AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 12, 1997
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(Pursuant to Section 13(e)(1) of the Securities Exchange Act of 1934)
FINANCIAL SERVICES CORPORATION OF THE MIDWEST
(Name of Issuer)
FINANCIAL SERVICES CORPORATION OF THE MIDWEST
(Name of Person(s) Filing Statement)
SHARES OF COMMON STOCK, PAR VALUE $0.50 PER SHARE
(Title of Class of Securities)
317697100
(CUSIP Number of Class of Securities)
Douglas M. Kratz
Financial Services Corporation of the Midwest
224 - 18th Street, Suite 202
Rock Island, Illinois 61201-8737
(309) 794-1120
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of Person(s) Filing Statement)
WITH COPIES TO:
Michele D. Vaillancourt, Esq.
Winthrop & Weinstine, P.A.
3000 Dain Bosworth Plaza
60 South Sixth Street
Minneapolis, Minnesota 55402
May 12, 1997
(Date Tender Offer First Published, Sent or Given to Security Holders)
CALCULATION OF FILING FEE
TRANSACTION VALUATION: $7,470,000(1) AMOUNT OF FILING FEE: $1,494(2)
(1) Calculated as the aggregate maximum purchase price to be paid in the tender
offer for all 83,000 shares in the offer, based upon the tender offer price
of $90.00.
(2) In accordance with Rule 0-11(b) under the Securities Exchange Act of 1934,
as amended, calculated as 1/50th of 1% of the Transaction Valuation.
Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: ________________________________________________________
Form or Registration No.:_______________________________________________________
Filing Party:___________________________________________________________________
Date Filed:_____________________________________________________________________
<PAGE>
ITEM 1. Security and Issuer.
(a) The name of the issuer is Financial Services Corporation of the Midwest
("FSCM"), which is a one-bank holding company incorporated under Delaware
law. The principal executive office of FSCM is located at 224 - 18th
Street, Suite 202, Rock Island, Illinois 61201-8737.
(b) FSCM is seeking tenders for 83,000 of its issued and outstanding shares
("Shares") of Common Stock, par value $0.50 per share ("Common Stock"), for
$90.00 per share in cash. As of March 31, 1997, there were 177,711 shares
of Common Stock outstanding. Such offer is subject to the terms and
conditions set forth in the Offer to Purchase dated May 12, 1997 and the
related Letter of Transmittal (which together constitute the "Offer"). THE
OFFER EXPIRES AT 5:00 P.M., ROCK ISLAND, ILLINOIS TIME, ON JUNE 13, 1997,
UNLESS EXTENDED (THE "EXPIRATION DATE"). Copies of the Offer to Purchase
and the Letter of Transmittal are filed as Exhibits (a)(1) and (a)(2)(i) to
this Statement, respectively.
Reference is hereby made to the Cover Page, Section 1 -- "Price; Number of
Shares; Proration; Extension of Offer" and Section 9 -- "Interests of
Certain Related Persons" of the Offer to Purchase, which are incorporated
herein by reference.
(c) There is currently no established trading market for FSCM's Common Stock,
and the Common Stock is not traded on any securities exchange or listed on
any quotations system.
(d) Not applicable.
ITEM 2. Source and Amount of Funds or Other Consideration.
(a)-(b) Reference is hereby made to Section 6 -- "Purpose of the Offer; Plans
or Proposals of FSCM; Interests in Securities of FSCM" and Section 12
-- "Source and Amount of Funds" of the Offer to Purchase, which is
incorporated herein by reference.
ITEM 3. Purpose of the Tender Offer and Plans and Proposals of the Issuer or
Affiliate.
Reference is hereby made to Section 6 -- "Purpose of the Offer; Plans or
Proposals of FSCM; Interests in Securities of FSCM," Section 7 -- "Price Range
of Shares; Dividends," Section 10 -- "Certain Effects of the Offer" and Section
12 -"Source and Amount of Funds" of the Offer to Purchase, which are
incorporated herein by reference.
ITEM 4. Interest in Securities of the Issuer.
Reference is hereby made to Section 6 -- "Purpose of the Offer; Plans or
Proposals of FSCM; Interests in Securities of FSCM" and Section 9 -- "Interests
of Certain Related Persons" of the Offer to Purchase, which are incorporated
herein by reference.
ITEM 5. Contracts, Arrangements, Understandings or Relationships With Respect
to the Issuer's Securities.
Reference is made to Section 2 -- "Procedure for Tendering Shares," Section 3 --
"Withdrawal Rights," Section 4 -- "Payment for Shares," Section 5 -- "Certain
Conditions of the Offer," Section 6 -- "Purpose of the Offer; Plans or Proposals
of FSCM; Interests in Securities of FSCM" and Section 9 -- "Interests of Certain
Related Persons" of the Offer to Purchase, which are incorporated herein by
reference.
ITEM 6. Persons Retained, Employed or to be Compensated.
FSCM has entered into a Depositary Agreement dated as of May 12, 1997 with
Illinois Stock Transfer Company, the transfer agent and registrar for the Common
Stock ("Transfer Agent"), to provide certain Depositary services in connection
with the Offer. For its services, the Transfer Agent will receive a fee of
$100.00, plus an amount based on the number of accounts in which transactions
are processed. It is anticipated that the Transfer Agent's fee will be
approximately $500.00. In addition, the Transfer Agent will be reimbursed for
its out-of-pocket expenses incurred in processing any tenders made in the Offer.
The Depositary Agreement is filed as Exhibit (c) to this Statement and is
incorporated herein by reference.
No persons have been employed or retained or are to be compensated by or on
behalf of FSCM to make solicitations or recommendations in connection with the
Offer.
<PAGE>
ITEM 7. Financial Information.
(a) (1) Attached hereto as Schedule I (following the signature page) and
hereby incorporated herein by reference are FSCM's audited
consolidated financial statements as of, and for its fiscal years
ended, March 31, 1996 and 1995 (the "Audited Financial Statements").
The Audited Financial Statements were included in FSCM's Annual Report
on Form 10-K for FSCM's fiscal year ended March 31, 1996, which was
the most recent Annual Report on Form 10-K filed by FSCM pursuant to
the Securities Exchange Act of 1934, as amended ("Exchange Act").
(2) Attached hereto as Schedule I and hereby incorporated herein by
reference are FSCM's unaudited consolidated financial statements as
of, and for the nine-month and three-month periods ended, December 31,
1996 and 1995, which were included in FSCM's Quarterly Report on Form
10-Q for the quarter ended December 31, 1996; such Quarterly Report on
Form 10-Q was the most recent quarterly report filed by FSCM pursuant
to the Exchange Act.
(3) A summary of selected financial information ratios for the years ended
March 31, 1996 and 1997 is set forth in Section 8 -- "Selected
Financial Information" of the Offer to Purchase, which is incorporated
herein by reference.
(4) FSCM's book value per Share of Common Stock is set forth in Section 8
-- "Selected Financial Information" of the Offer to Purchase, which is
incorporated herein by reference.
(b) Included in Schedule I hereto is pro forma data disclosing the effect of
the Offer on FSCM's balance sheets as of March 31, 1996 and December 31,
1996, FSCM's statements of income, earnings per share and ratio of earnings
to fixed charges for the year ended March 31, 1996 and the nine months
ended December 31, 1996, and FSCM's book value per share as of such dates.
Reference also is hereby made to Section 8 -- "Selected Financial
Information" of the Offer to Purchase, which is incorporated herein by
reference.
ITEM 8. Additional Information.
(a) Reference is hereby made to Section 6 -- "Purpose of the Offer; Plans or
Proposals of FSCM; Interests in Securities of FSCM" and Section 9 --
"Interests of Certain Related Persons" of the Offer to Purchase, which are
incorporated herein by reference.
(b) Reference is hereby made to Section 5 -- "Certain Conditions of the Offer"
of the Offer to Purchase, which is incorporated herein by reference.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
ITEM 9. Material to be Filed as Exhibits.
The following documents are hereby filed as exhibits to this Issuer Tender Offer
Statement on Schedule 13E-4:
(a)(1) Offer to Purchase.
(a)(2)(i) Form of Letter of Transmittal.
(a)(2)(ii) Form of Notice of Guaranteed Delivery.
(a)(3)(i) Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees.
(a)(3)(ii) Form of Letter to Clients of Brokers, Dealers, Commercial Banks,
Trust Companies and Nominees.
(a)(3)(iii) Form of Letter to Shareholders.
(b)(1) Loan Agreement dated December 15, 1992 by and between FSCM and
the Bank and amendments thereto dated March 14, 1996 and
July 27, 1996.
<PAGE>
(b)(2) Revolving Business Note dated July 31, 1996 made payable by FSCM
to the Bank.
(c) Depositary Agreement dated as of May 12, 1997 between FSCM and
Illinois Stock Transfer Company.
(d)-(f) Not applicable.
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that the
information set forth in this Statement is true, complete and correct.
Date: May 12, 1997. FINANCIAL SERVICES CORPORATION OF THE MIDWEST
By: /s/ Douglas M. Kratz
Its Chairman, Chief Executive Officer
and Chief Financial Officer
<PAGE>
SCHEDULE I
FINANCIAL SERVICES CORPORATION OF THE MIDWEST
Index to Financial Statements
Page
Independent Auditor's Report
Consolidated Balance Sheets at March 31, 1996 and 1995
Consolidated Statements of Income for the fiscal years ended March 31,
1996 and 1995
Consolidated Statements of Stockholders' Equity for the fiscal years ended
March 31, 1996 and 1995
Consolidated Statements of Cash Flows for the fiscal years ended
March 31, 1996 and 1995
Notes to Consolidated Financial Statements
Consolidated Balance Sheets at December 31, 1996 and 1995 (unaudited)
Consolidated Statements of Income for the nine-month and three-month
periods ended December 31, 1996 and 1995 (unaudited)
Consolidated Statements of Stockholders' Equity for the nine
months ended December 31, 1996 and 1995 (unaudited)
Consolidated Statements of Cash Flows for the nine months ended
December 31, 1996 and 1995 (unaudited)
Summary Financial and Pro Forma Information
<PAGE>
McGladrey & Pullen, LLP
Certified Public Accountants and Consultants
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Financial Services Corporation of the Midwest Rock Island, Illinois
We have audited the accompanying consolidated balance sheets of Financial
Services Corporation of the Midwest and subsidiaries as of March 31, 1996 and
1995, and the related consolidated statements of income, stockholders' equity,
and cash flows for the years then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Financial Services
Corporation of the Midwest and subsidiary as of March 31, 1996 and 1995, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ McGladrey & Pullen, LLP
Davenport, Iowa
April 26, 1996
<PAGE>
Financial Services Corporation of the Midwest
- --------------------------------------------------------------------------------
Consolidated Balance Sheets
March 31, 1996 and 1995
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
1996 1995
----------------------------
<S> <C> <C>
Assets
Cash and due from banks (note 2) ............................................................... $ 14,423 $ 13,955
Interest-bearing deposits with other financial institutions .................................... 4,861 198
Investment securities:
Held-to-maturity (approximate market value 1996 - $29,072; 1995 -
$69,852) (note 3) ........................................................................ 29,115 71,822
Available-for-sale (amortized cost 1996 - $61,948; 1995 - $0) (note 3) ..................... 61,308 --
Federal funds sold ............................................................................. 11,900 32,900
Loans and direct financing leases (note 4) ..................................................... 255,965 212,076
Less: Allowance for possible loan and lease losses ......................................... (4,463) (3,832)
--------- ---------
Total loans and leases, net .............................................................. 251,502 208,244
Premises, furniture and equipment, net (note 5) ................................................ 5,953 3,623
Accrued interest receivable .................................................................... 2,653 1,960
Other real estate, net ......................................................................... 457 378
Other assets ................................................................................... 4,795 4,374
--------- ---------
Total .................................................................................... $ 386,967 $ 337,454
========= =========
Liabilities and Stockholders' Equity
Liabilities:
Deposits (note 6):
Non-interest-bearing demand .............................................................. $ 36,286 $ 33,496
Interest-bearing:
N.O.W. accounts ....................................................................... 24,420 23,974
Savings ............................................................................... 41,814 42,823
Money market .......................................................................... 8,638 8,830
Time .................................................................................. 190,660 162,488
--------- ---------
Total deposits ........................................................................ 301,818 271,611
Accounts payable and accrued liabilities ....................................................... 4,766 3,895
Securities sold under agreements to repurchase (note 7) ........................................ 48,846 33,371
Other short-term borrowings (note 7) ........................................................... 1,500 366
Notes payable (note 8) ......................................................................... 4,500 5,000
Mandatory convertible debentures (note 9) ...................................................... 1,250 1,250
--------- ---------
Total liabilities ........................................................................ 362,680 315,493
--------- ---------
Commitments and contingencies (note 14)
Stockholders' equity (notes 8, 9, and 15): Capital stock:
Preferred, no par value; authorized, 100,000 shares:
Class A Preferred Stock, stated value $100 per share;
authorized, 50,000 shares; issued and outstanding:
1996 and 1995 - 50,000 shares (note 11) ............................................... 5,000 5,000
Class B Preferred Stock, stated value $500 per share;
authorized, 1,000 shares; issued and outstanding:
1996 and 1995 - 1,000 shares (note 11) ................................................ 500 500
Class C Preferred Stock, stated value $425 per share;
authorized, 2,400 shares; issued and outstanding:
1996 and 1995 - 2,400 shares (note 11) ................................................ 1,020 1,020
Common, par value $.50 per share; authorized, 600,000
shares; issued: 1996 and 1995 - 340,662 shares;
outstanding: 1996 - 176,611 shares; 1995 - 175,111 shares .............................. 170 170
Capital surplus ................................................................................ 2,574 2,521
Net unrealized loss on available-for-sale securities, net of taxes ............................. (422) --
Retained earnings .............................................................................. 20,694 18,047
Treasury stock (note 12) ....................................................................... (5,249) (5,297)
--------- ---------
Total stockholders' equity ............................................................... 24,287 21,961
--------- ---------
Total .................................................................................... $ 386,967 $ 337,454
========= =========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
Financial Services Corporation of the Midwest
- --------------------------------------------------------------------------------
Consolidated Statements of Income
Years Ended March 31, 1996 and 1995
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
1996 1995
-------- ---------
<S> <C> <C>
Interest income:
Interest and fees on loans and leases ........................................ $ 24,208 $ 19,576
Interest on investment securities ............................................ 5,003 3,930
Interest on federal funds sold ............................................... 1,021 1,050
Interest on interest-bearing deposits with
other financial institutions .............................................. 39 15
-------- --------
Total interest income .................................................. 30,271 24,571
-------- --------
Interest expense:
Interest on deposits ......................................................... 12,864 9,029
Interest on securities sold under agreements to repurchase ................... 2,375 1,118
Interest on other short-term borrowings ...................................... 80 43
Interest on notes payable .................................................... 411 425
Interest on mandatory convertible debentures ................................. 103 92
--------
Total interest expense ................................................. 15,833 10,707
-------- --------
Net interest income .................................................... 14,438 13,864
Provision for possible loan and lease losses (note 4) ........................... 1,905 2,510
-------- --------
Net interest income after provision
for possible loan and lease losses .................................. 12,533 11,354
-------- --------
Other income:
Trust fees ................................................................... 322 361
Investment securities gains .................................................. 11 --
Loan servicing fees .......................................................... 680 677
Gain on sales of loans and leases ............................................ 362 132
Service charges on deposit accounts .......................................... 1,065 999
Insurance commissions ........................................................ 294 323
Other ........................................................................ 581 657
-------- --------
Total other income ..................................................... 3,315 3,149
-------- --------
Other expenses:
Salaries and employee benefits ............................................... 5,904 5,272
Occupancy, net ............................................................... 801 754
Insurance .................................................................... 281 713
Equipment .................................................................... 947 651
Data processing .............................................................. 569 551
Advertising .................................................................. 400 420
Other operating .............................................................. 1,625 1,558
-------- --------
Total other expenses ............................................................ 10,527 9,919
-------- --------
Income before income taxes ............................................. 5,321 4,584
Income taxes (note 10) ...................................................... 1,768 1,516
-------- --------
Net income ...................................................................... $ 3,553 $ 3,068
======== ========
Net income available for Common Stock ........................................... $ 2,955 $ 2,474
======== ========
Earnings per common share (note 18):
Primary ...................................................................... $ 16.87 $ 14.21
======== ========
Fully diluted ................................................................ $ 10.80 $ 9.10
======== ========
Weighted average common shares outstanding ...................................... 175,123 174,079
======== ========
Weighted average common and contingently
issuable common shares outstanding ........................................... 335,327 343,796
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
Financial Services Corporation of the Midwest
- --------------------------------------------------------------------------------
Consolidated Statements of Stockholders' Equity
Years Ended March 31, 1996 and 1995
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
Net
Unrealized
Gain/(Loss)
on
Preferred Stock Available-
------------------------- Common Capital For-Sale Retained Treasury
Class A Class B Class C Stock Surplus Securities1 Earnings Stock
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1994............................ 5,000 500 1,020 170 2,484 84 15,838 (5,345)
Net income ...................................... --- --- --- --- --- --- 3,068 ---
Change in net unrealized gain
on available-for-sale securities1........... --- --- --- --- --- (84) --- ---
Sale of 1,500 shares of Treasury Stock............... --- --- --- --- 37 --- --- 48
Cash dividends declared:
Class A Preferred, $9.25 per share.......... --- --- --- --- --- --- (463) ---
Class B Preferred, $44.21 per share......... --- --- --- --- --- --- (44) ---
Class C Preferred, $36.13 per share......... --- --- --- --- --- --- (87) ---
Common, $1.52 per share..................... --- --- --- --- --- --- ( 265) ---
-----------------------------------------------------------------------------
Balance at March 31, 1995............................ 5,000 500 1,020 170 2,521 --- 18,047 (5,297)
Net income ......................................... --- --- --- --- --- --- 3,553 ---
Change in net unrealized loss on
available-for-sale securities1.............. --- --- --- --- --- (422) --- ---
Sale of 1,500 shares of Treasury Stock............... --- --- --- --- 53 --- --- 48
Cash dividends declared:
Class A Preferred, $9.25 per share.......... --- --- --- --- --- --- (462) ---
Class B Preferred, $48.66 per share......... --- --- --- --- --- --- (49) ---
Class C Preferred, $36.13 per share......... --- --- --- --- --- --- (87) ---
Common, $1.76 per share..................... --- --- --- --- --- --- (308) ---
------------------------------------------------------------------ ----------
Balance at March 31, 1996............................ $5,000 $ 500 $ 1,020 $ 170 $ 2,574 $(422) $20,694 $(5,249)
====== ====== ======= ====== ======= ===== ======= =======
<FN>
1 Net of taxes
</FN>
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
Financial Services Corporation of the Midwest
- --------------------------------------------------------------------------------
Consolidated Statements of Cash Flows
Years Ended March 31, 1996 and 1995
(Dollars in Thousands)
<TABLE>
1996 1995
-------- --------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income.............................................................................. $ 3,553 $ 3,068
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization...................................................... 898 662
Provision for possible loan and lease losses....................................... 1,905 2,510
Gain on sale of investment securities.............................................. (11) ---
Investment amortization............................................................ 145 439
Loans and leases originated for sale............................................... (51,287) (32,162)
Proceeds on sales of loans and leases.............................................. 49,634 32,717
(Increase) decrease in accrued interest receivable................................. (693) 91
Increase in accrued interest payable............................................... 633 705
Increase in other assets........................................................... (68) (282)
Increase in other liabilities...................................................... 238 18
---------- ----------
Net cash provided by operating activities .............................................. 4,947 7,766
--------- ---------
Cash Flows from Investing Activities:
Net (increase) decrease in federal funds sold........................................... 21,000 (7,800)
Net (increase) decrease in interest-bearing deposits with other
financial institutions............................................................... (4,663) 297
Purchase of investment securities held-to-maturity...................................... (18,403) (21,315)
Proceeds from maturity and call of investment securities held-to-maturity............... 26,000 10,865
Purchase of investment securities available-for-sale.................................... (64,134) ---
Proceeds from maturity and call of investment securities available-for-sale............. 30,010 18,000
Proceeds from sales of investment securities available-for-sale......................... 7,152 ---
Net increase in loans and leases........................................................ (43,510) (34,208)
Purchase of premises, furniture and equipment .......................................... (3,363) (769)
Other investing activities, net......................................................... (79) (37)
-------- --------
Net cash used in investing activities................................................... (49,990) (34,967)
-------- --------
Cash Flows from Financing Activities:
Net increase in deposits................................................................ 30,207 20,837
Net increase in short-term borrowings................................................... 5,526 5,286
Proceeds from other borrowings.......................................................... 50,431 21,046
Payments on other borrowings............................................................ (39,348) (16,723)
Payments on notes payable............................................................... (500) ---
Sale of Treasury Stock.................................................................. 101 85
Cash dividends paid on Preferred Stock.................................................. (598) (594)
Cash dividends paid on Common Stock..................................................... (308) (265)
-------- --------
Net cash provided by financing activities............................................... 45,511 29,672
-------- --------
Net increase in cash and due from banks................................................. 468 2,471
Cash and due from banks at the beginning of the year.................................... 13,955 11,484
-------- --------
Cash and due from banks at the end of the year.......................................... $ 14,423 $ 13,955
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
Financial Services Corporation of the Midwest
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
(Dollars in Thousands, Except Per Share Amounts)
(1) Summary of Significant Accounting Policies
Financial Services Corporation of the Midwest ("FSCM") is a bank holding
company incorporated in 1973 under Delaware law and registered under the
Bank Holding Company Act of 1956, as amended. FSCM's principal place of
business is located at 224 - 18th Street, Suite 202, Rock Island, Illinois.
In 1974, FSCM acquired all outstanding shares of THE Rock Island Bank
("TRIB"), an Illinois chartered state commercial bank serving both the
Illinois and Iowa Quad Cities' communities since 1932. On November 1, 1995,
TRIB became a national bank known as THE Rock Island Bank, National
Association and relocated its head office from Rock Island, Illinois to
Bettendorf, Iowa.
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles and with general practice within
the banking industry. In preparing such financial statements, management is
required to make estimates and assumptions that affect the reported amounts
of assets and liabilities as of the date of the balance sheets and revenues
and expenses for the periods. Actual results could differ significantly
from those estimates. Material estimates that are particularly susceptible
to significant change in the near-term relate to the determination of the
allowance for possible loan and lease losses.
(a) Principles of Consolidation
The consolidated financial statements include the accounts of FSCM and
TRIB. All significant intercompany balances and transactions have been
eliminated in consolidation.
(b) Investment Securities
Investments consist principally of debt securities with fixed
maturities.
FSCM adopted Statement of Financial Accounting Standards ("SFAS") No.
115, "Accounting for Certain Investments in Debt and Equity
Securities," effective March 31, 1994. This statement requires that
investments in debt and certain equity securities be classified in one
of three categories: (1) held-to-maturity securities, which are carried
at amortized cost, (2) trading securities, which are carried at fair
market value, with unrealized gains and losses included in earnings,
and (3) available-for-sale securities, which are carried at fair value,
with net, tax effected, unrealized gain and loss excluded from earnings
and reported as a separate component of stockholders' equity. On
December 19, 1995, securities with an amortized cost of $34,999 were
transferred from held-to-maturity to available-for-sale in accordance
with a one-time reassessment of securities' classification permitted
under SFAS No. 115's implementation guidelines.
Market values of securities are estimated based on available market
quotations. Gains or losses from security transactions are determined
based on the carrying value of the specific security sold.
<PAGE>
Financial Services Corporation of the Midwest
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
(Dollars in Thousands, Except Per Share Amounts)
(c) Loans and Direct Financing Leases
Generally, interest on loans and direct financing leases ("leases") is
accrued and credited to income based on the principal balance
outstanding. It is FSCM's policy to discontinue the accrual of interest
income on any loan or lease when, in the opinion of management, there
is a reasonable doubt as to the timely collectibility of interest and
principal or to comply with regulatory requirements. Interest accrued
previously on such loans and leases is charged off. Nonaccrual loans
and leases are returned to an accrual status when, in the opinion of
management, the financial position of the borrower indicates that there
is no longer any reasonable doubt as to the timely payment of principal
and interest and only after all previously accrued but unpaid interest
has been brought current.
Net nonrefundable loan and lease origination fees and certain direct
costs associated with the lending process are deferred and recognized
as a yield adjustment over the life of the related loan or lease.
Loans and leases held for sale are stated at the lower of cost or
market on an aggregate basis. Gains and losses are recognized on loans
and leases sold on a nonrecourse basis based on the sale price for the
loan or lease adjusted for any normal servicing fees when servicing is
retained by FSCM.
Mortgage loan and lease servicing retained on loans and leases sold to
others are not included in the accompanying consolidated balance
sheets. The unpaid principal balances of these loans and leases as of
March 31, 1996 and 1995 were $165,003 and $155,657, respectively.
Custodial escrow balances maintained in connection with the loan and
lease servicing were approximately $1,744 and $1,837 as of March 31,
1996 and 1995, respectively.
(d) Allowance for Possible Loan and Lease Losses
The allowance for possible loan and lease losses is maintained at a
level deemed appropriate by management to provide for known and
inherent risks in the loan and lease portfolio. The allowance is based
upon a continuing review of past loan and lease loss experience,
current economic conditions, and the underlying collateral value. Loans
and leases which are deemed uncollectible are charged off and deducted
from the allowance. The provision for possible loan and lease losses
and recoveries are added to the allowance.
SFAS No. 114 "Accounting by Creditors for Impairment of a Loan," and
SFAS No. 118, "Accounting by Creditors for Impairment of Loan--Income
Recognition and Disclosure," were adopted as of April 1, 1995. These
statements address the accounting for loans when it is probable that
all principal and interest amounts due will not be collected in
accordance with their contractual terms (i.e. "impaired loans"). The
loan impairment is measured based on the discounted present value of
expected future cash flows or the fair market value of the loan's
collateral if the loan is collateral dependent. The portion of the
allowance for loan and lease losses is computed on the amount that the
recorded investment of an impaired loan exceeds the measured value. The
adoption of these standards had no material effect on FSCM's net
income.
(e) Income Taxes
FSCM and TRIB file a consolidated federal income tax return.
FSCM has a tax allocation agreement which provides that each subsidiary
of the consolidated group pay a tax liability to, or receive a tax
refund from, FSCM computed as if the subsidiary had filed a separate
return.
FSCM recognizes certain income and expenses in different time periods
for financial reporting and income tax purposes. The provision for
deferred income taxes is based on an asset and liability approach and
represents the change in deferred income tax accounts during the year,
including the effect of enacted tax rate changes.
(f) Trust Department Assets
Property held for customers in fiduciary or agency capacities is not
included in the accompanying consolidated balance sheets, as such items
are not assets of FSCM.
<PAGE>
Financial Services Corporation of the Midwest
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
(Dollars in Thousands, Except Per Share Amounts)
(g) Premises, Furniture and Equipment
Premises, furniture and equipment are stated at cost less accumulated
depreciation. The provision for depreciation of premises, furniture and
equipment is determined by the straight-line method over the estimated
useful lives of the assets.
(h) Other Real Estate
Other real estate represents property acquired through foreclosures or
settlements of loans or property that was subsequently sold on
contract. Property acquired is carried at the lower of the principal
amount of the loan outstanding or the estimated fair value of the
property. The excess, if any, of the principal balance over the fair
value of the property at the date acquired is charged against the
allowance for possible loan and lease losses. Subsequent writedowns
required on the basis of later fair value evaluations, gains or losses
on sales, and net expenses incurred in maintaining such properties are
included in other operating expenses. Property subsequently sold on
contract is carried at the contract balance outstanding.
(i) Per Common Share Amounts
Primary earnings per common share amounts are computed by dividing net
income, after deducting Preferred Stock dividends (net income available
for Common Stock), by the weighted average number of common shares
outstanding during the year. Fully diluted earnings per common share
amounts are computed by dividing net income, after deducting dividends
on nonconvertible Preferred Stock and adding back interest, net of the
related income tax effect, on Mandatory Convertible Debentures
("MCDs"), by the weighted average number of common shares and
contingently issuable common shares outstanding during the year.
(j) Cash and Cash Equivalents
Cash and cash equivalents are defined as those amounts included in the
consolidated balance sheets as "Cash and due from banks."
(k) Insurance Commission Revenue
Revenue from insurance commissions on credit life and accident and
health insurance related to loans is recognized at the effective date
of the coverage because substantially all services related to earning
the commissions have been rendered. A provision is made for probable
insurance commission refunds due to policy cancellations based on prior
experience and is netted against insurance commission revenue.
(l) Impact of Recently Issued Statements of Financial Accounting Standards
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of," and No. 122, "Accounting for
Mortgage Servicing Rights," both become effective for FSCM beginning
after March 31, 1996. SFAS No. 121 generally requires an estimation of
future cash flows to identify asset impairment and SFAS No. 122
attempts to standardize the accounting treatment of originated mortgage
servicing rights to those purchased, if it is practicable to separately
estimate the fair values of the loan and servicing rights. Management
believes that adoption of these statements will not have a material
effect on the financial statements.
(m) Reclassifications
Certain amounts in the 1995 consolidated financial statements have been
reclassified to conform with 1996 presentations.
(2) Cash and Due from Banks
TRIB's required reserves as a member of the Federal Reserve System were
$1,351 and $1,279 as of March 31, 1996 and 1995, respectively.
<PAGE>
Financial Services Corporation of the Midwest
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
(Dollars in Thousands, Except Per Share Amounts)
(3) Investment Securities
The amortized costs, fair values, and maturities of investment securities
held-to-maturity and available-for-sale as of March 31, 1996 and 1995 are
summarized as follow. Maturities of mortgage-backed obligations were
estimated based on anticipated payments.
<TABLE>
1996 1995
-------------------------------------- ----------------------------------------
Unrealized Losses Gross Unrealized
Amortized ----------------- Fair Amortized ------------------ Fair
HELD-TO-MATURITY:..................... Cost Gains Losses Value Cost Gains Losses Value
--------- ------- ------- ------- --------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury maturities:
Within 1 year ................................... $ 6,033 $ 32 $ -- $ 6,065 $ 988 $ -- $ 3 $ 985
From 1 to 5 years ............................... -- -- -- -- 6,118 5 20 6,103
------------------------------------------------------------------------------
Total ........................................ 6,033 2 -- 6,065 7,106 5 23 7,088
------------------------------------------------------------------------------
Obligations of U.S. government
agencies and corporations maturities:
Within 1 year ................................... 5,000 -- 37 4,963 -- -- -- --
From 1 to 5 years ............................... 13,980 68 68 13,980 61,040 25 1,857 59,208
From 5 to 10 years .............................. -- -- -- -- 2,000 -- 120 1,880
-----------------------------------------------------------------------------
Total ........................................ 18,980 8 105 18,943 63,040 25 1,977 61,088
-----------------------------------------------------------------------------
State and political subdivisions:
From 1 to 5 years ........................... 2,326 -- 40 2,286 -- -- -- --
-----------------------------------------------------------------------------
Other securities maturities:
Within 1 year ................................... 10 -- -- 10 -- -- -- --
From 1 to 5 years ............................... 70 2 -- 72 80 -- -- 80
From 5 to 10 years .............................. 400 -- -- 400 300 -- -- 300
Over 10 years ................................... 1,296 -- -- 1,296 1,296 -- -- 1,296
-----------------------------------------------------------------------------
Total ........................................ 1,776 2 -- 1,778 1,676 -- -- 1,676
-----------------------------------------------------------------------------
Total ........................................ $29,115 $ 102 $ 145 $29,072 $71,822 $ 30 $ 2,000 $69,852
=============================================================================
AVAILABLE-FOR-SALE:
U.S. Treasury maturities:
From 1 to 5 years ............................... $ 2,074 $ -- $ -- $ 2,074 $ -- $ -- $ -- $ --
-----------------------------------------------------------------------------
Obligations of U.S. government
agencies and corporations maturities:
Within 1 year ................................... 6,000 -- 29 5,971 -- -- -- --
From 1 to 5 years ........................... 32,174 16 121 32,069 -- -- -- --
From 5 to 10 years .......................... 4,004 1 4 4,001 -- -- -- --
-----------------------------------------------------------------------------
Total ........................................ 42,178 17 154 42,041 -- -- -- --
-----------------------------------------------------------------------------
Mortgage-backed obligations of federal agencies:
Within 1 year ............................... 2,228 -- 63 2,165 -- -- -- --
From 1 to 5 years ........................... 7,290 -- 207 7,083 -- -- -- --
From 5 to 10 years .......................... 6,136 -- 175 5,961 -- -- -- --
Over 10 years ............................... 2,042 -- 58 1,984 -- -- -- --
-----------------------------------------------------------------------------
Total .................................... 17,696 -- 503 17,193 -- -- -- --
-----------------------------------------------------------------------------
Total ....................................... $61,948 $ 17 $ 657 $61,308 $ -- $ -- $ -- $ --
=============================================================================
</TABLE>
In fiscal 1995, included in the category of obligations of U.S. government
agencies and corporations, were structured notes with a book value of
$46,005 that had step-up rate and callable provisions which resulted in the
advancement of redemption to a one-year time frame for the majority of the
issues.
Securities with an amortized cost of $34,999 and an unrealized gain of $95
were transferred into available-for-sale from held-to-maturity on December
19, 1995. This was done in accordance with Financial Accounting Standards
Board implementation guidance which permitted a one-time reassessment of
securities' classification under SFAS No. 115. Such decision was based on
management's desire to enhance the liquidity and flexibility of the
investment portfolio with consideration also given to the amendment in
regulatory capital ratios which excluded from the computation, any
unrealized gains or losses on available-for-sale investments.
<PAGE>
Financial Services Corporation of the Midwest
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
(Dollars in Thousands, Except Per Share Amounts)
As of March 31, 1996 and 1995, investment securities with carrying values
of $72,169 and $59,142, respectively, and fair values of $72,164 and
$58,071, respectively, were pledged to secure public and trust deposits,
short-term borrowings and for other purposes as required or permitted by
law.
Proceeds from sales and gross gains and losses related to investment
securities sold for the years ended March 31, 1996 and 1995 are summarized
as follows:
1996 1995
-----------------
Securities Sold:
Proceeds from sales ............ $7,152 $ ---
Gross security gains ........... 11 ---
(4) Loans and Direct Financing Leases
Loans and leases as of March 31, 1996 and 1995 are summarized as follows:
1996 1995
--------------------
Commercial, financial and agricultural ........ $ 85,578 $ 74,234
Direct financing leases ....................... 5,719 6,863
Real estate:
Residential mortgage ....................... 64,248 58,486
Construction ............................... 21,823 14,553
Commercial mortgage ........................ 62,746 51,529
Consumer, not secured by a real estate mortgage 15,851 6,411
-------- --------
Total ......................................... $255,965 $212,076
======== ========
1996 1995
--------------------
Direct financing leases:
Gross rents receivable ..................... $ 6,902 $ 7,804
Unearned income ............................ (1,183) (941)
-------- --------
Total ...................................... $ 5,719 $ 6,863
======== ========
Direct financing leases are generally short-term equipment type leases.
Future minimum lease payments as of March 31, 1996 are as follows: 1997,
$2,829; 1998, $2,049; 1999, $1,102; 2000, $615; 2001, $288; and 2002, $19.
Income on leases of $947, $1,854 and $3,030 is included in interest and
fees on loans and leases for the fiscal years ended March 31, 1996, 1995
and 1994, respectively.
Changes in the allowance for possible loan and lease losses for the fiscal
years ended March 31, 1996 and 1995 are as follows:
1996 1995
------------------
Balance at beginning of year ............ $ 3,832 $ 3,744
Provision for loan and lease losses ..... 1,905 2,510
Loans and leases charged off ............ (1,985) (4,398)
Recoveries .............................. 711 1,976
------- -------
Balance at end of year .................. $ 4,463 $ 3,832
======= =======
Although FSCM has a diversified loan and lease portfolio, a substantial
natural geographic concentration of credit risk exists within FSCM's market
area. FSCM's loan portfolio consists of commercial and commercial mortgage
loans extending across many industry types, as well as to individuals.
FSCM's leasing activities consisted primarily of financing arrangements. As
of March 31, 1996, total loans and leases to any group of customers engaged
in similar activities and having similar economic characteristics did not
exceed 10% of total loans and leases.
<PAGE>
Financial Services Corporation of the Midwest
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
(Dollars in Thousands, Except Per Share Amounts)
The table below summarizes nonperforming assets as of March 31, 1996 and
1995:
1996 1995
-----------------
Nonaccrual loans and leases:
Commercial, financial and agricultural ................ $ 339 $1,076
Direct financing leases ............................... 28 96
Real estate
Residential mortgage ............................... 388 419
Construction ..................................... 51 --
Commercial mortgage ................................ 427 1,020
Consumer 31 45
Other real estate owned .................................. 457 378
Accruing loans and leases past-due 90 days or more:
Commercial, financial and agricultural ................ 51 9
Direct financing leases ............................... 103 --
Real estate:
Residential mortgage ............................... -- 17
Construction ............................. 25 --
Commercial mortgage .............. -- 297
Consumer ................................... 10 --
-----------------
Total ................................................. $ 1,924 $3,343
=================
The interest income not recorded, but which would have been earned if the
nonaccrual loans and leases as of March 31 had performed in accordance with
their original terms, was $188 and $219 for the fiscal years ended March
31, 1996 and 1995, respectively.
As of March 31, 1996, impaired loans totaled $780 for which $197 of the
allowance for possible loan and lease losses was specifically allocated.
The average impaired loans for the year ended totaled $1,849. The amount of
interest which would have been earned if the impaired loans had performed
in accordance with their original terms and the amount of interest income
recognized on a cash basis was $47 and $44, respectively.
Loans are made in the normal course of business to directors, executive
officers and principal holders of equity securities of FSCM and to
affiliated companies in which they have an equity interest. The terms of
these loans, including interest rates and collateral, are similar to those
prevailing for comparable transactions and do not involve more than a
normal risk of collectibility. Changes in such loans during the fiscal
years ended March 31, 1996 and 1995 were as follows:
1996 1995
----------------
Balance at beginning of year ...................... $ 61 $ 98
New loans ......................................... 709 150
Repayments......................................... (134) (162)
Loans participated to other financial
institutions and other net changes ............. (550) (25)
----------------
Balance at end of year ............................ $ 86 $ 61
================
Unused lines of credit in the amount of $338 had been extended to directors
as of March 31, 1996.
<PAGE>
Financial Services Corporation of the Midwest
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
(Dollars in Thousands, Except Per Share Amounts)
(5) Premises, Furniture and Equipment
Premises, furniture and equipment as of March 31, 1996 and 1995 are
summarized as follows:
1996 1995
------- -------
Land ............................... $ 1,306 $ 1,139
Furniture and equipment ............ 5,545 3,996
Buildings and improvements ......... 6,691 5,308
Less accumulated depreciation ...... (7,589) (6,820)
------- -------
Total .......................... $ 5,953 $ 3,623
======= =======
Depreciation expense included in the accompanying consolidated statements
of income was $1,033 and $776 for the fiscal years ended March 31, 1996 and
1995, respectively.
(6) Deposits
The following is a maturity distribution of time certificates of deposit in
denominations of $100 or more as of March 31, 1996 and 1995:
1996 1995
------- -------
3 months or less............................ $ 4,181 $ 2,175
Over 3 months through 6 months.............. 9,706 2,582
Over 6 months through 12 months............. 6,359 1,682
Over 12 months.............................. 4,703 14,733
----------------
Total................................. $24,949 $21,172
================
(7) Securities Sold Under Agreements to Repurchase and Other Short-Term
Borrowings
Securities sold under agreements to repurchase are treated as financings.
The obligations to repurchase securities sold are reflected as a liability
in the consolidated balance sheets and the dollar amount of securities
underlying the agreements remains in investments. The carrying amount,
including interest, and market value of securities sold under agreements to
repurchase and the obligations to repurchase securities sold as of March
31, 1996 and 1995 are summarized as follows:
1996 1995
------------------ ------------------
Carrying Market Carrying Market
Amount Value Amount Value
-------- ------- -------- -------
U.S. Treasury securities .............. $ 5,092 $ 5,112 $ 5,102 $ 5,082
Obligations of U.S. Government
agencies and corporations securities 49,071 49,083 34,901 33,951
Mortgage backed obligations of federal
agencies ..... 11,178 11,178 -- --
------- ------- ------- -------
Total ........................... $65,341 $65,373 $40,003 $39,033
======= ======= ======= =======
Securities sold under agreements to
repurchase ......................... $48,846 $33,371
======= =======
<PAGE>
Financial Services Corporation of the Midwest
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
(Dollars in Thousands, Except Per Share Amounts)
The maturity distribution and weighted average interest rates of securities
sold under agreements to repurchase as of March 31, 1996 are summarized as
follows:
Weighted
Average
Amount Rate
-------- --------
Overnight ............................................ $ 21,353 5.21%
Term up to 30 days ................................... 1,762 5.33
Term of 30 to 90 days ............................... 18,174 5.35
Term over 90 days .................................... 7,557 5.35
--------------------
Total ............................................. $ 48,846 5.29%
====================
Other short-term borrowings generally include federal funds purchased,
which are overnight transactions, and interest-bearing demand notes due to
the U.S. Treasury, which are generally called within several days. Other
short-term borrowings of $1,500 and $366 as of March 31, 1996 and 1995,
respectively, are comprised of interest-bearing demand notes due to the
U.S. Treasury.
Maximum and average balances and rates on aggregate short-term borrowings
outstanding during the fiscal years ended March 31, 1996 and 1995 are as
follows:
1996 1995
------- -------
Maximum month-end balance...................... $62,128 $38,143
Weighted average balance for the year ......... 44,528 25,932
Weighted average interest rate for the year ... 5.51% 4.48%
Weighted average interest rate at year-end..... 5.29 5.85
(8) Notes Payable
Notes payable as of March 31, 1996 and 1995 are summarized as follows:
1996 1995
------- -------
8.50% Notes, due December 1, 1999, uncollateralized $ 4,500 $ 5,000
======= =======
Interest on the uncollateralized fixed rate 8.50% Notes dated December 1,
1992 is payable on the first of June and December. In addition to the $500
which was redeemed December 1, 1995, other mandatory redemptions in the
amount of $500 are due on December 1, 1996, 1997 and 1998. The remaining
$3,000 matures on December 1, 1999. FSCM may redeem any or all of the Notes
at any time upon not less than a 30-day notice. The Notes are senior or on
parity to any other uncollateralized debt. As of March 31, 1996, the Notes
were senior in right of payment to $750 of MCDs and payable on parity with
$500 of MCDs.
As of March 31, 1996 FSCM had a variable rate $10,000 unrestricted line of
credit available from a correspondent bank, none of which was in use. The
line of credit is collateralized by a pledge of all of the stock of TRIB
owned by FSCM and bears interest at a rate charged by banks to their most
preferred customers ("prime") which was 8.25% at March 31, 1996.
The most restrictive covenants under the correspondent bank loan agreement
and the 8.50% Notes require, among other things, that:
<PAGE>
Financial Services Corporation of the Midwest
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
(Dollars in Thousands, Except Per Share Amounts)
Correspondent Bank Loan:
FSCM must obtain approval to pay Common Stock dividends in excess of 30%
of prior year's consolidated net income;
Approval is required for fixed asset investments exceeding $250 for FSCM
or outside TRIB's normal banking practices;
FSCM must obtain approval before the incurrence of any additional debt
and TRIB can incur debt only in the normal course of business;
FSCM must obtain approval prior to making any investments exceeding $500
in other than short-term, cash management investments made in the normal
course of business;
FSCM and TRIB cannot issue any new stock nor can FSCM repurchase any of
its stock from its directors or executive officers without prior
approval and any other redemption of stock by FSCM is limited;
Mergers or acquisitions require approval;
FSCM and TRIB must maintain ratios of total capital (Tier 1 and Tier 2)
to total assets not less than 6.00% and 7.50%, respectively (March 31,
1996 actual equaled 8.26% and 8.37%, respectively);
TRIB must maintain a primary capital ratio not less than 5.50% (March
31, 1996 actual equaled 8.53%); and
TRIB must maintain a return on average assets not less than 0.70% (March
31, 1996 actual equaled 1.16%).
8.50% Notes:
Fixed assets investments are limited to not greater than three percent
of total assets on a consolidated basis; and
FSCM and TRIB must maintain tangible net worths of not less than $14,000
and $17,000, respectively (March 31, 1996 actual equaled $24,583 and
$28,814, respectively).
Management believes that FSCM and TRIB were in compliance with all
covenants as of March 31, 1996.
(9) Mandatory Convertible Debentures ("MCDs")
MCDs as of March 31, 1996 and 1995 are summarized as follows:
1996 1995
------ ------
MCDs issued March 31, 1989 .............. $ 425 $ 425
MCDs issued April 19, 1989 .............. 825 825
------ ------
Total $1,250 $1,250
====== ======
On March 23, 1995, agreements were entered into by FSCM with each MCD
holder whereby the mandatory conversion date on both issues of MCDs were
extended until March 31, 2001.
The MCDs bear interest at a rate of 1/2% below the reference rate of a
correspondent bank (7.75% at March 31, 1996). The interest is payable
quarterly on March 31, June 30, September 30, and December 31. The MCDs are
held by directors and former directors of FSCM or members of their
immediate families. Subject to a ninety day notice and obtaining any
regulatory approvals or legal opinions necessary, the MCDs are convertible
at any time prior to the extended conversion date at the option of the
holders into a number of shares of FSCM's Common Stock determined by
dividing the principal amount of the MCDs by a purchase price equal to $25
per share, as adjusted for any stock splits, stock dividends or other
similar occurrences. The MCDs are subordinate to all senior indebtedness of
FSCM and $750 of the MCDs are subordinate to the 8.50% Notes.
<PAGE>
Financial Services Corporation of the Midwest
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
(Dollars in Thousands, Except Per Share Amounts)
(10) Income Taxes
Income taxes for the fiscal years ended March 31, 1996 and 1995 are
summarized as follows:
Federal State
------- -------
1996:
Current ......... $ 2,121 $ 23
Deferred (376) --
------- -------
Total ........... $ 1,745 $ 23
======= =======
1995:
Current ........ $ 1,622 $ 3
Deferred (109) --
------- -------
Total ........... $ 1,513 $ 3
======= =======
Income taxes totaled $1,768 for 1996 and $1,516 for 1995 resulting in
effective tax rates of 33.2% and 33.1%, respectively. The actual income
taxes differ from the "expected" amounts (computed by applying the U.S.
federal corporate income tax rate of 35% for the years 1996 and 1995, to
income before income taxes) for such years as follows:
1996 1995
------- -------
Computed "expected" amounts ......... $ 1,862 $ 1,604
Increase (decrease) resulting from:
Effect of graduated tax rate ..... (53) (45)
Tax exempt interest income ....... (5) (1)
Life insurance policies .......... (56) (48)
State taxes net of federal benefit 15 2
Other, net ....................... 5 4
------- -------
Total $ 1,768 $ 1,516
======= =======
The components of the net deferred income tax asset as of March 31, 1996
and 1995 are as follows:
1996 1995
------- -------
Allowance for possible loan and lease losses .. $ 567 $ 353
Book depreciation in excess of tax depreciation 358 256
Post-retirement benefits ...................... 46 58
Loan origination fees ......................... 16 16
Bonuses ....................................... 44 31
Deferred insurance fee income ................. 212 142
Vacation accrual .............................. 65 65
Prepaid expense ............................... (55) (56)
Net unrealized loss on available-for-sale
securities net of taxes .................... 218 --
Other ......................................... (15) (3)
------- -------
Total ................................... $ 1,456 $ 862
======= =======
FSCM had no valuation allowance for deferred tax assets as of March 31,
1996 or 1995. FSCM has a demonstrated record of profitability for the past
ten years.
<PAGE>
Financial Services Corporation of the Midwest
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
(Dollars in Thousands, Except Per Share Amounts)
(11) Preferred Stock
Class A Preferred Stock - Fifty thousand shares, stated value $100 per
share, were issued December 30, 1992 for a total consideration of $5,000.
Costs associated with the issuance of the stock, $416, were charged to
capital surplus. The stock pays quarterly cumulative dividends at a 9.25%
per annum rate on the first of March, June, September and December. The
holders have no voting rights except if the payment of dividends falls in
arrears in an aggregate amount at least equal to the full accrued dividends
for six quarterly dividend periods, in which case they will have the right
to elect two representatives to the Board of Directors of FSCM and shall
continue to have such right until all dividends in arrears have been paid
or declared and set apart for payment. FSCM may redeem any or all of the
stock, upon a thirty day notice, for the stated value plus any accrued and
unpaid dividends at the redemption date. If the stock is still outstanding
at December 1, 2002, holders of the stock have the option to convert the
stock into FSCM's Common Stock according to a defined formula. Had all
shares of Class A Preferred Stock converted at March 31, 1996, an
additional 70,800 shares of FSCM's Common Stock would have been
outstanding.
Class B Preferred Stock - Holders of the one thousand shares of $500 stated
value per share stock issued November 17, 1986 have no voting rights. Non
cumulative dividends are based on a rate equal to 1% per annum in excess of
the interest rates charged by a New York money center bank to its most
preferred customers. The shares may be redeemed at stated value plus unpaid
dividends by FSCM in whole or in part at any time. Holders have an option
to convert the shares into a total of 11,111 shares of FSCM Common Stock.
The Class B Preferred Stock is owned by certain directors of FSCM.
Class C Preferred Stock - Twenty-four hundred shares of $425 stated value
per share were issued September 10, 1992 for total consideration of $1,020
to certain directors of FSCM. The nonvoting, convertible stock pays
quarterly cumulative dividends at an 8.50% per annum rate on the last day
of March, June, September and December and is nonredeemable by FSCM. The
Class C Preferred Stock is convertible into a total of 24,000 shares of
FSCM's Common Stock at the option of the holders.
Class D Preferred Stock - In June 1992, FSCM designated 250 shares with a
stated value of $5,000 per share for the potential conversion of the MCDs.
No agreement has ever been entered into authorizing conversion of the MCDs
into shares of the Class D Preferred Stock.
All classes of Preferred Stock have priority over Common Stock with respect
to dividends, liquidation and redemption rights. Priority amongst the
classes of Preferred Stock are in the following order, from highest to
lowest: Class A, Class D, Class B, Class C.
(12) Treasury Stock Sale
In both March 1996 and December 1994, FSCM sold 1,500 shares of Common
Stock from treasury to the 401(k) defined contribution retirement plan
sponsored by TRIB. The sale prices of $67.50 and $56.38 for the respective
dates were based on independent stock appraisals' average per share fair
market value for transactions involving small stock block sizes.
(13) Employee Benefit Plans
An employee savings plan covers substantially all employees of FSCM and its
subsidiary, TRIB. Under the plan, contributions of up to 2% of the
participants' wages are made by the respective subsidiaries. Plan costs,
which are charged to other expenses, were $41 and $40 for the years ended
March 31, 1996 and 1995, respectively.
FSCM provides certain health care and life insurance benefits for eligible
retired employees. In order to qualify for the benefits, a full-time
employee must, at retirement, be at least 55 years old and have completed a
minimum of ten years of service. The benefits consist of up to a sixty
dollars per month contribution by FSCM towards medical premium costs (up to
seventy-five dollars per month for existing retirees) and the payment of
life insurance premiums for coverage in the amount of two times the
employee's salary at retirement, which benefit is reduced for each year of
retirement. FSCM has the right to modify or terminate these benefits.
Accrued post retirement benefit liabilities included in other liabilities
as of March 31, 1996 and 1995 were $135 and $170, respectively. Net
periodic post retirement benefit costs for the fiscal years ended March 31,
1996 and 1995 were $(20) and $(18), respectively.
<PAGE>
Financial Services Corporation of the Midwest
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
(Dollars in Thousands, Except Per Share Amounts)
(14) Financial Instruments with Off-Balance-Sheet Risk
In the normal course of business, FSCM is a party to financial instruments
with off-balance-sheet risk to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and
letters of credit. These instruments involve, to varying degrees, elements
of credit and interest rate risk in excess of the amounts recognized in the
consolidated financial statements. FSCM's exposure to credit loss in the
event of nonperformance by the other party to the financial instrument for
commitments to extend credit, and to potential credit loss associated with
letters of credit issued, is represented by the contractual amount of those
instruments. FSCM uses the same credit policies in making commitments and
conditional obligations as it does for loan and other such on-balance-sheet
instruments.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments are
expected to expire without being drawn upon, the total commitment amounts
do not necessarily represent future cash requirements.
Letters of credit are conditional commitments that are primarily issued to
facilitate trade or support borrowing arrangements and generally expire in
one year or less. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending credit to customers.
As of March 31, 1996, FSCM had $3,412 of irrevocable letters of credit
outstanding and had commitments to lend of approximately $35,336. No
material losses are anticipated by management as a result of such
transactions.
(15) Dividends and Regulatory Capital and Ratios
In addition to the restriction on the payment of dividends by FSCM
discussed in Note 8, the ability of FSCM to pay dividends to its
stockholders is dependent upon the ability of TRIB to pay dividends to FSCM
since FSCM has no other significant source of income. TRIB is subject to
regulation by the Office of the Comptroller of the Currency and the Federal
Deposit Insurance Corporation under federal law and regulations, which
limit the amount of dividends TRIB may pay to FSCM. The amount of dividends
TRIB could pay FSCM as of March 31, 1996, without prior regulatory
approval, which is limited by statute to the sum of net profits for the
current year plus retained net profits of the preceding two years, was
$6,071.
Federal banking regulators (including the Federal Reserve Board which
regulates FSCM), have established, and monitor compliance with, capital
adequacy guidelines. These guidelines include the Tier 1 and total capital
ratios which compare adjusted capital to that of risk weighted assets.
Additionally, the leverage ratio is used to compare adjusted capital to
total assets. A 3% minimum leverage ratio was established for institutions
without any supervisory, financial or operational weaknesses or
deficiencies. Most banking organizations, including FSCM and TRIB, are
expected to maintain a leverage ratio of 100 to 200 basis points above this
minimum depending on their financial condition. The capital guidelines
established three measurement categories into which institutions are
grouped; well-capitalized, adequately-capitalized and
less-than-adequately-capitalized. The table below reflects that FSCM and
TRIB exceeded the regulatory capital guidelines for the well-capitalized
status as of March 31, 1996 and 1995.
<PAGE>
Financial Services Corporation of the Midwest
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
Regulatory Requirements
FSCM TRIB -----------------------
----------------------- ----------------------- Well
1996 1995 1996 1995 Minimum Capitalized
--------- ---------- ---------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Risk-based capital ratios:
Tier 1 capital .................... 8.97% 9.28% 10.56% 11.71% 4.00% 6.00%
Total capital ..................... 11.66 13.15 11.82 12.96 8.00 10.00
Leverage ratio ........................ 6.83 6.78 8.05 8.56 3.00 5.00
Stockholders' equity .................. $ 24,287 $ 21,961 $ 28,519 $ 26,606
Preferred stock limitation1 ........... -- (706) -- --
Net unrealized loss on available-
for- sale securities, net of taxes 422 -- 422 --
Intangible assets ..................... (140) (193) -- --
--------------------------------------------------
Tier 1 capital ................... 24,569 21,062 28,941 26,606
Supplementary capital ................. 7,387 8,794 3,437 2,840
--------------------------------------------------
Total capital .................... $ 31,956 $ 29,856 $ 32,378 $ 29,446
==================================================
Total adjusted average assets ......... $ 359,486 $ 310,820 $ 359,449 $ 310,785
==================================================
Risk weighted assets .................. $ 273,981 $ 227,040 $ 273,972 $ 227,235
==================================================
<FN>
1 Cumulative Preferred Stock is limited to 25% of the total Tier 1 capital;
any excess qualifies as supplementary capital.
</FN>
</TABLE>
(16) Supplemental Disclosures of Cash Flow and Other Information
Cash paid during the fiscal years ended March 31, 1996 and 1995 for:
1996 1995
------- -------
Interest ....................... $15,213 $10,001
Income taxes ................... 1,855 1,450
During fiscal 1996 investment securities totaling $34,999 were reclassified
from held-to-maturity to available-for-sale. See Note 1(b).
The consolidated statements of cash flows excludes certain noncash
transactions that had no significant effects on the investing or financing
activities of FSCM.
(17) Fair Value of Financial Instruments
The following information as of March 31, 1996 and 1995 was provided in
compliance with the requirements of SFAS No. 107, "Disclosures about Fair
Value of Financial Instruments." Quoted market prices, when available, were
used as the measure of fair value. When quoted market prices were not
available, fair values were based on discounted cash flow valuation
techniques. These derived fair values, which were founded on assumptions
relative to the timing of future cash flows and the discount rates, are
inherently subjective in nature and involve matters of judgment. It is
FSCM's intent to hold most of its financial instruments to maturity and
therefore the fair values reflected below will probably not be realized.
Because of the assumptions on which the fair market value information are
based, FSCM's fair value information is not necessarily comparable to that
of another financial institution. The aggregate fair value amounts
presented should in no way be construed to represent management's
estimation of the underlying value of FSCM as of March 31, 1996 or 1995.
<PAGE>
Financial Services Corporation of the Midwest
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
1996 1995
------------------- -----------------
Carrying Fair Carrying Fair
Value Value Value Value
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Financial Assets:
Cash and due from banks ...................................... $ 14,423 $ 14,423 $13,955 $13,955
Interest-bearing deposits with other financial
institutions .............................................. 4,861 4,861 198 198
Federal funds sold ........................................... 11,900 11,900 32,900 32,900
Investment securities:
Held to maturity .......................................... 29,115 29,072 71,822 69,852
Available for sale ........................................ 61,308 61,308 -- --
Loans and leases, net ........................................ 251,502 252,585 208,244 206,935
Accrued interest receivable .................................. 2,653 2,653 1,960 1,960
Other financial assets ...................................... 127 127 327 327
Financial Liabilities:
Deposits:
Demand ........................................ 36,286 36,286 33,496 33,496
N.O.W. accounts ............................... 24,420 24,420 23,974 23,974
Savings ...................................... 41,814 41,814 42,823 42,823
Insured money market .......................... 8,638 8,638 8,830 8,830
Other time .................................... 190,660 192,030 162,488 161,137
Securities sold under agreements to repurchase ... 48,846 48,805 33,371 33,297
Other short-term borrowings ...................... 1,500 1,500 366 366
Notes payable .................................... 4,500 4,410 5,000 4,950
Mandatory convertible debentures ................. 1,250 1,250 1,250 1,250
Other financial liabilities ...................... 2,862 2,862 2,243 2,243
</TABLE>
The estimated fair values of investment securities were generally based on
quoted market prices. For variable rate financial instruments, the carrying
amount was considered to be a reasonable estimate of fair value. For
fixed-rate financial instruments, the fair value was determined by
discounting contractual cash flows using rates which could have been earned
for assets and liabilities with similar characteristics issued as of the
balance sheet date.
(18) Earnings Per Common Share Data
The following information was used in the computation of earnings per
common share on both a primary and fully diluted basis for the fiscal years
ended March 31, 1996 and 1995:
1996 1995
--------- ---------
Net income ..................................... $ 3,553 $ 3,068
Accrued preferred dividends .................... (598) (594)
--------- ---------
Primary earnings ............................ 2,955 2,474
MCDs interest expense, net of tax .............. 68 61
Accrued convertible preferred dividends ........ 598 594
--------- ---------
Fully diluted earnings ...................... $ 3,621 $ 3,129
========= =========
Weighted average common shares outstanding ..... 175,123 174,079
Weighted average common shares
issuable upon conversion of:
MCDs ........................................ 50,000 50,000
Class A Preferred Stock ..................... 75,093 84,606
Class B Preferred Stock ..................... 11,111 11,111
Class C Preferred Stock ..................... 24,000 24,000
--------- ---------
Weighted average common and contingently
issuable common shares outstanding .......... 335,327 343,796
========= =========
<PAGE>
Financial Services Corporation of the Midwest
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
(Dollars in Thousands, Except Per Share Amounts)
No conversions occurred during the years presented .
(19) Parent Company Only Financial Information
Condensed financial information for FSCM was as follows:
Balance Sheets
March 31, 1996 1995
-------------------------------------------------------------------
Assets
Cash and short-term investments .............. $ 1,546 $ 1,568
Investment in TRIB ........................... 28,519 26,606
Due from TRIB ................................ 46 --
Other assets ................................. 141 423
Deferred income taxes ........................ 8 8
------------------
Total ............................... $30,260 $28,605
==================
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable and accrued liabilities .. $ 223 $ 394
Notes payable ............................. 4,500 5,000
Mandatory convertible debentures .......... 1,250 1,250
------------------
Total liabilities ................... 5,973 6,644
------------------
Stockholders' equity:
Preferred Stock ......................... 6,520 6,520
Common Stock ............................ 170 170
Capital surplus ......................... 2,574 2,521
Net unrealized loss on available-for-sale
securities, net of taxes ............. (422) --
Retained earnings ....................... 20,694 18,047
Treasury Stock .......................... (5,249) (5,297)
------------------
Total stockholders' equity ........ 24,287 21,961
------------------
Total ............................. $30,260 $28,605
==================
Statements of Income
Years Ended March 31, 1996 1995
- --------------------------------------------------------------------
Operating revenue:
Dividends received from TRIB 1,813 $1,562
Other income .................................. 44 45
------ ------
Total operating revenue ................. 1,857 1,607
------ ------
Operating expenses:
Professional fees ............................. 192 206
Other operating expenses ...................... 252 550
Interest expense:
Interest on notes payable .................. 425 425
Interest on mandatory convertible debentures 103 92
------ ------
Total operating expenses ................ 958 971
------ ------
Net operating income ................... 636 310
Equity in undistributed earnings of TRIB ......... 2,335 2,118
------ ------
Income before income tax benefit ........... 3,234 2,754
Income tax benefit ............................... 319 314
------ ------
Net income ....................................... $3,553 $3,068
====== ======
<PAGE>
Financial Services Corporation of the Midwest
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
Statements of Cash Flows
Years Ended March 31, 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income ................................................. $ 3,553 $ 3,068
Adjustments to reconcile net income to
Net cash provided by operating activities:
Depreciation and amortization ..................... 53 53
Equity in undistributed earnings of subsidiaries .. (2,335) (2,118)
(Increase) decrease in other assets ............... 183 (146)
Increase (decrease) in other liabilities .......... (171) 118
------- ------
Net cash provided by operating activities ................. 1,283 975
------- ------
Cash Flows From Financing Activities:
Payments on notes payable ................................. (500) --
Cash dividends paid ....................................... (906) (848)
Sale of Treasury Stock .................................... 101 85
------- ------
Net cash used by financing activities .................. (1,305) (774)
------- ------
Net increase (decrease) in cash and cash equivalents ... (22) 201
Cash and cash equivalents at the beginning of the year . 1,568 1,367
------- -------
Cash and cash equivalents at the end of the year .......... $ 1,546 $ 1,568
======= =======
</TABLE>
<PAGE>
FINANCIAL SERVICES CORPORATION OF THE MIDWEST
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
(Unaudited)
----------------------------
December 31, March 31,
1996 1996
------------- ---------
<S> <C> <C>
ASSETS
Cash and due from banks .......................................................................... $ 23,727 $ 14,423
Interest-bearing deposits with other financial institutions ...................................... 4,977 4,861
Investment securities:
Held-to-maturity (approximate market value December 31, 1996-$33,684 and
March 31, 1996-$29,072) .................................................................. 33,632 29,115
Available-for-sale (amortized cost December 31, 1996-$64,635 and
March 31, 1996-$61,948) .............................................................. 64,245 61,308
Federal funds sold ............................................................................... 6,200 11,900
Loans and direct financing leases ................................................................ 284,317 255,965
Less: Allowance for possible loan and lease losses .......................................... (5,508) (4,463)
--------- ---------
Total loans and leases, net .............................................................. 278,809 251,502
Premises, furniture and equipment, net ........................................................... 5,467 5,953
Accrued interest receivable ...................................................................... 3,178 2,653
Other real estate, net ........................................................................... 193 457
Other assets ..................................................................................... 5,753 4,795
--------- ---------
Total .................................................................................... $ 426,181 $ 386,967
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing demand ................................................................... $ 42,576 $ 36,286
Interest-bearing:
N.O.W. accounts .......................................................................... 24,011 24,420
Savings .................................................................................. 37,432 41,814
Insured money market ..................................................................... 37,089 8,638
Other time ............................................................................... 200,362 190,660
--------- ---------
Total deposits ........................................................................... 341,470 301,818
Accounts payable and accrued liabilities ......................................................... 6,057 4,766
Securities sold under agreements to repurchase ................................................... 39,508 48,846
Other short-term borrowings ...................................................................... 1,224 1,500
Notes payable .................................................................................... 10,000 4,500
Mandatory convertible debentures ................................................................. 1,250 1,250
--------- ---------
Total liabilities ........................................................................ 399,509 362,680
--------- ---------
Stockholders' equity:
Capital stock:
Preferred, no par value; authorized, 100,000 shares:
Class A Preferred Stock, stated value $100 per share; authorized, 50,000 shares;
issued and outstanding: 50,000 shares ................................................ 5,000 5,000
Class B Preferred Stock, stated value $500 per share; authorized, 1,000 shares;
issued and outstanding: 1,000 shares ................................................. 500 500
Class C Preferred Stock, stated value $425 per share; authorized, 2,400
shares; issued and outstanding: 2,400 shares ......................................... 1,020 1,020
Common, par value $.50 per share; authorized, 600,000 shares;
issued: 340,662 shares; outstanding: 176,611 shares .................................... 170 170
Capital surplus .................................................................................. 2,574 2,574
Net unrealized loss on available-for-sale securities, net of taxes ............................... (257) (422)
Retained earnings ................................................................................ 22,914 20,694
Treasury stock ................................................................................... (5,249) (5,249)
--------- ---------
Total stockholders' equity ..................................................... 26,672 24,287
--------- ---------
Total .......................................................................... $ 426,181 $ 386,967
========= =========
</TABLE>
<PAGE>
FINANCIAL SERVICES CORPORATION OF THE MIDWEST
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
(Unaudited) (Unaudited)
------------------------ ------------------------
Nine Months Ended Three Months Ended
December 31, December 31,
------------------------ ------------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans and leases ............................. $ 20,616 $ 17,772 $ 7,231 $ 6,361
Interest on investment securities ................................. 4,369 3,520 1,466 1,305
Interest on federal funds sold .................................... 382 941 200 212
Interest on interest-bearing deposits with other financial
institutions .............................................. 197 6 68 2
--------- --------- --------- ---------
Total interest income ......................................... 25,564 22,239 8,965 7,880
--------- --------- --------- ---------
Interest expense:
Interest on deposits .............................................. 10,711 9,464 3,814 3,247
Interest on securities sold under agreements to repurchase ........ 1,817 1,719 549 684
Interest on other short-term borrowings ........................... 69 58 20 27
Interest on notes payable ......................................... 343 315 152 102
Interest on mandatory convertible debentures ...................... 73 78 24 26
--------- --------- --------- ---------
Total interest expense ........................................ 13,013 11,634 4,559 4,086
--------- --------- --------- ---------
Net interest income ........................................... 12,551 10,605 4,406 3,794
Provision for possible loan and lease losses .......................... 2,000 1,380 950 650
--------- --------- --------- ---------
Net interest income after provision for possible loan
and lease losses ................................... 10,551 9,225 3,456 3,144
--------- --------- --------- ---------
Other income:
Trust fees ........................................................ 333 222 133 (2)
Investment securities gains ....................................... -- 11 -- 11
Loan servicing fees ............................................... 552 503 188 170
Gain on sales of loans and leases ................................. 287 265 107 93
Service charges on deposit accounts ............................... 849 795 296 259
Insurance commissions ............................................. 157 221 8 84
Other ............................................................. 554 417 193 159
--------- --------- --------- ---------
Total other income ............................................ 2,732 2,434 925 774
--------- --------- --------- ---------
Other expenses:
Salaries and employee benefits .................................... 4,706 4,326 1,542 1,533
Occupancy, net .................................................... 633 571 209 262
Insurance ......................................................... 86 254 31 60
Equipment ......................................................... 741 692 257 353
Data processing ................................................... 503 400 175 137
Advertising ....................................................... 295 290 65 58
Other operating ................................................... 1,663 1,189 619 226
--------- --------- --------- ---------
Total other expenses .......................................... 8,626 7,722 2,898 2,629
--------- --------- --------- ---------
Income before income taxes .................................... 4,657 3,937 1,483 1,289
Income taxes .......................................................... 1,725 1,294 592 417
--------- --------- --------- ---------
Net income ............................................................ $ 2,932 $ 2,643 $ 891 $ 872
========= ========= ========= =========
Net income available for Common Stock ................................. $ 2,485 $ 2,194 $ 743 $ 722
========= ========= ========= =========
Earnings per common share:
Primary ............................................................... $ 14.07 $ 12.53 $ 4.21 $ 4.12
========= ========= ========= =========
Fully diluted ......................................................... $ 9.06 $ 8.03 $ 2.77 $ 2.67
========= ========= ========= =========
Weighted average common shares outstanding ............................ 176,611 175,111 176,611 175,111
========= ========= ========= =========
Weighted average common and contingently issuable
common shares outstanding ............................................ 328,838 335,421 326,961 332,744
========= ========= ========= =========
</TABLE>
<PAGE>
FINANCIAL SERVICES CORPORATION OF THE MIDWEST
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
Net
Unrealized
Loss on
Preferred Stock Available-
Nine Months Ended ------------------------- Common Capital For-Sale Retained Treasury
December 31, 1996 (Unaudited) Class A Class B Class C Stock Surplus Securities1 Earnings Stock
- ------------------------------------------------- ------- ------- ------- ------- ------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1996........................ $5,000 $ 500 $1,020 $ 170 $2,574 $ (422) $20,694 $(5,249)
Net income....................................... --- --- --- --- --- --- 2,932 ---
Change in net unrealized loss on
available-for-sale securities1 ............... --- --- --- --- --- 165 --- ---
Cash dividends declared:
Class A Preferred, $6.94 per share............ --- --- --- --- --- --- (347) ---
Class B Preferred, $34.85 per share........... --- --- --- --- --- --- (35) ---
Class C Preferred, $27.09 per share........... --- --- --- --- --- --- (65) ---
Common, $1.50 per share ...................... --- --- --- --- --- --- (265) ---
------ ------ ------ ------ ------ ------ ------- -------
Balance at December 31, 1996..................... $5,000 $ 500 $1,020 $ 170 $2,574 $ (257) $22,914 $(5,249)
====== ====== ====== ====== ====== ====== ======= =======
Nine Months Ended
December 31, 1995 (Unaudited)
- -------------------------------------------------
Balance at March 31, 1995........................ $5,000 $ 500 $1,020 $ 170 $2,521 $ --- $18,047 $(5,297)
Net income....................................... --- --- --- --- --- --- 2,643 ---
Change in net unrealized gain on
available-for-sale securities1 ............... --- --- --- --- --- 174 --- ---
Cash dividends declared:
Class A Preferred, $6.94 per share............ --- --- --- --- --- --- (347) ---
Class B Preferred, $37.02 per share........... --- --- --- --- --- --- (37) ---
Class C Preferred, $27.09 per share........... --- --- --- --- --- --- (65) ---
Common, $1.26 per share ...................... --- --- --- --- --- --- (221) ---
------ ------ ------ ------ ------- ------- ------- -------
Balance at December 31, 1995..................... $5,000 $ 500 $1,020 $ 170 $ 2,521 $ 174 $20,020 $(5,297)
====== ====== ====== ====== ======= ======= ======= =======
<FN>
1 Net of taxes
</FN>
</TABLE>
<PAGE>
FINANCIAL SERVICES CORPORATION OF THE MIDWEST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
(Unaudited)
------------------------
Nine Months Ended
December 31,
------------------------
1996 1995
-------- --------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income ......................................................................................... $ 2,932 $ 2,643
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization .................................................................. 937 670
Provision for possible loan and lease losses ................................................... 2,000 1,380
Gain on sale of investment securities available-for-sale ....................................... -- (11)
Investment amortization ........................................................................ 183 113
Loans and leases originated for sale ........................................................... (25,928) (49,694)
Proceeds from sales of loans and leases ........................................................ 35,057 49,034
Gain on sales of loans and leases .............................................................. (287) (265)
Increase in interest receivable ................................................................ (525) (1,265)
Increase in interest payable ................................................................... 667 1,021
(Increase) decrease in other assets ............................................................ (1,068) 283
Increase in other liabilities .................................................................. 624 629
-------- --------
Net cash provided by operating activities .......................................................... 14,592 4,538
-------- --------
Cash Flows From Investing Activities:
Net decrease in federal funds sold ................................................................. 5,700 14,900
Net (increase) decrease in interest-bearing deposits with other financial institutions ............. (116) 181
Purchase of investment securities held-to-maturity ................................................. (14,542) (16,076)
Proceeds from maturity or call of investment securities held-to-maturity ........................... 10,000 19,000
Purchase of investment securities available-for-sale ............................................... (12,629) (34,790)
Proceeds from maturity or call of investment securities available-for-sale ......................... 9,784 --
Proceeds from sales of investment securities available-for-sale .................................... -- 7,152
Net increase in loans and leases ................................................................... (38,149) (31,964)
Net increase in other investing activities ......................................................... (162) (3,404)
-------- --------
Net cash used in investing activities .............................................................. (40,114) (45,001)
-------- --------
Cash Flows From Financing Activities:
Net increase in deposits ........................................................................... 39,652 20,986
Net increase (decrease) in short-term borrowings ................................................... (2,668) 13,696
Proceeds from other borrowings ..................................................................... 36,642 27,259
Payments on other borrowings ....................................................................... (43,588) (19,809)
Proceeds from bank note advance .................................................................... 1,210 --
Payments on bank note advance ...................................................................... (1,210) --
Issuance of notes payable .......................................................................... 10,000 --
Redemption of notes payable ........................................................................ (4,500) (500)
Cash dividends paid on Preferred Stock ............................................................. (447) (449)
Cash dividends paid on Common Stock ................................................................ (265) (221)
-------- --------
Net cash provided by financing activities .......................................................... 34,826 40,962
-------- --------
Net increase in cash and due from banks ............................................................ 9,304 499
Cash and due from banks at the beginning of the year ............................................... 14,423 13,955
-------- --------
Cash and due from banks at the end of the period ................................................... $ 23,727 $ 14,454
======== ========
</TABLE>
<PAGE>
Summary of Financial and Pro Forma Information
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
Nine Months Ended Fiscal Years Ended
-------------------------------------- -----------------------------------
Pro Forma 12/31/96 12/31/95 Pro Forma 03/31/96 12/31/95
--------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Income Statement:
Interest income ................................ $ 25,564 $ 25,564 $ 22,239 $ 30,271 $ 30,271 $ 24,571
Interest expense ............................... 13,076(1) 13,013 11,634 15,917(1) 15,833 10,707
-------- -------- -------- -------- -------- --------
Net interest expense .................. 12,488 12,551 10,605 14,354 14,438 13,864
Provision for possible loan and lease losses .. 2,000 2,000 1,980 1,905 1,905 2,510
-------- -------- -------- -------- -------- --------
Net interest income after provision
for possible loan and lease losses... 10,488 10,551 9,225 12,449 12,533 11,354
Other income ................................... 2,732 2,732 2,434 3,315 3,315 3,149
Other expense .................................. 8,636(2) 8,626 7,722 10,537(2) 10,527 9,919
Income taxes ................................... 1,700(3) 1,725 1,294 1,736(3) 1,768 1,516
-------- -------- -------- -------- -------- --------
Net income ............................ $ 2,884 $ 2,932 $ 2,643 $ 3,491 $ 3,553 $ 3,068
======== ======== ======== ======== ======== ========
Earnings per common share:
Primary ............................... $ 14.73 $ 14.07 $ 12.53 $ 17.64 $ 16.87 $ 14.21
Fully diluted ......................... 10.03 9.06 8.03 12.24 10.80 9.10
Weighted average common shares
outstanding ................................. 165,500(4) 176,611 175,111 164,012(4) 175,123 174,079
Weighted average common and contingently
issuable common shares outstanding .......... 292,277(5) 328,838 335,421 290,789(5) 335,327 343,796
Earnings to Fixed Charge Ratios:
Consolidated:
Excluding interest on deposits ........ 2.40 2.45 2.31 2.25 2.30 2.72
Including interest on deposits ........ 1.35 1.35 1.34 1.33 1.33 1.43
Parent company only ............................ 1.18 1.27 1.21 1.17 1.26 1.04
Balance Sheet:
Interest-earning assets ........................ $387,863 $387,863 $358,686 $358,686 $313,164
Noninterest-earning assets ..................... 38,318 38,318 28,281 28,281 24,290
-------- -------- -------- -------- --------
Total assets 426,181 426,181 386,967 386,967 337,454
-------- -------- -------- -------- --------
Deposits ....................................... 341,470 341,470 301,818 301,818 271,611
Other interest-bearing liabilities ............. 53,002(1) 51,982 57,116(1) 56,096 39,987
Other noninterest-bearing liabilities .......... 6,057 6,057 4,766 4,766 3,895
-------- -------- -------- -------- --------
Total liabilities ..................... 400,529 399,509 363,700 362,680 315,493
-------- -------- -------- -------- --------
Common Stock ................................... 170 170 170 170 170
Preferred Stock ................................ 6,520 6,520 6,520 6,520 6,520
Capital surplus ................................ 2,574 2,574 2,574 2,574 2,521
Net unrealized loss on available-for-sale
securities, net of taxes .................... (257) (257) (422) (422) --
Retained earnings .............................. 22,914 22,914 20,694 20,694 18,047
Treasury Stock ................................. (6,269) (5,249) (6,269) (5,249) (5,297)
-------- -------- -------- -------- --------
Total stockholders' equity 25,652 26,672 23,267 24,287 21,961
-------- -------- -------- -------- --------
Book Value Per Common Share:
Book value ..................................... $ 115.60 $ 114.10 $ 101.19 $ 100.60 $ 88.18
Book value assuming conversion of man-
datory convertible debentures and
convertible Preferred Stock ................. 92.04 85.87 83.88 76.80 68.35
<FN>
1 FSCM draws $1,020 on its 8.25% line of credit - $1,000 for 11,111 shares of
Common Stock at $90 per share and $20 in costs to acquire the Treasury
Stock.
2 Expense of $10 incurred in the redemption of the Class A Preferred Stock.
3 A 34% effective income tax rate.
4 Less 11,111 shares of Common Stock acquired at $90 per share.
5 Reduction in the weighted average number of common shares contingently
issuable from the conversion of the Class A Preferred Stock; for the pro
forma and nine month period ended December 31, 1996 - 41,666 and 67,116
shares, respectively; for the pro forma and actual fiscal year ended March
31, 1996 - 41,666 and 75,099 shares, respectively.
</FN>
</TABLE>
<PAGE>
EXHIBIT INDEX
Description of Exhibits Page No.
(a)(1) Offer to Purchase.
(a)(2)(i) Form of Letter of Transmittal.
(a)(2)(ii) Form of Notice of Guaranteed Delivery.
(a)(3)(i) Form of Letter to Brokers, Dealers, Commercial Banks,
Trust Companies and Nominees.
(a)(3)(ii) Form of Letter to Clients of Brokers, Dealers, Commercial Banks,
Trust Companies and Nominees.
(a)(3)(iii) Form of Letter to Shareholders.
(b)(1) Loan Agreement dated December 15, 1992 by and between FSCM and the
Bank and amendments thereto dated March 14, 1996 and July 27,
1996.
(b)(2) Revolving Business Note dated July 31, 1996 made payable by FSCM
to the Bank.
(c) Depositary Agreement dated as of May 12, 1997 between FSCM and
Illinois Stock Transfer Company.
<PAGE>
Exhibit a(1)
FINANCIAL SERVICES CORPORATION OF THE MIDWEST
OFFER TO PURCHASE FOR CASH UP TO 83,000
OF ITS ISSUED AND OUTSTANDING SHARES
OF COMMON STOCK AT $90.00 PER SHARE
- --------------------------------------------------------------------------------
THE OFFER, THE PRORATION PERIOD AND THE WITHDRAWAL
- -------------------------------------------------------------------------------
RIGHTS WILL EXPIRE AT 5:00 P.M., ROCK ISLAND, ILLINOIS TIME,
ON JUNE 13, 1997, UNLESS THE OFFER IS EXTENDED.
To the Common Stock Shareholders of
Financial Services Corporation of the Midwest:
Financial Services Corporation of the Midwest ("FSCM"), a one-bank holding
company incorporated under Delaware law, is offering to purchase for cash up to
83,000 of its issued and outstanding shares (the "Shares") of Common Stock, par
value $.50 per share (the "Common Stock"), for $90.00 per share in cash, subject
to the terms and conditions set forth in this Offer to Purchase and the related
Letter of Transmittal (which together constitute the "Offer"). THE OFFER EXPIRES
AT 5:00 P.M., ROCK ISLAND, ILLINOIS TIME, ON JUNE 13, 1997, UNLESS EXTENDED (THE
"EXPIRATION DATE"). If more than 83,000 Shares are duly tendered and not
withdrawn prior to the expiration of the Offer, FSCM then will purchase 83,000
Shares from tendering shareholders (with adjustments to avoid fractional
Shares), in accordance with the terms and conditions specified in this Offer to
Purchase, pro rata in proportion to the number of Shares tendered by each
shareholder during the period the Offer remains open as compared to the total
number of Shares of Common Stock duly tendered in the Offer, unless FSCM
determines not to purchase any Shares in the Offer. Subject to the terms and
conditions of the Offer, FSCM will (subject to such possible proration) accept
any and all Shares validly tendered and not withdrawn on or prior to the
Expiration Date. See Section 5. FSCM reserves the right to terminate the Offer
upon the occurrence of the conditions set forth in Section 5 or to amend the
Offer at any time on or prior to the Expiration Date.
Tenders may be withdrawn at any time on or prior to the Expiration Date. See
Section 3.
The purposes of the Offer are twofold. The first is to provide an opportunity to
FSCM's Common Stock shareholders to sell their Shares, thus increasing the
liquidity of the Common Stock. The Common Stock otherwise is illiquid, as it is
not traded on any exchange or quoted on any quotations system. In addition,
Shares of Common Stock are being repurchased by FSCM to make them available to
employees of THE Rock Island Bank, National Association ("TRIB"), FSCM's
wholly-owned subsidiary, under TRIB's 401(k) Plan.
The Offer is being made to all Common Stock shareholders of FSCM and is not
conditioned upon the tender of any minimum number of FSCM's outstanding Shares.
To prevent federal income tax backup withholding equal to 31% of the gross
payments made pursuant to this Offer, each U.S. shareholder must have submitted
to Illinois Stock Transfer Company (the "Transfer Agent") a correct, completed,
and signed Form W-9 or Substitute Form W-9, or other confirmation of an
exemption from backup withholding requirements. The Letter of Transmittal
contains a Substitute Form W-9.
NEITHER FSCM NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY
SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SUCH SHAREHOLDER'S
SHARES. SHAREHOLDERS ARE URGED TO EVALUATE CAREFULLY ALL INFORMATION IN THE
OFFER, CONSULT THEIR OWN INVESTMENT AND TAX ADVISERS AND MAKE THEIR OWN
DECISIONS AS TO WHETHER TO TENDER THEIR SHARES.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION OR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
This Offer is subject to certain conditions, including any required approval of
the Offer by the Board of Governors of the Federal Reserve System. See Section
5.
<PAGE>
IMPORTANT
If you want to tender your Shares, you should either: (1) complete and sign the
Letter of Transmittal (or a photocopy or facsimile thereof bearing original
signature(s) and any required signature guarantees) and mail or deliver it along
with such Shares (in proper certificated or uncertificated form) and any other
documents required by the Letter of Transmittal, to the Transfer Agent in the
enclosed envelope; or (2) request your broker, dealer, commercial bank, trust
company or other nominee to effect the transaction for you. If your Shares are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee, you must contact such firm if you desire to tender your Shares.
Shareholders are not required to pay a service charge to FSCM or the Transfer
Agent in connection with their tender of Shares, but they may be charged a fee
by a broker, dealer or other institution for processing the tender requested.
If you have lost the stock certificate(s) evidencing your Shares of Common
Stock, please contact Illinois Stock Transfer Company, the Transfer Agent, by
telephone at (312) 427-2953 or at the appropriate address set forth below.
IF YOU DO NOT WISH TO TENDER YOUR SHARES, YOU NEED NOT TAKE ANY ACTION.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF FSCM AS TO
WHETHER SHAREHOLDERS SHOULD TENDER SHARES PURSUANT TO THE OFFER. ANY SUCH
RECOMMENDATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY FSCM.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN
OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY FSCM.
THIS OFFER TO PURCHASE DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY FSCM OR
ANY OTHER PERSON FOR THE PURCHASE OF ANY SECURITIES OTHER THAN THE SECURITIES
COVERED BY THIS OFFER TO PURCHASE. THE OFFER IS NOT BEING MADE TO, AND TENDERS
WILL NOT BE ACCEPTED FROM OR ON BEHALF OF, HOLDERS OF SHARES IN ANY JURISDICTION
IN WHICH THE MAKING OF THE OFFER OR ACCEPTANCE THEREOF WOULD NOT BE IN
COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION. HOWEVER, FSCM MAY, IN ITS SOLE
DISCRETION, TAKE SUCH ACTION AS IT MAY DEEM NECESSARY TO MAKE THE OFFER IN ANY
SUCH JURISDICTION AND TO EXTEND THE OFFER TO HOLDERS OF SHARES IN SUCH
JURISDICTION.
Questions and requests for assistance may be directed to the Transfer Agent by
telephone at (312) 427-2953 or at the appropriate address set forth below or to
Ms. Patricia A. Zimmer at FSCM at the address and telephone number set forth
below. Requests for additional copies of this Offer to Purchase and the Letter
of Transmittal may also be directed to the Transfer Agent or to Ms. Zimmer.
Shareholders who do not own Shares directly may also obtain such information and
copies from their broker, dealer, commercial bank, trust company or other
nominee and are required to tender their Shares through such firm.
May 12, 1997 FINANCIAL SERVICES CORPORATION OF THE MIDWEST
224 - 18th Street, Suite 202
Rock Island, Illinois 61201-8719
Telephone: (309) 794-1122, extension 1301
Contact: Illinois Stock Transfer Company
By facsimile: (312) 427-2879
To call for additional information: (312) 427-2953
<TABLE>
BY MAIL: BY OVERNIGHT COURIER: BY HAND:
<S> <C> <C>
Illinois Stock Transfer Illinois Stock Transfer Illinois Stock Transfer
Company Company Company
223 West Jackson Boulevard, Suite 1210 223 West Jackson Boulevard, Suite 1210 223 West Jackson Boulevard, Suite 1210
Chicago, Illinois 60606 Chicago, Illinois 60606 Chicago, Illinois 60606
</TABLE>
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
1. Price; Number of Shares; Proration; Extension of Offer
2. Procedure for Tendering Shares
A. Proper Tender of Shares
B. Signature Guarantees and Method of Delivery
C. Book-Entry Delivery
D. Guaranteed Delivery
E. Determination of Validity
F. Federal Income Tax Withholding
3. Withdrawal Rights
4. Payment for Shares
5. Certain Conditions of the Offer
6. Purpose of the Offer; Plans or Proposals of FSCM; Interests in
Securities of FSCM
A. Purposes of the Offer
B. Plans or Proposals of FSCM
C. Interests in Securities of FSCM
7. Price Range of Shares; Dividends
8. Selected Financial Information
9. Interests of Certain Related Persons
10. Certain Effects of the Offer
11. Certain Information About FSCM
12. Source and Amount of Funds
13. Additional Information
14. Certain U. S. Federal Income Tax Consequences
15. Extension of Tender Period; Termination; Amendments
16. Miscellaneous
Exhibit A: Fairness Opinion of Austin Associates, Inc.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE OFFER
1. PRICE; NUMBER OF SHARES; PRORATION; EXTENSION OF OFFER.
FSCM will accept for payment and purchase up to 83,000 Shares of Common Stock at
a tender of $90.00 per Share in cash, subject to the terms and conditions set
forth in the Offer to Purchase dated May 12, 1997 and the related Letter of
Transmittal. THE OFFER EXPIRES AT 5:00 P.M., ROCK ISLAND, ILLINOIS TIME, ON JUNE
13, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE").
FSCM has the right to extend, terminate or amend the Offer. See Sections 5 and
15. FSCM will not be obligated to purchase Shares pursuant to the Offer under
certain circumstances. See Section 5. Holders of Shares may tender Shares to the
Transfer Agent or withdraw Shares previously tendered on or prior to the
Expiration Date. See Sections 2 and 3. FSCM will not pay interest on the
purchase price under any circumstances.
The Offer is being made to all shareholders of FSCM and is not conditioned upon
the tender of any minimum number of FSCM's outstanding Shares of Common Stock.
Subject to the terms and conditions of the Offer, the Company will, subject to
possible proration, accept any and all Shares of Common Stock validly tendered
and not withdrawn on or prior to the Expiration Date. If more than 83,000 Shares
of Common Stock are duly tendered and not withdrawn on or prior to the
Expiration Date, FSCM then will purchase 83,000 Shares from tendering
shareholders (with adjustments to avoid fractional Shares), in accordance with
the terms and conditions specified in this Offer to Purchase, pro rata in
proportion to the number of Shares tendered by each shareholder during the
period the Offer remains open as compared to the total number of Shares of
Common Stock duly tendered in the Offer, unless FSCM determines not to purchase
any Shares.
If proration of tendered Shares is required, FSCM does not expect that it will
be able to announce the final proration factor until approximately five Nasdaq
National Market trading days after the Expiration Date because of the difficulty
in determining the number of Shares validly tendered (including Shares tendered
pursuant to the guaranteed delivery procedure described in Section 2) and not
withdrawn on or prior to the Expiration Date. Preliminary results of the
proration will be announced as promptly as practicable after the Expiration
Date. Holders of Shares may obtain such preliminary information from the
Transfer Agent and may also be able to obtain such information from their
brokers.
FSCM expressly reserves the right, in its sole discretion, at any time or from
time to time, to extend the period of time during which the Offer is open by
giving oral or written notice of such extension to the Transfer Agent. See
Section 15. There can be no assurance, however, that FSCM will exercise its
right to extend the Offer. If FSCM decides, in its sole discretion, to increase
(except for any increase not in excess of 2% of the outstanding Shares) or
decrease the number of Shares being sought or to increase or decrease the
consideration offered in the Offer to holders of Shares and, at the time that
notice of such increase or decrease is first published, sent or given to holders
of Shares in the manner specified below, the Offer is scheduled to expire at any
time earlier than the tenth business day from the date that such notice is first
so published, sent or given, the Offer will be extended until the expiration of
such ten-business-day period. For purposes of the Offer, a "business day" means
any day other than a Saturday, Sunday or federal holiday and consists of a time
period from 12:01 a.m. through 12:00 midnight, local time, Rock Island,
Illinois.
As of March 31, 1997, there were 177,711 shares of Common Stock issued and
outstanding, and there were approximately 170 holders of record of shares of
Common Stock. Certain of these holders of record were nominees for brokers,
dealers, commercial banks, trust companies and other institutions that held
Shares on behalf of multiple beneficial owners. FSCM has been informed that no
executive officer, director or affiliate of FSCM or TRIB (who together own a
total of 74,664 issued and outstanding shares of Common Stock) intends to tender
shares of Common Stock pursuant to the Offer.
<PAGE>
2. PROCEDURE FOR TENDERING SHARES.
A. PROPER TENDER OF SHARES. For Shares to be properly tendered pursuant to the
Offer, either (i) a properly completed and duly executed Letter of
Transmittal (or a photocopy or facsimile thereof bearing original
signature(s) and any required signature guarantees) and any documents
required by the Letter of Transmittal must be received by the Transfer
Agent at the appropriate address set forth on page -ii- of this Offer to
Purchase on or prior to the Expiration Date or (ii) the guaranteed delivery
procedure described below must be complied with. If Shares are tendered
using the procedure described in clause (i) of the preceding sentence, then
either (a) certificates for the Shares tendered must be received by the
Transfer Agent at one of such addresses or (b) such Shares must be
delivered pursuant to the procedures for book-entry transfer described
below (and a confirmation of such delivery received by the Transfer Agent),
in each case on or prior to the Expiration Date.
Notwithstanding any other provisions hereof, payment for Shares tendered
and accepted for payment pursuant to the Offer will be made only after
timely receipt by the Transfer Agent of certificates for such Shares (or a
timely book-entry confirmation of transfer of such Shares into the Transfer
Agent's account at The Depository Trust Company ("DTC")), a properly
completed and duly executed Letter of Transmittal (or a photocopy or
facsimile thereof bearing original signature(s) and any required signature
guarantees ) and any other documents required by the Letter of Transmittal.
Letters of Transmittal and certificates representing tendered Shares should
NOT be sent or delivered to FSCM. Shareholders who desire to tender Shares
registered in the name of a broker, dealer, commercial bank, trust company
or other nominee should contact such firm to effect a tender on their
behalf.
Shareholders who have lost their stock certificate(s) evidencing Shares
they want to tender in the Offer should contact the Transfer Agent by
telephone at (312) 427-2953 or at the appropriate address set forth on page
-ii-.
The tender of Shares pursuant to any one of the procedures described herein
will constitute the tendering shareholder's acceptance of the terms and
conditions of the Offer and an agreement between the tendering shareholder
and FSCM upon the terms and subject to the conditions of the Offer,
including the tendering shareholder's representation and warranty that (i)
such shareholder owns the Shares being tendered within the meaning of Rule
13e-4 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and (ii) the tender of such Shares complies with Rule 13e-4.
Section 14(e) of the Exchange Act and Rule 14e-4 promulgated thereunder
make it unlawful for any person, directly or indirectly, acting alone or in
concert with others, to guarantee tender of Shares or to tender Shares in a
partial tender offer for such person's own account or for the account of
another person unless at the time of tender, and at the time the Shares are
accepted for payment, the person tendering has a net long position equal to
or greater than the amount tendered in (i) Shares, and will deliver or
cause to be delivered such Shares for the purpose of tender to the person
making the Offer within the period specified in the Offer, or (ii) an
equivalent security and, upon acceptance of his or her tender, will acquire
Shares by conversion, exchange, or exercise of such equivalent security to
the extent required by the terms of the Offer, and will deliver or cause to
be delivered the Shares so acquired for the purpose of tender to FSCM on or
prior to or on the Expiration Date.
The acceptance of Shares by FSCM for payment will constitute a binding
agreement between the tendering shareholder and FSCM upon the terms and
subject to the conditions of the Offer, including the tendering
shareholder's representation that (i) such shareholder has a net long
position in the Shares being tendered within the meaning of Rule 14e-4
promulgated under the Exchange Act and (ii) the tender of such Shares
complies with Rule 14e-4.
<PAGE>
B. SIGNATURE GUARANTEES AND METHOD OF DELIVERY. Except as otherwise
hereinafter provided, all signatures on a Letter of Transmittal must be
guaranteed by a financial institution (including most banks, savings and
loans associations and brokerage houses) which is a participant in the
Securities Transfer Medallion Program, the New York Stock Exchange
Medallion Signature Program, or the Stock Exchanges Medallion Program (an
"Eligible Institution"). A signature guarantee is not required on the
Letter of Transmittal (a) if the Letter of Transmittal is signed by the
registered holder(s) (which term, for purposes of this document, shall
include any participant in the DTC book-entry transfer facility whose name
appears on DTC's security position listing as the owner of Shares) of
Shares tendered herewith, and such holder(s) has not completed either the
box entitled "Special Payment Instructions" or the box entitled "Special
Delivery Instructions" in the Letter of Transmittal or (b) if such Shares
are tendered for the account of an Eligible Institution. See Instruction 5
of the Letter of Transmittal.
If the Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered thereby, the signature(s) must exactly correspond with the
name(s) as written on the face of the stock certificate(s) representing
such Shares, without alteration, enlargement or any change whatsoever.
If any of the Shares tendered thereby are owned of record by two or more
joint owners, all such owners must sign the Letter of Transmittal.
If any of the tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
certificates.
If the Letter of Transmittal or any stock certificates or stock powers are
signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing,
and proper evidence satisfactory to FSCM of their authority so to act must
be submitted.
If the Letter of Transmittal is signed by the registered holder(s) of the
Shares transmitted thereby, no endorsements of certificates or separate
stock powers are required unless payment is to be made to or certificates
for Shares not purchased are to be issued in the name of a person other
than the registered holder(s). Signatures on such certificates or stock
powers must be guaranteed by an Eligible Institution.
If the Letter of Transmittal is signed by a person other than the
registered holder(s) of the certificate(s) listed, the certificate(s) must
be endorsed or accompanied by appropriate stock powers, in either case
signed exactly as the name(s) of the registered holder(s) appears on the
certificate(s) for such Shares. Signatures on such certificates or stock
powers must be guaranteed by an Eligible Institution.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING ANY SHARE CERTIFICATES,
THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE
ELECTION AND RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. Shareholders have the responsibility to cause the Letter of
Transmittal (or a photocopy or facsimile thereof bearing original
signature(s) and any required signature guarantees) and any documents
required by the Letter of Transmittal to be timely delivered. Timely
delivery is a condition precedent to FSCM's acceptance of Shares for
purchase pursuant to the Offer and to payment of the amount of the purchase
price.
C. BOOK-ENTRY DELIVERY. The Transfer Agent will establish an account with
respect to the Shares at DTC for purposes of the Offer within two business
days after the date of this Offer to Purchase. Any financial institution
that is a participant in the DTC system may make book-entry delivery of
Shares by causing DTC to transfer such Shares into the Transfer Agent's
account at DTC in accordance with DTC's transfer procedures. Although the
delivery of Shares may be effected through book-entry transfer at DTC, a
Letter of Transmittal (or a photocopy or facsimile thereof bearing original
signature(s) and any required signature guarantees), or an Agent's Message
(as defined below) in connection with a book-entry transfer, and any other
documents required by the Letter of Transmittal, must in any case be
received by the Transfer Agent at one of its addresses set forth on page
-ii- of this Offer to Purchase on or prior to the Expiration Date, or the
tendering shareholder must comply with the guaranteed delivery procedures
described below.
<PAGE>
The term "Agent's Message" means a message from DTC transmitted to, and
received by, the Transfer Agent forming a part of a timely confirmation of
a book-entry transfer (a "Book-Entry Confirmation"), which states that (i)
DTC has received an express acknowledgment from the DTC participant
tendering the Shares that are the subject of the Book-Entry Confirmation,
(ii) the DTC participant has received and agrees to be bound by the terms
of the Letter of Transmittal and (iii) FSCM may enforce such agreement
against the DTC participant.
Delivery of documents to DTC in accordance with DTC's procedures does not
constitute delivery to the Transfer Agent.
D. GUARANTEED DELIVERY. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's Share certificates are not immediately
available, time will not permit all required documents to reach the
Transfer Agent on or prior to the Expiration Date, or a shareholder cannot
complete the procedures for delivery by book-entry transfer on a timely
basis, then such shareholder's Shares may nevertheless be tendered if all
of the following conditions are satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by FSCM herewith, is
received by the Transfer Agent as provided below on or prior to
the Expiration Date; and
(iii) the Share certificates evidencing all Shares, in proper form for
transfer, or a Book-Entry Confirmation, together with the Letter
of Transmittal (or a photocopy or facsimile thereof bearing
original signature(s) and any required signature guarantees) (or,
in the case of a book-entry transfer, an Agent's Message), and any
other documents required by the Letter of Transmittal, are
received by the Transfer Agent within three Nasdaq National Market
trading days after the date of execution of the Notice of
Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mail to the Transfer Agent and must
include a guarantee by an Eligible Institution and a representation that
the shareholder owns the Shares tendered within the meaning of, and that
the tender of the Shares effected thereby complies with, Rule 14e-4 under
the Exchange Act, each in the form set forth in the Notice of Guaranteed
Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Transfer Agent of (i) Share certificates evidencing such
Shares or a Book-Entry Confirmation of the delivery of such Shares (if
available), (ii) a properly completed and duly executed Letter of
Transmittal (or a photocopy or facsimile thereof bearing original
signature(s) and any required signature guarantees) or, in the case of a
book-entry transfer, an Agent's Message, and (iii) any other documents
required by the Letter of Transmittal. Accordingly, payment may not be made
to all tendering shareholders at the same time and will depend upon when
Share certificates are received by the Transfer Agent or Book-Entry
Confirmations of tendered Shares are received in the Transfer Agent's
account at DTC.
E. DETERMINATION OF VALIDITY. All questions as to the number of Shares
accepted in the Offer, the form of documents, and the validity, eligibility
(including time of receipt) and acceptance for payment of tenders of Shares
will be determined by FSCM, in its sole discretion, which determination
shall be final and binding on all parties. FSCM reserves the absolute right
to reject any or all tenders determined not to be in proper form or to
refuse to accept for payment, purchase or pay for any Shares if, in the
opinion of FSCM's counsel, accepting, purchasing or paying for such Shares
would be unlawful. FSCM also reserves the absolute right to waive any of
the conditions of the Offer or any defect in any tender, whether generally
or with respect to any particular Share(s) or shareholder(s). FSCM's
interpretations of the terms and conditions of the Offer shall be final and
binding on all parties. No tender of Shares will be deemed to be properly
made until all defects and irregularities have been cured or waived. Unless
waived, any defects or irregularities in connection with tenders must be
cured within such time as FSCM shall determine.
NEITHER FSCM, THE TRANSFER AGENT NOR ANY OTHER PERSON IS OR WILL BE
OBLIGATED TO GIVE ANY NOTICE OF DEFECTS OR IRREGULARITIES IN TENDERS, AND
NONE OF THEM WILL INCUR ANY LIABILITY FOR FAILURE TO GIVE ANY SUCH NOTICE.
<PAGE>
F. FEDERAL INCOME TAX WITHHOLDING. Under the United States federal income tax
backup withholding rules, 31% of the gross proceeds payable to a
shareholder pursuant to the Offer must be withheld and remitted to the
United States Treasury, unless the shareholder's taxpayer identification
number (employer identification number or social security number) is
provided to the Transfer Agent and the shareholder certifies that such
number is correct. Certain shareholders (including, among others, all
corporations and certain non-resident alien individuals) are not subject to
these backup withholding and reporting requirements ("exempt recipients").
All shareholders other than exempt recipients should execute and return to
the Transfer Agent the Substitute Form W-9 included as part of the Letter
of Transmittal. For a foreign individual to qualify as an exempt recipient,
that stockholder must submit a properly executed Form W-8, signed under
penalties of perjury, attesting to that individual's exempt status, a copy
of which can be obtained from the Transfer Agent. See Instruction 11 of the
Letter of Transmittal.
FSCM will treat the gross proceeds payable pursuant to the Offer as a
dividend for United States federal income tax purposes, and, therefore, any
foreign shareholders or agents thereof will be exempt from backup
withholding but will be subject to dividend withholding of federal income
tax at a rate of 30%, unless a reduced rate of withholding is applicable
pursuant to a tax treaty or an exemption from withholding is applicable
because such gross proceeds are effectively connected with the conduct of a
trade or business within the United States. For this purpose, a foreign
shareholder is any shareholder that is not (i) a citizen or resident of the
United States or any political subdivision thereof, (ii) a corporation,
partnership or other entity created or organized in or under the laws of
the United States or any political subdivision thereof, or (iii) an estate
or trust the income of which is includable in gross income for United
States federal income tax purposes, regardless of its source. FSCM will
determine the applicable rate of withholding by reference to a
shareholder's address, except if facts and circumstances indicate such
reliance is not warranted or if applicable law (for example, a tax treaty
or certain Treasury regulations) requires some other method for determining
a shareholder's residence.
A foreign FSCM shareholder may be eligible to file for a refund of such tax
or a portion of such tax if the shareholder is entitled to sale or exchange
treatment as described in Section 14 below with regard to receipt of the
proceeds payable pursuant to the Offer, or if such shareholder is entitled
to a reduced rate of withholding pursuant to a tax treaty and FSCM withheld
at a higher rate. In order to claim an exemption from withholding on the
grounds that gross proceeds paid pursuant to the Offer are effectively
connected with the conduct of a trade or business within the United States,
a foreign shareholder must deliver to the Transfer Agent a properly
executed Form 4224 claiming such exemption. Such forms can be obtained from
the Transfer Agent. See Instruction 11 of the Letter of Transmittal.
Foreign shareholders are urged to consult their own tax advisors regarding
the application of United States federal income tax withholding, including
possible eligibility for a withholding tax reduction or exemption and the
appropriate refund procedure.
ANY TENDERING SHAREHOLDER WHO FAILS TO COMPLETE FULLY AND SIGN THE
SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL MAY BE SUBJECT TO
REQUIRED FEDERAL INCOME TAX WITHHOLDING OF 31% OF THE GROSS PROCEEDS PAID
TO SUCH SHAREHOLDER PURSUANT TO THE OFFER. SEE SECTION 14 - "CERTAIN U.S.
FEDERAL INCOME TAX CONSEQUENCES."
3. WITHDRAWAL RIGHTS.
Tenders of Shares made pursuant to the Offer may be withdrawn at any time on or
prior to the Expiration Date. Thereafter, such tenders are irrevocable, except
that they may be withdrawn on and after July 9, 1997 (or such later date if the
Offer is extended for an additional period of time) unless theretofore accepted
for payment as provided in this Offer to Purchase. If FSCM extends the period of
time during which the Offer is open, is delayed in accepting for payment or
paying for Shares or is unable to accept for payment or pay for Shares pursuant
to the Offer for any reason, then , without prejudice to the Company's rights
under the Offer, the Transfer Agent may, on behalf of FSCM, retain all Shares
tendered, and such Shares may not be withdrawn except as otherwise provided in
this Section 3, subject to Rule 13e-4(f)(5) under the Exchange Act, which
provides that the issuer making the tender offer shall either pay the
consideration offered, or return the tendered securities, promptly after the
termination or withdrawal of the tender offer.
<PAGE>
To be effective, a written or facsimile notice of withdrawal must be timely
received by the Transfer Agent at the appropriate address set forth on page -ii-
of this Offer to Purchase. If the Shares to be withdrawn have been delivered to
the Transfer Agent, a signed notice of withdrawal with signatures guaranteed by
an Eligible Institution (except in the case of Shares tendered by an Eligible
Institution) must be submitted prior to the release of such Shares. In addition,
such notice must specify, in the case of Shares tendered by delivery of
certificates, the name of the registered holder (if different from that of the
tendering stockholder) and the serial numbers shown on the particular
certificates evidencing the Shares to be withdrawn or, in the case of Shares
tendered by book-entry transfer, the name and number of the account at DTC to be
credited with the withdrawn Shares. Withdrawals may not be rescinded, and Shares
withdrawn will thereafter be deemed not validly tendered for purposes of the
Offer. However, withdrawn Shares may be retendered at any time on or prior to
the Expiration Date by again following one of the procedures described in
Section 2.
All questions as to the form and validity (including time of receipt) of notices
of withdrawal will be determined by FSCM in its sole discretion, which
determination shall be final and binding on all parties.
NEITHER FSCM, THE TRANSFER AGENT NOR ANY OTHER PERSON IS OR WILL BE OBLIGATED TO
GIVE ANY NOTICE OF ANY DEFECTS OR IRREGULARITIES IN ANY NOTICE OF WITHDRAWAL,
AND NONE OF THEM WILL INCUR ANY LIABILITY FOR FAILURE TO GIVE ANY SUCH NOTICE OF
DEFECTS OR IRREGULARITIES.
4. PAYMENT FOR SHARES.
For purposes of the Offer, FSCM will be deemed to have purchased Shares pursuant
to the Offer when, as and if it gives oral or written notice to the Transfer
Agent of its acceptance of such Shares for purchase. Pursuant to a rule under
the Exchange Act, FSCM is obligated to pay for or return tendered Shares
promptly after the termination, expiration or withdrawal of the Offer. Upon the
terms and subject to the conditions of the Offer, FSCM will pay for Shares
properly tendered as soon as practicable after the Expiration Date (subject to
the proration provisions of the Offer). The approval of the Offer by the Board
of Governors of the Federal Reserve System ("Federal Reserve Board") may be
necessary prior to the date FSCM pays for any Shares tendered in the Offer. See
Section 5. If such approval is required, payment for the Shares tendered will be
made as soon as practicable after such approval is obtained. FSCM will make
payment for Shares purchased pursuant to the Offer by depositing the aggregate
purchase price therefor with the Transfer Agent, which will make payment to
shareholders promptly as directed by FSCM. FSCM will not pay interest on the
purchase price under any circumstances.
In all cases, payment for Shares purchased pursuant to the Offer will be made
only after timely receipt by the Transfer Agent of a properly completed and duly
executed Letter of Transmittal (or a photocopy thereof bearing original
signature(s) and any required signature guarantees) and any documents required
by the Letter of Transmittal. Shareholders are not required to pay a service
charge to FSCM or the Transfer Agent in connection with their tender of Shares,
but they may be charged a fee by a broker, dealer or other institution for
processing the tender requested. Certificates representing Shares tendered but
not purchased will be returned (or, in the case of Shares tendered by book-entry
transfer, such Shares will be credited to an account maintained with DTC)
promptly following the termination, expiration or withdrawal of the Offer,
without expense to the tendering shareholder.
Payment for Shares may be delayed in the event of difficulty in determining the
number of Shares validly tendered or if proration is required. See Section 1. In
addition, if certain events occur, FSCM may not be obligated to purchase Shares
pursuant to the Offer. See Section 5.
As provided in Rules 13e-4(f)(4) and (8)(ii) under the Exchange Act, FSCM will
pay the same amount per Share for each Share accepted pursuant to the Offer.
FSCM will pay any transfer taxes payable on the transfer to it of Shares
purchased pursuant to the Offer. However, if tendered Shares are registered in
the name of any person other than the person signing the Letter of Transmittal,
the amount of any such transfer taxes (whether imposed on the registered owner
or such other person) payable on account of the transfer to such person of such
Shares will be deducted from the purchase price unless satisfactory evidence of
the payment of such taxes, or exemption therefrom, is submitted. FSCM will not
pay any interest on the purchase price under any circumstances. FSCM may not be
obligated to purchase Shares pursuant to the Offer under certain conditions. See
Section 5.
Any tendering shareholder or other payee who has not previously submitted a
correct, completed and signed Form W-9 and who fails to complete fully and sign
either the Substitute Form W-9 in the Letter of Transmittal and provide such
form to the Transfer Agent may be subject to required federal income tax
withholding of 31% of the gross proceeds paid to such shareholder or other payee
pursuant to the Offer. See Section 14.
<PAGE>
5. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provision of the Offer, FSCM will not be required to
accept for payment or pay for any Shares tendered, and may terminate or amend
the Offer, or may postpone the acceptance for payment of, and payment for,
Shares tendered (subject to the requirements of the Exchange Act for prompt
payment or return of Shares) if (1) there is any (a) in the Board of Directors'
judgment, material legal action or proceeding instituted or threatened
challenging such transactions or otherwise materially adversely affecting FSCM,
(b) suspension of or limitation on prices for trading securities generally on
the New York Stock Exchange or other national securities exchange(s) or The
Nasdaq National Market, (c) declaration of a banking moratorium by federal or
state authorities or any suspension of payment by banks in the United States or
New York State, (d) limitation affecting FSCM imposed by federal or state
authorities on the extension of credit by lending institutions, (e) commencement
of war, armed hostilities or other international or national calamity directly
or indirectly involving the United States, or (f) in the Board of Directors'
judgment, other event or condition which would have a material adverse effect on
FSCM or its shareholders if Shares were repurchased; (2) the Board of Directors
determines that effecting any such transaction would constitute a breach of
their fiduciary duty owed to FSCM or its shareholders; or (3) the approval of
the Offer by the Federal Reserve Board is required and such approval is not
obtained on or before 5:00 p.m., Rock Island, Illinois time, on August 31, 1997,
or FSCM's Board of Directors determines that such approval is not forthcoming or
has become impracticable to obtain. The directors may modify these conditions.
Under Regulation Y of the Federal Reserve Board, with the exception described
below, a bank holding company (including FSCM) must give notice to the Federal
Reserve Bank in its Federal Reserve District before purchasing or redeeming its
equity securities if the gross consideration for the purchase or redemption,
when aggregated with the net consideration paid by the company for all such
purchases or redemptions during the preceding 12 months, is equal to 10% or more
of the company's consolidated net worth. (FSCM has not redeemed or purchased any
of its equity securities during the past 12 months, and 10% of its consolidated
net worth at December 31, 1996 was $2,667,000.) Within 15 calendar days of a
receipt of such a notice of redemption or purchase, the appropriate Federal
Reserve Bank must either approve the transaction proposed in the notice or refer
the notice to the Federal Reserve Board for decision, which must then act on the
notice within 30 calendar days after the notice is filed with the Federal
Reserve Bank. Regulation Y provides an exception to the requirement that such
approval of the Federal Reserve Bank or the Federal Reserve Board must be
obtained. Bank holding companies that are "well-capitalized" within the meaning
of Section 4(b)(6) of Regulation Y both before and immediately after the
redemption, that are well-managed, and that are not the subject of any
unresolved supervisory issues, need not obtain such approval.
As between FSCM and its shareholders, the foregoing conditions are for FSCM's
sole benefit and may be asserted by FSCM regardless of the circumstances giving
rise to any such condition (including any action or inaction of FSCM), and any
such condition may be waived by FSCM, in whole or in part, at any time and from
time to time in its sole discretion. FSCM's failure at any time to exercise any
of the foregoing rights shall not be deemed a waiver of any such right; the
waiver of any such right with respect to particular facts and circumstances
shall not be deemed a waiver with respect to any other facts or circumstances;
and each such right shall be deemed an ongoing right which may be asserted at
any time and from time to time. Any determination by FSCM concerning the events
described in this Section 5 shall be final and shall be binding.
FSCM reserves the right, at any time during the pendency of the Offer, to
terminate, extend, or amend the Offer in any respect. See Section 15.
6. PURPOSE OF THE OFFER; PLANS OR PROPOSALS OF FSCM; INTERESTS IN SECURITIES
OF FSCM.
A. PURPOSES OF THE OFFER. The purposes of the Offer are to increase the
liquidity of the Shares of Common Stock, as the Common Stock is not traded
on any exchange or quoted on any quotations system, and to obtain Shares of
Common Stock that may be acquired by TRIB's employees under its 401(k)
Plan.
<PAGE>
B. PLANS OR PROPOSALS OF FSCM
(i) REDEMPTION OF FSCM'S 9.25% CLASS A CUMULATIVE CONVERTIBLE PREFERRED
STOCK. The Company intends to redeem all shares of its 9.25% Class A
Cumulative Convertible Preferred Stock ("Class A Preferred"),
pursuant to the terms thereof, on or about June 30, 1997. The
approval of the Federal Reserve Board is required to effect such
redemption. The terms of the Class A Preferred provide that if FSCM
is unable to obtain necessary regulatory approvals for the
redemption, FSCM may assign its rights to redeem the number of shares
of Class A Preferred for which approvals were sought and not received
to an assignee or assignees selected by FSCM (collectively, the
"Assignee"). The redemption price required to be paid by FSCM is
$100.00 per share of Class A Preferred (which is equal to the stated
value thereof), and such redemption price to be paid by the Assignee
is $110.00 per share of Class A Preferred. There are 50,000 shares of
Class A Preferred authorized, issued and outstanding. The holders of
Class A Preferred are entitled to receive dividends at a per annum
rate equal to 9.25% of the stated value of the Class A Preferred,
payable on March 1, June 1, September 1 and December 1 of each year.
All dividends due to date on the Class A Preferred have been paid.
The Class A Preferred is redeemable at any time upon not less than 30
days' notice. No Shares of Common Stock or any class of Preferred
Stock may be redeemed by FSCM until all shares of Class A Preferred
have been redeemed.
If FSCM is voluntarily or involuntarily liquidated or dissolved or
its affairs wound up, the holders of the Class A Preferred would have
a preference of $100.00 per share, plus all dividends accrued and
unpaid thereon to the date of payment, or such lesser amount
remaining after the claims of all creditors have been satisfied,
before any payments are made with respect to any other class of
capital stock of FSCM, whether Common Stock or Preferred Stock. In
the event that, upon any such voluntary or involuntary liquidation,
the available assets of FSCM are insufficient to pay the full
liquidation preference on the outstanding shares of the Class A
Preferred, the holders of all such shares would share ratably in any
distribution of assets in proportion to the full amounts to which
they would otherwise be respectively entitled. After payment of the
full amount of the liquidation preference to which they are entitled,
the holders of shares of Class A Preferred would not be entitled to
any further participation in any distribution of assets by FSCM.
Holders of the Class A Preferred have no voting rights except as
hereinafter described or except as may be expressly required by law.
If at any time FSCM falls in arrears in the payment of dividends on
the Class A Preferred in an aggregate amount at least equal to the
full accrued dividends for six quarterly dividend periods, the
holders of the Class A Preferred, voting separately as a single
class, will have the right to elect two representatives to the Board
of Directors of FSCM. Such right shall continue until all dividends
in arrears have been paid or declared and set apart for payment. The
affirmative vote of the holders of at least 66-2/3% of the
outstanding shares of the Class A Preferred is required to amend the
Certificate of Incorporation of FSCM to create or authorize any class
of stock ranking prior to the Class A Preferred in respect of
dividends or distribution of assets on liquidation or otherwise alter
or abolish the liquidation preferences or any other preferential
rights of the Class A Preferred, reduce the redemption price or
otherwise alter any redemption rights of the Class A Preferred, alter
or abolish any rights of the Class A Preferred to receive dividends,
alter or abolish the conversion rights of the Class A Preferred, or
exclude or limit the voting rights as to these matters. If dividends
for any past quarterly dividend period shall not have been paid on
all outstanding shares of the Class A Preferred, FSCM may not,
without the consent of the holders of at least 66-2/3% of the then
outstanding shares of the Class A Preferred, purchase or redeem less
than all then outstanding shares of the Class A Preferred; provided,
however, that nothing shall prevent the purchase or acquisition of
the shares of the Class A Preferred pursuant to a purchase or
exchange offer made on the same terms to holders of all outstanding
shares of the Class A Preferred.
On and after December 1, 2002, each outstanding share of Class A
Preferred could be converted into Common Stock of FSCM. The number of
shares of Common Stock to be received for each share of Class A
Preferred upon conversion would be equal to the quotient resulting
from dividing $100.00 by 90% of the per share "Book Value" of FSCM's
Common Stock on a fully diluted basis as of the "Determination Date."
The conversion ratio is to be adjusted to account for any change in
the capitalization of FSCM occurring after the Determination Date but
prior to conversion, whether resulting from a recapitalization, stock
dividend, stock split or otherwise. Upon conversion, FSCM would have
the right to make a cash payment in lieu of issuing fractional shares
of Common Stock.
<PAGE>
Dividends accrued but unpaid on Class A Preferred at the date of
conversion are to be paid by FSCM to the converting holder at the
same time such dividends are paid to other holders of Class A
Preferred, even though such converted Class A Preferred is no longer
outstanding, with the same dividend priority rights as if such shares
of converted Class A Preferred were still outstanding.
For purposes of conversion rights, the "Book Value" of FSCM is to be
determined by the regularly employed accountants of FSCM on a fully
diluted consolidated basis pursuant to the application of generally
accepted accounting principles, consistently applied. Such
determination would be final and binding on all parties. The
"Determination Date" would be the last day of the month immediately
preceding the "Conversion Date," which is the effective date of the
conversion as specified in the holder's written notice to FSCM, such
effective date to be not less than 15 nor more than 60 days from the
date of such notice.
The Class A Preferred is registered under the Exchange Act, and the
redemption of the Class A Preferred will cause it to be eligible for
deregistration under the Exchange Act. The Class A Preferred is not
listed on any exchange or quoted on any quotations system. FSCM will
continue to be required to file reports (including Annual Reports on
Form 10-K and Quarterly Reports on Form 10-Q) pursuant to Section
15(d) of the Exchange Act.
The redemption of the Class A Preferred will be funded from the
$5,000,000 proceeds to be received by FSCM upon the issuance of 5,000
shares of a new class of 9.25% Class A Cumulative Convertible
Preferred Stock (the "New Class A Preferred") to be authorized by the
Board of Directors. It is anticipated that the New Class A Preferred
will have terms and conditions that are similar to those of the Class
A Preferred, except the stated value of the New Class A Preferred
will be $1,000 per share, each such share will be convertible into
8-1/3 shares of Common Stock, the New Class A Preferred can be
redeemed by FSCM only if the holders thereof agree, the holders of
the New Class A Preferred would have the right to elect two Directors
if FSCM falls in arrears in the payment of dividends for four
quarterly dividend periods (rather than six quarterly dividend
periods as provided with respect to the Class A Preferred), and the
New Class A Preferred will be immediately convertible into shares of
Common Stock. All shares of the New Class A Preferred will be issued
to Douglas M. Kratz (the Chairman, Chief Executive Officer, Chief
Financial Officer and a Director of FSCM and Vice Chairman of the
Board and a Director of TRIB) and Perry B. Hansen (the President and
a Director of FSCM and the Chairman, Chief Executive Officer and a
Director of TRIB).
FSCM retained Austin Associates, Inc. to provide an opinion
concerning the fairness to FSCM and its shareholders, from a
financial point of view, of the Offer and the issuance of the New
Class A Preferred. Austin Associates, Inc. is a financial institution
consulting firm which regularly engages in the valuation of banking
businesses and their securities in connection with mergers and
acquisitions. FSCM selected Austin Associates, Inc. on the basis of
its reputation and experience in evaluating the management,
operations and financial condition of bank holding companies.
Austin Associates, Inc. has rendered a written opinion dated May 6,
1997, that (a) the Offer, pursuant to which FSCM shareholders may
tender their Shares of Common Stock for $90.00 per Share and (b) the
proposed issuance by FSCM of $5,000,000 of the New Class A Preferred
to fund the redemption of the Class A Preferred under the terms and
conditions described in this Offer to Purchase, are fair, from a
financial point of view, to FSCM and its shareholders. In rendering
its opinion, Austin Associates, Inc. relied, without independent
verification, on the accuracy and completeness of financial and other
information provided to it by FSCM and other information considered
by it to be relevant as obtained from public sources. FSCM did not
impose any limitation on the scope of the investigations by Austin
Associates, Inc. Assumptions made and procedures followed by Austin
Associates, Inc. in rendering its opinion are discussed in its
opinion, a copy of which is attached as Exhibit A to this Offer to
Purchase.
(ii) INCREASE IN DIVIDENDS ON COMMON STOCK. FSCM's Board of Directors is
contemplating increasing the dividends paid on its Common Stock from
$2.00 to $2.50 per share per annum. If taken, such action would be
effective in September 1997. However, the declaration and payment of
dividends are solely in the discretion of FSCM's Board of Directors.
<PAGE>
(iii) ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. The purchase price
in the Offer for at least 11,111 Shares of Common Stock (or
approximately $1,000,000) will be paid from cash or cash equivalents
on hand and/or from funds drawn on FSCM's line of credit (the "Line
of Credit") with M&I Marshall & Ilsley Bank (the "Bank"). The
purchase price of any additional Shares also may be funded from the
$90.00 per share proceeds from the issuance by FSCM of an equal
number of shares of Common Stock more than 10 business days after the
Expiration Date to existing shareholders of FSCM (or other entities
or individuals), which may include Messrs. Kratz and Hansen. For
example, if a total of 15,000 shares of Common Stock were tendered in
the Offer, the purchase price for 11,111 Shares would be paid from
FSCM's cash, cash equivalents, and/or funds borrowed from the Bank
pursuant to the Line of Credit, and the remaining approximately
$350,000 purchase price may be paid with such cash or cash
equivalents, funds drawn on the Line of Credit and/or proceeds
received from the issuance of 3,890 shares of Common Stock.
As of March 31, 1997, the Line of Credit consisted of a variable rate
$10,000,000 unrestricted Line of Credit available from the Bank, none
of which was in use. The Line of Credit is collateralized by a pledge
of all stock of TRIB owned by FSCM and bears interest at a rate
charged by banks to their most preferred customers. The effective
interest rate under the Line of Credit was 8.5% at March 31, 1997.
Upon the failure to make a timely payment under the Line of Credit or
other default thereunder, the Bank could foreclose upon the pledge of
the stock of TRIB. As of March 31, 1997, and according to management
of FSCM and TRIB, there were no defaults existing or contemplated
under the Line of Credit, and no event had occurred or was
contemplated that with the passage of time or otherwise would
constitute such a default. Any borrowings under the Line of Credit
will be paid according to the terms thereof from FSCM's cash or cash
equivalents on hand or cash flow. The terms of the Line of Credit
require the payment of interest on a quarterly basis, with principal
due and payable on July 31, 1997. The Line of Credit historically has
been renewed annually.
(iv) 1996 COMBINED INCENTIVE AND NONSTATUTORY STOCK OPTION PLAN. On July
25, 1996, FSCM's Board of Directors adopted the 1996 Combined
Incentive and Nonstatutory Stock Option Plan ("Option Plan"), which
was approved by FSCM's shareholders at the Annual Meeting held on
August 22, 1996. The following discussion of the principal features
and effects of the Option Plan is qualified in its entirety by
reference to the text of the Option Plan.
General
Options that qualify as incentive stock options ("Incentive Stock
Options") as defined in Section 422 of the Internal Revenue Code of
1986, as amended ("Code"), and options that are not Incentive Stock
Options ("Nonstatutory Stock Options") may be granted under the
Option Plan. Certain terms of Incentive Stock Options are
prescribed by the Code. Incentive Stock Options granted under the
Option Plan may be granted only to individuals who are employees of
either FSCM or any "parent corporation" or "subsidiary corporation"
of FSCM (collectively, "Affiliates"), as such terms are defined in
Section 424(e) and 424(f) of the Code. Nonstatutory Options granted
under the Option Plan may be granted to employees or nonemployees
of FSCM, including, but not limited to, persons or entities who are
independent contractors but are not employees of FSCM. (y) (z)
Administration
The Option Plan is administered by FSCM's Board of Directors or a
committee of the Board of Directors appointed by the Board
("Committee"). The Option Plan gives broad powers to the Board or
the Committee, as the case may be, to administer and interpret the
Option Plan.
Shares Subject to Option Plan
This Option Plan provides for the grant of options to acquire up to
20,000 shares of FSCM's Common Stock. As of March 31, 1997, no
options had been granted under the Option Plan, although FSCM's
Board is contemplating the issuance of options thereunder in
calendar 1997. The number of shares of Common Stock available under
the Option Plan and purchasable pursuant to options issued under
the Option Plan will be adjusted to prevent dilution in the event
of a stock split, combination of shares, stock dividend or other
recapitalization.
<PAGE>
Terms of Options
Term and Exercise. Upon the grant of an option under the Option
Plan, and subject to the terms of the Option Plan, the FSCM Board
of Directors or the Committee determines its terms, including the
number of shares of FSCM's Common Stock subject to the option, the
exercise price at which the shares may be purchased upon exercise
of an option, and the conditions and limitations applicable to the
exercise of the option. However, no Incentive Stock Option may be
exercisable after the expiration of ten years from the date of
grant, and no Incentive Stock Option granted to a person who, at
the time of grant, owns more than 10% of the total combined voting
power of all classes of stock of FSCM or its Affiliates may be
exercisable after the expiration of five years from the date of
grant.
Upon the exercise of any option, payment may be made in cash or its
equivalent, or, if and to the extent permitted by the Board or the
Committee, by exchanging shares of Common Stock owned by the
optionee, or by a combination of the foregoing. The Board or the
Committee also may include as a term of an option granted under the
Option Plan, at the date of grant, a provision allowing the
optionee to apply the difference between the exercise price of the
option and the then-current fair market value of a share of Common
Stock purchasable upon exercise of the option to the exercise
price, thus reducing the number of shares actually purchased upon
exercise of the option.
Transferability of Options; Termination of Employment. All options
granted under the Option Plan are not transferable in any manner
except by will or the laws of descent and distribution, and during
the lifetime of each optionee, the option is exercisable only by
that optionee. As a condition to the exercise of an option, the
optionee must represent and agree that any and all shares of Common
Stock purchased upon exercise will be acquired for investment and
not for resale. Upon an optionee's death, such optionee's options
will pass by will or the laws of descent and distribution and may
be exercised only by such optionee's personal representative,
distributees or legatees but only to the extent determined by the
Board of Directors or the Committee at the time of grant of the
option as shall be indicated in the option agreement evidencing the
grant of such option.
Subject to the discretion of the Board of Directors or the
Committee to determine otherwise at the time of grant of an
Incentive Stock Option, upon termination of an optionee's
employment with FSCM or an Affiliate, whether such termination is
due to death, voluntary termination, involuntary termination or
otherwise, (i) all Incentive Stock Options held by the optionee may
thereafter be exercised only to the extent the optionee was
entitled to exercise such Incentive Stock Options as of the date of
such termination of employment; and (ii) all Incentive Stock
Options held by the optionee shall terminate three months after the
effective date of any such termination of employment.
Subject to the discretion of the Board of Directors or the
Committee to provide for otherwise at the time of grant of a
Nonstatutory Stock Option, upon termination (as determined solely
by the Board of Directors or the Committee) of the relationship
between an optionee and FSCM or its Affiliates, whether such
relationship consisted of such optionee serving as an employee of,
a member of the Board of Directors of, or an independent contractor
providing services to, FSCM or its Affiliates, (i) all Nonstatutory
Stock Options held by the optionee may thereafter be exercised only
to the extent the optionee was entitled to exercise such
Nonstatutory Stock Options as of the date of such relationship
termination; and (ii) all Nonstatutory Stock Options held by the
optionee shall terminate three months after the effective date of
any such relationship termination.
Limit on Exercise of Incentive Stock Options
The aggregate fair market value, determined as of the time an
Incentive Stock Option is granted, of the shares of Common Stock
with respect to which Incentive Stock Options are exercisable for
the first time by an optionee during any calendar year under the
Option Plan, and any other stock option plan of the Company or an
Affiliate, may not exceed $100,000.
<PAGE>
Exercise Price
The exercise price of an option granted under the Option Plan will
not be less than the greater of (i) $100.00 per share or (ii) the
fair market value of the Common Stock at the time the option is
granted (as determined by the Board of Directors or the Committee).
In addition, Incentive Stock Options granted on the same date must
have the same exercise price. With respect to Incentive Stock
Options granted to an employee owning stock representing more than
10% of the total combined voting power of all classes of stock of
the Company or its Affiliates, then the terms of the Incentive
Stock Option must specify that the option exercise price will not
be less than the greater of (x) $100.00 per share or (y) 110% of
the fair market value of the Common Stock at the time the option is
granted. The Board or the Committee may grant Nonstatutory Stock
Options with an exercise price that is less than the fair market
value of the Common Stock at the time the Option is granted so long
as the exercise price is equal to or greater than $100.00 per
share.
Termination and Amendment
The Option Plan will continue in effect for the grant of options
until July 25, 2006, unless sooner terminated as described in the
Option Plan. However, the expiration of the term of the Option Plan
shall not affect options previously granted under the Option Plan
which are then outstanding. The Board of Directors may at any time
terminate the Option Plan, although any such termination will not
affect options already granted, and such options will remain in
full force and effect as if the Option Plan had not been
terminated. Subject to the exception described in the Option Plan,
the Board of Directors or the Committee may amend the Option Plan
from time to time in such respects as it may deem advisable,
including, without limitation, amending the Option Plan so as to
affect options already granted, other than to increase the exercise
price of an option and/or to decrease or terminate the options
already granted.
Upon the occurrence of an "Acceleration Event" (as that term is
defined in the Option Plan), the Board of Directors or the
Committee may elect to terminate all or part of the options
outstanding under the Option Plan as of the effective date of the
Acceleration Event if such optionee is given at least 30 calendar
days' written notice of such termination and upon receipt by an
optionee of the Acceleration Event Notice, and assuming occurrence
of the Acceleration Event, all options held by the optionee will
have their vesting accelerated and be exercisable in full. The term
"Acceleration Event" means any liquidation, dissolution or sale of
all or substantially all of the assets of FSCM; any merger of FSCM
into another corporation where FSCM is not the survivor; any
transaction involving the transfer of FSCM's securities
representing greater than 50% of the voting power of all issued and
outstanding securities of FSCM; or any other event which, in the
opinion of the Board of Directors or the Committee, is likely to
lead to a change in control of FSCM, whether or not such change in
control actually occurs.
(v) ADDITIONAL FSCM DIRECTORS. FSCM's Bylaws provide that FSCM may have
25 Directors; it currently has four Directors. Under Delaware law,
FSCM's Board has the power to appoint members to the Board to fill
vacancies on the Board. The Board may appoint additional members if
individuals with suitable qualifications are located and are willing
to serve on the Board.
<PAGE>
(vi) GENERAL. Other than as described in the previous paragraphs, FSCM
does not have any present plans or proposals that relate to or would
result in (a) the acquisition by any person of additional securities
of FSCM, or the disposition of securities of FSCM; (b) an
extraordinary corporate transaction, such as a merger, reorganization
or liquidation involving FSCM; (c) a sale or transfer of a material
amount of assets of FSCM; (d) any change in the present Board of
Directors or management of FSCM including, but not limited to, any
plans or proposals to change the number or the term of Board of
Directors, to fill any existing vacancy on the Board or to change any
material term of the employment contract of any executive officer;
(e) any material change in the present dividend rate or policy, or
indebtedness or capitalization of FSCM; (f) any other material change
in FSCM's corporate structure or business; (g) changes in FSCM's
charter, bylaws or instruments corresponding thereto or other actions
which may impede the acquisition of control of FSCM by any person;
(h) causing a class of equity security of FSCM to be delisted from a
national securities exchange or to cease to be authorized to be
quoted in an inter-dealer quotation system of a registered national
securities association; (i) a class of equity security of FSCM
becoming eligible for termination of registration pursuant to Section
12(g)(4) of the Exchange Act; or (j) the suspension of FSCM's
obligation to file reports pursuant to Section 15(d) of the Exchange
Act.
C. INTERESTS IN SECURITIES OF FSCM. On March 27, 1997, TRIB's 401(k) Plan
acquired a total of 1,000 shares of FSCM's Common Stock held in treasury for a
purchase price of $85.00 per share and distributed such shares to the accounts
of the participants in the 401(k) Plan, including certain executive officers and
directors of FSCM and TRIB. The purchase price was equal to the appraised market
value of the Common Stock as of December 31, 1996 determined by Austin
Associates, Inc., an independent third party appraiser based in Toledo, Ohio.
The participants in the 401(k) Plan have the power to vote and to dispose of the
shares of Common Stock held for their benefit in the 401(k) Plan. In the March
27, 1997 distribution of shares of Common Stock, Perry B. Hansen received 212
shares; John T. Kustes (the Treasurer and a Director of FSCM and the Senior Vice
President, Senior Operations Officer, Assistant Secretary and a Director of
TRIB) received 99 shares; and Jean M. Hanson (the Controller and Chief
Accounting Officer of FSCM and the Controller and a Vice President of TRIB)
received 101 shares.
To FSCM's knowledge, there were no other transactions in FSCM's Shares of Common
Stock that were effected during the past 40 business days by FSCM, any executive
officer or director of FSCM, or by any associate or subsidiary of the foregoing,
including any executive officer or director of any such subsidiary. FSCM has
been informed that no executive officer, director or affiliate of FSCM or TRIB
(who together own a total of 74,664 issued and outstanding shares of Common
Stock) intends to tender Shares in the Offer.
7. PRICE RANGE OF SHARES; DIVIDENDS.
FSCM's Common Stock is not traded on any securities exchange or quoted on any
quotations system; therefore, no sales and purchase prices for the Common Stock
are readily available to FSCM. FSCM retained Austin Associates, Inc. to provide
an opinion concerning the fairness to FSCM and its shareholders, from a
financial point of view, of the Offer (including the $90.00 per Share tender
price) and the issuance of the New Class A Preferred. Austin Associates, Inc.
has rendered a written opinion, dated May 6, 1997, (i) that the Offer pursuant
to which shareholders may tender their Shares of Common Stock for $90.00 per
Share and (ii) the issuance by FSCM of $5,000,000 of the New Class A Preferred
to fund the redemption of the Class A Preferred, under the terms and conditions
described in this Offer to Purchase, are fair, from a financial point of view,
to FSCM and its shareholders. See Section 6.
<PAGE>
The following table sets forth the dividends paid per Share during the periods
indicated.
Period Dividends
Fiscal 1995 (ending March 31, 1995)
First Quarter
$ 0.37
Second Quarter ............................................. 0.37
Third Quarter .............................................. 0.37
Fourth Quarter ............................................. 0.37
Fiscal 1996 (ending March 31, 1996):
First Quarter .............................................. $ 0.37
Second Quarter ............................................. 0.37
Third Quarter .............................................. 0.50
Fourth Quarter ............................................. 0.50
Fiscal 1997 (ending March 31, 1997):
First Quarter .............................................. $ 0.50
Second Quarter ............................................. 0.50
Third Quarter .............................................. 0.50
Fourth Quarter ............................................. 0.50
8. SELECTED FINANCIAL INFORMATION.
Set forth below is a summary of selected financial information as of and for the
nine months ended December 31, 1996 and 1995. Such information has been
excerpted from FSCM's unaudited financial statements for such periods. Also set
forth below is a summary of selected financial information for FSCM as of and
for the fiscal years ended March 31, 1996 and 1995. Such information has been
excerpted from FSCM's audited financial statements for such periods. More
comprehensive financial information is set forth in the unaudited and audited
financial statements included in FSCM's Issuer Tender Offer Statement on
Schedule 13E-4 filed with the Securities and Exchange Commission ("SEC") with
respect to the Offer. The following summary financial information also includes
certain pro forma financial information as of and for the nine months ended
December 31, 1996 and as of and for the fiscal year ended March 31, 1996. Such
pro forma information shows the effects of the acquisition by FSCM of 83,000
Shares of Common Stock, the redemption of the Class A Preferred, and the
issuance of the New Class A Preferred. FSCM's Schedule 13E-4 may be inspected
without charge at a Web site maintained by the SEC at http://www.sec.gov. A copy
of the Schedule 13E-4 may also be obtained without charge by contacting Ms.
Patricia A. Zimmer at FSCM at the address and telephone number set forth on page
- -iihereof. The summary of selected financial information set forth below is
qualified in its entirety by reference to Schedule 13E-4 and the financial
information, the notes thereto and related matters contained therein.
<PAGE>
Summary of Financial and Pro Forma Information
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
Nine Months Ended Fiscal Years Ended
-------------------------------------- -----------------------------------
Pro Forma 12/31/96 12/31/95 Pro Forma 03/31/96 12/31/95
--------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Income Statement:
Interest income ................................ $ 25,564 $ 25,564 $ 22,239 $ 30,271 $ 30,271 $ 24,571
Interest expense ............................... 13,076(1) 13,013 11,634 15,917(1) 15,833 10,707
-------- -------- -------- -------- -------- --------
Net interest expense .................. 12,488 12,551 10,605 14,354 14,438 13,864
Provision for possible loan and lease losses .. 2,000 2,000 1,980 1,905 1,905 2,510
-------- -------- -------- -------- -------- --------
Net interest income after provision
for possible loan and lease losses... 10,488 10,551 9,225 12,449 12,533 11,354
Other income ................................... 2,732 2,732 2,434 3,315 3,315 3,149
Other expense .................................. 8,636(2) 8,626 7,722 10,537(2) 10,527 9,919
Income taxes ................................... 1,700(3) 1,725 1,294 1,736(3) 1,768 1,516
-------- -------- -------- -------- -------- --------
Net income ............................ $ 2,884 $ 2,932 $ 2,643 $ 3,491 $ 3,553 $ 3,068
======== ======== ======== ======== ======== ========
Earnings per common share:
Primary ............................... $ 14.73 $ 14.07 $ 12.53 $ 17.64 $ 16.87 $ 14.21
Fully diluted ......................... 10.03 9.06 8.03 12.24 10.80 9.10
Weighted average common shares
outstanding ................................. 165,500(4) 176,611 175,111 164,012(4) 175,123 174,079
Weighted average common and contingently
issuable common shares outstanding .......... 292,277(5) 328,838 335,421 290,789(5) 335,327 343,796
Earnings to Fixed Charge Ratios:
Consolidated:
Excluding interest on deposits ........ 2.40 2.45 2.31 2.25 2.30 2.72
Including interest on deposits ........ 1.35 1.35 1.34 1.33 1.33 1.43
Parent company only ............................ 1.18 1.27 1.21 1.17 1.26 1.04
Balance Sheet:
Interest-earning assets ........................ $387,863 $387,863 $358,686 $358,686 $313,164
Noninterest-earning assets ..................... 38,318 38,318 28,281 28,281 24,290
-------- -------- -------- -------- --------
Total assets 426,181 426,181 386,967 386,967 337,454
-------- -------- -------- -------- --------
Deposits ....................................... 341,470 341,470 301,818 301,818 271,611
Other interest-bearing liabilities ............. 53,002(1) 51,982 57,116(1) 56,096 39,987
Other noninterest-bearing liabilities .......... 6,057 6,057 4,766 4,766 3,895
-------- -------- -------- -------- --------
Total liabilities ..................... 400,529 399,509 363,700 362,680 315,493
-------- -------- -------- -------- --------
Common Stock ................................... 170 170 170 170 170
Preferred Stock ................................ 6,520 6,520 6,520 6,520 6,520
Capital surplus ................................ 2,574 2,574 2,574 2,574 2,521
Net unrealized loss on available-for-sale
securities, net of taxes .................... (257) (257) (422) (422) --
Retained earnings .............................. 22,914 22,914 20,694 20,694 18,047
Treasury Stock ................................. (6,269) (5,249) (6,269) (5,249) (5,297)
-------- -------- -------- -------- --------
Total stockholders' equity 25,652 26,672 23,267 24,287 21,961
-------- -------- -------- -------- --------
Book Value Per Common Share:
Book value ..................................... $ 115.60 $ 114.10 $ 101.19 $ 100.60 $ 88.18
Book value assuming conversion of man-
datory convertible debentures and
convertible Preferred Stock ................. 92.04 85.87 83.88 76.80 68.35
<FN>
1 FSCM draws $1,020 on its 8.25% line of credit - $1,000 for 11,111 shares of
Common Stock at $90 per share and $20 in costs to acquire the Treasury
Stock.
2 Expense of $10 incurred in the redemption of the Class A Preferred Stock.
3 A 34% effective income tax rate.
4 Less 11,111 shares of Common Stock acquired at $90 per share.
5 Reduction in the weighted average number of common shares contingently
issuable from the conversion of the Class A Preferred Stock; for the pro
forma and nine month period ended December 31, 1996 - 41,666 and 67,116
shares, respectively; for the pro forma and actual fiscal year ended March
31, 1996 - 41,666 and 75,099 shares, respectively.
</FN>
</TABLE>
<PAGE>
9. INTERESTS OF CERTAIN RELATED PERSONS
Pursuant to two Purchase Option Agreements dated July 6, 1992, Ira J. Weindruch
and Donna L. Weindruch (collectively, the "Weindruchs") granted to each of
Douglas M. Kratz and Perry B. Hansen options (the "Options") to acquire $250,000
in principal amount of mandatory convertible debentures (the "MCDs") owned by
the Weindruchs. Each $250,000 MCD subject to the Options allows the holder
thereof to acquire 10,000 shares of Common Stock. The Options expire March 31,
2001; however, if the date on which any of the MCDs are mandatorily converted
into Common Stock is extended, the terms of the Options also must be extended
for the same period. The option agreements provide that the closing on any sale
of the MCDs pursuant to the exercise of the Options is contingent upon the
receipt of all necessary regulatory approvals for such sale. Including the
shares of Common Stock subject to the MCDs and the Options, Mr. Kratz is the
beneficial owner of 67,189 shares of Common Stock, and Mr. Hansen is the
beneficial owner of 67,062 shares of Common Stock, representing, in each case,
32.1% of all outstanding shares of Common Stock and, for each such individual,
the shares of Common Stock that he could obtain upon the conversion of MCDs and
FSCM's preferred stock into shares of Common Stock.
Mr. Kratz has pledged to the Bank 31,590 shares of Common Stock, 333 shares of
Class B Preferred Stock convertible into 3,700 shares of Common Stock, 800
shares of Class C Preferred Stock convertible into 8,000 shares of Common Stock,
and $250,000 of MCDs convertible into 10,000 shares of Common Stock. Mr. Hansen
has pledged to the Bank 31,083 shares of Common Stock, 333 shares of Class B
Preferred Stock convertible into 3,700 shares of Common Stock, 800 shares of
Class C Preferred Stock convertible into 8,000 shares of Common Stock, and
$250,000 of MCDs convertible into 10,000 shares of Common Stock. These pledges
collateralize loans made by the Bank to such individuals. Upon a default under
the agreements and other documents evidencing each of such loans, the Bank would
be entitled to foreclose the pledge and obtain ownership of all or a portion of
the securities pledged, depending upon the amount due under the loan and the
value of the pledged securities at the time of foreclosure and other relevant
factors. Messrs. Kratz and Hansen have stated that payment of the principal and
interest due under these loans is current and that no other events of default
have occurred or are existing pursuant to the terms of the agreements evidencing
the loans. Marshall & Ilsley Corporation, which owns the Bank, also owns 20,211
shares of Common Stock of FSCM, representing 6.2% of all issued and outstanding
shares of Common Stock assuming the conversion into Common Stock of all MCDs and
Preferred Stock outstanding at March 31, 1997.
Richey Corporation ("Richey") provides to FSCM and TRIB various services,
including services related to strategic planning, regulatory matters,
accounting, auditing, income taxes, and loan administration, pursuant to a
Services Agreement by and between Richey and FSCM dated March 23, 1995. Douglas
M. Kratz is the Secretary and Treasurer of Richey. During the fiscal years ended
March 31, 1996 and 1995, Richey received under these Agreements, respectively,
$179,889 plus a bonus of $63,750; and $170,947 plus a bonus of $20,000.
Richard J. Carlson, the President and Chief Operating Officer and a Director of
TRIB, has entered into a Continuity/Severance Agreement with TRIB dated December
22, 1995 ("Carlson Agreement"). The Carlson Agreement provides for a severance
payment equal to 24 months of Mr. Carlson's salary if a "Change in Control" (as
defined in the Carlson Agreement) occurs on or before December 31, 1998; a
severance payment equal to at least 12 months but less than 24 months of salary
if a Change in Control occurs during the period from January 1, 1999 through
December 31, 2000; and a severance payment equal to 12 months of salary if a
Change in Control occurs after December 31, 2000. Such severance payments are to
be made only if Mr. Carlson's employment with TRIB is terminated for a reason
other than "Good Cause" (as defined in the Carlson Agreement). The Carlson
Agreement contains a covenant not to compete that becomes effective should Mr.
Carlson receive a severance payment under the Carlson Agreement.
TRIB has had, and expects to have in the future, banking transactions in the
ordinary course of business with executive officers and Directors of FSCM and
TRIB or with an affiliate of such person. Such transactions have been and will
be made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
unrelated persons and do not and will not involve more than normal risk of
collectibility.
All of the foregoing transactions and all future and ongoing transactions
between FSCM and TRIB and their affiliates, including Richey, have been and will
be on terms no more favorable than could be obtained from unaffiliated parties
and will be approved by a majority of the Directors of FSCM not interested in
the transaction.
FSCM has been informed that no executive officer, director or affiliate of FSCM
or TRIB (who together own a total of 74,664 issued and outstanding shares of
Common Stock) intends to tender Shares in the Offer.
<PAGE>
10. CERTAIN EFFECTS OF THE OFFER.
The purchase of Shares pursuant to the Offer will have the effect of increasing
the proportionate interest in FSCM of non-tendering shareholders. All
shareholders remaining after the Offer will be subject to any increased risks
associated with the reduction in FSCM's aggregate assets resulting from payment
for the tendered Shares. All Shares purchased by FSCM pursuant to the Offer will
remain authorized but unissued and will be held as treasury shares. See the Pro
Forma Financial Information included in Section 8.
11. CERTAIN INFORMATION ABOUT FSCM.
FSCM is a one-bank holding company incorporated under Delaware law and having
its principal executive offices at 224-18th Street, Suite 202, Rock Island,
Illinois 61201-8719, with its telephone number being (309) 794-1120. FSCM owns
all of the outstanding shares of TRIB, which has its principal place of business
in Rock Island, Illinois. In 1974, FSCM acquired all of the shares of TRIB, then
an Illinois state banking corporation. On November 1, 1995, TRIB became a
national bank and relocated its official office from Rock Island, Illinois to
Bettendorf, Iowa. TRIB's trade area includes portions of Rock Island County and
Henry County in Illinois and Scott County in Iowa (which together had a 1995
population of approximately 288,100) and includes the Greater Quad Cities
metropolitan Area, which encompasses the municipalities of Davenport and
Bettendorf, Iowa; and Rock Island, Moline, East Moline, Milan, Silvis, Colona
and Green Rock, Illinois. TRIB is a member of the Federal Reserve System, and
its deposits are insured by the Federal Deposit Insurance Corporation. See
Sections 7 and 8.
12. SOURCE AND AMOUNT OF FUNDS.
The total cost to FSCM of purchasing 83,000 Shares of its Common Stock at $90.00
per Share pursuant to the Offer would be $7,470,000. FSCM has been informed that
no executive officer, director or affiliate of FSCM or TRIB (who together own a
total of 74,664 issued and outstanding shares of Common Stock) intends to tender
Shares in the Offer.
To pay the aggregate purchase price of Shares accepted for payment pursuant to
the Offer, FSCM anticipates that at least $1,000,000 of the purchase price for
the Shares will be derived from cash or cash equivalents on hand, and/or funds
from its Line of Credit. Any remaining purchase price may also be funded from
the $90.00 per share proceeds paid for an equal number of shares of Common Stock
to be issued by FSCM more than 10 business days after the Expiration Date . See
Section 6.
13. ADDITIONAL INFORMATION.
The Company is subject to certain of the informational filing requirements of
the Exchange Act and in accordance therewith is obligated to file reports with
the Securities and Exchange Commission (the "Commission") relating to its
business, financial statements and other matters. FSCM also has filed with the
Commission an Issuer Tender Offer Statement on Schedule 13E-4, which includes
certain additional information relating to the Offer. The reports and the
Schedule 13E-4 may be inspected and copied at prescribed rates at the
Commission's public reference facilities at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and Seven World Trade Center, New York, New York
10048. Copies of such material may also be obtained by mail at prescribed rates
from the Public Reference Branch of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Certain of such reports and the Schedule 13E-4 also may
be inspected without charge at a Web site maintained by the SEC at
http://www.sec.gov., and copies may be obtained without charge by contacting Ms.
Patricia A. Zimmer at FSCM at the address and telephone number set forth on page
- -ii- hereof.
14. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES.
The following discussion is a summary of certain U.S. federal income tax
consequences for shareholders who sell Shares pursuant to the Offer. This
summary is based on the Internal Revenue Code of 1986, as amended (the "Code"),
and regulations, rulings, and decisions in effect on the date of this Offer, all
of which are subject to change. All section references herein are to the Code,
unless stated otherwise. This summary does not discuss any aspect of state,
local or foreign taxation and does not discuss all the tax considerations that
may be relevant to particular shareholders in light of their personal investment
circumstances, or to certain types of shareholders that may be subject to
special tax rules, such as financial institutions, tax exempt organizations,
insurance companies, dealers in stock or securities, foreign corporations, and
individuals who are not citizens or residents of the United States.
<PAGE>
Purchases of Shares by FSCM pursuant to the Offer generally will be taxable
transactions for federal income tax purposes, and they also may be taxable
transactions under applicable state, local and foreign tax laws. FSCM cannot
predict the extent to which the Offer may be oversubscribed. If the Offer is
oversubscribed, proration of tenders pursuant to the Offer will cause FSCM to
accept fewer Shares than are tendered. Therefore, shareholders cannot be given
any assurances that a sufficient number of their Shares will be purchased
pursuant to the Offer to ensure that such purchases will be treated as sales or
exchanges for federal income tax purposes rather than as dividends, pursuant to
the rules discussed below.
SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS IN DETERMINING THE TAX
CONSIDERATIONS THAT MAY BE RELEVANT IN CONNECTION WITH THE PROPOSED OFFER,
INCLUDING THE APPLICATION TO THEIR PARTICULAR SITUATIONS OF THE TAX
CONSIDERATIONS DISCUSSED BELOW, AS WELL AS THE APPLICATION OF STATE, LOCAL,
FOREIGN, OR OTHER TAX LAWS.
The receipt of cash for Shares tendered pursuant to the Offer generally will be
accorded sale or exchange treatment for federal income tax purposes, and gain or
loss (rather than dividend income) will be reorganized by a tendering
shareholder, if one of the three redemption tests described below is satisfied
with respect to that shareholder. Any gain or loss so recognized will be equal
to the difference between the amount of cash received in the exchange and the
holder's tax basis in the Shares redeemed. If the Shares constitute a capital
asset in the hands of the selling shareholder and have a holding period of more
than one year, this gain or loss generally will be long-term capital gain or
loss.
If none of the redemption tests are satisfied with regard to a particular
shareholder, gross proceeds received from FSCM for Shares redeemed from that
shareholder pursuant to the Offer will be treated as a fully taxable dividend to
the extent of FSCM's current or accumulated earnings and profits. If the
proceeds were taxed as dividends, the tax basis of Shares purchased by FSCM
generally would be added to the tax basis of the Shares that the shareholder
would continue to own. In the case of a corporate shareholder, any amount
treated as a dividend (i) generally would be eligible for a 70% dividends
received deduction under Section 243 of the Code, subject to the limitations
described in Sections 246 and 246A of the Code and (ii) likely would constitute
an "extraordinary dividend" under Section 1059 of the Code.
A tendering shareholder must satisfy one of the following three redemption tests
to be entitled to sale or exchange treatment pursuant to the Offer. The tests
are: (i) the shareholder's interest in FSCM is completely terminated as a result
of the transfer of Shares, (ii) the shareholder's percentage interest in FSCM
(as measured before FSCM's purchase of any shares pursuant to the Offer) is
reduced by more than 20% (as measured after FSCM's purchase of all Shares
redeemed pursuant to the Offer) as a result of the transfer of Shares, or (iii)
the shareholder demonstrates that the payment received in respect of the
transfer of Shares to FSCM is "not essentially equivalent to a dividend."
The determination of whether the redemption of an interest of a particular
shareholder in FSCM is "not essentially equivalent to a dividend" would be based
on whether that particular shareholder's interest in FSCM was "meaningfully
reduced" as a result of the redemption. Although there are no safe harbor
guidelines for the application of this rule, in a published ruling the Internal
Revenue Service has indicated that with regard to publicly held corporations,
any reduction in the percentage share ownership of a shareholder whose relative
share ownership in the corporation is minimal (ownership of less than 1% of the
outstanding shares should satisfy this requirement), and who exercises no
control over corporate affairs, probably would constitute a meaningful reduction
of that shareholder's interests in the corporation. However, the application of
this rule is based on the facts and circumstances of each shareholder's personal
investment situation, and therefore shareholders are urged to consult their own
tax advisors with regard to the application of this rule to any reduction of
their interests as shareholders of FSCM.
In applying the three redemption tests, a shareholder is deemed, in most cases,
to own Shares actually owned by certain related individuals and entities. For
example, an individual shareholder is considered to own Shares owned directly or
indirectly by or for his or her spouse and his or her children, grandchildren,
and parents. In addition, a shareholder is considered to own a proportionate
number of Shares owned by trusts or estates in which the shareholder has a
beneficial interest, by partnerships in which the shareholder is a partner, and
by corporations in which the shareholder owns, directly or indirectly, 50% or
more in value of the stock. Similarly, Shares directly or indirectly owned by
beneficiaries of estates or trusts, by partners of partnerships and, under
certain circumstances, by shareholders of corporations, are considered owned by
these entities. A shareholder also is deemed to own Shares which the shareholder
has the right to acquire by exercise of an option. These constructive ownership
rules generally will not apply, however, in the case of a complete redemption of
a shareholder's actual ownership interest in FSCM if the shareholder has no
interest in FSCM, including an interest as an officer, director or employee,
immediately after the redemption or at anytime after 10 years of the date of the
redemption.
<PAGE>
Special rules resulting in different tax consequences from those described
herein may apply in the case of Shares acquired as a form of compensation by an
employee of FSCM or an affiliate of FSCM.
See Section 2 with respect to the application of federal income tax withholding
and backup withholding.
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION PURPOSES
ONLY. SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE
TAX CONSIDERATIONS THAT MAY BE RELEVANT IN CONNECTION WITH THE PROPOSED OFFER,
INCLUDING THE APPLICATION OF THE TAX CONSIDERATIONS DISCUSSED ABOVE, AS WELL AS
THE APPLICATION OF STATE, LOCAL, FOREIGN OR OTHER TAX LAWS.
15. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS.
FSCM expressly reserves the right, in its sole discretion, at any time or from
time to time, to extend the period of time during which the Offer is open by
giving oral or written notice of such extension to the Transfer Agent. During
any such extension, all Shares previously tendered and not purchased or
withdrawn will remain subject to the Offer, except to the extent that such
Shares may be withdrawn as set forth in Section 3. FSCM also expressly reserves
the right, in its sole discretion, to terminate the Offer and not accept for
payment or pay for any Shares not theretofore accepted for payment or paid for
or, subject to applicable law, to postpone payment for Shares upon the
occurrence of any of the conditions specified in Section 5 hereof by giving oral
or written notice of such termination or postponement to the Transfer Agent and
making a public announcement thereof. FSCM's reservation of the right to delay
payment for Shares which it has accepted for payment is limited by Rule
13e-4(f)(5) promulgated under the Exchange Act, which requires that FSCM must
pay the consideration offered or return the Shares tendered promptly after
termination or withdrawal of a tender offer. Subject to compliance with
applicable law, FSCM further reserves the right, in its sole discretion, to
amend the Offer in any respect. Amendments to the Offer may be made at any time
or from time to time by notice sent promptly to shareholders in a manner
reasonably designed to inform shareholders of such amendments.
If FSCM materially changes the terms of the Offer or the information concerning
the Offer, FSCM will extend the Offer to the extent required by Rules
13e-4(e)(2) and 13e-4(f)(1)(ii) promulgated under the Exchange Act. These rules
provide that the minimum period during which an offer must remain open following
material changes in the terms of the offer or information concerning the offer
(other than a change in price, change in any dealer's soliciting fee or a change
in the percentage of securities sought) will depend on the facts and
circumstances, including the relative materiality of such terms or information.
If (i) FSCM increases or decreases the consideration offered for Shares pursuant
to the Offer or FSCM increases the number of Shares being sought by an amount
exceeding 2% of the outstanding Shares, or FSCM decreases the number of Shares
being sought and (ii) the Offer is scheduled to expire at any time earlier than
the expiration of a period ending on the tenth business day from, and including,
the date that notice of such increase or decrease is first published, sent or
given, the Offer will be extended until the expiration of such period of ten
business days.
16. MISCELLANEOUS.
The Offer is not being made to, nor will FSCM accept tenders from, owners of
Shares in any jurisdiction in which the Offer or its acceptance would not comply
with the securities or "blue sky" laws of such jurisdiction. FSCM is not aware
of any jurisdiction in which the making of the Offer or the acceptance of
tenders of, purchase of or payment for Shares would not be in compliance with
the laws of such jurisdiction. However, FSCM reserves the right to exclude
shareholders in any jurisdiction in which it is asserted that the Offer cannot
lawfully be made or tendered Shares cannot lawfully be accepted, purchased or
paid for. So long as FSCM makes a good faith effort to comply with any state law
deemed applicable to the Offer, FSCM believes that the exclusion of holders
residing in any such jurisdiction is permitted under Rule 13e-4(f)(9)
promulgated under the Exchange Act. In any jurisdiction the securities or "blue
sky" laws of which require the Offer to be made by a licensed broker or dealer,
the Offer shall be deemed to be made on FSCM's behalf by one or more registered
brokers or dealers licensed under the laws of such jurisdiction.
May 12, 1997 Financial Services Corporation of the Midwest
224 - 18th Street, Suite 202
Rock Island, Illinois 61201-8737
<PAGE>
LETTER OF TRANSMITTAL
May 6, 1997
Board of Directors
Financial Services Corporation of the Midwest
224 18th Street, Suite 202
Rock Island, Illinois 61201-8737
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to Financial Services Corporation of the Midwest, Rock Island, Illinois
("FSCM") of the terms of: (i) a proposed tender offer to repurchase up to 83,000
shares of common stock at $90.00 per share; (ii) the redemption of $5.0 million
of FSCM's Class A Cumulative Preferred Stock; and (iii) the issuance of $5.0
million of a New Class A Cumulative Preferred Stock with a conversion price of
$120.00 per common share and a dividend rate of 9.25% (collectively referred to
as the "Transactions").
In carrying out our engagement, we have reviewed and analyzed material bearing
upon the financial and operating condition of FSCM, including, but not limited
to: (i) the audited financial statemetns of FSCM for the year ending 1991-1996;
(ii) the unaudited financial statements for the year ending March 31, 1997;
(iii) certain other internal financial information of FSCM and other publicly
availbale information on FSCM; (iv) publicly available information regarding the
performance of certain other companies whose business activities were believed
by Austin Associates to be generally comparable to those of FSCM; (v) the pro
forma effect of the Transactions on FSCM; (vi) the Tender Offer Statement
provided to shareholders of FSCM; and (vii) such other analysis and information
as Austin deemed relevant.
In our review and analysis, we relied upon and assumed the accuracy and
completeness of the financial and other information provided to us, or publicly
available, and have not attempted to verify the same. It is understood that this
letter is for the information of the Board of Directors only; provided, however,
that we hereby consent to the inclusion of this opinion in any tender offer
documents produced in connection with the Transactions.
Based upon our analysis and subject to the qualifications described herein, we
believe that as of the date of this letter, the Transactions are fair, from a
financial point of view, to FSCM.
For our services in rendering this opinion, FSCM has paid us a fee and has
indemnified us against certain liabilities.
/s/ Austin Associates, Inc.
<PAGE>
Exhibit (a)(2)(i)
to Schedule 13E-4
LETTER OF TRANSMITTAL
To Tender Shares Of Common Stock
of
FINANCIAL SERVICES CORPORATION OF THE MIDWEST
Pursuant To The Offer To Purchase
Dated May 12, 1997
THE OFFER, THE PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE
AT 5:00 P.M., ROCK ISLAND, ILLINOIS TIME, ON JUNE 13, 1997,
UNLESS THE OFFER IS EXTENDED
To: Illinois Stock Transfer Company
By facsimile: (312) 427-2879
To call for additional information: (312) 427-2953
<TABLE>
BY MAIL: BY OVERNIGHT COURIER: BY HAND:
<S> <C> <C>
Illinois Stock Transfer Illinois Stock Transfer Illinois Stock Transfer
Company Company Company
223 West Jackson Boulevard, Suite 1210 223 West Jackson Boulevard, Suite 1210 223 West Jackson Boulevard, Suite 1210
Chicago, Illinois 60606 Chicago, Illinois 60606 Chicago, Illinois 60606
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS TO A FACSIMILE NUMBER OTHER THAN THE ONE
LISTED ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used only if (a) certificates for Shares are
to be delivered with it or (b) Shares are being delivered concurrently by
book-entry transfer to the account maintained by the Transfer Agent at The
Depository Trust Company ("DTC") as set forth in Section 2 of the Offer to
Purchase.
Shareholders who cannot deliver the certificates for their Shares to the
Transfer Agent on or prior to the Expiration Date (as defined in the Offer to
Purchase) or who cannot complete the procedure for book-entry transfer on a
timely basis or who cannot deliver a Letter of Transmittal and all other
required documents to the Transfer Agent on or prior to the Expiration Date, in
any such case, must tender their Shares pursuant to the guaranteed delivery
procedures set forth in Section 2 of the Offer to Purchase. See Instruction 2.
Shareholders are not required to pay a service charge to FSCM or the Transfer
Agent in connection with their tender of Shares, but may be charged a fee by a
broker, dealer or other institution for processing the tender requested.
Delivery of documents to a book-entry transfer facility does not constitute
delivery to the Transfer Agent.
DESCRIPTION OF SHARES TENDERED
<TABLE>
Total Number of Number of
Stock Certificate Shares Represented Shares
Name and Address(es) of Registered Holder(s) Number(s)* by Certificates Tendered**
- -------------------------------------------- ----------------- ------------------ ----------
<S> <C> <C> <C>
Total Shares Tendered:
*Need not be completed by shareholders
delivering shares by book-entry
transfer. If more than one certificate
is enclosed, shareholders may indicate,
by numbering or otherwise, any preference
in the order in which they would like
certificates to be accepted for purchase.
(The label affixed above, if any, indicates **Unless otherwise indicated, it will be
the number of Shares owned by you on the assumed that all Shares represented by
records of Illinois Stock Transfer Company, any certificates delivered to the Transfer
the Transfer Agent for the Shares. If blank, Agent are being tendered. See Instruction
fill in exactly as name(s) appear(s) of 4.
</TABLE>
<PAGE>
THE FOLLOWING TWO BOXES ARE TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY:
BOOK-ENTRY TRANSFERS
IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT
MAINTAINED BY THE TRANSFER AGENT WITH THE DEPOSITORY TRUST COMPANY
("DTC"), COMPLETE THE FOLLOWING:
NAME OF TENDERING INSTITUTION: ___________________________________________
DTC PARTICIPANT NUMBER: __________________________________________________
PREVIOUS TENDER BY NOTICE OF GUARANTEED DELIVERY
IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY
PREVIOUSLY SENT TO THE TRANSFER AGENT, COMPLETE THE FOLLOWING:
NAME(S) OF REGISTERED HOLDER(S): ________________________________________
WINDOW TICKET NUMBER (IF ANY): ___________________________________________
DATE OF EXECUTION OF NOTICE OF GUARANTEED DELIVERY: ______________________
NAME OF ELIGIBLE INSTITUTION WHICH GUARANTEED DELIVERY: __________________
DTC PARTICIPANT NUMBER (IF DELIVERED BY BOOK-ENTRY TRANSFER):
I have lost my Certificate(s) for _____ Shares and require assistance with
respect to replacing such certificate(s).
Ladies and Gentlemen:
The person(s) signing this Letter of Transmittal (the "Signor") hereby tenders
to Financial Services Corporation of the Midwest ("FSCM"), a one-bank holding
company incorporated under the laws of the State of Delaware, the
above-described shares (the "Shares") of Common Stock of FSCM, par value $0.50
per share (the "Common Stock"), at a price of $90.00 per Share payable in cash
(the "Purchase Price") upon the terms and subject to the conditions set forth in
the Offer to Purchase dated May 12, 1997, receipt of which is hereby
acknowledged, and in this Letter of Transmittal (which Offer to Purchase and
Letter of Transmittal together constitute the "Offer").
Subject to, and effective upon, acceptance for payment of, or payment for,
Shares tendered herewith in accordance with the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms or conditions of any such extension or amendment), the Signor hereby
sells, assigns and transfers to, or upon the order of, FSCM, all right, title
and interest in and to all of the Shares that are being tendered hereby that are
purchased pursuant to the Offer and hereby irrevocably constitutes and appoints
Illinois Stock Transfer Company (the "Transfer Agent") the true and lawful agent
and attorney-in-fact of the Signor with respect to such Shares, with full power
of substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to (a) deliver certificate(s) for such Shares, if
any, for cancellation and transfer on FSCM's books, or transfer ownership of
such Shares in the account maintained by the Transfer Agent at The Depository
Trust Company ("DTC"), together, in any such case, with all accompanying
evidences of transfer and authenticity, to or upon the order of FSCM, (b)
present such Shares for transfer and cancellation on FSCM's books and (c)
receive all benefits and otherwise exercise all rights of beneficial ownership
of such Shares, subject to the next paragraph, all in accordance with the terms
and subject to the conditions set forth in the Offer.
The Signor hereby represents and warrants that (a) the Signor, if a broker,
dealer, commercial bank, trust company or other nominee, has obtained the
tendering shareholder's instructions to tender pursuant to the terms and
conditions of this Offer in accordance with the letter from FSCM to brokers,
dealers, commercial banks, trust companies and other nominees; (b) when and to
the extent FSCM accepts the Shares for purchase, FSCM will acquire good,
marketable and unencumbered title thereto, free and clear of all security
interests, liens, restrictions, charges, encumbrances, conditional sales
agreements or other obligations relating to their sale or transfer, and not
subject to any adverse claim; (c) on request, the Signor will execute and
deliver any additional documents that the Transfer Agent or FSCM deems necessary
or desirable to complete the sale, assignment, transfer and purchase of the
Shares tendered hereby; and (d) the Signor has read and agrees to all of the
terms and conditions of the Offer.
The name(s) and address(es) of the registered owner(s) should be printed exactly
as on the registration of the Shares. If the Shares tendered hereby are in
certificated form, the stock certificate(s) representing such Shares must be
returned together with this Letter of Transmittal.
<PAGE>
The Signor recognizes that, under certain circumstances set forth in the Offer
to Purchase, FSCM may terminate or amend the Offer or may not be required to
purchase any of the Shares tendered hereby. In any such event, the Signor
understands that stock certificate(s) for the Shares not purchased, if any, will
be returned to the Signor at its registered address unless otherwise indicated
under the Special Delivery Instructions below. The Signor recognizes that FSCM
has no obligation, pursuant to the Special Payment Instructions, to transfer any
Shares from the name of the registered owner thereof if FSCM purchases none of
such Shares.
The Signor understands that acceptance of Shares by FSCM for payment will
constitute a binding agreement between the Signor and FSCM upon the terms and
subject to the conditions of the Offer.
The check for the Purchase Price of the tendered Shares purchased will be issued
to the order of the Signor and mailed to the address indicated, unless otherwise
indicated in the box titled Special Payment Instructions or the box titled
Special Delivery Instructions. FSCM will not pay interest on the Purchase Price
under any circumstances.
All authority herein conferred or agreed to be conferred shall survive the death
or incapacity of the Signor and all obligations of the Signor hereunder shall be
binding upon the heirs, personal representatives, successors and assigns of the
Signor. Except as stated in the Offer, this tender is irrevocable.
Unless otherwise indicated herein under "Special Payment Instructions," please
issue the check for the Purchase Price and/or return any stock certificates for
the Shares not tendered or accepted for payment in the name(s) of the registered
holder(s) appearing under "Description of Shares Tendered." Similarly, unless
otherwise indicated under "Special Delivery Instructions," please mail the check
for the Purchase Price for any Shares purchased and/or return any stock
certificates for the Shares not tendered or accepted for payment (and
accompanying documents, as appropriate) to the address(es) of the registered
holder(s) appearing under "Description of Shares Tendered." If both the Special
Payment Instructions and the Special Delivery Instructions are completed, please
issue the check for the Purchase Price and/or return any stock certificates for
the Shares not tendered or accepted for payment in the name of, and deliver such
check and/or return any such stock certificates to, the person(s) so indicated.
The undersigned recognizes that FSCM has no obligation pursuant to the Special
Payment Instructions to transfer any Shares from the name of the registered
holder thereof, or to order the registration or transfer of such Shares by
book-entry transfer, if FSCM does not accept for payment any of the Shares
tendered hereby.
It is not necessary to endorse the stock certificates when you are completing
this form.
<PAGE>
<TABLE>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
============================ ========================================
Special Payment Instructions Special Delivery Instructions
<S> <C>
To be completed ONLY if the check for the To be completed ONLY if the check for the purchase price
Purchase Price of Shares accepted for payment of Shares accepted for payment (less the amount of any
(less the amount of any federal income and backup federal income and backup withholding tax required to be
withholding tax required to be withheld) or withheld) or certificates for Shares not tendered or not
certificates for Shares not tendered or not purchased are to be mailed to someone other than the
purchased are to be issued in the name(s) of registered holder(s) in Box A or to such person at an
someone other than the registered holder(s) in address other than that in Box A.
Box A or if Shares delivered by Book-Entry
transfer that are not purchased are to be
returned by credit to an account maintained at
DTC. MAIL ___ CHECK ___ CERTIFICATE(S):
ISSUE ___ CHECK ___ CERTIFICATES TO: ______________________________________________
Name(s) (Please type or print)
__________________________________________________
Name(s) (Please type or print) ______________________________________________
Street Address
__________________________________________________
Street Address ______________________________________________
City, State and Zip Code
__________________________________________________
City, State and Zip Code ______________________________________________
Tax ID or Social Security Number
__________________________________________________
Tax ID or Social Security Number
___ Credit Shares tendered by book-entry transfer
and not purchased to the account set forth below.
Name of Account Party ____________________________
DTC Participant Number ___________________________
(See Instructions 1, 4, 5, 6 and 7.) (See Instructions 1,4, 5, 6 and 7.)
================================================== =================================================================
SIGNATURES SIGNATURE GUARANTEE
================================================== ==================================================================
See Instructions 1 and 5 to determine whether your signature
SIGN HERE (all tendering holders) must be Medallion guaranteed by an eligible financial
institution. NOTE: A notarization by a notary public is not
acceptable.
------------------------------------------------------------------
The Offer is hereby accepted in accordance with
its terms: FOR USE BY FINANCIAL INSTITUTION ONLY.
PLACE MEDALLION GUARANTEE IN SPACE BELOW.
________________________________________________
________________________________________________
Signature(s) of owner(s)
________________________________________________
Phone Number
(Must be signed by the registered holder(s) exactly
as name(s) appear(s) on the stock certificate(s) for
the Shares or on a security position listing or by
person(s) authorized to become registered holder(s)
by certificates and documents transmitted herewith.
If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact,
agents, officers of corporations or others acting in
a fiduciary or representative capacity, please set
forth full title and see Instruction 5.)
====================================================== ==================================================================
</TABLE>
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Offer
1. GUARANTEE OF SIGNATURES. Except as otherwise hereinafter provided, all
signatures on this Letter of Transmittal must be guaranteed by a financial
institution (including most banks, savings and loan associations and
brokerage houses) which is a participant in the Securities Transfer Agents
Medallion Program or the New York Stock Exchange Medallion Program (an
"Eligible Institution"). No signature guarantee is required on this Letter
of Transmittal (a) if this Letter of Transmittal is signed by the
registered holder(s) of Shares tendered herewith (including, for purposes
of this document, any participant in the book-entry transfer facility of
The Depository Trust Company ("DTC") whose name appears on DTC's security
position listing as the owner of Shares), unless such holder(s) has
completed either the box entitled "Special Payment Instructions" or the box
entitled "Special Delivery Instructions" above, or (b) if such Shares are
tendered for the account of an Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARES; GUARANTEED DELIVERY. This
Letter of Transmittal is to be used only if (a) certificates for Shares are
to be delivered with it or (b) Shares are being delivered by book-entry
transfer pursuant to the procedures set forth in Section 2 of the Offer to
Purchase. For a shareholder to validly tender Shares, certificates for all
physically delivered Shares, or a confirmation of a book-entry transfer of
all Shares delivered electronically into the Transfer Agent's account at
the DTC, as well as a properly completed and duly executed Letter of
Transmittal (or a photocopy or facsimile hereof bearing original
signature(s) and any required signature guarantees) and any documents
required by this Letter of Transmittal, must be received by the Transfer
Agent at one of its addresses set forth on the front page of this Letter of
Transmittal on or prior to the Expiration Date.
Shareholders who cannot deliver their Shares and all other required
documents to the Transfer Agent on or before the Expiration Date must
tender their Shares pursuant to the guaranteed delivery procedure set forth
in Section 2 of the Offer to Purchase. Pursuant to such procedure: (a) such
tender must be made by or through an Eligible Institution, (b) a properly
completed and duly executed Notice of Guaranteed Delivery substantially in
the form provided by the purchaser must be received by the Transfer Agent
on or before the Expiration Date, and (c) the certificates for all
physically delivered Shares, or a confirmation of a book-entry transfer of
all Shares delivered electronically into the Transfer Agent's account at
the DTC, as well as a properly completed and duly executed Letter of
Transmittal (or a photocopy or facsimile hereof bearing original
signature(s) and any required signature guarantees) or, in the case of a
book-entry delivery, an Agent's Message and any other documents required by
this Letter of Transmittal, must be received by the Transfer Agent within
three Nasdaq National Market trading days after the date of execution of
such Notice of Guaranteed Delivery, all as provided in Section 2 of the
Offer to Purchase.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING SHARE CERTIFICATES, THIS
LETTER OF TRANSMITTAL, AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY
THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND SOLE RISK OF
THE TENDERING SHAREHOLDER. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED
TO ENSURE TIMELY DELIVERY. Delivery will be deemed made only when actually
received by the Transfer Agent. If delivery is by mail, registered mail
with return receipt requested, properly insured, is recommended.
Shareholders have the responsibility to cause their Shares (in proper
certificated or uncertificated form), this Letter of Transmittal (or a
photocopy or facsimile hereof bearing original signature(s) and any
required signature guarantees), and any other documents required by this
Letter of Transmittal to be timely delivered in accordance with the Offer.
FSCM will not accept any alternative, conditional or contingent tenders,
and no fractional Shares will be purchased. All tendering shareholders,
brokers, dealers, commercial banks, trust companies and other nominees, by
execution of this Letter of Transmittal (or a photocopy or facsimile hereof
bearing original signature(s) and any required signature guarantees), waive
any right to receive any notice of the acceptance of their tender.
3. INADEQUATE SPACE. If the space provided in any of the above boxes is
inadequate, the necessary information should be listed on a separate
schedule signed by all of the required signatories and attached hereto.
<PAGE>
4. PARTIAL TENDERS (not applicable to shareholders who tendered by book-entry
transfer). If fewer than all of the Shares represented by any certificate
delivered to the Transfer Agent are to be tendered, fill in the number of
Shares which are to be tendered in the box entitled "Number of Shares
Tendered." In such case, a new certificate for the remainder of the Shares
represented by the old certificate will be sent to the person(s) signing
this Letter of Transmittal, unless otherwise provided in the appropriate
box on this Letter of Transmittal, as promptly as practicable after the
expiration or termination of the Offer. All Shares represented by
certificates delivered to the Transfer Agent will be deemed to have been
tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, AUTHORIZATIONS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, the signature(s) must correspond with the name(s)
as written on the face of the certificate(s) without any alteration,
enlargement or any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any of the tendered Shares are registered in different names on
different certificates, it will be necessary to complete, sign and submit
as many separate Letters of Transmittal as there are different
registrations of certificates. If this Letter of Transmittal is signed by
the registered holder(s) of the Shares tendered hereby, no endorsements of
certificates or separate stock powers are required unless payment is to be
made to, or stock certificates for Shares not tendered or not purchased are
to be returned, in the name of any person other than the registered
holder(s). Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution. See Instruction 1.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the certificate(s) must
be endorsed or accompanied by appropriate stock powers, in either case
signed exactly as the name(s) of the registered holder(s) appears on the
certificate(s) for such Shares. Signatures on any such certificates or
stock powers must be guaranteed by an Eligible Institution. See Instruction
1.
If this Letter of Transmittal or stock powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and proper evidence
satisfactory to FSCM of their authority so to act must be submitted.
6. STOCK TRANSFER TAXES. Except as provided in this Instruction, FSCM will pay
any stock transfer taxes payable on the transfer to it of Shares purchased
pursuant to the Offer. If, however, (a) payment of the Purchase Price is to
be made to, or (in the circumstances permitted by the Offer) Shares not
tendered or not purchased are to be registered in the name(s) of, any
person(s) other than the registered owner(s), or (b) if any tendered
certificate(s) are registered, or the Shares tendered are otherwise held,
in the name(s) of any person(s) other than the registered owner, the amount
of any transfer taxes (whether imposed on the registered owner(s) or such
other person(s)) payable on account of the transfer to such person(s) will
be deducted from the Purchase Price unless satisfactory evidence of the
payment of such taxes, or exemption therefrom, is submitted.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for the Purchase
Price of any Shares purchased is to be issued, or any Shares not tendered
or not purchased are to be returned, in the name of a person other than the
person(s) signing this Letter of Transmittal, or if the check or any
certificates for Shares not tendered or not purchased are to be mailed to
someone other than the person(s) signing this Letter of Transmittal or to
the person(s) signing this Letter of Transmittal at an address other than
that shown above, the appropriate boxes on this Letter of Transmittal
should be completed. Shareholders tendering Shares by book-entry transfer
may request that Shares not purchased be credited to such account at the
DTC as such shareholder may designate under "Special Payment Instructions."
<PAGE>
8. IRREGULARITIES. All questions as to the Purchase Price, number of Shares
accepted, the form of documents, and the validity, eligibility (including
time of receipt) and acceptance for payment of any tender of Shares will be
determined by FSCM, in its sole discretion, which determination shall be
final and binding on all parties. FSCM reserves the absolute right to
reject any or all tenders determined not to be in proper form or to refuse
to accept for payment, purchase or pay for any Shares if, in the opinion of
FSCM's counsel, accepting, purchasing or paying for such Shares would be
unlawful. FSCM also reserves the absolute right to waive any of the
conditions of the Offer or any defect in any tender, whether generally or
with respect to any particular Share(s) or shareholder(s). FSCM's
interpretations of the terms and conditions of the Offer (including these
instructions) shall be final and binding on all parties. No tender of
Shares will be deemed to be properly made until all defects and
irregularities have been cured or waived. Unless waived, any defects or
irregularities in connection with tenders must be cured within such time as
FSCM shall determine.
NEITHER FSCM, THE TRANSFER AGENT NOR ANY OTHER PERSON IS OR WILL BE
OBLIGATED TO GIVE ANY NOTICE OF DEFECTS IN TENDERS, AND NONE OF THEM SHALL
INCUR ANY LIABILITY FOR FAILURE TO GIVE ANY SUCH NOTICE.
9. QUESTIONS AND REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions and
requests for assistance may be directed to Illinois Stock Transfer Company
at the mailing address provided on the front page hereof or at (312)
427-2953, or by telephoning Ms. Patricia A. Zimmer at FSCM at (309)
794-1122, extension 1301. Requests for additional copies of the Offer to
Purchase and this Letter of Transmittal may also be directed to Illinois
Stock Transfer Company or Ms. Zimmer. Shareholders who do not own Shares
directly may also obtain such information and copies from their broker,
dealer, commercial bank, trust company or other nominee. Shareholders who
do not own Shares directly are required to tender their Shares through
their broker, dealer, commercial bank, trust company or other nominee and
should NOT submit this Letter of Transmittal to the Transfer Agent.
10. RESTRICTION ON SHORT SALES. Section 14(e) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and Rule 14e-4 promulgated
thereunder make it unlawful for any person, directly or indirectly, acting
alone or in concert with others, to guarantee tender of Shares or to tender
Shares in a partial tender offer for such person's own account or for the
account of another person unless at the time of tender, and at the time the
Shares are accepted for payment, the person tendering has a net long
position equal to or greater than the amount tendered in (i) Shares, and
will deliver or cause to be delivered such Shares for the purpose of tender
to the person making the Offer within the period specified in the offer, or
(ii) an equivalent security and, upon acceptance of his or her tender, will
acquire Shares by conversion, exchange, or exercise of such equivalent
security to the extent required by the terms of the Offer, and will deliver
or cause to be delivered the Shares so acquired for the purpose of tender
to FSCM prior to or on the Expiration Date.
The acceptance of Shares by FSCM for payment will constitute a binding
agreement between the tendering shareholder and FSCM, upon the terms and
subject to the conditions of the Offer, including such shareholder's
representation that (i) such shareholder has a net long position in the
Shares being tendered within the meaning of Rule 14e-4 promulgated under
the Exchange Act; and (ii) the tender of such Shares complies with Rule
14e-4.
11. BACKUP WITHHOLDING TAX. Under the United States federal income tax backup
withholding rules, 31% of the gross proceeds payable to a shareholder
pursuant to the Offer must be withheld and remitted to the United States
Treasury, unless the shareholder's taxpayer identification number (employer
identification number or social security number) is provided to the
Transfer Agent and the shareholder certifies that such number is correct.
Certain shareholders (including, among others, all corporations and certain
non-resident alien individuals) are not subject to these backup withholding
and reporting requirements ("exempt recipients").
All shareholders other than exempt recipients should execute and return to
the Transfer Agent the Substitute Form W-9 included as part of the Letter
of Transmittal. For a foreign individual to qualify as an exempt recipient,
that stockholder must submit a properly executed Form W-8, signed under
penalties of perjury, attesting to that individual's exempt status, a copy
of which can be obtained from the Transfer Agent.
<PAGE>
FSCM will treat the gross proceeds payable pursuant to the Offer as a
dividend for United States federal income tax purposes, and, therefore, any
foreign shareholders or agents thereof will be exempt from backup
withholding but will be subject to dividend withholding of federal income
tax at a rate of 30%, unless a reduced rate of withholding is applicable
pursuant to a tax treaty or an exemption from withholding is applicable
because such gross proceeds are effectively connected with the conduct of a
trade or business within the United States. For this purpose, a foreign
shareholder is any shareholder that is not (i) a citizen or resident of the
United States or any political subdivision thereof, (ii) a corporation,
partnership or other entity created or organized in or under the laws of
the United States or any political subdivision thereof, or (iii) an estate
or trust the income of which is includable in gross income for United
States federal income tax purposes, regardless of its source. FSCM will
determine the applicable rate of withholding by reference to a
shareholder's address, except if facts and circumstances indicate such
reliance is not warranted or if applicable law (for example, a tax treaty
or certain Treasury regulations) requires some other method for determining
a shareholder's residence.
A foreign FSCM shareholder may be eligible to file for a refund of such tax
or a portion of such tax if the shareholder is entitled to sale or exchange
treatment as described in Section 14 below with regard to receipt of the
proceeds payable pursuant to the Offer, or if such shareholder is entitled
to a reduced rate of withholding pursuant to a tax treaty and FSCM withheld
at a higher rate. In order to claim an exemption from withholding on the
grounds that gross proceeds paid pursuant to the Offer are effectively
connected with the conduct of a trade or business within the United States,
a foreign shareholder must deliver to the Transfer Agent a properly
executed Form 4224 claiming such exemption. Such forms can be obtained from
the Transfer Agent. Foreign shareholders are urged to consult their own tax
advisors regarding the application of United States federal income tax
withholding, including possible eligibility for a withholding tax reduction
or exemption and the appropriate refund procedure.
ANY TENDERING SHAREHOLDER WHO FAILS TO COMPLETE FULLY AND SIGN THE
SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL MAY BE SUBJECT TO
REQUIRED FEDERAL INCOME TAX WITHHOLDING OF 31% OF THE GROSS PROCEEDS PAID
TO SUCH SHAREHOLDER PURSUANT TO THE OFFER. SEE SECTION 14 - "CERTAIN U.S.
FEDERAL INCOME TAX CONSEQUENCES."
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY. IT MAY NOT BE APPLICABLE TO NON-U.S. SHAREHOLDERS. ALL
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISERS AS TO THE SPECIFIC
TAX CONSEQUENCES TO THEM OF THE OFFER.
Important: In order for Shares to be validly tendered, this Letter of
Transmittal (or a photocopy or facsimile hereof bearing original
signature(s), properly completed and duly executed, together with any
required signature guarantees), Shares (in proper certificated form) or
confirmation of book-entry transfer of Shares, and all required documents,
must be received by the Transfer Agent, or a properly completed and duly
executed notice of guaranteed delivery must be received by the Transfer
Agent, on or prior to the Expiration Date.
<PAGE>
IMPORTANT TAX INFORMATION
SUBSTITUTE FORM W-9
Under the U.S. federal income tax laws, the Transfer Agent may be required to
withhold 31% of the amount of any payment made to certain holders pursuant to
the Offer. In order to avoid such backup withholding, each tendering U.S.
shareholder must provide the Transfer Agent with such shareholder's correct TIN
by completing the Substitute Form W-9 set forth below. In general, if a
shareholder is an individual, the TIN is the Social Security number of such
individual. If the Transfer Agent is not provided with the correct TIN, the
shareholder may be subject to a penalty imposed by the Internal Revenue Service.
Certain shareholders (including, among others, all corporations) are not subject
to these backup withholding and reporting requirements, but should nonetheless
complete a Substitute Form W-9 to avoid possible erroneous backup withholding.
For further information regarding backup withholding and instructions for
completing the Substitute Form W-9 (including how to obtain a TIN if you do not
have one and how to complete the Substitute Form W-9 if Shares are held in more
than one name), consult the enclosed Guidelines for Certification of Taxpayer
Identification Number.
CONSEQUENCES OF FAILURE TO FILE SUBSTITUTE FORM W-9
Failure to complete Substitute Form W-9 will not, by itself, cause the Shares to
be deemed invalidly tendered but may require the Transfer Agent to withhold 31%
of the amount of any payments made pursuant to the Offer. Backup withholding is
not an additional federal income tax. Rather, the federal income tax liability
of a person subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, the shareholder may
claim a refund from the Internal Revenue Service.
PLEASE PROVIDE YOUR SOCIAL SECURITY OR OTHER TAX IDENTIFICATION NUMBER ON THIS
SUBSTITUTE FORM W-9 AND CERTIFY THEREIN THAT YOU ARE NOT SUBJECT TO BACKUP
WITHHOLDING. FAILURE TO DO SO WILL SUBJECT YOU TO 31% FEDERAL INCOME TAX
WITHHOLDING FROM YOUR PAYMENT CHECK. PLEASE REVIEW THE ENCLOSED "GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9" FOR
ADDITIONAL DETAILS.
<TABLE>
<S> <C> <C>
SUBSTITUTE
Form W-9 Part 1 - PLEASE PROVIDE YOUR TIN IN THE
Payor's Request for AT RIGHT AND CERTIFY BY SIGNING AND DATING _________________________________
Taxpayer Identification BELOW. Social Security Number
Number (TIN)
OR_______________________________
Employer Identification Number
Part 2 - Awaiting TIN __
</TABLE>
CERTIFICATION - UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT THE INFORMATION
PROVIDED ON THIS FORM IS TRUE, CORRECT AND COMPLETE.
Name ___________________________________________________________________________
(Please Print)
Address_________________________________________________________________________
(Including Zip Code)
Signature _____________________________________________ Date ___________________
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 2 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER
IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office, or (b) I intend to mail
or deliver an application in the near future. I understand that, notwithstanding
that I have checked the box on Part 2 (and have completed this Certificate of
Awaiting Taxpayer Identification Number), all reportable payments made to me
prior to the time I provide the Transfer Agent with a properly certified
taxpayer identification number will be subject to a 31% backup withholding tax.
Signature ____________________________________________ Date ____________________
<PAGE>
Exhibit (a)(2)(ii)
to Schedule 13E-4
NOTICE OF GUARANTEED DELIVERY
(Not to be Used for Signature Guarantee)
REGARDING THE OFFER BY
FINANCIAL SERVICES CORPORATION OF THE MIDWEST
TO PURCHASE FOR CASH 83,000 ISSUED AND OUTSTANDING
SHARES OF COMMON STOCK AT $90.00 PER SHARE
This form must be used to accept the Offer (as defined below) if a shareholder's
stock certificates for shares of Common Stock of FSCM are not immediately
available or if time will not permit the Letter of Transmittal and other
required documents to reach the Transfer Agent on or before the Expiration Date.
Terms used in this form that are not otherwise defined herein shall have the
meanings specified in the Offer to Purchase dated May 12, 1997. This form may be
delivered by hand, overnight courier or mail to the Transfer Agent at the
appropriate address set forth below AND MUST BEAR ORIGINAL SIGNATURES (NOT
PHOTOCOPIES OR FACSIMILES). Tenders using this form may be made only by or
through a member firm of a registered national securities exchange, or a
commercial bank or trust company having an office, branch or agency in the
United States. See Section 2 of the Offer to Purchase.
To: Illinois Stock Transfer Company, Transfer Agent
By facsimile: (312) 427-2879
To call for additional information: (312) 427-2953
<TABLE>
BY MAIL: BY OVERNIGHT COURIER: BY HAND:
<S> <C> <C>
Illinois Stock Transfer Illinois Stock Transfer Illinois Stock Transfer
Company Company Company
223 West Jackson Boulevard, Suite 1210 223 West Jackson Boulevard, Suite 1210 223 West Jackson Boulevard, Suite 1210
Chicago, Illinois 60606 Chicago, Illinois 60606 Chicago, Illinois 60606
</TABLE>
Delivery of this Notice of Guaranteed Delivery to an address other than those
shown above or transmission of instructions via a facsimile number other than
that listed above does not constitute a valid delivery.
THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A LETTER
OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER
THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE
SPACE PROVIDED IN THAT SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
The Eligible Institution that completes this form must communicate the guarantee
to the Transfer Agent and must deliver the Letter of Transmittal and
certificates for shares to the Transfer Agent within the time period shown
therein. Failure to do so could result in a financial loss to such Eligible
Institution.
Ladies and Gentlemen:
The undersigned hereby tenders to Financial Services Corporation of the Midwest
("FSCM"), upon the terms and subject to the conditions set forth in its Offer to
Purchase dated May 12, 1997 and the related Letter of Transmittal (which
together constitute the "Offer"), receipt of which are hereby acknowledged, the
number (indicate below) of Shares pursuant to the guaranteed delivery procedures
set forth in Section 2 of the Offer to Purchase.
<PAGE>
NUMBER OF SHARES BEING TENDERED HEREBY:
SIGN HERE
Number of Shares included
in certificates delivered: _________________________ __________________________
Certificate Nos. (if available):
__________________________
____________________________________________________ Signature(s)
Dated: _____________, 1997
Name(s) of Shareholders:
If Shares will be tendered by book-entry transfer
to The Depository Trust Company ("DTC"),
please check box: __
DTC Participant Number:
_____________________________________________________ _________________________
Please Type or Print
_____________________________________________________
Address
_____________________________________________________
Zip Code
_____________________________________________________
Area Code and Telephone No.
_____________________________________________________
Taxpayer ID No. or Social Security No.
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities exchange or
the National Association of Securities Dealers, Inc., or a commercial bank or
trust company having an office, branch or agency in the United States,
guarantees: (a) that the above named person(s) "own(s)" the Shares tendered
hereby within the meaning of Rule 14e-4 under the Securities Exchange Act of
1934, as amended; (b) that the tender of such Shares complies with Rule 14e-4;
and (c) to deliver to the Transfer Agent certificates representing the Shares
tendered hereby, in proper form for transfer (or to tender Shares pursuant to
the procedure for book-entry transfer into the Transfer Agent's account at The
Depository Trust Company if so specified on the foregoing page), together with a
properly completed and duly executed Letter of Transmittal with any required
signature guarantees, or an Agent's Message (as defined in the Offer to
Purchase), and any other required documents, within five New York Stock Exchange
trading days after the date of receipt hereof by the Transfer Agent.
_________________________________________
Name of Firm
_________________________________________
Authorized Signature
________________________________________
Name
Dated: _______________________, 1997
________________________________________
Address
________________________________________
Zip Code
_______________________________________
Area Code and Telephone No.
<PAGE>
Exhibit (a)(3)(i)
Letter To Brokers, Dealers,
Commercial Banks, Trust Companies And Other Nominees
Regarding The Offer By
FINANCIAL SERVICES CORPORATION OF THE MIDWEST
To Purchase For Cash Up To 83,000 Of Its Issued And Outstanding Shares Of
Common Stock At $90.00 Per Share
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Pursuant to your request, we are enclosing herewith the material listed below
relating to the offer by Financial Services Corporation of the Midwest ("FSCM")
to purchase up to 83,000 of its issued and outstanding shares (the "Shares") of
common stock, par value $0.50 per share ("Common Stock"), for cash at $90.00 per
Share, subject to the terms and conditions set forth in the Offer to Purchase
dated May 12, 1997 and the related Letter of Transmittal (which together
constitute the "Offer"). THE OFFER EXPIRES AT 5:00 P.M., ROCK ISLAND, ILLINOIS
TIME, ON JUNE 13, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE"). FSCM will
purchase all Shares validly tendered and not withdrawn upon the terms and
subject to the conditions set forth in the Offer to Purchase.
For your information and for forwarding to your clients for whom you hold Shares
registered in your name or in the name of your nominee, we are enclosing the
following documents:
The following documents are enclosed:
(1) Offer to Purchase dated May 12, 1997;
(2) Letter of Transmittal for your use and for the information of
your clients, together with Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9, which
provides information relating to backup federal income tax
withholding;
(3) Notice of Guaranteed Delivery to be used to accept the Offer
if the Shares and all other required documents cannot be
delivered to the Transfer Agent on or before the Expiration
Date (as defined in the Offer to Purchase);
(4) Letter dated May 12, 1997 from Douglas M. Kratz, Chairman,
Chief Executive Officer and Chief Financial Officer of
FSCM, to FSCM's shareholders;
(5) A form of letter that may be sent to your clients for whose
accounts you hold Shares registered in your name or in the
name of your nominee, with space provided for obtaining such
clients' instructions with regard to the Offer; and
(6) Return envelope addressed to Illinois Stock Transfer Company, as
Transfer Agent for the Shares.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. THE OFFER, THE
PRORATION PERIOD AND THE WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., ROCK ISLAND,
ILLINOIS TIME, ON JUNE 13, 1997, UNLESS EXTENDED.
No fees or commissions will be payable to brokers, dealers or other persons for
soliciting tenders of Shares pursuant to the Offer (other than to the Transfer
Agent as described in the Offer to Purchase). FSCM will, however, upon request,
reimburse brokers, dealers, commercial banks and trust companies for reasonable
and necessary costs and expenses incurred by them in forwarding materials to
their customers. FSCM will pay all stock transfer taxes on its purchase of
Shares, subject to Instruction 6 of the Letter of Transmittal. No broker,
dealer, bank, trust company or fiduciary shall be deemed to be either the agent
of FSCM or the Transfer Agent for the purposes of the Offer. Backup withholding
tax at a 31% rate may be required unless an exemption is proved or unless the
required taxpayer identification information is or has previously been provided.
Certain withholdings may also apply with respect to payments to non-U.S.
shareholders. See Instruction 11 of the Letter of Transmittal.
The Offer is not being made to (nor will tenders be accepted from or on behalf
of) shareholders residing in any jurisdiction in which the making of the Offer
or the acceptance thereof would not be in compliance with the laws of such
jurisdiction. To the extent that the securities laws of any jurisdiction would
require the Offer to be made by a licensed broker or dealer, the Offer shall be
deemed to be made on FSCM's behalf by one or more registered brokers or dealers
licensed under the laws of such jurisdiction.
<PAGE>
Additional copies of the enclosed material may be obtained from Illinois Stock
Transfer Company, the Transfer Agent, or from Ms. Patricia A. Zimmer at FSCM, at
the appropriate addresses and telephone numbers set forth in the Offer to
Purchase. Any question you have with respect to the Offer should be directed to
Illinois Stock Transfer Company or Ms. Zimmer.
Very truly yours,
FINANCIAL SERVICES CORPORATION OF THE MIDWEST
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON AS THE AGENT OF EITHER FSCM OR THE TRANSFER AGENT OR AUTHORIZE
YOU OR ANY OTHER PERSON (A) TO MAKE ANY STATEMENTS WITH RESPECT TO THE OFFER,
OTHER THAN THE STATEMENTS SPECIFICALLY SET FORTH IN THE OFFER TO PURCHASE AND
THE LETTER OF TRANSMITTAL, OR (B) TO DISTRIBUTE ANY MATERIAL WITH RESPECT TO THE
OFFER OTHER THAN AS SPECIFICALLY AUTHORIZED HEREIN.
<PAGE>
Exhibit (a)(3)(ii)
Offer by
FINANCIAL SERVICES CORPORATION OF THE MIDWEST
To Purchase For Cash Up To 83,000 Of Its
Issued And Outstanding Shares
Of Common Stock At $90.00 Per Share
To Our Clients:
Enclosed for your consideration are the Offer to Purchase dated May 12, 1997 of
Financial Services Corporation of the Midwest ("FSCM") and the related Letter of
Transmittal pursuant to which FSCM is offering to purchase up to 83,000 shares
(the "Shares") of its issued and outstanding common stock, par value $0.50 per
share ("Common Stock"), for $90.00 per Share in cash, subject to the terms and
conditions set forth in the Offer to Purchase dated May 12, 1997 and the related
Letter of Transmittal (which together constitute the "Offer"). THE OFFER EXPIRES
AT 5:00 P.M., ROCK ISLAND, ILLINOIS TIME, ON JUNE 13, 1997, UNLESS EXTENDED (THE
"EXPIRATION DATE"). FSCM will purchase all Shares validly tendered and not
withdrawn upon the terms and subject to the conditions of the Offer, including
the provisions thereof relating to proration described in the Offer to Purchase.
We are the holder of record of Shares held for your account. A tender of such
Shares can be made only by us as a holder of record and pursuant to your
instructions. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU AND FOR YOUR
INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR
ACCOUNT.
The purpose of the Offer is to provide an opportunity to Common Stock
shareholders to sell their Shares, thus increasing the liquidity of the Shares.
The Common Stock otherwise is illiquid as it is not traded on any exchange or
quoted on any quotations system. In addition, Shares are being repurchased by
FSCM to make them available to employees of THE Rock Island Bank, National
Association ("TRIB") (FSCM's wholly-owned subsidiary), under TRIB's 401(k) Plan.
As described in the Offer to Purchase, FSCM reserves the right to purchase more
than 83,000 Shares but does not currently plan to do so. FSCM will return all
Shares not purchased as a result of proration.
WE REQUEST INSTRUCTIONS AS TO WHETHER YOU WISH US TO TENDER ANY OR ALL OF THE
SHARES HELD BY US FOR YOUR ACCOUNT UPON THE TERMS AND SUBJECT TO THE CONDITIONS
SET FORTH IN THE OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL.
Your attention is called to the following:
1. The purchase price is $90.00 per Share in cash, and the Offer is subject to
the terms and conditions set forth in the Offer to Purchase dated May 12,
1997 and the related Letter of Transmittal. THE OFFER EXPIRES AT 5:00 P.M.,
ROCK ISLAND, ILLINOIS TIME, ON JUNE 13, 1997, UNLESS EXTENDED (THE
"EXPIRATION DATE").
2. The Offer is for up to 83,000 of the issued and outstanding Shares of
Common Stock of FSCM and is not conditioned upon any minimum number of
outstanding Shares being tendered, but the Offer is subject to certain
conditions set forth in Section 5 of the Offer to Purchase. Under the
conditions described in the Offer to Purchase, FSCM may terminate or amend
the Offer or may postpone the acceptance for payment of, payment for or
purchase of any Shares.
3. If more than 83,000 Shares of Common Stock are duly tendered and not
withdrawn prior to the expiration of the Offer, FSCM then will purchase
83,000 Shares from tendering shareholders (with adjustments to avoid
fractional shares), in accordance with the terms and conditions specified
in this Offer to Purchase, pro rata in proportion to the number of Shares
tendered by each shareholder during the period the Offer remains open as
compared to the total number of Shares duly tendered in the Offer, unless
FSCM determines not to purchase any Shares in the Offer.
4. Tendering shareholders will not be obligated to pay brokerage commissions
or, subject to Instruction 6 of the Letter of Transmittal, stock transfer
taxes on the purchase of Shares by FSCM pursuant to the Offer; however, a
broker, dealer or other person may charge a fee for processing the
transactions on behalf of shareholders. Shareholders are not required to
pay a service charge to FSCM or the Transfer Agent in connection with their
tender of Shares.
<PAGE>
5. Payment for Shares purchased pursuant to the Offer will in all cases be
made only after timely receipt by Illinois Stock Transfer Company (the
"Transfer Agent") of (a) Share Certificates or timely confirmation of the
book-entry transfer of such Shares into the account maintained by the
Transfer Agent at The Depository Trust Company ("DTC") pursuant to the
procedures set forth in Section 2 of the Offer to Purchase, (b) the Letter
of Transmittal (or a photocopy or facsimile thereof bearing original
signature(s) and any required signature guarantees) or an Agent's Message
(as defined in the Offer to Purchase) in connection with a book-entry
delivery, and (c) any other documents required by the Letter of
Transmittal. Accordingly, payment may not be made to all tendering
shareholders at the same time depending upon when certificates for or
confirmations of book-entry transfer of such Shares into the Transfer
Agent's account at DTC are actually received by the Transfer Agent.
If you wish to have us tender your Shares, please so instruct us by completing,
executing and returning to us the instruction form attached hereto. An envelope
to return your instructions to us is enclosed. If you authorize tender of your
Shares, all such Shares will be tendered unless otherwise specified on the
instruction.
YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT
A TENDER ON YOUR BEHALF ON OR BEFORE THE EXPIRATION OF THE OFFER. THE OFFER,
PRORATION PERIOD AND THE WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., ROCK ISLAND,
ILLINOIS TIME, ON JUNE 13, 1997, UNLESS EXTENDED.
As described in the Offer to Purchase, all Shares validly tendered and not
withdrawn on or before the Expiration Date are to be purchased by FSCM, on a pro
rata basis, if necessary (with appropriate adjustments to avoid purchases of
fractional Shares).
The Offer is not being made to (nor will tenders be accepted from or on behalf
of) owners of Shares in any jurisdiction in which the Offer or its acceptance
would violate the laws of such jurisdiction. To the extent that the securities
laws of any jurisdiction would require the Offer to be made by a licensed broker
or dealer, the Offer shall be deemed to be made on FSCM's behalf by one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
IMPORTANT
FOR US TO BE ABLE TO TENDER ALL OR PART OF YOUR SHARES, YOU MUST INDICATE THE
NUMBER OF SHARES YOU WISH TO TENDER -- ALL SHARES BY CHECKING THE BOX ON THE
FORM ON THE FOLLOWING PAGE, OR FEWER THAN ALL SHARES BY CHECKING THE BOX AND
INDICATING IN THE SPACE PROVIDED THE NUMBER OF SHARES YOU WISH TO TENDER.
<PAGE>
Instructions Regarding The Offer By
Financial Services Corporation of the Midwest
To Purchase For Cash Up To 83,000 Of Its Issued And Outstanding
Shares Of Common Stock At $90.00 Per Share
THIS FORM IS NOT TO BE USED TO TENDER SHARES DIRECTLY TO THE TRANSFER AGENT.
IT SHOULD BE SENT TO YOUR BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR
OTHER NOMINEE ONLY IF SUCH FIRM IS THE HOLDER OF RECORD OF YOUR SHARES AND WILL
BE EFFECTING THE TENDER ON YOUR BEHALF.
DO NOT COMPLETE THIS FORM IF YOU HAVE DECIDED NOT TO TENDER YOUR SHARES.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to
Purchase dated May 12, 1997 and the related Letter of Transmittal (which
together constitute the "Offer") in connection with the Offer by Financial
Services Corporation of the Midwest ("FSCM") to purchase up to 83,000 shares
(the "Shares") of its issued and outstanding common stock, par value $0.50 per
share, at $90.00 per Share in cash, on the terms and subject to the conditions
of the Offer.
INSTRUCTIONS: For us to be able to tender all or any part of your Shares, you
must indicate the number of Shares you wish to tender (all by checking the box,
and less than all by identifying the number of Shares in the space provided).
The undersigned hereby instruct(s) you to tender to FSCM the number of Shares
indicated below or, if no number is indicated, all Shares held by you for the
account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer to Purchase and the related Letter of Transmittal.
__ By checking this box, all Shares held by us for your account, including
fractional Shares, will be tendered. If fewer than all Shares are to be
tendered, please check the box and indicate below the aggregate number of
Shares to be tendered by us.
___________________ Shares*
- -----------------------
* Unless otherwise indicated here, it will be assumed that all Shares held by
us for your account are to be tendered.
SIGN HERE
___________________________________ __________________________________________
Signature(s) Signature(s)
___________________________________
Area Code and Telephone Number Please print name(s) and address(es) here:
__________________________________________
Dated _______________________, 1997
__________________________________________
Taxpayer ID No. or __________________________________________
Social Security No. _______________
<PAGE>
Exhibit (a)(3)(iii)
to Schedule 13E-4
Dear Common Stock Shareholder:
We are enclosing a copy of the Financial Services Corporation of the Midwest
("FSCM") Offer to Purchase (the "Offer to Purchase") up to 83,000 shares (the
"Shares") of its issued and outstanding common stock, par value $0.50 per share
(the "Shares"), for $90.00 per Share in cash, subject to the terms and
conditions set forth in the Offer to Purchase dated May 12, 1997 and the related
Letter of Transmittal (which together constitute the "Offer"). THE OFFER EXPIRES
AT 5:00 P.M., ROCK ISLAND, ILLINOIS TIME, ON JUNE 13, 1997, UNLESS EXTENDED (THE
"EXPIRATION DATE").
The Offer is explained in detail in the enclosed Offer to Purchase and Letter of
Transmittal. If you want to tender your Shares, the instructions for tendering
are also set forth in detail in the enclosed materials. I encourage you to read
these materials carefully before making any decision with respect to the Offer.
If, after reviewing the information set forth in the Offer to Purchase and
Letter of Transmittal, you wish to tender Shares for purchase by FSCM, please
contact your broker, dealer or other nominee to effect the tender for you or, if
you are the record owner of the Shares, you may follow the instructions
contained in the Offer to Purchase and Letter of Transmittal. Shareholders are
not required to pay a service charge to FSCM or to Illinois Stock Transfer
Company, the Transfer Agent, in connection with their tender of Shares, but may
be charged a fee by a broker, dealer or other institution for processing the
tender requested.
Neither FSCM nor its Board of Directors is making any recommendation to any
holder of Shares as to whether to tender Shares. Each shareholder is urged to
consult his or her broker, investment adviser or tax adviser before deciding
whether to tender any Shares.
Requests for additional copies of the Offer to Purchase, the Letter of
Transmittal and any other tender offer documents may be directed to Illinois
Stock Transfer Company at (312) 427-2953 or Ms. Patricia A. Zimmer at FSCM at
(309) 794-1122, extension 1301.
Should you have any other questions on the enclosed material, please do not
hesitate to contact your broker, dealer or other nominee, or call Illinois Stock
Transfer Company or Ms. Zimmer at the number set forth immediately above.
Very truly yours,
FINANCIAL SERVICES CORPORATION OF THE MIDWEST
By -
Douglas M. Kratz
Its Chairman, Chief Executive Officer and Chief Financial Officer
<PAGE>
Exhibit (b)(1)
to Schedule 13E-4
Dated as of
December 15, 1992
Mr. Douglas M. Kratz
President
Financial Services Corporation
of the Midwest
230 18th Street
Rock Island, Illinois 61204-4870
Dear Mr. Kratz:
M&I Marshall & Ilsley Bank ("M&I") has agreed to lend up to $5,000,000 (the
"Loan") to Financial Services Corporation of the Midwest (the "Borrower"), which
Loan is evidenced by a Promissory Note (the "Note") dated as of December 15,
1992 in the maximum principal amount of $5,000,000.00 executed by the Borrower
payable to the order of M&I. Such loan is made under the following terms and
conditions in addition to the terms of the other documents executed in
connection with the Loan:
1. The Loan is secured by all of the authorized and issued shares of THE Rock
Island Bank (the "Bank") which are owned by the Borrower, which we
understand on this date to be 500,000 of the 500,000 authorized and issued
shares of the Bank. The Borrower shall continue to own all of the
authorized and issued shares of the Bank. The M&I's lien on such stock was
granted pursuant to a Collateral Pledge Agreement (the "Pledge Agreement")
dated March 29, 1991 executed by the Borrower to M&I. The Pledge Agreement
secures all amounts owed by the Borrower to M&I, including all amounts due
hereunder and under the Note. The M&I's lien is a first, perfected lien on
the stock of the Bank, and there shall be no other liens or encumbrances on
such stock on the date hereof or at any time during the term of the Loan.
There shall be no restrictions on the transfer of such stock. All stock
certificates representing such stock shall be held by M&I.
2. The rate of interest on the Loan shall be the rate of interest adopted by
M&I from time to time as its base rate for interest rate determinations
("Prime Rate"), changing on each day that the Prime Rate changes. Interest
will be calculated on the basis of the actual number of days elapsed over a
360-day year and is payable quarterly in accordance with the Note. All
accrued and unpaid interest and any outstanding principal shall be due at
maturity on July 31, 1993.
3. The Borrower shall at all times maintain a minimum tangible net worth of at
least $12,000,000. Tangible net worth shall be defined in accordance with
generally accepted accounting principles. The Bank shall maintain a minimum
tangible net worth, as defined by applicable regulatory authorities, of at
least $17,000,000.
4. The Bank, at all times, shall maintain a minimum Return on Average Assets,
as defined by applicable regulatory authorities, of at least 0.70%,
provided, however, that if the minimum Return on Average Assets of the Bank
is less than 0.70% but at least 0.60%, no default shall exist hereunder if
the average of the current fiscal year's and the prior fiscal year's Return
on Average Assets of the Bank is at least 0.80%.
5. Each of the Borrower and the Bank shall comply with all regulatory
requirements applicable to it. Each of the Company and the Bank shall
maintain capital at not less than the minimum level required by applicable
regulators. Each of the Borrower and the Bank shall maintain all required
minimum regulatory ratios as well as the following:
A. The Bank shall maintain equity capital plus loan loss reserve to assets
of at least 5.5%; and
B. The Borrower shall maintain total capital on a consolidated basis (Tier
1 plus Tier 2) to assets of at least 6.0%; and
C. The Bank shall maintain total capital (Tier 1 plus Tier 2) to assets of
at least 7.5%.
6. The Borrower shall make no fixed asset expenditures in an aggregate amount
exceeding $250,000 in any one fiscal year without the prior approval of
M&I. The Bank shall make only such fixed asset expenditures as would be
made under normal banking practices and in accordance with applicable
regulatory requirements without the prior written approval of M&I. If the
Bank is required, under regulatory requirements, to obtain the approval of
regulators for any fixed asset expenditures, the Borrower shall also obtain
the prior written approval of M&I.
<PAGE>
7. All mergers, acquisitions, consolidations or transfers of all or
substantially all of the assets of the Borrower or the Bank are prohibited
without M&I's prior written approval. Each of the Borrower and the Bank
shall maintain their corporate existence and shall not dispose or sell,
lease, transfer or otherwise dispose of all or substantially all of its
assets.
8. Each of the Borrower and the Bank shall not dispose of any assets without
the prior written approval of M&I, except disposals in accordance with
normal business practices.
9. The Borrower shall incur no additional debt without the prior written
approval of M&I. The Bank shall incur debt only in the normal course of
business. The M&I approves the incurrence of debt by the Borrower related
to the $5,000,000 principal amount of notes due in 1999 issued by the
Borrower in December, 1992.
10. The Borrower shall not guarantee any debt of any person or incur contingent
liabilities or assume the liabilities of any other person or entity without
the prior written approval of M&I. The Bank shall make only such guarantees
and incur contingent liabilities as would be made under normal banking
practices.
11. The Borrower shall make investments in or advances to any person or entity
only in the normal course of business. Borrower must have the prior written
approval of M&I for all investments other than short-term, cash management
investments if the total of such investments shall exceed the lesser of
$500,000 or 4.95% of tangible net equity of the Borrower. The Borrower
shall not sell the Bank or any interest thereof without M&I's approval nor
shall the Borrower acquire any banks or any other subsidiaries without
M&I's express written approval. The Bank shall make investments in or
advances to any person or entity only in the normal course of business.
12. It shall be an event of default hereunder if Douglas M. Kratz and Perry B.
Hansen are no longer officers and/or directors of the Borrower or the Bank
or if there occurs any material reduction or alteration in either of their
duties with either the Borrower or the Bank.
13. The Borrower and the Bank shall maintain appropriate insurance as is
customary in the industry, including employee bonding and directors' and
officers' liability insurance and shall provide a certificate to M&I of
such coverage, at the request of M&I.
14. The Borrower shall not issue any additional shares of stock except for (a)
that in existence on the date hereof and (b) up to 50,000 shares of the
Borrower's Class A Cumulative Convertible Preferred Stock, which were
initially offered in December 1992, without the prior written approval of
M&I. The Borrower may reissue shares of treasury stock with the prior
written approval of M&I. Without the prior written approval of M&I, the
Bank shall not issue any additional shares of stock except for (a) that in
existence on the date hereof and (b) additional shares of Bank stock
provided that all such shares are owned by the Borrower and that the
Borrower grants to M&I a first, perfected lien on all such stock, subject
to no other liens or encumbrances, as additional collateral for all amounts
due under this Agreement and the Note, and that certificates evidencing all
such shares of stock shall immediately be delivered to M&I, as collateral,
accompanied by blank stock powers with respect to such stock executed by
the Borrower.
15. The Borrower shall not repurchase, redeem or otherwise acquire any of its
securities, including without limitation, any common or preferred stock,
notes and debentures, or any subordinated debt from its directors,
executive officers, or any other person who controls, or is a member of a
group which controls (as defined by appropriate regulatory authorities) the
Borrower, without prior written approval of M&I.
16. The Borrower may pay dividends on its common stock in an aggregate amount
of up to 30% of the prior fiscal year's earnings without the prior written
approval of M&I. Regulatory limits shall apply to any dividends paid by the
Bank. The Borrower may pay dividends on preferred stock and interest to its
debenture holders and public noteholders provided that no default exists
under this Agreement or the Note or the Pledge Agreement. Prior to the
Borrower paying any dividends on its common or preferred stock or interest
payments on its debentures or any debt other than the M&I debt, Borrower
shall provide a written certificate to M&I, in the form of Exhibit A
hereto, certifying that Borrower is in full compliance with the terms of
this Agreement, the Note and the Pledge Agreement.
<PAGE>
17. The Borrower and the Bank shall provide M&I with copies of quarterly call
reports with all schedules within 45 days after the end of each quarterly
fiscal period certified by the President, Controller or Chief Financial
Officer of the Borrower or the Bank, as the case may be. The Borrower will
provide M&I within 120 days of the Borrower's fiscal year end with the
Borrower's consolidated annual financial statements. The statements must be
audited with an unqualified opinion by a certified public account firm
acceptable to M&I. At the time of the provision of such annual financial
statements, the Borrower shall provide M&I with a certificate in the form
of Exhibit B hereto stating that neither the Borrower nor the Bank is in
default under any provisions of this Agreement, the Note or the Pledge
Agreement.
18. M&I shall be allowed to examine such accounts and records of the Borrower
and the Bank as M&I may reasonably request during normal business hours.
19. Borrower shall deliver to M&I this signed Agreement. The Borrower has
already delivered to M&I the executed Note, the executed Pledge Agreement,
all shares of the Bank stock and blank stock powers with respect thereto.
The Borrower agrees to deliver to M&I such other documents as M&I may
require from time to time to insure the perfection of M&I's security
interest in the Bank's stock.
20. Failure by the Borrower or the Bank in the performance or observance of any
term or condition of this Agreement, the Note or the Pledge Agreement shall
constitute a default permitting M&I (a) to accelerate all amounts due under
the Note and any other amounts due under this Agreement and the Pledge
Agreement and (b) to exercise all remedies under all such documents and
under law.
21. M&I has no obligation to refinance the Loan at its maturity.
22. The Borrower shall pay all fees and expenses of M&I, including reasonable
fees of counsel in connection with this Loan and the enforcement of this
Agreement, the Note, the Pledge Agreement or any other collateral security.
23. This Agreement, the Note, the Pledge Agreement and any other agreements
related to the Loan shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Wisconsin applicable to
agreements made and wholly performed within such state.
24. Either the Borrower or M&I may, upon written notice, require the execution
of a Loan Agreement containing the covenants described herein and such
other provisions as are customary of Loan Agreements with respect to
transactions of this type during the term of the indebtedness. All fees and
expenses of M&I and its counsel related thereto shall be paid by the
Borrower.
25. This Agreement shall replace in its entirety the prior agreement dated June
12, 1991 and all amendments to such agreement.
<PAGE>
26. Please acknowledge acceptance of, and agreement to, the terms by signing in
the appropriate place indicated.
Sincerely,
By: /s/ John A. Leonard
John A. Leonard
Vice President
Attest: /s/ A. R. Ragatz
Vice President
The above terms are accepted and agreed to on this date:
FINANCIAL SERVICES CORPORATION OF
THE MIDWEST
By: /s/ Benjamin D. Farrar, Jr.
Its: Chairman
Attest:/s/ Douglas M. Kratz
Its: President & C.E.O.
The above terms are acknowledged and agreed to on this date:
THE Rock Island Bank
By:/s/ Benjamin D. Farrar, Jr.
Its: Chairman of the Board
Attest:/s/ Perry B. Hansen
Its: President & C.E.O.
<PAGE>
EXHIBIT A
Officer's Certificate
M&I Marshall & Ilsley Bank
Attention: John A. Leonard
770 North Water Street
Milwaukee, Wisconsin 53202
Re: Financial Services Corporation of the Midwest
Gentlemen:
This Officer's Certificate is delivered to you pursuant to the Letter Agreement
dated as of December 15, 1992 (the "Letter Agreement") between Financial
Services Corporation of the Midwest (the "Borrower") and M&I Marshall & Ilsley
Bank ("M&I"). Capitalized terms used herein and not otherwise defined shall have
the meanings assigned to them in the Letter Agreement.
The Borrower hereby represents and warrants to M&I that:
1. The undersigned is an officer of the Borrower and is duly authorized to
execute and deliver this Officer's Certificate.
2. The Borrower intends to pay dividends on its common or preferred stock
and/or interest payments on its debentures or any other debt other than M&I
debt.
3. To the best knowledge of the undersigned, the Borrower is in full
compliance with the terms of the Letter Agreement and the Note and the
Pledge Agreement described in the Letter Agreement.
Dated: _____________________,19__.
FINANCIAL SERVICES CORPORATION OF
THE MIDWEST
By: __________________________________________
Its: _________________________________________
<PAGE>
EXHIBIT B
Officer's Certificate
M&I Marshall & Ilsley Bank
Attention: John A. Leonard
770 North Water Street
Milwaukee, Wisconsin 53202
Re: Financial Services Corporation of the Midwest
Gentlemen:
This Officer's Certificate is delivered to you pursuant to the Letter Agreement
dated as of December 15, 1992 (the "Letter Agreement") between Financial
Services Corporation of the Midwest (the "Borrower") and M&I Marshall & Ilsley
Bank ("M&I"). Capitalized terms used herein and not otherwise defined shall have
the meanings assigned to them in the Letter Agreement.
The Borrower hereby represents and warrants to M&I that:
1. The undersigned is an officer of the Borrower and is duly authorized to
execute and deliver this Officer's Certificate.
2. To the best knowledge of the undersigned, neither the Borrower nor the Bank
is in default under any provisions of the Letter Agreement, the Note or the
Pledge Agreement.
Dated: _______________________________, 19___.
FINANCIAL SERVICES CORPORATION OF
THE MIDWEST
By: _________________________________________
Its: ________________________________________
<PAGE>
Exhibit (b)(1)
Dated as of March 14, 1996
Mr. Douglas M. Kratz, President
Financial Services Corporation of the Midwest
230 18th Street
Rock Island, IL 61204-4870
RE: Amendment to Letter Agreement dated as of December 15, 1992
Dear Mr. Kratz:
M&I Marshall and Ilsley Bank ("M&I") has agreed to increase the amount of the
Loan from $5,000,000, as originally agreed, to $10,000,000 effective as of March
14, 1996 to Financial Services Corporation of the Midwest ("the Borrower") as
evidenced by a Replacement Promissory Note ("Replacement Note") dated as of
March 14, 1996. Such Loan is made under all the terms and conditions of the
Agreement dated as of December 15, 1992 ("Agreement") except the maximum amount
of the loan as stated above and the mutual acknowledgment of the change of
charter of the Borrower's subsidiary bank from THE Rock Island Bank, a bank
chartered by the State of Illinois, to THE Rock Island Bank, N.A., a National
Bank chartered in Bettendorf, Iowa, by this First Amendment to the Agreement
("the First Amendment").
Please acknowledge acceptance of, and agreement to, the terms by signing in the
appropriate place indicated.
Sincerely yours,
By:/s/ John A Leonard
John A. Leonard
Vice President
Attest:/s/ Andrew R. Ragatz VP
Andrew R. Ragatz
Vice President
<PAGE>
Dated as of March 14, 1996
Mr. Douglas M. Kratz, President
Financial Services Corporation of the Midwest
The above terms are accepted and agreed to on this date:
FINANCIAL SERVICES CORPORATION OF
THE MIDWEST
By: /s/ Douglas M. Kratz
Its: President
Attest:/s/ Benjamin D. Farrar, Jr.
Its: Chairman
The above terms are acknowledged and agreed to on this date:
THE Rock Island Bank, N.A.
By:/s/ Perry B. Hansen
Its: President
Attest:/s/ Benjamin D. Farrar, Jr.
Its: Chairman
<PAGE>
Dated as of July 27, 1996
Mr. Douglas M. Kratz, President
Financial Services Corporation of the Midwest
P.O. Box 4870
Rock Island, IL 61204-4870
RE: Amendment to Letter Agreement dated as of December 15, 1992
Dear Mr. Kratz:
M&I Marshall & Ilsley Bank ("M&I") has agreed to delete the following from
section 11. of the agreement:
"lesser of $500,000 or"
whereby the non-conforming investments retain the 4.95% of tangible net equity
limit.
All other terms and conditions of the Agreement dated as of December 15, 1992
("Agreement") together with the First Amendment dated as of March 14, 1996 shall
remain in force.
Please acknowledge acceptance of, and agreement to, the terms by signing in the
appropriate place indicated.
Sincerely yours,
By: /s/ John A. Leonard
John A. Leonard, Vice President
Attest: /s/ A. R. Ragatz
Andrew R. Ragatz, Vice President
<PAGE>
Dated as of July 27, 1996
Mr. Douglas M. Kratz, President
Financial Services Corporation of the Midwest
The above terms are accepted and agreed to as of this date:
FINANCIAL SERVICES CORPORATION OF
THE MIDWEST
By: /s/ Douglas M. Kratz
Its: President
Attest: /s/ Patricia A. Hays
Its: Secretary
The above terms are acknowledged and agreed to as of this date:
THE Rock Island Bank, N.A.
By:/s/ Perry B. Hansen
Its: President
Attest:/s/ John T. Kustes
Its: Assistant Secretary
<PAGE>
Revolving Business Note Exhibit (b)(2) to
M&I Bank Schedule 13E-4
M&I Marshall & Ilsley Bank
Financial Services Corporation of the Midwest July 31, 1996 $10,000,000.00
- --------------------------------------------- ------------- -------------
Customer Date Amount
The undersigned ("Customer," whether one or more) promises to pay to the order
of M&I Marshall & Ilsley Bank ("Lender") at 770 North Water Street, Milwaukee,
Wisconsin, the principal sum of $10,000,000.00 or, if less, the aggregate unpaid
principal amount of all loans made under this Note, plus interest, as set forth
below.
Lender will disburse loan proceeds to Customer's deposit account number
________________ or by other means acceptable to Lender.
Interest is payable on October 31, 1996 , and on the last day of each third
month thereafter and at maturity.
Principal is payable July 31, 1997 .
This Note bears interest on the unpaid principal balance before maturity at a
rate equal to [Complete (a) or (b); only one shall apply]:
(a) N/A % per year.
(b) -0- percentage points in excess of the prime rate of interest adopted
by Lender as its base rate for interest rate determinations from time
to time which may or may not be the lowest rate charged by Lender (with
the rate changing as and when that prime rate changes). The initial
rate is 8.250 % per year.
Interest is computed on the basis of a 360-day year on the actual number of days
principal is unpaid. Unpaid principal and interest bear interest after maturity
(whether by acceleration or lapse of time) until paid at the rate otherwise
applicable plus 2 percentage points computed on the same basis.
If any payment is not paid when due, if a default occurs under any other
obligation of any Customer to Lender or if Lender deems itself insecure, the
unpaid balance shall, at the option of the Lender, and without notice mature and
become immediately payable. The unpaid balance shall automatically mature and
become immediately payable in the event any Customer, surety, or guarantor
becomes the subject of bankruptcy or other insolvency proceedings. Lender's
receipt of any payment on this Note after the occurrence of an event of default
shall not constitute a waiver of the default or Lender's rights and remedies
upon such default.
The acceptance of this Note, the making of any loan, or any other action of
Lender does not constitute an obligation or commitment of Lender to make loans;
and any loans may be made solely in the discretion of Lender. This Note may be
prepaid in full or in part without penalty.
Lender is authorized to automatically charge payments due under this Note to
account number N/A at N/A (See reverse side regarding Notice of Transfers
Varying in Amount.)
______ Check here only if this Note is to be secured by a first lien mortgage or
equivalent security interest on a one-to-four family dwelling used as Customer's
principal place of residence.
This notice includes additional provisions on reverse side.
Financial Services Corporation of the Midwest (SEAL) 224 - 18th St., Suite 202
- --------------------------------------------- -------------------------
Street Address
BY:/s/ Douglas M. Kratz (SEAL) Rock Island, IL 61204-4870
- --------------------------------------------- --------------------------
City/State/Zip
President (SEAL)
- -------------------------------------------- (SEAL) Acct # 214396 Note # 12028
J Leonard / 00312
- -------------------------------------------- (SEAL) SLW
<PAGE>
ADDITIONAL PROVISIONS
This Note is secured by all existing and future security agreements, assignments
and mortgages between Lender and Customer, between Lender and any guarantor of
this Note, and between Lender and any other person providing collateral security
for Customer's obligations, and payment may be accelerated according to any of
them. Unless a lien would be prohibited by law or would render a nontaxable
account taxable, Customer grants to Lender a security interest and lien in any
deposit account Customer may at any time have with Lender. Lender may, at any
time after an occurrence of an event of default, without notice or demand,
setoff against any deposit balances or other money now or hereafter owed any
Customer by Lender any amount unpaid under this Note.
Lender is authorized to make book entries evidencing loans and payments and the
aggregate of all loans as evidenced by those entries is presumptive evidence
that those amounts are outstanding and unpaid to Lender. Customer covenants that
all loans shall be used solely for business and not personal purposes.
Customer agrees to pay all costs of administration and collection before and
after judgment, including reasonable attorneys' fees (including those incurred
in successful defense or settlement of any counterclaim brought by Customer or
incident to any action or proceeding involving Customer brought pursuant to the
United States Bankruptcy Code) and waives presentment, protest, demand and
notice of dishonor. Customer agrees to indemnify and hold harmless Lender, its
directors, officers, employees and agents, from and against any and all claims,
damages, judgments, penalties, and expenses, including reasonable attorneys'
fees, arising directly or indirectly from credit extended under this Note or the
activities of Customer. This indemnity shall survive payment of this Note.
Customer acknowledges that Lender has not made any representations or warranties
with respect to, and that Lender does not assume any responsibility to Customer
for, the collectability or enforceability of this Note or the financial
condition of any Customer. Customer authorizes Lender to disclose financial and
other information about Customer to others. Each Customer has independently
determined the collectability and enforceability of this Note.
Without affecting the liability of any Customer, surety, or guarantor, Lender
may, without notice, accept partial payments, release or impair any collateral
security for the payment of this Note or agree not to sue any party liable on
it. Without affecting the liability of any surety or guarantor, Lender may from
time to time, without notice, renew or extend the time for payment. The
obligations of all Customers under this Note are joint and several.
To the extent not prohibited by law, Customer consents that venue for any legal
proceeding relating to collection of this Note shall be, at Lender's option, the
county in which Lender has its principal office in this state, the county in
which any Customer resides or the county in which this Note was executed. This
Note shall be construed and enforced in accordance with the internal laws of
Wisconsin.
This Note is intended by Customer and Lender as a final expression of this Note
and as a complete and exclusive statement of its terms, there being no
conditions to the enforceability of this Note. This Note may not be supplemented
or modified except in writing.
PREAUTHORIZED TRANSFER DISCLOSURE
When Customer authorizes Lender to obtain payment of amounts becoming due Lender
by initiating charges to Customer's account, Customer also requests and
authorizes remitting financial institution to alert and honor same and to charge
same to Customer's account. This authorization will remain in effect until
Customer notifies Lender and the remitting financial institution in writing to
terminate this authorization and Lender and remitting financial institution have
a reasonable time to act on the termination. NOTICE OF TRANSFERS VARYING IN
AMOUNT: If Lender and remitting financial institution are not the same, Customer
is an individual, the account was established primarily for personal, family or
household purposes and the regular payments may vary in amount, Customer has the
right to receive a notice from Lender 10 days before each payment of how much
the payment will be; however, by signing this Note, Customer elects to receive
notice only when current payment would differ by more than 100% from previous
payment.
<PAGE>
Exhibit (c)
to Schedule 13E-4
DEPOSITARY AGREEMENT
Dated: May 12, 1997
Illinois Stock Transfer Company
223 West Jackson Boulevard, Suite 1210
Chicago, Illinois 60606
Ladies and Gentlemen:
Financial Services Corporation of the Midwest, a Delaware corporation ("FSCM"),
is making a tender offer (hereinafter referred to, together with any amendment
or extensions thereof, as the "Offer") to purchase 83,000 outstanding shares of
Common Stock (the "Shares"), par value $0.50 per share ("Common Stock"), for
$90.00 per Share in cash, upon the terms and subject to the conditions set forth
in the Offer to Purchase dated May 12, 1997 (the "Offer to Purchase"), and in
the related Letter of Transmittal ("Letter of Transmittal"), including the
instructions set forth therein. Definitive copies of each document being
distributed by the Company to its shareholders in connection with the Offer have
been or will be delivered to you.
The Offer is being made beginning on May 12, 1997 and will expire at 5:00 p.m.,
Rock Island, Illinois time, on June 13, 1997, unless extended by FSCM as
provided in the Offer (the last date to which the Offer is extended and on which
it expires is herein referred to as the "Expiration Date").
This will confirm our agreement with you to act as the Depositary in connection
with the Offer. In such capacity you will receive and make payment for, on
behalf of FSCM, Shares tendered pursuant to the terms of the Offer. In carrying
out your duties as the Depositary in connection with the Offer, you are to act
in accordance with the following instructions:
1. You shall examine the Letters of Transmittal, the certificates for Shares
and the other documents delivered or mailed to you in connection with
tenders of Shares to ascertain whether they are completed and executed in
accordance with the instructions set forth in the Letters of Transmittal.
If any Letter of Transmittal has been improperly completed or executed, or
the certificates for Shares accompanying such Letter of Transmittal are not
in proper form for transfer (as required by the aforesaid instructions), or
if some other irregularity in connection with any tender of Shares exists,
you shall endeavor to cause such action to be taken as is necessary to
correct such irregularity. Determination of all questions as to the
validity, form, eligibility (including timeliness of receipt) and
acceptance of any Shares tendered or delivered shall be determined by you
on behalf of FSCM in the first instance, but final decisions on all such
matters shall be made by FSCM. FSCM will reserve in the Offer the absolute
right to reject any or all tenders of any particular Shares not in
appropriate form or the acceptance of which would, in the opinion of FSCM's
counsel, be unlawful and to waive any of the conditions of the Offer or any
defect or irregularity in the tender of any Shares, and FSCM's
interpretation of the terms and conditions of the Offer will be final.
Tendering shareholders are required to tender all Shares actually and
constructively owned as of the date of purchase of Shares by the Company
pursuant to the Offer ("complete position tender"). Tenders that are not
complete position tenders shall be considered invalid and, if not corrected
by the Expiration Date, shall be rejected.
2. All Shares must be tendered in accordance with the terms and conditions set
forth in the Offer. Payment for Shares tendered and purchased pursuant to
the Offer shall be made only after deposit, with you of the certificates
for the Shares, the Letter of Transmittal and any other required documents.
3. A tendering shareholder may withdraw Shares tendered as set forth in
Section 3 of the Offer to Purchase, in which event you shall, as promptly
as possible after notification of such withdrawal, return such Shares to,
or in accordance with the instruction of, such shareholder and such Shares
shall no longer be considered properly tendered. All questions as to the
form and validity of notices of withdrawal, including timeliness of
receipt, shall be determined by FSCM, whose determination shall be final
and binding.
<PAGE>
4. On each business day up to and including the Expiration Date (as defined in
Section 1 of the Offer to Purchase), you shall advise by facsimile
transmission, not later than 5:00 p.m., Rock Island, Illinois time, FSCM
and such other persons as FSCM may direct, of the number of Shares which
have been duly tendered on such day, stating separately the number of
Shares tendered by Guarantees of Delivery pursuant to Section 2 of the
Offer to Purchase, the number of Shares tendered about which you have
questions concerning validity, and the cumulative number of Shares tendered
through the time of such facsimile transmission. You shall also inform
FSCM, and such other persons as may be designated by FSCM, upon request
made from time to time, of such other information as FSCM may request,
including, without limitation, the names and addresses of registered
holders of tendered Shares.
5. Letters of Transmittal or facsimile transmissions submitted in lieu thereof
pursuant to Section 2 of the Offer to Purchase shall be stamped by you as
of the date and time of receipt thereof and preserved by you as permanent
records until you are otherwise instructed by the Company. You are to match
Guarantees of Delivery submitted pursuant to Section 2 of the Offer to
Purchase with the Share(s) tendered pursuant thereto. If so instructed by
the Company, you shall telephone Eligible Institutions (as defined in
Section 2 of the Offer to Purchase) which have tendered a significant
number of shares by means of the aforementioned procedures to ascertain
information in connection therewith.
6. FSCM will notify you of, and confirm in writing, any extension or amendment
of the Offer.
7. You shall follow and act upon any amendments, modifications or supplements
to these instructions, and upon any further instructions in connection with
the Offer, any of which may be given to you by FSCM or such other persons
as it may authorize.
8. FSCM will from time to time deposit or cause to be deposited with you, as
agent for tendering holders of Shares, within a reasonable time after
FSCM's acceptance for purchase of tendered Shares, an amount equal to the
aggregate purchase price of all Shares to be purchased which you then hold.
FSCM will deposit with you or cause to be deposited with you an amount
equal to the total stock transfer taxes, if any, payable by FSCM pursuant
to the provisions of Instruction 6 of the Letter of Transmittal in respect
of the transfer of all the Shares to be purchased which you hold. You shall
thereupon, as promptly as possible, (a) purchase and affix appropriate
stock transfer tax stamps, (b) cause the tendered Shares which have been
thus paid for to be transferred and delivered to FSCM by you, and (c) send
a check for the purchase price (less the amount, if any, of any stock
transfer taxes which under Instruction 6 of the Letter of Transmittal are
to be deducted from the purchase price and, if applicable, adjusted in
accordance with the provisions of the Offer) of the Shares purchased to, or
in accordance with the instruction of, each of the holders who has tendered
Shares deposited with you.
9. If, pursuant to the provisions of Instruction 4 of the Letter of
Transmittal, fewer than all the Shares evidenced by any certificate
submitted to you are purchased pursuant to the Offer, you shall, promptly
after the Expiration Date, return or cause to be returned a new certificate
for the remainder of Shares not being tendered to, or in accordance with
the instruction of, each of such shareholders who has made a partial tender
of Shares deposited with you.
10. If, pursuant to the Offer, the Company does not accept the receipt of
instructions from a tendering shareholder, you shall return the
certificates for such shares to, or in accordance with the instructions of,
the persons who deposited the same, together with a letter of notice, in
form satisfactory to FSCM, explaining why the deposited Shares are being
returned, and return to FSCM any surplus funds deposited by FSCM with you.
11. As Depositary you:
(a) shall have no obligation to make payment for any tendered Shares unless
FSCM shall have provided the necessary funds to pay in full all amounts
due and payable with respect thereto;
(b) shall have no duties or obligations other than those specifically set
forth herein or as may subsequently be requested of you by FSCM with
respect to the Offer;
<PAGE>
(c) will be regarded as making no representations and having no
responsibilities as to the validity, sufficiency, value or genuineness
of any stock certificates or the Shares represented thereby deposited
with you pursuant to the Offer and will not be required and will make
no representations as to the validity, value or genuineness of the
Offer;
(d) shall not initiate any legal action hereunder without written approval
of FSCM and then only upon such reasonable indemnity as you may
request;
(e) may rely on and shall be protected in acting upon any certificate,
instrument, opinion, notice, letter, facsimile transmission, telegram
or other document, or any security delivered to you, and reasonably
believed by you to be genuine and to have been signed by the proper
party or parties;
(f) may rely on and shall be protected in acting upon written or oral
instructions with respect to any matter relating to your acting as
Depositary specifically covered by this Depositary Agreement, or
supplementing or qualifying any such action, of FSCM; or
(g) may consult with counsel satisfactory to you (including counsel for
FSCM), and the written advice or opinion of such counsel shall be full
and complete authorization and protection in respect of any action
taken, suffered or omitted by you hereunder in good faith and in
accordance with such advice or opinion of such counsel;
(h) shall arrange for insurance protecting FSCM and yourself against any
liability arising out of the loss, destruction or non-delivery of
checks or certificates for any cause; and
(i) shall not at any time advise any person as to the wisdom of making any
tender pursuant to the Offer, the value of the Shares or as to any
other financial or legal aspect of the Offer or any transaction related
thereto.
12. It is understood and agreed that the securities, money, assets or property
(the "Property") to be deposited with or received by you as Depositary from
FSCM constitute a special, segregated account, held solely for the benefit
of FSCM and shareholders tendering Shares, as their interests may appear,
and the Property shall not be commingled with the securities, money, assets
or properties of you or any other person, firm or corporation. You hereby
waive any and all rights of lien, attachment or set-off whatsoever, if any,
against the Property to be deposited, whether such rights arise by reason
of statutory or common law, by contract or otherwise.
13. For services rendered as Depositary hereunder, you shall be entitled to
payment of fee calculated as described on Exhibit A hereto, which does not
include out of pocket expenses, such as, but not limited to, postage, form
cost, printing, and envelopes. Your out of pocket expenses will be billed
to FSCM as incurred.
14. FSCM covenants and agrees to indemnify and to hold you harmless against any
costs, expenses (including reasonable fees of your legal counsel), losses
or damages which may be paid, incurred or suffered by or to which you may
become subject, arising from or out of, directly or indirectly, any claims
or liability resulting from your actions as Depositary pursuant hereto;
PROVIDED that such covenant and agreement does not extend to, and you shall
not be indemnified with respect to, such costs, expenses, losses and
damages incurred or suffered by you as a result of, or arising out of, your
negligence, bad faith, or willful failure to perform any of your
obligations hereunder. In no case will FSCM be liable under this indemnity
with respect to any claim against you unless, promptly after you have
received any written assertion of a claim or have been served with summons
or other first legal process giving information as to the nature and basis
of the claim, you notify FSCM, by letter or by cable or telex confirmed by
letter, of the written assertion of such claim against you or of any action
commenced against you or of the service of any summons on you, or other
first legal process giving information as to nature and basis of the claim.
FSCM will be entitled to participate at its own expense in the defense of
any such claim. If FSCM so elects at any time after receipt of such notices
and agrees in writing that such claim is a claim for which you are entitled
to be indemnified and held harmless hereunder or if you in such notice
request and FSCM agrees, FSCM will assume the defense of any suit brought
to enforce any such claim. If FSCM assumes the defense of any such suit,
FSCM may select counsel of its own choosing for such purpose, and FSCM will
not be liable for the fees and expenses of any additional counsel
thereafter retained by you.
<PAGE>
15. This Depositary Agreement shall be governed by and construed in accordance
with the laws of the State of Illinois and shall inure to the benefit of,
and the obligations created hereby shall be binding upon the successors and
assigns of, the parties hereto. Nothing in this Agreement shall confer any
rights upon any person or entity other than the parties hereto and their
respective heirs, successors and permitted assigns.
16. This Depositary Agreement may be executed in separate counterparts, each of
which when executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same instrument.
<PAGE>
If the foregoing is acceptable to you, please acknowledge receipt of this letter
and confirm the arrangements herein provided by signing and returning the
enclosed copy. Very truly yours,
FINANCIAL SERVICES CORPORATION OF THE MIDWEST
By /s/ Douglas M. Kratz
--------------------------------------------
Douglas M. Kratz
Chairman, Chief Executive Officer and Chief
Financial Officer
ACCEPTANCE AS PART OF THE DATE HEREOF:
Illinois Stock Transfer Company
By_____________________________________
Signature
- ---------------------------------------
Name Typed or Printed
- ---------------------------------------
Title Typed or Printed
MPLS:117128-9
<PAGE>
EXHIBIT A TO DEPOSITARY AGREEMENT
<TABLE>
<S> <C>
Mailing of Transmittals
Running of two sets of labels, one with shares and one without shares, the
affixing of labels to envelopes and transmittals and the matching and enclosing
of the transmittal into an envelope along with a non-prepaid return envelope
with a company letter introducing the buy back program, and one alpha order
listing for our use. (This same price per account would apply for any follow up
mailing.) $0.75 Per Account
Processing of Transmittal
Processing items surrendered, including receipt, balancing, share verification
and control of securities, examination of Letters of Transmittal for proper
signature, tax identification certifications, changes of address, etc.,
verifying outstanding check data and corresponding accordingly and the
cancellation of certificates surrendered and issuance and mailing of check
proceeds to responding holders. $5.00 Per Account
Minimum processing of transmittal charge $500.00
I. Sending of broker search letters asking brokers how many sets
(a) are required N/C
II. Filling broker sets as requested by brokers $100.00
Flat Fee
III. Issuing of a check in a name(s) other than the account of record $2.25 Per Account
IV. Placing and removing any stop transfer orders $1.10 Per Account
V. Processing of any legal items requiring additional documents
and writing to the shareholder for these documents $4.50 Per Account
VI. Notification to Securities Information Center of any
lost/stolen certificates as they are stopped and replaced $4.00 Per Account
VII. Processing of paper work for the replacement of lost/stolen
certificates with a bond of indemnity $10.00 Per Account**
(Paid by shareholder)
Year End Tax Reporting
Calculating and addressing of 1099's for tax reporting N/C
</TABLE>
These prices will remain in effect for six (6) months at which time they may be
revised unless an agreement has been signed between Financial Services
Corporation of the Midwest and Illinois Stock Transfer Company.
** This fee can be paid by Financial Services Corporation of the Midwest, if
desired.
