<PAGE>
As filed with the Securities and Exchange Commission on February 2, 2000
Registration No. 333-91759
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
MAIN STREET TRUST, INC.
(Exact Name of Registrant as Specified in its Articles)
6712
(Primary Standard Industrial Classification Code Number)
ILLINOIS 37-1338484
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
100 WEST UNIVERSITY AVENUE, CHAMPAIGN, ILLINOIS 61820, (217) 351-6500
(Address, including zip code and telephone number, including area code, of
Registrant's principal executive offices)
GREGORY B. LYKINS
VICE CHAIRMAN
MAIN STREET TRUST, INC.
100 WEST UNIVERSITY AVENUE
CHAMPAIGN, ILLINOIS 61820
(217) 351-6500
(Name, address, including zip code and telephone number,
including area code, of agent for service)
WITH COPIES TO:
JOHN E. FREECHACK, ESQ. THEODORE L. EISSFELDT, ESQ.
DENNIS R. WENDTE, ESQ. JOSEPH HEMKER, ESQ.
BARACK FERRAZZANO KIRSCHBAUM PERLMAN & NAGELBERG HOWARD & HOWARD ATTORNEYS PC
333 WEST WACKER DRIVE, SUITE 2700 ONE TECHNOLOGY PLAZA
CHICAGO, ILLINOIS 60606 211 FULTON STREET, SUITE 600
(312) 984-3100 PEORIA, ILLINOIS 61602
(309) 672-1483
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO
THE PUBLIC: As soon as practicable after this registration statement becomes
effective.
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. / /
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
==============================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION
FEE(3)
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<S> <C> <C> <C> <C>
Common stock, $0.01 par value 10,631,088 shares $21.76 value per share $231,345,373 $ 61,076
==============================================================================================================================
</TABLE>
(1) Represents the estimated maximum number of shares to be issued pursuant to
the merger agreement dated as of August 12, 1999, among First Decatur
Bancshares, Inc., a Delaware corporation, BankIllinois Financial
Corporation, a Delaware corporation, and Main Street Trust, Inc.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(1) and (2) under the Securities Act of 1933, as
amended, based upon $23.03 per share, the average of the bid and asked
price as quoted on November 29, 1999, on the OTC Bulletin Board for the
6,073,812 shares of BankIllinois Financial common stock, the maximum
number of shares outstanding at the effective time of the merger, and
based upon $32.875 per share, the average of the bid and asked price
as quoted on November 29, 1999 on the OTC Bulletin Board for the
2,764,970 shares of First Decatur common stock, the maximum number of
shares outstanding at the effective time of the merger, to be exchanged
for the common stock of the registrant pursuant to the merger agreement.
(3) THE REGISTRATION FEE WAS PREVIOUSLY PAID TO THE
COMMISSION.
DELAYING AMENDMENT: The Registrant hereby amends this registration
statement on such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which specifically
states that this registration statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
registration statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
<PAGE>
PROXY STATEMENT FOR THE SPECIAL PROXY STATEMENT FOR THE SPECIAL
MEETING OF STOCKHOLDERS OF MEETING OF STOCKHOLDERS OF
BANKILLINOIS FINANCIAL CORPORATION FIRST DECATUR BANCSHARES, INC.
PROSPECTUS OF
MAIN STREET TRUST, INC.
IN CONNECTION WITH AN OFFERING OF UP
TO 10,631,088 SHARES OF ITS COMMON STOCK
The boards of directors of BankIllinois Financial Corporation and
First Decatur Bancshares, Inc. have approved a merger agreement that would
result in our tax-free merger into a new company known as Main Street Trust,
Inc. As a result of the merger, BankIllinois Financial stockholders will
receive one Main Street common share for each BankIllinois Financial common
share they own and First Decatur stockholders will receive 1.638 Main Street
common shares for each First Decatur common share they own.
To complete this merger we must obtain the necessary government
approvals and the approvals of the stockholders of both our companies. Each
of us will hold a special meeting of our stockholders to vote on this merger
proposal. YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend your
stockholder meeting, please take the time to vote by completing and mailing
the enclosed proxy card to us. If you date and mail your proxy card without
indicating how you want to vote, your proxy will be counted as a vote FOR the
merger. If you do not return your card, or if you do not instruct your broker
how to vote any shares held for you in your broker's name, the effect will be
a vote against this merger.
The dates, times and places of the meetings are as follows:
<TABLE>
<CAPTION>
FOR BANKILLINOIS FINANCIAL STOCKHOLDERS: FOR FIRST DECATUR STOCKHOLDERS:
<S> <C>
The Forum at Carle The First National Bank of Decatur
611 West Park Street 130 North Water Street
Urbana, Illinois Decatur, Illinois
March 21, 2000, March 21, 2000,
10:00 a.m., local time 3:00 p.m., local time
</TABLE>
This joint proxy statement-prospectus gives you detailed information
about the merger we are proposing, and it includes our merger agreement as an
appendix. You can also obtain information about our companies from publicly
available documents we have filed with the Securities and Exchange
Commission. We encourage you to read this entire document carefully.
We enthusiastically support this combination and join with the other
members of our boards of directors in recommending that you vote in favor of
the merger.
Gregory B. Lykins John W. Luttrell
Chairman Chairman
BankIllinois Financial Corporation First Decatur Bancshares, Inc.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED UNDER
THIS JOINT PROXY STATEMENT-PROSPECTUS OR DETERMINED IF THIS JOINT PROXY
STATEMENT-PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. THE SECURITIES WE ARE OFFERING THROUGH THIS
DOCUMENT ARE NOT SAVINGS OR DEPOSIT ACCOUNTS OR OTHER OBLIGATIONS OF ANY BANK
OR NON-BANK SUBSIDIARY OF EITHER OF OUR COMPANIES, AND THEY ARE NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE FUND OR ANY
OTHER GOVERNMENTAL AGENCY.
- -----------------------------------------------------------------------------
JOINT PROXY STATEMENT-PROSPECTUS DATED FEBRUARY 2, 2000,
AND FIRST MAILED TO STOCKHOLDERS ON FEBRUARY 11, 2000
<PAGE>
BANKILLINOIS FINANCIAL CORPORATION
100 WEST UNIVERSITY AVENUE
CHAMPAIGN, ILLINOIS 61820
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 21, 2000
A special meeting of stockholders of BankIllinois Financial
Corporation, a Delaware corporation, will be held at The Forum at Carle, 611
West Park Street, in Urbana, Illinois, on March 21, 2000, at 10:00 a.m.,
local time, for the following purposes:
1. To consider and vote upon a proposal to adopt the Agreement
and Plan of Merger dated as of August 12, 1999, among
BankIllinois Financial, First Decatur Bancshares, Inc., a
Delaware corporation, and Main Street Trust, Inc., an Illinois
corporation formed by BankIllinois Financial and First
Decatur, pursuant to which, among other things, BankIllinois
Financial and First Decatur will merge with and into Main
Street upon the terms and subject to the conditions set forth
in the merger agreement.
2. To transact such other business as may properly be brought
before the special meeting, or any adjournments or
postponements of the special meeting.
The close of business on February 1, 2000, has been fixed as
the record date for determining those stockholders entitled to vote at the
special meeting and any adjournments or postponements of the special meeting.
Accordingly, only stockholders of record on such date are entitled to notice
of, and to vote at, the special meeting and any adjournments or postponements
of the special meeting.
BY ORDER OF THE BOARD OF DIRECTORS
February 11, 2000 Teresa M. Marsh
SECRETARY
YOUR VOTE IS VERY IMPORTANT
Whether or not you plan to attend the special meeting in person,
please take the time to vote by completing and mailing the enclosed proxy
card in the enclosed postage-paid envelope. If you attend the special
meeting, you may vote in person if you wish, even if you have previously
returned your proxy card.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE MERGER
AGREEMENT.
<PAGE>
FIRST DECATUR BANCSHARES, INC.
130 NORTH WATER STREET
DECATUR, ILLINOIS 62523
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 21, 2000
A special meeting of stockholders of First Decatur Bancshares,
Inc., a Delaware corporation ("First Decatur"), will be held at The First
National Bank of Decatur, 130 North Water Street, in Decatur, Illinois, on
March 21, 2000, at 3:00 p.m., local time, for the following purposes:
1. To consider and vote upon a proposal to adopt the Agreement
and Plan of Merger dated as of August 12, 1999, among First
Decatur, BankIllinois Financial, a Delaware corporation, and
Main Street Trust, Inc., an Illinois corporation formed by
BankIllinois Financial and First Decatur, pursuant to which,
among other things, BankIllinois Financial and First Decatur
will merge with and into Main Street upon the terms and
subject to the conditions set forth in the merger agreement.
2. To transact such other business as may properly be brought
before the special meeting, or any adjournments or
postponements of the special meeting.
The close of business on February 1, 2000, has been fixed as the
record date for determining those stockholders entitled to vote at the
special meeting and any adjournments or postponements of the special meeting.
Accordingly, only stockholders of record on such date are entitled to notice
of, and to vote at, the special meeting and any adjournments or postponements
of the special meeting.
BY ORDER OF THE BOARD OF DIRECTORS
February 11, 2000 Pete P. Grosso
SECRETARY
YOUR VOTE IS VERY IMPORTANT
Whether or not you plan to attend the special meeting in person,
please take the time to vote by completing and mailing the enclosed proxy
card in the enclosed postage-paid envelope. If you attend the special
meeting, you may vote in person if you wish, even if you have previously
returned your proxy card.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ADOPTION OF THE MERGER
AGREEMENT.
<PAGE>
TABLE OF CONTENTS
HOW TO OBTAIN ADDITIONAL INFORMATION.................................. 1
A WARNING ABOUT FORWARD-LOOKING STATEMENTS............................ 1
SUMMARY............................................................... 3
The Companies...................................................... 3
The Merger......................................................... 3
What You Will Receive in the Merger................................ 3
Effect of the Merger on Options.................................... 4
Ownership of Main Street After the Merger.......................... 4
Dissenters' Appraisal Rights....................................... 4
Material Federal Income Tax Consequences........................... 4
Comparative Market Prices of Common Stock.......................... 4
Our Reasons for the Merger......................................... 5
Fairness Opinions.................................................. 5
Special Meetings of Stockholders................................... 5
Record Date; Vote Required......................................... 5
Our Recommendation to Stockholders................................. 6
Share Ownership of Management and Significant Stockholders......... 6
Effective Time of the Merger....................................... 6
Exchange of Stock Certificates..................................... 6
Conditions to Completion of Merger................................. 7
Regulatory Approvals............................................... 7
Waiver, Amendment and Termination.................................. 7
Management and Operations After the Merger......................... 8
Interests of Certain Persons in the Merger that
Differ from Your Interests...................................... 8
Accounting Treatment............................................... 8
Expenses and Termination Fees...................................... 8
Material Differences in the Rights of
Stockholders..................................................... 9
Unaudited Comparative Per Share Data...............................10
Unaudited Pro Forma Consolidated Financial Statements..............12
Selected Financial Data............................................21
INTRODUCTION..........................................................26
BANKILLINOIS FINANCIAL SPECIAL MEETING................................26
Date, Place, Time and Purpose......................................26
Record Date, Voting Rights, Required Vote and
Revocability of Proxies..........................................26
Solicitation of Proxies............................................27
Recommendation of BankIllinois Financial Board.....................28
FIRST DECATUR SPECIAL MEETING.........................................28
Date, Place, Time and Purpose......................................28
Record Date, Voting Rights, Required Vote and
Revocability of Proxies..........................................28
Solicitation of Proxies............................................29
Recommendation of First Decatur Board..............................29
DESCRIPTION OF TRANSACTION............................................30
General............................................................30
Effect of Merger on Options........................................30
Material Federal Income Tax Consequences of the Merger.............30
Background of the Merger...........................................32
Recommendation of the BankIllinois Financial
Board and BankIllinois Financial's Reasons for the Merger........35
Recommendation of the First Decatur Board and
First Decatur's Reasons for the Merger...........................36
Opinion of BankIllinois Financial's Financial Advisor..............38
Opinion of First Decatur's Financial Advisor.......................45
Effective Time of the Merger.......................................53
Dissenters' Rights.................................................53
Distribution of Main Street Stock Certificates.....................54
Conditions to Completion of the Merger.............................55
Regulatory Approvals...............................................56
Waiver, Amendment and Termination..................................57
Conduct of Business Pending the Merger.............................58
Management and Operations After the Merger.........................58
Interests of Certain Persons in the Merger.........................59
Accounting Treatment...............................................61
Expenses and Termination Fees......................................61
Resales of Main Street Common Stock................................62
EFFECT OF MERGER ON RIGHTS OF STOCKHOLDERS............................63
Anti-Takeover Provisions Generally.................................63
Authorized Capital Stock...........................................63
Amendment of Articles and Bylaws...................................65
Director Removal...................................................66
Limitations on Director Liability..................................66
Indemnification....................................................66
Special Meetings of Stockholders...................................67
Stockholder Nominations and Proposals..............................67
Business Combinations..............................................68
Dissenters' Rights of Appraisal....................................69
Dividends..........................................................69
COMPARATIVE MARKET PRICES AND DIVIDENDS...............................70
BUSINESS OF BANKILLINOIS FINANCIAL....................................71
Management and Additional Information..............................71
BUSINESS OF FIRST DECATUR.............................................71
Management and Additional Information..............................72
Recent Developments................................................72
CERTAIN REGULATORY CONSIDERATIONS.....................................72
General............................................................72
Recent Regulatory Developments.....................................74
Payment of Dividends...............................................75
i
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Capital Adequacy...................................................75
Support of Subsidiary Institutions.................................76
Prompt Corrective Action...........................................77
Deposit Insurance..................................................79
The Financing Corporation Assessments..............................79
Insider Transactions...............................................80
DESCRIPTION OF MAIN STREET CAPITAL STOCK..............................80
Main Street Common Stock...........................................80
OTHER MATTERS.........................................................81
STOCKHOLDER PROPOSALS.................................................81
EXPERTS...............................................................81
CERTAIN OPINIONS......................................................81
WHERE YOU CAN FIND MORE INFORMATION...................................82
APPENDIX A - AGREEMENT AND PLAN OF MERGER
APPENDIX B - FORM OF OPINION OF KEEFE, BRUYETTE & WOODS, INC
APPENDIX C - OPINION OF ABN AMRO INCORPORATED
APPENDIX D - SECTION 262 OF THE DELAWARE GENERAL CORPORATION
LAW (APPRAISAL RIGHTS)
ii
<PAGE>
PLEASE NOTE
We have not authorized anyone to provide you with any information
other than the information included in this document and the documents to
which we refer you. If someone provides you with other information, please do
not rely on it as being authorized by us.
This joint proxy statement-prospectus has been prepared as of
February 2, 2000. There may be changes in the affairs of BankIllinois
Financial, First Decatur or Main Street since that date which are not
reflected in this document.
As used in this joint proxy statement-prospectus, the term
"BankIllinois Financial" refers to BankIllinois Financial Corporation, and,
where the context requires, to BankIllinois Financial and its subsidiaries;
the term "First Decatur" refers to First Decatur Bancshares, Inc., and, where
the context requires, to First Decatur and its subsidiaries; and the term
"Main Street" refers to Main Street Trust, Inc., and, where the context
requires, to Main Street and its subsidiaries after the completion of the
merger. Unless the context clearly suggests otherwise, general references to
"us," "we," and "our" include BankIllinois Financial and First Decatur.
However, when we discuss a specific organization such as BankIllinois
Financial or First Decatur, "us," "we," and "our" refers only to the specific
organization being discussed.
HOW TO OBTAIN ADDITIONAL INFORMATION
THIS JOINT PROXY STATEMENT-PROSPECTUS INCORPORATES IMPORTANT
BUSINESS AND FINANCIAL INFORMATION ABOUT US THAT IS NOT INCLUDED IN OR
DELIVERED WITH THIS DOCUMENT. THIS INFORMATION IS DESCRIBED ON PAGE 82
UNDER "WHERE YOU CAN FIND MORE INFORMATION." YOU CAN OBTAIN FREE COPIES OF
THIS INFORMATION BY WRITING OR CALLING:
FOR BANKILLINOIS FINANCIAL DOCUMENTS: FOR FIRST DECATUR DOCUMENTS:
Teresa M. Marsh Pete P. Grosso
Secretary Secretary
BankIllinois Financial Corporation First Decatur Bancshares, Inc.
100 West University Avenue 130 North Water Street
Champaign, Illinois 61820 Decatur, Illinois 62523
(Telephone (217) 351-6500) (Telephone (217) 424-1111)
TO OBTAIN TIMELY DELIVERY OF THE DOCUMENTS, YOU MUST REQUEST THE
INFORMATION BY MARCH 13, 2000.
A WARNING ABOUT FORWARD-LOOKING STATEMENTS
We have each made forward-looking statements in this document (and
in documents to which we refer you in this document) that are subject to
risks and uncertainties. These forward-looking statements include information
about possible or assumed future results of our operations or the performance
of Main Street after the merger is completed. When we use any of the words
"believes," "expects," "anticipates," "estimates" or similar expressions, we
are making forward-looking statements. Many possible events or factors could
affect the future financial results and performance of each of our companies
and the new company after the merger and could cause those results or
performance to differ materially from those expressed in our forward-looking
statements. These possible events or factors include the following:
1. our actual cost savings resulting from the merger are less than we
expect, we are unable to realize those cost savings as soon as we
expected or we incur additional or unexpected costs;
1
<PAGE>
2. our revenues after the merger are less than we expect as a result of
the loss of customers;
3. competition among financial services companies increases;
4. we have more trouble integrating our businesses than we expected;
5. changes in the interest rate environment reduce our interest margins;
6. general economic conditions change or are worse than we expected;
7. legislative or regulatory changes adversely affect our business;
8. changes occur in business conditions and inflation;
9. personal or commercial customers' bankruptcies increase;
10. changes occur in the securities markets; and
11. technology-related changes, including "Year 2000" data systems
compliance, are harder to make or more expensive than we expected.
The forward-looking earnings estimates included in the joint proxy
statement-prospectus have not been examined or compiled by our independent
public accountants, nor have our independent accountants applied any
procedures to our estimates. Accordingly, such accountants do not express an
opinion or any other form of assurance on them.
2
<PAGE>
SUMMARY
THIS BRIEF SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS JOINT PROXY
STATEMENT-PROSPECTUS AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS
IMPORTANT TO YOU. WE URGE YOU TO CAREFULLY READ THIS ENTIRE DOCUMENT AND THE
OTHER DOCUMENTS WE REFER TO IN THIS DOCUMENT. THESE WILL GIVE YOU A MORE
COMPLETE DESCRIPTION OF THE TRANSACTION WE ARE PROPOSING. FOR MORE
INFORMATION ABOUT OUR TWO COMPANIES, SEE "WHERE YOU CAN FIND MORE
INFORMATION." WE HAVE INCLUDED PAGE REFERENCES IN THIS SUMMARY TO DIRECT YOU
TO OTHER PLACES IN THIS JOINT PROXY STATEMENT-PROSPECTUS WHERE YOU CAN FIND A
MORE COMPLETE DESCRIPTION OF THE TOPICS WE HAVE SUMMARIZED.
THE COMPANIES (PAGE 71)
BANKILLINOIS FINANCIAL CORPORATION
100 West University Avenue
Champaign, Illinois 61820
(217) 351-6500
http://www.BankIllinois.com
BankIllinois Financial is a bank holding company organized under the laws of
Delaware in 1994 and registered under the Bank Holding Company Act. Through
BankIllinois, our wholly owned subsidiary bank, we conduct a complete range
of commercial and personal banking activities and offer trust and investment
services in central Illinois. In addition to our main office in Champaign,
Illinois, our subsidiary bank operates eight branches in Champaign County,
Illinois. At September 30, 1999, our assets were $536.4 million, our deposits
were $394.6 million and our stockholders' equity was $62.5 million.
FIRST DECATUR BANCSHARES, INC.
130 N. Water Street
Decatur, Illinois 62523
(217) 425-8221
First Decatur is a bank holding company organized under the laws of Delaware
in 1980 and registered under the Bank Holding Company Act. Through the First
National Bank of Decatur and the First Trust Bank of Shelbyville, our wholly
owned subsidiary banks, we conduct a complete range of commercial and
personal banking activities and offer trust services in central Illinois. In
addition to the main offices of our two bank subsidiaries in Decatur and
Shelbyville, Illinois, our banks operate a total of eight branches in two
counties in Illinois. We also own FirsTech, a retail payment processing
company. At September 30, 1999, our assets were $479.9 million, our deposits
were $375.5 million and our stockholders' equity was $54.2 million.
MAIN STREET TRUST, INC.
100 West University Avenue
Champaign, Illinois 61820
(217) 351-6500
Main Street Trust, Inc. is a company recently organized under the laws of
Illinois that has filed an application for approval to become a bank holding
company under the Bank Holding Company Act. We incorporated Main Street on
August 12, 1999, solely for the purpose of accomplishing the merger. Main
Street issued 500 shares to each of us for total consideration of $100. Main
Street does not currently engage in any business activity.
THE MERGER (PAGE 30)
WE HAVE ATTACHED THE MERGER AGREEMENT TO THIS DOCUMENT AS APPENDIX A. PLEASE
READ THE MERGER AGREEMENT. IT IS THE LEGAL DOCUMENT THAT GOVERNS THE MERGER.
We propose a combination in which our companies will merge with and into Main
Street to form a new financial services company which will serve central
Illinois. The name of the newly combined company will be "Main Street Trust,
Inc." Main Street will have new articles of incorporation and bylaws at the
time of the merger. Main Street's main office will be located in Champaign,
Illinois. We expect to complete the merger in the first quarter of 2000.
WHAT YOU WILL RECEIVE IN THE MERGER (PAGE 30)
BANKILLINOIS FINANCIAL STOCKHOLDERS. Each of your shares of BankIllinois
Financial common stock will automatically become the right to receive one
share of Main Street common stock. The total number of shares you will have
the right to receive will therefore be equal to the number of shares of
BankIllinois Financial common stock you own multiplied by 1.
You will have to surrender your BankIllinois Financial common stock
certificates to receive new certificates representing common stock of the
newly combined company. This will not be necessary until
3
<PAGE>
you receive written instructions on or around the time of the merger.
FIRST DECATUR STOCKHOLDERS. Each of your shares of First Decatur common stock
will automatically become the right to receive 1.638 shares of Main Street
common stock. The total number of shares you will have the right to receive
will therefore be equal to the number of shares of First Decatur common stock
you own multiplied by 1.638. Main Street will not issue any fractions of a
share of common stock. Rather, Main Street will pay cash (without interest)
for any fractional share interest any First Decatur stockholder would
otherwise receive in the merger. The cash payment will be in an amount equal
to the fraction of the share multiplied by the average of the closing sale
prices of Main Street common stock for the three business days immediately
after the completion of the merger.
You will have to surrender your First Decatur common stock certificates to
receive new certificates representing common stock of the newly combined
company and the cash payment for fractional shares. This will not be
necessary until you receive written instructions on or around the time of the
merger.
EFFECT OF THE MERGER ON OPTIONS (PAGE 30)
In the merger, each stock option to buy BankIllinois Financial and First
Decatur common stock that is outstanding immediately before completing the
merger will become an option to buy Main Street common stock and will
continue to be governed by the terms of the original plans under which they
were issued. The number of shares of Main Street common stock subject to each
of these converted stock options, as well as the exercise price of these
stock options, will be adjusted to reflect the exchange ratios applicable in
the merger.
OWNERSHIP OF MAIN STREET AFTER THE MERGER
Based on the BankIllinois Financial and First Decatur exchange ratios
contained in the merger agreement, upon completion of the merger, Main Street
will issue approximately 5,550,724 shares of its common stock to former
BankIllinois Financial stockholders and 4,765,592 shares of its common stock
to former First Decatur stockholders. Based on these numbers, after the
merger and on a fully diluted basis, former BankIllinois Financial
stockholders would own approximately 53.8%, and former First Decatur
stockholders would own approximately 46.2%, of the outstanding shares of Main
Street common stock.
DISSENTERS' APPRAISAL RIGHTS (PAGE 53)
Under Delaware law, you have the right to dissent from the merger and have
the appraised fair value of your shares of BankIllinois Financial or First
Decatur common stock paid to you in cash. To dissent and receive the
appraised fair value of your shares, you must:
- make a proper demand for appraisal in accordance with the Delaware
law as more fully described on pages 53-54;
- hold your shares of BankIllinois Financial or First Decatur common
stock until the merger is completed;
- not vote in favor of the merger (including by appointing a proxy to
vote your shares); and
- otherwise comply with Delaware law.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES (PAGE 30)
We expect that for United States federal income tax purposes, your exchange
of shares of BankIllinois Financial and First Decatur common stock for shares
of Main Street common stock will not cause you to recognize any gain or loss.
Holders of First Decatur common stock, however, will have to recognize
income, gain or loss in connection with any cash they receive instead of
fractional shares. Also, stockholders who dissent from the merger and receive
cash instead of Main Street common stock will have to recognize income, gain
or loss.
THESE TAX CONSEQUENCES MAY NOT APPLY TO EVERY ONE OF OUR STOCKHOLDERS.
DETERMINING THE ACTUAL TAX CONSEQUENCES OF THE MERGER TO YOU MAY BE
COMPLICATED. THEY WILL DEPEND ON YOUR SPECIFIC SITUATION AND ON VARIABLES NOT
WITHIN OUR CONTROL. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR FOR A FULL
UNDERSTANDING OF THE MERGER'S TAX CONSEQUENCES.
COMPARATIVE MARKET PRICES OF COMMON STOCK
Shares of BankIllinois Financial and First Decatur common stock are not
listed on any exchange, but rather trade in the over-the-counter market. On
August 12, 1999, the last trading day before we announced the merger,
BankIllinois Financial
4
<PAGE>
common stock closed at $23.75 per share and First Decatur common stock closed
at $29.00 per share. On January 28, 2000, BankIllinois Financial common stock
closed at $21.125 per share and First Decatur common stock closed at $31.75
per share. Of course, the common stock of Main Street has not started trading
and there is no prediction or guarantee at what price it will trade after the
completion of the merger.
OUR REASONS FOR THE MERGER (PAGES 35 AND 36)
Our companies are proposing to merge because we believe that by combining
them we can create a stronger and more diversified company that will provide
significant benefits to our stockholders and customers alike. For instance,
we estimate that the combination of our businesses should help us to reduce
duplicate costs by about $2 to $3 million annually, before taxes, within two
years. We also believe that the merger of our companies will create certain
revenue enhancement opportunities. However, due to the contingent nature and
timing of these potential revenue enhancements and efficiency improvements,
we have not taken them into account in arriving at our estimates of the
merger's impact on future earnings per share.
We expect the merger to strengthen our position as a competitor in the
financial services business, which is rapidly changing and growing more
competitive. We expect to be the market leader in total deposits in the
market area comprised of Champaign, Macom and Shelby counties.
We also expect to incur merger related costs of $2,500,000, before tax, as a
result of combining our companies.
The discussion of our reasons for the merger includes forward-looking
statements about possible or assumed future results of our operations and the
performance of the combined company after the merger. For a discussion of
factors that could affect these future results, see "A Warning About
Forward-Looking Statements" on page 1.
FAIRNESS OPINIONS (PAGES 38 AND 45)
BANKILLINOIS FINANCIAL STOCKHOLDERS. Keefe, Bruyette & Woods, Inc. has
delivered a written opinion to the BankIllinois Financial board of directors
that, as of the date of this document, the BankIllinois Financial exchange
ratio is fair to the holders of BankIllinois Financial common stock from a
financial point of view. We have attached this opinion to this document as
Appendix B. You should read this opinion completely to understand the
procedures followed, matters considered and limitations on the reviews
undertaken by KBW in providing its opinion.
FIRST DECATUR STOCKHOLDERS. ABN AMRO Incorporated has delivered a written
opinion to the First Decatur board of directors that, as of the date of this
document, the First Decatur exchange ratio is fair to the holders of First
Decatur common stock from a financial point of view. We have attached this
opinion to this document as Appendix C. You should read this opinion
completely to understand the procedures followed, matters considered and
limitations on the reviews undertaken by ABN AMRO in providing its opinion.
SPECIAL MEETINGS OF STOCKHOLDERS (PAGES 26 AND 28)
BANKILLINOIS FINANCIAL STOCKHOLDERS. The BankIllinois Financial meeting will
be held on March 21, 2000, at 10:00 a.m., local time, at The Forum at Carle,
611 West Park Street, Urbana, Illinois. At the BankIllinois Financial
meeting, you will be asked:
- to adopt a merger agreement that provides for the merger of
BankIllinois Financial and First Decatur with and into Main Street;
and
- to act on other matters that may be submitted to a vote at the
meeting.
FIRST DECATUR STOCKHOLDERS. The First Decatur meeting will be held on March
21, 2000, at 3:00 p.m., local time, at The First National Bank of Decatur,
130 North Water Street, Decatur, Illinois. At the First Decatur meeting, you
will be asked:
- to adopt a merger agreement that provides for the merger of First
Decatur and BankIllinois Financial, with and into Main Street; and
- to act on other matters that may be submitted to a vote at the
meeting.
RECORD DATE; VOTE REQUIRED (PAGES 26 AND 28)
BANKILLINOIS FINANCIAL STOCKHOLDERS. You can vote at the meeting of
BankIllinois Financial stockholders if you owned BankIllinois Financial
common stock at the close of business on February 1, 2000. You can cast
one vote for each share of BankIllinois Financial common stock that you owned
at that time. To adopt the merger agreement, the holders
5
<PAGE>
of a majority of shares of BankIllinois Financial common stock allowed to
vote at the meeting must vote in favor of doing so.
You may vote your shares in person by attending the meeting or by mailing us
your proxy if you are unable to or do not wish to attend. You can revoke your
proxy at any time before we take a vote at the meeting by sending a written
notice revoking the proxy or a later-dated proxy to the secretary of
BankIllinois Financial, or by attending the meeting and voting in person.
FIRST DECATUR STOCKHOLDERS. You can vote at the meeting of First Decatur
stockholders if you owned First Decatur common stock at the close of business
on February 1, 2000. You can cast one vote for each share of First
Decatur common stock that you owned at that time. To adopt the merger
agreement, the holders of a majority of shares of First Decatur common stock
allowed to vote at the meeting must vote in favor of doing so.
You may vote your shares in person by attending the meeting or by mailing us
your proxy if you are unable to or do not wish to attend. You can revoke your
proxy at any time before we take a vote at the meeting by sending a written
notice revoking the proxy or a later-dated proxy to the secretary of First
Decatur, or by attending the meeting and voting in person.
OUR RECOMMENDATIONS TO STOCKHOLDERS (PAGES 28 AND 29)
BANKILLINOIS FINANCIAL STOCKHOLDERS. The board of directors of BankIllinois
Financial believes that the merger is fair to you and in your best interests,
and unanimously recommends that you vote "FOR" the proposal to adopt the
merger agreement.
FIRST DECATUR STOCKHOLDERS. The board of directors of First Decatur believes
that the merger is fair to you and in your best interests, and unanimously
recommends that you vote "FOR" the proposal to adopt the merger agreement.
SHARE OWNERSHIP OF MANAGEMENT AND SIGNIFICANT STOCKHOLDERS (PAGES 27 AND 29)
BANKILLINOIS FINANCIAL. On BankIllinois Financial's record date, its
directors and executive officers, their immediate family members and entities
they control owned 3,191,672 shares, or approximately 57.5% of the
outstanding shares of BankIllinois Financial common stock, including shares
they may acquire through exercising stock options. On this record date,
BankIllinois Financial's subsidiary bank held 2,179,847 shares, or
approximately 39.3% of the outstanding shares of BankIllinois Financial
common stock, in a fiduciary capacity for others. BankIllinois Financial
owned 1,540 shares, or less than 1.0% of First Decatur common stock.
BankIllinois Financial's subsidiary bank did not own any shares of First
Decatur common stock in a fiduciary capacity for others or as a result of
debts previously contracted.
FIRST DECATUR. On First Decatur's record date, its directors and executive
officers, their immediate family members and entities they control owned
443,806 shares, or approximately 15.3% of the outstanding shares of First
Decatur common stock, including shares they may acquire through exercising
stock options. On this record date, First Decatur's subsidiary banks held
477,006 shares, or approximately 16.4% of the outstanding shares of First
Decatur common stock, in a fiduciary capacity for others, and First Decatur's
Employee Stock Ownership Plan held 120,578 shares, or approximately 4.0% of
the outstanding shares of First Decatur common stock. None of First Decatur's
directors and executive officers owned any shares of BankIllinois Financial
common stock and its subsidiary banks did not own any shares of BankIllinois
Financial common stock in a fiduciary capacity for others or as a result of
debts previously contracted.
EFFECTIVE TIME OF THE MERGER (PAGE 53)
The merger will become final when a certificate of merger is filed with the
Secretary of State of the State of Delaware and articles of merger are filed
with the Secretary of State of the State of Illinois. If our stockholders
approve the merger at their special meetings, and if Main Street obtains all
required regulatory approvals, we anticipate that the merger will be
completed in the first quarter of 2000, although delays could occur.
We cannot assure you that we can obtain the necessary stockholder and
regulatory approvals or that the other conditions to completion of the merger
can or will be satisfied.
EXCHANGE OF STOCK CERTIFICATES (PAGE 54)
On or around the time of the merger, you will receive a letter and
instructions on how to surrender
6
<PAGE>
your stock certificates representing BankIllinois Financial and First Decatur
common stock in exchange for Main Street stock certificates. You must
carefully review and complete these materials and return them as instructed
along with your stock certificates for BankIllinois Financial and First
Decatur common stock. PLEASE DO NOT SEND BANKILLINOIS FINANCIAL OR FIRST
DECATUR ANY STOCK CERTIFICATES UNTIL YOU RECEIVE THESE INSTRUCTIONS.
CONDITIONS TO COMPLETION OF THE MERGER (PAGE 55)
The completion of the merger depends on a number of conditions being met.
These include:
- approval of the merger agreement by our stockholders;
- approval of the merger by certain federal and state regulatory
authorities;
- receipt by us of an opinion that, for United States federal income tax
purposes, our stockholders who exchange their shares for shares of
Main Street common stock will not recognize any gain or loss as a
result of the merger, except in connection with the payment of cash
instead of fractional shares or the payment of cash resulting from the
exercise of appraisal rights (these opinions will be subject to
various limitations and we recommend that you read the fuller
description of tax consequences provided in this document beginning on
page 30);
- receipt by us of a letter from our accountants that the merger will
qualify for "pooling of interests" accounting treatment; and
- the absence of any injunction or legal restraint blocking the merger,
or of any proceedings by a government body trying to block the merger.
A party to the merger agreement could choose to complete the merger even
though a condition has not been satisfied, as long as the law allows it to do
so. We cannot be certain when or if the conditions to the merger will be
satisfied or waived, or that the merger will be completed.
REGULATORY APPROVALS (PAGE 56)
We cannot complete the merger unless it is approved by the Board of Governors
of the Federal Reserve System. Once the Federal Reserve approves the merger,
we have to wait anywhere from 15 to 30 days before we can complete the
merger, during which time the Department of Justice can challenge the merger.
In addition, the merger is subject to the approval of, or notice to, state
and other regulatory authorities.
We have filed all of the required applications or notices with the Federal
Reserve and these other regulatory authorities.
As of the date of this document, we have not received all of the required
approvals. While we do not know of any reason that we would not be able to
obtain the necessary approvals in a timely manner, we cannot be certain when
or if we will obtain them.
WAIVER, AMENDMENT AND TERMINATION (PAGE 57)
We may jointly amend the merger agreement and each of us may waive our right
to require the other party to adhere to any term or condition of the merger
agreement. However, we may not do so after our stockholders approve the
merger, if the amendment or waiver reduces or changes the consideration that
will be received by our stockholders, unless they approve the amendment or
waiver.
We can mutually agree at any time to terminate the merger agreement without
completing the merger. Also, either of us can decide, without the consent of
the other, to terminate the merger agreement if:
- any government agency denies an approval we need to complete the
merger and that denial has become final and nonappealable;
- the merger has not been completed by July 1, 2000, unless the failure
to complete the merger by that time is due to a violation of the
merger agreement by the party that wants to terminate the merger
agreement; or
- the other company breaches the merger agreement in any way that would
entitle the party seeking to terminate the merger agreement to not
consummate the merger, and the breaching party does not correct the
7
<PAGE>
breach promptly, as long as the party seeking to terminate has not
itself materially breached the merger agreement.
MANAGEMENT AND OPERATIONS AFTER THE MERGER (PAGE 58)
The present managements of our companies will share the responsibility of
managing Main Street, the newly combined company, after the completion of the
merger. The board of directors of Main Street will initially be comprised of
thirteen members, seven of whom have been chosen from among BankIllinois
Financial's current directors, and six of whom have been chosen from among
First Decatur's current directors.
These Main Street directors include, among others, John W. Luttrell, Chairman
of First Decatur, Gregory B. Lykins, Chairman of BankIllinois Financial, Van
A. Dukeman, President and Chief Executive Officer of BankIllinois Financial,
and Phillip C. Wise, President of First Decatur.
Following the merger, Mr. Luttrell will be Chairman, Mr. Lykins will be Vice
Chairman and Mr. Dukeman will be President and Chief Executive Officer of
Main Street. Mr. Wise and David B. White of BankIllinois Financial will each
serve as an Executive Vice President of the combined company, and Mr. White
will also serve as the company's Chief Financial Officer. Mr. Lykins will
succeed Mr. Luttrell as Chairman within three years after the completion of
the merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER THAT DIFFER FROM YOUR INTERESTS
(PAGE 59)
Some of our directors and officers have interests in the merger that differ
from, or are in addition to, their interests as stockholders in our
companies. These interests exist because of employment agreements that
certain officers of our companies have and rights that the directors and
officers have under some of our benefit plans. These employment agreements
and plans will provide the officers with severance benefits if their current
employment status changes as a result of the merger, except that both of our
companies have agreed to amend or replace most of these employment agreements
prior to the completion of our merger to provide that the merger will not
require the payment of severance benefits if the merger is completed.
Additional interests of some of our directors and executive officers are
described under "Management and Operations After the Merger."
The members of our boards of directors knew about these additional interests
and considered them when they approved the merger agreement and the merger.
ACCOUNTING TREATMENT (PAGE 61)
We expect the merger to qualify as a "pooling of interests." This means that,
for accounting and financial reporting purposes, we will treat our companies
as if they had always been one.
EXPENSES AND TERMINATION FEES (PAGE 61)
If we mutually agree to terminate the merger agreement, or if either of us
terminates the merger agreement because the merger has not been completed by
July 1, 2000, then we will each pay our own fees and expenses, except that we
will divide the costs and expenses that we have incurred in printing and
mailing this document and the fees that we have paid to the Securities and
Exchange Commission in connection with the merger.
If either of us terminates the merger agreement because of the breach by the
other company of any part of our agreement, or if the other company
terminates the merger agreement because its financial advisor has withdrawn
its fairness opinion, then the breaching company or the company with the
fairness opinion that has been withdrawn, must pay the other's fees and
expenses in connection with the merger up to a maximum of $500,000, and pay
an additional termination fee of $1,500,000. In addition, if within one year
after the termination of the merger agreement, the breaching company or the
company that had its fairness opinion withdrawn enters into another agreement
to be acquired by a company that was not a party to the merger agreement,
then the breaching company must pay another special termination fee to the
other of $1,500,000. However, if the breach or breaches by the other company
of any of its representations and warranties (but not covenants) was
unintentional, even though we chose to terminate the merger agreement because
of them, then the breaching company must pay the other's fees and expenses in
connection with the merger up to a maximum of $250,000 and will not be
required to pay to the other
8
<PAGE>
any other termination fees regardless of subsequent events.
Either of us may also terminate the merger agreement because we have received
an offer from an unrelated third party that our respective board of directors
has concluded is more favorable to our stockholders. In this case, the
company terminating the agreement must pay to the other company its costs and
expenses up to $500,000, and in the place of any other payment, a special
termination fee of $4,000,000.
We have agreed to pay these special termination fees to each other to
increase the likelihood that we would complete the merger. These fees could
discourage other companies from attempting to combine with either of us
before we complete the merger.
MATERIAL DIFFERENCES IN THE RIGHTS OF STOCKHOLDERS (PAGE 63)
The rights of BankIllinois Financial stockholders are governed by Delaware
law and BankIllinois Financial's certificate of incorporation and bylaws. The
rights of First Decatur stockholders are governed by Delaware law and First
Decatur's certificate of incorporation and bylaws. Upon our completion of the
merger, you will become stockholders of Main Street and your rights will be
governed by Illinois law and by Main Street's articles of incorporation and
bylaws.
9
<PAGE>
UNAUDITED COMPARATIVE PER SHARE DATA
The following table shows information about our income per common
share, dividends per share and book value per share, and similar information
reflecting the merger (which we refer to as "pro forma" information). In
presenting the comparative pro forma information for certain time periods, we
assumed that we had been merged through those periods.
We also assumed that we will treat our companies 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 pro forma" was obtained by multiplying the pro forma amounts by
the exchange ratio of 1 in the case of BankIllinois Financial and by 1.638 in
the case of First Decatur. We present this information to reflect the fact
that BankIllinois Financial stockholders will receive 1 share of Main Street
common stock for each share of BankIllinois Financial common stock exchanged
in the merger, and First Decatur stockholders will receive 1.638 shares of
Main Street common stock for each share of First Decatur common stock
exchanged in the merger. We expect that we will incur merger and integration
charges as a result of combining our companies. We also anticipate that the
merger will provide the new company with financial benefits that include
reduced operating expenses and the opportunity to earn more revenue. The pro
forma information, while helpful in illustrating the financial
characteristics of Main Street under one set of assumptions, does not reflect
these expenses or benefits and, accordingly, does not attempt to predict or
suggest future results. It also does not necessarily reflect what the
historical results of the combined company would have been had our companies
been combined. Further, First Decatur's management has recently become aware
of possible liabilities involving a subsidiary that it believes will not
exceed $1.7 million net of income taxes. Specifically, First Decatur recorded
a liability during the fourth quarter of 1999 in connection with unresolved
reconciliation differences involving First Decatur's subsidiary, FirsTech,
Inc. See "Business of First Decatur--Recent Developments."
The information in the following table is based on, and should be
read together with, the historical financial information that we have
presented in our prior Securities and Exchange Commission filings. We have
incorporated this material into this document by reference. See "Where You
Can Find More Information."
10
<PAGE>
COMPARATIVE BOOK VALUES, EARNINGS AND
DIVIDENDS PER COMMON SHARE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
MAIN STREET TRUST, INC.
As of and for the nine months
ended September 30,
(unaudited) As of and for the year ended December 31,
-------------------------------- -----------------------------------------
1999 1998 1998 1997 1996
--------------- -------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Historical:
Net income - basic $ 1.03 $ 0.76 $ 1.07 $ 0.95 $ 0.79
Net income - diluted 0.99 0.74 1.04 0.93 0.77
Cash dividends declared 0.24 0.23 0.30 0.07 0.00
Book value 11.28 - 10.85 - -
Pro forma combined:
Net income - basic 1.03 0.81 1.13 1.01 0.86
Net income - diluted 1.01 0.80 1.10 1.00 0.85
Cash dividends declared 0.24 0.23 0.31 0.17 0.12
Book value 11.34 - 11.01 - -
BANKILLINOIS FINANCIAL CORPORATION
As of and for the nine months
ended September 30,
(unaudited) As of and for the year ended December 31,
-------------------------------- -----------------------------------------
1999 1998 1998 1997 1996
--------------- -------------- ----------- ----------- -----------
Historical:
Net income - basic* $ 1.03 $ 0.76 $ 1.07 $ 0.95 $ 0.79
Net income - diluted* 0.99 0.74 1.04 0.93 0.77
Cash dividends declared* 0.24 0.23 0.30 0.07 0.00
Book value* 11.28 - 10.85 - -
Equivalent pro forma combined:
Net income - basic 1.03 0.81 1.13 1.01 0.86
Net income - diluted 1.01 0.80 1.10 1.00 0.85
Cash dividends declared 0.24 0.23 0.31 0.17 0.12
Book value 11.34 - 11.01 - -
</TABLE>
FIRST DECATUR BANCSHARES, INC.
<TABLE>
<CAPTION>
As of and for the nine months
ended September 30,
(unaudited) As of and for the year ended December 31,
-------------------------------- -----------------------------------------
1999 1998 1998 1997 1996
--------------- -------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Historical:
Net income - basic $ 1.70 $ 1.44 $ 1.95 $ 1.77 $ 1.56
Net income - diluted 1.69 1.43 1.94 1.76 1.55
Cash dividends declared 0.39 0.39 0.52 0.48 0.44
Book value 19.62 - 19.27 - -
Equivalent pro forma combined:
Net income - basic 1.69 1.33 1.85 1.65 1.41
Net income - diluted 1.65 1.31 1.80 1.64 1.39
Cash dividends declared 0.39 0.38 0.51 0.28 0.20
Book value 18.57 - 18.03 - -
</TABLE>
* BankIllinois Financial per share information has been restated to reflect a
5% stock dividend declared in May 1999.
11
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited Pro Forma Financial Information and
footnotes thereto are presented to show the impact on the historical
financial position and results of operations of Main Street pursuant to the
merger. As a result of the merger, BankIllinois Financial and First Decatur
stockholders will receive shares of Main Street pursuant to the established
exchange ratio. The exchange ratio is fixed at 1.0 for BankIllinois Financial
and 1.638 for First Decatur.
The unaudited Pro Forma Consolidated Balance Sheet reflects the
historical position of BankIllinois Financial and First Decatur at September
30, 1999 with pro forma adjustments based on the assumption that the merger
was effective September 30, 1999. The pro forma adjustments are based on the
pooling of interests method of accounting. The unaudited Pro Forma
Consolidated Statements of Income assumes that the merger was consummated on
January 1 of the earliest indicated period. The unaudited pro forma
consolidated financial statements reflect estimated nonrecurring charges
consisting of managements' estimates of legal, accounting and investment
banking fees that will be incurred in connection with the merger. The
adjustments are based on information available and certain assumptions that
we believe are reasonable. Management has not identified, quantified or
evaluated any material restructuring costs at this time.
The unaudited pro forma income amounts do not reflect any potential
income enhancements or cost reductions that are expected to result from the
consolidation of BankIllinois Financial's and First Decatur's operations and
are not necessarily indicative of the results expected of the future combined
operations. No assurances can be given with respect to the ultimate level of
income enhancements or cost reductions to be realized.
The following information should be read in conjunction with and is
qualified in its entirety by the consolidated financial statements and
accompanying notes of BankIllinois Financial and First Decatur included or
incorporated by reference herein. Interim results of BankIllinois Financial
and First for the nine months ended September 30, 1999 are not necessarily
indicative of results of operations or the combined financial position that
would have resulted had the merger been consummated at the beginning of the
period indicated.
The unaudited Pro Forma Financial Information is intended for
information purposes and is not necessarily indicative of the future
financial position or future operating results of the combined company or of
the financial position or operating results of the combined company that
would have actually occurred had the merger been in effect as of the date or
for the period presented.
12
<PAGE>
MAIN STREET TRUST, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)
September 30, 1999
(in thousands)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As reported
BankIllinois Pro
Financial First Decatur Forma Pro Forma
Historical Historical Adjustments Consolidated
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from Banks $ 16,685 $ 62,962 $ (2,210) (d) $ 77,437
Federal funds sold 0 1,929 0 1,929
Investments in debt and equity securities:
Available-for-sale, at fair value 84,120 131,476 (51) (a) 215,545
Held-to-maturity, at cost 71,463 21,860 0 93,323
Nonmarketable equity securities 1,613 1,658 0 3,271
Mortgage loans held for sale 1,958 0 0 1,958
Loans, net 337,088 240,406 0 577,494
Premises and Equipment 12,853 9,628 0 22,481
Other assets 10,583 9,953 (290) (d) 20,246
------------ ---------- -------- ----------
Total assets $ 536,363 $ 479,872 $ (2,551) $1,013,684
============ ========== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest bearing $ 47,784 $ 64,158 $ 0 $ 111,942
Interest bearing 346,821 310,829 0 657,650
------------ ---------- -------- ----------
Total deposits 394,605 374,987 0 769,592
Federal funds purchased and securities
sold under repurchase agreements 59,030 29,026 0 88,056
Federal Home Loan Bank advances and
other borrowings 13,207 17,865 0 31,072
Other liabilities 6,978 3,759 (6) (a) 10,731
------------ ---------- -------- ----------
Total liabilities 473,820 425,637 (6) 899,451
------------ ---------- -------- ----------
STOCKHOLDERS' EQUITY
Preferred stock 0 0 0 0
Common Stock 57 29 0 (a)
16 (c)
(2) (c) 100
Paid in capital 35,396 8,280 (32) (a)
(16) (c)
(8,040) (c) 35,588
Retained earnings 31,286 52,241 (2) (b)
2 (b)
(290) (d)
(2,210) (d) 81,027
Accumulated other comprehensive income (426) (2,043) (13) (a) (2,482)
------------ ---------- -------- ----------
66,313 58,507 (10,587) 114,233
Treasury stock (3,770) (4,272) 8,042 (c) 0
------------ ---------- -------- ----------
Total stockholders' equity 62,543 54,235 (2,545) 114,233
------------ ---------- -------- ----------
Total liabilities and stockholders' equity $ 536,363 $ 479,872 $ (2,551) $1,013,684
============ ========== ======== ==========
</TABLE>
13
<PAGE>
MAIN STREET TRUST, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share and weighted average share data)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the nine months ended
September 30, For the year ended
------------------------------ --------------------------------------
1999 1998 1998 1997 1996
------------ ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Interest income
Loans and fees on loans $ 34,441 $ 33,982 $ 45,064 $ 44,357 $ 42,811
Investments in debt and equity securities
Taxable 12,921 12,591 17,032 16,814 14,406
Tax exempt 1,447 1,133 1,517 1,085 1,025
Federal funds sold and interest-bearing
deposits 854 1,357 2,007 1,411 2,324
------------ ------------ --------- ----------- -----------
Total interest income 49,663 49,063 65,620 63,667 60,566
------------ ------------ --------- ----------- -----------
Interest expense
Demand, savings and other time deposits 19,935 20,945 27,661 27,660 26,385
Federal funds purchased and securities sold
under repurchase agreements 2,289 1,997 2,727 2,579 2,299
Federal Home Loan Bank advances and
other borrowings 1,298 1,018 1,474 888 760
------------ ------------ --------- ----------- -----------
Total interest expense 23,522 23,960 31,862 31,127 29,444
------------ ------------ --------- ----------- -----------
Net interest income 26,141 25,103 33,758 32,540 31,122
Provision for loan loss 408 568 809 897 685
------------ ------------ --------- ----------- -----------
Net interest income
after provision for loan loss 25,733 24,535 32,949 31,643 30,437
------------ ------------ --------- ----------- -----------
Non-interest income
Trust fees 3,283 2,870 3,922 3,649 3,466
Service charges on deposit accounts 1,172 1,211 2,707 2,930 2,966
Remittance processing income 6,149 3,598 5,165 4,241 5,748
Security transactions, net 191 83 126 49 (12)
Gain on sales of mortgage loans
held-for-sale, net 597 710 1,101 553 490
Other 2,393 2,022 1,533 1,415 1,304
------------ ------------ --------- ----------- -----------
Total non-interest income 13,785 10,494 14,554 12,837 13,962
------------ ------------ --------- ----------- -----------
Non-interest expense
Salaries and employee benefits 13,643 12,593 16,749 15,606 15,959
Occupancy 1,771 1,873 2,500 2,656 2,653
Equipment 2,538 2,157 2,949 3,099 3,450
Data Processing 759 789 978 1,059 1,086
Federal deposit insurance premiums 61 61 88 90 34
Other 5,573 5,211 7,237 6,501 7,760
------------ ------------ --------- ----------- -----------
Total non-interest expense 24,345 22,684 30,501 29,011 30,942
------------ ------------ --------- ----------- -----------
Income before income taxes 15,173 12,345 17,002 15,469 13,457
Income Taxes 4,742 3,884 5,318 4,977 4,436
------------ ------------ --------- ----------- -----------
Net income 10,431 8,461 11,684 10,492 9,021
============ ============ ========= =========== ===========
Per share data:
Basic earnings per share * $ 1.03 $ 0.81 $ 1.13 $ 1.01 $ 0.86
Weighted average shares of common stock
outstanding * 10,092,836 10,387,453 10,369,606 10,393,917 10,466,109
Diluted earnings per share * $ 1.01 $ 0.80 $ 1.10 $ 1.00 $ 0.85
Weighted average shares of common stock and dilutive
potential common shares outstanding * 10,324,176 10,589,723 10,578,297 10,541,122 10,577,984
</TABLE>
* BankIllinois Financial per share information has been restated to reflect
a 5% stock dividend declared in May 1999.
14
<PAGE>
MAIN STREET TRUST, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(in thousands, except per share and weighted average share data)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As Reported
BankIllinois First
Financial Decatur Pro Forma Pro
Historical Historical Adjustments Forma
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest income
Loans and fees on loans $ 20,366 $ 14,075 $ 0 $ 34,441
Investments in debt and equity securities
Taxable 6,866 6,055 0 12,921
Tax exempt 619 828 0 1,447
Federal funds sold and interest-bearing
deposits 374 480 0 854
-------------- ------------- ------------- ------------
Total interest income 28,225 21,438 0 49,663
-------------- ------------- ------------- ------------
Interest expense
Demand, savings and other time deposits 11,067 8,868 0 19,935
Federal funds purchased and securities sold
under repurchase agreements 2,068 221 0 2,289
Federal Home Loan Bank advances and
other borrowings 475 823 0 1,298
-------------- ------------- ------------- ------------
Total interest expense 13,610 9,912 0 23,522
-------------- ------------- ------------- ------------
Net interest income 14,615 11,526 0 26,141
Provision for loan loss 270 138 0 408
-------------- ------------- ------------- ------------
Net interest income
after provision for loan loss 14,345 11,388 0 25,733
-------------- ------------- ------------- ------------
Non-interest income
Trust fees 1,851 1,432 0 3,283
Service charges on deposit accounts 462 710 0 1,172
Remittance processing income 0 6,149 0 6,149
Security transactions, net 138 53 0 191
Gain on sales of mortgage loans held-for-sale, net 382 215 0 597
Other 1,272 1,121 0 2,393
-------------- ------------- ------------- ------------
Total non-interest income 4,105 9,680 0 13,785
-------------- ------------- ------------- ------------
Non-interest expense
Salaries and employee benefits 5,868 7,775 0 13,643
Occupancy 884 887 0 1,771
Equipment 728 1,810 0 2,538
Data Processing 571 188 0 759
Federal deposit insurance premiums 35 26 0 61
Other 1,976 3,597 0 5,573
-------------- ------------- ------------- ------------
Total non-interest expense 10,062 14,283 0 24,345
-------------- ------------- ------------- ------------
Income before income taxes 8,388 6,785 0 15,173
Income Taxes 2,659 2,083 0 4,742
-------------- ------------- ------------- ------------
Net income $ 5,729 $ 4,702 $ 0 $ 10,431
============== ============= ============= ============
Per share data:
Basic earnings per share * $ 1.03 $ 1.70 $ 1.03
Weighted average shares of common stock outstanding * 5,565,743 2,765,333 1,761,760 10,092,836
Diluted earnings per share * $ 0.99 $ 1.69 $ 1.01
Weighted average shares of common stock and dilutive
potential common shares outstanding * 5,769,001 2,782,477 1,772,698 10,324,176
</TABLE>
* BankIllinois Financial per share information has been restated to reflect a
5% stock dividend declared in May 1999.
15
<PAGE>
MAIN STREET TRUST, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(in thousands, except per share and weighted average share data)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As Reported
BankIllinois
Financial First Decatur Pro Forma Pro
Historical Historical Adjustments Forma
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Interest income
Loans and fees on loans $ 20,974 $ 13,008 $ 0 $ 33,982
Investments in debt and equity securities
Taxable 6,786 5,805 0 12,591
Tax exempt 323 810 0 1,133
Federal funds sold and interest-bearing
deposits 624 733 0 1,357
----------- ------------ ------------ ------------
Total interest income 28,707 20,356 0 49,063
----------- ------------ ------------ ------------
Interest expense
Demand, savings and other time deposits 12,287 8,658 0 20,945
Federal funds purchased and securities sold
under repurchase agreements 1,766 231 0 1,997
Federal Home Loan Bank advances and
other borrowings 404 614 0 1,018
----------- ------------ ------------ ------------
Total interest expense 14,457 9,503 0 23,960
----------- ------------ ------------ ------------
Net interest income 14,250 10,853 0 25,103
Provision for loan loss 345 223 0 568
----------- ------------ ------------ ------------
Net interest income
after provision for loan loss 13,905 10,630 0 24,535
----------- ------------ ------------ ------------
Non-interest income
Trust fees 1,622 1,248 0 2,870
Service charges on deposit accounts 461 750 0 1,211
Remittance processing income 0 3,598 0 3,598
Security transactions, net 46 37 0 83
Gain on sales of mortgage loans held-for-sale, net 409 301 0 710
Other 1,126 896 0 2,022
----------- ------------ ------------ ------------
Total non-interest income 3,664 6,830 0 10,494
----------- ------------ ------------ ------------
Non-interest expense
Salaries and employee benefits 6,418 6,175 0 12,593
Occupancy 1,042 831 0 1,873
Equipment 670 1,487 0 2,157
Data Processing 555 234 0 789
Federal deposit insurance premiums 37 24 0 61
Other 2,450 2,761 0 5,211
----------- ------------ ------------ ------------
Total non-interest expense 11,172 11,512 0 22,684
----------- ------------ ------------ ------------
Income before income taxes 6,397 5,948 0 12,345
Income Taxes 2,075 1,809 0 3,884
----------- ------------ ------------ ------------
Net income $ 4,322 $ 4,139 $ 0 $ 8,461
=========== ============ ============ ============
Per share data:
Basic earnings per share * $ 0.76 $ 1.44 $ 0.81
Weighted average shares of common stock outstanding * 5,667,446 2,883,107 1,836,900 10,387,453
Diluted earnings per share * $ 0.74 $ 1.43 $ 0.80
Weighted average shares of common stock and dilutive
potential common shares outstanding * 5,847,631 2,896,590 1,845,502 10,589,723
</TABLE>
* BankIllinois Financial per share information has been restated to
5% stock dividend declared in May 1999.
16
<PAGE>
MAIN STREET TRUST, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(in thousands, except per share and weighted average share data)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As Reported
BankIllinois First Decatur
Financial Bank Pro Forma Pro
Historical Historical Adjustments Forma
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Interest income
Loans and fees on loans $ 27,495 $ 17,569 0 $ 45,064
Investments in debt and equity securities
Taxable 9,115 7,917 0 17,032
Tax exempt 459 1,058 0 1,517
Federal funds sold and interest-bearing
deposits 945 1,063 (1) (b) 2,007
------------ ------------ --------- -----------
Total interest income 38,014 27,607 (1) 65,620
------------ ------------ --------- -----------
Interest expense
Demand, savings and other time deposits 15,988 11,673 0 27,661
Federal funds purchased and securities sold
under repurchase agreements 2,401 326 0 2,727
Federal Home Loan Bank advances and
other borrowings 573 901 0 1,479
------------ ------------ --------- -----------
Total interest expense 18,962 12,900 0 31,862
------------ ------------ --------- -----------
Net interest income 19,052 14,707 (1) 33,758
Provision for loan loss 535 274 0 809
------------ ------------ --------- -----------
Net interest income
after provision for loan loss 18,517 14,433 (1) 32,949
------------ ------------ --------- -----------
Non-interest income
Trust fees 2,198 1,724 0 3,922
Service charges on deposit accounts 1,705 1,002 0 2,707
Remittance processing income 0 5,165 0 5,165
Security transactions, net 60 66 0 126
Gain on sales of mortgage loans held-for-sale, net 594 507 0 1,101
Other 378 1,155 0 1,533
------------ ------------ --------- -----------
Total non-interest income 4,935 9,619 0 14,554
------------ ------------ --------- -----------
Non-interest expense
Salaries and employee benefits 8,283 8,466 0 16,749
Occupancy 1,382 1,118 0 2,500
Equipment 899 2,050 0 2,949
Data Processing 737 241 0 978
Federal deposit insurance premiums 49 39 0 81
Other 3,107 4,130 0 7,237
------------ ------------ --------- -----------
Total non-interest expense 14,457 16,044 0 30,501
------------ ------------ --------- -----------
Income before income taxes 8,995 8,008 (1) 17,002
Income Taxes 2,921 2,397 0 5,318
------------ ------------ --------- -----------
Net income 6,074 5,611 (1) 11,684
============ ============ ========= ===========
Per share data:
Basic earnings per share * $ 1.07 $ 1.95 $ 1.13
Weighted average shares of common stock 5,650,806 2,882,370 1,836,430 10,369,606
outstanding *
Diluted earnings per share * $ 1.04 $ 1.94 $ 1.10
Weighted average shares of common stock and dilutive
potential common shares outstanding * 5,833,963 2,897,959 1,846,375 10,578,297
</TABLE>
* BankIllinois Financial per share information has been restated to reflect
a 5% stock dividend declared in May 1999.
17
<PAGE>
MAIN STREET TRUST, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(in thousands, except per share and weighted average share data)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As Reported
BankIllinois First Decatur
Financial Bank Pro Forma Pro
Historical Historical Adjustments Forma
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest income
Loans and fees on loans $ 26,486 $ 17,871 $ 0 $ 44,357
Investments in debt and equity securities
Taxable 9,796 7,018 0 16,814
Tax exempt 302 783 0 1,085
Federal funds sold and interest-bearing
deposits 762 650 (1) (b) 1,411
----------- ------------ ---------- ------------
Total interest income 37,346 26,322 (1) 63,667
----------- ------------ ---------- ------------
Interest expense
Demand, savings and other time deposits 16,543 11,117 0 27,660
Federal funds purchased and securities sold
under repurchase agreements 2,275 304 0 2,579
Federal Home Loan Bank advances and
other borrowings 592 296 0 888
----------- ------------ ---------- ------------
Total interest expense 19,410 11,717 0 31,127
----------- ------------ ---------- ------------
Net interest income 17,936 14,605 (1) 32,540
Provision for loan loss 465 432 - 897
----------- ------------ ---------- ------------
Net interest income
after provision for loan loss 17,471 14,173 (1) 31,643
----------- ------------ ---------- ------------
Non-interest income
Trust fees 2,026 1,623 0 3,649
Service charges on deposit accounts 1,866 1,064 0 2,930
Remittance processing income 0 4,241 0 4,241
Security transactions, net 38 11 0 49
Gain on sales of mortgage loans held-for-sale, net 271 282 0 553
Other 275 1,140 0 1,415
----------- ------------ ---------- ------------
Total non-interest income 4,476 8,361 0 12,837
----------- ------------ ---------- ------------
Non-interest expense
Salaries and employee benefits 7,742 7,864 0 15,606
Occupancy 1,519 1,137 0 2,656
Equipment 920 2,179 0 3,099
Data Processing 733 326 0 1,059
Federal deposit insurance premiums 48 42 0 90
Other 2,926 3,575 0 6,501
----------- ------------ ---------- ------------
Total non-interest expense 13,888 15,123 - 29,011
----------- ------------ ---------- ------------
Income before income taxes 8,059 7,411 (1) 15,469
Income Taxes 2,659 2,318 - 4,977
----------- ------------ ---------- ------------
Net income $ 5,400 $ 5,093 $ (1) $ 10,492
=========== ============ ========== ============
Per share data:
Basic earnings per share * $ 0.95 $ 1.77 $ 1.01
Weighted average shares of common stock outstanding * 5,670,662 2,885,090 $1,838,165 10,393,917
Diluted earnings per share * $ 0.93 $ 1.76 $ 1.00
Weighted average shares of common stock and dilutive
potential common shares outstanding * 5,800,318 2,895,804 1,845,000 10,541,122
</TABLE>
* BankIllinois Financial per share information has been restated to reflect
a 5% stock dividend declared in May 1999.
18
<PAGE>
MAIN STREET TRUST, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(in thousands, except per share and weighted average share data)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As Reported
BankIllinois First Decatur
Financial Bank Pro Forma Pro
Historical Historical Adjustments Forma
------------------------------ ---------------------------
<S> <C> <C> <C> <C>
Interest income
Loans and fees on loans $ 26,037 $ 16,774 0 $ 42,811
Investments in debt and equity securities
Taxable 6,797 7,609 0 14,406
Tax exempt 380 645 0 1,025
Federal funds sold and interest-bearing
deposits
1,874 450 0 2,324
---------- ----------- --------- ------------
Total interest income 35,088 25,478 0 60,566
---------- ----------- --------- ------------
Interest expense
Demand, savings and other time deposits 15,220 11,165 0 26,385
Federal funds purchased and securities sold
under repurchase agreements 2,006 293 0 2,299
Federal Home Loan Bank advances and
other borrowings 599 161 0 760
---------- ----------- --------- ------------
Total interest expense 17,825 11,619 0 29,444
---------- ----------- --------- ------------
Net interest income 17,263 13,859 0 31,122
Provision for loan loss 375 310 0 685
---------- ----------- --------- ------------
Net interest income
after provision for loan loss 16,888 13,549 0 30,437
---------- ----------- --------- ------------
Non-interest income
Trust fees 1,931 1,535 0 3,466
Service charges on deposit accounts 1,839 1,127 0 2,966
Remittance processing income 0 5,748 0 5,748
Security transactions, net (4) (8) 0 (12)
Gain on sales of mortgage loans held-for-sale, net 266 224 0 490
Other 259 1,045 0 1,304
---------- ----------- --------- ------------
Total non-interest income 4,291 9,671 0 13,962
---------- ----------- --------- ------------
Non-interest expense
Salaries and employee benefits 7,795 8,164 0 15,959
Occupancy 1,511 1,142 0 2,653
Equipment 967 2,483 0 3,450
Data Processing 716 370 0 1,086
Federal deposit insurance premiums 2 32 0 34
Other 3,504 4,256 0 7,760
---------- ----------- --------- ------------
Total non-interest expense 14,495 16,447 0 30,942
---------- ----------- --------- ------------
Income before income taxes 6,684 6,773 0 13,457
Income Taxes 2,183 2,253 0 4,436
---------- ----------- --------- ------------
Net income $ 4,501 $ 4,520 $ 0 $ 9,021
========== =========== ========= ============
Per share data:
Basic earnings per share * $ 0.79 $ 1.56 $ 0.86
Weighted average shares of common stock outstanding * 5,717,558 2,900,533 1,848,018 10,466,109
Diluted earnings per share * $ 0.77 $ 1.55 $ 0.85
Weighted average shares of common stock and dilutive
potential common shares outstanding * 5,813,601 2,910,199 1,854,184 10,577,984
</TABLE>
* BankIllinois Financial per share information has been restated to reflect
a 5% stock dividend declared in May 1999.
19
<PAGE>
(a) INVESTMENT IN COMMON STOCK -- BankIllinois Financial holds 1,540 common
shares of First Decatur as an investment in debt and equity securities
available for sale. The investment and related fair market value
adjustments made in accordance with FAS 115 will be eliminated.
(b) DIVIDENDS FROM COMMON STOCK -- BankIllinois Financial has received
dividends on common stock from First Decatur since the purchase of the
shares in 1996. The dividends received by BankIllinois Financial, as
paid by First Decatur, will be eliminated in the years in which they
were received.
(c) STOCKHOLDERS' EQUITY -- In conjunction with the transaction, a new
holding company will be established, Main Street Trust, Inc. Each
outstanding share of First Decatur stock will be converted into 1.638
shares of Main Street Trust, Inc. stock and each share of BankIllinois
Financial will be converted into one share of Main Street Trust, Inc.
stock. Each share of Main Street Trust, Inc. stock will have a par
value of $.01 per share. First Decatur and BankIllinois Financial had
approximately 2.8 and 5.6 million shares of common stock outstanding as
of September 30, 1999, respectively. The pro forma average common share
amounts used to calculate pro forma basic and diluted earnings per
share were derived from the actual average share amounts for
BankIllinois Financial and the average share amounts for First Decatur
adjusted for the elimination of shares held by BankIllinois Financial
and the exchange ratio of 1.638. The common stock in the Unaudited Pro
Forma Balance Sheet has been adjusted to reflect the reclassification
of First Decatur's additional paid in capital and elimination of
treasury stock. Unaudited pro forma retained earnings reflect the
estimated adjustment for anticipated merger and restructuring costs as
described below.
(d) MERGER RELATED COSTS -- In connection with the transaction, First
Decatur and BankIllinois Financial expect to incur merger costs of
approximately $2,500,000, including legal, accounting and investment
banking fees. Additional restructuring costs for employee costs, exit
costs related to contract terminations or other reorganization costs
may be incurred but have not been identified or estimated at this time.
In anticipation of the merger, First Decatur terminated its defined
benefit retirement plan. As discussed in "Business of First
Decatur--Recent Developments" on page 72, a charge of $0.5 million,
net of income tax benefit of $0.2 million, has been taken in the fourth
quarter of 1999 by First Decatur. This charge is not included in the
pro forma adjustments presented.
20
<PAGE>
SELECTED FINANCIAL DATA
The following tables present our respective selected consolidated
financial data for the nine month periods ended September 30, 1999 and 1998, and
for the five year period ended December 31, 1998. The information for
BankIllinois Financial is based on the historical financial information that is
contained in reports BankIllinois Financial has previously filed with the
Securities and Exchange Commission. Historical financial statements of
BankIllinois Financial can be found in its September 30, 1999 Form 10-Q and its
1998 Annual Report on Form 10-K. The information for First Decatur is based on
the historical financial information that is contained in reports First Decatur
has previously filed with the Securities and Exchange Commission. Historical
financial statements of First Decatur can be found in its September 30, 1999
Form 10-Q and its 1998 Annual Report on Form 10-K. All of these documents are
incorporated by reference in this joint proxy statement-prospectus.
See "Where You Can Find More Information" on page 82.
You should read the following tables in conjunction with our
consolidated financial statements described above and with the notes to them.
Historical results do not necessarily indicate the results that you can
expect for any future period. We believe that we have included all adjustments
(which include only normal recurring adjustments) necessary to arrive at a fair
statement of our interim results of operations. Results for the nine months
ended September 30, 1999, do not necessarily indicate the results which you can
expect for any other interim period or for the year as a whole.
21
<PAGE>
SELECTED HISTORICAL FINANCIAL AND OTHER DATA
BANKILLINOIS FINANCIAL CORPORATION
(dollars in thousands, except per share data)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine months ended
September 30, Years ended December 31,
----------------------- ---------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
----------- ---------- --------- --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net interest income $ 14,615 $ 14,250 $ 19,052 $ 17,936 $ 17,263 $ 18,214 $ 18,599
Provision for loan losses 270 345 535 465 375 3,097 565
Investment securities gains (losses) 138 46 60 38 (4) 3 175
Other noninterest income 3,967 3,618 4,875 4,438 4,295 3,948 4,083
Noninterest expense 10,062 11,172 14,457 13,888 14,495 19,054 17,480
Earnings before income taxes and
discontinued operations 8,388 6,397 8,995 8,059 6,684 14 4,812
Income taxes 2,659 2,075 2,921 2,659 2,183 248 1,466
Earnings before discontinued
operations 5,729 4,322 6,074 5,400 4,501 (234) 3,346
Discontinued operations 0 0 0 0 0 570 4,634
Net earnings 5,729 4,322 6,074 5,400 4,501 336 7,980
PER COMMON SHARE DATA *
Basic earnings per share
Earnings before discontinued
operations $ 1.03 $ 0.76 $ 1.07 0.95 $ 0.79 $ (0.04) $ 0.58
Net earnings 1.03 0.76 1.07 0.95 0.79 0.06 1.39
Diluted earnings per share
Earnings before discontinued
operations 0.99 0.74 1.04 0.93 0.77 (0.04) 0.58
Net earnings 0.99 0.74 1.04 0.93 0.77 0.06 1.39
Cash dividends 0.24 0.23 0.30 0.07 0.00 0.20 0.11
Book Value 11.28 10.68 10.85 10.11 9.16 8.43 8.16
BALANCE SHEET DATA AT PERIOD END
Total assets $ 536,363 $ 522,487 $ 537,373 $ 539,366 $ 515,400 $520,586 $495,313
Loans, net of unearned discount 344,156 300,765 303,536 316,443 287,145 326,822 334,258
Allowance for loan losses 5,110 5,441 5,279 5,306 5,587 5,882 5,263
Investments in debt and equity
securities 157,196 162,324 191,136 155,386 153,492 97,304 106,034
Deposits 394,605 389,670 409,898 417,154 404,130 419,157 394,677
Short term borrowings 59,030 53,417 49,963 49,857 43,941 36,273 38,504
Long term debt
Parent company 0 0 0 0 0 0 0
Subsidiary bank 13,207 12,000 10,000 8,000 9,000 9,000 9,000
Total stockholder's equity 62,543 60,129 60,707 57,330 52,096 48,408 46,766
Average assets 543,336 524,779 527,966 513,298 491,475 496,634 487,609
Average stockholders equity 61,520 58,788 59,101 54,256 50,019 49,671 43,871
Average shares outstanding (in thousands) *
Basic 5,566 5,667 5,651 5,671 5,718 5,737 5,736
Diluted 5,769 5,848 5,834 5,800 5,814 5,795 5,753
</TABLE>
* All per share data has restated to reflect
the 5% stock dividend issued in May 1999.
22
<PAGE>
SELECTED HISTORICAL FINANCIAL AND OTHER DATA
BANKILLINOIS FINANCIAL CORPORATION
(dollars in thousands, except per share data)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine months ended
September 30, Years ended December 31,
----------------------- ---------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
----------- ---------- --------- --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
PROFITABILITY AND CAPITAL RATIOS
Return on average total assets 1.41 % 1.10 % 1.15 % 1.05 % 0.92 % 0.07 % 1.64 %
Return on average stockholders' equity 12.42 9.80 10.28 9.95 9.00 0.68 18.19
Net interest income (taxable
equivalent) / Average assets 3.67 3.66 3.65 3.53 3.55 3.72 3.88
Loans / Deposits 87.22 77.18 74.05 75.86 71.05 77.97 84.69
Equity / Assets (period end) 11.66 11.51 11.30 10.63 10.11 9.30 9.44
Average stockholders' equity / Average
total assets 11.32 11.20 11.19 10.57 10.18 10.00 9.00
Leverage ratio 11.60 11.20 11.10 10.90 10.70 9.70 9.99
Tier 1 capital / risk-weighted assets 16.60 17.90 17.80 16.40 16.50 13.78 14.16
Total capital / risk-weighted assets 17.90 19.20 19.10 17.70 17.70 15.03 15.36
CREDIT QUALITY RATIOS
Allowance / period end loans 1.48 % 1.81 % 1.74 % 1.68 % 1.95 % 1.80 % 1.57 %
Nonperforming loans / total loans 0.11 0.98 0.55 0.98 0.93 1.01 0.80
Allowance / nonperforming loans 1,355.44 185.45 317.63 171.44 208.39 178.51 197.19
Nonperforming assets / loans and
foreclosed properties 0.18 1.84 0.63 1.96 1.29 1.17 1.07
Provision / average loans 0.09 0.11 0.17 0.16 0.13 0.92 0.18
Net charge offs / average loans 0.14 0.07 0.18 0.25 0.23 0.74 0.00
</TABLE>
23
<PAGE>
SELECTED HISTORICAL FINANCIAL AND OTHER DATA
FIRST DECATUR BANCSHARES, INC.
(dollars in thousands, except per share data)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine months ended
September 30, Years ended December 31,
----------------------- ---------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
----------- ---------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net interest income $ 11,526 $ 10,853 $ 14,707 $ 14,605 $ 13,859 $ 13,328 $ 13,794
Provision for loan losses 138 223 274 432 310 275 300
Investment securities gains (losses) 53 37 66 11 (8) 8 19
Other noninterest income 9,627 6,793 9,553 8,350 9,679 12,488 11,359
Noninterest expense 14,283 11,512 16,044 15,123 16,447 19,236 18,312
Earnings before income taxes and
discontinued operations 6,785 5,948 8,008 7,411 6,773 6,313 6,560
Income taxes 2,083 1,809 2,397 2,318 2,253 2,020 2,128
Earnings before discontinued
operations 4,702 4,139 5,611 5,093 4,520 4,293 4,432
Discontinued operations 0 0 0 0 0 0 0
Net earnings 4,702 4,139 5,611 5,093 4,520 4,293 4,432
PER COMMON SHARE DATA
Basic earnings per share
Earnings before discontinued
operations $ 1.70 $ 1.44 $ 1.95 $ 1.77 $ 1.56 $ 1.48 $ 1.53
Net earnings 1.70 1.44 1.95 1.77 1.56 1.48 1.53
Diluted earnings per share
Earnings before discontinued
operations 1.69 1.43 1.94 1.76 1.55 1.47 1.53
Net earnings 1.69 1.43 1.94 1.76 1.55 1.47 1.53
Cash dividends 0.39 0.39 0.52 0.48 0.44 0.40 0.38
Book Value 19.62 19.50 19.27 18.17 16.80 15.82 14.26
BALANCE SHEET DATA AT PERIOD END
Total assets $ 479,872 $ 428,022 $ 441,692 $ 392,237 $ 394,123 $ 382,949 $ 376,081
Loans, net of unearned discount 244,050 212,305 218,385 200,053 199,896 189,130 194,687
Allowance for loan losses 3,644 3,598 3,573 3,531 3,382 3,356 3,375
Investments in debt and equity
securities 154,994 162,525 164,914 140,017 132,338 138,956 129,335
Deposits 374,987 336,090 355,768 321,128 320,162 322,710 320,561
Short term borrowings 29,026 11,647 10,278 11,599 21,802 9,806 10,636
Long term debt
Parent company 0 0 0 0 0 0 0
Subsidiary bank 17,865 17,917 17,904 2,954 0 0 0
Total stockholder's equity 54,235 56,234 53,368 52,299 48,494 45,880 41,369
Average assets 462,082 420,920 422,387 384,882 380,844 378,131 368,218
Average stockholders equity 53,832 54,112 54,514 50,277 46,695 43,978 40,285
Average shares outstanding (in thousands)
Basic 2,765 2,883 2,882 2,885 2,901 2,901 2,905
Diluted 2,782 2,897 2,898 2,896 2,910 2,907 2,911
</TABLE>
24
<PAGE>
SELECTED HISTORICAL FINANCIAL AND OTHER DATA
FIRST DECATUR BANCSHARES, INC.
(dollars in thousands, except per share data)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine months ended
September 30, Years ended December 31,
----------------------- ---------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
----------- ---------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
PROFITABILITY AND CAPITAL RATIOS
Return on average total assets 1.36 % 1.31 % 1.33 % 1.32 % 1.19 % 1.14 % 1.20 %
Return on average stockholders' equity 11.65 10.20 10.29 10.13 9.68 9.76 11.00
Net interest income (taxable
equivalent) / Average assets 4.01 4.07 4.09 4.40 4.23 4.14 4.44
Loans / Deposits 65.08 63.17 61.38 62.30 62.44 58.61 60.73
Equity / Assets (period end) 11.30 13.14 12.08 13.33 12.30 11.98 11.00
Average stockholders' equity / Average
total assets 11.65 12.86 12.91 13.06 12.26 11.63 10.94
Leverage ratio 11.67 12.90 12.40 13.00 12.40 11.05 10.33
Tier 1 capital / risk-weighted assets 21.42 23.46 22.50 25.60 22.70 16.25 15.61
Total capital / risk-weighted assets 22.67 24.71 23.80 26.80 24.00 17.50 16.87
CREDIT QUALITY RATIOS
Allowance / period end loans 1.49 % 1.69 % 1.64 % 1.77 % 1.69 % 1.77 % 1.73 %
Nonperforming loans / total loans 0.33 0.06 0.48 0.37 0.41 0.23 0.20
Allowance / nonperforming loans 510.35 2,335.90 340.29 473.96 410.94 761.00 869.85
Nonperforming assets / loans and
foreclosed properties 0.33 0.06 0.48 0.37 0.41 0.23 0.20
Provision / average loans 0.11 0.06 0.13 0.21 0.16 0.15 0.16
Net charge offs / average loans 0.05 0.03 0.11 0.14 0.15 0.16 0.10
</TABLE>
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INTRODUCTION
BankIllinois Financial is furnishing this joint proxy
statement-prospectus to holders of BankIllinois Financial common stock, $0.01
par value per share, in connection with the proxy solicitation by
BankIllinois Financial's board of directors. The BankIllinois Financial board
will use the proxies at the special meeting of stockholders of BankIllinois
Financial to be held on March 21, 2000, and at any adjournments or
postponements.
First Decatur is furnishing this joint proxy statement-prospectus to
holders of First Decatur common stock, $0.01 par value per share, in connection
with the proxy solicitation by First Decatur's board of directors. The First
Decatur board will use the proxies at the special meeting of stockholders of
First Decatur to be held on March 21, 2000, and at any adjournments
or postponements.
Our stockholders will be asked at their respective special meetings
to vote to adopt the Agreement and Plan of Merger, dated as of August 12,
1999, among BankIllinois Financial, First Decatur and Main Street Trust,
Inc., an Illinois corporation formed by us to facilitate the merger. Pursuant
to the merger agreement, we will each merge into Main Street, and each of the
outstanding shares of BankIllinois Financial common stock will be converted
into one share of Main Street common stock, $0.01 par value per share, and
each of the outstanding shares of First Decatur common stock will be
converted into 1.638 shares of Main Street common stock. First Decatur
stockholders will receive cash instead of any fractional shares.
BANKILLINOIS FINANCIAL SPECIAL MEETING
DATE, PLACE, TIME AND PURPOSE
The special meeting of BankIllinois Financial's stockholders will be
held at The Forum at Carle, located at 611 West Park Street, Urbana, Illinois,
at 10:00 a.m., local time, on March 21, 2000. At the special meeting, holders
of BankIllinois Financial common stock will be asked to vote upon a proposal to
adopt the merger agreement.
RECORD DATE, VOTING RIGHTS, REQUIRED VOTE AND REVOCABILITY OF PROXIES
The BankIllinois Financial board fixed the close of business on
February 1, 2000, as the record date for determining those BankIllinois
Financial stockholders who are entitled to notice of and to vote at the
special meeting. Only holders of BankIllinois Financial common stock of
record on the books of BankIllinois Financial at the close of business on the
record date have the right to receive notice of and to vote at the special
meeting. On the record date, there were 5,550,724 shares of BankIllinois
Financial common stock issued and outstanding held by approximately 400
holders of record.
At the special meeting, BankIllinois Financial stockholders will have
one vote for each share of BankIllinois Financial common stock owned on the
record date. The holders of a majority of the outstanding shares of BankIllinois
Financial common stock entitled to vote at the special meeting must be present
in order for a quorum to exist at the special meeting.
To determine if a quorum is present, BankIllinois Financial intends to
count the following:
- shares of BankIllinois Financial common stock present at the
special meeting either in person or by proxy;
- shares of BankIllinois Financial common stock present in
person at the special meeting but not voting; and
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- shares of BankIllinois Financial common stock for which it has
received proxies, but with respect to which holders of shares
have abstained on any matter.
Adoption of the merger agreement requires the affirmative vote of a majority
of the outstanding shares of BankIllinois Financial common stock.
Brokers who hold shares in street name for customers who are the
beneficial owners of such shares may not give a proxy to vote those shares
without specific instructions from their customers. Any abstention,
non-voting share or "broker non-vote" will have the same effect as a vote
against the adoption of the merger agreement.
Properly executed proxies that BankIllinois Financial receives
before the vote at the special meeting that are not revoked will be voted in
accordance with the instructions indicated on the proxies. If no instructions
are indicated, such proxies will be voted FOR the proposal to adopt the
merger agreement, and the proxy holder may vote the proxy in its discretion
as to any other matter which may come properly before the special meeting. If
necessary, the proxy holders may vote in favor of a proposal to adjourn the
special meeting in order to permit further solicitation of proxies if there
are not sufficient votes to approve the proposal at the time of the special
meeting. However, no proxy holder will vote any proxies voted against
adoption of the merger agreement in favor of a proposal to adjourn the
special meeting.
A BankIllinois Financial stockholder who has given a proxy solicited
by the BankIllinois Financial board may revoke it at any time prior to its
exercise at the special meeting by (1) giving written notice of revocation to
the Secretary of BankIllinois Financial, (2) properly submitting to
BankIllinois Financial a duly executed proxy bearing a later date or (3)
attending the special meeting and voting in person. All written notices of
revocation and other communications with respect to revocation of proxies
should be sent to: BankIllinois Financial Corporation, 100 West University
Avenue, Champaign, Illinois 61820, Attention: Teresa M. Marsh, Secretary.
On the record date, BankIllinois Financial's directors and executive
officers, including their immediate family members and affiliated entities,
owned 3,191,672 shares or approximately 57.5% of the outstanding shares of
BankIllinois Financial common stock, including shares subject to options to
purchase BankIllinois Financial common stock. On the record date, First
Decatur's directors and executive officers owned no shares of BankIllinois
Financial common stock.
On the record date, First Decatur held no shares of BankIllinois
Financial common stock in a fiduciary capacity for others, or as a result of
debts previously contracted, and BankIllinois Financial held 2,179,847 shares
or approximately 39.3% of the outstanding shares of BankIllinois Financial
common stock in a fiduciary capacity for others.
Additional information with respect to beneficial ownership of
BankIllinois Financial common stock by persons and entities owning more than
5% of such stock and more detailed information with respect to beneficial
ownership of BankIllinois Financial common stock by directors and executive
officers of BankIllinois Financial is incorporated by reference to
BankIllinois Financial's Annual Report on Form 10-K for the year ended
December 31, 1998. See "Where You Can Find More Information."
SOLICITATION OF PROXIES
Directors, officers and employees of BankIllinois Financial may
solicit proxies by mail, in person or by telephone or telegraph. They will
receive no additional compensation for such services. BankIllinois Financial
may make arrangements with brokerage firms and other custodians, nominees and
fiduciaries, if any, for the forwarding of solicitation materials to the
beneficial owners of BankIllinois Financial common stock held of record by
such persons. BankIllinois Financial will reimburse any such brokers,
custodians, nominees and fiduciaries for the reasonable out-of-pocket
expenses incurred by them for such services. BankIllinois Financial and First
Decatur will share all expenses related to the printing and mailing of this
joint proxy statement-
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prospectus, as provided in the merger agreement. See "Description of
Transaction -- Expenses and Termination Fees."
RECOMMENDATION OF BANKILLINOIS FINANCIAL BOARD
THE BANKILLINOIS FINANCIAL BOARD HAS APPROVED THE MERGER AGREEMENT
AND THE MERGER AND BELIEVES THAT THE PROPOSAL TO APPROVE THE MERGER AGREEMENT
AND MERGER IS IN THE BEST INTERESTS OF BANKILLINOIS FINANCIAL AND ITS
STOCKHOLDERS. THE BANKILLINOIS FINANCIAL BOARD RECOMMENDS THAT THE
BANKILLINOIS FINANCIAL STOCKHOLDERS VOTE FOR ADOPTION OF THE MERGER
AGREEMENT. SEE "DESCRIPTION OF TRANSACTION -- RECOMMENDATION OF THE
BANKILLINOIS FINANCIAL BOARD AND BANKILLINOIS FINANCIAL'S REASONS FOR THE
MERGER."
FIRST DECATUR SPECIAL MEETING
DATE, PLACE, TIME AND PURPOSE
The special meeting of First Decatur's stockholders will be held at
The First National Bank of Decatur, located at 130 North Water Street, Decatur,
Illinois, at 3:00 p.m., local time, on March 21, 2000. At the special
meeting, holders of First Decatur common stock will be asked to vote upon a
proposal to adopt the merger agreement.
RECORD DATE, VOTING RIGHTS, REQUIRED VOTE AND REVOCABILITY OF PROXIES
The First Decatur board fixed the close of business on February 1,
2000, as the record date for determining those First Decatur stockholders who
are entitled to notice of and to vote at the special meeting. Only holders of
First Decatur common stock of record on the books of First Decatur at the
close of business on the record date have the right to receive notice of and
to vote at the special meeting. On the record date, there were 2,909,397
shares of First Decatur common stock issued and outstanding held by
approximately 373 holders of record.
At the special meeting, First Decatur stockholders will have one
vote for each share of First Decatur common stock owned on the record date.
The holders of a majority of the outstanding shares of First Decatur common
stock entitled to vote at the special meeting must be present in order for a
quorum to exist at the special meeting.
To determine if a quorum is present, First Decatur intends to count
the following:
- shares of First Decatur common stock present at the special
meeting either in person or by proxy;
- shares of First Decatur common stock present in person at the
special meeting but not voting; and
- shares of First Decatur common stock for which it has received
proxies, but with respect to which holders of shares have
abstained on any matter.
Adoption of the merger agreement requires the affirmative vote of a majority
of the outstanding shares of First Decatur common stock.
Brokers who hold shares in street name for customers who are the
beneficial owners of such shares may not give a proxy to vote those shares
without specific instructions from their customers. Any abstention,
non-voting share or "broker non-vote" will have the same effect as a vote
against the adoption of the merger agreement.
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Properly executed proxies that First Decatur receives before the
vote at the special meeting that are not revoked will be voted in accordance
with the instructions indicated on the proxies. If no instructions are
indicated, such proxies will be voted FOR the proposal to adopt the merger
agreement, and the proxy holder may vote the proxy in its discretion as to
any other matter which may come properly before the special meeting. If
necessary, the proxy holders may vote in favor of a proposal to adjourn the
special meeting in order to permit further solicitation of proxies if there
are not sufficient votes to approve the proposal at the time of the special
meeting. However, no proxy holder will vote any proxies voted against
adoption of the merger agreement in favor of a proposal to adjourn the
special meeting.
A First Decatur stockholder who has given a proxy solicited by the
First Decatur board may revoke it at any time prior to its exercise at the
special meeting by (1) giving written notice of revocation to the Secretary
of First Decatur, (2) properly submitting to First Decatur a duly executed
proxy bearing a later date or (3) attending the special meeting and voting in
person. All written notices of revocation and other communications with
respect to revocation of proxies should be sent to: First Decatur Bancshares,
Inc., 130 North Water Street, Decatur, Illinois 62523, Attention: Pete P.
Grosso, Secretary.
On the record date, First Decatur's directors and executive
officers, including their immediate family members and affiliated entities,
owned 443,806 shares or approximately 15.3% of the outstanding shares of
First Decatur common stock, including shares subject to options to purchase
First Decatur common stock. On the record date, BankIllinois Financial owned
1,540 shares of First Decatur common stock or less than 1.0% of the
outstanding shares of First Decatur common stock.
On the record date, BankIllinois Financial held no shares of First
Decatur common stock in a fiduciary capacity for others or as a result of
debts previously contracted, and First Decatur held 477,006 shares or
approximately 16.4% of the outstanding shares of First Decatur common stock
in a fiduciary capacity for others. On the record date, First Decatur's
Employee Stock Ownership Plan held 120,578 shares of First Decatur common
stock or approximately 4.0% of the outstanding shares of First Decatur common
stock.
Additional information with respect to beneficial ownership of First
Decatur common stock by persons and entities owning more than 5% of such
stock and more detailed information with respect to beneficial ownership of
First Decatur common stock by directors and executive officers of First
Decatur is incorporated by reference to First Decatur's Annual Report on Form
10-K for the year ended December 31, 1998. See "Where You Can Find More
Information."
SOLICITATION OF PROXIES
Directors, officers and employees of First Decatur may solicit
proxies by mail, in person or by telephone or telegraph. They will receive no
additional compensation for such services. First Decatur may make
arrangements with brokerage firms and other custodians, nominees and
fiduciaries, if any, for the forwarding of solicitation materials to the
beneficial owners of First Decatur common stock held of record by such
persons. First Decatur will reimburse any such brokers, custodians, nominees
and fiduciaries for the reasonable out-of-pocket expenses incurred by them
for such services. BankIllinois Financial and First Decatur will share all
expenses associated with the printing and mailing of this joint proxy
statement-prospectus, as provided in the merger agreement. See "Description
of Transaction -- Expenses and Termination Fees."
RECOMMENDATION OF FIRST DECATUR BOARD
THE FIRST DECATUR BOARD HAS APPROVED THE MERGER AGREEMENT AND THE
MERGER AND BELIEVES THAT THE PROPOSAL TO APPROVE THE MERGER AGREEMENT AND
MERGER IS IN THE BEST INTERESTS OF FIRST DECATUR AND ITS STOCKHOLDERS. THE
FIRST DECATUR BOARD RECOMMENDS THAT THE FIRST DECATUR STOCKHOLDERS VOTE FOR
ADOPTION OF THE MERGER AGREEMENT. SEE "DESCRIPTION OF TRANSACTION --
RECOMMENDATION OF THE FIRST DECATUR BOARD AND FIRST DECATUR'S REASONS FOR THE
MERGER."
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<PAGE>
DESCRIPTION OF TRANSACTION
The following information describes material aspects of the merger.
This description does not provide a complete description of all the terms and
conditions of the merger agreement. It is qualified in its entirety by the
Appendices to this document, including the text of the merger agreement,
which is attached as Appendix A to this joint proxy statement-prospectus. The
merger agreement is incorporated herein by reference. You are urged to read
the Appendices in their entirety.
GENERAL
The merger agreement provides for the combination of BankIllinois
Financial and First Decatur pursuant to the merger of BankIllinois Financial
and First Decatur with and into Main Street. Main Street is a new Illinois
company that was formed by BankIllinois Financial and First Decatur solely
for the purposes of this transaction. At the time the merger becomes
effective, each share of BankIllinois Financial common stock then issued and
outstanding will be converted into and exchanged for the right to receive one
share of Main Street common stock (the "BankIllinois Financial exchange
ratio"), and each share of First Decatur common stock then issued and
outstanding will be converted into and exchanged for the right to receive
1.638 shares of Main Street common stock (the "First Decatur exchange ratio").
No fractional shares of Main Street common stock will be issued.
Rather, Main Street will pay cash (without interest) in an amount equal to
the average of the closing sale prices of Main Street common stock for the
three trading days immediately following the completion of the merger.
On the record date, BankIllinois Financial had 5,550,724 shares of
common stock issued and outstanding and First Decatur had 2,909,397 shares of
common stock issued and outstanding. Based on the BankIllinois Financial and
the First Decatur exchange ratios contained in the merger agreement, upon
completion of the merger, Main Street will issue approximately 5,550,724
shares of its common stock to former BankIllinois Financial stockholders and
4,765,592 shares of its common stock for former First Decatur stockholders.
Based on these numbers, after the merger, former BankIllinois Financial
stockholders would own approximately 53.8%, and former First Decatur
stockholders would own approximately 46.2%, of the outstanding shares of Main
Street common stock.
EFFECT OF THE MERGER ON OPTIONS
Pursuant to the merger agreement, any options to purchase shares of
BankIllinois Financial common stock and First Decatur common stock that are
outstanding immediately prior to the completion of the merger will be
converted into options to purchase shares of Main Street common stock. The
number of shares of BankIllinois Financial common stock and First Decatur
common stock covered by outstanding options will be converted into the number
of shares of Main Street common stock that are covered by Main Street options
on the same basis that the BankIllinois Financial common stock and the First
Decatur common stock are converted into shares of Main Street common stock.
See "Description of Transaction -- General." The exercise price of the
outstanding options will also be adjusted pursuant to those conversion
formulas.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
We have not requested nor do we intend to request a ruling from the
Internal Revenue Service ("IRS") as to the federal income tax consequences of
the merger. Instead, we have obtained the opinion of RSM McGladrey, Inc. as
to the expected material federal income tax consequences of the merger, which
is attached as an exhibit to the registration statement.
The tax opinion does not address, among other matters:
- state, local, foreign or other federal tax consequences of
the merger not specifically addressed in the opinion;
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<PAGE>
- federal income tax consequences to BankIllinois Financial or First
Decatur stockholders who are subject to special rules under the
Internal Revenue Code, such as foreign persons, tax-exempt
organizations, insurance companies, financial institutions, dealers in
stocks and securities and other persons who do not own such stock as a
capital asset;
- federal income tax consequences affecting shares of BankIllinois
Financial common stock or First Decatur common stock acquired upon the
exercise of stock options, stock purchase plan rights or otherwise as
compensation;
- the tax consequences to holders of warrants, options or other rights
to acquire shares of such stock;
- the tax consequences of BankIllinois Financial and First Decatur of
any income and deferred gain recognized pursuant to Treasury
Regulations issued under Section 1502 of the Internal Revenue Code.
Subject to the conditions, qualifications, representations and
assumptions contained in this document and in the tax opinion, RSM McGladrey,
Inc.'s opinion provides the following conclusions:
- The acquisition by Main Street of substantially all of the assets of
BankIllinois Financial and of First Decatur in exchange for shares of
Main Street common stock and the assumption of liabilities of
BankIllinois Financial and of First Decatur pursuant to the merger will
constitute a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code.
- First Decatur, BankIllinois Financial and Main Street will each be "a
party to a reorganization" within the meaning of Section 368(b) of the
Internal Revenue Code.
- No gain or loss will be recognized by either BankIllinois Financial
or First Decatur as a result of the merger.
- No gain or loss will be recognized by Main Street as a result of the
merger.
- No gain or loss will be recognized by the stockholders of
BankIllinois Financial or First Decatur as a result of the exchange of
BankIllinois Financial common stock and First Decatur common stock for
Main Street common stock pursuant to the merger, except that a gain or
loss will be recognized by First Decatur stockholders on the receipt of
any cash in lieu of a fractional share. Assuming that the First Decatur
common stock is a capital asset in the hands of the respective First
Decatur stockholders, any gain or loss recognized as a result of the
receipt of cash in lieu of a fractional share will be a capital gain or
loss equal to the difference between the cash received and that portion
of the holder's tax basis in the First Decatur common stock allocable
to the fractional share.
- The tax basis of Main Street common stock to be received by the
stockholders of BankIllinois Financial and First Decatur will be the
same as the tax basis of the BankIllinois Financial or First Decatur
common stock surrendered in exchange therefor (reduced by any amount
allocable to a fractional share interest for which cash is received).
- The holding period of the Main Street common stock to be received by
stockholders of BankIllinois Financial or First Decatur will include
the holding period of the BankIllinois Financial common stock or First
Decatur common stock surrendered in exchange for the Main Street common
stock therefor, provided the BankIllinois Financial shares or First
Decatur shares were held as a capital asset by the stockholders of
BankIllinois Financial or First Decatur, respectively, on the date of
the exchange.
- A stockholder of BankIllinois or First Decatur who dissents from the
merger and receives solely cash in exchange for his or her common stock
of BankIllinois or First Decatur will be treated as having received
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such cash as a distribution in redemption of his or her stock, subject
to the provisions and limitations of Section 302 of the Internal
Revenue Code.
The tax opinion is based on the Internal Revenue Code, Treasury
Regulations promulgated under the Internal Revenue Code by the IRS, judicial
decisions and administrative pronouncements of the IRS, all existing and in
effect on the date of this joint proxy statement-prospectus and all of which
are subject to change at any time, possibly retroactively. Any such change
could have a material impact on the conclusions reached in the opinion. The
tax opinion represents only the tax advisor's best judgment as to the
expected federal income tax consequences of the merger and is not binding on
the IRS or the courts. The IRS may challenge the conclusions stated in the
tax opinion or positions taken by stockholders on their income tax returns.
Stockholders of BankIllinois Financial or First Decatur may incur the cost
and expense of defending positions taken by them with respect to the merger.
A successful challenge by the IRS could have material adverse consequences to
the parties to the merger, including stockholders of First Decatur and
BankIllinois Financial.
In rendering the tax opinion, RSM McGladrey, Inc. has relied, as to
factual matters, solely on the continuing accuracy of the following:
- the description of the facts relating to the merger contained in the
merger agreement and this joint proxy statement-prospectus,
- the factual representations and warranties contained in the merger
agreement and this joint proxy statement-prospectus and related
documents and agreements,
- certain factual matters addressed by representations made by certain
executive officers of First Decatur, BankIllinois Financial and Main
Street, as further described in the tax opinion, and
- representations of legal counsel Barack Ferrazzano Kirschbaum Perlman
& Nagelberg as to the characterization of the proposed transaction as a
merger or consolidation under applicable state law.
Events occurring after the date of the tax opinion could alter the facts upon
which the opinion is based. In such case, the conclusions reached in the tax
opinion and in this summary could be materially impacted.
ACCORDINGLY, FOR ALL OF THE ABOVE REASONS, STOCKHOLDERS OF
BANKILLINOIS FINANCIAL AND FIRST DECATUR ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING
THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX LAWS.
Our obligation to complete the merger is conditioned on, among other
things, receipt by us of an updated opinion of RSM McGladrey, Inc.
substantially to the foregoing effect. The conditions relating to the receipt
of the tax opinion may be waived by both of us. Neither of us currently
intends to waive the conditions relating to the receipt of an updated tax
opinion. If the conditions relating to the receipt of the tax opinion were
waived and the material federal income tax consequences of the merger were
substantially different from those described in this joint proxy
statement-prospectus, we would each resolicit the approval of our respective
stockholders prior to completing the merger.
BACKGROUND OF THE MERGER
Each of our boards of directors has regularly reviewed its
respective business strategies in light of general conditions in the banking
industry, local competitive and economic conditions, the results of
operations and future prospects, legislative changes and other developments
affecting the banking industry generally and each of our respective companies
specifically.
The BankIllinois Financial board of directors has also considered
from time to time the possible benefits of strategic business combinations
with other financial institutions, including other large bank holding
companies,
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as part of its evaluation of available methods to increase stockholder value
and strengthen its franchise. To this end, the senior management of
BankIllinois Financial has from time to time had informal discussions with
the senior management of other financial institutions regarding potential
business combination transactions.
In March of 1998, First Decatur's board of directors determined to
undertake a detailed review of its financial and strategic alternatives and
asked ABN AMRO to make a presentation to its board on these matters.
On April 27, 1998, ABN AMRO presented an analysis to First Decatur's
board of directors encompassing, among other things:
- a business review of First Decatur including its financial condition
and performance, market position and local market conditions, lines of
business and stock price performance;
- a review of market conditions and trends in the overall securities
markets and bank-stock and bank merger-and-acquisition markets in
particular;
- a review and analysis of the potential effects on First Decatur of
various financial alternatives for enhancing stockholder value,
including stock repurchases, increased cash dividends and an initial
public stock offering;
- a review of First Decatur's prospects for, and an analysis of the
potential effects on First Decatur of, growth through acquisitions of
other financial institutions;
- a review of First Decatur's prospects for, and an analysis of the
potential effects on First Decatur of, a merger-of-equals transaction;
and
- an indication as to the reasonable range of value that could be
expected in the event First Decatur were acquired and an analysis of
potential acquirors.
After consideration of the various financial and strategic alternatives
presented by ABN AMRO, the First Decatur board decided to explore further the
possibility of a strategic business combination.
On June 18, 1998, First Decatur engaged ABN AMRO to provide
financial advisory and investment banking services with respect to a possible
strategic business combination. The First Decatur board authorized ABN AMRO
to contact and engage in discussions with three potential strategic-alliance
partners concerning a possible transaction and to prepare and provide an
information statement regarding First Decatur to these three parties.
Later in June 1998, ABN AMRO contacted the three organizations
authorized by the First Decatur board. On July 9, 1998, ABN AMRO forwarded
the information statement describing First Decatur to these three parties. In
early August 1998, ABN AMRO, on First Decatur's behalf, received written
strategic-alliance transaction proposals from two of the potential parties
contacted. The third potential partner elected not to submit an indication of
interest.
On September 2, 1998, ABN AMRO made a presentation to the First
Decatur board outlining the strategic-alliance search process to date as well
as then-current market conditions. ABN AMRO analyzed and compared the two
written proposals received and provided detailed information on the two
companies making them, noting that the level of the stock market, and bank
stocks in particular, had declined markedly during the prior two months. ABN
AMRO also provided a pro forma analysis of a hypothetical merger-of-equals
transaction with BankIllinois Financial. Following review and discussion, the
First Decatur board decided not to pursue either of the written
strategic-alliance transaction proposals.
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Over a period of several years, our respective managements had
informally discussed the possibility of a merger-of-equals of our two
companies and we renewed those discussions in the fall of 1998. At that time,
BankIllinois Financial requested KBW to assist it in arriving at an
appropriate exchange ratio for such a transaction. A proposed exchange ratio
was ultimately developed and was shared with First Decatur in January, 1999.
This was followed by informal discussions that dealt with the proposed
exchange ratio and other key issues such as transaction structure,
management, execution risk, systems compatibility and other potential
integration and transition issues. These discussions also included the
consideration of the possible advantages of such a combination, including the
fact that our respective franchises had little overlap and presented the
opportunity to extend our combined market share over a larger portion of
Central Illinois. These discussions continued through April, 1999, and
throughout this time period, our boards of directors were kept advised of the
progress made and the issues under discussion.
Using analyses prepared with KBW's assistance and after receiving
significant input from its board of directors, BankIllinois Financial made a
comprehensive merger of equals proposal to First Decatur in April of 1999
that included a revised exchange ratio and an indication that BankIllinois
Financial was unwilling to engage in further negotiations with respect to the
exchange ratio. As these informal discussions continued, the two parties that
had provided written proposals to First Decatur in August 1998, continued to
express through ABN AMRO interest in a potential transaction with First
Decatur. Neither party, however, expressed an interest at a nominal value
higher than the merger-of-equals proposal from BankIllinois Financial.
On June 8, 1999, the First Decatur board of directors held a
meeting, which included the participation of ABN AMRO representatives. At
this meeting the First Decatur board reviewed the strategic-alliance search
process to date; a summary of BankIllinois Financial's merger-of-equals
transaction proposal; and financial analyses of First Decatur, BankIllinois
Financial and the proposed transaction. At the conclusion of this meeting,
the First Decatur board authorized its management and ABN AMRO to negotiate
toward a definitive merger agreement with BankIllinois Financial.
After this series of board meetings, First Decatur management,
assisted by ABN AMRO and Howard & Howard Attorneys, P.C., counsel to First
Decatur, and BankIllinois Financial management, assisted by KBW and Barack
Ferrazzano Kirschbaum Perlman & Nagelberg, counsel to BankIllinois Financial,
negotiated the terms of the merger agreement.
On July 27, 1999, the First Decatur board of directors held a
special meeting at which attorneys from Howard & Howard reviewed a draft of
the proposed merger agreement. The First Decatur board held a second meeting
on August 10, 1999, to evaluate the proposed merger and included the
participation of ABN AMRO and Howard & Howard. The meeting included a
detailed discussion of the proposed transaction, a draft of the merger
agreement, and updated explanatory materials similar to those previously
reviewed by the First Decatur board at the June 8, 1999, meeting. ABN AMRO
reviewed the process leading to the proposed transaction, provided a
financial analysis of the proposed transaction and orally expressed an
opinion that the First Decatur exchange ratio was fair to First Decatur's
stockholders from a financial point of view. ABN AMRO confirmed this oral
opinion in writing by letter dated August 12, 1999. At the conclusion of this
portion of the meeting, the First Decatur board determined that the proposed
merger-of-equals transaction with BankIllinois Financial was in the best
interests of its stockholders and unanimously approved the merger agreement
and related transactions.
On July 20, 1999, the BankIllinois Financial board held a meeting at
which senior management of BankIllinois Financial reviewed its discussions
and negotiations with First Decatur as well as the business, strategic and
financial issues regarding a business combination, and the analyses that had
been performed with the assistance of KBW to arrive at a proposed exchange
ratio. In addition, the similarities between the proposed transaction with
First Decatur and the 1995 merger of equals between BankIllinois Financial
and Central Illinois Financial Corporation, of Champaign, Illinois, were
reviewed. In preparation for this meeting, senior management of BankIllinois
Financial had discussed with Barack Ferrazzano the terms of the draft merger
agreement, the legal standards applicable to a decision by the BankIllinois
Financial board to approve the merger
34
<PAGE>
agreement and the related transactions, and the likelihood that the
transactions would receive the requisite regulatory approvals in a timely
manner.
At this meeting, senior executive officers of BankIllinois Financial
presented to the board the financial information and analyses prepared by KBW
and these officers with respect to First Decatur and the merger. They also
presented to the board the substance of their discussions with BankIllinois
Financial's counsel and answered several questions from directors regarding
First Decatur and the proposed combination. The BankIllinois Financial board
also reviewed the terms of the draft merger agreement. After further
questions by, and discussions among, the members of the BankIllinois
Financial board, and consideration of the factors described under "--
Recommendation of the BankIllinois Financial Board and BankIllinois
Financial's Reasons for the Merger," the BankIllinois Financial board voted
unanimously to approve the merger agreement and the related transactions,
subject to the receipt of a fairness opinion from KBW.
The merger agreement was signed by both of after the closing of the
stock markets on August 12, 1999, and was publicly announced on August 13,
1999.
RECOMMENDATION OF THE BANKILLINOIS FINANCIAL BOARD AND BANKILLINOIS
FINANCIAL'S REASONS FOR THE MERGER
THE BANKILLINOIS FINANCIAL BOARD BELIEVES THAT THE MERGER IS FAIR
TO, AND IN THE BEST INTERESTS OF, BANKILLINOIS FINANCIAL AND THE BANKILLINOIS
FINANCIAL STOCKHOLDERS. ACCORDINGLY, THE BANKILLINOIS FINANCIAL BOARD HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT THE
BANKILLINOIS FINANCIAL STOCKHOLDERS VOTE FOR THE ADOPTION OF THE MERGER
AGREEMENT.
The BankIllinois Financial board believes that the consummation of
the merger presents a unique opportunity to combine two of Central Illinois'
strongest franchises to create a premier banking and financial services
company with the capability to offer a full range of financial products and
services in many of Central Illinois' most attractive markets through an
extensive distribution network.
In reaching its decision to approve the merger agreement, the
BankIllinois Financial board consulted with BankIllinois Financial's
management, as well as with its financial and legal advisors, and considered
a variety of factors, including the following:
- information concerning the businesses, earnings, operations,
financial condition, prospects, capital levels and asset quality of
BankIllinois Financial and First Decatur, both individually and as
combined; in particular, the BankIllinois Financial board focused on
the strategic fit of the business lines and the operating philosophies
of the two institutions;
- the consistency of the merger with BankIllinois Financial's long-term
business strategy;
- the advantages of a combination with an institution, such as First
Decatur, that already has a significant market share in the Central
Illinois market and the opportunities for increased efficiencies and
significant cost savings from a combination with BankIllinois
Financial's current market, resulting in increased profitability of the
combined entity over time as opposed to a possible combination with an
institution without a similar market presence;
- the current and prospective economic and competitive environments
facing BankIllinois Financial and other financial institutions
characterized by intensifying competition from both banks and nonbank
financial services organizations, the increasing necessity for strong
fee-based income producing components within a bank holding company and
the growing costs associated with regulatory compliance in the banking
industry;
35
<PAGE>
- the high costs of technology and new facilities required in order to
grow deposits in light of the fact that deposit growth for BankIllinois
Financial and the banking industry in general has been difficult and
such funding limitations would hamper BankIllinois Financial's
long-term asset growth;
- the belief that, following the merger, the combined company would be
well positioned to continue to grow through possible future
acquisitions or expansions while at the same time increasing its
attractiveness as a possible acquisition candidate;
- the belief that the merger would result in stockholders of
BankIllinois Financial receiving stock in a high quality combined
company that should benefit stockholders through enhanced operating
efficiencies and better penetration of commercial and consumer banking
markets in Central Illinois;
- the business, operations, financial condition, earnings and prospects
of First Decatur;
- the scale, scope, strength and diversity of operations, product lines
and delivery systems that could be achieved by combining BankIllinois
Financial and First Decatur;
- the complementary nature of the businesses of BankIllinois Financial
and First Decatur and the anticipated improved stability of the
combined company's business and earnings in varying economic and market
climates relative to BankIllinois Financial on a stand-alone basis made
possible by the merger, as a result of greater geographic, asset and
line-of-business diversification;
- the belief of BankIllinois Financial's senior management and the
BankIllinois Financial board that BankIllinois Financial and First
Decatur share a common vision with respect to delivering financial
performance and stockholder value and that their managements and
employees possess complementary skills and expertise;
- the BankIllinois Financial board's belief that, while no assurances
could be given, the business and financial advantages contemplated in
connection with the merger were likely to be achieved within a
reasonable time frame;
- the opinion of KBW that, as of August 12, 1999, the BankIllinois
Financial exchange ratio was fair from a financial point of view to
BankIllinois Financial stockholders (see "-- Opinion of BankIllinois
Financial's Financial Advisor"); and
- the likelihood that the merger will be approved by the appropriate
regulatory authorities (see "-- Regulatory Approvals").
The foregoing discussion of the information and factors considered
by the BankIllinois Financial board is not intended to be exhaustive, but
includes all material factors considered by the BankIllinois Financial board.
In reaching its determination to approve and recommend the merger, the
BankIllinois Financial board did not assign any relative or specific weights
to the foregoing factors, and individual directors may have given differing
weights to different factors. The BankIllinois Financial board is unanimous
in its recommendation that BankIllinois Financial stockholders vote for
approval and adoption of the merger agreement.
RECOMMENDATION OF THE FIRST DECATUR BOARD AND FIRST DECATUR'S REASONS FOR THE
MERGER
THE FIRST DECATUR BOARD BELIEVES THAT THE MERGER IS FAIR TO, AND IN
THE BEST INTERESTS OF, FIRST DECATUR AND THE FIRST DECATUR STOCKHOLDERS.
ACCORDINGLY, THE FIRST DECATUR BOARD HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT THE FIRST DECATUR STOCKHOLDERS VOTE
FOR THE ADOPTION OF THE MERGER AGREEMENT.
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<PAGE>
The First Decatur board believes that the consummation of the merger
presents a unique opportunity to combine two of Central Illinois' strongest
franchises to create a premier banking and financial services company with
the capability to offer a full range of financial products and services in
many of Central Illinois' most attractive markets through an extensive
distribution network.
In reaching its decision to approve the merger agreement, the First
Decatur board consulted with First Decatur's management, as well as with its
financial and legal advisors, and considered a variety of factors, including
the following:
- information concerning the businesses, earnings, operations,
financial condition, prospects, capital levels and asset quality of
First Decatur and BankIllinois Financial, both individually and as
combined; in particular, the First Decatur board focused on the
strategic fit of the business lines and the operating philosophies of
the two institutions;
- the consistency of the merger with First Decatur's long-term business
strategy;
- the advantages of a combination with an institution, such as
BankIllinois Financial, that already has a significant market share in
the Central Illinois market and the opportunities for increased
efficiencies and significant cost savings from a combination with First
Decatur's current market, resulting in increased profitability of the
combined entity over time as opposed to a possible combination with an
institution without a similar market presence;
- the current and prospective economic and competitive environments
facing First Decatur and other financial institutions characterized by
intensifying competition from both banks and nonbank financial services
organizations, the increasing necessity for strong fee-based income
producing components within a bank holding company and the growing
costs associated with regulatory compliance in the banking industry;
- the high costs of technology and new facilities required in order to
grow deposits in light of the fact that deposit growth for First
Decatur and the banking industry in general has been difficult and such
funding limitations would hamper First Decatur's long-term asset
growth;
- the belief that, following the merger, the combined company would be
well positioned to continue to grow through possible future
acquisitions or expansions while at the same time increasing its
attractiveness as a possible acquisition candidate;
- the belief that the merger would result in stockholders of First
Decatur receiving stock in a high quality combined company that should
benefit stockholders through enhanced operating efficiencies and better
penetration of commercial and consumer banking markets in Central
Illinois;
- the business, operations, financial condition, earnings and prospects
of BankIllinois Financial;
- the scale, scope, strength and diversity of operations, product lines
and delivery systems that could be achieved by combining First Decatur
and BankIllinois Financial;
- the complementary nature of the businesses of First Decatur and
BankIllinois Financial and the anticipated improved stability of the
combined company's business and earnings in varying economic and market
climates relative to First Decatur on a stand-alone basis made possible
by the merger, as a result of greater geographic, asset and
line-of-business diversification;
- the belief of First Decatur's senior management and the First Decatur
board that First Decatur and BankIllinois Financial share a common
vision with respect to delivering financial performance and stockholder
value and that their managements and employees possess complementary
skills and expertise;
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- the First Decatur board's belief that, while no assurances could be
given, the business and financial advantages contemplated in connection
with the merger were likely to be achieved within a reasonable
timeframe;
- the opinion of ABN AMRO that, as of August 12, 1999, the First
Decatur exchange ratio was fair from a financial point of view to First
Decatur stockholders (see "-- Opinion of First Decatur's Financial
Advisor"); and
- the likelihood that the merger will be approved by the appropriate
regulatory authorities (see "-- Regulatory Approvals").
The foregoing discussion of the information and factors considered
by the First Decatur board is not intended to be exhaustive, but includes all
material factors considered by the First Decatur board. In reaching its
determination to approve and recommend the merger, the First Decatur board
did not assign any relative or specific weights to the foregoing factors, and
individual directors may have given differing weights to different factors.
The First Decatur board is unanimous in its recommendation that First Decatur
stockholders vote for approval and adoption of the merger agreement.
OPINION OF BANKILLINOIS FINANCIAL'S FINANCIAL ADVISOR
KBW'S OPINION IS DIRECTED TO BANKILLINOIS FINANCIAL'S BOARD OF
DIRECTORS AND ADDRESSES ONLY THE EXCHANGE RATIOS. IT DOES NOT ADDRESS THE
UNDERLYING BUSINESS DECISION TO PROCEED WITH THE MERGER AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO HOW SUCH STOCKHOLDER
SHOULD VOTE WITH RESPECT TO THE MERGER OR ANY OTHER MATTER RELATED THERETO.
KBW has informed BankIllinois Financial that in arriving at its
opinion, KBW has, among other things:
- reviewed BankIllinois Financial's Annual Reports on Form 10-K and
related audited financial information for the three fiscal years ended
December 31, 1998 and BankIllinois Financial's quarterly reports on
Form 10-Q and related unaudited financial information for the period
ended September 30, 1999;
- reviewed First Decatur's Annual Reports on Form 10-K and related
audited financial information for the three fiscal years ended December
31, 1998 and First Decatur's quarterly report on Form 10-Q and related
unaudited financial information for the period ended September 30,
1999;
- reviewed certain limited financial information, including projections
of future financial performance, relating to the respective businesses,
earnings, assets and prospects of BankIllinois Financial and First
Decatur furnished to KBW by senior management of BankIllinois Financial
as well as projections of cost savings and related expenses which may
result from the merger furnished to it by senior management of
BankIllinois Financial;
- conducted certain limited discussions with members of senior
management of BankIllinois Financial and First Decatur concerning the
respective businesses, financial condition, earnings, assets,
liabilities, operations, regulatory condition, financial forecasts,
contingencies, including the financial impact of possible liabilities
involving First Decatur's subsidiary as described in First Decatur's
latest quarterly report on Form 10-Q; and prospects of BankIllinois
Financial and First Decatur and their respective views as to the future
financial performance of BankIllinois Financial, First Decatur, and
Main Street, as the case may be, following the merger;
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<PAGE>
- reviewed the historical market prices for BankIllinois Financial
common stock and First Decatur common stock and compared them with that
of certain publicly traded companies which KBW deemed to be relevant;
- compared the respective results of operations of BankIllinois
Financial and First Decatur with those of certain companies which KBW
deemed to be relevant;
- reviewed the amount and timing of the projected savings following the
merger as prepared by, and discussed with, senior management of
BankIllinois Financial;
- considered, based upon information provided by BankIllinois
Financial's and First Decatur's senior management, the pro forma impact
of the merger on the earnings and book value per share, consolidated
capitalization and certain balance sheet and profitability ratios of
BankIllinois Financial and First Decatur;
- reviewed the merger; and
- reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as KBW
deemed necessary.
In preparing its opinion, KBW, with BankIllinois Financial's consent,
assumed and relied on the accuracy and completeness of all financial and
other information supplied or otherwise made available to it by BankIllinois
Financial and First Decatur, including that contemplated in items above, and
KBW has not assumed responsibility for independently verifying such
information or undertaken an independent evaluation or appraisal of the
assets or liabilities, contingent or otherwise, of BankIllinois Financial,
First Decatur or any of their subsidiaries, nor has it been furnished any
such evaluation or appraisal. KBW is not an expert in the evaluation of
allowances for loan losses, and, with BankIllinois Financial's consent, it
has not made an independent evaluation of the adequacy of the allowance for
loan losses of BankIllinois Financial or First Decatur, nor has it reviewed
any individual credit files relating to BankIllinois Financial or First
Decatur, and, with BankIllinois Financial's consent, it assumed that the
respective aggregate allowances for loan losses for both BankIllinois
Financial and First Decatur are adequate to cover such losses and will be
adequate on a pro forma basis for Main Street. In addition, it has not
conducted any physical inspection of the properties or facilities of
BankIllinois Financial or First Decatur. KBW's opinion is predicated on the
merger receiving the tax and accounting treatment contemplated in the merger.
KBW's opinion was necessarily based on economic, market and other conditions
as in effect on, and the information made available to it as of, the date of
its opinion.
KBW's opinion was rendered without regard to the
necessity for, or level of, any restrictions, obligations, undertakings or
divestitures which may be imposed or required in the course of obtaining
regulatory approval for the merger.
In connection with rendering its opinion, KBW performed a variety of
financial analyses, including those summarized below. The summary set forth
below does not purport to be a complete description of the analyses performed
by KBW in this regard. The preparation of a fairness opinion involves various
determinations and judgments as to the most appropriate and relevant methods
of financial analysis and the application of these methods to the particular
circumstances and, therefore, such opinion is not readily susceptible to a
partial analysis or summary description. Accordingly, notwithstanding the
separate factors summarized below, KBW believes that its analyses must be
considered as a whole and that selecting portions of its analyses and factors
considered by it, without considering all analyses and factors, or attempting
to ascribe relative weights to some or all such analyses and factors, could
create an incomplete view of the evaluation process underlying KBW's opinion.
In performing its analyses, KBW made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of BankIllinois
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<PAGE>
Financial, First Decatur and KBW. The analyses performed by KBW are not
necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by such analyses. Such
analyses were prepared solely as part of KBW's analysis of the fairness of
the exchange ratios to BankIllinois Financial and its stockholders, and were
provided to BankIllinois Financial's Board of Directors in connection with
the delivery of KBW's opinion. KBW did not draw any specific conclusions
from, or with regard to, any one method of analysis. With respect to the
comparison of selected companies analysis and the analysis of selected merger
transactions summarized below, no company utilized as a comparison is
identical to BankIllinois Financial or First Decatur. Accordingly, an
analysis of comparable companies is not mathematical; rather it involves
complex considerations and judgments concerning the differences in financial
and operating characteristics of the companies and other factors that could
affect the public trading values, as the case may be, of the companies
concerned. The analyses do not purport to be appraisals or to reflect the
process at which BankIllinois Financial and First Decatur might actually be
sold or the prices at which any securities may trade at the present time or
at any time in the future. In addition, as described above, KBW's opinion is
just a part of many factors taken into consideration by BankIllinois
Financial's Board of Directors.
The projections of future financial performance furnished to KBW and
used by it in certain of its analyses were prepared by the senior management
of BankIllinois Financial. BankIllinois Financial does not publicly disclose
internal management projections of the type provided to KBW in connection
with its review of the merger, and as a result, such projections were not
prepared with a view towards public disclosure. These projections were based
on numerous variables and assumptions which are inherently uncertain,
including, without limitation, factors related to general economic and
competitive conditions, and accordingly, actual results could vary
significantly from those set forth in such projections.
The following is a summary of analyses presented by KBW to
BankIllinois Financial's Board of Directors on November 16, 1999 in
connection with its opinion.
COMPARABLE COMPANY ANALYSIS. KBW compared the financial performance
and market performance of BankIllinois Financial and First Decatur based on
various financial measures of earnings performance, operating efficiency,
capital adequacy and asset quality and various measures of market
performance, including, but not limited to, price to book values, price to
earnings and dividend yields to those of selected bank holding companies. For
purposes of such analysis, the financial information used by KBW was as of
and for the quarter ended September 30, 1999. Market price information was as
of November 12, 1999. KBW selected publicly traded banking companies in the
Midwestern United States with total assets ranging from $400 million to $700
million. The thirty-two companies in the BankIllinois Financial and First
Decatur peer group were:
- Allegiant Bancorp, Inc., St. Louis, MO; (2)
- Baylake Corporation, Sturgeon Bay, WI; (3)
- BNCCORP, Inc., Bismarck, ND; (4)
- Cass Commercial Corporation, Bridgeton, MO; (5)
- Castle BancGroup, Incorporated, De Kalb, IL; (6)
- Cortland Bancorp, Cortland, OH; (7)
- CoVest Bancshares, Inc., Des Plaines, IL; (8)
- DCB Financial Corporation, Delaware, OH; (9)
- Empire Banc Corporation, Traverse City, MI; (10)
- Farmers & Merchants Bancorp, Incorporated,
Archbold, OH; (11)
- First Citizens Banc Corp., Sandusky, OH; (12)
- First Mid-Illinois Bancshares, Incorporated,
Mattoon, IL; (13)
- Lafayette Bancorporation, Lafayette, IN;
- LNB Bancorp, Incorporated, Lorain, OH;
- Northern States Financial Corporation,
Waukegan, IL;
- Oak Hill Financial, Inc., Jackson, OH;
- Ohio Valley Banc Corp., Gallipolis, OH;
- Princeton National Bancorp, Inc., Princeton, IL;
- PrivateBancorp, Inc., Chicago, IL;
- Rurban Financial Corp., Defiance, OH;
- S.Y. Bancorp, Inc., Louisville, KY;
- Southside Bancshares Corp., St. Louis, MO;
- Success Bancshares, Inc., Lincolnshire, IL;
- Team Financial, Inc., Paola, KS;
- Tri City Bankshares Corporation, Oak Creek, WI;
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- Firstbank Corporation, Alma, MI; (14)
- Franklin Bank, N.A., Southfield, MI; (15)
- Horizon Bancorp, Michigan City, IN; (16)
- InterCounty Bancshares, Inc., Wilmington, OH; (17)
- UnionBancorp, Inc., Ottawa, IL;
- United Bancorp, Inc., Tecumseh, MI; and
- Wayne Bancorp, Inc., Wooster, OH.
KBW's analysis showed the following concerning BankIllinois
Financial's financial performance:
<TABLE>
<CAPTION>
BANKILLINOIS
PERFORMANCE AVERAGE MEDIAN
------------ ------- ------
<S> <C> <C> <C>
Return on assets(1) 1.40% 1.03% 1.04%
Return on equity(1) 12.23 11.39 11.13
Net interest margin(1) 3.84 4.33 4.14
Efficiency Ratio(1) 54.22 64.68 63.93
Ratio of total equity to total assets 11.66 8.76 8.54
Ratio of tangible equity to tangible assets 11.66 8.22 8.18
Ratio of non-performing assets to total
loans plus other real estate owned 0.10 0.76 0.52
Ratio of loan loss reserve to total loans 1.55 1.29 1.26
</TABLE>
KBW's analysis further showed the following concerning BankIllinois
Financial's market performance:
- that BankIllinois Financial's price to earnings per share multiple
based on 1999 projected earnings was 18.01 times, compared to an
average of 12.50 and median of 12.28;
- that its price to earnings per share multiple based on 2000 projected
earnings was 16.68 times, compared to an average of 10.69 and median of
10.30;
- that its price to book value per share was 2.03 times, compared to an
average of 1.71 and median of 1.59; and
- that its dividend yield was 1.40% compared to an average of 2.22% and
median of 2.26%.
KBW's analysis showed the following concerning First Decatur's
financial performance:
- -------------------
(1) On an annualized basis.
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<PAGE>
<TABLE>
<CAPTION>
FIRST DECATUR
PERFORMANCE AVERAGE MEDIAN
------------- ------- --------
<S> <C> <C> <C>
Return on assets(1) 1.42% 1.03% 1.04%
Return on equity(1) 11.72 11.39 11.13
Net interest margin(1) 3.82 4.33 4.14
Efficiency Ratio(1) 67.28 64.68 63.93
Ratio of total equity to total assets 11.58 8.76 8.54
Ratio of tangible equity to tangible assets 11.27 8.22 8.18
Ratio of non-performing assets to total
loans plus other real estate owned 0.14 0.76 0.52
Ratio of loan loss reserve to total loans 1.49 1.29 1.26
</TABLE>
KBW's analysis further showed the following concerning First
Decatur's market performance:
- that First Decatur's price to earnings per share multiple based on
1999 projected earnings was 14.46 times, compared to an average of
12.50 and median of 12.28;
- that its price to earnings per share multiple based on 2000 projected
earnings was 13.58 times, compared to an average of 10.69 and median of
10.30;
- that its price to book value per share was 1.64 times, compared to an
average of 1.71 and median of 1.59; and
- that its dividend yield was 1.61% compared to an average of 2.22% and
median of 2.26%.
HISTORICAL STOCK DATA ANALYSIS. KBW reviewed weekly stock price data
for BankIllinois Financial common stock and First Decatur common stock
compared to the Nasdaq Bank Index and Keefe Bank Index for the period from
January 1997 through November 1999. This analysis showed that on a relative
performance basis, BankIllinois Financial's and First Decatur's stock prices
appreciated 74% and 59%, respectively, compared with an appreciation of 41%
for the Nasdaq Bank Index and 58% for the Keefe Bank Index.
RELATIVE CONTRIBUTION ANALYSIS. KBW analyzed the contribution of
each of BankIllinois Financial and First Decatur to Main Street based on
certain balance sheet and income statement data for BankIllinois Financial
and First Decatur for the twelve month and quarter ended period dated
September 30,1999 and based on the projections of future financial
performance provided by senior management of BankIllinois Financial. The
analysis showed that, among other things, BankIllinois Financial and First
Decatur would contribute 52.8% and 47.2%, respectively, to the total assets
of Main Street, 53.6% and 46.4% to total stockholders' equity (or 54.3% and
45.7% as adjusted for the effect of possible liabilities involving First
Decatur's subsidiary as described in First Decatur's latest quarterly report
on Form 10-Q) and 54.8% and 45.2% to net income available to common equity.
The analysis further showed that, based on 1999 projected earnings,
BankIllinois Financial and First Decatur would contribute 54.3% and 45.7%,
respectively.
Pursuant to the merger, each share of BankIllinois Financial's
common stock can be exchanged for one share of Main Street common stock and
each share of First Decatur's common stock can be exchanged for 1.638 shares
of Main Street common stock, herein referred to as the exchange ratios. Under
the exchange ratios, the holders of BankIllinois Financial common stock would
own 55.8% of the common equity of Main Street on a fully diluted basis, and
the holders of First Decatur common stock would own 44.2% of the common
equity of Main Street on a fully diluted basis.
COMPARABLE MERGER ANALYSIS. KBW analyzed a group of 13 selected
banking merger transactions classified as mergers of equals in the United
States from 1996 to 1999. The institutions participating in these mergers had
pre-merger total assets ranging from $200 million to $1 billion. This
analysis showed that, among
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other things, the average and median relative contributions of the larger
institution and the smaller institution to the resulting combined entity were:
- 51.8% to 48.2% and 51.4% to 48.6% for total assets, respectively;
- 53.0% to 47.0% and 51.2% to 48.8% for total equity, respectively;
- 57.8% to 42.2% and 61.6% to 38.4% for trailing twelve months net
income, respectively; and
- 54.1% to 45.9% and 53.7% to 46.3% for allocation of shares in the
combined company, respectively.
The comparable merger analysis also indicated, based on the
announced transaction value, the following:
- the average and median multiples of transaction value to respective
last twelve months net income of the smaller institution to the
resulting combined entity were 21.5 times and 18.8 times, respectively,
as compared to an implied valuation of 17.5 times First Decatur's last
twelve months net income;
- the average and median multiples of transaction value to book value
were 1.62 times and 1.73 times, respectively, for the group as compared
to an implied valuation of 1.99 times First Decatur's book value; and
- the average and median multiples of transaction value to tangible
book value were 1.73 times and 1.81 times, respectively, for the group
as compared to an implied valuation of 2.00 times First Decatur's
tangible book value.
The comparable merger group included the following transactions:
- Fidelity Financial of Ohio Inc. / Glenway Financial Corp;
- Cortland First Financial Corporation / Oneida Valley Bancshares Inc.;
- First Alliance Premier Bancshares, Inc. / Central & Southern Holding
Company;
- FCB Financial Corp. / OSB Financial Corp.;
- Pinnacle Financial Services / Indiana Federal Corporation;
- Hudson Chartered Bancorp Inc. / Progressive Bank Inc.;
- Heritage Bancorp, Inc. / BCB Financial Services orporation;
- First Jermyn Corporation / Upper Valley Bancorp, Inc.;
- Indiana United Bancorp / PTC Bancorp;
- Hinsdale Financial Corporation / Liberty Bancorp, Inc.;
- Mid-Peninsula Bancorp / Cupertino National Bancorp;
- Northern Illinois Financial Corporation / Premier Financial Services,
Inc.; and
- CU Bancorp / Home Interstate Bancorp.
PRO FORMA MERGER ANALYSIS. KBW performed pro forma merger analysis
that analyzed the effect of the merger on the stand-alone projected income
statement and balance sheet of BankIllinois Financial and First Decatur to
estimate the financial consequences to BankIllinois Financial's stockholders.
Assumptions regarding the accounting treatment, acquisition adjustments, cost
savings, and revenue enhancements were used to calculate the financial impact
that the merger could have on certain projected future financial results.
This analysis was based on projections of BankIllinois Financial's and First
Decatur's 2000 and 2001 earnings per share. The actual results achieved by
Main Street following the merger may vary from the projected results, and the
variations may be material. Projected after-tax reductions in the combined
BankIllinois Financial and First Decatur non-interest expenses of $1,000,000
in 2000 and $1,500,000 in 2001 were assumed.
The analysis showed, among other things, the following:
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- Main Street's projected earnings per share for 2000 and 2001 would
increase 8.81% and 10.63% over BankIllinois Financial's stand-alone
earnings per share for the same periods, respectively;
- the merger would result in increases of 7.85% and 8.09% to
BankIllinois Financial's stand-alone book value per share in 2000 and
2001, respectively;
- the book value per share increases, as adjusted for the effect of
possible liabilities involving First Decatur's subsidiary as described
in First Decatur's latest quarterly report on Form 10-Q, would be 6.58%
and 6.94%, respectively; and
- BankIllinois Financial stockholders would experience an increase in
dividends per share of 8.81% and 10.63% over stand-alone projections in
2000 and 2001, respectively.
In addition, KBW analyzed the financial performance of BankIllinois
Financial and First Decatur, annualized for the quarter ended September 30,
1999, compared to the projected financial performance of Main Street. This
analysis ignored any of management's projected cost savings or synergies
gained in the merger. The analysis showed the following:
- Main Street's pro forma return on assets of 1.40%, compared to 1.46%
and 1.34% for BankIllinois Financial and First Decatur, respectively;
- pro forma return on equity of 12.25%, compared to 12.62% and 11.60%
for BankIllinois Financial and First Decatur, respectively;
- pro forma net interest margin of 3.87%, compared to 3.95% and 3.77%
for BankIllinois Financial and First Decatur, respectively;
- pro forma efficiency ratio of 61.92%, compared with 54.87% and 68.00%
for BankIllinois Financial and First Decatur, respectively;
- pro forma ratio of total equity to total assets of 11.49%, compared
to 11.66% and 11.30% for BankIllinois Financial and First Decatur,
respectively;
- pro forma ratio of tangible equity to tangible assets of 11.48%,
compared with 11.66% and 11.27% for BankIllinois Financial and First
Decatur, respectively;
- pro forma ratio of non-performing assets to total loans plus other
real estate owned of 0.12%, compared to 0.10% and 0.14% for
BankIllinois Financial and First Decatur, respectively; and
- pro forma ratio of loan loss reserve to total loans of 1.49%,
compared to 1.48% and 1.49% for BankIllinois Financial and First
Decatur, respectively.
DISCOUNTED FREE CAPITAL ANALYSIS. Using financial projections for
BankIllinois Financial provided by management of BankIllinois Financial, KBW
estimated the future amount of distributable free capital available to
holders of BankIllinois Financial shares of common stock assuming the
maintenance of a leverage ratio (as defined under regulatory guidelines) of
7.0% over a five year period. KBW then estimated the terminal value for
BankIllinois Financial shares of common stock at the end of the period by
applying terminal multiples ranging from 13 to 15 times BankIllinois
Financial's projected 2004 adjusted earnings. The distributable free capital
stream and terminal values were then discounted to a present value using
discount rates (ranging from 12% to 14%) chosen to reflect different
assumptions regarding the required rate of return to holders or prospective
buyers of shares of BankIllinois Financial common stock. KBW calculated
present values of distributable free capital for BankIllinois Financial
ranging from $16.57 per share to $19.68 per share.
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Under similar assumptions, KBW estimated the present value of future
cash flows that Main Street could generate through 2004, under various
circumstances, including projected expense savings. KBW's discounted free
capital analysis indicated a range of between $18.05 to $21.47 per share for
Main Street shareholders.
In connection with its opinion dated as of the date of this Proxy
Statement / Prospectus, KBW performed procedures to update, as necessary,
certain of the analyses described above and reviewed the assumptions on which
such analyses described above were based and the factors considered in
connection therewith.
KBW has been retained by BankIllinois Financial's board as an
independent contractor to act as financial adviser to BankIllinois Financial
with respect to the merger. KBW, as part of its investment banking business,
is continually engaged in the valuation of banking businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate
and other purposes. As specialists in the securities of banking companies,
KBW has experience in, and knowledge of, the valuation of banking
enterprises. In the ordinary course of its business as a broker-dealer, KBW
may, from time to time, purchase securities from, and sell securities to,
BankIllinois Financial and First Decatur and as a market maker in securities
KBW may from time to time have a long or short position in, and buy or sell,
debt or equity securities of BankIllinois Financial and First Decatur for
KBW's own account and for the accounts of its customers.
BankIllinois Financial and KBW have entered into an agreement dated
July 27, 1999 relating to the services provided by KBW in connection with the
merger. BankIllinois Financial has agreed to pay KBW, for the services
relating to the merger, a cash non-refundable financial advisory fee of
$50,000, paid upon the execution of the engagement agreement. In addition,
BankIllinois Financial agrees to pay KBW a one-time cash fee of $50,000 (the
"opinion fee"), payable on delivery of the fairness opinion. Upon closing of
the transaction, BankIllinois Financial will pay to KBW a cash fee
("contingent fee") equal to $400,000. The opinion fee shall, to the extent it
is paid, be credited against the contingent fee. Pursuant to KBW's engagement
agreement, BankIllinois Financial also agreed to reimburse KBW for reasonable
out-of-pocket expenses and disbursements incurred in connection with its
retention and to indemnify KBW against certain liabilities, including
liabilities under the federal securities laws.
OPINION OF FIRST DECATUR'S FINANCIAL ADVISOR
ABN AMRO has acted as financial advisor to First Decatur in
connection with the merger. First Decatur selected ABN AMRO based on its
experience, expertise and familiarity with First Decatur and its business.
ABN AMRO is a nationally recognized investment-banking firm regularly engaged
in the valuation of businesses and securities in connection with mergers and
acquisitions, as well as initial and secondary offerings of securities and
valuations for other purposes.
In connection with ABN AMRO's engagement, First Decatur asked ABN
AMRO to evaluate the fairness of the First Decatur exchange ratio to First
Decatur's stockholders from a financial point of view. At the August 10,
1999, meeting of the First Decatur board to evaluate the merger, ABN AMRO
orally informed the First Decatur board that ABN AMRO was prepared to deliver
a written opinion as to the fairness of the First Decatur exchange ratio upon
execution of the merger agreement. On August 12, 1999, the date of the merger
agreement, ABN AMRO rendered a written opinion to the First Decatur board
that, as of August 12, 1999, and based upon and subject to various matters
set forth in its opinion, the First Decatur exchange ratio was fair to First
Decatur's stockholders from a financial point of view. ABN AMRO confirmed
this opinion by delivery of an updated written opinion dated as of the date
of this document (the "ABN AMRO Opinion"). In delivering the ABN AMRO
Opinion, ABN AMRO updated selected analyses it performed in connection with
its August 12, 1999 opinion, and reviewed the assumptions on which those
analyses were based and the factors considered in connection with those
analyses.
First Decatur did not impose any limitations upon the scope of
investigation or procedures followed by ABN AMRO in connection with its
opinions, nor did First Decatur give ABN AMRO any specific instructions in
45
<PAGE>
connection with its opinions. The First Decatur exchange ratio was determined
through arm's-length negotiations between First Decatur and BankIllinois
Financial, although First Decatur was advised during merger negotiations by
ABN AMRO.
We have attached the full text of the ABN AMRO Opinion, which
describes the assumptions made, matters considered and limitations on the
review undertaken in connection with that opinion, as Appendix C to this
document. We incorporate the ABN AMRO Opinion into this description by
reference. You should read the entire ABN AMRO Opinion.
The ABN AMRO Opinion is directed to the First Decatur board. It
relates only to the fairness from a financial point of view of the First
Decatur exchange ratio to the holders of First Decatur common stock. The ABN
AMRO Opinion does not address First Decatur's underlying business decision to
enter into the merger, nor does it constitute a recommendation to you as a
First Decatur stockholder as to how you should vote at the special meeting.
The summary of the ABN AMRO Opinion in this document is qualified in its
entirety by reference to the full text of that opinion.
In arriving at the ABN AMRO Opinion, ABN AMRO, among other things:
- reviewed certain publicly available financial statements and other
business information relating to First Decatur and BankIllinois
Financial;
- reviewed certain internal financial statements and other financial
and operating data concerning First Decatur and BankIllinois Financial
prepared by their respective managements;
- analyzed certain financial projections prepared by the respective
managements of First Decatur and BankIllinois Financial (Projections
provided by BankIllinois assumed an annual earnings growth of
approximately 14%. That growth rate assumption factored into several of
the analyses performed. In addition, other growth rates and assumptions
were used as part of the analytical process.);
- discussed the past and current operations and financial condition and
the prospects of First Decatur and BankIllinois Financial, including
information relating to certain strategic, financial and operational
benefits anticipated from the merger, with senior executives of First
Decatur and BankIllinois Financial, respectively;
- reviewed the reported prices and trading activity for First Decatur
common stock and BankIllinois Financial common stock, respectively;
- compared the financial and operating performance of First Decatur and
BankIllinois Financial and the prices and trading activity of First
Decatur common stock and BankIllinois Financial common stock with that
of certain other publicly traded companies that ABN AMRO considered to
be relevant;
- compared the proposed financial terms of the merger with the
financial terms, to the extent publicly available, of certain other
transactions that ABN AMRO considered to be relevant;
- reviewed the pro forma impact of the merger on First Decatur;
- reviewed and discussed with the senior managements of First Decatur
and BankIllinois Financial the strategic rationale for, and the
potential benefits of, the merger;
- participated in discussions and negotiations among representatives of
First Decatur and BankIllinois Financial and their respective financial
and legal advisors;
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<PAGE>
- reviewed the draft merger agreement and certain related documents;
and
- performed such other analyses and examinations and considered such
other matters as ABN AMRO deemed appropriate.
In connection with its engagement, and at the request of the First
Decatur board, ABN AMRO approached and held discussions with certain third
parties to solicit indications of interest in a possible transaction with
First Decatur.
In rendering the ABN AMRO Opinion, ABN AMRO assumed and relied upon
the accuracy and completeness of the financial and other information reviewed
by it. ABN AMRO did not obtain, nor did it make or assume responsibility for
undertaking, any independent verification of this information. ABN AMRO
assumed that financial data were reasonably prepared on bases reflecting the
best currently available estimates and judgment of First Decatur and
BankIllinois Financial as to the future financial performance of each
company. ABN AMRO also relied upon, without independent verification, the
assessment by management of First Decatur and BankIllinois Financial of the
strategic and other benefits expected to result from the merger. In addition,
ABN AMRO assumed, with the consent of the First Decatur board, that the
merger will be consummated in accordance with the terms set forth in the
merger agreement, which was negotiated on the basis of a merger-of-equals,
and it includes, among other things, that the merger will be accounted for as
"pooling of interest" business combination in accordance with generally
accepted accounting principles as applied in the United States and will be
treated as a tax-free reorganization or exchange, each pursuant to the
Internal Revenue Code of 1986, as amended.
The following is a summary of the material financial analyses ABN
AMRO employed and summarized for the First Decatur board of directors in
connection with its August 10, 1999, review and written opinion addressed to
the First Decatur board dated August 12, 1999. In these analyses, ABN AMRO
compared the value obtained by multiplying the First Decatur exchange ratio
(1.638) times the most-recent reported closing market price per share of
BankIllinois Financial common stock ($23.75) to arrive at a proposed
transaction value of $38.90 per First Decatur share. Based on the $38.90
transaction value per First Decatur share, ABN AMRO calculated the aggregate
transaction value, including the conversion of stock options as contemplated
in the merger agreement, as $108.4 million.
(a) STOCK TRADING HISTORY. ABN AMRO compared the proposed
transaction value to First Decatur's recent stock price and related 52-week
trading range. This examination showed that the $38.90 proposed transaction
value per First Decatur share was a 34.1% premium over First Decatur's
most-recent closing market price per share of $29.00. ABN AMRO presented a
graph of the daily closing market prices per share of First Decatur common
stock over the prior year, indicating a range in price per share from a low
of $25.00 to a high of $29.50. ABN AMRO noted that the proposed transaction
value was 55.6% and 31.9%, respectively, above these 52-week high and low
closing market prices. This graph also showed what the proposed transaction
value per share would have been over the prior year by multiplying the daily
closing market prices per share of BankIllinois Financial common stock by the
First Decatur exchange ratio. ABN AMRO noted that the closing market price of
BankIllinois Financial common stock ranged from a low of $21.50 per share to
a high of $25.00 per share over the prior year, resulting in hypothetical
transaction values in the range of $35.22 to $40.95 per First Decatur common
share.
(b) COMPARABLE MARKET-VALUE ANALYSIS. ABN AMRO compared selected
pricing multiples and ratios implied by the proposed transaction value, First
Decatur's most-recent closing market price and BankIllinois Financial's
most-recent market price to corresponding current trading-market multiples and
ratios of comparable companies ABN AMRO deemed relevant to both First Decatur
and BankIllinois Financial.
ABN AMRO selected publicly traded banking companies based in the
Midwestern United States with total assets ranging from $300 million to $1.2
billion. The selected comparable companies included the following eleven
organizations:
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<PAGE>
- ANB Corp., Muncie, IN; (2)
- Belmont Bancorp., Bridgeport, OH; (3)
- Community Financial Corp., Olney, IL; (4)
- Franklin Bank, NA, Southfield, MI; (5)
- German American Bancorp, Jasper, IN; (6)
- Gold Banc Corp., Leawood, KS;
- Oak Hill Financial, Inc., Jackson, OH;
- Princeton National Bancorp, Princeton, IL;
- State Financial Services Corp, Hales Corner, WI;
- S.Y. Bancorp, Louisville, KY; and
- UnionBancorp Inc., Ottawa, IL.
ABN AMRO calculated the selected pricing multiples and ratios
summarized below using market price data as of July 27, 1999, and financial
data as of the then-most-recently available financial statement date, and for
the twelve-month period then ended. This analysis indicated that the proposed
transaction value was:
- a 18.1x multiple of latest-twelve month earnings as compared to
market multiples of 14.6x for First Decatur, 19.0x for BankIllinois
Financial and 17.3x at the median for the comparable companies with a
range of 11.7x to 20.6x;
- a 16.8x multiple of latest-twelve months tangible core earnings as
compared to market multiples of 14.1x for First Decatur, 19.0x for
BankIllinois Financial and 13.6x at the median for the comparable
companies with a range of 11.9x to 17.5x;
- a 17.5x multiple of earnings estimated for the current fiscal year as
compared to market multiples of 12.4x for First Decatur, 17.7x for
BankIllinois Financial and 13.4x at the median for the comparable
companies with a range of 11.1x to 16.9x;
- a 203.0% ratio of book value as compared to market ratios of 148.9%
for First Decatur, 214.5% for BankIllinois Financial and 150.2% at the
median for the comparable companies with a range of 93.5% to 230.8%;
and
- a 204.0% ratio of tangible book value as compared to market ratios of
149.4% for First Decatur, 214.5% for BankIllinois Financial and 139.2%
at the median for the comparable companies with a range of 73.7% to
261.1%.
In the preceding analysis, "tangible core earnings" excludes
intangible-asset amortization expense and non-recurring income and expense
items and "estimated earnings" are those prepared by securities analysts
following each company.
(c) STAND-ALONE DISCOUNTED CASH FLOW ANALYSES. ABN AMRO performed
discounted cash flow ("DCF") analyses of First Decatur and BankIllinois
Financial, each on a "stand-alone" basis, assuming each company would
continue to operate as an independent, publicly traded company and without
giving effect to the proposed transaction between them. In preparing the DCF
analyses, ABN AMRO studied First Decatur's and BankIllinois Financial's
historical and present earnings and growth patterns and then projected for
each company income statements and balance sheets for a five-year period
using a series of assumptions pertaining to growth, interest margins, loan
losses, non-interest income and expenses, income taxes and cash dividends.
Prior to completion, ABN AMRO reviewed and discussed each of the financial
projections and underlying assumptions with First Decatur's management. To
estimate projected net cash flows, ABN AMRO adjusted projected earnings for
certain non-cash expense items such as loan loss provisions and certain
stock-related benefit plans. ABN AMRO calculated the terminal value (the
value of cash flows following the five-year projection period) based upon a
growth-adjusted perpetuity of the fifth projected year's estimated net cash
flow. To estimate the present value of the five years' projected net cash
flows and terminal value, ABN AMRO used a discount rate of 12.5%.
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<PAGE>
The First Decatur DCF analysis yielded imputed values for First
Decatur common stock ranging from $29.00 to $37.92 per share with a midpoint
of $32.88 per share, compared to the transaction value of $38.90 per share.
The BankIllinois Financial DCF analysis yielded an imputed value for
BankIllinois Financial common stock of $23.26 per share, compared to its
most-recent closing market price of $23.75 per share.
(d) CHANGE-OF-CONTROL TRANSACTIONS ANALYSIS. ABN AMRO compared
selected pricing multiples and ratios implied by the transaction value to
corresponding merger-and-acquisition multiples and ratios observed in
change-of-control transactions ABN AMRO deemed to be relevant to the merger.
ABN AMRO noted that the merger was negotiated as a merger-of-equals
transaction and that change-of-control transactions are not necessarily
relevant to an evaluation of a merger-of-equals transaction.
ABN AMRO selected change-of-control transactions announced since
January 1, 1998 involving Midwestern banking companies in which the acquired
company had total assets ranging from $300 million to $700 million. The
fifteen selected change-of-control transactions included (the acquirer is the
first name and is in italics followed by the seller):
- OLD NATIONAL Bancorp., Evansville, IN--ANB
Corporation, Muncie, IN; (2)
- FIFTH THIRD BANCORP, Cincinnati, OH--Peoples Bank
Corporation, Indianapolis, IN; (3)
- WELLS FARGO & CO., San Francisco, CA--CA--Eastern
Heights Bank, Maplewood, MN; (4)
- INDEPENDENT BANK CORP., Ionia, MI--Mutual Savings
Bank, Bay City, MI; (5)
- ANCHOR BANCORP WISCONSIN, Madison, WI--FCB
Financial Corp, Oshkosh, WI;
- FIRST FINANCIAL BANCORP., Hamilton, OH--Sand
Ridge Financial Corp., Highland, IN;
- UNION PLANTERS CORP., Memphis, TN--Southeast
Bancorp, Corbin, KY;
- CITIZENS BANCSHARES, INc., Salineville,
OH--Ohio Bank, Findlay, OH;
- ASSOCIATED BANC-CORP, Green Bay, WI--WI--Riverside
Acquisition Corp, Minneapolis, MN; (6)
- FIFTH THIRD BANCORP, Cincinnati, OH--Emerald
Financial Corp., Strongsville, OH; (7)
- BREMER FINANCIAL CORP,. St. Paul, MN--Dean
Financial Services Inc., St. Paul, MN;
- MERCANTILE BANCORP, St. Louis, MO--First
Financial Bancorp, Iowa City, IA;
- MERCANTILE BANCORP, St. Louis, MO--Financial
Services Corp. of the Midwest., Rock Island, IL;
- ST. PAUL BANCORP, Chicago, IL--Beverly
Bancorp., Tinley Park, IL; and
- NORWEST CORP., Minneapolis, MN--MidAmerica
Bancshares, Newport, MN.
ABN AMRO calculated several change-of-control pricing multiples and
ratios using financial data for First Decatur and each acquired company as of
the most-recent financial-statement date available at the time the
transaction was announced, and for the twelve-month period then ended. ABN
AMRO used change-of-control transaction prices and related multiples and
ratios as of the respective transaction-announcement dates for each of the
change-of-control transactions. This analysis indicated that the proposed
transaction value was:
- a 18.1x multiple of latest-twelve month earnings as compared to a
change-of-control multiple of 24.0x at the median for the
change-of-control transactions with a range of 20.6x to 27.5x;
- a 203.0% ratio of book value as compared to a change-of-control ratio
of 299.3% at the median for the change-of-control transactions with a
range of 179.8% to 377.7%;
- a 204.0% ratio of tangible book value as compared to a
change-of-control ratio of 338.5% at the median for the
change-of-control transactions with a range of 223.2% to 417.8%;
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<PAGE>
- a 277.8% capital-equivalent ratio of tangible book value as compared
to a capital-equivalent change-of-control ratio of 387.3% at the median
for the change-of-control transactions with a range of 297.9% to
494.3%; and
- a 34.1% premium to First Decatur's day-earlier closing market price
as compared to a change-of-control premium of 36.7% at the median for
the change-of-control transactions with a range of 12.4% to 57.7%.
In the preceding analysis, "capital-equivalent" ratios adjust both
transaction value and tangible book value for the "excess" capital of each
company relative to a 7% tangible equity-to-assets ratio.
ABN AMRO observed that in three of the five preceding comparisons,
the transaction value in the proposed merger with BankIllinois Financial was
below the range of the change-of-control transactions. In this regard, ABN
AMRO noted that the merger was negotiated as a merger-of-equals transaction
and that these comparisons are therefore not necessarily relevant to an
evaluation of the merger. ABN AMRO also noted that many of the
change-of-control transactions were announced during periods of time when
financial stock and change-of-control prices were generally at higher levels
than on August 10, 1999. ABN AMRO calculated that the median decrease in
transaction value from the announcement date to the closing date of the stock
change-of-control transactions was 13.4%.
(e) MERGER-OF-EQUALS TRANSACTIONS ANALYSIS. ABN AMRO compared
selected pricing multiples and ratios implied by the transaction value to
corresponding merger multiples and ratios observed in merger-of-equals
transactions ABN AMRO deemed to be relevant to First Decatur's proposed
merger with BankIllinois Financial. ABN AMRO noted that the merger was
negotiated as a merger-of-equals transaction rather than as a
change-of-control transaction.
ABN AMRO selected merger transactions announced since January 1,
1996, which the banking companies involved identified as a merger-of-equals
transactions and which involved total assets ranging from $200 million to $2
billion. The fourteen selected merger-of-equals transactions included:
- Sharon Bancshares, Sharon, TN-First Northwest Bancshares,
Kenton, TN; (2)
- Coal City Corp., Coal City, IL-Avondale, Financial, IL; (3)
- Fidelity Financial of Ohio, Cincinnati,
OH-OH-Glenway Financial Corp., Cincinnati, OH; (4)
- Santa Barbara Bancorp, Santa Barbara,
CA-CA-Pacific Capital Bancorp, Salinas, CA; (5)
- Hudson Chartered Bancorp, Lagrangeville,
NY-Progressive Bank, Fishkill, NY; (6)
- Heritage Bancorp, Inc., Pottsville, PA-BCB
Financial Services Corp., Reading, PA; (7)
- First Jermyn Corp., Jermyn, PA-Upper Valley
Bancorp, Olyphant, PA;
- Indiana United Bancorp, Greensburg, IN-PTC
Bancorp, Brookville, IN;
- FCB Financial Corp., Neenah, WI--OSB Financial
Corp., Oshkosh, WI;
- Pinnacle Financial, St. Joseph, MI-Indiana
Federal Corp., Valparaiso, IN;
- Hinsdale Financial Corp., Hinsdale, IL-Liberty
Financial Corp., Chicago, IL;
- Mid-Peninsula Bancorp, Palo Alto, CA-Cupertino
National Bank, Cupertino, CA;
- Northern Illinois Financial, Wauconda,
IL-Premier Financial Services, Freeport, IL; and
- CU Bancorp, Encino, CA-Home Interstate
Bancorp, Signal Hill, CA.
ABN AMRO calculated several merger pricing multiples and ratios
using financial data for First Decatur and each acquired company as of the
most-recent financial-statement date available at the time the transaction
was announced, and for the twelve-month period then ended. ABN AMRO used
merger-of-equals transaction prices and related multiples and ratios as of
the respective transaction-announcement dates for each of the
merger-of-equals transactions. This analysis indicated that proposed
transaction value was:
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- a 18.1x multiple of latest-twelve month earnings as compared to a
merger-of-equals multiple of 18.8x at the median for the
merger-of-equals transactions with a range of 11.8x to 28.3x;
- a 203.0% ratio of book value as compared to a merger-of-equals ratio
of 158.1% at the median for the merger-of-equals transactions with a
range of 63.2% to 210.1%;
- a 204.0% ratio of tangible book value as compared to a
merger-of-equals ratio of 171.7% at the median for the merger-of-equals
transactions with a range of 63.2% to 228.1%; and
- a 277.8% capital-equivalent ratio of tangible book value as compared
to a capital-equivalent merger-of-equals ratio of 179.8% at the median
for the merger-of-equals transactions with a range of 60.4% to 246.7%.
(f) PRO FORMA ANALYSIS. ABN AMRO prepared a pro forma analysis
illustrating the estimated effects on selected historical and projected
financial data of First Decatur using the projected financial data for each
of First Decatur and BankIllinois Financial derived from the DCF analyses
described previously after giving effect to the First Decatur exchange ratio.
In preparing the analysis, ABN AMRO assumed that (1) $2 million of after-tax
merger benefits, estimated by First Decatur's and BankIllinois Financial's
managements, would be phased in over a two-year period; (2) the combined
company's stock price would be 15.8x pro forma diluted earnings per share;
and (3) the combined company's cash dividend would be 27% of pro forma
diluted earnings per share. The pro forma analysis indicated that, as
compared to First Decatur's stand-alone historical and projected financial
data, the proposed merger with BankIllinois Financial:
- would have increased First Decatur's historical stock price per share
by 37.5% and could increase First Decatur's projected stock prices per
share by a range of 32.5% to 52.3%;
- would have increased First Decatur's historical diluted earnings per
share by 11.4% and could increase First Decatur's projected diluted
earnings per share by a range of 4.8% to 20.5%;
- would have decreased First Decatur's historical book value per share
by 0.8% and could affect First Decatur's projected book value per share
in the range of negative 2.8% to positive 5.8%; and
- would have increased First Decatur's historical cash dividend per
share by 26.9% and could increase First Decatur's projected cash
dividend per share by a range of 3.2% to 20.5%.
(g) CONTRIBUTION ANALYSIS. ABN AMRO analyzed the relative
contribution to selected pro forma financial measures that First Decatur and
BankIllinois Financial would be making to the combined company and compared
this to the pro forma ownership of the outstanding common stock of the
combined company of First Decatur stockholders and BankIllinois Financial
stockholders. ABN AMRO noted that based on the First Decatur exchange ratio
of 1.638 and the number of shares of First Decatur and BankIllinois Financial
common stock outstanding at March 31, 1999, First Decatur stockholders would
own approximately 44.8%, and BankIllinois Financial stockholders would own
approximately 55.2%, of the outstanding common stock of the combined company.
ABN AMRO compared these percentages to the following pro forma financial data:
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<TABLE>
<CAPTION>
RELATIVE CONTRIBUTION PERCENTAGE
--------------------------------
BANKILLINOIS
FIRST DECATUR FINANCIAL
--------------------------------
<S> <C> <C>
Total assets at March 31, 1999.................................. 44.6% 55.4%
Total deposits at March 31, 1999................................ 46.2 53.8
Common stockholders' equity at March 31, 1999................... 46.7 53.2
Earnings for the three-month period ended March 31, 1999........ 44.8 55.2
Earnings projected for the year ended March 31, 2000............ 45.0 55.0
Market capitalization at March 31, 1999......................... 37.1 62.9
</TABLE>
(h) COMPARATIVE RETURN-TO-INVESTOR ANALYSIS. Using projected
financial data derived from the DCF analyses described previously and
assumptions regarding potential future change-of-control prices for each of
First Decatur and BankIllinois Financial, ABN AMRO calculated the
hypothetical investment returns First Decatur stockholders could achieve over
a five-year period under a number of scenarios. This analysis indicated
hypothetical compound annual rates of return to First Decatur stockholders of:
- 8.8 % assuming First Decatur would remain indefinitely a stand-alone,
independent entity;
- 16.5% assuming First Decatur would remain a stand-alone, independent
entity and then engage in a change-of-control transaction at the end of
the five-year analysis period;
- 18.0% assuming First Decatur would consummate the proposed
merger-of-equals transaction with BankIllinois Financial based upon the
First Decatur exchange ratio and the combined company would remain
indefinitely an independent company; and
- 23.5% assuming First Decatur would consummate the proposed
merger-of-equals transaction with BankIllinois Financial based upon the
First Decatur exchange ratio and the combined company would engage in a
change-of-control transaction at the end of the five-year analysis
period.
The preparation of a fairness opinion is a complex process and is
not necessarily susceptible to partial analysis or summary description.
Selecting portions of the analyses or of the summary set forth above, without
considering the analyses as a whole, could create an incomplete view of the
process underlying ABN AMRO's Opinion. In arriving at its fairness
determination, ABN AMRO considered the results of all such analyses. No
company or transaction used in the above analyses as a comparison is
identical to First Decatur or the merger. The analyses were prepared solely
for the purposes of ABN AMRO's Opinion provided to First Decatur's board as
to the fairness of the First Decatur exchange ratio to be received by the
stockholders of First Decatur pursuant to the merger and do not purport to be
appraisals or necessarily reflect the prices at which businesses or
securities actually may be sold. Analyses based upon projections of future
results are not necessarily indicative of actual future results, which may be
significantly more or less favorable than suggested by such analyses. Because
such analyses are inherently subject to uncertainty, being based upon
numerous factors or events beyond the control of the parties or ABN AMRO,
none of First Decatur, ABN AMRO or any other person assumes responsibility if
future results are materially different from those projected.
ABN AMRO acts as a market maker in BankIllinois Financial common
stock. In the ordinary course of ABN AMRO's business, ABN AMRO and its
affiliates may actively trade securities of First Decatur and BankIllinois
Financial for their own account and for the accounts of customers, and may,
therefore, at any time hold a long or short position in such securities.
First Decatur retained ABN AMRO as its financial advisor by letter
agreement dated June 18, 1998. Pursuant to the terms of the engagement
letter, upon delivery of ABN AMRO's Opinion, First Decatur paid ABN AMRO a
$50,000 fairness opinion fee. Upon consummation of the merger, First Decatur
will pay ABN AMRO a cash financial advisory fee equal to 0.90% of the
transaction value, as defined in the engagement letter, reduced by the
fairness opinion fee previously paid. Further, in the engagement letter,
First Decatur agreed to
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reimburse ABN AMRO for its reasonable out-of-pocket expenses incurred in
connection with its engagement, and to indemnify ABN AMRO against certain
liabilities, including liabilities under securities laws.
EFFECTIVE TIME OF THE MERGER
Subject to the conditions to our respective obligations to complete
the merger, the merger will become effective when a certificate and articles
of merger reflecting the merger become effective with the Secretary of State
of the State of Delaware and the Secretary of State of the State of Illinois,
respectively. Unless we agree otherwise, we will each use reasonable efforts
to cause the merger to become effective on the last business day of the
calendar month in which all of the following conditions are satisfied:
- the effective date of the last consent of any regulatory authority
having authority over and approving or exempting the merger (taking
into account any required waiting period); and
- the satisfaction or waiver in writing of all of the conditions
provided for in the merger agreement.
We anticipate that the merger will become effective during the first
quarter of 2000. However, delays could occur.
We cannot assure that the necessary stockholder and regulatory
approvals of the merger will be obtained or that other conditions precedent
to the merger can or will be satisfied. Either of our boards of directors may
terminate the merger agreement if the merger is not completed by July 1,
2000, unless it is not completed because of the willful breach of the merger
agreement by the party seeking termination. See "-- Conditions to Completion
of the Merger" and "-- Waiver, Amendment and Termination."
DISSENTERS' RIGHTS
You have the right to dissent from the merger and to demand and
obtain cash payment of the appraised value of your shares of BankIllinois
Financial or First Decatur common stock under the circumstances described
below. The appraised value that you obtain for your shares by dissenting may
be less than, equal to or greater than the value of the Main Street common
stock you will receive under the merger agreement. If you fail to comply with
the procedural requirements of Section 262 of the Delaware General
Corporation Law, you will lose your right to dissent and seek payment of the
appraised value of your shares.
The following is a summary of Section 262, which specifies the
procedures applicable to dissenting stockholders. This summary is not a
complete statement of the law regarding your right to dissent under Delaware
law, and if you are considering dissenting, we urge you to review the
provisions of Section 262 carefully. The text of Section 262 is attached to
this joint proxy statement-prospectus as Appendix D, and we incorporate that
text into this joint proxy statement-prospectus by reference. Among other
matters, you should be aware of the following:
- to be entitled to dissent and seek appraisal, you must hold shares of
BankIllinois Financial or First Decatur common stock on the date you
make the demand required under Delaware law, you must continually hold
those shares until the merger has been completed, you must not vote in
favor of the merger and you must otherwise comply with the requirements
of Section 262;
- before the special meeting at which you will be asked to vote on the
merger, you must deliver a written notice that states your identity and
your intent to demand appraisal;
- BankIllinois Financial stockholders must send this written notice to
Teresa M. Marsh, Secretary, BankIllinois Financial Corporation, 100
West University Avenue, Champaign, Illinois 61820, and First Decatur
stockholders, to Pete P. Grosso, Secretary, First Decatur Bancshares,
Inc., 130 North Water
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Street, Decatur, Illinois 62523 (you should be aware that simply
voting against the merger is not a demand for appraisal rights);
- within ten days after the effective time of the merger, Main Street
will notify all of the dissenting BankIllinois Financial and First
Decatur stockholders who have complied with Section 262 and who have
not voted in favor of the merger;
- within 120 days after the effective time of the merger, Main Street
or any stockholder who has complied with the requirements of Section
262 may file a petition in the Delaware Court of Chancery demanding a
determination of the value of the stock of the dissenting stockholders;
- the Court of Chancery will determine which dissenting stockholders
complied with the requirements of Section 262 and are entitled to
appraisal rights;
- the Court of Chancery will then appraise the shares, determining
their fair value exclusive of any value arising from the expectation of
the merger, together with a fair rate of interest, if any, to be paid
on the appraised fair value; the Court of Chancery will consider all
relevant factors in determining the fair value and the fair interest
rate (if any);
- the Court of Chancery will then direct Main Street to pay the fair
value of the dissenting shares, together with any interest, to the
stockholders entitled to payment; payment will be made when the
stockholder surrenders the certificates to Main Street;
- the costs of the proceeding for appraising the fair value may be
determined by the court and the court may require the parties to bear
the costs in any manner the court believes to be equitable;
- if you dissent from the merger, you will not be entitled to vote your
shares of BankIllinois Financial or First Decatur common stock for any
purpose or to receive dividends or other distributions (other than
dividends or other distributions payable to stockholders of record at a
date prior to the effective time of the merger); and
- you may withdraw your demand for appraisal and accept the shares of
Main Street common stock provided for in the merger agreement at any
time within 60 days after the effective time of the merger.
DISTRIBUTION OF MAIN STREET STOCK CERTIFICATES
At or around the time of the merger, you will be mailed a letter of
transmittal and instructions for the exchange of the certificates
representing your shares of BankIllinois Financial or First Decatur common
stock for certificates representing shares of Main Street common stock.
BankIllinois Financial's subsidiary bank will serve as the exchange agent.
YOU SHOULD NOT SEND IN YOUR CERTIFICATES UNTIL YOU RECEIVE A LETTER
OF TRANSMITTAL AND INSTRUCTIONS.
After you surrender to the exchange agent your certificates for
shares of BankIllinois Financial or First Decatur common stock with a
properly completed letter of transmittal, the exchange agent will mail you a
certificate or certificates representing the number of shares of Main Street
common stock to which you are entitled and a check for the amount to be paid
in lieu of any fractional share (without interest), if any, together with all
undelivered dividends or distributions in respect of the shares of Main
Street common stock (without interest thereon), if any. Main Street will not
be obligated to deliver the consideration to you as a former BankIllinois
Financial or First Decatur stockholder until you have surrendered your
BankIllinois Financial or First Decatur common stock certificates.
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Whenever a dividend or other distribution is declared by Main Street
on Main Street common stock with a record date after the date on which the
merger became effective, the declaration will include dividends or other
distributions on all shares of Main Street common stock that may be issued in
the merger. However, Main Street will not pay any dividend or other
distribution that is payable after the effective date of the merger to any
former BankIllinois Financial or First Decatur stockholder who has not
surrendered his or her BankIllinois Financial or First Decatur common stock
certificate until the holder surrenders the certificate. If any BankIllinois
Financial or First Decatur stockholder's common stock certificate has been
lost, stolen or destroyed, the exchange agent will issue the shares of Main
Street common stock and any cash in lieu of fractional shares upon the
stockholder's submission of an affidavit claiming the certificate to be lost,
stolen or destroyed by the stockholder of record and the posting of a bond in
such amount as Main Street may reasonably direct as indemnity against any
claim that may be made against Main Street with respect to the certificate.
At the time the merger becomes effective, the stock transfer books
of BankIllinois Financial and First Decatur will be closed to their
respective stockholders and no transfer of shares of BankIllinois Financial
or First Decatur common stock by any stockholder will thereafter be made or
recognized. If certificates for shares of BankIllinois Financial or First
Decatur common stock are presented for transfer after the merger becomes
effective, they will be canceled and exchanged for shares of Main Street
common stock, a check for the amount due in lieu of fractional shares, if
any, and any undelivered dividends on the Main Street common stock.
CONDITIONS TO COMPLETION OF THE MERGER
We are required to complete the merger only after the satisfaction
of various conditions. These conditions include:
- the holders of a majority of the outstanding shares of each of
BankIllinois Financial and First Decatur common stock must adopt the
merger agreement;
- we must receive all required regulatory approvals;
- the employment agreements of each of our officers identified in the
merger agreement must be amended in such a way so as to eliminate the
need for either BankIllinois Financial or First Decatur to pay
severance benefits to these officers as a result of the completion of
the merger;
- we must receive a written opinion as to the tax-free nature of the
merger;
- we must receive a written opinion that the merger can be accounted
for as a pooling of interests;
- each of us must receive a written opinion of the other company's
counsel regarding enforceability of the merger agreement, proper
authorization of the merger and other corporate and related matters;
- the Securities and Exchange Commission must declare the registration
statement registering the shares of Main Street common stock to be
issued to our stockholders in the merger effective under the Securities
Act of 1933, as amended;
- our representations and warranties in the merger agreement must be
accurate as of the date of the merger agreement and as of the date the
merger becomes effective;
- we perform all agreements and comply with all covenants contained in
the merger agreement;
- we must receive all other consents that may be required to complete
the merger or to prevent any default under any contract or permit that
would be reasonably likely to have, individually or in the aggregate, a
material adverse effect on either of us;
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- the absence of any law or order or any action taken by any court,
governmental or regulatory authority of competent jurisdiction
prohibiting or restricting the merger or making it illegal or that
would otherwise be expected to have a material adverse effect on
either of us;
- the absence of any other event since the date of the merger agreement
that would be reasonably likely to have a material adverse effect on
either of us;
- we must each receive an opinion from our own financial advisor to the
effect that the merger is fair to our stockholders from a financial
point of view;
- each of us must furnish to the other agreements from those persons we
believe may be deemed to be our affiliates; and
- other conditions must be satisfied, including the receipt of various
certificates from our officers.
Neither of us can assure our stockholders as to when or if all of
the conditions to the merger can or will be satisfied or waived by the party
permitted to do so. If the merger is not completed by July 1, 2000, either of
our boards of directors may terminate the merger agreement and abandon the
merger. See "-- Waiver, Amendment and Termination."
REGULATORY APPROVALS
We must receive certain regulatory approvals before the merger can
be completed. There is no assurance that these regulatory approvals will be
obtained or when they will be obtained.
It is a condition to the completion of the merger that we receive
all necessary regulatory approvals to the merger, without the imposition by
any regulator of any condition that, in the reasonable judgment of either us,
would be materially adverse to the success of Main Street. There can be no
assurance that the regulatory approvals of the merger will not contain terms,
conditions or requirements that would have such an impact.
We are not aware of any material governmental approvals or actions
that are required to complete the merger, except as described below. If any
other approval or action is required, we have agreed that we will also seek
this approval or action.
The merger is subject to the prior approval of the Federal Reserve,
pursuant to Section 3 of the Bank Holding Company Act. Factors considered by
the Federal Reserve in evaluating the merger are discussed under the heading
"Certain Regulatory Considerations-General." The merger may not be completed
until the 30th day following the date of the Federal Reserve approval,
although the Federal Reserve may reduce that period to 15 days. During this
period, the United States Department of Justice is given the opportunity to
challenge the transaction on antitrust grounds. The commencement of any
antitrust action would stay the effectiveness of the approval of the
agencies, unless a court of competent jurisdiction specifically ordered
otherwise.
The merger is also considered to be a change in control of
BankIllinois Financial's state bank subsidiary and the two state bank
subsidiaries of First Decatur. Under the Illinois Banking Act, these changes
of control require the approval of the Illinois Commissioner of Banks and
Real Estate. The Illinois Banking Act provides that the Illinois Commissioner
shall not approve a change in control of an Illinois state bank unless the
Commissioner finds that:
- the general character of the proposed management of the organization
that seeks to gain control of the state bank is such as to assure
reasonable promise of successful, safe and sound operation;
- depositors' interests will not be jeopardized by the proposed
transaction and adequate provision has been made for all liabilities of
the bank to be acquired;
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- the future earnings prospects after the proposed change are
favorable;
- any prior involvement by the person proposing to gain control of the
bank or by the proposed management personnel with any other financial
institution, whether as stockholder, director, officer or customer, was
conducted in a safe and sound manner; and
- any acquisition by a bank holding company is authorized under the
Illinois Bank Holding Company Act.
WAIVER, AMENDMENT AND TERMINATION
To the extent permitted by law, our boards of directors may agree in
writing to amend the merger agreement, whether before or after their
respective stockholders have approved the merger agreement. In addition,
before or at the time the merger becomes effective, either of us, or both,
may waive any default in the performance of any term of the merger agreement
by the other or may waive or extend the time for the compliance or
fulfillment by the other of any of its obligations under the merger
agreement. Either of us may also waive any of the conditions precedent to our
obligations under the merger agreement, unless a violation of any law or
governmental regulation would result. To be effective, a waiver must be in
writing and signed by one of our duly authorized officers.
At any time before the merger becomes effective, our boards of
directors may mutually agree to terminate the merger agreement. In addition,
either of us may terminate the merger agreement in the following
circumstances:
- if any representation or warranty of a party contained in the merger
agreement is inaccurate, the inaccuracy would reasonably be expected to
have a material adverse effect on Main Street after the completion of
the merger and if the inaccuracy is such that, in the reasonable
opinion of the party who did not make such representation or warranty,
cannot be cured before July 1, 2000;
- if a material breach by the other party of any covenant or agreement
contained in the merger agreement cannot be or has not been cured
within 30 days after the giving of written notice to the breaching
party of such breach (provided that the breach was not as a result of
the failure by the terminating party to perform or comply with any of
its material obligations under the merger agreement);
- if there has occurred since the date of the merger agreement, any
change in any law, rule or regulation, or there has been any decision
or action by any court or governmental agency, that could reasonably be
expected to prevent or delay completion of the merger beyond July 1,
2000;
- if any consent of any regulatory authority required to complete the
merger or other transactions contemplated by the merger agreement has
been denied by final nonappealable action, or if any application or
other filing has been withdrawn at the request of any regulatory
authority and a petition for rehearing shall not have been granted or
an amended application has not been accepted for filing within sixty
days after this withdrawal;
- if the merger is not completed by midnight on July 1, 2000 (provided
that a party shall not have the right to terminate for this reason if
the failure to complete the merger by this time resulted from this
party's failure to perform or comply with any of its obligations,
exclusive of representations and warranties, under the merger
agreement);
- if the other party violates the covenant against dealing with any
third party with respect to an alternative transaction with this third
party instead of the merger;
- if the other party breaches its agreement to call a stockholders'
meeting to vote on the adoption of the merger agreement or fails to
recommend that its stockholders vote to adopt the merger agreement;
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- subject to certain prior notice requirements and the obligation to
pay a special termination fee that are contained in the merger
agreement, if the party gives notice that it has received an offer from
a third party with respect to an alternative transaction that the
party's board of directors has determined in good faith is more
favorable to its stockholders than the merger; and
- subject to the obligation to pay a special termination fee, if the
fairness opinion provided to the party by its financial advisor is
withdrawn prior to the completion of the merger.
If the merger is terminated, the merger agreement will become void
and have no effect, except that certain provisions of the merger agreement,
including those relating to the obligation to share some expenses and
maintain the confidentiality of certain information obtained, will survive.
Any termination may trigger the obligation of a party to pay certain expenses
and termination fees to the other party. See "-- Expenses and Termination
Fees."
CONDUCT OF BUSINESS PENDING THE MERGER
The merger agreement obligates each of us to conduct our business
diligently before the merger becomes effective only in the usual, regular and
ordinary course. It also imposes limitations on the operations, expenditures
and other actions of each of us and our respective bank subsidiaries. These
items are listed in Articles 6 and 7 of the merger agreement which is
attached as Appendix A to this joint proxy statement-prospectus. The merger
agreement authorizes each of us to declare and pay regular quarterly cash
dividends on our respective common stock in accordance with our past
practices in an amount not to exceed $0.09 per share per quarter in the case
of BankIllinois Financial and in an amount not to exceed $0.15 per share per
quarter in the case of First Decatur. The merger agreement contemplates that
the merger will be timed to occur at such a time that each of our
stockholders will not fail to receive a dividend during a quarterly period,
nor will they receive a dividend on both their BankIllinois Financial or
First Decatur common stock and the Main Street common stock they receive in
the merger during the same quarterly period.
Each of us has also agreed that neither of us nor any of our
respective representatives will directly or indirectly solicit, negotiate or
enter into an alternative transaction with an outside third party, or furnish
any non-public information concerning ourselves that we are not legally
obligated to furnish, except in each case to the extent necessary to comply
with the fiduciary duties of our respective board of directors and as advised
by our counsel.
We have also agreed not to take any action that would materially and
adversely affect our ability to obtain any consents required for the merger
or prevent the merger from qualifying as a tax-free reorganization under the
Internal Revenue Code (see "-- Material Federal Income Tax Consequences of
the Merger"), prevent the merger from being able to be accounted for as a
pooling of interests or materially and adversely affect our ability to
perform our respective obligations under the merger agreement.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
We specifically negotiated and named in the merger agreement those
individuals who will serve as Main Street's directors and executive officers
following the merger. For initial formation purposes only, Gregory B. Lykins
and John W. Luttrell were named as Main Street's initial directors, and the
current officers appointed by the initial directors were John W. Luttrell,
Chairman; Gregory B. Lykins, Vice Chairman; Van A. Dukeman, President; and
Teresa Marsh, Secretary. These initial directors and officers will be
replaced prior to the completion of the merger with the following directors
and executive officers:
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MAIN STREET DIRECTORS
---------------------
(BANKILLINOIS FINANCIAL DESIGNEES) (FIRST DECATUR DESIGNEES)
David J. Downey John W. Luttrell*
Van A. Dukeman Larry D. Haab
Gregory B. Lykins Fred L. Kenney
August C. Meyer, Jr. Tom Sloan
Gene A. Salmon Phillip C. Wise
George T. Shapland H. Gale Zacheis
Roy V. Van Buskirk
* Also serves as Chairman of the Board, to be succeeded by Mr. Lykins
within three years after the completion of the merger.
MAIN STREET EXECUTIVE OFFICERS
Gregory B. Lykins Vice Chairman of the Board
Van A. Dukeman President and Chief Executive Officer
Phillip C. Wise Executive Vice President
David B. White Executive Vice President, Treasurer and
Chief Financial Officer
Teresa M. Marsh Corporate Secretary
The merger will not change the present management team or board of
directors of the subsidiaries of BankIllinois Financial or First Decatur.
Information concerning the management of BankIllinois Financial and First
Decatur is included in the documents incorporated by reference in this joint
proxy statement-prospectus. See "Where You Can Find More Information." For
additional information regarding the interests of certain persons in the
merger, see "-- Interests of Certain Persons in the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
GENERAL. Certain members of our respective management and boards of
directors may be deemed to have certain interests in the merger that are in
addition to their interests as stockholders of BankIllinois Financial or
First Decatur generally. Each of our boards of directors was aware of these
interests and considered them, among other matters, in approving the merger
agreement on behalf of our respective company. See "--Management and
Operations After the Merger."
BANKILLINOIS FINANCIAL EMPLOYMENT AGREEMENTS. BankIllinois Financial
is a party to a number of employment agreements with executive officers of
both BankIllinois Financial and its bank subsidiary. Each of these agreements
provides that the officer will receive a severance payment if he or she is
terminated after a "change of control" of BankIllinois Financial. In the
employment agreements with Messrs. Dukeman and Lykins, and in the absence of
any agreement to the contrary, the merger would constitute a change of
control triggering the payment of these severance amounts. However, pursuant
to the merger agreement, BankIllinois Financial is obligated to amend these
agreements to provide that the merger will not constitute a change of control
and require the making of these severance payments. The merger would not
constitute a change of control in any of BankIllinois Financial's other
employment agreements.
FIRST DECATUR EMPLOYMENT AGREEMENTS. First Decatur is a party to a
number of employment agreements with executive officers of both First Decatur
and its bank subsidiaries. Each of these agreements provides that the officer
will receive a severance payment if he is terminated after a "change of
control" of First Decatur. In the absence of any agreement to the contrary,
the merger would constitute a change of control triggering the payment of
these severance amounts. However, pursuant to the merger agreement, First
Decatur is
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obligated to amend all of these agreements, except for the agreement with
John W. Luttrell, to provide that the merger will not constitute a change of
control and require the making of these severance payments.
First Decatur is a party to an employment agreement with Mr.
Luttrell dated as of June 1, 1987. The agreement provides for a minimum base
salary of $210,000 and entitles Mr. Luttrell to receive certain other
employee benefits and to participate in incentive bonus and stock option
plans. The agreement provided for an initial term through December 31, 1989,
and successive three-year periods thereafter. The current term expires on
December 31, 2001, unless sooner terminated in accordance with its terms.
The employment agreement provides that if Mr. Luttrell's employment
is terminated for cause, Mr. Luttrell will be provided his salary through the
date of termination. If his employment is terminated without cause or if his
employment is involuntarily terminated due to a permanent disability, Mr.
Luttrell is entitled to receive a severance payment equal to two times his
then current annual salary. If Mr. Luttrell's employment is terminated within
two years following a change in control of First Decatur's national bank
subsidiary, he is entitled to receive a lump sum cash payment equal to two
times his then current salary. A change in control is defined in Mr.
Luttrell's employment agreement to mean the acquisition of 40% or more of the
voting control of First Decatur's national bank subsidiary by any one person
or group or a change in the majority of the bank's board of directors
following a successful tender offer, merger or other business combination.
The merger will constitute a change of control under Mr. Luttrell's
agreement. If Mr. Luttrell's employment were terminated within two years
following completion of the merger, the benefits payable to Mr. Luttrell
under his employment agreement would total approximately $420,000.
We anticipate that Mr. Wise will enter into an employment agreement
after the effectiveness of the merger with Main Street to serve as an
Executive Vice President. The employment agreement will have an initial term
of one year and, at the end of its initial term as well as any subsequent
term, will automatically extended for one year until either Main Street or
Mr. Wise gives written notice to the contrary. The agreement will terminate
upon Mr. Wise's death, disability, discharge for cause or a change of control.
Mr. Wise's initial annual salary under the agreement will be
$135,000. The agreement will also provide for bonuses, benefits and severance
payments in the event Main Street terminates employment without cause. The
amount of the severance payment Mr. Wise would be entitled to receive in such
a case will equal the sum of the then current base salary, the most recent
performance bonus and the value of contributions under retirement and
employee benefit plans that would have been made through the term of the
agreement.
The agreement will also provide that Mr. Wise will not be allowed to
compete within a 50-mile radius of Decatur, Illinois for a period of one year
following the termination of his employment agreement. The agreement
will also require Main Street to indemnify and to advance certain legal
expenses to Mr. Wise to the maximum extent permitted by law.
STOCK OPTIONS. Each of us has granted stock options to our
directors, executive officers and other employees under stock option plans.
As a result of the merger, which will constitute a "change of control" under
these stock option plans, all outstanding, non-vested stock options of
BankIllinois will accelerate and will become exercisable immediately
following completion of the merger. First Decatur has no non-vested stock
options. All outstanding options that are not exercised prior to the merger
will be converted into options to purchase shares of Main Street common
stock, as described on page 30.
FIRST DECATUR DIRECTOR DEFERRED FEE PLAN. Instead of receiving cash
payments for attendance at board and committee meetings, non-employee
directors of First Decatur are entitled to participate in a deferred
directors compensation program first adopted on June 30, 1994. Under the
plan, a non-employee director may defer director fees into a fixed income
fund maintained by the trust department of First Decatur's national bank
subsidiary or, alternatively, may receive "phantom stock units" instead.
First Decatur maintains a record of the number of phantom stock units each
director acquires through the deferral of fees. Phantom stock units are
purchased at a price equal to the market price of First Decatur's common
stock based upon the most recent
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purchase of its own stock by First Decatur. Each participating director's
account is increased by an amount equal to any cash dividends, stock dividend
or stock split.
Effective as of the merger, no further deferrals of director fees
shall be permitted to the plan. Payment of director fees delivered prior to
the merger will continue to be subject to the terms and conditions of the
plan and shall be paid in the form and at the time provided by the plan. As
of December 31, 1999 the value of all plan accounts was approximately
$265,511.
INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE. Each of us has
agreed to indemnify the present and former directors, officers, employees and
agents of our respective companies and their subsidiaries against certain
liabilities arising out of actions or omissions occurring at or prior to the
time the merger becomes effective to the fullest extent permitted under
Delaware law, our certificates of incorporation and bylaws and any indemnity
agreements previously entered with these directors, officers, employees or
agent. These obligations will be assumed by Main Street upon completion of
the merger.
We have agreed to cooperate to obtain after the completion of the
merger directors' and officers' liability insurance coverage for the officers
and directors of Main Street, to the extent this is economically practicable.
We have also agreed to cooperate to try to obtain liability insurance
coverage for the directors and officers of BankIllinois Financial and First
Decatur for a period of not less than three years after the completion of the
merger and with respect to actions taken by them prior to this completion.
ACCOUNTING TREATMENT
It is anticipated that the merger will be accounted for as a pooling
of interests transaction under generally accepted accounting principles as
applied in the United States. Under this method of accounting, our respective
stockholders will be deemed to have combined their existing common stock
interests by virtue of the exchange of BankIllinois Financial common stock
and First Decatur common stock for Main Street common stock. Accordingly, the
book value of the assets, liabilities and stockholders' equity of each of us,
as reported on our respective consolidated balance sheets, will be carried
over to the consolidated balance sheet of Main Street, and no goodwill will
be created. Main Street will be able to include in its consolidated income
the consolidated income of both of us for the entire fiscal year in which the
merger occurs.
It is a condition to the completion of the merger that we receive an
opinion to the effect that Main Street may properly account for the merger as
a pooling of interests.
EXPENSES AND TERMINATION FEES
Subject to the special circumstances described below, we will each
pay our own expenses in connection with the merger, including filing,
registration and application fees, printing fees and fees and expenses of our
own financial or other consultants, investment bankers, accountants and
counsel, except that each of us will bear and pay one-half of the printing
costs incurred in connection with the registration statement and this joint
proxy statement-prospectus. The same agreement with respect to the payment of
expenses will be in effect if we mutually agree to terminate the merger
agreement or if either of us terminates the merger agreement because the
merger has not been completed by July 1, 2000.
If, however, the merger agreement is terminated under the special
circumstances described below, either of us will be obligated to pay all or
part of the other's fees and expenses in connection with the merger and also
perhaps a special termination fee depending upon the reason for the
termination of the merger agreement and subsequent occurrences.
Either of us will be obligated to pay to the other its fees and
expenses in connection with the merger up to a maximum of $500,000, and pay
an additional termination fee of $1,500,000, if the merger agreement is
terminated because of the breach by one of us of any of our representations,
warranties or covenants contained in the merger agreement or if one of us
terminates the merger agreement because our financial advisor has
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withdrawn its fairness opinion. In addition, if within one year after the
termination of the merger agreement, the breaching company or the company
that terminated the agreement because its financial advisor withdrew its
fairness opinion enters into another agreement to be acquired by an outside
third party or group, then the breaching company or the company that had its
fairness opinion withdrawn must pay an additional special termination fee to
the other of $1,500,000. However, if the breach or breaches by either of us
of any of our representations or warranties (but not covenants) were
unintentional, even though the other company chose to terminate the merger
agreement because of them, then the breaching company must only pay the
other's fees and expenses in connection with the merger up to a maximum of
only $250,000 and will not be required to pay any additional termination fees
regardless of any subsequent occurrences.
Subject to prior notice to the other party, either of us may
terminate the merger agreement because we have received an offer from an
unrelated third party that our board of directors has concluded is more
favorable to our stockholders. In this case, the company terminating the
agreement must pay to the other its fees and expenses in connection with the
merger up to a maximum of $500,000, and in place of any other payment
required by the merger agreement, a special termination fee of $4,000,000.
RESALES OF MAIN STREET COMMON STOCK
Main Street common stock to be issued to our stockholders in the
merger will be registered under the Securities Act of 1933, as amended. All
shares of Main Street common stock received by our stockholders in the merger
will be freely transferable after the merger by our stockholders who are not
considered to be "affiliates" of either of us. "Affiliates" generally are
defined as persons or entities who control, are controlled by or are under
common control with either of us at the time of our respective special
meetings (generally, executive officers, directors and 10% or greater
stockholders).
Rule 145 promulgated under the Securities Act restricts the sale of
Main Street common stock received in the merger by affiliates of BankIllinois
Financial or First Decatur and certain of their family members and related
entities. Under the rule, during the first calendar year after the merger
becomes effective, affiliates of First Decatur or BankIllinois Financial may
publicly resell the Main Street common stock they receive in the merger but
only within certain limitations as to the amount of Main Street common stock
they can sell in any three-month period and as to the manner of sale. After
the one-year period, affiliates of BankIllinois Financial or First Decatur
who are not affiliates of Main Street may resell their shares without
restriction. Main Street must continue to satisfy its reporting requirements
under the Securities Exchange Act of 1934, as amended, in order for
affiliates to resell, under Rule 145, shares of Main Street common stock
received in the merger. Affiliates would also be permitted to resell Main
Street common stock received in the merger pursuant to an effective
registration statement under the Securities Act of 1933, as amended, or an
available exemption from the registration requirements. This joint proxy
statement-prospectus does not cover any resales of Main Street common stock
received by persons who may be deemed to be affiliates of BankIllinois
Financial or First Decatur.
Pursuant to the merger agreement, our affiliates signed an agreement
to the effect that they will not offer or sell or otherwise dispose of any of
the shares of Main Street common stock issued to them in the merger in
violation of the Securities Act. These agreements provide further than none
of our respective affiliates will offer, sell or otherwise dispose of Main
Street common stock or their shares of BankIllinois Financial or First
Decatur common stock during any period in which such transfer would
disqualify the merger from pooling of interests accounting treatment. The
pooling of interests prohibitions on transfer under these agreements will end
when Main Street has published an earnings statement covering 30 days of
post-merger operations.
Subject to the terms of the merger agreement, each of our respective
affiliates has agreed that he or she will use his or her best efforts to
cause the merger agreement to be adopted by the stockholders of BankIllinois
Financial or First Decatur, as the case may be, and completed according to
its terms. They have further agreed not to solicit, negotiate, discuss,
accept or approve any offers or proposals from or enter into any agreement
with, any third party concerning a tender offer, merger, consolidation, share
exchange or other business combination involving BankIllinois Financial or
First Decatur or concerning the offer, sale or disposition of any material
assets of BankIllinois Financial or First Decatur.
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EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS
In the merger, our stockholders will exchange their shares of
BankIllinois Financial and First Decatur stock for shares of Main Street. We
are each Delaware corporations governed by Delaware law and our respective
certificates of incorporation and bylaws. Main Street is an Illinois
corporation governed by Illinois law and Main Street's articles of
incorporation and bylaws. There are significant differences between the
rights of our stockholders and the rights of Main Street stockholders. The
following is a summary of the principal differences between the current
rights of our stockholders and those of Main Street's stockholders.
The following summary is not intended to be complete and is
qualified in its entirety by reference to the Delaware General Corporation
Law and the Illinois Business Corporation Act as well as our respective
certificates of incorporation and bylaws, and the articles of incorporation
and the bylaws of Main Street.
ANTI-TAKEOVER PROVISIONS GENERALLY
Main Street's articles of incorporation and bylaws contain certain
provisions designed to assist the Main Street board of directors in playing a
role if any group or person attempts to acquire control of Main Street so
that the Main Street board of directors can further protect the interests of
Main Street and its stockholders under the circumstances. These provisions
may help the Main Street board of directors determine that a sale of control
is in the best interests of Main Street's stockholders or enhance the Main
Street board of directors' ability to maximize the value to be received by
the stockholders upon a sale of control of Main Street.
Although Main Street's management believes that these provisions are
beneficial to Main Street's stockholders, they may also tend to discourage
some takeover bids. As a result, Main Street's stockholders may be deprived
of opportunities to sell some or all of their shares at prices that represent
a premium over prevailing market prices. On the other hand, defeating
undesirable acquisition offers can be a very expensive and time-consuming
process. To the extent that these provisions discourage undesirable
proposals, Main Street may be able to avoid those expenditures of time and
money.
These provisions may also discourage open market purchases by a
company that may desire to acquire Main Street. Those purchases may increase
the market price of Main Street common stock temporarily, and enable
stockholders to sell their shares at a price higher than they might otherwise
obtain. In addition, these provisions may decrease the market price of Main
Street common stock by making the stock less attractive to persons who invest
in securities in anticipation of price increases from potential acquisition
attempts. The provisions may also make it more difficult and time consuming
for a potential acquiror to obtain control of Main Street through replacing
the board of directors and management. Furthermore, the provisions may make
it more difficult for Main Street's stockholders to replace the board of
directors or management, even if a majority of the stockholders believe that
replacing the board of directors or management is in the best interests of
Main Street. Because of these factors, these provisions may tend to
perpetuate the incumbent board of directors and management.
Main Street's articles of incorporation and bylaws also contain
certain anti-takeover provisions which are described below. These provisions
may discourage or prevent tender or exchange offers by a corporation or group
that intends to use the acquisition of a substantial number of shares of Main
Street to initiate a takeover culminating in a merger or other business
combination. These provisions may also have the effect of making the removal
of current management more difficult.
AUTHORIZED CAPITAL STOCK
MAIN STREET. Main Street is authorized to issue 1,000 shares of
common stock, of which 1,000 shares were issued and outstanding as of the
date of this document. Pursuant to the merger agreement, Main Street will
amend and restate its articles of incorporation prior to the closing of the
merger. Main Street will increase the number of shares of its authorized
common stock to 15,000,000 shares, and authorize an additional class of no
par value preferred stock. The Main Street board of directors may authorize
the issuance of additional shares of
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common stock without further action by its stockholders, unless applicable
laws or regulations or a stock exchange on which Main Street's capital stock
is listed requires stockholder action.
Main Street may issue, without a stockholder vote, shares of its
preferred stock, in one or more classes or series, with voting, conversion,
dividend and liquidation rights as it specifies in its articles. The Main
Street board of directors may determine, among other things, the distinctive
designation and number of shares comprising a series of preferred stock, the
dividend rate or rates on the shares of such series and the relation of such
dividends to the dividends payable on other classes of stock, whether the
shares of such series will be convertible into or exchangeable for shares of
any other class or series of Main Street capital stock, the voting powers if
any of such series, and any other preferences, privileges and powers of such
series.
In the event of the voluntary or involuntary liquidation,
dissolution, distribution of assets or winding up of Main Street, holders of
preferred stock will have priority over holders of common stock.
The authority to issue additional shares of common stock or
preferred stock provides Main Street with the flexibility necessary to meet
its future needs without the delay resulting from seeking stockholder
approval. The authorized but unissued shares of common stock and preferred
stock may be issued from time to time for any corporate purpose, including,
stock splits, stock dividends, employee benefit and compensation plans,
acquisitions and public or private sales for cash as a means of raising
capital. The shares could be used to dilute the stock ownership of persons
seeking to obtain control of Main Street. The sale of a substantial number of
shares of voting stock to persons who have an understanding with Main Street
concerning the voting of such shares or the distribution or declaration of a
dividend of shares of voting stock (or the right to receive voting stock) to
its stockholders, may have the effect of discouraging or increasing the cost
of unsolicited attempts to acquire control of Main Street.
BANKILLINOIS FINANCIAL. BankIllinois Financial is authorized to
issue up to 6,500,000 shares of common stock, of which 5,546,055 shares were
issued and outstanding as of September 30, 1999, and 300,000 shares of
preferred stock, of which no shares were issued or outstanding as of
September 30, 1999.
BankIllinois Financial's board of directors has substantially the
same powers with respect to the issuance of common stock and preferred stock
as does Main Street's board of directors described above.
BankIllinois Financial has a share purchase rights plan ("Rights
Plan") and under this Rights Plan distributed a dividend of one one-hundredth
of a share of preferred stock purchase right ("Preferred Share Right") for
each outstanding share of BankIllinois Financial common stock. Under the
Rights Plan, one Preferred Share Right was automatically distributed for each
share of BankIllinois Financial common stock. The Preferred Share Rights may
deter coercive takeover tactics and encourage persons interested in
potentially acquiring control of BankIllinois Financial to treat each
stockholder on a fair and equal basis. Each Preferred Share Right trades on
the same basis with the share of BankIllinois Financial common stock to which
it relates until the occurrence of certain events. Upon a potential change in
control of BankIllinois Financial, the Preferred Share Rights would separate
from BankIllinois Financial common stock and each holder of a Preferred Share
Right (other than the potential acquiror) would be entitled to purchase
equity securities of Main Street at prices below their market value.
BankIllinois Financial has authorized 100,000 shares of Series I preferred
stock for issuance under the Preferred Share Rights Plan. No shares have been
issued as of the date of this joint proxy statement-prospectus. Until a
Preferred Share Right is exercised, the holder has no rights as a stockholder
of BankIllinois Financial. BankIllinois Financial has amended the Rights Plan
to provide that the merger agreement and the merger with First Decatur and
Main Street will not make the Preferred Share Rights exercisable.
BankIllinois Financial will also terminate the Rights Plan immediately before
the completion of the merger. Neither Main Street nor First Decatur has any
share purchase rights plan.
FIRST DECATUR. First Decatur is authorized to issue up to 5,000,000
shares of common stock, of which 2,764,970 shares were issued and outstanding
as of September 30, 1999, and 200,000 shares of preferred stock, of which no
shares were issued or outstanding as of September 30, 1999.
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First Decatur's board of directors has substantially the same powers
with respect to the issuance of common stock and preferred stock as does Main
Street's board of directors described above.
AMENDMENT OF ARTICLES AND BYLAWS
MAIN STREET. Main Street may amend its articles in any manner
permitted by Illinois law. The Illinois Business Corporation Act provides
that a corporation's articles may be amended by holders of two-thirds or more
of the shares entitled to be voted on an amendment, unless the corporation's
articles provide otherwise. Main Street's articles provide that they may be
amended by holders of a majority of the shares of Main Street common stock
entitled to be voted on an amendment.
Main Street's board of directors may adopt, amend or repeal Main
Street's bylaws by a majority vote of the entire board of directors. The
bylaws may also be amended or repealed by action of Main Street's
stockholders.
BANKILLINOIS FINANCIAL. BankIllinois Financial may amend its
certificate of incorporation in any manner permitted by Delaware law. The
Delaware General Corporation Law provides that amendments to a corporation's
certificate must be approved by holders of a majority of the issued and
outstanding shares of a corporation's voting stock. However, BankIllinois
Financial's certificate provides that, until the annual meeting of its
stockholders in 2002, any amendment of its terms must be approved by 66 2/3%
of all the directors at a time when there are no vacancies existing in the
BankIllinois Financial board of directors. Furthermore, without regard to the
year, holders of at least 80% of all the outstanding BankIllinois Financial
common stock must vote to approve any amendments relating to the following
provisions of BankIllinois Financial's certificate: the number,
classification, term, election, replacement, removal and nomination of
directors; the vote required of directors to approve certain transactions;
the procedure for informal stockholder action; how special meetings are
called; the procedure for amending bylaws; provisions requiring the
indemnification of directors and officers and the limitation of the liability
of directors; and the provisions restricting certain business transactions
between BankIllinois Financial and an Interested Party (as defined in the
certificate).
Prior to the 2002 annual meeting of BankIllinois Financial's
stockholders, amendments to BankIllinois Financial's bylaws must be approved
by 66 2/3% of all of the directors of BankIllinois Financial at a time when
there are no vacancies on the BankIllinois Financial board. After the 2002
annual meeting, amendments to BankIllinois Financial's bylaws may be adopted
by the approval of a majority of directors then in office and also by the
affirmative vote of the holders of at least 80% of BankIllinois Financial's
voting stock entitled to voted on an amendment.
FIRST DECATUR. First Decatur may amend its certificate of
incorporation in any manner permitted by Delaware law. The Delaware General
Corporation Law provides that amendments to a corporation's certificate must
be approved by holders of a majority of the issued and outstanding shares of
a corporation's voting stock. First Decatur's certificate provides that it
may be amended by holders of a majority of the shares of First Decatur's
common stock entitled to voted on an amendment if the amendment was
recommended to the stockholders by the affirmative vote of three-quarters of
the members of the board of directors then in office and at a time when no
person owns 15% or more of the outstanding First Decatur common stock.
If, however, there is a person who owns 15% or more of the
outstanding First Decatur common stock, then amendments of certain provisions
of the certificate of incorporation, such as those governing the
establishment of rights and preferences for preferred stock, pre-emptive
rights for stockholders and additional voting requirements in the case of
transactions with a 15% stockholder, must be approved by two-thirds of the
outstanding shares of First Decatur common stock that are not owned by any
person who owns 15% or more of First Decatur's outstanding common stock.
First Decatur's board of directors may adopt, amend or repeal First
Decatur's bylaws by a majority vote of the entire board of directors. The
bylaws may also be amended or repealed by action of First Decatur's
stockholders.
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DIRECTOR REMOVAL
MAIN STREET. Main Street's articles provide that a director may be
removed by the stockholders only for "cause" and by stockholder action at an
annual meeting or at a special meeting of stockholders called for that
purpose. Cause is defined in the articles as the conviction of a director by
a court of a felony, or a court judgment that a director is liable for gross
negligence or willful misconduct in the performance of his or her duty to the
corporation, provided that this judgment is no longer appealable. The purpose
of this provision is to prevent a majority stockholder from circumventing the
classified board system by removing directors and filling the vacancies with
new individuals selected by that stockholder.
This provision may have the effect of impeding efforts to gain
control of the board of directors by anyone who obtains a controlling
interest in BankIllinois Financial common stock.
BANKILLINOIS FINANCIAL. BankIllinois Financial's certificate
provides that a director may be removed from office at any time, but only for
cause and only by the vote of the holders of at least 80% of BankIllinois
Financial common stock that is eligible to be voted in the election of
directors.
FIRST DECATUR. Neither First Decatur's certificate or its bylaws
contain any special provisions regarding the removal of a director from
office. Delaware law provides that any director or the entire board of
directors of First Decatur may be removed, with or without cause, by the
holders of a majority of the shares of First Decatur common stock then
entitled to vote at any election of directors.
LIMITATIONS ON DIRECTOR LIABILITY
MAIN STREET. Main Street's articles provide that a director will not
be personally liable to Main Street or its stockholders for monetary damages
resulting from the director's breach of his or her duty of care to the
fullest extent permitted by the Illinois Business Corporation Act. The
Illinois Business Corporation Act permits a corporation to limit a director's
personal liability to this extent, except:
- for any breach of a director's duty of loyalty to Main Street or its
stockholders;
- for actions, or the failure to take actions, not in good faith or
which involve intentional misconduct or a knowing violation of law;
- for liability of directors for the unlawful payment of dividends or
unlawful stock repurchases; or
- for any transactions from which the director derived any improper
personal benefit.
BANKILLINOIS FINANCIAL AND FIRST DECATUR. Each of our certificates
provides substantially the same limitation on the personal liability of its
directors as do Main Street's articles.
INDEMNIFICATION
MAIN STREET. Under Illinois law, directors, officers, employees and
agents of a corporation may be indemnified against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement under
certain circumstances. In certain types of actions, suits or proceedings,
whether they are civil, criminal, administrative or investigative (other than
an action by, or in the right of the corporation, I.E., a "derivative
action"), such individuals may be indemnified against individual liability if
he or she acted in good faith and in a manner he or she reasonably believed
to be in, or not opposed to, the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful. A similar standard applies in the
case of derivative actions, except that indemnification only extends to
expenses (including attorneys' fees) resulting from the defense or settlement
of such actions. In the case of derivative actions, Illinois law requires
court approval before there can be any indemnification when the person
seeking
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indemnification has been found liable to the corporation. To the extent that
a person otherwise eligible to be indemnified is successful on the merits or
otherwise of any claim or defense, indemnification is required for expenses
(including attorneys' fees) actually and reasonably incurred.
Expenses incurred by a director, officer, employee or agent of a
corporation in defending a proceeding may be paid by the corporation in
advance of the final disposition of the proceeding upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to
repay the amount of any advance if it shall ultimately be determined that he
or she is not entitled to be indemnified by the corporation as authorized by
Illinois law.
Main Street's articles and bylaws provide for the indemnification of
its directors and officers, and of any person serving at the request of Main
Street as a director, officer or partner of another enterprise, to the
fullest extent permitted by Illinois law.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers
or persons controlling Main Street under the provisions described above, Main
Street has been informed that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act, and is therefore unenforceable.
BANKILLINOIS FINANCIAL AND FIRST DECATUR. We are each subject to the
provisions of Delaware law with respect to indemnification. Delaware and
Illinois law are substantially the same in this area, and our respective
certificates contain substantially the same provisions governing
indemnification as do Main Street's articles.
SPECIAL MEETINGS OF STOCKHOLDERS
MAIN STREET. Special meetings of Main Street's stockholders may be
called at any time for any purpose or purposes permitted by law and Main
Street's articles by the President, a majority of the board of directors or
the holders of not less than one-fifth of the shares entitled to vote on the
matter.
BANKILLINOIS FINANCIAL. A special meeting of BankIllinois
Financial's stockholders may only be called by BankIllinois Financial's
Chairman of the Board or President or by a majority of the entire
BankIllinois Financial board of directors.
FIRST DECATUR. A special meeting of First Decatur's stockholders may
only be called by First Decatur's President or by a majority of the entire
First Decatur board of directors, or a majority of First Decatur's
stockholders.
STOCKHOLDER NOMINATIONS AND PROPOSALS
MAIN STREET. Main Street's bylaws provide that notice of any
stockholder nomination of a director or proposal of a stockholder that is to
be presented at any annual meeting of stockholders must be sent so it is
received by Main Street not less than 120 days in advance of the anniversary
date of the proxy statement issued in connection with the previous year's
annual meeting. At any special meeting, the only business that may be
conducted is the business specified in the notice calling that special
meeting.
BANKILLINOIS FINANCIAL. BankIllinois Financial's articles provide
that a stockholder's notice of nomination of a director for elections at an
annual meeting must generally be delivered to BankIllinois Financial not less
than 40 nor more than 70 days in advance of the first anniversary of the
preceding year's annual meeting. Stockholder nominations for directors to be
elected at a special meeting at which directors are to be elected are timely
generally if they are delivered to BankIllinois Financial no later than
fourteen days after the earlier of the date on which public disclosure of the
date of the special meeting and the nominees proposed by the BankIllinois
Financial board is first made or the date on which notice of the special
meeting is mailed to stockholders.
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FIRST DECATUR. First Decatur's bylaws do not contain any special
provisions governing notice of any stockholder nomination or proposal for new
business to be conducted at any annual meeting.
BUSINESS COMBINATIONS
MAIN STREET. Subject to contrary provisions in a corporation's
articles, the Illinois Business Corporation Act provides that a corporation
may engage in any merger, consolidation or a sale or lease of all or
substantially all of its assets if such transaction is approved by the
corporation's board of directors and ratified by the vote of holders of
two-thirds or more of the corporation's issued and outstanding shares of
voting stock. Main Street's articles provide that holders of only a majority
of Main Street common stock must approve this type of transaction.
BANKILLINOIS FINANCIAL. Subject to different approvals for certain
transactions described below, BankIllinois Financial's certificate provides
that, until the annual meeting of stockholders to be held in 2002, the
adoption of an agreement of merger, consolidation or the sale of
substantially all of BankIllinois Financial's assets or the dissolution or
liquidation (or revocation thereof) of BankIllinois Financial must be
approved by a 66 2/3% vote of the entire board when there are no vacancies
existing on the board.
BankIllinois Financial's certificate also provides that certain
extraordinary transactions with an Interested Party (a person or company,
combined with its respective affiliates, that beneficially owns 10% or more
of the outstanding shares of BankIllinois Financial common stock) must be
approved by 80% of BankIllinois Financial's common stock other than that
owned by the Interested Party. In general, this special voting requirement
applies to any merger or consolidation of BankIllinois Financial with any
Interested Party, any issuance of BankIllinois Financial's securities to an
Interested Party or any transaction which has the effect of increasing the
proportionate interest of any Interested Party in the equity securities of
BankIllinois Financial or any liquidation or dissolution of BankIllinois
Financial proposed by or on behalf of an Interested Party.
This special 80% stockholder approval provision described above will
not apply to any business transaction if the transaction has been approved by
the BankIllinois Financial board of directors prior to the acquisition of
beneficial ownership of 10% or more of BankIllinois Financial's common stock
by the Interested Party; following the acquisition of beneficial ownership of
10% or more of BankIllinois Financial's common stock by the Interested Party,
the business transaction is approved by a resolution adopted by 66 2/3% of
those members of the BankIllinois Financial board who have no interest in the
business transaction; or certain fair price and procedural requirements are
met.
The provisions in BankIllinois Financial's certificate dealing with
Interested Parties may not be amended without the approval of 80% of
BankIllinois Financial's common stock that is not beneficially owned by any
Interested Party, unless such amendment is approved by a resolution adopted
by 66 2/3% of those members of BankIllinois Financial's board who are not an
Interested Party and do not have certain specified relationships with an
Interested Party, in which case only a majority vote of BankIllinois
Financial's common stock would be required to approve such amendment.
FIRST DECATUR. First Decatur's certificate also provides that
certain extraordinary transactions with an Interested Person (a person or
company, combined with its respective affiliates, that beneficially owns 15%
or more of the outstanding shares of First Decatur common stock) must be
approved by more than two-thirds of First Decatur's common stock other than
that owned by the Interested Person. In general, this special voting
requirement applies to any merger or consolidation of First Decatur with any
Interested Party, any sale, lease, exchange or other disposition with or to
an Interested Person of more than 10% of the going concern value of First
Decatur or any of its subsidiaries, or the sale or lease to an Interested
Party of any of First Decatur's assets having an aggregate fair market value
of more than $5 million in exchange for securities of the Interested Person.
This more than two-thirds stockholder approval provision described
above will not apply to any business transaction if the transaction has been
approved by the First Decatur board of directors prior to the acquisition of
beneficial ownership of 15% or more of First Decatur's common stock by the
Interested Party. Any
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extraordinary transaction with an Interested Person must also meet certain
fair price requirements unless it has been approved by more than two-thirds
of First Decatur's common stock other than that owned by the Interested
Person.
The provisions in First Decatur's certificate dealing with
Interested Persons may not be amended without the approval of more than
two-thirds of First Decatur's common stock other than that owned by the
Interested Person, unless such amendment is approved by a resolution adopted
by 75% of the members of First Decatur's board at a time when there is no
Interested Person. In this latter case, the amendment can be approved by the
affirmative vote of holders of a majority of First Decatur's outstanding
common stock.
DISSENTERS' RIGHTS OF APPRAISAL
MAIN STREET. Under the Illinois Business Corporation Act, a
stockholder is generally entitled to dissent from a corporate action and
obtain payment of the fair value of his or her shares in certain events.
These events generally include:
- mergers, share exchanges and sales or leases of substantially all of
the corporation's assets if the stockholder is entitled to vote on the
transaction;
- certain types of amendments of the corporation's articles that
materially and adversely affect a stockholder's rights; or
- other corporate actions taken pursuant to a stockholder vote, to the
extent the articles, bylaws or a resolution of the board of directors
provide for dissenters' rights (Main Street's articles and bylaws do
not provide for any such additional dissenters' rights).
BANKILLINOIS FINANCIAL AND FIRST DECATUR. Under Section 262 of the
Delaware General Corporation Law, each of our respective stockholders is
entitled to dissent from a merger or consolidation of the corporation and
receive payment of the fair value of their stock, as determined by the
Delaware Court of Chancery. Our respective stockholders do not have
dissenters' appraisal rights with respect to any transaction involving the
sale, lease or exchange of all or substantially all of the assets of their
respective corporation.
DIVIDENDS
MAIN STREET. Main Street's ability to pay dividends on its common
stock is governed by Illinois corporate law. Under Illinois corporate law,
dividends may be paid so long as after giving effect to their payment, the
corporation would not be insolvent and the corporation's net assets would not
be less than zero or less than the maximum amount necessary at the time of
the payment of the dividends to satisfy the preferential rights upon
dissolution to stockholders whose preferential rights are superior to those
receiving the distribution.
There are various statutory limitations that will limit the ability
of Main Street's bank subsidiaries to pay dividends to Main Street. See
"Certain Regulatory Considerations -- Payment of Dividends."
BANKILLINOIS FINANCIAL AND FIRST DECATUR. Our ability to pay
dividends on our common stock is governed by Delaware corporate law. Under
Delaware corporate law, unless there are restrictions in the corporation's
certificate of incorporation, dividends may be declared from the
corporation's surplus, or, if there is no surplus, from its net profits for
the fiscal year in which the dividend is declared and the preceding years.
Dividends may not be declared, however, if the corporation's capital is less
than the amount of all capital represented by the issued and outstanding
stock of all classes having a preference upon the distribution of assets.
Substantially all of the funds available for the payment by us come
from the operations of our respective bank subsidiaries. There are various
statutory limitations on the ability of these bank subsidiaries to pay
dividends to us. See "Certain Regulatory Considerations -- Payment of
Dividends."
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COMPARATIVE MARKET PRICES AND DIVIDENDS
BankIllinois Financial common stock is traded in the
over-the-counter market and transactions are reported on the OTC Bulletin
Board under the symbol "BIFC." First Decatur common stock is traded
sporadically in the over-the-counter market and transactions (when they
occur) are reported on the OTC Bulletin Board under the symbol "FDEC."
The following table sets forth, for the indicated periods, the high
and low closing sale prices for the BankIllinois Financial common stock and
First Decatur common stock as reported on the OTC Bulletin Board, and the
cash dividends declared per share on BankIllinois Financial common stock and
First Decatur common stock for the indicated periods. The stock prices and
dividend amounts have been restated to give effect to stock splits and stock
dividends. The stock prices do not include retail mark-ups, mark-downs or
commissions.
<TABLE>
<CAPTION>
BankIllinois Financial First Decatur
----------------------------------------- -----------------------------------------
Cash Cash
Price Range Dividends Price Range Dividends
----------- Declared -------------- Declared
High Low Per Share High Low Per Share
---- --- --------- ---- --- ---------
<S> <C> <C> <C> <C> <C> <C>
1997
First Quarter $14.25 $13.17 $0.00 $22.00 $19.50 $0.11
Second Quarter 15.42 14.39 0.00 20.50 20.00 0.11
Third Quarter 17.01 14.51 0.00 22.00 20.25 0.13
Fourth Quarter 19.73 16.33 0.07 20.75 20.75 0.13
--------- -------
Total $0.07 $0.48
========= =======
</TABLE>
<TABLE>
<CAPTION>
BankIllinois Financial First Decatur
----------------------------------------- -----------------------------------------
Cash Cash
Price Range Dividends Price Range Dividends
----------- Declared -------------- Declared
High Low Per Share High Low Per Share
---- --- --------- ---- --- ---------
<S> <C> <C> <C> <C> <C> <C>
1998
First Quarter $19.00 $16.84 $0.075 $28.3438 $21.50 $0.13
Second Quarter 21.43 19.05 0.075 28.00 25.00 0.13
Third Quarter 22.86 20.71 0.075 28.25 27.125 0.13
Fourth Quarter 22.14 20.48 0.075 29.00 27.00 0.13
------------- -------------
Total $0.300 $0.52
============= =============
1999
First Quarter $21.09 $20.52 $0.08 $27.50 $27.50 $.13
Second Quarter 24.38 21.79 0.08 29.50 27.50 .13
Third Quarter 24.63 22.75 0.08 36.00 27.50 .13
Fourth Quarter (through
November 18, 1999)
23.38 22.75 0.00 0.00
------------- -------------
Total $0.24 $0.39
============= =============
</TABLE>
On January 28, 2000, the last sale price of BankIllinois Financial
common stock as reported on the OTC Bulletin Board was $21.125, and the last
sale of First Decatur common stock of which management was aware was at $31.75
per share. The last sale of BankIllinois Financial common stock prior to the
public announcement of the merger, of which management was aware, occurred on
August 5, 1999, at a price of $23.75 per share, as reported on the OTC Bulletin
Board. The last sale of First Decatur common stock prior to August 12, 1999, of
which management was aware occurred on June 29, 1999, at a price of $28.00 per
share.
The holders of Main Street common stock will be entitled to receive
dividends when and if declared by the board of directors out of funds legally
available therefor. Although Main Street currently intends to continue to pay
quarterly cash dividends on its common stock, there can be no assurance what
Main Street's dividend
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<PAGE>
policy will be after completion of the merger. The declaration and payment of
dividends by Main Street will depend upon business conditions, operating
results, capital and reserve requirements and the Main Street board of
directors' consideration of other relevant factors.
Upon completion of the merger, Main Street will be a legal entity
separate and distinct from its subsidiaries and its revenues will depend in
significant part on the payment of dividends and management fees from its
subsidiary banks. Main Street's bank subsidiaries will be subject to certain
legal restrictions on the amount of dividends they are permitted to pay. See
"Certain Regulatory Considerations -- Payment of Dividends."
BUSINESS OF BANKILLINOIS FINANCIAL
BankIllinois Financial, headquartered in Champaign, Illinois, is a
bank holding company registered with the Federal Reserve under the Bank
Holding Company Act. BankIllinois Financial conducts a complete range of
commercial and personal banking activities and offers trust and investment
services through its wholly owned bank subsidiary, BankIllinois, which
operates eight banking offices in Champaign County, Illinois.
BankIllinois Financial is a Delaware corporation and was
incorporated on December 9, 1994, to become the bank holding company for its
bank subsidiary. As of September 30, 1999, BankIllinois Financial had total
consolidated assets of approximately $536.4 million, total consolidated loans
of approximately $344.2 million, total consolidated deposits of approximately
$394.6 million and total consolidated stockholders' equity of approximately
$62.5 million.
The principal executive offices of BankIllinois Financial are
located at 100 West University Avenue, Champaign, Illinois, and its telephone
number at such address is (217) 351-6500. Additional information with respect
to BankIllinois Financial and its subsidiary is included elsewhere in this
joint proxy statement-prospectus and in documents incorporated by reference
in this joint proxy statement-prospectus. See "Where You Can Find More
Information."
MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to executive compensation, various
benefit plans (including stock option plans), voting securities and the
principal holders thereof, certain relationships and related transactions and
other related matters as to BankIllinois Financial is incorporated by
reference or set forth in BankIllinois Financial's Annual Report on Form 10-K
for the year ended December 31, 1998, incorporated herein by reference.
Stockholders who wish to receive copies of such documents may contact
BankIllinois Financial at its address or telephone number indicated under
"Where You Can Find More Information."
BUSINESS OF FIRST DECATUR
First Decatur, headquartered in Decatur, Illinois, is a bank holding
company registered with the Federal Reserve under the Bank Holding Company
Act. First Decatur conducts a complete range of commercial and personal
banking activities and offers trust and investment services through its two
wholly owned bank subsidiaries, the First National Bank of Decatur, a
national banking association with its main office located in Decatur,
Illinois, and First Trust Bank of Shelbyville, an Illinois state bank with
its main office located in Shelbyville, Illinois. First Decatur's two bank
subsidiaries operate a total of eight banking offices in central Illinois.
First Decatur also owns a retail payment processing subsidiary, FirsTech,
Inc. FirsTech provides retail lockbox processing for organizations through
its processing center in Decatur, Illinois.
First Decatur is a Delaware corporation and was incorporated on
February 28, 1980, to become the bank holding company for its Decatur bank
subsidiary. As of September 30, 1999, First Decatur had total consolidated
assets of approximately $479.9 million, total consolidated loans of
approximately $244.1 million, total consolidated deposits of approximately
$375.5 million and total consolidated stockholders' equity of approximately
$54.2 million.
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<PAGE>
The principal executive offices of First Decatur are located at 130
North Water Street, Decatur, Illinois, and its telephone number at such
address is (217) 424-1111. Additional information with respect to First
Decatur and its subsidiaries is included elsewhere in this joint proxy
statement-prospectus and in documents incorporated by reference in this joint
proxy statement-prospectus. See "Where You Can Find More Information."
MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to executive compensation, various
benefit plans (including stock option plans), voting securities and the
principal holders thereof, certain relationships and related transactions and
other related matters as to First Decatur is incorporated by reference or set
forth in First Decatur's Annual Report on Form 10-K for the year ended
December 31, 1998, incorporated herein by reference. Stockholders who wish to
receive copies of such documents may contact First Decatur at its address or
telephone number indicated under "Where You Can Find More Information."
RECENT DEVELOPMENTS
On January 12, 2000, First Decatur reported that it estimates that
1999 earnings, excluding one-time charges, increased 12.7% to a record $6.323
million compared to $5.611 million in 1998, or $2.29 per share compared to
$1.95 in 1998. First Decatur took one-time charges of approximately $2.187
million net of income taxes which included non-cash expenses of approximately
$0.5 million associated with terminating First Decatur's defined benefit
retirement plan in anticipation of the merger and a non-cash liability of
approximately $1.7 million recorded in connection with unresolved
reconciliation differences involving FirsTech, both net of income taxes.
Giving effect to these non-recurring items, First Decatur's 1999 estimated
earnings were $4.136 million, or $1.50 per share.
CERTAIN REGULATORY CONSIDERATIONS
GENERAL
Each of us is a bank holding company registered with the Federal
Reserve, and Main Street has filed an application with the Federal Reserve
for approval to become a bank holding company as a result of the merger. As
such, each of us and our non-bank subsidiaries are subject, and the non-bank
subsidiaries of Main Street after the completion of the merger will be
subject, to the supervision, examination and reporting requirements of the
Bank Holding Company Act and the regulations of the Federal Reserve. The
following discussion summarizes the regulatory framework applicable to banks
and bank holding companies and provides certain specific information related
to us and Main Street. All of the general information related to the
regulation of bank holding companies that is applicable to us will be
applicable to Main Street after the completion of the merger. A more complete
discussion of this regulatory framework is included in each of our 1998 Form
10-Ks. See "Where You Can Find More Information."
Bank holding companies are required to obtain the prior approval of
the Federal Reserve before they may:
- acquire direct or indirect ownership or control of more than 5% of
the voting shares of any bank;
- acquire all or substantially all of the assets of any bank; or
- merge or consolidate with any other bank holding company.
The Federal Reserve generally may not approve any transaction that
would result in a monopoly or that would further a combination or conspiracy to
monopolize banking in the United States. Nor can the Federal Reserve approve a
transaction that could substantially lessen competition in any section of the
country, that would tend to create a monopoly in any section of the country or
that would be in restraint of trade. But the Federal
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<PAGE>
Reserve may approve any such transaction if it determines that the public
interest in meeting the convenience and needs of the community served clearly
outweighs the anticompetitive effects of the proposed transaction. The
Federal Reserve is also required to consider the financial and managerial
resources and future prospects of the bank holding companies and banks
concerned, as well as the convenience and needs of the community to be
served. Consideration of financial resources generally focuses on capital
adequacy, which is discussed below. Consideration of convenience and needs
includes the parties' performance under the Community Reinvestment Act of
1977.
Another factor that is gaining increasing scrutiny in the
application process is the Year 2000 readiness of the parties involved in
acquisition transactions. Banking organizations whose Year 2000 readiness is
in less than satisfactory condition are undergoing special scrutiny in
connection with acquisition transactions requiring regulatory approval, and
may not be eligible to use expedited application procedures for acquisition
transactions.
Under the Riegle-Neal Interstate Banking and Branching Efficiency
Act of 1994 (the "Interstate Banking Act"), Main Street (after completion of
the merger) and any other bank holding company may now acquire a bank located
in any state, subject to certain deposit-percentage limitations, aging
requirements and other restrictions. The Interstate Banking Act also
generally permits a bank to branch interstate through acquisitions of banks
in other states. By adopting legislation prior to June 1, 1997, a state had
the ability either to "opt in" and accelerate the date after which interstate
branching is permissible or "opt out" and prohibit interstate branching
altogether. Illinois did not opt out of this legislation.
The Bank Holding Company Act will prohibit Main Street after the
completion of the merger from:
- engaging in activities other than banking, managing or controlling
banks or other permissible subsidiaries; and
- acquiring or retaining direct or indirect control of any company
engaged in any activities other than those activities determined by the
Federal Reserve to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto.
In determining whether a particular activity is permissible, the
Federal Reserve must consider whether the performance of such an activity
reasonably can be expected to produce benefits to the public that outweigh
possible adverse effects. Possible benefits the Federal Reserve considers
include greater convenience, increased competition or gains in efficiency.
Possible adverse effects include undue concentration of resources, decreased
or unfair competition, conflicts of interest or unsound banking practices.
The Federal Reserve has determined the following, among others, to be
permissible activities of bank holding companies:
- factoring accounts receivable;
- acquiring or servicing loans;
- leasing personal property;
- conducting discount securities brokerage activities;
- performing certain data processing services;
- acting as agent or broker in selling credit life insurance and
certain other types of insurance in connection with credit
transactions; and
- performing certain insurance underwriting activities.
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<PAGE>
There are no territorial limitations on permissible non-banking
activities of bank holding companies. Despite prior approval, the Federal
Reserve has the power to order a holding company or its subsidiaries to
terminate any activity or to terminate its ownership or control of any
subsidiary when it has reasonable cause to believe that a serious risk to the
financial safety, soundness or stability of any bank subsidiary of that bank
holding company may result from such activity.
The banks now owned by us, and that will be owned by Main Street after
the completion of the merger, are members of the Federal Deposit Insurance
Corporation. Their deposits are insured by the Federal Deposit Insurance
Corporation to the extent provided by law. Each bank is also subject to numerous
state and federal statutes and regulations that affect its business, activities
and operations, and each is supervised and examined by one or more state or
federal bank regulatory agencies.
The Federal Deposit Insurance Corporation and the applicable state
authority in the case of state-chartered nonmember banks, and the Office of the
Comptroller of the Currency in the case of national banks, supervise our bank
subsidiaries. The regulatory agencies regularly examine the operations of such
institutions and such examinations will continue after the completion of the
merger. These regulatory agencies have authority to approve or disapprove
mergers, consolidations, the establishment of branches and similar corporate
actions. The federal and state banking regulators also have the power to prevent
the continuance or development of unsafe or unsound banking practices or other
violations of law.
RECENT REGULATORY DEVELOPMENTS
On November 12, 1999, President Clinton signed legislation that will
allow bank holding companies to engage in a wider range of nonbanking
activities, including greater authority to engage in securities and insurance
activities. Under the Gramm-Leach-Bliley Act, a bank holding company that elects
to become a financial holding company may engage in any activity that the
Federal Reserve, in consultation with the Secretary of the Treasury, determines
by regulation or order is (i) financial in nature, (ii) incidental to any such
financial activity or (iii) complementary to any such financial activity and
does not pose a substantial risk to the safety or soundness of depository
institutions or the financial system generally. The act specifies certain
activities that are deemed to be financial in nature, including lending,
exchanging, transferring, investing for others or safeguarding money or
securities; underwriting and selling insurance; providing financial, investment
or economic advisory services; underwriting, dealing in or making a market in,
securities; and any activity currently permitted for bank holding companies by
the Federal Reserve under section 4(c)(8) of the Bank Holding Company Act. A
bank holding company may elect to be treated as a financial holding company only
if all depository institution subsidiaries of the holding company are
well-capitalized, well-managed and have at least a satisfactory rating under the
Community Reinvestment Act.
National banks are also authorized by the Gramm-Leach-Bliley Act to
engage, through "financial subsidiaries," in any activity that is permissible
for a financial holding company (as described above) and any activity that the
Secretary of the Treasury, in consultation with the Federal Reserve, determines
is financial in nature or incidental to any such financial activity, except (i)
insurance or annuity underwriting, (ii) real estate development or real estate
investment activities (unless otherwise permitted by law), (iii) insurance
company portfolio investments and (iv) merchant banking. The authority of a
national bank to invest in a financial subsidiary is subject to a number of
conditions, including, among other things, requirements that the bank must be
well-managed and well-capitalized (after deducting from capital the bank's
outstanding investments in financial subsidiaries). The act provides that state
banks may invest in financial subsidiaries (assuming they have the requisite
investment authority under applicable state law) subject to the same conditions
that apply to national bank investments in financial subsidiaries.
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At this time, we are unable to predict the impact the
Gramm-Leach-Bliley Act may have on Main Street and its subsidiaries.
PAYMENT OF DIVIDENDS
Main Street is, and will continue to be after completion of the merger,
a legal entity separate and distinct from its banking and other subsidiaries.
Our principal sources of cash flow, and after completion of the merger, those of
Main Street, including cash flow to pay dividends to our respective
stockholders, is and will continue to be dividends from our subsidiary banks.
There are statutory and regulatory provisions that currently limit the payment
of dividends by our subsidiary banks to us, as well as by us to our respective
stockholders. These provisions will continue in the same manner to limit the
payment of dividends to and by Main Street.
As to the payment of dividends, our state-chartered bank subsidiaries
are subject, and will continue as subsidiaries of Main Street to be subject, to
the laws and regulations of the Office of the Commissioner of Banks and Real
Estate of the State of Illinois and to the regulations of the Federal Deposit
Insurance Corporation, these banks' primary federal regulator. First Decatur's
national bank subsidiary is, and will continue to be after completion of the
merger, subject to the regulations of the Office of the Comptroller of the
Currency.
If the federal banking regulator determines that a bank under its
jurisdiction is engaged in or is about to engage in an unsafe or unsound
practice, the regulator may require, after notice and hearing, that the bank
cease and desist from such practice. Depending on the financial condition of
the bank, an unsafe or unsound practice could include the payment of
dividends. The federal banking agencies have indicated that paying dividends
that deplete a bank's capital base to an inadequate level would be an unsafe
and unsound banking practice. Under the Federal Deposit Insurance Corporation
Improvement Act of 1991, a bank may not pay any dividend if payment would
cause it to become undercapitalized or if it already is undercapitalized. See
"--Prompt Corrective Action." The federal agencies have also issued policy
statements that provide that bank holding companies and insured banks should
generally pay dividends only out of current operating earnings.
At September 30, 1999, under dividend restrictions imposed under
federal and state laws and without obtaining any governmental approvals,
BankIllinois Financial's bank subsidiary could declare aggregate dividends to
BankIllinois Financial of approximately $4.7 million and First Decatur's bank
subsidiaries could declare aggregate dividends to First Decatur of approximately
$19.0 million.
The payment of dividends by us and our bank subsidiaries currently, and
the payment by Main Street and its bank subsidiaries after completion of the
merger, may also be affected or limited by other factors, such as the
requirement to maintain adequate capital above regulatory guidelines.
CAPITAL ADEQUACY
We and our bank subsidiaries are required to comply, and after
completion of the merger, Main Street and its banking subsidiaries will be
required to comply, with the capital adequacy standards established by the
Federal Reserve in the case of BankIllinois Financial, First Decatur and Main
Street, and the appropriate federal banking regulator in the case of each
subsidiary bank. There are two basic measures of capital adequacy for bank
holding companies and the banks that they own: a risk-based measure and a
leverage measure. All applicable capital standards must be satisfied for a bank
holding company to be considered in compliance.
The risk-based capital standards are designed to make regulatory
capital requirements more sensitive to differences in risk profile among banks
and bank holding companies, to account for off-balance-sheet exposure and to
minimize disincentives for holding liquid assets. Assets and off-balance-sheet
items are assigned to broad risk categories, each with appropriate weights. The
resulting capital ratios represent capital as a percentage of total
risk-weighted assets and off-balance-sheet items.
The minimum required ratio ("Total Capital Ratio") of total capital
("Total Capital") to risk-weighted assets (including certain off-balance-sheet
items, such as standby letters of credit) is 8.0%. At least half of Total
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<PAGE>
Capital must be composed of common equity, undivided profits, minority interests
in the equity accounts of consolidated subsidiaries, noncumulative perpetual
preferred stock and a limited amount of cumulative perpetual preferred stock,
less goodwill and certain other intangible assets ("Tier 1 Capital"). The
remainder may consist of subordinated debt, other preferred stock and a limited
amount of loan loss reserves ("Tier 2 Capital"). At September 30, 1999,
BankIllinois Financial's consolidated Total Capital Ratio and its Tier 1 Capital
Ratio (i.e., the ratio of Tier 1 Capital to risk-weighted assets) were 17.90%
and 16.60%, respectively; First Decatur's consolidated Total Capital Ratio and
its Tier 1 Capital Ratio were 22.67% and 21.42%, respectively; and Main Street's
consolidated Total Capital Ratio and its Tier 1 Capital Ratio on a pro forma
basis were 19.49% and 18.24%, respectively.
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
required ratio (the "Leverage Ratio") of Tier 1 Capital to average assets, less
goodwill and certain other intangible assets, of 3.0% for bank holding companies
that meet certain specified criteria, including having the highest regulatory
rating. All other bank holding companies generally are required to maintain a
Leverage Ratio of at least 4.0%. The Leverage Ratios of BankIllinois Financial
and First Decatur at September 30, 1999, were 11.60% and 11.67%, respectively.
Main Street's Leverage Ratio on a pro forma basis at September 30, 1999, was
11.46%. The guidelines also provide that bank holding companies that experience
internal growth or make acquisitions will be expected to maintain strong capital
positions substantially above the minimum supervisory levels without significant
reliance on intangible assets. The Federal Reserve will consider a "tangible
Tier 1 Capital Leverage Ratio" (deducting all intangibles) and other indicia of
capital strength in evaluating proposals for expansion or new activities.
Each of our bank subsidiaries is currently, and after completion of
the merger will continue to be, subject to risk-based and leverage capital
requirements adopted by its federal banking regulator. Those requirements are
substantially the same as those adopted by the Federal Reserve for bank
holding companies. In addition, the capital requirements applicable to these
bank subsidiaries contemplate that the bank regulators may establish higher
capital requirements for a particular institution based upon the
institution's risk profile including exposure to interest rate risk. Each of
our bank subsidiaries was in compliance with those minimum capital
requirements as of September 30, 1999. No federal banking agency has advised
either of us or any of our bank subsidiaries of any specific minimum capital
ratio requirement applicable to it.
A bank that fails to meet its capital guidelines may be subject to a
variety of enforcement remedies and certain other restrictions on its business.
Remedies could include the issuance of a capital directive, the termination of
deposit insurance by the Federal Deposit Insurance Corporation and a prohibition
on the taking of brokered deposits. As described below, substantial additional
restrictions can be imposed upon Federal Deposit Insurance Corporation-insured
depository institutions that fail to meet their capital requirements.
See "-- Prompt Corrective Action."
The capital requirements described above are minimum requirements, and
higher capital levels will be required if warranted by the particular
circumstances or risk profile of individual institutions. For example, the
regulations of the Federal Reserve, the Federal Deposit Insurance Corporation
and the Office of the Comptroller of the Currency include provisions which
require banks to calculate their exposure to increases and decreases in market
interest rates and require banks with excessive interest rate risk exposure to
hold additional amounts of capital against such exposures.
SUPPORT OF SUBSIDIARY INSTITUTIONS
Under Federal Reserve policy, each of us is expected to act as a source
of financial strength for and commit its resources to support each of our
respective subsidiary banks. This Federal Reserve policy will apply to Main
Street and its subsidiary banks after completion of the merger. This support may
be required at times when we or Main Street may not be inclined to provide it.
In addition, any capital loans by a bank holding company to any of its bank
subsidiaries are subordinate to the payment of deposits and to certain other
indebtedness. In the event of a bank holding company's bankruptcy, any
commitment by the bank holding
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<PAGE>
company to a federal bank regulatory agency to maintain the capital of a bank
subsidiary will be assumed by the bankruptcy trustee and entitled to a
priority of payment.
A depository institution insured by the Federal Deposit Insurance
Corporation can be held liable for any loss incurred by, or reasonably expected
to be incurred by, the Federal Deposit Insurance Corporation in connection with
the default of a commonly controlled Federal Deposit Insurance
Corporation-insured depository institution or any assistance provided by the
Federal Deposit Insurance Corporation to any commonly controlled Federal Deposit
Insurance Corporation-insured depository institution "in danger of default."
"Default" is defined generally as the appointment of a conservator or receiver,
and "in danger of default" is defined generally as the existence of certain
conditions indicating that a default is likely to occur in the absence of
regulatory assistance. The Federal Deposit Insurance Corporation's claim for
damages is superior to claims of stockholders of the insured depository
institution or its holding company, but is subordinate to claims of depositors,
secured creditors and holders of subordinated debt (other than affiliates) of
the commonly controlled insured depository institution. Our bank subsidiaries
are, and after completion of the merger, the bank subsidiaries of Main Street
banks will be, subject to these cross-guarantee provisions. As a result, any
loss suffered by the Federal Deposit Insurance Corporation in respect of any of
these banks would likely result in assertion of the cross-guarantee provisions,
the assessment of estimated losses against their respective banking affiliates
and a potential loss of their respective parent holding company's investments in
its other banks.
PROMPT CORRECTIVE ACTION
The Federal Deposit Insurance Corporation Improvement Act of 1991
establishes a system of prompt corrective action to resolve the problems of
undercapitalized institutions. Under this system, which became effective in
December 1992, the federal banking regulators are required to establish five
capital categories (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized). With respect to institutions in the three undercapitalized
categories, the regulators must take certain supervisory actions, and are
authorized to take other discretionary actions. The severity of the actions
will depend upon the capital category in which the institution is placed.
Generally, subject to a narrow exception, the Federal Deposit Insurance
Corporation Improvement Act of 1991 requires the banking regulator to appoint
a receiver or conservator for an institution that is critically
undercapitalized. The federal banking agencies have specified the relevant
capital level for each category.
An institution is deemed to be WELL CAPITALIZED if it:
- has a Total Capital Ratio of 10% or greater;
- has a Tier 1 Capital Ratio of 6.0% or greater;
- has a Leverage Ratio of 5.0% or greater; and
- is not subject to any written agreement, order, capital directive or
prompt corrective action directive issued by its federal banking
agency.
An institution is considered to be ADEQUATELY CAPITALIZED if it has:
- a Total Capital Ratio of 8.0% or greater;
- a Tier 1 Capital Ratio of 4.0% or greater; and
- a Leverage Ratio of 4.0% or greater (or, if the institution received a
composite 1 rating under the regulator's CAMEL rating system, a
Leverage Ratio of 3.0% or greater).
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A depository institution is considered to be UNDERCAPITALIZED if it has:
- a Total Capital Ratio of less than 8.0%;
- a Tier 1 Capital Ratio of less than 4.0%; or
- a Leverage Ratio of less than 4.0% (or, if the institution received a
composite 1 rating under the regulator's CAMEL rating system, a
Leverage Ratio of 3.0% or greater).
A depository institution is considered to be SIGNIFICANTLY UNDERCAPITALIZED if
it has:
- a Total Capital Ratio of less than 6.0%;
- a Tier 1 Capital Ratio of less than 3.0%; or
- a Leverage Ratio of less than 3.0%.
An institution that has a tangible equity capital to assets ratio equal to or
less than 2.0% is deemed to be critically undercapitalized. "Tangible equity"
includes core capital elements counted as Tier 1 Capital for purposes of the
risk-based capital standards, plus the amount of outstanding cumulative
perpetual preferred stock (including related surplus), minus all intangible
assets, with certain exceptions. A depository institution may be deemed to be in
a capitalization category that is lower than is indicated by its actual capital
position if it receives an unsatisfactory examination rating.
An institution that is categorized as undercapitalized,
significantly undercapitalized or critically undercapitalized is required to
submit an acceptable capital restoration plan to its appropriate federal
banking agency. In addition, a bank holding company must guarantee that a
subsidiary bank meets its capital restoration plan. This obligation to fund a
capital restoration plan is limited to the lesser of 5.0% of an
undercapitalized subsidiary's assets or the amount required to meet
regulatory capital requirements. Except in accordance with an accepted
capital restoration plan or with the approval of the Federal Deposit
Insurance Corporation, an undercapitalized institution is also generally
prohibited from increasing its average total assets, making acquisitions,
establishing any branches or engaging in any new line of business. In
addition, its primary federal banking regulator is given authority with
respect to any undercapitalized institution to take any of the actions it is
required to or may take with respect to a significantly undercapitalized
institution if it determines "that those actions are necessary to carry out
the purpose" of Federal Deposit Insurance Corporation Act of 1991.
For any institution that is significantly undercapitalized or
undercapitalized and either fails to submit an acceptable capital restoration
plan or fails to implement an approved capital restoration plan, its primary
federal banking regulator must require the institution to take one or more of
the following actions, as the regulator determines will best address the
institution's capital problems:
- sell enough shares, including voting shares, to become adequately
capitalized;
- merge with (or be sold to) another institution (or holding company),
but only if grounds exist for appointing a conservator or receiver;
- restrict certain transactions with its banking affiliates;
- restrict transactions with bank or non-bank affiliates;
- restrict interest rates that the institution pays on deposits to
"prevailing rates" in the institution's "region";
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- restrict asset growth or reduce total assets;
- alter, reduce or terminate activities;
- hold a new election of directors;
- dismiss any director or senior executive officer who held office for
more than 180 days immediately before the institution became
undercapitalized, provided that in requiring dismissal of a director
or senior officer, the agency must comply with certain procedural
requirements, including the opportunity for an appeal in which the
director or officer will have the burden of proving his or her value
to the institution;
- employ "qualified" senior executive officers;
- cease accepting deposits from correspondent depository institutions;
- divest certain nondepository affiliates which pose a danger to the
institution; or
- be divested by a parent holding company.
In addition, without the prior approval of its federal banking agency, a
significantly undercapitalized institution may not pay any bonus to any senior
executive officer or increase the rate of compensation for such an officer.
DEPOSIT INSURANCE
As Federal Deposit Insurance Corporation-insured institutions, our
bank subsidiaries are required to pay deposit insurance premium assessments
to the Federal Deposit Insurance Corporation. The Federal Deposit Insurance
Corporation has adopted a risk-based assessment system under which all
insured depository institutions are placed into one of nine categories and
assessed insurance premiums based upon their respective levels of capital and
results of supervisory evaluations. Institutions classified as
well-capitalized (as defined by the Federal Deposit Insurance Corporation)
and considered healthy pay the lowest premium while institutions that are
less than adequately capitalized (as defined by the Federal Deposit Insurance
Corporation) and considered of substantial supervisory concern pay the
highest premium. Risk classification of all insured institutions is made by
the Federal Deposit Insurance Corporation for each semi-annual assessment
period. Bank Insurance Fund assessments currently range from 0% of deposits
to 0.27% of deposits.
The Federal Deposit Insurance Corporation may terminate the deposit
insurance of any insured depository institution if it determines, after a
hearing, that the institution (i) has engaged or is engaging in unsafe or
unsound practices, (ii) is in an unsafe or unsound condition to continue
operations or (iii) has violated any applicable law, regulation, order, or any
condition imposed in writing by, or written agreement with, the Federal Deposit
Insurance Corporation. The Federal Deposit Insurance Corporation may also
suspend deposit insurance temporarily during the hearing process for a permanent
termination of insurance if the institution has no tangible capital. We are not
aware of any activity or condition that could result in termination of the
deposit insurance of any of our bank subsidiaries.
THE FINANCING CORPORATION ASSESSMENTS
Since 1987, a portion of the deposit insurance assessments paid by
members of the Federal Deposit Insurance Corporation's Savings Association
Insurance Fund has been used to cover interest payments due on the outstanding
obligations of the Financing Corporation. The Financing Corporation was created
in 1987 to finance the recapitalization of the Federal Savings and Loan
Insurance Corporation, the Savings Association Insurance Fund's predecessor
insurance fund. As a result of federal legislation enacted in 1996, beginning as
of January 1, 1997, both Savings Association Insurance Fund members and Bank
Insurance Fund members became subject to assessments to cover the interest
payments on outstanding The Financing Corporation obligations. These Financing
Corporation assessments are in addition to amounts assessed by the Federal
Deposit Insurance Corporation for deposit insurance.
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Until January 1, 2000, the Financing Corporation assessments made against
Bank Insurance Fund members may not exceed 20% of the amount of the Financing
Corporation assessments made against Savings Association Insurance Fund
members. Between January 1, 2000 and the final maturity of the outstanding
the Financing Corporation obligations in 2019, Bank Insurance Fund members
and Savings Association Insurance Fund members will share the cost of the
interest on the Financing Corporation bonds on a PRO RATA basis. During 1999,
the Financing Corporation assessment rate for Savings Association Insurance
Fund members ranged between approximately 0.058% of deposits and
approximately 0.061% of deposits, while the Financing Corporation assessment
rate for Bank Insurance Fund members was approximately 0.012% of deposits.
INSIDER TRANSACTIONS
Our respective bank subsidiaries are subject to certain restrictions
imposed by federal law on extensions of credit to us and our other subsidiaries,
on investments in the stock or other securities we or our other subsidiaries
issue and the acceptance of the stock or other securities issued by us or our
other subsidiaries as collateral for loans. Certain limitations and reporting
requirements are also placed on extensions of credit by our bank subsidiaries to
their respective directors and officers, to our directors and officers and the
directors and officers of our other subsidiaries, to our principal stockholders,
and to "related interests" of such directors, officers and principal
stockholders. In addition, federal law and regulations may affect the terms upon
which our directors, officers and principal stockholders and the directors and
officers of our other subsidiaries may obtain credit from banks with which our
respective bank subsidiaries maintain correspondent relationships.
DESCRIPTION OF MAIN STREET CAPITAL STOCK
Main Street's articles currently authorize the issuance of 1,000
shares of Main Street common stock and no shares of Main Street Preferred
Stock. On the date of this joint proxy statement-prospectus, 1,000 shares of
Main Street common stock were outstanding (500 held by each of us) and no
shares of preferred stock, were outstanding. Main Street expects to issue
approximately 10,100,000 shares of Main Street common stock in connection
with the merger, and to reserve approximately 600,000 shares of Main Street
common stock for the exercise of converted stock options.
THE CAPITAL STOCK OF MAIN STREET DOES NOT REPRESENT OR CONSTITUTE A
DEPOSIT ACCOUNT AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE BANK INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY
GOVERNMENTAL AGENCY.
MAIN STREET COMMON STOCK
GENERAL. Shares of Main Street common stock may be issued at such time
or times and for such consideration (not less than the par value thereof) as the
Main Street board of directors may deem advisable, subject to such limitations
as may be set forth in the laws of the State of Illinois or Main Street's
articles or bylaws. BankIllinois, BankIllinois Financial's state bank
subsidiary, will be the Registrar, Transfer Agent and Dividend Disbursing Agent
for shares of Main Street common stock. Its address is BankIllinois, 100 West
University Avenue, Champaign, Illinois 61820.
DIVIDENDS. Subject to the preferential rights of any outstanding shares
of Main Street preferred stock, the holders of Main Street common stock are
entitled to receive, to the extent permitted by law, only such dividends as may
be declared from time to time by Main Street's board of directors.
Main Street has the right to, and may from time to time, enter into
borrowing arrangements or issue other debt instruments, the provisions of which
may contain restrictions on payment of dividends and other distributions on Main
Street common stock and Main Street preferred stock. Main Street has no such
arrangements in effect at the date hereof.
LIQUIDATION RIGHTS. In the event of the voluntary or involuntary
liquidation, dissolution, distribution of assets or winding-up of Main Street,
after distribution in full of the preferential amounts required to be
distributed
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to holders of any Main Street preferred stock, holders of Main Street common
stock will be entitled to receive all of the remaining assets of Main Street,
of whatever kind, available for distribution to stockholders ratably in
proportion to the number of shares of Main Street common stock held. The Main
Street board of directors may distribute in kind to the holders of Main
Street common stock such remaining assets of Main Street or may sell,
transfer or otherwise dispose of all or any part of such remaining assets to
any other person or entity and receive payment therefor in cash, stock or
obligations of such other person or entity, and may sell all or any part of
the consideration so received and distribute any balance thereof in kind to
holders of Main Street common stock.
Because Main Street is a holding company, its right and the rights of
its creditors and stockholders, including the holders of Main Street preferred
stock, if any, and Main Street common stock, to participate in the distribution
of assets of a subsidiary on its liquidation or recapitalization may be subject
to prior claims of such subsidiary's creditors except to the extent that Main
Street itself may be a creditor having recognized claims against such
subsidiary.
For a further description of Main Street common stock, see "Effect of
the Merger on Rights of Stockholders."
OTHER MATTERS
As of the date of this joint proxy statement-prospectus, each of our
boards of directors knows of no matters that will be presented for consideration
at the special meeting of our respective stockholders other than as described in
this joint proxy statement-prospectus. However, if any other matters properly
come before the BankIllinois Financial or First Decatur special meeting or any
adjournment or postponement of the special meeting and are voted upon, the
enclosed proxy will be deemed to confer discretionary authority to the
individuals named as proxies to vote the shares represented by such proxy as to
any such matters.
STOCKHOLDER PROPOSALS
Main Street expects to hold its next annual meeting of stockholders
in late May or June, 2000, after the merger. Under Securities and Exchange
Commission rules, proposals of Main Street stockholders intended to be
presented at that meeting must be received by Main Street at its principal
executive offices no later than March 31, 2000. It is not currently
anticipated that either BankIllinois Financial or First Decatur will hold its
respective annual meeting in 2000, unless the merger has not been completed
or the Agreement has been terminated.
EXPERTS
The consolidated financial statements of BankIllinois Financial and
subsidiary incorporated in this joint proxy statement-prospectus by reference to
BankIllinois Financial's annual report on Form 10-K for the year ended December
31, 1998, have been audited by McGladrey & Pullen LLP, independent auditors, as
stated in their report, which is incorporated herein by reference and have been
so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The consolidated financial statements of First Decatur and subsidiaries
incorporated in this joint proxy statement-prospectus by reference to First
Decatur's annual report on Form 10-K for the year ended December 31, 1998, have
been audited by Olive LLP, independent auditors, as stated in their report,
which is incorporated herein by reference and have been so incorporated in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
CERTAIN OPINIONS
The legality of the Main Street common stock to be issued as a result
of the merger will be passed upon for Main Street by Barack Ferrazzano
Kirschbaum Perlman & Nagelberg, 333 West Wacker Drive, Chicago, Illinois 60606.
Certain legal matters in connection with the merger will be passed upon for
First Decatur by
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Howard & Howard Attorneys P.C., 321 Liberty Street, Suite 200, Peoria,
Illinois 61602, and for BankIllinois Financial by Barack Ferrazzano.
RSM McGladrey, Inc. has delivered an opinion to us concerning material
federal income tax consequences of the Merger. See "Description of Transaction
- -- Material Federal Income Tax Consequences of the Merger."
WHERE YOU CAN FIND MORE INFORMATION
We each file annual, quarterly and current reports and other
information with the Securities and Exchange Commission under the Securities
Exchange Act of 1934. You may read and copy this information at the Public
Reference Section at the Securities and Exchange Commission at 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 Securities and Exchange
Commission at 1-800-SEC-0330. The Securities and Exchange Commission maintains
an Internet site that contains reports, proxy and information statements and
other information about issuers that file electronically with the Securities and
Exchange Commission. The address of that site is http://www.sec.gov. In
addition, you can read and copy this information at the regional offices of the
Securities and Exchange Commission at 7 World Trade Center, 13th Floor, New
York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661.
Main Street filed a registration statement with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, relating to
the Main Street common stock offered to our stockholders. The registration
statement contains additional information about Main Street and the Main
Street common stock. The Securities and Exchange Commission allows Main
Street to omit certain information included in the registration statement
from this joint proxy statement-prospectus. The registration statement may be
inspected and copied at the Securities and Exchange Commission's public
reference facilities described above. The registration statement is also
available on the Securities and Exchange Commission's internet site.
This joint proxy statement-prospectus incorporates important business
and financial information about us that is not included in or delivered with
this joint proxy statement-prospectus. The following documents filed with the
Securities and Exchange Commission by BankIllinois Financial are incorporated by
reference in this joint proxy statement-prospectus (Securities and Exchange
Commission File No. 33-90342):
(1) BankIllinois Financial's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998;
(2) BankIllinois Financial's Quarterly Report on Form 10-Q for the
three months ended March 31, 1999;
(3) BankIllinois Financial's Quarterly Report on Form 10-Q for the
six months ended June 30, 1999;
(4) BankIllinois Financial's Quarterly Report on Form 10-Q for the
nine months ended September 30, 1999; and
(5) BankIllinois Financial's Current Report on Form 8-K dated
August 17, 1999;
The following documents filed with the Securities and Exchange
Commission by First Decatur are incorporated by reference in this Proxy
Statement (Securities and Exchange Commission File No. 2-80333):
(1) First Decatur's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998;
(2) First Decatur's Quarterly Report on Form 10-Q for the three
months ended March 31, 1999;
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(3) First Decatur's Quarterly Report on Form 10-Q for the six
months ended June 30, 1999;
(4) First Decatur's Quarterly Report on Form 10-Q for the nine
months ended September 30, 1999;
(5) First Decatur's Current Report on Form 8-K dated August 17,
1999; and
(6) First Decatur's Current Report on Form 8-K dated January 13,
2000.
We also incorporate by reference additional documents filed by us
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of this joint proxy statement-prospectus and prior to final adjournment of
our respective special meetings. Any statement contained in this joint proxy
statement-prospectus or in a document incorporated or deemed to be incorporated
by reference in this joint proxy statement-prospectus shall be deemed to be
modified or superseded to the extent that a statement contained herein or in any
subsequently filed document which also is, or is deemed to be, incorporated by
reference herein modifies or supersedes such statement.
You may obtain copies of the information incorporated by reference in
this joint proxy statement-prospectus upon written or oral request. The inside
front cover of this joint proxy statement-prospectus contains information about
how such requests should be made.
All information contained in this joint proxy statement-prospectus or
incorporated herein by reference with respect to BankIllinois Financial was
supplied by BankIllinois Financial, and all information contained in this joint
proxy statement-prospectus or incorporated herein by reference with respect to
First Decatur was supplied by First Decatur.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
FIRST DECATUR BANCSHARES, INC.,
BANKILLINOIS FINANCIAL CORPORATION
AND
MAIN STREET TRUST, INC.
AUGUST 12, 1999
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into
as of this 12th day of August, 1999, among FIRST DECATUR BANCSHARES, INC., a
Delaware corporation ("FDB"), BANKILLINOIS FINANCIAL CORPORATION, a Delaware
corporation ("BIF"), and MAIN STREET TRUST, INC., an Illinois corporation
("Newco").
RECITALS
A. FDB and BIF each desire to merge with and into Newco (the
"Merger") with Newco as the resulting corporation (the "Resulting
Corporation").
B. Pursuant to the terms of this Agreement, each outstanding share
of the common stock of FDB, $0.01 par value per share ("FDB Common Stock"),
and each outstanding share of the common stock of BIF, $0.01 par value per
share ("BIF Common Stock"), shall be converted into the right to receive and
be exchangeable for the number of shares of the common stock of Newco, $0.01
par value per share ("Newco Common Stock"), provided for herein at the time
of the closing of the Merger (the "Closing").
AGREEMENTS
In consideration of the mutual covenants, representations and
warranties contained herein, the parties agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 DEFINITIONS. The following terms, when used herein and
unless the context clearly requires otherwise, shall have the following
meanings (such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
"Affiliate" shall have the meaning provided in Rule 144 promulgated
under the Securities Act.
"Agreement" shall mean this Agreement and Plan of Merger.
"Articles of Merger" shall mean the articles of merger filed by FDB,
BIF and Newco with the Secretary of State of the State of Illinois pursuant
to SECTION 2.9(b).
"BCA" shall mean the Illinois Business Corporation Act of 1983, as
amended.
"BHCA" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"BIF" shall mean BankIllinois Financial Corporation, a Delaware
corporation.
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"BIF Common Stock" shall mean the common stock of BIF, $0.01 par value
per share.
"BIF Employee Benefit Plans" shall have the meaning provided in
SECTION 4.10(d).
"BIF Exchange Ratio" shall have the meaning provided in SECTION 3.2(a).
"BIF Exchange Shares" shall have the meaning provided in SECTION
3.2(a).
"BIF Financial Statements" shall have the meaning provided in SECTION
4.9.
"BIF Subsidiary" shall mean any Subsidiary of BIF.
"BIF Transactional Expenses" shall mean all fees and expenses of
attorneys, accountants, consultants, financial advisors and other
professional advisors incurred by BIF in connection with this Agreement and
the transactions contemplated hereby, BIF's costs of preparing, printing and
mailing the Proxy Statement-Prospectus, and all other non-payroll related
costs and expenses owed or paid by BIF to third parties in connection with
this Agreement and the transactions contemplated hereby.
"BKI" shall mean BankIllinois, an Illinois state bank with its main
office located in Champaign, Illinois, and a wholly-owned Subsidiary of BIF.
"Blue Sky Laws" shall mean the securities or blue sky laws of the
various states and all regulations promulgated thereunder.
"Business Day" shall mean any day on which the trading of stocks
occurs on the New York Stock Exchange.
"Call Report" shall mean the Consolidated Report of Condition and
Income of a bank.
"Certificate" shall mean a stock certificate representing an
outstanding share or outstanding shares of either FDB Common Stock or BIF
Common Stock.
"Closing" shall mean the closing of the Merger and all other
transactions contemplated by this Agreement.
"Closing Date" shall mean the day the Closing occurs.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the rules and regulations promulgated thereunder.
"Commissioner" shall mean the Commissioner of the Office of Banks and
Real Estate of the State of Illinois.
"Competing BIF Proposal" shall have the meaning provided in SECTION
6.9.
"Competing FDB Proposal" shall have the meaning provided in SECTION
7.9.
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"Delaware Code" shall mean the General Corporation Law of the State of
Delaware, as amended.
"Dissenting Shares" shall have the meaning set forth in SECTION 3.5.
"Effective Time" shall have the meaning provided in SECTION 2.9(b).
"Environmental Laws" shall mean those statutes, regulations, rules,
ordinances, orders, restrictions and requirements relating to the protection
of the environment described in SECTION 4.22.
"Environmental Report" shall have the meaning set forth in SECTION 6.7.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall mean with respect to FDB or BIF, any person
(as defined in Section 3(9) of ERISA) which together with FDB or BIF,
respectively, or any of its respective Subsidiaries would be a member of the
same "controlled group" within the meaning of Section 414(b), (m), (c) and
(o) of the Code.
"Exchange Agent" shall have the meaning provided in SECTION 3.3(a).
"Federal Reserve" shall mean the Board of Governors of the Federal
Reserve System.
"FDB" shall mean First Decatur Bancshares, Inc., a Delaware
corporation.
"FDB Common Stock" shall mean the common stock of FDB, $0.01 par value
per share.
"FDB Employee Benefit Plans" shall have the meaning provided in
SECTION 5.10(d).
"FDB Exchange Ratio" shall have the meaning provided in SECTION 3.2(a).
"FDB Exchange Shares" shall have the meaning provided in SECTION
3.2(a).
"FDB Financial Statements" shall have the meaning provided in SECTION
5.9.
"FDB Subsidiary" shall mean any Subsidiary of FDB.
"FDB Transactional Expenses" shall mean all fees and expenses of
attorneys, accountants, consultants, financial advisors and other
professional advisors incurred by FDB in connection with this Agreement and
the transactions contemplated hereby, FDB's costs of preparing, printing and
mailing the Proxy Statement-Prospectus, and all other non-payroll related
costs and expenses owed or paid by FDB to third parties in connection with
this Agreement and the transactions contemplated hereby.
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"FirsTech" shall mean FirsTech, Inc., a Delaware corporation, and a
wholly-owned Subsidiary of FDB.
"First Trust" shall mean the First Trust Bank of Shelbyville, an
Illinois state bank with its main office located in Shelbyville, Illinois,
and a wholly-owned Subsidiary of FDB.
"FNB" shall mean The First National Bank of Decatur, a national
banking association with its main office located in Decatur, Illinois, and a
wholly-owned Subsidiary of FDB.
"Illinois Act" shall mean the Illinois Bank Holding Company Act of
1957, as amended.
"IRS" shall mean the United States Internal Revenue Service.
"Letter of Transmittal" shall have the meaning set forth in SECTION
3.3.
"Material Adverse Effect" or "Material Adverse Change" with respect to
a Person (other than an individual) means a material adverse effect on or
material adverse change in the consolidated financial condition, assets or
business of such Person and its Subsidiaries, if any, but not including the
effect of any change of law, rule or regulation or economic event affecting
financial institutions generally.
"Merger" shall mean the merger of FDB and BIF with and into Newco.
"Merging Corporations" shall collectively mean FDB, BIF and Newco.
"Newco Common Stock" shall mean the common stock of Newco, $0.01 par
value per share.
"OCC" shall mean the Office of the Comptroller of the Currency.
"Person" shall mean any individual, partnership, joint venture, firm,
corporation, association, trust or other enterprise or any government or
political subdivision or any agency, department or instrumentality thereof.
"Proxy Statement-Prospectus" shall have the meaning provided in
SECTION 11.1.
"Registration Statement" shall have the meaning provided in SECTION
11.1.
"Resulting Corporation" shall mean Newco, the corporation resulting
from the merger of FDB and BIF with and into Newco.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Subsequent BIF Financial Statements" shall have the meaning provided
in SECTION 6.3.
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"Subsequent FDB Financial Statements" shall have the meaning provided
in SECTION 7.3.
"Subsidiary" shall mean, as to any Person: (i) any corporation more
than fifty percent (50%) of whose stock of any class or classes having by the
terms thereof ordinary voting power to elect a majority of the directors of
such corporation (irrespective of whether or not at the time stock of any
class or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time owned by such
Person and/or one or more Subsidiaries of such Person and (ii) any
partnership, association, joint venture or other entity in which such Person
and/or one or more Subsidiaries of such Person has more than a fifty percent
(50%) equity interest at the time.
"Superior BIF Proposal" shall have the meaning provided in SECTION
13.1(g).
"Superior FDB Proposal" shall have the meaning provided in SECTION
13.1(h).
"Termination Date" shall mean July 1, 2000, or such later date as
shall have been agreed to in writing by the parties.
"TIA Agreement" shall mean that certain Asset Purchase Agreement
between BKI and Trust and Investment Advisors, Inc. providing for the
acquisition by BKI or TIA Corp, as BKI's assignee, of certain assets which it
will utilize in establishing and maintaining an investment advisory business.
"TIA Corp" shall mean TIA Acquisition Corporation, an Indiana
corporation and a wholly-owned subsidiary of BIF.
"Unsolicited BIF Proposal" shall have the meaning provided in SECTION
6.9.
"Unsolicited FDB Proposal" shall have the meaning provided in SECTION
7.9.
SECTION 1.2 PRINCIPLES OF CONSTRUCTION. (a) In this Agreement,
unless otherwise stated or the context otherwise requires, the following uses
apply: (i) actions permitted under this Agreement may be taken at any time
and from time to time in the actor's sole discretion; (ii) references to a
statute shall refer to the statute and any successor statute, and to all
regulations promulgated under or implementing the statute or successor, as in
effect at the relevant time; (iii) in computing periods from a specified date
to a later specified date, the words "from" and "commencing on" (and the
like) mean "from and including," and the words "to," "until" and "ending on"
(and the like) mean "to, but excluding"; (iv) references to a governmental or
quasi-governmental agency, authority or instrumentality shall also refer to a
regulatory body that succeeds to the functions of the agency, authority or
instrumentality; (v) indications of time of day mean Decatur, Illinois time;
(vi) "including" means "including, but not limited to"; (vii) all references
to sections, schedules and exhibits are to sections, schedules and exhibits
in or to this Agreement unless otherwise specified; (viii) all words used in
this Agreement will be construed to be of such gender or number as the
circumstances require; and (ix) the captions and headings of articles,
sections, schedules and exhibits
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appearing in or attached to this Agreement have been inserted solely for
convenience of reference and shall not be considered a part of this Agreement
nor shall any of them affect the meaning or interpretation of this Agreement
or any of its provisions.
(b) The Book of Schedules of each of FDB and BIF referred to in
this Agreement shall consist of the information, agreements and other
documentation described and referred to in this Agreement as being included
in the Book of Schedules with respect to such party, which Book of Schedules
were delivered by each of FDB and BIF to the other not less than five (5)
Business Days before the date of this Agreement. Disclosure of any fact or
item in any Schedule or Exhibit hereto referenced by a particular paragraph
or section in this Agreement shall, should the existence of the fact or item
or its contents be relevant to any other paragraph or section, be deemed to
be disclosed with respect to that other paragraph or section whether or not
an explicit cross-reference appears.
(c) All accounting terms not specifically defined herein shall be
construed in accordance with generally accepted accounting principles in the
United States consistent with those used in the preparation of the most
recent audited consolidated financial statements of FDB or BIF, as the case
may be.
ARTICLE 2
THE MERGER
SECTION 2.1 MANNER OF MERGER. Upon the terms and subject to the
conditions of this Agreement, at the Effective Time (as defined below), FDB
and BIF shall be merged with and into Newco pursuant to the provisions of,
and with the effect provided in the BCA, and Newco shall be the corporation
resulting from such merger. As a result of the Merger, each share of FDB
Common Stock issued and outstanding immediately prior to the Effective Time,
other than any Dissenting Shares held by FDB stockholders or as otherwise
provided herein, and each share of BIF Common Stock issued and outstanding
immediately prior to the Effective Time, other than Dissenting Shares held by
BIF stockholders or as otherwise provided herein, will be converted into the
right to receive the number of shares of Newco Common Stock in accordance
with the FDB Exchange Ratio and the BIF Exchange Ratio, respectively, set
forth in SECTION 3.2(a).
SECTION 2.2 EFFECT OF MERGER. (a) At the Effective Time, BIF and
FDB shall be merged with and into Newco and Newco Corp shall be the Surviving
Corporation. BFI, FDB and Newco are sometimes referred to collectively
herein as the "Merging Corporations."
(b) Without limiting the generality of the foregoing, at the Effective
Time, the Surviving Corporation shall thereupon and thereafter possess all the
rights, privileges, immunities and franchises, as of a public or a private
nature, of each of the Merging Corporations, and all property, real, personal
and mixed, and all debts due on whatever account, including subscriptions to
shares, and all other choses in action, and all and every other interest, of or
belonging to or due to each of the Merging Corporations, shall be taken and
deemed to be transferred to and vested in the Surviving Corporation without
further act or
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deed; and the title to any real estate, or any interest therein, vested in
any of such corporations shall not revert or be in any way impaired by reason
of the Merger. Upon the terms and subject to the conditions of this
Agreement, the Surviving Corporation shall assume and thenceforth be
responsible and liable for all the liabilities and obligations (including all
obligations of indemnification, if any) of each of the Merging Corporations,
and any claim existing or action or proceeding pending by or against any of
the Merging Corporations may be prosecuted to judgment as if the Merger had
not taken place, or the Surviving Corporation may be substituted in its
place. Neither rights of creditors nor any liens upon the property of any of
the Merging Corporations shall be impaired by the Merger.
SECTION 2.3 AMENDED AND RESTATED ARTICLES OF INCORPORATION. At the
Effective Time, an amendment and restatement of the articles of incorporation
of Newco substantially in the form attached as EXHIBIT A shall be filed with
the Secretary of State of the State of Illinois, and such amended and
restated articles of incorporation shall thereafter represent the articles of
incorporation of the Resulting Corporation until amended as provided by law.
SECTION 2.4 BYLAWS. The bylaws of Newco, in the form attached as
EXHIBIT B, shall be the bylaws of the Resulting Corporation until amended as
provided by law.
SECTION 2.5 DIRECTORS AND OFFICERS. From and after the Effective
Time, the directors and executive officers of the Resulting Corporation shall
be as set forth in EXHIBIT C, with the directors divided into Class I and
Class II of four (4) members each, and Class III of five (5) members. Such
directors and executive officers shall serve until their successors shall
have been elected or appointed and shall have qualified in accordance with
the BCA and the articles of incorporation and bylaws of the Resulting
Corporation.
SECTION 2.6 FDB'S DELIVERIES AT CLOSING. At the Closing, FDB shall
deliver, or cause to be delivered to BIF the following items:
(a) a good standing certificate for each of FDB and FirsTech, in
each case issued by the Secretary of State of each of the States of Delaware
and Illinois and dated in not more than fifteen (15) Business Days prior to
the Closing Date, as defined below;
(b) a good standing certificate for FNB issued by the OCC and dated
not more than fifteen (15) Business Days prior to the Closing Date;
(c) a good standing certificate for First Trust issued by the
Commissioner and dated not more than fifteen (15) Business Days prior to the
Closing Date;
(d) a copy of the certificate of incorporation of each of FDB and
FirsTech, in each case certified not more than fifteen (15) Business Days
prior to the Closing Date by the Secretary of State of the State of Delaware;
(e) a copy of the articles of association of FNB certified not more
that fifteen (15) Business Days prior to the Closing Date by the OCC;
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(f) a copy of the charter of First Trust certified not more that
fifteen (15) Business Days prior to the Closing Date by the Commissioner;
(g) a certificate of the Secretary or any Assistant Secretary of
each of FDB and FirsTech, in each case dated the Closing Date and certifying
a copy of their respective bylaws;
(h) a certificate of the Cashier or any Assistant Cashier of each
of FNB and First Trust, in each case dated the Closing Date and certifying a
copy of their respective bylaws;
(i) copies of resolutions of the board of directors of FDB
authorizing and approving this Agreement and the consummation of the
transactions contemplated hereby, certified as of the Closing Date by the
Secretary or any Assistant Secretary of FDB;
(j) the certificates contemplated by SECTION 8.1 and SECTION 8.2;
(k) a list of FDB's stockholders as of the Closing Date certified
by the Secretary or any Assistant Secretary of FDB;
(l) a legal opinion of FDB's counsel, Howard & Howard Attorneys,
P.C., dated the Closing Date to the effect set forth in EXHIBIT D attached
hereto; and
(m) such other documents as BIF or its counsel shall reasonably
request.
SECTION 2.7 BIF'S DELIVERIES AT CLOSING. At the Closing, BIF shall
deliver, or cause to be delivered to FDB the following items:
(a) a good standing certificate for BIF issued by the Secretary of
State of the States of Delaware and Illinois, and a good standing certificate
for TIA Corp issued by the Secretary of State of the States of Indiana and
Illinois, in each case dated not more than fifteen (15) Business Days prior
to the Closing Date;
(b) a good standing certificate for BKI, issued by the Commissioner
and dated not more than fifteen (15) Business Days prior to the Closing Date;
(c) a copy of the certificate or articles of incorporation, as the
case may be, of each of BIF and TIA Corp, in each case certified not more
than fifteen (15) Business Days prior to the Closing Date by the Secretary of
State of the States of Delaware and Indiana, respectively;
(d) a copy of the charter of BKI certified not more that fifteen
(15) Business Days prior to the Closing Date by the Commissioner;
(e) a certificate of the Secretary or any Assistant Secretary of
each of BIF and TIA Corp, in each case dated the Closing Date certifying a
copy of their respective bylaws;
(f) a certificate of the Cashier or any Assistant Cashier of BKI
dated the Closing Date certifying a copy of the bylaws of BKI;
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(g) copies of resolutions of the board of directors of BIF
authorizing and approving this Agreement and the consummation of the
transactions contemplated hereby, certified as of the Closing Date by the
Secretary or any Assistant Secretary of BIF;
(h) the certificates contemplated by SECTION 9.1 and SECTION 9.2;
(i) a list of BIF's stockholders as of the Closing Date certified
by the Secretary or any Assistant Secretary of BIF;
(j) a legal opinion of BIF's counsel, Barack Ferrazzano Kirschbaum
Perlman & Nagelberg, dated the Closing Date to the effect set forth in
EXHIBIT E attached hereto; and
(k) such other documents as FDB or its counsel shall reasonably
request.
SECTION 2.8 NEWCO'S DELIVERIES AT CLOSING. At the Closing, Newco
shall deliver, or cause to be delivered to BIF and FDB the following items:
(a) a good standing certificate for Newco issued by the Secretary
of State of the State of Illinois and dated not more than fifteen (15)
Business Days prior to the Closing Date,
(b) a copy of the articles of incorporation of Newco certified not
more than fifteen (15) Business Days prior to the Closing Date by the
Secretary of State of the State of Illinois;
(c) a certificate of the Secretary or any Assistant Secretary of
Newco dated the Closing Date certifying a copy of the bylaws of Newco;
(d) copies of resolutions of the board of directors of Newco
authorizing and approving this Agreement and the consummation of the
transactions contemplated hereby, certified as of the Closing Date by the
Secretary or any Assistant Secretary of Newco;
(e) a certificate of the President or any Vice President and the
Secretary or any Assistant Secretary of Newco dated the Closing Date
certifying that: (i) there have been no further amendments to the articles
of incorporation delivered pursuant to subsection (b) of this Section; (ii)
all of the representations and warranties of Newco set forth in this
Agreement are true and correct with the same force and effect as if all of
such representations and warranties were made at the Closing Date; and (iii)
Newco has performed or complied with all of the covenants and obligations to
be performed or complied with by Newco under the terms of this Agreement on
or prior to the Closing Date; and
(f) such other documents as BIF, FDB or the counsel of either shall
reasonably request.
SECTION 2.9 CLOSING; EFFECTIVE TIME. (a) The Closing shall be on a
date agreed to by the parties hereto, and in the event the parties fail to so
agree, the Closing shall take place on the last Business Day of the calendar
month in which all of the following conditions are satisfied: (i) the receipt
of the last required regulatory approval of the Merger; (ii) the expiration of
the last requisite waiting period; and (iii) the satisfaction or waiver in
writing of
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all of the conditions provided for in Articles 8, 9 and 10; whichever is
later (the "Closing Date").
(b) The parties hereto agree to file on the Closing Date the
appropriate articles of merger, as contemplated by Section 11.25 of the BCA,
with the Secretary of State of the State of Illinois, and an appropriate
certificate of merger, as contemplated by Section 252(c) of the Delaware
Code, with the Secretary of State of the State of Delaware. The Merger shall
be effective at the time and on the date agreed to by the parties hereto, and
in the event the parties fail to so agree, at 12:01 a.m. of the day following
the later of the dates on which the Secretary of State of the State of
Illinois issues a certificate of Merger, or the Certificate of Merger is
accepted for filing by the Secretary of State of the State of Delaware, as
the case may be (the "Effective Time").
(c) The Closing shall take place at 10:00 a.m. on the Closing Date,
at such place as the parties hereto may mutually agree, and in the event they
fail to agree, at the main banking offices of FNB.
SECTION 2.10 CONFIRMING DUE DILIGENCE. (a) Immediately after the
execution of this Agreement, FDB shall initiate an additional pre-acquisition
investigation and review of the books, records and facilities of BIF and its
Subsidiaries and will complete such pre-acquisition investigation not later
than thirty (30) days following the date of this Agreement. FDB shall have
the right to terminate this Agreement by giving written notice of its
election to terminate to BIF, together with a brief statement of the reason
therefor, by 5:00 p.m. on or before the thirtieth (30th) day after the date
of this Agreement in the event that such pre-acquisition investigation and
review discloses matters not previously disclosed to FDB which FDB in good
faith believes either: (i) violate or contravene in a material and adverse
respect any of the representations and warranties of BIF contained in this
Agreement or in any of the Schedules hereto provided by BIF; or (ii) could
reasonably be expected to have a Material Adverse Effect on BIF, and which in
either case of item (i) or (ii) has not been cured within ten (10) Business
Days of receipt of such written notice from FDB. Nothing in this Section
shall limit in any respect any other right or basis that FDB may then or
thereafter have to terminate this Agreement by reason of any breach hereof by
BIF or any breach or inaccuracy of any of the aforesaid representations and
warranties of BIF.
(b) Immediately after the execution of this Agreement, BIF shall
initiate an additional pre-acquisition investigation and review of the books,
records and facilities of FDB and its Subsidiaries and will complete such
pre-acquisition investigation not later than thirty (30) days following the
date of this Agreement. BIF shall have the right to terminate this Agreement
by giving written notice of its election to terminate to FDB, together with a
brief statement of the reason therefor, by 5:00 p.m. on or before the
thirtieth (30th) day after the date of this Agreement in the event that such
pre-acquisition investigation and review discloses matters not previously
disclosed to BIF which BIF in good faith believe either: (i) violate or
contravene in a material and adverse respect any of the representations and
warranties of FDB contained in this Agreement or in any of the Schedules
hereto provided by FDB; or (ii) could reasonably be expected to have a
Material Adverse Effect on FDB, and which in either case of
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item (i) or (ii) has not been cured within ten (10) Business Days of receipt
of such written notice from BIF. Nothing in this Section shall limit in any
respect any other right or basis that BIF may then or thereafter have to
terminate this Agreement by reason of any breach hereof by FDB or any breach
or inaccuracy of any of the aforesaid representations and warranties of FDB.
ARTICLE 3
TREATMENT OF SHARES
SECTION 3.1 TREATMENT OF NEWCO, FDB AND BIF COMMON STOCK. Each
share of Newco Common Stock which is issued and outstanding immediately prior
to the Effective Time shall at the Effective Time be cancelled without
consideration and without any action required on the part of FDB or BIF, as
the holders thereof. Each share of FDB Common Stock and each share of BIF
Common Stock which is issued and outstanding immediately prior to the
Effective Time shall at the Effective Time be converted into and shall
thereafter represent the right to receive the number of shares of Newco
Common Stock as is set forth in SECTION 3.2(a).
SECTION 3.2 EXCHANGE RATIOS. (a) Subject to the provisions of this
Article, by virtue of the Merger and without any action on the part of the
holder thereof, at the Effective Time, (i) each share of FDB Common Stock
issued and outstanding immediately prior to the Effective Time shall become
and automatically be converted into 1.638 shares of Newco Common Stock (the
"FDB Exchange Ratio") and shall thereafter represent the right to receive and
be exchangeable for such number of shares, rounded to the nearest hundredth
of a share (subject to the provisions of SECTIONS 3.2(b) AND (c)), of Newco
Common Stock (the "FDB Exchange Shares"), and (ii) each share of BIF Common
Stock issued and outstanding immediately prior to the Effective Time shall
become and automatically be converted into one (1) share of Newco Common
Stock (the "BIF Exchange Ratio") and shall thereafter represent the right to
receive and be exchangeable for such number of shares, rounded to the nearest
hundredth of a share (subject to the provisions of SECTIONS 3.2(b) AND (c),
of Newco Common Stock (the "BIF Exchange Shares").
(b) After the Effective Time, no holder of FDB Common Stock or BIF
Common Stock which is issued and outstanding immediately prior to the
Effective Time will have any rights in respect of such FDB Common Stock or
BIF Common Stock, respectively, except: (i) to receive shares of Newco
Common Stock for the shares of FDB Common Stock or BIF Common Stock,
respectively, converted as provided in this SECTION 3.2(a), plus an amount in
cash, as provided below, for any fractional share of Newco Common Stock which
such holder would have been entitled to receive; or (ii) to receive payment
for such shares of FDB Common Stock or BIF Common Stock, respectively, in the
manner and to the extent provided in Section 262 of the Delaware Code.
SECTION 3.3 STEPS OF TRANSACTION. (a) On the date agreed to by the
parties hereto, and in the event the parties fail to so agree, the date which is
ten (10) Business Days prior to the Closing, the Exchange Agent shall mail or
cause to be mailed to each then current holder
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of record of a certificate or certificates representing outstanding shares of
either FDB Common Stock or BIF Common Stock (the "Certificates") a form of
transmittal letter (the "Letter of Transmittal") which shall provide
instructions for the transmittal of the Certificates and shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates (or a lost certificate
affidavit and a bond in a form reasonably acceptable to Newco). Pursuant to
the terms of an exchange agent agreement in the form attached as EXHIBIT F,
BKI shall serve as exchange agent (the "Exchange Agent") for the parties to
effect the surrender of the Certificates in exchange for Newco Common Stock.
FDB and BIF agree to cause the Exchange Agent to use all reasonable efforts
to mail or cause to be mailed the Letter of Transmittal to all Persons who
become holders of FDB Common Stock or BIF Common Stock, respectively,
subsequent to the date the Letter of Transmittal was first mailed to FDB and
BIF stockholders, respectively, and by 5:00 p.m. on the date which is five
(5) Business Days prior to the Closing Date.
(b) As promptly as practicable, BIF and FDB shall cause the
Exchange Agent to deliver to each holder of FDB Common Stock or BIF Common
Stock who has previously submitted an effective Letter of Transmittal
accompanied by the Certificates covered by such Letter of Transmittal: (i)
certificates representing the number of whole shares of Newco Common Stock
into which the shares of FDB Common Stock or BIF Common Stock previously
represented by the Certificates so surrendered were converted; plus (ii) an
amount in cash, as provided below, for any fractional share of Newco Common
Stock which such holder would have been entitled to receive.
(c) As promptly as practicable after the Effective Time, the
Exchange Agent shall send to each holder of record of FDB Common Stock or BIF
Common Stock immediately prior to the Effective Time who has not previously
submitted his or her Certificates, additional transmittal materials for use
in surrendering such Certificates to the Exchange Agent and instructions for
use in effecting such surrender in exchange for shares of Newco Common Stock.
(d) No dividends or other distributions declared after the
Effective Time with respect to Newco Common Stock payable to former
stockholders of record of FDB or BIF, respectively, after the Effective Time
shall be paid to a former stockholder of FDB or BIF, respectively, who holds
any unsurrendered Certificate with respect to FDB Common Stock or BIF Common
Stock formerly represented thereby, until such stockholder shall surrender
such Certificate. Until so surrendered and exchanged, each such outstanding
Certificate shall for all purposes, other than the payment of dividends or
other distributions, if any, to former holders of record of shares of FDB
Common Stock or BIF Common Stock represent the shares of Newco Common Stock
into and for which such shares have been so converted; PROVIDED, HOWEVER,
that upon surrender of a Certificate, there shall be paid to the record
holder or holders of the Certificate, the amount, without interest thereon,
of such dividends and other distributions, if any, which previously have
become payable with respect to the number of whole shares of Newco Common
Stock represented by such Certificate.
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(e) No fractional shares of Newco Common Stock shall be issued upon
the surrender for exchange of Certificates; no dividend or distribution of
Newco shall relate to any fractional share interest; and such fractional
share interests will not entitle the owner thereof to vote or to any rights
of a stockholder of Newco. Instead, each holder of shares of FDB Common
Stock or BIF Common Stock having a fractional interest in shares of Newco
Common Stock arising upon the conversion of such shares of FDB Common Stock
or BIF Common Stock shall, at the time of surrender of the Certificates, be
paid by Newco an amount in cash, without interest, determined by multiplying
such fractional share of Newco Common Stock by the average of the closing
sale prices of Newco Common Stock for the three (3) trading days immediately
following the Closing Date.
(f) All rights to receive shares of Newco Common Stock into and for
which shares of FDB Common Stock or BIF Common Stock shall have been
converted and exchanged pursuant to this Agreement, shall be deemed to have
been issued in full satisfaction of all rights pertaining to such converted
and exchanged shares of FDB Common Stock or BIF Common Stock, respectively.
(g) At the Effective Time, FDB and BIF shall each deliver to the
Exchange Agent a certified copy of a list of its respective stockholders,
after which there shall be no further registration or transfers on the stock
transfer books of FDB of the shares of FDB Common Stock or of BIF of the
shares of BIF Common Stock, all of which were outstanding immediately prior
to the Effective Time. If, after the Effective Time, Certificates are
presented to the Exchange Agent or Newco, they shall be cancelled and
exchanged for Newco Common Stock as provided in this Agreement.
(h) If a certificate representing shares of Newco Common Stock is
to be issued in a name other than that in which the Certificate surrendered
in exchange therefor is registered, it shall be a condition of the issuance
thereof that the Certificate so surrendered shall be properly endorsed,
accompanied by all documents required to evidence and effect such transfer
and otherwise in proper form for transfer and that the Person requesting such
exchange shall pay to Newco any transfer or other taxes required by reason of
the issuance of a certificate representing shares of Newco Common Stock in
any name other than that of the registered holder of the Certificate
surrendered, or otherwise required, or shall establish to the satisfaction of
Newco that such tax has been paid or is not payable.
SECTION 3.4 TAX FREE REORGANIZATION. The parties hereto intend for
the Merger to qualify as a nontaxable reorganization within the meaning of
Section 368(a) and related sections of the Code, and agree to cooperate and
to take such actions as may be reasonably necessary to ensure such result.
SECTION 3.5 DISSENTING SHARES. Notwithstanding anything to the
contrary contained in this Agreement, to the extent appraisal rights are
available to stockholders of FDB or BIF pursuant to the Delaware Code, any
shares of FDB Common Stock or BIF Common Stock held by a Person who objects to
the Merger, whose shares either were not entitled to vote or were not voted in
favor of the Merger and who complies with all of the provisions of the Delaware
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Code concerning the rights of such Person to dissent from the Merger and to
require appraisal of such Person's shares and who has not withdrawn such
objection or waived such rights prior to the Effective Time (collectively
with respect to all such FDB or BIF stockholders, the "Dissenting Shares"),
shall not be converted pursuant to SECTION 3.2(a) but shall become the right
to receive such consideration as may be determined to be due to the holder of
such Dissenting Shares pursuant to the Delaware Code, including, if
applicable, any costs determined to be payable by either FDB or BIF to its
respective holders of Dissenting Shares pursuant to an order of the Delaware
Court of Chancery in accordance with the Delaware Code; PROVIDED, HOWEVER,
that each Dissenting Share held by a Person at the Effective Time who shall,
after the Effective Time, withdraw the demand for appraisal or lose the right
of appraisal, in either case pursuant to the Delaware Code shall be deemed to
be converted, as of the Effective Time, into the number of shares of Newco
Common Stock as is determined in accordance with SECTION 3.2(a).
SECTION 3.6 OPTIONS. (a) At and after the Effective Time, each
option granted by FDB and BIF to purchase shares of FDB Common Stock and BIF
Common Stock, respectively, which is outstanding and unexercised immediately
prior thereto shall cease to represent a right to acquire shares of either
FDB Common Stock or BIF Common Stock and shall be converted automatically
into an option to purchase shares of Newco Common Stock (the "FDB Converted
Stock Options" and the "BIF Converted Stock Options," respectively) in an
amount and at an exercise price determined as provided below and otherwise
subject to the terms of the agreements evidencing the grants of such options:
(i) The number of shares of Newco Common Stock to be
subject to each FDB Converted Stock Option shall be equal to the product of
the number of shares of FDB Common Stock subject to the original option and
the FDB Exchange Ratio, PROVIDED that any fractional shares of Newco Common
Stock shall be rounded up to the next highest whole share; and
(ii) The exercise price per share of Newco Common
Stock under the FDB Converted Stock Option shall be equal to the exercise
price per share of FDB Common Stock under the original option divided by the
FDB Exchange Ratio, PROVIDED that such exercise price shall be rounded to the
nearest whole cent.
(iii) The number of shares of Newco Common Stock to be
subject to each BIF Converted Stock Option shall be equal to the product of
the number of shares of BIF Common Stock subject to the original option and
the BIF Exchange Ratio, PROVIDED that any fractional shares of Newco Common
Stock shall be rounded up to the next highest whole share; and
(iv) The exercise price per share of Newco Common
Stock under the BIF Converted Stock Option shall be equal to the exercise
price per share of BIF Common Stock under the original option divided by the
BIF Exchange Ratio, PROVIDED that such exercise price shall be rounded to the
nearest whole cent.
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(b) The adjustment provided herein with respect to any
options which are "incentive stock options" (as defined in Section 422 of the
Code), shall be and is intended to be effected in a manner which is
consistent with Section 424(a) of the Code. The duration and other terms of
the FDB Converted Stock Options and BIF Converted Stock Options shall be the
same as the original option except that all references to FDB or BIF, as the
case may be, shall be deemed to be references to Newco.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES BY BIF
BIF hereby represents and warrants to FDB that the following are true
and correct as of the date hereof, and will be true and correct as of the
Effective Time:
SECTION 4.1 BIF ORGANIZATION. BIF: (a) is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware and is a registered bank holding company under the BHCA; (b) is
duly qualified to do business and is in good standing in the states of
Delaware and Illinois and in each other jurisdiction in which the nature of
the business conducted or the properties or assets owned or leased by it
makes such qualification necessary and where failure to be so qualified would
reasonably be expected to have a Material Adverse Effect on BIF; and (c) has
full power and authority, corporate and otherwise, to own, operate and lease
its properties as presently owned, operated and leased, and to carry on its
business as it is now being conducted. BIF owns no voting stock or equity
securities of any corporation, association, partnership or other entity,
other than all of the voting stock of BKI and TIA Corp and as set forth on
SCHEDULE 4.1 OF THE BIF BOOK OF SCHEDULES.
SECTION 4.2 BIF CAPITALIZATION. The authorized capital stock of BIF
consists, and at June 30, 1999, consisted of: (a) 6,500,000 shares of common
stock, $0.01 par value per share, of which 5,739,965 shares were issued as of
July 31, 1999, of which 193,910 shares were held in the treasury of BIF as of
that date; and (b) 300,000 shares of preferred stock, no par value per share,
none of which shares are issued and outstanding. The maximum number of
shares of BIF Common Stock (assuming for this purpose that share equivalents
constitute BIF Common Stock) that would be outstanding immediately prior to
the Effective Time (including treasury shares) if all options, warrants,
conversion rights and other rights with respect thereto were exercised and
the restrictions on any restricted stock were no longer applicable is
6,267,722 shares. All of the outstanding shares of capital stock of BIF have
been duly and validly authorized and issued and are fully paid and
nonassessable. Except as contemplated in this Agreement or as set forth in
SCHEDULE 4.2 OF THE BIF BOOK OF SCHEDULES, there are, as of the date of this
Agreement, no outstanding subscriptions, contracts, conversion privileges,
options, warrants, calls or other rights obligating BIF or any BIF Subsidiary
to issue, sell or otherwise dispose of, or to purchase, redeem or otherwise
acquire, any shares of capital stock of BIF or any BIF Subsidiary, other than
preemptive rights granted to stockholders of Illinois state banks pursuant to
the Illinois Banking Act, as amended. Except as permitted by this Agreement
and provided on SCHEDULE 4.2 OF THE BIF BOOK OF SCHEDULES,
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no shares of BIF capital stock have been purchased, redeemed or otherwise
acquired, directly or indirectly, by BIF or any BIF Subsidiary and no
dividends or other distributions payable in any equity securities of BIF or
any BIF Subsidiary have been declared, set aside, made or paid to the
stockholders of BIF.
SECTION 4.3 SUBSIDIARY ORGANIZATION. (a) BKI is an Illinois state
bank duly organized, validly existing and in good standing under the laws of
the State of Illinois. BKI has full power and authority, corporate and
otherwise, to own, operate and lease its properties as presently owned,
operated and leased, and to carry on its business as it is now being
conducted. BKI owns no voting stock or equity securities of any corporation,
association, partnership or other entity, other than as shown on SCHEDULE 4.3
OF THE BIF BOOK OF SCHEDULES.
(b) TIA Corp (i) is, or prior to the Closing will be, a corporation
duly organized, validly existing and in good standing under the laws of the
State of Indiana; (ii) is, or will be prior to the Closing, duly qualified to
do business and is in good standing in the states of Indiana and Illinois and
in each other jurisdiction in which the nature of the business conducted or
the properties or assets owned or leased by it makes such qualification
necessary and where failure to be so qualified would reasonably be expected
to have a Material Adverse Effect on BIF; and (iii) has, or will have prior
to the Closing, full power and authority, corporate and otherwise, to own,
operate and lease its properties as presently owned, operated and leased, and
to carry on its business as it is now being conducted. TIA Corp will own no
voting stock or equity securities of any corporation, association,
partnership or other entity, other than in a fiduciary or representative
capacity for others.
SECTION 4.4 SUBSIDIARY CAPITALIZATION. (a) The authorized capital
stock of BKI consists, and at the Effective Time will consist, of 250,000
shares of common stock, $10.00 par value per share, all of which shares are
validly issued and outstanding, fully paid and nonassessable, and owned by
BIF. There are no options, warrants, rights, calls or commitments of any
character relating to any additional shares of the capital stock of BKI
except for stockholders' preemptive rights granted by the Illinois Banking
Act, as amended. No capital stock or other security issued by BKI has been
issued in violation of, or without compliance with, the preemptive rights of
stockholders.
(b) The authorized capital stock of TIA Corp will consists at the
Effective Time of 1,000 shares of common stock, $0.01 par value per share,
all of which shares will be validly issued and outstanding, fully paid and
nonassessable, and owned by BIF. There will be no options, warrants, rights,
calls or commitments of any character relating to any additional shares of
the capital stock of TIA Corp.
SECTION 4.5 AUTHORIZATION. BIF has the requisite corporate power
and authority to enter into and perform its obligations under this Agreement
and the execution, delivery and performance of this Agreement by BIF and the
consummation by it of the transactions contemplated thereby, have been duly
authorized by all necessary corporate action, subject to stockholder
approval. This Agreement constitutes a legal, valid and binding obligation of
BIF enforceable in accordance with its terms except as such enforcement may
be limited by
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bankruptcy, insolvency, reorganization or other similar laws and subject to
general principles of equity.
SECTION 4.6 LITIGATION AND REGULATORY MATTERS. SCHEDULE 4.6 OF THE
BIF BOOK OF SCHEDULES sets forth a list of all actions, suits or proceedings
pending as of the date hereof in which BIF or any BIF Subsidiary is a named
party, other than collection or foreclosure actions brought by BIF or any BIF
Subsidiary in the ordinary course of business and where no counterclaim has
been filed against BIF or such BIF Subsidiary. Except as set forth on
SCHEDULE 4.6 OF THE BIF BOOK OF SCHEDULES, there is no action, suit,
proceeding, claim or formal written protest by any Person or agency, or any
investigation or report by any regulatory authority having jurisdiction over
BIF or any BIF Subsidiary or any of its respective assets or businesses which
is pending or, to BIF's knowledge, threatened against BIF or any BIF
Subsidiary, or any of its respective officers or directors in their
capacities as such, or its assets, business or goodwill which would
reasonably be expected to have a Material Adverse Effect on BIF or which
would impair BIF's ability to consummate the Merger. BIF further represents
and warrants that except as set forth on SCHEDULE 4.6 OF THE BIF BOOK OF
SCHEDULES, it does not know or have any reason to believe that there is any
basis for assertion against it or any BIF Subsidiary of any material claims
based upon the wrongful action or inaction of either BIF or any BIF
Subsidiary, and any of their respective officers, directors or employees
which would reasonably be expected to have a Material Adverse Effect on BIF
or which would impair BIF's ability to consummate the Merger. Neither BIF
nor any BIF Subsidiary is subject to, or in default with respect to, nor are
any of its assets subject to, any outstanding judgment, regulatory agreement,
injunction, writ, order or decree or any other requirement of any
governmental body or court or of any governmental agency or instrumentality
which would reasonably be expected to have a Material Adverse Effect on BIF
or which would impair BIF's ability to consummate the Merger.
SECTION 4.7 INSURANCE. SCHEDULE 4.7 OF THE BIF BOOK OF SCHEDULES
lists the policies of insurance (including bankers blanket bond and insurance
providing benefits for employees) owned or held by BIF or any BIF Subsidiary
on the date hereof. Each such policy is, and BIF will use all reasonable
efforts to keep each such policy, in full force and effect (except for any
expiring policy which is replaced by coverage at least as extensive) until
the Effective Time. All premiums due on such policies have been paid.
SECTION 4.8 DEFAULTS UNDER AGREEMENTS. Neither BIF nor any BIF
Subsidiary is in default or alleged to be in default, under any loan or
credit agreement, conditional sales contract or other title retention
agreement or security agreement relating to money borrowed by BIF or any BIF
Subsidiary, agreements pursuant to which it leases real or personal property
or any other instrument or obligation, which would reasonably be expected to
have a Material Adverse Effect on BIF. Neither BIF nor any BIF Subsidiary is
in default in any material respect and BIF has no knowledge of any material
default under such instruments by any other party thereto and has no
knowledge of any event which with notice or lapse of time or both would
constitute a material default.
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SECTION 4.9 FINANCIAL STATEMENTS AND REPORTS. Copies of the
following financial statements and reports of BIF and the BIF Subsidiaries
(collectively, the "BIF Financial Statements") have been delivered by BIF to
FDB:
(a) Consolidated Balance Sheets and the related Statements of
Income, Statements of Changes in Stockholders' Equity and Statements of Cash
Flows of BIF for the years ended December 31, 1996, 1997 and 1998;
(b) Consolidated Balance Sheets and the related Statements of
Income of BIF for the quarter ended March 31, 1999; and
(c) Consolidated Reports of Condition and Income (the "Call
Reports") for BKI at the close of business on December 31, 1996, 1997 and
1998, and on March 31, 1999.
The BIF Financial Statements are complete and correct in all material
respects and fairly present the consolidated financial position of BIF and
BKI, as the case may be, at the dates shown and the results of operations for
the periods covered. The BIF Financial Statements described in clause (a)
above are audited statements and have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis. The
BIF Financial Statements described in clauses (b) and (c) above have been
prepared on a basis consistent with past accounting practices and as required
by applicable rules or regulations and fairly present the consolidated
financial condition and results of operations at the dates and for the
entities and periods presented, subject to year-end audit adjustments (which
changes in the aggregate would not reasonably be expected to be materially
adverse). The BIF Financial Statements do not include any material assets or
omit to state any material liabilities, absolute or contingent, or other
facts, which inclusion or omission would render the BIF Financial Statements
misleading in any material respect.
SECTION 4.10 PROPERTIES, CONTRACTS, BENEFIT PLANS AND OTHER
AGREEMENTS. SCHEDULE 4.10 OF THE BIF BOOK OF SCHEDULES lists or describes the
following:
(a) All real property owned or leased by BIF or any BIF Subsidiary
together with a legal description of such real estate, and each lease of real
property to which BIF or any BIF Subsidiary is a party, identifying the
parties thereto, the annual rental payable and the expiration date thereof;
(b) All loan and credit agreements, conditional sales contracts or
other title retention agreements or security agreements relating to money
borrowed by BIF or any BIF Subsidiary, exclusive of deposit agreements with
customers of any BIF Subsidiary entered into in the ordinary course of
business, agreements for the purchase of federal funds and repurchase
agreements;
(c) All agreements, loans, contracts, leases, guaranties, letters
of credit, lines of credit or commitments of BIF or any of the BIF
Subsidiaries not referred to elsewhere in this Section which:
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(i) involve payment by BIF or any BIF Subsidiary (other than
as disbursement of loan proceeds to customers) of more than $50,000;
(ii) involve payments based on profits of BIF or any BIF
Subsidiary;
(iii) relate to the future purchase of goods or services in
excess of the requirements of its respective business at current
levels or for normal operating purposes;
(iv) were not made in the ordinary course of business; or
(v) materially affect the business or financial condition of
BIF or any BIF Subsidiary;
(d) All profit sharing; group insurance; hospitalization; stock
option; pension; retirement; bonus; deferred compensation; stock bonus; stock
purchase; collective bargaining agreements, contracts or arrangements under
which pensions, deferred compensation or other retirement benefits are being
paid or may become payable respectively by BIF or any BIF Subsidiary; or
other employee welfare or benefit agreements, plans or arrangements
established, maintained, sponsored or undertaken by BIF or any BIF Subsidiary
for the benefit of its respective officers, directors or employees, including
each trust or other agreement with any custodian or any trustee for funds
held under any such agreement, plan or arrangement (collectively, the "BIF
Employee Benefit Plans"), and, in respect to any of them, the latest reports
or forms, if any, filed with the Department of Labor and Pension Benefit
Guaranty Corporation under the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), any current financial or actuarial reports and
any currently effective United States Internal Revenue Service ("IRS")
private rulings or determination letters obtained by or for the benefit of
BIF or any BIF Subsidiary;
(e) All leases or licenses of BIF or any BIF Subsidiary with
respect to personal property, whether as lessee or licensee, with annual
rental or other payments due thereunder in excess of $20,000;
(f) All employment and consulting contracts to which BIF or any BIF
Subsidiary is a party (except for ordinary oral employment contracts with
employees of BIF or any BIF Subsidiary creating at will employment
relationships);
(g) The name and annual salary as of January 1, 1999, of each
director, officer or employee of BIF or any BIF Subsidiary; and
(h) The TIA Agreement.
Copies of each document, plan or contract listed and described in
SCHEDULE 4.10 OF THE BIF BOOK OF SCHEDULES are appended to such Schedule and
included in the BIF Book of Schedules.
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SECTION 4.11 DISCLOSURES. No representation or warranty made herein
by BIF contains any untrue statement of a material fact, or omits to state a
material fact necessary to make the statements contained herein under the
circumstances under which they were made not misleading. Except as and to
the extent reflected or reserved against in BIF's audited financial
statements for the year ended December 31, 1998, referenced in SECTION 4.9
above, or the Subsequent BIF Financial Statements (as such term is defined in
SECTION 6.3), neither BIF nor any BIF Subsidiary has, and with respect to the
Subsequent BIF Financial Statements will not have, any liabilities or
obligations, of any nature, secured or unsecured, (whether accrued, absolute,
contingent or otherwise) including, without limitation, any tax liabilities
due or to become due, which would reasonably be expected to have a Material
Adverse Effect on BIF.
SECTION 4.12 EFFECT OF AGREEMENT. The execution, delivery and
performance of this Agreement by BIF and the consummation by it of the
transactions contemplated hereby do not: (a) require the consent, waiver,
order, registration, qualification, approval, license or authorization of any
Person, court, regulatory authority or other governmental body, other than as
specifically contemplated by this Agreement and as may be required in
connection or in compliance with the provisions of the BCA, the Delaware
Code, the BHCA and the Illinois Act; (b) violate, with or without the giving
of notice or the passage of time or both, in any material respect any
provision of law applicable to it; (c) conflict with or result in a breach of
any terms of its certificate of incorporation or bylaws, or any material
mortgage, deed of trust, license, indenture or other agreement or instrument,
or any order, judgment, decree, statute, regulation or other restriction of
any kind or character, to which BIF or any BIF Subsidiary is a party or by
which it or any of its respective assets may be bound; (d) give to others any
right to accelerate or terminate, or result in acceleration or termination
of, any such agreement or instrument; (e) result in termination of any
provision of any such agreement or instrument; or (f) result in the creation
of any lien, charge or encumbrance upon any of the property or assets of BIF
or any BIF Subsidiary.
SECTION 4.13 BOOKS AND RECORDS. The books and records of BIF and the
BIF Subsidiaries are in all material respects complete and correct and
accurately reflect the basis for the respective financial condition and
results of operations of BIF and the BIF Subsidiaries set forth in the BIF
Financial Statements.
SECTION 4.14 TAXES. Each of BIF and the BIF Subsidiaries has filed
with the appropriate governmental agencies all federal, state and local
income, franchise, excise, sales, use, real and personal property and other
tax returns and reports required to be filed by it. Except as set forth on
SCHEDULE 4.14 OF THE BIF BOOK OF SCHEDULES, neither BIF nor any BIF
Subsidiary is: (a) delinquent in the payment of any taxes shown on such
returns or reports or on any assessments received by it for such taxes; (b)
aware of any pending or threatened examination for income taxes for any year
by the IRS or any state tax agency; (c) subject to any agreement extending
the period for assessment or collection of any federal or state tax; or (d) a
party to any action or proceeding nor has any claim been asserted against it
by any governmental authority for assessment or collection of taxes. None of
the tax liabilities of BIF or any BIF Subsidiary has ever been audited by the
IRS or any state tax agency for any period since January 1, 1994. Other than
non-material items related to real estate tax assessments,
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neither BIF nor any BIF Subsidiary is, to the knowledge of BIF, a party to
any threatened action or proceeding by any governmental authority for
assessment or collection of taxes. The reserve for taxes in the audited
financial statements of BIF for the year ended December 31, 1998, is adequate
to cover all of the tax liabilities of BIF and the BIF Subsidiaries
(including, without limitation, income taxes and franchise fees) that may
become payable in future years in respect to any transactions consummated
prior to December 31, 1998. Neither BIF nor any of the BIF Subsidiaries has
and, to the best of BIF's knowledge, will not have any liability for taxes of
any nature for or in respect of the operation of its business or ownership of
its assets from December 31, 1998, up to and including the Effective Time,
except to the extent reflected on the audited BIF Financial Statements for
the year ended December 31, 1998, or on the Subsequent BIF Financial
Statements or otherwise reflected in the books and records of BIF and the BIF
Subsidiaries for the period following its then most recent of the Subsequent
BIF Financial Statements.
SECTION 4.15 TITLE TO PROPERTIES. BIF either directly or indirectly
owns all of the issued and outstanding capital stock of the BIF Subsidiaries
free and clear of all liens and encumbrances of any kind whatsoever. Each of
BIF and the BIF Subsidiaries has good and marketable title to all other
assets and properties, whether real or personal, tangible or intangible,
which it purports to own subject to no liens, mortgages, security interests,
encumbrances or charges of any kind except: (a) as noted in the BIF Financial
Statements or on SCHEDULE 4.15 OF THE BIF BOOK OF SCHEDULES; (b) statutory
liens for taxes not yet delinquent or being contested in good faith by
appropriate proceedings and for which appropriate reserves have been
established and reflected on the BIF Financial Statements or will be
reflected on the Subsequent BIF Financial Statements; (c) pledges or liens
required to be granted in connection with the acceptance of government
deposits, granted in connection with repurchase or reverse repurchase
agreements or otherwise incurred in the ordinary course of business; and (d)
minor defects and irregularities in title and encumbrances which do not
materially impair the use thereof for the purposes for which they are held
and which would not reasonably be expected to have a Material Adverse Effect
on BIF. Each of BIF and the BIF Subsidiaries as lessee has the right under
valid and subsisting leases to occupy, use, possess and control any and all
of the respective properties leased by it.
SECTION 4.16 BROKERAGE COMMISSIONS. Except as disclosed in SCHEDULE
4.16 OF THE BIF BOOK OF SCHEDULES, all negotiations relating to this
Agreement and the transactions contemplated herein have been and will be
carried on between BIF and FDB and its respective counsel, accountants and
other representatives in such a manner that no actions of BIF or any BIF
Subsidiary or any of its respective officers, agents or representatives shall
give rise to any claim against BIF, FDB or Newco or any of its respective
Affiliates for any brokerage commission, finder's fee, investment advisor's
fee or other like payment.
SECTION 4.17 CERTIFICATE OF INCORPORATION, CHARTER AND BYLAWS. The
copies of the certificate of incorporation of BIF and the charter of BKI, and
the bylaws of each of BIF and BKI, as amended to date, are complete and
correct and set forth in SCHEDULE 4.17 OF THE BIF BOOK OF SCHEDULES.
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SECTION 4.18 INTERIM EVENTS. Except as disclosed on SCHEDULE 4.18 OF
THE BIF BOOK OF SCHEDULES and as otherwise permitted hereunder, since
December 31, 1998, neither BIF nor any of the BIF Subsidiaries has:
(a) Suffered any changes having a Material Adverse Effect on BIF,
or in the operation or conduct of the respective businesses of BIF or any of
the BIF Subsidiaries;
(b) Suffered any material damage, destruction or loss to any of its
respective properties whether covered by insurance or not;
(c) Declared any dividend or other distribution with respect to its
stock (except for payment of dividends and distributions from any BIF
Subsidiary to BIF or any other BIF Subsidiary), repurchased or redeemed
shares of its stock, issued any shares of its stock or sold or agreed to
issue or sell any of its stock or any right to purchase or acquire any such
stock or any security convertible into such stock or taken any action to
reclassify, recapitalize or split up its stock or issued any stock
appreciation rights;
(d) Granted or agreed to grant any increase in benefits payable or
to become payable under any BIF Employee Benefit Plan;
(e) Cancelled or compromised any debt or claim other than in the
ordinary course of business;
(f) Entered into any transaction, contract or commitment other than
in the ordinary course of business;
(g) Incurred any obligation or liability (fixed or contingent)
other than obligations and liabilities incurred in the ordinary course of its
respective business;
(h) Mortgaged, pledged or subjected to a lien, security interest or
other encumbrance any of its assets except to tax and other liens which arise
by operation of law and with respect to which payment is not past due and
except for pledges or liens: (i) required to be granted in connection with
the acceptance by any BIF 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 respective
business;
(i) Conducted its respective business in any manner other than
substantially as it was being conducted prior to such time;
(j) Leased, sold or otherwise disposed of any of its assets except
in the ordinary course of business or leased, purchased or otherwise acquired
from third parties any assets except in the ordinary course of business;
(k) Except for the transactions contemplated by this Agreement,
merged, consolidated or agreed to merge or consolidate with or into any other
Person, or acquired or agreed to acquire any stock, equity interest or
business of any other Person;
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(l) Agreed to enter into any transaction for the borrowing or
loaning of monies, other than in the ordinary course of business; or
(m) Increased the salary of any officer or the compensation or fees
payable to any director, except for normal increases in the ordinary course
of business or in accordance with any BIF Employee Benefit Plan, or entered
into any employment contract with any officer or salaried employee or
installed any employee welfare, stock option, profit sharing or other similar
plan or arrangement.
SECTION 4.19 REGULATORY FILINGS. Each of BIF and the BIF
Subsidiaries has filed in a timely manner all required filings with all
proper regulatory agencies, including, but not limited to: (a) the
Securities and Exchange Commission (the "SEC"); (b) the Board of Governors of
the Federal Reserve System (the "Federal Reserve"); (c) the Federal Deposit
Insurance Corporation (the "FDIC"); and (d) the Commissioner. All such
filings with such federal and state regulatory agencies were accurate and
complete in all material respects as of the dates of the filings, and no such
filing has made any untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements made, in the light of
the circumstances under which they were made, not misleading. Accurate and
complete copies of each document filed by BIF with the SEC since January 1,
1999, are attached as SCHEDULE 4.19 OF THE BIF BOOK OF SCHEDULES.
SECTION 4.20 COMPLIANCE WITH APPLICABLE LAW. Each of BIF and the BIF
Subsidiaries holds all licenses, certificates, permits, franchises and rights
from all appropriate federal, state or other public authorities necessary for
the conduct of its respective business and where failure to do so would
reasonably be expected to have a Material Adverse Effect on BIF. Each of BIF
and the BIF Subsidiaries has complied in all material respects with all
applicable federal, state and local statutes, ordinances, regulations, rules
or requirements, and neither BIF nor any BIF Subsidiary is presently charged
with, or to the knowledge of BIF, under governmental investigation with
respect to, any actual or alleged material violations of any statute,
ordinance, regulation or rule.
SECTION 4.21 COMPLIANCE WITH ERISA. All of the employee benefit
plans (as defined in Section 3(3) of ERISA) established or maintained by BIF
or any of the BIF Subsidiaries, or to which BIF or any of the BIF
Subsidiaries contributes are in compliance in all material respects with all
applicable requirements of ERISA, and are in compliance in all material
respects with all applicable requirements (including qualification and
non-discrimination requirements in effect as of the Effective Time) of the
Code for obtaining the tax benefits the Code thereupon permits with respect
to such employee benefit plans. For purposes of this Section, non-compliance
with the Code and ERISA is material if such non-compliance would reasonably
be expected to have a Material Adverse Effect on BIF. No such employee
benefit plan has, or as of the Effective Time will have, any amount of
unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA) for
which BIF or any of the BIF Subsidiaries would be liable to any Person under
Title IV of ERISA if any such employee benefit plan were terminated as of the
Effective Time, which amounts would be material to BIF and the BIF
Subsidiaries taken as a whole. Such employee benefit plans are funded in
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accordance with Section 412 of the Code (if applicable). There would be no
obligations which would be material to BIF and the BIF Subsidiaries taken as
a whole under Title IV of ERISA relating to any such employee benefit plan
that is a multi-employer plan if any such plan were terminated or if BIF or
the BIF Subsidiaries withdrew from any such plan as of the Effective Time.
SECTION 4.22 COMPLIANCE WITH ENVIRONMENTAL LAWS. Each of BIF and the
BIF Subsidiaries has conducted its respective business in material compliance
with all federal, state, county and municipal laws, including statutes,
regulations, rules, ordinances, orders, restrictions and requirements,
relating to underground storage tanks, petroleum products, air pollutants,
water pollutants or process waste water or otherwise relating to the
environment or toxic or hazardous substances or to the manufacture,
processing, distribution, use, recycling, generation, treatment, handling,
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, but not limited to, 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 regulations of the Environmental Protection Agency, the Nuclear
Regulatory Agency and any state department of natural resources or state
environmental protection agency now or at any time hereafter in effect
(collectively, the "Environmental Laws"). There are no pending or, to the
knowledge of BIF, threatened actions or proceedings by any local
municipality, sewerage district or other governmental entity against BIF or
any of the BIF Subsidiaries with respect to the Environmental Laws and, to
the knowledge of BIF, there is no basis or grounds for any such action or
proceeding. No environmental clearances or other governmental approvals are
required for the conduct of the business of BIF or any of the BIF
Subsidiaries or the consummation of the transactions contemplated hereby. To
the knowledge of BIF, neither BIF nor any of the BIF Subsidiaries is the
owner of any interest in real estate on which any substances have been used,
stored, deposited, treated, recycled or disposed of, which substances if
known to be present on, at or under such property, would require clean-up,
removal or some other remedial action under any Environmental Laws.
SECTION 4.23 TRUST ADMINISTRATION. Each of BIF and the BIF
Subsidiaries has properly administered, in all material respects, all
accounts for which it acts as fiduciary, including but not limited to
accounts for which it serves as a trustee, agent, custodian, personal
representative, guardian or investment advisor, in accordance with the terms
of the governing documents and applicable state and federal law and
regulations and common law. None of BIF or any BIF Subsidiary, or any
director, officer or employee of BIF or any BIF Subsidiary has committed any
material breach of trust with respect to any such fiduciary account, and the
accountings for each such fiduciary account are true and correct in all
material respects and accurately reflect the assets of such fiduciary account.
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SECTION 4.24 LOAN LOSS RESERVE. The reserve for possible loan and
lease losses shown on the March 31, 1999, Call Report for BKI is adequate in
all material respects under the requirements of generally accepted accounting
principles to provide for possible losses, net of recoveries relating to
loans previously charged off, on loans outstanding (including, without
limitation, accrued interest receivable) as of March 31, 1999. The aggregate
loan balances of BKI at such date in excess of such reserves are, to the best
knowledge of BIF, and based on past loan loss experience, collectible in
accordance with their terms.
SECTION 4.25 YEAR 2000. Neither BIF nor any BIF Subsidiary has
received, and BIF has no reason to believe that it or any BIF Subsidiary will
receive, a rating of less than "satisfactory" on any Year 2000 Report of
Examination conducted by the Commissioner, the FDIC, the Federal Reserve or
any other regulatory authority. SCHEDULE 4.25 OF THE BIF BOOK OF SCHEDULES
contains complete and accurate copies of the plans of BIF and each BIF
Subsidiary for addressing the issues set forth in the statements of the FFIEC
dated May 5, 1997, entitled "Year 2000 Project Management Awareness," and
December 17, 1997, entitled "Safety and Soundness Guidelines Concerning the
Year 2000 Business Risk," as such issues affect BIF and its Subsidiaries.
BIF, each BIF Subsidiary and their respective plans are in material
compliance with the Schedule set forth in the foregoing FFIEC statements and
with the foregoing FFIEC guidelines.
SECTION 4.26 APPROVAL DELAYS. To the best of its knowledge, BIF
knows of no reason why the granting of any of the regulatory approvals
referred to in SECTION 12.2 would be denied or unduly delayed.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES BY FDB
FDB hereby represents and warrants to BIF that the following are true
and correct as of the date hereof, and will be true and correct as of the
Effective Time:
SECTION 5.1 FDB ORGANIZATION. FDB: (a) is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware and is a registered bank holding company under the BHCA; (b) is
duly qualified to do business and is in good standing in the states of
Delaware and Illinois and in each other jurisdiction in which the nature of
the business conducted or the properties or assets owned or leased by it
makes such qualification necessary and where failure to be so qualified would
reasonably be expected to have a Material Adverse Effect on FDB; and (c) has
full power and authority, corporate and otherwise, to own, operate and lease
its properties as presently owned, operated and leased, and to carry on its
business as it is now being conducted. FDB owns no voting stock or equity
securities of any corporation, association, partnership or other entity,
other than all of the voting stock of FNB, First Trust and FirsTech and as
set forth on SCHEDULE 5.1 OF THE FDB BOOK OF SCHEDULES.
SECTION 5.2 FDB CAPITALIZATION. The authorized capital stock of FDB
consists, and at June 30, 1999, consisted of: (a) 5,000,000 shares of common
stock, $0.01 par value per
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share, of which 2,909,397 shares were issued as of July 28, 1999, of which
144,427 shares were held in the treasury of FDB as of that date; and (b)
200,000 shares of preferred stock, no par value per share, none of which
shares are issued and outstanding. The maximum number of shares of FDB
Common Stock (assuming for this purpose that share equivalents constitute FDB
Common Stock) that would be outstanding immediately prior to the Effective
Time (including treasury shares) if all options, warrants, conversion rights
and other rights with respect thereto were exercised and the restrictions on
any restricted stock were no longer applicable is 2,926,647 shares. All of
the outstanding shares of capital stock of FDB have been duly and validly
authorized and issued and are fully paid and nonassessable. Except as
contemplated in this Agreement or as set forth in SCHEDULE 5.2 OF THE FDB
BOOK OF SCHEDULES, there are, as of the date of this Agreement, no
outstanding subscriptions, contracts, conversion privileges, options,
warrants, calls or other rights obligating FDB or any FDB Subsidiary to
issue, sell or otherwise dispose of, or to purchase, redeem or otherwise
acquire, any shares of capital stock of FDB or any FDB Subsidiary, other than
preemptive rights granted to stockholders of Illinois state banks pursuant to
the Illinois Banking Act, as amended. Except as permitted by this Agreement
and provided on SCHEDULE 5.2 OF THE FDB BOOK OF SCHEDULES, no shares of FDB
capital stock have been purchased, redeemed or otherwise acquired, directly
or indirectly, by FDB or any FDB Subsidiary and no dividends or other
distributions payable in any equity securities of FDB or any FDB Subsidiary
have been declared, set aside, made or paid to the stockholders of FDB.
SECTION 5.3 SUBSIDIARY ORGANIZATION. (a) FNB is a national banking
association duly organized, validly existing and in good standing under the
laws of the United States. FNB has full power and authority, corporate and
otherwise, to own, operate and lease its properties as presently owned,
operated and leased, and to carry on its business as it is now being
conducted. FNB owns no voting stock or equity securities of any corporation,
association, partnership or other entity, other than as shown on SCHEDULE 5.3
OF THE FDB BOOK OF SCHEDULES.
(b) First Trust is an Illinois state bank duly organized, validly
existing and in good standing under the laws of the State of Illinois. The
Bank has full power and authority, corporate and otherwise, to own, operate
and lease its properties as presently owned, operated and leased, and to
carry on its business as it is now being conducted. First Trust owns no
voting stock or equity securities of any corporation, association,
partnership or other entity, other than as shown on SCHEDULE 5.3 OF THE FDB
BOOK OF SCHEDULES.
(c) FirsTech: (i) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware; (ii)
is duly qualified to do business and is in good standing in the states of
Delaware and Illinois and in each other jurisdiction in which the nature of
the business conducted or the properties or assets owned or leased by it
makes such qualification necessary and where failure to be so qualified would
reasonably be expected to have a Material Adverse Effect on FDB; and (iii)
has full power and authority, corporate and otherwise, to own, operate and
lease its properties as presently owned, operated and leased, and to carry on
its business as it is now being conducted. FirsTech owns no voting stock or
equity securities of any corporation, association, partnership or other
entity.
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SECTION 5.4 SUBSIDIARY CAPITALIZATION. (a) The authorized capital stock
of FNB consists, and at the Effective Time will consist, of 130,975 shares of
common stock, $25.00 par value per share, all of which shares are validly issued
and outstanding, fully paid and nonassessable, and owned by FDB. There are no
options, warrants, rights, calls or commitments of any character relating to any
additional shares of the capital stock of FNB.
(b) The authorized capital stock of First Trust consists, and at the
Effective Time will consist, of 9,000 shares of common stock, $50.00 par value
per share, all of which shares are validly issued and outstanding, fully paid
and nonassessable, and owned by FDB. There are no options, warrants, rights,
calls or commitments of any character relating to any additional shares of the
capital stock of First Trust except for the stockholders' pre-emptive rights
granted by the Illinois Banking Act, as amended.
(c) The authorized capital stock of FirsTech consists, and at the
Effective Time will consist, of 1,000 shares of common stock, no par value per
share, 100 of which shares are validly issued and outstanding, fully paid and
nonassessable, and owned by FDB. There are no options, warrants, rights, calls
or commitments of any character relating to any additional shares of the capital
stock of FirsTech.
SECTION 5.5 AUTHORIZATION. FDB has the requisite corporate power and
authority to enter into and perform its obligations under this Agreement and the
execution, delivery and performance of this Agreement by FDB and the
consummation by it of the transactions contemplated thereby, have been duly
authorized by all necessary corporate action, subject to stockholder approval.
This Agreement constitutes a legal, valid and binding obligation of FDB
enforceable in accordance with its terms except as such enforcement may be
limited by bankruptcy, insolvency, reorganization or other similar laws and
subject to general principles of equity.
SECTION 5.6 LITIGATION AND REGULATORY MATTERS. SCHEDULE 5.6 OF THE FDB
BOOK OF SCHEDULES sets forth a list of all actions, suits or proceedings pending
as of the date hereof in which FDB or any FDB Subsidiary is a named party, other
than collection or foreclosure actions brought by FDB or any FDB Subsidiary in
the ordinary course of business and where no counterclaim has been filed against
FDB or such FDB Subsidiary. Except as set forth on SCHEDULE 5.6 OF THE FDB BOOK
OF SCHEDULES, there is no action, suit, proceeding, claim or formal written
protest by any Person or agency, or any investigation or report by any
regulatory authority having jurisdiction over FDB or any FDB Subsidiary or any
of its respective assets or businesses which is pending or, to FDB's knowledge,
threatened against FDB or any FDB Subsidiary, or any of its respective officers
or directors in their capacities as such, or its assets, business or goodwill
which would reasonably be expected to have a Material Adverse Effect on FDB or
which would impair FDB's ability to consummate the Merger. FDB further
represents and warrants that except as set forth on SCHEDULE 5.6 OF THE FDB BOOK
OF SCHEDULES, it does not know or have any reason to believe that there is any
basis for assertion against it or any FDB Subsidiary of any material claims
based upon the wrongful action or inaction of either FDB or any FDB Subsidiary,
and any of their respective officers, directors or employees which would
reasonably be expected to have a Material Adverse Effect
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on FDB or which would impair FDB's ability to consummate the Merger. Neither
FDB nor any FDB Subsidiary is subject to, or in default with respect to, nor
are any of its assets subject to, any outstanding judgment, regulatory
agreement, injunction, writ, order or decree or any other requirement of any
governmental body or court or of any governmental agency or instrumentality
which would reasonably be expected to have a Material Adverse Effect on FDB
or which would impair FDB's ability to consummate the Merger.
SECTION 5.7 INSURANCE. SCHEDULE 5.7 OF THE FDB BOOK OF SCHEDULES lists
the policies of insurance (including bankers blanket bond and insurance
providing benefits for employees) owned or held by FDB or any FDB Subsidiary on
the date hereof. Each such policy is, and FDB will use all reasonable efforts
to keep each such policy, in full force and effect (except for any expiring
policy which is replaced by coverage at least as extensive) until the Effective
Time. All premiums due on such policies have been paid.
SECTION 5.8 DEFAULTS UNDER AGREEMENTS. Neither FDB nor any FDB
Subsidiary is in default or alleged to be in default, under any loan or credit
agreement, conditional sales contract or other title retention agreement or
security agreement relating to money borrowed by FDB or any FDB Subsidiary,
agreements pursuant to which it leases real or personal property or any other
instrument or obligation, which would reasonably be expected to have a Material
Adverse Effect on FDB. Neither FDB nor any FDB Subsidiary is in default in any
material respect and FDB has no knowledge of any material default under such
instruments by any other party thereto and has no knowledge of any event which
with notice or lapse of time or both would constitute a material default.
SECTION 5.9 FINANCIAL STATEMENTS AND REPORTS. Copies of the following
financial statements and reports of FDB and the FDB Subsidiaries (collectively,
the "FDB Financial Statements") have been delivered by FDB to BIF:
(a) Consolidated Balance Sheets and the related Statements of Income,
Statements of Changes in Stockholders' Equity and Statements of Cash Flows of
FDB for the years ended December 31, 1996, 1997 and 1998; and
(b) Consolidated Balance Sheets and the related Statements of Income
of FDB for the quarter ended March 31, 1999; and
(c) Call Reports for FNB and First Trust, in each case at the close of
business on December 31, 1996, 1997 and 1998, and on March 31, 1999.
The FDB Financial Statements are complete and correct in all material respects
and fairly present the consolidated financial position of FDB, FNB, First Trust
and FirsTech, as the case may be, at the dates shown and the results of
operations for the periods covered. The FDB Financial Statements described in
clause (a) above are audited statements and have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis.
The FDB Financial Statements described in clauses (b) and (c) above have been
prepared on a basis consistent with past accounting practices and as required by
applicable rules or regulations and fairly present the consolidated financial
condition and results of
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operations at the dates and for the entities and periods presented, subject
to year-end audit adjustments (which changes in the aggregate would not
reasonably be expected to be materially adverse). The FDB Financial
Statements do not include any material assets or omit to state any material
liabilities, absolute or contingent, or other facts, which inclusion or
omission would render the FDB Financial Statements misleading in any material
respect.
SECTION 5.10 PROPERTIES, CONTRACTS, BENEFIT PLANS AND OTHER AGREEMENTS.
SCHEDULE 5.10 OF THE FDB BOOK OF SCHEDULES lists or describes the following:
(a) All real property owned or leased by FDB or any FDB Subsidiary
together with a legal description of such real estate, and each lease of real
property to which FDB or any FDB Subsidiary is a party, identifying the parties
thereto, the annual rental payable and the expiration date thereof;
(b) All loan and credit agreements, conditional sales contracts or
other title retention agreements or security agreements relating to money
borrowed by FDB or any FDB Subsidiary, exclusive of deposit agreements with
customers of any FDB Subsidiary entered into in the ordinary course of business,
agreements for the purchase of federal funds and repurchase agreements;
(c) All agreements, loans, contracts, leases, guaranties, letters of
credit, lines of credit or commitments of FDB or any of the FDB Subsidiaries not
referred to elsewhere in this Section which:
(i) involve payment by FDB or any FDB Subsidiary (other than as
disbursement of loan proceeds to customers) of more than $50,000;
(ii) involve payments based on profits of FDB or any FDB
Subsidiary;
(iii) relate to the future purchase of goods or services in
excess of the requirements of its respective business at current levels
or for normal operating purposes;
(iv) were not made in the ordinary course of business; or
(v) materially affect the business or financial condition of
FDB or any FDB Subsidiary;
(d) All profit sharing; group insurance; hospitalization; stock
option; pension; retirement; bonus; deferred compensation; stock bonus; stock
purchase; collective bargaining agreements, contracts or arrangements under
which pensions, deferred compensation or other retirement benefits are being
paid or may become payable respectively by FDB or any FDB Subsidiary; or other
employee welfare or benefit agreements, plans or arrangements established,
maintained, sponsored or undertaken by FDB or any FDB Subsidiary for the benefit
of its respective officers, directors or employees, including each trust or
other agreement with any custodian or any trustee for funds held under any such
agreement, plan or
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arrangement (collectively, the "FDB Employee Benefit Plans"), and, in respect
to any of them, the latest reports or forms, if any, filed with the
Department of Labor and Pension Benefit Guaranty Corporation under ERISA, any
current financial or actuarial reports and any currently effective IRS
private rulings or determination letters obtained by or for the benefit of
FDB or any FDB Subsidiary;
(e) All leases or licenses of FDB or any FDB Subsidiary with respect
to personal property, whether as lessee or licensee, with annual rental or other
payments due thereunder in excess of $20,000;
(f) All employment and consulting contracts to which FDB or any FDB
Subsidiary is a party (except for ordinary oral employment contracts with
employees of FDB or any FDB Subsidiary creating at will employment
relationships); and
(g) The name and annual salary as of January 1, 1999, of each
director, officer or employee of FDB or any FDB Subsidiary.
Copies of each document, plan or contract listed and described in
SCHEDULE 5.10 OF THE FDB BOOK OF SCHEDULES are appended to such Schedule and
included in the FDB Book of Schedules.
SECTION 5.11 DISCLOSURES. No representation or warranty made herein by
FDB contains any untrue statement of a material fact, or omits to state a
material fact necessary to make the statements contained herein under the
circumstances under which they were made not misleading. Except as and to the
extent reflected or reserved against in FDB's audited financial statements for
the year ended December 31, 1998, referenced in SECTION 5.9 above, or the
Subsequent FDB Financial Statements, neither FDB nor any FDB Subsidiary has, and
with respect to the Subsequent FDB Financial Statements (as such term is defined
in SECTION 7.3) will not have, any liabilities or obligations, of any nature,
secured or unsecured, (whether accrued, absolute, contingent or otherwise)
including, without limitation, any tax liabilities due or to become due, which
would reasonably be expected to have a Material Adverse Effect on FDB.
SECTION 5.12 EFFECT OF AGREEMENT. The execution, delivery and
performance of this Agreement by FDB and the consummation by it of the
transactions contemplated hereby do not: (a) require the consent, waiver, order,
registration, qualification, approval, license or authorization of any Person,
court, regulatory authority or other governmental body, other than as
specifically contemplated by this Agreement and as may be required in connection
or in compliance with the provisions of the BCA, the Delaware Code, the BHCA and
the Illinois Act; (b) violate, with or without the giving of notice or the
passage of time or both, in any material respect any provision of law applicable
to it; (c) conflict with or result in a breach of any terms of its certificate
of incorporation or bylaws, or any material mortgage, deed of trust, license,
indenture or other agreement or instrument, or any order, judgment, decree,
statute, regulation or other restriction of any kind or character, to which FDB
or any FDB Subsidiary is a party or by which it or any of its respective assets
may be bound; (d) give to others any right to accelerate or terminate, or result
in acceleration or termination of, any such agreement
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or instrument; (e) result in termination of any provision of any such
agreement or instrument; or (f) result in the creation of any lien, charge or
encumbrance upon any of the property or assets of FDB or any FDB Subsidiary.
SECTION 5.13 BOOKS AND RECORDS. The books and records of FDB and the
FDB Subsidiaries are in all material respects complete and correct and
accurately reflect the basis for the respective financial condition and results
of operations of FDB and the FDB Subsidiaries set forth in the FDB Financial
Statements.
SECTION 5.14 TAXES. Each of FDB and the FDB Subsidiaries has filed with
the appropriate governmental agencies all federal, state and local income,
franchise, excise, sales, use, real and personal property and other tax returns
and reports required to be filed by it. Except as set forth on SCHEDULE 5.14 OF
THE FDB BOOK OF SCHEDULES, neither FDB nor any FDB Subsidiary is: (a) delinquent
in the payment of any taxes shown on such returns or reports or on any
assessments received by it for such taxes; (b) aware of any pending or
threatened examination for income taxes for any year by the IRS or any state tax
agency; (c) subject to any agreement extending the period for assessment or
collection of any federal or state tax; or (d) a party to any action or
proceeding nor has any claim been asserted against it by any governmental
authority for assessment or collection of taxes. None of the tax liabilities of
FDB or any FDB Subsidiary has ever been audited by the IRS or any state tax
agency for any period since January 1, 1994. Other than non-material items
related to real estate tax assessments, neither FDB nor any FDB Subsidiary is,
to the knowledge of FDB, a party to any threatened action or proceeding by any
governmental authority for assessment or collection of taxes. The reserve for
taxes in the audited financial statements of FDB for the year ended December 31,
1998, is adequate to cover all of the tax liabilities of FDB and the FDB
Subsidiaries (including, without limitation, income taxes and franchise fees)
that may become payable in future years in respect to any transactions
consummated prior to December 31, 1998. Neither FDB nor any of the FDB
Subsidiaries has and, to the best of FDB's knowledge, will not have any
liability for taxes of any nature for or in respect of the operation of its
business or ownership of its assets from December 31, 1998, up to and including
the Effective Time, except to the extent reflected on the audited FDB Financial
Statements for the year ended December 31, 1998, or on the Subsequent FDB
Financial Statements or otherwise reflected in the books and records of FDB and
the FDB Subsidiaries for the period following its then most recent of the
Subsequent FDB Financial Statements.
SECTION 5.15 TITLE TO PROPERTIES. FDB either directly or indirectly
owns all of the issued and outstanding capital stock of the FDB Subsidiaries
free and clear of all liens and encumbrances of any kind whatsoever. Each of
FDB and the FDB Subsidiaries has good and marketable title to all other assets
and properties, whether real or personal, tangible or intangible, which it
purports to own subject to no liens, mortgages, security interests, encumbrances
or charges of any kind except: (a) as noted in the FDB Financial Statements or
on SCHEDULE 5.15 OF THE FDB BOOK OF SCHEDULES; (b) statutory liens for taxes not
yet delinquent or being contested in good faith by appropriate proceedings and
for which appropriate reserves have been established and reflected on the FDB
Financial Statements or will be reflected on the Subsequent FDB Financial
Statements; (c) pledges or liens required to be granted in connection
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with the acceptance of government deposits, granted in connection with
repurchase or reverse repurchase agreements or otherwise incurred in the
ordinary course of business; and (d) minor defects and irregularities in
title and encumbrances which do not materially impair the use thereof for the
purposes for which they are held and which would not reasonably be expected
to have a Material Adverse Effect on FDB. Each of FDB and the FDB
Subsidiaries as lessee has the right under valid and subsisting leases to
occupy, use, possess and control any and all of the respective properties
leased by it.
SECTION 5.16 BROKERAGE COMMISSIONS. Except as disclosed in
SCHEDULE 5.16 OF THE FDB BOOK OF SCHEDULES, all negotiations relating to this
Agreement and the transactions contemplated herein have been and will be carried
on between FDB and BIF and its respective counsel, accountants and other
representatives in such a manner that no actions of FDB or any FDB Subsidiary or
any of its respective officers, agents or representatives shall give rise to any
claim against FDB or BIF or any of its respective Affiliates for any brokerage
commission, finder's fee, investment advisor's fee or other like payment.
SECTION 5.17 CERTIFICATE OF INCORPORATION AND BYLAWS. The copies of the
certificate of incorporation of FDB and FirsTech, the articles of association of
FNB and the charter of First Trust and the bylaws of each of FDB, FirsTech, FNB
and First Trust, as amended to date, are complete and correct and set forth in
SCHEDULE 5.17 OF THE FDB BOOK OF SCHEDULES.
SECTION 5.18 INTERIM EVENTS. Except as disclosed on SCHEDULE 5.18 OF
THE FDB BOOK OF SCHEDULES and as otherwise permitted hereunder, since December
31, 1998, neither FDB nor any of the FDB Subsidiaries has:
(a) Suffered any changes having a Material Adverse Effect on FDB, or
in the operation or conduct of the respective businesses of FDB or any of the
FDB Subsidiaries;
(b) Suffered any material damage, destruction or loss to any of its
respective properties whether covered by insurance or not;
(c) Declared any dividend or other distribution with respect to its
stock (except for payment of dividends and distributions from any FDB Subsidiary
to FDB or any other FDB Subsidiary), repurchased or redeemed shares of its
stock, issued any shares of its stock or sold or agreed to issue or sell any of
its stock or any right to purchase or acquire any such stock or any security
convertible into such stock or taken any action to reclassify, recapitalize or
split up its stock or issued any stock appreciation rights;
(d) Granted or agreed to grant any increase in benefits payable or to
become payable under any FDB Employee Benefit Plan;
(e) Cancelled or compromised any debt or claim other than in the
ordinary course of business;
(f) Entered into any transaction, contract or commitment other than in
the ordinary course of business;
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(g) Incurred any obligation or liability (fixed or contingent) other
than obligations and liabilities incurred in the ordinary course of its
respective business;
(h) Mortgaged, pledged or subjected to a lien, security interest or
other encumbrance any of its assets except to tax and other liens which arise by
operation of law and with respect to which payment is not past due and except
for pledges or liens: (i) required to be granted in connection with the
acceptance by any FDB 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 respective business;
(i) Conducted its respective business in any manner other than
substantially as it was being conducted prior to such time;
(j) Leased, sold or otherwise disposed of any of its assets except in
the ordinary course of business or leased, purchased or otherwise acquired from
third parties any assets except in the ordinary course of business;
(k) Except for the transactions contemplated by this Agreement,
merged, consolidated or agreed to merge or consolidate with or into any other
Person, or acquired or agreed to acquire any stock, equity interest or business
of any other Person;
(l) Agreed to enter into any transaction for the borrowing or loaning
of monies, other than in the ordinary course of business; or
(m) Increased the salary of any officer or the compensation or fees
payable to any director, except for normal increases in the ordinary course of
business or in accordance with any FDB Employee Benefit Plan, or entered into
any employment contract with any officer or salaried employee or installed any
employee welfare, stock option, profit sharing or other similar plan or
arrangement.
SECTION 5.19 REGULATORY FILINGS. Each of FDB and the FDB Subsidiaries
has filed in a timely manner all required filings with all proper regulatory
agencies, including, but not limited to: (a) the SEC; (b) the Federal Reserve;
(c) the OCC; (d) the FDIC and (e) the Commissioner. All such filings with such
federal and state regulatory agencies were accurate and complete in all material
respects as of the dates of the filings, and no such filing has made any untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements made, in the light of the circumstances under which
they were made, not misleading. Accurate and complete copies of each document
filed by FDB with the SEC since January 1, 1999, are attached as SCHEDULE 5.19
OF THE FDB BOOK OF SCHEDULES.
SECTION 5.20 COMPLIANCE WITH APPLICABLE LAW. Each of FDB and the FDB
Subsidiaries holds all licenses, certificates, permits, franchises and rights
from all appropriate federal, state or other public authorities necessary for
the conduct of its respective business and where failure to do so would
reasonably be expected to have a Material Adverse Effect on FDB. Each of FDB
and the FDB Subsidiaries has complied in all material respects with all
applicable federal, state and local statutes, ordinances, regulations, rules or
requirements, and
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neither FDB nor any FDB Subsidiary is presently charged with, or to the
knowledge of FDB, under governmental investigation with respect to, any
actual or alleged material violations of any statute, ordinance, regulation
or rule.
SECTION 5.21 COMPLIANCE WITH ERISA. All of the employee benefit plans
(as defined in Section 3(3) of ERISA) established or maintained by FDB or any of
the FDB Subsidiaries, or to which FDB or any of the FDB Subsidiaries contributes
are in compliance in all material respects with all applicable requirements of
ERISA, and are in compliance in all material respects with all applicable
requirements (including qualification and non-discrimination requirements in
effect as of the Effective Time) of the Code for obtaining the tax benefits the
Code thereupon permits with respect to such employee benefit plans. For
purposes of this Section, non-compliance with the Code and ERISA is material if
such non-compliance would reasonably be expected to have a Material Adverse
Effect on FDB. No such employee benefit plan has, or as of the Effective Time
will have, any amount of unfunded benefit liabilities (as defined in
Section 4001(a)(18) of ERISA) for which FDB or any of the FDB Subsidiaries would
be liable to any Person under Title IV of ERISA if any such employee benefit
plan were terminated as of the Effective Time, which amounts would be material
to FDB and the FDB Subsidiaries taken as a whole. Such employee benefit plans
are funded in accordance with Section 412 of the Code (if applicable). There
would be no obligations which would be material to FDB and the FDB Subsidiaries
taken as a whole under Title IV of ERISA relating to any such employee benefit
plan that is a multi-employer plan if any such plan were terminated or if FDB or
the FDB Subsidiaries withdrew from any such plan as of the Effective Time.
SECTION 5.22 COMPLIANCE WITH ENVIRONMENTAL LAWS. Each of FDB and the
FDB Subsidiaries has conducted its respective business in material compliance
with all Environmental Laws. There are no pending or, to the knowledge of FDB,
threatened actions or proceedings by any local municipality, sewerage district
or other governmental entity against FDB or any of the FDB Subsidiaries with
respect to the Environmental Laws and, to the knowledge of FDB, there is no
basis or grounds for any such action or proceeding. No environmental clearances
or other governmental approvals are required for the conduct of the business of
FDB or any of the FDB Subsidiaries or the consummation of the transactions
contemplated hereby. To the knowledge of FDB, neither FDB nor any of the FDB
Subsidiaries is the owner of any interest in real estate on which any substances
have been used, stored, deposited, treated, recycled or disposed of, which
substances if known to be present on, at or under such property, would require
clean-up, removal or some other remedial action under any Environmental Laws.
SECTION 5.23 TRUST ADMINISTRATION. Each of FDB and the FDB Subsidiaries
has properly administered, in all material respects, all accounts for which it
acts as fiduciary, including but not limited to accounts for which it serves as
a trustee, agent, custodian, personal representative, guardian or investment
advisor, in accordance with the terms of the governing documents and applicable
state and federal law and regulations and common law. None of FDB or any FDB
Subsidiary, or any director, officer or employee of FDB or any FDB Subsidiary
has committed any material breach of trust with respect to any such fiduciary
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account, and the accountings for each such fiduciary account are true and
correct in all material respects and accurately reflect the assets of such
fiduciary account.
SECTION 5.24 LOAN LOSS RESERVE. The reserve for possible loan and lease
losses shown on the March 31, 1999, Call Reports for FNB and First Trust,
respectively in each case is adequate in all material respects under the
requirements of generally accepted accounting principles to provide for possible
losses, net of recoveries relating to loans previously charged off, on loans
outstanding (including, without limitation, accrued interest receivable) as of
March 31, 1999. The aggregate loan balances of FNB and of First Trust at such
date in excess of such reserves are, to the best knowledge of FDB, and based on
past loan loss experience, collectible in accordance with their terms.
SECTION 5.25 YEAR 2000. Neither FDB nor any FDB Subsidiary has
received, and FDB has no reason to believe that it or any FDB Subsidiary will
receive, a rating of less than "satisfactory" on any Year 2000 Report of
Examination conducted by the Commissioner, the OCC, the FDIC, the Federal
Reserve or any other regulatory authority. SCHEDULE 5.25 OF THE FDB BOOK OF
SCHEDULES contains complete and accurate copies of the plans of FDB and each FDB
Subsidiary for addressing the issues set forth in the statements of the FFIEC
dated May 5, 1997, entitled "Year 2000 Project Management Awareness," and
December 17, 1997, entitled "Safety and Soundness Guidelines Concerning the Year
2000 Business Risk," as such issues affect FDB and its Subsidiaries. FDB, each
FDB Subsidiary and their respective plans are in material compliance with the
schedule set forth in the foregoing FFIEC statements and with the foregoing
FFIEC guidelines.
SECTION 5.26 APPROVAL DELAYS. To the best of its knowledge, FDB knows
of no reason why the granting of any of the regulatory approvals referred to in
SECTION 12.2 would be denied or unduly delayed.
ARTICLE 6
COVENANTS OF BIF
From and after the date hereof and until the Effective Time, BIF hereby
covenants and agrees with FDB as follows:
SECTION 6.1 INFORMATION, ACCESS THERETO, CONFIDENTIALITY. (a) FDB, its
representatives and agents shall, at all times during normal business hours
prior to the Closing Date, have full and continuing access to the facilities,
operations, records and properties of BIF and the BIF Subsidiaries. FDB, its
representatives and agents may, prior to the Closing Date, make or cause to be
made such reasonable investigation of the operations, records and properties of
BIF and the BIF Subsidiaries, including observation of any audit of, and
examination of any audit work papers with respect to, BIF or any BIF Subsidiary,
and of its and their financial and legal condition as FDB shall deem necessary
or advisable to familiarize itself with such records, properties and other
matters; provided, that such access or investigation shall not interfere
unnecessarily with the normal operations of BIF or any of the BIF Subsidiaries.
Upon request, each of BIF and the BIF Subsidiaries will furnish FDB or its
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representatives or agents, its attorneys' responses to auditors' requests for
information, and such financial and operating data and other information
reasonably requested by FDB developed by BIF or any of the BIF Subsidiaries,
its auditors, accountants or attorneys (provided with respect to attorneys,
such disclosure shall be limited to information that would not result in the
waiver by BIF of any claim of attorney-client privilege), and will permit
FDB, its representatives or agents to discuss such information directly with
any individual or firm performing auditing or accounting functions for BIF or
any of the BIF Subsidiaries, and such auditors and accountants shall be
directed to furnish copies of any reports or financial information as
developed to FDB or its representatives or agents. No investigation by FDB
shall affect the representations and warranties made by BIF. This Section
shall not require the disclosure of any information the disclosure of which
to FDB would be prohibited by law.
(b) Any confidential information or trade secrets received by BIF, its
employees or agents in the course of the examination described in SECTIONS
2.10(a) OR 7.1 shall be treated confidentially, and any correspondence,
memoranda, records, copies, documents and electronic or other media of any kind
containing either such confidential information, or trade secrets or both shall
be destroyed by BIF or, at FDB's request, returned to FDB in the event this
Agreement is terminated as provided in SECTION 13.1. Such information shall not
be used by BIF or its agents to the detriment of FDB or any FDB Subsidiary.
SECTION 6.2 CARRY ON IN REGULAR COURSE. Each of BIF and the BIF
Subsidiaries shall carry on its business diligently and substantially in the
same manner as is presently being conducted and shall not make or institute any
unusual or material change in its methods of doing business without the prior
written consent of FDB. BIF shall, and shall also cause each of the BIF
Subsidiaries to, unless otherwise consented to in writing in advance by FDB:
(a) Enter into loan transactions only in accordance with sound credit
practices and only on terms and conditions which are not materially more
favorable than those available to the borrower from competitive sources in
transactions in the ordinary course of business and consistent with prudent
banking practices and policies and regulations of applicable regulatory
authorities, and in that connection, BIF will apprise FDB of all new credits or
new lending relationships approved in excess of $1.0 million to any Person or
Persons and his, her or their Affiliates from the date hereof to the Effective
Time;
(b) Maintain all of its assets necessary for the conduct of its
business in good operating condition and repair, reasonable wear and tear and
damage by fire or unavoidable casualty excepted, and maintain policies of
insurance upon its assets and with respect to the conduct of its business in
amounts and kinds comparable to that in effect on the date hereof and pay all
premiums on such policies when due;
(c) Use all reasonable efforts to preserve its present business
organization intact, keep available the services of its present officers and
employees and preserve its present relationships with Persons having business
dealings with it;
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(d) Maintain its books, accounts and records in the usual, regular
and ordinary manner, on a basis consistent with prior years and comply in all
material respects with all laws and regulations applicable to it and to the
conduct of its business;
(e) Subject to the provisions of Section 6.9, make no amendment to
its certificate of incorporation, charter or bylaws and enter into no merger
or consolidation with, or sale of a significant portion of its assets to, any
other Person;
(f) Except as otherwise permitted or required by this Agreement,
make no change in the number of shares of its capital stock issued and
outstanding, grant or make no option, warrant, call, right, commitment or any
other security or agreement of any character obligating it to issue any
shares of its capital stock and issue no other securities or evidences of
indebtedness, so long as any such permitted actions are taken prior to the
Closing Date;
(g) Except as otherwise permitted by this Agreement, make no
increase in the compensation payable or to become payable by it to any
employee except for normal periodic increases, and as may be required, or as
is normal and customary based upon past practices over the last three (3)
fiscal years, under the terms of any existing BIF Employee Benefit Plan, so
long as any such permitted actions are taken prior to the Closing Date;
(h) Except as contemplated by Schedule 5.10(c)(i) of the FDB Book
of Schedules, not make any investment of a capital nature exceeding $100,000
or aggregate investments of a capital nature exceeding $500,000;
(i) Except as otherwise permitted or required by this Agreement and
for modifications necessary to comply with any applicable law, rule or
regulation, make no change in any BIF Employee Benefit Plan;
(j) Cause BKI, consistent with BKI's past practices, to maintain a
reserve for possible loan and lease losses which is adequate in all material
respects under the requirements of generally accepted accounting principles
to provide for possible losses, net of recoveries relating to loans
previously charged off, on loans outstanding (including, without limitation,
accrued interest receivable);
(k) Make no material change in any lease of real property;
(l) File in a timely manner all required filings with all proper
regulatory authorities and cause such filings to be true and correct in all
material respects;
(m) Enter into no employment, consulting or similar agreement or
arrangement that is not terminable, without penalty or premium, on thirty
(30) days' notice or less;
(n) File with the appropriate governmental agencies all federal,
state and local income, franchise, excise, sales, use, real and personal
property and other tax returns and reports required to be filed by it;
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(o) Enter into no lease of assets having annual rental payments in
excess of $25,000 or such leases which in the aggregate have annual rental
payments exceeding $100,000;
(p) Except for the TIA Agreement, enter into no material contract
that is not terminable, without penalty or premium, on thirty (30) days'
notice or less; and
(q) Purchase or sell any investment securities other than pursuant
to its investment policy in the ordinary course of business.
With respect to any written request by BIF for FDB's consent to any
non-permitted action of BIF or any BIF Subsidiary described in this Section,
BIF shall be entitled to conclusively presume FDB has consented to any such
action unless BIF shall have received FDB's written objection to such action
within five (5) Business Days of the date of FDB's receipt of such written
request.
SECTION 6.3 SUBSEQUENT BIF FINANCIAL STATEMENTS. As soon as
available after the date hereof, BIF will furnish FDB copies of each filing
made by BIF with the SEC subsequent to May 15, 1999, the monthly unaudited
consolidated balance sheets and profit and loss statements of each of BKI and
TIA Corp prepared for its internal use, BKI's Call Reports 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, the "Subsequent BIF Financial
Statements"). The Subsequent BIF Financial Statements shall be prepared on a
basis consistent with past accounting practices and shall fairly present the
financial condition and results of operations for the dates and periods
presented, subject in the case of unaudited financial statements to year-end
audit adjustments (which changes in the aggregate would not reasonably be
expected to be materially adverse). The Subsequent BIF Financial Statements
will not include any material assets or omit to state any material
liabilities, absolute or contingent, or other facts, which inclusion or
omission would render such financial statements misleading in any material
respect.
SECTION 6.4 STOCKHOLDERS' MEETING. BIF shall cause a meeting of its
stockholders to be held at the earliest practicable date after the
Registration Statement (as defined below) has been declared effective by the
SEC for the purpose of acting upon this Agreement. In connection with such
stockholders' meeting and in accordance with the Delaware Code, BIF shall
recommend to its stockholders the approval of this Agreement and the Merger
and shall solicit proxies voting in favor thereof from its stockholders.
SECTION 6.5 BIF AFFILIATE UNDERTAKING. BIF shall use all reasonable
efforts to furnish to FDB as soon as practicable after the date of this
Agreement an undertaking in the form attached as EXHIBIT G executed by each
Person who is identified by BIF as one of its Affiliates.
SECTION 6.6 DIVIDENDS. Between the date of this Agreement and the
Effective Time, BIF may continue to declare and pay to its stockholders, on
dates consistent with its past practices, its normal quarterly cash dividend
not to exceed $0.09 per share of BIF Common Stock, and shall declare, pay or
make no other dividend or other distribution or payment in
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respect of, or redemption of, shares of BIF Common Stock, PROVIDED, HOWEVER,
that BIF shall not declare the record date for any dividend, or pay or make
any such dividend or other distribution or payment, in the quarter in which
the Effective Time shall occur. It is the intent of this Section to provide
that the holders of BIF Common Stock will receive either payment of dividends
on their shares of BIF Common Stock as permitted under this Section or the
payment of cash dividends as the holders of the BIF Exchange Shares for the
calendar quarter during which the Effective Time shall occur, but will not
receive and will not become entitled to receive for the same calendar quarter
both the payment of a permitted dividend as stockholders of BIF and the
payment of a cash dividend as the holders of the BIF Exchange Shares. If BIF
does not declare and pay permitted dividends on its BIF Common Stock in a
particular calendar quarter because of BIF's reasonable expectation that the
Effective Time would occur in such quarter wherein the holders of BIF Common
Stock would have become entitled to receive cash dividends for such calendar
quarter on the BIF Exchange Shares, and the Effective Time does not in fact
occur in said calendar quarter, then, as a result thereof, BIF shall be
entitled to declare and pay a permitted dividend on said shares of BIF Common
Stock for said calendar quarter as soon as reasonably practicable.
SECTION 6.7 ENVIRONMENTAL MATTERS. FDB may in its discretion, prior
to the Closing, retain at its own expense an independent professional
consultant to perform an environmental site assessment and render to FDB a
report (an "Environmental Report") to determine if any real property in which
BIF holds any interest contains or gives evidence that any violations of
Environmental Laws have occurred on any such property. Neither FDB nor its
independent professional consultant shall enter upon any such real property
in which BIF or any BIF Subsidiary holds only a mortgagee's interest without
the prior permission of BIF and the Person in possession thereof. BIF shall
not withhold such permission unreasonably, and shall use all reasonable
efforts to obtain such permission for FDB from the Person in possession of
any such mortgaged real property for which FDB desires its independent
professional consultant to conduct a site assessment. FDB shall have no duty
to act upon any information produced by such reviews or investigations with
or for the benefit of BIF, any BIF Subsidiary or any other Person, but shall
provide such information to BIF as soon as practicable after such information
becomes available to FDB.
SECTION 6.8 ADVICE OF CHANGES. Between the date hereof and the
Closing Date, BIF shall promptly advise FDB in writing of any fact, change or
event which, if existing or known at the date hereof, would have been
required to be set forth or disclosed in or pursuant to this Agreement or of
any fact which, if existing or known at the date hereof, would have made any
of the representations contained herein materially untrue, PROVIDED, HOWEVER,
that receipt of notice of such facts after the date of this Agreement shall
have no effect on the truth and accuracy of the representations and
warranties made in this Agreement as of the date hereof. BIF shall also
provide to FDB copies of each written communication sent to its stockholders
between the date of this Agreement and the Closing Date.
SECTION 6.9 EXCLUSIVITY. Neither BIF, any BIF Subsidiary nor any of
their respective directors, officers, employees, professional and financial
advisors, representatives, agents and Affiliates shall, directly or
indirectly, make, encourage, facilitate, solicit, initiate or
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assist any inquiries, proposals, offers or expressions of interest from, or
provide any nonpublic information or access to BIF's or any BIF Subsidiary's
premises to, or participate in any discussions or negotiations with, any
Person (other than FDB and Newco and their directors, officers, employees,
professional and financial advisors, representatives, agents and Affiliates)
concerning or relating to (a) any merger, sale of assets not in the ordinary
course of business, acquisition, business combination, change of control or
other similar transaction involving BIF or any BIF Subsidiary, or (b) any
purchase or other acquisition by any Person of five percent (5%) or more of
the capital stock of BIF or of any capital stock of any BIF Subsidiary, or
(c) any issuance by any BIF Subsidiary of any shares of its capital stock
(collectively, a "Competing BIF Proposal"). BIF will promptly advise FDB of,
and communicate to FDB the terms and conditions of, and the identity of the
Person making, any Competing BIF Proposal, and will promptly furnish FDB with
copies of any non-privileged documents provided to and received from such
Person, and summaries of any other communications with respect to such
Competing BIF Proposal. Upon the date of this Agreement, BIF will terminate
all discussions and negotiations that it has heretofore engaged in or
conducted with any other Person with respect to any of the above, and will
cause its directors, officers, employees, professional and financial
advisors, representatives, agents and Affiliates to also terminate the same.
Notwithstanding the foregoing, BIF may engage in discussions or negotiations
with, furnish nonpublic information concerning BIF and any BIF Subsidiary and
their respective properties, assets and business, and grant access to the
facilities of BIF and any BIF Subsidiary, to any Person that hereafter makes
a Competing BIF Proposal that was not directly or indirectly, after the date
hereof, made, encouraged, facilitated, solicited, initiated or assisted by
BIF, any BIF Subsidiary or any of their respective directors, officers,
employees, professional or financial advisors, representatives, agents or
Affiliates (an "Unsolicited BIF Proposal"), but only to the extent that the
BIF Board of Directors shall conclude in good faith on the basis of the
written opinion of its outside counsel that the failure to take such actions
would be inconsistent with its fiduciary duties, and then only if BIF
provides FDB with prior written notice of its intent to take such actions and
such notice summarizes all material terms of the Unsolicited BIF Proposal and
identifies the Person making it.
SECTION 6.10 INFORMATION PROVIDED TO FDB. BIF agrees that none of
the information concerning BIF or any BIF Subsidiary or the Merger which is
provided or to be provided by BIF or any BIF Subsidiary to FDB for inclusion
or which is included in the Registration Statement or Proxy
Statement-Prospectus and any other documents to be filed with any
governmental authority in connection with the transactions contemplated by
this Agreement will, at the respective times such documents are filed and, in
the case of the Registration Statement, when it becomes effective and, with
respect to the Proxy Statement-Prospectus, and any amendments or supplements
thereto, when mailed and at the time of the stockholder meetings referred to
in SECTIONS 6.4 AND 7.4, contain any untrue statement of a material fact, or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances in which
they were made, not misleading. Notwithstanding the foregoing, BIF shall
have no responsibility for the truth or accuracy of any information with
respect to FDB or the FDB Subsidiaries or any of their affiliates or
associates contained in the Registration Statement or the Proxy
Statement-Prospectus.
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SECTION 6.11 REASONABLE EFFORTS. Subject to the terms and conditions
of this Agreement, BIF agrees to use all reasonable efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
satisfy the conditions set forth herein and to consummate and make effective
the transactions contemplated by this Agreement, including cooperating fully
with FDB. In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement or to vest
Newco with full title to all properties, assets, rights, approvals,
immunities and franchises of BIF, the proper officers and directors of BIF
shall take all such necessary action.
SECTION 6.12 TERMINATION OF BIF RIGHTS AGREEMENT. Prior to the
Effective Time, BIF shall take all actions that may be necessary to terminate
the Rights Agreement dated as of April 28, 1995, between BIF and BKI and to
redeem all rights previously issued thereunder.
SECTION 6.13 TIA AGREEMENT. BIF agrees to diligently pursue the
consummation of the transactions contemplated by the TIA Agreement prior to
the Closing Date.
ARTICLE 7
COVENANTS OF FDB
From and after the date hereof and until the Effective Time, FDB
hereby covenants and agrees with BIF as follows:
SECTION 7.1 INFORMATION, ACCESS THERETO, CONFIDENTIALITY. (a) BIF,
its representatives and agents shall, at all times during normal business
hours prior to the Closing Date, have full and continuing access to the
facilities, operations, records and properties of FDB and the FDB
Subsidiaries. BIF, its representatives and agents may, prior to the Closing
Date, make or cause to be made such reasonable investigation of the
operations, records and properties of FDB and the FDB Subsidiaries, including
observation of any audit of, and examination of any audit work papers with
respect to, FDB or any FDB Subsidiary, and of its and their financial and
legal condition as BIF shall deem necessary or advisable to familiarize
itself with such records, properties and other matters; provided, that such
access or investigation shall not interfere unnecessarily with the normal
operations of FDB or any of the FDB Subsidiaries. Upon request, each of FDB
and the FDB Subsidiaries will furnish BIF or its representatives or agents,
its attorneys' responses to auditors' requests for information, and such
financial and operating data and other information reasonably requested by
BIF developed by FDB or any of the FDB Subsidiaries, its auditors,
accountants or attorneys (provided with respect to attorneys, such disclosure
shall be limited to information that would not result in the waiver by FDB of
any claim of attorney-client privilege), and will permit BIF, its
representatives or agents to discuss such information directly with any
individual or firm performing auditing or accounting functions for FDB or any
of the FDB Subsidiaries, and such auditors and accountants shall be directed
to furnish copies of any reports or financial information as developed to BIF
or its representatives or agents. No investigation by BIF shall affect the
representations and warranties made by FDB. This Section shall not require
the disclosure of any information the disclosure of which to BIF would be
prohibited by law
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(b) Any confidential information or trade secrets received by FDB,
its employees or agents in the course of the examination described in
SECTIONS 2.10(b) OR 6.1 shall be treated confidentially, and any
correspondence, memoranda, records, copies, documents and electronic or other
media of any kind containing either such confidential information, or trade
secrets or both shall be destroyed by FDB or, at BIF's request, returned to
BIF in the event this Agreement is terminated as provided in SECTION 13.1.
Such information shall not be used by FDB or its agents to the detriment of
BIF or any BIF Subsidiary.
SECTION 7.2 CARRY ON IN REGULAR COURSE. Each of FDB and the FDB
Subsidiaries shall carry on its business diligently and substantially in the
same manner as is presently being conducted and shall not make or institute
any unusual or material change in its methods of doing business without the
prior written consent of BIF. FDB shall, and shall also cause each of the
FDB Subsidiaries to, unless otherwise consented to in writing in advance by
BIF:
(a) Enter into loan transactions only in accordance with sound
credit practices and only on terms and conditions which are not materially
more favorable than those available to the borrower from competitive sources
in transactions in the ordinary course of business and consistent with
prudent banking practices and policies and regulations of applicable
regulatory authorities, and in that connection, FDB will apprise BIF of all
new credits or new lending relationships approved in excess of $1.0 million
to any Person or Persons and his, her or their Affiliates from the date
hereof to the Effective Time;
(b) Maintain all of its assets necessary for the conduct of its
business in good operating condition and repair, reasonable wear and tear and
damage by fire or unavoidable casualty excepted, and maintain policies of
insurance upon its assets and with respect to the conduct of its business in
amounts and kinds comparable to that in effect on the date hereof and pay all
premiums on such policies when due;
(c) Use all reasonable efforts to preserve its present business
organization intact, keep available the services of its present officers and
employees and preserve its present relationships with Persons having business
dealings with it;
(d) Maintain its books, accounts and records in the usual, regular
and ordinary manner, on a basis consistent with prior years and comply in all
material respects with all laws and regulations applicable to it and to the
conduct of its business;
(e) Subject to the provisions of Section 7.9, make no amendment to
its certificate of incorporation, articles of association, charter or bylaws
and enter into no merger or consolidation with, or sale of a significant
portion of its assets to, any other Person;
(f) Except as otherwise permitted or required by this Agreement,
make no change in the number of shares of its capital stock issued and
outstanding, grant or make no option, warrant, call, right, commitment or any
other security or agreement of any character obligating it to issue any
shares of its capital stock and issue no other securities or evidences of
indebtedness, so long as any such permitted actions are taken prior to the
Closing Date;
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(g) Except as otherwise permitted by this Agreement, make no increase
in the compensation payable or to become payable by it to any employee except
for normal periodic increases, and as may be required, or as is normal and
customary based upon past practices over the last three (3) fiscal years, under
the terms of any existing FDB Employee Benefit Plan, so long as any such
permitted actions are taken prior to the Closing Date;
(h) Not make any investment of a capital nature exceeding $100,000 or
aggregate investments of a capital nature exceeding $500,000;
(i) Except as otherwise permitted by this Agreement and for
modifications necessary to comply with any applicable law, rule or regulation,
make no change in any FDB Employee Benefit Plan, PROVIDED, HOWEVER, that in a
manner reasonably acceptable to BIF, FDB shall take all steps necessary as soon
as practicable after the date of this Agreement to freeze all benefits under any
defined benefit plan sponsored by FDB;
(j) Cause each of FNB and First Trust, consistent with their
respective past practices, to maintain a reserve for possible loan and lease
losses which is adequate in all material respects under the requirements of
generally accepted accounting principles to provide for possible losses, net of
recoveries relating to loans previously charged off, on loans outstanding
(including, without limitation, accrued interest receivable);
(k) Make no material change in any lease of real property;
(l) File in a timely manner all required filings with all proper
regulatory authorities and cause such filings to be true and correct in all
material respects;
(m) Enter into no employment, consulting or similar agreement or
arrangement that is not terminable, without penalty or premium, on thirty
(30) days' notice or less;
(n) File with the appropriate governmental agencies all federal,
state and local income, franchise, excise, sales, use, real and personal
property and other tax returns and reports required to be filed by it;
(o) Enter into no lease of assets having annual rental payments in
excess of $25,000 or such leases which in the aggregate have annual rental
payments exceeding $100,000;
(p) Except for the TIA Agreement, enter into no material contract
that is not terminable, without penalty or premium, on thirty (30) days'
notice or less; and
(q) Purchase or sell any investment securities other than pursuant
to its investment policy in the ordinary course of business.
With respect to any written request by FDB for BIF's consent to any
non-permitted action of FDB or any FDB Subsidiary described in this Section,
FDB shall be entitled to conclusively presume BIF has consented to any such
action unless FDB shall have received
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BIF's written objection to such action within five (5) Business Days of the
date of BIF's receipt of such written request.
SECTION 7.3 SUBSEQUENT FDB FINANCIAL STATEMENTS. As soon as
available after the date hereof, FDB will furnish BIF copies of each filing
made by FDB with the SEC subsequent to May 15, 1999, the monthly unaudited
consolidated balance sheets and profit and loss statements of each of FNB,
First Trust and FirsTech prepared for their internal use, Call Reports of
each of FNB and First Trust 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, the "Subsequent FDB Financial Statements"). The Subsequent
FDB Financial Statements shall be prepared on a basis consistent with past
accounting practices and shall fairly present the financial condition and
results of operations for the dates and periods presented, subject in the
case of unaudited financial statements to year-end audit adjustments (which
changes in the aggregate would not reasonably be expected to be materially
adverse). The Subsequent FDB Financial Statements will not include any
material assets or omit to state any material liabilities, absolute or
contingent, or other facts, which inclusion or omission would render such
financial statements misleading in any material respect.
SECTION 7.4 STOCKHOLDERS' MEETING. FDB shall cause a meeting of its
stockholders to be held at the earliest practicable date after the
Registration Statement has been declared effective by the SEC for the purpose
of acting upon this Agreement. In connection with such stockholders' meeting
and in accordance with the Delaware Code, FDB shall recommend to its
stockholders the approval of this Agreement and the Merger and shall solicit
proxies voting in favor thereof from its stockholders.
SECTION 7.5 FDB AFFILIATE UNDERTAKING. FDB shall use all reasonable
efforts to furnish to BIF as soon as practicable after the date of this
Agreement an undertaking in the form attached as EXHIBIT G executed by each
Person who is identified by FDB as one of its Affiliates
SECTION 7.6 DIVIDENDS. Between the date of this Agreement and the
Effective Time, FDB may continue to declare and pay to its stockholders, on
dates consistent with its past practices, its normal quarterly cash dividend
not to exceed $0.15 per share of FDB Common Stock, and shall declare, pay or
make no other dividend or other distribution or payment in respect of, or
redemption of, shares of FDB Common Stock, PROVIDED, HOWEVER, that FDB shall
not declare the record date for any dividend, or pay or make any such
dividend or other distribution or payment, in the quarter in which the
Effective Time shall occur. It is the intent of this Section to provide that
the holders of FDB Common Stock will receive either payment of dividends on
their shares of FDB Common Stock as permitted under this Section or the
payment of cash dividends as the holders of the FDB Exchange Shares for the
calendar quarter during which the Effective Time shall occur, but will not
receive and will not become entitled to receive for the same calendar quarter
both the payment of a permitted dividend as stockholders of FDB and the
payment of a cash dividend as the holders of the FDB Exchange Shares. If FDB
does not declare and pay permitted dividends on its FDB Common Stock in a
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particular calendar quarter because of FDB's reasonable expectation that the
Effective Time would occur in such quarter wherein the holders of FDB Common
Stock would have become entitled to receive cash dividends for such calendar
quarter on the FDB Exchange Shares, and the Effective Time does not in fact
occur in said calendar quarter, then, as a result thereof, FDB shall be
entitled to declare and pay a permitted dividend on said shares of FDB Common
Stock for said calendar quarter as soon as reasonably practicable.
SECTION 7.7 ENVIRONMENTAL MATTERS. BIF may in its discretion, prior
to the Closing, retain at its own expense an independent professional
consultant to perform an environmental site assessment and render to BIF an
Environmental Report to determine if any real property in which FDB holds any
interest contains or gives evidence that any violations of Environmental Laws
have occurred on any such property. Neither BIF nor its independent
professional consultant shall enter upon any such real property in which FDB
or any FDB Subsidiary holds only a mortgagee's interest without the prior
permission of FDB and the Person in possession thereof. FDB shall not
withhold such permission unreasonably, and shall use all reasonable efforts
to obtain such permission for BIF from the Person in possession of any such
mortgaged real property for which BIF desires its independent professional
consultant to conduct a site assessment. BIF shall have no duty to act upon
any information produced by such reviews or investigations with or for the
benefit of FDB, any FDB Subsidiary or any other Person, but shall provide
such information to FDB as soon as practicable after such information becomes
available to BIF.
SECTION 7.8 ADVICE OF CHANGES. Between the date hereof and the
Closing Date, FDB shall promptly advise BIF in writing of any fact, change or
event which, if existing or known at the date hereof, would have been
required to be set forth or disclosed in or pursuant to this Agreement or of
any fact which, if existing or known at the date hereof, would have made any
of the representations contained herein materially untrue, PROVIDED, HOWEVER,
that receipt of notice of such facts after the date of this Agreement shall
have no effect on the truth and accuracy of the representations and
warranties made in this Agreement as of the date hereof. FDB shall also
provide to BIF copies of each written communication sent to its stockholders
between the date of this Agreement and the Closing Date.
SECTION 7.9 EXCLUSIVITY. Neither FDB, any FDB Subsidiary nor any of
their respective directors, officers, employees, professional and financial
advisors, representatives, agents and Affiliates shall, directly or
indirectly, make, encourage, facilitate, solicit, initiate or assist any
inquiries, proposals, offers or expressions of interest from, or provide any
nonpublic information or access to FDB's or any FDB Subsidiary's premises to,
or participate in any discussions or negotiations with, any Person (other
than BIF and Newco and their directors, officers, employees, professional and
financial advisors, representatives, agents and Affiliates) concerning or
relating to (a) any merger, sale of assets not in the ordinary course of
business, acquisition, business combination, change of control or other
similar transaction involving FDB or any FDB Subsidiary, or (b) any purchase
or other acquisition by any Person of five percent (5%) or more of the
capital stock of FDB or of any capital stock of any FDB Subsidiary, or (c)
any issuance by any FDB Subsidiary of any shares of its capital stock
(collectively, a "Competing FDB Proposal"). FDB will promptly advise BIF of,
and
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communicate to BIF the terms and conditions of, and the identity of the
Person making, any Competing FDB Proposal, and will promptly furnish BIF with
copies of any non-privileged documents provided to and received from such
Person, and summaries of any other communications with respect to such
Competing FDB Proposal. Upon the date of this Agreement, FDB will terminate
all discussions and negotiations that it has heretofore engaged in or
conducted with any other Person with respect to any of the above, and will
cause its directors, officers, employees, professional and financial
advisors, representatives, agents and Affiliates to also terminate the same.
Notwithstanding the foregoing, FDB may engage in discussions or negotiations
with, furnish nonpublic information concerning FDB and any FDB Subsidiary and
their respective properties, assets and business, and grant access to the
facilities of FDB and any FDB Subsidiary, to any Person that hereafter makes
a Competing FDB Proposal that was not directly or indirectly, after the date
hereof, made, encouraged, facilitated, solicited, initiated or assisted by
FDB, any FDB Subsidiary or any of their respective directors, officers,
employees, professional or financial advisors, representatives, agents or
Affiliates (an "Unsolicited FDB Proposal"), but only to the extent that the
FDB Board of Directors shall conclude in good faith on the basis of the
written opinion of its outside counsel that the failure to take such actions
would be inconsistent with its fiduciary duties, and then only if FDB
provides BIF with prior written notice of its intent to take such actions and
such notice summarizes all material terms of the Unsolicited FDB Proposal and
identifies the Person making it.
SECTION 7.10 INFORMATION PROVIDED TO BIF. FDB agrees that none of
the information concerning FDB or any FDB Subsidiary or the Merger which is
provided or to be provided by FDB or any FDB Subsidiary to BIF for inclusion
or which is included in the Registration Statement or Proxy
Statement-Prospectus and any other documents to be filed with any
governmental authority in connection with the transactions contemplated by
this Agreement will, at the respective times such documents are filed and, in
the case of the Registration Statement, when it becomes effective and, with
respect to the Proxy Statement-Prospectus, and any amendments or supplements
thereto, when mailed and at the time of the stockholder meetings referred to
in SECTIONS 6.4 AND 7.4, contain any untrue statement of a material fact, or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances in which
they were made, not misleading. Notwithstanding the foregoing, FDB shall
have no responsibility for the truth or accuracy of any information with
respect to BIF or the BIF Subsidiaries or any of their affiliates or
associates contained in the Registration Statement or the Proxy
Statement-Prospectus.
SECTION 7.11 REASONABLE EFFORTS. Subject to the terms and conditions
of this Agreement, FDB agrees to use all reasonable efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
satisfy the conditions set forth herein and to consummate and make effective
the transactions contemplated by this Agreement, including cooperating fully
with BIF. In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement or to vest
Newco with full title to all properties, assets, rights, approvals,
immunities and franchises of FDB, the proper officers and directors of FDB
shall take all such necessary action.
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ARTICLE 8
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BIF
The obligations of BIF under this Agreement are subject, unless waived by
BIF, to the satisfaction of the following conditions on or prior to the
Effective Time:
SECTION 8.1 REPRESENTATIONS AND WARRANTIES TRUE AT EFFECTIVE TIME. The
representations and warranties made by FDB in this Agreement shall be true and
correct on and as of the Effective Time with the same effect as though such
representations and warranties had been made or given on and as of the Effective
Time, except for changes contemplated by this Agreement, and except also for
representations and warranties as of a specified time other than the Effective
Time, which shall be true and correct in all material respects at such specified
time. FDB shall have delivered to BIF a certificate of its President or any
Vice President to the same effect.
SECTION 8.2 COMPLIANCE WITH AGREEMENT. FDB shall have performed and
complied with all of its obligations under this Agreement which are to be
performed or complied with prior to or at the Effective Time and FDB shall have
delivered to BIF a certificate of its President or any Vice President to the
same effect.
SECTION 8.3 OPINION OF COUNSEL FOR FDB. BIF shall have received from
Howard & Howard Attorneys PC the opinion contemplated by SECTION 2.6(l), dated
as of the Closing Date, addressed to BIF.
SECTION 8.4 PROCEEDINGS AND DOCUMENTS SATISFACTORY. All proceedings,
corporate or other, to be taken by FDB in connection with the transactions
contemplated by this Agreement, and all documents incident thereto, shall be
reasonably satisfactory in form and substance to counsel for BIF, and FDB shall
have made available to BIF for examination the originals or true and correct
copies of all records and documents relating to the business and affairs of FDB
which BIF may reasonably request in connection with said transactions.
SECTION 8.5 STATUTORY REQUIREMENTS. This Agreement shall have been
duly and validly authorized by the stockholders of FDB. Such stockholder
approval shall have been obtained in conformity with all applicable laws at a
meeting of stockholders for which proxies are solicited in compliance with
applicable laws and requirements.
SECTION 8.6 LITIGATION. Neither FDB nor any FDB Subsidiary shall be
made a party to any actions, suits, proceedings, litigation or legal proceedings
which, in the reasonable opinion of BIF, have or are likely to have a Material
Adverse Effect on FDB, and no action, suit, proceeding or claim shall have been
instituted, made or threatened by any Person relating to the Merger or the
validity or propriety of the transactions contemplated by this Agreement which
BIF reasonably believes will result in material damages or an order enjoining
the Merger or a determination that FDB failed to comply with legal requirements
of a material nature in connection with the Merger.
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SECTION 8.7 ACCURACY OF FINANCIAL STATEMENTS. The FDB Financial
Statements and the Subsequent FDB Financial Statements, previously or
subsequently furnished to BIF by FDB shall not be inaccurate in any material
respect.
SECTION 8.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. From the date hereof
to the Effective Time, there shall be and have been no Material Adverse Change
in FDB or any event or occurrence reasonably likely to result in a Material
Adverse Change.
SECTION 8.9 CONSENTS AND APPROVALS. Any consents or approvals required
to be secured by the parties to this Agreement or otherwise reasonably necessary
in the opinion of BIF to consummate the transactions contemplated by this
Agreement shall have been obtained and shall be reasonably satisfactory to BIF.
SECTION 8.10 ACCRUAL OF COSTS. On or prior to the Closing Date, the sum
of: (a) the cost of any benefits or contributions supplied or made or to be
supplied or made through the Effective Time under any of the FDB Employee
Benefit Plans; (b) the costs of any corrective action to bring any such plans
into compliance with applicable law; (c) the aggregate cost of complying with
any representation, warranty or covenant of FDB set forth in this Agreement; and
(d) all transaction costs of FDB necessary to consummate the Merger, including,
but not limited to, its share of organizational expenses of Newco and the
aggregate professional fees of attorneys, accountants and financial advisors, in
each case incurred or to be incurred by FDB through the Effective Time in
connection with this Agreement or the Merger, shall be fully paid or accrued for
in accordance with generally accepted accounting principles.
SECTION 8.11 LOAN LOSS RESERVE. At the Effective Time, the reserve for
possible loan and lease losses of each FNB and First Trust shall be adequate in
all material respects under the requirements of generally accepted accounting
principles to provide for possible losses, net of recoveries relating to loans
previously charged off, on loans outstanding (including, without limitation,
accrued interest receivable) as of the Closing Date and the Effective Time.
SECTION 8.12 FAIRNESS OPINION. As of the date of this Agreement and
prior to distribution of the Proxy Statement-Prospectus to the stockholders of
BIF, BIF shall have received an opinion from Keefe, Bruyette & Woods, Inc. to
the effect that the consideration to be received by BIF's stockholders in
connection with the Merger, from a financial point of view, is fair to BIF's
stockholders, and the same shall not have been withdrawn.
SECTION 8.13 EMPLOYMENT AGREEMENTS. On or prior to the Closing Date,
the Employment Agreements identified on EXHIBIT H, shall be amended in a manner,
or replaced with a substitute agreement, in each case reasonably satisfactory to
BIF to provide that the Merger, if consummated in accordance with the terms of
this Agreement, will not constitute a "Change of Control" as defined in such
agreements.
SECTION 8.14 ENVIRONMENTAL REPORTS. BIF shall have been granted
acceptable access to any real property in which FDB or any FDB Subsidiary has an
interest and for which BIF desired its independent professional consultant to
prepare an Environmental Report, and the
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results of any Environmental Report rendered to BIF with respect to such real
property shall have not disclosed any violation of Environmental Laws which
would reasonably be expected to have a Material Adverse Effect on FDB.
ARTICLE 9
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF FDB
The obligations of FDB under this Agreement are subject, unless waived by
FDB, to the satisfaction on or prior to the Effective Time of the following
conditions:
SECTION 9.1 REPRESENTATIONS AND WARRANTIES TRUE AT EFFECTIVE TIME. The
representations and warranties made by BIF in this Agreement shall be true and
correct on and as of the Effective Time with the same effect as though such
representations and warranties had been made or given on and as of the Effective
Time, except for changes contemplated by this Agreement, and except also for
representations and warranties as of a specified time other than the Effective
Time, which shall be true and correct in all material respects at such specified
time. BIF shall have delivered to FDB a certificate of its President or any
Vice President to the same effect.
SECTION 9.2 COMPLIANCE WITH AGREEMENT. BIF shall have performed and
complied with all of its obligations under this Agreement which are to be
performed or complied with prior to or at the Effective Time and BIF shall have
delivered to FDB a certificate of its President or any Vice President to the
same effect.
SECTION 9.3 OPINION OF COUNSEL FOR BIF. FDB shall have received from
Barack Ferrazzano Kirschbaum Perlman & Nagelberg the opinion contemplated by
SECTION 2.7(j), dated as of the Closing Date, addressed to FDB.
SECTION 9.4 PROCEEDINGS AND DOCUMENTS SATISFACTORY. All proceedings,
corporate or other, to be taken by BIF in connection with the transactions
contemplated by this Agreement, and all documents incident thereto, shall be
reasonably satisfactory in form and substance to counsel for FDB, and BIF shall
have made available to FDB for examination the originals or true and correct
copies of all records and documents relating to the business and affairs of BIF
which FDB may reasonably request in connection with said transactions.
SECTION 9.5 STATUTORY REQUIREMENTS. This Agreement shall have been
duly and validly authorized by the stockholders of BIF. Such stockholder
approval shall have been obtained in conformity with all applicable laws at a
meeting of stockholders for which proxies are solicited in compliance with
applicable laws and requirements.
SECTION 9.6 LITIGATION. Neither BIF nor any BIF Subsidiary shall be
made a party to any actions, suits, proceedings, litigation or legal proceedings
which, in the reasonable opinion of FDB, have or are likely to have a Material
Adverse Effect on BIF, and no action, suit, proceeding or claim shall have been
instituted, made or threatened by any Person relating to the Merger or the
validity or propriety of the transactions contemplated by this Agreement
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which FDB reasonably believes will result in material damages or an order
enjoining the Merger or a determination that BIF failed to comply with legal
requirements of a material nature in connection with the Merger.
SECTION 9.7 ACCURACY OF FINANCIAL STATEMENTS. The BIF Financial
Statements and the Subsequent BIF Financial Statements, previously or
subsequently furnished to FDB by BIF shall not be inaccurate in any material
respect.
SECTION 9.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. From the date hereof
to the Effective Time, there shall be and have been no Material Adverse Change
in BIF or any event or occurrence reasonably likely to result in a Material
Adverse Change.
SECTION 9.9 CONSENTS AND APPROVALS. Any consents or approvals required
to be secured by the parties to this Agreement or otherwise reasonably necessary
in the opinion of FDB to consummate the transactions contemplated by this
Agreement shall have been obtained and shall be reasonably satisfactory to FDB.
SECTION 9.10 ACCRUAL OF COSTS. On or prior to the Closing Date, the sum
of: (a) the cost of any benefits or contributions supplied or made or to be
supplied or made through the Effective Time under any of the BIF Employee
Benefit Plans; (b) the costs of any corrective action to bring any such plans
into compliance with applicable law; (c) the aggregate cost of complying with
any representation, warranty or covenant of BIF set forth in this Agreement; and
(d) all transaction costs of BIF necessary to consummate the Merger, including,
but not limited to, its share of organizational expenses of Newco and the
aggregate professional fees of attorneys, accountants and financial advisors, in
each case incurred or to be incurred by BIF through the Effective Time in
connection with this Agreement or the Merger, shall be fully paid or accrued for
in accordance with generally accepted accounting principles.
SECTION 9.11 LOAN LOSS RESERVE. At the Effective Time, the reserve for
possible loan and lease losses of BKI shall be adequate in all material respects
under the requirements of generally accepted accounting principles to provide
for possible losses, net of recoveries relating to loans previously charged off,
on loans outstanding (including, without limitation, accrued interest
receivable) as of the Closing Date and the Effective Time.
SECTION 9.12 FAIRNESS OPINION. As of the date of this Agreement and
prior to distribution of the Proxy Statement-Prospectus to the stockholders of
FDB, FDB shall have received an opinion from ABN AMRO to the effect that the FDB
Exchange Ratio is fair to FDB's stockholders from a financial point of view, and
the same shall not have been withdrawn.
SECTION 9.13 EMPLOYMENT AGREEMENTS. On or prior to the Closing Date,
the Employment Agreements identified on EXHIBIT I shall be amended in a manner,
or replaced with a substitute agreement, in each case reasonably satisfactory to
FDB to provide that the Merger, if consummated in accordance with the terms of
this Agreement, will not constitute a "Change of Control" as defined in such
agreements.
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SECTION 9.14 ENVIRONMENTAL REPORTS. FDB shall have been granted
acceptable access to any real property in which BIF or any BIF Subsidiary has an
interest and for which FDB desired its independent professional consultant to
prepare an Environmental Report, and the results of any Environmental Report
rendered to FDB with respect to such real property shall have not disclosed any
violation of Environmental Laws which would reasonably be expected to have a
Material Adverse Effect on BIF.
ARTICLE 10
CONDITIONS PRECEDENT TO OBLIGATIONS OF BOTH PARTIES
SECTION 10.1 REGISTRATION STATEMENT. The Registration Statement shall
have become effective and no stop order suspending such effectiveness shall have
been issued or threatened by the SEC that suspends the effectiveness of the
Registration Statement and no proceeding shall have been commenced or be pending
or overtly threatened for such purpose.
SECTION 10.2 OTHER APPROVALS. All actions, consents or approvals,
governmental or otherwise, which are, or in the opinion of counsel for BIF or
FDB may be, necessary to permit or enable the Resulting Corporation upon and
after the Merger, to conduct all or any part of the business of FDB or BIF, in
the manner in which such activities and businesses are conducted up to the
Effective Time, shall have been obtained without any conditions which in the
reasonable opinion of BIF or FDB are materially adverse, and shall not have been
withdrawn or stayed.
SECTION 10.3 ORDERS, DECREES AND JUDGMENTS. Consummation of the
transactions contemplated by this Agreement shall not violate any order, decree
or judgment of any court or governmental body having competent jurisdiction.
SECTION 10.4 REGULATORY APPROVALS. BIF, FDB and Newco shall have
received any and all required approvals from the Federal Reserve and the
Commissioner and any other necessary governmental authority, for the
consummation of the transactions contemplated hereby.
SECTION 10.5 TAX OPINION. Each of FDB and BIF shall have received from
counsel, accountants or tax advisors reasonably acceptable to FDB and BIF an
opinion dated as of the Closing Date to the effect that the Merger qualifies as
a nontaxable reorganization within the meaning of Section 368(a) and related
sections of the Code.
SECTION 10.6 POOLING LETTER. Each of FDB and BIF shall have received
from accountants mutually acceptable to BIF and FDB a letter opining that Newco
may properly account for the Merger as a pooling of interests.
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ARTICLE 11
ADDITIONAL COVENANTS OF THE PARTIES
SECTION 11.1 SEC REGISTRATION. Newco shall file with the SEC as soon as
practicable after the execution of this Agreement, a Registration Statement on
an appropriate form under the Securities Act covering Newco Common Stock to be
issued pursuant to this Agreement and shall use all reasonable efforts to cause
the same to become effective and thereafter, until the Effective Time or lawful
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 herein as the "Registration Statement."
The Registration Statement shall include a Proxy Statement-Prospectus thereto
reasonably acceptable to BIF and FDB (the "Proxy Statement-Prospectus"),
prepared by Newco, and reasonably acceptable to BIF and FDB, for use in
connection with the meetings of the stockholders of BIF and FDB referred to in
SECTIONS 6.4 AND 7.4, respectively, of this Agreement, all in accordance with
the rules and regulations of the SEC. Newco shall, as soon as practicable after
the execution of this Agreement, make all filings required to obtain all Blue
Sky permits, authorizations, consents or approvals required for the issuance of
the Newco Common Stock. In advance of any filing made under this Section, FDB
and BIF and their respective counsel shall be provided with the opportunity to
comment thereon, and FDB, BIF and Newco each agree promptly to advise each other
and each other's counsel of any material communication received by it or its
counsel from the SEC or any other regulatory authorities with respect to such
filings.
SECTION 11.2 COOPERATION. Each of FDB and BIF and their respective
Subsidiaries and Newco will fully and promptly cooperate with each other and
their respective counsel and accountants in connection with any steps to be
taken as part of their obligations under this Agreement.
SECTION 11.3 CUSTOMER AND EMPLOYEE RELATIONSHIPS. Each of FDB and BIF
agrees that its respective representatives may jointly:
(a) participate in meetings or discussions with officers and employees
of BIF and FDB and their Subsidiaries in connection with employment
opportunities with Newco after the Effective Time; and
(b) contact Persons having dealings with BIF or FDB or any of its
respective Subsidiaries for the purpose of informing such Persons of the
services to be offered by Newco after the Effective Time.
SECTION 11.4 POOLING TREATMENT. The parties agree to cooperate and
to take such actions as are reasonably necessary to permit Newco properly to
account for the transaction contemplated by this Agreement as a
pooling-of-interests.
SECTION 11.5 EXPENSES. Except as otherwise provided herein, all costs
and expenses incurred by a party hereto shall be borne by such party, including
the fees of their respective
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accountants and attorneys. Organizational expenses of Newco and reasonable
expenses incurred in its performance of this Agreement (but not including
attorneys fees) shall be divided equally between BIF and FDB and shall be
considered expenses of each for purposes of SECTIONS 8.11 AND 9.11.
SECTION 11.6 PUBLICITY. Prior to the Effective Time, the parties hereto
will consult with each other before issuing any press releases or otherwise
making any public statements with respect to this Agreement or the transactions
contemplated hereby and shall not issue any such press release or make any such
public statement without the prior consent of the other parties, except as may
be required by law.
SECTION 11.7 NEWCO EMPLOYEE BENEFITS. FDB and BIF agree to cooperate to
determine prior to the Closing the types of benefits to be offered after the
Effective Time by Newco to former employees of BIF and FDB who become employees
of Newco.
SECTION 11.8 DIRECTOR AND OFFICER LIABILITY COVERAGE. FDB and BIF agree
to cooperate to attempt to obtain after the Effective Time directors' and
officers' liability insurance coverage for the officers and directors of Newco,
to the extent the same is economically practicable. Any such coverage shall be
on substantially the same terms and conditions and provide the same coverage
against personal liability for actions taken after the Effective Time as the
most protective coverage which is currently provided to officers and directors
of either BIF or FDB. Such coverage may be provided through an insurance policy
or through an agreement by Newco to indemnify such officers and directors. FDB
and BIF also agree to cooperate to attempt to obtain as of the Effective Time
and to maintain in effect for a period of not less than three (3) years after
the Effective Time directors' and officers' liability insurance coverage for the
officers and directors of each of FDB and BIF with respect to actions taken by
them prior to the Effective to the extent the same is economically practicable
("Tail Coverage"). Notwithstanding any such Tail Coverage, the parties further
agree that after the Effective Time Newco will indemnify the current and past
officers and directors of FDB and BIF for all actions taken by them prior to the
Effective Time in their respective capacities as officers and directors of FDB
and BIF to the same extent as the indemnification provided by FDB or BIF to its
respective officers and directors as of the time immediately prior to the
Effective Time.
SECTION 11.9 ACTIONS BY NEWCO. Prior to the date hereof, FDB and BIF
have incorporated Newco under Illinois law, and Newco has issued one half of
Newco's capital stock to each of BIF and FDB. BIF and FDB agree that from and
after the date hereof they shall each cause Newco to take all other corporate
and other actions that are necessary for Newco to comply with its respective
obligations under this Agreement and to effectuate the Merger and the other
transactions contemplated by this Agreement.
SECTION 11.10 EMPLOYMENT AGREEMENT. FDB and BIF shall cause Newco to
enter into an employment agreement, to become effective at the Effective Time,
with Phillip Wise which will embody the terms set forth in EXHIBIT J hereto.
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ARTICLE 12
REGULATORY APPROVALS
SECTION 12.1 INITIAL FILINGS. FDB and BIF shall use all reasonable
efforts to make as soon as practicable all appropriate initial filings necessary
to obtain the regulatory approvals referred to in SECTION 12.2 at such time as
they reasonably believe that such filings would be accepted and approved by the
appropriate regulatory agencies. FDB and BIF shall in good faith pursue the
regulatory approvals necessary to consummate the transactions contemplated in
this Agreement. FDB and BIF and their respective counsel shall be provided with
a copy of each application or document filed with federal or state regulatory
officials to obtain such approvals.
SECTION 12.2 NECESSARY APPROVALS. FDB and BIF shall mutually agree upon
the parties who will have primary responsibility for preparation of the
Registration Statement and for the necessary applications for regulatory
approval of the transactions contemplated in this Agreement, including, but not
limited to, the preparation of an application or any amendment thereto or any
other required statements or documents filed or to be filed by any party with:
(a) the Federal Reserve pursuant to the BHCA; and (b) any other party or
governmental authority pursuant to any applicable law or regulation, for
authority to consummate the transactions contemplated by this Agreement. Each
of FDB and BIF agrees to cooperate with the other and to use all reasonable
efforts to assist the other in preparing the Registration Statement and such
applications and in pursuit of such approvals.
ARTICLE 13
TERMINATION AND ABANDONMENT
SECTION 13.1 TERMINATION OF AGREEMENT. This Agreement may be terminated
only as set forth below:
(a) by mutual consent of the Boards of Directors of BIF and FDB, each
evidenced by appropriate written resolutions; or
(b) by BIF by giving written notice of such termination to FDB, (i) if
there has been (A) a material breach of any covenant herein (except for breaches
of SECTION 7.4 or 7.9, which are separately addressed in SECTION 13.1(e)) on the
part of FDB which has not been cured or adequate assurance of cure given, in
either case within thirty (30) Business Days following notice of such breach
from BIF, unless such breach or failure is a result of the failure by BIF to
perform and comply in all material respects with any of its material obligations
under this Agreement which are to be performed or complied with by it prior to
or on the date required hereunder; or (B) a breach of a representation or
warranty of FDB herein which (individually or, together with other such
breaches, in the aggregate) affect or could reasonably be expected to have a
Material Adverse Effect on Newco following the consummation of the Merger, and
which, in the reasonable opinion of the BIF Board of Directors, by its nature
cannot be cured on or prior to the
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Termination Date, or (ii) if there shall have occurred after the date of this
Agreement, any change in any law, rule or regulation, or after the date of
this Agreement there shall have been any decision or action by any court,
government or governmental agency (including, without limitation, any bank
regulatory authority), that could reasonably be expected to prevent or delay
consummation of the Merger beyond the Termination Date; or
(c) by FDB by giving written notice of such termination to BIF, (i) if
there has been (A) a material breach of any covenant herein (except for breaches
of SECTION 6.4 OR 6.9 which are separately addressed in SECTION 13.1(f)) on the
part of BIF which has not been cured or adequate assurance of cure given, in
either case within thirty (30) Business Days following notice of such breach
from FDB, unless such breach or failure is a result of the failure by FDB to
perform and comply in all material respects with any of its material obligations
under this Agreement which are to be performed or complied with by it prior to
or on the date required hereunder; or (B) a breach of a representation or
warranty of BIF herein which (individually or, together with other such
breaches, in the aggregate) affect or could reasonably be expected to affect in
a material and adverse manner the business and affairs of Newco, on a
consolidated basis, following the consummation of the Merger, and which, in the
reasonable opinion of the FDB Board of Directors, by its nature cannot be cured
on or prior to the Termination Date, or (ii) if there shall have occurred after
the date of this Agreement, any change in any law, rule or regulation, or after
the date of this Agreement there shall have been any decision or action by any
court, government or governmental agency (including, without limitation, any
bank regulatory authority), that could reasonably be expected to prevent or
delay consummation of the Merger beyond the Termination Date; or
(d) by BIF or FDB, by giving written notice of such termination to the
other party or parties, if (i) the Federal Reserve, the Commissioner or any
other applicable governmental authority whose approval is required for
consummation of the Merger has denied approval of the Merger and such denial has
become final and nonappealable, (ii) any application, filing or notice for a
regulatory approval has been withdrawn at the request or recommendation of the
applicable governmental authority and a petition for rehearing shall not have
been granted or an amended application shall not have been accepted for filing
by the applicable governmental authority within the sixty (60) day period
following such withdrawal, or (iii) the Effective Time shall not have occurred
at or before 11:59 p.m. on the Termination Date, PROVIDED, HOWEVER (and without
limiting the applicability, if any, of the provisions of SECTION 13.2 below,
with respect to the occurrence of any event described in clauses (i) or (ii)
above), that the right to terminate this Agreement under this SECTION 13.1(d)
shall not be available to any party hereto whose failure to fulfill any of its
obligations (excluding warranties and representations) under this Agreement has
been the cause of or resulted in the occurrence of the event described in clause
(iii) above; or
(e) by BIF, by giving written notice of such termination to FDB, and
subject to the special termination fee set forth in SECTION 13.5(a), (i) if FDB
breaches its obligations under SECTION 7.9, or (ii) if FDB breaches any of its
obligations under SECTION 7.4 to call a stockholders' meeting to vote on, and to
recommend to its stockholders to vote to approve, this Agreement and the
transactions contemplated hereby, including the Merger; or
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(f) by FDB, by giving written notice of such termination to BIF, and
subject to the special termination fee set forth in SECTION 13.5(b), (i) if BIF
breaches its obligations under SECTION 6.9, or (ii) if BIF breaches any of its
obligations under SECTION 6.4 to call a stockholders' meeting to vote on, and to
recommend to its stockholders to vote to approve, this Agreement and the
transactions contemplated hereby, including the Merger.
(g) by BIF, by giving written notice of such termination to FDB, and
subject to the special termination fee set forth in SECTION 13.5(c), if BIF
receives an Unsolicited BIF Proposal that is determined in good faith by the BIF
Board of Directors, after consultation with BIF's financial advisor, is on terms
that are more favorable to the stockholders of BIF than the Merger and has a
reasonable prospect of being consummated in accordance with its terms (a
"Superior BIF Proposal"); provided, however, that BIF shall not be permitted to
terminate this Agreement pursuant to this SECTION 13.1(g) unless BIF shall have
given FDB five (5) Business Days' prior written notice thereof (or, if there are
less than five (5) Business Days remaining prior to the Closing, written notice
prior to the Closing) of its intent to so terminate this Agreement pursuant to
this SECTION 13.1(g), together with a summary of the terms of, and the identity
of the Person making, such Superior BIF Proposal; or
(h) by FDB, by giving written notice of such termination to BIF, and
subject to the special termination fee set forth in SECTION 13.5(d), if FDB
receives an Unsolicited FDB Proposal that is determined in good faith by the FDB
Board of Directors, after consultation with FDB's financial advisor, is on terms
that are more favorable to the stockholders of FDB than the Merger and has a
reasonable prospect of being consummated in accordance with its terms (a
"Superior FDB Proposal"), provided, however, that FDB shall not be permitted to
terminate this Agreement pursuant to this SECTION 13.1(h) unless FDB shall have
given BIF five (5) Business Days' prior written notice thereof (or, if there are
less than five (5) Business Days remaining prior to the Closing, written notice
prior to the Closing) of its intent to so terminate this Agreement pursuant to
this SECTION 13.1(h), together with a summary of the terms of, and the identity
of the Person making, such Superior FDB Proposal; or
(i) by BIF, by giving written notice of such termination to FDB, and
subject to the special termination fee set forth in SECTION 13.5(b), if the
fairness opinion provided for in SECTION 8.12 shall have been withdrawn prior to
the Closing; or
(j) by FDB, by giving written notice of such termination to BIF, and
subject to the special termination fee set forth in SECTION 13.5(a), if the
fairness opinion provided for in SECTION 9.12 shall have been withdrawn prior to
the Closing; or
(k) by BIF as provided in SECTION 2.10(b); or
(l) by FDB as provided in SECTION 2.10(a).
SECTION 13.2 EFFECT OF TERMINATION OR ABANDONMENT. In the event of the
lawful termination of this Agreement and the abandonment of the Merger pursuant
to SECTION 13.1, this Agreement shall become null and void, BIF shall bear all
BIF Transactional Expenses, FDB shall
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bear all FDB Transactional Expenses, and there shall be no liability of one
party to the other or any restrictions on the future activities on the part
of any party hereto, or its directors, officers or stockholders, except for
the obligations of BIF and FDB concerning confidentiality referred to in
SECTIONS 6.1 AND 7.1, respectively, and except as provided under SECTIONS
13.3, 13.4 AND 13.5.
SECTION 13.3 PAYMENTS TO FDB. Subject to the further provisions of this
Section, if: (a) FDB lawfully terminates this Agreement pursuant to
SECTION 13.1(c) OR (f); or (b) BIF lawfully terminates this Agreement pursuant
to SECTION 13.1(i), then in either case, BIF shall pay to FDB, upon its written
demand, the FDB Transactional Expenses in an amount not to exceed $500,000, and
an additional sum equal to $1,500,000 (the "BIF Base Termination Fee"), by wire
transfer of immediately available funds to such account as FDB shall designate.
Such sums shall constitute liquidated damages and the receipt thereof shall be
the sole and exclusive remedy of FDB and the FDB Subsidiaries against BIF, the
BIF Subsidiaries, and their respective officers, directors, employees and
stockholders for any claims arising from or relating in any way to this
Agreement or the transactions contemplated herein; PROVIDED, HOWEVER, that
nothing herein shall preclude or bar FDB from asserting or enforcing any such
claim against any Person other than BIF, the BIF Subsidiaries and their
respective officers, directors, employees and stockholders. Notwithstanding the
foregoing, this SECTION 13.3 shall not require (x) BIF to pay any BIF Base
Termination Fee or FDB Transactional Expenses if the Merger is not consummated
as a result of the termination of this Agreement by the mutual consent of FDB
and BIF pursuant to SECTION 13.1(a), or as a result of the lawful termination of
this Agreement by FDB or BIF pursuant to SECTION 13.1(d), or as a result of the
lawful termination of this Agreement by FDB pursuant to SECTION 2.10(a) or
SECTION 13.1(c)(ii); or (y) BIF to pay any BIF Base Termination Fee if the
Merger is not consummated as a result of the lawful termination of this
Agreement by FDB pursuant to SECTION 13.1(c)(i)(B), and such termination is
based solely upon a material but unintentional breach by BIF of any
representation or warranty, PROVIDED, HOWEVER, in such event, BIF shall remain
obligated to pay the FDB Transactional Expenses, but only up to a maximum amount
of $250,000.
SECTION 13.4 PAYMENTS TO BIF. Subject to the further provisions of this
Section, if: (a) BIF lawfully terminates this Agreement pursuant to
SECTION 13.1(b) OR (e); or (b) FDB lawfully terminates this Agreement pursuant
to SECTION 13.1(j), then in either case, FDB shall pay to BIF, upon its written
demand, the BIF Transactional Expenses in an amount not to exceed $500,000, and
an additional sum equal to $1,500,000 (the "FDB Base Termination Fee"), by wire
transfer of immediately available funds to such account as BIF shall designate.
Such sums shall constitute liquidated damages and the receipt thereof shall be
the sole and exclusive remedy of BIF and the BIF Subsidiaries against FDB, the
FDB Subsidiaries and their respective officers, directors, employees and
stockholders for any claims arising from or relating in any way to this
Agreement or the transactions contemplated herein; PROVIDED, HOWEVER, that
nothing herein shall preclude or bar BIF from asserting or enforcing any such
claim against any Person other than FDB, the FDB Subsidiaries and their
respective officers, directors, employees and stockholders. Notwithstanding the
foregoing, this SECTION 13.4 shall not require (x) FDB to pay any FDB Base
Termination Fee or BIF Transactional Expenses if the Merger is not consummated
as a result of the termination of this Agreement by the mutual consent of FDB
and BIF pursuant to SECTION 13.1(a), or as a result of the lawful termination of
this Agreement by FDB or BIF
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pursuant to SECTION 13.1(d), or as a result of the lawful termination of this
Agreement by BIF pursuant to SECTION 2.10(b) or SECTION 13.1(b)(ii); or (y)
FDB to pay any FDB Base Termination Fee if the Merger is not consummated as a
result of the lawful termination of this Agreement by BIF pursuant to SECTION
13.1(b)(i)(B), and such termination is based solely upon a material but
unintentional breach by FDB of any representation or warranty, PROVIDED,
HOWEVER, in such event, FDB shall remain obligated to pay the BIF
Transactional Expenses, but only up to a maximum amount of $250,000.
SECTION 13.5 SPECIAL TERMINATION FEES (a) If this Agreement is lawfully
terminated by BIF pursuant to SECTION 13.1(b)(i) OR (e), or by FDB pursuant to
SECTION 13.1(j), and within twelve (12) months after such termination FDB shall
enter into a letter of intent or definitive written agreement with any Person
(other than BIF and its Affiliates) with respect to an acquisition of not less
than thirty-five percent (35%) of the outstanding shares of FDB Common Stock or
all or substantially all of the assets of FDB or FNB, and after giving credit
for any prior payment under SECTION 13.4, FDB shall pay to BIF, within ten (10)
Business Days after the execution of such letter of intent or definitive
agreement, the amount of $3.0 million plus the BIF Transactional Expenses up to
$500,000 by wire transfer of immediately available funds to such account as BIF
shall designate. Notwithstanding the foregoing, this SECTION 13.5(a) shall not
apply in the event that BIF lawfully terminates this Agreement pursuant to
SECTION 13.1(b)(i)(B) unless FDB intentionally breached or caused the applicable
warranty or representation to be breached.
(b) If this Agreement is lawfully terminated by FDB pursuant to
SECTION 13.1(c)(i) OR (f), OR BY BIF PURSUANT TO SECTION 13.1(i), and within
twelve (12) months after such termination BIF shall enter into a letter of
intent or definitive written agreement with any Person (other than FDB and its
Affiliates) with respect to an acquisition of not less than thirty-five percent
(35%) of the outstanding shares of BIF Common Stock or all or substantially all
of the assets of BIF or BKI, and after giving credit for any prior payment under
SECTION 13.3, BIF shall pay to FDB, within ten (10) Business Days after the
execution of such letter of intent or definitive agreement, the amount of
$3.0 million plus the FDB Transactional Expenses up to $500,000 by wire transfer
of immediately available funds to such account as FDB shall designate.
Notwithstanding the foregoing, this SECTION 13.5(b) shall not apply in the event
that FDB lawfully terminates this Agreement pursuant to SECTION 13.1(c)(i)(B)
unless BIF intentionally breached or caused the applicable warranty or
representation to be breached.
(c) If this Agreement is terminated by BIF pursuant to
SECTION 13.1(g), and in lieu of any payment under SECTIONS 13.3 OR 13.5 (b), BIF
shall pay to FDB, within ten (10) Business Days after the occurrence of any such
termination by BIF pursuant to SECTION 13.1(g), the amount of $4.0 million plus
the FDB Transactional Expenses up to $500,000 by wire transfer of immediately
available funds to such account as FDB shall designate.
(d) If this Agreement is terminated by FDB pursuant to
SECTION 13.1(h), and in lieu of any payment under SECTIONS 13.4 OR 13.5(a), FDB
shall pay to BIF, within ten (10) Business Days after the occurrence of any such
termination by FDB pursuant to SECTION 13.1(h), the
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amount of $4.0 million plus the FDB Transactional Expenses up to $500,000 by
wire transfer of immediately available funds to such account as BIF shall
designate.
(e) All payments made pursuant to this Section shall constitute
liquidated damages and the receipt thereof shall be the sole and exclusive
remedy of the receiving party against the party making such payment, its
Affiliates and their respective directors, officers and stockholders for any
claims arising out of or relating in any way to this Agreement or the
transactions contemplated herein; PROVIDED, HOWEVER, that nothing herein shall
preclude or bar the party receiving such payment from asserting or enforcing any
such claim against any Person other than the party making such payment, such
party's Affiliates and their respective officers, directors, employees and
stockholders.
ARTICLE 14
MISCELLANEOUS
SECTION 14.1 GOVERNING LAW. All questions concerning the construction,
validity and interpretation of this Agreement, and the performance of the
obligations imposed by this Agreement shall be governed by the internal laws of
the State of Illinois applicable to contracts made and wholly to be performed in
such state without regard to conflicts of laws, except that the law of the state
of Delaware shall apply to all matters of corporate law and except to the extent
superseded by federal law.
SECTION 14.2 ASSIGNMENT. Neither this Agreement nor any of the rights
or obligations hereunder may be assigned, in whole or in part, by any of the
parties hereto without the prior written consent of the other parties hereto and
any purported assignment in violation hereof shall be void and of no effect.
SECTION 14.3 AMENDMENT AND MODIFICATION. The parties may by written
agreement signed by FDB and FDB: (a) extend the time for the performance of any
of the obligations or other acts of the parties hereto; (b) waive any
inaccuracies in the representations or warranties contained in this Agreement or
in any document delivered pursuant to this Agreement; and (c) waive compliance
with or modify, amend or supplement any of the conditions, covenants,
agreements, representations or warranties contained in this Agreement or waive
or modify performance of any of the obligations of any of the parties hereto,
which are for the benefit of the waiving party, PROVIDED, HOWEVER, that no such
modification, amendment or supplement agreed to after authorization of this
Agreement by the stockholders of FDB or FDB shall affect the rights of such
respective stockholders in any manner which is materially adverse to such
stockholders. The failure of any party hereto to enforce at any time any
provision of this Agreement shall not be construed to be a waiver of such
provision, nor in any way affect the validity of this Agreement or any part
hereof or the right of any party thereafter to enforce each and every such
provision. No waiver of any breach of this Agreement shall be held to
constitute a waiver of any other or subsequent breach.
SECTION 14.4 NOTICES. All notices, requests and other communications
hereunder shall be in writing (which shall include telecopier communication) and
shall be deemed to have been
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duly given if delivered by hand or by overnight express delivery service,
mailed certified or registered mail with first class postage prepaid or
telecopied if confirmed immediately thereafter by also mailing a copy of any
notice, request or other communication by certified or registered mail with
first class postage prepaid:
(a) If to FDB or Newco, to:
First Decatur Bancshares, Inc.
130 N. Water Street
Decatur, Illinois 62523-1376
Attention: John W. Luttrell
Chairman of the Board
Telephone: (217) 424-1111
Telecopier: (217) 425-8356
with copies to:
Howard & Howard Attorneys PC
321 Liberty Street, Suite 200
Peoria, Illinois 61602
Attention: Theodore L. Eissfeldt, Esq.
Telephone: (309) 672-1483
Telecopier: (309) 672-1568
or to such other Person and place as FDB shall furnish to FDB in writing; or
(b) if to BIF or Newco, to:
BankIllinois Financial Corporation
100 West University Avenue
Box 128
Champaign, Illinois 61820-3511
Attention: Gregory B. Lykins
Chairman of the Board
Telephone: (217) 351-6500
Telecopier: (217) 351-7188
60
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with copies to:
Barack Ferrazzano Kirschbaum Perlman & Nagelberg
333 West Wacker
Suite 2700
Chicago, Illinois 60606
Attention: James J. Brennan, Esq.
Dennis R. Wendte, Esq.
Telephone: (312) 984-3100
Telecopier: (312) 984-3220
or to such other Person or place as FDB or FDB shall furnish to FDB or FDB shall
furnish to FDB and FDB in writing. Except as otherwise provided herein, all
such notices, requests or other communications shall be effective: (i) if
delivered by hand, when delivered; (ii) if mailed in the manner provided in this
Section, five (5) Business Days after deposit with the United States Postal
Service; (iii) if delivered by overnight express delivery service, on the next
Business Day after deposit with such service; (iv) if by telecopier, on the next
Business Day if also confirmed by mail in the manner provided in this Section.
SECTION 14.5 HEADINGS. The table of contents and the captions and
headings of articles, sections, schedules and exhibits appearing in or attached
to this Agreement have been inserted solely for convenience of reference and
shall not be considered a part of this Agreement nor shall any of them affect
the meaning or interpretation of this Agreement or any of its provisions.
SECTION 14.6 ENTIRE AGREEMENT. This Agreement and any documents
executed by the parties pursuant to this Agreement and referred to herein
constitute the entire understanding and agreement of the parties hereto and
supersede all other prior agreements and understandings, written or oral,
relating to such subject matter between the parties, except for the Joint
Confidentiality Agreement between FDB and FDB dated July 9, 1999. This
Agreement and every representation, warranty, covenant, agreement and provision
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
SECTION 14.7 SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement unless the
consummation of the transactions contemplated hereby is adversely affected
thereby.
SECTION 14.8 FURTHER INSTRUMENTS. The parties hereto will, at or before
the Effective Time, execute and deliver such further instruments as may be
reasonably requested by any other party which are necessary to or appropriate
with respect to the consummation of the transactions contemplated by this
Agreement.
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SECTION 14.9 COUNTERPARTS. This Agreement and any amendments thereto
may be executed in any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
SECTION 14.10 ALL REASONABLE EFFORTS. Each party represents and
warrants that it will use all reasonable efforts to bring about the
transactions contemplated by this Agreement as soon as practicable provided
that this Section shall not obligate FDB or FDB to remedy any breach of any
of its representations, warranties and covenants herein. In the event that
any party becomes aware of the occurrence or impending occurrence of any
event which would constitute or cause a breach by it of any of the
representations or warranties herein, or would have constituted or caused a
breach by it of any of the representations or warranties herein, had such an
event occurred or been known prior to the date hereof, said party shall
immediately give detailed and written notice thereof to the other party.
SECTION 14.11 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as
otherwise expressly provided herein, the covenants, representations and
warranties contained in this Agreement shall survive only until the Effective
Time.
SECTION 14.12 NO THIRD PARTY BENEFICIARIES. This Agreement is not
intended to and shall not create any rights in or confer any benefits upon
any Person or entity other than the parties hereto.
[THIS SPACE LEFT INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers as of the day and year first written
above.
ATTEST: FIRST DECATUR BANCSHARES, INC.
By: /s/ Pete Grosso By: /s/ John Luttrell
------------------------------ ------------------------------
Name: Pete Grosso John W. Luttrell
Secretary Chairman
ATTEST: BANKILLINOIS FINANCIAL
CORPORATION
By: /s/ Teresa M. Marsh By: /s/ Gregory B. Lykins
------------------------------ ------------------------------
Name: Teresa M. Marsh Gregory B. Lykins
Secretary Chairman
ATTEST: MAIN STREET TRUST, INC.
By: Teresa M. Marsh By: /s/ Van A Dukeman
------------------------------ ------------------------------
Name: Teresa M. Marsh Name: Van A. Dukeman
Secretary President & CEO
63
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APPENDIX B
[Letterhead of Keefe, Bruyette & Woods]
February __, 2000
The Board of Directors
BankIllinois Financial Corporation
100 West University
Champaign, Illinois 61820
Members of the Board:
You have requested our opinion as investment bankers as to the fairness,
from a financial point of view, to the common stockholders of BankIllinois
Financial Corporation ("BankIllinois Financial") of the exchange ratio in the
proposed merger ("the Merger") among BankIllinois Financial, First Decatur
Bancshares, Inc. ("First Decatur") and Main Street Trust, Inc. ("Main Street"),
an Illinois orporation formed to facilitate the Merger. Pursuant to the
Agreement and Plan of Merger (the "Merger Agreement") dated as of August 12,
1999 each of the outstanding shares of BankIllinois Financial common stock will
be converted into one share of Main Street common stock, $0.01 par value per
share, and each of the outstanding shares of First Decatur common stock will be
converted into 1.638 shares of Main Street common stock (collectively, the
"Exchange Ratio"). It is our understanding that the Merger will be structured
as a pooling accounting transaction under generally accepted accounting
principles.
Keefe, Bruyette & Woods, Inc. ("Keefe Bruyette"), as part of
its investment banking business, is continually engaged in the valuation of
bank holding companies and banks, thrift holding companies and thrifts and
their securities in connection with mergers and acquisitions, underwriting,
private placements, competitive bidding processes, market making as a NASD
market maker, and valuations for various other purposes. As specialists in the
securities of banking companies we have experience in, and knowledge of, the
valuation of banking enterprises. In the ordinary course of our business as a
broker-dealer, we may, from time to time, trade the securities of First Decatur
or BankIllinois Financial, for our own account, and for the accounts of our
customers and, accordingly, may at any time hold a long or short position in
such securities. To the extent we have any such positions as of the date of this
opinion it has been disclosed to BankIllinois Financial. KBW has served as
financial advisor to BankIllinois Financial in the negotiation of the Merger
Agreement and in rendering this fairness opinion and will receive a fee from
BankIllinois Financial for those services.
In arriving at our opinion, we have reviewed, analyzed and relied
upon material bearing upon the financial and operating condition of First
Decatur and BankIllinois Financial and the Merger, including among other things,
the following:
<PAGE>
February ___, 2000
The Board of Directors
BankIllinois Financial Corporation
Page 2 of 3
i. Reviewed the Merger Agreement;
ii. Reviewed certain historical financial and other information concerning
BankIllinois Financial for the three years ending December 31, 1998 and
the period ending September 30, 1999, including BankIllinois Financial's
Annual Report to Stockholders and Annual Reports on Forms 10-K, and
quarterly reports on Form 10-Q;
iii. Reviewed certain historical financial and other information
concerning First Decatur for the three years ending December 31, 1998 and
the period ended September 30, 1999, including First Decatur's Annual
Report to Stockholders and Annual Reports on Forms 10-K, and quarterly
reports on Form 10-Q;
iv. Reviewed and studied the historical stock prices and trading volumes of
the common stock of both BankIllinois Financial and First Decatur;
v. Held discussions with senior management of BankIllinois Financial and
First Decatur with respect to their past and current financial
performance, financial condition and future prospects;
vi. Reviewed certain internal financial data, projections and other
information of BankIllinois Financial, including financial projections
prepared by management;
vii. Analyzed certain publicly available information of other
financial institutions that we deemed comparable or otherwise relevant to
our inquiry, and compared BankIllinois Financial and First Decatur from a
financial point of view with certain of these institutions;
viii. Reviewed the financial terms of certain recent business combinations in
the banking industry that we deemed comparable or otherwise relevant to
our inquiry;
ix. Conducted such other financial studies, analyses and investigations
and reviewed such other information as we deemed appropriate to enable
us to render our opinion; and
x. Held discussions with management regarding legal proceedings as described
in First Decatur's latest quarterly report on Form 10-Q.
In conducting our review and arriving at our opinion, we have relied
upon the accuracy and completeness of all of the financial and other
information provided to us or publicly available and we have not assumed any
responsibility for independently
<PAGE>
February ___, 2000
The Board of Directors
BankIllinois Financial Corporation
Page 3 of 3
verifying the accuracy or completeness of any such information. We have
relied upon the management of BankIllinois Financial and First Decatur as to
the reasonableness and achievability of the financial and operating forecasts
and projections (and the assumptions and bases therefor) provided to us, and
we have assumed that such forecasts and projections reflect the best
currently available estimates and judgments of such managements and that such
forecasts and projections will be realized in the amounts and in the time
periods currently estimated by such managements. We are not experts in the
independent verification of the adequacy of allowances for loan and lease
losses and we have assumed that the current and projected aggregate reserves
for loan and lease losses for BankIllinois Financial and First Decatur are
adequate to cover such losses. We did not make or obtain any independent
evaluations or appraisals of any assets or liabilities of BankIllinois
Financial, First Decatur, or any of their respective subsidiaries nor did we
verify any of BankIllinois Financial's or First Decatur's books or records.
We have considered such financial and other factors as we have
deemed appropriate under the circumstances, including, among others, the
following: (i) the historical and financial position and results of operations
of BankIllinois Financial and First Decatur; (ii) the assets and liabilities of
BankIllinois Financial and First Decatur, including the financial impact of
possible liabilities involving First Decatur's subsidiary as described in First
Decatur's latest quarterly report on Form 10-Q; and (iii) the nature and
terms of certain other merger transactions involving banks and bank holding
companies. We have also taken into account our assessment of general economic,
market and financial conditions and our experience in other transactions, as
well as our experience in securities valuation and knowledge of the banking
industry generally. Our opinion is necessarily based upon conditions as they
exist and can be evaluated on the date hereof and the information made available
to us through the date hereof.
Based upon and subject to the foregoing, it is our opinion that, as
of the date hereof, the Exchange Ratio is fair, from a financial point of view,
to BankIllinois Financial and its stockholders.
Very truly yours,
Keefe, Bruyette & Woods, Inc.
Steven P. Kent
Managing Director
<PAGE>
[Letterhead of ABN AMRO Incorporated]
Appendix C
August 12, 1999
Board of Directors
First Decatur Bancshares, Inc.
130 North Water Street
Decatur, Illinois 62523
Members of the Board:
We understand that First Decatur Bancshares, Inc. ("FDB"), BankIllinois
Financial Corporation ("BIF"), and BIF/FDB Merger Co. ("Newco") propose to
enter into an Agreement and Plan of Merger, substantially in the form of the
agreement dated as of August 12, 1999 (the "Agreement"), which provides,
among other things, for the merger of each of FDB and BIF with and into Newco
(the "Merger") with Newco as the resulting corporation. Pursuant to the
Merger, each issued and outstanding share of common stock, par value $0.01
per share, of FDB ("FDB Common Stock"), will be converted into the right to
receive 1.638 shares (the "FDB Exchange Ratio") of common stock, par value
$0.01 per share, of Newco ("Newco Common Stock"), and each issued and
outstanding share of common stock, par value $0.01 per share, of BIF ("BIF
Common Stock") will be converted into the right to receive 1.000 share of
Newco Common Stock. The terms and conditions of the Merger are more fully
set forth in the Agreement.
You have asked us whether, in our opinion, the FDB Exchange Ratio pursuant to
the Merger is fair from a financial point of view to the holders of FDB
Common Stock.
In connection with this opinion, we have, among other things:
i. reviewed certain publicly available financial statements and
other business information relating to FDB and BIF;
ii. reviewed certain internal financial statements and other
financial and operating data concerning FDB and BIF prepared by
their respective managements;
iii. analyzed certain financial projections prepared by the
respective managements of FDB and BIF;
iv. discussed the past and current operations and financial
condition and the prospects of FDB and BIF, including
information relating to certain strategic, financial and
operational benefits anticipated from the Merger, with senior
executives of FDB and BIF, respectively;
v. reviewed the reported prices and trading activity for FDB
Common Stock and BIF Common Stock, respectively;
<PAGE>
First Decatur Bancshares, Inc.
August 12, 1999
Page 2 of 3
vi. compared the financial and operating performance of FDB and BIF
and the prices and trading activity of FDB Common Stock and BIF
Common Stock with that of certain other publicly traded
companies that we considered to be relevant;
vii. compared the proposed financial terms of the Merger with the
financial terms, to the extent publicly available, of certain
other transactions that we considered to be relevant;
viii. reviewed the pro forma impact of the Merger on FDB;
ix. reviewed and discussed with the senior managements of FDB and
BIF the strategic rationale for, and the potential benefits of,
the Merger;
x. participated in discussions and negotiations among
representatives of FDB and BIF and their respective financial
and legal advisors;
xi. reviewed the draft Agreement and certain related documents; and
xii. performed such other analyses and examinations and considered
such other matters as we deemed appropriate.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of the financial and other information reviewed by us and we
have not obtained, nor have we made or assumed responsibility for
undertaking, any independent verification of such information. We have
assumed that financial data have been reasonably prepared on bases reflecting
the best currently available estimates and judgment of FDB and BIF as to the
future financial performance of each company. We have also relied upon,
without independent verification, the assessment by management of FDB and BIF
of the strategic and other benefits expected to result from the Merger. In
addition, we have assumed, with your consent, that the Merger will be
consummated in accordance with the terms set forth in the Agreement, which
was negotiated on the basis of a merger-of-equals, and it includes, among
other things, that the Merger will be accounted for as "pooling of interest"
business combination in accordance with U.S. Generally Accepted Accounting
Principles and will be treated as a tax-free reorganization or exchange, each
pursuant to the Internal Revenue Code of 1986.
We have not made an independent evaluation or appraisal of the assets and
liabilities of FDB or BIF or any of their respective subsidiaries nor have we
been furnished with such evaluations or appraisals. Our opinion is necessarily
based on the economic, monetary, market and other conditions as in effect on,
and the information made available to us, as of the date hereof.
<PAGE>
First Decatur Bancshares, Inc.
August 12, 1999
Page 3 of 3
In connection with our engagement, and upon your request, we approached and
held discussions with certain third parties to solicit indications of
interest with respect to a possible transaction with FDB.
We have acted as financial advisor to the Board of Directors of FDB in
connection with this transaction and will receive a fee for our services,
including rendering this opinion, a significant portion of which is
contingent upon the consummation of the Merger. In the ordinary course of
our business, we may actively trade FDB Common Stock and BIF Common Stock for
our own account and for the accounts of customers and may, therefore, at any
time hold a long or short position in such securities.
It is understood that this letter is for the information and assistance of
the Board of Directors of FDB in its consideration of the transaction
contemplated by the Agreement and may not be used for any other purpose or
reproduced, disseminated, quoted or referred to at any time, in any manner or
for any purpose without our prior written consent, except that FDB may use
this letter in its entirety as part of any filing made by Newco in respect of
the Merger with the Securities and Exchange Commission. This letter does not
address FDB's underlying business decision to enter into the Merger nor does
it constitute a recommendation to any holder of FDB Common Stock as to how
such holder should vote with respect to the proposed Merger. Furthermore, we
are not expressing any opinion as to the prices at which any of FDB Common
Stock, BIF Common Stock, or Newco Common Stock will trade following the
announcement or consummation of the Merger.
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the FDB Exchange Ratio pursuant to the Merger is fair from a
financial point of view to the holders of FDB Common Stock.
Very truly yours,
/s/ ABN AMRO INCORPORATED
ABN AMRO INCORPORATED
<PAGE>
APPENDIX D
SECTION 262 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
RELATING TO DISSENTERS' RIGHTS
SECTION 262 - APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of
this section with respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has neither voted in
favor of the merger or consolidation nor consented thereto in writing
pursuant to Section 228 of this title shall be entitled to an appraisal by
the Court of Chancery of the fair value of the stockholder's shares of stock
under the circumstances described in subsections (b) and (c) of this section.
As used in this section, the word "stockholder" means a holder of record of
stock in a stock corporation and also a member of record of a nonstock
corporation; the words "stock" and "share" mean and include what is
ordinarily meant by those words and also membership or membership interest of
a member of a nonstock corporation; and the words "depository receipt" mean a
receipt or other instrument issued by a depository representing an interest
in one or more shares, or fractions thereof, solely of stock of a
corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or consolidation,
were either (i) listed on a national securities exchange or designated as a
national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. or (ii) held of record by
more than 2,000 holders; and further provided that no appraisal rights shall
be available for any shares of stock of the constituent corporation surviving
a merger if the merger did not require for its approval the vote of the
stockholders of the surviving corporation as provided in subsection (f) of
Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to Sections
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
<PAGE>
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository
receipts in respect thereof) or depository receipts at the effective
date of the merger or consolidation will be either listed on a national
securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of
Securities Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation
that appraisal rights under this section shall be available for the shares of
any class or series of its stock as a result of an amendment to its
certificate of incorporation, any merger or consolidation in which the
corporation is a constituent corporation or the sale of all or substantially
all of the assets of the corporation. If the certificate of incorporation
contains such a provision, the procedures of this section, including those
set forth in subsections (d) and (e) of this section, shall apply as nearly
as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a meeting
of stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are available
pursuant to subsection (b) or (c) hereof that appraisal rights are available
for any or all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder electing to
demand the appraisal of such stockholder's shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation, a
written demand for appraisal of such stockholder's shares. Such demand will
be sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal
of such stockholder's shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein provided.
Within 10 days after the effective date of such merger or consolidation, the
surviving or resulting corporation shall notify each stockholder of each
constituent corporation who has complied with this subsection and has not
voted in favor of or consented to the merger or consolidation of the date
that the merger or consolidation has become effective; or
2
<PAGE>
(2) If the merger or consolidation was approved pursuant to Section 228
or Section 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval
of the merger or consolidation and that appraisal rights are available for
any or all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section;
provided that, if the notice is given on or after the effective date of the
merger or consolidation, such notice shall be given by the surviving or
resulting corporation to all such holders of any class or series of stock of
a constituent corporation that are entitled to appraisal rights. Such notice
may, and, if given on or after the effective date of the merger or
consolidation, shall, also notify such stockholders of the effective date of
the merger or consolidation. Any stockholder entitled to appraisal rights
may, within 20 days after the date of mailing of such notice, demand in
writing from the surviving or resulting corporation the appraisal of such
holder's shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such
notice did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall send a
second notice before the effective date of the merger or consolidation
notifying each of the holders of any class or series of stock of such
constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or
resulting corporation shall send such a second notice to all such holders on
or within 10 days after such effective date; provided, however, that if such
second notice is sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder who is
entitled to appraisal rights and who has demanded appraisal of such holder's
shares in accordance with this subsection. An affidavit of the secretary or
assistant secretary or of the transfer agent of the corporation that is
required to give either notice that such notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated therein. For
purposes of determining the stockholders entitled to receive either notice,
each constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the record
date shall be the close of business on the day next preceding the day on
which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who
has complied with subsections (a) and (d) hereof and who is otherwise
entitled to appraisal rights, may file a petition in the Court of Chancery
demanding a determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms
offered upon the merger or consolidation. Within 120 days after the effective
date of the merger or consolidation, any stockholder who has complied with
the requirements of subsections (a) and (d) hereof, upon written request,
shall be entitled to receive from the corporation surviving the merger or
resulting from the consolidation a statement setting forth the aggregate
number of shares not voted in favor of the merger or
3
<PAGE>
consolidation and with respect to which demands for appraisal have been
received and the aggregate number of holders of such shares. Such written
statement shall be mailed to the stockholder within 10 days after such
stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail
and by publication shall be approved by the Court, and the costs thereof
shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for
notation thereon of the pendency of the appraisal proceedings; and if any
stockholder fails to comply with such direction, the Court may dismiss the
proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of
any element of value arising from the accomplishment or expectation of the
merger or consolidation, together with a fair rate of interest, if any, to be
paid upon the amount determined to be the fair value. In determining such
fair value, the Court shall take into account all relevant factors. In
determining the fair rate of interest, the Court may consider all relevant
factors, including the rate of interest which the surviving or resulting
corporation would have had to pay to borrow money during the pendency of the
proceeding. Upon application by the surviving or resulting corporation or by
any stockholder entitled to participate in the appraisal proceeding, the
Court may, in its discretion, permit discovery or other pretrial proceedings
and may proceed to trial upon the appraisal prior to the final determination
of the stockholder entitled to an appraisal. Any stockholder whose name
appears on the list filed by the surviving or resulting corporation pursuant
to subsection (f) of this section and who has submitted such stockholder's
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that such
stockholder is not entitled to appraisal rights under this section.
4
<PAGE>
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of
the certificates representing such stock. The Court's decree may be enforced
as other decrees in the Court of Chancery may be enforced, whether such
surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances.
Upon application of a stockholder, the Court may order all or a portion of
the expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or
to receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal
of such stockholder's demand for an appraisal and an acceptance of the merger
or consolidation, either within 60 days after the effective date of the
merger or consolidation as provided in subsection (e) of this section or
thereafter with the written approval of the corporation, then the right of
such stockholder to an appraisal shall cease. Notwithstanding the foregoing,
no appraisal proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval may be
conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized
and unissued shares of the surviving or resulting corporation.
5
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Main Street's articles and bylaws provide for the indemnification of
its directors and officers, and of any person serving at the request of Main
Street as a director, officer or partner of another enterprise, to the
fullest extent permitted by Illinois law.
Under Illinois law, the directors, officers, employees and agents of
an Illinois corporation may be indemnified by the corporation if they acted
in good faith and in a manner they reasonably believed to be in or not
opposed to the best interests of the corporation or its shareholders (and, if
a criminal proceeding, if they had no reasonable cause to believe their
conduct was unlawful) against: (i) expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with any threatened, pending or completed action, suit
or proceeding (other than an action by, or in the right of, the corporation)
arising out of their position with the corporation or their service as
director, officer, employee or agent of another enterprise at the request of
the corporation; and (ii) expenses (including attorneys' fees) actually and
reasonably incurred in connection with the settlement or defense of any
threatened, pending or completed action, suit or proceeding by or in the
right of the corporation, provided that no indemnification shall be made in
respect of any claim, issue or matter as to which the director, officer,
employee or agent may be found liable to the corporation, unless, and only to
the extent the appropriate court could determine that he or she is
nevertheless fairly and reasonably entitled to indemnity for the expenses the
court deems proper. The termination of an action, suit or proceeding by
judgment, order, settlement, conviction or through plea of nolo contendere,
does not create a presumption that the director, officer, employee or agent
did not act in good faith and in a manner he or she reasonably believed to be
opposed to the corporation's best interests (or, in the case of a criminal
proceeding, that he or she had reasonable cause to believe his or her conduct
was unlawful).
Illinois law requires indemnification for expenses to the extent that
a director, officer, employee or agent is successful in defending against any
such action, suit or proceeding, and otherwise requires in general that the
indemnification provided for in (i) and (ii) above be made only on a
determination that the director or officer met the applicable standard of
conduct by a majority vote of a quorum of the board of directors who were not
parties to the action, suit or proceeding, by independent legal counsel if so
directed by a quorum of disinterested directors, or by the shareholders.
Illinois law further permits advances to cover such expenses before a
final determination that indemnification is permissible or required, as
authorized by the board of directors in the specific case, upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to
repay the amounts if it is ultimately determined that he or she is not
entitled to indemnification by the corporation.
Indemnification under Illinois law is not exclusive of other rights to
indemnification to which a person may be entitled under the corporation's
articles of incorporation, bylaws or any contractual agreement. Unless
otherwise specified when authorized or ratified, the indemnification provided
for under Illinois law continues as to a person who ceases to be a director,
officer, employee or agent of the corporation. If a corporation has paid
indemnity or advanced expenses pursuant to the above described provisions,
the corporation must report such payment or advancement in writing to the
shareholders in or prior to the notice of the next shareholders meeting.
Illinois law permits a corporation to purchase insurance on behalf of
its directors, officers, employees and agents (or those holding such
positions with another enterprise at the request of the corporation) against
liabilities arising out of their positions, whether or not such liabilities
would be within the above described indemnification provisions.
BankIllinois and First Decatur have agreed to indemnify the present
and former directors, officers, employees and agents of our respective
companies and their subsidiaries against certain liabilities arising out of
actions or omissions occurring at or prior to the time the merger becomes
effective to the fullest extent permitted
<PAGE>
under Delaware law, their certificates of incorporation and bylaws and any
indemnity agreements previously entered with these directors, officers,
employees or agents. These obligations will be assumed by Main Street upon
completion of the merger.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers
or persons controlling Main Street under the provisions described above, Main
Street has been informed that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act, and is therefore unenforceable.
BankIllinois and First Decatur have agreed to cooperate to obtain
after the completion of the merger directors' and officers' liability
insurance coverage for the officers and directors of Main Street, to the
extent economically practicable. They have also agreed to cooperate to try
to obtain liability insurance coverage for the directors and officers of
BankIllinois Financial and First Decatur for a period of not less than three
years after the completion of the merger and with respect to actions taken by
such directors and officers prior to this completion.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The exhibits filed pursuant to this Item 21 immediately follow the
Exhibit Index. The following is a description of the applicable exhibits
required for Form S-4 as provided by Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
Exhibit
Number Description
<S> <C>
2.1 Agreement and Plan of Merger, providing for the combination of
BankIllinois Financial and First Decatur pursuant to their merger
with and into Main Street (filed as Appendix A to the Proxy
Statement/Prospectus forming a part of this Registration
Statement) (The Agreement and Plan of Merger does not include
the Schedules which include routine background information
relating to the parties. The Registrant will furnish
supplementally a copy of the omitted material to the Commission
upon request)
2.2 Form of Affiliate Undertaking (previously filed)
3.1 Articles of Incorporation of Main Street (previously filed)
3.2 Form of Amended and Restated Articles of Incorporation on Main
Street Trust, Inc. to be adopted at the effective time of the
merger (previously filed)
3.3 Bylaws of Main Street (previously filed)
5.1 Opinion of Barack Ferrazzano Kirschbaum Perlman & Nagelberg
(previously filed)
8.1 Opinion of RSM McGladrey, Inc. regarding certain tax matters
23.1 Consent of Barack Ferrazzano Kirschbaum Perlman & Nagelberg
(previously filed)
23.2 Consent of Olive LLP
23.3 Consent of RSM McGladrey, Inc.
23.4 Consent of Howard & Howard Attorneys P.C. (previously filed)
23.5 Consent of Keefe, Bruyette & Woods, Inc.
<PAGE>
23.6 Consent of ABN AMRO Incorporated (included in Appendix C to
the Proxy Statement/Prospectus forming a part of this
Registration Statement)
27 Financial Data Schedule (previously filed)
99.1 Form of Proxy to be delivered to the Shareholders of BankIllinois
99.2 Form of Proxy to be delivered to the Stockholders of First Decatur
99.3 Consents of persons named as future directors of Main Street
99.4 Consent of person named as future director of Main Street
99.5 Consent of person named as future director of Main Street
99.6 Consent of person named as future director of Main Street
99.7 Consent of person named as future director of Main Street
99.8 Consent of person named as future director of Main Street
99.9 Consent of person named as future director of Main Street
99.10 Consent of person named as future director of Main Street
99.11 Consent of person named as future director of Main Street
99.12 Consent of person named as future director of Main Street
99.13 Consent of person named as future director of Main Street
</TABLE>
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933 (the "Act"), 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 and Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through 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.
The undersigned registrant hereby undertakes that every prospectus:
(i) that is filed pursuant to the immediately preceding paragraph, 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
<PAGE>
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.
Insofar as indemnification for liabilities arising under the Act 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.
The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the Proxy
Statement/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 the documents filed subsequent to the
effective date of this registration statement through the date of responding
to the request.
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 this registration statement when it became effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, Main Street Trust, Inc., has duly caused this Amendment No. 1 to
Form S-4 Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Champaign, State of
Illinois, this 2nd day of February, 2000.
MAIN STREET TRUST, INC.
By: /s/ John W. Luttrell
--------------------------
John W. Luttrell
Chairman
By: /s/ Van A. Dukeman
---------------------------
Van A. Dukeman
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to Form S-4 Registration Statement has been signed on
February 2, 2000 by the following persons in their capacities indicated.
SIGNATURE CAPACITY
/s/ John W. Luttrell Chairman of the Board of Directors
- --------------------------------
John W. Luttrell
/s/ Gregory B. Lykins Vice Chairman of the Board of Directors
- --------------------------------
Gregory B. Lykins
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Previously Filed With
Exhibit Registration Statement on Filed
Number Description of Exhibit November 30, 1999 Herewith
- -------------- --------------------------------------------------- ---------------------------- ---------------
<S> <C> <C> <C>
2.1 Agreement and Plan of Merger, providing for the X
combination of BankIllinois Financial and First Decatur pursuant
to their merger with and into Main Street (filed as Appendix A to
the Proxy Statement/Prospectus forming a part of this
Registration Statement)
2.2 Form of Affiliate Undertaking X
3.1 Articles of Incorporation of Main Street X
3.2 Form of Amended and Restated Articles of X
Incorporation on Main Street Trust, Inc. to be
adopted at the effective time of the merger
3.3 Bylaws of Main Street X
5.1 Opinion of Barack Ferrazzano Kirschbaum Perlman & X
Nagelberg
8.1 Opinion of RSM McGladrey, Inc. regarding certain X
tax matters
23.1 Consent of Barack Ferrazzano Kirschbaum Perlman & X
Nagelberg
23.2 Consent of Olive LLP X
23.3 Consent of RSM McGladrey, Inc. X
23.4 Consent of Howard & Howard Attorneys P.C. X
23.5 Consent of Keefe, Bruyette & Woods, Inc. X
23.6 Consent of ABN AMRO Incorporated (included in X
Appendix C to the Proxy Statement/Prospectus
forming a part of this Registration Statement)
27 Financial Data Schedule X
99.1 Form of Proxy to be delivered to the Shareholders X
of BankIllinois
99.2 Form of Proxy to be delivered to the Stockholders X
of First Decatur
99.3 Consent of persons named as future director of X
Main Street
99.4 Consent of person named as future director of X
Main Street
99.5 Consent of person named as future director of X
Main Street
<PAGE>
99.6 Consent of person named as future director of X
Main Street
99.7 Consent of person named as future director of X
Main Street
99.8 Consent of person named as future director of X
Main Street
99.9 Consent of person named as future director of X
Main Street
99.10 Consent of person named as future director of X
Main Street
99.11 Consent of person named as future director of X
Main Street
99.12 Consent of person named as future director of X
Main Street
99.13 Consent of person named as future director of X
Main Street
</TABLE>
<PAGE>
[RSM MCGLADREY INC LETTERHEAD]
EXHIBIT 8.1
November 30, 1999
Board of Directors
BankIllinois Financial Corporation
100 W. University
Champaign, IL 61820
RE: TAX OPINION CONCERNING REORGANIZATION UNDER IRC SECTION 368(a)(1)(A)
Attention: Gregory B. Lykins
You have requested our opinion as to certain federal income tax consequences
of the merger (Merger) of BankIllinois Financial Corporation (BIF) and First
Decatur Bancshares, Inc. (FDB) into Main Street Trust, Inc. (Newco). The
shareholders of BIF and FDB will receive Newco stock and cash in exchange for
their stock of BIF and FDB, respectively. In connection with your request,
you have provided us with the Agreement and Plan of Merger dated as of August
12, 1999 (Agreement), by and among FDB, BIF and Newco (Agreement). WE HAVE
ALSO RECEIVED AND RELIED UPON THE FOLLOWING REPRESENTATIONS MADE BY AND ON
BEHALF OF FDB, BIF, AND NEWCO:
- To the extent not inconsistent with the following representations, the
Merger will be consummated in accordance with the Agreement, by and
among FDB, BIF and Newco.
- The fair market value of Newco stock and other consideration, if any,
to be received by BIF and FDB shareholders in the Merger will, in each
instance, be approximately equal to the fair market value of BIF and
FDB stock surrendered in exchange therefor.
- In the Merger, shares of both BIF and FDB representing at least 90% of
the outstanding stock of BIF and FDB will be exchanged solely for stock
of Newco. For purposes of this representation, shares of BIF or FDB
stock exchange for cash or other property, surrendered by dissenters or
exchanged for cash is lieu of fractional shares of Newco stock will be
treated as shares of BIF or FDB stock on the date of the Merger.
Moreover, shares of BIF and FDB stock held by BIF and FDB shareholders
and otherwise sold, redeemed or disposed of prior or subsequent to the
Merger will be considered as outstanding stock of BIF and FDB in making
this representation.
- Neither Newco nor any party "related", as defined in the Internal Revenue
Code of 1986 (Code) for purposes of Treasury Regulation 1.368-1(e)(3),
to Newco has a plan, binding
<PAGE>
commitment or intention to redeem or otherwise reacquire any of the
Newco stock issued in the Merger.
- Following the Merger, Newco will retain substantially all of the assets
of BIF and FDB and continue the historic businesses of BIF and FDB.
- The liabilities of BIF and FDB assumed by Newco and the liabilities to
which the assets of BIF and of FDB are subject were incurred by BIF
and FDB in the ordinary course of business.
- BIF, FDB, Newco and shareholders of BIF and FDB will pay their respective
expenses, if any, incurred in connection with the Merger.
- There is and will be no intercorporate indebtedness between or among
BIF, FDB and Newco that was or will be issued, acquired or settled at
a discount.
- Neither BIF, FDB nor Newco is an investment company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
- Neither BIF or FDB are under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Code.
- At the time of the Merger, the fair market value and the adjusted basis
for income tax purposes (tax basis) of the assets of BIF and FDB
acquired by Newco will exceed the sum of BIF's and FDB's liabilities,
plus the amount of liabilities, if any, to which the assets to be
acquired are subject.
- None of the compensation to be received by any shareholder employees of
BIF or FDB is separate consideration for, or allocable to, any of their
shares of BIF or FDB stock. Newco stock received by any
shareholder-employee of BIF or FDB is not separate consideration for,
or allocable to, any employment agreement or other compensation owed to
such shareholder-employee.
- The formation of Newco, the Merger of BIF and FDB with and into Newco
and the exchange of BIF and FDB stock for Newco stock are to be
affected for the business purposes as stated in the Agreement. Further,
the reasons for the Merger into Newco of BIF and FDB constitute
substantial business purposes of BIF, FDB and Newco and can be
documented and demonstrated clearly.
- No dividends will be paid by BIF or FDB before the consummation of the
Merger, other than regular periodic dividends, consistent in amount and
in effect with prior dividend distributions.
ASSUMPTIONS
We have assumed all of the representations contained herein are true and
correct. We have relied upon the opinion of Barack, Ferrazzano, Kirschbaum,
Perlman & Nagelberg (BFKPN), counsel
<PAGE>
to BIF and Newco, and upon which such counsel has expressly stated we are
entitled to rely, that the Merger qualifies as a merger or consolidation
under applicable state law as more fully described in such opinion.
OPINION
Based on our understanding of the facts, and relying upon the opinion of
BFKPN with respect to the qualification of the Merger, the representations
made to us and assumptions stated herein, our review of the relevant sections
of the Internal Revenue Code of 1986, as amended, the regulations promulgated
thereunder, and cases, rulings and other authorities, it is our opinion that
the transaction will be treated as follows for Federal Income Tax purposes:
1. The Merger of BIF and FDB into Newco will qualify as a reorganization
within the meaning of Section 368(a)(1)(A) of the Code, and BIF, FDB
and Newco will each be a "party to a reorganization" within the
meaning of Section 368(b) of the Code.
2. No gain or loss will be recognized by BIF, FDB or Newco as a result
of the Merger under Sections 361(a), 357(a) of the Code and Rev.
Rul. 57-278.
3. The tax basis of the assets of BIF and FDB acquired by Newco will
be, in each case, the same as the tax basis of such assets in the
hands of BIF and FDB immediately before the transaction under
Section 362(b) of the Code.
4. The holding period of BIF's and FDB's assets in the hands of Newco
will include the holding period of such assets by BIF and FDB
immediately before the transaction under Section 1223(2) of the
Code.
5. For BIF and FDB shareholders who receive solely Newco stock in
exchange for their BIF or FDB stock, the tax basis in the new shares
will be the same as the tax basis of the BIF or FDB stock
surrendered in exchange therefore under Section 358(a)(1) of the
Code.
6. The holding period of Newco stock received by BIF or FDB
shareholders will include the holding period for the BIF or FDB
shares surrendered in the Merger, provided that BIF or FDB shares
surrendered were held as capital assets in the hands of the BIF and
FDB shareholders at the time of the Merger under Section 1223(1) of
the Code.
7. In the exchange of stock, no gain or loss will be recognized by the
shareholders of BIF or FDB upon the receipt of solely Newco stock
under Section 354(a)(1) of the Code.
Our opinion is based on the representations made to us and the assumptions
stated herein. If any of the facts, representations or assumptions are
determined to be incorrect, our opinion may be
<PAGE>
adversely affected. We express no opinion as to the accuracy of the facts,
representations and assumptions stated herein. We express no opinion
regarding federal, state, local, foreign or other tax matters not contained
in items 1. through 7. above.
Our opinion is based upon existing law, Treasury Regulations and on
administrative and judicial interpretations of the law and regulations.
Administrative positions of the Internal Revenue Service contained in Revenue
Rulings and Revenue Procedures as well as judicial decisions are subject to
change either prospectively or retroactively. We undertake no obligation to
update this opinion for changes in facts or law occurring subsequent to the
date of this opinion. This opinion is effective as of Closing; effective
time as provided in Section 2.9 of the Agreement. This opinion is not
binding on the Internal Revenue Service or the courts.
We consent to the inclusion of this opinion as an exhibit to the Registration
Statement on Form S-4 filed by Main Street Trust, Inc. with the Securities
and Exchange Commission for the purpose of registering securities under the
Securities Act of 1933, as amended.
/s/ RSM McGladrey, Inc.
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Proxy
Statement/Prospectus forming a part of the Registration Statement on Form S-4
filed by Main Street Trust, Inc. of our report dated January 29, 1999, on our
audit of the consolidated financial statements of First Decatur Bancshares,
Inc. and subsidiaries for the year ended December 31, 1998, which is included
in the March 29, 1999 Form 10-K of First Decatur Bancshares, Inc. and to the
reference of our firm under the heading "Experts" in the Proxy
Statement/Prospectus.
/s/ Olive LLP
Decatur, Illinois
February 1, 2000
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Proxy Statement/Prospectus
forming a part of the Registration Statement on Form S-4 filed by Main Street
Trust, Inc. of our report dated February 5, 1999, on our audits of the
consolidated financial statements of BankIllinois Financial Corporation and
subsidiary for the three years in the period ended December 31, 1998, which
are included in the March 24, 1999 Form 10-K of BankIllinois Financial
Corporation and to the reference of our firm under the heading "EXPERTS" in
the Proxy Statement/Prospectus.
/s/ McGLADREY & PULLEN, LLP
Champaign, Illinois
February 1, 2000
<PAGE>
Exhibit 23.5
We hereby consent to the use of the form of our opinion letter to the
Board of Directors of BankIllinois Financial Corporation included as Appendix
B to the Prospectus/Proxy Statement which forms a part of the Form S-4
Registration Statement dated November 30, 1999, as amended by Amendment No. 1
to Form S-4, and to the references to such opinion in such Prospectus/Proxy
Statement. In giving such consent, we do not admit that we come within the
category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder, nor do we thereby admit that
we are experts with respect to any part of such Registration Statement within
the meaning of the term "experts" as used in the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange
Commission thereunder.
/s/ Keefe, Bruyette & Woods
- ---------------------------
Keefe, Bruyette & Woods
January 31, 2000
<PAGE>
REVOCABLE PROXY
BANKILLINOIS FINANCIAL CORPORATION
SPECIAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints [_________],[_________], and
[_________], or any or all of them, of First Decatur Bancshares, Inc. ("First
Decatur"), with full power of substitution, to act as attorneys and proxies
for the undersigned to vote all shares of common stock of First Decatur that
the undersigned is entitled to vote at First Decatur's Special Meeting of
Stockholders (the "Meeting"), to be held on [_________], at [_________], at
[___] [__].m., local time, and any and all adjournments and postponements
thereof, as follows:
The approval and adoption of the Agreement and Plan of Merger,
dated as of August 12, 1999 (the "Merger Agreement"), between
BankIllinois Financial Corporation, First Decatur Bancshares,
Inc. and Main Street Trust, Inc.
/ / FOR / / AGAINST / / ABSTAIN
The Board of Directors recommends a vote "FOR"
adoption of the Merger Agreement.
- --------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR ADOPTION OF THE MERGER AGREEMENT. IF ANY OTHER BUSINESS
IS PRESENTED AT THE MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS
PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS
OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
<PAGE>
This proxy may be revoked at any time before it is voted by: (i)
filing with the Secretary of First Decatur at or before the Meeting a written
notice of revocation bearing a later date than this proxy; (ii) duly
executing a subsequent proxy relating to the same shares and delivering it to
the Secretary of First Decatur at or before the Meeting; or (iii) attending
the Meeting and voting in person (although attendance at the Meeting will not
in and of itself constitute revocation of this proxy). If this proxy is
properly revoked as described above, then the power of such attorneys and
proxies shall be deemed terminated and of no further force and effect.
The undersigned acknowledges receipt from First Decatur, prior to
the execution of this proxy, of Notice of the Special Meeting and a
Prospectus and Proxy Statement.
Date:______________________, 2000 ____________________________________
PRINT NAME OF STOCKHOLDER
____________________________________
SIGNATURE OF STOCKHOLDER
____________________________________
PRINT NAME OF STOCKHOLDER
____________________________________
SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears
on this card. When signing as attorney,
executor, administrator, trustee or
guardian, please give your full title.
If shares are held jointly, each holder
should sign.
----------------------------------------------------------------
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL
THIS PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE
------------------------------------------------------------------
2
<PAGE>
REVOCABLE PROXY
FIRST DECATUR BANCSHARES, INC.
SPECIAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints [_________],[_________], and
[_________], or any or all of them, of BankIllinois Financial Corporation
("BankIllinois"), with full power of substitution, to act as attorneys and
proxies for the undersigned to vote all shares of common stock of
BankIllinois that the undersigned is entitled to vote at BankIllinois'
Special Meeting of Stockholders (the "Meeting"), to be held on [_________],
at [_________], at [___] [__].m., local time, and any and all adjournments
and postponements thereof, as follows:
The approval and adoption of the Agreement and Plan of Merger,
dated as of August 12, 1999 (the "Merger Agreement"), between
BankIllinois Financial Corporation, First Decatur Bancshares,
Inc. and Main Street Trust, Inc.
/ / FOR / / AGAINST / / ABSTAIN
The Board of Directors recommends a vote "FOR"
adoption of the Merger Agreement.
- --------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR ADOPTION OF THE MERGER AGREEMENT. IF ANY OTHER BUSINESS
IS PRESENTED AT THE MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS
PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS
OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
<PAGE>
This proxy may be revoked at any time before it is voted by: (i)
filing with the Secretary of BankIllinois at or before the Meeting a written
notice of revocation bearing a later date than this proxy; (ii) duly
executing a subsequent proxy relating to the same shares and delivering it to
the Secretary of BankIllinois at or before the Meeting; or (iii) attending
the Meeting and voting in person (although attendance at the Meeting will not
in and of itself constitute revocation of this proxy). If this proxy is
properly revoked as described above, then the power of such attorneys and
proxies shall be deemed terminated and of no further force and effect.
The undersigned acknowledges receipt from BankIllinois, prior to the
execution of this proxy, of Notice of the Special Meeting and a Prospectus
and Proxy Statement.
Date:______________________, 2000 ____________________________________
PRINT NAME OF STOCKHOLDER
____________________________________
SIGNATURE OF STOCKHOLDER
____________________________________
PRINT NAME OF STOCKHOLDER
____________________________________
SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears
on this card. When signing as attorney,
executor, administrator, trustee or
guardian, please give your full title.
If shares are held jointly, each holder
should sign.
----------------------------------------------------------------
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL
THIS PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE
------------------------------------------------------------------
2
<PAGE>
Exhibit 99.3
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
Pursuant to Section 230.438 of Regulation C promulgated under the
Securities Act of 1933, as amended, the undersigned hereby consents to his
being named in the Proxy Statement-Prospectus, which forms a part of the
Registration Statement on Form S-4 relating to the proposed merger of
BankIllinois Financial Corporation and First Decatur Bancshares, Inc. with
and into Main Street Trust, Inc., as a person who is expected to become a
director of Main Street Trust, Inc. upon the consummation of such merger. As
of the effective time of the Registration Statement, the undersigned will not
be a member of the Board of Directors of Main Street Trust, Inc. and will not
be required to sign the Registration Statement.
January 31, 2000 /s/ Phillip C. Wise
------------------------
Phillip C. Wise
<PAGE>
Exhibit 99.4
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
Pursuant to Section 230.438 of Regulation C promulgated under the
Securities Act of 1933, as amended, the undersigned hereby consents to his
being named in the Proxy Statement-Prospectus, which forms a part of the
Registration Statement on Form S-4 relating to the proposed merger of
BankIllinois Financial Corporation and First Decatur Bancshares, Inc. with
and into Main Street Trust, Inc., as a person who is expected to become a
director of Main Street Trust, Inc. upon the consummation of such merger. As
of the effective time of the Registration Statement, the undersigned will not
be a member of the Board of Directors of Main Street Trust, Inc. and will not
be required to sign the Registration Statement.
January 31, 2000 /s/ H. Gale Zacheis
------------------------
H. Gale Zacheis
<PAGE>
Exhibit 99.5
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
Pursuant to Section 230.438 of Regulation C promulgated under the
Securities Act of 1933, as amended, the undersigned hereby consents to his
being named in the Proxy Statement-Prospectus, which forms a part of the
Registration Statement on Form S-4 relating to the proposed merger of
BankIllinois Financial Corporation and First Decatur Bancshares, Inc. with
and into Main Street Trust, Inc., as a person who is expected to become a
director of Main Street Trust, Inc. upon the consummation of such merger. As
of the effective time of the Registration Statement, the undersigned will not
be a member of the Board of Directors of Main Street Trust, Inc. and will not
be required to sign the Registration Statement.
January 31, 2000 /s/ David J. Downey
------------------------
David J. Downey
<PAGE>
Exhibit 99.6
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
Pursuant to Section 230.438 of Regulation C promulgated under the
Securities Act of 1933, as amended, the undersigned hereby consents to his
being named in the Proxy Statement-Prospectus, which forms a part of the
Registration Statement on Form S-4 relating to the proposed merger of
BankIllinois Financial Corporation and First Decatur Bancshares, Inc. with
and into Main Street Trust, Inc., as a person who is expected to become a
director of Main Street Trust, Inc. upon the consummation of such merger. As
of the effective time of the Registration Statement, the undersigned will not
be a member of the Board of Directors of Main Street Trust, Inc. and will not
be required to sign the Registration Statement.
January 31, 2000 /s/ Van A. Dukeman
------------------------
Van A. Dukeman
<PAGE>
Exhibit 99.7
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
Pursuant to Section 230.438 of Regulation C promulgated under the
Securities Act of 1933, as amended, the undersigned hereby consents to his
being named in the Proxy Statement-Prospectus, which forms a part of the
Registration Statement on Form S-4 relating to the proposed merger of
BankIllinois Financial Corporation and First Decatur Bancshares, Inc. with
and into Main Street Trust, Inc., as a person who is expected to become a
director of Main Street Trust, Inc. upon the consummation of such merger. As
of the effective time of the Registration Statement, the undersigned will not
be a member of the Board of Directors of Main Street Trust, Inc. and will not
be required to sign the Registration Statement.
January 31, 2000 /s/ August C. Meyer, Jr.
------------------------
August C. Meyer, Jr.
<PAGE>
Exhibit 99.8
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
Pursuant to Section 230.438 of Regulation C promulgated under the
Securities Act of 1933, as amended, the undersigned hereby consents to his
being named in the Proxy Statement-Prospectus, which forms a part of the
Registration Statement on Form S-4 relating to the proposed merger of
BankIllinois Financial Corporation and First Decatur Bancshares, Inc. with
and into Main Street Trust, Inc., as a person who is expected to become a
director of Main Street Trust, Inc. upon the consummation of such merger. As
of the effective time of the Registration Statement, the undersigned will not
be a member of the Board of Directors of Main Street Trust, Inc. and will not
be required to sign the Registration Statement.
January 31, 2000 /s/ Gene A. Salmon
------------------------
Gene A. Salmon
<PAGE>
Exhibit 99.9
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
Pursuant to Section 230.438 of Regulation C promulgated under the
Securities Act of 1933, as amended, the undersigned hereby consents to his
being named in the Proxy Statement-Prospectus, which forms a part of the
Registration Statement on Form S-4 relating to the proposed merger of
BankIllinois Financial Corporation and First Decatur Bancshares, Inc. with
and into Main Street Trust, Inc., as a person who is expected to become a
director of Main Street Trust, Inc. upon the consummation of such merger. As
of the effective time of the Registration Statement, the undersigned will not
be a member of the Board of Directors of Main Street Trust, Inc. and will not
be required to sign the Registration Statement.
January 31, 2000 /s/ George T. Shapland
------------------------
George T. Shapland
<PAGE>
Exhibit 99.10
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
Pursuant to Section 230.438 of Regulation C promulgated under the
Securities Act of 1933, as amended, the undersigned hereby consents to his
being named in the Proxy Statement-Prospectus, which forms a part of the
Registration Statement on Form S-4 relating to the proposed merger of
BankIllinois Financial Corporation and First Decatur Bancshares, Inc. with
and into Main Street Trust, Inc., as a person who is expected to become a
director of Main Street Trust, Inc. upon the consummation of such merger. As
of the effective time of the Registration Statement, the undersigned will not
be a member of the Board of Directors of Main Street Trust, Inc. and will not
be required to sign the Registration Statement.
January 31, 2000 /s/ Roy V. Van Buskirk
------------------------
Roy V. Van Buskirk
<PAGE>
Exhibit 99.11
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
Pursuant to Section 230.438 of Regulation C promulgated under the
Securities Act of 1933, as amended, the undersigned hereby consents to his
being named in the Proxy Statement-Prospectus, which forms a part of the
Registration Statement on Form S-4 relating to the proposed merger of
BankIllinois Financial Corporation and First Decatur Bancshares, Inc. with
and into Main Street Trust, Inc., as a person who is expected to become a
director of Main Street Trust, Inc. upon the consummation of such merger. As
of the effective time of the Registration Statement, the undersigned will not
be a member of the Board of Directors of Main Street Trust, Inc. and will not
be required to sign the Registration Statement.
January 31, 2000 /s/ Larry D. Haab
------------------------
Larry D. Haab
<PAGE>
Exhibit 99.12
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
Pursuant to Section 230.438 of Regulation C promulgated under the
Securities Act of 1933, as amended, the undersigned hereby consents to his
being named in the Proxy Statement-Prospectus, which forms a part of the
Registration Statement on Form S-4 relating to the proposed merger of
BankIllinois Financial Corporation and First Decatur Bancshares, Inc. with
and into Main Street Trust, Inc., as a person who is expected to become a
director of Main Street Trust, Inc. upon the consummation of such merger. As
of the effective time of the Registration Statement, the undersigned will not
be a member of the Board of Directors of Main Street Trust, Inc. and will not
be required to sign the Registration Statement.
January 31, 2000 /s/ Fred L. Kenney
------------------------
Fred L. Kenney
<PAGE>
Exhibit 99.13
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
Pursuant to Section 230.438 of Regulation C promulgated under the
Securities Act of 1933, as amended, the undersigned hereby consents to his
being named in the Proxy Statement-Prospectus, which forms a part of the
Registration Statement on Form S-4 relating to the proposed merger of
BankIllinois Financial Corporation and First Decatur Bancshares, Inc. with
and into Main Street Trust, Inc., as a person who is expected to become a
director of Main Street Trust, Inc. upon the consummation of such merger. As
of the effective time of the Registration Statement, the undersigned will not
be a member of the Board of Directors of Main Street Trust, Inc. and will not
be required to sign the Registration Statement.
January 31, 2000 /s/ Tom Sloan
------------------------
Tom Sloan
