1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
JANUARY 11, 2000
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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OLD NATIONAL BANCORP
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(Exact name of registrant as specified in its charter)
INDIANA 6021 35-1539838
- ------------------------------- ---------------------------- -----------------------------------
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
420 MAIN STREET, EVANSVILLE, INDIANA 47708, (812) 464-1434
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(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
JEFFREY L. KNIGHT, ESQ. TIMOTHY M. HARDEN, ESQ.
CORPORATE SECRETARY & GENERAL COUNSEL MICHAEL J. MESSAGLIA, ESQ.
OLD NATIONAL BANCORP KRIEG DEVAULT ALEXANDER & CAPEHART, LLP
420 MAIN STREET ONE INDIANA SQUARE, SUITE 2800
EVANSVILLE, INDIANA 47708 INDIANAPOLIS, INDIANA 46204-2017
(812) 464-1363 (317) 636-4341
(AGENT FOR SERVICE) (COPY TO)
- --------------------------------------------------------------------------------
(Name, address, including zip code, and telephone number, including area
code, or agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE
SECURITIES TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
Title of each class Amount Proposed maximum Proposed maximum Amount of
of securities to be offering price aggregate offering registration
to be registered registered (1) per unit (2) price (2) fee (3)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK, UP TO
NO PAR VALUE 2,220,682 SHARES $ N/A $18,939,000 $5,000
====================================================================================================================================
(1) The number of shares of Old National common stock to be registered
pursuant to this registration statement is based upon an estimate of the
maximum number of shares of Heritage common stock presently outstanding
or reserved for issuance under various plans or otherwise expected to be
issued upon the consummation of the proposed merger to which this
registration statement relates, multiplied by the exchange ratio of
3.3075 shares of Old National common stock per each share of Heritage
common stock.
(2) Estimated solely for the purpose of calculating the registration fee and
calculated as of September 30, 1999, in accordance with Rule 457(f)(2)
on the basis of the book value of the securities to be exchanged for the
common stock to be issued by the registrant.
2
(3) The registration fee was calculated pursuant to Rule 457(f) under the
Securities Act of 1933, as amended as follows: .000264 multiplied by the
proposed maximum aggregate offering price.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
3
[HERITAGE FINANCIAL SERVICES, INC. LETTERHEAD]
January ___, 2000
Dear Shareholders:
I am pleased to invite you to attend a special meeting of shareholders
of Heritage Financial Services, Inc. on:
_______________, __________ ___, 2000
_____:_____ __.m.
-------------------------
Clarksville, Tennessee 37041-1348
The purposes of the Special Meeting are (1) to consider and vote upon
the Agreement of Affiliation and Merger dated as of September 8, 1999, between
Heritage Financial Services, Inc. and Old National Bancorp, pursuant to which
Heritage will merge into Old National and (2) to consider and vote upon any
other matters that may properly come before the meeting. The merger agreement
provides that Heritage will merge with Old National, and that you will receive
3.3075 shares of Old National common stock, as adjusted for the 5% stock
dividend declared by Old National on December 9, 1999, and subject to
adjustment, for each share of Heritage common stock you own. The exchange ratio
will be adjusted if, among other reasons, Old National issues a stock dividend
prior to the completion of the merger. A copy of the merger agreement is
attached to this document as Appendix A.
The Board of Directors of Heritage enthusiastically supports the merger
and believes that the proposed merger between Old National and Heritage is in
the best interests of Heritage as a whole, including the interests of the
shareholders, customers and employees of Heritage. Heritage's financial adviser,
Professional Bank Services, Inc., has issued its opinion to the Board of
Directors of Heritage that the 3.3075 exchange ratio in the proposed merger is
fair, from a financial point of view, to Heritage's shareholders. Your Board of
Directors unanimously approved the merger agreement and recommends that the
shareholders of Heritage approve it.
We have enclosed a Notice of Special Meeting of Shareholders and a
Proxy Statement-Prospectus containing information about the special meeting and
the proposed merger. We encourage you to read this document carefully. Also
enclosed is a proxy card so you can vote on the merger without attending the
special meeting. Please complete, sign and date the enclosed proxy card and
return it to us as soon as possible in the envelope we have provided. If you
decide to come to the special meeting, you may vote your shares in person
whether or not you have mailed us a proxy.
Please give this matter your careful consideration.
Sincerely,
Earl O. Bradley, III
President and CEO
4
HERITAGE FINANCIAL SERVICES, INC.
25 JEFFERSON STREET
CLARKSVILLE, TENNESSEE 37041-1348
(931) 553-0500
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
to be held on __________ ___, 2000
To Our Shareholders:
We will hold a Special Meeting of Shareholders of Heritage Financial
Services, Inc. on:
_________, __________ ___, _____
_____ __.m.
___________________________________
-------------------------
Clarksville, Tennessee 37041-1348
The purposes of the special meeting are:
1. To consider and vote upon the Agreement of Affiliation and Merger,
dated as of September 8, 1999, by and between Old National Bancorp and
Heritage, pursuant to which Heritage will merge with Old National.
Under the terms of the merger agreement, each outstanding share of
Heritage common stock will be converted into the right to receive
3.3075 shares of Old National common stock, as adjusted for the 5%
stock dividend declared by Old National on December 9, 1999, and
subject to adjustment, as described in the merger agreement. The merger
agreement, which describes the terms of the merger in great detail, is
attached as Appendix A to the accompanying Proxy Statement-Prospectus;
and
2. To transact such other business which may properly be presented at the
special meeting or any adjournment thereof.
We have fixed the close of business on ____________, 2000 as the record
date for determining those shareholders who are entitled to notice of, and to
vote at, the special meeting and any adjournment or postponement of it. Approval
and adoption of the merger agreement requires the affirmative vote of the
holders of at least the majority of the outstanding shares of Heritage common
stock.
Please do not send your stock certificates at this time. If the merger
is completed, we will send you instructions regarding the surrender of your
stock certificates.
BY ORDER OF THE BOARD OF DIRECTORS
____________, 2000 JOHN T. HALLIBURTON
SECRETARY
DISSENTING SHAREHOLDERS WHO COMPLY WITH THE PROCEDURES REQUIRED BY THE TENNESSEE
BUSINESS CORPORATION ACT WILL BE ENTITLED TO RECEIVE PAYMENT OF THE FAIR CASH
VALUE OF THEIR SHARES. WE HAVE ATTACHED A COPY OF THIS LAW AS AN APPENDIX TO THE
ACCOMPANYING PROXY STATEMENT-PROSPECTUS. HERITAGE SHAREHOLDERS CONSIDERING THE
EXERCISE OF THEIR DISSENTERS' RIGHTS SHOULD CAREFULLY REVIEW THESE MATERIALS AND
INFORMATION BEFORE VOTING AT THE SPECIAL MEETING.
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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
APPROVAL OF THE MERGER AGREEMENT.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU
ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE
PREVIOUSLY RETURNED YOUR PROXY CARD.
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PROXY STATEMENT
PROSPECTUS FOR
OF SPECIAL MEETING OF SHAREHOLDERS
OLD NATIONAL BANCORP OF
HERITAGE FINANCIAL SERVICES, INC.
---------------------------
The Board of Directors of Old National Bancorp and Heritage Financial
Services, Inc. have agreed that Old National will acquire Heritage in a merger.
Heritage's Board of Directors believes the merger is in the best interests of
Heritage as a whole, including your interests. The merger will allow the
subsidiaries of Heritage to offer more products and services to their customers.
If the merger is approved by the shareholders of Heritage and all other
closing conditions are satisfied, you will receive 3.3075 shares of Old National
common stock, as adjusted for the 5% stock dividend declared by Old National on
December 9, 1999, for each share of Heritage common stock you own on the date
the merger is completed. If this exchange results in you owning a fractional
share of Old National common stock, Old National will pay you cash for the
fractional share. The number of shares of Old National common stock you receive
as a result of the merger will be proportionally increased or decreased if Old
National issues a stock dividend or stock split between now and the closing date
of the merger. Old National's common stock is traded on the Nasdaq National
Market System under the symbol "OLDB."
The merger cannot be completed unless the holders of at least a
majority of the outstanding shares of Heritage approve it. The special meeting
of Heritage shareholders to vote on the merger will be held on:
__________, __________ ___, 2000
_____ __.m.
____________________
---------------
Clarksville, Tennessee 37041-1348
YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE
SPECIAL MEETING, PLEASE TAKE THE TIME TO VOTE BY COMPLETING AND MAILING THE
ENCLOSED PROXY CARD TO US.
This document provides you with detailed information about the meeting
and the merger. In addition, you may obtain information about Old National from
documents it has filed with the Securities and Exchange Commission. We encourage
you to read this entire document carefully.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OF THE SECURITIES TO BE ISSUED UNDER THIS PROXY
STATEMENT-PROSPECTUS OR DETERMINED IF THIS PROXY STATEMENT-PROSPECTUS IS
ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------------------------------
SHARES OF OLD NATIONAL COMMON STOCK ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER
OBLIGATIONS OF ANY BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE BANK INSURANCE FUND OR ANY OTHER GOVERNMENT AGENCY.
--------------------------------------------
THE DATE OF THIS PROXY STATEMENT-PROSPECTUS IS ____________, 2000
AND IS BEING MAILED TO HERITAGE SHAREHOLDERS ON THE SAME DATE.
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TABLE OF CONTENTS
PAGE
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Questions and Answers About the Heritage/Old National Merger.................iii
Summary ......................................................................v
The Parties to the Merger.............................................v
The Merger...........................................................vi
Interests of Certain Persons in the Merger.........................viii
Special Shareholders' Meeting......................................viii
Comparative Per Share Market Price Information.......................ix
Recent Developments..................................................ix
Comparative Per Share Data............................................x
Summary of Selected Financial Data -- Old National...........................xii
Summary of Selected Financial Data -- Heritage...............................xiv
Special Meeting................................................................1
General .............................................................1
Matters to be Considered..............................................1
Proxies .............................................................1
Solicitation of Proxies...............................................1
Record Date and Voting Rights.........................................2
Recommendation of Heritage Board of Directors.........................3
Proposed Merger................................................................3
General .............................................................3
Description of the Merger.............................................4
Background of the Merger..............................................4
Reasons for the Merger................................................5
Fairness Opinion of Heritage's Financial Advisor......................6
Recommendation of the Heritage Board of Directors....................11
Conversion of Heritage Common Stock..................................11
Treatment of Heritage Stock Options..................................12
Exchange of Certificates; Fractional Shares..........................12
Dissenters' or Appraisal Rights......................................13
Dissenters' Rights...................................................13
Resale of Old National Common Stock by Affiliates of Heritage........16
Conditions to the Completion of the Merger...........................18
Break-up Fee.........................................................18
Termination of the Merger Agreement..................................19
Restrictions Affecting Heritage......................................21
Regulatory Approvals Required for the Merger.........................22
Accounting Treatment for the Merger..................................24
Effective Time.......................................................25
Management, Personnel and Employee Benefits After the Merger.........25
Indemnification; Directors' and Officers' Liability Insurance........29
Federal Income Tax Consequences...............................................29
Tax Opinion..........................................................30
Tax Consequences to Old National and Heritage........................30
i
8
Tax Consequences to Heritage Shareholders............................30
Comparative Per Share Data....................................................31
Nature of Trading Market.............................................31
Dividends............................................................33
Existing and Pro Forma Per Share Information.........................34
Pro Forma Condensed Combined Financial Information............................37
Notes to Pro Forma Condensed Combined Financial Information...................43
Description of Old National...................................................44
Overview ............................................................44
Supervision and Regulation...........................................45
Recent Developments..................................................45
Incorporation of Certain Information by Reference....................46
Description of Heritage.......................................................46
Business ............................................................46
Incorporation of Certain Information by Reference....................47
Comparison of Common Stock....................................................47
Authorized But Unissued Shares.......................................47
Preemptive Rights....................................................48
Dividend Rights......................................................49
Voting Rights........................................................50
Dissenters' Rights...................................................51
Liquidation Rights...................................................52
Redemption and Assessment............................................52
Anti-Takeover Provisions.............................................53
Director Liability...................................................58
Director Nominations.................................................58
Legal Opinions................................................................59
Experts .....................................................................59
Other Matters.................................................................59
Forward-Looking Statements....................................................60
Where You Can Find More Information...........................................60
APPENDIX A.................................................................A - 1
APPENDIX B.................................................................B - 1
APPENDIX C.................................................................C - 1
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QUESTIONS AND ANSWERS ABOUT THE HERITAGE/OLD NATIONAL MERGER
Q: WHAT DO I NEED TO DO NOW?
A: After you carefully read this document, indicate on your proxy card how
you want to vote, sign it and mail it in the enclosed envelope as soon
as possible. The instructions on the accompanying proxy card will give
you more information on how to vote by mail. This will enable your
shares to be represented at the Heritage special meeting.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER
VOTE MY SHARES FOR ME?
A: Your broker will not be able to vote your shares without instructions
from you. You should instruct your broker to vote your shares,
following the directions your broker provides. Your failure to instruct
your broker to vote your shares will result in your shares not being
voted. If you fail to return a proxy card or abstain from voting, the
effect will be a vote against the merger.
Q: CAN I CHANGE MY VOTE AFTER I SUBMIT MY PROXY WITH VOTING INSTRUCTIONS?
A: Yes. There are three ways you can change your vote. First, you may send
a written notice to the person to whom you submitted your proxy stating
that you would like to revoke your proxy. Second, you may complete and
submit a new proxy card by mail or submit your proxy with new voting
instructions. Your shares will be voted in accordance with the latest
proxy actually received by Heritage prior to the shareholders' meeting.
Any earlier proxies will be revoked. Third, you may attend the Heritage
special meeting, and vote in person. Any earlier proxies will be
revoked. Simply attending the meeting without voting, however, will not
revoke your proxy. If you have instructed a broker to vote your shares,
you must follow directions you will receive from your broker to change
or revoke your proxy.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. You should not send in your stock certificates at this time.
Heritage shareholders will exchange their Heritage common stock
certificates for Old National common stock certificates after Old
National and Heritage complete the merger. Old National will send you
instructions for exchanging your Heritage common stock certificates
promptly after the merger is completed.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: In the merger you will receive 3.3075 shares of Old National common
stock for each share of Heritage common stock you own. This means that,
based on the closing price of Old National common stock on The Nasdaq
National Market on January ___, 2000, you would have received
$__________ worth of Old National common stock for each share of
Heritage common stock you own. Old National will not issue fractional
shares of Old National common stock. Instead, Old National will pay you
cash for any fractional shares.
Q: WHAT IS THE "EXCHANGE RATIO?"
A: The exchange ratio is the number of shares of Old National common stock
into which each share of Heritage common stock will be converted when
the merger is completed. The exchange ratio
iii
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is 3.3075 shares of Old National common stock for each share of
Heritage common stock. Please note that the share price of Old National
common stock may fluctuate before and after the merger is completed. As
a result of the exchange ratio being fixed, you will not be sure of the
market value of the Old National common stock you will receive until
the time the merger is completed.
Q: WHEN CAN I EXPECT THE MERGER WILL BE COMPLETED?
A: Old National and Heritage are working to complete the merger as quickly
as possible. In addition to the approval of Heritage shareholders, Old
National and Heritage also must obtain certain banking and regulatory
approvals. Old National and Heritage anticipate the merger will be
completed in February 2000.
Q: WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER?
A: For U.S. federal income tax purposes, the conversion of your Heritage
common stock into Old National common stock will not cause you to
recognize any gain or loss. You will, however, recognize gain or loss
in connection with any cash received for fractional shares of Old
National common stock. Your tax basis for the Old National common stock
received in the merger (including the fractional shares you are deemed
to have received and then are redeemed for cash) will be the same as
the tax basis for your Heritage common stock and your holding period
for the Old National common stock received in the merger (including the
fractional shares you are deemed to have received and then are redeemed
for cash) generally will include the holding period of your Heritage
common stock exchanged in the merger. For a more complete description
of federal income tax considerations, see page 30.
THIS TAX TREATMENT MAY NOT APPLY TO CERTAIN HERITAGE SHAREHOLDERS,
INCLUDING SHAREHOLDERS WHO ARE NON-U.S. PERSONS OR DEALERS IN
SECURITIES. DETERMINING THE ACTUAL TAX CONSEQUENCES OF THE MERGER TO
YOU MAY BE COMPLEX. THE TAX CONSEQUENCES WILL DEPEND ON YOUR SPECIFIC
SITUATION AND ON VARIABLES NOT WITHIN YOUR CONTROL. YOU SHOULD CONSULT
YOUR OWN TAX ADVISOR FOR A FULL UNDERSTANDING OF THE MERGER'S TAX
CONSEQUENCES.
Q: WHAT OTHER MATTERS WILL BE VOTED ON AT THE MEETING?
A: Heritage does not expect that any matter other than the merger will be
voted on at the meeting.
Q: WILL MY SHAREHOLDER RIGHTS CHANGE AS A RESULT OF THE MERGER?
A: Yes. Currently, your rights as a Heritage shareholder are governed by
Heritage's Charter and ByLaws. Old National shareholder rights are
governed by Old National's Articles of Incorporation and By-Laws. After
the merger, you will become an Old National shareholder, and therefore
your rights will be governed by Old National's Articles of
Incorporation and By-Laws. For a summary of some of the differences
between the rights of Heritage shareholders and the rights of Old
National shareholders, see page 48.
Q: WHOM SHOULD I CALL WITH QUESTIONS?
A: You should call John T. Halliburton, Secretary of Heritage, at (931)
553-0500.
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SUMMARY
This summary highlights some of the information contained in this
document. Because this is a summary, it does not contain all the information
that may be important to you. To understand the merger fully and for a more
complete description of the legal terms of the merger, you should read carefully
this entire document and the documents to which we have referred you.
THE PARTIES TO THE MERGER
OLD NATIONAL BANCORP
420 Main Street
Evansville, Indiana 47708
(812) 464-1434
Old National is a bank holding company, incorporated under Indiana law and
headquartered in Evansville, Indiana. Through its full-service banking
subsidiaries Old National operates a general banking business from 119 banking
offices and 174 ATM locations located throughout Indiana, Illinois and Kentucky.
In addition, Old National provides trust services and other financial services
through additional subsidiaries. At September 30, 1999, on a consolidated basis,
Old National had assets of approximately $6.963 billion, deposits of
approximately $5.025 billion, and shareholders' equity of approximately $514.9
million. Old National's common stock is traded on the Nasdaq National Market
under the symbol "OLDB."
HERITAGE FINANCIAL SERVICES, INC.
25 Jefferson Street
Clarksville, Tennessee 37041-1348
(931) 553-0500
Heritage is a bank holding company, incorporated under Tennessee law and
headquartered in Clarksville, Tennessee. Heritage owns and operates one
affiliate bank, an investment brokerage services provider, an insurance company,
a finance company and an investment corporation, each located in Tennessee. At
September 30, 1999, Heritage, on a consolidated basis, had assets of
approximately $234.03 million, deposits of approximately $198.86 million and
shareholders' equity of approximately $18.94 million. Heritage's common stock is
not traded on a national exchange system.
v
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THE MERGER
Description of the merger. We propose a merger in which Heritage will merge with
Old National, and Old National will survive the merger. Old National will issue
shares of its common stock to shareholders of Heritage in exchange for their
shares of Heritage common stock.
Recommendation of the Board of Directors of Heritage. The Board of Directors of
Heritage believes that the merger is in the best interests of Heritage as a
whole, including your interests, and unanimously recommends that you vote "FOR"
the proposal to approve the merger. See "Proposed Merger - Recommendation of the
Heritage Board of Directors" on page 7.
Heritage shareholders will receive Old National common stock in the merger. If
the merger is completed, you will have the right to receive 3.3075 shares of Old
National common stock for each share of Heritage common stock that you own as of
the effective time of the merger. Because the number of shares of common stock
of Old National that you will receive in the merger is fixed at 3.3075, subject
to adjustments that will not decrease the economic value of the exchange ratio,
the value of the shares of Old National common stock you will receive in the
merger will fluctuate as the price of Old National common stock changes. Based
upon the closing price of Old National common stock on The Nasdaq National
Market on January ___, 2000, the market value of shares of Old National common
stock you will receive in the merger would be $_____ per share of Heritage
common stock.
You will have to surrender your Heritage common stock certificates to receive
new stock certificates representing Old National common stock. This will not be
necessary, however, until you receive written instructions after we complete the
merger. See "Proposed Merger Conversion of Heritage Common Stock," "Exchange of
Certificates; Fractional Shares" on pages 7.
Payments of dividends on shares of Heritage common stock. After the merger
becomes effective, your stock certificates for shares of Heritage common stock
will represent only the right to receive shares of Old National common stock and
cash for fractional shares. You will not receive payments of dividends declared
on shares of Old National common stock until you surrender your Heritage common
stock certificates to receive new stock certificates representing Old National
common stock.
Old National will not issue fractional shares. Old National will not issue any
fractional shares of its common stock as a result of the exchange ratio.
Instead, you will receive the value of any fractional share in cash, based upon
the market value of Old National's common stock.
Merger generally tax-free for Heritage shareholders. Heritage and Old National
expect that your exchange of shares of Heritage common stock for shares of Old
National common stock generally will not cause you to recognize any gain or loss
for U.S. federal income tax purposes. You will, however, have to recognize
income or gain for any cash received instead of fractional shares. The expected
material federal income tax consequences are set out in greater detail on page
25.
Old National and Heritage will not be obligated to complete the merger unless
they receive legal opinions, dated as of the closing date, from their respective
legal counsel that the merger will be treated as a transaction of a type that is
generally tax-free for U.S. federal income tax purposes. In that case, the U.S.
federal income tax treatment of the merger will be as described above. However,
these legal opinions will not bind the Internal Revenue Service, which could
take a different view.
vi
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Tax matters are very complicated, and the tax consequences of the merger to you
will depend on the facts of your own situation. Old National and Heritage urge
you to consult with your tax advisor for a full understanding of the tax
consequences of the merger to you.
Dissenters' rights. Heritage shareholders have the right, under Chapter 23 of
the Tennessee Business Corporation Act, to dissent from the merger. Certain
specific procedures must be followed to dissent from the merger. A Heritage
shareholder who complies with the required procedures will not receive Old
National common stock in the merger. Instead, if the merger is completed, a
dissenting shareholder will be entitled to demand payment of the fair cash value
of his Heritage shares. A copy of Chapter 23 of the Tennessee Business
Corporation Act ("TBCA") is attached as Appendix C to this proxy
statement-prospectus. See "Dissenter's Rights" on page 9.
Our reasons for the merger. Heritage and Old National are proposing to merge
because they believe that by combining the companies they can create a stronger
and more diversified company that will provide significant benefits to
Heritage's shareholders and customers. The Board of Directors of Heritage
believes that by bringing its customers and banking products together with those
of Old National, the companies can do a better job of growing their combined
revenue than if they did not merge. The Heritage Board of Directors also
believes that in the rapidly changing environment of the banking industry,
Heritage's long-term goal of enhancing shareholder value will be reached by
merging with Old National. You can find a more detailed discussion of the
background to the merger agreement and Heritage's and Old National's reasons for
the merger under "Proposed Merger Reasons for the Merger" on page 5.
Heritage's financial advisor believes the exchange ratio is fair, from a
financial point of view, to Heritage's shareholders. Among other factors
considered in deciding to approve the merger, the Heritage Board of Directors
received the oral opinion of its financial advisor, Professional Bank Services,
Inc., that, as of September 8, 1999, the exchange ratio was fair to the holders
of Heritage common stock from a financial point of view. Heritage has received a
written opinion from Professional Bank Services dated as of the date of this
document. The opinion is attached to this document as Appendix B. You should
read this opinion completely to understand the assumptions made, matters
considered and limitations of the review undertaken by Professional Bank
Services, Inc. See "Proposed Merger - Fairness Opinion of Heritage's Financial
Advisor" on page 6.
Conditions to completion of the merger. The completion of the merger depends on
a number of conditions being met. Some of the conditions are:
- - The merger agreement is approved by the holders of at least a majority of
the outstanding shares of Heritage common stock.
- - Regulatory approvals required under federal and state banking laws are
received and the waiting periods have expired.
- - Old National has received a letter from its independent auditors stating
its opinion that the merger will qualify for pooling of interests
accounting treatment.
See "Proposed Merger - Conditions to Completion of the Merger" on page 13.
We may decide not to complete the merger. Old National and Heritage can agree at
any time to not complete the merger, even if the shareholders of Heritage have
approved it. Also, either party can decide, without the consent of the other, to
terminate the merger agreement if, among other reasons:
- - The other party breaches any representation or any warranty contained in
the merger agreement.
vii
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- - The other party breaches any covenant contained in the merger agreement.
- - Certain claims, proceedings or litigation are commenced or threatened.
- - Old National experiences a material adverse change in financial condition
from March 31, 1999.
- - Heritage experiences a material adverse change in financial condition from
September 8, 1999.
- - The merger is not completed by June 30, 2000.
Additionally, Heritage may terminate the merger agreement if the price of Old
National common stock fluctuates sufficiently to cause the merger to no longer
be in the best interests of Heritage as a whole, including its shareholders. If
this occurs, Old National has the right to change the exchange ratio. This right
to terminate is based upon a complex formula that compares any decrease in the
value of Old National common stock to the change in value of an index of bank
stocks.
This formula provides that before Heritage may terminate the merger because of a
decline in the value of Old National common stock, the value of Old National's
common stock must have declined by approximately 20% since the signing of the
merger agreement and Old National's stock is valued approximately 15% less than
the Nasdaq Bank Index during the period for valuing the stock. Assuming the last
regulatory approval was received on the date of this document, Heritage would
not have the right to terminate the merger agreement on the basis of the price
of Old National's common stock. See "Proposed Merger - Termination of the Merger
Agreement" on page 14.
Effective time of the merger. Old National and Heritage anticipate that the
merger will be completed in February 2000. See "Proposed Merger - Effective
Time" on page 20.
Comparative shareholder rights. If the merger is completed, you will become a
shareholder of Old National. As a result, your rights as a shareholder, which
are now governed by the Charter and By-laws of Heritage, will be governed by Old
National's Articles of Incorporation and By-laws. Additionally, Old National is
an Indiana corporation. Therefore, your rights as a shareholder will then be
governed by Indiana law. See "Comparison of Common Stock" on page 43.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Interest of Mr. Earl O. Bradley. Old National and Earl O. Bradley entered into
an employment agreement which provides for Mr. Bradley to serve as Chief
Executive Officer and President of Old National Bank, Clarksville, Tennessee
following the merger. The agreement is effective at the time the merger is
completed, is for a term of three years and provides for an annual salary of
$165,000, as well as a variety of other standard employee benefits. The
agreement establishes, among other things, non-compete and non-solicitation
provisions. See "Proposed Merger - Employment Agreements" on page _____.
Interest of John T. Halliburton. Old National and John T. Halliburton entered
into an employment agreement which provides for Mr. Halliburton to serve as
Executive Vice President - Lending, Old National Bank, Clarksville, Tennessee
following the merger. The agreement is effective at the time the merger is
completed, is for a term of three years and provides for an annual salary of
$140,000, as well as a variety of other standard employee benefits. The
agreement establishes, among other things, non-compete and non-solicitation
provisions. See "Proposed Merger - Employment Agreements" on page _____.
Interest of Randy Clouser. Old National and Randy Clouser entered into an
employment agreement which provides for Mr. Clouser to serve as Senior Vice
President - Commercial Loans, Old National Bank, Clarksville, Tennessee
following the merger. The agreement is effective at the time the merger is
completed, is for a term of three years and provides for an annual salary of
$90,000, as well as a variety of other standard employee benefits. The agreement
establishes, among other things, non-compete and non-solicitation provisions.
See "Proposed Merger - Employment Agreements" on page _____.
Stock options. At the time the merger is effective, all outstanding options to
purchase Heritage common stock under Heritage's stock option plans become
options to purchase Old National common stock.
Break-up Fee. Heritage has agreed to pay to Old National a break-up fee
in the amount of $2,000,000, plus out-of-pocket expenses, upon the occurrence of
certain actions by Heritage or the Heritage Board. See "Break-up Fee" on page
_____.
SPECIAL SHAREHOLDERS' MEETING
Date, time and place of special meeting. The special shareholders' meeting will
be held on __________, __________, 2000, at _____ __.m., local time, at
________________________, Clarksville, Tennessee 37041.
Purposes of special meeting. At the Heritage special meeting, you will be asked:
- - to approve the merger agreement between Heritage and Old National; and
- - to act upon any other items that may be submitted to a vote at the special
meeting.
As of the date of this document the Heritage Board of Directors does not know of
any other matters that will be presented at the special meeting.
See "Notice of Special Meeting of Shareholders" and the discussions under the
captions "Special Meeting" and "Proposed Merger" on pages 1 and 3, respectively.
Required shareholder vote. In order to approve the merger, the holders of at
least a majority of
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the issued and outstanding shares of Heritage common stock must vote in its
favor.
Proxies. You can revoke your proxy at any time before it is exercised by
delivering a later dated proxy to Heritage, by written notice delivered to the
Secretary of Heritage, or by attending the special meeting and voting in person.
See "Special Meeting - Proxies" on page 1.
Shares outstanding and entitled to vote. As of _____________, 2000, there were
___________ shares of Heritage common stock outstanding. You can vote at the
special meeting of Heritage if you owned Heritage common stock at the close of
business on that date. You can cast one vote for each share of Heritage common
stock you owned on that date. See "Special Meeting - Record Date and Voting
Rights" on page 2.
Old National and Heritage expect pooling of interests accounting treatment. Old
National and Heritage expect the merger to qualify as a pooling of interests.
This means that, for accounting and financial reporting purposes, Old National
will treat Old National and Heritage as if they had always been one. Old
National is not required to complete the merger unless it receives a letter from
its independent accountants telling it that the merger will qualify as a
"pooling of interests." See "Proposed Merger - Accounting Treatment for the
Merger" on page 20.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION
Old National common stock trades on the Nasdaq National Market System. Heritage
common stock is not traded on any national exchange system. Some examples of
recent closing prices for Old National common stock are as follows:
Old National
----------------------
Sept. 9, 1999 $ 28.51
_________, 2000 $
----------------------
Based on the exchange ratio in the merger, which is 3.3075, the market value of
the consideration that Heritage shareholders will receive in the merger for each
share of Heritage common stock would be:
September 9, 1999 $ 94.30
____________, 2000 $
----------------------
In addition, recently declared per share dividend information for Old National
common stock and Heritage common stock is as follows:
Old National Heritage
--------------- ---------------
1st Quarter 1999 $ 0.15 $ 0.00
2nd Quarter 1999 $ 0.16 $ 0.00
3rd Quarter 1999 $ 0.16 $ 0.00
4th Quarter 1999 $ 0.16 $ 1.50
Of course, the market price of Old National common stock will fluctuate prior to
the completion of the merger, while the exchange ratio is fixed. You should
obtain current stock price quotations for Old National common stock and Heritage
common stock. You can get these quotations from a newspaper, on the Internet or
by calling your broker.
RECENT DEVELOPMENTS
Old National registered $200 million of trust preferred securities.
Old National completed the acquisition of Sycamore Agency, Inc., a general
insurance agency, located in Terre Haute, Indiana.
Old National declared on December 9, 1999 a 5% stock dividend to its
shareholders payable on January 28, 2000. The exchange ratio has been adjusted
from 3.15 to 3.3075 pursuant to the merger agreement to give effect to the stock
dividend. Additionally, all references in this document to Old National's per
share information has been adjusted to give effect to the stock dividend.
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On December 20, 1999, Old National agreed to acquire Permanent Bancorp, Inc. and
Permanent Bank, each of Evansville, Indiana, in a transaction valued at
approximately $92 million. Old National expects this acquisition to be completed
during the third quarter of 2000.
See "Description of Old National - Recent Developments" on page 41.
COMPARATIVE PER SHARE DATA
The table below shows historical information about Old National's and Heritage's
earnings per share, cash dividends per share and book value per share, and
similar information reflecting the merger, which is referred to as pro forma
information. In presenting the comparative pro forma information for the time
periods shown in the table, Old National and Heritage assumed that the companies
had been merged throughout those periods. See "Old National Bancorp Pro Forma
Condensed Combined Financial Information" on page 33.
Old National also assumed that it will treat Old National and Heritage as if
they had always been combined for accounting and financial reporting purposes, a
method known as pooling of interests accounting. The information listed as
equivalent share basis was obtained by multiplying the pro forma amounts by the
exchange ratio of 3.15. Old National and Heritage present this information to
reflect the fact that Heritage shareholders will receive more than one share of
Old National common stock for each share of Heritage common stock exchanged in
the merger.
Old National expects that it will incur merger and restructuring expenses as a
result of combining the companies. Old National also anticipates that the merger
will provide Old National with financial benefits that include reduced operating
expenses and enhanced opportunities to earn more revenue. The pro forma
information, while helpful in illustrating the financial characteristics of Old
National under one set of assumptions, does not reflect these anticipated
financial benefits and, accordingly, does not attempt to predict or suggest
future results.
The information in the following table is based on the historical financial
information that Old National and Heritage have presented in their prior SEC
filings. Old National and Heritage are incorporating this material into this
document by reference. See "Where You Can Find More Information" on page 55.
Old National Heritage
------------------------------------------ ------------------------------------------
Equivalent Share
Historical Pro Forma (1) Historical Basis (1)
-------------------- -------------------- -------------------- --------------------
Earnings per share (2)
Nine months ended
September 30, 1999 $ 1.30 $ 1.34 $ 4.10
Twelve months ended
December 31:
1998 $ 1.54 $ 1.49 $ 4.95
1997 1.40 1.37 4.54
1996 1.25 1.22 4.03
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Old National Heritage
------------------------------------------ ------------------------------------------
Equivalent Share
Historical Pro Forma (1) Historical Basis (1)
-------------------- -------------------- -------------------- --------------------
Dividends declared per share
- ----------------------------
Nine months ended
September 30, 1999 $ 0.47 $ 0.47 $ 1.54
Twelve months ended
December 31:
1998 $ 0.55 $ 0.55 $ 1.83
1997 0.53 0.53 1.76
1996 0.50 0.50 1.67
Book value per share
- --------------------
At September 30, 1999 $ 10.75 $ 10.64 $ 35.19
At December 31, 1998 10.86 10.63 35.19
- -----------------------------
(1) Considers the pending merger with Heritage Financial Services, Inc. as
well as the pending merger as of September 30, 1999 with ANB Corporation.
See "Old National Bancorp Pro Forma Condensed Combined Financial
Information."
(2) Old National's and Heritage's basic earnings per share.
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SUMMARY OF SELECTED FINANCIAL DATA -- OLD NATIONAL
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
The following summary sets forth selected consolidated financial information
relating to Old National. This information should be read in conjunction with
the financial statements and notes incorporated herein by reference.
Year Ended December 31,
-----------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------
RESULTS OF OPERATIONS
Interest income $ 470,915 $ 448,875 $ 419,483 $ 402,793 $ 353,983
Interest expense 231,613 216,868 196,289 191,835 149,809
----------- ----------- ----------- ----------- ----------
Net interest income 239,302 232,007 223,194 210,958 204,174
Provision for loan losses 12,160 13,562 11,082 7,491 7,886
----------- ----------- ----------- ----------- ----------
Net interest income after
provision for loan losses 227,142 218,445 212,112 203,467 196,288
Noninterest income 58,891 51,104 47,402 42,044 36,680
Noninterest expense 167,937 158,631 156,720 153,345 152,093
----------- ----------- ----------- ----------- ----------
Income before income taxes 118,096 110,918 102,794 92,166 80,875
Income taxes 43,961 42,835 40,107 35,222 29,550
----------- ----------- ----------- ----------- ----------
Net income from continuing operation 74,135 68,083 62,687 56,944 51,325
Discontinued operations (9,854) (5,005) 494 0 -
----------- ----------- ----------- ----------- ----------
Net income $ 64,281 $ 63,078 $ 63,181 $ 56,944 $ 51,325
=========== =========== =========== =========== ==========
PERIOD-END BALANCES
Total assets $ 6,416,611 $ 5,933,321 $ 5,602,460 $ 5,281,387 $5,081,088
Investment securities 1,636,674 1,606,930 1,573,708 1,481,267 1,419,378
Loans, net of unearned income 4,354,256 3,915,841 3,627,592 3,375,915 3,205,097
Deposits 4,668,858 4,521,010 4,479,357 4,336,406 4,028,932
Shareholders' equity 519,645 500,609 480,435 481,511 457,971
PER SHARE DATA (ON CONTINUING OPERATIONS) (1)
Net income - basic $ 1.54 $ 1.40 $ 1.25 $ 1.10 $ 0.97
Net income - diluted (2) 1.49 1.36 1.22 1.08 0.95
Cash dividends paid 0.55 0.53 0.50 0.49 0.46
Book value at year-end 10.86 10.41 9.77 9.43 8.72
SELECTED PERFORMANCE RATIOS (ON CONTINUING OPERATIONS)
Return on assets 1.21% 1.19% 1.17% 1.11% 1.04%
Return on equity (3) 14.95 14.28 13.23 12.20 11.07
Net interest margin 4.17 4.31 4.42 4.38 4.38
Average equity to average assets 8.38 8.46 8.95 9.02 9.36
Dividend payout 35.15 36.74 38.96 43.90 47.36
Primary capital to assets 9.22 9.27 9.77 9.88 10.26
Net charge-offs to average loans 0.23 0.21 0.30 0.25 0.27
End of period allowance for loan losses to end of
period loans 1.19 1.25 1.20 1.27 1.36
Non-performing loans to total loans 0.45 0.39 0.46 0.31 0.39
Leverage ratio 7.72 7.95 8.28 8.83 9.13
Tier 1 capital to risk adjusted assets 11.40 12.17 12.90 13.92 14.20
Efficiency ratio (4) 56.32 56.03 57.92 60.61 63.15
- ------------------------------------------------------
(1) Restated for all stock dividends.
(2) Assumes the conversion of Old National's subordinated debentures.
(3) Excludes unrealized gains (losses) on investment securities.
(4) Excludes One Bank related security gains (losses) and expenses.
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SUMMARY OF SELECTED FINANCIAL DATA -- OLD NATIONAL (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Nine Months ended September 30,
------------------------------
1999 1998
------------- -------------
RESULTS OF OPERATIONS
(Taxable equivalent basis)
Interest income $ 374,906 $ 351,426
Interest expense 183,723 172,930
----------- -----------
Net interest income 191,183 178,496
Provision for loan losses 8,437 9,189
----------- -----------
Net interest income after provision for loan losses 182,746 169,307
Noninterest income 50,186 42,879
Noninterest expense 134,695 122,442
----------- -----------
Income before income taxes 98,237 89,744
Income taxes 35,389 33,603
----------- -----------
Net income from continuing operation 62,848 56,141
Discontinued operations 3,483 (9,854)
----------- -----------
Net Income $ 66,331 $ 46,287
=========== ===========
PERIOD-END BALANCES
Total assets $ 6,963,307 $ 6,235,978
Investment securities 1,725,378 1,611,085
Loans, net of unearned income 4,796,556 4,228,864
Deposits 5,025,330 4,592,992
Shareholders' equity 514,935 518,083
PER SHARE DATA (ON CONTINUING OPERATIONS) (1)
Net income - basic $ 1.30 $ 1.16
Net income - diluted (2) 1.26 1.13
Cash dividends paid 0.47 0.42
Book value at period-end 10.75 10.76
SELECTED PERFORMANCE RATIOS (ON CONTINUING OPERATIONS)
Return on assets 1.25% 1.23%
Return on equity (3) 15.91 15.13
Net interest margin 4.02 4.19
Average equity to average assets 7.91 8.42
Dividend payout 36.03 36.07
Primary capital to assets 8.73 9.26
Net charge-offs to average loans 0.09 0.21
End of period allowance for loan losses to end of period loans 1.21 1.23
Non-performing loans to total loans 0.40 0.38
Leverage ratio 7.51 7.80
Tier 1 capital to risk adjusted assets 11.58 11.58
Efficiency ratio (4) 55.03 55.31
- ----------------------------------------------------------------
(1) Restated for all stock dividends.
(2) Assumes the conversion of Old National's subordinated debentures.
(3) Excludes unrealized gains (losses) on investment securities.
(4) Excludes One Bank related security gains (losses) and expenses.
xiii
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SUMMARY OF SELECTED FINANCIAL DATA -- HERITAGE
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
The following table presents financial data for Heritage. The financial
data below includes amounts previously reported by Heritage. This summary should
be read in conjunction with the consolidated financial statements and the notes
thereto of Heritage which are incorporated herein.
Year Ended December 31,
----------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------
RESULTS OF OPERATIONS
Interest income - tax equivalent (1) $ 16,919 $ 13,689 $ 10,925 $ 8,912 $ 6,682
Interest expense 7,410 5,922 4,629 3,741 2,535
---------- ---------- ---------- ---------- ---------
Net interest income - tax equivalent (1) 9,509 7,767 6,296 5,171 4,147
Tax equivalent adjustment (1) (106) (73) (79) (102) (87)
---------- ---------- ---------- ---------- ---------
Net interest income 9,403 7,694 6,217 5,069 4,060
Provision for loan losses 1,325 676 485 374 307
---------- ---------- ---------- ---------- ---------
Net interest income after
provision for loan losses 8,078 7,018 5,732 4,695 3,753
Noninterest income 3,951 3,475 3,372 2,530 2,226
Noninterest expense 7,553 6,868 5,780 4,598 4,133
---------- ---------- ---------- ---------- ---------
Income before income taxes 4,476 3,625 3,324 2,627 1,846
Income taxes 1,624 1,323 1,219 940 645
---------- ---------- ---------- ---------- ---------
Net income $ 2,852 $ 2,302 $ 2,105 $ 1,687 $ 1,201
========== ========== ========== ========== =========
BALANCE SHEET DATA
Total assets $ 208,211 $ 166,083 $ 132,783 $ 111,961 $ 94,674
Total loans, net 161,594 132,942 102,233 79,302 62,307
Total deposits 176,618 134,380 115,312 100,058 85,085
Federal Home Loan Bank advances 9,732 8,886 183 221 260
Shareholders' equity 15,795 13,253 11,263 9,347 7,456
PER SHARE DATA
Net income - basic $ 5.00 $ 4.15 $ 3.93 $ 3.23 $ 2.49
Net income - diluted 4.98 4.11 3.84 3.12 2.37
Cash dividends paid 778 680 547 397 301
Book value at year-end 27.25 23.31 20.43 17.65 14.50
SELECTED PERFORMANCE RATIOS
Return on assets 1.53% 1.55% 1.76% 1.66% 1.39%
Return on equity 19.35 18.65 20.27 19.79 17.38
Equity to assets 7.59 7.98 8.48 8.35 7.88
Net charge-offs to average loans 0.41 0.26 0.22 0.18 0.13
Allowance for loan losses to average loans 1.78 1.59 1.65 1.75 1.75
- ------------------------------------------------------
(1) Net interest income has been presented on both a tax equivalent and
non-tax equivalent basis. The tax equivalent basis was calculated using a
34% tax rate for all periods presented. The tax equivalent adjustment
reverses the tax equivalent basis in order to present net interest income
in accordance with GAAP, as reflected in the consolidated financial
statements.
xiv
21
SUMMARY OF SELECTED FINANCIAL DATA -- HERITAGE (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Nine Months ended September 30,
------------------------------
1999 1998
------------ --------------
RESULTS OF OPERATIONS
Interest income - tax equivalent (1) $ 14,004 $ 12,352
Interest expense 5,930 5,433
--------- ---------
Net interest income - tax equivalent (1) 8,074 6,919
Tax equivalent adjustment (1) (99) (75)
--------- ---------
Net interest income 7,975 6,844
Provision for loan losses 1,079 803
--------- ---------
Net interest income after provision for loan losses 6,896 6,041
Noninterest income 3,063 3,136
Noninterest expense 6,464 5,759
--------- ---------
Income before income taxes 3,495 3,418
Income taxes 1,209 1,253
--------- ---------
Net income $ 2,286 $ 2,165
========= =========
BALANCE SHEET DATA
Total assets $ 234,034 $ 200,061
Total loans, net 177,724 156,950
Total deposits 198,861 170,430
Federal Home Loan Bank advances 13,701 10,746
Shareholders' equity 18,939 15,595
PER SHARE DATA
Net income - basic $ 3.93 $ 3.80
Net income - diluted 3.92 3.75
Cash dividends paid 0.00 0.00
Book value at period-end 31.30 27.37
SELECTED PERFORMANCE RATIOS
Return on assets 1.42 % 1.60 %
Return on equity 18.07 20.04
Equity to assets 8.09 7.80
Net charge-offs to average loans 0.90 0.35
Allowance for loan losses to average loans 1.56 1.58
- ----------------------------------------------------------------
(1) Net interest income has been presented on both a tax equivalent and
non-tax equivalent basis. The tax equivalent basis was calculated using a
34% tax rate for all periods presented. The tax equivalent adjustment
reverses the tax equivalent basis in order to present net interest income
in accordance with GAAP, as reflected in the consolidated financial
statements.
xv
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SPECIAL MEETING
General
This document is first being mailed by Heritage to the holders of
Heritage common stock on ___________________, 2000 and is accompanied by the
notice of the Heritage special meeting and a form of proxy that is solicited by
the Board of Directors of Heritage for use at the special meeting. The special
meeting will be held on __________, __________ ___, 2000 at ____:____ _.m.,
local time, at the ____________________, _______________________, Clarksville,
Tennessee 37041.
Matters to be Considered
The purposes of the special meeting are to consider and vote upon the
merger agreement, dated September 8, 1999, between Old National Bancorp and
Heritage, which provides for the merger of Heritage into Old National, and to
consider and vote upon any other matters that may properly come before the
special meeting.
Proxies
The accompanying form of proxy is for your use at the special meeting if
you are unable or do not wish to attend the meeting in person. You may revoke
your proxy at any time before it is exercised by delivering to the Secretary of
Heritage a written notice of revocation, a properly executed proxy having a
later date, or by attending the special meeting and voting in person. Written
notices of revocation should be addressed to Heritage Financial Services, Inc.,
25 Jefferson Street, Clarksville, Tennessee 37041, Attn: John T. Halliburton,
Secretary. To be effective, Heritage must receive the revocation before the
shares are voted. The shares represented by proxies properly signed and returned
will be voted at the special meeting as instructed by the shareholders of
Heritage giving the proxies. If you make no specification as to your vote on the
proxy, your proxy will be voted in favor of approval of the merger agreement.
The Heritage Board is unaware of any other matters that may be presented
for action at the special meeting. However, if other matters do properly come
before the special meeting, the shares represented by properly executed proxies
will be voted in accordance with the best judgment of the person named in the
proxy.
Solicitation of Proxies
Heritage will bear the entire cost of soliciting proxies from
shareholders. In addition to the solicitation of proxies by mail, Heritage will
request that banks, brokers and other record holders send
1
23
proxies and proxy material to the beneficial owners of stock held by them and
secure their voting instructions, if necessary. Additionally, proxies may be
solicited personally or by telephone by directors, officers and certain
employees of Heritage, who will not be specifically compensated for such
soliciting.
Record Date and Voting Rights
Heritage has fixed _______________, 2000 as the record date for
determining those Heritage shareholders entitled to notice of, and to vote at,
the special meeting. Accordingly, only Heritage shareholders of record at the
close of business on _______________, 2000 will be entitled to notice of and to
vote at the special meeting. Each share of Heritage common stock you own on the
record date entitles you to one vote on each matter presented for a vote at the
special meeting. At the close of business on the record date, there were
________ shares of Heritage common stock outstanding held by approximately
________ holders of record. The presence, in person or by proxy, of shares of
Heritage common stock representing a majority of those shares outstanding and
entitled to vote on the record date is necessary to constitute a quorum at the
special meeting.
Shares of Heritage common stock held by persons attending the special
meeting but not voting, and shares of Heritage common stock for which Heritage
has received proxies but with respect to which the holders have abstained from
voting, will be counted as present at the special meeting for purposes of
determining the presence or absence of a quorum for the transaction of business
at the special meeting. Brokers who hold shares of Heritage common stock in
nominee or "street" name for customers who are the beneficial owners of those
shares are prohibited from giving a proxy to vote shares held for those
customers on matters to be considered and voted upon at the special meeting
without specific instructions from those customers. These so-called "broker
non-votes" will be counted for purposes of determining whether a quorum exists.
The merger agreement must be approved by the affirmative vote of the
holders of at least a majority of the outstanding shares of Heritage common
stock entitled to vote at the special meeting.
BECAUSE APPROVAL OF THE MERGER AGREEMENT REQUIRES THE AFFIRMATIVE VOTE OF
THE HOLDERS OF AT LEAST A MAJORITY OF THE OUTSTANDING SHARES OF HERITAGE COMMON
STOCK ENTITLED TO VOTE AT THE SPECIAL MEETING, ABSTENTIONS AND BROKER NON-VOTES
WILL HAVE THE SAME EFFECT AS VOTES AGAINST APPROVAL OF THE MERGER AGREEMENT.
ACCORDINGLY, THE HERITAGE BOARD URGES YOU TO COMPLETE, DATE AND SIGN THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE-PAID
ENVELOPE.
As of the record date, directors and executive officers of Heritage owned
approximately ________ shares of Heritage common stock, entitling them to
exercise _____% of the voting power of the Heritage common stock entitled to
vote at the special meeting. On the basis of the unanimous approval of the
merger agreement by the Heritage Board, we currently expect that each director
and
2
24
executive officer of Heritage will vote the shares of Heritage common stock
owned by him or her for approval of the merger agreement and the transactions
contemplated by the merger agreement. As of the record date, the banking, trust
and investment management subsidiaries of Heritage, as fiduciaries, custodians
or agents, held a total of ___________ shares of Heritage common stock. These
entities maintained sole or shared voting power with respect to _____ of these
shares of Heritage common stock.
Additional information with respect to the beneficial ownership of
Heritage common stock by individuals and entities owning more than 5% of that
stock and more detailed information with respect to beneficial ownership of
Heritage common stock by directors and executive officers of Heritage is
incorporated by reference to the Annual Report on Form 10-KSB of Heritage for
the year ended December 31, 1998. See "Where You Can Find More Information."
Recommendation of Heritage Board of Directors
The Heritage Board has unanimously approved the merger agreement and the
transactions contemplated by the merger agreement. The Heritage Board believes
that the merger agreement is in the best interests of Heritage as a whole,
including the interests of Heritage shareholders, and recommends that the
Heritage shareholders vote "FOR" approval of the merger agreement. See "PROPOSED
MERGER - Background of the Merger, - Reasons for the Merger, - Recommendation of
the Heritage Board of Directors."
PROPOSED MERGER
At the special meeting, the shareholders of Heritage will consider and
vote upon approval of the merger, certain features of which are summarized
below. The following summary of aspects of the merger is not a complete
description of the terms and conditions of the merger and is qualified in its
entirety by reference to the merger agreement, which is attached to this
document as Appendix A and is incorporated herein by reference.
General
The Board of Directors of Old National and Heritage each have unanimously
approved the merger agreement, which provides for the merger. Old National and
Heritage expect to complete the merger in February 2000. Each share of Heritage
common stock issued and outstanding at the effective time of the merger will be
converted into the right to receive 3.3075 shares of Old National common stock,
as adjusted for the 5% stock dividend declared by Old National on December 9,
1999, and subject to adjustment as discussed in this document.
3
25
Description of the Merger
In the merger, Heritage will merge with Old National. Old National will
be the surviving corporation in the merger and the separate corporate existence
of Heritage will cease.
As of September 30, 1999, Heritage had consolidated assets of
approximately $234.03 million, consolidated deposits of approximately $198.86
million, consolidated shareholders' equity of approximately $18.94 million and
consolidated net income for the nine months then ended of approximately $2.286
million. Based upon the pro forma financial information included elsewhere in
this document and assuming that the merger had been consummated on September 30,
1999, Heritage represented as of such date 3.36% of the consolidated assets of
Old National, 3.96% of its consolidated deposits, 3.68% of its consolidated
shareholders' equity and, for the nine month period then ended, 3.45% of its
consolidated net income. See "Pro Forma Condensed Combined Financial
Information".
Background of the Merger
Historically, banking laws in Tennessee and many other states
prohibited banks from expanding outside of their home counties. Many changes to
Tennessee's law have occurred since 1985, first permitting in-state acquisitions
by bank holding companies, then permitting regional interstate acquisitions and
currently permitting virtual nationwide and international expansion
opportunities. These developments stimulated aggressive acquisition activity
among financial institutions located in Tennessee and neighboring states,
resulting in the entry of large bank holding companies into virtually every
attractive market in the Midwestern United States. Moreover, developments and
deregulation in the financial services industry generally have led to further
increases in competition for bank services. Compounded by the significant
increase in bank regulatory burdens over the past several years, these
competitive factors have created an environment in which it is increasingly
difficult for small bank holding companies to compete effectively.
In analyzing how to address the increasing competition and continuing
consolidation in the banking industry, the Heritage Board considered several
strategic alternatives including remaining independent, growing through
acquisitions, and seeking a merger partner. After evaluation of financial,
economic, legal and market considerations, the Heritage Board concluded that
seeking a potential merger partner was in the best interests of the
shareholders.
In 1998, Heritage management began assessing the future of Heritage
Bank to determine the methods of operation necessary to maintain shareholder
expectations and to continue to provide quality banking services throughout the
local market.
Heritage considered a strategy of acquiring other financial
institutions and began informal discussions with other banks regarding a
possible affiliation. Heritage was unsuccessful in its acquisition attempts,
primarily because the directors of other institutions, in seeking a potential
target company, preferred a more liquid stock than that of Heritage. Heritage
stock has a limited marketability because it is not publicly traded.
In late 1998 and early 1999, Heritage management attended various
seminars where long-term strategies and the current economic and operating
environment for banks were discussed. In March of 1999, Heritage management made
the decision, after careful consideration and discussion, to obtain the advice
of investment bankers and other trusted advisors to validate concerns regarding
the course of action which would be in the best interest of shareholders.
Several investment bankers were interviewed and in May of 1999, the
Heritage Board met with Investment Bank Services, a subsidiary of Professional
Bank Services, Inc., to discuss strategic alternatives for the future. The
alternatives considered included remaining independent, growing through
acquisitions, and seeking a merger partner. Investment Bank Services provided
the directors with an array of ideas on the future of banking and answered
questions concerning the positives and negatives of possible alternatives.
Heritage's Board agreed through consensus to engage Investment Bank Services to
explore potential merger candidates.
On May 4, 1999, Heritage's Board further evaluated future strategy and
concluded that seeking a potential merger partner was in the best interest of
long-term value to shareholders. Several factors were considered in making this
decision, including: (i) the maximization of long-term shareholder interest;
(ii) the increased competition from bank and non-bank entities creating a trend
toward narrower net interest margins; (iii) the ability to compete with the
efficiencies of scale of larger institutions, making it more difficult to price
loans and deposits competitively while meeting shareholder profit expectations;
(iv) the regulatory environment and the relative imminent changes occurring, as
mentioned above; (v) the liquidity of the stock, considering the 900 or more
shareholders and a limited number of potential buyers in the local market; and
(vi) the change in consumer attitudes, tending to require large investments in
technology in order to develop products and services necessary to meet the
future consumer demands.
On July 6, 1999, Investment Bank Services reported to the Heritage
Board solicitations of indications of interest from 12 banks, in addition to
non-binding indications from 3 financial institutions. The Heritage Board
reviewed the proposals, discussing the value of each proposal as it related to
Heritage shareholders. After meeting with management of Old National and
evaluating all possible strategic alternatives and partners, the Heritage Board
voted on August 30, 1999 to pursue affiliation discussions with Old National.
Heritage and Old National management entered into continued discussions
regarding the possible affiliation, conducted due diligence, and negotiated a
proposed merger agreement. Upon review of the proposed merger agreement, the
Heritage Board concluded that affiliation with Old National was in the best
interest of the Heritage shareholders. Shortly thereafter, Heritage and Old
National signed a definitive merger agreement.
The Heritage Board believes that the merger is fair and equitable to,
and in the best interest of, Heritage and its shareholders. After considerable
discussions by and between Heritage and Old National, the Heritage Board
concluded that Heritage and Old National had similar operating philosophies
which would allow Heritage to continue serving the market in a "community
banking manner", yet having the resources of a strong regional bank. The
Heritage Board also reviewed and agreed with the fairness opinion prepared by
Professional Bank Services as to the value of the exchange ratio and underlying
value of Old National common stock as an investment. The Heritage Board
considered, among other factors,: (i) the history, financial condition, results
of operations and dividend record of Old National; (ii) the market value of Old
National common shares at various times; and (iii) the prospects of Heritage and
Old National, both separately and as a combined entity. The Heritage Board also
considered: (i) that the value of the consideration to be delivered in exchange
for the Heritage shares represents a premium over the book value of Heritage
common shares; (ii) that the Heritage shareholders receiving Old National common
shares in the merger will acquire securities having greater liquidity than the
Heritage shares; and (iii) the dividends historically paid on the equivalent
number of Heritage shares.
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Reasons for the Merger
In reaching its decision to approve the merger agreement and the stock
option agreement, the Heritage Board consulted with management of Heritage, as
well as its financial and legal advisors, and it considered a variety of
factors, including the following:
- The Heritage Board's knowledge and analysis of the current
environment of the financial services industry, which is
characterized by rapid consolidation, increased opportunities
for cross-industry expansion, evolving trends in technology
and increasing nationwide and Internet competition;
- The Heritage Board's belief that the financial terms of the
merger are fair to and in the best interests of Heritage as a
whole and Heritage's shareholders and are consistent with
Heritage's long term strategy of maximizing shareholder value;
- The business, operations, financial condition, earnings and
prospects of Heritage and Old National. In making its
determination, the Heritage Board took into account the
results of Heritage's due diligence review of Old National;
- The scale, scope, strength and diversity of operations,
product lines and delivery systems that can be achieved by
combining Heritage and Old National;
- The complimentary nature of the businesses of Heritage and Old
National and the anticipated improved stability of Old
National's businesses and earnings in varying economic and
market climates relative to Heritage on a stand-alone basis as
a result of greater geographic, asset and line-of-business
diversification;
- The Heritage Board's belief that the merger represents:
- an opportunity to leverage Heritage's management,
infrastructure, products, marketing and business
lines over a larger consumer, business and corporate
customer base through Old National's geographically
diverse network; and
- the possibility of achieving expense savings and
operating efficiencies through, among other things,
the elimination of duplicative efforts;
- The structure of the merger and the terms of the merger
agreement, including the fact that the fixed exchange ratio
provides certainty as to the number of shares of common stock
of Old National to be issued in the merger, and that the
merger is intended to qualify as a transaction of a type that
is generally tax-free for U.S. federal income tax purposes and
as a pooling of interests for accounting purposes;
- The opinion of Professional Bank Services, Inc. to the
Heritage Board that, based upon and subject to the
considerations set forth in the opinion, the exchange ratio
was fair from a financial point of view to Heritage
shareholders (see "- - Fairness Opinion of Heritage's
Financial Advisor");
- The Heritage Board's belief that, while no assurances could be
given, the level of execution risk in completing the merger
was minimal, and that the business and financial
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advantages contemplated in connection with the merger were
likely to be achieved within a reasonable time frame;
- The likelihood of the merger being approved by the
appropriate regulatory authorities;
- Consideration of the effect of the merger on Heritage's other
constituencies, including Heritage's employees and the
customers and communities served by Heritage, including
consideration of Old National's historical practice of
retaining employees of acquired institutions with
competitive salary and benefit programs, and the opportunity
for training, education and advancement of employees within
Old National or one of its affiliated companies; and
- The Heritage Board's analysis of alternatives to merging with
Old National, including merging with other potential acquirors
and its analysis of relevant price information from recent
comparable bank mergers which occurred in the Midwest and
across the United States.
This discussion of the information and factors considered by the Heritage
Board is not intended to be exhaustive, but it does include all material factors
considered by the Heritage Board. In reaching its decision to approve and
recommend the merger, the Heritage Board of Directors did not assign any
relative or specific weights to these factors, and individual directors may have
given differing weights to different factors. Based upon the foregoing and other
factors, the Board of Directors of Heritage concluded that it was in the best
interests of Heritage and its shareholders to merge with Old National.
Fairness Opinion of Heritage's Financial Advisor
Professional Bank Services, Inc. was engaged by Heritage to advise
Heritage's Board of Directors as to the fairness of the consideration, from a
financial perspective, to be paid by Old National to Heritage shareholders as
set forth in the merger agreement.
Professional Bank Services is a bank consulting firm with offices in
Louisville, New York, Chicago, Nashville and Washington, D.C. As part of its
investment banking business, Professional Bank Services is regularly engaged in
reviewing the fairness of financial institution acquisition transactions from a
financial perspective and in the valuation of financial institutions and other
businesses and their securities in connection with mergers, acquisitions, estate
settlements, and other transactions. Neither Professional Bank Services nor any
of its affiliates has a material financial interest in Heritage or Old National.
Professional Bank Services was selected to advise Heritage's Board of Directors
based upon its familiarity with Tennessee financial institutions and knowledge
of the banking industry as a whole.
Professional Bank Services performed certain analyses described herein
and presented the range of values for Heritage resulting from such analyses to
the Board of Directors of Heritage in connection with its advice as to the
fairness of the consideration to be paid by Old National.
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A Fairness Opinion of Professional Bank Services was delivered to the
Board of Directors of Heritage on September 8, 1999, at a special meeting of the
Board of Directors of Heritage and has been updated as of the date of this
document. A copy of the Fairness Opinion, which includes a summary of the
assumptions made and information analyzed in deriving the Fairness Opinion, is
attached as Appendix B to this document and should be read in its entirety.
In arriving at its Fairness Opinion, Professional Bank Services reviewed
certain publicly available business and financial information relating to
Heritage and Old National. Professional Bank Services considered certain
financial and stock market data of Heritage and Old National, compared that data
with similar data for certain other publicly-held bank holding companies and
considered the financial terms of certain other comparable bank transactions in
the state of Tennessee that had recently been effected. Professional Bank
Services also considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria that it deemed
relevant. In connection with its review, Professional Bank Services did not
independently verify the foregoing information and relied on such information as
being complete and accurate in all material respects. Financial forecasts
prepared by Professional Bank Services were based on assumptions believed by
Professional Bank Services to be reasonable and to reflect currently available
information. Professional Bank Services did not make an independent evaluation
or appraisal of the assets of Heritage or Old National. Professional Bank
Services took into consideration the results of Professional Bank Services'
wholly owned subsidiary Investment Bank Services, Inc. solicitation of
indications of interest from other financial institutions concerning their
interest in a possible affiliation with Heritage. Professional Bank Services
reviewed the correspondence and information received from interested financial
institutions that were contacted. Professional Bank Services reviewed all offers
received by Heritage.
As part of preparing this Fairness Opinion, Professional Bank Services
performed a due diligence review of Old National on September 2 and 3, 1999. As
part of the due diligence, Professional Bank Services reviewed the following
items: minutes of the Old National Board of Directors meetings from January 1998
through July 1999; reports filed with the Securities and Exchange Commission by
Old National on Forms 10-K, 8-K and 10-Q for the years ending December 31, 1996,
1997 and 1998 and year-to-date 1999; reports of independent auditors and
management letters and response thereto, for the year ending December 31, 1998;
the most recent analysis and calculation of allowance for loan and lease losses
for each subsidiary bank; internal loan review reports; investment portfolio
activity reports; asset quality reports; Uniform Holding Company Report for Old
National as of March 31, 1999; March 31, 1999 reports of Condition and Income
and March 31, 1999 Uniform Bank or Thrift Performance Reports for each
subsidiary bank; discussion of pending litigation and other issues with senior
management of Old National.
Professional Bank Services reviewed and analyzed the historical
performance of Heritage and Heritage's wholly owned subsidiary Heritage Bank,
Clarksville, Tennessee contained in: audited Annual
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Reports and financial statements dated December 31, 1997 and 1998 of Heritage;
June 30, 1999, March 31, 1999, December 31, 1998 and December 31, 1997
Consolidated Reports of Condition and Income filed by Heritage with the Federal
Reserve; July 31, 1999 consolidated unaudited financial statements of Heritage;
March 31, 1999 Uniform Bank and Holding Company Performance Reports of the Bank
and Heritage; historical common stock trading activity of Heritage; and the
premises and other fixed assets. Professional Bank Services reviewed and
tabulated statistical data regarding the loan portfolio, securities portfolio
and other performance ratios and statistics. Financial projections were prepared
and analyzed as well as other financial studies, analyses and investigations as
deemed relevant for the purposes of this opinion. In review of the
aforementioned information, Professional Bank Services took into account its
assessment of general market and financial conditions, its experience in other
similar transactions, and its knowledge of the banking industry generally.
In connection with rendering the Fairness Opinion and preparing its
written and oral presentation to Heritage's Board of Directors, Professional
Bank Services performed a variety of financial analyses, including those
summarized herein. The summary does not purport to be a complete description of
the analyses performed by Professional Bank Services in this regard. The
preparation of a Fairness Opinion involves various determinations as to the most
appropriate and relevant methods of financial analysis and the application of
these methods to the particular circumstances and therefore, such an opinion is
not readily susceptible to summary description. Accordingly, notwithstanding the
separate factors summarized below, Professional Bank Services believes that its
analyses must be considered as a whole and that selecting portions of its
analyses and of the factors considered by it, without considering all analyses
and factors, could create an incomplete view of the evaluation process
underlying its opinion. In performing its analyses, Professional Bank Services
made numerous assumptions with respect to industry performance, business and
economic conditions and other matters, many of which are beyond Heritage's or
Old National's control. The analyses performed by Professional Bank Services are
not necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by such analyses. In
addition, analyses relating to the values of businesses do not purport to be
appraisals or to reflect the process by which businesses actually may be sold.
ACQUISITION COMPARISON ANALYSIS. In performing this analysis,
Professional Bank Services reviewed all bank acquisition transactions in the
United States since January 1, 1999. There were 147 bank acquisition
transactions in the United States announced since January 1, 1999 for which
detailed financial information was available. The purpose of the analysis was to
obtain an evaluation range based on these United States bank acquisition
transactions. Median multiples of earnings and book value implied by the
comparable transactions were utilized in obtaining a range for the acquisition
value of Heritage. In addition to reviewing recent United States bank
transactions, Professional Bank Services performed separate comparable analyses
for acquisitions of banks which, like Heritage, had an equity-to- asset ratio
less than 8.00% and had a return on average equity greater than 17%. In
addition, all Tennessee bank transactions since January 1, 1996 were analyzed.
Median values for the 147 United
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States acquisitions expressed as multiples of both book value and earnings were
2.99 and 21.15, respectively. The median multiples of book value and earnings
for acquisitions of United States banks which, like Heritage, had an
equity-to-asset ratio less than 8.00% were 2.82 and 22.34, respectively. For
acquisitions of United States banks with a return on average equity greater than
17%, the median multiples of book value and earnings were 3.10 and 18.66,
respectively. The median multiples of book value and earnings for acquisitions
of Tennessee banks since January 1, 1996, were 2.58 and 21.34, respectively.
In the proposed transaction, Company shareholders will receive 3.3075 Old
National common shares per Company common share. In addition, each of Heritage's
common stock options will be converted into options to purchase 3.3075, as
adjusted per the merger agreement, Old National shares at an exercise price
which is determined by dividing the current Company option strike price by the
exchange ratio of 3.3075, as further defined in the Agreement. On September 7,
1999 the closing price for Old National common stock on the National Association
of Securities Dealers Automated Quotation System was $29.9375 per share. Using
this average price of $29.9375 per Old National common share, the proposed
consideration to be received represents an aggregate value of $63,316,076 or
$94.30 per Company common share. The $94.30 per Company common share represents
a multiple of Heritage's June 30, 1999 adjusted book value and a multiple of
Heritage's 1999 Adjusted Earnings Value of 3.22X and 18.64 respectively.
The market value of the proposed transaction's percentile ranking was
prepared and analyzed with respect to the above United States comparable
transactions group. Compared to all United States bank transactions, the
acquisition value ranked in the 83rd percentile as a multiple of book value and
in the 32nd percentile as a multiple of earnings. Compared to United States bank
transactions where the acquired institution had an equity-to-asset ratio less
than 8.00%, the acquisition value ranked in the 74th percentile as a multiple of
book value and the 21st percentile as a multiple of earnings. For United States
bank transactions where the acquired institution had a return on average equity
greater than 17%, the acquisition value ranked in the 60th percentile as a
multiple of book value and the 50th percentile as a multiple of earnings. For
Tennessee bank transactions effected since January 1, 1996, the acquisition
value ranked in the 76th percentile as a multiple of book value and in the 30th
percentile as a multiple of earnings.
ADJUSTED NET ASSET VALUE ANALYSIS. Professional Bank Services reviewed
Heritage's balance sheet data to determine the amount of material adjustments
required to the stockholders' equity of Heritage based on differences between
the market value of Heritage's assets and their value reflected on Heritage's
financial statements. Professional Bank Services determined that two adjustments
were warranted. Equity was reduced by $336,000 to reflect intangibles on
Heritage's balance sheet. Professional Bank Services also reflected a value of
the non-interest bearing demand deposits of
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approximately $6,578,000. The aggregate adjusted net asset value of Heritage was
determined to be $23,344,000 or $40.03 per Company common share.
DISCOUNTED EARNINGS ANALYSIS. A dividend discount analysis was performed
by Professional Bank Services pursuant to which a range of values of Heritage
was determined by adding (i) the present value of estimated future dividend
streams that Heritage could generate over a five-year period and (ii) the
present value of the "terminal value" of Heritage's equity at the end of the
fifth year. The "terminal value" of Heritage's equity at the end of the
five-year period was determined by applying a multiple of 2.49 times the
projected terminal year's earnings. The 2.49 multiple represents the median
price paid as a multiple of earnings for all Tennessee bank transactions since
1996.
Dividend streams and terminal values were discounted to present values
using a discount rate of 14%. This rate reflects assumptions regarding the
required rate of return of holders or buyers of Heritage's common stock. The
aggregate value of Heritage, determined by adding the present value of the total
cash flows, was $46,739,000 or $80.16 per share. In addition, using the
five-year projection as a base, a twenty-year projection was prepared assuming
an annual growth rate of 15% in Years 1 and 2 and 10% in Year 3 and beyond, and
a return on assets of 1.53% in Year 1 and 1.55% in Year 2 and beyond would
remain in effect. Dividends were assumed to consistently equal 50.0% of net
income in all projected years. This long-term projection resulted in an
aggregate value of $51,002,000 or $87.47 per Company common share.
SPECIFIC ACQUISITION ANALYSIS. Professional Bank Services valued Heritage
based on an acquisition analysis assuming a "break-even" earnings scenario to an
acquiror as to price, current interest rates and amortization of the premium
paid. Based on this analysis, an acquiring institution would pay in aggregate
$43,990,000, or $64.09 per share, assuming they were willing to accept no impact
to their net income in the initial year. This analysis was based on a funding
cost of 7.0% adjusted for taxes, amortization of the acquisition premium over 15
years and a projected December 31, 1999 earnings level of $3,397,000. This
analysis was repeated assuming a potential acquiror would attain non-interest
expense reductions of 10% in the transaction. Based on this analysis an
acquiring institution would pay in aggregate $47,990,000 or $71.48 per Heritage
share.
PRO FORMA MERGER ANALYSIS. Professional Bank Services compared the
historical performance of Heritage to that of Old National and other regional
holding companies. This analysis included, among other things, a comparison of
profitability, asset quality and capital measures. In addition, the contribution
of Heritage and Old National to the income statement and balance sheet of the
pro forma combined company was analyzed.
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The effect of the affiliation on the historical and pro forma financial
data of Heritage was prepared and analyzed. Heritage's historical financial data
was compared to the pro forma combined historical and projected earnings, book
value and dividends per share.
The Fairness Opinion is directed only to the question of whether the
consideration to be received by Heritage's shareholders under the Agreement is
fair and equitable from a financial perspective and does not constitute a
recommendation to any Company shareholder to vote in favor of the affiliation.
No limitations were imposed on Professional Bank Services regarding the scope of
its investigation or otherwise by Heritage.
Based on the results of the various analyses described above,
Professional Bank Services concluded that the consideration to be received by
Heritage's shareholders under the Agreement is fair and equitable from a
financial perspective to the shareholders of Heritage.
Based on an Old National stock price of $29.9375 Professional Bank
Services and Investment Bank Services will receive fees of approximately
$191,000 for all services performed in connection with the sale of Heritage and
the rendering of the Fairness Opinion. In addition, Heritage has agreed to
indemnify Professional Bank Services and Investment Bank Services and its
directors, officers and employees, from liability in connection with the
transaction, and to hold Professional Bank Services and Investment Bank Services
harmless from any losses, actions, claims, damages, expenses or liabilities
related to any of Professional Bank Services' or Investment Bank Services' acts
or decisions made in good faith and in the best interest of Heritage.
Recommendation of the Heritage Board of Directors
THE BOARD OF DIRECTORS OF HERITAGE HAS CAREFULLY CONSIDERED AND
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE MERGER AND UNANIMOUSLY
RECOMMENDS THAT THE SHAREHOLDERS OF HERITAGE VOTE "FOR" APPROVAL OF THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THE AGREEMENT.
Conversion of Heritage Common Stock
Under the terms of the merger agreement, shareholders of Heritage of
record when the merger is completed will be entitled to receive 3.3075, as
adjusted per the merger agreement, shares of Old National common stock, as
adjusted for the 5% stock dividend declared by Old National on December 9, 1999
and subject to adjustment, if any, for stock splits, stock dividends or any
similar recapitalization of Old National or if Old National elects to adjust the
exchange ratio following Heritage's exercise of its right to terminate the
merger agreement due to a decline in the value of Old National common stock.
Because the exchange ratio is fixed and because the market price of Old National
common stock prior to
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the effective time of the merger may fluctuate, the value of the shares of Old
National common stock that you will receive if and when the merger is completed
may increase or decrease prior to and following the merger.
As of _______________, 2000, the closing price of Old National common
stock was $_____ per share, as reported by the Nasdaq National Market System. If
the merger had been consummated on that date, the number of shares of Old
National common stock exchanged in the merger (disregarding any fractional
shares) would have been ________, with an aggregate market value of
approximately $________.
Treatment of Heritage Stock Options
Each stock option to acquire Heritage common stock granted under
Heritage's stock option and incentive plans outstanding and unexercised
immediately prior to the effective time of the merger will be converted
automatically at the effective time into a stock option to purchase Old National
common stock on the same terms that were applicable to the stock option at the
effective time of the merger. Old National will assume the obligations of
Heritage with respect to each outstanding option to purchase Heritage common
stock. The number of shares of Old National common stock subject to the new Old
National options will be equal to the product of the number of shares of
Heritage common stock subject to the Heritage stock options times the exchange
ratio as then in effect, rounded to the nearest whole share. The exercise price
per share of Old National common stock subject to the new Old National stock
options will be equal to the aggregate exercise price for shares of Heritage
common stock divided by the number of shares of Old National common stock,
rounded to the nearest whole share, deemed purchasable pursuant to the stock
options. Additionally, stock options that are incentive stock options under the
Internal Revenue Code will be adjusted in the manner required by the Code.
Exchange of Certificates; Fractional Shares
Immediately after the effective time of the merger, Old National will
mail a letter of transmittal to Heritage shareholders. This transmittal letter
will contain instructions with respect to the surrender of certificates
representing shares of Heritage common stock. YOU SHOULD NOT RETURN YOUR
HERITAGE STOCK CERTIFICATES WITH THE ENCLOSED PROXY AND SHOULD NOT FORWARD THEM
TO OLD NATIONAL UNTIL YOU RECEIVE A LETTER OF TRANSMITTAL FROM OLD NATIONAL.
If your certificate for your shares of Heritage common stock has been
lost, stolen or destroyed, Old National will issue the Old National common stock
and pay cash for any fractional shares after Old National receives from you an
agreement to indemnify Old National against loss from such lost, stolen or
destroyed certificate and appropriate evidence of the loss, theft or
destruction, such as an affidavit.
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After the effective time of the merger, stock certificates previously
representing Heritage common stock will represent only the right to receive
shares of Old National common stock and cash for any fractional shares.
Following the effective time of the merger and prior to the surrender by holders
of Heritage of their stock certificates to Old National in exchange for Old
National common stock, the holders will not be entitled to receive payment of
dividends or other distributions declared on shares of Old National common
stock. Upon the subsequent exchange of such certificates, however, Old National
will pay, without interest, any accumulated dividends or other distributions
previously declared and withheld on the shares of Old National common stock.
After the effective time of the merger, there will be no transfers on the stock
transfer books of Heritage of shares of Heritage issued and outstanding
immediately prior to the effective time. If, after the effective time of the
merger, you present certificates representing shares of Heritage common stock
for registration or transfer, the certificates will be canceled and exchanged
for shares of Old National common stock.
No fractional shares of Old National common stock will be issued to
shareholders of Heritage in connection with the merger. Each shareholder of
Heritage who otherwise would be entitled to a fractional interest in a share of
Old National common stock as a result of the exchange ratio will be paid a cash
amount equal to the fractional interest multiplied by the average of the per
share closing price of Old National common stock as reported on the Nasdaq
National Market System for the five days on which shares of Old National common
stock were traded immediately before the effective time of the merger.
Old National will distribute stock certificates representing shares of
Old National common stock and will pay any cash payment for fractional shares
(without interest) to each former shareholder of Heritage as soon as practical
following the shareholder's delivery to Old National of his or her
certificate(s) representing shares of Heritage common stock.
Dissenters' or Appraisal Rights
Tennessee law generally provide dissenters' rights for mergers and share
exchanges that would require shareholder approval, sales of substantially all
the assets (other than sales that are in the usual and regular course of
business and certain liquidations and court-ordered sales), and certain
amendments to the charter that materially and adversely affect rights in respect
of a dissenter's shares.
Dissenters' Rights
Any holder of Heritage common stock has the right to dissent from the
merger by complying with the procedures described in this Section. Such a person
is sometimes referred to as a Dissenting Shareholder herein. The following
summary does not purport to be a complete statement of dissenters'
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rights of appraisal, and such summary is qualified in its entirety by reference
to Chapter 23 of the TBCA, which is reproduced in full as Appendix C to this
document.
Under the TBCA, any holder of Heritage common stock has the right to
object to the merger and demand payment of the fair value of his or her shares
upon compliance with Sections 48-23-202 and 48- 23-204 of the TBCA. A
shareholder may not dissent as to less than all of the shares that he or she
holds at the close of business on the record date. A nominee or fiduciary may
not dissent on behalf of a beneficial owner as to less than all of the shares of
such beneficial owner held of record by such nominee or fiduciary. A beneficial
owner asserting dissenters' rights to rights to shares held on his or her behalf
must notify Heritage in writing of the name and address of the record holder of
the shares, if known to him or her.
Any Heritage shareholder intending to enforce his or her dissenter's
rights may not vote in favor of the merger agreement (either personally or by
proxy) and must deliver to Heritage before the time of the vote a written notice
of intent to demand payment for his or her shares (the "Objection Notice"). The
Objection Notice must state that the shareholder intends to demand payment for
his or her shares of Heritage common stock if the merger is completed. A vote
against approval of the merger agreement will not, in and of itself, constitute
an Objection Notice satisfying the requirements of Section 48-23-202 of the
TBCA.
If the merger agreement is approved by Heritage's shareholders at the
special meeting, each shareholder who has filed an Objection Notice will be
notified by Heritage of such approval no later than ten days after the special
meeting (the "Dissenter's Notice"). The Dissenter's Notice will (i) state where
the payment demand must be sent and where and when certificates of certificated
shares of Heritage common stock (the "Certificates") must be deposited, (ii)
inform holders of uncertificated shares (if any) to what extent transfer of the
shares will be restricted after the payment demand is receive, (iii) supply a
form for demanding payment that includes the date of the first announcement to
news media or to shareholders of the principal terms of the proposed corporate
action and requires that the person asserting the dissenters' rights certify
whether or not he or she acquired beneficial ownership of the shares before that
date, (iv) set a date by which Heritage must receive payment demand, which date
may not be fewer than one nor more than two months after the date of the
Dissenter's Notice was delivered, and (v) be accompanied by a copy of Chapter 23
of Title 48 of the TBCA. Within the time prescribed in the Dissenter's Notice, a
Heritage shareholder electing to dissent must make demand for payment (the
"Payment Demand"), certify whether he (or the beneficial shareholder on whose
behalf he is asserting dissenters' rights) acquired beneficial ownership of the
shares of Heritage common stock before September 9, 1999 (the date of the first
public announcement of the terms of the merger agreement), and deposit all
Certificates in accordance with the terms of the Dissenter's Notice. Upon
delivering the Payment Demand and depositing the Certificates in accordance with
the terms of the Dissenter's Notice, the Dissenting Shareholder will retain all
other rights of a Heritage shareholder until these rights are
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canceled or modified by consummation of the merger. Failure to comply
substantially with these procedures will cause the Dissenting Shareholder to
lose his or her dissenter's rights to payment of the shares. Consequently, any
Heritage shareholder who desires to exercise his or her rights to payment for
his or her shares is urged to consult his or her legal advisor before attempting
to exercise such rights.
As soon as the merger is completed, or upon later receipt of a timely
Payment Demand, Heritage shall, pursuant to Section 48-23-206 of the TBCA, pay
to each Dissenting Shareholder who has complied with the requirements of Section
48-23-204 of the TBCA the amount which Heritage estimates to be fair value of
the shares of Heritage common stock, plus accrued interest. Such payment must be
accompanied by (i) certain of Heritage's financial statements, (ii) a statement
of Heritage's estimate of the fair value of the shares, (iii) an explanation of
how the interest was calculated, (iv) a statement of the Dissenting
Shareholder's right to demand payment under Section 48-23-209 of the TBCA, and
(v) a copy of Sections 48-23-101 through 48-23-302 of the TBCA if not previously
furnished. As authorized by Section 48-23-208 of the TBCA, Heritage intends to
delay any payments with respect to any shares (the "after-acquired shares") held
by Dissenting Shareholders which were not held by such shareholder on September
9, 1999, the date of the first public announcement of the terms of the merger
agreement. To the extent Heritage should elect to withhold payment, after
effecting the merger, Old National as the surviving corporation in the merger
must estimate the fair value of the shares, plus accrued interest, and pay such
amount to each Dissenting Shareholder who agrees to accept it in full
satisfaction of this demand. Old National shall send with such payment a
statement of its estimate of the fair value of the shares, an explanation of how
the interest was calculated and a statement of the Dissenting Shareholder's
right to demand additional payment under Section 48-23-209 of the TBCA.
If (i) a Dissenting Shareholder believes that the amount paid with
respect to his or her shares under Section 48-23-206 or offered under Section
48-23-208 of the TBCA is less than the fair value of his or her shares or that
the interest due is incorrectly calculated, (ii) Old National fails to make
payment under Section 48-23-206 within two months after the date set for
demanding payment, or (iii) Heritage, having failed to effect the merger, does
not return the depositing Certificates or release the transfer restrictions
imposing on uncertificated shares within two months after the date set for
demanding payment, the Dissenting Shareholder may notify Heritage within one
month after Heritage made or offered payment for such shareholders' shares) of
his or her own estimate of the fair value of the shares and the amount of
interest due and may demand payment of the difference between his or her
estimate of the fair value and the amount of any payment in respect to such
shares already received by the shareholder, or, in the alternative, if no
payment has yet been made by Heritage, reject Heritage's offer made under
Section 48-23-208 of the TBCA and demand payment of the fair value of his or her
shares and interest due.
If Old National (as the surviving corporation) cannot agree with such
Dissenting Shareholder as to fair value within two months after Old National
receives the Payment Demand, Old National will
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institute judicial proceedings in either the Chancery or Circuit Court of
Montgomery County, Tennessee (the "Court"), naming all Dissenting Shareholders
(whether or not Tennessee residents) whose demands remain unsettled as party to
the proceeding and serving such parties with a copy of the petition. The Court
will then undertake to establish the fair value of the shares immediately before
the completion of the merger, excluding any appreciation or depreciation in
anticipation of the merger and will determine the interest owing on the disputed
amount. The fair value of the Dissenting Shareholder's shares of Heritage common
stock may be more than, less than or the same as the consideration provided in
the merger agreement. The Court may, in its discretion, appoint one or more
persons as appraisers to receive evidence and render a decision on the question
of fair value of his or her shares, plus accrued interest, exceeds the amount
paid by Heritage or the fair value, plus accrued interest, or his or her after
acquired shares for which Heritage or the fair value, plus accrued interest, or
his or her after acquired shares for which Heritage elected to withhold payment
under Section 48-23-208 of TBCA.
The Court shall assess costs and expenses of such proceeding (including
reasonable compensation for and expense of the appraiser but excluding fees and
expenses of counsel and experts) against Heritage (or Old National as its
successor in the merger), except that the Court may assess such costs and
expenses as it deems appropriate against any and all of the Dissenting
Shareholders if it finds that their demand for additional payment was arbitrary,
vexatious or not in good faith. The Court may award fees and expenses of counsel
and experts in amounts the Court finds equitable: (i) against Heritage, if the
Court find that Heritage did not comply substantially with the relevant
requirements of the TBCA or (ii) against Heritage or any Dissenting Shareholder,
if the Court finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously, or not in good faith.
The foregoing summary of the applicable provision of Chapter 23 of Title
48 of the TBCA is not intended to be a complete statement of such provisions,
and is qualified in its entirety by reference to such Chapter, a copy of which
is attached as Appendix C. Any Heritage shareholder who intends to dissent from
the merger should review the text of Appendix C carefully and should also
consult with an attorney. Any shareholder who fails to strictly follow the
procedures described in the statute will forfeit dissenters' rights.
Resale of Old National Common Stock by Affiliates of Heritage
Shares of Old National common stock to be issued to Heritage shareholders
in the merger have been registered under the Securities Act of 1933, as amended.
Shares of Old National common stock issued in the merger may be traded freely
and without restriction by those shareholders not considered to be affiliates
(as that term is defined by the Securities Act) of Heritage. However, shares by
any person who is an affiliate of Heritage at the time of the merger is
submitted for a vote at the special meeting will, under existing law, require:
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- the further registration under the Securities Act of the
shares of Old National common stock to be transferred;
- compliance with Rule 145 promulgated under the Securities Act,
which permits limited sales in certain circumstances; or
- the availability of another exemption from registration.
An "affiliate" of Heritage is a person who directly, or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, Heritage. These restrictions are expected to apply to the
directors and executive officers of Heritage and the holders of 10% or more of
the Heritage common stock. The same restrictions apply to certain relatives or
the spouse of those persons and any trusts, estates, corporations or other
entities in which those persons have a 10% or greater beneficial or equity
interest. Old National will give stop transfer instructions to the transfer
agent with respect to the shares of Heritage common stock to be received by
persons subject to these restrictions, and the certificates for their shares may
contain a legend indicating the resale restrictions.
SEC guidelines regarding qualifying for the pooling of interests method
of accounting also limit sales of shares of the acquiring and acquired company
by affiliates of either company in a business combination. SEC guidelines
indicate that the pooling of interests method of accounting will generally not
be challenged on the basis of sales by affiliates of the acquiring or acquired
company if those affiliates do not dispose of any of the shares of the
corporation they own or shares of a corporation they receive in connection with
a merger during the period beginning 30 days before the merger and ending when
financial results covering at least 30 days of post-merger operations of the
combined entity have been published.
Each affiliate of Heritage delivered to Old National on September 8,
1999, a written agreement to the effect that the affiliate (1) will not sell,
pledge, transfer, dispose of or otherwise reduce the affiliate's market risk
with respect to the shares of Heritage common stock directly or indirectly owned
or held by such person during the thirty day period prior to the effective time
of the merger, and (2) will not sell, pledge, transfer or otherwise dispose of
or reduce the affiliate's market risk with respect to the shares of Old National
common stock to be received by such person pursuant to the merger agreement (i)
until such time as financial results covering at least thirty days of combined
operations of Heritage and Old National have been published within the meaning
of Section 201.01 of the Securities and Exchange Commission's Codification of
Financial Reporting Policies and (ii) unless done pursuant to an effective
registration statement under the Securities Act or pursuant to Rule 145 or
another exemption from the registration requirements under the Securities Act.
The merger agreement requires that any person who becomes an affiliate of
Heritage after September 8, 1999 deliver a similar agreement to Old National,
and that all persons who have delivered these agreements confirm, at the
effective time of the merger, that they have complied with the terms of the
agreements.
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This is only a general statement of certain restrictions regarding the
sale or transfer of the shares of Old National common stock to be issued in the
merger. Therefore, those shareholders of Heritage who may be deemed to be
affiliates of Heritage should consult with their legal counsel regarding the
resale restrictions that may apply to them.
Conditions to the Completion of the Merger
Heritage's and Old National's obligations to complete the merger are
subject to the satisfaction of the following conditions at or prior to the
effective time of the merger:
- The merger agreement has been approved by the affirmative vote
of the holders of at least a majority of the outstanding
shares of Heritage common stock;
- Old National and Heritage have received all regulatory
approvals required for the merger;
- Old National and Heritage have received the opinion of counsel
dated as of the effective time of the merger, with respect to
the fact that the merger will be treated as tax-free for U.S.
federal income tax purposes;
- The registration statement of which this document is a part is
effective and no stop order suspending its effectiveness is
issued or threatened;
- Old National and Heritage have received certain officers'
certificates and other closing documents;
- The representations and warranties contained in the merger
agreement are accurate at the effective time of the merger;
and
- Certain covenants set forth in the merger agreement have been
fulfilled.
Old National's obligation to complete the merger also is subject to the
condition that it has received an opinion from its independent auditors dated as
of the effective time of the merger, to the effect that the merger will qualify
for pooling of interests accounting treatment.
The conditions to consummation of the merger, which are more fully
enumerated in the merger agreement, are requirements subject to waiver by the
party entitled to the benefit of such conditions, as set forth in the merger
agreement. See "Proposed Merger - Resale of Old National Common Stock by
Affiliates of Heritage," "- Regulatory Approvals Required for the Merger",
"Federal Income Tax Consequences" and Appendix A.
Break-up Fee
Heritage has agreed to pay Old National a break-up fee in the amount of
$2,000,000.00, plus out-of-pocket expenses, in the event that (i) the Heritage
Board fails to recommend to Heritage shareholders approval of the merger
agreement; (ii) the Heritage Board withdraws, modifies or conditions its
recommendation of approval of the merger agreement to the Heritage
shareholders; (iii) Heritage approves, enters into or executes a definitive
agreement, letter of intent, term sheet or understanding relating to an
acquisition transaction with a party other than Old National or an affiliate of
Old National; or (iv) Heritage terminates the merger agreement as a result of
contemporaneously entering into a definitive agreement with a third party.
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Termination of the Merger Agreement
The merger agreement contains provisions allowing Old National and
Heritage to terminate the merger agreement and the merger for various reasons.
The merger may be terminated by Old National or Heritage before or after the
shareholders of Heritage have approved the merger if one of the events which
gives a party the right to terminate occurs. The merger agreement may be
terminated:
- by the mutual, written consent of the Board of Directors of
Old National and Heritage;
- by either Old National or Heritage if the merger has not been
completed by June 30, 2000;
- by either the Old National Board or the Heritage Board if
there has been a breach of any representation or warranty
contained in the merger agreement by Heritage, in the case of
termination by Old National, or by Old National, in the case
of termination by Heritage, and the breach has not been cured
within 30 days after written notice to the breaching party of
the breach;
- by either the Old National Board or the Heritage Board if
there has been a breach of any of the covenants or agreements
contained in the merger agreement by Heritage, in the case of
termination by Old National, or by Old National, in the case
of termination by Heritage, and (1) the breach has not been
cured within 30 days written notice to the breach party of the
breach; and (2) the breach will be likely, individually or in
the aggregate with other breaches, to result in a material
adverse effect;
- by either Old National or Heritage if the terminating party
reasonably determines that the merger has become
impracticable because of (1) the commencement or threat of
any claim or litigation against Old National, Heritage, any
subsidiary of Old National or Heritage, or any director or
officer of any of these companies relating to the merger or
merger agreement, if Old National is the terminating party
or (2) the commencement, a threat of any material claim,
litigation or proceeding against Old National which relates
to the merger or merger agreement or which is likely to have
a material adverse effect on Old National, if the
terminating party is Heritage; or
- by either Old National or Heritage if the shareholders of
Heritage do not approve the merger and the merger agreement
and Heritage has satisfied its obligation to obtain
shareholder approval.
Additionally, Old National may terminate the merger if:
- the merger will not qualify for pooling of interests
accounting treatment;
- there has been a material adverse change in the business,
assets, capitalization, financial condition or results of
operations of Heritage and its subsidiaries (considered as a
whole) as of the effective time of the merger compared to
that in existence as of September 8,
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1999 (the date of the merger agreement) other than changes
that occur as a result of changes in banking laws,
accounting principles, actions approved by Old National,
changes such as interest rates that affect the banking
industry generally and changes and charges that are a result
of the merger; or
- in the event that dissenters' rights are exercised pursuant to
the merger agreement, and the aggregate amount of cash payable
to dissenting shareholders exceeds ten percent (10%) of the
value of the total consideration to be paid with respect to
the merger.
Further, Heritage may terminate the merger if:
- there has been a material adverse change in the financial
condition, results of operations, business, assets or
capitalization of Old National on a consolidated basis as of
the effective time as compared to that in existence on June
30, 1999 other than changes that occur as a result of changes
in banking laws, accounting principles, changes such as
interest rates that affect the banking industry generally and
changes and charges that are a result of the merger;
- prior to approval of the shareholders of Heritage of the
merger, without breaching its covenant relating to
negotiations with other potential acquirors, Heritage enters
into a definitive agreement with a third party that provides
for an acquisition of Heritage or a subsidiary of Heritage on
terms determined in good faith by the Heritage Board to be
more favorable to the shareholders of Heritage than the merger
with Old National and that the Heritage Board has determined
that to proceed with the merger with Old National would
violate their fiduciary duties to Heritage's shareholders; or
- at any time during the five-day period beginning on the date
on which the last required regulatory approval is obtained,
both of the following conditions are satisfied:
(1) the number obtained by dividing the average of the
closing price of a share of Old National common stock
on the Nasdaq National Market System for the 20
consecutive trading days ending on the day prior to
the day the last required regulatory approval is
obtained by $28.63 (the "ONB Ratio") is less than
0.80; and
(2) the ONB Ratio is less than a number obtained by
dividing two index numbers derived from the Nasdaq
Bank Index as reported in the Bloomberg News Service
("the Index Ratio"). The Index Ratio is calculated by
dividing the average of the index value of the Nasdaq
Bank Index for the 20 consecutive trading days ending
on the trading day prior to the day the last
regulatory approval is obtained by $28.63 and then
subtracting 0.15.
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If Heritage elects to terminate the merger for this
reason, it must give written notice to Old National
of its desire to terminate the merger within a five
day period, which begins on the day the last
regulatory approval is received. After Old National
receives the notice of termination, Old National has
five days to determine, at its option, to increase
the consideration to be received by Heritage
shareholders by adjusting the exchange ratio of
3.3075. The exchange ratio would be adjusted to equal
the lesser of:
(a) a number obtained by dividing the product
of $28.63, 0.80 and the exchange ratio by
the average of the closing price of a
share of Old National common stock on
the Nasdaq National Market System during
the period of 20 consecutive trading
days ending on the day before the day
the last regulatory approval is
obtained; and
(b) a number obtained by dividing the product of
the Index Ratio by the exchange ratio (as
then in effect) by the ONB Ratio.
If Old National elects to adjust the exchange ratio,
it must give Heritage prompt notice of this election
and of the revised exchange ratio.
If the last regulatory approval was received on the
date of this document, the average of the closing
price of a share of Old National common stock for the
above calculation would be $________. The ONB Ratio
would equal $________ ($________ divided by
$________). As a result of the ONB Ratio being less
than .80, Heritage would not have the right to
terminate the merger agreement as the result of the
price of Old National's common stock.
Upon termination for any of these reasons, the merger agreement will be of no
further force or effect.
Restrictions Affecting Heritage
The merger agreement contains a number of restrictions regarding the
conduct of business of Heritage until the merger is completed. Among other
items, Heritage or any subsidiary of Heritage may not, without the prior written
consent of Old National:
- change its capital stock accounts, except for the issuance of
up to 87,969 shares of Heritage common stock under the
Heritage 1989 Stock Option Plan, the Heritage 1998 Outside
Director Stock Option Plan, and the Heritage 1998 Stock Option
Plan;
- authorize any additional class of stock or issue securities
other than or in addition to the securities which were issued
and outstanding as of the date of the merger agreement;
- distribute or pay any dividends or make any other
distributions to its shareholders except that (1) Heritage
Bank may pay cash dividends to Heritage in the ordinary course
of
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business for payment of reasonable and necessary business
and operating expenses of Heritage and to provide funds for
Heritage's dividends to its shareholders in accordance with
the merger agreement; and (2) Heritage may pay to its
shareholders its usual and customer annual cash dividend of
no greater than One and 50/100 Dollars ($1.50) per share to
be paid to shareholders of Heritage prior to December 31,
1999, and (3) if Old National declares a cash dividend in
the first quarter of 2000 and the merger has not been
completed prior to the record date of such cash dividend,
the Heritage may declare and pay a cash dividend for each
issued and outstanding share of Heritage common stock in an
amount equal to the Old National cash dividend (on a per
share of Old National Bancorp common stock basis) multiplied
by the exchange ratio.
- redeem any of its outstanding shares of common stock;
- merge, consolidate or sell its assets or securities to any
other person or entity;
- purchase any assets or securities or assume any liabilities of
another bank, bank holding company or other entity, except in
the ordinary course of business;
- make any loan or commitment to lend money or accept any
deposit except in accordance with existing banking practices;
- amend or restate its Charter or By-Laws or the Charter or
By-Laws of any of its subsidiaries;
- open, close or alter any of its offices or facilities;
- fail to maintain the reserve for loan and lease losses of its
subsidiaries financial institutions;
- elect or appoint any new executive officers or directors of
Heritage or any of its subsidiaries;
- hire or employ additional employees of Heritage or any
subsidiary, except those which are reasonably necessary for
the proper operation of their businesses; or
- negotiate or discuss with third parties a possible sale,
merger or combination of Heritage, unless the failure to do so
would be breach of the fiduciary duties of the Heritage Board.
This discussion of the restrictions imposed by the merger agreement is not
intended to be exhaustive, but includes the material restrictions imposed on
Heritage. Please refer to Appendix A for a complete listing of the restrictions.
Regulatory Approvals Required for the Merger
Old National and Heritage have agreed to use their best efforts to obtain
all regulatory approvals required to complete the transactions contemplated in
the merger agreement. The merger requires the prior approval of the Board of
Governors of the Federal Reserve System ("Federal Reserve") and the Tennessee
Department of Financial Institutions. The merger cannot be completed without
these
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approvals. It is possible we may not obtain the required regulatory approvals
and, if we do, we do not know when the regulators will give approvals.
Approval of the merger by the Federal Reserve and the state regulators is
not to be interpreted as the opinion of the regulatory authorities that the
merger is favorable to the shareholders of Heritage from a financial point of
view or that the regulatory authorities have considered the adequacy of the
terms of the merger. An approval by the Federal Reserve or a state regulatory
agency in no way constitutes an endorsement or a recommendation of the merger by
such regulatory authority.
- FEDERAL RESERVE
The merger is subject to approval by the Federal Reserve. Old National
has filed the required application and notification with the Federal Reserve for
approval of the merger. Assuming the Federal Reserve approves the merger, Old
National and Heritage may not complete the merger until 30 days after that
approval. During that time, the Department of Justice may challenge the merger
on antitrust grounds. With the approval of the Federal Reserve and the
Department of Justice, the waiting period may be reduced to no fewer than 15
days. The commencement of an antitrust action by the Department of Justice would
stay the effectiveness of Federal Reserve approval of the merger, unless a court
specifically orders otherwise.
In reviewing a transaction under the applicable statutes, the Federal
Reserve will consider the financial and managerial resources of the companies
and their subsidiary banks and the convenience and needs of the communities to
be served. As part of, or in addition to, consideration of these facts, Old
National and Heritage anticipate that the Federal Reserve will consider the
regulatory status of Old National and Heritage, current and projected economic
conditions in the areas of the Midwestern United States where Old National and
Heritage operate, and the overall capital and safety and soundness standards
established by the Federal Deposit Insurance Corporation Improvement Act of 1991
(the "FDICIA") and the regulations promulgated under the FDICIA.
Furthermore, the Federal Reserve will assess the degree to which Old
National and Heritage and their subsidiaries have taken appropriate steps to
assure that electronic data processing systems and those of their vendors are
year 2000 compliant. Additional information about Old National's and Heritage's
year 2000 compliance efforts to date may be found in each company's Annual
Report on Form 10-K for the year ended December 31, 1998. See "Where You Can
Find More Information."
Under the Community Reinvestment Act of 1977, as amended (the "CRA"), the
Federal Reserve must take into account the record of performance of each Old
National and Heritage in meeting the credit needs of the entire community,
including low and moderate-income neighborhoods, served by each company and
their subsidiaries. Each of Old National's and Heritage's subsidiary depository
institutions
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has either an outstanding or satisfactory CRA rating with the appropriate
federal regulator. None of the subsidiary banks of Old National or Heritage
received any negative comments from its respective federal regulator in its last
CRA examination relating to those ratings that were material and remain
unresolved.
The BHC Act and Federal Reserve regulations require publication or notice
of, and the opportunity for public comment on, the application submitted by Old
National for approval of the merger, and authorize the Federal Reserve to hold a
public meeting in connection with the application if the Federal Reserve
determines that a meeting would be appropriate. Any meeting or comments provided
by third parties could prolong the period during which the application is
subject to review by the Federal Reserve.
Old National's rights to exercise its options under the option agreement
are also subject to the prior approval of the Federal Reserve, to the extent
that the exercise of the options under the option agreement would result in Old
National owning more than 5% of the outstanding shares of Heritage common stock.
In considering whether to approve Old National's right to exercise its option,
including its right to purchase more than 5% of the outstanding shares of
Heritage common stock, the Federal Reserve would generally apply the same
statutory criteria it will apply to its consideration of the merger.
- TENNESSEE DEPARTMENT OF FINANCIAL INSTITUTIONS
The merger requires the approval of the Tennessee Department of Financial
Institutions pursuant to Tennessee Department of Financial Institution Rule
018.0-15. The Tennessee Department of Financial Institutions will consider,
among other factors, whether the merger would result in a monopoly in any of the
markets served by Heritage in Tennessee and whether the financial condition of
Old National might jeopardize the financial stability of Heritage, in
determining whether to approve the merger. Old National has filed a copy of the
Federal Reserve notice with the Tennessee Department of Financial Institutions
in satisfaction of its application requirements.
Accounting Treatment for the Merger
Old National and Heritage anticipate that the merger will be accounted
for as a pooling of interests transaction under GAAP. Under this method of
accounting, shareholders of Old National and Heritage will be deemed to have
combined their existing voting common stock interests by virtue of the exchange
of shares of Heritage common stock for shares of Old National common stock.
Accordingly, the book value of the assets, liabilities and shareholders' equity
of each of Heritage, as reported on its consolidated balance sheet, will be
carried over to the balance sheet of Old National and no goodwill will be
created. The parties have prepared the unaudited, pro forma financial
information contained in this document using the pooling of interests accounting
method to account for the merger. See "Old National Bancorp Pro Forma Condensed
Combined Financial Information".
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In order for the merger to qualify for pooling of interests accounting
treatment, among other requirements, 90% or more of the outstanding shares of
Heritage common stock must be exchanged for Old National common stock. In the
event the holders representing more than 10% of the outstanding shares of
Heritage common stock become entitled to receive cash instead of Old National
common stock, the merger would not qualify for pooling of interests method of
accounting and Old National would have the right to terminate the merger. See
"Proposed Merger - Termination of the Merger Agreement."
Effective Time
The merger will become effective at the close of business on the day and
at the time specified in the Articles of Merger of Heritage with and into Old
National as filed with the Indiana Secretary of State and Tennessee Secretary of
State. The effective time of the merger will occur on the later of (1) January
31, 2000 or (2) the last business day of the month following (a) the fulfillment
of all conditions precedent to the merger set forth in the merger agreement and
(b) the expiration of all waiting periods in connection with the bank regulatory
applications filed for approval of the merger, unless, in each case, otherwise
mutually agreed to by Old National and Heritage.
Old National and Heritage currently anticipate that merger will be
consummated during February 2000. However, completion of the merger could be
delayed if there is a delay in obtaining the required regulatory approvals or in
satisfying other conditions to the merger.
Management, Personnel and Employee Benefits After the Merger
Old National will be the surviving corporation in the merger and, upon
consummation of the merger, the separate corporate existence of Heritage will
cease. Consequently, the directors and officers of Heritage will no longer serve
in such capacities after the effective time of the merger.
Heritage Bank will become a wholly-owned subsidiary of Old National.
Heritage Investment Center, Inc., Central Life Insurance Company, Advance Credit
Company, Inc., and Heritage Investment Corporation will each remain wholly-owned
subsidiaries of Heritage Bank. The Boards of Directors and officers of all of
Heritage's subsidiaries serving at the effective time of the merger will
continue as the Boards of Directors and officers of the respective subsidiary
after the effective time of the merger. Following the effective time of the
merger, Old National, as the sole shareholder of each of the subsidiaries, will
have the ability to elect the Boards of Directors and officers of the
subsidiaries. The current officers of the subsidiaries of Heritage will continue
in their respective positions after the merger, until the Board of Directors of
each of the subsidiaries determines otherwise. Additionally, Old National has
agreed to honor and abide by the terms of the employment agreements of Heritage
or its subsidiaries, which were in effect as of the date of the merger
agreement.
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Those persons who are full-time officers or employees of the subsidiaries
of Heritage as of the effective time of the merger, provided that these persons
continue as full-time officers or employees of the former subsidiaries of
Heritage or any other subsidiary of Old National after the effective time of the
merger, will receive substantially the same employee benefits on substantially
the same terms and conditions that Old National may offer to similarly situated
officers and employees of its banking subsidiaries from time to time. In
addition, years of service of an employee of Heritage or any of its subsidiaries
prior to the effective time of the merger will be credited to each such employee
for purposes of eligibility under Old National's employee welfare benefit plans
and for purposes of eligibility and vesting, but not for accrual or
contributions, under the Old National Employees' Retirement Plan ("Old National
Pension Plan"), the Old National Employees' Savings and Profit Sharing Plan
("Old National Profit Sharing Plan"), and the Old National Employee Stock
Ownership Plan ("Old National ESOP").
Those officers and employees of Heritage or any of its subsidiaries who
otherwise meet the eligibility requirements of the Old National Pension Plan,
Old National Profit Sharing Plan and the Old National ESOP, based upon their age
and years of service to Heritage or any of its subsidiaries, will become
participants under the Old National Pension Plan on the January 1st which
coincides with or next follows the effective time of the merger, and will become
participants under the Old National Profit Sharing Plan and the Old National
ESOP on the first day of the calendar month which coincides with or next follows
the effective time of the merger. Those officers and employees who do not meet
the eligibility requirements of the Old National Pension Plan, Old National
Profit Sharing Plan or the Old National ESOP on such date will become
participants in these plans on the first "plan entry date" (as defined in the
Old National Pension Plan, the Old National Profit Sharing Plan or the Old
National ESOP, as the case may be) which coincides with or next follows the date
on which such eligibility requirements are satisfied.
The assets and liabilities under the Heritage Bank Profit Sharing, 401(K)
Savings and Employee Stock Ownership Plan and Trust ("Heritage 401(K)/ESOP")
will merge with the Old National Savings Plan. All account balances maintained
under the Heritage 401(k) Plan will become fully vested at the effective time of
the merger. As soon as administratively feasible after the effective time of the
merger, the assets and liabilities under the Heritage Bank Profit Sharing,
401(k) Savings and Employee Stock Ownership Plan and Trust ("Heritage
401(k)/ESOP") attributable to the 401(k) portion of such plan shall be merged
with and into the ONB Savings Plan. All account balances maintained under the
Heritage 401(k)/ESOP shall become fully vested and nonforfeitable at the
effective time of the merger. Until such 401(k) plans are merged, Heritage and
its subsidiaries may continue to make contributions to the Heritage 401(k)/ESOP
so long as such contributions are comparable in amount, on a prorated basis, to
recent past contributions to that plan in comparable amounts to past
contributions to such plan.
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The Heritage Bank Group Health Plan will terminate as of the last day of
the calendar month in which the effective time of the merger occurs. Until such
time when the Heritage Group Health Plan terminates, Heritage and its
subsidiaries shall continue to pay the insurance premiums necessary to continue
the Heritage Group Health Plan benefits.
The Heritage Bank Group Dental Plan will terminate as of the last day of
the calendar month in which the effective time of the merger occurs. Until such
time when the Heritage Dental Plan terminates, Heritage and its subsidiaries
shall continue to pay the insurance premiums necessary to continue the Heritage
Dental Plan benefits.
The Heritage Bank Group Long Term Disability Plan will terminate as of
the effective time of the merger, or as soon as administratively feasible
thereafter, but such termination shall not affect the benefits payable to any
covered former Heritage employee who became entitled to a disability benefit
under the Heritage Long Term Disability Plan prior to the termination of said
plan. Until such time when the Heritage Long Term Disability Plan terminates,
Heritage and its subsidiaries shall continue to pay the insurance premiums
necessary to continue the Heritage Long Term Disability Plan benefits.
The Heritage Fringe Benefit Plan will terminate as of same date the
Heritage Bank Group Health Plan is terminated. Until such time when the Heritage
Fringe Benefit Plan terminates, Heritage and its subsidiaries shall continue to
contribute to such plan the pre-tax amounts which the Heritage Fringe Benefit
Plan participants elect to defer from compensation As of the date of
termination, the balances in the health and dependent care flexible spending
accounts under the Heritage Fringe Benefit Plan shall be transferred to the Old
National "cafeteria" plan. Elections in effect at that time shall be continued
under the Old National "cafeteria" plan, subject to change as provided in the
Old National "cafeteria" plan. All benefit payments relating to the transferred
balances shall be made in accordance with the Old National "cafeteria" plan.
The Heritage Bank Group Term Life and ADD Insurance Plan will terminate
as of the end of the month coincident with or next following the effective time
of the merger. Until such time when the Heritage Bank Group Term Life and ADD
Insurance Plan terminates, Heritage and its subsidiaries shall continue to pay
the insurance premiums necessary to continue the death benefits provided by such
plan.
The payment of premiums to provide voluntary cancer insurance shall cease
as of the effective time of the merger.
The payment of premiums to provide executives of Heritage and/or its
subsidiaries with individual life and/or disability insurance coverage shall
cease as of the effective time of the merger. The
27
49
executives may then exercise at their discretion whatever conversion rights they
may have, if any, with respect to those insurance policies.
The Heritage Financial Services, Inc. Directors' Unfunded Deferred
Compensation Plan (the "Heritage Directors' Deferred Compensation Plan") and all
participation agreements in effect thereunder, will terminate as of the
effective time of the merger. Until such time when the Heritage Directors'
Deferred Compensation Plan is terminated, Heritage and its subsidiaries may
continue to allow participants thereunder to elect to defer the receipt of all
or a portion of the director fees he or she would otherwise receive and to
credit such fees to the director's individual account under the plan. Upon the
termination of the Heritage Directors' Plan, the balance in each individual
account thereunder shall be distributed in a lump sum payment to the participant
entitled thereto. The Board of Directors of Heritage, and the Board of Directors
of each of its subsidiaries which is participating in the Heritage Directors'
Deferred Compensation Plan, shall, prior to the day on which the effective time
of the merger occurs, amend or cause the amendment of such plan to provide that
upon the termination of such plan the accrued benefits thereunder shall be
immediately paid in a lump sum payment to the individuals entitled to such
accrued benefits. Notwithstanding the foregoing, if Old National adopts a
deferred compensation plan for its directors and/or the directors of its
subsidiaries, then the Heritage Directors' Deferred Compensation Plan shall be
"frozen" as of the effective time of the merger and the accumulated benefit
obligations under the Heritage Directors' Deferred Compensation Plan shall be
transferred to, and become benefit obligations under, the Old National plan.
Such transferred benefits shall thereafter accrue "earnings," be paid and
generally be administered pursuant to the terms of the Old National plan. Prior
to the effective time of the merger, Heritage shall use its best efforts to
obtain acknowledgments and consents from each Heritage Directors' Deferred
Compensation Plan participant as to the foregoing disposition of his or her plan
benefit.
The Heritage Bank Severance Policy will terminate as of the effective
time of the merger. With respect to an individual covered by such severance
policy on the date of its termination, in the event that he or she incurs,
within twelve months from the effective time of the merger, an involuntary
termination of employment for reasons other than cause, he or she shall be
entitled to receive a severance benefit. The severance benefit shall be a salary
continuation the amount of which shall be the amount payable to such individual
under the salary continuation provisions of the Old National Severance Policy,
if any, then applicable to such individual. An individual who is entitled to a
benefit under the Old National Severance Policy shall also be entitled to a
continuation of employee benefits as determined solely by the applicable
provisions of the Old National Severance Policy.
At or prior to the effective time of the merger, Heritage shall use its
best efforts, including using its best efforts to obtain any necessary consents
from optionees, with respect to the Heritage Bank 1989 Employees Stock Option
Plan and the Heritage Financial Services, Inc. 1998 Stock Option Plan
28
50
("Heritage Stock Option Plans") to permit the conversion of each outstanding
option to acquire shares of common stock of Heritage which was properly granted
pursuant to a stock option agreement executed in accordance with the provisions
of a Heritage Stock Option Plan by Old National, and to permit Old National to
assume the sponsorship and administration of the Heritage Stock Option Plans.
Heritage shall amend the Heritage Bank 1989 Employees Stock Option Plan, or
cause such plan to be amended, to eliminate any rights to receive cash in lieu
of stock under the plan. Finally, Heritage shall take all actions needed to
terminate the Heritage Financial Services, Inc. 1998 Outside Directors' Stock
Option Plan as of the effective time of the merger. In addition, all unexercised
options previously granted under that plan shall lapse and become unexercisable
on and after the effective time of the merger.
Indemnification; Directors' and Officers' Liability Insurance
Employment Agreements
Earl O. Bradley, Chief Executive Officer and President of Heritage
Bank, entered into a three-year employment agreement which becomes effective at
the time the merger is completed. The agreement provides for Mr. Bradley to
serve as of Chief Executive Officer and President of Old National Bank,
Clarksville, Tennessee following the merger. The agreement provides for an
annual salary of $165,000. Additionally, Old National will grant to Mr. Bradley
executive performance awards, stock options, stock appreciation rights, bonuses
and other incentive grants at least in equal amounts and substantially the same
as those awarded to other executives of Old National during the term of
Mr. Bradley's employment agreement.
Under the terms of the employment agreement, Mr. Bradley agrees not
solicit any of Old National's customers or employees for a term of eighteen
months after his employment with Old National ends or the expiration of the term
of the employment agreement. Additionally, Mr. Bradley agrees not to compete
with Old National or be employed by Old National's competitors within Montgomery
County, Tennessee and those counties contiguous to Montgomery County, Tennessee.
This restriction is for a period of eighteen months after Mr. Bradley's
employment with Old National ends or the term of the employment agreement ends.
John T. Halliburton, Executive Vice President - Lending of Heritage
Bank, entered into a three-year employment agreement which becomes effective at
the time the merger is completed. The agreement provides for Mr. Halliburton to
serve as Executive Vice President - Lending of Old National Bank, Clarksville,
Tennessee following the merger. The agreement provides for an annual salary of
$140,000. Additionally, Old National will grant to Mr. Halliburton executive
performance awards, stock options, stock appreciation rights, bonuses and other
incentive grants at least in equal amounts and substantially the same as those
awarded to other executives of Old National during the term of Mr. Halliburton's
employment agreement.
Under the terms of the employment agreement, Mr. Halliburton agrees not
solicit any of Old National's customers or employees for a term of eighteen
months after his employment with Old National ends or the expiration of the term
of the employment agreement. Additionally, Mr. Halliburton agrees not to compete
with Old National or be employed by Old National's competitors within Montgomery
County, Tennessee and those counties contiguous to Montgomery County, Tennessee.
This restriction is for a period of eighteen months after Mr. Halliburton's
employment with Old National ends or the term of the employment agreement ends.
Randy Clouser, Senior Vice President - Commercial Loans of Heritage
Bank, entered into a three-year employment agreement which becomes effective at
the time the merger is completed. The agreement provides for Mr. Clouser to
serve as Executive Vice President - Lending of Old National Bank, Clarksville,
Tennessee following the merger. The agreement provides for an annual salary of
$90,000. Additionally, Old National will grant to Mr. Clouser executive
performance awards, stock options, stock appreciation rights, bonuses and other
incentive grants at least in equal amounts and substantially the same as those
awarded to other executives of Old National during the term of Mr. Clouser's
employment agreement.
Under the terms of the employment agreement, Mr. Clouser agrees not
solicit any of Old National's customers or employees for a term of eighteen
months after his employment with Old National ends or the expiration of the term
of the employment agreement. Additionally, Mr. Clouser agrees not to compete
with Old National or be employed by Old National's competitors within Montgomery
County, Tennessee and those counties contiguous to Montgomery County, Tennessee.
This restriction is for a period of eighteen months after Mr. Clouser's
employment with Old National ends or the term of the employment agreement ends.
The merger agreement provides that Old National will indemnify, defend
and hold harmless any person who is or has been a director or officer of
Heritage or was serving at the request of Heritage as a director or officer of
any corporation, joint venture, trust employee benefit plan or other enterprise
against all losses arising out of any claim that is based upon or in any way
relates to any act or omission occurring at or prior to the effective time of
the merger in the person's capacity as a director or officer. Old National will
indemnify officers and directors of the subsidiaries of Heritage following the
effective time of the merger to the same extent it indemnifies other persons
working in similar capacities for Old National or its subsidiaries. The merger
agreement also provides that Old National will maintain in effect for not less
than two years from the effective time of the merger the directors' and
officers' liability insurance policies carried by Heritage. However, Old
National may substitute other liability insurance policies if the policies
provide substantially similar coverage.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material federal income tax
consequences to holders of Heritage common stock who hold such stock as a
"capital asset" within the meaning of Section 1221 of the Internal Revenue Code
of 1986, as amended. Special tax consequences may be applicable to particular
classes of taxpayers, such as financial institutions, insurance companies,
tax-exempt organizations, broker-dealers, traders in securities that elect to
apply a mark-to-market method of accounting, persons that hold Heritage common
stock as part of a hedge, straddle or conversion transaction, persons who are
not citizens or residents of the United States and shareholders who acquired
their shares of Heritage common stock through the exercise of an employee stock
option or otherwise received as compensation. The following represents general
information only and is based on the Code, its legislative history, existing and
proposed regulations thereunder, published rulings and decisions, all as
currently in effect as of the date hereof, and all of which are subject to
change possibly with
29
51
retroactive effect. Tax considerations under state, local and foreign laws are
not addressed in this document.
Tax Opinion
Old National has requested the law firm of Krieg DeVault Alexander &
Capehart, LLP to render an opinion that the merger, for federal income tax
purposes, and the merger to be effected pursuant to the merger agreement
constitutes a tax-free reorganization under the Code to each party thereto and
to the shareholders of Heritage, except with respect to cash received by
Heritage's shareholders for fractional share interests of Old National common
stock.
In rendering its opinion, Krieg DeVault Alexander & Capehart, LLP may
require and rely upon representations contained in letters received from Old
National and Heritage, respectively, and may rely on customary assumptions of
certain facts stated in the opinion. Under the merger agreement, the obligations
of each of Old National and Heritage to consummate the merger is conditioned
upon the receipt of an opinion of their respective counsel substantially to the
effect as set forth above. However, these legal opinions will not bind the
Internal Revenue Service, which could take a different view.
Tax Consequences to Old National and Heritage
Assuming the merger of Heritage with and into Old National is consummated
as described in the merger agreement and constitutes a statutory merger under
Indiana law, then for United States federal income tax purposes, the merger of
Heritage with and into Old National will constitute a tax-free reorganization.
As a result, Old National and Heritage will recognize neither gain nor loss as a
result of the merger for federal income tax purposes.
Tax Consequences to Heritage Shareholders
- HERITAGE SHAREHOLDERS RECEIVING SOLELY OLD NATIONAL COMMON STOCK
An Heritage shareholder who receives solely Old National common stock
in exchange for shares of Heritage common stock owned by the shareholder will
not recognize any gain or loss upon such exchange for federal income tax
purposes. See the later paragraph for a discussion of the tax consequences of
the receipt of cash in lieu of fractional share interests of Old National common
stock.
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52
- CASH RECEIVED FOR FRACTIONAL SHARES
An Heritage shareholder who receives cash for a fractional share interest
of Old National common stock will be treated as having received such fraction of
a share of Old National common stock and then as having received cash in
redemption of the fractional share interest, subject to the provisions of
Section 302 of the Code. That deemed redemption will be treated as a sale of the
fractional share, unless it is both "essentially equivalent to a dividend" and
is not "substantially disproportionate" with respect to the Heritage
shareholder. If treated as a sale and not a dividend, the Heritage shareholder
will recognize capital gain or loss equal to the difference between the amount
of cash received and the portion of the basis of the shares of Heritage common
stock allocable to the fractional interest. This capital gain or loss will be
long term gain or loss if, as of the date of the merger, the holding period for
the shares of Heritage common stock is greater than one year.
THE INTERNAL REVENUE SERVICE HAS NOT VERIFIED THE FEDERAL INCOME TAX
CONSEQUENCES DISCUSSION SET FORTH ABOVE. THE DISCUSSION IS INCLUDED FOR GENERAL
INFORMATION ONLY AND IS BASED UPON THE FEDERAL INTERNAL REVENUE CODE AS IN
EFFECT ON THE DATE OF THIS DOCUMENT WITHOUT CONSIDERATION OF ANY STATE LAWS OR
THE PARTICULAR FACTS OR CIRCUMSTANCES OF ANY SHAREHOLDER OF HERITAGE. THE ABOVE
DISCUSSION MAY NOT BE APPLICABLE WITH RESPECT TO SHARES ACQUIRED PURSUANT TO THE
EXERCISE OF STOCK OPTIONS OR OTHERWISE RECEIVED AS COMPENSATION. HERITAGE URGES
SHAREHOLDERS TO CONSULT WITH THEIR TAX ADVISOR WITH RESPECT TO ALL TAX
CONSEQUENCES OF THE MERGER TO THEM, INCLUDING THE EFFECT OF FEDERAL, STATE AND
LOCAL TAX LAWS AND ANY OTHER TAX CONSEQUENCES.
COMPARATIVE PER SHARE DATA
Nature of Trading Market
- OLD NATIONAL
Shares of Old National common stock are traded in the over-the-counter
market and share prices are reported by the Nasdaq National Market System under
the symbol OLDB. On September 9, 1999, the business day immediately preceding
the public announcement of the merger, the closing price of Old National common
stock reported by the Nasdaq National Market System was $28.63 per share. On
_______________, 2000, the closing price of Old National common stock reported
by the Nasdaq National Market System was $_____ per share. The following table
sets forth, for the periods indicated, the high and low per share closing prices
of Old National common stock as reported by the Nasdaq National Market System.
The prices shown below have been adjusted for all stock splits and stock
dividends paid by Old National.
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53
PRICE RANGE OF
COMMON STOCK
HIGH LOW
---- ----
1997
----
First Quarter $ 21.74 $ 20.88
Second Quarter 25.63 21.59
Third Quarter 26.21 25.19
Fourth Quarter 28.65 25.63
1998
----
First Quarter $ 28.87 $ 27.22
Second Quarter 29.63 28.87
Third Quarter 33.70 28.91
Fourth Quarter 35.37 30.39
1999
----
First Quarter $ 35.00 $ 28.57
Second Quarter 33.57 28.57
Third Quarter 30.00 26.43
Fourth Quarter 30.55 26.19
- HERITAGE
Shares of Heritage common stock are not traded publicly on a national
exchange system. There is no established trading market for Heritage common
stock, and trading in such shares is sporadic and generally confined to
Clarksville, Tennessee. The quarterly high and low sale prices in the following
table were obtained by Heritage from parties to the transactions. Heritage does
not have information relating to the sale price in all transactions, and the
prices provided may not be indicative of the actual high and low sale prices.
PRICE RANGE OF
COMMON STOCK
HIGH LOW
---- ---
1997
----
First Quarter $ 42.00 32.00
Second Quarter 49.00 44.00
Third Quarter 49.00 44.00
Fourth Quarter 75.00 62.00
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54
PRICE RANGE OF
COMMON STOCK
HIGH LOW
---- ---
1998
----
First Quarter $ 75.00 75.00
Second Quarter 95.00 65.00
Third Quarter 100.00 85.00
Fourth Quarter 95.00 82.00
1999
----
First Quarter $ 100.00 95.00
Second Quarter 100.00 95.00
Third Quarter 100.00 95.00
Fourth Quarter 95.00 95.00
Dividends
The following table sets forth the per share cash dividends paid on
shares of Old National common stock and Heritage common stock since January 1,
1997. All dividends have been adjusted to give effect to their respective stock
dividends and stock splits (if any).
OLD NATIONAL HERITAGE
COMMON COMMON
STOCK (1) STOCK (2)
------------ ---------
1997
----
First Quarter $ 0.13 $ 0.00
Second Quarter 0.13 0.00
Third Quarter 0.13 0.00
Fourth Quarter 0.14 1.20
1998
----
First Quarter $ 0.13 $ 0.00
Second Quarter 0.14 0.00
Third Quarter 0.14 0.00
Fourth Quarter 0.14 1.35
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55
OLD NATIONAL HERITAGE
COMMON COMMON
STOCK (1) STOCK (2)
------------ ---------
1999
----
First Quarter $ 0.15 $ 0.00
Second Quarter 0.16 0.00
Third Quarter 0.16 0.00
Fourth Quarter 0.16 1.50
(1) The timing and amount of future dividends will depend upon earnings,
cash requirements, the financial condition of Old National and its
subsidiaries, applicable government regulations and other factors the
Old National Board considers relevant. The dividend policies are
subject to the discretion of the Old National Board. For certain
restrictions on the payment of dividends on shares of Old National
common stock, see "Comparison of Common Stock -- Dividend Rights."
(2) The merger agreement provides that Heritage may pay its customary
annual dividends of up to $1.50 share prior to December 31, 1999.
Certain subsidiaries may pay cash dividends to Heritage in the ordinary
course of business for payment of reasonable and necessary business and
operating expenses of Heritage and to provide funds for Heritage's
dividends to Heritage shareholders in accordance with the merger
agreement.
EXISTING AND PRO FORMA PER SHARE INFORMATION
The following table sets forth certain historical, pro forma and
equivalent information. The data is based on historical financial statements and
the pro forma financial information included on pages ___ through ____ and has
been restated to give effect to all stock dividends, including the 5% stock
dividend issued by Old National on January 28, 1999, the 5% stock dividend
declared by Old National on December 9, 1999 and a three-for-two stock split
paid on May 24, 1999. Equivalent per share data is calculated by multiplying the
pro forma Old National information by the exchange ratio of 3.3075 shares of Old
National common stock for each share of Heritage common stock.
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As Reported
--------------------------------------------------------------------
Cash Book Value
Heritage Net Income Dividends at Period End
- -------------------------------------------- --------------------------------- --------------- ----------------
Nine months ended September 30, 1999 $ $ $
Year ended December 31,
1998
1997
1996
Net Income (1)
--------------------------------------------------------------------
Old National Heritage Old National Heritage
Pro Forma (2) Equivalent(2) Pro Forma (3) Equivalent(3)
--------------- ---------------- --------------- ----------------
Nine months ended September 30, 1999 $ 1.29 $ 4.27 $ 1.24 $ 4.10
Year ended December 31,
1998 1.54 5.09 1.49 4.93
1997 1.40 4.63 1.37 4.53
1996 1.25 4.13 1.22 4.04
Cash Dividends
--------------------------------------------------------------------
Old National Heritage Old National Heritage
Pro Forma (2) Equivalent(2) Pro Forma (3) Equivalent(3)
--------------- ---------------- --------------- ----------------
Nine months ended September 30, 1999 $ 0.47 $ 1.55 $ 0.47 $ 1.55
Year ended December 31,
1998 0.55 1.82 0.55 1.82
1997 0.53 1.75 0.53 1.75
1996 0.50 1.65 0.50 1.65
Shareholders' Equity
---------------------------------
Old National Heritage Old National Heritage
Pro Forma (2) Equivalent(2) Pro Forma (3) Equivalent(3)
--------------- ---------------- --------------- ----------------
As of September 30, 1999 $ 10.70 $ 35.39 $ 10.64 $ 35.19
As of December 31, 1998 10.73 35.49 10.63 35.16
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Market Value of Common Stock
--------------------------------------------------------------------
Old National Heritage Equivalent
--------------------------------- ---------------------------------
As of September 9, 1999 (4) $ 28.51 $ 94.30
- --------------------------------------
(1) Only includes net income from continuing operations for Old National.
(2) Considers the pending merger with Heritage. See "Pro Forma Condensed
Combined Financial Information."
(3) Considers the pending merger with Heritage and the pending merger as of
September 30, 1999 with ANB Corporation. See "Pro Forma Condensed
Combined Financial Information."
(4) Represents the last business day prior to the public announcement of
the proposed merger of ANB and Old National.
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58
OLD NATIONAL BANCORP
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(UNAUDITED)
The accompanying financial statements present a Pro Forma Condensed
Combined Balance Sheet of Old National as of September 30, 1999 and Pro Forma
Condensed Combined Statements of Income for the nine months ended September 30,
1999 and for the years ended December 31, 1998, 1997, and 1996.
The Pro Forma Condensed Combined Statements of Income for the nine months
ended September 30, 1999 and the years ended December 31, 1998, 1997 and 1996
are presented giving effect to the pending merger as of January 1 of each of the
years presented.
The pro forma information is based upon historical financial statements.
The assumptions give effect to the proposed merger under the pooling of
interests method of accounting. The information has been prepared in accordance
with the rules and regulations of the SEC and is provided for comparative
purposes only. The information does not purport to be indicative of the results
that actually would have occurred had the merger been effected on January 1 of
the years presented.
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59
OLD NATIONAL BANCORP
PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of September 30, 1999
(Unaudited - Dollars in Thousands)
ASSETS Old National Heritage Adjustments Pro Forma
- ----------------------------------- ------------ ----------- ----------- -----------
Cash and due from banks ........... $ 156,439 $ 9,063 $ 165,502
Money market investments .......... 11,917 2,040 13,957
Investment securities ............. 1,725,378 27,649 1,753,027
Loans ............................. 4,796,556 182,777 4,979,333
Reserve for loan losses ........... (58,117) (2,650) (60,767)
Excess cost over assets acquired .. 14,077 16 14,093
Other intangibles ................. 0 412 412
Premises and equipment ............ 90,880 11,187 102,067
Other assets ...................... 226,177 3,540 229,717
----------- ----------- ----------- -----------
$ 6,963,307 $ 234,034 $ 0 $ 7,197,341
=========== =========== =========== ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits .......................... $ 5,025,330 $ 198,861 $ 5,224,191
Medium term notes ................. 96,300 0 96,300
Subordinated debentures ........... 17,808 0 17,808
Other borrowings .................. 1,220,824 13,701 1,234,525
Other liabilities ................. 88,110 2,533 90,643
----------- ----------- -----------
Total liabilities ........... 6,448,372 215,095 0 6,663,467
----------- ----------- ----------- -----------
Common stock ...................... 45,635 1,210 791(a) 47,636
Capital surplus ................... 331,711 6,671 (791)(a) 337,591
Retained earnings ................. 154,632 11,305 165,937
Net unrealized gain ............... (17,043) (247) (17,290)
----------- ----------- ----------- -----------
Total shareholders' equity .. 514,935 18,939 0 533,874
----------- ----------- ----------- -----------
$ 6,963,307 $ 234,034 $ 0 $ 7,197,341
=========== =========== =========== ===========
Outstanding common shares ......... 47,917 49,918
=========== ===========
Shareholders' equity per share..... 10.75 10.70
=========== ===========
ANB
Corporation Adjustments Pro Forma
----------- ----------- ------------
Cash and due from banks ........... $ 27,104 $ 192,606
Money market investments .......... 5,877 19,834
Investment securities ............. 116,832 1,869,859
Loans ............................. 653,678 5,633,011
Reserve for loan losses ........... (5,532) (66,299)
Excess cost over assets acquired .. 11,220 25,313
Other intangibles ................. 0 412
Premises and equipment ............ 13,601 115,668
Other assets ...................... 11,096 240,813
----------- ----------- -----------
$ 833,876 $ 0 $ 8,031,217
=========== =========== ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits .......................... $ 676,642 $ 5,900,833
Medium term notes ................. 0 96,300
Subordinated debentures ........... 0 17,808
Other borrowings .................. 77,991 1,312,516
Other liabilities ................. 5,668 96,311
----------- ----------- -----------
Total liabilities ........... 760,301 0 7,423,768
----------- ----------- -----------
Common stock ...................... 5,485 1,714 (b) 54,835
Capital surplus ................... 13,622 (1,714) (b) 349,499
Retained earnings ................. 55,097 221,034
Net unrealized gain ............... (629) (17,919)
----------- ----------- -----------
Total shareholders' equity .. 73,575 0 607,449
----------- ----------- -----------
$ 833,876 $ 0 $ 8,031,217
=========== =========== ===========
Outstanding common shares ......... 57,117
===========
Shareholders' equity per share .... 10.64
===========
- ---------------------------------
See "Notes to Pro Forma Condensed Combined Financial Information."
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60
OLD NATIONAL BANCORP
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(Unaudited - Dollars in Thousands, Except Share and Per Share Data)
As Reported As Reported
------------------------- -----------------
Old ANB
National Heritage Pro Forma Corporation Pro Forma
----------- ----------- ----------- ----------- ------------
Interest income............................ $ 362,574 $ 13,905 $ 376,479 $ 41,947 $ 418,426
Interest expense........................... 183,722 5,930 189,652 18,402 208,054
----------- ----------- ----------- ----------- ------------
Net interest income........................ 178,852 7,975 186,827 23,545 210,372
Provision for loan losses.................. 8,437 1,079 9,516 1,090 10,606
----------- ----------- ----------- ----------- ------------
Net interest income after provision for
loan losses....................... 170,415 6,896 177,311 22,455 199,766
Noninterest income......................... 50,186 3,063 53,249 8,299 61,548
Noninterest expense........................ 134,696 6,464 141,160 20,941 162,101
----------- ----------- ----------- ----------- ------------
Income before income taxes................. 85,905 3,495 89,400 9,813 99,213
Provision for income taxes................. 23,057 1,209 24,266 3,568 27,834
----------- ----------- ----------- ----------- ------------
Net income from continuing operations...... 62,848 2,286 65,134 6,245 71,379
Discontinued operations.................... 3,483 0 3,483 0 3,483
----------- ----------- ----------- ----------- ------------
Net income................................. $ 66,331 $ 2,286 $ 68,617 $ 6,245 $ 74,862
=========== =========== =========== =========== ============
Net income from continuing operations per common share: (b)
===========
Assuming no dilution.............. $ 1.30 $ 1.29 $ 1.24
=========== =========== ============
Assuming full dilution............ $ 1.26 $ 1.26 $ 1.21
=========== =========== ============
Weighted average common shares outstanding: (b)
Assuming no dilution.............. 48,393 50,317 57,450
=========== =========== ============
Assuming full dilution............ 50,232 52,159 59,413
=========== =========== ============
- ----------------------------------------
See "Notes to Pro Forma Condensed Combined Financial Information."
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61
OLD NATIONAL BANCORP
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(Unaudited - Dollars in Thousands, Except Share and Per Share Data)
As Reported As Reported
------------------------- -----------------
Old ANB
National Heritage Pro Forma Corporation Pro Forma
----------- ----------- ----------- ----------- ------------
Interest income............................ $ 456,528 $ 16,813 $ 473,341 $ 50,174 $ 523,515
Interest expense........................... 231,614 7,411 239,025 22,665 261,690
----------- ----------- ----------- ----------- ------------
Net interest income........................ 224,914 9,402 234,316 27,509 261,825
Provision for loan losses.................. 12,160 1,325 13,485 1,502 14,987
----------- ----------- ----------- ----------- ------------
Net interest income after provision for
loan losses....................... 212,754 8,077 220,831 26,007 246,838
Noninterest income......................... 58,891 3,952 62,843 10,282 73,125
Noninterest expense........................ 167,937 7,553 175,490 23,628 199,118
----------- ----------- ----------- ----------- ------------
Income before income taxes................. 103,708 4,476 108,184 12,661 120,845
Provision for income taxes................. 29,573 1,624 31,197 4,205 35,402
----------- ----------- ----------- ----------- ------------
Net income from continuing operations...... 74,135 2,852 76,987 8,456 85,443
Discontinued operations.................... (9,854) 0 (9,854) 0 (9,854)
----------- ----------- ----------- ----------- ------------
Net income................................. $ 64,281 $ 2,852 $ 67,133 $ 8,456 $ 75,589
=========== =========== =========== =========== ============
Net income from continuing operations per common share: (b)
===========
Assuming no dilution.............. $ 1.54 $ 1.54 $ 1.49
=========== =========== ============
Assuming full dilution............ $ 1.49 $ 1.49 $ 1.46
=========== =========== ============
Weighted average common shares outstanding: (b)
Assuming no dilution.............. 48,204 50,091 57,161
=========== =========== ============
Assuming full dilution............ 50,373 52,268 59,489
=========== =========== ============
- --------------------------------------
See "Notes to Pro Forma Condensed Combined Financial Information."
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62
OLD NATIONAL BANCORP
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(Unaudited - Dollars in Thousands, Except Share and Per Share Data)
As Reported As Reported
------------------------- -----------------
Old ANB
National Heritage Pro Forma Corporation Pro Forma
----------- ----------- ----------- ----------- ------------
Interest income............................ $ 435,038 $ 13,616 $ 448,654 $ 46,862 $ 495,516
Interest expense........................... 216,868 5,922 222,790 20,785 243,575
----------- ----------- ----------- ----------- ------------
Net interest income........................ 218,170 7,694 225,864 26,077 251,941
Provision for loan losses.................. 13,562 676 14,238 1,027 15,265
----------- ----------- ----------- ----------- ------------
Net interest income after provision for
loan losses....................... 204,608 7,018 211,626 25,050 236,676
Noninterest income......................... 51,104 3,476 54,580 7,944 62,524
Noninterest expense........................ 158,631 6,869 165,500 20,851 186,351
----------- ----------- ----------- ----------- ------------
Income before income taxes................. 97,081 3,625 100,706 12,143 112,849
Provision for income taxes................. 28,998 1,323 30,321 4,102 34,423
----------- ----------- ----------- ----------- ------------
Net income from continuing operations...... 68,083 2,302 70,385 8,041 78,426
Discontinued operations.................... (5,005) 0 (5,005) 0 (5,005)
----------- ----------- ----------- ----------- ------------
Net income................................. $ 63,078 $ 2,302 $ 65,380 $ 8,041 $ 73,421
=========== =========== =========== =========== ============
Net income from continuing operations per common share: (b)
===========
Assuming no dilution.............. $ 1.40 $ 1.40 $ 1.37
=========== =========== ============
Assuming full dilution............ $ 1.36 $ 1.36 $ 1.33
=========== =========== ============
Weighted average common shares outstanding: (b)
Assuming no dilution.............. 48,488 50,321 57,343
=========== =========== ============
Assuming full dilution............ 51,135 52,988 60,143
=========== =========== ============
- --------------------------------------
See "Notes to Pro Forma Condensed Combined Financial Information."
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OLD NATIONAL BANCORP
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(Unaudited - Dollars in Thousands, Except Share and Per Share Data)
As Reported As Reported
------------------------- -----------------
Old ANB
National Heritage Pro Forma Corporation Pro Forma
----------- ----------- ----------- ----------- ------------
Interest income............................ $ 405,669 $ 10,846 $ 416,515 $ 44,431 $ 460,946
Interest expense........................... 196,289 4,629 200,918 19,848 220,766
----------- ----------- ----------- ----------- ------------
Net interest income........................ 209,380 6,217 215,597 24,583 240,180
Provision for loan losses.................. 11,082 485 11,567 1,156 12,723
----------- ----------- ----------- ----------- ------------
Net interest income after provision for
loan losses........................ 198,298 5,732 204,030 23,427 227,457
Noninterest income......................... 47,402 3,372 50,774 7,362 58,136
Noninterest expense........................ 156,720 5,780 162,500 20,344 182,844
----------- ----------- ----------- ----------- ------------
Income before income taxes................. 88,980 3,324 92,304 10,445 102,749
Provision for income taxes................. 26,293 1,219 27,512 3,375 30,887
----------- ----------- ----------- ----------- ------------
Net income from continuing operations...... 62,687 2,105 64,792 7,070 71,862
Discontinued operations.................... 494 0 494 0 494
----------- ----------- ----------- ----------- ------------
Net income................................. $ 63,181 $ 2,105 $ 65,286 $ 7,070 $ 72,356
=========== =========== =========== =========== ============
Net income from continuing operations per common share: (c)
===========
Assuming no dilution.............. $ 1.25 $ 1.25 $ 1.22
=========== =========== ============
Assuming full dilution............ $ 1.22 $ 1.21 $ 1.19
=========== =========== ============
Weighted average common shares outstanding: (c)
Assuming no dilution.............. 50,134 51,905 58,982
=========== =========== ============
Assuming full dilution............ 52,772 54,584 61,785
=========== =========== ============
- --------------------------------------
See "Notes to Pro Forma Condensed Combined Financial Information."
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OLD NATIONAL BANCORP
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(a) Exchange of 100% of ANB Corporation common stock for 7,198,671 shares
of Old National common stock.
(b) Exchange of 100% of Heritage common stock for 2,001,166 of Old
National common stock.
(c) Net income per share on a fully diluted basis assumes the conversion of
Old National's convertible subordinated debentures.
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DESCRIPTION OF OLD NATIONAL
Overview
Old National is a bank holding company that operates 119 banking
offices and 174 ATM locations in Indiana, Illinois and Kentucky through its bank
subsidiaries. These banks provide a wide range of financial services, including:
- commercial, consumer and real estate loans;
- deposit products;
- issuing and servicing credit cards;
- leasing;
- letters of credit; and
- safe deposit facilities.
Old National also owns nonbank subsidiaries which provide additional
financial services incidental to its operations, including:
- securities brokerage services;
- fiduciary and trust services;
- investment services; and
- issuance and reinsurance of credit life, accident, health,
life, property and casualty insurance.
Old National was incorporated in 1982 in the State of Indiana. It began
its acquisition program in 1985 and has acquired 38 financial institutions since
that time. Old National continues to explore opportunities to acquire banks,
savings associations and nonbank companies and is currently reviewing and
analyzing potential acquisitions, as well as engaging in discussions or
negotiations concerning potential acquisitions. It is possible that none of
these discussions or negotiations will result in definitive agreements or
consummated acquisitions. Any acquisitions may be pending or completed prior to
the completion of the merger.
Old National's principal office is located at 420 Main Street,
Evansville, Indiana 47708. Its telephone number is (812) 464-1434.
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Supervision and Regulation
As a bank holding company, Old National is subject to regulation,
supervision and examination by the Board of Governors of the Federal Reserve
System under the Bank Holding Company Act of 1956, as amended. For a discussion
of certain of the material elements of the regulatory framework applicable to
bank holding companies and their subsidiaries and certain specific information
relevant to Old National, see Old National's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 which is incorporated by referenced into
this document.
This regulatory framework is intended primarily for the protection of
depositors and the federal deposit insurance funds and not for the protection of
security holders or creditors. The various government rules, regulations and
requirements that apply to Old National impact its business and activities. A
change in applicable statutes, rules, regulations and requirements that apply to
Old National impact its business and activities may have a material effect on
Old National's business and earnings. In addition, Old National's business and
earnings are affected by general economic conditions, legislation and actions of
regulatory authorities.
Under policy of the Federal Reserve, a bank holding company is expected
to act as a source of financial strength for its bank subsidiaries and to commit
resources to support such banks. As a result, the Federal Reserve may require
Old National to commit resources to its bank subsidiaries.
On November 12, 1999, The President signed into law comprehensive
legislation that modernizes the financial services industry for the first time
in decades. The legislation permits bank holding companies to conduct
essentially unlimited securities and insurance activities, in addition to other
activities determined by the Federal Reserve to be related to financial
services. As a result, Old National would be able to underwrite and sell
securities and insurance. It would also be able to acquire, or be acquired by,
brokerage firms and insurance underwriters. Old National has not had an
opportunity to assess the impact of the legislation on its operations, but at
the present time does not anticipate significant changes in its products or
services.
Recent Developments
On September 22, 1999, Old National registered $200 million of capital
securities of wholly-owned business trusts. Following the effective date of the
registration statement related to those securities, Old National may begin
selling these securities.
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On December 9, 1999, Old National declared a 5% stock dividend to its
shareholders of record on January 7, 2000 and payable on January 28, 2000.
References to the exchange ratio contained in this document have been adjusted
from 1.25 to 1.3125 pursuant to the merger agreement to give effect to the stock
dividend and references to Old National's per share information have been
adjusted to give effect to the stock dividend.
On December 20, 1999, Old National announced that it had agreed to
acquire Permanent Bancorp and Permanent Bank, each located in Evansville,
Indiana, in a stock exchange for stock transaction valued at approximately $92
million. Permanent Bancorp has assets of approximately $500 million.
On December 31, 1999, Old National through a subsidiary bank acquired
Sycamore Agency, located in Terre Haute, Indiana, through a share exchange
valued at approximately $10.8 million. Sycamore operates a general insurance
agency with a focus on commercial property and casualty business.
Incorporation of Certain Information by Reference
The foregoing information concerning Old National does not purport to
be complete. Certain information relating to the executive compensation, various
benefit plans (including stock option plans), voting securities, including the
principal holders of those securities, certain relationships and related
transactions and other matters as to Old National is incorporated by reference
from or set forth in Old National's Annual Report on Form 10-K for the year
ended December 31, 1998 and other documents filed by Old National and listed
under "Where You Can Find More Information" in this document, which are
specifically incorporated herein by reference. If you desire copies of any of
these documents, you may contact Old National at its address or telephone number
indicated under "Where You Can Find More Information."
DESCRIPTION OF HERITAGE
Business
Heritage is a bank holding company with one affiliate bank located in
Tennessee. Heritage engages in the business of commercial banking, investment
management and insurance services, providing such products and services through
its subsidiaries, Heritage Investment Center, Inc., Central Life Insurance
Company, Advance Credit Company, Inc., and Heritage Investment Corporation, all
located in offices throughout Tennessee. These subsidiaries provide a broad
range of financial services
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to their customers. As of September 30, 1999, Heritage had consolidated assets
of approximately $234.03 million. Heritage's principal office is located at 25
Jefferson Street, Clarksville, Tennessee 37040. Its telephone number is (931)
553-0500.
Incorporation of Certain Information by Reference
The foregoing information concerning Heritage does not purport to be
complete. Certain information relating to the executive compensation, various
benefit plans (including stock option plans), voting securities, including the
principal holders of those securities, certain relationships and related
transactions and other matters as to Heritage is incorporated by reference from
or set forth in Heritage's Annual Report on Form 10-KSB for the year ended
December 31, 1998 and other documents filed by Heritage and listed under "Where
You Can Find More Information" in this document, which are specifically
incorporated herein by reference. If you desire copies of any of these
documents, you may contact Heritage at its address or telephone number indicated
under "Where You Can Find More Information."
COMPARISON OF COMMON STOCK
Following the merger, the rights of former Heritage shareholders will
be governed by the laws of the State of Indiana, the state in which Old National
is incorporated, and by Old National's Articles of Incorporation, as amended and
Old National's By-Laws, as amended. The rights of the shareholders of Heritage
are presently governed by the laws of the State of Tennessee, the state in which
Heritage is incorporated, and by Heritage's Charter, as amended and By-Laws, as
amended. The rights of the shareholders of Heritage differ in certain respects
from the rights they will have as Old National shareholders, including for
anti-takeover measures and the vote required for the amendment of significant
provisions of the articles of incorporation and for the approval of significant
corporate transactions. The following summary comparison of Old National common
stock and Heritage common stock includes all material differences in the rights
accruing to holders of such shares but does not purport to be complete and is
qualified in its entirety by reference to Old National's and Heritage's Articles
of Incorporation and ByLaws and Heritage's Charter and By-Laws.
Authorized But Unissued Shares
- OLD NATIONAL
Old National's Articles of Incorporation authorize the issuance of
75,000,000 shares of Old National Common Stock, of which approximately 47.9
million shares were outstanding as of September
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30, 1999. The remaining authorized but unissued shares of common stock may be
issued upon authorization of the Board of Directors of Old National without
prior shareholder approval. Old National has 2,000,000 shares of preferred stock
authorized. These shares are available to be issued, without prior shareholder
approval, in classes with relative rights, privileges and preferences determined
for each class by the Board of Directors of Old National. No shares of preferred
stock are presently outstanding.
The Board of Directors of Old National has authorized a series of
preferred stock designated as Series A preferred stock. The Board of Directors
of Old National has designated 200,000 shares of Series A preferred stock in
connection with the shareholder rights plan of Old National. The Old National
Series A preferred stock may not be issued except upon exercise of certain
rights ("Rights") pursuant to such shareholder rights plan. No shares of Series
A preferred stock have been issued as of the date of this Proxy Statement. See
"Comparison of Common Stock -- Anti-Takeover Provisions -- Old National's
Shareholder Rights Plan" below.
As of September 30, 1999, Old National had approximately 500,000 shares
of Old National common sock reserved for issuance under Old National's Stock
Purchase and Discounted Dividend Reinvestment Plan and 1.4 million shares of its
common stock reserved for issuance upon conversion of its outstanding 8%
convertible subordinated debentures. Such debentures are convertible at any time
prior to maturity, unless previously redeemed, into shares of Old National
common stock at a conversion rate of 81.39 shares per $1,000 principal amount of
debentures (equivalent to a conversion price of approximately $12.29 per share),
subject to adjustment in certain events.
The issuance of additional shares of Old National common stock or the
issuance of Old National preferred stock may adversely affect the interests of
Old National shareholders.
- HERITAGE
Heritage's Charter authorizes the issuance of 3,000,000 shares of
Heritage common stock, of which 605,039 were issued and outstanding as of
September 30, 1999. Heritage has 1,000,000 shares of preferred stock authorized.
No shares of preferred stock are presently outstanding. Following the merger,
each outstanding share of Heritage common stock will convert to the right to
receive 3.3075 shares of Old National common stock, as adjusted for the 5% stock
dividend declared by Old National on December 9, 1999 subject to further
adjustment for stock dividends and stock splits. See "Proposed Merger Conversion
of Heritage Common Stock."
Preemptive Rights
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As permitted by Indiana law, Old National's Articles of Incorporation
do not provide for preemptive rights to subscribe for any new or additional Old
National common stock or other securities. Preemptive rights may be granted to
Old National's shareholders if Old National's Articles of Incorporation are
amended accordingly. As permitted by Tennessee law, Heritage's Charter do not
provide for preemptive rights to subscribe for any new or additional Heritage
common stock or other securities.
Dividend Rights
The holders of common stock of Old National and Heritage are entitled
to dividends and other distributions when, as and if declared by their
respective boards of directors out of funds legally available therefor. Old
National or Heritage may not pay a dividend if, after giving it effect, (1) Old
National or Heritage, respectively, would not be able to pay its debts as they
become due in the usual course of business, or (2) Old National's or Heritage's
respective total assets would be less than the sum of its total liabilities
plus, unless Old National's Articles of Incorporation or Heritage's Charter
permitted otherwise, the amount that would be needed to satisfy the preferential
rights upon dissolution of shareholders whose preferential rights are superior
to those receiving the dividend if Old National or Heritage respectively were to
be dissolved at the time of the dividend.
The amount of dividends, if any, that may be declared by Old National
in the future will necessarily depend upon many factors, including, without
limitation, future earnings, capital requirements, business conditions and
capital levels of subsidiaries (since Old National is primarily dependent upon
dividends paid by its subsidiaries for its revenues), the discretion of Old
National's Board of Directors and other factors that may be appropriate in
determining dividend policies.
Cash dividends paid to Old National by its Illinois-chartered affiliate
banks are limited by Illinois law to the bank's net profits then on hand, less
losses and statutorily-defined bad debts. Cash dividends paid to Old National by
its Kentucky-chartered affiliate banks are limited by Kentucky law to so much of
the net profits of the banks, after deducting all expenses, losses, bad or
suspended debts and interest and taxes accrued or due from the banks, as the
boards of directors of the banks deem expedient. In addition, the approval of
the Kentucky Commissioner of Banks is required if the total of all dividends
declared by a Kentucky bank in any calendar year exceeds the bank's net profit
for that year and the net retained profits from the preceding two years, less
any transfers to surplus or a fund for retirement of preferred stock or debt.
Old National's national affiliate banks and Indiana-chartered affiliate banks
may pay cash dividends on their common stock only out of adjusted retained net
profits for the year in which the dividend is paid and the two preceding years.
Cash dividends paid to Heritage by Heritage Bank, as a Tennessee-chartered bank,
are limited by Tennessee law to the undivided profits of Heritage Bank.
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However, prior to the declaration of any dividend, the Bank must have made all
required allocations to reserves for losses or contingencies. In addition, the
approval of the Tennessee Department of Financial Institutions is required if
the total dividends declared by Heritage Bank in any year exceeds the total of
its net income for that year combined with its retained net income of the
preceding two years.
Dividends paid by Old National's affiliate banks will ordinarily be
restricted to a lesser amount than is legally permissible because of the need
for the banks to maintain adequate capital consistent with the capital adequacy
guidelines promulgated by the banks' principal federal regulatory authorities.
If a bank's capital levels are deemed inadequate by the regulatory authorities,
payment of dividends to its parent holding company may be prohibited without
prior regulatory approval. None of Old National's affiliate banks are currently
subject to such a restriction.
Voting Rights
The holders of the outstanding shares of Old National common stock and
Heritage common stock are entitled to one vote per share on all matters
presented for shareholder vote. Shareholders of Old National and Heritage do not
have cumulative voting rights in the election of directors. Under cumulative
voting, the number of shares a shareholder is entitled to vote is multiplied by
the number of directors to be elected to the Board, which number represents the
number of votes a shareholder may cast at such election. A shareholder may cast
all his or her votes for one candidate or distribute them among any two or more
candidates. The absence of cumulative voting rights in the election of directors
may make it more difficult for a minority shareholder to elect a nominee as a
director.
Indiana law generally require that mergers, consolidations, sales,
leases, exchanges or other dispositions of all or substantially all of the
assets of a corporation be approved by the affirmative vote of a majority of the
issued and outstanding shares entitled to vote at the shareholders meeting,
subject in each case to provisions in the corporation's articles of
incorporation requiring a higher percentage vote for certain transactions. Old
National's Articles of Incorporation and Heritage's Charter provide that certain
business combinations may, under certain circumstances, require approval of more
than a simple majority of the issued and outstanding shares of Old National
common stock. See "Comparison of Common Stock -- Anti-Takeover Provisions".
Indiana law requires shareholder approval by a majority of a quorum
present at a shareholders' meeting (and, in certain cases, a majority of all
shares held by any voting group entitled to vote) for most amendments to a
corporation's articles of incorporation. Indiana law permits a corporation in
its articles of incorporation to prescribe a higher shareholder vote for certain
amendments to the articles of incorporation. Old National's Articles of
Incorporation require a super-majority shareholder vote of
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eighty percent (80%) of the outstanding shares of Old National common stock for
the amendment of certain significant provisions.
Dissenters' Rights
The holders of shares of Indiana business corporations possess
dissenters' rights in connection with certain mergers and other significant
corporate actions. Under Indiana law, a shareholder is entitled to dissent from
and obtain payment of the fair value of the shareholder's shares in the event of
(1) consummation of a plan of merger, if shareholder approval is required and
the shareholder is entitled to vote thereon, (2) consummation of a plan of share
exchange by which the shareholder's shares will be acquired, if the shareholder
is entitled to vote thereon, (3) consummation of a sale or exchange of all, or
substantially all, the property of the corporation other than in the usual
course of business, if the shareholder is entitled to vote thereon, (4) approval
of a control share acquisition under Indiana law, and (5) any corporate action
taken pursuant to a shareholder vote to the extent the articles of
incorporation, by-laws or a resolution of the board of directors provides that
voting or non-voting shareholders are entitled to dissent and obtain payment for
their shares.
The dissenters' rights provisions described above do not apply,
however, to the holders of shares of any class or series with respect to a
merger, share exchange or sale or exchange of property if the shares of that
class or series were registered on a United States securities exchange
registered under the Exchange Act or traded on the Nasdaq National Market System
or a similar market. As of the date of this Proxy Statement, shares of Old
National common stock are traded on the Nasdaq National Market System and,
therefore, Old National shareholders presently are not entitled to assert
dissenters' rights under Indiana law with respect to any of the transactions
discussed above.
Under the TBCA, a shareholder is generally entitled to dissent from a
corporate action and obtain payment of the fair value of his shares in certain
events. These events generally include:
- mergers, share exchanges and sales of substantially all of the
corporation's assets other than in the usual and regular
course of business, if the shareholder is entitled to vote on
certain transactions;
- certain types of amendments of the corporation's charter that
materially and adversely affects a shareholder's rights; or
- other corporate actions taken pursuant to a shareholder vote,
to the extent the Charter, ByLaws, or a resolution of the
board of directors provide for dissenters' rights.
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Heritage's Charter and By-Laws do not provide for any such additional
dissenters' rights. Under the TBCA, a shareholder will not have the right to
dissent as to any shares which are listed on a national securities exchange
registered under Section 6 of the Exchange Act or are national market system
securities under the Exchange Act rules. Heritage common stock is not currently
so listed. Accordingly, shareholders of Heritage will be able to asset
dissenters' rights with respect to their shares of Heritage common stock. See
"Dissenters' Rights" on page _____.
Liquidation Rights
In the event of any liquidation or dissolution of Old National, the
holders of shares of Old National common stock are entitled to receive pro rata
with respect to the number of shares held by them any assets distributable to
shareholders, subject to the payment of Old National's liabilities and any
rights of creditors and holders of shares of Old National preferred stock then
outstanding. Shareholders of Heritage have similar liquidation rights.
Redemption and Assessment
Under Indiana law, shares of Old National common stock are not liable
to further assessment. Old National may redeem or acquire shares of Old National
common stock with funds legally available therefor, and shares so acquired
constitute authorized but unissued shares. The Old National Board of Directors
authorized the purchase or redemption of up to the number of shares to be issued
to the shareholders of Permanent Bancorp relating to Old National's acquisition
of Permanent Bancorp. Old National may not redeem or acquire shares of Old
National common stock if, after giving such redemption or acquisition effect,
Old National would not be able to pay its debts as they become due in the usual
course of business, or Old National's total assets would be less than the sum of
its total liabilities plus, unless Old National's Articles of Incorporation
permitted otherwise, the amount that would be needed to satisfy the preferential
rights upon dissolution of shareholders whose preferential rights are superior
to those whose stock is being redeemed or acquired if Old National were to be
dissolved at the time of the redemption or acquisition.
Under Tennessee law, shares of Heritage common stock are not liable to
further assessment. Heritage may redeem or acquire shares of Heritage common
stock with funds legally available therefor, and shares so acquired constitute
authorized but unissued shares.
In addition, Old National and Heritage must give prior notice to the
Federal Reserve if the consideration to be paid by them for any redemption or
acquisition of their respective shares, when
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aggregated with the consideration paid for all redemptions or acquisitions for
the preceding twelve (12) months, equals or exceeds 10% of their respective
consolidated net worth.
Anti-Takeover Provisions
The anti-takeover measures applicable to Old National as described
below, may have the effect of discouraging or rendering it more difficult for a
person or other entity to acquire control of Old National. These measures may
have the effect of discouraging certain tender offers for shares of Old National
common stock which might otherwise be made at premium prices or certain other
acquisition transactions which might be viewed favorably by a significant number
of shareholders.
INDIANA LAW. Under the business combinations provision of Indiana law,
any 10% shareholder of an Indiana corporation, with a class of voting shares
registered under Section 12 of the Exchange Act or which has specifically
adopted this provision in the corporation's articles of incorporation, is
prohibited for a period of five (5) years from completing a business combination
with the corporation unless, prior to the acquisition of such 10% interest, the
board of directors of the corporation approved either the acquisition of such
interest or the proposed business combination. Further, the corporation and a
10% shareholder may not consummate a business combination unless all provisions
of the articles of incorporation of the corporation are complied with and a
majority of disinterested shareholders approve the transaction or all
shareholders receive a price per share determined in accordance with the
business combinations provision of Indiana law.
An Indiana corporation may elect to remove itself from the protection
provided by the Indiana business combinations provision, but such an election
remains ineffective for eighteen (18) months and does not apply to a combination
with a shareholder who acquired a 10% ownership position prior to the effective
time of the election. Old National is subject to the business combinations
provision of Indiana law, but such provision does not apply to the merger
between Old National and Heritage. The constitutional validity of the business
combinations provision of Indiana law has in the past been challenged and has
been upheld by the United States Supreme Court.
In addition to the business combinations provision, Indiana law also
contains a "control share acquisition" provision which, although different in
structure from the business combinations provision, may have a similar effect of
discouraging or making more difficult a hostile takeover of an Indiana
corporation. This provision also may have the effect of discouraging premium
bids for outstanding shares. Indiana law provides that, unless otherwise
provided in an Indiana corporation's articles of incorporation or by-laws,
certain acquisitions of shares of the corporation's common stock will be
accorded voting rights only if a majority of the disinterested shareholders
approves a resolution granting
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the potential acquiror the ability to vote such shares. Upon disapproval of the
resolution, the shares held by the acquiror shall be redeemed by the corporation
at the fair value of the shares as determined by the control share acquisition
provision.
This provision does not apply to a plan of affiliation and merger, if
the corporation complies with the applicable merger provisions and is a party to
the plan of merger or plan of share exchange. Old National and Heritage are
subject to the control share acquisition provision, but such provision does not
apply to the merger between Old National and Heritage.
TENNESSEE LAW. Tennessee's Business Combination Act (the "Tennessee
Business Combination Act") provides that an interested stockholder (defined as
person beneficially owning, either directly or indirectly, ten percent or more
of the voting securities in a Tennessee corporation) cannot engage in a business
combination with that corporation unless the transaction takes place at least
five (5) years after the interested stockholder first became an interested
stockholder, and unless either the transaction (a) is approved by at least
two-thirds of the shares of the corporation not beneficially owned by an
interested stockholder (b) satisfies certain fairness conditions specified in
the Tennessee Business Combination Act relating to be paid to the non-interested
stockholders in such transactions.
These provisions apply to Tennessee corporations unless one of two
events occurs. A business combination with an entity can proceed without the
five year moratorium if the business combination or the transaction resulting in
the stockholder becoming an interested stockholder is approved by the target
corporation's board of directors before that entity becomes an interested
stockholder. Alternatively, the corporation may enact a charter amendment or
bylaw to remove itself entirely from the Tennessee Business Combination Act.
This charter amendment or bylaw must be approved by a majority of the
stockholders who have held shares for more than one year prior to the vote and
may not take effect for at least two years after the vote. Heritage has not
adopted such a provision in its Charter or By-Laws removing Heritage from
coverage under the Tennessee Business Combination Act. The merger is not
governed by the Tennessee Business Combination Act because the Heritage board of
directors approved the merger agreement before it was executed.
In addition to the Tennessee Business Combination Act, Tennessee law
also contains the Tennessee Control Share Acquisition Act ("TCSAA"), which,
although different in structure from the Tennessee Business Combination Act, may
have a similar affect of discouraging or making more difficult a hostile take
over of a Tennessee corporation. The TCSAA takes away the voting rights of a
purchaser's shares any time an acquisition of shares in a Tennessee corporation
brings the purchaser's voting power to 20%, 331/3% or more than 50% of all
voting power in such corporation (a "control share"). The purchaser's voting
rights can be maintained or re-established only by a majority vote of all the
shares
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entitled to vote generally with respect to the election of directors other than
those shares owned by the acquiror and the officers and inside directors of the
corporation.
After acquiring a control share, the TCSAA provides a procedure by
which a purchase may demand a special meeting of stockholders to conduct such a
vote. The purchaser can demand such a meeting before acquiring a control share,
but, can do so only if it holds at least 10% of outstanding shares and announces
a good faith intention to make the control share acquisition. The TCSAA applies
only to a corporation that has adopted a provision in its charter or bylaw
declaring that the TCSAA will apply. Heritage has not adopted any such provision
in its Charter or By-Laws electing protection under the TCSAA and therefore is
not subject to the TCSAA.
The Tennessee Investor Protection Act (the "TIPA") provides that unless
a Tennessee corporation's board of directors has recommended a take over offer
to stockholders, no offeror beneficially owning 5% or more of any class of
equity securities of the offeree company, any of which was purchased within the
preceding year, may make a tender offer for a class of equity security of the
offeree company if after completion the offeror would be a beneficial owner of
more than 10% of any class of outstanding equity securities of the company
unless the offeror, before making such purchase:
- A public announcement of his or her intention with respect to
changing or influencing the management or control of the
offeree company;
- Makes a full, fair and effective disclosure of such intentions
to the person from whom he or she intends to acquire such
securities; and
- Files with the Tennessee Commissioner of Commerce and
Insurance (the "Commissioner") and the offeree company a
statement signifying such intentions and containing such
additional information as may be prescribed by the
Commissioner.
The offeror must provide that any equity securities of an offeree
company deposited or tendered pursuant to a take over offer may be withdrawn by
an offeree at any time within seven days from the date the offer has become
effective following filing with the Commission and offeree company and public
announcement of the terms or after 60 days from the date the offer has become
effective. If the take over offer is for less than all the outstanding equity
securities of any class, such an offer must also accept securities pro rata if
the number of securities tendered is greater than the number the offeror has
offered to accept and pay for. Such an offeror varies the terms of the take over
offer before its expiration date by increasing the consideration offered to
offerees, the offeror must pay the increased consideration for equity securities
accepted whether accepted before or after the variation in the terms of the
offer.
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Any person making a take over offer involving a Tennessee corporation
shall file a registration statement with the Commissioner and send a copy of the
registration statement by certified mail to the offeree company. The
registration statement shall contain such information as set forth in the
statute. The TIPA dos not apply to an offer involving a vote by holders of
equity securities of the offeree company, pursuant to its charter, on a merger,
consolidation or sale of corporate assets in consideration of the issuance of
securities of another corporation, or on a sale of its securities in exchange
for cash or securities of another corporation. The TIPA does not apply to the
merger because the Heritage Board of Directors has recommended acceptance of the
merger to its stockholders. The merger therefor does not involve a "takeover
offer" within the meaning of the TIPA.
OLD NATIONAL'S ARTICLES OF INCORPORATION. In addition to the
protections provided by Indiana law, Old National's Articles of Incorporation
require the affirmative vote of the holders of at least eighty percent (80%) of
the issued and outstanding shares of capital stock for any business combination
which is not recommended by the vote of two-thirds or more of the members of the
Board of Directors of Old National. For purposes of Old National's Articles of
Incorporation, "business combination" is defined to include: (1) a merger or
consolidation of Old National with or into any other corporation, (2) any sale,
lease, exchange or other disposition of any material part of the assets of Old
National, or (3) any liquidation or dissolution of Old National or any material
subsidiary of Old National. Further, this provision cannot be altered, amended
or repealed without the affirmative vote of the holders of at least eighty
percent (80%) of the issued and outstanding shares of Old National common stock
entitled to vote thereon.
Old National's Articles of Incorporation also include provisions
requiring (1) the Board of Directors to consider non-financial factors in the
evaluation of business combinations and tender or exchange offers, and (2) any
person acquiring fifteen percent (15%) of the then issued and outstanding stock
of Old National to pay equal consideration in connection with the acquisition of
any further shares. These provisions require an eighty percent (80%) affirmative
vote of the issued and outstanding shares of Old National common stock entitled
to vote thereon in order to be altered, amended or repealed.
OLD NATIONAL PREFERRED STOCK. The shares of Old National Series A
preferred stock are nonredeemable and, unless otherwise provided in connection
with the creation of a subsequent series of preferred stock, are subordinate to
all other series of preferred stock of Old National. Each share of Old National
Series A preferred stock will be entitled to receive, when, as and if declared,
a quarterly dividend in an amount equal to the greater of $1.00 per share or 100
times the quarterly cash dividend declared on Old National common stock. In
addition, the Old National Series A preferred stock is entitled to 100 times any
non-cash dividends (other than dividends payable in equity securities) declared
on the Old National common stock, in like kind. In the event of liquidation, the
holders of Old National
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Series A preferred stock will be entitled to receive a liquidation payment in an
amount equal to the greater of $100.00 per share or 100 times the liquidation
payment made per share of Old National common stock. Each share of Old National
Series A preferred stock will have 100 votes, subject to adjustment, voting
together with the Old National common stock and not as a separate class unless
otherwise required by law or Old National's Articles of Incorporation. In the
event of any merger, consolidation or other transaction in which common shares
are exchanged, each share of Old National Series A preferred stock will be
entitled to receive 100 times the amount received per share of Old National
common stock. The rights of the Old National Series A preferred stock as to
dividends, voting rights and liquidation are protected by antidilution
provisions.
OLD NATIONAL'S SHAREHOLDER RIGHTS PLAN. On January 25, 1990, the Board
of Directors of Old National declared a dividend of one (1) right for each
issued and outstanding share of Old National common stock ("Right"). See
"Comparison of Common Stock -- Authorized But Unissued Shares". The dividend was
payable on March 15, 1990 to holders of record of Old National common stock at
the close of business on March 1, 1990. Each Right entitles the registered
holder to purchase from Old National one-hundredth (1/100) of a share of Old
National Series A preferred stock at an initial Purchase Price of $60.00,
subject to adjustment. The terms and conditions of the Rights are contained in a
Rights Agreement between Old National and Old National Bank in Evansville, as
Rights Agent.
The foregoing information concerning Old National's shareholder Rights
Plan does not purport to be complete. For additional information, see The Rights
Agreement, dated March 1, 1990, between Old National and Old National Bank in
Evansville, as Trustee, which is specifically incorporated herein by reference.
See "Incorporation of Certain Documents by Reference." The shares of Old
National common stock to be received by Heritage shareholders in the merger will
be subject to the rights under the Old National Shareholder Rights Plan.
HERITAGE'S CHARTER. In addition to the protections provided by
Tennessee law, Heritage's Charter require the affirmative vote of the holders of
at least two-thirds of the outstanding voting stock of Heritage for any business
combination which is not recommended by a majority vote of the members of the
Board of Directors of Heritage. For purposes of Heritage's Charter, "business
combination" is defined to include: (i) a merger or consolidation of Heritage
with or into any other corporation; (ii) any sale, exchange or lease of all or
substantially all of the assets of Heritage to any person or entity. Further,
this provision cannot be amended or repealed without the affirmative vote of the
holders of not less than two-thirds of the outstanding voting stock of Heritage.
Heritage's Charter also includes provisions requiring the Board of
Directors of Heritage to consider non-financial factors in the evaluation of
business combinations in tender or exchange offers.
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This provision requires the affirmative vote of the holders of not less than
two-thirds of the outstanding voting stock of Heritage to amend or repeal the
provision.
Director Liability
Under Indiana law, a director of Old National will not be liable to
shareholders for any action taken as a director, or any failure to take any
action, unless (1) the director has breached or failed to perform his duties as
a director in good faith with the care an ordinarily prudent person in a like
position would exercise under similar circumstances and in a manner the director
reasonably believes to be in the best interests of the corporation and (2) such
breach or failure to perform constitutes willful misconduct or recklessness.
Under Tennessee law, a director is not liable for any action taken as a
director, or any failure to take any action, if the director has performed the
duties of the office: (i) in good faith; (ii) with the care an ordinarily
prudent person in a like position would exercise under similar circumstances;
and (iii) in a manner the director reasonably believes to be in the best
interest of the corporation.
Director Nominations
Old National's By-Laws require that all nominations for election as
directors of Old National shall be made by the Board of Directors of Old
National in accordance with the By-Laws. Under the By-Laws, the Nominating
Committee of the Board of Directors of Old National ("Nominating Committee") is
required to submit to the entire Board of Directors its recommendation of
nominees for election as directors of Old National prior to each annual or
special meeting of shareholders at which directors will be elected.
The Nominating Committee is comprised of five (5) directors of Old
National, none of whom is an officer or employee of Old National. The Nominating
Committee maintains the responsibility to recruit potential director candidates,
recommend changes to the entire Board of Directors concerning the size,
composition and responsibilities of the Board of Directors, review proxy
documents received from shareholders relating to the Board of Directors and
review suggestions of shareholders regarding nominees for election as directors.
All such suggestions of shareholders with respect to director nominations must
be submitted in writing to the Nominating Committee not less than 120 days prior
to the date of the annual or special meeting of shareholders at which directors
will be elected.
Heritage's By-Laws do not set forth a specific way for nominating
directors. The By-Laws do specify that each director shall own at least 1,000
shares of Heritage and at least three-fourths of the
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directors shall be citizens of the United States and at least two-thirds shall
be residents of Tennessee or reside within twenty-five miles of the main office
of Heritage. The majority of the directors shall reside within a hundred miles
of the main office of Heritage.
LEGAL OPINIONS
The validity of the shares of Old National common stock to be issued in
the merger will be passed upon by Krieg DeVault Alexander & Capehart, LLP, One
Indiana Square, Suite 2800, Indianapolis, Indiana 46204. Certain tax
consequences of the merger will be passed upon by Krieg DeVault Alexander &
Capehart, LLP.
EXPERTS
The consolidated financial statements of Old National and affiliates
incorporated into this document have been audited by Arthur Andersen, LLP,
independent public accountants, to the extent and for the years indicated in
their report thereon, and have been so incorporated into this document in
reliance upon the report of Arthur Andersen and upon the authority of such firm
as experts in auditing and accounting.
The consolidated financial statements of Heritage incorporated into
this document have been audited by Heathcott & Mulloly, P.C., independent
auditors, to the extent and for the year indicated in their report thereon. Such
consolidated financial statements have been so incorporated into this document
in reliance upon the report of Heathcott & Mulloly and upon the authority of
such firm as experts in auditing and accounting.
Representatives of Heathcott & Mulloly are not expected to be at the
special meeting.
OTHER MATTERS
The special meeting is called for the purposes set forth in the Notice
attached to this Proxy Statement. The Board of Directors of Heritage knows of no
other matters for action by shareholders at the special meeting other than the
matters described in the Notice. However, the enclosed proxy will confer
discretionary authority to the persons named therein with respect to any such
matters, none of which are known to the Board of Directors of Heritage as of the
date hereof, which may properly come before the Special Meeting. It is the
intention of the persons named in the proxy to vote pursuant to the proxy with
respect to such matters in accordance with the best judgment of the person named
in the proxy.
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FORWARD-LOOKING STATEMENTS
This document (including information included or incorporated by
reference herein) contains certain forward-looking statements with respect to
the financial condition, results of operations, plans, objectives, future
performance and business of each of Old National and Heritage, as well as
certain information relating to the merger, including, without limitation
statements preceded by, followed by or that include the words "believes,"
"expects," "anticipates," "estimates" or similar expressions. These forward-
looking statements involve certain risks and uncertainties. Actual results may
differ materially from those contemplated by such forward-looking statements due
to, among others, the following factors: (a) expected cost savings from the
merger may not be fully realized or realized within the expected time frame; (b)
revenues following the merger may be lower than expected, or deposit attrition,
operating costs or customer loss and business disruption following the merger
may be greater than expected; (c) competitive pressures among depository and
other financial institutions may increase significantly; (d) changes in the
interest rate environment may reduce margins; (e) general economic or business
conditions, either nationally or in the states in which Old National is doing
business, may be less favorable than expected resulting in, among other things,
a deterioration in credit quality or a reduced demand for credit; (f)
legislative or regulatory changes may adversely affect the business in which Old
National is engaged; (g) technological changes (including "Year 2000" data
systems compliance issues) may be more difficult or expensive than anticipated;
and (h) changes may occur in the securities markets.
WHERE YOU CAN FIND MORE INFORMATION
Old National and Heritage are subject to the reporting requirements of
the Exchange Act and in accordance therewith file reports, proxy statements and
other information with the SEC. Such reports, proxy statements and other
information may be inspected and copied at prescribed rates at the following
locations of the SEC:
Public Reference Room Midwest Regional Office
450 Fifth Street, N.W. 500 West Madison Street
Room 1024 Suite 1400
Washington, D.C. 20549 Chicago, IL 60661-2511
Copies of such material may also be obtained at prescribed rates from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549. You may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an
Internet site that contains reports, proxy and information statements, and other
information regarding Old National and Heritage, and the address of that site is
http://www.sec.gov. You may obtain
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information about Old National on its Internet site. The address of the site is
http://www.oldnational.com. Old National's common stock is quoted on the Nasdaq
National Market System and reports, proxy statements and other information
concerning Old National are available for inspection and copying at prescribed
rates at the office of the National Association of Securities Dealers, Inc.,
1735 K Street, Washington, D.C. 20006.
Old National has filed with the SEC a Registration Statement on Form
S-4 under the Securities, with respect to the shares of Old National common
stock to be issued in connection with its merger with Heritage. This Proxy
Statement - Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the SEC. Reference is made to the Registration
Statement, including the exhibits filed as a part thereof or incorporated
therein by reference, which can be inspected and copied at prescribed rates at
the public reference facilities maintained by the SEC at the addresses set forth
above.
The SEC allows Old National and Heritage to "incorporate by reference"
information into this document. This means that the companies can disclose
important information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is considered
to be a part of this document, except for any information that is superseded by
information that is included directly in this document. This document
incorporates by reference the documents listed below that Old National and
Heritage have previously filed with the SEC. They contain important information
about the companies and their financial condition.
The following documents previously filed by Old National (SEC File No.
0-10888) with the SEC pursuant to the Exchange Act are incorporated herein by
reference:
- Old National's Quarterly Report on Form 10-Q for the quarters
ended March 31, 1999, June 30, 1999 and September 30, 1999.
- Old National's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998.
- Old National's Annual Report to Shareholders for the fiscal
year ended December 31, 1998.
- The description of Old National's common stock contained in
Old National's Current Report on Form 8-K, dated January 6,
1983, and the description of Old National's Preferred Stock
Purchase Rights contained in Old National's Form 8-A, dated
March 1, 1990, including the Rights Agreement, dated March 1,
1990, between Old National and Old National Bank in
Evansville, as Trustee.
- The Current Report on Form 8-K filed on July 29, 1999.
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- The Current Report on Form 8-K filed on December 1, 1999.
The following documents previously filed by Heritage (SEC File No.
33-45240) with the SEC pursuant to the Exchange Act are incorporated herein by
reference:
- Heritage's Quarterly Report on Form 10-QSB for the quarters
ended March 31, 1999, June 30, 1999 and September 30, 1999.
- Heritage's Annual Report on Form 10-KSB, as amended, for the
fiscal year ended December 31, 1998.
- Heritage's Annual Report to Shareholders for the fiscal year
ended December 31, 1998.
Old National and Heritage incorporate by reference additional documents
that either company may file with the SEC between the date of this document and
the dates of the Heritage special meeting. These documents include periodic
reports, such as Annual Reports on Form 10-KSB, Quarterly Reports on Form 10-Q
or 10-QSB and Current Reports on Form 8-K, as well as proxy statements.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein will be deemed to be modified or superseded for
purposes of this document to the extent that a statement contained herein or in
any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this document.
Old National has supplied all information contained or incorporated by
reference in this Old National Proxy Statement-Prospectus relating to Old
National, as well as all pro forma financial information, and Heritage has
supplied all relevant information relating to Heritage.
You can obtain any of the documents incorporated by reference in this
document through Old National or Heritage, as the case may be, or from the SEC
through the SEC's Internet world wide web site at the address listed above.
Documents incorporated by reference are available from the companies without
charge, excluding any exhibits to those documents, unless the exhibit is
specifically incorporated by reference as an exhibit in this document. You can
obtain documents incorporated by reference in this document by requesting them
in writing or by telephone from the appropriate company at the following
addresses:
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Old National Bancorp Heritage Financial Services, Inc.
420 Main Street 25 Jefferson Street
P. O. Box 718 Clarksville, Tennessee 37041
Evansville, Indiana 47705 Attn: Earl O. Bradley, III
Attn: Jeffrey L. Knight, Corporate President and Chief Executive Officer
Secretary and General Counsel (931) 553-0500
(812) 464-1363
If you would like to request documents, please do so by _______________, 2000 to
receive them before the special meeting. If you request any incorporated
documents from us, we will mail them to you by first class mail, or another
equally prompt means, promptly after we receive your request.
Old National and Heritage have not authorized anyone to give any
information or make any representation about the merger or our companies that is
different from, or in addition to, that contained in this document or any of the
materials that we have incorporated into this document. Therefore, if anyone
does give you information of this sort, you should not rely on it. If you are in
a jurisdiction where offers to exchange or sell, or solicitations of offers to
exchange or purchase, the securities offered by this document or the
solicitation of proxies is unlawful, or if you are a person to whom it is
unlawful to direct these types of activities, then the offer presented in this
document does not extend to you. The information contained in this document
speaks only as of the date of this document unless the information specifically
indicates that another date applies.
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LIST OF APPENDICES
Agreement of Affiliation and Merger, dated September 8, 1999,
between Old National Bancorp and Heritage Financial Services, Inc. Appendix A
Fairness Opinion of Professional Bank Services, Inc. Appendix B
Chapter 23, Tennessee Business Corporation Act Appendix C
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APPENDIX A
AGREEMENT OF AFFILIATION AND MERGER
THIS AGREEMENT OF AFFILIATION AND MERGER ("Agreement") is made
and entered into effective as of the 8th day of September, 1999, by and between
OLD NATIONAL BANCORP ("ONB") and HERITAGE FINANCIAL SERVICES, INC. ("Heritage").
W I T N E S S E T H:
WHEREAS, ONB is an Indiana corporation registered as a bank holding
company under the federal Bank Holding Company Act of 1956, as amended ("BHC
Act"), with its principal office located in Evansville, Vanderburgh County,
Indiana; and
WHEREAS, Heritage is a Tennessee corporation registered as a bank
holding company under the BHC Act, with its principal office located in
Clarksville, Montgomery County, Tennessee; and
WHEREAS, Heritage is the sole owner, directly or indirectly, of all of
the outstanding capital stock of: (i) Heritage Bank (the "Bank") and (ii)
Heritage Investment Center, Inc. (the "Investment Center"), Central Life
Insurance Company ("CLIC"), Advance Credit Company, Inc. (the "Finance Company")
and Heritage Investment Corporation (the "Investment Corporation")
(collectively, the "Subsidiaries"); and
WHEREAS, ONB and Heritage seek to affiliate through a corporate
reorganization whereby Heritage will merge with and into ONB and the Bank will
thereby become a wholly-owned subsidiary of ONB; and
WHEREAS, ONB and Heritage intend that the Merger (as hereinafter
defined) constitute a tax-free reorganization pursuant to Section 368 of the
Internal Revenue Code of 1986, as amended ("Code"); and
WHEREAS, the Board of Directors of each of ONB and Heritage has
determined that it is in the best interests of its respective corporation to
consummate the strategic business combination provided for herein and has
approved this Agreement, authorized its execution and designated this Agreement
a plan of reorganization and a plan of merger.
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NOW, THEREFORE, in consideration of the foregoing premises, the
representations, warranties, covenants and agreements herein contained and other
good and valuable consideration, the sufficiency of which is hereby
acknowledged, ONB and Heritage hereby make this Agreement and prescribe the
terms and conditions of the affiliation of ONB and Heritage and the mode of
carrying such merger into effect as follows:
SECTION 1
THE MERGER
1.01. General Description. Upon the terms and subject to the conditions
of this Agreement, at the Effective Time (as defined in Section 10 hereof),
Heritage shall merge with and into and under the Articles of Incorporation of
ONB ("Merger"). ONB shall survive the Merger ("Surviving Corporation") and shall
continue its corporate existence under the laws of the State of Indiana pursuant
to the provisions of and with the effect provided in the Indiana Business
Corporation Law, as amended. Upon consummation of the Merger, the Bank shall
become a wholly-owned subsidiary of ONB.
1.02. Name, Officers, Directors and Management. (a) The name of the
Surviving Corporation shall be "Old National Bancorp." Its principal office
shall be located at 420 Main Street, Evansville, Indiana 47708.
(b) The officers of ONB serving at the Effective Time shall continue to
serve as the officers of the Surviving Corporation, until such time as their
successors shall have been duly elected and have qualified or until their
earlier resignation, death or removal from office.
(c) The directors of ONB as of the Effective Time shall be the
directors of the Surviving Corporation, until such time as their successors have
been duly elected and have been qualified or until their earlier resignation,
death or removal from office.
1.03. Capital Structure. The capital of the Surviving Corporation shall
be not less than the capital of ONB immediately prior to the Effective Time.
1.04. Articles of Incorporation and By-Laws. The Articles of
Incorporation and By-Laws of ONB in existence at the Effective Time shall remain
the Articles of Incorporation and By-Laws of the Surviving Corporation following
the Effective Time, until such Articles of Incorporation and By-Laws shall be
further amended as provided by applicable law.
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1.05. Assets and Liabilities. At the Effective Time, the title to all
assets, real estate and other property owned by Heritage shall vest in ONB
without reversion or impairment. At the Effective Time, all liabilities of
Heritage shall be assumed by ONB.
1.06. Tax-Free Reorganization and Accounting Treatment. ONB and
Heritage intend for the Merger to qualify as a reorganization within the meaning
of Section 368 and related sections of the Code, and for the Merger to be
accounted for as a pooling of interests transaction. ONB and Heritage agree to
cooperate and to take such action as may be reasonably necessary to achieve such
results.
SECTION 2
MANNER AND BASIS OF EXCHANGE OF STOCK
2.01. Exchange Ratio. Upon and by virtue of the Merger becoming
effective at the Effective Time, each issued and outstanding share of Heritage
Common Stock (as defined in Section 4.03 hereof) shall be converted into the
right to receive Three and Fifteen One-Hundredths (3.15) shares of ONB common
stock ("Exchange Ratio"), subject to adjustment, if any, pursuant to the
provisions of Section 2.03 hereof.
2.02. No Fractional Shares. Certificates for fractional shares of ONB
common stock shall not be issued for fractional interests resulting from
application of the Exchange Ratio. Each shareholder of Heritage who would
otherwise have been entitled to a fraction of a share of ONB common stock shall
be paid in cash following the Effective Time an amount equal to such fraction
multiplied by the average of the per share closing price of ONB common stock as
reported on the Nasdaq National Market System for the final five (5) business
days on which shares of ONB common stock were traded immediately preceding the
Effective Time.
2.03. Recapitalization. If, between the date of this Agreement and the
Effective Time, the record date occurs for the distribution or issuance by ONB
of a stock dividend with respect to its shares of common stock, or a
combination, subdivision, reclassification or split of ONB's issued and
outstanding shares of common stock, such that the number of issued and
outstanding shares of ONB common stock is increased or decreased, then the
Exchange Ratio shall be adjusted so that Heritage's shareholders shall receive,
in the aggregate, such number of shares of ONB common stock representing the
same percentage of outstanding shares of ONB common stock at the Effective Time
as would have been represented by the number of shares of ONB common stock such
shareholders would have received if any of the foregoing actions had not
occurred.
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2.04. Distribution of ONB Common Stock and Cash. (a) In a reasonable
period of time following the Effective Time, ONB shall mail to each Heritage
shareholder a letter of transmittal providing instructions as to the transmittal
to ONB of certificates representing shares of Heritage Common Stock and the
issuance of shares of ONB common stock in exchange therefor pursuant to the
terms of this Agreement.
(b) Following the Effective Time, distribution of stock certificates
representing shares of ONB common stock and any cash payment, without interest,
for fractional shares, if any, shall be made by ONB to each former shareholder
of Heritage as soon as practical following delivery to ONB of the shareholder's
certificate(s) representing its shares of Heritage Common Stock accompanied by a
properly completed and executed letter of transmittal, all in form and substance
reasonably satisfactory to ONB.
(c) As of the Effective Time, stock certificates representing shares of
Heritage Common Stock shall be deemed to evidence ownership of ONB common stock
for all corporate purposes other than the payment of dividends or other
distributions. No dividends or other distributions otherwise payable subsequent
to the Effective Time on shares of ONB common stock shall be paid to any
Heritage shareholder entitled to receive the same until such shareholder has
surrendered to ONB his or her certificate or certificates representing Heritage
Common Stock in exchange for a certificate or certificates representing ONB
common stock. Upon surrender of the certificates representing shares of Heritage
Common Stock, there shall be paid in cash to the record holder of the new
certificate or certificates evidencing shares of ONB common stock the amount of
all dividends and other distributions, without interest thereon, withheld with
respect to such shares of ONB common stock.
(d) ONB shall be entitled to rely upon the stock transfer books of
Heritage to establish the persons entitled to receive shares of ONB common stock
pursuant to this Agreement, which books shall be conclusive with respect to the
ownership of shares of Heritage Common Stock.
(e) With respect to any certificate for shares of Heritage Common Stock
which has been lost, stolen or destroyed, ONB shall be authorized to issue
common stock (and to pay cash as to fractional shares) to the registered owner
of such certificate upon receipt by ONB of an agreement to indemnify ONB against
loss from such lost, stolen or destroyed certificate and an affidavit of lost,
stolen or destroyed stock certificate, both in form and substance reasonably
satisfactory to ONB, and upon compliance by the Heritage shareholder with all
other reasonable requirements of ONB in connection with lost, stolen or
destroyed stock certificates.
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SECTION 3
DISSENTING SHAREHOLDERS
Shareholders of Heritage who properly exercise and perfect statutory
dissenters' rights shall have the rights accorded to dissenting shareholders
under Chapter 23 of the Tennessee Business Corporation Act, as amended.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF HERITAGE
On or prior to the date hereof, Heritage has delivered to ONB a
schedule (the "Disclosure Schedule") setting forth, among other things, items
the disclosure of which is necessary or appropriate either in response to an
express disclosure requirement contained in a provision hereof or as an
exception to one or more representations or warranties contained in this Section
4 or to one or more of its covenants contained in Section 6; provided, that the
mere inclusion of an item in the Disclosure Schedule as an exception to a
representation or warranty shall not be deemed an admission by Heritage that
such item represents a material exception or fact, event or circumstance or that
such item is reasonably likely to result in a Material Adverse Effect (as
defined below).
For the purpose of this Agreement, and in relation to Heritage and the
Subsidiaries, a "Material Adverse Effect" means any effect that (i) is material
and adverse to the financial position, results of operations or business of
Heritage and the Subsidiaries taken as a whole, or (ii) would materially impair
the ability of Heritage to perform its obligations under this Agreement or
otherwise materially threaten or materially impede the consummation of the
Merger and the other transactions contemplated by this Agreement; provided,
however, that Material Adverse Effect shall not be deemed to include the impact
of (a) changes in banking and similar laws of general applicability or
interpretations thereof by courts or governmental authorities, (b) changes in
generally accepted accounting principles or regulatory accounting requirements
applicable to banks and their holding companies generally, (c) any modifications
or changes to valuation policies and practices in connection with the Merger or
restructuring charges taken in connection with the Merger, in each case in
accordance with generally accepted accounting principles, (d) effects of any
action taken with the prior written consent of ONB and (e) changes in general
level of interest rate or conditions or circumstances that affect the banking
industry generally.
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No representation or warranty of Heritage contained in this Section 4,
except Section 4.03, shall be deemed untrue, incomplete or incorrect, and
Heritage shall not be deemed to have breached a representation or warranty, as a
consequence of the existence of any fact, event or circumstance unless such
fact, circumstance or event, individually or taken together with all other
facts, events or circumstances inconsistent with any representation or warranty
contained in this Section 4, has had or is reasonably likely to have a Material
Adverse Effect on Heritage.
Heritage accordingly hereby represents and warrants to ONB as follows:
4.01. Organization and Authority. (a) Heritage is a corporation duly
organized and validly existing under the laws of the State of Tennessee.
Heritage has full power and authority (corporate and otherwise) to own and lease
its properties as presently owned and leased and to conduct its business in the
manner and by the means utilized as of the date hereof. Heritage has a class of
stock registered pursuant to Section 12, and is subject to the reporting
requirements, of the Securities Exchange Act of 1934, as amended ("1934 Act").
Except as set forth in the Disclosure Schedule, Heritage's only direct
subsidiary is the Bank and Heritage has no other subsidiaries and owns no voting
stock or equity securities of any corporation, partnership, association or other
entity.
(b) The Bank is a Tennessee state-chartered bank duly organized and
validly existing under the laws of the State of Tennessee. The Bank has no
subsidiaries, except the Bank owns all of the capital stock of: (i) the
Investment Center; (ii) CLIC; (iii) the Finance Company; and (iv) the Investment
Corporation. The Bank is subject to primary regulatory supervision and
examination by the Tennessee Department of Financial Institutions ("TDFI"). The
Bank has full power and authority (corporate and otherwise) to own and lease its
properties as presently owned and leased and to conduct its business in the
manner and by the means utilized as of the date hereof.
(c) The Investment Center is an investment brokerage services provider
duly organized and validly existing under the laws of the State of Tennessee.
The Investment Center has no subsidiaries. The Investment Center is subject to
primary regulatory supervision and examination by the Tennessee Department of
Commerce and Insurance ("TDCI"). The Investment Center has full power and
authority (corporate and otherwise) to own and lease its properties as presently
owned and leased and to conduct its business in the manner and by the means
utilized as of the date hereof.
(d) CLIC is a corporation duly organized and validly existing under the
laws of the State of Tennessee. The Insurance Company has no subsidiaries. The
Insurance Company is subject to primary regulatory supervision and examination
by the TDCI. The Insurance Company has full power and
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authority (corporate and otherwise) to own and lease its properties as presently
owned and leased and to conduct its business in the manner and by the means
utilized as of the date hereof.
(e) The Finance Company is a corporation duly organized and validly
existing under the laws of the State of Tennessee. The Finance Company has no
subsidiaries. The Finance Company is subject to primary regulatory supervision
and examination by the TDCI. The Finance Company has full power and authority
(corporate and otherwise) to own and lease its properties as presently owned and
leased and to conduct its business in the manner and by the means utilized as of
the date hereof.
(f) The Investment Corporation is a Tennessee corporation duly
organized and validly existing under the laws of the State of Tennessee. The
Investment Corporation currently has no business operations and has no
subsidiaries. The Investment Corporation has full power and authority (corporate
and otherwise) to own and lease its properties as presently owned and leased and
to conduct its business in the manner and by the means utilized as of the date
hereof.
4.02. Authorization. (a) Heritage has the requisite corporate power and
authority to enter into this Agreement and to perform its obligations hereunder,
subject to the fulfillment of the conditions precedent set forth in Section
8.02(e) and (f) hereof. As of the date hereof, Heritage is not aware of any
reason why the approvals set forth in Section 8.02(e) will not be received in a
timely manner and without the imposition of a condition, restriction or
requirement of the type described in Section 8.02(e). This Agreement, and its
execution and delivery by Heritage, have been duly authorized and approved by
the Board of Directors of Heritage and, assuming due execution and delivery by
ONB, constitutes a valid and binding obligation of Heritage, subject to the
fulfillment of the conditions precedent set forth in Section 8.02 hereof, and is
enforceable in accordance with its terms, except to the extent limited by
general principles of equity and public policy and by bankruptcy, insolvency,
fraudulent transfer, reorganization, liquidation, moratorium, readjustment of
debt or other laws of general application relating to or affecting the
enforcement of creditors' rights.
(b) Except as set forth in the Disclosure Schedule, neither the
execution of this Agreement nor consummation of the Merger contemplated hereby:
(i) conflicts with or violates Heritage's Charter or ByLaws; (ii) conflicts with
or violates any local, state, federal or foreign law, statute, ordinance, rule
or regulation (provided that the approvals of or filings with applicable
government regulatory agencies or authorities required for consummation of the
Merger are obtained) or any court or administrative judgment, order, injunction,
writ or decree; (iii) conflicts with, results in a breach of or constitutes a
default under any note, bond, indenture, mortgage, deed of trust, license,
lease, contract, agreement, arrangement, commitment or other instrument to which
Heritage or any Subsidiary is a party or by which Heritage or any Subsidiary is
subject or bound; (iv) results in the creation of or gives any person,
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corporation or entity the right to create any lien, charge, claim, encumbrance
or security interest, or results in the creation of any other rights or claims
of any other party (other than ONB) or any other adverse interest, upon any
right, property or asset of Heritage or any Subsidiary; or (v) terminates or
gives any person, corporation or entity the right to terminate, accelerate,
amend, modify or refuse to perform under any note, bond, indenture, mortgage,
agreement, contract, lease, license, arrangement, deed of trust, commitment or
other instrument to which Heritage or any Subsidiary is bound or with respect to
which Heritage or any Subsidiary is to perform any duties or obligations or
receive any rights or benefits.
(c) Other than in connection or in compliance with the provisions of
the applicable federal and state banking, securities, and corporation statutes,
all as amended, and the rules and regulations promulgated thereunder, no notice
to, filing with, exemption by or consent, authorization or approval of any
governmental agency or body is necessary for consummation of the Merger by
Heritage or any Subsidiary.
4.03. Capitalization. (a) The authorized capital stock of Heritage as
of the date hereof consists, and at the Effective Time will consist, of
1,000,000 shares of preferred stock, no par value, none of which shares are
issued or outstanding and 3,000,000 shares of common stock, $2.00 par value per
share, 583,439 of which shares are issued and outstanding, which number of
issued shares of Heritage Common Stock is subject to increase to a total of
671,408 shares pursuant to the exercise of options (collectively, the "Stock
Options") granted under the Heritage 1989 Stock Option Plan, the Heritage 1998
Outside Director Stock Option Plan, and the Heritage 1998 Stock Option Plan
(collectively, the "Stock Option Plans") to purchase an aggregate of 87,969
shares of common stock of Heritage (such issued and outstanding shares are
referred to herein as "Heritage Common Stock"). Such issued and outstanding
shares of Heritage Common Stock have been duly and validly authorized by all
necessary corporate action of Heritage, are validly issued, fully paid and
nonassessable and have not been issued in violation of any pre-emptive rights of
any present or former Heritage shareholder. Heritage has no capital stock
authorized, issued or outstanding other than as described in this Section
4.03(a) and has no intention or obligation to authorize or issue any other
capital stock or any additional shares of Heritage Common Stock.
(b) The authorized capital stock of the Bank as of the date hereof
consists, and at the Effective Time will consist, of 1,000,000 shares of common
stock, $2.00 par value per share, 415,099 of which shares are issued and
outstanding (such issued and outstanding shares are referred to herein as "Bank
Common Stock"). Such issued and outstanding shares of Bank Common Stock have
been duly and validly authorized by all necessary corporate action of the Bank,
are validly issued, fully paid and nonassessable, and have not been issued in
violation of any pre-emptive rights of any present or former
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Bank shareholder. All of the issued and outstanding shares of the Bank Common
Stock are owned by Heritage free and clear of all liens, pledges, charges,
claims, encumbrances, restrictions, security interests, options and pre-emptive
rights and of all other rights or claims of any other person, corporation or
entity with respect thereto. The Bank has no capital stock authorized, issued or
outstanding other than as described in this Section 4.03(b) and has no intention
or obligation to authorize or issue any other capital stock or any additional
shares of Bank Common Stock.
(c) The authorized capital stock of the Investment Center as of the
date hereof consists, and at the Effective Time will consist, of 100 shares of
common stock, $2.00 par value per share, 25 of which shares are issued and
outstanding (such issued and outstanding shares are referred to herein as
"Investment Center Common Stock"). Such issued and outstanding shares of the
Investment Center Common Stock have been duly and validly authorized by all
necessary corporate action of the Investment Center, are validly issued, fully
paid and nonassessable, and have not been issued in violation of any pre-emptive
rights of any present or former Investment Center shareholder. All of the issued
and outstanding shares of Investment Center Common Stock are owned by the Bank
free and clear of all liens, pledges, charges, claims, encumbrances,
restrictions, security interests, options and pre-emptive rights and of all
other rights or claims of any other person, corporation or entity with respect
thereto. The Investment Center has no capital stock authorized, issued or
outstanding other than as described in this Section 4.03(c) and has no intention
or obligation to authorize or issue any other capital stock or any additional
shares of the Investment Center Common Stock.
(d) The authorized capital stock of CLIC as of the date hereof
consists, and at the Effective Time will consist, of 1,000,000 shares of common
stock, $1.00 par value per share, 150,000 of which shares are issued and
outstanding (such issued and outstanding shares are referred to herein as "CLIC
Common Stock"). Such issued and outstanding shares of CLIC Common Stock have
been duly and validly authorized by all necessary corporate action of CLIC, are
validly issued, fully paid and nonassessable, and have not been issued in
violation of any pre-emptive rights of any present or former CLIC shareholder.
All of the issued and outstanding shares of CLIC Common Stock are owned by the
Bank free and clear of all liens, pledges, charges, claims, encumbrances,
restrictions, security interests, options and pre-emptive rights and of all
other rights or claims of any other person, corporation or entity with respect
thereto. CLIC has no capital stock authorized, issued or outstanding other than
as described in this Section 4.03(d) and has no intention or obligation to
authorize or issue any other capital stock or any additional shares of CLIC
Common Stock.
(e) The authorized capital stock of the Finance Company as of the date
hereof consists, and at the Effective Time will consist, of 10,000 shares of
common stock, no par value, 1,000 of which shares are issued and outstanding
(such issued and outstanding shares are referred to herein as "Finance
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Company Common Stock"). Such issued and outstanding shares of the Finance
Company Common Stock have been duly and validly authorized by all necessary
corporate action of the Finance Company, are validly issued, fully paid and
nonassessable, and have not been issued in violation of any pre-emptive rights
of any present or former Finance Company shareholder. All of the issued and
outstanding shares of Finance Company Common Stock are owned by the Bank free
and clear of all liens, pledges, charges, claims, encumbrances, restrictions,
security interests, options and pre-emptive rights and of all other rights or
claims of any other person, corporation or entity with respect thereto. The
Finance Company has no capital stock authorized, issued or outstanding other
than as described in this Section 4.03(e) and has no intention or obligation to
authorize or issue any other capital stock or any additional shares of Finance
Company Common Stock.
(f) The authorized capital stock of the Investment Corporation as of
the date hereof consists, and at the Effective Time will consist, of 100 shares
of common stock, $2.00 par value, 25 of which shares are issued and outstanding
(such issued and outstanding shares are referred to herein as "Investment
Corporation Common Stock"). Such issued and outstanding shares of Investment
Corporation Common Stock have been duly and validly authorized by all necessary
corporate action of the Investment Corporation, are validly issued, fully paid
and nonassessable, and have not been issued in violation of any pre-emptive
rights of any present or former Investment Corporation shareholder. All of the
issued and outstanding shares of Investment Corporation Common Stock are owned
by the Bank free and clear of all liens, pledges, charges, claims, encumbrances,
restrictions, security interests, options and pre-emptive rights and of all
other rights or claims of any other person, corporation or entity with respect
thereto. The Investment Corporation has no capital stock authorized, issued or
outstanding other than as described in this Section 4.03(f) and has no intention
or obligation to authorize or issue any other capital stock or any additional
shares of Investment Corporation Common Stock.
(g) Except as set forth in the Disclosure Schedule and except for
options granted under the Stock Option Plans, there are no options, warrants,
commitments, calls, puts, agreements, understandings, arrangements or
subscription rights relating to any shares of Heritage Common Stock, or any
securities convertible into or representing the right to purchase or otherwise
acquire any common stock or debt securities of Heritage, by which Heritage is or
may become bound. Heritage does not have any outstanding contractual or other
obligation to repurchase, redeem or otherwise acquire any of the issued and
outstanding shares of Heritage Common Stock.
(h) There are no options, warrants, commitments, calls, puts,
agreements, understandings, arrangements or subscription rights relating to any
shares of common stock of the Subsidiaries, or any securities convertible into
or representing the right to purchase or otherwise acquire any common stock or
debt securities of a Subsidiary, by which a Subsidiary is or may become bound.
None of the
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Subsidiaries has any outstanding contractual or other obligation to repurchase,
redeem or otherwise acquire any of the issued and outstanding shares of its
common stock.
(i) Except as set forth in the Disclosure Schedule, Heritage has no
knowledge of any person or entity which beneficially owns 5% or more of its
outstanding shares of Heritage Common Stock.
(j) Set forth in the Disclosure Schedule is a listing of each affiliate
of Heritage as described in Section 6.05 hereof setting forth the number of
shares of Heritage Common Stock beneficially owned by each affiliate and the
manner in which such shares are owned.
4.04. Organizational Documents. The respective Charter and By-Laws of
Heritage and each of the Subsidiaries, representing true, accurate and complete
copies of such corporate documents in effect as of the date of this Agreement,
have been delivered to ONB.
4.05. Compliance with Law. (a) Neither Heritage nor any Subsidiary has
engaged in any activity nor taken or omitted to take any action which has
resulted in the violation of any local, state, federal or foreign law, statute,
regulation, rule, ordinance, order, restriction or requirement, nor are they in
violation of any order, injunction, judgment, writ or decree of any court or
government agency or body. Heritage and each Subsidiary possess and hold all
licenses, franchises, permits, certificates and other authorizations necessary
for the continued conduct of their business without interference or
interruption, and such licenses, franchises, permits, certificates and
authorizations are transferable (to the extent required) to ONB at the Effective
Time without any restrictions or limitations thereon or the need to obtain any
consents of government agencies or other third parties other than as set forth
in this Agreement.
(b) Except as set forth in the Disclosure Schedule, neither Heritage
nor any of the Subsidiaries or their property is a party to or is subject to any
order, decree, agreement, memorandum of understanding or similar arrangement
with, or a commitment letter or similar submission to, or extraordinary
supervisory letter from, any federal or state governmental agency or authority
charged with the supervision or regulation of financial institutions or issuers
of securities or engaged in the insurance of deposits (including, without
limitation, the TDFI, the Federal Reserve Board and Federal Deposit Insurance
Corporation) or the supervision or regulation of Heritage or any of its
Subsidiaries. There are no uncured violations, or violations with respect to
which refunds or restitutions may be required, cited in any examination report
of Heritage or any Subsidiary as a result of an examination by any regulatory
agency or body, or set forth in any accountant's or auditor's report to Heritage
or any Subsidiary.
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4.06. Accuracy of Statements Made and Materials Provided to ONB. No
representation, warranty in this Section 4 or other statement made, or any
information provided, by Heritage or any Subsidiary in this Agreement or the
Disclosure Schedule (and any update thereto), and no written report, statement,
list, certificate, materials or other information furnished or to be furnished
by Heritage or any Subsidiary to ONB through and including the Effective Time in
connection with this Agreement or the Merger contemplated hereby (including,
without limitation, any written information which has been or shall be supplied
by Heritage and the Subsidiaries with respect to their financial condition,
results of operations, business, assets, capital or directors and officers for
inclusion in the proxy statement-prospectus and registration statement relating
to the Merger), contains or shall contain (in the case of information relating
to the proxy statement-prospectus at the time it is mailed to Heritage's
shareholders) any untrue statement of material fact or omits or shall omit to
state a material fact necessary to make the statements contained herein or
therein, in light of the circumstances in which they are made, not false or
misleading.
4.07. Litigation and Pending Proceedings. (a) Except as set forth in
the Disclosure Schedule and lawsuits involving collection of delinquent
accounts, there are no claims, actions, suits, proceedings, mediations,
arbitrations or investigations pending or to the best knowledge of Heritage
after due inquiry, threatened in any court or before any government agency or
authority, arbitration panel or otherwise (nor does Heritage have any knowledge
of a basis for any claim, action, suit, proceeding, litigation, arbitration or
investigation) against, by or affecting Heritage or any Subsidiary or which
would prevent the performance of this Agreement, declare the same unlawful or
cause the rescission hereof.
(b) Except as set forth in the Disclosure Schedule, neither Heritage
nor any Subsidiary is: (i) subject to any outstanding judgment, order, writ,
injunction or decree of any court, arbitration panel or governmental agency or
authority; (ii) presently charged with or, to the best knowledge of Heritage
after due inquiry, under governmental investigation with respect to any actual
or alleged violations of any law, statute, rule, regulation or ordinance; or
(iii) the subject of any pending or, to the best knowledge of Heritage after due
inquiry, threatened proceeding by any government regulatory agency or authority
having jurisdiction over its respective business, assets, capital, properties or
operations.
4.08. Financial Statements and Reports. Heritage has delivered to ONB
copies of the following financial statements and reports of Heritage and the
Subsidiaries, including the notes thereto (collectively, the "Heritage Financial
Statements"):
(a) Consolidated Balance Sheets and the related Consolidated Statements
of Income and Consolidated Statements of Changes in Shareholders' Equity of
Heritage as of and for the years ended December 31, 1996, 1997 and 1998, and as
of and for the fiscal quarter ended June 30, 1999;
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(b) Consolidated Statements of Cash Flows of Heritage for the years
ended December 31, 1996, 1997 and 1998, and for the fiscal quarter ended June
30, 1999;
(c) Consolidated Statements of Changes in Financial Position of
Heritage for the years ended December 31, 1997 and 1998, and for the fiscal
quarter ended June 30, 1999.
(d) Reports of Condition and Income ("Call Reports") for the Bank as of
close of business on December 31, 1995, 1996, 1997 and 1998; and
(e) Financial Statements of Heritage on Form FRY-9LP and Form FRY-9C
filed with the Board of Governors of the Federal Reserve System at the close of
business on December 31, 1997 and 1998.
The Heritage Financial Statements present fairly the consolidated
financial position of Heritage as of and at the dates shown and the consolidated
results of operations for the periods covered thereby. The Heritage Financial
Statements described in clauses (a), (b) and (c) above for completed fiscal
years are audited financial statements and have been prepared in conformance
with generally accepted accounting principles applied on a consistent basis,
except as may otherwise be indicated in any accountants' notes or reports with
respect to such financial statements. The Heritage Financial Statements do not
include any assets, liabilities or obligations or omit to state any assets,
liabilities or obligations, absolute or contingent, or any other facts which
inclusion or omission would render any of the Heritage Financial Statements
false, misleading or inaccurate in any respect.
4.09. Properties, Contracts, Employees and Other Agreements. (a) Set
forth in the Disclosure Schedule are a true, accurate and complete copy of the
following:
(i) A brief description and the location of all real property
owned by Heritage and the Subsidiaries and the principal
buildings and structures located thereon and each lease of
real property to which Heritage or any Subsidiary is a party,
identifying the parties thereto, the annual rental payable,
the expiration date of the lease and a brief description of
the property covered;
(ii) a list of all agreements, contracts, leases, licenses, lines
of credit, understandings, commitments or obligations of
Heritage or any Subsidiary which individually or in the
aggregate:
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(A) involve payment or receipt by Heritage or any
Subsidiary (other than as disbursements of loan
proceeds to customers, loan payments by customers or
customer deposits) of more than $50,000;
(B) involve payments based on profits of Heritage or any
Subsidiary;
(C) relate to the purchase of goods, products, supplies
or services in excess of $50,000;
(D) were not made in the ordinary course of business; or
(E) may not be terminated without penalty within one (1)
year from the date of this Agreement; and
(iii) The name and current annual salary of each director, officer
and employee of Heritage or any Subsidiary whose current
annual salary is in excess of $50,000, and the profit sharing,
bonus or other form of compensation (other than salary) paid
or payable by Heritage or any Subsidiary to or for the benefit
of each such person for the year ended December 31, 1998, and
any employment, severance or deferred compensation agreement
or arrangement with respect to each such person.
(b) Each of the agreements, contracts, commitments, leases, instruments
and documents set forth in the Disclosure Schedule relating to this Section 4.09
is valid and enforceable in accordance with its terms, except to the extent
limited by general principles of equity and public policy or by bankruptcy,
insolvency, fraudulent transfer, readjustment of debt or other laws of general
application relative to or affecting the enforcement of creditor's rights, and
Heritage and the Subsidiaries are, and, to the best knowledge of Heritage after
due inquiry, all other parties thereto are, in compliance with the provisions
thereof, and Heritage and the Subsidiaries are not in default in the
performance, observance or fulfillment of any obligation, covenant or provision
contained therein. None of the foregoing requires the consent of any party to
its assignment in connection with the Merger contemplated by this Agreement.
Other than as disclosed pursuant to this Section 4.09, to the best knowledge of
Heritage after due inquiry, no circumstances exist resulting from transactions
effected or to be effected, from events which have occurred or may occur or from
any action taken or omitted to be taken which could reasonably be expected to
result in the creation of any agreement, contract, obligation, commitment,
arrangement, lease or document described in or contemplated by this Section
4.09.
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(c) Neither Heritage nor any Subsidiary is, to the best knowledge of
Heritage after due inquiry, in default under or in breach of or, alleged to be
in default under or in breach of, any loan or credit agreement, conditional
sales contract or other title retention agreement, security agreement, bond,
indenture, mortgage, license, contract, lease, commitment or any other
instrument or obligation.
4.10. Absence of Undisclosed Liabilities. Except as provided in the
Heritage Financial Statements, Subsequent Heritage Financial Statements and in
the Disclosure Schedule, except for unfunded loan commitments and obligations on
letters of credit to customers of the Bank and trade payables incurred in the
ordinary course of the Bank's business, and except for the transaction
contemplated by this Agreement, neither Heritage nor any Subsidiary has, nor
will have at the Effective Time, any obligation, agreement, contract,
commitment, liability, lease or license which exceeds $50,000 individually, or
any obligation, agreement, contract, commitment, liability, lease or license
made outside of the ordinary course of business, nor does there exist any
circumstances resulting from transactions effected or events occurring on or
prior to the date of this Agreement or from any action omitted to be taken
during such period which could reasonably be expected to result in any such
obligation, agreement, contract, commitment, liability, lease or license.
4.11. Title to Assets. Except as described in this Section 4.11: (a)
Heritage or the Subsidiaries, as the case may be, has good and marketable title
in fee simple absolute to all real property (including, without limitation, all
real property used as bank premises and all other real estate owned) which is
reflected in the Heritage Financial Statements as of June 30, 1999; good title
to all personal property reflected in the Heritage Financial Statements as of
June 30, 1999, other than personal property disposed of in the ordinary course
of business since June 30, 1999; good title to or right to use by valid and
enforceable lease or contract all other properties and assets (whether real or
personal, tangible or intangible) which Heritage and the Subsidiaries purports
to own or which Heritage or any Subsidiary uses in its business; good title to,
or right to use by terms of a valid and enforceable lease or contract, all other
property used in their respective businesses; and good title to all property and
assets acquired and not disposed of or leased since June 30, 1999. All of such
properties and assets are owned by Heritage or a Subsidiary free and clear of
all land or conditional sales contracts, mortgages, liens, pledges,
restrictions, security interests, charges, claims, rights of third parties or
encumbrances of any nature except: (i) as set forth in the Disclosure Schedule;
(ii) as specifically noted in the Heritage Financial Statements; (iii) statutory
liens for taxes not yet delinquent or being contested in good faith by
appropriate proceedings; (iv) pledges or liens required to be granted in
connection with the acceptance of government deposits or granted in connection
with repurchase or reverse repurchase agreements; and (v) easements,
encumbrances and liens of record, imperfections of title and other limitations
which are not material in amounts to Heritage on a consolidated basis and which
do not materially detract from the value or materially interfere with the
present or contemplated use of any of the properties subject thereto
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or impair the use thereof for the purposes for which they are held or used. All
real property owned or leased by Heritage or any Subsidiary is in compliance
with all applicable zoning and land use laws.
All real property, machinery, equipment, furniture and fixtures owned
or leased by Heritage or any of the Subsidiaries is structurally sound, in good
operating condition and has been and is being maintained and repaired in the
ordinary condition of business.
(b) Heritage and the Subsidiaries have conducted their respective
businesses in compliance with all federal, state, county and municipal laws,
statutes, regulations, rules, ordinances, orders, directives, restrictions and
requirements relating to, without limitation, responsible property transfer,
underground storage tanks, petroleum products, air pollutants, water pollutants
or storm water or process waste water or otherwise relating to the environment,
air, water, soil or toxic or hazardous substances or to the manufacturing,
recycling, handling, processing, distribution, use, generation, treatment,
storage, disposal or transport of any hazardous or toxic substances or petroleum
products (including polychlorinated biphenyls, whether contained or uncontained,
and asbestos-containing materials, whether friable or not), including, without
limitation, the Federal Solid Waste Disposal Act, the Hazardous and Solid Waste
Amendments, the Federal Clean Air Act, the Federal Clean Water Act, the
Occupational Health and Safety Act, the Federal Resource Conservation and
Recovery Act, the Toxic Substances Control Act, the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980 and the Superfund
Amendments and Reauthorization Act of 1986, all as amended, and the rules and
regulations of the Environmental Protection Agency, the Nuclear Regulatory
Agency, the Army Corp of Engineers, the Department of Interior, the United
States Fish and Wildlife Service and any state department of natural resources
or state environmental protection agency now in effect (collectively,
"Environmental Laws"). Except as set forth in the Disclosure Schedule, there are
no pending or, to the best knowledge of Heritage after due inquiry, threatened,
claims, actions or proceedings by any local municipality, sewage district or
other governmental entity against Heritage or any Subsidiary with respect to the
Environmental Laws. No environmental clearances or other governmental approvals
are required for the conduct of the business of Heritage or any Subsidiary as
presently conducted. Neither Heritage nor any Subsidiary is the owner, and has
not been in the chain of title or the operator or lessee, of any property on
which any substances have been released, which substances if known to be present
on, at or under such property would require clean-up, removal, treatment,
abatement, response costs or any other remedial action under any Environmental
Law, and there is no reasonable basis or grounds for any such claim, action or
proceeding. Heritage and the Subsidiaries own, operate, lease, use and control,
and have owned, operated, leased, used and controlled, all real property in
compliance with the Environmental Laws. Neither Heritage nor any Subsidiary has
any liability for any clean-up or remediation under any of the Environmental
Laws with respect to any real property.
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4.12. Loans. (a) Except as set forth in the Disclosure Schedule, there
is no loan by the Bank in excess of $50,000 that has been classified by bank
regulatory management as "Other Loans Specially Mentioned," "Substandard,"
"Doubtful" or "Loss" or in excess of $50,000 that has been identified by
accountants or auditors (internal or external) as having a significant risk of
uncollectability. The most recent loan watch list of the Bank and a list of all
loans in excess of $50,000 which the Bank has determined to be thirty (30) days
or more past due with respect to principal or interest payments or has placed on
nonaccrual status has been provided to ONB.
(b) All loans reflected in the Heritage Financial Statements as of June
30, 1999 and which have been made, extended, renewed, restructured, approved,
amended or acquired since June 30, 1999: (i) to the best knowledge of Heritage
after due inquiry, constitute the legal, valid and binding obligation of the
obligor and any guarantor named therein, except to the extent limited by general
principles of equity and public policy or by bankruptcy, insolvency, fraudulent
transfer, reorganization, liquidation, moratorium, readjustment of debt or other
laws of general application relative to or affecting the enforcement of
creditors' rights; (ii) are evidenced by notes, instruments or other evidences
of indebtedness which are true, genuine and what they purport to be; and (iii)
are secured, to the extent that Heritage or any Subsidiary has a security
interest in collateral or a mortgage securing such loans, by perfected security
interests or recorded mortgages naming Heritage or a Subsidiary as the secured
party or mortgagee (unless by written agreement to the contrary).
(c) The reserves, the allowance for possible loan and lease losses and
the carrying value for real estate owned which are shown on the Heritage
Financial Statements are adequate in all respects under the requirements of
generally accepted accounting principles applied on a consistent basis to
provide for possible losses on items for which reserves were made, on loans and
leases outstanding and real estate owned as of the respective dates.
4.13. Shareholder Rights Plan. Except as otherwise provided in this
Agreement, the Disclosure Schedule and Heritage's Charter and By-Laws, Heritage
has no shareholder rights plan or any other plan, program or agreement
involving, restricting, prohibiting or discouraging a change in control or
merger of Heritage or which may be considered an anti-takeover mechanism.
4.14. Employee Benefit Plans. (a) With respect to the employee benefit
plans, as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), sponsored or otherwise maintained by Heritage or
any Subsidiary, whether written or oral, in which Heritage or any Subsidiary
participates as a participating employer; to which Heritage or any Subsidiary
contributes and including any such plans which within the preceding six years
have been terminated, merged into another plan of Heritage or any Subsidiary,
frozen or discontinued (collectively, "Heritage
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Plans") except as set forth on the Disclosure Schedule: (i) all such Heritage
Plans have been, in all respects, maintained in compliance with the requirements
prescribed by all applicable statutes, orders and governmental rules or
regulations, including, without limitation, ERISA, the Code, and Treasury and
Labor Regulations promulgated thereunder, (ii) all Heritage Plans intended to
constitute tax-qualified plans under Section 401(a) of the Code have received
favorable determination letters from the Internal Revenue Service ("Service")
with respect to "TRA" (as defined in Section 1 of Rev. Proc. 93-39), and
Heritage is not aware of any circumstances likely to result in revocation of any
such favorable determination letter; (iii) except for the Heritage Common Stock
held by its trustee as an asset of the Heritage ESOP, no Heritage Plan (or its
related trust) holds any stock or other securities of Heritage or any related or
affiliated person or entity; (iv) Heritage has not engaged in any transaction
that may subject Heritage, or any Heritage Plan, to a civil penalty imposed by
Section 502 of ERISA; (v) no prohibited transaction (as defined in Section 406
of ERISA and as defined in Section 4975(c) of the Code) has occurred with
respect to any Heritage Plan; (vi) there are no actions, suits, proceedings or
claims pending (other than routine claims for benefits) or, to the best
knowledge of Heritage after due inquiry, threatened, against Heritage, any
Subsidiary, any Heritage Plan, any fiduciary of any Heritage Plan or the assets
of any Heritage Plan as to which Heritage or any Subsidiary would have
liability.
(b) Heritage has made available to ONB true, accurate and complete
copies of the following (including all plans and programs which have been
terminated): (i) pension, retirement, profit-sharing, savings, stock purchase,
stock bonus, stock ownership, stock option and stock appreciation right plans
and all amendments thereto and all summary plan descriptions thereof (including
any modifications thereto); (ii) all employment, deferred compensation (whether
funded or unfunded), salary continuation, consulting, bonus, severance and
collective bargaining agreements, arrangements or understandings; (iii) all
executive and other incentive compensation plans, programs and agreements; (iv)
all group insurance and health insurance contracts, policies or plans; and (v)
all other incentive, welfare, fringe or benefit plans, or agreements, maintained
or sponsored, participated in, or contributed to by Heritage or any Subsidiary
for its current or former directors, officers or employees.
(c) Except as set forth on the Disclosure Schedule, no current or
former director, officer or employee of Heritage or any Subsidiary is entitled
to any benefit under any welfare benefit plans (as defined in Section 3(1) of
ERISA) after termination of employment with Heritage, except that such
individuals may be entitled to continue their group health care coverage
pursuant to the retiree health coverage provisions of the Heritage Group Health
Plan or pursuant to Section 4980B of the Code if they pay the cost of such
coverage pursuant to the applicable requirements of that plan or the Code with
respect thereto, whichever is applicable.
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(d) With respect to any group health plan (as defined in Section 607(1)
of ERISA) sponsored or maintained by Heritage or any Subsidiary, in which
Heritage or any Subsidiary participates as a participating employer or to which
Heritage or any Subsidiary contributes, no director, officer, employee or agent
of Heritage or any Subsidiary has engaged in any action or failed to act in such
a manner that, as a result of such action or failure to act, would cause a tax
to be imposed on Heritage or any Subsidiary under Code Section 4980B(a). With
respect to all such plans, all applicable provisions of Section 4980B of the
Code and Section 601 of ERISA have been complied with in all respects by
Heritage and the Subsidiaries.
(e) Except as set forth on the Disclosure Schedule, there are no
collective bargaining, employment, management, consulting, deferred
compensation, reimbursement, indemnity, retirement, early retirement, severance
or similar plans or agreements, under discussion or negotiation by management
with any employee or group of employees, any member of management or any other
person.
4.15. Obligations to Employees. All contributions required to be made
under the terms of any Heritage Plan have been timely made or have been
reflected on the Heritage Financial Statements. Neither any Heritage Plan which
is an "employee pension benefit plan" within the meaning of Section 3(2) of
ERISA (a "Pension Plan") nor any single-employer plan or any entity which is
considered one employer with Heritage under Section 4001 of ERISA or Section 414
of the Code (an "ERISA Affiliate") has an "accumulated funding deficiency"
(whether or not waived) within the meaning of Section 412 of the Code or Section
302 of ERISA and no ERISA Affiliate has an outstanding funding waiver. Neither
Heritage nor any of its Subsidiaries have provided, or is required to provide,
security to any Pension Plan or to any single-employer plan of any ERISA
Affiliate pursuant to Section 401(a)(29) of the Code.
4.16. Taxes, Returns and Reports. Except as set forth in the Disclosure
Schedule, Heritage and each Subsidiary has since January 1, 1995: (a) duly filed
all federal, state, local and foreign tax returns of every type and kind
required to be filed, and each such return is true, accurate and complete in all
respects; (b) paid or otherwise adequately reserved in accordance with generally
accepted accounting principles for all taxes, assessments and other governmental
charges due or claimed to be due upon Heritage or any Subsidiary or any of their
income, properties or assets; and (c) not requested an extension of time for any
such payments (which extension is still in force). Heritage has established, and
shall establish in the Subsequent Heritage Financial Statements, in accordance
with generally accepted accounting principles, a reserve for taxes in the
Heritage Financial Statements adequate to cover all of Heritage's and the
Subsidiaries' tax liabilities (including, without limitation, income taxes,
payroll taxes and withholding, and franchise fees) for the periods then ending.
Neither Heritage nor any Subsidiary has, nor will have, any liability for taxes
of any nature for or with respect to the operation of their respective
businesses, including the business of any subsidiary, or ownership of their
assets, including
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the assets of any subsidiary, from the date hereof up to and including the
Effective Time, except to the extent set forth in the Subsequent Heritage
Financial Statements (as hereinafter defined) or as accrued or reserved for on
the books and records of Heritage. Neither Heritage nor any Subsidiary is
currently under audit by any state or federal taxing authority. No federal,
state or local tax returns of Heritage have been audited by any taxing authority
during the past five (5) years.
4.17. Deposit Insurance. The deposits of the Bank are insured by the
FDIC in accordance with the Federal Deposit Insurance Act, as amended, and
Heritage and the Bank have paid or properly reserved or accrued for all current
premiums and assessments with respect to such deposit insurance.
4.18. Insurance. Set forth in the Disclosure Schedule is a list and
brief description of all policies of insurance (including, without limitation,
bankers' blanket bond, directors' and officers' liability insurance, property
and casualty insurance, group health or hospitalization insurance and insurance
providing benefits for employees) owned or held by Heritage or any Subsidiary on
the date hereof or with respect to which Heritage or any Subsidiary pays any
premiums. Each such policy is in full force and effect and all premiums due
thereon have been paid when due, and a true, accurate and complete copy thereof
has been made available to ONB prior to the date hereof.
4.19. Books and Records. The books and records of Heritage and the
Subsidiaries have been fully, properly and accurately maintained.
4.20. Broker's, Finder's or Other Fees. Except for reasonable fees of
Heritage's attorneys, accountants and investment bankers, all of which shall be
paid by Heritage prior to the Effective Time, no agent, broker or other person
acting on behalf of Heritage or any Subsidiary or under any authority of
Heritage or any Subsidiary is or shall be entitled to any commission, broker's
or finder's fee or any other form of compensation or payment from any of the
parties hereto relating to this Agreement and the Merger contemplated hereby.
4.21. Interim Events. (a) Except as set forth in the Disclosure
Schedule, between the period from June 30, 1999 to the date of this Agreement,
no event has occurred and no fact or circumstance shall have come to exist or
come to be known which, directly or indirectly, individually or taken together
with all other facts, circumstances and events, has had, or is reasonably likely
to have, a Material Adverse Effect.
(b) Except as set forth in the Disclosure Schedule, between the period
from June 30, 1999 to the date of this Agreement, Heritage and the Subsidiaries
have carried on their businesses in the ordinary
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and usual course consistent with their past practices (excluding the incurrence
of fees and expenses of professional advisors related to this Agreement and the
transactions contemplated hereby) and there has not been:
(i) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash,
stock or property) with respect to Heritage Common
Stock; or
(ii) any split, combination or reclassification of any
capital stock of Heritage or any Subsidiary or any
issuance or the authorization of any issuance of any
other securities in respect of, or in lieu of or in
substitution for shares of Heritage Common Stock,
except for issuances of Heritage Common Stock upon
the exercise of the Options awarded prior to the date
hereof in accordance with the terms of the Stock
Option Plans.
4.22. Regulatory Filings. Heritage and the Subsidiaries have filed and
will continue to file in a timely manner all required filings with the
Securities and Exchange Commission ("SEC"), including, but not limited to, all
reports on Form 8-K, Form 10-KSB and Form 10-QSB and proxy statements, and with
all appropriate federal and state regulatory agencies and authorities as
required by applicable law. All such filings with the SEC and with all other
appropriate federal and state regulatory agencies were and will be true,
accurate and complete as of the dates of the filings and have been complied or
will comply in all respects as to form with the applicable requirements and
prepared in conformity with generally accepted regulatory accounting principles
applied on a consistent basis, and no such filing contained or will contain any
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements, at the time and in light of the
circumstances under which they were made, not false or misleading.
4.23. Indemnification Agreements. (a) Neither Heritage nor any
Subsidiary is a party to any indemnification, indemnity or reimbursement
agreement, contract, commitment or understanding to indemnify any present or
former director, officer, employee, shareholder or agent against liability or
hold the same harmless from liability other than as expressly provided in the
Charter or By-Laws of Heritage, the Investment Center, CLIC, the Finance Company
and the Investment Corporation.
(b) No claims have been made against or filed with Heritage or any
Subsidiary nor have, to the best knowledge of Heritage after due inquiry, any
claims been threatened against Heritage or any Subsidiary, for indemnification
against liability or for reimbursement of any costs or expenses incurred in
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connection with any legal or regulatory proceeding by any present or former
director, officer, shareholder, employee or agent of Heritage or any Subsidiary.
4.24. Year 2000. (a) All devices, systems, machinery, information
technology, computer software and hardware, and other date sensitive technology
(collectively, the "Systems") necessary for Heritage to carry on its business as
presently conducted and as contemplated to be conducted in the future are Year
2000 Compliant or will be Year 2000 Compliant within a period of time calculated
to result in no disruption of any of Heritage's business operations. Neither
Heritage nor any Subsidiary has received, or reasonably expects to receive, a
deficiency notice for any federal or state regulator relating to their failure
to be Year 2000 Compliant. For purposes of this Section 4.24, "Year 2000
Compliant" means that such Systems are designed to be used prior to, during and
after the Gregorian calendar year 2000 A.D. and will operate during each such
time period without error relating to date data, specifically including any
error relating to, or the product of, date data which represents or references
different centuries or more than one century.
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(b) Heritage has:
(i) undertaken a detailed inventory, review, and
assessment of all areas within its business and
operations that could be adversely affected by the
failure of Heritage to be Year 2000 Compliant on a
timely basis;
(ii) developed a detailed plan and timeline for becoming
Year 2000 Compliant on a timely basis; and
(iii) to date, implemented that plan in accordance with
that timetable.
4.25. Shareholder Approval. The affirmative vote of the holders of a
majority of the Heritage Common Stock (which are issued and outstanding on the
record date relating to the meeting of shareholders) is required for shareholder
approval of this Agreement and the Merger.
4.26. Nonsurvival of Representations and Warranties. The
representations and warranties of Heritage contained in this Agreement shall
expire at the earlier of the termination of this Agreement and the Effective
Time, and thereafter Heritage and all directors, officers and employees of
Heritage shall have no further liability with respect thereto, except for fraud
or for false or misleading statements made intentionally or knowingly in
connection with such representations and warranties.
SECTION 5
REPRESENTATIONS AND WARRANTIES OF ONB
On or prior to the date hereof, ONB has delivered to Heritage a
schedule (the "ONB Disclosure Schedule") setting forth, among other things,
items the disclosure of which is necessary or appropriate as an exception to one
or more representations or warranties contained in this Section 5 or to one or
more of its covenants contained in Section 7; provided, that the mere inclusion
of an item in the ONB Disclosure Schedule as an exception to a representation or
warranty shall not be deemed an admission by ONB that such item represents a
material exception or fact, event or circumstance or that such item is
reasonably likely to result in a Material Adverse Effect (as defined below). The
items set forth in the Disclosure Schedule establish only those items that
constitute an exception to a representation or warranty which constitutes, or is
reasonably likely to result in, a Material Adverse Effect.
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For the purpose of this Agreement, and in relation to ONB and its
subsidiaries, a Material Adverse Effect means any effect that (i) is material
and adverse to the financial position, results of operations or business of ONB
and its subsidiaries taken as a whole, or (ii) would materially impair the
ability of ONB to perform its obligations under this Agreement or otherwise
materially threaten or materially impede the consummation of the Merger and the
other transactions contemplated by this Agreement; provided, however, that
Material Adverse Effect shall not be deemed to include the impact of (a) changes
in banking and similar laws of general applicability or interpretations thereof
by courts or governmental authorities, (b) changes in generally accepted
accounting principles or regulatory accounting requirements applicable to banks
and their holding companies generally, (c) any modifications or changes to
valuation policies and practices in connection with the Merger or restructuring
charges taken in connection with the Merger, in each case in accordance with
generally accepted accounting principles, and (d) changes in general level of
interest rate or conditions or circumstances that affect the banking industry
generally.
No representation or warranty of ONB contained in this Section 5, shall
be deemed untrue or incorrect, and ONB shall not be deemed to have breached a
representation or warranty, as a consequence of the existence of any fact, event
or circumstance unless such fact, circumstance or event, individually or taken
together with all other facts, events or circumstances inconsistent with any
representation or warranty contained in this Section 5, has had or is reasonably
likely to have a Material Adverse Effect on ONB.
ONB accordingly hereby represents and warrants to Heritage as follows:
5.01. Organization and Authority. ONB is a corporation duly organized
and validly existing under the laws of the State of Indiana, is a registered
bank holding company under the BHC Act, and has full power and authority
(corporate and otherwise) to own and lease its properties as presently owned and
leased and to conduct its business in the manner and by the means utilized as of
the date hereof. ONB's common stock is registered pursuant to Section 12, and
ONB is subject to the reporting requirements, of the 1934 Act. Each of ONB's
direct subsidiaries has been duly organized and is validly existing in good
standing under the laws of the jurisdiction of its organization, and has full
power and authority to own and lease its properties as presently owned and
leased and to conduct its business in the manner and by the means utilized as of
the date hereof.
5.02. Authorization. (a) ONB has the requisite corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder, subject to the fulfillment of the conditions precedent set forth in
Section 8.01 (d), (e) and (f) hereof. As of the date hereof, ONB is not aware of
any reason why the approvals set forth in Section 8.01(e) will not be received
in a timely manner and without
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the imposition of a condition, restriction or requirement of the type described
in Section 8.01(e). This Agreement and its execution and delivery by ONB have
been duly authorized by its Board of Directors. Assuming due execution and
delivery by Heritage, this Agreement constitutes a valid and binding obligation
of ONB, subject to the conditions precedent set forth in Section 8.01 hereof,
and is enforceable in accordance with its terms, except to the extent limited by
general principles of equity and public policy and by bankruptcy, insolvency,
reorganization, liquidation, moratorium, readjustment of debt or other laws of
general application relating to or affecting the enforcement of creditors'
rights.
(b) Neither the execution of this Agreement nor consummation of the
Merger contemplated hereby: (i) conflicts with or violates ONB's Articles of
Incorporation or By-Laws; (ii) conflicts with or violates in any respect any
local, state, federal or foreign law, statute, ordinance, rule or regulation
(provided that the approvals of or filings with applicable government regulatory
agencies or authorities required for consummation of the Merger are obtained) or
any court or administrative judgment, order, injunction, writ or decree; (iii)
conflicts with, results in a breach of or constitutes a default under any note,
bond, indenture, mortgage, deed of trust, license, contract, lease, agreement,
arrangement, commitment or other instrument to which ONB is a party or by which
ONB is subject or bound; (iv) results in the creation of or gives any person,
corporation or entity the right to create any lien, charge, claim, encumbrance
or security interest, or results in the creation of any other rights or claims
of any other party (other than Heritage) or any other adverse interest, upon any
right, property or asset of ONB; or (v) terminates or gives any person,
corporation or entity the right to terminate, accelerate, amend, modify or
refuse to perform under any note, bond, indenture, mortgage, agreement,
contract, lease, license, arrangement, deed of trust, commitment or other
instrument to which ONB is bound or with respect to which ONB is to perform any
duties or obligations or receive any rights or benefits.
(c) Other than in connection or in compliance with applicable federal
and state banking, securities and corporation statutes, all as amended, and the
rules and regulations promulgated thereunder, no notice to, filing with,
exemption by or consent, authorization or approval of any governmental agency or
body is necessary for the consummation by ONB of the Merger contemplated by this
Agreement.
5.03. Capitalization. (a) The authorized capital stock of ONB as of the
date hereof consists of (i) 75,000,000 shares of common stock, no par value per
share, of which approximately 46,158,663 shares were issued and outstanding as
of June 30, 1999, and (ii) 2,000,000 shares of preferred stock, no shares of
which have been or are presently intended to be issued, other than in connection
with any obligations of ONB to issue such preferred stock under its
shareholders' rights plan. Such issued and outstanding shares of ONB capital
stock have been duly and validly authorized by all necessary corporate action of
ONB, are validly issued, fully paid and nonassessable, and have not been issued
in violation of any pre-emptive rights of any present or former ONB shareholder.
All of the issued and outstanding
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shares of common stock of ONB's subsidiaries are owned by ONB free and clear of
all liens, pledges, charges, claims, encumbrances, restrictions, security
interests, options and pre-emptive rights and of all other rights or claims of
any other person, corporation or entity with respect thereto. Except as
described in this Section 5.03, ONB has no other authorized capital stock.
Except for shares of ONB common stock to be issued in connection with: (i) ONB's
dividend reinvestment and stock purchase plan; (ii) ONB's outstanding
convertible subordinated debentures; (iii) acquisitions by ONB of other
financial institutions or holding companies; and (iv) ONB's restricted stock
plan and other employee benefit plans, ONB has no intention or obligation to
authorize or issue any other capital stock or any additional shares of ONB
capital stock.
(b) Except for shares of ONB common stock beneficially owned by its
trust affiliates, ONB has no knowledge of any person or entity who beneficially
owns 5% or more of its issued and outstanding shares of common stock.
5.04. Organizational Documents. The Articles of Incorporation and
By-Laws of ONB in force as of the date of this Agreement have been delivered to
Heritage and represent true, accurate and complete copies of such corporate
documents of ONB in effect as of the date of this Agreement.
5.05. Compliance With Law. Neither ONB nor any of its subsidiaries has
engaged in any activity nor taken or omitted to take any action which has
resulted or could result in the violation of any local, state, federal or
foreign law, statute, rule, regulation, ordinance, order, restriction or
requirement or of any order, injunction, judgment, writ or decree of any court
or government agency or body. ONB and each of its subsidiaries possesses and
holds all licenses, franchises, permits, certificates and other authorizations
necessary for the continued conduct of their business without interference or
interruption.
5.06. Regulatory Filings. ONB and each of its subsidiaries have filed
and will continue to file in a timely manner all required filings with the SEC,
including, but not limited to, all reports on Form 8-K, Form 10-K and Form 10-Q
and proxy statements, and with all other federal and state regulatory agencies
as required by applicable law. All filings by ONB with the SEC and with all
other federal and state regulatory agencies complied or will comply in all
respects as to form with the applicable requirements and were and will be true,
accurate and complete in all respects as of the dates of the filings, and no
such filings contained or will contain any untrue statement of a material fact
or omitted to state a material fact necessary in order to make the statements,
at the time and in the light of the circumstances under which they were made,
not false or misleading.
5.07. Litigation and Pending Proceedings. (a) There are no claims,
actions, suits, proceedings, investigations or arbitrations pending or, to the
best knowledge of ONB after due inquiry, threatened in
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any court or before or by any government agency or authority, arbitration panel
or otherwise (nor is there any basis for any claim, action, suit, proceeding,
litigation, investigation or arbitration) against, by or affecting ONB or its
subsidiaries which would prevent the performance of this Agreement, declare the
same unlawful or cause the rescission hereof.
(b) Neither ONB nor any of its subsidiaries is: (i) subject to any
outstanding judgment, order, writ, injunction or decree of any court,
arbitration panel or governmental agency or authority; (ii) presently charged
with or, to the best knowledge of ONB, under governmental investigation with
respect to any actual or alleged violations of any law, statute, rule,
regulation or ordinance; or (iii) the subject of any pending or, to the best
knowledge of ONB after due inquiry, threatened proceeding by any government
regulatory agency or authority having jurisdiction over its business, assets,
capital, properties or operations.
5.08. Financial Statements and Reports. (a) ONB or its agents have
delivered to Heritage copies of the following financial statements and reports
of ONB and its subsidiaries, including the notes thereto (collectively, the "ONB
Financial Statements"):
(i) Consolidated Balance Sheets and related Consolidated
Statements of Income and Consolidated Statements of Changes in
Shareholders' Equity of ONB as of and for the years ended
December 31, 1996, 1997 and 1998, and for the fiscal quarter
ended June 30, 1999; and
(ii) Consolidated Statements of Cash Flows of ONB for the years
ended December 31, 1996, 1997 and 1998 and for the fiscal
quarter ended June 30, 1999.
(b) The ONB Financial Statements present fairly the consolidated
financial position of ONB and its subsidiaries as of and at the dates shown and
the consolidated results of operations for the periods covered thereby. The ONB
Financial Statements described in clauses (i) and (ii) above, which consist of
fiscal year-end information, are audited financial statements and have been
prepared in conformance with generally accepted accounting principles applied on
a consistent basis except as may otherwise be indicated in any accountants'
notes or reports with respect to such financial statements. The ONB Financial
Statements do not include any assets, liabilities or obligations or omit to
state any assets, liabilities or obligations, absolute or contingent, or any
other facts, which inclusion or omission would render any of the ONB Financial
Statements false, misleading or inaccurate in any respect.
5.09. Shares to be Issued in Merger. The shares of ONB common stock
which Heritage shareholders will be entitled to receive upon consummation of the
Merger pursuant to this Agreement
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will, at the Effective Time, be duly authorized and will, when issued in
accordance with this Agreement, be validly issued, fully paid and nonassessable
and will have been registered under the Securities Act of 1933, as amended
("1933 Act") and listed for trading on the Nasdaq National Market System.
5.10. Shareholder Approval. Approval by ONB's shareholders of the
Merger or for any other actions contemplated by this Agreement is not required.
5.11. Accuracy of Statements Made to Heritage. No representation,
warranty or other statement made, or any information provided or to be provided,
by ONB in this Agreement, and no written report, statement, list, certificate,
materials or other information furnished or to be furnished by ONB to Heritage
through and including the Effective Time in connection with this Agreement or
the Merger contemplated hereby (including, without limitation, any written
information which has been or shall be supplied by ONB with respect to its
financial condition, results of operations, business, assets, capital or
directors and officers for inclusion in the proxy statement-prospectus and
registration statement relating to the Merger), contains or shall contain (in
the case of information relating to the proxy statement-prospectus at the time
it is mailed to Heritage's shareholders) any untrue or misleading statement of
material fact or omits or shall omit to state a material fact necessary to make
the statements contained herein or therein, in light of the circumstances in
which they are made, not false or misleading.
5.12. Broker's, Finder's or Other Fees. Except for reasonable fees of
ONB's attorneys and accountants and investment bankers, no agent, broker or
other person acting on behalf of ONB or under any authority of ONB is or shall
be entitled to any commission, broker's or finder's fee or any other form of
compensation or payment from any of the parties hereto relating to this
Agreement and the Merger contemplated hereby.
5.13. Employee Benefit Plans. (a) With respect to the employee benefit
plans, as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), sponsored or otherwise maintained by ONB or any
of its subsidiaries, whether written or oral, in which ONB or any of its
subsidiaries participates as a participating employer; to which ONB or any of
its subsidiaries contributes and including any such plans which within the
preceding six years have been terminated, merged into another plan of ONB or any
of its subsidiaries, frozen or discontinued (collectively, "ONB Plans"): (i) all
such ONB Plans have been, in all respects, maintained in compliance with the
requirements prescribed by all applicable statutes, orders and governmental
rules or regulations, including, without limitation, ERISA, the Code, and
Treasury and Labor Regulations promulgated thereunder, (ii) all ONB Plans
intended to constitute tax-qualified plans under Section 401(a) of the Code have
received favorable determination letters from the Internal Revenue Service
("Service") with respect to "TRA" (as defined in Section 1 of Rev. Proc. 93-39),
and ONB is not aware of any circumstances
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likely to result in revocation of any such favorable determination letter; (iii)
except for the ONB common stock held by its trustee as an asset of the ONB
Employee Stock Ownership Plan and the ONB Employees' Retirement Plan, no ONB
Plan (or its related trust) holds any stock or other securities of ONB or any
related or affiliated person or entity; (iv) ONB has not engaged in any
transaction that may subject ONB, or any ONB Plan, to a civil penalty imposed by
Section 502 of ERISA; (v) no prohibited transaction (as defined in Section 406
of ERISA and as defined in Section 4975(c) of the Code) has occurred with
respect to any ONB Plan; (vi) to the best knowledge of ONB, there are no
actions, suits, proceedings or claims pending (other than routine claims for
benefits) or threatened, against ONB, any of its subsidiaries, any ONB Plan, any
fiduciary of any ONB Plan or the assets of any ONB Plan as to which ONB would
have liability.
(b) ONB has made available to Heritage true, accurate and complete
copies of the following (including all plans and programs which have been
terminated): (i) pension, retirement, profit-sharing, savings, stock purchase,
stock bonus, stock ownership, stock option and stock appreciation right plans
and all amendments thereto and all summary plan descriptions thereof (including
any modifications thereto); (ii) all employment, deferred compensation (whether
funded or unfunded), salary continuation, consulting, bonus, severance and
collective bargaining agreements, arrangements or understandings; (iii) all
executive and other incentive compensation plans, programs and agreements; (iv)
all group insurance and health insurance contracts, policies or plans; and (v)
all other incentive, welfare or employee benefit plans, or agreements,
maintained or sponsored, participated in, or contributed to by ONB or any of its
subsidiaries for its current or former directors, officers or employees.
(c) No current or former director, officer or employee of ONB or any of
its subsidiaries is entitled to any benefit under any welfare benefit plans (as
defined in Section 3(1) of ERISA) after termination of employment with ONB,
except that such individuals may be entitled to continue their group health care
coverage pursuant to the retiree health coverage provisions of the ONB
Corporation Group Health Plan or pursuant to Section 4980B of the Code if they
pay the cost of such coverage pursuant to the applicable requirements of the
Plan or the Code with respect thereto, whichever is applicable.
(d) With respect to any group health plan (as defined in Section 607(1)
of ERISA) sponsored or maintained by ONB or any of its subsidiaries, in which
ONB or any of its subsidiaries participates as a participating employer or to
which ONB or any of its subsidiaries contributes, no director, officer, employee
or agent of ONB or any of its subsidiaries has engaged in any action or failed
to act in such a manner that, as a result of such action or failure to act,
would cause a tax to be imposed on ONB or any of its subsidiaries under Code
Section 4980B(a). With respect to all such plans, all applicable provisions
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of Section 4980B of the Code and Section 601 of ERISA have been complied with in
all respects by ONB and its subsidiaries.
5.14. Nonsurvival of Representations and Warranties. The
representations and warranties of ONB contained in this Agreement shall expire
at the earlier of the termination of this Agreement and the Effective Time and,
thereafter, ONB and all directors, officers and employees of ONB shall have no
further liability with respect thereto, except for fraud or for false or
misleading statements made intentionally or knowingly in connection with such
representations and warranties.
SECTION 6
COVENANTS OF HERITAGE
Heritage covenants and agrees with ONB, and covenants and agrees to
cause the Subsidiaries, to act as follows:
6.01. Shareholder Approval. Subject to Section 6.06 hereof, Heritage
shall submit this Agreement to its shareholders for approval and adoption at a
meeting to be called and held in accordance with applicable law and the Charter
and By-Laws of Heritage at the earliest possible reasonable date. Subject to
Section 6.06 hereof, the Board of Directors of Heritage shall recommend to
Heritage's shareholders that such shareholders approve and adopt this Agreement
and the Merger contemplated hereby and shall solicit proxies voting in favor of
this Agreement from Heritage's shareholders.
6.02. Other Approvals. (a) Heritage and the Subsidiaries shall proceed
expeditiously, cooperate fully and use its best efforts to assist ONB in
procuring upon reasonable terms and conditions all consents, authorizations,
approvals, registrations and certificates, in completing all filings and
applications and in satisfying all other requirements prescribed by law which
are necessary for consummation of the Merger on the terms and conditions
provided in this Agreement at the earliest possible reasonable date.
(b) Any materials or information provided by Heritage or any Subsidiary
to ONB for use by ONB in any filing with any state or federal regulatory agency
or authority shall not contain any untrue or misleading statement of material
fact or shall omit to state a material fact necessary to make the statements
contained therein, in light of the circumstances in which they are made, not
false or misleading.
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6.03. Conduct of Business. (a) On and after the date of this Agreement
and until the Effective Time or until this Agreement shall be terminated as
herein provided, neither Heritage nor any Subsidiary shall, without the prior
written consent of ONB:
(i) make any changes in its capital stock accounts
(including, without limitation, any stock split,
stock dividend, recapitalization or
reclassification), except for the issuance of up to
87,969 shares of Heritage Common Stock under the
Stock Option Plans;
(ii) authorize a class of stock or issue, or authorize the
issuance of, securities other than or in addition to
the issued and outstanding common stock as set forth
in Section 4.03 hereof;
(iii) distribute or pay any dividends on its shares of
common stock, or make any other distribution to its
shareholders except that (A) the Bank may pay cash
dividends to Heritage in the ordinary course of
business for payment of reasonable and necessary
business and operating expenses of Heritage and to
provide funds for Heritage's dividends to its
shareholders in accordance with this Agreement, (B)
Heritage may pay to its shareholders its usual and
customary annual cash dividend of no greater than One
Dollar and 50/100 Dollars ($1.50) per share to be
paid to shareholders of Heritage prior to December
31, 1999, and (C) if ONB declares a cash dividend in
the first quarter of 2000 and the Merger has not been
consummated prior to the record date of such cash
dividend, then Heritage may declare and pay a cash
dividend for each issued and outstanding share of
Heritage Common Stock in an amount equal to the ONB
cash dividend (on a per share of ONB common stock
basis) multiplied by the Exchange Ratio.
(iv) redeem any of its outstanding shares of common stock;
(v) merge, combine or consolidate or effect a share
exchange with or sell its assets or any of its
securities to any other person, corporation or entity
or enter into any other similar transaction not in
the ordinary course of business;
(vi) purchase any assets or securities or assume any
liabilities of another bank holding company, bank,
corporation or other entity, except in the ordinary
course of business necessary to manage their
investment portfolios;
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(vii) make any loan or commitment to lend money, issue any
letter of credit or accept any deposit, except in the
ordinary course of business in accordance with its
existing banking practices;
(viii) except for the acquisition or disposition in the
ordinary course of business of other real estate
owned, acquire or dispose of any real or personal
property (excluding the investment portfolio of the
Bank) or fixed asset constituting a capital
investment in excess of $50,000 individually or
$100,000 in the aggregate;
(ix) subject any of its properties or assets to a
mortgage, lien, claim, charge, option, restriction,
security interest or encumbrance, except for tax and
other liens which arise by operation of law and with
respect to which payment is not past due or is being
contested in good faith by appropriate proceedings
and except for pledges or liens: (i) required to be
granted in connection with acceptance by Heritage or
any Subsidiary of government deposits; (ii) granted
in connection with repurchase or reverse repurchase
agreements; or (iii) otherwise incurred in the
ordinary course of the conduct of its business;
(x) promote to a new position or increase the rate of
compensation or enter into any agreement to promote
to a new position or increase the rate of
compensation, of any director, officer or employee of
Heritage or any Subsidiary (except for promotions and
compensation increases in the ordinary course of
business and in accordance with past practices and
established employment policies of Heritage and the
Subsidiaries and other than pursuant to an employee
retention program, which has been disclosed to ONB);
(xi) execute, create, institute, modify, amend or
terminate (except with respect to any amendments to
the Heritage Plans required by law, rule or
regulation) any pension, retirement, savings, stock
purchase, stock bonus, stock ownership, stock option,
stock appreciation or depreciation rights or profit
sharing plans; any employment, deferred compensation,
consulting, bonus or collective bargaining agreement;
any group insurance or health contract or policy; or
any other incentive, retirement, welfare or employee
welfare benefit plan, agreement or understanding for
current or former directors, officers or employees of
Heritage or any Subsidiary; or change the level of
benefits or payments under any of the foregoing or
increase or decrease any severance or termination of
pay benefits or
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any other fringe or employee benefits other than as
required by law or regulatory authorities or the
terms of any of the foregoing;
(xii) modify, amend or institute new employment policies or
practices, or enter into, renew or extend any
employment, indemnity, reimbursement, consulting,
compensation or severance agreements with respect to
any present or former directors, officers or
employees of Heritage or any Subsidiary;
(xiii) hire or employ any new or additional employees of
Heritage or any Subsidiary, except those which are
reasonably necessary for the proper operation of
their respective businesses;
(xiv) elect or appoint any executive officers or directors
of Heritage or any Subsidiary who are not presently
serving in such capacities;
(xv) amend, modify or restate Heritage's or any of the
Charters or By-Laws from those in effect on the date
of this Agreement and as delivered to ONB hereunder;
(xvi) give, dispose of, sell, convey or transfer; assign,
hypothecate, pledge or encumber; or grant a security
interest in or option to or right to acquire any
shares of common stock or substantially all of the
assets of Heritage or any Subsidiary, or enter into
any agreement or commitment relative to the
foregoing;
(xvii) fail to continue to make additions to in accordance
with the Bank's past practices and to otherwise
maintain in all respects the Bank's reserve for loan
and lease losses, or any other reserve account, in
accordance with safe, sound, and prudent banking
practices and in accordance with generally accepted
accounting principles applied on a consistent basis;
(xviii) fail to accrue, pay, discharge and satisfy all debts,
liabilities, obligations and expenses, including, but
not limited to, trade payables, incurred in the
regular and ordinary course of business as such
debts, liabilities, obligations and expenses become
due;
(xix) except for obligations disclosed within this
Agreement or the Disclosure Statement, trade payables
and similar liabilities and obligations incurred in
the ordinary course of business and the payment,
discharge or satisfaction in the
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ordinary course of business of liabilities reflected
in the Heritage Financial Statements or the
Subsequent Heritage Financial Statements, (A) borrow
any money (except for capital purposes related to the
Subsidiaries), (B) incur any indebtedness including,
without limitation, through the issuance of
debentures, or (C) incur any liability or obligation
(whether absolute, accrued, contingent or
otherwise), in an aggregate amount exceeding $50,000
(other than as contemplated by Section 6.03(a)(vii)
hereof and legal, accounting and fees related to the
Merger);
(xx) open, close, move or, in any material respect,
expand, diminish, renovate, alter or change any of
its offices or branches; or
(xxi) pay or commit to pay any management or consulting or
other similar type of fees other than in the ordinary
course of business.
(b) Heritage and the Subsidiaries shall maintain, or cause to be
maintained, in full force and effect, insurance on their assets, properties and
operations, fidelity coverage and directors' and officers' liability insurance
on their directors, officers and employees in such amounts and with regard to
such liabilities and hazards as are currently insured by Heritage and the
Subsidiaries as of the date of this Agreement.
6.04. Preservation of Business. On and after the date of this Agreement
and until the Effective Time or until this Agreement is terminated as herein
provided, Heritage and the Subsidiaries shall: (a) carry on their business
substantially in the manner as is presently being conducted and in the ordinary
course of business; (b) use their reasonable best efforts to preserve their
business organization intact, keep available the services of the present
officers and employees and preserve their present relationships with customers
and persons having business dealings with it; (c) maintain all of the properties
and assets that each of them owns or utilizes in good operating condition and
repair, reasonable wear and tear excepted, and maintain insurance upon such
properties and assets in amounts and kinds comparable to that in effect on the
date of this Agreement; (d) maintain their books, records and accounts in the
usual, regular and ordinary manner, on a basis consistent with prior years and
in compliance with all material respects with all statutes, laws, rules and
regulations applicable to them and to the conduct of their business; and (e) not
knowingly do or fail to do anything which will cause a breach of, or default in,
any contract, agreement, commitment, obligation, understanding, arrangement,
lease or license to which any one of them is a party or by which any one of them
is or may be subject or bound.
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6.05. Restrictions Regarding Affiliates. Heritage shall, within thirty
(30) days after the date of this Agreement and promptly thereafter until the
Effective Time to reflect any changes, provide ONB with a list identifying each
person who may be deemed to be an affiliate of Heritage for purposes of Rule 145
under the 1933 Act. On or prior to the date of this Agreement, and thereafter as
may be required for a person who may be deemed an affiliate of Heritage
following the date of this Agreement, Heritage shall obtain from each director,
executive officer and other person who may be deemed to be such an affiliate of
Heritage to deliver to ONB on or prior to the date of this Agreement, and
thereafter as may be required for any other person who may be deemed an
affiliate of Heritage following the date of this Agreement, a written agreement,
substantially in the form as attached hereto as Exhibit A. On or prior to the
Effective Time, Heritage shall use its best efforts to obtain from each
director, executive officer and other person who may be deemed to be an
affiliate of Heritage for purposes of Rule 145 under the 1933 Act to deliver to
ONB at the Effective Time a certificate signed by each such person certifying to
the effect that such person has complied with the terms and conditions of their
written agreement delivered to ONB pursuant to this Section 6.05.
6.06. Other Negotiations. (a) On and after the date of this Agreement
and until the Effective Time or until this Agreement is terminated as herein
provided, except with the prior written approval of ONB, neither Heritage nor
any Subsidiary shall permit nor authorize their respective directors, officers,
employees, agents or representatives to, directly or indirectly, initiate,
solicit or encourage, or provide information to, any corporation, association,
partnership, person or other entity or group concerning any merger,
consolidation, share exchange, combination, purchase or sale of substantial
assets, sale of shares of common stock (or securities convertible or
exchangeable into or otherwise evidencing, or any agreement or instrument
evidencing the right to acquire, capital stock) or similar transaction relating
to Heritage or any Subsidiary or to which Heritage or any Subsidiary may become
a party (all such transactions are hereinafter referred to as "Acquisition
Transactions").
(b) Heritage and the Subsidiaries shall promptly communicate to ONB the
terms of any proposal or offer which any one of them may receive with respect to
an Acquisition Transaction. Heritage or any Subsidiary may, in response to an
unsolicited written proposal with respect to an Acquisition Transaction from a
third party, furnish information to, and negotiate, explore or otherwise engage
in substantive discussions with such third party, and enter into any such
agreement, arrangement or understandings, in each case, only if Heritage's Board
of Directors determines in good faith by majority vote, after consultation with
its financial advisors and outside legal counsel, that failing to take such
action would be a breach of the fiduciary duties of Heritage's Board of
Directors in connection with seeking an Acquisition Transaction, and that is
substantially more favorable to the shareholders of Heritage than the terms of
the Merger.
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(c) This Section 6.06 shall not authorize Heritage or any Subsidiary,
or any of their directors, officers, employees, agents or representatives, to
initiate any discussions or negotiations with respect to an Acquisition
Transaction with a third party.
6.07. Press Releases. Except as required by law, neither Heritage nor
any Subsidiary shall issue any news or press releases or make any other public
announcements or disclosures relating to the Merger without the prior consent of
ONB, which consent shall not be unreasonably withheld.
6.08. Disclosure Schedule Update. Heritage shall promptly supplement,
amend and update, upon the occurrence of any change prior to the Effective Time,
and as of the Effective Time, the Disclosure Schedule with respect to any
matters or events hereafter arising which, if in existence or having occurred as
of the date of this Agreement, would have been required to be set forth or
described in the Disclosure Schedule or this Agreement and including, without
limitation, any fact which, if existing or known as of the date hereof, would
have made any of the representations or warranties of Heritage contained herein
incorrect, untrue or misleading.
6.09. Information, Access Thereto, Confidentiality. ONB and its
respective representatives and agents shall, on reasonable notice and during
normal business hours prior to the Effective Time, have full and continuing
access to the properties, facilities, operations, books and records of Heritage
and the Subsidiaries. ONB and its respective representatives and agents may,
prior to the Effective Time, make or cause to be made such reasonable
investigation of the operations, books, records and properties of Heritage and
the Subsidiaries and of their financial and legal condition as deemed necessary
or advisable to familiarize themselves with such operations, books, records,
properties and other matters; provided, however, that such access or
investigation shall not interfere with the normal business operations of
Heritage and the Subsidiaries. Upon request, Heritage and the Subsidiaries shall
furnish ONB or its respective representatives or agents, their attorneys'
responses to external auditors requests for information, management letters
received from their external auditors and such financial, loan and operating
data and other information reasonably requested by ONB which has been or is
developed by Heritage or any Subsidiary, their auditors, accountants or
attorneys (provided with respect to attorneys, such disclosure would not result
in the waiver by Heritage or any Subsidiary of any claim of attorney-client
privilege), and will permit ONB and its respective representatives or agents to
discuss such information directly with any individual or firm performing
auditing or accounting functions for Heritage and the Subsidiaries, and such
auditors and accountants shall be directed to furnish copies of any reports or
financial information as developed to ONB or its respective representatives or
agents. No investigation by ONB shall affect the representations and warranties
made by Heritage herein. ONB shall not use any such information obtained
pursuant to this Agreement for any purpose unrelated to the Merger. Any
confidential information or trade secrets received by ONB or its representatives
or agents
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in the course of such examination (whether conducted prior to or after the date
of this Agreement) shall be treated confidentially, and any correspondence,
memoranda, records, copies, documents and electronic or other media of any kind
containing such confidential information or trade secrets or both shall be
destroyed by ONB or, at Heritage's request, returned to Heritage in the event
this Agreement is terminated as provided in Section 9 hereof. This Section 6.09
shall not require the disclosure of any information to ONB which would be
prohibited by law.
6.10. Subsequent Heritage Financial Statements. As soon as reasonably
available after the date of this Agreement, Heritage shall deliver to ONB the
monthly unaudited consolidated balance sheets and profit and loss statements of
Heritage prepared for its internal use, Call Reports of the Banks for each
quarterly period completed prior to the Effective Time, and all other financial
reports or statements submitted to regulatory authorities after the date hereof,
to the extent permitted by law (collectively, "Subsequent Heritage Financial
Statements"). The Subsequent Heritage Financial Statements shall be prepared on
a basis consistent with past accounting practices and generally accepted
accounting principles applied on a consistent basis to the extent applicable and
shall present fairly the financial condition and results of operations as of the
dates and for the periods presented, subject to year end audit adjustments and
the absence of footnotes for interim statements. The Subsequent Heritage
Financial Statements, including the notes thereto, will not include any assets,
liabilities or obligations or omit to state any assets, liabilities or
obligations, absolute or contingent, or any other facts, which inclusion or
omission would render such financial statements inaccurate, incomplete or
misleading in any respect.
6.11. Employee Benefits. Neither the terms of Section 7.03 hereof nor
the provision of any employee benefits by ONB or any of its subsidiaries to
employees of Heritage shall: (a) create any employment contract, agreement or
understanding with or employment rights for, or constitute a commitment or
obligation of employment to, any of the officers or employees of Heritage; or
(b) prohibit or restrict ONB or its subsidiaries, whether before or after the
Effective Time, from changing, amending or terminating any employee benefits
provided to its employees from time to time.
6.12. Transition of Heritage 401(k)/ESOP. As soon as administratively
feasible after the Effective Time, the assets and liabilities under the Heritage
Bank Profit Sharing, 401(k) Savings and Employee Stock Ownership Plan and Trust
("Heritage 401(k)/ESOP") attributable to the 401(k) portion of such plan shall
be merged with and into the ONB Savings Plan. All account balances maintained
under the Heritage 401(k)/ESOP shall become fully vested and nonforfeitable at
the Effective Time. From the date of this Agreement through the Effective Time,
Heritage and the Subsidiaries may continue to make contributions to the Heritage
401(k)/ESOP (including participant "deferral" contributions and discretionary
employer contributions), so long as such contributions are comparable in amount,
on a prorated basis, to recent past contributions to that plan. In addition,
Heritage shall take, or cause to be
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taken, all actions necessary to cause the fiduciaries of the 401(k)/ESOP to take
all of the following actions:
(i) Implement a written confidential pass through voting
procedure pursuant to which the participants under
the Heritage 401(k)/ESOP and their beneficiaries
shall direct the trustee under the Heritage
401(k)/ESOP to vote the shares of Heritage Common
Stock allocated to their Heritage 401(k)/ ESOP
accounts with respect to the Merger;
(ii) Provide the Heritage 401(k)/ESOP participants and
their beneficiaries with a written notice regarding
the existence of and provisions for such confidential
pass through voting procedures, as well as the same
written materials to be provided to the shareholders
of Heritage in connection with the Merger;
(iii) Obtain a written opinion from a qualified,
independent financial advisor to the trustee of the
Heritage 401(k)/ESOP to the effect that the shares of
ONB common stock to be received by the Heritage
401(k)/ESOP in the Merger in exchange for the shares
of Heritage Common Stock will constitute "adequate
consideration" as defined in Section 3(18) of ERISA,
and that the Merger, including the disposition of the
Heritage 401(k)/ESOP in connection therewith, are
fair to the Heritage 401(k)/ESOP and its participants
from a financial point of view. The identity of the
financial advisor and the contents of its written
opinion referred to in the preceding sentence must be
acceptable in form and content to ONB and its
counsel; and
(iv) Take any and all additional actions necessary to
satisfy the requirements of ERISA applicable to the
Heritage 401(k)/ESOP fiduciaries in connection with
the Merger.
Effective as of the last day of the month in which the Effective Time occurs,
the "employee stock ownership plan" portion of the Heritage 401(k)/ESOP (that
is, the portion of that plan that (i) is not attributable to the 401(k) portion
and therefore (ii) is not being merged into the ONB Savings Plan) shall be
terminated and all benefits thereunder distributed as soon as practicable
following that date. Prior to the distribution of any ESOP accounts in
connection with such termination, Heritage shall have obtained a determination
letter from the Service to the effect that the termination will not affect the
tax qualified status of the ESOP.
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6.13. Termination of Group Health Plan. The Heritage Bank Group Health
Plan ("Heritage Group Health Plan") shall be terminated as of the last day of
the calendar month in which the Effective Time occurs. From the date of this
Agreement through the date as of which the Heritage Group Health Plan
terminates, Heritage and the Subsidiaries shall continue to pay the insurance
premiums necessary to continue the Heritage Group Health Plan benefits.
6.14. Termination of Group Dental Plan. The Heritage Bank Group Dental
Plan ("Heritage Dental Plan") shall be terminated as of the last day of the
calendar month in which the Effective Time occurs. From the date of this
Agreement through the date as of which the Heritage Dental Plan terminates,
Heritage and the Subsidiaries shall continue to pay the insurance premiums
necessary to continue the Heritage Dental Plan benefits.
6.15. Termination of Group LTD Plan. The Heritage Bank Group Long Term
Disability Plan ("Heritage LTD Plan") shall be terminated as of the Effective
Time, or as soon as administratively feasible thereafter, but such termination
shall not affect the benefits payable to any covered former Heritage employee
who became entitled to a disability benefit under the Heritage LTD Plan prior to
the termination of said plan. From the date of this Agreement through the date
as of which the Heritage LTD Plan terminates, Heritage and the Subsidiaries
shall continue to pay the insurance premiums necessary to continue the Heritage
LTD Plan benefits.
6.16. Termination of Cafeteria Plan. The Heritage Fringe Benefit Plan
("Heritage Cafeteria Plan") shall be terminated as of same date the Heritage
Health Plan is terminated. From the date of this Agreement through the date as
of which the Heritage Cafeteria Plan terminates, Heritage and the Subsidiaries
shall continue to contribute to such plan the pre-tax amounts which the Heritage
Cafeteria Plan participants elect to defer from compensation As of the date of
termination, the balances in the health and dependent care flexible spending
accounts under the Heritage Cafeteria Plan shall be transferred to the ONB
"cafeteria" plan. Elections in effect at that time shall be continued under the
ONB plan, subject to change as provided in the ONB plan. All benefit payments
relating to the transferred balances shall be made in accordance with the ONB
plan.
6.17. Termination of Group Life and ADD Plan. The Heritage Bank Group
Term Life and ADD Insurance Plan ("Heritage Life Plan") shall be terminated as
of the end of the month coincident with or next following the Effective Time.
From the date of this Agreement through the date on which the Heritage Life Plan
terminates, Heritage and the Subsidiaries shall continue to pay the insurance
premiums necessary to continue the death benefits provided by such plan.
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6.18. Termination of Cancer Policies. The payment of premiums to
provide voluntary cancer insurance shall cease as of the Effective Time.
6.19. Termination of Executive Life and Disability Policies. The
payment of premiums to provide executives of Heritage and/or its Subsidiaries
with individual life and/or disability insurance coverage shall cease as of the
Effective Time. The executives may then exercise at their discretion whatever
conversion rights they may have, if any, with respect to those insurance
policies.
6.20 Termination of the Heritage Directors' Deferred Compensation Plan.
The Heritage Financial Services, Inc. Directors' Unfunded Deferred Compensation
Plan (the "Heritage Directors' Deferred Compensation Plan"), and all
participation agreements in effect thereunder, shall be terminated as of the
Effective Time. From the date of this Agreement through the date on which the
Heritage Directors' Deferred Compensation Plan is terminated, Heritage and the
Subsidiaries may continue to allow participants thereunder to elect to defer the
receipt of all or a portion of the director fees he or she would otherwise
receive and to credit such fees to the director's individual account under the
plan. Upon the termination of the Heritage Directors' Plan, the balance in each
individual account thereunder shall be distributed in a lump sum payment to the
participant entitled thereto. The Board of Directors of Heritage, and the Board
of Directors of each of the Subsidiaries which is participating in the Heritage
Directors' Deferred Compensation Plan, shall, prior to the day on which the
Effective Time occurs, amend or cause the amendment of such plan to provide that
upon the termination of such plan the accrued benefits thereunder shall be
immediately paid in a lump sum payment to the individuals entitled to such
accrued benefits. Notwithstanding the foregoing, if ONB adopts a deferred
compensation plan for its directors and/or the directors of its subsidiaries,
then the Heritage Directors' Deferred Compensation Plan shall be "frozen" as of
the Effective Time and the accumulated benefit obligations under the Heritage
Directors' Deferred Compensation Plan shall be transferred to, and become
benefit obligations under, the ONB plan. Such transferred benefits shall
thereafter accrue "earnings," be paid and generally be administered pursuant to
the terms of the ONB plan. Prior to the Effective Time, Heritage shall use its
best efforts to obtain acknowledgments and consents from each Heritage
Directors' Deferred Compensation Plan participant as to the foregoing
disposition of his or her plan benefit.
6.21. Termination of Heritage Severance Policy. The Heritage Bank
Severance Policy, shall be terminated as of the Effective Time. With respect to
an individual covered by such severance policy on the date of its termination,
in the event that he or she incurs, within twelve months from the Effective
Time, an involuntary termination of employment for reasons other than cause he
or she shall be entitled to receive a severance benefit. The severance benefit
shall be a salary continuation the amount of which shall be the amount payable
to such individual under the salary continuation provisions of the ONB Severance
Policy, if any, then applicable to such individual. An individual who is
entitled to a benefit
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under the ONB Severance Policy shall also be entitled to a continuation of
employee benefits as determined solely by the applicable provisions of the ONB
Severance Policy.
6.22 Disposition of Heritage Stock Option Plans. At or prior to the
Effective Time, Heritage shall use its best efforts, including using its best
efforts to obtain any necessary consents from optionees, with respect to the
Heritage Bank 1989 Employees Stock Option Plan and the Heritage Financial
Services, Inc. 1998 Stock Option Plan ("Heritage Stock Option Plans") to permit
the conversion of each outstanding option to acquire shares of common stock of
Heritage which was properly granted pursuant to a stock option agreement
executed in accordance with the provisions of a Heritage Stock Option Plan by
ONB pursuant to Section 7.04 of this Agreement, and to permit ONB to assume the
sponsorship and administration of the Heritage Stock Option Plans. Heritage
shall not grant any additional options under a Heritage Stock Option Plans after
the date of this Agreement and shall also take all actions necessary to amend
the Heritage Stock Option Plans to eliminate additional automatic or
discretionary grants or awards under such plans subsequent to the Effective
Time. Heritage shall amend the Heritage Bank 1989 Employees Stock Option Plan,
or cause such plan to be amended, to eliminate any rights to receive cash in
lieu of stock under the plan. Finally, Heritage shall take all actions needed to
terminate the Heritage Financial Services, Inc. 1998 Outside Directors' Stock
Option Plan as of the Effective Time. No grants of options shall be made under
that plan on or after the date of this Agreement. In addition, all unexercised
options previously granted under that plan shall lapse and become unexercisable
on and after the Effective Time.
6.23. Break-up Fee. (a) Heritage hereby acknowledges and agrees that
ONB has committed and will commit substantial time, effort, resources and
expenses, and will forgo other acquisition opportunities, in pursuing the
Merger. Heritage further agrees that it shall pay to ONB a break-up fee in the
amount of Two Million Dollars ($2,000,000), plus out-of-pocket expenses
(collectively, the "Break-up Fee"), in the event that:
(i) The Board of Directors of Heritage fails to recommend
to shareholders of Heritage that such shareholders
should approve this Agreement and the Merger; or
(ii) The Board of Directors of Heritage withdraws,
modifies or conditions its recommendation to
shareholders of Heritage to approve this Agreement
and the Merger or is silent with respect to the
approval of this Agreement and the Merger; or
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(iii) Heritage approves, enters into or executes a
definitive agreement, letter of intent (whether
binding or non-binding), term sheet or understanding
relating to an Acquisition Transaction with a party
other than ONB or an affiliate of ONB; or
(iv) Heritage terminates this Agreement pursuant to
Section 9.01(c)(vi) hereof.
(b) The Break-up Fee shall be paid to ONB within thirty (30) days of
the occurrence of any of the events specified in Section 6.23(a) hereof. If the
Break-up Fee is not paid as provided, then ONB shall be entitled to recover
interest at the highest prime rate set forth in The Wall Street Journal (Midwest
Edition) under the section entitled "Money Rates" on the unpaid amount of the
Break-up Fee from the time the Break-up Fee is due until paid-in-full, together
with all costs of collection thereof, including reasonable attorneys' fees and
expenses.
(c) ONB and Heritage hereby acknowledge and agree that the Break-up Fee
shall compensate ONB for (i) the value of the lost business opportunity which
would have inured to ONB if the Merger had been consummated, (ii) expenses
incurred for attorneys, accountants, financial advisors and consultants of ONB
in developing the Merger and drafting this Agreement, (iii) ONB's management
time and expense in investigating, analyzing, developing and pursuing the
Merger, (iv) expenses relating to ONB's due diligence efforts and (v) the value
of the acquisition opportunities lost by ONB in pursuing the Merger instead of
other acquisitions. Heritage further acknowledges and agrees that the amount of
the Break-up Fee is fair, reasonable and not a penalty and that its obligation
to pay the Break-up Fee shall survive any termination of this Agreement by ONB.
6.24. Year 2000. Heritage shall:
(a) Additional Information. Furnish such additional information,
statements and other reports with respect to Heritage's Year 2000 compliance
(and its approach to and progress towards achieving compliance) discussed in
Section 4.24 hereof as ONB may reasonably request from time to time.
(b) Notice of Changes. In the event of any change in circumstances that
causes or will likely cause any of Heritage's representations and warranties set
forth in Section 4.24 hereof ("Year 2000 Compliance") to no longer be true and
would result in a Material Adverse Effect (hereinafter referred to as a "Change
in Circumstances"), then Heritage shall promptly, and in any event within ten
(10) days of receipt of information regarding a Change in Circumstances, provide
ONB with written notice ("Notice") that describes in reasonable detail the
Change in Circumstances and how such Change in Circumstances caused or will
likely cause Heritage's representations and warranties set forth in Section 4.24
hereof to
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no longer be true. Heritage shall, within ten (10) days of a request, also
provide ONB with any additional information ONB reasonably requests of Heritage
in connection with the Notice and/or a Change in Circumstances.
(c) Audits. Give any representative of ONB reasonable access during all
business hours to, and permit such representative to examine, copy or make
excerpts from, any and all books, records and documents in the possession of
Heritage and the Subsidiaries and relating to their affairs, and to inspect any
of the properties and Systems of Heritage and the Subsidiaries, and to project
test the Systems to determine if they are Year 2000 Compliant in an integrated
environment, all at the sole cost and expense of ONB.
6.25. Reports. Promptly upon its becoming available, furnish to ONB one
(1) copy of each financial statement, report, notice, or proxy statement sent by
Heritage to its shareholders generally and of each regular or periodic report,
registration statement or prospectus filed by Heritage with the SEC or any
successor agency, and of any order issued by any Governmental Authority in any
proceeding to which Heritage is a party. For purposes of this provision,
"Governmental Authority" shall mean any government (or any political subdivision
or jurisdiction thereof), court, bureau, agency or other governmental entity
having or asserting jurisdiction over Heritage or any of its business,
operations or properties.
6.26. Adverse Actions. Heritage shall not (a) take any action while
knowing that such action would, or is reasonably likely to, 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; or
(b) knowingly take any action that is intended or is reasonably likely to result
in (i) any of its representations and warranties set forth in this Agreement
being or becoming untrue, subject to the standard set out in the second
paragraph to Section 4, in any respect at any time at or prior to the Effective
Time, (ii) any of the conditions to the Merger set forth in Section 8 not being
satisfied, (iii) a material violation of any provision of this Agreement or (iv)
a delay in the consummation of the Merger except, in each case, as may be
required by applicable law or regulation.
SECTION 7
COVENANTS OF ONB
ONB covenants and agrees with Heritage as follows:
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7.01. Approvals. ONB shall have primary responsibility for the
preparation, filing and costs of all bank holding company and bank regulatory
applications required for consummation of the Merger. ONB shall file all bank
holding company and bank regulatory applications as soon as practicable after
the execution of this Agreement. ONB shall provide to Heritage's legal counsel a
reasonable opportunity to review such applications prior to their filing and
shall provide to Heritage's legal counsel copies of all applications filed and
copies of all material written communications with all state and federal bank
regulatory agencies relating to such applications. ONB shall proceed
expeditiously, cooperate fully and use its best efforts to procure, upon terms
and conditions reasonably acceptable to ONB, all consents, authorizations,
approvals, registrations and certificates, to complete all filings and
applications and to satisfy all other requirements prescribed by law which are
necessary for consummation of the Merger on the terms and conditions provided in
this Agreement at the earliest possible reasonable date.
7.02. SEC Registration. (a) ONB shall file with the SEC as soon as
practicable after the execution of this Agreement a Registration Statement on an
appropriate form under the 1933 Act covering the shares of ONB common stock to
be issued pursuant to this Agreement and shall use its best efforts to cause the
same to become effective and thereafter, until the Effective Time or termination
of this Agreement, to keep the same effective and, if necessary, amend and
supplement the same. Such Registration Statement and any amendments and
supplements thereto are referred to in this Agreement as the "Registration
Statement". The Registration Statement shall include a proxy
statement-prospectus reasonably acceptable to ONB and Heritage, prepared for use
in connection with the meeting of shareholders of Heritage referred to in
Section 6.01 hereof, all in accordance with the rules and regulations of the
SEC. ONB shall, as soon as practicable after filing the Registration Statement,
make all filings required to obtain all Blue Sky exemptions, authorizations,
consents or approvals required for the issuance of ONB common stock. In advance
of filing the Registration Statement and all other filings described in Section
7.01 hereof, ONB shall provide Heritage and its counsel with a copy of the
Registration Statement and each such other filing and provide an opportunity to
comment thereon.
(b) Any materials or information provided by ONB in any filing with any
state or federal regulatory agency or authority shall not contain any untrue or
misleading statement of material fact or shall omit to state a material fact
necessary to make the statements contained therein, in light of the
circumstances in which they are made, not false or misleading.
(c) All filings by ONB with the SEC and with all other federal and
state regulatory agencies shall be true, accurate and complete in all material
respects as of the dates of the filings, and no such filings shall contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements, at the time and in light of the circumstances
under which they were made, not false or misleading.
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(d) ONB will use reasonable best efforts to list for trading on the
Nasdaq National Market System (subject to official notice of issuance) prior to
the Effective Time, the shares of ONB common stock to be issued in the Merger.
7.03. Employee Benefit Plans. (a) As of the Effective Time, ONB will
make available to the employees of Heritage and the Subsidiaries who continue as
employees of ONB or any subsidiary of ONB after the Effective Time, subject to
Section 7.03(b) and (c) hereof, substantially the same employee benefits on
substantially the same terms and conditions as ONB offers to similarly situated
officers and employees. Until such time as the employees of Heritage and the
Subsidiaries become covered by the ONB welfare benefit plans, the employees of
Heritage and the Subsidiaries shall remain covered by the Heritage Plans which
cover such employees, subject to the terms of such plans. Except as otherwise
provided in Sections 6.11 through 6.22, ONB will honor in accordance with their
terms (i) all employee benefit obligations to current and former officers and
employers and employees of Heritage and the Subsidiaries accrued as of the
Effective Time and (ii) to the extent set forth in the Disclosure Schedule, all
employee severance plans in existence on the date hereof and all employment or
severance agreements entered into prior to the date hereof to the extent set
forth in the Disclosure Schedule.
(b) Subject to the provisions of subsection (c) hereof, years of
service (as defined in the applicable ONB plan) of an officer or employee of
Heritage or any Subsidiary prior to the Effective Time shall be credited,
effective as of the date on which such employees become covered by a particular
ONB plan, to each such officer or employee eligible for coverage under Section
7.03(a) hereof for purposes of: (i) eligibility under ONB's employee welfare
benefit plans; (ii) eligibility and vesting, but not for purposes of benefit
accrual or contributions, under the ONB Employees' Retirement Plan ("ONB Pension
Plan") or under the ONB Employees' Savings and Profit Sharing Plan ("ONB Profit
Sharing Plan"); and (iii) eligibility and vesting, but not for purposes of
benefit accrual or contributions, under the ONB Employee Stock Ownership Plan
("ESOP"). Those officers and employees of Heritage or any Subsidiary who
otherwise meet the eligibility requirements of the ONB Profit Sharing Plan and
ESOP, based on their age and years of service to Heritage or any Subsidiary,
shall become participants thereunder at the Effective Time. Those officers and
employees of Heritage or any Subsidiary who otherwise meet the eligibility
requirements of the ONB Pension Plan, based upon their age and years of Heritage
or any Subsidiary service, shall become participants thereunder no later than
the January 1st which coincides with or next follows the Effective Time. Those
officers or employees who do not meet the eligibility requirements of the ONB
Pension Plan, ONB Profit Sharing Plan or ESOP on such dates shall become
participants thereunder on the first plan entry date under the ONB Pension Plan,
the ONB Profit Sharing Plan or ESOP, as the case may be, which coincides with or
next follows the date on which such eligibility requirements are satisfied.
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(c) In accordance with the provisions of the Health Insurance
Portability and Accountability Act ("HIPAA") and the terms of the ONB group
health plan, officers and employees of Heritage or any Subsidiary who become
participants in the ONB group health plan will be given "creditable coverage"
credit for their coverage under the Heritage Group Health Plan under the ONB
group health plan's pre-existing condition limitation provisions. In addition,
if a condition was not a "pre-existing condition" for a participant in the
Heritage Group Health Plan, it shall not be considered to be a pre-existing
condition under the ONB group health plan.
(d) Neither the terms of this Section 7.03 nor the provision of any
employee benefits by ONB or any of its subsidiaries to employees of Heritage or
any Subsidiary shall: (i) create any employment contract, agreement or
understanding with or employment rights for, or constitute a commitment or
obligation of employment to, any of the officers or employees of Heritage or any
Subsidiary; or (ii) prohibit or restrict ONB or its subsidiaries, whether before
or after the Effective Time, from changing, amending or terminating any employee
benefits provided to its employees from time to time.
(e) ONB shall take any and all actions reasonably necessary to
effectuate the disposition of the Heritage Plans provided by Section 6.12
through 6.22.
7.04. Stock Options. (a) At the Effective Time, the obligations of
Heritage with respect to each outstanding option to purchase shares of Heritage
Common Stock ("Stock Options") which was properly granted pursuant to a stock
option agreement executed in accordance with a Heritage Stock Option Plan shall
be assumed by ONB as hereinafter provided. In connection therewith, each Stock
Option shall be deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such Stock Option at the Effective Time,
that number of shares of ONB common stock, rounded to the nearest whole share,
as the holder of such Stock Option would have been entitled to receive pursuant
to the Merger had such holder exercised such Option in full (after giving effect
to accelerated vesting) immediately prior to the Effective Time and, immediately
thereafter, exchanged such shares solely for ONB common stock based upon the
Exchange Ratio at an exercise price per share equal to (A) the aggregate
exercise price for Heritage Common Stock otherwise purchasable pursuant to such
Stock Option divided by (B) the number of shares of ONB common stock, rounded to
the nearest whole share, deemed purchasable pursuant to such Stock Option;
provided, however, that in the case of any Stock Option to which Section 422 of
the Code applies, the option price, the number of shares purchasable pursuant to
such option and the terms and conditions of exercise of such option shall be
determined in accordance with the foregoing, subject to such adjustments as are
necessary in order to satisfy the requirements of Section 424(a) of the Code. By
way of example and illustration only, if any option holder has been granted and
is vested in options to acquire 1,000 shares of Heritage Common
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Stock for $10.00 per share, then after the Effective Time, such option holder's
same option would be converted into the option to acquire, 3,154 shares of ONB
common stock at $3.17 per share. In no event shall ONB be required to issue
fractional shares of ONB common stock pursuant to the Stock Options.
(b) As soon as practicable after the Effective Time, ONB shall deliver
to each holder of a Stock Option an appropriate notice or agreement which sets
forth such holder's rights pursuant to the Stock Option, and the agreements
evidencing the grants of such Stock Options shall continue in effect on the same
terms and conditions (subject to the conversion required by this Section 7.04
after giving effect to the Merger and the assumption by ONB as set forth above);
provided, however, to the extent necessary to effectuate the provisions of this
Section 7.04, ONB may deliver new or amended Stock Option agreements which
reflect the terms of each Stock Option assumed by ONB. With respect to each
Stock Option, the optionee shall be solely responsible for any and all tax
liability (other than the employer's one-half share of any employment taxes)
which may be imposed upon the optionee as a result of the provisions of this
Section 7.04 and as a result of the grant and exercise of such Stock Options.
(c) As soon as practicable after the Effective Time, ONB shall file
with the SEC a registration statement on an appropriate form with respect to the
shares of ONB common stock subject to such options and shall use its best
efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the prospectus or
prospectuses with respect thereto) for so long as such options remain
outstanding.
7.05. Press Releases. Except as required by law, ONB shall not issue
any news or press releases or make any other public announcements or disclosures
relating primarily to Heritage with respect to the Merger without the prior
consent of Heritage, which consent shall not be unreasonably withheld.
7.06. Indemnification. (a) From and after the Effective Time, ONB shall
indemnify, defend and hold harmless to the fullest extent permitted by
applicable federal and state law each person who is on the date hereof, or has
been at any time prior to the date hereof or who becomes prior to the Effective
Time, a director or officer of Heritage or was serving at the request of
Heritage as a director or officer of any domestic or foreign corporation, joint
venture, trust, employee benefit plan or other enterprise (collectively, the
"Indemnitees") arising out of Heritage's Charter or By-Laws in effect at the
Effective Time against any and all losses in connection with or arising out of
any claim which is based upon, arises out of or in any way relates to any actual
or alleged act or omission occurring at or prior to the Effective Time in the
Indemnitee's capacity as a director or officer (whether elected or appointed),
of Heritage. Indemnification of officers and directors of the Subsidiaries
following the Effective Time will be
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provided to the same extent it is provided from time to time to other persons
working in similar capacities for ONB or its subsidiaries following the
Effective Time.
(b) In the event ONB or any of its successors or assigns (i)
consolidates with or merges into any other corporation or entity 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 or entity, then, and in each case, to the extent
necessary, proper provision shall be made so that the successors and assigns of
ONB assume the obligations set forth in this Section 7.06.
(c) ONB shall maintain in effect for not less than two (2) years from
the Effective Time the policies of directors' and officers' liability insurance
most recently maintained by Heritage; provided, however, that ONB may substitute
therefor policies with reputable and financially sound carriers for
substantially similar coverage containing terms and conditions which are no less
advantageous for so long as such substitution does not result in gaps or lapses
in coverage with respect to claims arising from or relating to matters occurring
prior to the Effective Time. ONB shall pay all expenses, including attorneys'
fees, that may be incurred by any Indemnitee in enforcing the indemnity and
other obligations provided for in this Section 7.06.
(d) The provisions of this Section 7.06 are intended to be for the
benefit of, and shall be enforceable by, each Indemnitee and their respective
heirs and representatives.
7.07 Adverse Actions. ONB shall not (a) take any action while knowing
that such action would, or is reasonably likely to, 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; or (b) knowingly
take any action that is intended or is reasonably likely to result in (i) any of
its representations and warranties set forth in this Agreement being or becoming
untrue, subject to the standard set out in the second paragraph to Section 5, in
any respect at any time at or prior to the Effective Time, (ii) any of the
conditions to the Merger set forth in Section 8 not being satisfied, (iii) a
material violation of any provision of this Agreement or (iv) a delay in the
consummation of the Merger except, in each case, as may be required by
applicable law or regulation.
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SECTION 8
CONDITIONS PRECEDENT TO THE MERGER
8.01. ONB. The obligation of ONB to consummate the Merger is subject to
the satisfaction and fulfillment of each of the following conditions on or prior
to the Effective Time, unless waived in writing by ONB:
(a) Representations and Warranties at Effective Time. Each of the
representations and warranties of Heritage with respect to itself and the
Subsidiaries contained in this Agreement shall, subject to the standard set out
in the second paragraph to Section 4, be true, and correct at and as of the
Effective Time as though such representations and warranties had been made or
given on and as of the Effective Time.
(b) Covenants. Each of the covenants and agreements of Heritage shall
have been fulfilled or complied with from the date of this Agreement through and
as of the Effective Time.
(c) Deliveries at Closing. ONB shall have received from Heritage at the
Closing (as hereinafter defined) the items and documents, in form and content
reasonably satisfactory to ONB, set forth in Section 11.02(b) hereof.
(d) Registration Statement Effective. ONB shall have registered its
shares of common stock to be issued to shareholders of Heritage in accordance
with this Agreement with the SEC pursuant to the 1933 Act, and all state
securities and Blue Sky approvals, authorizations and exemptions required to
offer and sell such shares shall have been received by ONB. The Registration
Statement with respect thereto shall have been declared effective by the SEC and
no stop order shall have been issued or threatened.
(e) Regulatory 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 and no such approvals shall contain any
conditions, restrictions or requirements which the board of directors of ONB
reasonably determines in good faith would (i) following the Effective Time, have
a Material Adverse Effect on ONB and its subsidiaries taken as a whole or (ii)
reduce the benefits of the transactions contemplated hereby to such a degree
that ONB would not have entered into this Agreement had such conditions,
restrictions or requirements been known at the date hereof.
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(f) Shareholder Approval. The shareholders of Heritage shall have
approved and adopted this Agreement as required by applicable law and its
Charter.
(g) Officers' Certificate. Heritage shall have delivered to ONB a
certificate signed by its Chairman or President and its Secretary, dated as of
the Effective Time, certifying: (i) to the effect set out in Section 8.01(a);
(ii) that all the covenants of Heritage have been complied with from the date of
this Agreement through and as of the Effective Time; and (iii) that Heritage has
satisfied and fully complied with all conditions necessary to make this
Agreement effective as to Heritage.
(h) Tax Opinion. The Board of Directors of ONB shall have received a
written opinion of the law firm of Krieg DeVault Alexander & Capehart, LLP,
dated as of the Effective Time, in form and content satisfactory to ONB, to the
effect that the Merger to be effected pursuant to this Agreement will constitute
a tax-free reorganization under the Code (as described in Section 1.06 hereof)
to each party hereto and to the shareholders of Heritage, except with respect to
cash received by Heritage's shareholders for fractional shares resulting from
application of the Exchange Ratio. In rendering such opinion, counsel may
require and rely upon customary representation letters of ONB and Heritage and
rely upon customary assumptions.
(i) Pooling of Interests Opinion. The Board of Directors of ONB shall
have received a written opinion from its independent auditors, dated as of the
Effective Time, in form and content satisfactory to ONB, to the effect that the
Merger to be effected pursuant to this Agreement will qualify for pooling of
interests accounting treatment for ONB.
(j) Fairness Opinion. Heritage's investment banker shall have issued
(as of the date not later than the mailing date of the proxy
statement-prospectus relating to the Merger to be mailed to the shareholders of
Heritage) its fairness opinion stating that the Exchange Ratio relating to the
Merger is fair to the shareholders of Heritage from a financial point of view;
provided, that this condition precedent shall apply only in the event that
Heritage waives its condition precedent in Section 8.02(i) hereof.
8.02. Heritage. The obligation of Heritage to consummate the Merger is
subject to the satisfaction and fulfillment of each of the following conditions
on or prior to the Effective Time, unless waived in writing by Heritage:
(a) Representations and Warranties at Effective Time. Each of the
representations and warranties of ONB contained in this Agreement shall, subject
to the standards set out in the second paragraph of Section 5, be true and
correct on and as of the Effective Time as though the representations and
warranties had been made or given at and as of the Effective Time.
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(b) Covenants. Each of the covenants and agreements of ONB shall have
been fulfilled or complied with from the date of this Agreement through and as
of the Effective Time.
(c) Deliveries at Closing. Heritage shall have received from ONB at the
Closing the items and documents, in form and content reasonably satisfactory to
Heritage, listed in Section 11.02(a) hereof.
(d) Registration Statement Effective. ONB shall have registered its
shares of common stock to be issued to shareholders of Heritage in accordance
with this Agreement with the SEC pursuant to the 1933 Act, and all state
securities and Blue Sky approvals, authorizations and exemptions required to
offer and sell such shares shall have been received by ONB. The Registration
Statement with respect thereto shall have been declared effective by the SEC and
no stop order shall have been issued or threatened. In addition, such shares of
ONB common stock shall be listed on the Nasdaq National Market System.
(e) Regulatory 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 and no such approvals shall contain any
conditions, restrictions or requirements which the board of directors of
Heritage reasonably determines in good faith would (i) following the Effective
Time, have a Material Adverse Effect on Heritage or (ii) reduce the benefits of
the transactions contemplated hereby to such a degree that Heritage would not
have entered into this Agreement had such conditions, restrictions or
requirements been known at the date hereof.
(f) Shareholder Approval. The shareholders of Heritage shall have
approved and adopted this Agreement as required by applicable law and its
Charter.
(g) Officers' Certificate. ONB shall have delivered to Heritage a
certificate signed by its Chairman or President and its Secretary, dated as of
the Effective Time, certifying that: (i) to the effect set out in Section
8.02(a); (ii) that all the covenants of ONB have been complied with from the
date of this Agreement through and as of the Effective Time; and (iii) ONB has
satisfied and fully complied with all conditions necessary to make this
Agreement effective as to it.
(h) Tax Opinion. The Board of Directors of Heritage shall have received
a written opinion of the law firm of Krieg DeVault Alexander & Capehart, LLP,
dated as of the Effective Time, in form and content satisfactory to Heritage, to
the effect that the Merger to be effected pursuant to this Agreement will
constitute a tax-free reorganization under the Code (as described in Section
1.06 hereof) to each party hereto and to the shareholders of Heritage, except
with respect to cash received by
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Heritage's shareholders for fractional shares resulting from application of the
Exchange Ratio. In rendering such opinion, counsel may require and rely upon
customary representation letters of ONB and Heritage and rely upon customary
assumptions.
(i) Fairness Opinion. Heritage's investment banker shall have issued
(as of a date not later than the mailing date of the proxy statement-prospectus
relating to the Merger to be mailed to the shareholders of Heritage) its
fairness opinion stating that the Exchange Ratio relating to the Merger is fair
to the shareholders of Heritage from a financial point of view.
SECTION 9
TERMINATION OF MERGER
9.01. Manner of Termination. This Agreement and the Merger may be
terminated at any time prior to the Effective Time by written notice delivered
by ONB to Heritage, or by Heritage to ONB as follows:
(a) By ONB or Heritage, if:
(i) the Merger contemplated by this Agreement has not been
consummated by June 30, 2000; or
(ii) the respective Boards of Directors of ONB and Heritage
mutually agree to terminate this Agreement.
(b) By ONB, if:
(i) the Merger will not qualify for pooling of interests
accounting treatment for ONB; or
(ii) at any time prior to the Effective Time, ONB's Board of
Directors so determines, in the event of either
(A) a breach by Heritage of any representation or warranty
contained herein, which breach cannot be or has not been
cured within thirty (30) days after the giving of
written notice to Heritage of such breach; provided,
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however, that any such cure may not result in a Material
Adverse Effect; or
(B) a breach by Heritage of any of the covenants or
agreements contained herein, which breach cannot be or
has not been cured within thirty (30) days after the
giving of written notice to Heritage of such breach;
provided that a breach under this clause (B) would be
reasonably likely, individually or in the aggregate with
other breaches, to result in a Material Adverse Effect;
provided, however, that any such cure may not result in
a Material Adverse Effect; or
(iii) it shall reasonably determine that the Merger contemplated
by this Agreement has become impracticable by reason of
commencement or threat of any claim, litigation or
proceeding against ONB, Heritage, any Subsidiary, or any
subsidiary of ONB, or any director or officer of any of such
entities relating to this Agreement or the Merger; or
(iv) there has been a material adverse change in the business,
assets, capitalization, financial condition or results of
operations of Heritage and its Subsidiaries taken as a whole
as of the Effective Time as compared to that in existence as
of the date of this Agreement other than any change
resulting primarily by reason of changes in banking laws or
regulations (or interpretations thereof), changes in banking
laws of general applicability or interpretations thereof by
courts or governmental authorities, changes in generally
accepted accounting principles or regulatory accounting
requirements applicable to banks and their holding companies
generally, any modifications or changes to valuation
policies and practices in connection with the Merger or
restructuring charges taken in connection with the Merger,
in each case in accordance with generally accepted
accounting principles, effects of any action taken with the
prior written consent of ONB and changes in the general
level of interest rate or conditions or circumstances that
affect the banking industry generally; or
(v) Heritage fulfills the requirements of Section 6.01 hereof
but the shareholders of Heritage do not approve and adopt
the Merger and this Agreement; or
(vi) in the event that dissenters' rights are exercised pursuant
to Section 3 hereof, and the aggregate amount of cash
payable to dissenting shareholders exceeds ten
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percent (10%) of the value of the total consideration to be
paid with respect to the Merger.
(c) By Heritage, if:
(i) at any time prior to the Effective Time, Heritage's Board of
Directors so determines, in the event of either
(A) a breach by ONB of any representation or warranty
contained herein, which breach cannot be or has not been
cured within thirty (30) days after the giving of
written notice to ONB of such breach; or
(B) a breach by ONB of any of the covenants or agreements
contained herein, which breach cannot be or has not been
cured within thirty (30) days after the giving of
written notice to ONB of such breach; provided that a
breach under this clause (B) would be reasonably likely,
individually or in the aggregate with other breaches, to
result in a Material Adverse Effect; or
(ii) there has been a material adverse change in the financial
condition, results of operations, business, assets or
capitalization of ONB on a consolidated basis as of the
Effective Time as compared to that in existence on June 30,
1999, other than any change resulting primarily by reason of
changes in banking laws or regulations (or interpretations
thereof), changes in banking and similar laws of general
applicability or interpretations thereof by courts or
governmental authorities, changes in generally accepted
accounting principles or regulatory accounting requirements
applicable to banks and their holding companies generally,
any modifications or changes to valuation policies and
practices in connection with the Merger or restructuring
charges taken in connection with the Merger, in each case in
accordance with generally accepted accounting principles,
effects of any action taken with the prior written consent
of Heritage and changes in the general level of interest
rate or conditions or circumstances that affect the banking
industry generally; or
(iii) it shall reasonably determine that the Merger contemplated
by this Agreement has become impracticable by reason of
commencement or threat of any material
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claim, litigation or proceeding against ONB (A) relating to
this Agreement or the Merger or (B) which is likely to have
a Material Adverse Effect on ONB; or
(iv) Heritage fulfills the requirements of Section 6.01 hereof
but the shareholders of Heritage do not approve and adopt
the Merger and this Agreement; or
(v) at any time during the five-day period commencing with the
Determination Date if both of the following conditions are
satisfied:
(A) the number obtained by dividing the Average Closing
Price by the Starting Price (the "ONB Ratio") shall be
less than 0.80; and
(B) the ONB Ratio shall be less than the number obtained by
dividing the Final Index Value by the Index Value on the
Starting Date and subtracting 0.15 from the quotient in
this clause (B) (such number being referred to herein as
the "Index Ratio");
subject, however, to the following three sentences. If Heritage elects to
exercise its termination right pursuant to this Section 9.01(c)(v), it shall
give written notice to ONB (provided that such notice of election to terminate
may be withdrawn at any time within the below-mentioned five-day period). During
the five-day period commencing with its receipt of such notice, ONB shall have
the option to increase the consideration to be received by the holders of
Heritage Common Stock hereunder, by adjusting the Exchange Ratio (calculated to
the nearest one one-thousandth) to equal the lesser of (x) a number (rounded to
the nearest thousandth) obtained by dividing (A) the product of the Starting
Price, 0.80 and the Exchange Ratio (as then in effect) by (B) the Average
Closing Price and (y) a number (rounded to the nearest one one-thousandth)
obtained by dividing (A) the product of the Index Ratio and the Exchange Ratio
(as then in effect) by (B) the ONB Ratio. If ONB so elects within such five-day
period, it shall give prompt written notice to Heritage of such election and the
revised Exchange Ratio. Whereupon no termination shall have occurred pursuant to
this Section 9.01(c)(v) and this Agreement shall remain in effect in accordance
with its terms (except as the Exchange Ratio shall have been so modified).
For purposes of Section 9.01(c)(v), the following terms shall have the
meanings indicated:
"Average Closing Price" shall mean the average of the
closing price of a share of ONB Common Stock on the Nasdaq National
Market System (as reported in The Wall Street Journal, or if not
reported therein, in another authoritative source) during the period of
20 consecutive
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trading days ending on the trading day prior to the Determination Date,
rounded to the nearest whole cent.
"Determination Date" shall mean the date on which the last
required approval required under Section 8.01(e) and 8.02(e) hereof is
obtained, without regard to any requisite waiting period in respect
thereof.
"Final Index Value" shall mean the average of the Index
Value for the 20 consecutive trading days ending on the trading day
prior to the Determination Date.
"Index Value," on a given date, shall mean the index value
on such date of the Nasdaq Bank Index, as such index value is reported
by Bloomberg News Service on such date.
"Starting Date" shall mean the last trading day immediately
preceding the date of the first public announcement of entry to this
Agreement.
"Starting Price" shall mean the closing price of a share of
ONB common stock on the Nasdaq National Market System (as reported in
The Wall Street Journal, or if not reported therein, in another
authoritative source) on the Starting Date.
(vi) prior to the approval by the shareholders of Heritage of the
Merger contemplated by this Agreement, if, without breaching
6.06, Heritage shall contemporaneously enter into a
definitive agreement with a third party providing for an
Acquisition Transaction on terms determined in good faith by
the Board of Directors of Heritage, after consulting with
and considering the advice of Heritage's independent counsel
and financial advisors, to be substantially more favorable
to the shareholders of Heritage than the Merger and with
respect to which the Board of Directors has determined after
such consultation and consideration that to proceed with the
Merger would violate the fiduciary duties of the Board of
Directors to the Heritage shareholders.
9.02. Effect of Termination. Upon termination by written notice, this
Agreement shall be of no further force or effect, and there shall be no further
obligations or restrictions on future activities on the part of ONB or Heritage
and their respective directors, officers, employees, agents and shareholders,
except as provided in compliance with: (i) the confidentiality provisions of
this Agreement set forth in Section 6.09 hereof and the Confidentiality
Agreement dated June 10, 1999 by and between ONB and Heritage (the
"Confidentiality Agreement"); (ii) the payment of expenses set forth in Section
12.09 hereof; and (iii) the payment of the Break-Up Fee as provided by Section
6.23 hereof; provided,
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however, that termination will not in any way release a breaching party from
liability for any willful breach of this Agreement giving rise to such
termination. The obligation to pay the Break-Up Fee in accordance with Section
6.23 hereof will survive any termination of this Agreement.
SECTION 10
EFFECTIVE TIME OF THE MERGER
Upon the terms and subject to the conditions specified in this
Agreement, the Merger shall become effective at the close of business on the day
and at the time specified in the Articles of Merger of Heritage with and into
ONB as filed with the Indiana Secretary of State and the Tennessee Secretary of
State ("Effective Time"). Unless otherwise mutually agreed to by the parties
hereto, the Effective Time shall occur on the later of (i) January 31, 2000 or
(ii) the last business day of the month following (a) the fulfillment of all
conditions precedent to the Merger set forth in Section 8 of this Agreement and
(b) the expiration of all waiting periods in connection with the bank regulatory
applications filed for the approval of the Merger.
SECTION 11
CLOSING
11.01. Closing Date and Place. So long as all conditions precedent set
forth in Section 8 hereof have been satisfied and fulfilled, the closing of the
Merger ("Closing") shall take place on the Effective Time at the law offices of
Krieg DeVault Alexander & Capehart, LLP, One Indiana Square, Suite 2800,
Indianapolis, Indiana 46204.
11.02. Deliveries. (a) At the Closing, ONB shall deliver to Heritage
the following:
(i) the officers' certificate contemplated by Section 8.02(g)
hereof;
(ii) copies of all approvals by government regulatory agencies
necessary to consummate the Merger;
(iii) copies of the resolutions of the Board of Directors of
ONB certified by the Secretary of ONB, relative to the
approval of this Agreement and the Merger;
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(iv) an opinion of its counsel dated as of the Effective Time
and substantially in form set forth in Exhibit B attached
hereto; and
(v) such other documents as Heritage or its legal counsel may
reasonably request.
(b) At the Closing, Heritage shall deliver to ONB the following:
(i) the officers' certificate contemplated by Section 8.01(g)
hereof;
(ii) a list of Heritage's shareholders as of the Effective
Time certified by the President and Secretary of
Heritage;
(iii) copies of the resolutions adopted by the Board of
Directors of Heritage certified by the Secretary of
Heritage, relative to the approval of this Agreement and
the Merger;
(iv) an opinion of its counsel dated as of the Effective Time
and substantially in form set forth in Exhibit C attached
hereto; and
(v) such other documents as ONB or its legal counsel may
reasonably request.
SECTION 12
MISCELLANEOUS
12.01. Effective Agreement. This Agreement shall be binding upon and
inure to the benefit of the respective parties hereto and their respective
successors and assigns; provided, however, that this Agreement may not be
assigned by any party hereto without the prior written consent of the other
parties hereto; provided, further, that no such extension, waiver or amendment
agreed to after authorization of this Agreement by the shareholders of Heritage
shall affect the rights of such shareholders in any manner which is materially
adverse to such shareholders. The representations, warranties, covenants and
agreements contained in this Agreement are for the sole benefit of the parties
hereto and their successors and assigns, and they shall not be construed as
conferring any rights on any other persons except as specifically set forth in
Sections 7.03, 7.04, and 7.06 hereof.
12.02. Waiver; Amendment. (a) The parties hereto may by an instrument
in writing: (i) extend the time for the performance of or otherwise amend any of
the covenants, conditions or agreements of the
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other parties under this Agreement, except that the consideration to be received
by the Heritage shareholders shall not be decreased by such an amendment
following the adoption and approval of the Merger and this Agreement by the
Heritage shareholders; (ii) waive any inaccuracies in the representations or
warranties of the other party contained in this Agreement or in any document
delivered pursuant hereto or thereto; (iii) waive the performance by the other
party of any of the covenants or agreements to be performed by it or them under
this Agreement; or (iv) waive the satisfaction or fulfillment of any condition,
the nonsatisfaction or nonfulfillment of which is a condition to the right of
the party so waiving to consummate the Merger. The waiver by any party hereto of
a breach of or noncompliance with any provision of this Agreement shall not
operate or be construed as a continuing waiver or a waiver of any other or
subsequent breach or noncompliance hereunder.
(b) This Agreement may be amended, modified or supplemented only by a
written agreement executed by the parties hereto.
12.03. Notices. All notices, requests and other communications
hereunder shall be in writing (which shall include telecopier communication) and
shall be deemed to have been duly given if delivered by hand and receipted for,
sent by certified United States Mail, return receipt requested, first class
postage pre-paid, delivered by overnight express receipted delivery service or
telecopied if confirmed immediately thereafter by also mailing a copy of such
notice, request or other communication by certified United States Mail, return
receipt requested, with first class postage pre-paid as follows:
If to ONB: with a copy to (which shall not
constitute notice):
Old National Bancorp Krieg DeVault Alexander & Capehart, LLP
420 Main Street One Indiana Square, Suite 2800
P.O. Box 718 Indianapolis, Indiana 46204-2017
Evansville, Indiana 47705 ATTN: Nicholas J. Chulos, Esq.
ATTN: Jeffrey L. Knight, Secretary Telephone: (317) 238-6224
and General Counsel Telecopier: (317) 636-1507
Telephone: (812) 464-1363
Telecopier: (812) 464-1567
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If to Heritage: with a copy to (which shall not
constitute notice):
Heritage Financial Services, Inc. Stokes and Bartholomew, P.A.
25 Jefferson Street 2800 SunTrust Financial Center
P.O. Box 1348 Nashville, Tennessee 37219
Clarksville, Tennessee 37041-1348 ATTN: Carter R. Todd, Esq.
ATTN: Earl O. Bradley, III, President Telephone: (615) 259-1427
and Chief Executive Officer Telecopier: (615) 259-1470
Telephone: (931) 553-0500
Telecopier: (931) 906-0231
or such substituted address or person as any of them have given to the other in
writing. All such notices, requests or other communications shall be effective:
(a) if delivered by hand, when delivered; (b) if mailed in the manner provided
herein, five (5) business days after deposit with the United States Postal
Service; (c) if delivered by overnight express delivery service, on the next
business day after deposit with such service; and (d) if by telecopier, on the
next business day if also confirmed by mail in the manner provided herein.
12.04. Headings. The headings in this Agreement have been inserted
solely for ease of reference and should not be considered in the interpretation
or construction of this Agreement.
12.05. Severability. In case any one or more of the provisions
contained herein shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such invalid, illegal or unenforceable provision or
provisions had never been contained herein.
12.06. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall
together constitute one and the same instrument.
12.07. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Indiana and applicable federal laws,
without regard to principles of conflicts of law.
12.08. Entire Agreement. This Agreement supersedes, terminates and
renders of no further force or effect all other prior or contemporaneous
understandings, commitments, representations,
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negotiations or agreements, whether oral or written, among the parties hereto
relating to the Merger or matters contemplated herein and constitutes the entire
agreement between the parties hereto, except for the Confidentiality Agreement,
which shall continue in full force and effect following the date hereof. The
parties hereto agree that each party and its counsel reviewed and revised this
Agreement and that the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement or any amendments or exhibits hereto.
12.09. Expenses. ONB shall pay its expenses incidental to the Merger
contemplated hereby. Heritage shall pay its expenses incidental to the Merger
contemplated hereby.
12.10 Certain References. Whenever in this Agreement a singular word is
used, it also shall include the plural wherever required by the context and
vice-versa. Except expressly stated otherwise, all references in this Agreement
to periods of days shall be construed to refer to calendar, not business, days.
The term "business day" shall mean any day except Saturday and Sunday when Old
National Bank in Evansville, the lead bank of ONB, is open for the transaction
of business.
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IN WITNESS WHEREOF, ONB and Heritage have made and entered into this
Agreement as of the day and year first above written and have caused this
Agreement to be executed, attested in counterparts and delivered by their duly
authorized officers.
OLD NATIONAL BANCORP
By: /s/ RONALD B. LANKFORD
--------------------------------
Ronald B. Lankford, President
and Chief Operating Officer
ATTEST:
By: /s/ JEFFREY L. KNIGHT
-------------------------------------------
Jeffrey L. Knight, Corporate Secretary
HERITAGE FINANCIAL SERVICES, INC.
By: /s/ EARL O. BRADLEY, III
--------------------------------
Earl O. Bradley, III, President
and Chief Executive Officer
ATTEST:
By: /s/ JOHN T. HALLIBURTON
-------------------------------------------
John T. Halliburton, Secretary
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APPENDIX B
_____________, 2000
Board of Directors
Heritage Financial Services, Inc.
25 Jefferson Street
Clarksville, Tennessee 37041-1348
Dear Members of the Board:
You have requested our opinion as investment bankers as to the fairness, from a
financial perspective, to the common shareholders of Heritage Financial
Services, Inc., Clarksville, Tennessee (the "Company") of the proposed merger of
the Company with Old National Bancorp, Evansville, Indiana ("OLDB"). In the
proposed merger, Company shareholders will receive 3.15 OLDB common shares for
each Company common share outstanding as further defined in the Agreement of
Affiliation and Merger between OLDB and the Company (the "Agreement"). In
addition, each Company option currently outstanding will be exchanged for a like
OLDB option as further defined in the Agreement. On September 7, 1999, the
proposed consideration to be received represents an aggregate value of
$63,316,076 or $94.30 per Company common share based on the closing price for
OLDB common stock of $29.9375 as quoted on the National Association of
Securities Dealers Automated Quotation System.
Professional Bank Services, Inc. ("PBS") is a bank consulting firm and as part
of its investment banking business is continually engaged in reviewing the
fairness, from a financial perspective, of bank acquisition transactions and in
the valuation of banks and other businesses and their securities in connection
with mergers, acquisitions, estate settlements and other purposes. We are
independent with respect to the parties of the proposed transaction.
For purposes of this opinion, PBS performed a review and analysis of the
historic performance of the Company and its wholly owned subsidiary, Heritage
Bank (the "Bank") contained in: (i) December 31, 1998, March 31, 1999 and June
30, 1999 Consolidated Reports of Condition and Income filed by the Bank with the
FDIC and filed by the Company with the Federal Reserve System; (ii) reports
filed on Form 10-K for December 31, 1998 and Form 10-Q for March 31, 1999 and
June 30, 1999 with the Securities and Exchange Commission; (iii) December 31,
1997 and 1998 audited annual reports of the Company; and (iv) December 31, 1998
and March 31, 1999 Uniform Bank Performance Reports of the
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Board of Directors
Heritage Financial Services, Inc.
____________,2000
Page Two
Bank and the Company. We have reviewed and tabulated statistical data regarding
the loan portfolio, securities portfolio and other performance ratios and
statistics. Financial projections were prepared and analyzed as well as other
financial studies, analyses and investigations as deemed relevant for the
purposes of this opinion. In review of the aforementioned information, we have
taken into account our assessment of general market and financial conditions,
our experience in other transactions, and our knowledge of the banking industry
generally. We have also taken into consideration other offers received by the
Company.
For the purposes of this opinion, PBS reviewed and analyzed the historic
performance of OLDB contained in: (i) December 31, 1996, 1997 and 1998 audited
annual reports of OLDB, (ii) June 30, 1998, September 30, 1998, December 31,
1998, March 31, 1999 and June 30, 1999 unaudited financial data and reports
filed on Form 10-K for December 31, 1997 and 1998 and 10-Q for March 31, 1999
and June 30, 1999 with the Securities and Exchange Commission.
We have not compiled, reviewed or audited the financial statements of the
Company or OLDB nor have we independently verified any of the information
reviewed; we have relied upon such information as being complete and accurate in
all material respects. We have not made independent evaluation of the assets of
the Company or OLDB.
Based on the foregoing and all other factors deemed relevant, it is our opinion
as investment bankers, that, as of the date hereof, the consideration proposed
to be received by the shareholders of the Company under the Agreement is fair
and equitable from a financial perspective.
Very truly yours,
Professional Bank Services, Inc.
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APPENDIX C
PROVISIONS OF TENNESSEE BUSINESS CORPORATION ACT
GOVERNING THE EXERCISE OF DISSENTERS' RIGHTS
DISSENTER'S RIGHTS
PART 1 - RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
48-23-101. DEFINITIONS - (1) "Beneficial shareholder" means the person who
is a beneficial owner of shares held by a nominee as the record shareholder;
(2) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer;
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under ss. 48-23-102 and who exercises that right when and in
the manner required by ss. 48-23-201 - 48-23-209;
(4) "Fair Value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action;
(5) "Interest" means interest from the effective date of the corporate
action that gave rise to the shareholder's right to dissent until the date of
payment, at the average auction rate paid on United States treasury bills with a
maturity of six (6) months (or the closest maturity thereto) as of the auction
date for such treasury bills closest to such effective date;
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation; and
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
48-23-102. RIGHT TO DISSENT - (a) A shareholder is entitled to dissent
from, and obtain payment of the fair value of his shares in the event of, any of
the following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a party:
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(A) If shareholder approval is required for the merger by ss.
48-21-103 or the charter and the shareholder is entitled to vote on the
merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under ss. 48-21-104;
(2) Consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired, if the shareholder is
entitled to vote on the plan;
(3) Consummation of a sale or exchange of all, or substantially all, of the
property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially all of
the net proceeds of the sale will be distributed to the shareholders within one
(1) year after the date of sale;
(4) An amendment of the charter that materially and adversely affects
rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a sinking fund for the
redemption or repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights; or
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share is to be acquired for cash
under ss. 48-16-104; or
(5) Any corporate action taken pursuant to a shareholder vote to the extent
the charter, bylaws, or a resolution of the board of directors provides that
voting or nonvoting shareholders are entitled to dissent and obtain payment for
their shares.
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(b) A shareholder entitled to dissent and obtain payment for his shares
under this chapter may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
(c) Notwithstanding the provisions of subsection (a), no shareholder may
dissent as to any shares of a security which, as of the date of the effectuation
of the transaction which would otherwise give rise to dissenters' rights, is
listed on an exchange registered under ss. 6 of the Securities Exchange Act of
1934, as amended, or is a "national market system security," as defined in rules
promulgated pursuant to the Securities Exchange Act of 1934, as amended.
48-23-103. DISSENT BY NOMINEES AND BENEFICIAL OWNERS - (a) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one (1) person and notifies the corporation in writing
of the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares of
any one (1) or more classes held on his behalf only if:
(1) He submits to the corporation the record shareholders s written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of the same class of which he
is the beneficial shareholder or over which he has power to direct the
vote.
PART 2 - PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
48-23-201. NOTICE OF DISSENTERS' RIGHTS - (a) If proposed corporate action
creating dissenters' rights under ss. 48-23-102 is submitted to a vote at a
shareholders' meeting, the meeting notice must state that shareholders are or
may be entitled to assert dissenters' rights under this chapter and be
accompanied by a copy of this chapter.
(b) If corporate action creating dissenters' rights under ss. 48-23-102 is
taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in ss. 48-23-203.
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(c) A corporation's failure to give notice pursuant to this section will
not invalidate the corporate action.
48-23-202. NOTICE OF INTENT TO DEMAND PAYMENT - (a) If proposed corporate
action creating dissenters' rights under ss. 48-23-102 is submitted to a vote at
a shareholders' meeting, a shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written notice
of his intent to demand payment for his shares if the proposed action is
effectuated; and
(2) Must not vote his shares in favor of the proposed action. No such
written notice of intent to demand payment is required of any shareholder to
whom the corporation failed to provide the notice required by ss. 48-23-201.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this chapter.
48-23-203. DISSENTERS' NOTICE - (a) If proposed corporate action creating
dissenters' rights under ss. 48-23-102 is authorized at a shareholders' meeting,
the corporation shall deliver a written dissenters' notice to all shareholders
who satisfied the requirements of ss. 48-23-202.
(b) The dissenters' notice must be sent no later than ten (10) days after
the corporate action was authorized by the shareholders or effectuated,
whichever is the first to occur, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the principal terms of the
proposed corporate action and requires that the person asserting dissenters'
rights certify whether or not he acquired beneficial ownership of the shares
before that date;
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(4) Set a date by which the corporation must receive the payment demand,
which date may not be fewer than one (1) nor more than two (2) months after the
date the subsection (a) notice is delivered; and
(5) Be accompanied by a copy of this chapter if the corporation has not
previously sent a copy of this chapter to the shareholder pursuant to ss.
48-23-201.
48-23-204. DUTY TO DEMAND PAYMENT - (a) A shareholder sent a dissenters'
notice described in ss. 48-23-203 must demand payment, certify whether he
acquired beneficial ownership of the shares before the date required to be set
forth in the dissenters' notice pursuant to ss. 48-23-203(b)(3), and deposit his
certificates in accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the effectuation of the proposed corporate
action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this chapter.
(d) A demand for payment filed by a shareholder may not be withdrawn unless
the corporation with which it was filed, or the surviving corporation, consents
thereto.
48-23-205. SHARE RESTRICTIONS - (a) The corporation may restrict the
transfer of uncertificated shares from the date the demand for their payment is
received until the proposed corporate action is effectuated or the restrictions
released under ss. 48-23-207.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the effectuation of the proposed corporate
action.
48-23-206. PAYMENT - (a) Except as provided in 5 48-23-208, as soon as the
proposed corporate action is effectuated, or upon receipt of a payment demand,
whichever is later, the corporation shall pay each dissenter who complied with 5
48-23-204 the amount the corporation estimates to be the fair value of his
shares, plus accrued interest.
(b) The payment must be accompanied by:
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(1) The corporation's balance sheet as of the end of a fiscal
year ending not more than sixteen (16) months before the date of payment,
an income statement for that year, a statement of changes in shareholders'
equity for that year, and the latest available interim financial
statements, if any;
(2) A statement of the corporation's estimate of the fair
value of the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment
under ss. 48-23-209; and
(5) A copy of this chapter if the corporation has not
previously sent a copy of this chapter to the shareholder pursuant to
ss.ss. 48-23-201 or 48-23-203.
48-23-207. FAILURE TO TAKE ACTION - (a) If the corporation does not
effectuate the proposed action that gave rise to the dissenters' rights within
two (2) months after the date set for demanding payment and depositing share
certificates, the corporation shall return the deposited certificates and
release the transfer restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation effectuates the proposed action, it must send a
new dissenters' notice under ss. 48-23-203 and repeat the payment demand
procedure.
48-23-208. AFTER-ACQUIRED SHARES - (a) A corporation may elect to withhold
payment required by ss. 48-23-206 from a dissenter unless he was the beneficial
owner of the shares before the date set forth in the dissenters' notice as the
date of the first announcement to news media or to shareholders of the principal
terms of the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under
subsection (a), after effectuating the proposed corporate action, it shall
estimate the fair value of the shares, plus accrued interest, and shall pay this
amount to each dissenter who agrees to accept it in full satisfaction of his
demand. The corporation shall send with its offer a statement of its estimate of
the fair value of the shares, an explanation of how the interest was calculated,
and a statement of the dissenter's right to demand payment under ss. 48-23-209.
48-23-209. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER -
(a) A dissenter may notify the corporation in writing of his own estimate of the
fair value of his shares and amount of interest
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due, and demand payment of his estimate (less any payment under ss. 48-23-206),
or reject the corporation's offer under 5 48-23-208 and demand payment of the
fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under ss. 48-23-206 or
offered under ss. 48-23-208 is less than the fair value of his shares or
that the interest due is incorrectly calculated;
(2) The corporation fails to make payment under 5 48-23-206 within two
(2) months after the date set for demanding payment; or
(3) The corporation, having failed to effectuate the proposed action,
does not return the deposited certificates or release the transfer
restrictions imposed on uncertificated shares within two (2) months after
the date set for demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing under subsection (a)
within one (1) month after the corporation made or offered payment for his
shares.
PART 3 - JUDICIAL APPRAISAL OF SHARES
48-23-301. COURT ACTION - (a) If a demand for payment under ss. 48-23-209
remains unsettled, the corporation shall commence a proceeding within two (2)
months after receiving the payment demand and petition the court to determine
the fair value of the shares and accrued interest. If the corporation does not
commence the proceeding within the two-month period, it shall pay each dissenter
whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in a court of record
having equity jurisdiction in the county where the corporation's principal
office (or, if none in this state, its registered office) is located. If the
corporation is a foreign corporation without a registered office in this state,
it shall commence the proceeding in the county in this state where the
registered office of the domestic corporation merged with or whose shares were
acquired by the foreign corporation was located.
(c) The corporation shall make all dissenters (whether or not residents of
this state) whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
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(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) is plenary and exclusive. The court may appoint one (1) or
more persons as appraisers to receive evidence and recommend decision on the
question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The dissenters are entitled to
the same discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment:
(1) For the amount, if any, by which the court finds the fair value of
his shares, plus accrued interest, exceeds the amount paid by the
corporation; or
(2) For the fair value, plus accrued interest, of his after-acquired
shares for which the corporation elected to withhold payment under ss.
48-23-208.
48-23-302. COURT COSTS AND COUNSEL FEES - (a) The court in an appraisal
proceeding commenced under ss. 48-23-301 shall determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court. The court shall assess the costs against the
corporation, except that the court may assess costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent the court finds
the dissenters acted arbitrarily, vexatiously, or not in good faith in demanding
payment under ss. 48-23-209.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of ss.ss. 48-23-201 - 48-23-209; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this chapter.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded to
the dissenters who were benefitted.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Articles of Incorporation provide that the Registrant will
indemnify any person who is or was a director, officer or employee of the
Registrant or of any other corporation for which he is or was serving in any
capacity at the request of the Registrant against all liability and expense that
may be incurred in connection with any claim, action, suit or proceeding with
respect to which such director, officer or employee is wholly successful or
acted in good faith in a manner he reasonably believed to be in, or not opposed
to, the best interests of the Registrant or such other corporation and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
that his conduct was unlawful. A director, officer or employee of the Registrant
is entitled to be indemnified as a matter of right with respect to those claims,
actions, suits or proceedings where he has been wholly successful. In all other
cases, such director, officer or employee will be indemnified only if the Board
of Directors of the Registrant or independent legal counsel finds that he has
met the standards of conduct set forth above.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following Exhibits are being filed as part of this Registration
Statement:
2 Agreement of Affiliation and Merger (included as Appendix A to
Prospectus)
3(i) Articles of Incorporation of the Registrant (incorporated by
reference to Registrant's Registration Statement on Form S-3, File
No. 333-87573, dated September 22, 1999)
3(ii) By-Laws of the Registrant (incorporated by reference to
Registrant's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999, File No. 333-72117, dated May 14, 1999)
4 (a) the description of Registrant's common stock contained in its
Current Report on Form 8-K, dated January 6, 1983 (incorporated by
reference thereto), and (b) the description of Registrant's
Preferred Stock Purchase Rights contained in Registrant's Form
8-A, dated March 1, 1990, including the Rights Agreement, dated
March 1, 1990, between the Registrant and Old National Bank in
Evansville, as Trustee (incorporated by reference thereto)
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5 Opinion of Krieg DeVault Alexander & Capehart, LLP re: legality
8.01 Tax Opinion of Krieg DeVault Alexander & Capehart, LLP copy re:
certain federal income tax matters
10.01 Material Contracts (incorporated by reference to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31,
1998)
10.02 Employment Agreement, dated September 8, 1999 by and between Earl
O. Bradley, III and Old National Bancorp
10.03 Employment Agreement, dated September 8, 1999 by and between John
T. Halliburton and Old National Bancorp
10.04 Employment Agreement, dated September 8, 1999 by and between Randy
Clouser and Old National Bancorp
21 Subsidiaries of the Registrant
23.01 Consent of Krieg DeVault Alexander & Capehart, LLP (included in
Opinion of Krieg DeVault Alexander & Capehart, LLP at Exhibit
5/Exhibit 8.01)
23.02 Consent of Arthur Andersen, LLP
23.03 Consent of Heathcott & Mullaly, P.C.
24 Powers of Attorney
99.01 Form of Proxy
99.02 Consent of Professional Bank Services, Inc.
(b) Financial Statement Schedules Not Applicable
(c) Fairness Opinion. Included in Part I as Appendix B to the Proxy
Statement-Prospectus included in this Registration Statement
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration
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statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(b) (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through the use
of a prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(2) The undersigned registrant hereby undertakes that every prospectus
(i) that is filed pursuant to paragraph (b)(1) immediately preceding or (ii)
that purports to meet the requirements of Section 10(a)(3) of the Act, and is
used in connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement and will not be
used until such amendment is effective, and that, for purposes of determining
any liability under the Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
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(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Evansville,
State of Indiana, on January 10, 2000.
OLD NATIONAL BANCORP
By: /s/ JAMES A. RISINGER
------------------------------
James A. Risinger, President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities indicated below as of January 10, 2000.
Name Title
- ---- -----
/s/ JAMES A. RISINGER Chairman of the Board, Director, President and
- ------------------------------ Chief Executive Officer (Chief Executive
James A. Risinger Officer)
/s/ JOHN S. POELKER Senior Vice President (Chief Financial Officer
- ------------------------------ and Principal Accounting Officer)
John S. Poelker
DAVID L. BARNING* Director
- ------------------------------
David L. Barning
RICHARD J. BOND* Director
- ------------------------------
Richard J. Bond
ALAN W. BRAUN * Director
- ------------------------------
Alan W. Braun
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WAYNE A. DAVIDSON* Director
- ------------------------------
Wayne A. Davidson
LARRY E. DUNIGAN* Director
- ------------------------------
Larry E. Dunigan
DAVID E. ECKERLE* Director
- ------------------------------
David E. Eckerle
PHELPS L. LAMBERT* Director
- ------------------------------
Phelps L. Lambert
RONALD B. LANKFORD* Director
- ------------------------------
Ronald B. Lankford
LUCIEN H. MEIS* Director
- ------------------------------
Lucien H. Meis
LOUIS L. MERVIS* Director
- ------------------------------
Louis L. Mervis
LAWRENCE D. PRYBIL* Director
- ------------------------------
Lawrence D. Prybil
JOHN N. ROYSE* Director
- ------------------------------
John N. Royse
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MARJORIE Z. SOYUGENC* Director
- ------------------------------
Marjorie Z. Soyugenc
CHARLES D. STORMS* Director
- ------------------------------
Charles D. Storms
*By: /s/ JEFFREY L. KNIGHT
------------------------------
Attorney-in-Fact
Print Name: Jeffrey L. Knight
-----------------------
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