UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------
FORM 8-K
---------------------------------
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 28, 2002
FIRST MERCHANTS CORPORATION
(Exact name of registrant as specified in its charter)
INDIANA
(State or other jurisdiction of incorporation)
0-17071 35-1544218
(Commission File Number) (IRS Employer Identification No.)
200 East Jackson Street
P.O. Box 792
Muncie, Indiana 47305-2814
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (765) 747-1500
Item 5. Other Events
On August 28, 2002, First Merchants Corporation (the "Registrant") and
CNBC Bancorp ("CNBC") jointly announced the signing of a definitive agreement
(the "Agreement") pursuant to which CNBC will be merged with and into Registrant
(the "Merger"). The Merger has been approved by the Boards of Directors of each
of CNBC and Registrant. The Agreement provides that upon the effective date of
the Merger (the "Effective Time"), each shareholder of CNBC may elect to receive
either 1.01 shares of Registrant's common stock (valued at $27.41 based on
Registrant's August 27, 2002 closing price of $27.14 per share), or $29.57 in
cash for each CNBC common share owned by such shareholder. However, no more than
$24,561,693 aggregate cash may be paid in the Merger and there may be
allocations of stock to certain CNBC shareholders if this threshold is exceeded.
Based on the closing price of Registrant's common stock on August 27, 2002, the
transaction has an aggregate value of approximately $58 million. Registrant
declared a 5% stock dividend payable September 13, 2002 to Registrant's
shareholders of record on August 30, 2002. The 1.01 exchange ratio will not be
adjusted as a result of the stock dividend. The transaction is expected to be a
tax-free stock exchange for those CNBC shareholders electing to receive
Registrant's common stock. The Merger is subject to various contingencies,
including the approval of the holders of CNBC's outstanding common shares and
the receipt of certain regulatory approvals.
The Agreement of Reorganization and Merger between First Merchants
Corporation and CNBC dated August 28, 2002, is attached hereto as Exhibit 2 and
incorporated herein by reference.
This current report on Form 8-K, including the exhibit hereto, contains
forward-looking statements that involve risk and uncertainty. It should be noted
that a variety of factors could cause the company's actual results and
experience to differ materially from the anticipated results or other
expectations expressed in the combined company's forward-looking statements.
The risks and uncertainties that may affect the operations,
performance, development, growth projections and results of the combined
company's business include, but are not limited to, the growth of the economy,
interest rate movements, timely development by the combined company of
technology enhancements for its products and operating systems, the impact of
competitive products, services and pricing, customer business requirements,
legislation, acquisition cost savings and revenue enhancements and similar
matters. Readers of this report are cautioned not to place undue reliance on
forward-looking statements which are subject to influence by the named risk
factors and unanticipated future events. Actual results, accordingly, may differ
materially from management expectations.
Item 7. Financial Statements and Exhibits
(c) Exhibits
Exhibit 2 Agreement of Reorganization and Merger between
First Merchants Corporation and CNBC Bancorp dated August 28, 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
By: /s/ Larry R. Helms
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Larry R. Helms, Senior Vice President
Dated: August 28, 2002
638376
EXHIBIT 2
AGREEMENT OF REORGANIZATION AND MERGER
BETWEEN
FIRST MERCHANTS CORPORATION
AND
CNBC BANCORP
THIS AGREEMENT OF REORGANIZATION AND MERGER (the "Agreement"), is
entered into as of this 28th day of August, 2002, by and between FIRST MERCHANTS
CORPORATION ("First Merchants") and CNBC BANCORP ("CNBC").
W I T N E S S E T H:
WHEREAS, First Merchants is a corporation duly organized and existing
under the laws of the State of Indiana and a registered bank holding company
under the Bank Holding Company Act of 1956, as amended, with its principal place
of business in Muncie, Delaware County, Indiana;
WHEREAS, CNBC is a corporation duly organized and existing under the
laws of the State of Ohio and a registered bank holding company under the Bank
Holding Company Act of 1956, as amended, with its principal place of business in
Worthington, Franklin County, Ohio;
WHEREAS, Commerce National Bank (the "Bank") is a national bank duly
organized and existing under the laws of the United States and a wholly-owned
subsidiary of CNBC with its principal banking office in Worthington, Franklin
County, Ohio;
WHEREAS, CNBC Retirement Services, Inc. ("CNBC Retirement Services") is
a corporation duly organized and existing under the laws of the State of Ohio
and a wholly-owned subsidiary of CNBC with its principal place of business in
Worthington, Franklin County, Ohio;
WHEREAS, CNBC Statutory Trust I ("CNBC Trust") is a statutory business
trust duly organized and existing under the laws of the State of Connecticut and
a wholly-owned subsidiary of CNBC with its principal place of business in
Worthington, Franklin County, Ohio;
WHEREAS, the Bank, CNBC Retirement Services and CNBC Trust are
hereinafter collectively referred to as the "Subsidiaries" and individually as a
"Subsidiary";
WHEREAS, it is the desire of First Merchants and CNBC to effect a
transaction whereby the Subsidiaries will become wholly-owned subsidiaries of
First Merchants through a statutory merger of CNBC with and into First
Merchants; and
WHEREAS, a majority of the entire Board of Directors of First Merchants
and a majority of the entire Board of Directors of CNBC have approved this
Agreement, designated it as a plan of reorganization within the provisions of
Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the
"Code"), and authorized its execution.
NOW, THEREFORE, in consideration of the mutual promises, covenants, and
agreements herein contained and other good and valuable consideration, the
receipt of which is hereby acknowledged, First Merchants and CNBC hereby make
this Agreement and prescribe the terms and conditions of the merger of CNBC with
and into First Merchants and the mode of carrying the transaction into effect as
follows:
SECTION 1
The Merger
1.01. Merger. Subject to the terms and conditions of this Agreement, on
the Effective Date (as defined in Section 11 hereof), CNBC shall be merged with
and into First Merchants, which shall be the "Continuing Company" and shall
continue its corporate existence under the laws of the State of Indiana,
pursuant to the provisions of and with the effect provided in Indiana Code
Chapter 23-1-40 and Ohio Revised Code Section 1701.79 (the "Merger").
1.02. Right to Revise Merger. First Merchants may, at any time, change
the method of effecting the Merger if and to the extent First Merchants deems
such change to be desirable; provided, however, that no such change,
modification or amendment shall (a) provide for the merger of the Bank with and
into a subsidiary of First Merchants or another entity; (b) alter or change the
amount or kind of consideration to be received by the shareholders of CNBC
specified in Section 3 hereof as a result of the Merger, except in accordance
with the terms of Section 3 hereof; (c) adversely affect the tax treatment to
the shareholders of CNBC; or (d) materially impede or delay receipt of any
approvals referred to in this Agreement or the consummation of the transactions
contemplated by this Agreement.
SECTION 2
Effect Of The Merger
Upon the Merger becoming effective:
2.01. General Description. The separate existence of CNBC shall cease
and the Continuing Company shall possess all of the assets of CNBC, including
all of the issued and outstanding shares of capital stock of the Subsidiaries
and all of its rights, privileges, immunities, powers, and franchises, and shall
assume all of the duties and liabilities of CNBC.
2.02. Name, Offices, and Management. The name of the Continuing Company
shall continue to be "First Merchants Corporation." Its principal banking office
shall be located at 200 E. Jackson Street, Muncie, Indiana. Except as otherwise
provided in Section 8.06 hereof, the Board of Directors of the Continuing
Company, until such time as their successors have been elected and qualified,
shall consist of the current Board of Directors of First Merchants. The officers
of First Merchants immediately prior to the Effective Date shall continue as the
officers of the Continuing Company.
2.03. Capital Structure. The amount of capital stock of the Continuing
Company shall not be less than the capital stock of First Merchants immediately
prior to the Effective Date, increased by the amount of capital stock issued in
accordance with Section 3 hereof.
2.04. Articles of Incorporation and Bylaws. The Articles of
Incorporation and the Bylaws of the Continuing Company shall be those of First
Merchants immediately prior to the Effective Date until the same shall be
further amended as provided by law.
2.05. Assets and Liabilities. The title to all assets, real
estate and other property owned by First Merchants and CNBC shall vest in the
Continuing Company without reversion or impairment. All liabilities of
CNBC shall be assumed by the Continuing Company.
2.06. Statutory Agent. The Continuing Company hereby consents to be
sued and served with process in the State of Ohio and hereby irrevocably
appoints the Secretary of State of the State of Ohio as its agent to accept
service of process in any proceeding in the State of Ohio to enforce against the
Continuing Company any obligation of CNBC or to enforce the rights of a
dissenting shareholder of CNBC.
2.07. Qualification to do Business. As of the date of this Agreement,
the Continuing Company intends to qualify to do business in the State of Ohio as
of the Effective Date of the Merger and may appoint CT Corporation, located at
1300 East Ninth Street, Cleveland, Ohio 44114, as its agent for service of
process, notice or demand.
2.08. Additional Actions. If, at any time after the Effective Date, the
Continuing Company shall consider or be advised that any further deeds,
assignments or assurances in law or any other acts are necessary or desirable
(a) to vest, perfect or confirm, of record or otherwise, in the Continuing
Company its right, title or interest in, to or under any of the rights,
properties or assets of CNBC or the Subsidiaries, or (b) otherwise carry out the
purposes of this Agreement, CNBC and the Subsidiaries and their respective
officers and directors shall be deemed to have granted to the Continuing Company
an irrevocable power of attorney to execute and deliver all such deeds,
assignments or assurances in law and to do all acts necessary or proper to vest,
perfect or confirm title to and possession of such rights, properties or assets
in the Continuing Company and otherwise to carry out the purposes of this
Agreement, and the officers and directors of the Continuing Company are
authorized in the name of CNBC or the Subsidiaries or otherwise to take any and
all such action.
SECTION 3
Consideration To Be
Distributed To Shareholders Of CNBC
3.01. Consideration. Upon and by reason of the Merger becoming
effective, the shareholders of CNBC of record on the Effective Date who have not
dissented to the Merger in accordance with Ohio Revised Code ss. 1701.84 and ss.
1701.85, as amended, shall be entitled to receive in exchange for CNBC's common
shares held and at their election (subject to the limitations and prorations set
forth in this Section 3) either (i) 1.01 (the "Conversion Ratio") shares of
First Merchants' common stock for each CNBC common share held ("Option 1"), or
(ii) cash in the amount of $29.57 for each CNBC common share held, subject to
the provisions and limitations of Section 3.07 ("Option 2"). A CNBC shareholder
shall be entitled to elect Option 1 for all shares held of record, Option 2 for
all shares held of record or Option 1 for a portion of the shares held of record
and Option 2 for a portion of the shares held of record. The Conversion Ratio
shall be subject to adjustment as set forth in Sections 3.03 and 3.04.
3.02. No Fractional First Merchants Common Shares. Certificates for
fractional shares of common stock of First Merchants shall not be issued in
respect of fractional interests arising from the Conversion Ratio. Each CNBC
shareholder who would otherwise have been entitled to a fraction of a First
Merchants share, upon surrender of all such shareholder's certificates
representing CNBC's common shares, shall be paid in cash (without interest) in
an amount equal to the fraction of the First Merchants Average Price (as defined
below). No such shareholder of CNBC shall be entitled to dividends, voting
rights or any other rights in respect of any fractional share.
3.03. Recapitalization. If, between the date of this Agreement and the
Effective Date, First Merchants issues a stock dividend with respect to its
shares of common stock, combines, subdivides, reclassifies or splits up its
outstanding shares or takes any similar recapitalization action, then the
Conversion Ratio shall be adjusted so that each CNBC shareholder electing Option
1 shall receive such number of First Merchants shares as represents the same
percentage of outstanding shares of First Merchants common stock at the
Effective Date as would have been represented by the number of shares such
shareholder would have received if the recapitalization had not occurred. First
Merchants and CNBC acknowledge that First Merchants declared a 5% stock dividend
on its shares of common stock payable on September 13, 2002 to shareholders of
record on August 30, 2002, and that the Conversion Ratio set forth in Section
3.01 hereof and the dollar amounts set forth in Sections 3.04(b) and 3.04(c)
hereof take such stock dividend into account and shall not be adjusted as a
result thereof.
3.04. Termination Rights.
(a) As used in this Section 3.04, the term "First Merchants
Average Price" shall mean the average of the mid point between the bid
and ask prices of the common stock of First Merchants as reported in
Bloomberg, L.P. for the thirty (30) days that First Merchants common
stock trades on NASDAQ preceding the fifth (5th) calendar day prior to
the Effective Date (the "Determination Date"). The First Merchants
Average Price and the dollar amounts set forth in Sections 3.04(b) and
3.04(c) shall be appropriately and proportionately adjusted to reflect
any share adjustment as contemplated by Section 3.03 hereof.
(b) CNBC may terminate this Agreement if its Board of
Directors so determines by a vote of a majority of the members of its
entire Board of Directors if the First Merchants Average Price shall be
less than $22.61; subject to the following two provisions. If CNBC
elects to exercise its right of termination pursuant to the immediately
preceding sentence, it shall give written notice to First Merchants
within twenty-four (24) hours of the Determination Date. Within two
business days after the date of receipt of such notice, First Merchants
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
$22.61 and the Conversion Ratio (as then in effect) and the denominator
of which is the First Merchants Average Price. If First Merchants makes
an election contemplated by the preceding sentence, it shall give
prompt written notice to CNBC of such election and the revised
Conversion Ratio, whereupon no termination shall have occurred pursuant
to this Section 3.04(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 3.04(b).
(c) First Merchants may terminate this Agreement if its Board
of Directors so determines by a vote of a majority of the members of
its entire Board of Directors if the First Merchants Average Price
shall be greater than $30.59; subject to the following two provisions.
If First Merchants elects to exercise its right of termination pursuant
to the immediately preceding sentence, it shall give written notice to
CNBC within twenty-four (24) hours of the Determination Date. Within
two business days after the date of receipt of such notice, CNBC 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 $30.59
and the Conversion Ratio (as then in effect) and the denominator of
which is the First Merchants Average Price. If CNBC makes an election
contemplated by the preceding sentence, it shall give prompt written
notice to First Merchants of such election and the revised Conversion
Ratio, whereupon no termination shall have occurred pursuant to this
Section 3.04(c) 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 3.04(c).
3.05. Election. An election form (the "Election Form") shall be mailed
to each record holder of CNBC's common shares as of the record date fixed for
the special shareholders' meeting at which the Merger will be submitted to a
vote of CNBC's shareholders (the "Special Record Date"). In addition, reasonable
efforts will be made to make the Election Form available to all persons who
become shareholders of CNBC between the Special Record Date and the Election
Deadline (as defined below). CNBC and First Merchants shall also establish a
deadline for receipt of such Election Forms (the "Election Deadline"), which
deadline shall be the close of business on the first day on which the
administrative offices of First Merchants are generally open for business after
the special meeting at which the Merger will be submitted to a vote of CNBC's
shareholders. The Election Forms shall be mailed to each record holder of CNBC's
common shares as of the Special Record Date along with the proxy materials for
the special shareholders' meeting at which the Merger will be submitted to a
vote of CNBC's shareholders. The Election Form will permit each holder of record
of CNBC's common shares as of the Special Record Date to elect, subject to
Section 3.07, to have all of such holder's shares converted in the Merger into
either Option 1, Option 2 or a combination of Option 1 and Option 2. The
Election Form shall also permit direct deposit of cash in each holder's account
in either the Bank or First Merchants Bank, National Association. An election
shall be duly made by completing the Election Form and any other required
documents in accordance with the instructions set forth therein and delivering
them to the Election Agent (as defined below) or to such other person or persons
mutually agreed upon by CNBC and First Merchants to receive elections, to
receive outstanding CNBC shares, to deliver cash or cash and shares of First
Merchants' common stock and to carry out the other procedures set forth herein.
3.06. Election Agent. First Merchants and CNBC hereby appoint the Trust
Department of First Merchants Bank, National Association to act as agent (the
"Election Agent") of CNBC's shareholders for the purposes of mailing and
receiving the Election Forms, tabulating the results and notifying First
Merchants and CNBC of the results.
3.07. All Cash Payments.
(a) In the event the number of CNBC common shares covered by
Option 2 elections would entitle CNBC's shareholders to receive less
than $24,561,693 in cash, all Option 1 and Option 2 elections of the
holders of CNBC's common shares shall be honored (each in its
entirety). In the event that the amount of cash to be received by
shareholders of CNBC pursuant to the terms of this Agreement would
result in cash payments of $24,561,693 or more, the ten (10) Option 2
elections which cover the largest number of CNBC's common shares (the
"Ten Largest Option 2 Elections") shall be converted into Option 1
elections on a pro rata basis based on the number of CNBC common shares
covered by such Option 2 elections; provided that such Option 2
elections shall be converted into Option 1 elections only to the extent
necessary so that the total remaining number of outstanding CNBC common
shares covered by Option 2 elections is such that the Merger will (i)
result in cash payments of no more than $24,561,693, and (ii) satisfy
the "continuity of interest" requirement applicable to tax-free
reorganizations under the Code. Option 2 elections which are not
converted into Option 1 elections shall remain as Option 2 elections.
Option 2 elections which are partially converted into Option 1
elections shall remain as Option 2 elections to the extent they are not
so converted. In the event the conversion of the Ten Largest Option 2
Elections (in their entirety) to Option 1 elections does not result in
the Merger satisfying the conditions of provisos (i) and (ii) above of
this Section 3.07(a), the next ten (10) largest Option 2 elections
shall also be converted into Option 1 elections on the same pro rata
basis as applied to the Ten Largest Option 2 Elections described above,
and such methodology shall continue to be applied to Option 2 elections
until such time as the Merger satisfies the conditions of provisos (i)
and (ii) above of this Section 3.07(a).
(b) CNBC's common shares with respect to which no Election
Form is timely received or ever received or which are the subject of
otherwise invalid elections (the "Non-Electing Shares") will be treated
as if the holders thereof elected Option 1 for all shares held of
record. This Section 3.07(b) shall be given effect prior to the
reallocation provided for in Section 3.07(a).
(c) CNBC and First Merchants shall mutually determine
the validity of elections submitted by CNBC's shareholders.
(d) A holder of CNBC's shares that is a bank, trust company,
security broker-dealer or other recognized nominee, may submit one or
more Election Forms for the persons for whom it holds shares as nominee
provided that such bank, trust company, security broker-dealer or
nominee certifies to the satisfaction of CNBC and First Merchants the
names of the persons for whom it is so holding shares (the "Beneficial
Owners"). In such case, each Beneficial Owner for whom an Election Form
is submitted shall be treated as a separate owner for purposes of the
election procedure and allocation of shares set forth herein.
(e) First Merchants and CNBC may, upon mutual agreement, apply
the adjustments set forth in this Section 3.07 only to such extent and
to such number of CNBC's shareholders as is necessary to accomplish the
objectives of this Section 3.07.
3.08. Distribution of First Merchants' Common Stock and Cash.
(a) Each share of common stock of First Merchants outstanding
immediately prior to the Effective Date shall remain outstanding
unaffected by the Merger.
(b) Following the Effective Date, First Merchants shall mail
to each CNBC shareholder a letter of transmittal (the "Letter of
Transmittal") providing instructions as to the transmittal to the
conversion agent, First Merchants Bank, National Association (the
"Conversion Agent"), of certificates representing CNBC's common shares
and the issuance of shares of First Merchants' common stock and cash in
exchange therefor pursuant to the terms of this Agreement. Distribution
of stock certificates representing First Merchants' common stock and
cash payments for CNBC's common shares and for fractional shares shall
be made by First Merchants to each former shareholder of CNBC within
fifteen (15) business days of the later of the Effective Date or the
date of such shareholder's delivery to the Conversion Agent of such
shareholder's certificates representing CNBC common shares, accompanied
by a properly completed and executed Letter of Transmittal.
Certificates surrendered for exchange by a person who is deemed to be
an "affiliate" (as defined in Section 7.06 hereof) of CNBC shall not be
exchanged until First Merchants has received a written agreement from
such affiliate as required pursuant to Section 7.06 hereof. Interest
shall not accrue or be payable with respect to any cash payments.
(c) Following the Effective Date, stock certificates
representing CNBC's common shares shall be deemed to evidence only the
right to receive cash and/or ownership of First Merchants' common stock
(for all corporate purposes other than the payment of dividends) and
cash for fractional shares, as applicable. No dividends or other
distributions otherwise payable subsequent to the Effective Date on
stock of First Merchants shall be paid to any shareholder entitled to
receive the same until such shareholder has surrendered such
shareholder's certificates for CNBC's common shares to the Conversion
Agent in exchange for certificates representing First Merchants' common
stock and/or cash. Upon surrender or compliance with the provisions of
Section 3.08(f), there shall be paid to the record holder of the new
certificate(s) evidencing shares of First Merchants' common stock the
amount of all dividends and other distributions, without interest
thereon, withheld with respect to such common stock.
(d) At or after the Effective Date, there shall be no
transfers on the stock transfer books of CNBC of any CNBC common
shares. If, after the Effective Date, certificates are presented for
transfer to CNBC, such certificates shall be cancelled and exchanged
for the consideration set forth in Section 3.01 hereof, as adjusted
pursuant to the terms of this Agreement.
(e) First Merchants shall be entitled to rely upon the stock
transfer books of CNBC to establish the persons entitled to receive
cash and shares of common stock of First Merchants, which books, in the
absence of actual knowledge by First Merchants of any adverse claim
thereto, shall be conclusive with respect to the ownership of such
stock.
(f) With respect to any certificate for CNBC's common shares
which has been lost, stolen, or destroyed, First Merchants shall be
authorized to issue common stock to the registered owner of such
certificate upon receipt of an affidavit of lost stock certificate, in
form and substance satisfactory to First Merchants, and upon compliance
by the CNBC's shareholder with all procedures historically required by
CNBC in connection with lost, stolen, or destroyed certificates.
SECTION 4
Dissenting Shareholders
Shareholders of CNBC shall have the rights accorded to dissenting
shareholders under Ohio Revised Code ss. 1701.84 and ss. 1701.85, as amended.
SECTION 5
Representations and
Warranties of CNBC
CNBC represents and warrants to First Merchants with respect to itself
and the Subsidiaries as follows: (For the purposes of this Section, a
"Disclosure Letter" is defined as a letter referencing Section 5 of this
Agreement which shall be prepared and executed by an authorized executive
officer of CNBC and delivered to and executed by an authorized executive officer
of First Merchants contemporaneous with the execution of this Agreement.)
5.01. Standard. No representation or warranty of CNBC contained in
Section 5 of this Agreement shall be deemed untrue or incorrect, and no party
hereto shall be deemed to have breached a representation or warranty, as a
consequence of the existence of any fact, event or circumstance unless such
fact, event or circumstance (either individually or taken together with all
other facts, events or circumstances inconsistent with such or with any
representation or warranty contained in Section 5) has had, or is reasonably
likely to have, a Material Adverse Effect (as defined in Section 13.10).
5.02. Organization and Authority. CNBC is a corporation duly organized
and validly existing under the laws of the State of Ohio. The Bank is a national
bank duly organized and validly existing under the laws of the United States.
CNBC Retirement Services is a corporation duly organized and validly existing
under the laws of the State of Ohio. CNBC Trust is a statutory business trust
duly organized and validly existing under the laws of the State of Connecticut.
CNBC and each of the Subsidiaries have the power and authority (corporate and
other) to conduct their respective businesses in the manner and by the means
utilized as of the date hereof. Except as set forth in the Disclosure Letter,
CNBC's only subsidiaries are the Subsidiaries, and the Bank has no subsidiaries.
The Bank is subject to primary federal regulatory supervision and regulation by
the Office of the Comptroller of the Currency.
5.03. Authorization.
(a) CNBC has the corporate power and authority to enter into
this Agreement and to carry out its obligations hereunder subject to
certain required regulatory approvals and CNBC's shareholder approval.
This Agreement, when executed and delivered, will have been duly
authorized and will constitute a valid and binding obligation of CNBC,
enforceable in accordance with its terms except to the extent limited
by insolvency, reorganization, liquidation, readjustment of debt or
other laws of general application relating to or affecting the
enforcement of creditors' rights.
(b) Except as set forth in the Disclosure Letter, neither the
execution of this Agreement, nor the consummation of the transactions
contemplated hereby, does or will (i) conflict with, result in a breach
of, or constitute a default under CNBC's Articles of Incorporation or
Code of Regulations; (ii) conflict with, result in a breach of, or
constitute a default under any federal, foreign, state or local law,
statute, ordinance, rule, regulation or court or administrative order
or decree, or any note, bond, indenture, loan, mortgage, security
agreement, contract, arrangement or commitment, to which CNBC or any of
the Subsidiaries is subject or bound; (iii) result in the creation of
or give any person, corporation or entity, the right to create any
lien, charge, encumbrance, security interest, or any other rights of
others or other adverse interest upon any right, property or asset of
CNBC or any of the Subsidiaries; (iv) terminate or give any person,
corporation or entity, the right to terminate, amend, abandon, or
refuse to perform any note, bond, indenture, loan, mortgage, security
agreement, contract, arrangement or commitment to which CNBC or any of
the Subsidiaries is subject or bound; or (v) accelerate or modify, or
give any party thereto the right to accelerate or modify, the time
within which, or the terms according to which, CNBC or any of the
Subsidiaries is to perform any duties or obligations or receive any
rights or benefits under any note, bond, indenture, loan, mortgage,
security agreement, contract, arrangement or commitment.
(c) Other than in connection or in compliance with the
provisions of the Bank Holding Company Act of 1956, federal and state
securities laws and applicable Indiana and Ohio banking and corporate
statutes, all as amended, and the rules and regulations promulgated
thereunder, no notice to, filing with, authorization of, exemption by,
or consent or approval of, any public body or authority is necessary
for the consummation by CNBC of the transactions contemplated by this
Agreement.
(d) Other than those filings, authorizations, consents and
approvals referenced in Section 5.03(c) above and except as set forth
in the Disclosure Letter, no notice to, filing with, authorization of,
exemption by, or consent or approval of, any third party is necessary
for the consummation by CNBC of the transactions contemplated by this
Agreement.
5.04. Capitalization.
(a) The authorized capital stock of CNBC as of the date hereof
consists, and on the Effective Date will consist, of 3,000,000 common
shares, without par value. On the date of this Agreement, 1,991,572
common shares are issued and outstanding. Such issued and outstanding
CNBC common shares have been duly and validly authorized by all
necessary corporate action of CNBC, are validly issued, fully paid and
nonassessable and have not been issued in violation of any preemptive
rights of any shareholders. CNBC has no capital stock authorized,
issued or outstanding other than as described in this Section 5.04(a)
and, except as set forth in the Disclosure Letter, has no intention or
obligation to authorize or issue any other shares of capital stock.
(b) All outstanding shares of capital stock of the Bank are
owned directly by CNBC. Such issued and outstanding shares of Bank
common stock have been duly and validly authorized by all necessary
corporate action of the Bank, are validly issued, fully paid and
nonassessable, and have not been issued in violation of any preemptive
rights of any Bank shareholders. All the issued and outstanding Bank
common stock is owned by CNBC, free and clear of all liens, pledges,
charges, claims, encumbrances, restrictions, security interests,
options and preemptive rights and of all other rights of any other
person, corporation or entity with respect thereto. The Bank has no
capital stock authorized, issued or outstanding other than as described
in this Section 5.04(b) and has no intention or obligation to authorize
or issue any other shares of capital stock.
(c) All outstanding shares of capital stock of CNBC Retirement
Services and CNBC Trust are owned directly by CNBC. Such shares have
been duly and validly authorized by all necessary corporate action, are
validly issued, fully paid and nonassessable, and have not been issued
in violation of any preemptive rights. Such shares are owned by CNBC,
free and clear of any liens, pledges, charges, claims, encumbrances,
restrictions, security interests, options and preemptive rights and of
all other rights of any other person, corporation or entity with
respect thereto. Neither CNBC Retirement Services nor CNBC Trust have
any other shares of capital stock authorized, issued or outstanding
except as set forth in the Disclosure Letter, and neither CNBC
Retirement Services nor CNBC Trust have any intention or obligation to
authorize or issue any other shares of capital stock.
(d) Except as set forth in the Disclosure Letter, there are no
options, commitments, calls, agreements, understandings, arrangements
or subscription rights regarding the issuance, purchase or acquisition
of capital stock, or any securities convertible into or representing
the right to purchase or otherwise receive the capital stock or any
debt securities, of CNBC nor any Subsidiary by which CNBC or any
Subsidiary is or may become bound. Neither CNBC nor any Subsidiary has
any outstanding contractual or other obligation to repurchase, redeem
or otherwise acquire any of its respective outstanding shares of
capital stock.
(e) Except as set forth in the Disclosure Letter, to the
knowledge of CNBC, no person or entity beneficially owns 5% or more of
CNBC's outstanding common shares.
5.05. Organizational Documents. The respective Articles of
Incorporation or Association, Code of Regulations or By-Laws, Certificate of
Trust and Trust Agreement, as applicable, of CNBC and the Subsidiaries have been
delivered to First Merchants and represent true, accurate and complete copies of
such corporate documents of CNBC and the Subsidiaries in effect as of the date
of this Agreement.
5.06. Compliance with Law. Except as set forth in the Disclosure
Letter, neither CNBC nor any Subsidiary has engaged in any activity nor taken or
omitted to take any action which has resulted, or to the knowledge of CNBC could
result, in the violation of any local, state, federal or foreign law, statute,
rule, regulation or ordinance or of any order, injunction, judgment or decree of
any court or government agency or body. CNBC and each Subsidiary possess all
licenses, franchises, permits and other authorizations necessary for the
continued conduct of their respective businesses without interference or
interruption and such licenses, franchises, permits and authorizations shall be
transferred to First Merchants on the Effective Date without any restrictions or
limitations thereon or the need to obtain any consents of third parties. All
agreements and understandings with, and all orders and directives of, all
regulatory agencies or government authorities with respect to the business or
operations of CNBC or the Subsidiaries, including all correspondence related
thereto, are set forth in the Disclosure Letter. Except as set forth in the
Disclosure Letter, the Bank has received no inquiries from any regulatory agency
or government authority relating to its compliance with the Bank Secrecy Act,
the Truth-in-Lending Act or the Community Reinvestment Act or any laws with
respect to the protection of the environment or the rules and regulations
promulgated thereunder. Except as set forth in the Disclosure Letter, CNBC has
received no inquiries from any regulatory agency or government authority
relating to its compliance with any securities laws applicable to CNBC.
5.07. Accuracy of Statements. The representations and warranties
contained in this Section 5 do not contain any untrue statements of material
fact or omit to state a material fact necessary to make the statements contained
in this Section 5, in light of the circumstances in which they are made, not
misleading.
5.08. Litigation and Pending Proceedings. Except as set forth in the
Disclosure Letter, there are no claims of any kind, nor any action, suits,
proceedings, arbitrations or investigations pending, or to the knowledge of CNBC
or any Subsidiary threatened, in any court or before any government agency or
body, arbitration panel or otherwise (nor does CNBC or any Subsidiary have any
knowledge of a basis for any claim, action, suit, proceeding, arbitration or
investigation) against or by CNBC or any Subsidiary. There are no uncured
violations, or violations with respect to which refunds or restitutions may be
required, cited in any compliance report to CNBC or the Bank as a result of an
examination by any regulatory agency or body.
5.09.
Financial Statements.
(a) CNBC's consolidated balance sheets as of the end of the
two fiscal years ended December 31, 2001 and 2000 and for the six (6)
month period ended June 30, 2002 and the related consolidated
statements of income, shareholders' equity and cash flows for the years
or period then ended (hereinafter collectively referred to as the
"Financial Information") present fairly the consolidated financial
condition or position of CNBC as of the respective dates thereof and
the consolidated results of operations of CNBC for the respective
periods covered thereby and have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis.
The Financial Information as of and for the two (2) fiscal years ended
2001 and 2000 are audited financial statements.
(b) All loans reflected in the Financial Information and which
have been made, extended or acquired since June 30, 2002, (i) have been
made for good, valuable and adequate consideration in the ordinary
course of business; (ii) constitute the legal, valid and binding
obligation of the obligor and any guarantor named therein; (iii) are
evidenced by notes, instruments or other evidences of indebtedness
which are true, genuine and what they purport to be; and (iv) to the
extent that the Bank has a security interest in collateral or a
mortgage securing such loans, are secured by perfected security
interests or mortgages naming the Bank as the secured party or
mortgagee.
5.10. Absence of Certain Changes. Except for events and conditions
relating to the business and interest rate environment in general, the accrual
or payment of Merger-related expenses, or as set forth in the Disclosure Letter,
since June 30 2002, no events have occurred, or to the knowledge of CNBC, can
reasonably be expected to occur, which could reasonably be expected to have a
Material Adverse Effect. Between the period from June 30, 2002 to the date of
this Agreement, CNBC and each Subsidiary have carried on their respective
businesses in the ordinary and usual course consistent with their past practices
(excluding the incurrence of fees and expenses of professional advisors related
to this Agreement and the transactions contemplated hereby) and there has not
been any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to CNBC's common
shares (other than normal quarterly cash dividends) or any split, combination or
reclassification of any stock of CNBC or any Subsidiary or any issuance or the
authorization of any issuance of any securities in respect of, or in lieu of, or
in substitution for CNBC's common shares.
5.11. Absence of Undisclosed Liabilities. Neither CNBC nor any
Subsidiary is a party to any agreement, contract, loan, obligation, commitment,
arrangement, liability, lease or license which individually exceeds $50,000 per
year or which may not be terminated within one year from the date of this
Agreement, except as set forth in the Disclosure Letter and except for unfunded
loan commitments made in the ordinary course of the Bank's business consistent
with past practices, nor to the knowledge of CNBC does there exist any
circumstances resulting from transactions effected or to be effected or events
which have occurred or may occur or from any action taken or omitted to be taken
which could reasonably be expected to result in any such agreement, contract,
loan, obligation, commitment, arrangement, liability, lease or license.
5.12. Title to Assets.
(a) Except as set forth in the Disclosure Letter, CNBC and the
Subsidiaries have good and marketable title to all personal property
reflected in the June 30, 2002 Financial Information, good and
marketable title to all other properties and assets which CNBC or the
Subsidiaries purport to own, good and marketable title to or right to
use by terms of any lease or contract all other property used in CNBC's
or any Subsidiary's business, and good and marketable title to all
property and assets acquired since June 30, 2002, free and clear of all
mortgages, liens, pledges, restrictions, security interests, charges,
claims or encumbrances of any nature.
(b) All furniture, fixtures, machinery, equipment, computer
software and hardware, and all other tangible personal property owned
or used by CNBC or any Subsidiary, including any such items leased as a
lessee, are in good working order and free of known defects, subject
only to normal wear and tear. The operation by CNBC and the
Subsidiaries of such properties and assets is in compliance with all
applicable laws, ordinances, rules and regulations of any governmental
authority or third party having jurisdiction over such use.
5.13. Loans and Investments.
(a) Except as set forth in the Disclosure Letter, there is no
loan of the Bank in excess of $100,000 that has been classified by bank
regulatory examiners as "Other Loans Specially Mentioned,"
"Substandard," "Doubtful" or "Loss," nor is there any loan of the Bank
in excess of $100,000 that has been identified by management,
accountants or auditors (internal or external) as having a significant
risk of uncollectibility. The Bank's loan watch list and all loans in
excess of $100,000 that the Bank's management has determined to be
ninety (90) days or more past due with respect to principal or interest
or has placed on nonaccrual status are set forth in the Disclosure
Letter.
(b) Each of the reserves and allowances for possible loan
losses and the carrying value for real estate owned which are shown on
the Financial Information is, in the opinion of CNBC and the Bank,
adequate under the requirements of generally accepted accounting
principles applied on a consistent basis to provide for possible losses
on loans outstanding and real estate owned as of the date of such
Financial Information.
(c) Except as set forth in the Disclosure Letter, none of the
investments reflected in the Financial Information and none of the
investments made by CNBC or any Subsidiary since June 30, 2002 is
subject to any restrictions, whether contractual or statutory, which
impairs the ability of CNBC or any Subsidiary to dispose freely of such
investment at any time. Except as set forth in the Disclosure Letter,
neither CNBC nor the Bank is a party to any repurchase agreements with
respect to securities.
5.14. Employee Benefit Plans.
(a) The Disclosure Letter contains a list identifying each
"employee benefit plan," as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), which (i)
is subject to any provision of ERISA, and (ii) is maintained,
administered or contributed to by CNBC or any Subsidiary and covers any
employee, director or former employee or director of CNBC or any
Subsidiary under which CNBC or any Subsidiary has any liability. Copies
of such plans (and, if applicable, related trust agreements or
insurance contracts) and all amendments thereto and written
interpretations thereof have been furnished to First Merchants together
with the three most recent annual reports prepared in connection with
any such plan and the current summary plan descriptions. Such plans are
hereinafter referred to individually as an "Employee Plan" and
collectively as the "Employee Plans." The Employee Plans which
individually or collectively would constitute an "employee pension
benefit plan" as defined in Section 3(2)(A) of ERISA are identified in
the list referred to above.
(b) The Employee Plans comply with and have been operated in
compliance with all applicable laws, regulations, rulings and other
requirements. Each Employee Plan has been administered in substantial
conformance with such requirements and all reports and information
required with respect to each Employee Plan have been timely given.
(c) No "prohibited transaction," as defined in Section 406 of
ERISA or Section 4975 of the Code, for which no statutory or
administrative exemption exists, and no "reportable event," as defined
in Section 4043(b) of ERISA, for which a notice is required to be
filed, has occurred with respect to any Employee Plan. Neither CNBC nor
any Subsidiary has any outstanding liability to the Pension Benefit
Guaranty Corporation ("PBGC"), or any liability to the Internal Revenue
Service ("IRS"), to the Department of Labor ("DOL") or to an employee
or Employee Plan beneficiary under Section 502 of ERISA.
(d) To the knowledge of CNBC and the Subsidiaries, no
"fiduciary," as defined in Section 3(21) of ERISA, of an Employee Plan
has failed to comply with the requirements of Section 404 of ERISA.
(e) Each of the Employee Plans which is intended to be
qualified under Code Section 401(a) has been amended to comply with the
applicable requirements of the Code, including the Tax Reform Act of
1986, the Revenue Act of 1987, the Technical and Miscellaneous Revenue
Act of 1988, the Omnibus Budget Reconciliation Act of 1989, the Revenue
Reconciliation Act of 1990, the Tax Extension Act of 1991, the
Unemployment Compensation Amendments of 1992, the Omnibus Budget
Reconciliation Act of 1993, and the Retirement Protection Act of 1994
and any rules, regulations or other requirements promulgated thereunder
(the "Acts"). In addition, each such Employee Plan has been and is
being operated in substantial conformance with the applicable
provisions of ERISA and the Code, as amended by the Acts, including
operational compliance with the Uruguay Round Agreements Act, the
Uniformed Services Employment and Reemployment Rights Act of 1994, the
Small Business Job Protection Act of 1996, the Taxpayer Relief Act of
1997, and the Internal Revenue Service Restructuring and Reform Act of
1998 (even though actual plan amendments do not have to be made until
the last day of the 2001 plan year). Except as set forth in the
Disclosure Letter, CNBC and/or the Subsidiaries, as applicable, sought
and received favorable determination letters from the IRS within the
applicable remedial amendment periods under Code Section 401(b), and
has furnished to First Merchants copies of the most recent IRS
determination letters with respect to any such Employee Plan.
(f) No Employee Plan owns any security of CNBC or any Subsidiary.
(g) Except as set forth in the Disclosure Letter, no Employee
Plan has incurred an "accumulated funding deficiency," as determined
under Code Section 412 and ERISA Section 302.
(h) Except as set forth in the Disclosure Letter, no
Employee Plan has been terminated or incurred a partial termination
(either voluntarily or involuntarily).
(i) No claims against an Employee Plan, CNBC or any
Subsidiary, with respect to an Employee Plan, (other than normal
benefit claims) have been asserted or, to the knowledge of CNBC or any
Subsidiary, threatened.
(j) Except as set forth in the Disclosure Letter, there is no
contract, agreement, plan or arrangement covering any employee,
director or former employee or director of CNBC or any Subsidiary that,
individually or collectively, could give rise to the payment of any
amount that would not be deductible by reason of Section 280G or
Section 162(a)(1) of the Code.
(k) To the knowledge of CNBC and the Subsidiaries, no event
has occurred that would cause the imposition of the tax described in
Code Section 4980B. To the knowledge of CNBC and the Subsidiaries, all
requirements of ERISA Section 601 have been met.
(l) The Disclosure Letter contains a list of each employment,
severance or other similar contract, arrangement or policy and each
plan or arrangement (written or oral) providing for insurance coverage
(including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation
benefits, retirement benefits or deferred compensation, profit sharing,
bonuses, stock options, stock appreciation rights or other forms of
incentive compensation or post-retirement insurance, compensation or
benefits which (i) is not an Employee Plan, (ii) was entered into,
maintained or contributed to, as the case may be, by CNBC or any
Subsidiary, and (iii) covers any employee, director or former employee
or director of CNBC or any Subsidiary. Such contracts, plans and
arrangements as are described above, copies or descriptions of all of
which have been furnished previously to First Merchants, are
hereinafter referred to collectively as the "Benefit Arrangements."
Each of the Benefit Arrangements has been maintained in compliance with
its terms and with the requirements prescribed by any and all statutes,
orders, rules and regulations, which are applicable to such Benefit
Arrangements.
(m) Except as set forth in the Disclosure Letter, neither CNBC
nor any Subsidiary has any present or future liability in respect of
post-retirement health and medical benefits for former employees or
directors of CNBC or any Subsidiary.
(n) Except as set forth in the Disclosure Letter, there has
been no amendment to, written interpretation or announcement (whether
or not written) by CNBC or any Subsidiary relating to, or change in
employee participation or coverage under, any Employee Plan or Benefit
Arrangement which would increase the expense of maintaining such
Employee Plans or Benefit Arrangements above the level of the expense
incurred in respect thereof for the fiscal year ended December 31,
2001.
(o) For purposes of this Section 5.14, references to CNBC or
the Subsidiaries are deemed to include (i) all predecessors of CNBC or
the Subsidiaries, (ii) any subsidiary of CNBC or the Subsidiaries,
(iii) all members of any controlled group (as determined under Code
Section 414(b) or (c)) that includes CNBC or any Subsidiary, and (iv)
all members of any affiliated service group (as determined under Code
Section 414(m) or (n)) that includes CNBC or any Subsidiary.
5.15. Obligations of Employees. Except as set forth in the Disclosure
Letter, all accrued obligations and liabilities of CNBC and the Subsidiaries,
whether arising by operation of law, by contract or by past custom, for payments
to trust or other funds, to any government agency or body or to any individual
director, officer, employee or agent (or his heirs, legatees or legal
representative) with respect to unemployment compensation or social security
benefits and all pension, retirement, savings, stock purchase, stock bonus,
stock ownership, stock option, stock appreciation rights or profit sharing plan,
any employment, deferred compensation, consultant, bonus or collective
bargaining agreement or group insurance contract or other incentive, welfare or
employee benefit plan or agreement maintained by CNBC or the Subsidiaries for
their current or former directors, officers, employees and agents have been and
are being paid to the extent required by law or by the plan or contract, and
adequate actuarial accruals and/or reserves for such payments have been and are
being made by CNBC or the Subsidiaries in accordance with generally accepted
accounting and actuarial principles. All obligations and liabilities of CNBC and
the Subsidiaries, whether arising by operation of law, by contract, or by past
custom, for all forms of compensation which are or may be payable to their
current or former directors, officers, employees or agents have been and are
being paid, and adequate accruals and/or reserves for payment therefor have been
and are being made in accordance with generally accepted accounting principles.
All accruals and reserves referred to in this Section 5.15 are correctly and
accurately reflected and accounted for in the books, statements and records of
CNBC and the Subsidiaries.
5.16. Taxes, Returns and Reports. CNBC and the Subsidiaries have (a)
duly filed all federal, state, local and foreign tax returns of every type and
kind required to be filed as of the date hereof, and each return is true,
complete and accurate; (b) paid all taxes, assessments and other governmental
charges due and payable or claimed to be due and payable upon them or any of
their income, properties or assets; and (c) not requested an extension of time
for any such payments (which extension is still in force). Except for taxes not
yet due and payable, the reserve for taxes on the Financial Information is
adequate to cover all of CNBC's and the Subsidiaries' tax liabilities
(including, without limitation, income taxes and franchise fees) that may become
payable in future years with respect to any transactions consummated prior to
June 30, 2002. Neither CNBC nor any Subsidiary has, or will have, any liability
for taxes of any nature for or with respect to the operation of their business,
including the assets of any subsidiary, from June 30, 2002, up to and including
the Effective Date, except to the extent reflected on financial statements of
CNBC or the Subsidiaries subsequent to such date. Neither CNBC nor any
Subsidiary is currently under audit by any state or federal taxing authority.
Except as set forth in the Disclosure Letter, neither the federal, state nor
local tax returns of CNBC or any Subsidiary have been audited by any taxing
authority during the past five (5) years.
5.17. Deposit Insurance. The deposits of the Bank are insured by
the Federal Deposit Insurance Corporation ("FDIC") in accordance with the
Federal Deposit Insurance Act, and the Bank has paid all premiums and
assessments with respect to such deposit insurance.
5.18. Reports. Since January 1, 1997, each of CNBC and the Bank have
timely filed all reports, registrations and statements, together with any
required amendments thereto, that it was required to file with (i) the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board"), (ii) the
Office of the Comptroller of the Currency, and (iii) any federal, state,
municipal or local government, securities, banking, environmental, insurance and
other governmental or regulatory authority, and the agencies and staffs thereof
(collectively, the "Regulatory Authorities"), having jurisdiction over the
affairs of either CNBC or the Bank. All such reports filed by CNBC and the Bank
complied with all the rules and regulations promulgated by the applicable
Regulatory Authorities and are true, accurate and complete and were prepared in
conformity with generally accepted regulatory accounting principles applied on a
consistent basis. Except as set forth in the Disclosure Letter, there is no
unresolved violation with respect to any report or statement filed by, or any
examinations of, CNBC or the Bank.
5.19. Absence of Defaults. Neither CNBC nor any Subsidiary is in
violation of its charter documents, Code of Regulations or By-Laws or in default
under any material agreement, commitment, arrangement, loan, lease, insurance
policy or other instrument, whether entered into in the ordinary course of
business or otherwise and 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.
5.20. Tax and Regulatory Matters. Neither CNBC nor any Subsidiary has
taken or agreed to take any action or has any knowledge of any fact or
circumstance that would (i) prevent the transactions contemplated hereby from
qualifying as a reorganization within the meaning of Section 368 of the Code or
(ii) impede or delay receipt of any regulatory approval required for
consummation of the transactions contemplated by this Agreement.
5.21. Real Property.
(a) Neither CNBC nor any Subsidiary owns any real property
(other than real property acquired in foreclosure or in lieu of
foreclosure in the course of the collection of loans and being held by
CNBC or the Bank for disposition as required by law). A list of the
locations of each parcel of real property leased by CNBC or any
Subsidiary is set forth in the Disclosure Letter under the heading of
"Leased Real Property" (such real property being herein referred to as
the "Leased Real Property"). CNBC shall update the Disclosure Letter
within ten (10) days after acquiring or leasing any real property after
the date hereof.
(b) There is no pending action involving CNBC or any
Subsidiary as to the leasehold title of or the right to use any of the
Leased Real Property.
(c) Neither CNBC nor any Subsidiary has any interest in any
other real property except interests as a mortgagee, and except for any
real property acquired in foreclosure or in lieu of foreclosure and
being held for disposition as required by law.
(d) None of the buildings, structures or other improvements
located on the Leased Real Property encroaches upon or over any
adjoining parcel of real estate or any easement or right-of-way or
"setback" line and all such buildings, structures and improvements are
located and constructed in conformity with all applicable zoning
ordinances and building codes.
(e) None of the buildings, structures or improvements located
on the Leased Real Property are the subject of any official complaint
or notice by any governmental authority of violation of any applicable
zoning ordinance or building code, and there is no zoning ordinance,
building code, use or occupancy restriction or condemnation action or
proceeding pending, or, to the knowledge of CNBC, threatened, with
respect to any such building, structure or improvement. The Leased Real
Property is in good condition for its intended purpose, ordinary wear
and tear excepted, and has been maintained in accordance with
reasonable and prudent business practices applicable to like
facilities. The Leased Real Property has been used and operated in
compliance with all applicable laws, statutes, rules, regulations and
ordinances applicable thereto.
(f) Neither CNBC nor any Subsidiary has caused or allowed the
generation, treatment, storage, disposal or release at any Leased Real
Property of any Toxic Substance, except in compliance with all
applicable federal, state and local laws and regulations. "Toxic
Substance" means any hazardous, toxic or dangerous substance,
pollutant, waste, gas or material, including, without limitation,
petroleum and petroleum products, metals, liquids, semi-solids or
solids, that are regulated under any federal, state or local statute,
ordinance, rule, regulation or other law pertaining to environmental
protection, contamination, quality, waste management or cleanup.
(g) Neither CNBC nor any Subsidiary owns or operates any
underground storage tank at any Leased Real Property and no such Leased
Real Property has previously contained an underground storage tank. No
Leased Real Property is or has been listed on the CERCLIS.
(h) No Toxic Substance has been released, spilled, discharged
or disposed at, in, on or under any Leased Real Property nor are there
any other conditions or circumstances affecting any Leased Real
Property, in each case, that would require remediation, corrective
action or clean-up under applicable laws or regulations.
(i) Except as set forth in the Disclosure Letter, there are no
mechanic's or materialman's liens against the Leased Real Property, and
no unpaid claims for labor performed, materials furnished or services
rendered in connection with constructing, improving or repairing the
Leased Real Property in respect of which liens may or could be filed
against the Leased Real Property.
5.22. Securities Law Compliance. CNBC's common shares are traded on the
NASDAQ Small Cap market under the symbol of "CNBD." CNBC has complied with all
state, federal or foreign securities laws, statutes, rules, regulations or
orders, injunctions or decrees of any government agency relating thereto. CNBC
has complied with all rules, regulations, orders, injunctions or decrees of the
National Association of Securities Dealers, Inc. and all entities related or
affiliated therewith and has filed all reports and documents required to be
filed with such entities. CNBC has filed all reports and other documents
required to be filed by it under the Securities Exchange Act of 1934 and the
Securities Act of 1933, including CNBC's Annual Report on Form 10 KSB for the
year ended December 31, 2001, and Quarterly Report on Form 10 QSB for the
quarter ended June 30, 2002, copies of which have previously been delivered to
First Merchants. All such Securities and Exchange Commission filings were true,
accurate and complete in all material respects as of the dates of the filings,
and no such filings contained any untrue statement of a material fact or omitted
to state a material fact necessary in order to make the statements, at the time
and in the light of the circumstances under which they were made, not false or
misleading.
5.23. Broker's or Finder's Fees. Except for Stifel, Nicolaus & Company,
Incorporated, no agent, broker or other person acting on behalf of CNBC or any
Subsidiary or under any authority of CNBC or any Subsidiary is or shall be
entitled to any commission, broker's or finder's fee or any other form of
compensation or payment from any of the parties hereto, other than attorneys' or
accountants' fees, in connection with any of the transactions contemplated by
this Agreement.
5.24. Shareholder Rights Plan. Except as otherwise provided in CNBC's
Articles of Incorporation and Code of Regulations, CNBC has no shareholder
rights plan or any other plan, program or agreement involving, restricting,
prohibiting or discouraging a change in control or merger of CNBC or which may
be considered an anti-takeover mechanism.
5.25. Indemnification Agreements. Except as set forth in the Disclosure
Letter, neither CNBC nor any Subsidiary is a party to any indemnification,
indemnity or reimbursement agreement, contract, commitment or understanding to
indemnify any present or former director, officer, employee, shareholder or
agent against any liability or hold the same harmless from liability other than
as expressly provided in the charter documents of CNBC or the Subsidiary.
5.26. Bring Down of Representations and Warranties. Subject to Section
5.01 hereof, all representations and warranties of CNBC and the Subsidiaries
contained in this Section 5 shall be true, accurate and correct on and as of the
Effective Date except as affected by the transactions contemplated by and
specified within the terms of this Agreement.
5.27. Nonsurvival of Representations and Warranties. The
representations and warranties contained in this Section 5 shall expire on the
Effective Date or the earlier termination of this Agreement, and thereafter CNBC
and the Subsidiaries and all directors and officers of CNBC and the Subsidiaries
shall have no further liability with respect thereto unless a court of competent
jurisdiction should determine that any misrepresentation or breach of a warranty
was willfully or intentionally made or is deemed to be fraudulent.
SECTION 6
Representations and
Warranties of First Merchants
First Merchants hereby represents and warrants to CNBC as follows: (For
the purposes of this Section, a "Disclosure Letter" is defined as a letter
referencing Section 6 of this Agreement which shall be prepared and executed by
an authorized executive officer of First Merchants and delivered to and executed
by an authorized executive officer of CNBC contemporaneous with the execution of
this Agreement.)
6.01. Standard. No representation or warranty of First Merchants
contained in Section 6 of this Agreement shall be deemed untrue or incorrect,
and no party hereto shall be deemed to have breached a representation or
warranty, as a consequence of the existence of any fact, event or circumstance
unless such fact, event or circumstance (either individually or taken together
with all other facts, events or circumstances inconsistent with such or with any
representation or warranty contained in Section 6) has had, or is reasonably
likely to have, a Material Adverse Effect (as defined in Section 13.10).
6.02. Organization and Qualification. First Merchants is a
corporation duly organized and validly existing under the laws of the State of
Indiana and has the corporate power and authority to conduct its business in
the manner and by the means utilized as of the date hereof.
6.03. Authorization.
(a) First Merchants has the corporate power and authority to
enter into this Agreement and to carry out its obligations hereunder
subject to certain required regulatory approvals. The Agreement, when
executed and delivered, will have been duly authorized and will
constitute a valid and binding obligation of First Merchants,
enforceable in accordance with its terms, except to the extent limited
by insolvency, reorganization, liquidation, readjustment of debt, or
other laws of general application relating to or affecting the
enforcement of creditor's rights.
(b) Neither the execution of this Agreement, nor the
consummation of the transactions contemplated hereby, does or will (i)
conflict with, result in a breach of, or constitute a default under
First Merchants' Articles of Incorporation or By-laws; (ii) conflict
with, result in a breach of, or constitute a default under any federal,
foreign, state or local law, statute, ordinance, rule, regulation, or
court or administrative order or decree, or any note, bond, indenture,
mortgage, security agreement, contract, arrangement, or commitment, to
which First Merchants is subject or bound; (iii) result in the creation
of or give any person, corporation or entity, the right to create any
lien, charge, claim, encumbrance, security interest, or any other
rights of others or other adverse interest upon any right, property or
asset of First Merchants; (iv) terminate or give any person,
corporation or entity the right to terminate, amend, abandon, or refuse
to perform any note, bond, indenture, mortgage, security agreement,
contract, arrangement, or commitment to which First Merchants is a
party or by which First Merchants is subject or bound; or (v)
accelerate or modify, or give any party thereto the right to accelerate
or modify, the time within which, or the terms according to which,
First Merchants is to perform any duties or obligations or receive any
rights or benefits under any note, bond, indenture, mortgage, security
agreement, contract, arrangement, or commitment.
(c) Other than in connection or in compliance with the provisions of the
Bank Holding Company Act of 1956, federal and state securities laws,
and applicable Indiana banking and corporate statutes, all as amended,
and the rules and regulations promulgated thereunder, no notice to,
filing with, authorization of, exemption by, or consent or approval of,
any public body or authority is necessary for the consummation by First
Merchants of the transactions contemplated by this Agreement.
(d) Other than those filings, authorizations, consents and
approvals referenced in Section 6.03(c) above and filings and approvals
relating to the listing of the shares of First Merchants common stock
to be issued in the Merger on the National Market System of NASDAQ and
certain other filings and approvals with NASDAQ relating to the change
in the number of shares of First Merchants outstanding as a result of
the Merger, no notice to, filing with, authorization of, execution by,
or consent or approval of, any third party is necessary for the
consummation by First Merchants of the transactions contemplated by
this Agreement.
6.04. Capitalization.
(a) As of August 20, 2002, First Merchants had 50,000,000
shares of common stock authorized, no par value, of which 15,495,804
shares were issued and outstanding. Such issued and outstanding shares
of First Merchants' common stock have been duly and validly authorized
by all necessary corporate action of First Merchants, are validly
issued, fully paid and nonassessable and have not been issued in
violation of any preemptive rights of any shareholders.
(b) First Merchants has 500,000 shares of Preferred Stock
authorized, no par value, no shares of which have been issued and no
commitments exist to issue any of such shares.
(c) The shares of First Merchants' common stock to be issued
pursuant to the Merger will be duly authorized, fully paid, validly
issued and nonassessable and subject to no preemptive rights.
6.05. Organizational Documents. The Articles of Incorporation and
By-laws of First Merchants in force as of the date hereof have been delivered to
CNBC. The documents delivered by it represent true, accurate and complete copies
of the corporate documents of First Merchants in effect as of the date of this
Agreement.
6.06. Litigation and Pending Proceedings. Except as set forth in the
Disclosure Letter, there are no claims of any kind, nor any action, suits,
proceedings, arbitrations or investigations pending, or to the knowledge of
First Merchants, threatened, in any court or before any government agency or
body, arbitration panel or otherwise (nor does First Merchants have any
knowledge of a basis for any claim, action, suit, proceeding, arbitration or
investigation) against First Merchants or any of its subsidiaries. There are no
uncured violations, or violations with respect to which refunds or restitutions
may be required, cited in any compliance report to First Merchants or its
subsidiary, First Merchants Bank, National Association, as a result of an
examination by any regulatory agency or body.
6.07. Financial Statements.
(a) First Merchants' consolidated balance sheets as of the end
of the two fiscal years ended December 31, 2001 and 2000 and the six
(6) months ended June 30, 2002 and the related consolidated statements
of income, shareholders' equity and cash flows for the years or period
then ended ("First Merchants Financial Information") present fairly the
consolidated financial condition or position of First Merchants as of
the respective dates thereof and the consolidated results of operations
of First Merchants for the respective periods covered thereby and have
been prepared in conformity with generally accepted accounting
principles applied on a consistent basis. The First Merchants financial
statements as of and for the two (2) fiscal years ended December 31,
2001 and 2000 are audited financial statements.
(b) All loans reflected in the First Merchants Financial
Information and which have been made, extended or acquired since June
30, 2002, (i) have been made for good, valuable and adequate
consideration in the ordinary course of business; (ii) constitute the
legal, valid and binding obligation of the obligor and any guarantor
named therein; (iii) are evidenced by notes, instruments or other
evidences of indebtedness which are true, genuine and what they purport
to be; and (iv) to the extent that a banking subsidiary of First
Merchants has a security interest in collateral or a mortgage securing
such loans, are secured by perfected security interests or mortgages
naming the banking subsidiary as the secured party or mortgagee.
6.08. Loans and Investments.
(a) Except as set forth in the Disclosure Letter, as of June
30, 2002, there was no loan of First Merchants Bank, National
Association in excess of $100,000 that had been classified by bank
regulatory examiners as "Other Loans Specially Mentioned,"
"Substandard," "Doubtful" or "Loss." All loans of First Merchants Bank,
National Association as of June 30, 2002, in excess of $100,000 that
management has determined to be ninety (90) days or more past due with
respect to principal or interest or has placed on nonaccrual status are
set forth in the Disclosure Letter.
(b) Each of the reserves and allowances for possible loan losses and the
carrying value for real estate owned which are shown on the First
Merchants Financial Information is, in the opinion of First Merchants,
adequate under the requirements of generally accepted accounting
principles applied on a consistent basis to provide for possible losses
on loans outstanding and real estate owned as of the date of such First
Merchants Financial Information.
(c) Except as set forth in the Disclosure Letter, none of the investments
reflected in the First Merchants Financial Information and none of the
investments made by First Merchants or its subsidiary since June 30,
2002 is subject to any restrictions, whether contractual or statutory,
which impairs the ability of First Merchants or its subsidiary, First
Merchants Bank, National Association, to dispose freely of such
investment at any time. Except as set forth in the Disclosure Letter,
neither First Merchants nor its subsidiary, First Merchants Bank,
National Association, is a party to any repurchase agreements with
respect to securities.
6.09. Employee Benefit Plans.
(a) The Disclosure Letter contains a list identifying each
"employee benefit plan," as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), which (i)
is subject to any provision of ERISA, and (ii) is maintained,
administered or contributed to by First Merchants or its subsidiaries
and covers any employee, director or former employee or director of
First Merchants or its subsidiaries under which First Merchants or any
of its subsidiaries has any liability. Copies of such plans (and, if
applicable, related trust agreements or insurance contracts) and all
amendments thereto and written interpretations thereof have been
furnished to CNBC together with the three most recent annual reports
prepared in connection with any such plan and the current summary plan
descriptions. Such plans are hereinafter referred to individually as a
"First Merchants Employee Plan" and collectively as the "First
Merchants Employee Plans." The First Merchants Employee Plans which
individually or collectively would constitute an "employee pension
benefit plan" as defined in Section 3(2)(A) of ERISA are identified in
the list referred to above.
(b) The First Merchants Employee Plans comply with and have
been operated in compliance with all applicable laws, regulations,
rulings and other requirements. Each First Merchants Employee Plan has
been administered in substantial conformance with such requirements and
all reports and information required with respect to each First
Merchants Employee Plan have been timely given.
(c) No "prohibited transaction," as defined in Section 406 of
ERISA or Section 4975 of the Code, for which no statutory or
administrative exemption exists, and no "reportable event," as defined
in Section 4043(b) of ERISA, for which a notice is required to be
filed, has occurred with respect to any First Merchants Employee Plan.
Neither First Merchants nor any of its subsidiaries has any outstanding
liability to the Pension Benefit Guaranty Corporation ("PBGC"), or any
liability to the Internal Revenue Service ("IRS"), to the Department of
Labor ("DOL") or to an employee or First Merchants Employee Plan
beneficiary under Section 502 of ERISA.
(d) To the knowledge of First Merchants, no "fiduciary," as
defined in Section 3(21) of ERISA, of a First Merchants Employee Plan
has failed to comply with the requirements of Section 404 of ERISA.
(e) Each of the First Merchants Employee Plans which is
intended to be qualified under Code Section 401(a) has been amended to
comply with the applicable requirements of the Code, including the Tax
Reform Act of 1986, the Revenue Act of 1987, the Technical and
Miscellaneous Revenue Act of 1988, the Omnibus Budget Reconciliation
Act of 1989, the Revenue Reconciliation Act of 1990, the Tax Extension
Act of 1991, the Unemployment Compensation Amendments of 1992, the
Omnibus Budget Reconciliation Act of 1993, and the Retirement
Protection Act of 1994 and any rules, regulations or other requirements
promulgated thereunder (the "Acts"). In addition, each such First
Merchants Employee Plan has been and is being operated in substantial
conformance with the applicable provisions of ERISA and the Code, as
amended by the Acts, including operational compliance with the Uruguay
Round Agreements Act, the Uniformed Services Employment and
Reemployment Rights Act of 1994, the Small Business Job Protection Act
of 1996, the Taxpayer Relief Act of 1997, and the Internal Revenue
Service Restructuring and Reform Act of 1998 (even though actual plan
amendments do not have to be made until the last day of the 2001 plan
year). Except as set forth in the Disclosure Letter, First Merchants
and/or its subsidiaries, as applicable, sought and received favorable
determination letters from the IRS within the applicable remedial
amendment periods under Code Section 401(b), and have furnished to CNBC
copies of the most recent IRS determination letters with respect to any
such First Merchants Employee Plan.
(f) No First Merchants Employee Plan has incurred an
"accumulated funding deficiency," as determined under Code Section 412
and ERISA Section 302.
(g) No First Merchants Employee Plan has been terminated or
incurred a partial termination (either voluntarily or involuntarily).
(h) No claims against a First Merchants Employee Plan, First
Merchants, or any of its subsidiaries, with respect to a First
Merchants Employee Plan (other than normal benefit claims), have been
asserted or, to the knowledge of First Merchants, threatened.
(i) To the knowledge of First Merchants, no event has occurred
that would cause the imposition of the tax described in Code Section
4980B. To the knowledge of First Merchants, all requirements of ERISA
Section 601 have been met.
(j) Except as set forth in the Disclosure Letter, there has
been no amendment to, written interpretation or announcement (whether
or not written) by First Merchants or any of its subsidiaries relating
to, or change in employee participation or coverage under, any First
Merchants Employee Plan which would increase the expense of maintaining
such First Merchants Employee Plans above the level of the expense
incurred in respect thereof for the fiscal year ended December 31,
2001.
(k) For purposes of this Section 6.09, references to First
Merchants or its subsidiaries are deemed to include (i) all
predecessors of First Merchants or its subsidiaries, (ii) all members
of any controlled group (as determined under Code Section 414(b) or
(c)) that includes First Merchants or any of its subsidiaries, and
(iii) all members of any affiliated service group (as determined under
Code Section 414(m) or (n)) that includes First Merchants or any of its
subsidiaries.
6.10. Taxes, Returns and Reports. First Merchants and its subsidiaries
have (a) duly filed all federal, state, local and foreign tax returns of every
type and kind required to be filed as of the date hereof, and each return is
true, complete and accurate; (b) paid all taxes, assessments and other
governmental charges due and payable or claimed to be due and payable upon them
or any of their income, properties or assets; and (c) not requested an extension
of time for any such payments (which extension is still in force). Except for
taxes not yet due and payable, the reserve for taxes on the First Merchants
Financial Information is adequate to cover all of First Merchants' and its
subsidiaries' tax liabilities (including, without limitation, income taxes and
franchise fees) that may become payable in future years with respect to any
transactions consummated prior to June 30, 2002. Neither First Merchants nor any
of its subsidiaries has, or will have, any liability for taxes of any nature for
or with respect to the operation of their business, including the assets of any
subsidiary, from June 30, 2002, up to and including the Effective Date, except
to the extent reflected on financial statements of First Merchants subsequent to
such date. Neither First Merchants nor any of its subsidiaries is currently
under audit by any state or federal taxing authority. Except as set forth in the
Disclosure Letter, neither the federal, state, or local tax returns of First
Merchants or its subsidiaries have been audited by any taxing authority during
the past five (5) years.
6.11. Reports. Since January 1, 1997, First Merchants and its
subsidiaries have timely filed all reports, registrations and statements,
together with any required amendments thereto, that it was required to file with
the Regulatory Authorities having jurisdiction over the affairs of either First
Merchants or its subsidiaries. All such reports filed by First Merchants and its
subsidiaries complied with all the rules and regulations promulgated by the
applicable Regulatory Authorities and are true, accurate and complete and were
prepared in conformity with generally accepted regulatory accounting principles
applied on a consistent basis. Except as set forth in the Disclosure Letter,
there is no unresolved violation, criticism or exception by any of the
Regulatory Authorities with respect to any report or statement filed by, or any
examinations of, First Merchants or its subsidiary, First Merchants Bank,
National Association.
6.12. Absence of Defaults. First Merchants is not in violation of its
charter documents or By-Laws or in default under any material agreement,
commitment, arrangement, loan, lease, insurance policy or other instrument,
whether entered into in the ordinary course of business or otherwise and 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.
6.13. Accuracy of Statements. The representations and warranties
contained in this Section 6 do not contain any untrue statements of a material
fact or omit to state a material fact necessary to make the statements contained
in this Section 6, in light of the circumstances in which they are made, not
misleading.
6.14. Compliance With Law. First Merchants has not engaged in any
activity nor taken or omitted to take any action which has resulted, or to the
knowledge of First Merchants, could result, in the violation of any local,
state, federal or foreign law, statute, rule, regulation or ordinance or of any
order, injunction, judgment or decree of any court or government agency or body.
First Merchants possesses all licenses, franchises, permits and other
authorizations necessary for the continued conduct of its business without
interference or interruption. There are no agreements or understandings with,
nor any orders or directives of, any regulatory agencies or government
authorities, which would have a Material Adverse Effect. First Merchants has
received no written inquiries from any regulatory agency or government authority
relating to its compliance with the Bank Secrecy Act, the Truth-in-Lending Act
or the Community Reinvestment Act or any laws with respect to the protection of
the environment or the rules and regulations promulgated thereunder. First
Merchants has received no inquiries from any regulatory agency or government
authority relating to its compliance with any securities laws applicable to
First Merchants.
6.15. Absence of Certain Changes. Except for events and conditions
relating to the business and interest rate environment in general and the
accrual or payment of Merger-related expenses, since June 30, 2002, no events
have occurred, or, to the knowledge of First Merchants, can reasonably be
expected to occur, which could reasonably be expected to have a Material Adverse
Effect.
6.16. First Merchants Securities and Exchange Commission Filings. First
Merchants has complied with all state, federal or foreign securities laws,
statutes, rules, regulations or orders, injunctions or decrees of any government
agency relating thereto. First Merchants has filed all reports and other
documents required to be filed by it under the Securities Exchange Act of 1934
and the Securities Act of 1933, including First Merchants' Annual Report on Form
10-K for the year ended December 31, 2001, and Quarterly Report on Form 10-Q for
the quarter ended June 30, 2002, copies of which have previously been delivered
to CNBC. All such Securities and Exchange Commission ("SEC") filings were true,
accurate and complete in all material respects as of the dates of the filings,
and no such filings contained any untrue statement of a material fact or omitted
to state a material fact necessary in order to make the statements, at the time
and in the light of the circumstances under which they were made, not false or
misleading.
6.17. Environmental Matters.
(a) Neither First Merchants nor any of its subsidiaries has
caused or allowed the generation, treatment, storage, disposal or
release at any real property owned or leased by them of any Toxic
Substance, except in accordance with all applicable federal, state and
local laws and regulations.
(b) Except as disclosed in the Disclosure Letter, there are no
underground storage tanks located on, in or under any real property
owned by First Merchants or any of its subsidiaries and no such owned
real property has previously contained an underground storage tank.
Neither First Merchants nor any of its subsidiaries own or operate any
underground storage tank at any real property leased by them and no
such leased real property has previously contained an underground
storage tank. No such owned or leased real property is or has been
listed on the CERCLIS.
(c) No Toxic Substance has been released, spilled, discharged
or disposed at, in, on or under any real property owned or leased by
First Merchants or any of its subsidiaries nor are there any other
conditions or circumstances affecting any real property owned or leased
by First Merchants or any of its subsidiaries, in each case, that would
require remediation, corrective action or clean-up under applicable
laws or regulations.
6.18. Absence of Undisclosed Liabilities. First Merchants has no
liabilities or obligations of any type (whether accrued, contingent, absolute,
fixed or otherwise) that are required by generally accepted accounting
principles to be reflected or reserved against on a balance sheet prepared in
accordance with generally accepted accounting principles or the notes thereto
that were not (i) fully reflected against or otherwise disclosed in the First
Merchants Financial Information or (ii) incurred in the ordinary course of
business since December 31, 2001.
6.19. Deposit Insurance. The deposits of First Merchants' bank
subsidiaries are insured by the FDIC in accordance with the Federal Deposit
Insurance Act, and its bank subsidiaries have paid all premiums and assessments
with respect to such deposit insurance.
6.20. Broker's or Finder's Fees. No agent, broker or other person
acting on behalf of First Merchants or under any authority of First Merchants is
or shall be entitled to any commission, broker's or finder's fee or any other
form of compensation or payment from any of the parties hereto, other than
attorneys' or accountants' fees or fees payable to third parties in connection
with the financing of the cash portion of the consideration to be paid in
connection with the Merger, in connection with any of the transactions
contemplated by this Agreement.
6.21. Bring Down of Representations and Warranties. Subject to Section
6.01 hereof, all representations and warranties of First Merchants contained in
this Section 6 shall be true, accurate and correct on and as of the Effective
Date except as affected by the transactions contemplated by and specified within
the terms of this Agreement.
6.22. Nonsurvival of Representations and Warranties. The
representations and warranties contained in this Section 6 shall expire on the
Effective Date or the earlier termination of this Agreement, and thereafter
First Merchants and all directors and officers of First Merchants shall have no
further liability with respect thereto unless a court of competent jurisdiction
should determine that any misrepresentation or breach of a warranty was
willfully or intentionally made or is deemed to be fraudulent.
SECTION 7
Covenants of CNBC
CNBC covenants and agrees with First Merchants, and covenants and
agrees to cause the Subsidiaries to act, as follows:
7.01. Shareholder Approval. CNBC shall submit this Agreement to its
shareholders for approval at a meeting to be called and held in accordance with
applicable law and the Articles of Incorporation and Code of Regulations of CNBC
at the earliest possible reasonable date, and, subject to Section 7.05 hereof,
the Board of Directors of CNBC shall recommend to the shareholders of CNBC that
such shareholders approve this Agreement and shall not thereafter withdraw or
modify its recommendation. The Board of Directors of CNBC shall use its
reasonable best efforts to obtain any vote of its shareholders necessary for the
approval of this Agreement.
7.02. Other Approvals. CNBC and the Subsidiaries shall cooperate fully
and use their reasonable best efforts to procure upon reasonable terms and
conditions all consents, authorizations, approvals, registrations and
certificates, to complete all filings and applications and to satisfy all other
requirements prescribed by law which are necessary for consummation of the
Merger on the terms and conditions provided in this Agreement at the earliest
possible reasonable date.
7.03. Conduct of Business.
(a) On and after the date of this Agreement and until the
Effective Date or until this Agreement shall be terminated as herein
provided, neither CNBC nor any Subsidiary shall, without the prior
written consent of First Merchants, (i) make any changes in their
capital structure including, but not limited to, the redemption of any
CNBC common shares; (ii) authorize a class of stock or, except for the
issuance of common shares upon the exercise of stock options as
described in Section 7.12 hereof, issue, or authorize the issuance of,
stock other than or in addition to the outstanding stock as set forth
in Section 5.04 hereof; (iii) declare, distribute or pay any dividends
on their common shares, or authorize a stock split, or make any other
distribution to their shareholders, except for (a) the payment by CNBC
prior to the Effective Date of quarterly cash dividends on its common
shares in the amount of $0.10 per share (provided the declaration of
the last dividend by CNBC prior to the Effective Date and the payment
thereof shall be coordinated with First Merchants so that the holders
of CNBC common shares do not receive dividends on both CNBC common
shares and First Merchants common stock received in the Merger in
respect of such quarter or fail to receive a dividend on at least one
of the CNBC common shares or First Merchants common stock received in
the Merger in respect of such quarter), and (b) the payment by the
Subsidiaries to CNBC of dividends to pay CNBC's expenses of operations
and its business and payment of fees and expenses incurred in
connection with the transactions contemplated by this Agreement; (iv)
except as set forth in the Disclosure Letter, merge, combine or
consolidate with or sell their assets or any of their securities to any
other person, corporation or entity, effect a share exchange or enter
into any other transaction not in the ordinary course of business; (v)
except as set forth in the Disclosure Letter, incur any liability or
obligation, make any commitment, payment or disbursement, enter into
any contract, agreement, understanding or arrangement or engage in any
transaction, or acquire or dispose of any property or asset having a
fair market value in excess of $50,000.00 (except for personal or real
property acquired or disposed of in connection with foreclosures on
mortgages, enforcement of security interests and loans made or sold by
the Bank in the ordinary course of business or acceptance of deposits
and borrowings in the ordinary course of business); (vi) subject any of
their properties or assets to a mortgage, lien, claim, charge, option,
restriction, security interest or encumbrance; (vii) promote or
increase or decrease the rate of compensation or enter into any
agreement to promote or increase or decrease the rate of compensation
of any director, officer or employee of CNBC or any Subsidiary (except
for promotions and increases in the ordinary course of business and in
accordance with past practices); (viii) except as set forth in the
Disclosure Letter or otherwise specifically authorized by this
Agreement, execute, create, institute, modify or amend any pension,
retirement, savings, stock purchase, stock bonus, stock ownership,
stock option, stock appreciation or depreciation right or profit
sharing plans, any employment, deferred compensation, consultant, bonus
or collective bargaining agreement, group insurance contract or other
incentive, welfare or employee benefit plan or agreement for current or
former directors, officers or employees of CNBC or any Subsidiary,
change the level of benefits or payments under any of the foregoing or
increase or decrease any severance or termination pay benefits or any
other fringe or employee benefits other than as required by law or
regulatory authorities or specifically provided for in this Agreement;
(ix) amend their Articles of Incorporation or Association, Code of
Regulations, By-Laws, Certificate of Trust or Trust Agreement, as
applicable, from those in effect on the date of this Agreement; (x)
except as set forth in the Disclosure Letter or otherwise specifically
authorized by this Agreement, modify, amend or institute new employment
policies or practices, or enter into, renew or extend any employment or
severance agreements with respect to any present or former CNBC or
Subsidiary directors, officers or employees; (xi) give, dispose, sell,
convey, assign, hypothecate, pledge, encumber or otherwise transfer or
grant a security interest in any capital stock of any Subsidiary; (xii)
fail to make additions to the Bank's reserve for loan losses, or any
other reserve account, in the ordinary course of business and in
accordance with past practices; (xiii) other than in the ordinary
course of business consistent with past practice, incur any
indebtedness for borrowed money or assume, guarantee, endorse or
otherwise as an accommodation become responsible or liable for the
obligations of any other individual, corporation or other entity; and
(xiv) agree in writing or otherwise to take any of the foregoing
actions.
(b) CNBC and the Subsidiaries shall maintain, or cause to be
maintained, in full force and effect insurance on its properties and
operations and on the Leased Real Property and fidelity coverage on its
directors, officers and employees in such amounts and with regard to
such liabilities and hazards as currently in effect and in accordance
with past practices.
(c) CNBC and the Subsidiaries shall continue to give to First
Merchants and its employees, accountants, attorneys and other
authorized representatives reasonable access during regular business
hours and other reasonable times to all their premises, properties,
statements, books and records.
7.04. Preservation of Business. On and after the date of this Agreement
and until the Effective Date or until this Agreement is terminated as herein
provided, CNBC and the Subsidiaries each shall (a) carry on their business
substantially in the same manner as heretofore conducted; (b) use their
reasonable best efforts to preserve their business organizations intact, to keep
their present officers and employees and to preserve their present relationship
with customers and others having business dealings with them; and (c) not do or
fail to do anything which will cause a material breach of, or material default
in, any contract, agreement, commitment, obligation, understanding, arrangement,
lease or license to which they are a party or by which they are or may be
subject or bound.
7.05. Other Negotiations. On and after the date of this Agreement and
until the Effective Date, CNBC and the Subsidiaries shall not, and shall not
permit or authorize their respective directors, officers, employees, agents or
representatives to, directly or indirectly, initiate, solicit, encourage, or
engage in discussions or negotiations with, or provide information to, any
corporation, association, partnership, person or other entity or group
concerning any proposal by such corporation, association, partnership, person or
other entity or group for a merger, consolidation, share exchange, combination,
purchase or sale of substantial assets, sale of shares of capital stock (or
securities convertible or exchangeable into or otherwise evidencing, or any
agreement or instrument evidencing the right to acquire, capital stock), tender
offer, acquisition of control of CNBC or any Subsidiary or similar transaction
involving CNBC or any Subsidiary (all such transactions hereinafter referred to
as an "Acquisition Transaction"). CNBC and the Subsidiaries shall promptly
communicate to First Merchants the terms of any written proposal or offer which
any of them may receive with respect to an Acquisition Transaction and any
written indication of interest or letter of intent on the part of any third
party with respect to initiation of any Acquisition Transaction. The above
provisions of this Section 7.05 notwithstanding, nothing contained in this
Agreement shall prohibit (i) CNBC from furnishing information to, or entering
into discussions or negotiations with, any person or entity that makes an
unsolicited proposal of an Acquisition Transaction if and to the extent that (a)
the Board of Directors of CNBC, after consultation with legal counsel and its
investment banker, determines in good faith that such action is required for the
directors of CNBC to fulfill their fiduciary duties and obligations to CNBC's
shareholders and other constituencies under Ohio law, and (b) prior to
furnishing such information to, or entering into discussions or negotiations
with, such person or entity, CNBC provides prompt written notice to First
Merchants to the effect that it is furnishing information to, or entering into
discussions or negotiations with, such person or entity, or (ii) notwithstanding
the provisions of Section 7.01, the Board of Directors of CNBC from failing to
make, withdrawing or modifying its recommendation to shareholders regarding the
Merger following receipt of a proposal for an Acquisition Transaction if the
Board of Directors of CNBC, after consultation with and based upon the advice of
legal counsel and its investment banker, determines in good faith that such
action is required for the directors of CNBC to fulfill their fiduciary duties
and obligations to CNBC's shareholders and other constituencies under Ohio law.
7.06. Restrictions Regarding Affiliates. CNBC shall, within thirty (30)
days after the date of this Agreement and promptly thereafter until the
Effective Date to reflect any changes or upon the reasonable request of First
Merchants, provide First Merchants with a list identifying each person who may
reasonably be deemed to be an "affiliate" of CNBC within the meaning of such
term as used in Rule 145 under the Securities Act of 1933, as amended (the "1933
Act"). Each director, executive officer and other person who is an "affiliate"
of CNBC for purposes of the 1933 Act shall deliver to First Merchants, at least
thirty-one (31) days prior to the Effective Date, a written agreement, in form
and substance satisfactory to counsel to First Merchants, regarding compliance
by each such person with the provisions of such Rule 145.
7.07. Press Release. Except as required by law, neither CNBC nor any
Subsidiary shall issue any press releases or make any other public announcements
or disclosures relating to the Merger without the prior approval of First
Merchants, which approval will not be unreasonably withheld.
7.08. Disclosure Letter. CNBC shall supplement, amend and update as of
the Effective Date the Disclosure Letter with respect to any matters hereafter
arising which if in existence or having occurred as of the date of this
Agreement would have been required to be set forth or described in the
Disclosure Letter.
7.09. Confidentiality. CNBC and the Subsidiaries shall use their best
efforts to cause their respective officers, employees, and authorized
representatives to, hold in strict confidence all confidential data and
information obtained by them from First Merchants, unless such information (i)
was already known to CNBC and the Subsidiaries, (ii) becomes available to CNBC
and the Subsidiaries from other sources, (iii) is independently developed by
CNBC and the Subsidiaries, (iv) is disclosed outside of CNBC and the
Subsidiaries with and in accordance with the terms of prior written approval of
First Merchants, or (v) is or becomes readily ascertainable from public or
published information or trade sources or public disclosure of such information
is required by law or requested by a court or other governmental agency,
commission, or regulatory body. CNBC and the Subsidiaries further agree that in
the event this Agreement is terminated, it will return to First Merchants all
information obtained by CNBC and the Subsidiaries regarding First Merchants,
including all copies made of such information by CNBC and the Subsidiaries. This
provision shall survive the Effective Date or the earlier termination of this
Agreement.
7.10. Cooperation. CNBC shall generally cooperate with First Merchants
and its officers, employees, attorneys, accountants and other agents, and,
generally, do such other acts and things in good faith as may be reasonable,
necessary or appropriate to timely effectuate the intents and purposes of this
Agreement and the consummation of the transactions contemplated hereby,
including, without limitation, (i) CNBC shall cooperate and assist First
Merchants in preparation of and/or filing of all regulatory applications, the
registration statement for registration of First Merchants' shares, and all
other documentation required to be prepared for consummation of the Merger and
obtaining all necessary approvals, and (ii) CNBC shall furnish First Merchants
with all information concerning itself and the Subsidiaries that First Merchants
may request in connection with the preparation of the documentation referenced
above. Prior to the Closing (as defined in Section 12 hereof), CNBC agrees to
disclose to First Merchants in writing any fact or matter that comes to the
attention of CNBC that might indicate that any of the representations or
warranties of CNBC may be untrue, incorrect, or misleading in any material
respect and such disclosure shall be made by CNBC promptly upon discovery of
such fact or matter.
7.11. Letter to CNBC's Shareholders. Within five (5) business days
after execution of this Agreement by CNBC and First Merchants, CNBC shall
deposit in the United States mail a letter to each of the shareholders of record
of CNBC as of the date of execution of this Agreement informing each shareholder
about the execution of this Agreement and the proposed Merger. The terms of such
letter to the shareholders of CNBC shall be in a form mutually agreed to by
First Merchants and CNBC.
7.12. Exercise of Options. CNBC shall use its best efforts to cause the stock
options disclosed pursuant to Section 5.04(d) hereof to be exercised on or
immediately before the Effective Date. CNBC shall use its best efforts to cause
each exercised non-qualified stock option to be exchanged for a cash payment to
each holder thereof to be paid on or before the Effective Date by CNBC in an
amount equal to $29.57 minus the applicable exercise price per CNBC common share
issuable upon exercise of such non-qualified stock option, multiplied by the
number of CNBC common shares issuable upon exercise of such non-qualified
option. In respect of incentive stock options, each holder thereof shall have
the option to surrender for cash on or prior to the Effective Date, as specified
above, or surrender the option on a net issuance basis exercise and receive CNBC
common shares issuable upon such exercise on or prior to the Effective Date.
Immediately prior to the Effective Date, CNBC shall have no more than 2,076,572
common shares outstanding. On or prior to the Effective Date, CNBC shall take
all action necessary to terminate all stock option plans of CNBC and shall use
its best efforts, including using its best efforts to obtain necessary consents
from optionees, to permit termination of any outstanding CNBC stock options at
the Effective Date. From and after the date hereof, CNBC covenants that no
additional stock options or stock appreciation rights shall be granted by CNBC
under any stock option plans of CNBC or otherwise.
7.13. SEC and Other Reports.
(a) Promptly upon its becoming available, CNBC shall furnish
to First Merchants one (1) copy of each financial statement, report,
notice, or proxy statement sent by CNBC to its shareholders generally
and of each regular or periodic report, registration statement or
prospectus filed by CNBC with NASDAQ or the SEC or any successor
agency, of any order issued by any Governmental Authority in any
proceeding to which CNBC is a party, and of any notice or communication
received by CNBC from NASDAQ or the SEC. For purposes of this
provision, "Governmental Authority" shall mean any government (or any
political subdivision or jurisdiction thereof), court, bureau, agency
or other governmental entity having or asserting jurisdiction over CNBC
or any of its respective businesses, operations or properties.
(b) None of the information supplied or to be supplied by CNBC
for inclusion or incorporation by reference in (i) the Registration
Statement (as defined in Section 8.01 hereof) will, at the time the
Registration Statement and each amendment or supplement thereto, if
any, becomes effective under the Securities Act of 1933, as amended,
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements contained therein, in
light of the circumstances in which they are made, not misleading, and
(ii) the Proxy Statement (as defined in Section 8.01 hereof) and any
amendment or supplement thereto will, at the date of mailing, contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements contained therein, in light of
the circumstances in which they are made, not misleading.
7.14. Adverse Actions. CNBC shall not (a) take any action while knowing
that such action would, or is reasonably likely to, prevent or impede the Merger
from qualifying as a reorganization within the meaning of Section 368 of the
Code; or (b) knowingly take any action that is intended or is reasonably likely
to result in (i) any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect at any time at or
prior to the Effective Date, (ii) any of the conditions to the Merger set forth
in Section 9 not being satisfied, (iii) a material violation of any provision of
this Agreement, or (iv) a material delay in the consummation of the Merger
except, in each case, as may be required by applicable law or regulation.
SECTION 8
Covenants of First Merchants
First Merchants covenants and agrees with CNBC as follows:
8.01. Approvals. First Merchants shall proceed expeditiously, cooperate
fully and use its best efforts to procure upon reasonable terms and conditions
all consents, authorizations, approvals, registrations and certificates, to
complete all filings and applications and to satisfy all other requirements
prescribed by law which are necessary for consummation of the Merger on the
terms and conditions provided in this Agreement at the earliest possible
reasonable date. First Merchants agrees to use its best efforts to raise any
additional capital which might be required to obtain any required regulatory
approvals of the Merger. First Merchants shall provide CNBC with copies of
proposed regulatory filings in connection with the Merger and afford CNBC the
opportunity to offer comment on the filings before filing. Not in limitation of
the foregoing, First Merchants agrees to prepare a registration statement on
Form S-4 (the "Registration Statement"), to be filed by First Merchants with the
SEC in connection with the issuance of First Merchants common stock in the
Merger (including the proxy statements and prospectus and other proxy
solicitation materials of CNBC constituting a part thereof (the "Proxy
Statement") and all related documents). The Proxy Statement shall fully disclose
that CNBC's shareholders have dissenters' rights under Ohio Revised Code ss.
1701.84 and ss. 1701.85. First Merchants agrees to advise CNBC, promptly after
First Merchants receives notice thereof, of the time when the Registration
Statement has become effective or any supplement or amendment has been filed, of
the issuance of any stop order or the suspension of the qualification of First
Merchants common stock for offering or sale in any jurisdiction, of the
initiation or threat of any proceeding for any such purpose, or of any request
by the SEC for the amendment or supplement of the Registration Statement or for
additional information. First Merchants agrees to use its reasonable best
efforts to list, prior to the Effective Date, on the National Market System of
NASDAQ (subject to official notice of issuance), the shares of First Merchants
common stock to be issued to the holders of CNBC common shares in the Merger.
8.02. Employee Benefit Plans.
(a) Coverage Under First Merchants' Plans. No later than
January 1, 2004, First Merchants will cover the Subsidiaries' employees
under any tax-qualified retirement plan First Merchants maintains for
its employees, provided that such an employee meets the applicable
participation requirements, in lieu of the Subsidiaries' current
tax-qualified retirement plan. Until that time, the Subsidiaries'
current tax-qualified retirement plan will be maintained at the same
level, with respect to benefit accruals, provided for on the Effective
Date. Following the Effective Date, the Subsidiaries' employees will
otherwise receive employee benefits that in the aggregate are
substantially similar to the employee benefits provided to those
employees by CNBC or the Subsidiaries on the Effective Date. For
purposes of determining a CNBC or Subsidiaries' employee's service
under a First Merchants' employee benefit plan that the employee is
permitted to enter, service with CNBC or the Subsidiaries will be
treated as service with First Merchants; provided, however, that except
as set forth in the next sentence, service with CNBC or the
Subsidiaries shall not be treated as service with First Merchants for
purposes of benefit accrual under any employee pension benefit plan (as
defined in ERISA Section 3(2)) of First Merchants. For purposes of such
employee pension benefit plan benefit accrual, service with the
Subsidiaries on or after the Effective Date will be treated as service
with First Merchants. Once the Subsidiaries' employees are covered
under First Merchants' tax-qualified retirement plans, First Merchants,
in its sole discretion, shall determine whether CNBC's and the
Subsidiaries' tax-qualified retirement plan(s) are terminated or merged
into First Merchants' plan(s).
(b) Coverage Under First Merchants' Health Plan. With respect
to First Merchant's health plans under which employees of the
Subsidiaries become participants under the provisions of Section
8.02(a) above, First Merchants agrees to waive all restrictions and
limitations for pre-existing conditions.
(c) COBRA. First Merchants shall be responsible for providing
COBRA continuation coverage to any qualified employee or former
employee of CNBC or the Subsidiaries and to their respective qualified
beneficiaries, on and after the Effective Date, regardless of when the
qualifying event occurred.
(d) Severance. First Merchants does not intend to terminate
any employees of CNBC or its Subsidiaries in connection with the
Merger. However, should it decide to do so, it shall consult with the
President and Chief Executive Officer of the Bank about appropriate
severance benefits payable in connection with any such termination.
Nothing in this Section 8.02(d) shall be deemed to limit or modify
First Merchants at-will employment policy.
8.03. Press Release. Except as required by law, First Merchants shall
not issue any press releases or make any other public announcements or
disclosures relating to the Merger without the prior approval of CNBC, which
approval will not be unreasonably withheld.
8.04. Confidentiality. First Merchants shall, and shall use its best
efforts to cause its officers, employees, and authorized representatives to,
hold in strict confidence all confidential data and information obtained by it
from CNBC or the Subsidiaries, unless such information (i) was already known to
First Merchants, (ii) becomes available to First Merchants from other sources,
(iii) is independently developed by First Merchants, (iv) is disclosed outside
of First Merchants with and in accordance with the terms of prior written
approval of CNBC or the Subsidiaries, or (v) is or becomes readily ascertainable
from public or published information or trade sources or public disclosure of
such information is required by law or requested by a court or other
governmental agency, commission, or regulatory body. First Merchants further
agrees that in the event this Agreement is terminated, it will return to CNBC
all information obtained by First Merchants regarding CNBC or the Subsidiaries,
including all copies made of such information by First Merchants. This provision
shall survive the Effective Date or the earlier termination of this Agreement.
8.05. Covenants Regarding the Bank. Upon consummation of the Merger,
the Bank shall be a national bank organized under the laws of the United States
and the officers and directors of the Bank in office immediately prior to the
consummation of the Merger shall be the officers and directors of the Bank at
the Effective Date subject to the Bank's Articles of Association and By-Laws.
Thereafter, the Bank directors who desire to continue to serve in that capacity
shall do so for at least the remainder of the one (1) year terms to which they
have been elected. The Bank directors will be subject to First Merchants' policy
of mandatory retirement at age seventy (70); provided, however, the policy of
mandatory retirement will not apply to any of the Bank's current directors until
twenty-four (24) months after the Effective Date. First Merchants shall continue
to operate the Bank as an operating subsidiary of First Merchants under the name
"Commerce National Bank" or a name substantially similar thereto for a period of
at least five (5) years following the Effective Date.
8.06. Board of Directors of First Merchants. First Merchants shall
cause all necessary action to be taken to cause Thomas D. McAuliffe, or such
other person as shall be agreed to by First Merchants and CNBC, to either (i) be
nominated for election as a member of the First Merchants' Board of Directors
for a three (3) year term at the first annual meeting of the shareholders of
First Merchants following the Effective Date; or (ii) to be appointed as a
member of the First Merchants' Board of Directors at the next meeting of the
First Merchants' Board of Directors following the Effective Date to serve until
the first annual meeting of the shareholders of First Merchants following the
Effective Date and then to be nominated for election as a member of the First
Merchants' Board of Directors for a three (3) year term at the first annual
meeting of the shareholders of First Merchants following the Effective Date,
whichever can be effected first depending on the timing of the occurrence of the
Effective Date.
8.07. Directors and Officers Insurance.
(a) Prior to the Closing, CNBC shall purchase and pay for tail
coverage on its director's and officer's liability insurance policy for
a period of at least three years from the Effective Date to cover the
present and former officers and directors of CNBC and the Subsidiaries
(as determined immediately prior to the Closing) with respect to claims
against such directors and officers arising from facts or events which
occurred before the Effective Date, which tail coverage shall contain
at least the same coverage and amounts, and contain terms and
conditions no less advantageous, as that coverage currently provided by
CNBC and the Subsidiaries; provided, however, that in no event shall
CNBC expend for such tail coverage more than two (2) times the current
annual amount spent by CNBC and the Subsidiaries to maintain or procure
its current directors' and officers' insurance coverage.
In the event CNBC is unable to obtain such tail coverage,
First Merchants shall use its reasonable best efforts to obtain an
endorsement to its directors and officers liability insurance policy to
cover the present and former officers and directors of CNBC and the
Subsidiaries (as determined immediately prior to the Closing) with
respect to claims against such directors and officers arising from
facts or events which occurred before the Effective Date, which
insurance shall contain at least the same coverage and amounts, and
contain terms and conditions no less advantageous, as that coverage
currently provided by CNBC and the Subsidiaries; provided, however,
that in no event shall First Merchants expend for such insurance more
than two (2) times the current annual amount spent by CNBC and the
Subsidiaries to maintain or procure such insurance; provided, further,
that if First Merchants is unable to maintain or obtain the insurance
called for by this Section 8.07, First Merchants shall use its
reasonable best efforts to obtain as much comparable insurance as is
available for two (2) times the current annual amount spent by CNBC and
the Subsidiaries; provided, further, that officers and directors of
CNBC and the Subsidiaries may be required to make application and
provide customary representations and warranties to First Merchants'
insurance carrier for the purpose of obtaining such insurance.
(b) For six years after the Effective Date, the Continuing
Company shall indemnify, defend and hold harmless the present and
former officers and directors of CNBC and the Subsidiaries against all
losses, expenses (including attorneys' fees), claims, damages or
liabilities arising out of actions or omissions occurring on or prior
to the Effective Date (including, without limitation, the transactions
contemplated by this Agreement) to the full extent then permitted under
the Ohio General Corporate Law and by First Merchants' or CNBC's and
the Subsidiaries' Articles of Incorporation or Code of Regulations or
By-Laws as in effect on the date hereof (whichever is more favorable to
the officers and directors of CNBC and the Subsidiaries), including
provisions relating to advances of expenses incurred in the defense of
any action or suit.
(c) Following the Effective Date, First Merchants will provide
any CNBC and the Subsidiaries' officers, directors and employees who
become officers, directors and employees of the Continuing Company or
its subsidiaries with the same directors and officers liability
insurance coverage and indemnification protections that First Merchants
provides to other officers, directors and employees of First Merchants
or its subsidiaries.
(d) If First Merchants shall consolidate with or merge into
any other entity and shall not be the continuing or surviving entity of
such consolidation or merger or shall transfer all or substantially all
of its assets to any entity, then and in each case, proper provision
shall be made so that the successors and assigns of First Merchants
shall assume the obligations set forth in this Section 8.07.
8.08. SEC and Other Reports.
(a) Promptly upon its becoming available, First Merchants
shall furnish to CNBC one (1) copy of each financial statement, report,
notice, or proxy statement sent by First Merchants to its shareholders
generally and of each regular or periodic report, registration
statement or prospectus filed by First Merchants with the SEC or any
successor agency, of any order issued by any Governmental Authority in
any proceeding to which First Merchants is a party, and of any notice
or communication received by First Merchants from the SEC. For purposes
of this provision, "Governmental Authority" shall mean any government
(or any political subdivision or jurisdiction thereof), court, bureau,
agency or other governmental entity having or asserting jurisdiction
over First Merchants or any of its respective businesses, operations or
properties.
(b) None of the information supplied or to be supplied by
First Merchants for inclusion or incorporation by reference in (i) the
Registration Statement (as defined in Section 8.01 hereof) will, at the
time the Registration Statement and each amendment or supplement
thereto, if any, becomes effective under the Securities Act of 1933, as
amended, contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements contained
therein, in light of the circumstances in which they are made, not
misleading, and (ii) the Proxy Statement (as defined in Section 8.01
hereof) and any amendment or supplement thereto will, at the date of
mailing, contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements contained
therein, in light of the circumstances in which they are made, not
misleading.
8.09. Disclosure Letter. First Merchants shall supplement, amend and
update as of the Effective Date the Disclosure Letter with respect to any
matters hereafter arising, which, if in existence or having occurred as of the
date of this Agreement, would have been required to be set forth or described in
the Disclosure Letter.
8.10. Adverse Actions. First Merchants shall not (a) take any action
while knowing that such action would, or is reasonably likely to, prevent or
impede the Merger from qualifying as a reorganization within the meaning of
Section 368 of the Code; or (b) knowingly take any action that is intended or is
reasonably likely to result in (i) any of its representations and warranties set
forth in this Agreement being or becoming untrue in any material respect at any
time at or prior to the Effective Date, (ii) any of the conditions to the Merger
set forth in Section 9 not being satisfied, (iii) a material violation of any
provision of this Agreement, or (iv) a material delay in the consummation of the
Merger except, in each case, as may be required by applicable law or regulation.
8.11. Access. First Merchants shall continue to give to CNBC and its
employees, accountants, attorneys and other authorized representatives
reasonable access during regular business hours and other reasonable times to
all their premises, properties, statements, books and records.
8.12. Cooperation. First Merchants shall generally cooperate with CNBC
and its officers, employees, attorneys, accountants and other agents, and,
generally, do such other acts and things in good faith as may be reasonable,
necessary or appropriate to timely effectuate the intents and purposes of this
Agreement and the consummation of the transactions contemplated hereby. Prior to
the Closing (as defined in Section 12 hereof), First Merchants agrees to
disclose to CNBC in writing any fact or matter that comes to the attention of
First Merchants that might indicate that any of the representations or
warranties of First Merchants may be untrue, incorrect, or misleading in any
material respect and such disclosure shall be made by First Merchants promptly
upon discovery of such fact or circumstance.
SECTION 9
Conditions Precedent To The Merger
The obligation of each of the parties hereto to consummate the
transactions contemplated by this Agreement is subject to the satisfaction and
fulfillment of each of the following conditions on or prior to the Effective
Date:
9.01. Shareholder Approval. The shareholders of CNBC shall have
approved, ratified and confirmed this Agreement as required by applicable law.
9.02. Registration Statement Effective. First Merchants shall have
registered its shares of common stock to be issued to shareholders of CNBC in
accordance with this Agreement with the SEC pursuant to the 1933 Act, and all
state securities and "blue sky" approvals and authorizations required to offer
and sell such shares shall have been received by First Merchants. The
registration statement with respect thereto shall have been declared effective
by the SEC and no stop order shall have been issued or threatened. The shares of
First Merchants common stock shall have been listed for trading on the NASDAQ
National Market System (subject to official notice of issuance).
9.03. Tax Opinions.
(a) CNBC shall have obtained an opinion of Squire, Sanders & Dempsey L.L.P.
dated on or about the Effective Date to the effect that the Merger
effected pursuant to this Agreement shall constitute a reorganization
within the meaning of Section 368(a) of the Code, and that no gain or
loss will be recognized by shareholders of CNBC to the extent they
receive shares of First Merchants common stock in the Merger in
exchange for their CNBC common shares, other than the gain or loss to
be recognized as to cash received in lieu of fractional share interests
and cash received in exchange for CNBC common shares. Such opinions
shall be based upon factual representations received by counsel from
CNBC and First Merchants, which representations may take the form of
written certifications.
(b) First Merchants shall have obtained an opinion of Bingham McHale LLP
dated on or about the Effective Date to the effect that the Merger
effected pursuant to this Agreement shall constitute a reorganization
within the meaning of Section 368(a) of the Code. Such opinions shall
be based upon factual representations received by counsel from CNBC and
First Merchants, which representations may take the form of written
certifications.
9.04. Affiliate Agreements. First Merchants shall have obtained
(a) from CNBC, a list identifying each affiliate of CNBC and (b) from each
affiliate of CNBC, the agreements contemplated by Section 7.06 hereof.
9.05. Regulatory Approvals. The Federal Reserve Board and the Indiana
Department of Financial Institutions shall have authorized and approved the
Merger and the transactions related thereto. In addition, all appropriate
orders, consents, approvals and clearances from all other regulatory agencies
and governmental authorities whose orders, consents, approvals or clearances are
required by law for consummation of the transactions contemplated by this
Agreement shall have been obtained.
9.06. Officer's Certificate. First Merchants and CNBC shall have
delivered to each other a certificate signed by their Chairman or President and
their Secretary, dated the Effective Date, certifying that (a) all the
representations and warranties of their respective corporations are true,
accurate and correct (subject to Section 5.01 and Section 6.01) on and as of the
Effective Date; (b) all the covenants of their respective corporations have been
complied with in all material respects from the date of this Agreement through
and as of the Effective Date; and (c) their respective corporations have
satisfied and fully complied with all conditions necessary to make this
Agreement effective as to them.
9.07. Fairness Opinion. CNBC shall have obtained an opinion from
Stifel, Nicolaus & Company, Incorporated, to the effect that the consideration
paid in the Merger is fair to the shareholders of CNBC from a financial
viewpoint. Such opinion shall be (a) in form and substance reasonably
satisfactory to CNBC, (b) dated as of a date not later than the mailing date of
the Proxy Statement relating to the Merger and (c) included in the Proxy
Statement.
9.08. No Judicial Prohibition. Neither CNBC, any Subsidiary nor First
Merchants shall be subject to any order, decree or injunction of a court or
agency of competent jurisdiction which enjoins or prohibits the consummation of
the Merger.
9.09. Other Consents and Approvals. All consents and other
approvals required for the transfer of any contracts, agreements, leases,
loans, etc. as a result of the Merger shall have been obtained.
9.10. Options. All of the options disclosed in Section 5.04(d) of the
Disclosure Letter shall have been exercised pursuant to Section 7.12 hereof and
CNBC shall have no more than 2,076,572 shares of common stock issued and
outstanding. CNBC shall have no commitment to issue any additional shares of
common stock. All stock option plans of CNBC shall have been terminated.
9.11. Executive Employment Agreements. First Merchants shall have
entered into Executive Employment Agreements and change in control agreements
with Thomas D. McAuliffe and John Romelfanger immediately prior to the Effective
Date that supersede their current employment agreements upon terms and
conditions satisfactory to Mr. McAuliffe, Mr. Romelfanger and First Merchants,
respectively.
9.12. Opinions. The parties shall have received the respective
opinions of counsel described in Section 12.03 of this Agreement.
SECTION 10
Termination of Merger
10.01. Manner of Termination. This Agreement and the transactions
contemplated hereby may be terminated at any time prior to the Effective Date by
written notice delivered by First Merchants to CNBC or by CNBC to First
Merchants only for the following reasons:
(a) By the mutual consent of First Merchants and CNBC,
if the Board of Directors of each so determines by vote of a majority
of the members of its entire Board;
(b) By First Merchants or CNBC, if its respective Board of
Directors so determines by vote of a majority of the members of its
entire Board, in the event of either: (i) a breach by the other party
of any representation or warranty contained herein (subject to the
standard set forth in Section 5.01 and Section 6.01), which breach
cannot be or has not been cured within 30 days after the giving of
written notice to the breaching party of such breach; (ii) a breach by
the other party of any of the covenants or agreements contained herein,
which breach cannot be or has not been cured within 30 days after the
giving of written notice to the breaching party of such breach,
provided that such breach (whether under (i) or (ii)) would be
reasonably likely, individually or in the aggregate with other
breaches, to result in a Material Adverse Effect; or (iii) any event,
fact or circumstance shall have occurred that has had or may have a
Material Adverse Effect;
(c) By CNBC or First Merchants, if it shall determine in its
sole discretion that the transactions contemplated by this Agreement
have become inadvisable or impracticable by reason of commencement of
material litigation or proceedings against any of the parties;
(d) By CNBC or First Merchants, if the transaction
contemplated herein has not been consummated by April 30, 2003
(provided that the terminating party is not then in material breach of
any representation, warranty, covenant or other agreement contained
herein);
(e) By First Merchants or CNBC, pursuant to their
respective termination rights set forth in Section 3.04 hereof;
(f) By CNBC, if the appropriate discharge of the fiduciary
duties of the Board of Directors of CNBC consistent with Section 7.05
requires that CNBC terminate this Agreement;
(g) By First Merchants, if CNBC's Board of Directors fails to
make, withdraws or modifies its recommendation to CNBC's shareholders
to vote in favor of the Merger following receipt of a written proposal
for an Acquisition Transaction;
(h) By First Merchants, if CNBC fails to give any written
notice as required by Section 7.05 or if within twenty (20) days after
giving First Merchants written notice pursuant to Section 7.05 of its
intent to furnish information to or enter into discussions or
negotiations with another person or entity, CNBC does not terminate all
discussions, negotiations and information exchanges related to such
Acquisition Transaction and provide First Merchants with written notice
of such termination;
(i) By either party (provided that the terminating party is
not then in material breach of any representation or warranty contained
in this Agreement or in material breach of any covenant or other
agreement contained in this Agreement) in the event that any of the
conditions precedent to the obligations of such party to consummate the
Merger cannot be satisfied or fulfilled by the date specified in
Section 10.1(d) of this Agreement; or
(j) By CNBC, if First Merchants enters into a definitive
agreement in which it is the target company or the company to be
acquired which would result in a change of control of First Merchants
or require approval pursuant to the Bank Holding Company Act of 1956,
as amended.
10.02. Effect of Termination. Except as provided below, in the event
that this Agreement is terminated pursuant to the provisions of Section 10.01
hereof, no party shall have any liability to any other party for costs,
expenses, damages or otherwise; provided, however, that notwithstanding the
foregoing, in the event that this Agreement is terminated pursuant to Section
10.01(b) hereof on account of a willful breach of any of the representations and
warranties set forth herein or any breach of any of the agreements set forth
herein, then the non-breaching party shall be entitled to recover appropriate
damages from the breaching party, including, without limitation, reimbursement
to the non-breaching party of its costs, fees and expenses (including
attorneys', accountants' and advisors' fees and expenses) incident to the
negotiation, preparation and execution of this Agreement and related
documentation; provided, however, that nothing in this proviso shall be deemed
to constitute liquidated damages for the willful breach by a party of the terms
of this Agreement or otherwise limit the rights of the non-breaching party.
Notwithstanding the foregoing, in the event of termination by CNBC in accordance
with Section 10.01(f) or by First Merchants in accordance with Section 10.01(g)
or 10.01(h), CNBC shall pay First Merchants the sum of $1,200,000 as liquidated
damages. Such liquidated damages shall be in lieu of costs, expenses and damages
otherwise recoverable under the first sentence of this Section 10.02. Such
payment shall be made within ten (10) days of the date of notice of termination.
CNBC acknowledges the reasonableness of such amount in light of the considerable
time and expense invested and to be invested by First Merchants and its
representatives in furtherance of the Merger. Such amount was agreed upon by
First Merchants and CNBC as compensation to First Merchants for its time and
expense and not as a penalty to CNBC, it being impossible to ascertain the exact
value of the time and expense to be invested. First Merchants shall also be
entitled to recover from CNBC its reasonable attorneys' fees incurred in the
enforcement of this provision.
SECTION 11
Effective Date Of Merger
Subject to the terms and upon satisfaction of all requirements of law
and the conditions specified in this Agreement, the Merger shall become
effective at the close of business on the day specified in the Articles of
Merger of CNBC with and into First Merchants as filed with the Secretary of
State of the States of Indiana and Ohio (the "Effective Date"). The Effective
Date shall occur no later than the last business day of the month in which any
waiting period following the last approval of the Merger by a state or federal
regulatory agency or governmental authority expires, unless otherwise agreed to
by First Merchants and CNBC.
SECTION 12
Closing
12.01. Closing Date and Place. The closing of the Merger (the
"Closing") shall take place at the main office of First Merchants on the
Effective Date or at such other place as mutually agreed to by First Merchants
and CNBC.
12.02. Articles of Merger. Subject to the provisions of this Agreement,
on or prior to the Effective Date, the Articles of Merger and Certificate of
Merger shall be duly filed with the Secretary of State of the States of Indiana
and Ohio specifying that the Merger shall be effective as of the Effective Date.
12.03. Opinions of Counsel. At the Closing, CNBC shall deliver an opinion of its
counsel, Squire, Sanders & Dempsey L.L.P., to First Merchants, and First
Merchants shall deliver an opinion of its counsel, Bingham McHale LLP, to CNBC,
dated as of the date of the Closing. The form of such opinions shall be as
mutually agreed to by the parties hereto and their respective counsel.
SECTION 13
Miscellaneous
13.01. Effective Agreement. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns but none of the provisions thereof shall inure to the benefit
of any other person, firm, or corporation whomsoever. Neither this Agreement nor
any of the rights, interests, or obligations hereunder shall be assigned or
transferred by either party hereto without the prior written consent of the
other party.
13.02. Waiver; Amendment.
(a) First Merchants and CNBC may, by an instrument in writing
executed in the same manner as this Agreement: (i) extend the time for
the performance of any of the covenants or agreements of the other
party under this Agreement; (ii) waive any inaccuracies in the
representations or warranties of the other party contained in this
Agreement or in any document delivered pursuant hereto or thereto;
(iii) waive the performance by the other party of any of the covenants
or agreements to be performed by it or them under this Agreement; or
(iv) waive the satisfaction or fulfillment of any condition the
nonsatisfaction or nonfulfillment of which is a condition to the right
of the party so waiving to terminate this Agreement. The waiver by any
party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any other or subsequent breach
hereunder.
(b) Notwithstanding the prior approval by the shareholders of
CNBC, this Agreement may be amended, modified or supplemented by the
written agreement of CNBC and First Merchants without further approval
of such shareholders, except that no such amendment, modification or
supplement shall result in a decrease in the consideration specified in
Section 3 hereof, except in accordance with the terms of Section 3
hereof, or shall materially adversely affect the rights of the
shareholders of CNBC without the further approval of such shareholders.
13.03. Notices. Any and all notices or other communications required or
permitted under this Agreement shall be in writing and shall be deemed to be
given (i) when delivered in person, or (ii) on the day of transmission if sent
via facsimile transmission to the facsimile number given below, provided
telephonic confirmation of receipt is obtained promptly after completion of
transmission, or (iii) on the fifth (5th) day after sent by certified or
registered mail, postage prepaid, return receipt requested, addressed as
follows:
If to First Merchants: With a copy to:
200 E. Jackson Street, Box 792 Bingham McHale LLP
Muncie, IN 47305 2700 Market Tower
Attn: Larry L. Helms, 10 West Market Street
Senior Vice President and Indianapolis, Indiana 46204-2982
General Counsel Attn: David R. Prechtel, Esq.
(765) 741-7283 (317) 236-9907
If to CNBC: With a copy to:
100 East Wilson Bridge Road Squire, Sanders & Dempsey L.L.P.
Worthington, Ohio 43085 127 Public Square
Attn: Thomas D. McAuliffe Cleveland, Ohio 44114
Chairman, President and CEO Attn: M. Patricia Oliver, Esq.
(614) 848-8700 (216) 479-8717
or to such substituted address as any of them have given to the other in
writing. Notwithstanding the foregoing, all notices required to be given
pursuant to Sections 3.04(b) and 3.04(c) hereof shall be given in the time
periods specified in such sections by either hand delivery or facsimile
transmission to the specified parties.
13.04. Headings. The headings in this Agreement have been inserted
solely for the ease of reference and should not be considered in the
interpretation or construction of this Agreement.
13.05. Severability. In case any one or more of the provisions
contained herein shall, for any reason, be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such invalid, illegal, or unenforceable provision or
provisions had never been contained herein.
13.06. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall
together constitute one and the same instrument. In addition, this Agreement and
the documents to be delivered hereunder may be executed by the parties hereto
either manually or by facsimile signatures, each of which shall constitute an
original signature.
13.07. Governing Law. This Agreement is executed in and shall be
construed in accordance with the laws of the State of Indiana, without regard
to choice of law principles.
13.08. Entire Agreement. This Agreement supersedes any other
agreement, whether oral or written, between First Merchants and CNBC relating
to the matters contemplated hereby, and constitutes the entire agreement between
the parties hereto.
13.09. Expenses. First Merchants and CNBC shall each pay their own
expenses incidental to the transactions contemplated hereby. It is understood
that the fees of Stifel, Nicolaus & Company, Incorporated and the cost of the
fairness opinion referenced in Section 9.07, shall be borne by CNBC whether or
not the Merger is consummated. This provision shall survive the Effective Date
or the earlier termination of this Agreement.
13.10. Material Adverse Effect. The phrase "Material Adverse Effect"
means, with respect to First Merchants or CNBC, any effect that (i) is material
and adverse to the financial position, results of operations or business of
First Merchants and its subsidiaries taken as a whole, or CNBC and its
Subsidiaries taken as a whole, respectively, or (ii) would materially impair the
ability of either First Merchants or CNBC 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 or other
changes affecting depository institutions generally, including changes in
general economic conditions and changes in prevailing interest and deposit
rates, (b) any modifications or changes to valuation policies and practices in
connection with the Merger or restructuring charges taken in connection with the
Merger, in each case in accordance with generally accepted accounting
principles, (c) changes resulting from expenses (such as legal, accounting and
investment bankers' fees) incurred in connection with this Agreement or the
transactions contemplated herein, and (d) actions or omissions of a party that
have been waived in accordance with Section 13.02 hereof.
13.11. Survival of Contents. The provisions of Sections 7.09, 8.04,
10.02, 13.09 and this Section 13.11 shall survive beyond the termination of this
Agreement. The provisions of Sections 7.09, 8.02, 8.04, 8.05, 8.06, 8.07, 13.09
and this Section 13.11 shall survive beyond the Effective Date.
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IN WITNESS WHEREOF, First Merchants and CNBC have made and entered into
this Agreement as of the day and year first above written and have caused this
Agreement to be executed and attested by their duly authorized officers.
FIRST MERCHANTS CORPORATION
ATTEST:
/s/ Larry R. Helms By:/s/ Michael L. Cox
------------------------- -----------------------------------
Larry R. Helms, Secretary Michael L. Cox, President and Chief
Executive Officer
CNBC BANCORP
ATTEST:
/s/ John A. Romelfanger By:/s/ Thomas D. McAuliffe
------------------------ ------------------------------------
John A. Romelfanger, Thomas D. McAuliffe, Chairman,
Secretary President and Chief Executive Officer