<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
AUGUST 4, 1995
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------------
OLD NATIONAL BANCORP
------------------------------------------------------
(Exact name of registrant as specified in its charter)
INDIANA 6021 35-1539838
- ---------------------------- ------------------------- -------------------
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification No.)
organization) Code Number)
420 MAIN STREET, EVANSVILLE, INDIANA 47708, (812) 464-1434
------------------------------------------------------------------------
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
JEFFREY L. KNIGHT, ESQ. TIMOTHY M. HARDEN, ESQ.
CORPORATE SECRETARY & GENERAL COUNSEL NICHOLAS J. CHULOS, ESQ.
OLD NATIONAL BANCORP KRIEG DEVAULT ALEXANDER & CAPEHART
420 MAIN STREET ONE INDIANA SQUARE, SUITE 2800
EVANSVILLE, INDIANA 47708 INDIANAPOLIS, INDIANA 46204-2017
(812) 464-1363 (317) 636-4341
(AGENT FOR SERVICE) (COPY TO)
- --------------------------------------------------------------------------------
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==============================================================================================
Title of each class Amount Proposed maximum Proposed maximum Amount of
of securities to be offering price aggregate offering registration
to be registered registered per unit (1) price (1) fee
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCK, UP TO $ N/A $2,029,000.00 $699.60
NO PAR VALUE 140,271 SHARES
==============================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee and
calculated as of March 1, 1995, in accordance with Rule 457(f)(2) on the
basis of the book value of the securities to be exchanged for the common
stock to be issued by the registrant.
--------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
CROSS-REFERENCE SHEET
FOR
REGISTRATION STATEMENT ON FORM S-4 AND PROSPECTUS
<TABLE>
<CAPTION>
Items of Form S-4 Headings in Prospectus
- ----------------- ----------------------
<S> <C>
1. Forepart of Registration Statement and Forepart of Registration Statement;
Outside Front Cover Page of Prospectus Outside Front Cover Page
2. Inside Front and Outside Back Cover Inside Front Cover Page of
Pages of Prospectus Prospectus
3. Risk Factors, Ratio of Earnings to Summary; Summary of Selected Financial
Fixed Charges and Other Information Data; Comparative Per Share Data
4. Terms of the Transaction Summary; General information; Proposed Affiliation;
Federal Income Tax Consequences; Comparative Per Share
Data; Comparison of Common Stock
5. Pro Forma Financial Information Pro Forma Condensed Combined Financial Information
6. Material Contacts with the Company Not Applicable
Being Acquired
7. Additional Information Required for Not Applicable
Reoffering by Persons and Parties
Deemed to be Underwriters
8. Interests of Named Experts and Counsel Not Applicable
9. Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act Liabilities
10. Information with Respect to S-3 Registrants Summary of Selected Financial Data;
Regulatory Considerations; Comparative
Per Share Data
11. Incorporation of Certain Information Incorporation of Certain Documents
by Reference by Reference
12. Information with Respect to S-2 or Not Applicable
S-3 Registrants
13. Incorporation of Certain Information Not Applicable
by Reference
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Items of Form S-4 Headings in Prospectus
- ----------------- ----------------------
<S> <C>
14. Information with Respect to Registrants Not Applicable
Other Than S-3 or S-2 Registrants
15. Information with Respect to S-3 Companies Not Applicable
16. Information with Respect to S-2 or Not Applicable
S-3 Companies
17. Information with Respect to Companies Summary of Selected Financial Data; Description
Other Than S-3 or S-2 Companies of Shawnee Bancorp and the Bank; Management's
Discussion and Analysis of Financial Condition and Results
of Operations of Shawnee Bancorp and the Bank;
Regulatory Considerations; Comparative Per Share Data
18. Information if Proxies, Consents or General Information; Proposed Affiliation;
Authorizations are to be Solicited Description of ONB; Description of
Shawnee Bancorp and the Bank
19. Information if Proxies, Consents or Not Applicable
Authorizations are not to be Solicited or
in an Exchange Offer
</TABLE>
<PAGE>
[SHAWNEE BANCORP, INC. LETTERHEAD]
, 1995
- -----------------
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
Shawnee Bancorp, Inc. ("Shawnee Bancorp") to be held at the main office of The
Bank of Harrisburg ("Bank"), located at 2 West Walnut Street, Harrisburg,
Illinois 62946 on _________________, 1995, at ____:_____ __.m., local time.
The purpose of the Special Meeting is to consider and vote upon the Agreement
of Affiliation and Merger ("Agreement"), dated May 31, 1995, by and among
Shawnee Bancorp, Old National Bancorp ("ONB"), The First National Bank of
Harrisburg and the Bank. Under the terms of the Agreement, Shawnee Bancorp will
merge with and into ONB, and each outstanding share of Shawnee Bancorp common
stock will be converted into the right to receive such number of shares of ONB
common stock which have a market value equal to Forty-One Dollars ($41.00), as
determined pursuant to and as described in the Agreement, a copy of which is
attached to the accompanying Proxy Statement-Prospectus.
The Board of Directors of Shawnee Bancorp believes that the proposed
affiliation between ONB and Shawnee Bancorp is in the best interests of the
shareholders of Shawnee Bancorp and the customers and employees of the Bank and
the communities which the Bank serves. Your Board of Directors has unanimously
approved the Agreement and recommends that the shareholders approve it.
Enclosed with this letter are (i) a Notice of Special Meeting of
Shareholders, (ii) a Joint Proxy Statement-Prospectus containing information
about the Special Meeting and the proposed affiliation, (iii) a proxy card for
you to complete, sign, date and return, and (iv) a postage pre-paid envelope for
your use to return your proxy card to Shawnee Bancorp. We encourage you to read
the enclosed materials carefully and in their entirety.
Whether or not you attend the Special Meeting, your Board of Directors
requests that you complete, sign and date the enclosed proxy card and return it
in the enclosed postage pre-paid envelope at your earliest convenience prior to
the Special Meeting. If you desire, you may cancel your proxy at any time
before it is voted at the special meeting.
Please give this matter your careful consideration.
Sincerely,
William E. Cook
President
<PAGE>
SHAWNEE BANCORP, INC.
2 WEST WALNUT STREET
HARRISBURG, ILLINOIS 62946
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
to be held on _________________, 1995
To Our Shareholders:
Notice is hereby given that, pursuant to the call of the Board of Directors,
a Special Meeting of Shareholders of Shawnee Bancorp, Inc. ("Shawnee Bancorp")
will be held on _________________, 1995 at ____:______ p.m., local time, at the
main office of The Bank of Harrisburg ("Bank"), located at 2 West Walnut Street,
Harrisburg, Illinois 62946.
The purposes of the Special Meeting are:
1. To consider and vote upon the Agreement of Affiliation and Merger
("Agreement"), dated May 31, 1995, by and among Old National Bancorp,
Evansville, Indiana ("ONB"), Shawnee Bancorp, The First National Bank of
Harrisburg and the Bank, pursuant to which Shawnee Bancorp will merge with
and into ONB. Under the terms of the Agreement, each outstanding share of
Shawnee Bancorp common stock will be converted into the right to receive such
number of shares of ONB common stock which have a market value equal to
Forty-One Dollars ($41.00), all as determined pursuant to and as described in
the Agreement, a copy of which is attached to the accompanying Proxy
Statement-Prospectus; and
2. To transact such other business which may properly be presented at the
Special Meeting or any adjournment thereof.
Only shareholders of record at the close of business on __________________,
1995 will be entitled to notice of, and to vote at, the Special Meeting and any
adjournment thereof.
Notice is also given that Shawnee Bancorp shareholders are entitled to assert
dissenters' rights under Illinois law with respect to the proposed merger with
ONB, provided that they comply with the provisions of Sections 11.65 and 11.70
of the Illinois Business Corporation Act of 1983, as amended, a copy of which is
attached as Appendix B to the accompanying Joint Proxy Statement-Prospectus.
BY ORDER OF THE BOARD OF DIRECTORS
____________________, 1995
WILLIAM E. COOK
PRESIDENT
YOUR VOTE IS IMPORTANT-PLEASE MAIL YOUR PROXY PROMPTLY.
THE AFFIRMATIVE VOTE OF THE HOLDERS OF AT LEAST
TWO-THIRDS OF THE OUTSTANDING SHARES OF SHAWNEE BANCORP
COMMON STOCK IS REQUIRED FOR APPROVAL OF THE AGREEMENT.
IN ORDER THAT THERE MAY BE PROPER REPRESENTATION AT THE MEETING,
YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN
THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
<PAGE>
[THE BANK OF HARRISBURG LETTERHEAD]
, 1995
- ---------------
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of The
Bank of Harrisburg ("Bank") to be held at the main office of the Bank, located
at 2 West Walnut Street, Harrisburg, Illinois 62946 on __________________, 1995,
at ____:_____ __.m., local time.
The purpose of the Special Meeting is to consider and vote upon the Agreement
of Affiliation and Merger ("Agreement"), dated May 31, 1995, by and among the
Bank, Old National Bancorp ("ONB"), Shawnee Bancorp, Inc. and The First National
Bank of Harrisburg ("First National"). Under the terms of the Agreement, the
Bank will merge with and into First National, and each outstanding share of
common stock of the Bank held by the individual minority shareholders of the
Bank will be converted into the right to receive from ONB cash in the amount of
Seventeen Dollars ($17.00), as described in the Agreement, a copy of which is
attached to the accompanying Proxy Statement-Prospectus.
The Board of Directors of the Bank believes that the proposed affiliation
between First National and the Bank is in the best interests of the shareholders
of the Bank and the customers and employees of the Bank and the communities
which the Bank serves. Your Board of Directors has unanimously approved the
Agreement and recommends that the shareholders approve it.
Enclosed with this letter are (i) a Notice of Special Meeting of
Shareholders, (ii) a Joint Proxy Statement-Prospectus containing information
about the Special Meeting and the proposed affiliation, (iii) a proxy card for
you to complete, sign, date and return, and (iv) a postage pre-paid envelope for
your use to return your proxy card to the Bank. We encourage you to read the
enclosed materials carefully and in their entirety.
Whether or not you attend the Special Meeting, your Board of Directors
requests that you complete, sign and date the enclosed proxy card and return it
in the enclosed postage pre-paid envelope at your earliest convenience prior to
the Special Meeting. If you desire, you may cancel your proxy at any time
before it is voted at the special meeting.
Please give this matter your careful consideration.
Sincerely,
David H. Clemmons
Chairman
<PAGE>
THE BANK OF HARRISBURG
2 WEST WALNUT STREET
HARRISBURG, ILLINOIS 62946
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
to be held on _________________, 1995
To Our Shareholders:
Notice is hereby given that, pursuant to the call of the Board of Directors,
a Special Meeting of Shareholders of The Bank of Harrisburg ("Bank") will be
held on __________________, 1995 at ____:______ p.m., local time, at the main
office of the Bank, located at 2 West Walnut Street, Harrisburg, Illinois 62946.
The purposes of the Special Meeting are:
1. To consider and vote upon the Agreement of Affiliation and Merger
("Agreement"), dated May 31, 1995, by and among Old National Bancorp,
Evansville, Indiana ("ONB"), Shawnee Bancorp, Inc., The First National Bank
of Harrisburg ("First National") and the Bank, pursuant to which the Bank
will merge with and into First National. Under the terms of the Agreement,
each outstanding share of Bank common stock owned by the individual minority
shareholders of the Bank will be converted into the right to receive from ONB
cash in the amount of Seventeen Dollars ($17.00), as described in the
Agreement, a copy of which is attached to the accompanying Proxy Statement-
Prospectus; and
2. To transact such other business which may properly be presented at the
Special Meeting or any adjournment thereof.
Only shareholders of record at the close of business on _________________,
1995 will be entitled to notice of, and to vote at, the Special Meeting and any
adjournment thereof.
Notice is also given that shareholders of the Bank are entitled to assert
dissenters' rights under federal law with respect to the proposed merger with
First National, provided that they comply with the provisions of Section
215a(b) (d) of the National Bank Act, as amended, a copy of which is attached as
Appendix C to the accompanying Joint Proxy Statement-Prospectus.
BY ORDER OF THE BOARD OF DIRECTORS
____________________, 1995
DAVID H. CLEMMONS
CHAIRMAN
YOUR VOTE IS IMPORTANT-PLEASE MAIL YOUR PROXY PROMPTLY.
THE AFFIRMATIVE VOTE OF THE HOLDERS OF AT LEAST
TWO-THIRDS OF THE OUTSTANDING SHARES OF BANK
COMMON STOCK IS REQUIRED FOR APPROVAL OF THE AGREEMENT.
IN ORDER THAT THERE MAY BE PROPER REPRESENTATION AT THE MEETING,
YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN
THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
<PAGE>
PROSPECTUS
OF
OLD NATIONAL BANCORP
FOR UP TO
140,271 SHARES OF COMMON STOCK
(NO PAR VALUE)
____________________
THIS PROSPECTUS ALSO CONSTITUTES
THE JOINT PROXY STATEMENT
OF
SHAWNEE BANCORP, INC.
AND
THE BANK OF HARRISBURG
FOR THEIR RESPECTIVE
SPECIAL MEETING OF SHAREHOLDERS
EACH TO BE HELD ON ______________, 1995
____________________
This Joint Proxy Statement-Prospectus ("Proxy Statement") constitutes the
Prospectus of Old National Bancorp ("ONB") with respect to a maximum of 140,271
shares of ONB common stock, no par value per share ("ONB Common Stock"), being
offered to the shareholders of Shawnee Bancorp, Inc. ("Shawnee Bancorp") in
connection with the proposed affiliation of ONB and Shawnee Bancorp, and to the
individual minority shareholders of The Bank of Harrisburg ("Bank") in
connection with the proposed merger of the Bank into The First National Bank of
Harrisburg ("First National"). It also serves as the Joint Proxy Statement of
Shawnee Bancorp and the Bank in connection with the solicitation of proxies by
the Board of Directors of Shawnee Bancorp and the Bank for use at the respective
Special Meeting of Shareholders, each to be held on _________________, 1995, and
at any adjournment thereof (collectively, "Special Meetings"), for the purpose
of considering and voting upon (1) a proposal to approve the Agreement of
Affiliation and Merger ("Agreement"), dated May 31, 1995, by and among ONB,
Shawnee Bancorp, First National and the Bank, and (2) any other business which
may properly be presented at the Special Meetings or any adjournment thereof.
As more fully discussed hereinafter, at the effective time of the proposed
affiliation of ONB and Shawnee Bancorp ("Affiliation"), Shawnee Bancorp will
first merge with and into ONB ("Company Merger") and, immediately thereafter,
the Bank will merge with and into First National ("Bank Merger"). Each
outstanding share of Shawnee Bancorp common stock, $0.50 par value per share
("Shawnee Bancorp Common Stock"), will be converted into the right to receive
such number of shares of ONB Common Stock which have a market value equal to
Forty-One Dollars ($41.00), and each outstanding share of Bank common stock,
$1.00 par value per share ("Bank Common Stock"), owned by the individual
minority shareholders of the Bank will be converted into the right to receive
from ONB cash in the amount of Seventeen Dollars ($17.00), except for 178 shares
of Shawnee Bancorp Common Stock which will be converted into the right to
receive such number of shares of ONB Common Stock which have a market value of
Seventeen ($17.00), all as described pursuant to the Agreement. ONB will pay
cash for any fractional share interests resulting from the exchange ratio in
accordance with the Agreement. The Company Merger and the Bank Merger are each
subject to approval by the holders of at least two-thirds (2/3) of the
outstanding shares of Shawnee Bancorp Common Stock and Bank Common Stock,
respectively. Both mergers require the receipt of required regulatory approvals
and the satisfaction of certain other conditions as set forth in the Agreement
attached hereto as Appendix A.
<PAGE>
____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
____________________
THE DATE OF THIS PROXY STATEMENT IS _________________, 1995.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION ........................................................................ iii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE .............................................. iii
SUMMARY ...................................................................................... v
SUMMARY OF SELECTED FINANCIAL DATA ........................................................... xi
GENERAL INFORMATION .......................................................................... 1
PROPOSED AFFILIATION .........................................................................
Description of the Affiliation ............................................................
Background of and Reasons for the Affiliation .............................................
Recommendation of the Boards of Directors .................................................
Exchange of Shawnee Bancorp Common Stock and Bank Common Stock ............................
Rights of Dissenting Shareholders .........................................................
Resale of ONB Common Stock by Shawnee Bancorp Affiliates ..................................
Conditions to Consummation ................................................................
Termination ...............................................................................
Restrictions Affecting Shawnee Bancorp ....................................................
Regulatory Approvals ......................................................................
Accounting Treatment for the Affiliation ..................................................
Effective Time ............................................................................
Management, Personnel and Operations After the Affiliation ................................
FEDERAL INCOME TAX CONSEQUENCES ..............................................................
Tax Opinion ...............................................................................
Tax Consequences to ONB, First National, Shawnee Bancorp and the Bank .....................
Tax Consequences to Shawnee Bancorp Shareholders ..........................................
Tax Consequences to Shareholders of the Bank ..............................................
COMPARATIVE PER SHARE DATA ...................................................................
Nature of Trading Market ..................................................................
Dividends .................................................................................
Existing and Pro Forma Per Share Information ..............................................
Tax Consequences to Shareholders of the bank ..............................................
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION ...........................................
DESCRIPTION OF ONB AND FIRST NATIONAL ........................................................
Business ..................................................................................
Acquisition Policy and Pending Transactions ...............................................
Incorporation of Certain Information by Reference .........................................
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DESCRIPTION OF SHAWNEE BANCORP AND THE BANK
Business ..................................................................................
Properties ................................................................................
Litigation ................................................................................
Employees .................................................................................
Management ................................................................................
Security Ownership of Management ..........................................................
Principal Shareholders ....................................................................
Certain Relationships and Related Transactions ............................................
MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF SHAWNEE
BANCORP AND THE BANK FOR THE THREE MONTHS
ENDED MARCH 31, 1995 AND 1994, AND FOR THE YEARS ENDED
DECEMBER 31, 1994, 1993 AND 1992 ............................................................
REGULATORY CONSIDERATIONS ....................................................................
Bank Holding Company Regulation ...........................................................
Capital Adequacy Guidelines for Bank Holding Companies ....................................
Bank Regulation ...........................................................................
Bank Capital Requirement ..................................................................
Branches and Affiliates ...................................................................
FDICIA ....................................................................................
Deposit Insurance .........................................................................
Recent Legislation ........................................................................
Additional Matters ........................................................................
COMPARISON OF COMMON STOCK ...................................................................
Authorized But Unissued Shares ............................................................
Preemptive Rights .........................................................................
Dividend Rights ...........................................................................
Voting Right ..............................................................................
Dissenters' Rights ........................................................................
Liquidation Rights ........................................................................
Assessment and Redemption .................................................................
Anti-Takeover Provisions ..................................................................
Director Liability ........................................................................
Director Nominations ......................................................................
LEGAL OPINIONS ...............................................................................
EXPERTS ......................................................................................
</TABLE>
-ii-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
OTHER MATTERS..........................................................
INDEX TO FINANCIAL STATEMENTS.......................................... F-1
APPENDICES
A. Agreement of Affiliation and Merger.............................. A-1
B. Illinois Business Corporation Act of 1983, as amended,
Sections 11.65 and 11.70 (Dissenters' Rights).................. B-1
C. 12 United States Code Section 215a(b)-(d) (Dissenters' Rights
for Shawnee Bancorp)........................................... C-1
D. Banking Circular 259 of the Comptroller of the Currency.......... D-1
-iii-
<PAGE>
AVAILABLE INFORMATION
ONB is subject to the reporting requirements of the Securities Exchange Act
of 1934, as amended ("Exchange Act"), and in accordance therewith files reports,
proxy statements and other information with the Securities and Exchange
Commission ("SEC"). Such reports, proxy statements and other information may be
inspected and copied at prescribed rates at the public reference facilities
maintained by the SEC at 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549, and may also be inspected and copied at prescribed rates at the
SEC's regional offices located at Seven World Trade Center, 13th Floor, New
York, New York 10048 and at Northwestern Atrium Center, Suite 1400, 500 West
Madison Street, Chicago, Illinois 60661-2511. Copies of such material may also
be obtained at prescribed rates from the Public Reference Section of the SEC,
450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. ONB common
stock is quoted on the NASDAQ National Market System and reports, proxy
statements and other information concerning ONB are available for inspection and
copying at prescribed rates at the office of the National Association of
Securities Dealers, Inc., 1735 K Street, Washington, D.C. 20006.
ONB has filed with the SEC a Registration Statement on Form S-4 under the
Securities Act of 1933, as amended ("Securities Act"), with respect to the
shares of ONB Common Stock to be issued in connection with its affiliation with
Shawnee Bancorp. This Proxy Statement does not contain all of the information
set forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the SEC. Reference is made to the
Registration Statement, including the exhibits filed as a part thereof or
incorporated therein by reference, which can be inspected and copied at
prescribed rates at the public reference facilities maintained by the SEC at the
addresses set forth above.
All information contained in this Proxy Statement with respect to Shawnee
Bancorp and the Bank has been supplied by Shawnee Bancorp and the Bank,
respectively, and all information contained in this Proxy Statement with respect
to ONB and First National has been supplied by ONB and First National,
respectively.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (EXCLUDING
UNINCORPORATED EXHIBITS) ARE AVAILABLE WITHOUT CHARGE TO EACH PERSON (INCLUDING
ANY BENEFICIAL OWNER) TO WHOM THIS PROXY STATEMENT IS DELIVERED UPON WRITTEN OR
ORAL REQUEST TO JEFFREY L. KNIGHT, CORPORATE SECRETARY AND GENERAL COUNSEL, OLD
NATIONAL BANCORP, 420 MAIN STREET, P.O. BOX 718, EVANSVILLE, INDIANA 47705,
(812) 464-1363. IN ORDER TO ASSURE TIMELY DELIVERY OF SUCH DOCUMENTS, ANY
REQUESTS SHOULD BE MADE BY ___________________, 1995.
-iv-
<PAGE>
The following documents previously filed by ONB (SEC File No. 0-10888) with
the SEC pursuant to the Exchange Act are incorporated herein by reference:
1. ONB's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995.
2. ONB's Annual Report on Form 10-K for the fiscal year ended December 31,
1994.
3. ONB's Annual Report to Shareholders for the fiscal year ended
December 31, 1994.
4. The description of ONB's common stock contained in ONB's Current Report
on Form 8-K, dated January 6, 1983, and the description of ONB's
Preferred Stock Purchase Rights contained in ONB's Form 8-A, dated March
1, 1990, including the Rights Agreement, dated March 1, 1990, between ONB
and Old National Bank in Evansville, as Trustee.
All documents subsequently filed by ONB pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act prior to the date on which the Special Meeting is
held shall be deemed to be incorporated by reference into this Proxy Statement
and to be a part hereof from the date of filing such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed to
be incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THIS PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO PURCHASE ANY OF THE SECURITIES OFFERED BY THIS PROXY STATEMENT, NOR
THE SOLICITATION OF A PROXY, IN ANY JURISDICTION TO ANY PERSON TO WHOM IT WOULD
BE UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION OF AN OFFER OR PROXY SOLICITATION
IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT NOR ANY
DISTRIBUTION OF THE SECURITIES COVERED HEREBY AT ANY TIME SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF ONB, SHAWNEE BANCORP, FIRST NATIONAL OR THE BANK SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE OF THIS PROXY STATEMENT.
-v-
<PAGE>
SUMMARY
The following is a brief summary of certain information contained elsewhere
herein and was prepared to assist the shareholders of Shawnee Bancorp and the
Bank in their review of the Proxy Statement. This summary does not purport to
be complete and is qualified in all respects by reference to the full text of
this Proxy Statement and the appendices hereto.
SPECIAL MEETINGS:
Date, Time and Place of ________________, 1995, at the main office of
Special Meetings The Bank of Harrisburg ("Bank"), located at 2
West Walnut Street, Harrisburg, Illinois 62946,
with the Shawnee Bancorp Special Meeting to
begin at ___:___ __.m., local time, and the
Bank Special Meeting to begin at ___:___ __.m.,
local time.
Purpose of Special To consider and vote upon the Agreement, under
Meetings the terms of which Shawnee Bancorp will first
merge with and into ONB ("Company Merger") and,
immediately thereafter, the Bank will merge
with and into First National ("Bank Merger"). A
copy of the Agreement, which is incorporated
herein by reference, is attached to this Proxy
Statement as Appendix A. See "NOTICE OF SPECIAL
MEETINGS OF SHAREHOLDERS" and the discussions
under the captions "GENERAL INFORMATION" and
"PROPOSED AFFILIATION".
Required Shareholder Vote The approval of the Agreement requires the
affirmative vote, in person or by proxy, of the
holders of at least two-thirds (2/3) of the
issued and outstanding shares of Shawnee
Bancorp Common Stock and Bank Common Stock,
respectively. Members of the Board of Directors
of Shawnee Bancorp beneficially own in the
aggregate, directly and indirectly,
approximately 80.51% of the outstanding shares
of Shawnee Bancorp Common Stock. Members of the
Board of Directors of the Bank beneficially own
in the aggregate, directly and indirectly,
approximately 0.01% of the outstanding shares
of Bank Common Stock. Shawnee Bancorp
beneficially owns 439,080 shares of Bank Common
Stock, or approximately 98.5% of the
outstanding shares of Bank Common Stock. See
"GENERAL INFORMATION", "PROPOSED AFFILIATION --
Conditions to Consummation" and "DESCRIPTION OF
SHAWNEE BANCORP AND THE BANK -- Security
Ownership of Management".
Shares Outstanding and As of March 31, 1995, there were 118,000 shares
Entitled to Vote of Shawnee Bancorp Common Stock outstanding,
and 445,766 shares of Bank Common Stock
outstanding. Shareholders of Shawnee Bancorp
and the Bank of record at the close of business
on ______________, 1995 are entitled to notice
of, and to vote at, the Special Meetings. See
"GENERAL INFORMATION".
-vi-
<PAGE>
Proxies Proxies are revocable at any time before they
are exercised by a later dated proxy delivered
to Shawnee Bancorp or the Bank or by written
notice delivered to the Secretary of Shawnee
Bancorp or the Cashier of the Bank. See
"GENERAL INFORMATION".
THE PARTIES TO THE
TRANSACTION:
Old National Bancorp As the largest independent bank holding
420 Main Street company headquartered in the State of Indiana,
Evansville, Indiana 47708 ONB owns and operates 23 affiliate banks with
(812) 464-1434 [123] offices located in the three state area
of Indiana, Illinois, and Kentucky. As of March
31, 1995, ONB had total assets of approximately
$4.2 billion and its ratio of total capital to
risk-adjusted assets was 16.07%. This capital
ratio is well in excess of applicable
regulatory requirements. See "DESCRIPTION OF
ONB".
ONB has entered into definitive agreements to
acquire (i) First United Savings Bank, f.s.b.
("First United"), located in Greencastle and
Bloomington, Indiana, and (ii) City National
Bancorp, Inc. ("City National"), Fulton,
Kentucky, and its wholly-owned subsidiary, City
National Bank. See "DESCRIPTION OF ONB --
Acquisition Policy and Pending Affiliations".
The First National Bank First National is a national banking
of Harrisburg association located in Harrisburg, Illinois and
2 East Locust Street a wholly-owned subsidiary of ONB. As of
Harrisburg, Illinois 62946 March 31, 1995, First National had total
(618) 253-7611 assets of approximately $170 million.
Shawnee Bancorp, Inc. Shawnee Bancorp is an Illinois corporation and
2 West Walnut Street a bank holding company located in Harrisburg,
Harrisburg, Illinois 62946 Illinois and owns 98.5% of the outstanding
(618) 253-7693 shares of Bank Common Stock. As of March 31,
1995, Shawnee Bancorp had total assets of
approximately $30.0 million and its ratio of
total capital to risk-adjusted assets was
9.33%. See "DESCRIPTION OF SHAWNEE BANCORP AND
THE BANK".
The Bank of Harrisburg The Bank is an Illinois state chartered bank
2 West Walnut Street located in Harrisburg, Illinois. Shawnee
Harrisburg, Illinois 62946 Bancorp owns 98.5% of the outstanding shares
(618) 253-7693 of Bank Common Stock. As of March 31, 1995, the
Bank had total assets of approximately $29.7
million.
THE AFFILIATION:
Description of the The affiliation involves the merger of
Affiliation Shawnee Bancorp with and into ONB and,
immediately thereafter, the merger of the Bank
with and into First National ("Affiliation").
ONB will be the surviving corporation in the
Company Merger and, upon consummation of the
Company Merger, the separate corporate
existence of Shawnee
-vii-
<PAGE>
Bancorp will cease. First National will survive
the Bank Merger and, upon consummation of the
Bank Merger, the separate corporate existence
of the Bank will cease.
Exchange of Shawnee Bancorp At the effective time of the Company Merger,
and Bank Common Stock each outstanding share of Shawnee Bancorp
Common Stock will be converted into the right
to receive such number of shares of ONB Common
Stock which have a market value equal to Forty-
One Dollars ($41.00), all as determined
pursuant to the Agreement. At the effective
time of the Bank Merger, each outstanding share
of Bank Common Stock issued to and beneficially
owned by the individual minority shareholders
of the Bank will be converted into the right to
receive from ONB an amount of Seventeen Dollars
($17.00) in cash, except two (2) minority
shareholders of the Bank who are also
shareholders of Shawnee Bancorp, may exchange
their shares of Bank Common Stock for such
number of shares of ONB Common Stock which have
a Market Value of Seventeen Dollars ($17.00).
No fractional shares of ONB Common Stock will
be issued and ONB will pay cash for any
fractional share interests resulting from the
exchange ratio in the Company Merger in
accordance with the terms of the Agreement. The
price at which ONB Common Stock traded on
_______________, 1995, as reported by the
NASDAQ National Market System, was $_________
per share. See "PROPOSED AFFILIATION --Exchange
of Shawnee Bancorp Common Stock and Bank Common
Stock" and Appendix A to this Proxy Statement.
Reasons for the In considering the affiliation with ONB, the
Affiliation Board of Directors of Shawnee Bancorp and the
Bank collected and evaluated a variety of
economic, financial and market information
regarding ONB and its affiliate banks, their
respective businesses and ONB's reputation and
future prospects. In the opinion of the Board
of Directors of Shawnee Bancorp and the Bank,
favorable factors included ONB's strong
earnings and stock performance, its management,
the compatibility of its markets to those of
the Bank and the attractiveness of ONB's offer
from a financial perspective. Consideration was
further given to the potential benefits of
ownership of ONB Common Stock, which is traded
in the over-the-counter market and reported on
the NASDAQ National Market System, as compared
to Shawnee Bancorp Common Stock which has no
established public trading market. The Boards
of Directors of Shawnee Bancorp and the Bank
also determined that the Affiliation would have
a positive, long-term impact on the Bank's
customers and employees and the communities
served by the Bank. See "PROPOSED AFFILIATION
-- Background of and Reasons for the
Affiliation".
-viii-
<PAGE>
Recommendation of the In the opinion of the Boards of Directors of
Boards of Directors of Shawnee Bancorp and the Bank, the Affiliation
Shawnee Bancorp and is in the best interests of the shareholders
the Bank of Shawnee Bancorp and the shareholders,
employees and customers of the Bank and the
communities which it serves. Accordingly, the
Boards of Directors of Shawnee Bancorp and the
Bank have unanimously approved the Affiliation
and recommend that their shareholders approve
the Agreement and the Affiliation provided for
therein. See "PROPOSED AFFILIATION --
Recommendation of the Boards of Directors".
Conditions to the Consummation of the Affiliation is subject
Affiliation to certain conditions which include, among
others, (1) approval of the Agreement by the
affirmative vote of the holders of at least
two-thirds (2/3) of the outstanding shares of
Shawnee Bancorp Common Stock and Bank Common
Stock, respectively, (2) receipt of certain
regulatory approvals, (3) the Federal Deposit
Insurance Corporation ("FDIC") shall have
modified, released or terminated the FDIC
Assistance Agreement, dated September 16, 1991,
to the reasonable satisfaction of ONB, and (4)
receipt of an opinion of counsel with respect
to certain income tax matters. See "PROPOSED
AFFILIATION -- Conditions to Consummation".
Termination of the The Agreement may be terminated before the
Affiliation Affiliation becomes effective upon the
occurrence of certain events which include,
among others, (1) a misrepresentation or breach
of any warranty set forth in the Agreement by
ONB or Shawnee Bancorp, (2) a breach of or
failure to comply with any covenant set forth
in the Agreement by ONB or Shawnee Bancorp, (3)
the commencement or threat of certain claims,
proceedings or litigation, (4) a material
adverse change in ONB, Shawnee Bancorp or the
Bank since December 31, 1994, and (5) the
Affiliation not having been consummated by
January 31, 1996. See "PROPOSED AFFILIATION --
Termination".
Effective Time of the ONB and Shawnee Bancorp anticipate that the
Affiliation Affiliation will be completed during the fourth
quarter of 1995. See "PROPOSED AFFILIATION --
Effective Time".
Management, Personnel and ONB will be the surviving corporation in the
Operations After the Company Merger and, upon consummation, Shawnee
Affiliation Bancorp's separate corporate existence will
cease. First National will be the surviving
bank in the Bank Merger and, upon consummation,
the Bank's separate corporate existence will
cease. The Board of Directors of First National
and the Bank serving at the effective time of
the Bank Merger will continue as the Board of
Directors of First National after the effective
time of the Bank Merger. Following the
effective time of the Bank Merger, ONB, as the
sole shareholder of First National, will have
the ability to elect the Board of Directors of
First National. The officers of First National
serving at the effective time of the Bank
Merger will
-ix-
<PAGE>
continue in their respective positions after
the effective time, until the Board of
Directors of First National determines
otherwise. Following the Affiliation, employees
of the Bank will receive benefits in accordance
with the current policies and employee benefit
plans of ONB. See "PROPOSED AFFILIATION --
Description of the Affiliation",
"-- Management, Personnel and Operations After
the Affiliation" and "DESCRIPTION OF SHAWNEE
BANCORP AND THE BANK -- Management".
-x-
<PAGE>
Federal Income Tax ONB, Shawnee Bancorp, First National and the
Consequences to Shareholders Bank will receive an opinion of counsel to the
of Shawnee Bancorp and effect that the Affiliation should constitute
the Bank a tax-free reorganization. In general,
shareholders of Shawnee Bancorp and the Bank
who receive solely ONB Common Stock in exchange
for their shares of Shawnee Bancorp Common
Stock and Bank Common Stock will not recognize
gain or loss as a result of the exchange.
Shareholders receiving cash in exchange for
their Bank Common Stock or Shawnee Bancorp
Common Stock will recognize capital gain or
loss on such exchange. Shareholders are urged
to consult with their tax advisors with respect
to the tax consequences of the Affiliation to
them. See "FEDERAL INCOME TAX CONSEQUENCES".
Dissenters' Rights Shareholders of Shawnee Bancorp have
dissenters' rights established by Illinois law
which entitle them to receive cash for their
shares of Shawnee Bancorp Common Stock. In the
event that holders of greater than 10% of the
outstanding shares of Shawnee Bancorp Common
Stock become entitled, by exercise of
dissenters' rights or otherwise, to receive
cash instead of ONB Common Stock, the
Affiliation will not qualify as a pooling-of-
interests transaction for accounting purposes
and ONB would have the right to terminate the
Agreement. Shareholders of the Bank have
statutory dissenter's rights and, upon exercise
of these rights, the right to receive payment
of the value of their shares of Bank Common
Stock. Shareholders of Shawnee Bancorp and the
Bank wishing to exercise such rights must
follow certain statutory procedures. See
"PROPOSED AFFILIATION -- Rights of Dissenting
Shareholders of Shawnee Bancorp and the Bank"
and Appendices B, C and D to this Proxy
Statement.
Resale of ONB Certain resale restrictions apply to the sale
Common Stock or transfer of shares of ONB Common Stock
issued to directors, executive officers and 10%
shareholders of Shawnee Bancorp in exchange for
their shares of Shawnee Bancorp Common Stock.
See "PROPOSED AFFILIATION -- Resale of ONB
Common Stock by Affiliates of Shawnee Bancorp".
Comparative Shareholder The rights of shareholders of ONB and Shawnee
Rights Bancorp differ in some respects. Upon
consummation of the Affiliation, shareholders
of Shawnee Bancorp who receive ONB Common Stock
will take such stock subject to its terms and
conditions. The Articles of
-xi-
<PAGE>
Incorporation of ONB contain certain anti-
takeover measures which may discourage or
render more difficult a subsequent takeover of
ONB by another corporation. See "COMPARISON OF
COMMON STOCK".
Trading Market for Common There is presently no established public
Stock trading market for shares of Shawnee Bancorp
Common Stock or Bank Common Stock. Shares of
ONB Common Stock are traded in the over-the-
counter market and stock prices are reported on
the NASDAQ National Market System. The closing
price of ONB Common Stock as reported by the
NASDAQ National Market System was $34.75 per
share on February 22, 1995, the business day
before the Affiliation was publicly announced,
and was $_______ per share on ________________,
1995. Assuming the Affiliation had been
consummated on ___________________, 1995,
Shawnee Bancorp shareholders entitled to
receive ONB Common Stock would have received,
in exchange for all of the shares of Shawnee
Bancorp Common Stock, shares of ONB Common
Stock having a total market value of
$4,838,000, which represents $41.00 per share
of Shawnee Bancorp Common Stock (including cash
received in lieu of any fractional share
interest). See "COMPARATIVE PER SHARE DATA".
-xii-
<PAGE>
SUMMARY OF SELECTED FINANCIAL DATA -- ONB
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
The following summary sets forth selected consolidated financial information
relating to ONB. This information should be read in conjunction with the
financial statements and notes incorporated herein by reference.
<TABLE>
<CAPTION>
Twelve Months ended December 31,
---------------------------------------------------------------
1994 1993 1992 1991 1990
------------ ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Results of Operations
(Taxable equivalent basis)
Interest income $ 308,636 $ 302,728 $ 315,087 $ 348,575 $ 356,156
Interest expense 126,109 124,958 144,908 190,721 210,573
---------- ---------- ---------- ---------- ----------
Net interest income 182,527 177,770 170,179 157,854 145,583
Provision for loan losses 6,241 9,989 11,731 11,514 10,025
---------- ---------- ---------- ---------- ----------
Net interest income after provision for loan losses 176,286 167,781 158,448 146,340 135,558
Noninterest income 33,656 32,451 28,082 25,452 22,935
Noninterest expense 134,774 125,525 113,548 108,022 101,773
---------- ---------- ---------- ---------- ----------
Income before income taxes 75,168 74,707 72,982 63,770 56,720
Income taxes 27,190 28,534 28,245 23,918 21,365
---------- ---------- ---------- ---------- ----------
Net income $ 47,978 $ 46,173 $ 44,737 $ 39,852 $ 35,355
========== ========== ========== ========== ==========
Year-End Balances
Total assets $4,386,839 $4,233,780 $3,949,725 $3,917,024 $3,857,020
Total loans--net of unearned income 2,718,041 2,456,946 2,279,245 2,264,064 2,244,545
Total deposits 3,469,753 3,484,294 3,343,146 3,223,359 3,200,193
Shareholders' equity 391,223 383,367 356,890 329,892 314,378
Per Share Data (1)
Net income - primary $ 2.03 $ 1.95 $ 1.88 $ 1.67 $ 1.43
Net income - fully diluted (2) 1.98 1.90 1.82 1.62 1.43
Cash dividends paid 0.88 0.76 0.72 0.69 0.66
Book value at year-end 16.75 16.18 15.00 13.72 12.65
Selected Performance Ratios
(based on averages)
Return on assets 1.12% 1.12% 1.14% 1.04% 0.95%
Return on equity 12.29 12.56 13.06 12.45 11.32
Equity to assets 9.14 8.89 8.75 8.39 8.38
Primary capital to assets 10.12 9.83 9.65 9.23 9.21
Net charge-offs to average loans 0.31 0.27 0.35 0.41 0.55
Allowance for loan losses to average loans 1.62 1.65 1.56 1.42 1.44
</TABLE>
(1) Restated for all stock dividends.
(2) Assumes the conversion of ONB's subordinated debentures.
In years prior to 1991, the assumed conversion would not be significant.
-xiii-
<PAGE>
SUMMARY OF SELECTED FINANCIAL DATA -- ONB (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months ended March 31,
---------------------------
1995 1994
---- ----
<S> <C> <C>
Results of Operations
- ---------------------
(Taxable equivalent basis)
Interest income $ 83,235 $ 73,660
Interest expense 37,383 29,594
---------- ----------
Net interest income 45,852 44,066
Provision for loan losses 1,064 1,247
---------- ----------
Net interest income after provision
for loan losses 44,788 42,819
Noninterest income 9,093 8,139
Noninterest expense 34,293 32,183
---------- ----------
Income before income taxes 19,588 18,775
Income taxes 7,615 7,201
---------- ----------
Net income $ 11,973 $ 11,574
========== ==========
Period-End Balances
- -------------------
Total assets $4,383,562 $4,252,713
Total loans--net of unearned income 2,746,352 2,470,754
Total deposits 3,513,776 3,482,956
Shareholders' equity 390,943 388,324
Per Share Data (1)
- ------------------
Net income - primary $ 0.51 $ 0.49
Net income - fully diluted (2) 0.50 0.47
Cash dividends paid 0.23 0.22
Book value at period-end 16.96 16.43
Selected Performance Ratios
- ---------------------------
(based on averages)
Return on assets 1.10% 1.10%
Return on equity 12.23 12.01
Equity to assets 9.01 9.18
Primary capital to assets 9.94 10.17
Net charge-offs to average loans 0.06 0.00
Allowance for loan losses to average loans 1.47 1.69
</TABLE>
(1) Restated for all stock dividends.
(2) Assumes the conversion of ONB's subordinated debentures.
-xiv-
<PAGE>
SUMMARY OF SELECTED FINANCIAL DATA -- SHAWNEE BANCORP
The following table presents financial data for Shawnee Bancorp. This
summary should be read in conjunction with the consolidated financial
statements and the notes thereto of Shawnee Bancorp and the Bank contained
elsewhere herein. The data presented for the year ended December 31, 1994 is
derived from audited consolidated financial statements; the data presented for
the other periods are derived from consolidated financial statements which
have not been audited. In the opinion of Shawnee Bancorp and the Bank, the
unaudited data presented reflect all adjustments (consisting of normal
recurring adjustments) necessary for a fair presentation of the financial
position and results of operations for such periods.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------
1994 1993 1992 1991* 1990*
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Interest income 1,859 1,779 1,839 2,138 3,156
Interest expense 874 844 999 1,446 2,279
------- ------ ------ ------ ------
Net interest income 985 935 840 692 877
Provision for possible loan losses 2 (6) (44) 190 41
------- ------ ------ ------ ------
Net interest income after provision for
possible loan losses 983 941 884 502 836
Noninterest income 177 183 179 240 259
Noninterest expense 853 835 858 1,258 1,269
------- ------ ------ ------ ------
Income before income taxes 307 289 205 (516) (174)
Income tax expense 67 71 61 - -
------- ------ ------ ------ ------
Net income $ 240 218 144 (516) (174)
======= ====== ====== ====== ======
PER SHARE DATA:
Dividends declared - - - - -
Book value per common share (2) 16.66 14.67 12.93 38.37 -
======= ====== ====== ====== ======
BALANCE SHEET DATA:
Total assets 29,709 29,058 26,268 24,770 32,709
Investments in debt securities:
Available-for-sale 842 - - - -
Held-to-maturity 12,543 10,619 7,438 7,325 9,939
------- ------ ------ ------ ------
Total investments in debt securities 13,385 10,619 7,438 7,325 9,939
Loans, net of unearned interest 13,791 14,667 15,066 13,885 18,888
Allowance for possible loan losses 245 234 230 200 616
Deposits:
Non-interest bearing 2,385 2,663 1,981 2,015 2,639
Interest-bearing 22,685 21,261 20,146 19,267 27,395
------- ------ ------ ------ ------
Total deposits 25,070 23,924 22,127 21,282 30,034
Stockholders' equity 1,966 1,731 1,513 1,263 2,220
======= ====== ====== ====== ======
EARNINGS PERFORMANCE RATIOS:
Net interest rate margin (1) 3.96% 3.81% 3.68% 2.85% 2.57%
Net overhead burden 3.19 3.25 3.75 5.18 3.71
Return on average assets .83 .78 .56 (1.88) (.46)
Return on average equity 12.98 13.44 10.37 (46.44) (7.40)
======= ====== ====== ====== ======
ASSET QUALITY RATIOS:
Net loan charge-offs (recoveries) to average loans (.06)% (.07)% (49)% 3.35% 8.98%
Allowance for possible loan losses to loans 1.77 1.59 1.52 1.44 3.26
Allowance for possible loan losses to
nonperforming loans 245.00 54.04 46.18 24.60 34.49
Nonperforming loans to loans .72 2.95 3.30 5.86 9.46
Nonperforming assets to loans plus
foreclosed property .88 3.10 3.91 8.88 13.77
======= ====== ====== ====== ======
CAPITAL RATIOS:
Tier 1 capital to risk-adjusted assets 8.10% 7.96% 6.85% 5.25% 9.21%
Total capital to risk-adjusted assets 9.26 9.26 8.19 6.35 11.77
Leverage ratio 5.76 4.95 4.49 3.88 6.79
======= ====== ====== ====== ======
</TABLE>
*Information for periods prior to September 16, 1991, represents the Bank only.
(1) Based on interest income on a fully tax-equivalent basis assuming an
income tax rate of 34%.
(2) Shawnee Bancorp was incorporated on December 27, 1990 for the purpose of
acquiring a majority ownership in the Bank. The Bank was acquired on
September 16, 1991. The book value per common share for the year ended
December 31, 1991 was calculated based on the average outstanding shares for
the period September 16, 1991 to December 31, 1991.
-xv-
<PAGE>
SUMMARY OF SELECTED FINANCIAL DATA -- SHAWNEE BANCORP (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1995 1994
------- ------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF INCOME DATA:
<S> <C> <C>
Interest income $ 534 438
Interest expense 266 204
------- ------
Net interest income 268 234
Provision for possible loan losses (2) 1
------- ------
Net interest income after provision for possible loan losses 270 233
Noninterest income 43 41
Noninterest expense 232 200
------- ------
Income before income taxes 81 74
Income tax expense 24 17
------- ------
Net income $ 57 57
======= ======
PER SHARE DATA:
Dividends declared - -
Book value per common share $ 17.19 15.19
======= ======
BALANCE SHEET DATA:
Total assets $29,977 29,502
Investments in debt securities:
Available-for-sale 602 1,200
Held-to-maturity 13,128 10,002
------- ------
Total investments in debt securities 13,730 11,202
Loans, net of unearned interest 13,922 14,759
Allowance for possible loan losses 235 241
Deposits:
Non-interest bearing 2,262 2,441
Interest-bearing 22,749 21,831
------- ------
Total deposits 25,011 24,272
Stockholders' equity 2,029 1,793
======= ======
EARNINGS PERFORMANCE RATIOS (2):
Net interest rate margin (1) 3.85% 3.50%
Net overhead burden 3.33 2.99
Return on average assets .76 .79
Return on average equity 11.41 12.94
======= ======
ASSET QUALITY RATIOS:
Net loan charge-offs (recoveries) to average loans .06% (.04)%
Allowance for possible loan losses to loans 1.69 1.63
Allowance for possible loan losses to nonperforming loans 235.00 122.96
Nonperforming loans to loans .72 1.33
Nonperforming assets to loans plus foreclosed property .87 1.49
======= ======
CAPITAL RATIOS:
Tier 1 capital to risk-adjusted assets 8.24% 6.53%
Total capital to risk-adjusted assets 9.33 7.57
Leverage ratio 5.95 5.11
======= ======
</TABLE>
(1) Based on interest income on a fully tax-equivalent basis assuming an
income tax rate of 34%.
(2) Ratios for the three months ended March 31, 1995 and 1994 are annualized.
-xvi-
<PAGE>
PROSPECTUS JOINT PROXY STATEMENT
OF OF
OLD NATIONAL BANCORP SHAWNEE BANCORP, INC.
AND
THE BANK OF HARRISBURG
-----------------------------
SPECIAL MEETINGS OF SHAREHOLDERS
OF
SHAWNEE BANCORP, INC.
AND
THE BANK OF HARRISBURG
TO BE HELD ON , 1995
----------------
-----------------------------
GENERAL INFORMATION
This Proxy Statement is furnished to the shareholders of Shawnee Bancorp
and the Bank in connection with the solicitation by their respective Boards of
Directors of proxies for use at the Special Meetings of Shareholders each to
be held on ______________, 1995, at the main office of the Bank, located at 2
West Walnut Street, Harrisburg, Illinois 62946, with the Shawnee Bancorp
Special Meeting to begin at ___:___ __.m., local time, and the Bank Special
Meeting to begin at ___:___ __.m., local time. This Proxy Statement is first
being mailed to shareholders of Shawnee Bancorp and the Bank on
______________, 1995.
The purposes of the Special Meetings of Shareholders are to (1) consider
and vote upon the Agreement, under the terms of which Shawnee Bancorp will
merge into ONB and, immediately thereafter, the Bank will merge into First
National and each outstanding share of Shawnee Bancorp Common Stock will be
converted into the right to receive such number of shares of ONB Common Stock
which have a market value equal to Forty-One Dollars ($41.00), and each
outstanding share of Bank Common Stock beneficially owned by 103 individual
minority shareholders of the Bank will be converted into the right to receive
from ONB an amount of Seventeen Dollars ($17.00) in cash, all as determined
pursuant to the Agreement, and (2) transact such other business which may
properly be presented at the Special Meetings or any adjournment thereof. See
"PROPOSED AFFILIATION - Exchange of Shawnee Bancorp Common Stock and Bank
Common Stock".
The affirmative vote of the holders of at least two-thirds (2/3) of the
outstanding shares of Shawnee Bancorp Common Stock and Bank Common Stock,
respectively, is required for approval of the Agreement. Only holders of
Shawnee Bancorp Common Stock and Bank Common Stock of record at the close of
business on ______________, 1995 ("Record Date") are entitled to notice of,
and to vote at, the Special Meetings. There were 118,000 shares of Shawnee
Bancorp Common Stock and 445,766 shares of Bank Common Stock outstanding on
the Record Date, which were held of record by approximately 10 and 106
shareholders, respectively. For each matter to be voted on at the Special
Meetings, each share of Shawnee Bancorp Common Stock and Bank Common Stock is
entitled to one vote.
-1-
<PAGE>
The cost of soliciting proxies will be borne by Shawnee Bancorp and the
Bank. In addition to use of the mails, proxies may be solicited personally or
by telephone or telegraph by directors, officers and certain employees of
Shawnee Bancorp and the Bank, who will not be specially compensated for such
soliciting.
The shares represented by proxies properly signed and returned will be
voted at the Special Meetings as instructed by the shareholders of Shawnee
Bancorp and the Bank giving the proxies. In the absence of specific
instructions to the contrary, proxies will be voted FOR approval of the
Agreement described in this Proxy Statement and in accordance with the
recommendation of the Board of Directors of Shawnee Bancorp and the Bank, as
the case may be, with respect to any other matter which may properly be
presented at the Special Meetings. See "PROPOSED AFFILIATION -- Rights of
Dissenting Shareholders of Shawnee Bancorp and the Bank". Any shareholder
giving a proxy has the right to revoke it at any time before it is exercised.
Therefore, execution of a proxy will not affect a shareholder's right to vote
in person if he or she attends either Special Meeting. Revocation may be made
by a later dated proxy delivered to Shawnee Bancorp and the Bank, by written
notice received by the Secretary of Shawnee Bancorp or Cashier of the Bank
prior to the Special Meetings, or by written notice delivered to the Secretary
of Shawnee Bancorp or Cashier of the Bank at the Special Meetings. To be
effective, any revocation must be received before the proxy is exercised.
PROPOSED AFFILIATION
At the Special Meetings, the shareholders of Shawnee Bancorp and the Bank
will consider and vote upon the Agreement, certain features of which are
summarized below. The following summary of certain aspects of the Agreement
does not purport to be a complete description of the terms and conditions of
the Agreement and is qualified in its entirety by reference to the Agreement,
which is attached to this Proxy Statement as Appendix A and is incorporated
herein by reference.
DESCRIPTION OF THE AFFILIATION
Under the terms of the Agreement, Shawnee Bancorp will affiliate with ONB
through a statutory merger of Shawnee Bancorp into ONB under the laws of the
State of Indiana and, immediately thereafter, the Bank will affiliate with
First National through a statutory merger of the Bank into First National
under the laws of the United States of America. ONB will be the surviving
corporation in the Company Merger and, at the effective time of the Company
Merger, the separate corporate existence of Shawnee Bancorp will cease. First
National will be the surviving bank in the Bank Merger and, at the effective
time of the Bank Merger, the separate corporate existence of the Bank will
cease.
As of March 31, 1995, Shawnee Bancorp had consolidated assets of $30.0
million, consolidated deposits of $25.0 million, consolidated shareholders'
equity of $2.0 million and consolidated net income for the three months then
ended of $57,000. Based upon the pro forma financial information included
elsewhere in this Proxy Statement and assuming that the Affiliation had been
consummated on March 31, 1995, Shawnee Bancorp represented as of such date
0.7% of the consolidated assets of ONB, 0.7% of its consolidated deposits,
0.5% of its consolidated shareholders' equity and, for the three month period
then ended, 0.5% of its consolidated net income. See "PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION".
As of March 31, 1995, the Bank had assets of $29.7 million, deposits of
$25.1 million, shareholders' equity of $2.4 million and net income for the
three months then ended of $103,000. Based upon the pro
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forma financial information included elsewhere in this Proxy Statement and
assuming that the Affiliation had been consummated on March 31, 1995, the Bank
represented as of such date 0.7% of the consolidated assets of ONB, 0.7% of
its consolidated deposits, 0.5% of its consolidated shareholders' equity and,
for the three month period then ended, 0.9% of its consolidated net income.
BACKGROUND OF AND REASONS FOR THE AFFILIATION
Until 1985, Indiana banking laws prohibited banks located in Indiana from
expanding outside of their home counties. The changes since that time have
been swift, first permitting in-state acquisitions by bank holding companies,
then permitting regional interstate acquisitions and currently permitting
virtual nationwide expansion opportunities. These developments stimulated
aggressive acquisition activity among financial institutions located in
Indiana and neighboring states, resulting in the entry of large bank holding
companies into virtually every attractive market in the midwestern United
States. Moreover, developments and deregulation in the financial services
industry generally have led to further increases in competition for bank
services. Compounded by the significant increase in bank regulatory burdens
over the past several years, these competitive factors have created an
environment in which it is increasingly difficult for community banks such as
the Bank to achieve the economies of scale necessary to compete effectively.
In response to these competitive and regulatory factors and after
evaluation of financial, economic, legal and market considerations, the Boards
of Directors of Shawnee Bancorp and the Bank approved the Affiliation as being
in the best interests of Shawnee Bancorp and the Bank and their respective
shareholders. Whether to remain independent or whether to pursue an
affiliation with another financial institution was the subject of a number of
discussions among the directors of Shawnee Bancorp and the Bank. Discussions
regarding a possible affiliation between ONB and Shawnee Bancorp began in the
fourth quarter of 1994, and continued intermittently through the following
months. The Boards of Directors of Shawnee Bancorp and the Bank met on
December 26, 1994, to consider a merger proposal from ONB. At such time, the
Boards of Directors authorized Shawnee Bancorp's and the Bank's management to
negotiate the terms of a merger with ONB. On February 6, 1995, the parties
executed a non-binding written letter of intent. The Boards of Directors of
Shawnee Bancorp and the Bank discussed the proposed affiliation again on April
24, 1995 and approved the Affiliation. After a business investigation by ONB
and Shawnee Bancorp of each other, the parties executed a definitive merger
agreement on May 31, 1995. In determining to pursue the Affiliation, the
Boards of Directors of Shawnee Bancorp and the Bank specifically considered
financial, managerial and other information regarding ONB and its affiliate
banks. In particular, the Boards of Directors of Shawnee Bancorp and the Bank
evaluated ONB's, Shawnee Bancorp's and the Bank's respective businesses,
financial condition, reputation and future prospects. The earnings history
and stock performance of ONB were carefully reviewed with a view towards the
investment potential for shareholders of Shawnee Bancorp.
Among other items considered in this evaluation were the prospects of
Shawnee Bancorp and the Bank, as separate institutions and as combined with
ONB; the compatibility of ONB's affiliate bank's markets to those of the
Bank's market; the price offered by ONB to Shawnee Bancorp shareholders and
the Bank shareholders and the anticipated tax-free nature of the Affiliation
to the shareholders of Shawnee Bancorp receiving solely ONB Common Stock in
exchange for their shares of Shawnee Bancorp Common Stock; the possibility of
increased liquidity through ownership of ONB Common Stock as compared to
Shawnee Bancorp Common Stock because ONB Common Stock is traded in the over-
the-counter market and share prices are reported on the NASDAQ National Market
System; regulatory requirements; relevant price information involving recent
comparable bank acquisitions which occurred in the midwest United States; and
an analysis of alternatives to affiliating with ONB, including other potential
acquirors.
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The Boards of Directors of Shawnee Bancorp and the Bank also considered
the impact of the Affiliation on the Bank's customers and employees and the
communities served by the Bank. ONB's historical practice of retaining
employees of acquired institutions with competitive salary and benefit
programs was considered, as was the opportunity for training, education,
growth and advancement of the Bank's employees within ONB or one of its
affiliates. The Boards of Directors of Shawnee Bancorp and the Bank examined
ONB's continuing commitment to the communities served by institutions
previously acquired by ONB. Further, from the standpoint of the Bank's
customers, it was anticipated that more products and services would become
available because of ONB's greater resources.
Based upon the foregoing factors, the Boards of Directors of Shawnee
Bancorp and the Bank concluded that it was advantageous to affiliate with ONB.
The importance of the various factors relative to one another cannot be
precisely determined or stated.
RECOMMENDATION OF THE BOARDS OF DIRECTORS
THE BOARDS OF DIRECTORS OF SHAWNEE BANCORP AND THE BANK HAVE CAREFULLY
CONSIDERED AND UNANIMOUSLY APPROVED THE AGREEMENT AND UNANIMOUSLY RECOMMEND
THAT THE SHAREHOLDERS OF SHAWNEE BANCORP AND THE BANK APPROVE THE AGREEMENT.
EXCHANGE OF SHAWNEE BANCORP COMMON STOCK AND BANK COMMON STOCK
Under the terms of the Agreement, shareholders of Shawnee Bancorp of
record upon consummation of the Company Merger will be entitled to receive
such number of ONB Common Stock equal to the quotient arrived at by dividing
(a) Forty-One Dollars ($41.00) by (b) the Market Value (as defined below) of
ONB Common Stock ("Exchange Ratio") and subject to further adjustment, if any,
for stock splits, stock dividends or any similar recapitalization of ONB. The
Market Value of ONB Common Stock shall be the average of the per share closing
prices of ONB Common Stock, as reported on the NASDAQ National Market System
for the first five (5) business days on which shares of ONB Common Stock are
traded within the ten (10) calendar days immediately preceding the effective
time of the Affiliation. As of ____________, 1995, the closing price of ONB
Common Stock was $________ per share, as reported by the NASDAQ National
Market System. If the Affiliation had been consummated on that date, the
number of shares of ONB Common Stock and cash exchanged in the Affiliation
would have been ______________, with an aggregate value of approximately
$4,841,026.
Under the terms of the Agreement, each of the minority shareholders of
the Bank of record upon consummation of the Bank Merger will be entitled to
receive from ONB Seventeen Dollars ($17.00) in cash per share of Bank Common
Stock, except, to preserve the pooling-of-interests method of accounting
treatment for the Affiliation, two (2) minority shareholders of the Bank who
are also shareholders of Shawnee Bancorp, may exchange their shares of Bank
Common Stock for such number of shares of ONB Common Stock which have a Market
Value of Seventeen Dollars ($17.00).
No fractional shares of ONB Common Stock will be issued to shareholders
of Shawnee Bancorp and the Bank in connection with the Affiliation. Each
shareholder of Shawnee Bancorp and the Bank who otherwise would be entitled to
a fractional interest in a share of ONB Common Stock as a result of the
Exchange Ratio will be paid a cash amount equal to such fractional interest
multiplied by the Market Value of ONB Common Stock.
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After the effective time of the Affiliation, stock certificates
previously representing Shawnee Bancorp Common Stock will represent only the
right to receive shares of ONB Common Stock and cash for any fractional
shares, and stock certificates previously representing Bank Common Stock will
represent only the right to receive cash, except for two (2) shareholders of
the Bank who are also shareholders of Shawnee Bank whose stock certificates of
Bank Common Stock may represent the right to receive shares of ONB Common
Stock and cash for any fractional shares. Following the effective time of the
Affiliation and prior to the surrender by holders of Shawnee Bancorp of their
stock certificates to ONB in exchange for ONB Common Stock, such holders will
not be entitled to receive payment of dividends or other distributions
declared on shares of ONB Common Stock. Upon the subsequent exchange of such
certificates, however, any accumulated dividends or other distributions
previously declared and withheld on the shares of ONB Common Stock will be
paid, without interest. At the effective time of the Affiliation, the stock
transfer books of Shawnee Bancorp and the Bank will be closed and no transfers
of shares of Shawnee Bancorp Common Stock and Bank Common Stock will
thereafter be made. If, after the effective time of the Affiliation,
certificates representing shares of Shawnee Bancorp Common Stock and Bank
Common Stock are presented for registration or transfer, they will be canceled
and exchanged for shares of ONB Common Stock or cash, as the case may be.
Distribution of cash (without interest) to shareholders of the Bank,
stock certificates representing shares of ONB Common Stock and any cash
payment for fractional shares (without interest) will be made, after the
effective time of the Affiliation, to each former shareholder of Shawnee
Bancorp and the Bank within ten (10) business days following the shareholder's
delivery to ONB of his or her certificate(s) representing shares of Shawnee
Bancorp Common Stock or Bank Common Stock. Instructions as to delivery of
stock certificates of Shawnee Bancorp and the Bank to ONB will be sent to each
shareholder of Shawnee Bancorp and the Bank shortly after the effective time
of the Affiliation.
DISSENTERS' RIGHTS
Rights of Dissenting Shareholders of Shawnee Bancorp. The Illinois
Business Corporation Act of 1983, as amended ("IBCA"), provides shareholders
of merging corporations with certain dissenters' rights. The dissenters'
rights of shareholders of Shawnee Bancorp are set forth in Sections 11.65 and
11.70 of the IBCA, a copy of which is attached to this Proxy Statement as
Appendix B. Shareholders will not be entitled to assert dissenters' rights
absent strict compliance with the procedures of Illinois law.
Section 11.65 of the IBCA provides that shareholders of Shawnee Bancorp
have the right to demand payment for the fair market value of their shares of
Shawnee Bancorp Common Stock immediately before the Company Merger becomes
effective. To claim its right, the shareholder must first:
(a) deliver to Shawnee Bancorp before the vote is taken a written demand
for payment for the shareholder's shares if the merger is effectuated, and
(b) not vote in favor of the Company Merger in person or by proxy.
Dissenting shareholders may send their written notice to William E. Cook,
President, Shawnee Bancorp, Inc., 2 West Walnut Street, Harrisburg, Illinois
62946.
If the Company Merger is approved by the shareholders of Shawnee Bancorp,
ONB will send a statement to those shareholders satisfying the above
conditions within ten (10) days of the effective date of the Company Merger or
thirty (30) days after the shareholder delivers his/her written demand for
payment,
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whichever is later. The statement shall set forth the opinion of ONB as to the
estimated value of shares, Shawnee Bancorp's latest balance sheet as of the
end of the fiscal year ending not earlier than 16 months before delivery of
the statement, together with the statement of income for that year and the
latest available interim financial statements, and a commitment to pay for the
shares of the dissenting shareholder at the estimated value thereof upon
transmittal to ONB of the share certificates or other evidence of ownership
with respect to such shares. The notice will state the procedures the
dissenting shareholder thereafter must follow to exercise dissenters' rights
in accordance with Illinois law.
A Shawnee Bancorp shareholder who is sent such a statement and does not
agree with the opinion of ONB as to the estimated value of the Shawnee Bancorp
shares must notify ONB in writing of the shareholder's estimate of value of
the Shawnee Bancorp shares and demand payment for the difference between the
shareholder's estimated value of the Shawnee Bancorp shares and the amount of
the payment offered by ONB. Shawnee Bancorp shareholders who do not notify
ONB of their fair value estimate and demand payment as required and within
applicable time periods are considered to have voted the shareholders' shares
of Shawnee Bancorp Common Stock in favor of the Company Merger and are not
entitled to receive payment for the shareholder's shares under Section 11.65
of the IBCA.
Rights of Dissenting Shareholders of the Bank. In accordance with Title
12, Section 215a of the United States Code, a copy of which is attached hereto
as Appendix C, shareholders of the Bank have the right to dissent from the
Bank Merger and to receive the value of their Bank Common Stock. In order to
perfect dissenters' rights, a shareholder must take the following steps: (i)
either vote against the Agreement at the Special Meeting or give written
notice to the officer presiding at the Special Meeting prior to or at the
Special Meeting that the shareholder dissents from approval of the Agreement;
(ii) submit a written request for payment of the value of his or her shares of
Bank Common Stock to First National at any time before thirty (30) days after
the consummation of the Bank Merger; and (iii) surrender to First National the
certificates representing his or her shares of Bank Common Stock at the time
of making the foregoing request. ONB will mail notice of the date of
consummation of the Affiliation to each person listed as a shareholder of the
Bank on such date.
The "value" of a dissenting shareholder's shares of Bank Common Stock
(determined as of the effective date of the Bank Merger) will be determined in
accordance with the following procedure, which is contained in Title 12,
Section 215a of the United States Code. Three appraisers will be appointed,
one to be elected by the vote of a majority of the shareholders of the Bank
who have perfected their right to dissent as set forth above, one to be
selected by the Board of Directors of First National, and the third to be
selected by the other two appraisers. The valuation agreed upon by any two of
the three appraisers shall govern. If the value of Bank Common Stock
established by the appraisers is not satisfactory to any dissenting
shareholder, such dissenting shareholder may, within five (5) days after being
notified of the appraised value of the shares, appeal to the Office of the
Comptroller of the Currency ("OCC") which shall cause a reappraisal to be
made, and such reappraisal will be final and binding upon the dissenting
shareholder so appealing. The value of the shares as determined by the OCC
shall be promptly paid by First National to the dissenting shareholder. All
expenses of the OCC in making an appraisal or a reappraisal will be paid by
First National.
If, within ninety (90) days of the date of consummation of the Bank
Merger, one or more of the appraisers is not selected or the appraisers fail
to determine the value of the shares of Bank Common Stock, then the OCC will
upon written request of any dissenting shareholder cause an appraisal to be
performed, which will be binding upon all parties. The value of the shares of
Bank Common Stock determined by the appraisers or the OCC must be promptly
paid by First National to the dissenting shareholders.
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The OCC also has issued a Circular dated March 5, 1992 relating to its
valuation methods used for appraisals in connection with mergers such as the
Bank Merger. A copy of such Circular is attached hereto as Appendix D.
THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING SHAREHOLDERS ADDRESSES
ALL MATERIAL FEATURES OF THE APPLICABLE DISSENTERS' RIGHTS STATUTES, UNDER THE
LAWS OF THE STATE OF ILLINOIS AND THE UNITED STATES OF AMERICA, RESPECTIVELY,
BUT DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY THE
STATUTORY PROVISIONS ATTACHED HERETO AS APPENDICES B AND C. THE DISSENTERS'
RIGHTS RELATING TO SHAREHOLDERS OF THE BANK SHOULD BE READ IN CONJUNCTION WITH
THE OCC'S CIRCULAR ATTACHED HERETO AS APPENDIX D.
A SHAREHOLDER'S FAILURE TO COMPLY WITH THE STATUTORY REQUIREMENTS FOR
EXERCISING DISSENTERS' RIGHTS WILL RESULT IN A LOSS OF SUCH RIGHTS, AND
SHAREHOLDERS WHO MAY WISH TO EXERCISE DISSENTERS' RIGHTS SHOULD CONSIDER
SEEKING LEGAL COUNSEL.
RESALE OF ONB COMMON STOCK BY AFFILIATES OF SHAWNEE BANCORP
No restrictions on the sale or transfer of the shares of ONB Common Stock
issued pursuant to the Affiliation will be imposed solely as a result of the
Affiliation, other than restrictions on the transfer of such shares issued to
any shareholder of Shawnee Bancorp who may be deemed to be an "affiliate" of
Shawnee Bancorp for purposes of Rule 145 under the Securities Act. Directors,
executive officers and 10% shareholders are generally deemed to be affiliates
for purposes of Rule 145.
The Agreement provides that Shawnee Bancorp will provide ONB with a list
identifying each affiliate of Shawnee Bancorp. The Agreement also requires
that each affiliate of Shawnee Bancorp deliver to ONB, prior to the effective
time of the Affiliation, a written agreement to the effect that such affiliate
(1) has not sold, pledged, transferred, disposed of or otherwise reduced the
affiliate's market risk with respect to the shares of Shawnee Bancorp Common
Stock directly or indirectly owned or held by such person during the thirty
(30) day period prior to the effective time, and (2) will not sell, pledge,
transfer or otherwise dispose of or reduce the affiliate's market risk with
respect to the shares of ONB Common Stock to be received by such person
pursuant to the Agreement (i) until such time as financial results covering at
least thirty (30) days of combined operations of Shawnee Bancorp and ONB have
been published within the meaning of Section 201.01 of the Commission's
Codification of Financial Reporting Policies and (ii) unless done pursuant to
an effective registration statement under the Securities Act or pursuant to
Rule 145 or another exemption from the registration requirements under the
Securities Act. The certificates representing ONB Common Stock issued to
affiliates of Shawnee Bancorp in the Affiliation may contain a legend
indicating these resale restrictions.
This is only a general statement of certain restrictions regarding the
sale or transfer of the shares of ONB Common Stock to be issued in the
Affiliation. Therefore, those shareholders of Shawnee Bancorp who may be
deemed to be affiliates of Shawnee Bancorp should consult with their legal
counsel regarding the resale restrictions that may apply to them.
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CONDITIONS TO CONSUMMATION
Consummation of the Affiliation is conditioned upon, among other items,
(1) approval of the Agreement by the affirmative vote of the holders of at
least two-thirds (2/3) of the outstanding shares of Shawnee Bancorp Common
Stock and Bank Common Stock, respectively, (2) receipt by ONB and Shawnee
Bancorp, First National and the Bank of all applicable regulatory approvals
required for the Affiliation, (3) receipt of an opinion of counsel with
respect to certain federal income tax matters, (4) receipt by ONB of certain
undertakings from affiliates of Shawnee Bancorp, (5) receipt by ONB and
Shawnee Bancorp of certain officers' certificates and other legal opinions,
(6) the accuracy at the effective time of the Affiliation of representations
and warranties contained in the Agreement, (7) the FDIC shall have modified,
released, or terminated the FDIC Assistance Agreement dated September 16, 1991
("Assistance Agreement"), to the reasonable satisfaction of ONB, and (8) the
fulfillment of certain covenants set forth in the Agreement. The conditions
to consummation of the Affiliation, which are more fully enumerated in the
Agreement, are requirements subject to unilateral waiver by the party entitled
to the benefit of such conditions, as set forth in the Agreement. See
"PROPOSED AFFILIATION -- Resale of ONB Common Stock by Shawnee Bancorp
Affiliates", "-- Regulatory Approvals", "FEDERAL INCOME TAX CONSEQUENCES" and
Appendix A.
TERMINATION
The Agreement may be terminated before consummation of the Affiliation by
either ONB or Shawnee Bancorp (as set forth in the Agreement) if, among other
reasons, (1) there has been a misrepresentation or a breach of any warranty
set forth in the Agreement by Shawnee Bancorp or ONB which has had or could be
expected to have a material adverse effect on the financial condition, results
of operations, business, assets or capitalization of Shawnee Bancorp, the Bank
or ONB, (2) ONB, Shawnee Bancorp or the Bank has breached or failed to comply
with any covenant set forth in the Agreement, (3) consummation of the
Affiliation has become inadvisable or impracticable due to the commencement or
threat of any claim, litigation or proceeding against ONB, Shawnee Bancorp,
the Bank or any subsidiary of ONB relating to the Agreement or which is likely
to have a material adverse effect on the financial condition, results of
operations, business, assets or capitalization of ONB, Shawnee Bancorp or the
Bank, (4) there has been a material adverse change in the financial condition,
results of operations, business, assets or capitalization of ONB, Shawnee
Bancorp or the Bank, as of the effective time of the Affiliation as compared
to that in existence as of December 31, 1994, (5) ONB cannot utilize the
pooling-of-interests method of accounting for the Affiliation, or (6)
consummation of the Affiliation has not occurred by January 31, 1996. Upon
termination for any of these reasons, the Agreement will be of no further
force or effect. See Appendix A.
RESTRICTIONS AFFECTING SHAWNEE BANCORP
The Agreement contains a number of restrictions regarding the conduct of
business of Shawnee Bancorp and the Bank pending consummation of the
Affiliation. Among other items, Shawnee Bancorp and the Bank may not, without
the prior written consent of ONB, (1) change their capital stock accounts, (2)
distribute or pay any dividends, except that the Bank may pay cash dividends
to Shawnee Bancorp in the ordinary course of business for payment of
reasonable and necessary business and operating expenses of Shawnee Bancorp
and for expenses incurred in connection with the Affiliation, (3) amend their
respective Articles of Incorporation and Charter or By-Laws, (4) carry on
their business other than substantially in the manner as conducted as of the
date of the Agreement and in the ordinary course of business, or (5) negotiate
or discuss with third parties relative to a merger, combination or sale of
Shawnee Bancorp or the Bank, except under certain limited circumstances. See
Appendix A.
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REGULATORY APPROVALS
The Company Merger requires the prior approval of the Board of Governors
of the Federal Reserve System ("Federal Reserve") under the Bank Holding
Company Act of 1956, as amended ("BHC Act"), and the Illinois Commissioner of
Banks and Trust Companies ("Illinois Commissioner") under the Illinois Bank
Holding Company Act of 1957, as amended. The Bank Merger requires the prior
approval of the FDIC pursuant to the Assistance Agreement, and the OCC under
the National Bank Act, as amended. ONB has filed applications with the
Federal Reserve and the Illinois Commissioner for their prior approval of the
Company Merger. First National has also filed an application with the OCC for
its prior approval of the Bank Merger. ONB and the Bank are in the process of
obtaining the FDIC's prior approval of the Bank Merger.
Approval of the Affiliation by the Federal Reserve, FDIC, OCC and the
Illinois Commissioner is not to be interpreted as the opinion of these
regulatory authorities that the Affiliation is favorable to the shareholders
of Shawnee Bancorp or the Bank from a financial point of view or that those
regulatory authorities have considered the adequacy of the terms of the
Affiliation. An approval by the Federal Reserve, FDIC, OCC or the Illinois
Commissioner in no way constitutes an endorsement or a recommendation of the
Affiliation by such regulatory authorities.
ACCOUNTING TREATMENT FOR THE AFFILIATION
It is anticipated that the Affiliation will be accounted for as a
"pooling-of-interests" transaction. Under this method of accounting,
shareholders of ONB, Shawnee Bancorp and the Bank will be deemed to have
combined their existing voting common stock interests. See "SUMMARY OF
SELECTED FINANCIAL DATA" and "PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION".
In order for the Affiliation to qualify for pooling-of-interests
accounting treatment, among other items, 90% or more of the outstanding shares
of Shawnee Bancorp Common Stock must be exchanged for ONB Common Stock. In
the event the holders representing more than 10% of the outstanding shares of
Shawnee Bancorp Common Stock become entitled by the exercise of dissenters'
rights or otherwise to receive cash instead of ONB Common Stock, the
Affiliation would not qualify for pooling-of-interests method of accounting
and ONB would have the right to terminate the Agreement. See "PROPOSED
AFFILIATION --Rights of Dissenting Shareholders" and "PROPOSED AFFILIATION --
Termination".
EFFECTIVE TIME
The Company Merger will become effective at the close of business on the
day specified in the Articles of Merger of Shawnee Bancorp with and into ONB
as filed with both the Indiana Secretary of State and the Illinois Secretary
of State, and the Bank Merger will become effective at the close of business
on the day specified in the Articles of Merger of the Bank with and into First
National as filed with the OCC. The effective time of the Affiliation will
occur on the last business day of the month following (1) the fulfillment of
all conditions precedent to the Affiliation set forth in the Agreement and (2)
the expiration of all waiting periods in connection with the bank regulatory
applications filed for approval of the Affiliation, unless otherwise mutually
agreed to by ONB, Shawnee Bancorp, First National and the Bank.
ONB and Shawnee Bancorp currently anticipate that Affiliation will be
consummated during the fourth quarter of 1995.
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MANAGEMENT, PERSONNEL AND OPERATIONS AFTER THE AFFILIATION
ONB will be the surviving corporation in the Company Merger and, upon
consummation of the Company Merger, the separate corporate existence of
Shawnee Bancorp will cease. Consequently, the directors and officers of
Shawnee Bancorp will no longer serve in such capacities after the effective
time of the Company Merger.
First National will be the surviving bank in the Bank Merger and, upon
consummation of the Bank Merger, the separate corporation existence of the
Bank will cease. The Board of Directors of First National and the Bank serving
at the effective time of the Bank Merger will continue as the Board of
Directors of First National after the effective time of the Bank Merger.
Following the effective time of the Bank Merger, ONB, as the sole shareholder
of First National, will have the ability to elect the Board of Directors of
First National. The officers of First National serving at the effective time
of the Bank Merger will continue in their respective positions after the
effective time, until the Board of Directors of First National determines
otherwise.
Those persons who are full-time officers or employees of the Bank as of
the effective time of the Affiliation, provided that these persons continue as
full-time officers or employees of First National or any other subsidiary of
ONB after the effective time of the Affiliation, will receive substantially
the same employee benefits on substantially the same terms and conditions that
ONB may offer to similarly situated officers and employees of its banking
subsidiaries from time to time. In addition, years of service of an employee
of the Bank prior to the effective time of the Affiliation will be credited to
each such employee for purposes of eligibility under ONB's employee welfare
benefit plans and for purposes of eligibility and vesting, but not for accrual
or contributions, under the ONB Employees' Retirement Plan ("ONB Pension
Plan") and the ONB Employees' Savings and Profit Sharing Plan ("ONB Profit
Sharing Plan").
Those officers and employees of the Bank who otherwise meet the
eligibility requirements of the ONB Pension Plan and the ONB Profit Sharing
Plan, based upon their age and years of service to the Bank shall become
participants thereunder on the January 1st which coincides with or next
follows the effective time of the Affiliation. Those officers and employees
who do not meet the eligibility requirements of the ONB Pension Plan or ONB
Profit Sharing Plan on such date shall become participants thereunder on the
on the first "plan entry date" (as defined in the ONB Pension Plan or ONB
Profit Sharing Plan, as the case may be) which coincides with or next follows
the date on which such eligibility requirements are satisfied.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes certain federal income tax aspects of
the Affiliation. This discussion does not purport to cover all federal income
tax consequences relating to the Affiliation and does not contain any
information with respect to state, local or other tax laws.
TAX OPINION
ONB and Shawnee Bancorp have requested the law firm of Krieg DeVault
Alexander & Capehart to render an opinion that the Affiliation constitutes a
tax-free reorganization and, with respect to certain federal income tax
consequences of the Affiliation, substantially to the effect that the mergers
to be effected pursuant to the Affiliation constitute tax-free reorganizations
under the Internal Revenue Code of 1986, as amended ("Code") to each party
thereto and to the shareholders of Shawnee Bancorp, except with respect to (a)
cash received by Shawnee Bancorp's shareholders (i) for fractional share
interests of ONB Common Stock or (ii)
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pursuant to the exercise of dissenters' rights, and (b) cash received by the
minority shareholders of the Bank (i) in the Bank Merger, (ii) for fractional
share interests of ONB common stock, or (iii) pursuant to the exercise of
dissenters' rights.
The opinion rendered by Krieg DeVault Alexander & Capehart will be based
upon the assumption of certain facts to be stated in the opinion. Under the
Agreement, the obligations of each of ONB and Shawnee Bancorp to consummate
the Affiliation is conditioned upon the receipt of an opinion of counsel
substantially to the effect as set forth above.
TAX CONSEQUENCES TO ONB, FIRST NATIONAL, SHAWNEE BANCORP AND THE BANK
The merger of Shawnee Bancorp with and into ONB and the merger of the
Bank with and into First National constitute statutory mergers under
applicable law. Consequently, based upon the assumption of certain facts to
be stated in the opinion, the merger of Shawnee Bancorp with and into ONB and
the merger of the Bank with and into First National should constitute a tax-
free reorganization. As a result, ONB, First National, Shawnee Bancorp and
the Bank will recognize neither gain nor loss as a result of the Affiliation
for federal income tax purposes.
TAX CONSEQUENCES TO SHAWNEE BANCORP SHAREHOLDERS
A. Shawnee Bancorp Shareholders Receiving Solely ONB Common Stock
--------------------------------------------------------------
A Shawnee Bancorp shareholder who receives solely ONB Common Stock in
exchange for all of the shares of Shawnee Bancorp Common Stock actually owned
by the shareholder will not recognize any gain or loss upon such exchange for
federal income tax purposes. See paragraph C. following for a discussion of
the tax consequences of the receipt of cash in lieu of fractional share
interests of ONB Common Stock.
B. Dissenting Shawnee Bancorp Shareholders Receiving Solely Cash
-------------------------------------------------------------
The transaction will result in income being recognized for federal income
tax purposes for Shawnee Bancorp shareholders who dissent to the Company
Merger and receive solely cash in exchange for their shares of Shawnee Bancorp
Common Stock. A shareholder who receives solely cash for the shareholder's
shares of Shawnee Bancorp Common Stock pursuant to the Company Merger through
the exercise of dissenters' rights and, as a result of the surrender of all of
the shareholder's shares of Shawnee Bancorp Common Stock, owns no Shawnee
Bancorp Common Stock either directly or through the constructive ownership
rules of Section 318 of the Code, would recognize capital gain or loss
(assuming that the Shawnee Bancorp Common Stock is held by such shareholder as
a capital asset) equal to the difference between the amount of the cash
received and the shareholder's tax basis of its shares of Shawnee Bancorp
Common Stock.
C. Cash Received in Lieu of Fractional Shares
------------------------------------------
A Shawnee Bancorp shareholder who receives cash in lieu of a fractional
share interest of ONB Common Stock will be treated as having received such
fraction of a share of ONB Common Stock and then as having received cash in
redemption of the fractional share interest, subject to the provisions of
Section 302 of the Code.
-11-
<PAGE>
TAX CONSEQUENCES TO SHAREHOLDERS OF THE BANK
A. Shareholders of the Bank Receiving Solely ONB Common Stock
----------------------------------------------------------
A shareholder of the Bank who receives solely ONB Common Stock in
exchange for all of the shares of Bank Common Stock actually owned by the
shareholder will not recognize any gain or loss upon such exchange for federal
income tax purposes. See paragraph C. following for a discussion of the tax
consequences of the receipt of cash in lieu of fractional share interests of
ONB Common Stock.
B. Shareholders of the Bank Receiving Solely Cash
----------------------------------------------
The transaction will result in income being recognized for federal income
tax purposes for shareholders of the Bank who exchange their shares solely for
cash, or who exercise dissenters' rights to the Affiliation and receive
solely cash in exchange for their shares of Bank Common Stock. A shareholder
who receives solely cash for the shareholder's shares of Bank Common Stock
pursuant to the Bank Merger through the exchange of his shares solely for cash
or through the exercise of dissenters' rights and, as a result of the
surrender of all of the shareholder's shares of Bank Common Stock, owns no
Bank Common Stock either directly or through the constructive ownership rules
of Section 318 of the Code, would recognize capital gain or loss (assuming
that the Bank Common Stock is held by such shareholder as a capital asset)
equal to the difference between the amount of the cash received and the
shareholder's tax basis of his shares of Bank Common Stock.
C. Cash Received in Lieu of Fractional Shares
------------------------------------------
A shareholder of the Bank who receives cash in lieu of a fractional share
interest of ONB Common Stock will be treated as having received such fraction
of a share of ONB Common Stock and then as having received cash in redemption
of the fractional share interest, subject to the provisions of Section 302 of
the Code.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE HAS NOT BEEN VERIFIED
WITH THE INTERNAL REVENUE SERVICE, IS INCLUDED FOR GENERAL INFORMATION ONLY
AND IS BASED UPON THE FEDERAL INTERNAL REVENUE CODE AS IN EFFECT ON THE DATE
OF THIS PROXY STATEMENT WITHOUT CONSIDERATION OF ANY STATE LAWS OR THE
PARTICULAR FACTS OR CIRCUMSTANCES OF ANY SHAREHOLDER OF SHAWNEE BANCORP OR THE
BANK. THE ABOVE DISCUSSION MAY NOT BE APPLICABLE WITH RESPECT TO SHARES
ACQUIRED PURSUANT TO THE EXERCISE OF STOCK OPTIONS OR OTHERWISE RECEIVED AS
COMPENSATION. SHAREHOLDERS ARE URGED TO CONSULT WITH THEIR TAX ADVISOR WITH
RESPECT TO ALL TAX CONSEQUENCES OF THE AFFILIATION TO THEM, INCLUDING THE
EFFECT OF FEDERAL, STATE AND LOCAL TAX LAWS AND ANY OTHER TAX CONSEQUENCES.
-12-
<PAGE>
COMPARATIVE PER SHARE DATA
NATURE OF TRADING MARKET
Shares of ONB Common Stock are traded in the over-the-counter market and
share prices are reported by the NASDAQ National Market System under the
symbol OLDB. On February 22, 1995, the business day immediately preceding the
public announcement of the Affiliation, the closing price of ONB Common Stock
reported by the NASDAQ National Market System was $34.75 per share. On
______________, 1995, the closing price of ONB Common Stock reported by the
NASDAQ National Market System was $________ per share. The following table
sets forth, for the periods indicated, the high and low per share closing
prices of ONB Common Stock as reported by the NASDAQ National Market System.
The prices shown below have been adjusted for all stock splits and stock
dividends paid by ONB.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
1991
----
<S> <C> <C>
First Quarter 19-5/8 $18-3/4
Second Quarter 19-3/4 19
Third Quarter 23-1/8 19-7/8
Fourth Quarter 24-5/8 22-5/8
1992
----
First Quarter $26-5/8 $24-3/4
Second Quarter 26-3/8 25-3/8
Third Quarter 27-5/8 25-3/4
Fourth Quarter 28-1/8 26-5/8
1993
----
First Quarter $30-3/8 $27-5/8
Second Quarter 31-1/2 29-5/8
Third Quarter 33-5/8 30-7/8
Fourth Quarter 36-1/8 33-1/4
1994
----
First Quarter $35-7/8 $34-1/2
Second Quarter 34-3/4 34-1/4
Third Quarter 35-1/2 34-1/4
Fourth Quarter 35-1/4 34-3/4
1995
----
First Quarter $35-7/8 $34-1/2
Second Quarter 34-3/4 34
</TABLE>
-13-
<PAGE>
There is no established public trading market for shares of Shawnee
Bancorp Common Stock or Bank Common Stock and shares of Shawnee Bancorp Common
Stock and Bank Common Stock are traded in limited quantities in private
transactions. Since there are no market makers for Shawnee Bancorp Common
Stock or Bank Common Stock and no recognized exchanges on which shares of
Shawnee Bancorp Common Stock and Bank Common Stock are traded, there is no
published source of prices relating to transactions in Shawnee Bancorp Common
Stock or Bank Common Stock. Most trades occur as a result of private
negotiations in isolated transactions, with the result that management of
Shawnee Bancorp and Bank Common Stock is not directly informed of the number
of trades or prices at which shares of Shawnee Bancorp Common Stock and Bank
Common Stock are traded. Because of the limited market for shares of Shawnee
Bancorp Common Stock and Bank Common Stock, the actual per share trade prices
shown below may not necessarily be indicative of the value of a share of
Shawnee Bancorp Common Stock and Bank Common Stock.
The last trade of Shawnee Bancorp Common Stock, the terms of which
management of Shawnee Bancorp is aware, occurred on or about November 3, 1993,
and involved the sale of 12,500 shares of Shawnee Bancorp Common Stock at a
price of $12 per share. The last trade of Bank Common Stock, the terms of
which management of the Bank is aware, occurred on or about March 15, 1995,
and involved the sale of seventy-five (75) shares at an unknown price. The
table below sets forth, for the periods indicated, the high and low trade
prices for shares of Shawnee Bancorp Common Stock and Bank Common Stock,
respectively, the number of shares traded and the number of trades of Shawnee
Bancorp Common Stock and Bank Common Stock, respectively, based upon
information received by management of Shawnee Bancorp and the Bank.
As of the Record Date, there were approximately 10 and 106 holders of
Shawnee Bancorp Common Stock and of Bank Common Stock, respectively.
Management of Shawnee Bancorp and the Bank have not verified the accuracy
of the following share prices. Further, these prices may not be a reliable
indicator of the price at which more than a limited number of shares of
Shawnee Bancorp Common Stock and Bank Common Stock would trade, and there may
have been additional shares of Shawnee Bancorp Common Stock and Bank Common
Stock traded at higher or lower prices of which the management of Shawnee
Bancorp and the Bank is unaware.
SHAWNEE BANCORP
---------------
<TABLE>
<CAPTION>
NUMBER TOTAL
OF SHARES NUMBER
HIGH LOW TRADED OF TRADES
---- --- --------- ---------
<S> <C> <C> <C> <C>
1992 $12 - 3,000 1
----
1993 12 - 12,500 3
----
1994 None
----
1995 None
----
(through
May 10,
1995)
</TABLE>
-14-
<PAGE>
<TABLE>
<CAPTION>
BANK
----
NUMBER TOTAL
OF SHARES NUMBER
HIGH LOW TRADED OF TRADES
---- --- --------- ---------
<S> <C> <C> <C> <C>
1992 $N/A $N/A 1,075 4
1993 N/A N/A 113 1
1994 N/A N/A 401 3
1995 N/A N/A 337 3
(through
May 10,
1995)
</TABLE>
"NA" means the information is not available to management of the Bank.
DIVIDENDS
The following table sets forth the per share cash dividends paid on
shares of ONB Common Stock, Shawnee Bancorp Common Stock and Bank Common Stock
since January 1, 1991. All dividends have been adjusted to give effect to
their respective stock dividends and stock splits (if any).
<TABLE>
<CAPTION>
ONB SHAWNEE BANCORP BANK
COMMON STOCK (1) COMMON STOCK (2) COMMON STOCK(2)
---------------- ---------------- ---------------
<S> <C> <C> <C>
1991
----
First Quarter $.17 -0- -0-
Second Quarter .17 -0- -0-
Third Quarter .17 -0- -0-
Fourth Quarter .17 -0- -0-
1992
----
First Quarter $.18 -0- -0-
Second Quarter .18 -0- $.16
Third Quarter .18 -0- $.13
Fourth Quarter .18 -0- $.13
</TABLE>
-15-
<PAGE>
<TABLE>
<CAPTION>
1993
----
<S> <C> <C> <C>
First Quarter $.19 -0- -0-
Second Quarter .19 -0- $.13
Third Quarter .19 -0- $.13
Fourth Quarter .19 -0- $.13
1994
----
First Quarter $.22 -0- -0-
Second Quarter .22 -0- $.13
Third Quarter .22 -0- $.17
Fourth Quarter .22 -0- $.17
1995
----
First Quarter $.23 -0- $.17
Second Quarter .23 -0- $.17
</TABLE>
(1) There can be no assurance as to the amount of future dividends that may
be declared or paid on shares of ONB Common Stock since dividend
policies are subject to the discretion of the Board of Directors of ONB,
general business conditions and dividends paid to ONB by its affiliate
banks. For certain restrictions on the payment of dividends on shares of
ONB Common Stock, see "COMPARISON OF COMMON STOCK -- Dividend Rights".
(2) The Agreement provides that the shareholders of Shawnee Bancorp and the
Bank may not receive any dividends, except that the Bank may pay cash
dividends to Shawnee Bancorp in the ordinary course of business for
payment of reasonable and necessary business and operating expenses of
Shawnee Bancorp and for expenses incurred in connection with the
Affiliation. The Bank's ability to pay dividends is restricted by the
FDIC under the Assistance Agreement which has the effect of restricting
the ability of Shawnee Bancorp to pay dividends to its shareholders.
-16-
<PAGE>
EXISTING AND PRO FORMA PER SHARE INFORMATION
The following table sets forth certain historical, pro forma and
equivalent information, giving effect to the pending affiliations with First
United and City National. The data is based on historical financial statements
and the pro forma financial information included on pages 19 through 25 and has
been restated to give effect to all stock dividends, including the 5% stock
dividend issued by ONB on February 10, 1995. Equivalent per share data is
calculated by multiplying the pro forma ONB information by the Exchange Ratio
under the Agreement, based upon a stock price of $34.50 per share.
<TABLE>
<CAPTION>
As Reported
----------------------------------------------
Cash Book Value at
ONB Net Income Dividends Period End
- ---------------- ------------- ---------- -------------
<S> <C> <C> <C>
Three Months Ended
March 31, 1995 $0.51 $0.23 $16.96
Year Ended December 31,
1994 2.03 0.88 16.76
1993 1.95 0.76 16.18
1992 1.88 0.72 15.00
Shawnee Bancorp
- -----------------
Three Months Ended
March 31, 1995 $0.48 -0- $17.19
Year Ended December 31,
1994 2.03 -0- 16.66
1993 1.85 -0- 14.67
1992 1.23 -0- 12.93
</TABLE>
<TABLE>
<CAPTION>
Net Income
-------------------------------------------
ONB Shawnee Bancorp ONB Shawnee Bancorp
Pro Forma(1) Equivalent(1) Pro Forma(2) Equivalent(2)
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Three Months Ended
March 31, 1995 $0.51 $0.61 $0.51 $0.61
Year Ended December 31,
1994 2.03 2.41 1.84 2.19
1993 1.95 2.32 1.93 2.29
1992 1.88 2.23 1.84 2.19
</TABLE>
-17-
<PAGE>
EXISTING AND PRO FORMA PER SHARE INFORMATION - (Continued)
<TABLE>
<CAPTION>
Cash Dividends
-------------------------------------------
ONB Shawnee Bancorp ONB Shawnee Bancorp
Pro Forma(1) Equivalent(1) Pro Forma(2) Equivalent(2)
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Three Months Ended
March 31, 1995 $0.23 $0.27 $0.23 $0.27
Year Ended December 31,
1994 0.88 1.05 0.88 1.05
1993 0.76 0.90 0.76 0.90
1992 0.72 0.86 0.72 0.86
</TABLE>
<TABLE>
<CAPTION>
Shareholders' Equity
-------------------------------------------
ONB Shawnee Bancorp ONB Shawnee Bancorp
Pro Forma(1) Equivalent(1) Pro Forma(2) Equivalent(2)
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
As of March 31, 1995 $16.95 $20.14 $16.84 $20.01
As of December 31, 1994 16.74 19.89 16.61 19.73
</TABLE>
<TABLE>
<CAPTION>
Market Value of Common Stock
-------------------------------------------
Shawnee Bancorp
-----------------------------
ONB Historical(4) Equivalent
------------ --------------- ------------
<S> <C> <C> <C>
As of February 22, 1995(3) $34.75 $17.19 $41.28
</TABLE>
(1) Considers the pending merger with Shawnee Bancorp. See "PRO FORMA
CONDENSED COMBINED FINANCIAL INFORMATION".
(2) Considers the pending merger with Shawnee Bancorp, as well as the pending
mergers with First United and City National. See "PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION".
(3) Represents the last business day prior to the public announcement of the
proposed merger with Shawnee Bancorp.
(4) Based upon the per share book value of Shawnee Bancorp Common Stock as of
March 31, 1995.
-18-
<PAGE>
OLD NATIONAL BANCORP
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(UNAUDITED)
The accompanying financial statements present a Pro Forma Condensed
Combined Balance Sheet of ONB as of March 31, 1995 and Pro Forma Condensed
Combined Statements of Income for the three months ended March 31, 1995 and for
the years ended December 31, 1994, 1993 and 1992.
The Pro Forma Condensed Combined Balance Sheet as of March 31, 1995 is
presented giving effect to the mergers pending as of March 31, 1995 with First
United and City National. The Pro Forma Condensed Combined Statements of Income
for the three months ended March 31, 1995 and the years ended December 31, 1994,
1993 and 1992 are presented giving effect to each of these pending mergers as of
January 1 of each of the years presented.
The pro forma information is based upon historical financial statements.
The assumptions give effect to the proposed mergers under the pooling-of-
interests method of accounting. The information has been prepared in accordance
with the rules and regulations of the SEC and is provided for comparative
purposes only. The information does not purport to be indicative of the results
that actually would have occurred had the mergers been effected on January 1 of
the years presented.
-19-
<PAGE>
OLD NATIONAL BANCORP
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 1995
(Unaudited - Dollars in Thousands)
<TABLE>
<CAPTION>
SHAWNEE FIRST CITY
ASSETS ONB BANCORP Adjustments Pro Forma UNITED NATIONAL Adjustments PRO FORMA
----------- ------- ----------- ------------ ------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash and due from banks.... $ 154,349 $ 1,129 $ 155,478 $ 618 $ 2,337 $ 158,433
Money market investments... 49,283 49,283 4,713 4,975 58,971
Investment securities...... 1,318,959 13,730 1,332,689 5,377 52,506 1,390,572
Loans...................... 2,746,352 13,922 2,760,274 118,932 39,692 2,918,898
Reserve for loan losses.... (40,465) (235) (40,700) (728) (496) (41,924)
Excess cost over assets
acquired................. 13,196 13,196 308 317 13,821
Other intangibles.......... 1,337 1,337 1,337
Premises and equipment..... 63,127 729 63,856 3,080 1,081 68,017
Other assets............... 77,424 702 78,126 3,796 3,198 85,120
----------- ------- -- ----------- -------- -------- -- -----------
$ 4,383,562 $29,977 $0 $ 4,413,539 $136,096 $103,610 $0 $ 4,653,245
=========== ======= == =========== ======== ======== == ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits................... $ 3,513,776 $25,011 $ 3,538,787 $109,675 $ 89,260 $ 3,737,722
Medium term notes.......... 32,000 32,000 0 32,000
Subordinated debentures.... 36,350 36,350 0 36,350
Other borrowings........... 284,590 2,540 287,130 17,000 5,685 309,815
Other liabilities.......... 125,903 397 126,300 1,753 728 128,781
----------- ------- -- ----------- -------- -------- -- -----------
Total Liabilities.. 3,992,619 27,948 0 4,020,567 128,428 95,673 0 4,244,668
----------- ------- -- ----------- -------- -------- -- -----------
Common stock............... 23,049 59 79 (a) 23,187 5 360 707 (b)(c) 24,259
Capital surplus............ 218,152 1,357 (79)(a) 219,430 4,958 1,140 (707)(b)(c) 224,821
Retained earnings.......... 152,753 612 153,365 2,705 7,229 163,299
Net unrealized loss........ (3,011) 1 (3,010) (792) (3,802)
----------- ------- -- ----------- -------- -------- -- -----------
Total shareholders'
equity............. 390,943 2,029 0 392,972 7,668 7,937 0 408,577
----------- ------- -- ----------- -------- -------- -- -----------
$ 4,383,562 $29,977 $0 $ 4,413,539 $136,096 $103,610 $0 $ 4,653,245
=========== ======= == =========== ======== ======== == ===========
Outstanding common shares.. 23,049,205 23,187,405 24,258,615
=========== =========== ==========
Shareholders' equity per
share..................... 16.96 16.95 16.84
=========== =========== ==========
See Notes to Pro Forma Financial Information.
</TABLE>
-20-
<PAGE>
OLD NATIONAL BANCORP
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1995
(Unaudited - Dollars in Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
As Reported As Reported
----------- -----------
ONB SHAWNEE BANCORP PRO FORMA FIRST UNITED CITY NATIONAL PRO FORMA
--- --------------- --------- ------------ ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Interest income....................... $ 80,102 $534 $ 80,636 $2,447 $1,816 $ 84,899
Interest expense...................... 37,383 266 37,649 1,507 1,007 40,163
----------- ---- ----------- ------ ------ -----------
Net Interest income................... 42,719 268 42,987 940 809 44,736
Provision for loan losses............. 1,064 (2) 1,062 23 15 1,100
----------- ---- ----------- ------ ------ -----------
Net interest income after provision
for loan losses...................... 41,655 270 41,925 918 794 43,636
Noninterest income.................... 9,093 43 9,136 166 104 9,406
Noninterest expense................... 34,293 232 34,525 816 564 35,905
----------- ---- ----------- ------ ------ -----------
Income (loss) before income
taxes................................ 16,455 81 16,536 268 334 17,137
Provision for income taxes............ 4,482 24 4,506 130 60 4,696
----------- ---- ----------- ------ ------ -----------
Net income (loss)..................... $ 11,973 $ 57 $ 12,030 $ 138 $ 274 $ 12,441
=========== ==== =========== ====== ====== ===========
Net income per common share: (d)
Assuming no dilution.............. $0.51 $0.51 $ 0.51
=========== =========== ===========
Assuming full dilution............ $0.50 $0.50 $ 0.50
=========== =========== ===========
Weighted average common shares
outstanding: (d)
Assuming no dilution.............. 23,249,139 23,387,339 24,458,549
=========== =========== ===========
Assuming full dilution............ 24,794,632 24,932,832 26,004,042
=========== =========== ===========
</TABLE>
See Notes to Pro Forma Financial Information.
-21-
<PAGE>
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
(Unaudited - Dollars in Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
As Reported As Reported
----------- -----------
ONB SHAWNEE BANCORP PRO FORMA FIRST UNITED CITY NATIONAL PRO FORMA
--- --------------- ----------- ------------ ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Interest income....................... $ 295,946 $1,859 $ 297,805 $ 8,646 $6,193 $ 312,644
Interest expense...................... 126,109 874 126,983 5,266 3,083 135,332
----------- ------ ----------- -------- ------ -----------
Net Interest income................... 169,837 985 170,822 3,380 3,110 177,312
Provision for loan losses............. 6,241 2 6,243 619 60 6,922
----------- ------ ----------- -------- ------ -----------
Net interest income after provision
for loan losses...................... 163,596 983 164,579 2,761 3,050 170,390
Noninterest income.................... 33,656 177 33,833 524 386 34,743
Noninterest expense................... 134,774 853 135,627 6,505 2,126 144,258
----------- ------ ----------- -------- ------ -----------
Income (loss) before income taxes..... 62,478 307 62,785 (3,220) 1,310 60,875
Provision for income taxes............ 14,500 67 14,567 306 255 15,128
----------- ------ ----------- -------- ------ -----------
Net income (loss)..................... $ 47,978 $ 240 $ 48,218 ($3,526) $1,055 $ 45,747
=========== ====== =========== ======== ====== ===========
Net income per common share: (d)
Assuming no dilution.............. $2.03 $2.03 $ 1.84
=========== =========== ===========
Assuming full dilution............ $1.98 $1.97 $ 1.80
=========== =========== ===========
Weighted average common shares
outstanding: (d)
Assuming no dilution.............. 23,595,468 23,733,668 24,804,878
=========== =========== ===========
Assuming full dilution............ 25,213,197 25,351,397 26,422,607
=========== =========== ===========
</TABLE>
See notes to Pro Forma Financial Information.
-22-
<PAGE>
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1993
(Unaudited - Dollars in Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
As Reported As Reported
----------- -----------
ONB SHAWNEE BANCORP PRO FORMA FIRST UNITED CITY NATIONAL PRO FORMA
--- --------------- --------- ------------ ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Interest income....................... $ 291,077 $1,779 $ 292,856 $9,045 $5,900 $ 307,801
Interest expense...................... 124,958 844 125,802 5,841 2,841 134,484
----------- ------ ----------- ------ ------ -----------
Net Interest income................... 166,119 935 167,054 3,204 3,059 173,317
Provision for loan losses............. 9,989 (6) 9,983 106 100 10,189
----------- ------ ----------- ------ ------ -----------
Net interest income after provision
for loan losses...................... 156,130 941 157,071 3,098 2,959 163,128
Noninterest income.................... 32,451 183 32,634 640 325 33,599
Noninterest expense................... 125,525 835 126,360 2,813 1,924 131,097
----------- ------ ----------- ------ ------ -----------
Income (loss) before income taxes..... 63,056 289 63,345 925 1,360 65,630
Provision for income taxes............ 16,883 71 16,954 329 316 17,599
----------- ------ ----------- ------ ------ -----------
Net income (loss)..................... $ 46,173 $ 218 $ 46,391 $ 596 $1,044 $ 48,031
=========== ====== =========== ====== ====== ===========
Net income per common share: (d)
Assuming no dilution.............. $ $1.95 $ $1.95 $ 1.93
=========== =========== ===========
Assuming full dilution............ $ $1.90 $ $1.90 $ 1.88
=========== =========== ===========
Weighted average common shares
outstanding: (d)
Assuming no dilution.............. 23,632,680 23,770,880 24,842,090
=========== =========== ===========
Assuming full dilution............ 25,335,954 25,474,154 26,545,364
=========== =========== ===========
</TABLE>
See notes to Pro Forma Financial Information
-23-
<PAGE>
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1992
(Unaudited - Dollars in Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
As Reported As Reported
----------- -----------
ONB SHAWNEE BANCORP PRO FORMA FIRST UNITED CITY NATIONAL PRO FORMA
--- --------------- --------- ------------ ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Interest income....................... $ 304,695 $1,839 $ 306,534 $9,712 $6,231 $ 322,477
Interest expense...................... 144,908 999 145,907 6,785 3,364 156,056
----------- ------ ----------- ------ ------ -----------
Net Interest income................... 159,787 840 160,627 2,927 2,867 166,421
Provision for loan losses............. 11,731 (44) 11,687 93 60 11,840
----------- ------ ----------- ------ ------ -----------
Net interest income after provision
for loan losses...................... 148,056 884 148,940 2,834 2,807 154,581
Noninterest income.................... 28,082 179 28,261 598 293 29,152
Noninterest expense................... 113,548 858 114,406 3,473 1,768 119,647
----------- ------ ----------- ------ ------ -----------
Income (loss) before income taxes..... 62,590 205 62,795 (41) 1,332 64,086
Provision for income taxes............ 17,853 61 17,914 (127) 324 18,111
----------- ------ ----------- ------ ------ -----------
Net income (loss)..................... $ 44,737 $ 144 $ 44,881 $ 86 $1,008 $ 45,975
=========== ====== =========== ====== ====== ===========
Net income per common share: (d)
Assuming no dilution............ $1.88 $1.88 $1.84
=========== =========== ===========
Assuming full dilution.......... $1.82 $1.82 $1.79
=========== =========== ===========
Weighted average common shares
outstanding: (d)
Assuming no dilution............ 23,772,874 23,911,074 24,982,284
=========== =========== ===========
Assuming full dilution.......... 25,781,590 25,919,790 26,991,000
=========== =========== ===========
</TABLE>
See notes to Pro Forma Financial Information.
-24-
<PAGE>
OLD NATIONAL BANCORP
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(a) Exchange of 100% of Shawnee Bancorp for 138,200 shares of ONB Common
Stock.
(b) Exchange of 100% of First United common stock for 519,613 shares of ONB
Common Stock.
(c) Exchange of 100% of City National common stock for 551,597 shares of ONB
Common Stock.
(d) Net income per share on a fully diluted basis assumes the conversion of
ONB's convertible subordinated debentures.
[THIS SPACE INTENTIONALLY LEFT BLANK]
-25-
<PAGE>
DESCRIPTION OF ONB AND FIRST NATIONAL
BUSINESS
ONB is a multi-bank holding company with 23 affiliate banks located in
the tri-state area comprised of southwestern Indiana and neighboring portions
of Illinois and Kentucky. With total consolidated assets of $4.2 billion as
of March 31, 1995, ONB is the largest independent bank holding company
headquartered in the State of Indiana. Since 1985, ONB has acquired 31
financial institutions, 9 of which were combined with existing affiliate
banks, and has increased its banking offices to [123].
ONB is implementing plans for future expansion through pending
affiliations with First United and City National. ONB anticipates that it
will continue its policy of geographic expansion through strategic
affiliations with additional commercial banks and thrifts. See "DESCRIPTION
OF ONB AND FIRST NATIONAL -- Acquisition Policy and Pending Affiliations".
The principal activity of ONB is to own, manage and supervise its
affiliate banks and its non-bank subsidiaries, each of which is held by ONB as
a separate wholly-owned subsidiary. The primary sources of ONB's revenues are
dividends and fees received from its subsidiaries. There are various legal
limitations on the extent to which the affiliate banks may finance, pay
dividends to or otherwise supply funds to ONB. See "REGULATORY
CONSIDERATIONS" and "COMPARISON OF COMMON STOCK -- Dividend Rights".
ONB's affiliate banks engage in a wide range of commercial and consumer
banking activities and provide other services relating to the general banking
business. Set forth below is a list of ONB's affiliate banks by state.
<TABLE>
<CAPTION>
Indiana Kentucky Illinois
- ------------------------------ -------------------------- --------------------
<S> <C> <C>
Bank of Western Indiana Farmers Bank & Trust First National Bank
(Covington) Company (Henderson) (Harrisburg)
Citizens National Bank Farmers Bank & Trust First National Bank
(Tell City) Company (Madisonville) (Oblong)
Clinton State Bank First State Bank Palmer-American National Bank
Dubois County Bank (Jasper) (Greenville) (Danville)
First-Citizens Bank & Morganfield National Bank Peoples National
Trust Company (Lawrenceville)
(Greencastle) Security Bank & Bank
Gibson County Bank (Princeton) Trust Company
Indiana State Bank (Terre Haute) (Mt. Carmel)
Merchants National Bank
(Terre Haute)
Old National Bank
(Evansville)
Orange County Bank (Paoli)
People's Bank & Trust
Company (Mt. Vernon)
Rockville National Bank
Security Bank & Trust Company
(Vincennes)
United Southwest Bank (Washington)
</TABLE>
-26-
<PAGE>
In addition to these affiliate banks, ONB has six (6) non-bank
affiliates. Indiana Old National Insurance Company reinsures credit life,
accident and health insurance of installment consumer borrowers of ONB's
affiliate banks; Old National Realty Company, Inc. owns real properties which
are incidental to ONB's operations; and Old National Service Corporation
provides data processing services to ONB's affiliate banks and to third
parties. ONB's other three (3) non-banking subsidiaries include Old National
Trust Company, Old National Trust Company -- Illinois and Old National Trust
Company -- Kentucky, all of which provide trust services.
First National is a national banking association located in Harrisburg,
Illinois and a wholly-owned subsidiary of ONB. As of March 31, 1995, First
National had total assets of approximately $170 million.
ACQUISITION POLICY AND PENDING TRANSACTIONS
ONB anticipates that it will continue its policy of geographic expansion
through consideration of acquisitions of financial institutions located in
Indiana, Kentucky and Illinois. Management of ONB currently is reviewing and
analyzing potential acquisitions, as well as engaging in discussions or
negotiations preliminary to letters of intent or agreements in principle
concerning potential acquisitions. There can be no assurance that any of
these discussions or negotiations will result in definitive agreements or
consummated transactions.
As of the date of this Proxy Statement, ONB is a party to a definitive
agreement to acquire First United and City National. Under these agreements,
ONB proposes to issue approximately 1,071,210 shares of ONB Common Stock.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The foregoing information concerning ONB does not purport to be complete.
For additional information, see the documents filed by ONB and listed under
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" in this Proxy Statement
which are specifically incorporated herein by reference.
-27-
<PAGE>
DESCRIPTION OF SHAWNEE BANCORP AND THE BANK
BUSINESS
Shawnee Bancorp is an Illinois corporation and a bank holding company
headquartered in Harrisburg, Illinois. Shawnee Bancorp owns 98.5% of the
issued and outstanding shares of the Bank, and its business consists primarily
of the ownership, supervision and control of the Bank. The common stock of
the Bank is Shawnee Bancorp's principal asset and dividends paid by the Bank
are Shawnee Bancorp's principal source of income.
The Bank is an Illinois chartered bank originally organized and chartered
in May, 1965. The Bank has been in continuous operation since that date. The
Bank is a full-service commercial bank, offering banking services to the
commercial and residential areas which it serves throughout Saline County,
Illinois. Services include commercial; real estate and personal loans; money
market accounts; checking, savings, and time deposit accounts; and trust
services.
The lending portion of the Bank's business relates primarily to real
estate, the activities of small to medium-sized businesses and local community
residences.
Shawnee Bancorp is subject to vigorous competition from major banking
institutions, as well as other financial institutions in its principal service
area, such as savings and loan associations, insurance companies, and finance
companies.
Shawnee Bancorp, Shawnee Bancorp shareholders, the Bank, and the FDIC
entered into an Assistance Agreement on September 16, 1991. The Assistance
Agreement, among other matters, provides for assistance from the FDIC in the
re-capitalization of the Bank, guarantees the recovery of certain loan charge-
offs and related collection expenses on loans originated by prior management,
restricts the sale of Shawnee Bancorp and Bank Common Stock, requires the
maintenance of specified capital ratios, and limits dividends paid by the
Bank. The total amount of assistance the FDIC provided under the Assistance
Agreement is limited to $673,000. The Assistance Agreement expires on
September 16, 1996, except for the loan recovery guaranty which expired on
September 16, 1994. The terms of the Assistance Agreement require the
approval of the FDIC of the affiliation of Shawnee Bancorp and the Bank with
ONB.
PROPERTIES
Shawnee Bancorp's and the Bank's principal banking office is located at 2
West Walnut Street, Harrisburg, Illinois 62946. The Bank also operates a
branch facility at Parker Plaza Shopping Center, Harrisburg, Illinois 62946.
The Bank owns its principal banking office and leases the land on which the
branch facility is located for $3,000 annually. The original term of the
lease expired on July 31, 1995; however, the Bank has the option to renew the
lease for two five-year terms for $3,000 annually plus 30% of the increase in
the Consumer Price Index for U.S. City Averages since the inception of the
lease on July 31, 1985. The Bank has exercised its option to renew the lease
for an additional five (5) year term.
-28-
<PAGE>
LITIGATION
There is no pending litigation of a material nature in which Shawnee
Bancorp or the Bank is a party or to which any of their respective property is
subject. Further, there is no material legal proceeding in which any
director, executive officer, principal shareholder or affiliate of Shawnee
Bancorp or the Bank, or any associate of any such director, executive officer,
principal shareholder or affiliate, is a party or has a material interest
adverse to Shawnee Bancorp or the Bank. None of the ordinary routine
litigation in which Shawnee Bancorp or the Bank is involved is expected to
have a material adverse effect on the financial condition, results of
operations, business, assets or capitalization of Shawnee Bancorp or the Bank.
EMPLOYEES
Shawnee Bancorp has no employees. As of June 9, 1995, the Bank had
fifteen (15) full-time and three (3) part-time employees to whom the Bank
provides a variety of benefits. Management of the Bank considers relations
with its employees to be good.
MANAGEMENT
The following table contains certain information about each director and
executive officer of the Bank and Shawnee Bancorp as of the date of this Proxy
Statement:
<TABLE>
<CAPTION>
DIRECTORS:
SERVED AS
DIRECTOR OF
THE BANK AND
SHAWNEE BANCORP
PRINCIPAL OCCUPATION CONTINUOUSLY
NAME AGE DURING PAST 5 YEARS SINCE
- ---- --- ------------------------ ---------------
<S> <C> <C> <C>
David H. Clemmons 53 Vice President of Barnes 1991
Lumber Co., Inc.
William E. Cook 63 President of the Bank and 1991
Shawnee Bancorp
Fred G. Denny 55 Owner of Denny Simpson 1992
Trucking, Denny Simpson
Stone Co., Equality Mining
and Bob Barnett Redi-Mix
Lannie Gribble 52 General Superintendent 1991
of Southern Illinois
Asphalt Company; Real Estate
Developer
Larry J. Perrotto 57 President & CEO of American 1991
Publishing Co.
</TABLE>
-29-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
George R. Rawlinson 57 Owner & CEO of Rawlinson & 1991
Associates, Inc. and Engineering
Consulting Co.
Charles E. Seten, M.D. 53 Physician 1991
EXECUTIVE OFFICERS:
- -------------------
NAME AGE OFFICE AND BUSINESS EXPERIENCE
---- --- ------------------------------
William E. Cook 63 President of the Bank and Shawnee Bancorp since
1991
David H. Clemmons 53 Chairman of the Board of the Bank since 1991.
Vice President of Barnes Lumber Co., Inc.
</TABLE>
All of the directors of Shawnee Bancorp and the Bank hold office for a
term of one (1) year and their executive officers hold office for a term of one
(1) year. There are no arrangements or understandings between any of the
directors, executive officers or any other persons pursuant to which any of the
Bank's or Shawnee Bancorp's directors or executive officers have been selected
for their respective positions. See "PROPOSED AFFILIATION -- Interests of
Certain Persons in the Affiliation".
SECURITY OWNERSHIP OF MANAGEMENT
The table below sets forth as of the Record Date the total number of
shares of Shawnee Bancorp Common Stock and Bank Common Stock beneficially owned
by each director and executive officer of Shawnee Bancorp and the Bank and by
all of their directors and executive officers as a group.
<TABLE>
<CAPTION>
SHAWNEE BANCORP BANK
COMMON STOCK COMMON STOCK
BENEFICIALLY PERCENT OF BENEFICIALLY PERCENT OF
NAME OF BENEFICIAL OWNER OWNED (1) CLASS (2) OWNED (3) CLASS (4)
- ------------------------ --------------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
David H. Clemmons 15,000 12.71% -0- -0-
William E. Cook 15,000 12.71 -0- -0-
Fred G. Denny (5) 10,000 8.48 59 0.01%
Lannie Gribble 15,000 12.71 -0- -0-
Larry J. Perrotto 15,000 12.71 -0- -0-
George R. Rawlinson 10,000 8.48 -0- -0-
Charles E. Seten, M.D. 15,000 12.71 -0-
All directors and executive
officers as a group (7) individuals 95,000 80.51% 59 0.01%
</TABLE>
-30-
<PAGE>
(1) The number of shares shown as being beneficially owned are those over
which the director or executive officer has either sole or shared voting or
investment power. The information contained in this column is based upon
shareholder records of Shawnee Bancorp and information furnished to Shawnee
Bancorp by the individuals listed.
(2) Calculated based upon 118,000 shares of Shawnee Bancorp Common Stock
outstanding as of the Record Date.
(3) The number of shares shown as being beneficially owned are those over
which the director or executive officer has either sole or shared voting or
investment power. The information contained in this column is based upon
shareholder records of the Bank and information furnished to the Bank by the
individuals listed.
(4) Calculated based upon 445,766 shares of Bank Common Stock outstanding as
of the Record Date.
(5) Includes shares of Bank Common Stock owned by Denny & Simpson Stone Co.,
Inc., of which Mr. Denny is an affiliate.
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of the Record Date, certain
information about each person known to the management of Shawnee Bancorp to be
beneficial owners of more than 5% of the outstanding shares of Shawnee Bancorp
Common Stock. Shawnee Bancorp has no class of stock authorized, issued or
outstanding other than the Shawnee Bancorp Common Stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) PERCENT OF CLASS (2)
- ------------------- ------------------------ --------------------
<S> <C> <C>
David H. Clemmons 15,000 12.71
6 Dogwood Place
Harrisburg, Illinois 62946
William E. Cook 15,000 12.71
1006 E. Clark
Marion, Illinois 62959
Fred G. Denny 10,000 8.48
10 Dogwood Place
Harrisburg, Illinois 62949
Lannie Gribble 15,000 12.71
RR #7
Marion, Illinois 62959
Larry J. Perrotto 15,000 12.71
47 Frankfort Drive
West Frankfort, Illinois 62896
</TABLE>
-31-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
George R. Rawlinson 10,000 8.48
60A Technical Center
Crossville, Illinois 62827
John H. Satterwhite 15,000 12.71
729 South Avenue
Bradford, Pennsylvania 16701
Charles E. Seten, M.D. 15,000 12.71
22 Dogwood Place
Harrisburg, Illinois 62946
</TABLE>
(1) The number of shares shown as being beneficially owned are those shares over
which the shareholder has either sole or shared voting or investment power.
The information contained in this column is based upon information obtained
from shareholder records of Shawnee Bancorp and information furnished to
Shawnee Bancorp by the person listed.
(2) Calculated based upon 118,000 shares of Shawnee Bancorp Common Stock
outstanding as of the Record Date.
As of the Record Date, Shawnee Bancorp beneficially owns 98.5% of the
outstanding shares of Bank Common Stock and is the only shareholder of the
Bank who beneficially owns more than 5% of the outstanding shares of Bank
Common Stock. The Bank has no class of stock authorized, issued or
outstanding other than the Bank Common Stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Directors and executive officers of Shawnee Bancorp and the Bank and
their associates are customers of and have had transactions with Shawnee
Bancorp and the Bank from time to time in the ordinary course of business.
Such transactions have been made on substantially the same terms, including
interest rates and collateral on loans, as those prevailing at the time for
comparable transactions with other persons and did not involve more than the
normal risk of collectibility or present other unfavorable features. Similar
transactions may be expected to take place in the ordinary course of business
in the future.
STATISTICAL INFORMATION ABOUT SHAWNEE BANCORP
In the following pages, various statistical information about Shawnee
Bancorp and the Bank is presented. Such information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations of Shawnee Bancorp and the Bank" and the
consolidated financial statements included elsewhere herein.
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.
-32-
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------------------
1994 1993 1992
----------------------------------- ----------------------------------- ------------------------------------
PERCENT INTEREST AVERAGE PERCENT INTEREST AVERAGE PERCENT INTEREST AVERAGE
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
------- -------- ------- ------- ------- ------- -------- ------- ------- -------- --------- ------
(DOLLARS IN THOUSANDS)
Assets:
Interest-earning
assets:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans (1) $14,405 49.55% $1,176 8.16% $15,335 54.73% $1,201 7.83% $15,208 59.03% $1,303 8.57%
Taxable
investment
securities 8,837 30.39 494 5.59 7,862 28.06 453 5.76 6,732 26.13 505 7.50
Nontaxable
investment
securities (2) 2,592 8.92 224 8.64 1,034 3.69 126 12.19 41 .16 5 12.20
Federal funds
sold 939 3.23 41 4.37 1,445 5.16 42 2.91 886 3.44 28 3.16
------- ------ ------ ------- ------ ------ ------- ------ ------
Total
interest-
earning
assets 26,773 92.09 1,935 7.23 25,676 91.64 1,822 7.10 22,867 88.76 1,841 8.05
====== ==== ====== ===== ====== =====
Non-interest-
earning assets:
Cash and due
from banks 1,108 3.81 961 3.43 966 3.75
Premises and
equipment 727 2.50 741 2.65 770 2.99
Other assets 709 2.44 872 3.11 1,226 4.76
Allowance for
possible loan
losses (243) (.84) (232) (.83) (68) (.26)
------- ------ ------- ------ ------- ------
Total
assets $29,074 100.00% $28,018 100.00% $25,761 100.00%
======= ====== ======= ====== ======= ======
Liabilities and
stockholders'
equity:
Interest-bearing
liabilities:
Interest-
bearing
demand
deposits $ 6,475 22.27% 163 2.52% $ 5,847 20.87% 152 2.60% 4,704 18.26 $ 166 3.53%
Savings
deposits 2,969 10.21 74 2.49 3,034 10.83 79 2.60 2,662 10.33 102 3.83
Time deposits 12,352 42.49 495 4.01 12,141 43.33 491 4.04 12,480 48.45 636 5.10
Securities sold
under agreements
to repurchase
and other short-
term borrowings 1,917 6.59 80 4.17 1.506 5.37 57 3.78 637 2.47 20 3.14
Note payable 825 2.84 62 7.52 1,055 3.77 65 6.16 1,180 4.58 75 6.36
------- ------ ------ ------- ------ ------ ------- ------ ------
Total
interest-
bearing
liabilities 24,538 84.40 874 3.56 23,583 84.17 844 3.58 21,663 84.09 999 4.61
------ ---- ------ ----- ------ -----
Non-interest-bearing
liabilities:
Demand
deposits 2,344 8.06 2,491 8.89 2,248 8.73
Other
liabilities 343 1.18 322 1.15 462 1.79
------- ------ ------- ------ ------- ------
Total
liabilities 27,225 93.64 26,396 94.21 24,373 94.61
Stockholders'
equity 1,849 6.36 1,622 5.79 1,388 5.39
------- ------ ------- ------ ------- ------
Total
liabilities
and Stockholders
equity $29,074 100.00% $28,018 100.00% $25,761 100.00%
======= ====== ======= ====== ======= ======
Net interest
income $1,061 $ 978 $ 842
====== ====== ======
Interest rate spread 3.67% 3.52% 3.44%
==== ===== =====
Net interest rate margin 3.96% 3.81% 3.68%
==== ===== =====
</TABLE>
- -------------------
(1) Average balances include nonaccrual loans. The income on such loans is
included in interest but is recognized only upon receipt.
(2) Nontaxable investment income is presented on a fully tax-equivalent basis
assuming a tax rate of 34%.
-33-
<PAGE>
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 yields/rates:
<TABLE>
<CAPTION>
AMOUNT OF INCREASE (DECREASE)
1994 COMPARED TO 1993 1993 COMPARED TO 1992
INCREASE (DECREASE) INCREASE (DECREASE)
DUE TO DUE TO
--------------------- ----------------------
VOLUME RATE VOLUME RATE
(1) (2) NET (1) (2) NET
------ ---- --- ------ ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Interest earned on:
Loans $(74) 49 (25) 11 (113) (102)
Taxable investment securities 55 (14) 41 77 (129) (52)
Nontaxable investment securities (3) 144 (46) 98 121 - 121
Federal funds sold (18) 17 (1) 16 (2) 14
---- --- --- --- ---- ----
Total interest-earning assets 107 6 113 225 (244) (19)
---- --- --- --- ---- ----
Interest paid on:
Interest-bearing demand deposits 16 (5) 11 35 (49) (14)
Savings deposits (2) (3) (5) 13 (36) (23)
Time deposits 8 (4) 4 (17) (128) (145)
Securities sold under agreements to
repurchase and other short-term
borrowings 17 6 23 32 5 37
Note payable (16) 13 (3) (8) (2) (10)
---- --- --- --- ---- ----
23 7 30 55 (210) (155)
---- --- --- --- ---- ----
Net interest income $ 84 (1) 83 170 (34) 136
==== === === === ==== ====
</TABLE>
- ------------------------
(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
rate and volume changes in proportion to the relationship of the absolute dollar
amounts of the change in each.
-34-
<PAGE>
INVESTMENT PORTFOLIO
The book value of investment securities is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------------------------------
1994 1993 1992
-------------- ---------------- ---------------
PERCENT PERCENT PERCENT
OF OF OF
TOTAL TOTAL TOTAL
SECURI- SECURI- SECURI-
AMOUNT TIES AMOUNT TIES AMOUNT TIES
------- ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
U.S. Treasury and other U.S. government
agencies and corporations $10,065 75.2% $ 8,373 78.9% $6,391 85.9%
Obligations of states and political subdivisions 2,968 22.2 1,842 17.3 40 .5
Other debt securities 352 2.6 404 3.8 1,007 13.6
------- ----- ------- ----- ------ -----
Total $13,385 100.0% $10,619 100.0% $7,438 100.0%
======= ===== ======= ===== ====== =====
</TABLE>
The following table summarizes maturity and yield information on the
investment portfolio at December 31, 1994:
<TABLE>
<CAPTION>
AFTER ONE AFTER FIVE
IN ONE YEAR THROUGH THROUGH AFTER
OR LESS FIVE YEARS TEN YEARS TEN YEARS
---------- ---------- ---------- ----------
YIELD YIELD YIELD YIELD
AMOUNT (1) AMOUNT (1) AMOUNT (1) AMOUNT (1)
------ ----- ------ ----- ------ ---- ------ -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and other
U.S. government agencies
and corporations $1,251 5.1% $5,945 6.4% $ 833 5.9% $2,036 5.2%
Obligation of states and
political subdivisions 10 8.5 367 6.8 2,016 4.8 575 5.6
Other debt securities - - 352 7.5 - - - -
------ ------ ------ ------
Total $1,261 5.6 $6,664 6.4 $2,849 5.0 $2,611 5.4
====== === ====== === ====== === ====== ===
</TABLE>
- ------------
(1) Presented on a fully tax-equivalent basis assuming a tax rate of 34%.
-35-
<PAGE>
LOAN PORTFOLIO
TYPES OF LOANS
The composition of the loan portfolio is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------
1994 1993 1992
---------------- ------------------- -----------------
PERCENT PERCENT PERCENT
OF TOTAL OF TOTAL OF TOTAL
AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
------- ------- ------ -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Commercial, financial, and agricultural $ 3,286 23.8% $ 3,559 24.2% $ 2,554 16.9%
Real estate:
Commercial 5,254 38.0 5,238 35.6 4,965 32.8
Residential 3,466 25.0 3,953 26.9 3,893 25.8
------- ----- ------- ----- ------- -----
Total 8,720 63.0 9,191 62.5 8,858 58.6
------- ----- ------- ----- ------- -----
Consumer 1,508 10.9 1,631 11.1 3,412 22.6
Industrial revenue bonds 320 2.3 320 2.2 282 1.9
------- ----- ------- ----- ------- -----
Total loans $13,834 100.0% $14,701 100.0% $15,106 100.0%
======= ===== ======= ===== ======= =====
</TABLE>
The following table sets forth the maturities and sensitivities
composition of total loans at December 31, 1994:
FIXED-RATE LOANS
<TABLE>
<CAPTION>
DECEMBER 31, 1994 MATURING
-------------------------------------------
AFTER ONE
IN ONE THROUGH AFTER
YEAR OR LESS FIVE YEARS FIVE YEARS TOTAL
------------ ---------- ---------- -----
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Commercial, financial, and agricultural $1,074 $ 993 - 2,067
Real estate:
Commercial 1,298 757 769 2,824
Residential 1,772 1,148 156 3,076
------ ------ ----- -----
Total 3,070 1,905 925 5,900
------ ------ ----- -----
Consumer 927 464 93 1,484
Industrial revenue bonds - - 320 320
------ ------ ----- -----
$5,071 $3,362 1,338 9,771
====== ====== ===== =====
</TABLE>
-36-
<PAGE>
VARIABLE-RATE LOANS
<TABLE>
<CAPTION>
DECEMBER 31, 1994 MATURING
-------------------------------------------
AFTER ONE
IN ONE THROUGH AFTER
YEAR OR LESS FIVE YEARS FIVE YEARS TOTAL
------------ ---------- ---------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial, financial, and agricultural $ 913 $215 91 1,219
Real estate:
Commercial 561 317 1,552 2,430
Residential - 194 196 390
------ ---- ----- -----
Total 561 511 1,748 2,820
------ ---- ----- -----
Consumer 10 14 - 24
------ ---- ----- -----
$1,484 $740 1,839 4,063
====== ==== ===== =====
</TABLE>
The following table summarizes maturity information for the loan
portfolio as of December 31, 1994:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 MATURING
--------------------------------------------
AFTER ONE
IN ONE THROUGH AFTER
YEAR OR LESS FIVE YEARS FIVE YEARS TOTAL
------------ ---------- ---------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial, financial, and agricultural $1,987 $1,208 91 3,286
Real estate:
Commercial 1,859 1,074 2,321 5,254
Residential 1,772 1,342 352 3,466
------ ------ ----- ------
Total 3,631 2,416 2,673 8,720
Consumer 937 478 93 1,508
Industrial revenue bonds - - 320 320
------ ------ ----- ------
$6,555 $4,102 3,177 13,834
====== ====== ===== ======
</TABLE>
-37-
<PAGE>
RISK ELEMENTS INVOLVED IN LENDING ACTIVITIES
The following table details the nonperforming asset information for the
periods presented:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1993 1992
------ ----- -----
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C>
Nonaccrual loans $ 28 360 376
Loans past due 90 days or more 72 73 122
Restructured loans - - -
----- ---- ----
Total nonperforming loans 100 433 498
Foreclosed property 22 24 96
----- ---- ----
Total nonperforming assets $ 122 457 594
===== ==== ====
Nonperforming loans to loans .72% 2.95% 3.30%
Nonperforming assets to loans plus foreclosed property .88 3.10 3.91
Nonperforming assets to total assets .41 1.57 2.26
</TABLE>
It is generally the policy of Shawnee Bancorp and the Bank 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 December 31, 1994, such loans (excluding all
nonperforming loans described above) amounted to $109,000.
FOREIGN OUTSTANDINGS
Shawnee Bancorp and the Bank had no loans to any foreign countries on any
of the dates specified in the tables.
LOAN CONCENTRATIONS
Shawnee Bancorp and the Bank do not have any particular concentration of
credit in any one economic sector; however, a substantial portion of the
portfolio is concentrated and secured by real estate. The ability of Shawnee
Bancorp's and the Bank's borrowers to honor their contractual obligations is
dependent on the local economy and its effect on the real estate market.
-38-
<PAGE>
OTHER INTEREST-BEARING ASSETS
Other interest-bearing assets, consisting of federal funds sold, would
not be considered nonperforming at December 31, 1994 and 1993 if such assets
were loans.
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:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------
1994 1993 1992
------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of period $ 234 $ 230 $ 200
------- ------ ------
Loans charged-off:
Commercial, financial, and agricultural 11 74 74
Real estate:
Commercial 43 2 45
Residential 2 36 74
------- ------ ------
Total real estate 45 38 119
------- ------ ------
Consumer 10 27 6
------- ------ ------
Total charge-offs 66 139 199
------- ------ ------
Recoveries of loans previously charged-off:
Commercial, financial, and agricultural 20 87 148
Real estate:
Commercial 43 2 45
Residential 2 36 74
------ ------ ------
Total real estate 45 38 119
------ ------ ------
Consumer 10 24 6
------ ------ ------
Total recoveries 75 149 273
------ ------ ------
Net loans charged-off (recoveries) (9) (10) (74)
------ ------ ------
Additions (reductions) to reserve charged to
operations 2 (6) (44)
------ ------ ------
Balance at end of period $ 245 $ 234 $ 230
====== ====== ======
Net loan charge-offs (recoveries) to average
loans (.06)% (.07)% (.49)%
Allowance for possible loan losses to loans 1.77 1.59 1.52
Allowance for possible loan losses to
nonperforming loans 245.00 54.04 46.18
====== ====== ======
</TABLE>
In determining an adequate balance in the allowance for possible loan
losses, Shawnee Bancorp's and the Bank'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 or loans
-39-
<PAGE>
classified by supervisory authorities, and an overall review of the remaining
portfolio in light of past loan loss experience.
Under the terms of the Assistance Agreement with the FDIC, the Bank was
entitled to recover 100% of charge-offs on loans originated under prior
management. These reimbursements received for charge-offs subject to the
Assistance Agreement totaled approximately $63,000, $135,000, and $183,000 for
the years ended December 31, 1994, 1993, and 1992, respectively. Charge-offs on
loans originated under current management were not recoverable under the
Assistance Agreement. Recoveries of charge-offs on loans originated under prior
management, and costs of collection with respect to these recoveries, were
equally divided between the Bank and the FDIC. The portion of the Assistance
Agreement relating to reimbursements for charge-offs expired on September 16,
1994; recoveries on these charged-off loans and the related costs of collection
will continue to be divided equally between the Bank and the FDIC until the
expiration of the Assistance Agreement on September 16, 1996. Of the maximum
assistance the FDIC would provide under the Assistance Agreement of $673,000,
the Bank has collected, for the period September 16, 1991, through the
expiration of this portion of the Assistance Agreement on September 16, 1994,
approximately $669,000, representing recoveries of charge-offs on loans
originated by prior management and costs of collection incurred on recovery
efforts from the borrower of those loans.
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, Shawnee Bancorp and Bank management has estimated those
portions of the allowance that could be attributable to major categories of
loans as detailed in the table below:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------
1994 1993 1992
------------------ ------------------ ------------------
PERCENT PERCENT PERCENT
OF LOANS OF LOANS OF LOANS
IN EACH IN EACH IN EACH
CATEGORY CATEGORY CATEGORY
ALLOW- TO TOTAL ALLOW- TO TOTAL ALLOW- TO TOTAL
ANCE LOANS ANCE LOANS ANCE LOANS
------ -------- ------ -------- ------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial, and agricultural $ 74 23.8% $ 70 24.2% $ 69 16.9%
Real estate:
Commercial 74 38.0 70 35.6 69 32.8
Residential 49 25.0 47 26.9 46 25.8
---- ----- ---- ----- ---- -----
Total real estate 123 63.0 117 62.5 115 58.6
---- ----- ---- ----- ---- -----
Consumer 37 10.9 35 11.1 35 22.6
Industrial revenue bonds - 2.3 - 2.2 - 1.9
Not allocated 11 - 12 - 11 -
---- ----- ---- ----- ---- -----
$245 100.0% $234 100.0% $230 100.0%
==== ===== ==== ===== ==== =====
</TABLE>
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.
-40-
<PAGE>
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
December 31, 1994, 1993, and 1992:
<TABLE>
<CAPTION>
1994 1993 1992
-------------- -------------- --------------
AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE BALANCE RATE
-------- ----- ------- ----- ------- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Non-interest-bearing demand deposits $ 2,344 - % $ 2,491 - % $ 2,248 - %
Interest-bearing demand deposits 6,475 2.52 5,847 2.60 4,704 3.53
Savings deposits 2,969 2.49 3,034 2.60 2,662 3.83
Time deposits 12,352 4.01 12,141 4.04 12,480 5.10
------- ------- -------
$24,140 3.03 $23,513 3.07 $22,094 4.09
======= ==== ======= ==== ======= ====
</TABLE>
The following table shows the maturity of time deposits of $100,000 or more
at December 31, 1994 (dollars in thousands):
<TABLE>
<CAPTION>
<S> <C>
Three months or less $ 673
Over three through six months 200
Over six through twelve months 576
Over twelve months 300
------
$1,749
======
</TABLE>
RETURN ON EQUITY AND ASSETS
The following ratios are among those commonly used in analyzing banks and
bank holding companies:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Return on average assets .83% .78% .56%
Return on average equity 12.98 13.44 10.37
Dividend payout ratio - - -
Average equity to average assets ratio 6.36 5.79 5.39
</TABLE>
-41-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATION OF SHAWNEE BANCORP AND THE BANK
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
AND
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
INTRODUCTION
The following discussion and analysis is intended to review the
significant factors affecting the financial condition and results of operations
of Shawnee Bancorp and the Bank for the three months ended March 31, 1995 and
1994 and the three-year period ended December 31, 1994. It provides a more
comprehensive review which is not 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
Shawnee Bancorp's net income for 1994 was $240,000 as compared to
$218,000 for 1993 and $144,000 for 1992. The increase in net income for 1994 as
compared to 1993 was due primarily to an increase in net interest income of
$50,000, partially offset by a $18,000 increase in noninterest expense. The
increase in net income for 1993 as compared to 1992 was primarily due to a
$95,000 increase in net interest income, partially offset by a decrease of
$38,000 in the negative provision for possible loan losses. The negative
provision for possible loan losses in 1993 and 1992 is due to recoveries
exceeding charge-offs primarily resulting from the Assistance Agreement
discussed in the "Provision for Possible Loan Losses" section below.
For the three months ended March 31, 1995 and 1994, net income was
$57,000. Although there was no significant fluctuation in net income, interest
income increased by $96,000. This increase was offset by a $62,000 increase in
interest expense and a $32,000 increase in noninterest expense.
NET INTEREST INCOME
Net interest income is the largest 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. Shawnee Bancorp's net interest income increased 5.3% to $985,000 during
1994 after an increase of 11.3% in 1993. The net interest margin, which is
calculated by dividing tax-equivalent net interest income by average interest-
earning assets, was 3.96% in 1994 as compared to 3.81% and 3.68% in 1993 and
1992, respectively. The increase in the net interest margin during 1994
primarily resulted from the overall rise in the level of interest rates in the
economy during 1994. The Bank increased its average yield on loans from 7.83% in
1993 to 8.16% in 1994 while decreasing the average rates paid on deposits from
3.43% in 1993 to 3.36% in 1994. Like most financial institutions during 1994,
the Bank managed to hold interest rates lower on its deposits for most of the
year. The Bank shifted funds into investments due to a decrease in loan demand
and an increase in customer deposits. However, the average yield on investment
securities declined from 6.51% in 1993 to 6.28% in 1994. The increase in the net
interest margin during 1993 primarily resulted from a $2,809,000 increase in
average interest-earning assets, offset by a $1,920,000 increase in average
interest-bearing liabilities. Additionally, the mix of interest-bearing
liabilities changed as maturing time deposits were reinvested in demand
-42-
<PAGE>
deposits which generally yield lower rates as customers sought increased
flexibility with their deposit accounts due to the potential need to access
their funds for a higher rate in other investments when they would come
available. As a result of this change in mix and the decline in interest rates
in 1992 which remained low throughout 1993, interest paid on liabilities
decreased approximately $155,000 during 1993.
During 1994, increases in the average volume of taxable and nontaxable
investment securities resulted in an increase in interest income of $199,000.
This increase was partially offset by a $92,000 decrease in interest income
associated with a decrease in the average volume of loans and federal funds
sold. Changes in interest rates on the average volume of all interest-earning
assets increased interest income by $6,000. Decreases in the average balance of
savings deposits and the note payable resulted in a decrease in interest expense
of $18,000. This decrease was offset by a $41,000 increase due to the volume of
interest-bearing demand deposit accounts, time deposits, and securities sold
under agreements to repurchase and other short-term borrowings. Changes in
interest rates on the average volume of interest-bearing liabilities resulted in
an increase in interest expense of $7,000. The net effect of the volume and rate
changes associated with all categories of interest-earning assets during 1994 as
compared to 1993 increased interest income by $113,000, while the net effect of
the volume and rate changes associated with all categories of interest-bearing
liabilities increased interest expense by $30,000.
During 1993, increases in the average volume of all interest-earning
assets resulted in an increase in interest income of $225,000. Changes in
interest rates on the average volume of loans, taxable investment securities,
and federal funds sold resulted in a decrease in interest income of $244,000.
Increases in the average balance of interest-bearing demand deposit accounts and
savings resulted in an increase in interest expense of $48,000. Changes in
interest rates on the average volume of interest-bearing liabilities resulted in
a decrease in interest expense of $181,000. The net effect of the volume and
rate changes associated with all categories of interest-earning assets during
1993 as compared to 1992 lowered interest income $19,000, while the net effect
of the volume and rate changes associated with all categories of interest-
bearing liabilities lowered interest expense by $154,000.
Net interest income was $268,000 for the first three months of 1995, a
14.5% increase from the same period of 1994. Interest income increased $96,000
for the first three months of 1995 and interest expense increased $62,000. This
increase is primarily attributable to the overall rise in the level of interest
rates in the economy during 1994 and 1995. The increase is also attributable to
the level of earning assets representing 92.24% of total assets as of March 31,
1995 compared to 88.00% as of March 31, 1994.
PROVISION FOR POSSIBLE LOAN LOSSES
The provision for possible loan losses charged to expense was $2,000 in
1994. During 1993 and 1992, the negative provision of $6,000 and $44,000,
respectively, was recorded representing management's determination that the
allowance for possible loan losses exceeded losses inherent in the loan
portfolio for those years. On September 16, 1991, Shawnee Bancorp and the Bank,
under new management and ownership, entered into the Assistance Agreement with
the FDIC. Under the terms of the Assistance Agreement, Shawnee Bancorp and the
Bank were entitled to recover 100% of charge-offs on loans originated under
prior management. Charge-offs on loans originated under current management were
not recoverable under the Assistance Agreement. Recoveries of charge-offs on
loans originated under prior management, and costs of collection with respect to
these recoveries, were equally divided between Shawnee Bancorp and the Bank and
the FDIC. The portion of the Assistance Agreement relating to reimbursements for
charge-offs expired on September 16, 1994; recoveries on these charged-off loans
and the related costs of collection will continue to be divided equally between
the Bank and the FDIC until the expiration of the Assistance Agreement on
September 16, 1996. Of the total assistance
-43-
<PAGE>
available under the Assistance Agreement of $673,000, and the Bank collected
approximately $669,000, representing recoveries of charge-offs on loans
originated by prior management and costs of collection incurred on recovery
efforts from the borrowers on those loans for the period September 16, 1991,
through September 16, 1994.
The allowance for possible loan losses is maintained at a level
considered adequate to provide for potential losses. The provision for possible
loan losses is based on a periodic analysis, considering, among other factors,
current economic conditions, loan portfolio composition, past loan loss
experience, independent appraisals, loan collateral, and payment experience. In
addition to the allowance for estimated losses on identified problem loans, an
overall unallocated allowance is established to provide for unidentified credit
losses inherent in the portfolio. As adjustments become necessary, they are
reflected in the results of operations in the periods in which they become
known.
Management believes the allowance for possible loan losses is adequate to
absorb losses in the loan portfolio. While management uses available information
to recognize loan losses, future additions to the allowance may be necessary
based on changes in economic conditions. In addition, various regulatory
agencies, as an integral part of the examination process, periodically review
the allowance for possible loan losses. Such agencies may require Shawnee
Bancorp and the Bank to increase the allowance for possible loan losses based on
their judgments and interpretations about information available to them at the
time of their examinations.
The allowance for possible loan losses is a valuation account available
to absorb future loan losses. The following table includes pertinent ratios
which describe trends in the allowance for possible loan losses during the
three-year period ended:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Nonperforming loans/loans .72% 2.95% 3.30%
Allowance for possible loan losses/loans 1.77 1.59 1.52
Allowance for possible loan losses/
non-performing loans 245.00 54.04 46.18
Net charge-offs (recoveries)/average loans (.06) (.07) (.49)
</TABLE>
The decrease in nonperforming loans to loans since 1992 is a result of a
more aggressive approach to account collections and the effectiveness of new
management in working with the problem credits created by prior management.
During 1994, 1993, and 1992, the Bank was in a net recovery position.
The provision for possible loan losses was a credit of $2,000 in the first
three months of 1995 compared to a charge of $1,000 in the same period for 1994.
NONINTEREST INCOME
Shawnee Bancorp's 1994 noninterest income was $177,000, representing a
3.3% decrease from 1993 results, while 1993 noninterest income represented an
increase of 2.2% over 1992 results. Lower average balances on commercial non-
interest-bearing checking accounts resulted in a 2.9% decrease in service charge
income for 1994 as compared to 1993. Other noninterest income, comprised mainly
of miscellaneous fees for
-44-
<PAGE>
bank services, increased by a combined 4.2% during 1994 compared to an increase
of 7.5% during 1993. The increase in 1994 is primarily the result of increases
in trust fees due to termination fees charged to customers.
Noninterest income for the first three months of 1995 was $43,000, an
increase of $2,000 over the same period in 1994 which is attributable to a
$2,000 increase in other income, comprised primarily of miscellaneous fees for
bank services.
NONINTEREST EXPENSE
Shawnee Bancorp's noninterest expense increased 2.2% in 1994 and decreased
2.7% in 1993. Salaries and employee benefits, the largest component of
noninterest expense, increased $23,000 or 6.5% in 1994 and $33,000 or 10.3% in
1993. These increases are attributed to normal compensation increases. As a
percentage of average assets, total noninterest expense for 1994 was 2.9%
following 2.9% and 3.3% in 1993 and 1992, respectively. Noninterest expense
items other than salaries and employee benefits show a decline of 1% from 1994
to 1993 and a decline of 1% from 1993 to 1992. Decreases in occupancy expenses
and data processing fees, partially offset by increases in FDIC insurance
assessments, have contributed to the decrease in noninterest expense categories
exclusive of salaries and employee benefits.
Noninterest expense was $232,000 in the first three months of 1995
compared to $200,000 in the first three months of 1994. Salaries and employee
benefits increased by $2,000, or 2.3%, reflecting normal increases in
compensation. Increases in other expenses, comprised of professional fees and
miscellaneous expenses, has contributed to the increase in noninterest expense
exclusive of salaries and employee benefits.
INCOME TAXES
Shawnee Bancorp recorded income tax expense of $67,000 for 1994, $71,000
for 1993, and $61,000 for 1992. Income tax expense of $24,000 and $17,000 was
recorded for the three months ended March 31, 1995 and 1994, respectively. The
effective income tax rate was 21.8%, 24.6%, and 29.8% for the years ended
December 31, 1994, 1993, and 1992, respectively. The decrease in the effective
income tax rate is primarily a result of an increase in the percentage of
nontaxable income on investment securities to income before income tax expense.
The effective income tax rate was 29.6% and 23.0% for the three months ended
March 31, 1995 and 1994, respectively. See note 7 to the consolidated financial
statements with respect to the components of income taxes.
In February 1992, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS 109). SFAS 109 is effective for fiscal years beginning after
December 15, 1992, and may be applied through retroactive restatement of
previously issued financial statements, or through reporting the cumulative
effect of applying the changes in the period of its initial application. Shawnee
Bancorp and the Bank implemented SFAS 109 during the first quarter of 1993 on a
prospective basis; however, no adjustment was necessary to reflect the
cumulative effect of adoption in Shawnee Bancorp's and the Bank's 1993
consolidated statement of income.
LIQUIDITY AND INTEREST RATE SENSITIVITY
Liquidity is provided to Shawnee Bancorp and the Bank through earning
assets including short-term investments in federal funds sold and through
maturities in the investment portfolio.
-45-
<PAGE>
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 table
reflects Shawnee Bancorp's and the Bank's GAP analysis (rate-sensitive assets
minus rate-sensitive liabilities) as of December 31, 1994:
<TABLE>
<CAPTION>
OVER OVER
3 MONTHS ONE YEAR
3 MONTHS THROUGH 12 THROUGH AFTER
OR LESS MONTHS FIVE YEARS FIVE YEARS TOTAL
--------- ----------- ----------- ---------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Assets:
Investments in debt securities $ 3,072 2,951 5,097 2,265 13,385
Loans 5,865 4,260 2,852 857 13,834
Federal funds sold 450 - - - 450
------- ------ ----- ----- ------
Total interest-sensitive assets 9,387 7,211 7,949 3,122 27,669
------- ------ ----- ----- ------
Liabilities:
Money market deposits 7,525 - - - 7,525
Savings deposits - - 2,693 - 2,693
Time deposits 3,748 5,239 3,480 - 12,467
Note payable 700 - - - 700
Securities sold under agreements to
repurchase 917 150 537 - 1,604
------- ------ ----- ----- ------
Total interest-sensitive
liabilities 12,890 5,389 6,710 - 24,989
------- ------ ----- ----- ------
Interest-sensitivity gap at
December 31, 1994:
Incremental $(3,503) 1,822 1,239 3,122 2,680
======= ====== ===== ===== ======
Cumulative $(3,503) (1,681) (442) 2,680
======= ====== ===== =====
</TABLE>
As is indicated in the preceding table, Shawnee Bancorp and the Bank were
liability sensitive on a cumulative basis in the near term (3 months or less) at
December 31, 1994 based on contractual maturities. In this regard, an increase
in the general level of interest rates would generally have a negative effect on
Shawnee Bancorp's and the Bank's net interest income as the repricing of the
larger volume of interest-sensitive liabilities would create a larger amount of
interest expense than the additional amount of interest income created by the
repricing of the smaller volume of interest sensitive assets.
The following table summarizes certain trends in Shawnee Bancorp's
consolidated balance sheet during the three-year period ended:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------
1994 1993 1992
------- ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Total assets $29,709 29,058 26,268
Earning assets 27,626 27,021 23,799
Deposits 25,070 23,924 22,128
Loans to deposits 55.01% 61.31% 68.09%
Loans to total assets 46.42 50.47 57.35
Debt securities to total assets 45.05 36.54 28.32
======= ====== ======
</TABLE>
-46-
<PAGE>
The composition of total assets and earning assets changed during 1994 as
funds were shifted into investments due to a decrease in loan demand and an
increase in customer deposits. Investment securities were $13,385,000 at
December 31, 1994 as compared to $10,619,000 and $7,438,000 at December 31, 1993
and 1992, respectively, while loans, net of unearned discount, decreased to
$13,791,000 at December 31, 1994 from $14,667,000 and $15,066,000 at December
31, 1993 and 1992, respectively.
During 1993, the composition of total assets and earning assets remained
relatively unchanged. However, as discussed above, investment securities
increased $3,181,000 and loans, net of unearned discount, decreased $399,000
during this period. The net increase in these earning assets resulted from
increased customer deposits being invested in investment securities as loan
demand was lower during 1993 than during 1992. Additionally, Shawnee Bancorp and
the Bank experienced a change in the deposit mix during 1993 as average
interest-bearing demand, savings, and market rate deposits increased
approximately $1,515,000, while average time deposits decreased approximately
$339,000. This trend was primarily attributable to the lower interest rate
environment experienced during 1993 as maturing, longer-term time deposits were
reinvested in more liquid instruments.
Shawnee Bancorp's earning assets increased $605,000 from December 31,
1993 to December 31, 1994 while total assets increased $651,000 during the same
period. Interest-bearing deposits increased $1,424,000 while total deposits
increased $1,146,000. The increase in deposits was largely due to an increase in
money market demand accounts due to a promotion offered by the Bank.
Shawnee Bancorp's earning assets increased $475,000 from December 31,
1994 to March 31, 1995 while total assets increased $268,000 during the same
period. Interest-bearing deposits increased $64,000 while total deposits
decreased $59,000. This disintermediation in interest-bearing deposits compared
to total deposits is due to the current interest rate environment.
CAPITAL ADEQUACY
Shawnee Bancorp's equity capital was $2,029,000 at March 31, 1995. This
represented an increase of 3.2% over equity capital at December 31, 1994 and
resulted from net income for the first three months of 1995 of $57,000 and a
$6,000 unrealized gain on investment securities available-for-sale.
Shawnee Bancorp's equity capital was $1,966,000, $1,731,000, and
$1,513,000 at December 31, 1994, 1993, and 1992, respectively. During 1994,
equity capital increased $235,000, or 13.6% as a result of net income of
$240,000 and a $5,000 unrealized loss on investment securities available-for-
sale. During 1993, equity capital increased $218,000, or 14.4%. This increase
was solely attributable to net income.
Risk-based capital guidelines for financial institutions were adopted by
regulatory authorities effective January 1, 1991. These guidelines were designed
to relate regulatory capital requirements to the risk profile of the specific
institutions and to provide for uniform requirements among the various
regulators. Currently, the risk-based capital guidelines require Shawnee Bancorp
and the Bank to meet a minimum total capital ratio of 8.0% of which at least
4.0% 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 FDIC, and (c)
minority interests in the equity accounts of consolidated securities less
goodwill and any other intangible assets and investments in subsidiaries that
the FDIC determines should be deducted from Tier 1 capital. The FDIC also
requires a minimum leverage ratio of 3.0%, defined as the ratio of Tier 1
capital
-47-
<PAGE>
less purchased mortgage servicing rights to total assets, for banking
organizations deemed the strongest and most highly rated by banking regulators.
A higher minimum leverage ratio is required of less highly rated banking
organizations.
The following table summarizes on a consolidated basis Shawnee Bancorp's
risk-based capital and leverage ratios:
<TABLE>
<CAPTION>
RISK-BASED CAPITAL RATIOS
- -------------------------------------------------------------------------------
TOTAL TIER 1
- ------------------------------------- ------------------------------------
DECEMBER 31, DECEMBER 31,
MARCH 31, ---------------------- MARCH 31, ----------------------
1995 1994 1993 1992 1995 1994 1993 1992
- --------- ---- ---- ---- --------- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
9.33% 9.30% 9.26% 8.20% 8.24% 8.14% 7.96% 6.86%
==== ==== ==== ==== ==== ==== ==== ====
LEVERAGE RATIOS
- --------------------------------------------------------------------------------
MARCH 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 1993 DECEMBER 31, 1992
- -------------- ----------------- ----------------- -----------------
5.95% 5.76% 4.95% 4.49%
==== ==== ==== ====
</TABLE>
Additionally, financial analysts often track primary capital levels as an
indicator of capital adequacy. Primary capital includes equity capital,
allowance for possible loan losses, and debt considered equity for regulatory
capital purposes. Tangible primary capital represents primary capital reduced
by total intangible assets included in the balance sheet. At December 31, 1994,
on a consolidated basis Shawnee Bancorp's primary capital was $2,211,000
compared to $1,965,000 and $1,743,000 at December 31, 1993 and 1992,
respectively. Shawnee Bancorp's primary capital to assets ratio on a
consolidated basis was 7.44%, 6.76%, and 6.64% at December 31, 1994, 1993, and
1992, respectively. Tangible primary capital at year-end 1994 was $1,956,000 as
compared to $1,671,000 and $1,410,000 at December 31, 1993 and 1992,
respectively, translating into tangible primary capital to assets ratio of
6.58%, 5.75%, and 5.37% for the years then ended.
The Assistance Agreement requires the Bank to maintain specified capital
ratios including a ratio of Tier 1 capital to total assets of not less than 6%
and a ratio of Tier 2 Capital to total assets of at least 8%. The Bank's Tier 1
Capital to total assets was 8.24% as of March 31, 1995 and 8.22%, 8.02%, and
8.45% as of December 31, 1994, 1993, and 1992, respectively. The Bank's Tier 2
Capital to total assets was 9.03% as of March 31, 1995 and 9.05%, 8.83%, and
9.34% as of December 31, 1994, 1993, and 1992, respectively.
The Assistance Agreement also restricts the Bank's dividends to the amount
necessary to service Shawnee Bancorp's acquisition debt, provided that the Bank
maintains a return on average assets of .75% and specified capital ratios and
the dividends do not exceed the net operating income of the Bank. Additionally,
the Bank must notify the FDIC, in writing, 15 days prior to the declaration of a
dividend for approval under the Assistance Agreement. Based on the terms of the
Assistance Agreement, the Bank had approximately $114,000 available for the
payment of dividends at December 31, 1994. Given that the terms of the
Assistance Agreement restricts the dividends of the Bank to only those amounts
necessary to service acquisition debt, Shawnee Bancorp is effectively prohibited
from paying dividends during the period the Assistance Agreement is in effect.
-48-
<PAGE>
RISK MANAGEMENT
Shawnee Bancorp's and the Bank's management objective in structuring the
balance sheet is to maximize the return on stockholders' equity while minimizing
the associated risks. The major risks involved in the banking industry are
market, credit, and liquidity risks. The following is a discussion of Shawnee
Bancorp's and the Bank's management of these risks.
MARKET RISK MANAGEMENT
Shawnee Bancorp's and the Bank's management believes its loan and
investment portfolios are sufficiently diversified to minimize the effect of a
downturn in any particular industry or market.
Shawnee Bancorp and the Bank do not have any particular concentration of
credit in any one economic sector. However, $8,720,000 or 63.0% of the loan
portfolio was concentrated and secured by real estate at December 31, 1994. The
commercial loan portfolio, which includes loans made primarily to businesses
located and served by Shawnee Bancorp and the Bank, is generally secured by
business assets such as real estate, inventory, accounts receivable, and
equipment. Of the $8,720,000 in loans secured by real estate, $3,466,000 or
25.0% of total loans are secured by one- to four-family residential mortgages.
Consumer loans as of December 31, 1994 totaled $1,508,000 or 10.9% of the loan
portfolio. At December 31, 1994, the total investment portfolio was $13,385,000,
an increase of 26.0% from the same period in 1993. Approximately 75.2% of the
portfolio is comprised of U.S. government issues.
CREDIT RISK MANAGEMENT
The risks Shawnee Bancorp's and the Bank's management assumes in providing
credit products to customers is fundamental to its business operation. Credit
risk management includes defining an acceptable level of risk and return,
establishing policies and procedures to govern the credit process, and
maintaining a thorough portfolio review function. Credit policies are ultimately
the responsibility of Shawnee Bancorp's and the Bank's Board of Directors and,
as such, are reviewed and approved by the Board of Directors. Of equal
importance in this risk management process are the ongoing, monitoring
procedures performed by management.
Nonperforming loans represented .72% of total loans at March 31, 1995
compared to .72%, 2.95%, and 3.30% at December 31, 1994, 1993, and 1992,
respectively. Other real estate owned by the Bank as a result of foreclosure
transactions was $21,000 at March 31, 1995 compared to $22,000, $24,000, and
$96,000 at December 31, 1994, 1993, and 1992, respectively.
LIQUIDITY RISK MANAGEMENT
Liquidity is a measurement of Shawnee Bancorp's and the Bank's ability to
meet the borrowing needs and the deposit withdrawal requirements of its
customers. Shawnee Bancorp and the Bank actively manage the composition of their
assets and liabilities to maintain the appropriate level of liquidity in the
balance sheet. Management is guided by regularly reviewed policies when
determining the appropriate portion of total assets which should be comprised of
readily marketable assets available to meet future liquidity needs. Much of this
liquidity risk management has been discussed previously in connection with the
liquidity and rate sensitivity.
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<PAGE>
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
In December 1991, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments" (SFAS 107). During May 1993, the FASB issued
Statement of Financial Accounting Standards No. 114, "Accounting by Creditors
for Impairment of a Loan" (SFAS 114) and Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" (SFAS 115). During October 1994, the FASB issued Statement of
Financial Accounting Standards No. 118, "Accounting by Creditors for Impairment
of a Loan - Income Recognition and Disclosures" (SFAS 118), which amends SFAS
114. During October 1994, the FASB issued Statement of Financial Accounting
Standards No. 119, "Disclosure about Derivative Financial Instruments and Fair
Value of Financial Instruments" (SFAS 119).
SFAS 107 requires disclosure of the fair value of financial instruments for
which it is practicable to estimate that value in the body of the financial
statements or in the accompanying notes to the financial statements. The methods
and significant assumptions used to estimate the fair value of financial
instruments must also be disclosed.
SFAS 107 defines a financial instrument as cash, evidence of an ownership
interest in an entity, or a contract that both: (1) imposes on one entity a
contractual obligation to deliver cash or another financial instrument to a
second entity or to exchange other financial instruments with the second entity;
and (2) conveys to that second entity a contractual right to receive cash or
another financial instrument from the first entity or to exchange other
financial instruments with the first entity.
The fair value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between willing parties,
other than in a forced or liquidation sale. Quoted market prices, if available,
are the best evidence of the fair value of financial instruments. If quoted
market prices are not available, management's best estimate of fair value may be
based on the quoted market price of a financial instrument with similar
characteristics or on valuation techniques. If it is not practicable for an
entity to estimate the fair value of a financial instrument or a class of
financial instruments, the entity must disclose information pertinent to
estimating the fair value of that financial instrument or class of financial
instruments such as the carrying amount, effective interest rate, and maturity,
and the reasons why its not practicable to estimate fair value.
SFAS 107 is effective for financial statements issued for fiscal years
ending after December 15, 1992, except for entities with less than $150 million
in total assets. For those entities, the effective date shall be for financial
statements issued for fiscal years ending after December 15, 1995. Management of
Shawnee Bancorp and the Bank does not believe SFAS 107 will have a material
effect on Shawnee Bancorp's and the Bank's consolidated financial condition when
implemented.
SFAS 114 (as amended by SFAS 118) amends SFAS No. 5, "Accounting for
Contingencies," and SFAS No. 15, "Accounting by Debtors and Creditors for
Troubled Debt Restructurings." SFAS 114 defines the recognition criterion for
loan impairment and the measurement methods for certain impaired loans and loans
whose terms have been modified in troubled-debt restructurings (a restructured
loan). Specifically, a loan is considered impaired when it is probable a
creditor will be unable to collect all amounts due - both principal and
interest -according to the contractual terms of the loan agreement. When
measuring impairment, the expected future cash flows of an impaired loan will be
required to be discounted at the loan's effective interest rate. Alternatively,
impairment can be measured by reference to an observable market price, if one
exists, or the fair value of the collateral for a collateral-dependent loan.
Regardless of the measurement method used historically, SFAS 114 will require a
creditor to measure impairment based on the fair
-50-
<PAGE>
value of the collateral when the creditor determines foreclosure is probable.
Additionally, impairment of a restructured loan will be measured by
discounting the total expected future cash flow at the loan's effective rate
of interest as stated in the original loan agreement.
SFAS 118 amends SFAS 114 to allow a creditor to use existing methods for
recognizing interest income on an impaired loan. While the income recognition
methods described in SFAS 114 are no longer required, SFAS 118 does not
preclude a creditor from using those methods.
The impact of initially applying SFAS 114 and SFAS 118 will not be
reported as an accounting change; rather, it will be reported as a component
of provision of possible loan losses charged to operations. SFAS 114 and SFAS
118 are effective for fiscal years beginning after December 15, 1994.
Management of Shawnee Bancorp and the Bank does not believe SFAS 114 and SFAS
118 will have a material effect on Shawnee Bancorp's and the Bank's
consolidated financial condition when implemented.
SFAS 115 supersedes SFAS No. 12, "Accounting for Certain Marketable
Securities," and related Interpretations, and significantly amends SFAS No.
65, "Accounting for Certain Mortgage Banking Activities," and SFAS No. 60,
"Accounting and Reporting by Insurance Enterprises." Shawnee Bancorp and the
Bank adopted the provisions of SFAS 115 on January 1, 1994.
SFAS 115 addresses the accounting and reporting for investments in equity
securities that have readily determinable fair values, and all investments in
debt securities. Under SFAS 115, debt and equity securities are classified
into one of three categories: trading, available-for-sale and held-to-
maturity. Trading securities are bought and held principally for the purpose
of selling them in the near-term. Held-to-maturity securities are those
securities which the Company has the ability and intent to hold until
maturity. All other securities not classified as trading or held-to-maturity
are classified as available-for-sale.
Trading and available-for-sale securities are recorded at fair value.
Held-to-maturity securities are recorded at amortized cost, adjusted for the
amortization or accretion of premiums or discounts. Unrealized gains and
losses on trading securities are included in earnings. Unrealized gains and
losses, net of the related tax effect, on available-for-sale securities are
excluded from earnings and reported as a separate component of stockholders'
equity until realized. Transfers of securities between categories are
recorded at fair value at the date of transfer. Unrealized gains and losses
are recognized in earnings for transfers into the trading category.
Unrealized gains and losses associated with transfers of securities from the
held-to-maturity category to the available-for-sale category are recorded as a
separate component of stockholders' equity.
A decline in the market value of any available-for-sale or held-to-
maturity security below cost that is deemed other than temporary results in a
charge to earnings and the establishment of a new cost basis for the security.
For securities in the available-for-sale and held-to-maturity categories,
premiums and discounts are amortized and accreted over the lives of the
respective securities, with consideration of historical and estimated
prepayment rates, as an adjustment to yield using the interest method.
Dividend and interest income are recognized when earned. Realized gains and
losses for securities classified as available-for-sale are included in
earnings and are derived using the specific identification method for
determining the cost of securities sold.
-51-
<PAGE>
As previously mentioned, effective January 1, 1994, Shawnee Bancorp and
the Bank adopted SFAS 115, for which the cumulative effect was recorded on the
balance sheet on that date. On January 1, 1994, debt securities with an
amortized cost of $9,229,000 were classified as held-to-maturity securities;
debt and equity securities with an amortized cost of $1,390,000 were
classified as available-for-sale securities; a market valuation account was
established for the available-for-sale securities of approximately $16,000 to
increase the recorded balance of such securities at January 1, 1994, to their
fair value on that date; a deferred tax liability of approximately $5,000 was
recorded to reflect the tax effect of the market valuation account; and the
net increase resulting from the market valuation adjustment at January 1,
1994, was recorded as a separate component of stockholders' equity.
As of December 31, 1994, debt securities with an amortized cost of
$12,543,000 were classified as held-to-maturity securities; debt and equity
securities with an amortized cost of $850,000 were classified as available-
for-sale securities; the market valuation account for the available-for-sale
securities was adjusted to approximately $(8,000) to decrease the recorded
balance of such securities at December 31, 1994, to their fair value on that
date; the deferred tax liability was adjusted to a deferred tax asset of
approximately $3,000 to reflect the tax effect of the market valuation
account; and the separate component of stockholders' equity was adjusted to a
$(5,000) balance, resulting from the market valuation adjustment at December
31, 1994. The significant change in the market valuation account and related
components resulted from an overall increase in the interest rate environment
during 1994, as a direct result of the Federal Reserve increasing the discount
interest rate.
As of March 31, 1995, debt securities with an amortized cost of
$13,128,000 were classified as held-to-maturity securities; debt and equity
securities with an amortized cost of $600,000 were classified as available-
for-sale securities; the market valuation account for the available-for-sale
securities was adjusted to approximately $2,000 to increase the recorded
balance of such securities at March 31, 1995, to their fair value on that
date; the deferred tax asset was adjusted to a deferred tax liability of
approximately $1,000 to reflect the tax effect of the market valuation
account; and the separate component of stockholders' equity was adjusted to a
$1,000 balance, resulting from the market valuation adjustment at March 31,
1995. The significant change in the market valuation account and related
components resulted from $450,000 or 53.4% of the securities classified as
available-for-sale at December 31, 1994 maturing prior to March 31, 1995, and
the related funds being reinvested in securities which have market values at
March 31, 1995, in excess of their amortized cost basis.
SFAS 119 requires disclosures about the amounts, nature, and terms of
derivative financial instruments that are not subject to SFAS No. 105,
"Disclosure of Information about Financial Instruments with Off-Balance Sheet
Risk and Financial Instruments with Concentrations of Credit Risk" because
they do not result in off-balance-sheet risk of accounting loss. SFAS 119
requires that a distinction be made between financial instruments held or
issued for trading purposes and financial instruments held or issued for
purposes other than trading.
SFAS 119 is effective for financial statements issued for fiscal years
ending after December 15, 1994, except for entities with less than $150
million in total assets. For those entities, SFAS 119 is effective for
financial statements issued for fiscal years ending after December 31, 1995.
Management of Shawnee Bancorp and the Bank does not believe SFAS 119 will have
a material effect on their consolidated financial condition when implemented.
-52-
<PAGE>
EFFECT OF INFLATION
Persistent high rates of inflation can have a significant effect on the
reported financial condition and results of operations of all industries.
However, the asset and liability structure of commercial banks is
substantially different from that of an industrial company in that virtually
all assets and liabilities of commercial banks are monetary in nature.
Accordingly, changes in interest rates may have a significant impact on a
commercial bank'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.
One of the most important effects that inflation has had on the commercial
banking industry is to reduce the proportion of earnings paid out in the form
of dividends.
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 simple 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.
REGULATORY CONSIDERATIONS
BANK HOLDING COMPANY REGULATION
ONB and Shawnee Bancorp are registered as bank holding companies and are
subject to the regulations of the Federal Reserve under the BHC Act. Bank
holding companies are required to file periodic reports with and are subject
to periodic examination by the Federal Reserve. The Federal Reserve has
issued regulations under the BHC Act requiring a bank holding company to serve
as a source of financial and managerial strength to its subsidiary banks. It
is the policy of the Federal Reserve that, pursuant to this requirement, a
bank holding company should stand ready to use its resources to provide
adequate capital funds to its subsidiary banks during periods of financial
stress or adversity. Additionally, under the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"), a bank holding company is
required to guarantee the compliance of any insured depository institution
subsidiary that may become "undercapitalized" (as defined in the statute) with
the terms of any capital restoration plan filed by such subsidiary with its
appropriate federal banking agency up to the lesser of (i) an amount equal to
5% of the institution's total assets at the time the institution became
undercapitalized, or (ii) the amount that is necessary (or would have been
necessary) to bring the institution into compliance with all applicable
capital standards as of the time the institution fails to comply with such
capital restoration plan. Under the BHC Act, the Federal Reserve has the
authority to require a bank holding company to terminate any activity or
relinquish control of a nonbank subsidiary (other than a nonbank subsidiary of
a bank) upon the Federal Reserve's determination that such activity or control
constitutes a serious risk to the financial soundness and stability of any
bank subsidiary of the bank holding company.
ONB and Shawnee Bancorp are prohibited by the BHC Act from acquiring
direct or indirect control of more than 5% of the outstanding shares of any
class of voting stock or substantially all of the assets of any bank or
savings association or merging or consolidating with another bank holding
company without prior approval of the Federal Reserve. Additionally, ONB and
Shawnee Bancorp are prohibited by the BHC Act from engaging in or from
acquiring ownership or control of more than 5% of the outstanding shares of
any class of voting stock
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<PAGE>
of any company engaged in a nonbanking business unless such business is
determined by the Federal Reserve to be so closely related to banking as to be
a proper incident thereto. The BHC Act does not place territorial restrictions
on the activities of such nonbanking-related activities.
CAPITAL ADEQUACY GUIDELINES FOR BANK HOLDING COMPANIES
Bank holding companies are required to comply with the Federal Reserve's
risk-based capital guidelines which require a minimum ratio of total capital
to risk-weighted assets (including certain off-balance sheet activities such
as standby letters of credit) of 8%. At least half of the total required
capital must be "Tier 1 capital," consisting principally of common
shareholders' equity, noncumulative perpetual preferred stock, a limited
amount of cumulative perpetual preferred stock and minority interest in the
equity accounts of consolidated subsidiaries, less certain goodwill items.
The remainder ("Tier 2 capital") may consist of a limited amount of
subordinated debt and intermediate-term preferred stock, certain hybrid
capital instruments and other debt securities, cumulative perpetual preferred
stock, and a limited amount of the general loan loss allowance. In addition
to the risk-based capital guidelines, the Federal Reserve has adopted a Tier 1
(leverage) capital ratio under which the bank holding company must maintain a
minimum level of Tier 1 capital to average total consolidated assets of 3% in
the case of bank holding companies which have the highest regulatory
examination ratings and are not contemplating significant growth or expansion.
All other bank holding companies are expected to maintain a ratio of at least
1% to 2% above the stated minimum.
The following are ONB's and Shawnee Bancorp's regulatory capital ratios
as of March 31, 1995:
<TABLE>
<CAPTION>
ONB SHAWNEE BANCORP
--- ---------------
<S> <C> <C>
Tier 1 Capital: 13.51% 8.24%
Total Capital: 16.07% 9.33%
Leverage Ratio: 8.51% 5.95%
</TABLE>
BANK REGULATION
The affiliate banks of ONB which are national banks are supervised,
regulated and examined by the OCC. The affiliate banks of ONB which are state
banks chartered in Indiana, are supervised, regulated and examined by the
Indiana Department of Financial Institutions. ONB's affiliate banks chartered
in Kentucky are supervised, regulated and examined by the Kentucky Department
of Financial Institutions and those affiliate banks chartered in Illinois are
supervised, regulated and examined by the Illinois Commissioner. In addition,
those ONB affiliate banks which are state banks and members of the Federal
Reserve are supervised and regulated by the Federal Reserve, and those which
are not members of the Federal Reserve are supervised and regulated by the
FDIC. First National, a national bank, is supervised, regulated and examined
by the OCC and will continue to be supervised, regulated and examined by this
bank regulatory agency following consummation of the Affiliation. Each
regulator has the authority to issue cease-and-desist orders if it determines
that activities of the bank regularly represent an unsafe and unsound banking
practice or a violation of law.
Both federal and state law extensively regulate various aspects of the
banking business such as reserve requirements, truth-in-lending and truth-in-
savings disclosure, equal credit opportunity, fair credit reporting,
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<PAGE>
trading in securities and other aspects of banking operations. Current federal
law also requires banks, among other things to make deposited funds available
within specified time periods.
Insured state-chartered banks are prohibited under FDICIA from engaging
as principal in activities that are not permitted for national banks, unless
(i) the FDIC determines that the activity would pose no significant risk to
the appropriate deposit insurance fund, and (ii) the bank is, and continues to
be, in compliance with all applicable capital standards.
BANK CAPITAL REQUIREMENTS
The FDIC and the OCC have adopted risk-based capital ratio guidelines to
which state-chartered banks and national banks under their respective
supervision are subject. The guidelines establish a systematic analytical
framework that makes regulatory capital requirements more sensitive to
differences in risk profiles among banking organizations. Risk-based capital
ratios are determined by allocating assets and specified off-balance sheet
commitments to four risk weighted categories, with higher levels of capital
being required for the categories perceived as representing greater risk.
Like the capital guidelines established by the Federal Reserve, these
guidelines divide a bank's capital into two tiers. Banks are required to
maintain a total risk-based capital ratio of 8%. The FDIC or OCC may,
however, set higher capital requirements when a bank's particular
circumstances warrant. Banks experiencing or anticipating significant growth
are expected to maintain capital ratios, including tangible capital positions,
well above the minimum levels.
In addition, the FDIC and OCC established guidelines prescribing a
minimum Tier 1 leverage ratio (Tier 1 capital to adjusted total assets as
specified in the guidelines). These guidelines provide for a minimum Tier 1
leverage ratio of 3% for banks that meet certain specified criteria, including
that they have the highest regulatory rating and are not experiencing or
anticipating significant growth. All other banks are required to maintain a
Tier 1 leverage ratio of 3% plus an additional 100 to 200 basis points.
All of ONB's affiliate banks as well as the Bank exceed the risk-based
capital guidelines of the FDIC and OCC as of March 31, 1995.
FDICIA requires each federal banking agency to revise its risk-based
capital standards within 18 months of their enactment to ensure that those
standards take adequate account of interest rate risk, concentration of credit
risk and the risk of nontraditional activities, as well as reflect the actual
performance and expected risk of loss on multifamily mortgages. Banking
regulators continue to indicate their desire to raise capital requirements
applicable to banking organizations beyond their current levels. Neither ONB
nor Shawnee Bancorp is able to predict whether and when higher capital
requirements would be imposed and, if so, to what levels and on what schedule.
BRANCHES AND AFFILIATES
Branching by ONB affiliate banks in Indiana, Kentucky and Illinois is
subject to the jurisdiction, and requires the prior approval of, the bank's
primary federal regulatory authority and, if the branching bank is a state
bank, of the Indiana Department of Financial Institutions, Kentucky Department
of Financial Institutions or the Illinois Commissioner (depending upon the
location of the principal office of the bank).
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<PAGE>
ONB's affiliate banks and the Bank are subject to the Federal Reserve
Act, which restricts financial transactions between banks and affiliated
companies. The statute limits credit transactions between a bank and its
executive officers and its affiliates, prescribes terms and conditions for
bank affiliate transactions deemed to be consistent with safe and sound
banking practices, and restricts the types of collateral security permitted in
connection with a bank's extension of credit to an affiliate.
FDICIA
FDICIA requires, among other things, federal bank regulatory authorities
to take "prompt corrective action" with respect to banks which do not meet
minimum capital requirements. For these purposes, FDICIA establishes five
capital tiers: well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized and critically undercapitalized.
The FDIC has adopted regulations to implement the prompt corrective
action provisions of FDICIA. Among other things, the regulations define the
relevant capital measures for the five capital categories. An institution is
deemed to be "well capitalized" if it has a total risk-based capital ratio of
10% or greater, a Tier 1 risk-based capital ratio of 6% or greater, and a
leverage ratio of 5% or greater, and is not subject to a regulatory order,
agreement or directive to meet and maintain a specific capital level for any
capital measure. An institution is deemed to be "adequately capitalized" if it
has a total risk-based capital ratio of 8% or greater, a Tier 1 risk-based
capital ratio of 4% or greater, and generally a leverage ratio 4% or greater.
An institution is deemed to be "undercapitalized" if it has a total risk-based
capital ratio of less than 8%, a Tier 1 risk-based capital ratio of less than
4%, or generally a leverage ratio of less than 4%, and "significantly
undercapitalized" if it has a total risk-based capital ratio of less than 6%,
a Tier 1 risk-based capital ratio of less than 3%, or a leverage ratio of less
than 3%. An institution is deemed to be "critically undercapitalized" if it
has a ratio of tangible equity (as defined in the regulations) to total assets
that is equal to or less than 2%.
"Undercapitalized" banks are subject to growth limitations and are
required to submit a capital restoration plan. A bank's compliance with such
plan is required to be guaranteed by any company that controls the
undercapitalized institution as described above. If an "undercapitalized"
bank fails to submit an acceptable plan, it is treated as if it is
significantly undercapitalized. "Significantly undercapitalized" banks are
subject to one or more of a number of requirements and restrictions, including
an order by the FDIC to sell sufficient voting stock to become adequately
capitalized, requirements to reduce total assets and case receipt of deposits
from correspondent banks, and restrictions on compensation of executive
officers. "Critically undercapitalized" institutions may not, beginning 60
days after becoming "critically undercapitalized", make any payment of
principal or interest on certain subordinated debt or extend credit for a
highly leveraged transaction or enter into any transaction outside the
ordinary course of business. In addition, "critically undercapitalized"
institutions are subject to appointment of a receiver or conservator.
FDICIA further directs that each federal banking agency prescribe
standards for depository institutions and depository institution holding
companies relating to internal controls, information systems, internal audit
systems, loan documentation, credit underwriting, interest rate exposure,
asset growth, management compensation, a maximum ratio of classified assets to
capital, minimum earnings sufficient to absorb losses, a minimum ratio of
market value to book value of publicly traded shares and such other standards
as the agency deemed appropriate. The federal banking agencies have issued
certain advance notices of proposed rulemakings, soliciting comments on the
implementation of these FDICIA provisions. Neither ONB, Shawnee Bancorp nor
the Bank can predict on what form such rules will eventually be adopted or
what effect such rules will have on ONB's affiliate banks or the Bank.
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<PAGE>
DEPOSIT INSURANCE
The deposits of ONB's affiliate banks are insured up to $100,000 per
insured account, by the Bank Insurance Fund ("BIF"), except for deposits
acquired in connection with affiliations with savings associations, which
deposits are insured by the Savings Association Insurance Fund ("SAIF").
Accordingly, deposit insurance premiums are paid to both BIF and SAIF. The
Bank's deposits are insured up to $100,000 per insured account by the BIF. If
the FDIC believes that an increase in the insurance rates is necessary, it may
increase the insurance premiums applicable to the BIF.
FDICIA required the FDIC to issue regulations, effective January 1, 1994,
which establish a system for setting deposit insurance premiums based upon the
risks a particular bank or savings association poses to the deposit insurance
funds. Effective January 1, 1993, the FDIC adopted a final rule that
implements a transitional risk-based assessment system whereby a base
insurance premium, yet unspecified, will be adjusted according to the capital
category and subcategory of an institution to one of three capital categories
consisting of (1) well-capitalized, (2) adequately capitalized, or (3)
undercapitalized, and one of three subcategories consisting of (a) health, (b)
supervisory concern, or (c) substantial supervisory concern. An institution's
assessment rate will depend upon the capital category and supervisory category
to which it is assigned. Assessment rates will range from 0.23% for an
institution in the highest category (i.e., well capitalized) to 0.31% for an
institution in the lowest category (i.e. undercapitalized and substantial
supervisory concern). The supervisory subgroup to which an institution is
assigned by the FDIC is confidential and may not be disclosed. Deposit
insurance assessments may increase depending upon the category and
subcategory, if any, to which the bank is assigned by the FDIC. Any increase
in insurance assessments could have an adverse effect on the earnings of ONB's
affiliate banks.
RECENT LEGISLATION
President Clinton recently signed into law the Riegle Community
Development and Regulatory Improvement Act of 1994 ("Act"). The Act contains
seven titles pertaining to community development and home ownership
protection, small business capital formation, paperwork reduction and
regulatory improvement, money laundering and flood insurance. The Act grants
the authority to several agencies to promulgate regulations under the Act. No
regulations have yet been promulgated. Neither ONB, Shawnee Bancorp nor the
Bank is able to predict the impact of the Act on the banking industry.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
allows for interstate banking and interstate branching without regard to
whether such activity is permissible under state law. Beginning on
September 29, 1995, bank holding companies may acquire banks anywhere in the
United States subject to certain state restrictions. Beginning on June 1,
1997, an insured bank may merge with an insured bank in another state without
regard to whether such merger is prohibited by state law. Additionally, an
out-of-state bank may acquire the branches of an insured bank in another state
without acquiring the entire bank; provided, however, that the law of the
state where the branch is located permits such an acquisition. States may
permit interstate branching earlier than June 1, 1997, where both states
involved with the bank merger expressly permit it by statute. Further, bank
holding companies may merge existing bank subsidiaries located in different
states into one bank.
Beginning on September 29, 1995, an insured bank subsidiary may act as an
agent for an affiliated bank or thrift in offering limited banking services
(receive deposits, renew time deposits, close loans, service loans and receive
payments on loans obligations) both within the same state and across state
lines.
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Neither ONB, Shawnee Bancorp nor the Bank is able to predict with
certainty the impact of this legislation on the banking industry.
ADDITIONAL MATTERS
In addition to the matters discussed above, ONB's affiliate banks and the
Bank are subject to additional regulation of their activities, including a
variety of consumer protection regulations affecting their lending, deposit
and collection activities and regulations affecting secondary mortgage market
activities.
The earnings of financial institutions are also affected by general
economic conditions and prevailing interest rates, both domestic and foreign
and by the monetary and fiscal policies of the United States Government and
its various agencies, particularly the Federal Reserve.
Additional legislation and administrative actions affecting the banking
industry may be considered by the United States Congress, state legislatures
and various regulatory agencies, including those referred to above. It cannot
be predicted with certainty whether such legislation of administrative action
will be enacted or the extent to which the banking industry in general or ONB
and its affiliate banks in particular would be affected thereby.
COMPARISON OF COMMON STOCK
The rights of holders of Shawnee Bancorp Common Stock who receive ONB
Common Stock in the Affiliation will be governed by the laws of the State of
Indiana, the state in which ONB is incorporated, and by ONB's Amended and
Restated Articles of Incorporation ("ONB's Articles of Incorporation") and
ONB's By-Laws, as amended ("ONB's By-Laws"). The rights of the shareholders
of Shawnee Bancorp are presently governed by the laws of the State of
Illinois, the state in which Shawnee Bancorp is incorporated, and by Shawnee
Bancorp's Articles of Incorporation and By-Laws. The rights of the
shareholders of Shawnee Bancorp differ in certain respects from the rights
they would have as ONB shareholders, including for ONB anti-takeover measures
and the vote required for the amendment of significant provisions of the
articles of incorporation and for the approval of significant corporate
transactions. The following summary comparison of ONB Common Stock and
Shawnee Bancorp Common Stock includes all material features of such shares but
does not purport to be complete and is qualified in its entirety by reference
to ONB's and Shawnee Bancorp's Articles of Incorporation and their By-Laws.
AUTHORIZED BUT UNISSUED SHARES
ONB's Articles of Incorporation authorize the issuance of 30,000,000
shares of ONB Common Stock, of which 22,556,278 whole shares were outstanding
as of March 31, 1995. The remaining authorized but unissued shares of common
stock may be issued upon authorization of the Board of Directors of ONB
without prior shareholder approval. ONB has 2,000,000 shares of preferred
stock authorized. These shares are available to be issued, without prior
shareholder approval, in classes with relative rights, privileges and
preferences determined for each class by the Board of Directors of ONB. No
shares of preferred stock are presently outstanding.
The Board of Directors of ONB has authorized a series of preferred stock
designated as Series A preferred stock. The Board of Directors of ONB has
designated 200,000 shares of Series A preferred stock in connection with the
shareholder rights plan of ONB. The ONB Series A preferred stock may not be
issued except
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upon exercise of certain rights ("Rights") pursuant to such shareholder rights
plan. No shares of Series A preferred stock have been issued as of the date of
this Proxy Statement. See "COMPARISON OF COMMON STOCK -- Anti-Takeover
Provisions -- ONB's Shareholder Rights Plan" below.
The shares of ONB Series A preferred stock are nonredeemable and, unless
otherwise provided in connection with the creation of a subsequent series of
preferred stock, are subordinate to all other series of preferred stock of
ONB. Each share of ONB Series A preferred stock will be entitled to receive,
when, as and if declared, a quarterly dividend in an amount equal to the
greater of $1.00 per share or 100 times the quarterly cash dividend declared
on ONB Common Stock. In addition, the ONB Series A preferred stock is
entitled to 100 times any non-cash dividends (other than dividends payable in
equity securities) declared on the ONB Common Stock, in like kind. In the
event of liquidation, the holders of ONB Series A preferred stock will be
entitled to receive a liquidation payment in an amount equal to the greater of
$100.00 per share or 100 times the liquidation payment made per share of ONB
Common Stock. Each share of ONB Series A preferred stock will have 100 votes,
subject to adjustment, voting together with the ONB Common Stock and not as a
separate class unless otherwise required by law or ONB's Articles of
Incorporation. In the event of any merger, consolidation or other transaction
in which common shares are exchanged, each share of ONB Series A preferred
stock will be entitled to receive 100 times the amount received per share of
ONB Common Stock. The rights of the ONB Series A preferred stock as to
dividends, voting rights and liquidation are protected by antidilution
provisions. See "COMPARISON OF COMMON STOCK -- Anti-Takeover Provisions".
As of March 31, 1995, ONB had approximately 1,446,993 shares of ONB
Common Stock reserved for issuance under ONB's dividend reinvestment and stock
purchase plan and 1.5 million shares of its common stock reserved for issuance
upon conversion of its outstanding 8% convertible subordinated debentures.
Such debentures are convertible at any time prior to maturity, unless
previously redeemed, into shares of ONB Common Stock at a conversion rate of
42.517 shares per $1,000 principal amount of debentures (equivalent to a
conversion price of approximately $23.52 per share), subject to adjustment in
certain events.
The issuance of additional shares of ONB Common Stock to persons who were
not holders of ONB Common Stock prior to such issuance or the issuance of ONB
preferred stock may adversely affect the interests of ONB shareholders.
Shawnee Bancorp's Articles of Incorporation authorizes the issuance of
200,000 shares of Shawnee Bancorp Common Stock, $0.50 par value per share,
118,000 of which were outstanding as of March 31, 1995. Following the
Affiliation, all of the outstanding shares of Shawnee Bancorp Common Stock
will be cancelled.
The Bank's Charter authorizes the issuance of 445,766 shares of Bank
Common Stock, $1.00 par value per share, all of which were outstanding as of
March 31, 1995. Following the Affiliation, all of the outstanding shares of
Bank Common Stock will be cancelled.
PREEMPTIVE RIGHTS
As permitted by Indiana law, ONB's Articles of Incorporation do not
provide for preemptive rights to subscribe for any new or additional ONB
Common Stock or other securities. Preemptive rights may be granted to ONB's
shareholders, respectively, if ONB's Articles of Incorporation are amended
accordingly. Under Shawnee Bancorp's Articles of Incorporation, shareholders
of Shawnee Bancorp have preemptive rights to subscribe for any new or
additional Shawnee Bancorp Common Stock or other securities, except that
such preemptive right does not apply to Shawnee Bancorp Common Stock or other
securities of Shawnee Bancorp
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(i) issued to effect any merger or consolidation with, or acquisition of all
or substantially all of the assets of, another corporation, or otherwise
offered or issued for a consideration other than cash; (ii) granted or issued
to directors, officers or employees of Shawnee Bancorp pursuant to any stock
benefit or bonus plan; (iii) issued to satisfy conversion or option rights
previously granted by Shawnee Bancorp; or (iv) issued from the treasury of
Shawnee Bancorp.
DIVIDEND RIGHTS
The holders of common stock of ONB and Shawnee Bancorp are entitled to
dividends and other distributions when, as and if declared by their respective
Boards of Directors out of funds legally available therefor. With respect to
ONB, a dividend may not be paid if, after giving it effect, (1) ONB would not
be able to pay its debts as they become due in the usual course of business,
or (2) ONB's total assets would be less than the sum of its total liabilities
plus, unless ONB's Articles of Incorporation permitted otherwise, the amount
that would be needed to satisfy the preferential rights upon dissolution of
shareholders whose preferential rights are superior to those receiving the
dividend if ONB were to be dissolved at the time of the dividend. With respect
to Shawnee Bancorp, a dividend may not be paid if, after giving it effect, (i)
Shawnee Bancorp would be insolvent, or (ii) the net assets of Shawnee Bancorp
would be less than zero or less than the maximum amount payable at the time of
distribution to shareholders having preferential rights in liquidation if
Shawnee Bancorp was then to be liquidated. Shawnee Bancorp's ability to pay
dividends is further restricted by the FDIC under the Assistance Agreement.
See "NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Footnote No. 9."
The amount of dividends, if any, that may be declared by ONB in the
future will necessarily depend upon many factors, including, without
limitation, future earnings, capital requirements, business conditions and
capital levels of subsidiaries (since ONB is primarily dependent upon
dividends paid by its subsidiaries for its revenues), the discretion of ONB's
Board of Directors and other factors that may be appropriate in determining
dividend policies.
Cash dividends paid to ONB by its Illinois-chartered affiliate banks are
limited by Illinois law to the bank's net profits then on hand, less losses
and statutorily-defined bad debts. Cash dividends paid to ONB by its Indiana-
chartered affiliate banks are limited by Indiana law to the balance of the
bank's undivided profits account adjusted for statutorily-defined bad debts.
Cash dividends paid to ONB by its Kentucky-chartered affiliate banks are
limited by Kentucky law to so much of the net profits of the banks, after
deducting all expenses, losses, bad or suspended debts and interest and taxes
accrued or due from the banks, as the boards of directors of the banks deem
expedient. In addition, the approval of the Kentucky Commissioner of Banks is
required if the total of all dividends declared by a Kentucky bank in any
calendar year exceeds the bank's net profit for that year and the net retained
profits from the preceding two years, less any transfers to surplus or a fund
for retirement of preferred stock or debt. ONB's national affiliate banks may
pay cash dividends on their common stock only out of adjusted retained net
profits for the year in which the dividend is paid and the two preceding
years.
Dividends paid by ONB's affiliate banks will ordinarily be restricted to
a lesser amount than is legally permissible because of the need for the banks
to maintain adequate capital consistent with the capital adequacy guidelines
promulgated by the banks' principal federal regulatory authorities. See
"REGULATORY CONSIDERATIONS". If a bank's capital levels are deemed inadequate
by the regulatory authorities, payment of dividends to its parent holding
company may be prohibited without prior regulatory approval. None of ONB's
affiliate banks are currently subject to such a restriction. The Assistance
Agreement restricts the Bank's
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payments of dividends to its shareholders. See "NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS, Footnote No. 9."
VOTING RIGHTS
The holders of the outstanding shares of ONB Common Stock and Shawnee
Bancorp Common Stock are entitled to one vote per share on all matters presented
for shareholder vote, except shareholders of Shawnee Bancorp have cumulative
voting rights in the election of directors. Shareholders of ONB do not have
cumulative voting rights in the election of directors.
Illinois law generally requires that a merger, consolidation, or exchange
of shares be approved by a shareholder vote of two-thirds of the votes entitled
to be cast at the shareholders meeting, subject to provisions in the
corporation's articles of incorporation requiring a lower or higher percentage
vote requirement not less than a majority of the outstanding shares entitled to
vote. Indiana law generally require that mergers, consolidations, sales, leases,
exchanges or other dispositions of all or substantially all of the assets of a
corporation be approved by the affirmative vote of a majority of the issued and
outstanding shares entitled to vote at the shareholders meeting, subject in each
case to provisions in the corporation's articles of incorporation requiring a
higher percentage vote for certain transactions. ONB's Articles of Incorporation
provide that certain business combinations may, under certain circumstances,
require approval of more than a simple majority of the issued and outstanding
shares of ONB Common Stock. See "COMPARISON OF COMMON STOCK -- Anti-Takeover
Provisions".
Both Indiana and Illinois law require shareholder approval for most
amendments to a corporation's articles of incorporation -- under Indiana law, by
a majority of a quorum present at a shareholders' meeting (and, in certain
cases, a majority of all shares held by any voting group entitled to vote) and
under Illinois law, by two-thirds of all shares entitled to vote. Both Indiana
and Illinois law permit a corporation in its articles of incorporation to
prescribe a higher shareholder vote for certain amendments to the articles of
incorporation and Illinois law permits a corporation in its articles of
incorporation to prescribe a lower shareholder vote for certain amendments to
the articles of incorporation, but not lower than a majority of the outstanding
shares entitled to vote. ONB's Articles of Incorporation require a super-
majority shareholder vote of eighty percent (80%) of the outstanding shares of
ONB Common Stock for the amendment of certain significant provisions.
DISSENTERS' RIGHTS
The holders of Indiana business corporations possess dissenters' rights
in connection with certain mergers and other significant corporate actions.
Under Indiana law, a shareholder is entitled to dissent from and obtain payment
of the fair value of the shareholder's shares in the event of (1) consummation
of a plan of merger, if shareholder approval is required and the shareholder is
entitled to vote thereon, (2) consummation of a plan of share exchange by which
the shareholder's shares will be acquired, if the shareholder is entitled to
vote thereon, (3) consummation of a sale or exchange of all, or substantially
all, the property of the corporation other than in the usual course of business,
if the shareholder is entitled to vote thereon, (4) approval of a control share
acquisition under Indiana law, and (5) any corporate action taken pursuant to a
shareholder vote to the extent the articles of incorporation, by-laws or a
resolution of the Board of Directors provides that voting or non-voting
shareholders are entitled to dissent and obtain payment for their shares.
The dissenters' rights provisions described above do not apply, however,
to the holders of shares of any class or series with respect to a merger, share
exchange or sale or exchange of property if the shares of that class
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or series were registered on a United States securities exchange registered
under the Exchange Act or traded on the NASDAQ National Market System or a
similar market. As of the date of this Proxy Statement, shares of ONB Common
Stock are traded on the NASDAQ National Market System and, therefore, ONB
shareholders presently are not entitled to assert dissenters' rights under
Indiana law with respect to any of the transactions discussed above.
With respect to dissenters' rights of the shareholders of Shawnee Bancorp
in connection with the Company Merger, see the discussion under the caption
"PROPOSED AFFILIATION -- Rights of Dissenting Shareholders" and Appendix B.
LIQUIDATION RIGHTS
In the event of any liquidation or dissolution of ONB, the holders of
shares of ONB Common Stock are entitled to receive pro rata with respect to the
number of shares held by them any assets distributable to shareholders, subject
to the payment of ONB's liabilities and any rights of creditors and holders of
shares of ONB preferred stock then outstanding. In the event of any liquidation,
dissolution or winding up of Shawnee Bancorp, the holders of shares of Shawnee
Bancorp Common Stock are entitled to receive pro rata with respect to the number
of shares held by them any assets distributable to shareholders, subject to the
payment of Shawnee Bancorp's liabilities and any rights of creditors.
ASSESSMENT AND REDEMPTION
Under Indiana law and Illinois law, respectively, shares of ONB Common
Stock and Shawnee Bancorp Common Stock are not liable to further assessment.
Under Indiana law, ONB may redeem or acquire shares of ONB Common Stock
with funds legally available therefor, and shares so acquired constitute
authorized but unissued shares. ONB may not redeem or acquire shares of ONB
Common Stock if, after giving such redemption or acquisition effect, ONB would
not be able to pay its debts as they become due in the usual course of business,
or ONB's total assets would be less than the sum of its total liabilities plus,
unless ONB's Articles of Incorporation permitted otherwise, the amount that
would be needed to satisfy the preferential rights upon dissolution of
shareholders whose preferential rights are superior to those whose stock is
being redeemed or acquired if ONB were to be dissolved at the time of the
redemption or acquisition. Shawnee Bancorp has similar redemption rights under
Illinois law.
In addition, ONB and Shawnee Bancorp must give prior notice to the
Federal Reserve if the consideration to be paid by them for any redemption or
acquisition of their respective shares, when aggregated with the consideration
paid for all redemptions or acquisitions for the preceding twelve (12) months,
equals or exceeds 10% of their respective consolidated net worth.
ANTI-TAKEOVER PROVISIONS
The anti-takeover measures applicable to ONB and Shawnee Bancorp, as
described below, may have the effect of discouraging or rendering it more
difficult for a person or other entity to acquire control of ONB or Shawnee
Bancorp. These measures may have the effect of discouraging certain tender
offers for shares of ONB Common Stock or Shawnee Bancorp Common Stock which
might otherwise be made at premium prices or certain other acquisition
transactions which might be viewed favorably by a significant number of
shareholders.
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Indiana Law. Under the business combinations provision of Indiana law,
any 10% shareholder of an Indiana corporation, with a class of voting shares
registered under Section 12 of the Exchange Act or which has specifically
adopted this provision in the corporation's articles of incorporation, is
prohibited for a period of five (5) years from completing a business combination
with the corporation unless, prior to the acquisition of such 10% interest, the
board of directors of the corporation approved either the acquisition of such
interest or the proposed business combination. Further, the corporation and a
10% shareholder may not consummate a business combination unless all provisions
of the articles of incorporation of the corporation are complied with and a
majority of disinterested shareholders approve the transaction or all
shareholders receive a price per share determined in accordance with the
business combinations provision of Indiana law.
An Indiana corporation may elect to remove itself from the protection
provided by the Indiana business combinations provision, but such an election
remains ineffective for eighteen (18) months and does not apply to a combination
with a shareholder who acquired a 10% ownership position prior to the effective
time of the election. ONB is covered by the business combinations provision of
Indiana law and Shawnee Bancorp is not covered. The constitutional validity of
the business combinations provision of Indiana law has in the past been
challenged and has been upheld by the United States Supreme Court.
In addition to the business combinations provision, Indiana law also
contains a "control share acquisition" provision which, although different in
structure from the business combinations provision, may have a similar effect of
discouraging or making more difficult a hostile takeover of an Indiana
corporation. This provision also may have the effect of discouraging premium
bids for outstanding shares. Indiana law provides that, unless otherwise
provided in an Indiana corporation's articles of incorporation or by-laws,
certain acquisitions of shares of the corporation's common stock will be
accorded voting rights only if a majority of the disinterested shareholders
approves a resolution granting the potential acquiror the ability to vote such
shares. Upon disapproval of the resolution, the shares held by the acquiror
shall be redeemed by the corporation at the fair value of the shares as
determined by the control share acquisition provision.
This provision does not apply to a plan of affiliation and merger, if the
corporation complies with the applicable merger provisions and is a party to the
agreement of merger or plan of share exchange. ONB is subject to the control
share acquisition provision.
ONB's Articles of Incorporation. In addition to the protections provided
by Indiana law, ONB's Articles of Incorporation require the affirmative vote of
the holders of at least eighty percent (80%) of the issued and outstanding
shares of capital stock for any business combination which is not recommended by
the vote of two-thirds or more of the members of the Board of Directors. For
purposes of ONB's Articles of Incorporation, "business combination" is defined
to include: (1) a merger or consolidation of ONB with or into any other
corporation, (2) any sale, lease, exchange or other disposition of any material
part of the assets of ONB, or (3) any liquidation or dissolution of ONB or any
material subsidiary of ONB. Further, this provision cannot be altered, amended
or repealed without the affirmative vote of the holders of at least eighty
percent (80%) of the issued and outstanding shares of ONB Common Stock entitled
to vote thereon.
ONB's Articles of Incorporation also include provisions requiring (1) the
Board of Directors to consider non-financial factors in the evaluation of
business combinations and tender or exchange offers, and (2) any person
acquiring fifteen percent (15%) of the then issued and outstanding stock of ONB
to pay equal consideration in connection with the acquisition of any further
shares. These provisions require an eighty percent (80%) affirmative vote of the
issued and outstanding shares of ONB Common Stock entitled to vote thereon in
order to be altered, amended or repealed.
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ONB's Shareholder Rights Plan. On January 25, 1990, the Board of
Directors of ONB declared a dividend of one (1) right for each issued and
outstanding share of ONB Common Stock ("Right"). See "COMPARISON OF COMMON
STOCK--Authorized But Unissued Shares". The dividend was payable on March 15,
1990 to holders of record of ONB Common Stock at the close of business on March
1, 1990. Each Right entitles the registered holder to purchase from ONB one-
hundredth (1/100) of a share of ONB Series A preferred stock at an initial
Purchase Price of $60.00, subject to adjustment. The terms and conditions of the
Rights are contained in a Rights Agreement between ONB and Old National Bank in
Evansville, as Rights Agent.
The foregoing information concerning ONB's shareholder Rights Plan does
not purport to be complete. For additional information, see The Rights
Agreement, dated March 1, 1990, between ONB and Old National Bank in Evansville,
as Trustee, which is specifically incorporated herein by reference. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
Illinois Law and Shawnee Bancorp's Articles of Incorporation. Under the
business combinations provision of the IBCA, any interested shareholder (defined
as a shareholder owning at least 15% of the outstanding shares of common stock)
of an Illinois corporation is prohibited for a period of three (3) years
following the date on which the shareholder becomes an interested shareholder
from engaging in any business combination with the corporation unless (i) the
board of directors approves the business combination prior to the shareholder
becoming an interested shareholder, or (ii) upon consummation of the transaction
which resulted in the shareholder becoming an interested shareholder, the
shareholder owned at least 85% of the voting shares of the corporation
outstanding at the time the transaction commenced, or (iii) the business
combination is approved by the board of directors and authorized in an annual or
special meeting of shareholders by at least two-thirds of the outstanding voting
shares other than those held by the interested shareholder.
Shawnee Bancorp is not covered by the IBCA's business combinations
provision, but it could elect to be covered through an amendment to Shawnee
Bancorp's Articles of Incorporation.
DIRECTOR LIABILITY
Under Indiana law, a director of ONB will not be liable to shareholders
for any action taken as a director, or any failure to take any action, unless
(1) the director has breached or failed to perform his duties as a director in
good faith with the care an ordinarily prudent person in a like position would
exercise under similar circumstances and in a manner the director reasonably
believes to be in the best interests of the corporation and (2) such breach or
failure to perform constitutes willful misconduct or recklessness.
Under Illinois law, a director of Shawnee Bancorp may not be liable by
reason of serving as a director or for any action taken as a director if the
director acts in good faith and in a manner the director reasonably believed to
be in or not opposed to the best interests of the corporation, and, as to any
criminal action, had no reasonable cause to believe their conduct was unlawful.
A director may be liable for his negligence or misconduct in the performance of
his duty to the corporation.
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DIRECTOR NOMINATIONS
ONB's By-Laws require that all nominations for election as directors of
ONB shall be made by the Board of Directors of ONB in accordance with the By-
Laws. Under the By-Laws, the Nominating Committee of the Board of Directors of
ONB ("Nominating Committee") is required to submit to the entire Board of
Directors its recommendation of nominees for election as directors of ONB prior
to each annual or special meeting of shareholders at which directors will be
elected.
The Nominating Committee is comprised of five (5) directors of ONB, none
of whom is an officer or employee of ONB. The Nominating Committee maintains the
responsibility to recruit potential director candidates, recommend changes to
the entire Board of Directors concerning the size, composition and
responsibilities of the Board of Directors, review proxy documents received from
shareholders relating to the Board of Directors and review suggestions of
shareholders regarding nominees for election as directors. All such suggestions
of shareholders with respect to director nominations must be submitted in
writing to the Nominating Committee not less than 120 days prior to the date of
the annual or special meeting of shareholders at which directors will be
elected.
LEGAL OPINIONS
Certain legal matters in connection with the Agreement will be passed
upon for ONB by the law firm of Krieg DeVault Alexander & Capehart, One Indiana
Square, Suite 2800, Indianapolis, Indiana 46204, and for Shawnee Bancorp by the
law firm of Peper, Martin, Jensen, Maichel and Hetlage, 720 Olive Street, 24th
Floor, St. Louis, Missouri 63101.
EXPERTS
The consolidated financial statements of ONB and affiliates incorporated
into this Proxy Statement have been audited by Arthur Andersen LLP, independent
public accountants, to the extent and for the years indicated in their report
thereon, and have been so incorporated into this Proxy Statement in reliance
upon the report of Arthur Andersen LLP and upon the authority of such firm as
experts in auditing and accounting.
The consolidated financial statements of Shawnee Bancorp as of and for
the fiscal year ended December 31, 1994 included in this Proxy Statement have
been audited by KPMG Peat Marwick LLP, independent auditors, to the extent and
for the year indicated in their report thereon. Such consolidated financial
statements have been included in this Proxy Statement in reliance upon such
report and upon the authority of such firm as experts in auditing and
accounting.
Representatives of KPMG Peat Marwick LLP are not expected to be at the
Special Meeting.
OTHER MATTERS
The Special Meetings are called for the purposes set forth in the Notice
attached to this Proxy Statement. The Board of Directors of Shawnee Bancorp and
the Bank knows of no other matters for action by shareholders at the Special
Meetings other than the matters described in the Notice. However, the enclosed
proxy will confer
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discretionary authority to the persons named therein with respect to any such
matters, none of which are known to the Board of Directors of Shawnee Bancorp
and the Bank as of the date hereof, which may properly come before the Special
Meetings. It is the intention of the persons named in the proxy to vote pursuant
to the proxy with respect to such matters in accordance with the recommendation
of the Board of Directors of Shawnee Bancorp and the Bank.
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INDEX TO SHAWNEE BANCORP, INC.
AND
THE BANK FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report............................. F-2
Consolidated Balance Sheets as of March 31, 1995
and December 31, 1994 and 1993........................... F-3
Consolidated Statements of Income for the Three Months
Ended March 31, 1995 and 1994 and for the Years Ended
December 31, 1994, 1993, and 1992........................ F-4
Consolidated Statements of Shareholders' Equity for the
Three Months Ended March 31, 1995 and for the Years
Ended December 31, 1994, 1993, and 1992.................. F-5
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1995 and 1994 for the
Years Ended December 31, 1994, 1993, and 1992............ F-6
Notes to Consolidated Financial Statements as of
December 31, 1994, 1993, and 1992........................ F-8
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Shawnee Bancorp, Inc.:
We have audited the accompanying consolidated balance sheet of Shawnee
Bancorp, Inc. and subsidiary as of December 31, 1994, and the related
consolidated statements of income, stockholders' equity, and cash flows for the
year then ended. These consolidated financial statements are the responsibility
of Shawnee Bancorp, Inc.'s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 our audit provides a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Shawnee
Bancorp, Inc. and subsidiary as of December 31, 1994, and the results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles.
As discussed in notes 1 and 2 to the consolidated financial statements,
Shawnee Bancorp, Inc. and subsidiary changed their method of accounting for
investments in debt securities to adopt the provisions of the Financial
Accounting Standards Board's Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities," on
January 1, 1994.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
March 23, 1995
F-2
<PAGE>
SHAWNEE BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1995 AND DECEMBER 31, 1994 AND 1993
(dollars expressed in thousands, except share data)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994 1993
--------- ------ ---------
ASSETS (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash and due from banks..................................... $ 1,129 945 748
Federal funds sold.......................................... - 450 1,735
------- ------ ------
CASH AND CASH EQUIVALENTS.......................... 1,129 1,395 2,483
------- ------ ------
Investment securities:
Available-for-sale, at estimated market value.............. 602 842 -
Held-to-maturity (estimated market value of $12,888,
$12,015, and $10,754 at March 31, 1995 and December 31,
1994 and 1993, respectively)............................. 13,128 12,543 10,619
Loans....................................................... 13,959 13,834 14,701
Less:
Unearned discount........................................ 37 43 34
Allowance for possible loan losses....................... 235 245 234
------- ------ ------
LOANS, NET......................................... 13,687 13,546 14,433
------- ------ ------
Office properties, furniture, and equipment, net of
accumulated depreciation................................... 729 716 725
Other real estate owned..................................... 21 22 24
Accrued interest receivable................................. 317 285 265
Other assets................................................ 364 360 509
------- ------ ------
TOTAL ASSETS....................................... $29,977 29,709 29,058
======= ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest-bearing....................................... 2,262 2,385 2,663
Interest-bearing........................................... 22,749 22,685 21,261
------- ------ ------
TOTAL DEPOSITS..................................... 25,011 25,070 23,924
Securities sold under agreements to repurchase.............. 1,170 1,604 2,149
Federal funds purchased..................................... 670 - -
Note payable................................................ 700 700 950
Accrued interest payable.................................... 146 152 131
Other liabilities........................................... 251 217 173
------- ------ ------
TOTAL LIABILITIES.................................. 27,948 27,743 27,327
------- ------ ------
Stockholders' equity:
Common stock, $.50 par value; 200,000 shares authorized,
118,000 shares issued and outstanding................... 59 59 59
Surplus.................................................... 1,357 1,357 1,357
Retained earnings.......................................... 612 555 315
Unrealized holding gain (loss) on security available-for-
sale, net............................................... 1 (5) -
------- ------ ------
TOTAL STOCKHOLDERS' EQUITY.............................. 2,029 1,966 1,731
------- ------ ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.............. $29,977 29,709 29,058
======= ====== ======
</TABLE>
F-3
<PAGE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
SHAWNEE BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1995 AND
1994 AND YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(dollars expressed in thousands, except share data)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
----------------- ---------------------------
1995 1994 1994 1993 1992
------- ------- ------- ------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Interest income:
Interest and fees on loans.............. $ 314 279 1,176 1,201 1,303
Interest on investment securities:
Taxable............................... 174 118 494 453 505
Exempt from federal income tax........ 44 33 148 83 3
Interest on federal funds sold.......... 2 8 41 42 28
------- ------- ------- ------- -------
TOTAL INTEREST INCOME............. 534 438 1,859 1,779 1,839
------- ------- ------- ------- -------
Interest expense:
Interest on deposits.................... 224 169 732 722 904
Interest on short-term borrowings....... 27 21 80 57 20
Interest on note payable................ 15 14 62 65 75
------- ------- ------- ------- -------
TOTAL INTEREST EXPENSE............ 266 204 874 844 999
------- ------- ------- ------- -------
NET INTEREST INCOME............... 268 234 985 935 840
Provision for possible loan losses........ (2) 1 2 (6) (44)
------- ------- ------- ------- -------
NET INTEREST INCOME AFTER
PROVISION FOR POSSIBLE
LOAN LOSSES..................... 270 233 983 941 884
------- ------- ------- ------- -------
Noninterest income:
Service charges on deposit accounts..... 24 24 102 105 99
Security gains.......................... - - - 6 13
Other income............................ 19 17 75 72 67
------- ------- ------- ------- -------
TOTAL NONINTEREST INCOME.......... 43 41 177 183 179
------- ------- ------- ------- -------
Noninterest expense:
Salaries and employee benefits.......... 89 87 376 353 320
Occupancy............................... 12 13 54 56 67
Furniture and equipment................. 15 16 67 63 65
Data processing fees.................... 13 15 59 64 68
Federal Deposit Insurance Corporation
assessment............................ 15 15 61 57 55
Postage, printing, and supplies......... 14 11 42 36 47
Amortization............................ 10 10 39 39 39
Other expenses.......................... 64 33 155 167 197
------- ------- ------- ------- -------
TOTAL NONINTEREST EXPENSE......... 232 200 853 835 858
------- ------- ------- ------- -------
INCOME BEFORE INCOME
TAX EXPENSE..................... 81 74 307 289 205
Income tax expense........................ 24 17 67 71 61
------- ------- ------- ------- -------
NET INCOME........................ $ 57 57 240 218 144
======= ======= ======= ======= =======
SHARE DATA:
Average common shares outstanding....... 118,000 118,000 118,000 118,000 117,000
======= ======= ======= ======= =======
Earnings per common share............... $ .48 .48 2.03 1.85 1.23
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
SHAWNEE BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1995 AND
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(dollars expressed in thousands, except share data)
<TABLE>
<CAPTION>
Unrealized
holding
gain (loss) Total
on securities stock-
Common Retained available- holders'
stock Surplus Earnings for-sale, net equity
------ ------- -------- ------------- --------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1991 (UNAUDITED)...... $ 55 1,265 (47) - 1,273
Sale of 8,000 shares of common stock
(unaudited)................................. 4 92 - - 96
Net income (unaudited)........................ - - 144 - 144
------ ----- --- --- -----
BALANCE AT DECEMBER 31, 1992 (UNAUDITED)...... 59 1,357 97 - 1,513
Net income (unaudited)........................ - - 218 - 218
------ ----- --- --- -----
BALANCE AT DECEMBER 31, 1993 (UNAUDITED)...... 59 1,357 315 - 1,731
Cumulative effect of implementation of
change in accounting for investment - - - 11 11
securities, net of tax......................
Net income.................................... - - 240 - 240
Net change in unrealized holding gain (loss)
on debt securities available-for-sale, - - - (16) (16)
net of tax..................................
------ ----- --- --- -----
BALANCE AT DECEMBER 31, 1994.................. 59 1,357 555 (5) 1,966
Net income (unaudited)........................ - - 57 - 57
Net change in unrealized holding gain (loss)
on debt securities available-for-sale, - - - 6 6
net of tax (unaudited)
------ ----- --- --- -----
BALANCE AT MARCH 31, 1995 (UNAUDITED)......... $ 59 1,357 612 1 2,029
====== ===== === === =====
</TABLE>
F-6
<PAGE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
SHAWNEE BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1995 AND
1994 AND YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(dollars expressed in thousands, except share data)
<TABLE>
MARCH 31 DECEMBER 31
------------- -----------------------
1995 1994 1994 1993 1992
----- ---- ----- ----- -----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.............................................. $ 57 57 240 218 144
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, amortization, and deferred taxes...... 23 24 95 180 162
Provision for possible loan losses.................. (2) 1 2 (6) (44)
Decrease (increase) in accrued interest receivable.. (32) 54 (20) 5 31
Increase (decrease) in accrued interest payable..... (6) 3 21 (7) (48)
Net change in other assets and liabilities.......... 15 49 155 (275) 360
Loss on sale of other real estate................... - - - 5 64
Gain on sale of investment securities............... - - - (6) (13)
Other operating activities, net..................... (4) 1 3 4 62
----- ---- ------ ------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES......... 51 189 496 118 718
----- ---- ------ ------ ------
Cash flows from investing activities:
Purchase of investment securities,
available-for-sale.................................... (200) - (896) - -
Purchase of investment securities, held-to-maturity..... (691) (940) (4,884) (6,236) (3,013)
Proceeds from calls and maturities of investment
securities, available-for-sale........................ 450 200 1,450 - -
Proceeds from calls and maturities of investment
securities, held-to-maturity.......................... 10 50 850 2,210 940
Proceeds from sales of investment securities............ - - - 101 1,844
Principal payments on mortgage-backed securities,
held-to-maturity...................................... 94 114 710 716 122
Net (increase) decrease in loans........................ (147) (94) 810 185 (1,305)
Reimbursement for charge-offs subject to FDIC
Assistance Agreement.................................. 8 1 63 135 199
Recoveries of loans previously charged off.............. - 7 12 14 74
Proceeds from sale of other real estate owned........... - - - 140 164
Purchases of office properties, furniture, and
equipment............................................. (41) (15) (50) (41) (29)
Proceeds from sale of office properties, furniture,
and equipment......................................... 23 - - 11 -
----- ---- ------ ------ ------
NET CASH USED IN INVESTING ACTIVITIES............. (494) (677) (1,935) (2,765) (1,004)
----- ---- ------ ------ ------
Cash flows from financing activities:
Net increase (decrease) in deposits..................... (59) 348 1,146 1,797 845
Increase (decrease) in securities sold under
agreements to repurchase.............................. (434) 5 (545) 1,281 368
Increase in federal funds purchased..................... 670 - - - -
Repayments of note payable.............................. - - (250) (210) (40)
Sale of common stock.................................... - - - - 96
----- ---- ------ ------ ------
NET CASH PROVIDED BY FINANCING ACTIVITIES......... 177 353 351 2,868 1,269
===== ==== ====== ======= ======
</TABLE>
F-8
<PAGE>
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
--------------- ------------------------
1995 1994 1994 1993 1992
------ ----- ------ ----- -----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS....................... (266) (135) (1,088) 221 983
Cash and cash equivalents, beginning of period............ 1,395 2,483 2,483 2,262 1,279
------ ----- ------ ----- -----
Cash and cash equivalents, end of period.................. $1,129 2,348 1,395 2,483 2,262
====== ===== ====== ===== =====
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income taxes.......................................... $ - - - 44 -
Interest on deposits, short-term borrowings, and
note payable........................................ 272 201 853 851 1,047
Noncash:
Other real estate owned transferred from loans........ - - - 75 123
Loans to facilitate sale of foreclosed real estate.... - - - - 198
Transfer of debt securities to available-for-sale..... - 1,390 1,390 - -
====== ===== ====== ===== =====
</TABLE>
See accompanying notes to consolidated financial statements.
F-9
<PAGE>
SHAWNEE BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 (AUDITED), 1993 AND 1992 (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
--------
Shawnee Bancorp, Inc. and subsidiary (the Company) provides a full range of
banking services to individual and corporate customers through its
subsidiary bank located in Harrisburg, Illinois. The Company is subject to
competition from other financial institutions and is subject to the
regulations of certain federal and state agencies which perform periodic
examinations.
Shawnee Bancorp, Inc. was incorporated on December 27, 1990 for the purpose
of acquiring a majority ownership in The Bank of Harrisburg (the Bank). The
Bank was acquired on September 16, 1991. Shawnee Bancorp, Inc., the
shareholders of Shawnee Bancorp, Inc., the Bank, and the Federal Deposit
Insurance Corporation (FDIC) entered into an Assistance Agreement (the
Agreement) on September 16, 1991. The Agreement, among other matters,
provides for assistance in the initial capitalization of the Bank,
guarantees of the recovery of loan charge-offs and related collection
expenses on loans originated by prior Bank management, restricts the sale
of Company or Bank stock, requires the maintenance of specified capital
ratios, and limits Bank dividends. The Agreement expires on September 16,
1996, except for the loan recovery guaranty which expired on September 16,
1994.
BASIS OF FINANCIAL STATEMENT PRESENTATION
-----------------------------------------
The consolidated financial statements of the Company have been prepared in
conformity with generally accepted accounting principles and conform to
predominant practices within the banking industry. In preparing the
consolidated financial statements, management is required to make estimates
and assumptions which significantly affect the reported amounts in the
consolidated financial statements. The most significant estimate, which is
particularly susceptible to significant change in the near term, relates to
the determination of the allowance for possible loan losses. The more
significant accounting policies used by the Company in the accompanying
consolidated financial statements are summarized below.
PRINCIPLES OF CONSOLIDATION
---------------------------
The consolidated financial statements include the accounts of the Company
and its 98.5% owned subsidiary, Bank of Harrisburg. All significant
intercompany balances and transactions have been eliminated.
CASH AND CASH EQUIVALENTS
-------------------------
For purposes of the consolidated statements of cash flows, cash and cash
equivalents is defined as cash and due from banks and federal funds sold.
(Continued)
F-10
<PAGE>
SHAWNEE BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INVESTMENT SECURITIES
---------------------
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" (SFAS 115), on January 1, 1994. Under SFAS 115, debt securities
are classified in one of three categories: trading, available-for-sale, or
held-to-maturity. Trading securities are bought and held principally for
the purpose of selling them in the near term. Held-to-maturity securities
are those securities which the Company has the ability and intent to hold
until maturity. Securities not classified as trading or held-to-maturity
are classified as available-for-sale.
Trading and available-for-sale securities are recorded at fair value. Held-
to-maturity securities are recorded at amortized cost, adjusted for the
amortization or accretion of premiums or discounts. Unrealized gains and
losses on trading securities (for which no securities were so designated by
the Company at December 31, 1994) are included in earnings. Unrealized
gains and losses, net of the related tax effect, on available-for-sale
securities are excluded from earnings and reported as a separate component
of stockholders' equity until realized. Transfers of securities between
categories are recorded at fair value at the date of transfer. Unrealized
gains and losses are recognized in earnings for transfers into the trading
category. Unrealized gains and losses associated with transfers of
securities from the held-to-maturity category to the available-for-sale
category are recorded as a separate component of stockholders' equity. The
unrealized gains and losses included in the separate component of
stockholders' equity for securities transferred from the available-for-sale
category to the held-to-maturity category are maintained and amortized into
earnings over the remaining life of the security as an adjustment to yield
using the interest method.
A decline in the market value of any available-for-sale or held-to-maturity
security below cost that is deemed other than temporary results in a charge
to earnings and the establishment of a new cost basis for the security.
For securities in the available-for-sale and held-to-maturity categories,
premiums and discounts are amortized and accreted over the lives of the
respective securities, with consideration of historical and estimated
prepayment rates, as an adjustment to yield using the interest method.
Dividend and interest income are recognized when earned. Realized gains and
losses for securities classified as available-for-sale are included in
earnings and are derived using the specific identification method for
determining the cost of securities sold.
Prior to adoption of SFAS 115 in 1994, investments in debt securities were
stated at cost, adjusted for amortization of premiums and accretion of
discounts over the period to maturity of the respective security.
Amortization of premiums and accretion of discounts on mortgage-backed
securities were amortized in relation to the corresponding prepayment
rates, both historical and estimated, using a method which approximates the
interest method. Gains or losses were recognized upon realization and
(Continued)
F-11
<PAGE>
SHAWNEE BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
were shown separately in the consolidated statements of income and the cost
of the securities sold was based on a specific identification method.
LOANS
-----
The Company grants commercial, real estate mortgage, and consumer loans
primarily to customers in the Company's immediate geographic lending area.
The Company has a diversified loan portfolio and has no concentrations of
credit in any specific industry.
Loans receivable are carried at cost, adjusted for amortization of premiums
and accretion of discounts using a method which approximates the level
yield method. Interest and fees on loans are recorded in income using the
interest method. Loans receivable are stated at cost as the Company has the
ability and it is management's intent to hold them to maturity. The accrual
of interest is discontinued when management believes interest or principal
may not be paid in a timely manner in the normal course of business.
Generally, payments received on nonaccrual loans are recorded as principal
reductions. Interest income is recognized after all principal has been
repaid or an improvement in the condition of the loan has occurred which
would warrant resumption of interest accruals.
The allowance for possible loan losses is maintained at a level considered
adequate to provide for potential losses. The provision for possible loan
losses is based on a periodic analysis, considering, among other factors,
current economic conditions, loan portfolio composition, past loan loss
experience, independent appraisals, loan collateral, and payment
experience. In addition to the allowance for estimated losses on identified
problem loans, an overall unallocated allowance is established to provide
for unidentified credit losses inherent in the portfolio. As adjustments
become necessary, they are reflected in the results of operations in the
periods in which they become known.
Management believes the allowance for possible loan losses is adequate to
absorb losses in the loan portfolio. While management uses available
information to recognize loan losses, future additions to the allowance may
be necessary based on changes in economic conditions. In addition, various
regulatory agencies, as an integral part of the examination process,
periodically review the allowance for possible loan losses of the Company.
Such agencies may require the Company to increase its allowance for
possible loan losses based on their judgments and interpretations about
information available to them at the time of their examinations.
During May 1993, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 114, "Accounting by
Creditors for Impairment of a Loan" (SFAS 114). During October 1994, the
FASB issued Statement of Financial Accounting Standards No. 118,
"Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures" (SFAS 118), which amends SFAS 114.
(Continued)
F-12
<PAGE>
SHAWNEE BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SFAS 114 (as amended by SFAS 118) defines the recognition criteria for loan
impairment and the measurement methods for certain impaired loans and loans
for which terms have been modified in troubled-debt restructurings (a
restructured loan). Specifically, a loan will be considered impaired when
it is probable a creditor will be unable to collect all amounts due - both
principal and interest -according to the contractual terms of the loan
agreement. When measuring impairment, the expected future cash flows of an
impaired loan will be required to be discounted at the loan's effective
interest rate. Alternatively, impairment could be measured by reference to
an observable market price, if one exists, or the fair value of the
collateral for a collateral-dependent loan. Regardless of the historical
measurement method used, SFAS 114 will require a creditor to measure
impairment based on the fair value of the collateral when the creditor
determines foreclosure is probable. Additionally, impairment of a
restructured loan will be measured by discounting the total expected future
cash flows at the loan's effective rate of interest as stated in the
original loan agreement.
SFAS 118 amends SFAS 114 to allow a creditor to use existing methods for
recognizing interest income on an impaired loan. Prior to the issuance of
SFAS 118, SFAS 114 provided for two alternative income recognition methods
to be used to account for changes in the net carrying amount of an impaired
loan subsequent to the initial measurement of impairment. Under the first
income recognition method, a creditor would accrue interest on the net
carrying amount of the impaired loan and report other changes in the net
carrying amount of the loan as an adjustment to the provision for possible
loan losses. Under the second income recognition method, a creditor would
recognize all changes in the net carrying amount of the loan as an
adjustment to the provision for possible loan losses. While those income
recognition methods are no longer required, SFAS 118 does not preclude a
creditor from using either of those methods.
The impact of initially applying SFAS 114 and SFAS 118 will not be reported
as an accounting change; rather, it will be reported as a component of the
provision for possible loan losses charged to operations. SFAS 114 and 118
are effective for fiscal years beginning after December 15, 1994. The
Company does not believe SFAS 114 and SFAS 118 will have a material effect
on its consolidated financial position when implemented.
OFFICE PROPERTIES, FURNITURE, AND EQUIPMENT
-------------------------------------------
Office properties, furniture, and equipment are stated at cost less
accumulated depreciation. Depreciation is computed primarily using the
straight-line method over the estimated useful lives of the related assets.
Office properties and improvements are depreciated over five to 40 years
and furniture and equipment over three to 40 years. Expenditures for major
renewals and betterments of office properties, furniture, and equipment are
capitalized, and those for maintenance and repairs are expensed as
incurred.
OTHER REAL ESTATE OWNED
-----------------------
(Continued)
F-13
<PAGE>
SHAWNEE BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Other real estate owned, consisting of real estate acquired through
foreclosure or deeded to the Company in lieu of foreclosure, is stated at
the lower of fair value less applicable selling costs or cost at the time
the property is acquired. The excess of cost over fair value of other real
estate owned at the date of acquisition is charged to the allowance for
possible loan losses. Subsequent reductions in carrying value to reflect a
reduction in current fair value or costs incurred in maintaining the
properties are charged to expense as incurred.
Gains on sales of other real estate owned are recognized when the title has
passed to the purchaser, minimum down payment requirements have been met,
the terms of any notes received by the Company satisfy continuing payment
requirements, and the Company is relieved of any requirement for continued
involvement in the properties.
INTANGIBLE ASSETS
-----------------
The excess of cost over fair value of net assets acquired, included in
other assets of the Company's consolidated balance sheets, is being
amortized on a straight-line basis over 15 years. The organization costs
incurred in such acquisition, also included in other assets, is being
amortized over five years.
INCOME TAXES
------------
The Company and the Bank file consolidated federal income tax returns.
In February 1992, the FASB issued Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS 109). SFAS 109
requires a change from the deferred method of accounting for income taxes
pursuant to Accounting Principle Board (APB) Opinion 11 to the asset and
liability method of accounting for income taxes. Under the asset and
liability method of SFAS 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under SFAS 109, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date.
Effective January 1, 1993, the Company adopted SFAS 109; however, no
adjustment was necessary to reflect the cumulative effect of adoption in
the Company's 1993 consolidated statement of income.
Pursuant to the deferred method under APB Opinion 11, which was applied in
1992 and prior years, deferred income taxes were recognized for income and
expense items that were reported in different years for financial reporting
purposes and income tax purposes using the tax rate applicable for the year
of the calculation. Under the deferred method, deferred taxes are not
adjusted for subsequent changes in tax rates.
(Continued)
F-14
<PAGE>
SHAWNEE BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EARNINGS PER COMMON SHARE
-------------------------
Earnings per common share data is calculated using the weighted average
number of shares of common stock outstanding during each period.
(Continued)
F-15
<PAGE>
SHAWNEE BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. INVESTMENTS IN DEBT SECURITIES
Effective January 1, 1994, the Company adopted SFAS 115, for which the
cumulative effect was recorded on the consolidated balance sheet on that
date. On January 1, 1994, debt securities with an amortized cost of
$1,390,000 were classified as available-for-sale securities; a market
valuation account was established for the available-for-sale securities
of approximately $16,000 to increase the recorded balance of such
securities at January 1, 1994 to their fair value on that date; a
deferred tax liability of approximately $5,000 was recorded to reflect
the tax effect of the market valuation account; and the net increase
resulting from the market valuation adjustment at January 1, 1994 was
recorded as a separate component of stockholders' equity. The Company
did not classify any securities as trading securities at January 1, 1994.
The amortized cost, gross unrealized gains, gross unrealized losses, and
estimated market values of debt securities classified as available-for-
sale at December 31, 1994 are as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
--------- ---------- ---------- ---------
(dollars expressed in thousands)
<S> <C> <C> <C> <C>
Securities of U.S. government corporations
and agencies................................. $850 - (8) 842
==== == == ===
</TABLE>
The amortized cost, gross unrealized gains, gross unrealized losses, and
estimated market values of debt securities classified as held-to-maturity
at December 31, 1994 are as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
--------- ---------- ---------- ---------
(dollars expressed in thousands)
<S> <C> <C> <C> <C>
U.S. Treasury securities.............................. $ 1,196 - (26) 1,170
Securities of U.S. government corporations
and agencies...................................... 8,027 - (313) 7,714
Obligations of states and political
subdivisions...................................... 2,968 1 (187) 2,782
Other debt securities................................. 352 - (3) 349
------- -- ---- ------
$12,543 1 (529) 12,015
======= == ==== ======
(Continued)
</TABLE>
F-16
<PAGE>
SHAWNEE BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The amortized costs and estimated market value of investment securities
classified as available-for-sale and held-to-maturity at December 31, 1994, by
contractual maturity, are shown below. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Available-for-sale Held-to-maturity
------------------ ----------------
Estimated Estimated
Amortized market Amortized market
cost value cost value
--------- ---------- --------- ---------
(dollars expressed in thousands)
<S> <C> <C> <C> <C>
Due in one year or less...................... $550 548 713 701
Due after one year through five years........ 300 294 6,278 6,124
Due after five years through ten years....... - - 2,016 1,881
Due after ten years.......................... - - 575 531
---- --- ------ ------
850 842 9,582 9,237
Mortgage-backed securities................... - - 2,961 2,778
---- --- ------ ------
$850 842 12,543 12,015
==== === ====== ======
</TABLE>
The amortized cost, gross unrealized gains, gross unrealized losses, and
estimated market values of investment securities at December 31, 1993 were as
follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
(dollars expressed in thousands)
U.S. Treasury securities...................... $ 882 - - 882
Securities of U.S. government corporations
and agencies.............................. 7,491 75 (35) 7,531
Obligations of states and political
subdivisions.............................. 1,842 77 - 1,919
Other debt securities......................... 404 18 - 422
------- --- --- ------
$10,619 170 (35) 10,754
======= === === ======
</TABLE>
There were no sales of investment securities during 1994. Proceeds from sales
of investment securities were $101,000 and $1,844,000 for the years ended
December 31, 1993 and 1992, respectively. Gross gains of $6,000 and $23,000,
respectively, were realized on those sales. There were no gross losses in
1993. Gross losses of $10,000 were realized on sales for the year ended
December 31, 1992.
(Continued)
F-17
<PAGE>
SHAWNEE BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Investment securities with a carrying value of approximately $3,454,000
and $2,912,000 at December 31, 1994 and 1993, respectively, were pledged
to secure public funds, securities sold under agreements to repurchase,
and for other purposes as required or permitted by law.
3. LOANS
The composition of the loan portfolio at December 31, 1994 and 1993 is as
follows:
<TABLE>
<CAPTION>
1994 1993
------- -----
(dollars expressed in thousands)
<S> <C> <C>
Commercial, financial, and agricultural.... $ 3,286 3,559
Real estate:
Commercial............................. 5,254 5,238
Residential............................ 3,466 3,953
Consumer................................... 1,508 1,631
Industrial revenue bonds................... 320 320
------- ------
$13,834 14,701
======= ======
</TABLE>
The Company grants agribusiness, commercial, residential, and consumer loans
to customers throughout their service area, which is primarily in southern
Illinois. The Company has a diversified loan portfolio, with no particular
concentration of credit in any one economic sector in this service area;
however, a substantial portion of the portfolio is concentrated in and secured
by real estate in the southern Illinois area. The ability of the Company's
borrowers to honor their contractual obligations is dependent upon the local
economy and its effect on the real estate market.
Industrial revenue bonds meet the definition of debt securities under SFAS 115
and, therefore, must be classified as trading, available-for-sale, or held-to-
maturity based on the Company's intent to sell or hold the bonds. The Company
classified all industrial revenue bonds as held-to-maturity upon adoption of
SFAS 115 on January 1, 1994. No fair value information on these bonds was
available as of December 31, 1994 as the bonds are not actively traded.
(Continued)
F-18
<PAGE>
SHAWNEE BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Transactions in the allowance for possible loan losses for the years ended
December 31, 1994, 1993, and 1992 are summarized as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------ ---- ----
<S> <C> <C> <C>
(dollars expressed in thousands)
Balance at beginning of year............................. $234 230 200
Provision charged (credited) to operations............... 2 (6) (44)
Charge-offs on loans originated under
current Bank management............................... (3) (4) -
Recoveries of charge-offs on loans originated under
current Bank management............................... 1 - 3
Charge-offs on loans subject to Federal Deposit Insurance
Corporation (FDIC) Assistance Agreement............... (63) (135) (199)
Reimbursement received for charge-offs on loans
subject to FDIC Assistance Agreement.................. 63 135 199
Recoveries of charge-offs on loans subject to FDIC
Assistance Agreement.................................. 11 14 71
---- ---- ----
Balance at end of year................................... $245 234 230
==== ==== ====
</TABLE>
The allowance for possible loan losses is a valuation account available
to absorb future loan losses. Under the terms of the Assistance
Agreement with the FDIC, the Bank was entitled to recover 100% of charge-
offs on loans originated under prior Bank management. Charge-offs on
loans originated under current Bank management were not recoverable under
the Agreement. Recoveries of charge-offs on loans originated under prior
Bank management, and costs of collection with respect to these
recoveries, were equally divided between the Bank and the FDIC. The
portion of the Agreement relating to reimbursements for charge-offs
expired on September 16, 1994; recoveries on these charged-off loans and
the related costs of collection will continue to be divided equally
between the Bank and the FDIC until the expiration of the Agreement on
September 16, 1996.
Nonaccrual loans totaled approximately $28,000 and $360,000 at
December 31, 1994 and 1993, respectively. Interest on nonaccrual loans,
which would have been recorded under the original terms of the loans, was
approximately $1,000 and $10,000 for the years ended December 31, 1994
and 1993, respectively.
(Continued)
F-19
<PAGE>
SHAWNEE BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Aggregate loan transactions involving executive officers and directors of
the Company for the year ended December 31, 1994 are summarized as
follows (dollars expressed in thousands):
<TABLE>
<CAPTION>
<S> <C>
Aggregate balance, December 31, 1993.. $3,640
New loans and advances................ 507
Repayments............................ (386)
------
Aggregate balance, December 31, 1994.. $3,761
======
</TABLE>
Such loans were made in the ordinary course of business at normal credit
terms, including interest rates and collateral, prevailing at the time
for comparable transactions with unrelated parties, and do not involve
more than the normal risk of collection.
4. OFFICE PROPERTIES, FURNITURE, AND EQUIPMENT
Office properties, furniture, and equipment at December 31, 1994 and 1993
are summarized as follows:
<TABLE>
<CAPTION>
1994 1993
------ -----
<S> <C> <C>
(dollars expressed in thousands)
Land and land improvements............ $ 118 118
Buildings and improvements............ 678 654
Furniture, fixtures, and equipment.... 768 742
------ -----
1,564 1,514
Less accumulated depreciation......... 848 789
------ -----
$ 716 725
====== =====
</TABLE>
Depreciation expense for the years ended December 31, 1994, 1993, and
1992 was approximately $59,000, $54,000, and $55,000, respectively.
5. INTEREST-BEARING DEPOSITS
Interest-bearing deposits at December 31, 1994 and 1993 are summarized as
follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
(dollars expressed in thousands)
Interest-bearing demand deposits.......... $ 7,525 5,785
Savings deposits.......................... 2,693 2,955
Time and certificates of deposit:
Less than $100,000..................... 10,718 10,050
$100,000 and over...................... 1,749 2,471
------- ------
$22,685 21,261
======= ======
</TABLE>
(Continued)
F-20
<PAGE>
SHAWNEE BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Interest on deposits for the years ended December 31, 1994, 1993 and 1992
consists of the following:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(dollars expressed in thousands)
<S> <C> <C> <C>
Interest-bearing demand deposits........... $163 152 166
Savings deposits........................... 74 79 102
Time and certificates of deposit:
Less than $100,000...................... 431 420 580
$100,000 and over....................... 64 71 56
---- --- ---
$732 722 904
==== === ===
</TABLE>
6. NOTE PAYABLE
Note payable consists of a demand note with an original face value of
$1,200,000 from an unaffiliated bank.
The demand note provides for interest payments quarterly. The demand
note bears interest at the lending bank's prime rate on commercial loans
(8.5% and 6.0% at December 31, 1994 and 1993, respectively). The
weighted average rate paid on the note was 7.52%, 6.16% and 6.36% in
1994, 1993, and 1992, respectively. Principal payments are not required,
but the Company has the right to prepay the demand note in whole or in
part at any time without penalty or premium provided certain conditions
are met. Common stock of the Bank is pledged to secure the demand note.
7. INCOME TAXES
As discussed in note 1, the Company adopted SFAS 109 as of January 1,
1993; however, no adjustment to the consolidated statement of income was
necessary to reflect the cumulative effect of this adoption in the
Company's consolidated financial statements.
The components of income tax expense for the years ended December 31,
1994, 1993, and 1992 are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
(dollars expressed in thousands)
<S> <C> <C> <C>
Current federal income taxes... $66 18 -
Deferred income taxes.......... 1 53 61
--- -- --
$67 71 61
=== == ==
</TABLE>
(Continued)
F-21
<PAGE>
SHAWNEE BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of expected income tax expense to income tax expense computed
by applying the federal statutory rate of 34% to income before income tax
expense for the years ended December 31, 1994, 1993, and 1992 to reported
income tax expense is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------ ----- -----
(dollars expressed in thousands)
<S> <C> <C> <C>
Expected statutory federal income tax............... $105 98 70
Increase (decrease) in income taxes resulting from:
Tax-exempt income.................................. (46) (26) (1)
Other, net......................................... 8 (1) (8)
---- ---- ----
Income tax expense................................ $ 67 71 61
==== ==== ====
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1994 and 1993 are presented below (dollars expressed in
thousands):
<TABLE>
<CAPTION>
1994 1993
------- -----
<S> <C> <C>
Deferred tax assets:
Other real estate owned...................... $ 21 21
Unrealized holding loss on securities
available-for-sale......................... 3 -
Alternative minimum tax credits.............. 14 10
----- ----
Total deferred tax assets............... 38 31
----- ----
Deferred tax liabilities:
Office properties, furniture, and equipment.. (94) (88)
Allowance for possible loan losses........... (71) (72)
Other........................................ (1) (1)
----- ----
Total deferred tax liabilities.......... (166) (161)
----- ----
Net deferred tax liabilities............ $(128) (130)
===== ====
</TABLE>
Pursuant to SFAS 109, a valuation allowance would be provided on deferred tax
assets when it is more likely than not some portion of the assets will not be
realized. The Company has not established a valuation allowance as of
December 31, 1994, due to management's belief that it is more likely than not
that the results of future operations will generate sufficient taxable income
to realize the deferred tax assets.
(Continued)
F-22
<PAGE>
SHAWNEE BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The significant components of deferred income tax expense for the year
ended December 31, 1992 is as follows (dollars expressed in thousands):
<TABLE>
<CAPTION>
<S> <C>
Net operating loss carryforward............................. $ 45
Provision for possible loan losses for financial reporting
purposes greater than for tax reporting purposes.......... 15
Other real estate owned..................................... 12
Depreciation................................................ 5
Other, net.................................................. (16)
----
</TABLE>
$ 61
====
8. COMMITMENTS AND CONTINGENT LIABILITIES
The Company is party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its
customers and to reduce its own exposure to fluctuations in interest
rates. These financial instruments include commitments to extend credit
and standby letters of credit. Those instruments involve, to varying
degrees, elements of credit and interest rate risk in excess of the
amount recognized in the consolidated balance sheets. The contractual
amounts of those instruments reflect the extent of involvement the
Company has in particular classes of financial instruments.
The Company'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 is represented by the contractual
amount of those instruments. The Company uses the same credit policies
in making commitments and conditional obligations as it does for on-
balance-sheet instruments.
<TABLE>
<CAPTION>
Contractual amount
------------------
1994 1993
---- ----
(dollars expressed in thousands)
<S> <C> <C>
Financial instruments whose contractual amounts
represents:
Commitments to extend credit.................. $343 277
Standby letters of credit..................... 354 454
==== ===
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any conditions established in the contract.
Standby letters of credit are conditional commitments issued by the Bank
to guarantee the performance of a customer to a third party.
Commitments to extend credit and standby letters of credit generally have
fixed expiration dates or other termination clauses and may require
payment of a fee. Since certain of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not
necessarily represent future
(Continued)
F-23
<PAGE>
SHAWNEE BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
cash requirements. The Company evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by the Company upon extension of credit, is
based on management's credit evaluation of the counterparty. Collateral
held varies, but may include commercial and residential real estate,
accounts receivable, inventory and equipment, and securities.
In the ordinary course of business, there are various legal proceedings
against the Company. Management, after consultation with legal counsel,
is of the opinion that the ultimate resolution of these proceedings will
have no material adverse effect on the consolidated financial position of
the Company.
9. DIVIDEND LIMITATIONS
The Bank is restricted by state and federal regulations, as well as by
the terms of the Agreement described in note 1, in the amount of
dividends available for payment to the Company. The Bank is state-
chartered and subject to supervision by the FDIC and the Illinois
Commissioner of Bank and Trust Companies, and is only limited in the
amount of dividends paid, without prior regulatory approval, to maintain
minimum capital requirements and what sound and prudent banking practices
would permit. However, the Agreement limits the amount of dividends paid
to the amount necessary to service acquisition debt of the Company,
provided that the Bank maintains a return on average assets of .75%, the
dividends do not exceed the net operating income of the Bank, and the
dividends do not cause the ratio of the Bank's Tier 1 capital to total
assets to fall below 6% or the Bank's ratio of Tier 2 capital to total
assets to fall below 8%. Additionally, the Bank must notify the FDIC, in
writing, 15 days prior to the declaration of a dividend for approval
under the Agreement. Management believes they are in compliance with the
terms of the Agreement. Based on the terms of the Agreement, the Bank
had approximately $114,000 available for the payment of dividends at
December 31, 1994. Given that the terms of the Agreement restrict the
dividends of the Bank to only those amounts necessary to service
acquisition debt, the Company is effectively prohibited from paying
dividends during the period the Agreement is in effect.
10. EMPLOYEE BENEFITS
During 1994, the Company began to sponsor a pre-tax savings plan that is
designed to give employees an opportunity to contribute toward their
retirement. Employer contributions are optional. Employer contributions
amounted to approximately $3,000 for the year ended December 31, 1994.
Postretirement benefits are generally not provided for the Company's
employees.
(Continued)
F-24
<PAGE>
SHAWNEE BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. PARENT COMPANY ONLY FINANCIAL INFORMATION
Following are condensed balance sheets of Shawnee Bancorp, Inc. (parent
company only) as of December 31, 1994 and 1993, and condensed statements
of income and cash flows for the years ended December 31, 1994, 1993,
and 1992:
CONDENSED BALANCE SHEETS
(dollars expressed in thousands)
<TABLE>
<CAPTION>
ASSETS 1994 1993
------- -----
(UNAUDITED)
<S> <C> <C>
Cash deposited in Bank............................................. $ 32 114
Investment in Bank, at equity...................................... 2,379 2,272
Excess of purchase price over equity in Bank, net of
amortization of $59,000 in 1994 and $41,000 in 1993............. 215 233
Organizational costs, net of accumulated amortization of $65,000
in 1994 and $44,000 in 1993..................................... 40 61
Other assets....................................................... - 1
------ -----
Total assets..................................................... $2,666 2,681
====== =====
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
Note payable............................................................... 700 950
Stockholders' equity:
Common stock........................................................... 59 59
Surplus................................................................ 1,357 1,357
Retained earnings...................................................... 555 315
Unrealized holding loss on investment securities
available-for-sale, net.............................................. (5) -
------ -----
Total stockholders' equity........................................ 1,966 1,731
------ -----
Total liabilities and stockholders' equity........................ $2,666 2,681
====== =====
</TABLE>
(Continued)
F-25
<PAGE>
SHAWNEE BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED STATEMENTS OF INCOME
(dollars expressed in thousands)
<TABLE>
<CAPTION>
1994 1993 1992
------ ----- -----
(UNAUDITED)
<S> <C> <C> <C>
Income:
Dividends from Bank........................................... $206 171 184
Interest income on cash deposited in Bank..................... 2 4 5
---- ---- ----
Total income.............................................. 208 175 189
---- ---- ----
Expenses:
Interest expense.............................................. 62 65 75
Amortization of excess of purchase price over equity of Bank.. 18 18 18
Amortization of organizational costs.......................... 21 21 21
Other......................................................... - 1 1
---- ---- ----
Total expenses............................................ 101 105 115
---- ---- ----
Income before income tax benefit and equity
in undistributed earnings of Bank....................... 107 70 74
Income tax benefit.............................................. (21) (32) (25)
---- ---- ----
Income before equity in undistributed
earnings of Bank........................................ 128 102 99
Equity in undistributed earnings of Bank........................ 112 116 45
---- ---- ----
Net income................................................ $240 218 144
==== ==== ====
</TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
(dollars expressed in thousands)
<TABLE>
<CAPTION>
1994 1993 1992
------ ----- -----
(UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.................................................... $ 240 218 144
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in undistributed earnings of Bank................... (112) (116) (45)
Amortization of excess of purchase price over
equity of Bank.......................................... 18 18 18
Amortization of organizational costs....................... 21 21 21
Other, net................................................. 1 25 (99)
----- ---- ----
Net cash provided by operating activities............. 168 166 39
----- ---- ----
Cash flows from financing activities:
Payments on note payable...................................... (250) (210) (40)
Sale of common stock.......................................... - - 96
----- ---- ----
Net cash provided by (used in)
financing activities................................ (250) (210) 56
----- ---- ----
Net increase (decrease) in cash and
cash equivalents.................................... (82) (44) 95
Cash and cash equivalents, beginning of year.................... 114 158 63
----- ---- ----
</TABLE>
(Continued)
F-26
<PAGE>
SHAWNEE BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C> <C> <C>
Cash and cash equivalents, end of year............. $32 114 158
=== === ===
</TABLE>
(Continued)
F-27
<PAGE>
SHAWNEE BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. BASIS OF PRESENTATION - INTERIM CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
The unaudited interim consolidated financial statements include the
accounts of Shawnee Bancorp, Inc. and its subsidiary 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 and
recurring nature.
13. EVENT (UNAUDITED) SUBSEQUENT TO THE DATE OF INDEPENDENT AUDITORS' REPORT
On May 31, 1995, the Company entered into an Agreement of Affiliation and
Merger with Old National Bancorp (Old National) to merge Shawnee Bancorp,
Inc. into Old National and merge Bank of Harrisburg into The First
National Bank of Harrisburg, a wholly owned subsidiary of Old National.
At December 31, 1994, Old National, which is headquartered in Evansville,
Indiana, had total assets of approximately $4.15 billion. The merger
agreement with Old National will be effected through a stock for stock
exchange. The merger is contingent upon approval of various regulatory
agencies and the stockholders of Shawnee Bancorp, Inc. and requires the
approval of the FDIC under the Agreement. If approved, the merger is
expected to close by the fourth quarter of 1995.
(Continued)
F-28
<PAGE>
APPENDIX A
AGREEMENT OF AFFILIATION AND MERGER
THIS AGREEMENT OF AFFILIATION AND MERGER ("Agreement"), made and entered
into effective as of the 31st day of May, 1995, by and among OLD NATIONAL
BANCORP ("ONB"), SHAWNEE BANCORP, INC., HARRISBURG ("Shawnee Bancorp"), THE
FIRST NATIONAL BANK OF HARRISBURG ("First National") and THE BANK OF HARRISBURG
("Harrisburg").
W I T N E S S E T H:
-------------------
WHEREAS, ONB is an Indiana corporation registered as a bank holding company
under the federal Bank Holding Company Act of 1956, as amended, with its
principal office located in Evansville, Vanderburgh County, Indiana; and
WHEREAS, Shawnee Bancorp is an Illinois corporation registered as a bank
holding company under the federal Bank Holding Company Act of 1956, as amended,
with its principal office located in Harrisburg, Saline County, Illinois; and
WHEREAS, First National is a wholly-owned subsidiary of ONB and a national
banking association with its principal banking office located in Harrisburg,
Saline County, Illinois; and
WHEREAS, Harrisburg is a wholly-owned subsidiary of Shawnee Bancorp and an
Illinois chartered bank with its principal banking office located in Harrisburg,
Saline County, Illinois; and
WHEREAS, it is the desire of the parties hereto that Shawnee Bancorp should
first merge with and into ONB and then immediately thereafter Harrisburg should
merge with and into First National; and
WHEREAS, a majority of the entire Board of Directors of each of ONB,
Shawnee Bancorp, First National and Harrisburg have approved this Agreement,
have authorized its execution and delivery and have designated this Agreement a
plan of reorganization and a plan of merger.
NOW, THEREFORE, in consideration of the foregoing premises, the
representations, warranties, covenants and agreements herein contained and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, ONB, Shawnee Bancorp, First National and Harrisburg hereby make
this Agreement and prescribe the terms and conditions of the merger of Shawnee
Bancorp with and into ONB and of Harrisburg with and into First National and the
mode of carrying such mergers into effect as follows:
SECTION 1
THE COMPANY MERGER
------------------
1.01. General Description. Upon the terms and subject to the conditions of
this Agreement, immediately prior to the Bank Merger (as defined in Section 2.01
hereof) and at the Effective Time (as defined in Section 11 hereof), Shawnee
Bancorp shall be merged into and under the Articles of Incorporation of ONB
("Company Merger"). ONB shall survive the Company Merger ("Surviving
Corporation") and shall continue its corporate
A-1
<PAGE>
existence under the laws of the State of Indiana pursuant to the provisions of
and with the effect provided in the Indiana Business Corporation Law, as
amended.
1.02. Name, Offices and Management. The name of the Surviving Corporation
shall be "Old National Bancorp." Its principal office shall be located at 420
Main Street, Evansville, Indiana 47708. The Board of Directors of the Surviving
Corporation shall consist of the Board of Directors of ONB serving at the
Effective Time, until such time as their successors have been duly elected and
have qualified. The officers of the Surviving Corporation shall consist of the
officers of ONB serving at the Effective Time, until such time as their
successors shall have been duly elected and have qualified.
1.03. Capital Structure. The capital of the Surviving Corporation shall be
not less than the capital of ONB immediately prior to the Effective Time.
1.04. Articles of Incorporation and By-Laws. The Articles of Incorporation
and By-Laws of ONB in existence at the Effective Time shall remain the Articles
of Incorporation and By-Laws of the Surviving Corporation until such Articles of
Incorporation and By-Laws shall be further amended as provided by applicable
law.
1.05. Assets and Liabilities. At the Effective Time, the title to all
assets, real estate and other property owned by Shawnee Bancorp shall vest in
the Surviving Corporation without reversion or impairment. At the Effective
Time, all liabilities of Shawnee Bancorp shall be assumed by the Surviving
Corporation.
SECTION 2
THE BANK MERGER
---------------
2.01. General Description. Upon the terms and subject to the conditions of
this Agreement, immediately following consummation of the Company Merger and at
the Effective Time, Harrisburg shall be merged into and under the Articles of
Association of First National ("Bank Merger") (the Bank Merger and the Company
Merger are hereinafter collectively referred to as the "Mergers"). First
National shall survive the Bank Merger ("Surviving Bank") and shall continue its
corporate existence as a national banking association under the laws of the
United States of America pursuant to the provisions of and with the effect
provided in the National Bank Act, as amended.
2.02. Name, Offices and Management. The name of the surviving bank shall
be "The First National Bank of Harrisburg". Its principal office shall be
located at 2 East Locust Street, Harrisburg, Illinois 62946. The Board of
Directors of the Surviving Bank, until such time as their successors have been
duly elected and have qualified, shall consist of the Board of Directors of
First National and Harrisburg serving at the Effective Time. The officers of
First National serving at the Effective Time shall be the officers of the
Surviving Bank until the Board of Directors of the Surviving Bank shall
determine otherwise. As of and following the Effective Time, the main bank
office and all branch offices of Harrisburg shall become branch offices of First
National.
2.03. Capital Structure. At the Effective Time, the capital of the
Surviving Bank shall be not less than the capital of First National immediately
prior to the Effective Time. At the Effective Time, all outstanding shares of
Harrisburg common stock shall be cancelled.
A-2
<PAGE>
2.04. Articles of Association and By-Laws. The Articles of Association and
By-Laws of First National in existence at the Effective Time shall remain the
Articles of Association and By-Laws of the Surviving Bank, until such Articles
of Association and By-Laws shall be further amended as provided by applicable
law.
2.05. Assets and Liabilities. All rights, franchises and interests of the
individual merging banks in and to all assets and every type of property (real,
personal and mixed) and choses in action shall be transferred to and vested in
the Surviving Bank by virtue of the Bank Merger without any deed or other
transfer and without reversion or impairment. At the Effective Time, all
liabilities of Harrisburg shall be assumed by the Surviving Bank.
2.06. Tax-Free Reorganization. ONB, Shawnee Bancorp, First National and
Harrisburg intend for the Mergers to qualify as a reorganization within the
meaning of Section 368(a)(1)(A) and related sections of the Internal Revenue
Code of 1986, as amended ("Code"), and agree to cooperate and to take such
actions as may be reasonably necessary to assure such result.
SECTION 3
MANNER AND BASIS
OF EXCHANGE OF CAPITAL STOCK
----------------------------
3.01. Exchange Ratio for Company Merger. Upon and by virtue of the Company
Merger becoming effective at the Effective Time, each issued and outstanding
share of Shawnee Bancorp Common Stock (as defined in Section 5.03 hereof) shall
be converted into the right to receive such number of shares of ONB common stock
equal to the quotient arrived at by dividing (a) Forty-One Dollars ($41.00) by
(b) the Market Value (as defined below) of ONB common stock ("Exchange Ratio").
For purposes of this Agreement, the "Market Value" of ONB common stock shall be
the average of the per share closing prices of ONB common stock, as reported on
the National Association of Securities Dealers Automated Quotation System
("NASDAQ") National Market System for the first five (5) business days on which
shares of ONB common stock are traded within the ten (10) calendar days
immediately preceding the Effective Time. The aggregate Market Value of all of
the shares of ONB common stock to be exchanged in the Company Merger, calculated
pursuant to the Exchange Ratio, and including those shares of Harrisburg Common
Stock (as defined in Section 5.03 hereof) beneficially held of record by
shareholders of Shawnee Bancorp exchanged for ONB common stock instead of cash,
shall not exceed $4,841,026.
3.02. Consideration for Bank Merger. (a) Except as otherwise provided in
Section 3.02(b) hereof, upon and by virtue of the Bank Merger becoming effective
at the Effective Time, each of the 103 minority shareholders of Harrisburg, who
in the aggregate beneficially own 6,686 shares, or 1.5% of the total number of
issued and outstanding shares, of Harrisburg Common Stock, shall be converted
into the right to receive from ONB Seventeen Dollars ($17.00) in cash per share
of Harrisburg Common Stock. The aggregate amount ONB shall pay to the minority
shareholders of Harrisburg in consideration of the Bank Merger shall not exceed
$110,636.
(b) Upon and by virtue of the Bank Merger becoming effective at the
Effective Time, Fred G. Denny and Robert Mugge, as shareholders of record of
both Shawnee Bancorp and Harrisburg, may exchange their shares of Harrisburg
Common Stock for such number of shares of ONB common stock equal to the quotient
arrived at by dividing (i) Seventeen Dollars ($17.00) by (ii) the Market Value
of ONB common stock.
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3.03. No Fractional Shares. Certificates for fractional shares of ONB
common stock shall not be issued for fractional share interests arising from
application of the Exchange Ratio. Each shareholder of Shawnee Bancorp who would
otherwise have been entitled to a fraction of a share of ONB common stock shall
be paid in cash an amount equal to such fraction multiplied by the Market Value
(as herein defined) of ONB common stock.
3.04. Recapitalization. If, between the date of this Agreement and the
Effective Time, ONB distributes or issues a stock dividend with respect to its
shares of common stock, or combines, subdivides, reclassifies or splits its
issued and outstanding shares of common stock, such that the number of issued
and outstanding shares of ONB common stock is increased or decreased, then the
Exchange Ratio shall be adjusted so that Shawnee Bancorp's shareholders shall
receive, in the aggregate, such number of shares of ONB common stock
representing the same percentage of outstanding shares of ONB common stock at
the Effective Time as would have been represented by the number of shares such
shareholders would have received if any of the foregoing actions had not
occurred.
3.05. Distribution of ONB Common Stock and Cash. (a) Following the
Effective Time and within ten (10) days thereof, ONB shall mail to each Shawnee
Bancorp shareholder and each Harrisburg shareholder a letter of transmittal
providing instruction as to the transmittal to ONB of certificates representing
shares of Shawnee Bancorp Common Stock and certificates representing shares of
Harrisburg Common Stock, as applicable, and the issuance of shares of ONB common
stock, or cash with respect to Harrisburg shareholders, in exchange therefor
pursuant to the terms of this Agreement.
(b) Following the Effective Time, ONB shall distribute stock certificates
representing shares of ONB common stock and any cash payment, without interest,
for fractional shares, if any, to each former shareholder of Shawnee Bancorp,
and ONB shall distribute cash payment to each former shareholder of Harrisburg,
without interest, within ten (10) business days following delivery to ONB of the
shareholder's certificate or certificates representing shares of Shawnee Bancorp
Common Stock and/or shares of Harrisburg Common Stock, respectively, accompanied
by a properly completed and executed letter of transmittal, all in form and
substance reasonably satisfactory to ONB.
(c) Following the Effective Time, stock certificates representing shares of
Shawnee Bancorp Common Stock shall be deemed to evidence ownership of ONB common
stock for all corporate purposes other than the payment of dividends or other
distributions. No dividends or other distributions otherwise payable subsequent
to the Effective Time on shares of ONB common stock shall be paid to any Shawnee
Bancorp shareholder entitled to receive the same until such shareholder has
surrendered to ONB his or her certificate or certificates representing Shawnee
Bancorp Common Stock in exchange for a certificate or certificates representing
ONB common stock. Upon surrender thereof, there shall be paid in cash to the
record holder of the new certificate or certificates evidencing shares of ONB
common stock the amount of all dividends and other distributions, without
interest thereon, withheld with respect to such shares of ONB common stock.
(d) ONB shall be entitled to rely upon the stock transfer books of Shawnee
Bancorp and Harrisburg to establish the persons entitled to receive shares of
ONB common stock or cash payments as a result of the Mergers, which books shall
be conclusive with respect to the ownership of shares of Shawnee Bancorp Common
Stock and Harrisburg Common Stock.
(e) With respect to any certificate for shares of Shawnee Bancorp Common
Stock or Harrisburg Common Stock which has been lost, stolen or destroyed, ONB
shall be authorized to issue shares of ONB common stock (or to pay cash as to
any fractional shares) or to make cash payments, as the case may be, to the
registered owner of such certificate upon receipt by ONB of an agreement to
indemnify ONB against loss from
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such lost, stolen or destroyed stock certificate and an affidavit of lost,
stolen or destroyed stock certificate, both in form and substance reasonably
satisfactory to ONB, and upon compliance by the Shawnee Bancorp shareholder or
the Harrisburg shareholder with all other reasonable requirements of ONB in
connection with lost, stolen or destroyed stock certificates.
SECTION 4
DISSENTING SHAREHOLDERS
-----------------------
Shareholders of Shawnee Bancorp who properly exercise and perfect statutory
dissenters' rights shall have the rights accorded to dissenting shareholders
under Article 11 of the Illinois Business Corporation Act of 1983, as amended.
Shareholders of Harrisburg who properly exercise and perfect statutory
dissenters' rights shall have the rights accorded to dissenting shareholders
under Chapter 205 of the Illinois Banking Act, as amended.
SECTION 5
REPRESENTATIONS AND WARRANTIES OF SHAWNEE BANCORP
-------------------------------------------------
Shawnee Bancorp hereby represents and warrants to ONB with respect to
itself and, where applicable, Harrisburg, as follows:
5.01. Organization and Authority. (a) Shawnee Bancorp is a corporation
duly organized and validly existing under the laws of the State of Illinois and
is a registered bank holding company under the federal Bank Holding Company Act
of 1956, as amended ("BHC Act"). Shawnee Bancorp has full power and authority
(corporate and otherwise) to own and lease its properties as presently owned and
leased and to conduct its business in the manner and by the means utilized as of
the date hereof. Shawnee Bancorp has no subsidiaries and owns no voting stock or
equity securities of any corporation, partnership, association or other entity,
other than a majority of the issued and outstanding common stock of Harrisburg.
Shawnee Bancorp does not have a class of stock registered pursuant to Section
12, and is not subject to the reporting requirements, of the Securities Exchange
Act of 1934, as amended ("1934 Act").
(b) Harrisburg is an Illinois chartered bank duly organized, validly
existing and in good standing under the laws of the State of Illinois.
Harrisburg has full power and authority (corporate and otherwise) to own and
lease its properties as presently owned and leased and to conduct its business
in the manner and by the means utilized as of the date hereof. Except as set
forth in the Disclosure Schedule (for purposes of this Agreement, "Disclosure
Schedule" shall mean the schedules referencing the applicable provisions of this
Section 5 which have been delivered to ONB and are made a part of this
Agreement), Harrisburg has no subsidiaries and owns no voting stock or equity
securities of any corporation, partnership, association or other entity.
Harrisburg is subject to primary federal regulatory supervision and examination
by the Federal Deposit Insurance Corporation ("FDIC") and state regulatory
supervision by the Illinois Commissioner of Banks and Trust Companies ("ICBT").
5.02. Authorization. (a) Each of Shawnee Bancorp and Harrisburg has the
requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder, subject to the fulfillment of the conditions
precedent set forth in Section 9.02 hereof. This Agreement and its execution and
delivery by Shawnee Bancorp and Harrisburg have been duly authorized by the
Board of Directors of Shawnee Bancorp and Harrisburg and constitutes a valid and
binding obligation of Shawnee Bancorp and Harrisburg, subject to the
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fulfillment of the conditions precedent set forth in Section 9.02 hereof, and is
enforceable in accordance with its terms, except to the extent limited by
general principles of equity and public policy and by bankruptcy, insolvency,
reorganization, liquidation, moratorium, readjustment of debt or other laws of
general application relating to or affecting the enforcement of creditors'
rights.
(b) Neither the execution of this Agreement nor the consummation of the
Mergers contemplated hereby (i) conflicts with or violates Shawnee Bancorp's or
Harrisburg's Articles of Incorporation, Charter or By-Laws; (ii) conflicts with
or violates any local, state, federal or foreign law, statute, ordinance, rule
or regulation (provided that the approvals of applicable bank regulatory
agencies or authorities required for consummation of the Mergers are obtained)
or any court or administrative judgment, order, injunction, writ or decree;
(iii) except as set forth in the Disclosure Schedule, conflicts with, results in
a breach of or constitutes a default under any note, bond, indenture, mortgage,
deed of trust, license, contract, agreement, arrangement, commitment or other
instrument to which Shawnee Bancorp or Harrisburg is a party or by which Shawnee
Bancorp or Harrisburg is subject or bound; (iv) except as set forth in the
Disclosure Schedule, results in the creation of or gives any person, corporation
or entity the right to create any lien, charge, claim, encumbrance or security
interest, or results in the creation of any other rights or claims of any other
party or any other adverse interest, upon any right, property or asset of
Shawnee Bancorp or Harrisburg; or (v) except as set forth in the Disclosure
Schedule, terminates or gives any person, corporation or entity the right to
terminate, accelerate, amend, modify or refuse to perform under any note, bond,
indenture, mortgage, agreement, contract, lease, arrangement, commitment or
other instrument to which Shawnee Bancorp or Harrisburg is bound or with respect
to which Shawnee Bancorp or Harrisburg is to perform any duties or obligations
or receive any rights or benefits.
(c) Other than in connection or in compliance with the provisions of the
BHC Act and applicable federal and state banking, securities and corporation
statutes, all as amended, and the rules and regulations promulgated thereunder,
no notice to, filing with, exemption by or consent, authorization or approval of
any governmental agency or body is necessary for consummation by Shawnee Bancorp
or Harrisburg of the Mergers contemplated by this Agreement.
5.03. Capitalization. (a) The authorized capital stock of Shawnee Bancorp
presently consists, and at the Effective Time will consist, of 200,000 shares of
common stock, $.50 par value per share, 118,000 of which shares are issued and
outstanding (the issued and outstanding shares of Shawnee Bancorp common stock
are referred to herein as "Shawnee Bancorp Common Stock"). The issued and
outstanding shares of Shawnee Bancorp Common Stock have been duly and validly
authorized by all necessary corporate action of Shawnee Bancorp, are validly
issued, fully paid and nonassessable and have not been issued in violation of
any pre-emptive rights of any present or former Shawnee Bancorp shareholder.
Shawnee Bancorp has no class or series of capital stock authorized other than as
described in this Section 5.03(a) and has no intention or obligation to
authorize or issue any other class or series of capital stock or any additional
shares of Shawnee Bancorp Common Stock. On a consolidated basis as of December
31, 1994, Shawnee Bancorp had total shareholders' equity of $1,966,000, which
consisted of common stock of $59,000, capital surplus of $1,357,000, retained
earnings of $555,000, and unrealized loss on securities available for sale of
($5,000). Each share of Shawnee Bancorp Common Stock is entitled to one vote per
share. A description of the Shawnee Bancorp Common Stock is contained in the
Articles of Incorporation of Shawnee Bancorp, as amended, as set forth in the
Disclosure Schedule pursuant to Section 5.04 hereof.
(b) The authorized common stock of Harrisburg consists, and at the
Effective Time will consist, of 445,766 shares of common stock, $1.00 par value
per share (hereinafter referred to as "Harrisburg Common Stock"), all of which
shares are outstanding, 439,080 of which shares are validly issued to Shawnee
Bancorp and 6,686 of which shares are validly issued to 103 other individual
minority shareholders. Such issued and
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outstanding shares of Harrisburg Common Stock have been duly and validly
authorized by all necessary corporate action of Harrisburg, are validly issued,
fully paid and nonassessable and have not been issued in violation of any pre-
emptive rights of any present or former Harrisburg shareholders. Harrisburg has
no class or series of capital stock authorized other than as described in this
Section 5.03(b) and has no intention or obligation to authorize or issue any
other class or series of capital stock or any additional shares of Harrisburg
Common Stock. Except for the pledge of shares of Harrisburg Common Stock to
Mercantile Bank of St. Louis National Association, St. Louis, Missouri, to
secure the Promissory Note ("Note"), in the principal amount of $1,200,000,
dated September 17, 1991, payable by Shawnee Bancorp to such bank (hereinafter
referred to as the "Mercantile Indebtedness"), the issued and outstanding shares
of Harrisburg Common Stock are owned by Shawnee Bancorp free and clear of all
liens, pledges, charges, encumbrances, restrictions, security interests, options
and pre-emptive rights and of all other rights or claims of any other person,
corporation or entity with respect thereto. As of December 31, 1994, Harrisburg
had total capital of $2,415,283, which consisted of common stock of $445,766,
capital surplus of $1,244,554, undivided profits of $730,472, and unrealized
loss on securities available for sale of ($5,509).
(c) Except as set forth in the Disclosure Schedule, there are no options,
warrants, commitments, calls, puts, agreements, understandings, arrangements or
subscription rights relating to any shares of Shawnee Bancorp Common Stock, or
any securities convertible into or representing the right to purchase or
otherwise acquire any common stock or debt securities of Shawnee Bancorp, by
which Shawnee Bancorp is or may become bound. Shawnee Bancorp does not have any
outstanding contractual or other obligation to repurchase, redeem or otherwise
acquire any of the issued and outstanding shares of Shawnee Bancorp Common
Stock.
(d) There are no options, warrants, commitments, calls, puts, agreements,
understandings, arrangements or subscription rights relating to any shares of
Harrisburg Common Stock, or any securities convertible into or representing the
right to purchase or otherwise acquire any common stock or debt securities of
Harrisburg, by which Shawnee Bancorp or Harrisburg is or may become bound.
Harrisburg does not have any outstanding contractual or other obligation to
repurchase, redeem or otherwise acquire any of the issued and outstanding shares
of Harrisburg Common Stock.
(e) Except as set forth in the Disclosure Schedule, Shawnee Bancorp has no
knowledge of any person who beneficially owns 5% or more of the issued and
outstanding shares of Shawnee Bancorp Common Stock.
5.04. Organizational Documents. The Articles of Incorporation, Charter and
By-Laws of Shawnee Bancorp and Harrisburg, representing true, accurate and
complete copies of such corporate documents of Shawnee Bancorp and Harrisburg in
effect as of the date of this Agreement, have been delivered to ONB and are
included in the Disclosure Schedule.
5.05. Compliance with Law. (a) Except as set forth in the Disclosure
Schedule, neither Shawnee Bancorp nor Harrisburg has engaged in any activity or
has taken or omitted to take any action which has resulted in the violation of
any local, state, federal or foreign law, statute, regulation, rule, ordinance,
order, restriction or requirement or in the violation of any order, injunction,
judgment or decree of any court or government agency or body, the violation of
which could have an adverse effect on the financial condition, results of
operations, business, assets or capital of Shawnee Bancorp or Harrisburg,
whether individually or on a consolidated basis. To the knowledge of each of
Shawnee Bancorp and Harrisburg after due inquiry, each possesses and holds all
licenses, franchises, permits, certificates and other authorizations necessary
for the continued conduct of its business without interference or interruption,
and such licenses, franchises, permits, certificates and authorizations are
transferable to ONB or First National, as applicable, at the Effective Time
without any restrictions or limitations thereon or the need to obtain any
consents of government agencies or other third parties other than as set forth
in this Agreement.
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(b) All agreements, understandings and commitments with, and all orders and
directives of, all government regulatory agencies or authorities with respect to
the financial condition, results of operations, business, assets or capital of
Shawnee Bancorp or Harrisburg which presently are binding upon or require action
by, or at any time during the last five (5) years have been binding upon or have
required action by, Shawnee Bancorp or Harrisburg including, without limitation,
all correspondence, communications and commitments related thereto, are set
forth in the Disclosure Schedule. Except as set forth in the Disclosure
Schedule, there are no uncured violations, or violations with respect to which
refunds or restitutions may be required, cited in any examination report of
Shawnee Bancorp or Harrisburg as a result of an examination by any regulatory
agency or body or set forth in any accountant's, auditor's or other report to
Shawnee Bancorp or Harrisburg.
(c) All of the existing offices and branches of Harrisburg have been
legally authorized and established in accordance with all applicable federal,
state and local laws, statutes, regulations, rules, ordinances, orders,
restrictions and requirements. Harrisburg has no approved but unopened offices
or branches.
5.06. Accuracy of Statements Made and Materials Provided to ONB. (a) No
representation, warranty or other statement made by Shawnee Bancorp or
Harrisburg in this Agreement, the Disclosure Schedule or any written report,
statement, list, certificate, materials or other information furnished or to be
furnished by Shawnee Bancorp or Harrisburg to ONB through and including the
Effective Time in connection with this Agreement or the Mergers contemplated
hereby (including, without limitation, any written information which has been or
shall be supplied by Shawnee Bancorp or Harrisburg with respect to its financial
condition, results of operations, business, assets, capital or directors and
officers for inclusion in the proxy statement-prospectus and registration
statement relating to the Mergers), contains or shall contain (in the case of
information relating to the proxy statement-prospectus at the time it is mailed
to Shawnee Bancorp's and Harrisburg's shareholders) any untrue or misleading
statement of material fact or omits or shall omit to state a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances in which they are made, not false or misleading.
(b) Any materials or information provided by Shawnee Bancorp or Harrisburg
to ONB for use by ONB in any filing with any state or federal regulatory agency
shall not contain any untrue or misleading statement of material fact or shall
omit to state a material fact necessary to make the statements contained
therein, in light of the circumstances in which they are made, not false or
misleading.
5.07. Litigation and Pending Proceedings. (a) Except as set forth in the
Disclosure Schedule, there are no claims, actions, suits, proceedings,
arbitrations or investigations pending or, to the best knowledge of Shawnee
Bancorp and Harrisburg after due inquiry, threatened in any court or before any
government agency or authority, arbitration panel or otherwise (nor does Shawnee
Bancorp or Harrisburg have any knowledge after due inquiry of a basis for any
claim, action, suit, proceeding, litigation, arbitration or investigation)
against, by or affecting Shawnee Bancorp or Harrisburg which could have a
material adverse effect on the financial condition, results of operations,
business, assets or capital of Shawnee Bancorp or Harrisburg, whether
individually or on a consolidated basis, or which would prevent the performance
of this Agreement, declare the same unlawful or cause the rescission hereof.
(b) Except as set forth in the Disclosure Schedule, neither Shawnee Bancorp
nor Harrisburg is (i) subject to any outstanding judgment, order, writ,
injunction or decree of any court, arbitration panel or governmental agency or
authority, (ii) presently charged with or, to the knowledge of Shawnee Bancorp
and Harrisburg after due inquiry, under governmental investigation with respect
to any actual or alleged violations of any law, statute, rule, regulation or
ordinance, or (iii) the subject of any pending or, to the knowledge of Shawnee
Bancorp and
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Harrisburg after due inquiry, threatened proceeding by any government regulatory
agency or authority having jurisdiction over its business, assets, capital,
properties or operations.
5.08. Financial Statements and Reports. Shawnee Bancorp has delivered to
ONB copies of the following financial statements and reports of Shawnee Bancorp
and Harrisburg (collectively, the "Shawnee Bancorp Financial Statements"):
(a) Consolidated Balance Sheet for the year ended December 31, 1994 and the
related Consolidated Statement of Income, Consolidated Statement of Changes in
Shareholders' Equity and Consolidated Statement of Cash Flows of Shawnee Bancorp
for the year ended December 31, 1994;
(b) Consolidated Balance Sheet for the year ended December 31, 1993 and the
related Consolidated Statements of Income, Consolidated Statements of Changes in
Shareholders' Equity and Consolidated Statements of Cash Flows for the years
ended December 31, 1993 and 1992;
(c) Consolidated Reports of Condition and Income ("Call Reports") for
Harrisburg as of the close of business on December 31, 1994, 1993 and 1992; and
(d) Financial Statements of Shawnee Bancorp on Form FR Y-9LP and Form FR Y-
9C filed with the Board of Governors of the Federal Reserve System ("Federal
Reserve") as of the close of business on December 31, 1994, 1993 and 1992.
The Shawnee Bancorp Financial Statements are true, accurate and complete in
all material respects and present fairly the consolidated financial position of
Shawnee Bancorp and Harrisburg as of and at the dates shown and the consolidated
results of operations for the periods covered thereby. The Shawnee Bancorp
Financial Statements described in clause (a) above are audited financial
statements and have been prepared in conformance with generally accepted
accounting principles applied on a consistent basis. The Shawnee Bancorp
Financial Statements described in clauses (b), (c) and (d) above are unaudited
and have been prepared on a basis consistent with past accounting practices and
as required by applicable rules or regulations and present fairly the
consolidated financial condition and results of operations at the dates and for
the periods presented. The Shawnee Bancorp Financial Statements do not include
any assets, liabilities or obligations or omit to state any assets, liabilities
or obligations, absolute or contingent, or any other facts which inclusion or
omission would render any of the Shawnee Bancorp Financial Statements false,
misleading or inaccurate in any material respect.
5.09. Properties, Contracts, Employees and Other Agreements. (a) Set forth
in the Disclosure Schedule is a true, accurate and complete copy of the
following:
(i) A brief description and the location of all real property owned by
Shawnee Bancorp or Harrisburg and the principal buildings and structures located
thereon, together with a legal description of such real property, and each lease
of real property to which Shawnee Bancorp or Harrisburg is a party, identifying
the parties thereto, the annual rental payable, the expiration date of the lease
and a brief description of the property covered;
(ii) All current conditional sales contracts or other title retention
agreements relating to Shawnee Bancorp or Harrisburg and agreements for the
purchase of federal funds;
(iii) All current agreements, contracts, leases, licenses, understandings,
commitments or obligations of Shawnee Bancorp or Harrisburg which individually
or in the aggregate:
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(A) involve payment or receipt by Shawnee Bancorp or Harrisburg
(other than as disbursements of loan proceeds to customers or
loan payments by customers) of more than $10,000, including,
without limitation, the Mercantile Indebtedness;
(B) involve payments based on profits of Shawnee Bancorp or
Harrisburg;
(C) relate to the purchase of goods, products, supplies, data
processing or other services in excess of $5,000;
(D) were not made in the ordinary course of business; or
(E) may not be terminated without penalty within one (1) year from
the date of this Agreement; and
(iv) The name and current annual salary of each director, officer and
employee of Shawnee Bancorp or Harrisburg whose current annual salary from
Shawnee Bancorp, Harrisburg or any combination thereof is in excess of $50,000,
and the profit sharing, bonus or other form of compensation (other than salary)
paid or payable by Shawnee Bancorp, Harrisburg or a combination thereof to or
for the benefit of each such person for the year ended December 31, 1994, and
any employment agreement or arrangement with respect to each such person.
(b) Shawnee Bancorp or Harrisburg has, prior to the date of this Agreement,
provided ONB or given ONB access to the files and documentation of all borrowers
from Harrisburg, or persons or entities that may become obligated to Harrisburg
under a letter of credit, line of credit, loan transaction, loan agreement,
promissory note or other commitment of Harrisburg, in excess of $10,000
individually or in the aggregate, whether in principal, interest or otherwise,
and including all guarantors of such indebtedness; and
(c) Each of the agreements, contracts, commitments, leases, instruments and
documents set forth in the Disclosure Schedule relating to this Section 5.09 is
valid and enforceable against Shawnee Bancorp or Harrisburg in accordance with
its terms. Shawnee Bancorp, Harrisburg and, to their respective knowledge after
due inquiry, all other parties thereto are in compliance with the provisions
thereof, and Shawnee Bancorp, Harrisburg and, to their respective knowledge
after due inquiry, any other party thereto are not in default in the
performance, observance or fulfillment of any material obligation, covenant or
provision contained therein. None of the foregoing requires the consent of any
party to its assignment in connection with the Mergers contemplated by this
Agreement. Other than as disclosed pursuant to this Section 5.09, to the
knowledge of Shawnee Bancorp and Harrisburg after due inquiry, no circumstances
exist resulting from transactions effected or to be effected, from events which
have occurred or may occur or from any action taken or omitted to be taken which
could reasonably be expected to result in the creation of any agreement,
contract, obligation, commitment, arrangement, lease or document described in or
contemplated by this Section 5.09.
5.10. Absence of Undisclosed Liabilities. Except as set forth in the
Disclosure Schedule, except as provided in the Shawnee Bancorp Financial
Statements, except for unfunded loan commitments to customers of Harrisburg,
except for trade payables incurred in the ordinary course of business and except
for reasonable obligations and expenses of Shawnee Bancorp and Harrisburg
incurred and to be incurred in connection with the Mergers contemplated by this
Agreement, neither Shawnee Bancorp nor Harrisburg has, nor will have at the
Effective Time, any obligation, agreement, contract, commitment, liability,
lease or license which exceeds $5,000 individually, or any obligation,
agreement, contract, commitment, liability, lease or license made outside of the
ordinary course of business, nor does there exist any circumstances resulting
from transactions effected or events
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occurring on or prior to the date of this Agreement or from any action taken or
omitted to be taken during such period which could reasonably be expected to
result in any such obligation, agreement, contract, commitment, liability, lease
or license.
5.11. Title to Assets. (a) Shawnee Bancorp and Harrisburg have good and
marketable title in fee simple absolute to all real property (including, without
limitation, all real property used as bank holding company or bank premises and
all other real estate owned) which is reflected in the Shawnee Bancorp Financial
Statements as of December 31, 1994; good and marketable title to all personal
property reflected in the Shawnee Bancorp Financial Statements as of December
31, 1994, other than personal property disposed of in the ordinary course of
business since December 31, 1994; good and marketable title to all other
properties and assets (whether real or personal, tangible or intangible) which
Shawnee Bancorp or Harrisburg purports to own; good and marketable title to, or
right to use by terms of a valid and enforceable lease or contract, all other
property used in Shawnee Bancorp's or Harrisburg's business; and good and
marketable title to all property and assets acquired and not disposed of since
December 31, 1994. All of such properties and assets are owned by Shawnee
Bancorp or Harrisburg free and clear of all mortgages, liens, pledges,
restrictions, security interests, charges, claims or encumbrances of any nature
except (i) as set forth in the Disclosure Schedule; (ii) as specifically noted
in reasonable detail in the Shawnee Bancorp Financial Statements; (iii)
statutory liens for taxes not yet delinquent or being contested in good faith by
appropriate proceedings; (iv) pledges or liens required to be granted in
connection with the acceptance of government deposits or granted in connection
with repurchase or reverse repurchase agreements; and (v) easements,
encumbrances and liens of record, minor imperfections of title and other
limitations which are not material in amounts to Shawnee Bancorp or Harrisburg,
whether individually or on a consolidated basis, do not materially detract from
the value or materially interfere with the present or contemplated use of any of
the properties subject thereto or otherwise materially impair the use thereof
for the purposes for which they are held or used. All real property owned by
Shawnee Bancorp or Harrisburg is in material compliance with all applicable
zoning laws.
(b) Each of Shawnee Bancorp and Harrisburg has conducted its business in
compliance with all federal, state, county and municipal laws, statutes,
regulations, rules, ordinances, orders, directives, restrictions and
requirements relating to, without limitation, responsible property transfer,
underground storage tanks, petroleum products, air pollutants, water pollutants
or storm water or process waste water or otherwise relating to the environment
or toxic or hazardous substances or to the manufacturing, recycling, handling,
processing, distribution, use, generation, treatment, storage, disposal or
transport of any hazardous or toxic substances or petroleum products (including
polychlorinated biphenyls, whether contained or uncontained, and asbestos-
containing materials, whether friable or not), including, without limitation,
the federal Solid Waste Disposal Act, the Hazardous and Solid Waste Amendments,
the Federal Clean Air Act, the federal Clean Water Act, the Occupational Health
and Safety Act, the federal Resource Conservation and Recovery Act, the Toxic
Substances Control Act, the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 and the Superfund Amendments and
Reauthorization Act of 1986, all as amended, and regulations of the
Environmental Protection Agency, the Nuclear Regulatory Agency, the Army Corp of
Engineers, the Department of Interior, the United States Fish and Wildlife
Service and any state department of natural resources or state environmental
protection agency now or at any time thereafter in effect (collectively,
"Environmental Laws"). There are no pending or, to the knowledge of Shawnee
Bancorp and Harrisburg after due inquiry, threatened claims, actions or
proceedings by any local municipality, sewage district or other governmental
entity against Shawnee Bancorp or Harrisburg with respect to any of the
Environmental Laws and there is no basis or grounds for any such claim, action
or proceeding. No environmental clearance, certificate or other governmental
approval is required for the conduct of the business of Shawnee Bancorp and
Harrisburg or the consummation of the Mergers contemplated hereby. Neither
Shawnee Bancorp nor Harrisburg is the owner of any property on which any
substances have been used, stored, deposited, treated, recycled or disposed of,
which substances if known
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to be present on, at or under such property would require clean-up, removal or
any other remedial action under any of the Environmental Laws.
(c) Neither Shawnee Bancorp nor Harrisburg (i) is in default in any respect
under any agreements pursuant to which either leases real or personal property,
(ii) has knowledge of any default under such agreements by any party thereto and
(iii) has knowledge of any event which, with notice or lapse of time or both,
would constitute a default or a breach thereof.
5.12. Loans and Investments. (a) Except as set forth in the Disclosure
Schedule, there is no loan by Harrisburg in excess of $10,000 that has been
classified by bank regulatory examiners as "Other Loans Specially Mentioned,"
"Substandard," "Doubtful" or "Loss" or in excess of $10,000 that has been
identified by accountants or auditors (internal or external) as having a
significant risk of uncollectability. The most recent loan watch list of
Harrisburg and a list of all loans in excess of $10,000 which Harrisburg has
determined to be thirty (30) days or more past due with respect to principal or
interest payments or has placed on nonaccrual status are set forth in the
Disclosure Schedule.
(b) All loans reflected in the Shawnee Bancorp Financial Statements as of
December 31, 1994 and which have been made, extended, renewed, restructured,
approved, amended or acquired since December 31, 1994 (i) have been made for
good, valuable and adequate consideration in the ordinary course of business;
(ii) the notes or other evidences of indebtedness evidencing the loans
constitute the legal, valid and binding obligation of the obligor and any
guarantor named therein, except to the extent limited by general principles of
equity and public policy or by bankruptcy, insolvency, reorganization,
liquidation, moratorium, readjustment of debt or other laws of general
application relative to or affecting the enforcement of creditors' rights; and
(iii) are secured, to the extent that Harrisburg has a security interest in
collateral or a mortgage securing such loans, by perfected security interests or
recorded mortgages naming Harrisburg as the secured party or mortgagee.
(c) The reserves, the allowance for possible loan and lease losses and the
carrying value for real estate owned which are shown on the Shawnee Bancorp
Financial Statements are adequate in all respects under the requirements of
generally accepted accounting principles applied on a consistent basis to
provide for possible losses on items for which reserves were made, on loans and
leases outstanding and real estate owned as of the respective dates. The
aggregate loan balances outstanding as of December 31, 1994 in excess of the
reserve for loan losses as of such date are collectible in accordance with the
respective terms of the loan agreements.
(d) None of the investments reflected in the Shawnee Bancorp Financial
Statements as of and for the period ended December 31, 1994 and none of the
investments made by Shawnee Bancorp or Harrisburg since December 31, 1994 are
subject to any restriction, whether contractual or statutory, which materially
impairs the ability of Shawnee Bancorp or Harrisburg to dispose freely of such
investment at any time, except for those investments classified as held to
maturity in accordance with Statement of Financial Accounting Standards No. 115.
Neither Shawnee Bancorp nor Harrisburg is a party to any repurchase agreements
with respect to securities.
(e) Set forth in the Disclosure Schedule is a true, accurate and complete
list of all loans in which Harrisburg has any participation interest or which
have been made with or through another financial institution on a recourse basis
against Harrisburg.
(f) The total amount of the principal, together with accrued interest
thereon and all proper costs and expenses attributable thereto, of the
Mercantile Indebtedness does not, and will not at the Effective Time, exceed One
Million Two Hundred Thousand Dollars ($1,200,000.00). Except for the Mercantile
Indebtedness, neither Shawnee Bancorp nor Harrisburg has nor will have at the
Effective Time any indebtedness for borrowed money.
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5.13. Shareholder Rights Plan. Except as set forth in the Disclosure
Schedule, Shawnee Bancorp has no shareholder rights plan or any other plan,
program or agreement involving, restricting, prohibiting or discouraging a
change in control or merger of Shawnee Bancorp or Harrisburg or which may be
considered an anti-takeover mechanism.
5.14. Employee Benefit Plans. (a) With respect to the employee benefit
plans, as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), sponsored or otherwise maintained by Shawnee
Bancorp or Harrisburg; in which Shawnee Bancorp or Harrisburg participates as a
participating employer; to which Shawnee Bancorp or Harrisburg contributes; with
respect to which Shawnee Bancorp or Harrisburg acts as administrator, trustee or
fiduciary, whether written or oral; and including any such plans which have been
terminated, merged into another plan, frozen or discontinued (collectively,
"Shawnee Bancorp Plans"): (i) all such Shawnee Bancorp Plans have, on a
continuous basis since their adoption, been maintained in compliance with the
requirements prescribed by all applicable statutes, orders and governmental
rules or regulations, including, without limitation, ERISA, the Code, and the
Department of Labor ("Department") and Treasury Regulations promulgated
thereunder, the breach of which could have a material adverse effect on the
financial condition, results of operations, business, assets or capital of
Shawnee Bancorp or Harrisburg, whether individually or on a consolidated basis;
(ii) all Shawnee Bancorp Plans intended to constitute tax-qualified plans under
Section 401(a) of the Code have complied since their adoption in all respects
with all applicable requirements of the Code and the Treasury Regulations
promulgated thereunder, and favorable determination letters have been timely
received from the Internal Revenue Service ("Service") with respect to each such
Shawnee Bancorp Plan stating that each, in its current form (or at the time of
its disposition if it has been terminated, merged or discontinued), is qualified
under and satisfies all applicable provisions of the Code and Treasury
Regulations; (iii) no Shawnee Bancorp Plan (or its related trust) holds any
stock of Shawnee Bancorp, Harrisburg or any related or affiliated person or
entity; (iv) neither Shawnee Bancorp nor Harrisburg has any liability to the
Department or the Service with respect to any Shawnee Bancorp Plan; (v) neither
Shawnee Bancorp nor Harrisburg has engaged in any transaction that may subject
Shawnee Bancorp, Harrisburg or any Shawnee Bancorp Plan to a civil penalty
imposed by Section 502 of ERISA; (vi) no prohibited transaction (as defined in
Section 406 of ERISA and as defined in Section 4975(c) of the Code) has occurred
with respect to any Shawnee Bancorp Plan; (vii) each Shawnee Bancorp Plan
subject to ERISA or intended to be qualified under Section 401(a) of the Code
has been and, if applicable, is being operated in accordance with the applicable
provisions of ERISA and the Code and the Department and Treasury Regulations
promulgated thereunder; (viii) no participant or beneficiary or non-
participating employee has been denied any benefit due or to become due under
any Shawnee Bancorp Plan or has been misled as to his or her rights under any
Shawnee Bancorp Plan; (ix) all obligations required to be performed by Shawnee
Bancorp and Harrisburg under any provision of a Shawnee Bancorp Plan have been
performed by them and they are not in default under or in violation of any
provision of a Shawnee Bancorp Plan; (x) no event has, to the best knowledge of
Shawnee Bancorp, occurred which would constitute grounds for an enforcement
action by any party under Part 5 of Title I of ERISA under any Shawnee Bancorp
Plan; (xi) there are no actions, suits, proceedings or claims pending (other
than routine claims for benefits) or, to the best knowledge of Shawnee Bancorp,
threatened against Shawnee Bancorp, Harrisburg, any Shawnee Bancorp Plan or the
assets of any Shawnee Bancorp Plan; and (xii) with respect to any Shawnee
Bancorp Plan sponsored, participated in or contributed to by Shawnee Bancorp or
Harrisburg or with respect to which Shawnee Bancorp or Harrisburg is responsible
for complying with the reporting and disclosure requirements of ERISA or the
Code, there has been, to the best knowledge of Shawnee Bancorp, no violation of
the reporting and disclosure requirements imposed either under ERISA or the Code
for which a penalty has been or may be imposed.
(b) With regard to any Shawnee Bancorp Plan intended to be qualified under
Section 401(a) of the Code, no director, officer, employee or agent of Shawnee
Bancorp or Harrisburg has engaged in any action or failed to
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act in such a manner that, as a result of such action or failure to act, (i) the
Service could revoke or deny that plan's qualification under Section 401(a) of
the Code or the exemption under Section 501(a) of the Code for any trust related
to such Plan or (ii) a participant or beneficiary or a non-participating
employee has been denied any benefit due or to become due under such Shawnee
Bancorp Plan or has been misled as to his or her rights under such Shawnee
Bancorp Plan. Neither Shawnee Bancorp nor Harrisburg has ever sponsored or
contributed to a defined benefit plan, as defined in Section 414(j) of the Code.
(c) Shawnee Bancorp and Harrisburg have provided to ONB in the Disclosure
Schedule true, accurate and complete copies and, in the case of any plan or
program which has not been reduced to writing, a complete summary, of all of the
following: (i) pension, retirement, profit-sharing, savings, stock purchase,
stock bonus, stock ownership, stock option and stock appreciation right plans
and all amendments thereto; (ii) all employment, deferred compensation (whether
funded or unfunded), salary continuation, consulting, bonus, severance and
collective bargaining agreements; (iii) all executive and other incentive
compensation plans and programs; (iv) all group insurance and health contracts,
policies or plans; and (v) all other incentive, welfare or employee benefit
plans or agreements, maintained or sponsored, participated in, or contributed to
by Shawnee Bancorp or Harrisburg for its current or former directors, officers
or employees. All such plans have been, since their inception, drafted,
implemented, administered and, where applicable, amended or terminated in
accordance with their terms and with applicable law.
(d) No current or former director, officer or employee of Shawnee Bancorp
or Harrisburg is entitled to any benefit under any welfare benefit plans (as
defined in Section 3(1) of ERISA) after termination of employment with Shawnee
Bancorp or Harrisburg, except that such individuals may be entitled to continue
their group health care coverage pursuant to Section 4980B of the Code if they
pay the cost of that coverage pursuant to the applicable requirements of the
Code with respect thereto.
(e) With respect to any group health plan (as defined in Section 607(1) of
ERISA) sponsored or maintained by Shawnee Bancorp or Harrisburg, in which
Shawnee Bancorp or Harrisburg participates as a participating employer or to
which Shawnee Bancorp or Harrisburg contributes, no director, officer, employee
or agent of Shawnee Bancorp or Harrisburg has engaged in any action or failed to
act in such a manner that, as a result of such action or failure to act, would
cause a tax to be imposed on Shawnee Bancorp or Harrisburg under Section
4980B(a)of the Code. With respect to all such plans, all applicable provisions
of Section 4980B of the Code and Section 601 of ERISA have been complied with in
all material respects by Shawnee Bancorp and Harrisburg.
(f) Except as otherwise provided in the Disclosure Schedule, there are no
collective bargaining, employment, management, consulting, deferred
compensation, reimbursement, severance or similar agreements, commitments or
understandings, or any employee benefit or retirement plan, binding upon Shawnee
Bancorp or Harrisburg and no such agreement, commitment, understanding or plan
is under discussion or negotiation by management with any employee or group of
employees, any member of management or any other person.
5.15. Obligations to Employees. All accrued obligations and liabilities of
and all payments by Shawnee Bancorp, Harrisburg and all Shawnee Bancorp Plans,
whether arising by operation of law, by contract or by past custom, for payments
to trusts or other funds, to any government agency or authority or to any
present or former director, officer, employee or agent (or his or her heirs,
legatees or legal representatives) have been and are being paid to the extent
required by applicable law or by the applicable plan, trust or contract, and
adequate actuarial accruals and reserves for such payments have been and are
being made by Shawnee Bancorp or Harrisburg in accordance with generally
accepted accounting principles and applicable law applied on a consistent basis
and actuarial methods with respect to the following: (a) withholding taxes,
unemployment compensation or social
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security benefits; (b) all pension, profit-sharing, savings, stock purchase,
stock bonus, stock ownership, stock option and stock appreciation rights plans;
(c) all employment, deferred compensation (whether funded or unfunded), salary
continuation, consulting, severance, reimbursement, bonus or collective
bargaining agreements; (d) all executive and other incentive compensation plans
or programs; (e) all group insurance and health contracts and policies; and (f)
all other incentive, welfare, retirement or employee benefit plans or agreements
maintained or sponsored, participated in, or contributed to Shawnee Bancorp or
Harrisburg for its current or former directors, officers, employees and agents.
All obligations and liabilities of Shawnee Bancorp and Harrisburg, whether
arising by operation of law, by contract or by past custom, for all other forms
of compensation which are or may be payable to their current or former
directors, officers, employees or agents have been and are being paid to the
extent required by applicable law or by the plan or contract, and adequate
actuarial accruals and reserves for payment therefor have been and are being
made by Shawnee Bancorp or Harrisburg in accordance with generally accepted
accounting and actuarial principles applied on a consistent basis. All accruals
and reserves referred to in this Section 5.15 are correctly and accurately
reflected and accounted for in all material respects in the Shawnee Bancorp
Financial Statements and the books, statements and records of Shawnee Bancorp
and Harrisburg.
5.16. Taxes, Returns and Reports. Shawnee Bancorp and Harrisburg have since
1991 (a) duly filed all federal, state, local and foreign tax returns of every
type and kind required to be filed, and each such return is, to the knowledge of
Shawnee Bancorp after due inquiry, true, accurate and complete in all respects;
(b) paid all taxes, assessments and other governmental charges due or claimed to
be due upon each of them or any of its income, properties or assets; and (c) not
requested an extension of time for any such payments (which extension is still
in force). Except for taxes not yet due and payable, the reserve for taxes in
the Shawnee Bancorp Financial Statements as of December 31, 1994 is adequate to
cover all of Shawnee Bancorp's and Harrisburg's tax liabilities (including,
without limitation, income taxes and franchise fees) that may become payable in
future years with respect to any transactions consummated prior to December 31,
1994. Neither Shawnee Bancorp nor Harrisburg has, or will have, any liability
for taxes of any nature for or with respect to the operation of their respective
businesses, including the business of any subsidiary, or ownership of their
assets, including the assets of any subsidiary, from the date hereof up to and
including the Effective Time, except to the extent set forth in the Subsequent
Shawnee Bancorp Financial Statements (as hereinafter defined). Neither Shawnee
Bancorp nor Harrisburg is currently under audit by any state or federal taxing
authority. No federal, state or local tax returns of Shawnee Bancorp or
Harrisburg have been audited by any taxing authority during the past five (5)
years.
5.17. Deposit Insurance. The deposits of Harrisburg are insured by the FDIC
in accordance with the Federal Deposit Insurance Act, as amended, and Harrisburg
has paid or properly reserved or accrued for all current premiums and
assessments with respect to such deposit insurance.
5.18. Insurance. Set forth in the Disclosure Schedule is a list and brief
description of all policies of insurance (including, without limitation,
bankers' blanket bond, directors' and officers' liability insurance and
insurance providing benefits for employees) owned or held by Shawnee Bancorp or
Harrisburg on the date hereof or with respect to which Shawnee Bancorp or
Harrisburg pays any premiums. Each such policy is in full force and effect.
5.19. Books and Records. The books and records of Shawnee Bancorp and
Harrisburg are complete and correct in all material respects and accurately
reflect the basis for the respective financial condition, results of operations,
business, assets and capital of Shawnee Bancorp and Harrisburg set forth therein
or in the Shawnee Bancorp Financial Statements.
5.20. Broker's, Finder's or Other Fees. Except for reasonable fees of
Shawnee Bancorp's attorneys and accountants, all of which will be paid by
Shawnee Bancorp prior to the Effective Time, no agent, broker or other
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person acting on behalf of Shawnee Bancorp or Harrisburg or under any authority
of Shawnee Bancorp or Harrisburg is or shall be entitled to any commission, any
broker's or finder's fee or any other form of compensation or payment from any
of the parties hereto relating to this Agreement and the Mergers contemplated
hereby.
5.21. Disclosure Schedule and Documents. All written data, documents,
materials and information referred to in this Agreement and delivered by Shawnee
Bancorp or Harrisburg pursuant to or in connection with the Disclosure Schedule
are true, accurate and complete in all material respects as of the date hereof
and, with respect to such items delivered subsequent to the date hereof or with
any update to the Disclosure Schedule, will be true, accurate and complete in
all material respects on the date of delivery thereof.
5.22. Interim Events. Except as otherwise permitted hereunder, since
December 31, 1994, neither Shawnee Bancorp nor Harrisburg has:
(a) Suffered any changes having a material adverse financial impact on the
financial condition, results of operations, business, assets, capital or
prospects of Shawnee Bancorp or Harrisburg;
(b) Suffered any material damage, destruction or loss to any of its
properties, whether or not covered by insurance;
(c) Declared, distributed or paid any dividend or other distribution to its
shareholders, except for payment of dividends as permitted by Section
7.03(a)(iii) hereof;
(d) Repurchased, redeemed or otherwise acquired shares of its common stock,
issued any shares of its common stock or stock appreciation rights or sold or
agreed to issue or sell any shares of its common stock or any right to purchase
or acquire any such stock or any security convertible into such stock or taken
any action to reclassify, recapitalize or split up its stock;
(e) Granted or agreed to grant any increase in benefits payable or to
become payable under any pension, retirement, profit sharing, health, bonus,
insurance or other benefit plan to employees, officers or directors of Shawnee
Bancorp or Harrisburg;
(f) Increased the salary of any director, officer or employee, except for
normal increases in the ordinary course of business and in accordance with past
practices, or entered into any employment contract or understanding with any
officer or employee or installed any employee welfare, pension, retirement,
stock option, stock appreciation, stock dividend, profit sharing or other
similar plan or arrangement, or fired, suspended or dismissed any employee
director or officer;
(g) Leased, sold or otherwise disposed of any of its assets except in the
ordinary course of business or leased, purchased or otherwise acquired from
third parties any assets except in the ordinary course of business;
(h) Except for the Mergers contemplated by this Agreement, merged,
consolidated or sold shares of Shawnee Bancorp Common Stock or Harrisburg Common
Stock, agreed to merge or consolidate with or into any third party, agreed to
sell any shares of Shawnee Bancorp Common Stock or Harrisburg Common Stock or
acquired or agreed to acquire any stock, equity interest or business of any
third party;
(i) Incurred, assumed or guaranteed any obligation or liability (fixed or
contingent) other than obligations and liabilities incurred in the ordinary
course of business;
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(j) Mortgaged, pledged or subjected to a lien, security interest, option or
other encumbrance any of its assets except for tax and other liens which arise
by operation of law and with respect to which payment is not past due and except
for pledges or liens: (i) required to be granted in connection with acceptance
by Harrisburg of government deposits; (ii) granted in connection with repurchase
or reverse repurchase agreements; or (iii) otherwise incurred in the ordinary
course of the conduct of its business;
(k) Cancelled or compromised any loan, debt, obligation, claim or
receivable other than in the ordinary course of business;
(l) Entered into any transaction, contract or commitment other than in the
ordinary course of business;
(m) Agreed to enter into any transaction for the borrowing or loaning of
monies, other than in the ordinary course of its lending business; or
(n) Conducted its business in any manner other than substantially as it was
being conducted at December 31, 1994.
5.23. Regulatory Filings. (a) Shawnee Bancorp and Harrisburg have filed and
will continue to file in a timely manner all filings with all federal and state
regulatory agencies as required by applicable law. All such filings with federal
and state regulatory agencies were true, accurate and complete in all respects
as of the dates of the filings and have been prepared on a basis consistent with
past accounting practices and as required by applicable rules or regulations,
and no such filing contained any untrue statement of a material fact or omitted
to state a material fact necessary in order to make the statements, at the time
and in light of the circumstances under which they were made, not false or
misleading.
(b) Shawnee Bancorp and Harrisburg are in full compliance with the terms
and provisions of that certain Assistance Agreement Among Federal Deposit
Insurance Corporation, First Bank and Trust, Harrisburg, Illinois, Shawnee
Bancorp, Inc. and The Investors, dated as of September 16, 1991 ("FDIC
Assistance Agreement"), and there is no breach of or default under such
agreement.
5.24. Contracts. Neither Shawnee Bancorp nor Harrisburg is in default under
or breach of or, to the best knowledge of Shawnee Bancorp, alleged to be in
default under or breach of any loan or credit agreement, conditional sales
contract or other title retention agreement, security agreement, bond,
indenture, mortgage, license, contract, lease, commitment or any other
instrument or obligation, including the FDIC Assistance Agreement and those
documents evidencing the Mercantile Indebtedness, which could have a material
adverse effect on the financial condition, results of operations, business,
assets or capital of Shawnee Bancorp or Harrisburg, whether individually or on a
consolidated basis.
5.25. No Third Party Options. There are no agreements, options, commitments
or rights with, of or to any third party to acquire any shares of capital stock
or assets of Shawnee Bancorp or Harrisburg.
5.26. Representations and Warranties at the Effective Time. All
representations and warranties of Shawnee Bancorp and Harrisburg contained
herein shall be true, accurate and complete in all material respects on and as
of the Effective Time as though made or given at such time.
5.27. Nonsurvival of Representations and Warranties. The representations
and warranties of Shawnee Bancorp and Harrisburg contained in this Agreement
shall expire at the Effective Time, and thereafter Shawnee Bancorp and
Harrisburg and all directors, officers and employees of Shawnee Bancorp and
Harrisburg shall have
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no further liability with respect thereto, except for fraud or for false or
misleading statements made intentionally or knowingly in such representations
and warranties or except as otherwise provided by law, whether statutory or
common law or otherwise.
SECTION 6
REPRESENTATIONS AND WARRANTIES OF ONB
-------------------------------------
ONB represents and warrants to Shawnee Bancorp and Harrisburg with respect
to itself and, where applicable, First National, as follows:
6.01. Organization and Authority. ONB is a corporation duly organized and
validly existing under the laws of the State of Indiana, is a registered bank
holding company under the BHC Act, and has full power and authority (corporate
and otherwise) to own and lease its properties as presently owned and leased and
to conduct its business in the manner and by the means utilized as of the date
hereof. First National is a wholly-owned subsidiary of ONB, is a national
banking association duly organized, validly existing and in good standing under
the laws of the United States of America, and has full power and authority
(corporate and otherwise) to own and lease its properties as presently owned and
leased and to conduct its business in the manner and by the means utilized as of
the date hereof.
6.02. Authorization. (a) Each of ONB and First National has the requisite
corporate power and authority to enter into this Agreement and to carry out its
obligations hereunder subject to the fulfillment of the conditions precedent set
forth in Section 9.01 hereof. This Agreement and its execution and delivery by
ONB has been duly authorized by the Board of Directors of ONB and constitutes a
valid and binding obligation of ONB, subject to the conditions precedent set
forth in Section 9.01 hereof, and is enforceable in accordance with its terms,
except to the extent limited by general principles of equity and public policy
and by bankruptcy, insolvency, reorganization, liquidation, moratorium,
readjustment of debt or other laws of general application relating to or
affecting the enforcement of creditors' rights.
(b) Neither the execution of this Agreement nor consummation of the
Mergers contemplated hereby (i) conflicts with or violates ONB's Articles of
Incorporation or By-Laws or First National's Articles of Association or By-Laws;
(ii) conflicts with or violates in any material respect any local, state,
federal or foreign law, statute, ordinance, rule or regulation (provided that
the approvals of government banking regulatory agencies or authorities required
for consummation of the Mergers are obtained) or any court or administrative
judgment, order, injunction, writ or decree; or (iii) conflicts with, results in
a breach of or constitutes a material default under any note, bond, indenture,
mortgage, deed of trust, license, contract, agreement, arrangement, commitment
or other instrument to which ONB or First National is a party or by which ONB or
First National is subject or bound and which is material to ONB on a
consolidated basis.
(c) Other than in connection or in compliance with the provisions of the
BHC Act and applicable federal and state banking, securities and corporation
statutes, all as amended, and the rules and regulations promulgated thereunder,
no notice to, filing with, exemption by or consent, authorization or approval of
any governmental agency or body is necessary for the consummation by ONB and
First National of the Mergers contemplated by this Agreement.
6.03. Capitalization. (a) The authorized capital stock of ONB as of the
date of this Agreement consists of (i) 30,000,000 shares of common stock, no par
value per share, of which approximately 21,165,123 shares were issued and
outstanding as of December 31, 1994, and (ii) 2,000,000 shares of preferred
stock, no shares
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of which have been or are presently intended to be issued, other than in
connection with any obligations of ONB to issue such preferred stock under its
shareholders' rights plan. Such issued and outstanding shares of ONB capital
stock have been duly and validly authorized by all necessary corporate action of
ONB, are validly issued, fully paid and nonassessable, and have not been issued
in violation of any pre-emptive rights of any present or former ONB
shareholders. All of the issued and outstanding shares of common stock of ONB's
subsidiaries are owned by ONB free and clear of all liens, pledges, charges,
claims, encumbrances, restrictions, security interests, options and pre-emptive
rights and of all other rights or claims of any other person, corporation or
entity with respect thereto. Except as described in this Section 6.03, ONB has
no other authorized series or class of capital stock. Except for shares of ONB
common stock to be issued in connection with (i) ONB's dividend reinvestment and
stock purchase plan, (ii) ONB's outstanding convertible subordinated debentures,
(iii) acquisitions by ONB of other financial institutions or holding companies,
and (iv) ONB's restricted stock plan and other employee benefit plans, ONB has
no intention or obligation to authorize or issue any other capital stock or any
additional shares of ONB capital stock. On a consolidated basis as of December
31, 1994, ONB had total shareholders' equity of approximately $365,940,000,
which consisted of common stock of $21,897,000, capital surplus of $220,260,000
and retained earnings of $130,330,000.
(b) ONB has no knowledge of any person who beneficially owns 5% or more
of its issued and outstanding shares of common stock.
6.04. Organizational Documents. The Articles of Incorporation and By-Laws
of ONB and the organizational documents of First National in force as of the
date of this Agreement have been delivered to Shawnee Bancorp and represent
true, accurate and complete copies of such corporate documents of ONB and First
National in effect as of the date of this Agreement.
6.05. Compliance With Law. Neither ONB nor any of its subsidiaries has
engaged in any activity or has taken or omitted to take any action which has
resulted or could result in the violation of any local, state, federal or
foreign law, statute, rule, regulation, ordinance, order, restriction or
requirement or of any order, injunction, judgment or decree of any court or
government agency or body, the violation of which could have a material adverse
effect on the financial condition, results of operations, business, assets or
capitalization of ONB and its subsidiaries on a consolidated basis.
6.06. Regulatory Filings. ONB and each of its subsidiaries have filed and
will continue to file in a timely manner all required filings with the
Securities and Exchange Commission ("SEC") including, but not limited to, all
reports on Form 8, Form 8-K, Form 10-K and Form 10-Q, and all other federal and
state regulatory agencies as required by applicable law. All filings by ONB with
the SEC and with all other federal and state regulatory agencies were true,
accurate and complete in all material respects as of the dates of the filings,
and no such filings contained any untrue statement of a material fact or omitted
to state a material fact necessary in order to make the statements, at the time
and in the light of the circumstances under which they were made, not false or
misleading.
6.07. Litigation and Pending Proceedings. There are no claims, actions,
suits, proceedings, investigations or arbitrations pending or, to the best
knowledge of ONB after due inquiry, threatened in any court or before any
government agency or authority, arbitration panel or otherwise (nor does ONB
have any knowledge of a basis for any claim, action, suit, proceeding,
litigation, investigation or arbitration) against, by or affecting ONB or its
subsidiaries which could have a material adverse effect on the financial
condition, results of operations, business, assets or capitalization of ONB and
its subsidiaries on a consolidated basis, or which would prevent the performance
of this Agreement, declare the same unlawful or cause the rescission hereof.
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6.08. Financial Statements and Reports. (a) ONB or its agents have
delivered to Shawnee Bancorp copies of the following financial statements and
reports of ONB and its subsidiaries (collectively, the "ONB Financial
Statements"):
(i) Consolidated Balance Sheets and related Consolidated Statements of
Income and Consolidated Statements of Changes in Shareholders' Equity
of ONB as of and for the years ended December 31, 1992, 1993 and
1994; and
(ii) Consolidated Statements of Cash Flows of ONB for the years ended
December 31, 1992, 1993 and 1994.
(b) The ONB Financial Statements are true, accurate and complete in all
material respects and present fairly the consolidated financial position of ONB
and its subsidiaries as of and at the dates shown and the consolidated results
of operations for the periods covered thereby. The ONB Financial Statements
described in clauses (i) and (ii) above which consist of fiscal year-end
information are audited financial statements and have been prepared in
conformance with generally accepted accounting principles applied on a
consistent basis except as may otherwise be indicated in any independent
auditors' reports with respect to such financial statements. The ONB Financial
Statements do not include any assets, liabilities or obligations or omit to
state any assets, liabilities or obligations, absolute or contingent, or any
other facts, which inclusion or omission would render the ONB Financial
Statements false, misleading or inaccurate in any material respect.
6.09. Shares to be Issued in the Company Merger. The shares of ONB common
stock which Shawnee Bancorp shareholders will be entitled to receive upon
consummation of the Company Merger pursuant to this Agreement will, at the
Effective Time, be duly authorized and will, when issued in accordance with this
Agreement, be validly issued, fully paid and nonassessable and will have been
registered under the Securities Act of 1933, as amended ("1933 Act").
6.10. Shareholder Approval. The approval by ONB's shareholders of the
Mergers contemplated by this Agreement is not required.
6.11. Representations and Warranties at the Effective Date. All
representations and warranties of ONB contained herein shall be true, accurate
and complete in all material respects on and as of the Effective Date as though
made or given at such time.
6.12. Nonsurvival of Representations and Warranties. The representations
and warranties of ONB contained in this Agreement shall expire at the Effective
Time and, thereafter, ONB and all directors, officers and employees of ONB shall
have no further liability with respect thereto, except for fraud or for false or
misleading statements made intentionally or knowingly in such representations
and warranties or except as otherwise provided by law, whether statutory or
common law or otherwise.
SECTION 7
COVENANTS OF SHAWNEE BANCORP
----------------------------
Shawnee Bancorp covenants and agrees, and covenants and agrees to cause
Harrisburg to act, as follows:
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7.01. Shareholder Approval. (a) Subject to Section 7.06(b) hereof, Shawnee
Bancorp shall submit this Agreement to its shareholders for approval at a
meeting to be called and held in accordance with applicable law and the Articles
of Incorporation and By-Laws of Shawnee Bancorp at the earliest possible
reasonable date. Subject to Section 7.06(b) hereof, the Board of Directors of
Shawnee Bancorp shall recommend to Shawnee Bancorp's shareholders that such
shareholders approve this Agreement and the Mergers contemplated hereby and
shall solicit proxies voting in favor of this Agreement from Shawnee Bancorp's
shareholders.
(b) Harrisburg shall submit this Agreement to its shareholders for
approval at a meeting to be called and held in accordance with applicable law
and the Charter and By-Laws of Harrisburg at the earliest possible reasonable
date. The Board of Director of Harrisburg shall recommend to Harrisburg's
shareholders that such shareholders approve this Agreement and the Mergers
contemplated hereby and shall solicit proxies voting in favor of this Agreement
from Harrisburg's shareholders.
7.02. Other Approvals. (a) Shawnee Bancorp shall proceed expeditiously,
cooperate fully and use its best efforts to assist ONB in procuring upon
reasonable terms and conditions all consents, authorizations, approvals,
registrations and certificates, in completing all filings and applications and
in satisfying all other requirements prescribed by law which are necessary for
consummation of the Mergers on the terms and conditions provided in this
Agreement at the earliest possible reasonable date. Shawnee Bancorp shall
promptly advise ONB in writing if, prior to the Effective Time, it shall obtain
knowledge of any fact that would make it necessary to amend the Registration
Statement or to supplement the prospectus contained in the Registration
Statement in order to make the statements therein not misleading or to comply
with applicable law.
(b) The tax-qualified Shawnee Bancorp Plans shall be terminated so that
all benefit accruals thereunder will cease on the December 31 coincident with or
immediately following the Effective Time. Prior to the Effective Time, Shawnee
Bancorp shall cooperate with ONB in the dissolution of the Shawnee Bancorp Plans
to the reasonable satisfaction of ONB. Participants' benefits under the Shawnee
Bancorp Plans shall be distributed, following the Shawnee Bancorp Plans
dissolution, (i) in a single lump sum, (ii) by distribution of an annuity
contract if so required by the applicable Shawnee Bancorp Plan, or (iii) by
direct rollover to the ONB Profit Sharing Plan (as hereinafter defined) or to an
individual retirement account. However, if so determined by ONB, distributions
shall not be permitted from any Shawnee Bancorp Plans until the Service has
issued a favorable determination letter as to the termination of the applicable
Shawnee Bancorp Plan. To the extent an application with respect to the Shawnee
Bancorp Plans is permitted by the Service's procedures, ONB shall be responsible
for, and Shawnee Bancorp shall cooperate with ONB in, the submission of all
applications to the Service as soon as practicable following the Shawnee Bancorp
Plans' termination for a determination letter to the effect that the termination
of the Shawnee Bancorp Plan does not adversely affect its tax-qualified status.
Shawnee Bancorp shall be responsible for and shall pay any and all costs and
expenses associated with such termination and determination letter.
7.03. Conduct of Business. (a) On and after the date of this Agreement and
until the Effective Time or until this Agreement shall be terminated as herein
provided, each of Shawnee Bancorp and Harrisburg shall not, without the prior
written consent of ONB:
(i) make any changes in its capital stock accounts (including,
without limitation, any stock split, recapitalization or
reclassification);
(ii) authorize a class of stock or issue, or authorize the issuance
of, any capital stock other than or in addition to the issued
and outstanding common stock as set forth in Section 5.03
hereof;
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(iii) distribute or pay any dividends on its shares of common stock, or make
any other distribution to its shareholders, except that Harrisburg may
pay cash dividends to Shawnee Bancorp in the ordinary course of
business for payment of reasonable and necessary business and
operating expenses of Shawnee Bancorp and for expenses incurred in
connection with the transactions contemplated by this Agreement;
(iv) redeem any of its outstanding shares of common stock;
(v) merge, combine or consolidate or effect a share exchange with or sell
any of its assets or any of its securities to any other person,
corporation or entity or enter into any other similar transaction not
in the ordinary course of business;
(vi) purchase any assets or securities or assume any liabilities of another
bank holding company, bank, corporation or other entity, except in the
ordinary course of business necessary to manage its investment
portfolio;
(vii) make any loan or commitment to lend money, issue any letter of credit
or accept any deposit, except in the ordinary course of business in
accordance with sound banking practices (and, with respect to loan
transactions or commitments, letters of credit and deposit accounts,
only on terms and conditions which are not materially more favorable
than those available to the borrower or customer from competitive
sources in transactions in the ordinary course of business);
(viii) acquire or dispose of any property or asset constituting a
capital investment in excess of $10,000 individually or $25,000 in the
aggregate;
(ix) except for repurchase agreements entered into in the ordinary course
of business and the pledge of securities to secure public funds
deposits, subject any of its properties or assets to a mortgage, lien,
claim, charge, option, restriction, security interest or encumbrance;
(x) promote to a new position or increase the rate of compensation (except
for promotions and compensation increases in the ordinary course of
business and in accordance with past practices and established
employment policies), or enter into any agreement to promote to a new
position or increase the rate of compensation, of any director,
officer or employee of Shawnee Bancorp or Harrisburg;
(xi) execute, create, institute, modify or amend (except with
respect to any amendments to the Shawnee Bancorp Plans required by
law, rule, regulation or this Agreement) any pension, retirement,
savings, stock purchase, stock bonus, stock ownership, stock option,
stock appreciation or depreciation right or profit sharing plans; any
employment, deferred compensation, consultant, bonus or collective
bargaining agreement; any group insurance or health contract or
policy; or any other incentive, retirement, welfare or employee
benefit plan or agreement for current or former directors, officers or
employees of Shawnee Bancorp or Harrisburg; or change the level of
benefits or payments under any of the foregoing or increase or
decrease any severance or termination of pay benefits or any other
fringe or employee benefits other than as required by law or
regulatory authorities;
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(xii) modify, amend or institute new employment policies or practices, or
enter into, renew or extend any employment, consulting or severance
agreements with respect to any present or former directors, officers
or employees of Shawnee Bancorp or Harrisburg;
(xiii) hire or employ any new or additional employees of Shawnee Bancorp or
Harrisburg, except those which are reasonably necessary for the proper
operation of Shawnee Bancorp's or Harrisburg's business;
(xiv) elect or appoint any new officers or directors of either Shawnee
Bancorp or Harrisburg;
(xv) amend, modify or restate Shawnee Bancorp's or Harrisburg's Articles of
Incorporation, Charter or By-Laws from those in effect on the date of
this Agreement and as delivered to ONB hereunder;
(xvi) give, dispose of, sell, convey or transfer; assign, hypothecate,
pledge or encumber; or grant a security interest in or option to or
right to acquire any shares of common stock or a material portion of
the assets, of Shawnee Bancorp or Harrisburg;
(xvii) fail to continue to make additions to in accordance with
past practices and to otherwise maintain in all respects Harrisburg's
reserve for loan and lease losses, or any other reserve account, in
accordance with safe, sound, and prudent banking practices and in
accordance with generally accepted accounting principles applied on a
consistent basis;
(xviii) fail to accrue, pay, discharge and satisfy all liabilities,
obligations and expenses, including, but not limited to, trade
payables, incurred in the regular and ordinary course of business as
such liabilities, obligations and expenses become due;
(xix) issue, or authorize the issuance, of any securities convertible into
or exchangeable for shares of Shawnee Bancorp Common Stock or
Harrisburg Common Stock;
(xx) except for trade payables and similar liabilities and obligations
incurred in the ordinary course of business and the payment, discharge
or satisfaction in the ordinary course of business of liabilities
reflected in the Shawnee Bancorp Financial Statements or the
Subsequent Shawnee Bancorp Financial Statements, borrow any money or
incur any indebtedness including, without limitation, through the
issuance of debentures, or incur any liability or obligation (whether
absolute, accrued, contingent or otherwise), in an aggregate amount
exceeding $5,000;
(xxi) open, close, move or, in any material respect, expand, diminish,
renovate, alter or change any of its offices or branches;
(xxii) pay or commit to pay any management or consulting or other similar
type of fees;
(xxiii) incur any additional indebtedness or increase the aggregate
outstanding principal indebtedness under the Mercantile Indebtedness,
or be in breach of or default under any of the documents evidencing
the Mercantile Indebtedness, including, without limitation, the Note;
or
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(xxiv) enter into any contract, agreement, lease, commitment,
understanding, arrangement or transaction or incur any
liability or obligation (other than as contemplated by
Section 7.03(a)(vii) hereof and legal and accounting fees
related to the transactions contemplated by this Agreement)
requiring payments by Shawnee Bancorp or Harrisburg which
exceed $5,000, whether individually or in the aggregate, or
that is not in the ordinary course of business.
(b) Each of Shawnee Bancorp and Harrisburg shall maintain, or cause to be
maintained, in full force and effect, insurance on its assets, properties and
operations, fidelity coverage and directors' and officers' liability insurance
on its directors, officers and employees in such amounts and with regard to
such liabilities and hazards as are currently insured by Shawnee Bancorp and
Harrisburg as of the date of this Agreement.
7.04. Preservation of Business. On and after the date of this Agreement
and until the Effective Time or until this Agreement is terminated as herein
provided, Shawnee Bancorp and Harrisburg each shall (a) carry on its business
diligently, substantially in the manner as is presently being conducted and in
the ordinary course of business; (b) use its best efforts to preserve its
business organization intact, keep available the services of the present
officers and employees and preserve its present relationships with customers
and persons having business dealings with it; (c) maintain all of the
properties and assets that it owns or utilizes in good operating condition and
repair, reasonable wear and tear excepted, and maintain insurance upon such
properties and assets in amounts and kinds comparable to that in effect on the
date of this Agreement; (d) maintain its books, records and accounts in the
usual, regular and ordinary manner, on a basis consistent with prior years and
in compliance in all material respects with all statutes, laws, rules and
regulations applicable to it and to the conduct of its business; and (e) not
do or fail to do anything which will cause a material breach of, or material
default in, any contract, agreement, commitment, obligation, understanding,
arrangement, lease or license to which it is a party or by which it is or may
be subject or bound.
7.05. Restrictions Regarding Affiliates. Shawnee Bancorp shall, within 30
days after the date of this Agreement and promptly thereafter until the
Effective Time to reflect any changes, provide ONB with a list identifying
each person who may be deemed to be an affiliate of Shawnee Bancorp for
purposes of Rule 145 under the 1933 Act. On or prior to the Effective Time,
Shawnee Bancorp shall use its best efforts to cause each director, executive
officer and other person who may be deemed to be such an affiliate of Shawnee
Bancorp to deliver to ONB on or prior to the Effective Time hereunder a
written agreement, substantially in the form as attached hereto as Exhibit A,
providing that such person (a) has not sold, pledged, transferred, disposed of
or otherwise reduced his or her market risk with respect to the shares of
Shawnee Bancorp Common Stock directly or indirectly owned or held by such
person during the thirty (30) day period prior to the Effective Time, and (b)
will not sell, pledge, transfer, dispose of or otherwise reduce his or her
market risk with respect to the shares of ONB common stock to be received by
such person pursuant to this Agreement (i) until such time as financial
results covering at least 30 days of combined operations of ONB and Shawnee
Bancorp have been published as and when required and within the meaning of
Section 201.01 of the SEC's Codification of Financial Reporting Policies and
(ii) unless such sales are pursuant to an effective Registration Statement
under the 1933 Act or pursuant to Rule 145 of the SEC or another exemption
from registration under the 1933 Act.
7.06. Other Negotiations. (a) Subject to Section 7.06(b) hereof, on and
after the date of this Agreement and until the Effective Time or until this
Agreement is terminated as herein provided, except with the prior written
approval of ONB, Shawnee Bancorp and Harrisburg shall not, and shall not
permit or authorize their respective directors, officers, employees, agents or
representatives to, directly or indirectly, initiate, solicit, encourage or
engage in discussions or negotiations with, or provide information to, any
corporation, association, partnership, person or other entity or group
concerning any merger, consolidation, share exchange, combination, purchase or
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sale of substantial assets, sale of shares of common stock (or securities
convertible or exchangeable into or otherwise evidencing, or any agreement or
instrument evidencing the right to acquire, capital stock) or similar
transaction relating to Shawnee Bancorp or Harrisburg or to which Shawnee
Bancorp or Harrisburg may become a party (all such transactions are
hereinafter referred to as "Acquisition Transactions"). Shawnee Bancorp and
Harrisburg shall promptly communicate to ONB the terms of any proposal or
offer which either of them may receive with respect to an Acquisition
Transaction and any request by or indication of interest on the part of any
third party with respect to the initiation of any Acquisition Transaction or
discussions with respect thereto.
(b) On and after the date of this Agreement and until the Effective Time or
until this Agreement is terminated as herein provided, Shawnee Bancorp and
Harrisburg may engage, and may permit and authorize their respective
directors, officers, employees, agents or representatives to engage, in
discussions or negotiations with, or provide information to, any corporation,
association, partnership, person or other entity or group concerning an
unsolicited offer by such third party with respect to an Acquisition
Transaction only with the prior written approval of ONB, which approval shall
be provided to Shawnee Bancorp promptly upon receipt by ONB of a letter from
Shawnee Bancorp signed by at least a majority of its Board of Directors then
in office indicating that Shawnee Bancorp has received an unsolicited offer
regarding an Acquisition Transaction which the Board of Directors of Shawnee
Bancorp (i) considers, in the exercise of its fiduciary duties as a Board, to
be substantially superior to the then current offer of ONB pursuant to this
Agreement and (ii) concludes, after consultation with its counsel, that its
fiduciary duties as a Board require it to consider and, in light of such
duties, take such other actions with respect to such unsolicited offer as may
be necessary or appropriate, and such approval may, in all other instances, be
provided to Shawnee Bancorp when and if ONB shall, in its sole discretion,
determine. This Section 7.06 shall not authorize Shawnee Bancorp or
Harrisburg, or their respective directors, officers, employers, agents or
representatives, to initiate any discussions or negotiations relative to an
Acquisition Transaction with a third party.
7.07. Press Releases. Except as required by law, Shawnee Bancorp and
Harrisburg shall not issue any press releases or make any other public
announcements or disclosures relating to the Mergers without the prior consent
of ONB, which consent shall not be unreasonably withheld.
7.08. Disclosure Schedule Update. Shawnee Bancorp shall promptly
supplement, amend and update, upon the occurrence of any change prior to the
Effective Time, and as of the Effective Time, the Disclosure Schedule with
respect to any matters or events hereafter arising which, if in existence or
having occurred as of the date of this Agreement, would have been required to
be set forth or described in the Disclosure Schedule or this Agreement
including, without limitation, any fact which, if existing or known as of the
date hereof, would have made any of the representations or warranties of
Shawnee Bancorp or Harrisburg contained herein materially incorrect, untrue or
misleading.
7.09. Information, Access Thereto, Confidentiality. ONB and its respective
representatives and agents shall, at all times during normal business hours
prior to the Effective Time, have full and continuing access to the
properties, facilities, operations, books and records of Shawnee Bancorp and
Harrisburg. ONB and its respective representatives and agents may, prior to
the Effective Time, make or cause to be made such reasonable investigation of
the operations, books, records and properties of Shawnee Bancorp and
Harrisburg and of their financial and legal condition as deemed reasonably
necessary or advisable to familiarize themselves with such operations, books,
records, properties and other matters; provided, however, that such access or
investigation shall not interfere unnecessarily with the normal operations of
Shawnee Bancorp or Harrisburg. Upon request, Shawnee Bancorp and Harrisburg
shall furnish ONB or its respective representatives or agents, their
attorneys' responses to external auditors requests for information, management
letters received from their external auditors and such financial and operating
data and other information reasonably requested by ONB which has been or is
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developed by Shawnee Bancorp or Harrisburg, their auditors, accountants or
attorneys (provided with respect to attorneys, such disclosure would not
result in the waiver by Shawnee Bancorp or by Harrisburg of any claim of
attorney-client privilege), and will permit ONB and its respective
representatives or agents to discuss such information directly with any
individual or firm performing auditing or accounting functions for Shawnee
Bancorp or Harrisburg, and such auditors and accountants shall be directed to
furnish copies of any reports or financial information as developed to ONB or
its respective representatives or agents. No investigation by ONB shall
affect the representations and warranties made by Shawnee Bancorp or
Harrisburg herein. Any confidential information or trade secrets received by
ONB or its employees or agents in the course of such examination, including
such confidential information and trade secrets contained in the Disclosure
Schedule, shall be treated confidentially, and any correspondence, memoranda,
records, copies, documents and electronic or other media of any kind
containing such confidential information or trade secrets or both shall be
destroyed by ONB or, at Shawnee Bancorp's request, returned to Shawnee Bancorp
in the event this Agreement is terminated as provided in Section 10 hereof.
This Section 7.09 shall not require the disclosure of any information the
disclosure to ONB of which would be prohibited by law.
7.10. Subsequent Shawnee Bancorp Financial Statements. As soon as
available after the date of this Agreement, Shawnee Bancorp shall deliver to
ONB the monthly unaudited consolidated balance sheets and profit and loss
statements of Shawnee Bancorp prepared for its internal use, Harrisburg's Call
Reports for each quarterly period completed prior to the Effective Time and
all other financial reports or statements submitted to regulatory authorities
after the date hereof, to the extent permitted by law (collectively,
"Subsequent Shawnee Bancorp Financial Statements"). The Subsequent Shawnee
Bancorp Financial Statements shall be prepared on a basis consistent with past
accounting practices and generally accepted accounting principles and shall
present fairly the financial condition and results of operations as of the
dates and for the periods presented. The Subsequent Shawnee Bancorp Financial
Statements will not include any material assets or omit to state any material
liabilities, absolute or contingent, or other facts, which inclusion or
omission would render such financial statements inaccurate, incomplete or
misleading in any respect.
7.11. Employee Benefits. The terms of Section 8.03 hereof and the
provision of any employee benefits by ONB or any of its subsidiaries to
employees of Harrisburg shall not (i) create any employment contract,
agreement or understanding with or employment rights for, or constitute a
commitment or obligation of employment to, any of the officers or employees of
Shawnee Bancorp or Harrisburg; or (ii) prohibit or restrict ONB or its
subsidiaries, whether before or after the Effective Time, from changing,
amending or terminating any employee benefits provided to its employees from
time to time.
7.12. FDIC Assistance Agreement. Shawnee Bancorp shall take any and all
necessary and appropriate action to cause the FDIC Assistance Agreement to be
modified, terminated or released to the satisfaction of ONB prior to or as of
the Effective Time, and to obtain the approval of the FDIC of this Agreement
and the Mergers contemplated hereby as required under the FDIC Assistance
Agreement.
7.13. Mercantile Indebtedness. In connection with ONB assuming,
transferring, assigning or paying in full the Mercantile Indebtedness pursuant
to Sections 8.08 hereof, Shawnee Bancorp shall proceed expeditiously,
cooperate fully and use its best efforts to obtain the complete release of
the General Pledge and Security Agreement from Shawnee Bancorp to Mercantile
Bank covering the shares of Harrisburg Common Stock, which pledge was taken,
made or given to secure repayment of the Mercantile Indebtedness, all to the
reasonable satisfaction of ONB.
7.14. Shareholder Agreement. The Shareholder Agreement, dated September
13, 1991, among the shareholders of Shawnee Bancorp shall be terminated in all
respects prior to the Effective Time.
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SECTION 8
COVENANTS OF ONB
----------------
ONB covenants and agrees, and covenants and agrees to cause First National to
act, as follows:
8.01. Approvals. ONB shall have primary responsibility for the
preparation, filing and cost of all bank holding company and bank regulatory
applications required for consummation of the Mergers. ONB shall file all
bank holding company and bank regulatory applications as soon as practicable
after the execution of this Agreement. ONB shall provide to Shawnee Bancorp's
counsel copies of all material written communications with all state and
federal bank regulatory agencies relating to such applications. ONB shall
proceed expeditiously, cooperate fully and use its best efforts to procure,
upon terms and conditions reasonably acceptable to ONB, all consents,
authorizations, approvals, registrations and certificates, to complete all
filings and applications and to satisfy all other requirements prescribed by
law which are necessary for consummation of the Mergers on the terms and
conditions provided in this Agreement at the earliest possible reasonable
date.
8.02. SEC Registration. (a) ONB shall file with the SEC as soon as
practicable after the execution of this Agreement a Registration Statement on
an appropriate form under the 1933 Act covering ONB common stock to be issued
pursuant to this Agreement and shall use its best efforts to cause the same to
become effective and thereafter, until the Effective Time or termination of
this Agreement, to keep the same effective and, if necessary, amend and
supplement the same. Such Registration Statement and any amendments and
supplements thereto are referred to in this Agreement as the "Registration
Statement". The Registration Statement shall include a proxy statement-
prospectus reasonably acceptable to ONB and Shawnee Bancorp, prepared for use
in connection with the meeting of shareholders of Shawnee Bancorp referred to
in Section 7.01 of this Agreement, all in accordance with the rules and
regulations of the SEC. ONB shall, as soon as practicable after filing the
Registration Statement, make all filings required to obtain all Blue Sky
exemptions, authorizations, consents or approvals required for the issuance of
ONB common stock. In advance of filing the Registration Statement and all
other filings described in Section 8.01 herein, ONB shall provide Shawnee
Bancorp and its counsel with a copy of the Registration Statement and each
such other filing and provide an opportunity to comment thereon.
(b) The information pertaining to ONB furnished by or on behalf of ONB or
its management for inclusion in the Registration Statement, and the
information pertaining to ONB which appears in the Registration Statement, as
well as the documents incorporated by reference therein, filed with the SEC,
will contain no untrue statement of any material fact and will not omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they are
made, not misleading.
8.03. Employee Benefit Plans. (a) At such time as ONB shall determine in
its sole discretion but in no event later than January 1, 1996, ONB will make
available to the employees of Harrisburg who continue as employees of any
subsidiary of ONB after the Effective Time, and, further, subject to Section
8.03(b) and (c) hereof, substantially the same employee benefits on
substantially the same terms and conditions that ONB may offer to similarly
situated officers and employees of its banking subsidiaries from time to time.
Until such time as the employees of Harrisburg become covered by the ONB
welfare benefit plans, the employees of Harrisburg shall remain covered by the
welfare benefit plans sponsored by Harrisburg, subject to the terms of such
plans.
(b) Years of service (as defined in the applicable ONB plan) of an officer
or employee of Harrisburg prior to the Effective Time shall be credited,
effective as the date on which such employees become covered by ONB's employee
welfare benefit plans, to each such officer or employee eligible for coverage
under Section 8.03(a) hereof for purposes of (i) eligibility under ONB's
employee welfare benefit plans, and (ii) eligibility and
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vesting, but not for purposes of benefit accrual or contributions, under the
ONB Employees' Retirement Plan ("ONB Pension Plan") and under the ONB
Employees' Savings and Profit Sharing Plan ("ONB Profit Sharing Plan"). Those
officers and employees of Harrisburg who otherwise meet the eligibility
requirements of the ONB Pension Plan and the ONB Profit Sharing Plan, based
upon their age and years of Harrisburg service, shall become participants
thereunder on the January 1st which coincides with or next follows the
Effective Time. Those officers or employees who do not meet the eligibility
requirements of the ONB Pension Plan or ONB Profit Sharing Plan on such date
shall become participants thereunder on the first plan entry date under the
ONB Pension Plan or the ONB Profit Sharing Plan, as the case may be, which
coincides with or next follows the date on which such eligibility requirements
are satisfied.
(c) No full-time officer or employee of Harrisburg serving as of the
Effective Time shall be subject to any pre-existing condition exclusions under
any of ONB's welfare benefit plans if such officer, employee or individual was
covered by the corresponding Harrisburg welfare benefit plan for more than 270
days immediately preceding the Effective Time.
(d) The terms of this Section 8.03 or the provision of any employee benefits
by ONB or any of its subsidiaries to employees of Harrisburg shall not (i)
create any employment contract, agreement or understanding with or employment
rights for, or constitute a commitment or obligation of employment to, any of
the officers or employees of Shawnee Bancorp or Harrisburg; or (ii) prohibit
or restrict ONB or its subsidiaries, whether before or after the Effective
Time, from changing, amending or terminating any employee benefits provided to
its employees from time to time.
8.04. Authorization of ONB Common Stock. The Board of Directors of ONB
shall, prior to the Effective Time, authorize the issuance of the required
number of shares of ONB common stock to be issued pursuant to this Agreement
and take all other necessary corporate action to consummate the Mergers
contemplated hereby.
8.05. Press Releases. Except as required by law, ONB shall not issue any
press releases or make any other public announcements or disclosures relating
primarily to Shawnee Bancorp or Harrisburg with respect to the Mergers without
the prior consent of Shawnee Bancorp or Harrisburg, which consent shall not be
unreasonably withheld.
8.06 Indemnification and Insurance. (a) Indemnification. From and after
the Effective Time, ONB shall assume and honor any obligations as provided for
and permitted by applicable federal and state law which Shawnee Bancorp and
Harrisburg had immediately prior to the Effective Time with respect to the
indemnification of each person who is, on the date hereof, or has been at any
time prior to the date hereof, or who becomes, prior to the Effective Time, a
director or officer of Shawnee Bancorp or Harrisburg or was serving at the
request of Shawnee Bancorp as a director or officer of any domestic or foreign
corporation, joint venture, trust, employee benefit plan or other enterprise
(collectively, the "Indemnitees") arising out of Shawnee Bancorp's Articles of
Incorporation or By-Laws or Harrisburg's Charter or By-Laws in effect at the
Effective Time, against any and all losses in connection with or arising out
of any claim, which is based upon, arises out of or in any way relates to any
actual or alleged act or omission occurring at or prior to the Effective Time
in the Indemnitee's capacity as a director or officer (whether elected or
appointed) of Shawnee Bancorp or Harrisburg. Indemnification of employees and
directors of Shawnee Bancorp or Harrisburg following the Effective Time will
be provided to the same extent as provided to other persons serving in similar
capacities for ONB or its subsidiaries following the Effective Time.
(b) Insurance. For a period of one (1) year after the Effective Time, ONB
shall use all reasonable efforts to cause to be maintained in effect the
current policies of directors' and officers' liability insurance maintained
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<PAGE>
by Shawnee Bancorp and Harrisburg (provided that ONB may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions which are substantially no less advantageous) with respect to
claims arising from facts or events which occurred prior to or at the
Effective Time. Following the Effective Time, ONB will provide any Shawnee
Bancorp or Harrisburg employees who become officers of ONB or any of its
subsidiaries with the same directors' and officers' liability insurance
coverage that ONB provides to other similarly situated officers at ONB and its
bank subsidiaries.
8.07. Information, Access Thereto, Confidentiality. Shawnee Bancorp and
Harrisburg and its representatives and agents shall, at all times during
normal business hours prior to the Effective Time, have full and continuing
access to the material facilities, operations, books, records and properties
of ONB. Shawnee Bancorp and Harrisburg and their respective representatives
and agents may, prior to the Effective Time, make or cause to be made such
reasonable investigation of the material operations, books, records and
properties of ONB and of its financial and legal condition as Shawnee Bancorp
and Harrisburg shall deem reasonably necessary or advisable to familiarize
itself with such books, records, properties and other matters; provided,
however, that such access or investigation shall not interfere unnecessarily
with the normal operations of ONB. No investigation by Shawnee Bancorp or
Harrisburg shall affect the representations and warranties made by ONB. Any
confidential information or trade secrets received by Shawnee Bancorp or
Harrisburg or their respective employees or agents in the course of such
examination shall be treated confidentially, and any correspondence,
memoranda, records, copies, documents and electronic or other media of any
kind containing such confidential information or trade secrets or both shall
be destroyed by Shawnee Bancorp or, at ONB's request, returned to ONB in the
event this Agreement is terminated as provided in Section 10 hereof. This
Section 8.07 shall not require the disclosure of any information to Shawnee
Bancorp and Harrisburg the disclosure of which would be prohibited by law.
8.08. Mercantile Indebtedness. Upon terms and conditions
acceptable to ONB, prior to or as of the Effective Time, ONB shall either (i)
pay in full the Mercantile Indebtedness or (ii) assume, assign or transfer the
Mercantile Indebtedness to it or an affiliate or subsidiary of ONB.
8.09. FDIC Assistance Agreement. ONB shall cooperate fully and use its
best efforts to assist Shawnee Bancorp in modifying, terminating or releasing
the FDIC Assistance Agreement upon terms and conditions acceptable to ONB.
SECTION 9
CONDITIONS PRECEDENT TO THE MERGER
----------------------------------
9.01. ONB. The obligation of ONB to consummate the Mergers is subject to
the satisfaction and fulfillment of each of the following conditions at or
prior to the Effective Time, unless waived in writing by ONB:
(a) Representations and Warranties at Effective Time. Each of the
representations and warranties of Shawnee Bancorp and Harrisburg contained in
this Agreement shall be true, accurate and correct in all material respects at
and as of the Effective Time as though such representations and warranties had
been made or given on and as of the Effective Time.
(b) Covenants. Each of the covenants and agreements of Shawnee Bancorp and
Harrisburg shall have been fulfilled or complied with from the date of this
Agreement through and as of the Effective Time.
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<PAGE>
(c) Deliveries at Closing. ONB shall have received from Shawnee Bancorp and
Harrisburg at the Closing (as hereinafter defined) the items and documents, in
form and content reasonably satisfactory to ONB, set forth in Section 12.02(b)
hereof.
(d) Registration Statement Effective. ONB shall have registered its shares
of common stock to be issued to shareholders of Shawnee Bancorp in accordance
with this Agreement with the SEC pursuant to the 1933 Act, and all state
securities and Blue Sky approvals, authorizations and exemptions required to
offer and sell such shares shall have been received by ONB. The Registration
Statement with respect thereto shall have been declared effective by the SEC
and no stop order shall have been issued or threatened. In addition, such
shares shall be listed on the NASDAQ National Market System.
(e) Regulatory Approvals. The Federal Reserve, the FDIC, the Office of the
Comptroller of the Currency ("OCC") and the ICBT shall have authorized and
approved the Mergers on terms and conditions satisfactory to ONB. In
addition, all appropriate orders, consents, approvals and clearances from all
other regulatory agencies and governmental authorities, including the FDIC as
required by the FDIC Assistance Agreement, whose orders, consents, approvals
or clearances are required by law for consummation of the Mergers contemplated
by this Agreement shall have been obtained on terms and conditions
satisfactory to ONB.
(f) Shareholder Approval. The shareholders of Shawnee Bancorp and
Harrisburg shall have approved and adopted this Agreement as required by
applicable law and Shawnee Bancorp's and Harrisburg's Articles of
Incorporation and Charter, respectively.
(g) Officers' Certificate. Shawnee Bancorp and Harrisburg shall have
delivered to ONB a certificate signed by its Chairman or President and its
Secretary, dated as of the Effective Time, certifying that (i) all the
representations and warranties of Shawnee Bancorp and Harrisburg are true,
accurate and correct in all material respects on and as of the Effective Time;
(ii) all the covenants of Shawnee Bancorp and Harrisburg have been complied
with from the date of this Agreement through and as of the Effective Time; and
(iii) Shawnee Bancorp and Harrisburg have satisfied and fully complied with
all conditions necessary to make this Agreement effective as to each of them.
(h) Tax Opinion. The respective Boards of Directors of the parties to this
Agreement shall have received a written opinion of the law firm of Krieg
DeVault Alexander & Capehart, dated as of the Effective Time, in form and
content satisfactory to the parties hereto, to the effect that the Mergers to
be effected pursuant to this Agreement should constitute a tax-free
reorganization under the Code (as described in Section 1.06 hereof) to each
party hereto and to the shareholders of Shawnee Bancorp, except with respect
to (a) cash received by Shawnee Bancorp's shareholders (i) for fractional
shares resulting from application of the Exchange Ratio or (ii) pursuant to
the exercise of dissenters' rights as described in Section 4 hereof, and (b)
cash received by the minority shareholders of Harrisburg (i) in the Bank
Merger or (ii) pursuant to the exercise of dissenters' rights described in
Section 4 hereof.
(i) Affiliate Agreements. ONB shall have received from Shawnee Bancorp (i)
a list identifying each affiliate of Shawnee Bancorp in accordance with
Section 7.05 hereof dated as of the Effective Time and (ii) from each
affiliate of Shawnee Bancorp the agreements dated as of the Effective Time
contemplated by Section 7.05 hereof.
(j) FDIC Assistance Agreement. The FDIC shall have modified, released or
terminated the FDIC Assistance Agreement, and any and all other arrangements,
commitments, undertakings, understandings,
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<PAGE>
agreements or contracts with any governmental regulatory agency or body shall
have been released or terminated, all to the reasonable satisfaction of ONB.
9.02. Shawnee Bancorp. The obligation of Shawnee Bancorp to consummate the
Mergers is subject to the satisfaction and fulfillment of each of the
following conditions on or prior to the Effective Time, unless waived in
writing by Shawnee Bancorp:
(a) Representations and Warranties at Effective Time. All of the
representations and warranties of ONB contained in this Agreement shall be
true, accurate and correct in all material respects on and as of the Effective
Time as though the representations and warranties had been made or given at
and as of the Effective Time.
(b) Covenants. Each of the covenants and agreements of ONB shall have been
fulfilled or complied with from the date of this Agreement through and as of
the Effective Time.
(c) Deliveries at Closing. Shawnee Bancorp shall have received from ONB at
the Closing the items and documents, in form and content reasonably
satisfactory to Shawnee Bancorp, listed in Section 12.02(a) hereof.
(d) Registration Statement Effective. ONB shall have registered its shares
of common stock to be issued to shareholders of Shawnee Bancorp in accordance
with this Agreement with the SEC pursuant to the 1933 Act, and all state
securities and Blue Sky approvals, authorizations and exemptions required to
offer and sell such shares shall have been received by ONB. The Registration
Statement with respect thereto shall have been declared effective by the SEC
and no stop order shall have been issued or threatened. In addition, such
shares shall be listed on the NASDAQ National Market System.
(e) Regulatory Approvals. The Federal Reserve, the FDIC, the OCC and the
ICBT shall have authorized and approved the Mergers. In addition, all
appropriate orders, consents, approvals and clearances from all other
regulatory agencies and governmental authorities, including the FDIC as
required by the FDIC Assistance Agreement, whose orders, consents, approvals
or clearances are required by law for consummation of the Mergers contemplated
by this Agreement shall have been obtained.
(f) Shareholder Approval. The shareholders of Shawnee Bancorp and
Harrisburg shall have approved and adopted this Agreement as required by
applicable law and Shawnee Bancorp's and Harrisburg's Articles of
Incorporation and Charter, respectively.
(g) Officers' Certificate. ONB shall have delivered to Shawnee Bancorp a
certificate signed by its Chairman or President and its Secretary, dated as of
the Effective Time, certifying that (i) all the representations and warranties
of ONB are true, accurate and correct in all material respects at and as of
the Effective Time; (ii) all the covenants of ONB have been complied with from
the date of this Agreement through and as of the Effective Time; and (iii) ONB
has satisfied and fully complied with all conditions necessary to make this
Agreement effective as to it.
(h) Tax Opinion. The respective Boards of Directors of the parties to this
Agreement shall have received a written opinion of the law firm of Krieg
DeVault Alexander & Capehart, dated as of the Effective Time, in form and
content satisfactory to the parties hereto, to the effect that the Mergers to
be effected pursuant to this Agreement should constitute a tax-free
reorganization under the Code (as described in Section 1.06 hereof) to each
party hereto and to the shareholders of Shawnee Bancorp, except with respect
to (a) cash received by Shawnee Bancorp's shareholders (i) for fractional
shares resulting from application of the Exchange Ratio or (ii) pursuant to
the exercise of dissenters' rights as described in Section 4 hereof, and (b)
cash received by the
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<PAGE>
minority shareholders of Harrisburg (i) in the Bank Merger and (ii) pursuant
to dissenters' rights as described in Section 4 hereof.
SECTION 10
TERMINATION OF MERGERS
----------------------
10.01. Manner of Termination. This Agreement and the Mergers may be
terminated at any time prior to the Effective Time by written notice delivered
by ONB to Shawnee Bancorp, or by Shawnee Bancorp to ONB, as follows:
(a) By ONB or Shawnee Bancorp, if:
(i) the Mergers contemplated by this Agreement have not been
consummated by January 31, 1996; or
(ii) the respective Boards of Directors of ONB and Shawnee Bancorp
mutually agree to terminate this Agreement.
(b) By ONB, if:
(i) the Mergers will not qualify for pooling-of-interest accounting
treatment for ONB;
(ii) any item, event or information set forth in any update to the
Disclosure Schedule has had or would be expected to have, in the reasonable
discretion of ONB, a material adverse effect on the business, prospects,
assets, capitalization, financial condition or results of operations of
Shawnee Bancorp or Harrisburg, whether individually or on a consolidated
basis;
(iii) there has been a misrepresentation or a breach of any
warranty by or on the part of Shawnee Bancorp in its representations and
warranties set forth in this Agreement which has had or would be expected to
have, in the reasonable discretion of ONB, a material adverse effect on the
business, prospects, assets, capitalization, financial condition or results of
operations of Shawnee Bancorp or Harrisburg, whether individually or on a
consolidated basis; provided, however, that in the event of any inaccuracy in
the representations and warranties contained in Section 5.03 hereof relative
to the number of issued and outstanding shares of capital stock of Shawnee
Bancorp or Harrisburg, ONB shall have the absolute right to terminate this
Agreement without regard to the materiality of any such inaccuracy;
(iv) there has been a breach of or failure to comply with any
covenant set forth in this Agreement by or on the part of Shawnee Bancorp or
Harrisburg;
(v) it shall reasonably determine that the Mergers contemplated by
this Agreement have become inadvisable or impracticable by reason of
commencement or threat of any claim, litigation or proceeding against ONB,
Shawnee Bancorp, Harrisburg or any subsidiary of ONB, or any director or
officer of any of such entities (A) relating to this Agreement or the Mergers
or (B) which is likely to have a material adverse effect on the business,
prospects, assets, capitalization, financial condition or results of
operations of Shawnee Bancorp or Harrisburg, whether individually or on a
consolidated basis, or of ONB; or
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<PAGE>
(vi) there has been a material adverse change in the business,
prospects, assets, capitalization, financial condition or results of
operations of Shawnee Bancorp or Harrisburg as of the Effective Time as
compared to that in existence as of December 31, 1994.
(c) By Shawnee Bancorp, if:
(i) there has been a misrepresentation or a breach of any warranty
by or on the part of ONB in its representations and warranties set forth in
this Agreement which has had or would be expected to have, in the reasonable
discretion of Shawnee Bancorp, a material adverse effect on the business,
assets, capitalization, financial condition or results of operation of ONB on
a consolidated basis;
(ii) there has been a breach of or failure to comply with any
covenant set forth in this Agreement by or on the part of ONB; or
(iii) there has been a material adverse change in the financial
condition, results of operations, business, prospects, assets or
capitalization of ONB on a consolidated basis as of the Effective Time as
compared to that in existence on December 31, 1994.
10.02. Effect of Termination. Upon termination by written notice, this
Agreement shall be of no further force or effect, and there shall be no
further obligations or restrictions on future activities on the part of ONB,
Shawnee Bancorp and their respective directors, officers, employees, agents
and shareholders, except as provided in compliance with the confidentiality
provisions of this Agreement set forth in Section 7.09 and Section 8.07 hereof
and the payment of expenses set forth in Section 13.09 hereof.
SECTION 11
EFFECTIVE TIME OF THE MERGER
----------------------------
Upon the terms and subject to the conditions specified in this Agreement,
the Mergers shall become effective at the close of business on the day and at
the time specified in the Articles of Merger of Shawnee Bancorp with and into
ONB as filed with the Indiana Secretary of State and the Illinois Secretary of
State ("Effective Time"). Unless otherwise mutually agreed to by the parties
hereto, the Effective Time shall occur on the last business day of the month
following (a) the fulfillment of all conditions precedent to the Mergers set
forth in Section 9 of this Agreement and (b) the expiration of all waiting
periods in connection with the bank regulatory applications filed for the
approval of the Mergers.
SECTION 12
CLOSING
-------
12.01. Closing Date and Place. So long as all conditions precedent set
forth in Section 9 have been satisfied and fulfilled, the closing of the
Mergers ("Closing") shall take place on the Effective Time at a location to be
reasonably determined by ONB.
12.02. Deliveries. (a) At the Closing, ONB shall deliver to Shawnee Bancorp
the following:
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<PAGE>
(i) an opinion of its counsel dated as of the Effective Time and
substantially in the form set forth in Exhibit B attached hereto;
(ii) the officers' certificate contemplated by Section 9.02(g)
hereof;
(iii) copies of all approvals by bank regulatory agencies necessary
to consummate the Mergers;
(iv) copies of the resolutions of the Board of Directors of ONB and
First National, certified by the Secretary of ONB and the Cashier of First
National, respectively, relative to the approval of this Agreement and the
Mergers; and
(v) such other documents as Shawnee Bancorp or its legal counsel may
reasonably request.
(b) At the Closing, Shawnee Bancorp shall deliver to ONB the following:
(i) an opinion of its counsel dated as of the Effective Time and
substantially in the form set forth in Exhibit C attached hereto;
(ii) the officers' certificate contemplated by Section 9.01(g)
hereof;
(iii) a list of Shawnee Bancorp's and Harrisburg's shareholders as
of the Effective Time, certified by the President and Secretary of Shawnee
Bancorp and Harrisburg, respectively;
(iv) copies of the resolutions adopted by the Board of Directors and
shareholders of Shawnee Bancorp and Harrisburg, certified by the President or
Secretary of Shawnee Bancorp and Harrisburg, respectively, relative to the
approval of this Agreement and the Mergers; and
(v) such other documents as ONB or its legal counsel may reasonably
request.
SECTION 13
MISCELLANEOUS
-------------
13.01. Effective Agreement. This Agreement shall be binding upon and inure
to the benefit of the respective parties hereto and their respective
successors and may not be assigned by any party hereto without the prior
written consent of the other parties hereto.
13.02. Waiver; Amendment. (a) The parties hereto may by an instrument in
writing: (i) extend the time for the performance of any of the covenants or
agreements of the other parties under this Agreement; (ii) waive any
inaccuracies in the representations or warranties of the other parties
contained in this Agreement or in any document delivered pursuant hereto or
thereto; (iii) waive the performance by the other parties of any of the
covenants or agreements to be performed by it or them under this Agreement; or
(iv) waive the satisfaction or fulfillment of any condition, the
nonsatisfaction or nonfulfillment of which is a condition to the right of the
party so waiving to consummate the Mergers. The waiver by any party hereto of
a breach of or noncompliance with any provision of this Agreement shall not
operate or be construed as a waiver of any other or subsequent breach or
noncompliance hereunder.
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<PAGE>
(b) This Agreement may be amended, modified or supplemented only by a
written agreement executed by the parties hereto.
13.03. Notices. All notices, requests and other communications hereunder
shall be in writing (which shall include telecopier communication) and shall
be deemed to have been duly given if delivered by hand and receipted for, sent
by certified United States Mail, return receipt requested, first class postage
pre-paid, delivered by overnight express receipted delivery service or
telecopied if confirmed immediately thereafter by also mailing a copy of such
notice, request or other communication by certified United States Mail, return
receipt requested, with first class postage pre-paid as follows:
<TABLE>
<CAPTION>
<S> <C>
If to ONB or First National: with a copy to (which shall not
constitute notice):
Old National Bancorp Krieg DeVault Alexander & Capehart
420 Main Street, 11th Floor One Indiana Square, Suite 2800
P.O. Box 718 Indianapolis, Indiana 46204-2017
Evansville, Indiana 47705 ATTN: Nicholas J. Chulos, Esq.
ATTN: Jeffrey L. Knight, Telephone: (317) 238-6224
Corporate Secretary and Telecopier: (317) 636-1507
General Counsel
Telephone: (812) 464-1363
Telecopier: (812) 464-1567
If to Shawnee Bancorp or Harrisburg: with a copy to (which shall not
constitute notice):
Shawnee Bancorp, Inc., Harrisburg Peper, Martin, Jensen, Maichel and Hetlage
2 West Walnut Street 24th Floor, 720 Olive Street
P.O. Drawer 448 St. Louis, Missouri 63101
Harrisburg, Illinois 62946-0448 Attn: John R. Short, Esq.
Attn: William Cook, President Telephone: (314) 444-6430
Telephone: (618) 253-7693 Telecopier: (314) 621-4834
Telecopier: (618) 252-1234
</TABLE>
or such substituted address or person as any of them have given to the other
in writing. All such notices, requests or other communications shall be
effective: (a) if delivered by hand, when delivered; (b) if mailed in the
manner provided herein, three (3) business days after deposit with the United
States Postal Service; (c) if delivered by overnight express delivery service,
on the next business day after deposit with such service; and (d) if by
telecopier, on the next business day if also confirmed by mail in the manner
provided herein.
13.04. Headings. The headings in this Agreement have been inserted
solely for ease of reference and should not be considered in the
interpretation or construction of this Agreement.
13.05. Severability. In case any one or more of the provisions
contained herein shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but this Agreement
shall be construed as if such invalid, illegal or unenforceable provision or
provisions had never been contained herein.
13.06. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but such counterparts
shall together constitute one and the same instrument.
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<PAGE>
13.07. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Indiana and applicable
federal laws.
13.08. Entire Agreement. This Agreement supersedes all other prior
or contemporaneous understandings, commitments, representations, negotiations
or agreements, whether oral or written, among the parties hereto relating to
the Mergers or matters contemplated herein and constitutes the entire
agreement between the parties hereto. Upon the execution of this Agreement by
all the parties hereto, the preliminary non-binding letter of intent, dated
February 6, 1995, executed by ONB and Shawnee Bancorp, and any and all other
prior writings of either party relating to the Mergers, shall terminate and
shall be rendered of no further force or effect.
13.09. Expenses. ONB and Shawnee Bancorp shall each pay their
respective expenses incidental to the Mergers contemplated hereby.
Notwithstanding the foregoing, if the Mergers are not able to be consummated
because any governmental entity denies approval of the Mergers based upon
antitrust or any other reason which is directly attributable to or based upon
ONB's condition, actions or status, or a lawsuit is filed to enjoin the
Mergers based upon antitrust or any other reason which is directly
attributable to or based upon ONB's condition, actions or status, (and such
denial or legal action is not subject to further administrative or judicial
appeal), and ONB thereafter terminates this Agreement pursuant to section
10.01(b)(v) hereof, ONB will, within ten (10) days after such termination of
the Mergers, reimburse Shawnee Bancorp for all reasonable out-of-pocket
expenses and fees incurred by it or on its behalf in connection with the
negotiation, preparation, execution and performance of this Agreement, the
Mergers and all documents and applications related thereto up to a maximum of
Fifty Thousand Dollars ($50,000). In the event of such a termination of this
Agreement, ONB shall not be obligated to pay Shawnee Bancorp any amount for
any reason other than the foregoing sum.
13.10. Certain References. Whenever in this Agreement a singular
word is used, it also shall include the plural wherever required by the
context and vice-versa. Except expressly stated otherwise, all references in
this Agreement to periods of days shall be construed to refer to calendar, not
business, days. The term "business day" shall mean any day except Saturday
and Sunday when Old National Bank in Evansville, the lead affiliate bank of
ONB, is open for the transaction of business.
13.11. Disclosure Schedule. The Disclosure Schedule attached hereto
is intended to be and hereby is specifically made a part of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, ONB, Shawnee Bancorp, First National and
Harrisburg have made and entered into this Agreement as of the day and year
first above written and have caused this Agreement to be executed and attested
in counterparts by their duly authorized officers.
OLD NATIONAL BANCORP
By: /s/ John N. Royse
-------------------------------------
John N. Royse, Chairman and
Chief Executive Officer
ATTEST:
By: /s/ Jeffrey L. Knight
-------------------------------
Jeffrey L. Knight, Secretary
SHAWNEE BANCORP, INC., HARRISBURG
By: /s/ William Cook
-------------------------------------
William Cook, President and
Chief Executive Officer
ATTEST:
By: /s/ David H. Clemmons
-------------------------------
David H. Clemmons, Secretary
THE FIRST NATIONAL BANK
OF HARRISBURG
By: /s/ Ronald Gibbons
------------------------------------
Ronald Gibbons, President and Chief
Executive Officer
ATTEST:
By: /s/ Shirley Rose
-------------------------------
Shirley Rose, Cashier
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<PAGE>
THE BANK OF HARRISBURG
By: /s/ William Cook
------------------------------------
William Cook, President
ATTEST:
By: /s/ Cindy Dillard
-------------------------------
Cindy Dillard, Cashier
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<PAGE>
APPENDIX B
ILLINOIS DISSENTERS' RIGHTS LAW
UNDER THE ILLINOIS BUSINESS CORPORATION ACT OF 1983
5/11.65. RIGHT TO DISSENT
s 11.65. Right to dissent. (a) A shareholder of a corporation is
entitled to dissent from, and obtain payment for his or her shares in the event
of any of the following corporate actions:
(1) consummation of a plan of merger or consolidation or a plan of
share exchange to which the corporation is a party if (i) shareholder
authorization is required for the merger or consolidation or the share exchange
by Section 11.20 or the articles of incorporation or (ii) the corporation is a
subsidiary that is merged with its parent or another subsidiary under Section
11.30;
(2) consummation of a sale, lease or exchange of all, or substantially
all, of the property and assets of the corporation other than in the usual and
regular course of business;
(3) an amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(i) alters or abolishes a preferential right of such shares;
(ii) alters or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of such
shares;
(iii) in the case of a corporation incorporated prior to January 1,
1982, limits or eliminates cumulative voting rights with respect to such shares;
or
(4) any other corporate action taken pursuant to a shareholder vote if
the articles of incorporation, by-laws, or a resolution of the board of
directors provide that shareholders are entitled to dissent and obtain payment
for their shares in accordance with the procedures set forth in Section 11.70 or
as may be otherwise provided in the articles, by-laws or resolution.
(b) A shareholder entitled to dissent and obtain payment for his or
her shares under this Section may not challenge the corporate action creating
his or her entitlement unless the action is fraudulent with respect to the
shareholder or the corporation or constitutes a breach of a fiduciary duty owed
to the shareholder.
(c) A record owner of shares may assert dissenters' rights as to fewer
than all the shares recorded in such person's name only if such person dissents
with respect to all shares beneficially owned by any one person and notifies the
corporation in writing of the name and address of each person on whose behalf
the record owner asserts dissenters' rights. The rights of a partial dissenter
are determined as if the shares as to which dissent is made and the other shares
were recorded in the names of different shareholders. A beneficial owner of
shares who is not the record owner may assert dissenters' rights as to shares
held on such person's behalf only if the beneficial owner submits to the
corporation the record owner's written consent to the dissent before or at the
same time the beneficial owner asserts dissenters' rights.
B-1
<PAGE>
5/11.70. PROCEDURE TO DISSENT
s 11.70. Procedure to Dissent. (a) If the corporate action giving rise
to the right to dissent is to be approved at a meeting of shareholders, the
notice of meeting shall inform the shareholders of their right to dissent and
the procedure to dissent. If, prior to the meeting, the corporation furnishes to
the shareholders material information with respect to the transaction that will
objectively enable a shareholder to vote on the transaction and to determine
whether or not to exercise dissenters' rights, a shareholder may assert
dissenters' rights only if the shareholder delivers to the corporation before
the vote is taken a written demand for payment for his or her shares if the
proposed action is consummated, and the shareholder does not vote in favor of
the proposed action.
(b) If the corporate action giving rise to the right to dissent is not
to be approved at a meeting of shareholders, the notice to shareholders
describing the action taken under Section 11.30 or Section 7.10 shall inform the
shareholders of their right to dissent and the procedure to dissent. If, prior
to or concurrently with the notice, the corporation furnishes to the
shareholders material information with respect to the transaction that will
objectively enable a shareholder to determine whether or not to exercise
dissenters' rights, a shareholder may assert dissenter's rights only if he or
she delivers to the corporation within 30 days from the date of mailing the
notice a written demand for payment for his or her shares.
(c) Within 10 days after the date on which the corporate action giving
rise to the right to dissent is effective or 30 days after the shareholder
delivers to the corporation the written demand for payment, whichever is later,
the corporation shall send each shareholder who has delivered a written demand
for payment a statement setting forth the opinion of the corporation as to the
estimated fair value of the shares, the corporation's latest balance sheet as of
the end of a fiscal year ending not earlier than 16 months before the delivery
of the statement, together with the statement of income for that year and the
latest available interim financial statements, and either a commitment to pay
for the shares of the dissenting shareholder at the estimated fair value thereof
upon transmittal to the corporation of the certificate or certificates, or other
evidence of ownership, with respect to the shares, or instructions to the
dissenting shareholder to sell his or her shares within 10 days after delivery
of the corporation's statement to the shareholder. The corporation may instruct
the shareholder to sell only if there is a public market for the shares at which
the shares may be readily sold. If the shareholder does not sell within that 10
day period after being so instructed by the corporation, for purposes of this
Section the shareholder shall be deemed to have sold his or her shares at the
average closing price of the shares, if listed on a national exchange, or the
average of the bid and asked price with respect to the shares quoted by a
principal market maker, if not listed on a national exchange, during that 10 day
period.
(d) A shareholder who makes written demand for payment under this
Section retains all other rights of a shareholder until those rights are
cancelled or modified by the consummation of the proposed corporate action. Upon
consummation of that action, the corporation shall pay to each dissenter who
transmits to the corporation the certificate or other evidence of ownership of
the shares the amount the corporation estimates to be the fair value of the
shares, plus accrued interest, accompanied by a written explanation of how the
interest was calculated.
(e) If the shareholder does not agree with the opinion of the
corporation as to the estimated fair value of the shares or the amount of
interest due, the shareholder, within 30 days from the delivery of the
corporation's
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<PAGE>
statement of value, shall notify the corporation in writing of the shareholder's
estimated fair value and amount of interest due and demand payment for the
difference between the shareholder's estimate of fair value and interest due and
the amount of the payment by the corporation or the proceeds of sale by the
shareholder, whichever is applicable because of the procedure for which the
corporation opted pursuant to subsection (c).
(f) If, within 60 days from delivery to the corporation of the
shareholder notification of estimate of fair value of the shares and interest
due, the corporation and the dissenting shareholder have not agreed in writing
upon the fair value of the shares and interest due, the corporation shall either
pay the difference in value demanded by the shareholder, with interest, or file
a petition in the circuit court of the county in which either the registered
office or the principal office of the corporation is located, requesting the
court to determine the fair value of the shares and interest due. The
corporation shall make all dissenters, whether or not residents of this State,
whose demands remain unsettled parties to the proceeding as an action against
their shares and all parties shall be served with a copy of the petition.
Nonresidents may be served by registered or certified mail or by publication as
provided by law. Failure of the corporation to commence an action pursuant to
this Section shall not limit or affect the right of the dissenting shareholders
to otherwise commence an action as permitted by law.
(g) The jurisdiction of the court in which the proceeding is commenced
under subsection (f) by a corporation is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the power described
in the order appointing them, or in any amendment to it.
(h) Each dissenter made a party to the proceeding is entitled to
judgment for the amount, if any, by which the court finds that the fair value of
his or her shares, plus interest, exceeds the amount paid by the corporation or
the proceeds of sale by the shareholder, whichever amount is applicable.
(i) The court, in a proceeding commenced under subsection (f), shall
determine all costs of the proceeding, including the reasonable compensation and
expenses of the appraisers, if any, appointed by the court under subsection (g),
but shall exclude the fees and expenses of counsel and experts for the
respective parties. If the fair value of the shares as determined by the court
materially exceeds the amount which the corporation estimated to be the fair
value of the shares or if no estimate was made in accordance with subsection
(c), then all or any part of the costs may be assessed against the corporation.
If the amount which any dissenter estimated to be the fair value of the shares
materially exceeds the fair value of the shares as determined by the court, then
all or any part of the costs may be assessed against that dissenter. The court
may also assess the fees and expenses of counsel and experts for the respective
parties, in amounts the court finds equitable, as follows:
(1) Against the corporation and in favor of any or all dissenters if
the court finds that the corporation did not substantially comply with the
requirements of subsections (a), (b), (c), (d), or (f).
(2) Against either the corporation or a dissenter and in favor of any
other party if the court finds that the party against whom the fees and expenses
are assessed acted arbitrarily, vexatiously, or not in good faith with respect
to the rights provided by this Section.
If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated and that the fees
for those services should not be assessed against the corporation, the court may
award to that counsel reasonable fees to be paid out of the amounts awarded to
the dissenters who are benefited. Except as otherwise provided in this Section,
the practice, procedure, judgment and costs shall be governed by the Code of
Civil Procedure.
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<PAGE>
(j) As used in this Section:
(1) "Fair value", with respect to a dissenter's shares, means the
value of the shares immediately before the consummation of the corporate action
to which the dissenter objects excluding any appreciation or depreciation in
anticipation of the corporate action, unless exclusion would be inequitable.
(2) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
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<PAGE>
APPENDIX C
NATIONAL BANK ACT
DISSENTERS' RIGHTS LAW
S 215A. MERGER OF NATIONAL BANKS OR STATE BANKS INTO NATIONAL BANKS
(b) DISSENTING SHAREHOLDERS
If a merger shall be voted for at the called meetings by the necessary
majorities of the shareholders of each association or State bank participating
in the plan of merger, and thereafter the merger shall be approved by the
Comptroller, any shareholder of any association or State bank to be merged into
the receiving association who has voted against such merger at the meeting of
the association or bank of which he is a stockholder, or has given notice in
writing at or prior to such meeting to the presiding officer that he dissents
from the plan of merger, shall be entitled to receive the value of the shares so
held by him when such merger shall be approved by the Comptroller upon written
request made to the receiving association at any time before thirty days after
the date of consummation of the merger, accompanied by the surrender of his
stock certificates.
(c) VALUATION OF SHARES
The value of the shares of any dissenting shareholder shall be
ascertained, as of the effective date of the merger, by an appraisal made by a
committee of three persons, composed of (1) one selected by the vote of the
holders of the majority of the stock, the owners of which are entitled to
payment in cash; (2) one selected by the directors of the receiving association;
and (3) one selected by the two so selected. The valuation agreed upon by any
two of the three appraisers shall govern. If the value so fixed shall not be
satisfactory to any dissenting shareholder who has requested payment, that
shareholder may, within five days after being notified of the appraised value of
his shares, appeal to the Comptroller, who shall cause a reappraisal to be made
which shall be final and binding as to the value of the shares of the appellant.
(d) APPLICATION TO SHAREHOLDERS OF MERGING ASSOCIATIONS: APPRAISAL BY
COMPTROLLER; EXPENSES OF RECEIVING ASSOCIATION; SALE AND RESALE OF SHARES; STATE
APPRAISAL AND MERGER LAW
If, within ninety days from the date of consummation of the merger,
for any reason one or more of the appraisers is not selected as herein provided,
or the appraisers fail to determine the value of such shares, the Comptroller
shall upon written request of any interested party cause an appraisal to be made
which shall be final and binding on all parties. The expenses of the Comptroller
in making the reappraisal or the appraisal, as the case may be, shall be paid by
the receiving association. The value of the shares ascertained shall be promptly
paid to the dissenting shareholders by the receiving association. The shares of
stock of the receiving association which would have been delivered to such
dissenting shareholders had they not requested payment shall be sold by the
receiving association at an advertised public auction, and the receiving
association shall have the right to purchase any of such shares at such public
auction, if it is the highest bidder therefor, for the purpose of reselling such
shares within thirty days thereafter to such person or persons and at such price
not less than par as its board of directors by resolution may determine. If the
shares are sold at public auction at a price greater than the amount paid to the
dissenting shareholders, the excess in such sale price shall be paid to such
dissenting shareholders. The appraisal of such shares of stock in any State bank
shall be determined in the manner prescribed by the law of the State in such
cases, rather than as provided in this section, if such provision is made in the
State law; and no such merger shall be in contravention of the law of the State
under which such bank is incorporated. The
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<PAGE>
provisions of this subsection shall apply only to shareholders of (and stock
owned by them in) a bank or association being merged into the receiving
association.
C-2
<PAGE>
APPENDIX D
NOTICES
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
(Docket No. 92-3)
Stock Appraisals
Monday, March 16, 1992
To: Chief Executive Officers of National Banks, Deputy Comptrollers
(District), Department and Division Heads, and Examining Personnel.
PURPOSE
This Banking Circular informs all national banks of the valuation
methods used by the Office of the Comptroller of the Currency (OCC) to estimate
the value of a bank's shares when requested to do so by a shareholder dissenting
to the conversion, merger, or consolidation of its bank. The results of
appraisals performed by the OCC between January 1, 1985, and September 30, 1991
are summarized.
REFERENCES: 12 U.S.C. 214a, 215 and 215a; 12 CFR 11.590 (item 2)
BACKGROUND
Under 12 U.S.C. 214a, a shareholder dissenting from a conversion,
consolidation, or merger involving a national bank is entitled to receive the
value of his or her shares from the resulting bank. A valuation of the shares
shall be made by a committee of three appraisers (a representative of the
dissenting shareholder, a representative of the resulting bank, and a third
appraiser selected by the other two). If the committee is formed and renders an
appraisal that is acceptable to the dissenting shareholder, the process is
complete and the appraised value of the shares is paid to the dissenting
shareholder by the resulting bank. If, for any reason, the committee is not
formed or if it renders an appraisal that is not acceptable to the dissenting
shareholder, an interested party may request an appraisal by the OCC. 12 U.S.C.
215 provides these appraisal rights to any shareholder dissenting to a
consolidation. Any dissenting shareholder of a target bank in a merger is also
entitled to these appraisal rights pursuant to 12 U.S.C. 215a.
The above provides only a general overview of the appraisal process.
The specific requirements of the process are set forth in the statutes
themselves.
D-1
<PAGE>
METHODS OF VALUATION USED
Through its appraisal process, the OCC attempts to arrive at a fair
estimate of the value of a bank's shares. After reviewing the particular facts
in each case and the available information on a bank's shares, the OCC selects
an appropriate valuation method, or combination of methods, to determine a
reasonable estimate of the shares' value.
Market Value
The OCC uses various methods to estimate the market value of shares
being appraised. If sufficient trading in the shares exists and the prices are
available from direct quotes from the Wall Street Journal or a market-maker,
those quotes are considered in determining the market value. If no market value
is readily available, or if the market value available is not well established,
the OCC may use other methods of estimating market value, such as the investment
value and adjusted book value methods.
Investment Value
Investment value requires an assessment of the value to investors of a
share in the future earnings of the target bank. Investment value is estimated
by applying an average price/earnings ratio of banks with similar earnings
potential to the earnings capacity of the target bank.
The peer group selection is based on location, size, and earnings
patterns. If the state in which the subject bank is located provides a
sufficient number of comparable banks using location, size and earnings patterns
as the criteria for selection, the price/earnings ratios assigned to the banks
are applied to the earnings per share estimated for the subject bank. In order
to select a reasonable peer group when there are too few comparable independent
banks in a location that is comparable to that of the subject bank, the pool of
banks from which a peer group is selected is broadened by including one-bank
holding company banks in a comparable location, and/or by selecting banks in
less comparable locations, including adjacent states, that have earnings
patterns similar to the subject bank.
Adjusted Book Value
The OCC also uses an "adjusted book value" method for estimating
value. Historically, the OCC has not placed any weight on the bank's "unadjusted
book value", since that value is based on historical acquisition costs of the
bank's assets, and does not reflect investors' perceptions of the value of the
bank as an ongoing concern. Adjusted book value is calculated by multiplying the
book value of the target bank's assets per share times the average market price
to book value ratio of comparable banking organizations. The average market
price to book value ratio measures the premium or discount to book value, which
investors attribute to shares of similarly situated banking organizations.
Both the investment value method and the adjusted book value method
present appraised values, which are based on the target bank's value as a going
concern. These techniques provide estimates of the market value of the shares of
the subject bank.
D-2
<PAGE>
OVERALL VALUATION
The OCC may use more than one of the above-described methods in
deriving the value of shares of stock. If more than one method is used,
varying weights may be applied in reaching an overall valuation. The weight
given to the value by a particular valuation method is based on how accurately
the given method is believed to represent market value. For example, the OCC
may give more weight to a market value representing infrequent trading by
shareholders than to the value derived from the investment value method when
the subject bank's earnings trend is so irregular that it is considered to be
a poor predictor of future earnings.
Purchase Premiums
For mergers and consolidations, the OCC recognizes that purchase
premiums do exist and may, in some instances, be paid in the purchase of small
blocks of shares. However, the payment of purchase premiums depends entirely
on the acquisition or control plans of the purchasers, and such payments are
not regular or predictable elements of market value. Consequently, the OCC's
valuation methods do not include consideration of purchase premiums in
arriving at the value of shares.
STATISTICAL DATA
The chart below lists the results of appraisals the OCC performed
between January 1, 1985, and September 30, 1991. The OCC provides statistical
data on book value and price/earnings ratios for comparative purposes, but
does not necessarily rely on such data in determining the value of the banks'
shares. Dissenting shareholders should not view these statistics as
determinative for future appraisals.
In connection with disclosures given to shareholders under 12 CFR
11.590 (Item 2), banks may provide shareholders a copy of this Banking
Circular or disclose the information contained in the Banking Circular,
including the results of OCC appraisals. If the bank discloses the past
results of the OCC appraisals, it should advise shareholders that: (1) The OCC
did not rely on all the information set forth in the chart in performing each
appraisal; and, (2) the OCC's past appraisals are not necessarily
determinative of its future appraisals of a particular bank's shares.
APPRAISAL RESULTS
<TABLE>
<CAPTION>
APPRAISAL DATE APPRAISAL PRICE OFFERED BOOK VALUE AVERAGE PRICE
VALUE EARNINGS RATIO
OF PEER GROUP
<S> <C> <C> <C> <C>
1/1/85 107.05 110.00 178.29 5.3
1/2/85 73.16 NA 66.35 6.8
1/15/85 53.41 60.00 83.95 4.8
1/31/85 22.72 20.00 38.49 5.4
2/1/85 30.63 24.00 34.08 5.7
2/25/85 27.74 27.55 41.62 5.9
4/30/85 25.98 35.00 42.21 4.5
</TABLE>
D-3
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
7/30/85 3,153.10 2,640.00 6,063.66 NC
9/1/85 17.23 21.00 21.84 4.7
11/22/85 316.74 338.75 519.89 5.0
11/22/85 30.28 NA 34.42 5.9
1/12/86 19.93 NA 26.37 7.0
3/14/86 59.02 200.00 132.20 3.1
4/21/86 40.44 35.00 43.54 6.4
5/2/86 15.50 16.50 23.69 5.0
7/3/86 405.74 NA 612.82 3.9
7/31/86 297.34 600.00 650.63 4.4
8/22/86 103.53 106.67 136.23 NC
12/26/86 16.66 NA 43.57 4.0
12/31/86 53.39 95.58 69.66 7.1
5/1/87 186.42 NA 360.05 5.1
6/11/87 50.46 70.00 92.35 4.5
6/11/87 38.53 55.00 77.75 4.5
7/31/87 13.10 NA 20.04 6.7
8/26/87 55.92 57.52 70.88 NC
8/31/87 19.55 23.75 30.64 5.0
8/31/87 10.98 NA 17.01 4.2
10/6/87 56.48 60.00 73.11 5.6
3/15/88 297.63 NA 414.95 6.2
6/2/88 27.26 NA 28.45 5.4
6/30/88 137.78 NA 215.36 6.0
8/30/88 768.62 677.00 1,090.55 10.7
3/31/89 773.62 NA 557.30 7.9
</TABLE>
D-4
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
5/26/89 136.47 180.00 250.42 4.5
5/29/90 9.87 NA 11.04 9.9
</TABLE>
- ---------------------------------
*The "Appraisal Date" is the consummation date for the conversion,
consolidation, or merger.
NA--Not Available.
NC--Not Computed.
For more information regarding the OCC's stock appraisal process,
contact the Office of the Comptroller of the Currency, Bank Organization and
Structure.
Dated: February 26, 1992.
Robert L. Clarke,
Comptroller of the Currency.
D-5
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Articles of Incorporation provide that the
Registrant will indemnify any person who is or was a director, officer or
employee of the Registrant or of any other corporation for which he is or was
serving in any capacity at the request of the Registrant against all liability
and expense that may be incurred in connection with any claim, action, suit or
proceeding with respect to which such director, officer or employee is wholly
successful or acted in good faith in a manner he reasonably believed to be in,
or not opposed to, the best interests of the Registrant or such other
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe that his conduct was unlawful. A director,
officer or employee of the Registrant is entitled to be indemnified as a
matter of right with respect to those claims, actions, suits or proceedings
where he has been wholly successful. In all other cases, such director,
officer or employee will be indemnified only if the Board of Directors of the
Registrant or independent legal counsel finds that he has met the standards of
conduct set forth above.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following Exhibits are being filed as part of this Registration
Statement:
2 Agreement of Affiliation and Merger (included as Appendix A to
Prospectus)
3(i) Articles of Incorporation of the Registrant (incorporated by
reference to Registrant's Registration Statement on Form S-4, File
No. 33-57207, dated January 22, 1993)
3(ii) By-Laws of the Registrant (incorporated by reference to Registrant's
Registration Statement on Form S-4, File No. 33-80670, dated June
23, 1994)
4 (a) the description of Registrant's common stock contained in its
Current Report on Form 8-K, dated January 6, 1983 (incorporated by
reference thereto), and (b) the description of Registrant's
Preferred Stock Purchase Rights contained in Registrant's Form 8-A,
dated March 1, 1990, including the Rights Agreement, dated March 1,
1990, between the Registrant and Old National Bank in Evansville, as
Trustee (incorporated by reference thereto)
5 Opinion of Krieg DeVault Alexander & Capehart re: legality
8 Ruling Request to the Internal Revenue Service re: certain federal
income tax matters
10 Material Contracts (incorporated by reference to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31,
1991 and to the Distribution Agreement set forth in Exhibit 1 of the
Registrant's Registration Statement on Form S-3, File No. 33-55222,
dated December 2, 1992)
II-1
<PAGE>
21 Subsidiaries of the Registrant
23.01 Consent of Krieg DeVault Alexander & Capehart (included in Opinion
of Krieg DeVault Alexander & Capehart re: legality at Exhibit 5)
23.02 Consent of Arthur Andersen LLP
23.03 Consent of KPMG Peat Marwick LLP
24 Powers of Attorney
99.01 Form of Proxy
99.02 Form of Proxy
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(b) (1) The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder through
the use of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
(2) The undersigned registrant hereby undertakes that every prospectus
(i) that is filed pursuant to paragraph (b)(1) immediately preceding or (ii)
that purports to meet the requirements of Section 10(a)(3) of the Act, and is
used in connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement and will not be
used until such amendment is effective, and that, for purposes of determining
any liability under the Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being
II-2
<PAGE>
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Evansville,
State of Indiana, on August 3, 1995.
OLD NATIONAL BANCORP
By: /s/ RONALD B. LANKFORD
-----------------------------
Ronald B. Lankford, President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities indicated below as of August 3, 1995.
Name Title
- ---- -----
/s/ JOHN N. ROYSE Chairman of the Board, Director and Chief
- ----------------------------- Executive Officer (Chief Executive Officer)
John N. Royse
/s/ STEVE H. PARKER Senior Vice President (Chief Financial
- ----------------------------- Officer and Principal Accounting Officer)
Steve H. Parker
DAVID L. BARNING* Director
- -----------------------------
David L. Barning
RICHARD J. BOND* Director
- -----------------------------
Richard J. Bond
ALAN W. BRAUN* Director
- -----------------------------
Alan W. Braun
JOHN J. DAUS, JR.* Director
- -----------------------------
John J. Daus, Jr.
WAYNE A. DAVIDSON* Director
- -----------------------------
Wayne A. Davidson
LARRY E. DUNIGAN* Director
- -----------------------------
Larry E. Dunigan
DAVID E. ECKERLE* Director
- -----------------------------
David E. Eckerle
II-4
<PAGE>
THOMAS B. FLORIDA* Director
- -----------------------------
Thomas B. Florida
PHELPS L. LAMBERT* Director
- -----------------------------
Phelps L. Lambert
RONALD B. LANKFORD* President and Director
- -----------------------------
Ronald B. Lankford
LUCIEN H. MEIS* Director
- -----------------------------
Lucien H. Meis
DAN W. MITCHELL* Director
- -----------------------------
Dan W. Mitchell
MARJORIE Z. SOYUGENC* Director
- -----------------------------
Marjorie Z. Soyugenc
CHARLES D. STORMS* Director
- -----------------------------
Charles D. Storms
EDWARD T. TURNER, JR.* Director
- -----------------------------
Edward T. Turner, Jr.
*By: /s/ JEFFREY L. KNIGHT
-----------------------------
Attorney-in-Fact
Printed Name: Jeffrey L. Knight
---------------------
SS-38097-1
II-5
<PAGE>
EXHIBIT 5
---------
August 2, 1995
Board of Directors
Old National Bancorp
420 Main Street
P.O. Box 718
Evansville, Indiana 47705
RE: Issuance of Shares of Common Stock of Old National Bancorp in
connection with the Acquisition of Shawnee Bancorp, Inc. and
its affiliate, The Bank of Harrisburg
Ladies and Gentlemen:
We have represented Old National Bancorp ("ONB") as special counsel
in connection with the preparation and filing of a Registration Statement
on Form S-4 (the "Registration Statement") with the Securities and
Exchange Commission for the purpose of registering shares of ONB's no par
value common stock under the Securities Act of 1933, as amended (the
"Shares"). The Shares are to be issued to non-dissenting shareholders of
Shawnee Bancorp, Inc. ("Shawnee Bancorp"), Harrisburg, Illinois, in
connection with the proposed merger of Shawnee Bancorp into ONB (the
"Company Merger"), and to two minority shareholders of The Bank of
Harrisburg (the "Bank") as specified in the Agreement of Affiliation and
Merger, dated May 31, 1995 (the "Agreement"), by and among ONB, Shawnee
Bancorp, The First National Bank of Harrisburg ("First National") and the
Bank, in connection with the proposed merger of the Bank into First
National (the "Bank Merger") (the Company Merger and the Bank Merger are
hereinafter collectively referred to as the "Mergers"). The Mergers will
be accomplished and the Shares will be issued pursuant to the specific
terms of the Agreement. In connection with this opinion, we have
reviewed and are familiar with ONB's Articles of Incorporation and By-
Laws and such other records, documents and information as we have in our
judgment deemed relevant.
Based upon the foregoing, it is our opinion that if and when the
Mergers are consummated, the Shares will, when issued to non-dissenting
shareholders of Shawnee Bancorp and the Bank in accordance with all of
the terms and conditions of the Agreement, be legally issued, fully paid
and non-assessable. This opinion is limited to the matters stated
herein, and no opinion is to be implied or may be inferred beyond the
matters expressly stated.
This opinion is addressed to you and is solely for your use in
connection with the Registration Statement, and we assume no professional
responsibility to any other person whatsoever. Accordingly, the opinion
expressed herein is not to be relied upon, utilized or quoted by or
delivered or disclosed to,
<PAGE>
Board of Directors
August 2, 1995
Page 2
in whole or in part, any other person, corporation, entity or
governmental authority without, in each instance, the prior written
consent of this firm.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference made to us in the
Registration Statement and the Prospectus forming a part thereof under
the caption "Legal Opinions". In giving this consent, we do not thereby
admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or
the Rules and Regulations of the Securities and Exchange Commission
promulgated thereunder.
Very truly yours,
/s/ KRIEG DeVAULT ALEXANDER & CAPEHART
KRIEG DeVAULT ALEXANDER & CAPEHART
<PAGE>
EXHIBIT 8
August ___, 1995 [DRAFT]
Internal Revenue Service
Associate Chief Counsel (Domestic)
Attention CC:DOM:CORP:T
Post Office Box 7604
Ben Franklin Station
Washington, D.C. 20044
RE: Old National Bancorp
EIN: 35-1539838
The First National Bank of Harrisburg
EIN: 31-1267219
Shawnee Bancorp, Inc.
EIN:
The Bank of Harrisburg
EIN: 37-0865793
Ladies and Gentlemen:
Old National Bancorp, a bank holding company ("ONB"), The First
National Bank of Harrisburg, a national banking association and a wholly-
owned subsidiary of ONB ("First National"), Shawnee Bancorp, Inc., a bank
holding company ("Shawnee"), The Bank of Harrisburg, an Illinois
chartered bank and a ninety-eight and one-half percent (98.5%) owned
subsidiary of Shawnee ("Harrisburg"), and their respective shareholders,
respectfully request your rulings as to the federal income tax
consequences of significant subissues of the proposed transaction
hereinafter described.
In summary, the proposed transaction involves the following
transactions in the following order: (1) the merger of Shawnee with and
into ONB ("Company Merger"), with ONB as the surviving entity ("Surviving
Company"), and (2) immediately after the first merger, Harrisburg will
merge with and into First National ("Bank Merger"), with First National
as the surviving entity ("Surviving Bank"). In consideration of the
proposed transaction, non-dissenting Shawnee shareholders will receive
solely ONB voting common stock. Except for two (2) individual minority
shareholders who own common stock of both Harrisburg and Shawnee who will
receive ONB voting common stock, the 101 individual minority shareholders
of Harrisburg will receive cash.
<PAGE>
Internal Revenue Service
Associate Chief Counsel (Domestic)
Attention: CC:DOM:CORP:T
Page 9
A. ONB
---
ONB has its principal office at 420 Main Street, Evansville, Indiana
47708, and the District Director at Indianapolis, Indiana has audit
jurisdiction. Its employer identification number is 35-1539838. The
telephone number for ONB is (812) 464-1434.
ONB is a corporation duly organized and existing under the laws of
the State of Indiana, and is a registered multi-bank holding company
under the Bank Holding Company Act of 1956, as amended. As of December
31, 1994, ONB had 30,000,000 shares of voting no par value common stock
authorized, of which 21,896,972 shares were issued and outstanding. ONB
common stock is traded and stock prices are reported on the NASDAQ
National Market System. No shareholder of ONB holds five percent (5%) or
more of ONB's outstanding common stock.
ONB also has 2,000,000 shares of no par value preferred stock
authorized, of which 200,000 shares have been designated as Series A
preferred stock. The preferred stock has no stated dividend rate. No
shares of ONB preferred stock have been issued, and ONB presently has no
intent and no commitments to issue any of such shares. However, during
the first fiscal quarter of 1990, ONB declared and paid a dividend in the
form of rights ("Rights") to purchase shares of its Series A preferred
stock pursuant to a Rights Agreement. One Right was issued for each
outstanding share of ONB common stock. Subsequent issuances of ONB
common stock also included such Rights. Each Right entitles the holder
thereof, upon the occurrence of certain events involving a change in
control of ONB, to purchase from ONB 1/100 of a share of the Series A
preferred stock at an initial purchase price equal to $60.00, subject to
adjustment. Unless earlier exercised or redeemed, the Rights will expire
at the close of business on March 1, 2000. A Right is transferred
automatically with a transfer of each underlying share of ONB common
stock, and future issuances of ONB common stock will also include such
Rights.
ONB is subject to primary regulatory federal supervision and
examination by the Board of Governors of the Federal Reserve System
("Federal Reserve"). ONB maintains its accounting on a calendar year
basis, and computes its income under the accrual method of accounting.
ONB is the parent corporation of an affiliated group of subsidiaries
consisting of twenty-three (23) operating banks, one insurance company,
one realty company, three (3) national trust companies, and one data
processing company (collectively, the "ONB Group"). The ONB Group files
a consolidated federal income tax return and will continue to file
consolidated federal income tax returns after the Company and Bank
Merger. ONB has been in existence since approximately July, 1982. A
Consolidated Balance Sheet and Consolidated Income Statement of ONB as of
December 31, 1994 are attached hereto and designated, respectively, as
Exhibits "A" and "B".
B. First National
--------------
<PAGE>
Internal Revenue Service
Associate Chief Counsel (Domestic)
Attention: CC:DOM:CORP:T
Page 10
First National has its principal office at 2 East Locust Street,
Harrisburg, Illinois 62946, and the District Director at Indianapolis,
Indiana, has audit jurisdiction. Its employer identification number is
31-1267219. The telephone number for First National is (618) 253-7611.
First National is a national banking association organized under the
laws of the United States of America pursuant to the provisions of and
with the effect provided in the National Bank Act, as amended. First
National does not own or operate any subsidiaries. All of the issued and
outstanding shares of First National capital stock are owned by ONB.
First National is subject to primary federal regulatory federal
supervision and examination by the Office of the Comptroller of the
Currency ("OCC").
First National maintains its accounting on a calendar year basis,
and computes its income under the accrual method of accounting. First
National is a subsidiary corporation of ONB. First National files as a
member of the ONB consolidated federal income tax return. First National
has been in existence since approximately 1876. A Balance Sheet and
Profit and Loss Statement of First National as of December 31, 1994 are
attached hereto and designated, respectively, as Exhibits "C" and "D".
On May 30, 1989 First National became a subsidiary of ONB as part of
a tax-free reorganization pursuant to Section 368(a)(1)(A) and
368(a)(2)(D) of the Internal Revenue Code of 1986, as amended ("Code") in
which First National merged with and into Harrisburg Merger Bank,
National Association, a wholly-owned subsidiary of ONB.
C. Shawnee
-------
Shawnee has its principal office at 2 West Walnut Street,
Harrisburg, Illinois 62946, and the District Director at
_____________________________, _______________________ has audit
jurisdiction. Its employer identification number is
____________________________________. The telephone number for Shawnee
is (618) 253-7693.
Shawnee is a corporation duly organized and existing under the laws
of the State of Illinois, and is a registered bank holding company under
the federal Bank Holding Company Act of 1956, as amended. As of December
31, 1994, Shawnee had 200,000 shares of voting $.50 par value common
stock authorized, of which 118,000 shares were issued and outstanding.
Shawnee common stock is not actively traded and there has never been
an established public trading market for its stock. As of December 31,
1994, the below shareholders held five percent (5%) or more of Shawnee's
common stock.
Name Taxpayer Number of Percentage
---- I.D. Shawnee of Outstanding
Number Shares Shares
--------- --------- --------------
- ------------------------------------------------------------------------
<PAGE>
Internal Revenue Service
Associate Chief Counsel (Domestic)
Attention: CC:DOM:CORP:T
Page 11
Lannie Gribble(1) ###-##-#### 15,000 12.72%
George Rawlinson ###-##-#### 10,000 8.47%
Dr. Charles E. Seten, III ###-##-#### 15,000 12.72%
William E. Cook ###-##-#### 15,000 12.72%
David H. Clemmons ###-##-#### 15,000 12.72%
Larry J. Perrotto ###-##-#### 15,000 12.72%
Fred G. Denny ###-##-#### 10,000 8.47%
John Satterwhite ###-##-#### 15,000 12.72%
(1) Stifel Nicolaus is custodian for the Val Gribble IRA Rollover
Account, which holds an additional 5,000 shares of Shawnee common
stock.
Shawnee has no class or series of capital stock authorized other
than the common stock. There are no options, warrants, commitments,
calls, puts, agreements, understandings, arrangements or subscription
rights relating to any shares of Shawnee common stock, or any securities
convertible into or representing the right to purchase or otherwise
acquire any common stock or debt securities of Shawnee, by which Shawnee
is or may become bound.
Shawnee is subject to primary federal regulatory supervision and
examination by the Federal Reserve. Shawnee maintains its accounting on
a calendar year basis, and computes its income under the accrual method
of accounting. Shawnee is the parent corporation of one (1) operating
bank (collectively, the "Shawnee Group"). The Shawnee Group files a
consolidated federal income tax return. Shawnee has been in existence
since approximately 1991. A Consolidated Balance Sheet and Consolidated
Income Statement of Shawnee as of December 31, 1994 are attached hereto
and designated, respectively, as Exhibits "E" and "F".
D. Harrisburg
----------
Harrisburg has its principal office at 2 West Walnut Street,
Harrisburg, Illinois 62946, and the District Director at
_______________________, _________________, has audit
jurisdiction. Its employer identification number is 37-0865793. The
telephone number for Harrisburg is (618) 253-7693.
Harrisburg is an Illinois chartered bank organized under the laws of
the State of Illinois. Harrisburg does not own or operate any
subsidiaries. As of December 31, 1994, Harrisburg had 445,766 shares of
voting $1.00 par value common stock authorized,
<PAGE>
Internal Revenue Service
Associate Chief Counsel (Domestic)
Attention: CC:DOM:CORP:T
Page 12
439,080 of which shares are validly issued to Shawnee and 6,686 of which
shares are validly issued to 103 other individual minority shareholders.
Harrisburg common stock is not actively traded and there has never been
an established public trading market for the stock. Shawnee owns
approximately ninety eight and one-half percent (98.5%) of Harrisburg's
outstanding common stock. Harrisburg has no class or series of capital
stock authorized other than the common stock. There are no options,
warrants, commitments, calls, puts, agreements, understandings,
arrangements or subscription rights relating to any shares of the
Harrisburg common stock, or any securities convertible into or
representing the right to purchase or otherwise acquire any common stock
or debt securities of Harrisburg, by which Harrisburg is or may become
bound.
Harrisburg is subject to primary federal regulatory supervision and
examination by the Federal Deposit Insurance Corporation ("FDIC").
Harrisburg maintains its accounting on a calendar year basis, and
computes its income under the accrual method of accounting. Harrisburg
is a subsidiary corporation of Shawnee. Harrisburg files as a member of
the Shawnee consolidated federal income tax return. Harrisburg has been
in existence since approximately May, 1965. A Balance Sheet and Profit
and Loss Statement of Harrisburg as of December 31, 1994 are attached
hereto and designated, respectively, as Exhibits "G" and "H".
On September 16, 1991, Harrisburg became a subsidiary of Shawnee as
part of a tax-free reorganization pursuant to Section 351 of the Code in
which certain individual investors formed Shawnee and acquired control of
Harrisburg, all pursuant to that certain Assistance Agreement Among FDIC,
First State Bank and Trust, Shawnee and the Investors dated September 16,
1991.
BUSINESS PURPOSES
-----------------
The entities submitting this request desire to reorganize their
stock interests to accomplish the following business objectives:
1. To obtain greater financial and managerial strength for future
growth and to achieve economies of scale and other operational benefits.
2. To allow ONB, First National, Shawnee and Harrisburg to compete
more effectively with other financial institutions and financial services
providers and to enable Harrisburg to provide new or broader services to
its customers.
3. To provide the shareholders of Shawnee and Harrisburg an
interest in a more widely held enterprise that is potentially more liquid
than Shawnee and Harrisburg common stock.
4. To allow ONB greater access to the financial services market in
the Harrisburg, Illinois area.
<PAGE>
Internal Revenue Service
Associate Chief Counsel (Domestic)
Attention: CC:DOM:CORP:T
Page 13
PROPOSED TRANSACTION
--------------------
To accomplish the objectives specified above, ONB, First National,
Shawnee and Harrisburg have entered into the Agreement of Affiliation and
Merger ("Agreement"), a copy of which is attached hereto and designated
as Exhibit "I".
Transaction 1 - Company Merger. Pursuant to the Agreement, the
Company Merger will involve the merger of Shawnee with and into ONB, with
ONB as the surviving bank holding company. ONB will continue its
corporate existence under the laws of the State of Indiana, and as a
registered multi-bank holding company under the Bank Holding Company Act
of 1956, as amended.
On the effective date of the Company Merger, each issued and
outstanding share of Shawnee common stock shall be converted into the
right to receive such number of shares of ONB common stock equal to the
quotient arrived at by dividing (a) Forty-One Dollars ($41.00) by (b) the
Market Value (as defined below) of ONB common stock ("Exchange Ratio").
The "Market Value" of ONB common stock shall be the average of the per
share closing prices of ONB common stock, as reported on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ")
National Market System for the first five (5) business days on which
shares of ONB common stock are traded within the ten (10) calendar days
immediately preceding the effective date of the Company Merger. The
aggregate Market Value of all of the shares of ONB common stock to be
exchanged in the Company Merger, calculated pursuant to the Exchange
Ratio, and including those shares of Harrisburg common stock beneficially
held of record by two (2) shareholders of Shawnee exchanged for ONB
common stock instead of cash, shall not exceed $4,841,026.
No fractional shares of ONB common stock will be issued with respect
to fractional share interests arising from the Exchange Ratio specified
above. Rather, any shareholder of Shawnee entitled to a fractional share
interest will receive cash in
lieu thereof in an amount equal to such fraction multiplied by the Market
Value of ONB common stock. The payment of cash in lieu of fractional
share interests of ONB common stock is solely for the purpose of avoiding
the expense and inconvenience to ONB of issuing fractional shares and
does not represent separately bargained-for consideration.
No cash or other property, except for ONB common stock and cash paid
in lieu of fractional shares, will be allocated to the shareholders of
Shawnee. Shareholders of Shawnee who properly exercise and perfect
statutory dissenters' rights shall have the rights accorded to dissenting
shareholders under Article 11 of the Illinois Business Corporation Act of
1983, as amended.
The Agreement will be submitted to the shareholders of Shawnee for
approval at a meeting called and held in accordance with applicable law
and the Articles of Incorporation and By-Laws of Shawnee. Approval of
the Company Merger by the shareholders of ONB is not contemplated or
required. The Company Merger requires approval by the Boards of
Directors of ONB and Shawnee.
<PAGE>
Internal Revenue Service
Associate Chief Counsel (Domestic)
Attention: CC:DOM:CORP:T
Page 14
The proposed Transaction 1 Company Merger is subject to approval by
the Federal Reserve and the Illinois Commissioner of Banks and Trust
Companies ("ICBT").
Transaction 2 - Bank Merger. Pursuant to the Agreement, and
immediately following the Company Merger, Harrisburg will be merged with
and into First National pursuant to the federal law of the United States,
with First National as the surviving bank. First National shall continue
its corporate existence as a national banking association under the laws
of the United States of America pursuant to the provisions of and with
the effect provided in the National Bank Act, as amended.
As ONB will beneficially own 98.5% of the shares of Harrisburg
common stock after and by virtue of consummation of the Company Merger,
no additional consideration will be given for the shares of Harrisburg
common stock owned by ONB. Each outstanding share of Harrisburg common
stock issued to 101 minority shareholders of Harrisburg (out of a total
of 103 minority shareholders), who in the aggregate beneficially own
______________ shares, or _______% of the total number of issued and
outstanding shares, of Harrisburg common stock, shall be converted into
the right to receive from ONB the amount of Seventeen Dollars ($17.00) in
cash. The aggregate amount ONB shall pay to the minority shareholders of
Harrisburg in consideration of the Bank Merger shall not exceed $110,636.
In addition, two shareholders, who are shareholders of record of both
Shawnee and Harrisburg, may exchange their shares of Harrisburg common
stock for such number of shares of ONB common stock which is equal to the
quotient arrived at by dividing (i) Seventeen Dollars ($17.00) by (ii)
the Market Value of ONB common stock.
No fractional shares of ONB common stock will be issued with respect
to fractional share interests arising from the exchange ratio for the two
minority shareholders specified above. Rather, any shareholder of
Harrisburg entitled to a fractional share interest will receive cash in
lieu thereof in an amount equal to such fraction multiplied by the Market
Value of ONB common stock. The payment of cash in lieu of fractional
share interests of ONB common stock is solely for the purpose of avoiding
the expense and inconvenience to ONB of issuing fractional shares and
does not represent separately bargained-for consideration.
Except for ONB common stock, cash paid to Harrisburg minority
shareholders and cash paid in lieu of fractional shares, no cash or other
property will be allocated to the shareholders of Harrisburg.
Shareholders of Harrisburg who properly exercise and perfect statutory
dissenters' rights shall have the rights accorded to dissenting
shareholders under Chapter 205 of the Illinois Banking Act, as amended
and Section ____ of the National Bank Act, as amended.
The Agreement will be submitted to the shareholders of Harrisburg
for approval at a meeting called and held in accordance with applicable
law and the Charter and By-Laws of Harrisburg. Approval of the Agreement
by the shareholders of ONB is not contemplated or required. Approval of
the Agreement by ONB as the sole shareholder of First National is
required and will be obtained. The Bank Merger requires approval by the
<PAGE>
Internal Revenue Service
Associate Chief Counsel (Domestic)
Attention: CC:DOM:CORP:T
Page 15
Boards of Directors of First National and Harrisburg. The proposed
Transaction 2 Bank Merger is subject to approval by the OCC, ICBT and
FDIC.
ONB and First National are currently studying the status of the
locations of the Harrisburg branches. ONB and First National have no
current intent to dispose of any of the assets to be acquired by First
National in the proposed Transaction 2 Bank Merger. However, ONB and
First National are reviewing the operation of all branch locations and
are considering whether any branch locations should be closed or sold.
Any decision by the management of ONB and First National will be made in
the ordinary course of business based on, among other factors, the
desirability to consolidate branches that may be in close proximity to
one another.
SIGNIFICANCE OF SUBISSUE AND AUTHORITY FOR SERVICE TO
-----------------------------------------------------
RULE IN FAVOR OF PROPOSED TRANSACTION.
--------------------------------------
The taxpayers are aware that reorganizations under Section
368(a)(2)(A) of the Code and Section 368(a)(1)(A) of the Code by reason
of Section 368(a)(2)(D) of the Code similar to the transactions
contemplated under Transaction 1 and 2 are within an area in which
private letter rulings will not be issued by the Internal Revenue Service
("Service"). However, the Service does, in specified instances, rule on
subissues involved in such reorganizations.
Subissues
---------
The taxpayers have stated below in representation 1 that to the best
of their knowledge and belief that Transaction 1 qualifies as a tax-free
reorganization under Section 368(a)(1)(A) of the Code. In addition, the
taxpayers have stated below in representation 16 that to the best of
their knowledge and belief that Transaction 2 qualifies as a tax-free
reorganization under Section 368(a)(1)(A) of the Code by reason of
Section 368(a)(2)(D) of the Code. The Taxpayers request rulings as to
the following subissues:
1. The rulings requested with respect to this Transaction 1 are
requested only with respect to the subissue of continuity of
interest requirement set forth in Treasury Regulation Section
1.368(1)(b) arising from the proposed transaction contemplated
in the Transaction 2 Bank Merger.
2. The rulings requested with respect to this Transaction 2 are
requested with respect to the subissue arising from the
proposed transaction contemplated in the Transaction 1 Company
Merger.
3. The rulings requested with respect to this Transaction 2 are
requested with respect to the subissue of the "substantially
all" requirements of Section 368(a)(2)(D) of the Code arising
from the proposed transaction contemplated in the Transaction 2
Bank Merger.
<PAGE>
Internal Revenue Service
Associate Chief Counsel (Domestic)
Attention: CC:DOM:CORP:T
Page 16
The effect, if any, of the proposed Transaction 2 Bank Merger upon the
Transaction 1 Company Merger is significant because of the importance to
the taxpayers and their respective shareholders that the Company and Bank
Merger qualify as a tax-free reorganization.
The taxpayers and their representatives are unable to locate
adequate authority directly establishing that the proposed Transaction 2
Bank Merger does not adversely affect the tax-free status of the
Transaction 1 Company Merger because of the subissues noted above.
However, the taxpayers and their representatives believe that where all
requirements of Section 368(a)(1)(A) of the Code and related Regulations
have otherwise been satisfied, the proposed Transaction 2 Bank Merger
should not adversely affect the Transaction 1 Company Merger. The result
of the Transaction 1 Company Merger is that Shawnee shareholders will
receive only ONB common stock and the shareholders of Shawnee will
continue as ONB shareholders having an interest in all of the assets of
Shawnee, including Harrisburg as part of First National.
The taxpayers and their representatives are unable to locate
adequate authority directly establishing that the proposed Transaction 1
Company Merger does not adversely affect the tax-free status of the
Transaction 2 Bank Merger. However, the taxpayers and their
representatives believe that where all requirements of Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code and related Regulations have
otherwise been satisfied, the proposed Transaction 1 Company Merger
should not adversely affect the Transaction 2 Bank Merger.
The taxpayers and their representatives cannot locate any authority
in the Code, Regulations, Revenue Rulings or cases stating that the
proposed Transaction 1 and 2 violate the Service's tax-free
reorganization rules, including the subissues noted above. However, the
taxpayer recognizes that the tax-free reorganization rules are strictly
construed. In addition, the Service has ruled in this area since the
Service adopted its no ruling position with regard to tax-free
reorganizations. It is noted that the Service ruled on these subissues
in similar transactions in Private Letter Rulings 9529034 (July 21,
1995), 9510054 (March 10, 1995), 9446013 (November 18, 1994) and 9448037
(December 2, 1994). These private letter rulings cannot be cited as
precedential authority by the present or other taxpayers. It is
significant that the Service in these private letter rulings considered
the fact that a merger of two bank holding companies and the merger of
two subsidiary banks presented sufficiently significant subissues to
merit specifically ruling that each of these reorganizations qualified as
tax-free reorganizations.
Therefore, the Service should rule that the proposed Transaction 2
Bank Merger and the receipt of ONB stock by Shawnee shareholders in the
Company Merger will not cause the Company Merger to fail to satisfy the
continuity of interest requirement. Further, the Service should rule
that the proposed Transaction 1 Company Merger will not prevent the Bank
Merger from qualifying as a tax-free reorganization. In addition, the
Service should rule that the exchange of Harrisburg stock for ONB stock
pursuant to the Bank Merger will not cause the Bank Merger to fail to
satisfy the "substantially all" requirement.
<PAGE>
Internal Revenue Service
Associate Chief Counsel (Domestic)
Attention: CC:DOM:CORP:T
Page 17
REPRESENTATIONS
---------------
In connection with proposed Transaction 1 Company Merger, the
following representations are hereby made pursuant to Revenue Procedure
95-3, Section 3.01 (24), 1995-1 C.B. ____ and Revenue Procedure 86-42,
Section 7.03, 1986-2 C.B. 722. These representations are made on the
basis of the requirements of the indicated revenue procedures for
purposes of a ruling under Code Section 368(a)(1)(A).
LEGEND: ONB = PARENT
FIRST NATIONAL = SUB
SHAWNEE = TARGET
HARRISBURG = TARGET SUB
1. To the best of the taxpayers' knowledge and belief, the Company
Merger will qualify as a reorganization under Section 368(a)(1)(A) of the
Code, provided the Service rules as requested.
2. The fair market value of the ONB stock and other consideration
received by each Shawnee shareholder will be approximately equal to the
fair market value of the Shawnee common stock surrendered in the
exchange.
3. There is no plan or intention by the shareholders of Shawnee
who own 1 percent or more of the Shawnee common stock, and to the best of
the knowledge of the management of Shawnee, there is no plan or intention
on the part of the remaining shareholders of Shawnee to sell, exchange,
or otherwise dispose of a number of shares of ONB common stock received
in the transaction that would reduce the Shawnee shareholders' ownership
of ONB common stock to a number of shares having a value, as of the date
of the transaction, of less than 50 percent of the value of all of the
formerly outstanding common stock of Shawnee as of the same date. For
purposes of this representation, shares of Shawnee common stock exchanged
for cash or other property, surrendered by dissenters, or exchanged for
cash in lieu of fractional shares of ONB common stock will be treated as
outstanding Shawnee common stock on the date of the transaction,
moreover, shares of Shawnee common stock and shares of ONB common stock
held by Shawnee shareholders and otherwise sold, redeemed, or disposed of
prior or subsequent to the transaction will be considered in making this
representation.
4. ONB has no plan or intention to reacquire any of its common
stock issued in the transaction. ONB may, however, acquire shares of ONB
common stock on a periodic basis through purchases on an anonymous basis
on the open market at open market prices.
5. ONB has no plan or intention to sell or otherwise dispose of
any of the assets of Shawnee acquired in the transaction, except for
dispositions made in the ordinary course of business or transfers
described in Section 368(a)(2)(C) of the Code.
<PAGE>
Internal Revenue Service
Associate Chief Counsel (Domestic)
Attention: CC:DOM:CORP:T
Page 18
6. The liabilities of Shawnee assumed by ONB and the liabilities
to which the transferred assets of Shawnee are subject were incurred by
Shawnee in the ordinary course of its business.
7. Following the transaction, ONB will continue the historic
business of Shawnee or use a significant portion of Shawnee's historic
business assets in a business.
8. ONB, Shawnee and the shareholders of Shawnee will pay their
respective expenses, if any, incurred in connection with the transaction.
9. There is no intercorporate indebtedness existing between
Shawnee and ONB that was issued, acquired, or will be settled at a
discount.
10. No two parties to the transaction are investment companies as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
11. Shawnee 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.
12. The fair market value of the assets of Shawnee transferred to
ONB will equal or exceed the sum of the liabilities assumed by ONB plus
the amount of liabilities, if any, to which the transferred assets are
subject.
13. The payment of cash in lieu of fractional shares of ONB common
stock resulting from the exchange ratio is solely for the purpose of
avoiding the expense and inconvenience to ONB of issuing fractional
shares of ONB common stock and does not represent separately bargained-
for consideration. The total cash consideration that will be paid in the
transaction to the Shawnee shareholders instead of issuing fractional
shares of ONB common stock will not exceed one percent (1%) of the total
consideration that will be issued in the transaction to the Shawnee
shareholders in exchange for their shares of Shawnee common stock. The
fractional share interest of each Shawnee shareholder will be aggregated,
and no Shawnee shareholder will receive cash in an amount equal to or
greater than the value of one (1) full share of ONB common stock.
14. None of the compensation received by any shareholder-employee
of Shawnee will be separate consideration for, or allocable to, any of
their shares of Shawnee common stock; none of the shares of ONB common
stock received by any shareholder-employee will be separate consideration
for, or allocable to, any employment agreement; and the compensation paid
to any shareholder-employees will be for services actually rendered and
will be commensurate with amounts paid to third parties bargaining at
arm's-length for similar services.
15. The shareholders of Shawnee (immediately prior to the Company
Merger) receiving shares of ONB common stock will not own (immediately
after the Company Merger) more than fifty percent (50%) of the fair
market value of the common stock of ONB.
<PAGE>
Internal Revenue Service
Associate Chief Counsel (Domestic)
Attention: CC:DOM:CORP:T
Page 19
In connection with proposed Transaction 2 Bank Merger, the following
representations are hereby made pursuant to Revenue Procedure 95-3,
Section 3.01 (24), 1995-1 C.B. ____ and Revenue Procedure 86-42, Section
7.03, 1986-2 C.B. 722. These representations are made on the basis of
the requirements of the indicated revenue procedures for purposes of a
ruling under Code Sections 368(a)(1)(A) and 368(a)(2)(D).
LEGEND: ONB = PARENT
FIRST NATIONAL = SUB
SHAWNEE = TARGET
HARRISBURG = TARGET SUB
16. To the best of the taxpayers' knowledge and belief, the Bank
Merger will qualify as a reorganization under Section 368(a)(1)(A) of the
Code by reason of Section 368(a)(2)(D) of the Code, provided the Service
rules as requested.
17. As ONB owns 100 percent of the common stock of First National,
no additional First National capital stock is being issued or exchanged.
18. There is no plan or intention by the shareholders of Harrisburg
who own 1 percent or more of the Harrisburg common stock, and to the best
of the knowledge of the management of Harrisburg, there is no plan or
intention on the part of the remaining shareholders of Harrisburg to
sell, exchange or otherwise dispose of a number of shares of ONB common
stock received in the transaction that would reduce the Harrisburg
shareholders' ownership of ONB common stock to a number of shares having
a value, as of the date of the transaction, of less than 50 percent of
the value of all of the formerly outstanding common stock of Harrisburg
as of the same date. For purposes of this representation, shares of
Harrisburg common stock exchanged for cash or other property, surrendered
by dissenters or exchanged for cash in lieu of fractional shares of ONB
common stock will be treated as outstanding Harrisburg common stock on
the date of the transaction. Moreover, shares of Harrisburg common stock
and shares of ONB common stock held by Harrisburg shareholders and
otherwise sold, redeemed, or disposed of prior or subsequent to the
transaction will be considered in making this representation.
19. First National will acquire at least 90 percent of the fair
market value of the net assets and at least 70 percent of the fair market
value of the gross assets held by Harrisburg immediately prior to the
transaction. For purposes of this representation, amounts paid by
Harrisburg to dissenters, amounts paid by Harrisburg to shareholders who
receive cash or other property, Harrisburg assets used to pay its
reorganization expenses, and all redemptions and distributions (except
for regular, normal dividends) made by Harrisburg immediately preceding
the transfer, will be included as assets of Harrisburg held immediately
prior to the transaction.
<PAGE>
Internal Revenue Service
Associate Chief Counsel (Domestic)
Attention: CC:DOM:CORP:T
Page 20
20. Prior to the transaction, ONB will be in control of First
National within the meaning of Section 368(c) of the Code.
21. Following the transaction, First National will not issue
additional shares of its common stock that would result in ONB losing
control of First National within the meaning of Section 368(c) of the
Code.
22. First National has no plan or intention to reacquire any of its
common stock constructively issued in the Bank Merger. ONB has no plan
or intention to reacquire any of its common stock issued in the
transaction. ONB may, however, acquire ONB common stock through periodic
purchases on an anonymous basis on the open market at open market prices.
23. ONB has no plan or intention to liquidate First National; to
merge First National with and into another corporation; to sell or
otherwise dispose of the common stock of First National; or to cause
First National to sell or otherwise dispose of any of the assets of
Harrisburg acquired in the transaction, except for dispositions made in
the ordinary course of business or transfers described in Section
368(a)(2)(C) of the Code.
24. The liabilities of Harrisburg assumed by First National and the
liabilities to which the transferred assets of Harrisburg are subject
were incurred by Harrisburg in the ordinary course of its business.
25. The fair market value of the ONB common stock and other
consideration received by each Harrisburg shareholder will be
approximately equal to the fair market value of the Harrisburg common
stock surrendered in the exchange.
26. Following the transaction, First National will continue the
historic business of Harrisburg or use a significant portion of
Harrisburg historic business assets in a business.
27. ONB, First National, Harrisburg, and the shareholders of
Harrisburg will pay their respective expenses, if any, incurred in
connection with the transaction.
28. There is no intercorporate indebtedness existing between ONB
and Harrisburg or between First National and Harrisburg that was issued,
acquired, or will be settled at a discount.
29. No two parties to the transaction are investment companies as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
30. Harrisburg 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.
<PAGE>
Internal Revenue Service
Associate Chief Counsel (Domestic)
Attention: CC:DOM:CORP:T
Page 21
31. The fair market value of the assets of Harrisburg transferred
to First National will equal or exceed the sum of the liabilities assumed
by First National plus the amount of liabilities, if any, to which the
transferred assets are subject.
32. The payment of cash in lieu of fractional shares of ONB common
stock resulting from the exchange ratio is solely for the purpose of
avoiding the expense and inconvenience to ONB of issuing fractional
shares of ONB common stock and does not represent separately bargained-
for consideration. The total cash consideration that will be paid in the
transaction to the two (2) Harrisburg minority shareholders receiving ONB
common stock instead of issuing fractional shares of ONB common stock
will not exceed one percent (1%) of the total consideration that will be
issued in the transaction to the Harrisburg shareholders in exchange for
their shares of Harrisburg common stock. The fractional share interests
of each Harrisburg shareholder receiving ONB common stock will be
aggregated, and no Harrisburg shareholder receiving ONB common stock will
receive cash in an amount equal to or greater than the value of one (1)
full share of ONB common stock.
33. None of the compensation received by any shareholder-employee
of Harrisburg will be separate consideration for, or allocable to, any of
their shares of Harrisburg common stock; none of the shares of ONB common
stock received by any shareholder-employee will be separate consideration
for, or allocable to, any employment agreement; and the compensation paid
to any shareholder-employees will be for services actually rendered and
will be commensurate with amounts paid to third parties bargaining at
arm's-length for similar services.
RULINGS
-------
Based upon the information submitted and the representations set
forth above, the following rulings are respectfully requested with
respect to the Company Merger:
(a) Provided that the proposed Company Merger otherwise qualifies
as a reorganization under Section 368(a)(1)(A) of the Code and
the Bank Merger otherwise qualifies as a reorganization under
Section 368(a)(1)(A) of the Code by reason of Section
368(a)(2)(D) of the Code, then the Bank Merger and the receipt
of ONB common stock by Shawnee shareholders in the Company
Merger will not cause the Company Merger to fail to satisfy the
continuity of interest requirement set forth in Treasury
Regulation Section 1.368-1(b). Significant subissue under
Section 3.01(24) of Revenue Procedure 95-3, 1995-1 C.B. _____.
Shawnee and ONB will each be "a party to a reorganization"
within the meaning of Section 368(b) of the Code.
(b) Shawnee will recognize no gain or loss upon the transfer of its
assets to ONB in exchange solely for ONB common stock, cash for
dissenting shareholders, and the assumption by ONB of the
liabilities of Shawnee. Sections 361(b) and 357(a) of the Code.
<PAGE>
Internal Revenue Service
Associate Chief Counsel (Domestic)
Attention: CC:DOM:CORP:T
Page 22
(c) The basis of Shawnee's assets in the hands of ONB will be the
same as the basis of those assets in the hands of Shawnee
immediately prior to the transaction. Section 362(b) of the
Code.
(d) The holding period of the assets of Shawnee in the hands of ONB
will include, in each instance, the period for which the assets
were held by Shawnee. Section 1223(2) of the Code.
(e) No gain or loss will be recognized by the shareholders of
Shawnee upon the receipt of solely ONB common stock in exchange
for their shares of Shawnee common stock. Section 354(a)(1) of
the Code.
(f) The basis of ONB common stock to be received by the
shareholders of Shawnee will be, in each instance, the same as
the basis of the common stock of Shawnee surrendered in
exchange therefor. Section 358(a)(1) of the Code.
(g) The holding period of the ONB common stock to be received by
the shareholders of Shawnee in the transaction will include, in
each instance, the period during which the Shawnee common stock
surrendered in exchange therefor is held as a capital asset on
the date of the surrender. Section 1223(1) of the Code.
(h) No gain or loss will be recognized by ONB on the receipt of the
assets of Shawnee in exchange for common stock of ONB. Section
1032(a) of the Code.
(i) ONB will succeed to and take into account those tax attributes
of Shawnee described in Section 381(c) of the Code. Section
381(a) of the Code and Section 1.381(a)-1 of the Regulations.
These items will be taken into account by ONB subject to the
conditions and limitations specified in Sections 381, 382, 383,
and 384 of the Code and the Regulations thereunder.
(j) As provided by Section 381(c)(2) of the Code and Section
1.381(c)(2)-1 of the Regulations, ONB will succeed to and take
into account the earnings and profits, or deficit in earnings
and profits, of Shawnee as of the date of the transfer. Any
deficit in earnings and profits of either ONB or Shawnee will
be used only to offset earnings and profits accumulated after
the date or dates of transfer.
(k) Cash received by a dissenting shareholder of Shawnee in
exchange for his or her Shawnee common stock will be treated as
having been received by such shareholder as a distribution in
redemption of his or her Shawnee common stock, subject to the
provisions and limitations of Section 302 of the Code. If, as a
result of such distribution, a
<PAGE>
Internal Revenue Service
Associate Chief Counsel (Domestic)
Attention: CC:DOM:CORP:T
Page 23
shareholder owns no common stock of Shawnee either directly or
through the application of Section 318(a) of the Code, the
redemption will be a complete termination of interest within
the meaning of Section 302(b)(3) of the Code and such cash will
be treated as a distribution in full payment in exchange for
his or her Shawnee common stock, as provided by Section 302(a)
of the Code.
(l) The payment of cash in lieu of fractional share interests of
ONB common stock will be treated as if the fractional shares
were distributed as part of the exchange and then were redeemed
by ONB. These cash payments will be treated as distributions in
full payment in exchange for the common stock redeemed, as
provided in Section 302(a) of the Code. Rev. Rul. 66-365,
1966-2 C.B. 116 and Rev. Proc. 77-41, 1977-2 C.B. 574.
Based upon the information submitted and the representations set
forth above, the following rulings are respectfully requested with
respect to the Bank Merger:
(m) Provided that the proposed Bank Merger otherwise qualifies as a
reorganization under Sections 368(a)(1)(A) and 368(a)(2)(D) of
the Code and the Company Merger otherwise qualifies as a
reorganization under Section 368(a)(1)(A) of the Code, then the
Company Merger will not prevent the Bank Merger from qualifying
as a reorganization under Section 368(a)(1)(A) of the Code by
reason of Section 368(a)(2)(D) of the Code. Significant
subissue under Section 3.01(24) of Revenue Procedure 95-3,
1995-1 C.B. __.
(n) The exchange of Harrisburg common stock for ONB common stock
pursuant the Bank Merger will not cause the Bank Merger to fail
to satisfy the "substantially all" requirement of Section
368(a)(2)(D) of the Code. For purposes of this ruling,
"substantially all" means at least 90% of the fair market value
of the net assets and 70% of the fair market value of the gross
assets held by Harrisburg immediately prior to the proposed
transaction. ONB, First National and Harrisburg will each be a
"party to a reorganization" within the meaning of Section
368(b) of the Code.
(o) ONB and First National will recognize no gain or loss upon the
receipt by First National of the assets of Harrisburg in
constructive exchange for ONB common stock and the assumption
by First National of Harrisburg's liabilities. Section 1032(a)
of the Code; Rev. Rul. 57-278. 1957-1 C.B. 124.
(p) The basis of First National common stock in the hands of ONB
will be increased by an amount equal to the basis of
Harrisburg's assets in the
<PAGE>
Internal Revenue Service
Associate Chief Counsel (Domestic)
Attention: CC:DOM:CORP:T
Page 24
hands of First National and decreased by the sum of the amount
of liabilities of Harrisburg assumed by First National and the
amount of liabilities to which the assets of Harrisburg are
subject.
(q) The holding period of the assets of Harrisburg to be received
by First National will include, in each instance, the period
during which such assets were held by Harrisburg. Section
1223(2) of the Code.
(r) The basis of ONB common stock in the hands of the shareholders
of Harrisburg (ONB) will be the same as the shareholder's basis
in the Harrisburg common stock surrendered in exchange
therefor. Section 358 of the Code.
(s) The shareholders of Harrisburg will recognize no gain or loss
upon the exchange of Harrisburg common stock solely for ONB
common stock. Section 354(a)(1) of the Code.
(t) The holding period of ONB common stock to be received by
Harrisburg shareholders on the exchange will include the
holding period during which Harrisburg's shareholders held the
shares of Harrisburg common stock surrendered in exchange
therefor, provided that Harrisburg's common stock is held as a
capital asset on the date of the exchange. Section 1223(1) of
the Code.
(u) Harrisburg will recognize no gain or loss on the transfer of
its assets to First National in constructive exchange for First
National common stock and the assumption by First National of
the liabilities of Harrisburg, as described above. Sections
361(a) and 357(a) of the Code.
(v) The payment of cash in lieu of fractional share interests of
ONB common stock will be treated as if the fractional shares
were distributed as part of the exchange and then were redeemed
by ONB. These cash payments will be treated as distributions in
full payment in exchange for the common stock redeemed, as
provided in Section 302(a) of the Code. Rev. Rul. 66-365, 1966-
2 C.B. 116 and Rev. Proc. 77-41, 1977-2 C.B. 574.
(w) Harrisburg will close its taxable year as of the date of the
distribution or transfer. First National will not close its
taxable year merely because of the merger. Section 381(b) of
the Code.
(x) Pursuant to Section 381(a) of the Code and Section 1.381(a)-1
of the Regulations, First National will succeed to and take
into account the items of Harrisburg described in Section
381(c) of the Code. These items will be taken into account by
First National subject to the provisions and limitations
specified in Sections 381, 382, 383 and 384 of the Code and
Regulations promulgated thereunder.
<PAGE>
Internal Revenue Service
Associate Chief Counsel (Domestic)
Attention: CC:DOM:CORP:T
Page 25
(y) As provided by Section 381(c)(2) of the Code and Section
1.381(c)(2)-1 of the Regulations, First National will succeed
to and take into account the earnings and profits, or deficit
in earnings and profits, of Harrisburg as of the date of the
transfer. Any deficit in earnings and profits will be used only
to offset earnings and profits accumulated after the date of
the transfer.
(z) The affiliated group consisting of Shawnee and Harrisburg will
cease to exist as of the date of the transactions and the
consolidated group consisting of the ONB Group will remain in
existence with ONB remaining the common parent corporation.
Section 1.1502-75(d)(1) of the Regulations.
(aa) The members of the Shawnee Group will close their taxable year
as of the date of the transactions. The members of the ONB
Group will not close their taxable year merely because of
the transactions. Section 381(b) of the Code and Section
1.1502-1(a) of the Regulations.
(bb) For the taxable year in which the transactions become
effective, the consolidated return filed by the ONB Group will
include in its income for the entire year, the income of the
members of the ONB Group for the entire year, excluding any
period during such year when any members were not members of
such group. For purposes of the preceding sentence, income of
the ONB Group will include the income attributable to the
assets of Shawnee and Harrisburg for the period beginning on
the effective date of the transactions. Section 1.1502-76(b)(1)
of the Regulations.
(cc) The taxable years of the ONB Group ending on or before the
effective date of the transactions will constitute neither
separate return years nor separate return limitation years to
the extent they are not so treated prior to the effective date
of the transactions. Section 1.1502-1(f)(2) of the Regulations.
(dd) No members of either the ONB or Shawnee Group will be required
to take into account any unrestored balance of deferred gain or
loss. Section 1.1502-13(f)(2) of the Regulations.
(ee) Any consolidated net operating loss incurred by the ONB Group
for taxable years ending after the effective date of the
transactions, to the extent attributable to a member of the ONB
Group before the transaction under the principles of Section
1.1502-79(a)(3) of the Regulations, may be carried back, in
accordance with Section 172(b) of the Code, to the prior
taxable years of the ONB Group. Loss attributable to the
members of the Shawnee Group before the transaction may not be
carried back to
<PAGE>
Internal Revenue Service
Associate Chief Counsel (Domestic)
Attention: CC:DOM:CORP:T
Page 26
prior years of the ONB Group. Sections 1.1502-79(a)(i) and
1.1502-1(e) of the Regulations.
PROCEDURAL STATEMENTS
---------------------
Please address a copy of your Ruling Letter to Paul F. Lindemann and
John R. Short, in accordance with the enclosed Power-of-Attorney forms
(Exhibits "J", "K", "L" and "M"); your original Ruling Letter should be
sent to Mr. Jeffrey L. Knight, Corporate Secretary and General Counsel,
Old National Bancorp, 420 Main Street, P.O. Box 718, Evansville, Indiana
47705, with a copy to William Cook, President and Chief Executive
Officer, Shawnee Bancorp, Inc., 2 West Walnut Street, P.O. Drawer 448,
Harrisburg, Illinois 62946.
To the best of the knowledge of the taxpayers and their
representatives, the issues raised with respect to this request are not
under examination in a return of any of the taxpayers or a person related
to them within the meaning of Code Section 267 or a member of an
affiliated group of which the taxpayers are also a member within the
meaning of Code Section 1504. Further, to the best knowledge of the
taxpayers and the taxpayers' representatives, the issues:
(1) have not previously been submitted to the Service, but withdrawn
by the taxpayers before a ruling was issued,
(2) have not been ruled upon by the Service to the taxpayers or to
the taxpayers' predecessors,
(3) have not previously been submitted to the Service in a request
that is currently pending with the Service, and
(4) are not being submitted in another letter ruling request by the
taxpayer or a related taxpayer to the Service.
Pursuant to Appendix A of Rev. Proc. 95-1, enclosed is a check in
the amount of $3,575.00 in payment of the user fee for the requested
ruling.
Pursuant to Rev. Proc. 95-1, enclosed is the completed checklist for
the requested ruling.
Deletions Statement
-------------------
<PAGE>
Internal Revenue Service
Associate Chief Counsel (Domestic)
Attention: CC:DOM:CORP:T
Page 27
No information other than names, addresses and identifying numbers
need be deleted.
Conference Statement
--------------------
A conference in the National Office is hereby requested, if any
decision should be under consideration inconsistent with any of the
foregoing ruling requests, before such decision is actually made.
If any additional information is desired, please contact Paul F.
Lindemann at (317) 238-6210.
Respectfully,
On behalf of Old
National Bancorp and
First National Bank of Harrisburg
By: [Draft]
----------------------------------
Paul F. Lindemann
Krieg DeVault Alexander & Capehart
One Indiana Square, Suite 2800
Indianapolis, IN 46204
(317) 238-6210
On behalf of Shawnee Bancorp, Inc. and
The Bank of Harrisburg
By: [Draft]
-------------------------------------
John R. Short
Peper, Martin, Hensen, Maichel and
Hetlage
24th Floor, 720 Olive Street
St. Louis, Missouri 63101
(314) 444-6430
<PAGE>
Internal Revenue Service
Associate Chief Counsel (Domestic)
Attention: CC:DOM:CORP:T
Page 28
ENCLOSURES
----------
Exhibit A: Consolidated Balance Sheet of Old National Bancorp as of
December 31, 1994
Exhibit B: Consolidated Income Statement of Old National Bancorp as
of December 31, 1994
Exhibit C: Balance Sheet of The First National Bank of Harrisburg as
of December 31, 1994
Exhibit D: Profit & Loss Statement of The First National Bank of
Harrisburg as of December 31, 1994
Exhibit E: Balance Sheet of Shawnee Bancorp, Inc., as of December 31, 1994
Exhibit F: Profit and Loss Statement of Shawnee Bancorp, Inc., as
of December 31, 1994
Exhibit G: Balance Sheet of The Bank of Harrisburg as of December 31, 1994
Exhibit H: Profit and Loss Statement of The Bank of Harrisburg as
of December 31, 1994
Exhibit I: Agreement of Affiliation and Merger
Exhibit J: Power of Attorney of Old National Bancorp
Exhibit K: Power of Attorney of The First National Bank of Harrisburg
Exhibit L: Power of Attorney of Shawnee Bancorp, Inc.
Exhibit M: Power of Attorney of The Bank of Harrisburg
<PAGE>
Internal Revenue Service
Associate Chief Counsel (Domestic)
Attention: CC:DOM:CORP:T
Page 29
PERJURY DECLARATION
-------------------
Under penalties of perjury, I declare that I have examined this
request, including accompanying documents, and to the best of my
knowledge and belief, the facts presented in support of the requested
rulings are true, correct and complete.
OLD NATIONAL BANCORP ("ONB")
By: [Draft]
--------------------------
Jeffrey L. Knight, Corporate Secretary
and General Counsel
<PAGE>
Internal Revenue Service
Associate Chief Counsel (Domestic)
Attention: CC:DOM:CORP:T
Page 30
PERJURY DECLARATION
-------------------
Under penalties of perjury, I declare that I have examined this
request, including accompanying documents, and to the best of my
knowledge and belief, the facts presented in support of the requested
rulings are true, correct and complete.
THE FIRST NATIONAL BANK OF HARRISBURG
("FIRST NATIONAL")
By: [Draft]
-----------------------------------
Ronald Gibbons, President and Chief
Executive Officer
<PAGE>
Internal Revenue Service
Associate Chief Counsel (Domestic)
Attention: CC:DOM:CORP:T
Page 31
PERJURY DECLARATION
-------------------
Under penalties of perjury, I declare that I have examined this
request, including accompanying documents, and to the best of my
knowledge and belief, the facts presented in support of the requested
rulings are true, correct and complete.
SHAWNEE BANCORP, INC. ("Shawnee")
By: [Draft]
------------------------------
William Cook, President and Chief
Executive Officer
THE BANK OF HARRISBURG ("Harrisburg")
By: [Draft]
------------------------------
William Cook, President
SS-38498-1
<PAGE>
EXHIBIT 21
----------
SUBSIDIARIES OF THE REGISTRANT
------------------------------
JURISDICTION OF
INCORPORATION OR
NAME OF SUBSIDIARY ORGANIZATION
------------------ ----------------------
Old National Bank in Evansville United States of America
The Merchants National Bank of Terre Haute United States of America
First-Citizens Bank & Trust Company Indiana
People's Bank & Trust Company Indiana
The Rockville National Bank United States of America
Clinton State Bank Indiana
Gibson County Bank Indiana
Security Bank & Trust Company Indiana
Farmers Bank & Trust Company Kentucky
The Peoples National Bank in Lawrenceville United States of America
First State Bank of Greenville Kentucky
Morganfield National Bank United States of America
The First National Bank of Harrisburg United States of America
Security Bank & Trust Company Illinois
Farmers Bank & Trust Company Kentucky
United Southwest Bank Indiana
Bank of Western Indiana Indiana
Palmer-American National Bank of Danville United States of America
Dubois County Bank Indiana
Indiana State Bank of Terre Haute Indiana
Orange County Bank Indiana
<PAGE>
The First National Bank of Oblong United States of America
The Citizens National Bank of Tell City United States of America
Indiana Old National Insurance Company Arizona
Old National Realty Company, Inc. Indiana
Old National Service Corporation Indiana
Old National Trust Company Indiana
Old National Trust Company, Illinois Illinois
Old National Trust Company, Kentucky Kentucky
MM:SS-38061-1
<PAGE>
EXHIBIT 23.01
-------------
CONSENT OF COUNSEL
------------------
The consent of Krieg DeVault Alexander & Capehart is included in its
opinion attached to this Registration Statement as Exhibit 5.
<PAGE>
EXHIBIT 23.02
-------------
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
registration statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Indianapolis, Indiana,
August 1, 1995
<PAGE>
EXHIBIT 23.03
-------------
Independent Auditors' Consent
-----------------------------
The Board of Directors and Stockholders
Shawnee Bancorp, Inc.:
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the prospectus. Our report refers to a
change in the method of accounting for investments in debt securities.
/s/ KPMG PEAT MARWICK LLP
St. Louis, Missouri
July 28, 1995
<PAGE>
Exhibit 24
----------
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a Director of Old
National Bancorp (the "Company"), an Indiana corporation with its principal
office located in Evansville, Indiana, does hereby severally make, constitute
and appoint Steve H. Parker, Ronald W. Seib and Jeffrey L. Knight, and each of
them individually, as his true and lawful attorney-in-fact and agent, with full
power of substitution and re-substitution, for and on his behalf and in his
name, place and stead, and in all capacities, (a) to execute registration
statements and all amendments, revisions, supplements, exhibits and other
documents in connection therewith relating to the proposed registration,
offering, sale and issuance of securities of the Company with respect to the
Company's acquisition of control of (i) Shawnee Bancorp, Inc., an Illinois
corporation with its principal office located in Harrisburg, Illinois, and (ii)
City National Bancorp, Inc., a Kentucky corporation with its principal office
located in Fulton, Kentucky, (b) to file any and all of the foregoing, in
substantially the form which has been presented to me or which any of the above-
named attorneys-in-fact and agents may approve, with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended (the "Act"), and
the rules and regulations promulgated thereunder; and (c) to do, or cause to be
done, any and all other acts and things whatsoever as fully and to all intents
and purposes as the undersigned might or could do in person which any of the
above-named attorneys-in-fact and agents may deem necessary or advisable in the
premises and in order to enable the Company to register its securities under and
otherwise comply with the Act and the rules and regulations promulgated
thereunder; hereby approving, ratifying and confirming all actions heretofore or
hereafter lawfully taken, or caused to be taken, by any of the above-named
attorneys-in-fact and agents by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the day
and year indicated below.
/S/ DAVID L. BARNING
- ------------------------
DIRECTOR
David L. Barning
- ---------------------------------
Printed Name
Dated: April 27, 1995
-----------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a Director of Old
National Bancorp (the "Company"), an Indiana corporation with its principal
office located in Evansville, Indiana, does hereby severally make, constitute
and appoint Steve H. Parker, Ronald W. Seib and Jeffrey L. Knight, and each of
them individually, as his true and lawful attorney-in-fact and agent, with full
power of substitution and re-substitution, for and on his behalf and in his
name, place and stead, and in all capacities, (a) to execute registration
statements and all amendments, revisions, supplements, exhibits and other
documents in connection therewith relating to the proposed registration,
offering, sale and issuance of securities of the Company with respect to the
Company's acquisition of control of (i) Shawnee Bancorp, Inc., an Illinois
corporation with its principal office located in Harrisburg, Illinois, and (ii)
City National Bancorp, Inc., a Kentucky corporation with its principal office
located in Fulton, Kentucky, (b) to file any and all of the foregoing, in
substantially the form which has been presented to me or which any of the above-
named attorneys-in-fact and agents may approve, with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended (the "Act"), and
the rules and regulations promulgated thereunder; and (c) to do, or cause to be
done, any and all other acts and things whatsoever as fully and to all intents
and purposes as the undersigned might or could do in person which any of the
above-named attorneys-in-fact and agents may deem necessary or advisable in the
premises and in order to enable the Company to register its securities under and
otherwise comply with the Act and the rules and regulations promulgated
thereunder; hereby approving, ratifying and confirming all actions heretofore or
hereafter lawfully taken, or caused to be taken, by any of the above-named
attorneys-in-fact and agents by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the day
and year indicated below.
/S/ RICHARD J. BOND
- ------------------------
DIRECTOR
Richard J. Bond
- ---------------------------------
Printed Name
Dated: April 27, 1995
----------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a Director of Old
National Bancorp (the "Company"), an Indiana corporation with its principal
office located in Evansville, Indiana, does hereby severally make, constitute
and appoint Steve H. Parker, Ronald W. Seib and Jeffrey L. Knight, and each of
them individually, as his true and lawful attorney-in-fact and agent, with full
power of substitution and re-substitution, for and on his behalf and in his
name, place and stead, and in all capacities, (a) to execute registration
statements and all amendments, revisions, supplements, exhibits and other
documents in connection therewith relating to the proposed registration,
offering, sale and issuance of securities of the Company with respect to the
Company's acquisition of control of (i) Shawnee Bancorp, Inc., an Illinois
corporation with its principal office located in Harrisburg, Illinois, and (ii)
City National Bancorp, Inc., a Kentucky corporation with its principal office
located in Fulton, Kentucky, (b) to file any and all of the foregoing, in
substantially the form which has been presented to me or which any of the above-
named attorneys-in-fact and agents may approve, with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended (the "Act"), and
the rules and regulations promulgated thereunder; and (c) to do, or cause to be
done, any and all other acts and things whatsoever as fully and to all intents
and purposes as the undersigned might or could do in person which any of the
above-named attorneys-in-fact and agents may deem necessary or advisable in the
premises and in order to enable the Company to register its securities under and
otherwise comply with the Act and the rules and regulations promulgated
thereunder; hereby approving, ratifying and confirming all actions heretofore or
hereafter lawfully taken, or caused to be taken, by any of the above-named
attorneys-in-fact and agents by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the day
and year indicated below.
/S/ ALAN W. BRAUN
- ----------------------
DIRECTOR
Alan W. Braun
- -------------------------------
Printed Name
Dated: April 27, 1995
-----------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a Director of Old
National Bancorp (the "Company"), an Indiana corporation with its principal
office located in Evansville, Indiana, does hereby severally make, constitute
and appoint Steve H. Parker, Ronald W. Seib and Jeffrey L. Knight, and each of
them individually, as his true and lawful attorney-in-fact and agent, with full
power of substitution and re-substitution, for and on his behalf and in his
name, place and stead, and in all capacities, (a) to execute registration
statements and all amendments, revisions, supplements, exhibits and other
documents in connection therewith relating to the proposed registration,
offering, sale and issuance of securities of the Company with respect to the
Company's acquisition of control of (i) Shawnee Bancorp, Inc., an Illinois
corporation with its principal office located in Harrisburg, Illinois, and (ii)
City National Bancorp, Inc., a Kentucky corporation with its principal office
located in Fulton, Kentucky, (b) to file any and all of the foregoing, in
substantially the form which has been presented to me or which any of the above-
named attorneys-in-fact and agents may approve, with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended (the "Act"), and
the rules and regulations promulgated thereunder; and (c) to do, or cause to be
done, any and all other acts and things whatsoever as fully and to all intents
and purposes as the undersigned might or could do in person which any of the
above-named attorneys-in-fact and agents may deem necessary or advisable in the
premises and in order to enable the Company to register its securities under and
otherwise comply with the Act and the rules and regulations promulgated
thereunder; hereby approving, ratifying and confirming all actions heretofore or
hereafter lawfully taken, or caused to be taken, by any of the above-named
attorneys-in-fact and agents by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the day
and year indicated below.
/S/ JOHN J. DAUS, JR.
- ------------------------
DIRECTOR
John J. Daus, Jr.
- -------------------------------
Printed Name
Dated: April 27, 1995
---------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a Director of Old
National Bancorp (the "Company"), an Indiana corporation with its principal
office located in Evansville, Indiana, does hereby severally make, constitute
and appoint Steve H. Parker, Ronald W. Seib and Jeffrey L. Knight, and each of
them individually, as his true and lawful attorney-in-fact and agent, with full
power of substitution and re-substitution, for and on his behalf and in his
name, place and stead, and in all capacities, (a) to execute registration
statements and all amendments, revisions, supplements, exhibits and other
documents in connection therewith relating to the proposed registration,
offering, sale and issuance of securities of the Company with respect to the
Company's acquisition of control of (i) Shawnee Bancorp, Inc., an Illinois
corporation with its principal office located in Harrisburg, Illinois, and (ii)
City National Bancorp, Inc., a Kentucky corporation with its principal office
located in Fulton, Kentucky, (b) to file any and all of the foregoing, in
substantially the form which has been presented to me or which any of the above-
named attorneys-in-fact and agents may approve, with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended (the "Act"), and
the rules and regulations promulgated thereunder; and (c) to do, or cause to be
done, any and all other acts and things whatsoever as fully and to all intents
and purposes as the undersigned might or could do in person which any of the
above-named attorneys-in-fact and agents may deem necessary or advisable in the
premises and in order to enable the Company to register its securities under and
otherwise comply with the Act and the rules and regulations promulgated
thereunder; hereby approving, ratifying and confirming all actions heretofore or
hereafter lawfully taken, or caused to be taken, by any of the above-named
attorneys-in-fact and agents by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the day
and year indicated below.
/S/ WAYNE A. DAVIDSON
- ------------------------
DIRECTOR
Wayne A. Davidson
- ----------------------------------
Printed Name
Dated: April 27, 1995
-------------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a Director of Old
National Bancorp (the "Company"), an Indiana corporation with its principal
office located in Evansville, Indiana, does hereby severally make, constitute
and appoint Steve H. Parker, Ronald W. Seib and Jeffrey L. Knight, and each of
them individually, as his true and lawful attorney-in-fact and agent, with
full power of substitution and re-substitution, for and on his behalf and in
his name, place and stead, and in all capacities, (a) to execute registration
statements and all amendments, revisions, supplements, exhibits and other
documents in connection therewith relating to the proposed registration,
offering, sale and issuance of securities of the Company with respect to the
Company's acquisition of control of (i) Shawnee Bancorp, Inc., an Illinois
corporation with its principal office located in Harrisburg, Illinois, and
(ii) City National Bancorp, Inc., a Kentucky corporation with its principal
office located in Fulton, Kentucky, (b) to file any and all of the foregoing,
in substantially the form which has been presented to me or which any of the
above-named attorneys-in-fact and agents may approve, with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations promulgated thereunder; and (c) to do,
or cause to be done, any and all other acts and things whatsoever as fully and
to all intents and purposes as the undersigned might or could do in person
which any of the above-named attorneys-in-fact and agents may deem necessary
or advisable in the premises and in order to enable the Company to register
its securities under and otherwise comply with the Act and the rules and
regulations promulgated thereunder; hereby approving, ratifying and confirming
all actions heretofore or hereafter lawfully taken, or caused to be taken, by
any of the above-named attorneys-in-fact and agents by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the day
and year indicated below.
/S/ LARRY E. DUNIGAN
------------------------
DIRECTOR
Larry E. Dunigan
------------------------
Printed Name
Dated: April 27 , 1995
------------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a Director of Old
National Bancorp (the "Company"), an Indiana corporation with its principal
office located in Evansville, Indiana, does hereby severally make, constitute
and appoint Steve H. Parker, Ronald W. Seib and Jeffrey L. Knight, and each of
them individually, as his true and lawful attorney-in-fact and agent, with
full power of substitution and re-substitution, for and on his behalf and in
his name, place and stead, and in all capacities, (a) to execute registration
statements and all amendments, revisions, supplements, exhibits and other
documents in connection therewith relating to the proposed registration,
offering, sale and issuance of securities of the Company with respect to the
Company's acquisition of control of (i) Shawnee Bancorp, Inc., an Illinois
corporation with its principal office located in Harrisburg, Illinois, and
(ii) City National Bancorp, Inc., a Kentucky corporation with its principal
office located in Fulton, Kentucky, (b) to file any and all of the foregoing,
in substantially the form which has been presented to me or which any of the
above-named attorneys-in-fact and agents may approve, with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations promulgated thereunder; and (c) to do,
or cause to be done, any and all other acts and things whatsoever as fully and
to all intents and purposes as the undersigned might or could do in person
which any of the above-named attorneys-in-fact and agents may deem necessary
or advisable in the premises and in order to enable the Company to register
its securities under and otherwise comply with the Act and the rules and
regulations promulgated thereunder; hereby approving, ratifying and confirming
all actions heretofore or hereafter lawfully taken, or caused to be taken, by
any of the above-named attorneys-in-fact and agents by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the day
and year indicated below.
/S/ DAVID E. ECKERLE
-------------------------
DIRECTOR
David E. Eckerle
-------------------------
Printed Name
Dated: April 27 , 1995
-------------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a Director of Old
National Bancorp (the "Company"), an Indiana corporation with its principal
office located in Evansville, Indiana, does hereby severally make, constitute
and appoint Steve H. Parker, Ronald W. Seib and Jeffrey L. Knight, and each of
them individually, as his true and lawful attorney-in-fact and agent, with
full power of substitution and re-substitution, for and on his behalf and in
his name, place and stead, and in all capacities, (a) to execute registration
statements and all amendments, revisions, supplements, exhibits and other
documents in connection therewith relating to the proposed registration,
offering, sale and issuance of securities of the Company with respect to the
Company's acquisition of control of (i) Shawnee Bancorp, Inc., an Illinois
corporation with its principal office located in Harrisburg, Illinois, and
(ii) City National Bancorp, Inc., a Kentucky corporation with its principal
office located in Fulton, Kentucky, (b) to file any and all of the foregoing,
in substantially the form which has been presented to me or which any of the
above-named attorneys-in-fact and agents may approve, with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations promulgated thereunder; and (c) to do,
or cause to be done, any and all other acts and things whatsoever as fully and
to all intents and purposes as the undersigned might or could do in person
which any of the above-named attorneys-in-fact and agents may deem necessary
or advisable in the premises and in order to enable the Company to register
its securities under and otherwise comply with the Act and the rules and
regulations promulgated thereunder; hereby approving, ratifying and confirming
all actions heretofore or hereafter lawfully taken, or caused to be taken, by
any of the above-named attorneys-in-fact and agents by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the day
and year indicated below.
/S/ THOMAS B. FLORIDA
--------------------------
DIRECTOR
Thomas B. Florida
--------------------------
Printed Name
Dated: April 27 , 1995
--------------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a Director of Old
National Bancorp (the "Company"), an Indiana corporation with its principal
office located in Evansville, Indiana, does hereby severally make, constitute
and appoint Steve H. Parker, Ronald W. Seib and Jeffrey L. Knight, and each of
them individually, as his true and lawful attorney-in-fact and agent, with
full power of substitution and re-substitution, for and on his behalf and in
his name, place and stead, and in all capacities, (a) to execute registration
statements and all amendments, revisions, supplements, exhibits and other
documents in connection therewith relating to the proposed registration,
offering, sale and issuance of securities of the Company with respect to the
Company's acquisition of control of (i) Shawnee Bancorp, Inc., an Illinois
corporation with its principal office located in Harrisburg, Illinois, and
(ii) City National Bancorp, Inc., a Kentucky corporation with its principal
office located in Fulton, Kentucky, (b) to file any and all of the foregoing,
in substantially the form which has been presented to me or which any of the
above-named attorneys-in-fact and agents may approve, with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations promulgated thereunder; and (c) to do,
or cause to be done, any and all other acts and things whatsoever as fully and
to all intents and purposes as the undersigned might or could do in person
which any of the above-named attorneys-in-fact and agents may deem necessary
or advisable in the premises and in order to enable the Company to register
its securities under and otherwise comply with the Act and the rules and
regulations promulgated thereunder; hereby approving, ratifying and confirming
all actions heretofore or hereafter lawfully taken, or caused to be taken, by
any of the above-named attorneys-in-fact and agents by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the day
and year indicated below.
/S/ PHELPS L. LAMBERT
--------------------------
DIRECTOR
Phelps L. Lambert
--------------------------
Printed Name
Dated: April 27 , 1995
--------------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a Director of Old
National Bancorp (the "Company"), an Indiana corporation with its principal
office located in Evansville, Indiana, does hereby severally make, constitute
and appoint Steve H. Parker, Ronald W. Seib and Jeffrey L. Knight, and each of
them individually, as his true and lawful attorney-in-fact and agent, with
full power of substitution and re-substitution, for and on his behalf and in
his name, place and stead, and in all capacities, (a) to execute registration
statements and all amendments, revisions, supplements, exhibits and other
documents in connection therewith relating to the proposed registration,
offering, sale and issuance of securities of the Company with respect to the
Company's acquisition of control of (i) Shawnee Bancorp, Inc., an Illinois
corporation with its principal office located in Harrisburg, Illinois, and
(ii) City National Bancorp, Inc., a Kentucky corporation with its principal
office located in Fulton, Kentucky, (b) to file any and all of the foregoing,
in substantially the form which has been presented to me or which any of the
above-named attorneys-in-fact and agents may approve, with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations promulgated thereunder; and (c) to do,
or cause to be done, any and all other acts and things whatsoever as fully and
to all intents and purposes as the undersigned might or could do in person
which any of the above-named attorneys-in-fact and agents may deem necessary
or advisable in the premises and in order to enable the Company to register
its securities under and otherwise comply with the Act and the rules and
regulations promulgated thereunder; hereby approving, ratifying and confirming
all actions heretofore or hereafter lawfully taken, or caused to be taken, by
any of the above-named attorneys-in-fact and agents by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the day
and year indicated below.
/S/ RONALD B. LANKFORD
--------------------------
DIRECTOR
Ronald B. Lankford
--------------------------
Printed Name
Dated: April 27 , 1995
--------------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a Director of Old
National Bancorp (the "Company"), an Indiana corporation with its principal
office located in Evansville, Indiana, does hereby severally make, constitute
and appoint Steve H. Parker, Ronald W. Seib and Jeffrey L. Knight, and each of
them individually, as his true and lawful attorney-in-fact and agent, with
full power of substitution and re-substitution, for and on his behalf and in
his name, place and stead, and in all capacities, (a) to execute registration
statements and all amendments, revisions, supplements, exhibits and other
documents in connection therewith relating to the proposed registration,
offering, sale and issuance of securities of the Company with respect to the
Company's acquisition of control of (i) Shawnee Bancorp, Inc., an Illinois
corporation with its principal office located in Harrisburg, Illinois, and
(ii) City National Bancorp, Inc., a Kentucky corporation with its principal
office located in Fulton, Kentucky, (b) to file any and all of the foregoing,
in substantially the form which has been presented to me or which any of the
above-named attorneys-in-fact and agents may approve, with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations promulgated thereunder; and (c) to do,
or cause to be done, any and all other acts and things whatsoever as fully and
to all intents and purposes as the undersigned might or could do in person
which any of the above-named attorneys-in-fact and agents may deem necessary
or advisable in the premises and in order to enable the Company to register
its securities under and otherwise comply with the Act and the rules and
regulations promulgated thereunder; hereby approving, ratifying and confirming
all actions heretofore or hereafter lawfully taken, or caused to be taken, by
any of the above-named attorneys-in-fact and agents by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the day
and year indicated below.
/S/ LUCIEN H. MEIS
---------------------------
DIRECTOR
Lucien H. Meis
---------------------------
Printed Name
Dated: April 27 , 1995
---------------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a Director of Old
National Bancorp (the "Company"), an Indiana corporation with its principal
office located in Evansville, Indiana, does hereby severally make, constitute
and appoint Steve H. Parker, Ronald W. Seib and Jeffrey L. Knight, and each of
them individually, as his true and lawful attorney-in-fact and agent, with
full power of substitution and re-substitution, for and on his behalf and in
his name, place and stead, and in all capacities, (a) to execute registration
statements and all amendments, revisions, supplements, exhibits and other
documents in connection therewith relating to the proposed registration,
offering, sale and issuance of securities of the Company with respect to the
Company's acquisition of control of (i) Shawnee Bancorp, Inc., an Illinois
corporation with its principal office located in Harrisburg, Illinois, and
(ii) City National Bancorp, Inc., a Kentucky corporation with its principal
office located in Fulton, Kentucky, (b) to file any and all of the foregoing,
in substantially the form which has been presented to me or which any of the
above-named attorneys-in-fact and agents may approve, with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations promulgated thereunder; and (c) to do,
or cause to be done, any and all other acts and things whatsoever as fully and
to all intents and purposes as the undersigned might or could do in person
which any of the above-named attorneys-in-fact and agents may deem necessary
or advisable in the premises and in order to enable the Company to register
its securities under and otherwise comply with the Act and the rules and
regulations promulgated thereunder; hereby approving, ratifying and confirming
all actions heretofore or hereafter lawfully taken, or caused to be taken, by
any of the above-named attorneys-in-fact and agents by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the day
and year indicated below.
/S/ DAN W. MITCHELL
---------------------------
DIRECTOR
Dan W. Mitchell
---------------------------
Printed Name
Dated: April 27 , 1995
---------------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a Director of Old
National Bancorp (the "Company"), an Indiana corporation with its principal
office located in Evansville, Indiana, does hereby severally make, constitute
and appoint Steve H. Parker, Ronald W. Seib and Jeffrey L. Knight, and each of
them individually, as her true and lawful attorney-in-fact and agent, with
full power of substitution and re-substitution, for and on her behalf and in
her name, place and stead, and in all capacities, (a) to execute registration
statements and all amendments, revisions, supplements, exhibits and other
documents in connection therewith relating to the proposed registration,
offering, sale and issuance of securities of the Company with respect to the
Company's acquisition of control of (i) Shawnee Bancorp, Inc., an Illinois
corporation with its principal office located in Harrisburg, Illinois, and
(ii) City National Bancorp, Inc., a Kentucky corporation with its principal
office located in Fulton, Kentucky, (b) to file any and all of the foregoing,
in substantially the form which has been presented to me or which any of the
above-named attorneys-in-fact and agents may approve, with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations promulgated thereunder; and (c) to do,
or cause to be done, any and all other acts and things whatsoever as fully and
to all intents and purposes as the undersigned might or could do in person
which any of the above-named attorneys-in-fact and agents may deem necessary
or advisable in the premises and in order to enable the Company to register
its securities under and otherwise comply with the Act and the rules and
regulations promulgated thereunder; hereby approving, ratifying and confirming
all actions heretofore or hereafter lawfully taken, or caused to be taken, by
any of the above-named attorneys-in-fact and agents by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand as of the day
and year indicated below.
/S/ MARJORIE Z. SOYUGENC
----------------------------
DIRECTOR
Marjorie Z. Soyugenc
----------------------------
Printed Name
Dated: April 27 , 1995
----------------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a Director of Old
National Bancorp (the "Company"), an Indiana corporation with its principal
office located in Evansville, Indiana, does hereby severally make, constitute
and appoint Steve H. Parker, Ronald W. Seib and Jeffrey L. Knight, and each of
them individually, as his true and lawful attorney-in-fact and agent, with
full power of substitution and re-substitution, for and on his behalf and in
his name, place and stead, and in all capacities, (a) to execute registration
statements and all amendments, revisions, supplements, exhibits and other
documents in connection therewith relating to the proposed registration,
offering, sale and issuance of securities of the Company with respect to the
Company's acquisition of control of (i) Shawnee Bancorp, Inc., an Illinois
corporation with its principal office located in Harrisburg, Illinois, and
(ii) City National Bancorp, Inc., a Kentucky corporation with its principal
office located in Fulton, Kentucky, (b) to file any and all of the foregoing,
in substantially the form which has been presented to me or which any of the
above-named attorneys-in-fact and agents may approve, with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations promulgated thereunder; and (c) to do,
or cause to be done, any and all other acts and things whatsoever as fully and
to all intents and purposes as the undersigned might or could do in person
which any of the above-named attorneys-in-fact and agents may deem necessary
or advisable in the premises and in order to enable the Company to register
its securities under and otherwise comply with the Act and the rules and
regulations promulgated thereunder; hereby approving, ratifying and confirming
all actions heretofore or hereafter lawfully taken, or caused to be taken, by
any of the above-named attorneys-in-fact and agents by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the day
and year indicated below.
/S/ CHARLES D. STORMS
-----------------------------
DIRECTOR
Charles D. Storms
-----------------------------
Printed Name
Dated: April 27 , 1995
-----------------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a Director of Old
National Bancorp (the "Company"), an Indiana corporation with its principal
office located in Evansville, Indiana, does hereby severally make, constitute
and appoint Steve H. Parker, Ronald W. Seib and Jeffrey L. Knight, and each of
them individually, as his true and lawful attorney-in-fact and agent, with
full power of substitution and re-substitution, for and on his behalf and in
his name, place and stead, and in all capacities, (a) to execute registration
statements and all amendments, revisions, supplements, exhibits and other
documents in connection therewith relating to the proposed registration,
offering, sale and issuance of securities of the Company with respect to the
Company's acquisition of control of (i) Shawnee Bancorp, Inc., an Illinois
corporation with its principal office located in Harrisburg, Illinois, and
(ii) City National Bancorp, Inc., a Kentucky corporation with its principal
office located in Fulton, Kentucky, (b) to file any and all of the foregoing,
in substantially the form which has been presented to me or which any of the
above-named attorneys-in-fact and agents may approve, with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations promulgated thereunder; and (c) to do,
or cause to be done, any and all other acts and things whatsoever as fully and
to all intents and purposes as the undersigned might or could do in person
which any of the above-named attorneys-in-fact and agents may deem necessary
or advisable in the premises and in order to enable the Company to register
its securities under and otherwise comply with the Act and the rules and
regulations promulgated thereunder; hereby approving, ratifying and confirming
all actions heretofore or hereafter lawfully taken, or caused to be taken, by
any of the above-named attorneys-in-fact and agents by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the day
and year indicated below.
/S/ EDWARD T. TURNER, JR.
----------------------------
DIRECTOR
Edward T. Turner, Jr.
----------------------------
Printed Name
Dated: April 27 , 1995
----------------------
<PAGE>
PROXY Exhibit 99.01
-------------
SHAWNEE BANCORP, INC.
SPECIAL MEETING OF SHAREHOLDERS
________________, 1995
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints ________________ and ________________, or
either of them, as proxies of the undersigned, each with full power of
substitution and resubstitution, to represent and to vote all of the shares of
common stock of Shawnee Bancorp, Inc. ("Shawnee Bancorp") which the undersigned
beneficially holds of record on ___________, 1995 and would be entitled to vote
at the Special Meeting of Shareholders of Shawnee Bancorp, to be held at the
main office of The Bank of Harrisburg, located at 2 West Walnut Street,
Harrisburg, Illinois 62946, on ___________, 1995, at ___:____ __.m., local time,
and at any adjournments thereof, with all of the powers the undersigned would
possess if personally present, on the matters set forth below.
The Board of Directors of Shawnee Bancorp recommends a vote FOR approval and
adoption of the Agreement of Affiliation and Merger specified in Item 1 below.
1. Approval and adoption of the Agreement of Affiliation and Merger
("Agreement"), dated May 31, 1995, among Shawnee Bancorp, Old National
Bancorp ("ONB"), The First National Bank of Harrisburg and The Bank of
Harrisburg, pursuant to which Shawnee Bancorp will affiliate through a
merger with ONB and each outstanding share of Shawnee Bancorp common stock
will be converted into the right to receive such number of shares of ONB
common stock which have a market value equal to Forty-One Dollars ($41.00),
all as provided for in the Agreement.
[_] FOR [_] AGAINST [_] ABSTAIN
2. In their discretion, on such other matters as may properly come before the
Special Meeting.
Please sign on reverse side (continued on other side)
<PAGE>
(continued from other side)
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NOT OTHERWISE DIRECTED, THIS PROXY
WILL BE VOTED FOR APPROVAL OF THE AGREEMENT. ON ANY OTHER MATTERS THAT MAY
PROPERLY COME BEFORE THE SPECIAL MEETING, THIS PROXY WILL BE VOTED IN ACCORDANCE
WITH THE RECOMMENDATION OF THE BOARD OF DIRECTORS OF SHAWNEE BANCORP. THIS
PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS EXERCISE.
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY.
DATED:___________________, 1995 __________________________________
(Signature of Shareholder)
__________________________________
(Signature of Shareholder)
Please sign exactly as your name appears
on your stock certificates and on the
label placed to the left. Joint owners
should each sign personally. Trustees,
guardians, executors and others signing in
a representative capacity should indicate
the capacity in which they sign.
<PAGE>
PROXY Exhibit 99.02
-------------
THE BANK OF HARRISBURG
SPECIAL MEETING OF SHAREHOLDERS
______________, 1995
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints __________________ and _________________, or
either of them, as proxies of the undersigned, each with full power of
substitution and resubstitution, to represent and to vote all of the shares of
common stock of The Bank of Harrisburg (the "Bank") which the undersigned
beneficially holds of record on ___________, 1995 and would be entitled to vote
at the Special Meeting of Shareholders of the Bank, to be held at the main
office of the Bank located at 2 West Walnut Street, Harrisburg, Illinois 62949,
on ____________, 1995, at ___:____ __.m., local time, and at any adjournments
thereof, with all of the powers the undersigned would possess if personally
present, on the matters set forth below.
The Board of Directors of the Bank recommends a vote FOR approval and adoption
of the Agreement of Affiliation and Merger specified in Item 1 below.
1. Approval and adoption of the Agreement of Affiliation and Merger
("Agreement"), dated May 31, 1995, among Shawnee Bancorp, Inc., Old
National Bancorp, The First National Bank of Harrisburg ("First National")
and the Bank, pursuant to which the Bank will affiliate through a merger
with First National and each outstanding share of Bank common stock will be
converted into the right to receive cash from ONB in the amount of
Seventeen Dollars ($17.00), all as provided for in the Agreement.
[_] FOR [_] AGAINST [_] ABSTAIN
2. In their discretion, on such other matters as may properly come before the
Special Meeting.
Please sign on reverse side (continued on other side)
<PAGE>
(continued from other side)
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NOT OTHERWISE DIRECTED, THIS PROXY
WILL BE VOTED FOR APPROVAL OF THE AGREEMENT. ON ANY OTHER MATTERS THAT MAY
PROPERLY COME BEFORE THE SPECIAL MEETING, THIS PROXY WILL BE VOTED IN ACCORDANCE
WITH THE RECOMMENDATION OF THE BOARD OF DIRECTORS OF THE BANK. THIS PROXY MAY
BE REVOKED AT ANY TIME PRIOR TO ITS EXERCISE.
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY.
DATED:___________________, 1995 ______________________________
(Signature of Shareholder)
______________________________
(Signature of Shareholder)
Please sign exactly as your name
appears on your stock certificates and
on the label placed to the left. Joint
owners should each sign personally.
Trustees, guardians, executors and
others signing in a representative
capacity should indicate the capacity
in which they sign.
