AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 14, 1996,
by and between PINNACLE FINANCIAL SERVICES, INC., a Michigan
corporation ("Pinnacle"), and INDIANA FEDERAL CORPORATION, a
Delaware corporation ("IFC").
WITNESSETH:
WHEREAS, the Boards of Directors of Pinnacle and IFC have
determined that it is in the best interests of their respective
companies and their stockholders to consummate the business
combination transaction provided for herein in which IFC will,
subject to the terms and conditions set forth herein, merge with
and into Pinnacle (the "Merger"), so that Pinnacle is the surviving
corporation (hereinafter sometimes called the "Surviving
Corporation") in the Merger; and
WHEREAS, it is the intent of the respective Boards of
Directors of Pinnacle and IFC that the Merger be structured as a
"merger of equals" of Pinnacle and IFC and that the Surviving
Corporation be governed and operated on this basis; and
WHEREAS, as a condition to, and immediately after the
execution of, this Agreement, Pinnacle and IFC are entering into a
Pinnacle stock option agreement (the "Pinnacle Option Agreement")
attached hereto as Exhibit A; and
WHEREAS, as a condition to, and immediately after the
execution of, this Agreement, Pinnacle and IFC are entering into an
IFC stock option agreement (the "IFC Option Agreement"; and
together with the Pinnacle Option Agreement, the "Option
Agreements") attached hereto as Exhibit B; and
WHEREAS, the parties desire to make certain representations,
warranties and agreements in connection with the Merger and also to
prescribe certain conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and
intending to be legally bound hereby, the parties agree as follows:
ARTICLE I
THE MERGER
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1.1 The Merger. Subject to the terms and conditions of this
Agreement, in accordance with the Michigan Business Corporation
Act, as amended (the "MBCA"), the Delaware General Corporation Law,
as amended (the "DGCL"), at the Effective Time (as defined in
Section 1.2), IFC shall merge with and into Pinnacle. Pinnacle
shall be the Surviving Corporation in the Merger, and shall
continue its corporate existence under the laws of the State of
Michigan. Upon consummation of the Merger, the separate corporate
existence of IFC shall terminate.
1.2 Effective Time. The Merger shall become effective as set
forth in certificates of merger (each, a "Certificate of Merger"),
which shall specify an effective date and time no earlier than the
filing thereof with the appropriate authorities of the State of
Michigan, and with the appropriate authorities of the State of
Delaware, on the Closing Date (as defined in Section 9.1), or as
soon thereafter as practicable. The term "Effective Time" shall be
the date and time when the Merger becomes effective, as set forth
in each Certificate of Merger having been filed in accordance with
the MBCA and DGCL.
1.3 Effects of the Merger. At and after the Effective Time,
the Merger shall have the effects set forth in the MBCA and the
DGCL.
1.4 Conversion of IFC Common Stock. At the Effective Time,
in each case, subject to Section 2.2(e), by virtue of the Merger
and without any action on the part of Pinnacle, IFC or the holder
of any of the following securities:
(a) Each share of the common stock, par value $0.01 per
share, of IFC (the "IFC Common Stock") issued and outstanding
immediately prior to the Effective Time (other than shares of IFC
Common Stock held (x) in IFC's treasury or (y) directly or
indirectly by IFC or Pinnacle or any of their respective wholly-
owned Subsidiaries (as defined in Section 3.1) (except for Trust
Account Shares and DPC shares, as such terms are defined in Section
1.4(c) and as set forth in the IFC Disclosure Schedule)), shall be
converted into the right to receive one (1) share (the "Exchange
Ratio") of the common stock, without par value, of Pinnacle (the
"Pinnacle Common Stock").
(b) All of the shares of IFC Common Stock converted into
Pinnacle Common Stock pursuant to this Article I shall no longer be
outstanding and shall automatically be cancelled and shall cease to
exist as of the Effective Time, and each certificate (each a
"Common Certificate") previously representing any such shares of
IFC Common Stock shall thereafter represent the right to receive a
certificate representing the number of whole shares of Pinnacle
Common Stock into which the shares of IFC Common Stock represented
by such Common Certificate have been converted pursuant to this
Section 1.4 and Section 2.2. Common Certificates previously
representing shares of IFC Common Stock shall be exchanged for
certificates representing whole shares of Pinnacle Common Stock
issued in consideration therefor upon the surrender of such Common
Certificates in accordance with Section 2.2, without any interest
thereon. If, prior to the Effective Time, the outstanding shares of
Pinnacle Common Stock or IFC Common Stock shall have been
increased, decreased, changed into or exchanged for a different
number or kind of shares or securities as a result of a
reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split, or other similar change in
capitalization, then an appropriate and proportionate adjustment
shall be made to the Exchange Ratio.
(c) At the Effective Time, all shares of IFC Common
Stock that are owned by IFC as treasury stock and all shares of IFC
Common Stock that are owned, directly or indirectly, by IFC or
Pinnacle or any of their respective wholly-owned Subsidiaries
(other than shares of IFC Common Stock held, directly or
indirectly, in trust accounts, managed accounts and the like or
otherwise held in a fiduciary capacity that are beneficially owned
by third parties (any such shares, and shares of Pinnacle Common
Stock which are similarly held, whether held directly or indirectly
by IFC or Pinnacle, as the case may be, being referred to herein as
"Trust Account Shares") and other than any shares of IFC Common
Stock held by IFC or Pinnacle or any of their respective
Subsidiaries in respect of a debt previously contracted (any such
shares of IFC Common Stock, and shares of Pinnacle Common Stock
which are similarly held, whether held directly or indirectly by
IFC or Pinnacle or any of their respective Subsidiaries, being
referred to herein as "DPC Shares") and as set forth in the IFC
Disclosure Schedule) shall be cancelled and shall cease to exist
and no stock of Pinnacle or other consideration shall be delivered
in exchange therefor.
1.5 Pinnacle Common Stock. At and after the Effective Time,
each share of Pinnacle Common Stock issued and outstanding
immediately prior to the Closing Date shall remain an issued and
outstanding share of common stock of the Surviving Corporation and
shall not be affected by the Merger. All shares of Pinnacle Common
Stock that are owned by IFC or any of its wholly-owned Subsidiaries
(other than Trust Account Shares and DPC Shares) shall become
treasury stock of Pinnacle.
1.6 Options.
(a) At the Effective Time, each option granted by IFC to
purchase shares of IFC Common Stock which is outstanding and
unexercised immediately prior thereto (excluding any and all IFC
Rights (as hereinafter defined), all of which shall have been
redeemed, and thereby extinguished, terminated and cancelled
without any right of exercise, prior to the Effective Time) shall
cease to represent a right to acquire shares of IFC Common Stock
and shall be converted automatically into an option to purchase
shares of Pinnacle Common Stock in an amount and at an exercise
price determined as provided below (and subject to the terms of the
IFC benefit plans under which they were issued (collectively, the
"IFC Stock Plans") and the agreements evidencing grants
thereunder):
(i) The number of shares of Pinnacle Common Stock to be
subject to the new option shall be equal to the number of
shares of IFC Common Stock subject to the original option; and
(ii) The exercise price per share of Pinnacle Common Stock
under the new option shall be equal to the exercise price per
share of IFC Common Stock under the original option.
The adjustment provided herein with respect to any options which
are "incentive stock options" (as defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code")) shall be
and is intended to be effected in a manner which is consistent with
Section 424(a) of the Code. The duration and other terms of the new
option shall be the same as the original option except that all
references to IFC shall be deemed to be references to Pinnacle.
(b) At the Effective Time, each option granted by
Pinnacle to purchase shares of Pinnacle Common Stock which is
outstanding and unexercised immediately prior thereto shall
continue to represent a right to acquire shares of Pinnacle Common
Stock and shall remain an issued and outstanding option to purchase
from the Surviving Corporation shares of Pinnacle Common Stock in
the same amount and at the same exercise price subject to the terms
of the Pinnacle benefit plans under which they were issued
(collectively, the "Pinnacle Stock Plans") and the agreements
evidencing grants thereunder, and shall not be affected by the
Merger.
1.7 Articles of Incorporation. Subject to the terms and
conditions of this Agreement, at the Effective Time, the Articles
of Incorporation of Pinnacle shall be the Articles of Incorporation
of the Surviving Corporation, until thereafter amended in
accordance with applicable law.
1.8 Bylaws. Subject to the terms and conditions of this
Agreement, at the Effective Time, the Bylaws of Pinnacle, with
appropriate amendments to incorporate the provisions of
Section 1.11 of this Agreement, shall be the Bylaws of the
Surviving Corporation until thereafter amended in accordance with
applicable law.
1.9 Tax Consequences; Accounting Treatment. It is intended
that (i) the Merger shall constitute a reorganization within the
meaning of Section 368(a)(i)(A) of the Code, (ii) this Agreement
shall constitute a "plan of reorganization" for the purposes of
Section 368 of the Code, and (iii) the Merger shall qualify for
"pooling of interests" accounting treatment under Accounting
Principles Board Opinion No. 16 and SEC Accounting Series Releases
130 and 135, as amended.
1.10 Management. At the Effective Time, Mr. Richard L.
Schanze shall be the Chairman of the Board and the Chief Executive
Officer of the Surviving Corporation, and Mr. Donald A. Lesch shall
be the Vice Chairman, President and Chief Operating Officer of the
Surviving Corporation.
1.11 Board of Directors. At the Effective Time, the Board of
Directors of the Surviving Corporation shall consist of ten (10)
persons, with Mr. Schanze, as well as Mr. Arnold L. Weaver and
three (3) other persons, to be named as directors of the Surviving
Corporation on behalf of the Board of Directors of Pinnacle, and
with Mr. Lesch, as well as Mr. Howard Silverman and three (3) other
persons, to be named as directors of the Surviving Corporation on
behalf of the Board of Directors of IFC. Under the terms of the
Standstill Agreement dated as of December 1, 1995, between Pinnacle
and Mr. Cyrus A. Ansary, Pinnacle has certain obligations to
nominate Mr. Ansary for election as a director of Pinnacle. In the
event that Pinnacle, as the Surviving Corporation, becomes
obligated to nominate Mr. Ansary as a director of the Surviving
Corporation, then the Board of Directors shall be increased in size
to a total of twelve (12) persons, and Mr. Ansary shall be
nominated as a director of the Surviving Corporation pursuant to
the terms of the Standstill Agreement dated as of December 1, 1995,
between Pinnacle and Mr. Ansary, and the Chairman shall nominate
for approval by the Board of Directors a twelfth person as a
director of the Surviving Corporation. Whenever the Board of
Directors is comprised of ten (10) or fewer persons, action of the
Board within the meaning of Section 523 of the MBCA, and for all
other purposes, shall require the favorable vote of six (6) or more
of the directors, and whenever the Board of Directors is comprised
of eleven (11) or twelve (12) persons, action of the Board within
the meaning of Section 523 of the MBCA, and for all other purposes,
shall require the favorable vote of seven (7) or more of the
directors.
1.12 Headquarters of Surviving Corporation. At the Effective
Time, the headquarters and principal executive offices of the
Surviving Corporation shall be located in Valparaiso, Indiana.
1.13 Bank Merger. At the Bank Merger Effective Time (as
hereinafter defined), Indiana Federal Bank for Savings, a federal
savings bank ("IndFed Bank"), the wholly-owned subsidiary of IFC,
shall be merged (the "Bank Merger") with and into Pinnacle Bank, a
Michigan banking corporation ("Pinnacle Bank"), the wholly-owned
subsidiary of Pinnacle, pursuant to the terms and conditions set
forth herein and in the Agreement and Plan of Merger and
Consolidation substantially in the form attached hereto as
Exhibit C (the "Bank Merger Agreement"). Upon consummation of the
Bank Merger, the separate existence of IndFed Bank shall cease, and
Pinnacle Bank shall continue as the surviving institution of the
Bank Merger. The name of Pinnacle Bank, as the surviving
institution of the Bank Merger, shall be "Pinnacle Bank". From and
after the Bank Merger Effective Time (as hereinafter defined),
Pinnacle Bank as the surviving institution of the Bank Merger shall
possess all of the properties and rights and be subject to all of
the liabilities and obligations of Pinnacle Bank and IndFed Bank.
The Bank Merger shall become effective at the time the Bank Merger
Agreement for such merger is endorsed and declared effective by the
Financial Institutions Bureau of the State of Michigan (the "Bank
Merger Effective Time"). The parties shall cause the Bank Merger
to become effective as soon as practical following the Merger. At
the Bank Merger Effective Time:
(a) each share of IndFed Bank common stock issued and
outstanding immediately prior thereto shall, by virtue of the Bank
Merger, be cancelled. No new shares of the capital stock or other
securities or obligations of IndFed Bank shall be issued or be
deemed issued with respect to or in exchange for such cancelled
shares, and such cancelled shares of common stock of IndFed Bank
shall not be converted into any shares or other securities or
obligations of any other entity;
(b) each share of Pinnacle Bank common stock issued and
outstanding immediately prior thereto shall remain an issued and
outstanding share of common stock of Pinnacle Bank as the surviving
institution and shall not be affected by the Bank Merger;
(c) the charter and bylaws of Pinnacle Bank, as then in
effect, shall be the Charter and Bylaws of Pinnacle Bank as the
surviving institution of the Bank Merger, and may thereafter be
amended in accordance with applicable law; and
(d) the directors of Pinnacle Bank as the surviving
institution following the Bank Merger shall consist of eighteen
(18) persons, with nine (9) persons to be named as directors by the
Board of Directors of Pinnacle Bank and nine (9) persons to be
named as directors by the Board of Directors of IndFed Bank; and
the executive officers of Pinnacle Bank as the surviving
institution following the Bank Merger shall be those appointed by
the Board of Directors of the surviving institution upon
consummation of the Bank Merger, on the basis of recommendations
made by Mr. Schanze, as the Chairman of the parent Surviving
Corporation, Mr. Lesch, as the Vice Chairman of the parent
Surviving Corporation, and an outside consulting service to be
engaged and charged with reviewing and evaluating the
qualifications of candidates.
ARTICLE II
EXCHANGE OF SHARES
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2.1 Pinnacle to Make Shares Available. At or prior to the
Effective Time, Pinnacle shall deposit, or shall cause to be
deposited, with Harris Trust and Savings Bank, Chicago, Illinois,
or another bank or trust company reasonably acceptable to each of
Pinnacle and IFC (the "Exchange Agent"), for the benefit of the
holders of Common Certificates, for exchange in accordance with
this Article II, certificates representing the shares of Pinnacle
Common Stock (such certificates for shares of Pinnacle Common
Stock, together with any dividends or distributions with respect
thereto, being hereinafter referred to as the "Exchange Fund") to
be issued pursuant to Section 1.4 and Section 2.2(a) in exchange
for outstanding shares of IFC Common Stock.
2.2 Exchange of Shares.
(a) As soon as practicable after the Effective Time, and
in no event later than five (5) business days thereafter, the
Exchange Agent shall mail to each holder of record of one or more
Common Certificates a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the
Common Certificates shall pass, only upon delivery of the Common
Certificates to the Exchange Agent) and instructions for use in
effecting the surrender of the Common Certificates in exchange for
certificates representing the shares of Pinnacle Common Stock into
which the shares of IFC Common Stock represented by such Common
Certificate or Common Certificates shall have been converted
pursuant to this Agreement. Upon proper surrender of a Common
Certificate for exchange and cancellation to the Exchange Agent,
together with such properly completed letter of transmittal, duly
executed, the holder of such Common Certificate shall be entitled
to receive in exchange therefor a certificate representing that
number of whole shares of Pinnacle Common Stock to which such
holder of IFC Common Stock shall have become entitled pursuant to
the provisions of Article I, and the Common Certificate so
surrendered shall forthwith be cancelled. No interest will be paid
or accrued on any unpaid dividends and distributions payable to
holders of Common Certificates.
(b) No dividends or other distributions declared with
respect to Pinnacle Common Stock with a record date following the
Effective Time shall be paid to the holder of any unsurrendered
Common Certificate until the holder thereof shall surrender such
Common Certificate in accordance with this Article II.
(c) If any certificate representing shares of Pinnacle
Common Stock is to be issued in a name other than that in which the
Common Certificate surrendered in exchange therefor is registered,
it shall be a condition of the issuance thereof that the Common
Certificate so surrendered shall be properly endorsed (or
accompanied by an appropriate instrument of transfer) and otherwise
in proper form for transfer, and that the person requesting such
exchange shall pay to the Exchange Agent in advance any transfer or
other taxes required by reason of the issuance of a certificate
representing shares of Pinnacle Common Stock in any name other than
that of the registered holder of the Common Certificate
surrendered, or required for any other reason, or shall establish
to the satisfaction of the Exchange Agent that such tax has been
paid or is not payable.
(d) After the Effective Time, there shall be no
transfers on the stock transfer books of IFC of shares of IFC
Common Stock which were issued and outstanding immediately prior to
the Effective Time. If, after the Effective Time, Common
Certificates representing such shares are presented for transfer to
the Exchange Agent, they shall be cancelled and exchanged for
certificates representing shares of Pinnacle Common Stock as
provided in this Article II.
(e) Notwithstanding anything to the contrary contained
herein, no certificates or scrip representing fractional shares of
Pinnacle Common Stock shall be issued upon the surrender for
exchange of Common Certificates.
(f) Any portion of the Exchange Fund that remains
unclaimed by the stockholders of IFC for 12 months after the
Effective Time shall be paid to Pinnacle. Any stockholders of IFC
who have not theretofore complied with this Article II shall
thereafter look only to Pinnacle for payment of the shares of
Pinnacle Common Stock and any unpaid dividends and distributions on
the Pinnacle Common Stock deliverable in respect of each share of
IFC Common Stock such stockholder holds as determined pursuant to
this Agreement, in each case, without any interest thereon.
Notwithstanding the foregoing, none of IFC, Pinnacle, the Exchange
Agent or any other person shall be liable to any former holder of
shares of IFC Common Stock for any amount delivered in good faith
to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(g) In the event any Common Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such Common Certificate to be lost,
stolen or destroyed and, if reasonably required by Pinnacle or the
Exchange Agent, the posting by such person of a bond in such amount
as Pinnacle may determine is reasonably necessary as indemnity
against any claim that may be made against it with respect to such
Common Certificate, the Exchange Agent will issue in exchange for
such lost, stolen or destroyed Common Certificate the shares of
Pinnacle Common Stock deliverable in respect thereof pursuant to
this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PINNACLE
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Except as disclosed in the Pinnacle disclosure schedule
delivered to IFC concurrently herewith (the "Pinnacle Disclosure
Schedule"), Pinnacle hereby represents and warrants to IFC as
follows:
3.1 Corporate Organization.
(a) Pinnacle is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Michigan. Pinnacle has the corporate power and authority to own or
lease all of its properties and assets and to carry on its business
as it is now being conducted, and is duly licensed or qualified to
do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed
or qualified would not have a Material Adverse Effect on Pinnacle.
As used in this Agreement, the term "Material Adverse Effect"
means, with respect to IFC, Pinnacle or the Surviving Corporation,
as the case may be, a material adverse effect on the business,
results of operations, financial condition, or (insofar as they can
reasonably be foreseen) prospects of such party and its
Subsidiaries taken as a whole, excluding for this purpose only,
however, the payment and/or incurrence of (i) the one-time special
assessment on institutions holding deposits subject to assessment
by the Savings Association Insurance Fund ("SAIF") pursuant to The
Deposit Insurance Funds Act of 1996 ("Funds Act") intended to
increase SAIF's net worth as of October 1, 1996 to 1.25 percent of
SAIF-insured deposits, and (ii) transactional expenses by IFC or
Pinnacle in connection with the Merger, to the extent having such
an effect. As used in this Agreement, the word "Subsidiary" when
used with respect to any party means any bank, savings and loan
institution, corporation, partnership, limited liability company,
or other organization, whether incorporated or unincorporated,
which is consolidated with such party for financial reporting
purposes. Pinnacle is duly registered as a bank holding company
under the Bank Holding Company Act of 1956, as amended (the "BHC
Act") and as a savings and loan holding company under the Home
Owners' Loan Act ("HOLA"). True and complete copies of the
Articles of Incorporation and Bylaws of Pinnacle, as in effect as
of the date of this Agreement, have previously been made available
by Pinnacle to IFC.
(b) Each Pinnacle Subsidiary (i) is duly organized and
validly existing as a bank, savings and loan institution,
corporation, partnership or limited liability company under the
laws of its jurisdiction of organization, (ii) is duly qualified to
do business and in good standing in all jurisdictions (whether
federal, state, local or foreign) where its ownership or leasing of
property or the conduct of its business requires it to be so
qualified and in which the failure to be so qualified would have a
Material Adverse Effect on Pinnacle, and (iii) has all requisite
corporate power and authority to own or lease its properties and
assets and to carry on its business as now conducted.
(c) The minute books of Pinnacle accurately reflect in
all material respects all corporate actions held or taken since
January 1, 1994 of its stockholders and Board of Directors
(including committees of the Board of Directors of Pinnacle).
3.2 Capitalization.
(a) The authorized capital stock of Pinnacle consists of
(i) 15,000,000 shares of Pinnacle Common Stock, of which as of
November 11, 1996, 5,976,548 shares were issued and outstanding and
no shares were held in treasury. All of the issued and outstanding
shares of Pinnacle Common Stock have been duly authorized and
validly issued and are fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the
ownership thereof. As of the date of this Agreement, except
pursuant to the terms of the Pinnacle Option Agreement and the
Pinnacle Stock Plans, Pinnacle does not have and is not bound by
any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase
or issuance of any shares of Pinnacle Common Stock or any other
equity securities of Pinnacle or any securities representing the
right to purchase or otherwise receive any shares of Pinnacle
Common Stock or any other equity securities of Pinnacle. As of
November 11, 1996, no shares of Pinnacle Common Stock were reserved
for issuance, except for (i) 496,261 shares reserved for issuance
upon the exercise of stock options pursuant to the Pinnacle Stock
Plans. Since January 1, 1996, Pinnacle has not issued any shares
of Pinnacle Common Stock or other equity securities of Pinnacle, or
any securities convertible into or exercisable for any shares of
Pinnacle Common Stock or other equity securities of Pinnacle, other
than pursuant to the exercise of employee stock options granted
prior to such date. The shares of Pinnacle Common Stock to be
issued pursuant to the Merger will be duly authorized and validly
issued and, at the Effective Time, all such shares will be fully
paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof.
(b) Pinnacle owns, directly or indirectly, all of the issued
and outstanding shares of capital stock of each of the Pinnacle
Subsidiaries, free and clear of any liens, pledges, charges,
encumbrances and security interests whatsoever ("Liens"), and all
of such shares are duly authorized and validly issued and are fully
paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. No Pinnacle
Subsidiary has or is bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of
capital stock or any other equity security of such Subsidiary or
any securities representing the right to purchase or otherwise
receive any shares of capital stock or any other equity security of
such Subsidiary.
3.3 Authority; No Violation.
(a) Pinnacle has full corporate power and authority to
execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly approved by the
Board of Directors of Pinnacle. The Board of Directors of Pinnacle
has directed that this Agreement and the transactions contemplated
hereby be submitted to Pinnacle's stockholders for approval at a
meeting of such stockholders and, except for the adoption of this
Agreement by the affirmative vote of the holders of a majority of
the outstanding shares of Pinnacle Common Stock, no other corporate
proceedings on the part of Pinnacle are necessary to approve this
Agreement and to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by
Pinnacle and (assuming due authorization, execution and delivery by
IFC) constitutes a valid and binding obligation of Pinnacle,
enforceable against Pinnacle in accordance with its terms.
(b) Neither the execution and delivery of this Agreement
by Pinnacle nor the consummation by Pinnacle of the transactions
contemplated hereby, nor compliance by Pinnacle with any of the
terms or provisions hereof, will (i) violate any provision of the
Articles of Incorporation or Bylaws of Pinnacle or (ii) assuming
that the consents and approvals referred to in Section 3.4 are duly
obtained, (x) violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable
to Pinnacle or any of its Subsidiaries or any of their respective
properties or assets, or (y) violate, conflict with, result in a
breach of any provision of or the loss of any benefit under,
constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, result in the
termination of or a right of termination or cancellation under,
accelerate the performance required by, or result in the creation
of any Lien upon any of the respective properties or assets of
Pinnacle or any of its Subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or
obligation to which Pinnacle or any of its Subsidiaries is a party,
or by which they or any of their respective properties or assets
may be bound or affected, except (in the case of clause (y) above)
for such violations, conflicts, breaches or defaults which, either
individually or in the aggregate, will not have or be reasonably
likely to have a Material Adverse Effect on Pinnacle or the
Surviving Corporation.
3.4 Consents and Approvals. Except for (i) the filing of
applications and notices, as applicable, with the Board of
Governors of the Federal Reserve System (the "Federal Reserve
Board") under the BHC Act and approval of such applications and
notices, (ii) the filing of any required applications with the
Office of Thrift Supervision (the "OTS"), (iii) the filing of any
required applications or notices with any state or foreign agencies
and approval of such applications and notices (the "State
Approvals"), (iv) the filing with the Securities and Exchange
Commission (the "SEC") of a joint proxy statement in definitive
form relating to the meetings of Pinnacle's and IFC's stockholders
to be held in connection with this Agreement and the transactions
contemplated hereby (the "Joint Proxy Statement") and the
registration statement on Form S-4 (the "S-4") in which the Joint
Proxy Statement will be included as a prospectus, (v) the filing of
Certificates of Merger with the appropriate authorities of the
State of Michigan pursuant to the MBCA and with the appropriate
officials of the State of Delaware pursuant to the DGCL, (vi) any
notices to or filings with the Small Business Administration
("SBA"), (vii) any consent, authorizations, approvals, filings or
exemptions in connection with compliance with the applicable
provisions of federal and state securities laws relating to the
regulation of broker-dealers or investment advisers, and federal
commodities laws relating to the regulation of futures commission
merchants and the rules and regulations thereunder and of any
applicable industry self-regulatory organization ("SRO"), and the
rules of NASDAQ, or which are required under consumer finance,
mortgage banking and other similar laws, (viii) such filings and
approvals as are required to be made or obtained under the
securities or "Blue Sky" laws of various states in connection with
the issuance of the shares of Pinnacle Common Stock pursuant to
this Agreement, and (ix) the approval of this Agreement by the
requisite vote of the stockholders of Pinnacle and IFC, no consents
or approvals of or filings or registrations with any court,
administrative agency or commission or other governmental authority
or instrumentality (each a "Governmental Entity") or with any third
party are necessary in connection with (A) the execution and
delivery by Pinnacle of this Agreement and (B) the consummation by
Pinnacle of the Merger and the other transactions contemplated
hereby.
3.5 Reports. Pinnacle and each of its Subsidiaries have
timely filed all reports, registrations and statements, together
with any amendments required to be made with respect thereto, that
they were required to file since January 1, 1994 with (i) the
Federal Reserve Board, (ii) the Federal Deposit Insurance
Corporation, (iii) any state regulatory authority (each a "State
Regulator"), (iv) the Office of the Comptroller of the Currency
(the "OCC"), (v) the OTS, (vi) the SEC and (vii) any SRO
(collectively "Regulatory Agencies"), and all other reports and
statements required to be filed by them since January 1, 1994,
including, without limitation, any report or statement required to
be filed pursuant to the laws, rules or regulations of the United
States, any state, or any Regulatory Agency and have paid all fees
and assessments due and payable in connection therewith, except
where the failure to file such report, registration or statement or
to pay such fees and assessments, either individually or in the
aggregate, will not have a Material Adverse Effect on Pinnacle.
Except for normal examinations conducted by a Regulatory Agency in
the regular course of the business of Pinnacle and its
Subsidiaries, no Regulatory Agency has initiated any proceeding or,
to the best knowledge of Pinnacle, investigation into the business
or operations of Pinnacle or any of its Subsidiaries since
January 1, 1994, except where such proceedings or investigation are
not likely, either individually or in the aggregate, to have a
Material Adverse Effect on Pinnacle. There is no unresolved
violation, criticism, or exception by any Regulatory Agency with
respect to any report or statement relating to any examinations of
Pinnacle or any of its Subsidiaries which, in the reasonable
judgment of Pinnacle, is likely, either individually or in the
aggregate, to have a Material Adverse Effect on Pinnacle.
3.6 Financial Statements. Pinnacle has previously made
available to IFC copies of (a) the consolidated balance sheets of
Pinnacle and its Subsidiaries as of December 31, for the fiscal
years 1994 and 1995, and the related consolidated statements of
income, changes in stockholders' equity and cash flows for the
fiscal years 1993 through 1995, inclusive, as reported in
Pinnacle's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 filed with the SEC under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), in each case
accompanied by the audit report of KPMG Peat Marwick LLP,
independent public accountants with respect to Pinnacle, and (b)
the unaudited consolidated balance sheet of Pinnacle and its
Subsidiaries as of June 30, 1996 and the related unaudited
consolidated statements of income, cash flows and changes in
stockholders' equity for the six-month period then ended as
reported in Pinnacle's Quarterly Report on Form 10-Q for the period
ended June 30, 1996 filed with the SEC under the Exchange Act (the
"Pinnacle June 30, 1996 Form 10-Q"). The December 31, 1995
consolidated balance sheet of Pinnacle (including the related
notes, where applicable) fairly presents the consolidated financial
position of Pinnacle and its Subsidiaries as of the date thereof,
and the other financial statements referred to in this Section 3.6
(including the related notes, where applicable) fairly present
(subject, in the case of the unaudited statements, to recurring
audit adjustments normal in nature and amount) the results of the
consolidated operations and changes in stockholders' equity and
consolidated financial position of Pinnacle and its Subsidiaries
for the respective fiscal periods or as of the respective dates
therein set forth; each of such statements (including the related
notes, where applicable) comply in all material respects with
applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto; and each of such
statements (including the related notes, where applicable) has been
prepared in all material respects in accordance with generally
accepted accounting principles ("GAAP") consistently applied during
the periods involved, except, in each case, as indicated in such
statements or in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q. The books and records of
Pinnacle and its Subsidiaries have been, and are being, maintained
in all material respects in accordance with GAAP and any other
applicable legal and accounting requirements and reflect only
actual transactions.
3.7 Broker's Fees. Neither Pinnacle nor any Pinnacle
Subsidiary nor any of their respective officers or directors has
employed any broker or finder or incurred any liability for any
broker's fees, commissions or finder's fees in connection with the
Merger or related transactions contemplated by this Agreement or
the Option Agreements, other than The Chicago Corporation (a copy
of which engagement agreement has been disclosed by Pinnacle to
IFC) whose fees, commissions and expenses shall be paid by
Pinnacle.
3.8 Absence of Certain Changes or Events.
(a) Except as publicly disclosed in Pinnacle Reports (as
defined in Section 3.12) filed prior to the date hereof, since
December 31, 1995, (i) Pinnacle and its Subsidiaries taken as a
whole have not incurred any material liability, except in the
ordinary course of their business, and (ii) no event has occurred
which has had, individually or in the aggregate, a Material Adverse
Effect on Pinnacle or the Surviving Corporation.
(b) Except as publicly disclosed in Pinnacle Reports
filed prior to the date hereof, since December 31, 1995, Pinnacle
and its Subsidiaries have carried on their respective businesses in
all material respects in the ordinary and usual course.
(c) Since December 31, 1995, neither Pinnacle nor any of
its Subsidiaries has (i) except for such actions as are in the
ordinary course of business consistent with past practice or except
as required by applicable law, (A) increased the wages, salaries,
compensation, pension, or other fringe benefits or perquisites
payable to any executive officer, employee, or director from the
amount thereof in effect as of December 31, 1995, or (B) granted
any severance or termination pay, entered into any contract to make
or grant any severance or termination pay, or paid any bonuses in
excess of Pinnacle's 1995 salary and employee benefits expenses, or
(ii) suffered any strike, work stoppage, slowdown, or other labor
disturbance which, in the reasonable judgment of Pinnacle, is
likely, either individually or in the aggregate, to have a Material
Adverse Effect on Pinnacle.
3.9 Legal Proceedings.
(a) Neither Pinnacle nor any of its Subsidiaries is a
party to any, and there are no pending or, to the best of
Pinnacle's knowledge, threatened, material legal, administrative,
arbitral or other proceedings, claims, actions or governmental or
regulatory investigations of any nature against Pinnacle or any of
its Subsidiaries or challenging the validity or propriety of the
transactions contemplated by this Agreement or the Pinnacle Option
Agreement as to which there is a reasonable probability of an
adverse determination and which, if adversely determined, would,
individually or in the aggregate, have a Material Adverse Effect on
Pinnacle.
(b) There is no injunction, order, judgment, decree, or
regulatory restriction (other than those that apply to similarly
situated bank holding companies, savings and loan holding companies
banks, or savings institutions) imposed upon Pinnacle, any of its
Subsidiaries or the assets of Pinnacle or any of its Subsidiaries
which has had, or might reasonably be expected to have, a Material
Adverse Effect on Pinnacle.
3.10 Taxes and Tax Returns.
(a) Each of Pinnacle and its Subsidiaries has duly filed
all federal, state, county, foreign and, to the best of Pinnacle's
knowledge, local information returns and tax returns required to be
filed by it on or prior to the date hereof (all such returns being
accurate and complete in all material respects) and has duly paid
or made provisions for the payment of all Taxes (as defined in
Section 3.10(b)) and other governmental charges which have been
incurred or are due or claimed to be due from it by federal, state,
county, foreign or local taxing authorities on or prior to the date
of this Agreement (including, without limitation, if and to the
extent applicable, those due in respect of its properties, income,
business, capital stock, deposits, franchises, licenses, sales and
payrolls) other than (i) Taxes or other charges which are not yet
delinquent or are being contested in good faith and have not been
finally determined, or (ii) information returns, tax returns, Taxes
or other governmental charges the failure to file, pay or make
provision for, either individually or in the aggregate, are not
likely, in the reasonable judgment of Pinnacle, to have a Material
Adverse Effect on Pinnacle. The income tax returns of Pinnacle and
its Subsidiaries have been examined by the Internal Revenue Service
(the "IRS") and any liability with respect thereto has been
satisfied for all years to and including 1993, and either no
material deficiencies were asserted as a result of such examination
for which Pinnacle does not have adequate reserves or all such
deficiencies were satisfied. To the best of Pinnacle's knowledge,
there are no material disputes pending, or claims asserted for,
Taxes or assessments upon Pinnacle or any of its Subsidiaries for
which Pinnacle does not have adequate reserves, nor has Pinnacle or
any of its Subsidiaries given any currently effective waivers
extending the statutory period of limitation applicable to any
federal, state, county or local income tax return for any period.
In addition, (A) proper and accurate amounts have been withheld by
Pinnacle and its Subsidiaries from their employees for all prior
periods in compliance in all material respects with the tax
withholding provisions of applicable federal, state and local laws,
except where failure to do so would not have a Material Adverse
Effect on Pinnacle, (B) federal, state, county and local returns
which are accurate and complete in all material respects have been
filed by Pinnacle and its Subsidiaries for all periods for which
returns were due with respect to income tax withholding, Social
Security and unemployment taxes, except where failure to do so
would not have a Material Adverse Effect on Pinnacle, (C) the
amounts shown on such federal, state, local or county returns to be
due and payable have been paid in full or adequate provision
therefor has been included by Pinnacle in its consolidated
financial statements as of December 31, 1995, except where failure
to do so would not have a Material Adverse Effect on Pinnacle and
(D) there are no Tax liens upon any property or assets of Pinnacle
or its Subsidiaries except liens for current taxes not yet due or
liens that would not have a Material Adverse Effect on Pinnacle.
Neither Pinnacle nor any of its Subsidiaries has been required to
include in income any adjustment pursuant to Section 481 of the
Code by reason of a voluntary change in accounting method initiated
by Pinnacle or any of its Subsidiaries, and the IRS has not
initiated or proposed any such adjustment or change in accounting
method, in either case which has had or is reasonably likely to
have a Material Adverse Effect on Pinnacle. Except as set forth in
the financial statements described in Section 3.6, neither Pinnacle
nor any of its Subsidiaries has entered into a transaction which is
being accounted for as an installment obligation under Section 453
of the Code, which would be reasonably likely to have a Material
Adverse Effect on Pinnacle.
(b) As used in this Agreement, the term "Tax" or "Taxes"
means all federal, state, county, local, and foreign income,
excise, gross receipts, gross income, ad valorem, profits, gains,
property, capital, sales, transfer, use, payroll, employment,
severance, withholding, duties, intangibles, franchise, backup
withholding, and other taxes, charges, levies or like assessments
together with all penalties and additions to tax and interest
thereon.
(c) Any amount that is reasonably likely to be received
(whether in cash or property or the vesting of property) as a
result of any of the transactions contemplated by this Agreement by
any employee, officer or director of Pinnacle or any of its
affiliates who is a "Disqualified Individual" (as such term is
defined in proposed Treasury Regulation Section 1.280G-1) under any
employment, severance or termination agreement, other compensation
arrangement or Pinnacle Benefit Plan (as defined in Section
3.11(a)) currently in effect should not be characterized as an
"excess parachute payment" (as such term is defined in Section
280G(b)(1) of the Code).
(d) No disallowance of a deduction under Section 162(m)
of the Code for employee remuneration of any amount paid or payable
by Pinnacle or any Subsidiary of Pinnacle under any contract, plan,
program, arrangement or understanding would be reasonably likely to
have a Material Adverse Effect on Pinnacle.
3.11 Employees.
(a) The Pinnacle Disclosure Schedule sets forth a true
and complete list of each material employee benefit plan,
arrangement or agreement that is maintained as of the date of this
Agreement (the "Pinnacle Benefit Plans") by Pinnacle or any of its
Subsidiaries or by any affiliated trade or business, whether or not
incorporated (an "ERISA Affiliate"), all of which together with
Pinnacle would be deemed a "single employer" within the meaning of
Section 4001 of the Employee Retirement Income Security Act of
1974, as amended ("ERISA").
(b) Pinnacle has heretofore delivered to IFC true and
complete copies of each of the Pinnacle Benefit Plans and certain
related documents, including, but not limited to, (i) the actuarial
report for such Pinnacle Benefit Plan (if applicable) for each of
the last two years, and (ii) the most recent determination letter
from the IRS (if applicable) for such Plan.
(c) (i) Each of the Pinnacle Benefit Plans has been
operated and administered in all material respects in compliance
with applicable laws, including, but not limited to, ERISA and the
Code, (ii) each of the Pinnacle Benefit Plans intended to be
"qualified" within the meaning of Section 401(a) of the Code is so
qualified, (iii) with respect to each Plan which is subject to
Title IV of ERISA, the present value of accrued benefits under such
Plan, based upon the actuarial assumptions used for funding
purposes in the most recent actuarial report prepared by such
Plan's actuary with respect to such Plan, did not, as of its latest
valuation date, exceed the then current value of the assets of such
Plan allocable to such accrued benefits, (iv) no Pinnacle Benefit
Plan provides benefits, including, without limitation, death or
medical benefits (whether or not insured), with respect to current
or former employees of Pinnacle, its Subsidiaries or any ERISA
Affiliate beyond their retirement or other termination of service,
other than (A) coverage mandated by applicable law, (B) death
benefits or retirement benefits under any "employee pension plan"
(as such term is defined in Section 3(2) of ERISA), (C) deferred
compensation benefits accrued as liabilities on the books of
Pinnacle, its Subsidiaries or the ERISA Affiliates or (D) benefits
the full cost of which is borne by the current or former employee
(or his beneficiary), (v) no material liability under Title IV of
ERISA has been incurred by Pinnacle, its Subsidiaries or any ERISA
Affiliate that has not been satisfied in full, and no condition
exists that presents a material risk to Pinnacle, its Subsidiaries
or any ERISA Affiliate of incurring a material liability
thereunder, (vi) no Plan is a "multiemployer pension plan" (as such
term is defined in Section 3(37) of ERISA), (vii) all contributions
or other amounts payable by Pinnacle or its Subsidiaries as of the
Effective Time with respect to each Pinnacle Benefit Plan in
respect of current or prior plan years have been paid or accrued in
accordance with GAAP and Section 412 of the Code, (viii) neither
Pinnacle, its Subsidiaries nor any ERISA Affiliate has engaged in
a transaction in connection with which Pinnacle, its Subsidiaries
or any ERISA Affiliate reasonably could be subject to either a
material civil penalty assessed pursuant to Section 409 or 502(i)
of ERISA or a material tax imposed pursuant to Section 4975 or 4976
of the Code, and (ix) to the best knowledge of Pinnacle there are
no pending, threatened or anticipated claims (other than routine
claims for benefits) by, on behalf of or against any of the
Pinnacle Benefit Plans or any trusts related thereto which are, in
the reasonable judgment of Pinnacle, likely, either individually or
in the aggregate, to have a Material Adverse Effect on Pinnacle.
(d) Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will
(i) result in any material payment (including, without limitation,
severance, unemployment compensation, golden parachute or
otherwise) becoming due to any director or any employee of Pinnacle
or any of its affiliates from Pinnacle or any of its affiliates
under any Pinnacle Benefit Plan or otherwise, (ii) materially
increase any benefits otherwise payable under any Pinnacle Benefit
Plan or (iii) result in any acceleration of the time of payment or
vesting of any such benefits to any material extent.
3.12 SEC Reports. Pinnacle has previously made available to
IFC an accurate and complete copy of each (a) final registration
statement, prospectus, report, schedule and definitive proxy
statement filed since January 1, 1994 by Pinnacle with the SEC
pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), or the Exchange Act (the "Pinnacle Reports") and prior to
the date hereof and (b) communication mailed by Pinnacle to its
stockholders since January 1, 1994 and prior to the date hereof,
and no such registration statement, prospectus, report, schedule,
proxy statement or communication contained any untrue statement of
a material fact or omitted to state any material fact required to
be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they were made, not
misleading, except that information as of a later date shall be
deemed to modify information as of an earlier date. Since
January 1, 1994, Pinnacle has timely filed all Pinnacle Reports and
other documents required to be filed by it under the Securities Act
and the Exchange Act, and, as of their respective dates, all
Pinnacle Reports complied in all material respects with the
published rules and regulations of the SEC with respect thereto.
3.13 Compliance with Applicable Law. Pinnacle and each of
its Subsidiaries hold all material licenses, franchises, permits
and authorizations necessary for the lawful conduct of their
respective businesses under and pursuant to all, and have complied
in all material respects with and are not in default in any
material respect under any, applicable law, statute, order, rule,
regulation, policy and/or guideline of any Governmental Entity
relating to Pinnacle or any of its Subsidiaries, except where the
failure to hold such license, franchise, permit or authorization or
such noncompliance or default would not, individually or in the
aggregate, have a Material Adverse Effect on Pinnacle.
3.14 Certain Contracts.
(a) Neither Pinnacle nor any of its Subsidiaries is a
party to or bound by any contract, arrangement, commitment or
understanding (whether written or oral) (i) with respect to the
employment of any directors, officers or employees other than in
the ordinary course of business consistent with past practice, (ii)
which, upon the consummation of the transactions contemplated by
this Agreement will (either alone or upon the occurrence of any
additional acts or events) result in any payment (whether of
severance pay or otherwise) becoming due from IFC, Pinnacle, the
Surviving Corporation, or any of their respective Subsidiaries to
any officer or employee thereof, (iii) which is a "material
contract" (as such term is defined in Item 601(b)(10) of Regulation
S-K of the SEC) to be performed after the date of this Agreement
that has not been filed or incorporated by reference in the
Pinnacle Reports, (iv) which materially restricts the conduct of
any line of business by Pinnacle, (v) with or to a labor union or
guild (including any collective bargaining agreement) or (vi)
(including any stock option plan, stock appreciation rights plan,
restricted stock plan or stock purchase plan) any of the benefits
of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement, or the value of any of the benefits
of which will be calculated on the basis of any of the transactions
contemplated by this Agreement. Pinnacle has previously made
available to IFC true and correct copies of all employment and
deferred compensation agreements which are in writing and to which
Pinnacle is a party. Each contract, arrangement, commitment or
understanding of the type described in this Section 3.14(a),
whether or not set forth in the Pinnacle Disclosure Schedule, is
referred to herein as a "Pinnacle Contract", and neither Pinnacle
nor any of its Subsidiaries knows of, or has received notice of,
any violation of the above by any of the other parties thereto
which, individually or in the aggregate, would have a Material
Adverse Effect on Pinnacle.
(b) (i) Each Pinnacle Contract is valid and binding on
Pinnacle or any of its Subsidiaries, as applicable, and in full
force and effect, (ii) Pinnacle and each of its Subsidiaries has in
all material respects performed all obligations required to be
performed by it to date under each Pinnacle Contract, except where
such noncompliance, individually or in the aggregate, would not
have a Material Adverse Effect on Pinnacle, and (iii) no event or
condition exists which constitutes or, after notice or lapse of
time or both, would constitute, a material default on the part of
Pinnacle or any of its Subsidiaries under any such Pinnacle
Contract, except where such default, individually or in the
aggregate, would not have a Material Adverse Effect on Pinnacle.
3.15 Agreements with Regulatory Agencies. Neither Pinnacle
nor any of its Subsidiaries is subject to any cease-and-desist or
other order issued by, or is a party to any written agreement,
consent agreement or memorandum of understanding with, or is a
party to any commitment letter or similar undertaking to, or is
subject to any order or directive by, or has been since January 1,
1994, a recipient of any supervisory letter from, or since January
1, 1994, has adopted any board resolutions at the request of any
Regulatory Agency or other Governmental Entity that currently
restricts in any material respect the conduct of its business or
that in any material manner relates to its capital adequacy, its
credit policies, its management or its business (each, whether or
not set forth in the Pinnacle Disclosure Schedule, a "Pinnacle
Regulatory Agreement"), nor has Pinnacle or any of its Subsidiaries
been advised since January 1, 1994, by any Regulatory Agency or
other Governmental Entity that it is considering issuing or
requesting any such Regulatory Agreement.
3.16 Other Activities of Pinnacle and its Subsidiaries.
(a) Neither Pinnacle nor any of its Subsidiaries that is
neither a bank, a bank operating subsidiary or a bank service
corporation, directly or indirectly, engages in any activity
prohibited by the Federal Reserve Board or the OTS. Without
limiting the generality of the foregoing, any equity investment of
Pinnacle and each Subsidiary that is not a bank, a bank operating
subsidiary or a bank service corporation is not prohibited by the
Federal Reserve Board or the OTS.
(b) To Pinnacle's knowledge, each Pinnacle Subsidiary
which is a federally insured bank or savings institution (a
"Pinnacle Bank Subsidiary") currently performs all personal trust,
corporate trust and other fiduciary activities ("Trust Activities")
with requisite authority under applicable law of Governmental
Entities and in accordance in all material respects with the
agreed-upon terms of the agreements and instruments governing such
Trust Activities, sound fiduciary principles and applicable law and
regulation (specifically including, but not limited to, Section 9
of Title 12 of the Code of Federal Regulations); there is no
investigation or inquiry by any Governmental Entity pending, or to
the knowledge of Pinnacle, threatened, against or affecting
Pinnacle, or any Significant Subsidiary thereof relating to the
compliance by Pinnacle or any such Significant Subsidiary (as such
term is defined in Rule 1-02(w) of Regulation S-X of the SEC) with
sound fiduciary principles and applicable regulations; and except
where any such failure would not have a Material Adverse Effect on
Pinnacle, each employee of a Pinnacle Bank Subsidiary had the
authority to act in the capacity in which he or she acted with
respect to Trust Activities, in each case, in which such employee
held himself or herself out as a representative of a Pinnacle Bank
Subsidiary; and each Pinnacle Bank Subsidiary has established
policies and procedures for the purpose of complying with
applicable laws of Governmental Entities relating to Trust
Activities, has followed such policies and procedures in all
material respects and has performed appropriate internal audit
reviews of, and has engaged independent accountants to perform
audits of, Trust Activities, which audits since January 1, 1994
have disclosed no material violations of applicable laws of
Governmental Entities or such policies and procedures.
3.17 Investment Securities. Each of Pinnacle and its
Subsidiaries has good and marketable title to all securities held
by it (except securities sold under repurchase agreements or held
in any fiduciary or agency capacity), free and clear of any Lien,
except to the extent such securities are pledged in the ordinary
course of business consistent with prudent banking practices to
secure obligations of Pinnacle or any of its Subsidiaries. Such
securities are valued on the books of Pinnacle in accordance with
GAAP.
3.18 Interest Rate Risk Management Instruments. All interest
rate swaps, caps, floors and option agreements and other interest
rate risk management arrangements, whether entered into for the
account of Pinnacle or for the account of a customer of Pinnacle or
one of its Subsidiaries, were entered into in the ordinary course
of business and, to Pinnacle's knowledge, in accordance with
prudent banking practice and applicable rules, regulations and
policies of any Regulatory Authority and with counterparties
believed to be financially responsible at the time and are legal,
valid and binding obligations of Pinnacle or one of its
Subsidiaries enforceable in accordance with their terms (except as
may be limited by bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting the rights of creditors
generally and the availability of equitable remedies), and are in
full force and effect. Pinnacle and each of its Subsidiaries have
duly performed in all material respects all of their material
obligations thereunder to the extent that such obligations to
perform have accrued; and, to Pinnacle's knowledge, there are no
material breaches, violations or defaults or allegations or
assertions of such by any party thereunder.
3.19 Undisclosed Liabilities. Except for those liabilities
that are fully reflected or reserved against on the consolidated
balance sheet of Pinnacle included in the Pinnacle June 30, 1996
Form 10-Q and for liabilities incurred in the ordinary course of
business consistent with past practice since June 30, 1996, neither
Pinnacle nor any of its Subsidiaries has incurred any liability of
any nature whatsoever (whether absolute, accrued, contingent or
otherwise and whether due or to become due) that, either alone or
when combined with all similar liabilities, has had, or could
reasonably be expected to have, a Material Adverse Effect on
Pinnacle.
3.20 Environmental Liability. Except as set forth in the
Pinnacle Disclosure Schedule, there are no legal, administrative,
arbitral or other proceedings, claims, actions, causes of action,
private environmental investigations or remediation activities or
governmental investigations of any nature seeking to impose, or
that could reasonably be expected to result in the imposition, on
Pinnacle or any of the Pinnacle Subsidiaries of any liability or
obligation arising under common law or under any local, state or
federal environmental statute, regulation or ordinance including,
without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"),
pending or threatened against Pinnacle or any of the Pinnacle
Subsidiaries, which liability or obligation could reasonably be
expected to have a Material Adverse Effect on Pinnacle. To the
knowledge of Pinnacle, there is no reasonable basis for any such
proceeding, claim, action or governmental investigation that would
impose any material liability or obligation that could reasonably
be expected to have a Material Adverse Effect on Pinnacle. Neither
Pinnacle nor any of the Pinnacle Subsidiaries is subject to any
agreement, order, judgment, decree, letter or memorandum by or with
any court, governmental authority, regulatory agency or third party
imposing any material liability or obligation that could reasonably
be expected to have a Material Adverse Effect on Pinnacle.
3.21 State Takeover Laws. The Board of Directors of Pinnacle
has approved the transactions contemplated by this Agreement and
the Option Agreements and taken such action such that the
provisions of Chapter 7A of the MBCA and any other provisions of
any state or local "takeover" law applicable to Pinnacle will not
apply to this Agreement or the Option Agreements or any of the
transactions contemplated hereby or thereby.
3.22 Pooling of Interests. Pinnacle has no reason to believe
that the Merger will not qualify as a "pooling of interests" for
accounting purposes.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF IFC
-------------------------------------
Except as disclosed in the IFC disclosure schedule delivered
to Pinnacle concurrently herewith (the "IFC Disclosure Schedule")
IFC hereby represents and warrants to Pinnacle as follows:
4.1 Corporate Organization.
(a) IFC is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware. IFC has the corporate power and authority to own or
lease all of its properties and assets and to carry on its business
as it is now being conducted, and is duly licensed or qualified to
do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed
or qualified would not have a Material Adverse Effect on IFC. IFC
is duly registered as a savings and loan holding company under the
HOLA. True and complete copies of the Certificate of Incorporation
and Bylaws of IFC, as in effect as of the date of this Agreement,
have previously been made available by IFC to Pinnacle.
(b) Each IFC Subsidiary (i) is duly organized and
validly existing as a bank, savings and loan institution,
corporation, partnership or limited liability company under the
laws of its jurisdiction of organization, (ii) is duly qualified to
do business and in good standing in all jurisdictions (whether
federal, state, local or foreign) where its ownership or leasing of
property or the conduct of its business requires it to be so
qualified and in which the failure to be so qualified would have a
Material Adverse Effect on IFC, and (iii) has all requisite
corporate power and authority to own or lease its properties and
assets and to carry on its business as now conducted.
(c) The minute books of IFC accurately reflect in all
material respects all corporate actions held or taken since
January 1, 1994 of its stockholders and Board of Directors
(including committees of the Board of Directors of IFC).
4.2 Capitalization.
(a) The authorized capital stock of IFC consists of (i)
5,000,000 shares of serial preferred stock, par value $0.01 per
share, none of which as of November 11, 1996 were issued or
outstanding; and (ii) 10,000,000 shares of IFC Common Stock, of
which as of November 11, 1996, 4,751,131 shares were issued and
outstanding and 1,110,000 shares were held in treasury. All of the
issued and outstanding shares of IFC Common Stock have been duly
authorized and validly issued and are fully paid, nonassessable and
free of preemptive rights, with no personal liability attaching to
the ownership thereof. As of the date of this Agreement, except
pursuant to the terms of the IFC Option Agreement (as hereinafter
defined), the IFC Rights Agreement and the IFC Stock Plans, IFC
does not have and is not bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of IFC
Common Stock or any other equity securities of IFC or any
securities representing the right to purchase or otherwise receive
any shares of IFC Common Stock or any other equity securities of
IFC. As of November 11, 1996, no shares of IFC Common Stock were
reserved for issuance, except for (i) 253,089 shares reserved for
issuance upon the exercise of stock options pursuant to the IFC
Stock Plans, and (ii) shares reserved for issuance pursuant to the
IFC Rights Agreement. Since January 1, 1996, IFC has not issued
any shares of IFC Common Stock or other equity securities of IFC,
or any securities convertible into or exercisable for any shares of
IFC Common Stock or other equity securities of IFC, other than
pursuant to the exercise of employee stock options granted prior to
such date.
(b) As of November 11, 1996, there are issued and outstanding
up to 4,751,131 rights in respect of shares of IFC Common Stock
(the "IFC Rights"), subject to terms and conditions of the
Stockholder Protection Rights Agreement dated as of February 26,
1992, as amended by the Amendment to Stockholder Protection Rights
Agreement dated as of November 14, 1996 (the "IFC Rights
Agreement"), between IFC and Harris Trust and Savings Bank, as
Rights Agent. As of the date of this Agreement, the Separation
Time (as defined in the IFC Rights Agreement) has not occurred, the
Amendment to Stockholder Protection Rights Agreement dated as of
November 14, 1996, has been entered into and is effective and in
full force and effect, the entering into of this Agreement and/or
the IFC Stock Option Agreement and/or the consummation of the
transactions contemplated hereby and/or thereby have been exempted
from the application of the IFC Rights Agreement and do not and
will not cause a Separation Time to occur, and all IFC Rights are
redeemable by IFC at a cost to IFC of not more than $0.01 per each
of the shares of IFC Common Stock issued and outstanding.
(c) IFC owns, directly or indirectly, all of the issued and
outstanding shares of capital stock of each of the IFC
Subsidiaries, free and clear of any Liens, and all of such shares
are duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. No IFC Subsidiary has
or is bound by any outstanding subscriptions, options, warrants,
calls, commitments or agreements of any character calling for the
purchase or issuance of any shares of capital stock or any other
equity security of such Subsidiary or any securities representing
the right to purchase or otherwise receive any shares of capital
stock or any other equity security of such Subsidiary.
4.3 Authority; No Violation.
(a) IFC has full corporate power and authority to
execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly approved by the
Board of Directors of IFC. The Board of Directors of IFC has
directed that this Agreement and the transactions contemplated
hereby be submitted to IFC's stockholders for approval at a meeting
of such stockholders and, except for the adoption of this Agreement
by the affirmative vote of the holders of a majority of the
outstanding shares of IFC Common Stock, no other corporate
proceedings on the part of IFC are necessary to approve this
Agreement and to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by
IFC and (assuming due authorization, execution and delivery by
Pinnacle) constitutes a valid and binding obligation of IFC,
enforceable against IFC in accordance with its terms.
(b) Neither the execution and delivery of this Agreement
by IFC nor the consummation by IFC of the transactions contemplated
hereby, nor compliance by IFC with any of the terms or provisions
hereof, will (i) violate any provision of the Certificate of
Incorporation or Bylaws of IFC or (ii) assuming that the consents
and approvals referred to in Section 4.4 are duly obtained, (x)
violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to IFC or any of its
Subsidiaries or any of their respective properties or assets, or
(y) violate, conflict with, result in a breach of any provision of
or the loss of any benefit under, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a
default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance
required by, or result in the creation of any Lien upon any of the
respective properties or assets of IFC or any of its Subsidiaries
under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement
or other instrument or obligation to which IFC or any of its
Subsidiaries is a party, or by which they or any of their
respective properties or assets may be bound or affected, except
(in the case of clause (y) above) for such violations, conflicts,
breaches or defaults which, either individually or in the
aggregate, will not have or be reasonably likely to have a Material
Adverse Effect on IFC or the Surviving Corporation; provided,
however, that prior to the date hereof, IFC has secured a waiver of
Harris Trust and Savings Bank under the loan, security agreement
and guaranty for the benefit of the IFC Employee Stock Ownership
Plan ("ESOP") so that this Agreement and the Merger shall not cause
any breach, default or acceleration under said IFC ESOP loan
arrangement.
4.4 Consents and Approvals. Except for (i) the filing of
applications and notices, as applicable, with the Federal Reserve
Board under the BHC Act and approval of such applications and
notices, (ii) the filing of any required applications with the OTS,
(iii) the filing of any required applications or notices for, and
the receipt of, the State Approvals, (iv) the filing with the SEC
of the Joint Proxy Statement and the S-4 in which the Joint Proxy
Statement will be included as a prospectus, (v) the filing of
Certificates of Merger with the appropriate authorities of the
State of Michigan pursuant to the MBCA and with the appropriate
officials of the State of Delaware pursuant to the DGCL, (vi) any
notices to or filings with the SBA, (vii) any consent,
authorizations, approvals, filings or exemptions in connection with
compliance with the applicable provisions of federal and state
securities laws relating to the regulation of broker-dealers or
investment advisers, and federal commodities laws relating to the
regulation of futures commission merchants and the rules and
regulations thereunder and of any applicable industry SRO, and the
rules of NASDAQ, or which are required under consumer finance,
mortgage banking and other similar laws, (viii) such filings and
approvals as are required to be made or obtained under the
securities or "Blue Sky" laws of various states in connection with
the issuance of the shares of Pinnacle Common Stock pursuant to
this Agreement, and (ix) the approval of this Agreement by the
requisite vote of the stockholders of Pinnacle and IFC, no consents
or approvals of or filings or registrations with any Governmental
Entity or with any third party are necessary in connection with (A)
the execution and delivery by IFC of this Agreement and (B) the
consummation by IFC of the Merger and the other transactions
contemplated hereby.
4.5 Reports. IFC and each of its Subsidiaries have timely
filed all reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were
required to file since January 1, 1994 with any of the Regulatory
Agencies, and all other reports and statements required to be filed
by them since January 1, 1994, including, without limitation, any
report or statement required to be filed pursuant to the laws,
rules or regulations of the United States, any state, or any
Regulatory Agency and have paid all fees and assessments due and
payable in connection therewith, except where the failure to file
such report, registration or statement or to pay such fees and
assessments, either individually or in the aggregate, will not have
a Material Adverse Effect on IFC. Except for normal examinations
conducted by a Regulatory Agency in the regular course of the
business of IFC and its Subsidiaries, no Regulatory Agency has
initiated any proceeding or, to the best knowledge of IFC,
investigation into the business or operations of IFC or any of its
Subsidiaries since January 1, 1994, except where such proceedings
or investigation are not likely, either individually or in the
aggregate, to have a Material Adverse Effect on IFC. There is no
unresolved violation, criticism, or exception by any Regulatory
Agency with respect to any report or statement relating to any
examinations of IFC or any of its Subsidiaries which, in the
reasonable judgment of IFC, is likely, either individually or in
the aggregate, to have a Material Adverse Effect on IFC.
4.6 Financial Statements. IFC has previously made available
to Pinnacle copies of (a) the consolidated balance sheets of IFC
and its Subsidiaries as of December 31, for the fiscal years 1994
and 1995, and the related consolidated statements of income,
changes in stockholders' equity and cash flows for the fiscal years
1993 through 1995, inclusive, as reported in IFC's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995 filed with
the SEC under the Exchange Act, in each case accompanied by the
audit report of Ernst & Young LLP, independent public accountants
with respect to IFC, and (b) the unaudited consolidated balance
sheet of IFC and its Subsidiaries as of June 30, 1996 and the
related unaudited consolidated statements of income and cash flows
for the six-month period then ended as reported in IFC's Quarterly
Report on Form 10-Q for the period ended June 30, 1996 filed with
the SEC under the Exchange Act (the "IFC June 30, 1996 Form 10-Q").
The December 31, 1995 consolidated balance sheet of IFC (including
the related notes, where applicable) fairly presents the
consolidated financial position of IFC and its Subsidiaries as of
the date thereof, and the other financial statements referred to in
this Section 4.6 (including the related notes, where applicable)
fairly present (subject, in the case of the unaudited statements,
to recurring audit adjustments normal in nature and amount) the
results of the consolidated operations and changes in stockholders'
equity and consolidated financial position of IFC and its
Subsidiaries for the respective fiscal periods or as of the
respective dates therein set forth; each of such statements
(including the related notes, where applicable) comply in all
material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect
thereto; and each of such statements (including the related notes,
where applicable) has been prepared in all material respects in
accordance with GAAP consistently applied during the periods
involved, except, in each case, as indicated in such statements or
in the notes thereto or, in the case of unaudited statements, as
permitted by Form 10-Q. The books and records of IFC and its
Subsidiaries have been, and are being, maintained in all material
respects in accordance with GAAP and any other applicable legal and
accounting requirements and reflect only actual transactions.
4.7 Broker's Fees. Neither IFC nor any IFC Subsidiary nor
any of their respective officers or directors has employed any
broker or finder or incurred any liability for any broker's fees,
commissions or finder's fees in connection with the Merger or
related transactions contemplated by this Agreement or the Option
Agreements, other than Sandler O'Neill & Partners, L.P. ("Sandler
O'Neill") (a copy of which engagement agreement has been disclosed
by IFC to Pinnacle) whose fees, commissions and expenses shall be
paid by IFC.
4.8 Absence of Certain Changes or Events.
(a) Except as publicly disclosed in IFC Reports (as
defined in Section 4.12) filed prior to the date hereof, since
December 31, 1995, (i) IFC and its Subsidiaries taken as a whole
have not incurred any material liability, except in the ordinary
course of their business, and (ii) no event has occurred which has
had, individually or in the aggregate, a Material Adverse Effect on
IFC or the Surviving Corporation.
(b) Except as publicly disclosed in IFC Reports filed
prior to the date hereof, since December 31, 1995, IFC and its
Subsidiaries have carried on their respective businesses in all
material respects in the ordinary and usual course.
(c) Since December 31, 1995, neither IFC nor any of its
Subsidiaries has (i) except for such actions as are in the ordinary
course of business consistent with past practice or except as
required by applicable law, (A) increased the wages, salaries,
compensation, pension, or other fringe benefits or perquisites
payable to any executive officer, employee, or director from the
amount thereof in effect as of December 31, 1995, or (B) granted
any severance or termination pay, entered into any contract to make
or grant any severance or termination pay, or paid any bonuses in
excess of IFC's 1995 salary and employee benefits expenses, or (ii)
suffered any strike, work stoppage, slowdown, or other labor
disturbance which, in the reasonable judgment of IFC, is likely,
either individually or in the aggregate, to have a Material Adverse
Effect on IFC.
4.9 Legal Proceedings.
(a) Neither IFC nor any of its Subsidiaries is a party
to any, and there are no pending or, to the best of IFC's
knowledge, threatened, material legal, administrative, arbitral or
other proceedings, claims, actions or governmental or regulatory
investigations of any nature against IFC or any of its Subsidiaries
or challenging the validity or propriety of the transactions
contemplated by this Agreement or the IFC Option Agreement as to
which there is a reasonable probability of an adverse determination
and which, if adversely determined, would, individually or in the
aggregate, have a Material Adverse Effect on IFC.
(b) There is no injunction, order, judgment, decree, or
regulatory restriction (other than those that apply to similarly
situated bank holding companies, savings and loan holding companies
banks, or savings institutions) imposed upon IFC, any of its
Subsidiaries or the assets of IFC or any of its Subsidiaries which
has had, or might reasonably be expected to have, a Material
Adverse Effect on IFC.
4.10 Taxes and Tax Returns.
(a) Each of IFC and its Subsidiaries has duly filed all
federal, state, county, foreign and, to the best of IFC's
knowledge, local information returns and tax returns required to be
filed by it on or prior to the date hereof (all such returns being
accurate and complete in all material respects) and has duly paid
or made provisions for the payment of all Taxes and other
governmental charges which have been incurred or are due or claimed
to be due from it by federal, state, county, foreign or local
taxing authorities on or prior to the date of this Agreement
(including, without limitation, if and to the extent applicable,
those due in respect of its properties, income, business, capital
stock, deposits, franchises, licenses, sales and payrolls) other
than (i) Taxes or other charges which are not yet delinquent or are
being contested in good faith and have not been finally determined,
or (ii) information returns, tax returns, Taxes or other
governmental charges the failure to file, pay or make provision
for, either individually or in the aggregate, are not likely, in
the reasonable judgment of IFC, to have a Material Adverse Effect
on IFC. The income tax returns of IFC and its Subsidiaries have
been examined by the IRS and any liability with respect thereto has
been satisfied for all years to and including 1993, and either no
material deficiencies were asserted as a result of such examination
for which IFC does not have adequate reserves or all such
deficiencies were satisfied. To the best of IFC's knowledge, there
are no material disputes pending, or claims asserted for, Taxes or
assessments upon IFC or any of its Subsidiaries for which IFC does
not have adequate reserves, nor has IFC or any of its Subsidiaries
given any currently effective waivers extending the statutory
period of limitation applicable to any federal, state, county or
local income tax return for any period. In addition, (A) proper and
accurate amounts have been withheld by IFC and its Subsidiaries
from their employees for all prior periods in compliance in all
material respects with the tax withholding provisions of applicable
federal, state and local laws, except where failure to do so would
not have a Material Adverse Effect on IFC, (B) federal, state,
county and local returns which are accurate and complete in all
material respects have been filed by IFC and its Subsidiaries for
all periods for which returns were due with respect to income tax
withholding, Social Security and unemployment taxes, except where
failure to do so would not have a Material Adverse Effect on IFC,
(C) the amounts shown on such federal, state, local or county
returns to be due and payable have been paid in full or adequate
provision therefor has been included by IFC in its consolidated
financial statements as of December 31, 1995, except where failure
to do so would not have a Material Adverse Effect on IFC and (D)
there are no Tax liens upon any property or assets of IFC or its
Subsidiaries except liens for current taxes not yet due or liens
that would not have a Material Adverse Effect on IFC. Neither IFC
nor any of its Subsidiaries has been required to include in income
any adjustment pursuant to Section 481 of the Code by reason of a
voluntary change in accounting method initiated by IFC or any of
its Subsidiaries, and the IRS has not initiated or proposed any
such adjustment or change in accounting method, in either case
which has had or is reasonably likely to have a Material Adverse
Effect on IFC. Except as set forth in the financial statements
described in Section 4.6, neither IFC nor any of its Subsidiaries
has entered into a transaction which is being accounted for as an
installment obligation under Section 453 of the Code, which would
be reasonably likely to have a Material Adverse Effect on IFC.
(b) Any amount that is reasonably likely to be received
(whether in cash or property or the vesting of property) as a
result of any of the transactions contemplated by this Agreement by
any employee, officer or director of IFC or any of its affiliates
who is a "Disqualified Individual" (as such term is defined in
proposed Treasury Regulation Section 1.280G-1) under any
employment, severance or termination agreement, other compensation
arrangement or IFC Benefit Plan (as defined in Section 4.11(a))
currently in effect should not be characterized as an "excess
parachute payment" (as such term is defined in Section 280G(b)(1)
of the Code).
(c) No disallowance of a deduction under Section 162(m)
of the Code for employee remuneration of any amount paid or payable
by IFC or any Subsidiary of IFC under any contract, plan, program,
arrangement or understanding would be reasonably likely to have a
Material Adverse Effect on IFC.
4.11 Employees.
(a) The IFC Disclosure Schedule sets forth a true and
complete list of each material employee benefit plan, arrangement
or agreement that is maintained as of the date of this Agreement
(the "IFC Benefit Plans") by IFC or any of its Subsidiaries or by
any ERISA Affiliate, all of which together with IFC would be deemed
a "single employer" within the meaning of Section 4001 of ERISA.
(b) IFC has heretofore delivered to Pinnacle true and
complete copies of each of the IFC Benefit Plans and certain
related documents, including, but not limited to, (i) the actuarial
report for such IFC Benefit Plan (if applicable) for each of the
last two years, and (ii) the most recent determination letter from
the IRS (if applicable) for such Plan.
(c) (i) Each of the IFC Benefit Plans has been operated
and administered in all material respects in compliance with
applicable laws, including, but not limited to, ERISA and the Code,
(ii) each of the IFC Benefit Plans intended to be "qualified"
within the meaning of Section 401(a) of the Code is so qualified,
(iii) with respect to each Plan which is subject to Title IV of
ERISA, the present value of accrued benefits under such Plan, based
upon the actuarial assumptions used for funding purposes in the
most recent actuarial report prepared by such Plan's actuary with
respect to such Plan, did not, as of its latest valuation date,
exceed the then current value of the assets of such Plan allocable
to such accrued benefits, (iv) no IFC Benefit Plan provides
benefits, including, without limitation, death or medical benefits
(whether or not insured), with respect to current or former
employees of IFC, its Subsidiaries or any ERISA Affiliate beyond
their retirement or other termination of service, other than (A)
coverage mandated by applicable law, (B) death benefits or
retirement benefits under any "employee pension plan" (as such term
is defined in Section 3(2) of ERISA), (C) deferred compensation
benefits accrued as liabilities on the books of IFC, its
Subsidiaries or the ERISA Affiliates or (D) benefits the full cost
of which is borne by the current or former employee (or his
beneficiary), (v) no material liability under Title IV of ERISA has
been incurred by IFC, its Subsidiaries or any ERISA Affiliate that
has not been satisfied in full, and no condition exists that
presents a material risk to IFC, its Subsidiaries or any ERISA
Affiliate of incurring a material liability thereunder, (vi) no
Plan is a "multiemployer pension plan" (as such term is defined in
Section 3(37) of ERISA), (vii) all contributions or other amounts
payable by IFC or its Subsidiaries as of the Effective Time with
respect to each IFC Benefit Plan in respect of current or prior
plan years have been paid or accrued in accordance with GAAP and
Section 412 of the Code, (viii) neither IFC, its Subsidiaries nor
any ERISA Affiliate has engaged in a transaction in connection with
which IFC, its Subsidiaries or any ERISA Affiliate reasonably could
be subject to either a material civil penalty assessed pursuant to
Section 409 or 502(i) of ERISA or a material tax imposed pursuant
to Section 4975 or 4976 of the Code, and (ix) to the best knowledge
of IFC there are no pending, threatened or anticipated claims
(other than routine claims for benefits) by, on behalf of or
against any of the IFC Benefit Plans or any trusts related thereto
which are, in the reasonable judgment of IFC, likely, either
individually or in the aggregate, to have a Material Adverse Effect
on IFC.
(d) Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will
(i) result in any material payment (including, without limitation,
severance, unemployment compensation, golden parachute or
otherwise) becoming due to any director or any employee of IFC or
any of its affiliates from IFC or any of its affiliates under any
IFC Benefit Plan or otherwise, (ii) materially increase any
benefits otherwise payable under any IFC Benefit Plan or (iii)
result in any acceleration of the time of payment or vesting of any
such benefits to any material extent.
4.12 SEC Reports. IFC has previously made available to
Pinnacle an accurate and complete copy of each (a) final
registration statement, prospectus, report, schedule and definitive
proxy statement filed since January 1, 1994 by IFC with the SEC
pursuant to the Securities Act or the Exchange Act (the "IFC
Reports") and prior to the date hereof and (b) communication mailed
by IFC to its stockholders since January 1, 1994 and prior to the
date hereof, and no such registration statement, prospectus,
report, schedule, proxy statement or communication contained any
untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances in
which they were made, not misleading, except that information as of
a later date shall be deemed to modify information as of an earlier
date. Since January 1, 1994, IFC has timely filed all IFC Reports
and other documents required to be filed by it under the Securities
Act and the Exchange Act, and, as of their respective dates, all
IFC Reports complied in all material respects with the published
rules and regulations of the SEC with respect thereto.
4.13 Compliance with Applicable Law. IFC and each of its
Subsidiaries hold all material licenses, franchises, permits and
authorizations necessary for the lawful conduct of their respective
businesses under and pursuant to all, and have complied in all
material respects with and are not in default in any material
respect under any, applicable law, statute, order, rule,
regulation, policy and/or guideline of any Governmental Entity
relating to IFC or any of its Subsidiaries, except where the
failure to hold such license, franchise, permit or authorization or
such noncompliance or default would not, individually or in the
aggregate, have a Material Adverse Effect on IFC.
4.14 Certain Contracts.
(a) Neither IFC nor any of its Subsidiaries is a party
to or bound by any contract, arrangement, commitment or
understanding (whether written or oral) (i) with respect to the
employment of any directors, officers or employees other than in
the ordinary course of business consistent with past practice, (ii)
which, upon the consummation of the transactions contemplated by
this Agreement will (either alone or upon the occurrence of any
additional acts or events) result in any payment (whether of
severance pay or otherwise) becoming due from IFC, Pinnacle, the
Surviving Corporation, or any of their respective Subsidiaries to
any officer or employee thereof, (iii) which is a "material
contract" (as such term is defined in Item 601(b)(10) of Regulation
S-K of the SEC) to be performed after the date of this Agreement
that has not been filed or incorporated by reference in the IFC
Reports, (iv) which materially restricts the conduct of any line of
business by IFC, (v) with or to a labor union or guild (including
any collective bargaining agreement) or (vi) (including any stock
option plan, stock appreciation rights plan, restricted stock plan
or stock purchase plan) any of the benefits of which will be
increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions
contemplated by this Agreement, or the value of any of the benefits
of which will be calculated on the basis of any of the transactions
contemplated by this Agreement. IFC has previously made available
to Pinnacle true and correct copies of all employment and deferred
compensation agreements which are in writing and to which IFC is a
party. Each contract, arrangement, commitment or understanding of
the type described in this Section 4.14(a), whether or not set
forth in the IFC Disclosure Schedule, is referred to herein as an
"IFC Contract", and neither IFC nor any of its Subsidiaries knows
of, or has received notice of, any violation of the above by any of
the other parties thereto which, individually or in the aggregate,
would have a Material Adverse Effect on IFC.
(b) (i) Each IFC Contract is valid and binding on IFC
or any of its Subsidiaries, as applicable, and in full force and
effect, (ii) IFC and each of its Subsidiaries has in all material
respects performed all obligations required to be performed by it
to date under each IFC Contract, except where such noncompliance,
individually or in the aggregate, would not have a Material Adverse
Effect on IFC, and (iii) no event or condition exists which
constitutes or, after notice or lapse of time or both, would
constitute, a material default on the part of IFC or any of its
Subsidiaries under any such IFC Contract, except where such
default, individually or in the aggregate, would not have a
Material Adverse Effect on IFC.
4.15 Agreements with Regulatory Agencies. Neither IFC nor
any of its Subsidiaries is subject to any cease-and-desist or other
order issued by, or is a party to any written agreement, consent
agreement or memorandum of understanding with, or is a party to any
commitment letter or similar undertaking to, or is subject to any
order or directive by, or has been since January 1, 1994, a
recipient of any supervisory letter from, or since January 1, 1994,
has adopted any board resolutions at the request of any Regulatory
Agency or other Governmental Entity that currently restricts in any
material respect the conduct of its business or that in any
material manner relates to its capital adequacy, its credit
policies, its management or its business (each, whether or not set
forth in the IFC Disclosure Schedule, an "IFC Regulatory
Agreement"), nor has IFC or any of its Subsidiaries been advised
since January 1, 1994, by any Regulatory Agency or other
Governmental Entity that it is considering issuing or requesting
any such Regulatory Agreement.
4.16 Other Activities of IFC and its Subsidiaries.
(a) Neither IFC nor any of its Subsidiaries that is
neither a bank, a bank operating subsidiary or a bank service
corporation, directly or indirectly, engages in any activity
prohibited by the Federal Reserve Board or the OTS. Without
limiting the generality of the foregoing, any equity investment of
IFC and each Subsidiary that is not a bank, a bank operating
subsidiary or a bank service corporation is not prohibited by the
Federal Reserve Board or the OTS.
(b) To IFC's knowledge, each IFC Subsidiary which is a
federally insured bank or savings institution (an "IFC Bank
Subsidiary") currently performs all Trust Activities with requisite
authority under applicable law of Governmental Entities and in
accordance in all material respects with the agreed-upon terms of
the agreements and instruments governing such Trust Activities,
sound fiduciary principles and applicable law and regulation
(specifically including, but not limited to, Section 9 of Title 12
of the Code of Federal Regulations); there is no investigation or
inquiry by any Governmental Entity pending, or to the knowledge of
IFC, threatened, against or affecting IFC, or any Significant
Subsidiary thereof relating to the compliance by IFC or any such
Significant Subsidiary (as such term is defined in Rule 1-02(w) of
Regulation S-X of the SEC) with sound fiduciary principles and
applicable regulations; and except where any such failure would not
have a Material Adverse Effect on IFC, each employee of a IFC Bank
Subsidiary had the authority to act in the capacity in which he or
she acted with respect to Trust Activities, in each case, in which
such employee held himself or herself out as a representative of a
IFC Bank Subsidiary; and each IFC Bank Subsidiary has established
policies and procedures for the purpose of complying with
applicable laws of Governmental Entities relating to Trust
Activities, has followed such policies and procedures in all
material respects and has performed appropriate internal audit
reviews of, and has engaged independent accountants to perform
audits of, Trust Activities, which audits since January 1, 1994
have disclosed no material violations of applicable laws of
Governmental Entities or such policies and procedures.
4.17 Investment Securities. Each of IFC and its Subsidiaries
has good and marketable title to all securities held by it (except
securities sold under repurchase agreements or held in any
fiduciary or agency capacity), free and clear of any Lien, except
to the extent such securities are pledged in the ordinary course of
business consistent with prudent banking practices to secure
obligations of IFC or any of its Subsidiaries. Such securities are
valued on the books of IFC in accordance with GAAP.
4.18 Interest Rate Risk Management Instruments. All interest
rate swaps, caps, floors and option agreements and other interest
rate risk management arrangements, whether entered into for the
account of IFC or for the account of a customer of IFC or one of
its Subsidiaries, were entered into in the ordinary course of
business and, to IFC's knowledge, in accordance with prudent
banking practice and applicable rules, regulations and policies of
any Regulatory Authority and with counterparties believed to be
financially responsible at the time and are legal, valid and
binding obligations of IFC or one of its Subsidiaries enforceable
in accordance with their terms (except as may be limited by
bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting the rights of creditors generally and the availability of
equitable remedies), and are in full force and effect. IFC and
each of its Subsidiaries have duly performed in all material
respects all of their material obligations thereunder to the extent
that such obligations to perform have accrued; and, to IFC's
knowledge, there are no material breaches, violations or defaults
or allegations or assertions of such by any party thereunder.
4.19 Undisclosed Liabilities. Except for those liabilities
that are fully reflected or reserved against on the consolidated
balance sheet of IFC included in the IFC June 30, 1996 Form 10-Q
and for liabilities incurred in the ordinary course of business
consistent with past practice since June 30, 1996, neither IFC nor
any of its Subsidiaries has incurred any liability of any nature
whatsoever (whether absolute, accrued, contingent or otherwise and
whether due or to become due) that, either alone or when combined
with all similar liabilities, has had, or could reasonably be
expected to have, a Material Adverse Effect on IFC.
4.20 Environmental Liability. Except as set forth in the IFC
Disclosure Schedule, there are no legal, administrative, arbitral
or other proceedings, claims, actions, causes of action, private
environmental investigations or remediation activities or
governmental investigations of any nature seeking to impose, or
that could reasonably be expected to result in the imposition, on
IFC or any of the IFC Subsidiaries of any liability or obligation
arising under common law or under any local, state or federal
environmental statute, regulation or ordinance including, without
limitation, CERCLA, pending or threatened against IFC or any of the
IFC Subsidiaries, which liability or obligation could reasonably be
expected to have a Material Adverse Effect on IFC. To the
knowledge of IFC, there is no reasonable basis for any such
proceeding, claim, action or governmental investigation that would
impose any material liability or obligation that could reasonably
be expected to have a Material Adverse Effect on IFC. Neither IFC
nor any of the IFC Subsidiaries is subject to any agreement, order,
judgment, decree, letter or memorandum by or with any court,
governmental authority, regulatory agency or third party imposing
any material liability or obligation that could reasonably be
expected to have a Material Adverse Effect on IFC.
4.21 State Takeover Laws; Redemption of IFC Rights. The
Board of Directors of IFC has approved the transactions
contemplated by this Agreement and the Option Agreements and taken
such action (i) such that the provisions of Section 9 of the
Certificate of Incorporation of IFC pertaining to certain "Business
Combinations" shall not be applicable to the transactions
contemplated by this Agreement and the Option Agreements, and the
provisions of Section 203 of the DGCL and any other provision of
any state or local "takeover" law applicable to IFC will not apply
to this Agreement or the Option Agreements or any of the
transactions contemplated hereby or thereby, and (ii) to redeem the
IFC Rights prior to the Effective Time at a cost to IFC of not more
than $0.01 (the "Redemption Price") per each of the shares of IFC
Common Stock issued and outstanding, such that all of said IFC
Rights will have been extinguished, terminated and cancelled prior
to the Effective Time, without any right of exercise, and shall
only represent the right to receive the Redemption Price in cash
from IFC or the Surviving Corporation following the Merger.
4.22 Pooling of Interests. IFC has no reason to believe that
the Merger will not qualify as a "pooling of interests" for
accounting purposes.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
-----------------------------------------
5.1 Conduct of Businesses Prior to the Effective Time.
During the period from the date of this Agreement to the Effective
Time, except as expressly contemplated or permitted by this
Agreement (including the Pinnacle Disclosure Schedule and the IFC
Disclosure Schedule) or the Option Agreements, each of Pinnacle and
IFC shall, and shall cause each of their respective Subsidiaries
to, (a) conduct its business in the usual, regular and ordinary
course consistent with past practice, (b) use reasonable best
efforts to maintain and preserve intact its business organization,
employees and advantageous business relationships and retain the
services of its key officers and key employees and (c) take no
action which would adversely affect or delay the ability of either
Pinnacle or IFC to obtain any necessary approvals of any Regulatory
Agency or other governmental authority required for the
transactions contemplated hereby or to perform its covenants and
agreements under this Agreement or the Option Agreements.
5.2 Forbearances. During the period from the date of this
Agreement to the Effective Time, except as set forth in the
Pinnacle Disclosure Schedule or the IFC Disclosure Schedule, as the
case may be, and, except as expressly contemplated or permitted by
this Agreement or the Option Agreements, neither Pinnacle nor IFC
shall, and neither Pinnacle nor IFC shall permit any of their
respective Subsidiaries to, without the prior written consent of
the other:
(a) other than in the ordinary course of business
consistent with past practice, incur any indebtedness for borrowed
money (other than short-term indebtedness incurred to refinance
short-term indebtedness and indebtedness of Pinnacle or any of its
Subsidiaries to Pinnacle or any of its Subsidiaries, on the one
hand, or of IFC or any of its Subsidiaries to IFC or any of its
Subsidiaries, on the other hand), assume, guarantee, endorse or
otherwise as an accommodation become responsible for the
obligations of any other individual, corporation or other entity,
or make any loan or advance (it being understood and agreed that
incurrence of indebtedness in the ordinary course of business shall
include, without limitation, the creation of deposit liabilities,
purchases of Federal funds, sales of certificates of deposit and
entering into repurchase agreements);
(b) (i) adjust, split, combine or reclassify any capital
stock; (ii) make, declare or pay any dividend or make any other
distribution on, or directly or indirectly redeem, purchase or
otherwise acquire, any shares of its capital stock or any
securities or obligations convertible into or exchangeable for any
shares of its capital stock (except, (A) in the case of Pinnacle,
for regular quarterly cash dividends on Pinnacle Common Stock at a
rate not in excess of $0.25 per share of Pinnacle Common Stock, (B)
in the case of IFC, for regular quarterly cash dividends on IFC
Common Stock at a rate not in excess of $0.21 per share of IFC
Common Stock, (C) for dividends paid by any of the Subsidiaries of
each of Pinnacle and IFC to Pinnacle or IFC or any of their
Subsidiaries, respectively, and (D) for dividends paid in the
ordinary course of business by any subsidiaries (whether or not
wholly owned) of each of Pinnacle and IFC), (iii) grant any stock
appreciation rights or grant any individual, corporation or other
entity any right to acquire any shares of its capital stock (and no
further or additional options to purchase stock shall be granted
pursuant to the Pinnacle Stock Plans or the IFC Stock Plans, except
as otherwise agreed in writing by Pinnacle and IFC) or (iv) issue
any additional shares of capital stock except pursuant to (A) the
exercise of stock options or warrants outstanding as of the date
hereof, (B) the Option Agreements, or (C) as permitted unless
clause (iii) above;
(c) sell, transfer, mortgage, encumber or otherwise
dispose of any of its properties or assets to any individual,
corporation or other entity other than a Subsidiary, or cancel,
release or assign any indebtedness to any such person or any claims
held by any such person, except in the ordinary course of business
consistent with past practice or pursuant to contracts or
agreements in force at the date of this Agreement;
(d) except for transactions in the ordinary course of
business consistent with past practice or pursuant to contracts or
agreements in force at the date of this Agreement, make any
material investment either by purchase of stock or securities,
contributions to capital, property transfers, or purchase of any
property or assets of any other individual, corporation or other
entity other than a Subsidiary thereof;
(e) except for transactions in the ordinary course of
business consistent with past practice, enter into or terminate any
material contract or agreement, or make any change in any of its
material leases or contracts, other than renewals of contracts and
leases without material adverse changes of terms;
(f) increase in any manner the compensation or fringe
benefits of any of its employees or pay any pension or retirement
allowance not required by any existing plan or agreement to any
such employees or become a party to, amend or commit itself to any
pension, retirement, profit-sharing or welfare benefit plan or
agreement or employment agreement with or for the benefit of any
employee other than in the ordinary course of business consistent
with past practice or accelerate the vesting of any stock options
or other stock-based compensation;
(g) solicit, encourage or authorize or permit any
individual, corporation or other entity to solicit from any third
party any inquiries or proposals relating to the disposition of its
business or assets, or the acquisition of its voting securities, or
the merger or business combination of it or any of its Subsidiaries
with any corporation or other entity other than as provided by this
Agreement (and each party shall promptly notify the other of all of
the relevant details relating to all inquiries and proposals which
it may receive relating to any of such matters);
(h) settle any claim, action or proceeding involving
money damages, except in the ordinary course of business consistent
with past practice;
(i) take any action that would prevent or impede the
Merger from qualifying (i) for "pooling of interests" accounting
treatment or (ii) as a reorganization within the meaning of Section
368 of the Code; provided, however, that nothing contained herein
shall limit the ability of Pinnacle or IFC to exercise its rights
under the Pinnacle Option Agreement or the IFC Option Agreement, as
the case may be;
(j) amend its Certificate of Incorporation or Articles
of Incorporation, as the case may be, or its Bylaws, except as
contemplated by this Agreement;
(k) other than in prior consultation with the other
party to this Agreement, restructure or materially change its
investment securities portfolio or its gap position, through
purchases, sales or otherwise, or the manner in which the portfolio
is classified or reported;
(l) take any action that is intended or may reasonably
be expected to result in any of its representations and warranties
set forth in this Agreement being or becoming untrue in any
material respect at any time prior to the Effective Time, or in any
of the conditions to the Merger set forth in Article VII not being
satisfied or in a violation of any provision of this Agreement,
except, in every case, as may be required by applicable law; or
(m) agree to, or make any commitment to, take any of the
actions prohibited by this Section 5.2.
ARTICLE VI
ADDITIONAL AGREEMENTS
---------------------
6.1 Regulatory Matters.
(a) Pinnacle and IFC shall promptly prepare and file
with the SEC the Joint Proxy Statement and Pinnacle shall promptly
prepare and file with the SEC the S-4, in which the Joint Proxy
Statement will be included as a prospectus. Each of Pinnacle and
IFC shall use all reasonable efforts to have the S-4 declared
effective under the Securities Act as promptly as practicable after
such filing, and Pinnacle and IFC shall thereafter mail or deliver
the Joint Proxy Statement to their respective stockholders.
Pinnacle shall also use all reasonable efforts to obtain all
necessary state securities law or "Blue Sky" permits and approvals
required to carry out the transactions contemplated by this
Agreement, and IFC shall furnish all information concerning IFC and
the holders of IFC Common Stock as may be reasonably requested in
connection with any such action.
(b) The parties hereto shall cooperate with each other
and use their best efforts to promptly prepare and file all
necessary documentation, to effect all applications, notices,
petitions and filings, to obtain as promptly as practicable all
permits, consents, approvals and authorizations of all third
parties and Governmental Entities which are necessary or advisable
to consummate the transactions contemplated by this Agreement
(including, without limitation, the Merger), and to comply with the
terms and conditions of all such permits, consents, approvals and
authorizations of all such Governmental Entities. Pinnacle and IFC
shall have the right to review in advance, and, to the extent
practicable, each will consult the other on, in each case subject
to applicable laws relating to the exchange of information, all the
information relating to Pinnacle or IFC, as the case may be, and
any of their respective Subsidiaries, which appear in any filing
made with, or written materials submitted to, any third party or
any Governmental Entity in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right,
each of the parties hereto shall act reasonably and as promptly as
practicable. The parties hereto agree that they will consult with
each other with respect to the obtaining of all permits, consents,
approvals and authorizations of all third parties and Governmental
Entities necessary or advisable to consummate the transactions
contemplated by this Agreement and each party will keep the other
apprised of the status of matters relating to completion of the
transactions contemplated herein.
(c) Pinnacle and IFC shall, upon request, furnish each
other with all information concerning themselves, their
Subsidiaries, directors, officers and stockholders and such other
matters as may be reasonably necessary or advisable in connection
with the Joint Proxy Statement, the S-4 or any other statement,
filing, notice or application made by or on behalf of Pinnacle, IFC
or any of their respective Subsidiaries to any Governmental Entity
in connection with the Merger and the other transactions
contemplated by this Agreement.
(d) Pinnacle and IFC shall promptly advise each other
upon receiving any communication from any Governmental Entity whose
consent or approval is required for consummation of the
transactions contemplated by this Agreement which causes such party
to believe that there is a reasonable likelihood that any Requisite
Regulatory Approval will not be obtained or that the receipt of any
such approval will be materially delayed.
6.2 Access to Information.
(a) Upon reasonable notice and subject to applicable
laws relating to the exchange of information, each of Pinnacle and
IFC shall, and shall cause each of their respective Subsidiaries
to, afford to the officers, employees, accountants, counsel and
other representatives of the other party, access, during normal
business hours during the period prior to the Effective Time, to
all its properties, books, contracts, commitments and records and,
during such period, each of Pinnacle and IFC shall, and shall cause
their respective Subsidiaries to, make available to the other party
(i) a copy of each report, schedule, registration statement and
other document filed or received by it during such period pursuant
to the requirements of federal securities laws or federal or state
banking laws, savings and loan or savings association laws (other
than reports or documents which Pinnacle or IFC, as the case may
be, is not permitted to disclose under applicable law) and (ii) all
other information concerning its business, properties and personnel
as such party may reasonably request. Neither Pinnacle nor IFC nor
any of their respective Subsidiaries shall be required to provide
access to or to disclose information where such access or
disclosure would violate or prejudice the rights of Pinnacle's or
IFC's, as the case may be, customers, jeopardize the attorney-
client privilege of the institution in possession or control of
such information or contravene any law, rule, regulation, order,
judgment, decree, fiduciary duty or binding agreement entered into
prior to the date of this Agreement. The parties hereto will make
appropriate substitute disclosure arrangements under circumstances
in which the restrictions of the preceding sentence apply.
(b) Each of Pinnacle and IFC agrees to keep
confidential, and not divulge to any other party or person (other
than employees of, and attorneys, accountants, financial advisors
and other representatives for, any said party), all non-public
documents, information, records and financial statements received
from the other and, in addition, any and all reports, information
and financial information obtained through audits or other reviews
conducted pursuant to this Agreement (unless readily ascertainable
from public or published information, or trade sources, or already
known or subsequently developed by a party independently of any
investigation or received from a third party not under an
obligation to the other party to keep such information
confidential), and to use the same only in connection with the
transactions contemplated by this Agreement; and if the
transactions contemplated hereby are not consummated for any
reason, each party agrees to promptly return to the other party all
written materials furnished by the other party, and all copies
thereof, in connection with such investigation, and to destroy all
documents and records in its possession containing extracts or
summaries of any such non-public information.
(c) No investigation by either of the parties or their
respective representatives shall affect the representations,
warranties, covenants or conditions of the other set forth herein.
6.3 Stockholders' Approvals. Each of Pinnacle and IFC shall
call a meeting of its stockholders to be held as soon as reasonably
practicable for the purpose of voting upon the requisite
stockholder approvals required in connection with this Agreement
and the Merger, and each shall use its best efforts to cause such
meetings to occur on the same date. Pinnacle and IFC will, through
their respective Boards of Directors, subject to their respective
fiduciary obligations as determined by the respective Boards of
Directors, recommend to their respective stockholders approval of
this Agreement and the Merger.
6.4 Legal Conditions to Merger. Each of Pinnacle and IFC
shall, and shall cause its Subsidiaries to, use their best efforts
(a) to take, or cause to be taken, all actions necessary, proper or
advisable to comply promptly with all legal requirements which may
be imposed on such party or its Subsidiaries with respect to the
Merger and, subject to the conditions set forth in Article VII
hereof, to consummate the transactions contemplated by this
Agreement and (b) to obtain (and to cooperate with the other party
to obtain) any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity and any other third party
which is required to be obtained by Pinnacle or IFC or any of their
respective Subsidiaries in connection with the Merger and the other
transactions contemplated by this Agreement.
6.5 Affiliates; Publication of Combined Financial Results.
(a) Each of Pinnacle and IFC shall use its best efforts
to cause each director, executive officer and other person who is
an "affiliate" (for purposes of Rule 145 under the Securities Act
and for purposes of qualifying the Merger for "pooling of
interests" accounting treatment) of such party to deliver to the
other party hereto, as soon as practicable after the date of this
Agreement, and prior to the date of the stockholders' meetings
called by Pinnacle and IFC to approve this Agreement, a written
agreement, in the form of Exhibit D hereto, providing that such
person will not sell, pledge, transfer or otherwise dispose of any
shares of Pinnacle Common Stock or IFC Common Stock held by such
"affiliate" and, in the case of the "affiliates" of IFC, the shares
of Pinnacle Common Stock to be received by such "affiliate" in the
Merger: (i) in the case of shares of Pinnacle Common Stock to be
received by "affiliates" of IFC in the Merger, except in compliance
with the applicable provisions of the Securities Act and the rules
and regulations thereunder; and (ii) except to the extent and under
the conditions permitted therein, during the period commencing 30
days prior to the Merger and ending at the time of the publication
of financial results covering at least 30 days of combined
operations of Pinnacle and IFC.
(b) The Surviving Corporation shall use its best efforts
to publish as promptly as reasonably practical but in no event
later than 90 days after the end of the first month after the
Effective Time in which there are at least 30 days of post-Merger
combined operations (which month may be the month in which the
Effective Time occurs), combined sales and net income figures as
contemplated by and in accordance with the terms of SEC Accounting
Series Release No. 135.
6.6 NASDAQ Listing. Pinnacle shall cause the shares of
Pinnacle Common Stock to be issued in the Merger to be approved for
trading and reporting on NASDAQ, National Market System, subject to
official notice of issuance, prior to the Effective Time.
6.7 Employee Benefit Plans.
(a) From and after the Effective Time, unless otherwise
mutually determined, the Pinnacle Benefit Plans and IFC Benefit
Plans in effect as of the date of this Agreement shall remain in
effect with respect to employees of Pinnacle or IFC (or their
Subsidiaries) covered by such plans at the Effective Time until
such time as the Surviving Corporation shall, subject to applicable
law, the terms of this Agreement and the terms of such plans, adopt
new benefit plans with respect to employees of the Surviving
Corporation and its Subsidiaries in substantial conformance with
the Pinnacle Benefit Plans in effect as of the Effective Time, in
replacement and substitution for the IFC Benefit Plans (including,
without limitation, non-qualified stock option agreements,
incentive stock option agreements, the IFC ESOP, deferred
compensation plans and agreements, supplemental retirement income
agreements, severance agreements, employment agreements and stock
option and incentive plans benfitting current or former directors,
officers or employees of IFC or its Subsidiaries, or their
predecessors) which shall be cancelled, terminated or frozen to the
extent permitted by applicable law (the "New Benefit Plans").
Prior to the Closing Date, Pinnacle and IFC shall cooperate in
reviewing, evaluating and analyzing the Pinnacle Benefit Plans and
IFC Benefit Plans with a view towards developing appropriate New
Benefit Plans for the employees covered thereby subsequent to the
Merger in substantial conformance with the Pinnacle Benefit Plans
in effect as of the Effective Time, in replacement and substitution
for the IFC Benefit Plans which shall be cancelled, terminated or
frozen to the extent permitted by applicable law. It is the
intention of Pinnacle and IFC to develop New Benefit Plans,
effective as of the Effective Time, which, among other things, (i)
treat similarly situated employees on a substantially equivalent
basis, taking into account all relevant factors, including, without
limitation, duties, geographic location, tenure, qualifications and
abilities, and (ii) do not discriminate between employees of the
Surviving Corporation who were covered by Pinnacle Benefit Plans,
on the one hand, and those covered by IFC Benefit Plans, on the
other, prior to the Effective Time, but (iii) with the overall view
that the IFC Benefit Plans would be cancelled, terminated or
frozen, and replaced by the Pinnacle Benefit Plans for times
following the Effective Time to the extent permitted by applicable
law.
(b) The foregoing notwithstanding, the Surviving
Corporation agrees to honor in accordance with their terms all
benefits vested as of the date hereof under the Pinnacle Benefit
Plans or the IFC Benefit Plans or under other contracts,
arrangements, commitments, or understandings described in the
Pinnacle Disclosure Schedule and the IFC Disclosure Schedule.
(c) Nothing in this Section 6.7 shall be interpreted as
preventing the Surviving Corporation from amending, modifying or
terminating any Pinnacle Benefit Plans, IFC Benefit Plans, or other
contracts, arrangements, commitments or understandings, in
accordance with their terms and applicable law.
6.8 Indemnification; Directors' and Officers' Insurance.
(a) In the event of any threatened or actual claim,
action, suit, proceeding or investigation, whether civil, criminal
or administrative, including, without limitation, any such claim,
action, suit, proceeding or investigation in which any individual
who is now, or has been at any time prior to the date of this
Agreement, or who becomes prior to the Effective Time, a director
or officer or employee of IFC or any of its Subsidiaries, including
any entity specified in the IFC Disclosure Schedule (the
"Indemnified Parties"), is, or is threatened to be, made a party
based in whole or in part on, or arising in whole or in part out
of, or pertaining to (i) the fact that he is or was a director,
officer or employee of IFC, any of the IFC Subsidiaries or any
entity specified in the IFC Disclosure Schedule, or any of their
respective predecessors or (ii) this Agreement, the Option
Agreements or any of the transactions contemplated hereby or
thereby, whether in any case asserted or arising before or after
the Effective Time, the parties hereto agree to cooperate and use
their best efforts to defend against and respond thereto. It is
understood and agreed that after the Effective Time, Pinnacle shall
indemnify and hold harmless, as and to the fullest extent permitted
by law (and, as relates to acts or times prior to the Effective
Time, to the fullest extent permitted by law pertaining to IFC or
any of its Subsidiaries at such time, including the provisions of
Section 11 of IFC's Certificate of Incorporation), each such
Indemnified Party against any losses, claims, damages, liabilities,
costs, expenses (including reasonable attorney's fees and expenses
in advance of the final disposition of any claim, suit, proceeding
or investigation to each Indemnified Party to the fullest extent
permitted by law upon receipt of any undertaking required by
applicable law), judgments, fines and amounts paid in settlement in
connection with any such threatened or actual claim, action, suit,
proceeding or investigation, and in the event of any such
threatened or actual claim, action, suit, proceeding or
investigation (whether asserted of arising before or after the
Effective Time), the Indemnified Parties may retain counsel
reasonably satisfactory to them after consultation with Pinnacle;
provided, however, that (A) Pinnacle shall have the right to assume
the defense thereof and upon such assumption Pinnacle shall not be
liable to any Indemnified Party for any legal expenses of other
counsel or any other expenses subsequently incurred by any
Indemnified Party in connection with the defense thereof, except
that if Pinnacle elects not to assume such defense or counsel for
the Indemnified Parties reasonably advises the Indemnified Parties
that there are issues which raise conflicts of interest between
Pinnacle and the Indemnified Parties, the Indemnified Parties may
retain counsel reasonably satisfactory to them after consultation
with Pinnacle, and Pinnacle shall pay the reasonable fees and
expenses of such counsel for the Indemnified Parties, (B) Pinnacle
shall be obligated pursuant to this paragraph to pay for only one
firm of counsel for all Indemnified Parties, unless an Indemnified
Party shall have reasonably concluded, based on the advice of
counsel, that in order to be adequately represented, separate
counsel is necessary for such Indemnified Party, in which case,
Pinnacle shall be obligated to pay for such separate counsel, (C)
Pinnacle shall not be liable for any settlement effected without
its prior written consent (which consent shall not be unreasonably
withheld) and (D) Pinnacle shall have no obligation hereunder to
any Indemnified Party when and if a court of competent jurisdiction
shall ultimately determine, and such determination shall have
become final and nonappealable, that indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited
by applicable law. Any Indemnified Party wishing to claim
Indemnification under this Section 6.8, upon learning of any such
claim, action, suit, proceeding or investigation, shall notify
Pinnacle thereof, provided that the failure to so notify shall not
affect the obligations of Pinnacle under this Section 6.8 except to
the extent such failure to notify materially prejudices Pinnacle.
Pinnacle's obligations under this Section 6.8 continue in full
force and effect for a period of six years from the Effective Time
(or the period of the applicable statute of limitations, if
longer); provided, however, that all rights to indemnification in
respect of any claim (a "Claim") asserted or made within such
period shall continue until the final disposition of such Claim.
(b) Pinnacle shall use its best efforts to cause the
individuals serving as officers and directors of IFC, its
Subsidiaries or any entity specified in the IFC Disclosure Schedule
immediately prior to the Effective Time to be covered for a period
of six (6) years from the Effective Time (or the period of the
applicable statute of limitations, if longer) by the directors' and
officers' liability insurance policy maintained by IFC or any of
the IFC Subsidiaries (provided that Pinnacle may substitute
therefor policies of the same or substantially similar coverage and
amounts containing terms and conditions which are not less
advantageous in any material respect than such policy) with respect
to acts or omissions occurring prior to the Effective Time which
were committed by such officers and directors in their capacity as
such; provided, however, that in no event shall Pinnacle be
required to expend more than 150% of the current amount expended by
IFC or any of the IFC Subsidiaries (the "Insurance Amount") to
maintain or procure insurance coverage pursuant hereto; and
provided, further, that if Pinnacle is unable to maintain or obtain
the insurance called for by this Section 6.8(b), Pinnacle shall use
its best efforts to obtain as much comparable insurance as
available for the Insurance Amount.
(c) In the event Pinnacle or any of its successors or
assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of
such consolidation or merger, or (ii) transfers or conveys all or
substantially all of its properties and assets to any person, then,
and in each such case, to the extent necessary, proper provision
shall be made so that the successors and assigns of Pinnacle assume
the obligations set forth in this Section 6.8.
(d) The provisions of this Section 6.8 are intended to
be for the benefit of, and shall be enforceable by, each
Indemnified Party and his or her heirs and representatives.
6.9 Additional Agreements. In case at any time after the
Effective Time any further action is necessary or desirable to
carry out the purposes of this Agreement (including, without
limitation, any merger between a Subsidiary of Pinnacle and a
Subsidiary of IFC) or to vest the Surviving Corporation with full
title to all properties, assets, rights, approvals, immunities and
franchises of any of the parties to the Merger, the proper officers
and directors of each party to this Agreement and their respective
Subsidiaries shall take all such necessary action as may be
reasonably requested by, and at the sole expense of, Pinnacle.
6.10 Advice of Changes. Pinnacle and IFC shall promptly
advise the other party of any change or event having a Material
Adverse Effect on it or which it believes would or would be
reasonably likely to cause or constitute a material breach of any
of its representations, warranties or covenants contained herein.
6.11 Dividends. After the date of this Agreement, each of
Pinnacle and IFC shall coordinate with the other the declaration of
any dividends in respect of Pinnacle Common Stock and IFC Common
Stock and the record dates and payment dates relating thereto, it
being the intention of the parties hereto that holders of Pinnacle
Common Stock or IFC Common Stock shall not receive two dividends,
or fail to receive one dividend, for any quarter with respect to
their shares of Pinnacle Common Stock and/or IFC Common Stock and
any shares of Pinnacle Common Stock any such holder receives in
exchange therefor in the Merger.
6.12 Negotiations with Other Parties. So long as this
Agreement remains in effect and no notice of termination has been
given under this Agreement, neither Pinnacle, on the one hand, nor
IFC, on the other hand, shall authorize or knowingly permit any of
its representatives, directly or indirectly, to entertain, solicit
or encourage negotiations with any person or entity or any group of
persons or entities other than the other party to this Agreement or
any of its affiliates (a "Potential Acquiror") concerning any
"Acquisition Proposal" (as hereinafter defined) other than pursuant
to this Agreement. The preceding sentence shall not be construed
to prohibit the Board of Directors of Pinnacle, on the one hand, or
IFC, on the other hand, from providing, or authorizing or
permitting their respective representatives to provide, to any
person making an unsolicited Acquisition Proposal, any information
that is public or published information or readily ascertainable
from such information, or from discussing and considering any such
unsolicited Acquisition Proposal if it is advised in writing by
legal counsel that such actions are advisable under applicable law
in order to discharge their fiduciary duties to stockholders. As
used in this Agreement, "Acquisition Proposal" means any
(i) proposal pursuant to which any corporation, partnership, person
or other entity or group, other than Pinnacle or IFC, would acquire
or participate in a merger or other business combination involving
Pinnacle or any of the Pinnacle Bank Subsidiaries, on the one hand,
or IFC or any of the IFC Bank Subsidiaries, on the other hand,
directly or indirectly; (ii) proposal by which any corporation,
partnership, person or other entity or group, other than Pinnacle
or IFC, would acquire the right to vote 10% or more of the capital
stock of Pinnacle or any of the Pinnacle Bank Subsidiaries, on the
one hand, or IFC or any of the IFC Bank Subsidiaries, on the other
hand, entitled to vote thereon for the election of directors;
(iii) acquisition of 10% or more of the assets of Pinnacle or any
of the Pinnacle Bank Subsidiaries, on the one hand, or IFC or any
of the IFC Bank Subsidiaries, on the other hand, other than in the
ordinary course of business; or (iv) acquisition in excess of 10%
of the outstanding capital stock of Pinnacle or any of the Pinnacle
Bank Subsidiaries, on the one hand, or IFC or any of the IFC Bank
Subsidiaries, on the other hand, other than as contemplated by this
Agreement.
ARTICLE VII
CONDITIONS PRECEDENT
--------------------
7.1 Conditions to Each Party's Obligation To Effect the
Merger. The respective obligation of each party to effect the
Merger shall be subject to the satisfaction at or prior to the
Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement and the
transactions contemplated hereby shall have been approved and
adopted by the respective requisite affirmative votes of the
holders of Pinnacle Common Stock and IFC Common Stock entitled to
vote thereon.
(b) NASDAQ Listing. The shares of Pinnacle Common Stock
which shall be issued to the stockholders of IFC upon consummation
of the Merger shall have been authorized for trading and reporting
on the NASDAQ, National Market System, subject to official notice
of issuance.
(c) Other Approvals. All regulatory approvals required
to consummate the transactions contemplated hereby shall have been
obtained and shall remain in full force and effect and all
statutory waiting periods in respect thereof shall have expired
(all such approvals and the expiration of all such waiting periods
being referred to herein as the "Requisite Regulatory Approvals").
(d) S-4. The S-4 shall have become effective under the
Securities Act and no stop order suspending the effectiveness of
the S-4 shall have been issued and no proceedings for that purpose
shall have been initiated or threatened by the SEC.
(e) No Injunctions or Restraints; Illegality. No order,
injunction or decree issued by any court or agency of competent
jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the Merger or any of
the other transactions contemplated by this Agreement shall be in
effect. No statute, rule, regulation, order, injunction or decree
shall have been enacted, entered, promulgated or enforced by any
Governmental Entity which prohibits, materially restricts or makes
illegal consummation of the Merger.
(f) Federal Tax Opinion. Pinnacle and IFC each shall
have received an opinion of their respective tax counsel, addressed
to Pinnacle or IFC, as the case may be, in form and substance
reasonably satisfactory to Pinnacle and IFC, dated as of the
Effective Time, substantially to the effect that, on the basis of
facts, representations and assumptions set forth in such opinion
which are consistent with the state of facts existing at the
Effective Time:
(i) The Merger will constitute a tax free reorganization
under Section 368(a)(1)(A) of the Code and Pinnacle and IFC
will each be a party to the reorganization;
(ii) No gain or loss will be recognized by Pinnacle or
IFC as a result of the Merger;
(iii) No gain or loss will be recognized by the
stockholders of IFC who exchange their IFC Common Stock solely
for Pinnacle Common Stock pursuant to the Merger (except with
respect to cash received in lieu of a fractional share
interest in Pinnacle Common Stock);
(iv) The tax basis of the Pinnacle Common Stock received
by stockholders who exchange all of their IFC Common Stock
solely for Pinnacle Common Stock in the Merger will be the
same as the tax basis of the IFC Common Stock surrendered in
exchange therefor (reduced by any amount allocable to a
fractional share interest for which cash is received); and
(v) The holding period of Pinnacle Common Stock received
by stockholders of IFC in the Merger will include the period
during which the shares of IFC Common Stock surrendered in
exchange therefor were held; provided, such IFC Common Stock
was held as a capital asset by the holder of such IFC Common
Stock at the Effective Time. In rendering such opinion,
counsel may require and rely upon representations contained in
certificates of officers of Pinnacle, IFC and others.
(g) Pooling of Interests. Pinnacle and IFC shall each have
received a letter, effective as of the Effective Time, from their
respective independent accountants addressed to Pinnacle or IFC, as
the case may be, to the effect that the Merger will qualify for
"pooling of interests" accounting treatment.
7.2 Conditions to Obligation of Pinnacle. The obligation of
Pinnacle to effect the Merger is also subject to the satisfaction
or waiver by Pinnacle at or prior to the Effective Time of the
following conditions:
(a) Representations and Warranties. The representations
and warranties of IFC set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement
and (except (i) to the extent such representations and warranties
speak as of an earlier date and (ii) for any changes to the IFC
Disclosure Schedule that are disclosed by IFC to Pinnacle in the
form of an updated IFC disclosure schedule delivered to Pinnacle as
of the Closing Date (the "Closing Date IFC Disclosure Schedule"))
as of the Closing Date as though made on and as of the Closing
Date. Pinnacle shall have received a certificate signed on behalf
of IFC by the Chief Executive Officer and the Chief Financial
Officer of IFC to the foregoing effect, and to which any Closing
Date IFC Disclosure Schedule shall be appended.
(b) Performance of Obligations of IFC. IFC shall have
performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing
Date, and Pinnacle shall have received a certificate signed on
behalf of IFC by the Chief Executive Officer and the Chief
Financial Officer of IFC to such effect.
(c) IFC Rights Redeemed. The IFC Rights shall have been
redeemed at a cost to IFC of not more than $0.01 (the "Redemption
Price") per each of the shares of the IFC Common Stock issued and
outstanding, such that all of said IFC Rights have been
extinguished, terminated and cancelled, without any right of
exercise, and shall only represent the rights to receive the
Redemption Price in cash from IFC or the Surviving Corporation
following the Merger.
(d) Comfort Letters. Pinnacle shall have received
"comfort" letters from Ernst & Young, L.L.P., dated (x) the
effective date of the S-4 and (y) not earlier than five (5) days
preceding the Closing Date, in each case substantially to the
effect that: (i) based upon a review (and audit of year-end
statements) of IFC's consolidated financial statements dated as of
December 31, 1995, June 30, 1996, each subsequent year-end and
quarter-end and the most recent interim month-end consolidated
financial statements of IFC available prior to the date of any said
letter, nothing has come to their attention that has caused them to
believe that any adjustments would be required to be made to
restate said financial statements in a manner conforming to GAAP,
other than such adjustments, if any, as are specifically noted and
disclosed, none of which adjustments shall be materially adverse;
(ii) they are independent public accountants with respect to IFC
and the IFC Subsidiaries within the meaning of the Securities Act
and the Exchange Act and the applicable published rules and
regulations thereunder; (iii) in their opinion, the audited
consolidated financial statements of IFC examined by them and
included or incorporated by reference in the S-4 and the prospectus
and reported therein by them, comply as to form in all material
respects with the applicable accounting requirements of the
Exchange Act, the Securities Act and the applicable published rules
and regulations thereunder, as appropriate; (iv) on the basis of
certain procedures and inquiries including a reading of the latest
available unaudited interim consolidated financial statements of
IFC, inquiries of officials of IFC responsible for financial and
accounting matters, and a reading of the minutes of the Boards of
Directors and stockholders of IFC and the IFC Subsidiaries (which
procedures and inquiries do not constitute an examination made in
accordance with generally accepted auditing standards and would not
necessarily reveal material adverse changes in the consolidated
financial position or results of operations of IFC), nothing came
to their attention that caused them to believe that (A) the
unaudited consolidated financial statements of IFC included or
incorporated by reference in the S-4 and the prospectus do not
comply as to form in all material respects with the applicable
accounting requirements of the Exchange Act and the Securities Act,
as appropriate, or that the unaudited consolidated financial
statements are not in conformity with GAAP applied on a basis
consistent with that of the audited consolidated financial
statements or that as of the most recent month-end preceding the
Closing Date there has been any material change in the capital
stock of IFC, except as a result of the exercise of employee stock
options granted prior to June 30, 1996, or the IFC Subsidiaries or
any increase in consolidated long-term debt of IFC or the IFC
Subsidiaries or any reduction in consolidated stockholders' equity
as compared with the amounts of those items set out in the audited
consolidated statement of condition at December 31, 1995 and with
any subsequent unaudited consolidated statement of condition
included or incorporated by reference in the S-4 and the
prospectus, except for changes and the amount of such reduction, if
any, derived from IFC's accounts and records, which are described
in such letter or are set forth in the S-4 and the prospectus, or
(B) since December 31, 1995 any dividends were paid on the IFC
Common Stock except as described in such letter; and (v) in
addition to the limited procedures referred to in clause (iv)
above, they have carried out certain specified procedures with
respect to certain accounts or percentages and financial
information which appear in the S-4 and the prospectus and which
have been reasonably specified by Pinnacle, as described in such
letter.
(e) Legal Opinion. IFC shall have delivered to Pinnacle
an opinion, dated the Closing Date, of counsel for IFC,
satisfactory to Pinnacle and its counsel, to the effect set forth
on Exhibit E. Such opinion shall also cover such other matters
incident to the transactions herein contemplated as Pinnacle and
its counsel may reasonably request. In rendering their opinion,
counsel to IFC may rely on certificates of officers of IFC,
opinions of other counsel, the authenticity of all signatures on
documents believed to be genuine and such other evidence as they
may deem necessary or desirable.
(f) Fairness Opinion. Pinnacle shall have received the
favorable opinion from The Chicago Corporation in connection with
the deliberations of its Board of Directors approving this
Agreement and the Option Agreements and confirmed at or about the
time the S-4 is declared effective and the Joint Proxy Statement is
distributed that consummation of the Merger transaction
contemplated by this Agreement upon the terms and conditions
provided in this Agreement is fair to the stockholders of Pinnacle
from a financial point of view.
(g) No Material Adverse Change. No event or
circumstance shall have occurred which has, or is likely to have,
a Materially Adverse Effect on IFC or upon the right of IFC or any
of the IFC Subsidiaries to conduct their businesses as presently
conducted.
7.3 Conditions to Obligation of IFC. The obligation of IFC
to effect the Merger is also subject to the satisfaction or waiver
by IFC at or prior to the Effective Time of the following
conditions:
(a) Representations and Warranties. The representations
and warranties of Pinnacle set forth in this Agreement shall be
true and correct in all material respects as of the date of this
Agreement and (except (i) to the extent such representations and
warranties speak as of an earlier date and (ii) for any changes to
the Pinnacle Disclosure Schedule that are disclosed by Pinnacle to
IFC in the form of an updated Pinnacle disclosure schedule
delivered to IFC as of the Closing Date (the "Closing Date Pinnacle
Disclosure Schedule")) as of the Closing Date as though made on and
as of the Closing Date. IFC shall have received a certificate
signed on behalf of Pinnacle by the Chief Executive Officer and the
Chief Financial Officer of Pinnacle to the foregoing effect, and to
which any Closing Date Pinnacle Disclosure Schedule shall be
appended.
(b) Performance of Obligations of Pinnacle. Pinnacle
shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to
the Closing Date, and IFC shall have received a certificate signed
on behalf of Pinnacle by the Chief Executive Officer and the Chief
Financial Officer of Pinnacle to such effect.
(c) Comfort Letters. IFC shall have received "comfort"
letters from KPMG Peat Marwick, L.L.P., dated (x) the effective
date of the S-4 and (y) not earlier than five (5) days preceding
the Closing Date, in each case substantially to the effect that:
(i) based upon a review (and audit of year-end statements) of
Pinnacle's consolidated financial statements dated as of
December 31, 1995, June 30, 1996, each subsequent year-end and
quarter-end and the most recent interim month-end consolidated
financial statements of Pinnacle available prior to the date of any
said letter, nothing has come to their attention that has caused
them to believe that any adjustments would be required to be made
to restate said financial statements in a manner conforming to
GAAP, other than such adjustments, if any, as are specifically
noted and disclosed, none of which adjustments shall be materially
adverse; (ii) they are independent public accountants with respect
to Pinnacle and the Pinnacle Subsidiaries within the meaning of the
Securities Act and the Exchange Act and the applicable published
rules and regulations thereunder; (iii) in their opinion, the
audited consolidated financial statements of Pinnacle examined by
them and included or incorporated by reference in the S-4 and the
prospectus and reported therein by them, comply as to form in all
material respects with the applicable accounting requirements of
the Exchange Act, the Securities Act and the applicable published
rules and regulations thereunder, as appropriate; (iv) on the basis
of certain procedures and inquiries including a reading of the
latest available unaudited interim consolidated financial
statements of Pinnacle, inquiries of officials of Pinnacle
responsible for financial and accounting matters, and a reading of
the minutes of the Boards of Directors and stockholders of Pinnacle
and the Pinnacle Subsidiaries (which procedures and inquiries do
not constitute an examination made in accordance with generally
accepted auditing standards and would not necessarily reveal
material adverse changes in the consolidated financial position or
results of operations of Pinnacle), nothing came to their attention
that caused them to believe that (A) the unaudited consolidated
financial statements of Pinnacle included or incorporated by
reference in the S-4 and the prospectus do not comply as to form in
all material respects with the applicable accounting requirements
of the Exchange Act and the Securities Act, as appropriate, or that
the unaudited consolidated financial statements are not in
conformity with GAAP applied on a basis consistent with that of the
audited consolidated financial statements or that as of the most
recent month-end preceding the Closing Date there has been any
material change in the capital stock of Pinnacle, except as a
result of the exercise of employee stock options granted prior to
June 30, 1996, or the Pinnacle Subsidiaries or any increase in
consolidated long-term debt of Pinnacle or the Pinnacle
Subsidiaries or any reduction in consolidated stockholders' equity
as compared with the amounts of those items set out in the audited
consolidated statement of condition at December 31, 1995 and with
any subsequent unaudited consolidated statement of condition
included or incorporated by reference in the S-4 and the
prospectus, except for changes and the amount of such reduction, if
any, derived from Pinnacle's accounts and records, which are
described in such letter or are set forth in the S-4 and the
prospectus, or (B) since December 31, 1995 any dividends were paid
on the Pinnacle Common Stock except as described in such letter;
and (v) in addition to the limited procedures referred to in clause
(iv) above, they have carried out certain specified procedures with
respect to certain accounts or percentages and financial
information which appear in the S-4 and the prospectus and which
have been reasonably specified by IFC, as described in such letter.
(d) Legal Opinion. Pinnacle shall have delivered to IFC
an opinion, dated the Closing Date, of counsel for Pinnacle,
satisfactory to IFC and its counsel, to the effect set forth on
Exhibit F. Such opinion shall also cover such other matters
incident to the transactions herein contemplated as IFC and its
counsel may reasonably request. In rendering their opinion,
counsel to Pinnacle may rely on certificates of officers of
Pinnacle, opinions of other counsel, the authenticity of all
signatures on documents believed to be genuine and such other
evidence as they may deem necessary or desirable.
(e) Fairness Opinion. IFC shall have received the
favorable opinion from Sandler O'Neill in connection with the
deliberations of its Board of Directors approving this Agreement
and the Option Agreements and confirmed at or about the time the
S-4 is declared effective and the Joint Proxy Statement is
distributed that consummation of the Merger transaction
contemplated by this Agreement upon the terms and conditions
provided in this Agreement is fair to the stockholders of IFC from
a financial point of view.
(f) No Material Adverse Change. No event or
circumstance shall have occurred which has, or is likely to have,
a Materially Adverse Effect on Pinnacle or upon the right of
Pinnacle or any of the Pinnacle Subsidiaries to conduct their
businesses as presently conducted.
ARTICLE VIII
TERMINATION AND AMENDMENT
-------------------------
8.1 Termination. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after approval
of the matters presented in connection with the Merger by the
stockholders of Pinnacle or IFC:
(a) by mutual consent of Pinnacle and IFC in a written
instrument, if the Board of Directors of each so determines by a
vote of a majority of the members of its entire Board;
(b) by either the Board of Directors of Pinnacle or the
Board of Directors of IFC if any Governmental Entity which must
grant a Requisite Regulatory Approval has denied approval of the
Merger and such denial has become final and nonappealable or any
Governmental Entity of competent jurisdiction shall have issued a
final nonappealable order permanently enjoining or otherwise
prohibiting the consummation of the transactions contemplated by
this Agreement;
(c) by either the Board of Directors of Pinnacle or the
Board of Directors of IFC if the Merger shall not have been
consummated on or before the first anniversary of the date of this
Agreement, unless the failure of the Closing (as defined in Section
9.1) to occur by such date shall be due to the failure of the party
seeking to terminate this Agreement to perform or observe the
covenants and agreements of such party set forth herein;
(d) by either the Board of Directors of Pinnacle or the
Board of Directors of IFC (provided that the terminating party is
not then in material breach of any representation, warranty,
covenant or other agreement contained herein) if there shall have
been a material breach of any of the covenants or agreements or any
of the representations or warranties set forth in this Agreement on
the part of the other party, which breach is not cured within
forty-five (45) days following written notice to the party
committing such breach, or which breach, by its nature or timing,
cannot be cured prior to the Closing Date;
(e) by either Pinnacle or IFC if any approval of the
stockholders of Pinnacle or IFC required for the consummation of
the Merger shall not have been obtained by reason of the failure to
obtain the required vote at a duly held meeting of stockholders or
at any adjournment or postponement thereof;
(f) by either Pinnacle or IFC if any of the conditions
specified by Article VII to the obligation of the terminating party
have not been satisfied on the Closing Date; or
(g) by Pinnacle if the Closing Date IFC Disclosure
Schedule discloses any change from the IFC Disclosure Schedule
which has, or is likely to have, a Material Adverse Effect on IFC
or any of the IFC Subsidiaries; or by IFC if the Closing Date
Pinnacle Disclosure Schedule discloses any change from the Pinnacle
Disclosure Schedule which has, or is likely to have, a Material
Adverse Effect on Pinnacle or any of the Pinnacle Subsidiaries.
8.2 Effect of Termination. In the event of termination of
this Agreement by either Pinnacle or IFC as provided in Section
8.1, this Agreement shall forthwith become void and have no effect,
and none of Pinnacle, IFC, any of their respective Subsidiaries or
any of the officers or directors of any of them shall have any
liability of any nature whatsoever hereunder, or in connection with
the transactions contemplated hereby, except that (i) Sections
6.2(b), 8.2, 9.2 and 9.3, shall survive any termination of this
Agreement, and (ii) notwithstanding anything to the contrary
contained in this Agreement, neither Pinnacle nor IFC shall be
relieved or released from any liabilities or damages arising out of
its willful breach of any provision of this Agreement.
8.3 Amendment. Subject to compliance with applicable law,
this Agreement may be amended by the parties hereto, by action
taken or authorized by their respective Boards of Directors, at any
time before or after approval of the matters presented in
connection with the Merger by the stockholders of Pinnacle or IFC;
provided, however, that after any approval of the transactions
contemplated by this Agreement by the respective stockholders of
Pinnacle or IFC, there may not be, without further approval of such
stockholders, any amendment of this Agreement which changes the
amount or the form of the consideration to be delivered to the
holders of IFC Common Stock hereunder other than as contemplated by
this Agreement. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties
hereto.
8.4 Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their
respective Board of Directors, may, to the extent legally allowed,
(a) extend the time for the performance of any of the obligations
or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein
or in any document delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions contained
herein; provided, however, that after any approval of the
transactions contemplated by this Agreement by the respective
stockholders of Pinnacle or IFC, there may not be, without further
approval of such stockholders, any extension or waiver of this
Agreement or any portion thereof which reduces the amount or
changes the form of the consideration to be delivered to the
holders of IFC Common Stock hereunder other than as contemplated by
this Agreement. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party, but such
extension or waiver or failure to insist on strict compliance with
an obligation, covenant, agreement or condition shall not operate
as a waiver of, or estoppel with respect to, any subsequent or
other failure.
ARTICLE IX
GENERAL PROVISIONS
------------------
9.1 Closing. Subject to the terms and conditions of this
Agreement and the Option Agreements, the closing of the Merger (the
"Closing") will take place at 10:00 a.m. on a date and at a place
to be specified by the parties, which shall be no later than five
(5) business days after the satisfaction or waiver (subject to
applicable law) of the latest to occur of the conditions set forth
in Article VII hereof, unless extended by mutual agreement of the
parties (the "Closing Date").
9.2 Nonsurvival of Representations, Warranties and
Agreements. None of the representations, warranties, covenants and
agreements in this Agreement or in any instrument delivered
pursuant to this Agreement (other than pursuant to the Option
Agreements, which shall terminate in accordance with their terms)
shall survive the Effective Time, except for those covenants and
agreements contained herein and therein which by their terms apply
in whole or in part after the Effective Time.
9.3 Expenses. All costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expense; provided, however,
that the costs and expenses of printing and mailing the Joint Proxy
Statement, and all filing and other fees paid to the SEC in
connection with the Merger, shall be borne equally by Pinnacle and
IFC.
9.4 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered
personally, telecopied (with confirmation), mailed by registered or
certified mail (return receipt requested) or delivered by an
express courier (with confirmation) to the parties at the following
addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to Pinnacle to:
Pinnacle Financial Services, Inc.
830 Pleasant Street
St. Joseph, Michigan 49085
Attention: Richard L. Schanze, Chairman and CEO
Fax: (616) 853-5567
with copies to:
Miller, Canfield, Paddock and Stone, P.L.C.
1400 N. Woodward Ave., Suite 100
Bloomfield Hills, Michigan 48304
Attention: J. Kevin Trimmer, Esq.
Fax: (810) 258-3036
and
(b) if to IFC, to:
Indiana Federal Corporation
56 Washington Street
Valparaiso, Indiana 46383
Attention: Donald A. Lesch, Chairman and CEO
Fax: (219) 464-2041
with copies to:
Silver, Freedman & Taff, L.L.P.
1100 New York Avenue, N.W.
Washington, D.C. 20005-3934
Attention: James S. Fleischer Esq.
Fax: (202) 682-0354
9.5 Interpretation. When a reference is made in this
Agreement to Sections, Exhibits or Schedules, such reference shall
be to a Section of or Exhibit or Schedule to this Agreement unless
otherwise indicated. The table of contents and headings contained
in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words
"without limitation". No provision of this Agreement shall be
construed to require Pinnacle, IFC or any of their respective
Subsidiaries or affiliates to take any action which would violate
any applicable law, rule or regulation.
9.6 Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been
signed by each of the parties and delivered to the other parties,
it being understood that all parties need not sign the same
counterpart.
9.7 Entire Agreement. This Agreement (including the
documents and the instruments referred to herein) constitutes the
entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with
respect to the subject matter hereof other than the Option
Agreements and the Confidentiality Agreement.
9.8 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware,
without regard to any applicable conflicts of law.
9.9 Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of such invalidity
or unenforceability without rendering invalid or unenforceable the
remaining terms and provisions of this Agreement or affecting the
validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall
be interpreted to be only so broad as is enforceable.
9.10 Publicity. Except as otherwise required by applicable
law or the rules of NASDAQ, neither Pinnacle nor IFC shall, or
shall permit any of its Subsidiaries to, issue or cause the
publication of any press release or other public announcement with
respect to, or otherwise make any public statement concerning, the
transactions contemplated by this Agreement without the consent of
the other party, which consent shall not be unreasonably withheld.
9.11 Assignment; Third Party Beneficiaries. Neither this
Agreement nor any of the rights, interests or obligations shall be
assigned by any of the parties hereto (whether by operation of law
or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the
parties and their respective successors and assigns. Except as
otherwise specifically provided in Section 6.8, this Agreement
(including the documents and instruments referred to herein) is not
intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
IN WITNESS WHEREOF, Pinnacle and IFC have caused this
Agreement to be executed by their respective officers thereunto
duly authorized as of the date first above written.
PINNACLE FINANCIAL SERVICES, INC.
By: /s/Richard L. Schanze
-------------------------------
Richard L. Schanze
Chairman and
Chief Executive Officer
INDIANA FEDERAL CORPORATION
By: /s/Donald A. Lesch
-------------------------------
Donald A. Lesch
Chairman and
Chief Executive Officer
SCHEDULE OF EXHIBITS
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Exhibit A - Pinnacle Option Agreement
Exhibit B - IFC Option Agreement
Exhibit C - Bank Merger Agreement
Exhibit D - Affiliate Letter Agreement
Exhibit E - Opinion of IFC Counsel
Exhibit F - Opinion of Pinnacle Counsel
SCHEDULES
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Pinnacle Disclosure Schedule
IFC Disclosure Schedule
EXHIBIT A
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STOCK OPTION AGREEMENT
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated as of November 14, 1996, between
PINNACLE FINANCIAL SERVICES, INC., a Michigan corporation
("Issuer"), and INDIANA FEDERAL CORPORATION, a Delaware corporation
("Grantee").
WITNESSETH:
WHEREAS, Grantee and Issuer have entered into an Agreement and
Plan of Merger of even date herewith (the "Merger Agreement"),
which agreement has been executed by the parties hereto immediately
prior to this Stock Option Agreement (the "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger
Agreement and in consideration therefor, Issuer has agreed to grant
Grantee the Option (as hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein and in the Merger
Agreement, the parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms
hereof, up to 591,678 fully paid and nonassessable shares of
Issuer's Common Stock, no par value ("Common Stock"), at a price of
$24.625 per share (the "Option Price"); provided, however, that in
no event shall the number of shares of Common Stock for which this
Option is exercisable exceed 9.9% of the Issuer's issued and
outstanding shares of Common Stock without giving effect to any
shares subject to or issued pursuant to the Option. The number of
shares of Common Stock that may be received upon the exercise of
the Option and the Option Price are subject to adjustment as herein
set forth.
(b) In the event that any additional shares of Common
Stock are either (i) issued or otherwise become outstanding after
the date of this Agreement (other than pursuant to this Agreement)
or (ii) redeemed, repurchased, retired or otherwise cease to be
outstanding after the date of the Agreement, the number of shares
of Common Stock subject to the Option shall be increased or
decreased, as appropriate, so that, after an event described in
either clause (i) or (ii), such number equals 9.9% of the number of
shares of Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option.
Nothing contained in this Section 1(b) or elsewhere in this
Agreement shall be deemed to authorize Issuer or Grantee to breach
any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the
Option, in whole or part, and from time to time, if, but only if,
both an Initial Triggering Event (as hereinafter defined) and a
Subsequent Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Exercise Termination Event
(as hereinafter defined), provided that the Holder shall have sent
the written notice of such exercise (as provided in subsection (e)
of this Section 2) within 90 days following such Subsequent
Triggering Event. Each of the following shall be an Exercise
Termination Event: (i) the Effective Time (as defined in the
Merger Agreement) of the Merger; (ii) termination of the Merger
Agreement in accordance with the provisions thereof if such
termination occurs prior to the occurrence of an Initial Triggering
Event, except a termination by Grantee pursuant to Section 8.1(d)
of the Merger Agreement (unless the breach by Issuer giving rise to
such right of termination is non- volitional); or (iii) the passage
of 12 months after termination of the Merger Agreement if such
termination follows the occurrence of an Initial Triggering Event
or is a termination by Grantee pursuant to Section 8.1(d) of the
Merger Agreement (unless the breach by Issuer giving rise to such
right of termination is non-volitional) (provided that if an
Initial Triggering Event continues or occurs beyond such
termination and prior to the passage of such 12-month period, the
Exercise Termination Event shall be 12 months from the expiration
of the Last Triggering Event but in no event more than 18 months
after such termination). The "Last Triggering Event" shall mean
the last Initial Triggering Event to expire. The term "Holder"
shall mean the holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any
of the following events or transactions occurring after the date
hereof:
(i) Issuer or any of its Subsidiaries (each an "Issuer
Subsidiary"), without having received Grantee's prior written
consent, shall have entered into an agreement to engage in an
Acquisition Transaction (as hereinafter defined) with any
person (the term "person" for purposes of this Agreement
having the meaning assigned thereto in Sections 3(a)(9) and
13(d)(3) of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), and the rules and regulations thereunder)
other than Grantee or any of its Subsidiaries (each a "Grantee
Subsidiary") or the Board of Directors of Issuer shall have
recommended that the stockholders of Issuer approve or accept
any Acquisition Transaction. For purposes of this Agreement,
"Acquisition Transaction" shall mean (w) a merger or
consolidation, or any similar transaction, involving Issuer or
any Significant Subsidiary (as defined in Rule 1-02 of
Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC")) of Issuer, (x) a purchase, lease or
other acquisition or assumption of all or a substantial
portion of the assets or deposits of Issuer or any Significant
Subsidiary of Issuer, (y) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or
otherwise) of securities representing 10% or more of the
voting power of Issuer, or (z) any substantially similar
transaction; provided, however, that in no event shall any
merger, consolidation, purchase or similar transaction
involving only the Issuer and one or more of its Subsidiaries
or involving only any two or more of such Subsidiaries, be
deemed to be an Acquisition Transaction, provided that any
such transaction is not entered into in violation of the terms
of the Merger Agreement; and provided, further, that any
transaction described in this sentence that is expressly
permitted by the Merger Agreement shall not be deemed to be an
Acquisition Transaction;
(ii) Issuer or any Issuer Subsidiary, without having
received Grantee's prior written consent, shall have
authorized, recommended, proposed or publicly announced its
intention to authorize, recommend or propose, to engage in an
Acquisition Transaction with any person other than Grantee or
a Grantee Subsidiary, or the Board of Directors of Issuer
shall have publicly withdrawn or modified, or publicly
announced its interest to withdraw or modify, in any manner
adverse to Grantee, its recommendation that the stockholders
of Issuer approve the transactions contemplated by the Merger
Agreement;
(iii) Any person other than Grantee, any Grantee
Subsidiary or any Issuer Subsidiary acting in a fiduciary
capacity in the ordinary course of its business (and other
than any person who (a) as of the date hereof beneficially
owns 10% or more of the outstanding shares of Common Stock and
(b) would be eligible to use Schedule 13G but for the fact
that such person owns 10% or more of the outstanding shares of
Common Stock) shall have acquired beneficial ownership or the
right to acquire beneficial ownership of 10% or more of the
outstanding shares of Common Stock (the term "beneficial
ownership" for purposes of this Agreement having the meaning
assigned thereto in Section 13(d) of the 1934 Act, and the
rules and regulations thereunder);
(iv) Any person other than Grantee or any Grantee
Subsidiary shall have made a bona fide proposal to Issuer or
its stockholders by public announcement or written
communication that is or becomes the subject of public
disclosure to engage in an Acquisition Transaction;
(v) After an overture is made by a third party to
Issuer or its stockholders to engage in an Acquisition
Transaction, Issuer shall have breached any covenant or
obligation contained in the Merger Agreement and such breach
(x) would entitle Grantee to terminate the Merger Agreement
and (y) shall not have been cured prior to the Notice Date (as
defined below); or
(vi) Any person other than Grantee or any Grantee
Subsidiary, other than in connection with a transaction to
which Grantee has given its prior written consent, shall have
filed an application or notice with the Federal Reserve Board,
the Office of Thrift Supervision (the "OTS") or other federal
or state bank regulatory authority, which application or
notice has been accepted for processing, for approval to
engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean
either of the following events or transactions occurring after the
date hereof:
(i) The acquisition by any person of beneficial
ownership of 20% or more of the then outstanding Common Stock;
or
(ii) The occurrence of the Initial Triggering Event
described in paragraph (i) of subsection (b) of this Section
2, except that the percentage referred to in clause (y) shall
be 20%.
(d) Issuer shall notify Grantee promptly in writing of
the occurrence of any Initial Triggering Event or Subsequent
Triggering Event of which it has notice (together, a "Triggering
Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to
exercise the Option.
(e) In the event the Holder is entitled to and wishes to
exercise the Option, it shall send to Issuer a written notice (the
date of which being herein referred to as the "Notice Date")
specifying (i) the total number of shares it will purchase pursuant
to such exercise and (ii) a place and date not earlier than three
business days nor later than 60 business days from the Notice Date
for the closing of such purchase (the "Closing Date"); provided
that if prior notification to or approval of the Federal Reserve
Board, the OTS or any other regulatory agency is required in
connection with such purchase, the Holder shall promptly file the
required notice or application for approval and shall expeditiously
process the same and the period of time that otherwise would run
pursuant to this sentence shall run instead from the date on which
any required notification periods have expired or been terminated
or such approvals have been obtained and any requisite waiting
period or periods shall have passed. Any exercise of the Option
shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this
Section 2, the Holder shall pay to Issuer the aggregate purchase
price for the shares of Common Stock purchased pursuant to the
exercise of the Option in immediately available funds by wire
transfer to a bank account designated by Issuer, provided that
failure or refusal of Issuer to designate such a bank account shall
not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of
immediately available funds as provided in subsection (f) of this
Section 2, Issuer shall deliver to the Holder a certificate or
certificates representing the number of shares of Common Stock
purchased by the Holder and, if the Option should be exercised in
part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder, and
the Holder shall deliver to Issuer a copy of this Agreement and a
letter agreeing that the Holder will not offer to sell or otherwise
dispose of such shares in violation of applicable law or the
provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend that shall read
substantially as follows:
"The transfer of the shares represented by this
certificate is subject to certain provisions of an
agreement between the registered holder hereof and Issuer
and to resale restrictions arising under the Securities
Act of 1933, as amended. A copy of such agreement is on
file at the principal office of Issuer and will be
provided to the holder hereof without charge upon receipt
by Issuer of a written request therefor." It is
understood and agreed that: (i) the reference to the
resale restrictions of the Securities Act of 1933, as
amended (the "1933 Act"), in the above legend shall be
removed by delivery of substitute certificate(s) without
such reference if the Holder shall have delivered to
Issuer a copy of a letter from the staff of the SEC, or
an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is
not required for purposes of the 1933 Act; (ii) the
reference to the provisions to this Agreement in the
above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have
been sold or transferred in compliance with the
provisions of this Agreement and under circumstances that
do not require the retention of such reference; and (iii)
the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any
other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the
written notice of exercise of the Option provided for under
subsection (e) of this Section 2 and the tender of the applicable
purchase price in immediately available funds, the Holder shall be
deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually
delivered to the Holder. Issuer shall pay all expenses, and any
and all United States federal, state and local taxes and other
charges that may be payable in connection with the preparation,
issue and delivery of stock certificates under this Section 2 in
the name of the Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain,
free from preemptive rights, sufficient authorized but unissued or
treasury shares of Common Stock so that the Option may be exercised
without additional authorization of Common Stock after giving
effect to all other options, warrants, convertible securities and
other rights to purchase Common Stock; (ii) that it will not, by
charter amendment or through reorganization, consolidation, merger,
dissolution or sale of assets, or by any other voluntary act, avoid
or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (iii) promptly to take all action as may from
time to time be required (including (x) complying with all
premerger notification, reporting and waiting period requirements
specified in 15 U.S.C. (S)18a and regulations promulgated
thereunder and (y) in the event, under the Bank Holding Company Act
of 1956, as amended (the "BHCA"), the Change in Bank Control Act of
1978, as amended, the Home Owners' Loan Act, as amended, the Change
in Savings and Loan Control Act of 1978, as amended, or any other
federal or state banking or savings and loan law, prior approval of
or notice to the Federal Reserve Board, the OTS or to any other
federal or state regulatory authority is necessary before the
Option may be exercised, cooperating fully with the Holder in
preparing such applications or notices and providing such
information to the Federal Reserve Board, the OTS or such other
federal or state regulatory authority as they may require) in order
to permit the Holder to exercise the Option and Issuer duly and
effectively to issue shares of Common Stock pursuant hereto; and
(iv) promptly to take all action provided herein to protect the
rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon
presentation and surrender of this Agreement at the principal
office of Issuer, for other Agreements providing for Options of
different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set
forth herein, in the aggregate the same number of shares of Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as
used herein include any Stock Option Agreements and related Options
for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and
cancellation of this Agreement, if mutilated, Issuer will execute
and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional
contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time
be enforceable by anyone.
5. In addition to the adjustment in the number of shares of
Common Stock that are purchasable upon exercise of the Option
pursuant to Section 1 of this Agreement, the number of shares of
Common Stock purchasable upon the exercise of the Option and the
Option Price shall be subject to adjustment from time to time as
provided in this Section 5. In the event of any change in, or
distributions in respect of, the Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares, distributions on or
in respect of the Common Stock that would be prohibited under the
terms of the Merger Agreement, or the like, the type and number of
shares of Common Stock purchasable upon exercise hereof and the
Option Price shall be appropriately adjusted in such manner as
shall fully preserve the economic benefits provided hereunder and
proper provision shall be made in any agreement governing any such
transaction to provide for such proper adjustment and the full
satisfaction of the Issuer's obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that
occurs prior to an Exercise Termination Event, Issuer shall, at the
request of Grantee delivered within 90 days of such Subsequent
Triggering Event (whether on its own behalf or on behalf of any
subsequent holder of this Option (or part thereof) or any of the
shares of Common Stock issued pursuant hereto), promptly prepare,
file and keep current a shelf registration statement under the 1933
Act covering this Option and any shares issued and issuable
pursuant to this Option and shall use its reasonable best efforts
to cause such registration statement to become effective and remain
current in order to permit the sale or other disposition of this
Option and any shares of Common Stock issued upon total or partial
exercise of this Option ("Option Shares") in accordance with any
plan of disposition requested by Grantee. Issuer will use its
reasonable best efforts to cause such registration statement first
to become effective and then to remain effective for such period
not in excess of 180 days from the day such registration statement
first becomes effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions. Grantee
shall have the right to demand two such registrations. The
foregoing notwithstanding, if, at the time of any request by
Grantee for registration of the Option or Option Shares as provided
above, Issuer is in registration with respect to an underwritten
public offering of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or,
if none, the sole underwriter or underwriters, of such offering the
inclusion of the Holder's Option or Option Shares would interfere
with the successful marketing of the shares of Common Stock offered
by Issuer, the number of Option Shares otherwise to be covered in
the registration statement contemplated hereby may be reduced; and
provided, however, that after any such required reduction the
number of Option Shares to be included in such offering for the
account of the Holder shall constitute at least 25% of the total
number of shares to be sold by the Holder and Issuer in the
aggregate; and provided further, however, that if such reduction
occurs, then the Issuer shall file a registration statement for the
balance as promptly as practical and no reduction shall thereafter
occur. Each such Holder shall provide all information reasonably
requested by Issuer for inclusion in any registration statement to
be filed hereunder. If requested by any such Holder in connection
with such registration, Issuer shall become a party to any
underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of
representations, warranties, indemnities and other agreements
customarily included in secondary offering underwriting agreements
for the Issuer. Upon receiving any request under this Section 6
from any Holder, Issuer agrees to send a copy thereof to any other
person known to Issuer to be entitled to registration rights under
this Section 6, in each case by promptly mailing the same, postage
prepaid, to the address of record of the persons entitled to
receive such copies. Notwithstanding anything to the contrary
contained herein, in no event shall Issuer be obligated to effect
more than two registrations pursuant to this Section 6 by reason of
the fact that there shall be more than one Grantee as a result of
any assignment or division of this Agreement.
7. (a) Immediately prior to the occurrence of a Repurchase
Event (as defined below), (i) following a request of the Holder,
delivered prior to an Exercise Termination Event, Issuer (or any
successor thereto) shall repurchase the Option from the Holder at
a price (the "Option Repurchase Price") equal to the amount by
which (A) the Market/Offer Price (as defined below) exceeds (B) the
Option Price, multiplied by the number of shares for which this
Option may then be exercised and (ii) at the request of the owner
of Option Shares from time to time (the "Owner"), delivered within
90 days of such occurrence (or such later period as provided in
Section 10), Issuer shall repurchase such number of the Option
Shares from the Owner as the Owner shall designate at a price (the
"Option Share Repurchase Price") equal to the Market/Offer Price
multiplied by the number of Option Shares so designated. The term
"Market/Offer Price" shall mean the highest of (i) the price per
share of Common Stock at which a tender offer or exchange offer
therefor has been made, (ii) the price per share of Common Stock to
be paid by any third party pursuant to an agreement with Issuer,
(iii) the highest closing price for shares of Common Stock within
the six-month period immediately preceding the date the Holder
gives notice of the required repurchase of this Option or the Owner
gives notice of the required repurchase of Option Shares, as the
case may be, or (iv) in the event of a sale of all or a substantial
portion of Issuer's assets, the sum of the price paid in such sale
for such assets and the current market value of the remaining
assets of Issuer as determined by a nationally recognized
investment banking firm mutually selected by the Holder or the
Owner, as the case may be, on the one hand, and the Issuer, on the
other, divided by the number of shares of Common Stock of Issuer
outstanding at the time of such sale. In determining the
Market/Offer Price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking
firm mutually selected by the Holder or Owner, as the case may be,
on the one hand, and the Issuer, on the other.
(b) The Holder and the Owner, as the case may be, may
exercise its right to require Issuer to repurchase the Option and
any Option Shares pursuant to this Section 7 by surrendering for
such purpose to Issuer, at its principal office, a copy of this
Agreement or certificates for Option Shares, as applicable,
accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to
repurchase this Option and/or the Option Shares in accordance with
the provisions of this Section 7. Within the latter to occur of
(x) five business days after the surrender of the Option and/or
certificates representing Option Shares and the receipt of such
notice or notices relating thereto and (y) the time that is
immediately prior to the occurrence of a Repurchase Event, Issuer
shall deliver or cause to be delivered to the Holder the Option
Repurchase Price and/or to the Owner the Option Share Repurchase
Price therefor or the portion thereof that Issuer is not then
prohibited under applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under
applicable law or regulation from repurchasing the Option and/or
the Option Shares in full, Issuer shall immediately so notify the
Holder and/or the Owner and thereafter deliver or cause to be
delivered, from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Option Repurchase Price and the
Option Share Repurchase Price, respectively, that it is no longer
prohibited from delivering, within five business days after the
date on which Issuer is no longer so prohibited; provided, however,
that if Issuer at any time after delivery of a notice of repurchase
pursuant to paragraph (b) of this Section 7 is prohibited under
applicable law or regulation from delivering to the Holder and/or
the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Issuer
hereby undertakes to use its best efforts to obtain all required
regulatory and legal approvals and to file any required notices as
promptly as practicable in order to accomplish such repurchase),
the Holder or Owner may revoke its notice of repurchase of the
Option or the Option Shares either in whole or to the extent of the
prohibition, whereupon, in the latter case, Issuer shall promptly
(i) deliver to the Holder and/or the Owner, as appropriate, that
portion of the Option Repurchase Price or the Option Share
Repurchase Price that Issuer is not prohibited from delivering; and
(ii) deliver, as appropriate, either (A) to the Holder, a new Stock
Option Agreement evidencing the right of the Holder to purchase
that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Stock
Option Agreement was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the
Option Repurchase Price less the portion thereof theretofore
delivered to the Holder and the denominator of which is the Option
Repurchase Price, or (B) to the Owner, a certificate for the Option
Shares it is then so prohibited from repurchasing.
(d) For purposes of this Section 7, a Repurchase Event
shall be deemed to have occurred (i) upon the consummation of any
merger, consolidation or similar transaction involving Issuer or
any purchase, lease or other acquisition of all or a substantial
portion of the assets of Issuer, other than any such transaction
which would not constitute an Acquisition Transaction pursuant to
the provisos to Section 2(b)(i) hereof or (ii) upon the acquisition
by any person of beneficial ownership of 50% or more of the then
outstanding shares of Common Stock, provided that no such event
shall constitute a Repurchase Event unless a Subsequent Triggering
Event shall have occurred prior to an Exercise Termination Event.
The parties hereto agree that Issuer's obligations to repurchase
the Option or Option Shares under this Section 7 shall not
terminate upon the occurrence of an Exercise Termination Event
unless no Subsequent Triggering Event shall have occurred prior to
the occurrence of an Exercise Termination Event.
8. (a) In the event that prior to an Exercise Termination
Event, Issuer shall enter into an agreement (i) to consolidate with
or merge into any person, other than Grantee or one of its
Subsidiaries, and shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to merge
into Issuer and Issuer shall be the continuing or surviving
corporation, but, in connection with such merger, the then
outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other person or cash
or any other property or the then outstanding shares of Common
Stock shall after such merger represent less than 50% of the
outstanding voting shares and voting share equivalents of the
merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee
or one of its Subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provision so
that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth herein, be
converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the
Acquiring Corporation (as hereinafter defined) or (y) any person
that controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the
continuing or surviving corporation of a consolidation or
merger with Issuer (if other than Issuer), (ii) Issuer in a
merger in which Issuer is the continuing or surviving person,
and (iii) the transferee of all or substantially all of
Issuer's assets.
(2) "Substitute Common Stock" shall mean the common
stock issued by the issuer of the Substitute Option upon
exercise of the Substitute Option.
(3) "Assigned Value" shall mean the Market/Offer
Price, as defined in Section 7.
(4) "Average Price" shall mean the average closing
price of a share of the Substitute Common Stock for the one
year immediately preceding the consolidation, merger or sale
in question, but in no event higher than the closing price of
the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is
the issuer of the Substitute Option, the Average Price shall
be computed with respect to a share of common stock issued by
the person merging into Issuer or by any company which
controls or is controlled by such person, as the Holder may
elect.
(c) The Substitute Option shall have the same terms as
the Option, provided, that if the terms of the Substitute Option
cannot, for legal reasons, be the same as the Option, such terms
shall be as similar as possible and in no event less advantageous
to the Holder. The issuer of the Substitute Option shall also
enter into an agreement with the then Holder or Holders of the
Substitute Option in substantially the same form as this Agreement,
which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such
number of shares of Substitute Common Stock as is equal to the
Assigned Value multiplied by the number of shares of Common Stock
for which the Option is then exercisable, divided by the Average
Price. The exercise price of the Substitute Option per share of
Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the
number of shares of Common Stock for which the Option is then
exercisable and the denominator of which shall be the number of
shares of Substitute Common Stock for which the Substitute Option
is exercisable.
(e) In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more
than 9.9% of the shares of Substitute Common Stock outstanding
prior to exercise of the Substitute Option. In the event that the
Substitute Option would be exercisable for more than 9.9% of the
shares of Substitute Common Stock outstanding prior to exercise but
for this clause (e), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall make a cash payment to Holder
equal to the excess of (i) the value of the Substitute Option
without giving effect to the limitation in this clause (e) over
(ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be
determined by a nationally recognized investment banking firm
selected by the Holder or the Owner, as the case may be, and
reasonably acceptable to the Acquiring Corporation.
(f) Issuer shall not enter into any transaction
described in subsection (a) of this Section 8 unless the Acquiring
Corporation and any person that controls the Acquiring Corporation
assume in writing all the obligations of Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option
(the "Substitute Option Holder"), the Substitute Option Issuer
shall repurchase the Substitute Option from the Substitute Option
Holder at a price (the "Substitute Option Repurchase Price") equal
to (x) the amount by which (i) the Highest Closing Price (as
hereinafter defined) exceeds (ii) the exercise price of the
Substitute Option, multiplied by the number of shares of Substitute
Common Stock for which the Substitute Option may then be exercised
plus (y) Grantee's reasonable out-of-pocket expenses (to the extent
not previously reimbursed), and at the request of the owner (the
"Substitute Share Owner") of shares of Substitute Common Stock (the
"Substitute Shares"), the Substitute Option Issuer shall repurchase
the Substitute Shares at a price (the "Substitute Share Repurchase
Price") equal to (x) the Highest Closing Price multiplied by the
number of Substitute Shares so designated plus (y) Grantee's
reasonable Out-of- Pocket Expenses (to the extent not previously
reimbursed). The term "Highest Closing Price" shall mean the
highest closing price for shares of Substitute Common Stock within
the six-month period immediately preceding the date the Substitute
Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the
required repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute
Share Owner, as the case may be, may exercise its respective right
to require the Substitute Option Issuer to repurchase the
Substitute Option and the Substitute Shares pursuant to this
Section 9 by surrendering for such purpose to the Substitute Option
Issuer, at its principal office, the agreement for such Substitute
Option (or, in the absence of such an agreement, a copy of this
Agreement) and certificates for Substitute Shares accompanied by a
written notice or notices stating that the Substitute Option Holder
or the Substitute Share Owner, as the case may be, elects to
require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the
provisions of this Section 9. As promptly as practicable, and in
any event within five business days after the surrender of the
Substitute Option and/or certificates representing Substitute
Shares and the receipt of such notice or notices relating thereto,
the Substitute Option Issuer shall deliver or cause to be delivered
to the Substitute Option Holder the Substitute Option Repurchase
Price and/or to the Substitute Share Owner the Substitute Share
Repurchase Price therefor or, in either case, the portion thereof
which the Substitute Option Issuer is not then prohibited under
applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is
prohibited under applicable law or regulation from repurchasing the
Substitute Option and/or the Substitute Shares in part or in full,
the Substitute Option Issuer following a request for repurchase
pursuant to this Section 9 shall immediately so notify the
Substitute Option Holder and/or the Substitute Share Owner and
thereafter deliver or cause to be delivered, from time to time, to
the Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, the portion of the Substitute Share Repurchase Price,
respectively, which it is no longer prohibited from delivering,
within five business days after the date on which the Substitute
Option Issuer is no longer so prohibited; provided, however, that
if the Substitute Option Issuer is at any time after delivery of a
notice of repurchase pursuant to subsection (b) of this Section 9
prohibited under applicable law or regulation from delivering to
the Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, the Substitute Option Repurchase Price and the
Substitute Share Repurchase Price, respectively, in full (and the
Substitute Option Issuer shall use its best efforts to receive all
required regulatory and legal approvals as promptly as practicable
in order to accomplish such repurchase), the Substitute Option
Holder or Substitute Share Owner may revoke its notice of
repurchase of the Substitute Option or the Substitute Shares either
in whole or to the extent of the prohibition, whereupon, in the
latter case, the Substitute Option Issuer shall promptly (i)
deliver to the Substitute Option Holder or Substitute Share Owner,
as appropriate, that portion of the Substitute Option Repurchase
Price or the Substitute Share Repurchase Price that the Substitute
Option Issuer is not prohibited from delivering; and (ii) deliver,
as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option
Holder to purchase that number of shares of the Substitute Common
Stock obtained by multiplying the number of shares of the
Substitute Common Stock for which the surrendered Substitute Option
was exercisable at the time of delivery of the notice of repurchase
by a fraction, the numerator of which is the Substitute Option
Repurchase Price less the portion thereof theretofore delivered to
the Substitute Option Holder and the denominator of which is the
Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Common Shares it is then so
prohibited from repurchasing.
10. The 90-day period for exercise of certain rights under
Sections 2, 6, 7 and 13 shall be extended: (i) to the extent
necessary to obtain all regulatory approvals for the exercise of
such rights, and for the expiration of all statutory waiting
periods; and (ii) to the extent necessary to avoid liability under
Section 16(b) of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as
follows:
(a) Issuer has full corporate power and authority to
execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on
the part of Issuer are necessary to authorize this Agreement or to
consummate the transactions so contemplated. This Agreement has
been duly and validly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times
from the date hereof through the termination of this Agreement in
accordance with its terms will have reserved for issuance upon the
exercise of the Option, that number of shares of Common Stock equal
to the maximum number of shares of Common Stock at any time and
from time to time issuable hereunder, and all such shares, upon
issuance pursuant hereto, will be duly authorized, validly issued,
fully paid, nonassessable, and will be delivered free and clear of
all claims, liens, encumbrance and security interests and not
subject to any preemptive rights.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and
authority to enter into this Agreement and, subject to any
approvals or consents referred to herein, to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of Grantee. This Agreement has been
duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common
Stock or other securities acquired by Grantee upon exercise of the
Option will not be, acquired with a view to the public distribution
thereof and will not be transferred or otherwise disposed of except
in a transaction registered or exempt from registration under the
Securities Act.
13. Neither of the parties hereto may assign any of its
rights or obligations under this Option Agreement or the Option
created hereunder to any other person, without the express written
consent of the other party, except that in the event a Subsequent
Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions
hereof, may assign in whole or in part its rights and obligations
hereunder within 90 days following such Subsequent Triggering Event
(or such later period as provided in Section 10); provided,
however, that until the date 15 days following the date on which
the Federal Reserve Board and/or the OTS approves an application by
Grantee if required under applicable law to acquire the shares of
Common Stock subject to the Option, Grantee may not assign its
rights under the Option except in (i) a widely dispersed public
distribution, (ii) a private placement in which no one party
acquires the right to purchase in excess of 2% of the voting shares
of Issuer, (iii) an assignment to a single party (e.g., a broker or
investment banker) for the purpose of conducting a widely dispersed
public distribution on Grantee's behalf, or (iv) any other manner
approved by the Federal Reserve Board or the OTS, as applicable.
14. Each of Grantee and Issuer will use its best efforts to
make all filings with, and to obtain consents of, all third parties
and governmental authorities necessary to the consummation of the
transactions contemplated by this Agreement, including without
limitation making application to cause the shares of Common Stock
issuable hereunder to be approved for trading and reporting on the
NASDAQ, National Market System, upon official notice of issuance
and applying to the Federal Reserve Board and/or the OTS if
required under applicable law for approval to acquire the shares
issuable hereunder.
15. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party
hereto and that the obligations of the parties hereto shall be
enforceable by either party hereto through injunctive or other
equitable relief.
16. If any term, provision, covenant or restriction contained
in the Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions and covenants
and restrictions contained in this Agreement shall remain in full
force and effect, and shall in no way be affected, impaired or
invalidated. If for any reason such court or regulatory agency
determines that the Holder is not permitted to acquire, or Issuer
is not permitted to repurchase pursuant to Section 7, the full
number of shares of Common Stock provided in Section 1(a) hereof
(as adjusted pursuant to Section 1(b) or 5 hereof), it is the
express intention of Issuer to allow the Holder to acquire or to
require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
17. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given
when delivered in person, by cable, telegram, telecopy or telex, or
by registered or certified mail (postage prepaid, return receipt
requested) at the respective addresses of the parties set forth in
the Merger Agreement.
18. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of
conflicts of laws thereof.
19. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but
all of which shall constitute one and the same agreement.
20. Except as otherwise expressly provided herein, each of
the parties hereto shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own
financial consultants, investment bankers, accountants and counsel.
21. Except as otherwise expressly provided herein or in the
Merger Agreement, this Agreement contains the entire agreement
between the parties with respect to the transactions contemplated
hereunder and supersedes all prior arrangements or understandings
with respect thereof, written or oral. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and permitted
assigns. Nothing in this Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto,
and their respective successors except as assigns, any rights,
remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
22. Capitalized terms used in this Agreement and not defined
herein shall have the meanings assigned thereto in the Merger
Agreement.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its officers thereunto
duly authorized, all as of the date first above written.
PINNACLE FINANCIAL SERVICES, INC.
By:
-----------------------------------------
Richard L. Schanze
Chairman and Chief Executive Officer
INDIANA FEDERAL CORPORATION
By:
-----------------------------------------
Donald A. Lesch
Chairman and Chief Executive Officer
EXHIBIT B
---------
STOCK OPTION AGREEMENT
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated as of November 14, 1996, between
INDIANA FEDERAL CORPORATION, a Delaware corporation ("Issuer"),
and PINNACLE FINANCIAL SERVICES, INC., a Michigan corporation
("Grantee").
WITNESSETH:
WHEREAS, Grantee and Issuer have entered into an Agreement and
Plan of Merger of even date herewith (the "Merger Agreement"),
which agreement has been executed by the parties hereto immediately
prior to this Stock Option Agreement (the "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger
Agreement and in consideration therefor, Issuer has agreed to grant
Grantee the Option (as hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein and in the Merger
Agreement, the parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms
hereof, up to 470,361 fully paid and nonassessable shares of
Issuer's Common Stock, par value $ 0.01 per share ("Common Stock"),
at a price of $19.875 per share (the "Option Price"); provided,
however, that in no event shall the number of shares of Common
Stock for which this Option is exercisable exceed 9.9% of the
Issuer's issued and outstanding shares of Common Stock without
giving effect to any shares subject to or issued pursuant to the
Option. The number of shares of Common Stock that may be received
upon the exercise of the Option and the Option Price are subject to
adjustment as herein set forth.
(b) In the event that any additional shares of Common
Stock are either (i) issued or otherwise become outstanding after
the date of this Agreement (other than pursuant to this Agreement)
or (ii) redeemed, repurchased, retired or otherwise cease to be
outstanding after the date of the Agreement, the number of shares
of Common Stock subject to the Option shall be increased or
decreased, as appropriate, so that, after an event described in
either clause (i) or (ii), such number equals 9.9% of the number of
shares of Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option.
Nothing contained in this Section 1(b) or elsewhere in this
Agreement shall be deemed to authorize Issuer or Grantee to breach
any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the
Option, in whole or part, and from time to time, if, but only if,
both an Initial Triggering Event (as hereinafter defined) and a
Subsequent Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Exercise Termination Event
(as hereinafter defined), provided that the Holder shall have sent
the written notice of such exercise (as provided in subsection (e)
of this Section 2) within 90 days following such Subsequent
Triggering Event. Each of the following shall be an Exercise
Termination Event: (i) the Effective Time (as defined in the
Merger Agreement) of the Merger; (ii) termination of the Merger
Agreement in accordance with the provisions thereof if such
termination occurs prior to the occurrence of an Initial Triggering
Event, except a termination by Grantee pursuant to Section 8.1(d)
of the Merger Agreement (unless the breach by Issuer giving rise to
such right of termination is non- volitional); or (iii) the passage
of 12 months after termination of the Merger Agreement if such
termination follows the occurrence of an Initial Triggering Event
or is a termination by Grantee pursuant to Section 8.1(d) of the
Merger Agreement (unless the breach by Issuer giving rise to such
right of termination is non-volitional) (provided that if an
Initial Triggering Event continues or occurs beyond such
termination and prior to the passage of such 12-month period, the
Exercise Termination Event shall be 12 months from the expiration
of the Last Triggering Event but in no event more than 18 months
after such termination). The "Last Triggering Event" shall mean
the last Initial Triggering Event to expire. The term "Holder"
shall mean the holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any
of the following events or transactions occurring after the date
hereof:
(i) Issuer or any of its Subsidiaries (each an
"Issuer Subsidiary"), without having received Grantee's prior
written consent, shall have entered into an agreement to
engage in an Acquisition Transaction (as hereinafter defined)
with any person (the term "person" for purposes of this
Agreement having the meaning assigned thereto in Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934,
as amended (the "1934 Act"), and the rules and regulations
thereunder) other than Grantee or any of its Subsidiaries
(each a "Grantee Subsidiary") or the Board of Directors of
Issuer shall have recommended that the stockholders of Issuer
approve or accept any Acquisition Transaction. For purposes of
this Agreement, "Acquisition Transaction" shall mean (w) a
merger or consolidation, or any similar transaction, involving
Issuer or any Significant Subsidiary (as defined in Rule 1-02
of Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC")) of Issuer, (x) a purchase, lease or
other acquisition or assumption of all or a substantial
portion of the assets or deposits of Issuer or any Significant
Subsidiary of Issuer, (y) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or
otherwise) of securities representing 10% or more of the
voting power of Issuer, or (z) any substantially similar
transaction; provided, however, that in no event shall any
merger, consolidation, purchase or similar transaction
involving only the Issuer and one or more of its Subsidiaries
or involving only any two or more of such Subsidiaries, be
deemed to be an Acquisition Transaction, provided that any
such transaction is not entered into in violation of the terms
of the Merger Agreement; and provided, further, that any
transaction described in this sentence that is expressly
permitted by the Merger Agreement shall not be deemed to be an
Acquisition Transaction;
(ii) Issuer or any Issuer Subsidiary, without
having received Grantee's prior written consent, shall have
authorized, recommended, proposed or publicly announced its
intention to authorize, recommend or propose, to engage in an
Acquisition Transaction with any person other than Grantee or
a Grantee Subsidiary, or the Board of Directors of Issuer
shall have publicly withdrawn or modified, or publicly
announced its interest to withdraw or modify, in any manner
adverse to Grantee, its recommendation that the stockholders
of Issuer approve the transactions contemplated by the Merger
Agreement;
(iii) Any person other than Grantee, any Grantee
Subsidiary or any Issuer Subsidiary acting in a fiduciary
capacity in the ordinary course of its business (and other
than any person who (a) as of the date hereof beneficially
owns 10% or more of the outstanding shares of Common Stock and
(b) would be eligible to use Schedule 13G but for the fact
that such person owns 10% or more of the outstanding shares of
Common Stock) shall have acquired beneficial ownership or the
right to acquire beneficial ownership of 10% or more of the
outstanding shares of Common Stock (the term "beneficial
ownership" for purposes of this Agreement having the meaning
assigned thereto in Section 13(d) of the 1934 Act, and the
rules and regulations thereunder);
(iv) Any person other than Grantee or any Grantee
Subsidiary shall have made a bona fide proposal to Issuer or
its stockholders by public announcement or written
communication that is or becomes the subject of public
disclosure to engage in an Acquisition Transaction;
(v) After an overture is made by a third party to
Issuer or its stockholders to engage in an Acquisition
Transaction, Issuer shall have breached any covenant or
obligation contained in the Merger Agreement and such breach
(x) would entitle Grantee to terminate the Merger Agreement
and (y) shall not have been cured prior to the Notice Date (as
defined below); or
(vi) Any person other than Grantee or any Grantee
Subsidiary, other than in connection with a transaction to
which Grantee has given its prior written consent, shall have
filed an application or notice with the Federal Reserve Board,
the Office of Thrift Supervision (the "OTS"), or other federal
or state bank regulatory authority, which application or
notice has been accepted for processing, for approval to
engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean
either of the following events or transactions occurring after the
date hereof:
(i) The acquisition by any person of beneficial
ownership of 20% or more of the then outstanding Common Stock;
or
(ii) The occurrence of the Initial Triggering Event
described in paragraph (i) of subsection (b) of this Section
2, except that the percentage referred to in clause (y) shall
be 20%.
(d) Issuer shall notify Grantee promptly in writing of
the occurrence of any Initial Triggering Event or Subsequent
Triggering Event of which it has notice (together, a "Triggering
Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to
exercise the Option.
(e) In the event the Holder is entitled to and wishes to
exercise the Option, it shall send to Issuer a written notice (the
date of which being herein referred to as the "Notice Date")
specifying (i) the total number of shares it will purchase pursuant
to such exercise and (ii) a place and date not earlier than three
business days nor later than 60 business days from the Notice Date
for the closing of such purchase (the "Closing Date"); provided
that if prior notification to or approval of the Federal Reserve
Board, the OTS or any other regulatory agency is required in
connection with such purchase, the Holder shall promptly file the
required notice or application for approval and shall expeditiously
process the same and the period of time that otherwise would run
pursuant to this sentence shall run instead from the date on which
any required notification periods have expired or been terminated
or such approvals have been obtained and any requisite waiting
period or periods shall have passed. Any exercise of the Option
shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this
Section 2, the Holder shall pay to Issuer the aggregate purchase
price for the shares of Common Stock purchased pursuant to the
exercise of the Option in immediately available funds by wire
transfer to a bank account designated by Issuer, provided that
failure or refusal of Issuer to designate such a bank account shall
not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of
immediately available funds as provided in subsection (f) of this
Section 2, Issuer shall deliver to the Holder a certificate or
certificates representing the number of shares of Common Stock
purchased by the Holder and, if the Option should be exercised in
part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder, and
the Holder shall deliver to Issuer a copy of this Agreement and a
letter agreeing that the Holder will not offer to sell or otherwise
dispose of such shares in violation of applicable law or the
provisions of this Agreement. If at the time of issuance of any
shares of Common Stock pursuant to an exercise of all or part of
the Option hereunder, the Rights (as defined in the Stockholder
Protection Rights Agreement dated as of February 26, 1992, as
amended by the Amendment to Stockholder Protection Rights Agreement
dated as of November 14, 1996 (the "IFC Rights Agreement"), between
Issuer and Harris Trust and Savings Bank, as Rights Agent) issued
pursuant to the IFC Rights Agreement remain outstanding, or Issuer
shall have issued any similar securities, then each share of Common
Stock issued pursuant to such Option exercise shall also represent
Rights or such similar securities with terms substantially the same
as and at least as favorable to Grantee as are provided under the
IFC Rights Agreement or any similar agreement then in effect.
(h) Certificates for Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend that shall read
substantially as follows:
"The transfer of the shares represented by this
certificate is subject to certain provisions of an
agreement between the registered holder hereof and Issuer
and to resale restrictions arising under the Securities
Act of 1933, as amended. A copy of such agreement is on
file at the principal office of Issuer and will be
provided to the holder hereof without charge upon receipt
by Issuer of a written request therefor." It is
understood and agreed that: (i) the reference to the
resale restrictions of the Securities Act of 1933, as
amended (the "1933 Act"), in the above legend shall be
removed by delivery of substitute certificate(s) without
such reference if the Holder shall have delivered to
Issuer a copy of a letter from the staff of the SEC, or
an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is
not required for purposes of the 1933 Act; (ii) the
reference to the provisions to this Agreement in the
above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have
been sold or transferred in compliance with the
provisions of this Agreement and under circumstances that
do not require the retention of such reference; and (iii)
the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any
other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the
written notice of exercise of the Option provided for under
subsection (e) of this Section 2 and the tender of the applicable
purchase price in immediately available funds, the Holder shall be
deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually
delivered to the Holder. Issuer shall pay all expenses, and any
and all United States federal, state and local taxes and other
charges that may be payable in connection with the preparation,
issue and delivery of stock certificates under this Section 2 in
the name of the Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain,
free from preemptive rights, sufficient authorized but unissued or
treasury shares of Common Stock so that the Option may be exercised
without additional authorization of Common Stock after giving
effect to all other options, warrants, convertible securities and
other rights to purchase Common Stock; (ii) that it will not, by
charter amendment or through reorganization, consolidation, merger,
dissolution or sale of assets, or by any other voluntary act, avoid
or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (iii) promptly to take all action as may from
time to time be required (including (x) complying with all
premerger notification, reporting and waiting period requirements
specified in 15 U.S.C. (S)18a and regulations promulgated
thereunder and (y) in the event, under the Bank Holding Company Act
of 1956, as amended (the "BHCA"), the Change in Bank Control Act of
1978, as amended, the Home Owners' Loan Act, as amended, the Change
in Savings and Loan Control Act of 1978, as amended, or any other
federal or state banking or savings and loan law, prior approval of
or notice to the Federal Reserve Board, the OTS or to any other
federal or state regulatory authority is necessary before the
Option may be exercised, cooperating fully with the Holder in
preparing such applications or notices and providing such
information to the Federal Reserve Board, the OTS or such other
federal or state regulatory authority as they may require) in order
to permit the Holder to exercise the Option and Issuer duly and
effectively to issue shares of Common Stock pursuant hereto; and
(iv) promptly to take all action provided herein to protect the
rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon
presentation and surrender of this Agreement at the principal
office of Issuer, for other Agreements providing for Options of
different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set
forth herein, in the aggregate the same number of shares of Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as
used herein include any Stock Option Agreements and related Options
for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and
cancellation of this Agreement, if mutilated, Issuer will execute
and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional
contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time
be enforceable by anyone.
5. In addition to the adjustment in the number of shares of
Common Stock that are purchasable upon exercise of the Option
pursuant to Section 1 of this Agreement, the number of shares of
Common Stock purchasable upon the exercise of the Option and the
Option Price shall be subject to adjustment from time to time as
provided in this Section 5. In the event of any change in, or
distributions in respect of, the Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares, distributions on or
in respect of the Common Stock that would be prohibited under the
terms of the Merger Agreement, or the like, the type and number of
shares of Common Stock purchasable upon exercise hereof and the
Option Price shall be appropriately adjusted in such manner as
shall fully preserve the economic benefits provided hereunder and
proper provision shall be made in any agreement governing any such
transaction to provide for such proper adjustment and the full
satisfaction of the Issuer's obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that
occurs prior to an Exercise Termination Event, Issuer shall, at the
request of Grantee delivered within 90 days of such Subsequent
Triggering Event (whether on its own behalf or on behalf of any
subsequent holder of this Option (or part thereof) or any of the
shares of Common Stock issued pursuant hereto), promptly prepare,
file and keep current a shelf registration statement under the 1933
Act covering this Option and any shares issued and issuable
pursuant to this Option and shall use its reasonable best efforts
to cause such registration statement to become effective and remain
current in order to permit the sale or other disposition of this
Option and any shares of Common Stock issued upon total or partial
exercise of this Option ("Option Shares") in accordance with any
plan of disposition requested by Grantee. Issuer will use its
reasonable best efforts to cause such registration statement first
to become effective and then to remain effective for such period
not in excess of 180 days from the day such registration statement
first becomes effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions. Grantee
shall have the right to demand two such registrations. The
foregoing notwithstanding, if, at the time of any request by
Grantee for registration of the Option or Option Shares as provided
above, Issuer is in registration with respect to an underwritten
public offering of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or,
if none, the sole underwriter or underwriters, of such offering the
inclusion of the Holder's Option or Option Shares would interfere
with the successful marketing of the shares of Common Stock offered
by Issuer, the number of Option Shares otherwise to be covered in
the registration statement contemplated hereby may be reduced; and
provided, however, that after any such required reduction the
number of Option Shares to be included in such offering for the
account of the Holder shall constitute at least 25% of the total
number of shares to be sold by the Holder and Issuer in the
aggregate; and provided further, however, that if such reduction
occurs, then the Issuer shall file a registration statement for the
balance as promptly as practical and no reduction shall thereafter
occur. Each such Holder shall provide all information reasonably
requested by Issuer for inclusion in any registration statement to
be filed hereunder. If requested by any such Holder in connection
with such registration, Issuer shall become a party to any
underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of
representations, warranties, indemnities and other agreements
customarily included in secondary offering underwriting agreements
for the Issuer. Upon receiving any request under this Section 6
from any Holder, Issuer agrees to send a copy thereof to any other
person known to Issuer to be entitled to registration rights under
this Section 6, in each case by promptly mailing the same, postage
prepaid, to the address of record of the persons entitled to
receive such copies. Notwithstanding anything to the contrary
contained herein, in no event shall Issuer be obligated to effect
more than two registrations pursuant to this Section 6 by reason of
the fact that there shall be more than one Grantee as a result of
any assignment or division of this Agreement.
7. (a) Immediately prior to the occurrence of a Repurchase
Event (as defined below), (i) following a request of the Holder,
delivered prior to an Exercise Termination Event, Issuer (or any
successor thereto) shall repurchase the Option from the Holder at
a price (the "Option Repurchase Price") equal to the amount by
which (A) the Market/Offer Price (as defined below) exceeds (B) the
Option Price, multiplied by the number of shares for which this
Option may then be exercised and (ii) at the request of the owner
of Option Shares from time to time (the "Owner"), delivered within
90 days of such occurrence (or such later period as provided in
Section 10), Issuer shall repurchase such number of the Option
Shares from the Owner as the Owner shall designate at a price (the
"Option Share Repurchase Price") equal to the Market/Offer Price
multiplied by the number of Option Shares so designated. The term
"Market/Offer Price" shall mean the highest of (i) the price per
share of Common Stock at which a tender offer or exchange offer
therefor has been made, (ii) the price per share of Common Stock to
be paid by any third party pursuant to an agreement with Issuer,
(iii) the highest closing price for shares of Common Stock within
the six-month period immediately preceding the date the Holder
gives notice of the required repurchase of this Option or the Owner
gives notice of the required repurchase of Option Shares, as the
case may be, or (iv) in the event of a sale of all or a substantial
portion of Issuer's assets, the sum of the price paid in such sale
for such assets and the current market value of the remaining
assets of Issuer as determined by a nationally recognized
investment banking firm mutually selected by the Holder or the
Owner, as the case may be, on the one hand, and the Issuer, on the
other, divided by the number of shares of Common Stock of Issuer
outstanding at the time of such sale. In determining the
Market/Offer Price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking
firm mutually selected by the Holder or Owner, as the case may be,
on the one hand, and the Issuer, on the other.
(b) The Holder and the Owner, as the case may be, may
exercise its right to require Issuer to repurchase the Option and
any Option Shares pursuant to this Section 7 by surrendering for
such purpose to Issuer, at its principal office, a copy of this
Agreement or certificates for Option Shares, as applicable,
accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to
repurchase this Option and/or the Option Shares in accordance with
the provisions of this Section 7. Within the latter to occur of
(x) five business days after the surrender of the Option and/or
certificates representing Option Shares and the receipt of such
notice or notices relating thereto and (y) the time that is
immediately prior to the occurrence of a Repurchase Event, Issuer
shall deliver or cause to be delivered to the Holder the Option
Repurchase Price and/or to the Owner the Option Share Repurchase
Price therefor or the portion thereof that Issuer is not then
prohibited under applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under
applicable law or regulation from repurchasing the Option and/or
the Option Shares in full, Issuer shall immediately so notify the
Holder and/or the Owner and thereafter deliver or cause to be
delivered, from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Option Repurchase Price and the
Option Share Repurchase Price, respectively, that it is no longer
prohibited from delivering, within five business days after the
date on which Issuer is no longer so prohibited; provided, however,
that if Issuer at any time after delivery of a notice of repurchase
pursuant to paragraph (b) of this Section 7 is prohibited under
applicable law or regulation from delivering to the Holder and/or
the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Issuer
hereby undertakes to use its best efforts to obtain all required
regulatory and legal approvals and to file any required notices as
promptly as practicable in order to accomplish such repurchase),
the Holder or Owner may revoke its notice of repurchase of the
Option or the Option Shares either in whole or to the extent of the
prohibition, whereupon, in the latter case, Issuer shall promptly
(i) deliver to the Holder and/or the Owner, as appropriate, that
portion of the Option Repurchase Price or the Option Share
Repurchase Price that Issuer is not prohibited from delivering; and
(ii) deliver, as appropriate, either (A) to the Holder, a new Stock
Option Agreement evidencing the right of the Holder to purchase
that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Stock
Option Agreement was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the
Option Repurchase Price less the portion thereof theretofore
delivered to the Holder and the denominator of which is the Option
Repurchase Price, or (B) to the Owner, a certificate for the Option
Shares it is then so prohibited from repurchasing.
(d) For purposes of this Section 7, a Repurchase Event
shall be deemed to have occurred (i) upon the consummation of any
merger, consolidation or similar transaction involving Issuer or
any purchase, lease or other acquisition of all or a substantial
portion of the assets of Issuer, other than any such transaction
which would not constitute an Acquisition Transaction pursuant to
the provisos to Section 2(b)(i) hereof or (ii) upon the acquisition
by any person of beneficial ownership of 50% or more of the then
outstanding shares of Common Stock, provided that no such event
shall constitute a Repurchase Event unless a Subsequent Triggering
Event shall have occurred prior to an Exercise Termination Event.
The parties hereto agree that Issuer's obligations to repurchase
the Option or Option Shares under this Section 7 shall not
terminate upon the occurrence of an Exercise Termination Event
unless no Subsequent Triggering Event shall have occurred prior to
the occurrence of an Exercise Termination Event.
8. (a) In the event that prior to an Exercise Termination
Event, Issuer shall enter into an agreement (i) to consolidate with
or merge into any person, other than Grantee or one of its
Subsidiaries, and shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to merge
into Issuer and Issuer shall be the continuing or surviving
corporation, but, in connection with such merger, the then
outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other person or cash
or any other property or the then outstanding shares of Common
Stock shall after such merger represent less than 50% of the
outstanding voting shares and voting share equivalents of the
merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee
or one of its Subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provision so
that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth herein, be
converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the
Acquiring Corporation (as hereinafter defined) or (y) any person
that controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the
continuing or surviving corporation of a consolidation or
merger with Issuer (if other than Issuer), (ii) Issuer in a
merger in which Issuer is the continuing or surviving person,
and (iii) the transferee of all or substantially all of
Issuer's assets.
(2) "Substitute Common Stock" shall mean the
common stock issued by the issuer of the Substitute Option
upon exercise of the Substitute Option.
(3) "Assigned Value" shall mean the Market/Offer
Price, as defined in Section 7.
(4) "Average Price" shall mean the average closing
price of a share of the Substitute Common Stock for the one
year immediately preceding the consolidation, merger or sale
in question, but in no event higher than the closing price of
the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is
the issuer of the Substitute Option, the Average Price shall
be computed with respect to a share of common stock issued by
the person merging into Issuer or by any company which
controls or is controlled by such person, as the Holder may
elect.
(c) The Substitute Option shall have the same terms as
the Option, provided, that if the terms of the Substitute Option
cannot, for legal reasons, be the same as the Option, such terms
shall be as similar as possible and in no event less advantageous
to the Holder. The issuer of the Substitute Option shall also
enter into an agreement with the then Holder or Holders of the
Substitute Option in substantially the same form as this Agreement,
which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such
number of shares of Substitute Common Stock as is equal to the
Assigned Value multiplied by the number of shares of Common Stock
for which the Option is then exercisable, divided by the Average
Price. The exercise price of the Substitute Option per share of
Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the
number of shares of Common Stock for which the Option is then
exercisable and the denominator of which shall be the number of
shares of Substitute Common Stock for which the Substitute Option
is exercisable.
(e) In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more
than 9.9% of the shares of Substitute Common Stock outstanding
prior to exercise of the Substitute Option. In the event that the
Substitute Option would be exercisable for more than 9.9% of the
shares of Substitute Common Stock outstanding prior to exercise but
for this clause (e), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall make a cash payment to Holder
equal to the excess of (i) the value of the Substitute Option
without giving effect to the limitation in this clause (e) over
(ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be
determined by a nationally recognized investment banking firm
selected by the Holder or the Owner, as the case may be, and
reasonably acceptable to the Acquiring Corporation.
(f) Issuer shall not enter into any transaction
described in subsection (a) of this Section 8 unless the Acquiring
Corporation and any person that controls the Acquiring Corporation
assume in writing all the obligations of Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option
(the "Substitute Option Holder"), the Substitute Option Issuer
shall repurchase the Substitute Option from the Substitute Option
Holder at a price (the "Substitute Option Repurchase Price") equal
to (x) the amount by which (i) the Highest Closing Price (as
hereinafter defined) exceeds (ii) the exercise price of the
Substitute Option, multiplied by the number of shares of Substitute
Common Stock for which the Substitute Option may then be exercised
plus (y) Grantee's reasonable out-of-pocket expenses (to the extent
not previously reimbursed), and at the request of the owner (the
"Substitute Share Owner") of shares of Substitute Common Stock (the
"Substitute Shares"), the Substitute Option Issuer shall repurchase
the Substitute Shares at a price (the "Substitute Share Repurchase
Price") equal to (x) the Highest Closing Price multiplied by the
number of Substitute Shares so designated plus (y) Grantee's
reasonable Out-of- Pocket Expenses (to the extent not previously
reimbursed). The term "Highest Closing Price" shall mean the
highest closing price for shares of Substitute Common Stock within
the six-month period immediately preceding the date the Substitute
Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the
required repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute
Share Owner, as the case may be, may exercise its respective right
to require the Substitute Option Issuer to repurchase the
Substitute Option and the Substitute Shares pursuant to this
Section 9 by surrendering for such purpose to the Substitute Option
Issuer, at its principal office, the agreement for such Substitute
Option (or, in the absence of such an agreement, a copy of this
Agreement) and certificates for Substitute Shares accompanied by a
written notice or notices stating that the Substitute Option Holder
or the Substitute Share Owner, as the case may be, elects to
require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the
provisions of this Section 9. As promptly as practicable, and in
any event within five business days after the surrender of the
Substitute Option and/or certificates representing Substitute
Shares and the receipt of such notice or notices relating thereto,
the Substitute Option Issuer shall deliver or cause to be delivered
to the Substitute Option Holder the Substitute Option Repurchase
Price and/or to the Substitute Share Owner the Substitute Share
Repurchase Price therefor or, in either case, the portion thereof
which the Substitute Option Issuer is not then prohibited under
applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is
prohibited under applicable law or regulation from repurchasing the
Substitute Option and/or the Substitute Shares in part or in full,
the Substitute Option Issuer following a request for repurchase
pursuant to this Section 9 shall immediately so notify the
Substitute Option Holder and/or the Substitute Share Owner and
thereafter deliver or cause to be delivered, from time to time, to
the Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, the portion of the Substitute Share Repurchase Price,
respectively, which it is no longer prohibited from delivering,
within five business days after the date on which the Substitute
Option Issuer is no longer so prohibited; provided, however, that
if the Substitute Option Issuer is at any time after delivery of a
notice of repurchase pursuant to subsection (b) of this Section 9
prohibited under applicable law or regulation from delivering to
the Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, the Substitute Option Repurchase Price and the
Substitute Share Repurchase Price, respectively, in full (and the
Substitute Option Issuer shall use its best efforts to receive all
required regulatory and legal approvals as promptly as practicable
in order to accomplish such repurchase), the Substitute Option
Holder or Substitute Share Owner may revoke its notice of
repurchase of the Substitute Option or the Substitute Shares either
in whole or to the extent of the prohibition, whereupon, in the
latter case, the Substitute Option Issuer shall promptly (i)
deliver to the Substitute Option Holder or Substitute Share Owner,
as appropriate, that portion of the Substitute Option Repurchase
Price or the Substitute Share Repurchase Price that the Substitute
Option Issuer is not prohibited from delivering; and (ii) deliver,
as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option
Holder to purchase that number of shares of the Substitute Common
Stock obtained by multiplying the number of shares of the
Substitute Common Stock for which the surrendered Substitute Option
was exercisable at the time of delivery of the notice of repurchase
by a fraction, the numerator of which is the Substitute Option
Repurchase Price less the portion thereof theretofore delivered to
the Substitute Option Holder and the denominator of which is the
Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Common Shares it is then so
prohibited from repurchasing.
10. The 90-day period for exercise of certain rights under
Sections 2, 6, 7 and 13 shall be extended: (i) to the extent
necessary to obtain all regulatory approvals for the exercise of
such rights, and for the expiration of all statutory waiting
periods; and (ii) to the extent necessary to avoid liability under
Section 16(b) of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as
follows:
(a) Issuer has full corporate power and authority to
execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on
the part of Issuer are necessary to authorize this Agreement or to
consummate the transactions so contemplated. This Agreement has
been duly and validly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times
from the date hereof through the termination of this Agreement in
accordance with its terms will have reserved for issuance upon the
exercise of the Option, that number of shares of Common Stock equal
to the maximum number of shares of Common Stock at any time and
from time to time issuable hereunder, and all such shares, upon
issuance pursuant hereto, will be duly authorized, validly issued,
fully paid, nonassessable, and will be delivered free and clear of
all claims, liens, encumbrance and security interests and not
subject to any preemptive rights.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and
authority to enter into this Agreement and, subject to any
approvals or consents referred to herein, to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of Grantee. This Agreement has been
duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common
Stock or other securities acquired by Grantee upon exercise of the
Option will not be, acquired with a view to the public distribution
thereof and will not be transferred or otherwise disposed of except
in a transaction registered or exempt from registration under the
Securities Act.
13. Neither of the parties hereto may assign any of its
rights or obligations under this Option Agreement or the Option
created hereunder to any other person, without the express written
consent of the other party, except that in the event a Subsequent
Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions
hereof, may assign in whole or in part its rights and obligations
hereunder within 90 days following such Subsequent Triggering Event
(or such later period as provided in Section 10); provided,
however, that until the date 15 days following the date on which
the Federal Reserve Board and/or the OTS approves an application by
Grantee if required under applicable law to acquire the shares of
Common Stock subject to the Option, Grantee may not assign its
rights under the Option except in (i) a widely dispersed public
distribution, (ii) a private placement in which no one party
acquires the right to purchase in excess of 2% of the voting shares
of Issuer, (iii) an assignment to a single party (e.g., a broker or
investment banker) for the purpose of conducting a widely dispersed
public distribution on Grantee's behalf, or (iv) any other manner
approved by the Federal Reserve Board or the OTS, as applicable.
14. Each of Grantee and Issuer will use its best efforts to
make all filings with, and to obtain consents of, all third parties
and governmental authorities necessary to the consummation of the
transactions contemplated by this Agreement, including without
limitation making application to cause the shares of Common Stock
issuable hereunder to be approved for trading and reporting on the
NASDAQ, National Market System, upon official notice of issuance
and applying to the Federal Reserve Board and/or the OTS if
required under applicable law for approval to acquire the shares
issuable hereunder.
15. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party
hereto and that the obligations of the parties hereto shall be
enforceable by either party hereto through injunctive or other
equitable relief.
16. If any term, provision, covenant or restriction contained
in the Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions and covenants
and restrictions contained in this Agreement shall remain in full
force and effect, and shall in no way be affected, impaired or
invalidated. If for any reason such court or regulatory agency
determines that the Holder is not permitted to acquire, or Issuer
is not permitted to repurchase pursuant to Section 7, the full
number of shares of Common Stock provided in Section 1(a) hereof
(as adjusted pursuant to Section 1(b) or 5 hereof), it is the
express intention of Issuer to allow the Holder to acquire or to
require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
17. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given
when delivered in person, by cable, telegram, telecopy or telex, or
by registered or certified mail (postage prepaid, return receipt
requested) at the respective addresses of the parties set forth in
the Merger Agreement.
18. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of
conflicts of laws thereof.
19. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but
all of which shall constitute one and the same agreement.
20. Except as otherwise expressly provided herein, each of
the parties hereto shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own
financial consultants, investment bankers, accountants and counsel.
21. Except as otherwise expressly provided herein or in the
Merger Agreement, this Agreement contains the entire agreement
between the parties with respect to the transactions contemplated
hereunder and supersedes all prior arrangements or understandings
with respect thereof, written or oral. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and permitted
assigns. Nothing in this Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto,
and their respective successors except as assigns, any rights,
remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
22. Capitalized terms used in this Agreement and not defined
herein shall have the meanings assigned thereto in the Merger
Agreement.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its officers thereunto
duly authorized, all as of the date first above written.
INDIANA FEDERAL CORPORATION
By: ___________________________________________
Donald A. Lesch
Chairman and Chief Executive Officer
PINNACLE FINANCIAL SERVICES, INC.
By: ___________________________________________
Richard L. Schanze
Chairman and Chief Executive Officer