<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 11, 1994
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
FIRST CHICAGO CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 6712 36-2669970
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION INDUSTRIAL IDENTIFICATION NO.)
OF INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
ONE FIRST NATIONAL PLAZA
CHICAGO, ILLINOIS 60670
(312) 732-4000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
ROBERT A. ROSHOLT
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
FIRST CHICAGO CORPORATION
ONE FIRST NATIONAL PLAZA
CHICAGO, ILLINOIS 60670
(312) 732-3209
(NAME, ADDRESS, INCLUDING ZIP CODE, AND
TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
LAURENCE GOLDMAN, ESQ. THOMAS A. COLE, ESQ.
SENIOR VICE PRESIDENT SIDLEY & AUSTIN
AND ASSOCIATE GENERAL COUNSEL ONE FIRST NATIONAL PLAZA
THE FIRST NATIONAL BANK OF CHICAGO CHICAGO, ILLINOIS 60603
ONE FIRST NATIONAL PLAZA (312) 853-7000
CHICAGO, ILLINOIS 60670
(312) 732-3565 ----------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: on or about July 8, 1994. If
the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [_]
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock
($5.00 par value per share).... 8,732,600(1) $29.4375(2) $257,065,912(2) $88,644
- ---------------------------------------------------------------------------------------------
Preferred Share Purchase
Rights(3)...................... (4) -- -- --
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Represents the maximum number of shares of the Registrant's Common Stock to
be issued in connection with the Merger described herein.
(2) Estimated pursuant to Rule 457(f) solely for the purpose of calculating the
registration fee based on the average of the high and low prices for shares
of Common Stock of Lake Shore Bancorp., Inc. on February 7, 1994, as
reported on the NASDAQ National Market System.
(3) These Rights are currently attached to, and trade with, the Registrant's
Common Stock. Such Rights will be issued for no additional consideration.
(4) Such number to be issued attached to the Registrant's Common Stock.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
FIRST CHICAGO CORPORATION
CROSS-REFERENCE SHEET
FOR
REGISTRATION STATEMENT ON FORM S-4 AND PROSPECTUS/PROXY STATEMENT
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND CAPTION CAPTION IN PROSPECTUS/PROXY STATEMENT
-------------------------------- -------------------------------------
<S> <C>
1. Forepart of Registration
Statement and Outside Front Facing Page of Registration Statement;
Cover Page of Prospectus...... Cross Reference Sheet; Outside Front Cover
Page of Prospectus/Proxy Statement
2. Inside Front and Outside Back Available Information; Incorporation of
Cover Pages of Prospectus..... Certain Documents by Reference; Table of
Contents
3. Risk Factors, Ratio of Summary of Prospectus/Proxy Statement;
Earnings to Fixed Charges and Outside Front Cover Page of
Other Information............. Prospectus/Proxy Statement; Selected
Financial Data; Comparative Per Share Data
4. Terms of the Transaction...... The Merger; Terms of the Merger;
Description of First Chicago Common Stock;
Description of Lake Shore Common Stock
5. Pro Forma Financial Capitalization of First Chicago
Information...................
6. Material Contacts with the The Merger--Background of the Merger; The
Company Being Acquired........ Merger--Interests of Certain Persons in the
Merger; The Merger--Stock Option Agreement
7. Additional Information
Required for Reoffering by
Persons and Parties Deemed to
be Underwriters............... Not Applicable
8. Interests of Named Experts and Legal Matters; Experts
Counsel.......................
9. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................... Not Applicable
10. Information with Respect to S- First Chicago and Recent Developments;
3 Registrants................. Incorporation of Certain Documents by
Reference; Terms of the Merger;
Description of First Chicago Common Stock
11. Incorporation of Certain Incorporation of Certain Documents by
Information by Reference...... Reference
12. Information with Respect to S-
2 or S-3 Registrants.......... Not Applicable
13. Incorporation of Certain
Information by Reference...... Not Applicable
14. Information with Respect to
Registrants Other than S-3 or
S-2 Registrants............... Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND CAPTION CAPTION IN PROSPECTUS/PROXY STATEMENT
-------------------------------- -------------------------------------
<S> <C>
15. Information with Respect to S-3 Information Regarding Lake Shore;
Companies....................... Incorporation of Certain Documents by
Reference; Terms of the Merger;
Description of Lake Shore Common Stock
16. Information with Respect to S-2
or S-3 Companies................ Not Applicable
17. Information with Respect to
Companies Other than S-3 or S-2
Companies....................... Not Applicable
18. Information if Proxies, Consents Summary of Prospectus/Proxy Statement;
or Authorizations are to be Introduction; The Merger; Terms of the
Solicited....................... Merger; Experts; Incorporation of Certain
Documents by Reference
19. Information if Proxies, Consents
or Authorizations are not to be
Solicited or in an Exchange
Offer........................... Not Applicable
</TABLE>
<PAGE>
PRELIMINARY COPY
LAKE SHORE BANCORP., INC.
605 NORTH MICHIGAN AVENUE
CHICAGO, ILLINOIS 60611
MARCH , 1994
To the Stockholders of Lake Shore Bancorp., Inc.:
Enclosed is a Notice of Special Meeting of Stockholders, a Prospectus/Proxy
Statement and a Proxy Card for the Special Meeting of Stockholders of Lake
Shore Bancorp. Inc. ("Lake Shore"), to be held at [insert time], local time on
, 1994. The Special Meeting will be held at [insert location].
At the meeting, you will be asked to consider and vote upon a proposal to
approve the Amended and Restated Agreement and Plan of Merger (the
"Agreement"), pursuant to which Lake Shore will be merged into First Chicago
Corporation ("First Chicago"). The Agreement provides that each outstanding
share of Lake Shore Common Stock will be converted into a fraction of a share
of First Chicago Common Stock. The terms of conversion depend on the average
closing price of First Chicago Common Stock on the New York Stock Exchange (the
"NYSE") during a twenty-day trading period ending on the third trading day
prior to the closing of the transaction (the "20-Day Average Closing Price") in
accordance with the following circumstances:
. Each share of Lake Shore Common Stock will be converted into that portion
of a whole share of First Chicago Common Stock (rounded to the nearest
thousandth of a share) equal to $31.08 divided by the 20-Day Average
Closing Price; provided, that if the 20-Day Average Closing Price is less
than $37, it will be deemed to be $37, and if it is more than $53, it
will be deemed to be $53.
. No fractional shares of First Chicago Common Stock will be issued in
exchange for Lake Shore Common Stock; instead, a cash payment will be
made for fractional shares based upon the net proceeds of the sale of
such fractional shares by the exchange agent in the open market.
. It is a condition to the consummation of the merger that Lake Shore shall
have received an opinion of counsel to the effect that, among other
things, no gain or loss will be recognized by Lake Shore Stockholders
upon the conversion of the Lake Shore Common Stock into First Chicago
Common Stock (except with respect to cash, if any, received in lieu of
fractional shares).
For further details regarding the consideration to be received by Lake Shore
Stockholders, see "Terms of the Merger--Consideration to be Received by Lake
Shore Stockholders," in the accompanying Prospectus/Proxy Statement. The
Prospectus/Proxy Statement and appendices thereto contain other details of the
proposed merger and information regarding First Chicago and Lake Shore. We
encourage you to read it carefully.
The Lake Shore Board of Directors believes that the proposed merger is in the
best interests of Lake Shore and Lake Shore Stockholders. We urge you to vote
in favor of the proposed merger by marking, dating, signing and returning the
enclosed Proxy Card promptly.
Lake Shore Bancorp., Inc.
James W. Aldrich, Chairman and
Chief Executive Officer
<PAGE>
PRELIMINARY COPY
LAKE SHORE BANCORP., INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD , 1994
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Lake Shore
Bancorp., Inc., a Delaware corporation ("Lake Shore"), will be held at [insert
time], local time at [insert location], on , 1994, for the following
purposes:
(i) To consider and vote upon a proposal to approve the Amended and
Restated Agreement and Plan of Merger, effective as of November 21, 1993
(the "Agreement"), by and among Lake Shore, First Chicago Corporation, a
Delaware corporation ("First Chicago"), and First Chicago Acquisition
Corporation V ("Acquisition Corp."), a wholly-owned subsidiary of First
Chicago, pursuant to which Lake Shore will be merged into First Chicago and
each share of Lake Shore Common Stock will be converted in accordance with
the following provisions:
. Each share of Lake Shore Common Stock will be converted into that
portion of a whole share of First Chicago Common Stock (rounded to
the nearest thousandth of a share) equal to $31.08 divided by the
average closing price per share of First Chicago Common Stock as
reported on the New York Stock Exchange Composite Transaction Tape
for the twenty consecutive trading days ending on the third trading
day prior to the closing of the transaction (the "20-Day Average
Closing Price");
. If the 20-Day Average Closing Price is less than $37, it will be
deemed to be $37, and if the 20-Day Average Closing Price is more
than $53, it will be deemed to be $53.
The Agreement is described in the accompanying Prospectus/Proxy statement
and is attached thereto as Appendix A.
(ii) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only holders of record of Lake Shore Common Stock at the close of business on
, 1994, will be entitled to receive notice of, and to vote at, the
meeting and any adjournment thereof.
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE MEETING REGARDLESS OF
THE NUMBER OF SHARES YOU MAY HOLD. YOU ARE ENCOURAGED TO ATTEND THE MEETING IN
PERSON, BUT WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE MARK, DATE, SIGN AND
RETURN THE ACCOMPANYING PROXY IN THE SELF-ADDRESSED ENVELOPE. IF YOU DO ATTEND
THE MEETING, YOU MAY, IF YOU WISH, REVOKE YOUR PROXY AND VOTE YOUR SHARES IN
PERSON.
By Order of the Board of Directors,
James W. Aldrich, Chairman and Chief
Executive Officer
<PAGE>
PRELIMINARY COPY SUBJECT TO COMPLETION DATED FEBRUARY 11, 1994
PROSPECTUS/PROXY STATEMENT
FIRST CHICAGO CORPORATION
PROSPECTUS
UP TO 8,732,600 SHARES
OF ITS
COMMON STOCK,
$5.00 PAR VALUE PER SHARE
----------------
LAKE SHORE BANCORP., INC.
PROXY STATEMENT
FOR
SPECIAL MEETING OF STOCKHOLDERS
, 1994
----------------
This Prospectus/Proxy Statement is furnished by the Board of Directors of
Lake Shore Bancorp., Inc. ("Lake Shore"), in connection with the solicitation
of proxies from Stockholders of Lake Shore for the purpose of voting at a
Special Meeting of Stockholders to be held on , 1994, and at any
adjournments thereof (the "Special Meeting"), upon the approval of the proposed
merger (the "Merger") of Lake Shore into First Chicago Corporation ("First
Chicago") pursuant to the Amended and Restated Agreement and Plan of Merger
(the "Agreement") attached hereto as Appendix A. At present, the Board of
Directors of Lake Shore knows of no other matters to be presented at the
Special Meeting. This Prospectus/Proxy Statement is first being mailed to
Stockholders of Lake Shore on or about March , 1994.
This Prospectus/Proxy Statement also constitutes the Prospectus of First
Chicago, filed with the Securities and Exchange Commission as part of a
Registration Statement on Form S-4 under the Securities Act of 1933, as amended
(the "Registration Statement"), with respect to shares of First Chicago's
Common Stock, $5.00 par value per share (the "First Chicago Common Stock"), to
be issued in connection with the Merger.
Lake Shore has supplied all the information contained herein with respect to
itself, and First Chicago has supplied all the information contained herein
with respect to itself.
The principal executive offices of First Chicago are located at One First
National Plaza, Chicago, Illinois 60670. First Chicago's telephone number is
(312) 732-4000. The principal executive offices of Lake Shore are located at
605 North Michigan Avenue, Chicago, Illinois 60611. Lake Shore's telephone
number is (312) 787-1900.
THIS PROSPECTUS/PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY WITHIN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION WITHIN SUCH JURISDICTION. NO AGENT OR OFFICER OF FIRST CHICAGO OR
LAKE SHORE NOR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR
TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED HEREIN AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS SHOULD NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY FIRST CHICAGO OR LAKE SHORE.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------------
The date of this Prospectus/Proxy Statement is March , 1994.
<PAGE>
AVAILABLE INFORMATION
First Chicago and Lake Shore are subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Certain reports,
proxy statements and other information relating to First Chicago and Lake Shore
can be inspected and copied at the Public Reference Room of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, and the Commission's Regional
Offices at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and
Seven World Trade Center (13th Floor), New York, New York 10048. Copies of such
material can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. In
addition, such reports, proxy statements and other material concerning First
Chicago can be inspected at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York; the Chicago Stock Exchange, 440 South LaSalle
Street, Chicago, Illinois; and the Pacific Stock Exchange, 301 Pine Street, San
Francisco, California.
First Chicago has filed with the Commission a Registration Statement under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the First Chicago Common Stock offered hereby. This Prospectus/Proxy Statement
does not contain all the information set forth in the Registration Statement,
certain portions of which have been omitted as permitted by the rules and
regulations of the Commission. For further information, reference is made to
the Registration Statement, including the exhibits thereto. The Registration
Statement may be inspected by anyone without charge at the principal office of
the Commission in Washington, D.C., and copies of all or any part of it may be
obtained from the Commission upon payment of the prescribed fees.
THIS PROSPECTUS/PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH FIRST CHICAGO
DOCUMENTS, OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS), ARE AVAILABLE
WITHOUT CHARGE TO ANY PERSON TO WHOM THIS PROSPECTUS/PROXY STATEMENT IS
DELIVERED UPON WRITTEN OR ORAL REQUEST TO FIRST CHICAGO CORPORATION, ATTENTION:
COLLEEN M. MULLIGAN, INVESTOR RELATIONS, ONE FIRST NATIONAL PLAZA, SUITE 0460,
CHICAGO, ILLINOIS 60670; TELEPHONE NUMBER (312) 732-4812. COPIES OF ANY SUCH
LAKE SHORE DOCUMENTS, OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH
EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS), ARE
AVAILABLE WITHOUT CHARGE TO ANY PERSON TO WHOM THIS PROSPECTUS/PROXY STATEMENT
IS DELIVERED UPON WRITTEN OR ORAL REQUEST TO LAKE SHORE, ATTENTION: RANDOLPH F.
WILLIAMS, SENIOR VICE PRESIDENT, 605 NORTH MICHIGAN AVENUE, CHICAGO, ILLINOIS
60611; TELEPHONE NUMBER (312) 915-5794. IN ORDER TO ENSURE TIMELY DELIVERY OF
THE DOCUMENTS PRIOR TO THE SPECIAL MEETING, ANY REQUEST SHOULD BE RECEIVED BY
, 1994. COPIES OF SUCH DOCUMENTS WILL ALSO BE AVAILABLE UPON REQUEST
THEREAFTER UNTIL CONSUMMATION OF THE MERGER.
Neither the delivery of this Prospectus/Proxy Statement nor any sale or
exchange made hereunder shall, under any circumstances, create any implication
that there has been no change in the affairs or operations of First Chicago or
Lake Shore since the date hereof.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
FIRST CHICAGO
The following documents previously filed by First Chicago with the Commission
are incorporated herein by reference:
(i) First Chicago's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992, as amended by First Chicago's Form 8 dated March 12,
1993 (File No. 1-6052);
(ii) First Chicago's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1993, June 30, 1993 and September 30, 1993 (File No. 1-
6052);
(iii) First Chicago's Current Reports on Form 8-K dated January 14, 1993,
January 20, 1993, February 26, 1993, March 3, 1993, March 5, 1993,
April 16, 1993, July 14, 1993, July 30, 1993, October 13, 1993,
November 15, 1993, November 22, 1993, January 17, 1994 and February
9, 1994;
(iv) Item 14 on pages 26 and 27 of First Chicago's Registration Statement
on Form 10 (File No. 1-6052) describing First Chicago's Common Stock;
and
(v) First Chicago's Registration Statement on Form 8-A dated November 25,
1988, describing the Preferred Share Purchase Rights declared by First
Chicago on November 18, 1988, as amended by Amendment No. 1 on Form 8
dated July 16, 1990 (File No. 1-6052).
All documents filed by First Chicago pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus/Proxy
Statement and prior to the Effective Time (as defined hereinafter) shall be
deemed to be incorporated by reference into this Prospectus/Proxy Statement and
to be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus/Proxy Statement to the extent that a statement contained herein or
in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus/Proxy
Statement.
LAKE SHORE
The following documents previously filed by Lake Shore with the Commission
are incorporated herein by reference:
(i) Lake Shore's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992 (File No. 0-10543);
(ii) Lake Shore's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1993, June 30, 1993 and September 30, 1993 (File No. 0-
10543); and
(iii) Lake Shore's Current Reports on Form 8-K dated January 26, 1993,
September 20, 1993 and November 22, 1993.
All documents filed by Lake Shore pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus/Proxy
Statement and prior to the Effective Time (as defined hereinafter) shall be
deemed to be incorporated by reference into this Prospectus/Proxy Statement and
to be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus/Proxy Statement to the extent that a statement contained herein or
in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus/Proxy
Statement.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION...................................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................ 3
SUMMARY OF PROSPECTUS/PROXY STATEMENT...................................... 6
SELECTED FINANCIAL DATA.................................................... 12
First Chicago............................................................ 12
Lake Shore............................................................... 13
COMPARATIVE PER SHARE DATA................................................. 14
INTRODUCTION............................................................... 15
General.................................................................. 15
Record Date; Proxies..................................................... 15
Quorum................................................................... 15
Vote Required for Approval............................................... 15
Proxy Solicitation....................................................... 16
THE MERGER................................................................. 16
Background of the Merger................................................. 16
Lake Shore's Reasons for the Merger...................................... 17
First Chicago's Reasons for the Merger................................... 18
Opinion of Lake Shore's Financial Advisor................................ 19
Interests of Certain Persons in the Merger............................... 24
Stock Option Agreement................................................... 27
TERMS OF THE MERGER........................................................ 28
Effect of the Merger on Lake Shore Common Stock.......................... 28
Consideration to be Received by Lake Shore Stockholders.................. 28
Appointment of Exchange Agent............................................ 31
Exchange of Certificates................................................. 31
Federal Income Tax Consequences.......................................... 31
Accounting Treatment..................................................... 32
Regulatory Approvals..................................................... 32
Conditions to the Merger................................................. 33
Termination of the Agreement............................................. 34
Operations After the Merger.............................................. 34
Effect of Merger on Lake Shore Employee Benefit Plans.................... 35
Actions of Lake Shore Pending the Merger................................. 35
Restrictions on Solicitation............................................. 36
Severance Policy......................................................... 37
Resales of First Chicago Common Stock.................................... 37
Stock Exchange Listing of First Chicago Common Stock..................... 37
No Dissenting Stockholders' Rights....................................... 37
CAPITALIZATION OF FIRST CHICAGO............................................ 38
FIRST CHICAGO AND LAKE SHORE COMPARATIVE STOCK PRICES...................... 39
First Chicago............................................................ 39
Lake Shore............................................................... 40
FIRST CHICAGO AND RECENT DEVELOPMENTS...................................... 40
General.................................................................. 40
Supervision and Regulation............................................... 41
Capital Adequacy......................................................... 41
Recent Legislation....................................................... 42
FDIC Insurance........................................................... 43
Recent Developments...................................................... 44
Recent Financial Results................................................. 45
Incorporation of Certain Information by Reference........................ 48
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DESCRIPTION OF FIRST CHICAGO COMMON STOCK................................. 49
General................................................................. 49
Preferred Share Purchase Rights......................................... 49
Other Capital Stock..................................................... 51
DESCRIPTION OF LAKE SHORE COMMON STOCK.................................... 53
COMPARATIVE RIGHTS OF HOLDERS OF LAKE SHORE COMMON STOCK AND
FIRST CHICAGO COMMON STOCK............................................... 53
Authorized Capital Stock................................................ 53
Directors............................................................... 54
Distributions to Stockholders........................................... 54
Special Meetings of Stockholders........................................ 55
INFORMATION REGARDING LAKE SHORE.......................................... 55
Description of Lake Shore, LSNB and BOH................................. 55
Certain Relationships and Related Transactions.......................... 55
Supervision and Regulation.............................................. 55
Recent Developments..................................................... 56
Incorporation of Certain Information by Reference....................... 56
LEGAL MATTERS............................................................. 57
EXPERTS................................................................... 57
Appendix A--Form of Amended and Restated Agreement and Plan of Merger
Appendix B--Form of Opinion of Donaldson, Lufkin & Jenrette Securities
Corporation
Appendix C--Section 262 of the Delaware General Corporation Law
</TABLE>
5
<PAGE>
SUMMARY OF PROSPECTUS/PROXY STATEMENT
The following is a summary of the more significant aspects of the matters
discussed in this Prospectus/Proxy Statement. Certain capitalized terms used
herein are defined terms, the definitions of which appear elsewhere herein.
This summary is not intended to be complete and is qualified in all respects by
the detailed information appearing elsewhere in this Prospectus/Proxy
Statement, the appendices hereto and the documents incorporated herein by
reference. Lake Shore Stockholders should carefully review the entire
Prospectus/Proxy Statement, the Agreement attached hereto as Appendix A, the
other appendices hereto and the documents incorporated herein by reference
concerning First Chicago and Lake Shore.
FIRST CHICAGO First Chicago is a multi-bank holding company
CORPORATION incorporated in Delaware in 1969, the principal asset
of which is all the outstanding capital stock of The
First National Bank of Chicago ("FNBC"). FNBC provides
a broad range of banking, fiduciary, financial and
other services domestically and overseas. First Chicago
is registered as a bank holding company under the Bank
Holding Company Act of 1956, as amended (the "BHCA").
First Chicago also owns all the outstanding capital
stock of American National Corporation ("ANC") and FCC
National Bank ("FCCNB"). ANC is the holding company for
American National Bank and Trust Company of Chicago,
American National Bank of Libertyville and American
National Bank and Trust Company of Wisconsin. FCCNB is
a Delaware-based bank primarily engaged in the issuance
of VISA and MasterCard credit cards. Together with
these banking organizations, First Chicago, directly or
indirectly, owns the stock of various nonbank companies
engaged in businesses related to banking and finance,
including venture capital and leasing subsidiaries.
At December 31, 1993, First Chicago had consolidated
assets of approximately $52.6 billion and stockholders'
equity of approximately $4.3 billion. See "First
Chicago and Recent Developments" and "Selected
Financial Data--First Chicago."
First Chicago's executive offices are located at One
First National Plaza, Chicago, Illinois 60670, and the
telephone number is (312) 732-4000.
LAKE SHORE BANCORP., Lake Shore is a two-bank holding company incorporated
INC. in Delaware in 1981 and registered under the BHCA. Lake
Shore owns 100 percent of the outstanding common stock
of Lake Shore National Bank ("LSNB") and Bank of
Hinsdale ("BOH"). LSNB is a national banking
association founded in 1920 and BOH is a state banking
association chartered in Illinois in 1967. At December
31, 1993, Lake Shore had consolidated assets of
approximately $1.253 billion and stockholders' equity
of approximately $125 million. See "Information
Regarding Lake Shore" and "Selected Financial Data--
Lake Shore."
LSNB offers a full line of commercial services,
including lines of credit, term loans, real estate
financing, other forms of asset-based financing, cash
management and trust and investment services. BOH
conducts all customary lending and deposit functions of
a commercial bank, including real estate, commercial
and consumer installment loans, checking and savings
accounts, certificates of deposits, IRA deposits,
collection services and safe deposit facilities.
6
<PAGE>
Lake Shore's executive offices are located at 605 North
Michigan Avenue, Chicago, Illinois 60611, and the
telephone number is (312) 787-1900.
LAKE SHORE SPECIAL MEETING
DATE, TIME AND PLACE
OF THE SPECIAL
MEETING
[insert date, time and place]
RECORD DATE TO VOTE [insert date]
NUMBER OF SHARES
OUTSTANDING AS OF
RECORD DATE [insert number of shares]
PURPOSE OF THE
SPECIAL MEETING
Lake Shore Stockholders will consider and vote upon the
approval of the Agreement between Lake Shore and First
Chicago with respect to the proposed Merger of Lake
Shore into First Chicago. See "Terms of the Merger" and
Appendix A.
QUORUM The presence, either in person or by properly executed
proxy, of the holders of more than 50 percent of the
outstanding shares of Lake Shore Common Stock entitled
to vote at the Special Meeting is necessary to
constitute a quorum at the Special Meeting.
VOTE REQUIRED The affirmative vote of the holders of more than 50
percent of the outstanding shares of Lake Shore Common
Stock is required for approval of the proposed Merger.
As of the Record Date, the directors and officers of
Lake Shore, and certain persons associated with them,
as a group were beneficial owners of approximately
percent of the outstanding shares of Lake Shore
Common Stock entitled to vote at the Special Meeting.
RECOMMENDATION OF
LAKE SHORE BOARD OF
DIRECTORS THE BOARD OF DIRECTORS OF LAKE SHORE BELIEVES THAT THE
MERGER IS IN THE BEST INTEREST OF LAKE SHORE
STOCKHOLDERS AND RECOMMENDS THAT LAKE SHORE
STOCKHOLDERS VOTE FOR APPROVAL OF THE MERGER. SEE "THE
MERGER--LAKE SHORE'S REASONS FOR THE MERGER."
OPINION OF LAKE
SHORE'S FINANCIAL
ADVISOR DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION,
LAKE SHORE'S FINANCIAL ADVISOR, HAS GIVEN ITS OPINION
TO THE BOARD OF DIRECTORS OF LAKE SHORE THAT, AS OF THE
DATE HEREOF AND SUBJECT TO THE ASSUMPTIONS STATED IN
THE OPINION, THE CONSIDERATION TO BE RECEIVED BY LAKE
SHORE STOCKHOLDERS PURSUANT TO THE TERMS OF THE AGREE-
MENT IS FAIR, FROM A FINANCIAL POINT OF VIEW, TO LAKE
SHORE STOCKHOLDERS. SEE "THE MERGER--OPINION OF LAKE
SHORE'S FINANCIAL ADVISOR" AND APPENDIX B.
7
<PAGE>
INTERESTS OF CERTAIN
PERSONS IN THE
MERGER
Certain officers of Lake Shore will become eligible
upon consummation of the Merger, pursuant to
transitional compensation agreements between such
officers and Lake Shore, to receive benefits, including
continued salary and bonus payments, continued coverage
under employee benefit plans, use of outplacement
services and continued use of a leased automobile, if
their employment is terminated. Pursuant to the
transitional compensation agreements, certain officers
of Lake Shore may voluntarily terminate their
employment with Lake Shore during the 30-day period
commencing one year after the consummation of the
Merger and still receive transitional compensation. See
"The Merger--Interests of Certain Persons in the
Merger." After consummation of the Merger, the officers
and employees of Lake Shore, LSNB and BOH will be
eligible for employee benefits and programs which are
no less favorable than those generally available to
similarly situated employees of First Chicago and its
subsidiaries. See "Terms of the Merger--Effect of
Merger on Lake Shore Employee Benefit Plans."
Certain current and former employees of Lake Shore hold
options to purchase shares of Lake Shore Common Stock
pursuant to the Lake Shore Stock Incentive Plan (the
"Incentive Plan"). Pursuant to the Agreement, each
outstanding option to purchase shares of Lake Shore
Common Stock pursuant to the Incentive Plan shall
become and represent an option to purchase the number
of shares of First Chicago Common Stock (decreased to
the nearest full share) determined by multiplying the
number of shares of Lake Shore Common Stock subject to
such stock option by the number (the "Exchange Ratio")
equal to $31.08 divided by the 20-Day Average Closing
Price, as defined below, provided that in no event will
the 20-Day Average Closing Price be deemed to be less
than $37 or more than $53, at an exercise price per
share of Lake Shore Common Stock (rounded to the
nearest whole cent) equal to the exercise price per
share of Lake Shore Common Stock immediately prior to
the Effective Time divided by the Exchange Ratio. After
the Effective Time, as defined below, each option to
purchase shares of Lake Shore Common Stock pursuant to
the Incentive Plan shall be exercisable to purchase
shares of First Chicago Common Stock upon the same
terms and conditions as were applicable to such stock
option at the Effective Time, giving effect to the
acceleration of the exercisability of such stock
options as a result of the Merger. See "The Merger--
Interests of Certain Persons in the Merger."
Certain directors of Lake Shore beneficially own shares
of First Chicago stock. The husband of Paula H. Crown,
James S. Crown, is a director of First Chicago. Both
Mrs. Crown, in her capacity as a director of Lake
Shore, and Mr. Crown, in his capacity as a director of
First Chicago, recused themselves from all
deliberations of their respective Boards of Directors
regarding either First Chicago or Lake Shore, as the
case may be. For a description of Mr. Crown's stock
ownership in First Chicago and Lake Shore, see "The
Merger--Interests of Certain Persons in the Merger."
Certain directors of First Chicago beneficially own
shares of Lake Shore. Additionally, Andrew J. McKenna,
a director of First Chicago, is a former director of
Lake Shore.
8
<PAGE>
EFFECT OF THE MERGER
ON LAKE SHORE
STOCKHOLDERS
Upon consummation of the proposed Merger, each share of
Lake Shore Common Stock will be converted into that
portion of a whole share of First Chicago Common Stock
(rounded to the nearest thousandth of a share) equal to
$31.08 divided by the average of the per share closing
prices on the New York Stock Exchange (the "NYSE") of
First Chicago Common Stock as reported on the New York
Stock Exchange Composite Transaction Tape (the "NYSE
Composite Tape") during a twenty-day trading period
ending on the third trading day prior to the closing
(the "Closing") of the Merger (the "20-Day Average
Closing Price"), provided that in no event will the 20-
Day Average Closing Price be deemed to be less than $37
or more than $53. See "Terms of the Merger--
Consideration to be Received by Lake Shore
Stockholders" and "Description of First Chicago Common
Stock." Stockholders of Lake Shore, a Delaware
corporation, will become stockholders of First Chicago,
which is also a Delaware corporation. See "Comparative
Rights of Holders of Lake Shore Common Stock and First
Chicago Common Stock."
FIRST CHICAGO COMMON The shares of First Chicago Common Stock offered hereby
STOCK will be entitled to receive dividends when, as and if
declared by the Board of Directors of First Chicago;
however, Lake Shore Stockholders will not be entitled
to receive dividends from both Lake Shore and First
Chicago for the quarter in which the Closing of the
Merger occurs. The holders of First Chicago Common
Stock are entitled to one vote for each share held. In
addition, the voting rights of holders of First Chicago
Common Stock are non-cumulative and the holders of
First Chicago Common Stock do not have any preemptive
rights to subscribe for additional shares of capital
stock of First Chicago. The shares of First Chicago
Common Stock are, and the shares of First Chicago
Common Stock offered hereby will be, listed on the
NYSE. Shares of First Chicago Common Stock also have
certain preferred share purchase rights attached to
them. See "Description of First Chicago Common Stock."
CLOSING DATE AND
EFFECTIVE TIME OF
THE MERGER The Agreement sets forth various dates on which the
Merger may be consummated (the "Closing Date"), subject
to the satisfaction of certain conditions precedent.
The earliest such date is July 8, 1994. In addition,
the Closing Date may be any other date agreed upon by
the parties. The Closing Date currently is anticipated
to occur early in the third quarter of 1994. The
effective time of the Merger (the "Effective Time")
shall be the later of the date and time at which the
Certificate of Merger (the "Certificate of Merger") to
be filed in Delaware is accepted for record by the
Secretary of State of Delaware or such later time
established by the Certificate of Merger. See "Terms of
the Merger--Effect of the Merger on Lake Shore Common
Stock."
REGULATORY APPROVALS The Merger and certain related transactions are subject
to approval by the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board"), the
Office of the Comptroller of the Currency (the "OCC")
and the Illinois Commissioner of Banks and Trust
Companies. It is anticipated that the approvals of the
Federal Reserve Board, the OCC and the Illinois
Commissioner of Banks and Trust Companies will be
obtained by the end
9
<PAGE>
of the second quarter of 1994, but there can be no
assurance that such approval will be obtained at all or
in a timely fashion to permit consummation of the
Merger. The Merger may not be consummated prior to 30
days after approval is received from the Federal
Reserve Board, nor later than 120 days thereafter,
unless such period is extended by the Federal Reserve
Board. If all requisite approvals have not been
obtained within a sufficient time to allow closing by
October 31, 1994, or other conditions to the Merger
have not been satisfied by the dates required in the
Agreement, either party may terminate the Agreement.
See "Terms of the Merger--Regulatory Approvals"; "Terms
of the Merger--Conditions to the Merger"; and "Terms of
the Merger--Termination of the Agreement."
FEDERAL INCOME TAX
CONSEQUENCES
One of the conditions to the Merger is receipt of an
opinion of counsel to the effect that, among other
things, the Merger will not result in the recognition
of gain or loss for Federal income tax purposes with
respect to the shares of First Chicago Common Stock
exchanged for shares of Lake Shore Common Stock, except
that to the extent cash is received in the exchange in
lieu of fractional shares, gain will be recognized by
Lake Shore Stockholders to the extent of the cash
received. See "Terms of the Merger--Federal Income Tax
Consequences."
ACCOUNTING TREATMENT First Chicago expects to treat the Merger as a "pooling
of interests" for accounting purposes. It is a
condition to the consummation of the Merger that First
Chicago shall have no reasonable basis for believing
that the Merger may not be treated as a "pooling of
interests" for accounting purposes in accordance with
generally accepted accounting principles. See "The
Merger--Accounting Treatment" and "Terms of the
Merger--Conditions to the Merger."
NO DISSENTING
STOCKHOLDERS' RIGHTS
Under Delaware Law, holders of Lake Shore Common Stock
will not be entitled to dissenting stockholders'
rights. See "Terms of the Merger--No Dissenting
Stockholders' Rights" and Appendix C.
MARKET PRICE Shares of First Chicago Common Stock are traded on the
COMPARISON NYSE as well as the Pacific and Chicago Stock
Exchanges. First Chicago Common Stock is also listed on
the International Stock Exchange of the United Kingdom
and the Republic of Ireland. The closing sales price of
First Chicago Common Stock on the NYSE as reported on
the NYSE Composite Tape was (i) $44.00 per share on
November 19, 1993, the last trading date prior to the
public announcement of a definitive agreement between
First Chicago and Lake Shore with respect to the
Merger, and (ii) $ per share on , 1994.
Shares of Lake Shore Common Stock are traded in the
over-the-counter market and are quoted on the National
Association of Securities Dealers Automated Quotation
("NASDAQ") National Market System. The high and low
sales prices of Lake Shore Common Stock as reported on
NASDAQ were $30.75 and $30.00, respectively, on
November 19, 1993, the last trading date prior to the
public announcement of a definitive
10
<PAGE>
agreement between First Chicago and Lake Shore with
respect to the Merger, and (ii) $ and $ ,
respectively, on , 1994.
CURRENT DIVIDEND
COMPARISON
First Chicago declared a dividend of $.30 per share of
First Chicago Common Stock in each of the first three
quarters of 1993 and a dividend of $.40 per share
during the fourth quarter of 1993. Lake Shore paid
quarterly dividends of $.08 per share for 1993.
Pursuant to the terms of the Agreement, Lake Shore
Stockholders will not be entitled to receive dividends
from both Lake Shore and First Chicago for the quarter
in which the Closing occurs. See "Terms of the Merger--
Exchange of Certificates."
11
<PAGE>
SELECTED FINANCIAL DATA
FIRST CHICAGO
The following is selected historical financial information for First Chicago.
The information is qualified in its entirety by the detailed information and
financial statements and notes thereto of First Chicago which are incorporated
herein by reference and the information hereinafter set forth under the caption
"First Chicago and Recent Developments." See "Available Information;"
"Incorporation of Certain Documents by Reference;" and "First Chicago and
Recent Developments."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS AND
RATIOS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARY OF
INCOME
Net interest income..... $1,225.8 $1,183.0 $1,080.0 $1,197.6 $1,235.0
Combined credit
provisions
Assets held for
accelerated
disposition.......... -- 625.0 -- -- --
Other................. 274.2 481.9 544.3 518.8 468.4
Noninterest income (1).. 2,202.1 1,479.6 1,228.5 1,191.8 1,133.5
Investment securities
gains (losses)......... 0.3 8.6 (3.3) 7.5 1.7
Noninterest expense
(2).................... 1,853.9 1,764.4 1,597.0 1,565.9 1,430.2
Income (loss) before
cumulative effect of
changes in accounting
principles............. 804.5 (114.5) 116.3 249.3 358.7
Net income.............. 804.5 93.5 116.3 249.3 358.7
CONSOLIDATED AVERAGE
BALANCES
Loans................... $ 21,997 $ 24,347 $ 27,281 $ 30,609 $ 29,239
Total assets............ 56,854 54,768 52,655 53,097 48,534
Total deposits.......... 29,677 31,694 32,819 34,213 32,420
Long-term debt.......... 2,057 1,735 1,589 1,380 1,260
Total stockholders'
equity................. 3,886 3,314 2,938 2,762 2,538
COMMON SHARE DATA
Earnings per share
Primary
Income (loss) before
cumulative effect
of changes in
accounting
principles......... $ 8.78 $ (2.08) $ 1.15 $ 3.35 $ 5.10
Net income.......... 8.78 0.64 1.15 3.35 5.10
Fully diluted
Income (loss) before
cumulative effect
of changes in
accounting
principles......... $ 8.43 $ (2.08) $ 1.15 $ 3.32 $ 4.99
Net income.......... 8.43 0.64 1.15 3.32 4.99
Dividends declared...... 1.30 1.20 2.00 2.00 1.80
Book value, period-end.. 40.55 33.19 34.90 36.27 34.82
Market price, period-
end.................... 43 1/4 36 3/4 24 5/8 16 1/2 37 1/8
CAPITAL
Common equity-to-assets
(3).................... 7.2% 5.9% 5.1% 4.8% 4.5%
Regulatory leverage
ratio (4).............. 8.0 6.6 5.8 5.0 4.9
Risk-based capital (4)
Tier 1 ratio.......... 8.8 6.7 5.5 4.9 4.7
Total capital ratio
(5).................. 13.6 10.8 9.4 8.3 8.0
Tier 1 capital........ $ 4,098 $ 3,223 $ 2,804 $ 2,642 $ 2,517
Total capital (5)..... 6,292 5,221 4,762 4,441 4,307
RATIOS
Rate of return on: (6)
Average common
stockholders' equity. 24.2% 1.8% 3.2% 9.4% 15.5%
Average total
stockholders' equity. 20.7 2.8 4.0 9.0 14.1
Average assets........ 1.42 0.17 0.22 0.47 0.74
Average earning
assets............... 1.66 0.20 0.26 0.55 0.85
Average stockholders'
equity as a percentage
of average assets...... 6.8 6.1 5.6 5.2 5.2
Net interest margin-tax
equivalent basis....... 2.61 2.61 2.51 2.73 3.03
Allowance for credit
losses as a percentage
of loans outstanding
at period-end (5)...... 3.0(7) 2.8(7) 3.0 3.2 4.1
Nonperforming loans as
a percentage of total
loans at period-end.... 1.0(7) 1.7(7) 3.3 3.1 3.2
Net charge-offs as a
percentage of average
loans.................. 0.8(7) 1.5(7) 2.0 2.6 1.8
</TABLE>
- --------
(1) Excludes investment securities gains (losses).
(2) Excludes provision for other real estate and provision for other real
estate held for accelerated disposition.
(3) Net of investment in First Chicago Capital Markets, Inc., First Chicago's
wholly-owned subsidiary authorized to underwrite, trade and deal in certain
securities.
(4) Under year-end 1992 risk-based capital rules.
(5) First Chicago reclassified its reserve for securitized credit card
receivables from the allowance for credit losses to other assets. This
information has been adjusted to give effect to this reclassification.
(6) Ratios based on net income. For return on average common stockholders'
equity, dividends on preferred stock have been deducted.
(7) Excludes accelerated disposition portfolio.
12
<PAGE>
SELECTED FINANCIAL DATA
LAKE SHORE
The following is selected historical financial information for Lake Shore.
The information is qualified in its entirety by the detailed information and
financial statements and notes thereto of Lake Shore which are incorporated
herein by reference. See "Available Information;" "Incorporation of Certain
Documents by Reference;" and "Information Regarding Lake Shore--Incorporation
of Certain Information by Reference."
<TABLE>
<CAPTION>
(IN MILLIONS, EXCEPT PER YEAR ENDED DECEMBER 31,
SHARE -------------------------------------------------------
AND NON-FINANCIAL DATA) 1993 1992 1991 1990 1989
- ------------------------ --------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL DATA
FOR THE YEAR
Net interest income... $ 49.2 $ 45.8 $ 42.6 $ 39.9 $ 38.7
Tax-equivalent
adjustment........... 2.4 2.6 2.8 3.1 3.2
--------- --------- --------- ---------- ----------
Net interest income--
tax equivalent basis. 51.6 48.4 45.4 43.0 41.9
Provision for loan
losses............... 5.1 3.7 2.4 1.6 1.5
Non-interest income... 10.7 15.3 8.5 7.8 7.1
Non-interest expense.. 37.1 35.7 33.0 30.8 29.7
Income before
cumulative effect of
accounting changes... 12.2 15.4 12.2 12.0 11.6
Cumulative effect of
accounting changes... -- (1.6) -- -- --
Net income............ 12.2 13.8 12.2 12.0 11.6
EARNINGS PER SHARE
Income before
cumulative effect of
accounting changes... 1.22 1.55 1.24 1.18 1.14
Net income............ 1.23 1.39 1.24 1.18 1.14
Dividends declared per
common share......... 0.32 0.32 0.30 0.30 0.30
AT YEAR-END
Total assets.......... $ 1,253 $ 1,151 $ 1,109 $ 1,097 $ 1,025
Total deposits........ 1,048 970 926 926 858
Loans................. 841 807 751 737 683
Shareholders' equity.. 125 116 105 99 90
AVERAGE BALANCES
Total assets.......... 1,183 1,109 1,066 1,025 987
Earning assets........ 1,092 1,017 978 927 893
Loans................. 825 770 721 695 665
Total deposits........ 973 925 896 855 835
Shareholders' equity.. 122 109 101 95 86
FINANCIAL RATIOS
Return on
shareholders' equity. 10.04% 12.47% 12.18% 12.65% 13.52%
Return on assets...... 1.03 1.25 1.15 1.17 1.17
CAPITAL RATIOS
Equity-to-assets...... 10.0 10.0 9.5 9.0 8.8
Regulatory leverage
ratio................ 9.9 10.0 9.2 8.7 NA
Risk-based capital
Tier I ratio........ 13.8 13.3 12.9 12.4 NA
Total capital ratio. 15.0 14.6 14.2 13.7 NA
Tier I capital...... $ 125 $ 115 $ 104 $ 96 NA
Total capital....... 136 126 115 106 NA
COMMON SHARE AND
SHAREHOLDER DATA
Market price, end of
year................. $ 28 3/4 $ 23 3/16 $17 13/16 $ 12 13/16 $ 22 13/16
Book value, end of
year................. 12.62 11.72 10.64 9.76 8.88
Cash dividends
declared............. 3.2 3.1 3.0 3.1 3.0
Dividend payout ratio. 25.86% 22.65% 24.68% 25.87% 25.49%
Number of common
shareholders
of record............ 669 684 723 758 750
Weighted average
number of
shares outstanding... 9,924,432 9,861,118 9,903,281 10,173,829 10,168,724
</TABLE>
- --------
NA = Not available
13
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth for First Chicago Common Stock and Lake Shore
Common Stock certain historical and pro forma per share financial information
for the periods specified below. This information is based upon the
consolidated financial statements of First Chicago and of Lake Shore, certain
of which are incorporated herein by reference. This information should be read
in conjunction with such historical and financial statements and notes thereto.
The unaudited pro forma amounts give effect to the Merger. See "Available
Information;" "Incorporation of Certain Documents by Reference;" and "First
Chicago and Recent Developments."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
FIRST CHICAGO COMMON STOCK
Earnings per share-primary(a):
Historical..................... $ 8.78 $(2.08) $ 1.15 $ 3.35 $ 5.10
Pro forma...................... 8.23(b) (1.72)(b) 1.21(b)
Earnings per share-fully
diluted(a):
Historical..................... 8.43 (2.08) 1.15 3.32 4.99
Pro forma...................... 7.94(b) (1.72)(b) 1.21(b)
Cash Dividends declared per
share:
Historical..................... 1.30 1.20 2.00 2.00 1.80
Book value per share-end of
period:
Historical..................... 40.55 33.19 34.90 36.27 34.82
Pro forma...................... 38.85(c)
LAKE SHORE COMMON STOCK
Earnings per share-primary(a):
Historical..................... 1.22 1.55 1.24 1.18 1.14
Pro forma...................... 5.81(d) (1.21)(d) 0.85(d)
Earnings per share-fully
diluted(a):
Historical..................... 1.22 1.55 1.24 1.18 1.14
Pro forma...................... 5.61(d) (1.21)(d) 0.85(d)
Cash dividends declared per
share:
Historical..................... 0.32 0.32 0.30 0.30 0.30
Pro forma...................... 0.92(d) 0.85(d) 1.41(d)
Book value per share-end of
period:
Historical..................... 12.62 11.72 10.64 9.76 8.88
Pro forma...................... 27.43(d)
</TABLE>
- --------
(a) Earnings per share were calculated using income (loss) before the
cumulative effect of changes in accounting principles.
(b) Gives effect to the Merger as if it had occurred at the beginning of each
year presented and assumes a $44.00 per share price of First Chicago Common
Stock.
(c) Pro forma book value per share gives effect to the Merger as if it had
occurred at the end of the period and reflects the addition of $125 million
of common equity through the issuance of 7.018 million shares of First
Chicago Common Stock.
(d) Gives effect to the exchange of one share of Lake Shore Common Stock for
0.706 of a share of First Chicago Common Stock. These pro forma amounts
would decrease if the per share price of First Chicago Common Stock exceeds
$44.00.
14
<PAGE>
INTRODUCTION
GENERAL
This Prospectus/Proxy Statement is being furnished to the holders of the
outstanding shares of Common Stock of Lake Shore Bancorp., Inc. ("Lake Shore"),
in connection with the solicitation of proxies by the Board of Directors of
Lake Shore from such holders (the "Lake Shore Stockholders" or "Stockholders").
The proxies are to be voted at the Special Meeting of Stockholders of Lake
Shore to be held at [insert location, time and date], and at any adjournment
thereof (the "Special Meeting"). Each Lake Shore Stockholder is entitled to one
vote for each share of Common Stock, $.01 par value per share (the "Lake Shore
Common Stock"), held by him or her. The purpose of the Special Meeting is to
consider and to act upon a proposal to approve the merger (the "Merger") of
Lake Shore into First Chicago Corporation, a Delaware corporation ("First
Chicago"), pursuant to the Amended and Restated Agreement and Plan of Merger
(the "Agreement") attached hereto as Appendix A. The Board of Directors of Lake
Shore is not aware of any other matters that will be presented for
consideration at the Special Meeting.
RECORD DATE; PROXIES
The Board of Directors of Lake Shore has fixed the close of business on
, 1994 as the record date (the "Record Date") for determination of the Lake
Shore Stockholders entitled to notice of and to vote at the Special Meeting.
Accordingly, only holders of record of Lake Shore Common Stock at the close of
business on the Record Date will be entitled to vote at the Special Meeting. As
of , 1994, there were shares of Lake Shore Common Stock
outstanding and such shares were held by approximately holders of
record.
Shares of Lake Shore Common Stock represented at the Special Meeting by
properly executed proxies will, unless such proxies have been previously
revoked, be voted in accordance with the instructions indicated in such
proxies. If no instructions are so indicated, such shares will be voted to
approve the Merger. If any other matters are properly presented at the Special
Meeting for action, the persons named in the proxies and acting thereunder will
have discretion to vote on such matters in accordance with their best judgment
as to the best interests of Lake Shore and its Stockholders. Any Lake Shore
Stockholder who has given a proxy may revoke it at any time prior to its
exercise at the Special Meeting either by filing an instrument revoking it with
the Secretary of Lake Shore, by duly executing a proxy bearing a later date or
by appearing at such Special Meeting and voting in person. The mere presence at
the Special Meeting of a person who has given a proxy will not revoke such
proxy.
QUORUM
The presence, either in person or by properly executed proxy, of the holders
of more than 50 percent of the outstanding shares of Lake Shore Common Stock
entitled to vote at the Special Meeting is necessary to constitute a quorum at
the Special Meeting.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of the holders of more than 50 percent of the
outstanding shares of Lake Shore Common Stock is required to approve the
Merger. Members of the Lake Shore Board of Directors and organizations with
which they are affiliated holding % of the issued and outstanding shares of
Lake Shore Common Stock have indicated their present intention to vote for the
Merger. Each Lake Shore Stockholder is entitled to one vote at the Special
Meeting for each share of Lake Shore Common Stock held of record by him or her
on the Record Date. All shares represented by a valid proxy will be deemed to
be present at the meeting. If a proxy indicates that all or a portion of the
votes represented by the proxy are not to be cast at the meeting, such shares
will not be counted as affirmative votes but will be counted for purposes of
determining the presence of a quorum.
15
<PAGE>
PROXY SOLICITATION
Proxies are being solicited by and on behalf of the Board of Directors of
Lake Shore. Pursuant to the Agreement, the expenses of this solicitation,
including the cost of preparing and mailing this Prospectus/Proxy Statement,
will be borne by First Chicago and Lake Shore.
In addition to solicitation by use of the mails, proxies may be solicited by
directors, officers and employees of Lake Shore in person or by telephone,
telegram or other means of communication. Such directors, officers and
employees will not be additionally compensated, but may be reimbursed for out-
of-pocket expenses incurred in connection with such solicitation. Arrangements
have also been made with brokerage firms, banks, custodians, nominees and
fiduciaries for the forwarding of proxy solicitation material to beneficial
owners of Lake Shore Common Stock held of record by such persons, and in
connection therewith such firms will be reimbursed for reasonable expenses
incurred in forwarding such materials.
THE MERGER
BACKGROUND OF THE MERGER
Over the course of approximately the last two years, various officers and
directors of Lake Shore have been approached by representatives of various
banks and bank holding companies expressing an interest in Lake Shore if the
Board of Directors of Lake Shore should ever conclude to sell Lake Shore. No
offers were made pursuant to these expressions of interest.
In July 1993, certain members of the Board of Directors of Lake Shore were
contacted by officers of First Chicago who expressed interest, on behalf of
First Chicago, in a purchase of Lake Shore. On August 4, 1993, a special
meeting of the Board of Directors of Lake Shore was held to discuss First
Chicago's indication of interest. (Because her husband, James S. Crown, is a
director of First Chicago, Paula H. Crown, a director of Lake Shore, recused
herself from all Board deliberations relating to First Chicago. In addition,
Mr. Crown recused himself from all deliberations of the Board of Directors of
First Chicago relating to Lake Shore.) The Board of Directors of Lake Shore
authorized Lake Shore to provide limited information to First Chicago pursuant
to a confidentiality agreement and authorized retention of an investment
banking firm for a possible advisory engagement. Pursuant to the Board of
Directors' authorization, Lake Shore entered into an engagement agreement with
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") to serve as its
financial advisor.
On August 23, 1993, the Board of Directors of Lake Shore authorized pursuing
limited discussions with First Chicago, without, however, authorizing a sale or
other transaction involving Lake Shore, and constituted a committee (the
"Special Committee") to meet with officials from First Chicago. On August 24,
1993 and August 25, 1993, the Special Committee, and individual members
thereof, held conversations with representatives of First Chicago. Following a
report from the Special Committee about those conversations, on August 25,
1993, the Board of Directors of Lake Shore authorized the issuance of a press
release announcing that Lake Shore had received an indication of interest from
a bank holding company and that Lake Shore had retained DLJ to assist it in
studying a full range of options, including continuing to pursue a corporate
strategy of growth as an independent publicly-held institution. On the same
day, Lake Shore's engagement of DLJ was modified to provide, among other
things, that DLJ's assignment would be to solicit indications of interest and
to provide a "fairness opinion."
Between August 25, 1993 and September 20, 1993, Lake Shore management
prepared a strategic analysis of Lake Shore as an independent publicly-held
institution. During that period, Lake Shore, directly or through DLJ, received
indications of interest from approximately 16 banks and bank holding companies.
On September 20, 1993, the Board of Directors of Lake Shore authorized the
issuance of a press release to the effect that after considering a full range
of strategic options, it had concluded to solicit indications of interest in a
business combination with Lake Shore. Subsequently, DLJ began to prepare a
confidential information memorandum (the "Information Memorandum") containing
relevant information about Lake Shore to be sent to prospective purchasers.
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In late September and October 1993, DLJ contacted approximately 21 potential
acquirors and distributed the Information Memorandum to 13 banks and bank
holding companies. The potential bidders received the Information Memorandum
only after executing a confidentiality and standstill agreement. On October 21,
1993, pursuant to instructions given to the prospective purchasers that had
received the Information Memorandum, DLJ, on behalf of Lake Shore, received
preliminary indications of interest from six bank holding companies, including
First Chicago. Four of such indications were written and included a purchase
price while two of such indications were oral and included a range of purchase
prices. On October 25, 1993, the Board of Directors of Lake Shore, acting on
the recommendation of the Special Committee and based upon the purchase price
indications, selected a final group of two purchasers, including First Chicago
(the "Final Bidders"), from among those who had given preliminary indications
of interest on October 21, 1993. The Board directed that the Final Bidders be
permitted to conduct due diligence of Lake Shore and be supplied with a draft
merger agreement (which had been reviewed by the Board) pursuant to which any
transaction would be consummated. The Board of Directors also directed DLJ to
conduct due diligence of the Final Bidders.
On October 27, 1993, DLJ sent a draft merger agreement prepared by Sidley &
Austin, Lake Shore's counsel, to the Final Bidders, including First Chicago.
From October 27, 1993 to November 17, 1993, the Final Bidders conducted due
diligence of Lake Shore and DLJ conducted due diligence of the Final Bidders.
On November 17, 1993, pursuant to the instructions previously given to the
Final Bidders, DLJ, on behalf of Lake Shore, received the proposals of the
Final Bidders. On November 18, 1993, DLJ made a presentation to the Special
Committee of Lake Shore regarding the proposals of the Final Bidders. On
November 19, 1993, the Board of Directors of Lake Shore met to review and
discuss the proposals. Based on the recommendations of the management of Lake
Shore, the Special Committee and DLJ, the Board of Directors of Lake Shore
authorized negotiation of a definitive merger agreement with First Chicago.
On November 20, 1993 and November 21, 1993, the final terms of a definitive
merger agreement (the "Original Agreement") and various related agreements were
negotiated by officers and representatives of Lake Shore and First Chicago,
including the terms of an option to purchase shares of Lake Shore Common Stock
to be granted to First Chicago as a condition to its execution of the
Agreement. On November 21, 1993, the Board of Directors of Lake Shore
reconvened the November 19, 1993 meeting and, after considering all relevant
factors and the recommendations of the management of Lake Shore, the Special
Committee and DLJ, those members of the Board of Directors who were present
unanimously authorized the execution and delivery of the Original Agreement and
the various related agreements (as previously disclosed, Paula H. Crown recused
herself from all deliberations relating to First Chicago; Robert R. Yohanan was
absent from the November 19, 1993 and November 21, 1993 meetings and
subsequently resigned from the Board of Directors of Lake Shore effective
November 18, 1993). On November 21, 1993, the Agreement and the various related
agreements were executed by both parties. See "The Merger--Lake Shore's Reasons
for the Merger."
In February 1994, the Original Agreement was amended and restated in the form
of the Agreement to provide for a merger of Lake Shore into First Chicago
instead of a merger of Lake Shore into a wholly-owned subsidiary of First
Chicago, as originally contemplated.
LAKE SHORE'S REASONS FOR THE MERGER
Over the course of six meetings since First Chicago's initial indication of
interest in July, the Board of Directors of Lake Shore has carefully considered
Lake Shore's strategic options, including the proposed Merger. The Board has
concluded that the transaction is in the best interests of Lake Shore and its
Stockholders. In reaching this conclusion, the Board of Directors of Lake Shore
has considered, among other things, the consideration offered to Lake Shore
Stockholders in relation to the historical per share market value, book value
and earnings of Lake Shore Common Stock. See "First Chicago and Lake Shore
Comparative Stock Prices" and "Comparative Per Share Data."
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The Board of Directors of Lake Shore also considered a number of additional
factors in approving the terms and conditions of the Merger including, without
limitation, the following:
(a) the financial condition (including the excess of appraised value of
real estate over book value and the conservative nature of the level of
allowance for loan losses), results of operations, business, prospects
and strategic objectives of Lake Shore;
(b) the projected financial condition and results of operations of Lake
Shore, as well as the risks involved in achieving those prospects and
objectives;
(c) the detailed financial and valuation analyses presented to the Board of
Directors of Lake Shore by DLJ with respect to Lake Shore and First
Chicago and the market for bank acquisitions;
(d) the opinion of DLJ that the consideration which the Lake Shore
Stockholders will receive in the Merger is fair to such Stockholders
from a financial point of view;
(e) the history of unsolicited expressions of interest in Lake Shore, the
process whereby indications of interest were publicly solicited, the
fact that First Chicago's proposal represented the highest bid for Lake
Shore and the relative attributes of the common stocks of the Final
Bidders;
(f) the terms and conditions of, and course of negotiations resulting in,
the Agreement;
(g) the terms and conditions of, course of the negotiations resulting in,
and the legal, accounting and practical significance of the stock
option granted to First Chicago, as well as the facts that (i) First
Chicago insisted on the stock option as a condition to entering into
the Agreement, (ii) indications of interest in Lake Shore had been
publicly solicited in a thorough auction process and the Board had been
advised by DLJ that the second Final Bidder would not engage in a
transaction at the price level proposed by First Chicago, (iii) First
Chicago has been able to offer the highest bid largely because its in-
market position allows it greater potential cost savings and synergies
than could be achieved by out-of-market bidders, and (iv) First
Chicago's bid met or exceeded the valuation ranges produced by DLJ
using various methodologies;
(h) the likelihood that the proposed acquisition would be consummated;
(i) the effect of the proposed acquisition on employees and customers of
Lake Shore;
(j) the absence of dissenter's rights in the Merger under applicable law;
(k) the advice of DLJ as to the structure of the price provisions in the
Agreement;
(l) the recommendations of Lake Shore's management and the Special
Committee with respect to the proposed acquisition;
(m) the collective experience of the members of the Board of Directors of
Lake Shore with respect to Lake Shore and the multiple meetings and
lengthy deliberation of the Board of Directors of Lake Shore with
respect to the foregoing; and
(n) the active and direct role taken by the Board of Directors of Lake
Shore in the process, including the involvement of the Special
Committee and the continuous updating given to the Board of Directors.
Lake Shore's management believes that the Merger will benefit Lake Shore
Stockholders by affording them the opportunity to participate in the future
growth of a much larger and more diversified bank holding company.
ACCORDINGLY, THE BOARD OF DIRECTORS OF LAKE SHORE RECOMMENDS THAT LAKE SHORE
STOCKHOLDERS VOTE FOR ADOPTION OF THE AGREEMENT.
FIRST CHICAGO'S REASONS FOR THE MERGER
The Board of Directors of First Chicago has carefully considered the proposed
Merger and the terms of the Agreement and has concluded that the transaction is
in the best interests of First Chicago and its stockholders.
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First Chicago's Board of Directors believes that First Chicago will benefit
from the transaction by gaining the ability to offer various middle market,
small business and consumer banking services to an increasingly broader segment
of the metropolitan Chicago area market. The locations and customer base of
Lake Shore complement the markets currently being served by American National
Bank and Trust Company of Chicago ("ANB") and The First National Bank of
Chicago ("FNBC"), subsidiaries of First Chicago, thus enhancing the ability of
First Chicago to offer additional full-service banking locations to its
existing customers, to increase the array of products and services offered to
(and enhance the banking convenience of) existing Lake Shore customers, and to
gain access to potential customers living or working in communities where First
Chicago currently has no physical presence. First Chicago also will benefit
from access to Lake Shore's existing customer base, many of whom currently do
not have significant banking relationships with First Chicago.
OPINION OF LAKE SHORE'S FINANCIAL ADVISOR
In August 1993, the Lake Shore Board of Directors retained DLJ to act as Lake
Shore's financial advisor with respect to the evaluation of Lake Shore's long-
term strategic alternatives, including, among other things, maintaining Lake
Shore in independent form, or the possible sale, merger, consolidation or any
other business combination, in one or a series of transactions, involving all
or a substantial amount of the business, securities or assets of Lake Shore. As
part of its services, DLJ analyzed Lake Shore and its operations, historical
performance and future prospects; assisted the Lake Shore Board of Directors in
evaluating First Chicago's August 1993 preliminary indication of interest;
identified and contacted selected bank holding companies acceptable to the Lake
Shore Board of Directors to solicit indications of interest in a possible
business combination with Lake Shore; participated in negotiations concerning
the financial aspects of the Agreement under the guidance of the Lake Shore
Board of Directors; and provided an opinion as to the fairness, from a
financial point of view, of the number of shares of First Chicago Common Stock
into which each share of Lake Shore Common Stock will be converted in the
Merger (the "Exchange Ratio") to the holders of Lake Shore Common Stock.
DLJ is a nationally recognized investment banking firm regularly engaged in
the valuation of financial institutions and their securities in connection with
mergers and acquisitions. The Lake Shore Board of Directors selected DLJ on the
basis of its familiarity with Lake Shore and the financial services industry,
qualifications, ability, and its previous experience and its reputation with
respect to mergers and acquisitions. No limitations were imposed by the Lake
Shore Board of Directors upon DLJ with respect to the investigations made or
procedures followed by DLJ in rendering its opinion.
DLJ has rendered a written opinion to the Lake Shore Board of Directors to
the effect that, as of the date of this Prospectus/Proxy Statement, the
Exchange Ratio is fair, from a financial point of view, to the holders of Lake
Shore Common Stock. Such opinion describes the assumptions made, matters
considered and the scope of the review undertaken and procedures followed by
DLJ. DLJ's opinion is attached hereto as Appendix B and is incorporated herein
by reference. STOCKHOLDERS ARE ENCOURAGED TO READ SUCH OPINION IN ITS ENTIRETY.
DLJ's opinion is directed to the Lake Shore Board of Directors only and is
directed only to the Exchange Ratio and does not constitute a recommendation to
any holder of Lake Shore Common Stock as to how such holder should vote at the
Lake Shore Special Meeting of Stockholders.
For purposes of its opinion and in connection with its review of the proposed
transaction, DLJ, among other things: (a) participated in discussions and
negotiations among representatives of Lake Shore and its legal advisor and
representatives of First Chicago that resulted in the Agreement; (b) reviewed
the Agreement, the Stock Option Agreement, dated November 21, 1993, between
Lake Shore and First Chicago (the "Stock Option Agreement") and this
Prospectus/Proxy Statement; (c) reviewed certain publicly available financial
statements, both audited and unaudited, for Lake Shore and First Chicago,
including those included in the Annual Report on Form 10-K for the year ended
December 31, 1992, the Quarterly Reports on Form
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10-Q for the periods ended March 31, 1993, June 30, 1993 and September 30, 1993
and the most recent regular annual proxy statement available as of November 21,
1993 for Lake Shore and First Chicago; (d) reviewed certain financial
statements and other financial and operating data concerning Lake Shore and
First Chicago prepared by their respective managements; (e) reviewed certain
financial projections of Lake Shore and First Chicago, both on a stand-alone
and on a combined basis, prepared by their respective managements; (f) reviewed
certain appraisals of real property owned by Lake Shore; (g) discussed certain
aspects of the past and current business operations, results of regulatory
examinations, financial condition and future prospects of Lake Shore and First
Chicago with certain members of the management of Lake Shore and First Chicago;
(h) reviewed reported market prices and historical trading activity of Lake
Shore Common Stock and First Chicago Common Stock; (i) reviewed certain aspects
of the financial performance of Lake Shore and First Chicago and compared such
financial performance of Lake Shore and First Chicago with the stock market
data relating to Lake Shore and First Chicago and with similar data available
for certain other financial institutions and certain of their publicly traded
securities; (j) reviewed certain of the financial terms, to the extent publicly
available, of certain recent business combinations involving other financial
institutions; and (k) conducted such other studies, analyses and examinations
as DLJ deemed appropriate.
DLJ relied upon and assumed without independent verification the accuracy and
completeness of all of the financial and other information provided to it by
Lake Shore, First Chicago and their respective representatives and of the
publicly available information reviewed by DLJ. At the direction of the Lake
Shore Board of Directors, DLJ also relied upon the managements of both Lake
Shore and First Chicago as to the reasonableness and achievability of the
financial and operating forecasts provided to DLJ (and the assumptions and
bases therefor). In that regard, DLJ assumed with the permission of the Lake
Shore Board of Directors that such forecasts, including without limitation
projected cost savings and operating synergies resulting from the Merger,
reflect the best currently available estimates and judgments of such respective
managements and that such projections and forecasts will be realized in the
amounts and in the time periods currently estimated by the managements of both
Lake Shore and First Chicago. DLJ did not independently verify and relied on
and assumed that the aggregate allowances for loan losses set forth in the
balance sheets of each of Lake Shore and First Chicago at September 30, 1993
were adequate to cover such losses and complied fully with applicable law,
regulatory policy and sound banking practice as of the date of such financial
statements. With the permission of the Lake Shore Board of Directors, DLJ did
not independently verify that any of Lake Shore's assets reported in its
balance sheet as of September 30, 1993 should have been classified as other
real estate owned or in-substance foreclosures under applicable law, regulatory
policy or sound banking practice as of such date; nor did DLJ independently
verify the carrying values of other real estate owned and loans classified as
in-substance foreclosures of First Chicago in its September 30, 1993 balance
sheet, and DLJ assumed with the permission of the Lake Shore Board of Directors
that such carrying values complied fully with applicable law, regulatory policy
and sound banking practice as of such date. DLJ was not retained to and did not
conduct a physical inspection of any of the properties or facilities of Lake
Shore or First Chicago, nor did DLJ make any independent evaluation or
appraisal of the assets, liabilities or prospects of Lake Shore or First
Chicago, and did not review any individual credit files. DLJ also assumed with
the permission of the Lake Shore Board of Directors that the Merger is, and
will be, in compliance with all laws and regulations that are applicable to
Lake Shore and First Chicago. With the permission of the Lake Shore Board of
Directors, DLJ assumed for purposes of its opinion that the Merger will be
recorded as a "pooling of interests" under generally accepted accounting
principles.
Prior to rendering its written opinion dated as of the date of this
Prospectus/Proxy Statement to the Lake Shore Board of Directors, DLJ rendered a
written opinion to the Lake Shore Board of Directors on November 21, 1993. DLJ
also addressed the Lake Shore Board of Directors on November 19, 1993 in
connection with the decision by the Lake Shore Board of Directors to negotiate
with First Chicago on an exclusive basis. See "The Merger--Background of the
Merger" for a discussion of the events preceding the execution of the
Agreement. Set forth below is a brief summary of the analyses performed by DLJ
in reaching its November 21, 1993 opinion.
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Stock Trading History. DLJ examined the history of trading prices and volume
for Lake Shore Common Stock and First Chicago Common Stock and the relationship
between the movements of such common stock prices to the market prices of the
common stock of the companies in the Lake Shore Peer Group (as defined below)
and the DLJ Midwest Universe (as defined below).
Discounted Cash Flow Analysis. Using discounted cash flow analysis, DLJ
estimated the future dividend streams that Lake Shore could produce over the
period from September 30, 1993 through December 31, 1997, assuming a minimum
required tangible equity level of 6.5% of tangible total assets, if Lake Shore
performed in accordance with management's forecast. DLJ also estimated the
terminal value of Lake Shore's common equity as of December 31, 1997, by
applying a range of multiples to Lake Shore's projected 1997 earnings. The
dividend streams and terminal value were discounted to present values as of
September 30, 1993 using discount rates ranging from 12% to 14%, which reflect
different assumptions regarding the required rates of return of holders and
prospective buyers of Lake Shore Common Stock. The range of present values per
fully diluted share of Lake Shore Common Stock resulting from this analysis was
$20.67 to $25.50.
Comparison with Selected Companies. DLJ compared selected financial ratios
for Lake Shore to the corresponding ratios of the "Lake Shore Peer Group"
(consisting of AMCORE Financial, Inc., First Colonial Bankshares Corporation,
First Midwest Bancorp, Inc., First Oak Brook Bancshares, Inc., Firstbank of
Illinois Co., Heritage Financial Services, Inc., Pinnacle Banc Group, Inc.,
River Forest Bancorp, and Suburban Bancorp, Inc.), and for First Chicago to the
corresponding ratios of the "DLJ Midwest Universe" (consisting of Banc One
Corporation, Boatmen's Bancshares, Inc., Comerica Incorporated, Fifth Third
Bancorp, First Bank System, Inc., First of America Bank Corporation, Huntington
Bancshares Incorporated, National City Corporation, NBD Bancorp, Inc., Norwest
Corporation, Old Kent Financial Corporation, and Society Corporation) and the
"Money Center Banks" (consisting of The Bank of New York Company, Inc., Bankers
Trust New York Corporation, The Chase Manhattan Corporation, Chemical Banking
Corporation, Citicorp, Continental Bank Corporation and J.P. Morgan & Co.
Incorporated). Such ratios included: the "Leverage Ratio" (as defined in the
capital guidelines published by the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board")), return on average total assets, return
on average total equity, loan loss reserve to non-performing loans (defined as
non-accrual loans, loans 90 days or more past due but still accruing interest
and renegotiated loans), non-performing assets (defined as non-performing loans
plus other real estate owned) to total loans plus other real estate owned,
market price to latest twelve months' ("LTM") earnings per share ("EPS") and
market price to book value per share. All ratios were based on financial data
at or for the twelve months ended September 30, 1993. Market prices as of
November 19, 1993 were used for all companies except Lake Shore, for which the
market price as of August 20, 1993 was used.
DLJ compared the mean values for each of such ratios for the Lake Shore Peer
Group with the corresponding ratio for Lake Shore. This analysis showed that
the Lake Shore Peer Group had a mean Leverage Ratio of 7.76% as compared with
10.37% for Lake Shore; a mean return on average total assets of 1.20% as
compared with 1.44% for Lake Shore; a mean return on average total equity of
14.1% as compared with 14.0% for Lake Shore; a mean ratio of loan loss reserve
to non-performing loans of 578.4% as compared with 307.6% for Lake Shore; a
mean ratio of non-performing assets to total loans plus other real estate owned
of 1.68% as compared with 0.50% for Lake Shore; a mean ratio of market price to
LTM EPS of 13.3 times as compared with 13.1 times for Lake Shore; and a mean
ratio of market price to book value per share of 1.66 times as compared with
1.74 times for Lake Shore.
DLJ also compared the mean values for each of such ratios for the DLJ Midwest
Universe and the Money Center Banks with the corresponding ratio for First
Chicago. This analysis showed that the DLJ Midwest Universe and the Money
Center Banks had mean Leverage Ratios of 7.66% and 7.33%, respectively, as
compared with 8.00% for First Chicago; mean returns on average total assets of
1.28% and 0.97%, respectively, as compared with 1.36% for First Chicago; mean
returns on average total equity of 15.9% and 15.2%, respectively, as compared
with 21.1% for First Chicago; mean ratios of loan loss reserve to non-
performing loans of 287.2% and 154.6%, respectively, as compared with 276.2%
for First Chicago;
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means ratios of non-performing assets to loans plus other real estate owned of
1.34% and 5.30%, respectively, as compared with 1.59% for First Chicago; mean
ratios of market price to LTM EPS of 12.0 times and 12.4 times, respectively,
as compared with 5.4 times for First Chicago; and mean ratios of market price
to book value per share of 1.75 times and 1.26 times, respectively, as compared
with 1.13 times for First Chicago.
Analysis of Selected Merger Transactions. DLJ reviewed selected mergers
involving acquisitions of banks or bank holding companies announced between
January 1, 1992 and November 19, 1993, in which the aggregate value of the
consideration offered was between $100 million and $500 million. Specifically,
DLJ reviewed the mergers involving the following pairs of institutions: Banc
One Corporation/Central Banking Group, Banc One Corporation/First Community
Bancorp, Inc., Bank of Boston Corporation/Multibank Financial Corporation, Bank
South Corporation/two Atlanta-area bank subsidiaries of Barnett Banks, Inc.,
Boatmen's Bancshares, Inc./First Amarillo Bancorporation, Inc., Boatmen's
Bancshares, Inc./Sunwest Financial Services, Comerica Incorporated/Pacific
Western Bancshares, CoreStates Financial Corp/Constellation Bancorp, CoreStates
Financial Corp/First Peoples Financial Corporation, First Bank System,
Inc./Bank Shares Incorporated, First Bank System, Inc./Boulevard Bancorp, Inc.,
First Commercial Corporation/State First Financial Corporation, First Empire
State Corporation/Central Trust Company and Endicott Trust Company
(subsidiaries of Midlantic Corporation), First Interstate Bancorp/San Diego
Financial Corporation, First Security Corporation/First National Financial
Corporation, First Union Corporation/First American Metro Corporation,
Huntington Bancshares Incorporated/CB&T Financial Corporation, Huntington
Bancshares Incorporated/COMMERCE BANC, Integra Financial Corp./Equimark
Corporation, Mercantile Bancorporation, Inc./MidAmerican Corporation, Meridian
Bancorp, Inc./Commonwealth Bancshares, National City Corporation/Ohio Bancorp,
NationsBank Corporation/Corpus Christi National Bank, NationsBank
Corporation/MNC Financial Inc., Norwest Corporation/First United Bank Group,
Norwest Corporation/Lincoln Financial Corporation, One Valley Bancorp of West
Virginia/Mountaineer Bankshares of West Virginia, PNC Bank Corp./First Eastern
Corporation, Shawmut National Corporation/New Dartmouth Bank and Synovus
Financial Corporation/First Commercial Bancshares, Inc.
DLJ calculated the multiples of the offer value over the market price, LTM
EPS and book value per share of the acquired company in each transaction. DLJ
also calculated the multiple of the "adjusted offer value" over the acquired
company's "normalized book value" in each transaction. For purposes of the
latter multiple, DLJ assumed "normalized book value" to be the lesser of the
acquired company's actual equity capital or 8% of its total assets, and
"adjusted offer value" to be the actual offer value minus the acquired
company's equity capital in excess of 8% of its total assets. The calculations
yielded a range of multiples of offer value to market price of 0.95 times to
1.61 times, with a mean of 1.34 times and a median of 1.37 times; a range of
multiples of offer value to LTM EPS of 6.3 times to 54.7 times, with a mean of
17.3 times and a median of 15.3 times; a range of multiples of offer value to
book value of 1.10 times to 3.12 times, with a mean of 1.85 times and a median
of 1.85 times, and a range of multiples of adjusted offer value to normalized
book value of 1.10 times to 3.12 times, with a mean of 1.90 times and a median
of 1.96 times.
DLJ compared these multiples with the corresponding multiples for the Merger,
valuing the Exchange Ratio at $31.08 per share of Lake Shore Common Stock. In
calculating the multiples for the Merger, DLJ used the closing market price per
share of Lake Shore Common Stock on August 20, 1993, EPS for the twelve months
ended September 30, 1993, and book value per share and normalized book value as
of September 30, 1993. Based on a $31.08 value per share of Lake Shore Common
Stock for the Exchange Ratio, such value represented multiples of 1.41 times
Lake Shore's market price per share, 18.5 times its EPS, 2.46 times its book
value per share and 2.90 times its normalized book value.
No company or transaction used in the above analyses as a comparison is
identical to Lake Shore, First Chicago or the Merger. Accordingly, an analysis
of the results of the foregoing is not mathematical; rather, it involves
complex considerations and judgments concerning differences in financial and
operating characteristics of the companies and other facts that could affect
the public trading value of the companies to which they are being compared.
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Pro Forma Merger Analysis. DLJ analyzed certain pro forma effects of the
Merger for market prices of First Chicago Common Stock ranging from $37.00 per
share to $53.00 per share. DLJ's analysis was based on September 30, 1993
financial data for Lake Shore and First Chicago, projected earnings estimates
for Lake Shore as provided by management, and median projected earnings
estimates as published by the Institutional Brokers Estimate System ("IBES")
for First Chicago. IBES is a data service which monitors and publishes a
compilation of earnings estimates produced by selected research analysts on
companies of interest to investors. The managements of both Lake Shore and
First Chicago informed DLJ of their belief that certain reductions in the
operating expenses and increases in the revenues of Lake Shore could result
from the Merger. For purposes of DLJ's analysis, it was assumed that Lake
Shore's operating expenses could be reduced by 25% in 1994 and 50% in 1995, and
that Lake Shore's revenues could be increased by 4.5% in 1994 and 9% in 1995,
as a result of the Merger.
DLJ's analysis showed pro forma dilution to First Chicago's LTM EPS ranging
from 3.99% to 6.43% (assuming no cost savings or revenue increases); to First
Chicago's 1994 estimated EPS ranging from 1.95% to 4.55% (assuming the
aforementioned cost savings and revenue increases); to First Chicago's 1995
estimated EPS ranging from 0.49% to 3.12% (assuming the aforementioned cost
savings and revenue increases); and to First Chicago's September 30, 1993 book
value per share ranging from 2.90% to 5.55%. The analysis also showed that
holders of Lake Shore Common Stock would experience an increase in dividend
income of from 195% to 320%, based on Lake Shore's and First Chicago's current
dividend payments as of November 21, 1993, and that the shares of First Chicago
Common Stock issued in the Merger would represent from 6.6% to 9.2% of the pro
forma total number of outstanding shares of First Chicago Common Stock. Lastly,
the analysis showed a pro forma increase in First Chicago's Leverage Ratio as
of September 30, 1993 from 8.00% to 8.06%.
In connection with its written opinion dated as of the date of this
Prospectus/Proxy Statement, DLJ performed procedures to update certain of its
analyses and reviewed the assumptions on which such analyses were based and the
factors considered in connection therewith.
Although the summary set forth above does not purport to be a complete
description of the analyses performed by DLJ, the material analyses performed
by DLJ in rendering its opinion have been summarized above. However, the
preparation of a fairness opinion is not necessarily susceptible to partial
analysis or summary description. DLJ believes that its analyses and the summary
set forth above must be considered as a whole and that selecting portions of
its analyses, without considering all factors and analyses, would create an
incomplete view of the process underlying the analyses by which DLJ reached its
opinions. In addition, DLJ may have given various analyses more or less weight
than other analyses, but no analysis was given materially more weight than any
other analysis. Also, DLJ may have deemed various assumptions more or less
probable than other assumptions, so that the range of valuations resulting from
any particular analysis described above should not be taken to be DLJ's view of
the actual value of Lake Shore or the combined company.
In performing its analyses, DLJ made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of Lake Shore and First Chicago.
The analyses performed by DLJ are not necessarily indicative of actual value or
actual future results, which may be significantly more or less favorable than
suggested by such analyses. Such analyses were prepared solely as part of DLJ's
analysis of the fairness, from a financial point of view, of the Exchange
Ratio. The analyses do not purport to be appraisals or to reflect the prices at
which a company might actually be sold or the prices at which any securities
may trade at the present time or at any time in the future. DLJ used in its
analyses various projections of future performance prepared by the managements
of Lake Shore and First Chicago. The projections are based on numerous
variables and assumptions which are inherently unpredictable and must be
considered not certain of occurrence as projected. Accordingly, actual results
could vary significantly from those assumed in the projections and any related
analyses. DLJ's opinion does not address the relative merits of the Merger as
compared to any alternative business strategies that might exist for Lake Shore
or the effect of any other business combination in which Lake Shore might
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engage. In addition, as described above, DLJ's opinion to the Lake Shore Board
of Directors was one of many factors taken into consideration by the Lake Shore
Board of Directors in making its determination to approve the Agreement.
Pursuant to the terms of a letter agreement dated August 25, 1993 (the
"August 25 Engagement Letter"), for DLJ's services in connection with the
Merger, including the rendering of its opinions, Lake Shore (i) has paid DLJ
$750,000, and (ii) has agreed to pay DLJ an amount equal to 0.7% of the
aggregate amount of consideration received by the holders of Lake Shore Common
Stock (treating any shares issuable upon exercise of options, warrants or other
rights of conversion as outstanding), less the amount paid by Lake Shore
pursuant to clause (i) above. Because the major portion of the aggregate
consideration to be received by the holders of Lake Shore Common Stock is to be
paid in the form of securities, the August 25 Engagement Letter provides that
the value of such securities, for purposes of calculating the fee payable to
DLJ, will be determined by the last sale price for such securities on the last
trading day thereof prior to consummation of the Merger. Lake Shore has also
agreed under the August 25 Engagement Letter to reimburse DLJ for all out-of-
pocket expenses, including reasonable fees and expenses of legal counsel, and
has agreed to indemnify DLJ against certain expenses and liabilities incurred
in connection with its engagement, including liabilities under Federal
securities law. The DLJ fee is an obligation of Lake Shore, which is payable at
the closing of the Merger (the "Closing"), and will have no impact on the
consideration to be received by the holders of Lake Shore Common Stock.
The Lake Shore Board of Directors had previously engaged DLJ pursuant to a
letter agreement dated August 5, 1993 (the "August 5 Engagement Letter") to act
as Lake Shore's financial advisor for a period of six months with respect to
the review and analysis of financial and structural alternatives available to
Lake Shore with a view to meeting its strategic objectives. The August 5
Engagement Letter provided for a fee of $75,000, half payable upon execution of
the August 5 Engagement Letter and half payable on November 5, 1993. Lake Shore
also agreed under the August 5 Engagement Letter to reimburse DLJ for all
reasonable and necessary out-of-pocket expenses (including reasonable fees and
expenses of counsel), not to exceed $10,000 without Lake Shore's prior
approval, and to indemnify DLJ against certain expenses and liabilities
incurred in connection with its engagement, including liabilities under Federal
securities law. In light of DLJ's subsequent engagement under the August 25
Engagement Letter, DLJ waived the fee provided for in the August 5 Engagement
Letter.
DLJ may, in the ordinary course of its business, trade securities of Lake
Shore and First Chicago for its own account or for the accounts of customers
and thus may hold long or short positions in such securities at any time. A
subsidiary of DLJ provides securities clearance and related services for a
discount brokerage subsidiary of First Chicago; during 1993, fees of
approximately $1.6 million were paid by First Chicago for such services.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Seven officers and one former officer of Lake Shore and/or Lake Shore
National Bank ("LSNB") have entered into Transitional Compensation Agreements
(the "Transitional Compensation Agreements") with Lake Shore. Pursuant to the
Transitional Compensation Agreement between Lake Shore and James W. Aldrich,
Chairman and Chief Executive Officer of Lake Shore, Mr. Aldrich will become
eligible for transitional compensation in the event of a voluntary termination
of employment occurring within the 30-day "window period" commencing one year
following a "change in control" or in the event of any other termination within
24 months of a "change in control", except a termination resulting from
retirement on or after age 65, disability, death, cause or resignation (unless
such resignation results from a successor failing to assume the Transitional
Compensation Agreement, a reduction of compensation or status, or relocation).
Consummation of the Merger is a "change in control" under the Transitional
Compensation Agreement. Pursuant to his Transitional Compensation Agreement,
upon such a termination of employment Mr. Aldrich will be entitled to (i)
continuation of base salary for three years, (ii) continuation of bonus for
three years at a rate equal to the bonus received for 1993, (iii) continuation
of group health, life, long-term disability and similar insurance coverage for
three years or until Mr. Aldrich obtains comparable coverage under another
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<PAGE>
plan, (iv) use of outplacement services and (v) continued use of a leased
automobile until the end of the lease term. Upon such a termination of
employment, Mr. Aldrich's Transitional Compensation Agreement also entitles him
to a lump sum cash amount equal to the value of any nonvested amounts under the
Lake Shore Bancorp., Inc. Profit Sharing Plan (the "Profit Sharing Plan") and
vesting of all unvested shares of restricted stock held under the Lake Shore
Bancorp., Inc. Stock Incentive Plan (the "Incentive Plan"). In addition, Mr.
Aldrich's Transitional Compensation Agreement provides that he shall not
disclose certain confidential information relating to Lake Shore. Mr. Aldrich's
current base salary is $339,625 and his bonus for 1993 was $200,000. Currently,
Mr. Aldrich holds 50,000 unvested restricted shares of Lake Shore Common Stock.
On December 27, 1993, Mr. Aldrich's Employment Agreement was amended to
provide that Lake Shore pay Mr. Aldrich a supplemental pension benefit in the
amount of $1,757,400, which amount was deposited on December 28, 1993 in a
grantor trust established by Mr. Aldrich. This amendment replaced the
provisions previously contained in Mr. Aldrich's Employment Agreement requiring
Lake Shore to pay Mr. Aldrich a supplemental pension benefit upon his
retirement on or after the attainment of age 65 or upon his attainment of age
65 if he were then disabled. Mr. Aldrich's Transitional Compensation Agreement
also was amended to delete provisions requiring the payment upon termination
following a "change in control" of a lump sum amount equal to the actuarial
equivalent value of his accrued benefit under the Lake Shore Bancorp., Inc.
Pension Plan (the "Pension Plan") and the Lake Shore Bancorp., Inc.
Supplemental Retirement Plan (the "Supplemental Retirement Plan"). First
Chicago has consented to such funding of Mr. Aldrich's grantor trust.
Robert R. Yohanan, formerly the President and Chief Operating Officer and a
director of Lake Shore, also entered into a Transitional Compensation Agreement
with Lake Shore. In addition, in December 1993, Mr. Yohanan and Lake Shore
entered into an agreement whereby Mr. Yohanan ceased to be an executive officer
and a director of Lake Shore, but agreed to continue as an employee of Lake
Shore until the effective time of the Merger (the "Effective Time") or
termination of the Agreement. Under the agreement between Lake Shore and Mr.
Yohanan, Lake Shore agreed to pay Mr. Yohanan his base salary and benefits
through November 30, 1994, a bonus for 1993 and, following the Effective Time
or termination of the Agreement, a cash payment of $375,000. Lake Shore also
agreed that, commencing at the Effective Time, Mr. Yohanan will receive the
benefits payable under his Transitional Compensation Agreement similar to those
payable under Mr. Aldrich's Transitional Compensation Agreement for three
years, except that, for the period through November 30, 1994, his base salary
will be paid pursuant to his Employment Agreement, and he will be entitled to
full vesting under the Pension Plan. Mr. Yohanan's current base salary is
$242,384 and his 1993 bonus was $100,000. Mr. Yohanan currently holds 114,687
options, 70,417 of which are unvested and will become vested upon consummation
of the Merger, 7,813 of which are unvested and will become vested on April 1,
1994 and expire on May 2, 1994 and 15,624 of which are vested and will expire
on May 2, 1994.
The Transitional Compensation Agreements of Stephen D. Daniels, Senior Vice
President and Chief Financial Officer of Lake Shore, Thomas D. Roegner, Vice
President of Lake Shore, Michael B. Westberg, Senior Vice President of LSNB,
and Randolph F. Williams, Senior Vice President of LSNB, are similar to Mr.
Aldrich's Transitional Compensation Agreement, except that they provide for
continuation of base salary and bonus for two years, rather than three, and, in
the case of Messrs. Daniels and Williams, do not provide for vesting under the
Profit Sharing Plan. The Transitional Compensation Agreements of Messrs.
Roegner and Westberg also provide for full vesting under the Pension Plan and
the calculation of bonus payments based on the average of the bonuses paid
during the five years preceding the year in which termination of employment
occurs. The current base salaries of Messrs. Daniels, Roegner, Westberg and
Williams are $145,600, $150,800, $125,683 and $140,400, respectively, and their
1993 bonuses were $55,000, $58,000, $18,000 and $40,000, respectively. Mr.
Daniels currently holds 31,000 options, all of which are unvested and will
become vested upon consummation of the Merger. Mr. Roegner currently holds
68,854 options, 50,000 of which are unvested and will become vested upon
consummation of the Merger, 4,427 of which are unvested and will become vested
on April 1, 1994 and expire on May 2, 1994 and 4,427 of which are vested and
will expire on May 2, 1994. Mr. Westberg currently holds 25,718 options, 10,167
of which are unvested and will
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<PAGE>
become vested upon consummation of the Merger, 3,906 of which are unvested and
will become vested on April 1, 1994 and expire on May 2, 1994 and 3,312 of
which are vested and will expire on May 2, 1994. Mr. Williams currently holds
30,000 options, all of which are unvested and will become vested upon
consummation of the Merger.
The Transitional Compensation Agreements of Joseph A. Bamonte, Senior Vice
President of LSNB, and Alma J. Pini, Vice President/Secretary of Lake Shore,
also are similar to Mr. Aldrich's, except that they provide for continuation of
base salary for one year, rather than three, do not provide for continuation of
a bonus, do not give rise to payments upon a voluntary termination of
employment during a "window period" and, in the case of Mr. Bamonte, does not
provide for vesting under the Profit Sharing Plan or use of a leased automobile
or outplacement services. The Transitional Compensation Agreement of Ms. Pini
also provides for full vesting under the Pension Plan. The current base
salaries of Mr. Bamonte and Ms. Pini are $94,050 and $117,500, respectively.
Mr. Bamonte currently holds 4,000 options, all of which are unvested and will
become vested upon consummation of the Merger. Ms. Pini currently holds 6,891
options, 4,000 of which are unvested and will become vested upon consummation
of the Merger and 2,891 of which are unvested and will become vested on April
1, 1994 and expire on May 2, 1994.
Certain current and former employees of Lake Shore and its subsidiaries hold
options to purchase shares of Lake Shore Common Stock pursuant to the Incentive
Plan. At the Effective Time, each option to purchase shares of Lake Shore
Common Stock which is outstanding immediately prior to the Effective Time under
the Incentive Plan shall become and represent an option to purchase the number
of shares of First Chicago Common Stock (decreased to the nearest full share)
determined by multiplying (i) the number of shares of Lake Shore Common Stock
subject to such stock option immediately prior to the Effective Time by (ii)
the Exchange Ratio. Each such option will be exercisable at an exercise price
per share of Lake Shore Common Stock (rounded to the nearest whole cent) equal
to the exercise price per share of Lake Shore Common Stock immediately prior to
the Effective Time divided by the Exchange Ratio. First Chicago shall pay cash
to each holder of such stock options in lieu of issuing fractional shares of
First Chicago Common Stock unless, in its reasonable judgment, such payment
would adversely affect the ability to account for the Merger as a "pooling of
interests." After the Effective Time, each option to purchase shares of Lake
Shore Common Stock pursuant to the Incentive Plan shall be exercisable to
purchase shares of First Chicago Common Stock upon the same terms and
conditions as were applicable to such stock option at the Effective Time,
giving effect to the acceleration of the exercisability of such stock options
as a result of the Merger. Currently, there are options to purchase 449,535
shares of Lake Shore Common Stock outstanding under the Incentive Plan of which
348,942 are held by current employees of Lake Shore and 100,593 are held by
former employees of Lake Shore.
The Agreement provides that all rights to indemnification now existing in
favor of the past and present directors or officers of Lake Shore, LSNB or Bank
of Hinsdale ("BOH") pursuant to Lake Shore's certificate of incorporation and
by-laws will continue and will be honored by First Chicago with respect to acts
or omissions occurring at or prior to the Effective Time. First Chicago also
agreed to provide, for not less than five years from the Effective Time, the
current officers and/or directors of Lake Shore an insurance and
indemnification policy that provides such officers and/or directors coverage
for events occurring through the Effective Time that is in the aggregate no
less favorable than the existing policy for such officers and/or directors of
Lake Shore.
The Agreement also provides that, following the Effective Time, the employees
of Lake Shore, LSNB and BOH will be eligible for employee benefits and programs
which are no less favorable than those generally available to similarly
situated employees of First Chicago and its subsidiaries. For further
information with respect to the effect of the Merger on the Lake Shore employee
benefit plans, see "Terms of Merger--Effect of Merger on Lake Shore Employee
Benefit Plans." In addition, the Agreement also provides that First Chicago
shall maintain Lake Shore's policy for terminated employees as now existing,
with certain agreed upon modifications, or shall replace such policy with a
policy providing at least equal compensation, for a period of at least one year
from the Effective Time. See "Terms of Merger--Severance Policy."
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<PAGE>
LSNB and BOH may have had in the past, and expect to have in the future,
transactions in the ordinary course of business with directors and officers of
First Chicago and their associates and with First Chicago's subsidiaries.
Similarly, one or more subsidiaries of First Chicago may have had in the past
transactions in the ordinary course of business with directors, officers and
principal stockholders of Lake Shore and their associates and with LSNB and
BOH. Such transactions, including borrowings and loan commitments, are on
substantially the same terms, including interest rates and collateral, as
applicable, as those prevailing at the time for comparable transactions with
others, and, in the opinion of the respective managements of First Chicago and
Lake Shore, did not involve more than a normal risk of collectibility, and did
not present other significant unfavorable features.
Certain directors of Lake Shore beneficially own shares of First Chicago
stock. The husband of Paula H. Crown, James S. Crown, is a director of First
Chicago. Both Mrs. Crown, in her capacity as a director of Lake Shore, and Mr.
Crown, in his capacity as a director of First Chicago, recused themselves from
all deliberations of their respective Boards of Directors regarding either
First Chicago or Lake Shore, as the case may be. Mr. Crown may be deemed to
beneficially own, as of December 31, 1993, 3,051,604 shares of First Chicago
Common Stock. Included in this number are 19,846 shares directly owned by Mr.
Crown; 1,555,305 shares owned by The Crown Fund of which Mr. Crown is a
partner; 226,205 shares owned by Henry Crown and Company (Not Incorporated), of
which he is a partner; 230,179 shares owned by Areljay, L.P., of which a trust
of which Mr. Crown is a beneficiary is a limited partner; 266,476 shares owned
by Arie and Ida Crown Memorial, of which Mr. Crown is a director; and 517,639
shares owned by Pines Trailer Limited Partnership, of which a corporation of
which Mr. Crown is a shareholder and a partnership of which Mr. Crown is a
partner are partners. Also included are 131,941 shares beneficially owned by
trusts of which Mr. Crown is a beneficiary and 98,766 shares beneficially owned
by trusts of which Mr. Crown is a co-trustee. Mrs. Crown beneficially owns 802
shares, and trusts of which the Crowns' children are beneficiaries own
beneficially 4,445 shares. Mr. Crown disclaims beneficial ownership of the
shares held by the various persons and entities described above except for the
19,846 shares held directly by Mr. Crown. Mrs. Crown disclaims beneficial
ownership of the shares deemed to be held by Mr. Crown except for the 802
shares held directly by Mrs. Crown.
Additionally, certain directors of First Chicago own shares of Lake Shore
stock. As of December 31, 1993, Mr. Crown was the beneficiary of a trust which
is a partner in a partnership owning 8,400 shares of Lake Shore stock and Mrs.
Crown directly owned 1,125 shares of Lake Shore stock. Mr. Crown disclaims any
beneficial ownership in these shares. Andrew J. McKenna, a director of First
Chicago, is a former director of Lake Shore; Mr. McKenna owned 10,531 shares of
Lake Shore stock as of December 31, 1993.
STOCK OPTION AGREEMENT
As a condition to its execution of the Agreement, First Chicago required that
Lake Shore enter into the Stock Option Agreement. Pursuant to the Stock Option
Agreement, Lake Shore granted First Chicago an option to purchase up to
1,977,643 shares of Lake Shore Common Stock at a price of $31.08 per share.
Under the Stock Option Agreement, First Chicago's option becomes exercisable
(i) on the fifth day preceding the scheduled initial expiration date of a bona
fide tender or exchange offer for 20% or more of the then outstanding shares of
Lake Shore Common Stock by any person other than First Chicago or its
subsidiaries (a "Person"), (ii) the execution of a letter of intent or other
agreement by Lake Shore whereby any Person would have the right to acquire
control of Lake Shore or any of its subsidiaries or all or substantially all of
their respective assets, (iii) withdrawal by the Lake Shore Board of Directors
of its recommendation to Lake Shore Stockholders of the approval of the Merger,
or the acceptance by the Lake Shore Board of Directors of, or the
recommendation by the Lake Shore Board of Directors that Lake Shore
Stockholders accept, an offer from any Person to merge or consolidate with or
acquire 20% or more of the then outstanding shares of Lake Shore Common Stock
or all or substantially all of the assets of Lake Shore or any of its
subsidiaries, (iv) the acquisition by any Person of 20% or more of the then
outstanding shares of Lake Shore Common Stock or (v) any of the events
described in (ii) or (iii) above occurring within 180 days
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<PAGE>
after termination of the Agreement in whole or in part because of a breach by
Lake Shore of the terms and provisions of the Agreement.
The Stock Option Agreement provides First Chicago with the right to require
Lake Shore to purchase all, but not less than all, of the shares issued
pursuant to the Stock Option Agreement (or the option itself if it has not been
exercised). In addition, after the exercise of the option pursuant to the Stock
Option Agreement, First Chicago shall have the right for two years after such
exercise to require that Lake Shore file a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), to register the
shares issued pursuant to the exercise of the option.
The Stock Option Agreement shall terminate upon the earliest of (i) the
expiration of one year after the occurrence of an event causing the option to
become exercisable, (ii) termination of the Agreement in accordance with its
terms (unless terminated by First Chicago because of a breach of the terms and
provisions of the Agreement by Lake Shore), (iii) one year after the
termination of the Agreement by First Chicago because of a breach of the terms
and provisions of the Agreement by Lake Shore or (iv) consummation of the
Merger.
TERMS OF THE MERGER
The detailed terms of and conditions to the Merger are contained in the
Agreement, which is attached to this Prospectus/Proxy Statement as Appendix A
and is incorporated herein by reference. The description in this
Prospectus/Proxy Statement of the terms of and conditions to the Merger is
qualified by, and made subject to, the more complete information set forth in
the text of the Agreement.
EFFECT OF THE MERGER ON LAKE SHORE COMMON STOCK
The Agreement provides that, subject to the terms and conditions thereof,
Lake Shore will be merged into First Chicago with First Chicago being the
surviving corporation. First Chicago intends at the Effective Time, or as soon
as possible after the Effective Time, to consolidate the business of LSNB and
BOH into FNBC and ANB.
As a result of the Merger, the separate existence of Lake Shore will cease
and following the consolidation of the business of LSNB and BOH into FNBC and
ANB, the separate existence of LSNB and BOH also will cease. Lake Shore
Stockholders will become stockholders of First Chicago. Although both Lake
Shore and First Chicago are Delaware corporations, the provisions of the
restated certificate of incorporation and by-laws of First Chicago are
different from the provisions of the certificate of incorporation and by-laws
of Lake Shore with respect to such matters as voting of stock for election of
directors, removal of directors and payment of dividends. See "Comparative
Rights of Holders of Lake Shore Common Stock and First Chicago Common Stock."
The Closing of the transactions described in the Agreement will occur (a) on
the first to occur of July 8, 1994, July 15, 1994, July 22, 1994, August 12,
1994, August 19, 1994, September 16, 1994, September 23, 1994, October 14, 1994
and October 31, 1994, provided that such date (the "Closing Date") is at least
five business days following the day on which the last of the following occurs:
(i) the Merger shall have been approved by the requisite vote of the holders of
Lake Shore Common Stock, (ii) the First Chicago Common Stock issuable in the
Merger and pursuant to any outstanding stock options of Lake Shore shall have
been authorized for listing on the New York Stock Exchange (the "NYSE") upon
official notice of issuance, (iii) the approval of the Federal Reserve Board
specified in the Bank Holding Company Act of 1956, as amended (the "BHCA"), the
approvals of the Office of the Comptroller of the Currency (the "OCC") under
the Bank Merger Act and the approval of the Illinois Commissioner of Banks and
Trust Companies specified in the Illinois Banking Act shall have been obtained
and become effective and (iv) the registration statement registering the First
Chicago Common Stock issuable in the Merger and pursuant to outstanding stock
options of Lake Shore (the "Registration Statement") shall have become
effective in accordance with the provisions of the Securities Act, or (b) at
such other time and place as First Chicago and Lake Shore shall agree. The
Effective Time of the Merger shall be the later of the date and time at which
the Certificate of Merger (the "Certificate of Merger") to be filed in Delaware
is accepted for record by the Secretary of State
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of Delaware or such later time established by the Certificate of Merger. At the
Effective Time, each outstanding share of Lake Shore Common Stock will be
converted automatically by operation of law into a fraction of a share of First
Chicago Common Stock, as described in the following section. See "Terms of the
Merger--Consideration to be Received by Lake Shore Stockholders."
CONSIDERATION TO BE RECEIVED BY LAKE SHORE STOCKHOLDERS
The Agreement provides that at the Effective Time each Lake Shore Stockholder
will receive, for each share of Lake Shore Common Stock, the portion of a whole
share of First Chicago Common Stock (rounded to the nearest thousandth of a
share) equal to $31.08 divided by the average of the per share closing prices
on the NYSE of First Chicago Common Stock (as reported on the New York Stock
Exchange Composite Transactions Tape (the "NYSE Composite Tape")) during the
twenty consecutive trading days ending on the third trading day prior to the
Closing Date as reported in The Wall Street Journal, Midwest Edition (the "20-
Day Average Closing Price"), which number shall be the Exchange Ratio;
provided, that in no event shall the 20-Day Average Closing Price, for purposes
of the foregoing computation, be deemed to be less than a price of $37 or
greater than a price of $53 (the "Adjusted Average Closing Price") for each
presently outstanding share of First Chicago Common Stock.
No fractional shares of First Chicago Common Stock will be issued. Any Lake
Shore Stockholder who otherwise would be entitled to receive a fraction of a
share of First Chicago Common Stock (after taking into account all shares of
Lake Shore Common Stock owned by such Stockholder) shall receive an amount of
cash, without interest, equal to such Stockholder's proportionate interest in
the net proceeds from the sale or sales in the open market by First Chicago
Trust Company of New York, a wholly-owned subsidiary of First Chicago ("First
Chicago Trust Company") and the exchange agent for the Merger (the "Exchange
Agent"), made on behalf of Lake Shore Stockholders of the aggregate fractional
shares of First Chicago Common Stock issued pursuant to the Merger. As soon as
practical after the Effective Time, the Exchange Agent will determine the
excess of (x) the number of full shares of First Chicago Common Stock delivered
to the Exchange Agent by First Chicago pursuant to the terms of the Merger over
(y) the aggregate number of full shares of First Chicago Common Stock to be
distributed to Lake Shore Stockholders (such excess, the "Excess Shares"). The
Exchange Agent will sell the Excess Share at the prevailing prices on the NYSE
as agent for the former Lake Shore Stockholders. First Chicago will pay all
commissions, transfer taxes and other out-of-pocket transaction costs,
including the expenses and compensation of the Exchange Agent, incurred in
connection with such sale of Excess Shares. Until the net proceeds of such sale
have been distributed to the former Lake Shore Stockholders, the Exchange Agent
will hold such proceeds in trust for such former Stockholders.
In the event of any reclassification, stock split or stock dividend with
respect to First Chicago Common Stock (or if the record date with respect to
any of the foregoing should occur) during the period of trading days which is
used to determine the Exchange Ratio, or subsequent to such period but prior to
the Effective Time, appropriate and proportionate adjustments will be made in
the Exchange Ratio.
The following table provides examples of the portion of a share of First
Chicago Common Stock and total consideration to be received by Lake Shore
Stockholders for each share of Lake Shore Common Stock at various prices for
First Chicago Common Stock. Because the Agreement provides that each share of
Lake Shore Common Stock will be converted into that portion of a share of First
Chicago Common Stock ROUNDED TO THE NEAREST THOUSANDTH OF A SHARE equal to
$31.08 divided by the 20-Day Average Closing Price, even at 20-Day Average
Closing Prices between $37 and $53 there is no assurance that Lake Shore
Stockholders will receive First Chicago Common Stock equal in value to $31.08
for each share of Lake Shore Common Stock. As illustrated in the following
table, the per share value of First Chicago Common Stock received by Lake Shore
Stockholders may be somewhat more or less than $31.08. In addition, because the
Exchange Agent will sell Excess Shares on behalf of Lake Shore Stockholders at
prevailing prices on the NYSE, which prices may be more or less than the 20-Day
Average Closing Price, there is no assurance that Lake Shore Stockholders
receiving cash in lieu of fractional shares of First Chicago Common Stock will
receive cash equal to their pro rata portion of $31.08.
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PER SHARE CONSIDERATION TO BE PAID TO LAKE SHORE STOCKHOLDERS
AT VARIOUS PRICES FOR FIRST CHICAGO COMMON STOCK
<TABLE>
<CAPTION>
FIRST CHICAGO FIRST CHICAGO FIRST CHICAGO
COMMON STOCK PRICE(A) COMMON STOCK RECEIVED(B) COMMON STOCK VALUE(C)
--------------------- ------------------------ ---------------------
<S> <C> <C>
$35.00(d) .840 $29.40
$36.00(d) .840 $30.24
$37.00 .840 $31.08
$38.00 .818 $31.08
$39.00 .797 $31.08
$40.00 .777 $31.08
$41.00 .758 $31.08
$42.00 .740 $31.08
$43.00 .723 $31.09
$44.00 .706 $31.06
$45.00 .691 $31.10
$46.00 .676 $31.10
$47.00 .661 $31.07
$48.00 .648 $31.10
$49.00 .634 $31.07
$50.00 .622 $31.10
$51.00 .609 $31.06
$52.00 .598 $31.10
$53.00 .586 $31.06
$54.00(e) .586 $31.64
$55.00(e) .586 $32.23
</TABLE>
- --------
(a) This column represents various assumed 20-Day Average Closing Prices.
(b) This represents the portion of a share of First Chicago Common Stock
(rounded to the nearest thousandth of a share) which would be received at
the relevant 20-Day Average Closing Price of First Chicago Common Stock.
(c) This column assumes the value of a share of First Chicago Common Stock
equals the 20-Day Average Closing Price. There can be no assurance that at
the Effective Time of the Merger the value of First Chicago Common Stock
will be equal to, or greater than, the 20-Day Average Closing Price.
(d) Under the Agreement, if the 20-Day Average Closing Price of First Chicago
Common Stock is less than $37, it will be deemed to be $37 for purposes of
calculating the fraction of a share of First Chicago Common Stock to be
issued in the Merger. See "Terms of the Merger--Consideration to be
Received by Lake Shore Stockholders."
(e) Under the Agreement, if the 20-Day Average Closing Price of First Chicago
Common Stock is greater than $53, it will be deemed to be $53 for purposes
of calculating the fraction of a share of First Chicago Common Stock to be
issued in the Merger. See "Terms of the Merger--Consideration to be
Received by Lake Shore Stockholders."
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<PAGE>
APPOINTMENT OF EXCHANGE AGENT
In order to facilitate distribution of First Chicago Common Stock to Lake
Shore Stockholders, First Chicago will appoint First Chicago Trust Company to
act as Exchange Agent in connection with the Merger. The Exchange Agent will
enter into an agreement with First Chicago and Lake Shore pursuant to which it
will agree to act as agent for purposes of distributing the First Chicago
Common Stock to Lake Shore Stockholders.
EXCHANGE OF CERTIFICATES
Stockholders should not tender their certificates for Lake Shore Common Stock
with their proxy. As promptly as practicable after the Effective Time, the
Exchange Agent will mail to all Lake Shore Stockholders transmittal materials,
including a Letter of Transmittal (the "Letter of Transmittal") for use in
exchanging certificates evidencing Lake Shore Common Stock for certificates
evidencing First Chicago Common Stock. As soon as practicable after the Letter
of Transmittal is properly completed and returned, along with the certificates
evidencing Lake Shore Common Stock, to the Exchange Agent, the person specified
in the Letter of Transmittal shall receive certificates for the number of whole
shares of First Chicago Common Stock and, to the extent applicable, any cash in
lieu of fractional shares of First Chicago Common Stock, to which such person
is entitled as a result of the Merger. The Letter of Transmittal is expected to
provide instructions for Stockholders who have lost or misplaced their
certificates and wish to tender their shares.
Each share of First Chicago Common Stock for which shares of Lake Shore
Common Stock are exchanged in the Merger will be deemed to have been issued at
the Effective Time. Accordingly, Lake Shore Stockholders who receive First
Chicago Common Stock in the Merger will be entitled to receive any dividends or
other distributions which may be payable to all holders of record of First
Chicago Common Stock with respect to any record date after the Effective Time.
No holder of Lake Shore Common Stock will be entitled to receive shares of
First Chicago Common Stock or cash in lieu of fractional shares, and no
dividends or other distributions actually will be paid with respect to any
shares of First Chicago Common Stock, until the certificate or certificates
formerly representing such holder's shares of Lake Shore Common Stock have been
surrendered in accordance with the procedures described above. At the time such
surrender has been accomplished, a certificate representing the appropriate
number of shares of First Chicago Common Stock will be issued and accrued
dividends and other distributions on such shares of First Chicago Common Stock
will be paid without interest. Pursuant to the Agreement, if both Lake Shore
and First Chicago declare dividends to their respective stockholders for the
quarter in which the Closing occurs, Lake Shore Stockholders shall be entitled
to either a dividend on Lake Shore Common Stock or First Chicago Common Stock,
but not both, for such quarter.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion provides general information as to the anticipated
Federal income tax consequences of the Merger. Each Lake Shore Stockholder
should consult his or her own tax advisor as to the specific tax consequences
of the Merger, including the application and possible effect of state and local
tax laws.
It is a condition to the consummation of the Merger that Lake Shore receive
an opinion from Sidley & Austin, its counsel, concerning certain Federal income
tax consequences described herein, including among others, the following:
(a) the Merger of Lake Shore into First Chicago will constitute a
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), and Lake Shore and First
Chicago each will be a party to that reorganization within the meaning
of Section 368(b) of the Code;
(b) no gain or loss will be recognized by Lake Shore as a result of the
Merger;
31
<PAGE>
(c) no gain or loss will be recognized by Lake Shore Stockholders upon the
conversion of their Lake Shore Common Stock into shares of First
Chicago Common Stock pursuant to the Merger except with respect to
cash, if any, received in lieu of fractional shares of First Chicago
Common Stock;
(d) the aggregate tax basis of the shares of First Chicago Common Stock
received in exchange for shares of Lake Shore Common Stock pursuant to
the Merger will be the same as the aggregate tax basis of such shares
of Lake Shore Common Stock decreased by the amount of any tax basis
allocable to the fractional share interest for which cash is received;
and
(e) the holding period of the shares of First Chicago Common Stock received
in exchange for shares of Lake Shore Common Stock pursuant to the
Merger will include the period that such shares of Lake Shore Common
Stock were held by the holder provided such shares of Lake Shore Common
Stock were held as capital assets by the holder on the Closing Date.
In rendering such opinion, Sidley & Austin may receive and rely upon
representations contained in certificates of Lake Shore, First Chicago and
others, and may condition such opinion on the receipt, from Lake Shore
Stockholders holding a substantial amount of Lake Shore Common Stock (the
"Major Stockholders"), of a certificate verifying that such Major Stockholders
have no present intention as of the Closing Date to sell the shares of First
Chicago Common Stock to be distributed to them in the Merger.
ACCOUNTING TREATMENT
The Merger is expected to be accounted for as a "pooling of interests" of
Lake Shore and First Chicago under generally accepted accounting principles.
The pro forma results of this accounting treatment are shown on a per share
basis with respect to earnings, dividends and book value in the unaudited pro
forma financial information under the caption "Comparative Per Share Data." The
capitalization, as of December 31, 1993, of First Chicago as adjusted to give
effect to the Merger is shown under the caption "Capitalization of First
Chicago." While it is a condition to the consummation of the Merger that First
Chicago shall have no reasonable basis for believing that the Merger may not be
treated as a "pooling of interests", there is no assurance that the Merger,
ultimately, will be so accounted for, See "Terms of the Merger--Conditions to
the Merger."
REGULATORY APPROVALS
First Chicago filed on , 1994 an application with the Illinois
Commissioner of Banks and Trust Companies under Section 18 of the Illinois
Banking Act for prior approval of the Merger. On , 1994, First Chicago
filed applications with the OCC for prior approval of the consolidation of the
business of LSNB and BOH into FNBC and ANB. First Chicago also filed an
application on , 1994 for approval of the Merger with the Federal
Reserve Board under Section 3 of the BHCA. Under the BHCA, the Federal Reserve
Board must withhold approval of the Merger if it finds that the Merger would
result in a monopoly or be in furtherance of any combination or conspiracy to
monopolize or attempt to monopolize the business of banking in any geographical
area. In addition, the Federal Reserve Board may not approve the Merger if its
finds that the effect of the Merger may be to lessen competition substantially
or to tend to create a monopoly or would in any other manner be in restraint of
trade, unless it finds that the anti-competitive effects of the proposed
transaction clearly are outweighed in the public interest by the probable
effect of the transaction in meeting the convenience and needs of the
communities to be served. In ruling upon the application, the Federal Reserve
Board also will take into consideration the financial and managerial resources
and future prospects of Lake Shore and of First Chicago after completion of the
Merger, as well as other factors, such as compliance by Lake Shore and First
Chicago with the Community Reinvestment Act and other banking laws and
regulations.
The Merger may not be consummated for 30 days from the date of approval of
the Federal Reserve Board, during which time the United States Department of
Justice may challenge the Merger on antitrust grounds. Neither First Chicago
nor Lake Shore believes that the Merger is likely to raise significant issues
32
<PAGE>
under United States antitrust laws. The Merger must be consummated no later
than 120 days after the approval date, unless such period is extended by the
Federal Reserve Board or the Federal Reserve Bank of Chicago under delegated
authority.
It is anticipated that the approvals of the Illinois Commissioner of Banks
and Trust Companies, the Federal Reserve Board and the OCC described above will
be obtained by the end of the second quarter of 1994, but no assurance can be
given that such approvals will be obtained, that such approvals will not
contain conditions unacceptable to First Chicago or that the other conditions
to the Merger will be satisfied or waived so as to permit consummation of the
Merger. See "Terms of the Merger--Conditions to the Merger." As described under
"Terms of the Merger--Termination of the Agreement," if the Closing has not
occurred by October 31, 1994, each of First Chicago and Lake Shore will have
the unilateral right to terminate the Agreement, unless the failure to effect
the Merger has been caused by the failure of the terminating party to fulfill
any obligation under the Agreement.
CONDITIONS TO THE MERGER
The obligations of Lake Shore and First Chicago to effect the Merger are
conditioned, among other things, on (i) approval of the Agreement by the
requisite vote of Lake Shore Stockholders; (ii) authorization for listing on
the NYSE, upon official notice of issuance, the First Chicago Common Stock to
be issued pursuant to the Merger or upon exercise of outstanding options to
purchase Lake Shore Common Stock previously granted under the Incentive Plan;
(iii) approval of the Federal Reserve Board under the BHCA, approval of the OCC
under the Bank Merger Act and approval of the Illinois Commissioner of Banks
and Trust Companies under the Illinois Banking Act; (iv) the Registration
Statement becoming effective and no stop order suspending its effectiveness
being issued by the Securities and Exchange Commission (the "Commission") and
remaining in effect; and (v) the absence of any law, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) being in effect and having the effect of making the
Merger or the transactions contemplated by the Agreement illegal.
In addition to the foregoing conditions, the obligation of Lake Shore to
effect the Merger is conditioned, among other things, on (i) First Chicago
performing in all material respects each of its agreements contained in the
Agreement and required to be performed as of the Closing Date and each of the
representations and warranties of First Chicago contained in the Agreement that
is qualified by materiality being true and correct on and as of the Closing
Date as if made on and as of such date and each of the representations and
warranties that is not so qualified being true and correct in all material
respects on and as of the Closing Date as if made on and as of such date, in
each case except as contemplated or permitted by the Agreement; (ii) receipt,
in a form reasonably satisfactory to Lake Shore, of the opinion of Sidley &
Austin, Lake Shore's counsel, with respect to certain Federal income tax
consequences of the transaction; (iii) receipt, in a form reasonably
satisfactory to Lake Shore, of an opinion of DLJ, dated as of the date hereof,
substantially to the effect that the consideration to be received by Lake Shore
Stockholders in the Merger is fair to such Stockholders from a financial point
of view, and as of the Closing Date such opinion shall not have been withdrawn
or modified in any material respect; (iv) receipt of an officer's certificate
from First Chicago certifying to the effect that the closing conditions of Lake
Shore set forth in the Agreement, as they relate to First Chicago, have been
satisfied in full; (v) receipt of the legal opinion of Sherman I. Goldberg,
First Chicago's Executive Vice President, General Counsel and Secretary,
required by the Agreement; and (vi) all authorizations, consents, orders,
declarations or approvals of, or filings with, or terminations or expirations
of waiting periods imposed by any governmental entity or third party required
by or with respect to any law, rule, regulation, order or decree being obtained
in form and substance reasonably satisfactory to Lake Shore.
In addition to the foregoing conditions, the obligation of First Chicago to
effect the Merger is conditioned, among other things, on (i) Lake Shore
performing in all material respects each of its agreements contained in the
Agreement and required to be performed as of the Closing Date and each of the
representations and warranties of Lake Shore contained in the Agreement that is
qualified by materiality being true and correct on and as of the Closing Date
as if made on and as of such date and each of the representations and
warranties that is not so qualified being true and correct in all material
respect on and as
33
<PAGE>
of the Closing Date as if made on and as of such date, in each case, except as
contemplated or permitted by the Agreement; (ii) all authorizations, consents,
orders, declarations, agreements or approvals of, or filings with, or
terminations or expirations of waiting periods imposed by any governmental
entity or third party required by or with respect to any law, rule, regulation,
order or decree being obtained in form and substance reasonably satisfactory to
First Chicago; (iii) based on the advice of Arthur Andersen & Co. and such
other advice as First Chicago may deem relevant, First Chicago having no
reasonable basis for believing that following the Merger, the combination with
Lake Shore may not be accounted for as a "pooling of interests" in accordance
with generally accepted accounting principles; (iv) receipt, in a form
reasonably satisfactory to First Chicago, of an opinion of counsel reasonably
satisfactory to First Chicago with respect to certain Federal income tax
consequences of the transaction; (v) receipt of an officer's certificate from
Lake Shore certifying to the effect that the closing conditions of First
Chicago set forth in the Agreement, as they relate to Lake Shore, have been
satisfied in full; (vi) receipt of the opinion of Sidley & Austin, Lake Shore's
counsel, required by the Agreement; (vii) receipt of the affiliate's agreement
required by the Agreement with respect to the Commission's Rule 145 ("Rule
145") under the Securities Act and certain "pooling of interests" matters from
each person identified by Lake Shore as an affiliate; and (viii) as of the end
of the month ending prior to the Closing Date, the consolidated stockholders'
equity of Lake Shore not being less than $125 million as computed pursuant to
the terms of the Agreement, adding back certain merger-related expenses and
other items. As of December 31, 1993, the consolidated stockholders' equity of
Lake Shore as reflected in its financial statements was $125.457 million. As
computed pursuant to the terms of the Agreement, Lake Shore's consolidated
stockholders' equity, as of December 31, 1993, was $128.413 million.
TERMINATION OF THE AGREEMENT
The Agreement may be terminated at any time prior to the Closing Date (a) by
mutual consent of First Chicago and Lake Shore; (b) by First Chicago, if (i)
Lake Shore shall have failed to comply in any material respect with any of its
covenants or agreements contained in the Agreement required to be complied with
prior to the date of such termination, which failure to comply has not been
cured within five business days following receipt by Lake Shore of notice of
such failure to comply, (ii) the Stockholders of Lake Shore shall have failed
to approve the Merger at the Special Meeting, (iii) the Board of Directors of
Lake Shore shall not have recommended, or shall have resolved not to recommend,
or shall have modified or withdrawn its recommendation of the Merger or its
declaration that the Merger is in the best interests of Lake Shore Stockholders
or (iv) the Board of Directors of Lake Shore shall have recommended, or shall
have resolved to recommend, to Lake Shore Stockholders any takeover proposal or
offer of any other person; (c) by Lake Shore if (i) First Chicago shall have
failed to comply in any material respect with any of its covenants or
agreements contained in the Agreement required to be complied with by First
Chicago prior to the date of such termination, which failure to comply has not
been cured within five business days following receipt by First Chicago of
notice of such failure to comply or (ii) the Stockholders of Lake Shore shall
have failed to approve the Merger at the Special Meeting; (d) by either First
Chicago or Lake Shore if (i) there has been a material breach of a
representation or warranty of the other party that is not qualified as to
materiality, which breach has not been cured within five business days
following notice of such breach to the other party, (ii) there has been a
breach by the other party of any representation or warranty that is qualified
as to materiality, which breach has not been cured within five business days
following notice of such breach to the other party, (iii) the Merger has not
been effected by October 31, 1994 and the failure to complete the Merger has
not been caused by the failure by the terminating party to fulfill any
obligation of the Agreement or (iv) any court of competent jurisdiction or any
governmental, administrative or regulatory authority, agency or body shall have
issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the transactions contemplated
by the Agreement and such order, decree, ruling or other action shall have
become final and nonappealable.
OPERATIONS AFTER THE MERGER
At the Effective Time of the Merger, Lake Shore will merge into First Chicago
with First Chicago being the surviving corporation. First Chicago intends, at
the Effective Time, or as soon as possible after the Effective Time, to
consolidate the business of LSNB and BOH into FNBC and ANB.
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<PAGE>
EFFECT OF MERGER ON LAKE SHORE EMPLOYEE BENEFIT PLANS
Pursuant to the Agreement, following the Effective Time, the officers and
employees of Lake Shore and its subsidiaries will be eligible for employee
benefits and programs (including pension, life insurance, medical, 401(k),
severance and salary continuation benefits) which are no less favorable than
those generally available to similarly situated employees of First Chicago and
its subsidiaries. For purposes of eligibility to participate in, and vesting
in, various benefits provided to employees but not for the purpose of
determining the amount of any such benefit, employees of Lake Shore and its
subsidiaries will be credited with their years of service with Lake Shore and
its subsidiaries; provided, however, that for purposes of determining the
amount of severance benefits, if any, employees of Lake Shore and its
subsidiaries are entitled to under the severance policy of Lake Shore, such
employees will be credited with their years of service with Lake Shore and its
subsidiaries. All officers and employees of Lake Shore and its subsidiaries at
the Effective Time shall be fully vested in the amounts in their accounts at
such time under the Profit Sharing Plan.
ACTIONS OF LAKE SHORE PENDING THE MERGER
Pursuant to the Agreement, from the date of the Agreement until the Effective
Time, Lake Shore shall, and shall cause its subsidiaries to, in all material
respects carry on their respective businesses in, and not enter into any
material transaction other than in accordance with, the ordinary course and, to
the extent consistent therewith, use all reasonable efforts to preserve intact
their current business organizations, keep available the services of their
current officers and employees and preserve their relationships with customers,
suppliers and others having business dealings with them to the end that their
goodwill and ongoing businesses shall be unimpaired at the Effective Time.
Except as otherwise required by appropriate regulatory authorities, Lake Shore
shall not, and shall not permit any of its subsidiaries to, without the prior
written consent of First Chicago:
(a) (i) declare, set aside or pay dividends or make distributions (actual,
constructive or deemed) in respect of any of its capital stock or
otherwise make any payments to any stockholder in their capacity as
such, except (x) ordinary quarterly dividends consistent with past
practice in an amount not to exceed $.08 per share, (y) dividends
declared prior to the date of the Agreement and (z) dividends payable
to Lake Shore declared by any of Lake Shore's subsidiaries, (ii) split,
combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of, or in
substitution for shares of its capital stock or (iii) purchase, redeem
or otherwise acquire any shares of capital stock of Lake Shore or any
of its subsidiaries or any other securities thereof or any rights,
warrants or options to acquire such shares or other securities;
(b) issue, deliver, sell, pledge, dispose of or otherwise encumber any
share of its capital stock, other than the issuance of Lake Shore
Common Stock upon the exercise of stock options to purchase Lake Shore
Common Stock outstanding as of the date of the Agreement or upon the
exercise by First Chicago of the option to purchase Lake Shore Common
Stock pursuant to the Stock Option Agreement described herein;
(c) amend its certificate of incorporation or amend in any material
respects its by-laws;
(d) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of or equity in, or by
any other manner, any business or any corporation, partnership,
association or other business organization or division thereof or
otherwise acquire or agree to acquire any assets other than in the
ordinary course of business;
(e) sell, lease or otherwise dispose of or agree to sell, lease or
otherwise dispose of, any of its assets other than in the ordinary
course of business consistent with past practice and then only if, and
to the extent that, such assets are not material, individually or in
the aggregate, to Lake Shore and its subsidiaries taken as a whole;
(f) except in the ordinary course of business consistent with past
practice, (y) incur any indebtedness for borrowed money or guarantee
any such indebtedness or issue or sell any debt securities or guarantee
any debt securities of others or (z) make any loans, advances or
capital contributions to, or investments in, any other person, other
than to Lake Shore or any of its subsidiaries;
35
<PAGE>
(g) alter through merger, liquidation, reorganization, restructuring or in
any other fashion the corporate structure or ownership of any
subsidiary of Lake Shore;
(h) enter into, adopt or amend any severance plan, employee benefit plan or
any employment, severance, transition or consulting agreement, except
for (y) certain bonuses, in addition to any bonuses or payments
pursuant to existing bonus or incentive plans of Lake Shore, payable to
employees who remain in the employ of Lake Shore or its subsidiaries
until a date set by Lake Shore, which shall be no earlier than the date
three months after the Effective Time; provided, that the aggregate
amount paid pursuant to the grant of such bonuses prior to or on or
after the effective date of the Agreement shall be no greater than
$2,000,000 and (z) consistent with past practice average compensation
increases not in excess of 4.5% per annum associated with annual
reviews in the ordinary course of business;
(i) (x) purchase or agree to purchase any private label asset-backed
securities, (y) purchase or sell or agree to purchase or sell options
or other derivative instruments on any securities held in the
investment account of Lake Shore or any of its subsidiaries or (z)
change in any material way its overall policies, procedures and
strategies with respect to the investment account of Lake Shore or any
of its subsidiaries and use its best efforts to implement such hedging
and other strategies with respect to such investment account as are
recommended by First Chicago;
(j) change its credit policies, procedures or practices, or commit or renew
a prior commitment to lend money, purchase assets, issue a letter of
credit, guarantee or similar instrument or otherwise extend credit to
any person in a manner not in the ordinary course of the Lake Shore's
business or inconsistent with past practice;
(k) create any additional obligation, or increase or extend in any way any
existing obligation, of Lake Shore or any of its subsidiaries with
respect to the provision of post-retirement medical benefits;
(l) violate or fail to perform any obligation or duty imposed upon Lake
Shore or any of its subsidiaries by any applicable federal, state or
local law, rule, regulation, guideline or ordinance, the noncompliance
with or nonperformance of which might have a material adverse effect on
Lake Shore, LSNB and BOH, taken as a whole; or
(m) modify its current practices with respect to allowances for loan
losses.
RESTRICTIONS ON SOLICITATION
During the pendency of the Agreement, Lake Shore has agreed that it will not,
and will not permit any of its officers, directors, employees, agents and other
representatives to, directly or indirectly, solicit, initiate, assist or
encourage (including by way of furnishing information) any takeover proposal or
offer from any person, or engage in discussions or negotiations relating to
such; provided, however, that (i) Lake Shore may engage in discussions or
negotiations with a third party who seeks to initiate such discussions or
negotiations or may furnish such third party information concerning Lake Shore
and its business, properties or assets, (ii) Lake Shore's Board of Directors
may take and disclose to the Lake Shore Stockholders a position contemplated by
the rules of the Commission and (iii) following the receipt of a takeover
proposal, the Lake Shore Board of Directors may withdraw or modify its
recommendation of the Merger, but in each case referred to in the foregoing
clauses (i) through (iii) only to the extent that the Lake Shore Board of
Directors is advised in a written opinion of Sidley & Austin or other counsel
reasonably acceptable to First Chicago that such action is necessary for the
Lake Shore Board to act in a manner which is consistent with its fiduciary
obligations under applicable law. Lake Shore promptly will notify First Chicago
of any takeover proposal or offer, including the material terms and conditions
thereof and the identity of the person or group making such takeover proposal
or offer. A "takeover proposal" or "offer" means any proposal or offer, other
than the proposal or offer by First Chicago or any of its affiliates, for a
tender or exchange offer, a merger, consolidation or other business combination
involving Lake Shore or any of its subsidiaries or any proposal to acquire in
any manner a substantial equity interest in, or a substantial portion of the
assets of, Lake Shore or any of its subsidiaries.
36
<PAGE>
SEVERANCE POLICY
Pursuant to the Agreement, First Chicago shall (i) maintain Lake Shore's
severance policy for terminated employees as in effect on the date of the
Agreement, or as modified by agreement of Lake Shore and First Chicago, or (ii)
replace such severance policy with a policy providing for equal or more
favorable compensation, in either case for a period of one year from the
Effective Time.
RESALES OF FIRST CHICAGO COMMON STOCK
All shares of First Chicago Common Stock received by Lake Shore Stockholders
pursuant to the Merger will be freely tradeable except that shares received by
persons who are deemed to be "affiliates" of Lake Shore for purposes of Rule
145 under the Securities Act may be resold by them only in transactions
permitted by Rule 145, or as otherwise permitted under the Securities Act.
Pursuant to the Agreement, Lake Shore has agreed to deliver to First Chicago a
letter (the "Lake Shore Letter") identifying all persons who are directors or
executive officers of Lake Shore or holders of 10 percent or more of the shares
of Lake Shore Common Stock. Lake Shore also has agreed to use its best efforts
to cause each person who is so identified in the Lake Shore Letter to deliver
to First Chicago, on or prior to the Effective Time, a written agreement, in
form reasonably satisfactory to Lake Shore and First Chicago, that such person
will not sell, pledge, transfer or otherwise dispose of any shares of First
Chicago Common Stock issued to such person or his or her associates pursuant to
the Merger, except pursuant to an effective registration statement or in
compliance with Rule 145 or an exemption from the registration requirements of
the Securities Act, and that such person will not sell or in any other way
reduce such person's risk relative to any shares of First Chicago Common Stock
received in the Merger until such time as financial results covering at least
30 days of post-merger operations have been published.
STOCK EXCHANGE LISTING OF FIRST CHICAGO COMMON STOCK
Prior to the Effective Time, First Chicago will use its best efforts to list
on the NYSE, subject to official notice of issuance, the shares of First
Chicago Common Stock which will be issued in the Merger or upon exercise of any
outstanding Lake Shore stock options. Listing on the NYSE of the First Chicago
Common Stock to be issued in the Merger or upon exercise of any outstanding
Lake Shore stock options is a condition to the obligations of First Chicago and
Lake Shore to effect the Merger. See "Terms of the Merger--Conditions to the
Merger."
NO DISSENTING STOCKHOLDERS' RIGHTS
Section 262 of the Delaware General Corporation Law (the "DGCL") provides
that any stockholder who has not voted in favor of a statutory merger,
consolidation or sale of substantially all the assets of a corporation, except
where the corporation is to be the surviving corporation and no vote of its
stockholders is required, and has complied with certain procedural
requirements, has the right to demand payment of the fair market value of such
stockholder's shares, unless such shares are listed on a national securities
exchange or designated as a national market system security on NASDAQ, or such
shares are held of record by more than 2,000 stockholders. In addition,
appraisal rights are not available in certain types of transactions, including
statutory mergers, if the consideration to be paid to the stockholders is (i)
shares of stock of the surviving or resulting corporation, (ii) shares of stock
of any other corporation which is either listed on a national securities
exchange or designated as a national market system security on NASDAQ or held
of record by more than 2,000 stockholders, (iii) cash in lieu of the fractional
shares of the corporations described in (i) or (ii) above, or (iv) any
combination of shares of stock and cash in lieu of fractional shares described
in (i), (ii) or (iii) above. Because Lake Shore Common Stock is listed on
NASDAQ and because the First Chicago Common Stock is listed on the NYSE, there
are no appraisal rights available to Lake Shore Stockholders in the Merger. See
Appendix C.
37
<PAGE>
CAPITALIZATION OF FIRST CHICAGO
The following table sets forth the capitalization of First Chicago at
December 31, 1993, as adjusted to give effect to the issuance of the First
Chicago Common Stock offered hereby.
<TABLE>
<CAPTION>
AT DECEMBER 31,
1993
------------------
ACTUAL AS ADJUSTED
------ -----------
(IN MILLIONS)
<S> <C> <C>
LONG-TERM DEBT
Total senior debt..................................... $ 393 $ 393
Total subordinated debt(1)............................ 1,672 1,870
------ ------
Total............................................. 2,065 2,263
STOCKHOLDERS' EQUITY
Preferred stock--without par value, authorized
15,000,000 shares
Outstanding (2):
Series A ($50 stated value)--2,410,000 shares....... 121 121
Series B ($100 stated value)--1,191,000 shares...... 119 119
Series C ($100 stated value)--713,800 shares........ 71 71
Series D ($25 stated value)--6,000,000 shares....... 150 150
Series E ($625 stated value)--160,000 shares........ 100 100
Convertible Series B ($5,000 stated value)--40,000
shares............................................. 200 200
Common stock--$5 par value; authorized 150,000,000
shares,
Issued: actual 86,715,812 shares; as adjusted
93,734,092 shares (3).............................. 434 469
Surplus (3)........................................... 1,724 1,736
Retained earnings..................................... 1,358 1,436
Other adjustments..................................... -- --
------ ------
Total............................................. 4,277 4,402
Less: Treasury stock at cost, 317,207 shares...... 13 13
------ ------
Total Stockholders' equity........................ 4,264 4,389
------ ------
Total Long-Term Debt and Stockholders' Equity..... $6,329 $6,652
====== ======
</TABLE>
- --------
(1) The as adjusted amounts reflect the issuance in an unrelated transaction of
$198 million of subordinated debt in January 1994.
(2) First Chicago also has authorized but not issued its Junior Participating
Voting Preferred Stock, Series A, without par value, which is issuable upon
the occurrence of certain change in control events. See "Description of
First Chicago Common Stock--Preferred Share Purchase Rights".
(3) The as adjusted amounts assume the issuance of 7.018 million shares of
First Chicago Common Stock based on an assumed 20-Day Average Closing Price
of $44.00 per share in order to effectuate the Merger.
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<PAGE>
FIRST CHICAGO AND LAKE SHORE COMPARATIVE STOCK PRICES
FIRST CHICAGO
First Chicago Common Stock is listed and traded on the NYSE as well as the
Chicago and Pacific Stock Exchanges. First Chicago Common Stock also is listed
on the International Stock Exchange of the United Kingdom and the Republic of
Ireland. The following table sets forth by quarter the high and low sales
prices per share of First Chicago Common Stock and cash dividends declared per
share.
<TABLE>
<CAPTION>
CASH
PRICE DURING QUARTER DIVIDENDS
--------------------- DECLARED
HIGH LOW PER SHARE
---------- ---------- ---------
<S> <C> <C> <C>
1994
First Quarter (through March )........ $ $ $
1993
Fourth Quarter.......................... 50 5/8 40 7/8 0.40
Third Quarter........................... 49 1/4 40 7/8 0.30
Second Quarter.......................... 45 3/8 35 1/2 0.30
First Quarter........................... 44 3/4 36 0.30
1992
Fourth Quarter.......................... 37 3/4 29 1/8 0.30
Third Quarter........................... 37 3/8 29 1/2 0.30
Second Quarter.......................... 36 1/4 27 1/8 0.30
First Quarter........................... 32 5/8 22 7/8 0.30
1991
Fourth Quarter.......................... 27 3/8 21 1/8 0.50
Third Quarter........................... 28 3/4 21 1/8 0.50
Second Quarter.......................... 28 3/8 20 1/2 0.50
First Quarter........................... 25 3/8 15 5/8 0.50
</TABLE>
The closing sales price of First Chicago Common Stock as reported on the NYSE
Composite Tape on November 19, 1993, the last trading day prior to the public
announcement of a definitive agreement with respect to the Merger, was $44.00
share. On , 1994, the closing sales price for First Chicago Common
Stock as reported on the NYSE Composite Tape was $ per share.
Stockholders are urged to obtain a current market quotation for First Chicago
Common Stock.
At the close of business on December 31, 1993, there were approximately
15,034 holders of record of First Chicago Common Stock.
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<PAGE>
LAKE SHORE
Lake Shore Common Stock is traded in the over-the-counter market and is
quoted on the NASDAQ National Market System under the market symbol "LSNB." The
following table shows the range of high and low sales prices for Lake Shore
Common Stock and the cash dividends declared per share for the calendar periods
indicated. The sales prices for the periods are as reported on the NASDAQ
National Market System.
<TABLE>
<CAPTION>
CASH
PRICE DURING QUARTER* DIVIDENDS
--------------------- DECLARED*
HIGH LOW PER SHARE
--------------------- ---------
<S> <C> <C> <C>
1994
First Quarter (through March ).......... $ $ $
1993
Fourth Quarter........................... 31 28 1/4 .080
Third Quarter............................ 29 3/4 21 3/4 .080
Second Quarter........................... 23 1/4 22 .080
First Quarter............................ 24 1/2 21 13/16 .080
1992
Fourth Quarter........................... 23 3/16 20 3/8 .080
Third Quarter............................ 23 13/16 17 5/8 .080
Second Quarter........................... 18 3/8 16 13/16 .080
First Quarter............................ 18 3/16 17 3/16 .076
1991
Fourth Quarter........................... 19 3/16 16 5/8 .076
Third Quarter............................ 18 5/8 15 5/8 .076
Second Quarter........................... 17 3/16 13 5/8 .076
First Quarter............................ 16 12 .076
</TABLE>
- --------
*Adjusted to reflect subsequent stock dividends and splits.
The high and low sales prices of Lake Shore Common Stock as reported on
NASDAQ on November 19, 1993, the last trading day prior to the public
announcement of a definitive agreement with respect to the Merger, were $30.75
and $30.00 per share, respectively. On , 1994, the high and low sales
prices of Lake Shore Common Stock as reported on NASDAQ were $ and
$ , respectively. Stockholders are urged to obtain a current market
quotation for Lake Shore Common Stock.
At the close of business on December 31, 1993, there were approximately 669
holders of record of Lake Shore Common Stock.
FIRST CHICAGO AND RECENT DEVELOPMENTS
GENERAL
First Chicago is a multi-bank holding company incorporated in Delaware. At
December 31, 1993, First Chicago had consolidated assets of $52.6 billion and
total equity capital of $4.3 billion. The principal asset of First Chicago is
the capital stock of FNBC, which provides a broad range of banking, fiduciary,
financial and other services domestically and overseas. At December 31, 1993,
FNBC had deposits of $23.1 billion and assets of approximately $34.5 billion.
First Chicago also owns all the outstanding capital stock of American
National Corporation ("ANC") and FCC National Bank ("FCCNB"). ANC is the
holding company for ANB, American National Bank of Libertyville and American
National Bank and Trust Company of Wisconsin. FCCNB is a Delaware-based bank
primarily engaged in the issuance of VISA and MasterCard credit cards. Together
with these banking organizations, First Chicago, directly or indirectly, owns
the stock of various nonbank companies engaged in businesses related to banking
and finance, including venture capital and leasing subsidiaries.
40
<PAGE>
In addition to its equity investment in subsidiaries, First Chicago, directly
or indirectly, raises funds principally to finance the operations of its
nonbank subsidiaries. A substantial portion of First Chicago's annual income
typically has been derived from dividends from its subsidiaries, and from
interest on loans, some of which are subordinated, to its subsidiaries.
First Chicago's executive offices are located at One First National Plaza,
Chicago, Illinois 60670, and the telephone number is (312) 732-4000.
SUPERVISION AND REGULATION
First Chicago is a legal entity separate and distinct from its banking
subsidiaries (the "Banks") and First Chicago's other affiliates. Investors
should be aware of the various legal limitations on the extent to which the
Banks can finance or otherwise supply funds to First Chicago or various of its
affiliates. In particular, the Banks are subject to certain restrictions
imposed by the laws of the United States on any extensions of credit to First
Chicago or, with certain exceptions, other affiliates, on investments in stock
or other securities thereof, on the taking of such securities as collateral for
loans, and on the terms of transactions between the Banks and other
subsidiaries. The Banks are subject to regulation by the OCC, the Federal
Reserve Board and the Federal Deposit Insurance Corporation (the "FDIC"). As
national banks, they are examined by the OCC, and FNBC and ANB's operations in
other countries are subject to various restrictions imposed by the laws of such
countries.
Federal law prohibits First Chicago and certain of its affiliates from
borrowing from the Banks without the prior approval of the respective Bank's
Board of Directors and unless such loans are secured by United States Treasury
or other specified obligations. Further, such secured loans and investments by
any of the Banks are limited in amount as to First Chicago or any other such
affiliate to 10% of the respective Bank's capital and surplus and as to First
Chicago and all such affiliates to an aggregate 20% of the respective Bank's
capital and surplus. Under Federal Reserve Board policy, First Chicago is
expected to act as a source of financial strength to each Bank and to commit
resources to support such Bank in circumstances where it might not do so absent
such policy. In addition, any capital loans by First Chicago to any of the
Banks would be subordinate in right of payment to deposits and to certain other
indebtedness of such Bank.
Additionally, there are certain regulatory limitations on the payment of
dividends to First Chicago by the Banks. Dividend payments by national banks
are limited to the lesser of (i) the level of "undivided profits then on hand"
less the amount of bad debts, as defined, in excess of the allowance for credit
losses and (ii) absent regulatory approval, an amount not in excess of "net
profits" for the current year combined with "retained net profits" for the
preceding two years. As of December 31, 1993, the Banks could have declared
additional dividends of approximately $445 million without the approval of the
OCC. The payment of dividends by any Bank also may be affected by other
factors, such as the maintenance of adequate capital for such Bank. The OCC
also has authority under the Financial Institutions Supervisory Act to prohibit
a national bank from paying dividends if, in the OCC's opinion, the payment of
dividends would, in light of the financial condition of such bank, constitute
an unsafe or unsound practice.
CAPITAL ADEQUACY
The Federal Reserve Board has adopted risk-based capital guidelines for bank
holding companies which require bank holding companies to maintain a minimum
ratio of total capital to risk-weighted assets (including certain off-balance-
sheet items, such as standby letters of credit) of 8%. At least half of total
capital has to be composed of common stockholders' equity, noncumulative
perpetual preferred stock and a limited amount of cumulative perpetual
preferred stock, less disallowed intangibles (primarily goodwill) ("Tier I
capital"). The remainder ("Tier II capital") may consist of subordinated debt,
other preferred stock, certain other instruments and a limited amount of loan
loss reserves. At December 31, 1993, First Chicago's consolidated Tier I and
total capital ratios were 8.8% and 13.6%, respectively.
41
<PAGE>
In addition, the Federal Reserve Board has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio of Tier I capital to total assets, less disallowed intangibles (the
"leverage ratio"), of 3% for bank holding companies that meet certain specified
criteria, including those having the highest regulatory rating. All other bank
holding companies generally are required to maintain a leverage ratio of at
least 3% plus an additional cushion of 100 to 200 basis points. First Chicago's
leverage ratio at December 31, 1993 was 8.0%. The guidelines also provide that
bank holding companies experiencing internal growth or making acquisitions will
be expected to maintain strong capital positions substantially above the
minimum supervisory levels without significant reliance on intangible assets.
Furthermore, the Federal Reserve Board has indicated that it will consider a
"tangible Tier I capital leverage ratio" (deducting all intangibles) and other
indicia of capital strength in evaluating proposals for expansion or new
activities.
Each of the Banks is subject to similar risk-based and leverage capital
requirements adopted by the Federal Reserve Board, the FDIC or the OCC, as the
case may be. Each of First Chicago's Banks was in compliance with the
applicable minimum capital requirements as of December 31, 1993. Neither First
Chicago nor any of the Banks has been advised by any federal banking agency of
any specific minimum leverage ratio requirement applicable to it.
Failure to meet capital requirements could subject a bank to a variety of
enforcement remedies, including the termination of deposit insurance by the
FDIC, and to certain restrictions on its business, which are described below
under "Recent Legislation."
Bank regulators continue to indicate their desire to raise capital
requirements applicable to banking organizations beyond their current levels.
However, the management of First Chicago is unable to predict whether higher
capital requirements would be imposed and, if so, at what levels and on what
schedule.
RECENT LEGISLATION
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"),
enacted in December 1991, significantly expanded the regulatory and enforcement
powers of federal banking regulators, in particular the FDIC. While the full
impact of FDICIA cannot yet be determined, it has important consequences for
bank holding companies and other depository institutions located in the United
States.
FDICIA establishes five tiers of capital measurement for regulatory purposes
ranging from "well capitalized" to "critically undercapitalized." Under
regulations adopted by the federal banking agencies, a depository institution
is well capitalized if it significantly exceeds the minimum level required by
regulation for each relevant capital measure, adequately capitalized if it
meets such measure, undercapitalized if it fails to meet any such measure,
significantly undercapitalized if it is significantly below such measure and
critically undercapitalized if its tangible equity is not greater than 2% of
total tangible assets. A depository institution may be deemed to be in a
capitalization category that is lower than is indicated by its actual capital
position if it receives an unsatisfactory examination rating. FDICIA directs
banking regulators to take increasingly strong corrective steps, based on the
capital tier of any subject bank, to cause such bank to achieve and maintain
capital adequacy. Even if a bank is adequately capitalized, however, the
banking regulators are authorized to apply corrective measures if the bank is
determined to be in an unsafe or unsound condition or engaging in an unsafe or
unsound activity.
"Undercapitalized" banks are subject to growth limitations and restrictions
on borrowings from the Federal Reserve System and are required to submit a
capital restoration plan. If an "undercapitalized" bank fails to submit an
acceptable plan, it is treated as if it is significantly undercapitalized.
"Significantly undercapitalized" banks may be subject to a number of
requirements and restrictions, including orders to sell sufficient voting stock
to become adequately capitalized, requirements to reduce total assets and
orders to cease receiving deposits from correspondent banks. "Critically
undercapitalized" institutions are subject to appointment of a receiver or
conservator.
42
<PAGE>
In addition to the foregoing, depending on the level of capital of an insured
depository institution, the banking regulatory agencies' corrective powers can
include: requiring a capital restoration plan; placing limits on asset growth
and restrictions on activities; requiring the institution to issue additional
stock (including voting stock) or to be acquired; placing restrictions on
transactions with affiliates; restricting the interest rate the institution may
pay on deposits; ordering a new election for the institution's board of
directors; requiring that certain senior executive officers or directors be
dismissed; prohibiting the institution from accepting deposits from
correspondent banks; requiring the institution to divest certain subsidiaries;
prohibiting the payment of principal or interest on subordinated debt;
prohibiting the institution's parent bank holding company from making capital
distributions without prior regulatory approval; and, ultimately, appointing a
receiver for the institution.
If the insured depository institution is undercapitalized, the parent bank
holding company is required to guarantee that the institution will comply with
any capital restoration plan submitted to, and approved by, the appropriate
federal banking agency in an amount equal to the lesser of (i) 5% of the
institution's total assets at the time the institution became undercapitalized
or (ii) the amount which is necessary (or would have been necessary) to bring
the institution into compliance with all applicable capital standards as of the
time the institution fails to comply with the capital restoration plan. If such
parent bank holding company guarantee is not obtained, the capital restoration
plan may not be accepted by the banking regulators. As a result, such
institution would be subject to the more severe restrictions imposed on
significantly undercapitalized institutions. Further, the failure of such a
depository institution to submit an acceptable capital plan is grounds for the
appointment of a conservator or receiver.
FDICIA also contains a number of other provisions affecting depository
institutions, including the creation of additional reporting and independent
auditing requirements, the changing of FDIC insurance premiums from flat
amounts to a new system of risk-based assessments as described below under
"FDIC Insurance," a review of accounting standards, and supplemental
disclosures and limits on the ability of all but well capitalized depository
institutions to acquire brokered deposits.
It is anticipated that FDICIA will result in increased costs for the banking
industry due to higher FDIC assessments and more limitations on the activities
of all but the most well-capitalized banks.
In addition to FDICIA, there have been a number of legislative and regulatory
proposals designed to strengthen the federal deposit insurance system and to
improve the overall financial stability of the United States banking system.
These include proposals to increase capital requirements above presently
published guidelines, to place special assessments on banks to increase funds
available to the FDIC, and to allow national banks to branch on an interstate
basis. It is impossible to predict whether or in what form these proposals may
be adopted in the future and, if adopted, what their effect would be on First
Chicago and the Banks.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA"), among other things, provides generally that, upon the default of
any bank of a multi-unit holding company, the FDIC may assess an affiliated
insured depository institution for the estimated losses incurred by the FDIC.
Specifically, FIRREA provides that a depository institution insured by the FDIC
can be held liable for any loss incurred by, or reasonably expected to be
incurred by, the FDIC, in connection with (i) the default of a commonly
controlled FDIC-insured depository institution or (ii) any assistance provided
by the FDIC to a common controlled FDIC-insured depository institution in
danger of a default. "Default" is defined generally as the appointment of a
conservator or receiver. "In danger of a default" is defined generally as the
existence of certain conditions indicating that a default is likely to occur in
the absence of regulatory assistance. All of the Banks are FDIC-insured
depository institutions.
FDIC INSURANCE
The Banks are subject to FDIC deposit insurance assessments. Under FDICIA,
authority has been granted to the FDIC to impose special assessments on insured
depository institutions to repay FDIC
43
<PAGE>
borrowings from the United States Treasury or other sources and to establish
semiannual assessment rates for the Bank Insurance Fund (the "BIF"). FDICIA
provided that FDIC deposit insurance assessments were to change from flat rate
premiums to a new system of risk-based premium assessments. In June 1993, the
FDIC adopted final rules effective January 1, 1994, for the implementation of
the risk-based assessment system. Under this risk-based assessment system, the
assessment rate for an insured depository institution varies according to the
level of risk incurred in its activities.
Under the FDIC's risk-based assessment system, the prior flat assessment rate
of 0.23% per annum on the amount of domestic deposits has been changed to a
rate based upon classification of a depository institution in one of nine
assessment risk categories. Such classification is based upon whether the
institution is well capitalized, adequately capitalized or undercapitalized,
and upon certain supervisory evaluations of the institution as "healthy",
causing "supervisory concern" or causing "substantial supervisory concern"
(designated as supervisory subgroups "A", "B" and "C", respectively, for
reference purposes). For purposes of this regulation, a depository institution
is defined to be well capitalized if it maintains a risk-based total capital
ratio of at least 10%, a risk-based Tier I capital ratio of at least 6.0% and a
Tier I leverage ratio of at least 5.0%, adequately capitalized if the foregoing
ratios are maintained at 8.0%, 4.0% and 4.0%, respectively, and
undercapitalized if it is neither well capitalized nor adequately capitalized.
With respect to the supervisory evaluations, healthy institutions are
financially sound institutions with few minor weaknesses; supervisory concern
refers to institutions that demonstrate weaknesses which, if not corrected,
could result in significant deterioration, and substantial supervisory concern
refers to institutions for which there is a substantial probability that the
FDIC will suffer a loss in connection with the institution unless effective
action is taken to correct the areas of weakness.
The assessment rate schedule adopted creates a 0.08% spread in assessment
rates between banks classified as strongest and weakest by the FDIC. Under the
assessment rate schedule, a well capitalized bank in subgroup A continues to be
assessed at the rate of 0.23% per annum, in subgroup B at 0.26% per annum and
in subgroup C at 0.29% per annum. An adequately capitalized bank in subgroup A
is assessed at 0.26% per annum, in subgroup B at 0.29% per annum and in
subgroup C at 0.30% per annum. An undercapitalized bank in subgroup A is
assessed at 0.29% per annum, in subgroup B at 0.30% per annum and in subgroup C
at 0.31% per annum.
RECENT DEVELOPMENTS
Accelerated Asset Disposition Program
During the fourth quarter of 1993, the carrying value of the accelerated
disposition portfolio of First Chicago declined $118 million. This portfolio is
composed primarily of certain real estate exposure of FNBC.
The following table shows the composition of the accelerated asset
disposition portfolio as of December 31, 1993 and December 31, 1992.
<TABLE>
<CAPTION>
DISPOSITION VALUE
-------------------------
DECEMBER 31, DECEMBER 31,
1993 1992
------------ ------------ ---
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
LOANS
Performing................................. $ 20 $ 504
Nonperforming.............................. 16 115
Other Real Estate Assets..................... 71 257
---- ------
Subtotal................................... 107 876
Off-Balance-Sheet Exposure................... 19 161
---- ------
Total Portfolio.......................... $126 $1,037
==== ======
Disposition Value as a Percentage of Original
Contractual Exposure........................ 26% 46%
</TABLE>
44
<PAGE>
RECENT FINANCIAL RESULTS
General
First Chicago reported net income for 1993 of $804.5 million, or $8.78 per
share. Return on common stockholders' equity was 24.2 percent. Earnings from
First Chicago's venture capital business were $204 million, or $2.29 per share,
for 1993.
For the fourth quarter of 1993, First Chicago earned net income of $172.8
million, or $1.81 per common share. Return on common stockholders's equity was
18.3 percent. Earnings from the venture capital business were $7 million, or
five cents per share, for the fourth quarter. Excluding the venture capital
contribution, quarterly earnings were up 83 percent from a year earlier.
In the fourth quarter of 1992, net income was $137 million, or $1.53 per
share. Net income for the full year 1992 was $94 million, or 64 cents per
share, reflecting the $625 million special provision for combined credit losses
related to the accelerated asset disposition program.
Noteworthy factors contributing to the 1993 full year results included the
following:
. First Chicago's earnings from core businesses were consistently strong
each quarter throughout the year.
. Equity securities gains of $381 million were recognized in the venture
capital portfolio in 1993. Net income from the venture capital business--
revenues less the portfolio's cost-to-carry and other expenses--was $204
million, or $2.29 per share, for the year. In 1992, venture capital
earnings were $80 million, or 95 cents per share.
. Earnings from the credit card business grew substantially in 1993. Total
managed receivables ended the year at $10.7 billion, up from $8.6 billion
at year-end 1992. Average credit card outstandings for the year increased
21 percent over 1992 levels.
. Combined trading profits reached a record $285 million for the year,
compared with $177 million in 1992. Foreign exchange trading, interest
rate swap and option transactions, and emerging markets trading were the
key activities driving this performance.
. Nonperforming assets at December 31, 1993, were $277 million, or 1.2
percent of loans and other real estate. The ratio of the allowance for
credit losses to nonperforming loans at year-end was 292 percent. Total
commercial provision expense for the year was $78 million, or 54 basis
points of related loans--an improvement from 165 basis points in 1992.
. As of December 31, 1993, approximately 89 percent of the net value of the
accelerated asset disposition portfolio had been liquidated, well ahead
of First Chicago's "price and pace" objectives. The carrying value of the
portfolio was $126 million at year-end, down from $1.0 billion at
December 31, 1992. This value represented 26 percent of original
contractual exposure, compared with 46 percent a year earlier. Net gains
of $60 million from portfolio activity were recognized in noninterest
income in 1993.
. First Chicago's regulatory capital ratios, and those of all its banking
subsidiaries, remain significantly above the guidelines for "well-
capitalized" status. At December 31, 1993, the Tier 1 ratio was 8.8
percent, and the total risk-adjusted ratio was 13.6 percent. Year-ago
ratios were 6.7 percent and 10.8 percent, respectively.
. First Chicago's book value increased to $40.55 per common share at the
end of 1993 from $33.19 at year-end 1992.
Factors contributing to the fourth quarter 1993 results included the
following:
. The credit card business continued to contribute significantly to
earnings. Total managed credit card receivables grew 11 percent in the
quarter to $10.7 billion from $9.6 billion at September 30, 1993.
45
<PAGE>
. The carrying value of the accelerated asset disposition portfolio
declined $118 million during the quarter to $126 million at December 31,
1993, or 26 percent of original contractual exposure. A net gain of $30
million from portfolio activity was recognized in noninterest income in
the fourth quarter.
. First Chicago reclassified its $196 million reserve for securitized
credit card receivables from the "allowance for credit losses" to "other
assets". This reclassification was made to be consistent with industry
practice and had no impact on reserves available for losses or on
reported earnings.
. The provision for commercial credits was $8 million for the fourth
quarter of 1993, representing 22 basis points of related loans.
. Total equity securities gains were $40 million, of which $20 million were
generated from the venture capital portfolio. Net income from the venture
capital business was $7 million, or five cents per share, in the fourth
quarter of 1993. In 1992's fourth quarter, venture capital earnings were
$48 million, or 57 cents per share.
Net Interest Income
Net interest income on a tax-equivalent basis was $307 million for the fourth
quarter of 1993. Net interest margin was 2.49 percent, and average earning
assets were $49.0 billion.
Adjusted for the effects of credit card securitization and the activities of
First Chicago's capital markets subsidiary, net interest margin was 3.62
percent. Adjusted net interest margin was 3.78 percent in the fourth quarter of
1992 and 3.98 percent in the third quarter of 1993.
For the full year, adjusted net interest margin was 3.70 percent, compared
with 3.45 percent in 1992. Gains on Brazilian bonds and a required revaluation
of leveraged leases in conjunction with the change in tax rates added 9 basis
points to adjusted net interest margin in 1993.
Noninterest Income
Total noninterest income was $523 million for the fourth quarter of 1993.
Combined trading activities generated revenues of $61 million.
Equity securities gains were $40 million, including $20 million from the
venture capital portfolio. The remaining gains of $20 million were realized
from equity securities held in conjunction with corporate financing activities
and the sale of Chilean equity positions previously received in exchange for
debt.
Net gains of $30 million from accelerated disposition activities were
recorded in other revenue.
For the year, noninterest income totaled $2.202 billion and included $480
million in equity securities gains.
Noninterest Expense
Operating noninterest expense was $481 million for the quarter. Higher
incentive compensation costs versus prior periods and increased expenses for
the credit card business are reflected in this total. The provision for other
real estate was $1 million.
Operating noninterest expense for 1993 was $1.854 billion, compared with
$1.764 billion a year earlier. In 1992 these expenses included charges of $86
million principally for reserves related to occupancy, asset disposition and
litigation matters.
Credit Quality
The provision for credit losses was $70 million for the fourth quarter. This
included $62 million for the consumer portfolios and $8 million for commercial
credits.
For the year, the provision for credit losses was $270 million, down
substantially from $425 million in 1992 before the special provision.
46
<PAGE>
First Chicago's allowance for credit losses was $683 million at year-end. Of
this total, $488 million was related to the commercial exposure segment and
$195 million to the consumer portfolios.
The reclassification of reserves related to securitized credit card
receivables reduced the ratio of total allowance to nonperforming loans.
However, it had no impact on the ratio of commercial reserves to commercial
nonperforming loans, which was 209 percent at the end of 1993.
Net charge-offs were $39 million for the fourth quarter of 1993. Commercial
net charge-offs were $10 million. Consumer net charge-offs, mainly in the
credit card portfolio, were $29 million. The net charge-off rate for credit
card receivables was 3.5 percent.
Comparative Earnings Summary
Set forth below is comparative selected financial information of First
Chicago for the three months ended December 31, 1993 and 1992 and for the year
ended December 31, 1993 and 1992
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
---------------------------- --- ---
1993 1992 CHANGE
--------- --------- ------
(DOLLARS IN MILLIONS,
EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net interest income--tax-equivalent basis. $ 306.9 $ 326.2 - 6%
Provisions for credit and real estate
losses (including provisions for assets
held for accelerated disposition)........ 71.2 81.5 -13%
Noninterest income........................ 523.0 436.0 +20%
Noninterest expense (excluding provisions
for other real estate)................... 480.7 461.2 + 4%
Net income................................ 172.8 136.6 +27%
Earnings per share
Primary................................. 1.81 1.53 +18%
Average common and common equivalent
shares (in millions).................. 87.7 81.7 + 7%
Fully diluted........................... 1.77 1.49 +19%
Average shares, assuming full dilution
(in millions)......................... 91.5 85.1 + 7%
Average balances
Loans................................... 22,263 22,761 - 2%
Earning assets.......................... 48,977 47,654 + 3%
Total assets............................ 57,708 56,167 + 3%
Common equity........................... 3,451 2,616 +32%
Stockholders' equity.................... 4,212 3,235 +30%
Net interest margin....................... 2.49% 2.72% - 8%
Return on assets.......................... 1.19% 0.97% +23%
Return on common stockholders' equity..... 18.3% 19.0% - 4%
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------- --- ---
1993 1992 CHANGE
-------- -------- ------
(DOLLARS IN MILLIONS,
EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net interest income--tax-equivalent basis... $1,264.0 $1,217.0 + 4%
Provisions for credit and real estate losses
(including provisions for assets held for
accelerated disposition)................... 274.2 1,106.9 --
Noninterest income.......................... 2,202.4 1,488.2 +48%
Noninterest expense (excluding provisions
for other real estate)..................... 1,853.9 1,764.4 + 5%
Income (loss) before cumulative effect of
changes in accounting principles........... 804.5 (114.5) --
Cumulative effect of changes in accounting
principles--
Valuation of venture capital investment
securities............................... -- 220.7 --
Recognition of credit card solicitation
costs.................................... -- (12.7) --
Net income.................................. 804.5 93.5 --
Earnings per share
Primary
Income (loss) before cumulative effect of
changes in accounting principles......... 8.78 (2.08) --
Cumulative effect of changes in accounting
principles............................... -- 2.72 --
Net income................................ 8.78 0.64 --
Average common and common equivalent
shares (in millions).................... 85.2 76.5 +11%
Fully Diluted
Income (loss) before cumulative effect of
changes in accounting principles......... 8.43 (2.08) --
Cumulative effect of changes in accounting
principles............................... -- 2.72 --
Net income................................ 8.43 0.64 --
Average shares, assuming full dilution
(in millions)........................... 90.3 79.7 +13%
Average balances
Loans..................................... 21,997 24,347 -10%
Earning assets............................ 48,517 46,706 + 4%
Total assets.............................. 56,854 54,768 + 4%
Common equity............................. 3,092 2,733 +13%
Stockholders' equity...................... 3,886 3,314 +17%
Net interest margin......................... 2.61% 2.61% --
Return on assets............................ 1.42% 0.17% --
Return on common stockholders' equity....... 24.2% 1.8% --
</TABLE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
Additional information concerning First Chicago, including certain financial
information, information regarding voting securities of First Chicago and
principal holders thereof, and information concerning directors and executive
officers of First Chicago, is included in the documents filed by First Chicago
with the Commission under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
48
<PAGE>
DESCRIPTION OF FIRST CHICAGO COMMON STOCK
GENERAL
The authorized capital stock of First Chicago consists of 150,000,000 shares
of Common Stock, $5 par value and 15,000,000 shares of preferred stock, without
par value. As of December 31, 1993, there were issued and outstanding
86,398,605 shares of First Chicago Common Stock. At December 31, 1993, there
were also issued and outstanding 2,410,000 shares of First Chicago Preferred
Stock with Cumulative and Adjustable Dividends ($50 stated value) (the "First
Chicago Series A Preferred Stock"), 1,191,000 shares of First Chicago Preferred
Stock with Cumulative and Adjustable Dividends, Series B ($100 stated value)
(the "First Chicago Series B Preferred Stock"), 713,800 shares of First Chicago
Preferred Stock with Cumulative and Adjustable Dividends, Series C ($100 stated
value) (the "First Chicago Series C Preferred Stock"), 6,000,000 shares of
First Chicago 10% Cumulative Preferred Stock, Series D (Stated Value $25 Per
Share) (the "First Chicago Series D Preferred Stock"), 160,000 shares of First
Chicago 8.45% Cumulative Preferred Stock, Series E ($625 stated value) (the
"First Chicago Series E Preferred Stock") and 40,000 shares of First Chicago 5
3/4% Cumulative Convertible Preferred Stock, Series B ($5,000 stated value)
(the "First Chicago Convertible Preferred Stock") (collectively, the "First
Chicago Preferred Stock"). See "Other Capital Stock" below.
Holders of First Chicago Common Stock are entitled to receive dividends when,
as and if declared by the Board of Directors out of any funds legally available
therefor, and are entitled upon liquidation, after claims of creditors and
preferences of the First Chicago Preferred Stock and any other series of
preferred stock hereafter authorized by First Chicago, to receive pro rata the
net assets of First Chicago. A schedule of dividends paid by First Chicago for
the last three years is included herein. See "First Chicago and Lake Shore
Comparative Stock Prices-First Chicago." First Chicago currently intends to
continue its present policy of paying quarterly cash dividends to the holders
of First Chicago Common Stock. Future dividends will be determined by the First
Chicago Board of Directors in light of circumstances existing at the time
including the earnings and financial condition of First Chicago.
The holders of First Chicago Common Stock are entitled to one vote for each
share held and are vested with all of the voting power except as the Board of
Directors of First Chicago has provided with respect to the outstanding shares
of First Chicago Preferred Stock or may provide, in the future, with respect to
any other series of preferred stock which it may hereafter authorize. Directors
of First Chicago are elected for a one-year term expiring upon the annual
meeting of stockholders of First Chicago. The shares of First Chicago Common
Stock do not have cumulative voting rights.
The holders of First Chicago Common Stock do not have any preemptive rights
to subscribe for additional shares of capital stock of First Chicago. The
holders of First Chicago Common Stock have no conversion rights, the First
Chicago Common Stock is not subject to redemption by either First Chicago or a
stockholder, and there is no restriction on the purchase by First Chicago of
shares of First Chicago Common Stock except for certain regulatory limits.
First Chicago Common Stock is listed on the NYSE as well as the Chicago and
Pacific Stock Exchanges. First Chicago Common Stock also is listed on the
International Stock Exchange of the United Kingdom and the Republic of Ireland.
First Chicago Trust Company is the transfer agent, registrar and dividend agent
for First Chicago Common Stock.
First Chicago offers a Dividend Reinvestment and Stock Purchase Plan to
holders of First Chicago Common Stock.
PREFERRED SHARE PURCHASE RIGHTS
On November 18, 1988, the Board of Directors of First Chicago declared a
dividend to holders of First Chicago Common Stock of record on December 2, 1988
(the "First Chicago Record Date") of one preferred
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share purchase right (a "Right") for each outstanding share of First Chicago
Common Stock for, and to be attached to, each share of First Chicago Common
Stock outstanding on the First Chicago Record Date. Each right entitles the
registered holder to purchase from First Chicago one one-hundredth of a share
of Series A Junior Participating Voting Preferred Stock, without par value (the
"First Chicago Junior Preferred Shares"), of First Chicago, at a price of $130
per one one-hundredth of a First Chicago Junior Preferred Share, subject to
certain adjustments. As long as the Rights are attached to shares of First
Chicago Common Stock as provided in the Rights Agreement referred to below, one
additional Right shall be issued with each share of First Chicago Common Stock
issued after December 2, 1988.
The Rights will expire on December 2, 1998, unless the expiration date is
extended or the Rights are redeemed earlier and will not be exercisable or
transferable separately from the shares of First Chicago Common Stock until the
"Distribution Date" which will occur on the earlier of (i) 10 days following a
public announcement that a person or group of affiliated or associated persons
(an "Acquiring Person") have acquired beneficial ownership of 20% or more of
the outstanding First Chicago Common Stock or (ii) 10 business days (or such
later date as may be determined by action of the Board of Directors of First
Chicago prior to such time as any person becomes an Acquiring Person) following
the commencement of, or announcement of an intention to make, a tender offer or
exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 20% or more of the outstanding First Chicago
Common Stock.
In the event First Chicago is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets are sold,
each holder of a right will have the right to receive, upon payment of the
Right's then current exercise price, common stock of the acquiring company
which has a market value of two times the exercise price of the Right. In the
event that any person becomes an Acquiring Person, each holder of a Right,
other than Rights beneficially owned by the Acquiring Person (which will
thereafter be void), will thereafter have the right to receive upon exercise
that number of shares of First Chicago Common Stock (or under certain
circumstances, First Chicago Common Stock-equivalent First Chicago Junior
Preferred Shares) having a market value of two times the exercise price of the
Rights.
At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 20% or more of the outstanding
First Chicago Common Stock and prior to the acquisition by such person or group
of 50% or more of the outstanding First Chicago Common Stock, the Board of
Directors of First Chicago may exchange the Rights (other than Rights owned by
such person or group which have become void), in whole or in part at an
exchange ratio of one share of First Chicago Common Stock per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction (or under certain circumstances, First Chicago Common Stock-
equivalent First Chicago Junior Preferred Shares).
At any time prior to the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 20% or more of the outstanding
First Chicago Common Stock, the Board of Directors of First Chicago may redeem
the Rights in whole, but not in part, at a price of $.01 per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction (the "Redemption Price"). The redemption of the Rights may be made
effective at such time, on such basis and with such condition as the Board of
Directors of First Chicago in its sole discretion may establish.
The purchase price payable, and the number of First Chicago Junior Preferred
Shares or other securities or property issuable, upon exercise of the Rights
are subject to adjustment from time to time to prevent dilution (i) in the
event of a stock dividend on, or a subdivision, combination or reclassification
of, the First Chicago Junior Preferred Shares, (ii) upon the grant to holders
of the First Chicago Junior Preferred Shares of certain rights or warrants to
subscribe for or purchase First Chicago Junior Preferred Shares at a price, or
securities convertible into First Chicago Junior Preferred Shares with a
conversion price, less than the current market price of the First Chicago
Junior Preferred Shares or (iii) upon the distribution to holders of the First
Chicago Junior Preferred Shares of evidences of indebtedness or assets
(excluding regular periodic cash
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dividends paid out of earnings or retained earnings or dividends payable in
First Chicago Junior Preferred Shares) or of subscription rights or warrants
(other than those referred to above).
The number of outstanding Rights and the number of one-hundredths of a First
Chicago Junior Preferred Share issuable upon exercise of each Right also are
subject to adjustment in the event of a stock split of the First Chicago Common
Stock or a stock dividend on First Chicago Common Stock payable in First
Chicago Common Stock or subdivisions, consolidations or combinations of First
Chicago Common Stock occurring, in any such case, prior to the Distribution
Date.
The term of the Rights may be amended by the Board of Directors of First
Chicago without the consent of the holders of the Rights, including an
amendment to lower the threshold for exercisability of the Rights from 20% to
not less than the greater of (i) any percentage greater than the largest
percentage of the outstanding First Chicago Common Stock then known to First
Chicago to be beneficially owned by any person or group of affiliated or
associated persons and (ii) 10%, except that from and after such time as any
person becomes an Acquiring Person no such amendment may adversely affect the
interests of the holders of the Rights.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire First
Chicago on terms not approved by the Board of Directors of First Chicago. The
Rights should not interfere with any merger or other business combination
approved by the Board of Directors of First Chicago since the Rights may be
redeemed by First Chicago at the Redemption Price prior to the time that a
person or group has acquired beneficial ownership of 20% or more of First
Chicago Common Stock.
The foregoing description of the Rights and the First Chicago Junior
Preferred Shares does not purport to be complete and is qualified in its
entirety by reference to the Rights Agreement, as amended, which is an exhibit
to the Registration Statement of which this Prospectus/Proxy Statement forms a
part, and the certificate of designation, preferences and rights for the First
Chicago Junior Preferred Shares.
OTHER CAPITAL STOCK
The Board of Directors of First Chicago has the authority, without further
stockholder action, to issue from time to time a maximum of 15,000,000 shares
of preferred stock, without par value, in one or more series and for such
consideration, as may be fixed from time to time by the Board of Directors of
First Chicago, and to fix before the issuance of any shares of preferred stock
of a particular series, the designation of such series, the redemption price or
prices, if any, and the terms and conditions of the redemption, the liquidation
price, the voting rights, if any, any sinking fund provisions of the redemption
or purchase of the shares of such series, the terms and conditions upon which
the shares are convertible, if they are convertible, and any other relative
rights, preferences and limitations pertaining to such series.
The First Chicago Preferred Stock ranks prior to the First Chicago Common
Stock, both as to dividends and upon liquidation, but has no general voting
rights except as described in the next succeeding paragraph. Each series of
First Chicago Preferred Stock ranks pari passu with each other series of First
Chicago Preferred Stock with respect to dividends and liquidation rights.
Dividends on the currently outstanding First Chicago Preferred Stock are
cumulative.
Except as set forth herein, or as expressly required by applicable law, the
holders of the First Chicago Preferred Stock are not entitled to vote. If the
equivalent of six quarterly dividends payments on any series of First Chicago
Preferred Stock are in default, the number of directors of First Chicago will
be increased by two and the holders of all outstanding series of the First
Chicago Preferred Stock, voting as a single class without regard to series,
will be entitled to elect such additional two directors until all dividends in
default have been paid or declared and set aside for payment.
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The outstanding First Chicago Series A Preferred Stock, First Chicago Series
B Preferred Stock and First Chicago Series C Preferred Stock were issued in
October 1982, February 1983, and February 1984, respectively. The dividend rate
on each series is adjusted quarterly, based on a formula that considers the
interest rates for selected short- and long-term United States Treasury
securities prevailing at the time the rate is set. The First Chicago
Convertible Preferred Stock, First Chicago Series D Preferred Stock and First
Chicago Series E Preferred Stock, which were issued in March 1993, May 1991 and
November 1992, respectively, have fixed dividend rates.
The First Chicago Series A Preferred Stock is subject to a minimum and
maximum dividend rate of 7.00 percent and 15.00 percent, respectively. The
dividend rate for the quarterly dividend period ended March 31, 1994, is 7.00
percent. Shares of this series are redeemable, at the option of First Chicago,
at their stated value of $50 per share plus accrued and unpaid dividends.
Shares of this series are not convertible into other securities of First
Chicago.
The First Chicago Series B Preferred Stock is subject to a minimum and
maximum dividend rate of 6.00 percent and 12.00 percent, respectively. The
dividend rate for the quarterly period ended May 31, 1994, is percent.
Shares of this series are redeemable, at the option of First Chicago, at their
stated value of $100 per share plus accrued and unpaid dividends. Shares of
this series are not convertible into other securities of First Chicago.
The First Chicago Series C Preferred Stock is subject to a minimum and
maximum dividend rate of 6.50 percent and 12.50 percent, respectively. The
dividend rate for the quarterly period ended May 31, 1994, is percent.
Shares of this series are redeemable, at the option of First Chicago, at their
stated value of $100 per share plus accrued and unpaid dividends. Shares of
this series are not convertible into other securities of First Chicago.
The First Chicago Series D Preferred Stock has an annual dividend rate equal
to $2.50, or 10 percent, which was fixed at the date of issue. Shares of this
series are redeemable, at the option of First Chicago, at any time on or after
June 1, 1994, at a redemption price equal to $25.75 per share during the
twelve-month period ending May 31, 1995, at a redemption price equal to $25.375
per share during the twelve-month period ending May 31, 1996, and thereafter at
their stated value of $25 per share plus, in each case, accrued and unpaid
dividends. Shares of this series are not convertible into other securities of
First Chicago.
The First Chicago Series E Preferred Stock is represented by depositary
shares with each depositary share representing a one-twenty-fifth interest in a
share of First Chicago Series E Preferred Stock. The First Chicago Series E
Preferred Stock has an annual dividend rate equal to $52.8125 ($2.1125 per
depositary share), or 8.45 percent, which was fixed at the date of issue.
Shares of this series are redeemable, at the option of First Chicago, at any
time on or after November 16, 1997 at a redemption price of $625 per share ($25
per depositary share). Shares of this series are not convertible into other
securities of First Chicago.
The First Chicago Convertible Preferred Stock is represented by depositary
shares with each depositary share representing a one-hundredth interest in a
share of First Chicago Convertible Preferred Stock. The First Chicago
Convertible Preferred Stock has an annual dividend rate equal to $287.50
($2.875 per depositary share), or 5 3/4 percent, which was fixed at the date of
issue. Shares of the First Chicago Convertible Preferred Stock may be converted
into shares of First Chicago Common Stock at a conversion price of $53 5/8 per
share of First Chicago Common Stock (equivalent to a conversion rate of .9324
share of First Chicago Common Stock for each depositary share) at the option of
the stockholder at any time. Resultant fractional interests are paid in cash.
The conversion rate is subject to adjustment for certain stock dividends,
subdivisions, splits and combinations, certain distributions of assets and debt
to holders of First Chicago Common Stock, certain reclassification of First
Chicago Common Stock into other securities and certain distributions of rights
or warrants to purchase First Chicago Common Stock at a price per share less
than First Chicago Common Stock's then market value. Shares of this series are
redeemable, at the option of First Chicago, on or after
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April 1, 1997, through March 30, 2003, at an original redemption price of
$5,172.50 ($51.7250 per depositary share), declining over such period to
$5,028.75 ($50.2875 per depositary share), and thereafter at their stated value
of $5,000 per share ($50.00 per depositary share) plus accrued and unpaid
dividends.
The shares of the outstanding First Chicago Preferred Stock (or with respect
to the First Chicago Series E Preferred Stock and the First Chicago Convertible
Preferred Stock, the outstanding depositary shares representing such stock),
are listed on the NYSE. First Chicago Trust Company serves as transfer agent,
registrar and dividend disbursing agent for shares of the First Chicago
Preferred Stock and the depositary shares representing such stock. FNBC serves
as depositary for the shares of First Chicago Preferred Stock represented by
depositary shares.
DESCRIPTION OF LAKE SHORE COMMON STOCK
Lake Shore's authorized capital stock currently consists of 15,000,000 shares
of Common Stock, $.01 par value per share, and, as of the date of this
Prospectus/Proxy Statement, shares were issued and outstanding.
Holders of Lake Shore Common Stock are entitled to receive dividends declared
by the Lake Shore Board of Directors in accordance with the DGCL. See
"Comparative Rights of Holders of Lake Shore Common Stock and First Chicago
Common Stock--Distributions to Stockholders." Upon liquidation, Lake Shore
Stockholders are entitled, after settlement of claims of creditors, to receive
pro rata the net assets of Lake Shore. The holders of Lake Shore Common Stock
are entitled to one vote for each share held and have cumulative voting rights
in the election of directors. Holders of Lake Shore Common Stock do not have
preemptive rights to subscribe for additional shares of Lake Shore Common
Stock.
COMPARATIVE RIGHTS OF HOLDERS OF LAKE SHORE COMMON STOCK
AND FIRST CHICAGO COMMON STOCK
The current rights of the Stockholders of Lake Shore, a Delaware corporation,
are governed by the DGCL and Lake Shore's certificate of incorporation and by-
laws. Upon consummation of the Merger, Lake Shore Stockholders will become
stockholders of First Chicago, a Delaware corporation. As stockholders of First
Chicago, their rights will be governed by the DGCL and by First Chicago's
restated certificate of incorporation and by-laws. The certificate of
incorporation and by-laws of Lake Shore differ from the restated certificate of
incorporation and by-laws of First Chicago. Although it is not practical to
compare all such differences, the following is a summary of certain of the more
significant of them.
AUTHORIZED CAPITAL STOCK
Lake Shore. Under Lake Shore's certificate of incorporation, the aggregate
number of shares which it is authorized to issue is 15,000,000 shares of one
class of common stock, $.01 par value. All shares of Lake Shore Common Stock
are identical in rights and have one vote. Lake Shore's certificate of
incorporation provides that while the holders of its common stock shall have no
preemptive rights to subscribe to any newly issued shares, they do have
cumulative voting rights with respect to the election of directors. See the
following subsection captioned "Directors" for a discussion of cumulative
voting in the election of directors. See also "Description of Lake Shore Common
Stock" and "First Chicago and Lake Shore Comparative Stock Prices."
First Chicago. Under First Chicago's restated certificate of incorporation,
First Chicago is authorized to issue 150,000,000 shares of common stock, $5.00
par value, and 15,000,000 shares of preferred stock, no par value. All shares
of First Chicago Common Stock are identical in rights and have one vote. For a
description of First Chicago Common Stock see "Description of First Chicago
Common Stock."
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First Chicago's restated certificate of incorporation provides that its Board
of Directors can issue preferred stock in one or more series and with such
terms and at such times and for such consideration as First Chicago's Board of
Directors may determine. The authority of the First Chicago Board of Directors
includes the determination or fixing of the following with respect to shares of
any series thereof: (i) the number of shares and designation or title thereof;
(ii) rights as to dividends; (iii) whether and upon what terms the shares are
to be redeemable; (iv) rights and preferences of the holders upon the
liquidation, dissolution or winding up of First Chicago; (v) whether the shares
are to be subject to a retirement or sinking fund; (vi) whether and upon what
terms the shares are convertible; (vii) the voting rights, if any; (viii)
whether the issuance of any additional shares of a series shall be subject to
restrictions as to issuance or as to the powers, preferences or rights of any
other series; and (ix) any other preferences, privileges, powers or relative
rights specified by the Board of Directors. First Chicago has authorized and
issued those classes of First Chicago Preferred Stock listed or referenced
under the section captioned "Capitalization of First Chicago" and described
under the caption "Description of First Chicago Common Stock--Other Capital
Stock." None of the outstanding shares of First Chicago Preferred Stock have
any voting rights unless First Chicago is in default in the payment of
dividends on the First Chicago Preferred Stock for six consecutive quarters;
however, shares of First Chicago Convertible Preferred Stock are convertible at
the option of the holder into shares of First Chicago Common Stock.
DIRECTORS
Number. Both Lake Shore's and First Chicago's by-laws provide that the number
of directors shall be not less than five nor more than twenty-five. The exact
number of directors of Lake Shore shall be determined by the vote of a majority
of the votes to which all Lake Shore Stockholders are entitled; provided, that
Lake Shore's directors may increase the number of directors by not more than
four during the time period between annual meetings of Stockholders. The exact
number of directors of First Chicago shall be established from time to time by
resolution of First Chicago's Board of Directors. Currently Lake Shore has
eleven directors and First Chicago has eighteen directors.
Election. Lake Shore Stockholders are entitled to cumulative voting rights in
the election of directors. Under the DGCL cumulative voting exists in the
election of directors only if the certificate of incorporation so provides.
First Chicago's restated certificate of incorporation contains no provision
granting cumulative voting rights to First Chicago stockholders.
Under cumulative voting, a stockholder has as many votes as the number of
directors to be elected multiplied by the number of shares the stockholder
owns. The stockholder is entitled to cumulate all such votes and cast them for
the same candidate or split them among candidates. However, under First
Chicago's restated certificate of incorporation, which contains no rights to
cumulative voting in the election of directors, the number of a stockholder's
votes is equal to the number of shares he or she owns, and the stockholder is
entitled to cast only that number of votes for each of the candidates to be
elected. Consequently, under First Chicago's restated certificate of
incorporation, the holders of a majority of the votes have the power to elect
all of its directors.
Removal. Under the DGCL, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of the shares
entitled to vote at an election of directors. The DGCL also provides that in
the case of a corporation having cumulative voting, if less than the entire
board is to be removed, no director may be removed without cause if the votes
cast against his or her removal would be sufficient to elect such director if
then cumulatively voted at an election of the entire board of directors. Lake
Shore Stockholders have cumulative voting rights. No shares of First Chicago
possess any cumulative voting rights.
DISTRIBUTIONS TO STOCKHOLDERS
The DGCL allows a corporation, subject to any restrictions in its certificate
of incorporation, to declare and pay dividends upon its shares of capital stock
either out of its surplus (as determined under the statute)
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or, in the event there is no such surplus, out of its net profits for the
fiscal year in which the dividend is declared and/or the preceding fiscal year.
Further restrictions on dividends apply in the event a corporation has issued
shares possessing a preference upon the distribution of assets. Neither Lake
Shore's certificate of incorporation nor its by-laws address dividend
distributions. First Chicago's restated certificate of incorporation grants to
the Board of Directors the power to declare dividends on First Chicago Common
Stock, subject to any dividend or sinking fund requirements pertaining to First
Chicago Preferred Stock.
SPECIAL MEETINGS OF STOCKHOLDERS
Under the DGCL, special meetings of stockholders of a corporation may be
called by the board of directors or by such persons as are authorized by the
corporation's certificate of incorporation or by-laws. The Lake Shore
certificate of incorporation and by-laws do not contain any provisions
governing the calling of special meetings of Lake Shore Stockholders. First
Chicago's by-laws provide that special meetings may be called by the Chairman
of the Board, the President or any Vice Chairman and shall be called by the
Chairman or the Secretary at the written request of stockholders owning not
less than one-fifth of all shares issued and outstanding and entitled to vote
on any proposal to be submitted to the meeting.
INFORMATION REGARDING LAKE SHORE
DESCRIPTION OF LAKE SHORE, LSNB AND BOH
Lake Shore was incorporated in Delaware in 1981 as a bank holding company
registered under the BHCA. Lake Shore owns 100 percent of the outstanding
common stock of LSNB and BOH. LSNB is a national banking association founded in
1920. BOH is a state banking association chartered in Illinois founded in 1967.
At December 31, 1993, Lake Shore had consolidated assets of approximately
$1.253 billion and stockholders' equity of approximately $125 million.
LSNB offers a full line of commercial services, including lines of credit,
term loans, real estate financing, asset-based financing and cash management.
LSNB has a trust and investment management division which offers a variety of
services, including personal trust and estate administration, investment
management accounts, all forms of pension, profit sharing and 401(k) employee
benefit plans and custodial accounts. BOH conducts all the customary lending
and deposit functions of a commercial bank, including real estate, commercial
and consumer installment loans, checking and savings accounts, certificates of
deposits, IRA deposits, collection services and safe deposit facilities.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The directors, officers and principal shareholders of Lake Shore, LSNB and
BOH and their associates may have had in the past, and expect to have in the
future, transactions in the ordinary course of business with First Chicago and
its subsidiaries. Such transactions, including borrowings and loan commitments,
are and are expected to be on substantially the same terms, including interest
rates and collateral, as applicable, as those prevailing at the time for
comparable transactions with others.
SUPERVISION AND REGULATION
General
Lake Shore is a bank holding company within the meaning of the BHCA. As a
bank holding company, Lake Shore is required to file with the Federal Reserve
Board an annual report and such additional information as the Federal Reserve
Board may require pursuant to the BHCA. The Federal Reserve Board also may make
examinations of Lake Shore, LSNB and BOH. In addition, the Federal Reserve
Board has the authority to issue cease-and-desist orders against a bank holding
company and its non-bank subsidiaries if the Federal Reserve Board determines
that their actions represent an unsafe or unsound practice or violation of the
law.
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The operations of LSNB and BOH are subject to Federal and state statutes
applicable to banks chartered under the banking laws of the United States, in
the case of LSNB, and the State of Illinois, in the case of BOH, and to members
of the Federal Reserve System and the FDIC. LSNB's operations also are subject
to regulations of the OCC, the Federal Reserve Board and the FDIC. BOH's
operations also are subject to regulations of the Illinois Commissioner of
Banks and Trust Companies, the Federal Reserve Board and the FDIC.
The primary regulatory authority for LSNB is the OCC. The primary regulatory
authorities for BOH are the FDIC and the Illinois Commissioner of Banks and
Trust Companies. These agencies regularly examine such areas as loans,
investments, management practices and other aspects of LSNB's and BOH's
operations. These examinations are designed for the protection of LSNB's and
BOH's depositors and not its stockholder. In addition to these regular
examinations, LSNB and BOH must furnish to the FDIC quarterly Call Reports
containing a statement of financial affairs. As members of the FDIC, deposits
in LSNB and BOH are insured as provided by law.
Federal and state banking laws and regulations govern, among other things,
the scope of a bank's business, the investments a bank may make, the reserves
against deposits a bank must maintain, loans a bank makes and collateral it
takes, the activities of a bank with respect to mergers and consolidations, and
the establishment of branches. The OCC has the authority under the Financial
Institutions Supervisory Act to prevent a national bank from engaging in an
unsafe or an unsound practice in conducting its business. The Illinois
Commissioner of Banks and Trust Companies has similar authority with respect to
state banks. The payment of dividends, depending upon the financial condition
of a bank, could be deemed such a practice.
As subsidiary banks of a bank holding company, LSNB and BOH are subject to
certain restrictions imposed by the Federal Reserve Act on any extensions of
credit to Lake Shore or any of its subsidiaries, on investments in the stock or
other securities of Lake Shore or any of its subsidiaries, and on taking such
stock or securities as collateral for loans. The BHCA limits the activities
which may be engaged in by Lake Shore and its subsidiaries to certain specified
activities, including those activities which the Federal Reserve Board may
find, by order or regulation, to be so closely related to banking or managing
or controlling banks as to be a proper incident thereto.
Recent Legislation
FDICIA revised sections of the Federal Deposit Insurance Act affecting bank
regulation, strengthened the bank regulators' authority to intervene to prevent
the deterioration of a bank's capital level and generally tightened regulatory
requirements. The FDIC has adopted a system of risk-based premiums for deposit
insurance, as required by FDICIA. For a discussion of the potential impact of
FDICIA and the FDIC risk-based assessment system, including a discussion of the
classifications of depository institutions under the FDIC risk-based assessment
system, see "First Chicago and Recent Developments--Recent Legislation" and
"First Chicago and Recent Developments--FDIC Insurance." Section 38 of FDICIA
generally prohibits a bank from declaring any dividends, making any other
capital distribution or paying a management fee to a controlling person if,
following the distribution or payment, the institution would be within any of
the three undercapitalized categories. As of December 31, 1993, none of Lake
Shore's subsidiary banks were subject to any restrictions imposed by Section 38
of FDICIA.
RECENT DEVELOPMENTS
Other than as described herein, there have been no material changes in the
affairs of Lake Shore since the filing of its Annual Report on Form 10-K for
the year ended December 31, 1992, that have not been described in a subsequent
report filed with the SEC pursuant to the Exchange Act.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
Additional information concerning Lake Shore, including certain financial
information, information regarding voting securities of Lake Shore and the
principal holders thereof, and information concerning directors and executive
officers of Lake Shore, is included in the documents filed by Lake Shore with
the Commission under the Exchange Act.
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LEGAL MATTERS
The legality of the First Chicago Common Stock offered hereby and certain other
matters with respect to the Merger will be passed upon for First Chicago by
Sherman I. Goldberg, Executive Vice President, General Counsel and Secretary
for First Chicago. As of December 31, 1993, Sherman I. Goldberg was the record
and beneficial owner of 64,331 shares of First Chicago Common Stock and options
to purchase 100,310 shares of First Chicago Common Stock.
The statements as to matters of law and legal conclusions under "Terms of the
Merger--Federal Income Tax Consequences" contained herein are stated upon
authority of Sidley & Austin, counsel for Lake Shore. Sidley & Austin will also
pass upon certain other legal matters in connection with the Merger for Lake
Shore. Sidley & Austin has provided in the past, and is expected to continue to
provide to First Chicago from time to time in the future, legal services. After
full disclosure of Sidley & Austin's relationship with First Chicago and Lake
Shore in August 1993, each of First Chicago and Lake Shore waived any apparent
or perceived conflict of interest and consented to Sidley & Austin's
representation of Lake Shore. Nevertheless, William J. Devers, Jr. resigned
from the Board of Directors of Lake Shore on November 5, 1993, after it became
apparent that First Chicago was a Final Bidder, out of an expressed concern
with the appearance of a conflict of interest.
EXPERTS
The financial statements incorporated by reference in the Annual Report on
Form 10-K of First Chicago for the year ended December 31, 1992, as amended by
First Chicago's Form 8 dated March 12, 1993, have been audited by Arthur
Andersen & Co., independent public accountants, as indicated in their report
with respect thereto, and are incorporated herein by reference in reliance upon
the authority of said firm as experts in accounting and auditing in giving said
report.
The financial statements incorporated in the Prospectus/Proxy Statement by
reference to the Annual Report on Form 10-K of Lake Shore for the year ended
December 31, 1992, have been so incorporated in reliance on the report of Price
Waterhouse, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
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APPENDIX A
FORM OF
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
Among
First Chicago Corporation
First Chicago Acquisition Corporation V
And
Lake Shore Bancorp., Inc.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
Parties and Recitals...................................................... A-1
ARTICLE I
THE MERGER
Section 1.1 The Merger.................................................. A-1
Section 1.2 Effective Time.............................................. A-1
Section 1.3 Effects of the Merger....................................... A-2
Section 1.4 Certificate of Incorporation and By-laws.................... A-2
Section 1.5 Conversion of Securities.................................... A-2
Section 1.6 First Chicago to Make Certificates Available................ A-2
(a) Exchange of Certificates................................ A-2
(b) Exchange Procedures..................................... A-2
Section 1.7 Dividends; Transfer Taxes................................... A-3
Section 1.8 No Fractional Securities.................................... A-3
Section 1.9 Return of Exchange Fund and Fractional Securities Fund...... A-4
Section 1.10 Adjustment of Exchange Ratio................................ A-4
Section 1.11 No Further Ownership Rights in Company Common Stock......... A-4
Section 1.12 Closing of Company Transfer Books........................... A-4
Section 1.13 Further Assurances.......................................... A-4
Section 1.14 Closing..................................................... A-4
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF FIRST CHICAGO
Section 2.1 Organization, Standing and Power............................ A-5
Section 2.2 Capital Structure........................................... A-5
Section 2.3 Authority; Non-Contravention................................ A-5
Section 2.4 SEC Documents............................................... A-6
Section 2.5 Registration Statement and Proxy Statement.................. A-7
Section 2.6 Absence of Material Adverse Change.......................... A-7
Section 2.7 Pooling of Interests; Reorganization........................ A-7
Section 2.8 Brokers..................................................... A-7
Section 2.9 Reports and Filings......................................... A-7
Section 2.10 Regulatory Approvals........................................ A-8
Section 2.11 Litigation.................................................. A-8
Section 2.12 Environmental Compliance.................................... A-8
Section 2.13 Employee Matters............................................ A-8
Section 2.14 Taxes....................................................... A-8
</TABLE>
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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Section 3.1 Organization, Standing and Power........................... A-9
Section 3.2 Capital Structure.......................................... A-9
Section 3.3 Authority; Non-Contravention............................... A-9
Section 3.4 SEC Documents.............................................. A-10
Section 3.5 Registration Statement and Proxy Statement................. A-10
Section 3.6 Absence of Certain Events.................................. A-11
Section 3.7 Pooling of Interests; Reorganization....................... A-11
Section 3.8 Brokers.................................................... A-11
Section 3.9 Reports and Filings........................................ A-11
Section 3.10 Regulatory Approvals....................................... A-11
Section 3.11 Litigation................................................. A-11
Section 3.12 Environmental Compliance................................... A-11
Section 3.13 Employee Matters........................................... A-12
Section 3.14 Taxes...................................................... A-12
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business by the Company Pending the Merger...... A-13
(a) Actions................................................ A-13
(b) Advice of Changes...................................... A-14
Section 4.2 No Solicitation............................................ A-14
Section 4.3 Pooling of Interests; Reorganization....................... A-15
Section 4.4 Data Processing; Contracts; and Other Transitional Matters. A-15
Section 4.5 Additional Information..................................... A-15
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Company Stockholder Approval............................... A-16
Section 5.2 Registration Statement and Proxy Statement................. A-16
Section 5.3 Access to Information...................................... A-16
Section 5.4 Compliance with the Securities Act; Pooling................ A-17
Section 5.5 Stock Exchange Listing..................................... A-17
Section 5.6 Fees and Expenses.......................................... A-17
Section 5.7 Company Stock Options...................................... A-17
Section 5.8 Reasonable Efforts......................................... A-17
Section 5.9 Public Announcements....................................... A-18
Section 5.10 Real Estate Transfer and Gains Tax......................... A-18
Section 5.11 State Takeover Laws........................................ A-18
Section 5.12 Indemnification; Directors and Officers Insurance.......... A-18
Section 5.13 Employee Benefits.......................................... A-19
Stay Bonuses; Severance Policy; Future Hiring; Vesting
Section 5.14 Under Profit Sharing Plan................................. A-19
Section 5.15 Pooling-of-Interests....................................... A-19
</TABLE>
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ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
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Section 6.1 Conditions to Each Party's Obligation to Effect the Merger.. A-20
(a) Stockholder Approval.................................... A-20
(b) NYSE Listing............................................ A-20
(c) Bank Regulatory Approvals............................... A-20
(d) Registration Statement.................................. A-20
(e) No Order................................................ A-20
Conditions to Obligation of the Company to Effect the
Section 6.2 Merger..................................................... A-20
(a) Performance of Obligations; Representations and
Warranties................................................. A-20
(b) Tax Opinion............................................. A-20
(c) Fairness Opinion........................................ A-21
(d) Officers' Certificate................................... A-21
(e) Opinion of Counsel...................................... A-21
(f) Other Approvals......................................... A-22
(g) Other Documents......................................... A-22
Conditions to Obligations of First Chicago to Effect the
Section 6.3 Merger..................................................... A-23
(a) Performance of Obligations; Representations and
Warranties................................................. A-23
(b) Third Party Consents.................................... A-23
(c) Accounting.............................................. A-23
(d) Tax Opinion............................................. A-23
(e) Officers' Certificate................................... A-24
(f) Opinion of Counsel...................................... A-24
(g) Other Documents......................................... A-25
(h) Affiliates Agreement.................................... A-25
(i) Stockholders' Equity.................................... A-25
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination................................................. A-26
Section 7.2 Effect of Termination....................................... A-26
Section 7.3 Amendment................................................... A-26
Section 7.4 Waiver...................................................... A-27
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Non-survival of Representations and Warranties.............. A-27
Section 8.2 Notices..................................................... A-27
Section 8.3 Interpretation.............................................. A-27
Section 8.4 Counterparts................................................ A-28
Section 8.5 Entire Agreement; No Third-Party Beneficiaries.............. A-28
Section 8.6 Governing Law............................................... A-28
Section 8.7 Assignment.................................................. A-28
Section 8.8 Severability................................................ A-28
Section 8.9 Enforcement of this Agreement............................... A-28
</TABLE>
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<PAGE>
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
This AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, effective as of
November 21, 1993 (this "Agreement"), among First Chicago Corporation, a
Delaware corporation ("First Chicago"), First Chicago Acquisition Corporation
V, a Delaware corporation and a wholly-owned subsidiary of First Chicago
("Sub"), and Lake Shore Bancorp., Inc., a Delaware corporation (the "Company")
(First Chicago and the Company being hereinafter collectively referred to as
the "Constituent Corporations") amends and restates the Agreement and Plan of
Merger dated November 21, 1993 (the "Original Agreement"), among First Chicago,
Sub and the Company.
W I T N E S S E T H:
WHEREAS, First Chicago, Sub and the Company have agreed that the Original
Agreement shall be amended and restated to remove all references to Sub and to
provide for the merger of the Company into First Chicago (the "Merger"), and as
a consequence of such amendment, all references herein to "as of the date
hereof," "even date herewith," or any similar reference, shall mean November
21, 1993;
WHEREAS, the respective Boards of Directors of First Chicago and the Company
have approved and declared advisable the Merger, upon the terms and subject to
the conditions set forth herein, whereby each issued and outstanding share of
Common Stock, par value $.01 per share, of the Company ("Company Common Stock")
not owned directly or indirectly by First Chicago or the Company, will be
converted into shares of Common Stock, par value $5.00 per share, of First
Chicago ("First Chicago Common Stock");
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, it is intended that the merger shall be recorded for accounting
purposes as a pooling of interests; and
WHEREAS, First Chicago and the Company desire to make certain
representations, warranties and agreements in connection with the Merger and
also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein contained, the parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions hereof,
and in accordance with the General Corporation Law of the State of Delaware
(the "DGCL"), the Company shall be merged with and into First Chicago at the
Effective Time (as hereinafter defined). Following the Merger, the separate
corporate existence of the Company shall cease and First Chicago shall continue
as the surviving corporation (the "Surviving Corporation") and shall succeed to
and assume all the rights and obligations of the Company in accordance with the
DGCL.
Section 1.2 Effective Time. The Merger shall become effective when the
Certificate of Merger (the "Certificate of Merger"), executed in accordance
with the relevant provisions of the DGCL, is filed with the Secretary of State
of the State of Delaware; provided, however, that, upon mutual consent of the
Constituent Corporations the Certificate of Merger may provide for a later date
of effectiveness of the Merger not more than 30 days after the date the
Certificate of Merger is filed. When used in this Agreement, the term
"Effective Time" shall mean the later of the date and time at which the
Certificate of Merger is accepted for record or
<PAGE>
such later time established by the Certificate of Merger. The filing of the
Certificate of Merger shall be made as soon as practicable after the
satisfaction or waiver of the conditions to the Merger set forth herein.
Section 1.3 Effects of the Merger. The Merger shall have the effects set
forth in Section 251 of the DGCL.
Section 1.4 Certificate of Incorporation and By-laws. The Certificate of
Incorporation and By-laws of First Chicago, as in effect immediately prior to
the Effective Time, shall be the Certificate of Incorporation and By-laws of
the Surviving Corporation until thereafter changed or amended as provided
therein or by applicable law.
Section 1.5 Conversion of Securities. As of the Effective Time, by virtue of
the Merger and without any action on the part of any stockholder of the
Company:
(a) All shares of Company Common Stock that are held in the treasury of
the Company or by any wholly-owned Subsidiary (as hereinafter defined) of
the Company and any shares of Company Common Stock owned by First Chicago,
or any wholly-owned Subsidiary of First Chicago shall be cancelled and no
capital stock of First Chicago or other consideration shall be delivered in
exchange therefor; provided, however, that the foregoing shall not apply to
shares held as fiduciaries by the trust or other departments of any
Subsidiary of the Company (the "Fiduciary Shares") or any Subsidiary of
First Chicago.
(b) The capital stock of First Chicago shall continue to be the capital
stock of the Surviving Corporation.
(c) Subject to the provisions of Sections 1.8 and 1.10 hereof, each share
of Company Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares to be cancelled in accordance with
Section 1.5(a)) shall be converted into the number (the "Exchange Ratio")
of validly issued, fully paid and nonassessable shares of First Chicago
Common Stock rounded to the nearest thousandth of a share, or if there
shall not be a nearest thousandth of a share, to the next lower thousandth
of a share determined by dividing $31.08 by the average of the per share
closing prices on the New York Stock Exchange (the "NYSE") of First Chicago
Common Stock (as reported in the NYSE Composite Transactions) during the 20
consecutive trading days ending on the third trading day prior to the
Closing Date (as defined below) as reported in The Wall Street Journal,
Midwest Edition (the "Reference Period"); provided, however, that if such
average of the per share closing prices shall be greater than $53.00, then
the Exchange Ratio shall be determined by dividing $31.08 by $53.00; and
provided, further, that if such average of the per share closing prices
shall be less than $37.00, then the Exchange Ratio shall be determined by
dividing $31.08 by $37.00. All such shares of Company Common Stock, when so
converted, shall no longer be outstanding and shall automatically be
cancelled and retired and each holder of a Certificate (as defined in
Section 1.6(a)) representing any such shares shall cease to have any rights
with respect thereto, except the right to receive certain dividends and
other distributions as contemplated by Section 1.7 and shares of First
Chicago Common Stock and any cash, without interest, in lieu of fractional
shares to be issued or paid in consideration therefor upon the surrender of
such Certificate in accordance with Section 1.6.
Section 1.6 First Chicago to Make Certificates Available.
(a) Exchange of Certificates. First Chicago shall authorize First Chicago
Trust Company of New York (or such other person or persons as shall be
acceptable to First Chicago and the Company) to act as Exchange Agent hereunder
(the "Exchange Agent"). As soon as practicable after the Effective Time, First
Chicago shall deposit with the Exchange Agent in trust for the holders of
certificates which immediately prior to the Effective Time represented shares
of Company Common Stock (the "Certificates") certificates representing the
shares of First Chicago Common Stock (such shares of First Chicago Common
Stock, together with any dividends or distributions with respect thereto, being
hereinafter referred to as the "Exchange Fund") issuable pursuant to Section
1.5(c) in exchange for outstanding shares of Company Common Stock.
(b) Exchange Procedures. As soon as practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of a Certificate whose
shares were converted pursuant to Section 1.5 into shares of
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<PAGE>
First Chicago Common Stock a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon actual delivery of the Certificates to the Exchange Agent
and shall contain instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of First Chicago
Common Stock). Upon surrender of a Certificate for cancellation to the Exchange
Agent, together with such letter of transmittal, duly executed, the holder of
such Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of First Chicago Common
Stock which such holder has the right to receive pursuant to this Article I,
and the Certificate so surrendered shall forthwith be cancelled. Until
surrendered as contemplated by this Section 1.6, each Certificate shall, at and
after the Effective Time, be deemed to represent only the right to receive,
upon surrender of such Certificate, the certificate representing the
appropriate number of shares of First Chicago Common Stock, cash in lieu of
fractional shares as contemplated by Section 1.8 and certain dividends and
other distributions as contemplated by Section 1.7.
Section 1.7 Dividends; Transfer Taxes. No dividends or other distributions
that are declared on or after the Effective Time on First Chicago Common Stock
or are payable to the holders of record thereof on or after the Effective Time
will be paid to persons entitled by reason of the Merger to receive
certificates representing First Chicago Common Stock until such persons
surrender their Certificates, as provided in Section 1.6, and no cash payment
in lieu of fractional shares shall be paid to any such holder pursuant to
Section 1.8 until such holder of such Certificate shall so surrender such
Certificate. Subject to the effect of applicable law, there shall be paid to
the record holder of the certificates representing such First Chicago Common
Stock (i) at the time of such surrender or as promptly as practicable
thereafter, the amount of any dividends or other distributions theretofore paid
with respect to whole shares of such First Chicago Common Stock and having a
record date on or after the Effective Time and a payment date prior to such
surrender and (ii) at the appropriate payment date or as promptly as
practicable thereafter, the amount of dividends or other distributions payable
with respect to whole shares of First Chicago Common Stock and having a record
date on or after the Effective Time but prior to surrender and a payment date
subsequent to surrender. In no event shall the person entitled to receive such
dividends or other distributions be entitled to receive interest on such
dividends or other distributions. If any cash or certificate representing
shares of First Chicago Common Stock is to be paid to or issued in a name other
than that in which the Certificate surrendered in exchange therefor is
registered, it shall be a condition of such exchange that the Certificate so
surrendered shall be properly endorsed and otherwise in proper form for
transfer and that the person requesting such exchange shall pay to the Exchange
Agent any transfer or other taxes required by reason of the issuance of
certificates for such shares of First Chicago Common Stock in a name other than
that of the registered holder of the Certificate surrendered, or shall
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not applicable.
Section 1.8 No Fractional Securities. No certificates or scrip representing
fractional shares of First Chicago Common Stock shall be issued upon the
surrender for exchange of Certificates pursuant to this Article I, and no First
Chicago dividend or other distribution or stock split shall relate to any
fractional security, and such fractional interests shall not entitle the owner
thereof to vote or to any rights of a security holder of First Chicago. In lieu
of any such fractional securities, each holder of Company Common Stock who
would otherwise have been entitled to a fraction of a share of First Chicago
Common Stock upon surrender of Certificates for exchange pursuant to this
Article I will be paid an amount in cash (without interest) equal to such
holder's proportionate interest in the net proceeds from the sale or sales in
the open market by the Exchange Agent, on behalf of all such holders, of the
aggregate fractional shares of First Chicago Common Stock issued pursuant to
this Article I. As soon as practicable following the Effective Time, the
Exchange Agent shall determine the excess of (x) the number of full shares of
First Chicago Common Stock delivered to the Exchange Agent by First Chicago
pursuant to Section 1.6(a) over (y) the aggregate number of full shares of
First Chicago Common Stock to be distributed to holders of Company Common Stock
pursuant to Section 1.6(b) (such excess being herein called the "Excess
Shares") and the Exchange Agent, as agent for the former holders of Company
Common Stock, shall sell the Excess Shares at the prevailing prices on the
NYSE. The sale of the Excess Shares by the Exchange Agent shall be executed on
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<PAGE>
the NYSE through one or more member firms of the NYSE and shall be executed in
round lots to the extent practicable. First Chicago shall pay all commissions,
transfer taxes and other out-of-pocket transaction costs, including the
expenses and compensation of the Exchange Agent, incurred in connection with
such sale of Excess Shares. Until the net proceeds of such sale have been
distributed to the former stockholders of the Company, the Exchange Agent will
hold such proceeds in trust for such former stockholders (the "Fractional
Securities Fund"). As soon as practicable after the determination of the amount
of cash to be paid to former stockholders of the Company in lieu of any
fractional interests, the Exchange Agent shall make available in accordance
with this Agreement such amounts to such former stockholders.
Section 1.9 Return of Exchange Fund and Fractional Securities Fund. Any
portion of the Exchange Fund and the Fractional Securities Fund which remains
undistributed to the former stockholders of the Company for one year after the
Effective Time shall be delivered to First Chicago, upon demand of First
Chicago, and any former stockholders of the Company who have not theretofore
complied with this Article I shall thereafter look only to First Chicago for
payment of their claim for First Chicago Common Stock, any cash in lieu of
fractional shares of First Chicago Common Stock and any dividends or
distributions with respect to First Chicago Common Stock.
Section 1.10 Adjustment of Exchange Ratio. In the event of any
reclassification, stock split or stock dividend with respect to First Chicago
Common Stock (or if a record date with respect to any of the foregoing should
occur) during the period of trading days which is used to determine the
Exchange Ratio, or subsequent to such period but prior to the Effective Time,
appropriate and proportionate adjustments, if any, shall be made to the
Exchange Ratio, and all references to the Exchange Ratio in this Agreement
shall be deemed to be to the Exchange Ratio as so adjusted.
Section 1.11 No Further Ownership Rights in Company Common Stock. All shares
of First Chicago Common Stock issued upon the surrender for exchange of
Certificates in accordance with the terms hereof (including any cash paid
pursuant to Sections 1.7 or 1.8) shall be deemed to have been issued in full
satisfaction of all rights pertaining to the shares of Company Common Stock,
subject, however, to First Chicago's obligation to pay any dividends or make
any other distribution with a record date prior to the Effective Time which may
have been declared or made by the Company on such shares of Company Common
Stock in accordance with the terms of this Agreement.
Section 1.12 Closing of Company Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of shares
of Company Common Stock shall thereafter be made. If, after the Effective Time,
Certificates are presented to First Chicago, they shall be cancelled and
exchanged as provided in this Article I.
Section 1.13 Further Assurances. If at any time after the Effective Time
First Chicago shall consider or be advised that any deeds, bills of sale,
assignments or assurances or any other acts or things are necessary, desirable
or proper (a) to vest, perfect or confirm, of record or otherwise, in First
Chicago its right, title or interest in, to or under any of the rights,
privileges, powers, franchises, properties or assets of either of the
Constituent Corporations, or (b) otherwise to carry out the purposes of this
Agreement, First Chicago and its proper officers and directors or their
designees shall be authorized to execute and deliver, in the name and on behalf
of either of the Constituent Corporations in the Merger, all such deeds, bills
of sale, assignments and assurances and do, in the name and on behalf of such
Constituent Corporations, all such other acts and things necessary, desirable
or proper to vest, perfect or confirm its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets
of such Constituent Corporation and otherwise to carry out the purposes of this
Agreement.
Section 1.14 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of First Chicago, One
First National Plaza, Chicago, Illinois at 10:00 A.M., local time, on (a) the
first to occur of July 8, 1994, July 15, 1994, July 22, 1994, August 12, 1994,
August 19, 1994, September 16, 1994, September 23, 1994, October 14, 1994 and
October 31, 1994, provided that such
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<PAGE>
date (the "Closing Date") is at least five business days following the day on
which the last of the conditions set forth in Article VII hereof shall have
been fulfilled or waived or (b) at such other time and place as First Chicago
and the Company shall agree.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF FIRST CHICAGO
First Chicago represents and warrants to the Company as follows:
Section 2.1 Organization, Standing and Power. First Chicago is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to carry
on its business as now being conducted. First Chicago and each of its
Significant Subsidiaries (as hereinafter defined) is duly qualified to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or held under lease or the nature of its activities makes
such qualification necessary, except where the failure to be so qualified would
not, individually or in the aggregate, have a Material Adverse Effect (as
hereinafter defined). First Chicago is registered as a bank holding company
under Section 1481 et. seq. of Title 12, United States Code (the "Bank Holding
Company Act"). For purposes of this Agreement (a) "Material Adverse Change" or
"Material Adverse Effect" means, when used with respect to First Chicago or the
Company, as the case may be, any change or effect that is or, so far as can
reasonably be determined, may be materially adverse to the assets, condition
(financial or otherwise) or results of operations or prospects of First Chicago
and its Significant Subsidiaries taken as a whole or the Company and its
Significant Subsidiaries taken as a whole, as the case may be, (b) "Subsidiary"
means any corporation, partnership, joint venture or other legal entity (other
than inactive bank charters) of which First Chicago or the Company, as the case
may be (either alone or through or together with any other Subsidiary), owns,
directly or indirectly, 50% or more of the stock or other equity interests the
holders of which are generally entitled to vote for the election of the board
of directors or other governing body of such corporation or other legal entity,
(c) "Significant Subsidiary" means any Significant Subsidiary within the
meaning of Rule 1-02 of Regulation S-X of the SEC and, in the case of the
Company, includes Lake Shore National Bank ("Lake Shore") and Bank of Hinsdale
("Bank of Hinsdale") and (d) "knowledge of the Senior Executives," when used
with respect to First Chicago or the Company, as the case may be, means the
actual knowledge of any "executive officer" within the meaning of Rule 3b-7
under the Exchange Act (as defined below).
Section 2.2 Capital Structure. As of November 19, 1993, the authorized
capital stock of First Chicago consists of 150,000,000 shares of First Chicago
Common Stock and 15,000,000 shares of Preferred Stock ("First Chicago Preferred
Stock"). At the close of business on September 30, 1993, the issued and
outstanding and treasury shares of First Chicago Common Stock and First Chicago
Preferred Stock were as disclosed in the First Chicago SEC Documents (as
hereinafter defined). All of the shares of First Chicago Common Stock issuable
in exchange for Company Common Stock at the Effective Time in accordance with
this Agreement will be, when so issued, duly authorized, validly issued, fully
paid and nonassessable and free of preemptive rights and will be either listed
on a national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association of
Securities Dealers, Inc. ("NASDAQ") or held of record by more than 2,000
stockholders.
Section 2.3 Authority; Non-Contravention. First Chicago has all requisite
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by First Chicago and the consummation by First Chicago of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of First Chicago. Without limiting the foregoing, no vote or
approval by the stockholders of First Chicago of this Agreement, of the
issuance of stock in the transactions contemplated hereby or of such
transactions is required pursuant to statute, Certificate of Incorporation,
stock exchange or NASDAQ rules, contract or otherwise. This
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<PAGE>
Agreement has been duly executed and delivered by First Chicago and (assuming
the valid authorization, execution and delivery of this Agreement by the
Company) constitutes a valid and binding obligation of First Chicago
enforceable against First Chicago in accordance with its terms. The issuance of
shares of First Chicago Common Stock pursuant to this Agreement and the filing
of a registration statement with the SEC by First Chicago on Form S-4 under the
Securities Act of 1933, as amended (together with the rules and regulations
promulgated thereunder, the "Securities Act"), for the purpose of registering
the shares of First Chicago Common Stock to be issued in the Merger (together
with any amendments or supplements thereto, the "Registration Statement") has
been duly authorized by First Chicago's Board of Directors. The execution and
delivery of this Agreement do not, and the consummation of the transactions
contemplated hereby and compliance with the provisions hereof will not,
conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
material benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of First
Chicago or any of its Significant Subsidiaries under, any provision of (i) the
Certificate of Incorporation or By-laws (true and complete copies of which as
of the date hereof have been delivered to the Company) of First Chicago or any
provision of the comparable charter or organization documents of any of its
Significant Subsidiaries, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to First Chicago or any of its Significant
Subsidiaries or (iii) any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to First Chicago or any of its Significant
Subsidiaries or any of their respective properties or assets, other than, in
the case of clauses (ii) or (iii), any such conflicts, violations, defaults,
rights, liens, security interests, charges or encumbrances that, individually
or in the aggregate, would not have a Material Adverse Effect on First Chicago,
materially impair the ability of First Chicago to perform its obligations
hereunder or prevent the consummation of any of the transactions contemplated
hereby. No filing or registration with, or authorization, consent or approval
of, any domestic (federal and state), foreign or supranational court,
commission, governmental body, regulatory agency, authority or tribunal (a
"Governmental Entity") is required by or with respect to First Chicago or any
of its Significant Subsidiaries in connection with the execution and delivery
of this Agreement by First Chicago or is necessary for the consummation of the
Merger and the other transactions contemplated by this Agreement, except for
(i) in connection, or in compliance, with the provisions of the Bank Holding
Company Act, the Bank Merger Act, the Clayton Anti-Trust Act, as amended, the
Illinois Banking Act, the Securities Act and the Securities Exchange Act of
1934, as amended (together with the rules and regulations promulgated
thereunder, the "Exchange Act"), (ii) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware and appropriate documents
with the relevant authorities of other states in which the Company is qualified
to do business, (iii) such filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or the
transactions contemplated by this Agreement, (iv) such filings as may be
required in connection with the taxes described in Section 5.10, (v) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under the corporation, takeover or "Blue Sky" laws
of various states and (vi) such other consents, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made would not, individually or in the aggregate have a Material Adverse Effect
on First Chicago, materially impair the ability of First Chicago to perform its
obligations hereunder or prevent the consummation of any of the transactions
contemplated hereby.
Section 2.4 SEC Documents. First Chicago has filed all required documents
with the SEC since January 1, 1993 (the "First Chicago SEC Documents"). As of
their respective dates, the First Chicago SEC Documents complied in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and none of the First Chicago SEC Documents contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of First Chicago included in the First Chicago SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with
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respect thereto, have been prepared in accordance with generally accepted
accounting principles (except, in the case of the unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto)
and fairly present the consolidated financial position of First Chicago and its
consolidated Subsidiaries as at the dates thereof and the consolidated results
of their operations and statements of cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein).
Section 2.5 Registration Statement and Proxy Statement. None of the
information to be supplied by First Chicago for inclusion or incorporation by
reference in the Registration Statement or the proxy statement (together with
any amendments or supplements thereto, the "Proxy Statement") relating to the
Stockholder Meeting (as defined in Section 5.1) will (i) in the case of the
Registration Statement, at the time it becomes effective and at the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading or (ii) in the case of the Proxy Statement,
at the time of the mailing of the Proxy Statement and at the time of the
Stockholder Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. If at any time prior to the Effective Time any event with
respect to First Chicago, its officers and directors or any of its Subsidiaries
shall occur which is required to be described in the Proxy Statement or the
Registration Statement, such event shall be so described, and an amendment or
supplement shall be promptly filed with the SEC and, as required by law,
disseminated to the stockholders of the Company. The Registration Statement
will comply (with respect to First Chicago) as to form in all material respects
with the provisions of the Securities Act, and the Proxy Statement will comply
(with respect to First Chicago) as to form with the provisions of the Exchange
Act.
Section 2.6 Absence of Material Adverse Change. Except as disclosed in the
First Chicago SEC Documents filed with the SEC prior to the date hereof (and,
for purposes of Section 6.2(a) hereof, as disclosed in the First Chicago SEC
Documents filed on or prior to the day which is the second business day prior
to the beginning of the Reference Period), since January 1, 1993 there has not
been any Material Adverse Change with respect to First Chicago (other than
changes in banking laws or regulations, changes in generally accepted
accounting principles or interpretations thereof or changes in general economic
conditions that affect the banking industry, including changes in the general
level of interest rates).
Section 2.7 Pooling of Interests; Reorganization. To the knowledge of First
Chicago, First Chicago has not (i) taken any action or failed to take any
action which action or failure to take action would jeopardize the treatment of
First Chicago's combination with the Company in the Merger as a pooling of
interests for accounting purposes or (ii) taken any action or failed to take
any action which action or failure to take action would jeopardize the
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code.
Section 2.8 Brokers. No broker, investment banker or other person the fees
and expenses of which will be paid by First Chicago, is entitled to any
broker's, finder's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of First Chicago.
Section 2.9 Reports and Filings. Since January 1, 1993, First Chicago and
each of its Significant Subsidiaries has filed each report or other filing it
was required to file with any federal or state banking or bank holding company
regulatory authority having jurisdiction over it (together with all exhibits
thereto, the "First Chicago Regulatory Reports"), except for such reports and
filings which the failure to so file would not have a Material Adverse Effect
on First Chicago. As of their respective dates or as subsequently amended prior
to the date hereof, each of the First Chicago Regulatory Reports was true and
correct in all material respects and complied in all material respects with
applicable laws, rules and regulations.
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Section 2.10 Regulatory Approvals. As of the date hereof, First Chicago is
not aware of any reason that the regulatory approvals required to be obtained
by it as a condition to the Closing should not be obtained.
Section 2.11 Litigation. Except as disclosed in the First Chicago SEC
Documents, there is no investigation, claim, action, suit, or proceeding
pending, or threatened, nor has First Chicago been advised that such claim,
action, suit or proceeding is contemplated, against First Chicago, any of its
Subsidiaries, or any of their properties or assets (real, personal, or mixed,
tangible or intangible) which (i) will, or can reasonably be expected to, have
a Material Adverse Effect on First Chicago, or (ii) could have a Material
Adverse Effect on the transactions contemplated hereby or the performance of
First Chicago's obligations hereunder.
Section 2.12 Environmental Compliance. All real property owned or occupied by
First Chicago or any of its Subsidiaries (the "First Chicago Real Property") is
in compliance with all applicable environmental laws and regulations, except
for such non-compliance as cannot be reasonably expected to have a Material
Adverse Effect on First Chicago. To the knowledge of the Senior Executives of
First Chicago, there are no outstanding citations, notices of violation, or
orders of noncompliance issued to First Chicago or any of its Significant
Subsidiaries, nor have First Chicago or any of its Significant Subsidiaries
been advised that any such citation, notice of violation or order of
noncompliance is contemplated, pursuant to any environmental law or regulation
relating to any such First Chicago Real Property owned or occupied by First
Chicago or any of its Significant Subsidiaries or relating to any real property
no longer owned or occupied by First Chicago or any of its Subsidiaries where
the failure to cure the subject of such citation, notice of violation or order
of noncompliance could reasonably be expected to have a Material Adverse Effect
on First Chicago. To the knowledge of the Senior Executives of First Chicago,
there are no liens against such First Chicago Real Property imposed pursuant to
any environmental law or regulation which would have a Material Adverse Effect
on First Chicago.
Section 2.13 Employee Matters. Each employee benefit plan of First Chicago
and its Subsidiaries (other than a suspended plan) complies with the applicable
requirements of the Employee Retirement Income Security Act of 1974 as amended
("ERISA"), except for such non-compliance as cannot be reasonably expected to
have a Material Adverse Effect on First Chicago, and to the knowledge of the
Senior Executives of First Chicago any such plan which purports to be a
qualified plan under Section 401(a) of the Code is so qualified. To the
knowledge of the Senior Executives of First Chicago, (i) there are no
circumstances which would adversely affect the qualification of these plans or
their compliance with the applicable requirements of ERISA, would result or
have resulted in liability under Title IV of ERISA or of any "reportable event"
(as defined in Section 403(3) of ERISA) or any "prohibited transaction" (as
defined in Section 406 of ERISA and Section 4975(c) of the Code) unless such
prohibited transaction is otherwise exempted under ERISA, (ii) all employee
pension benefit plans (as defined in Section 3(2) of ERISA) of First Chicago
and its affiliates comply with the minimum funding requirement of Section 412
of the Code and, as of the most recent valuation date for each individual plan,
the fair market value of each plan's assets exceeds the present value of all
vested nonforfeitable benefits under such plan and (iii) all material
liabilities of First Chicago and its Subsidiaries related to post retirement
benefits, including post-retirement medical benefits, are disclosed in First
Chicago's most recent audited consolidated financial statements. A description,
which is true and correct in all material respects as of the date hereof, of
employee benefit plans of First Chicago and its Subsidiaries, or offered or
available to employees of First Chicago or its Subsidiaries, has been made
available to the Company.
Section 2.14 Taxes. First Chicago and each of its Significant Subsidiaries
have duly and timely filed all tax reports and returns required to be filed
with any jurisdiction, except for any failure to file as cannot be reasonably
expected to have a Material Adverse Effect on First Chicago. First Chicago and
its Significant Subsidiaries have duly and timely paid, or established adequate
reserves for the payment of, all taxes required to be paid in respect of the
periods covered by such returns.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to First Chicago as follows:
Section 3.1 Organization, Standing and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has the requisite corporate power
and authority to carry on its business as now being conducted. Lake Shore is a
national banking association duly incorporated, validly existing and in good
standing under laws of the United States and has the requisite corporate power
carry on its business as now conducted. Bank of Hinsdale is a state banking
association duly incorporated, validly existing and in good standing under the
laws of the State of Illinois and has the requisite corporate power and
authority to carry on its business as now conducted. Lake Shore and Bank of
Hinsdale are the only Subsidiaries of the Company. The Company and each of its
Subsidiaries is duly qualified to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary, except as
disclosed in the Disclosure Letter delivered to First Chicago by the Company on
the date hereof (the "Disclosure Letter"), which failures to be so qualified
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company. The Company is registered as a bank holding company under the Bank
Holding Company Act.
Section 3.2 Capital Structure. The authorized capital stock of the Company
consists of 15,000,000 shares of Company Common Stock. At the close of business
on November 19, 1993, (i) 9,937,907 shares of Company Common Stock were issued
and outstanding, (ii) 458,035 shares of Company Common Stock were reserved for
issuance upon the exercise of outstanding Company Stock Options (as defined in
Section 5.7) and (iii) 312,500 shares of Company Common Stock were held by the
Company in its treasury. There are no outstanding stock appreciation rights
("SARs") which were not granted in tandem with a related Company Stock Option.
All outstanding shares of capital stock of the Company are validly issued,
fully paid and nonassessable and not subject to preemptive rights. Except for
the Company Stock Options outstanding as of November 19, 1993, there are no
options, warrants, rights, convertible or exchangeable securities, commitments,
agreements, arrangements or undertakings of any kind to which the Company or
any of its Subsidiaries is a party or by which any of them is bound obligating
the Company or any of its Subsidiaries to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock or other
voting securities, or securities convertible into or exchangeable for shares of
capital stock or voting securities, of the Company or of any of its
Subsidiaries. True and correct copies of all agreements, instruments and other
governing documents relating to the Stock Plan (as defined below) have been
made available to First Chicago.
Section 3.3 Authority; Non-Contravention. The Board of Directors of the
Company has declared the Merger to be in the best interests of the Company's
stockholders and the Company has all requisite power and authority to enter
into this Agreement and, subject to approval of the Merger by the stockholders
of the Company, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company, subject to such
approval of the Merger by the stockholders of the Company. This Agreement has
been duly executed and delivered by the Company and (assuming the valid
authorization, execution and delivery of this Agreement by First Chicago)
constitutes a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms. The execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated hereby
and compliance with the provisions hereof will not, conflict with, or result in
any violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to the loss of a material benefit under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of the Company or any of its Significant Subsidiaries
under, any provision of (i) the Certificate of Incorporation or By-laws of the
Company (true and complete copies of which as of the date hereof have been
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delivered to First Chicago) or any provision of the comparable charter or
organization documents of any of its Significant Subsidiaries, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to the Company
or any of its Significant Subsidiaries or (iii) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or any of
its Significant Subsidiaries or any of their respective properties or assets,
other than, in the case of clause (ii) or (iii), any such conflicts,
violations, defaults, rights, liens, security interests, charges or
encumbrances that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company, materially impair the ability of the Company to
perform its obligations hereunder or prevent the consummation of any of the
transactions contemplated hereby. No filing or registration with, or
authorization, consent or approval of, any Governmental Entity is required by
or with respect to the Company or any of its Significant Subsidiaries in
connection with the execution and delivery of this Agreement by the Company or
the consummation by the Company of the transactions contemplated hereby, except
for (i) in connection, or compliance with, the provisions of the Bank Holding
Company Act, the Bank Merger Act, the Clayton Anti-Trust Act, as amended, and
the Illinois Banking Act, (ii) the filing with the SEC of (x) the Proxy
Statement, and (y) such reports under Section 13(a) of the Exchange Act as may
be required in connection with this Agreement and the transactions contemplated
hereby, (iii) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware and appropriate documents with the relevant
authorities of other states in which the Company or any of its Significant
Subsidiaries is qualified to do business, (iv) such filings and consents as may
be required under any environmental, health or safety law or regulation
pertaining to any notification, disclosure or required approval triggered by
the Merger or the transactions contemplated by this Agreement, (v) such filings
as may be required in connection with the taxes described in Section 5.10, (vi)
such other consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under the corporation, takeover or
"Blue Sky" laws of various states, and (vii) such other consents, approvals,
orders, authorizations, registrations, declarations and filings the failure of
which to be obtained or made would not, individually or in the aggregate, have
a Material Adverse Effect on the Company, materially impair the ability of the
Company to perform its obligations hereunder or prevent the consummation of any
of the transactions contemplated hereby.
Section 3.4 SEC Documents. The Company has filed all required documents with
the SEC since January 1, 1993 (the "Company SEC Documents"). As of their
respective dates, the Company SEC Documents complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case
may be, and none of the Company SEC Documents contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the Company SEC Documents comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles (except,
in the case of unaudited statements, as permitted by Form 10-Q of the SEC)
applied on a consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto) and fairly present the consolidated
financial position of the Company and its consolidated Subsidiaries as at the
dates thereof and the consolidated results of their operations and changes in
financial position for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments and to any other
adjustments described therein).
Section 3.5 Registration Statement and Proxy Statement. None of the
information supplied or to be supplied by the Company for inclusion or
incorporation by reference in the Registration Statement or the Proxy Statement
will (i) in the case of the Registration Statement, at the time it becomes
effective and at the Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading or (ii) in the
case of the Proxy Statement, at the time of the mailing of the Proxy Statement
and at the time of the Stockholder Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under
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which they are made, not misleading. If at any time prior to the Effective Time
any event with respect to the Company, its officers and directors or any of its
Subsidiaries should occur which is required to be described in an amendment of,
or a supplement to, the Proxy Statement or the Registration Statement, such
event shall be so described, and such amendment or supplement shall be promptly
filed with the SEC and, as required by law, disseminated to the stockholders of
the Company. The Registration Statement will comply (with respect to the
Company) as to form in all material respects with the provisions of the
Securities Act, and the Proxy Statement will (with respect to the Company)
comply as to form in all material respects with the requirements of the
Exchange Act.
Section 3.6 Absence of Material Adverse Change. Except as disclosed in the
Company SEC Documents filed with the SEC prior to November 21, 1993 or in the
Disclosure Letter, since January 1, 1993 there has not been any Material
Adverse Change with respect to the Company (other than changes in banking laws
or regulations, changes in generally accepted accounting principles or
interpretations thereof or changes in general economic conditions that affect
the banking industry, including changes in the general level of interest
rates).
Section 3.7 Pooling of Interests; Reorganization. To the knowledge of the
Company, neither it nor any of its Subsidiaries has (i) taken any action or
failed to take any action which action or failure to take action would
jeopardize the treatment of First Chicago's combination with the Company in the
Merger as a pooling of interests for accounting purposes or (ii) taken any
action or failed to take any action which action or failure to take action
would jeopardize the qualification of the Merger as a reorganization within the
meaning of Section 368(a) of the Code.
Section 3.8 Brokers. No broker, investment banker or other person, other than
Donaldson, Lufkin & Jenrette Securities Corporation, the fees and expenses of
which are described in the Disclosure Letter and will be paid by the Company,
is entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.
Section 3.9. Reports and Filings. Since January 1, 1993, each of the Company
and its Subsidiaries has filed each report or other filing that it was required
to file with any federal or state banking or bank holding company regulatory
authority having jurisdiction over it (together with all exhibits thereto, the
"Company Regulatory Reports"), except for such reports and filings which the
failure to so file would not have a Material Adverse Effect on the Company. The
Company has provided First Chicago with copies or access to copies of all of
the Company Regulatory Reports. As of their respective dates or as subsequently
amended prior to the date hereof, each of the Company Regulatory Reports was
true and correct in all material respects and compiled in all material respects
with applicable laws, rules and regulations.
Section 3.10 Regulatory Approvals. As of the date hereof, the Company is not
aware of any reason that the regulatory approvals required to be obtained by it
as a condition to Closing should not be obtained.
Section 3.11 Litigation. Except as disclosed in the Company SEC Documents
filed prior to November 21, 1993 or in the Disclosure Letter, there is no
investigation, claim, action, suit, or proceeding pending, or threatened, nor
has the Company been advised that such claim, action, suit or proceeding is
contemplated, against the Company, any of its Subsidiaries, or any of their
properties or assets (real, personal, or mixed, tangible or intangible) which
(i) will, or can reasonably be expected to, have a Material Adverse Effect on
the Company, or (ii) could have a Material Adverse Effect on the transactions
contemplated hereby or the performance of the Company's obligations hereunder.
Section 3.12 Environmental Compliance. All real property owned or occupied by
the Company or any of its Subsidiaries (the "Company Real Property") is in
compliance with all applicable environmental laws and regulations, except for
such non-compliance as cannot be reasonably expected to have a Material Adverse
Effect on the Company. To the knowledge of the Senior Executives of the
Company, there are no outstanding
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citations, notices of violation, or orders of noncompliance issued to the
Company or any of its Subsidiaries, nor have the Company or any of its
Subsidiaries been advised that any such citation, notice of violation or order
of noncompliance is contemplated, pursuant to any environmental law or
regulation relating to any such Company Real Property owned or occupied by the
Company or any of its Subsidiaries or relating to any real property no longer
owned or occupied by the Company or any of its Subsidiaries. To the knowledge
of the Senior Executives of the Company, there are no liens against such
Company Real Property imposed pursuant to any environmental law or regulation.
To the knowledge of the Senior Executives of the Company, the Company Real
Property does not fall within the definition of "real property" under the
Illinois Responsible Property Transfer Act.
Section 3.13 Employee Matters. Each employee benefit plan of the Company and
its Subsidiaries complies with the applicable requirements of the Employee
Retirement Income Security Act of 1974 as amended ("ERISA"), except for such
non-compliance as cannot be reasonably expected to have a Material Adverse
Effect on the Company, and to the knowledge of the Senior Executives of the
Company any such plan which purports to be a qualified plan under Section
401(a) of the Code is so qualified. To the knowledge of the Senior Executives
of the Company, (i) there are no circumstances which would adversely affect the
qualification of these plans or their compliance with the applicable
requirements of ERISA, would result or have resulted in liability under Title
IV of ERISA or of any "reportable event" (as defined in Section 403(3) of
ERISA) or any "prohibited transaction" (as defined in Section 406 of ERISA and
Section 4975(c) of the Code) unless such prohibited transaction is otherwise
exempted under ERISA, (ii) all employee pension benefit plans (as defined in
Section 3(2) of ERISA) of the Company and its affiliates comply with the
minimum funding requirement of Section 412 of the Code and, as of the most
recent valuation date for each individual plan, the fair market value of each
plan's assets exceeds the present value of all vested nonforfeitable benefits
under such plan and (iii) all liabilities of the Company and its Subsidiaries
related to post retirement benefits, including post-retirement medical
benefits, are disclosed in the Company's most recent audited consolidated
financial statements. None of the Company or its Subsidiaries are bound by any
union or collective bargaining contract. A description, which is true and
correct in all material respects as of the date hereof, of employee benefit
plans of the Company and its Subsidiaries, or offered or available to employees
of the Company to is Subsidiaries, has been made available to the Company.
Section 3.14 Taxes. The Company and each of its Subsidiaries have duly and
timely filed all tax reports and returns required to be filed with any
jurisdiction, except for any failure to file as cannot be reasonably expected
to have a Material Adverse Effect on the Company. All such reports and returns
filed by the Company and its Subsidiaries are true, correct, complete and
accurate in all material respects. The Company and its Subsidiaries have duly
and timely paid, or established adequate reserves for the payment of, all taxes
required to be paid in respect of the periods covered by such returns. The
Company and each of its Subsidiaries are not delinquent in the payment of any
corporate income or franchise tax, have not requested any extension of time
within which to file any corporate or franchise income tax returns that have
not since been filed, or have not waived or agreed to waive any applicable
statute of limitations.
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ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business by the Company Pending the Merger. (a)
Actions. During the period from the date of this Agreement through the
Effective Time, the Company shall, and shall cause its Subsidiaries to, in all
material respects carry on their respective businesses in, and not enter into
any material transaction other than in accordance with, the ordinary course
and, to the extent consistent therewith, use all reasonable efforts to preserve
intact their current business organizations, keep available the services of
their current officers and employees and preserve their relationships with
customers, suppliers and others having business dealings with them to the end
that their goodwill and ongoing businesses shall be unimpaired at the Effective
Time. Without limiting the generality of the foregoing, and, except as
otherwise expressly contemplated by this Agreement or the Disclosure Letter and
except as otherwise required by appropriate regulatory authorities, the Company
shall not, and shall not permit any of its Subsidiaries to, without the prior
written consent of First Chicago:
(i) (x) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its
capital stock, or otherwise make any payments to stockholders of the
Company in their capacity as such, other than (1) ordinary quarterly
dividends by the Company consistent with past practice in an amount not in
excess of $0.08 per share of Company Common Stock (it being the intent that
stockholders of the Company shall be entitled to either a dividend on
Company Common Stock or First Chicago Common Stock, but not both, for the
quarter in which the Closing occurs), (2) dividends declared prior to the
date of this Agreement, and (3) dividends payable to the Company declared
by any of the Company's Subsidiaries, (y) split, combine or reclassify any
of its capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock and (z) purchase, redeem or otherwise acquire any shares of
capital stock of the Company or any of its Subsidiaries or any other
securities thereof or any rights, warrants or options to acquire any such
shares or other securities;
(ii) issue, deliver, sell, pledge, dispose of or otherwise encumber any
shares of its capital stock, any other voting securities or equity
equivalent or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities or convertible
securities or equity equivalent (other than, in the case of the Company,
the issuance of Company Common Stock during the period from the date of
this Agreement through the Effective Time upon the exercise of Company
Stock Options outstanding on the date of this Agreement in accordance with
their current terms or upon exercise of the Stock Option Agreement dated
November 21, 1993 between the Company and First Chicago (the "First Chicago
Option Agreement") in accordance with its terms);
(iii) amend its Certificate of Incorporation or amend in any material
respects its By-laws;
(iv) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of or equity in, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof or otherwise acquire or
agree to acquire any assets other than in the ordinary course of business;
(v) sell, lease or otherwise dispose of or agree to sell, lease or
otherwise dispose of, any of its assets other than in the ordinary course
of business consistent with past practice and then only if, and to the
extent, that such assets are not material, individually or in the
aggregate, to the Company and its Subsidiaries taken as a whole;
(vi) except in the ordinary course of business consistent with past
practice, (y) incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or guarantee any
debt securities of others or (z) make any loans, advances or capital
contributions to, or investments in, any other person, other than to the
Company or any wholly-owned Subsidiary of the Company;
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(vii) alter through merger, liquidation, reorganization, restructuring or
in any other fashion the corporate structure or ownership of any Subsidiary
of the Company;
(viii) enter into, adopt, or amend any severance plan, employee benefit
plan or any employment, severance, transition or consulting agreement
except (y) as permitted by Section 5.14 and (z) consistent with past
practice, average compensation increases not in excess of 4.5% per annum
associated with annual reviews in the ordinary course of business;
(ix)(x) purchase or agree to purchase any private label asset-backed
securities, (y) purchase or sell or agree to purchase or sell options or
other derivative instruments on any securities held in the investment
account of the Company or any of its Subsidiaries (collectively, the
"Investment Account"), or (z) change in any material way its overall
policies, procedures and strategies with respect to the Investment Account
and use its best efforts to implement such hedging and other strategies
with respect to the Investment Account as are recommended by First Chicago;
(x) change its credit policies, procedures or practices, or commit or
renew a prior commitment to lend money, purchase assets, issue a letter of
credit, guarantee or similar instrument or otherwise extend credit to any
person in a manner not in the ordinary course of the Company's business or
inconsistent with past practice;
(xi) create any additional obligation, or increase or extend in any way
any existing obligation, of the Company or any of its Subsidiaries with
respect to the provision of post-retirement medical benefits;
(xii) violate or fail to perform any obligation or duty imposed upon the
Company or any Subsidiary by any applicable federal, state or local law,
rule, regulation, guideline or ordinance, the noncompliance with or
nonperformance of which might have a Material Adverse Effect; or
(xiii) modify its current practices with respect to allowances for loan
losses.
(b) Advice of Changes. The Company shall promptly advise First Chicago orally
and in writing of any change or event having, or which, insofar as can
reasonably be foreseen, would have, a Material Adverse Effect on the Company or
any of its Subsidiaries.
Section 4.2 No Solicitation. From and after the date hereof, the Company will
not, and will not permit any of its officers, directors, employees, agents and
other representatives or those of any of its Subsidiaries to, directly or
indirectly, solicit, initiate, assist or encourage (including by way of
furnishing information) any takeover proposal or offer from any person, or
engage in discussions or negotiations relating thereto; provided, however, that
(i) the Company may engage in discussions or negotiations with a third party
who seeks to initiate such discussions or negotiations or may furnish such
third party information concerning the Company and its business, properties or
assets, (ii) the Company's Board of Directors may take and disclose to the
Company's stockholders a position contemplated by Rule 14e-2(a) promulgated
under the Exchange Act and (iii) following receipt of a takeover proposal the
Board of Directors of the Company may withdraw or modify its recommendation
referred to in Section 5.1, but in each case referred to in the foregoing
clauses (i) through (iii) only to the extent that the Board of Directors of the
Company shall be advised in a written opinion of Sidley & Austin or other firm
of outside counsel reasonably acceptable to First Chicago that such action is
necessary in order for the Board of Directors of the Company to act in a manner
which is consistent with its fiduciary obligations under applicable law. The
Company will promptly notify First Chicago of any takeover proposal or offer,
including the material terms and conditions thereof and the identity of the
person or group making such takeover proposal or offer. As used in this
Agreement, "takeover proposal" or "offer" shall mean any proposal or offer,
other than a proposal or offer by First Chicago or any of its affiliates, for a
tender or exchange offer, a merger, consolidation or other business combination
involving the Company or any Subsidiary of the Company or any proposal to
acquire in any manner a substantial equity interest in, or a substantial
portion of the assets of, the Company or any of its Subsidiaries.
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Section 4.3 Pooling of Interests; Reorganization. During the period from the
date of this Agreement through the Effective Time, unless the other parties
shall otherwise agree in writing, none of First Chicago, any Subsidiary of
First Chicago, the Company nor any Subsidiary of the Company shall (a)
knowingly take or fail to take any action which action or failure to act would
jeopardize the treatment of First Chicago's combination with the Company as a
pooling of interests for accounting purposes or (b) knowingly take or fail to
take any action which action or failure to act would jeopardize qualification
of the Merger as a reorganization within the meaning of Section 368(a) of the
Code.
Section 4.4 Data Processing; Contracts; and Other Transitional Matters. To
the extent permitted by applicable regulatory requirements:
(a) Commencing on November 29, 1993 and continuing through the Effective
Time, the Company agrees to provide reasonable access to its facilities,
personnel, files and equipment, and the facilities, personnel, files and
equipment of its Subsidiaries, and agrees to use its reasonable efforts to
provide such access to third parties providing services or equipment to the
Company or its Subsidiaries, to officers, employees, agents and representatives
of First Chicago and its Subsidiaries for the purpose of First Chicago
effecting a conversion (the "Conversion") of the data processing and operating
systems of the Company and its Subsidiaries to the data processing and
operating systems of First Chicago and its Subsidiaries at the Effective Time
or as soon as possible thereafter as First Chicago may determine. Such access,
which shall include, without limitation, the right of First Chicago and its
Subsidiaries to install and test on the premises of the Company and its
Subsidiaries all equipment and systems necessary or appropriate to effect the
Conversion, the right to train officers, employees, agents and representatives
of the Company and its Subsidiaries, and the right to maintain without costs or
expense to First Chicago or its Subsidiaries adequate working space on site at
the Company and its Subsidiaries, shall be designed to the extent reasonably
practicable to limit interference with the normal business of the Company and
its Subsidiaries. Immediately upon execution of this Agreement and through the
Effective Time, the Company agrees to make available and cause its Subsidiaries
to make available, officers, employees, agents and representatives of the
Company and its Subsidiaries with appropriate training and expertise in data
processing and operations to work with First Chicago and its Subsidiaries in
order to effectuate the Conversion. Company and First Chicago agree to jointly
review and approve all external communications relating to the Conversion.
(b) From the effective date of this Agreement through the Effective Time, the
Company agrees that neither it nor any of its Subsidiaries will enter into,
renew, extend, modify or terminate any contract or other agreement with an
aggregate value in excess of $25,000 (1) without consulting with First Chicago
or (2) if First Chicago advises against such action, unless, in the case of
(2), the Company reasonably believes such action is in the best interests of
the Company and will not unduly restrict, delay or materially increase the
expense of the Conversion. The Company and its Subsidiaries will use their
reasonable efforts to (y) implement prior to the Effective Date the joint
decision of the Company and First Chicago with respect to any such agreement
and (z) terminate on or immediately prior to the Closing Date the credit card
program agreement with MBNA American Bank, N.A., and the agreement with Harris
Trust & Savings Bank with respect to membership in the Charge-It system.
(c) Company agrees that it will file, mail and post, or permit First Chicago
or its Subsidiaries to file, mail and post, any branch closing notice(s)
pursuant to Section 39(c) of the Federal Deposit Insurance Act, as amended, and
the guidelines thereunder, which First Chicago requests be furnished with
respect to any branches of the Company or its Subsidiaries.
Section 4.5 Additional Information. The Company shall provide to First
Chicago on or before the Closing Date a supplemental schedule summarizing any
information known to the Senior Executives of the Company relating to the
following subjects or necessary to update previously supplied information: (a)
non-compliance by the Company or its Subsidiaries in any material respect with
applicable environmental laws and regulations; (b) the failure of employee
benefit plans of the Company or its Subsidiaries to comply in any
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material respect with the applicable requirements of ERISA; (c) the failure of
the Company or its Subsidiaries to file any tax reports and returns in any
jurisdiction; and (d) non-compliance by the Company or its Subsidiaries in any
material respect with any contracts which are disclosed in the Company SEC
Reports or other significant contracts which are material to the business or
operations of the Company or its Subsidiaries.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Company Stockholder Approval. The Company shall call a meeting of
its stockholders (the "Stockholder Meeting") for the purpose of voting upon the
Merger and shall use its best efforts to obtain stockholder approval of the
Merger. The Stockholder Meeting shall be held as soon as practicable following
the date upon which the Registration Statement becomes effective, and the
Company will, through its Board of Directors but subject to the fiduciary
duties of its Board of Directors under applicable law as determined by the
Board of Directors in good faith after consultation with the Company's outside
counsel, recommend to its stockholders the approval of the Merger as being in
the best interests of the Company's stockholders and not rescind its
declaration that the Merger is advisable.
Section 5.2 Registration Statement and Proxy Statement. (a) First Chicago
shall prepare and file with the SEC as soon as reasonably practicable the
Registration Statement and shall use all reasonable efforts to have the
Registration Statement declared effective by the SEC as soon as reasonably
practicable. First Chicago shall also take any reasonable action required to be
taken under state securities or "Blue Sky" laws in connection with the issuance
of the First Chicago Common Stock pursuant to the Merger and the exercise of
the Company Stock Options after the Effective Time. The Company shall furnish
First Chicago all information concerning the Company and the holders of Company
Common Stock required for use in the Registration Statement, and the Company
shall take such other actions as First Chicago may reasonably request in
connection with the preparation of such Registration Statement and the actions
to be taken by First Chicago pursuant to this Section 5.2(a).
(b) The Company shall prepare and file with the SEC as soon as reasonably
practicable the Proxy Statement. First Chicago shall furnish the Company all
information concerning First Chicago required for use in the Proxy Statement,
and First Chicago shall take such other action as the Company may reasonably
request in connection with the preparation of the Proxy Statement.
Section 5.3. Access to Information. The Company shall, and shall cause each
of its Subsidiaries to, afford to First Chicago, and to First Chicago's
accountants, counsel, financial advisers and other representatives, reasonable
access and permit them to make such inspections as they may reasonably require
during normal business hours during the period from the date of this Agreement
through the Effective Time to all their respective properties, books, minutes,
contracts, commitments and records and, during such period, the Company shall,
and shall cause each of its Subsidiaries to, furnish promptly to First Chicago
(i) access to each report, schedule, registration statement and other document
filed by it during such period pursuant to the requirements of federal or state
laws and (ii) all other information concerning its business, properties and
personnel as First Chicago may reasonably request. In no event shall the
Company be required to supply to First Chicago, or to First Chicago's
accountants, counsel, financial advisors or other representatives, any
information relating to indications of interest from, or discussions with, any
other potential acquirors of the Company which were received or conducted prior
to the date hereof except to the extent necessary for use in the Registration
Statement. Except as required by law, First Chicago and the Company will hold,
and will cause their respective affiliates, associates and representatives to
hold, any nonpublic information received from the other party to this
Agreement, any of their respective Subsidiaries or their respective advisors
(other than information already in the possession of such party or its
Subsidiaries at the time of its receipt from the other party, or information
subsequently developed independently by such party or any of its Subsidiaries)
in confidence until such time as such information otherwise becomes publicly
available and shall use their best
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efforts to ensure that such affiliates, associates and representatives do not
disclose such information to others without the prior written consent of First
Chicago or the Company, as appropriate. In the event of termination of this
Agreement for any reason, First Chicago and the Company shall promptly return
or destroy all nonpublic documents so obtained from the Company, First Chicago
or any of their Subsidiaries and any copies made of such documents for the
Company or First Chicago.
Section 5.4 Compliance with the Securities Act; Pooling. Prior to the
Effective Time, the Company shall cause to be prepared and delivered to First
Chicago a list (reasonably satisfactory to counsel for First Chicago)
identifying all persons who, at the time of the Stockholder Meeting, may be
deemed to be "affiliates" of the Company as that term is used in paragraphs (c)
and (d) of Rule 145 under the Securities Act (the "Affiliates"). The Company
shall use its best efforts to cause each person who is identified as an
Affiliate in such list to deliver to First Chicago on or prior to the Effective
Time a written agreement, in a form reasonably acceptable to the parties
hereto, that such Affiliate will not sell, pledge, transfer or otherwise
dispose of any shares of First Chicago Common Stock issued to such possible
Affiliate pursuant to the Merger, except pursuant to an effective registration
statement or in compliance with Rule 145 or an exemption from the registration
requirements of the Securities Act and that such Affiliate will not sell or in
any other way reduce such Affiliate's risk relative to any shares of First
Chicago Common Stock received in the Merger (within the meaning of Section
201.01 of the SEC's Financial Reporting Release No. 1), until such time as
financial results (including combined sales and net income) covering at least
30 days of post-merger operations have been published, except as permitted by
Staff Accounting Bulletin No. 76 issued by the SEC.
Section 5.5 Stock Exchange Listing. First Chicago shall use its best efforts
to list on the NYSE, upon official notice of issuance, the shares of First
Chicago Common Stock to be issued in connection with the Merger and pursuant to
the Company Stock Options.
Section 5.6 Fees and Expenses. Whether or not the Merger is consummated, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
costs and expenses.
Section 5.7 Company Stock Options. No later than the Effective Time, each
option to purchase shares of Company Common Stock (a "Company Stock Option")
which is outstanding immediately prior to the Effective Time pursuant to the
Company's Stock Incentive Plan (the "Stock Plan") shall become and represent an
option to purchase the number of shares of First Chicago Common Stock (a "First
Chicago Stock Option") (decreased to the nearest full share) determined by
multiplying (i) the number of shares of Company Common Stock subject to such
Company Stock Option immediately prior to the Effective Time by (ii) the
Exchange Ratio, at an exercise price per share of Company Common Stock (rounded
up to the nearest whole cent) equal to the exercise price per share of Company
Common Stock immediately prior to the Effective Time divided by the Exchange
Ratio. First Chicago shall pay cash to holders of Company Stock Options in lieu
of issuing fractional shares of First Chicago Common Stock upon the exercise of
Company Stock Options for shares of First Chicago Common Stock unless in the
reasonable judgment of First Chicago such payment would adversely affect the
ability to account for the Merger under the pooling-of-interests method. After
the Effective Time, except as provided above in this Section 5.7, each First
Chicago Stock Option shall be exercisable upon the same terms and conditions as
were applicable under the related Company Stock Option simultaneously with the
Effective Time, giving effect to the acceleration of the exercisability of such
Company Stock Option as a result of the Merger.
Section 5.8 Reasonable Efforts. Upon the terms and subject to the conditions
set forth in this Agreement, each of the parties agrees to use all reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including (a) the obtaining of all necessary
actions or non-actions, waivers, consents and approvals from Governmental
Entities and the making of all necessary registrations and filings (including
filings with the Federal Reserve Board, the Office of the Comptroller of
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the Currency and the Illinois Commissioner of Banks and Trust Companies or
other applicable Governmental Entities) and the taking of all reasonable steps
as may be necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by any Governmental Entity, (b) the obtaining of all
necessary consents, approvals, agreements or waivers from third parties, (c)
the defending of any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed, and (d) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by this
Agreement; provided, however, that this Section 5.8 shall not require voting
of the Fiduciary Shares in favor of the Merger. Notwithstanding anything to
the contrary in this Section 5.8, the Company shall not commit to any
divestiture transaction without First Chicago's prior consent.
Section 5.9 Public Announcements. First Chicago and its Subsidiaries, on the
one hand, and the Company and its Subsidiaries, on the other hand, will
consult with each other before issuing any press release or otherwise making
any public statements with respect to the transactions contemplated by this
Agreement, and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by applicable
law or by obligations pursuant to any listing agreement with any national
securities exchange.
Section 5.10 Real Estate Transfer and Gains Tax. First Chicago and the
Company agree that either the Company or First Chicago will pay any state or
local tax which is attributable to the transfer of the beneficial ownership of
the Company's or its Subsidiaries' real property, if any (collectively, the
"Gains Taxes"), and any penalties or interest with respect to the Gains Taxes,
payable in connection with the consummation of the Merger. The Company agrees
to cooperate with First Chicago in the filing of any returns with respect to
the Gains Taxes, including supplying in a timely manner a complete list of all
real property interests held by the Company or its Subsidiaries and any
information with respect to such property that is reasonably necessary to
complete such returns. The portion of the consideration allocable to the real
property of the Company and its Subsidiaries shall be determined by First
Chicago in its reasonable discretion. The stockholders of the Company shall be
deemed to have agreed to be bound by the allocation established pursuant to
this Section 5.10 in the preparation of any return with respect to the Gains
Taxes.
Section 5.11 State Takeover Laws. If any "fair price" or "control share
acquisition" statute or other similar statute or regulation shall become
applicable to the transactions contemplated hereby, the Company and the
members of the Board of Directors of the Company shall use their best efforts
to grant such approvals and take such actions as are necessary so that the
transactions contemplated hereby may be consummated as promptly as practicable
on the terms contemplated hereby and otherwise act to minimize the effects of
such statute or regulation on the transactions contemplated hereby.
Section 5.12 Indemnification; Directors and Officers Insurance. From and
after the Effective Time, First Chicago agrees to indemnify and hold harmless
all past and present officers and/or directors of the Company and of its
Subsidiaries to the same extent such persons are currently indemnified by the
Company pursuant to the Company's Certificate of Incorporation and By-Laws for
acts or omissions occurring at or prior to the Effective Time and shall
advance reasonable litigation expenses incurred by such officers and directors
in connection with defending any action arising out of such acts or omissions.
First Chicago will provide, or cause to be provided, for one or more periods
which, in the aggregate, will be not less than five years from the Effective
Time, the Company's current directors and officers an insurance and
indemnification policy that provides such officers and\or directors coverage
for events occurring through the Effective Time (the "D&O Insurance") that is
in the aggregate no less favorable than the existing policy or, if
substantially equivalent insurance coverage is commercially unavailable, the
best available coverage; provided, however, that First Chicago and its
Subsidiaries shall not be required to pay aggregate premiums for the D&O
Insurance required under this Section in excess of three times the last annual
premium paid by the Company prior to the date hereof, but in such case shall
purchase as much coverage as possible for such amount.
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Section 5.13 Employee Benefits. Following the Effective Time, the officers
and employees of the Company and its Subsidiaries will be eligible for employee
benefits and programs (including pension, life insurance, medical, 401(k),
severance and salary continuation benefits) which are no less favorable than
those generally available to similarly situated employees of First Chicago and
its Subsidiaries. For purposes of eligibility to participate in and vesting in
various benefits provided to employees but not for the purpose of determining
the amount of any such benefit, employees of the Company and its Subsidiaries
will be credited with their years of service with the Company and its
Subsidiaries; provided, however, that notwithstanding the foregoing clause, for
purposes of determining the amount of severance benefits, if any, employees of
the Company and its Subsidiaries are entitled to under the severance policy of
the Company, such employees will be credited with their years of service with
the Company and its Subsidiaries.
Section 5.14 Stay Bonuses; Severance Policy; Future Hiring; Vesting Under
Profit Sharing Plan. (a) Prior to the date hereof, the Company has offered to
pay bonuses, in addition to any bonuses or payments pursuant to any existing
bonus or incentive plans of the Company, payable to employees who remain in the
employ of the Company or its Subsidiaries until a date set by the Company,
which date shall be no earlier than the date three months after the Effective
Time ("Stay Bonuses"). The Company agrees with First Chicago that the aggregate
amount to be paid by the Company pursuant to Stay Bonuses granted either prior
to or on or after the date of this Agreement shall be no greater than
$2,000,000.
(b) First Chicago shall maintain the Company's severance policy for
terminated employees as in effect on the date hereof and as to be modified
consistent with the prior discussions between representatives of the parties to
clarify that it provides for continuations of health benefits, or shall replace
such policy with a policy providing equal or more favorable compensation, for a
period of at least one year from the Effective Time.
(c) To the extent permitted by law, First Chicago and its Subsidiaries shall
give appropriate consideration in its future hirings to employees of the
Company and its Subsidiaries who are terminated as a result of, or within
twelve months following, the Merger.
(d) First Chicago agrees that all officers and employees of the Company and
its Subsidiaries on the Effective Date shall be fully vested in the amounts in
their accounts on the Effective Date under the Lake Shore Bancorp., Inc.
Profit-Sharing Plan.
Section 5.15 Pooling-of-Interests. The Company agrees to use its best efforts
to obtain and deliver to First Chicago (a) all waivers required in the
reasonable opinion of First Chicago from any present or former directors,
officers or employees of the Company or any of its Subsidiaries of any
provision of the Stock Plan which, if not waived, would adversely affect the
ability of First Chicago to account for the Merger as a pooling, (b) any
letters, documents, opinions or other materials required under the terms of any
such waivers in order that such waivers become effective and (c) after the
Effective Time, the consolidated balance sheet of the Company and its
Subsidiaries as of the date immediately preceding the Effective Time and the
statement of income and changes in consolidated cash flows for the appropriate
periods through such date, as certified by the Company's independent public
accountants.
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ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions:
(a) Stockholder Approval. The Merger shall have been approved by the
requisite vote of the holders of Company Common Stock.
(b) NYSE Listing. The First Chicago Common Stock issuable in the Merger
and pursuant to the Company Stock Options shall have been authorized for
listing on the NYSE, upon official notice of issuance.
(c) Bank Regulatory Approvals. The approval of the Board of Governors of
the Federal Reserve System specified in the Bank Holding Company Act, the
approval of the Office of the Comptroller of the Currency under the Bank
Merger Act, and the approval of the Illinois Commissioner of Banks and
Trust Companies specified in the Illinois Banking Act shall have been
obtained.
(d) Registration Statement. The Registration Statement shall have become
effective in accordance with the provisions of the Securities Act. No stop
order suspending the effectiveness of the Registration Statement shall have
been issued by the SEC and remain in effect. All necessary state securities
or "Blue Sky" authorizations shall have been received.
(e) No Order. No Governmental Entity or court of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any law, rule,
regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which is then in effect and has the
effect of making the Merger or the transactions contemplated hereby
illegal.
Section 6.2 Conditions to Obligation of the Company to Effect the Merger. The
obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following additional
conditions:
(a) Performance of Obligations; Representations and Warranties. First
Chicago shall have performed in all material respects each of its
agreements contained in this Agreement required to be performed on or prior
to the Closing Date, each of the representations and warranties of First
Chicago contained in this Agreement that is qualified by materiality shall
be true and correct on and as of the Closing Date as if made on and as of
such date and each of the representations and warranties that is not so
qualified shall be true and correct in all material respects on and as of
the Closing Date as if made on and as of such date, in each case except as
contemplated or permitted by this Agreement; provided, however, that the
representation and warranty included in clause (ii) of Section 2.11 shall
be excluded from the operation of this condition.
(b) Tax Opinion. The Company shall have received an opinion of Sidley &
Austin, in form reasonably satisfactory to the Company, dated the Closing
Date, substantially to the effect that on the basis of facts,
representations and assumptions set forth in such opinion which are
consistent with the state of facts existing as of the Closing Date:
(i) The Merger will constitute a reorganization for federal income tax
purposes within the meaning of Section 368(a) of the Code and the Company
and First Chicago will each be a party to that reorganization within the
meaning of Section 368(b) of the Code;
(ii) No gain or loss will be recognized by the Company as a result of the
Merger;
(iii) No gain or loss will be recognized by the stockholders of the
Company upon the conversion of their Company Common Stock into shares of
First Chicago Common Stock pursuant to the Merger except with respect to
cash, if any, received in lieu of fractional shares of First Chicago Common
Stock;
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(iv) The aggregate tax basis of the shares of First Chicago Common Stock
received in exchange for shares of Company Common Stock pursuant to the
Merger will be the same as the aggregate tax basis of such shares of
Company Common Stock, decreased by the amount of any tax basis allocable to
the fractional share interest for which cash is received; and
(v) The holding period for shares of First Chicago Common Stock received
in exchange for shares of Company Common Stock pursuant to the Merger will
include the period that such shares of Company Common Stock were held by
the holder provided such shares of Company Common Stock were held as
capital assets by the holder on the Effective Date.
In rendering such opinion, Sidley & Austin may receive and rely upon
representations contained in certificates of the Company, First Chicago and
others, and may condition such opinion on the receipt, from stockholders of the
Company holding a substantial amount of the Company Common Stock ("Major
Stockholders"), of a certificate verifying that such Major Stockholders have no
present intention as of the Closing Date to sell the shares of First Chicago
Common Stock to be distributed to them in the Merger.
(c) Fairness Opinion. The Company shall have received in form reasonably
satisfactory to the Company, an opinion of Donaldson, Lufkin & Jenrette
Securities Corporation, dated as of the date of the Proxy Statement,
substantially to the effect that the consideration to be received by the
stockholders of the Company in the Merger is fair to such stockholders from a
financial point of view and as of the Closing Date such opinion shall not have
been withdrawn or modified in any material respect.
(d) Officers' Certificate. First Chicago shall have furnished to the Company
a certificate, dated the Closing Date, signed by the appropriate officers of
First Chicago, certifying to the effect that to the best of the knowledge and
belief of each of them, the conditions set forth in this Section 6.2, insofar
as they relate to First Chicago, have been satisfied in full.
(e) Opinion of Counsel. The Company shall have received an opinion from
Sherman I. Goldberg, First Chicago's General Counsel, dated the Closing Date,
substantially to the effect that:
(i) The incorporation, existence and good standing of First Chicago is as
stated in this Agreement; the authorized shares of First Chicago are as
stated in this Agreement; all outstanding shares of First Chicago Common
Stock are duly and validly authorized and issued, fully paid and
nonassessable and have not been issued in violation of any preemptive right
of any stockholders.
(ii) First Chicago has full corporate power and authority to execute,
deliver and perform this Agreement and this Agreement has been duly
authorized, executed and delivered by First Chicago, as the case may be,
and (assuming due and valid authorization, execution and delivery by the
Company) constitutes the legal, valid and binding agreement of First
Chicago enforceable against First Chicago in accordance with its terms,
except to the extent enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other
similar laws of general applicability relating to or affecting the
enforcement of creditors' rights and by the effect of general principles of
equity (regardless of whether enforceability is considered in a proceeding
in equity or at law).
(iii) The execution and performance by First Chicago of this Agreement
will not violate the Certificate of Incorporation or By-Laws of First
Chicago and, to the knowledge of such counsel, will not violate, result in
a breach of or constitute a default under any material lease, mortgage,
contract, agreement, instrument, law, rule, regulation, judgment, order or
decree to which First Chicago is a party or by which it or any of its
properties or assets may be bound.
(iv) To the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental agency or body which
has not been obtained is required on behalf of First Chicago for the
consummation of the transactions contemplated by this Agreement.
(v) To the knowledge of such counsel, there are no actions, suits or
proceedings, pending or threatened against or affecting First Chicago, at
law or in equity or before or by any court, governmental
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department, commission, board, bureau, agency or instrumentality, or before
any arbitrator of any kind which seek to restrain, prohibit or invalidate
the transactions contemplated by this Agreement.
(vi) (a) At the time the Registration Statement became effective, the
Registration Statement (other than the financial statements, financial
data, statistical data and supporting schedules included therein, and
information relating to or supplied by the Company as to which such counsel
expresses no opinion) complied as to form in all material respects with the
requirements of the Securities Act and the rules and regulations of the SEC
thereunder.
(b) In the course of the preparation of the Registration Statement and
the Proxy Statement such counsel has considered the information set forth
therein in light of the matters required to be set forth therein, and has
participated in conferences with officers and representatives of the
Company and First Chicago, including their respective counsel and
independent public accountants, during the course of which the contents of
the Registration Statement and the Proxy Statement and related matters were
discussed. Such counsel has not independently checked the accuracy or
completeness of, or otherwise verified, and accordingly is not passing
upon, and does not assume responsibility for, the accuracy, completeness or
fairness of the statements contained in the Registration Statement or the
Proxy Statement; and such counsel has relied as to materiality, to a large
extent, upon the judgment of officers and representatives of the Company
and First Chicago. However, as a result of such consideration and
participation, nothing has come to such counsel's attention which causes
such counsel to believe that the Registration Statement (other than the
financial statements, financial data, statistical data and supporting
schedules included therein, and information relating to or supplied by the
Company as to which such counsel expresses no belief), at the time it
became effective, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading or that the Proxy Statement
(other than the financial statements, financial data, statistical data and
supporting schedules included therein, and information relating to or
supplied by the Company, as to which such counsel expresses no belief), at
the time the Registration Statement became effective, included any untrue
statement of a material fact or omitted to state a material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(vii) The shares of First Chicago Common Stock to be issued pursuant to
this Agreement will be, when so issued, duly authorized, validly issued and
outstanding, fully paid and nonassessable.
(viii) The shares of First Chicago Common Stock included in the
Registration Statement have been listed on the NYSE subject to official
notice of issuance and evidence of satisfactory distribution.
In rendering such opinion, counsel for First Chicago may rely as to matters
of fact upon the representations of officers of First Chicago contained in any
certificate delivered to such counsel and certificates of public officials.
Such opinion shall be limited to the General Corporation Law of the State of
Delaware and the laws of the United States of America and the State of
Illinois.
(f) Other Approvals. All authorizations, consents, orders, declarations or
approvals of, or filings with, or terminations or expirations of waiting
periods imposed by, any Governmental Entity or third party required by or with
respect to any law, rule, regulation, order or decree shall have been obtained
in form and substance reasonably satisfactory to the Company.
(g) Other Documents. First Chicago shall have furnished to the Company at the
Closing such other customary documents, certificates or instruments as the
Company may reasonably request evidencing compliance by First Chicago with the
terms of this Agreement.
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<PAGE>
Section 6.3 Conditions to Obligations of First Chicago to Effect the Merger.
The obligations of First Chicago to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following additional
conditions:
(a) Performance of Obligations; Representations and Warranties. The
Company shall have performed in all material respects each of its
agreements contained in this Agreement required to be performed on or prior
to the Closing Date, each of the representations and warranties of the
Company contained in this Agreement that is qualified by materiality shall
be true and correct on and as of the Closing Date as if made on and as of
such date and each of the representations and warranties that is not so
qualified shall be true in all material respects on and as of the Closing
Date as if made on and as of such date, in each case except as contemplated
or permitted by this Agreement; provided, however, that the representation
and warranty included in clause (ii) of Section 3.11 shall be excluded from
the operation of this condition and provided, further, that the
representation and warranty in Section 3.6 shall not be deemed to be
breached as the result of a loss or prospective loss on or after November
22, 1993 of business from any customer of the Company or its Subsidiaries
which had previously been a customer of First Chicago or its Subsidiaries
and had, since January 1, 1991, terminated or substantially reduced its
relationship with First Chicago or its Subsidiaries.
(b) Third Party Consents. All authorizations, consents, orders,
declarations, agreements or approvals of, or filings with, or terminations
or expirations of waiting periods imposed by any Governmental Entity or
third party required by or with respect to any law, rule, regulation, order
or decree shall have been obtained in form and substance reasonably
satisfactory to First Chicago.
(c) Accounting. Based on the advice of Arthur Andersen & Co. and such
other advice as First Chicago may deem relevant, First Chicago shall have
no reasonable basis for believing that following the Merger, the
combination of the Company and First Chicago may not be accounted for as a
"pooling of interests" in accordance with generally accepted accounting
principles.
(d) Tax Opinion. First Chicago shall have received an opinion of counsel
reasonably satisfactory to First Chicago, in form reasonably satisfactory
to First Chicago, dated the Closing Date, substantially to the effect that
on the basis of facts, representations and assumptions set forth in such
opinion which are consistent with the state of facts existing as of the
Closing Date:
(i) The Merger will constitute a reorganization for federal income tax
purposes within the meaning of Section 368(a) of the Code and the Company
and First Chicago will each be a party to that reorganization within the
meaning of Section 368(b) of the Code;
(ii) No gain or loss will be recognized by First Chicago, or the Company
as a result of the Merger;
(iii) No gain or loss will be recognized by the stockholders of the
Company upon the conversion of their Company Common Stock into shares of
First Chicago Common Stock pursuant to the Merger except with respect to
cash, if any, received in lieu of fractional shares of First Chicago Common
Stock;
(iv) The aggregate tax basis of the shares of First Chicago Common Stock
received in exchange for shares of Company Common Stock pursuant to the
Merger will be the same as the aggregate tax basis for such shares of
Company Common Stock, decreased by the amount of any tax basis allocable to
the fractional share interests for which cash is received; and
(v) The holding period for shares of First Chicago Common Stock received
in exchange for shares of Company Common Stock pursuant to the Merger will
include the period that such shares of the Company Common Stock were held
by the holder provided such shares of Company Common Stock were held as
capital assets by the holder on the Effective Date.
In rendering such opinion, counsel to First Chicago may receive and rely upon
representations contained in certificates of the Company, First Chicago, and
others, and may condition such opinion on the receipt, from Major Stockholders,
of a certificate verifying that such Major Stockholders have no present
intention as of the Closing Date to sell the shares of First Chicago Common
Stock to be distributed to them in the Merger.
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(e) Officers' Certificate. The Company shall have furnished to First Chicago
a certificate, dated the Closing Date, signed by the appropriate officers of
the Company, certifying to the effect that to the best of the knowledge and
belief of each of them, the conditions set forth in this Section 6.3, insofar
as they relate to the Company, have been satisfied.
(f) Opinion of Counsel. First Chicago shall have received an opinion of
counsel from Sidley & Austin, special counsel to the Company, dated the Closing
Date, substantially to the effect that:
(i) The incorporation, existence, good standing and capitalization of the
Company are as stated in this Agreement; the authorized shares of Company
Common Stock are as stated in this Agreement; all outstanding shares of
Company Common Stock are duly and validly authorized and issued, fully paid
and non-assessable and have not been issued in violation of any preemptive
right of stockholders; and, to the knowledge of such counsel, there is no
existing option, warrant, right, call, subscription or other agreement or
commitment obligating the Company to issue or sell, or to purchase or
redeem, any shares of its capital stock other than as stated in this
Agreement.
(ii) The Company has full corporate power and authority to execute,
deliver and perform this Agreement and this Agreement has been duly
authorized, executed and delivered by the Company, and (assuming the due
and valid authorization, execution and delivery by First Chicago)
constitutes the legal, valid and binding agreement of the Company
enforceable against the Company in accordance with its terms, except to the
extent enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws of
general applicability relating to or affecting the enforcement of
creditors' rights and by the effect of general principles of equity
(regardless of whether enforceability is considered in a proceeding in
equity or at law).
(iii) The incorporation, existence and good standing of Lake Shore and
Bank of Hinsdale are as stated in this Agreement.
(iv) All of the issued and outstanding shares of capital stock of Lake
Shore and Bank of Hinsdale are owned of record and, to the knowledge of
such counsel, beneficially by the Company, and such counsel is aware of no
liens, charges and encumbrances on any such shares.
(v) To the knowledge of such counsel, there is no existing option,
warrant, right, call, subscription or other agreement or commitment
obligating the Company, Lake Shore or Bank of Hinsdale to issue or sell, or
to purchase or redeem, any shares of capital stock of Lake Shore or Bank of
Hinsdale.
(vi) To the knowledge of such counsel, there are no actions, suits or
proceedings, pending or threatened against or affecting the Company or its
Subsidiaries, at law or in equity or before or by any court, governmental
department, commission, board, bureau, agency or instrumentality, or before
any arbitrator of any kind which seek to restrain, prohibit or invalidate
the transactions contemplated by this Agreement.
(vii) The execution and performance by the Company of this Agreement will
not violate the Certificate of Incorporation or By-laws of the Company or
the Charter or By-laws of any of its Subsidiaries, and, to the knowledge of
such counsel, will not violate, result in a breach of, or constitute a
default under, any material lease, mortgage, contract, agreement,
instrument, law, rule, regulation, judgment, order or decree to which the
Company or any of its Subsidiaries is a party or to which they or any of
their properties or assets may be bound.
(viii) To the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental agency or body which
has not been obtained is required on behalf of the Company or any of its
Subsidiaries for consummation of the transactions contemplated by this
Agreement.
(ix)(a) At the time the Registration Statement became effective, the
Registration Statement (other than the financial statements, financial
data, statistical data and supporting schedules included therein, and
information relating to or supplied by First Chicago as to which such
counsel expresses no opinion) complied as to form in all material respects
with the requirements of the Securities Act and the rules and regulations
of the SEC thereunder.
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(b) In the course of the preparation of the Registration Statement and
the Proxy Statement such counsel has considered the information set forth
therein in light of the matters required to be set forth therein, and has
participated in conferences with officers and representatives of the
Company and First Chicago, including their respective counsel and
independent public accountants, during the course of which the contents of
the Registration Statement and the Proxy Statement and related matters were
discussed. Such counsel has not independently checked the accuracy or
completeness of, or otherwise verified, and accordingly is not passing
upon, and does not assume responsibility for, the accuracy, completeness or
fairness of the statements contained in the Registration Statement or the
Proxy Statement; and such counsel has relied as to materiality, to a large
extent, upon the judgment of officers and representatives of the Company
and First Chicago. However, as a result of such consideration and
participation, nothing has come to such counsel's attention which causes
such counsel to believe that the Registration Statement (other than the
financial statements, financial data, statistical data and supporting
schedules included therein, and information relating to or supplied by
First Chicago, as to which such counsel expresses no belief), at the time
it became effective, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading or that the Proxy Statement
(other than the financial statements, financial data, statistical data and
supporting schedules included therein, and information relating to or
supplied by First Chicago, as to which such counsel expresses no belief),
at the time the Registration Statement became effective, included any
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
In rendering such opinion, counsel for the Company may rely (i) as to matters
of fact upon the representations of officers of the Company and its
Subsidiaries contained in any certificate delivered to such counsel and
certificates of public officials and (ii) as to certain matters of law upon the
opinion of Richards, Layton & Finger, P.A. Such opinion should be limited to
the General Corporation Law of the State of Delaware and the laws of the United
States of America and the State of Illinois.
(g) Other Documents. The Company shall have furnished to First Chicago at the
Closing such other customary documents, certificates or instruments, including
certificates of good standing for the Company and each Significant Subsidiary
as First Chicago may reasonably request evidencing compliance by the Company
with the terms of this Agreement.
(h) Affiliates Agreement. The Company shall have furnished or caused to be
furnished to First Chicago the agreement required by Section 5.4 hereof from
each person identified by the Company as an Affiliate in accordance with the
provisions of Section 5.4 of this Agreement.
(i) Stockholders' Equity. As of the end of the month ending prior to the
Closing Date, the consolidated stockholders' equity of the Company shall not be
less than $125 million. In computing such amount, the determination shall be
made in accordance with Generally Accepted Accounting Principles as in effect
on the date hereof and applied consistently with prior periods and there shall
be added back any expenses, charges and similar amounts which are paid or
accrued by the Company or any of its Subsidiaries, in anticipation of the
Merger, including (i) transition expenses as required by First Chicago such as
expenses paid or accrued by the Company in implementing Sections 4.4 and 5.14
hereof; (ii) the amount of the lump sum payment agreed to in the settlement of
a claim of a Company executive (as described in the Disclosure Letter) to the
extent not accrued as of the date hereof; (iii) all merger related expenses for
executive compensation, investment banker fees and expenses, legal fees and
expenses, accounting fees and expenses, expenses of the Stockholder Meeting,
expenses for the preparation, printing and mailing of the proxy statement, and
expenses for the preparation of regulatory applications and the registration
statement; (iv) any expense related to acceleration of pension benefits through
funding of secular trusts for certain executives; and (v) any other items of
expense which are mutually agreed to by the Company and First Chicago.
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<PAGE>
APPENDIX B
FORM OF OPINION OF
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
, 1994
Board of Directors
Lake Shore Bancorp., Inc.
605 North Michigan Avenue
Chicago, Illinois 60611
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the outstanding common stock, par value $0.01 per share
(the "Lake Shore Common Stock"), of Lake Shore Bancorp., Inc. ("Lake Shore") of
the Exchange Ratio (as defined in the Merger Agreement) pursuant to the Amended
and Restated Agreement and Plan of Merger effective as of November 21, 1993
among Lake Shore, First Chicago Corporation ("First Chicago") and First Chicago
Acquisition Corporation V, a wholly-owned subsidiary of First Chicago (the
"Merger Agreement").
At the time the Merger (as defined in the Merger Agreement) becomes effective
(the "Effective Time"), each share of Lake Shore Common Stock issued and
outstanding at the Effective Time shall be converted into validly issued, fully
paid and nonassessable shares of common stock, par value $5.00 per share, of
First Chicago ("First Chicago Common Stock") rounded to the nearest thousandth
of a share, or if there shall not be a nearest thousandth of a share, to the
next lower thousandth of a share based upon the Exchange Ratio; the Exchange
Ratio will be determined by dividing $31.08 by the average of the per share
closing prices on the New York Stock Exchange (the "NYSE") of First Chicago
Common Stock (as reported on the NYSE Composite Transactions Tape) during the
twenty day trading period ending on the third trading day prior to the Closing
Date (as defined in the Merger Agreement) as reported in The Wall Street
Journal, Midwest Edition; provided, however, that if such average of the per
share closing prices shall be greater than $53.00, then the Exchange Ratio
shall be determined by dividing $31.08 by $53.00; and provided, further, that
if such average of the per share closing prices shall be less than $37.00, then
the Exchange Ratio shall be determined by dividing $31.08 by $37.00.
The Merger is subject to, among other things, approvals of the Board of
Governors of the Federal Reserve System, the Office of the Comptroller of the
Currency and the Illinois Commissioner of Banks and Trust Companies, approval
by the holders of a majority of the shares of Lake Shore Common Stock, and
receipt of opinions to the effect that the Merger will qualify for treatment as
a tax-free reorganization. In connection with the Merger, the parties have also
entered into an agreement (the "Stock Option Agreement") pursuant to which Lake
Shore has irrevocably granted First Chicago an option to purchase up to
1,977,643 shares of Lake Shore Common Stock, representing approximately 19.9%
of the total number of shares of Lake Shore Common Stock outstanding as of the
date of the Merger Agreement, at a price of $31.08 per share and on the terms
and conditions set forth in the Stock Option Agreement.
Donaldson, Lufkin & Jenrette Securities Corporation, as part of its
investment banking business, is regularly engaged, with respect to bank holding
companies and other corporations, in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements, and valuations for corporate and other
purposes. We were retained by Lake Shore to act as its financial advisor with
respect any sale, merger, consolidation, or other business combination, in one
or a series of transactions, involving all or a substantial amount of the
business, securities or assets of Lake Shore. We have received and will receive
compensation from Lake Shore in connection with our services, a significant
portion of which is contingent upon the consummation of the Merger.
At your direction, we solicited the interest of third parties regarding a
possible business combination with Lake Shore. The Merger Agreement is the
result of this solicitation.
<PAGE>
In the ordinary course of our business we may actively trade the debt and
equity securities of companies, including Lake Shore and First Chicago, for our
own account and for the accounts of customers and may hold a long or short
position in such securities at any time.
For purposes of this opinion and in connection with our review of the
proposed transaction, we have, among other things:
1. Participated in discussions and negotiations among representatives of
Lake Shore and their legal advisor and representatives of First Chicago
that resulted in the Merger Agreement;
2. Reviewed the Merger Agreement and the Stock Option Agreement;
3. Reviewed certain publicly available financial statements, both audited
and unaudited, for Lake Shore and First Chicago, including those included
in the Annual Report on Form 10-K for the year ended December 31, 1992, the
Quarterly Reports on Form 10-Q for the periods ended March 31, 1993, June
30, 1993 and September 30, 1993 and the most recent regular annual proxy
statement available as of the date hereof for Lake Shore and First Chicago;
4. Reviewed certain financial statements and other financial and
operating data concerning Lake Shore and First Chicago prepared by their
respective managements;
5. Reviewed certain financial projections of Lake Shore and First
Chicago, both on a stand-alone and on a combined basis, prepared by their
respective managements;
6. Reviewed certain appraisals of real property owned by Lake Shore;
7. Discussed certain aspects of the past and current business operations,
results of regulatory examinations, financial condition and future
prospects of Lake Shore and First Chicago with certain members of the
management of Lake Shore and First Chicago;
8. Reviewed reported market prices and historical trading activity of
Lake Shore Common Stock and First Chicago Common Stock;
9. Reviewed certain aspects of the financial performance of Lake Shore
and First Chicago and compared such financial performance of Lake Shore and
First Chicago together with the stock market data relating to Lake Shore
and First Chicago with similar data available for certain other financial
institutions and certain of their publicly traded securities;
10. Reviewed certain of the financial terms, to the extent publicly
available, of certain recent business combinations involving other
financial institutions; and
11. Conducted such other studies, analyses, and examinations as we deemed
appropriate.
We have relied upon and assumed without independent verification the accuracy
and completeness of all of the financial and other information that has been
provided to us by Lake Shore, First Chicago and their respective
representatives and of the publicly available information that was reviewed by
us. At your direction, we have also relied upon the managements of both Lake
Shore and First Chicago as to the reasonableness and achievability of the
financial and operating forecasts provided to us (and the assumptions and bases
therefor). In that regard, we have assumed with your permission that such
forecasts, including without limitation projected cost savings and operating
synergies resulting from the Merger, reflect the best currently available
estimates and judgments of such respective managements and that such
projections and forecasts will be realized in the amounts and in the time
periods currently estimated by the managements of both Lake Shore and First
Chicago. We have not independently verified and have relied on and assumed that
the aggregate allowances for loan losses set forth in the balance sheets of
each of Lake Shore and First Chicago at September 30, 1993 are adequate to
cover such losses and complied fully with applicable law, regulatory policy and
sound banking practice as of the date of such financial statements. With your
permission, we have not independently verified that any of Lake Shore's assets
reported in its balance sheet as of September 30, 1993 should have been
classified as other real estate owned or in-substance foreclosures under
applicable law, regulatory policy and sound banking practice as of such date;
nor have we
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<PAGE>
independently verified the carrying values of other real estate owned and loans
classified as in-substance foreclosures of First Chicago in its September 30,
1993 balance sheet, and we have assumed with your permission that such carrying
values complied fully with applicable law, regulatory policy and sound banking
practice as of such date. We were not retained to and we did not conduct a
physical inspection of any of the properties or facilities of Lake Shore or
First Chicago, nor did we make any independent evaluation or appraisal of the
assets, liabilities or prospects of Lake Shore or First Chicago, and did not
review any individual credit files. We have also assumed with your permission
that the Merger is, and will be, in compliance with all laws and regulations
that are applicable to Lake Shore and First Chicago. With your permission, we
have assumed for purposes of our opinion that the Merger will be recorded as a
pooling of interests under generally accepted accounting principles.
Our opinion is based solely upon the information available to us and the
economic, market, and other circumstances as they exist as of the date hereof.
Events occurring after the date hereof could materially affect the assumptions
used in preparing this opinion. We have not undertaken to reaffirm or revise
this opinion or otherwise comment upon any events occurring after the date
hereof.
In rendering our opinion, we have been advised by First Chicago and Lake
Shore and have assumed with your permission that there are no other factors
that would impede any necessary regulatory or governmental approval for the
Merger and we have further assumed with your permission that in the course of
obtaining the necessary regulatory and governmental approvals for the proposed
Merger, no restriction will be imposed on First Chicago, as the surviving
corporation in the Merger, that would have a material adverse effect on First
Chicago or the contemplated benefits of the Merger. We have also assumed with
your permission that there would not occur any change in the applicable law or
regulation that would cause a material adverse change in the prospects or
operations of First Chicago.
We are not expressing any opinion herein as to the prices at which shares of
First Chicago Common Stock issued in the Merger may trade if and when they are
issued or at any future time, nor does our opinion constitute a recommendation
to any holder of Lake Shore Common Stock as to how such holder should vote with
respect to the Merger Agreement at any meeting of holders of Lake Shore Common
Stock.
This letter is for the information of the Board of Directors of Lake Shore
and is not to be used, circulated, quoted or otherwise referred to for any
other purpose, except in each case with our prior written consent which shall
not be unreasonably withheld; provided, however, that this letter may by filed
with or included in any registration statement, proxy statement, information
statement or tender offer document to be delivered to the Company's
shareholders if set forth in its entirety therein, unless it has been withdrawn
prior to the date of such document.
Subject to the foregoing and based on our experience as investment bankers,
our activities as described above, and other factors we have deemed relevant,
we are of the opinion as of the date hereof that the Exchange Ratio is fair,
from a financial point of view, to the holders of Lake Shore Common Stock.
Very truly yours,
Donaldson, Lufkin & Jenrette
Securities Corporation
By: _________________________________
C. Douglas Mercer II
Managing Director
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APPENDIX C
(SECTION 262 DOES NOT PROVIDE APPRAISAL RIGHTS
IN CONNECTION WITH THE MERGER)
DELAWARE GENERAL CORPORATION LAW
SECTION 262
262 APPRAISAL RIGHTS. (a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation,
who has otherwise complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor consented thereto in
writing pursuant to (S)228 of this title shall be entitled to an appraisal by
the Court of Chancery of the fair value of his shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation.
(b) Appraisal rights shall be available for the shares of any class or series
of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to (S)251, 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock which, at the record
date fixed to determine the stockholders entitled to receive notice of and to
vote at the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held of
record by more than 2,000 stockholders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its approval
the vote of the stockholders of the surviving corporation as provided in
subsection (f) of (S)251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights under
this section shall be available for the shares of any class or series of stock
of a constituent corporation if the holders thereof are required by the terms
of an agreement of merger or consolidation pursuant to (S)(S)251, 252, 254,
257, 258, 263 and 264 of this title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from such merger
or consolidation;
b. Shares of stock of any other corporation which at the effective date of
the merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc. or
held of record by more than 2,000 stockholders;
c. Cash in lieu of fractional shares of the corporations described in the
foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock and cash in lieu of fractional
shares described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation party
to a merger effected under (S)253 of this title is not owned by the parent
corporation immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
<PAGE>
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for such
meeting with respect to shares for which appraisal rights are available
pursuant to subsections (b) or (c) hereof that appraisal rights are available
for any or all of the shares of the constituent corporations, and shall include
in such notice a copy of this section. Each stockholder electing to demand the
appraisal of his shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of his
shares. Such demand will be sufficient if it reasonably informs the corporation
of the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein provided.
Within 10 days after the effective date of such merger or consolidation, the
surviving or resulting corporation shall notify each stockholder of each
constituent corporation who has complied with this subsection and has not voted
in favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to (S)228 or 253 of
this title, the surviving or resulting corporation, either before the effective
date of the merger or consolidation or within 10 days thereafter, shall notify
each of the stockholders entitled to appraisal rights of the effective date of
the merger or consolidation and that appraisal rights are available for any or
all of the shares of the constituent corporation, and shall include in such
notice a copy of this section. The notice shall be sent by certified or
registered mail, return receipt requested, addressed to the stockholder at his
address as it appears on the records of the corporation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing of
the notice, demand in writing from the surviving or resulting corporation the
appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw his demand for
appraisal and to accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a) and (d)
hereof, upon written request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation a statement setting
forth the aggregate number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal have been
received and the aggregate number of holders of such shares. Such written
statement shall be mailed to the stockholder within 10 days after his written
request for such a statement is received by the surviving or resulting
corporation or within 10 days after expiration of the period for delivery of
demands for appraisal under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses
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of all stockholders who have demanded payment for their shares and with whom
agreements as to the value of their shares have not been reached by the
surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The
forms of the notices by mail and by publication shall be approved by the Court,
and the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court may,
in its discretion, permit discovery or other pretrial proceedings and may
proceed to trail upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on the
list filed by the surviving or resulting corporation pursuant to subsection (f)
of this section and who has submitted his certificates of stock to the Register
in Chancery, if such is required, may participate fully in all proceedings
until it is finally determined that he is not entitled to appraisal rights
under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed upon
the parties as the Court deems equitable in the circumstances. Upon application
of a stockholder, the Court may order all or a portion of the expenses incurred
by any stockholder in connection with the appraisal proceeding, including,
without limitation, reasonable attorney's fees and the fees and expenses of
experts, to be charged pro rata against the value of all the shares entitled to
an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall
deliver to the surviving or resulting corporation a written withdrawal of this
demand for an appraisal and an acceptance of the merger or consolidation,
either
C-3
<PAGE>
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the
Court of Chancery shall be dismissed as to any stockholder without the approval
of the Court, and such approval may be conditioned upon such terms as the Court
deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
C-4
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of Delaware contains detailed
provisions on indemnification of directors and officers of a Delaware
corporation against expenses, judgments, fines and amounts paid in settlement,
actually and reasonably incurred in connection with litigation.
Article Ninth of the Restated Certificate of Incorporation, as amended, of
the Registrant provides for indemnification of directors and officers to the
full extent permitted or allowed by the laws of the State of Delaware, as such
laws exist or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Registrant to provide
broader indemnification rights than said law permitted the Registrant to
provide prior to such amendment), whether or not specifically required,
permitted, or allowed by said Section 145. The Registrant also insures its
officers and directors to the full extent permitted by Section 145.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS. This Registration Statement includes the following Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ---------------------- ---
<C> <S> <C>
2(A). Amended and Restated Agreement and Plan of Merger,
effective as of November 21, 1993, by and among First
Chicago Corporation ("First Chicago"), First Chicago
Acquisition Corporation V ("Acquisition Corp.") and Lake
Shore Bancorp., Inc. ("Lake Shore") [included as Appendix
A to the Prospectus/Proxy Statement and hereby
incorporated herein by reference]
2(B). Stock Option Agreement [Exhibit C to First Chicago's
Schedule 13D dated November 30, 1993 (File No. 1-6052)
hereby incorporated herein by reference]
4(A). Restated Certificate of Incorporation, as amended
[incorporated by reference to Exhibit 3(A) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1992, as amended by the Registrant's Form 8
dated March 12, 1993]
4(B). Certificate of Stock Designation relating to the Series A
Preferred Stock [incorporated by reference to Exhibit 3(A)
to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1992, as amended by the
Registrant's Form 8 dated March 12, 1993]
4(C). Certificate of Stock Designation relating to the Series B
Preferred Stock [incorporated by reference to Exhibit 3(A)
to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1992, as amended by the
Registrant's Form 8 dated March 12, 1993]
4(D). Certificate of Stock Designation, as amended by a
Certificate of Correction, relating to the Series C
Preferred Stock [incorporated by reference to Exhibit 3(A)
to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1992, as amended by the
Registrant's Form 8 dated March 12, 1993]
4(E). Certificate of Stock Designation, as amended by a
Certificate of Increase to Certificate of Amendment,
relating to the Series A Convertible Preferred Stock
[incorporated by reference to Exhibit 3(A) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1992, as amended by the Registrant's Form 8
dated March 12, 1993]
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S> <C>
4(F). Certificate of Stock Designation relating to the Junior
Preferred Shares [incorporated by reference to Exhibit
3(A) to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1992, as amended by the
Registrant's Form 8 dated March 12, 1993]
4(G). Certificate of Stock Designation relating to the Series D
Preferred Stock [incorporated by reference to Exhibit
3(A) to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1992, as amended by the
Registrant's Form 8 dated March 12, 1993]
4(H). Certificate of Stock Designation relating to the Series E
Preferred Stock [incorporated by reference to Exhibit
3(A) to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1992, as amended by the
Registrant's Form 8 dated March 12, 1993]
4(I). Certificate of Stock Designation relating to the Series B
Convertible Preferred Stock [incorporated by reference to
Exhibit 4(i) to the Registrant's Current Report on Form
8-K dated March 5, 1993]
4(J). By-laws of Registrant, as amended [incorporated by
reference to Exhibit 4(B) to Registrant's Form S-3
Registrant Statement (File No. 33-37717)]
4(K). Rights Agreement dated as of November 18, 1988, relating
to Registrant's Preferred Share Purchase Rights
[incorporated by reference to Exhibit 1 to Registrant's
Current Report on Form 8-K dated November 25, 1988, File
No. 1-6052]
4(L). Amendment to Rights Agreement dated as of July 13, 1990
[incorporated by reference to Exhibit 1 to Registrant's
Current Report on Form 8-K dated July 16, 1990, File No.
1-6052]
4(M). Form of First Chicago Common Stock Certificate
[incorporated by reference to Exhibit 4(a) to
Registrant's Registration Statement on Form S-3 (File No.
2-88937)]
4(N). No instruments defining the rights of holders of long-term
debt of First Chicago and its subsidiaries have been
included as exhibits because the total amount of
indebtedness authorized under any such instrument does
not exceed 10% of the total assets of First Chicago and
its subsidiaries on a consolidated basis. First Chicago
hereby agrees to furnish supplementally to the Commission
upon request a copy of any omitted long-term debt
instrument
5. Opinion of Counsel for First Chicago
8. Form of Opinion of Sidley & Austin with respect to certain
tax matters*
23(A)(1). Consent of Arthur Andersen & Co.
23(A)(2). Consent of Price Waterhouse
23(B). Consent of Counsel for First Chicago (filed as part of
Exhibit 5)
23(C). Consent of Sidley & Austin, counsel to Lake Shore (filed
as part of Exhibit 8)*
24. Power of Attorney
99(A). Form of Opinion of Donaldson, Lufkin & Jenrette Securities
Corporation [included as Appendix B to the
Prospectus/Proxy Statement and hereby incorporated herein
by reference]
99(B). Form of Proxy of Lake Shore
</TABLE>
- --------
*To be filed by amendment.
(b) Financial Statement Schedules. Not Application.
(c) Opinion of Outside Party. See Exhibit 99(A) and Appendix C hereto.
II-2
<PAGE>
ITEM 22. UNDERTAKINGS.
The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, as amended (the "1933 Act"), each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934, as amended (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
section 15(d) of the Securities Exchange Act of 1934, as amended), that is
incorporated by reference in the Registration Statement shall be deemed to be a
new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
The Registrant hereby undertakes that prior to any public reoffering of the
securities registered hereunder through use of a prospectus which is a part of
this Registration Statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes that such
reoffering prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
The Registrant hereby undertakes that every prospectus (i) that is filed
pursuant to the paragraph immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the 1933 Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the 1933 Act, each such post-effective amendment shall be deemed to be a
new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
The Registrant hereby undertakes to respond to requests for information that
is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11
or 13 of this Form, within one business day of receipt of such request, and to
send the incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed subsequent to the
effective date of the Registration Statement through the date of responding to
the request.
The Registrant hereby undertakes to supply by means of a post-effective
amendment all information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and included in the
Registration Statement when it became effective.
Insofar as indemnification for liabilities arising under the 1933 Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the 1933 Act and will be governed by the
final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-4 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CHICAGO, STATE OF ILLINOIS, ON THE 11TH DAY OF
FEBRUARY, 1994.
First Chicago Corporation
/s/ DAVID P. BOLGER
By: _________________________________
David P. Bolger
Attorney-in-Fact
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITY AND ON THE
DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
JOHN H. BRYAN*
- ------------------------------------
(John H. Bryan) Director
DEAN L. BUNTROCK*
- ------------------------------------
(Dean L. Buntrock) Director
FRANK W. CONSIDINE*
- ------------------------------------
(Frank W. Considine) Director
JAMES S. CROWN*
- ------------------------------------
(James S. Crown) Director
DONALD V. FITES*
- ------------------------------------
(Donald V. Fites) Director February 11, 1994
- ------------------------------------
(Donald P. Jacobs) Director
ANDREW J. MCKENNA*
- ------------------------------------
(Andrew J. McKenna) Director
RICHARD M. MORROW*
- ------------------------------------
(Richard M. Morrow) Director
LEO F. MULLIN*
- ------------------------------------
(Leo F. Mullin) Director
EARL L. NEAL*
- ------------------------------------
(Earl L. Neal) Director
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
JAMES J. O'CONNOR*
- ------------------------------------
(James J. O'Connor) Director
JERRY K. PEARLMAN*
- ------------------------------------
(Jerry K. Pearlman) Director
JACK F. REICHERT*
- ------------------------------------
(Jack F. Reichert) Director
PATRICK G. RYAN*
- ------------------------------------
(Patrick G. Ryan) Director
ADELE SIMMONS*
- ------------------------------------
(Adele Simmons) Director
ROGER W. STONE*
- ------------------------------------
(Roger W. Stone) Director February 11, 1994
RICHARD L. THOMAS*
- ------------------------------------
(Richard L. Thomas) Director and Principal
Executive Officer
DAVID J. VITALE*
- ------------------------------------
(David J. Vitale) Director
ROBERT A. ROSHOLT*
- ------------------------------------
(Robert A. Rosholt) Principal Financial Officer
WILLIAM J. ROBERTS*
- ------------------------------------
(William J. Roberts) Principal Accounting Officer
</TABLE>
- --------
*The undersigned, by signing his name hereto, does hereby sign this
Registration Statement on behalf of each of the above-indicated directors
and officers of the Registrant pursuant to power of attorney signed by such
directors and officers.
/s/ DAVID P. BOLGER
-------------------------------------
David P. Bolger
Attorney-in-Fact
II-5
<PAGE>
EXHIBITS 5 AND 23 (B)
February 11, 1994
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: First Chicago Corporation
Form S-4 Registration Statement
Ladies and Gentlemen:
I am Executive Vice President, General Counsel and Secretary of First Chicago
Corporation, a Delaware corporation ("First Chicago"), and, in such capacity, I
am, or members of my staff subject to my supervision are, familiar with (i) the
Restated Certificate of Incorporation and By-Laws of First Chicago, (ii) the
Registration Statement on Form S-4 (the "Registration Statement") concurrently
being filed with the Securities and Exchange Commission relating to the shares
of First Chicago's Common Stock, $5.00 par value per share (the "First Chicago
Common Stock"), and its preferred share purchase rights (the "Rights") which
currently are attached to, and trade with, the Common Stock, to be issued in
connection with the proposed merger of Lake Shore Bancorp., Inc. ("Lake Shore")
into First Chicago, (iii) the form of Amended and Restated Agreement and Plan
of Merger (the "Agreement") to be entered into by Lake Shore and First Chicago
and (iv) such other documents, proceedings and matters as we deem necessary in
order to render the opinion hereinafter expressed.
On the basis of the foregoing, it is my opinion that, assuming the Agreement
is executed by Lake Shore and First Chicago in the form presented to me, the
shares of First Chicago Common Stock (and the Rights attached thereto) offered
as set forth in the Registration Statement, when issued in accordance with
their terms and the terms of the Agreement, will be legally issued, fully paid
and non-assessable.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of my name whenever it appears in the
Registration Statement, including the Prospectus constituting a part thereof,
as originally filed or as subsequently amended.
Very truly yours,
Sherman I. Goldberg
<PAGE>
EXHIBIT 23(A)(1)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To First Chicago Corporation:
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our report dated January 14, 1993,
incorporated by reference in First Chicago Corporation's Form 10-K for the year
ended December 31, 1992, as amended by the Corporation's Form 8 dated March 12,
1993, and to the reference to our Firm under the caption "Experts" in this
Registration Statement.
Arthur Andersen & Co.
Chicago, Illinois
February 10, 1994
<PAGE>
Exhibit 23(A)(2)
CONSENT OF INDEPENDENT ACCOUNTANT
We hereby consent to the incorporation by reference in the Prospectus/Proxy
Statement constituting part of this Registration Statement on Form S-4 of First
Chicago Corporation of our report dated January 19, 1993 which appears on page
18 of Lake Shore Bancorp., Inc.'s 1992 Annual Report to Shareholders, which is
incorporated by reference in its Annual Report on Form 10-K for the year ended
December 31, 1992. We also consent to the references to us under the headings
"Experts" and "Selected Financial Data" in such Prospectus. However, it should
be noted that Price Waterhouse has not prepared or certified such "Selected
Financial Data."
PRICE WATERHOUSE
Chicago, Illinois
February 10, 1994
<PAGE>
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard L. Thomas, Leo F. Mullin, David J.
Vitale, Sherman I. Goldberg, Robert A. Rosholt and David P. Bolger, jointly and
severally, his attorney-in-fact, each with power of substitution, for him in any
and all capacities to sign a Registration Statement on Form S-4 relating to the
common stock, $5.00 par value per share, of First Chicago Corporation (the
"Corporation") to be issued in connection with the acquisition of Lake Shore
Bancorp., Inc. pursuant to resolutions adopted by the Board of Directors of the
Corporation on November 12, 1993, and any amendments thereto, and to file the
same, with exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission hereby ratifying and confirming all that
each of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.
Signature Title
--------- -----
/s/ John H. Bryan Director
- ------------------------------------
John H. Bryan
/s/ Dean L. Buntrock Director
- ------------------------------------
Dean L. Buntrock
/s/ Frank W. Considine Director
- ------------------------------------
Frank W. Considine
/s/ James S. Crown Director
- ------------------------------------
James S. Crown
/s/ Donald V. Fites Director
- ------------------------------------
Donald V. Fites
Director
- -------------------------------------
Donald P. Jacobs
/s/ Andrew J. McKenna Director
- ------------------------------------
Andrew J. McKenna
/s/ Richard M. Morrow Director
- ------------------------------------
Richard M. Morrow
<PAGE>
/s/ Leo F. Mullin Director
- ------------------------------------
Leo F. Mullin
/s/ Earl L. Neal Director
- ------------------------------------
Earl L. Neal
/s/ James J. O'Connor Director
- ------------------------------------
James J. O'Connor
/s/ Jerry K. Pearlman Director
- ------------------------------------
Jerry K. Pearlman
/s/ Jack F. Reichert Director
- ------------------------------------
Jack F. Reichert
/s/ Patrick G. Ryan Director
- ------------------------------------
Patrick G. Ryan
/s/ Adele Simmons Director
- ------------------------------------
Adele Simmons
/s/ Roger W. Stone Director
- ------------------------------------
Roger W. Stone
/s/ Richard L. Thomas Director and Principal
----------------------------------- Executive Officer
Richard L. Thomas
/s/ David J. Vitale Director
-----------------------------------
David J. Vitale
/s/ William J. Roberts Principal Accounting
----------------------------------- Officer
William J. Roberts
/s/ Robert A. Rosholt Principal Financial
----------------------------------- Officer
Robert A. Rosholt
Dated: December 10, 1993
<PAGE>
Exhibit 99(B)
[Form of proxy for holders of
Lake Shore Bancorp., Inc. Common Stock]
LAKE SHORE BANCORP., INC.
605 North Michigan Avenue, Chicago, Illinois 60611
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints _______________ and _________________, or
either of them, proxies of the undersigned with power of substitution, to vote
all stock of the undersigned at the special meeting of the stockholders of Lake
Shore Bancorp., Inc., to be held on , 1994, at , and at any
adjournments thereof, as indicated below:
1. Proposal to approve an Amended and Restated Agreement and Plan of
Merger, effective as of November 21, 1994, among First Chicago
Corporation, First Chicago Acquisition Corporation V and Lake Shore
Bancorp., Inc.:
[_] FOR [_] AGAINST [_] ABSTAIN
2. With discretionary power upon any and all other business that may
properly come before the meeting and upon matters incident to the
conduct of the meeting.
The Board of Directors recommends a vote FOR Item 1.
<PAGE>
[reverse]
PROXY NO. NO. OF SHARES
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND IF NO
DIRECTION IS MADE, IT WILL BE VOTED IN FAVOR OF THE ABOVE PROPOSAL NUMBER 1, AND
AS TO ANY OTHER ITEM OF BUSINESS PROPERLY PRESENTED TO SAID MEETING, IT WILL BE
VOTED IN THE DISCRETION OF THE NAMED PROXIES.
DATED:______________, 1994 ______________________________
______________________________
Shareholder(s) Sign Here
Please sign exactly as your name
appears hereon, giving your full
title if signing as attorney or
fiduciary.
If shares are held jointly, each
joint owner should sign. If a
corporation, please sign in full
corporate name, by duly authorized
officer. If a partnership, please
sign in partnership name by
authorized person.
PLEASE RETURN PROMPTLY IN ENCLOSED ENVELOPE
WHICH REQUIRES NO POSTAGE IF MAILED IN THE U.S.
-2-
