SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
FIRSTBANK OF ILLINOIS CO.
(Exact name of registrant as specified in its charter)
DELAWARE 6711 37-6141253
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction Classification Code Number) Identification No.)
of incorporation
or organization)
205 South Fifth Street, 9th Floor
Springfield, Illinois 62701
(217) 753-7543
(Address, including ZIP Code, and telephone number, including area code, of
principal executive office)
MARK H. FERGUSON
Chairman and President
Firstbank of Illinois Co.
205 South Fifth Street, 9th Floor
Springfield, Illinois 62701
(217) 753-7543
(Name, address, including ZIP Code, and telephone number, including area
code, of agent for service)
Copies to:
Jeffery M. Wilday Dennis R. Wendte
Brown, Hay & Stephens Barrack Ferrazzano Kirschbaum
700 First National Bank Building Perlman & Nagelberg
Springfield, Illinois 62701 333 W. Wacker, Ste. 2700
(217)544-8491 Chicago, IL 60606
(312) 984-3188
Approximate date of commencement of proposed sale of the Securities to
the public: As soon as practicable after the effective date of this
Registration Statement.
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
Title of each class of Amount to Proposed maximum Proposed maximum Amount of
securities to be be registered offering price aggregate offering Registration
registered per unit* price* fee
Common Stock;
<S> <C> <C> <C> <C>
$1.00 Par Value 214,200 $4.56 $977,314 $296.16
</TABLE>
*Pursuant to Rules 457(f)(2) and (3) under the Securities Act of 1933,
and solely for the purpose of calculating the registration fee, the
proposed maximum aggregate offering price represents the value of the
maximum amount of Common Stock, $1.00 par value, of BankCentral Corporation
("BankCentral Common Stock") estimated to be outstanding immediately prior
to, and to be canceled in the Merger, less the cash to be paid by the
Registrant in connection with the Merger and is based on the book value of
BankCentral Common Stock on February 28, 1997.
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.
CROSS REFERENCE SHEET
Firstbank of Illinois Co. Form S-4 Registration Statement
Item Location
Number in Prospectus
PART I INFORMATION REQUIRED IN THE PROSPECTUS
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement Outside Front Cover
and Outside Front Cover of Prospectus Page; Cross Reference
Sheet
2. Inside Front and Outside Back Cover Pages Inside Front Cover
of Prospectus Page; Outside
Back Cover Page
3. Risk Factors, Ratio of Earnings to Fixed SUMMARY
Charges and Other Information INFORMATION
4. Terms of the Transaction SUMMARY
INFORMATION;
THE MERGER
5. Pro Forma Financial Information THE MERGER
6. Material Contacts with the Company Being SUMMARY
Acquired INFORMATION;
THE MERGER
7. Additional Information Required for Not Applicable
Reoffering by Persons and Parties Deemed
to Be Underwriters
8. Interests of Named Experts and Counsel LEGAL MATTERS;
EXPERTS
9. Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act
Liabilities
B. INFORMATION ABOUT THE REGISTRANT
10. Information With Respect to S-3 Registrants INFORMATION
WITH RESPECT TO
FIRSTBANK OF
ILLINOIS CO.;
DOCUMENTS
INCORPORATED
BY REFERENCE
11. Incorporation of Certain Information by INFORMATION
Reference WITH RESPECT TO
FIRSTBANK OF
ILLINOIS CO.;
INCORPORATION
BY REFERENCE
12. Information With Respect to S-2 or S-3 Not Applicable
Registrants
13. Incorporation of Certain Information by Not Applicable
Reference
14. Information With Respect to Registrants Not Applicable
Other Than S-2 or S-3 Registrants
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information With Respect to S-3 Companies Not Applicable
16. Information With Respect to S-2 or S-3 Not Applicable
Companies
17. Information With Respect to Companies INFORMATION
Other Than S-2 or S-3 Companies WITH RESPECT TO
BANKCENTRAL
CORPORATION
D. VOTING AND MANAGEMENT INFORMATION
18. Information If Proxies, Consents or SUMMARY
Authorizations Are to Be Solicited INFORMATION;
SPECIAL MEETING
OF BANKCENTRAL
STOCKHOLDERS;
THE MERGER;
INFORMATION
WITH RESPECT TO
BANKCENTRAL
CORPORATION
19. Information If Proxies, Consents or Not Applicable
Authorizations Are Not To Be Solicited
in An Exchange Offer
Page ii
BANKCENTRAL CORPORATION
1400 Charleston Avenue
Mattoon, Illinois 61938
<date*notice*to*stockholders>, 1997
To the Stockholders of BankCentral Corporation:
You are cordially invited to attend a Special Meeting of
Stockholders to be held on the day of
, 1997, at 10:00 a.m., local time, in the meeting room located at
<to*be*determined> (the "Special Meeting").
At this important meeting, you will be asked to consider and
vote upon the Agreement and Plan of Merger dated December 20,
1996, as amended March 10, 1997 (the "Merger Agreement"),
pursuant to which BankCentral Corporation, a Delaware corporation
("BankCentral"), will merge (the "Merger") with and into FBIC
Subsidiary, Inc., ("FBIC"), an Illinois corporation and a wholly-
owned subsidiary of Firstbank of Illinois Co., a Delaware
corporation ("Firstbank"). Under the terms of the Merger
Agreement, each share of the common stock of BankCentral will be
converted into the right to receive cash and/or shares of
Firstbank common stock subject to certain limitations and
adjustments, as more fully described in the accompanying Proxy
Statement/Prospectus. Approval of the Merger Agreement requires
the affirmative vote of holders of a majority of the outstanding
shares of BankCentral common stock.
The Merger would provide to the stockholders of BankCentral
the opportunity: (i) to receive a premium over the book value of
their shares of common stock of BankCentral prior to the
announcement of the Merger Agreement, (ii) to participate in the
enhanced growth and other opportunities of a larger banking
organization, and (iii) to receive stock that is traded in the
over-the-counter market and reported on the National Market
System of The Nasdaq Stock Market in exchange for their shares
of common stock of BankCentral which are not actively traded and
for which there is no established public trading market. The
Merger is intended to be tax-free for federal income tax purposes
to BankCentral stockholders to the extent they exchange their
BankCentral shares for common stock of Firstbank.
THE BANKCENTRAL BOARD OF DIRECTORS CAREFULLY CONSIDERED AND
UNANIMOUSLY APPROVED THE TERMS OF THE MERGER AGREEMENT AS BEING
IN THE BEST INTERESTS OF BANKCENTRAL AND ITS STOCKHOLDERS. THE
BANKCENTRAL BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS
VOTE FOR THE PROPOSAL TO APPROVE THE MERGER AGREEMENT.
The accompanying Proxy Statement/Prospectus and related
proxy materials set forth, or incorporate by reference,
information, including financial data, relating to Firstbank and
BankCentral and describe the terms and conditions of the Merger.
The Board of Directors requests that you carefully review these
materials before completing the enclosed Proxy or attending the
Special Meeting.
Page iii
Approval by the stockholders of BankCentral of the Merger
Agreement is a condition to the consummation of the Merger.
Accordingly, it is important that your shares be represented at
the Special Meeting, whether or not you plan to attend the
Special Meeting in person. Please complete, sign, and date the
enclosed Proxy and return it in the accompanying envelope (which
requires no postage if mailed within the United States). If you
later decide to attend the Special Meeting and vote in person, or
if you wish to revoke your Proxy for any reason prior to the vote
at the Special Meeting, you may do so and your Proxy will have no
further effect. You may revoke your Proxy by following the
procedures set forth in the accompanying Proxy
Statement/Prospectus. Attendance at the Special Meeting will not
in itself constitute a revocation of an earlier dated Proxy.
Should you require assistance in completing your Proxy or if
you have any questions about the voting procedure or accompanying
Proxy Statement/Prospectus, please feel free to contact
Mr. L. Dean Clausen, BankCentral Corporation, 1400 Charleston
Ave., Mattoon, Illinois, 61938.
L. Dean Clausen
Chairman of the Board
YOUR VOTE IS IMPORTANT
The Merger Agreement cannot be approved unless a majority of
all issued and outstanding shares of common stock of BankCentral
are voted in favor of it. Thus, a failure to vote has the same
practical effect as a no vote. In the event sufficient shares
are not present at the Special Meeting, BankCentral, at
stockholder expense, would continue to solicit votes in an
attempt to achieve the necessary number of votes. Stockholders
can help avoid the necessity and expense of follow-up
solicitation of proxies by promptly returning the enclosed Proxy.
Page iv
BANKCENTRAL CORPORATION
1400 Charleston Avenue
Mattoon, Illinois 61938
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD <date*special*meeting>, 1997
<date*notice*to*stockholders>, 1997
To The Stockholders of BankCentral Corporation:
Notice is hereby given that, pursuant to the call of its Directors, a
Special Meeting of Stockholders of BankCentral Corporation will be held on
<date*special*meeting>, 1997, at 10:00 a.m., local time, in the meeting
room located <to*be*determined>
, Illinois.
The purposes of the meeting are:
(1) To consider and vote upon a proposal to approve an Agreement and
Plan of Merger dated December 20, 1996 as amended March 10, 1997 (the
"Merger Agreement"), by and among Firstbank of Illinois Co. ("Firstbank"),
FBIC Subsidiary, Inc. ("FBIC") and BankCentral Corporation ("BankCentral"),
pursuant to which BankCentral will merge with and into FBIC (the "Merger")
and the separate existence of BankCentral will cease. FBIC shall be the
surviving corporation, shall have the name BankCentral, Inc. and shall
become a wholly-owned subsidiary of Firstbank. Each share of common stock
of BankCentral will be converted into the right to receive cash and/or
shares of common stock of Firstbank, subject to certain limitations and
adjustments, all as described in the enclosed Proxy Statement/Prospectus,
which is hereby made a part of this Notice; and
(2) To transact such other business as may properly be brought before
the meeting or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on
<date*record*date>, 1997, will be entitled to notice of, and to vote at,
the Special Meeting.
THE AFFIRMATIVE VOTE OF HOLDERS OF A MAJORITY OF THE SHARES OF COMMON
STOCK OF BANKCENTRAL OUTSTANDING ON THE RECORD DATE IS REQUIRED TO APPROVE
THE MERGER AGREEMENT. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING, IT IS IMPORTANT THAT YOU MARK, SIGN, DATE, AND RETURN PROMPTLY THE
PROXY IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE. YOU MAY WITHDRAW YOUR
PROXY AT ANY TIME PRIOR TO THE SPECIAL MEETING BY FOLLOWING THE PROCEDURES
SET FORTH IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS.
By Order of the Board of Directors
/s/ L. Dean Clausen
L. Dean Clausen
Chairman of the Board
PROXY STATEMENT OF
BANKCENTRAL CORPORATION
AND
PROSPECTUS OF
FIRSTBANK OF ILLINOIS CO.
Special Meeting of BankCentral Corporation Stockholders
to be held on <date*special*meeting>, 1997.
This Proxy Statement/Prospectus is being furnished to the
stockholders of BankCentral Corporation, a Delaware corporation
("BankCentral"), in connection with the solicitation of proxies
by the Board of Directors of BankCentral for use at the Special
Meeting of Stockholders to be held on <date*special*meeting>,
1997. At that meeting, the BankCentral stockholders will
consider and vote to approve an Agreement and Plan of Merger,
dated December 20, 1996 as amended March 10, 1997 (the "Merger
Agreement"), by and among BankCentral, Firstbank of Illinois Co.,
a Delaware corporation ("Firstbank"), and FBIC Subsidiary, Inc.,
an Illinois corporation and wholly-owned subsidiary of Firstbank
("FBIC"). Pursuant to the Merger Agreement, BankCentral would
merge with and into FBIC (the "Merger"). FBIC shall be the
surviving corporation, shall have the name of BankCentral, Inc.
and shall be a wholly-owned subsidiary of Firstbank. This Proxy
Statement/Prospectus also serves as the Prospectus of Firstbank
relating to up to 214,200 shares of common stock of Firstbank
("Firstbank Common Stock") to be issued to the stockholders of
BankCentral in connection with the Merger. See "THE MERGER --
Terms of the Merger".
Upon consummation of the Merger, the business and operations
of BankCentral will be continued through the surviving
corporation. The Merger Agreement provides that each issued and
outstanding share of BankCentral common stock, $1.00 par value
(the "BankCentral Common Stock"), other than shares owned by
BankCentral stockholders who exercise their dissenters' rights
under Delaware law, will be converted into the right to receive
cash and/or shares of common stock of Firstbank. The Merger
Agreement provides that the cash and the number of shares of
Firstbank Common Stock into which each share of BankCentral
Common Stock will be converted pursuant to the Merger is subject
to equitable adjustments in the event of certain changes in the
average closing price of Firstbank Common Stock prior to
completion of the Merger. See "THE MERGER -- Terms of the
Merger." No fractional shares of Firstbank Common Stock will be
issued in the Merger, but cash will be paid in lieu of such
fractional shares.
The transaction is intended to qualify as a tax-free
reorganization under the Internal Revenue Code of 1986, as
amended. The Merger generally is intended to achieve certain tax-
free benefits for federal income tax purposes to the extent that
BankCentral stockholders receive shares of Firstbank Common
Stock in the Merger. See "THE MERGER -- Certain Federal Income
Tax Consequences of the Merger."
Firstbank Common Stock is traded in the over-the-counter
market and its quotations are reported on the National Market
System of The Nasdaq Stock Market under the symbol "FBIC."
BankCentral Common Stock has not been actively traded, and there
is no established public trading market for such shares. On
<recent*date>, 1997, the closing price for Firstbank Common Stock
as reported by The Nasdaq Stock Market, was $<recent*date> per
share.
Page 1
This Proxy Statement/Prospectus, the Notice of Special
Meeting and form of Proxy were first mailed to stockholders of
BankCentral on or about _________________, 1997.
THE SHARES OF FIRSTBANK COMMON STOCK OFFERED HEREBY ARE NOT
SAVINGS OR DEPOSIT ACCOUNTS OR OTHER OBLIGATIONS OF A BANK AND
ARE NOT INSURED BY THE BANK INSURANCE FUND, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, OR ANY OTHER GOVERNMENTAL AGENCY OR
ENTITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAVE THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is
, 1997.
Page 2
AVAILABLE INFORMATION
Firstbank is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith
files reports, proxy statements, and other information with the Securities
and Exchange Commission (the "Commission"). Firstbank also files such
items with the National Association of Securities Dealers, Inc. Such
reports, proxy statements, and other information can be inspected and
copied at Room 1024 of the Commission's offices at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549, and at the following Regional
Offices of the Commission: 75 Park Place, 14th Floor, New York, New York
10007, and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such materials can also be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549 at prescribed rates.
Such reports and other information may also be inspected at the offices of
the National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
This Proxy Statement/Prospectus does not contain all of the
information set forth in the Registration Statement on Form S-4 and
exhibits thereto (the "Registration Statement") covering the securities
offered hereby which has been filed by Firstbank with the Commission. As
permitted by the rules and regulations of the Commission, this Proxy
Statement/Prospectus omits certain information contained or incorporated by
reference in the Registration Statement. The Registration Statement is
available for copying and inspection at the public reference facilities of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
Statements contained in this Proxy Statement/Prospectus as to the contents
of any contract or other document are not necessarily complete and in each
instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement. For such further
information, reference is made to the Registration Statement.
No person has been authorized to give any information or to make any
representation not contained in this Proxy Statement/Prospectus and, if
given or made, such information or representation should not be relied upon
as having been authorized. This Proxy Statement/Prospectus does not
constitute an offer to sell or a solicitation of an offer to purchase the
securities offered by this Proxy Statement/Prospectus, or the solicitation
of a proxy, in any jurisdiction to or from any person to whom it is
unlawful to make such offer or solicitation of an offer or proxy in such
jurisdiction. Neither the delivery of this Proxy Statement/Prospectus nor
any offer made hereunder nor any distribution of the securities to which
this Proxy Statement/Prospectus relates shall, under any circumstances,
imply that the information herein is correct as of any time subsequent to
its date.
DOCUMENTS INCORPORATED BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SEE "INFORMATION
WITH RESPECT TO FIRSTBANK OF ILLINOIS CO. -- INCORPORATION BY REFERENCE."
COPIES OF THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS
DELIVERED UPON WRITTEN OR ORAL REQUEST TO: MR. CHRIS R. ZETTEK, EXECUTIVE
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, FIRSTBANK OF ILLINOIS CO., 205
SOUTH FIFTH STREET, 9TH FLOOR, SPRINGFIELD, ILLINOIS 62701 (TELEPHONE:
(217) 753-7543).
IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST FOR
COPIES OF DOCUMENTS SHOULD BE MADE BY
<date*5*bus.*days*before*stockholder*mtg>, 1997.
Page 3
BankCentral Corporation
and
Firstbank of Illinois Co.
Proxy Statement/Prospectus
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION 3
DOCUMENTS INCORPORATED BY REFERENCE 3
SUMMARY INFORMATION 6
SPECIAL MEETING OF BANKCENTRAL STOCKHOLDERS 20
THE MERGER 21
The Merger Agreement 21
Background 21
BankCentral's Reasons for the Merger 21
Firstbank's Reasons for the Merger 25
Terms of the Merger 26
Exchange Agent 27
Fractional Shares 28
Conduct of Business Prior to the Merger 28
Management and Operations of BankCentral After the
Merger 30
Conditions to the Merger 30
Resales of Firstbank Common Stock 32
Federal Income Tax Consequences of the Merger 32
Comparison of Rights of Holders of BankCentral Common
Stock and Holders of Firstbank Common Stock 34
Dissenters' Rights 38
Stockholders' Undertaking Agreements 39
Pro Forma Condensed Combining Financial Statements
(unaudited)
Material Contacts Between Firstbank and BankCentral 56
INFORMATION WITH RESPECT TO FIRSTBANK OF ILLINOIS CO. 57
Annual Report of Firstbank 57
Incorporation by Reference 57
Market Price of Common Stock and Dividends 57
Nasdaq Market Makers 58
INFORMATION WITH RESPECT TO BANKCENTRAL CORPORATION 59
Business 59
Statistical Information About BankCentral 59
Properties 71
Legal Proceedings 71
Market Price of Common Stock and Dividends 72
Security Ownership of Certain Beneficial Owners and
Management of BankCentral 73
Management's Discussion and Analysis of Financial Condition
and Results of Operations 75
Page 4
REGULATION AND SUPERVISION 83
OTHER MATTERS 86
STOCKHOLDER PROPOSALS 86
LEGAL MATTERS 86
EXPERTS 86
EXHIBIT A
EXHIBIT B
FINANCIAL INFORMATION
Index to Financial Statements
Page 5
SUMMARY INFORMATION
The following is a brief summary of certain information contained
elsewhere in this Proxy Statement/Prospectus. The summary is necessarily
incomplete and selective and is qualified in its entirety by more detailed
information contained herein or incorporated herein by reference.
Stockholders of BankCentral are urged to read this Proxy
Statement/Prospectus and Exhibits A and B hereto in their entirety.
Purpose of Special
Meeting: To obtain approval by the holders of
BankCentral Common Stock of the Merger Agreement and
the transactions contemplated thereby. See "SPECIAL
MEETING OF BANKCENTRAL STOCKHOLDERS."
Time and Date of
Special Meeting: <date*special*meeting>, 1997, 10:00 a.m.
Place of Special
Meeting: The meeting room located on <to*be*determined>
Required Vote: The affirmative vote of persons holding a majority
of the issued and outstanding shares of BankCentral
Common Stock is required to approve the Merger
Agreement. See "SPECIAL MEETING OF BANKCENTRAL
STOCKHOLDERS."
Shares Outstanding
and Entitled to
Vote: As of <record*date>, 1997, there were 228,443
shares of BankCentral Common Stock issued and
outstanding. Stockholders of BankCentral of record at
the close of business on <date*record*date>, 1997, are
entitled to notice of, and to vote at, the Special
Meeting of Stockholders. See "SPECIAL MEETING OF
BANKCENTRAL STOCKHOLDERS."
As of the <record*date>, 1997, directors and officers
of BankCentral and their affiliates owned beneficially
an aggregate of 71,684 shares of BankCentral Common
Stock or approximately 31.38% of the shares entitled to
vote at the Special Meeting. All of BankCentral's
officers and directors and their affiliates have
indicated their intention to vote in favor of the
approval of the Merger Agreement.
Proxies: Proxies are revocable at any time before
being exercised. See "SPECIAL MEETING OF BANKCENTRAL
STOCKHOLDERS."
Merger Agreement: Firstbank, FBIC, and BankCentral entered into an
Agreement and Plan of Merger, dated December 20, 1997,
as amended March 10, 1997 (the "Merger Agreement"),
providing for the merger of BankCentral with and into
FBIC as a result of which the separate existence of
BankCentral will cease. FBIC will be the surviving
corporation and shall have the name BankCentral, Inc.
See "THE MERGER."
Page 6
Terms of the Merger:Subject to the terms and conditions set forth
in the Merger Agreement, BankCentral will merge with
and into FBIC. Upon consummation of the Merger,
BankCentral's corporate existence will terminate. FBIC
will continue as the surviving entity, shall have the
name of BankCentral, Inc. and shall become a wholly-
owned subsidiary of Firstbank. Simultaneously with the
effectiveness of the Merger, each share of BankCentral
Common Stock issued and outstanding immediately prior
to the Merger, other than shares owned by BankCentral
stockholders who exercise their dissenters' rights
under Delaware law, will be cancelled and be converted
into the right to receive cash and/or shares of
Firstbank Common Stock. The value of the cash plus the
Firstbank Common Stock to be received by BankCentral
stockholders shall be not more than $13,265,328 and,
depending upon the value of the Firstbank Common Stock
at closing, could be substantially less; provided,
however, that BankCentral has the right to terminate
the Merger Agreement, without penalty, if the total
consideration is less than $12,800,000. The Merger
Agreement provides that the cash and the number of
shares of Firstbank Common Stock into which each share
of BankCentral Common Stock will be converted pursuant
to the Merger is subject to equitable adjustments in
the event of certain changes in the average closing
price of Firstbank Common Stock prior to the completion
of the Merger. See "THE MERGER -- Terms of The
Merger."
Recommendation of the
Board of Directors of
BankCentral: The Board of Directors of BankCentral has
unanimously approved the Merger Agreement as being in
the best interests of BankCentral and its stockholders
and unanimously recommends that the stockholders of
BankCentral approve the Merger Agreement.
The Board of Directors of BankCentral reached these
decisions after considering the following principal
factors: (i) stockholders of BankCentral will receive a
premium over the book value of BankCentral Common Stock
prior to the announcement of the Merger Agreement;
(ii) the Merger should provide BankCentral stockholders
with the opportunity to participate in the enhanced
growth and other opportunities of a larger banking
organization; and (iii) BankCentral stockholders will
receive in the Merger stock which is traded in the over-
the-counter market and reported on the National Market
System of the Nasdaq Stock Market, and, accordingly,
the Merger should provide BankCentral stockholders with
increased liquidity in their holdings. See "THE MERGER
-- Background" and "THE MERGER -- BankCentral's Reasons
for the Merger."
Page 7
The Parties: Firstbank of Illinois Co. ("Firstbank")
205 South Fifth Street, 9th Floor
Springfield, Illinois 62701
Telephone: (217) 753-7543
FBIC Subsidiary, Inc. ("FBIC")
205 South Fifth Street
Springfield, Illinois 62701
Telephone: (217) 753-7543
BankCentral Corporation ("BankCentral")
1400 Charleston Avenue
Mattoon, Illinois 61938
Telephone: (217) 234-6434
Business of
Firstbank: Firstbank is a bank holding company
registered under the Bank Holding Company Act of 1956,
as amended. Firstbank is a Delaware corporation, and
owns directly or indirectly all of the outstanding
capital stock of seven banks with 39 locations
throughout downstate Illinois and five banking offices
in Missouri. Additionally, Firstbank owns all of the
outstanding capital stock of three non-banking
subsidiaries, FFG Trust, Inc., a trust company
organized under the laws of the State of Illinois, FFG
Investments Inc., an Illinois corporation and a
registered broker-dealer, and Zemenick & Walker, Inc.,
an Illinois corporation and a registered investment
advisory firm. At September 30, 1996, Firstbank had
consolidated total assets of $1.92 billion, loans (net
of unearned discount) of $1.28 billion, deposits of
$1.66 billion, and shareholders' equity of $201million.
Business of FBIC: FBIC is a newly-formed Illinois corporation and a
wholly-owned subsidiary of Firstbank.
Business of
BankCentral: BankCentral is a bank holding company registered
under the Bank Holding Company Act of 1956, as amended.
BankCentral is a Delaware corporation and owns all of
the capital stock of Central National Bank of Mattoon
("CNB of Mattoon"), a national banking association. At
September 30, 1996, BankCentral had consolidated total
assets of $114.3 million, loans (net of unearned
discount) of $72.0 million, deposits of $97.2 million,
and stockholders' equity of $6.6 million.
Dissenters' Rights: Under Delaware law, holders of BankCentral Common
Stock have the right to dissent from the Merger, and
receive cash for their shares equal to the fair value
of their shares if the Merger is consummated, by
following certain procedures set forth in Section 262
of the Delaware General Corporation Law (the "Delaware
Code"). See "THE MERGER -- Dissenters' Rights."
Page 8
Required Regulatory
Approval: Before the Merger may be consummated, the
transaction must be approved by the Board of Governors
of the Federal Reserve System (the "Federal Reserve
Board"). Firstbank's application was approved on March
7, 1997 by the Federal Reserve Board. See "THE MERGER
-- Conditions to the Merger."
Federal Income Tax
Consequences: A condition to the consummation of the Merger
is that BankCentral's tax advisor deliver an opinion
that, assuming that the Merger occurs in accordance
with the Merger Agreement, the Merger will constitute a
"reorganization" for federal income tax purposes. If
the Merger constitutes such a reorganization, no gain
or loss will be recognized by BankCentral stockholders
to the extent they exchange their shares of BankCentral
Common Stock for shares of Firstbank Common Stock.
However, cash received pursuant to the Merger or
pursuant to the exercise of dissenters' rights may give
rise to taxable income. Each stockholder of
BankCentral is urged to consult his or her own tax
advisor to determine the specific tax consequences of
the Merger for such stockholder. See "THE MERGER --
Federal Income Tax Consequences of the Merger."
Conditions to the
Merger: Consummation of the Merger is subject to
several conditions, including, but not limited to (i)
approval of the Merger Agreement and the Merger by
BankCentral stockholders holding at least a majority of
the issued and outstanding BankCentral Common Stock,
(ii) approval by the Federal Reserve Board of the
acquisition of BankCentral by Firstbank, and (iii) the
occurrence or nonoccurrence of certain events as
described in the Merger Agreement. See "THE MERGER --
Conditions to the Merger."
Termination of the
Merger Agreement: The Merger Agreement may be terminated at any time
prior to the Effective Date, as defined therein, by
mutual consent of the Boards of Directors of all
parties to the Merger Agreement, by the Board of
Directors of any party to the Merger Agreement at any
time after May 31, 1997, if the Merger has not been
consummated, or by the parties to the Merger Agreement
in the event of certain other occurrences. See "THE
MERGER -- Terms of the Merger."
Amendment and Waiver
of Terms of the
Merger Agreement: Subject to certain limitations after approval by
BankCentral's stockholders, Firstbank and BankCentral
may amend, modify, supplement or waive certain terms
and conditions of the Merger Agreement prior to
consummation of the Merger. See "THE MERGER -- Terms
of the Merger."
Page 9
Prices of Firstbank and
BankCentral Common
Stock: On December 20, 1996, the last business
day before the Merger Agreement was announced, the
closing price of Firstbank Common Stock as reported on
The Nasdaq Stock Market was $33.25 per share. Shares
of BankCentral Common Stock are not actively traded and
there is no established public trading market for such
shares. For information regarding more recent prices,
see "INFORMATION WITH RESPECT TO FIRSTBANK OF ILLINOIS
CO." and "INFORMATION WITH RESPECT TO BANKCENTRAL
CORPORATION."
Summary Financial
Data: The following tables set forth for the
periods indicated certain summary historical financial
information for Firstbank and BankCentral. The balance
sheet and income statement data for Firstbank included
in this summary for each of the years in the five-year
period ended December 31, 1995, are taken from audited
consolidated financial statements as of and for each of
those five years. The balance sheet and income
statement data for Firstbank included in this summary
for the nine-month period ended September 30, 1996,
are taken from unaudited consolidated financial
statements of Firstbank as of and for the nine months
ended September 30, 1996. Results for the nine months
ended September 30, 1996, are not necessarily
indicative of results for the entire year. The balance
sheet and income statement data for BankCentral
included in this summary for each of the years in a
four-year period ended June 30, 1996, (see note on page
21) are taken from audited consolidated financial
statements as of and for each of those four years. The
balance sheet and income statement data for BankCentral
which is included in this summary for the three-month
period ended September 30, 1996, are taken from
unaudited consolidated financial statements of
BankCentral as of and for the three months ended
September 30, 1996. Results for the three months ended
September 30, 1996, are not necessarily indicative of
results for the entire year. These data include all
adjustments which, in the opinion of the respective
management of Firstbank and BankCentral, are necessary
for a fair presentation of these periods and are of a
normal recurring nature. The following pages should be
read in conjunction with the consolidated financial
statements of Firstbank and BankCentral, and related
notes thereto, incorporated into this Proxy
Statement/Prospectus by reference and included
elsewhere herein, respectively. See "INFORMATION WITH
RESPECT TO FIRSTBANK OF ILLINOIS CO.," and "INFORMATION
WITH RESPECT TO BANKCENTRAL CORPORATION."
Page 10
THIS PAGE INTENTIONALLY LEFT BLANK
Page 11
<TABLE>
FIRSTBANK OF ILLINOIS CO.
SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA
<CAPTION>
As of and for the Years Ended December 31,
As of and for the
Nine Months Ended
September 30, 1996 1995 1994 1993 1992 1991
(dollars in thousands, except per share data)
<S>
Balance Sheet Items <C> <C> <C> <C> <C> <C>
Investment securities $ 459,677 $ 456,919 $ 468,217 $ 443,046 $ 527,025 $ 488,368
Loans, net of unearned discount 1,276,347 1,236,798 1,178,550 1,129,894 1,074,667 1,121,926
Reserve for possible loan losses 18,924 18,047 18,360 18,252 16,538 14,583
Total assets 1,923,296 1,863,294 1,816,902 1,758,902 1,797,221 1,823,836
Total deposits 1,662,482 1,618,269 1,534,990 1,523,700 1,565,494 1,612,223
Long-term borrowings 8 108 10,638 21,377 27,111 31,585
Stockholders' equity 201,498 190,981 163,311 157,925 143,926 131,892
Results of Operations
Interest income $ 104,348 $ 134,401 $ 124,254 $ 124,010 $ 139,696 $ 145,288
Interest expense 45,272 57,486 45,057 45,406 62,407 79,849
Net interest income 59,076 76,915 79,197 78,604 77,289 65,439
Provision for possible loan losses 2,151 2,313 2,942 5,535 6,014 4,919
Net income before cumulative effect
of change in accounting principle 20,753 25,742 24,034 19,099 17,094 14,454
Cumulative effect of change in
accounting principle - - - 386 - -
Net income 20,753 25,742 24,034 19,485 17,094 14,454
Per Share Data
Net income before cumulative effect
of change in accounting principle $ 1.98 $ 2.46 $ 2.30 $ 1.84 $ 1.65 $ 1.44
Cumulative effect of change in
accounting principle - - - 0.03 - -
Net income 1.98 2.46 2.30 1.87 1.65 1.44
Cash dividends declared 0.72 0.88 0.80 0.72 0.64 .59
Book value 19.58 18.47 15.82 15.37 14.09 12.99
Tangible book value 18.21 17.02 14.25 13.64 12.19 10.94
Other Information
Return on average assets 1.46% 1.41% 1.33% 1.11% 0.95% .88%
Return on average equity 14.14 14.47 14.99 12.78 12.38 11.71
Net interest margin (tax-equivalent) 4.56 4.66 4.86 5.03 4.83 4.41
Stockholders' equity to assets 10.48 10.25 8.99 8.98 8.01 7.23
Tangible capital to assets 9.82 9.52 8.17 8.05 7.00 6.16
Tier 1 capital 15.68 14.12 13.37 12.03 10.82 9.12
Total risk-based capital 16.94 15.18 14.44 13.12 11.88 10.25
Leverage ratio 9.87 9.77 8.83 8.08 6.80 6.53
Stock Price Information
Market value:
Period end $ 31.88 $ 30.88 $ 25.83 $ 24.17 $ 25.25 $ 19.00
High 32.25 31.50 25.83 26.17 25.33 20.00
Low 29.50 25.50 22.67 23.33 18.50 11.50
</TABLE>
Page 12 and 13
<TABLE>
BANKCENTRAL CORPORATION
SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA
<CAPTION>
As of and for the Years Ended June 30,
As of and for the
Three Months Ended
September 30, 1996 1996 1995 1994 1993**
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Balance Sheet Items
Investment securities $ 28,079 $ 29,101 $ 23,204 $ 27,765 $ 29,758
Loans, net of unearned discount 72,039 73,072 75,509 76,179 69,268
Allowance for possible loan losses 996 1,148 1,260 834 1,012
Total assets 114,342 112,376 113,893 114,474 109,388
Total deposits 97,196 96,799 98,451 100,670 96,253
Note payable 4,600 4,600 5,150 5,383 5,783
Stockholders' equity 6,575 6,295 6,396 5,893 4,995
Results of Operations
Interest income $ 2,128 $ 8,423 $ 8,272 $ 7,817 $ 7,412
Interest expense 1,066 4,297 4,412 3,272 3,516
Net interest income 1,062 4,126 3,860 4,545 3,896
Provision for possible loan losses 45 451 705 628 831
Net income before cumulative effect
of change in accounting principle 220 640 326 523 188
Cumulative effect of change in
accounting principle - - - 618 -
Net income 220 640 326 1,141 188
Per Share Data
Net income before cumulative effect
of change in accounting principle $ 0.96 $ 2.68 $ 1.34 $ 2.19 $ 0.79
Cumulative effect of change in
accounting principle - - - 2.59 -
Net income 0.96 2.68 1.34 4.78 0.79
Cash dividends declared - - - - -
Book value 29.87 28.50 27.12 24.67 20.91
Other Information
Return on average assets 0.78% 0.57% 0.28% 0.99% 0.19%
Return on average equity 13.68 9.73 5.38 20.39 4.26
Net interest margin (tax-equivalent) 4.16 4.04 4.26 4.42 4.26
Stockholders' equity to assets 5.75 5.60 5.62 5.15 4.57
Tier 1 capital 8.71 8.48 7.74 7.07 5.91
Total risk-based capital 9.96 9.75 8.99 8.06 7.16
Leverage ratio 5.98 5.80 5.57 5.19 4.24
Stock Price Information*
Market value:
Period End $ 32.62 $ 30.00 $ 30.50 $ 30.00 $ 21.00
High 32.62 30.50 30.50 30.00 25.00
Low 30.00 30.00 28.00 20.00 20.00
</TABLE>
* No established public trading market exists for BankCentral Common
Stock. To the knowledge of management, this table presents the
stock prices of known transfers for the periods presented.
** Results of operations for 1993 are for the period August 6, 1992, the
date of acquisition of the subsidiary bank, through June 30, 1993.
Because BankCentral first acquired its subsidiary on that
date, financial disclosures prior to August 6, 1992 are not meaningful.
Page 14 and 15
Comparative Per
Share Data: The following table sets forth for the
periods presented selected historical (unaudited)
per share data of Firstbank and BankCentral and
corresponding pro forma per share amounts for
Firstbank after giving effect to the Merger. The
table also sets forth the pro forma equivalents of
one share of BankCentral Common Stock after giving
effect to the Merger. Such data assumes the
Merger was given effect as of January 1, 1995.
The data presented are based upon the historical
consolidated financial statements and related
notes of Firstbank and BankCentral, and the pro
forma condensed combining financial statements
(unaudited) and related notes included elsewhere
herein and should be read in conjunction
therewith. The assumptions used in the
preparation of this table are included in "Notes
to Pro Forma Condensed Combining Financial
Statements." These data are not necessarily
indicative of the results of future operations of
the combined organization or the actual results
that would have occurred if the Merger had been
consummated on September 30, 1996. See "THE
MERGER -- Pro Forma Condensed Combining Financial
Statements," "INFORMATION WITH RESPECT TO
FIRSTBANK OF ILLINOIS CO.," and "INFORMATION WITH
RESPECT TO BANKCENTRAL CORPORATION."
Page 16
Comparative Per Share Data
(unaudited)
Book Value Cash Dividends Net Income
Per Common Share Per Common Share Per Common Share
For the nine months
ended September 30, 1996:
Firstbank:
As reported $19.58 $0.72 $1.98
Pro forma combined 19.85 0.72 1.94
BankCentral:
As reported $29.87 $ - $1.84
Equivalent pro forma 17.55 0.64 1.71
For the year ended
December 31, 1995:
Firstbank:
As reported $18.47 $0.88 $2.46
Pro forma combined 18.77 0.88 2.40
BankCentral:
As reported $28.50 $ - $1.71
Equivalent pro forma 16.59 0.78 2.12
NOTE TO COMPARATIVE PER SHARE DATA:
Equivalent pro forma amounts for BankCentral equal Firstbank pro forma
combined amounts multiplied by the common stock exchange ratio of .884
shares of Firstbank Common Stock to be received for each share of
BankCentral Common Stock. In addition to the stock exchange component
detailed above, each BankCentral stockholder would receive $28.45 in cash
for each share of BankCentral Common Stock exchanged.
Page 17
Comparative Market
Prices: Firstbank Common Stock is quoted on the
National Market System of the Nasdaq Stock Market
under the symbol "FBIC". There is no established
public trading market for BankCentral Common
Stock. The following chart sets forth the closing
price of Firstbank Common Stock as of December 20,
1996, the last trading day preceding the
announcement of the Merger, and the pro forma
equivalent for one share of BankCentral Common
Stock, had the Merger been effective as of
December 20, 1996. To the knowledge of
BankCentral's management, there have been no
transactions in BankCentral Common Stock since
August 9, 1996.
Firstbank Common Stock price
as reported: $33.25
BankCentral Common Stock
pro forma equivalent: $29.39
Pro forma equivalent price for
BankCentral Common Stock is equal to the Firstbank
Common Stock price reported, multiplied by the
Common Stock exchange ratio of .884 shares of
Firstbank to be received for each share of
BankCentral Common Stock. In addition to the
stock exchange component, each BankCentral
stockholder would receive $28.45 in cash for each
share of BankCentral Common Stock exchanged.
Summary of Selected Pro
Forma Combined Financial
Information: The following table provides a
summary of selected pro forma combined financial
information of Firstbank and BankCentral. This
information should be read in conjunction with the
"THE MERGER -- Pro Forma Condensed Combining
Financial Statements" for further discussion of
pro forma accounting treatment included in the
following table.
Page 18
Summary of Selected Pro Forma Combined Financial Information
As of and for the As of and for the Year
Nine Months Ended Ended December 31, 1995
September 30, 1996
(dollars in thousands, except per
share data)
Balance Sheet Items
Investment securities $ 487,756 $ 483,043
Loans, net of unearned discount 1,348,386 1,313,077
Reserve for possible loan losses 19,920 19,161
Total assets 2,037,828 1,979,095
Total deposits 1,759,678 1,718,654
Long-term borrowings 4,608 5,158
Stockholders' equity 208,263 197,746
Results of Operations
Interest income $ 110,342 $ 142,816
Interest expense 48,448 61,741
Net interest income 61,894 81,075
Provision for possible loan
losses 2,497 2,988
Net income 20,757 25,592
Per Share Data
Net income $ 1.94 $ 2.40
Cash dividends declared 0.72 0.88
Book value 19.85 18.77
Tangible book value 17.87 16.72
Other Information
Return on average assets 1.38% 1.32%
Return on average equity 13.68 13.86
Stockholders' equity to assets 10.22 9.99
Tangible capital to assets 9.29 9.00
Page 19
SPECIAL MEETING OF BANKCENTRAL STOCKHOLDERS
This Proxy Statement/Prospectus is being furnished in
connection with the solicitation by the Board of Directors
of BankCentral of proxies to be voted at the Special Meeting
of Stockholders of BankCentral to be held on
<date*special*meeting*>, 1997, and any adjournment thereof.
At the Special Meeting the holders of BankCentral Common
Stock will consider and vote upon the approval of the Merger
Agreement providing for the Merger of BankCentral with and
into FBIC. The meeting will take place in the meeting room
located <to*be*determined>.
The Board of Directors of BankCentral has fixed
<date*record*date>, 1997, as the record date ("Record Date")
for determining the stockholders of BankCentral entitled to
notice of and to vote at the meeting. On the Record Date,
BankCentral had outstanding 228,443 shares of its Common
Stock, each share entitling its holder to one vote on each
matter to be voted upon at the meeting. The affirmative
vote of the holders of a majority of the issued and
outstanding BankCentral Common Stock is required for
approval of the Merger Agreement. As of the Record Date,
directors and officers of BankCentral and their affiliates
beneficially owned an aggregate of 71,684 shares of
BankCentral Common Stock, or approximately 31.38% of the
outstanding shares of BankCentral Common Stock entitled to
vote at the Special Meeting. All such directors and
officers and their affiliates have indicated their intent to
vote their shares in favor of the Merger Agreement.
BankCentral will bear the cost of soliciting proxies in
the accompanying form, other than the cost of printing this
Proxy Statement/Prospectus, which will be borne by
Firstbank. Officers, directors, and employees of
BankCentral may also solicit proxies by mail, personal
conversation, telephone, facsimile transmission, or
telegraph. Compensation, other than regular compensation
for those individuals' regular duties, will not be paid to
those individuals for such solicitation services.
It is not intended that any business other than
consideration of the Merger Agreement and Merger described
above will be presented at the meeting. With respect to any
other matters or proposals that may legally come before the
meeting, however, it is the intention of the persons named
as proxies to vote said proxy in accordance with their best
judgment.
The Board of Directors of BankCentral requests that
stockholders of BankCentral mark, sign, and date the
accompanying form of Proxy and promptly return it to
BankCentral in the enclosed envelope. If a Proxy is
properly executed and returned in time for voting, it will
be voted as indicated thereon or, if no voting instructions
are indicated thereon, such Proxy will be voted in favor of
the Merger Agreement and Merger. Failure to return a
properly executed Proxy or to vote in person at the Special
Meeting will have the practical effect of a vote against the
Merger Agreement. A Proxy may be revoked by the person
giving it at any time prior to its being voted. Such
revocation may be accomplished by a letter, by a properly
executed form of Proxy bearing a later date, delivered to
the Secretary of BankCentral, or if the person giving the
Proxy is present at the Special Meeting of Stockholders and
wishes to vote in person, the Proxy may be withdrawn at that
time. Merely attending the Special Meeting of Stockholders
will not constitute revocation of a Proxy.
Page 20
Shares of BankCentral Common Stock subject to
abstentions will be treated as shares present at
the Special Meeting of Stockholders for purposes
of determining the presence of a quorum but as
unvoted for purposes of determining the number of
shares voting on a particular proposal. If a
broker or other nominee holder indicates on the Proxy
that it does not have discretionary authority to vote
the shares it holds of record on a proposal, those shares
will not be considered as present for purposes of determining
a quorum or as voted for purposes of determining the
approval of stockholders on a particular proposal.
THE MERGER
The Merger Agreement
The following information with respect to
the Merger is qualified in its entirety by
reference to the Merger Agreement, which is
incorporated herein by reference to Exhibit 2.1 and
2.2 of the Registration Statement of which this Proxy
Statement/Prospectus is a part. Each person to whom
this Proxy Statement/Prospectus is delivered may obtain a
copy of the Merger Agreement without charge upon written
request addressed to BankCentral Corporation, 1400 Charleston Avenue,
Mattoon, Illinois 61938.
Background
Reasons for the Merger and Recommendation of
the BankCentral Board of Directors
The board of directors of BankCentral has carefully
considered BankCentral's future role in the changing banking
environment. The board considered such things as potential
increased competition from bank and nonbank sources, prospects for
future growth through mergers and acquisitions in Illinois as well as
the ability of CNB of Mattoon to develop new products on a profitable
basis. In light of the foregoing, the board concluded the
affiliation of BankCentral with a major banking organization with
substantial resources would be in the best interests of BankCentral's
stockholders, employees and communities.
BankCentral's board of directors discussed the possibility
of a business combination with, and solicited
expressions of interest from, a number of banking
organizations doing business in central Illinois and
surrounding areas. After considerable discussion, the board
concluded that Firstbank offered the most attractive
affiliation alternative. Firstbank presented BankCentral with
financial and other information about Firstbank and an affiliation
proposal. After substantial negotiations with Firstbank and internal
discussions by BankCentral's board of directors, BankCentral and
Firstbank entered into the Agreement on December 20, 1996. Prior
to execution of the Agreement, BankCentral's board of directors
received an opinion from Professional Bank Systems ("PBS") that the
consideration to be received by the stockholders of BankCentral
pursuant to the Merger Agreement is fair, from a financial point
of view, to the stockholders of BankCentral.
BankCentral's board of directors has concluded that the
terms of the Merger are fair to BankCentral and its stockholders.
In reaching these conclusions, the board has considered, among
other things, the price being offered in the Merger relative
to the market value, book value
Page 21
and earnings per share of Firstbank's common stock and the
written opinion of PBS. BankCentral's board has also considered
a number of additional factors in approving and recommending
the terms of the Merger, including, without limitation,
information concerning the financial condition, earnings
and dividends of BankCentral and Firstbank, and the financial
terms of other recent business combinations in the
banking industry. BankCentral's board of directors also
conditioned BankCentral's obligation to consummate the
Merger on the receipt of an opinion from a financial advisor
that the consideration to be paid by Firstbank was fair,
from a financial point of view, to the stockholders of BankCentral.
The opinion of PBS to this effect is attached to this Proxy
Statement/Prospectus as Exhibit A.
FOR THESE REASONS, THE BOARD OF DIRECTORS OF
BANKCENTRAL UNANIMOUSLY RECOMMENDS THAT HOLDERS OF
BANKCENTRAL COMMON STOCK VOTE "FOR" APPROVAL OF THE
MERGER AGREEMENT AND THE MERGER.
Opinion of Financial Advisor to BankCentral
Corporation
PBS was engaged by BankCentral to advise
BankCentral's board of directors as to the
fairness of the consideration, from a financial
perspective, to be paid by Firstbank to BankCentral
stockholders as set forth in the Merger Agreement.
PBS is a bank consulting firm with offices in
Louisville, Atlanta, Chicago, Nashville and
Washington, D.C. As part of its investment banking
business, PBS is regularly engaged in reviewing the
fairness of financial institution acquisition
transactions from a financial perspective and in
the valuation of financial institutions and other
businesses and their securities in connection with
mergers, acquisitions, estate settlements, and
other transactions. Neither PBS nor any of its
affiliates has a material financial interest in
BankCentral or Firstbank. PBS was selected to advise
BankCentral's board of directors based upon their
familiarity with Illinois financial institutions and
knowledge of the banking industry as a whole.
PBS performed certain analyses described herein
and demonstrated the range of values for BankCentral
resulting from such analyses for BankCentral's board
of directors in connection with its advice as to
the fairness of the consideration to be paid by
Firstbank.
A preliminary Fairness Opinion of PBS was
delivered to BankCentral's board of directors on
December 20, 1996. In addition, a final Fairness
Opinion was delivered to BankCentral's board
of directors on February 21, 1997. A copy of the
Fairness Opinion, which includes a summary of the
assumptions made and information analyzed in
deriving the Fairness Opinion, is attached as
Exhibit A to this Proxy Statement/Prospectus and
should be read in its entirety.
In arriving at its Fairness Opinion, PBS
reviewed certain publicly available business and
financial information relating to BankCentral and
Firstbank. PBS considered certain financial and
stock market data of BankCentral and Firstbank,
compared that data with similar data for
certain other publicly-held bank holding
companies and considered the financial terms of
certain other comparable bank transactions in the
state of Illinois that had recently been
effected. PBS also considered such other
information, financial studies, analyses and
investigations and financial, economic and market
criteria that it deemed relevant. In connection
with its review, PBS did not independently verify
the foregoing information and relied on such
information as being complete
Page 22
and accurate in all material respects. Financial forecasts prepared
by PBS were based on assumptions believed by PBS to be
reasonable and to reflect currently available information.
PBS did not make an independent evaluation or
appraisal of the assets of BankCentral or Firstbank.
As part of preparing the fairness opinion, PBS
performed a due diligence review of Firstbank. As
part of the due diligence, PBS reviewed the
following items: minutes of the board of
directors and board committee meetings from
January 19, 1996 through December 20, 1996;
reports filed with the Commission by Firstbank on
Forms 10-K, 8-K and 10-Q for the year ending December
31, 1995 and year-to-date 1996; reports of independent auditors and
management letters and response thereto, for the
year ending December 31, 1995; analysis and
calculations of allowance for loan and lease
losses as of December 31, 1996; internal loan
review reports; investment portfolio activity
reports; asset quality reports; Uniform Bank
Holding Company Report for Firstbank as of
September 30, 1996; discussion of pending
litigation and other issues with senior
management of Firstbank.
PBS reviewed and analyzed the historical performance of
BankCentral and its wholly owned subsidiary, CNB
of Mattoon, contained in: Audited Financial
Statements dated June 30, 1994, 1995 and 1996 as
well as unaudited September 30, 1996 financial
statements of BankCentral; June 30, 1996
Consolidated Report of Condition and Income filed with the Federal
Deposit Insurance Corporation by CNB of
Mattoon; June 30, 1996 Uniform Bank Performance
Report of CNB of Mattoon; June 30,1996 Form FR Y9SP
Parent Company Only Financial Statements filed by
BankCentral; historical common stock trading
activity of BankCentral; and the premises and
other fixed assets. PBS reviewed and tabulated
statistical data regarding the loan portfolio,
securities portfolio and other performance ratios and
statistics. Financial projections were prepared and
analyzed as well as other financial studies,
analyses and investigations as deemed relevant for
the purposes of this opinion. In review of the aforementioned
information, PBS took into account its assessment of general
market and financial conditions, its experience in other
similar transactions, and its knowledge of the
banking industry generally.
In connection with rendering the Fairness Opinion
and preparing its various written presentations to BankCentral's
board of directors, PBS performed a variety of financial analyses,
including those summarized herein. The summary does not purport
to be a complete description of the analyses performed by PBS
in this regard. The preparation of a Fairness Opinion involves various
determinations as to the most appropriate and relevant methods of
financial analysis and the application of these methods to the
particular circumstances and therefore, such an opinion is not readily
susceptible to summary description. Accordingly, notwithstanding the
separate factors summarized below, PBS believes that its analyses must
be considered as a whole and that selecting portions of its analyses and
of the factors considered by it, without considering all analyses and
factors, could create an incomplete view of the evaluation process
underlying its opinion. In performing its analyses, PBS made numerous
assumptions with respect to industry performance, business and economic
conditions and other matters, many of which are beyond BankCentral's
or Firstbank's control. The analyses performed by PBS are not necessarily
indicative of actual values or future results, which may be
significantly more or less favorable than suggested
by such analyses. In addition, analyses relating to
the values of businesses do not purport to
be appraisals or to reflect the process by which
businesses actually may be sold.
Page 23
Acquisition Comparison Analysis
In performing this analysis, PBS reviewed
bank acquisition transactions in the state of
Illinois. There were 177 bank acquisition
transactions in Illinois announced since 1990 for
which detailed financial information was available.
The purpose of the analysis was to obtain an
evaluation range based on these Illinois acquisition
transactions. Median multiples of earnings and
book value implied by the comparable transactions were utilized
in obtaining a range for the acquisition value of BankCentral.
In addition to reviewing recent Illinois bank transactions,
PBS performed separate comparable analyses for acquisitions
of Illinois banks which, like BankCentral, had an equity-to-asset
ratio between 5.00% and 7.00%, had a return on average equity
("ROAE") between 9.00% and 12.00%, and like BankCentral had
deposits between $80.0 million and $110.0 million. Median
values for the 177 Illinois acquisitions expressed as multiples
of both book value and earnings were 1.62 and 14.43, respectively.
The median multiples of book value and earnings for acquisitions of
Illinois banks with equity-to-asset ratios between 5.00% and 7.00%
were 1.83 and 20.16, respectively. For acquisitions of Illinois banks
with a ROAE between 9.00% and 12.00%, the median multiples were 1.45 and
14.62, respectively. For acquisitions of Illinois banks with deposits
between $80.0 and $110.0 million the median multiples were 1.84 and 17.66,
respectively. In the proposed transaction, BankCentral's
stockholders will receive an aggregate value between
$12,861,425 and $13,265,328 in Firstbank Common Stock
and cash when Firstbank Common Stock is valued at
$31.50 or greater as further defined in the Merger
Agreement. In addition, the board of directors of
BankCentral have the right to terminate the Merger
Agreement if the aggregate value to be received
by BankCentral's common stockholders is less than
$12,800,000. On February 12, 1997, Firstbank
Common Stock closed at $35.75. Using this closing
price to hypothetically value the consideration to be
received by BankCentral's stockholders, the
aggregate value would equal $13,265,328 and
represent a multiple of BankCentral's September 30,
1996 book value and a multiple of the BankCentral's
last twelve month earnings of 2.02 and 20.57
respectively.
Adjusted Net Asset Value Analysis
PBS reviewed BankCentral's balance sheet
data to determine the amount of material adjustments
required to the stockholder's equity of BankCentral
based on differences between the market value of
BankCentral's assets and their value reflected on
BankCentral's financial statements. PBS determined
that three adjustments were warranted. The
investment securities portfolio had depreciation of
approximately $3,000 after adjustment for income
taxes. PBS reflected a value of the non-interest
bearing demand deposits of approximately $3,866,000.
PBS also subtracted an adjustment to reflect
BankCentral's non compete agreement and intangible
assets of $1,642,000. The aggregate adjusted net
asset value of BankCentral was determined to be
$8,804,000.
Discounted Earnings Analysis
A dividend discount analysis was performed by PBS
pursuant to which a range of stand-alone values of
BankCentral was determined by adding (i) the present value
of estimated future dividend streams that BankCentral could
generate over a five-year period beginning in 1997 and ending
in 2001, and (ii) the present value of the "terminal
value" of BankCentral's earnings at the end of the year
2001. The "terminal value" of BankCentral's earnings at the
end of the five-year period was determined by applying a
multiple of 14.43 times the projected terminal year's
earnings. The 14.43 multiple represents the median price
paid as a multiple of earnings for all Illinois bank
transactions since 1990.
Dividend streams and terminal values were discounted
to present values using a discount rate of 12%. This rate
reflects assumptions regarding the required rate of return
of holders or buyers of BankCentral's common stock. The
aggregate value of BankCentral, determined by adding the
present value of the total cash flows, was $11,200,000.
In addition, using the five-year projection as a base, a
twenty-year projection was prepared assuming that an
annual growth rate of 5.0% and a consistent return on assets
of 1.00% would remain in effect for the entire period,
beginning in year eight. Dividends also were assumed to be
50% of income for all years. This long-term projection
resulted in an aggregate value of $9,936,000.
Specific Acquisition Analysis
PBS valued BankCentral based on an acquisition analysis
assuming a "break-even" earnings scenario to an acquiror as
to price, current interest rates and amortization of the
premium paid. Based on this analysis, an acquiring institution
would pay in aggregate $9,330,000, assuming they were willing
to accept no impact to their net income in the initial year.
This analysis was based on a funding cost of 7.5% adjusted
for taxes, amortization of the acquisition premium over 15
years and a 1996 last twelve month earnings level for
BankCentral of $645,000. This analysis was repeated assuming
a potential acquiror would attain non-interest expense
reductions of 10% in the transaction. Based on this analysis
an acquiring institution would pay in aggregate $11,396,000.
The Fairness Opinion is directed only to the question
of whether the consideration to be received by BankCentral's
stockholders under the Agreement is fair and equitable from a
financial perspective and does not constitute a recommendation
to any BankCentral stockholder to vote in favor of the Merger.
No limitations were imposed on PBS regarding the scope of
its investigation or otherwise by BankCentral or any of its
affiliates.
Based on the results of the various analyses described
above, PBS concluded that the consideration to be received
by BankCentral's stockholders under the Agreement is fair
and equitable from a financial perspective to BankCentral's
stockholders.
PBS will receive a fee in the amount of $17,500 for all
of its services performed in connection with the Merger,
including rendering the Fairness Opinion. In addition, the
Company has agreed to indemnify PBS and its directors,
officers and employees, from liability in connection with the
Merger, and to hold PBS harmless from any losses, actions,
claims, damages, expenses or liabilities related to any of PBS'
acts or decisions made in good faith and in the best interest
of BankCentral.
Firstbank's Reasons for the Merger
One aspect of Firstbank's strategic plan is continued
growth through acquisition. In an effort to increase market
share and create opportunities for the most significant cost
Page 25
savings, Firstbank has focused on opportunities in and around
areas in which it already operates. During the last five
years, Firstbank has spent significant time and effort
evaluating merger opportunities in the eastern half of
central Illinois. This region has been attractive to
Firstbank because of its growth potential and retail, small
and medium-sized business concentration. In addition to its
attractive market share and diverse client base, BankCentral
possesses the potential for continued growth in earnings
and presents the opportunity for operational efficiencies.
Terms of the Merger
Pursuant to the Merger Agreement, BankCentral will merge
with and into FBIC, a wholly owned subsidiary of Firstbank.
Upon consummation of the Merger, BankCentral's corporate
existence will terminate, and the surviving corporation shall
have the name BankCentral, Inc. Simultaneously with the
effectiveness of the Merger, each share of BankCentral Common
Stock issued and outstanding immediately prior to the Merger,
other than shares owned by BankCentral stockholders who
exercise their dissenters' rights under Delaware law, will
be cancelled and be converted into the right to receive cash
and/or shares of Firstbank Common Stock. The value of the
cash plus the Firstbank Common Stock to be received by
BankCentral stockholders shall not be more than $13,265,328
and, depending upon the value of Firstbank Common Stock at
closing, could be substantially less; provided, however, that
BankCentral has the right to terminate the Merger Agreement,
without penalty, if the total consideration is less than
$12,800,000. BankCentral stockholders may elect to exchange
their BankCentral Common Stock for cash, Firstbank Common
Stock, or a combination of both. Notwithstanding the
elections of the BankCentral stockholders, the total cash
consideration shall not exceed $6,500,000 and the total
number of shares of Firstbank Common Stock to be issued
shall not exceed 214,200. See "THE MERGER --Exchange Agent."
No fractional shares of Firstbank Common Stock will be
issued in the Merger. In lieu thereof, stockholders of
BankCentral who would otherwise be entitled to receive
fractional shares will receive cash in an amount to be
determined by multiplying the fractional share interest to
which such holder would otherwise be entitled by the average
price of a share of Firstbank Common Stock as determined by
the terms of the Merger Agreement. See "THE MERGER-Fractional
Shares."
The Merger Agreement may be amended only in writing and
signed by each of the parties to the Merger Agreement. If the
stockholders of BankCentral approve the Merger Agreement, after
such approval, no amendments may be made to the Merger Agreement
that would have an adverse effect upon the stockholders of
BankCentral.
The Merger Agreement may be terminated at any time prior to
the Effective Date by (i) mutual consent of the Boards of
Directors of all parties to the Merger Agreement; (ii) by the
Board of Directors of any party to the Merger Agreement at any
time after May 31, 1997, if the Merger Agreement has not been
consummated by that date; (iii) by the Board of Directors of any
party to the Merger Agreement if any federal and/or state
regulatory agency whose approval is required for the consummation
of the Merger Agreement denies approval of the transactions
contemplated by the Merger Agreement; (iv) by the Board of
Directors of Firstbank or of BankCentral in the event of a
material breach by the other of any representation, warranty,
or agreement in the Merger Agreement which is not cured within
the period given to cure such breach as set forth in the Merger
Agreement; (v) by Firstbank if BankCentral or CNB of Mattoon
engage in certain activity relating to the possibility of a
merger with any party other than Firstbank; (vi) by BankCentral
Page 26
if the Total Consideration (as defined in the Merger Agreement)
is less than $12,800,000; (vii) by Firstbank if BankCentral
fails to provide to Firstbank certain environmental reports
with respect to real property owned by BankCentral, or if
BankCentral fails to remediate any environmental defects
disclosed by such reports at an aggregate cost not to exceed
$50,000; or (viii) by Firstbank if certain loan participations
owned, and a letter of credit issued, by CNB of Mattoon
have not been sold and cancelled, respectively, prior to the
closing of the Merger.
The Merger Agreement additionally provides that in the event
that BankCentral shall enter into an agreement with any third
party providing for a merger or certain other business
combinations and the entry of such agreement occurs during a
period within nine months of (i) failure of the Merger Agreement
to be approved by the stockholders of BankCentral, (ii)
termination of the Merger Agreement by Firstbank for material
breach, or (iii) failure of certain closing conditions to
occur, then BankCentral shall pay to Firstbank as liquidated
damages $1,250,000, plus all reasonable out-ofpocket expenses
incurred by Firstbank in connection with the transactions
contemplated by the Merger Agreement.
Exchange Agent and Election Procedures
Upon the closing date of the Merger ("Closing Date"), the
total amount of the shares of Firstbank Common Stock to be issued
and, along with the cash consideration, will be deposited with
Central Bank, Fairview Heights, Illinois, which will act as
exchange agent (the "Exchange Agent"). The Exchange Agent will
hold the cash and shares of Firstbank Common Stock for further
distribution to the stockholders of BankCentral.
The Merger Agreement provides that each holder of
BankCentral Common Stock may, by properly completing and
delivering to the Exchange Agent a Form of Election as described
below, indicate the number of shares of BankCentral Common Stock
to be converted into the right to receive cash, shares of
Firstbank Common Stock or a combination of both. On the same
date that notice is sent to stockholders of BankCentral of
the Special Meeting of Stockholders, Firstbank will cause to
be mailed to each stockholder of BankCentral a Form of Election
that will provide holders of BankCentral Common Stock
with instructions for the transmittal of certificates representing
their BankCentral Common Stock to the Exchange Agent and for
choosing among the types of consideration offered to them
pursuant to the Merger Agreement. To be effective, completed Forms
of Election must be mailed or delivered to the Exchange Agent
by 5:00 p.m. on the date which is two business days prior to the
Closing Date. Any stockholder of BankCentral who does not submit
a properly completed Form of Election prior to this deadline
will be deemed to have elected to receive all cash for his or her
shares of BankCentral Common Stock.
Notwithstanding the Forms of Election, however, in no event
shall the cash payable or the Firstbank Common Stock issuable
to stockholders of BankCentral exceed 49% and 51%, respectively,
of the Total Consideration (cash and Firstbank Common Stock)
payable to BankCentral's stockholders. Accordingly, if
holders of BankCentral Common Stock elect to receive an
aggregate amount of cash in excess of such 49% limit, then the
amount of cash that would have otherwise been payable pursuant
to such Forms of Election will be reduced on a pro rata basis
among all of BankCentral's stockholders so that the total amount
of cash paid to BankCentral's stockholders will not exceed 49%
of the Total Consideration. Likewise, if holders of BankCentral
Common Stock elect to receive an aggregate amount of Firstbank
Page 27
Common Stock with a value in excess of such 51% limit, then the
amount of Firstbank Common Stock that would have otherwise been
issuable pursuant to such Forms of Election will be reduced on a
pro rata basis among all of BankCentral's stockholders so that
the total amount of Firstbank Common Stock issuable to
BankCentral's stockholders will not exceed 51% of the Total
Consideration.
No later than five business days after the Closing Date,
Firstbank will cause the Exchange Agent to deliver to each
holder of BankCentral Common Stock who previously had
submitted an effective Form of Election accompanied by the
stock certificates representing his or her surrendered shares
of BankCentral Common Stock the amount of cash and/or Firstbank
Common Stock into which such shares of BankCentral Common Stock
were converted as a result of the Merger.
Fractional Shares
No fractional shares of Firstbank Common Stock will be
issued pursuant to the Merger. In lieu thereof, each holder
of BankCentral Common Stock who would otherwise be entitled
to receive fractional shares will receive cash in an amount to
be determined by multiplying the fractional share interest to
which such holder would otherwise be entitled by the average
price of a share of Firstbank Common Stock as determined by the
terms of the Merger Agreement. Such amounts received in lieu
of fractional share interests may vary from the market value of
such fractional shares as of the Closing Date. Cash received
in lieu of a fractional share will be treated, for federal
income tax purposes, as cash received in redemption of such
fractional share interest. The receipt of such cash should cause
the recipient to recognize capital gain or loss, in an amount
equal to the difference between the amount of cash received and
the portion of such holder's adjusted tax basis allocable to
the fractional share interest. See "THE MERGER -Certain Federal
Income Tax Consequences."
Conduct of Business Prior to the Merger
The Merger Agreement provides that Firstbank and BankCentral
will take or refrain from taking certain actions prior to the
Merger. In general, Firstbank and BankCentral have agreed that
they will continue to conduct their respective businesses in the
usual, regular, and ordinary course in substantially the same
manner that they have been conducted.
During the period from the date of the Merger Agreement to
the Closing Date, BankCentral has agreed it will not, and will
not cause, vote in favor of, or otherwise authorize, approve, or
permit its subsidiary, CNB of Mattoon, to:
(a) Declare and/or pay any dividends on its outstanding
shares of capital stock, other than dividends from CNB of Mattoon
to BankCentral;
(b) Enter into or amend any employment, severance, or
similar agreements or arrangements with any director, officer,
key employee, or consultant; provided, however, that BankCentral
may engage such person or persons, who may be directors of
BankCentral, to perform a due diligence investigation of
Firstbank and its subsidiaries and may engage an investment
banker or other financial consultant to issue a fairness opinion
to BankCentral with respect to the fairness to BankCentral's
stockholders of the Merger from a financial point of view;
Page 28
(c) Authorize, recommend, propose, or announce an intention
to authorize, recommend, or propose, or enter into an agreement
in principle with respect to, any merger, consolidation, or
acquisition of a material amount of assets or securities, any
disposition of a material amount of assets or securities, other
than as may be necessary pursuant to the exercise of the
fiduciary duties of the Board of Directors of BankCentral or CNB
of Mattoon, or release or relinquish any material contract rights
not in the ordinary course of business;
(d) Propose or adopt any amendments to the certificate of
incorporation of BankCentral, the articles of association of CNB
of Mattoon or any of their respective by-laws;
(e) Issue any shares of capital stock or effect any stock
split or otherwise change its capitalization as it existed as of
December 20, 1996, except pursuant to any exercisable stock
options;
(f) Except as set forth in the employment agreement of Mr.
L. Dean Clausen, grant, confer, or award any options, warrants,
conversion rights, or other rights not existing on the date
hereof to acquire any shares of its capital stock;
(g) Purchase or redeem any shares of its capital stock;
(h) Enter into or increase any loan or credit commitment
(including standby letters of credit), purchase securities, or
invest or agree to invest in any person or entity in an amount in
excess of $100,000 without first consulting with Firstbank;
provided, however, this shall not prohibit CNB of Mattoon from
honoring any contractual and legally binding obligation in
existence on the date of this Agreement, it being understood that
"consulting with" in the context of this paragraph means advising
sufficiently in advance of any proposed action to allow Firstbank
a reasonable opportunity to offer a (non-binding) responsive
opinion;
(i) Agree in writing or otherwise to take any of the
foregoing actions or engage in any activity, enter into any
transaction, or take or omit to take any other act which would
make any of BankCentral's representations and warranties untrue
or incorrect in any material respect if made anew after engaging
in such activity, entering into such transaction, or taking or
omitting such other act;
(j) Directly or indirectly (including through its officers,
directors, employees, or other representatives) initiate, solicit,
or encourage any discussions, inquiries, or proposals with any
party (other than Firstbank and FBIC) relating to the disposition
of any significant portion of the business or assets of
BankCentral or CNB of Mattoon, or the acquisition of the capital
stock (or rights or options exercisable for, or securities
convertible or exchangeable into, capital stock) of BankCentral
or CNB of Mattoon, or the merger of BankCentral or CNB of
Mattoon, with any person, corporation, partnership, business
trust, or other entity (each such transaction being referred to
as an "Acquisition Transaction"), or provide any such person with
information (other than information required to be given under
applicable law, rule, or regulation) or assist or negotiate with
any such person with respect to an Acquisition Transaction other
than as may be necessary pursuant to the exercise of the fiduciary
duties of the Board of Directors of BankCentral or CNB of Mattoon;
(k) Take back or commence foreclosure on any property; or
Page 29
(l) Take any actions, or fail to take any actions which
alone, or together with any other action or inaction, shall
create, alter, or eliminate any rights, benefits, obligations,
or liabilities of any person (including, but not limited to
the participants, beneficiaries, BankCentral, CNB of Mattoon,
or, after the Merger, Firstbank or FBIC) with respect to any
employee benefit plans or policies.
All parties to the Merger Agreement have agreed that if
there is any material adverse change in their business or
condition, they will notify the other of such change. Each of
the parties to the Merger Agreement has also agreed to allow the
other parties to review its books and records prior to the
Closing Date.
Management and Operations of BankCentral After the Merger
On the Closing Date of the Merger, BankCentral will be
merged with and into FBIC and the separate corporate existence of
BankCentral will cease. FBIC's Board of Directors and officers
will be the board and officers of the surviving corporation after
the Effective Date. The surviving corporation shall have the
name of BankCentral, Inc. The operations of BankCentral's sole
subsidiary, CNB of Mattoon, are expected to continue with no
material changes following the Closing.
As a result of the Merger, Firstbank will own all of the
issued and outstanding stock of the surviving corporation, to be
known as BankCentral, Inc., and will indirectly own all of the
outstanding stock of CNB of Mattoon.
Conditions to the Merger
The Merger Agreement provides that consummation of the
Merger is subject to certain conditions, unless any such
condition is waived by the party(ies) in whose favor the
condition exists, including, but not limited to, the following:
(1) The Merger Agreement shall have been validly approved by
a vote of stockholders owning a majority of the issued
and outstanding shares of BankCentral Common Stock.
(2) BankCentral, Firstbank and FBIC shall have complied with
their respective agreements, covenants, and conditions
and their respective representations and warranties
shall have been confirmed as set forth in the Merger
Agreement.
(3) The Merger Agreement and the transactions contemplated
thereby shall have been approved by the Federal Reserve
Board and any other federal and/or state regulatory
agencies necessary for the consummation of the Merger.
(4) The Registration Statement (of which this Proxy
Statement/Prospectus forms a part) shall have been
declared effective and shall not be subject to a
stop order or threatened stop order.
Page 30
(5) Neither BankCentral, Firstbank nor FBIC shall be subject
to any order, decree, or injunction of a court or agency
of competent jurisdiction which enjoins or prohibits the
consummation of the Merger.
(6) There shall have been no material adverse change since
December 20, 1996, in the business, financial condition,
or results of operations of Firstbank and its
subsidiaries, taken as a whole, or BankCentral and its
subsidiary, taken as a whole, other than changes in
banking laws or regulations, or interpretations thereof,
that affect the banking industry generally or changes in
the general level of interest rates.
(7) Each of BankCentral and Firstbank shall have received
from legal counsel for the other party an opinion of
such counsel relating to certain matters as set forth
in the Merger Agreement.
(8) BankCentral shall have received an opinion from its tax
advisor to the effect that the receipt of Firstbank
Common Stock by BankCentral stockholders shall not
result in a gain or loss for income tax purposes.
(9) Firstbank shall have received from designated
stockholders of BankCentral a Stockholder's Undertaking
Agreement.
(10) All BankCentral Insiders who are "affiliates" (as that
term is used in Rules 144 and 145 of the Securities Act,
as defined below) of BankCentral shall have executed
and delivered to Firstbank affiliate agreements in the
form attached as an Exhibit to the Merger Agreement
and BankCentral shall have used its best efforts to
obtain such affiliate agreements from all other
affiliates of BankCentral.
(11) BankCentral shall have delivered to Firstbank all
Phase I Environmental Site Assessments requested by
Firstbank and all remediation required under the Merger
Agreement shall have been completed.
(12) BankCentral and CNB of Mattoon shall have received
repayment in full of any and all balances due on the
loan participation agreements with Bank Champaign
described in the Merger Agreement.
(13) BankCentral and CNB of Mattoon shall have used their
best efforts to sell on commercially reasonable terms
all of the assets in CNB of Mattoon's FHA Title I
Portfolio and shall have provided monthly progress
reports on the sale of such assets to Firstbank.
(14) The Letter of Credit described in the Merger Agreement
shall have been surrendered to CNB of Mattoon without
being drawn upon prior to the consummation of the
Merger.
(15) Firstbank and FBIC shall have obtained any and all
material permits, authorizations, consents, waivers
and approvals required for the lawful consummation of
the Merger.
Page 31
Resales of Firstbank Common Stock
All shares of Firstbank Common Stock received by stockholders
of BankCentral as a result of the Merger will be transferable
without further restriction or registration under the Securities
Act of 1933, as amended, (the "Securities Act") except those
shares issued to any persons who will be "affiliates" of Firstbank
after completion of the Merger or who have been "affiliates" of
BankCentral prior to the Merger, as such term is defined and used
in Rules 144 and 145 promulgated under the Securities Act. Only
those persons deemed to control BankCentral, directly or
indirectly, through one or more intermediaries are affiliates of
BankCentral. Each affiliate of BankCentral who desires to resell
Firstbank Common Stock received in the Merger must sell such stock
either pursuant to an effective registration statement under the
Securities Act, as amended, or in accordance with an applicable
exception, such as the application provisions of Rule 145(d) of
the Securities Act. It is a condition of consummation of the
Merger that each BankCentral stockholder who is deemed to be an
"affiliate" of either Firstbank or BankCentral has entered into a
written agreement to the effect that such person agrees not to
sell any shares of Firstbank Common Stock except upon compliance
with the Securities Act and the rules and regulations
promulgated thereunder.
Federal Income Tax Consequences of the Merger
The discussion set forth below is a general description of
the material federal income tax consequences of the Merger to
certain BankCentral stockholders and does not purport to be a
complete analysis or listing of all potential tax considerations
or consequences relevant to a decision whether to vote for the
approval of the Merger. The discussion does not address all aspects
of federal income taxation that may be applicable to BankCentral
stockholders subject to special federal income tax treatment
including (without limitation) foreign persons, insurance companies,
tax-exempt entities, retirement plans, dealers in securities, and
persons who acquired their BankCentral Common Stock pursuant to
the exercise of employee stock options or otherwise as compensation.
The discussion addresses neither the effect of any applicable state,
local or foreign tax laws, nor the effect of any federal tax laws
other than those pertaining to the federal income tax. IN VIEW OF
THE INDIVIDUAL NATURE OF FEDERAL INCOME TAX CONSEQUENCES, EACH
BANKCENTRAL STOCKHOLDER IS URGED TO CONSULT HIS/HER OWN TAX
ADVISOR TO DETERMINE THE SPECIFIC TAX CONSEQUENCES OF THE MERGER
TO HIM/HER.
The discussion is based upon the Code, regulations and
rulings now in effect or proposed thereunder, current
administrative rulings and practices, and judicial precedent, all
of which are subject to change. Any such change, which may or
may not be retroactive, could alter the tax consequences to
stockholders of BankCentral discussed herein. The discussion is
also based upon certain assumptions regarding the factual
circumstances that will exist at the Closing Date of the Merger,
and thereafter, including certain representations to be made
by BankCentral, Firstbank, and FBIC. This discussion assumes
that stockholders of BankCentral hold their BankCentral Common
Stock as a capital asset within the meaning of Section 1221 of
the Code. If any of these factual assumptions or representations
are inaccurate, the tax consequences of the Merger could differ
from those described herein.
Page 32
The Merger is intended to constitute a "reorganization" for
federal income tax purposes under Section 368(a)(1)(A) of the
Code, by reason of the application of Section 368 (a)(2)(D) of the
Code, with the following federal income tax consequences:
(1) BankCentral stockholders will recognize no gain or loss
as a result of the exchange of their BankCentral Common
Stock solely for shares of Firstbank Common Stock.
(2) The aggregate adjusted tax basis of the shares of
Firstbank Common Stock received by each BankCentral
stockholder in the Merger will be equal to the
aggregate adjusted tax basis of the shares of BankCentral
Common Stock surrendered.
(3) The holding period of the shares of Firstbank Common
Stock received by each BankCentral stockholder in the
Merger (including any fractional share of Firstbank
Common Stock deemed to be received) will include the
holding period of the shares of BankCentral Common Stock
exchanged therefor.
(4) A BankCentral stockholder who receives cash will realize
gain or loss for federal income tax purposes (determined
separately as to each block of BankCentral Common Stock
exchanged) in an amount equal to the difference between
(x) the amount of cash received by such stockholder, and
(y) such stockholder's tax basis for the shares of
BankCentral Common Stock surrendered in exchange
therefor, provided that the cash payment does not have
the effect of the distribution of a dividend. Any such
gain or loss will be recognized for federal income tax
purposes and will be treated as capital gain or loss.
In general, if a BankCentral stockholder does not
actually or constructively own any Firstbank Common
Stock after the Merger, the distribution will not have
the effect of the distribution of a dividend. However,
if the cash payment does have the effect of the
distribution of a dividend, the amount of taxable
income recognized generally will equal the amount of cash
received; such income generally will be taxable as a
dividend; and no loss (or other recovery of such
stockholder's tax basis for the shares of BankCentral
Common Stock surrendered in the exchange) generally will
be recognized by such stockholder. The determination
of whether a cash payment has the effect of the
distribution of a dividend will be made pursuant to the
provisions and limitations of Section 302 of the Code,
taking into account the constructive stock ownership
rules of Section 318 of the Code.
BankCentral's obligations to consummate the Merger are subject
to the condition that it receive an opinion of its tax advisor
to the effect that the receipt of the Firstbank Common Stock by
BankCentral stockholders will not result in a gain or loss for
tax purposes. Such opinion will be subject to the conditions and
assumptions stated therein and will also rely on various
representations made by BankCentral, certain stockholders of
BankCentral, and Firstbank. An opinion of a tax advisor, unlike
a private letter ruling from the Internal Revenue Service (the
"Service"), has no binding effect on the Service. The Service
could take a position contrary to counsel's opinion and, if the
Page 33
matter were litigated, a court may reach a decision contrary to
the opinion. The Service is not expected to issue a ruling on
the tax effects of the Merger, and no such ruling has been
requested and no such ruling has been requested. Firstbank and
BankCentral have not sought any opinion with respect to state or
local tax consequences of the Merger to BankCentral stockholders.
THE FOREGOING IS A GENERAL DISCUSSION OF THE MATERIAL FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER AND IS INCLUDED FOR GENERAL
INFORMATION ONLY. THE FOREGOING DISCUSSION DOES NOT TAKE INTO
ACCOUNT THE PARTICULAR FACTS AND CIRCUMSTANCES OF EACH BANKCENTRAL
STOCKHOLDER'S TAX STATUS AND ATTRIBUTES. AS A RESULT, THE FEDERAL
INCOME TAX CONSEQUENCES ADDRESSED IN THE FOREGOING DISCUSSION
MAY NOT APPLY TO EACH BANKCENTRAL STOCKHOLDER. IN VIEW OF
THE INDIVIDUAL NATURE OF INCOME TAX CONSEQUENCES, EACH BANKCENTRAL
STOCKHOLDER SHOULD CONSULT HIS/HER OWN TAX ADVISOR REGARDING THE
SPECIFIC TAX CONSEQUENCES OF THE MERGER TO SUCH STOCKHOLDER,
INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND
OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL
AND OTHER TAX LAWS.
Comparison of Rights of Holders of BankCentral Common Stock and
Holders of Firstbank Common Stock
Upon consummation of the Merger, holders of BankCentral
Common Stock who receive Firstbank Common Stock will become
stockholders of Firstbank, and their rights will be governed by
the Certificate of Incorporation and Bylaws of Firstbank, the
provisions of which differ from the Certificate of Incorporation
and Bylaws of BankCentral. The material differences in these
provisions are discussed below.
State Corporate Law
Changes in Control. Firstbank's Certificate of Incorporation
(the "Certificate") and its Bylaws ("Bylaws") have certain
provisions described below intended to encourage any person
interested in acquiring Firstbank to obtain the approval of its
Board of Directors and to discourage takeovers by persons intending
to eliminate the remaining stockholders' interest in Firstbank
through a reorganization. Firstbank believes that, in such a
situation, the ability of the Board of Directors to represent
effectively the interests of its stockholders will thereby be
enhanced. However, a change in control of Firstbank which is
opposed by the Board of Directors could be made more difficult by
these provisions, even if such a change were desired by a majority
of the stockholders of Firstbank. Firstbank is not aware of any
person who intends to acquire Firstbank or seek a change in control
of Firstbank. BankCentral has some comparable provisions in its
Certificate of Incorporation and Bylaws.
Authorized Stock. The Certificate of Incorporation of
Firstbank authorizes 20,000,000 shares of Firstbank Common stock,
par value $1.00 per share. As of September 30, 1996, 10,289,717
shares of Firstbank Common Stock were issued and outstanding.
Firstbank is also authorized to issue up to 1,000,000 shares of no
par preferred stock from time to time (without stockholder action)
Page 34
in one or more series and to fix for each series, by resolution of
the Board of Directors, the number of shares to be issued, the
rights of such shares as to voting, dividend, redemption
(including sinking fund provisions), liquidation, exchange, and
conversion. No shares of preferred stock of Firstbank are issued
and outstanding. Other than any rights or preferences that may be
granted to preferred stockholders in the future, the Firstbank
Common Stock holders are entitled to receive, ratably, all
dividends and distributions. No right of redemption or conversion
exists with respect to the Firstbank Common Stock.
BankCentral is authorized to issue 350,000 shares of Common
Stock, par value $1.00 per share. As of September 30, 1996,
220,109 shares of BankCentral Common Stock were issued and
outstanding. BankCentral is also authorized to issue 50,000
shares of preferred stock, par value $.01 per share, none of
which are outstanding.
Stockholders of neither Firstbank nor BankCentral have any
pre-emptive rights with respect to any of the authorized but
unissued shares of Firstbank Common Stock or BankCentral Common
Stock, respectively.
Issuance of shares of preferred stock could have an impact on
the voting rights of the holders of Firstbank Common Stock by the
creation of series voting rights on particular matters.
The issuance of shares of preferred stock with conversion rights
which are convertible into shares of Firstbank Common Stock could
increase the potential number of shares of Firstbank Common Stock
outstanding. It is probable that if shares of preferred stock are
issued they would be preferred to the Firstbank Common Stock
as to dividends and distributions in the event of liquidation. In
addition, Firstbank's Board of Directors may provide that the
holders of any series of preferred stock will be entitled, in
addition to their preferential rights, to participate with the
holders of Firstbank Common Stock in dividends and in distributions
in liquidation.
Although Firstbank has no arrangements, agreements,
understandings, or plans at the present time for the issuance or
use of the shares of preferred stock, Firstbank believes that the
availability of such shares will provide Firstbank with increased
flexibility in structuring possible future financings and
acquisitions and in meeting other corporate needs which might
arise. The authorized shares of preferred stock are available
for issuance at such times and for such purposes as the Board of
Directors may deem advisable without further action by the
stockholders, except as may be required by law or regulatory
authorities.
In the event of a proposed merger, tender offer, or other
attempt to gain control of Firstbank of which management does not
approve, it might be possible for the Board of Directors to
authorize the issuance of a series of preferred stock with rights
and preferences which could impede the completion of such a
transaction and therefore deter a future takeover attempt. The
Board of Directors of Firstbank does not intend to issue any
preferred stock except on terms that the Board deems to be in the
best interests of Firstbank and its then existing stockholders.
Stockholder Action Without a Meeting and Power to Call
Special Meetings. The Certificate of Firstbank provides that any
corporate action which is permitted or required to be taken by
stockholders may be taken without a meeting by written consent of
not less than a majority of all of the stock entitled to vote
upon the action if a meeting were held to approve such action.
However, the written consent of stockholders having not less than
the minimum percent of shares required by Delaware law must be
Page 35
obtained and prompt notice of any action taken without a meeting
must be given to all stockholders. The Bylaws of Firstbank
provides that special meetings of the stockholders may be called
by the Board of Directors of Firstbank or by any officer
instructed by the Directors to call such meeting.
BankCentral's Bylaws provide that the stockholders may take
action only at a duly called annual or special meeting. Special
meetings of the stockholders of BankCentral may be called at any
time by the Chairman or President, by a majority of the Board of
Directors or by the holders of at least twentyfive percent (25%) of
all of the issued and outstanding shares entitled to vote.
Board of Directors. The Board of Directors of Firstbank is
divided into three classes and at each annual meeting of
stockholders one class of directors is elected for a term of
three years. Each class must be as nearly equal in number as is
possible. Under its Certificate, vacancies occurring on the
Board of Directors of Firstbank may be filled by a majority vote
of the remaining directors for the remainder of the full terms.
The classification system in electing directors tends to maintain
the incumbency of the existing directors and makes it more
difficult for stockholders to change a majority of the directors.
A holder of a majority of the shares of voting stock of Firstbank
may need two or three years to replace a majority of the directors.
The Bylaws of Firstbank authorize the Board of Directors by
a majority vote of the full Board to vary the number of directors
up to a maximum of 25. The currently established number is 10.
The authorized number of directors may be changed by resolution
adopted by the Board of Directors.
The Certificate of Firstbank provides for cumulative voting
in the election of directors. Cumulative voting gives each
stockholder voting in an election of directors the number of
votes equal to the number of directors to be elected multiplied
by the number of shares owned by the stockholder, and each
stockholder may cast such votes for one nominee or distribute
them in such a manner as he or she sees fit among any number of
nominees. Therefore, an acquisition of more than a majority of
Firstbank Common Stock may be necessary to completely replace the
Board of Directors.
The Certificate of Firstbank provides that nomination of
directors by stockholders must be in writing and be delivered or
mailed to the Secretary of Firstbank generally no less than 14
days prior to any meeting of stockholders called for the election
of directors; provided, however, that if less than 21 days notice
of such meeting is given to stockholders, then such nomination
must be given to the Secretary not later than the close of the
seventh day following the day on which notice of the meeting is
mailed to stockholders. The notification must contain the
information specified in the Certificate. Nominations by
stockholders not made in accordance with the Certificate shall be
disregarded.
The Bylaws of BankCentral provide that the number of directors
shall be not less than five nor more than ten. The Bylaws also
provide that any vacancies shall be filled by election by the
stockholders except that in the interim between stockholder
meetings, vacancies may be filled by an affirmative vote of the
majority of the directors then in office, and the directors so
elected may hold office until the next annual meeting at which
their term expires.
Page 36
The certificate of incorporation of each of Firstbank and
BankCentral provides for the elimination of the liability of
directors for monetary damages for breach of fiduciary duties, as
permitted by Section 102(b)(7) of the Delaware General
Corporation Law (the "Delaware Code").
Stockholder Vote Required for Bylaws Amendments. The
Certificate of Firstbank allows the Board of Directors by a
majority vote of the full Board to adopt, amend, or repeal the
Bylaws. Approval of the holders of at least 70 percent of the
voting power of then outstanding voting stock is required for
stockholders to adopt, amend, or repeal the Bylaws. This
provision is intended primarily to deter changes in the Bylaws to
reduce the authority of the Board of Directors, thereby
circumventing the effect of provisions for a classified Board of
Directors. It would, however, apply to all Bylaw amendments,
regardless of subject matter. This provision would enable
holders of more than 30 percent of the voting power to prevent an
amendment to the Bylaws by the stockholders even if it were
favored by the holders of a majority of the voting stock.
The Bylaws of BankCentral may be amended or repealed and new
Bylaws may be adopted by a majority vote of the Board of
Directors, or by the affirmative vote of not less than 70% of the
issued and outstanding shares of BankCentral Common Stock.
Business Combinations. Section 203 of the Delaware Code
requires that certain types of business combinations (including
mergers, combinations, and sales or other dispositions of
significant assets of a corporation) may not be accomplished with
an interested stockholder (generally, any person holding
15 percent or more, directly or indirectly through affiliates or
associates, of the issued and outstanding shares of voting stock
of the corporation) within 3 years of the date the person became
an interested stockholder unless: (i) prior to such date
the Board of Directors of the corporation approved of the business
combination or transaction which resulted in the stockholder
becoming an interested stockholder; or (ii) upon consummation of
the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at
least 85 percent of the voting stock (excluding shares of stock
owned by persons who are both directors and officers, and by
certain employee stock plans); or (iii) on or subsequent to such
date, the business combination is approved by the Board of
Directors and by the affirmative vote of stockholders holding at
least twothirds of the issued and outstanding voting stock of
the corporation. Section 203 of the Delaware Code applies to
Firstbank.
Stockholder Vote Required to Amend or Repeal Certain
Provisions of the Certificate. The provisions of the Certificate
of Firstbank with respect to the requirement for stockholder
action to take place at a meeting, calling special meetings,
removal of directors, the classification of the Board of
Directors, and the provision relating to amendment of the
Certificate are subject to repeal or amendment only upon approval
of the holders of at least 70 percent of the voting stock. This
provision would prevent holders of less than 70 percent of the
voting power from circumventing any or all of the foregoing
provisions by amending the Certificate to delete or modify one or
more of them. The amendment of BankCentral's Certificate of
Incorporation requires the affirmative vote of at least 70% of
the issued and outstanding shares of BankCentral Common Stock.
Page 37
Dissenters' Rights
Each stockholder of BankCentral has the right to demand an
appraisal of the fair value of his or her shares of BankCentral
Common Stock by the Court of Chancery of the State of Delaware,
and to receive the appraised value of such shares in cash if the
stockholder follows procedures set forth under Delaware law and
summarized below.
Under Section 262 of the Delaware Code, a BankCentral
stockholder seeking to exercise his or her appraisal rights must
(1) deliver to BankCentral prior to the vote on the Agreement
written demand for appraisal of his or her shares of BankCentral
Common Stock and (2) not vote in favor of or consent in writing
to the Agreement at the Special Meeting. If a stockholder fails
to file a demand for appraisal or votes in favor of the
Agreement, he/she will be deemed to have waived his/her appraisal
rights. A stockholder who perfects his/her appraisal rights by
delivering a demand for appraisal prior to the vote and by not
voting in favor of the Agreement may withdraw his or her demand
for appraisal and accept the terms of the Agreement for a period
of 60 days after the Closing Date.
If the Merger is approved and consummated, within ten days
after the Closing Date, Firstbank will notify each BankCentral
stockholder who has perfected his or her appraisal rights of the
date upon which the Merger was consummated. Within 120 days of
the Closing Date, each stockholder who has perfected his or her
appraisal rights may request from BankCentral a statement setting
forth the aggregate number of shares of BankCentral Common Stock
owned by all BankCentral stockholders who have perfected their
appraisal rights. Such written statement must be mailed by
BankCentral within ten days after receipt of a stockholder's
written request therefor.
Within 120 days after the Closing Date, BankCentral or any
stockholder who has perfected his or her appraisal rights may
file a petition in the Court of Chancery demanding a
determination of the value of the stock of all stockholders of
BankCentral who have perfected their appraisal rights. If the
petition is filed by stockholders, BankCentral will be served
with a copy of such petition and must, within 20 days of such
service, file in the office of the Registrar in Chancery where
the petition was filed a duly verified list of the names and
addresses of the shareholders who have demanded payment for the
value of the shares of BankCentral Common Stock and with whom
BankCentral has not reached an agreement as to such value. If
the petition is filed by BankCentral, such duly verified list of
stockholders must accompany the filing. If ordered by the court,
the Registrar of Chancery will give notice, by certified or
registered mail, of the time and place fixed for hearing on the
petition to BankCentral and to each stockholder on the list of
stockholders. The notice of time and place of hearing will also
be published in one or more newspapers of general circulation at
least one week prior to the hearing.
At the hearing on such petition, the court shall first
determine which of the stockholders of BankCentral have complied
fully with the appraisal rights provisions of the Delaware Code
and have become entitled to appraisal rights. The court may also
require all stockholders who demand appraisal to present their
stock certificates to the Registrar of Chancery for the placement
of a notation thereon as to the pendency of the appraisal
proceedings. After determination of the stockholders entitled to
an appraisal, the court will appraise the fair value of the
shares, exclusive of any element of value arising from the
accomplishment or expectation of the Merger. The
Page 38
court may also determine a fair rate of interest to be paid on the
fair value of the shares, considering, among other factors, the
rate of interest which BankCentral would have paid on borrowed
money during the pendency of the appraisal proceedings.
After appraisal of the fair value of these shares, the court
will direct BankCentral to pay such amount, with interest, if any,
to the stockholders entitled to such payment. Payment will be
made only upon the surrender to BankCentral of stock certificates
evidencing shares of BankCentral Common Stock. The costs of the
appraisal proceeding will be determined by the court and such
costs will be allocated to the parties in a manner deemed to be
equitable by the court. Upon application of a stockholder, the
court may order all or a portion of the expenses incurred by the
stockholders in connection with the appraisal proceedings,
including reasonable attorneys' fees and the fees and expenses
of experts, to be charged pro rata against the value of all shares
subject to appraisal.
THE ABOVE SUMMARY OF THE PROVISIONS REGARDING STOCKHOLDERS'
APPRAISAL RIGHTS UNDER THE DELAWARE CODE IS QUALIFIED IN ITS
ENTIRETY BY THE TEXT OF SECTION 262 OF THE DELAWARE CODE. THE
TEXT OF SECTION 262 IS ATTACHED HERETO AS EXHIBIT B.
STOCKHOLDERS OF BANKCENTRAL INTENDING TO EXERCISE APPRAISAL
RIGHTS ARE URGED TO SEEK THE ADVICE OF COUNSEL. FAILURE TO
COMPLY WITH ALL REQUIREMENTS OF SECTION 262 OF THE DELAWARE CODE
WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Stockholders' Undertaking Agreements
As a precondition to Firstbank entering into the Merger
Agreement, certain stockholders of BankCentral entered into
Stockholders' Undertaking Agreements. As of the Record Date,
these individuals beneficially owned 68,279 shares of BankCentral
Common Stock, constituting approximately 29.9 percent of the
outstanding shares of BankCentral Common Stock.
The Stockholders' Undertaking Agreements provide that, with
respect to each stockholder of BankCentral entering into the
agreements: (i) he or she will not, without the prior written
consent of Firstbank, enter into any negotiations, discussions,
agreements, or understandings, or entertain any proposals, for
the purpose of merging or consolidating BankCentral or any of its
subsidiaries with any other entity or causing BankCentral or any
of its subsidiaries to sell its assets or any shares of its
capital stock to any other person or to issue or grant any
options or rights to purchase shares of any class of its stock;
(ii) he or she will not with the prior written consent of
Firstbank, enter into any negotiations, discussions, agreements,
or undertakings, or entertain any proposals, for the purpose of
selling any of his or her shares of stock of BankCentral;
and (iii) he or she will vote all shares of BankCentral he or
she owns or controls, directly or indirectly, in favor of the
transactions described in the Agreement and will use his or her
best efforts to encourage the remaining stockholders of
BankCentral to vote his or her stock of BankCentral in a similar
manner.
Page 39
PRO FORMA CONDENSED COMBINING
FINANCIAL STATEMENTS
(UNAUDITED)
The following financial information is set forth at the pages
indicated: Page
Pro Forma Condensed Combining
Balance Sheet of Firstbank of Illinois Co.
and Subsidiaries and BankCentral
Corporation and Subsidiary as of
September 30, 1996 50
Pro Forma Condensed Combining Statements
of Income of Firstbank of Illinois Co.
and Subsidiaries and BankCentral
Corporation
and Subsidiary:
For the year ended December 31, 1995 51
For the nine month period ended September 30, 1996 52
Notes to Pro Forma Condensed Combining
Financial Statements 53
The unaudited pro forma condensed combining
balance sheet as of September 30, 1996, gives
effect to the Merger between Firstbank and BankCentral, as if the
transaction had been consummated on September 30, 1996. The following
unaudited condensed combining statements of income
for the nine months ended September 30, 1996 and
for the year ended December 31, 1995 set forth the
consolidated operations of Firstbank combined with
the consolidated operations of BankCentral for
the periods presented as if the Merger had
occurred on January 1, 1995 (the beginning of the
earliest year presented).
These pro forma condensed combining financial
statements, which have been prepared by Firstbank
management based upon historical financial
statements of Firstbank and BankCentral, should be read in
conjunction with the accompanying notes to such pro
forma condensed combining financial statements
and the consolidated financial statements and
related notes thereto of Firstbank, incorporated
herein by reference, and BankCentral, included
elsewhere herein. The historical interim
financial information for the nine months ended
September 30, 1996 , used as a basis for the
pro forma combined consolidated financial
statements, include all necessary adjustments,
which in the opinions of management of Firstbank and
BankCentral, are necessary to present the data fairly. These pro
forma condensed combining financial statements
may not be indicative of the results that
actually would have occurred if the Merger had
been in effect on the dates indicated or the
results of operations which may be obtained in the
future.
<TABLE>
Pro Forma Condensed Combining Balance Sheet of Firstbank of Illinois Co.
and Subsidiaries and BankCentral Corporation and Subsidiary
September 30, 1996
(in thousands of dollars)
(unaudited)
<CAPTION>
Bank- Historical Adjust Pro Forma
Firstbank Central Combined ments Combined
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks $88,470 $ 8,518 $ 96,988 - $ 96,988
Short-term investments 25,991 25,991 (6,500)1(d) 19,491
Investment securities 459,677 28,079 487,756 - 487,756
Loans, net of unearned
discount 1,276,347 72,039 1,348,386 - 1,348,386
Reserve for possible
loan losses (18,924) (996) (19,920) - (19,920)
Premises and equipment 42,209 3,582 45,791 - 45,791
Excess cost over fair
value of net assets
acquired 14,090 14,090 6,690 1(c) 20,780
Other Assets 35,436 3,120 38,556 - 38,556
$1,923,296 $114,342 $2,037,638 $ 190 $2,037,828
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing $ 272,572 $ 15,103 $ 287,625 - $ 287,625
Interest-bearing 1,389,960 82,093 1,472,053 - 1,472,053
Total deposits 1,662,482 97,196 1,759,678 - 1,759,678
Short-term borrowings 41,109 4,516 45,625 - 45,625
Other Liabilities 18,199 1,455 19,654 - 19,654
Long-term borrowings 8 4,600 4,608 - 4,608
Total liabilities 1,721,798 107,767 1,829,565 - 1,829,565
Shareholders' equity:
Preferred stock (none issued)
Common stock 10,352 243 10,595 (41)1(b) 10,554
Surplus 42,306 4,794 47,100 1,769 1(b) 48,869
Retained Earnings 151,860 2,515 154,375 (2,515)1(b) 151,860
Unrealized holding gains
(losses) on investment
securities available-
for-sale (1,090) (292) (1,382) 292 1(c) (1,090)
Treasury stock (1,930) (685) (2,615) 685 1(b) (1,930)
Total shareholders'
equity 201,498 6,575 208,073 190 208,263
$1,923,296 $114,342 $2,037,638 $ 190 $2,037,828
</TABLE>
See accompanying notes to pro forma condensed combining financial
statements.
Page 50
<TABLE>
Pro Forma Condensed Combining Statements of Income of Firstbank of Illinois
Co. and Subsidiaries and BankCentral Corporation and Subsidiary
For the Year Ended December 31, 1995
(in thousands of dollars except per share data)
(unaudited)
<CAPTION>
Bank Pro Forma
Firstbank Central Combined Adjustments Combined
<S> <C> <C> <C> <C> <C>
Interest income $ 134,401 $ 8,598 $ 142,991 (183)2(d) 142,816
Interest expense 57,486 4,255 61,741 61,741
Net interest income 76,915 4,343 81,258 (183) 81,075
Provision for possible
loan losses 2,313 675 2,988 2,988
Noninterest income 20,168 904 21,072 21,072
Noninterest expense 54,921 4,033 58,954 2(c,d) 59,400
Net income before
income tax expense 39,849 539 40,388 (629) 39,759
Income tax expense 14,107 124 31 (64)2(d,e) 14,167
Net income $ 25,742 415 26,157 (565) 25,592
PRO FORMA PER SHARE
DATA:
Weighted average
number of shares
outstanding 10,477,931 10,679,881 881
Net income $ 2.46 $ 2.40
</TABLE>
See accompanying notes to pro forma condensed combining financial
statements.
Page 51
<TABLE>
Pro Forma Condensed Combining Statements of Income of Firstbank of
Illinois Co. and Subsidiaries and BankCentral Corporation
and Subsidiary
(in thousands of dollars except per share data)
For the Nine Months Ended September 30, 1996
(unaudited)
<CAPTION>
Bank- Pro Forma
Firstbank Central Combined Adjustments Combined
<S> <C> <C> <C> <C> <C>
Interest income $ 104,348 6,131 110,479 (137)2(d) 110,342
Interest expense 45,272 3,176 48,448 48,448
Net interest income 59,076 2,955 62,031 (137) 61,894
Provision for possible
loan losses 2,151 346 2,497 2,497
Noninterest income 16,437 743 17,180 17,180
Noninterest expense 40,955 2,747 43,702 335 2(c,d) 44,037
Net income before
income taxes 32,407 605 33,012 (472) 32,540
Income tax expense 11,654 177 11,831 (48)2(d,e) 11,783
Net income $ 20,753 $ 428 $ 21,181 $(424) $ 20,753
PRO FORMA PER SHARE
DATA:
Weighted average
number of shares
outstanding 10,482,853 10,684,803
Net income $ 1.98 $ 1.94
</TABLE>
See accompanying notes to pro forma condensed combining financial
statements.
Page 52
NOTES TO PRO FORMA CONDENSED COMBINING
FINANCIAL STATEMENTS
(UNAUDITED)
Background
Firstbank proposes to acquire BankCentral through the
exchange of Firstbank Common Stock and cash for all the issued
and outstanding shares of BankCentral Common Stock in accordance
with the Merger Agreement dated December 20, 1996. BankCentral
owns 100% of the issued and outstanding shares of capital stock
of CNB of Mattoon. While subject to adjustment, the Merger
Agreement calls for the exchange of 201,950 shares of Firstbank
Common Stock and $6,500,000 cash.
BankCentral financial information presented elsewhere in
this Proxy Statement / Prospectus reflects a June 30 fiscal year-
end. Pro forma financial information has been prepared using
Firstbank and BankCentral information assuming a December 31 year-
end.
This transaction is to be accounted for as a purchase and,
accordingly, certain estimates were made in the preparation of
pro forma financial information.
Assumptions
1. The pro forma condensed combining balance sheet of
Firstbank and BankCentral as of September 30, 1996, has been
prepared in accordance with the following financial assumptions:
a. The transaction referred to above occurs on September
30, 1996.
b. The Merger Agreement calls for the exchange of 201,950
shares of Firstbank Common Stock and $6,500,000 cash,
subject to certain adjustments, for the outstanding shares
of BankCentral Common Stock.
c. The Merger is accounted for using the purchase method of
accounting and, accordingly, the net assets of BankCentral
are adjusted to their fair market value. The investment
securities classified by BankCentral as available-for-sale
have been adjusted to fair value through the $292,000
valuation account in stockholders' equity. This valuation
account is comprised of gross unrealized losses of $476,000
net of the related tax benefit of $184,000. The components
of the transaction are outlined as follows (in thousands of
dollars):
Firstbank consideration:
Cash . . . . .. . . . . . . . . . . . $ 6,500
Firstbank Common Stock (201,950 shares
@ $33.50 per share)........... . . . . 6,765
Total consideration . . . . . . 13,265
Historical book value of BankCentral . .. 6,575
Excess of cost over net assets acquired . . $ 6,690
The price of Firstbank Common Stock of $33.50 was used in
connection with the Merger Agreement and is consistent with
the closing price on the date the Merger was publicly
announced.
d. Firstbank will generate funds necessary to fund the cash
portion of the BankCentral transaction through dividends
from its current subsidiary banks. That funding is assumed
to come from short-term investments.
Page 53
2. The pro forma condensed combining statements of income
presented herein have been prepared in accordance with the
following financial assumptions:
a. The pro forma condensed combining statements of income
presented herein include the historical net income of
Firstbank for the year ended December 31, 1995 and the nine
months ended September 30, 1996.
b. The Merger occurs January 1, 1995 and is accounted for
by the purchase method of accounting. Accordingly, the
operations of BankCentral are included in Firstbank's
consolidated results of operations from January 1, 1995
forward.
c. The effects of the pro forma purchase accounting
adjustments outlined in (1)(c) above on the individual
balance sheet captions and in total for each of the next
five years and thereafter are as follows (in thousands):
Amortization of Purchase
Adjustments on:
Investment Excess of
Securities cost
(income) over net
assets
acquired
1997 $ 158 $ 446
1998 159 446
1999 159 446
2000 - 446
2001 - 446
After 5 years - 4,460
Total $ 476 $ 6,690
d. The adjustments to reflect amortization of the purchase
adjustments in the pro forma condensed combining statements
of income included herein are as follows (in thousands):
Year Nine Months
ended Ended
December 31, September 30,
1995 1996
Increase in investment
income from
accretion of write-down $ 158 $ 119
on
investment securities
Decrease in interest income
related to the
reduction in short-term (341) (256)
investments
(183) (137)
Increase in noninterest
expense for
amortization of excess 446 335
of assets
over fair value of net
assets acquired
$ 629 $ 472
The discount on investment securities is accreted on a
straight-line basis over three years (the approximate
average life of the investment securities to which the write-
down applies), which approximates the level effective rate
on the securities included herein. The resulting accretion
income is $158,000, and the related tax expense thereon of
$55,000, for the year ended December 31, 1995.
Page 54
The excess of cost over the fair value of net assets of
BankCentral acquired by Firstbank is amortized on a straight-
line basis over 15 years.
e. The $6,500,000 cash component of the consideration will
be funded out of short-term investments. The resulting
decrease in interest income at 5.25% (applicable short-term
interest rate) is $341,000, and related tax benefit thereon
of $119,000, for the year ended December 31, 1995.
Page 55
Material Contacts Between Firstbank and BankCentral
The only material contacts, arrangements, understandings,
relationships, negotiations, or transactions between Firstbank
and BankCentral are the agreements entered into as a result of
the proposed Merger. These agreements are the Merger Agreement
and the Stockholders' Undertaking Agreements. For a discussion
of these documents, see, respectively, "THE MERGER -- The Merger
Agreement" and "THE MERGER -- Stockholders' Undertaking
Agreements."
Page 56
INFORMATION WITH RESPECT TO FIRSTBANK OF ILLINOIS CO.
Firstbank is a multi-bank holding company owning directly or
indirectly all of the issued and outstanding common stock of
seven banks with locations throughout downstate Illinois and in
the St. Louis metropolitan area of Missouri. Additionally,
Firstbank owns all of the outstanding capital stock of three non-
bank subsidiaries, FFG Trust Inc., a trust company organized
under the laws of the State of Illinois, FFG Investments, Inc.,
an Illinois corporation and a registered broker-dealer, and
Zemenick & Walker, Inc., an Illinois corporation and a registered
investment advisory firm. On September 30, 1996, Firstbank had
consolidated total assets of $1.92 billion, loans (net of
unearned discount) of $1.28 billion, total deposits of $1.66
billion, and stockholders' equity of $201 million.
Annual Report of Firstbank
Firstbank's 1995 Summary Annual Report to Stockholders
distributed to Firstbank stockholders in March 1996 and
Firstbank's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, and Firstbank's Quarterly Report on Form 10-Q
for the nine months ended September 30, 1996, filed by Firstbank
with the Commission, have been delivered with this Proxy
Statement/Prospectus. BankCentral stockholders are encouraged to
review carefully these disclosure documents.
Incorporation by Reference
The following information is hereby incorporated by
reference into this Proxy Statement/Prospectus.
1. Firstbank's Annual Report on Form 10-K for the year
ended December 31, 1995.
2. All reports filed pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended (the
"Exchange Act") since December 31, 1995.
3. The description of Firstbank Common Stock set forth as
Item 1 in Firstbank's Registration of Certain Classes
of Securities on Form 8-A, dated March 8, 1977.
4. All reports and documents filed by Firstbank pursuant
to Sections 13(a), 13(c), 14, and 15(d) of the Exchange
Act from the date of this Proxy Statement/Prospectus
through and including the date of the Special Meeting
of Stockholders of BankCentral.
Market Price of Common Stock and Dividends
Firstbank Common Stock is traded in the over-the-counter
market under the symbol FBIC. The following table represents
cash dividends declared and the rage of high and low sales prices
for the Company's stock during the periods indicated, as quoted
by the Nasdaq National Market System. As of December 31, 1996,
Firstbank Common Stock was held by 2,144 stockholders of record.
Page 57
Cash
Dividends
1997 High Low Declared
1st Quarter* $38.25 34.75 $0.27
Cash
Dividends
1996 High Low Declared
1st Quarter $32.00 30.50 $0.24
2nd Quarter 31.50 29.50 0.24
3rd Quarter 32.25 29.50 0.24
4th Quarter 34.75 31.88 0.24
Cash
Dividends
1995 High Low Declared
1st Quarter $27.00 $25.50 $0.22
2nd Quarter 27.75 26.75 0.22
3rd Quarter 28.75 27.00 0.22
4th Quarter 31.50 28.00 0.22
Cash
Dividends
1994 High Low Declared
1st Quarter $24.33 $22.67 $0.20
2nd Quarter 25.83 22.83 0.20
3rd Quarter 25.83 25.00 0.20
4th Quarter 25.83 25.00 0.20
_______________
*Through March 13,1997.
Nasdaq Market Makers
The following broker-dealers currently act as market makers
of Firstbank Common Stock:
Robert W. Baird & Co., Inc.
Bear, Stearns & Co., Inc.
ABN AMRO Chicago Corporation
Herzog, Heine, Geduld, Inc.
Howe, Barnes & Johnson, Inc.
Keefe, Bruyette & Woods, Inc.
M. A. Schapiro & Co., Inc.
Stifel, Nicolaus & Co.
Page 58
INFORMATION WITH RESPECT TO BANKCENTRAL CORPORATION
Business
BankCentral is a Delaware corporation which was incorporated
on April 1, 1991. BankCentral became a registered bank holding
company on August 5, 1992.
BankCentral was originally organized to acquire CNB of
Mattoon. BankCentral gained control of CNB of Mattoon on August
5, 1992 through the acquisition of 80.5% of CNB of Mattoon's
common stock, and 96.9% of its preferred stock. The stockholders
of CNB of Mattoon subsequently approved a merger agreement in May
1993 resulting in CNB of Mattoon becoming a wholly owned
subsidiary of BankCentral. The preferred stock of CNB of Mattoon
was retired in October 1995.
CNB of Mattoon was organized in 1910 under the laws of the
United States. CNB of Mattoon's main office is located at 1400
Charleston Avenue in Mattoon, Illinois. It also operates three
branch banking facilities in Mattoon on property it owns at 1
Cross County Plaza and 1900 Lakeland Boulevard, and property
leased inside the Wal-Mart SuperCenter at 101 Dettro Drive. Each
banking facility also has an automated teller machine ("ATM").
CNB of Mattoon is a full-service community bank offering a
wide range of personal and business-related financial services to
individuals, partnerships, corporations, municipalities and other
public and governmental entities. Through its various
departments, CNB of Mattoon makes secured, unsecured and
government guaranteed commercial loans; construction and
permanent mortgage loans; and consumer loans to individuals for
the purchase of such things as automobiles, home improvements and
household appliances. CNB of Mattoon also provides its customers
with letters of credit, lines of credit and revolving credit
loans, and offers checking, savings, money market, deposit, and
individual retirement accounts, certificates of deposit, safe
deposit and after-hour deposit services, ATM and wire transfer
services.
CNB of Mattoon is subject to aggressive competition from
other banking institutions operating in its service area. In
addition, CNB of Mattoon competes with other financial
institutions, including savings and loan associations, credit
unions, insurance companies, and financial companies.
CNB of Mattoon is subject to supervision, regulation, and
examination by the Office of the Comptroller of the Currency
("OCC"). The deposits of CNB of Mattoon are insured by the Bank
Insurance Fund ("BIF") of the Federal Deposit Insurance
Corporation ("FDIC"). As a bank holding company, BankCentral is
regulated by the Federal Reserve Board.
Statistical Information About BankCentral
In the following pages, various statistical information
about BankCentral and CNB of Mattoon is presented for review.
Such information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements included
elsewhere herein.
Page 59
<TABLE>
Distribution of Average Assets, Liabilities and Stockholders' Equity, and
Interest Rates.
The following table shows the condensed average balance sheets for the periods
presented and the percentage of each principal category of assets, liabilities,
and stockholders' equity to total assets. Also shown is the average yield on
each category of interest-earning assets and the average rate paid on interest-
bearing liabilities for each of the periods presented.
<CAPTION>
Years Ended June 30,
1996 1995 1994
Percent Interest Average Percent Interest Average Percent Interest Ave
Average of Total Income/ Yield/ Average of Total Income/ Yield/ Average of Total Income/ Yield/
Balance Assets Expense Rate Balance Assets Expense Rate Balance Assets Expense Rate
(in thousands of dollars)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Earning assets:
Loans(1) $74,481 65.81% $6,793 9.12% $74,867 64.97% $6,630 8.86% $74,043 64.51% $6,231 8.42%
Investment securities:
Taxable 25,997 22.97 1,530 5.89 27,020 23.45 1,540 5.70 27,406 23.88 1,524 5.56
Nontaxable(2) 408 0.36 26 6.32 358 0.31 32 9.00 395 0.34 38 9.71
Federal funds sold 1,487 1.31 82 5.51 1,525 1.32 80 5.25 1,197 1.04 37 3.09
Total earning assets 102,373 91.99 8,431 8.24 103,770 90.05 8,282 7.98 103,041 89.77 7,830 7.60
Nonearning assets:
Cash and due from banks 5,570 4.92 5,526 4.80 5,949 5.18
Allowance for possible
loan losses (1,123) (0.99) (892) (0.77) (947) (0.83)
Office properties,
furniture, and
equipment 3,689 3.26 3,823 3.32 3,610 3.15
Other assets 2,672 2.36 3,006 2.61 3,130 2.73
Total assets $113,181 100.00% $115,233 100.00% $114,783 100.00%
LIABILITIES
Interest-bearing:
Deposits:
Savings, NOW and money
market accounts $ 28,487 25.17% $ 680 2.39% $ 31,452 27.29% $ 746 2.37% $ 34,935 30.44% $ 883 2.53%
Time deposits 53,009 46.84 3,035 5.73 53,309 46.26 2,533 4.75 51,437 44.81 1,963 3.82
Total deposits 81,496 72.01 3,715 4.56 84,761 73.56 3,279 3.87 86,372 75.25 2,846 3.30
Note payable 4,930 4.36 426 8.64 5,310 4.61 440 8.29 5,543 4.83 374 6.75
Other borrowed funds 2,702 2.39 157 5.81 2,727 2.37 141 5.17 1,507 1.31 51 3.38
Total interest-bearing
liabilities 89,128 78.75 4,298 4.82 92,798 80.53 3,860 4.16 93,422 81.39 3,271 3.50
Noninterest-bearing
deposits 16,173 14.29 15,052 13.06 14,125 12.31
Other liabilities 1,300 1.15 1,329 1.15 1,639 1.43
Total liabilities 106,601 94.19 109,179 94.75 109,186 95.12
STOCKHOLDERS' EQUITY 6,580 5.81 6,054 5.25 5,597 4.88
Total liabilities and
shareholders' equity $113,181 100.00% $115,233 100.00% $114,783 100.00%
Net interest income/net
yield on earning
assets $4,133 4.04% $4,422 4.26% $4,559 4.42%
</TABLE>
(1) Average balances include non-accrual loans. The income on such loans is
included in interest but is recognized only upon receipt.
Loan fees are included in interest income.
(2) Non-taxable investment income presented on a fully tax-equivalent basis
assuming a tax rate of 34%.
Page 60
Interest Differential
The following table sets forth, on a tax-equivalent
basis for the periods indicated, a summary of the changes in
interest income and interest expense resulting from changes
in yield/rates:
Amount of Increase (Decrease)
Change From 1995 Change From 1994
to 1996 Due to to 1995 Due to
Volume Yield Volume Yield/
(1) Rate(2) Total (1) Rate(2) Total
(in thousands of dollars)
Interest income:
Loans $ (34) $ 197 $ 163 $ 70 $ 329 $ 399
Investment securities:
Taxable (59) 49 (10) (21) 37 16
Nontaxable (3) 4 (10) (6) (3) (3) (6)
Total investment
securities (55) 39 (16) (24) 34 10
Federal funds sold (2) 4 2 12 31 43
Total interest income (91) 240 149 58 394 452
Interest expense:
Deposits:
Savings, NOW and
money market accounts (71) 5 (66) (85) (52) (137)
Time deposits (14) 516 502 74 496 570
Total deposits (85) 521 436 (11) 444 433
Note payable (32) 18 (14) (16) 82 66
Other borrowed funds (1) 17 16 54 36 90
Total interest expense (118) 556 438 27 562 589
Net interest income $ 27 (316) $(289) $ 31 $(168) $(137)
(1) Change in volume multiplied by yield/rate of prior
period.
(2) Change in yield/rate multiplied by volume of prior
period.
(3) Nontaxable investment securities are presented on a
fully tax-equivalent basis assuming a tax rate of 34%.
NOTE: The change in interest due to both rate and volume
has been allocated to volume and rate changes in
proportion to the relationship of the absolute dollar
amounts of the change in each.
Page 61
<TABLE>
Investment Portfolio
The table below sets forth the book value of
investment securities held by BankCentral for the
periods indicated:
<CAPTION>
June 30,
1996 1995 1994
Percent Percent Percent
Of Of Of
Total Total Total
Amount Securities Amount Securities Amount Securities
(in thousands of dollars)
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury and
other U.S. Government
agencies and $27,986 96.2% $21,844 94.1% $26,314 94.8%
corporations
Obligations of state
and political
subdivisions 1,055 3.6 1,279 5.5 1,328 4.8
Other debt securities 60 0.2 81 0.4 12 .4
Total $29,101 100.0% $23,204 100.0% $27,765 100.0%
</TABLE>
Effective June 30, 1994, BankCentral adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt
and Equity Securities" ("SFAS 115"), for which the cumulative effect was
recorded on the consolidated balance sheet on that date. The effect
of adopting SFAS 115 was a decrease in stockholders' equity of
$356,000, net of the related income tax effect of $183,000, to
recognize the net unrealized loss in securities classified as
available-for-sale on that date.
As of June 30, 1996, debt securities with an amortized cost of
$828,000 were classified as held-to-maturity securities; debt securities with
an amortized cost of $28,887,000 were classified as available-for-sale
securities. The market valuation account for the available-for-sale
securities was adjusted to approximately $(615,000) to decrease the
recorded balance of such securities at June 30, 1996 to their fair value
on that date; the deferred tax asset account was adjusted to $237,000 to
reflect the tax effect of the market valuation account; and the separate
component of stockholders' equity was adjusted to $(378,000) to reflect
the market valuation adjustment at June 30, 1996. The change in the
market valuation account and related components resulted from an overall
increase in the interest rate environment.
As of September 30, 1996, debt securities with an amortized cost
of $1,009,000 were classified as held-to-maturity securities; debt securities
with an amortized cost of $27,546,000 were classified as available-for-sale
securities. The market valuation account for the available-for-sale
securities was adjusted to approximately $(476,000) to adjust the recorded
balance of such securities at June 30, 1996 to their fair value on that
date; the deferred tax asset account was adjusted to $184,000 to reflect
the tax effect of the market valuation account; and the separate component
of stockholders' equity was adjusted to $(292,000) to reflect the market
valuation adjustment at September 30, 1996. The change in the market
valuation since June 30, 1996 resulted from an overall decrease in
interest rates for the three months ended September 30, 1996.
Page 64
The following table summarizes maturity and yield information on the
investment portfolio at June 30, 1996:
Weighted
Average Tax-
Book Equivalent
Value Yield
(in thousands of dollars)
U.S. Treasury and other U.S.
Government agencies and
corporations:
0 to 1 year $2,209 5.2%
1 to 5 years 23,150 5.8
5 to 10 years 1,670 6.6
Over 10 years 957 6.9
Total $27,986 5.8
State and political subdivisions:
0 to 1 year $ 295
8.2%
1 to 5 years 760 6.2
Over 5 years - -
Over 10 years - -
Total $1,055 6.8
Other securities:
0 to 1 year $ - -%
1 to 5 years - -
5 to 10 years 60 6.3
Over 10 years - -
Total $ 60 6.3
Total securities:
0 to 1 year $2,504 5.5%
1 to 5 years 23,910 5.8
5 to 10 years 1,730 6.5
Over 10 years 957 6.9
Total $29,101 5.9
NOTE: Presented on a fully tax-equivalent basis assuming a tax rate of 34%.
Page 65
Loan Portfolio
Types of Loans:
The composition of the loan portfolio, net of applicable unearned discount,
is summarized as follows:
June 30,
1996 1995 1994
Percent Percent Percent
Of Of Of
Total Total Total
Amount Loans Amount Loans Amount Loans
(in thousands of dollars)
Commercial,
financial and
agricultural(1) $48,214 66.0% $47,336 62.7% $49,431 64.9%
Real estate 16,028 21.9 13,778 18.2 11,073 14.5
Consumer 8,824 12.1 14,252 18.9 15,653 20.6
Other 6 - 143 0.2 22 -
Total Loans $73,072 100.0 % $75,509 100.0% $76,179 100.0%
(1) Commercial loans collateralized by commercial real estate are
classified as commercial, financial and agricultural.
Page 66
The following table sets forth the maturity and
sensitivities composition of total loans at June 30,
1996:
June 30, 1996
Maturing
After
One
In One Through After
Year or Five Five
Less Years Years Total
(in thousands of dollars)
Fixed Rate Loans
Commercial, financial and
agricultural $ 11,199 $ 14,069 $ 2,871 $28,139
Real estate 2,029 5,663 6,497 14,189
Consumer 3,021 4,024 12 7,057
Other 6 - - 6
Total fixed rate loans 16,255 23,756 9,380 49,391
Variable Rate Loans
Commercial, financial, 16,673 682 2,720 20,075
and agriculture
Real estate 1,669 15 155 1,839
Consumer 1,767 - - 1,767
Total variable rate loans 20,109 697 2,875 23,681
Total Loans
Commercial, financial and
agricultural 27,872 14,751 5,591 48,214
Real estate 3,698 5,678 6,652 16,028
Consumer 4,788 4,024 12 8,824
Other 6 - - 6
Total loans 36,364 24,453 12,255 73,072
Page 67
Risk Elements Involved in Lending Activities
The following table details the nonperforming asset information for
the periods presented:
September 30, June 30,
1996 1996 1995 1994
(in thousands of dollars)
Non-accrual loans $ 943 $1,084 $1,763 $ 1,183
Loans past due 90 days or
more 4 225 132 221
Restructured loans - - - -
Total nonperforming loans 947 1,309 1,895 1,404
Foreclosed property 364 364 230 431
Total nonperforming $ 1,311 $ 1,673 $ 2,125 $ 1,835
assets
Nonperforming loans
to loans 1.31% 1.79% 2.51% 1.84%
Nonperforming assets
to loans plus foreclosed
property 1.81 2.28 2.81 2.40
Nonperforming assets to
toals assets 1.15 1.49 1.87 1.60
Total assets $114,342 $112,376 $113,893 $114,474
Total loans 72,038 73,072 75,509 76,179
Total loans plus
foreclosed property 72,402 73,436 75,739 76,610
It is generally the policy of BankCentral to discontinue the accrual of
interest on loans when principal or interest is due and has remained
unpaid for 90 days or more, unless the loan is well secured and in the
process of collection.
Potential Problem Loans
Certain loans may require frequent management attention and are
reviewed on a monthly or more frequent basis. Although payments
on these loans are less than 90 days past due, or in many cases
current, the borrowers presently have or have had a history of
financial difficulties and management has concern as to the borrower's
ability to comply with present loan repayment terms. As such, these loans
may result in classification at some future point as nonperforming.
At September 30, 1996 and June 30, 1996, such loans (excluding all
nonperforming loans described above) amounted to $2,621,000 and
$4,119,000, respectively.
Loan Concentrations
BankCentral conducts most of its business activities, including
granting agribusiness, commercial, residential and installment loans
with customers in the Illinois counties of Coles, Cumberland, Douglas,
Edgar, Moultrie and Shelby. The loan portfolio includes a concentration of
loans to agricultural and agricultural-related industries amounting to
approximately $8,175,000 and $8,016,000 as of June 30, 1996 and 1995,
respectively. Generally those loans are collateralized by assets of those
entities. The loans are expected to be repaid from cash flows or from
proceeds from the sale of selected assets of the borrowers. The ability
of BankCentral's borrowers to honor their contractual obligations
is further dependent on the local economy and its effect on the
agricultural-related industry.
Page 68
Summary of Loan Loss Experience
The following table summarizes changes in the allowance for possible
loan losses arising from loans charged-off and recoveries on loans previously
charged-off, by loan category and additions to the allowance that have been
charged to expense:
September 30, June 30,
1996 1996 1995 1994
(in thousands of dollars)
Allowance balance at $ 1,148 $ 1,260 $ 834 $ 1,012
beginning of period
Loans charged-off:
Commercial, financial and 4 358 66 627
agricultural
Real Estate 180 169 87 136
Consumer 30 166 165 86
Total charge-offs 214 693 318 849
Recoveries of loans
previously
charged-off:
Commercial, financial and - 79 10 26
agricultural
Real Estate 7 2 - -
Consumer 10 49 29 17
Total recoveries 17 130 39 43
Net charge-offs 197 563 279 806
Additions to allowance
charged to operations 45 451 705 628
Allowance balance at end of $ 996 $ 1,148 $ 1,260 $ 834
period
Net charge-offs to
average loans 0.27% 0.76% 0.37% 1.09%
Allowance for possible loan 1.38 1.57 1.67 1.09
losses to loans
Allowance for possible loan
losses to nonperforming loans 105.17 87.70 66.49 59.40
Average loans $73,090 $74,481 $74,867 $74,043
Total loans 72,038 73,072 75,509 76,179
Nonperforming loans 947 1,309 1,895 1,404
In determining whether there is an adequate balance in the
allowance for possible loan losses, BankCentral's management
places its emphasis as follows: evaluation of the loan portfolio
with regard to potential future exposure on loans to specific
customers and industries, reevaluation of each nonperforming
loan, loans classified by supervisory authorities, loans
identified by management as potential problems and listed on
internal watch lists, and an overall view of the remaining
portfolio in light of past loan loss experience.
Historical loan loss performance has had a negative impact
on BankCentral's performance. The allowance for possible loan
losses as a percentage of total loans was 1.38%, 1.57%, 1.67% and
1.09% at September 30, 1996 and June 30, 1996, 1995 and 1994,
respectively.
Management views the allowance for possible loan losses as
being available for all potential or previously unidentified loan
losses which may occur in the future. The risk of future losses that
is inherent in the loan portfolio is not precisely attributable
to a particular loan or category of loans. Based on its review of
adequacy, BankCentral's management has estimated those portions of
the allowance that could be attributable to major categories of loans
as detailed in the following table:
Page 69
September 30, June 30,
1996 1996 1995 1994
Categ- Categ- Categ- Categ-
ories ories ories ories
% of % of % of % of
Allow- Total Allow- Total Allow- Total Allow- Total
ance Loans ance Loans ance Loans ance Loans
(in thousands of dollars)
Allowance
allocation:
Commercial,
financial
and $ 348 42.6% $572 52.9% $ 513 40.7% $ 408 57.0%
agricultural
Real estate 271 32.9 279 25.8 520 41.2 127 17.8
Consumer 204 24.8 231 21.3 227 18.0 180 25.2
Other - - - - - - - -
Unallocated 173 - 66 - - - 119 -
$ 996 100.0% $1,148 100.0% $1,260 100.0% $ 834 100.0%
Allocations estimated for the loan categories do not specifically
represent that loan charge-offs of that magnitude will necessarily be
incurred. The allocation does not restrict future loan losses
attributable to other categories. The risk factors considered
when determining the overall level of the allowance are the same
when estimating the allocation by major category, as specified in
the allowance category.
Deposits
The following table shows, for each type of deposit, the average
monthly amount and the average rate paid on each type of deposit for the
years ended June 30, 1996, 1995, and 1994:
June 30,
1996 1995 1994
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
(in thousands of dollars)
Noninterest-
bearing demand
deposits $16,173 - % $15,052 -% $14,125 -%
Savings, NOW and
money market
deposits 28,487 2.39 31,452 2.37 34,935 2.53
Time deposits 53,009 5.73 53,309 4.75 51,437 3.82
$97,669 3.81% $99,813 3.28% $100,497 2.83%
The following table shows the maturity of time deposits of $100,000 or
more at June 30, 1996: (in thousands of dollars):
Three months or less $ 3,958
Over three through six months 3,752
Over six months through twelve months 5,041
Over twelve months 1,134
$13,885
Page 70
Return on Equity and Assets
The following ratios are among those commonly used in analyzing
banks and bank holding companies:
For the year ended June 30,
1996 1995 1994
(in thousands of dollars)
Return on Average Assets:
Net Income $ 640 $ 326 $ 1,141
Average Assets 113,181 115,233 114,783
0.57% 0.28% 0.99%
Return on Average Equity
Net Income $ 640 $ 326 $ 1,141
Average Equity 6,580 6,054 5,597
9.73% 5.38% 20.39%
Dividend Payout Ratio
Not applicable-No cash dividends have been paid on BankCentral Common Stock.
Equity to Assets Ratio:
Average Equity $ 6,580 $ 6,054 $ 5,597
Average Assets 113,181 115,233 114,783
5.81% 5.25% 4.88%
Note Payable
Note payable at June 30, 1996 represent an obligation to LaSalle
National Bank, Chicago, Illinois, in the amount of $4,600,000. The repayment
terms of the note if no demand is made by the lender call for an annual
payment of $225,000. Interest is due quarterly at a rate equal to the
prime rate of LaSalle National Bank (an effective rate of 8.25% at
June 30, 1996). The note payable is collateralized by 200,000 shares of
CNB of Mattoon's common stock.
Properties
BankCentral's office is located in the principal banking office of
its wholly-owned subsidiary, CNB of Mattoon. The office is located at
1400 Charleston Avenue in Mattoon, Illinois. CNB of Mattoon also operates
branch facilities at 1 Cross County Plaza, 1900 Lakeland Boulevard, and
101 Dettro Drive (inside the Wal-Mart SuperCenter). All facilities are
owned by CNB of Mattoon except the Dettro Drive branch which is leased from
WalMart.
Legal Proceedings
From time to time, BankCentral may become involved as plaintiff
or defendant in various legal actions arising in the normal course of
business. While the ultimate outcome of these various legal
proceedings cannot be predicted with certainty, it
is the opinion of BankCentral's management that
there are no material pending legal proceedings to
which BankCentral is a party other than such
ordinary routine litigation the resolution of which
would not reasonably be expected to have an adverse
effect on BankCentral's consolidated financial
position.
Page 71
Market Price of Common Stock and Dividends
No established public trading market exists for
BankCentral Common Stock. This table presents the
stock prices of transfers known by management of
BankCentral to have occurred during the periods
presented.
Cash
Dividends
1997 High Low Declared
1st Quarter* $ - $ - $ -
Cash
Dividends
1996 High Low Declared
1st Quarter $ 30.50 $ 30.50 $ -
2nd Quarter 30.00 30.00 -
3rd Quarter 32.62 30.00 -
4th Quarter - - -
Cash
Dividends
1995 High Low Declared
1st Quarter $ 30.00 $ 30.00 $ -
2nd Quarter 30.50 30.50 -
3rd Quarter 30.50 30.00 -
4th Quarter 30.50 30.50 -
Cash
Dividends
1994 High Low Declared
1st Quarter $ 28.00 $ 21.50 $ -
2nd Quarter 30.00 30.00 -
3rd Quarter 29.00 28.00 -
4th Quarter 30.00 29.00 -
_______________
*Through March 13, 1997
Page 72
Security Ownership of Certain Beneficial Owners and
Management of BankCentral
The following table sets forth, as of the date hereof,
beneficial ownership of BankCentral Common Stock by: (i)
each beneficial owner of more than five percent (5%) of
BankCentral Common Stock, (ii) each director and executive
officer of BankCentral, and (iii) all directors and executive
officers of BankCentral as a group.
Shares of
BankCentral Common
Stock Percent of
Name of Beneficial Owner Beneficially Owned(1) Class (1)
L. Dean Clausen(2)
3810 Fairhills Drive
Champaign, IL 26,476 11.59%
Kathleen Steward(3)
117 Wabash Avenue
Mattoon, IL 14,056 6.15
Douglas P. Herr(4)
3819 Vermillion Drive
Danville, IL 12,500 5.47
Roger Roberson(5) 13,000 5.69
Burnham E. Neal 8,013 3.51
Newton H. Dodds 8,001 3.50
Don P. Portugal(6) 3,039 1.33
Mark S. Ballard 655 .29
All directors and executive
officers as a group (7 persons) 71,684 31.38
(1)The information contained in these columns is
based upon information furnished to BankCentral
by the persons named above and the members of
the designated group. Share ownership
percentages are based upon 228,443 shares of
BankCentral Common Stock issued and outstanding.
Shares include, without admission of beneficial
ownership thereof by the named individual,
shares held of record by or jointly with the
named person's wife or children sharing the same
household.
(2)Includes 700 shares held solely by Mr. Clausen's
spouse, over which shares Mr. Clausen has no
voting or investment power, and includes 7,076
shares over which Mr. Clausen is entitled to
exercise a general proxy pursuant to a separate
agreement with a former borrower from CNB of
Mattoon.
(3)Includes 12,590 shares held by Ms. Stewart as co
trustee under a testamentary trust, over which
shares Ms. Stewart shares voting and investment
power with the other two cotrustees of such
trust.
(4)Held by Mr. Herr as trustee of his inter vivos
trust.
Page 73
(5)Includes 1,356 shares held solely by Mr.
Roberson's spouse, over which shares Mr.
Roberson has no voting or investment power.
Also includes 1,394 shares held by one of Mr.
Roberson's children, over which shares Mr.
Roberson has shared voting and investment power.
(6)Includes 1,986 shares held jointly by Mr.
Portugal and his spouse, over which shares Mr.
Portugal has shared voting and investment power.
Also includes 150 shares held by Mr. Portugal as
custodian for his minor children, over which
shares Mr. Portugal has sole voting or
investment power.
Page 74
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF BANKCENTRAL
Introduction
The following discussion and analysis is
intended to review the significant factors
affecting the financial condition and results
of operations of BankCentral and its wholly-
owned subsidiary CNB of Mattoon for the three
months ended September 30, 1996 and 1995 and the
threeyear period ended June 30, 1996. Accordingly,
references to years throughout this management's
discussion and analysis section refer to
BankCentral's fiscal years ending June 30.
This is intended to provide a more
comprehensive review than is otherwise apparent
from the consolidated financial statements
alone. Reference should be made to those
statements and the selected financial data
presented elsewhere herein for an understanding of
the following review.
Net Income Analysis
Net income for 1996 was $640,000 as compared
to $326,000 for 1995 and $1,141,000 for 1994.
The increase in net income for 1996 as compared to
1995 was primarily due to a reduction in noninterest expense of $468,000.
The reduction in net income for 1995 as compared to 1994 was primarily
due to reduced net interest income of $134,000 and increased
noninterest expense of $248,000. In addition, net income for 1994
included the cumulative effect of change in accounting principles
as the Company adopted the Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes". The one-time
impact associated with this accounting change was a cumulative
income effect of $618,000.
Net income was $220,000 for the three months
ended September 30, 1996, compared to $215,000 for the same period in
1995.
Earnings for 1996 represented a return on average assets of .57%
and a return on average equity of 9.73%. This compares to a .28% and
.99% return on average assets and a 5.38% an 20.39% return on average
equity for 1995 and 1994, respectively.
Net Interest Income
Net interest income is a substantial component of
earnings and is affected by the volume of the sources and
uses of funds, the respective rates earned and paid on those
funds, the mix of those funds, and the volume of
nonperforming assets. The Company's net interest income
decreased by 6.5% to $4,126,000 during 1996 after a 2.9%
decline in the preceding year. The net interest margin,
which is calculated by dividing tax-equivalent net interest
income by average interest-earning assets, was 4.04%
in 1996 as compared to 4.26% and 4.42% in
1995 and 1994, respectively.
The decrease in the net interest margin over
the periods presented is primarily due to a
general increase in interest rates with
interestbearing liabilities repricing faster than
interestearning assets. The yield on interest-
earning assets increased from 7.98% in 1995 to 8.24%
in 1996. However, for the same period, the
average cost of interest-bearing liabilities
increased from 4.16% to 4.82%. The interest rate
environment within which financial institutions
have operated during these periods has caused
compression in the interest margins of the Company
and the industry as a whole.
Page 75
The average mix and volume levels of interest-
earning assets has remained stable over the periods
presented. The average mix of interest-bearing
liabilities has shifted slightly from lower cost
savings and money market deposits to higher
cost time deposits. The average volume of
interestbearing liabilities decreased slightly over
the periods presented.
Net interest income was $1,062,000 for the
three months ended September 30, 1996, up
slightly from $1,054,000 for the same period in
1995.
Provision For Possible Loan Losses
The provision for possible loan losses charged to expense was
$451,000 in 1996, as compared to $705,000 and $628,000 for 1995 and
1994, respectively. The reduction from 1994 to 1995 is consistent with
the reduction in nonperforming loans during that time. Net charge-offs
were $563,000, $279,000, and $806,000 for the periods ended June 30,
1996, 1995, and 1994, respectively
The reserve for possible loan losses was 1.57% of
outstanding loans at June 30, 1996 as compared to 1.67% and 1.09% for
1995 and 1994, respectively.
Provision for possible loan losses of $45,000 for the three months
ended September 30, 1996 compares favorably to $75,000 for the same
period in 1995. The reserve for possible loan losses was 1.38% of
outstanding loans at September 30, 1996.
Loan losses have had a negative impact on the
earnings of the Company for several years. In
recent years, management has taken a very aggressive
position toward nonperforming loans. Nonperforming loans to
total loans were 1.79%, 2.51%, and 1.84% as of June 30, 1996,
1995, and 1994, respectively. That ratio further declined to
1.31% as of September 30, 1996.
Noninterest Income
Noninterest income was $997,000 in 1996, up from
$808,000 in 1995, and $779,000 in 1994. The 23.3% increase
in 1996 can be primarily attributed to a $150,000 gain on
the sale of mortgage servicing rights.
Management continues to search for new sources of
noninterest revenue in an attempt to counter the declining nature
of deposit charges.
Noninterest income was $179,000 for the three
months ended September 30, 1996 as compared to
$313,000 for the same period in 1995. Included in
the 1995 income is $109,000 of the $150,000 of
gain on the sale of mortgage servicing rights.
Noninterest Expense
Noninterest expense declined 11.2% in 1996 to
a total of $3,714,000. That decline follows a
6.3% increase experienced in 1995 over 1994.
Salaries and benefits, the largest component of
noninterest expense, decreased by $209,000, or
10.2% in 1996 following a $23,000 decline in
1995. The decline is consistent with management's
continued efforts to improve efficiency.
Another significant expense reduction for the year
ended June 30, 1996 resulted from the decision by the Federal
Deposit Insurance Corporation ("FDIC") to reduce deposit
insurance premiums for member banks effective June 1, 1995.
BankCentral's expenses associated with insurance
premiums were $224,000 less for the year ended June 30, 1996
compared to 1995.
Page 76
Noninterest expense was $876,000 for the three months ended
September 30, 1996 as compared to $954,000 for the same period in 1995.
The 8.1% decline illustrates the continued efforts to reduce overhead
in relation to salaries and benefits, as well as, other general expenses.
Income Taxes
Income tax expense was $316,000 for 1996 as
compared to $6,000 for 1995 and $238,000 for
1994. Income tax expense of $100,000 and
$122,000 was recorded for the three months ended
September 30, 1996 and 1995, respectively. The
effective tax rate was 33.0%, 1.7%, and 31.2%
for the years ended June 30, 1996, 1995, and
1994, respectively. The decrease in the effective
tax rate in 1995 is primarily due to the level
of nontaxable income as a percentage of total income
versus the the other years. The effective income
tax rate was 31.4% and 36.1% for the three
months ended September 30, 1996 and 1995,
respectively.
In February 1992, the Financial Accounting
Standards Board issued Statement of Financial
Accounting Standards No. 109 "Accounting for
Income Taxes" ("SFAS 109"). The Company
implemented SFAS 109 during its fiscal year ended
June 30, 1994 on a prospective basis;
however, the cumulative effect of adoption was
a onetime increase of $618,000 in that year's
consolidated statement of income.
Liquidity and Interest Rate Sensitivity
Liquidity is provided by maturities in the
available-forsale investment portfolio and short
term investments in federal funds sold.
Liquiditiy is further enhanced by the ability to
purchase federal funds on a short-term basis
through various established lines.
The asset/liability management process,
which involves management of the components of the
balance sheet to allow assets and liabilities to
reprice at approximately the same time, is a
dynamic process essential to minimizing the effect
of interest rate fluctuations on net interest
income. The following tables reflect the
Company's GAP analysis (rate sensitive assets
minus rate sensitive liabilities) as of September
30, 1996 and June 30, 1996, respectively:
Page 77
September 30, 1996
Over Over
3 Months 1 Year
3 Months Through Through After
or Less 12 Months 5 Years 5 Years Total
(in thousands of dollars)
Assets:
Investments in debt
securities $ 4,195 $ 2,805 $ 14,188 $ 7,091 $ 28,079
Loans 21,758 9,381 29,208 11,691 72,038
Interest-bearing
deposits 13 - - - 13
Total interest-
sensitive assets $ 25,966 $ 11,986 $ 43,396 $ 18,782 $100,114
Liabilities:
Interest-bearing
demand deposits $ 15,027 $ - $ - $ - $ 15,027
Saving, NOW and money
market deposits 12,280 - - - 12,280
Time deposits 13,445 28,911 12,428 - 54,784
Note payable 4,600 - - - 4,600
Other borrowed funds 2,300 2,216 - - 4,516
Total interest-
sensitive
liabilities 47,652 31,127 12,428 - 91,250
GAP by period $(21,686) $(19,141) $ 30,968 $ 18,782 $ 8,923
Cumulative GAP $(21,686) $(40,827) $ (9,859) $ 8,923
June 30, 1996
Over Over
3 Months 1 Year
3 Months Through Through After
or Less 12 Months 5 Years 5 Years Total
(in thousands of dollars)
Assets:
Investments in debt
securities $ 4,237 $ 3,719 $ 16,204 $ 4,941 $ 29,101
Loans 24,423 11,941 24,453 12,255 73,072
Interest-bearing
deposits 37 - - - 37
Total interest-
sensitive assets $ 28,697 $ 15,660 $ 40,657 $ 17,196 $102,210
Liabilities:
Interest-bearing
demand deposits $ 13,950 - - $ - $ 13,950
Saving, NOW and money
market deposits 15,141 - - - 15,141
Time deposits 12,757 26,078 13,045 - 51,880
Note payable 4,600 - - - 4,600
Other borrowed funds 1,200 2,218 - - 3,418
Total interest-
sensitive
liabilities $ 47,648 $ 28,296 $ 13,045 $ - $ 88,989
GAP by period $(18,951) $(12,636) $ 27,612 $ 17,196 $ 13,221
Cumulative GAP $(18,951) $(31,587) $ (3,975) $ 13,221
Page 78
These tables reflect the static gap analysis which indicate
substantial liability sensitivity over a one-year time horizon.
Generally, such a position indicates that an overall rise in
interest rates would result in an unfavorable impact
on the net interest margin, as liabilities would
reprice more quickly than assets. Conversely, the
net interest margin would be expected to improve
with an overall decline in interest rates. As
savings, NOW, and money market accounts are subject
to withdrawal on demand, they are presented in the
analysis as immediately repriceable. Based on
experience, pricing on such deposits is not expected
to change in direct correlation with changes in the
general level of short-term interest rates.
Accordingly, management believes that a gradual
increase in the general level of interest rates will
not have a material effect on net interest income.
In management's opinion, the traditional static
gap analysis does not adequately assess many of the
variables that effect the net interest margin. Management
places more emphasis on the use of both dynamic gap
analysis and simulation analysis. These techniques
allow management to estimate the effect to net
interest margin given various interest rate
scenarios. The Company's Funds Management Committee
has established certain tolerances used to manage
the asset/liability mix.
Balance Sheet Analysis
The following table summarizes certain
trends in the Company's balance sheet during the
three-year period ended June 30, 1996:
June 30,
1996 1995 1994
(in thousands of dollars)
Total assets $112,376 $113,893 $114,474
Earning assets 102,209 101,515 104,244
Deposits 96,799 98,451 100,670
Loans to deposits (loans, net 75.49% 76.70% 75.67%
of unearned discount)
Loans to total assets (loans, 65.02 66.30 66.55
net of unearned discount)
Debt securities to total assets 25.90 20.37 24.25
Loans $ 73,374 $ 76,307 $ 77,542
Unearned discount (302) (798) (1,363)
Loans, net of unearned discount $ 73,072 $ 75,509 $ 76,179
Investment securities -
available-for-sale $ 28,272 $ 16,314 $ 22,981
Investment securities -
held-to-maturity 828 6,889 4,784
Total investments $ 29,101 $ 23,203 $ 27,765
Federal funds sold 0 2,800 300
Interest-bearing deposits 37 3 -
Total earning assets $102,210 $101,515 $104,244
The balance sheet has remained somewhat stable
over the past three years, with slight declines in
total assets and total deposits. Management has
taken a more conservative lending approach than
in past years to minimize the effect that below
average credit quality has on earnings. Accordingly,
there have been decreases in the dollar volume
of outstanding loans. Management believes this
approach has been successful as demonstrated in
the improved loan loss and nonperforming loan
ratios.
Page 79
Management has made efforts to aggressively
pursue new customer relationships that possess
strong credit quality and/or core deposits. This
strategy allows CNB of Mattoon to continue the
improvement of asset quality and also rely less
heavily on deposits of local governments.
Management has also made efforts to increase
earning assets in relation to total assets. As the
preceding table illustrates, earning assets increased
$694,000 from June 30, 1995 to June 30, 1996 while
total assets actually declined $1,517,000 over the
same period.
Capital Adequacy
The Company's June 30, 1996 stockholder's
equity was $6,295,000, down 1.6% from 1995. The
reduction was due to the purchase of treasury
stock and the increase in the unrealized loss on
securities available-for-sale (net of tax), with
the reduction being offset by net income.
The following table summarizes on a consolidated
basis the Company's risk-based capital and leverage
ratios:
June 30,
1996 1995 1994
Tier I capital ratio 8.48% 7.74% 7.07%
Total risk-based capital ratio 9.75 8.99 8.06
Leverage ratio 5.80 5.57 5.19
The risk-based minimum capital ratios
established by regulatory authorities for "adequately-
capitalized" institutions are 4%, 8%, and 3% for Tier 1,
Total Capital and Leverage ratios, respectively.
The Company met these requirements at June 30, 1996.
Risk Management
Management's objective in structuring the
consolidated balance sheet is to maximize the return on
stockholder's equity while minimizing associated risks.
The major risks with which the Company is concerned
are market, credit, and liquidity risks. Following
is a discussion of the Company's management of these risks.
Market Risk Management
Management believes the Company's loan and
investment portfolios are sufficiently diversified so
as to minimize the effect of a downturn in any
particular industry or geographic region.
The Company's loan portfolio includes a
concentration of loans to agricultural and agricultural-
related industries amounting to $8,175,000 at June 30, 1996.
Generally those loans are collateralized by assets of those
entities. The loans are expected to be repaid from
cash flows or from proceeds from the sale of selected
assets of the borrowers. Credit losses arising from
lending transactions with agricultural entities
compare favorably with CNB of Mattoon's credit loss
experience on its loan portfolio as a whole.
The Company's Funds Management Committee monitors
market valuation risk on the investment securities
portfolio. This process involves measurement of the
general interest rate, maturity and liquidity risk in
the portfolio. At June 30, 1996, approximately 97.2%
of the investment securities portfolio was designated
as available-for-sale. The unrealized losses, net of
tax, on that portfolio was $378,000, representing 1.3%
of the total available-for-sale market value.
Page 80
Credit Risk Management
Management of the risks that the Company
assumes in providing credit products to customers is
extremely important. The return realized by assuming those
risks is fundamental to its business operations. Credit risk
management involves defining an acceptable level of
risk and return, establishing appropriate policies and
procedures to govern the credit process
and maintaining a thorough portfolio review process.
Credit policies are ultimately the responsibility of
the Company's Board of Directors and, as such, are
reviewed and approved by the Board of Directors. Also
important in the risk management process are the ongoing
monitoring procedures performed by internal personnel and
external auditors.
Nonperforming loans to total loans were 1.79%,
2.51%, and 1.84% as of June 30, 1996, 1995, and 1994,
respectively. That ratio was 1.31% as of September
30, 1996. As of June 30, and September 30, 1996, the
Company had $364,000 in other real estate owned as a
result of foreclosure. That figure compares to
$230,00 and $431,000 at June 30, 1995 and 1994.
Liquidity Risk Management
Liquidity is a measurement of the ability to
meet the borrowing needs and the deposit withdrawal
requirements of its customers.
Management has established policies which
are regularly reviewed when determining the appropriate
composition of its assets and liabilities to
maintain an acceptable level of liquidity in the
balance sheet. Much of this liquidity risk management
has been discussed previously in connection with the
analysis of liquidity and rate sensitivity.
Accounting Pronouncements
Effective July 1, 1995, the Company adopted
Statement of Financial Accounting Standards Board
Statement No. 114, ("FAS 114"), "Accounting by
Creditors for the Impairment of a Loan", as amended by
FAS 118, "Accounting by Creditors for Impairment of a
Loan - Income Recognition and Disclosures" which
requires loans to be considered impaired when, based on
current information and events it is probable that the
Company will not be able to collect all amounts due.
The portion of the allowance for loan losses applicable
to impaired loans has been computed based on the
present value of the estimated future cash flows of
interest and principal discounted at the loan's effective
interest rate or on the fair value of collateral for
collateral dependent loans. The entire change in
present value of expected cash flows of impaired loans
or of collateral value is reported as bad debt expense
in the same manner in which impairment initially was
recognized or as a reduction in the amount of bad debt
expense that otherwise would be reported.
Effective July 1, 1996, the Company adopted
FAS 122, "Accounting for Mortgage Servicing Rights", FAS
122 requires the Company to recognize
as separate assets rights to service mortgage loans
for others, however those servicing rights are acquired.
If the Company acquired mortgage servicing rights
through either the purchase or origination of mortgage
loans and sells or securitizes those loans with
servicing rights retained, the Company should allocate
the total cost of the mortgage loans to mortgage
servicing rights and the loans (without the mortgage
servicing rights) based on their relative fair values.
The mortgage servicing rights should be amortized in
proportion to and over the period of estimated net
servicing income.
In October 1995, the Financial Accounting
Standards Board issued FAS 123, "Accounting for Stock-
Based Compensation", FAS 123 establishes a fair value
method of accounting for stock options and other equity
instruments. FAS 123 permits the continued use of the
intrinsic value method included in Accounting Principle
Board Opinion 25 ("APB-25"), "Accounting for Stock Issue to
Employees", but regardless of the method used to account
for the compensation cost associated with stock option or
similar plans, it requires employers to disclose information
required by FAS 123. The Company intends to continue to use
APB25 in accounting for the compensation cost associated with stock
options, but will be required to provide the disclosures required
by FAS 123.
Page 81
In June 1996, the Financial Accounting
Standards Board issued Statement of Financial Accounting
Standard No. 125 ("FAS 125"), "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of
Liabilities", FAS 125 requires that an entity recognize
only those assets that it controls and liabilities it has
incurred. Assets should be recognized until
control has been surrendered, and liabilities should
be recognized until they have been extinguished.
Recognition of financial assets and liabilities
will not be affected by the sequence of the transactions
unless the effect of the transactions is to maintain
effective control over a transferred financial asset.
FAS 125 is effective for transactions after December 31, 1996.
The Company believes the adoption of FAS 125
will not have a material impact on the
consolidated financial statements.
Effect of Inflation
Persistent high rates of inflation can have a
significant effect on the reported financial
condition and results of operation of all
industries. However, the asset and liability
structure of a bank holding company is
substantially different from that of an
industrial company, in that virtually all assets
and liabilities of a bank holding company are
monetary in nature. Accordingly, changes in
interest rates may have significant impact on a
bank holding company's performance. Interest
rates do not necessarily move in the same direction, or in the
same magnitude, as the prices of goods and services.
Inflation does have an impact on the growth
of total assets in the banking industry, often
resulting in a need to increase equity capital
at higher than normal rates to maintain an
appropriate equity-to-assets ratio.
Although it is obvious that inflation affects
the growth of total assets, it is difficult to
measure the impact precisely. Only new assets
acquired in each year are directly affected, so a
simply adjustment of asset totals by use of an
inflation index is not meaningful. The results
of operations also have been affected by
inflation, but again, there is no simple way to
measure the effect on the various categories
of income and expense.
Interest rates in particular are significantly
affected by inflation, but neither the timing
nor the magnitude of the changes coincides
with changes in standard measurements of
inflation such as the consumer price index.
Additionally, changes in interest rates on some
types of consumer deposits may be delayed.
These factors in turn affect the composition of
sources of funds by reducing the growth of deposits
that are less interest sensitive and increasing
the need for funds that are more interest
sensitive.
Page 82
REGULATION AND SUPERVISION
Firstbank and BankCentral are bank holding
companies within the meaning of the Bank Holding Company Act
of 1956, as amended (the "Bank Holding Company Act"), and are
registered as such with the Federal Reserve Board. Under the
Bank Holding Company Act, and the regulations promulgated
thereunder, Firstbank and BankCentral are required to file
periodic reports on their respective operations and such
additional information as the Federal Reserve Board may require.
They are also subject to examination by the Federal Reserve
Board which has jurisdiction to regulate the terms of certain
debt issues of each company, including the authority to
impose reserve requirements.
All of the subsidiary banks of Firstbank are state
banks chartered under the Illinois Banking Act, except for
The First National Bank of Central Illinois and Colonial Bank.
The Illinois state banks are subject to regulation and
examination by the Illinois Commissioner of Banks and Real Estate
under the provisions of the Illinois Banking Act and by the FDIC under
the provisions of the Federal Deposit Insurance Act. Elliott State
Bank, a subsidiary of Firstbank, is an Illinois state "member" bank
of the Federal Reserve System, and is subject to regulation and
examination by the Federal Reserve Board. The First National Bank of
Central Illinois, a subsidiary of Firstbank, is chartered under the
National Banking Act and is subject to supervision and regulation by
the Office of the Comptroller of the Currency (the "Comptroller").
Colonial Bank, a subsidiary of Colonial, is
chartered as a Missouri banking corporation by the Missouri
Division of Finance under the laws of the State of Missouri and is
subject to regulation and supervision by the Missouri Division and the
FDIC under the provisions of the Federal Deposit Insurance Act.
The subsidiary bank of BankCentral, CNB of Mattoon, is
chartered as a national banking association under the laws of the
United States. It is subject to regulation and supervision by
the Comptroller and the FDIC under the provisions of
the Federal Deposit Insurance Act.
The federal and state laws and
regulations generally applicable to banks regulate, among other things,
the scope of business of the aforesaid subsidiary banks, their
investments, their reserves against deposits, and the nature and amount
of and collateral for loans, and include restrictions on the number of
banking offices and activities which may be performed at such offices.
These laws and regulations are generally designed for the protection
of the bank's depositors and not the stockholders of a banking institution.
The primary source of cash for Firstbank and
BankCentral comes in the form of dividends from
subsidiary banks. Banks organized under
Federal and Illinois law must meet certain
requirements respecting the amount of their
capital and surplus, and in certain instances,
must obtain regulatory approval before declaring
dividends. Under the National Banking Act and
the Illinois Banking Act, until a bank's surplus
equals or exceeds the amount of its capital, no
dividends may be declared unless at least one-
tenth of the bank's net profit earned since
declaration of the last dividend has been
transferred to surplus. Illinois banks are
prohibited from paying dividends in an amount
greater than net profits then on hand less
losses and bad debts. In
addition, approval of the Comptroller, or his
designate, is required for any dividend by a
national bank if the total of all
dividends declared by the bank in any calendar
year would exceed the total of its net profits
for that year combined with its retained net
profits for the preceding two years,
Page 83
less any required transfers to surplus. Sound banking
practices also require the maintenance of adequate levels
of capital. Federal regulatory authorities have adopted standards
for the maintenance of capital by banks, and adherence to such
standards may further limit the ability of The First
National Bank of Central Illinois to pay dividends.
Illinois state banks are allowed to establish
branches without limit as to number or geographic
location, thus giving Illinois state banks the
same branching rights enjoyed by
national banks in Illinois.
Subsidiary banks of a bank holding company are
subject to certain restrictions under the Federal
Reserve Act and the Federal Deposit Insurance Act
on loans and extensions of credit to the bank
holding company or to its subsidiaries, investments in
the stock or other securities of the bank holding
company or its subsidiaries, or advances to any
borrower collateralized by such stock or other
securities.
The Bank Holding Company Act requires every bank
holding company to obtain the prior approval of the
Federal Reserve Board before merging with or
consolidating into another bank holding company,
acquiring substantially all the assets of any bank, or
acquiring direct or indirect ownership or control of
more than five percent of the voting shares of any
bank. The Federal Reserve Board may not approve an
acquisition by a bank holding company unless such
acquisition has been specifically authorized by
applicable statute.
The Bank Holding Company Act also prohibits a
bank holding company, with certain exceptions, from
acquiring direct or indirect ownership or control of
more than five percent of the voting shares of any
company which is not a bank and from engaging in
any business other than that of banking, managing and
controlling banks, or furnishing services to banks
and their subsidiaries. Firstbank and BankCentral,
however, may engage in, and may own shares of
companies engaged in, certain businesses determined by
the Federal Reserve Board to be so closely related to
banking or managing or controlling banks as to be a
proper incident thereto. The Bank Holding Company Act
does not place territorial restrictions on the
activities of bank holding companies or their non-
bank subsidiaries. The Federal Reserve Board has
adopted minimum capital ratios and guidelines to
provide a framework for assessing the adequacy of the
capital of bank holding companies by the Reserve Bank.
The guidelines apply to all bank holding companies
regardless of size and are used in the examination
and supervisory process as well as in the analysis
of applications to be acted upon by the Federal
Reserve Board.
The Federal Reserve Board has established
minimum capital ratios under its risk-based capital
guidelines. The risk-based guidelines are used by the
Federal Reserve Board for the purposes of assessing
the capital adequacy of Firstbank and BankCentral.
Currently the risk-based capital guidelines require
Firstbank and BankCentral to meet a minimum Total
Capital ratio of 8 percent, of which at least 4
percent must consist of Tier 1 Capital. Tier 1
Capital generally consists of (a) common stockholders'
equity, (b) qualifying perpetual preferred stock and
related surplus, subject to certain limitations
specified by the Federal Reserve Board, and (c)
minority interests in the equity accounts of
consolidated subsidiaries; less goodwill and any other
intangible assets and investments in subsidiaries that
the Federal Reserve Board determines should be
deducted from Tier 1 capital.
Page 84
The Federal Reserve Board has also adopted an
additional capital standard for bank holding
companies. Under this new standard, a 3 percent
leverage ratio of Tier 1 Capital to total assets is
the minimum requirement for banking organizations that
are deemed the strongest and most highly rated by
the Federal Reserve Board. A higher minimum leverage
ratio is required of less highly rated banking
organizations.
Illinois bank holding companies are permitted to
acquire banks and bank holding companies, and be
acquired by bank holding companies, located in any
state which authorizes such acquisitions
under qualifications and conditions which are not
unduly restrictive, as determined by the
Commissioner, when compared to those imposed under
Illinois law. Recently enacted federal legislation
permits bank holding companies to acquire savings and
loan associations located anywhere in the United
States.
Effective September 29, 1995, pursuant to the
provisions of the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 (the "Interstate
Banking Act"), an Illinois bank holding company may
acquire either control or substantially all the
assets of a bank located outside of Illinois,
regardless of whether the
acquisition would be prohibited by state law.
The Interstate Banking Act also will permit, effective
June 1, 1997, merger transactions between insured banks with
different home states, regardless of prohibitions under
state law, which converts existing bank offices into branches
of the resulting bank. The Act imposes certain concentration
limitations and permits a state, during the interim period, to
either "opt in" or "opt out" of the interstate branching
provisions.
The Federal Deposit Insurance Corporation Improvement Act of
1991 (the "FDICIA") requires the federal banking regulatory agencies
to take prompt corrective action against undercapitalized financial
institutions. Under the FDICIA, financial institutions are assigned
to one of five categories, based upon the adequacy of their capital:
well-capitalized; adequately capitalized; undercapitalized; significantly
undercapitalized; or critically undercapitalized. The
FDICIA requires each federal banking regulatory agency to
specify by regulation the capital levels for each category.
Undercapitalized, significantly undercapitalized, and
critically undercapitalized financial institutions
are subject to prompt imposition of newly
authorized corrective measures. Each of the
federal banking agencies have regulations defining
these five categories. The FDICIA also places
restrictions on capital distributions and
operations of undercapitalized financial
institutions. All insured financial institutions
are prohibited from making capital distributions
or paying management fees to any person or
company who controls the financial institution if
such distribution or payment would leave the
financial institution undercapitalized. A
financial institution which is not well-
capitalized generally cannot accept brokered
deposits or pay rates on
deposits which are significantly higher than the
prevailing rates of interest on insured deposits.
Undercapitalized financial institutions may not
increase total average assets, make acquisitions,
establish new branch offices, or engage in any new
line of business unless certain statutory conditions
have been met, including prior approval by the FDIC of
the financial institution's capital restoration plan.
FDICIA also gives the appropriate federal banking
regulatory agency discretion to take any of the corrective
actions authorized for significantly undercapitalized
financial institutions, if the agency determines that
such actions are necessary to protect the deposit
insurance funds.
Page 85
The FDICIA further provides that if an insured
depository institution receives a less than satisfactory
examination rating for asset quality, management,
earnings, or liquidity, the examining agency may
deem such financial institution to be engaging in
an unsafe or unsound practice. The potential
consequences of being found to have engaged in an
unsafe or unsound practice are significant, because
under FDICIA the appropriate federal banking
regulatory agency may: (i) for a financial
institution otherwise classified as wellcapitalized,
reclassify the financial institution as adequately
capitalized; (ii) for a financial institution
classified as adequately capitalized, take any of the
prompt corrective actions authorized for
undercapitalized financial institutions and impose
restrictions on capital distributions and management
fees; and (iii) for a financial institution classified
as undercapitalized, take any of the
prompt corrective actions authorized
for significantly undercapitalized financial
institutions.
OTHER MATTERS
The Special Meeting of Stockholders of
BankCentral is called for the purpose set forth
in the Notice of Special Meeting and discussed
herein. The Board of Directors of BankCentral does
not know of any matters for action by
stockholders at such meeting other than the
matters described in the notice. If any other
matter should properly come before the Special
Meeting, the persons named as proxies will have
discretionary authority to vote the shares
represented by proxies in accordance with their
discretion and judgment as to the best interests
of BankCentral.
STOCKHOLDER PROPOSALS
If the Merger is approved, the other
conditions of the Merger are satisfied and the
Merger is consummated, stockholders of
BankCentral will become stockholders of
Firstbank at the Effective Date. Firstbank
stockholders had the opportunity to submit to
Firstbank proposals for formal consideration at
the 1997 annual meeting of Firstbank's stockholders and
inclusion in Firstbank's proxy statement for such meeting.
To be considered for inclusion in Firstbank's proxy statement
and proxy for the 1997 annual meeting, such proposals were
required to be submitted prior to December 5, 1997. No such
proposals were received by Firstbank.
LEGAL MATTERS
Certain legal matters with respect to the Merger and
the legality of the Firstbank Common Stock offered hereby
will be passed upon by counsel for Firstbank, Brown, Hay &
Stephens, 700 First National Bank Building, P.O. Box
2459, Springfield, Illinois 62705-2459. Certain legal
matters will be passed upon for BankCentral by Barack
Ferrazzano Kirschbaum Perlman & Nagelberg, 333 West Wacker
Drive, Suite 2700, Chicago, Illinois 60606.
Page 86
EXPERTS
The consolidated financial statements of Firstbank
and subsidiaries as of December 31, 1995, and 1994 and for
each of the years in the three-year period ended December 31, 1995,
have been incorporated by reference herein and in the
Registration Statement in reliance upon the report of KPMG
Peat Marwick, LLP, independent certified public accountants,
incorporated herein by reference, and upon the authority of
said firm as experts in accounting and auditing.
The consolidated financial statements of
BankCentral and subsidiary as of June 30, 1996, and 1995 and for
each of the years in the threeyear period ended June 30, 1996, have
been included herein and in the Registration Statement in reliance
upon the report of McGladrey & Pullen, LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of
said firm as experts in accounting and auditing.
Page 87
EXHIBIT A
Board of Directors
BankCentral Corporation
1400 Charleston Avenue
Mattoon, Illinois 61938
Dear Members of the Board:
You have requested our opinion as investment bankers as to the
fairness, from a financial perspective, to the common
shareholders of BankCentral Corporation, Mattoon, Illinois (the
"Company") of the proposed merger of the Company with Firstbank of
Illinois Co., Springfield, Illinois ("FBIC"). In the proposed merger,
Company shareholders will receive $6,500,000 in cash and between
$6,361,425 and $6,765,328 in FBIC common stock for an
aggregate value between $12,861,425 and $13,265,328 when FBIC stock
is valued at $31.50 or greater as defined in the Plan and Agreement
of Merger between FBIC and the Company (the "Agreement"). The
closing price of FBIC on February 12, 1997 was $35.75. In addition, the
Board of Directors of the Company have the right to terminate the
Agreement without penalty if the aggregate value to be received by the
Company's common shareholders is less than $12,800,000.
Professional Bank Services, Inc. ("PBS") is a bank
consulting firm and as part of its investment
banking business is continually engaged in reviewing
the fairness, from a financial perspective, of bank
acquisition transactions and in the valuation of banks
and other businesses and their securities in
connection with mergers, acquisitions, estate
settlements and other purposes. We are
independent with respect to the parties of the
proposed transaction.
For purposes of this opinion, PBS performed a
review and analysis of the historic performance of
the Company and its wholly owned subsidiary
Central National Bank of Mattoon, Mattoon,
Illinois (the "Bank") contained in: (i) June 30,
1996 form FR Y-9SP Parent Company Only Financial
Statements filed by the Company; (ii) September
30, 1996 financial statements and June 30, 1996
audited annual report of the Company; (iii) June
30, 1995, June 30, 1994 audited annual reports of
the Company; and (iv) June 30, 1996 Uniform Bank
Performance Report of the Bank. We have reviewed
and tabulated statistical data regarding the
loan portfolio, securities portfolio and other
performance ratios and statistics. Financial
projections were prepared and analyzed as well as
other financial studies,
Page A-1
Board of Directors
BankCentral Corporation
February 21, 1997
Page 2
analyses and investigations as deemed relevant for the purposes of
this opinion. In review of the aforementioned information, we have
taken into account our assessment of general market and financial
conditions, our experience in other transactions, and our knowledge of
the banking industry generally.
We have not compiled, reviewed or audited the financial
statements of the Company, the
Bank or FBIC, nor have we independently verified any of the
information reviewed; we have relied upon such information as being
complete and accurate in all material respects. We have not made
independent evaluation of the assets of the Company, the Bank or FBIC.
Based on the foregoing and all other factors deemed relevant, it is
our opinion as investment bankers, that, as of the date hereof,
the consideration proposed to be received by the shareholders of
the Company under the Agreement is fair and equitable from a
financial perspective.
Very truly yours,
PROFESSIONAL BANK SERVICES, INC.
Christopher L. Hargrove
President
Page A-2
EXHIBIT B
Section 262 of the Delaware Code provides:
(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 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; and the words "depository receipt" mean a receipt or
other instrument issued by a depository representing an interest in one
or more shares, or fractions thereof, solely of stock of a corporation,
which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class
or series of stock of a constituent corporation in a merger or consolidation
to be effected pursuant to 251 (other than a
merger effected pursuant to subsection (g) of Section
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 stock, or depository receipts in respect thereof, at
the record date fixed to determine the stockholders entitled
to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation,
were either (i) listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or (ii) held of record by more than 2,000 holders; and
further provided that no appraisal rights shall be available for
any shares of stock of the constituent corporation surviving a merger if
the merger did not require for its approval the vote of the
holders of the surviving corporation as provided in
subsection (f) of 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 251, 252, 254, 257, 258, 263 and 264
of this title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock or depository
receipts at the effective date of the merger or consolidation will
be either listed on a national securities exchange or designated as
a national market system security on an interdealer quotation system
by the National Association of Securities Dealers, Inc. or held of
record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
Page B-1
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under 253 of this title is
not owned by the parent corporation immediately prior to the
merger, appraisal rights shall be available for
the shares of the subsidiary Delaware
corporation.
(c) Any corporation may provide in its
certificate of incorporation that appraisal rights under this
section shall be available for the shares of any
class or series of its stock as a result of an amendment to
its certificate of incorporation, any merger or
consolidation in which the corporation is a constituent
corporation or the sale of all or substantially all of the
assets of the corporation. If the certificate of
incorporation contains such a provision, the procedures of
this section, including those set forth in subsections (d)
and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for
which appraisal rights are provided under this section is
to be submitted for approval at a meeting of stockholders,
the corporation, not less than 20 days prior to the
meeting, shall notify each of its stockholders who was
such on the record date for such meeting with respect to
shares for which appraisal rights are available pursuant to
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 228 or 253 of this title, each constituent corporation,
either before the effective date of the merger or consolidation
or within ten days thereafter, shall notify each of the holders of
any class or series of stock of such constituent
corporation who are entitled to appraisal rights of the
approval of the merger or consolidation and that
appraisal rights are available for any
or all shares of such class or series of stock of such
constituent corporation, and shall include in such
notice a copy of this section; provided that, if the notice is
given on or after the effective date of the merger or consolidation,
such notice shall be given by the surviving or resulting corporation
to all such holders of any class or series of stock of a
constituent corporation that are entitled to appraisal rights. Such
notice may, and, if given on or after the effective date of the merger or
consolidation, shall, also notify such stockholders of the effective
date of the merger or consolidation. Any stockholder entitled to
appraisal rights may, within twenty days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will
be sufficient if it reasonably informs
the corporation of the identity of the stockholder
and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such
notice did not notify stockholders
of the effective date of the merger or consolidation,
either (i) each such constituent corporation shall send a
second notice before the effective date of the merger
or consolidation notifying each of
the holders of any class or series of stock
of such constituent corporation that are entitled
to appraisal rights of the effective date of the
merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all
Page B-2
such holders on or within 10 days after such
effective date; provided, however, that if such second
notice is sent more than 20 days following the sending of
the first notice, such second notice need only be sent to
each stockholder who is entitled to
appraisal rights and who has demanded appraisal of
such holder's shares in accordance with this subsection.
An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to
give either notice that such notice has been given shall,
in the absence of fraud, be prima facie evidence of the
facts stated therein. For purposes
of determining the stockholders entitled to receive
either notice, each constituent corporation may fix, in
advance, a record date that shall be not more than 10 days
prior to the date the notice is given; provided that, if the
notice is given on or after the effective date of the
merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice
is given prior to the effective date, the record date
shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the
merger or consolidation, the surviving or resulting
corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise
entitled to appraisal rights, may
file a petition in the Court of Chancery demanding
a determination
of
the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within
60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to
withdraw 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 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.
Page B-3
(h) After determining the stockholders
entitled to an appraisal, the Court shall appraise the shares,
determining the fair value exclusive of any
element of value arising from the accomplishment or
expectation of the merger or consolidation,
together with a fair rate of interest, if any, to
be paid upon the amount determined to be the fair value.
In determining such fair value, the Court shall take into
account all relevant factors. In determining the fair
rate of interest, the Court may consider all
relevant factors, including the rate of interest
which the surviving or resulting corporation
would have had to pay to borrow money during
the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any
stockholder entitled to participate in
the appraisal proceeding, the Court may, in
its discretion, permit discovery or other
pretrial proceedings and may proceed to trial upon
the appraisal prior to the final determination of
the stockholder entitled to an appraisal.
Any stockholder whose name appears on the list
filed by the surviving or resulting corporation
pursuant to subsection (f) of this section and who has submitted
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
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 his demand for an appraisal and an acceptance of the
merger or consolidation, either within 60 days after the
effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no
appraisal proceeding in the Court of Chancery shall
be dismissed as to any stockholder without the
approval of the Court, and such approval may be
conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting
corporation to which the shares of such
objecting stockholders would have been converted
had they assented to the merger or consolidation
shall have the status of authorized and
unissued shares of the surviving or resulting
corporation. (Last amended by Ch. 349 L. '96,
eff. 7-1-96.)
Page B-4
FINANCIAL INFORMATION
Index to Financial Statements
Page
BankCentral Corporation and Subsidiary:
Independent Auditors' Report F-2
Consolidated Balance Sheets - September 30, 1996 and
June 30, 1996 and 1995 F-3
Consolidated Statements of Income - Three
Months Ended September 30, 1996 and 1995 and
Years Ended June 30, 1996, 1995 and 1994 F-5
Consolidated Statements of Stockholders'
Equity - Three Months Ended
September 30, 1996 and Years Ended
June 30, 1996, 1995 and 1994 F-7
Consolidated Statements of Cash Flows - Three
Months Ended September 30, 1996 and 1995 and
Years Ended June 30, 1996, 1995 and 1994 F-8
Notes to Consolidated Financial Statements -
June 30, 1996, 1995 and 1994 F-11
Page F-1
Independent Auditor's Report
To the Stockholders and Board of Directors
BANKCENTRAL CORPORATION AND SUBSIDIARY
Mattoon, Illinois
We have audited the accompanying balance sheets of
BANKCENTRAL CORPORATION AND SUBSIDIARY as of June 30, 1996
and 1995, and the related consolidated statements of
income, stockholders' equity, and cash
flows for the three years ended June 30, 1996.
These financial statements are the responsibility of
the Company's management. Our responsibility is
to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with
generally accepted auditing standards. Those
standards require that we plan and perform the
audit to obtain reasonable assurance about whether
the financial statements are free of material
misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and
disclosures in the financial statements. An
audit also includes assessing the accounting
principles used and significant estimates made by
management, as well as evaluating
the overall financial statement presentation. We
believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements
referred to above present fairly, in all
material respects, the financial position of
BANKCENTRAL CORPORATION AND SUBSIDIARY as of June
30, 1996 and 1995, and the results of their operations and
their cash flows for the three years ended June
30, 1996, in conformity with generally accepted
accounting principles.
McGladrey & Pullen, LLP
Champaign, Illinois
October 25, 1996, except for Note 20 as
to which the date is December 20, 1996
Page F-2
BANKCENTRAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
June 30, 1996, 1995 and September 30,
1996
September 30, June 30,
ASSETS 1996 1996 1995
(Unaudited)
Cash and due from banks $ 8,518,092 $ 4,548,085 $6,843,097
Federal funds sold 2,800,000
Securities held to maturity
(fair value September 30, 1996
$1,004,854; June 30, 1996
$820,789; June 30, 1995
$6,978,390) 1,008,696 828,330 6,889,377
Securities available for sale 27,070,601 28,272,310 16,314,426
Loans (net of allowance for
loan losses September 30,1996
$995,640; June 30, 1996
$1,148,197; June 30, 1995
$1,260,102) 71,042,985 71,923,657 74,248,438
Premises and
equipment 3,581,996 3,632,036 3,748,312
Other real estate 364,047 364,047 230,000
Non-compete agreement 82,500 105,000 195,000
Deferred income tax asset 181,354 297,484 319,092
Income tax receivable 60,573 38,455 3,633
Other assets 2,431,336 2,366,991 2,302,124
$ 114,342,180 $ 112,376,395 $ 113,893,499
See Accompanying Notes to Consolidated Financial Statements.
Page F-3
BANKCENTRAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
June 30, 1996 and 1995 and September 30, 1996
LIABILITIES AND September 30, June 30,
STOCKHOLDERS' EQUITY 1996 1996 1995
(Unaudited)
Liabilities
Deposits:
Demand $ 32,016,852 $ 32,350,811 $35,723,831
Savings 10,395,156 12,358,618 12,251,385
Time, $100,000 and over 19,650,440 13,884,896 12,825,698
Other time 35,133,880 38,204,200 37,650,409
97,196,328 96,798,525 98,451,323
Federal funds purchased 1,350,000 500,000
Borrowings under notes issued
by the U.S. Treasury 949,591 700,000 347,926
Note payable 4,600,000 4,600,000 5,150,000
Securities sold under agreements
to repurchase 2,216,338 2,218,397 2,150,000
Non-compete agreement 82,500 105,000 195,000
Other liabilities 1,372,180 1,159,572 1,191,071
107,766,937 106,081,494 107,485,320
Minority Interest in Subsidiary 12,117
Stockholders' Equity
Common stock, $1.00 par value;
350,000 shares authorized;
shares issued September 30,
1996 243,081; June 30, 1996
243,081; and June 30,1995
238,915 243,081 243,081 238,915
Additional paid-in capital 4,793,814 4,793,814 4,793,814
Retained earnings 2,515,664 2,295,722 1,655,425
Unrealized loss on securities
available for sale (292,219) (378,356) (206,272)
7,260,340 6,954,261 6,481,882
Less cost of treasury stock;
22,972 shares September 30,
1996; 22,183 shares June 30,
1996; 3,065 shares June 30,
1995 (685,097) (659,360) (85,820)
6,575,243 6,294,901 6,396,062
$114,342,180 $112,376,395 $113,893,499
See Accompanying Notes to Consolidated Financial Statements.
Page F-4
<TABLE>
BANKCENTRAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Years Ended June 30, 1996, 1995 and 1994 and
Three Months Ended September 30, 1996 and 1995
<CAPTION>
September 30, June 30,
1996 1995 1996 1995 1994
(Unaudited)
<S>
Interest income: <C> <C> <C> <C> <C>
Loans and fees on loans $ 1,680,659 $ 1,745,906 $ 6,792,630 $ 6,630,299 $ 6,230,503
Securities:
U.S. Treasury 130,506 91,927 378,390 486,322 411,887
U.S. Government agencies
and corporations 288,577 229,266 1,044,397 978,835 1,025,159
States and political
subdivisions 12,310 19,226 72,897 78,474 69,699
Other 12,025 12,047 52,276 18,088 42,877
Federal funds sold 4,180 30,574 82,476 79,921 37,235
Total interest income 2,128,257 2,128,946 8,423,066 8,271,939 7,817,360
Interest expense:
Deposits 922,204 920,844 3,715,250 3,278,983 2,846,247
Note payable 94,875 114,455 425,659 439,717 374,355
Other borrowed funds 48,856 39,449 156,633 141,381 51,240
Total interest expense 1,065,935 1,074,748 4,297,542 3,860,081 3,271,842
Net interest income 1,062,322 1,054,198 4,125,524 4,411,858 4,545,518
Provision for loan losses 45,000 75,000 451,200 705,000 628,181
Net interest income
after provision for
loan losses 1,017,322 979,198 3,674,324 3,706,858 3,917,337
Other income:
Service charges 91,588 97,097 467,887 479,821 409,942
Gain on sale of mortgage
servicing rights 109,000 150,000
Credit card income and fees 27,267 33,414 132,100 125,931
Net securities gains (losses) (12,868) 16,860 12,250 (17,651) 23,722
Other 73,496 56,623 234,399 219,958 345,533
179,483 312,994 996,636 808,059 779,197
</TABLE>
(Continued)
Page F-5
<TABLE>
BANKCENTRAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (Continued)
Years Ended June 30, 1996, 1995 and 1994 and Three Months Ended
September 30, 1996 and 1995
<CAPTION>
September 30, June 30,
1996 1995 1996 1995 1994
(Unaudited)
<S> <C> <C> <C> <C> <C>
Other expenses:
Salaries and wages $ 369,979 $ 398,866 $ 1,539,762 $1,717,099 $1,678,312
Employee benefits 83,395 77,195 304,283 336,035 398,083
Occupancy and equipment 161,211 165,440 650,910 676,763 640,715
Credit and debit card expense 47,897 37,004 180,329 149,881
Management fees 39,124 98,163 71,379
Amortization expense 24,030 24,030 96,120 96,120
FDIC insurance 500 (6,638) 3,941 227,589 221,878
Other 189,409 218,493 840,333 906,870 994,669
876,421 953,514 3,713,841 4,181,736 3,933,657
Income before income
taxes and minority
interest 320,384 338,678 957,119 333,181 762,877
Income taxes 100,442 122,121 316,129 5,500 238,237
Income before minority
interest in net income
of subsidiary 219,942 216,557 640,990 327,681 524,640
Minority interest in net
income of subsidiary 1,212 693 1,210 1,258
Income before
cumulative effect
of change in
accounting principle 219,942 215,345 640,297 326,471 523,382
Cumulative effect on prior
years of changing to a different
method of accounting for income
taxes 618,000
Net income $ 219,942 $ 215,345 $ 640,297 $ 326,471 $ 1,141,382
Net income per share
of common stock $ 0.96 $ 0.88 $ 2.68 $ 1.34 $ 4.78
Weighted average number
of shares outstanding 228,784 244,182 238,539 243,434 238,915
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
<TABLE>
BANKCENTRAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended June 30, 1996, 1995 and 1994 and
Three Months Ended September 30, 1996
<CAPTION>
Unrealized
Additional Loss on
Common Paid-In Retained Securities Treasury
Stock Capital Earnings Available For Sale Stock Total
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1993 $ 238,915 $4,568,780 $ 187,572 $ $ $4,995,267
Net income 1,141,382 1,141,382
Stock options granted 112,482 112,482
Effect of change in
accounting principle
to recognize the net
unrealized loss on
securities available
for sale, net of tax
effect of $183,456 (356,121) (356,121)
Balance, June 30, 1994 238,915 4,681,262 1,328,954 (356,121) 5,893,010
Net income 326,471 326,471
Stock options granted 112,552 112,552
Purchase of 3,065
shares of treasury
stock (85,820) (85,820)
Change in unrealized
loss on securities
available for sale,
net of tax effect of
$77,195 149,849 149,849
Balance, June 30, 1995 238,915 4,793,814 1,655,425 (206,272) (85,820) 6,396,062
Net income 640,297 640,297
Stock options
exercised 4,166 4,166
Purchase of 19,118
shares of treasury
stock (573,540) (573,540)
Change in unrealized
loss on securities
available for sale,
net of tax effect
of $130,256 (172,084) (172,084)
Balance, June 30, 1996 243,081 4,793,814 2,295,722 (378,356) (659,360) 6,294,901
Net income (unaudited) 219,942 219,942
Purchase of 789
shares of treasury
stock (unaudited) (25,737) (25,737)
Change in unrealized
loss on securities
available for sale,
net of tax effect
of $54,372 (unaudited) 86,137 86,137
Balance, September 30,
1996 (unaudited) $ 243,081 $4,793,814 $2,515,664 $ (292,219) $ (685,097) $6,575,243
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
Page F-7
<TABLE>
BANKCENTRAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30, 1996, 1995 and 1994 and
Three Months Ended September 30, 1996 and 1995
<CAPTION>
September 30, June 30,
1996 1995 1996 1995 1994
(Unaudited)
<S>
Cash Flows from Operating Activities <C> <C> <C> <C> <C>
Net income $ 219,942 $ 215,345 $ 640,297 $ 326,471 $ 1,141,382
Adjustments to reconcile net
income to net cash provided
by operating activities:
Deferred income taxes 61,758 110,870 151,864 (135,730) 6,304
Depreciation 77,407 74,027 305,768 288,959 237,860
Amortization 24,030 24,030 96,120 96,120 90,000
Stock options granted 112,552 112,482
Provision for loan losses 45,000 75,000 451,200 705,000 628,181
Net (gain) loss on sales of
securities 12,868 (16,860) (12,250) 17,651 (23,722)
Gain on sale of mortgage
servicing rights (109,000) (150,000)
Amortization (accretion) of bond
premiums/discounts, net 16,547 12,860 90,119 (24,215) 196,600
Loss (gain) on sale of other
real estate (9,000) 1,600 (30,773) (5,732)
Loss on write-down of other
real estate 20,000 9,500
Minority interest in net income
of subsidiary 1,212 693
Cumulative effect of change in
accounting principle (618,000)
Changes in assets and
liabilities:
(Increase) in income tax
receivable (22,118) (84,505) (34,822) (3,633)
(Increase) in other assets (65,875) (47,063) (70,987) (240,265) (24,263)
Increase (decrease) in other
liabilities 212,608 (99,452) (31,499) 206,356 (96,080)
Net cash provided by
operating activities 582,167 147,464 1,458,103 1,319,703 1,655,770
(Continued)
Page F-8
</TABLE>
<TABLE>
BANKCENTRAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Years Ended June 30, 1996, 1995 and 1994 and Three Months Ended September 30,
1996 and 1995
<CAPTION>
September 30, June 30,
1996 1995 1996 1995 1994
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash Flows from Investing Activities
Investment securities:
Held to maturity:
Purchases $ (281,314) $ $ (582,295) $ (1,411,328)
Proceeds from maturities
and calls 100,000 221,250 2,061,000
Proceeds from principal
payments 689 2,632 167,001
Available for sale:
Purchases (2,355,937) (2,994,897) (17,299,720) (4,957,578)
Proceeds from sales 3,507,997 971,562 7,802,513 7,445,012
Proceeds from maturities
and calls 40,000 35,000 2,535,000 535,000
Proceeds from principal
payments 121,002 174,617 1,046,206 955,669
Proceeds from maturities and
principal payments of invest-
ment securities 4,917,857
Proceeds from sales of invest-
ment securities 5,154,600
Purchase of investment securities (12,023,480)
Proceeds from sales of other
real estate 184,000 253,000 702,675 365,732
Decrease (increase) in federal
funds sold, net 1,300,000 2,800,000 (2,500,000) 700,000
Decrease (increase) in loans, net 835,672 (1,142,379) 1,464,934 (79,641) (4,572,902)
(Increase) in cash value of life
insurance policies (35,325)
Cash received from surrender of
life insurance policies 135,460
Purchase of premises and
equipment (27,367) (51,737) (189,492) (138,360) (901,287)
Acquisition of minority shares (1,212) (12,810) (1,718)
Proceeds from sale of mortgage
servicing rights 109,000 150,000
Net cash (used in)
provided by
investing activities 1,940,742 (1,413,414) (1,811,414) 2,779,450 (6,261,063)
(Continued)
Page F-9
</TABLE>
<TABLE>
BANKCENTRAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Years Ended June 30, 1996, 1995 and 1994 and Three Months Ended September 30,
1996 and 1995
<CAPTION>
September 30, June 30,
1996 1995 1996 1995 1994
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash Flows from Financing Activities
Net increase (decrease) in demand
deposits and savings accounts $ (2,297,421) $ (3,378,002) $ (3,265,787) $ 83,543 $ 1,067,865
Net increase (decrease) in time
deposits 2,695,224 4,068,084 1,612,989 (2,301,971) 3,348,917
Increase in federal funds
purchased 850,000 500,000
Net proceeds from other borrow-
ings and securities sold under
agreements to repurchase 247,532 295,046 (129,529) 1,017,000 492,981
Payments on non-
agreement (22,500) (22,500) (90,000) (90,000) (90,000)
Purchase of treasury stock (25,737) (573,540) (85,820)
Issuance of common stock 4,166
Net cash (used in)
financing activities 1,447,098 962,628 (1,941,701) (1,377,248) 4,819,763
Net increase
(decrease) in
cash and
cash equivalents 3,970,007 (303,322) (2,295,012) 2,721,905 214,470
Cash and cash equivalents,
beginning 4,548,085 6,843,097 6,843,097 4,121,192 3,906,722
Cash and cash equivalents,
ending $ 8,518,092 $ 6,539,775 $ 4,548,085 $ 6,843,097 $ 4,121,192
Supplemental Disclosures of
Cash Flow Information
Cash payments for:
Interest:
Paid to depositors $ 809,377 $ 769,012 $ 3,614,985 $ 3,139,025 $ 2,868,302
Paid on note payable 96,571 115,838 459,835 394,269 364,889
Paid on other borrowed funds 37,173 47,755 164,782 141,381 51,240
Income taxes 15,303 183,960 126,841 374,495
</TABLE>
(Continued)
Page F-10
<TABLE>
BANKCENTRAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Years Ended June 30, 1996, 1995 and 1994 and Three Months Ended September 30,
1996 and 1995
<CAPTION>
September 30, June 30,
1996 1995 1996 1995 1994
(Unaudited)
<S> <C> <C> <C> <C> <C>
Supplemental Schedule of Noncash
Investing and Financing Activities
Transfer of loans to real estate
acquired in settlement of
loans $ 227,047 $ 408,647 $ 470,902
(Increase) decrease in unrealized
loss on securities available
for sale $ 140,509 $ 128,255 $ (464,980) $ 389,684 $ (539,577)
Increase (decrease) in deferred tax
asset attributable to unrealized
loss on securities available
for sale $ (54,372) $ (21,386) $ 185,553 $ (77,195) $ 183,456
Decrease (increase) in unrealized
loss on securities transferred
to held to maturity $ 162,640 $(162,640)
Securities transferred from avail-
able for sale to held to maturity $2,982,500
Amortized cost of securities trans-
ferred from held to maturity
to available for sale $ 2,940,256 $6,425,795
(Decrease) in deferred tax asset
attributable to unrealized
loss on securities transferred
from held to maturity $ (22,214) $ (55,297)
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
Page F-11
BANKCENTRAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
The consolidated financial statements have been prepared in
conformity with generally accepted accounting principles and
reporting practices prescribed for the banking industry.
The significant accounting and reporting policies of BankCentral
Corporation and its subsidiary, Central National Bank of Mattoon,
follow:
Nature of business
Through Central National Bank of Mattoon (the "Bank"), BankCentral
Corporation (the "Company") provides a full range of banking services
to individual and corporate customers located in Mattoon, Illinois
and the surrounding communities. The Bank is subject to competition
from other financial institutions and nonfinancial institutions
providing financial products. Additionally, the Company and the
Bank are subject to the regulations of certain regulatory agencies
and undergo periodic examinations by those regulatory agencies.
Basis of consolidation
The consolidated financial statements include the accounts of
BankCentral Corporation and its subsidiary, Central National Bank
of Mattoon. As of June 30, 1996, the Company owns 100% of the
Bank common stock. As of June 30, 1995 and 1994, the Company
owned 100% of the Bank common stock and 97% of the Bank preferred
stock. Significant intercompany accounts and transactions have
been eliminated in consolidation.
Use of estimates
In preparing the consolidated financial statements, Company
management is required to make estimates and assumptions which
significantly affect the amounts reported in the consolidated
financial statements. Significant estimates which are
particularly susceptible to change in a short period of time
include the determination of the allowance for loan losses and
valuation of real estate and other properties acquired in
connection with foreclosures or in satisfaction of amounts due
from borrowers on loans. Actual results could differ from those
estimates.
Securities held to maturity
Securities classified as held to maturity are those debt
securities the Company has both the intent and ability to hold to
maturity regardless of changes in market conditions, liquidity
needs or changes in general economic conditions. These
securities are carried at cost adjusted for amortization of
premium and accretion of discount, computed by the interest
method over their contractual lives.
Securities available for sale
Securities classified as available for sale are those debt
securities that the Company intends to hold for an indefinite
period of time, but not necessarily to maturity and equity
securities. Any decision to sell a security classified as
available for sale would be based on various factors, including
significant movements in interest rates, changes in the maturity
mix of the Company's assets and liabilities, liquidity needs,
regulatory capital considerations and other similar factors.
Securities available for sale are carried at fair value. The
difference between fair value and cost, adjusted for amortization
of premium and accretion of discounts, results in an unrealized
gain or loss. Unrealized gains or losses are reported as
increases or decreases in stockholders' equity, net of the
related deferred tax effect. Realized gains or losses on the
sale of securities are determined on the basis of the specific
security sold and are included in earnings. Amortization of
premiums and accretion of discounts are recognized in interest
income using the interest method over their contractual lives.
Page F-12
Loans
Loans are stated at their unpaid principal balance, reduced by
unearned interest and an allowance for loan losses.
Unearned interest on installment loans is credited to income over
the term of the loan using the interest method. For all other
loans, interest is credited to income as earned using the simple
interest method applied to the daily balances of the principal
outstanding.
The accrual of interest income on any loan is discontinued when,
in the opinion of management, there is reasonable doubt as to the
timely collectibility of interest or principal. Interest income
on these loans is recognized to the extent interest payments are
received and the principal is considered fully collectible.
Allowance for loan losses
The allowance for loan losses is established through a provision
for loan losses charged to operating expenses. Loans are charged
against the allowance for loan losses when management believes
that the collectibility of the principal is unlikely. The
allowance is an amount that management believes will be adequate
to absorb losses on existing loans that may become uncollectible,
based on evaluations of the collectibility of loans and prior
loan loss experience. The evaluations take into consideration
such factors as changes in the nature and volume of the loan
portfolio, overall portfolio quality, review of specific problem
loans and current economic conditions that may affect the
borrowers' ability to pay. While management uses the best
information available to make its evaluation, future adjustments
to the allowance may be necessary if there are significant
changes in economic conditions. In addition, regulatory
agencies, as an integral part of their examination process,
periodically review the Bank's allowance for loan losses, and may
require the Bank to make additions to the allowance based on
their judgment about information available to them at the time of
their examination.
On July 1, 1995, the Company adopted Financial Accounting
Standards Board Statement No. 114 (FAS 114), "Accounting by
Creditors for the Impairment of a Loan", as amended by FAS 118,
"Accounting by Creditors for the Impairment of a Loan - Income
Recognition and Disclosure", which requires loans to be
considered impaired when, based on current information and
events, it is probable that the Company will not be able to
collect all amounts due. The portion of the allowance for loan
losses applicable to impaired loans has been computed based on
the present value of the estimated future cash flows of interest
and principal discounted at the loan's effective interest rate or
on the fair value of collateral for collateral dependent loans.
The entire change in present value of expected cash flows of
impaired loans or of collateral value is reported as bad debt
expense in the same manner in which impairment initially was
recognized or as a reduction in the amount of bad debt expense
that otherwise would be reported.
Premises and equipment
Premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed on the accelerated and
straight-line methods over the estimated useful lives of the
assets.
Other real estate
Real estate acquired through foreclosure of deed in lieu of
foreclosure represents specific assets to which the Company has
acquired legal title in satisfaction of indebtedness. Such real
estate is recorded at the property's fair value at the date of
foreclosure (cost). Initial valuation adjustments, if any, are
charged against the allowance for loan losses. Property is
evaluated regularly to ensure the recorded amount is supported by
its current fair value, valuation allowances to reduce the
carrying amount to fair value less estimated cost to dispose are
recorded as necessary. Revenues and expenses related to holding
and operating these properties are included in operations.
Page F-13
Deferred income taxes
The Company and its subsidiary file consolidated Federal and
State income tax returns, with each organization computing its
taxes on a separate entity basis. The provision for income taxes
is based on income as reported in the consolidated financial
statements.
Deferred income tax assets and liabilities are computed annually
for differences between the financial statement and tax bases of
assets and liabilities that will result in taxable or deductible
amounts in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected
to affect taxable income. Deferred tax assets are also
recognized for operating loss and tax credit carryforwards.
Valuation allowances are established when necessary to reduce
deferred tax assets to an amount expected to be realized. Income
tax expense is the tax payable or refundable for the period plus
or minus the change during the period in deferred tax assets and
liabilities.
Non-compete agreement
The non-compete agreement is amortized by the straight-line
method over the five-year term of the agreement.
Earnings per common share and common share equivalents
Earnings per share are computed by dividing net income by the
weighted average number of shares outstanding as increased by
common stock equivalents. This increase is the number of shares
issuable upon exercise of stock options less common shares
assumed to have been purchased by the Company with the proceeds
received upon exercise.
Cash and due from banks
For reporting cash flows, cash and due from banks includes cash
on hand and due from bank accounts (including cash items in
process of clearing).
Reclassifications
Certain amounts in the June 30, 1995 and 1994 consolidated
financial statements have been reclassified to conform with the
June 30, 1996 presentation. Such reclassifications have no
effect on previously reported net income.
Accounting for mortgage servicing rights
In May 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 122 (FAS 122),
"Accounting for Mortgage Servicing Rights." FAS 12 requires the
Bank to recognize as separate assets rights to service mortgage
loans for others, however those servicing rights are acquired.
If the Bank acquires mortgage servicing rights through either the
purchase or origination of mortgage loans and sells or
securitizes those loans with servicing rights retained, the Bank
should allocate the total cost of the mortgage loans to mortgage
servicing rights and the loans (without the mortgage servicing
rights) based on their relative fair values. The mortgage
servicing rights should be amortized in proportion to and over
the period of estimated net servicing income.
FAS 122 is effective for fiscal years beginning after December
15, 1995. Effective July 1, 1996, the Company adopted FAS 122.
The adoption did not have a material impact on the consolidated
financial statements.
Accounting for stock-based compensation
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 123 ("FAS 123"),
"Accounting for Stock-Based Compensation." FAS 123 establishes a
fair value based method of accounting for stock options and other
equity instruments.
Page F-14
FAS 123 permits the continued use of the intrinsic value method
included in Accounting Principle Board Opinion 25 ("APB-25"),
"Accounting for Stock Issued to Employees", but regardless of the
method used to account for the compensation cost associated with
the stock option or similar plans, it requires employers to
disclose information required by FAS 123.
The Company intends to continue to use APB 25 in accounting for
the compensation cost associated with stock options. The Company
will be required to include the disclosures required by FAS 123
in the June 30. 1997 consolidated financial statements.
Accounting for transfers and servicing of financial assets and
extinguishments of liabilities
In June 1996, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 125 (FAS 125),
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities", FAS 125 requires that an entity
recognize only those assets that it controls and liabilities it
has incurred. Assets should be recognized until control has been
surrendered, and liabilities should be recognized until they have
been extinguished. Recognition of financial assets and
liabilities will not be affected by the sequence of the
transactions unless the effect of the transactions is to maintain
effective control over a transferred financial asset.
FAS 125 is effective for transactions after December 31, 1996.
The Company believes the adoption of FAS 125 will not have a
material impact on the consolidated financial statements.
Note 2. Cash and Due From Banks
The Bank is required to maintain legal reserves comprised of
funds on deposit with the Federal Reserve Bank and cash on hand.
The minimum balance as of June 30, 1996 and 1995, was $835,000
and $816,000, respectively.
Note 3. Securities
Amortized cost and fair values of securities are summarized as
follows:
Held to Maturity
As of June 30, 1996
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
States and political subdivisions $ 649,305 $ 281 $ 11,693 $637,893
Other debt securities 59,596 892 58,704
Mortgage-backed securities 119,429 4,763 124,192
$ 828,30 $5,044 $12,585 $820,789
As of June 30, 1995
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
U.S. Government agencies and
corporations $3,445,430 $ 23,896 $35,701 $3,433,625
States and political subdivisions 334,419 8,036 1,177 341,278
Other debt securities 80,924 1,724 79,200
Mortgage-backed securities 3,028,604 142,332 46,649 3,124,287
$6,889,377 $174,264 $85,251 $6,978,390
Page F-15
Available for Sale
As of June 30, 1996
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
U.S. Treasury $ 9,217,389 $ 2,563 $165,904 $ 9,054,048
U.S. Government agencies and
corporations 10,902,161 304,474 10,597,687
States and political subdivisions 410,382 1,370 6,233 405,519
Mortgage-backed securities 8,357,251 7,391 149,586 8,215,056
$28,887,183 $11,324 $626,197 $28,272,310
As of June 30, 1995
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
U.S. Treasury $ 7,080,755 $22,346 $ 98,101 $ 7,005,000
U.S. Government agencies and
corporations 2,509,653 10,000 42,347 2,477,306
States and political subdivisions 949,903 6,852 11,990 944,765
Mortgage-backed securities 5,924,008 27,112 63,765 5,887,355
$16,464,319 $66,310 $216,203 $16,314,426
During the year ended June 30, 1995, the Company transferred
$2,982,500 of securities originally classified as available for
sale to the held to maturity classification. The unrealized loss
on the securities transferred at the date of transfer was
$170,758 and was being amortized over the remaining life of the
securities. The unamortized balance at June 30, 1995 was
$107,342, net of the deferred tax effect of $55,297, and is
included as a component of stockholders' equity. During the year
ended June 30, 1996, the Company transferred certain securities
classified as held to maturity to the available for sale
classification. The securities transferred had an amortized cost
of $2,940,256. The Company recorded, as a component of equity,
an unrealized loss of $57,342 net of $22,214 deferred taxes at
the date of transfer.
During 1995, the Financial Accounting Standards Board decided to
allow all enterprises to make a one-time reassessment of the
classification of securities made under FAS 115. The Company
transferred a portion of their portfolio with an amortized cost
of $3,485,539, from held to maturity classification to the
available for sale classification and recorded, as a component of
equity, an unrealized loss of $87,477, net of $33,889 deferred
taxes, to allow for more flexibility in managing the Company's
asset mix.
The amortized cost and fair value of debt securities classified
as held to maturity and available for sale, by contractual
maturity, as of June 30, 1996, are shown below. Expected
maturities in mortgage backed securities may differ from
contractual maturities because the mortgages underlying the
securities may be called or repaid with or without prepayment
penalties. Therefore, these securities are not included in the
maturity categories in the following maturity summary.
Held to Maturity Available for Sale
Amortized Fair Amortized Fair
Cost Value Cost Value
Less than 1 year $189,305 $189,370 $ 2,007,362 $ 2,002,344
1 year to 5 years 460,000 448,522 16,815,643 16,423,062
5 years to 10 years 59,596 58,705 1,706,927 1,631,848
Mortgage-backed securities 119,429 124,192 8,357,251 8,215,056
$828,330 $820,789 $28,887,183 $28,272,310
Page F-16
Securities with carrying amounts of approximately $18,402,600 and
$17,766,700 at June 30, 1996 and 1995, respectively, were pledged
to secure public deposits and for other purposes as required or
permitted by law.
Securities gains and losses on sales of securities available for
sale were as follows:
Years Ended June 30,
1996 1995 1994
Gross realized gains $ 51,709 $ 25,758 $ 46,538
Gross realized losses (39,459) (43,409) (22,816)
$ 12,250 $(17,651) $ 23,722
Note 4. Loans
The major classifications of loans are as follows:
June 30,
1996 1995
Commercial $47,267,575 $47,336,006
Real estate 14,995,590 11,749,047
Installment 7,254,693 12,970,392
Other 3,856,169 4,251,538
73,374,027 76,306,983
Deduct:
Unearned interest 302,173 798,443
Allowance for loan losses 1,148,197 1,260,102
$71,923,657 $74,248,438
The Company's opinion as to the ultimate collectibility of these
loans is subject to estimates regarding future cash flows from
operations and the value of property, real and personal, pledged
as collateral. These estimates are affected by changing economic
conditions and the economic prospects of borrowers.
The following table presents data on impaired loans at June 30,
1996:
Impaired loans for which an allowance has been provided $2,083,321
Impaired loans for which no allowance has been provided 2,226,079
Total loans determined to be impaired $4,309,400
Allowance for loan loss for impaired loans included in
the allowance for loan losses $ 643,918
Average recorded investment in impaired loans $4,748,832
Interest income recognized from impaired loans $ 470,419
Cash basis interest income recognized from impaired loans $ 373,677
Loans on which the accrual of interest has been discontinued or
reduced amounted to approximately $1,763,000 and $1,183,000 at
June 30, 1995 and 1994, respectively, which had the effect of
reducing interest income by approximately $148,000 and $140,000
for the years ended June 30, 1995 and 1994, respectively.
The Bank conducts most of its business activities, including
granting agribusiness, commercial, residential and installment
loans with customers in the Illinois counties of Coles,
Cumberland, Douglas, Edgar, Moultrie and Shelby. The loan
portfolio includes a concentration of loans to agricultural and
agricultural-related industries
Page F-17
amounting to approximately $8,175,000 and $8,016,000 as of
June 30, 1996 and 1995, respectively. Generally those loans
are collateralized by assets of those entities. The loans
are expected to be repaid from cash flows or from proceeds
from the sale of selected assets of the borrowers. Credit
losses arising from lending transactions with agricultural
entities compare favorably with the Bank's credit loss
experience on its loan portfolio as a whole.
In the normal course of business, loans are made to
executive officers, directors and principal stockholders of
the Bank and to parties which the Bank or its directors,
executive officers and stockholders have the ability to
significantly influence its management or operations
(related parties). In the opinion of management, the terms
of these loans, including interest rates and collateral, are
similar to those prevailing for comparable transactions with
other customers and do not involve more than a normal risk
of collectibility. Changes in such loans during the year
ended June 30, 1996 follow.
Balance at beginning of year $2,220,000
New loans, extensions and modifications 1,064,000
Repayments (65,000)
Balance at end of year $3,219,000
Loans with carrying amounts of approximately $3,847,000 at
June 30, 1995 were pledged to secure public deposits and for
other purposes as required or permitted by law. There were
no loans pledged as of June 30, 1996.
Note 5. Allowance for Loan Losses
Changes in the allowance for loan losses are as follows:
Years Ended June 30,
1996 1995 1994
Balance, beginning $1,260,102 $ 834,442 $1,012,025
Provision for loan losses 451,200 705,000 628,181
Recoveries applicable to loans
previously charged-off 130,038 39,467 43,460
Loan balances charged-off (693,143) (318,807) (849,224)
Balance, ending $1,148,197 $1,260,102 $ 834,442
Note 7. Premises and Equipment
Premises and equipment consist of:
June 30,
1996 1995
Land $ 1,034,491 $ 986,041
Buildings 2,217,605 2,183,032
Furniture and equipment 827,095 721,717
Leasehold improvements 199,796 198,706
4,278,987 4,089,496
Less accumulated depreciation 646,951 341,184
$ 3,632,036 $ 3,748,312
Note 8. Non-Compete Agreement
The Company has a non-compete agreement with a former officer of Central
National Bank of Mattoon. The agreement calls for payments which
total $450,000, to be paid in monthly installments of $7,500 over a five
year period beginning August 5, 1992, and ending August 5, 1997.
Note 9. Deposits
At June 30, 1996, the scheduled maturities of time deposits are as follows:
Year Ended Amount
June 30, 1997 $ 39,376,493
June 30, 1998 8,337,621
June 30, 1999 3,445,780
June 30, 2000 717,642
June 30, 2001 and thereafter 211,560
$ 52,089,096
Note 10. Short Term Borrowings
Short term borrowings at June 30, 1996 include a note payable to a third
party lender of $4,600,000.
The note payable is to LaSalle National Bank, Chicago, Illinois. The
repayment terms of the note if no demand is made by the lender call for an
annual payment of $225,000. Interest is due quarterly at a rate equal
to the LaSalle National Bank prime (an effective rate of 8.25% at
June 30, 1996). The note payable is collateralized by 200,000 shares
of common stock of Central National Bank of Mattoon.
The note payable contains certain covenants which limit the amounts
of dividends paid, the purchase and sales of assets and merger with
other corporations, the changes in capital structure and the guarantees
of other liabilities and obligations. In addition, the Company and
Central National Bank of Mattoon must maintain certain financial ratios.
As of June 30, 1996, the Company was in compliance with all covenants.
F-19
Note 11. Securities Sold Under Agreements to Repurchase
Information concerning securities sold under agreements to repurchase
is summarized as follows:
June 30,
1996
Average balance during the year $ 2,184,199
Average interest rate during the year 5.84%
Maximum month-end balance during the year $ 2,279,828
Mortgage-backed securities underlying the agreements at year-end:
Carrying value $ 2,289,141
Estimated fair value $ 2,289,141
Note 12. Income Taxes
The components of income tax expense follows:
Years Ended June 30,
1996 1995 1994
Current $ 164,265 $ 141,230 $ 231,933
Deferred 151,864 (135,730) 6,304
$ 316,129 $ 5,500 $ 238,237
The Company's income tax expense differed from the statutory federal
rate of 34% as follows:
Years Ended June 30,
1996 1995 1994
Expected tax expense $ 325,185 $ 113,282 $ 259,378
Income tax effect of:
Interest earned on tax free
investments and loans (59,593) (69,649) (74,828)
Nondeductible interest expense
incurred to carry tax-free investments 3,183 12,932 8,302
Other 47,354 (51,065) 45,385
$ 316,129 $ 5,500 $ 238,237
The net deferred tax asset in the accompanying balance sheets includes
the following amounts of deferred tax assets and liabilities:
June 30,
1996 1995
Deferred tax liability $ (595,462) $ (566,836)
Deferred tax asset 892,946 885,928
$ 297,484 $ 319,092
F-20
The tax effects of principal temporary differences are shown in the following
table:
June 30,
1996 1995
Allowance for loan losses $ 235,559 $ 221,777
Loans and other real estate 8,160 1,360
Alternative minimum tax credits 192,088 258,984
Premises and equipment (564,667) (566,836)
Securities 209,057 106,261
Deferred expenses 93,163 135,451
State deferred asset, net effect 154,919 94,369
Other (30,795) 67,726
$ 297,484 $ 319,092
The alternative minimum tax credit carryforwards have an unlimited
carryforward period.
State net operating loss carryforwards of $3,331,000 have the following
expiration dates:
2003 $ 19,000
2004 9,000
2005 482,000
2006 503,000
2007 1,000
2008 403,000
2009 533,000
2010 628,000
2011 753,000
$ 3,331,000
Note 13. Capital Ratios
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory--and
possibly additional discretionary--actions by regulators that, if
undertaken, could have a direct material effect on the Bank's
financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must
meet specific capital guidelines that involve quantitative
measures of the Bank's assets, liabilities, and certain off-
balance-sheet items as calculated under regulatory accounting
practices. The Bank's capital amounts and classification are
also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios
(set forth in the table below) of total and Tier I capital (as
defined in the regulations) to risk-weighted assets (as defined),
and of Tier I capital (as defined) to average assets (as
defined). Management believes, as of June 30, 1996, that the
Bank meets all capital adequacy requirements to which it is
subject.
As of June 30, 1996, the most recent notification from the Office
of the Comptroller of the Currency categorized the Bank as well
capitalized under the regulatory framework for prompt corrective
action. To be categorized as adequately capitalized, the Bank
must maintain minimum total risk-based, Tier I risk-based, and
Tier I leverage ratios as set forth in the table. There are no
conditions or events since that notification that management
believes have changed the institution's category.
F-21
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes: Action Provisions:
Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
As of June 30, 1996:
Total Capital (to Risk
Weighted Assets)
Consolidated $ 6,673,000 8.6% $ 6,186,000 8.0% N/A
Central National Bank
of Mattoon $ 9,589,000 12.7% $ 6,034,000 8.0% $ 7,543,000 10.0%
Tier I Capital (to Risk
Weighted Assets)
Consolidated $ 6,559,000 8.5% $ 3,093,000 4.0% N/A
Central National Bank
of Mattoon $ 9,101,000 12.1% $ 3,017,000 4.0% $ 4,526,000 6.0%
Tier I Capital
(to Average Assets)
Consolidated $ 6,559,000 5.8% $ 4,526,000 4.0% N/A
Central National Bank
of Mattoon $ 9,101,000 8.2% $ 4,449,000 4.0% $ 5,561,000 5.0%
</TABLE>
Note 14. Stock Options
The Company has a stock option plan under which options to purchase shares
of common stock could be granted to an officer provided Central National
Bank of Mattoon attained specified net income levels. The plan provides
that the option price would be $1 per share and that the option must be
exercised within ten years of the grant date.
A summary of the changes in stock options during the periods ended
June 30, 1996 and 1995, follows:
Shares
Outstanding at June 30, 1993
Granted 4,166
Exercised
Canceled
Outstanding at June 30, 1994 4,166
Granted 4,166
Exercised
Canceled
Outstanding at June 30, 1995 8,332
Granted
Exercised 4,166
Canceled
Outstanding at June 30, 1996 4,166
Exercisable at June 30, 1996 4,166
Compensation expense of $112,552 and $112,482 related to the grant of
the stock options was recognized for the year ended June 30, 1995 and 1994,
respectively.
F-22
Note 15. Retirement Plans
The Bank previously had a noncontributory defined contribution
pension plan covering substantially all employees, a
noncontributory profit sharing plan covering substantially all
employees which provided for discretionary contributions as
determined by the Board of Directors and an Employee Stock
Ownership Plan (ESOP) covering substantially all full-time
employees. These Plans are frozen, and no benefits were accrued
nor were there any contributions due to the plan. These plans
were merged into the Company's 401(k) Plan in December 1994.
Substantially all employees of the Bank are allowed to
participate in the 401(k) profit sharing plan. Contributions by
the Bank consist of a discretionary matching employer
contribution, and a discretionary annual employer contribution.
The amount of contributions for each plan is not to exceed the
amount permitted under the Internal Revenue Code as a deductible
expense. Expense for the plans for the years ended June 30,
1996, 1995 and 1994, was approximately $72,500, $76,500 and
$68,500, respectively.
Note 16. Fair Value of Financial Instruments
Management uses its best judgment in estimating the fair value of
the financial instruments. In cases where quoted market prices
are not available, fair values are based on estimates using
present value or other valuation techniques. Those techniques
are significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. In that
regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, could
not be realized in immediate settlement of the instrument.
Certain financial instruments and all nonfinancial instruments
have been excluded from this disclosure. Accordingly, the
aggregate fair value amounts presented do not represent the
underlying value of the Company and its subsidiary.
The following table reflects a comparison of carrying amounts and
the fair values of the financial instruments:
June 30, 1996
Carrying
Amount Fair Value
Assets:
Cash and due from banks $ 4,548,085 $ 4,548,085
Securities held to maturity 828,330 820,789
Securities available for sale 28,272,310 28,272,310
Loans 71,923,657 71,621,478
Accrued interest receivable 1,053,215 1,053,215
Liabilities:
Deposits $ 96,798,525 $ 96,955,784
Borrowings 8,018,397 8,018,397
Accrued interest payable 691,954 691,954
The following methods and assumptions were used by the Company in
estimating the fair value disclosures for financial instruments:
Cash and due from banks: The carrying amounts reported in the
balance sheet for cash and due from banks approximate their fair
values.
Securities: Fair values for securities are based on quoted
market prices, where available. If quoted market prices are not
available, fair values are based on quoted market prices of
comparable instruments. The carrying value of accrued interest
receivable approximates its fair value.
F-23
Loans: For variable-rate loans that reprice frequently and with
no significant change in credit risk, fair values are based on
carrying values. The fair values for fixed-rate loans are
estimated using discounted cash flow analyses using interest
rates currently being offered for loans with similar terms to
borrowers of similar credit quality. The carrying value of
accrued interest receivable approximates its fair value.
Deposits: The fair value disclosed for demand deposits are, by
definition, equal to the amount payable on demand at the balance
sheet date. The carrying amounts for variable-rate, fixed-term
money market accounts approximate their fair values at the
balance sheet date. Fair values for fixed-rate certificates of
deposit are estimated using a discounted cash flow calculation
that applies interest rates currently being offered on
certificates to a schedule of aggregated expected monthly
maturities on time deposits. The carrying value of accrued
interest payable approximates its fair value.
Borrowings: The carrying amounts reported in the balance sheet
for federal funds purchased, borrowings under notes issued by the
U.S. Treasury, securities sold under agreements to repurchase and
other short-term borrowings approximates their fair values based
on rates and terms currently available to the Company for debt
with similar terms and remaining maturities.
Off-balance-sheet instruments: Fair values for the Bank's off-
balance-sheet instruments which consists of commitments to extend
credit and standby letters of credit are based on fees currently
charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the counterparties' credit
standing. The fair value for such commitments is nominal.
Note 17. Commitments, Contingencies and Credit Risk
In the normal course of business, there are outstanding various
contingent liabilities such as claims and legal actions, which
are not reflected in the accompanying balance sheet. In the
opinion of management, no material losses are anticipated as a
result of these actions or claims.
The Bank is a party to financial instruments with off-balance-
sheet risk in the normal course of business to meet the financing
needs of its customers. These financial instruments include
commitments to extend credit and standby letters of credit.
Those instruments involve, to varying degrees, elements of credit
risk in excess of the amount recognized in the balance sheet.
The contractual amounts of those instruments reflect the extent
of involvement the Bank has in particular classes of financial
instruments.
The Bank's exposure to credit loss in the event of nonperformance
by the other party to the financial instrument for commitments to
extend credit and standby letters of credit written is
represented by the contractual amount of those instruments. The
Bank uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet
instruments.
As of June 30, 1996 and 1995, commitments under standby letters
of credit were approximately $217,000 and $193,000 and
undisbursed loan commitments, principally variable rate, were
approximately $20,551,000 and $21,519,000, respectively. The
Bank does not anticipate any material losses as a result of these
commitments.
The Company does not engage in the use of interest rate swaps, or
futures, forwards, or option contracts.
Note 18. BankCentral Corporation (Parent Company Only)
The Company's principal asset is its investment in Central
National Bank of Mattoon. The primary source of funds for the
Company is dividends from the Bank.
F-24
By regulation, the Bank is prohibited from paying dividends in
excess of the current year's net earnings plus the retained net
earnings from the prior two years, unless regulatory approval is
obtained. As of June 30, 1995, the Bank had available retained
earnings of approximately $828,000 for the payment of dividends
without obtaining prior regulatory approval. As of June 30,
1996, the Bank did not have any available retained earnings for
the payment of dividends without obtaining prior regulatory
approval.
Condensed financial information for BankCentral Corporation
follows:
Balance Sheets (Parent Company Only)
June 30,
1996 1995
ASSETS
Cash and due from banks $ 50,611 $ 151,073
Investment in subsidiary 9,211,145 9,824,344
Premises and equipment 1,584,313 1,632,289
Non-compete agreement 105,000 195,000
Income tax receivable 139,842
Other assets 311,707 333,482
$ 11,402,618 $ 12,136,188
Balance Sheets (Parent Company Only)
June 30,
1996 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
Short term borrowings $ 4,600,000 $ 5,150,000
Non-compete agreement 105,000 195,000
Deferred income tax liability 244,363 201,883
Other liabilities 158,354 193,243
5,107,717 5,740,126
Common stock 243,081 238,916
Additional paid in capital 4,793,814 4,793,814
Retained earnings 2,295,722 1,655,425
Unrealized loss on securities
available for sale (378,356) (206,272)
6,954,261 6,481,883
Less cost of treasury stock (659,360) (85,820)
6,294,901 6,396,063
$ 11,402,618 $ 12,136,189
F-25
Income Statements (Parent Company Only)
Years Ended June 30,
1996 1995 1994
Interest on securities $ 13,974 $ 1,540 $ 3,465
Interest expense on note payable 425,659 439,717 374,355
Net interest income (loss) (411,685) (438,177) (370,890)
Other income:
Dividends 1,137,196 1,032,788 726,449
Other income 71,217 42,224 9,107
1,208,413 1,075,012 735,556
Other expenses:
Salaries and wages (114,043) (169,910) (112,482)
Occupancy and equipment (47,976) (72,263) (137,316)
Amortization (96,120) (96,120)
Other (61,564) (83,741) (181,828)
(319,703) (422,034) (431,626)
Income before income tax benefit
and equity in undistributed
earnings of subsidiary 477,025 214,801 (66,960)
Income tax benefit 216,504 335,060 250,522
Income before equity in
undistributed earnings
of subsidiary 693,529 549,861 183,562
Equity in undistributed
earnings of subsidiary (53,232) (223,390) 957,820
Net income $ 640,297 $ 326,471 $ 1,141,382
Statements of Cash Flows (Parent Company Only)
Years Ended June 30,
1996 1995 1994
Cash Flows from Operating Activities
Net income $ 640,297 $ 326,471 $ 1,141,382
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Undistributed earnings
of subsidiary 53,232 223,390 (957,820)
Deferred income taxes 42,480 (257,222) (98,217)
Depreciation 47,976 48,001 46,133
Amortization of non-compete
agreement 90,000 90,000 90,000
Amortization of investment
security purchase accounting 24,262 90,012
Amortization of organization
expense 6,120 6,120 6,120
Changes in assets and liabilities:
(Increase) decrease in
other assets (123,494) (204,697) (38,394)
(Decrease) increase in other
liabilities (34,889) 87,034 (68,015)
Net cash provided by
operating activities 721,722 343,359 211,201
F-26
Cash Flows from Investing Activities
Proceeds from redemption of
subsidiary preferred stock 400,000
Acquisition of minority shares (12,810) (1,718)
Purchase of cash surrender
value policy from subsidiary (273,813)
Net cash provided by (used in)
investing activities 387,190 (275,531)
Cash Flows from Financing Activities
Payments on note payable (550,000) (233,000) (400,000)
Payments on non-compete agreement (90,000) (90,000) (90,000)
Purchase of treasury stock (573,540) (85,820)
Proceeds from additional
paid in capital 112,552 112,482
Proceeds from issuance of
common stock 4,166
Net cash used in financing
activities (1,209,374) (296,268) (377,518)
Net (decrease) increase in cash and
due from banks (100,462) 47,091 (441,848)
Cash and due from banks, beginning 151,073 103,982 545,830
Cash and due from banks, ending $ 50,611 $ 151,073 $ 103,982
Supplemental Schedule of Noncash
Investing Activities Net
(increase) decrease in
unrealized loss on securities
available for sale, net of
deferred tax effect $ (172,084) $ 149,849 $ (356,121)
Note 19. Interim Consolidated Financial Information (Unaudited)
The unaudited interim consolidated financial statements include
BankCentral Corporation and its subsidiary, Central National Bank
of Mattoon after elimination of material intercompany
transactions. This unaudited data, in the opinion of the
Company, includes all adjustments necessary for the fair
presentation thereof. All adjustments made were of a normal
recurring nature.
Note 20.-Subsequent Event - Merger with Firstbank of Illinois Co.
On December 20, 1996, the Company entered into an Agreement and
Plan of Merger with Firstbank of Illinois Co. (Firstbank). At
September 30, 1996, Firstbank, which is headquartered in
Springfield, Illinois, had total assets of approximately $1.9
billion. The merger agreement will be effected through an
exchange of stock of the Company for stock and cash of Firstbank.
The merger is contingent upon approval of various regulatory
agencies and the stockholders of BankCentral and the Federal
Reserve Bank under the agreement. If approved, the merger is
expected to close by the second quarter of 1997.
F-27
PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Under its Certificate of Incorporation, Firstbank
shall, to the full extent permitted by the Delaware General
Corporation Law, as it may be in effect from time to time,
indemnify each person who is or was a director or officer of
Firstbank against any liability, cost, or expense incurred
by him or her in his or her capacity as a director or
officer or arising out of his status as a director or
officer.
Page 88
Item 21. Exhibits and Financial Statement Schedules
The Exhibit Index at Page E-1 is incorporated herein by
reference.
Item 22. Undertakings
(a) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's
Annual Report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement
shall be deemed to be a new registration statement
relating to the securities offered therein, and the
offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to deliver
or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the
latest annual report to security holders that is
incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of
Rule 14a-3 or Rule 14c-3 under the Securities Exchange
Act of 1934; and, where interim financial information
required to be presented by Article 3 of Regulation S-X
are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the
prospectus is sent or given, the latest quarterly
report that is specifically incorporated by reference
in the prospectus to provide such interim financial
information.
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to
directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions
(described in Item 20), or otherwise, the Registrant
has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against
public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other
than the payment by the Registrant of expense incurred
or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action,
suit, or proceeding) is asserted by such director,
officer, or controlling person in connection with the
securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
(b) The undersigned Registrant hereby undertakes to respond
to requests for information that is incorporated by
reference into the prospectus pursuant to Item 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.
Page 89
(c) The undersigned Registrant hereby undertakes to supply
by means of a post-effective amendment all information
concerning a transaction, and the company being
acquired involved therein, that was not the subject of
and included in the registration statement when it
became effective.
Page 90
SIGNATURES
Pursuant to the requirements of the Securities Act, the
Registrant has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City
of Springfield, State of Illinois, on March 17, 1997.
FIRSTBANK OF ILLINOIS CO.
By: /s/ Mark H. Ferguson
Mark H. Ferguson
Chairman, President and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes
and appoints Mark H. Ferguson and Chris R. Zettek and each of
them, the true and lawful attorneys-in-fact and agents of the
undersigned, with full power of substitution and resubstitution,
for and in the name, place, and stead of the undersigned, in any
and all capacities, to sign any and all amendments (including
post-effective amendments) to the Registration Statement, and to
file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and
agents, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to
be done, as fully for all intents and purposes as the undersigned
might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
Signature and Capacity Date
/s/ Mark H. Ferguson ______March 18, 1997_____
Mark H. Ferguson,
Chairman, President,
Chief Executive Officer and Director
/s/ Leo J. Dondanville, Jr. ______March 18, 1997_____
Leo J. Dondanville, Jr.
Director
/s/ William T. Grant, Jr. ______March 18, 1997_____
William T. Grant, Jr.
Director
/s/ William B. Hopper ______March 18, 1997_____
William B. Hopper
Director
/s/ Robert W. Jackson ______March 18, 1997_____
Robert W. Jackson
Director
/s/ William R. Schnirring ______March 18, 1997_____
William R. Schnirring
Director
/s/ Robert L. Sweney ______March 18, 1997_____
Robert L. Sweney
Director
/s/ P. Richard Ware ______March 18, 1997_____
P. Richard Ware
Director
/s/ Richard E. Zemenick ______March 18, 1997_____
Richard E. Zemenick
Director
/s/ Chris R. Zettek ______March 18, 1997_____
Chris R. Zettek
Executive Vice President and
Chief Financial Officer
/s/ Daniel R. Davis ______March 18, 1997_____
Daniel R. Davis
Vice President and Controller
(Principal Accounting Officer)
INDEX TO EXHIBITS
Item 21. Exhibits and Financial Statements and Schedules
The following Exhibits are filed as part of the Registration Statement:
(a) Exhibits
2.1 Agreement and Plan of Merger, dated as of December 20, 1996,
by and among Firstbank of Illinois Co., FBIC Subsidiary, Inc.,
and BankCentral Corporation
2.2 Amendment to Agreement and Plan of Merger, dated as of
March 10, 1997, by and among Firstbank of Illinois Co.,
FBIC Subsidiary, Inc., and BankCentral Corporation
5.1 Opinion of Brown, Hay & Stephens
8.1 Opinion of McGladrey & Pullen, LLP
13.1 Form 10-K for the fiscal year ended December 31, 1995 of
Registrant (including the portions of the Registrant's 1995
Annual Report incorporated therein) is incorporated by
reference herein.
13.2 Quarterly reports on Form 10-Q for the quarter ended
September 30, 1996 are incorporated by reference herein.
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Brown, Hay & Stephens (included in Exhibit 5.1)
23.3 Consent of McGladrey & Pullen, LLP
24.1 Power of Attorney (included on signature page hereto)
99.1 Form of Proxy for BankCentral Corporation
(b) Financial Statement Schedules
Not Required
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
Among
FIRSTBANK OF ILLINOIS CO.
a Delaware corporation
and
FBIC SUBSIDIARY, INC.
an Illinois corporation
and
BANKCENTRAL CORPORATION
a Delaware corporation
Dated December 20,1996
TABLE OF CONTENTS
Agreement and Plan of Merger
I. The Merger
1.01 The Merger
1.02 Closing
1.03 Effective Time
1.04 Articles of Incorporation and By-Laws
1.05 Board of Directors and Officers
1.06 Additional Actions
1.07 Price and Conversion of Shares
1.08 Delivery of Firstbank Stock and Cash to Exchange Agent
1.09 Election Procedures, Steps of Transaction
1.10 Surrender of Exchange of Certificates
1.11 Transfers
II. Representation and Warranties of BankCentral
2.01 Organization and Authority
2.02 Corporation Authorization; Records
2.03 Subsidiaries of CNB of Mattoon
2.04 Capitalization of BankCentral
2.05 Capitalization of CNB of Mattoon
2.06 Financial Statements
2.07 Reports
2.08 Title to and Condition of BankCentral and CNB of Mattoon Assets
2.09 Real Property
2.10 Contracts, Commitments, and Certain Loans
2.11 Absence of Defaults
2.12 Absence of Undisclosed Liabilities
2.13 Taxes and Tax Returns
2.14 Material Adverse Change
2.15 Litigation and Other Proceedings
2.16 Legal Proceedings and Governmental Compliance
2.17 Labor and Employment
2.18 Material Interests of Certain Persons
2.19 Employee Benefit Plan
2.20 Conduct of BankCentral and CNB of Mattoon to Date
2.21 Proxy Statement, etc.
2.22 Brokers, Investment Bankers, and Finders
2.23 Accuracy of Information
III. Representations and Warranties of Firstbank
3.01 Organization and Authority
3.02 Corporation Authorization; Records
3.03 Capitalization of Firstbank
3.04 Firstbank Financial Statements
3.05 Reports
3.06 Material Adverse Changes
3.07 Registration Statement, etc.
3.08 Brokers, Investment Bankers, and Finders
3.09 Accuracy of Information
3.10 Litigation; Governmental Compliance; Other Proceedings
3.11 Compliance with Laws
IV. Conduct of Business Prior to the Effective Time
4.01 Conduct of Business Prior to the Effective Time
4.02 Forbearances by BankCentral
4.03 Forbearance by Firstbank
V. Additional Agreements
5.01 Access and Information
5.02 Registration Statement; Regulatory Matters
5.03 Stockholder Approvals
5.04 Current Information
5.05 Agreements of Affiliates
5.06 Expenses
5.07 Miscellaneous Agreements and Consents
5.08 Press Releases
5.09 Stockholder s' Undertakings
5.10 Due Diligence Review
5.11 ERISA Matters
5.12 Employee Agreements and Benefits
5.13 CNB of Mattoon Board of Directors
5.14 Firstbank Merger, Consolidation, or Acquisition
5.15 Tax Covenant
VI. Certain Conditions
6.01 Conditions to Each Party's Obligation to Effect the Merger
6.02 Conditions to Obligations of BankCentral
6.03 Conditions to Obligations of the Firstbank Entities
VII. Termination, Amendment, and Waiver
7.01 Termination
7.02 Effect of Termination
7.03 Amendment
7.04 Waiver
VIII.General Provisions
8.01 Survival of Representations, Warranties, and Agreements
8.02 Indemnification
8.03 No Assignment; Successors and Assigns
8.04 Severability
8.05 No Implied Waiver
8.06 Headings
8.07 Entire Agreement
8.08 Schedules
8.09 Counterparts
8.10 Notices
8.11 Governing Law
8.12 Best Knowledge and Belief
Exhibit 2.04 Stock Options
Exhibit 5.05 Affiliate Letter
Exhibit 5.09 Stockholder Undertaking Agreement
Exhibit 6.02 Firstbank's Counsel's Legal Opinion
Exhibit 6.03 BankCentral's Counsel's Legal Opinion
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made and
entered into as of the date last below written by and among FIRSTBANK
OF ILLINOIS CO., a Delaware corporation ("Firstbank"), FBIC
SUBSIDIARY, INC., an Illinois corporation ("New Company", and
collectively with Firstbank, the "Firstbank Entities") and BANKCENTRAL
CORPORATION, a Delaware corporation ("BankCentral"):
WHEREAS, BankCentral is the beneficial and record owner of one
hundred percent (100%) of the issued and outstanding shares of the
capital stock of Central National Bank of Mattoon, a national banking
association ("CNB of Mattoon"); and
WHEREAS, Firstbank is the beneficial and record owner of one
hundred percent (100%) of the issued and outstanding shares of the
capital stock of New Company; and
WHEREAS, the respective Boards of Directors of the Firstbank
Entities and BankCentral have authorized the execution and delivery of
this Agreement; and
WHEREAS, the Firstbank Entities and BankCentral desire to provide
for certain undertakings, conditions, representations, warranties, and
covenants in connection with the transactions contemplated by this
Agreement;
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, and agreements herein contained, the
parties agree as follows:
ARTICLE I
The Merger
1.01 The Merger. Subject to the terms and conditions of this
Agreement, BankCentral shall be merged with and into New Company (the
"Merger") in accordance with the Illinois Business Corporation Act
(the "Illinois Act") and the separate corporate existence of
BankCentral shall cease. New Company shall be the surviving
corporation, shall have the name of BankCentral, Inc., shall become a
wholly-owned subsidiary of Firstbank, and shall continue to be
governed by the laws of the State of Illinois. New Company as the
surviving corporation is hereinafter sometimes referred to as the
"Surviving Corporation."
1.02 Closing. The closing (the "Closing") of the Merger shall
take place, subject to satisfaction or waiver of all conditions set
forth in Article VI hereof, at the offices of Brown, Hay & Stephens,
700 First National Bank Building, Springfield, Illinois, 10:00 a.m.
local time, on the last Business Day (as hereinafter defined) of the
month in which the last of the following events occurs: (a) the
receipt of the requisite approval of this Agreement by the
stockholders of BankCentral as set forth in Section 5.03 hereof and
(b) the receipt of the approval of the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") and of any
other bank regulatory authority the approval of which is required to
consummate the Merger and the expiration of any required waiting
period, or at such other time and place as the Firstbank Entities and
BankCentral shall agree (the "Closing Date"). For purposes of this
Agreement, "Business Day" shall mean any day that the Office of the
Secretary of State of the State of Illinois is open for receipt of
official corporate filings.
1.03 Effective Time. On the Closing Date, the parties hereto
will cause the Merger to be consummated by delivering to the Illinois
Secretary of State for filing articles of merger (the "Articles of
Merger") in such form as required by, and duly executed and
acknowledged in accordance with, the relevant provisions of the
Illinois Act. The Merger shall be effective (the "Effective Time")
upon the issuance of a certificate of merger by the Illinois Secretary
of State. Upon the Effective Time, the effect of the Merger shall be
as provided in the applicable provisions of the Illinois Act. Without
limiting the generality of the foregoing, upon the Effective Time, the
separate existence of BankCentral shall cease, and the Surviving
Corporation shall possess all the rights, privileges, powers and
franchises of a public as well as of a private nature, and shall be
subject to all of the restrictions, disabilities and duties of each of
New Company and BankCentral, and all and singular, the rights,
privileges, powers and franchises of each of New Company and
BankCentral. All property, real, personal and mixed, and all debts
due to each of New Company and BankCentral on whatever account, as
well for stock subscriptions as all other things in action or
belonging to each of New Company and BankCentral shall be vested in
the Surviving Corporation; and all property, rights, privileges,
powers and franchises, and all and every other interest shall be
thereafter as effectually the property of the Surviving Corporation as
they were of New Company and BankCentral, and the title to any real
restate vested by deed or otherwise in either of New Company or
BankCentral shall not revert or be in any way impaired, but all rights
of creditors and all liens upon any property of any of New Company and
BankCentral shall be preserved unimpaired, and all debts, liabilities
and duties of each of New Company and BankCentral shall thenceforth
attach to the Surviving Corporation, and may be enforced against it to
the same extent as if said debts, liabilities and duties had been
incurred or contracted by it. Any action or proceeding pending by or
against either New Company or BankCentral at the Effective Time shall
be prosecuted as if the merger had not taken place, or the Surviving
Corporation may be substituted in such action or proceeding.
1.04 Articles of Incorporation and By-Laws. The Articles of
Incorporation and By-Laws of New Company in effect immediately prior
to the Effective Time shall be the Articles of Incorporation and By-
Laws of the Surviving Corporation and shall continue until amended in
accordance with their provisions and applicable law.
1.05 Board of Directors and Officers.
(a) At the Effective Time, the Board of Directors of the
Surviving Corporation shall consist of those persons serving as
directors of New Company immediately prior to the Effective Time and
the terms of those directors after the Effective Time shall be the
same as their respective terms immediately prior to the Effective Time
(either by operation of this Agreement or by action of Firstbank as
the sole shareholder of the Surviving Corporation immediately after
the Effective Time).
(b) The officers of New Company shall be the officers of
the Surviving Corporation until their respective successors are duly
elected and qualified.
1.06 Additional Actions. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any
further deeds, assignments, or assurances in law or any other acts are
necessary or desirable to (a) vest, perfect, or confirm, of record or
otherwise, in the Surviving Corporation its right, title, or interest
in, to, or under any of the rights, properties, or assets of
BankCentral, or (b) otherwise carry out the purposes of this
Agreement, BankCentral and its officers and directors shall be deemed
to have granted to the Surviving Corporation an irrevocable power of
attorney to execute and deliver all such deeds, assignments, or
assurances in law and to do all acts necessary or proper to vest,
perfect, or confirm title to and possession of such rights,
properties, or assets in the Surviving Corporation and otherwise to
carry out the purposes of this Agreement, and the officers and
directors of the Surviving Corporation are authorized in the name of
BankCentral or otherwise to take any and all such actions.
1.07 Price and Conversion of Shares. The manner and basis of
converting the shares of stock of New Company and BankCentral on the
Effective Time into cash and shares of Firstbank common stock are as
follows:
(a) Each share of BankCentral Common Stock issued and
outstanding at the close of business on the Business Day immediately
preceding the Closing Date shall, without any action on the part of
the holder thereof, shall be converted as follows:
(i) Each outstanding share of BankCentral Common Stock
which under the terms of this Agreement is to be converted into the
common stock, $1.00 par value per share, of Firstbank ("Firstbank
Conversion Stock"), shall be converted into that number of shares
which is equal to the quotient of the Total Consideration divided by
the Average Price, and then divided by the Outstanding BankCentral
Common Stock (the "Stock Per Share Amount").
(ii) Each outstanding share of BankCentral Common
Stock which under the terms of this Agreement is to be converted into
cash shall be converted into the dollar amount that is equal to the
Total Consideration divided by the Outstanding BankCentral Common
Stock (the "Cash Per Share Amount").
(iii) For purposes of this Agreement, the
following terms shall have the following definitions:
"Average Price" shall be the average closing price of
Firstbank Common Stock, as reported on the NASDAQ National Market
("NASDAQ") during the twenty (20) trading days next prior to the date
that is seven (7) days prior to the Closing Date.
"Outstanding BankCentral Common Stock" shall mean the number
of shares of BankCentral Common Stock issued and outstanding
immediately preceding the Closing Date, including the Option Shares,
as defined below.
"Per Share Amount" shall mean the applicable consideration
into which each share of BankCentral Common Stock shall be converted
pursuant to paragraphs (i) and (ii) of this Section.
"Total Cash Consideration" shall mean, subject to any
adjustment required by Section 1.12, $6,500,000 if the Average Price
is greater than or equal to $31.50, and $6,174,000 if the Average
Price is less that $31.50.
"Total Stock Consideration" shall mean, subject to the
provisions of Sections 5.14 and 7.01, the number of shares of
Firstbank Conversion Stock which is equal to: (i) 201,950 if the
Average Price is greater than or equal to $31.50 but less than or
equal to $33.50; (ii) the quotient of $6,426,000 divided by the
Average Price if the Average Price is less than $31.50 but greater
than or equal to $30.50; (iii) 214,200 if the Average price is less
than $30.50; and (iv) the quotient of $6,765,328 divided by the
Average Price if the Average Price is greater than $33.50.
"Total Cash Election" shall mean the total number of shares
of BankCentral Common Stock issued and outstanding immediately
preceding the Closing Date which the holders thereof have elected to
have converted into the right to receive cash, as such total number
may be adjusted pursuant to the terms of Section 1.09.
"Total Consideration" shall mean the sum of the Total Cash
Consideration plus, the product of the Total Stock Consideration
multiplied by the Average Price.
"Total Stock Election" shall mean the total number of shares
of BankCentral Common Stock issued and outstanding immediately
preceding the Closing Date which the holders thereof have elected to
have converted into the right to receive shares of Firstbank
Conversion Stock, as such total number may be adjusted pursuant to the
terms of Section 1.09.
"Trading day" shall be a day on which an actual trade of
Firstbank Common Stock occurs and is reported on the NASDAQ.
(b) For all purposes of this Agreement, the shares of
BankCentral Common Stock issuable to the holder of any currently
exercisable options, or options that will become exercisable at any
time on or before or as a result of the consummation of the Merger,
for the purchase of BankCentral Common Stock ("Option Shares") shall
be treatedas a share of BankCentral Common Stock that is issued and
outstanding immediately preceding the Closing Date and the holder of
such options shall have the right to elect to receive either shares of
Firstbank Conversion Stock or cash for each of the Option Shares held
by him or her in the same manner as any other holder of currently
issued and outstanding BankCentral Common Stock if payment of the
exercise price is made prior to the Closing.
(c) All shares of Firstbank Conversion Stock shall be duly
authorized, validly issued, fully paid and non-assessable. Each
holder of an outstanding certificate which prior to the Effective Time
represented shares of BankCentral Common Stock shall be entitled, upon
surrender thereof, to receive in exchange therefor cash, shares of
Firstbank Conversion Stock or a combination thereof, subject to the
limitations set forth in Section 1.09 hereof. No stockholder of
BankCentral Common Stock shall be entitled to receive a fractional
share of Firstbank Conversion Stock. Any such stockholder shall
receive, in lieu of such fractional share, cash in an amount equal to
the product of such fractional share multiplied by the Average Price.
No stockholder of BankCentral who has dissented from the Merger and
become entitled to receive payment for his shares in accordance with
the provisions of the Delaware General Corporation Law (the
"Delaware Code") shall receive or be entitled to receive cash or
shares of Firstbank Conversion Stock under this Agreement. All
amounts due to stockholders of BankCentral who properly exercise
their appraisal rights pursuant to Section 262 of the Delaware Code
("Dissenting Stockholders") shall be paid by Firstbank.
(d) Any shares of BankCentral Common Stock then issued but
not outstanding and held in treasury shall cease to exist, the
certificate or certificates therefor shall be canceled, and no shares
of stock of Firstbank or of the Surviving Corporation shall be issued
in respect thereof.
(e) Any shares of New Company stock then issued and
outstanding and all rights in respect thereof shall remain issued and
outstanding and in the possession of Firstbank as the only issued and
outstanding shares of the Surviving Corporation.
1.08 Delivery of Firstbank Stock and Cash to Exchange Agent. On
the Closing Date, Firstbank shall deliver to the Exchange Agent (as
defined in Section 1.09(c) hereof) certificates representing the
shares of Firstbank Conversion Stock to be issuable and the Total
Cash Consideration to be paid on the Effective Time. Such shares of
Firstbank Conversion Stock shall not be deemed issued until the
Effective Time. The Exchange Agent shall not be entitled to vote or
exercise any rights of ownership with respect to any shares of
Firstbank Conversion Stock held by it from time to time hereunder, and
shall receive and hold any dividends or other distributions paid or
distributed with respect to such shares for the account of the
stockholders entitled hereto. After the expiration of one hundred
twenty (120) days after the Effective Time, the Exchange Agent shall,
if so directed by Firstbank, return to Firstbank any certificates
representing shares of Firstbank stock, cash, dividends, or other
distributions then held by the Exchange Agent which have not been
delivered to the holders of common stock of BankCentral pursuant
hereto. In such event, any further shares of BankCentral Common
Stock surrendered to the Exchange Agent shall be delivered to
Firstbank for exchange as provided herein. After the return of any
such shares, cash, dividends, or other distributions to Firstbank,
Firstbank shall be required to distribute the same to former
stockholders of BankCentral upon the surrender of their certificates
in the same manner as is otherwise required under Section 1.10
hereof.
1.09 Election Procedures; Steps of Transaction.
(a) Subject to the provisions of this Section, each record
holder of shares of BankCentral Common Stock (other than Dissenting
Stockholders) will be entitled to elect to: (i) receive the Cash Per
Share Amount for each share of BankCentral Common Stock held (a "Cash
Election"); (ii) receive the Stock Per Share Amount in exchange for
each share of BankCentral Common Stock held (a "Stock Election");
(iii) receive a combination of cash and shares of Firstbank Conversion
Stock for the shares of BankCentral Common Stock held (a "Combination
Election"); or (iv) otherwise indicate by such holder's action or
inaction that such record holder prefers solely to receive the Cash
Per Share Amount for each share of BankCentral Common Stock held (a
"Non-Election). All such elections shall be made on a form designed
for that purpose and mutually agreeable to BankCentral and Firstbank
(a "Form of Election").
(b) After the Closing, no holder of BankCentral Common
Stock which is issued and outstanding immediately prior to the Closing
or of any Option Shares will have any rights in respect of such
BankCentral Common Stock or Option Shares except to receive cash,
shares of Firstbank Conversion Stock or a combination thereof for the
shares of BankCentral Common Stock or Option Shares converted as
provided in Section 1.07, or to receive payment for such shares of
BankCentral Common Stock in the manner and to the extent provided in
Section 262 of the Delaware Code.
(c) On the same date which notice is sent to stockholders
of BankCentral of the special meeting of stockholders to be held
pursuant to Section 5.03 (the "Mailing Date"), Firstbank shall mail or
cause to be mailed to each then current holder of record of a
certificate or certificates representing outstanding shares of
BankCentral Common Stock (the "Certificates"): (i) a Form of Election
which shall allow holders of BankCentral Common Stock to make the Cash
Election, Stock Election or a Combination Election, shall provide
instructions for the transmittal of the Certificates and shall specify
that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates (or a
lost certificate affidavit and a bond in a form reasonably acceptable
to Firstbank); and (ii) instructions for use in making a Stock
Election, Cash Election or a Combination Election and effecting the
surrender of the Certificates in exchange for either cash or Firstbank
Conversion Stock. Pursuant to the terms of a mutually agreeable
exchange agent agreement, the parties hereto agree to appoint Central
Bank, Fairview Heights, Illinois, as exchange agent (the "Exchange
Agent"), for the parties to effect the surrender of the Certificates
in exchange for either cash, Firstbank Conversion Stock or a
combination thereof. Firstbank shall use its best efforts to mail or
cause to be mailed the Form of Election to all persons who become
holders of BankCentral Common Stock subsequent to the Mailing Date and
by the close of business of BankCentral on the date which is five (5)
Business Days prior to the Closing Date.
(d) Elections by holders of BankCentral Common Stock shall
be made by mailing or delivering to the Exchange Agent a properly
completed and executed Form of Election and the Certificates. A
properly completed Form of Election must be received by the Exchange
Agent by 5:00 p.m., Springfield, Illinois time, on the date which is
two (2) Business Days prior to the Closing Date (the "Election
Deadline") to be effective. For the purpose hereof, a holder of
BankCentral Common Stock who does not submit a properly completed Form
of Election prior to the Election Deadline shall be deemed to have
made a Non-Election.
(e) Notwithstanding the Forms of Election submitted by
BankCentral stockholders, in no event shall the cash payable and
number of shares of Firstbank Conversion Stock issued to all
BankCentral stockholders exceed in the aggregate the Total Cash
Consideration and the Total Stock Consideration, respectively.
Accordingly: (i) if the Total Stock Election exceeds the Total Stock
Consideration, the Exchange Agent shall automatically convert on a pro
rata basis the number of shares of BankCentral Common Stock for which
a Stock Election has been made into a Cash Election so that after the
completion of such conversion the total number of shares of Firstbank
Conversion Stock issuable to all BankCentral stockholders is equal to
the Total Stock Consideration; and (ii) if the Total Cash Election
exceeds the Total Cash Consideration, the Exchange Agent shall
automatically convert on a pro rata basis the number of shares of
BankCentral Common Stock for which a Cash Election has been made into
a Stock Election so that after the completion of such conversion the
total amount of cash issuable to all BankCentral stockholders is equal
to the Total Cash Consideration.
(f) As promptly as practicable, but in not event later than
five (5) Business Days after the Closing, Firstbank shall cause the
Exchange Agent to deliver to each holder of BankCentral Common Stock
who has theretofore submitted an effective Form of Election
accompanied by the Certificates covered by such Form of Election: (i)
cash in an amount equal to the product of the Cash Per Share Amount
times the number of shares of BankCentral Common Stock theretofore
represented by the Certificates so surrendered in exchange for cash;
(ii) certificates representing the number of whole shares of Firstbank
Conversion Stock into which the shares of BankCentral Common Stock
theretofore represented by the Certificates so surrendered in exchange
for Firstbank Conversion Stock were converted, plus cash as
heretofore provided for any fractional share of Firstbank Conversion
Stock which such holder would have been entitled to receive; or (iii)
both cash and shares of Firstbank Conversion Stock pursuant to a
Combination Election.
(g) As promptly as practicable, but in no event later than
three (3) Business Days after the Closing, Firstbank shall send to
each holder of record of BankCentral Common Stock immediately prior to
the Closing who has not previously submitted his Certificates,
additional transmittal materials for use in surrendering such
Certificates to the Exchange Agent and instructions for use in
effecting such surrender in exchange for cash.
(h) Subject to the limitations of this Section, any
stockholder of BankCentral who is deemed to have made a Non-Election
shall be entitled only to receive cash in exchange for the surrender
of the Certificates of such holder. As promptly as practicable after
receipt by the Exchange Agent of the Certificates of any holder who
has made a Non-Election, Firstbank shall cause the Exchange Agent to
deliver to such holder cash in an amount equal to the Cash Per Share
Amount times the number of shares of BankCentral Common Stock
represented by such Certificates.
1.10 Surrender and Exchange of Certificates.
(a) On or after the Effective Time, each holder of an
outstanding certificate or certificates which prior to the Effective
Time represented shares of BankCentral Common Stock, upon surrender
to the Exchange Agent, shall be entitled to a certificate or
certificates representing the number of shares of Firstbank Conversion
Stock and/or the amount of cash for which the shares of BankCentral
Common Stock previously represented by such BankCentral Common Stock
are entitled to be exchanged. To the extent such shares of
BankCentral Common Stock are exchanged for Firstbank Conversion Stock,
the holder of such certificate shall also be entitled to any dividends
or other distributions payable on or after the Effective Time to
holders of record of Firstbank Conversion Stock . In no event shall
the holder of any surrendered BankCentral certificate be entitled to
receive interest on: (i) any cash into which the shares represented
by such certificate may have been converted; or (ii) any dividends or
other distributions payable after the Effective Time on the shares of
Firstbank Conversion Stock into which the shares of BankCentral Common
Stock represented by such certificate may have been converted.
(b) The Exchange Agent shall accept certificates
representing shares of BankCentral Common Stock for exchange upon
compliance with such reasonable terms and conditions as the Exchange
Agent may impose to effect the orderly exchange thereof. If any
certificate for shares of Firstbank Conversion Stock is to be
delivered to, or any cash is to be paid to, a person other than the
person in whose name the certificate(s) for BankCentral Common Stock
surrendered for exchange are registered, it shall be a condition of
the exchange that the person requesting such exchange shall deliver
with the surrendered certificates any appropriate documents of
transfer and shall pay to the Exchange Agent any transfer or other
taxes required by reason thereof, or shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is
not applicable. Neither the Exchange Agent nor any party hereto shall
be liable to a holder of BankCentral Common Stock for any money paid
or stock delivered, to a public official pursuant to any applicable
abandoned property, escheat or similar law. In the event that any
stockholder is unable to surrender a certificate because it has been
lost or destroyed, the Exchange Agent may make distribution to that
stockholder upon receipt of such affidavits, undertakings, indemnity
bonds and other agreements as are customary in such circumstances.
(c) Unless otherwise provided herein, and until duly
surrendered to the Exchange Agent, each outstanding certificate which,
prior to the Effective Time, represented BankCentral Common Stock,
shall be deemed to evidence ownership of that number of shares of
Firstbank Conversion Stock and/or cash into which BankCentral Common
Stock shall have been converted. No dividends or other distributions
on Firstbank Conversion Stock will be remitted to any person entitled
to receive shares of Firstbank Conversion Stock until such person
properly surrenders such person's certificate or certificates
representing BankCentral Common Stock, at which time such dividends
shall be remitted to such person, without interest.
1.11 Transfers. The stock transfer books of BankCentral
shall be closed at the close of business five (5) Business Days
preceding the Closing Date, and the holders of record of BankCentral
Common Stock as of the Closing Date shall be the stockholders
entitled to conversion of their BankCentral Common Stock into
Firstbank Conversion Stock and cash as provided for in this Agreement.
No transfer or assignment of any shares of BankCentral Common Stock
may take place on or after the Closing Date until the certificates for
such shares are exchanged pursuant to this Agreement; and if such
certificates are presented to BankCentral or its transfer agent for
transfer, they shall be canceled against delivery of cash and
certificates for Firstbank Conversion Stock as provided herein.
ARTICLE II
Representations and Warranties of BankCentral
As a material inducement to the Firstbank Entities to enter into
and perform their respective obligations under this Agreement, and
notwithstanding any examinations, inspections, audits, and other
investigations heretofore or hereafter made by the Firstbank Entities,
BankCentral hereby represents and warrants to the Firstbank Entities
as follows:
2.01 Organization and Authority. BankCentral is a corporation
duly organized, and validly existing, and in good standing under the
laws of the State of Delaware, and in all other jurisdictions where
its ownership or leasing of property or the conduct of its business
requires it to be so qualified. BankCentral is registered as a
bank holding company with the Federal Reserve Board under the Bank
Holding Company Act of 1956, as amended (the "BHC Act"). Except for
CNB of Mattoon, BankCentral has no subsidiaries.
CNB of Mattoon is chartered as a national banking association
under the laws of the United States. BankCentral and CNB of Mattoon
each possess all corporate power and authority to own and operate its
respective properties and to carry out its respective businesses as
and where the same are now being conducted. The character of the
properties owned or leased by each of BankCentral and CNB of Mattoon
and the nature of the business transacted by each do not require that
any of them be qualified to do business in any other jurisdiction.
2.02 Corporation Authorization; Records. BankCentral has the
corporate power and authority to enter into this Agreement and,
subject to the approval of the Merger by the stockholders of
BankCentral and such approvals of government agencies and other
governing boards having regulatory authority over BankCentral, CNB of
Mattoon, or the Firstbank Entities as may be required by applicable
law, rule, or regulation, to carry out its obligations hereunder. The
only stockholder vote of BankCentral required to approve the Merger
is the affirmative vote of the holders of a majority of the
outstanding shares of BankCentral Common Stock, entitled to vote at
any meeting of stockholders of BankCentral held for such purpose.
The execution, delivery, and performance of this Agreement by
BankCentral and the consummation of the transactions contemplated
hereby have been duly authorized by the Board of Directors of
BankCentral. Subject to the approvals as aforesaid, this Agreement is
the valid and binding obligation of BankCentral, enforceable against
BankCentral in accordance with its terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium, and other laws now or hereafter in effect relating to the
enforcement of creditors' rights generally and except that equitable
principles may limit the right to obtain specific performance or other
equitable remedies.
Neither the execution, delivery and performance by BankCentral of
this Agreement, nor the consummation of the transactions contemplated
hereby, nor compliance by BankCentral with any of the provisions
hereof, will (a) except as set forth in Schedule 2.02 attached hereto,
violate, conflict with, or result in a breach of any provisions of, or
constitute a default for an event which, with notice or lapse of time
or both, would constitute a default under, or result in the
termination of, or accelerate the performance required by, or result
in a right of termination or acceleration of, or result in the
creation of any lien, security interest, charge, or encumbrance upon
any of the properties or assets of BankCentral or CNB of Mattoon under
any of the terms, conditions, or provisions of (i) the certificate of
incorporation, articles of association, or by-laws of each, or (ii)
except as set forth in Schedule 2.02 attached hereto, any material
note, bond, mortgage, indenture, deed of trust, license, lease,
agreement, or other instrument or obligation to which BankCentral or
CNB of Mattoon is a party or by which it may be bound, or to which
BankCentral or CNB of Mattoon or any of the properties or assets of
BankCentral or CNB of Mattoon may be subject, or (b) subject to
compliance with the statutes and regulations referred to in this
Section, violate any judgment, ruling, order, writ, injunction,
decree, or to the best of BankCentral's knowledge, any statute, rule,
or regulation applicable to BankCentral or CNB of Mattoon or any of
their respective properties or assets.
Other than in connection or compliance with the provisions of the
Delaware Code, the Securities Act of 1933 and the rules and
regulations thereunder (the "Securities Act"), the Securities Exchange
Act of 1934 and the rules and regulations thereunder (the "Exchange
Act"), the securities or blue sky laws of the various states, or
filings, consents, reviews, authorizations, approvals, or exemptions
required under the BHC Act, or any required approvals of the
Comptroller, or the FDIC, no notice to, filing with, exemption or
review by, or authorization, consent, or approval of, any public body
or authority is necessary for the consummation by BankCentral of the
transactions contemplated by this Agreement.
The minute books and stock records of BankCentral and CNB of
Mattoon are complete and correct in all material respects and
accurately reflect in all material respects all meetings, consents and
other actions of the organizers, incorporators, , stockholders, boards
of directors, and committees of the boards of directors occurring
since the organization of BankCentral with respect to BankCentral and
since the acquisition of CNB of Mattoon by BankCentral with respect to
CNB of Mattoon.
2.03 Subsidiaries of CNB of Mattoon. CNB of Mattoon has no
subsidiaries and does not control, or have any interest in any other
corporation, partnership, joint venture, or other business association
(other than any interest pledged to CNB of Mattoon in the ordinary
course of its business as security for the obligations of third
parties to CNB of Mattoon or held by CNB of Mattoon as a consequence
of its exercise of rights and remedies in respect of any interest
pledged as security in respect of such obligations).
2.04 Capitalization of BankCentral. The authorized stock of
BankCentral consists of: (a) 350,000 shares of common stock, par value
$1.00 per share, of which, as of the date hereof, 220,109 shares are
issued and outstanding, and 22,972 shares are issued but not
outstanding and held in treasury; and (b) 50,000 shares of preferred
stock, par value $0.01 per share, none of which are issued and
outstanding. Except for the options to purchase BankCentral Common
Stock listed on Exhibit 2.04 attached hereto, there are no other
shares of capital stock or other equity securities of BankCentral
outstanding and no other outstanding options, warrants, scrip, rights
to subscribe to, calls, or commitments of any character whatsoever
relating to, or securities or rights convertible into, shares of any
capital stock of BankCentral, or contracts, commitments,
understandings, or arrangements by which BankCentral is or may become
bound to issue additional shares of its capital stock or options,
warrants, or rights to purchase or acquire any additional shares of
its capital stock. All of the issued and outstanding shares of
BankCentral Common Stock are validly issued, fully paid, and
nonassessable, and have not been issued in violation of any preemptive
right of any stockholder of BankCentral.
2.05 Capitalization of CNB of Mattoon. The authorized capital
stock of CNB of Mattoon consists of 225,000 shares of common stock,
par value $2.50 per share, all of which are issued and outstanding.
Except for the security interest of LaSalle National Bank, BankCentral
has and will have as of the Closing Date good and marketable title to
all then issued and outstanding shares of the common stock of CNB of
Mattoon, free and clear of any liens, claims, charges, encumbrances,
and assessments of any kind or nature whatsoever. There are no other
shares of capital stock or other equity securities of CNB of Mattoon
outstanding and no other outstanding options, warrants, scrip, rights
to subscribe to, calls, or commitments of any character whatsoever
relating to, or securities or rights convertible into shares of any
capital stock of CNB of Mattoon, or contracts, commitments,
understandings, or arrangements by which CNB of Mattoon is or may
become bound to issue additional shares of capital stock or options,
warrants, or rights to purchase or acquire any additional shares of
capital stock. All of the issued and outstanding shares of CNB of
Mattoon's common stock are validly issued, fully paid, and
nonassessable and are currently pledged to secure an indebtedness to
LaSalle National Bank.
2.06 Financial Statements.
(a) The financial statements which are now available from
those described below are appended to Schedule 2.06 attached hereto.
As soon as is practicable following the execution of this Agreement,
BankCentral shall furnish Firstbank with copies of all of such other
financial statements described below:
(i) Balance sheets, statements of income or loss,
statements of cash flows and statements of stockholders' equity
together with notes thereto of BankCentral for the years ending June
30, 1996, June 30, 1995 and June 30, 1994 and balance sheets of CNB of
Mattoon, as audited by McGladrey & Pullen, LLP, and the unaudited
consolidated balance sheets and statements of income or loss and
statements of ' stockholders' equity of BankCentral at and for the
period ending September 30, 1996.
(ii) Any and all reports of BankCentral which have been
filed with the Federal Reserve Board prior to the execution of this
Agreement and since June 30, 1996, or if none have yet been filed,
then such reports shall be provided to Firstbank within five (5)
Business Days following the date such report is filed or on the date
such report is due, whichever is earlier;
(iii) The Reports of Condition and Income of CNB of
Mattoon as of December 31, 1993, 1994, and 1995, and as of September
30, 1996, as furnished by CNB of Mattoon to each federal and state
bank regulatory agency having jurisdiction over its affairs; and
(b) The financial statements referenced above in subsection
(a) of this Section are referred to collectively as the "Financial
Statements". The Financial Statements have been prepared in
accordance with the books and records of BankCentral and CNB of
Mattoon and in accordance with generally accepted accounting
principles and/or regulatory accounting principles in the case of CNB
of Mattoon, and present fairly the consolidated financial position of
BankCentral and the financial position of CNB of Mattoon at the dates
thereof and the results of their operations and cash flows for the
periods stated, subject to year-end audit adjustment in the case of
interim financial statements, none of which shall be material.
(c) BankCentral and CNB of Mattoon have each prepared,
kept, and maintained through the date hereof true, correct, and
complete financial and other books and records of their affairs which
fairly reflect in all material respects their respective assets,
properties, liabilities, and operations.
(d) Except as otherwise reflected on the books and records
of BankCentral and CNB of Mattoon, all of the accounts, notes, other
receivables, and investment securities which are reflected in the
Financial Statements were acquired in the ordinary course of business.
2.07 Reports. BankCentral and CNB of Mattoon have filed all
reports, registrations, and statements, together with any required
amendments thereto, that they were required to file with (i) the
Federal Reserve Board, (ii) the FDIC, (iii) the Comptroller, and (iv)
any applicable state securities authorities. All such reports and
statements filed with any such regulatory body or authority are
collectively referred to herein as the "BankCentral Reports." As of
their respective dates and to the extent applicable, the BankCentral
Reports complied in all material respects with all rules and
regulations promulgated by the Securities and Exchange Commission
("SEC"), the Federal Reserve Board, the FDIC, the Office of the
Comptroller of the Currency (the "Comptroller"), and any applicable
state securities authorities, as the case may be, and did not contain
any untrue statement of a material fact or omit 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.
2.08 Title to and Condition of BankCentral and CNB of Mattoon
Assets.
(a) Except as may be reflected in the Financial Statements,
BankCentral and CNB of Mattoon have, and at the Closing Date will
have, good and marketable title to all of their respective properties
and assets, including, without limitation, those reflected on the
Financial Statements, free and clear of any liens, charges, pledges,
encumbrances, defects, claims, or rights of third parties, except:
(i) as set forth in Schedule 2.08 attached hereto
under the heading "Encumbrances; " or
(ii) pledges or liens required to be granted in
connection with the acceptance of government deposits, or granted in
connection with repurchase or reverse repurchase agreements; or
(iii) those otherwise incurred in the ordinary
course of business, none of which shall exceed the amount of
$5,000.00;
(iv) for liens for taxes, assessments, or other
governmental charges not yet delinquent; or
(v) with respect to real property only, for such
easements, defects of title, and other encumbrances as do not
individually or in the aggregate materially and adversely affect the
use or value of such real estate.
(b) No material assets reflected on the Financial
Statements in respect of BankCentral or CNB of Mattoon have been sold,
leased, transferred, assigned, or otherwise disposed of since June 30,
1996, except in the ordinary course of business, or except sales of
all or a portion of the assets in CNB of Mattoon's FHA Title I
Portfolio, or as set forth in Schedule 2.08 under the heading
"Dispositions."
(c) All furniture, fixtures, vehicles, machinery,
equipment, and computer software owned or used by BankCentral and CNB
of Mattoon including any of such items leased as a lessee and all
facilities and improvements comprising part of any owned or leased
real property, taken as a whole as to each of the foregoing, and with
no single such item being deemed of material importance, is fit for
the purposes for which they are currently used, will remain, in the
same level of order and repair as currently exists through the
Effective Time and free of defects not currently existing and in the
same operating condition as is currently existing, subject only to
normal wear and tear. The operation by BankCentral and CNB of Mattoon
of such properties is in compliance in all material respects with all
applicable laws, ordinances, and rules and regulations of any
governmental authorities having jurisdiction.
2.09 Real Property.
(a) The legal description of each parcel of real property
owned by BankCentral and CNB of Mattoon (other than real property (i)
held by CNB of Mattoon as a trustee in the ordinary course of its
business, or (ii) acquired in foreclosures or in lieu of foreclosures
and being held by CNB of Mattoon for disposition as required by law
("OREO")) is set forth in Schedule 2.09 attached hereto under the
heading "Owned Real Property" (such real property and other real
property previously owned by BankCentral or CNB of Mattoon being
herein referred to as the "Owned Real Property"). The legal
description of each parcel of real property leased by BankCentral and
CNB of Mattoon as lessee is also set forth in Schedule 2.09 under the
heading "Leased Real Property" (such real property being herein
referred to as "Leased Real Property"). Collectively, the Owned Real
Property and the Leased Real Property is herein referred to as the
"Real Property."
(b) BankCentral and CNB of Mattoon enjoy peaceful
possession of all of the Real Property currently owned or leased by
them.
(c) Neither BankCentral nor CNB of Mattoon has any interest
in any other real property except interests as a mortgagee, and except
for OREO.
(d) To the best of BankCentral's knowledge, none of the
buildings, structures, or other improvements located on the Real
Property currently owned or leased by BankCentral or CNB of Mattoon
encroaches upon or over any adjoining parcel of real estate or any
easement or right-of-way or "setback" line in any material respect,
and all such buildings, structures, and improvements are located and
constructed in material conformity with all applicable zoning
ordinances and building codes.
(e) None of the buildings, structures, or improvements
located on the Real Property currently owned or leased by BankCentral
or CNB of Mattoon are the subject of any official complaint or notice
of violation of any applicable zoning ordinance or building code, and
there is no zoning ordinance, building code, use or occupancy
restriction, or condemnation action or proceeding pending, or to
BankCentral's knowledge, threatened with respect to any such building,
structure or improvement.
(f) Except as set forth in Schedule 2.09 under the heading
of "Property Especially Mentioned," neither any Owned Real Property
currently owned or leased by BankCentral or CNB of Mattoon nor any
real property now or, to the best of BankCentral's knowledge,
previously held by BankCentral or CNB of Mattoon as a result of any
foreclosures is or was in violation of any federal, state, or
municipal environmental laws, regulations, or ordinances and there are
not nor have there been conditions existing on any of such Owned Real
Property or on any real property held by CNB of Mattoon as a result of
foreclosure, or otherwise existing with respect to BankCentral and CNB
of Mattoon which give rise to, or may give rise to, any such
violation, or which require or may in the future require remedial
action under or with respect to such laws, regulations, and
ordinances.
(g) Within forty-five (45) days of the execution of this
Agreement, BankCentral shall cause to be delivered to Firstbank, at
BankCentral's expense, Phase I Environmental Site Assessments for the
Real Property currently owned or leased by BankCentral or CNB of
Mattoon and OREO by a firm or firms acceptable to Firstbank. Upon
Firstbank's receipt and review of such Phase I Environmental Site
Assessments, Firstbank may elect to require BankCentral to furnish, at
BankCentral's expense, Phase II Addenda thereto on any or all of such
Real Property and OREO. Unless required to do so by BankCentral,
Firstbank shall not disclose to BankCentral any of the results of any
such Assessments or Addenda nor shall BankCentral have any duty to act
upon such results except as set forth in this Section 2.09(g). Each
Phase II Addendum required by Firstbank shall be in a form acceptable
to Firstbank and shall specifically identify all environmental defects
on, in and under the subject real property and provide a detailed
estimate of the cost and procedure for remediation of the subject real
property. If remediation is recommended by such Assessments or
Addenda, Firstbank may require BankCentral to complete such
remediation prior to the Closing Date as long as the aggregate actual
cost of such remediation does not exceed $50,000.
2.10 Contracts, Commitments, and Certain Loans.
(a) Schedule 2.10 attached hereto contains a complete and
accurate listing of all agreements (written or oral) and other
contracts (including any leases, whether as lessor or as lessee) to
which BankCentral or CNB of Mattoon is a party which involve
commitment of funds by either of more than $10,000.00 and which cannot
be terminated by BankCentral or CNB of Mattoon on thirty (30) days'
notice or less without liability, other than contracts entered into in
respect of deposits, loan agreements and commitments, notes, security
agreements, repurchase agreements, bankers' acceptances, outstanding
letters of credit and commitments to issue letters of credit,
participation agreements, and other documents relating to loan or
deposit transactions entered into by CNB of Mattoon in the ordinary
course of business. In addition, Schedule 2.10 also contains a
complete and accurate listing of all loan commitments, outstanding
letters of credit and commitments to issue letters of credit, and
other documents relating to or involving commitments to extend credit
by BankCentral or CNB of Mattoon.
(b) Except for the contracts and agreements required to be
listed on Schedule 2.10, neither BankCentral nor CNB of Mattoon is a
party to or bound by any written or oral:
(i) agreement, contract, arrangement, understanding,
or commitment with any labor union or similar organization:
(ii) bonus, incentive compensation, deferred
compensation, retirement, savings, stock purchase, stock option, or
other similar plan;
(iii) franchise or license agreement:
(iv) employment, severance or termination pay, agency,
consulting, or similar agreement, contract, arrangement, understanding
or commitment;
(v) loans or other obligations payable or owing to any
officer, director, or employee, except (i) salaries and wages incurred
and accrued in the ordinary course of business and/or (ii) obligations
due in respect of any depository accounts maintained by any of the
foregoing at CNB of Mattoon in the ordinary course of business;
(vi) loans or debts payable or owing by any executive
officer or director of BankCentral or CNB of Mattoon or any other
person or entity deemed an "executive officer" or a "related interest"
of any of the foregoing, as such terms are defined in Regulation O of
the Federal Reserve Board; or
(vii) other agreement, contract, arrangement,
understanding or commitment extending beyond six (6) months from the
date hereof that cannot be cancelled without cost or penalty upon
notice of thirty (30) days or less and which involve commitment of
funds by either BankCentral or CNB of Mattoon of more than $10,000.
(c) BankCentral and CNB of Mattoon each carry property
casualty, liability, fidelity, and other insurance coverages as set
forth in Schedule 2.10 under the heading "Insurance."
(d) True, correct, and complete copies of the agreements,
contracts, leases, insurance policies, and other documents referred to
in Schedule 2.10 are appended to such Schedule 2.10.
(e) To the best of BankCentral's knowledge, each of the
agreements, contracts, leases, insurance policies, and other documents
referred to in Schedule 2.10 is a valid, binding, and enforceable
obligation of the parties sought to be bound thereby, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium, and other laws now or hereafter in effect
relating to the enforcement of creditors' rights generally, and except
that equitable principles may limit the right to obtain specific
performance or other equitable remedies.
(f) There is set forth in Schedule 2.10 under the heading
"Loans" a true, correct, and complete listing, by account or other
identifying number, of (i) all loans of CNB of Mattoon which have
been accelerated during the past 24 months and which as of the time of
acceleration, had in excess of $25,000.00 of principal and interest
due; (ii) all loan commitments or lines of credit of CNB of Mattoon
which have been terminated during the past 24 months by reason of
default or material adverse developments in the condition of the
borrower or other events or circumstances affecting the credit of the
borrower and which, as of the time of termination, pertained to more
than $25,000.00 of principal and interest; (iii) all loans, lines of
credit, and loan commitments as to which CNB of Mattoon has given
notice to the borrower or customer of CNB of Mattoon's intent to
terminate during the past 24 months and which, as of the time of such
notice pertained to more than $25,000.00 of principal and interest;
(iv) all loans, all notification letters, and other written
communications between CNB of Mattoon and any of its borrowers,
customers, or other parties during the past 24 months under which, or
pursuant to which, CNB of Mattoon has requested or demanded that
actions be taken to correct existing defaults or facts or
circumstances which may become defaults, which, as of the time of such
request or demand, had more than $25,000.00 of principal and interest
due; and (v) each borrower, customer, or other party which has
notified CNB of Mattoon during the past 24 months of, or asserted
against CNB of Mattoon, in writing, any "lender liability" or similar
claim, and, to the best of CNB of Mattoon's knowledge, each borrower,
customer, or other party which has given BankCentral or CNB of Mattoon
any oral notification of, or asserted against BankCentral or CNB of
Mattoon, any such claim.
2.11 Absence of Defaults. Except as set forth in Schedule 2.11
attached hereto under the heading "Defaults," there are no pending
material disputes between BankCentral or CNB of Mattoon and the other
parties to the agreements, contracts, leases, insurance policies, and
other documents referred to in Schedule 2.10, and all such agreements,
contracts, leases, insurance policies, and other documents are in full
force and effect and not in default in any material respect with
respect to BankCentral or CNB of Mattoon, or, to the best of
BankCentral's knowledge, any other party thereto, and will continue in
full force and effect immediately after the Closing Date.
2.12 Absence of Undisclosed Liabilities. Except as disclosed in
Schedule 2.12 attached hereto:
(a) Neither BankCentral nor CNB of Mattoon, as of the date
hereof, has any debts, liabilities, or obligations, whether accrued,
absolute, contingent, or otherwise and whether due or to become due,
except:
(i) liabilities reflected in the Financial Statements;
or
(ii) debts, liabilities or obligations incurred since
June 30, 1996, in the ordinary and usual course of their respective
businesses, none of which are for breach of contract, breach of
warranty, tort, infringement, or lawsuits, and none of which would be
reasonably expected to materially and adversely affect their
respective financial positions or results of operations, or
businesses, assets, or operations; and
(b) BankCentral and CNB of Mattoon were not, as of June 30,
1996, and since such date have not become, a party to any contract or
agreement which affected, affects, or may reasonably be expected to
affect, materially and adversely, their respective financial
positions, results of operations, businesses, assets, or operations.
2.13 Taxes and Tax Returns. BankCentral and CNB of Mattoon have
timely filed or will timely file all tax returns required to be filed
at or prior to the Closing Date. BankCentral and CNB of Mattoon have
paid, or have set up adequate reserves on the Financial Statements for
the payment of, all taxes required to be paid in respect of the
periods covered by such returns and have set up adequate reserves on
the Financial Statements for the payment of all taxes anticipated to
be payable in respect of the periods subsequent to the last of said
periods for which returns have been filed (treating for this purpose
the Closing Date as the last day of an applicable period, whether or
not it is in fact the last day of a taxable period). Neither
BankCentral nor CNB of Mattoon will have any material liability for
any such taxes in excess of the amounts so paid or reserves so
established and no material deficiencies for any tax, assessment, or
governmental charge have been proposed, asserted, or assessed
(tentatively or definitely) against BankCentral or CNB of Mattoon
which would not be covered by existing reserves. Neither BankCentral
nor CNB of Mattoon is delinquent in the payment of any material tax,
assessment, or governmental charge, nor has it requested any extension
of time within which to file any tax return in respect of any fiscal
year which has not since been filed and no requests for waivers of the
time to assess any taxes are pending. There are no pending or
unresolved audits of any tax returns filed by BankCentral or CNB of
Mattoon.
2.14 Material Adverse Change. Except as otherwise disclosed in
any of the Schedules of BankCentral referenced herein, since June
30,1996, there has been no material adverse change in the business,
financial condition, or results of operations of BankCentral and CNB
of Mattoon taken as a whole (other than changes in banking laws or
regulations, or interpretations thereof, that affect the banking
industry generally, or changes in the general level of interest
rates).
2.15 Litigation and Other Proceedings. Except as set forth in
Schedule 2.15, neither BankCentral nor CNB of Mattoon is a party to
any pending or threatened claim, action, suit, investigation, or
proceeding, or is subject to any order, judgment or decree, adversely
affecting either's business, financial condition or assets. Without
limiting the generality of the foregoing, except as set forth in
Schedule 2.15, as of the date of this Agreement, there are no
actions, suits, or proceedings pending, or to BankCentral's
knowledge, threatened against BankCentral or CNB of Mattoon or any of
their respective officers, employees, or directors by any stockholder
of BankCentral or any former stockholder or involving claims under
the Community Reinvestment Act of 1977, the Bank Secrecy Act, the
Right to Financial Privacy Act, or any other laws applicable to
BankCentral or CNB of Mattoon.
2.16 Legal Proceedings and Governmental Compliance. Except as set
forth in Schedule 2.16 (a) there is no pending claim, action, suit,
or proceeding, or governmental proceeding or, to the best knowledge of
BankCentral, investigation or threat of any of the foregoing against
BankCentral or CNB of Mattoon or their business, properties, or
assets; and (b) no such claim, action, suit, or proceeding, or
governmental proceeding or investigation, if adversely determined,
would reasonably be expected to affect materially and adversely the
financial conditions, results of operations, business, assets, or
operations of BankCentral or CNB of Mattoon.
BankCentral and CNB of Mattoon are in compliance in all material
respects with all applicable laws, ordinances, rules, regulations,
orders, licenses and permits where noncompliance with same would
reasonably be expected to have a materially adverse effect on
BankCentral and/or CNB of Mattoon.
BankCentral and CNB of Mattoon hold all permits, business
licenses, certificates, franchises, and other similar items, which, if
not held, would reasonably be expected to have a material adverse
effect on the financial condition, operations, and/or ownership
rights as to the assets and properties of any of the foregoing. A
true, correct and complete list of all such items is set forth in
Schedule 2.16 attached hereto.
There is no pending legal action or governmental proceeding or,
to the best knowledge of BankCentral, investigation or threat of any
of the foregoing against BankCentral or CNB of Mattoon that could
prevent or adversely affect or which seeks to prohibit the
consummation of the transactions contemplated hereby, nor is
BankCentral or CNB of Mattoon subject to any order of court or
governmental authority having any such effect.
Except as set forth in Schedule 2.16, to the best of
BankCentral's knowledge, neither BankCentral nor CNB of Mattoon is in
violation of any environmental law or regulation that would reasonably
be expected to result in a material liability as a result of its
ownership, operation, or use of any property (whether directly or as a
consequence of such property being part of its investment portfolio,
including, without limitation, properties under foreclosure, property
held by such in its capacity as a trustee, and property in which
BankCentral or CNB of Mattoon has an interest, but excluding property
held as collateral for the security of any loan due it) (the
"Property") (a) that is contaminated by or contains any hazardous
waste, toxic substance, or related materials, including without
limitation, asbestos, PCBs, pesticides, herbicides, or any other
substance or waste that is hazardous to human health or the
environment (collectively, a "Toxic Substance"), or (b) on which any
Toxic Substance has been stored, disposed of, placed, or used in the
construction thereof. No claim, action, suit, proceeding, or
investigation is pending or has been initiated against BankCentral or
CNB of Mattoon relating to the Property before any court or other
governmental authority or arbitration tribunal relating to hazardous
substances, pollution, or the environment, and there is no outstanding
judgment, order, writ, injunction, decree, or award against or
affecting BankCentral or CNB of Mattoon with respect to the same.
Except for statutory or regulatory restrictions of general
application, no federal, state, municipal or other governmental
authority has placed any restriction on the business of BankCentral or
CNB of Mattoon which would reasonably be expected to have a material
adverse effect on the business, financial condition, or results of
operations of BankCentral or CNB of Mattoon.
The Firstbank Entities acknowledge that the Comptroller has in
the past removed CNB of Mattoon's trust powers.
2.17 Labor and Employment. No work stoppage involving
BankCentral or CNB of Mattoon is pending or, to the best knowledge of
BankCentral, threatened. BankCentral and CNB of Mattoon are not
involved in, or to BankCentral's knowledge, threatened with, or
affected by, any labor dispute, arbitration, lawsuit, or
administrative proceeding which would reasonably be expected to
materially and adversely affect the business of BankCentral and CNB of
Mattoon. Employees of BankCentral and CNB of Mattoon are not
represented by any labor union nor are any collective bargaining
agreements otherwise in effect with respect to such employees.
2.18 Material Interests of Certain Persons. Except as set forth
on Schedule 2.18, to the best knowledge of BankCentral, no officer or
director of BankCentral or CNB of Mattoon has any material interest in
any material contract or property (real or personal, tangible or
intangible), used in or pertaining to the business of BankCentral or
CNB of Mattoon.
2.19 Employee Benefit Plan. There are set forth in Schedule 2.19
all pension, retirement, stock option, stock purchase, stock
ownership, savings, stock appreciation right, profit sharing, deferred
compensation, consulting, bonus, group insurance, Section 125,
severance, and other employee benefit, incentive, and welfare
policies, contracts, plans, and arrangements, and all trust agreements
related thereto, in respect of any of the present or former directors,
officers, or other employees of BankCentral and CNB of Mattoon
collectively ("Employee Plans or Policies"). Except as set forth in
Schedule 2.19, all Employee Plans or Policies currently comply and
have at all relevant times complied in all material respects with all
applicable laws, requirements, and orders under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), the
Internal Revenue Code of 1986, as amended (the "Code"), and state law.
With respect to each Employee Plan or Policy which is a pension plan
(as defined in Section 3(2) of ERISA) (the "Pension Plans"), except as
set forth in Schedule 2.19, (a) no Pension Plan is a "multi-employer
plan" within the meaning of Section 3(37) of ERISA; (b) each Pension
Plan, to the extent necessary and applicable, is "qualified" within
the meaning of Section 401(a) of the Code, and each related trust, if
any is exempt from taxation under Section 501(a) of the Code; (c) the
present value of all benefits vested and all benefits accrued under
each Pension Plan which is subject to Title IV of ERISA did not, in
each case, as of the last applicable annual valuation date (as
indicated on Schedule 2.19) exceed the value of the assets of the
Pension Plans allocable to such vested or accrued benefits; (d) no
Pension Plan or any trust created thereunder, nor any trustee,
fiduciary, or administrator thereof, has engaged in a "prohibited
transaction" within, the meaning of Section 4975 of the Code or
Section 406 of ERISA, which could subject such plan or trust, or any
trustee, fiduciary, or administrator thereof, or any party dealing
with any such plan or trust, to the tax or penalty on prohibited
transactions imposed by said Section 4975 or by Section 502(1) of
ERISA; (e) no Pension Plan or any trust created thereunder has been
terminated, nor have there been any "reportable events" with respect
to any Pension Plan, as that term is defined in Section 4043 of ERISA;
and (f) no Pension Plan or any trust created thereunder has incurred
any "accumulated funding deficiency," as such term is defined in
Section 302 of ERISA(whether or not waived), since the effective date
of ERISA.
2.20 Conduct of BankCentral and CNB of Mattoon to Date. Except
as disclosed in Schedule 2.20, from and after June 30, 1996;
(a) BankCentral and CNB of Mattoon have carried on their
respective businesses in the ordinary and usual course consistent with
their past practices;
(b) Neither BankCentral nor CNB of Mattoon has issued or
sold any of its capital stock or any corporate debt securities which
should, under generally accepted accounting principles, be classified
as long-term debt on its balance sheet;
(c) Except in connection with amendments to the employment
agreement of Mr. L. Dean Clausen, BankCentral has not granted any
option for the purchase of its capital stock, effected any stock
split, or otherwise changed its capitalization:
(d) BankCentral has not declared, set aside, or paid any
dividend or other distribution in respect of its capital stock, or,
directly or indirectly, redeemed or otherwise acquired any of its
capital stock;
(e) Neither BankCentral nor CNB of Mattoon has incurred any
material obligation or liability (absolute or contingent), except
normal trade or business obligations or liabilities incurred in the
ordinary course of business, or mortgaged, pledged, or subjected to
lien, claim, security interest, charge, encumbrance, or restriction
any of its assets or properties;
(f) Except for sales of assets by CNB of Mattoon from its
FHA Title I Portfolio, neither BankCentral nor CNB of Mattoon has
discharged or satisfied any material lien, mortgage, pledge, claim,
security interest, charge, encumbrance, or restriction or paid any
material obligation or liability (absolute or contingent), other than
in the ordinary course of business;
(g) Except for sales of assets by CNB of Mattoon from its
FHA Title I Portfolio, neither BankCentral nor CNB of Mattoon has
sold, assigned, transferred, leased, exchanged, or otherwise disposed
of any of its properties or assets other than for a fair consideration
in the ordinary course of business;
(h) Except for amendments to the Employment Agreement of
Mr. L. Dean Clausen and a Change of Control Agreement with Mr. Dewey
Yaeger, neither BankCentral nor CNB of Mattoon has (i) increased the
rate of compensation of, or paid any bonus to, any of its directors,
officers, or other employees, except merit or promotion increases in
accordance with existing policy; (ii) entered into any new, or amended
or supplemented any existing employment, management, consulting,
deferred compensation, severance, or other similar contract; (iii)
entered into, terminated, or substantially modified any Employee Plan
or Policy in respect of any of its present or former directors,
officers, or other employees; or (iv) agreed to do any of the
foregoing;
(i) Neither BankCentral nor CNB of Mattoon has suffered any
material damage, destruction, or loss, whether as the result of fire,
explosion, earthquake, accident, casualty, labor trouble, requisition,
or taking of property by any government or any agency of any
government, flood, windstorm, embargo, riot, act of God or the enemy,
or other similar or dissimilar casualty or event or otherwise, and
whether or not covered by insurance; and
(j) Except for this Agreement and the transaction
contemplated hereby, neither BankCentral nor CNB of Mattoon has
entered into any material transaction, contract, or commitment outside
the ordinary course of its business.
2.21 Proxy Statement, etc. None of the information regarding
BankCentral and/or CNB of Mattoon supplied or to be supplied by
BankCentral for inclusion or included in (i) a Registration Statement
on Form S-4 to be filed with the SEC by Firstbank for the purpose of
registering the shares of Firstbank Conversion Stock to be exchanged
for BankCentral Common Stock pursuant to the provisions of this
Agreement (the "Registration Statement"), (ii) the Proxy Statement-
Prospectus to be mailed to stockholders of BankCentral in connection
with the meeting to be called to consider the Merger (the "Proxy
Statement"), and (iii) any other documents to be filed with the SEC or
any regulatory authority in connection with the transactions
contemplated hereby , at the respective times such documents are filed
with the SEC or other applicable regulatory authority and, in the case
of the Registration Statement, when it becomes effective and, with
respect to the Proxy Statement, when mailed, will be false or
misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements therein not
misleading or, in the case of the Proxy Statement or any amendment
thereof or supplement thereto, at the time of the meeting of
stockholders referred to in Section 5.03, be false or misleading with
respect to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication with
respect to the solicitation of any proxy for such meeting. All
documents which BankCentral is responsible for filing with any
regulatory authority in connection with the Merger will comply as to
form in all material respects with the provisions of applicable law.
2.22 Brokers, Investment Bankers, and Finders. Except as
authorized in Section 4.02(b) hereof and except for the retention of
an investment banker for purposes of issuing a fairness opinion to the
Board of Directors of BankCentral, neither BankCentral, CNB of
Mattoon, nor any of their respective officers, directors, or employees
has employed any broker, investment banker, or finder or incurred any
liability for any financial advisory fees, brokerage fees,
commissions, investment banker fees or commissions, or finder's fees,
and no broker, investment banker, or finder has acted directly or
indirectly for BankCentral and/or CNB of Mattoon in connection with
this Agreement or the transactions contemplated hereby.
2.23 Accuracy of Information. The statements contained in this
Agreement, the Schedules, and in any other written document executed
and delivered by or on behalf of BankCentral pursuant to the terms of
this Agreement are true and correct in all material respects, and such
statements and documents include all material facts necessary to make
the statements contained therein not misleading.
ARTICLE III
Representations and Warranties of Firstbank
As a material inducement to BankCentral to enter into and perform
its obligations under this Agreement, and notwithstanding any
examinations, inspections, audits, and other investigations
heretofore or hereafter made by BankCentral, Firstbank hereby
represents and warrants to BankCentral as follows:
3.01 Organization and Authority. Firstbank is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware, is duly qualified to do business and is in good
standing in all jurisdictions where its ownership or leasing of
property or the conduct of its business requires it to be so
qualified, and has corporate power and authority to own its properties
and assets and to carry on its business as it is now being conducted.
Firstbank is registered as a bank holding company with the Federal
Reserve Board under the BHC Act.
New Company is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Illinois, is duly
qualified to do business and is in good standing in all jurisdictions
where its conduct of its business requires it to be so qualified and
has corporate power and authority to own its properties and assets and
to carry on its business as it is now being conducted.
Each of Firstbank's other direct and indirect subsidiaries is a
corporation or a bank duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization and in
all other jurisdictions where the conduct of its respective business
requires it to be so qualified and has the requisite corporate power
to own its respective properties and assets and to carry on its
respective business as it is now being conducted.
3.02 Corporation Authorization; Records. Firstbank and New
Company each have the corporate power and authority to enter into this
Agreement and to carry out their respective obligations hereunder.
The execution, delivery, and performance of this Agreement by
Firstbank and New Company and the consummation of the transactions
contemplated hereby have been duly authorized by the Board of
Directors of each of Firstbank and New Company and by the sole
shareholder of New Company. Subject to such approvals of government
agencies and other governing boards having regulatory authority over
Firstbank and New Company as may be required by statute or regulation,
this Agreement is a valid and binding obligation of Firstbank and New
Company, enforceable against each in accordance with its terms, except
as the enforceability thereof may be limited by bankruptcy insolvency,
reorganization, moratorium, and other laws now or hereafter in effect
relating to the enforcement of creditors' rights generally, and except
that equitable principles may limit the right to obtain specific
performance or other equitable remedies.
Neither the execution, delivery and performance by Firstbank or
New Company of this Agreement, nor the consummation of the
transactions contemplated hereby, nor compliance by Firstbank or New
Company with any of the provisions hereof will (i) violate, conflict
with, or result in a breach of any provisions of, or constitute a
default for an event which, with notice or lapse of time or both,
would constitute a default under, or result in the termination of, or
accelerate the performance required by, or result in a right of
termination or acceleration of, or result in the creation of, any
lien, security interest, charge, or encumbrance upon any of the
properties or assets of Firstbank or New Company under any of the
terms, conditions, or provisions of (x) their respective certificates
or articles of incorporation or by-laws, or (y) any material note,
bond, mortgage, indenture, deed of trust, license, lease, agreement,
or other instrument or obligation to which Firstbank or New Company is
a party or by which it may be bound, or to which Firstbank or New
Company or either's respective properties or assets may be subject,
or (ii) subject to compliance with the statutes and regulations
referred to in the next paragraph, violate any judgment, ruling,
order, writ, injunction, decree, or to the best knowledge of
Firstbank, statute, rule, or regulation applicable to Firstbank or New
Company or any of their respective properties or assets.
Other than in connection or compliance with the provisions of the
Illinois Act, the Securities Act, the Exchange Act, the securities or
blue sky laws of the various states or filings, consents, reviews,
authorizations, approvals, or exemptions required under the BHC Act,
or any required approvals of the Comptroller, or the FDIC, no notice
to, filing with, exemption or review by, or authorization, consent, or
approval of, any public body or authority is necessary for the
consummation by Firstbank and New Company of the transactions
contemplated by this Agreement.
The minute books and stock records of Firstbank and New Company
are complete and correct in all material respects and accurately
reflect in all material respects all meetings, consents, and other
actions of the organizers, incorporators, shareholders or stockholders
as the case may be, boards of directors, and committees of the boards
of directors occurring since the organization of each.
3.03 Capitalization of Firstbank. The authorized capital stock
of Firstbank consists of (i) 20,000,000 shares of Firstbank common
stock, $1.00 par value of which, as of September 30, 1996, 10,289,717
shares were issued and outstanding and (ii) 1,000,000 shares of
preferred stock, no par value, of which, as of September 30, 1996,
none were issued and outstanding. As of September 30, 1996, 530,542
shares of Firstbank common stock were reserved for issuance under the
Firstbank Incentive Stock Option Plan, 623,920 shares of Firstbank
common stock were reserved for issuance under the Firstbank Dividend
Reinvestment and Stock Purchase Plan, 58,500 shares of Firstbank
common stock were reserved for issuance under the Firstbank Directors
Stock Option Plan, and 62,686 shares of Firstbank common stock were
issued but not outstanding and were held in treasury. Except as set
forth above, there are no other shares of capital stock or other
equity securities of Firstbank outstanding and no other outstanding
options, warrants, scrip, rights to subscribe to, calls, or
commitments of any character whatsoever relating to, or securities or
rights convertible into, shares of any capital stock of Firstbank, or
contracts, commitments, understandings, or arrangements by which
Firstbank is or may become bound to issue additional shares of its
capital stock or options, warrants, or rights to purchase or acquire
any additional shares of its capital stock. All of the issued and
outstanding shares of Firstbank common stock are validly issued, fully
paid, and nonassessable, and have not been issued in violation of any
preemptive right of any stockholder of Firstbank. At the Effective
Time, the Firstbank Conversion Stock issued pursuant to this Agreement
will be duly authorized, validly issued in compliance with all
applicable federal and state securities laws, fully paid,
nonassessable, and not subject to preemptive rights.
3.04 Firstbank Financial Statements. The consolidated balance
sheets of Firstbank and its subsidiaries (hereinafter sometimes
referred to collectively as the "Firstbank Subsidiaries") as of
December 31, 1995 and 1994 and related consolidated statements of
income, shareholders' equity, and cash flows for the three years
ended December 31, 1995, together with the notes thereto, certified by
KPMG Peat Marwick LLP and included in Firstbank's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995 (the "Firstbank
10-K") as filed with the SEC, and the unaudited consolidated balance
sheet of Firstbank as of September 30,1996, and the related unaudited
consolidated statements of income and cash flows for the period then
ended included in Firstbank's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1996, as filed with the SEC
(collectively, with the Firstbank 10-K, the "Firstbank Financial
Statements"), have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis, and present
fairly the consolidated financial position of Firstbank at the dates
and the consolidated results of operations and cash flows of Firstbank
for the periods stated therein.
3.05 Reports. Firstbank and each of the Firstbank Subsidiaries
(with "Subsidiaries" being defined as in Rule 1-02 of Regulation S-X
promulgated by the SEC) have filed all reports, registrations, and
statements, together with any required amendments thereto, that they
were required to file with (i) the SEC, including, but not limited to,
Forms 10-K, Forms 10-Q, Forms 8-K, and proxy statements, (ii) the
Federal Reserve Board, (iii) the FDIC, (iv) the OCC, and (v) any
applicable state securities or banking authorities. All such reports
and statements filed with any such regulatory body or authority are
collectively referred to herein as the "Firstbank Reports". As of
their respective dates, the Firstbank Reports complied in all material
respects with all the rules and regulations promulgated by the SEC,
the Federal Reserve Board, the FDIC, the Comptroller, and any
applicable state securities or banking authorities, as the case may
be, and did not contain any untrue statement of a material fact or
omit 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.
3.06 Material Adverse Changes. Except as set forth in Schedule
3.06, since December 31, 1995, there has been no material adverse
change in the business, financial condition, or results of operations
of Firstbank and the Firstbank Subsidiaries taken as a whole (other
than changes in banking laws or regulations, or interpretations
thereof, that affect the banking industry generally or changes in the
general level of interest rates).
3.07 Registration Statement, etc. None of the information
regarding Firstbank and the Firstbank Subsidiaries supplied or to be
supplied by Firstbank for inclusion or included in (i) the
Registration Statement, (ii) the Proxy Statement, or (iii) any other
documents to be filed with the SEC or any regulatory authority in
connection with the transactions contemplated hereby will, at the
respective times such documents are filed with the SEC or any
regulatory authority and, in the case of the Registration Statement,
when it becomes effective and, with respect to the Proxy Statement,
when mailed, be false or misleading with respect to any material fact,
or omit to state any material fact necessary in order to make the
statements therein not misleading or, in the case of the Proxy
Statement or any amendment thereof or supplement thereto, at the time
of the meeting of stockholders of BankCentral to approve the Merger
provided for in Section 5.03 hereof, be false or misleading with
respect to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication with
respect to the solicitation of any proxy for such meeting. All
documents which Firstbank and the Firstbank Subsidiaries are
responsible for filing with the SEC and any regulatory authority in
connection with the Merger will comply as to form in all material
respects with the provisions of applicable law.
3.08 Brokers, Investment Bankers, and Finders. Neither
Firstbank, New Company, nor any of their respective officers,
directors, or employees has employed any broker, investment banker, or
finder or incurred any liability for any financial advisory fees,
brokerage fees, commissions, investment banker fees or commissions, or
finder's fees, and no broker, investment banker, or finder has acted
directly or indirectly for Firstbank or New Company in connection with
this Agreement or the transactions contemplated hereby.
3.09 Accuracy of Information. The statements contained in this
Agreement, the Schedules, and in any other written document executed
and delivered by or on behalf of Firstbank pursuant to the terms of
this Agreement are true and correct in all material respects, and such
statements and documents do not omit any material fact necessary to
make the statements contained therein not misleading.
3.10 Litigation; Governmental Compliance; Other Proceedings.
(a) Except as set forth in Schedule 3.10, neither Firstbank
nor any of the Firstbank Subsidiaries is a party to any pending or
threatened claim, action, suit, investigation or proceeding, or is
subject to any order, judgment or decree, which would reasonably be
expected to have a material adverse effect on the financial condition,
results of operations or business (collectively, the "Condition") of
Firstbank and its Subsidiaries, taken as a whole. Without limiting
the generality of the foregoing, except as set forth in Schedule 3.10,
as of the date hereof, there are no actions, suits, or proceedings
pending or threatened against Firstbank or any of its Subsidiaries or
any of their respective officers, employees, or directors by any
stockholder or shareholder, as the case may be, of Firstbank or any of
its Subsidiaries, or any former stockholder or shareholder, or
involving claims under the Community Reinvestment Act of 1977, the
Bank Secrecy Act, the Right to Financial Privacy Act, or any other
laws applicable to Firstbank or any of the Firstbank Subsidiaries.
(b) There is no legal action or other governmental
proceeding or investigation pending or, to the best knowledge of the
Firstbank Entities, threatened against Firstbank or any of its
Subsidiaries that could prevent or adversely affect in a material
manner or that seeks to prohibit the consummation of the transactions
contemplated herein, nor is Firstbank or any of the Firstbank
Subsidiaries subject to any order of a court or governmental authority
having any such effect. To the best knowledge of the Firstbank
Entities, there is no other fact that could prevent or adversely
affect the consummation of the transactions contemplated herein.
3.11 Compliance with Laws. To the best knowledge of Firstbank,
Firstbank and each of the Firstbank Subsidiaries have all permits,
licenses, authorizations, orders and approvals of, and have made all
filings, applications and registrations with, all regulatory
authorities that are required in order to permit them to own or lease
their respective properties and assets and to carry on their
respective businesses as presently conducted; all such permits,
licenses, certificates of authority, orders and approvals are in full
force and effect and no suspension or cancellation of any of them is
threatened; and all such filings, applications and registrations are
current; in each case except for permits, licenses, authorizations,
orders, approvals, filings, applications and registrations the failure
to have (or have made) would not have a material adverse effect on the
Condition of Firstbank and the Firstbank Subsidiaries, taken as a
whole. Firstbank and the Firstbank Subsidiaries have complied in all
material respects with all applicable federal, state and local
statutes, ordinances, regulations, rules or requirements where the
failure to do so would have a material adverse effect on the condition
of Firstbank and the Firstbank Subsidiaries taken as a whole.
ARTICLE IV
Conduct of Business Prior to the Effective Time
4.01 Conduct of Businesses Prior to the Effective
Time. During the period from the date of this Agreement to the
Effective Time, BankCentral and each of the Firstbank Entities shall,
and shall cause each of their respective subsidiaries to, conduct
its business according to the ordinary and usual course consistent
with past and current practices and each shall use its best efforts to
maintain and preserve its business organization, employees,
and advantageous business relationships and retain the services of its
officers and key employees; provided, however, that BankCentral shall
be entitled to pay any expenses or fees incurred in connection with
the transactions contemplated by this Agreement, including, but not
limited to, reasonable accountants' and attorneys' fees.
4.02 Forbearances by BankCentral. Without the prior
consent of Firstbank, during the period from the date of
this Agreement to the Effective Time, BankCentral shall
not, and shall not cause, vote in favor of, or otherwise
authorize, approve, or permit CNB of Mattoonto:
(a) Declare and/or pay any dividends on its
outstanding shares of capital stock, other than dividends from CNB of
Mattoon to BankCentral;
(b) Enter into or amend any employment,
severance, or similar agreements or arrangements with any director,
officer, key employee, or consultant; provided, however, that
BankCentral may engage such person or persons, who may be directors
of BankCentral, to perform a due diligence investigation of Firstbank
and its Subsidiaries and may engage an investment banker or other
financial consultant to issue a fairness opinion to BankCentral
with respect to the fairness to BankCentral's stockholders of this
Merger from a financial point of view;
(c) Authorize, recommend, propose, or announce an intention
to authorize, recommend, or propose, or enter into an agreement in
principle with respect to, any merger, consolidation, or acquisition
of a material amount of assets or securities, any disposition of a
material amount of assets or securities, other than as may be
necessary pursuant to the exercise of the fiduciary duties of the
Board of Directors of BankCentral or CNB of Mattoon, or any release or
relinquishment of any material contract rights not in the ordinary
course of business;
(d) Propose or adopt any amendments to the certificate of
incorporation of BankCentral, the articles of association of CNB of
Mattoon or any of their respective by-laws;
(e) Issue any shares of capital stock or effect any stock
split or otherwise change its capitalization as it existed as of the
date hereof except pursuant to any exercisable stock options;
(f) Except as set forth in the employment agreement of Mr.
L. Dean Clausen, grant, confer, or award any options, warrants,
conversion rights, or other rights not existing on the date hereof to
acquire any shares of its capital stock;
(g) Purchase or redeem any shares of its capital stock;
(h) Enter into or increase any loan or credit commitment
(including standby letters of credit), purchase securities, or invest
or agree to invest in any person or entity in an amount in excess of
$100,000 without first consulting with the Firstbank Entities;
provided, however, that nothing in this paragraph shall prohibit
CNB of Mattoon from honoring any contractual and legally binding
obligation in existence on the date of this Agreement, it being
understood that "consulting with" in the context of this paragraph
means advising sufficiently in advance of any proposed action to allow
Firstbank a reasonable opportunity to offer a (nonbinding) responsive
opinion;
(i) Agree in writing or otherwise to take any of the
foregoing actions or engage in any activity, enter into any transaction,
or take or omit to take any other act which would make any of
BankCentral's representations and warranties untrue or incorrect
in any material respect if made anew after engaging in such activity,
entering into such transaction, or taking or omitting such other act;
(j) Directly or indirectly (including through its officers,
directors, employees, or other representatives) initiate, solicit, or
encourage any discussions, inquiries, or proposals with any party
(other than the Firstbank Entities) relating to the disposition of any
significant portion of the business or assets of BankCentral or CNB of
Mattoon, or the acquisition of the capital stock (or rights or options
exercisable for, or securities convertible or exchangeable into,
capital stock) of BankCentral or CNB of Mattoon, or the merger
of BankCentral or CNB of Mattoon, with any person, corporation,
partnership, business trust, or other entity (each such transaction
being referred to herein as an "Acquisition Transaction"), or provide
any such person with information (other than information required to be
given under applicable law rule, or regulation) or assistance or
negotiate with any such person with respect to an Acquisition
Transaction other than as may be necessary pursuant to the exercise
of the fiduciary duties of the Board of Directors of BankCentral or
CNB of Mattoon;
(k) Take back or commence foreclosure on any property; or
(l) Take any actions, or fail to take any actions which
alone, or together with any other action or inaction, shall create,
alter, or eliminate any rights, benefits, obligations, or liabilities
of any person (including, but not limited to the participants,
beneficiaries, BankCentral, CNB of Mattoon, or, after the Merger,
Firstbank or New Company) with respect to any Employee Plans or
Policies.
With respect to any written request by BankCentral for
Firstbank's consent to any non-permitted action of BankCentral or
CNB of Mattoon described in thisSection, BankCentral shall be entitled
to conclusively presume Firstbank has consented to any such action
unless BankCentral shall have received Firstbank's written objection
to such action within two (2) Business Days of the date of Firstbank's
receipt of such written request.
4.03 Forbearance by Firstbank. During the period from the date
of this Agreement to the Effective Time, Firstbank shall not, without
the prior written consent of BankCentral, agree in writing or otherwise
to engage in any activity, enter into any transaction, or take or omit
to take any other act which would make any of Firstbank's
representations and warranties untrue or incorrect in any respect
that is materially detrimental to the interests of the stockholders
of BankCentral under this Agreement if, after engaging in such activity,
entering into such transaction, or taking or omitting such other act,
the effect would be to make any representation or warranty of the
Firstbank Entities contained herein untrue as if made as of the date
thereof.
ARTICLE V
Additional Agreements
5.01 Access and Information. The Firstbank Entities, BankCentral,
and CNB of Mattoon shall each afford to the other, and to the other's
accountants, counsel, and other representatives, full access during
normal business hours, during the period prior to the Closing Date, to
all their respective properties, books, contracts, commitments, reports,
audits, financial statements, and other such business records and,
during such period, each shall furnish promptly to the other (i) a copy
of each report, schedule, and other document filed or received by it
during such period pursuant to the requirements of Federal and state
securities laws; (ii) all documents or other information sent to its
stockholders; and (iii) all other information concerning its business,
properties, and personnel as such other party may reasonably request.
In the event of the termination of this Agreement each party hereto
shall, and shall cause its advisors and representatives to, (x) hold
confidential all information obtained in connection with any transaction
contemplated hereby with respect to the other party which is not
otherwise public knowledge, (y) return all documents (including copies
thereof) obtained hereunder from the other party to such other party,
and (z) use its best efforts to cause all information obtained pursuant
to this Agreement or in connection with the negotiation hereof to be
treated as confidential and not use, or knowingly permit others to use,
any such information unless such information becomes generally available
to the public.
5.02 Registration Statement; Regulatory Matters.
(a) Subject to the review and consent of BankCentral with
respect to matters relating to BankCentral, Firstbank shall prepare
and file with the SEC, within forty-five (45) days of the receipt
by Firstbank of BankCentral's Financial Statements, a Registration
Statement with respect to the shares of Firstbank Conversion Stock to
be issued to stockholders of BankCentral in respect of the Merger
and shall use its best efforts to cause the Registration Statement to
become effective. The Registration Statement shall include as a part
thereof the Proxy Statement, in a form acceptable to BankCentral and its
counsel. Firstbank shall also take any action required to be taken
under any applicable state blue sky or securities laws in connection
with the exchange of such shares, and BankCentral shall furnish Firstbank
all information concerning BankCentral and CNB of Mattoon as Firstbank
may reasonably request in connection with any such action.
In advance of filing the Registration Statement and
all other filings described in this Section with any
securities regulatory authority, including any
amendments thereto, Firstbank shall provide BankCentral
and its counsel with a copy of the Registration Statement
and each such other filing and provide an opportunity
to comment thereon, and thereafter shall promptly
advise BankCentral and its counsel, and provide them
with copies, of any material communication received by
Firstbank or its counsel from, or filed by Firstbank or
its counsel with, such authority with respect to the
Registration Statement or such other filing.
(b) Firstbank shall prepare and file within thirty (30)
days of the date of execution of this Agreement, an application
for approval of the Merger with the Federal Reserve Board
and any other bank regulatory authority the approval
of which is required to consummate the Merger. Each
of the parties hereto shall cooperate and use their
respective best efforts to prepare all documentation,
to effect all filings, and to obtain all permits,
consents, approvals, and authorizations of all third
parties and governmental bodies necessary to
consummate the transactions contemplated by this Agreement,
including, without limitation, any such approval
or authorization required by the Federal Reserve Board, the
Comptroller, and the FDIC.
In advance of any such filing with any bank regulatory
authority, Firstbank shall provide BankCentral and its
counsel with a copy of each application or document filed
by it with such regulatory authority to obtain
such approvals and shall promptly advise BankCentral
and its counsel, and provide them with copies, of any material
communication received by it from such authorities with respect
to such approvals. Firstbank shall in good faith pursue the regulatory
approvals necessary to consummate the transactions contemplated in
this Agreement.
5.03 Stockholder Approvals. BankCentral shall
call a meeting of its stockholders to be held as soon as practicable
following the effectiveness of the Registration Statement for the purpose
of voting upon the Merger and related matters. In connection with such
meeting, BankCentral shall mail the Proxy Statement and related documents
to its stockholders. The Board of Directors of BankCentral, subject
to the exercise of its fiduciary duty, shall submit for approval of its
stockholders the matters to be voted upon at such meeting. The Board of
Directors of BankCentral and each member thereof will recommend the
approval of this Agreement and the transactions contemplated hereby
and will use its and their best efforts to obtain the votes and
approvals of its stockholders necessary for the approval of this
Agreement and the Merger transaction contemplated hereby.
5.04 Current Information. During the period from the date of
this Agreement to the Closing Date, each party shall cause one or more
of its designated representatives to confer on a regular and frequent
basis with representatives of the other party. Each party shall
promptly notify the other party of any material change known to it in its
business, operations, or prospects and of any
governmental complaints, investigations, or hearings or
communications indicating that the same may be
contemplated, or the institution or the overt threat of
material litigation or administrative or other claim
involving such party, and shall keep the other party fully
informed of such events.
5.05 Agreements of Affiliates. At least five (5)
days prior to the Closing Date, BankCentral shall deliver to
Firstbank a letter identifying all persons whom
BankCentral believes to be, at the time the Merger is
submitted to a vote of the stockholders of BankCentral,
"affiliates" of BankCentral for purposes of Rules 144 and
145 under the Securities Act. BankCentral shall use its
best efforts to cause each person who is identified as an
"affiliate" in the letter referred to above to deliver to
Firstbank prior to the Effective Time a written agreement
substantially in the form set forth as Exhibit 5.05 attached
hereto. Prior to the Closing Date, BankCentral shall
amend and supplement such letter to include all additional
persons who have become "affiliates" of BankCentral, and
shall use its best efforts to cause each additional
person who is identified as an "affiliate" to execute a
written agreement substantially in the form of Exhibit 5.05.
5.06 Expenses.
(a) In the event that:
(i) this Agreement and the Merger transaction
contemplated hereby are not approved by the requisite vote
of BankCentral's stockholders at the meeting of stockholders called
pursuant to Section 5.03, or
(ii) this Agreement is terminated by Firstbank or
New Company pursuant to Section 7.01(d) (other than by reason
of an unintentional breach of the Agreement by BankCentral which
cannot be cured by BankCentral) or Section 7.01(f), or
(iii) the merger is not effected by the Firstbank
Entities because all stockholder undertakings as described in
Section 5.09 are not delivered to Firstbank, and within nine (9)
months after the occurrence of either (i), (ii) or (iii), BankCentral
shall have entered into an agreement with any person (other than the
Firstbank Entities and other than a banking regulatory agency that
accomplishes a regulatory or similar takeover pursuant to applicable
law) to (x) merge or consolidate, or enter into any similar
transaction with BankCentral or CNB of Mattoon, (y) purchase,
lease, or otherwise acquire (including by way of merger,
consolidation, share exchange, or similar transaction)
securities representing thirty percent(30%) or more of the voting power
of BankCentral or CNB of Mattoon, (or rights or options
exercisable for, or securities convertible into, securities
representing thirty percent (30%) or more of the voting power
of BankCentral or CNB of Mattoon), BankCentral will, within ten
(10) Business Days following written demand by Firstbank, pay
to Firstbank, as liquidated damages and as the sole and
exclusive remedy of the Firstbank Entities under this Agreement
for any breach by BankCentral of its obligations hereunder, in
immediately available funds, an amount equal to $1,250,000 plus
an amount equal to all reasonable out-of-pocket expenses
incurred by Firstbank in connection with the transactions
contemplated by this Agreement, including but not limited to
legal and accounting fees and expenses, but in no event shall
such out-ofpocket expenses exceed $50,000. Upon payment in
full of the foregoing, this Agreement shall be terminated and
without further force and effect. This paragraph (a)
shall not apply in the event of a termination under Section
7.01 unless such termination is for breach of this Agreement by
BankCentral pursuant to Section 7.01(d) (other than by reason of an
unintentional breach of the Agreement by BankCentral which cannot
be cured by BankCentral)
(b) Except as provided in subsection (a) of this
Section, each party hereto shall bear its own expenses incident
to preparing, entering into, and carrying out this Agreement and to
consummating the Merger; provided, however, (i) Firstbank shall
pay all printing and mailing expenses and filing fees associated
with the Registration Statement, the Proxy Statement and the
regulatory filings and (ii) Firstbank shall cause the Surviving
Corporation to pay, with funds provided by Firstbank, any holders
of BankCentral Common Stock who have perfected their appraisal
rights under the Delaware Code the fair value of their shares.
5.07 Miscellaneous Agreements and Consents. Subject to the
terms and conditions herein provided, each of the parties hereto
agrees to use its best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary,
proper, or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by
this Agreement as expeditiously as possible, including, without
limitation, using its best efforts to lift or rescind any
injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the
transactions contemplated hereby. BankCentral and the
Firstbank Entities shall use their best efforts to obtain consents
of all third parties and governmental bodies necessary or, in the
opinion of any of the parties, desirable for the consummation
of the transactions contemplated by this Agreement.
5.08 Press Releases. BankCentral and the Firstbank
Entities shall consult with each other as to the form and
substance of any proposed press release or other proposed public
disclosure of matters related to this Agreement or any of the
transactions contemplated hereby prior to any public or other
non-private dissemination of same.
5.09 Stockholders' Undertakings. Within ten (10)
days of the execution of this Agreement, each of
BankCentral's directors, executive officers, and their
respective spouses, and trusts and other entities controlled
directly or indirectly by any of the foregoing (to the extent that
any of said individuals or entities own or control, directly or
indirectly, shares of BankCentral Common Stock) as listed on
Schedule 5.09 (collectively the "BankCentral Insiders") shall have
entered into an agreement substantially in the form of Exhibit
5.09, by which each of them agrees that he, she, it or they shall
vote his, her, its, or their shares in favor of this Agreement
and the Merger contemplated hereby at the meeting of
BankCentral's stockholders to approve such Agreement and Merger.
5.10 Due Diligence Review.
(a) Promptly following execution and delivery
of this Agreement by BankCentral, the Firstbank Entities shall
have the right to update its due diligence review of BankCentral
and CNB of Mattoon and their respective operations, business
affairs, prospects, and financial condition, including, without
limitation, those matters which are the subject of BankCentral's
representations and warranties. Until the Closing, Firstbank
shall have reasonable access to BankCentral's and CNB of
Mattoon's management and personnel, and to BankCentral's and
CNB of Mattoon's loan files, records, and loan and other committee
meetings (including, but not limited to attending any or all of such
meetings in person and reviewing the minutes of any such meetings),
and may have any Firstbank Entities' personnel present at BankCentral
and CNB of Mattoon during business hours, all as Firstbank, in
its sole discretion, shall reasonably deem appropriate or useful.
Notwithstanding the provisions of this Section, no representative
of the Firstbank Entities shall have the right to attend or observe
any meeting of the board of directors or any committee of BankCentral
at which there is a discussion of any of the provisions of this
Agreement or any unsolicited offer for the acquisition of BankCentral
by any party other than the Firstbank Entities.
(b) Promptly following execution and delivery of this
Agreement, BankCentral may undertake a review of the Firstbank
Entities and their respective operations, business affairs, prospects,
and financial condition, including, without limitation, those matters
which are the subject of Firstbank's representations and warranties.
BankCentral shall conclude such review no later than fifteen (15)
Business Days following the execution of this Agreement (the
"BankCentral Due Diligence Review" and the time for said review
is referred to as the "BankCentral Due Diligence Review Period").
Notwithstanding anything hereinabove contained or implied to the
contrary, the BankCentral Due Diligence Review shall not limit,
restrict, or preclude, or be construed to limit, restrict,
or preclude BankCentral's rights under Section 5.01.
5.11 ERISA Matters. BankCentral shall take any
action reasonably requested by the Firstbank Entities
with respect to any of the Employee Plans or
Policies, including, but not limited to, correcting
operational errors or deficiencies, making necessary
filings with the Internal Revenue Service, or the Department of Labor,
or the Pension Benefit Guaranty Corporation, or amending, freezing,
terminating, or merging one or more Pension Plans; provided,
however, that any such action not otherwise required by law shall
not be effective prior to the Effective Time and, if this Agreement
is terminated pursuant to its terms, Firstbank shall pay to
BankCentral the cost of taking such action.
5.12 Employee Agreements and Benefits.
(a) Following the Effective Time, the Firstbank Entities
shall cause the Surviving Corporation to honor in accordance with
their terms all employment, severance and other compensation contracts
set forth on Schedule 2.10 between BankCentral, CNB of Mattoon, and
any current or former director, officer, employee or agent thereof,
and all provisions for vested benefits or other vested amounts
earned or accrued through the Effective Time under the Employee Plans
or Policies.
(b) The Employee Plans or Policies shall not
be terminated by reason of the Merger but shall continue
thereafter as plans of the Surviving Corporation until
such time as the employees of BankCentral and CNB of
Mattoon are offered participation in Firstbank's employee
benefit plans that are available to other employees of
Firstbank and its Subsidiaries, subject to the terms and
conditions specified in such plans and to such changes
therein as may be necessary to reflect the consummation
of the Merger. Firstbank shall take such steps as are
necessary to allow the employees of BankCentral and CNB of
Mattoon to participate in employee benefit plans
available to other employees of New Company and its
Subsidiaries as soon as practicable after the Effective Time.
(c) With regard to Firstbank's Retirement
Plan, full time employees of BankCentral and CNB of
Mattoon, for vesting purposes, shall receive credit
for their period of full time employment with
BankCentral and CNB of Mattoon calculated from their
date of hire; employees of BankCentral and CNB of
Mattoon shall be credited with benefit accrual service
from the later of the Effective Time or the date the
eligibility requirements have been met. For
purposes of determining eligibility for
participation in all other benefit plans available to
New Company employees, including its group health plan,
full time employees of BankCentral and CNB of Mattoon
shall receive credit for their period of full time
employment with BankCentral or CNB of Mattoon prior to
the Effective Time.
5.13 CNB of Mattoon Board of Directors. The
Firstbank Entities desire to encourage an ongoing
relationship, in some capacity, with
those individuals who currently serve as members of
the Board of Directors of CNB of Mattoon. The
parties agree that the board members, through their
continued identification with CNB of Mattoon and
active support, will ensure an ongoing program of
interest and commitment in CNB of Mattoon's market area.
5.14 Firstbank Merger, Consolidation, or
Acquisition. Firstbank acknowledges and agrees that if it shall
have entered into an agreement, arrangement or
understanding with any person pursuant to which such
person would (A) purchase, lease or otherwise acquire
50% or more of the assets of Firstbank or (B) purchase
or otherwise acquire (including by way of merger,
consolidation, share exchange or similar transaction)
Beneficial Ownership of securities representing 30% or
more of the voting power of Firstbank, and such
transaction is consummated prior to the Effective Time,
the exchange ratio of the Firstbank Conversion Stock
shall be equitably adjusted, as described in
Section 1.07(a) hereof, such that the stockholders
of BankCentral are treated as if the Merger was effective
prior to the consummation of such other transaction.
Firstbank shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the
business and/or assets of Firstbank to assume expressly
and agree to perform this Agreement in the same manner
and to the same extent that Firstbank would be required
to perform it if no such succession had taken place.
Firstbank further agrees that if at any time after
the date of this Agreement there is a public announcement
to the effect that: (i) Firstbank has retained an
investment banker to assist it in assessing the viability
of any of the actions described in Clauses (A) or (B) of
this Section; (ii) Firstbank has entered into a letter of
intent, an agreement or other understanding providing
for any of the actions described in clauses (A) or (B)
of this Section; or (iii) any party has made a
tender offer for shares of Firstbank voting stock
representing more than 30% of the voting power of
Firstbank, then notwithstanding any other provision in
this Agreement to the contrary, the Total Stock
Consideration shall be 201,950 shares and shall not be
adjusted, based upon the Average Price.
5.15 Tax Covenant. Firstbank agrees after the
Effective Time to take no action that would cause the
Internal Revenue Service to determine that the
Merger does not qualify as a nontaxable reorganization
within the meaning of Section 368 and related sections of
the Code. This covenant shall survive the Closing and is
made for the benefit of the record holders of
BankCentral Common Stock immediately preceding the
Effective Time.
ARTICLE VI
Certain Conditions
6.01 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 or
waiver at or prior to the Closing Date of all of the
following conditions:
(a) This Agreement shall have received
the requisite approval of stockholders of ankCentral at the
meeting of stockholders called for purposes of approving the Merger.
(b) This Agreement and the transactions contemplated
hereby shall have been approved by the Federal Reserve Board,
and each other federal and/or state regulatory agencies whose
approval is required for consummation of the transactions contemplated
hereby.
(c) The Registration Statement shall have been declared
effective and shall not be subject to a stop order or any threatened
stop order.
(d) Neither BankCentral nor Firstbank or New Company shall
be subject to any order, decree, or injunction of a court or agency of
competent jurisdiction which enjoins or prohibits the consummation of
the Merger.
6.02 Conditions to Obligations of BankCentral. The
obligations of BankCentral to effect the Merger
shall be subject to the fulfillment or waiver at or prior
to the Effective Time of all of the following additional conditions:
(a) Representations and Warranties. The
representations and warranties of Firstbank made herein shall be
true and correct in all material respects as of the date of this
Agreement and as of the Closing Date (as though made on
and as of the Closing Date except (i) to the extent such
representations and warranties are by their express
provisions made as of a specified date, and (ii) for the
effect of transactions contemplated by this Agreement)
and BankCentral shall have received a signed certificate
of the Chief Executive Officer and the Corporate
Secretary of Firstbank, signing on behalf of the
Firstbank Entities, to that effect. The condition set
forth in this paragraph requires that all said
representations and warranties made by Firstbank in
connection with this Agreement are absolutely true in all
material respects (whether or not made to the best
knowledge and belief of Firstbank).
(b) Performance of Obligations. The
Firstbank Entities shall have performed in all material respects all
obligations required to be performed by each under this
Agreement prior to the Effective Time, and BankCentral
shall have received a signed certificate of the Chief
Executive Officer and the Corporate Secretary of Firstbank
and is to that effect, including, without limitation, the
obligations of the Firstbank Entities with respect to
the delivery of the Total Stock Consideration and the
Total Cash Consideration to the Exchange Agent.
(c) No Material Adverse Change. Notwithstanding any
amended or supplemental Schedules delivered to
BankCentral, since the date of this Agreement, there
shall have been no material adverse change in the
business, financial condition, or results of operations
of Firstbank and the Firstbank Subsidiaries, taken as a
whole (other than changes in banking laws or
regulations, or interpretations thereof, that affect the
banking industry generally or changes in the general
level of interest rates).
(d) Opinion of Counsel. Firstbank shall have
delivered to BankCentral an opinion of counsel to
Firstbank dated as of the Closing Date or a mutually
agreeable earlier date in form substantially similar to
that attached hereto as Exhibit 6.02.
(e) Permits, Authorizations, etc. Firstbank
Entities shall have obtained any and all material
permits, authorizations, consents, waivers, and
approvals required for the lawful consummation of the Merger.
(f) Tax Treatment. BankCentral shall have
received an opinion of its tax advisor, which
opinion shall not have been withdrawn prior to the
Effective Time, to the effect that the receipt of the
Firstbank Conversion Stock by BankCentral stockholders
shall not result in a gain or loss for tax purposes.
(g) Fairness Opinion. An opinion shall have
been received by BankCentral from its investment banker
or financial consultant, prior to the distribution of
the Proxy Statement to the stockholders of BankCentral, to the effect
thateration to be received by BankCentral's stockholders from
Firstbank in connection with the Merger, from a financial point of
view, is fair to BankCentral's stockholders and such opinion shall
not have been withdrawn or materially modified prior to the vote on
the Merger by BankCentral's stockholders.
6.03 Conditions to Obligations of the Firstbank
Entities. The obligations of the Firstbank Entities to effect the
Merger shall be subject to the fulfillment at or prior to the Effective
Time of all of the following additional conditions:
(a) Representations and Warranties. The representations
and warranties of BankCentral made herein shall be true and correct in
all material respects as of the date of this Agreement and as of the
Closing Date ( as though made on and as of the Closing Date
except (i) to the extent such representations and warranties
are by their express provisions made as of a specific date and
(ii) for the effect of transactions contemplated by this Agreement)
and Firstbank shall have received a signed certificate of the Chief
Executive Officer and Corporate Secretary of BankCentral,
signing on behalf of BankCentral, to that effect. The condition
set forth in this paragraph requires that all
said representations and warranties made by BankCentral
in connection with this Agreement are absolutely true in all
material respects (whether or not made to the best knowledge and
belief of BankCentral).
(b) Performance of Obligations. BankCentral
shall have performed in all material respects all
obligations required to be performed by it under this Agreement
prior to the Closing Date, and Firstbank shall have received
a signed certificate of the Chief Executive Officer and
Corporate Secretary of BankCentral, signing on behalf of BankCentral,
to that effect.
(c) Permits, Authorizations, etc. BankCentral
shall have obtained any and all material consents or
waivers from other parties to loan agreements,
leases, or other contracts material to
BankCentral's and CNB of Mattoon's businesses required
for the consummation of the Merger, and BankCentral and CNB of Mattoon
shall have obtained any and all material permits, authorizations,
consents, waivers, and approvals required for the lawful consummation
of the Merger.
(d) No Material Adverse Change.
Notwithstanding any amended or supplemental Schedules delivered to
Firstbank since the date of this Agreement, there shall have been no
material adverse change in the business, financial condition or
results of operations of BankCentral or CNB of Mattoon taken as a whole
(other than changes in banking laws or regulations, or
interpretations thereof, that affect the banking industry generally
or changes in the general level of interest rates).
(e) Opinion of Counsel. BankCentral shall have delivered to
Firstbank an opinion of counsel to BankCentral dated as of the Closing
Date or a mutually agreeable earlier date in form
substantially similar to that attached hereto as Exhibit 6.03.
(f) Stockholders' Undertakings and Agreements of
Affiliates. Each of the BankCentral Insiders to have executed and
delivered to Firstbank a stockholder undertaking substantially in
the form of Exhibit 5.09.
(g) Agreements of Affiliates. All BankCentral
Insiders who are "affiliates" (as that term is used in Rules
144 and 145 of the Securities Act) of BankCentral shall have executed
and delivered to Firstbank affiliate agreements substantially in the
form of Exhibit 5.05, and BankCentral shall have used its best efforts to
obtain such affiliate agreements from all other affiliates of
BankCentral.
(h) Environmental Reports. BankCentral shall have
delivered to Firstbank all Phase I Environmental Site Assessments
requested by Firstbank pursuant to Section 2.09(g) hereof, and all
remediation required under Section 2.09(g) shall have been completed.
(i) Loan Participations. BankCentral and CNB of Mattoon
shall have received repayment in full of any and all balances due on
the loan participation agreements with Bank Champaign described on
Schedule 6.03.
(j) FHA Title I Portfolio. BankCentral and CNB of Mattoon
shall have used their best efforts to sell on commercially reasonable
terms all of the assets in CNB of Mattoon's FHA Title I Portfolio and
shall have provided monthly progress reports on the sale of such
assets to Firstbank.
(k) Letters of Credit. The Letter of Credit
described on Schedule 6.03(k) shall have been surrendered to CNB of
Mattoon without being drawn upon prior to the Closing.
ARTICLE VII
Termination, Amendment, and Waiver
7.01 Termination. This Agreement may be terminated at any
time prior to the Closing Date, whether before or after
approval by the stockholders of BankCentral:
(a) By mutual consent of the Boards of Directors of all
parties hereto; or
(b) By the Board of Directors of any party hereto at any
time after May 31, 1997, if the Merger shall not theretofore have
been consummated; provided, however, that if the Closing occurs
after May 1, 1997, and CNB of Mattoon's earnings from July 1,
1996, through March 31, 1997, equal or exceed $630,000,
(excluding from such calculation of earnings any expenses directly
related to the negotiation of this Agreement or consummation of the
Merger but including costs of any remediation required under
Section 2.09(g) hereof), then the consideration to be paid to
BankCentral stockholders hereunder shall increase at a rate of $70,000
per month, to be paid in the form of cash or Firstbank Conversion
Stock as necessary to preserve the Merger's nontaxable
reorganization status, computed on a pro rata basis for the period
from May 1, 1997 to the date of the Closing Date. If this Agreement
is not otherwise terminated pursuant to its express terms, said
monthly payment shall not continue subsequent to May 31, 1997, if
the delay in consummating the merger is solely the result of the
failure of BankCentral to complete remediation required under
Section 2.09(g);
(c) By the Board of Directors of any party hereto if the
Federal Reserve Board, the Comptroller, or any other federal
and/or state regulatory agency whose approval is required for
the consummation of the transactions contemplated hereby shall
have denied approval of such transaction and such denial has, after
exhaustion of any and all available appellate procedures, become
final; or
(d) By the Board of Directors of Firstbank or the Board
of Directors of BankCentral in the event of a material breach by
the other of any representation, warranty, or agreement contained in
this Agreement, which breach is not cured within 15 days (or such
longer period not exceeding 40 days in the event such breach
cannot reasonably be cured within 15 days and a cure is being
pursued with reasonable diligence) after written notice thereof is
given to the party committing such breach or waived by such other
party(ies); or
(e) By Firstbank, in its sole discretion and without
penalty to Firstbank, in the event BankCentral or CNB of
Mattoon engages in conduct described in Section 4.02(c) or Section
4.02(j), whether or not such conduct is necessary pursuant to the
exercise of the fiduciary duties of BankCentral's or CNB of Mattoon's
Board of Directors; or
(f) Without penalty other than as set forth in Section
5.06, by BankCentral, in its sole discretion, by written notice
to Firstbank within five (5) Business Days after the end of the
BankCentral Due Diligence Review Period; or
(g) By BankCentral, in its sole discretion and without
penalty, in the event that the Total Consideration is less
than $12,800,000; or
(h) By Firstbank, in its sole discretion
and without penalty to Firstbank, in the event BankCentral fails to
provide any of the Phase I Environmental Assessment Reports or Phase II
Addenda required by Section 2.09(g) hereof or in the event that any
of said Reports and/or Phase II Addenda reveal that any of the
subject real property contains any environmental defects which
require remediation and which remediation is not completed prior to
the Closing Date at an aggregate cost not to exceed $50,000; or
(i) By Firstbank, in its sole discretion and without
penalty to or further obligation on BankCentral, in the event the
loan participation agreements described in Exhibit 6.03 have
not been repaid in full prior to the Closing Date;
(j) By Firstbank, in its sole discretion and without
penalty to or further obligation on BankCentral, in the event that
the Letter of Credit described in Section 6.03(k) hereof has
not been surrendered as required by Section 6.03(k) prior to the
Closing Date.
7.02 Effect of Termination. In the event of termination of
this Agreement as provided in Section 7.01 above, this Agreement
shall forthwith become void and without further effect and there shall
be no liability on the part of any party hereto or the respective
officers and directors of any party, except as set forth in the second
sentence of Section 5.01 (respecting confidentiality and the return of
information) and in Section 5.06 (respecting payment of certain
expenses); and provided, however, that there shall be no liability
for breach of a representation or warranty that was, when given, true
and correct to the best knowledge and belief of the party giving same
and which later turns out (without any other fault of the party
giving same) to be incorrect.
7.03 Amendment. This Agreement and the Exhibits and
Schedules hereto may be amended by the parties hereto by action
taken by or on behalf of their respective Boards of Directors. at
any time before or after approval of this Agreement by the
stockholders of BankCentral; provided, however, that after any such
approval no such modification shall (i) alter the amount or
change the form of the consideration contemplated by this
Agreement to be received by stockholders of BankCentral, (ii)
adversely affect the tax treatment to the BankCentral
stockholders as a result of receiving the Firstbank Conversion
Stock in the Merger, or (iii) alter or change any of the terms of
this Agreement if such alteration or change would materially and
adversely affect the stockholders of BankCentral. This Agreement may
not be amended except by an instrument in writing signed on behalf of
each of the parties hereto.
7.04 Waiver. Any term, condition or provision of this
Agreement may be waived in writing at any time by the party which
is, or whose stockholders or shareholders, as the case may be, are
entitled to the benefits thereof.
ARTICLE VIII
General Provisions
8.01 Survival of Representations, Warranties, and
Agreements. No investigation by the parties hereto made heretofore
or hereafter shall affect the representations and warranties of
the parties which are contained herein and each such
representation and warranty shall survive such investigation.
Except as expressly set forth in this Agreement, all representations,
warranties, and agreements in this Agreement of the Firstbank Entities
and of BankCentral or in any instrument delivered by BankCentral
pursuant to this Agreement shall expire at the Effective Time or upon
termination of this Agreement in accordance with its terms. In the
event of termination of this Agreement in accordance with its terms
prior to the Effective Time, the agreements contained in Sections 5.01
(second sentence), 5.06, 7.02 and 8.02 shall survive such termination.
8.02 Indemnification. BankCentral and the Firstbank
Entities (hereinafter, in such capacity being referred to
individually and/or collectively as the "lndemnifying Party"),
agree to indemnify and hold harmless each other (each such other
party being hereinafter referred to, individually and/or
collectively, as the "lndemnified Party") against any and all
losses, claims, damages, or liabilities, joint or several, to
which the Indemnified Party may become subject under
the Securities Act, the Exchange Act, or other Federal or state
statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages, or liabilities for
actions in respect thereof) (a) arise out of any information furnished
to the Indemnified Party by the Indemnifying Party or are based upon
any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement as originally filed or in
any amendment thereof, or in the Proxy Statement or in any
amendment thereof or supplement thereto, and provided by the
Indemnifying Party or (b) arise out of or are based upon
the omission, or alleged omission by the Indemnifying Party
to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
and the Indemnifying Party agrees to reimburse each such Indemnified
Party as incurred, for, any legal or other expenses reasonably incurred
by them in connection with investigating or defending any
such loss, claim, damage, liability or action. The
obligations of the Indemnifying Party under this Section
shall survive any termination of this Agreement.
8.03 No Assignment; Successors and Assigns. This
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, but
neither this Agreement nor any right or obligation set
forth in any provision hereof may be transferred or assigned by any
party hereto without the prior written consent of all other parties,
and any purported transfer or assignment in violation of this
Section shall be void and of no effect.
8.04 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement
shall be held to be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remaining
provisions of this Agreement.
8.05 No Implied Waiver. No failure or delay on the part of
either party hereto to exercise any right, power, or privilege
hereunder or under any instrument executed pursuant hereto shall
operate as a waiver nor shall any single or partial exercise of any
right, power, or privilege preclude any other further exercise thereof
or the exercise of any other right, power, or privilege.
8.06 Headings. Article, section, subsection, and paragraph
titles, captions and headings herein are inserted only as a matter of
convenience and for reference, and in no way define, limit, extend, or
describe the scope of this Agreement or the intent of any provision
hereof.
8.07 Entire Agreement. This Agreement, and the Schedules and
Exhibits hereto constitute the entire agreement between and among the
parties with respect to the subject matter hereof, and supersedes all
prior negotiations, representations, warranties, commitments, offers,
letters of interest or intent, proposal letters, contracts, writings,
or other agreements or understandings with respect thereto. No waiver
and no modification or amendment of any provision of this Agreement
shall be effective unless specifically made in writing and duly signed
by all parties thereto.
8.08 Schedules. The Schedules referenced in this Agreement hereof
are incorporated in this Agreement as of the date of its execution.
A representation in one Schedule shall constitute a representation
in all Schedules.
8.09 Counterparts. This Agreement may be executed in one or more
counterparts, and any party to this Agreement may execute and deliver this
Agreement by executing and delivering any of such counterparts, each
of which when executed and delivered shall be deemed to be an original
and all of which taken together shall constitute one and the same
instrument.
8.10 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to be duly received (i) on the
date given if delivered personally or by cable, telegram, or telex or
(ii) on the date received if mailed by registered or certified mail
(return receipt requested), or by nationally recognized overnight
courier service, to the parties at the following addresses for at such
other address for a party as shall be specified by like notice):
If to the Firstbank Entities:
Firstbank of Illinois Co.
205 South Fifth Street
Springfield, Illinois 62701
Attention: Mr. Mark H. Ferguson
Chairman, President and Chief Executive Officer
Copy to: Jeffery M. Wilday
Brown, Hay & Stephens
700 First National Bank Bldg.
Springfield, Illinois 62701
If to BankCentral:
BankCentral Corporation
1400 Charleston Ave.
Mattoon, IL 61938
Attention: Mr. L. Dean Clausen, Chairman
Copy to: Mr. Dennis R. Wendte
Barack, Ferrazzano, Kirschbaum
& Perlman 333 W. Wacker, Ste
2700 Chicago, IL 60606
provided, however, that the providing of notice to counsel shall
not, of itself, be deemed the providing of notice to a party hereto.
8.11 Governing Law. This Agreement shall be governed by
and controlled as to validity, enforcement, interpretation, effect,
and in all other respects by the internal laws of the State of
Illinois applicable to contracts made in that state.
8.12 Best Knowledge and Belief. Whenever a representation or
warranty contained in this Agreement is made to the best knowledge and
belief of a party, it is understood and agreed that such representation
or warranty was made only after careful due diligence and that the party
making same knows of no reason not disclosed in this Agreement or in
the Schedules attached hereto to believe that such representation or
warranty is false, misleading, incorrect, or omits to state a material
fact necessary to prevent same from being false, misleading, or
otherwise incorrect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be signed by their respective officers thereunto duly authorized as
of the 20th day of December, 1996.
FIRSTBANK: Firstbank of Illinois Co.
By: /s/ Mark H. Ferguson
Mark H. Ferguson, Chairman,
President and
Chief Executive Officer
NEW COMPANY: FBIC Subsidiary, Inc.
By: /s/ Mark H. Ferguson
Mark H. Ferguson, President
BANKCENTRAL: BankCentral Corporation
By: /s/ L. Dean Clausen
L. Dean Clausen, Chairman
EXHIBIT 5.05
AFFILIATE AGREEMENT
Firstbank of Illinois Co.
250 South Fifth Street, 9th Floor
Springfield, Illinois 62701
Re: Affiliate Agreement
Gentlemen:
I have been advised that I may be deemed an "affiliate" of BankCentral
Corporation ("BankCentral") within the meaning of paragraph (c) of Rule
145 of the Rules and Regulations of the Securities and Exchange
Commission (the "SEC") promulgated under the Securities Act of 1933,
as amended (the "1933 Act") and might be deemed such at the time of
merger of BankCentral and FBIC Subsidiary, Inc. ("New Company").
Pursuant to the Agreement and Plan of Merger by and among Firstbank
of Illinois Co. ("Firstbank"), New Company, and BankCentral dated
December 20, 1996, and amended March 10, 1997, (the "Agreement and
Plan of Merger"), I will receive cash and/or shares of Firstbank common
stock in exchange for those shares of BankCentral common stock
owned by me. I agree that I will not make any sale, transfer,
or other disposition of any shares of Firstbank Common Stock
received pursuant to the Agreement and Plan of Merger in violation
of the 1933 Act or the rules and regulations promulgated
thereunder by the SEC.
I have been advised that the issuance of the Firstbank
common stock to me pursuant to the Agreement and Plan of Merger
has been registered under the 1933 Act with the SEC pursuant to
a Registration Statement on Form S-4. However, I have also been
advised that, since at the Effective Time of the Agreement and
Plan of Merger, I may be deemed to have been an "affiliate" of
BankCentral, any offering or sale by me of any of the shares of
Firstbank common stock so received will, under current law,
require either: (i) the further registration under the 1933 Act
of the Firstbank common stock to be sold; (ii) compliance with
Rule 145 promulgated under the 1933 Act; or (iii) the availability of
another exemption from such registration. In addition, I
understand that any transferee from me in a private offering or other
similar disposition will be subject to the same limitations as those
imposed upon me.
I represent and warrant to Firstbank and agree that:
1. I have carefully read this letter discussing certain of the
requirements and other applicable limitations upon the sale,
transfer, or other disposition of such shares of Firstbank
common stock by me.
2. I have been informed by Firstbank that any sale or other
disposition by me of the shares of Firstbank common stock has
not been egistered under the 1933 Act and that the shares of
Firstbank common stock must be held by me indefinitely unless:
(i) such sale or other disposition of the shares of Firstbank
common stock has been registered under the 1933 Act; (ii) a
sale or other disposition of the shares of Firstbank common
stock is made in conformity with the provisions of Rule 145;
or (iii) some other exemption from registration is available
with respect to any such proposed sale or other disposition
of the shares of Firstbank common stock. I will deliver to
Firstbank evidence of compliance with one of those three
conditions in connection with any proposed sale or other
disposition by me of any of the shares ofFirstbank common
stock which may include, in the case of a distribution under
some other exemption from registration, an opinion of counsel
satisfactory to counsel for Firstbank that such exemption is
available.
3. If I rely on the exemption from the registration provisions
provided by Section 4 of the 1933 Act (other than that
contained in Rule 144 or 145), I will obtain and deliver to
Firstbank a copy of a letter from any prospective transferee
which will contain, to the satisfaction of counsel for
Firstbank: (i) representations reasonably satisfactory to
Firstbank as to the nondistributive intent, sophistication,
ability to bear risk, and access to information of such
transferee; (ii) an acknowledgment concerning restrictions
on transfer ofthe shares of Firstbank common stock; and
(iii) an assumption of the obligations of the undersigned
under paragraphs 2, 3, and 4.
4. I also understand that to enforce the foregoing commitments,
the transfer agent of Firstbank common stock will have stop
transfer instructions with respect to the shares of Firstbank
common stock and that there will be placed on the certificates
for the shares of Firstbank common stock or any substitutions
therefor, a legend stating in substance:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ISSUED IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER
THE SECURITIES ACT OF 1933 APPLIES AND MAY ONLY BE SOLD OR
OTHERWISE TRANSFERRED IN COMPLIANCE WITH THE REQUIREMENTS
OF RULE 145 OR PURSUANT TO A REGISTRATION STATEMENT UNDER
SAID ACT OR AN EXEMPTION FROM SUCH REGISTRATION.
Very truly yours,
Signature
Print Name
DATE:
EXHIBIT 5.09
STOCKHOLDER UNDERTAKING AGREEMENT
In consideration of the execution and delivery by Firstbank of
Illinois Co. ("Firstbank"), of that Agreement and Plan of Merger,
dated as of December 20, 1996, (the "Agreement"), by and among
Firstbank, FBIC Subsidiary, Inc. ("New Company"), and BankCentral
Corporation ("BankCentral") which provides for the Merger of
BankCentral with and into New Company, the undersigned in his, her
or its capacity as a stockholder of BankCentral hereby agrees
(except as necessary pursuant to the exercise of fiduciary
duties as a director of BankCentral if the undersigned serves
in such capacity) that, until the Agreement has been terminated
pursuant to the terms of the Agreement:
1. Except as permitted by the Agreement, he, she, or it will
not, without the prior written consent of Firstbank,
enter into any negotiations, discussions, agreements,
or understandings, or entertain any proposals, for the
purpose of merger or consolidating BankCentral or any of its
subsidiaries with any other entity or causing BankCentral or
any of its subsidiaries to sell its assets or any shares of
its capital stock to any other person or to issue or grant
any options or rights to purchase shares of any class of
its stock.
2. He, she, or it will not, without the prior written consent
of Firstbank, enter into any negotiations, discussions,
agreements or undertakings or entertain any proposals for
the purpose ofselling any of his, her or its shares of stock
of BankCentral.
3. He, she, or it will vote all stock of BankCentral he or she
owns or controls, directly or indirectly, in favor of the
transactions described in the Agreement and will use his, her
or its best efforts to encourage the remaining stockholders
of BankCentral to vote his, her or its stock of BankCentral
in a similar manner.
IN WITNESS WHEREOF, the undersigned has set his or her hand this
______ day of ___________, 199__.
________________________________________
Stockholder Signature
_______________________________________
Print Name
EXHIBIT 6.02
[Brown, Hay & Stephens Letterhead]
[Date]
BankCentral Corporation
1400 Charleston Avenue
Mattoon, Illinois 61938
Re: Agreement and Plan of Merger dated as of December 20,
1996, as amended March 10, 1997, among Firstbank of
Illinois Co., FBIC Subsidiary, Inc. and BankCentral
Corporation (the "Merger Agreement")
Gentlemen:
We have served as counsel to Firstbank of Illinois Co. ("Firstbank")
and FBIC Subsidiary, Inc. ("New Company") in connection with the Merger
Agreement and the merger transaction contemplated thereunder, pursuant
to which BankCentral is to merge with and into New Company, with New
Company being the surviving or resulting corporation. This opinion is
rendered to you pursuant to Section 6.02(d) of the Merger Agreement.
All terms appearing but not otherwise defined in this opinion shall
have the meanings ascribed to them in the Merger Agreement. For purposes
of rendering this opinion, we have examined the following:
(i) The Merger Agreement;
(ii) Certified copies of the Certificate of Incorporation
of Firstbank and all amendments thereto and restatements
thereof, as issued by the Secretary of State of Delaware;
(iii) By-Laws of Firstbank and all amendments thereto,
certified as true and complete by the Secretary of
Firstbank;
(iv) Certificate of Good Standing furnished by the Secretary
of State of Delaware in respect of Firstbank;
(v) Certificate of Good Standing furnished by the Secretary
of State of Illinois in respect to Firstbank as a foreign
corporation doing business in the State of Illinois;
(vi) Certified copy of the Articles of Incorporation for New
Company and all amendments thereto and restatements
thereof, as issued by the Secretary of State of Illinois;
(vii) By-Laws of New Company and all amendments thereto,
certified as true and complete by the Secretary of New
Company;
(viii)Certificate of Good Standing furnished by the Secretary
of State of Illinois in respect of New Company;
(ix) Certificate of the Chief Executive Officer and Chief
Financial Officer of Firstbank attached hereto as
Exhibit A, as to factual matters deemed relevant to
the opinions expressed herein;
(x) Certificate of the President and Secretary of New
Company attached hereto as Exhibit B, as to factual
matters deemed relevant to the opinions expressed herein;
(xi) Registration Statement prepared in connection with the
issuance of shares of Firstbank of Illinois Co. common
stock pursuant to the Merger Agreement, including the
Proxy Statement/Prospectus included therein; and
(xii) Such other agreements, instruments, records,
certificates, and documents as we have deemed necessary.
In connection with this opinion, we have made such other inquiries as
we deemed necessary or appropriate for the purpose of rendering the
opinions stated herein. In rendering this opinion, we have assumed: the
genuineness of all signatures on documents, statements, records,
certificates, and instruments reviewed by us; the accurateness and
authenticity of all documents, statements, records, certificates, and
instruments submitted to or reviewed by us as certified, conformed,
photostatic, or other reproduced copies; and, the due authority of all
persons executing any and all of the foregoing (except with respect to
the authority of persons executing the Merger Agreement on behalf of
Firstbank and New Company).
Based upon and subject to the foregoing and subject to the assumptions,
limitations, and exceptions set forth herein, we are of the opinion that:
1. Organization and Power of Firstbank. Firstbank is a
corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware, is duly
qualified to do business and is in good standing in all
jurisdictions where its ownership or leasing of property or
the conduct of its business requires it to be so qualified
and has corporate power and authority to own its properties
and assets and to carry on its business as it is now being
conducted. Firstbank is registered as a bank holding company
with the Board of Governors of the Federal Reserve System
under the Bank Holding Company Act of 1956, as amended (the
"BHC Act").
2. Organization and Power of New Company. New Company is a
corporation duly organized, validly existing, and in good
standing under the laws of the State of Illinois, is duly
qualified to do business and is in good standing in all
jurisdictions where its ownership or leasing of property or
the conduct of its business requires it to be so qualified
and has corporate power and authority to own its properties
and assets and to carry on its business as it is now being
conducted.
3. Authority of Firstbank. The execution and delivery by Firstbank
of the Merger Agreement and the consummation of the merger
contemplated thereunder (i) have been duly authorized by all
requisite corporate and stockholder action, and (ii) do not,
and will not, require the consent, waiver, approval, or
authorization of any person, entity, or governmental authority
other than the approvals by the Board of Governors of the Federal
Reserve System, or by delegation, the Federal Reserve Bank of
Chicago, and the Office of the Comptroller of the Currency, which
approvals have been obtained (collectively, the "Requisite
Regulatory Approvals"). To the best of our knowledge, such
Requisite Regulatory Approvals are not now contested by any
federal or state governmental or regulatory authority, or by
any other party.
4. Authority of New Company. Except for the issuance of the
Certificate of Merger, the application for which is now pending
with the Illinois Secretary of State, the execution and delivery
by New Company of the Merger Agreement and the consummation of
the merger contemplated thereunder (i) have been duly authorized
by all requisite corporate and shareholder action, and (ii) do
not, and will not, require the consent, waiver, approval, or
authorization of any person, entity, or governmental authority
other than the approvals by the Board of Governors of the Federal
Reserve System, or by delegation, the Federal Reserve Bank of
Chicago, and the Illinois Secretary of State, which approvals
have been obtained (collectively, the "Requisite Regulatory
Approvals"). To the best of our knowledge, such Requisite
Regulatory Approvals are not now contested by any federal or
state governmental or regulatory authority, or by any other
party.
5. Binding Effect. The Merger Agreement constitutes the legal,
valid, and binding obligation of both Firstbank and New Company,
respectively, enforceable against both or either of them in
accordance with its terms.
6. No Conflict or Violation. The execution and delivery of the
Merger Agreement and the consummation of the merger do not
conflict with or violate the provisions of either Firstbank's
or New Company's Certificate or Articles ofIncorporation or
By-Laws, or, to the best of our knowledge, any order or decree
of any governmental or regulatory agency, or of any court, to
which either Firstbank or New Company is a party or subject,
or by which either Firstbank or New Company is bound.
7. No Default or Breach. To the best of our knowledge, the execution
and delivery of the Merger Agreement and the consummation of the
merger do not result in any breach or default, or give rise to
any right of termination, cancellation, or acceleration under
any material note, bond, mortgage, indenture, lease, contract,
or other agreement to which either Firstbank or New Company is
a party or subject, or by which either Firstbank or New Company
is bound.
8. Absence of Litigation. To the best of our knowledge, there is no
action, suit, proceeding, claim, or investigation pending or,
threatened which affects or seeks to prohibit the consummation
of the Merger.
9. Capitalization of Firstbank. The authorized capital stock of
Firstbank consists of (i) 20,000,000 shares of common stock,
$1.00 par value ("Firstbank Common Stock"), of which as of this
date, shares are issued and outstanding, and (ii) 1,000,000
shares of preferred stock, no par value, of which none are issued
and outstanding. To the best of our knowledge, except for of
shares of Firstbank Common Stock subject to outstanding options,
shares of Firstbank Common Stock reserved for issuance under the
Firstbank Incentive Stock Option Plan, shares of Firstbank
Common Stock reserved for issuance under the Firstbank Dividend
Reinvestment and Stock Purchase Plan, shares of Firstbank
Common Stock reserved for issuance under the Firstbank Directors
Stock Option Plan, and shares of Firstbank Common Stock issued
but not outstanding and held in treasury, there are no other
shares of capital stock or other equity securities of Firstbank
outstanding or other outstanding options, warrants, scrip, rights
to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible
into, shares of any capital stock of Firstbank, or contracts,
commitments, understandings or arrangements by which Firstbank
is or may become bound to issue additional shares of its
capital stock or options, warrants, or rights to purchase
or acquire any additional shares of its capital stock. To
the best of our knowledge, all of the issued and outstanding
shares of Firstbank Common Stock are validly issued and have
not been issued in violation of any preemptive right of any
stockholder of Firstbank.
10. Firstbank Common Stock. The shares of Firstbank common stock
to be issued pursuant to the Merger Agreement conform to the
description thereof contained in the Registration Statement.
11. Registration Statement. The Registration Statement has become
effective under the Securities Act of 1933, as mended, and,
to the best of our knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been instituted or
threatened.
12. Authorization of New Stock. The shares of Firstbank Common
Stock that are to be issued to the stockholders of BankCentral
pursuant to the Merger have been duly authorized and, when so
issued in accordance with the terms of the Merger Agreement,
will be validly issued and outstanding, fully paid and
nonassessable.
In addition to the assumptions and other qualifications
stated elsewhere herein, we make the following further qualifications
with respect to the opinions stated herein:
a. Except as specifically stated in the aforesaid opinion or
otherwise specifically stated below, all of the opinions
expressed herein are based upon and relate only to the laws
and regulations of the States of Illinois and Delaware and
federal laws and regulations, all as presently in effect,
and we express no opinion herein with respect to the laws
of any other jurisdiction.
b. Our opinions are subject to public policy, bankruptcy,
insolvency, reorganization, fraudulent conveyance,
moratorium, and other laws relating to or affecting
the rights of creditors generally, and the exercise of
judicial discretion in accordance with general principles
applicable to equitable and similar remedies.
c. We express no opinion as to the enforceability of
provisions which purport to indemnify any person or entity
for his, her, or its reckless or intentional wrongs or which
exculpate any person or entity as to liability for wrongs
committed with respect to persons other than a party to the
instrument purporting to create such exculpation.
d. We have conducted no independent investigation as to the
factual matters stated herein. We have relied with respect
to those factual matters on the documents, statements,
records, certificates, and instruments submitted to and/or
reviewed by us as well as on Certifications supplied to us by
Firstbank and New Company (in the form attached hereto) to
the effect that the facts, assumptions, and factual
statements set forth in this opinion are true, accurate,
and correct. However, we have no knowledge from any other
source of any other facts which, if true, would make any of
the opinions expressed herein incorrect.
e. The opinions expressed herein are subject to exchange of legal
consideration.
f. Any opinion that is expressed herein to our knowledge or to
the best of our knowledge is based upon information known to
us without independent investigation or research and
represents our good faith belief that the opinion expressed
is correct.
g. No opinion should be considered to be given except as
expressly stated herein. Our opinions are limited to the
specific issues addressed and are limited in all respects to
laws and facts existing on the date hereof. By rendering
our opinions, we do not undertake to advise you of any
changes in such laws or facts which may occur after the
date hereof. An opinion is not an assurance or a guaranty.
h. Our opinion with respect to the issuance of the outstanding
shares of capital stock of Firstbank and New Company is based
entirely upon Certifications or certain factual information
supplied to us by Firstbank and New Company.
This opinion is solely for the benefit of BankCentral Corporation
and may not be relied upon in any manner by any other person, nor may
copies be delivered or furnished to any person, nor may all or any
portions of this opinion be quoted, circulated, or referred to in any
other document without our prior written consent. Delivery of a copy
of this opinion to any other person, whether with or without prior
consent, shall not entitle such person to rely hereon.
Very truly yours,
EXHIBIT A
Come now the undersigned, acting for and on behalf of FIRSTBANK OF
ILLINOIS CO., a Delaware corporation ("Firstbank"), and state as follows:
1. I have reviewed the Opinion of Counsel of Brown, Hay & Stephens
to BankCentral Corporation dated _____________, 1997, to which
this certificate is attached as Exhibit A.
2. Without attempting to express or verify any legal opinion stated
therein, the undersigned hereby certifies that the facts,
assumptions and factual statements set forth in said Opinion of
Counsel with respect to Firstbank are true, accurate and correct.
3. The undersigned knows of no action or proceeding, pending or
threatened, against Firstbank, before any court or governmental
or regulatory body or otherwise wherein an unfavorable judgment,
decree, or order would have a materially adverse effect on said
entity or would prevent the carrying out by said entity of the
transactions contemplated in said Opinion of Counsel.
4. With respect to the issued and outstanding shares of capital stock
of Firstbank: (i) the entire amount of consideration for which
said shares were issued has been received; (ii) the form of
consideration was either cash, services actually rendered,
property, or a combination thereof; and (iii) the consideration
was not less than the amount determined to be capital (at least
the par or stated value).
It is understood and agreed that Brown, Hay & Stephens will rely
upon this Certification in giving said Opinion of Counsel.
IN WITNESS WHEREOF, this Certification has been executed as of
this _____ day of _______________________, 1997.
FIRSTBANK OF ILLINOIS CO.
BY:______________________________
Chief Executive Officer
BY:_______________________________
Chief Financial Officer
EXHIBIT B
Come now the undersigned, acting for and on behalf of FBIC
SUBSIDIARY, INC., an Illinois corporation ("New Company"), and state
as follows:
1. I have reviewed the Opinion of Counsel of Brown, Hay & Stephens
to BankCentral Corporation dated _________, 1997, to which this
certificate is attached as Exhibit B.
2. Without attempting to express or verify any legal opinion stated
therein, the undersigned hereby certifies that the facts,
assumptions and factual statements set forth in said Opinion of
Counsel with respect to New Company are true, accurate and correct.
3. The undersigned knows of no action or proceeding, pending or
threatened, against New Company before any court or governmental
or regulatory body or otherwise wherein an unfavorable judgment,
decree, or order would have a materially adverse effect on said
entity or would prevent the carrying out by said entity of the
transactions contemplated in said Opinion of Counsel.
4. With respect to the issued and outstanding shares of capital stock
of Firstbank: (i) the entire amount of consideration for which
said shares were issued has been received; (ii) the form of
consideration was either cash, services actually rendered,
property, or a combination thereof; and (iii) the consideration
was not less than the amount determined to be capital (at least
the par or stated value).
It is understood and agreed that Brown, Hay & Stephens will rely
upon this Certification in giving said Opinion of Counsel.
IN WITNESS WHEREOF, this Certification has been executed as of
this _____ day of _______________________, 1997.
FBIC SUBSIDIARY, INC.
BY:______________________________
President
BY:_______________________________
Secretary
EXHIBIT 6.03
[Barack Ferrazzano Kirschbaum Perlman & Nagelberg]
[Date]
Firstbank of Illinois Co.
205 South Fifth Street
Springfield, Illinois 62701
Re: Agreement and Plan of Merger dated as of December 20,
1996, as amended March 10, 1997, among Firstbank of
Illinois Co., FBIC Subsidiary, Inc., and BankCentral
Corporation (the "Merger Agreement")
Gentlemen:
We have served as counsel to BankCentral Corporation ("BankCentral")
in connection with the Merger Agreement and the merger transaction
contemplated thereunder, pursuant to which BankCentral is to merge with
and into FBIC Subsidiary, Inc. ("New Company"), with New Company being
the surviving or resulting corporation. This opinion is rendered to
you pursuant to Section 6.03(f) of the Merger Agreement. All terms
appearing but not otherwise defined in this opinion shall have the
meanings ascribed to them in the Merger Agreement.
For purposes of rendering this opinion, we have examined the
following:
(i) The Merger Agreement;
(ii) Certified copies of the Certificate of Incorporation of
BankCentral and all amendments thereto and restatements
thereof, as issued by the Secretary of State of Delaware;
(iii)By-Laws of BankCentral and all amendments thereto,
certified as true and complete by the Secretary of
BankCentral;
(iv) Certificate of Good Standing furnished by the Secretary
of State of Delaware in respect of BankCentral;
(v) Certified copy of the Articles of Association and Good
Standing Certificate in respect of the Central National
Bank of Mattoon ("CNB of Mattoon"), as issued by the
Office of the Comptroller of the Currency;
(vi) By-Laws of CNB of Mattoon and all amendments thereto,
certified as true and complete by the Cashier of CNB of
Mattoon;
(vii)Certificates of the Chief Executive Officers and Chief
Financial Officers of BankCentral and CNB of Mattoon
attached hereto as Exhibits A and B as to factual matters
deemed relevant to the opinions expressed herein;
(viii)Registration Statement prepared in connection with the
issuance of shares of Firstbank of Illinois Co. common
stock pursuant to the Merger Agreement, including the
Proxy Statement/Prospectus included therein; and
(ix) Such other agreements, instruments, records,
certificates, and documents as we have deemed necessary.
In connection with this opinion, we have made such other inquiries
as we deemed necessary or appropriate for the purpose of rendering the
opinions stated herein. In rendering this opinion, we have assumed: the
genuineness of all signatures on documents, statements, records,
certificates, and instruments reviewed by us; the accurateness and
authenticity of all documents, statements, records, certificates, and
instruments submitted to or reviewed by us as certified, conformed,
photostatic, or other reproduced copies; and, the due authority of all
persons executing any and all of the foregoing (except with respect to
the authority of persons executing the Merger Agreement on behalf of
BankCentral).
Based upon and subject to the foregoing and subject to the
assumptions, limitations, and exceptions set forth herein, we are of
the opinion that:
1. Organization and Power of BankCentral. BankCentral is a
corporation duly organized, validly existing, and in good standing
under the laws of the State of Delaware, is duly qualified to do
business and is in good standing in all jurisdictions where its
ownership or leasing of property or the conduct of its business
requires it to be so qualified and has corporate power and
authority to own its properties and assets and to carry on its
business as it is now being conducted. BankCentral is registered
as a bank holding company with the Board of Governors of the Federal
Reserve System under the Bank Holding Company Act of 1956, as
amended.
2. Authority. Except for the issuance of the Certificate of Merger,
the application for which is now pending with the Illinois Secretary
of State, the execution and delivery by BankCentral of the Merger
Agreement and the consummation of the merger contemplated
thereunder (i) have been duly authorized by all requisite
corporate and stockholder action, and (ii) do not, and will not,
solely with respect to BankCentral, require the consent, waiver,
approval, or authorization of any person, entity, or governmental
authority other than the approvals by the Board of Governors of
the Federal Reserve System, or by delegation, the Federal
Reserve Bank of Chicago, and the Secretary of State of Illinois,
which approvals, we have been informed by counsel to Firstbank,
have been obtained (collectively, the "Requisite Regulatory
Approvals"). To the best of our knowledge, such Requisite
Regulatory Approvals are not now contested by any federal or
state governmental or regulatory authority, or by any other party.
3. Binding Effect. The Merger Agreement constitutes the legal,
valid, and binding obligation of BankCentral enforceable against
BankCentral in accordance with its terms.
4. No Conflict or Violation. The execution and delivery of the Merger
Agreement and the consummation of the merger do not conflict with
or violate the provisions of BankCentral's Certificate of
Incorporation or By-Laws, or, to the best of our knowledge, any
order or decree of any governmental or regulatory agency, or of
any court, to which BankCentral or CNB of Mattoon is a party or
subject, or by which BankCentral or CNB of Mattoon is bound.
5. No Default or Breach. Other than as disclosed in the Merger
Agreement and the Schedules attached thereto, to the best of our
knowledge, the execution and delivery of the Merger Agreement
and the consummation of the merger do not result in any breach
or default, or give rise to any right of termination, cancellation,
or acceleration under any material note, bond, mortgage, indenture,
lease, contract, or other agreement to which BankCentral or CNB of
Mattoon is a party or subject, or by which BankCentral or CNB of
Mattoon is bound.
6. Absence of Litigation. To the best of our knowledge, there is no
action, suit, proceeding, claim, or investigation pending or, to
the best of our knowledge, threatened which affects or seeks to
prohibit the consummation of the Merger.
7. Capitalization of BankCentral. The authorized capital stock of
BankCentral consists of: (a) 350,000 shares of common stock, $1.00
par value ("BankCentral Common Stock"), of which as of this date,
based upon the stock records of BankCentral, 220,109 shares are
issued and outstanding and 22,972 shares are issued but not
outstanding and held in treasury; and (b) 50,000 shares of
preferred stock par value of $0.01 per share, none of which are
issued and outstanding. Other than as disclosed in the Merger
Agreement and the Schedules attached thereto, there are no other
shares of capital stock or other equity securities of BankCentral
outstanding and, to the best of our knowledge, no other outstanding
options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or
securities or rights convertible into, shares of any capital stock
of BankCentral, or contracts, commitments, understandings or
arrangements by which BankCentral is or may become bound to issue
additional shares of its capital stock or options, warrants or
rights to purchase of acquire any additional shares of its capital
stock. To the best of our knowledge, all of the issued and
outstanding shares of BankCentral Common Stock are validly issued
and have not been issued in violation of any preemptive right of
any shareholder of BankCentral.
8. Corporate Existence of CNB of Mattoon. CNB of Mattoon is chartered
as a national banking association, is duly authorized, validly
existing and is a bank insured by the Federal Deposit Insurance
Corporation under the Federal Deposit Insurance Act of 1950, as
amended. To the best of our knowledge, CNB of Mattoon possesses
all corporate power and authority to own and operate its properties
and to carry out its businesses as and where the same are now being
conducted.
9. Capitalization of CNB of Mattoon. The authorized capital stock of
CNB of Mattoon consists solely of 225,000 shares of common stock,
par value $2.50 per share, all of which are issued and outstanding.
Except as otherwise disclosed in the Merger Agreement and the
Schedules attached thereto, to the best of our knowledge,
BankCentral has good and marketable title to all such currently
issued and outstanding shares of common stock of CNB of Mattoon,
free and clear of any liens, claims, charges, encumbrances, and
assessments of any kind or nature whatsoever, except for director
qualifying shares which BankCentral has the right to reacquire for
a nominal sum. To the best of our knowledge, there are no other
shares of capital stock or other equity securities of CNB of
Mattoon outstanding and no other outstanding options, of any
character whatsoever relating to, or securities or rights
convertible into, shares of any capital stock of CNB of Mattoon,
or contracts, commitments, understandings, or arrangements by CNB
of Mattoon by which it is or may become bound to issue additional
shares of capital stock or options, warrants, or rights to purchase
or acquire any additional shares of capital stock. To the best of
our knowledge, all of the issued and outstanding shares of CNB of
Mattoons' common stock are validly issued and are fully paid and
nonassessable.
In addition to the assumptions and other qualifications stated
elsewhere herein, we make the following further qualifications with
respect to the opinions stated herein:
a. Except as specifically stated in the aforesaid opinion or
otherwise specifically stated below, all of the opinions
expressed herein are based upon and relate only to the laws
and regulations of the State of Illinois, the general
corporate law of the State of Delaware and federal laws and
regulations, all as presently in effect, and we express no
opinion herein with respect to the laws of any other
jurisdiction.
b. Our opinions are subject to public policy, bankruptcy,
insolvency, reorganization, fraudulent conveyance,
moratorium, and other laws relating to or affecting the
rights of creditors generally, and the exercise of judicial
discretion in accordance with general principles applicable
to equitable and similar remedies.
c. We express no opinion as to the enforceability of provisions
which purport to indemnify any person or entity for his, her,
or its reckless or intentional wrongs or which exculpate any
person or entity as to liability for wrongs committed with
respect to persons other than a party to the instrument
purporting to create such exculpation.
d. We have conducted no independent investigation as to the
factual matters stated herein. We have relied with respect to
those factual matters on the documents, statements, records,
certificates, and instruments submitted to and/or reviewed by
us as well as on Certifications supplied to us by BankCentral
and CNB of Mattoon (in the form attached hereto) to the
effect that the facts, assumptions, and factual statements set
forth in this opinion are true, accurate, and correct.
However, we have no knowledge from any other source of any
other facts which, if true, would make any of the opinions
expressed herein incorrect.
e. The opinions expressed herein are subject to exchange of
legal consideration.
f. Any opinion that is expressed herein to our knowledge or to
the best of our knowledge is based upon information known
to us without independent investigation or research and
represents our good faith belief that the opinion expressed
is correct.
g. No opinion should be considered to be given except as
expressly stated herein. Our opinions are limited to the
specific issues addressed and are limited in all respects to
laws and facts existing on the date hereof. By rendering
our opinions, we do not undertake to advise you of any
changes in such laws or facts which may occur after the date
hereof. An opinion is not an assurance or a guaranty.
h. Our opinion with respect to the issuance of the outstanding
shares of capital stock of BankCentral and CNB of Mattoon
are fully paid and nonassessable is based entirely upon
Certifications or certain factual information supplied to us
by BankCentral and CNB of Mattoon.
This opinion is solely for the benefit of Firstbank of Illinois Co.
and may not be relied upon in any manner by any other person, nor may
copies be delivered or furnished to any person, nor may all or any
portions of this opinion be quoted, circulated, or referred to in any
other document without our prior written consent. Delivery of a copy
of this opinion to any other person, whether with or without prior
consent, shall not entitle such person to rely hereon.
Very truly yours,
EXHIBIT A
Come now the undersigned, acting for and on behalf of
BANKCENTRAL CORPORATION, a Delaware corporation ("Confluence"), and
state as follows:
1. I have reviewed the Opinion of Counsel of Barack, Ferrazzano,
Kirschbaum & Perlman to FIRSTBANK OF ILLINOIS CO., dated, 1997,
to which this certificate is attached as Exhibit A.
2. Without attempting to express or verify any legal opinion stated
therein, the undersigned hereby certifies that the facts,
assumptions and factual statements set forth in said Opinion of
Counsel with respect to BankCentral and CNB of Mattoon are true,
accurate and correct.
3. The undersigned knows of no action or proceeding, pending or
threatened, against BankCentral, before any court or governmental
or regulatory body or otherwise wherein an unfavorable judgment,
decree, or order would have a materially adverse effect on said
entity or would prevent the carrying out by said entity of the
transactions contemplated in said Opinion of Counsel.
4. With respect to the issued and outstanding shares of capital stock
of BankCentral and CNB of Mattoon: (i) the entire amount of
consideration for which said shares were to be issued has been
received; (ii) the form of consideration was either cash, services
actually rendered, property, or a combination thereof; and
(iii) the consideration was not less than the amount determined
to be capital (at least the par or stated value).
It is understood and agreed that Barack, Ferrazzano, Kirschbaum &
Perlman will rely upon this Certification in giving said Opinion of
Counsel.
IN WITNESS WHEREOF, this Certification has been executed as of
this _____ day of _______________________, 1997.
BANKCENTRAL CORPORATION
BY:______________________________
Chief Executive Officer
BY:_______________________________
Chief Financial Officer
EXHIBIT B
Come now the undersigned, acting for and on behalf of CENTRAL
NATIONAL BANK OF MATTOON ("Bank"), and state as follows:
1. I have reviewed the Opinion of Counsel of Barack, Ferrazzano,
Kirschbaum & Perlman to FIRSTBANK OF ILLINOIS CO., dated
_______________, 1997, to which this certificate is attached as
Exhibit B.
2. Without attempting to express or verify any legal opinion stated
therein, the undersigned hereby certifies that the facts,
assumptions and factual statements set forth in said Opinion of
Counsel with respect to Bank are true, accurate and correct.
3. The undersigned knows of no action or proceeding, pending or
threatened, against Bank, before any court or governmental or
regulatory body or otherwise wherein an unfavorable judgment,
decree, or order would have a materially adverse effect on
said entity or would prevent the carrying out by said entity of
the transactions contemplated in said Opinion of Counsel.
4. With respect to the issued and outstanding shares of capital
stock of Bank: (i) the entire amount of consideration for which
said shares were to be issued has been received; (ii) the form
of consideration was either cash, services actually rendered,
property, or a combination thereof; and (iii) the consideration
was not less than the amount determined to be capital (at least
the par or stated value).
It is understood and agreed that Barack, Ferrazzano, Kirschbaum &
Perlman will rely upon this Certification in giving said Opinion of
Counsel.
IN WITNESS WHEREOF, this Certification has been executed as of
this _____ day of _______________________, 1997.
CENTRAL NATIONAL BANK OF MATTOON
BY:______________________________
Chief Executive Officer
BY:______________________________
Chief Financial Officer
EXHIBIT 2.2
March 10, 1997
Mr. Mark H. Ferguson
Chairman, President and Chief Executive Officer
Firstbank of Illinois Co.
205 South Fifth Street
Springfield, Illinois 62701
RE: Agreement and Plan of Merger Among BankCentral
Corporation, Firstbank of FBIC Illinois Co. and
Subsidiary, Inc. dated December 20, 1996
Dear Mr. Ferguson:
We reference that certain Agreement and Plan of Merger dated
December 20, 1996 (the"Agreement"), among BankCentral Corporation, Inc.,
a Delaware corporation ("BankCentral"), Firstbank of Illinois Co., a
Delaware corporation, and FBIC Subsidiary, Inc., an Illinois corporation
("New Company"), providing for the merger (the "Merger") of the Company
with and into New Company. For ease of reference, all defined or
capitalized terms used in the Agreement have the same meanings in this
letter as in the Agreement, unless the terms are defined in this letter
or unless the context clearly indicates to the contrary.
In connection with the final negotiation and drafting of the
Agreement in the form executed by all parties thereto, we each acknowledge
that Section 1.12 was inadvertently deleted in its entirety when the
parties' true intent was to retain the last sentence of such Section of
the Agreement in order to preserve the intended tax treatment of the
Merger. This letter will evidence our agreement that the Agreement
should be revised to include the following Section 1.12:
1.12 Adjustment to Preserve Tax Treatment. Notwithstanding
anything contained herein to the contrary, the composition
of Total Consideration between cash and shares of
Firstbank Conversion Stock shall be adjusted so as to
remain at 49% and 51%, respectively.
Except as expressly amended by this letter, the Agreement is
ratified and confirmed and shall continue in full force and effect. If
this letter correctly sets forth our understanding and agreement with
respect to the matters described herein, please acknowledge your
acceptance by executing a copy of this letter in the space provided
below and returning the executed counterpart to me.
Sincerely yours,
L. Dean Clausen
President
BankCentral Corporation
Agreed to and accepted
this _______ day of March, 1997.
FIRSTBANK OF ILLINOIS CO. FBIC SUBSIDIARY, INC.
By:___________________________ By:_______________________________
Mr. Mark H. Ferguson Mr. Mark H. Ferguson
Chairman, President and Chief President
Executive Officer
cc: Jeffery M. Wilday, Esq.
Dennis R. Wendte, Esq.
EXHIBIT 5.1
________________, 1997
Firstbank of Illinois Co.
205 South Fifth Street, 9th Floor
Springfield, IL 62701
Re: Form S-4 Registration Statement Relating to 214,200 Shares
of Common Stock, Par Value $1.00 Per Share, of Firstbank
of Illinois Co.
Gentlemen:
We have acted as counsel for Firstbank of Illinois Co.
("Firstbank") in connection with the Form S-4 Registration Statement
to be filed by Firstbank with the Securities and Exchange Commission
relating to the shares of Common Stock, par value $1.00 per share,
of Firstbank (the "Common Stock") issuable pursuant to the Agreement
and Plan of Merger dated December 20, 1996, by and among Firstbank,
FBIC Subsidiary, Inc., a wholly owned subsidiary of Firstbank, and
BankCentral Corporation, as amended by an agreement dated March 10,
1997 (as amended, the "Merger Agreement"). As such counsel, we have
examined and relied upon such records, documents, certificates and
other instruments as in our judgment are necessary or appropriate to
form the basis for the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
(i) Firstbank is a corporation duly incorporated, validly
existing, and in good standing under the laws of the State of
Delaware.
(ii) The shares of Common Stock issuable in connection with
the Merger (as defined in the Registration Statement), when issued
in accordance with the terms set forth in the Merger Agreement and
as described in the Registration Statement, will be validly issued
and outstanding, fully paid, and nonassessable.
We consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to us under the caption
"Legal Matters" in the Proxy Statement/Prospectus that is included
in the Registration Statement.
Very truly yours,
EXHIBIT 8.1
March 17, 1997
Mr. L. Dean Clausen
BankCentral Corporation, Inc.
1400 Charleston Avenue
Mattoon, IL 61938
RE: Tax Opinion Concerning Reorganization I.R.C. Section
368(a)(2)(D)
Attention: L. Dean Clausen
You have requested our opinion as to certain federal income tax
consequences of the merger (Merger) of BankCentral Corporation, Inc.
(BankCentral) with and into FBIC Subsidiary, Inc., (FBIC) a wholly owned
subsidiary of Firstbank of Illinois, Inc. (Firstbank), in exchange for
stock of Firstbank and/or cash. In connection with your request, you
have provided us with the Agreement and Plan of Merger dated as of
December 20, 1996 (Agreement), between FBIC and BankCentral and joined
in by Firstbank. We have also received and relied upon the following
representations:
To the extent not inconsistent with the following representations,
the Merger will be consummated in accordance with the Agreement, by
and among Firstbank, FBIC and BankCentral.
The fair market value of Firstbank stock and other consideration,
if any, to be received by each BankCentral shareholder in the
Merger will, in each instance, be equal to the fair market value
of BankCentral stock surrendered in exchange therefore.
Shareholders of BankCentral receiving Firstbank stock in the Merger
have represented that they have no present plan or intention to
sell, exchange or otherwise dispose of any of the Firstbank stock
to be received in the Merger.
In the Merger, shares of BankCentral representing at least 51% of
the outstanding stock of BankCentral will be exchanged solely for
stock of Firstbank. For purposes of this representation, shares
of BankCentral stock exchanged for cash or other property,
surrendered by dissenters or exchanged for cash in lieu of
fractional shares of Firstbank stock will be treated as shares of
BankCentral stock on the date of the Merger. Moreover, shares of
BankCentral stock and shares of Firstbank stock held by BankCentral
shareholders and otherwise sold, redeemed or disposed of prior or
subsequent to the Merger will be considered as outstanding stock of
BankCentral in making this representation.
FBIC will acquire at least 90% of the fair market value of the net
assets and at least 70% of the fair market value of the gross
assets held by BankCentral immediately prior to the Merger. For
purposes of this representation, any amounts paid by BankCentral
to pay its reorganization expenses, and all redemptions and
distributions (except for regular, normal dividends) made by
BankCentral immediately before the transaction will be included
as assets held by BankCentral immediately prior to the transaction.
All payments to BankCentral shareholders who properly exercise
their dissenters' rights will be paid by Firstbank and no assets of
BankCentral will be used for this purpose.
Prior to the Merger, Firstbank will own all of the issued and
outstanding stock of FBIC. Neither Firstbank nor FBIC will engage
in any transaction that will result in Firstbank's ownership in
FBIC being reduced below control within the meaning of section
368(c) of the Internal Revenue Code (Code).
Firstbank has no plan, binding commitment or intention to redeem or
otherwise reacquire any of the Firstbank stock issued in the Merger.
Firstbank has no plan or intention to liquidate FBIC, to sell or
otherwise dispose of the stock of FBIC, to merge FBIC with and into
another corporation or to cause FBIC to sell or otherwise dispose
of any of the acquired assets of BankCentral, except for
dispositions made in the ordinary course of business.
Following the Merger, FBIC will retain substantially all of the
assets of BankCentral and continue the historic business of
BankCentral.
The liabilities of BankCentral assumed by FBIC and the liabilities
to which the transferred assets of BankCetnral are subject were
incurred by BankCentral in the ordinary course of its business.
Firstbank, FBIC, BankCentral and shareholders of BankCentral will
pay their respective expenses, if any, incurred in connection with
the Merger.
There is and will be no intercorporate indebtedness between
Firstbank, BankCentral and FBIC that was or will be issued, acquired
or settled at a discount.
Neither Firstbank, BankCentral or FBIC is an investment company as
defined in section 368(a)(2)(F)(iii) or (iv) of the Code.
FBIC is not under the jurisdiction of a court in a Title 11, or
similar case within the meaning of section 368(a)(3)(A) of the Code.
At the time of the Merger, the fair market value and the adjusted
tax basis of the assets of BankCentral acquired by FBIC will exceed
the sum of BankCentral's liabilities, plus the amount of
liabilities, if any, to which the assets to be acquired are subject.
No FBIC stock will be issued in the Merger.
None of the compensation to be received by any shareholder employees
of BankCentral is separate consideration for, or allocable to, any
of their shares of BankCentral stock. Firstbank stock received by
any shareholder-employee of BankCentral is not separate consideration
for, or allocable to, any employment agreement or other
compensation owed to such shareholder-employee.
Firstbank does not own, directly or indirectly, nor has it owned,
directly or indirectly, in the past five years, any BankCentral
stock.
The formation of FBIC, the merger of BankCentral with and into FBIC,
and the exchange of Firstbank stock for BankCentral stock are to be
affected for the business purposes as stated in the Agreement.
No dividends will be paid by BankCentral before the consummation
of the Merger, other than regular periodic dividends, consistent
in amount and in effect with prior dividend distributions.
BankCentral has, and on the date of the proposed transaction will
have, no outstanding warrants, options, convertible securities or
any other type of rights pursuant to which any person could acquire
stock in BankCentral that would affect Firstbank as defined in
section 368(c)(1) of the Code.
ASSUMPTIONS
We have assumed all of the representations contained herein are true and
correct. We have relied upon the opinion of Barack, Ferrazzano,
Kirschbaum, Perlman & Nagelberg, counsel to BankCentral, and upon which
such counsel has expressly stated we are entitled to rely, that the
Merger qualifies as a merger under applicable state law.
OPINION
Based on our understanding of the facts, our reliance upon the opinion of
Firstbank's counsel with respect to the qualification of the Merger, the
representations made to us and assumptions stated herein, our review of
the relevant sections of the Internal Revenue Code of 1986, as amended,
the regulations promulgated thereunder, and cases, rulings and other
authorities, it is our opinion that the transaction will be treated as
follows for tax purposes:
The Merger of BankCentral and FBIC will qualify as a reorganization
within the meaning of section (368)(a)(1)(A) and (a)(2)(D) of the Code,
and Firstbank, BankCentral and FBIC will each be a "party to a
reorganization" within the meaning of section 368(b).
No gain or loss will be recognized by BankCentral, Firstbank and
FBIC as a result of the Merger. IRC section 361(a), 357(a),
Rev. Rul 57-278.
The tax basis of the assets of BankCentral acquired by FBIC will be,
in each case, the same as the basis of such assets in the hands of
BankCentral immediately before the transaction. I.R.C. section
362(b).
The holding period of BankCentral's assets in the hands of FBIC
will include the holding period of such assets by BankCentral
immediately before the Merger. I.R.C. section 1223(2).
For BankCentral shareholders who receive solely Firstbank stock in
exchange for their BankCentral stock, the tax basis in the new
shares will be the same as the tax basis of BankCentral stock
surrendered in exchange therefore. I.R.C. section 358(a)(1).
The holding period of Firstbank stock received by shareholders of
BankCentral will include the holding period for BankCentral shares
surrendered in the Merger, provided that BankCentral shares
surrendered were held as capital assets in the hands of BankCentral
shareholders at the time of the Merger. I.R.C. section 1223(1).
In the exchange of stock, no gain or loss will be recognized by
the shareholders of BankCentral upon the receipt of solely Firstbank
stock. I.R.C. section 354(a)(1).
Cash received by a shareholder in exchange for BankCentral stock will
be treated as a distribution in redemption, subject to Section 302
of the Code. If such BankCentral shareholder neither holds any
stock of Firstbank directly, nor is deemed to own any such stock
under the constructive ownership rules of Section 318(a), the
redemption will be a complete termination of the shareholder's
interest within the meaning of Section 302(b)(3) of the Code and
will be treated as a distribution in full payment in exchange for
the stock redeemed, as provided in Section 302(a). Accordingly,
such shareholder will recognize gain or loss under Section 1001
measured by the difference between the cash received and the
adjusted basis of the surrendered stock. Provided that the
BankCentral stock is a capital asset in the hands of the
BankCentral shareholders, the gain or loss to be recognized will
be capital gain or loss. If the shareholder does not meet the
requirements of Section 302(b), cash received may be treated as
a taxable dividend and will be subject to ordinary income tax rates.
Commissioner v. Clark, 489 U.S. 76 (1989); Rev. Rul 93-61, I.R.B.
1993-30, Rev. Proc. 77-41, 1977-2 C.B. 574; Rev. Rul. 66-365,
1966-2 C.B. 116.
Our opinion is based on the representations made to us and the assumptions
stated herein. If any of the facts, representations or assumptions are
determined to be incorrect, our opinion may be adversely affected. We
express no opinion as to the accuracy of the facts, representations
and assumptions stated herein. We express no opinion regarding any other
federal, state, local, foreign or other matter not contained in this
letter.
Our opinion is based upon existing law, Treasury regulations and on
administrative and judicial interpretations of the law and regulations.
Administrative positions of the Internal Revenue Service contained in
revenue rulings and revenue procedures and judicial decisions are
subject to change either prospectively or retroactively. We undertake
no obligation to update this opinion for changes in facts or law
occurring subsequent to the date of this opinion. This opinion is not
binding on the Internal Revenue Service or the courts.
Our opinion is furnished solely for the benefit of the Board of Directors
of BankCentral Corporation and is not to be released or distributed to
any other person without our prior written consent. We consent to the
filing of this opinion as an exhibit to the Registration Statement on
Form S-4 filed by Firstbank of Illinois, Inc. with the Securities and
Exchange Commission for the purpose of registering securities under the
Securities Act of 1933, as amended.
McGLADREY & PULLEN, LLP
EXHIBIT 23.1
Independent Auditors' Consent
The Board of Directors
Firstbank of Illinois Co.
Springfield, Illinois:
We consent to the use of our reports incorporated herein by reference
and to the reference to our firm under the heading "experts" in the
prospectus.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
March 14, 1997
EXHIBIT 23.2
CONSENT OF INDENPENDENT ACCOUNTANT
We hereby consent to the use in the Proxy Statement/Prospectus
which forms a part of the Registration Statement on form S-4 relating to
the proposed merger of BankCentral Corporation ("BankCentral") with and
into a subsidiary of Firstbank of Illinois Co., of our report dated
October 25, 1996, except for Note 20 as to which the date is December
20, 1996, on the audits of the consolidated balance sheets of
BankCentral and subsidiary as of June 30, 1996 and 1995, and the
related consolidated statements of income, stockholders' equity and
cash flows for each of the three years in the period ended June 30,
1996. We further consent to the use of our name, and the statements
with respect to us, as appearing under the heading "Experts" in the
Proxy Statement/Prospectus, and the use of our opinion regarding the
anticipated tax consequences of such proposed merger as an Exhibit
to such Registration Statement.
/s/ McGladrey & Pullen, LLP
Champaign, Illinois
March 13, 1997
EXHIBIT 99.1
BANKCENTRAL CORPORATION Solicited on behalf of the
1400 Charleston Avenue BOARD OF DIRECTORS
Mattoon, Illinois 61938 for the Special Meeting on _________, 1997
The undersigned hereby appoints ________________ and
_______________, and each of them, with full power of substitution,
proxies to represent the undersigned at the Special Meeting of
Stockholders of BankCentral Corporation to be held at _______________,
Mattoon, Illinois, on the _______ day of _________, 1997, at
____:____.m., local time, and at any adjournments or postponements
thereof, and thereat to vote all of the shares of stock which the
undersigned would be entitled to vote, with all the powers the
undersigned would possess if personally present. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
1. The approval and adoption of the Agreement and Plan of Merger,
dated as of December 20, 1996, as amended March 10, 1997, by
and among BankCentral Corporation, Firstbank of Illinois Co. and
FBIC Subsidiary, Inc., and the transactions contemplated thereby.
FOR AGAINST ABSTAIN
2. In their discretion, to transact any other business that may
properly be brought before the Special Meeting or any
adjournments or postponements thereof.
Please date and sign below and return promptly.
Unless otherwise indicated, this proxy will be voted "FOR" proposal 1
referred to above.
________________________________
Signature
________________________________
Signature
________________________________
Title
________________________________
Dated
In case of joint owners, each
joint owner should sign. When
signing in a fiduciary or
representative capacity, please
give full title as such.
Proxies executed by a corporation
should be signed in full
corporate name by a duly
authorized officer.
PLEASE MARK, DATE AND SIGN YOUR NAME AS IT APPEARS
AND RETURN IN THE ENCLOSED ENVELOPE
