stock Option Agreement, the need for CNB to
35
<PAGE>
hold a special meeting of its shareholders to consider and vote upon the
Merger, the proposed addition of three directors to the CNB Board, the tax-
free status of the transaction of CNB, the ability of CNB to account for
the transaction as a pooling of interests, and the likelihood of all
required regulatory approvals being obtained in order to consummate the
Merger.
(iv) Advice of Financial Advisor and Fairness Opinion. The opinion of
CIBC Oppenheimer (including the assumptions and financial information and
projections relied upon by CIBC Oppenheimer in arriving at such opinion)
that, as of October 14, 1997, the Conversion Ratio was fair to CNB from a
financial point of view.
The foregoing discussion of the information and factors considered by the CNB
Board is not intended to be exhaustive, but it is believed to encompass all
material factors considered by the CNB Board in reaching its determination to
approve the Merger and recommend that CNB's shareholders vote in favor of the
Merger at the CNB Meeting. In reaching its determination, the CNB Board did
not assign any relative or specific weights to the factors considered, and
individual directors may have given different weights to different factors.
FOR THE REASONS DESCRIBED ABOVE, THE CNB BOARD UNANIMOUSLY APPROVED THE
MERGER AGREEMENT AND BELIEVES THAT THE MERGER IS FAIR TO, AND IS IN THE BEST
INTERESTS OF ITS SHAREHOLDERS. ACCORDINGLY, THE CNB BOARD UNANIMOUSLY
RECOMMENDS THAT THE CNB SHAREHOLDERS VOTE "FOR" ADOPTION OF THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER.
REASONS FOR MERGER; RECOMMENDATION OF PINNACLE BOARD
In reaching its determination to approve the Merger Agreement and recommend
the Merger to the Pinnacle shareholders, the Pinnacle Board considered various
factors, including, without limitation, the following:
(i) The increased value anticipated to be received by Pinnacle
shareholders in the Merger in relation to the historical trading prices of
Pinnacle Common.
(ii) The review by the Pinnacle Board with its legal and financial
advisors of all of the terms and conditions of the Merger Agreement and the
Pinnacle Stock Option Agreement.
(iii) A comparison of the financial terms of the Merger with comparable
transactions in the Midwest and elsewhere in the United States during
discussions with its financial advisors.
(iv) The financial advice rendered by the financial advisors of all of
the terms and conditions of the Merger Agreement and the Pinnacle Stock
Option Agreement.
(v) The anticipated absence of any significant regulatory impediments and
the corresponding likelihood that the proposed transaction would be
consummated.
(vi) The Pinnacle Board's familiarity with and review of the financial
condition, results of operations, cash flow, business and prospects of
Pinnacle and CNB.
(vii) The Pinnacle Board's review of the overall operating environment
for banks, including, but not limited to, the continued consolidation and
increasing competition in the banking and financial services industries,
the prospect for further changes in these industries and the importance of
operational scale and financial resources to remaining competitive in the
long-term and being able to capitalize on developing opportunities in these
industries.
(viii) The Pinnacle Board's assessment that the combined company
resulting from the Merger would better serve the convenience and needs of
its customers and the communities it serves as a result of being a
substantially larger bank (as compared to Pinnacle remaining independent),
thereby affording access to greater financial, managerial and technological
resources and an ability to offer an expanded range of potential products
and services.
36
<PAGE>
(ix) The Pinnacle Board's review of strategic alternatives to enhance
shareholder value, including potential transactions with other parties and
remaining independent, which alternatives the Pinnacle Board believed were
not likely to result in greater shareholder value than the Merger, based
on, among other things, the Pinnacle Board's knowledge of Pinnacle and CNB.
(x) The expectation that the Merger will generally be a tax-free
transaction to Pinnacle and its shareholders and will qualify for pooling-
of-interests accounting treatment.
(xi) The effect of the Merger on Pinnacle constituencies other than its
shareholders, including Pinnacle's senior management and other employees
and the communities served by Pinnacle, such considerations including CNB's
commitment to maintain Pinnacle's charitable contributions to Pinnacle
communities, the Pinnacle Board's awareness and assessment of the potential
that the Merger could be expected to provide Pinnacle employees, including
senior management, with employment and other benefits and the potential
impact of the transaction on employment in certain communities in which
Pinnacle operates.
(xii) Pinnacle's ability to achieve greater operational scale and
increase its financial resources to enable substantial investments in
technology and increase Pinnacle's return on equity, which are necessary to
remain competitive in the long-term.
(xiii) While no assurances can be given, the anticipated cost savings,
operating efficiencies and enhanced revenue opportunities available to the
combined company from the Merger, including, without limitation, revenue
enhancements driven by a broader array of products and repricing
initiatives, and synergies available due to the ability to leverage CNB's
technology investments for use throughout the combined company.
(xiv) The financial strength of CNB, its record of profitability and its
stock price performance, the business of CNB, the nature of its franchise,
its business and operating philosophy, and its business mix.
(xv) The potential appreciation in market and book value of Pinnacle
Common on both a short-term and long-term basis, as a stand-alone entity.
(xvi) The competitive position and future growth prospects of CNB as a
larger community banking company with operations in southern Michigan,
Indiana, southern Illinois and Kentucky following the Merger.
(xvii) The geographic diversity and lack of substantial overlap of
Pinnacle's and CNB's respective markets throughout southern Michigan and
Indiana, the compatibility of the business and management philosophies of
Pinnacle and CNB and CNB's strong commitment to the communities it serves.
The foregoing discussion of the information and factors considered by the
Pinnacle Board is not intended to be exhaustive, but it is believed to
encompass all material factors considered by the Pinnacle Board in reaching
its determination to approve the Merger and recommend that Pinnacle's
shareholders vote in favor of the Merger at the Pinnacle Meeting. The Pinnacle
Board considered both the positive and negative aspects of the foregoing
factors in terms of whether such factors indicated that the proposed Merger
would be more or less favorable to the shareholders of Pinnacle. In reaching
its determination, the Pinnacle Board did not assign any relative or specific
weights to the factors considered, and individual directors may have given
different weights to different factors.
FOR THE REASONS DESCRIBED ABOVE, THE PINNACLE BOARD UNANIMOUSLY APPROVED THE
MERGER AGREEMENT AND BELIEVES THAT THE MERGER IS FAIR TO, AND IS IN THE BEST
INTERESTS OF ITS SHAREHOLDERS. ACCORDINGLY, THE PINNACLE BOARD UNANIMOUSLY
RECOMMENDS THAT PINNACLE SHAREHOLDERS VOTE "FOR" ADOPTION OF THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER.
37
<PAGE>
FAIRNESS OPINIONS OF FINANCIAL ADVISORS
CNB
At the meeting of the CNB Board held on October 14, 1997, at which the terms
of the proposed Merger were discussed and considered, CIBC Oppenheimer
rendered a written opinion to the CNB Board that, as of the date of such
opinion and based upon and subject to the matters set forth in such opinion,
the Conversion Ratio was fair to CNB from a financial point of view. CIBC
Oppenheimer has confirmed its October 14, 1997 opinion by delivery of a
written opinion to the CNB Board dated the date of this Joint Proxy
Statement/Prospectus stating that, as of the date hereof and based upon and
subject to the matters set forth in such opinion, the Conversion Ratio is fair
to CNB from a financial point of view. No limitations were imposed by CNB upon
CIBC Oppenheimer with respect to investigations made or procedures followed by
CIBC Oppenheimer in rendering its opinion.
THE FULL TEXT OF CIBC OPPENHEIMER'S OPINION AS OF THE DATE OF THIS JOINT
PROXY STATEMENT/PROSPECTUS, WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS
CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN BY CIBC OPPENHEIMER, IS
ATTACHED HERETO AS APPENDIX C. CNB SHAREHOLDERS ARE URGED TO READ THE OPINION
IN ITS ENTIRETY. CIBC OPPENHEIMER'S OPINIONS ARE ADDRESSED TO THE CNB BOARD,
ARE DIRECTED ONLY TO THE FAIRNESS OF THE CONVERSION RATIO TO CNB AND DO NOT
CONSTITUTE A RECOMMENDATION TO ANY CNB SHAREHOLDER AS TO HOW SUCH SHAREHOLDER
SHOULD VOTE AT THE CNB MEETING. THE SUMMARY SET FORTH IN THIS JOINT PROXY
STATEMENT/PROSPECTUS OF THE CIBC OPPENHEIMER OPINION IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION ATTACHED HERETO AS
APPENDIX C.
In connection with rendering its opinion dated October 14, 1997, CIBC
Oppenheimer reviewed among other things: (a) the Merger Agreement; (b) the
Pinnacle Stock Option Agreement; (c) audited consolidated financial statements
and management's discussion and analysis of the financial condition and
results of operation for each of Pinnacle and CNB for the three fiscal years
ended December 31, 1996; (d) unaudited consolidated financial statements for
each of Pinnacle and CNB for the six months ended June 30, 1997; (e) audited
consolidated financial statements for each of IFC and CB for the three fiscal
years ended December 31, 1996 and the three fiscal years ended March 31, 1997,
respectively; (f) certain other publicly available business and financial
information relating to Pinnacle and CNB; (g) certain interim financial
analyses, budgets, projections and forecasts for Pinnacle and CNB, including
estimates as to the future cost savings relating to the Merger, prepared by
and reviewed with the management of CNB; (h) certain other summary materials
and analyses with respect to Pinnacle's loan portfolio and deposits prepared
by CNB; (i) the views of senior management of CNB and Pinnacle of the past and
current business operations, results thereof, financial condition and future
prospects of their respective companies, (j) a comparison of certain financial
information for CNB and Pinnacle, in each case with similar information for
certain other companies considered comparable to CNB and Pinnacle; (k) the
financial terms of certain recent business combinations in the banking
industry; (l) the pro forma effect of the transaction on CNB based on certain
assumptions provided by CNB; (m) the current market environment generally and
the banking environment in particular; and (n) such other information,
financial studies, analyses and investigations and financial, economic and
market criteria as CIBC Oppenheimer considered appropriate in the
circumstances.
CIBC Oppenheimer assumed and relied upon, without independent verification,
the accuracy and completeness of the information reviewed by it for the
purposes of its opinion. With respect to the financial projections, including
the estimates of cost savings expected to result from the Merger, CIBC
Oppenheimer assumed that they were reasonably prepared and reflected the best
currently available estimates and judgments of management of CNB and Pinnacle
as to the future financial performance of CNB and Pinnacle. CIBC Oppenheimer
did not make any independent evaluation or appraisal of the assets or
liabilities of Pinnacle, nor was it furnished with any such appraisal. In
addition, CIBC Oppenheimer did not examine any individual loan credit files of
Pinnacle. CIBC Oppenheimer also assumed that the Merger would be accounted for
as a pooling of interests under generally accepted accounting principles. CIBC
Oppenheimer's opinion was based on
38
<PAGE>
economic, market and other conditions as in effect on, and the information
made available to it as of, the date of the opinion. Subsequent developments
may affect the CIBC Oppenheimer opinion, and CIBC Oppenheimer does not have
any obligation to update, revise or reaffirm such opinion at any later date.
The projections furnished to CIBC Oppenheimer for each of CNB and Pinnacle
were prepared by the respective managements of each company. As a matter of
policy, neither CNB nor Pinnacle publicly discloses internal management
projections of the type provided to CIBC Oppenheimer in connection with its
analysis of the Merger, and such projections were not prepared with a view
toward public disclosure. These projections were based on numerous variables
and assumptions which are inherently uncertain and which may not be within the
control of management, including, without limitation, factors relating to
general economic and competitive conditions and prevailing interest rates.
Accordingly, actual results could vary significantly from those set forth in
such projections.
The following is a summary of the analyses presented by CIBC Oppenheimer to
the CNB Board at its meeting on October 14, 1997 in connection with CIBC
Oppenheimer's opinion dated such date:
Pro Forma Analysis. CIBC Oppenheimer analyzed the pro forma effects of the
Merger on the capital ratios, earnings per share and book value per share of
CNB. This analysis indicated that the Merger would result in earnings per
share dilution of $0.06 per share (equal to approximately 2.38%) in 1998 and
would be accretive to earnings by $.14 (equal to approximately 4.68%) in 1999,
the assumed first full year of combined operations.
Comparable Companies Analysis. Using publicly available information, CIBC
Oppenheimer compared selected financial information for Pinnacle with similar
information for the following eighteen selected public Midwest banks with
assets between $1.0 billion and $3.0 billion that CIBC Oppenheimer deemed
comparable: Area Bancshares Corp., Chemical Financial Corp., Corus Bankshares,
Inc., Community Trust Bancorp, Firstbank of Illinois Co., F&M Bancorp, First
Merchants Corp., Grand Premier Financial, Heritage Financial Services, Irwin
Financial Corp., Mid-America Bancorp, Mississippi Valley Bancshares, National
City Bancshares Inc., Peoples First Corp., Republic Bancorp Inc., 1st Source
Corp., First Financial Corp., Trans Financial Inc. (collectively the
"Comparable Bank Companies"). For each of the Comparable Bank Companies, CIBC
Oppenheimer calculated certain financial ratios and percentages and compared
the results of these calculations to calculations made by CIBC Oppenheimer for
Pinnacle. In addition, CIBC Oppenheimer compared selected financial
information for Pinnacle with similar information for the following nine
selected publicly-traded Midwest thrifts with assets between $1.0 billion and
$3.0 billion that CIBC Oppenheimer deemed comparable: Advantage Bancorp Inc.,
Alliance Bancorp Inc., Anchor Bancorp Wisconsin, S & N Financial Corp., First
Indiana Corporation, Flagstar Bancorp Inc., First Federal Capital Corp.,
Jefferson Savings Bancorp and St. Francis Capital Corp. (collectively the
"Comparable Thrift Companies"). Based upon this comparison of certain
financial ratios and percentages as set forth below, CIBC Oppenheimer noted
that Pinnacle's recent historical operating performance was consistent with
the Comparable Bank Companies and Comparable Thrift Companies.
This analysis showed that Pinnacle had a ratio of loans/deposits at June 30,
1997 of 101.51% compared to the average for the Comparable Bank Companies of
79.86%, and the average for the Comparable Thrift Companies of 93.12% and that
Pinnacle had a return on average assets and a return on average equity for the
six months ended June 30, 1997 (annualized on a fully taxed basis) of 1.14%
and 14.66%, respectively, compared to 1.34% and 14.18%, respectively, for the
Comparable Bank Companies and 1.00% and 13.49%, respectively, for the
Comparable Thrift Companies. Pinnacle's net interest margin, non-interest
expense/average assets and efficiency ratios for the period were 3.67%, 2.37%,
and 54.08%, respectively, as compared to the Comparable Bank Companies'
averages of 4.51%, 3.72% and 55.96%, respectively, and the Comparable Thrift
Companies' averages of 3.15%, 2.47%, and 59.81%, respectively.
This analysis also showed that Pinnacle's ratio of non-performing assets to
total equity at June 30, 1997 was 5.05%, compared to an average ratio for the
Comparable Bank Companies of 8.26% and the average ratio for the Comparable
Thrift Companies of 11.3%. Pinnacle's ratios of loan loss reserves to non-
performing loans and to total gross loans at such date were 79.00% and 0.97%,
respectively, compared to averages for the
39
<PAGE>
Comparable Bank Companies of 347.22% and 1.64%, respectively, and averages for
the Comparable Thrift Companies of 277.26% and 1.01%, respectively. Pinnacle's
equity/assets ratio at such date was 7.24% as compared to the Comparable Bank
Companies' average of 10.45% and the Comparable Thrift Companies' average of
7.73%
Discounted Cash Flow Analysis. Using a discounted cash flow analysis, CIBC
Oppenheimer estimated the present value of the future streams of after-tax
cash flows that Pinnacle could produce through December 31, 2001 based on
projections furnished by management of both CNB and Pinnacle. In this
analysis, CIBC Oppenheimer assumed that Pinnacle's net income was adjusted in
each year to reflect an assumed net charge-off ratio of 0.47% of total loans
and a level of provision for loan losses for each year based on an assumed
ratio of loan loss reserves to total loans which was maintained in each
projected year at approximately 1.00%. No dividend payments were assumed, nor
did CIBC Oppenheimer's analysis reflect any cost savings anticipated to result
from the Merger. CIBC Oppenheimer calculated a range of terminal values by
applying an earnings multiple of 15 to Pinnacle's estimated after-tax cash
flows for the twelve months ended December 31, 2001. The cash flows were
discounted to present values using different rates (ranging from 10% to 11%)
chosen to reflect different assumptions regarding the required rates of return
to prospective buyers of Pinnacle. This analysis indicated an implied range of
values for Pinnacle ranging from $602.0 million to $627.0 million. Based upon
the closing price of Pinnacle Common on October 14, 1997, of $40.125, the
aggregate market value of the outstanding shares of Pinnacle Common as of such
date was $490.6 million.
Comparable Transactions Analysis. CIBC Oppenheimer compared the financial
terms of the Merger to the financial terms, to the extent publicly available,
of the five Midwest bank transactions involving acquired companies with assets
greater than $1 billion announced or completed from January 1, 1997 through
October 10, 1997 (the "Recent Midwest Bank Acquisitions"). In addition, CIBC
Oppenheimer compared the financial terms of the Merger to the financial terms,
to the extent publicly available, of five recent nationwide bank transactions
involving acquired companies with assets greater than $500 million announced
or completed from July 1, 1997 through October 10, 1997 (the "Recent
Nationwide Acquisitions").
The Recent Midwest Bank Acquisitions included the following: Star Banc
Corp./Great Financial Corp., Associated Banc-Corp./First Financial Corp.,
Huntington Bancshares/First Michigan Bank Corp., TCF Financial Corp./Standard
Financial and Marshall & Ilsley/Security Capital Corp.
The Recent Nationwide Bank Acquisitions included the following: North Fork
Bancorp/New York Bancorp, Zions Bancorp/Vectra Banking Corp., NationsBank
Corp./Barnett Banks Inc., Union Planters Corp./Capital Bancorp and First Union
Corp./Signet Banking Corp.
For each of these transactions, CIBC Oppenheimer calculated, among other
things, the high, mean, median and low price to book value, price to last
twelve months ("LTM") net income, and core deposit premium (defined as the
transaction value minus book value divided by core deposits, excluding
certificates of deposit with balances equal to or greater than $100,000), and
compared the results of these calculations to calculations made by CIBC
Oppenheimer for the proposed Merger as follows:
CIBC Oppenheimer's analysis indicated that the Recent Midwest Bank
Acquisitions had a mean price/book multiple of 2.10x, price/LTM earnings
multiple of 26.87x, and a core deposit premium of 18.77%. The Recent
Nationwide Bank Acquisitions had a mean price/book multiple of 3.68x,
price/LTM earnings multiple of 22.95x and a core deposit premium of 31.94%.
The implied values for Pinnacle derived from these analyses were a mean of
$455 million and a median of $398 million based on the Recent Midwest Bank
Acquisitions, and a mean of $616 million and a median of $574 million based on
the Recent Nationwide Bank Acquisitions.
In connection with its opinion dated as of the date of this Joint Proxy
Statement/Prospectus, CIBC Oppenheimer confirmed the appropriateness of its
reliance on the analyses used to render its October 14, 1997
40
<PAGE>
opinion by, among other things, performing procedures to update certain of
such analyses, reviewing the assumptions on which such analyses were based and
the factors considered in connection therewith, and reviewing certain other
business and financial information relating to CNB and Pinnacle for periods
after June 30, 1997, including the unaudited consolidated financial statements
for each of CNB and Pinnacle for the nine months ended September 30, 1997, as
included in their respective Quarterly Reports on Form 10-Q currently on file
with the S.E.C.
CIBC Oppenheimer's fairness opinion dated as of the date of this Joint Proxy
Statement/Prospectus is based upon conditions and circumstances in effect on
such date. Accordingly, such opinion does not address the circumstances that
may arise if a Price Termination Event were to occur and CNB were to elect to
increase the number of shares of CNB Common to be issued in the Merger as
described under "--Termination of Merger Agreement--Conversion Ratio
Adjustment." It is currently expected that, in such event, the CNB Board would
request a reaffirmation from CIBC Oppenheimer of its fairness opinion in
connection with its determination of whether to increase the number of shares
of CNB Common to be issued in the Merger.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. CIBC
Oppenheimer believes that its analysis must be considered as a whole and that
selecting portions of its analyses, without considering the analyses taken as
a whole, would create an incomplete view of the process underlying the
analyses set forth in its opinion. In addition, CIBC Oppenheimer considered
the results of all such analyses and did not assign relative weights to any of
the analyses, so that the ranges of valuations resulting from any particular
analysis described above should not be taken to be CIBC Oppenheimer's view of
the actual value of Pinnacle or the combined entity.
In performing its analyses, CIBC Oppenheimer made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of CNB or Pinnacle. In
addition, no company or transaction used by CIBC Oppenheimer is identical to
CNB, Pinnacle or the Merger. The analyses performed by CIBC Oppenheimer are
not necessarily indicative of actual values, which may be significantly more
or less favorable than suggested by such analyses. Such analyses were prepared
solely to enable CIBC Oppenheimer to render its October 14, 1997 opinion. The
analyses do not purport to be appraisals or to reflect the prices at which a
company might actually be sold.
The CNB Board retained CIBC Oppenheimer based upon its experience and
expertise. CIBC Oppenheimer is a nationally recognized investment banking and
advisory firm. CIBC Oppenheimer, as part of its investment banking business,
is continuously engaged in the valuation of business and securities in
connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted
securities, private placements and valuations for corporate and other
purposes. In the course of its market making and other trading activities,
CIBC Oppenheimer may, from time to time, have a long or short position in, and
may buy or sell, securities of CNB and/or Pinnacle both for its own account
and for the accounts of customers.
As compensation for CIBC Oppenheimer's financial services as financial
advisor, CNB has agreed to pay CIBC Oppenheimer a fee of $250,000 plus
reasonable out-of-pocket expenses such as legal and travel expenses.
Pinnacle
Pursuant to a letter agreement dated as of October 2, 1997 (the "FBR
Agreement"), FBR was retained by Pinnacle to act as its financial advisor in
connection with the Merger. At the meeting of the Pinnacle Board held on
October 14, 1997, FBR delivered its written opinion to the Pinnacle Board to
the effect that, as of such date, the Conversion Ratio of 1.0365 shares of CNB
Common for each share of Pinnacle Common pursuant to the Merger Agreement was
fair, from a financial point of view, to the holders of Pinnacle Common. FBR
has reconfirmed its October 14, 1997 opinion by delivery of its written
opinion (the "FBR Opinion") to the Pinnacle Board, dated the date of this
Joint Proxy Statement/Prospectus, stating that as of the date hereof, based on
the matters set forth in such opinion and pursuant to the Merger Agreement,
the proposed Conversion Ratio of
41
<PAGE>
1.0365 shares of CNB Common for each share of Pinnacle Common to be received
by the holders of Pinnacle Common pursuant to the Merger Agreement is fair to
such holders from a financial point of view.
THE FULL TEXT OF THE FBR OPINION, WHICH SETS FORTH THE ASSUMPTIONS MADE,
PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN,
IS ATTACHED AS APPENDIX D TO THIS JOINT PROXY STATEMENT/PROSPECTUS AND IS
INCORPORATED HEREIN BY REFERENCE. THE DESCRIPTION OF THE FBR OPINION SET FORTH
HEREIN IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO APPENDIX D. PINNACLE'S
SHAREHOLDERS ARE URGED TO READ THE FBR OPINION IN ITS ENTIRETY. FBR'S OPINION
IS ADDRESSED ONLY TO THE PINNACLE BOARD AND DIRECTED ONLY TO THE CONVERSION
RATIO TO BE RECEIVED IN THE MERGER BY THE HOLDERS OF PINNACLE COMMON, AND DOES
NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER AS TO HOW SUCH SHAREHOLDER
SHOULD VOTE AT THE PINNACLE MEETING.
FBR is a nationally recognized investment banking firm and was selected by
Pinnacle based on the firm's reputation and experience in investment banking
in general, its recognized expertise in the valuation of banking businesses
and because of its familiarity with Pinnacle. FBR, as part of its investment
banking business, is frequently engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes.
In connection with rendering the opinion dated October 14, 1997, FBR, among
other things: (i) reviewed the Merger Agreement; (ii) reviewed the Annual
Reports to Shareholders of Pinnacle for the fiscal years ended December 31,
1995 and 1996 and Annual Reports on Form 10-K of Pinnacle filed with the
S.E.C. for the fiscal years ended December 31, 1995 and 1996, as well as
quarterly reports to Shareholders on Form 10-Q of Pinnacle filed with the
S.E.C. for the three month periods ended March 31, 1997 and June 30, 1997, and
certain other communications from Pinnacle to its shareholders; (iii) reviewed
CNB's Annual Report to Shareholders for the fiscal year ended December 31,
1996 and CNB's Annual Reports on Form 10-K filed with the S.E.C. for the
fiscal years ended December 31, 1994 through 1996, as well as quarterly
reports to Shareholders on Form 10-Q of CNB filed with the S.E.C. for the
three month periods ended March 31, 1997 and June 30, 1997; (iv) reviewed the
reported market prices and trading activity for CNB Common for the period
January 1994 through October 13, 1997 and reviewed the reported market prices
and trading activity for Pinnacle Common for the period January 1994 through
October 13, 1997; (v) discussed the financial condition, results of
operations, business and prospects of Pinnacle and CNB with the management of
both Pinnacle and CNB; (vi) compared the results of operations and financial
condition of Pinnacle and CNB with those of certain publicly-traded financial
institutions (or their holding companies) that FBR deemed to be reasonably
comparable to Pinnacle or CNB, as the case may be; (vii) reviewed the
financial terms, to the extent publicly available, of certain acquisition
transactions that FBR deemed to be reasonably comparable to the Merger; (viii)
reviewed financial terms, to the extent publicly available, of certain
acquisition transactions previously entered into by CNB; and (ix) performed
such other analyses and reviewed and analyzed such other information as FBR
deemed appropriate. In connection with updating its analysis of the Merger and
specifically rendering its opinion dated the date hereof, FBR, among other
things: (i) reviewed the Quarterly Report of Pinnacle on Form 10-Q filed with
the S.E.C. for the three month period ended September 30, 1997 (including
Amendment No. 1 to Form 10/Q-A as filed with the S.E.C. on November 21, 1997
and Amendment No. 2 to Form 10-Q/A as filed with the S.E.C. on January 7,
1998); (ii) reviewed the Quarterly Report of CNB on Form 10-Q filed with the
S.E.C. for the three month period ended September 30, 1997; and (iii)
performed such other additional analyses and reviewed and analyzed such other
additional information as FBR deemed appropriate.
In connection with rendering the FBR Opinion, as set forth herein, FBR
assumed and relied upon, without independent verification, the accuracy and
completeness of all the financial information, analyses and other information
reviewed by and discussed with it, and did not make an independent evaluation
or appraisal of the specific assets, the collateral securing assets or the
liabilities of CNB, Pinnacle or any of their respective subsidiaries, or the
collectibility of any such assets (relying, where relevant, on the analyses
and estimates of
42
<PAGE>
CNB and Pinnacle). With respect to the financial projections reviewed with
each company's management, FBR assumed that they reflect the best currently
available estimates and judgments of the respective managements of the
respective future financial performances of each of CNB and Pinnacle and of
the combined company, and that such performances will be achieved. FBR also
assumed that there has been no material change in CNB's or Pinnacle's assets,
financial condition, results of operations, business or prospects since the
date of the last financial statements noted above. Finally, FBR assumed
without independent verification that the aggregate consolidated allowances
for loan losses for Pinnacle and CNB were adequate to cover such losses, and
that the conditions precedent in the Merger Agreement are not waived.
The forecasts and projections furnished to FBR for Pinnacle were prepared by
the management of Pinnacle. As a matter of policy, Pinnacle does not publicly
disclose internal management forecasts, projections or estimates of the type
furnished to FBR in connection with its analysis of the Merger, and such
forecasts, projections or estimates were not prepared with a view towards
public disclosure. These forecasts, projections and estimates were based on
numerous variables and assumptions which are inherently uncertain and which
may not be within the control of management including, without limitation,
general economic, regulatory and competitive conditions. Accordingly, actual
results could vary materially from those set forth in such forecasts,
projections and estimates.
The Pinnacle Board imposed no limitations on FBR with respect to the
investigation made or procedures followed by FBR in rendering the FBR Opinion.
In connection with rendering such fairness opinion to the Pinnacle Board, FBR
performed a variety of financial analyses. The following is a summary of the
material financial analyses performed by FBR, but does not purport to be a
complete description of FBR's analyses or presentation at the October 14, 1997
meeting of the Pinnacle Board. FBR believes that its analyses must be
considered as a whole and that selecting portions of such analyses and the
factors considered therein, without considering all factors and analyses,
could create an incomplete view of the analyses and the processes underlying
the FBR Opinion. The preparation of a fairness opinion is a complex process
involving subjective judgments and is not necessarily susceptible to partial
analyses or summary description. In its analyses, FBR made numerous
assumptions with respect to industry performance, business and economic
conditions and various other matters, many of which are beyond the control of
Pinnacle and CNB. Any estimates contained in FBR's analyses are not
necessarily indicative of future results or values, which may be significantly
more or less favorable than such estimates. Estimates of values of companies
do not purport to be appraisals or necessarily reflect the prices at which the
companies or their securities may actually be sold.
Summary of Terms of Proposed Transactions. FBR reviewed the terms of the
proposed Merger, including the Conversion Ratio, the form of consideration,
and the percentage of premium to Pinnacle's market price at October 14, 1997.
Based on the Conversion Ratio of 1.0365 shares of CNB Common for each share of
Pinnacle Common and a price per share of $44.69 for CNB Common (the closing
price for such stock on October 13, 1997), the amount of consideration on
October 14, 1997 was $46.319 per share of Pinnacle Common (the "Exchange
Price"). The Exchange Price represented a percentage of premium to the current
market price per share of $39.25 for Pinnacle Common (the closing price for
such stock on October 13, 1997) of 18.01%.
Based on the closing share price of CNB Common as of October 13, 1997, the
Exchange Price represented a multiple of: (i) 22.83x Pinnacle's earnings per
share for the annualized nine months ended September 30, 1997 (before charges
related to prior acquisitions by Pinnacle); (ii) 22.19x IBES analysts'
estimate of Pinnacle's 1997 earnings per share; (iii) 3.32x Pinnacle's book
value per share as of September 30, 1997; and (iv) 3.68x Pinnacle's tangible
book value per share as of September 30, 1997. The Exchange Price also
represented a tangible book premium to core deposits of 30.76% based on
Pinnacle's tangible book value at September 30, 1997.
Comparable Transaction Analysis. FBR reviewed certain information relating
to transactions announced since January 1, 1997 involving the acquisition of
banks nationwide with assets between $1 and $5 billion ("Bank Asset Comparable
Transactions"), thrifts nationwide with assets between $1 and $5 billion
("Thrift Asset Comparable Transactions"), banks in Indiana, Illinois and
Michigan ("Regional Transactions"), and banks nationwide with seller's return
on average equity between 14% and 16% ("Seller's ROAE Comparable
43
<PAGE>
Transactions" and collectively, the "Comparable Groups"). In conjunction with
its analysis, FBR reviewed valuation multiples based on price to book value,
price to tangible book value, price to latest twelve months earnings per share
and the premium over tangible book value as a percentage of core deposits. FBR
compared CNB's pending acquisition of Pinnacle to transactions involving the
Comparable Groups over the period from January 1, 1997 through October 10,
1997. FBR also computed the foregoing ratios for the Merger based on the
Conversion Ratio and a price per share of $44.69 for CNB Common (the closing
price for such stock on October 13, 1997), indicating a price per share of
Pinnacle Common at announcement of the Merger of $46.319. The Comparable
Groups included the following numbers of transactions: Bank Asset Comparable
Transactions (12); the Thrift Asset Comparable Transactions (14); the Regional
Transactions (18); and Seller's ROAE Comparable Transactions (28). FBR's
computations yielded the following median multiples at announcement for the
Bank Asset Comparable Transactions, the Thrift Asset Comparable Transactions,
the Regional Transactions and the Seller's ROAE Comparable Transactions,
respectively, as compared with the following indicated multiples for Pinnacle
in the Merger: (i) price to book value multiples of 2.53x, 1.68x, 1.70x and
2.30x, compared with 3.32x for the Merger; (ii) price to tangible book value
multiples of 2.64x, 1.72x, 1.82x and 2.32x, compared with 3.68x for the
Merger; (iii) price to latest twelve months earnings multiples of 19.2x,
20.8x, 18.3x and 16.3x, compared with 22.8x for the Merger; and (iv) core
deposit premiums of 17.63%, 12.85%, 11.06% and 17.77%, compared with an
indicated deposit premium in the Merger of 30.76%.
Discounted Earnings Stream and Terminal Value Analysis. Using a discounted
earnings stream and terminal value analysis, FBR estimated the future stream
of earnings flows that Pinnacle could be expected to produce through the year
2000, under various circumstances, assuming Pinnacle performed in accordance
with the earnings forecasts of Pinnacle management. To approximate the
terminal value of the Pinnacle Common at the end of a four-year period
(December 31, 2000), FBR applied price to earnings multiples ranging from
17.5x to 20.x, applied multiples of tangible book value ranging from 315% to
340% and applied premiums over tangible book value as a percentage of core
deposits of 20.0% to 25.0%. The net income streams and terminal values were
then discounted to present values using a discount rate of 12%. When a 12%
discount rate was applied to median merger multiples based on the price to
tangible book value multiples of 315% to 340%, the analysis indicated a
reference range between $42.54 and $45.62 per share of Pinnacle Common. When
the same discount rate of 12% was applied to merger market multiples based on
price to earnings per share multiples of 17.5x to 20.0x, the analysis
indicated a reference range between $41.40 and $46.79 per share of Pinnacle
Common. When the same discount rate of 12% was applied to merger market
multiples based on tangible book premium to core deposits of 20.0% and 25.0%,
the analysis indicated a reference range between $36.72 and $41.89 per share
of Pinnacle Common.
Pro Forma Merger Analysis. FBR performed pro forma merger analyses that
combined Pinnacle's and CNB's current and projected income statements and
balance sheets based on earnings forecasts of Pinnacle and CNB, respectively.
Assumptions and analyses of the accounting treatment, acquisition adjustments,
operating efficiencies and other adjustments were made to arrive at a base
case pro forma analysis to determine the effect of the Merger on CNB. FBR
noted that, based on the Conversion Ratio of 1.0365 shares of CNB Common for
each share of Pinnacle Common, and net of the impact of merger related charges
and other one-time expenses, the impact of the Merger on CNB's earnings per
share and tangible book value per share based on such earnings forecasts did
not appear to be material. The actual results achieved by the combined company
will vary from the projected results and such variations may be material.
Analysis of Selected Publicly Traded Companies. In preparing its
presentation, FBR used publicly available information to compare selected
financial and market trading information, including book value, tangible book
value, earnings, asset quality ratios, efficiency levels and profitability
indicators, for CNB and selected other publicly traded regional commercial
banks located in the Midwest United States. This peer group consisted of
eighteen regional commercial bank holding companies with total assets between
$2 billion and $8 billion. FBR reviewed the historical financial information
for CNB and each member of the peer group since December 31, 1991. While the
efficiency ratio and certain of the profitability indicators of CNB were
slightly
44
<PAGE>
below the median performance of the peer group, CNB's return on equity for the
nine months ended September 30, 1997, was slightly above the median
performance of the peer group.
In connection with rendering the FBR Opinion, FBR confirmed the
appropriateness of its reliance on the analyses used to render its October 14,
1997 opinion by performing procedures to update certain of such analyses and
by reviewing the assumptions upon which such analyses were based and the
factors considered in connection therewith. The FBR Opinion is necessarily
based on economic, market and other conditions as in effect on, and the
information made available to it as of, the date of such opinion. Events
occurring after the date of the FBR Opinion could materially affect the
assumptions used in preparing such opinion.
Pursuant to the FBR Agreement, Pinnacle retained FBR to act as an
independent financial advisor to render general advisory services and also to
specifically advise Pinnacle in connection with its strategic planning and
merger and acquisition activities. Pursuant to Pinnacle's Agreement with FBR,
Pinnacle was obligated to pay FBR a nonrefundable retainer fee of $50,000 (the
"Retainer"). For its services as a financial advisor to Pinnacle in connection
with the Merger, FBR will receive a transaction fee equal to $1,250,000 (the
"Transaction Fee"). Twenty-five percent (25%) of the Transaction Fee, or
$312,500, was paid upon the signing of the Merger Agreement and the remaining
portion is payable at the closing of the Merger. The Retainer will be credited
against the remainder of the Transaction Fee. Pinnacle also has agreed to
reimburse FBR for its reasonable out-of-pocket expenses in connection with its
engagement and to indemnify FBR and its affiliates and their respective
partners, directors, officers, employees, agents and controlling persons
against certain expenses and liabilities, including liabilities applicable
under securities laws.
FBR has advised Pinnacle that, in the ordinary course of its business as a
full-service securities firm, FBR may, subject to certain restrictions,
actively trade the equity securities of Pinnacle and/or CNB for its own
account or for the accounts of its customers, and, accordingly, may at any
time hold a long or short position in such securities.
FORM OF MERGER
Subject to the satisfaction or waiver (where permissible) of the conditions
set forth in the Merger Agreement (see "--Conditions to Consummation of
Merger") and in accordance with the Indiana Corporate Law and the Michigan
Corporate Law, at the Effective Time, Pinnacle will merge with and into CNB.
CNB will be the surviving corporation in the Merger and will continue its
existence under the Indiana Corporate Law. The separate corporate existence of
Pinnacle will terminate.
Immediately following the Merger, shareholders of CNB and Pinnacle will own
approximately 60% and 40%, respectively, of the then outstanding shares of CNB
Common.
MERGER CONSIDERATION
At the Effective Time, each share of Pinnacle Common issued and outstanding
immediately prior to the Effective Time, other than shares held in the
treasury of Pinnacle or by any direct or indirect subsidiary of Pinnacle
(except shares held in trust accounts for the benefit of others or in other
fiduciary, nominee or similar capacities and shares held by Pinnacle or any of
its subsidiaries in respect to a debt previously contracted), will be
converted into the right to receive a number of shares of CNB Common equal to
the Conversion Ratio, without any action on the part of CNB, Pinnacle or their
respective shareholders. The Conversion Ratio is equal to 1.0365 shares of CNB
Common for each share of Pinnacle Common, although it is subject to adjustment
under certain circumstances. See "--Termination of Merger Agreement--
Conversion Ratio Adjustment."
Shares of CNB Common issued and outstanding immediately prior to the
Effective Time will remain issued and outstanding after the Effective Time,
unaffected by the Merger.
45
<PAGE>
For a discussion of the differences between the rights of holders of CNB
Common and Pinnacle Common, see "COMPARISON OF SHAREHOLDER RIGHTS." For a
description of CNB Common, see "DESCRIPTION OF CNB COMMON STOCK."
FRACTIONAL SHARES
No fractional shares of CNB Common will be issued to any holder of Pinnacle
Common upon consummation of the Merger. In lieu thereof, holders of Pinnacle
Common who would otherwise be entitled to a fractional share interest in CNB
Common (after taking into account all shares of Pinnacle Common held by such
holder) will be paid an amount in cash equal to the product of such fractional
share interest and the closing price of a share of CNB Common as reported in
The Wall Street Journal (Midwest Edition) on the N.Y.S.E. trading day
immediately preceding the date on which the Effective Time occurs.
EXCHANGE OF STOCK CERTIFICATES
As soon as reasonably practicable after the Effective Time, but in no event
later than ten business days after the Closing Date, Citizens Bank (the
"Exchange Agent") will mail a letter of transmittal (which will specify that
delivery will be effected, and risk of loss and title to any certificate or
certificates which immediately prior to the Effective Time represent
outstanding shares of Pinnacle Common (the "Pinnacle Certificates") will pass,
only upon proper delivery of the Pinnacle Certificates to the Exchange Agent
and will be in such form and have such other provisions as CNB may reasonably
specify) (each such letter, a "Merger Letter of Transmittal") and instructions
for use in effecting the surrender of the Pinnacle Certificates in exchange
for the Merger Consideration to each record holder of any Pinnacle Certificate
or Certificates whose shares were converted into the right to receive the
Merger Consideration pursuant to the Merger. Upon surrender to the Exchange
Agent of a Pinnacle Certificate, together with a Merger Letter of Transmittal
duly executed and any other required documents, the holder of such Pinnacle
Certificate will be entitled to receive the Merger Consideration, plus
dividends paid with respect to the Merger Consideration having a record date
after the Effective Time. No interest on the Merger Consideration issuable
upon the surrender of the Pinnacle Certificates will be paid or accrued for
the benefit of holders of Pinnacle Certificates.
If the Merger Consideration is to be issued to a person other than a person
in whose name a surrendered Pinnacle Certificate is registered, it will be a
condition of issuance that the surrendered Pinnacle Certificate be properly
endorsed or otherwise be in proper form for transfer and that the person
requesting such issuance 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. If a Pinnacle Certificate 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 determined by CNB.
The Merger Agreement provides that no dividends which are otherwise payable
on shares of CNB Common constituting the Merger Consideration will be paid to
persons entitled to receive such shares of CNB Common until such persons
surrender their Pinnacle Certificates. Upon such surrender, there will be paid
to the person in whose name the shares of CNB Common will 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.
HOLDERS OF PINNACLE COMMON ARE REQUESTED NOT TO SURRENDER THEIR PINNACLE
CERTIFICATES FOR EXCHANGE UNTIL SUCH LETTER OF TRANSMITTAL AND INSTRUCTIONS
ARE RECEIVED.
The Merger Agreement provides that, notwithstanding the foregoing, no Merger
Consideration will be delivered to a person who is an "affiliate" of Pinnacle
(as is hereafter defined under "MERGER--Resale of CNB Common") unless such
affiliate has previously executed and delivered to CNB the certain agreement
relating to affiliates referred to in the Merger Agreement. See "--Resale of
CNB Common."
46
<PAGE>
At or after the Effective Time, no transfers of any shares of Pinnacle
Common will be made on the stock transfer books of Pinnacle. If Pinnacle
Certificates are presented for transfer after the Effective Time, they will be
canceled and exchanged for the Merger Consideration.
For a description of the differences between the rights of the holders of
CNB Common and Pinnacle Common, see "COMPARISON OF SHAREHOLDER RIGHTS." For a
description of the CNB Common, see "DESCRIPTION OF CNB COMMON STOCK."
EFFECTIVE TIME
The Merger Agreement provides that the Effective Time will be upon the
filing of Articles of Merger with the Secretary of the State of Indiana and
the filing of a Certificate of Merger with the Department of Consumer and
Industry Services of the State of Michigan. The Merger Agreement provides that
both CNB and Pinnacle will use their best efforts to cause the Effective Time
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 other
approvals, including the requisite approval of the Merger Agreement by the
shareholders of Pinnacle and CNB, have been obtained or waived (where
permissible) and all waiting periods required by law have expired. See "--
Conditions to Consummation of Merger" and "--Regulatory Approvals."
Assuming that the Merger is approved by the requisite vote of the
shareholders of CNB and Pinnacle and the other conditions to the Merger are
satisfied or waived (where permissible), it is presently anticipated that the
Merger will be consummated during the second quarter of 1998, but no assurance
can be given that such timetable will be met. It is expected that the
Effective Time will occur during the same month in which the CNB Meeting and
the Pinnacle Meeting are held. If the Merger is not effected on or before
September 30, 1998, the Merger Agreement may be terminated by either CNB or
Pinnacle. See "--Termination of Merger Agreement--Termination."
SHARE ADJUSTMENTS
If, prior to 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 is declared on the
CNB Common with a record date prior to the Effective Time, then the Conversion
Ratio will be appropriately and proportionately adjusted so that each
shareholder of Pinnacle 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 of the Share Adjustment been immediately
following the Effective Time of the Merger. The 5% stock dividend declared by
CNB on August 11, 1997 and paid on September 18, 1997 does not constitute a
Share Adjustment and the Conversion Ratio will not be adjusted as a result of
such stock dividend.
In addition, in the event that, as of the Effective Time, the sum of (a) the
number of shares of Pinnacle Common presented for exchange pursuant to the
Merger Agreement or otherwise issued and outstanding at the Effective Time,
and (b) the number of shares of Pinnacle Common issuable upon the exercise of
options or warrants, whether pursuant to Pinnacle Employee Stock Options or
otherwise, as of the Effective Time is greater than the sum of (x) the number
of shares of Pinnacle Common represented in the Merger Agreement as being
outstanding as of the date of the Merger Agreement, and (y) the number of
shares of Pinnacle Common issuable upon the exercise of Pinnacle Employee
Stock Options represented in the Merger Agreement as being outstanding as of
the date of Merger Agreement or granted after April 30, 1998 in accordance
with the Merger Agreement, the Conversion Ratio will be appropriately and
proportionately decreased to take into account such issued and outstanding,
and issuable, shares of Pinnacle Common.
47
<PAGE>
DIVIDENDS
The Merger Agreement provides that, (i) in the case of dividends payable
until June 30, 1998, Pinnacle may declare and pay its regular quarterly
dividend on the Pinnacle Common in an amount not to exceed $0.235 per share,
at approximately the same times during each quarter during such period which
it has historically declared and paid such dividends, and (ii) in the case of
dividends payable on or after July 1, 1998, Pinnacle may declare and pay its
regular quarterly dividend on the Pinnacle Common in an aggregate amount equal
to the aggregate amount that Pinnacle shareholders would have received on
their shares of CNB Common received in the Merger had the Effective Time been
immediately before the record date or dates for the payment of each such
dividend, at approximately the same times during each quarter during such
period which it has historically declared and paid such dividends. Pinnacle
and CNB will, pursuant to the Merger Agreement, 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 Pinnacle shareholders
will receive a quarterly dividend from either Pinnacle or CNB but not from
both during or with respect to such quarter. Based upon the anticipated
Effective Time, shareholders of record of Pinnacle on March 28, 1998, will
receive a quarterly dividend from Pinnacle on April 1, 1998, but shareholders
of Pinnacle will not receive a dividend from CNB during or with respect to the
second quarter of 1998.
CONDITIONS TO CONSUMMATION OF MERGER
The obligations of each party to effect the Merger are subject to each
party's fulfillment or waiver (where permissible) of the following conditions
at or prior to the Closing Date: (i) the representations and warranties of
each party set forth in the Merger Agreement (see "--Representations and
Warranties of Parties") will 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 will be true
and correct as of such date; and subject to the Material Adverse Effect
standard described below under "--Representations and Warranties of Parties");
(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 would make consummation of
the Merger illegal; (iv) all necessary regulatory approvals, consents and
authorizations and other approvals required by law to consummate the Merger,
including the respective approvals of the shareholders of CNB and Pinnacle,
will have been obtained and all waiting periods required by law will have
expired, and no regulatory approval will have imposed any condition,
requirement or restriction which the CNB Board reasonably determines in good
faith would so materially adversely impact the economic or business benefits
of the transactions contemplated by the Merger Agreement to CNB and its
shareholders as to render the consummation of the Merger inadvisable; (v) 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; (vi) 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 nor will proceedings for that purpose
be pending before or threatened by the S.E.C.; (vii) the Merger will have
qualified for "pooling of interests" accounting treatment under Accounting
Principles Board Opinion No. 16, and each party will have each received an
opinion letter, dated as of the Closing Date, from KPMG Peat Marwick LLP, the
independent public accountants of both CNB and Pinnacle, to such effect (see
"--Accounting Treatment"); (viii) CNB will have received an opinion of its
counsel, Lewis, Rice & Fingersh, L.C., and Pinnacle will have received a copy
of such opinion addressed to Pinnacle, to the effect that if the Merger is
consummated in accordance with the terms set forth in the Merger Agreement,
(a) the Merger will constitute a reorganization within the meaning of Section
368(a) of the Code, (b) no gain or loss will be recognized by the holders of
Pinnacle Common upon receipt of the Merger Consideration (except for cash
received in lieu of fractional shares), (c) the basis of shares of CNB Common
received by the shareholders of Pinnacle will be the same as the basis of
shares of Pinnacle Common exchanged therefor, and (d) the holding period of
the shares of CNB Common received by the shareholders of Pinnacle will include
the holding period of the shares of Pinnacle Common exchanged therefor,
provided that such shares were held as capital assets as of the Effective Time
(see
48
<PAGE>
"--Federal Income Tax Consequences"); and (ix) each party will have received a
letter of KPMG Peat Marwick LLP, dated (a) the date on which the Registration
Statement became effective, and (b) a date shortly prior to the Closing Date
in form and substance customary for "comfort" letters delivered by independent
accountants in accordance with Statement of Auditing Standards No. 72.
The obligation of CNB to effect the Merger is further subject to the
condition that CNB will have received the opinion of its financial advisor,
CIBC Oppenheimer, to the effect that the transactions contemplated by the
Merger Agreement are fair to CNB from a financial point of view. The opinion
of CIBC Oppenheimer is attached hereto as Appendix C, and, therefore, this
condition has been satisfied.
The obligation of Pinnacle to effect the Merger is further subject to the
conditions that (a) Pinnacle will have received the opinion of its financial
advisor, FBR, to the effect that the transactions contemplated by the Merger
Agreement are fair to the Pinnacle shareholders from a financial point of
view, and (b) the shares of CNB Common issuable pursuant to the Merger
Agreement will have been approved for listing on the N.Y.S.E., subject to
official notice of issuance. The opinion of FBR is attached hereto as Appendix
D, and, therefore, the condition described in clause (a) above has been
satisfied.
The conditions described in clause (iii) above (issuance of court order
preventing consummation of the Merger) and in clause (iv) above (receipt of
shareholder and regulatory approval) may not be waived by either party. The
parties have agreed to waive the condition described in clause (ix) above
(receipt of "comfort" letters). Although the remaining conditions to effect
the Merger may be waived by the party entitled to the benefit thereof, neither
CNB nor Pinnacle intend to waive any such conditions except in those
circumstances where the CNB Board or the Pinnacle Board, as the case may be,
deems such waiver to be in the best interests of CNB and Pinnacle, as the case
may be, and its respective shareholders. If the condition described in clause
(viii) above is not satisfied (the tax-free reorganization status of the
Merger), the Merger will not be consummated unless this Joint Proxy
Statement/Prospectus is amended to reflect such revised tax treatment and the
approval of the Merger by the shareholders of CNB and Pinnacle is resolicited.
There can be no assurances as to when and if such conditions will be satisfied
(or, where permissible, waived) or that the Merger will be consummated.
REGULATORY APPROVALS
CNB has agreed, in the Merger Agreement, to promptly file all regulatory
applications to obtain the requisite regulatory approvals to consummate the
Merger. The Merger cannot proceed in the absence of such regulatory approvals.
There can be no assurance that such regulatory approvals will be obtained and,
if obtained, there can be no assurance as to the date of any such approvals or
the absence of any litigation challenging such approvals. Likewise, there can
be no assurance that the D.O.J. or any state attorney general will not attempt
to challenge the Merger on antitrust grounds or, if such a challenge is made,
as to the result thereof.
The Merger is subject to approval by the Federal Reserve Board pursuant to
Sections 3 and 4 of the B.H.C.A. The Federal Reserve Board approved the Merger
on February 6, 1998.
The Merger may not be consummated until 30 days after Federal Reserve Board
approval, during which time the D.O.J. 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 D.O.J., the waiting period may
be reduced to no less than fifteen days. The commencement of an antitrust
action by the D.O.J. would stay the effectiveness of Federal Reserve Board
approval of the Merger unless a court specifically orders otherwise. In
reviewing the Merger, the D.O.J. could analyze the effect of the Merger on
competition differently than the Federal Reserve Board. Thus, it is possible
that the D.O.J. could reach a different conclusion than the Federal Reserve
Board regarding the competitive effects of the Merger. Failure of the D.O.J.
to object to the Merger may not prevent the filing of antitrust actions by
private persons or state attorneys generals. In general, the Federal Reserve
Board and the D.O.J. will examine the impact of the Merger on competition in
various product and geographic markets, including competition for deposits and
loans, especially loans to small and middle market business.
49
<PAGE>
CNB's right to exercise the Pinnacle Option is also subject to the prior
approval of the Federal Reserve Board, to the extent that the exercise of the
Pinnacle Option would result in CNB owning more than 5% of the outstanding
shares of Pinnacle Common. See "PINNACLE STOCK OPTION AGREEMENT." In
considering whether to approve CNB's right to exercise the Pinnacle Option,
including its right to purchase more than 5% of the outstanding shares of
Pinnacle Common, the Federal Reserve Board would generally apply the same
statutory criteria it would apply to its consideration of approval of the
Merger.
CNB and Pinnacle are not aware of any other governmental approvals or
actions that are required prior to the parties' consummation of the Merger
other than those described herein. It is presently contemplated that if any
such additional governmental approvals or actions are required, such approvals
or actions will be sought. There can be no assurance, however, that any such
additional approvals or actions will be obtained.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of CNB
and Pinnacle. The Merger Agreement provides that no representation or warranty
will be deemed untrue or incorrect, and neither party will be deemed to have
breached a representation or warranty, as a consequence of the existence of
any fact, event or circumstance unless such fact, circumstance or event,
individually or taken together with all other facts, events or circumstances
inconsistent with any representation or warranty contained in the Merger
Agreement, has had or is reasonably likely to have a Material Adverse Effect
on the party and its subsidiaries taken as a whole making such representation
or warranty.
Except as otherwise disclosed to CNB, the representations and warranties
made by Pinnacle, include, among other things, those as to (i) the due
organization and good standing of Pinnacle; (ii) the capitalization of
Pinnacle; (iii) the due authorization and execution of the Merger Agreement
and the Pinnacle Stock Option Agreement; (iv) the due organization, good
standing and ownership of subsidiaries of Pinnacle; (v) the presentation in
accordance with generally accepted accounting principles on a consistent basis
and the fair presentation in all material respects of consolidated financial
statements and filings by Pinnacle with the S.E.C. and by Pinnacle Bank with
the Federal Deposit Insurance Corporation (the "F.D.I.C."); (vi) the absence
of any changes in the financial condition, results of operations or business
of Pinnacle since December 31, 1996 which would have a Material Adverse Effect
on Pinnacle (except as disclosed by Pinnacle in its periodic reports filed
with the S.E.C.); (vii) the absence of any cease-and-desist order, agreement,
consent agreement, memorandum of understanding, or other regulatory
enforcement action, proceeding or order (a "Regulatory Agreement") between
Pinnacle 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 Pinnacle
or any of its subsidiaries; (viii) the filing of tax returns and reports and
payment of taxes by Pinnacle and its subsidiaries; (ix) the absence of
material pending or threatened litigation or other such actions which would
have a Material Adverse Effect on Pinnacle; (x) the existence of agreements
with employees of Pinnacle and its subsidiaries, including certain employment
agreements; (xi) the filing and material compliance of certain reports
required to be filed by Pinnacle and its subsidiaries with various Regulatory
Agencies, including the Federal Reserve Board, the F.D.I.C., the S.E.C., any
state securities authorities and Nasdaq; (xii) certain employee matters and
matters under the Employee Retirement Income Security Act of 1974, as amended
("ERISA"); (xiii) the title to the properties of Pinnacle and its
subsidiaries, the absence of liens (except as specified) and insurance
matters; (xiv) certain environmental matters with respect to real properties
owned, leased or operated by Pinnacle and its subsidiaries; (xv) the
compliance by Pinnacle and its subsidiaries with applicable laws and
regulations; (xvi) the absence of brokerage commissions or similar finder's
fees (except as specified) in connection with the Merger payable by Pinnacle
or its subsidiaries; (xvii) the non-banking activities of Pinnacle and its
subsidiaries; (xviii) the trust administration of Pinnacle and its
subsidiaries; (xix) certain pooling of interests and tax-free reorganization
matters; (xx) the existence of certain material contracts to which Pinnacle
and its subsidiaries are a party; (xxi) the absence of undisclosed liabilities
of Pinnacle and its subsidiaries; (xxii) the accuracy of information supplied
or to be supplied by Pinnacle or its subsidiaries for inclusion in any
documents filed or to be filed with any documents
50
<PAGE>
filed with the S.E.C., Nasdaq, the N.Y.S.E. or any other Regulatory Agency in
connection with the transactions contemplated by the Merger Agreement; (xxiii)
the inapplicability of certain state take over laws; and (xxiv) certain
matters relating to fair lending and the Community Reinvestment Act of 1977,
as amended, of Pinnacle and its subsidiaries.
The representations and warranties of CNB include, among other things, those
as to (i) the due organization and good standing of CNB; (ii) the
capitalization of CNB; (iii) the due authorization and execution of the Merger
Agreement, and the absence of the need (except as specified) for governmental
or third party consents to the Merger; (iv) the significant subsidiaries of
CNB; (v) the presentation in accordance with generally accepted accounting
principles on a consistent basis and the fair presentation in all material
respects of the consolidated financial statements and filings by CNB with the
S.E.C.; (vi) the absence of any changes in the financial condition, results of
operations or business of CNB which would have a Material Adverse Effect on
CNB since December 31, 1996 (except as reported by CNB in its reports with the
S.E.C.); (vii) the absence of material pending or threatened litigation or
other such actions which would have a Material Adverse Effect on CNB; (viii)
the filing and material compliance of certain reports required to be filed by
CNB and its significant subsidiaries with various Regulatory Agencies,
including the S.E.C., the Federal Reserve Board, the Office of the Comptroller
of the Currency (the "O.C.C."), the F.D.I.C. and the N.Y.S.E.; (ix) the
compliance by CNB and its significant subsidiaries with applicable laws and
regulations; (x) certain pooling of interests and tax-free reorganization
matters; (xi) the filing of tax returns and reports and payment of taxes by
CNB and its subsidiaries; (xii) the absence of brokerage commissions or
similar finder's fees (except as specified) in connection with the Merger
payable by CNB or its subsidiaries; (xiii) the inapplicability of certain
state takeover laws; (xiv) the absence of Regulatory Agreements that would
materially impair the ability of CNB to obtain the regulatory approvals of the
Merger; (xv) the accuracy of information supplied by CNB in connection with
the Registration Statement, this Joint Proxy Statement/Prospectus and any
other documents to be filed with the S.E.C., N.Y.S.E. or any banking or other
regulatory authority in connection with the transactions contemplated by the
Merger Agreement; and (xvi) the absence of undisclosed liabilities of CNB and
its subsidiaries.
As used in the Merger Agreement, the term "Material Adverse Effect," means,
with respect to Pinnacle or CNB, any effect that (i) is, or is reasonably
expected to be, material and adverse to the financial position, results of
operations or business of Pinnacle and its subsidiaries taken as a whole, or
CNB and its subsidiaries taken as a whole, respectively, or (ii) would
materially impair the ability of either Pinnacle or CNB to perform its
obligations under the Merger Agreement or otherwise materially threaten or
materially impede the consummation of the Merger and the other transactions
contemplated by the Merger Agreement. The Merger Agreement provides, however,
that a Material Adverse Effect will not be deemed to include the impact of (a)
changes in banking and similar laws of general applicability or
interpretations thereof by courts or governmental authorities, (b) changes in
generally accepted accounting principles or regulatory accounting requirements
applicable to banks and their holding companies generally, and (c) any
modifications or changes to valuation or reserve policies and practices in
connection with or in anticipation of the Merger or restructuring charges
taken in connection with the Merger, in each case in accordance with generally
accepted accounting principles, or restructuring charges taken by Pinnacle in
connection with its prior acquisitions of IFC and CB, as included in the
consolidated financial statements included in Pinnacle's Current Report on
Form 8-K dated August 4, 1997 (as amended by Amendment No. 1 to Form 8-K/A
filed with the S.E.C. on October 14, 1997 and Amendment No. 2 to Form 8-K/A
filed with the S.E.C. on January 8, 1998). CNB and Pinnacle also have agreed
that the matters set forth in Amendment No. 2 to Pinnacle's Quarterly Report
on Form 10-Q, as filed with the S.E.C. on January 7, 1998, will not be deemed
to constitute a Material Adverse Effect.
CERTAIN OTHER AGREEMENTS
CNB
Pursuant to the Merger Agreement, CNB has agreed, among other things, to (i)
file all regulatory applications required in order to consummate the Merger
and to make copies of all such applications available to Pinnacle; (ii) file
the Registration Statement with the S.E.C. and use its best efforts to cause
the Registration
51
<PAGE>
Statement to become effective; (iii) promptly file all documents required to
list the shares of CNB Common to be issued pursuant to the Merger on the
N.Y.S.E. and to timely file all documents required to obtain all necessary
Blue Sky permits and approvals; (iv) prepare and file any application required
and any filings required under the Exchange Act relating to the Merger and the
transactions contemplated by the Merger Agreement; (v) have the CNB Board
recommend to its shareholders the issuance of the shares of CNB Common to the
shareholders of Pinnacle pursuant to the Merger Agreement (subject to
compliance with its fiduciary duties as advised by counsel) and use its best
efforts to obtain such shareholder approval; (vi) not grant any employee or
director stock options to acquire CNB Common except in a manner and pursuant
to policies consistent with past practice; (vii) not 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 CNB; (viii) not
affirmatively 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; (ix) not engage in any transaction or take any
action, without the prior written consent of Pinnacle, that would render
untrue in any material respect any of the representations and warranties of
CNB contained in the Merger Agreement, except for any such warranties made
only as of a specified date, if such representations and warranties were given
as of the date of such transaction or action; (x) give Pinnacle prompt written
notice of the occurrence of any matter or event known to and directly
involving CNB, 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 CNB; (xi) give Pinnacle prompt written
notice of the occurrence, or impending or threatened occurrence, of any event
or condition that it has knowledge of which would constitute a breach of any
of the representations or agreements of CNB in the Merger Agreement and use
its best efforts to prevent or promptly remedy the same; (xii) 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 effectuate the
Merger in accordance with the terms and conditions of the Merger Agreement;
(xiii) permit Pinnacle reasonable access to its properties and disclose and
make available to Pinnacle all books, documents, papers and records relating
to assets, stock ownership, properties, operations, obligations and
liabilities in which Pinnacle may have a reasonable and legitimate interest in
furtherance of the transactions contemplated in the Merger Agreement; (xiv)
use its reasonable best efforts to cause to be delivered to Pinnacle a letter
of KPMG Peat Marwick LLP, dated (a) on the date on which the Registration
Statement will become effective, and (b) on a date shortly prior to the
Effective Time, in a form and substance customary for "comfort" letters
delivered by independent accountants in accordance with Statement of Auditing
Standards No. 72; and (xv) deliver to Pinnacle, at least five days prior to
the mailing of this Joint Proxy Statement/Prospectus to the holders of CNB
Common, a list of each person who may reasonably be deemed an "affiliate" of
CNB within the meaning of such term as used in Rule 145 of the Securities Act
and cause each such person to deliver an agreement regarding compliance with
the pooling of interest rules.
Pinnacle
Business of Pinnacle in Ordinary Course
Pursuant to the Merger Agreement, Pinnacle has agreed, among other things,
that it will, and that it will cause each of its subsidiaries to, continue to
carry on its respective business and the discharge or incurrence of
obligations and liabilities only in the usual, regular and ordinary course of
business and that it will use its 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.
Pinnacle also has agreed that neither it nor its subsidiaries will, without
the prior written consent of CNB (which CNB has agreed to not unreasonably
withhold): (i) issue any Pinnacle Common or other capital stock, options,
warrants or other rights to subscribe for or purchase Pinnacle Common or any
other capital stock or any other securities convertible into or exchangeable
for any capital stock of Pinnacle or any of its subsidiaries (except for (a)
the issuance of Pinnacle Common pursuant to the exercise of previously
outstanding Pinnacle Employee Stock Options, (b) the issuance of Pinnacle
Common pursuant to the Pinnacle Stock Option Agreement, and (c) in the event
that the Effective Time does not occur on or before April 30, 1998, grants of
Pinnacle Employee Stock Options after April 30, 1998, in accordance with the
Pinnacle Employee Stock Option
52
<PAGE>
Plans (as such term is hereafter defined under "--Effect of Merger on Employee
Benefit and Employee Stock Option Plans--Employee Stock Option Plans") and in
a manner and pursuant to policies consistent with past practices; provided,
however, that (x) such grants will not be made if CNB determines that such
grants would disqualify the Merger as a "pooling of interests" for accounting
purposes, and (y) any person who receives such grants of Pinnacle Employee
Stock Options from Pinnacle will not be eligible to receive from CNB stock
options with respect to shares of CNB Common during 1998); (ii) directly or
indirectly redeem, purchase or otherwise acquire any Pinnacle Common or any
other capital stock of Pinnacle or its subsidiaries; (iii) effect a
reclassification, recapitalization, splitup, exchange of shares, readjustment
or other similar change in any capital stock of Pinnacle or otherwise
reorganize or recapitalize Pinnacle or its subsidiaries; (iv) change its
Articles of Incorporation or Bylaws; (v) grant any increase (other than
ordinary and normal increases consistent with past practices) in the
compensation payable or to become payable to officers or salaried employees,
grant any stock options or, except as required by law or as required by
existing contractual obligations, adopt or change any bonus, insurance,
pension, or other employee plan, agreement, payment or arrangement made to,
for or with any such officers or employees; (vi) borrow or agree to borrow any
amount of funds or directly or indirectly guarantee any obligations of others,
except in the ordinary course of business; (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, including risk exposure in the mortgage
repurchase program, in principal amounts in excess of $5 million or that would
increase the aggregate credit outstanding to any one borrower (or group of
affiliated borrowers) to more than $10 million (excluding for this purpose any
accrued interest or overdrafts) without the prior written consent of CNB;
(viii) purchase or otherwise acquire any investment security for its own
account, except in a manner and pursuant to policies consistent with past
practices; (ix) materially 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; (x) enter into any agreement,
contract or commitment of a material nature out of the ordinary course of
business; (xi) place any mortgage, pledge, lien, charge, or other encumbrance
of a material nature on any of its material assets or properties, except in
the ordinary course of business; (xii) cancel or accelerate any material
indebtedness owing to Pinnacle or its subsidiaries or any claims which
Pinnacle or its subsidiaries may possess or waive any material rights with
respect thereto, except in the ordinary course of business; (xiii) sell or
otherwise dispose of any material real property or any material amount of any
tangible or intangible personal property other than in the ordinary course of
business and other than properties acquired in foreclosure or otherwise in the
ordinary collection of indebtedness to Pinnacle and its subsidiaries; (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 (except that Pinnacle and its subsidiaries
will 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); (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 Pinnacle; (xvi)
purchase any real or personal property or make any other capital expenditure,
except in a manner and pursuant to policies consistent with past practice;
(xvii) affirmatively 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; (xviii) take any action which would materially
and adversely effect or delay the ability of either CNB or Pinnacle 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 or the
Pinnacle Stock Option Agreement; or (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 Pinnacle in the Merger Agreement, if
such representations or warranties were given as of the date of such
transaction or action.
Environmental Inspections
Pinnacle has agreed to provide to CNB a report of a phase one environmental
investigation on certain real property identified on a schedule to the Merger
Agreement and, with certain exceptions, acquired or leased by
53
<PAGE>
Pinnacle after the date of the Merger Agreement. In addition, Pinnacle has
agreed to provide a report of a phase two investigation on any of such
properties requiring such additional study, if, in CNB's reasonable opinion,
such report is required by the phase one investigation. If the cost of taking
all remedial or other corrective actions and measures required by applicable
law or reasonably likely to be required by applicable law, in the aggregate,
exceeds the sum of $5 million, as reasonably estimated by an environmental
expert retained for such purpose by CNB and reasonably acceptable to Pinnacle,
or if the cost of such actions and measures cannot be so reasonably estimated
by such expert with any reasonable degree of certainty to be $5 million or
less, then CNB will have the right, for a period of fifteen business days
following receipt of such estimate, to terminate the Merger Agreement, which
will be CNB's sole remedy in such event. Environmental 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 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. Based upon the results of the phase one environmental
investigations provided by Pinnacle as required by the Merger Agreement, CNB
has determined to waive its right to terminate the Merger Agreement as
provided above.
Other Agreements
Pursuant to the Merger Agreement, Pinnacle has agreed to (i) give CNB prompt
written notice of the occurrence, or impending or threatened occurrence, of
any event or condition that it has knowledge of which would cause or
constitute a breach of any of the representations or agreements of Pinnacle in
the Merger Agreement (and use its best efforts to prevent or promptly remedy
the same); (ii) use its best efforts to obtain all necessary consents with
respect to all interests of Pinnacle 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;
(iii) use its best efforts to perform and fulfill all conditions and
obligations to be performed or fulfilled under the Merger Agreement and to
effect the Merger promptly in accordance with the terms of the Merger
Agreement; (iv) at the request of CNB (which CNB has indicated it has no
present intention to do), cause Pinnacle Bank to enter into a merger agreement
with a wholly-owned banking subsidiary of CNB and to take all other actions
and cooperate with CNB in causing such merger to be effected (provided that
the Merger will not be conditioned upon the consummation of any such
subsidiary bank merger); (v) permit CNB reasonable access to its properties
and disclose and make available to CNB all books, documents, papers and
records and computer systems documentation and files relating to its 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; (vi) cause to be duly
called and held a special meeting of its shareholders for submission of the
Merger Agreement for approval as required by the Michigan Corporate Law; (vii)
deliver to CNB, at least five days prior to the mailing of this Joint Proxy
Statement/Prospectus to the holders of Pinnacle Common, a list of each person
who may reasonably be deemed an "affiliate" of Pinnacle within the meaning of
such term as used in Rule 145 of Securities Act and cause each such person to
deliver an agreement regarding compliance with Rule 145 of the Securities Act
and the pooling of interest rules; (viii) at CNB's request, enter into a
separate plan of merger or articles of merger or certificate of merger
reflecting the terms of the Merger Agreement for purposes of any filing
requirement of the Indiana Corporate Law or the Michigan Corporate Law; (ix)
use its reasonable best efforts to cause to be delivered to CNB a letter of
KPMG Peat Marwick LLP, dated (a) on the date on which the Registration
Statement will become effective, and (b) on a date shortly prior to the
Effective Time, in form and substance customary for "comfort" letters
delivered by independent accountants in accordance with Statement of Auditing
Standards No. 72; (x) promptly notify CNB in writing of the occurrence of any
matter or event known to and directly involving
54
<PAGE>
Pinnacle, other than changes in conditions that affect the banking industry
generally, that would have, either individually or in the aggregate, a
Material Adverse Effect on Pinnacle; and (xi) prepare restated audited
supplemental consolidated financial statements giving retroactive effect to
the business combinations with IFC and CB, and cause such financial statements
to be filed as an exhibit to a Current Report on Form 8-K.
EFFECT OF MERGER ON EMPLOYEE BENEFIT AND EMPLOYEE STOCK OPTION PLANS
Employee Benefit Plans
The Merger Agreement provides that, at the Effective Time, each employee of
Pinnacle or any of its subsidiaries who continues as an employee of Pinnacle
or its subsidiaries or as a new employee of CNB or its subsidiaries will be
entitled to participate in such employee benefit plans (as defined under
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, on the same basis as similarly situated employees of CNB
subsidiaries, if and as such employee is eligible and, if required, selected
for participation therein under the terms thereof, provided that such employee
is not participating in a similar plan administered by Pinnacle after the
Effective Time, subject to the right of CNB to amend, modify or terminate, in
its sole discretion, any such plans or programs. Pinnacle employees will be
eligible to participate on the same basis as similarly situated employees of
other CNB subsidiaries. CNB may terminate or modify all Pinnacle employee
plans except insofar as benefits thereunder have vested at the Effective Time
and cannot be modified. CNB will, 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 former employees of Pinnacle may
participate (but not for benefit accruals under any defined benefit plan),
credit each such employee with his or her term of service with Pinnacle and
its subsidiaries and its and their predecessors.
The Merger Agreement provides that, upon consummation of the Merger, CNB
will acknowledge and assume the obligations of Pinnacle relating to employee
benefits resulting from Pinnacle's prior acquisitions of IFC and CB. The
Merger Agreement also provides that, upon consummation of the Merger, CNB will
acknowledge and assume the obligations of Pinnacle under its severance
agreements, supplemental retirement plans and arrangements, deferred
compensation plans and arrangements and related trusts including, without
limitation, all of the same maintained or provided by any subsidiary of
Pinnacle and any predecessor of Pinnacle or any of its subsidiaries.
Employee Stock Option Plans
At the Effective Time, each outstanding option to purchase shares of
Pinnacle Common (a "Pinnacle Employee Stock Option") issued pursuant to the
Pinnacle Financial Services, Inc. Executive Long Term Incentive Plan (also
known as the Pinnacle Financial Services, Inc. 1993 Stock Option Plan), as
amended, and the Indiana Federal Corporation 1986 Stock Option and Incentive
Plan (together, the "Pinnacle Employee Stock Option Plans"), whether or not
exercisable or vested, will cease to represent a right to acquire shares of
Pinnacle Common and instead will be converted automatically into an option to
acquire, from and after the Effective Time, the number of full shares of CNB
Common as the holder of such Pinnacle Employee Stock Option would have been
entitled to receive pursuant to the Merger had such holder exercised such
option in full immediately prior to the Effective Time (determined by
multiplying the aggregate number of shares of Pinnacle Common covered by such
Pinnacle Employee Stock Option by the Conversion Ratio), on the same terms and
conditions as were applicable under such Pinnacle Employee Stock Option
(including the immediate vesting of such Pinnacle Employee Stock Option to the
extent that the terms thereof provide for such immediate vesting upon the
consummation of the Merger), at a price per share equal to (a) the aggregate
amount of the exercise prices for Pinnacle Common otherwise purchasable
pursuant to such Pinnacle Employee Stock Option divided by (b) the number of
full shares (with, subject to certain exceptions, any fractional share amount
rounded upwards to the next higher full share amount) of CNB Common deemed
purchasable pursuant to such Pinnacle Employee Stock Option. In no event,
however, will CNB be required to issue fractional shares of CNB Common.
55
<PAGE>
MANAGEMENT AND OPERATIONS AFTER MERGER
As a consequence of the Merger, Pinnacle will cease to exist as a separate
entity and its subsidiaries, including Pinnacle Bank, will become subsidiaries
of CNB. With the exception of Pinnacle Bank, which CNB intends to operate as a
separate subsidiary bank, CNB intends to ultimately combine the operations of
certain CNB and Pinnacle subsidiaries which provide similar services.
Following the Merger, Arnold L. Weaver, currently Vice Chairman of Pinnacle
and President and Chief Operating Officer of Pinnacle Bank, will become
President and Chief Executive Officer of Pinnacle Bank, and three persons, to
be mutually selected by CNB and Pinnacle, will be appointed to CNB's Board. It
has not yet been determined, as of the date of this Joint Proxy
Statement/Prospectus, which three persons will be appointed as new directors
of CNB following the Merger. Except as provided above, it is not anticipated
that the management of CNB or the CNB Board will be affected as a result of
the Merger.
INTERESTS OF CERTAIN PERSONS IN MERGER
Shareholders should be aware that certain members of the Pinnacle Board and
the managements of Pinnacle and CNB may have interests in the Merger that are
in addition to and/or separate from the interests of shareholders of Pinnacle
or CNB generally, as the case may be. The CNB Board and the Pinnacle Board
were aware of these interests, and considered them, among other matters, in
approving the Merger Agreement and the transactions contemplated thereby,
including the Merger. Adoption and approval of the Merger Agreement by the
shareholders of Pinnacle and CNB will also constitute approval of the
following benefits to be received by directors, executive officers and
employees of Pinnacle and CNB.
Indemnification and Insurance
CNB has agreed, for the applicable statute of limitations period, to
indemnify, defend and hold harmless the present and former officers,
directors, employees and agents of Pinnacle and its subsidiaries against all
losses, expenses, claims, damages or liabilities arising out of actions or
omissions occurring prior to the Effective Time (including, without
limitation, the transactions contemplated by the Merger Agreement and the
Pinnacle Stock Option Agreement) to the fullest extent permitted by the
Articles of Incorporation of Pinnacle as in effect on the date of the Merger
Agreement (and, with respect to predecessors of Pinnacle, the applicable laws,
articles of incorporation and bylaws pertaining thereto) and by the Michigan
Corporate Law.
For a period of six years after the Effective Time, CNB will use its
reasonable best efforts to maintain in effect the current policies of
directors' and officers' liability insurance maintained by Pinnacle (provided
that CNB may substitute therefor policies of comparable coverage with respect
to claims arising from facts or events which occurred before the Effective
Time) to the extent that such coverage is obtainable for an aggregate premium
not to exceed 150% of the amount of the annual premium paid by Pinnacle for
such insurance (the "Maximum Amount") as of the date of the Merger Agreement.
If the premiums necessary to maintain or procure such insurance coverage would
exceed the Maximum Amount, CNB will use all reasonable efforts to maintain the
most advantageous policies of directors' and officers' insurance obtainable
for an annual premium equal to the Maximum Amount. CNB may, prior to the
Effective Time and in lieu of the foregoing, request Pinnacle to purchase
insurance coverage on such terms and conditions as are acceptable to CNB,
extending for a period of six years Pinnacle's directors' and officers'
liability insurance coverage in effect as of the date of the Merger Agreement.
The Merger Agreement also provides that CNB will acknowledge and assume,
upon consummation of the Merger, the obligations of Pinnacle relating to
directors' and officers' liability insurance and indemnification arising out
of its prior acquisitions of IFC and CB.
56
<PAGE>
Employment and Employee Benefits
Following the Merger, Arnold L. Weaver, currently Vice Chairman of Pinnacle
and President and Chief Operating Officer of Pinnacle Bank, will become
President and Chief Executive Officer of Pinnacle Bank.
The Merger Agreement also contains certain provisions regarding employee
benefits which are described under "MERGER--Effect of Merger on Employee
Benefit and Employee Stock Option Plans--Employee Benefit Plans."
Employee Stock Option Plans
The Merger Agreement contains certain provisions regarding the assumption by
CNB of outstanding Pinnacle Employee Stock Options to acquire shares of
Pinnacle Common which are described under "MERGER--Effect of Merger on
Employee Benefit and Employee Stock Option Plans--Employee Stock Option
Plans."
Additional information with respect to Pinnacle Employee Stock Options
granted to directors and executive officers of Pinnacle under the Pinnacle
Employee Stock Option Plans is incorporated by reference to Pinnacle's 1996
Annual Report on Form 10-K which is incorporated herein by reference. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
Change of Control and Severance Agreements
Pinnacle currently has in effect severance agreements (the "Severance
Agreements") with seven executive officers (the "Executives"), which include,
among other things, provisions regarding payments under certain circumstances
following a "change in control." The Executives with Severance Agreements are
Richard L. Schanze, Chairman and Chief Executive Officer, Arnold L. Weaver,
Vice Chairman of Pinnacle and President and Chief Operating Officer of
Pinnacle Bank, Donald E. Radde, Executive Vice President, David W. Kolhagen,
Senior Vice President and Chief Financial Officer, John A. Newcomer, Vice
President and Corporate Affairs Officer, Donald A. Lesch, Vice Chairman,
President and Chief Operating Officer, and Michael J. Griffin, Senior Vice
President of Pinnacle Bank. Approval of the Merger Agreement by the Pinnacle
shareholders will constitute a "change in control" under each of the Severance
Agreements.
The Severance Agreements provide, among other things, that upon a "change in
control," an Executive will be entitled to receive certain amounts in the
event that, within twenty-four months after the change in control, such
Executive's employment is terminated for any reason other than "cause" (as
defined in the Severance Agreements) or such Executive terminates his
employment for "good reason" (as defined in the Severance Agreements). In such
an event, the appropriate Severance Agreement provides that Mr. Schanze would
be entitled to receive the greater of 299% of his base amount, as determined
under Section 280G of the Code (the "Base Amount") or $1,118,000; Mr. Weaver
would be entitled to receive the greater of 299% of his Base Amount or
$559,000; Mr. Radde would be entitled to receive the greater of (a) the lesser
of (i) 200% of his total compensation or (ii) 299% of his Base Amount, or (b)
$354,000; Mr. Kolhagen would be entitled to receive the greater of (a) the
lesser of (i) 200% of his total compensation or (ii) 299% of his Base Amount,
or (b) $287,000; Mr. Newcomer would be entitled to receive the greater of (a)
the lesser of (i) 100% of his total compensation or (ii) 299% of his Base
Amount, or (b) $156,000; Mr. Lesch would be entitled to receive the greater of
(a) 299% of his Base Amount, or (b) $568,100; and Mr. Griffin would be
entitled to receive the greater of 200% of his Base Amount or $87,816. Based
upon the foregoing, the Executives will be entitled to receive the following
estimated amounts in the event that their employment is terminated within 24
months following the Merger either by CNB (as the successor by Merger with
Pinnacle) for other than "cause" or by the Executive for "good reason": Mr.
Schanze $2,202,212, Mr. Lesch $1,182,049, Mr. Weaver $1,316,946, Mr. Radde
$860,136, and Mr. Kolhagen $744,489. The aggregate amount payable in the
aggregate to the Executives if the employment of each Executive is terminated
following the Merger as provided in the preceding sentence is estimated to be
$6,729,290.
57
<PAGE>
The Severance Agreements each also provide that in the event that an
Executive's employment is terminated for cause or the Executive terminates his
employment for any reason other than good reason, in either event upon or at
any time following a change in control, such Executive will be entitled to the
following payment: Mr. Schanze, $1,118,000; Mr. Weaver, $559,000; Mr. Radde,
$354,000; Mr. Kolhagen, $287,000; Mr. Newcomer, $156,000; Mr. Lesch, $568,100;
Mr. Griffin, $87,816; and Mr. Brownlee, $88,280.
Pinnacle also currently has employment contracts in effect with Joseph F.
Heffernan, Daniel R. Buresh and James D. Neff. These employment contracts do
not provide for payments upon a change in control and no benefits will be
payable thereunder solely as a result of the consummation of the Merger.
Board Composition
Pursuant to the Merger Agreement, three persons, to be mutually selected by
CNB and Pinnacle, will be appointed to the CNB Board as of the first meeting
of the CNB Board after the Effective Time. It has not yet been determined, as
of the date of this Joint Proxy Statement/Prospectus, which three persons will
be appointed as new directors of CNB following the Merger. Directors whose
principal occupations are with CNB or any of its subsidiaries receive no
director's fees. All other directors receive annual retainer payments of
$5,000 each, plus $500 for each Board or committee meeting attended, with the
exception of joint committee meetings held with the directors of Citizens
Bank, for which a fee of $375 per meeting is paid. In addition, the non-
employee directors automatically receive 1,000 non-qualified stock options
each year on the first business day following each CNB annual meeting of
shareholders at which such directors are elected, selected or continue as
directors. The exercise price per share of the CNB Common subject to such
options equals the market value of a share of CNB Common as of the date of
grant and the options become exercisable on the second anniversary of the date
of grant. See "--Management and Operations After Merger."
Interests of CNB Board and Management
Except as described below, no member of the CNB Board or the management of
CNB has an interest in the Merger, other than as a shareholder of CNB
generally.
CNB has Change of Control Agreements (the "CNB Change of Control
Agreements") with eleven of its executive officers (the "CNB Executives"),
including James J. Giancola, President and Chief Executive Officer, John R.
Spruill, Executive Vice President and Chief Financial Officer, David L. Knapp,
Executive Vice President, M. Lynn Cooper, Executive Vice President, and Marvin
Huff, Jr., Executive Vice President (the "Named CNB Officers"). The execution
of the Merger Agreement constitutes a "Change of Control" under each of the
CNB Change of Control Agreements.
The CNB Change of Control Agreement for each CNB Executive provides that, if
his employment is terminated by CNB (or its successor) during the Change
Period (as defined below) for any reason other than "cause" (as defined in his
CNB Change of Control Agreement), death or "disability" (as defined in his CNB
Change of Control Agreement), or if he terminates his employment during the
Change Period for "good reason" (as defined in his CNB Change of Control
Agreement), then he will receive (i) a lump-sum payment equal to his
Termination Compensation (as defined below) multiplied by the number of months
in the Payment Period (as defined below), and (ii) certain family medical,
life insurance and other welfare benefits (subject to certain limitations and
at his cost as provided in his CNB Change of Control Agreement).
The "Change Period" for each of the Named CNB Officers began on October 14,
1997 (the date of the Merger Agreement; which is the "Change of Control Date"
for purposes of each of the CNB Change of Control Agreements) and ends 36
months after the Closing Date. The "Change Period" for each of the other CNB
Executives began on the Change of Control Date and ends on various dates
ranging from 18 months to 24 months after the Closing Date, as specified in
his respective CNB Change of Control Agreement. The "Termination Compensation"
for a CNB Executive is the sum of (a) his highest rate of base monthly salary
during the twelve month period immediately preceding his termination from
employment, plus (b) one-twelfth of his average
58
<PAGE>
annual incentive compensation (in each case as determined as provided in his
CNB Change of Control Agreement). The Payment Period for each CNB Executive is
the period beginning on the later of the Change of Control Date or the date of
his termination of employment and continuing for the number of months
specified in his CNB Change of Control Agreement. The number of months in the
Payment Period will, however, be reduced by one for each full calendar month
in which the CNB Executive remains in the employ of CNB after the later of the
Change of Control Date or the Closing Date of the Merger. The number of months
specified in the CNB Change of Control Agreements for each of the Named CNB
Officers is 36, and the number of months specified in the CNB Change of
Control Agreements for each of the other CNB Executives ranges from 18 to 24.
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 Pinnacle 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 Pinnacle for the entire fiscal year in which the Merger occurs; the
separately reported income of CNB and Pinnacle for prior periods will be
combined and restated as consolidated income of CNB; and no goodwill will be
created.
The Merger Agreement provides that a condition to the obligations of CNB and
Pinnacle to consummate the Merger is the receipt by each of an opinion from
KPMG Peat Marwick LLP, the independent accountants for both CNB and Pinnacle,
to the effect that the Merger will qualify for "pooling of interests"
accounting treatment under Accounting Principles Board Opinion No. 16 if
consummated in accordance with the Merger Agreement. In the event that such
condition is not met, the Merger would not be consummated unless the condition
was waived by CNB and Pinnacle (which CNB and Pinnacle has each indicated that
it does not intend to do) and the approval of CNB and Pinnacle shareholders
entitled to vote on the Merger were resolicited if such change in accounting
treatment were deemed material, in the opinion of CNB and Pinnacle, to the
financial condition and results of operations of CNB on a pro forma basis
assuming consummation of the Merger.
As of the date of this Joint Proxy Statement/Prospectus, the managements of
CNB and Pinnacle are not aware of any existing facts or circumstances which
would preclude accounting for the transaction as a pooling of interests.
The unaudited pro forma financial information contained in this Joint Proxy
Statement/Prospectus has been prepared using the pooling of interests
accounting method to account for the Merger. See "SUMMARY--Selected
Comparative Per Share Data," "--Selected Financial Data" and "PRO FORMA
FINANCIAL DATA."
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of the material federal income tax
consequences of the Merger to holders of Pinnacle Common who or which hold
their shares as capital assets. This summary deals only with holders who or
which are (i) citizens or residents of the United States; (ii) domestic
corporations; or (iii) otherwise subject to United States federal income tax
on a net income basis in respect of shares of Pinnacle Common ("U.S.
Holders"). This summary may not be applicable to certain classes of taxpayers,
including, without limitation, insurance companies, tax-exempt organizations,
financial institutions, dealers in securities, foreign persons, persons who
acquired Pinnacle Common pursuant to an exercise of employee stock options or
rights or otherwise as compensation and persons who hold shares of Pinnacle
Common in a hedging transaction or as part of a straddle or conversion
transaction. The discussion also does not address state, local or foreign tax
consequences of the Merger. Consequently, each holder should consult such
holder's own tax advisor as to the specific tax consequences of the Merger to
such holder.
This summary is based on current laws, regulations, rulings, practice and
judicial decisions in effect on the date of this Joint Proxy
Statement/Prospectus and the opinion of Lewis, Rice & Fingersh, L.C.
Legislative, judicial or administrative changes or interpretations may,
however, be forthcoming that could alter or modify the
59
<PAGE>
statements and conclusions set forth herein. Any such changes may or may not
be retroactive and could affect the tax consequences to U.S. Holders described
herein. The opinion of Lewis, Rice & Fingersh, L.C. set forth in this summary
is based, among other things, on representations relating to certain facts and
circumstances of, and the intentions of the parties to, the Merger.
THE OBLIGATIONS OF PINNACLE AND CNB TO CONSUMMATE THE MERGER ARE SUBJECT TO
THE RECEIPT OF THE OPINION OF LEWIS, RICE & FINGERSH, L.C. OUTLINED BELOW. THE
OPINION OF LEWIS, RICE & FINGERSH, L.C. SUMMARIZED BELOW WILL NOT, HOWEVER, BE
BINDING UPON THE INTERNAL REVENUE SERVICE. NEITHER PINNACLE NOR CNB HAS
REQUESTED OR WILL REQUEST A RULING FROM THE INTERNAL REVENUE SERVICE AS TO THE
TAX CONSEQUENCES OF THE MERGER.
In the opinion of Lewis, Rice & Fingersh, L.C., the following will be the
material federal income tax consequences of the Merger 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 CNB or Pinnacle as a result of
the consummation of the Merger;
(iii) no gain or loss will be recognized by a U.S. Holder, except as
described below with respect to a U.S. Holder of Pinnacle Common who
receives cash in lieu of a fractional share interest of CNB Common;
(iv) the aggregate adjusted tax basis of shares of CNB Common (including
a fractional share interest of CNB Common deemed received and redeemed as
described below) received by a U.S. Holder will be the same as the
aggregate adjusted tax basis of the shares of Pinnacle Common exchanged
therefor;
(v) the holding period of the shares of CNB Common (including the holding
period of a fractional share interest of CNB Common) received by a U.S.
Holder will include the holding period of the Pinnacle Common exchanged
therefor; and
(vi) a U.S. Holder of Pinnacle Common who receives cash in the Merger in
lieu of a fractional share interest of CNB Common will be treated as having
received such fractional share interest and then as having received such
cash in redemption of such fractional share interest. Under Section 302 of
the Code, provided that such deemed distribution is "substantially
disproportionate" with respect to such U.S. Holder or is "not essentially
equivalent to a dividend" after giving effect to the constructive ownership
rules of the Code, the U.S. Holder will generally recognize capital gain or
loss equal to the difference between the amount of cash received and the
U.S. Holder's adjusted tax basis in the fractional share interest in CNB
Common. Such capital gain or loss will be long-term capital gain or loss if
the U.S. Holder's holding period in the fractional shares is more than one
year. Long-term capital gain of an individual U.S. Holder is subject to a
maximum rate of 28% in respect of property held for more than one year. The
maximum rate is reduced to 20% for property held for more than eighteen
months.
TERMINATION OF MERGER AGREEMENT
Termination
The Merger may be terminated at any time prior to the Closing Date (i) by
mutual written agreement of CNB and Pinnacle (regardless of whether
shareholder approval of the Merger Agreement by either the shareholders of CNB
or Pinnacle had previously been obtained); (ii) by either party in the event
of a material breach by the other party of any of its representations and
warranties or agreements under the Merger Agreement provided that such breach
is not cured within 30 days after the non-breaching party provides written
notice to the breaching party to cure such breach (see "MERGER--
Representations and Warranties"); (iii) by CNB if certain reports of
environmental inspection on the real properties of Pinnacle to be obtained
pursuant to the Merger Agreement should disclose any matters requiring
remedial or corrective measures the cost of which exceeds $5 million (as
determined in accordance with the Merger Agreement and described under
"MERGER--Certain Other Agreements--Pinnacle--Environmental Inspections;" the
subject reports have been obtained and,
60
<PAGE>
given the results thereof, CNB has determined to waive its right to terminate
the Merger Agreement on account thereof); (iv) by either party in the event
that any of 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) if any regulatory application is finally denied
or disapproved by the respective regulatory authority (see "MERGER--Regulatory
Approvals"); (vi) by CNB if the CNB Board reasonably and in good faith
determines that any requisite regulatory approval imposes a "Burdensome
Condition" (defined in the Merger Agreement as any condition, requirement or
restriction that the CNB Board reasonably determines in good faith would so
materially adversely impact the economic or business benefits of the
transactions contemplated by the Merger Agreement to CNB and its shareholders
as to render consummation of the Merger inadvisable); (vii) by either party if
the Merger Agreement and the transactions contemplated thereby, including the
Merger, are not approved by the shareholders of CNB and Pinnacle (see "CNB
MEETING--Vote Required" and "PINNACLE MEETING--Vote Required"); (viii) by
either party in the event that the other party's Board of Directors withdraws
or modifies its approval or recommendation of the Merger Agreement in any
manner adverse to the first party or resolves or publicly announces an
intention to do either of the foregoing; (ix) by either party in the event
that the other party or any of such other party's 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 which would have a Material Adverse
Effect on such other party; and (x) by either party if the Merger is not
consummated on or prior to September 30, 1998, unless the failure of the
Closing Date to occur prior to or on such date is due to the failure of the
party seeking to terminate the Merger Agreement to perform or observe the
covenants and agreements of such party set forth in the Merger Agreement.
Conversion Ratio Adjustment
The Merger Agreement also provides that Pinnacle may terminate the Merger
Agreement if each of the following conditions are met: (i) the CNB Average
Price (as defined below) is less than $36.00, and (ii) the number obtained by
dividing the CNB Average Price by the CNB Starting Price (as defined below) is
less than the number obtained by dividing the Index Average Price (as defined
below) by the Index Starting Price (as defined below) and multiplying such
quotient by 0.82.
Assuming that the Effective Time of the Merger was February 13, 1998,
neither of the conditions set forth in the preceding paragraph would have been
satisfied and a Price Termination Event would not have occurred. Under the
condition set forth in clause (i) in the preceding paragraph, the CNB Average
Price would have been $43.02, well above the $36.00 requirement. Under the
condition set forth in clause (ii) in the preceding paragraph, the CNB Average
Price ($43.02) divided by the CNB Starting Price ($43.41) would have been
0.99, which would have exceeded 0.86 (which is the number obtained by dividing
the Index Average Price ($42.01) by the Index Starting Price ($39.85) and
multiplying such quotient by 0.82). Although as set forth under "SUMMARY--
Comparative Stock Prices" the closing price of CNB Common was below $36.00
during the first quarter of 1997, CNB has no reason to expect that the CNB
Average Price would be less than $36.00 between the date hereof and the
Effective Time or that the other condition to a Price Termination Event
(described in clause (ii) in the preceding paragraph) would occur between the
date hereof and the Effective Time.
If a Price Termination Event occurs and Pinnacle exercises its right as a
result thereof to terminate the Merger Agreement, it must give written notice
to CNB of its election to terminate the Merger Agreement within two business
days of the Determination Date (as defined below). Within two business days
after the receipt of such notice, CNB will have the option of increasing the
Conversion Ratio to equal a number equal to a quotient, the numerator of which
is the product of $36.00 and the Conversion Ratio (as then in effect) and the
denominator of which is the CNB Average Price. If CNB elects to make such an
adjustment to the Conversion Ratio, the Merger Agreement will remain in effect
in accordance with its terms (except for the adjustment to the Conversion
Ratio).
The Pinnacle Board has not made any present determination as to whether, or
under what circumstances, it would exercise its right to terminate the Merger
Agreement in the event that a Price Termination Event should occur. At the
present time and based on present market conditions, the management of
Pinnacle believes that it
61
<PAGE>
is unlikely that a Price Termination Event will occur. Nevertheless, in the
event that a Price Termination Event were to occur, the Pinnacle Board, in the
exercise of its fiduciary duties and acting with the advice and counsel of its
financial advisors and legal counsel, would assess its right to terminate the
Merger Agreement and would make a determination whether to exercise such right
to terminate the Merger Agreement, taking into account all current
circumstances then deemed relevant by the Pinnacle Board, which would likely
involve consideration of the various factors considered by the Pinnacle Board
in making its initial determination to approve the Merger Agreement. See "--
Reasons for Merger; Recommendation of Pinnacle Board."
CIBC Oppenheimer's fairness opinion dated as of the date of this Joint Proxy
Statement/Prospectus is based upon conditions and circumstances in effect on
such date. Accordingly, such opinion does not address the circumstances that
may arise if a Price Termination Event were to occur and CNB were to elect to
increase the number of shares of CNB Common to be issued in the Merger as
described in the preceding paragraph. It is currently expected that, in such
event, the CNB Board would request a reaffirmation from CIBC Oppenheimer of
its fairness opinion in connection with its determination of whether to
increase the number of shares of CNB Common to be issued in the Merger. See
"--Fairness Opinions of Financial Advisors--CNB."
"CNB Average Price" means the average of the daily closing prices of CNB
Common as reported in The Wall Street Journal (Midwest Edition) for the twenty
N.Y.S.E. trading days preceding the Determination Date.
"Determination Date" means the fifth calendar day prior to the Closing Date.
"CNB Starting Price" means the average of the daily closing prices of CNB
Common as reported in The Wall Street Journal (Midwest Edition) for the ten
consecutive full N.Y.S.E. trading days commencing on the day five full
N.Y.S.E. trading days before the first public announcement of the Merger.
"Index Average Price" means the weighted average (weighted in accordance
with the factors listed in the Merger Agreement) of the Stock Prices (as
defined below) for all of the companies comprising the Index Group (as defined
below) for the twenty consecutive full N.Y.S.E. trading days ending on the
Determination Date.
"Index Starting Price" means the weighted average (weighted in accordance
with the factors listed in the Merger Agreement) of the Stock Prices for all
of the companies comprising the Index Group for the ten consecutive full
N.Y.S.E. trading days commencing on the day five full N.Y.S.E. trading days
before the first public announcement of the Merger.
"Stock Price" means, for any company belonging to the Index Group, the
average of the daily closing sale prices of a share of common stock of such
company, as reported in the consolidated transaction reporting system for the
market or exchange on which such common stock is principally traded during the
applicable period. The Stock Price, for any company belonging to the Index
Group, will be appropriately and proportionately adjusted to reflect any share
adjustment effected by such company during the applicable period.
"Index Group" means all of those companies listed in the Merger Agreement,
the common stock of which is publicly traded and as to which there is no
pending publicly announced agreement or proposal at any time during the period
of ten N.Y.S.E. trading days ending on the Determination Date for such company
to be acquired or to acquire another company in exchange for its stock where,
in such later case, such company to be acquired would be a significant
subsidiary of such acquiring company. In the event that any such company or
companies are so removed from the Index Group, the weights attributed to the
remaining companies will be adjusted accordingly.
TERMINATION FEE
The Merger Agreement provides that upon the occurrence of a Purchase Event
(as such term is hereafter defined under "PINNACLE STOCK OPTION AGREEMENT"),
Pinnacle must pay CNB $4.7 million in immediately available funds, provided
that such Purchase Event takes place prior to the occurrence of an
62
<PAGE>
Exercise Termination Event (as such term is hereafter defined under "PINNACLE
STOCK OPTION AGREEMENT"). See "PINNACLE STOCK OPTION AGREEMENT."
NO APPRAISAL RIGHTS OF DISSENTING SHAREHOLDERS
Neither holders of CNB Common nor holders of Pinnacle Common have any
dissenters' or appraisal rights under the Indiana Corporate Law or the
Michigan Corporate Law, respectively, in connection with the Merger.
NO SOLICITATION
The Merger Agreement provides that, unless and until the Merger Agreement
has been terminated, Pinnacle and its subsidiaries will not, and will not
authorize or permit any of their respective officers, directors, employees or
agents to directly or indirectly solicit, initiate, encourage or, subject to
the fiduciary duties of the directors of Pinnacle as advised by counsel, hold
discussions or negotiations with or provide information to, any person in
connection with any proposal from any person relating to the acquisition of
all or a substantial portion of the business, assets or shares of Pinnacle
Common or any of its subsidiaries. Pinnacle is required to advise CNB of its
receipt of any such proposal or inquiry within twenty-four hours.
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 either CNB or Pinnacle, except that the provisions
relating to the Merger Consideration will not be amended after the receipt of
the approval of CNB and Pinnacle shareholders unless the approval of such
shareholders is resolicited. It is anticipated that a condition to the
obligations of CNB and Pinnacle to consummate the Merger would be waived only
in those circumstances where the CNB Board or the Pinnacle Board, as the case
may be, deems such waiver to be in the best interests of such company and its
shareholders.
EXPENSES AND FEES
The Merger Agreement provides that in the event the Merger Agreement is
terminated or the Merger is abandoned, no party will have any liability to the
other party for costs, expenses, damages or otherwise, except that in the
event the Merger Agreement is terminated on account of a willful breach of any
of the representations and warranties set forth in the Merger Agreement or on
account of any willful breach of any of the agreements set forth in the Merger
Agreement, the non-breaching party will 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 incident to the
negotiation, preparation, execution and performance of the Merger Agreement.
RESALE OF CNB COMMON
The shares of CNB Common issued pursuant to the Merger will be freely
transferable under the Securities Act except for those shares issued to any
Pinnacle shareholder who may be deemed to be an "affiliate" of CNB for
purposes of Rule 144 promulgated under the Securities Act or an "affiliate" of
Pinnacle for purposes of Rule 145 promulgated under the Securities Act.
Persons who may be deemed to be affiliates of Pinnacle or CNB generally
include individuals who, or entities which, control, are controlled by or are
under common control with Pinnacle or CNB and will include directors and
certain officers of Pinnacle and CNB and may include principal shareholders of
Pinnacle and CNB.
Rules 144 and 145 will restrict the sale of CNB Common received by
affiliates in the Merger. Generally, during the one year following the
Effective Time, those persons who are affiliates of Pinnacle at the time of
the Pinnacle 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
63
<PAGE>
amount of CNB Common sold by them in any three-month period and as to the
manner of sale. After the one-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.
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 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.
S.E.C. guidelines regarding qualifying for the "pooling of interests" method
of accounting also limit sales of shares of the acquiring and acquired company
by affiliates of either company in a business combination. S.E.C. guidelines
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 CNB and Pinnacle will each use its best
efforts to obtain and deliver to the other party an agreement from each such
affiliate providing that such affiliate will not transfer any shares of CNB
Common received in the Merger (or otherwise owned by such affiliate) except
(in the case of Pinnacle affiliates) in compliance with the Securities Act and
(in the case of CNB and Pinnacle affiliates) in compliance with the
requirements of Accounting Principles Board Opinion No. 16 regarding the non-
disposition of any shares of Pinnacle 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 Pinnacle after the Merger have been published.
CNB will publish financial results covering at least thirty days of post-
Merger combined operations not later than forty-five days following the end of
the calendar quarter which first occurs following the Closing Date which
includes thirty or more days of post-Merger combined operations.
This Joint Proxy Statement/Prospectus does not cover resales of shares of
CNB Common received by any person who may be deemed to be an affiliate of
Pinnacle or CNB.
PINNACLE STOCK OPTION AGREEMENT
GENERAL
As an inducement for CNB to enter into the Merger Agreement, Pinnacle
entered into the Pinnacle Stock Option Agreement with CNB, pursuant to which
Pinnacle granted the Pinnacle Option to CNB. The Pinnacle Option grants CNB
the right to purchase from Pinnacle, at a purchase price of $37.00 per share,
up to 2,000,000 shares of Pinnacle Common (subject to adjustment in certain
circumstances), which constituted approximately 16.2% of the issued and
outstanding shares of Pinnacle Common as of the date of the Merger Agreement,
without giving effect to the exercise of the Pinnacle Option. The purchase of
any shares of Pinnacle Common pursuant to the Pinnacle Option is subject to
compliance with applicable laws, including the receipt of necessary approvals
under the B.H.C.A. See "MERGER--Regulatory Approvals."
The Pinnacle Stock Option Agreement and the Pinnacle Option are intended to
increase the likelihood that the Merger will be consummated according to the
terms set forth in the Merger Agreement and may be expected to discourage
offers by third parties to acquire Pinnacle prior to the Merger.
THE PINNACLE OPTION
Provided that (i) CNB is not in material breach of the Pinnacle Stock Option
Agreement or the Merger Agreement, and (ii) no preliminary or permanent
injunction or other court order against delivery of the shares
64
<PAGE>
covered by the Pinnacle Option is in effect, CNB may exercise the Pinnacle
Option, in whole or in part, at any time and from time to time following the
occurrence of a "Purchase Event," including (a) the acquisition by any person,
other than CNB or any subsidiary of CNB or a subsidiary of Pinnacle acting in
a fiduciary capacity in the ordinary course of business, of "beneficial
ownership" (as such term is defined in the Exchange Act and the rules and
regulations thereunder) of shares of Pinnacle Common, such that, upon the
consummation of such acquisition, such person would have beneficial ownership,
in the aggregate, of 20% or more of the then outstanding shares of Pinnacle
Common; or (b) the entry by Pinnacle or any of its subsidiaries into an
agreement to engage in an Acquisition Transaction (as defined below) with any
person, other than CNB or any subsidiary of CNB, or the recommendation by the
Pinnacle Board that the holders of Pinnacle Common approve or accept any
Acquisition Transaction with any person other than CNB or any subsidiary of
CNB. As used herein, "Acquisition Transaction" means (x) a merger or
consolidation, or any similar transaction, involving Pinnacle or any of its
subsidiaries, (y) a purchase, lease or other acquisition of all or
substantially all of the assets of or assumption of all or substantially all
the deposits of Pinnacle or any of its subsidiaries, or (z) 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
Pinnacle or any of its subsidiaries, provided that the term "Acquisition
Transaction" does not include any internal merger or consolidation, transfer
or lease of assets or voting securities involving only Pinnacle and/or its
subsidiaries.
TERMINATION OF PINNACLE OPTION
The Pinnacle Option will terminate and be of no further force and effect
upon the earliest to occur of (i) the time immediately prior to the Effective
Time; (ii) twelve months after the first occurrence of a Purchase Event; (iii)
eighteen months after the termination of the Merger Agreement following the
occurrence of a Preliminary Purchase Event (as defined below); (iv)
termination of the Merger Agreement in accordance with its terms prior to the
occurrence of a Purchase Event or a Preliminary Purchase Event (other than a
termination of the Merger Agreement by CNB pursuant to Section 7.02 thereof
(breach of the Merger Agreement by either party entitling the other party to
terminate the Merger Agreement) or by CNB and Pinnacle pursuant to Section
7.01 thereof (mutual agreement to terminate Merger Agreement) if, at such
time, CNB is entitled to terminate the Merger Agreement pursuant to Section
7.02 thereof (provided that the breach by Pinnacle giving rise to such
termination or such right to terminate was willful)); (v) eighteen months
after the termination of the Merger Agreement by CNB pursuant to Section 7.02
thereof or by CNB and Pinnacle pursuant to Section 7.01 thereof if CNB, at
such time, is entitled to terminate the Merger Agreement pursuant to Section
7.02 thereof (provided that the breach by Pinnacle giving rise to such
termination or such right to terminate was willful).
The term "Preliminary Purchase Event" means any of the following events or
transactions occurring after the date of the Pinnacle Stock Option Agreement:
(i) Pinnacle or any of its subsidiaries, without having received CNB's
prior written consent, enters into an agreement to engage in an Acquisition
Transaction with any person other than CNB or any subsidiary of CNB or the
Pinnacle Board recommends that the shareholders of Pinnacle approve or
accept any Acquisition Transaction with any person other than CNB or any
subsidiary of CNB;
(ii) any person, other than CNB or any subsidiary of CNB or any
subsidiary of Pinnacle acting in a fiduciary capacity in the ordinary
course of business, acquires beneficial ownership or the right to acquire
beneficial ownership of shares of Pinnacle Common such that, upon the
consummation of such acquisition, such person would have beneficial
ownership, in the aggregate, of 10% or more of the then outstanding shares
of Pinnacle Common, or, with respect to any person who as of the date of
the Pinnacle Stock Option Agreement beneficially owns 10% or more of the
outstanding shares of Pinnacle Common, such person acquires beneficial
ownership or the right to acquire beneficial ownership of shares of
Pinnacle Common such that, upon the consummation of such acquisition, such
person would have beneficial ownership, in the aggregate, of 15% or more of
the then outstanding shares of Pinnacle Common;
(iii) any person, other than CNB or any subsidiary of CNB, makes a bona
fide proposal to Pinnacle or its shareholders, by public announcement or
written communication that is or becomes the subject of public
65
<PAGE>
disclosure, to engage in an Acquisition Transaction (including, without
limitation, any situation in which any person other than CNB or any
subsidiary of CNB commences (as such term is defined in Rule 14d-2 under
the Exchange Act) or files a registration statement under the Securities
Act, with respect to, a tender offer or exchange offer to purchase any
shares of Pinnacle Common such that, upon consummation of such offer, such
person would own or control 10% or more of the then outstanding shares of
Pinnacle Common (such an offer being referred to herein as a "Tender Offer"
or an "Exchange Offer," respectively));
(iv) after a third party makes a proposal to Pinnacle or its shareholders
to engage in an Acquisition Transaction, or such third party states its
intention to make such a proposal if the Merger Agreement terminates and/or
the Pinnacle Option expires, Pinnacle breaches any covenant or obligation
contained in the Merger Agreement and such breach entitles CNB to terminate
the Merger Agreement (without regard to the cure period provided for
therein unless such cure is promptly effected without jeopardizing
consummation of the Merger pursuant to the terms of the Merger Agreement);
(v) the holders of Pinnacle Common fail to approve the Merger Agreement
by the requisite vote at the meeting of such shareholders held for the
purpose of voting on the Merger Agreement, or such meeting is not held or
is canceled prior to termination of the Merger Agreement, in each case
after it is publicly announced that any person (other than CNB or any
subsidiary of CNB) has (A) made, or disclosed an intention to make, a
proposal to engage in an Acquisition Transaction, (B) commenced a Tender
Offer or filed a registration statement under the Securities Act with
respect to an Exchange Offer, or (C) filed an application (or given a
notice) with, whether in draft or final form, the Federal Reserve Board or
any other governmental authority or regulatory or administrative agency or
commission (each, a "Governmental Authority") for approval to engage in an
Acquisition Transaction;
(vi) any person (other than CNB or any subsidiary of CNB), other than in
connection with a transaction to which CNB has given its prior written
consent, files an application or notice with the Federal Reserve Board or
other Governmental Authority for approval to engage in an Acquisition
Transaction; or
(vii) the Pinnacle Board withdraws or modifies (or publicly announces its
intention to withdraw or modify) in any manner adverse in any respect to
CNB its recommendation that the shareholders of Pinnacle approve the
transactions contemplated by the Merger Agreement, or Pinnacle or any of
its subsidiaries authorize, recommend, propose (or publicly announce its
intention to authorize, recommend or propose) an agreement to engage in an
Acquisition Transaction with any person other than CNB or any subsidiary of
CNB.
The Pinnacle Stock Option Agreement is attached hereto as Appendix B and is
incorporated by reference herein and reference is made thereto for the
complete terms of the Pinnacle Stock Option Agreement and the Pinnacle Option.
The foregoing discussion is qualified in its entirety by reference to the
Pinnacle Stock Option Agreement.
66
<PAGE>
PRO FORMA FINANCIAL DATA
The following unaudited pro forma combined condensed balance sheet as of
September 30, 1997, and the pro forma combined condensed statements of income
for the nine months ended September 30, 1997 and 1996, and for each of the
years in the three-year period ended December 31, 1996, give effect to the
Merger based on the historical consolidated financial statements of CNB and
its subsidiaries, which have been restated to reflect the merger with BMC
Bancshares, Inc., and the historical financial statements of Pinnacle and its
subsidiaries, which have been restated to reflect the mergers with IFC and CB,
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 Pinnacle 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 and Pinnacle
incorporated by reference herein. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
67
<PAGE>
CNB BANCSHARES, INC./PINNACLE FINANCIAL SERVICES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA CNB/PINNACLE
CNB PINNACLE ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ------------
INCREASE
(DECREASE)
<S> <C> <C> <C> <C>
ASSETS:
Cash and due from banks... $ 96,933 $ 44,477 $ 141,410
Short-term money market
investments.............. 831 7,940 8,771
Investment securities
available for sale....... 1,455,699 494,514 1,950,213
Investment securities..... 237,387 0 237,387
Loans held for sale....... 17,969 9,528 27,497
Loans..................... 2,436,103 1,524,195 3,960,298
Allowance for loan
losses................. (34,110) (24,414) (58,524)
---------- ---------- ------- ----------
Net loans................. 2,401,993 1,499,781 3,901,774
Premises and equipment.... 74,263 28,152 $(5,000)(2) 97,415
Foreclosed properties..... 2,354 2,633 4,987
Intangible assets......... 31,554 17,392 48,946
Interest receivable and
other assets............. 97,588 75,914 6,600 (2) 180,102
---------- ---------- ------- ----------
Total Assets.......... $4,416,571 $2,180,331 $ 1,600 $6,598,502
========== ========== ======= ==========
LIABILITIES:
Deposits.................. 3,054,444 1,471,956 4,526,400
Repurchase agreements..... 656,046 55,114 711,160
Federal funds purchased
and other short-term
borrowings............... 76,998 31,525 108,523
FHLB advances and other
long-term debt........... 257,826 428,571 686,397
Other liabilities......... 41,453 23,418 17,600 (2) 82,471
---------- ---------- ------- ----------
Total Liabilities..... 4,086,767 2,010,584 17,600 6,114,951
SHAREHOLDERS' EQUITY:
Common stock.............. 20,463 19,110 (6,319)(1) 33,254
Capital surplus........... 285,321 69,581 6,319 (1) 361,221
Retained earnings......... 19,995 79,381 (16,000)(2) 83,376
Net unrealized gains on
investment securities
available for sale....... 4,025 1,675 5,700
---------- ---------- ------- ----------
Total Shareholders'
Equity................... 329,804 169,747 (16,000) 483,551
---------- ---------- ------- ----------
Total Liabilities and
Equity............... $4,416,571 $2,180,331 $ 1,600 $6,598,502
========== ========== ======= ==========
</TABLE>
See Notes to Unaudited Pro Forma Combined Condensed Financial Statements.
68
<PAGE>
CNB BANCSHARES, INC./PINNACLE FINANCIAL SERVICES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA CNB/PINNACLE
CNB PINNACLE ADJUSTMENTS PRO FORMA
-------- -------- ----------- ------------
INCREASE
(DECREASE)
<S> <C> <C> <C> <C>
Interest income.................... $247,730 $124,331 $ $372,061
Interest expense................... 129,903 68,774 198,677
-------- -------- ---- --------
Net interest income.............. 117,827 55,557 -- 173,384
Provision for loan losses.......... 8,554 12,520 21,074
-------- -------- ---- --------
Net interest income after provision
for losses........................ 109,273 43,037 -- 152,310
Non-interest income................ 43,774 13,799 57,573
Non-interest expense............... 98,217 48,918 147,135
-------- -------- ---- --------
Income before income taxes......... 54,830 7,918 -- 62,748
Income taxes....................... 18,462 3,049 21,511
-------- -------- ---- --------
Net income......................... $ 36,368 $ 4,869 $-- $ 41,237
======== ======== ==== ========
Net income per common share........ $ 1.75 $ 1.23
Average shares outstanding......... 20,829 33,487
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
69
<PAGE>
CNB BANCSHARES, INC./PINNACLE FINANCIAL SERVICES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA CNB/PINNACLE
CNB PINNACLE ADJUSTMENTS PRO FORMA
-------- -------- ----------- ------------
INCREASE
(DECREASE)
<S> <C> <C> <C> <C>
Interest income.................... $224,372 $107,777 $ $332,149
Interest expense................... 114,071 57,648 171,719
-------- -------- ---- --------
Net interest income.............. 110,301 50,129 -- 160,430
Provision for loan losses.......... 6,878 1,571 8,449
-------- -------- ---- --------
Net interest income after provision
for losses........................ 103,423 48,558 -- 151,981
Non-interest income................ 41,903 9,198 51,101
Non-interest expense............... 104,289 41,866 146,155
-------- -------- ---- --------
Income before income taxes......... 41,037 15,890 -- 56,927
Income taxes....................... 13,975 4,838 18,813
-------- -------- ---- --------
Net income......................... $ 27,062 $ 11,052 $-- $ 38,114
======== ======== ==== ========
Net income per common share........ $ 1.30 $ 1.14
Average shares outstanding......... 20,880 33,342
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
70
<PAGE>
CNB BANCSHARES, INC./PINNACLE FINANCIAL SERVICES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA CNB/PINNACLE
CNB PINNACLE ADJUSTMENTS PRO FORMA
-------- -------- ----------- ------------
INCREASE
(DECREASE)
<S> <C> <C> <C> <C>
Interest income.................... $303,825 $147,903 $ $451,728
Interest expense................... 154,897 79,599 234,496
-------- -------- ---- --------
Net interest income.............. 148,928 68,304 -- 217,232
Provision for loan losses.......... 10,602 2,681 13,283
-------- -------- ---- --------
Net interest income after provision
for losses........................ 138,326 65,623 -- 203,949
Non-interest income................ 55,833 12,853 68,686
Non-interest expense............... 136,994 54,946 191,940
-------- -------- ---- --------
Income before income taxes......... 57,165 23,530 -- 80,695
Income taxes....................... 19,570 7,443 27,013
-------- -------- ---- --------
Net income......................... $ 37,595 $ 16,087 $-- $ 53,682
======== ======== ==== ========
Net income per common share........ $ 1.80 $ 1.60
Average shares outstanding......... 20,942 33,584
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
71
<PAGE>
CNB BANCSHARES, INC./PINNACLE FINANCIAL SERVICES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA CNB/PINNACLE
CNB PINNACLE ADJUSTMENTS PRO FORMA
-------- -------- ----------- ------------
INCREASE
(DECREASE)
<S> <C> <C> <C> <C>
Interest income.................... $279,964 $107,916 $ $387,880
Interest expense................... 143,379 55,069 198,448
-------- -------- ---- --------
Net interest income.............. 136,585 52,847 -- 189,432
Provision for loan losses.......... 6,927 1,422 8,349
-------- -------- ---- --------
Net interest income after provision
for losses........................ 129,658 51,425 -- 181,083
Non-interest income................ 46,628 9,809 56,437
Non-interest expense............... 118,448 38,660 157,108
-------- -------- ---- --------
Income before income taxes......... 57,838 22,574 -- 80,412
Income taxes....................... 21,212 6,353 27,565
-------- -------- ---- --------
Net income......................... $ 36,626 $ 16,221 $-- $ 52,847
======== ======== ==== ========
Net income per common share........ $ 1.76 $ 1.68
Average shares outstanding......... 20,835 31,509
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
72
<PAGE>
CNB BANCSHARES, INC./PINNACLE FINANCIAL SERVICES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA CNB/PINNACLE
CNB PINNACLE ADJUSTMENTS PRO FORMA
-------- -------- ----------- ------------
INCREASE
(DECREASE)
<S> <C> <C> <C> <C>
Interest income.................... $232,347 $82,067 $ $314,414
Interest expense................... 107,971 38,371 146,342
-------- ------- ---- --------
Net interest income.............. 124,376 43,696 -- 168,072
Provision for loan losses.......... 7,156 382 7,538
-------- ------- ---- --------
Net interest income after provision
for losses........................ 117,220 43,314 -- 160,534
Non-interest income................ 47,055 9,071 56,126
Non-interest expense............... 115,138 31,804 146,942
-------- ------- ---- --------
Income before income taxes......... 49,137 20,581 -- 69,718
Income taxes....................... 17,395 6,369 23,764
-------- ------- ---- --------
Net income......................... $ 31,742 $14,212 $-- $ 45,954
======== ======= ==== ========
Net income per common share........ $ 1.53 $ 1.47
Average shares outstanding......... 20,757 31,357
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
73
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(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 Pinnacle will be retained. In connection with the Merger, CNB
will exchange 1.0365 shares of CNB Common for each share of Pinnacle
Common (subject to adjustment as provided elsewhere in this Joint Proxy
Statement/Prospectus). A total of 12,790,885 shares of CNB Common are
expected to be issued, resulting in a transfer from common stock to
capital surplus of $6,319,000 to reflect the decrease in aggregate par
value of the currently outstanding Pinnacle Common over the stated value
of the issued and outstanding shares of CNB Common.
On August 1, 1997 Pinnacle completed mergers with IFC and CB, each of which
was accounted for under the pooling of interests method of accounting. In
connection with the IFC and CB mergers, Pinnacle recorded $11.1 million of
pre-tax restructuring charges and increased its provision for loan losses
by $10.0 million pre-tax. The restructuring charges included legal and
accounting expenses, compensation and employee contracts, write-off of
computer contracts, investment advisor fees and other charges. The
increased provision for loan losses was primarily attributable to the
conformity of loan loss reserve methodologies of IFC and CB to that of
Pinnacle.
The pro forma adjustments reflect management's best estimate based upon
available information at this time. Actual adjustments may differ from
those reflected in the consolidated Pro Forma Combined Condensed Financial
Statements. CNB and Pinnacle are in the process of reviewing their
respective accounting policies which may make it necessary to restate
certain amounts in the financial statements to conform accounting policies.
In management's opinion any such restatements will not be material.
(2) In connection with the Merger, CNB and Pinnacle expect to incur pre-tax
Merger related expenses of approximately $22.6 million ($16.0 million
after tax), which will include $7.9 million in technology--related costs
(including contract termination, software and equipment write-offs), $7.5
million in personnel costs, and $7.2 million in other Merger costs
(including investment advisor and legal fees). These amounts, including
the related tax effect, have been reflected in the Unaudited Pro Forma
Combined Condensed Balance Sheet as of September 30, 1997, but are not
reflected in the Unaudited Pro Forma Combined Condensed Statements of
Income because they are not expected to have a continuing impact on the
combined organization.
(3) The combined organization expects to achieve cost savings through the
consolidation of data processing and back office operations and a
reduction of corporate overhead. The combined organization also expects to
improve net interest income through a restructuring of the investment
portfolio and borrowed funds position and to increase non-interest income
through expanded product lines and sales efforts. CNB has previously
estimated that cost savings of 10% to 15% of Pinnacle's costs are possible
in connection with the Merger. CNB believes that its estimates of
projected cost savings, which are less than the cost savings estimated by
other acquirors in several recent larger bank acquistions, are appropriate
because (i) the Merger constitutes a market expansion for CNB (rather than
an in-market transaction in which cost savings may be more readily
identifiable), (ii) the estimates are consistent with CNB's strategy to
focus on revenue growth rather than solely on a more short-term strategy
of cost cutting, and (iii) the estimates take into consideration that
Pinnacle has recently completed two acquisions (IFC and CB) in which it
increased its asset size by approximately 95% and, in connection
therewith, is currently realizing cost savings. No adjustments have been
included in the Unaudited Pro Forma Combined Condensed Financial
Statements for the anticipated cost savings or revenue enhancements. There
can be no assurance that the anticipated cost savings or revenue
enhancements will be achieved in the expected amounts or time frames.
74
<PAGE>
DESCRIPTION OF CNB COMMON 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, 1997,
20,463,204 shares of CNB Common were issued and outstanding and no shares of
preferred stock were issued and outstanding. The CNB Board 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 CNB Board under the
Indiana Corporate Law.
DIVIDEND RIGHTS
Holders of CNB Common are entitled to receive dividends when as and if
declared by the CNB Board 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 timing and amount of future dividends will
depend, among other things, upon the earnings and financial condition of CNB
and its subsidiaries. In addition, the ability of the subsidiary banks of CNB
to pay cash dividends, which are expected to continue to be CNB's principal
source of income, is restricted by applicable banking laws.
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 CNB Board.
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.
NO PREEMPTIVE RIGHTS
Holders of shares of CNB Common do not have the preemptive right to
subscribe on a pro-rata basis for any presently or subsequently authorized
shares of CNB Common.
ASSESSMENT AND REDEMPTION
The shares of CNB Common presently outstanding are, and the shares of CNB
Common to be issued by CNB pursuant to the Merger will be, when issued and
delivered pursuant to the Merger Agreement and as described herein, duly
authorized, validly issued, fully paid and non-assessable. There are no
redemption or sinking fund provisions applicable to the shares of CNB Common.
TRANSFER AGENT
Citizens Bank is the transfer agent for shares of CNB Common.
75
<PAGE>
COMPARISON OF SHAREHOLDER RIGHTS
The rights of holders of shares of CNB Common are governed by the Indiana
Corporate Law and by CNB's Articles of Incorporation, Bylaws and other
corporate documents. The rights of holders of shares of Pinnacle Common are
governed by the Michigan Corporate Law and by Pinnacle's Articles of
Incorporation, Bylaws and other corporate documents. The rights of holders of
shares of Pinnacle 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 Pinnacle 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 Corporate Law would govern
the transaction).
The primary purpose of CNB's "fair price" provision is to provide additional
safeguards for the remaining shareholders in the event that an individual or
entity becomes a 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.
76
<PAGE>
Pinnacle
Pinnacle's Articles of Incorporation and Bylaws do not contain any type of
supermajority voting provision analogous to the "fair price" provision
contained in CNB's Articles of Incorporation. The Michigan Corporate Law does,
however, contain a "fair price" statute. See "COMPARISON OF SHAREHOLDER
RIGHTS--Takeover Statutes--Pinnacle."
Under the Michigan Corporate Law, the affirmative vote of at least a
majority 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.
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 that such a change would be desirable.
Pinnacle
Under the Michigan Corporate Law, directors may be removed with or without
cause unless the corporation's articles of incorporation provide otherwise.
Because Pinnacle's Articles of Incorporation contain no contrary provision,
Pinnacle directors are subject to removal by shareholders with or without
cause by the affirmative vote of a majority of shares entitled to vote at an
election of directors.
Amendments to Articles of Incorporation
CNB
The Indiana Corporate Law provides that, unless a greater vote is required
under a specific provision of the Indiana Corporate Law or by a corporation's
articles of incorporation or its board of directors, a corporation may amend
its articles of incorporation upon 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 Corporate Law, a
corporation's board of directors may condition its submission of a proposed
amendment to the shareholders of the corporation on any basis, including the
requirement of the affirmative vote of holders of a greater percentage of the
voting shares of the corporation than otherwise would be required under the
Indiana Corporate Law.
77
<PAGE>
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.
Pinnacle
Under the Michigan Corporate Law, a corporation's articles of incorporation
may be amended by the affirmative vote of a majority of the outstanding shares
entitled to vote thereon, subject to such supermajority vote requirement as
may be provided for in the corporation's articles of incorporation.
Because Pinnacle's Articles of Incorporation do not contain any
supermajority vote requirements with respect to amendments to its Articles of
Incorporation, Pinnacle's Articles of Incorporation may be amended by the
affirmative vote of a majority of the outstanding shares of Pinnacle Common.
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 CNB Board.
The number of directors to constitute the CNB Board may not be more than
twenty nor less than six. The CNB Board currently consists of nine members,
and the directors are divided into three classes with the term of office of
one of such classes expiring in each year. At each annual meeting of CNB
shareholders, the successors to the directors of the class whose term is
expiring at that time are elected to hold office for a term of three years.
Pinnacle
Holders of shares of Pinnacle 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 Pinnacle are elected by the affirmative
vote of a plurality of the votes cast at the election. Shareholders of
Pinnacle are not entitled to cumulative voting in the election of directors.
Therefore, holders of a majority of the shares of Pinnacle Common can elect
the entire Pinnacle Board. In contrast to the CNB Board, all members of the
Pinnacle Board are elected annually.
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.
78
<PAGE>
The Indiana Corporate Law provides that any action required or permitted to
be taken at a meeting of shareholders may be taken without a meeting if a
consent, in writing, setting forth the action taken is signed by the holders
of all of the shares entitled to vote on the subject matter.
Pinnacle
Pinnacle's Bylaws provide that a special meeting of shareholders may be
called by a majority of the members of the Pinnacle Board or by Pinnacle's
Chief Executive Officer. Pinnacle's Bylaws further provide that the Secretary
of Pinnacle shall call a special meeting of shareholders upon the written
request of shareholders of record holding in the aggregate 25% or more of the
outstanding voting stock of Pinnacle. Notwithstanding the foregoing provisions
of Pinnacle's Bylaws, the Michigan Corporate Law entitles the holders of not
less than 10% of the shares of Pinnacle entitled to vote at a meeting to apply
to the circuit court of Berrien County, Michigan and, upon good cause shown,
such court will order a special meeting of shareholders to be held.
Although the Michigan Corporate Law contains a provision permitting
shareholder action by less than unanimous written consent, it requires a
provision to that effect to be included in the corporation's articles of
incorporation. Pinnacle's Articles of Incorporation do not contain a provision
authorizing shareholder action by less than unanimous written consent.
DISSENTERS' RIGHTS
CNB
Under the Indiana Corporate Law, a shareholder of a corporation is entitled
(subject to certain exceptions) to receive payment for the fair value of his
shares if, among other things, such shareholder 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 shares of CNB Common are traded on the
N.Y.S.E., holders of CNB Common are not entitled to dissenter's rights in
connection with the Merger.
Pinnacle
Under the Michigan Corporate Law, a shareholder of a corporation is entitled
(subject to certain exceptions) to receive payment for the fair value of his
shares if, among other things, such shareholder 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. But, because CNB Common is traded on the N.Y.S.E.,
holders of Pinnacle Common are not entitled to dissenter's rights in
connection with the Merger.
TAKEOVER STATUTES
CNB
The Indiana Corporate 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 Corporate 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
Corporate Law is effective even if all parties should subsequently decide that
they wish to engage in the business combination.
The Indiana Corporate Law also contains a "control share acquisition"
provision which effectively denies voting rights to shares of an "issuing
public corporation" acquired in control share acquisitions unless the grant of
such voting right is approved by a majority vote of disinterested
shareholders. An issuing public corporation
79
<PAGE>
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 of its shareholders are residents of 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.
Pinnacle
Pinnacle is subject to the Michigan "fair price" statute, which applies to
certain "business combinations" such as mergers, substantial sales of assets
or securities issuances and liquidation, recapitalization or reorganization
plans. Generally, such statute provides that for a business combination with
an "interested stockholder" (generally, the holder of 10% or more of a class
of a corporation's voting stock), an advisory statement from the corporation's
board of directors, the approval of holders of 90% of each class of the
corporation's outstanding voting stock and the approval of two-thirds of the
holders of each such class other than the interested stockholder is required.
The supermajority voting requirements do not apply where the interested
stockholder's offer meets certain price, form of consideration and procedural
requirements designed to make such offers fair to all stockholders or where
the board of directors has approved the transaction with respect to a
particular interested stockholder prior to the interested stockholder becoming
an interested stockholder.
Pinnacle is also subject to the Michigan "control share acquisition"
statute. Generally, such statute provides that an entity that acquires
"control shares" may vote the control shares on any matter only if a majority
of all shares, and of all non-"interested shares" entitled to vote and of each
class of stock entitled to vote as a class, approve such voting rights.
"Interested shares" are defined generally as those shares owned by officers of
the corporation, employee directors of the corporation and the entity making
the control share acquisition. "Control shares" are defined generally as
shares that when added to shares already owned by an entity, would give the
entity voting power in the election of directors within any of three
thresholds: one-fifth, one-third and a majority. The effect of the statute is
to condition the acquisition of voting control of a Michigan corporation on
the approval of a majority of its pre-existing disinterested shareholders.
The provisions of the Michigan "fair price" statute do not apply to the
Merger because the Merger will not alter the contract rights of the Pinnacle
Common as set forth in Pinnacle's Articles of Incorporation. The provisions of
the Michigan "control share acquisition" statute do not apply to the Merger
because, among other things, Pinnacle is a party to the Merger Agreement and
the Merger will be effected in compliance with the applicable provisions of
the Michigan Corporate Law.
INDEMNIFICATION
CNB
Pursuant to the Indiana Corporate Law and the Articles of Incorporation and
Bylaws 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 Corporate 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
80
<PAGE>
made parties to proceedings as a result of their relationship with such
corporation. The Indiana Corporate 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 Corporate 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 Corporate 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 Corporate 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 Corporate 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 Corporate 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 Bylaws
generally provide for the indemnification of CNB's directors, officers,
employees and agents to the extent permitted by the Indiana Corporate Law.
Pinnacle
The Michigan Corporate law provides that a Michigan corporation may
indemnify a director, officer, employee or agent of the corporation (an
"Indemnitee") against the Indemnitee's expenses and judgments, fines and
amounts paid in settlement actually and reasonably incurred in connection with
any threatened, pending or completed action, suit or proceeding (other than an
action by or in the right of the corporation) involving the Indemnitee by
reason of the fact that the Indemnitee is or was a director, officer, employee
or agent of the corporation, if the Indemnitee acted in good faith and in a
manner the Indemnitee reasonably believed to be in or not opposed to the best
interest of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The Michigan Corporate Law also provides that in derivative actions,
a corporation may indemnify a director, officer, employee or agent of the
corporation against expenses actually and reasonably incurred by the
Indemnitee to the extent that the Indemnitee is successful on the merits or
otherwise in any such action, suit or proceeding or in the defense of any
claim, issue or matter therein. Under the Michigan Corporate Law, no
indemnification shall be made with respect to any claim, issue or matter as to
which an Indemnitee shall have been adjudged to be liable to the corporation
unless and only to the extent that the court shall determine upon application
that, despite the adjudication of liability but in view of all of the
circumstances of the case, the Indemnitee is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper. The Michigan
Corporate Law also generally permits the advancement of reasonable expenses
and empowers the corporation to purchase and maintain directors' and officers'
insurance.
Pinnacle's Bylaws contain provisions authorizing indemnification of
directors, officers, employees and agents of Pinnacle that are substantially
similar to those set forth in the Michigan Corporate Law.
81
<PAGE>
LIMITATION OF LIABILITY OF DIRECTORS
CNB
The Indiana Corporate 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
Corporate Law and the breach or failure to perform constitutes willful
misconduct or recklessness. This provision eliminates the potential liability
of a corporation's directors for failure, except through willful misconduct or
recklessness, to satisfy their duty of care, which requires each director to
carry out his duties in good faith, with the care an ordinarily prudent person
in a like position would exercise under similar circumstances, and in a manner
the director reasonably believes to be in the best interests of the
corporation. This provision may thus reduce the likelihood of derivative
litigation against directors and discourage or deter shareholders or
management from bringing a lawsuit against directors for breach of their duty
of care, even though such an action, if successful, might otherwise have been
beneficial to the corporation and its shareholders. Shareholders therefore
will not have a cause of action based upon negligent business decisions,
including those relating to attempts to acquire control of the corporation.
This provision does not, however, preclude all equitable remedies for breach
of the duty of care, although such remedies might not be available as a
practical matter.
Pinnacle
The Michigan Corporate Law does not contain a comparable provision providing
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 Michigan Corporate Law and the breach
or failure to perform constitutes willful misconduct or recklessness.
CONSIDERATION OF NON-SHAREHOLDER INTERESTS
CNB
The Indiana Corporate Law specifically authorizes directors, in considering
the best interests of a corporation, to consider the short-term and long-term
interests of the corporation as well as the effects of any action on
shareholders, employees, suppliers and customers of the corporation and
communities in which offices or other facilities of the corporation are
located, and any other factors the directors consider pertinent. Under the
Indiana Corporate Law, directors are not required to approve a proposed
corporate action if the directors determine in good faith after considering
and weighing as they deem appropriate the effect of such action on the
corporation's constituents that such approval is not in the best interest of
the corporation. In addition, the Indiana Corporate Law states that directors
are not required to redeem any rights under or render inapplicable a
shareholder rights plan or to take or decline to take any other action solely
because of the effect such action might have on a proposed acquisition of
control of a corporation or the amounts to be paid to shareholders under such
an acquisition. The Indiana Corporate Law explicitly provides that the
different or higher degree of scrutiny imposed 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.
Pinnacle
The Michigan Corporate Law does not contain a comparable provision regarding
the consideration of non-shareholder interests.
LEGAL OPINION
The legality of the CNB Common offered hereby and certain tax consequences
of the Merger will be passed upon by Lewis, Rice & Fingersh, L.C., St. Louis,
Missouri.
82
<PAGE>
BENEFICIAL OWNERSHIP OF PINNACLE COMMON
The following table sets forth information provided by the persons indicated
with respect to the beneficial ownership (as defined under applicable rules of
the S.E.C.) of shares of Pinnacle Common as of the Pinnacle Record Date by (i)
each person known by Pinnacle who is the owner of more than 5% of the
outstanding shares of Pinnacle Common, (ii) each person who is a director or
an executive officer of Pinnacle, and (iii) all persons who are directors or
executive officers of Pinnacle as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF BENEFICIAL
NAME AND ADDRESS (1) NUMBER OF SHARES(2) OWNERSHIP
-------------------- ------------------- ------------------------
<S> <C> <C>
Cyrus A. Ansary...............
John P. Cunningham(3).........
Terrence A. Friedman(3).......
Joseph F. Heffernan(3)(4).....
James E. Hutton(3)............
David W. Kolhagen(4)..........
Donald A. Lesch(3)(4).........
John Newcomer(4)..............
Donald E. Radde(4)............
Richard L. Schanze(3)(4)......
Howard Silverman(3)(5)........
Arnold L. Weaver(3)(4)........
Alton C. Wendzel(3)...........
Fred A. Wittlinger(3).........
Barbara A. Young(3)...........
All directors and executive
officers of Pinnacle as a
group (14 persons)...........
</TABLE>
- --------
(1) Unless otherwise noted, Pinnacle believes that all persons named in the
table have (i) sole voting and investment power with respect to all shares
of Pinnacle Common owned by them, except to the extent that authority is
shared by spouses under applicable law, and (ii) record and beneficial
ownership of such shares. The business address of Mr. Ansary, the only
owner of more than 5% of the outstanding shares of Pinnacle Common, is
1725 K Street, N.W., Suite 410, Washington, D.C. 20006. The business
address of all other persons named in the table is 830 Pleasant Street,
St. Joseph, Michigan 48085.
(2) Number of shares and percentages with respect to beneficial ownership of
Pinnacle Common are based on ownership of Pinnacle Common as of the
Pinnacle Record Date and have been calculated in accordance with Rule 13d-
3(d)(1) under the Exchange Act and assuming shares of Pinnacle Common
are issued and outstanding. An asterisk indicates beneficial ownership of
less than 1%.
(3) Director of Pinnacle.
(4) Executive Officer of Pinnacle.
(5) Mr. Silverman, age 58, became a director of Pinnacle on August 1, 1997,
the date on which Pinnacle's acquisition of IFC was consummated. Mr.
Silverman is Chairman of the Board of Directors of Reliance Acceptance
Group, Inc., a specialty consumer finance company, since the split-off of
its subsidiary bank in February 1997. On February 9, 1998, Reliance
Acceptance Group, Inc. filed for bankruptcy under Chapter 11 of the United
States Bankruptcy Code. He has also been Chairman of the Board of Reliance
Acceptance Corporation, its operating subsidiary, since its incorporation
in 1992. For more than five years, Mr. Silverman has also been President
of Silverman and Associates, a consulting firm furnishing services to
businesses and financial institutions which provided services to IFC.
During his earlier career, he served as Chairman and Executive Officer of
a multi-bank and financial services company, which included a finance
company subsidiary, and as President of a securities broker/dealer. Mr.
Silverman is also a director of Forrest Holdings, Inc., which owns and
operates Forrest Financial Corporation, a leasing company that provides
financing solutions for the acquisition of information systems.
83
<PAGE>
EXPERTS
INDEPENDENT AUDITORS FOR CNB
The consolidated financial statements of CNB are incorporated by reference
in CNB's Annual Report (Form 10-K) for the year ended December 31, 1996. The
consolidated financial statements of CNB as of December 31, 1996 and for the
year then ended have been audited by KPMG Peat Marwick LLP, independent
auditors, as set forth in their report thereon and included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing. The consolidated
financial statements for CNB as of December 31, 1995 and for the two year
period then ended were audited by Geo. S. Olive & Co., L.L.C., independent
auditors, as set forth in their report thereon and included herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
INDEPENDENT AUDITORS FOR PINNACLE
The combination of the consolidated balance sheets of Pinnacle at December
31, 1996 and 1995 and the related consolidated statements of income, changes
in stockholders' equity and cash flows for each of the years in the three year
period ended December 31, 1996 included in Pinnacle's Current Report (Form 8-
K) filed with the S.E.C. on February 12, 1998 have been audited by KPMG Peat
Marwick LLP, as set forth in their report thereon included therein and
incorporated by reference. KPMG Peat Marwick LLP had previously audited and
reported on the consolidated balance sheet of Pinnacle as of December 31, 1996
and 1995 and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the three year period
ended December 31, 1996 prior to their restatement for the 1997 pooling of
interest with IFC and CB. Ernst & Young LLP previously audited and reported on
the consolidated financial statements of IFC as of December 31, 1996 and 1995,
and the related consolidated statements of income, changes in stockholders'
equity and cash flows for each of the years in the three years ended December
31, 1996 and have issued their report thereon dated February 28, 1997. Crowe,
Chizek and Company LLP previously audited and reported on the consolidated
balance sheet of CB as of March 31, 1997 and 1996, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the years in the three year period ended March 31, 1997 and
have issued their report thereon dated May 23, 1997. The consolidated
financial statements referred to above are incorporated herein by reference in
reliance upon such reports given upon authority of such firms as experts in
accounting and auditing.
The consolidated financial statements of Pinnacle incorporated by reference
in Pinnacle's Annual Report (Form 10-K) for the year ended December 31, 1996,
have been audited by KPMG Peat Marwick LLP independent auditors, as set forth
in their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The consolidated financial statements of IFC incorporated by reference in
IFC's Annual Report (Form 10-K) for the year ended December 31, 1996, have
been audited by Ernst & Young, LLP, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The consolidated financial statements of CB incorporated by reference in
CB's Annual Report (Form 10-K) for the fiscal year ended March 31, 1997, have
been audited by Crowe, Chizek and Company LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
84
<PAGE>
SHAREHOLDER PROPOSALS
Shareholder proposals for the annual meeting of CNB shareholders to be held
in April 1998 must have been received by CNB not later than November 25, 1997
in order to have been considered for inclusion in the 1998 proxy statement.
Shareholder proposals for the 1999 annual meeting of CNB must meet the
requirements established by the S.E.C. for shareholder proposals and must be
received by CNB on a date to be determined and announced in the CNB proxy
statement for its 1998 annual meeting in order to be considered for inclusion
in the 1999 proxy statement. Upon receipt of any such proposal, CNB will
determine whether or not to include such proposal in the proxy statement and
proxy in accordance with the S.E.C.'s regulations governing the solicitation
of proxies.
85
<PAGE>
APPENDIX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
CNB BANCSHARES, INC.,
AN INDIANA CORPORATION,
AND
PINNACLE FINANCIAL SERVICES, INC.,
A MICHIGAN CORPORATION.
DATED AS OF OCTOBER 14, 1997.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE ONE
TERMS OF MERGER AND CLOSING............................................... A-6
Section 1.01. Merger..................................................... A-6
Section 1.02. Merging Corporation........................................ A-6
Section 1.03. Surviving Corporation...................................... A-6
Section 1.04. Effect of Merger........................................... A-6
Section 1.05. Conversion of Pinnacle Common.............................. A-6
Section 1.06. Share Adjustments.......................................... A-6
Section 1.07. Closing.................................................... A-7
Section 1.08. Exchange Procedures; Surrender of Certificates............. A-7
Section 1.09. Closing Date............................................... A-8
Section 1.10. Closing Deliveries......................................... A-8
Section 1.11. Disclosure Schedule; Standard.............................. A-9
ARTICLE TWO
REPRESENTATIONS AND WARRANTIES OF PINNACLE................................ A-10
Section 2.01. Organization and Capital Stock............................. A-10
Section 2.02. Authorization; No Defaults................................. A-10
Section 2.03. Subsidiaries............................................... A-11
Section 2.04. Financial Information...................................... A-11
Section 2.05. Absence of Changes......................................... A-12
Section 2.06. Regulatory Enforcement Matters............................. A-12
Section 2.07. Tax Matters................................................ A-13
Section 2.08. Litigation................................................. A-13
Section 2.09. Employment Agreements...................................... A-14
Section 2.10. Reports.................................................... A-14
Section 2.11. Employee Matters and ERISA................................. A-14
Section 2.12. Title to Properties; Insurance............................. A-15
Section 2.13. Environmental Matters...................................... A-16
Section 2.14. Compliance with Law........................................ A-16
Section 2.15. Brokerage.................................................. A-16
Section 2.16. Non-Banking Activities of Pinnacle and Subsidiaries........ A-17
Section 2.17. Trust Administration....................................... A-17
Section 2.18. Pooling of Interests; Tax-Free Reorganization.............. A-17
Section 2.20. Material Contracts and Agreements.......................... A-17
Section 2.21. No Undisclosed Liabilities................................. A-17
Section 2.22. Statements True and Correct................................ A-17
Section 2.23. State Takeover Laws........................................ A-18
Section 2.24. Fair Lending; Community Reinvestment Act................... A-18
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES OF CNB..................................... A-18
Section 3.01. Organization and Capital Stock............................. A-18
Section 3.02. Authorization.............................................. A-18
Section 3.03. Subsidiaries............................................... A-19
Section 3.04. Financial Information...................................... A-19
Section 3.05. Absence of Changes......................................... A-19
Section 3.06. Litigation................................................. A-19
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 3.07. Reports................................................... A-19
Section 3.08. Compliance With Law....................................... A-19
Section 3.09. Pooling of Interests; Tax-Free Reorganization............. A-20
Section 3.10. Statements True and Correct............................... A-20
Section 3.11. Regulatory Enforcement Matters............................ A-20
Section 3.12. Tax Matters............................................... A-20
Section 3.13. Brokerage................................................. A-20
Section 3.14. State Takeover Laws....................................... A-20
Section 3.15. No Undisclosed Liabilities................................ A-20
ARTICLE FOUR
AGREEMENTS OF PINNACLE................................................... A-21
Section 4.01. Business in Ordinary Course............................... A-21
Section 4.02. Breaches.................................................. A-23
Section 4.03. Submission to Shareholders................................ A-23
Section 4.04. Consents to Contracts and Leases.......................... A-23
Section 4.05. Consummation of Agreement................................. A-23
Section 4.06. Environmental Reports..................................... A-23
Section 4.07. Restriction on Resales.................................... A-24
Section 4.08. Access to Information..................................... A-24
Section 4.09. Subsidiary Bank Merger.................................... A-24
Section 4.10. Plan of Merger............................................ A-25
Section 4.11. Comfort Letters........................................... A-25
Section 4.12. Restated Pinnacle Financial Statements.................... A-25
ARTICLE FIVE
AGREEMENTS OF CNB........................................................ A-25
Section 5.01. Regulatory Approvals and Registration Statement........... A-25
Section 5.02. Breaches.................................................. A-26
Section 5.03. Consummation of Agreement................................. A-26
Section 5.04. Stock Options............................................. A-26
Section 5.05. Directors and Officers' Liability Insurance and
Indemnification........................................................ A-27
Section 5.06. Employee Benefits......................................... A-27
Section 5.07. Board Composition......................................... A-28
Section 5.08. Access to Information..................................... A-28
Section 5.09. Comfort Letters........................................... A-28
Section 5.10. Restriction on Resales.................................... A-28
ARTICLE SIX
CONDITIONS PRECEDENT TO MERGER........................................... A-29
Section 6.01. Conditions to CNB's Obligations........................... A-29
Section 6.02. Conditions to Pinnacle's Obligations...................... A-30
ARTICLE SEVEN
TERMINATION OR ABANDONMENT............................................... A-31
Section 7.01. Mutual Agreement.......................................... A-31
Section 7.02. Breach of Agreements...................................... A-31
Section 7.03. Environmental Reports..................................... A-31
Section 7.04. Failure of Conditions..................................... A-31
Section 7.05. Regulatory Approval Denial; Burdensome Condition.......... A-31
</TABLE>
A-3
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 7.06. Shareholder Approval Denial; Withdrawal/Modification of
Board Recommendation......................................... A-31
Section 7.07. Regulatory Enforcement Matters............................ A-32
Section 7.08. Fall-Apart Date........................................... A-32
Section 7.09. Possible Purchase Price Adjustment........................ A-32
ARTICLE EIGHT
GENERAL.................................................................. A-33
Section 8.01. Confidential Information.................................. A-33
Section 8.02. Publicity................................................. A-33
Section 8.03. Return of Documents....................................... A-34
Section 8.04. Notices................................................... A-34
Section 8.05. Liabilities and Expenses.................................. A-34
Section 8.06. Nonsurvival of Representations, Warranties and
Agreements............................................................. A-35
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-36
Section 8.13. Severability.............................................. A-36
Section 8.14. Governing Law; Assignment................................. A-36
Section 8.15. Enforcement of Agreement.................................. A-36
Section 8.16. Termination Fee........................................... A-36
</TABLE>
<TABLE>
<C> <S> <C>
--Form of Pinnacle Option Agreement [inten-
EXHIBIT 1.01 tionally omitted]
EXHIBIT 1.10(a) --Pinnacle's Legal Opinion Matters.......... A-Ex.-1.10(a)
EXHIBIT 1.10(b) --CNB's Legal Opinion Matters............... A-Ex.-1.10(b)
EXHIBIT 4.07 --Form of Affiliate's Letter................ A-Ex.-4.07-1
EXHIBIT 7.09 --Index Group............................... A-Ex.-7.09
</TABLE>
A-4
<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made as of October
14, 1997, by and between CNB BANCSHARES, INC., an Indiana corporation ("CNB"),
and PINNACLE FINANCIAL SERVICES, INC., a Michigan corporation ("Pinnacle").
RECITALS
A. The Boards of Directors of CNB and Pinnacle 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
Pinnacle shall, subject to the terms and conditions set forth herein, merge
with and into CNB (the "Merger").
B. The Boards of Directors of CNB and Pinnacle 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. Concurrently with the execution and delivery of this Agreement, and as a
condition and inducement to CNB's willingness to enter into this Agreement,
CNB and Pinnacle have executed a Stock Option Agreement (the "Pinnacle Option
Agreement"), dated as of the date hereof and in the form attached hereto as
Exhibit 1.01, pursuant to which Pinnacle has granted CNB an option exercisable
upon the occurrence of certain events.
D. 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 Pinnacle will receive certain federal income 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.
E. For accounting purposes, it is intended that the Merger shall be
accounted for under the "pooling of interests" method of accounting.
F. CNB and Pinnacle desire to make certain representations, warranties and
agreements in connection with the Merger and also to prescribe certain
conditions to the Merger.
G. In consideration of the foregoing and the respective representations,
warranties, covenants, and agreements set forth herein and in the Pinnacle
Option Agreement, CNB and Pinnacle hereby agree as follows:
A-5
<PAGE>
ARTICLE ONE
Terms of Merger And Closing
SECTION 1.01. MERGER. Pursuant to the terms and provisions set forth herein
and the Indiana Business Corporation Law (the "IBCL") and the Michigan
Business Corporation Act (the "MBCA"), Pinnacle shall merge with and into CNB.
SECTION 1.02. MERGING CORPORATION. Pinnacle shall be the merging corporation
under the Merger and its corporate identity and existence, separate and apart
from CNB, shall cease on consummation of the Merger.
SECTION 1.03. SURVIVING CORPORATION. CNB shall be the surviving corporation
in the Merger. No changes in the Articles of Incorporation of CNB 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 IBCL and the MBCA.
SECTION 1.05. CONVERSION OF PINNACLE COMMON.
(a) 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, Pinnacle or their
respective shareholders, each share of common stock, no par value per share,
of Pinnacle (the "Pinnacle Common") issued and outstanding immediately prior
to the Effective Time (other than shares of Pinnacle Common held in the
treasury of Pinnacle or by any direct or indirect subsidiary of Pinnacle)
shall be converted into the right to receive 1.0365 shares (the "Conversion
Ratio") of common stock of CNB, stated value $1.00 per share (the "CNB
Common"). The Conversion Ratio shall be subject to adjustment as set forth in
Sections 1.06 and 7.09 hereof.
(b) The shares of CNB Common to be issued pursuant to Section 1.05(a),
together with any cash payment in lieu of fractional shares, as provided below
in this Section 1.05(b), is referred to herein as the "Merger Consideration."
No fractional shares of CNB Common shall be issued and, in lieu thereof,
holders of shares of Pinnacle Common who would otherwise be entitled to a
fractional share interest (after taking into account all shares of Pinnacle
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 a share of
CNB Common as reported in The Wall Street Journal (Midwest Edition) on the New
York Stock Exchange ("N.Y.S.E.") trading day immediately preceding the date on
which the Effective Time occurs.
(c) At the Effective Time, all of the shares of Pinnacle 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 Pinnacle 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.
(d) At the Effective Time, each share of Pinnacle Common, if any, held in
the treasury of Pinnacle or by any direct or indirect subsidiary of Pinnacle
(other than shares held in trust accounts for the benefit of others or in
other fiduciary, nominee or similar capacities and shares held by Pinnacle or
any of its subsidiaries in respect to a debt previously contracted)
immediately prior to the Effective Time shall be canceled.
(e) Each share of CNB Common outstanding immediately prior to the Effective
Time shall remain outstanding unaffected by the Merger.
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,
A-6
<PAGE>
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
Pinnacle Common shall be converted pursuant to Section 1.05(a) hereof shall be
appropriately and proportionately adjusted so that each shareholder of
Pinnacle 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. In the event that the sum of (i) the number of shares of Pinnacle
Common presented for exchange pursuant to Section 1.08 hereof or otherwise
issued and outstanding at the Effective Time, and (ii) the number of shares of
Pinnacle Common issuable upon the exercise of options or warrants (whether
pursuant to Pinnacle Stock Options (as defined in Section 5.04 hereof) or
otherwise, including to the extent permitted under Section 4.01(b)(i) hereof)
as of the Effective Time, shall be greater than the sum of (x) the number of
shares of Pinnacle Common represented in Section 2.01(b) hereof as being
outstanding as of the date hereof, and (y) the number of shares of Pinnacle
Common issuable upon the exercise of Pinnacle Stock Options represented in
Section 2.01(b) hereof as being outstanding as of the date hereof or granted
after April 30, 1998, in accordance with Section 4.01(b)(i) hereof, then the
Conversion Ratio shall be appropriately and proportionately decreased to take
into account such additional issued and outstanding, and issuable, shares of
Pinnacle Common.
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.
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, but in no
event later than ten (10) business days after the Closing Date, 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, plus dividends paid with
respect to the Merger Consideration having a record date after the Effective
Time as provided in Section 1.08(d) hereof. 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 4.07 hereof) of Pinnacle unless such "affiliate" shall
have theretofore executed and delivered to CNB the agreement referred to in
Section 4.07 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.
A-7
<PAGE>
(e) 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.
(f) At or after the Effective Time there shall be no transfers on the stock
transfer books of Pinnacle of any shares of Pinnacle Common. If, after the
Effective Time, Certificates are presented for 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 Pinnacle and CNB may agree (the "Closing Date"). The
Merger shall be effective upon the later to occur of filing of Articles of
Merger with the Secretary of State of the State of Indiana and the filing of a
Certificate of Merger with the Department of Consumer and Industry Services of
the State of Michigan (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, Pinnacle shall deliver to CNB:
(i) a certified copy of the Articles of Incorporation and Bylaws of
Pinnacle and the Subsidiary Bank (as defined in Section 2.04 hereof); and
(ii) a Certificate signed by an appropriate officer of Pinnacle stating
that, to the best knowledge and belief of such officer, (A) each of the
representations and warranties contained in Article Two hereof (subject to
the standard in Section 1.11 hereof) is true and correct 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 Pinnacle'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 Department of Consumer and Industry Services of
the State of Michigan, dated a recent date, stating that Pinnacle is in
good standing; and
(v) Articles of Merger and Certificate of Merger executed by Pinnacle,
reflecting the terms and provisions hereof and in proper form for filing
with the Secretary of State of the State of Indiana and the Department of
Consumer and Industry Services of the State of Michigan, respectively, in
order to cause the Merger to become effective pursuant to the IBCL and the
MBCA; and
(vi) a legal opinion from counsel for Pinnacle, in form reasonably
acceptable to CNB's counsel, opining with respect to the matters listed on
Exhibit 1.10(a) hereto.
(b) At the Closing, CNB shall deliver to Pinnacle:
(i) a Certificate signed by an appropriate officer of CNB stating that,
to the best knowledge and belief of such officer, (A) each of the
representations and warranties contained in Article Three hereof (subject
to the standard in Section 1.11 hereof) is true and correct 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
Pinnacle's shareholders) have been satisfied or waived as provided therein;
and
A-8
<PAGE>
(ii) a certified copy of the resolutions of CNB's Board of Directors and
shareholders, as required for valid approval of the execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement; and
(iii) a legal opinion from counsel for CNB, in form reasonable acceptable
to Pinnacle's counsel, opining with respect to the matters listed on
Exhibit 1.12(b) hereto; and
(iv) a certified copy of the Articles of Incorporation and Bylaws of CNB;
and
(v) Certificate of the Secretary of State of the State of Indiana, dated
a recent date, stating that CNB is in good standing; and
(vi) Articles of Merger and Certificate of Merger executed by CNB,
reflecting the terms and provisions hereof and in proper form for filing
with the Secretary of State of the State of Indiana and the Department of
Consumer and Industry Services of the State of Michigan, respectively, in
order to cause the Merger to become effective pursuant to the IBCL and the
MBCA; and
(vii) Evidence that CNB shall have delivered the Merger Consideration to
the Exchange Agent for delivery to the shareholders of Pinnacle as
contemplated by Section 1.08 hereof.
SECTION 1.11. DISCLOSURE SCHEDULE; STANDARD.
(a) Pinnacle has delivered to CNB a confidential schedule (the "Disclosure
Schedule"), executed by both Pinnacle and CNB concurrently with the delivery
and execution hereof, setting forth, among other things, items the disclosure
of which shall be necessary or appropriate either in response to an express
disclosure requirement contained in a provision hereof or as an exception to
one or more representations or warranties contained in Article Two hereof;
provided, that (a) no such item shall be required to be set forth in the
Disclosure Schedule as an exception to a representation or warranty if its
absence would not be reasonably likely to result in the related representation
or warranty being deemed untrue or incorrect under the standard established by
Section 1.11(b) hereof, and (b) the mere inclusion of an item in the
Disclosure Schedule as an exception to a representation or warranty shall not
be deemed an admission by Pinnacle that such item represents a material
exception or fact, event or circumstance or that such item is reasonably
likely to result in a Material Adverse Effect.
(b) No representation or warranty of Pinnacle contained in Article Two
hereof or CNB contained in Article Three hereof shall be deemed untrue or
incorrect, and Pinnacle and CNB, as the case may be, shall not be deemed to
have breached a representation or warranty, as a consequence of the existence
of any fact, event or circumstance unless such fact, circumstance or event,
individually or taken together with all other facts, events or circumstances
inconsistent with any representation or warranty contained in Article Two
hereof, in the case of Pinnacle, or Article Three hereof, in the case of CNB,
has had or is reasonably likely to have a Material Adverse Effect (as defined
below in this Section 1.11(b)) on the party making such representation or
warranty. As used herein, the term "Material Adverse Effect" means, with
respect to Pinnacle or CNB, any effect that (i) is, or is reasonably expected
to be, material and adverse to the financial position, results of operations
or business of Pinnacle and its subsidiaries taken as a whole, or CNB and its
subsidiaries taken as a whole, respectively, or (ii) would materially impair
the ability of either Pinnacle or CNB to perform its obligations under this
Agreement or otherwise materially threaten or materially impede the
consummation of the Merger and the other transactions contemplated by this
Agreement; provided, however, that Material Adverse Effect shall not be deemed
to include the impact of (a) changes in banking and similar laws of general
applicability or interpretations thereof by courts or governmental
authorities, (b) changes in generally accepted accounting principles or
regulatory accounting requirements applicable to banks and their holding
companies generally, and (c) any modifications or changes to valuation or
reserve policies and practices in connection with or in anticipation of the
Merger or restructuring charges taken in connection with the Merger, in each
case in accordance with generally accepted accounting principles, or
restructuring charges taken by Pinnacle in connection with its prior
acquisitions of Indiana Financial Corporation ("IFC") and CB Bancorp, Inc.
("CBI"), as included in the financial statements included in Pinnacle's
Current Report on Form 8-K/A, dated October 14, 1997, as currently on file
with the Securities and Exchange Commission (the "S.E.C.").
A-9
<PAGE>
(c) Pinnacle shall be permitted to update and supplement the Disclosure
Schedule so as to disclose exceptions to one or more representations or
warranties contained in Article Two hereof which shall have arisen between the
date hereof and the Closing Date; provided, however, that, anything herein to
the contrary notwithstanding, the exceptions and other information set forth
on any such updated or supplemented Disclosure Schedule shall not be taken
into consideration in determining, for purposes of this Agreement, whether the
condition set forth in Section 6.01(a) hereof shall have been satisfied.
ARTICLE TWO
Representations And Warranties Of Pinnacle
Subject to Section 1.11 hereof and except as disclosed in a Section of the
Disclosure Schedule corresponding to the relevant Section in this Article Two,
Pinnacle hereby makes the following representations and warranties:
SECTION 2.01. ORGANIZATION AND CAPITAL STOCK.
(a) Pinnacle is a corporation duly organized, validly existing and in good
standing under the laws of the State of Michigan 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. Pinnacle 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 Pinnacle, as amended and as in effect on the date
of this Agreement, have been previously made available to CNB by Pinnacle.
(b) The authorized capital stock of Pinnacle consists only of 15,000,000
shares of Pinnacle Common, of which, as of the date hereof, 12,339,408 shares
are issued and outstanding. All of the issued and outstanding shares of
Pinnacle 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 Pinnacle Common has been issued in violation of any preemptive
rights of the current or past shareholders of Pinnacle. As of the date hereof,
Pinnacle had outstanding employee stock options representing the right to
acquire not more than 435,382 shares of Pinnacle Common pursuant to the Stock
Option Plans (as defined in Section 5.04 hereof). To the best knowledge of
Pinnacle, each Certificate issued by Pinnacle 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 Pinnacle only
upon receipt of an affidavit of lost stock certificate and indemnity agreement
of such shareholder indemnifying Pinnacle 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 and except for the
Pinnacle Option Agreement and as permitted under Section 4.01(b)(i) hereof,
(i) there are no shares of capital stock or other equity securities of
Pinnacle 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 Pinnacle
Common or other capital stock of Pinnacle or contracts, commitments,
understandings or arrangements by which Pinnacle 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 Pinnacle accurately reflect all corporate actions
held or taken by its shareholders and Board of Directors (including committees
of the Board of Directors) since January 1, 1992.
SECTION 2.02. AUTHORIZATION; NO DEFAULTS. Pinnacle's Board of Directors has,
by all appropriate action, approved this Agreement, the Pinnacle Option
Agreement and the Merger and authorized the execution hereof and thereof on
its behalf by its duly authorized officers and the performance by Pinnacle of
its obligations
A-10
<PAGE>
hereunder. Pinnacle's Board of Directors has directed that the agreement of
merger (within the meaning of the MBCA) contained in this Agreement and the
transactions contemplated by this Agreement, including the Merger, be
submitted to the shareholders of Pinnacle for approval at the Pinnacle
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 a majority of the outstanding shares of Pinnacle Common, no other corporate
proceedings on the part of Pinnacle are necessary to approve this Agreement,
the Pinnacle Option Agreement and to consummate the transactions contemplated
by this Agreement, including the Merger, and by the Pinnacle Option Agreement.
Nothing in the Articles of Incorporation or Bylaws of Pinnacle, 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 Pinnacle from consummating this Agreement and the Merger on the terms
and conditions herein contained. This Agreement and the Pinnacle Option
Agreement have been duly and validly executed and delivered by Pinnacle and
constitute a legal, valid and binding obligation of Pinnacle, enforceable
against Pinnacle in accordance with their respective terms. Pinnacle 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, 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.
Holders of Pinnacle Common do not have dissenters' rights under the MBCA in
connection with the Merger.
SECTION 2.03. SUBSIDIARIES. Each of Pinnacle'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 Pinnacle's subsidiaries that is an insured
institution (within the meaning of the Federal Deposit Insurance Act) 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 are owned by Pinnacle or Pinnacle'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. (S)55 and comparable state laws, if applicable. There are no options,
warrants or rights outstanding to acquire any capital stock of any of
Pinnacle's wholly-owned subsidiaries and no person or entity has any other
right to purchase or acquire any unissued shares of stock of any of Pinnacle's
wholly-owned subsidiaries, nor does any such wholly-owned subsidiary have any
obligation of any nature with respect to its unissued shares of stock. Neither
Pinnacle nor any of Pinnacle'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 Pinnacle, as
amended, copies of which have previously been made available to CNB by
Pinnacle, are true, complete and correct copies of such documents as in effect
on the date of this Agreement.
SECTION 2.04. FINANCIAL INFORMATION. The (i) audited consolidated balance
sheets of Pinnacle and its subsidiaries as of December 31, 1996 and 1995, and
related consolidated income statements and statements of changes in
shareholders' equity and of cash flows for the three (3) years ended December
31, 1996, together with the notes thereto, included in Pinnacle's Annual
Report on Form 10-K for the year ended December 31, 1996, as currently on file
with the S.E.C., and the unaudited consolidated balance sheets of Pinnacle and
its subsidiaries as of March 31, 1997 and June 30, 1997, 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 Pinnacle's Quarterly Reports on
Form 10-Q for the quarters then ended, as currently on file with the S.E.C.,
(ii) the audited consolidated balance sheets of IFC and its subsidiaries as of
December 31, 1996 and 1995, and related consolidated income statements and
statements of changes in
A-11
<PAGE>
shareholders' equity and of cash flows of IFC and its subsidiaries for the
three (3) years ended December 31, 1996, together with the notes thereto, and
the unaudited consolidated balance sheets of IFC and its subsidiaries as of
June 30, 1997, and the related unaudited consolidated income statements and
statements of changes in shareholders' equity and cash flows of IFC and its
subsidiaries for the six (6) months then ended each as included in Pinnacle's
Current Report on Form 8-K/A dated October 14, 1997, as currently on file with
the S.E.C., (iii) the audited consolidated balance sheets of CBI and its
subsidiaries as of March 31, 1997 and 1996, and related consolidated income
statements and statements of changes in shareholders' equity and of cash flows
of CBI and its subsidiaries for the three (3) years ended March 31, 1997,
together with the notes thereto, and the unaudited consolidated balance sheets
of CBI and its subsidiaries as of June 30, 1997, and the related unaudited
consolidated income statements and statements of changes in shareholders'
equity and cash flows of CBI and its subsidiaries for the three (3) months
then ended each as included in Pinnacle's Current Report on Form 8-K/A dated
October 14, 1997, as currently on file with the S.E.C., (iv) the pro forma
consolidated balance sheet of Pinnacle and its subsidiaries as of June 30,
1997, and related consolidated income statements of Pinnacle and its
subsidiaries for the twelve months ended December 31, 1996 and the six (6)
months ended June 30, 1997, as included in Pinnacle's Current Report on Form
8-K/A dated October 14, 1997, as currently on file with the S.E.C., and (v)
the year-end and quarterly Reports of Condition and Reports of Income of
Pinnacle Bank (the "Subsidiary Bank") for 1996, March 31, 1997, and June 30,
1997, respectively, as currently on file with the F.D.I.C., and the Thrift
Financial Reports of Indiana Federal Bank for Savings and Community Bank for
1996, March 31, 1997 and June 30, 1997, respectively, as filed with the Office
of Thrift Supervision (the "O.T.S.") (together, the "Pinnacle 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 reports of the Subsidiary Bank and Indiana Federal Bank for Savings and
Community Bank) and fairly present the consolidated financial position and the
consolidated results of operations, changes in shareholders' equity and cash
flows of the respective entity and its respective consolidated subsidiaries as
of the dates 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 Pinnacle and its subsidiaries and
IFC and CBI and their respective subsidiaries since January 1, 1992, have
been, and are being, maintained 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, 1996, there has not
been any change in the financial condition, the results of operations or the
business of Pinnacle and its subsidiaries taken as a whole which would have a
Material Adverse Effect on Pinnacle, except as disclosed by Pinnacle since
December 31, 1996 in its periodic reports filed with the S.E.C. under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
SECTION 2.06. REGULATORY ENFORCEMENT MATTERS. Neither Pinnacle, the
Subsidiary Bank nor any other 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 a
recipient of any supervisory letter from, or has adopted any board resolutions
at the request of, any Regulatory Agency (as defined below in this Section
2.06) that currently restricts the conduct of its business or that currently
affects its capital adequacy, its credit policies, its management or its
business (each, a "Regulatory Agreement"), nor has Pinnacle, the Subsidiary
Bank or any other subsidiaries been advised by any Regulatory Agency that it
is considering issuing or requesting any such Regulatory Agreement. Neither
Indiana Federal Bank for Savings and Community Bank was, prior to the
effective date of their respective mergers with the Subsidiary Bank, subject
or party to, or received any notice or advice that it may become subject or
party to, any currently effective Regulatory Agreement, nor had Indiana
Federal Bank for Savings or Community Bank been advised by any Regulatory
Agency that it was considering issuing or requesting any such Regulatory
Agreement having any current effect. There is no unresolved violation,
criticism or exception by any Regulatory Agency with respect to any report or
statement relating to any examinations of Pinnacle, the Subsidiary Bank, any
other subsidiaries, or
A-12
<PAGE>
any corporations or financial institutions merged with and into Pinnacle or
the Subsidiary Bank. Prior to the effective date of their respective mergers
with the Subsidiary Bank, there was no unresolved violation, criticism or
exception by any Regulatory Agency with respect to any report or statement
relating to any examinations of Indiana Federal Bank for Savings or Community
Bank. 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
Pinnacle or any of its subsidiaries.
SECTION 2.07. TAX MATTERS.
(a) Each of Pinnacle 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. Neither Pinnacle 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 Pinnacle
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 1993, and either no
deficiencies were asserted as a result of such examination for which Pinnacle
does not have adequate reserves or all such deficiencies have been satisfied.
The reserve for Taxes in the financial statements of Pinnacle for the year
ended December 31, 1996, is adequate to cover all of the liabilities for Taxes
of Pinnacle and its subsidiaries that may become payable in future years with
respect to any transactions consummated prior to December 31, 1996. 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 other tax of any kind whatsoever, including any interest, penalty or
addition thereto, whether disputed or undisputed.
(b) 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 Pinnacle 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 Pinnacle Employee
Plan (as defined in Section 2.11(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) Pinnacle has not been subject to any disallowance of a deduction under
Section 162(m) of the Code nor does Pinnacle reasonably believe that such a
disallowance is reasonably likely to be applicable for any tax year of
Pinnacle ended on or before the Closing Date.
SECTION 2.08. LITIGATION AND RELATED MATTERS. Section 2.08 of the Disclosure
Schedule describes all litigation, claims or other proceedings or
investigations of any nature pending or, to the knowledge of Pinnacle,
threatened, against Pinnacle or any of its subsidiaries, or of which the
property of Pinnacle or any of its subsidiaries is or would be subject. There
is no injunction, order, judgment, decree or regulatory restriction imposed
upon Pinnacle, or any of its subsidiaries or the assets of Pinnacle of any of
its subsidiaries. Since January 1, 1992, Pinnacle 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 Pinnacle 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
Pinnacle's and its subsidiaries' past claim experience.
A-13
<PAGE>
SECTION 2.09. EMPLOYMENT AGREEMENTS. Section 2.09 of the Disclosure Schedule
lists each 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 to which Pinnacle or any of its
subsidiaries is a party to or bound by and which, by its terms, is not
terminable by Pinnacle or such subsidiary on thirty (30) days written notice
or less without the payment of any amount by reason of such termination.
Copies of each written (and summaries of each oral) agreement, arrangement,
commitment or contract listed in Section 2.09 of the Disclosure Schedule have
been previously made available to CNB by Pinnacle.
SECTION 2.10. REPORTS. Since January 1, 1992, Pinnacle 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 S.E.C., (iv) any state securities authorities, (v) the Nasdaq Stock
Market's National Market ("Nasdaq"), and (vi) any other Regulatory Agency with
jurisdiction over Pinnacle 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, as amended, including
any financial statements, exhibits and schedules thereto, complied with the
relevant statutes, rules and regulations enforced or promulgated by the
regulatory authority with which they were filed, and did not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
SECTION 2.11. EMPLOYEE MATTERS AND ERISA.
(a) Neither Pinnacle nor any of its subsidiaries has entered into any
collective bargaining agreement with any labor organization with respect to
any group of employees of Pinnacle or any of its subsidiaries and to the
knowledge of Pinnacle there is no present effort nor existing proposal to
attempt to unionize any group of employees of Pinnacle or any of its
subsidiaries.
(b) (i) Pinnacle and its subsidiaries are and have been in compliance with
all applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including, without limitation,
any such laws respecting employment discrimination and occupational safety and
health requirements, and neither Pinnacle nor any of its subsidiaries is
engaged in any unfair labor practice, (ii) there is no unfair labor practice
complaint against Pinnacle or any subsidiary pending or, to the knowledge of
Pinnacle, threatened before the National Labor Relations Board, (iii) there is
no labor dispute, strike, slowdown or stoppage actually pending or, to the
knowledge of Pinnacle, threatened against or directly affecting Pinnacle or
any subsidiary, and (iv) neither Pinnacle nor any subsidiary has experienced
any work stoppage or other labor difficulty during the past five (5) years.
(c) Section 2.11(c) of the Disclosure Schedule describes each employee
benefit plan, as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and each nonqualified employee
benefit plan, deferred compensation, bonus, stock and incentive plan, and each
other employee benefit and fringe benefit program for the benefit of former or
current employees of Pinnacle or any subsidiary (the "Pinnacle Employee
Plans") which Pinnacle and its subsidiaries maintain, contribute to or
participate in or have any liability under. No present or former employee of
Pinnacle or any subsidiary has been charged with breaching, or to the
knowledge of Pinnacle has breached, a fiduciary duty under any of the Pinnacle
Employee Plans. Neither Pinnacle 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). Section 2.11(c) of the Disclosure Schedule describes
all plans that provides health, major medical, disability or life insurance
benefits to former employees of Pinnacle or any subsidiary that Pinnacle and
any subsidiary maintain, contribute to, or participate in. Section 2.11(c) of
the Disclosure Schedule describes all of the employment related obligations of
Pinnacle with respect to its acquisitions of IFC and CBI.
(d) Neither Pinnacle nor any of its subsidiaries maintain, nor have any of
them maintained for the past ten years, any Pinnacle Employee Plans subject to
Title IV of ERISA or Section 412 of the Code. No reportable
A-14
<PAGE>
event (as defined in Section 4043 of ERISA) has occurred with respect to any
Pinnacle Employee Plans as to which a notice would be required to be filed
with the Pension Benefit Guaranty Corporation. No claim is pending, and
Pinnacle has not received notice of any threatened or imminent claim with
respect to any Pinnacle Employee Plan (other than a routine claim for benefits
for which plan administrative review procedures have not been exhausted) for
which Pinnacle or any of its subsidiaries would be liable after December 31,
1996, except as reflected on the Pinnacle Financial Statements. All
liabilities of the Pinnacle Employee Plans have been funded on the basis of
consistent methods in accordance with sound actuarial assumptions and
practices, and no Pinnacle Employee Plan, at the end of any plan year, or at
December 31, 1996, had or has had an accumulated funding deficiency. No
actuarial assumptions have been changed since the last written report of
actuaries on such Pinnacle Employee Plans. All insurance premiums (including
premiums to the Pension Benefit Guaranty Corporation) have been paid in full,
subject only to normal retrospective adjustments in the ordinary course.
Pinnacle and its subsidiaries have no contingent or actual liabilities under
Title IV of ERISA. No accumulated funding deficiency (within the meaning of
Section 302 of ERISA or Section 412 of the Code) has been incurred with
respect to any of the Pinnacle Employee Plans, whether or not waived. No
reportable event (as defined in Section 4043 of ERISA) has occurred with
respect to any of the Pinnacle Employee Plans as to which a notice would be
required to be filed with the Pension Benefit Guaranty Corporation. After
December 31, 1996, Pinnacle 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 Pinnacle
Employee Plan. All Pinnacle Employee Plans have been operated, administered
and maintained in accordance with the terms thereof and in compliance with the
requirements of all applicable laws, including, without limitation, ERISA and
the Code.
(e) 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 payment (including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any director,
officer or employee of Pinnacle or any of its affiliates from Pinnacle or any
of its affiliates under any Pinnacle Employee Plan or otherwise, (ii) increase
any benefits otherwise payable under any Pinnacle Employee Plan, or (iii)
result in any acceleration of the time of payment or vesting of any such
benefits.
(f) Copies of each Pinnacle Employee Plan described in Section 2.11(c) of
the Disclosure Schedule, and all amendments or supplements thereto, have been
previously made available to CNB by Pinnacle. Section 2.11(f) of the
Disclosure Schedule lists, for each Pinnacle Employee Plan, all of the
following with respect 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. Copies of each of the documents described in the
preceding sentence have been previously made available to CNB by Pinnacle.
SECTION 2.12. TITLE TO PROPERTIES; INSURANCE. (i) Pinnacle 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
Pinnacle Financial Statements and easements, rights-of-way, and other
restrictions and imperfections not material in nature, and further excepting
in the case of Other Real Estate Owned (as such real estate is internally
classified on the books of Pinnacle or its subsidiaries) rights of redemption
under applicable law) to all of their owned real properties, (ii) all
leasehold interests for real property and personal property used by Pinnacle
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 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 Pinnacle, threatened
with respect to such properties, (iv) Pinnacle and its subsidiaries have valid
title or other ownership rights under licenses to all intangible personal or
intellectual property necessary to conduct the business and operations of
Pinnacle and its subsidiaries as presently conducted, free and clear of any
claim, defense or right
A-15
<PAGE>
of any other person or entity, subject only to rights of the licensors
pursuant to applicable license agreements, which rights do not adversely
interfere with the use of such property, (v) all insurable properties owned or
held by Pinnacle 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 Pinnacle or any of its subsidiaries under such policies, and (vi) all
tangible properties used in the businesses of Pinnacle 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 2.12
of the Disclosure Schedule sets forth, for each policy of insurance maintained
by Pinnacle and its subsidiaries, the amount and type of insurance, the name
of the insurer and the amount of the annual premium.
SECTION 2.13. 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 Pinnacle 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) Neither the conduct nor operation of Pinnacle or its subsidiaries nor
any condition of any property presently or previously owned, leased or
operated by any of them violates or violated or, to the knowledge of Pinnacle,
may violate, Environmental Laws in a manner or to any extent exposing Pinnacle
or its subsidiaries to liability or potential liability 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 or, to the
knowledge of Pinnacle, may constitute, a violation of Environmental Laws in a
manner or to any extent that would obligate (or potentially obligate) Pinnacle
or its subsidiaries to remedy, stabilize, neutralize or otherwise alter the
environmental condition of any such property. Neither Pinnacle nor any of its
subsidiaries has received any notice from any person or entity that Pinnacle
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 in a manner or to any extent exposing Pinnacle or its
subsidiaries to liability or potential liability 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 and, to the knowledge of
Pinnacle, Pinnacle and its subsidiaries and the operation and condition of any
property ever owned, leased or operated by any of them are not and were not in
violation of any Environmental Laws in a manner or to any extent exposing
Pinnacle or its subsidiaries to liability or potential liability and none 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 2.13(b)
of the Disclosure Schedule lists each property presently owned, leased or
operated by Pinnacle or any of its subsidiaries which, to the knowledge of
Pinnacle, contains any pollutants, contaminants, or hazardous or toxic wastes,
substances or materials at, on or beneath any such property or which otherwise
violates any Environmental Laws.
SECTION 2.14. COMPLIANCE WITH LAW. Pinnacle and its subsidiaries have all
licenses, franchises, permits and other governmental authorizations that are
legally required to enable them to conduct their respective businesses and are
in compliance with all applicable laws and regulations.
SECTION 2.15. BROKERAGE. 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 Pinnacle or
its subsidiaries, other than agreements with Donaldson, Lufkin & Jenrette
Securities Corporation, PL Capital, L.L.C., and Friedman, Billings, Ramsey &
Co., Inc., and copies of such agreements have been previously made available
to CNB by Pinnacle.
A-16
<PAGE>
SECTION 2.16. NON-BANKING ACTIVITIES OF PINNACLE AND SUBSIDIARIES. Neither
Pinnacle 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 Pinnacle 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.
SECTION 2.17. TRUST ADMINISTRATION. During the applicable statute of
limitations period, (i) the Subsidiary Bank and each other subsidiary of
Pinnacle 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, and (ii)
neither Pinnacle, any subsidiary of Pinnacle, nor any director, officer or
employee of Pinnacle or any of its subsidiaries acting on behalf of Pinnacle
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 and accurately reflect the
assets of such fiduciary or agency account. There is no investigation or
inquiry by any Regulatory Agency pending, or to the knowledge of Pinnacle,
threatened, against or affecting Pinnacle or any of its subsidiaries relating
to the compliance by Pinnacle or any such subsidiary with sound fiduciary
principles and applicable regulations.
SECTION 2.18. POOLING OF INTERESTS; TAX-FREE REORGANIZATION. Pinnacle 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 2.20. MATERIAL CONTRACTS AND AGREEMENTS. Neither Pinnacle nor any of
its subsidiaries is a party to, or is bound by, any material contract (as
defined in Item 601(b)(10) of Regulation S-K of the S.E.C.) or any other
material contract or similar arrangement whether or not made in the ordinary
course of business (other than loans or loan commitments and funding
transactions in the ordinary course of business of Pinnacle's subsidiaries)
that has not been filed or incorporated by reference in periodic reports filed
by Pinnacle with the S.E.C. under the Exchange Act or is not otherwise listed
in Section 2.20 of the Disclosure Schedule. Section 2.20 of the Disclosure
Schedule lists (i) each agreement restricting the nature or geographic scope
of any line of business or activity of Pinnacle or its subsidiaries, and (ii)
each agreement, indenture or other instrument relating to the borrowing of
money by Pinnacle or any of its subsidiaries or the guarantee by Pinnacle or
any of its subsidiaries of any such obligation, other than instruments
relating to transactions entered into in the ordinary course of business.
Copies of each of the contracts and agreements listed in Section 2.20 of the
Disclosure Schedule have been previously furnished to CNB by Pinnacle.
SECTION 2.21. NO UNDISCLOSED LIABILITIES. Pinnacle and its subsidiaries do
not have any 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 Pinnacle or its subsidiaries giving rise to any such liability),
except (i) for liabilities set forth in the Pinnacle Financial Statements, and
(ii) normal fluctuation in the amount of the liabilities referred to in clause
(i) above occurring in the ordinary course of business of Pinnacle and its
subsidiaries since the date of the June 30, 1997 balance sheet included in the
Pinnacle Financial Statements.
SECTION 2.22. STATEMENTS TRUE AND CORRECT. None of the information supplied
or to be supplied by Pinnacle or its subsidiaries for inclusion in (i) the
Registration Statement (as defined in Section 4.05 hereof), (ii) the Joint
Proxy Statement/Prospectus (as defined in Section 4.03 hereof), and (iii) any
other documents to be filed with the S.E.C., Nasdaq, 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 Joint Proxy Statement/Prospectus,
A-17
<PAGE>
when first mailed to the shareholders of Pinnacle and at the time of the
Shareholders' Meetings (as defined in Section 5.01(c) hereof), contain any
untrue statement of a material fact, or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they are made, not misleading. All documents that
Pinnacle shall be responsible for filing with the S.E.C., Nasdaq 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 2.23. STATE TAKEOVER LAWS. The Board of Directors of Pinnacle has
taken all such action required to be taken by it to provide that this
Agreement, the Pinnacle Option Agreement and the transactions contemplated by
this Agreement and by the Pinnacle Option Agreement shall be exempt from the
requirements of any "moratorium," "control share," "fair price" or other anti-
takeover laws or regulations of any state.
SECTION 2.24. FAIR LENDING; COMMUNITY REINVESTMENT ACT. With the exception
of routine investigation of consumer complaints, neither Pinnacle 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. Each of Pinnacle's depository
institution subsidiaries received a Community Reinvestment Act ("CRA") rating
of "Outstanding" or "Satisfactory" in its most recent CRA examination.
ARTICLE THREE
Representations And Warranties Of CNB
Subject to Section 1.11 hereof, CNB hereby make the following
representations and warranties:
SECTION 3.01. ORGANIZATION AND CAPITAL STOCK.
(a) CNB is a corporation duly organized, validly existing and in good
standing under the laws of the State of Indiana and has the corporate power to
own all of its property and assets, to incur all of its liabilities and to
carry on its business as now being conducted. CNB is a bank holding company
registered with the Federal Reserve Board under the B.H.C.A.
(b) The authorized capital stock of CNB consists of (i) 50,000,000 shares of
CNB Common, of which, as of September 30, 1997, 20,463,204 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. As of the date hereof, CNB had
outstanding employee stock options representing the right to acquire not more
than 1,074,000 shares of CNB Common pursuant to the stock option plans of CNB.
(c) The shares of CNB Common that are to be issued to the shareholders of
Pinnacle 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 has, by all
appropriate action, approved this Agreement and the Merger and authorized the
execution hereof on its behalf by its duly authorized officers and the
performance by CNB of its obligations hereunder. Nothing in the Articles of
Incorporation or Bylaws of CNB, as amended, or any other agreement,
instrument, decree, proceeding, law or regulation (except as specifically
referred to in or contemplated by this Agreement) by or to which CNB or any of
its subsidiaries are bound or subject would prohibit or inhibit CNB from
entering into and consummating this Agreement and the Merger on the terms and
conditions herein contained. This Agreement has been duly and validly executed
and delivered by CNB and constitutes a legal, valid and binding obligation of
CNB, enforceable against CNB in accordance with its terms and, except for the
approval of the Merger by the affirmative vote of a majority of the issued and
outstanding shares of CNB Common at the CNB Shareholders' Meeting (as defined
in Section 5.01(c) hereof), no other corporate acts or proceedings are
required to be taken by CNB to authorize the execution, delivery and
performance of this Agreement. Except for the requisite approval of the
Federal Reserve Board, the
A-18
<PAGE>
Indiana Department of Financial Institutions and the Michigan Financial
Institutions Bureau, 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.
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, 1996 and 1995, and related
consolidated statements of income, changes in shareholders' equity and cash
flows for the three (3) years ended December 31, 1996, together with the notes
thereto, included in CNB's Annual Report on Form 10-K for the year ended
December 31, 1996, as currently on file with the S.E.C., and the unaudited
consolidated balance sheets of CNB and its subsidiaries as of March 31, 1997
and June 30, 1997, 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 Form10-Q for the quarters then ended, as currently on
file with the S.E.C., and the year-end and quarterly Reports of Condition and
Reports of Income of each of the subsidiary banks of CNB for 1996, March 31,
1997, and June 30, 1997, respectively, as currently on file with the
applicable Regulatory Agency (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 except
for regulatory reporting differences required by the reports of the subsidiary
banks of CNB) 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, 1996, 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, 1996 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, and there is no injunction, order, judgment, decree or
regulatory restriction imposed upon CNB, or any of its subsidiaries or the
assets of CNB of any of its subsidiaries, which would have a Material Adverse
Effect on CNB.
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, and have paid all fees and assessments
due and payable in connection therewith. As of their respective dates, each of
such reports and documents, as amended, including any financial statements,
exhibits and schedules thereto, complied with the relevant statutes, rules and
regulations enforced or promulgated by the regulatory authority with which
they were filed and did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
SECTION 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 and
are in compliance with all applicable laws and regulations.
A-19
<PAGE>
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 for inclusion in (i) the Registration Statement, (ii)
the Joint 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
Joint Proxy Statement/Prospectus, when first mailed to the shareholders of
Pinnacle and at the time of the Shareholders' Meetings, 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.
SECTION 3.11. REGULATORY ENFORCEMENT MATTERS. Neither CNB nor any of its
significant subsidiaries is subject or is party to, or has received any notice
or advice that it may become subject or party to, any Regulatory Agreement,
nor has CNB or any of its significant subsidiaries been advised by any
Regulatory Agency that it is considering issuing or requesting any such
Regulatory Agreement.
SECTION 3.12. TAX MATTERS. Each of CNB and its subsidiaries has filed with
the appropriate governmental agencies all foreign, federal, state and local
Tax Returns required to be filed by it. Neither CNB 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 CNB and its subsidiaries have been audited or otherwise closed
by the I.R.S. and comparable state agencies and any liability with respect
thereto has been satisfied for all years to and including 1992 (except for the
State of Indiana which is 1990), and either no deficiencies were asserted as a
result of such examination for which CNB does not have adequate reserves or
all such deficiencies have been satisfied. The reserve for Taxes in the
financial statements of CNB for the year ended December 31, 1996, is adequate
to cover all of the liabilities for Taxes of CNB and its subsidiaries that may
become payable in future years with respect to any transactions consummated
prior to December 31, 1996.
SECTION 3.13. BROKERAGE. 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 CNB or its
subsidiaries, other than an agreement with Oppenheimer & Co., Inc., a copy of
which has been previously made available to Pinnacle by CNB.
SECTION 3.14. STATE TAKEOVER LAWS. The Board of Directors of CNB has taken
all such action required to be taken by it to provide that this Agreement, the
Pinnacle Option Agreement and the transactions contemplated by this Agreement
and by the Pinnacle Option Agreement shall be exempt from the requirements of
any "moratorium," "control share," "fair price" or other anti-takeover laws or
regulations of any state.
SECTION 3.15. NO UNDISCLOSED LIABILITIES. As of the date hereof, CNB and its
subsidiaries do not have any 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 CNB or its subsidiaries giving rise to any such liability), except (i)
for liabilities set forth in the CNB Financial Statements, and (ii) normal
fluctuation in the amount of the liabilities referred to in clause (i) above
occurring in the ordinary course of business of CNB and its subsidiaries since
the date of the June 30, 1997 balance sheet included in the CNB Financial
Statements.
A-20
<PAGE>
ARTICLE FOUR
Agreements of Pinnacle
SECTION 4.01. BUSINESS IN ORDINARY COURSE.
(a) Pinnacle 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 (i) in the case of dividends payable until June
30, 1998, Pinnacle may declare and pay its regular quarterly dividend on the
Pinnacle Common not to exceed $0.235 per share, at approximately the same
times during each quarter during such period which it has historically
declared and paid such dividends, and (ii) in the case of dividends payable on
or after July 1, 1998, Pinnacle may declare and pay its regular quarterly
dividend on the Pinnacle Common in an aggregate amount equal to the aggregate
amount that Pinnacle shareholders would have received on their shares of CNB
Common received in the Merger had the Effective Time been immediately before
the record date or dates for the payment of each such dividend, at
approximately the same times during each quarter during such period which it
has historically declared and paid such dividends; provided, however, that
Pinnacle 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 Pinnacle shareholders shall receive a
quarterly dividend from either Pinnacle or CNB but not from both during or
with respect to such quarter.
(b) Pinnacle 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, Pinnacle and each of its subsidiaries shall
not, without the prior written consent of CNB (which shall not be unreasonably
withheld):
(i) issue any Pinnacle Common or other capital stock or any options,
warrants, or other rights to subscribe for or purchase Pinnacle Common or
any other capital stock or any securities convertible into or exchangeable
for any capital stock of Pinnacle or any of its subsidiaries (except for
(i) the issuance of Pinnacle Common pursuant to the valid exercise of
Pinnacle Stock Options which are outstanding on the date hereof, (ii) the
issuance of Pinnacle Common pursuant to the Pinnacle Option Agreement, and
(iii) in the event that the Effective Time shall not have occurred on or
before April 30, 1998, grants of Pinnacle Stock Options after April 30,
1998, in accordance with the Stock Option Plans and in a manner and
pursuant to policies consistent with past practices; provided, however,
that (1) such grants shall not be made if CNB shall have determined, in
consultation with its independent auditors, KPMG Peat Marwick, LLP, that
such grants would disqualify the Merger as a "pooling of interests" for
accounting purposes, and (2) any persons who shall receive such grants of
Pinnacle Stock Options from Pinnacle shall not be eligible to receive stock
options with respect to shares of CNB Common from CNB during 1998); or
(ii) directly or indirectly redeem, purchase or otherwise acquire any
Pinnacle Common or any other capital stock of Pinnacle or effect a
reclassification, recapitalization, splitup, exchange of shares,
readjustment or other similar change in or to any capital stock or
otherwise reorganize or recapitalize Pinnacle; or
(iii) directly or indirectly redeem, purchase or otherwise acquire any
capital stock of subsidiaries of the Pinnacle or effect a reclassification,
recapitalization, splitup, exchange of shares, readjustment or other
similar change in or to any capital stock or otherwise reorganize or
recapitalize any subsidiary of Pinnacle (other than any of the foregoing
all of the parties to which shall consist exclusively of Pinnacle and the
wholly-owned subsidiaries of Pinnacle); or
(iv) change its 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 (other
than grants of Pinnacle Stock Options after April 30, 1998, as provided in
Section 4.01(b)(i) hereof) or, except as required by law or as required by
existing contractual obligations which shall have been described
A-21
<PAGE>
in Section 2.11 of the Disclosure Schedule, adopt or make any material
change in any bonus, insurance, pension, or other Pinnacle 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 material amount of funds except in the
ordinary course of business, or directly or indirectly guarantee or agree
to guarantee any material obligations of others, except in the ordinary
course of business; 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,
including risk exposure in the mortgage repurchase program, in principal
amounts in excess of $5,000,000 or that would increase the aggregate credit
outstanding to any one borrower (or group of affiliated borrowers) to more
than $10,000,000 (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 Pinnacle; or
(viii) purchase or otherwise acquire any investment security for its own
account, except in a manner and pursuant to policies consistent with past
practice; or
(ix) materially 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) except as set forth in Section 4.01(b)(x) of the Disclosure Schedule,
enter into any agreement, contract or commitment of a material nature out
of the ordinary course of business; or
(xi) except in the ordinary course of business, place on any of its
material assets or properties any mortgage, pledge, lien, charge, or other
encumbrance of a material nature; or
(xii) except in the ordinary course of business, cancel or accelerate any
material indebtedness owing to Pinnacle or its subsidiaries or any claims
which Pinnacle or its subsidiaries may possess or waive any material rights
with respect thereto; or
(xiii) except as set forth in Section 4.01(b)(xiii) of the Disclosure
Schedule, sell or otherwise dispose of any material real property or any
material amount of any tangible or intangible personal property other than
in the ordinary course of business and other than properties acquired in
foreclosure or otherwise in the ordinary collection of indebtedness to
Pinnacle 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
Pinnacle 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 Pinnacle; or
(xvi) purchase any real or personal property or make any other capital
expenditure, except in a manner and pursuant to policies consistent with
past practice; or
(xvii) affirmatively 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
(xviii) take any action which would materially and adversely effect or
delay the ability of either CNB or Pinnacle to obtain any necessary
approvals of any Regulatory Agency or other governmental authority required
for the transactions contemplated by this Agreement or to perform its
covenants and agreements under this Agreement or the Pinnacle Option
Agreement.
(c) Pinnacle and its subsidiaries shall not, without the prior written
consent of CNB, engage in any transaction or take any action that would render
untrue (under the standard of Section 1.11 hereof) any of the
A-22
<PAGE>
representations and warranties of Pinnacle contained in Article Two hereof, if
such representations and warranties were given as of the date of such
transaction or action.
(d) Pinnacle shall promptly notify CNB in writing of the occurrence of any
matter or event known to and directly involving Pinnacle, 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 Pinnacle.
(e) Pinnacle 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 (subject
to the fiduciary duties of its directors as advised by counsel) hold
discussions or negotiations with or provide any information to any person in
connection with any proposal from any person for the acquisition of all or any
substantial portion of the business, assets, shares of Pinnacle Common or
other securities of Pinnacle or its subsidiaries. Pinnacle 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. Pinnacle 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. Pinnacle shall cause to be duly
called and held, on a date selected by Pinnacle with the approval of CNB, a
special meeting of its shareholders (the "Pinnacle Shareholders' Meeting") for
submission of this Agreement and the Merger for approval of such Pinnacle
shareholders as required by the MBCA. In connection with the Pinnacle
Shareholders' Meeting, (i) Pinnacle shall cooperate and assist CNB in
preparing and filing a Joint Proxy Statement/Prospectus (the "Joint Proxy
Statement/Prospectus") with the S.E.C. and Pinnacle shall mail it to its
shareholders, (ii) Pinnacle shall furnish CNB all information concerning
itself that CNB may reasonably request in connection with such Joint Proxy
Statement/Prospectus, and (iii) the Board of Directors of Pinnacle (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. Pinnacle shall use its best
efforts to obtain all necessary consents with respect to all interests of
Pinnacle 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.
SECTION 4.05. CONSUMMATION OF AGREEMENT. Pinnacle 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 Pinnacle and its subsidiaries with the business and
operations of CNB and its subsidiaries. Pinnacle shall furnish to CNB in a
timely manner all information, data and documents in the possession of
Pinnacle requested by CNB as may be required to obtain any necessary
regulatory or other approvals of the Merger and to file with the S.E.C. a
registration statement on FormS-4 (the "Registration Statement") relating to
the shares of CNB Common to be issued to the shareholders of Pinnacle 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 4.06. ENVIRONMENTAL REPORTS. Pinnacle shall provide to CNB, as soon
as reasonably practical, but not later than forty-five (45) days after the
date hereof, a report of a phase one environmental investigation on the real
property identified on Section 2.13(b) of the Disclosure Schedule, if any, and
within ten (10) days after the acquisition or lease of any real property
acquired or leased by Pinnacle or its subsidiaries after the date
A-23
<PAGE>
hereof (but excluding space in office or retail and similar establishments
leased by Pinnacle or its subsidiaries for automatic teller machines or bank
branch facilities or other office uses where the space leased comprises less
than 50% of the total space leased to all tenants of such property), except as
otherwise provided in Section 4.01(b)(xiv) hereof. If required by the phase
one investigation in CNB's reasonable opinion, Pinnacle shall provide to CNB,
within sixty (60) days of the receipt by Pinnacle of the request of CNB
therefor, a report of a phase two investigation on properties requiring such
additional study. CNB shall have fifteen (15) business days from the receipt
of any such phase two investigation report to notify Pinnacle 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
$5,000,000 as reasonably estimated by an environmental expert retained for
such purpose by CNB and reasonably acceptable to Pinnacle, 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 can not be so reasonably estimated, to terminate
this Agreement, which shall be CNB's sole remedy in such event.
SECTION 4.07. RESTRICTION ON RESALES. Pinnacle shall deliver to CNB, at
least five (5) days prior to the mailing of the Joint Proxy
Statement/Prospectus to the shareholders of Pinnacle in connection with the
Pinnacle Shareholders' Meeting, a list of each person who may reasonably be
deemed an "affiliate" of Pinnacle within the meaning of such term as used in
Rule 145 under the Securities Act of 1933, as amended (the "Securities Act"),
at the time the Joint Proxy Statement/Prospectus is mailed to the shareholders
of Pinnacle. Pinnacle 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 4.07 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 (or
reduction of risk with respect thereto) of Pinnacle Common during the thirty
(30) days preceding the Closing Date, or CNB Common until such time as
financial results covering at least thirty (30) days of post-Merger combined
operations have been published.
SECTION 4.08. ACCESS TO INFORMATION. Pinnacle shall permit CNB reasonable
access in a manner which shall avoid undue disruption or interference with
Pinnacle's normal operations to its properties and shall disclose and make
available to CNB all books, documents, papers, records and computer systems
documentation and files 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), Employee
Benefit Plans, and any other business activities or prospects in which CNB may
have a reasonable and legitimate interest in furtherance of the transactions
contemplated by this Agreement. CNB shall hold any such information which is
nonpublic in confidence in accordance with the provisions of Section 8.01
hereof.
SECTION 4.09. SUBSIDIARY BANK MERGER. Upon the request of CNB, Pinnacle
shall cause the Subsidiary Bank to enter into a merger agreement, subject to
the conditions of this 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.
A-24
<PAGE>
SECTION 4.10. PLAN OF MERGER. At the request of CNB, Pinnacle shall enter
into a separate plan of merger or articles of merger or certificate of merger
reflecting the terms hereof for purposes of any filing requirement of the IBCL
and the MBCA.
SECTION 4.11. COMFORT LETTERS. Pinnacle shall use its reasonable best
efforts to cause to be delivered to CNB, and to CNB's directors and officers
who sign the Registration Statement, a letter of KPMG Peat Marwick, LLP,
independent auditors for Pinnacle, dated (i) the date on which the
Registration Statement shall become effective, and (ii) a date shortly prior
to the Effective Date, and addressed to CNB, and such directors and officers,
in form and substance customary for "comfort" letters delivered by independent
accountants in accordance with Statement of Accounting Standards No. 72.
SECTION 4.12. RESTATED PINNACLE FINANCIAL STATEMENTS. Pinnacle shall prepare
restated audited supplemental consolidated financial statements (the "Restated
Pinnacle Financial Statements"), giving retroactive effect to the business
combinations with IFC and CBI which were consummated on August 1, 1997.
Pinnacle shall prepare the Restated Pinnacle Financial Statements in
accordance with the requirements of Item 12(b)(2)(iv) of Form S-4 and
Regulation S-X under the Securities Act. Pinnacle shall include the Restated
Pinnacle Financial Statements as an exhibit to Pinnacle's Current Report on
Form 8-K, which Pinnacle shall file with the S.E.C. on or before the earlier
to occur of (i) the date upon which it shall have filed with the S.E.C. its
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, or
(ii) November 14, 1997.
ARTICLE FIVE
Agreements of CNB
SECTION 5.01. REGULATORY APPROVALS AND REGISTRATION STATEMENT; OTHER
AGREEMENTS.
(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. CNB shall keep Pinnacle
reasonably informed as to the status of such applications and make available
to Pinnacle for review prior to filing with the applicable Regulatory Agencies
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 Pinnacle pursuant
hereto, and shall use its best efforts to cause the Registration Statement to
become effective. At the time the Registration Statement becomes effective,
CNB shall cause the Registration Statement to comply in all material respects
with the provisions of the Securities Act and the published rules and
regulations thereunder, and 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. CNB
covenants with Pinnacle that at the time of mailing thereof to the
shareholders of Pinnacle, at the time of the Shareholders' Meetings and at the
Effective Time, the Joint 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 and properly 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.
(c) CNB shall cause to be duly called and held, on a date selected by CNB
and approved by Pinnacle, a special meeting of its shareholders (the "CNB
Shareholders' Meeting" and, together with the Pinnacle Shareholder Meeting,
the "Shareholders' Meetings") for submission of the transactions contemplated
by this Agreement for approval of such CNB shareholders. In connection with
the CNB Shareholders' Meeting, (i) CNB
A-25
<PAGE>
shall prepare and file the Joint Proxy Statement/Prospectus with the S.E.C.
and mail it to its shareholders, and (ii) the Board of Directors of CNB shall
(subject to compliance with its fiduciary duties as advised by counsel)
recommend to its shareholders the approval of the issuance by CNB of the
shares of CNB Common as provided herein and use its best efforts to obtain
such shareholder approval.
(d) CNB shall not (i) between the date hereof and the Effective Time, except
in a manner and pursuant to policies consistent with past practice, grant any
employee or director stock options to acquire CNB Common, (ii) between the
date hereof and the Effective Time, 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 CNB, (iii) affirmatively 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, (iv)
without the prior written consent of Pinnacle, engage in any transaction or
take any action that would render untrue (under the standard of Section 1.11
hereof) any of the representations and warranties of CNB contained in Article
Three hereof (except for any such representations and warranties made only as
of a specified date), if such representations and warranties were given as of
the date of such transaction or action. CNB shall promptly notify Pinnacle in
writing of the occurrence of any matter or event known to and directly
involving CNB, 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 CNB.
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 Pinnacle and use its best efforts to prevent
or promptly remedy the same.
SECTION 5.03. CONSUMMATION OF AGREEMENT. CNB shall use its best efforts to
perform and fulfill all conditions and obligations on its part to be performed
or fulfilled under this Agreement and to effect the Merger in accordance with
the terms and conditions of this Agreement.
SECTION 5.04. STOCK OPTIONS.
(a) At the Effective Time, each outstanding option to purchase shares of
Pinnacle Common (a "Pinnacle Stock Option") issued pursuant to the Pinnacle
Financial Services, Inc. Executive Long Term Incentive Plan (also known as the
Pinnacle Financial Services, Inc. 1993 Stock Option Plan), as amended, and the
Indiana Financial Corporation 1986 Stock Option and Incentive Plan (together,
the "Stock Option Plans"), whether or not exercisable or vested, shall cease
to represent a right to acquire shares of Pinnacle Common and shall be
converted automatically into an option to acquire, from and after the
Effective Time, on the same terms and conditions as were applicable under such
Pinnacle Stock Option (including the immediate vesting of such Pinnacle Stock
Option to the extent that the terms thereof shall provide for such immediate
vesting upon the consummation of the Merger), the number of full shares of CNB
Common as the holder of such Pinnacle Stock Option would have been entitled to
receive pursuant to the Merger had such holder exercised such option in full
immediately prior to the Effective Time (determined by multiplying the
aggregate number of shares of Pinnacle Common covered by such Pinnacle Stock
Option by the Conversion Ratio), at a price per share equal to (y) the
aggregate amount of the exercise prices for Pinnacle Common otherwise
purchasable pursuant to such Pinnacle Stock Option, divided by (z) the number
of full shares (and, subject to Section 5.04(d) hereof, for these purposes,
any fractional share amount shall be rounded upwards to the next higher full
share amount) of CNB Common deemed purchasable pursuant to such Pinnacle Stock
Option (determined as provided above in this Section 5.04(a)). In no event
shall CNB be required to issue fractional shares of CNB Common.
(b) As soon as practicable after the Effective Time, CNB shall deliver to
each holder of Pinnacle Stock Options appropriate notices setting forth such
holders' rights pursuant to the Stock Option Plans, and the agreements
evidencing the grants of such Pinnacle Stock Options shall continue in effect
on the same terms and
A-26
<PAGE>
conditions (subject to the conversion required by this Section 5.04 after
giving effect to the Merger and the assumption by CNB as set forth above). To
the extent necessary to effectuate the provisions of this Section 5.04, CNB
shall deliver new or amended agreements reflecting the terms of each Pinnacle
Stock Option assumed by CNB and amend the Stock Option Plans to reflect the
terms hereof.
(c) As soon as practicable after the Effective Time, CNB shall file with the
S.E.C. a registration statement on an appropriate form with respect to the
shares of CNB Common subject to such options and shall use its best efforts to
maintain the effectiveness of such registration statement or registration
statements (and maintain the current status of the prospectus or prospectuses
with respect thereto) for so long as such options remain outstanding.
(d) The adjustment provided in this Section 5.04 with respect to any
Pinnacle Stock Options which are "incentive stock options" (as defined in
Section 422 of the Code) shall be and is intended to be effected in a manner
which is consistent with Section 424(a) of the Code and, to the extent it is
not so consistent, such Section 424(a) of the Code shall override anything to
the contrary contained herein.
SECTION 5.05. DIRECTORS AND OFFICERS' LIABILITY INSURANCE AND
INDEMNIFICATION.
(a) For a period of six (6) years after the Effective Time, CNB shall use
its reasonable best efforts to cause to be maintained in effect the current
policies of directors' and officers' liability insurance maintained by
Pinnacle (provided that CNB may substitute therefor policies of comparable
coverage with respect to claims arising from facts or events which occurred
before the Effective Time); provided, however, that in no event shall CNB be
obligated to expend, in order to maintain or provide insurance coverage
pursuant to this Section 5.05(a), any amount per annum in excess of 150% of
the amount of the annual premiums paid as of the date hereof by Pinnacle for
such insurance (the "Maximum Amount"). If the amount of the annual premiums
necessary to maintain or procure such insurance coverage exceeds the Maximum
Amount, CNB shall use all reasonable efforts to maintain the most advantageous
policies of directors' and officers' insurance obtainable for an annual
premium equal to the Maximum Amount. Notwithstanding the foregoing, prior to
the Effective Time, CNB may request Pinnacle to, and Pinnacle shall, purchase
insurance coverage, on such terms and conditions as shall be acceptable to
CNB, extending for a period of six (6) years Pinnacle's directors' and
officers' liability insurance coverage in effect as of the date hereof
(covering past or future claims with respect to periods before the Effective
Time) and such coverage shall satisfy CNB's obligations under this Section
5.05(a).
(b) For the applicable statute of limitations period, CNB shall indemnify,
defend and hold harmless the present and former officers, directors, employees
and agents of Pinnacle and its subsidiaries (each, an "Indemnified Party")
against all losses, expenses, claims, damages or liabilities arising out of
actions or omissions occurring on or prior to the Effective Time (including,
without limitation, the transactions contemplated by this Agreement and the
Pinnacle Option Agreement) to the full extent then permitted under the MBCA
and by Pinnacle's Articles of Incorporation as in effect on the date hereof
(and, with respect to predecessors of Pinnacle, the applicable laws, articles
of incorporation and bylaws pertaining thereto), including provisions relating
to advances of expenses incurred in the defense of any action or suit.
(c) Notwithstanding anything to the contrary, CNB shall acknowledge and
assume, upon consummation of the Merger, the obligations of Pinnacle relating
to the subject matter of this Section 5.05 with respect to its prior
acquisitions of IFC and CBI.
SECTION 5.06. EMPLOYEE BENEFITS.
(a) CNB shall, with respect to each employee of Pinnacle or its subsidiaries
at the Effective Time who shall continue in employment with Pinnacle, CNB or
their respective subsidiaries (each a "Continued Employee"), provide the
benefits described in this Section 5.06. 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
A-27
<PAGE>
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
Pinnacle after the Effective Time. Pinnacle 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
CNB Employee Plans as may be in effect from time to time and this Section 5.06
is not intended to give Continued Employees any rights or privileges superior
to those of other employees of CNB's subsidiaries (except as provided in the
following sentence with respect to credit for past service). CNB may terminate
or modify all Pinnacle 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 5.06 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 Pinnacle and its subsidiaries
and its and their predecessors. Notwithstanding anything to the contrary, CNB
shall acknowledge and assume, upon consummation of the Merger, the obligations
of Pinnacle relating to the subject matter of this Section 5.06 resulting from
its prior acquisitions of IFC and CBI, as such obligations are described in
Section 2.11(c) of the Disclosure Schedule.
(b) Notwithstanding anything to the contrary, CNB shall acknowledge and
assume, upon consummation of the Merger, the obligations of Pinnacle under its
severance agreements, supplemental retirement plans and arrangements, deferred
compensation plans and arrangements, and related trusts including, without
limitation, all of the same maintained or provided by any subsidiary of
Pinnacle and any predecessor of Pinnacle or any of its subsidiaries, as such
obligations are described in Section 2.11(c) of the Disclosure Schedule.
SECTION 5.07. BOARD COMPOSITION. CNB's Board of Directors shall take all
requisite action to elect three (3) persons as directors of CNB (and divided
among the three (3) classes of CNB's Board of Directors) effective as of the
first meeting of CNB's Board of Directors after the Effective Time, which
persons shall be mutually selected by Pinnacle and CNB.
SECTION 5.08. ACCESS TO INFORMATION. CNB shall permit Pinnacle 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 Pinnacle 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 Pinnacle may have a reasonable and legitimate
interest in furtherance of the transactions contemplated by this Agreement.
Pinnacle shall hold any such information which is nonpublic in confidence in
accordance with the provisions of Section 8.01 hereof.
SECTION 5.09. COMFORT LETTERS. CNB shall use its reasonable best efforts to
cause to be delivered to Pinnacle, a letter of KPMG Peat Marwick, LLP,
independent auditors for CNB, dated (i) the date on which the Registration
Statement shall become effective, and (ii) a date shortly prior to the
Effective Date, and addressed to Pinnacle, in form and substance customary for
"comfort" letters delivered by independent accountants in accordance with
Statement of Accounting Standards No. 72.
SECTION 5.10. RESTRICTION ON RESALES; PUBLICATION OF POST-MERGER RESULTS.
(a) CNB shall deliver to Pinnacle, at least five (5) days prior to the
mailing of the Joint Proxy Statement/Prospectus to the shareholders of CNB in
connection with the CNB Shareholders' Meeting, a list of
A-28
<PAGE>
each person who may reasonably be deemed an "affiliate" of CNB within the
meaning of such term as used in Rule 145 under the Securities Act, at the time
the Joint Proxy Statement/Prospectus is mailed to the shareholders of CNB. CNB
shall use its best efforts to obtain and deliver to Pinnacle, at least thirty-
one (31) days prior to the Closing Date, the signed agreement of each person
named on the list referred to in the preceding sentence regarding compliance
by such person with the requirements of Accounting Principles Board Opinion
No. 16 regarding the disposition of shares (or reduction of risk with respect
thereto) of CNB Common during the thirty (30) days preceding the Closing Date
and until such time as financial results covering at least thirty (30) days of
post-Merger combined operations have been published.
(b) CNB shall publish financial results covering at least thirty (30) days
of post-Merger combined operations not later than forty-five (45) days
following the end of the calendar quarter which shall first occur following
the Closing Date which shall include thirty (30) or more days of post-Merger
combined operations.
ARTICLE SIX
Conditions Precedent To Merger
SECTION 6.01. CONDITIONS TO CNB'S OBLIGATIONS. The obligations of CNB to
effect the Merger shall be subject to the satisfaction (or waiver by CNB)
prior to or on the Closing Date of the following conditions:
(a) The representations and warranties made by Pinnacle in this Agreement
shall be true and correct (subject to the standard in Section 1.11 hereof)
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 only
as of a specified date which shall be true and correct (subject to the
standard in Section 1.11 hereof) as of such date); and
(b) Pinnacle 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 or other person seeking any of the foregoing be pending. There shall
not be any action taken, or any statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to the Merger which makes the
consummation of the Merger illegal; 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 Pinnacle and CNB, required by law or the
N.Y.S.E. for consummation of the Merger shall have been obtained and all
waiting periods required by law shall have expired, and no regulatory
approval shall have imposed any condition, requirement or restriction which
the Board of Directors of CNB reasonably determines in good faith would so
materially adversely impact the economic or business benefits of the
transactions contemplated by this Agreement to CNB and its shareholders as
to render inadvisable the consummation of the Merger (any such condition,
requirement or restriction, a "Burdensome Condition"); and
(e) CNB shall have received all documents required to be received from
Pinnacle on or prior to the Closing Date, all in form and substance
reasonably satisfactory to CNB; and
(f) 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 CNB shall have received
an opinion letter, dated as of the Closing Date, from KPMG Peat Marwick,
LLP, its independent public accountants, to such effect; and
(g) The Registration Statement shall be effective under the Securities
Act and no stop orders suspending the effectiveness of the Registration
Statement shall be in effect or proceedings for such purpose pending before
or threatened by the S.E.C. or any state securities agency; and
A-29
<PAGE>
(h) 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
Pinnacle Common upon receipt of Merger Consideration (except for cash
received in lieu of fractional shares), (iii) the basis of shares of CNB
Common received by the shareholders of Pinnacle shall be the same as the
basis of shares of Pinnacle 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 Pinnacle Common exchanged
therefor, provided such shares were held as capital assets as of the
Effective Time; and
(i) CNB shall have received the letters referred to in Section 4.11 from
KPMG Peat Marwick, LLP, Pinnacle's independent auditors; and
(j) CNB shall have received, on or before the date of the mailing of the
Joint Proxy Statement/Prospectus, from its investment banker, Oppenheimer &
Co., Inc., the reaffirmation of the opinion of such investment banker,
originally rendered and delivered to CNB at the meeting of the Board of
Directors of CNB at which this Agreement was approved by such Board of
Directors, to the effect that the transactions contemplated by this
Agreement are fair to CNB and its shareholders from a financial point of
view.
SECTION 6.02. CONDITIONS TO PINNACLE'S OBLIGATIONS. The obligations of
Pinnacle to effect the Merger shall be subject to the satisfaction (or waiver
by Pinnacle) prior to or on the Closing Date of the following conditions:
(a) The representations and warranties made by CNB in this Agreement
shall be true and correct (subject to the standard in Section 1.11 hereof)
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 only
as of a specified date which shall be true and correct (subject to the
standard in Section 1.11 hereof) as of such date); and
(b) CNB shall have performed and complied in all material respects with
all of its 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 or any other
person seeking any of the foregoing be pending. There shall not be any
action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Merger which makes the consummation of
the Merger illegal; 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 Pinnacle and CNB, required by law or the
N.Y.S.E. for consummation of the Merger shall have been obtained and all
waiting periods required by law shall have expired; and
(e) Pinnacle 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 Pinnacle; 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) Pinnacle shall have received a copy of the opinion of CNB's counsel,
addressed to Pinnacle, contemplated by Section 6.01(h) hereof; and
(h) Pinnacle shall have received the letters referred to in Section 5.09
from KPMG Peat Marwick, LLP, CNB's independent auditors; and
(i) Pinnacle shall have received, on or before the date of the mailing of
the Joint Proxy Statement/Prospectus, from its investment banker, Friedman,
Billings, Ramsey & Co., Inc., the reaffirmation of the opinion of such
investment banker, originally rendered and delivered to Pinnacle at the
meeting of
A-30
<PAGE>
the Board of Directors of Pinnacle at which this Agreement was approved by
such Board of Directors, to the effect that the transactions contemplated
by this Agreement, including the Merger, are fair to Pinnacle and its
shareholders from a financial point of view; and
(j) 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 Pinnacle shall have
received an opinion letter, dated as of the Closing Date, from KPMG Peat
Marwick, LLP, CNB's independent public accountants, to such effect; and
(k) The shares of CNB Common issuable pursuant to this Agreement shall
have been approved for listing on the N.Y.S.E., subject to official notice
of issuance.
ARTICLE SEVEN
Termination Or Abandonment
SECTION 7.01. MUTUAL AGREEMENT. This Agreement may be terminated by the
mutual written agreement of CNB and Pinnacle at any time prior to the Closing
Date, regardless of whether approval of this Agreement and the Merger by the
shareholders of Pinnacle and CNB shall have been previously obtained.
SECTION 7.02. BREACH OF AGREEMENTS. In the event that there is a breach in
any of the representations and warranties (subject to the standard in Section
1.11 hereof) or a material breach of any of the agreements of CNB or Pinnacle,
which breach is not cured within thirty (30) days after written 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 4.06 hereof and this Section 7.03 by giving timely
written notice thereof to Pinnacle.
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 Pinnacle and CNB 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; BURDENSOME CONDITION. 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 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. CNB may terminate this Agreement if its
Board of Directors shall have reasonably determined in good faith that any of
the requisite regulatory approvals imposes a Burdensome Condition, and CNB
shall deliver written notice of such determination to Pinnacle not later than
thirty (30) days after receipt by CNB of notice of the imposition of such
Burdensome Condition from the applicable Regulatory Agency (unless an appeal
of such determination is being pursued by CNB, in which event the foregoing
notice shall be given within thirty (30) days of the termination of any such
appeal by CNB or the denial of such appeal by the appropriate Regulatory
Agency).
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 Pinnacle and CNB at the respective Shareholders'
Meetings,
A-31
<PAGE>
then either party may terminate this Agreement. CNB may terminate this
Agreement if Pinnacle'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. Pinnacle may terminate this Agreement if CNB'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 Pinnacle
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 Pinnacle 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 a Regulatory Agency, which
would have a Material Adverse Effect on Pinnacle, then CNB may terminate this
Agreement. In the event that CNB 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 a Regulatory Agency, which would have a Material Adverse Effect on CNB,
then Pinnacle may terminate this Agreement.
SECTION 7.08. FALL-APART DATE. If the Closing Date does not occur on or
prior to September 30, 1998, 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. POSSIBLE PURCHASE PRICE ADJUSTMENT.
(a) As used in this Section 7.09, the following terms shall have the
following meanings:
(i) "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) N.Y.S.E. trading days preceding the fifth
(5th) calendar day prior to the Closing Date (the "Determination Date").
The CNB Average Price shall be appropriately and proportionately adjusted
to reflect any Share Adjustment, as contemplated by Section 1.06 hereof.
(ii) "CNB Starting Price" shall mean the average of the daily closing
prices of CNB Common as reported in The Wall Street Journal (Midwest
Edition) for the ten (10) consecutive full N.Y.S.E. trading days commencing
on the day five (5) full N.Y.S.E. trading days before the first public
announcement of the Merger.
(iii) "Index Average Price" shall mean the weighted average (weighted in
accordance with the factors listed on Exhibit 7.09 hereto) of the Stock
Prices for all of the companies comprising the Index Group for the twenty
(20) consecutive full N.Y.S.E. trading days ending on the Determination
Date.
(iv) "Index Group" shall mean all of those companies listed on Exhibit
7.09 hereto, the common stock of which is publicly traded and as to which
there is no pending publicly announced agreement or proposal at any time
during the period of ten (10)N.Y.S.E. trading days ending on the
Determination Date for such company to be acquired or to acquire another
company in exchange for its stock where, in such later case, such company
to be acquired would be a significant subsidiary of such acquiring company
(as such term is defined in Section 3.03 hereof). In the event that any
such company or companies are so removed from the Index Group, the weights
attributed to the remaining companies shall be adjusted accordingly.
(v) "Index Starting Price" shall mean the weighted average (weighted in
accordance with the factors listed on Exhibit 7.09 hereto) of the Stock
Prices for all of the companies comprising the Index Group for the ten (10)
consecutive full N.Y.S.E. trading days commencing on the day five (5) full
N.Y.S.E. trading days before the first public announcement of the Merger.
A-32
<PAGE>
(vi) "Stock Price" shall mean, for any company belonging to the Index
Group, the average of the daily closing sale prices of a share of common
stock of such company, as reported in the consolidated transaction
reporting system for the market or exchange on which such common stock is
principally traded during the applicable period. The Stock Price, for any
company belonging to the Index Group, shall be appropriately and
proportionately adjusted to reflect any Share Adjustment effected by such
company during the applicable period.
(b) Pinnacle may terminate this Agreement if its Board of Directors so
determines by a vote of a majority of the members of its entire Board, if both
of the following conditions are satisfied:
(i) The CNB Average Price shall be less than the $36.00; and
(ii) (1) the number obtained by dividing the CNB Average Price by the CNB
Starting Price shall be less than (2) the number obtained by dividing the
Index Average Price by the Index Starting Price and multiplying the
quotient in this clause (ii)(2) by 0.82:
subject, however, to the following two sentences. If Pinnacle elects to
exercise its termination right pursuant to the immediately preceding sentence,
it shall give written notice to CNB within two (2) business days of the
Determination Date. Within two (2) business days after the date of receipt of
such notice, CNB shall have the option of adjusting the Conversion Ratio to
equal a number equal to a quotient, the numerator of which is the product of
$36.00 and the Conversion Ratio (as then in effect) and the denominator of
which is the CNB Average Price. If CNB makes an election contemplated by the
preceding sentence, it shall give prompt written notice to Pinnacle of such
election and the revised Conversion Ratio, whereupon no termination shall have
occurred pursuant to this Section 7.09(b) and this Agreement shall remain in
effect in accordance with its terms (except as the Conversion Ratio shall have
been so modified), and any references in this Agreement to "Conversion Ratio"
shall thereafter be deemed to refer to the Conversion Ratio as adjusted
pursuant to this Section 7.09(b).
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 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 Pinnacle 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.
A-33
<PAGE>
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:
CNB Bancshares, Inc.
20 N.W. Third Street
Evansville, Indiana 47739-0001
Attention: James J. Giancola, Chief Executive Officer
Facsimile: 812/464-3496
with a copy to:
Lewis, Rice & Fingersh, L.C.
500 N. Broadway
St. Louis, Missouri 63102
Attention: Thomas C. Erb, Esq.
Facsimile: 314/444-7788
and
(b) if to Pinnacle:
Pinnacle Financial Services, Inc.
830 Pleasant Street
St. Joseph, Michigan 49085
Attention: Richard L. Schanze, Chairman and Chief Executive Officer
Facsimile: 616/983-5567
-and-
Pinnacle Financial Services, Inc.
56 Washington Street
Valparaiso, Indiana 46383-9962
Attention: Donald A. Lesch, Vice Chairman and President
Facsimile: 219/464-2041
with a copy to:
Miller, Canfield, Paddock and Stone, P.L.C.
1400 N. Woodward Ave., Suite 100
Bloomfield Hills, Michigan 48304
Attention: J. Kevin Trimmer, Esq.
Facsimile: 248/258-3036
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 the Pinnacle
Option Agreement, 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
A-34
<PAGE>
on account of a willful breach of any of the representations and warranties
set forth herein or any willful 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, execution and performance 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.
SECTION 8.06. NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. Except for, and as provided in, this Section 8.06 and the Pinnacle
Option Agreement, 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 or Pinnacle (or
any director, officer or controlling person thereof) of any defense in law or
equity which otherwise would be available against the claims of any person,
including, without limitation, any shareholder or former shareholder of either
CNB or Pinnacle, the aforesaid representations, warranties and covenants being
material inducements to the consummation by CNB and Pinnacle of the
transactions contemplated herein. The agreements set forth in Sections 5.04,
5.05, 5.06, 5.07 and 5.10(b) hereof shall survive the Effective Time and the
agreements set forth in Sections 8.01, 8.02, 8.03, 8.05 and 8.16 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 and the Pinnacle Option
Agreement constitute 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 Pinnacle. 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, (iv) words in the
singular may include the plural and in the plural include the singular, and
(v) "knowledge" of a party means the actual or constructive knowledge of any
director or executive officer of such party or any of its subsidiaries.
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.
A-35
<PAGE>
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, except for
the intended third party beneficiaries of Sections 5.04, 5.05, 5.06(b) and
5.10(b) 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 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 Indiana, except to the extent that the MBCA must
govern the Merger procedures, 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.
SECTION 8.16. TERMINATION FEE. Pinnacle shall pay CNB $4,700,000 in
immediately available funds within two (2) days after the occurrence of a
Purchase Event (as defined in Section 2(c) of the Stock Option Agreement),
provided that such Purchase Event shall have occurred prior to the occurrence
of an Exercise Termination Event (as defined in Section 2(a) of the Stock
Option Agreement).
A-36
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
Pinnacle Financial Services, Inc.
By /s/ Richard L. Schanze
-----------------------------------
Richard L. Schanze
Chairman and Chief Executive
Officer
CNB Bancshares, Inc.
By /s/ James J. Giancola
-----------------------------------
James J. Giancola
Chief Executive Officer
A-37
<PAGE>
EXHIBIT 1.10(A)
PINNACLE'S LEGAL OPINION MATTERS
1. The due incorporation, valid existence and good standing of Pinnacle
under the laws of the State of Michigan, its power and authority to own and
operate its properties and to carry on its business as now conducted, and its
power and authority to enter into the Agreement, to merge with CNB 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 the Subsidiary Bank and its power and authority to own and operate its
properties.
3. The due and proper performance of all corporate acts and other
proceedings necessary or required to be taken by Pinnacle to authorize the
execution, delivery and performance of the Agreement, the due execution and
delivery of the Agreement by Pinnacle, and the Agreement as a valid and
binding obligation of Pinnacle, enforceable against Pinnacle 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).
4. The execution of the Agreement by Pinnacle, and the consummation of the
Merger and the other transactions contemplated therein, does not violate or
cause a default under Pinnacle's Articles of Incorporation or Bylaws, or, to
the best knowledge of counsel, any statute, regulation or rule or any
judgment, order or decree against or any material agreement binding upon
Pinnacle or its subsidiaries.
5. To the best knowledge of such counsel, the receipt of all required
consents, approvals (including the requisite approval of the shareholders of
Pinnacle), orders or authorizations of, or registrations, declarations or
filings with or notices to, any court, administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign, or any
other person or entity required to be obtained or made by Pinnacle or its
subsidiaries in connection with the execution and delivery of the Agreement or
the consummation of the transactions contemplated therein.
6. To the best knowledge of counsel, the nonexistence of any material
actions, suits, proceedings, orders, investigations or claims pending against
Pinnacle or the Subsidiary Bank which, if adversely determined, would have a
material adverse effect upon their respective properties or assets or the
transactions contemplated by the Agreement.
A-38
<PAGE>
EXHIBIT 1.10(B)
CNB'S LEGAL OPINION MATTERS
1. The due incorporation, valid existence and good standing of CNB under the
laws of the State of Indiana, its power and authority to own and operate its
properties and to carry on its business as presently conducted and its power
and authority to enter into the Agreement to merge with Pinnacle in accordance
with the terms of 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 CNB to authorize the execution, delivery
and performance of the Agreement, its due execution and delivery of the
Agreement, and the Agreement as a valid and binding obligation of CNB
enforceable against CNB 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 Pinnacle 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 in connection with the execution and delivery
of the Agreement or the consummation of the transactions contemplated by the
Agreement.
6. To the knowledge of counsel, the nonexistence of any material actions,
suits, proceedings, orders, investigations or claims pending against CNB or
any of its significant subsidiaries which, if adversely determined, would have
a material adverse effect upon their respective properties or assets or the
transactions contemplated by the Agreement.
A-39
<PAGE>
EXHIBIT 4.07
, 199
CNB Bancshares, Inc.
20 N.W. Third Street
Evansville, Indiana 47739-0001
Attention: James J. Giancola
Chief Executive Officer
Re: Agreement and Plan of Merger, dated as of October 14, 1997 (the "Merger
Agreement"), by and between Pinnacle Financial Services, Inc.
("Pinnacle") and CNB Bancshares, Inc. ("CNB")
Gentlemen:
I have been advised that I may be deemed to be an affiliate of Pinnacle, 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 Pinnacle 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
Pinnacle 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 4.07 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 Pinnacle 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 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 Pinnacle. I understand that CNB has agreed to publish said results
not later than 45 days following the end of the first quarter of the year
that includes 30 days or more of combined operations following the Merger,
and my commitment is conditioned upon the CNB's agreement to so publish
said results.
A-40
<PAGE>
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 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,
A-41
<PAGE>
EXHIBIT 7.09
INDEX GROUP
<TABLE>
<CAPTION>
COMPANY INDEX WEIGHT (%)
------- ----------------
<S> <C>
Provident Financial Group Inc. (OH)......................... 11.10%
FirstMerit Corp. (OH)....................................... 9.39
First Commercial Corp. (AR)................................. 9.06
National Commerce Bancorp. (TN)............................. 8.19
Magna Group Inc. (MO)....................................... 7.23
Old National Bancorp (IN)................................... 6.55
One Valley Bancorp Inc. (WV)................................ 5.47
UMB Financial Corp. (MO).................................... 5.65
First Financial Bancorp. (OH)............................... 4.38
Park National Corp. (OH).................................... 4.37
United Bankshares Inc. (WV)................................. 3.85
Fort Wayne National Corp. (IN).............................. 3.48
First Midwest Bancorp Inc. (IL)............................. 3.35
Citizens Banking Corp. (MI)................................. 3.49
AMCORE Financial Inc. (IL).................................. 3.24
Corus Bankshares Inc. (IL).................................. 3.02
Mid Am Inc. (OH)............................................ 2.88
Firstbank of Illinois Co. (IL).............................. 2.80
1st Source Corp. (IN)....................................... 2.51
------
100.00%
======
</TABLE>
A-42
<PAGE>
APPENDIX B
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT (this "Agreement"), is made as of the 14th day
of October, 1997, between CNB BANCSHARES, INC., an Indiana corporation
("Grantee"), and PINNACLE FINANCIAL SERVICES, INC., a Michigan corporation
("Issuer").
RECITALS
A. Grantee and Issuer are entering into an Agreement and Plan of Merger,
dated as of the date hereof (the "Plan"), which is being executed by the
parties hereto simultaneously with the execution of this Agreement.
B. As a condition and inducement to Grantee's entering into the Plan and in
consideration therefor, Issuer has agreed to grant Grantee the Option (as
defined below).
C. In consideration of the foregoing and the mutual covenants and agreements
set forth herein and in the Plan, the parties hereto agree as follows:
SECTION 1. GRANT OF OPTION. (a) Issuer hereby grants to Grantee an
unconditional, irrevocable option (the "Option") to purchase, subject to the
terms hereof, up to 2,000,000 fully paid and nonassessable shares of Common
Stock, no par value per share (the "Common Stock"), of Issuer at a price per
share equal to $37.00 per share (the "Initial Price"); provided, however, that
in the event Issuer issues or agrees to issue (other than pursuant to options
and warrants to issue Common Stock or shares of convertible stock convertible
into shares of Common Stock in effect or outstanding as of the date hereof or
permitted to be granted under Section 4.01(b)(i) of the Plan) any shares of
Common Stock at a price less than the Initial Price (as adjusted pursuant to
Section 5(b)), such price shall be equal to such lesser price (such price, as
adjusted as hereinafter provided, the "Option Price"). The number of shares of
Common Stock that may be received upon the exercise of the Option and the
Option Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement and the Plan and other than pursuant to an event
described in Section 5(a) hereof), the number of shares of Common Stock
subject to the Option shall be increased so that, after such issuance, such
number together with any shares of Common Stock previously issued pursuant
hereto, represents the same proportion of the number of shares of Common Stock
then issued and outstanding as such proportion before the event referred to
above (without giving effect to any shares subject or issued pursuant to the
Option). Nothing contained in this Section l(b) or elsewhere in this Agreement
shall be deemed to authorize Issuer to issue shares in breach of any provision
of the Plan.
SECTION 2. EXERCISE OF OPTION.
(a) Timing of Exercise, Termination. Grantee may exercise the Option, in
whole or part, at any time and from time to time following the occurrence of a
Purchase Event (as defined below); provided that the Option shall terminate
and be of no further force and effect upon the earliest to occur of (i) the
time immediately prior to the Effective Time, (ii) 12 months after the first
occurrence of a Purchase Event, (iii) 18 months after the termination of the
Plan following the occurrence of a Preliminary Purchase Event (as defined
below), (iv) termination of the Plan in accordance with the terms thereof
prior to the occurrence of a Purchase Event or a Preliminary Purchase Event
(other than a termination of the Plan by Grantee pursuant to Section 7.02
thereof or by Grantee and Issuer pursuant to Section 7.01 thereof if Grantee
shall at that time have been entitled to terminate the Plan pursuant to
Section 7.02 thereof (provided that the breach of Issuer giving rise to such
termination or such right to terminate was willful)) or (v)18 months after the
termination of the Plan by Grantee pursuant to Section 7.02 thereof or by
Grantee and Issuer pursuant to Section 7.01 thereof if Grantee shall at that
time have
B-1
<PAGE>
been entitled to terminate the Plan pursuant to Section 7.02 thereof (provided
that the breach of Issuer giving rise to such termination or such right to
terminate was willful). The events described in clauses (i)-(v) in the
preceding sentence are hereinafter collectively referred to as an "Exercise
Termination Event."
(b) Preliminary Purchase Event. The term "Preliminary Purchase Event" shall
mean any of the following events or transactions occurring after the date
hereof:
(i) Issuer or any of its subsidiaries (each, an "Issuer Subsidiary"),
without having received Grantee's prior written consent, shall have entered
into an agreement to engage in an Acquisition Transaction (as defined
below) with any Person (the term "Person" for purposes of this Agreement
having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations thereunder) other than Grantee or any of its
subsidiaries (each a "Grantee Subsidiary") or the Board of Directors of
Issuer shall have recommended that the shareholders of Issuer approve or
accept any Acquisition Transaction with any Person other than Grantee or
any Grantee Subsidiary. For purposes of this Agreement, "Acquisition
Transaction" shall mean (x) a merger or consolidation, or any similar
transaction, involving Issuer or any Issuer Subsidiary that is a
significant subsidiary as defined in Rule 1-02 of Regulation S-X by the
Securities and Exchange Commission (and the term "significant subsidiary"
shall include, wherever used in this Agreement, any bank or other financial
institution subsidiary of Issuer), (y) a purchase, lease or other
acquisition of all or substantially all of the assets of or assumption of
all or substantially all the deposits of Issuer or any Issuer Subsidiary
that is a significant subsidiary, or (z)a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of
securities representing 10% or more of the voting power of Issuer or any
Issuer Subsidiary that is a significant subsidiary, provided that the term
"Acquisition Transaction" does not include any internal merger or
consolidation, transfer or lease of assets or voting securities involving
only Issuer and/or Issuer Subsidiaries;
(ii) Any Person (other than Grantee or any Grantee Subsidiary, or any
Issuer Subsidiary acting in a fiduciary capacity in the ordinary course of
business, or any other Person who as of the date hereof Beneficially Owns
(the term "Beneficial Ownership" for purposes of this Agreement having the
meaning assigned thereto in Section 13(d) of the Exchange Act, and the
rules and regulations thereunder) 10% or more of the outstanding shares of
Common Stock) shall have acquired Beneficial Ownership or the right to
acquire Beneficial Ownership, of shares of Common Stock such that, upon the
consummation of such acquisition, such Person would have Beneficial
Ownership, in the aggregate, of 10% or more of the then outstanding shares
of Common Stock, or, with respect to any Person who as of the date hereof
Beneficially Owns 10% or more of the outstanding shares of Common Stock,
such Person shall have acquired Beneficial Ownership or the right to
acquire Beneficial Ownership, of shares of Common Stock such that, upon the
consummation of such acquisition, such Person would have Beneficial
Ownership, in the aggregate, of 15% or more of the then outstanding shares
of Common Stock;
(iii) Any Person other than Grantee or any Grantee Subsidiary shall have
made a bona fide proposal to Issuer or its shareholders, by public
announcement or written communication that is or becomes the subject of
public disclosure, to engage in an Acquisition Transaction (including,
without limitation, any situation in which any Person other than Grantee or
any Grantee Subsidiary shall have commenced (as such term is defined in
Rule 14d-2 under the Exchange Act) or shall have filed a registration
statement under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to, a tender offer or exchange offer to purchase any
shares of Common Stock such that, upon consummation of such offer, such
Person would own or control 10% or more of the then outstanding shares of
Common Stock (such an offer being referred to herein as a "Tender Offer" or
an "Exchange Offer", respectively));
(iv) After a proposal is made by a third party to Issuer or its
shareholders to engage in an Acquisition Transaction, or such third party
states its intention to make such a proposal if the Plan terminates and/or
the Option expires, Issuer shall have breached any covenant or obligation
contained in the Plan and such breach would entitle Grantee to terminate
the Plan (without regard to the cure period provided for therein unless
such cure is promptly effected without jeopardizing consummation of the
Merger pursuant to the terms of the Plan);
B-2
<PAGE>
(v) The holders of Common Stock shall not have approved the Plan by the
requisite vote at the meeting of such stockholders held for the purpose of
voting on the Plan, or such meeting shall not have been held or shall have
been canceled prior to termination of the Plan, in each case after it shall
have been publicly announced that any Person (other than Grantee or any
Grantee Subsidiary) shall have (A) made, or disclosed an intention to make,
a proposal to engage in an Acquisition Transaction, (B) commenced a Tender
Offer or filed a registration statement under the Securities Act with
respect to an Exchange Offer, or (C) filed an application (or given a
notice) with, whether in draft or final form, the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") or any other
governmental authority or regulatory or administrative agency or commission
(each, a "Governmental Authority"), for approval to engage in an
Acquisition Transaction;
(vi) Any Person (other than Grantee or any Grantee Subsidiary), other
than in connection with a transaction to which Grantee has given its prior
written consent, shall have filed an application or notice with the Federal
Reserve Board or other Governmental Authority for approval to engage in an
Acquisition Transaction; or
(vii) Issuer's Board of Directors shall have withdrawn or modified (or
publicly announced its intention to withdraw or modify) in any manner
adverse in any respect to Grantee its recommendation that the stockholders
of Issuer approve the transactions contemplated by the Plan, or Issuer or
any significant Issuer Subsidiary shall have authorized, recommended,
proposed (or publicly announced its intention to authorize, recommend or
propose) an agreement to engage in an Acquisition Transaction between the
Issuer or any significant Issuer Subsidiary with any person other than
Grantee or a Grantee Subsidiary.
(c) Purchase Event. The term "Purchase Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any Person (other than Grantee or any Grantee
Subsidiary or any Issuer Subsidiary acting in a fiduciary capacity in the
ordinary course of business (provided that the foregoing exception shall
not apply to any Person for whom or which such Issuer Subsidiary is acting
in such fiduciary capacity)) of Beneficial Ownership of shares of Common
Stock, such that, upon the consummation of such acquisition, such Person
would have Beneficial Ownership, in the aggregate, of 20% or more of the
then outstanding shares of Common Stock; or
(ii) The occurrence of a Preliminary Purchase Event described in Section
2(b)(i) hereof except that the percentage referred to in clause (z) shall
be 20%.
(d) Notice by Issuer. Issuer shall notify Grantee promptly in writing of the
occurrence of any Preliminary Purchase Event or Purchase Event; provided,
however, that the giving of such notice by Issuer shall not be a condition to
the right of Grantee to exercise the Option.
(e) Notice of Exercise. In the event that Grantee is entitled to and wishes
to exercise the Option, it shall send to Issuer a written notice (the "Option
Notice" and the date of which being hereinafter referred to as the "Notice
Date") specifying (i) the total number of shares of Common Stock it will
purchase pursuant to such exercise, (ii) the aggregate purchase price as
provided herein, and (iii) a period of time (that shall not be less than three
business days nor more than thirty business days) running from the Notice Date
(the "Closing Date") and a place at which the closing of such purchase shall
take place; provided, that, if prior notification to or approval of the
Federal Reserve Board or any other Governmental Authority is required in
connection with such purchase (each, a "Notification" or an "Approval," as the
case may be), (a) Grantee shall promptly file, or cause to be filed, the
required notice or application for approval ("Notice/Application"), (b)
Grantee shall expeditiously process, or cause to be expeditiously processed,
the Notice/Application, and (c) for the purpose of determining the Closing
Date pursuant to clause (iii) of this sentence, the period of time that
otherwise would run from the Notice Date shall instead run from the later of
(x) in connection with any Notification, the date on which any required
notification periods have expired or been terminated, and (y) in connection
with any Approval, the date on which such approval has been obtained and any
requisite waiting period or periods shall have expired. For purposes of
Section 2(a) hereof, any exercise of the Option shall be deemed to occur on
the
B-3
<PAGE>
Notice Date relating thereto. On or prior to the Closing Date, Grantee shall
have the right to revoke its exercise of the Option in the event that the
transaction constituting a Purchase Event that gives rise to such right to
exercise shall not have been consummated.
(f) Payments. At the closing referred to in Section 2(e) hereof, Grantee
shall pay to Issuer the aggregate Option Price for the shares of Common Stock
specified in the Option Notice in immediately available funds by wire transfer
to a bank account designated by Issuer; provided, however, that failure or
refusal of Issuer to designate such a bank account shall not preclude Grantee
from exercising the Option.
(g) Delivery of Common Stock. At such closing, subject to any requisite
Notification and/or Approval having been made or given and being in full force
and effect, Issuer shall deliver to Grantee a certificate or certificates
representing the number of shares of Common Stock specified in the Option
Notice and, if the Option should be exercised in part only, a new Option
evidencing the rights of Grantee thereof to purchase the balance of the shares
of Common Stock purchasable hereunder.
(h) Common Stock Certificates. Certificates for Common Stock delivered at a
closing hereunder shall be endorsed with a restrictive legend substantially as
follows:
The transfer of the shares represented by this certificate is subject
to resale restrictions arising under the Securities Act of 1933, as
amended, and to certain provisions of an agreement between CNB
Bancshares, Inc. and Pinnacle Financial Services, Inc. ("Issuer") dated
as of the 14th day of October, 1997. A copy of such agreement is on
file at the principal office of Issuer and will be provided to the
holder hereof without charge upon receipt by Issuer of a written
request therefor.
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act in the above legend shall be removed by
delivery of substitute certificate(s) without such reference if Grantee shall
have delivered to Issuer a copy of a letter from the staff of the Securities
and Exchange Commission, or an opinion of counsel, in form and substance
reasonably satisfactory to Issuer, to the effect that such legend is not
required for purposes of the Securities Act; (ii) the reference to the
provisions of this Agreement in the above legend shall be removed by delivery
of substitute certificate(s) without such reference if the shares have been
sold or transferred in compliance with the provisions of this Agreement and
under circumstances that do not require the retention of such reference; and
(iii) the legend shall be removed in its entirety if the conditions in the
preceding clauses (i) and (ii) are both satisfied. In addition, such
certificates shall bear any other legend as may be required by law.
(i) Holder of Record. Upon the giving by Grantee to Issuer of an Option
Notice and the tender of the applicable purchase price in immediately
available funds on the Closing Date, subject to any requisite Notification
and/or Approval having been made or given and being in full force and effect,
Grantee shall be deemed to be the holder of record of the number of shares of
Common Stock specified in the Option Notice, notwithstanding that the stock
transfer books of Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not then actually be delivered
to Grantee. Issuer shall pay all expenses and any and all United States
federal, state and local taxes and other charges that may be payable in
connection with the preparation, issue and delivery of stock certificates
under this Section 2 in the name of Grantee.
SECTION 3. ISSUER'S COVENANTS.
(a) Available Shares. Issuer agrees that it shall at all times until the
termination of this Agreement have reserved for issuance upon the exercise of
the Option that number of authorized and reserved shares of Common Stock equal
to the maximum number of shares of Common Stock at any time and from time to
time issuable hereunder, all of which shares shall, upon issuance pursuant
hereto, be duly authorized, validly issued, fully paid, nonassessable, and
delivered free and clear of all claims, liens, encumbrances and security
interests and not subject to any preemptive rights.
(b) Compliance. Issuer agrees that it shall not, by amendment of its
articles of incorporation or through reorganization, consolidation, merger,
dissolution or sale of assets, or by any other voluntary act, avoid or seek
B-4
<PAGE>
to avoid the observance or performance of any of the covenants, stipulations
or conditions to be observed or performed hereunder by Issuer.
(c) Certain Actions, Applications and Arrangements. Issuer shall promptly
take all action as may from time to time be required (including (i) complying
with all premerger notification, reporting and waiting period requirements
specified in 15 U.S.C. (S)18a and regulations promulgated thereunder, and (ii)
in the event, under the Bank Holding Company Act of 1956, as amended (the
"B.H.C. Act"), or the Change in Bank Control Act of 1978, as amended, or any
state banking law, prior approval of or notice to the Federal Reserve Board or
to any other Governmental Authority is necessary before the Option may be
exercised, cooperating with Grantee in preparing such applications or notices
and providing such information to each such Governmental Authority as it may
require) in order to permit Grantee to exercise the Option and Issuer duly and
effectively to issue shares of Common Stock pursuant hereto, and to protect
the rights of Grantee against dilution.
SECTION 4. EXCHANGE OF OPTION. This Agreement and the Option granted hereby
are exchangeable, without expense, at the option of Grantee, upon presentation
and surrender of this Agreement at the principal office of Issuer, for other
agreements providing for Options of different denominations entitling the
holder thereof to purchase, on the same terms and subject to the same
conditions as are set forth herein, in the aggregate the same number of shares
of Common Stock purchasable hereunder. The terms "Agreement" and "Option" as
used in this Section 4 include any agreements and related options for which
this Agreement and the Option granted hereby may be exchanged. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of loss, theft
or destruction) of reasonably satisfactory indemnification, and upon surrender
and cancellation of this Agreement, if mutilated, Issuer shall execute and
deliver a new Agreement of like tenor and date. Any such new Agreement
executed and delivered shall constitute an additional contractual obligation
on the part of Issuer, whether or not the Agreement so lost, stolen, destroyed
or mutilated shall at any time be enforceable by anyone.
SECTION 5. ADJUSTMENTS. The number of shares of Common Stock purchasable
upon the exercise of the Option shall be subject to adjustment from time to
time as follows:
(a) In the event of any change in the Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares or the like, the type and number of shares of
Common Stock purchasable upon exercise hereof shall be appropriately adjusted
and proper provision shall be made so that, in the event that any additional
shares of Common Stock are to be issued or otherwise to become outstanding as
a result of any such change (other than pursuant to an exercise of the
Option), the number of shares of Common Stock that remain subject to the
Option shall be increased so that, after such issuance and together with
shares of Common Stock previously issued pursuant to the exercise of the
Option (as adjusted on account of any of the foregoing changes in the Common
Stock), it represents the same proportion of the number of shares of Common
Stock then issued and outstanding as such proportion before the applicable
event described in this Section 5(a).
(b) Whenever the number of shares of Common Stock purchasable upon exercise
hereof is adjusted as provided in this Section 5, the Option Price shall be
adjusted by multiplying the Option Price by a fraction, the numerator of which
shall be equal to the number of shares of Common Stock purchasable prior to
the adjustment and the denominator of which shall be equal to the number of
shares of Common Stock purchasable after the adjustment.
SECTION 6. REGISTRATION RIGHTS. (a) Upon the occurrence of a Purchase Event
that occurs prior to an Exercise Termination Event, Issuer shall, at the
request of Grantee (whether on its own behalf or on behalf of any subsequent
holder of the Option (or part thereof) or any holder of the shares of Common
Stock issued pursuant hereto), promptly prepare, file and keep current a
registration statement under the Securities Act covering any shares issued and
issuable pursuant to the Option and shall use its best efforts to cause such
registration statement to become effective and remain current in order to
permit the sale or other disposition of any shares of Common Stock issued upon
total or partial exercise of the Option (the "Option Shares") in accordance
with any plan of disposition requested by Grantee. Issuer shall use its best
efforts to cause such
B-5
<PAGE>
registration statement first to become effective and then to remain effective
for such period not in excess of 180 days from the day such registration
statement first becomes effective. Grantee shall have the right to demand two
such registrations at Issuer's expense. The foregoing notwithstanding, if, at
the time of any request by Grantee for registration of Option Shares as
provided above, Issuer is in the process of registration with respect to an
underwritten public offering of shares of Common Stock, and if in the good
faith judgment of the managing underwriter or managing underwriters, or, if
none, the sole underwriter or underwriters, of such offering, the offering or
inclusion of the Option Shares would interfere materially with the successful
marketing of the shares of Common Stock offered by Issuer, the number of
Option Shares otherwise to be covered in the registration statement
contemplated hereby may be reduced; provided, however, that after any such
required reduction, the number of Option Shares to be included in such
offering for the account of Grantee shall constitute at least 25% of the total
number of shares of Common Stock held by Grantee and Issuer covered in such
registration statement; provided further, however, that if such reduction
occurs, then Issuer shall file a registration statement for the balance as
promptly as practicable thereafter as to which no reduction shall thereafter
occur. In addition, if Issuer proposes to register its Common Stock or any
other securities on a form that would permit the registration of the Option
Shares for public sale under the Securities Act (whether proposed to be
offered for sale by Issuer or any other Person) it shall give prompt written
notice to Grantee of its intention to do so, specifying the relevant terms of
such proposal, including the proposed maximum offering price thereof. Upon the
written notice of Grantee (whether on its own behalf or on behalf of any
subsequent holder of the Option (or part thereof) or any holder of the shares
of Common Stock issued pursuant hereto) delivered to Issuer within 20 business
days after the giving of any such notice, which request shall specify the
number of Option Shares desired to be disposed by Grantee, Issuer shall use
its best efforts to effect, in connection with its proposed registration, the
registration under the Securities Act of the Option Shares set forth in such
request. Grantee shall provide all information reasonably requested by Issuer
for inclusion in any registration statement to be filed hereunder. In
connection with any such registration, Issuer and Grantee shall provide each
other with representations, warranties, indemnities and other agreements
customarily given in connection with such registrations. If requested by
Grantee in connection with such registration, Issuer and Grantee shall become
a party to any underwriting agreement relating to the sale of such shares, but
only to the extent of obligating themselves in respect of representations,
warranties, indemnities and other agreements customarily included in such
underwriting agreements.
(b) In the event that Grantee requests Issuer to file a registration
statement following the failure to obtain any approval required to exercise
the Option as described in Section 9 hereof, the closing of the sale or other
disposition of the Common Stock or other securities pursuant to such
registration statement shall occur substantially simultaneously with the
exercise of the Option.
(c) Except where applicable state law prohibits such payments, Issuer shall
pay all expenses (including without limitation registration fees,
qualification fees, blue sky fees and expenses (including the fees and
expenses of counsel), legal expenses, including the reasonable fees and
expenses of one counsel to the holders whose Option Shares are being
registered, printing expenses and the costs of special audits or "cold
comfort" letters, expenses of underwriters, excluding discounts and
commissions but including liability insurance if Issuer so desires or the
underwriters so require, and the reasonable fees and expenses of any necessary
special experts) in connection with each registration pursuant to this Section
6 (including the related offerings and sales by holders of Option Shares) and
all other qualifications, notification or exemptions pursuant to this Section
6.
(d) In connection with any registration under this Section 6, Issuer hereby
indemnifies Grantee, and each officer, director and controlling person of
Grantee, and each underwriter thereof, including each person, if any, who
controls such holder or underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, losses, claims, damages and liabilities
caused by any untrue, or alleged untrue, statement contained in any
registration statement or prospectus or notification or offering circular
(including any amendments or supplements thereto) or any preliminary
prospectus, or caused by any omission, or alleged omission, to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such expenses, losses,
claims, damages or liabilities of such indemnified party are caused by
B-6
<PAGE>
any untrue statement or alleged untrue statement that was included by Issuer
in any such registration statement or prospectus or notification or offering
circular (including any amendments or supplements thereto) in reliance upon
and in conformity with, information furnished in writing to Issuer by such
indemnified party expressly for use therein, and Issuer and each officer,
director and controlling person of Issuer shall be indemnified by such
Grantee, or by such underwriter, as the case may be, for all such expenses,
losses, claims, damages and liabilities caused by any untrue, or alleged
untrue, statement, that was included by Issuer in any such registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) in reliance upon, and in conformity with,
information furnished in writing to Issuer by such holder or such underwriter,
as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this Section 6(d) of
notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 6(d), such indemnified party shall
notify the indemnifying party in writing of the commencement of such action,
but the failure so to notify the indemnifying party shall not relieve it of
any liability which it may otherwise have to any indemnified party under this
Section 6(d). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and reasonably
satisfactory to such indemnified party. The indemnified party shall have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel (other than
reasonable costs of investigation) shall be paid by the indemnified party
unless (i) the indemnifying party either agrees to pay the same, (ii) the
indemnifying party fails to assume the defense of such action with counsel
reasonably satisfactory to the indemnified party, or (iii) the indemnified
party has been advised by counsel that one or more legal defenses may be
available to the indemnifying party that may be contrary to the interests of
the indemnified party. No indemnifying party shall be liable for the fees and
expenses of more than one separate counsel for all indemnified parties or for
any settlement entered into without its consent, which consent may not be
unreasonably withheld.
If the indemnification provided for in this Section 6(d) is unavailable to a
party otherwise entitled to be indemnified in respect of any expenses, losses,
claims, damages or liabilities referred to herein, then the indemnifying
party, in lieu of indemnifying such party otherwise entitled to be
indemnified, shall contribute to the amount paid or payable by such party to
be indemnified as a result of such expenses, losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative fault
of Issuer, Grantee and the underwriters in connection with the statements or
omissions which resulted in such expenses, losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
amount paid or payable by a party as a result of the expenses, losses, claims,
damages and liabilities referred to above shall be deemed to include any legal
or other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim; provided, however, that in no
case shall Grantee be responsible, in the aggregate, for any amount in excess
of the net offering proceeds attributable to its Option Shares included in the
offering. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. Any
obligation by any Grantee to indemnify shall be several and not joint with
other holders of Option Shares.
SECTION 7. OPTION REPURCHASE. (a) Upon the occurrence of a Purchase Event
that occurs prior to an Exercise Termination Event, (i) at the request (the
date of such request being the "Request Date") of Grantee, delivered within 30
days of the Purchase Event (or such later period as may be provided pursuant
to Section 9 hereof), Issuer shall repurchase the Option from Grantee at a
price (the "Option Repurchase Price") equal to the amount by which (A) the
market/offer price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which the Option may then be exercised, and (ii)
at the request (the date of such request being the "Request Date") of the
owner of Option Shares from time to time (the "Owner"), delivered within 30
days of a Purchase Event (or such later period as may be provided pursuant to
Section 9 hereof), Issuer shall repurchase such number of the Option Shares
from the Owner as the Owner shall designate at a price (the "Option Share
Repurchase Price") equal to the market/offer price multiplied by the number of
Option Shares so
B-7
<PAGE>
designated. The term "market/offer price" shall mean the highest of (i) the
price per share of Common Stock at which a tender offer or exchange offer
therefor has been made after the date hereof and on or prior to the Request
Date, (ii) the price per share of Common Stock paid or to be paid by any third
party pursuant to an agreement with Issuer (whether by way of a merger,
consolidation or otherwise), (iii) the highest closing price for shares of
Common Stock within the 90-day period ending on the Request Date as reported
on The Nasdaq Stock Market's National Market (as reported in The Wall Street
Journal (Midwest Edition) or, if not reported therein, in another mutually
agreed upon authoritative source), or (iv) in the event of a sale of all or
substantially all of Issuer's assets, the sum of the price paid in such sale
for such assets and the current market value of the remaining assets of Issuer
as determined by a nationally-recognized independent investment banking firm
mutually selected by Grantee or the Owner, as the case may be, on the one
hand, and Issuer, on the other hand, divided by the number of shares of Common
Stock of Issuer outstanding at the time of such sale. In determining the
market/offer price, the value of consideration other than cash shall be
determined by a nationally-recognized independent investment banking firm
mutually selected by Grantee or Owner, as the case may be, on the one hand,
and Issuer, on the other hand, whose determination shall be conclusive and
binding on all parties.
(b) Grantee or the Owner, as the case may be, may exercise its right to
require Issuer to repurchase the Option and/or any Option Shares pursuant to
this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that Grantee or
the Owner, as the case may be, elects to require Issuer to repurchase the
Option and/or the Option Shares in accordance with the provisions of this
Section 7. As immediately as practicable, and in any event within five
business days after the surrender of the Option and/or certificates
representing Option Shares and the receipt of such notice or notices relating
thereto, Issuer shall deliver or cause to be delivered to Grantee the Option
Repurchase Price or to the Owner the Option Share Repurchase Price or the
portion thereof that Issuer is not then prohibited from so delivering under
applicable law and regulation or as a consequence of administrative policy.
(c) Issuer hereby undertakes to use its best efforts to obtain all required
regulatory and legal approvals and to file any required notices as promptly as
practicable in order to accomplish any repurchase contemplated by this Section
7. Nonetheless, to the extent that Issuer is prohibited under applicable law
or regulation, or as a consequence of administrative policy, from repurchasing
the Option and/or the Option Shares in full, Issuer shall immediately so
notify Grantee and/or the Owner and thereafter deliver or cause to be
delivered, from time to time, to Grantee and/or the Owner, as appropriate, the
portion of the Option Repurchase Price and the Option Share Repurchase Price,
respectively, that it is no longer prohibited from delivering, within five
business days after the date on which Issuer is no longer so prohibited;
provided, however, that if Issuer at any time after delivery of a notice of
repurchase pursuant to Section 7(b) is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to
Grantee and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full Grantee or Owner may
revoke its notice of repurchase of the Option or the Option Shares either in
whole or in part whereupon, in the case of a revocation in part, Issuer shall
promptly (i) deliver to Grantee and/or the Owner, as appropriate, that portion
of the Option Purchase Price or the Option Share Repurchase Price that Issuer
is not prohibited from delivering after taking into account any such
revocation, and (ii) deliver, as appropriate, either (A) to Grantee, a new
Agreement evidencing the right of Grantee to purchase that number of shares of
Common Stock equal to the number of shares of Common Stock purchasable
immediately prior to the delivery of the notice of repurchase less the number
of shares of Common Stock covered by the portion of the Option repurchased, or
(B) to the Owner, a certificate for the number of Option Shares covered by the
revocation.
(d) Issuer shall not enter into any agreement with any party (other than
Grantee or a Grantee Subsidiary) for an Acquisition Transaction unless the
other party thereto assumes all the obligations of Issuer pursuant to this
Section 7 in the event that a Grantee or Owner elects, in its sole discretion,
to require such other party to perform such obligations.
B-8
<PAGE>
SECTION 8. SUBSTITUTE OPTION.
(a) Grant of Substitute Option. In the event that prior to an Exercise
Termination Event, Issuer shall enter into an agreement (i) to consolidate or
merge with any Person, other than Grantee or a Grantee Subsidiary, and shall
not be the continuing or surviving corporation of such consolidation or
merger, (ii) to permit any Person, other than Grantee or a Grantee Subsidiary,
to merge into Issuer and Issuer shall be the continuing or surviving
corporation, but, in connection with such merger, the then outstanding shares
of Common Stock shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property or the then
outstanding shares of Common Stock shall after such merger represent less than
50% of the outstanding shares and share equivalents of the merged company, or
(iii) to sell or otherwise transfer all or substantially all of its or any
significant Issuer Subsidiary's assets to any Person, other than Grantee or a
Grantee Subsidiary, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of Grantee, of either (x) the Acquiring Corporation
(as defined below), or (y) any Person that controls the Acquiring Corporation
(the Acquiring Corporation and any such controlling Person being hereinafter
referred to as the "Substitute Option Issuer").
(b) Exercise of Substitute Option. The Substitute Option shall be
exercisable for such number of shares of the Substitute Common Stock (as is
hereinafter defined) as is equal to the market/offer price (as defined in
Section 7 hereof), multiplied by the number of shares of the Common Stock for
which the Option was theretofore exercisable, divided by the Average Price (as
is hereinafter defined). The exercise price of the Substitute Option per share
of the Substitute Common Stock (the "Substitute Purchase Price") shall then be
equal to the product of the Option Price multiplied by a fraction in which the
numerator is the number of shares of Common Stock for which the Option was
theretofore exercisable and the denominator is the number of shares for which
the Substitute Option is exercisable.
(c) Terms of Substitute Option. The Substitute Option shall otherwise have
the same terms as the Option, provided, however, that if the terms of the
Substitute Option cannot, for legal reasons, be the same as the Option, such
terms shall be as similar as possible and in no event less advantageous to
Grantee.
(d) Substitute Option Definitions. The following terms have the meanings
indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than
Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving Person, and (iii) the transferee of all or any substantial part
of Issuer's assets (or the assets of any significant Issuer Subsidiary);
(ii) "Substitute Common Stock" shall mean the common stock issued by the
Substitute Option Issuer upon exercise of the Substitute Option; and
(iii) "Average Price" shall mean the average closing price of a share of
the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of the Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided, however, that if
such closing price is not ascertainable due to an absence of a public
market for the Substitute Common Stock, "Average Price" shall mean the
higher of (i) the price per share of Substitute Common Stock paid or to be
paid by any third party pursuant to an agreement with the issuer of the
Substitute Common Stock and (ii) the book value per share, calculated in
accordance with generally accepted accounting principles, of the Substitute
Common Stock immediately prior to exercise of the Substitute Option;
provided, further, that if Issuer is the issuer of the Substitute Option,
the Average Price shall be computed with respect to a share of common stock
issued by Issuer, the Person merging into Issuer or by any company which
controls or is controlled by such merging Person, as Grantee may elect.
(e) Cap on Substitute Option. In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more than that
proportion of the outstanding Substitute Common Stock equal
B-9
<PAGE>
to the proportion of the outstanding Common Stock of Issuer which Grantee had
the right to acquire immediately prior to the issuance of the Substitute
Option. In the event that the Substitute Option would be exercisable for more
than the proportion of the outstanding Substitute Common Stock referred to in
the immediately preceding paragraph but for this clause (e), the Substitute
Option Issuer shall make a cash payment to Grantee equal to the excess of (i)
the value of the Substitute Option without giving effect to the limitation in
this clause (e) over (ii) the value of the Substitute Option after giving
effect to the limitation in this clause (e). This difference in value shall be
determined by a nationally recognized investment banking firm mutually
selected by Grantee, on the one hand, and Issuer, on the other hand.
SECTION 9. EXTENSION OF EXERCISE RIGHT. Notwithstanding Sections 2, 6 and 7
and 11 hereof, if Grantee has given the notice referred to in one or more of
such Sections, the exercise of the rights specified in any such Section shall
be extended (a) if the exercise of such rights requires obtaining regulatory
approvals (including any required waiting periods) to the extent necessary to
obtain all regulatory approvals for the exercise of such rights, and (b) to
the extent necessary to avoid liability under Section 16(b) of the Exchange
Act by reason of such exercise; provided, however, that in no event shall any
closing date occur more than 6 months after the related Notice Date, and, if
the closing date shall not have occurred within such period due to the failure
to obtain any required approval by the Federal Reserve Board or any other
Governmental Authority despite the best efforts of Issuer or the Substitute
Option Issuer, as the case may be, to obtain such approvals, the exercise of
the Option shall be deemed to have been rescinded as of the related Notice
Date. In the event (a) Grantee receives official notice that an approval of
the Federal Reserve Board or any other Governmental Authority required for the
purchase and sale of the Option Shares shall not be issued or granted, or (b)
a closing date has not occurred within 6 months after the related Notice Date
due to the failure to obtain any such required approval, Grantee shall be
entitled to exercise the Option in connection with the resale of the Option
Shares pursuant to a registration statement as provided in Section 6.
SECTION 10. ISSUER'S REPRESENTATIONS AND WARRANTIES. Issuer hereby
represents and warrants to Grantee as follows:
(a) Corporate Authority. Issuer has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by the Board of Directors of Issuer and no other corporate proceedings on the
part of Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly executed and
delivered by, and constitutes a valid and binding obligation of, Issuer,
enforceable against Issuer in accordance with its terms, except as
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding may be brought; and
(b) Availability of Shares. Issuer has taken all necessary corporate action
to authorize and reserve and to permit it to issue, and at all times from the
date hereof through the termination of this Agreement in accordance with its
terms shall have reserved for issuance upon the exercise of the Option, that
number of shares of Common Stock equal to the maximum number of shares of
Common Stock at any time and from time to time issuable hereunder, and all
such shares, upon issuance pursuant hereto, shall be duly authorized, validly
issued, fully paid, non-assessable, and shall be delivered free and clear of
all claims, liens, encumbrances and security interests and not subject to any
preemptive rights.
(c) No Violations. The execution, delivery and performance of this Agreement
does not or shall not, and the consummation by Issuer of any of the
transactions contemplated hereby shall not, constitute or result in (A) a
breach or violation of, or a default under, its articles of incorporation or
by-laws, or the comparable governing instruments of any of the Issuer
Subsidiaries, or (B) a breach or violation of, or a default under, any
agreement, lease, contract, note, mortgage, indenture, arrangement or other
obligation of it or any of the Issuer Subsidiaries (with or without the giving
of notice, the lapse of time or both) or under any law, rule, ordinance or
regulation
B-10
<PAGE>
or judgment, decree, order, award or governmental or non-governmental permit
or license to which it or any of the Issuer Subsidiaries is subject, that
would, in any case give any other person the ability to prevent or enjoin
Issuer's performance under this Agreement in any material respect.
SECTION 11. ASSIGNMENT. Neither of the parties hereto may assign any of its
rights or delegate any of its obligations under this Agreement or the Option
created hereunder to any other Person without the express written consent of
the other party, except that Grantee may assign this Agreement to a wholly
owned subsidiary of Grantee and Grantee may assign its rights hereunder in
whole or in part after the occurrence of a Preliminary Purchase Event;
provided, however, that until the date at which the Federal Reserve Board has
approved an application by Grantee under the B.H.C. Act to acquire the shares
of Common Stock subject to the Option, other than to a wholly owned subsidiary
of Grantee, Grantee may not assign its rights under the Option except in (i) a
widely dispersed public distribution, (ii) a private placement in which no one
party acquires the right to purchase in excess of 2% of the voting shares of
Issuer, (iii) an assignment to a single party (e.g., a broker or investment
banker) for the purpose of conducting a widely dispersed public distribution
on Grantee's behalf, or (iv) any other manner approved by the Federal Reserve
Board. The term "Grantee," as used in this Agreement, shall also be deemed to
refer to Grantee's permitted assigns. Any attempted assignment prohibited by
this Section 11 is void and without effect.
SECTION 12. FILINGS AND CONSENTS. Each of Grantee and Issuer shall use its
reasonable efforts to make all filings with, and to obtain consents of, all
third parties and Governmental Authorities necessary to the consummation of
the transactions contemplated by this Agreement, including, without
limitation, making application if necessary, for listing of the shares of
Common Stock issuable hereunder on any exchange or quotation system and
applying to the Federal Reserve Board under the B.H.C. Act and to state
banking authorities for approval to acquire the shares issuable hereunder.
SECTION 13. REMEDIES. The parties hereto acknowledge that damages would be
an inadequate remedy for a breach of this Agreement by either party hereto and
that the obligations of the parties shall hereto be enforceable by either
party hereto through injunctive or other equitable relief. Both parties
further agree to waive any requirement for the securing or posting of any bond
in connection with the obtaining of any such equitable relief and that this
provision is without prejudice to any other rights that the parties hereto may
have for any failure to perform this Agreement.
SECTION 14. SEVERABILITY. If any term, provision, covenant or restriction
contained in this Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions and covenants and
restrictions contained in this Agreement shall remain in full force and
effect, and shall in no way be affected, impaired or invalidated.
SECTION 15. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when
delivered in Person, by cable, telegram, telecopy or telex, or by registered
or certified mail (postage prepaid, return receipt requested) at the
respective addresses of the parties set forth in the Plan.
SECTION 16. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement and shall be effective at
the time of execution.
SECTION 17. EXPENSES. Except as otherwise expressly provided herein, each of
the parties hereto shall bear and pay all costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
SECTION 18. ENTIRE AGREEMENT. Except as otherwise expressly provided herein
or in the Plan, this Agreement contains the entire agreement between the
parties with respect to the transactions contemplated
B-11
<PAGE>
hereunder and supersedes all prior arrangements or understandings with respect
thereof, written or oral. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. Nothing in this Agreement,
expressed or implied, is intended to confer upon any party, other than the
parties hereto, and their respective successors except as assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided herein.
SECTION 19. DEFINITIONS. Capitalized terms used in this Agreement and not
defined herein but defined in the Plan shall have the meanings assigned
thereto in the Plan.
SECTION 20. EFFECT ON PLAN. Nothing contained in this Agreement shall be
deemed to authorize Issuer or Grantee to breach any provision of the Plan.
SECTION 21. SELECTIONS. In the event that any selection or determination is
to be made by Grantee hereunder and at the time of such selection or
determination there is more than one Grantee, such selection shall be made by
a majority in interest of such Grantees.
SECTION 22. FURTHER ASSURANCES. In the event of any exercise of the option
by Grantee, Issuer and such Grantee shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such
exercise.
SECTION 23. VOTING. Except to the extent Grantee exercises the Option,
Grantee shall have no rights to vote or receive dividends or have any other
rights as a shareholder with respect to shares of Common Stock covered hereby.
SECTION 24. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Indiana.
B-12
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Stock Option
Agreement to be executed on its behalf by their officers thereunto duly
authorized, all as of the date first above written.
PINNACLE FINANCIAL SERVICES, INC.
By /s/ Richard L. Schanze
-----------------------------------
Richard L. Schanze
Chairman and Chief Executive
Officer
CNB BANCSHARES, INC.
By /s/ James J. Giancola
-----------------------------------
James J. Giancola
Chief Executive Officer
B-13
<PAGE>
APPENDIX C
[LOGO OF CIBC OPPENHEIMER APPEARS HERE]
, 199
Board of Directors
CNB Bancshares, Inc.
20 Northwest Third Street
Evansville, Indiana 47708
Directors:
You have requested our opinion as to the fairness, from a financial point of
view, to CNB Bancshares, Inc. (the "Company") of the aggregate consideration
to be paid by the Company to the stockholders of Pinnacle Financial Services,
Inc. ("Pinnacle") pursuant to the Agreement and Plan of Merger dated as of
October 14, 1997 by and between Pinnacle and the Company (the "Agreement").
Pursuant to the Agreement, Pinnacle will merge with and into the Company (the
"Merger") and each outstanding share of common stock of Pinnacle will be
converted into the right to receive 1.0365 shares of common stock of the
Company (the "Consideration").
In connection with this opinion we have reviewed, among other things: (a)
the Agreement; (b) the Pinnacle Option Agreement (as such term is defined in
the Agreement); (c) audited consolidated financial statements and management's
discussion and analysis of the financial condition and results of operation
for each of Pinnacle and the Company for the three fiscal years ended December
31, 1996; (d) unaudited consolidated financial statements for each of Pinnacle
and the Company for the six months ended June 30, 1997 and for the nine months
ended September 30, 1997 (restated, in the case of Pinnacle, as included in
Amendment No. 2 to its Quarterly Report on Form 10-Q/A as filed with the
Securities and Exchange Commission on January 7, 1998); (e) audited
consolidated financial statements for each of IFC and CB for the three fiscal
years ended December 31, 1996 and the three fiscal years ended March 31, 1997,
respectively; (f) the Joint Proxy Statement/Prospectus of the Company and
Pinnacle; (g) certain other publicly available business and financial
information relating to the Company and Pinnacle; (h) certain internal
financial analyses, budgets, projections and forecasts for Pinnacle and the
Company, including estimates as to the future cost savings relating to the
Merger, prepared by and reviewed with the management of the Company; (i)
certain other summary materials and analyses with respect to Pinnacle's loan
portfolio and deposits prepared by the Company; (j) the views of senior
management of Pinnacle and the Company of the past and current business
operations, results thereof, financial condition and future prospects; (k) a
comparison of certain financial information for Pinnacle, with similar
information for certain other companies we considered comparable to Pinnacle;
(l) the financial terms of certain recent business combinations in the banking
industry; (m) the pro forma effect of the transaction on the Company based on
certain assumptions provided by the Company; (n) the current market
environment generally and the banking environment in particular; and (o) such
other information, financial studies, analyses and investigations and
financial, economic and market criteria as we considered appropriate in the
circumstances.
We have relied, without independent verification or investigation, on all of
the financial information, analyses and other information furnished to us for
purposes of this opinion, including information relating to assets and
liabilities, contingent or otherwise, as being complete and accurate. We have
also relied upon the managements of Pinnacle and the Company as to the
reasonableness and achievability of the financial and operating forecasts and
projections, including estimates of future cost savings relating to the Merger
(and the assumptions and bases therefore) provided to us. In that regard, we
have assumed, with your consent, that such forecasts, projections and
estimates have been reasonably prepared and reflect the best currently
available estimates and judgments of the managements of Pinnacle and the
Company as to the future financial performance of the Company and Pinnacle and
that, for purposes of our opinion, such forecasts and projections will be
realized in the amounts and in the time periods currently estimated by the
managements of Pinnacle and the Company. We have not made an independent
evaluation or appraisal of the assets and liabilities of Pinnacle or
C-1
<PAGE>
any of its respective subsidiaries and we have not been furnished with any
such evaluation or appraisal. Furthermore, this opinion shall not constitute
any such evaluation or appraisal. We are not experts in the evaluation of
allowances for loan losses or liabilities (contingent or otherwise) and we
have neither made an independent evaluation of the adequacy of the allowance
for loan losses of Pinnacle or reviewed any individual loan credit files.
You have informed us and we have assumed that the Merger will be accounted
for as a pooling under generally accepted accounting principles.
We have acted as financial advisor to the Company in connection with the
Merger and will receive a fee for our services. In the ordinary course of our
business, we may actively trade the equity securities of the Company and
Pinnacle for our own account and for the accounts of customers, and
accordingly, may at any time hold a long or short position in such securities.
It is understood that this opinion is for the information of the Board of
Directors in connection with its consideration of the Merger and may not be
quoted or referred to, in whole or in part, in any registration statement,
prospectus, or proxy statement, or in any other document used in connection
with the offering or sale of securities, nor shall this letter be used for any
other purposes, without our prior written consent.
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that, as of the date hereof, the
Consideration to be paid by the Company in the Merger is fair, from a
financial point of view, to the Company.
Very truly yours,
/s/ CIBC Oppenheimer Corp.
CIBC Oppenheimer Corp.
C-2
<PAGE>
APPENDIX D
[LOGO OF FRIEDMAN, BILLINGS, RAMSEY & CO. INC. APPEARS HERE]
FEBRUARY , 1998
Board of Directors
Pinnacle Financial Services, Inc.
830 Pleasant Street
St. Joseph, Michigan 49085
Board of Directors:
You have requested that Friedman, Billings, Ramsey & Co., Inc. ("FBR"),
provide you with its opinion as to the fairness, from a financial point of
view, to holders of common stock ("Stockholders") of Pinnacle Financial
Services, Inc. ("Pinnacle" or the "Company") of the Consideration (as
hereinafter defined) to be received by such holders pursuant to the Agreement
and Plan of Merger by and between Pinnacle and CNB Bancshares, Inc. ("CNB"),
dated as of October 14, 1997 (the "Merger Agreement"), pursuant to which
Pinnacle will be merged with and into CNB (the "Merger"). The Merger Agreement
provides, among other things, that each issued and outstanding share of common
stock of Pinnacle shall be converted into the right to receive from CNB 1.0365
shares of CNB common stock (the "Consideration"), subject to certain terms and
conditions. The Merger Agreement will be considered at a special meeting of
the Stockholders of Pinnacle. The terms and conditions of the Merger are more
fully set forth in the Merger Agreement.
In delivering this opinion, FBR has completed the following tasks:
1. reviewed CNB Annual Report to Stockholders for the fiscal year ended
December 31, 1996 and CNB Annual Reports on Form 10-K filed with the
Securities and Exchange Commission (the "SEC") for the fiscal years ended
December 31, 1994 through 1996; reviewed CNB Quarterly Reports on Form 10-
Q filed with the SEC for the fiscal quarters ended March 31, 1997, June
30, 1997 and September 30, 1997;
2. reviewed Pinnacle Annual Report on Form 10-K filed with the SEC for the
fiscal year ended December 31, 1996 and Pinnacle Quarterly Reports on Form
10-Q filed with the SEC for the fiscal quarters ended March 31, 1997 and
June 30, 1997 and September 30, 1997 (including amendment No. 1 to Form
10-Q/A filed with the SEC on November 21, 1997 and Amendment No. 2 to Form
10-Q/A filed with the SEC on January 7, 1998);
3. reviewed CB Bancorp, Inc. Annual Report on Form 10-KSB filed with the SEC
for the fiscal year ended March 31, 1997 and CB Bancorp, Inc. Quarterly
Reports on Form 10-QSB filed with the SEC for the fiscal quarters ended
September 30, 1996 and December 31, 1996;
4. reviewed Indiana Federal Corporation Annual Report on Form 10-K filed with
the SEC for the fiscal year ended December 31, 1996 and Indiana Federal
Corporation Quarterly Reports on Form 10-Q filed with the SEC for the
fiscal quarters ended September 30, 1996 and March 31, 1997;
5. reviewed both CNB's and Pinnacle's unaudited financial statements for the
nine months ended September 30, 1997;
6. reviewed the reported market prices and trading activity for the CNB
common stock for the period January 1994 through February , 1998;
7. discussed the financial condition, results of operations, business and
prospects of Pinnacle and CNB with the managements of Pinnacle and CNB;
8. compared the results of operations and financial condition of Pinnacle and
CNB with those of certain publicly-traded financial institutions (or their
holding companies) that FBR deemed to be reasonably comparable to Pinnacle
or CNB, as the case may be;
D-1
<PAGE>
9. reviewed the financial terms, to the extent publicly available, of certain
acquisition transactions that FBR deemed to be reasonably comparable to
the Merger;
10. reviewed the financial terms, to the extent publicly available, of
certain acquisition transactions entered into by CNB;
11. reviewed a copy of the Merger Agreement; and
12. performed such other analyses and reviewed and analyzed such other
information as FBR deemed appropriate.
In rendering this opinion, FBR did not assume responsibility for
independently verifying, and did not independently verify, any financial or
other information concerning Pinnacle and CNB furnished to it by Pinnacle or
CNB, or the publicly-available financial and other information regarding
Pinnacle, CNB and other financial institutions (or their holding companies).
FBR has assumed that all such information is accurate and complete. FBR has
further relied on the assurances of management of Pinnacle and CNB that they
are not aware of any facts that would make such financial or other information
relating to such entities inaccurate or misleading. With respect to financial
forecasts for CNB and Pinnacle provided to FBR by their respective management,
FBR has assumed, for purposes of this opinion, that the forecasts have been
reasonably prepared on bases reflecting the best available estimates and
judgments of such management at the time of preparation as to the future
financial performance of CNB and Pinnacle, as the case may be. FBR has assumed
that there has been no material change in Pinnacle's (including Indiana
Federal Corporation and CB Bancorp, Inc.) assets, financial condition, result
of operations, business or prospects since September 30, 1997. FBR did not
undertake an independent appraisal of the assets or liabilities of Pinnacle
nor was FBR furnished with any such appraisals. FBR is not an expert in the
evaluation of allowances for loan losses, was not requested to and did not
review such allowances, and was not requested to and did not review any
individual credit files of Pinnacle. FBR's conclusions and opinion are
necessarily based upon economic, market and other conditions and the
information made available to FBR as of the date of this opinion. FBR
expresses no opinion on matters of a legal, regulatory, tax or accounting
nature related to the Merger.
FBR, as part of its institutional brokerage, research and investment banking
practice, is regularly engaged in the valuation of securities and the
evaluation of transactions in connection with mergers and acquisitions of
commercial banks, savings institutions and financial institution holding
companies, initial and secondary offerings, mutual-to-stock conversions of
savings institutions, as well as business valuations for other corporate
purposes for financial institutions and real estate related companies. FBR has
experience in, and knowledge of, the valuation of bank and thrift securities
in Indiana, Michigan and the rest of the United States.
FBR has acted as a financial advisor to Pinnacle in connection with the
Merger and will receive a fee for services rendered which is contingent upon
the consummation of the Merger. In the ordinary course of FBR's business, it
may effect transactions in the securities of Pinnacle or CNB for its own
account and/or for the accounts of its customers and, accordingly, may at any
time hold long or short positions in such securities. From time to time,
principals and/or employees of FBR may also have positions in the securities.
Based upon and subject to the foregoing, as well as any such other matters
as we consider relevant, it is FBR's opinion, as of the date hereof, that the
Consideration is fair, from a financial point of view, to the Stockholders of
Pinnacle.
Very truly yours,
/s/ Friedman, Billings, Ramsey & Co., Inc.
FRIEDMAN, BILLINGS,
RAMSEY & CO., INC.
D-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Bylaws of CNB provide that CNB shall indemnify any director or officer
of CNB against any and all liability and reasonable expense that said director
or officer may incur in connection with or resulting from any claim, action,
suit or proceeding, or civil, criminal, administrative or investigative
action, or threat thereof, by reason of said director's or officer's being or
having been a director or officer of CNB, or serving or having served at the
request of CNB as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise, if either (i) the officer or
director is wholly successful in any such claim, action, suit or proceeding,
or (ii) the officer or director is not wholly successful but it is
nevertheless determined that such officer or director acted in good faith in
what he reasonably believed to be in, or not opposed to, the best interests of
the corporation and, with respect to any criminal action or proceeding, either
said officer or director had reasonable cause to believe his conduct was
lawful or had no reasonable cause to believe his conduct was unlawful. The
Bylaws further provide that the board of directors may (i) authorize like
indemnification of persons who are not directors or officers of CNB but are
employees of CNB or are officers, directors or employees of any subsidiary of
CNB, and (ii) approve indemnification of directors, officers persons to the
full extent permitted by the Indiana Business Corporation Law (the "Indiana
Corporate Law") in effect at such time.
Section 23-1-37-9 of the Indiana Corporate 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 Corporate 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 Corporate
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 Corporate Law, and that those making the decision to reimburse the
director determine that the facts then known would not preclude
indemnification under the Indiana Corporate Law.
CNB's Bylaws further provide, in accordance with the Indiana Corporate 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
Corporate Law. Pursuant to a policy of directors' and officers' liability
insurance with total bi-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.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed as part of this Registration
Statement or incorporated by reference herein:
<TABLE>
<C> <S>
(2)(a) Agreement and Plan of Merger, dated October 14, 1997, by and between
CNB Bancshares, Inc. and Pinnacle Financial Services, Inc. (Appendix A
to Joint Proxy Statement/Prospectus);
(2)(b) Stock Option Agreement, dated October 14, 1997, by and between CNB
Bancshares, Inc. and Pinnacle Financial Services, Inc. (Appendix B to
Joint Proxy Statement/Prospectus);
(3)(a) Restated Articles of Incorporation of CNB Bancshares, Inc.,
incorporated herein by reference as Exhibit 3(i) to CNB Bancshares,
Inc.'s 1994 Annual Report on Form 10-K;
(3)(b) Amended Bylaws of CNB Bancshares, Inc., incorporated herein by
reference as Exhibit 3(ii) to CNB Bancshares, Inc.'s 1995 Annual
Report on Form 10-K;
(4) No long-term debt instrument issued by CNB Bancshares, Inc. exceeds
10% of the consolidated total assets of CNB Bancshares, Inc. and its
subsidiaries. In accordance with paragraph 4(iii) of Item 601(b) of
Regulation S-K, CNB Bancshares, Inc. will furnish to the Securities
and Exchange Commission upon request copies of long-term debt
instruments and related agreements.
(5) Opinion of Lewis, Rice & Fingersh, L.C. (re legality);
(8) Opinion of Lewis, Rice & Fingersh, L.C. (re federal income tax
consequences);
(10)(a) Change of Control Agreement, effective August 8, 1997, between CNB
Bancshares, Inc. and M. Lynn Cooper;
(10)(b) Change of Control Agreement, effective June 3, 1997, between CNB
Bancshares, Inc. and James J. Giancola;
(10)(c) Change of Control Agreement, effective June 3, 1997, between CNB
Bancshares, Inc. and Marvin Huff, Jr.;
(10)(d) Change of Control Agreement, effective May 28, 1997, between CNB
Bancshares, Inc. and David L. Knapp;
(10)(e) Change of Control Agreement, effective May 23, 1997, between CNB
Bancshares, Inc. and John R. Spruill;
(23)(a) Consent of Lewis, Rice & Fingersh, L.C. (in opinion re legality);
(23)(b) Consent of Lewis, Rice & Fingersh, L.C. (in opinion re federal income
tax consequences);
(23)(c) Consent of KPMG Peat Marwick LLP;
(23)(d) Consent of Geo. S. Olive & Co., L.L.C.;
(23)(e) Consent of KPMG Peat Marwick LLP;
(23)(f) Consent of Ernst & Young, LLP;
(23)(g) Consent of Crowe, Chizek and Company LLP;
(23)(h) Consent of CIBC Oppenheimer Corp.;
(23)(i) Consent of Friedman, Billings & Ramsey & Co., Inc.;
(24) Powers of Attorney;
(99)(a) Form of Proxy Card for CNB Bancshares, Inc. Special Meeting;
(99)(b) Form of Proxy Card for Pinnacle Financial Services, Inc. Special
Meeting;
(99)(c) Fairness Opinion of CIBC Oppenheimer Corp. (Appendix C to Joint Proxy
Statement/Prospectus);
(99)(d) Fairness Opinion of Friedman, Billings & Ramsey & Co., Inc. (Appendix
D to Joint Proxy Statement/Prospectus).
</TABLE>
(b) No financial statement schedules are required to be filed herewith
pursuant to Item 21(b) or (c) of this Form.
II-2
<PAGE>
ITEM 22. UNDERTAKINGS.
(1) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through the use
of a prospectus which is a part of this registration statement, by any person
or party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
(2) The undersigned Registrant undertakes that every prospectus (i) that is
filed pursuant to paragraph (1) immediately preceding, or (ii) that purports
to meet the requirements of Section 10(a)(3) of the Securities Act of 1933, as
amended, and is used in connection with an offering of securities subject to
Rule 415, will be filed as a part of an amendment to the registration
statement and will not be used until such amendment is effective, and that,
for purposes of determining any liability under the Securities Act of 1933, as
amended, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated document by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(4) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(5) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934, as amended (and, where
applicable, each filing of an employee benefit plan's annual report pursuant
to Section 15(d) of the Securities Exchange Act of 1934, as amended) that is
incorporated by reference in the registration statement shall be deemed to be
a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(6) The undersigned Registrant hereby undertakes to file, during any period
in which offers or sales are being made, a post-effective amendment to this
registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
that, for the purpose of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof; and to remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
II-3
<PAGE>
(7) Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy expressed in the Securities Act of 1933, as amended, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the act and will be governed by the
final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF EVANSVILLE, STATE OF
INDIANA, ON FEBRUARY 20, 1998.
CNB Bancshares, Inc.
By: /s/ James J. Giancola
---------------------------------
JAMES J. GIANCOLA
CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED ON FEBRUARY 20, 1998, BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED.
<TABLE>
<CAPTION>
NAME TITLE/POSITION
---- --------------
<S> <C>
* Chairman of the
- ------------------------------------- Board
H. LEE COOPER III
* President, Chief Executive
- ------------------------------------- Officer and Director
JAMES J. GIANCOLA (principal executive
officer)
* Executive Vice President
- ------------------------------------- (principal financial
JOHN R. SPRUILL officer)
* Senior Vice President and
- ------------------------------------- Controller, Treasurer
RALPH L. ALLEY (principal accounting
officer)
* Director
- -------------------------------------
JOHN D. ENGELBRECHT
* Director
- -------------------------------------
ROBERT L. KOCH, II
Director
- -------------------------------------
LARRY J. KREMER
* Director
- -------------------------------------
EDMUND L. HAFER
* Director
- -------------------------------------
BURKLEY F. MCCARTHY
* Director
- -------------------------------------
ROBERT K. RUXER
* Director
- -------------------------------------
THOMAS W. TRAYLOR
*By: /s/ James J. Giancola
-------------------------
Attorney-in-fact
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
NUMBER EXHIBIT
------ -------
<C> <S>
(2)(a) Agreement and Plan of Merger, dated October 14, 1997, by and between
CNB Bancshares, Inc. and Pinnacle Financial Services, Inc. (Appendix A
to Joint Proxy Statement/Prospectus);
(2)(b) Stock Option Agreement, dated October 14, 1997, by and between CNB
Bancshares, Inc. and Pinnacle Financial Services, Inc. (Appendix B to
Joint Proxy Statement/Prospectus);
(3)(a) Restated Articles of Incorporation of CNB Bancshares, Inc.,
incorporated herein by reference as Exhibit 3(i) to CNB Bancshares,
Inc.'s 1994 Annual Report on Form 10-K;
(3)(b) Amended Bylaws of CNB Bancshares, Inc., incorporated herein by
reference as Exhibit 3(ii) to CNB Bancshares, Inc.'s 1995 Annual
Report on Form 10-K;
(4) No long-term debt instrument issued by CNB Bancshares, Inc. exceeds
10% of the consolidated total assets of CNB Bancshares, Inc. and its
subsidiaries. In accordance with paragraph 4(iii) of Item 601(b) of
Regulation S-K, CNB Bancshares, Inc. will furnish to the Securities
and Exchange Commission upon request copies of long-term debt
instruments and related agreements.
(5) Opinion of Lewis, Rice & Fingersh, L.C. (re legality);
(8) Opinion of Lewis, Rice & Fingersh, L.C. (re federal income tax
consequences);
(10)(a) Change of Control Agreement, effective August 8, 1997, between CNB
Bancshares, Inc. and M. Lynn Cooper;
(10)(b) Change of Control Agreement, effective June 3, 1997, between CNB
Bancshares, Inc. and James J. Giancola;
(10)(c) Change of Control Agreement, effective June 3, 1997, between CNB
Bancshares, Inc. and Marvin Huff, Jr.;
(10)(d) Change of Control Agreement, effective May 28, 1997, between CNB
Bancshares, Inc. and David L. Knapp;
(10)(e) Change of Control Agreement, effective May 23, 1997, between CNB
Bancshares, Inc. and John R. Spruill;
(23)(a) Consent of Lewis, Rice & Fingersh, L.C. (in opinion re legality);
(23)(b) Consent of Lewis, Rice & Fingersh, L.C. (in opinion re federal income
tax consequences);
(23)(c) Consent of KPMG Peat Marwick LLP;
(23)(d) Consent of Geo. S. Olive & Co., L.L.C.;
(23)(e) Consent of KPMG Peat Marwick LLP;
(23)(f) Consent of Ernst & Young, LLP;
(23)(g) Consent of Crowe, Chizek and Company LLP;
(23)(h) Consent of CIBC Oppenheimer Corp.;
(23)(i) Consent of Friedman, Billings & Ramsey & Co., Inc.;
(24) Powers of Attorney;
(99)(a) Form of Proxy Card for CNB Bancshares, Inc. Special Meeting;
(99)(b) Form of Proxy Card for Pinnacle Financial Services, Inc. Special
Meeting;
(99)(c) Fairness Opinion of CIBC Oppenheimer Corp. (Appendix C to Joint Proxy
Statement/Prospectus);
(99)(d) Fairness Opinion of Friedman, Billings & Ramsey & Co., Inc. (Appendix
D to Joint Proxy Statement/Prospectus).
</TABLE>
<PAGE>
Exhibit 5
[LETTERHEAD OF LEWIS, RICE, & FINGERSH APPEARS HERE]
February 19, 1998
CNB Bancshares, Inc.
20 N.W. Third Street
Evansville, Indiana 47739
Re: Registration Statement on Form S-4
Dear Sirs:
In connection with a certain Registration Statement on Form S-4 (the
"Registration Statement") filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended (the "Act"), and the rules
and regulations promulgated thereunder, you have requested that we furnish to
you our opinion as to the legality of the shares of the common stock, stated
value $1.00 per share (the "Common Stock"), of CNB Bancshares, Inc. (the
"Company") registered thereunder, which Common Stock is to be issued pursuant to
the Agreement and Plan of Merger (the "Merger Agreement"), dated as of October
14, 1997, between the Company and Pinnacle Financial Services, Inc., a Michigan
corporation.
As counsel to the Company, we have participated in the preparation of the
Registration Statement. We have examined and are familiar with the Company's
Restated Articles of Incorporation, Amended Bylaws, records of corporate
proceedings and such other information and documents as we have deemed necessary
or appropriate.
Based upon the foregoing, we are of the opinion that the Common Stock has
been duly authorized and will, when issued as contemplated in the Registration
Statement and the Merger Agreement, be validly issued, fully paid and non-
assessable.
We consent to the use of this opinion as an Exhibit to the Registration
Statement.
Very truly yours,
/s/ Lewis, Rice & Fingersh, L.C.
LEWIS, RICE & FINGERSH, L.C.
<PAGE>
Exhibit 8
[LETTERHEAD OF LEWIS, RICE & FINGERSH, L.C. APPEARS HERE]
February 18, 1998
Board of Directors
CNB Bancshares, Inc.
20 N.W. Third Street
Evansville, Indiana 47739
Re: Merger of Pinnacle Financial Services, Inc. into CNB Bancshares,
Inc.
Gentlemen:
You have requested our opinion as to the federal income tax consequences
of the proposed merger (the"Merger") of Pinnacle Financial Services, Inc.
("Pinnacle") into CNB Bancshares, Inc. ("CNB") pursuant to the Agreement and
Plan of Merger dated October 14, 1997 by and between Pinnacle and CNB (the
"Merger Agreement").
In issuing this opinion letter, we have relied upon (1) the factual
representations made by Pinnacle in a written statement dated February 13, 1998,
CNB in a written statement dated February 17, 1998 (the "Representations"), (2)
the Merger Agreement, (3) the facts, information and documentation set forth in
the Registration Statement on Form S-4 of CNB filed with the Securities and
Exchange Commission in connection with the Merger (the "Registration
Statement").
Based on our review of the Merger Agreement, the Representations, and
the Registration Statement, and assuming the transactions described therein are
completed as described, our opinion as to the federal income tax consequences of
the Merger is as follows:
<PAGE>
LEWIS, RICE & FINGERSH, L.C.
CNB Bancshares, Inc.
February 18, 1998
Page 2
1. Provided that the Merger qualifies as a statutory merger under
applicable Indiana and Michigan law, the Merger will constitute a
reorganization within the meaning of section 368 of the Internal
Revenue Code of 1986, as amended (the "Code").
2. Pursuant to section 354(a)(1) of the Code, no gain or loss will be
recognized by Pinnacle shareholders who exchange all of their
Pinnacle stock for shares of CNB voting common stock, except with
respect to cash received in lieu of fractional share interests.
3. Pursuant to section 358 of the Code, the basis of CNB common stock
received by the shareholders of Pinnacle (including any fractional
share to which such shareholder would be entitled) will be the
same, in each instance, as the basis of the Pinnacle stock
exchanged therefor.
4. Pursuant to section 1223 of the Code, the holding period of the CNB
common stock received by Pinnacle shareholders (including any
fractional shares to which they may be entitled) will include, in
each instance, the holding period of the shares of Pinnacle common
stock exchanged therefor, provided such shares were held as capital
assets on the date of the Merger.
The opinions set forth in this letter are predicated upon our
understanding of the facts set forth in the Merger Agreement, the
Representations and the Registration Statement. Any change in such facts may
adversely affect our opinions. Furthermore, our opinions are based upon our
understanding of the existing provisions of the Code, currently applicable
regulations promulgated under the Code, current published administrative
positions of the Internal Revenue Service, such
<PAGE>
LEWIS, RICE & FINGERSH, L.C.
CNB Bancshares, Inc.
February 18, 1998
Page 3
as revenue rulings and revenue procedures, and existing judicial decisions, all
of which are subject to change either prospectively or retroactively. Any change
in such authorities may adversely affect our opinion. We assume no obligation to
update our opinion for any deletions or additions to or modifications of any law
applicable to the Merger. We express no opinion with regard to the federal
income tax consequences of the Merger not addressed expressly by the above
opinions. In addition, we express no opinion as to any state or local tax
consequences with respect to the Merger.
Each shareholder of Pinnacle should consult with a qualified tax advisor
for assurance as to the particular tax consequences of the Merger to that
shareholder, any reporting requirements which may be applicable, or any other
tax considerations not expressly mentioned herein.
We consent to the use of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/ Lewis, Rice & Fingersh, L.C.
Lewis, Rice & Fingersh, L.C.
cc: Board of Directors
Pinnacle Financial Services, Inc.
<PAGE>
Exhibit 10(a)
CHANGE OF CONTROL AGREEMENT
This AGREEMENT is entered into by and between CNB BANCSHARES, INC., an
Indiana corporation ("Company"), and M. LYNN COOPER ("Executive").
Background
----------
A. Executive is an officer and key management employee of Company.
B. Company's Board of Directors ("Board") has determined that it is in
the best interests of Company and its shareholders to assure Executive's
continued dedication and undivided time, attention, and loyalty, notwithstanding
the possibility, threat, or occurrence of a Change of Control (as defined in
Section 2 below).
C. In furtherance of that goal, the Board wishes to provide Executive
with certain benefits, if his employment should terminate as a result of a
Change of Control.
D. In reliance on this Agreement, Executive is willing to continue his
employment with Company on the terms agreed to by Executive and Company from
time to time.
In consideration of the premises, Company and Executive agree as follows:
Agreement
---------
1. Duration Of Agreement. This Agreement shall be effective
---------------------
8/8/97 , ("Effective Date"), and shall continue until the end of the Term (as
- -------
defined in Section 2).
2. Definitions. The following words and phrases, when capitalized,
-----------
shall have the following meanings for purposes of this Agreement:
(a) Affiliate. "Affiliate" means an employer required to be
---------
aggregated with Company pursuant to Section 414(b) or (c) of the Internal
Revenue Code.
<PAGE>
(b) Anniversary Date. "Anniversary Date" means each anniversary of
----------------
the Effective Date occurring during the Term.
(c) Cause. "Cause" means and shall be limited to the following:
-----
(1) Executive's willful and continued failure to perform (other
than a failure resulting from Executive's illness or disability) his
employment duties after a demand for substantial performance is
delivered to Executive on behalf of the Board that specifically
identifies the manner in which it alleges that Executive has failed to
perform his duties and Executive's failure to take appropriate actions
to correct such failure within thirty (30) days; or
(2) Executive's willful engaging in misconduct that has caused
demonstrable and material injury, monetary or otherwise, to Company or
an Affiliate.
For purposes of this Subsection (c), no act or failure to act on
Executive's part shall be considered "willful" unless done, or omitted to
be done, by Executive not in good faith and without reasonable belief that
his action or omission was in the best interests of Company.
Notwithstanding the foregoing, Executive shall not be deemed to have been
terminated for Cause unless and until the Board has delivered to him a copy
of a notice of termination, and after reasonable notice to him and an
opportunity for him, together with counsel, to be heard before the Board,
at least two-thirds of the Board finds, in its reasonable opinion, that
Executive was guilty of conduct set forth above in clause (1) or (2) and
specifying the particulars thereof in detail.
2
<PAGE>
(d) Change of Control. "Change of Control" shall be deemed to have
-----------------
occurred upon the happening of any one or more of the following:
(1) any person, as that term is used in Section 13(d)(3) and
14(d)(2) of the Securities Exchange Act of 1934, as amended from time
to time, becomes a beneficial owner, directly or indirectly, of
securities of Company representing twenty percent (20%) or more of the
combined voting power of Company's then outstanding securities;
(2) less than fifty-one percent (51%) of the members of the
Board are Incumbent Directors;
(3) any corporation or group of associated persons acting in
concert, owns more than twenty-five percent (25%) of the outstanding
shares of voting stock of Company coupled with or followed by the
exercise of the voting power of such shares by the election of two (2)
or more directors of Company in any one election at the instance of
such corporation or group;
(4) Company becomes a party to an agreement of merger,
consolidation, or other reorganization pursuant to which Company will
be a constituent corporation, and either (A) Company is not the
surviving or resulting corporation, or (B) the transaction will result
in less than eighty percent (80%) of the outstanding voting securities
of the surviving or resulting entity being owned by the former
shareholders of Company;
(5) Company becomes a party to an agreement providing for
Company's sale or other disposition of all or substantially all of its
assets to any
3
<PAGE>
individual, partnership, joint venture, association, trust,
corporation, or other entity or person which is not an Affiliate; or
(6) the occurrence of another event that the Board designates a
Change of Control.
(e) Change of Control Date. "Change of Control Date" means the date
----------------------
as of which a Change of Control occurs.
(f) Change Period. "Change Period" means the period beginning six
-------------
months before the Change of Control Date and continuing for the number of
months specified in Appendix A after the Change of Control Date.
Notwithstanding the preceding sentence, if a Change of Control described in
Paragraph (d)(4) or (d)(5) occurs, the Change Period shall begin when
Company becomes a party to a legally binding agreement described in
paragraph (d)(4) or (d)(5) but shall not end until the number of months
specified in Appendix A after the effective date of the Change of Control
transaction described in Paragraph (4) or (5).
(g) Confidential Information. "Confidential Information" means any
------------------------
information not in the public domain and not previously disclosed to the
public by the Board or management of the Company or an Affiliate with
respect to the products, facilities, and methods; trade secrets and other
intellectual property; systems, procedures, manuals, confidential reports,
customer lists, financial information, business plans, prospects, or
opportunities of the Company or an Affiliate; or any information which the
Company or an Affiliate has designated as Confidential Information.
4
<PAGE>
(h) Disability. "Disability" means Executive's inability to perform
----------
the material duties of his employment because of physical or mental
illness, which inability is likely to last for a period of one year or
longer.
(i) Effective Date. "Effective Date" means the effective date of this
--------------
Agreement, as specified in Section 1.
(j) Full Incentive Compensation. "Full Incentive Compensation" means
---------------------------
incentive compensation for a calendar year (including incentive
compensation in the amount of zero), provided that such compensation is not
reduced because Executive was employed by the Company for less than the
entire calendar year.
(k) Good Reason. "Good Reason" means, (i) with respect to a Change of
-----------
Control described in Section 2(d)(4) in which Company is the surviving or
resulting corporation, and which results in less than eighty percent (80%)
but more than fifty percent (50%) of the outstanding voting securities of
the resulting or surviving corporation being owned by former shareholders
of the Company, a material change in position, title, compensation, status,
responsibilities, or working conditions in effect immediately before the
Change of Control or relocation of the Executive's place of employment to a
location more than fifty (50) miles from the Executive's place of
employment immediately before the Change of Control, and, (ii) with respect
to any Change of Control not described in Clause (i), Executive's
determination, in his sole judgment, that the duties of his employment,
compensation therefor, or the benefits or status associated therewith have
been reduced during the Change Period or that he is unable to continue to
perform the duties of his employment effectively because of
5
<PAGE>
circumstances that changed during the Change Period directly or indirectly
as a result of the Change of Control.
(l) Incumbent Director. "Incumbent Director" means a director serving
------------------
on the Board who (i) was a director on the Effective Date or (ii) was later
elected as a director (except a director whose initial assumption of office
was in connection with an actual or threatened election contest, including
but not limited to a consent solicitation, relating to the election of
directors) and whose appointment, election, or nomination for election was
approved or recommended by a vote of at least two-thirds of the directors
then still in office who either were directors on the Effective Date hereof
or whose appointment, election, or nomination for election was previously
so approved or recommended.
(m) Payment Period. "Payment Period" means the period beginning on
--------------
the later of the Change of Control Date or the date of Executive's
termination of employment during the Change Period and continuing for the
number of months specified in Appendix A; provided, however, if Executive's
employment terminates after a Change of Control (or, in the case of a
transaction described in Paragraph 2(d)(4) or 2(d)(5), the later effective
date of such transaction), the number of months in the Payment Period shall
be reduced by one for each full calendar month before the effective date of
Executive's termination of employment occurring after the most recent
Change of Control Date (or, in the case of a transaction described in
Paragraph 2(d)(3) or (4), the later effective date of such transaction)
before such termination date.
6
<PAGE>
(n) Term. "Term" means the period beginning on the Effective Date and
----
ending on the second anniversary of the Effective Date, as extended
pursuant to the provisions of this Subsection. The period referred to in
the preceding sentence shall automatically be extended for one additional
year on each Anniversary Date, unless the Company has notified the
Executive not fewer than thirty (30) days before that Anniversary Date that
the Term will not automatically be extended further. Notwithstanding any
provision of this Agreement, if one or more Changes of Control occur during
the Term (as determined pursuant to the preceding provisions of this
Subsection or as extended pursuant to this sentence to reflect a prior
Change of Control), the Term shall not end before the end of the Payment
Period with respect to the latest Change of Control occurring during the
Term.
(o) Termination Compensation. "Termination Compensation" has the
------------------------
meaning specified in Paragraph 3(a)(1).
3. Termination of Executive's Employment During Change Period.
----------------------------------------------------------
(a) If Executive terminates his employment for Good Reason during the
Change Period, or if Company terminates Executive's employment during the
Change Period for a reason other than Cause or Executive's death or
Disability, Executive shall be entitled to the following benefits:
(1) An amount equal to Executive's Termination Compensation
multiplied by the number of months in the Payment Period. Executive's
Termination Compensation shall be equal to the sum of (i) his highest
rate of base monthly salary (unreduced by any elective salary
deferrals or redirections) during
7
<PAGE>
the twelve (12) month period immediately preceding his termination of
employment plus (ii) one-twelfth of his average annual incentive
compensation with respect to the shortest of (A) the three calendar
years immediately preceding the Payment Period, provided Executive
received Full Incentive Compensation for all such years, (B) the
calendar years immediately preceding the Payment Period with respect
to which Executive received Full Incentive Compensation, or (C) the
total period of Executive's employment by Company. This amount shall
be paid to Executive in a lump sum between sixty (60) and ninety (90)
days after the later of (A) his termination of employment or (B) the
Change of Control Date. Executive may, in his discretion, elect to
reduce the amount payable to him pursuant to this Paragraph 3 to the
extent necessary to avoid excise taxes in Code Section 4999 of the
Internal Revenue Code.
(2) Throughout the Payment Period, Company shall provide to
Executive and his family medical, life insurance, and other welfare
benefits substantially similar to those provided to active executive
employees of the Company, provided Executive pays any premiums charged
by Company to active executive employees receiving similar coverage.
Beginning at the end of the Payment Period, Company shall provide
medical coverage to Executive and his family that is substantially
similar to the coverage provided to active employees of the Company,
provided that Executive pays Company the same premium as he would have
been required to pay if such coverage had been provided pursuant to
the Consolidated Omnibus Budget Reconciliation Act of 1985. Executive
may
8
<PAGE>
elect to purchase single coverage or family coverage pursuant to
the preceding sentence. Subject to Executive's payment of the
required premiums, post-Payment Period medical coverage for Executive
and his spouse shall continue until the earliest of the following
events: (i) the Executive's (or in the case of coverage for the
Executive's spouse, his spouse's) Medicare eligibility, (ii) the
Executive's (or in the case of coverage for the Executive's spouse,
his spouse's) death, or (iii) medical coverage for the Executive (or
in the case of coverage for the Executive's spouse, his spouse)
through another employer.
(b) The payment or provision of benefits to Executive pursuant to
this Agreement shall not affect the obligations of Company or its successor
under any plan, agreement, or arrangement generally applicable to Company's
retired management employees pursuant to which Executive is entitled to any
retirement benefits, welfare benefits, stock, or other fringe benefits.
4. Non-Competition. Executive shall not, while employed or during the
---------------
Payment Period, become an officer, director, or employee of, consultant to, or
majority shareholder in any bank or bank holding company that substantially
competes with Company, its subsidiaries, or Affiliates, or its successor or
successors within one hundred (100) miles from Evansville, Indiana, or fifty
(50) miles from the nearest banking office of Company or a subsidiary thereof.
5. Non-Disclosure of Confidential Information. Executive acknowledges
------------------------------------------
that, by virtue of his employment, he has obtained or will obtain Confidential
Information, the use or disclosure of which could cause Company immeasurable and
substantial loss and damages for which no remedy at law would be adequate.
Accordingly, Executive covenants and agrees with
9
<PAGE>
Company that, except as necessary to perform his obligations to Company or with
the prior written consent of Company's Board, he will not at any time directly
or indirectly disclose any Confidential Information that he may acquire or has
acquired by reason of his association with Company. Without limiting the rights
or remedies, both legal and equitable, available to Company in the event of an
actual or threatened breach of Executive's obligations under this Section,
Company shall be entitled to seek and obtain a temporary restraining order
and/or a preliminary or permanent injunction against Executive, which shall
prevent Executive from engaging in any activities prohibited by this Section, or
to seek and obtain such other relief against Executive as may be required to
enforce Executive's obligations hereunder. Executive's obligations set forth in
this Section and Company's rights and remedies, whether legal or equitable, with
respect thereto, shall extend indefinitely.
6. Expenses. If Executive determines, in his absolute judgment, that it
--------
is necessary or advisable for him to incur reasonable legal and/or accounting
expenses, including but not limited to reasonable attorneys' and/or accountants'
fees, to obtain full and effective enforcement of his rights under this
Agreement or to determine the appropriate tax treatment of amounts paid pursuant
to this Agreement, Company shall reimburse Executive for all such reasonable
expenses and costs on a periodic basis. Company's obligation to reimburse
Executive for these reasonable expenses or costs pursuant to this Section shall
survive expiration of the Term and shall survive the termination of any later
employment agreements between Executive and Company. Any reimbursement required
by this Section shall be paid promptly to Executive after he submits a copy of
the service provider's invoice for the covered expense.
10
<PAGE>
7. Company's Obligation to Provide Information. After termination of
-------------------------------------------
Executive's employment, Company shall promptly provide Executive with reasonably
requested information relating to his retirement, benefits and payments under
this Agreement, and other post-employment benefits.
8. Binding Effect And Assignment. This Agreement shall inure to the
-----------------------------
benefit of and shall be binding upon the parties to this Agreement and their
respective executors, administrators, heirs, personal representatives,
successors, and assigns, but neither this Agreement nor any right created by
this Agreement may be assigned or transferred by either party. Notwithstanding
the foregoing, the Company shall assign this Agreement to any person or entity
succeeding to substantially all of the business and assets of the Company upon a
Change in Control, and upon such a Change in Control, the Company shall obtain
the assumption of this Agreement by its successor.
9. Notices. Any notice to a party required or permitted to be given by
-------
this Agreement shall be in writing and shall be deemed given when mailed by
registered or certified mail to the party at the party's address as specified in
this Section:
If to the Company, to: CNB Bancshares, Inc.
Attention: Corporate Secretary
20 N.W. Third Street
Evansville, Indiana 47708
or such other address designated by Company in writing to Executive as provided
in this Section.
If to Executive, to:
-------------------------------
-------------------------------
-------------------------------
11
<PAGE>
or such other address designated by the Executive in writing to the Company as
provided in this Section.
10. Severability. If any term, provision, covenant, or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid, void,
or unenforceable, the remainder of the terms, provisions, covenants, and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired, or invalidated.
11. Amendments. This Agreement may not be modified, amended, altered, or
----------
supplemented except upon the execution and delivery of a written agreement
executed by Company and Executive.
12. Governing Law. This Agreement shall be construed in accordance with
-------------
the laws of the State of Indiana.
13. Arbitration. Any dispute, claim, or controversy concerning the terms,
-----------
meaning, application, or enforcement of any provision of this Agreement that
cannot be resolved through direct discussion or mediation shall be submitted to
final and binding arbitration before a neutral arbitrator pursuant to the
arbitration procedures set out in this Section ("Procedures") under the auspices
of the American Arbitration Association (AAA) at Evansville, Indiana. The AAA
Employment Dispute Resolution Rules in effect at the time of the arbitration
shall govern arbitration proceedings, except insofar as these Procedures, as
they may be amended from time to time, specifically provide otherwise.
Executive may initiate a claim or case only by a written notice to Company as
provided in this Agreement. Company may likewise initiate a claim or case by a
written notice delivered to Executive, as provided in this Agreement. The
written notice must set forth the matter in dispute in sufficient detail to
advise the non-initiating party
12
<PAGE>
of the nature and amount of the dispute or claim, the date(s) of the underlying
occurrence(s), and the relief requested. It shall also be the initiating party's
responsibility to submit the claim and other required documents and fees to AAA
in a timely manner; provided, however, if Executive is fully or partially
successful, Company shall reimburse Executive for arbitration fees reasonably
incurred. In conducting arbitration proceedings, the AAA-appointed arbitrator
shall be authorized to award any relief available under the laws of the United
States or the State of Indiana applicable to the claim, dispute, or controversy
submitted, where such relief is warranted based on the evidence and the law. Any
arbitration award shall be final and binding, and enforceable by an action in
any court of competent jurisdiction. No award shall be set aside, or denied
enforcement, by any court in any action unless the court finds that the
arbitrator purported to resolve claims, disputes, or controversies not within
the scope of these Procedures. Adherence to these Procedures, and the agreement
of the parties to this Agreement to follow them, shall be enforceable in an
action to compel or stay arbitration pursuant to the Federal Arbitration Act or
the Indiana Uniform Arbitration Act in a court of competent jurisdiction.
14. Integration. This Agreement supersedes all prior agreements between
-----------
the parties with respect to the matters covered herein.
15. Counterparts. This Agreement may be signed in two counterparts, each
------------
of which shall be deemed to be an original but which together shall constitute
one and the same instrument.
16. Effect Of Headings. The section headings in this Agreement are for
------------------
convenience only and shall not affect the construction of this Agreement.
13
<PAGE>
IN WITNESS WHEREOF, CNB Bancshares, Inc. has caused this Agreement to be
executed on this 8th day of August , 1997, and Executive has
----------- --------------
executed this Agreement on the date specified below.
ATTEST: CNB BANCSHARES, INC.
/s/ Sallie A. Gore By /s/ James J. Giancola
- ------------------------ ----------------------------
(Signature)
8/8/97
-------------------------------
(Date)
EXECUTIVE
/s/ M. Lynn Cooper
-------------------------------
(Signature)
8/8/97
-------------------------------
(Date)
14
<PAGE>
APPENDIX A
The Payment Period shall consist of 36 months.
ATTEST: CNB BANCSHARES, INC.
/s/ Sallie A. Gore By /s/ James J. Giancola
- ------------------------------ -----------------------------
(Signature)
8/8/97
-------------------------------
(Date)
EXECUTIVE
/s/ M. Lynn Cooper
-------------------------------
(Signature)
8/8/97
-------------------------------
15
<PAGE>
Exhibit 10(b)
CHANGE OF CONTROL AGREEMENT
This AGREEMENT is entered into by and between CNB BANCSHARES, INC., an
Indiana corporation ("Company"), and JAMES J. GIANCOLA ("Executive").
Background
----------
A. Executive is an officer and key management employee of Company.
B. Company's Board of Directors ("Board") has determined that it is in
the best interests of Company and its shareholders to assure Executive's
continued dedication and undivided time, attention, and loyalty, notwithstanding
the possibility, threat, or occurrence of a Change of Control (as defined in
Section 2 below).
C. In furtherance of that goal, the Board wishes to provide Executive
with certain benefits, if his employment should terminate as a result of a
Change of Control.
D. In reliance on this Agreement, Executive is willing to continue his
employment with Company on the terms agreed to by Executive and Company from
time to time.
In consideration of the premises, Company and Executive agree as follows:
Agreement
---------
1. Duration Of Agreement. This Agreement shall be effective June 3,
--------------------- ------
1997 ("Effective Date"), and shall continue until the end of the Term (as
defined in Section 2).
2. Definitions. The following words and phrases, when capitalized,
-----------
shall have the following meanings for purposes of this Agreement:
(a) Affiliate. "Affiliate" means an employer required to be
---------
aggregated with Company pursuant to Section 414(b) or (c) of the Internal
Revenue Code.
<PAGE>
(b) Anniversary Date. "Anniversary Date" means each anniversary of the
----------------
Effective Date occurring during the Term.
(c) Cause. "Cause" means and shall be limited to the following:
-----
(1) Executive's willful and continued failure to perform (other
than a failure resulting from Executive's illness or disability) his
employment duties after a demand for substantial performance is
delivered to Executive on behalf of the Board that specifically
identifies the manner in which it alleges that Executive has failed to
perform his duties and Executive's failure to take appropriate actions
to correct such failure within thirty (30) days; or
(2) Executive's willful engaging in misconduct that has caused
demonstrable and material injury, monetary or otherwise, to Company or
an Affiliate.
For purposes of this Subsection (c), no act or failure to act on
Executive's part shall be considered "willful" unless done, or omitted to
be done, by Executive not in good faith and without reasonable belief that
his action or omission was in the best interests of Company.
Notwithstanding the foregoing, Executive shall not be deemed to have been
terminated for Cause unless and until the Board has delivered to him a copy
of a notice of termination, and after reasonable notice to him and an
opportunity for him, together with counsel, to be heard before the Board,
at least two-thirds of the Board finds, in its reasonable opinion, that
Executive was guilty of conduct set forth above in clause (1) or (2) and
specifying the particulars thereof in detail.
2
<PAGE>
(d) Change of Control. "Change of Control" shall be deemed to have
-----------------
occurred upon the happening of any one or more of the following:
(1) any person, as that term is used in Section 13(d)(3) and
14(d)(2) of the Securities Exchange Act of 1934, as amended from time
to time, becomes a beneficial owner, directly or indirectly, of
securities of Company representing twenty percent (20%) or more of the
combined voting power of Company's then outstanding securities;
(2) less than fifty-one percent (51%) of the members of the Board
are Incumbent Directors;
(3) any corporation or group of associated persons acting in
concert, owns more than twenty-five percent (25%) of the outstanding
shares of voting stock of Company coupled with or followed by the
exercise of the voting power of such shares by the election of two (2)
or more directors of Company in any one election at the instance of
such corporation or group;
(4) Company becomes a party to an agreement of merger,
consolidation, or other reorganization pursuant to which Company will
be a constituent corporation, and either (A) Company is not the
surviving or resulting corporation, or (B) the transaction will result
in less than eighty percent (80%) of the outstanding voting securities
of the surviving or resulting entity being owned by the former
shareholders of Company;
(5) Company becomes a party to an agreement providing for
Company's sale or other disposition of all or substantially all of its
assets to any
3
<PAGE>
individual, partnership, joint venture, association, trust,
corporation, or other entity or person which is not an Affiliate; or
(6) the occurrence of another event that the Board designates a
Change of Control.
(e) Change of Control Date. "Change of Control Date" means the date as
----------------------
of which a Change of Control occurs.
(f) Change Period. "Change Period" means the period beginning six
-------------
months before the Change of Control Date and continuing for the number of
months specified in Appendix A after the Change of Control Date.
Notwithstanding the preceding sentence, if a Change of Control described in
Paragraph (d)(4) or (d)(5) occurs, the Change Period shall begin when
Company becomes a party to a legally binding agreement described in
paragraph (d)(4) or (d)(5) but shall not end until the number of months
specified in Appendix A after the effective date of the Change of Control
transaction described in Paragraph (4) or (5).
(g) Confidential Information. "Confidential Information" means any
------------------------
information not in the public domain and not previously disclosed to the
public by the Board or management of the Company or an Affiliate with
respect to the products, facilities, and methods; trade secrets and other
intellectual property; systems, procedures, manuals, confidential reports,
customer lists, financial information, business plans, prospects, or
opportunities of the Company or an Affiliate; or any information which the
Company or an Affiliate has designated as Confidential Information.
4
<PAGE>
(h) Disability. "Disability" means Executive's inability to perform
----------
the material duties of his employment because of physical or mental
illness, which inability is likely to last for a period of one year or
longer.
(i) Effective Date. "Effective Date" means the effective date of this
--------------
Agreement, as specified in Section 1.
(j) Full Incentive Compensation. "Full Incentive Compensation" means
---------------------------
incentive compensation for a calendar year (including incentive
compensation in the amount of zero), provided that such compensation is not
reduced because Executive was employed by the Company for less than the
entire calendar year.
(k) Good Reason. "Good Reason" means, (i) with respect to a Change of
-----------
Control described in Section 2(d)(4) in which Company is the surviving or
resulting corporation, and which results in less than eighty percent (80%)
but more than fifty percent (50%) of the outstanding voting securities of
the resulting or surviving corporation being owned by former shareholders
of the Company, a material change in position, title, compensation, status,
responsibilities, or working conditions in effect immediately before the
Change of Control or relocation of the Executive's place of employment to a
location more than fifty (50) miles from the Executive's place of
employment immediately before the Change of Control, and, (ii) with respect
to any Change of Control not described in Clause (i), Executive's
determination, in his sole judgment, that the duties of his employment,
compensation therefor, or the benefits or status associated therewith have
been reduced during the Change Period or that he is unable to continue to
perform the duties of his employment effectively because of
5
<PAGE>
circumstances that changed during the Change Period directly or indirectly
as a result of the Change of Control.
(l) Incumbent Director. "Incumbent Director" means a director serving
------------------
on the Board who (i) was a director on the Effective Date or (ii) was later
elected as a director (except a director whose initial assumption of office
was in connection with an actual or threatened election contest, including
but not limited to a consent solicitation, relating to the election of
directors) and whose appointment, election, or nomination for election was
approved or recommended by a vote of at least two-thirds of the directors
then still in office who either were directors on the Effective Date hereof
or whose appointment, election, or nomination for election was previously
so approved or recommended.
(m) Payment Period. "Payment Period" means the period beginning on the
--------------
later of the Change of Control Date or the date of Executive's termination
of employment during the Change Period and continuing for the number of
months specified in Appendix A; provided, however, if Executive's
employment terminates after a Change of Control (or, in the case of a
transaction described in Paragraph 2(d)(4) or 2(d)(5), the later effective
date of such transaction), the number of months in the Payment Period shall
be reduced by one for each full calendar month before the effective date of
Executive's termination of employment occurring after the most recent
Change of Control Date (or, in the case of a transaction described in
Paragraph 2(d)(3) or (4), the later effective date of such transaction)
before such termination date.
6
<PAGE>
(n) Term. "Term" means the period beginning on the Effective Date and
----
ending on the second anniversary of the Effective Date, as extended
pursuant to the provisions of this Subsection. The period referred to in
the preceding sentence shall automatically be extended for one additional
year on each Anniversary Date, unless the Company has notified the
Executive not fewer than thirty (30) days before that Anniversary Date that
the Term will not automatically be extended further. Notwithstanding any
provision of this Agreement, if one or more Changes of Control occur during
the Term (as determined pursuant to the preceding provisions of this
Subsection or as extended pursuant to this sentence to reflect a prior
Change of Control), the Term shall not end before the end of the Payment
Period with respect to the latest Change of Control occurring during the
Term.
(o) Termination Compensation. "Termination Compensation" has the
------------------------
meaning specified in Paragraph 3(a)(1).
3. Termination of Executive's Employment During Change Period.
----------------------------------------------------------
(a) If Executive terminates his employment for Good Reason during the
Change Period, or if Company terminates Executive's employment during the
Change Period for a reason other than Cause or Executive's death or
Disability, Executive shall be entitled to the following benefits:
(1) An amount equal to Executive's Termination Compensation
multiplied by the number of months in the Payment Period. Executive's
Termination Compensation shall be equal to the sum of (i) his highest
rate of base monthly salary (unreduced by any elective salary
deferrals or redirections) during
7
<PAGE>
the twelve (12) month period immediately preceding his termination of
employment plus (ii) one-twelfth of his average annual incentive
compensation with respect to the shortest of (A) the three calendar
years immediately preceding the Payment Period, provided Executive
received Full Incentive Compensation for all such years, (B) the
calendar years immediately preceding the Payment Period with respect
to which Executive received Full Incentive Compensation, or (C) the
total period of Executive's employment by Company. This amount shall
be paid to Executive in a lump sum between sixty (60) and ninety (90)
days after the later of (A) his termination of employment or (B) the
Change of Control Date. Executive may, in his discretion, elect to
reduce the amount payable to him pursuant to this Paragraph 3 to the
extent necessary to avoid excise taxes in Code Section 4999 of the
Internal Revenue Code.
(2) Throughout the Payment Period, Company shall provide to
Executive and his family medical, life insurance, and other welfare
benefits substantially similar to those provided to active executive
employees of the Company, provided Executive pays any premiums charged
by Company to active executive employees receiving similar coverage.
Beginning at the end of the Payment Period, Company shall provide
medical coverage to Executive and his family that is substantially
similar to the coverage provided to active employees of the Company,
provided that Executive pays Company the same premium as he would have
been required to pay if such coverage had been provided pursuant to
the Consolidated Omnibus Budget Reconciliation Act of 1985. Executive
may
8
<PAGE>
elect to purchase single coverage or family coverage pursuant to the
preceding sentence. Subject to Executive's payment of the required
premiums, post-Payment Period medical coverage for Executive and his
spouse shall continue until the earliest of the following events: (i)
the Executive's (or in the case of coverage for the Executive's
spouse, his spouse's) Medicare eligibility, (ii) the Executive's (or
in the case of coverage for the Executive's spouse, his spouse's)
death, or (iii) medical coverage for the Executive (or in the case of
coverage for the Executive's spouse, his spouse) through another
employer.
(b) The payment or provision of benefits to Executive pursuant to
this Agreement shall not affect the obligations of Company or its successor
under any plan, agreement, or arrangement generally applicable to Company's
retired management employees pursuant to which Executive is entitled to any
retirement benefits, welfare benefits, stock, or other fringe benefits.
4. Non-Competition. Executive shall not, while employed or during the
---------------
Payment Period, become an officer, director, or employee of, consultant to, or
majority shareholder in any bank or bank holding company that substantially
competes with Company, its subsidiaries, or Affiliates, or its successor or
successors within one hundred (100) miles from Evansville, Indiana, or fifty
(50) miles from the nearest banking office of Company or a subsidiary thereof.
5. Non-Disclosure of Confidential Information. Executive acknowledges
------------------------------------------
that, by virtue of his employment, he has obtained or will obtain Confidential
Information, the use or disclosure of which could cause Company immeasurable and
substantial loss and damages for which no remedy at law would be adequate.
Accordingly, Executive covenants and agrees with
9
<PAGE>
Company that, except as necessary to perform his obligations to Company or with
the prior written consent of Company's Board, he will not at any time directly
or indirectly disclose any Confidential Information that he may acquire or has
acquired by reason of his association with Company. Without limiting the rights
or remedies, both legal and equitable, available to Company in the event of an
actual or threatened breach of Executive's obligations under this Section,
Company shall be entitled to seek and obtain a temporary restraining order
and/or a preliminary or permanent injunction against Executive, which shall
prevent Executive from engaging in any activities prohibited by this Section, or
to seek and obtain such other relief against Executive as may be required to
enforce Executive's obligations hereunder. Executive's obligations set forth in
this Section and Company's rights and remedies, whether legal or equitable, with
respect thereto, shall extend indefinitely.
6. Expenses. If Executive determines, in his absolute judgment, that it
--------
is necessary or advisable for him to incur reasonable legal and/or accounting
expenses, including but not limited to reasonable attorneys' and/or accountants'
fees, to obtain full and effective enforcement of his rights under this
Agreement or to determine the appropriate tax treatment of amounts paid pursuant
to this Agreement, Company shall reimburse Executive for all such reasonable
expenses and costs on a periodic basis. Company's obligation to reimburse
Executive for these reasonable expenses or costs pursuant to this Section shall
survive expiration of the Term and shall survive the termination of any later
employment agreements between Executive and Company. Any reimbursement required
by this Section shall be paid promptly to Executive after he submits a copy of
the service provider's invoice for the covered expense.
10
<PAGE>
7. Company's Obligation to Provide Information. After termination of
-------------------------------------------
Executive's employment, Company shall promptly provide Executive with reasonably
requested information relating to his retirement, benefits and payments under
this Agreement, and other post-employment benefits.
8. Binding Effect And Assignment. This Agreement shall inure to the
-----------------------------
benefit of and shall be binding upon the parties to this Agreement and their
respective executors, administrators, heirs, personal representatives,
successors, and assigns, but neither this Agreement nor any right created by
this Agreement may be assigned or transferred by either party. Notwithstanding
the foregoing, the Company shall assign this Agreement to any person or entity
succeeding to substantially all of the business and assets of the Company upon a
Change in Control, and upon such a Change in Control, the Company shall obtain
the assumption of this Agreement by its successor.
9. Notices. Any notice to a party required or permitted to be given by
-------
this Agreement shall be in writing and shall be deemed given when mailed by
registered or certified mail to the party at the party's address as specified in
this Section:
If to the Company, to: CNB Bancshares, Inc.
Attention: Corporate Secretary
20 N.W. Third Street
Evansville, Indiana 47708
or such other address designated by Company in writing to Executive as provided
in this Section.
If to Executive, to: 4123 Wyndclyff Court
Evansville, IN 47711
11
<PAGE>
or such other address designated by the Executive in writing to the Company as
provided in this Section.
10. Severability. If any term, provision, covenant, or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid, void,
or unenforceable, the remainder of the terms, provisions, covenants, and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired, or invalidated.
11. Amendments. This Agreement may not be modified, amended, altered, or
----------
supplemented except upon the execution and delivery of a written agreement
executed by Company and Executive.
12. Governing Law. This Agreement shall be construed in accordance with
-------------
the laws of the State of Indiana.
13. Arbitration. Any dispute, claim, or controversy concerning the terms,
-----------
meaning, application, or enforcement of any provision of this Agreement that
cannot be resolved through direct discussion or mediation shall be submitted to
final and binding arbitration before a neutral arbitrator pursuant to the
arbitration procedures set out in this Section ("Procedures") under the auspices
of the American Arbitration Association (AAA) at Evansville, Indiana. The AAA
Employment Dispute Resolution Rules in effect at the time of the arbitration
shall govern arbitration proceedings, except insofar as these Procedures, as
they may be amended from time to time, specifically provide otherwise.
Executive may initiate a claim or case only by a written notice to Company as
provided in this Agreement. Company may likewise initiate a claim or case by a
written notice delivered to Executive, as provided in this Agreement. The
written notice must set forth the matter in dispute in sufficient detail to
advise the non-initiating party
12
<PAGE>
of the nature and amount of the dispute or claim, the date(s) of the underlying
occurrence(s), and the relief requested. It shall also be the initiating party's
responsibility to submit the claim and other required documents and fees to AAA
in a timely manner; provided, however, if Executive is fully or partially
successful, Company shall reimburse Executive for arbitration fees reasonably
incurred. In conducting arbitration proceedings, the AAA-appointed arbitrator
shall be authorized to award any relief available under the laws of the United
States or the State of Indiana applicable to the claim, dispute, or controversy
submitted, where such relief is warranted based on the evidence and the law. Any
arbitration award shall be final and binding, and enforceable by an action in
any court of competent jurisdiction. No award shall be set aside, or denied
enforcement, by any court in any action unless the court finds that the
arbitrator purported to resolve claims, disputes, or controversies not within
the scope of these Procedures. Adherence to these Procedures, and the agreement
of the parties to this Agreement to follow them, shall be enforceable in an
action to compel or stay arbitration pursuant to the Federal Arbitration Act or
the Indiana Uniform Arbitration Act in a court of competent jurisdiction.
14. Integration. This Agreement supersedes all prior agreements between
-----------
the parties with respect to the matters covered herein.
15. Counterparts. This Agreement may be signed in two counterparts, each
------------
of which shall be deemed to be an original but which together shall constitute
one and the same instrument.
16. Effect Of Headings. The section headings in this Agreement are for
------------------
convenience only and shall not affect the construction of this Agreement.
13
<PAGE>
IN WITNESS WHEREOF, CNB Bancshares, Inc. has caused this Agreement to be
executed on this 3rd day of June , 1997, and Executive has
----------- ------------
executed this Agreement on the date specified below.
ATTEST: CNB BANCSHARES, INC.
By /s/ H. Lee Cooper
- ------------------------- -----------------
(Signature)
6-3-97
---------------------
(Date)
EXECUTIVE
/s/ James J. Giancola
---------------------
(Signature)
6-3-97
---------------------
(Date)
14
<PAGE>
APPENDIX A
The Payment Period shall consist of 36 months.
ATTEST: CNB BANCSHARES, INC.
By /s/ H. Lee Cooper
---------------------
(Signature)
6-3-97
-------------------------
(Date)
EXECUTIVE
/s/ James J. Giancola
-------------------------
(Signature)
6-3-97
-------------------------
(Date)
15
<PAGE>
Exhibit 10(c)
CHANGE OF CONTROL AGREEMENT
This AGREEMENT is entered into by and between CNB BANCSHARES, INC., an
Indiana corporation ("Company"), and MARVIN HUFF, JR. ("Executive").
Background
----------
A. Executive is an officer and key management employee of Company.
B. Company's Board of Directors ("Board") has determined that it is in
the best interests of Company and its shareholders to assure Executive's
continued dedication and undivided time, attention, and loyalty, notwithstanding
the possibility, threat, or occurrence of a Change of Control (as defined in
Section 2 below).
C. In furtherance of that goal, the Board wishes to provide Executive
with certain benefits, if his employment should terminate as a result of a
Change of Control.
D. In reliance on this Agreement, Executive is willing to continue his
employment with Company on the terms agreed to by Executive and Company from
time to time.
In consideration of the premises, Company and Executive agree as follows:
Agreement
---------
1. Duration Of Agreement. This Agreement shall be effective June 3,
---------------------
1997 ("Effective Date"), and shall continue until the end of the Term (as
defined in Section 2).
2. Definitions. The following words and phrases, when capitalized,
-----------
shall have the following meanings for purposes of this Agreement:
(a) Affiliate. "Affiliate" means an employer required to be
---------
aggregated with Company pursuant to Section 414(b) or (c) of the Internal
Revenue Code.
<PAGE>
(b) Anniversary Date. "Anniversary Date" means each anniversary of
----------------
the Effective Date occurring during the Term.
(c) Cause. "Cause" means and shall be limited to the following:
-----
(1) Executive's willful and continued failure to perform (other
than a failure resulting from Executive's illness or disability) his
employment duties after a demand for substantial performance is
delivered to Executive on behalf of the Board that specifically
identifies the manner in which it alleges that Executive has failed
to perform his duties and Executive's failure to take appropriate
actions to correct such failure within thirty (30) days; or
(2) Executive's willful engaging in misconduct that has caused
demonstrable and material injury, monetary or otherwise, to Company
or an Affiliate.
For purposes of this Subsection (c), no act or failure to act on
Executive's part shall be considered "willful" unless done, or omitted to
be done, by Executive not in good faith and without reasonable belief that
his action or omission was in the best interests of Company.
Notwithstanding the foregoing, Executive shall not be deemed to have been
terminated for Cause unless and until the Board has delivered to him a copy
of a notice of termination, and after reasonable notice to him and an
opportunity for him, together with counsel, to be heard before the Board,
at least two-thirds of the Board finds, in its reasonable opinion, that
Executive was guilty of conduct set forth above in clause (1) or (2) and
specifying the particulars thereof in detail.
2
<PAGE>
(d) Change of Control. "Change of Control" shall be deemed to have occurred
upon the happening of any one or more of the following:
(1) any person, as that term is used in Section 13(d)(3) and 14(d)(2)
of the Securities Exchange Act of 1934, as amended from time to time,
becomes a beneficial owner, directly or indirectly, of securities of
Company representing twenty percent (20%) or more of the combined voting
power of Company's then outstanding securities;
(2) less than fifty-one percent (51%) of the members of the Board are
Incumbent Directors;
(3) any corporation or group of associated persons acting in concert,
owns more than twenty-five percent (25%) of the outstanding shares of
voting stock of Company coupled with or followed by the exercise of the
voting power of such shares by the election of two (2) or more directors of
Company in any one election at the instance of such corporation or group;
(4) Company becomes a party to an agreement of merger, consolidation,
or other reorganization pursuant to which Company will be a constituent
corporation, and either (A) Company is not the surviving or resulting
corporation, or (B) the transaction will result in less than eighty percent
(80%) of the outstanding voting securities of the surviving or resulting
entity being owned by the former shareholders of Company;
(5) Company becomes a party to an agreement providing for Company's
sale or other disposition of all or substantially all of its assets to any
3
<PAGE>
individual, partnership, joint venture, association, trust, corporation, or
other entity or person which is not an Affiliate; or
(6) the occurrence of another event that the Board designates a Change
of Control.
(e) Change of Control Date. "Change of Control Date" means the date as of
which a Change of Control occurs.
(f) Change Period. "Change Period" means the period beginning six months
before the Change of Control Date and continuing for the number of months
specified in Appendix A after the Change of Control Date. Notwithstanding the
preceding sentence, if a Change of Control described in Paragraph (d)(4) or
(d)(5) occurs, the Change Period shall begin when Company becomes a party to a
legally binding agreement described in paragraph (d)(4) or (d)(5) but shall not
end until the number of months specified in Appendix A after the effective date
of the Change of Control transaction described in Paragraph (4) or (5).
(g) Confidential Information. "Confidential Information" means any
information not in the public domain and not previously disclosed to the public
by the Board or management of the Company or an Affiliate with respect to the
products, facilities, and methods; trade secrets and other intellectual
property; systems, procedures, manuals, confidential reports, customer lists,
financial information, business plans, prospects, or opportunities of the
Company or an Affiliate; or any information which the Company or an Affiliate
has designated as Confidential Information.
4
<PAGE>
(h) Disability. "Disability" means Executive's inability to perform the
material duties of his employment because of physical or mental illness, which
inability is likely to last for a period of one year or longer.
(i) Effective Date. "Effective Date" means the effective date of this
Agreement, as specified in Section 1.
(j) Full Incentive Compensation. "Full Incentive Compensation" means
incentive compensation for a calendar year (including incentive compensation in
the amount of zero), provided that such compensation is not reduced because
Executive was employed by the Company for less than the entire calendar year.
(k) Good Reason. "Good Reason" means, (i) with respect to a Change of
Control described in Section 2(d)(4) in which Company is the surviving or
resulting corporation, and which results in less than eighty percent (80%) but
more than fifty percent (50%) of the outstanding voting securities of the
resulting or surviving corporation being owned by former shareholders of the
Company, a material change in position, title, compensation, status,
responsibilities, or working conditions in effect immediately before the Change
of Control or relocation of the Executive's place of employment to a location
more than fifty (50) miles from the Executive's place of employment immediately
before the Change of Control, and, (ii) with respect to any Change of Control
not described in Clause (i), Executive's determination, in his sole judgment,
that the duties of his employment, compensation therefor, or the benefits or
status associated therewith have been reduced during the Change Period or that
he is unable to continue to perform the duties of his employment effectively
because of
5
<PAGE>
circumstances that changed during the Change Period directly or indirectly as a
result of the Change of Control.
(l) Incumbent Director. "Incumbent Director" means a director serving on
the Board who (i) was a director on the Effective Date or (ii) was later elected
as a director (except a director whose initial assumption of office was in
connection with an actual or threatened election contest, including but not
limited to a consent solicitation, relating to the election of directors) and
whose appointment, election, or nomination for election was approved or
recommended by a vote of at least two-thirds of the directors then still in
office who either were directors on the Effective Date hereof or whose
appointment, election, or nomination for election was previously so approved or
recommended.
(m) Payment Period. "Payment Period" means the period beginning on the
later of the Change of Control Date or the date of Executive's termination of
employment during the Change Period and continuing for the number of months
specified in Appendix A; provided, however, if Executive's employment terminates
after a Change of Control (or, in the case of a transaction described in
Paragraph 2(d)(4) or 2(d)(5), the later effective date of such transaction), the
number of months in the Payment Period shall be reduced by one for each full
calendar month before the effective date of Executive's termination of
employment occurring after the most recent Change of Control Date (or, in the
case of a transaction described in Paragraph 2(d)(3) or (4), the later effective
date of such transaction) before such termination date.
6
<PAGE>
(n) Term. "Term" means the period beginning on the Effective Date and
ending on the second anniversary of the Effective Date, as extended pursuant to
the provisions of this Subsection. The period referred to in the preceding
sentence shall automatically be extended for one additional year on each
Anniversary Date, unless the Company has notified the Executive not fewer than
thirty (30) days before that Anniversary Date that the Term will not
automatically be extended further. Notwithstanding any provision of this
Agreement, if one or more Changes of Control occur during the Term (as
determined pursuant to the preceding provisions of this Subsection or as
extended pursuant to this sentence to reflect a prior Change of Control), the
Term shall not end before the end of the Payment Period with respect to the
latest Change of Control occurring during the Term.
(o) Termination Compensation. "Termination Compensation" has the meaning
specified in Paragraph 3(a)(1).
3. Termination of Executive's Employment During Change Period.
(a) If Executive terminates his employment for Good Reason during the
Change Period, or if Company terminates Executive's employment during the Change
Period for a reason other than Cause or Executive's death or Disability,
Executive shall be entitled to the following benefits:
(1) An amount equal to Executive's Termination Compensation multiplied
by the number of months in the Payment Period. Executive's Termination
Compensation shall be equal to the sum of (i) his highest rate of base
monthly salary (unreduced by any elective salary deferrals or redirections)
during
7
<PAGE>
the twelve (12) month period immediately preceding his termination of
employment plus (ii) one-twelfth of his average annual incentive
compensation with respect to the shortest of (A) the three calendar years
immediately preceding the Payment Period, provided Executive received Full
Incentive Compensation for all such years, (B) the calendar years
immediately preceding the Payment Period with respect to which Executive
received Full Incentive Compensation, or (C) the total period of
Executive's employment by Company. This amount shall be paid to Executive
in a lump sum between sixty (60) and ninety (90) days after the later of
(A) his termination of employment or (B) the Change of Control Date.
Executive may, in his discretion, elect to reduce the amount payable to him
pursuant to this Paragraph 3 to the extent necessary to avoid excise taxes
in Code Section 4999 of the Internal Revenue Code.
(2) Throughout the Payment Period, Company shall provide to
Executive and his family medical, life insurance, and other welfare
benefits substantially similar to those provided to active executive
employees of the Company, provided Executive pays any premiums charged by
Company to active executive employees receiving similar coverage. Beginning
at the end of the Payment Period, Company shall provide medical coverage to
Executive and his family that is substantially similar to the coverage
provided to active employees of the Company, provided that Executive pays
Company the same premium as he would have been required to pay if such
coverage had been provided pursuant to the Consolidated Omnibus Budget
Reconciliation Act of 1985. Executive may
8
<PAGE>
elect to purchase single coverage or family coverage pursuant to the
preceding sentence. Subject to Executive's payment of the required
premiums, post-Payment Period medical coverage for Executive and his
spouse shall continue until the earliest of the following events: (i)
the Executive's (or in the case of coverage for the Executive's
spouse, his spouse's) Medicare eligibility, (ii) the Executive's (or
in the case of coverage for the Executive's spouse, his spouse's)
death, or (iii) medical coverage for the Executive (or in the case of
coverage for the Executive's spouse, his spouse) through another
employer.
(b) The payment or provision of benefits to Executive pursuant to this
Agreement shall not affect the obligations of Company or its successor
under any plan, agreement, or arrangement generally applicable to Company's
retired management employees pursuant to which Executive is entitled to any
retirement benefits, welfare benefits, stock, or other fringe benefits.
4. Non-Competition. Executive shall not, while employed or during the
Payment Period, become an officer, director, or employee of, consultant to, or
majority shareholder in any bank or bank holding company that substantially
competes with Company, its subsidiaries, or Affiliates, or its successor or
successors within one hundred (100) miles from Evansville, Indiana, or fifty
(50) miles from the nearest banking office of Company or a subsidiary thereof.
5. Non-Disclosure of Confidential Information. Executive acknowledges that,
by virtue of his employment, he has obtained or will obtain Confidential
Information, the use or disclosure of which could cause Company immeasurable and
substantial loss and damages for which no remedy at law would be adequate.
Accordingly, Executive covenants and agrees with
9
<PAGE>
Company that, except as necessary to perform his obligations to Company or with
the prior written consent of Company's Board, he will not at any time directly
or indirectly disclose any Confidential Information that he may acquire or has
acquired by reason of his association with Company. Without limiting the rights
or remedies, both legal and equitable, available to Company in the event of an
actual or threatened breach of Executive's obligations under this Section,
Company shall be entitled to seek and obtain a temporary restraining order
and/or a preliminary or permanent injunction against Executive, which shall
prevent Executive from engaging in any activities prohibited by this Section, or
to seek and obtain such other relief against Executive as may be required to
enforce Executive's obligations hereunder. Executive's obligations set forth in
this Section and Company's rights and remedies, whether legal or equitable, with
respect thereto, shall extend indefinitely.
6. Expenses. If Executive determines, in his absolute judgment, that it is
necessary or advisable for him to incur reasonable legal and/or accounting
expenses, including but not limited to reasonable attorneys' and/or accountants'
fees, to obtain full and effective enforcement of his rights under this
Agreement or to determine the appropriate tax treatment of amounts paid pursuant
to this Agreement, Company shall reimburse Executive for all such reasonable
expenses and costs on a periodic basis. Company's obligation to reimburse
Executive for these reasonable expenses or costs pursuant to this Section shall
survive expiration of the Term and shall survive the termination of any later
employment agreements between Executive and Company. Any reimbursement required
by this Section shall be paid promptly to Executive after he submits a copy of
the service provider's invoice for the covered expense.
10
<PAGE>
7. Company's Obligation to Provide Information. After termination of
Executive's employment, Company shall promptly provide Executive with reasonably
requested information relating to his retirement, benefits and payments under
this Agreement, and other post-employment benefits.
8. Binding Effect And Assignment. This Agreement shall inure to the benefit
of and shall be binding upon the parties to this Agreement and their respective
executors, administrators, heirs, personal representatives, successors, and
assigns, but neither this Agreement nor any right created by this Agreement may
be assigned or transferred by either party. Notwithstanding the foregoing, the
Company shall assign this Agreement to any person or entity succeeding to
substantially all of the business and assets of the Company upon a Change in
Control, and upon such a Change in Control, the Company shall obtain the
assumption of this Agreement by its successor.
9. Notices. Any notice to a party required or permitted to be given by this
Agreement shall be in writing and shall be deemed given when mailed by
registered or certified mail to the party at the party's address as specified in
this Section:
If to the Company, to: CNB Bancshares, Inc.
Attention: Corporate Secretary
20 N.W. Third Street
Evansville, Indiana 47708
or such other address designated by Company in writing to Executive as provided
in this Section.
If to Executive, to: Marvin Huff, Jr.
8707 Ascot Court
Evansville, IN 47711
11
<PAGE>
or such other address designated by the Executive in writing to the Company as
provided in this Section.
10. Severability. If any term, provision, covenant, or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the terms, provisions, covenants, and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired, or invalidated.
11. Amendments. This Agreement may not be modified, amended, altered, or
supplemented except upon the execution and delivery of a written agreement
executed by Company and Executive.
12. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of Indiana.
13. Arbitration. Any dispute, claim, or controversy concerning the terms,
meaning, application, or enforcement of any provision of this Agreement that
cannot be resolved through direct discussion or mediation shall be submitted to
final and binding arbitration before a neutral arbitrator pursuant to the
arbitration procedures set out in this Section ("Procedures") under the auspices
of the American Arbitration Association (AAA) at Evansville, Indiana. The AAA
Employment Dispute Resolution Rules in effect at the time of the arbitration
shall govern arbitration proceedings, except insofar as these Procedures, as
they may be amended from time to time, specifically provide otherwise. Executive
may initiate a claim or case only by a written notice to Company as provided in
this Agreement. Company may likewise initiate a claim or case by a written
notice delivered to Executive, as provided in this Agreement. The written notice
must set forth the matter in dispute in sufficient detail to advise the
non-initiating party
12
<PAGE>
of the nature and amount of the dispute or claim, the date(s) of the underlying
occurrence(s), and the relief requested. It shall also be the initiating party's
responsibility to submit the claim and other required documents and fees to AAA
in a timely manner; provided, however, if Executive is fully or partially
successful, Company shall reimburse Executive for arbitration fees reasonably
incurred. In conducting arbitration proceedings, the AAA-appointed arbitrator
shall be authorized to award any relief available under the laws of the United
States or the State of Indiana applicable to the claim, dispute, or controversy
submitted, where such relief is warranted based on the evidence and the law. Any
arbitration award shall be final and binding, and enforceable by an action in
any court of competent jurisdiction. No award shall be set aside, or denied
enforcement, by any court in any action unless the court finds that the
arbitrator purported to resolve claims, disputes, or controversies not within
the scope of these Procedures. Adherence to these Procedures, and the agreement
of the parties to this Agreement to follow them, shall be enforceable in an
action to compel or stay arbitration pursuant to the Federal Arbitration Act or
the Indiana Uniform Arbitration Act in a court of competent jurisdiction.
14. Integration. This Agreement supersedes all prior agreements between the
parties with respect to the matters covered herein.
15. Counterparts. This Agreement may be signed in two counterparts, each of
which shall be deemed to be an original but which together shall constitute one
and the same instrument.
16. Effect Of Headings. The section headings in this Agreement are for
convenience only and shall not affect the construction of this Agreement.
13
<PAGE>
IN WITNESS WHEREOF, CNB Bancshares, Inc. has caused this Agreement to
be executed on this 3rd day of June , 1997, and Executive has executed this
Agreement on the date specified below.
ATTEST: CNB BANCSHARES, INC.
/s/ Sallie A. Gore By /s/ James J. Giancola
- ------------------------------------- --------------------------------
(Signature)
6/3/97
----------------------------------
(Date)
EXECUTIVE
/s/ Marvin Huff, Jr.
----------------------------------
(Signature)
6-3-97
----------------------------------
(Date)
14
<PAGE>
APPENDIX A
The Payment Period shall consist of 36 months.
ATTEST: CNB BANCSHARES, INC.
/s/ Sallie A. Gore By /s/ James J. Giancola
- ------------------------------------- ----------------------------
(Signature)
6/3/97
------------------------------
(Date)
EXECUTIVE
/s/ Marvin Huff, Jr.
------------------------------
(Signature)
6-3-97
------------------------------
(Date)
15
<PAGE>
Exhibit 10(d)
CHANGE OF CONTROL AGREEMENT
This AGREEMENT is entered into by and between CNB BANCSHARES, INC., an
Indiana corporation ("Company"), and DAVID L. KNAPP ("Executive").
Background
----------
A. Executive is an officer and key management employee of Company.
B. Company's Board of Directors ("Board") has determined that it is in
the best interests of Company and its shareholders to assure Executive's
continued dedication and undivided time, attention, and loyalty, notwithstanding
the possibility, threat, or occurrence of a Change of Control (as defined in
Section 2 below).
C. In furtherance of that goal, the Board wishes to provide Executive
with certain benefits, if his employment should terminate as a result of a
Change of Control.
D. In reliance on this Agreement, Executive is willing to continue his
employment with Company on the terms agreed to by Executive and Company from
time to time.
In consideration of the premises, Company and Executive agree as
follows:
Agreement
---------
1. Duration Of Agreement. This Agreement shall be effective May 28,
1997 ("Effective Date"), and shall continue until the end of the Term (as
defined in Section 2).
2. Definitions. The following words and phrases, when capitalized,
shall have the following meanings for purposes of this Agreement:
(a) Affiliate. "Affiliate" means an employer required to be
aggregated with Company pursuant to Section 414(b) or (c) of the
Internal Revenue Code.
<PAGE>
(b) Anniversary Date. "Anniversary Date" means each anniversary of
the Effective Date occurring during the Term.
(c) Cause. "Cause" means and shall be limited to the following:
(1) Executive's willful and continued failure to perform (other
than a failure resulting from Executive's illness or disability) his
employment duties after a demand for substantial performance is
delivered to Executive on behalf of the Board that specifically
identifies the manner in which it alleges that Executive has failed
to perform his duties and Executive's failure to take appropriate
actions to correct such failure within thirty (30) days; or
(2) Executive's willful engaging in misconduct that has caused
demonstrable and material injury, monetary or otherwise, to Company
or an Affiliate.
For purposes of this Subsection (c), no act or failure to act on Executive's
part shall be considered "willful" unless done, or omitted to be done, by
Executive not in good faith and without reasonable belief that his action or
omission was in the best interests of Company. Notwithstanding the foregoing,
Executive shall not be deemed to have been terminated for Cause unless and until
the Board has delivered to him a copy of a notice of termination, and after
reasonable notice to him and an opportunity for him, together with counsel, to
be heard before the Board, at least two-thirds of the Board finds, in its
reasonable opinion, that Executive was guilty of conduct set forth above in
clause (1) or (2) and specifying the particulars thereof in detail.
2
<PAGE>
(d) Change of Control. "Change of Control" shall be deemed to have occurred
upon the happening of any one or more of the following:
(1) any person, as that term is used in Section 13(d)(3) and 14(d)(2)
of the Securities Exchange Act of 1934, as amended from time to time,
becomes a beneficial owner, directly or indirectly, of securities of
Company representing twenty percent (20%) or more of the combined voting
power of Company's then outstanding securities;
(2) less than fifty-one percent (51%) of the members of the Board are
Incumbent Directors;
(3) any corporation or group of associated persons acting in concert,
owns more than twenty-five percent (25%) of the outstanding shares of
voting stock of Company coupled with or followed by the exercise of the
voting power of such shares by the election of two (2) or more directors of
Company in any one election at the instance of such corporation or group;
(4) Company becomes a party to an agreement of merger, consolidation,
or other reorganization pursuant to which Company will be a constituent
corporation, and either (A) Company is not the surviving or resulting
corporation, or (B) the transaction will result in less than eighty percent
(80%) of the outstanding voting securities of the surviving or resulting
entity being owned by the former shareholders of Company;
(5) Company becomes a party to an agreement providing for Company's
sale or other disposition of all or substantially all of its assets to any
3
<PAGE>
individual, partnership, joint venture, association, trust, corporation, or
other entity or person which is not an Affiliate; or
(6) the occurrence of another event that the Board designates a Change
of Control.
(e) Change of Control Date. "Change of Control Date" means the date as of
which a Change of Control occurs.
(f) Change Period. "Change Period" means the period beginning six months
before the Change of Control Date and continuing for the number of months
specified in Appendix A after the Change of Control Date. Notwithstanding the
preceding sentence, if a Change of Control described in Paragraph (d)(4) or
(d)(5) occurs, the Change Period shall begin when Company becomes a party to a
legally binding agreement described in paragraph (d)(4) or (d)(5) but shall not
end until the number of months specified in Appendix A after the effective date
of the Change of Control transaction described in Paragraph (4) or (5).
(g) Confidential Information. "Confidential Information" means any
information not in the public domain and not previously disclosed to the public
by the Board or management of the Company or an Affiliate with respect to the
products, facilities, and methods; trade secrets and other intellectual
property; systems, procedures, manuals, confidential reports, customer lists,
financial information, business plans, prospects, or opportunities of the
Company or an Affiliate; or any information which the Company or an Affiliate
has designated as Confidential Information.
4
<PAGE>
(h) Disability. "Disability" means Executive's inability to perform the
material duties of his employment because of physical or mental illness, which
inability is likely to last for a period of one year or longer.
(i) Effective Date. "Effective Date" means the effective date of this
Agreement, as specified in Section 1.
(j) Full Incentive Compensation. "Full Incentive Compensation" means
incentive compensation for a calendar year (including incentive compensation in
the amount of zero), provided that such compensation is not reduced because
Executive was employed by the Company for less than the entire calendar year.
(k) Good Reason. "Good Reason" means, (i) with respect to a Change of
Control described in Section 2(d)(4) in which Company is the surviving or
resulting corporation, and which results in less than eighty percent (80%) but
more than fifty percent (50%) of the outstanding voting securities of the
resulting or surviving corporation being owned by former shareholders of the
Company, a material change in position, title, compensation, status,
responsibilities, or working conditions in effect immediately before the Change
of Control or relocation of the Executive's place of employment to a location
more than fifty (50) miles from the Executive's place of employment immediately
before the Change of Control, and, (ii) with respect to any Change of Control
not described in Clause (i), Executive's determination, in his sole judgment,
that the duties of his employment, compensation therefor, or the benefits or
status associated therewith have been reduced during the Change Period or that
he is unable to continue to perform the duties of his employment effectively
because
5
<PAGE>
of circumstances that changed during the Change Period directly or indirectly as
a result of the Change of Control.
(l) Incumbent Director. "Incumbent Director" means a director serving on
the Board who (i) was a director on the Effective Date or (ii) was later elected
as a director (except a director whose initial assumption of office was in
connection with an actual or threatened election contest, including but not
limited to a consent solicitation, relating to the election of directors) and
whose appointment, election, or nomination for election was approved or
recommended by a vote of at least two-thirds of the directors then still in
office who either were directors on the Effective Date hereof or whose
appointment, election, or nomination for election was previously so approved or
recommended.
(m) Payment Period. "Payment Period" means the period beginning on the
later of the Change of Control Date or the date of Executive's termination of
employment during the Change Period and continuing for the number of months
specified in Appendix A; provided, however, if Executive's employment terminates
after a Change of Control (or, in the case of a transaction described in
Paragraph 2(d)(4) or 2(d)(5), the later effective date of such transaction), the
number of months in the Payment Period shall be reduced by one for each full
calendar month before the effective date of Executive's termination of
employment occurring after the most recent Change of Control Date (or, in the
case of a transaction described in Paragraph 2(d)(3) or (4), the later effective
date of such transaction) before such termination date.
6
<PAGE>
(n) Term. "Term" means the period beginning on the Effective Date and
ending on the second anniversary of the Effective Date, as extended pursuant to
the provisions of this Subsection. The period referred to in the preceding
sentence shall automatically be extended for one additional year on each
Anniversary Date, unless the Company has notified the Executive not fewer than
thirty (30) days before that Anniversary Date that the Term will not
automatically be extended further. Notwithstanding any provision of this
Agreement, if one or more Changes of Control occur during the Term (as
determined pursuant to the preceding provisions of this Subsection or as
extended pursuant to this sentence to reflect a prior Change of Control), the
Term shall not end before the end of the Payment Period with respect to the
latest Change of Control occurring during the Term.
(o) Termination Compensation. "Termination Compensation" has the meaning
specified in Paragraph 3(a)(1).
3. Termination of Executive's Employment During Change Period.
(a) If Executive terminates his employment for Good Reason during the
Change Period, or if Company terminates Executive's employment during the Change
Period for a reason other than Cause or Executive's death or Disability,
Executive shall be entitled to the following benefits:
(1) An amount equal to Executive's Termination Compensation multiplied
by the number of months in the Payment Period. Executive's Termination
Compensation shall be equal to the sum of (i) his highest rate of base
monthly salary (unreduced by any elective salary deferrals or redirections)
during
7
<PAGE>
the twelve (12) month period immediately preceding his termination of
employment plus (ii) one-twelfth of his average annual incentive
compensation with respect to the shortest of (A) the three calendar years
immediately preceding the Payment Period, provided Executive received Full
Incentive Compensation for all such years, (B) the calendar years
immediately preceding the Payment Period with respect to which Executive
received Full Incentive Compensation, or (C) the total period of
Executive's employment by Company. This amount shall be paid to Executive
in a lump sum between sixty (60) and ninety (90) days after the later of
(A) his termination of employment or (B) the Change of Control Date.
Executive may, in his discretion, elect to reduce the amount payable to him
pursuant to this Paragraph 3 to the extent necessary to avoid excise taxes
in Code Section 4999 of the Internal Revenue Code.
(2) Throughout the Payment Period, Company shall provide to Executive
and his family medical, life insurance, and other welfare benefits
substantially similar to those provided to active executive employees of
the Company, provided Executive pays any premiums charged by Company to
active executive employees receiving similar coverage. Beginning at the end
of the Payment Period, Company shall provide medical coverage to Executive
and his family that is substantially similar to the coverage provided to
active employees of the Company, provided that Executive pays Company the
same premium as he would have been required to pay if such coverage had
been provided pursuant to the Consolidated Omnibus Budget Reconciliation
Act of 1985. Executive may
8
<PAGE>
elect to purchase single coverage or family coverage pursuant to the
preceding sentence. Subject to Executive's payment of the required
premiums, post-Payment Period medical coverage for Executive and his spouse
shall continue until the earliest of the following events: (i) the
Executive's (or in the case of coverage for the Executive's spouse, his
spouse's) Medicare eligibility, (ii) the Executive's (or in the case of
coverage for the Executive's spouse, his spouse's) death, or (iii) medical
coverage for the Executive (or in the case of coverage for the Executive's
spouse, his spouse) through another employer.
(b) The payment or provision of benefits to Executive pursuant to this
Agreement shall not affect the obligations of Company or its successor under
any plan, agreement, or arrangement generally applicable to Company's retired
management employees pursuant to which Executive is entitled to any retirement
benefits, welfare benefits, stock, or other fringe benefits.
4. Non-Competition. Executive shall not, while employed or during the Payment
Period, become an officer, director, or employee of, consultant to, or majority
shareholder in any bank or bank holding company that substantially competes with
Company, its subsidiaries, or Affiliates, or its successor or successors within
one hundred (100) miles from Evansville, Indiana, or fifty (50) miles from the
nearest banking office of Company or a subsidiary thereof.
5. Non-Disclosure of Confidential Information. Executive acknowledges that,
by virtue of his employment, he has obtained or will obtain Confidential
Information, the use or disclosure of which could cause Company immeasurable and
substantial loss and damages for which no remedy at law would be adequate.
Accordingly, Executive covenants and agrees with
9
<PAGE>
Company that, except as necessary to perform his obligations to Company or with
the prior written consent of Company's Board, he will not at any time directly
or indirectly disclose any Confidential Information that he may acquire or has
acquired by reason of his association with Company. Without limiting the rights
or remedies, both legal and equitable, available to Company in the event of an
actual or threatened breach of Executive's obligations under this Section,
Company shall be entitled to seek and obtain a temporary restraining order
and/or a preliminary or permanent injunction against Executive, which shall
prevent Executive from engaging in any activities prohibited by this Section, or
to seek and obtain such other relief against Executive as may be required to
enforce Executive's obligations hereunder. Executive's obligations set forth in
this Section and Company's rights and remedies, whether legal or equitable, with
respect thereto, shall extend indefinitely.
6. Expenses. If Executive determines, in his absolute judgment, that it is
necessary or advisable for him to incur reasonable legal and/or accounting
expenses, including but not limited to reasonable attorneys' and/or accountants'
fees, to obtain full and effective enforcement of his rights under this
Agreement or to determine the appropriate tax treatment of amounts paid pursuant
to this Agreement, Company shall reimburse Executive for all such reasonable
expenses and costs on a periodic basis. Company's obligation to reimburse
Executive for these reasonable expenses or costs pursuant to this Section shall
survive expiration of the Term and shall survive the termination of any later
employment agreements between Executive and Company. Any reimbursement required
by this Section shall be paid promptly to Executive after he submits a copy of
the service provider's invoice for the covered expense.
10
<PAGE>
7. Company's Obligation to Provide Information. After termination of
Executive's employment, Company shall promptly provide Executive with reasonably
requested information relating to his retirement, benefits and payments under
this Agreement, and other post-employment benefits.
8. Binding Effect And Assignment. This Agreement shall inure to the benefit
of and shall be binding upon the parties to this Agreement and their respective
executors, administrators, heirs, personal representatives, successors, and
assigns, but neither this Agreement nor any right created by this Agreement may
be assigned or transferred by either party. Notwithstanding the foregoing, the
Company shall assign this Agreement to any person or entity succeeding to
substantially all of the business and assets of the Company upon a Change in
Control, and upon such a Change in Control, the Company shall obtain the
assumption of this Agreement by its successor.
9. Notices. Any notice to a party required or permitted to be given by this
Agreement shall be in writing and shall be deemed given when mailed by
registered or certified mail to the party at the party's address as specified in
this Section:
If to the Company, to: CNB Bancshares, Inc.
Attention: Corporate Secretary
20 N.W. Third Street
Evansville, Indiana 47708
or such other address designated by Company in writing to Executive as provided
in this Section.
If to Executive, to: David L. Knapp
12441 Browning Road
Evansville, IN 47711
11
<PAGE>
or such other address designated by the Executive in writing to the Company as
provided in this Section.
10. Severability. If any term, provision, covenant, or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the terms, provisions, covenants, and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired, or invalidated.
11. Amendments. This Agreement may not be modified, amended, altered, or
supplemented except upon the execution and delivery of a written agreement
executed by Company and Executive.
12. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of Indiana.
13. Arbitration. Any dispute, claim, or controversy concerning the terms,
meaning, application, or enforcement of any provision of this Agreement that
cannot be resolved through direct discussion or mediation shall be submitted to
final and binding arbitration before a neutral arbitrator pursuant to the
arbitration procedures set out in this Section ("Procedures") under the auspices
of the American Arbitration Association (AAA) at Evansville, Indiana. The AAA
Employment Dispute Resolution Rules in effect at the time of the arbitration
shall govern arbitration proceedings, except insofar as these Procedures, as
they may be amended from time to time, specifically provide otherwise. Executive
may initiate a claim or case only by a written notice to Company as provided in
this Agreement. Company may likewise initiate a claim or case by a written
notice delivered to Executive, as provided in this Agreement. The written notice
must set forth the matter in dispute in sufficient detail to advise the
non-initiating party
12
<PAGE>
of the nature and amount of the dispute or claim, the date(s) of the underlying
occurrence(s), and the relief requested. It shall also be the initiating party's
responsibility to submit the claim and other required documents and fees to AAA
in a timely manner; provided, however, if Executive is fully or partially
successful, Company shall reimburse Executive for arbitration fees reasonably
incurred. In conducting arbitration proceedings, the AAA-appointed arbitrator
shall be authorized to award any relief available under the laws of the United
States or the State of Indiana applicable to the claim, dispute, or controversy
submitted, where such relief is warranted based on the evidence and the law. Any
arbitration award shall be final and binding, and enforceable by an action in
any court of competent jurisdiction. No award shall be set aside, or denied
enforcement, by any court in any action unless the court finds that the
arbitrator purported to resolve claims, disputes, or controversies not within
the scope of these Procedures. Adherence to these Procedures, and the agreement
of the parties to this Agreement to follow them, shall be enforceable in an
action to compel or stay arbitration pursuant to the Federal Arbitration Act or
the Indiana Uniform Arbitration Act in a court of competent jurisdiction.
14. Integration. This Agreement supersedes all prior agreements between the
parties with respect to the matters covered herein.
15. Counterparts. This Agreement may be signed in two counterparts, each of
which shall be deemed to be an original but which together shall constitute one
and the same instrument.
16. Effect Of Headings. The section headings in this Agreement are for
convenience only and shall not affect the construction of this Agreement.
13
<PAGE>
IN WITNESS WHEREOF, CNB Bancshares, Inc. has caused this Agreement to
be executed on this 28th day of May , 1997, and Executive has executed this
Agreement on the date specified below.
ATTEST: CNB BANCSHARES, INC.
/s/ Sally A. Gore By /s/ James J. Giancola
- ---------------------------- -----------------------------
(Signature)
May 27, 1997
-----------------------------
(Date)
EXECUTIVE
/s/ David L. Knapp
-----------------------------
(Signature)
May 28, 1997
-----------------------------
(Date)
14
<PAGE>
APPENDIX A
The Payment Period shall consist of 36 months.
ATTEST: CNB BANCSHARES, INC.
/s/ Sallie A. Gore By /s/ James J. Giancola
- ---------------------------- -----------------------------
(Signature)
May 27, 1997
-----------------------------
(Date)
EXECUTIVE
/s/ David L. Knapp
-----------------------------
(Signature)
May 28, 1997
-----------------------------
(Date)
15
<PAGE>
Exhibit 10(e)
CHANGE OF CONTROL AGREEMENT
This AGREEMENT is entered into by and between CNB BANCSHARES, INC., an
Indiana corporation ("Company"), and JOHN R. (JACK) SPRUILL ("Executive").
Background
----------
A. Executive is an officer and key management employee of Company.
B. Company's Board of Directors ("Board") has determined that it is in the
best interests of Company and its shareholders to assure Executive's continued
dedication and undivided time, attention, and loyalty, notwithstanding the
possibility, threat, or occurrence of a Change of Control (as defined in Section
2 below).
C. In furtherance of that goal, the Board wishes to provide Executive with
certain benefits, if his employment should terminate as a result of a Change of
Control.
D. In reliance on this Agreement, Executive is willing to continue his
employment with Company on the terms agreed to by Executive and Company from
time to time.
In consideration of the premises, Company and Executive agree as follows:
Agreement
---------
1. Duration Of Agreement. This Agreement shall be effective May 23 , 1997
("Effective Date"), and shall continue until the end of the Term (as defined in
Section 2).
2. Definitions. The following words and phrases, when capitalized, shall
have the following meanings for purposes of this Agreement:
(a) Affiliate. "Affiliate" means an employer required to be aggregated
with Company pursuant to Section 414(b) or (c) of the Internal Revenue
Code.
<PAGE>
(b) Anniversary Date. "Anniversary Date" means each anniversary of the
Effective Date occurring during the Term.
(c) Cause. "Cause" means and shall be limited to the following:
(1) Executive's willful and continued failure to perform (other than
a failure resulting from Executive's illness or disability) his
employment duties after a demand for substantial performance is
delivered to Executive on behalf of the Board that specifically
identifies the manner in which it alleges that Executive has failed to
perform his duties and Executive's failure to take appropriate actions
to correct such failure within thirty (30) days; or
(2) Executive's willful engaging in misconduct that has caused
demonstrable and material injury, monetary or otherwise, to Company or
an Affiliate.
For purposes of this Subsection (c), no act or failure to act on
Executive's part shall be considered "willful" unless done, or omitted to
be done, by Executive not in good faith and without reasonable belief that
his action or omission was in the best interests of Company.
Notwithstanding the foregoing, Executive shall not be deemed to have been
terminated for Cause unless and until the Board has delivered to him a copy
of a notice of termination, and after reasonable notice to him and an
opportunity for him, together with counsel, to be heard before the Board,
at least two-thirds of the Board finds, in its reasonable opinion, that
Executive was guilty of conduct set forth above in clause (1) or (2) and
specifying the particulars thereof in detail.
2
<PAGE>
(d) Change of Control. "Change of Control" shall be deemed to have
occurred upon the happening of any one or more of the following:
(1) any person, as that term is used in Section 13(d)(3) and
14(d)(2) of the Securities Exchange Act of 1934, as amended from time to
time, becomes a beneficial owner, directly or indirectly, of securities
of Company representing twenty percent (20%) or more of the combined
voting power of Company's then outstanding securities;
(2) less than fifty-one percent (51%) of the members of the Board
are Incumbent Directors;
(3) any corporation or group of associated persons acting in
concert, owns more than twenty-five percent (25%) of the outstanding
shares of voting stock of Company coupled with or followed by the
exercise of the voting power of such shares by the election of two (2)
or more directors of Company in any one election at the instance of such
corporation or group;
(4) Company becomes a party to an agreement of merger,
consolidation, or other reorganization pursuant to which Company will be
a constituent corporation, and either (A) Company is not the surviving
or resulting corporation, or (B) the transaction will result in less
than eighty percent (80%) of the outstanding voting securities of the
surviving or resulting entity being owned by the former shareholders of
Company;
(5) Company becomes a party to an agreement providing for Company's
sale or other disposition of all or substantially all of its assets to
any
3
<PAGE>
individual, partnership, joint venture, association, trust, corporation,
or other entity or person which is not an Affiliate; or
(6) the occurrence of another event that the Board designates a
Change of Control.
(e) Change of Control Date. "Change of Control Date" means the date as
of which a Change of Control occurs.
(f) Change Period. "Change Period" means the period beginning six months
before the Change of Control Date and continuing for the number of months
specified in Appendix A after the Change of Control Date. Notwithstanding
the preceding sentence, if a Change of Control described in Paragraph
(d)(4) or (d)(5) occurs, the Change Period shall begin when Company becomes
a party to a legally binding agreement described in paragraph (d)(4) or
(d)(5) but shall not end until the number of months specified in Appendix A
after the effective date of the Change of Control transaction described in
Paragraph (4) or (5).
(g) Confidential Information. "Confidential Information" means any
information not in the public domain and not previously disclosed to the
public by the Board or management of the Company or an Affiliate with
respect to the products, facilities, and methods; trade secrets and other
intellectual property; systems, procedures, manuals, confidential reports,
customer lists, financial information, business plans, prospects, or
opportunities of the Company or an Affiliate; or any information which the
Company or an Affiliate has designated as Confidential Information.
4
<PAGE>
(h) Disability. "Disability" means Executive's inability to perform the
material duties of his employment because of physical or mental illness,
which inability is likely to last for a period of one year or longer.
(i) Effective Date. "Effective Date" means the effective date of this
Agreement, as specified in Section 1.
(j) Full Incentive Compensation. "Full Incentive Compensation" means
incentive compensation for a calendar year (including incentive
compensation in the amount of zero), provided that such compensation is not
reduced because Executive was employed by the Company for less than the
entire calendar year.
(k) Good Reason. "Good Reason" means, (i) with respect to a Change of
Control described in Section 2(d)(4) in which Company is the surviving or
resulting corporation, and which results in less than eighty percent (80%)
but more than fifty percent (50%) of the outstanding voting securities of
the resulting or surviving corporation being owned by former shareholders
of the Company, a material change in position, title, compensation, status,
responsibilities, or working conditions in effect immediately before the
Change of Control or relocation of the Executive's place of employment to a
location more than fifty (50) miles from the Executive's place of
employment immediately before the Change of Control, and, (ii) with respect
to any Change of Control not described in Clause (i), Executive's
determination, in his sole judgment, that the duties of his employment,
compensation therefor, or the benefits or status associated therewith have
been reduced during the Change Period or that he is unable to continue to
perform the duties of his employment effectively because of
5
<PAGE>
circumstances that changed during the Change Period directly or indirectly
as a result of the Change of Control.
(l) Incumbent Director. "Incumbent Director" means a director serving on
the Board who (i) was a director on the Effective Date or (ii) was later
elected as a director (except a director whose initial assumption of office
was in connection with an actual or threatened election contest, including
but not limited to a consent solicitation, relating to the election of
directors) and whose appointment, election, or nomination for election was
approved or recommended by a vote of at least two-thirds of the directors
then still in office who either were directors on the Effective Date hereof
or whose appointment, election, or nomination for election was previously
so approved or recommended.
(m) Payment Period. "Payment Period" means the period beginning on the
later of the Change of Control Date or the date of Executive's termination
of employment during the Change Period and continuing for the number of
months specified in Appendix A; provided, however, if Executive's
employment terminates after a Change of Control (or, in the case of a
transaction described in Paragraph 2(d)(4) or 2(d)(5), the later effective
date of such transaction), the number of months in the Payment Period shall
be reduced by one for each full calendar month before the effective date of
Executive's termination of employment occurring after the most recent
Change of Control Date (or, in the case of a transaction described in
Paragraph 2(d)(3) or (4), the later effective date of such transaction)
before such termination date.
6
<PAGE>
(n) Term. "Term" means the period beginning on the Effective Date and
ending on the second anniversary of the Effective Date, as extended pursuant to
the provisions of this Subsection. The period referred to in the preceding
sentence shall automatically be extended for one additional year on each
Anniversary Date, unless the Company has notified the Executive not fewer than
thirty (30) days before that Anniversary Date that the Term will not
automatically be extended further. Notwithstanding any provision of this
Agreement, if one or more Changes of Control occur during the Term (as
determined pursuant to the preceding provisions of this Subsection or as
extended pursuant to this sentence to reflect a prior Change of Control), the
Term shall not end before the end of the Payment Period with respect to the
latest Change of Control occurring during the Term.
(o) Termination Compensation. "Termination Compensation" has the meaning
specified in Paragraph 3(a)(1).
3. Termination of Executive's Employment During Change Period.
(a) If Executive terminates his employment for Good Reason during the
Change Period, or if Company terminates Executive's employment during the Change
Period for a reason other than Cause or Executive's death or Disability,
Executive shall be entitled to the following benefits:
(1) An amount equal to Executive's Termination Compensation multiplied
by the number of months in the Payment Period. Executive's Termination
Compensation shall be equal to the sum of (i) his highest rate of base
monthly salary (unreduced by any elective salary deferrals or redirections)
during
7
<PAGE>
the twelve (12) month period immediately preceding his termination of
employment plus (ii) one-twelfth of his average annual incentive
compensation with respect to the shortest of (A) the three calendar years
immediately preceding the Payment Period, provided Executive received Full
Incentive Compensation for all such years, (B) the calendar years
immediately preceding the Payment Period with respect to which Executive
received Full Incentive Compensation, or (C) the total period of
Executive's employment by Company. This amount shall be paid to Executive
in a lump sum between sixty (60) and ninety (90) days after the later of
(A) his termination of employment or (B) the Change of Control Date.
Executive may, in his discretion, elect to reduce the amount payable to him
pursuant to this Paragraph 3 to the extent necessary to avoid excise taxes
in Code Section 4999 of the Internal Revenue Code.
(2) Throughout the Payment Period, Company shall provide to Executive
and his family medical, life insurance, and other welfare benefits
substantially similar to those provided to active executive employees of
the Company, provided Executive pays any premiums charged by Company to
active executive employees receiving similar coverage. Beginning at the end
of the Payment Period, Company shall provide medical coverage to Executive
and his family that is substantially similar to the coverage provided to
active employees of the Company, provided that Executive pays Company the
same premium as he would have been required to pay if such coverage had
been provided pursuant to the Consolidated Omnibus Budget Reconciliation
Act of 1985. Executive may
8
<PAGE>
elect to purchase single coverage or family coverage pursuant to the
preceding sentence. Subject to Executive's payment of the required
premiums, post-Payment Period medical coverage for Executive and his spouse
shall continue until the earliest of the following events: (i) the
Executive's (or in the case of coverage for the Executive's spouse, his
spouse's) Medicare eligibility, (ii) the Executive's (or in the case of
coverage for the Executive's spouse, his spouse's) death, or (iii) medical
coverage for the Executive (or in the case of coverage for the Executive's
spouse, his spouse) through another employer.
(b) The payment or provision of benefits to Executive pursuant to this
Agreement shall not affect the obligations of Company or its successor
under any plan, agreement, or arrangement generally applicable to Company's
retired management employees pursuant to which Executive is entitled to any
retirement benefits, welfare benefits, stock, or other fringe benefits.
4. Non-Competition. Executive shall not, while employed or during the
Payment Period, become an officer, director, or employee of, consultant to, or
majority shareholder in any bank or bank holding company that substantially
competes with Company, its subsidiaries, or Affiliates, or its successor or
successors within one hundred (100) miles from Evansville, Indiana, or fifty
(50) miles from the nearest banking office of Company or a subsidiary thereof.
5. Non-Disclosure of Confidential Information. Executive acknowledges that,
by virtue of his employment, he has obtained or will obtain Confidential
Information, the use or disclosure of which could cause Company immeasurable and
substantial loss and damages for which no remedy at law would be adequate.
Accordingly, Executive covenants and agrees with
9
<PAGE>
Company that, except as necessary to perform his obligations to Company or with
the prior written consent of Company's Board, he will not at any time directly
or indirectly disclose any Confidential Information that he may acquire or has
acquired by reason of his association with Company. Without limiting the rights
or remedies, both legal and equitable, available to Company in the event of an
actual or threatened breach of Executive's obligations under this Section,
Company shall be entitled to seek and obtain a temporary restraining order
and/or a preliminary or permanent injunction against Executive, which shall
prevent Executive from engaging in any activities prohibited by this Section, or
to seek and obtain such other relief against Executive as may be required to
enforce Executive's obligations hereunder. Executive's obligations set forth in
this Section and Company's rights and remedies, whether legal or equitable, with
respect thereto, shall extend indefinitely.
6. Expenses. If Executive determines, in his absolute judgment, that it is
necessary or advisable for him to incur reasonable legal and/or accounting
expenses, including but not limited to reasonable attorneys' and/or accountants'
fees, to obtain full and effective enforcement of his rights under this
Agreement or to determine the appropriate tax treatment of amounts paid pursuant
to this Agreement, Company shall reimburse Executive for all such reasonable
expenses and costs on a periodic basis. Company's obligation to reimburse
Executive for these reasonable expenses or costs pursuant to this Section shall
survive expiration of the Term and shall survive the termination of any later
employment agreements between Executive and Company. Any reimbursement required
by this Section shall be paid promptly to Executive after he submits a copy of
the service provider's invoice for the covered expense.
10
<PAGE>
7. Company's Obligation to Provide Information. After termination of
Executive's employment, Company shall promptly provide Executive with reasonably
requested information relating to his retirement, benefits and payments under
this Agreement, and other post-employment benefits.
8. Binding Effect And Assignment. This Agreement shall inure to the benefit
of and shall be binding upon the parties to this Agreement and their respective
executors, administrators, heirs, personal representatives, successors, and
assigns, but neither this Agreement nor any right created by this Agreement may
be assigned or transferred by either party. Notwithstanding the foregoing, the
Company shall assign this Agreement to any person or entity succeeding to
substantially all of the business and assets of the Company upon a Change in
Control, and upon such a Change in Control, the Company shall obtain the
assumption of this Agreement by its successor.
9. Notices. Any notice to a party required or permitted to be given by this
Agreement shall be in writing and shall be deemed given when mailed by
registered or certified mail to the party at the party's address as specified in
this Section:
If to the Company, to: CNB Bancshares, Inc.
Attention: Corporate Secretary
20 N.W. Third Street
Evansville, Indiana 47708
or such other address designated by Company in writing to Executive as provided
in this Section.
If to Executive, to: 420 Cedar Hill Lane
Evansville, IN 47710
11
<PAGE>
or such other address designated by the Executive in writing to the Company as
provided in this Section.
10. Severability. If any term, provision, covenant, or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the terms, provisions, covenants, and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired, or invalidated.
11. Amendments. This Agreement may not be modified, amended, altered, or
supplemented except upon the execution and delivery of a written agreement
executed by Company and Executive.
12. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of Indiana.
13. Arbitration. Any dispute, claim, or controversy concerning the terms,
meaning, application, or enforcement of any provision of this Agreement that
cannot be resolved through direct discussion or mediation shall be submitted to
final and binding arbitration before a neutral arbitrator pursuant to the
arbitration procedures set out in this Section ("Procedures") under the auspices
of the American Arbitration Association (AAA) at Evansville, Indiana. The AAA
Employment Dispute Resolution Rules in effect at the time of the arbitration
shall govern arbitration proceedings, except insofar as these Procedures, as
they may be amended from time to time, specifically provide otherwise. Executive
may initiate a claim or case only by a written notice to Company as provided in
this Agreement. Company may likewise initiate a claim or case by a written
notice delivered to Executive, as provided in this Agreement. The written notice
must set forth the matter in dispute in sufficient detail to advise the
non-initiating party
12
<PAGE>
of the nature and amount of the dispute or claim, the date(s) of the underlying
occurrence(s), and the relief requested. It shall also be the initiating party's
responsibility to submit the claim and other required documents and fees to AAA
in a timely manner; provided, however, if Executive is fully or partially
successful, Company shall reimburse Executive for arbitration fees reasonably
incurred. In conducting arbitration proceedings, the AAA-appointed arbitrator
shall be authorized to award any relief available under the laws of the United
States or the State of Indiana applicable to the claim, dispute, or controversy
submitted, where such relief is warranted based on the evidence and the law. Any
arbitration award shall be final and binding, and enforceable by an action in
any court of competent jurisdiction. No award shall be set aside, or denied
enforcement, by any court in any action unless the court finds that the
arbitrator purported to resolve claims, disputes, or controversies not within
the scope of these Procedures. Adherence to these Procedures, and the agreement
of the parties to this Agreement to follow them, shall be enforceable in an
action to compel or stay arbitration pursuant to the Federal Arbitration Act or
the Indiana Uniform Arbitration Act in a court of competent jurisdiction.
14. Integration. This Agreement supersedes all prior agreements between the
parties with respect to the matters covered herein.
15. Counterparts. This Agreement may be signed in two counterparts, each of
which shall be deemed to be an original but which together shall constitute one
and the same instrument.
16. Effect Of Headings. The section headings in this Agreement are for
convenience only and shall not affect the construction of this Agreement.
13
<PAGE>
IN WITNESS WHEREOF, CNB Bancshares, Inc. has caused this Agreement to
be executed on this 12th day of June , 1997, and Executive has executed this
Agreement on the date specified below.
ATTEST: CNB BANCSHARES, INC.
/s/ Sallie A. Gore By /s/ James J. Giancola
- --------------------------------- ----------------------------------
(Signature)
6/12/97
----------------------------------
(Date)
EXECUTIVE
/s/ John R. Spruill
----------------------------------
(Signature)
June 12, 1997
----------------------------------
(Date)
14
<PAGE>
APPENDIX A
The Payment Period shall consist of 36 months.
ATTEST: CNB BANCSHARES, INC.
/s/ Sallie A. Gore By /s/ James J. Giancola
- --------------------------------- ------------------------------
(Signature)
6/12/97
------------------------------
(Date)
EXECUTIVE
/s/ John R. Spruill
------------------------------
(Signature)
June 12, 1997
------------------------------
(Date)
15
<PAGE>
Exhibit 23(c)
Independent Auditors' Consent
The Board of Directors
CNB Bancshares, Inc:
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the Joint Proxy Statement/
Prospectus.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
February 23, 1998
<PAGE>
Exhibit 23(d)
Independent Auditor's Consent
We consent to the incorporation by reference in this Registration Statement of
CNB Bancshares, Inc. on Form S-4 of our report dated January 26, 1996 appearing
in the Annual Report on Form 10K of CNB Bancshares, Inc., for the year ended
December 31, 1996 and to the reference to us under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
/s/ Geo. S. Olive & Co. LLC
Evansville, Indiana
February 24, 1998
<PAGE>
Exhibit 23(e)
Independent Auditors' Consent
The Board of Directors
Pinnacle Financial Services, Inc.:
We consent to the use of our report incorporated by reference and to the
reference to our firm under the heading "Experts" in the Joint Proxy
Statement/Prospectus.
/s/ KPMG Peat Marwick LLP
Chicago, Illinois
February 23, 1998
<PAGE>
Exhibit 23(f)
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Prospectus of CNB Bancshares, Inc.
for the registration of shares of its common stock and to the incorporation by
reference therein of our report dated February 28, 1997, with respect to the
consolidated financial statements of Indiana Federal Corporation incorporated by
reference in its Annual Report on Form 10-K for the year ended December 31, 1996
and our report dated February 28, 1997 with respect to the consolidated
financial statements of Indiana Federal Corporation, included in the Current
Report on Form 8-K of Pinnacle Financial Services, Inc. dated February 11, 1998,
filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Chicago, Illinois
February 23, 1998
<PAGE>
Exhibit 23(g)
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
We consent to the reference to our firm under the caption "Experts" in the Joint
Proxy Statement of CNB Bancshares, Inc. and Pinnacle Financial Services, Inc.,
which is referred to and made a part of this Prospectus to the Registration
Statement of CNB Bancshares, Inc. for the registration of its common stock and
to the incorporation by reference of our report dated May 23, 1997, with respect
to the consolidated financial statements of CB Bancorp, Inc., included in its
Annual Report (Form 10-KSB) for the year ended March 31, 1997, filed with the
Securities and Exchange Commission.
/s/ Crowe, Chizek and Company LLP
Crowe, Chizek and Company LLP
South Bend, Indiana
February 23, 1998
<PAGE>
Exhibit 23(h)
[LETTERHEAD OF CIBC OPPENHEIMER CORP. APPEARS HERE]
February 11, 1998
Board of Directors
CNB Bancshares, Inc.
20 NW Third Street
Evansville, Indiana 47739
Members of the Board:
We hereby consent to the inclusion of our opinion letter to the Board of
Directors of CNB Bancshares, Inc. ("CNB") attached as an exhibit to the Joint
Proxy Statement/Prospectus of CNB and Pinnacle Financial Services, Inc.
("Pinnacle") relating to the proposed merger transaction involving CNB and
Pinnacle and references thereto 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
the purposes of, the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
CIBC OPPENHEIMER CORP.
By: /s/ Mark Biderman
---------------------------------
Mark Biderman
Managing Director
<PAGE>
Exhibit 23(i)
[LETTERHEAD OF FRIEDMAN, BILLINGS, RAMSEY & CO. INC. APPEARS HERE]
February 11, 1998
CNB Bancshares, Inc.
20 NW Third Street
Evansville, IN 47739-0001
Gentlemen:
This letter will constitute our consent to the inclusion of our opinion
regarding the acquisition of Pinnacle Financial Services, Inc., by CNB
Bancshares, Inc. in the Joint Proxy Statement/Prospectus on Form S-4 (the
"Registration Statement") and to the inclusion of the summary of such opinion
and the use of our name in the Registration Statement. In giving the foregoing
consent, we do not admit that we come within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended
(the "Securities Act"), or the rules and regulations of the Securities and
Exchange Commission (the "Commission") with respect to any part of such
Registration Statement within the meaning of the term "experts" as used in the
Securities Act and the rules and regulations of the Commission promulgated
thereunder.
Very truly yours,
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
/s/ Eugene S. Well
Eugene S. Well
Managing Director
<PAGE>
Exhibit 24
POWER OF ATTORNEY
1933 ACT REGISTRATION STATEMENT
of
CNB BANCSHARES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below hereby constitutes and appoints JAMES J. GIANCOLA and JOHN R. SPRUILL, and
each of them, as the true and lawful attorneys-in-fact and agents for him and in
his name, place or stead, in any and all capacities, to sign and file, or cause
to be signed and filed, with the Securities and Exchange Commission (the
"Commission"), any registration statement or statements on Form S-4 under the
Securities Act of 1933, as amended, relating to the issuance of common stock of
CNB Bancshares, Inc. in connection with the Agreement and Plan of Merger entered
into by and between CNB Bancshares, Inc. and Pinnacle Financial Services, Inc.,
and any and all amendments and supplements thereto, before or after
effectiveness of such statements, and any and all other documents required to be
filed with the Commission in connection therewith, granting unto said attorneys-
in-fact and agents, full power and authority to do and perform each and every
act and thing requisite and necessary to be done as fully and to all intents and
purposes as the undersigned might or could do in person, and ratifying and
confirming all that said attorneys-in-fact and agents may lawfully do or cause
to be done by virtue hereof.
Dated: Nov 18, 1997
/s/ H. Lee Cooper III
------------------------------
H. Lee Cooper III
<PAGE>
POWER OF ATTORNEY
1933 ACT REGISTRATION STATEMENT
of
CNB BANCSHARES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below hereby constitutes and appoints JAMES J. GIANCOLA and JOHN R. SPRUILL, and
each of them, as the true and lawful attorneys-in-fact and agents for him and in
his name, place or stead, in any and all capacities, to sign and file, or cause
to be signed and filed, with the Securities and Exchange Commission (the
"Commission"), any registration statement or statements on Form S-4 under the
Securities Act of 1933, as amended, relating to the issuance of common stock of
CNB Bancshares, Inc. in connection with the Agreement and Plan of Merger entered
into by and between CNB Bancshares, Inc. and Pinnacle Financial Services, Inc.,
and any and all amendments and supplements thereto, before or after
effectiveness of such statements, and any and all other documents required to be
filed with the Commission in connection therewith, granting unto said attorneys-
in-fact and agents, full power and authority to do and perform each and every
act and thing requisite and necessary to be done as fully and to all intents and
purposes as the undersigned might or could do in person, and ratifying and
confirming all that said attorneys-in-fact and agents may lawfully do or cause
to be done by virtue hereof.
Dated: November 20, 1997
/s/ Ralph L. Alley
------------------------------
Ralph L. Alley
<PAGE>
POWER OF ATTORNEY
1933 ACT REGISTRATION STATEMENT
of
CNB BANCSHARES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below hereby constitutes and appoints JAMES J. GIANCOLA and JOHN R. SPRUILL, and
each of them, as the true and lawful attorneys-in-fact and agents for him and in
his name, place or stead, in any and all capacities, to sign and file, or cause
to be signed and filed, with the Securities and Exchange Commission (the
"Commission"), any registration statement or statements on Form S-4 under the
Securities Act of 1933, as amended, relating to the issuance of common stock of
CNB Bancshares, Inc. in connection with the Agreement and Plan of Merger entered
into by and between CNB Bancshares, Inc. and Pinnacle Financial Services, Inc.,
and any and all amendments and supplements thereto, before or after
effectiveness of such statements, and any and all other documents required to be
filed with the Commission in connection therewith, granting unto said attorneys-
in-fact and agents, full power and authority to do and perform each and every
act and thing requisite and necessary to be done as fully and to all intents and
purposes as the undersigned might or could do in person, and ratifying and
confirming all that said attorneys-in-fact and agents may lawfully do or cause
to be done by virtue hereof.
Dated: Nov 18, 1997
/s/ John D. Engelbrecht
------------------------------
John D. Engelbrecht
<PAGE>
POWER OF ATTORNEY
1933 ACT REGISTRATION STATEMENT
of
CNB BANCSHARES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below hereby constitutes and appoints JAMES J. GIANCOLA and JOHN R. SPRUILL, and
each of them, as the true and lawful attorneys-in-fact and agents for him and in
his name, place or stead, in any and all capacities, to sign and file, or cause
to be signed and filed, with the Securities and Exchange Commission (the
"Commission"), any registration statement or statements on Form S-4 under the
Securities Act of 1933, as amended, relating to the issuance of common stock of
CNB Bancshares, Inc. in connection with the Agreement and Plan of Merger entered
into by and between CNB Bancshares, Inc. and Pinnacle Financial Services, Inc.,
and any and all amendments and supplements thereto, before or after
effectiveness of such statements, and any and all other documents required to be
filed with the Commission in connection therewith, granting unto said attorneys-
in-fact and agents, full power and authority to do and perform each and every
act and thing requisite and necessary to be done as fully and to all intents and
purposes as the undersigned might or could do in person, and ratifying and
confirming all that said attorneys-in-fact and agents may lawfully do or cause
to be done by virtue hereof.
Dated: November 18, 1997
/s/ Robert L. Koch II
------------------------------
Robert L. Koch, II
<PAGE>
POWER OF ATTORNEY
1933 ACT REGISTRATION STATEMENT
of
CNB BANCSHARES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below hereby constitutes and appoints JAMES J. GIANCOLA and JOHN R. SPRUILL, and
each of them, as the true and lawful attorneys-in-fact and agents for him and in
his name, place or stead, in any and all capacities, to sign and file, or cause
to be signed and filed, with the Securities and Exchange Commission (the
"Commission"), any registration statement or statements on Form S-4 under the
Securities Act of 1933, as amended, relating to the issuance of common stock of
CNB Bancshares, Inc. in connection with the Agreement and Plan of Merger entered
into by and between CNB Bancshares, Inc. and Pinnacle Financial Services, Inc.,
and any and all amendments and supplements thereto, before or after
effectiveness of such statements, and any and all other documents required to be
filed with the Commission in connection therewith, granting unto said attorneys-
in-fact and agents, full power and authority to do and perform each and every
act and thing requisite and necessary to be done as fully and to all intents and
purposes as the undersigned might or could do in person, and ratifying and
confirming all that said attorneys-in-fact and agents may lawfully do or cause
to be done by virtue hereof.
Dated: ___________ ___, 1997
------------------------------
Larry J. Kremer
<PAGE>
POWER OF ATTORNEY
1933 ACT REGISTRATION STATEMENT
of
CNB BANCSHARES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below hereby constitutes and appoints JAMES J. GIANCOLA and JOHN R. SPRUILL, and
each of them, as the true and lawful attorneys-in-fact and agents for him and in
his name, place or stead, in any and all capacities, to sign and file, or cause
to be signed and filed, with the Securities and Exchange Commission (the
"Commission"), any registration statement or statements on Form S-4 under the
Securities Act of 1933, as amended, relating to the issuance of common stock of
CNB Bancshares, Inc. in connection with the Agreement and Plan of Merger entered
into by and between CNB Bancshares, Inc. and Pinnacle Financial Services, Inc.,
and any and all amendments and supplements thereto, before or after
effectiveness of such statements, and any and all other documents required to be
filed with the Commission in connection therewith, granting unto said attorneys-
in-fact and agents, full power and authority to do and perform each and every
act and thing requisite and necessary to be done as fully and to all intents and
purposes as the undersigned might or could do in person, and ratifying and
confirming all that said attorneys-in-fact and agents may lawfully do or cause
to be done by virtue hereof.
Dated: 11/18, 1997
/s/ B.F. McCarthy
------------------------------
Burkley F. McCarthy
<PAGE>
POWER OF ATTORNEY
1933 ACT REGISTRATION STATEMENT
of
CNB BANCSHARES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below hereby constitutes and appoints JAMES J. GIANCOLA and JOHN R. SPRUILL, and
each of them, as the true and lawful attorneys-in-fact and agents for him and in
his name, place or stead, in any and all capacities, to sign and file, or cause
to be signed and filed, with the Securities and Exchange Commission (the
"Commission"), any registration statement or statements on Form S-4 under the
Securities Act of 1933, as amended, relating to the issuance of common stock of
CNB Bancshares, Inc. in connection with the Agreement and Plan of Merger entered
into by and between CNB Bancshares, Inc. and Pinnacle Financial Services, Inc.,
and any and all amendments and supplements thereto, before or after
effectiveness of such statements, and any and all other documents required to be
filed with the Commission in connection therewith, granting unto said attorneys-
in-fact and agents, full power and authority to do and perform each and every
act and thing requisite and necessary to be done as fully and to all intents and
purposes as the undersigned might or could do in person, and ratifying and
confirming all that said attorneys-in-fact and agents may lawfully do or cause
to be done by virtue hereof.
Dated: Nov 18, 1997
/s/ Robert K. Ruxer
------------------------------
Robert K. Ruxer
<PAGE>
POWER OF ATTORNEY
1933 ACT REGISTRATION STATEMENT
of
CNB BANCSHARES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below hereby constitutes and appoints JAMES J. GIANCOLA and JOHN R. SPRUILL, and
each of them, as the true and lawful attorneys-in-fact and agents for him and in
his name, place or stead, in any and all capacities, to sign and file, or cause
to be signed and filed, with the Securities and Exchange Commission (the
"Commission"), any registration statement or statements on Form S-4 under the
Securities Act of 1933, as amended, relating to the issuance of common stock of
CNB Bancshares, Inc. in connection with the Agreement and Plan of Merger entered
into by and between CNB Bancshares, Inc. and Pinnacle Financial Services, Inc.,
and any and all amendments and supplements thereto, before or after
effectiveness of such statements, and any and all other documents required to be
filed with the Commission in connection therewith, granting unto said attorneys-
in-fact and agents, full power and authority to do and perform each and every
act and thing requisite and necessary to be done as fully and to all intents and
purposes as the undersigned might or could do in person, and ratifying and
confirming all that said attorneys-in-fact and agents may lawfully do or cause
to be done by virtue hereof.
Dated: ___________ ___, 1997
/s/ Thomas W. Traylor
------------------------------
Thomas W. Traylor
<PAGE>
POWER OF ATTORNEY
1933 ACT REGISTRATION STATEMENT
of
CNB BANCSHARES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below hereby constitutes and appoints JAMES J. GIANCOLA and JOHN R. SPRUILL, and
each of them, as the true and lawful attorneys-in-fact and agents for him and in
his name, place or stead, in any and all capacities, to sign and file, or cause
to be signed and filed, with the Securities and Exchange Commission (the
"Commission"), any registration statement or statements on Form S-4 under the
Securities Act of 1933, as amended, relating to the issuance of common stock of
CNB Bancshares, Inc. in connection with the Agreement and Plan of Merger entered
into by and between CNB Bancshares, Inc. and Pinnacle Financial Services, Inc.,
and any and all amendments and supplements thereto, before or after
effectiveness of such statements, and any and all other documents required to be
filed with the Commission in connection therewith, granting unto said attorneys-
in-fact and agents, full power and authority to do and perform each and every
act and thing requisite and necessary to be done as fully and to all intents and
purposes as the undersigned might or could do in person, and ratifying and
confirming all that said attorneys-in-fact and agents may lawfully do or cause
to be done by virtue hereof.
Dated: Nov. 18, 1997
/s/ Edmund L. Hafer
------------------------------
Edmund L. Hafer
<PAGE>
POWER OF ATTORNEY
1933 ACT REGISTRATION STATEMENT
of
CNB BANCSHARES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below hereby constitutes and appoints JOHN R. SPRUILL, as the true and lawful
attorney-in-fact and agent for him and in his name, place or stead, in any and
all capacities, to sign and file, or cause to be signed and filed, with the
Securities and Exchange Commission (the "Commission"), any registration
statement or statements on Form S-4 under the Securities Act of 1933, as
amended, relating to the issuance of common stock of CNB Bancshares, Inc. in
connection with the Agreement and Plan of Merger entered into by and between CNB
Bancshares, Inc. and Pinnacle Financial Services, Inc., and any and all
amendments and supplements thereto, before or after effectiveness of such
statements, and any and all other documents required to be filed with the
Commission in connection therewith, granting unto said attorneys-in-fact and
agents, full power and authority to do and perform each and every act and thing
requisite and necessary to be done as fully and to all intents and purposes as
the undersigned might or could do in person, and ratifying and confirming all
that said attorneys-in-fact and agents may lawfully do or cause to be done by
virtue hereof.
Dated: Nov. 17, 1997
/s/ James J. Giancola
------------------------------
James J. Giancola
<PAGE>
POWER OF ATTORNEY
1933 ACT REGISTRATION STATEMENT
of
CNB BANCSHARES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below hereby constitutes and appoints JAMES J. GIANCOLA, as the true and lawful
attorney-in-fact and agent for him and in his name, place or stead, in any and
all capacities, to sign and file, or cause to be signed and filed, with the
Securities and Exchange Commission (the "Commission"), any registration
statement or statements on Form S-4 under the Securities Act of 1933, as
amended, relating to the issuance of common stock of CNB Bancshares, Inc. in
connection with the Agreement and Plan of Merger entered into by and between CNB
Bancshares, Inc. and Pinnacle Financial Services, Inc., and any and all
amendments and supplements thereto, before or after effectiveness of such
statements, and any and all other documents required to be filed with the
Commission in connection therewith, granting unto said attorneys-in-fact and
agents, full power and authority to do and perform each and every act and thing
requisite and necessary to be done as fully and to all intents and purposes as
the undersigned might or could do in person, and ratifying and confirming all
that said attorneys-in-fact and agents may lawfully do or cause to be done by
virtue hereof.
Dated: November 19, 1997
/s/ John R.Spruill
------------------------------
John R. Spruill
<PAGE>
Exhibit 99(a)
PROXY
SPECIAL MEETING OF SHAREHOLDERS
CNB BANCSHARES, INC.
April 13, 1998
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF CNB BANCSHARES, INC.
The undersigned shareholder of CNB Bancshares, Inc., an Indiana corporation
("CNB"), hereby appoints H. Lee Cooper, James J. Giancola, David L. Knapp and
John R. Spruill, 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 CNB which the undersigned is entitled to vote at the Special
Meeting of Shareholders of CNB (the "Special Meeting") to be held at CNB's
executive offices, 20 N.W. Third Street, Evansville, Indiana, 47739 on April
13, 1998, at 10:00 a.m., local time, and at any adjournment or adjournments
thereof, with all powers the undersigned would possess if personally present,
on the following:
Proposal to adopt and approve an Agreement and Plan of Merger, dated October
14, 1997, by and between CNB Bancshares, Inc., an Indiana corporation
("CNB"), and Pinnacle Financial Services, Inc., a Michigan corporation
("Pinnacle"), providing for the merger of Pinnacle with and into CNB.
[_] 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
<PAGE>
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
Joint Proxy Statement/Prospectus accompanying it.
THIS PROXY WILL BE VOTED AS SPECIFIED BY YOU ABOVE. IF NO SPECIFICATION IS
MADE, YOUR SHARES WILL BE VOTED "FOR" THE PROPOSALS DESCRIBED ABOVE.
Dated _____________ , 1998. SIGN HERE:
-------------------------------------------
-------------------------------------------
Please insert date of signing. Sign ex-
actly as name appears at left. Where stock
is issued in two or more names, all should
sign. If signing as attorney, administra-
tor, executor, trustee or guardian, give
full title as such. A corporation should
sign by an authorized officer and affix
seal.
<PAGE>
Exhibit 99(b)
PROXY
SPECIAL MEETING OF SHAREHOLDERS
PINNACLE FINANCIAL SERVICES, INC.
April 13, 1998
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF PINNACLE FINANCIAL
SERVICES, INC.
The undersigned shareholder of Pinnacle Financial Services, Inc., a Michigan
corporation ("Pinnacle"), hereby appoints Richard L. Schanze, Arnold L. Weaver
and Donald E. Radde, 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 Pinnacle which the undersigned is entitled to vote at the
Special Meeting of Shareholders of Pinnacle (the "Special Meeting") to be held
at the Radisson Hotel Star Plaza, Merrillville, Indiana on April 13, 1998, at
10:00 a.m., local time, and at any adjournment or adjournments thereof, with
all powers the undersigned would possess if personally present, on the
following:
Proposal to adopt and approve an Agreement and Plan of Merger, dated October
14, 1997, by and between CNB Bancshares, Inc., an Indiana corporation
("CNB"), and Pinnacle Financial Services, Inc., a Michigan corporation
("Pinnacle"), providing for the merger of Pinnacle with and into CNB.
[_] 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
<PAGE>
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
Joint Proxy Statement/Prospectus accompanying it.
THIS PROXY WILL BE VOTED AS SPECIFIED BY YOU ABOVE. IF NO SPECIFICATION IS
MADE, YOUR SHARES WILL BE VOTED "FOR" THE PROPOSALS DESCRIBED ABOVE.
Dated _____________ , 1998. SIGN HERE:
-------------------------------------------
-------------------------------------------
Please insert date of signing. Sign ex-
actly as name appears at left. Where stock
is issued in two or more names, all should
sign. If signing as attorney, administra-
tor, executor, trustee or guardian, give
full title as such. A corporation should
sign by an authorized officer and affix
seal.
