<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
Commission file number 0-13393
AMCORE FINANCIAL, INC.
NEVADA 36-3183870
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
501 Seventh Street, Rockford, Illinois 61104
Telephone number (815) 968-2241
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
The number of shares outstanding of the registrant's Common stock, par value
$.33 per share, at October 31, 1995 was 14,105,654 shares.
Index of Exhibits on Page 12 Page 1 of 98
<PAGE> 2
AMCORE FINANCIAL, INC.
Form 10-Q Table of Contents
<TABLE>
<CAPTION>
PART I Page Number
- ------ -----------
<S> <C> <C>
ITEM 1 Financial Statements
Consolidated Balance Sheets as of September 30, 1995 and
December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Income for the Three and Nine
Months Ended September 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows for the Three and Nine
Months Ended September 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 6
ITEM 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
PART II
- -------
ITEM 4 Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . 12
ITEM 6 Exhibits and Reports on Form 10-Q . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
2
<PAGE> 3
AMCORE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
(in thousands, except share data) 1995 1994
=======================================================================================================================
<S> <C> <C>
ASSETS Cash and cash equivalents..................................................... $97,442 $92,201
Interest earning deposits in banks............................................ 476 508
Federal funds sold and other short-term investments........................... 1,920 5,656
Mortgage loans held for sale.................................................. 14,495 10,184
Securities available for sale................................................. 460,428 318,246
Securities held to maturity (market value of $396,148 in 1995; $444,455 386,932 466,211
in 1994)
------------------------
Total securities.............................................................. 847,360 784,457
Loans and leases, net of unearned income...................................... 1,273,050 1,161,870
Allowance for loan and lease losses........................................... (13,190) (13,302)
------------------------
Net loans and leases..................................................... $1,259,860 $1,148,568
------------------------
Premises and equipment, net................................................... 49,649 49,178
Intangible assets, net........................................................ 14,828 18,314
Other real estate owned....................................................... 2,502 1,099
Other assets.................................................................. 45,926 41,818
------------------------
TOTAL ASSETS............................................................. $2,334,458 $2,151,983
========================
LIABILITIES LIABILITIES
AND Deposits:
STOCKHOLDERS Interest bearing............................................................ $1,567,069 $1,456,702
EQUITY Non-interest bearing........................................................ 259,794 250,857
------------------------
Total deposits........................................................... $1,826,863 $1,707,559
Short-term borrowings......................................................... 254,116 208,525
Long-term borrowings.......................................................... 22,013 26,487
Other liabilities............................................................. 32,195 23,253
------------------------
TOTAL LIABILITIES........................................................ $2,135,187 $1,965,824
------------------------
STOCKHOLDERS' EQUITY
Preferred stock, $1 par value: authorized 10,000,000 shares;
issued none................................................................. $ - $ -
Common stock, $.33 par value: authorized 30,000,000 shares;
September 30, December 31,
1995 1994
Issued.................................14,926,695 14,926,695
Outstanding............................14,093,764 14,039,680 4,976 4,976
Additional paid-in capital.................................................... 56,579 56,533
Retained earnings............................................................. 145,160 139,245
Treasury stock and other...................................................... (7,853) (8,296)
Net unrealized gain(loss) on securities available for sale.................... 409 (6,299)
------------------------
TOTAL STOCKHOLDERS' EQUITY............................................... $199,271 $186,159
------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............................... $2,334,458 $2,151,983
========================
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<PAGE> 4
AMCORE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
(in thousands, except per share data) 1995 1994 1995 1994
==========================================================================================================================
<S> <C> <C> <C>
INTEREST Interest and fees on loans and leases.............................. $28,158 $23,341 $80,496 $65,813
INCOME Interest on securities:
Taxable.......................................................... 9,527 7,562 27,957 23,194
Tax-exempt....................................................... 3,003 3,154 9,003 9,524
----------------------------------------
TOTAL INCOME FROM SECURITIES.................................. $12,530 $10,716 $36,960 $32,718
----------------------------------------
Interest on federal funds sold and other short-term investments.... 747 501 1,387 1,055
Interest and fees on mortgage loans held for sale.................. 991 705 2,205 2,256
Interest on deposits in banks...................................... 6 27 15 155
----------------------------------------
TOTAL INTEREST INCOME......................................... $42,432 $35,290 $121,063 $101,997
----------------------------------------
INTEREST Interest on deposits............................................... $17,990 $13,646 $50,353 $38,722
EXPENSE Interest on short-term borrowings.................................. 3,867 1,563 10,249 3,686
Interest on long-term borrowings................................... 403 497 1,279 1,465
Other.............................................................. 91 112 295 346
----------------------------------------
TOTAL INTEREST EXPENSE........................................ $22,351 $15,818 $62,176 $44,219
----------------------------------------
NET INTEREST INCOME................................................ $20,081 $19,472 $58,887 $57,778
Provision for loan and lease losses........................... 320 307 1920 611
----------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES...... $19,761 $19,165 $56,967 $57,167
----------------------------------------
OTHER Trust revenues..................................................... $2,628 $2,701 $8,455 $8,151
INCOME Service charges on deposits........................................ 1,879 1,627 5,306 4,914
Mortgage revenues.................................................. 1,069 1,398 2,632 2,814
Collection fees.................................................... 464 427 1,386 1,314
Other.............................................................. 2,013 1,946 5,631 5,159
----------------------------------------
TOTAL OTHER INCOME, EXCLUDING NET SECURITY GAINS.............. $8,053 $8,099 $23,410 $22,352
Net security gains................................................. 400 69 1,446 855
----------------------------------------
TOTAL OTHER INCOME............................................ $8,453 $8,168 $24,856 $23,207
OPERATING Compensation expense............................................... $9,352 $8,267 $27,501 $24,289
EXPENSES Employee benefits.................................................. 2,375 1,969 7,691 6,471
Net occupancy expense.............................................. 1,372 1,144 5,472 3,470
Equipment expense.................................................. 1,756 1,542 6,196 4,579
Insurance expense.................................................. 90 1,136 2,387 3,399
Professional fees.................................................. 587 874 2,174 2,393
Advertising and business development............................... 615 776 1,846 1,831
Amortization of intangible assets.................................. 516 647 3,478 1,945
Other.............................................................. 3,287 3,369 10,515 10,057
----------------------------------------
TOTAL OPERATING EXPENSES...................................... $19,950 $19,724 $67,260 $58,434
----------------------------------------
Income Before Income Taxes......................................... $8,264 $7,609 $14,563 $21,940
Income taxes....................................................... 2,024 2,060 2,566 5,618
----------------------------------------
NET INCOME.................................................... $6,240 $5,549 $11,997 $16,322
========================================
EARNINGS PER COMMON SHARE..................................... $0.44 $0.40 $0.85 $1.16
DIVIDENDS PER COMMON SHARE.................................... $0.15 $0.13 $0.45 $0.41
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
<PAGE> 5
AMCORE FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
(in thousands) 1995 1994
=========================================================================================================
<S> <C> <C> <C>
CASH FLOWS NET INCOME...................................................... $11,997 $16,322
FROM Adjustments to reconcile net income to net
OPERATING cash provided by(required for) operating activities:
ACTIVITIES Depreciation and amortization of premises and equipment.... $3,565 $3,258
Amortization and accretion of securities, net.............. 136 3,248
Provision for loan and lease losses........................ 1,920 611
Amortization of intangible assets.......................... 3,478 1,945
Gain on sale of securities available for sale.............. (1,567) (1,348)
Loss on sale of securities available for sale.............. 121 493
Gain on sale of trading securities......................... (1) -
Loss on sale of trading securities......................... 5 52
Purchase of trading securities............................. (8,017) (313)
Proceeds from sales of trading securities.................. 8,013 1,206
Write down of premises and equipment....................... 1,595 -
Write down of other real estate owned...................... 123 -
Non-employee directors compensation expense................ 218 282
Deferred income taxes...................................... (2,458) (1,694)
Net (increase) decrease in mortgage loans held for sale.... (4,311) 11,067
Other, net................................................. 4,503 412
----------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES............... $19,320 $35,541
----------------------
CASH FLOWS Proceeds from maturities of securities.......................... $111,232 $111,316
FROM Proceeds from sales of securities available for sale............ 140,972 82,374
INVESTING Purchase of securities held to maturity......................... (16,844) (57,395)
ACTIVITIES Purchase of securities available for sale....................... (286,405) (163,160)
Net (increase) decrease in federal funds sold and other
short-term investments........................................ 3,736 2,445
Net decrease in interest earning deposits in banks.............. 32 3,893
Net increase in loans and leases................................ (115,631) (103,760)
Proceeds from the sale of premises and equipment................ 266 173
Premises and equipment expenditures............................. (5,911) (6,919)
----------------------
NET CASH REQUIRED FOR INVESTING ACTIVITIES.............. ($168,553) ($135,923)
----------------------
CASH FLOWS Net increase in demand deposits and savings accounts............ $21,459 $44,013
FROM Net increase in time deposits................................... 97,845 21,082
FINANCING Net increase in short-term borrowings........................... 45,591 34,770
ACTIVITIES Payment of long-term borrowings................................. (4,613) (3,015)
Dividends paid.................................................. (6,078) (5,358)
Proceeds from exercise of incentive stock options............... 270 201
----------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES............... $154,474 $91,693
----------------------
Net change in cash and cash equivalents......................... $5,241 ($8,689)
----------------------
Cash and cash equivalents:
Beginning of year............................................. $92,201 $92,336
----------------------
End of period................................................. $97,442 $83,647
======================
SUPPLEMENTAL Cash payments for:
DISCLOSURES OF Interest paid to depositors................................... $46,582 $38,037
CASH FLOW Interest paid on borrowings................................... 11,112 4,525
INFORMATION Income taxes paid............................................. 3,924 6,666
NON-CASH Other real estate acquired in settlement of loans............... 2,419 539
INVESTING Transfer of short-term investments to securities available for
ACTIVITIES sale........................................................... - 10,307
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
<PAGE> 6
ITEM 1 - FINANCIAL STATEMENTS (CONTINUED)
AMCORE FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial reporting and with instructions for Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, these financial statements do not include all the
information and footnotes required by generally accepted accounting principles.
These financial statements include, however, all adjustments (consisting of
normal recurring accruals), which in the opinion of management are considered
necessary for the fair presentation of the results of operations for the
periods shown.
The consolidated financial statements and the financial information have been
restated to reflect the mergers with NBM Bancorp, Inc. (NBM) and NBA Holding
Company (NBA), all of which were accounted for using the pooling of interests
method. Operating results for the three and nine month periods ended September
30, 1995 are not necessarily indicative of the results that may be expected for
the fiscal year ending December 31, 1995. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Form 10-K Annual Report of AMCORE Financial, Inc. and Subsidiaries (the
"Company") for the year ended December 31, 1994.
NOTE 2 - EARNINGS PER SHARE
Earnings per share is based on dividing net income by the weighted average
number of shares of common stock outstanding during the periods, as adjusted
for common stock equivalents. Common stock equivalents consist of shares
issuable under options granted pursuant to various stock incentive plans. The
fully-dilutive effect of common stock equivalents on earnings per share was
less than three percent for all periods presented. Share data for all prior
year periods presented have been restated to reflect the mergers with NBM and
NBA.
NOTE 3 - LONG-TERM BORROWINGS
The Company has a term loan agreement (Agreement) with an unaffiliated
financial institution that requires semi-annual principal payments and allows
several interest rate and funding period options. At September 30, 1995, the
balance was $19.5 million and the selected interest rates ranged from 7.625% to
7.68%.
The Agreement contains several restrictive covenants, including restrictions on
dividends to stockholders and maintenance of various capital adequacy levels.
All capital adequacy ratios remained well above the required minimums per the
Agreement.
Scheduled principal reductions on the Agreement are required as follows:
<TABLE>
<CAPTION>
(in thousands) Total
<S> <C>
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,500
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000
-------
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $19,500
=======
</TABLE>
Other long-term borrowings include a non-interest bearing note from the January
19, 1993 acquisition of Rockford Mercantile Agency. The note requires annual
payments of $444,000 beginning in 1994 through 2002. The note was discounted
at an interest rate of 8.0%
6
<PAGE> 7
AMCORE FINANCIAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Management's discussion and analysis focuses on the consolidated financial
condition of AMCORE Financial, Inc. and subsidiaries (the "Company") as of
September 30, 1995 as compared to December 31, 1994 and the results of
operations for the three and nine months ended September 30, 1995 as compared
to the same periods in 1994. This discussion is intended to be read in
conjunction with the consolidated financial statements and notes thereto
appearing elsewhere in this report.
EARNINGS SUMMARY
Net income for the third quarter of 1995 was a record $6.2 million, a $691,000
increase over earnings in the third quarter of 1994. Quarterly earnings per
share reached a record $.44 in comparison to the $.40 posted a year earlier.
The increased earnings were the result of a $1.0 million pre-tax refund of FDIC
insurance premiums.
Through the first nine months of 1995, net income was $12.0 million as compared
to $16.3 million in 1994. Earnings per share totaled $.85 versus $1.16 in
1994. These declines were primarily caused by a $3.5 million, or $.25 per
share one-time charge in the second quarter of 1995 (see "Operating Expenses"
section for further discussion).
Despite a 33 basis point decline in the net interest margin to 4.04% versus the
third quarter of 1994, net interest income totaled $20.1 million, a $609,000 or
3.1% increase due primarily to higher loan volumes. On a year-to-date basis,
the results are similar, with net interest income rising by $1.1 million or
1.9%, while the net interest margin fell by 30 basis points to 4.16%. A shift
in the funding mix, particularly into time deposits, was the most significant
factor causing the margin compression.
Total other income, exclusive of security gains, was $8.1 million for the third
quarter, a $46,000 decline from 1994. Through the first nine months, other
income totaled $23.4 million and was $1.1 million or 4.7% above last year.
Increases in trust revenues, service charges and insurance commission income
contributed to the year-to-date improvement over 1994. Security gains totaled
$400,000 for the third quarter and $1.4 million for the first nine months,
increases of $331,000 and $591,000, respectively, over the 1994 periods.
The provision for loan and lease losses totaled $320,000 for the quarter, an
increase of $13,000 over the third quarter of 1994. For the first nine months
of 1995, the provision for loan and lease losses was $1.9 million, up from
$611,000 in 1994.
Operating expenses for the third quarter of 1995 were $20 million or $226,000
above the same period in 1994. Year-to-date operating expenses were $67.3
million as compared to $58.4 million in 1994, an increase of $8.8 million. The
year-to-date increase was due to the one-time charges recorded in the second
quarter, new expenses associated with branch expansion and upgrades in data
processing capabilities. Exclusive of the $5.6 million in one-time pre-tax
charges, year-to-date operating expenses reflect an increase of $3.2 million or
5.5% over 1994.
The return on assets (ROA) was 1.08% and 1.06%, respectively, for the third
quarters of 1995 and 1994. The return on average equity (ROE) for the quarter
was 12.61%, up from 11.95% in 1994. On a year-to-date basis, ROA and ROE were
.94% and 10.85%, respectively, after exclusion of the one-time charges,
compared with the prior year ROA of 1.07% and ROE of 11.80%.
NET INTEREST INCOME
Net interest income is the primary source of earnings for the Company's banking
affiliates. For the following analysis, net interest income is presented on a
tax equivalent basis, which adjusts reported interest income on tax-exempt
loans and securities to compare with other sources of fully taxable interest
income. Unlike changes in volume, or rates paid or earned, it has no effect on
actual net interest income or net income as reported in the Consolidated
Financial Statements.
7
<PAGE> 8
Tax equivalent net interest income totaled $21.8 million for the third quarter
of 1995, an increase of $528,000 or 2.5% over the prior year. This increase
was primarily a result of loan growth partially offset by higher funding costs.
The net interest margin, which is computed by dividing the tax equivalent net
interest income by average earning assets declined by 33 basis points to 4.04%
in the third quarter. The net interest margin on a year-to-date basis
reflected a similar decline falling to 4.16% from 4.46%. These declines were
due to the rising interest rate environment, which caused funding costs to
increase at a faster pace than yields on earning assets. In addition, a shift
in the deposit mix to higher rate time deposits contributed to the drop in net
interest margin. Accordingly, the net interest spread, which is the difference
between the yield on earning assets and the rate paid on interest bearing
liabilities, fell from 3.80% for the third quarter of 1994 to 3.36% for the
same period this year.
ANALYSIS OF NET INTEREST INCOME-TAX EQUIVALENT BASIS
Unaudited Quarters Ended September 30,
(in thousands)
<TABLE>
<CAPTION>
1995/1994
INTEREST EARNED CHANGE
AVERAGE BALANCE AVERAGE RATE OR PAID DUE TO
1995 1994 1995 1994 1995 1994 VOLUME RATE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
$539,972 $488,719 6.90% 6.05% Taxable securities....................... $9,527 $7,562 $840 $1,125
253,627 242,159 7.13% 7.84% Tax-exempt securities (1)................ 4,620 4,852 223 (455)
- ---------------------------------------------------------------------------------------------------------------------
$793,599 $730,878 6.98% 6.65% Total securities......................... $14,147 $12,414 $1,063 $670
- ---------------------------------------------------------------------------------------------------------------------
$15,214 $13,016 8.18% 7.03% Mortgage loans held for sale(3).......... $318 $234 $43 $41
1,250,852 1,112,104 8.83% 8.23% Loans(1)(2).............................. 28,216 23,399 3,052 1,765
48,504 43,647 6.07% 4.73% Other earning assets..................... 753 528 64 161
Fees on mortgage loans held for sale(3).. 673 471 163 39
- ---------------------------------------------------------------------------------------------------------------------
$2,108,169 $1,899,645 8.19% 7.63% TOTAL EARNING ASSETS (FTE) $44,107 $37,046 $4,385 $2,676
- ---------------------------------------------------------------------------------------------------------------------
INTEREST BEARING LIABILITIES:
$453,328 $479,936 2.52% 2.41% Interest-bearing demand deposits......... $2,883 $2,920 ($168) $131
165,852 170,296 2.53% 2.21% Savings deposits......................... 1,057 950 (26) 133
955,122 821,131 5.84% 4.72% Time deposits............................ 14,050 9,776 1,773 2,501
- ---------------------------------------------------------------------------------------------------------------------
$1,574,302 $1,471,363 4.53% 3.68% Total interest-bearing deposits.......... $17,990 $13,646 $1,579 $2,765
- ---------------------------------------------------------------------------------------------------------------------
$236,580 $136,966 6.48% 4.53% Short-term borrowings.................... $3,867 $1,563 $1,465 $839
21,994 27,448 7.27% 7.18% Long-term borrowings..................... 403 497 (101) 7
4,795 4,025 7.53% 11.04% Other.................................... 91 112 19 (40)
- ---------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST-BEARING
$1,837,671 $1,639,802 4.83% 3.83% LIABILITIES.............................. $22,351 $15,818 $2,962 $3,571
- ---------------------------------------------------------------------------------------------------------------------
3.36% 3.80% INTEREST RATE SPREAD (FTE)...............
- ---------------------------------------------------------------------------------------------------------------------
NET INTEREST MARGIN/
4.04% 4.37% NET INTEREST INCOME (FTE)................ $21,756 $21,228 $1,423 ($895)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
The above table shows the changes in interest income (tax equivalent) and
interest expense attributable to rate and volume variances. The change in
interest income (tax equivalent) 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.
(1) The interest on tax-exempt investment securities and tax-exempt loans is
calculated on a tax equivalent basis assuming a federal tax rate of 35%.
(2) The balances of nonaccrual loans are included in average loans
outstanding. Interest on loans includes yield-related loan fees.
(3) The yield-related fees recognized from the origination of mortgage loans
held for sale are in addition to the interest earned on the loans during
the period in which they are warehoused for sale as shown above.
Total average earning assets for the quarter were $2.1 billion, an increase of
$209 million or 11% over 1994. Average loans grew by $139 million or 12.5%,
primarily the result of growth in residential real estate loans and commercial
and industrial loans. Average total securities rose by $63 million, or 8.6%,
to $794 million for the quarter versus $731 million in 1994. Average other
earning assets, which include interest earning deposits in banks, federal funds
sold and other short-term investments increased by $4.9 million or 11.1%, to
$48.5 million.
Average total interest-bearing liabilities for the third quarter grew to $1.8
billion, a 12.1% or $198 million increase over the prior year. Average
interest-bearing deposits rose by $103 million or 7.0% during the third
quarter. Growth in average time deposits of $134 million (16.3%) more than
offset the $26.6 million decline in interest-bearing demand deposits and $4.4
million decline in savings deposits, and was utilized
8
<PAGE> 9
to fund loan growth. For the third quarter, average short-term borrowings rose
to $237 million, an increase of $100 million over the same quarter in 1994.
This increase resulted from the use of repurchase agreements to fund the
addition of mortgage-backed securities into the available for sale securities
portfolio. These transactions were designed to increase financial leverage
and, consequently, return on equity at certain banks with excess capital.
The yield on average earning assets for the third quarter of 1995 was 8.19%, an
increase of 56 basis points over the 1994 yield for the same period.
Generally, rising rates in the past year have resulted in higher yields in all
earning asset categories. The average rate paid on interest bearing
liabilities rose by 100 basis points, which caused the 44 basis point drop in
the net interest spread.
The average rate paid on interest-bearing deposits rose by 85 basis points to
4.53% for the third quarter of 1995. This increase was indicative of higher
market rates, increased competition and special promotional rates offered on
time deposits. The average rate paid on time deposits rose from 4.72% in the
third quarter of 1994 to 5.84% in the same period of 1995. The increase
reflects the movement by customers to longer term, higher yielding
interest-bearing deposits, particularly as a result of the rate increases noted
above. In a stable or declining interest rate environment, this trend could
continue the net interest margin compression.
The average rate paid on short-term borrowings increased from 4.53% to 6.48% in
the third quarter, primarily due to higher market rates on repurchase
agreements. The average rate paid on long-term borrowings rose from 7.18% in
the third quarter of 1994 to 7.27% in 1995. The interest rate risk on a
portion of the term loan agreement is hedged through the use of fixed rate swap
agreements.
On a year-to-date basis, tax equivalent net interest income was $63.9 million
in 1995, an increase of $822,000 or 1.3% over 1994. For this same period, the
net interest margin was 4.16% as compared to 4.46% for the prior year. Loan
growth and higher yields resulted in the higher net interest income. However,
the change in deposit mix coupled with faster repricing of interest-bearing
liabilities resulted in the net interest margin decline. Earning assets for
the first nine months of 1995 yielded 8.20%, a 61 basis point rise over 1994.
At the same time, the average rate paid on interest bearing liabilities
increased by 101 basis points to 4.71%.
PROVISION AND ALLOWANCE FOR LOAN AND LEASE LOSSES
The provision for loan and lease losses was $320,000 for the third quarter of
1995 as compared to $307,000 for the same period a year earlier. Total net
charge-offs for the quarter were $770,000 versus $438,000 in 1994. On a
year-to-date basis, net charge-offs totaled $2.0 million in 1995, up from the
$1.4 million recorded in 1994. The year-to-date increase over 1994 was due
mainly to a $595,000 write-down of a commercial real estate property, which was
acquired in foreclosure and reclassified into other real estate at the end of
the second quarter.
The annualized ratio of third quarter net charge-offs to average loans and
leases was .25% in 1995 versus .16% a year earlier. The year-to-date
annualized ratio rose from .17% in the first nine months of 1994 to .22% for
the same period this year.
The allowance for loan and lease losses as a percentage of total net loans and
leases was 1.04% at September 30, 1995, compared to 1.21% a year ago and 1.14%
at December 31, 1994. At September 30, 1995, the allowance covered 107.5% of
non-performing loans and leases versus 104.8% at December 31, 1994 and 113.2%
at September 30, 1994.
Total non-performing assets, which includes non-performing loans and leases and
other real estate owned, as a percentage of loans, leases and other real estate
owned were 1.16% at September 30, 1995, compared to 1.18% a year earlier and
1.19% at December 31, 1994.
OTHER INCOME
Non-interest income for the third quarter of 1995 declined slightly by .6% or
$46,000, exclusive of net security gains. On a year-to-date basis,
non-interest income totaled $23.4 million, a $1.1 million or 4.7% increase over
1994.
9
<PAGE> 10
Trust revenues were $2.6 million for the third quarter of 1995, a slight
decline of $73,000 versus 1994. On a year-to-date basis, trust revenues rose to
$8.5 million, an increase of 3.7% or $304,000 over the prior year. Continued
business expansion coupled with favorable market performance of trust assets
under management resulted in this increase.
Service charges on deposits were $1.9 million and $1.6 million for the third
quarters of 1995 and 1994, respectively, an increase of 15.5%. On a
year-to-date basis, service charges increased by $392,000 or 8.0% over the
prior year. Higher service charges were primarily due to the combination of
fee increases and a reduction in balances maintained to cover services. Other
non-interest income totaled $2.0 million for the quarter, an increase of 3.4%
over the prior year quarter. On a year-to-date basis, the total was $5.6
million, a 9.1% increase over 1994. These increases were the result of higher
credit card revenues and insurance commissions.
Mortgage revenues, which include income generated from underwriting and
servicing fees and gains realized on the sale of these loans, totaled $1.1
million for third quarter of 1995, versus $1.4 million a year earlier. This
decline was due to a $790,000 gain recognized in 1994 from the sale of
servicing rights. The decline was partially offset by $437,000 of revenues
recorded in 1995 in connection with the adoption of Statement of Financial
Accounting Standards (FAS) No. 122-"Accounting for Mortgage Servicing Rights".
On a year-to-date basis, mortgage revenues totaled $2.6 million, a decline of
$182,000 or 6.5% from the prior year.
OPERATING EXPENSES
Total operating expenses for the third quarter of 1995 were $20.0 million, a
$226,000 or 1.1% increase over 1994. On a year-to-date basis, these expenses
totaled $67.3 million versus $58.4 million in 1994, an increase of $8.8
million. Approximately $5.6 million of the year-to-date increase was caused by
the one-time charges recorded in the second quarter. These charges included
the early adoption impact of FAS No. 121-"Accounting for the Impairment of
Long-Lived Assets" and the recognition of certain merger and data conversion
costs. FAS No. 121 requires revaluation of an asset's carrying value when it
is determined the value is not fully recoverable.
Personnel costs, the largest component of total operating expenses, include
compensation and employee benefits and were $11.7 million in the third quarter
of 1995 versus $10.2 million in 1994. This increase of $1.5 million or 14.6%
was caused by approximately $200,000 in severance costs and an increase in
employees due to branch expansion and growth in the insurance group. On a
year-to-date basis, personnel costs were $35.2 million compared to $30.8
million in 1994, a 14.4% increase. This increase was caused by $941,000 of
one-time charges recorded in the second quarter in connection with the
recognition of merger costs.
Total occupancy and equipment expense was $3.1 million for the quarter versus
$2.7 million a year earlier, an increase of $442,000 or 16.5%. Year-to-date
expense totaled $11.7 million in 1995 and was $8.0 million the previous year.
Exclusive of $2.8 million in one-time charges recorded in the second quarter,
the increase was $864,000 or 10.7%. This increase was caused by branch
expansion as well as the upgrade to new information systems hardware and
software.
Insurance expense totaled only $90,000 in the third quarter of 1995 versus $1.1
million a year earlier. This decline resulted from a $1.0 million FDIC
insurance premium refund and was based on the premium rate reduction from $.23
to $.04 per $100 of deposit, effective June 1, 1995. This rate reduction is
expected to further reduce 1996 insurance costs by $1.3 million.
The remaining categories of operating expenses decreased when comparing the
third quarter of 1995 with the same period in 1994 due mainly to lower levels
of professional fees and intangible amortization expense. Total operating
expenses as a percent of average assets were 1.98% and 2.20% for the third
quarters of 1995 and 1994, respectively. On a year-to-date basis, excluding
the second quarter one-time charges, total operating expenses as a percent of
average assets were 2.23% for 1995 and 2.30% for 1994.
Income tax expense for the third quarter of 1995 totaled $2.0 million versus
$2.1 million the prior year, resulting in effective tax rates of 24.5% and
27.1%, respectively. The lower effective tax rate in 1995 resulted from 1994
tax return adjustments totaling $157,000. For the nine months ended September
30, 1995, income taxes totaled $2.6 million compared to $5.6 million in 1994.
The decline was caused by
10
<PAGE> 11
tax benefits recorded in connection with the one-time charges as well as
favorable tax return adjustments and the recognition of research and
experimentation tax credits.
SUMMARY OF FINANCIAL CONDITION
At September 30, 1995, total assets were $2.33 billion, a $182 million or 8.5%
increase since December 31, 1994. Total deposits grew to $1.83 billion,
representing a $119 million or 7.0% increase since the end of 1994. This
deposit increase included a 7.6% rise in interest-bearing deposits, primarily
certificates of deposit, and a 3.6% increase in non-interest bearing deposits.
Short-term borrowings also increased by $45.6 million to $254 million at
September 30, 1995. These increases were utilized to fund an increase in loans
and the purchase of mortgage-backed securities. Total loans at September 30,
1995 were $1.27 billion and grew $111 million or 9.6% since the previous
year-end. The primary loan categories contributing to this growth were
commercial loans and residential real estate loans. Total securities increased
$62.9 million to $847 million at September 30, 1995, an 8.0% increase over
December 31, 1994.
CAPITAL
Stockholders' equity grew 7.0% in the first nine months of 1995 to $199.3
million. At September 30, 1995, the risk-based capital ratio was 12.97% and
the Tier 1 risk-based capital ratio was 12.11%, both well above the 8.00% and
4.00% minimum required ratios. The leverage ratio at September 30, 1995 was
8.05%, also well above the 4.00% minimum.
Dividends paid were $.15 per share for the third quarters of 1995 and 1994.
The book value per share at September 30, 1994 rose by 6.6% to $14.14 when
compared to the December 31, 1994 book value.
OTHER MATTERS
In mid-November, the Financial Accounting Standards Board (FASB) is expected to
announce a temporary easing of the requirements of FAS No. 115 - "Accounting
for Certain Investments in Debt and Equity Securities". Accordingly, for the
remainder of 1995, the FASB will allow a one-time transfer of securities
between the available for sale and held to maturity categories without regard
to restrictions under FAS No. 115. Management is currently reviewing its
options related to this change and anticipates further reclassification of
securities into the available for sale category. This will allow more
flexibility with regard to managing liquidity and interest rate risk. The
higher level of securities classified as available for sale could, however,
cause additional capital volatility as unrealized gains and losses must be
adjusted through stockholders' equity.
On September 29, 1995, AMCORE Investment Banking, Inc. (AIB), a wholly-owned
subsidiary of AMCORE Financial, Inc., filed documents with the National
Association of Securities Dealers, Inc. to discontinue its operations as an
investment banking firm.
11
<PAGE> 12
PART II
ITEM 4. Submission of Matters to a Vote of Security Holders
(a)-(c) Incorporated herein by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1995 (File No. 0-13393)
<TABLE>
<CAPTION>
ITEM 6. Exhibits and Reports on Form 10-Q Page
----
<S> <C> <C>
(a) 2 Agreement and Plan of Reorganization by and among AMCORE Financial, Inc., NBM
Acquisition, Inc. and NBM Bancorp, Inc. (Incorporated by reference to the
Company's Amendment No. 1 to Form S-4 as filed with the Commission on February 23,
1995).
4 Rights Agreement dated February 12, 1986, between AMCORE Financial, Inc. and First
Wisconsin Trust Company (Incorporated by reference to Exhibit 4(a) of the
Company's Registration Statement on Form S-1 dated July 2, 1986).
10.1 Transitional Compensation Agreement dated September 25, 1995 between AMCORE 14
Financial, Inc. and Robert J. Meuleman.
10.2 Transitional Compensation Agreement dated September 25, 1995 between AMCORE 36
Financial, Inc. and John R. Hecht.
10.3 Transitional Compensation Agreement dated September 25, 1995 between AMCORE 55
Financial, Inc. and F. Taylor Carlin.
10.4 Transitional Compensation Agreement dated September 25, 1995 between AMCORE 74
Financial, Inc. and James S. Waddell.
11 Statement Re-Computation of Per Share Earnings 93
22 1995 Notice of Annual Meeting of Stockholders and Proxy Statement (Incorporated by
reference to Exhibit 22 of the Company's Annual Report on Form 10-K for the year
ended December 31, 1994).
27 Financial Data Schedule 94
99 Additional exhibit - Press release dated October 18, 1995. 95
(b) One report on Form 8 was filed with the Commission and dated August 4, 1995 as an
amendment to Form 8-K filed on May 25, 1995. The filing was necessary to complete
the financial statement filing requirements for the NBM Bancorp, Inc. merger.
</TABLE>
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMCORE Financial, Inc.
(Registrant)
Date: November 8, 1995
/s/ John R. Hecht
-------------------------
John R. Hecht
Senior Vice President and Chief Financial Officer
(Duly authorized officer of the registrant
and principal financial officer)
13
<PAGE> 1
EXHIBIT-10.1
(Revised draft 9/19/95)
(Version A)
TRANSITIONAL COMPENSATION AGREEMENT
AGREEMENT by and between Amcore Financial, Inc., a Nevada corporation (the
"Company"), and Robert J. Meuleman (the "Executive"), dated as of the 25th
day of September, 1995. This Agreement restates and supersedes any and
all prior agreements between the Company and the Executive relating to the
subject matter of this Agreement.
The Board of Directors of the Company (the "Board") has determined that it is
in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding
the possibility, threat or occurrence of a Change of Control (as defined below)
of the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control, to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefit arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other similar
corporations. Therefore, in order to accomplish these objectives, the Board
has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
<PAGE> 2
1. Certain Definitions
(a) The "Effective Date" shall mean the first date during the Change of
Control Period (as defined in paragraph (b), below) on which a Change of
Control (as defined in Section 2) occurs. Anything in this Agreement to the
contrary notwithstanding, if a Change of Control occurs and if the Executive's
employment with the Company is terminated or the Executive ceases to be an
officer of the Company prior to the date on which the Change of Control occurs,
and if it is reasonably demonstrated by the Executive that such termination of
employment or cessation of status as an officer (i) was at the request of a
third party who has taken steps reasonably calculated to effect the Change of
Control, or (ii) otherwise arose in connection with or anticipation of the
Change of Control and was not (A) for conduct by the Executive of the type
described in Section 4(b), below, (B) for significant deficiencies in the
Executive's performance of his duties to the Company (including, but not by way
of limitation, significant failure to cooperate in implementing a decision of
the Board), or (C) for some other specific substantial business reason
unrelated to the Change of Control, then for all purposes of this Agreement the
"Effective Date" shall mean the date immediately prior to the date of such
termination of employment or cessation of status as an officer.
(b) The "Change of Control Period" shall mean the period commencing on the
date of execution hereof and ending on the third anniversary of such date;
provided, however, that commencing on the date one (1) year after the date
hereof, and on each annual anniversary of such date (such date and each annual
anniversary thereof being hereinafter referred to as a "Renewal Date"), this
Agreement and the Change of Control Period shall be automatically extended so
as to terminate three (3) years from such Renewal Date, unless at least sixty
(60)
<PAGE> 3
days prior to the Renewal Date the Company shall give notice to the Executive
that the Change of Control Period shall not be so extended, in which case this
Agreement shall terminate upon the expiration of the Change of Control Period.
2. Change of Control. For the purpose of this Agreement, a "Change of
Control" shall mean:
(a) The acquisition, other than from the Company, by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of fifteen percent (15%) or more of either the then outstanding shares of
common stock of the Company or the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of directors, but excluding for this purpose any such acquisition by
the Company or any of its subsidiaries, or any employee benefit plan (or
related trust) of the Company or its subsidiaries, or any corporation with
respect to which, following such acquisition, more than sixty percent (60%) of,
respectively, the then outstanding shares of common stock of such corporation
and the combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
common stock and voting securities of the Company immediately prior to such
acquisition in substantially the same proportion as their ownership,
immediately prior to such acquisition, of the then outstanding shares of common
stock of the Company or the combined voting power of
<PAGE> 4
the then outstanding voting securities of the Company entitled to vote
generally in the election of directors, as the case may be; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board; provided that any individual becoming a director subsequent to the
date hereof, whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of directors then
comprising the Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office is in connection with an actual
or threatened election contest relating to the election of the directors of the
Company (as such terms are used in Rule 14a-11 Regulation 14A promulgated under
the Exchange Act); or
(c) Approval by the stockholders of the Company of (i) a reorganization,
merger or consolidation of the Company, in each case, with respect to which all
or substantially all of the individuals and entities who were the respective
beneficial owners of the common stock and voting securities of the Company
immediately prior to such reorganization, merger or consolidation do not,
following such reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than sixty percent (60%) of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election
of directors, as the case may be, of the corporation resulting from such
reorganization, merger or consolidation, or (ii) a complete liquidation or
dissolution of the Company, or (iii) the sale or other disposition of all or
substantially all of the assets of the Company.
<PAGE> 5
3. Effective Period. This Agreement shall be in effect for the period
commencing on the Effective Date and ending on the third anniversary of such
date (the "Effective Period").
4. Termination of Employment
(a) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Effective Period. If the
Company determines in good faith that the Disability of the Executive has
occurred during the Effective Period (pursuant to the definition of Disability
as set forth below), it may give to the Executive written notice in accordance
with Section 11(b) of this Agreement of its intention to terminate the
Executive's employment. In such event, the Executive's employment with the
Company shall terminate effective on the thirtieth (30th) day after receipt of
such notice by the Executive (the "Disability Effective Date"), provided that,
within the thirty (30) days after such receipt, the Executive shall not have
returned to full-time performance of the Executive's duties. For purposes of
this Agreement, "Disability" shall mean the absence of the Executive from the
Executive's duties with the Company on a full-time basis for one hundred and
eighty (180) consecutive business days as a result of incapacity due to mental
or physical illness which is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the
Executive or the Executive's legal representative (such agreement as to
acceptability not to be withheld unreasonably.)
(b) Cause. The Company may terminate the Executive's employment during
the Effective Period for Cause. For purposes of this Agreement, "Cause" shall
mean (i) repeated violations by the Executive of the Executive's assigned
duties as an employee of the Company (other than as a result of incapacity due
to physical or mental illness) which are demonstrably
<PAGE> 6
willful and deliberate on the Executive's part, which are committed in bad
faith or without reasonable belief that such violations are in the best
interests of the Company, and which are not remedied within thirty (30) days
after receipt of written notice from the Company specifying such violations or
(ii) the conviction of the Executive of a felony involving moral turpitude.
(c) Good Reason
(i) The Executive's employment may be terminated during the Effective
Period by the Executive for Good Reason (as defined below).
(ii) For purposes of this Agreement, "Good Reason" shall mean:
(A) The assignment to the Executive of any duties inconsistent in any
material respect with the Executive's position (including status, offices,
titles and reporting requirements), authority, duties or responsibilities as in
effect immediately prior to the Effective Date, or any other action by the
Company which results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the Company
within thirty (30) days after receipt of notice thereof given by the Executive;
(B) Any reduction by the Company in Executive's compensation or
benefits as in effect immediately prior to the Effective Date, other than an
isolated, insubstantial and inadvertent reduction not occurring in bad faith
and which is remedied by the Company promptly after receipt of notice thereof
given by the Executive;
(C) The Company's requiring the Executive to be based at any office or
location other than that in effect immediately prior to the Effective Date;
<PAGE> 7
(D) Any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(E) Any failure by the Company to comply with and satisfy Section 10(c)
of this Agreement, provided that such successor has received at
least ten (10) days prior written notice from the Company or the Executive of
the requirements of Section 10(c) of this Agreement. For purposes of this
Section 4(c), any good faith determination of "Good Reason" made by the
Executive shall be conclusive.
(d) Notice of Termination. Any termination by the Company for Cause, or
by the Executive for Good Reason, shall be communicated by a Notice of
Termination to the other party given in accordance with Section 11(b) of this
Agreement. For purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination
of the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of
such notice, specifies the termination date (which date shall be not more than
fifteen (15) days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company hereunder or preclude the
Executive or the Company from asserting such fact or circumstance in enforcing
the Executive's or the Company's rights hereunder.
<PAGE> 8
(e) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination, and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the
case may be.
5. Obligations of the Company upon Termination
(a) Good Reason; Other Than for Cause, Death or Disability. If, during
the Effective Period, the Company shall terminate the Executive's employment
other than for Cause or Disability, or the Executive shall terminate employment
for Good Reason:
(i) The Company shall pay to the Executive in a lump sum in cash within
thirty (30) days after the Date of Termination the aggregate of the following
amounts:
A. The sum of (1) the Executive's then current annual base salary
through the Date of Termination to the extent not theretofore paid; (2) the
product of (x) Executive's Recent Average Bonus (as defined below) and (y) a
fraction, the numerator of which is the number of days in the then current
fiscal year through the Date of Termination, and the denominator of which is
three hundred and sixty-five (365); (3) any compensation previously deferred by
the Executive (together with any accrued interest or earnings thereon); and (4)
any accrued vacation pay; in each case to the extent not theretofore paid (the
sum of the amounts described in parts (1), (2), (3) and (4), above, being
hereinafter referred to as the "Accrued
<PAGE> 9
Obligations"). For purposes of this Agreement, Executive's Recent Average
Bonus shall be the average annualized (for any fiscal year consisting of less
than twelve (12) full months or with respect to which the Executive has been
employed by the Company for less than twelve (12) full months) bonus paid or
payable, before taking into account any deferral, to the Executive by the
Company and its affiliated companies in respect of the three (3) fiscal years
immediately preceding the fiscal year in which the termination of Executive's
employment occurs; and
B. The amount (such amount being hereinafter referred to as the
"Severance Amount") equal to the product of multiplying by three (3) the sum of
(1) the Executive's then current annual base salary and (2) Executive's Recent
Average Bonus; provided, however, that such amount shall be reduced by the
present value (determined as provided in Section 280G(d)(4) of the Internal
Revenue Code of 1986, as amended (the "Code")) of any other amount of severance
relating to salary or bonus continuation to be received by the Executive, upon
such termination of employment, under any other severance plan, policy or
arrangement of the Company; and
C. A separate lump-sum supplemental retirement benefit (the amount of
such benefit being hereinafter referred to as the "Supplemental Retirement
Amount") equal to the difference between (1) the actuarial equivalent
(utilizing for this purpose the actuarial assumptions utilized with respect to
the Financial Security plans of the Company (or any successor plans
thereto) (the "Retirement Plans") during the ninety (90)-day period immediately
preceding the Effective Date) of the benefits payable under the Retirement
Plans and under any supplemental and/or excess retirement plans of the Company
and its affiliated companies providing benefits for the Executive (the "SERPs")
which the Executive would have
<PAGE> 10
received if the Executive's employment had continued (at the compensation level
in effect at the time of termination of Executive's employment) for three (3)
years after the Date of Termination, assuming for this purpose that all accrued
benefits are fully vested and that benefit accrual formulas are no less
advantageous to the Executive than those in effect during the ninety (90)-day
period immediately preceding the Effective Date, and (2) the actuarial
equivalent (utilizing for this purpose the actuarial assumptions utilized with
respect to the Retirement Plans during the ninety (90)-day period immediately
preceding the Effective Date) of the Executive's actual benefits (paid or
payable), if any, under the Retirement Plans and the SERPs; and
(ii) For three (3) years after the Date of Termination, or such longer
period as any other plan, program, practice or policy may provide, the
Executive's employment shall continue under all applicable stock option plans,
restricted stock plans, and other equity incentive plans or programs of the
Company and its affiliates solely for purposes of determining (A) the date(s)
on which any option(s) or similar right(s) shall become exercisable or shall
expire and (B) the date(s) on which any stock restriction(s) shall lapse;
provided that if such continuation is not possible under the provisions of such
plans or programs or under applicable law, the Company shall arrange to provide
benefits to the Executive substantially equivalent in value to those required
to be provided under this subparagraph (ii).
(iii) For three (3) years after the Date of Termination, or such longer
period as any other plan, program, practice or policy may provide, the Company
shall continue benefits to the Executive and/or the Executive's family at least
equal to those which would have been provided to them, if the Executive's
employment had not been terminated, in accordance with (A) the welfare benefit
plans, practices, programs or policies of the Company and its
<PAGE> 11
affiliated companies as in effect and applicable generally to other peer
executives and their families during the ninety (90)-day period immediately
preceding the Effective Date or (B) if more favorable to the Executive, those
in effect generally from time to time thereafter with respect to other peer
executives of the Company and its affiliated companies and their families (such
continuation of such benefits for the applicable period herein set forth being
hereinafter referred to as "Welfare Benefit Continuation"); provided that if
such continued coverage is not permitted by the applicable plans or by
applicable law, the Company shall provide the Executive and/or Executive's
family with comparable benefits of equal value; and provided further that if
the Executive becomes reemployed with another employer and is eligible to
receive medical or other welfare benefits under another employer-provided plan,
the medical and other welfare benefits described herein shall be secondary to
those provided under such other plan during such applicable period of
eligibility. For purposes of determining eligibility of the Executive for
retiree benefits pursuant to such plans, practices, programs and policies, the
Executive shall be considered to have remained employed until the end of the
Effective Period and to have retired on the last day of such period; and
(iv) To the extent not theretofore paid or provided, the Company shall
timely pay or provide to the Executive and/or the Executive's family any other
amounts or benefits required to be paid or provided or which the Executive
and/or the Executive's family is eligible to receive pursuant to this Agreement
or under (A) any other plan, program, policy or practice, or contract or
agreement of the Company and its affiliated companies as in effect and
applicable generally to other peer executives and their families during the
ninety (90)-day period immediately preceding the Effective Date or (B) if more
favorable to the Executive, those in
<PAGE> 12
effect generally from time to time thereafter with respect to other peer
executives of the Company and its affiliated companies and their families (such
other amounts and benefits being hereinafter referred to as the "Other
Benefits").
(b) Death. If the Executive's employment is terminated by reason of the
Executive's death during the Effective Period, this Agreement shall terminate
without further obligations to the Executive's legal representatives under this
Agreement, other than for (i) payment of the Accrued Obligations (which shall
be paid to the Executive's estate or beneficiary, as applicable, in a lump sum
in cash within thirty (30) days of the Date of Termination) and (ii) the timely
payment or provision of the Welfare Benefit Continuation and Other Benefits.
(c) Disability. If the Executive's employment is terminated by reason of
the Executive's Disability during the Effective Period, this Agreement shall
terminate without further obligations to the Executive, other than for (i)
payment of the Accrued Obligations (which shall be paid to the Executive in a
lump sum in cash within thirty (30) days of the Date of Termination) and (ii)
the timely payment or provision of the Welfare Benefit Continuation and Other
Benefits.
(d) Cause; Other than for Good Reason. If the Executive's employment
shall be terminated for Cause during the Effective Period, this Agreement shall
terminate without further obligations to the Executive other than the
obligation to pay the Executive's then current annual base salary through the
Date of Termination, plus the amount of any compensation previously deferred by
the Executive, in each case to the extent theretofore unpaid. If the Executive
terminates employment during the Effective Period, excluding a termination for
Good Reason, this Agreement shall terminate without further obligations to the
Executive, other than
<PAGE> 13
for (i) the Accrued Obligations and (ii) the timely payment or provision of
Other Benefits. In such case, all Accrued Obligations shall be paid to the
Executive in a lump sum in cash within thirty (30) days of the Date of
Termination.
6. Certain Additional Payments by the Company. The Company agrees that:
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company to
or for the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Section 6) (a "Payment") would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986, as amended, (the "Code") or if any
interest or penalties are incurred by the Executive with respect to such excise
tax (such excise tax, together with any such interest and penalties, being
hereinafter collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (a "Gross-Up Payment") in an
amount such that, after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payment.
(b) Subject to the provisions of paragraph (c), below, all determinations
required to be made under this Section 6, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by McGladrey &
Company (the "Accounting Firm"), which
<PAGE> 14
shall provide detailed supporting calculations both to the Company and the
Executive within fifteen (15) business days of the receipt of notice from the
Executive that there has been a Payment, or such earlier time as is requested
by the Company. In the event that the Accounting Firm is serving as accountant
or auditor for the individual, entity or group effecting the Change of Control,
the Executive shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 6, shall be paid by the Company to the
Executive within five (5) days of the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise Tax is payable
by the Executive, it shall furnish the Executive with a written opinion that
failure to report the Excise Tax on the Executive's applicable federal income
tax return would not result in the imposition of a negligence or similar
penalty. Any good faith determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
paragraph (c), below, and the Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the amount of
the Underpayment that has occurred and any such Underpayment shall be promptly
paid by the Company to or for the benefit of the Executive.
<PAGE> 15
(c) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of a Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than fifteen (15) business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the thirty
(30)-day period following the date on which Executive gives such notice to the
Company (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that it desires to contest such
claim, the Executive shall:
(i) Give the Company any information reasonably requested by the Company
relating to such claim,
(ii) Take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim
by an attorney reasonably selected by the Company,
(iii) Cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) Permit the Company to participate in any proceedings relating to such
claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and
<PAGE> 16
hold the Executive harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and expenses. Without
limiting the foregoing provisions of this paragraph (c), the Company shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct the Executive to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner; and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if
the Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment
of taxes for the taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
<PAGE> 17
(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to paragraph (c), above, the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall (subject to
the Company's complying with the requirements of said paragraph (c)) promptly
pay to the Company the amount of such refund (together with any interest paid
or credited thereon, after taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by the Company pursuant to said paragraph
(c), a determination is made that the Executive shall not be entitled to any
refund with respect to such claim and the Company does not notify the Executive
in writing of its intent to contest such denial of refund prior to the
expiration of thirty (30) days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of the Gross-Up Payment
required to be paid.
7. Non-exclusivity of Rights. Except as explicitly provided in this
Agreement, nothing in this Agreement shall prevent or limit the Executive's
continuing or future participation in any plan, program, policy or practice
provided by the Company or any of its affiliated companies and for which the
Executive may qualify, nor shall anything herein limit or otherwise affect such
rights as the Executive may have under applicable law or under any other
contract or agreement with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any other plan, policy, practice or program of, or any other
contract or agreement with, the Company or any of its affiliated companies at,
or subsequent to, the Date of Termination shall be payable in accordance with
such plan, policy, practice or program or contract or agreement except as
explicitly modified by this Agreement.
<PAGE> 18
8. Full Settlement; Resolution of Disputes
(a) The Company's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Company may have against the Executive or others. In
no event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as provided in Section
5(a)(iii) of this Agreement, such amounts shall not be reduced whether or not
the Executive obtains other employment. The Company agrees to pay promptly as
incurred, to the fullest extent permitted by law, all legal fees and expenses
which the Executive may reasonably incur as a result of any contest (regardless
of the outcome thereof) by the Company, the Executive or others of the validity
or enforceability of, or liability under, any provision of this Agreement or
any guarantee of performance thereof (including as a result of any contest
initiated by the Executive about the amount of any payment due pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
federal rate provided for in Section 7872(f)(2)(A) of the Code.
(b) If there shall be any dispute between the Company and the Executive
(i) in the event of any termination of the Executive's employment by the
Company, whether such termination was for Cause, or (ii) in the event of any
termination of employment by the Executive, whether Good Reason existed, then,
unless and until there is a final, nonappealable judgment by a court of
competent jurisdiction declaring that such termination was for Cause or that
the determination by the Executive of the existence of Good Reason was not made
in good
<PAGE> 19
faith, the Company shall pay all amounts, and provide all benefits, to the
Executive and/or the Executive's family or other beneficiaries, as the case may
be, that the Company would be required to pay or provide pursuant to Section
5(a) hereof as though such termination were by the Company without Cause or by
the Executive with Good Reason; provided, however, that the Company shall not
be required to pay any disputed amounts pursuant to this paragraph except upon
receipt of an undertaking by or on behalf of the Executive and/or the other
recipient(s), as the case may be, to repay all such amounts to which the
Executive or other recipient, as the case may be, is ultimately adjudged by
such court not to be entitled.
9. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the
Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the
Company and those designated by it. However, in no event shall an asserted
violation of the provisions of this Section 9 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this
Agreement.
10. Successors
<PAGE> 20
(a) This Agreement is personal to the Executive and, without the prior
written consent of the Company, no obligations or rights hereunder shall be
assignable by the Executive otherwise than by will or the laws of descent or
distribution. This Agreement shall inure to the benefit of and be enforceable
by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
As used in this Agreement, "Company" shall mean the Company as hereinbefore
defined and any successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement, by operation of law or otherwise.
11. Miscellaneous
(a) This Agreement shall be governed by and construed in accordance with
the laws of the State of Illinois, without reference to principles of choice of
law. The captions of this Agreement are for convenience only and are not part
of the provisions hereof and shall have no force or effect. This Agreement may
not be amended or modified otherwise than by a written agreement executed by
the parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and
shall be given to the other party by hand delivery or commercial messenger
delivery or by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
<PAGE> 21
If to the Executive:
If to the Company:
Amcore Financial, Inc.
501 Seventh Street
P.O. Box 1537
Rockford, Illinois 61110-0037
Attention: _________________________
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(d) The Company may withhold from any amounts payable under this Agreement
such federal, state or local taxes as shall be required to be withheld pursuant
to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or the failure to assert any right that
the Executive or the Company may have hereunder, including, without limitation,
the right of the Executive to terminate employment for Good Reason pursuant to
Section 4(c) of this Agreement, shall not be deemed to be a waiver of such
provision or right or of any other provision of or right under this Agreement.
(f) The Executive and the Company acknowledge that this Agreement is not a
contract of employment and that, except as may otherwise be provided under any
other written agreement between the Executive and the Company, the employment
of the Executive by the
<PAGE> 22
Company is, and shall remain during the Effective Period, "at will" and may,
subject to Section 5, above, be terminated by either the Executive or the
Company at any time. Moreover, subject to Section 1, above, if prior to the
Effective Date (i) the Executive's employment with the Company and all
affiliates terminates or (ii) the Executive ceases to be an officer of the
Company and of all affiliates, then the Executive shall have no further rights
under this Agreement.
(g) This Agreement embodies the entire agreement and understanding between
the Company and the Executive and supersedes all prior agreements and
understandings between the Company and Executive relating to the subject matter
hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and,
pursuant to the authorization of its Board of Directors, the Company has caused
these presents to be executed in its name on its behalf, all as of the day and
year first above written.
AMCORE FINANCIAL, INC.
By: /s/ Carl J. Dargene
---------------------------------------
Its Chairman Pres. & C.E.O.
----------------------------------
/s/ Robert J. Meuleman
---------------------------------------
("Executive")
<PAGE> 1
EXHIBIT 10.2
(Revised draft 9/19/95)
(Version B)
TRANSITIONAL COMPENSATION AGREEMENT
AGREEMENT by and between Amcore Financial, Inc., a Nevada corporation (the
"Company"), and John R. Hecht (the "Executive"), dated as of the
25 day of September, 1995. This Agreement restates and supersedes
any and all prior agreements between the Company and the Executive relating to
the subject matter of this Agreement.
The Board of Directors of the Company (the "Board") has determined that it is
in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding
the possibility, threat or occurrence of a Change of Control (as defined below)
of the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control, to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefit arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other similar
corporations. Therefore, in order to accomplish these objectives, the Board
has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
<PAGE> 2
1. Certain Definitions
(a) The "Effective Date" shall mean the first date during the Change of
Control Period (as defined in paragraph (b), below) on which a Change of
Control (as defined in Section 2) occurs. Anything in this Agreement to the
contrary notwithstanding, if a Change of Control occurs and if the Executive's
employment with the Company is terminated or the Executive ceases to be an
officer of the Company prior to the date on which the Change of Control occurs,
and if it is reasonably demonstrated by the Executive that such termination of
employment or cessation of status as an officer (i) was at the request of a
third party who has taken steps reasonably calculated to effect the Change of
Control, or (ii) otherwise arose in connection with or anticipation of the
Change of Control and was not (A) for conduct by the Executive of the type
described in Section 4(b), below, (B) for significant deficiencies in the
Executive's performance of his duties to the Company (including, but not by way
of limitation, significant failure to cooperate in implementing a decision of
the Board), or (C) for some other specific substantial business reason
unrelated to the Change of Control, then for all purposes of this Agreement the
"Effective Date" shall mean the date immediately prior to the date of such
termination of employment or cessation of status as an officer.
(b) The "Change of Control Period" shall mean the period commencing on the
date of execution hereof and ending on the third anniversary of such date;
provided, however, that commencing on the date one (1) year after the date
hereof, and on each annual anniversary of such date (such date and each annual
anniversary thereof being hereinafter referred to as a "Renewal Date"), this
Agreement and the Change of Control Period shall be automatically extended so
as to terminate three (3) years from such Renewal Date, unless at least sixty
(60)
<PAGE> 3
days prior to the Renewal Date the Company shall give notice to the Executive
that the Change of Control Period shall not be so extended, in which case this
Agreement shall terminate upon the expiration of the Change of Control Period.
2. Change of Control. For the purpose of this Agreement, a "Change of
Control" shall mean:
(a) The acquisition, other than from the Company, by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of fifteen percent (15%) or more of either the then outstanding shares of
common stock of the Company or the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of directors, but excluding for this purpose any such acquisition by
the Company or any of its subsidiaries, or any employee benefit plan (or
related trust) of the Company or its subsidiaries, or any corporation with
respect to which, following such acquisition, more than sixty percent (60%) of,
respectively, the then outstanding shares of common stock of such corporation
and the combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
common stock and voting securities of the Company immediately prior to such
acquisition in substantially the same proportion as their ownership,
immediately prior to such acquisition, of the then outstanding shares of common
stock of the Company or the
<PAGE> 4
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors, as the case may be; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board; provided that any individual becoming a director subsequent to the
date hereof, whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the directors of the Company (as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act); or
(c) Approval by the stockholders of the Company of (i) a reorganization,
merger or consolidation of the Company, in each case, with respect to which all
or substantially all of the individuals and entities who were the respective
beneficial owners of the common stock and voting securities of the Company
immediately prior to such reorganization, merger or consolidation do not,
following such reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than sixty percent (60%) of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election
of directors, as the case may be, of the corporation resulting from such
reorganization, merger or consolidation, or (ii) a complete liquidation or
dissolution of the Company, or (iii) the sale or other disposition of all or
substantially all of the assets of the Company.
<PAGE> 5
3. Effective Period. This Agreement shall be in effect for the period
commencing on the Effective Date and ending on the third anniversary of such
date (the "Effective Period").
4. Termination of Employment
(a) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Effective Period. If the
Company determines in good faith that the Disability of the Executive has
occurred during the Effective Period (pursuant to the definition of Disability
as set forth below), it may give to the Executive written notice in accordance
with Section 11(b) of this Agreement of its intention to terminate the
Executive's employment. In such event, the Executive's employment with the
Company shall terminate effective on the thirtieth (30th) day after receipt of
such notice by the Executive (the "Disability Effective Date"), provided that,
within the thirty (30) days after such receipt, the Executive shall not have
returned to full-time performance of the Executive's duties. For purposes of
this Agreement, "Disability" shall mean the absence of the Executive from the
Executive's duties with the Company on a full-time basis for one hundred and
eighty (180) consecutive business days as a result of incapacity due to mental
or physical illness which is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the
Executive or the Executive's legal representative (such agreement as to
acceptability not to be withheld unreasonably.)
(b) Cause. The Company may terminate the Executive's employment during
the Effective Period for Cause. For purposes of this Agreement, "Cause" shall
mean (i) repeated violations by the Executive of the Executive's assigned
duties as an employee of the Company (other than as a result of incapacity due
to physical or mental illness) which are
<PAGE> 6
demonstrably willful and deliberate on the Executive's part, which are
committed in bad faith or without reasonable belief that such violations are in
the best interests of the Company, and which are not remedied within thirty
(30) days after receipt of written notice from the Company specifying such
violations or (ii) the conviction of the Executive of a felony involving moral
turpitude.
(c) Good Reason
(i) The Executive's employment may be terminated during the Effective
Period by the Executive for Good Reason (as defined below).
(ii) For purposes of this Agreement, "Good Reason" shall mean:
(A) The assignment to the Executive of any duties inconsistent in any
material respect with the Executive's position (including status, offices,
titles and reporting requirements), authority, duties or responsibilities as in
effect immediately prior to the Effective Date, or any other action by the
Company which results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the Company
within thirty (30) days after receipt of notice thereof given by the Executive;
(B) Any reduction by the Company in Executive's compensation or
benefits as in effect immediately prior to the Effective Date, other than an
isolated, insubstantial and inadvertent reduction not occurring in bad faith
and which is remedied by the Company promptly after receipt of notice thereof
given by the Executive;
(C) The Company's requiring the Executive to be based at any office or
location other than that in effect immediately prior to the Effective Date;
<PAGE> 7
(D) Any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(E) Any failure by the Company to comply with and satisfy Section 10(c)
of this Agreement, provided that such successor has received at least ten (10)
days prior written notice from the Company or the Executive of the requirements
of Section 10(c) of this Agreement.
For purposes of this Section 4(c), any good faith determination of "Good
Reason" made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination by the Company for Cause, or
by the Executive for Good Reason, shall be communicated by a Notice of
Termination to the other party given in accordance with Section 11(b) of this
Agreement. For purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination
of the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of
such notice, specifies the termination date (which date shall be not more than
fifteen (15) days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company hereunder or preclude the
Executive or the Company from
<PAGE> 8
asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination, and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the
case may be.
5. Obligations of the Company upon Termination
(a) Good Reason; Other Than for Cause, Death or Disability. If, during
the Effective Period, the Company shall terminate the Executive's employment
other than for Cause or Disability, or the Executive shall terminate employment
for Good Reason:
(i) The Company shall pay to the Executive in a lump sum in cash within
thirty (30) days after the Date of Termination the aggregate of the following
amounts:
A. The sum of (1) the Executive's then current annual base salary
through the Date of Termination to the extent not theretofore paid; (2) the
product of (x) Executive's Recent Average Bonus (as defined below) and (y) a
fraction, the numerator of which is the number of days in the then current
fiscal year through the Date of Termination, and the denominator of which is
three hundred and sixty-five (365); (3) any compensation previously deferred by
the Executive (together with any accrued interest or earnings thereon); and (4)
any
<PAGE> 9
accrued vacation pay; in each case to the extent not theretofore paid (the sum
of the amounts described in parts (1), (2), (3) and (4), above, being
hereinafter referred to as the "Accrued Obligations"). For purposes of this
Agreement, Executive's Recent Average Bonus shall be the average annualized
(for any fiscal year consisting of less than twelve (12) full months or with
respect to which the Executive has been employed by the Company for less than
twelve (12) full months) bonus paid or payable, before taking into account any
deferral, to the Executive by the Company and its affiliated companies in
respect of the three (3) fiscal years immediately preceding the fiscal year in
which the termination of Executive's employment occurs; and
B. The amount (such amount being hereinafter referred to as the
"Severance Amount") equal to the product of multiplying by three (3) the sum of
(1) the Executive's then current annual base salary and (2) Executive's Recent
Average Bonus; provided, however, that such amount shall be reduced by the
present value (determined as provided in Section 280G(d)(4) of the Internal
Revenue Code of 1986, as amended (the "Code")) of any other amount of severance
relating to salary or bonus continuation to be received by the Executive, upon
such termination of employment, under any other severance plan, policy or
arrangement of the Company; and
C. A separate lump-sum supplemental retirement benefit (the amount of
such benefit being hereinafter referred to as the "Supplemental Retirement
Amount") equal to the difference between (1) the actuarial equivalent
(utilizing for this purpose the actuarial assumptions utilized with respect to
the Financial Security plans of the Company (or any successor plans
thereto) (the "Retirement Plans") during the ninety (90)-day period immediately
preceding the Effective Date) of the benefits payable under the Retirement
<PAGE> 10
Plans and under any supplemental and/or excess retirement plans of the Company
and its affiliated companies providing benefits for the Executive (the "SERPs")
which the Executive would have received if the Executive's employment had
continued (at the compensation level in effect at the time of termination of
Executive's employment) for three (3) years after the Date of Termination,
assuming for this purpose that all accrued benefits are fully vested and that
benefit accrual formulas are no less advantageous to the Executive than those
in effect during the ninety (90)-day period immediately preceding the Effective
Date, and (2) the actuarial equivalent (utilizing for this purpose the
actuarial assumptions utilized with respect to the Retirement Plans during the
ninety (90)-day period immediately preceding the Effective Date) of the
Executive's actual benefits (paid or payable), if any, under the Retirement
Plans and the SERPs; and
(ii) For three (3) years after the Date of Termination, or such longer
period as any other plan, program, practice or policy may provide, the
Executive's employment shall continue under all applicable stock option plans,
restricted stock plans, and other equity incentive plans or programs of the
Company and its affiliates solely for purposes of determining (A) the date(s)
on which any option(s) or similar right(s) shall become exercisable or shall
expire and (B) the date(s) on which any stock restriction(s) shall lapse;
provided that if such continuation is not possible under the provisions of such
plans or programs or under applicable law, the Company shall arrange to provide
benefits to the Executive substantially equivalent in value to those required
to be provided under this subparagraph (ii).
(iii) For three (3) years after the Date of Termination, or such longer
period as any other plan, program, practice or policy may provide, the Company
shall continue
<PAGE> 11
benefits to the Executive and/or the Executive's family at least equal to those
which would have been provided to them, if the Executive's employment had not
been terminated, in accordance with (A) the welfare benefit plans, practices,
programs or policies of the Company and its affiliated companies as in effect
and applicable generally to other peer executives and their families during the
ninety (90)-day period immediately preceding the Effective Date or (B) if more
favorable to the Executive, those in effect generally from time to time
thereafter with respect to other peer executives of the Company and its
affiliated companies and their families (such continuation of such benefits for
the applicable period herein set forth being hereinafter referred to as
"Welfare Benefit Continuation"); provided that if such continued coverage is
not permitted by the applicable plans or by applicable law, the Company shall
provide the Executive and/or Executive's family with comparable benefits of
equal value; and provided further that if the Executive becomes reemployed with
another employer and is eligible to receive medical or other welfare benefits
under another employer-provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other plan
during such applicable period of eligibility. For purposes of determining
eligibility of the Executive for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive shall be considered to have
remained employed until the end of the Effective Period and to have retired on
the last day of such period; and
(iv) To the extent not theretofore paid or provided, the Company shall
timely pay or provide to the Executive and/or the Executive's family any other
amounts or benefits required to be paid or provided or which the Executive
and/or the Executive's family is eligible to receive pursuant to this Agreement
or under (A) any other plan, program, policy
<PAGE> 12
or practice, or contract or agreement of the Company and its affiliated
companies as in effect and applicable generally to other peer executives and
their families during the ninety (90)-day period immediately preceding the
Effective Date or (B) if more favorable to the Executive, those in effect
generally from time to time thereafter with respect to other peer executives of
the Company and its affiliated companies and their families (such other amounts
and benefits being hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by reason of the
Executive's death during the Effective Period, this Agreement shall terminate
without further obligations to the Executive's legal representatives under this
Agreement, other than for (i) payment of the Accrued Obligations (which shall
be paid to the Executive's estate or beneficiary, as applicable, in a lump sum
in cash within thirty (30) days of the Date of Termination) and (ii) the timely
payment or provision of the Welfare Benefit Continuation and Other Benefits.
(c) Disability. If the Executive's employment is terminated by reason of
the Executive's Disability during the Effective Period, this Agreement shall
terminate without further obligations to the Executive, other than for (i)
payment of the Accrued Obligations (which shall be paid to the Executive in a
lump sum in cash within thirty (30) days of the Date of Termination) and (ii)
the timely payment or provision of the Welfare Benefit Continuation and Other
Benefits.
(d) Cause; Other than for Good Reason. If the Executive's employment
shall be terminated for Cause during the Effective Period, this Agreement shall
terminate without further obligations to the Executive other than the
obligation to pay the Executive's then current annual base salary through the
Date of Termination, plus the amount of any compensation
<PAGE> 13
previously deferred by the Executive, in each case to the extent theretofore
unpaid. If the Executive terminates employment during the Effective Period,
excluding a termination for Good Reason, this Agreement shall terminate without
further obligations to the Executive, other than for (i) the Accrued
Obligations and (ii) the timely payment or provision of Other Benefits. In
such case, all Accrued Obligations shall be paid to the Executive in a lump sum
in cash within thirty (30) days of the Date of Termination.
6. Limitation of Payments.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company to
or for the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise) would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), then the amount payable to the Executive
pursuant to paragraph (a)(i) of Section 5 of this Agreement shall be reduced so
that it is the maximum amount which can be paid without any payment or
distribution by the Company to or for the benefit of the Executive (whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise) being subject to the excise tax imposed by Section 4999
of the Code.
(b) All determinations required to be made under this Section 6 shall be
made by McGladrey & Company (the "Accounting Firm"), which shall provide
detailed supporting calculations both to the Company and the Executive within
fifteen (15) business days of receipt of a written request from the Company or
the Executive for a determination as to whether reduction of a payment is
necessary in order to avoid the excise tax imposed by Section 4999
<PAGE> 14
of the Code. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change of Control,
the Executive shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. If the Accounting Firm
determines that a payment under this Agreement (without reduction pursuant to
paragraph (a), above) will not be subject to the excise tax imposed by Section
4999 of the Code, the Accounting Firm shall furnish the Executive with a
written opinion that failure to report, on the Executive's applicable federal
income tax return, any excise tax in connection with such payment would not
result in the imposition of a negligence or similar penalty. Any good faith
determination by the Accounting Firm shall be binding upon the Company and the
Executive.
7. Non-exclusivity of Rights. Except as explicitly provided in this
Agreement, nothing in this Agreement shall prevent or limit the Executive's
continuing or future participation in any plan, program, policy or practice
provided by the Company or any of its affiliated companies and for which the
Executive may qualify, nor shall anything herein limit or otherwise affect such
rights as the Executive may have under applicable law or under any other
contract or agreement with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any other plan, policy, practice or program of, or any other
contract or agreement with, the Company or any of its affiliated companies at,
or subsequent to, the Date of Termination shall be payable in accordance with
such plan, policy, practice or program or contract or agreement except as
explicitly modified by this Agreement.
<PAGE> 15
8. Full Settlement; Resolution of Disputes
(a) The Company's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Company may have against the Executive or others. In
no event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as provided in Section
5(a)(iii) of this Agreement, such amounts shall not be reduced whether or not
the Executive obtains other employment. The Company agrees to pay promptly as
incurred, to the fullest extent permitted by law, all legal fees and expenses
which the Executive may reasonably incur as a result of any contest (regardless
of the outcome thereof) by the Company, the Executive or others of the validity
or enforceability of, or liability under, any provision of this Agreement or
any guarantee of performance thereof (including as a result of any contest
initiated by the Executive about the amount of any payment due pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
federal rate provided for in Section 7872(f)(2)(A) of the Code.
(b) If there shall be any dispute between the Company and the Executive
(i) in the event of any termination of the Executive's employment by the
Company, whether such termination was for Cause, or (ii) in the event of any
termination of employment by the Executive, whether Good Reason existed, then,
unless and until there is a final, nonappealable judgment by a court of
competent jurisdiction declaring that such termination was for Cause or that
the determination by the Executive of the existence of Good Reason was not made
in good
<PAGE> 16
faith, the Company shall pay all amounts, and provide all benefits, to the
Executive and/or the Executive's family or other beneficiaries, as the case may
be, that the Company would be required to pay or provide pursuant to Section
5(a) hereof as though such termination were by the Company without Cause or by
the Executive with Good Reason; provided, however, that the Company shall not
be required to pay any disputed amounts pursuant to this paragraph except upon
receipt of an undertaking by or on behalf of the Executive and/or the other
recipient(s), as the case may be, to repay all such amounts to which the
Executive or other recipient, as the case may be, is ultimately adjudged by
such court not to be entitled.
9. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the
Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the
Company and those designated by it. However, in no event shall an asserted
violation of the provisions of this Section 9 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this
Agreement.
<PAGE> 17
10. Successors
(a) This Agreement is personal to the Executive and, without the prior
written consent of the Company, no obligations or rights hereunder shall be
assignable by the Executive otherwise than by will or the laws of descent or
distribution. This Agreement shall inure to the benefit of and be enforceable
by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business and/or assets
as aforesaid which assumes and agrees to perform this Agreement, by operation
of law or otherwise.
11. Miscellaneous
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Illinois, without reference to principles
of choice of law. The captions of this Agreement are for convenience only and
are not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
<PAGE> 18
(b) All notices and other communications hereunder shall be in writing
and shall be given to the other party by hand delivery or commercial messenger
delivery or by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
--------------------
John R. Hecht
4912 Great Day Lane
Rockford, IL 61109
If to the Company:
------------------
Amcore Financial, Inc.
501 Seventh Street
P.O. Box 1537
Rockford, Illinois 61110-0037
Attention: James S. Waddell
-----------------
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or the failure to assert any right that
the Executive or the Company may have hereunder, including, without limitation,
the right of the Executive to terminate employment for Good Reason pursuant to
Section 4(c) of this Agreement, shall not be deemed
<PAGE> 19
to be a waiver of such provision or right or of any other provision of or right
under this Agreement.
(f) The Executive and the Company acknowledge that this Agreement is
not a contract of employment and that, except as may otherwise be provided
under any other written agreement between the Executive and the Company, the
employment of the Executive by the Company is, and shall remain during the
Effective Period, "at will" and may, subject to Section 5, above, be terminated
by either the Executive or the Company at any time. Moreover, subject to
Section 1, above, if prior to the Effective Date (i) the Executive's employment
with the Company and all affiliates terminates or (ii) the Executive ceases to
be an officer of the Company and of all affiliates, then the Executive shall
have no further rights under this Agreement.
(g) This Agreement embodies the entire agreement and understanding
between the Company and the Executive and supersedes all prior
agreements and understandings between the Company and Executive relating to the
subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and,
pursuant to the authorization of its Board of Directors, the Company has caused
these presents to be executed in its name on its behalf, all as of the day and
year first above written.
AMCORE FINANCIAL, INC.
By: \s\ Carl J. Dargene
-------------------
Its Chairman Pres. & C.E.O
----------------------
/s/ John R. Hecht
------------------------------------------
("Executive")
<PAGE> 1
EXHIBIT 10.3
(Revised draft 9/19/95)
(Version B)
TRANSITIONAL COMPENSATION AGREEMENT
AGREEMENT by and between Amcore Financial, Inc., a Nevada corporation (the
"Company"), and F. Taylor Carlin (the "Executive"), dated as of the
25 day of September, 1995. This Agreement restates and supersedes
any and all prior agreements between the Company and the Executive relating to
the subject matter of this Agreement.
The Board of Directors of the Company (the "Board") has determined that it is
in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding
the possibility, threat or occurrence of a Change of Control (as defined below)
of the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control, to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefit arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other similar
corporations. Therefore, in order to accomplish these objectives, the Board
has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
<PAGE> 2
1. Certain Definitions
(a) The "Effective Date" shall mean the first date during the Change of
Control Period (as defined in paragraph (b), below) on which a Change of
Control (as defined in Section 2) occurs. Anything in this Agreement to the
contrary notwithstanding, if a Change of Control occurs and if the Executive's
employment with the Company is terminated or the Executive ceases to be an
officer of the Company prior to the date on which the Change of Control occurs,
and if it is reasonably demonstrated by the Executive that such termination of
employment or cessation of status as an officer (i) was at the request of a
third party who has taken steps reasonably calculated to effect the Change of
Control, or (ii) otherwise arose in connection with or anticipation of the
Change of Control and was not (A) for conduct by the Executive of the type
described in Section 4(b), below, (B) for significant deficiencies in the
Executive's performance of his duties to the Company (including, but not by way
of limitation, significant failure to cooperate in implementing a decision of
the Board), or (C) for some other specific substantial business reason
unrelated to the Change of Control, then for all purposes of this Agreement the
"Effective Date" shall mean the date immediately prior to the date of such
termination of employment or cessation of status as an officer.
(b) The "Change of Control Period" shall mean the period commencing on the
date of execution hereof and ending on the third anniversary of such date;
provided, however, that commencing on the date one (1) year after the date
hereof, and on each annual anniversary of such date (such date and each annual
anniversary thereof being hereinafter referred to as a "Renewal Date"), this
Agreement and the Change of Control Period shall be automatically extended so
as to terminate three (3) years from such Renewal Date, unless at least sixty
(60)
<PAGE> 3
days prior to the Renewal Date the Company shall give notice to the Executive
that the Change of Control Period shall not be so extended, in which case this
Agreement shall terminate upon the expiration of the Change of Control Period.
2. Change of Control. For the purpose of this Agreement, a "Change of
Control" shall mean:
(a) The acquisition, other than from the Company, by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of fifteen percent (15%) or more of either the then outstanding shares of
common stock of the Company or the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of directors, but excluding for this purpose any such acquisition by
the Company or any of its subsidiaries, or any employee benefit plan (or
related trust) of the Company or its subsidiaries, or any corporation with
respect to which, following such acquisition, more than sixty percent (60%) of,
respectively, the then outstanding shares of common stock of such corporation
and the combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
common stock and voting securities of the Company immediately prior to such
acquisition in substantially the same proportion as their ownership,
immediately prior to such acquisition, of the then outstanding shares of common
stock of the Company or the
<PAGE> 4
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors, as the case may be; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board; provided that any individual becoming a director subsequent to the
date hereof, whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the directors of the Company (as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act); or
(c) Approval by the stockholders of the Company of (i) a reorganization,
merger or consolidation of the Company, in each case, with respect to which all
or substantially all of the individuals and entities who were the respective
beneficial owners of the common stock and voting securities of the Company
immediately prior to such reorganization, merger or consolidation do not,
following such reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than sixty percent (60%) of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election
of directors, as the case may be, of the corporation resulting from such
reorganization, merger or consolidation, or (ii) a complete liquidation or
dissolution of the Company, or (iii) the sale or other disposition of all or
substantially all of the assets of the Company.
<PAGE> 5
3. Effective Period. This Agreement shall be in effect for the period
commencing on the Effective Date and ending on the third anniversary of such
date (the "Effective Period").
4. Termination of Employment
(a) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Effective Period. If the
Company determines in good faith that the Disability of the Executive has
occurred during the Effective Period (pursuant to the definition of Disability
as set forth below), it may give to the Executive written notice in accordance
with Section 11(b) of this Agreement of its intention to terminate the
Executive's employment. In such event, the Executive's employment with the
Company shall terminate effective on the thirtieth (30th) day after receipt of
such notice by the Executive (the "Disability Effective Date"), provided that,
within the thirty (30) days after such receipt, the Executive shall not have
returned to full-time performance of the Executive's duties. For purposes of
this Agreement, "Disability" shall mean the absence of the Executive from the
Executive's duties with the Company on a full-time basis for one hundred and
eighty (180) consecutive business days as a result of incapacity due to mental
or physical illness which is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the
Executive or the Executive's legal representative (such agreement as to
acceptability not to be withheld unreasonably.)
(b) Cause. The Company may terminate the Executive's employment during
the Effective Period for Cause. For purposes of this Agreement, "Cause" shall
mean (i) repeated violations by the Executive of the Executive's assigned
duties as an employee of the Company (other than as a result of incapacity due
to physical or mental illness) which are
<PAGE> 6
demonstrably willful and deliberate on the Executive's part, which are
committed in bad faith or without reasonable belief that such violations are in
the best interests of the Company, and which are not remedied within thirty
(30) days after receipt of written notice from the Company specifying such
violations or (ii) the conviction of the Executive of a felony involving moral
turpitude.
(c) Good Reason
(i) The Executive's employment may be terminated during the Effective
Period by the Executive for Good Reason (as defined below).
(ii) For purposes of this Agreement, "Good Reason" shall mean:
(A) The assignment to the Executive of any duties inconsistent
in any material respect with the Executive's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as in effect immediately prior to the Effective Date, or any
other action by the Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company within thirty (30) days after receipt of notice thereof
given by the Executive;
(B) Any reduction by the Company in Executive's compensation or
benefits as in effect immediately prior to the Effective Date, other than an
isolated, insubstantial and inadvertent reduction not occurring in bad faith
and which is remedied by the Company promptly after receipt of notice thereof
given by the Executive;
(C) The Company's requiring the Executive to be based at any
office or location other than that in effect immediately prior to the
Effective Date;
<PAGE> 7
(D) Any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(E) Any failure by the Company to comply with and satisfy Section 10(c)
of this Agreement, provided that such successor has received at least ten (10)
days prior written notice from the Company or the Executive of the requirements
of Section 10(c) of this Agreement. For purposes of this Section 4(c), any
good faith determination of "Good Reason" made by the Executive shall be
conclusive.
(d) Notice of Termination. Any termination by the Company for Cause, or
by the Executive for Good Reason, shall be communicated by a Notice of
Termination to the other party given in accordance with Section 11(b) of this
Agreement. For purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination
of the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of
such notice, specifies the termination date (which date shall be not more than
fifteen (15) days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company hereunder or preclude the
Executive or the Company from
<PAGE> 8
asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination, and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the
case may be.
5. Obligations of the Company upon Termination
(a) Good Reason; Other Than for Cause, Death or Disability. If, during
the Effective Period, the Company shall terminate the Executive's employment
other than for Cause or Disability, or the Executive shall terminate employment
for Good Reason:
(i) The Company shall pay to the Executive in a lump sum in cash
within thirty (30) days after the Date of Termination the aggregate of the
following amounts:
A. The sum of (1) the Executive's then current annual base salary
through the Date of Termination to the extent not theretofore paid; (2) the
product of (x) Executive's Recent Average Bonus (as defined below) and (y) a
fraction, the numerator of which is the number of days in the then current
fiscal year through the Date of Termination, and the denominator of which is
three hundred and sixty-five (365); (3) any compensation previously deferred by
the Executive (together with any accrued interest or earnings thereon); and (4)
any
<PAGE> 9
accrued vacation pay; in each case to the extent not theretofore paid (the sum
of the amounts described in parts (1), (2), (3) and (4), above, being
hereinafter referred to as the "Accrued Obligations"). For purposes of this
Agreement, Executive's Recent Average Bonus shall be the average annualized
(for any fiscal year consisting of less than twelve (12) full months or with
respect to which the Executive has been employed by the Company for less than
twelve (12) full months) bonus paid or payable, before taking into account any
deferral, to the Executive by the Company and its affiliated companies in
respect of the three (3) fiscal years immediately preceding the fiscal year in
which the termination of Executive's employment occurs; and
B. The amount (such amount being hereinafter referred to as the
"Severance Amount") equal to the product of multiplying by three (3) the sum of
(1) the Executive's then current annual base salary and (2) Executive's Recent
Average Bonus; provided, however, that such amount shall be reduced by the
present value (determined as provided in Section 280G(d)(4) of the Internal
Revenue Code of 1986, as amended (the "Code")) of any other amount of severance
relating to salary or bonus continuation to be received by the Executive, upon
such termination of employment, under any other severance plan, policy or
arrangement of the Company; and
C. A separate lump-sum supplemental retirement benefit (the amount of
such benefit being hereinafter referred to as the "Supplemental Retirement
Amount") equal to the difference between (1) the actuarial equivalent
(utilizing for this purpose the actuarial assumptions utilized with respect to
the Financial Security plans of the Company (or any successor plans
thereto) (the "Retirement Plans") during the ninety (90)-day period immediately
preceding the Effective Date) of the benefits payable under the Retirement
<PAGE> 10
Plans and under any supplemental and/or excess retirement plans of the Company
and its affiliated companies providing benefits for the Executive (the "SERPs")
which the Executive would have received if the Executive's employment had
continued (at the compensation level in effect at the time of termination of
Executive's employment) for three (3) years after the Date of Termination,
assuming for this purpose that all accrued benefits are fully vested and that
benefit accrual formulas are no less advantageous to the Executive than those
in effect during the ninety (90)-day period immediately preceding the Effective
Date, and (2) the actuarial equivalent (utilizing for this purpose the
actuarial assumptions utilized with respect to the Retirement Plans during the
ninety (90)-day period immediately preceding the Effective Date) of the
Executive's actual benefits (paid or payable), if any, under the Retirement
Plans and the SERPs; and
(ii) For three (3) years after the Date of Termination, or such longer
period as any other plan, program, practice or policy may provide, the
Executive's employment shall continue under all applicable stock option plans,
restricted stock plans, and other equity incentive plans or programs of the
Company and its affiliates solely for purposes of determining (A) the date(s)
on which any option(s) or similar right(s) shall become exercisable or shall
expire and (B) the date(s) on which any stock restriction(s) shall lapse;
provided that if such continuation is not possible under the provisions of such
plans or programs or under applicable law, the Company shall arrange to provide
benefits to the Executive substantially equivalent in value to those required
to be provided under this subparagraph (ii).
(iii) For three (3) years after the Date of Termination, or such longer
period as any other plan, program, practice or policy may provide, the Company
shall continue
<PAGE> 11
benefits to the Executive and/or the Executive's family at least equal to those
which would have been provided to them, if the Executive's employment had not
been terminated, in accordance with (A) the welfare benefit plans, practices,
programs or policies of the Company and its affiliated companies as in effect
and applicable generally to other peer executives and their families during the
ninety (90)-day period immediately preceding the Effective Date or (B) if more
favorable to the Executive, those in effect generally from time to time
thereafter with respect to other peer executives of the Company and its
affiliated companies and their families (such continuation of such benefits for
the applicable period herein set forth being hereinafter referred to as
"Welfare Benefit Continuation"); provided that if such continued coverage is
not permitted by the applicable plans or by applicable law, the Company shall
provide the Executive and/or Executive's family with comparable benefits of
equal value; and provided further that if the Executive becomes reemployed with
another employer and is eligible to receive medical or other welfare benefits
under another employer-provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other plan
during such applicable period of eligibility. For purposes of determining
eligibility of the Executive for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive shall be considered to have
remained employed until the end of the Effective Period and to have retired on
the last day of such period; and
(iv) To the extent not theretofore paid or provided, the Company shall
timely pay or provide to the Executive and/or the Executive's family any other
amounts or benefits required to be paid or provided or which the Executive
and/or the Executive's family is eligible to receive pursuant to this Agreement
or under (A) any other plan, program, policy
<PAGE> 12
or practice, or contract or agreement of the Company and its affiliated
companies as in effect and applicable generally to other peer executives and
their families during the ninety (90)-day period immediately preceding the
Effective Date or (B) if more favorable to the Executive, those in effect
generally from time to time thereafter with respect to other peer executives of
the Company and its affiliated companies and their families (such other amounts
and benefits being hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by reason of the
Executive's death during the Effective Period, this Agreement shall terminate
without further obligations to the Executive's legal representatives under this
Agreement, other than for (i) payment of the Accrued Obligations (which shall
be paid to the Executive's estate or beneficiary, as applicable, in a lump sum
in cash within thirty (30) days of the Date of Termination) and (ii) the timely
payment or provision of the Welfare Benefit Continuation and Other Benefits.
(c) Disability. If the Executive's employment is terminated by reason of
the Executive's Disability during the Effective Period, this Agreement shall
terminate without further obligations to the Executive, other than for (i)
payment of the Accrued Obligations (which shall be paid to the Executive in a
lump sum in cash within thirty (30) days of the Date of Termination) and (ii)
the timely payment or provision of the Welfare Benefit Continuation and Other
Benefits.
(d) Cause; Other than for Good Reason. If the Executive's employment
shall be terminated for Cause during the Effective Period, this Agreement shall
terminate without further obligations to the Executive other than the
obligation to pay the Executive's then current annual base salary through the
Date of Termination, plus the amount of any compensation
<PAGE> 13
previously deferred by the Executive, in each case to the extent theretofore
unpaid. If the Executive terminates employment during the Effective Period,
excluding a termination for Good Reason, this Agreement shall terminate without
further obligations to the Executive, other than for (i) the Accrued
Obligations and (ii) the timely payment or provision of Other Benefits. In
such case, all Accrued Obligations shall be paid to the Executive in a lump sum
in cash within thirty (30) days of the Date of Termination.
6. Limitation of Payments.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company to
or for the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise) would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), then the amount payable to the Executive
pursuant to paragraph (a)(i) of Section 5 of this Agreement shall be reduced so
that it is the maximum amount which can be paid without any payment or
distribution by the Company to or for the benefit of the Executive (whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise) being subject to the excise tax imposed by Section 4999
of the Code.
(b) All determinations required to be made under this Section 6 shall be
made by McGladrey & Company (the "Accounting Firm"), which shall provide
detailed supporting calculations both to the Company and the Executive within
fifteen (15) business days of receipt of a written request from the Company or
the Executive for a determination as to whether reduction of a payment is
necessary in order to avoid the excise tax imposed by Section 4999
<PAGE> 14
of the Code. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change of Control,
the Executive shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. If the Accounting Firm
determines that a payment under this Agreement (without reduction pursuant to
paragraph (a), above) will not be subject to the excise tax imposed by Section
4999 of the Code, the Accounting Firm shall furnish the Executive with a
written opinion that failure to report, on the Executive's applicable federal
income tax return, any excise tax in connection with such payment would not
result in the imposition of a negligence or similar penalty. Any good faith
determination by the Accounting Firm shall be binding upon the Company and the
Executive.
7. Non-exclusivity of Rights. Except as explicitly provided in this
Agreement, nothing in this Agreement shall prevent or limit the Executive's
continuing or future participation in any plan, program, policy or practice
provided by the Company or any of its affiliated companies and for which the
Executive may qualify, nor shall anything herein limit or otherwise affect such
rights as the Executive may have under applicable law or under any other
contract or agreement with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any other plan, policy, practice or program of, or any other
contract or agreement with, the Company or any of its affiliated companies at,
or subsequent to, the Date of Termination shall be payable in accordance with
such plan, policy, practice or program or contract or agreement except as
explicitly modified by this Agreement.
<PAGE> 15
8. Full Settlement; Resolution of Disputes
(a) The Company's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Company may have against the Executive or others. In
no event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as provided in Section
5(a)(iii) of this Agreement, such amounts shall not be reduced whether or not
the Executive obtains other employment. The Company agrees to pay promptly as
incurred, to the fullest extent permitted by law, all legal fees and expenses
which the Executive may reasonably incur as a result of any contest (regardless
of the outcome thereof) by the Company, the Executive or others of the validity
or enforceability of, or liability under, any provision of this Agreement or
any guarantee of performance thereof (including as a result of any contest
initiated by the Executive about the amount of any payment due pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
federal rate provided for in Section 7872(f)(2)(A) of the Code.
(b) If there shall be any dispute between the Company and the Executive
(i) in the event of any termination of the Executive's employment by the
Company, whether such termination was for Cause, or (ii) in the event of any
termination of employment by the Executive, whether Good Reason existed, then,
unless and until there is a final, nonappealable judgment by a court of
competent jurisdiction declaring that such termination was for Cause or that
the determination by the Executive of the existence of Good Reason was not made
in good
<PAGE> 16
faith, the Company shall pay all amounts, and provide all benefits, to the
Executive and/or the Executive's family or other beneficiaries, as the case may
be, that the Company would be required to pay or provide pursuant to Section
5(a) hereof as though such termination were by the Company without Cause or by
the Executive with Good Reason; provided, however, that the Company shall not
be required to pay any disputed amounts pursuant to this paragraph except upon
receipt of an undertaking by or on behalf of the Executive and/or the other
recipient(s), as the case may be, to repay all such amounts to which the
Executive or other recipient, as the case may be, is ultimately adjudged by
such court not to be entitled.
9. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the
Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the
Company and those designated by it. However, in no event shall an asserted
violation of the provisions of this Section 9 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this
Agreement.
<PAGE> 17
10. Successors
(a) This Agreement is personal to the Executive and, without the prior
written consent of the Company, no obligations or rights hereunder shall be
assignable by the Executive otherwise than by will or the laws of descent or
distribution. This Agreement shall inure to the benefit of and be enforceable
by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
As used in this Agreement, "Company" shall mean the Company as hereinbefore
defined and any successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement, by operation of law or otherwise.
11. Miscellaneous
(a) This Agreement shall be governed by and construed in accordance with
the laws of the State of Illinois, without reference to principles of choice of
law. The captions of this Agreement are for convenience only and are not part
of the provisions hereof and shall have no force or effect. This Agreement may
not be amended or modified otherwise than by a written agreement executed by
the parties hereto or their respective successors and legal representatives.
<PAGE> 18
(b) All notices and other communications hereunder shall be in writing and
shall be given to the other party by hand delivery or commercial messenger
delivery or by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
F. Taylor Carlin
3303 Andover Drive
Rockford, IL 61111
If to the Company:
Amcore Financial, Inc.
501 Seventh Street
P.O. Box 1537
Rockford, Illinois 61110-0037
Attention: James S. Waddell
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(d) The Company may withhold from any amounts payable under this Agreement
such federal, state or local taxes as shall be required to be withheld pursuant
to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or the failure to assert any right that
the Executive or the Company may have hereunder, including, without limitation,
the right of the Executive to terminate employment for Good Reason pursuant to
Section 4(c) of this Agreement, shall not be deemed
<PAGE> 19
to be a waiver of such provision or right or of any other provision of or right
under this Agreement.
(f) The Executive and the Company acknowledge that this Agreement is not a
contract of employment and that, except as may otherwise be provided under any
other written agreement between the Executive and the Company, the employment
of the Executive by the Company is, and shall remain during the Effective
Period, "at will" and may, subject to Section 5, above, be terminated by either
the Executive or the Company at any time. Moreover, subject to Section 1,
above, if prior to the Effective Date (i) the Executive's employment with the
Company and all affiliates terminates or (ii) the Executive ceases to be an
officer of the Company and of all affiliates, then the Executive shall have no
further rights under this Agreement.
(g) This Agreement embodies the entire agreement and understanding between
the Company and the Executive and supersedes all prior agreements and
understandings between the Company and Executive relating to the subject matter
hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and,
pursuant to the authorization of its Board of Directors, the Company has caused
these presents to be executed in its name on its behalf, all as of the day and
year first above written.
AMCORE FINANCIAL, INC.
By: /s/ Carl J. Dargene
---------------------------------------
Its Chairman, Pres., & C.E.O.
---------------------------------
/s/ F. Taylor Carlin
---------------------------------------
("Executive")
<PAGE> 1
EXHIBIT-10.4
(Revised draft 9/19/95)
(Version B)
TRANSITIONAL COMPENSATION AGREEMENT
AGREEMENT by and between Amcore Financial, Inc., a Nevada corporation (the
"Company"), and James S. Waddell (the "Executive"), dated as of the
25 day of September, 1995. This Agreement restates and supersedes
any and all prior agreements between the Company and the Executive relating to
the subject matter of this Agreement.
The Board of Directors of the Company (the "Board") has determined that it is
in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding
the possibility, threat or occurrence of a Change of Control (as defined below)
of the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control, to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefit arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other similar
corporations. Therefore, in order to accomplish these objectives, the Board
has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
<PAGE> 2
1. Certain Definitions
(a) The "Effective Date" shall mean the first date during the Change of
Control Period (as defined in paragraph (b), below) on which a Change of
Control (as defined in Section 2) occurs. Anything in this Agreement to the
contrary notwithstanding, if a Change of Control occurs and if the Executive's
employment with the Company is terminated or the Executive ceases to be an
officer of the Company prior to the date on which the Change of Control occurs,
and if it is reasonably demonstrated by the Executive that such termination of
employment or cessation of status as an officer (i) was at the request of a
third party who has taken steps reasonably calculated to effect the Change of
Control, or (ii) otherwise arose in connection with or anticipation of the
Change of Control and was not (A) for conduct by the Executive of the type
described in Section 4(b), below, (B) for significant deficiencies in the
Executive's performance of his duties to the Company (including, but not by way
of limitation, significant failure to cooperate in implementing a decision of
the Board), or (C) for some other specific substantial business reason
unrelated to the Change of Control, then for all purposes of this Agreement the
"Effective Date" shall mean the date immediately prior to the date of such
termination of employment or cessation of status as an officer.
(b) The "Change of Control Period" shall mean the period commencing on
the date of execution hereof and ending on the third anniversary of such date;
provided, however, that commencing on the date one (1) year after the date
hereof, and on each annual anniversary of such date (such date and each annual
anniversary thereof being hereinafter referred to as a "Renewal Date"), this
Agreement and the Change of Control Period shall be automatically extended so
as to terminate three (3) years from such Renewal Date, unless at least sixty
(60)
<PAGE> 3
days prior to the Renewal Date the Company shall give notice to the Executive
that the Change of Control Period shall not be so extended, in which case this
Agreement shall terminate upon the expiration of the Change of Control Period.
2. Change of Control. For the purpose of this Agreement, a "Change of
Control" shall mean:
(a) The acquisition, other than from the Company, by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of fifteen percent (15%) or more of either the then outstanding shares of
common stock of the Company or the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of directors, but excluding for this purpose any such acquisition by
the Company or any of its subsidiaries, or any employee benefit plan (or
related trust) of the Company or its subsidiaries, or any corporation with
respect to which, following such acquisition, more than sixty percent (60%) of,
respectively, the then outstanding shares of common stock of such corporation
and the combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
common stock and voting securities of the Company immediately prior to such
acquisition in substantially the same proportion as their ownership,
immediately prior to such acquisition, of the then outstanding shares of common
stock of the Company or the
<PAGE> 4
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors, as the case may be; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board; provided that any individual becoming a director subsequent to the
date hereof, whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the directors of the Company (as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act); or
(c) Approval by the stockholders of the Company of (i) a reorganization,
merger or consolidation of the Company, in each case, with respect to which all
or substantially all of the individuals and entities who were the respective
beneficial owners of the common stock and voting securities of the Company
immediately prior to such reorganization, merger or consolidation do not,
following such reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than sixty percent (60%) of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election
of directors, as the case may be, of the corporation resulting from such
reorganization, merger or consolidation, or (ii) a complete liquidation or
dissolution of the Company, or (iii) the sale or other disposition of all or
substantially all of the assets of the Company.
<PAGE> 5
3. Effective Period. This Agreement shall be in effect for the period
commencing on the Effective Date and ending on the third anniversary of such
date (the "Effective Period").
4. Termination of Employment
(a) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Effective Period. If the
Company determines in good faith that the Disability of the Executive has
occurred during the Effective Period (pursuant to the definition of Disability
as set forth below), it may give to the Executive written notice in accordance
with Section 11(b) of this Agreement of its intention to terminate the
Executive's employment. In such event, the Executive's employment with the
Company shall terminate effective on the thirtieth (30th) day after receipt of
such notice by the Executive (the "Disability Effective Date"), provided that,
within the thirty (30) days after such receipt, the Executive shall not have
returned to full-time performance of the Executive's duties. For purposes of
this Agreement, "Disability" shall mean the absence of the Executive from the
Executive's duties with the Company on a full-time basis for one hundred and
eighty (180) consecutive business days as a result of incapacity due to mental
or physical illness which is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the
Executive or the Executive's legal representative (such agreement as to
acceptability not to be withheld unreasonably.)
(b) Cause. The Company may terminate the Executive's employment during
the Effective Period for Cause. For purposes of this Agreement, "Cause" shall
mean (i) repeated violations by the Executive of the Executive's assigned
duties as an employee of the Company (other than as a result of incapacity due
to physical or mental illness) which are
<PAGE> 6
demonstrably willful and deliberate on the Executive's part, which are
committed in bad faith or without reasonable belief that such violations are in
the best interests of the Company, and which are not remedied within thirty
(30) days after receipt of written notice from the Company specifying such
violations or (ii) the conviction of the Executive of a felony involving moral
turpitude.
(c) Good Reason
(i) The Executive's employment may be terminated during the Effective
Period by the Executive for Good Reason (as defined below).
(ii) For purposes of this Agreement, "Good Reason" shall mean:
(A) The assignment to the Executive of any duties inconsistent
in any material respect with the Executive's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as in effect immediately prior to the Effective Date, or any
other action by the Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company within thirty (30) days after receipt of notice thereof
given by the Executive;
(B) Any reduction by the Company in Executive's compensation or
benefits as in effect immediately prior to the Effective Date, other than an
isolated, insubstantial and inadvertent reduction not occurring in bad faith
and which is remedied by the Company promptly after receipt of notice thereof
given by the Executive;
(C) The Company's requiring the Executive to be based at any
office or location other than that in effect immediately prior to the
Effective Date;
<PAGE> 7
(D) Any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(E) Any failure by the Company to comply with and satisfy Section 10(c)
of this Agreement, provided that such successor has received at least ten (10)
days prior written notice from the Company or the Executive of the requirements
of Section 10(c) of this Agreement.
For purposes of this Section 4(c), any good faith determination of "Good
Reason" made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination by the Company for Cause, or
by the Executive for Good Reason, shall be communicated by a Notice of
Termination to the other party given in accordance with Section 11(b) of this
Agreement. For purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination
of the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of
such notice, specifies the termination date (which date shall be not more than
fifteen (15) days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company hereunder or preclude the
Executive or the Company from
<PAGE> 8
asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination, and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the
case may be.
5. Obligations of the Company upon Termination
(a) Good Reason; Other Than for Cause, Death or Disability. If, during
the Effective Period, the Company shall terminate the Executive's employment
other than for Cause or Disability, or the Executive shall terminate employment
for Good Reason:
(i) The Company shall pay to the Executive in a lump sum in cash
within thirty (30) days after the Date of Termination the aggregate of the
following amounts:
A. The sum of (1) the Executive's then current annual base
salary through the Date of Termination to the extent not theretofore paid; (2)
the product of (x) Executive's Recent Average Bonus (as defined below) and (y)
a fraction, the numerator of which is the number of days in the then
current fiscal year through the Date of Termination, and the denominator of
which is three hundred and sixty-five (365); (3) any compensation previously
deferred by the Executive (together with any accrued interest or earnings
thereon); and (4) any
<PAGE> 9
accrued vacation pay; in each case to the extent not theretofore paid (the sum
of the amounts described in parts (1), (2), (3) and (4), above, being
hereinafter referred to as the "Accrued Obligations"). For purposes of this
Agreement, Executive's Recent Average Bonus shall be the average annualized
(for any fiscal year consisting of less than twelve (12) full months or with
respect to which the Executive has been employed by the Company for less than
twelve (12) full months) bonus paid or payable, before taking into account any
deferral, to the Executive by the Company and its affiliated companies in
respect of the three (3) fiscal years immediately preceding the fiscal year in
which the termination of Executive's employment occurs; and
B. The amount (such amount being hereinafter referred to as the
"Severance Amount") equal to the product of multiplying by three (3) the sum of
(1) the Executive's then current annual base salary and (2) Executive's Recent
Average Bonus; provided, however, that such amount shall be reduced by the
present value (determined as provided in Section 280G(d)(4) of the Internal
Revenue Code of 1986, as amended (the "Code")) of any other amount of severance
relating to salary or bonus continuation to be received by the Executive, upon
such termination of employment, under any other severance plan, policy or
arrangement of the Company; and
C. A separate lump-sum supplemental retirement benefit (the amount of
such benefit being hereinafter referred to as the "Supplemental Retirement
Amount") equal to the difference between (1) the actuarial equivalent
(utilizing for this purpose the actuarial assumptions utilized with respect to
the Financial Security plans of the Company (or any successor plans
thereto) (the "Retirement Plans") during the ninety (90)-day period immediately
preceding the Effective Date) of the benefits payable under the Retirement
<PAGE> 10
Plans and under any supplemental and/or excess retirement plans of the Company
and its affiliated companies providing benefits for the Executive (the "SERPs")
which the Executive would have received if the Executive's employment had
continued (at the compensation level in effect at the time of termination of
Executive's employment) for three (3) years after the Date of Termination,
assuming for this purpose that all accrued benefits are fully vested and that
benefit accrual formulas are no less advantageous to the Executive than those
in effect during the ninety (90)-day period immediately preceding the Effective
Date, and (2) the actuarial equivalent (utilizing for this purpose the
actuarial assumptions utilized with respect to the Retirement Plans during the
ninety (90)-day period immediately preceding the Effective Date) of the
Executive's actual benefits (paid or payable), if any, under the Retirement
Plans and the SERPs; and
(ii) For three (3) years after the Date of Termination, or such longer
period as any other plan, program, practice or policy may provide, the
Executive's employment shall continue under all applicable stock option plans,
restricted stock plans, and other equity incentive plans or programs of the
Company and its affiliates solely for purposes of determining (A) the date(s)
on which any option(s) or similar right(s) shall become exercisable or shall
expire and (B) the date(s) on which any stock restriction(s) shall lapse;
provided that if such continuation is not possible under the provisions of such
plans or programs or under applicable law, the Company shall arrange to provide
benefits to the Executive substantially equivalent in value to those required
to be provided under this subparagraph (ii).
(iii) For three (3) years after the Date of Termination, or such longer
period as any other plan, program, practice or policy may provide, the Company
shall continue
<PAGE> 11
benefits to the Executive and/or the Executive's family at least equal to those
which would have been provided to them, if the Executive's employment had not
been terminated, in accordance with (A) the welfare benefit plans, practices,
programs or policies of the Company and its affiliated companies as in effect
and applicable generally to other peer executives and their families during the
ninety (90)-day period immediately preceding the Effective Date or (B) if more
favorable to the Executive, those in effect generally from time to time
thereafter with respect to other peer executives of the Company and its
affiliated companies and their families (such continuation of such benefits for
the applicable period herein set forth being hereinafter referred to as
"Welfare Benefit Continuation"); provided that if such continued coverage is
not permitted by the applicable plans or by applicable law, the Company shall
provide the Executive and/or Executive's family with comparable benefits of
equal value; and provided further that if the Executive becomes reemployed with
another employer and is eligible to receive medical or other welfare benefits
under another employer-provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other plan
during such applicable period of eligibility. For purposes of determining
eligibility of the Executive for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive shall be considered to have
remained employed until the end of the Effective Period and to have retired on
the last day of such period; and
(iv) To the extent not theretofore paid or provided, the Company shall
timely pay or provide to the Executive and/or the Executive's family any other
amounts or benefits required to be paid or provided or which the Executive
and/or the Executive's family is eligible to receive pursuant to this Agreement
or under (A) any other plan, program, policy
<PAGE> 12
or practice, or contract or agreement of the Company and its affiliated
companies as in effect and applicable generally to other peer executives and
their families during the ninety (90)-day period immediately preceding the
Effective Date or (B) if more favorable to the Executive, those in effect
generally from time to time thereafter with respect to other peer executives of
the Company and its affiliated companies and their families (such other amounts
and benefits being hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by reason of the
Executive's death during the Effective Period, this Agreement shall terminate
without further obligations to the Executive's legal representatives under this
Agreement, other than for (i) payment of the Accrued Obligations (which shall
be paid to the Executive's estate or beneficiary, as applicable, in a lump sum
in cash within thirty (30) days of the Date of Termination) and (ii) the timely
payment or provision of the Welfare Benefit Continuation and Other Benefits.
(c) Disability. If the Executive's employment is terminated by reason of
the Executive's Disability during the Effective Period, this Agreement shall
terminate without further obligations to the Executive, other than for (i)
payment of the Accrued Obligations (which shall be paid to the Executive in a
lump sum in cash within thirty (30) days of the Date of Termination) and (ii)
the timely payment or provision of the Welfare Benefit Continuation and Other
Benefits.
(d) Cause; Other than for Good Reason. If the Executive's employment
shall be terminated for Cause during the Effective Period, this Agreement shall
terminate without further obligations to the Executive other than the
obligation to pay the Executive's then current annual base salary through the
Date of Termination, plus the amount of any compensation
<PAGE> 13
previously deferred by the Executive, in each case to the extent theretofore
unpaid. If the Executive terminates employment during the Effective Period,
excluding a termination for Good Reason, this Agreement shall terminate without
further obligations to the Executive, other than for (i) the Accrued
Obligations and (ii) the timely payment or provision of Other Benefits. In
such case, all Accrued Obligations shall be paid to the Executive in a lump sum
in cash within thirty (30) days of the Date of Termination.
6. Limitation of Payments.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company to
or for the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise) would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), then the amount payable to the Executive
pursuant to paragraph (a)(i) of Section 5 of this Agreement shall be reduced so
that it is the maximum amount which can be paid without any payment or
distribution by the Company to or for the benefit of the Executive (whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise) being subject to the excise tax imposed by Section 4999
of the Code.
(b) All determinations required to be made under this Section 6 shall be
made by McGladrey & Company (the "Accounting Firm"), which shall provide
detailed supporting calculations both to the Company and the Executive within
fifteen (15) business days of receipt of a written request from the Company or
the Executive for a determination as to whether reduction of a payment is
necessary in order to avoid the excise tax imposed by Section 4999
<PAGE> 14
of the Code. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change of Control,
the Executive shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. If the Accounting Firm
determines that a payment under this Agreement (without reduction pursuant to
paragraph (a), above) will not be subject to the excise tax imposed by Section
4999 of the Code, the Accounting Firm shall furnish the Executive with a
written opinion that failure to report, on the Executive's applicable federal
income tax return, any excise tax in connection with such payment would not
result in the imposition of a negligence or similar penalty. Any good faith
determination by the Accounting Firm shall be binding upon the Company and the
Executive.
7. Non-exclusivity of Rights. Except as explicitly provided in this
Agreement, nothing in this Agreement shall prevent or limit the Executive's
continuing or future participation in any plan, program, policy or practice
provided by the Company or any of its affiliated companies and for which the
Executive may qualify, nor shall anything herein limit or otherwise affect such
rights as the Executive may have under applicable law or under any other
contract or agreement with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any other plan, policy, practice or program of, or any other
contract or agreement with, the Company or any of its affiliated companies at,
or subsequent to, the Date of Termination shall be payable in accordance with
such plan, policy, practice or program or contract or agreement except as
explicitly modified by this Agreement.
<PAGE> 15
8. Full Settlement; Resolution of Disputes
(a) The Company's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Company may have against the Executive or others. In
no event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as provided in Section
5(a)(iii) of this Agreement, such amounts shall not be reduced whether or not
the Executive obtains other employment. The Company agrees to pay promptly as
incurred, to the fullest extent permitted by law, all legal fees and expenses
which the Executive may reasonably incur as a result of any contest (regardless
of the outcome thereof) by the Company, the Executive or others of the validity
or enforceability of, or liability under, any provision of this Agreement or
any guarantee of performance thereof (including as a result of any contest
initiated by the Executive about the amount of any payment due pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
federal rate provided for in Section 7872(f)(2)(A) of the Code.
(b) If there shall be any dispute between the Company and the Executive
(i) in the event of any termination of the Executive's employment by the
Company, whether such termination was for Cause, or (ii) in the event of any
termination of employment by the Executive, whether Good Reason existed, then,
unless and until there is a final, nonappealable judgment by a court of
competent jurisdiction declaring that such termination was for Cause or that
the determination by the Executive of the existence of Good Reason was not made
in good
<PAGE> 16
faith, the Company shall pay all amounts, and provide all benefits, to the
Executive and/or the Executive's family or other beneficiaries, as the case may
be, that the Company would be required to pay or provide pursuant to Section
5(a) hereof as though such termination were by the Company without Cause or by
the Executive with Good Reason; provided, however, that the Company shall not
be required to pay any disputed amounts pursuant to this paragraph except upon
receipt of an undertaking by or on behalf of the Executive and/or the other
recipient(s), as the case may be, to repay all such amounts to which the
Executive or other recipient, as the case may be, is ultimately adjudged by
such court not to be entitled.
9. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the
Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the
Company and those designated by it. However, in no event shall an asserted
violation of the provisions of this Section 9 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this
Agreement.
<PAGE> 17
10. Successors
(a) This Agreement is personal to the Executive and, without the prior
written consent of the Company, no obligations or rights hereunder shall be
assignable by the Executive otherwise than by will or the laws of descent or
distribution. This Agreement shall inure to the benefit of and be enforceable
by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business and/or assets
as aforesaid which assumes and agrees to perform this Agreement, by operation
of law or otherwise.
11. Miscellaneous
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Illinois, without reference to principles of
choice of law. The captions of this Agreement are for convenience only
and are not part of the provisions hereof and shall have no force or effect.
This Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective successors and
legal representatives.
<PAGE> 18
(b) All notices and other communications hereunder shall be in writing and
shall be given to the other party by hand delivery or commercial messenger
delivery or by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
James S. Waddell
2657 Saxon Place
Rockford, Il 61114
If to the Company:
Amcore Financial, Inc.
501 Seventh Street
P.O. Box 1537
Rockford, Illinois 61110-0037
Attention: Robert J. Meuleman
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(d) The Company may withhold from any amounts payable under this Agreement
such federal, state or local taxes as shall be required to be withheld pursuant
to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or the failure to assert any right that
the Executive or the Company may have hereunder, including, without limitation,
the right of the Executive to terminate employment for Good Reason pursuant to
Section 4(c) of this Agreement, shall not be deemed
<PAGE> 19
to be a waiver of such provision or right or of any other provision of or right
under this Agreement.
(f) The Executive and the Company acknowledge that this Agreement is not a
contract of employment and that, except as may otherwise be provided under any
other written agreement between the Executive and the Company, the employment
of the Executive by the Company is, and shall remain during the Effective
Period, "at will" and may, subject to Section 5, above, be terminated by either
the Executive or the Company at any time. Moreover, subject to Section 1,
above, if prior to the Effective Date (i) the Executive's employment with the
Company and all affiliates terminates or (ii) the Executive ceases to be an
officer of the Company and of all affiliates, then the Executive shall have no
further rights under this Agreement.
(g) This Agreement embodies the entire agreement and understanding between
the Company and the Executive and supersedes all prior agreements and
understandings between the Company and Executive relating to the subject matter
hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and,
pursuant to the authorization of its Board of Directors, the Company has caused
these presents to be executed in its name on its behalf, all as of the day and
year first above written.
AMCORE FINANCIAL, INC.
By: /s/ Carl J. Dargene
---------------------------------------
Its Chairman, Pres. & C.E.O.
---------------------------------------
/s/ James S. Waddell
---------------------------------------
("Executive")
<PAGE> 1
AMCORE FINANCIAL, INC. AND SUBSIDIARIES
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Quarter Ended Sept. 30, Year-to-Date Ended Sept. 30,
(in 000's) 1995 1994 1995 1994
===================================================================================================================
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE:
EARNINGS
Income applicable to common stock $6,240 $5,549 $11,997 $16,322
SHARES
Weighted average number of common shares 14,089 14,022 14,069 14,018
Dilutive effect of outstanding options (as
determined by application of the treasury
stock method) 210 234 190 212
------- ------ ------- ------
Weighted average number of shares, as adjusted 14,299 14,256 14,259 14,230
======= ====== ======= ======
PRIMARY EARNINGS PER SHARE* $0.436 $0.389 $0.841 $1.147
======= ====== ======= ======
FULLY DILUTED EARNINGS PER SHARE:
EARNINGS
Income applicable to common stock $6,240 $5,549 $11,997 $16,322
SHARES
Weighted average number of shares, as adjusted
per primary computation above 14,299 14,256 14,259 14,230
Additional dilutive effect of outstanding options
(as determined by application of the treasury
stock method) 42 -- 64 27
------- ------ ------- ------
Weighted average number of shares, as adjusted 14,341 14,256 14,323 14,257
======= ====== ======= ======
FULLY DILUTED EARNINGS PER SHARE* $0.435 $0.389 $0.838 $1.145
======= ====== ======= ======
</TABLE>
* This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.
<PAGE> 1
EXHIBIT 99
Oct. 18, 1995
Date: Ben Rubendall
Contact: 815-961-7164 [AMCORE FINANCIAL INC LOGO]
AMCORE REPORTS RECORD EARNINGS
ROCKFORD, ILL. - AMCORE Financial, Inc. posted record earnings of $6.2
million, or 44 cents per share for its third quarter. Earnings for the period,
which ended September 30, 1995, were up $700,000 from $5.5 million, or 40
cents per share in the 1994 quarter.
"Our record-setting performance was made possible by a combination of
continued strong growth in loan demand and strong performance by our
Diversified Financial Services group. We also benefited from reductions in some
key expenses and managed our operating expenses within the anticipated range,"
said Carl J. Dargene, chairman, president and chief executive officer of AMCORE
Financial, Inc.
Net interest income for the quarter rose $600,000, up 3 percent from
the 1994 quarter, primarily because of higher loan volume. Average loans
increased $139 million, or 12.5 percent, offsetting the compression in margins
caused by an increase in funding costs.
Fee income was boosted by $435,000 due to the January 1995 adoption of
FAS 122 - "Accounting for Mortgage Servicing Rights," which allows for the
recognition of the value of servicing rights on new mortgage loans.
Mortgage servicing income rose $186,000 as a result of growth in the
mortgage servicing portfolio. Insurance commission income rose $176,000 due to
a combination of business from the newly formed insurance agency and a higher
volume of credit life insurance sales. Trust revenues were slightly lower for
the quarter, however, they were up $300,000 or 3.4 percent year-to-date.
Total fee income was up slightly compared with 1994, however, the
quarter-to-quarter increase would have been about 10 percent except for the
impact of the sale of mortgage servicing rights, which inflated the third
quarter 1994 fee income by $800,000. Net security gains were $331,000 higher
than in the 1994 quarter. Total income taxes decreased slightly, despite higher
pre-tax earnings, due to effective planning which resulted in lower marginal
federal tax rates.
Continued pressure on the net interest margin limited the level of the
earnings increase associated with strong loan demand. The net interest margin
was 4.04 percent for the third quarter, down 11 basis points compared with the
second quarter of 1995. Compared with 1994, the net interest margin fell 33
basis points. "Pressure caused by shifts in funding sources has continued to
result in lower margins in a time of strong loan growth, and it remains a
problem for both AMCORE and the banking industry in general," Dargene said.
<PAGE> 2
AMCORE Financial, Inc.
Third Quarter Earnings 1995
Page 2
Operating expenses rose $226,000, or 1 percent from the 1994 quarter.
Expenses were significantly reduced by a refund of FDIC insurance premiums and
to a lesser extent by lower amortization of intangibles and merger-related
costs following one-time charges in the second quarter. Operating expenses
would have risen $1.2 million, or 6.2 percent, excluding the FDIC refund.
Planned expense increases are due to branch expansion expenses and the
cost of on-going improvements in data processing, including the recent
installation of a system to automate many teller functions.
"The increase in operating expenses actually was less than we had
anticipated," said Dargene. "Costs related to the opening of six branches in
supermarkets during the past 12 months, and the impact of spending on a
long-term project to upgrade our information and product delivery systems, have
increased our expenses.
All financial information has been restated to reflect the mergers of
NBA Holding Company of Aledo, and NBM Bancorp, Inc., of Mendota.
AMCORE Financial, Inc. is a northern Illinois-based bank holding
company with assets of approximately $2.3 billion. Its holdings include eight
subsidiary banks operating in 37 locations.
The company also has seven primary financial service subsidiaries: a
trust company, a mortgage company, a full-service broker-dealer, a capital
management company, a collection agency, a consumer finance company, and an
insurance company. AMCORE common stock is listed on NASDAQ under the symbol
"AMFI".
###
<PAGE> 3
AMCORE Financial, Inc.
CONSOLIDATED KEY FINANCIAL DATA SUMMARY
NOTE: All amounts have been restated to reflect the mergers with NBA Holding
Company of Aledo, Illinois, and NBM Bancorp, Inc. These mergers were
accounted for under the pooling of interests method.
<TABLE>
<CAPTION>
TRAILING TWELVE MONTHS
(IN THOUSANDS, EXCEPT SHARE DATA) QUARTER ENDED SEPT. 30, NINE MONTHS ENDED SEPT. 30, ENDED SEPT. 30,
------------------------- --------------------------- ---------------------------
PERCENT PERCENT PERCENT
FINANCIAL HIGHLIGHTS 1995 1994 CHANGE 1995 1994 CHANGE 1995 1994 CHANGE
- -------------------------------------------------------------------- --------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues, including security gains $28,534 $27,640 3.2% $83,743 $80,985 3.4% $111,486 $108,422 2.8%
Operating expenses.................... 19,950 19,724 1.1% 67,260 58,434 15.1% 87,460 78,339 11.6%
Net income............................ 6,240 5,549 12.5% 11,997 16,322 -26.5% 17,476 21,866 -20.1%
Net income per share.................. 0.44 0.40 10.0% 0.85 1.16 -26.7% 1.24 1.56 -20.5%
Cash dividends per share.............. 0.15 0.15 0.0% 0.45 0.43 4.7% 0.62 0.56 10.7%
Book value per share.................. 14.14 13.23 6.9%
<CAPTION>
QUARTER ENDED SEPT. 30, NINE MONTHS ENDED SEPT. 30,
------------------------- --------------------------
PERCENT PERCENT
KEY FINANCIAL RATIOS (A) 1995 1994 CHANGE 1995 1994 CHANGE
- ------------------------------------------------------------------------------------ --------------------------
<S> <C> <C> <C> <C> <C> <C>
Return on average assets............................. 1.08% 1.06% 1.8% 0.94% 1.07% -12.3%
Return on average equity............................. 12.61% 11.95% 5.5% 10.85% 11.80% -8.1%
Net interest margin (FTE)............................ 4.04% 4.37% -7.6% 4.16% 4.46% -6.7%
Net operating expense/average assets................. 1.98% 2.20% -9.9% 2.23% 2.30% -3.3%
Average total equity to average assets............... 8.53% 8.84% -3.5% 8.62% 9.04% -4.6%
Other income/net revenues (1)........................ 28.6% 29.4% -2.6% 28.4% 27.9% 2.0%
Efficiency Ratio (FTE)............................... 66.0% 67.1% -1.6% 69.5% 67.7% 2.6%
(A) All 1995 ratios have been adjusted to exclude one-time charges recorded in the second quarter.
INCOME STATEMENT
- ------------------------------------------------------------------------------------- ---------------------------
Interest income......................................... $42,432 $35,290 20.2% $121,063 $101,997 18.7%
Interest expense........................................ 22,351 15,818 41.3% 62,176 44,219 40.6%
-------------------------- ---------------------------
Net interest income.................................. 20,081 19,472 3.1% 58,887 57,778 1.9%
Provision for loan losses............................... 320 307 4.2% 1,920 611 214.2%
Other Income:
Trust income......................................... 2,628 2,701 -2.7% 8,455 8,151 3.7%
Service charges on deposits.......................... 1,879 1,627 15.5% 5,306 4,914 8.0%
Mortgage revenues.................................... 1,069 1,398 -23.5% 2,632 2,814 -6.5%
Collection fee income................................ 464 427 8.7% 1,386 1,314 5.5%
Other................................................ 2,013 1,946 3.4% 5,631 5,159 9.1%
-------------------------- ---------------------------
Total other income................................ 8,053 8,099 -0.6% 23,410 22,352 4.7%
Net security gains...................................... 400 69 479.7% 1,446 855 69.1%
Operating expenses:
Personnel costs...................................... 11,727 10,236 14.6% 35,192 30,760 14.4%
Net occupancy expense................................ 1,372 1,144 19.9% 5,472 3,470 57.7%
Equipment expense.................................... 1,756 1,542 13.9% 6,196 4,579 35.3%
Insurance expense.................................... 90 1,136 -92.1% 2,387 3,399 -29.8%
Professional fees.................................... 587 874 -32.8% 2,174 2,393 -9.2%
Amortization of intangible assets.................... 516 647 -20.2% 3,478 1,945 78.8%
Other................................................ 3,902 4,145 -5.9% 12,361 11,888 4.0%
-------------------------- ---------------------------
Total operating expenses.......................... 19,950 19,724 1.1% 67,260 58,434 15.1%
-------------------------- ---------------------------
Income before income taxes.............................. 8,264 7,609 8.6% 14,563 21,940 -33.6%
Income taxes............................................ 2,024 2,060 -1.7% 2,566 5,618 -54.3%
-------------------------- ---------------------------
Net income........................................ $6,240 $5,549 12.5% $11,997 $16,322 -26.5%
========================== ===========================
Average shares outstanding (000)........................ 14,089 14,022 0.5% 14,069 14,018 0.4%
Ending shares outstanding (000)......................... 14,094 14,025 0.5% 14,094 14,025 0.5%
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
QUARTER ENDED SEPT. 30,
(IN THOUSANDS) 1995 1994
- ---------------------------------------------------------------------- -------------------------------------
ENDING AVERAGE YIELD/ AVERAGE YIELD/
BALANCE BALANCE RATE BALANCE RATE
- ---------------------------------------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Taxable securities................................... $581,817 $539,972 6.90% $488,719 6.05%
Tax-exempt securities (FTE).......................... 227,043 253,627 7.13% 242,159 7.84%
Other earning assets................................. 40,896 48,504 6.07% 43,647 4.73%
Mortgage loans held for sale......................... 14,495 15,214 8.18% 13,016 7.03%
Loans, net of unearned income (FTE).................. 1,273,050 1,250,852 8.83% 1,112,104 8.23%
---------- -------------------------------------
Total Earning Assets.............................. $2,137,301 $2,108,169 8.19% $1,899,645 7.63%
Intangible assets................................. 14,828 15,135 18,639
Other non-earning assets.......................... 182,329 178,150 165,176
---------- -------------------------------------
Total Assets...................................... $2,334,458 $2,301,454 $2,083,460
---------- -------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest bearing deposits............................ $1,567,069 $1,574,302 4.53% $1,471,363 3.68%
Non-interest bearing deposits........................ 259,794 248,884 247,189
---------- -------------------------------------
Total Deposits.................................... $1,826,863 $1,823,186 $1,718,552
---------- -------------------------------------
Short-term borrowings................................ 254,116 236,580 6.48% 136,966 4.53%
Long-term borrowings................................. 22,013 21,994 7.27% 27,448 7.18%
Other................................................ 4,869 4,795 7.53% 4,025 11.04%
---------- -------------------------------------
Total Interest Bearing Liabilities................ 1,848,067 1,837,671 4.83% 1,639,802 3.83%
Other liabilities................................. 27,326 18,633 12,275
---------- -------------------------------------
Total Liabilities................................. $2,135,187 $2,105,188 $1,899,266
Stockholders' Equity.............................. 199,271 196,266 184,194
---------- -------------------------------------
Total Liabilities and
Stockholders' Equity.............................. $2,334,458 $2,301,454 $2,083,460
---------- -------------------------------------
<CAPTION>
NINE MONTHS ENDED SEPT. 30
1995 1994
----------------------------------------
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE RATE BALANCE RATE
----------------------------------------
<S> <C> <C> <C> <C>
ASSETS: $521,199 7.07% $507,193 6.03%
Taxable securities................................... 252,645 7.23% 242,963 7.95%
Tax-exempt securities (FTE).......................... 30,923 5.98% 32,955 4.84%
Other earning assets................................. 10,908 8.12% 12,481 7.23%
Mortgage loans held for sale......................... 1,212,098 8.78% 1,069,541 8.14%
---------------------------------------
Loans, net of unearned income (FTE).................. $2,027,773 8.20% $1,865,133 7.59%
Total Earning Assets.............................. 16,849 19,160
Intangible assets................................. 165,980 161,469
Other non-earning assets.......................... ---------------------------------------
$2,210,602 $2,045,762
Total Assets...................................... ---------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest bearing deposits............................ $1,520,480 4.43% $1,439,068 3.60%
Non-interest bearing deposits........................ 238,548 244,594
---------------------------------------
Total Deposits.................................... $1,759,028 $1,683,662
---------------------------------------
Short-term borrowings................................ 216,917 6.32% 128,560 3.83%
Long-term borrowings................................. 23,071 7.41% 28,249 6.93%
Other................................................ 4,556 8.66% 3,825 12.09%
---------------------------------------
Total Interest Bearing Liabilities................ 1,765,024 4.71% 1,599,702 3.70%
Other liabilities................................. 16,456 16,559
---------------------------------------
Total Liabilities................................. $2,020,028 $1,860,855
Stockholders' Equity.............................. 190,574 184,907
Total Liabilities and ---------------------------------------
Stockholders' Equity.............................. $2,210,602 $2,045,762
---------------------------------------
<CAPTION>
--------------------------- ----------------------------
QUARTER ENDED SEPT. 30, NINE MONTHS ENDED SEPT 30,
--------------------------- ----------------------------
PERCENT PERCENT
ASSET QUALITY (IN THOUSANDS) 1995 1994 CHANGE 1995 1994 CHANGE
--------------------------------------------------------------------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
Ending allowance for loan losses........................ $13,190 $13,724 -3.9%
Net charge-offs......................................... 770 438 75.8% $2,028 $1,367 48.4%
Net charge-offs to average loans(2)..................... 0.25% 0.16% 56.3% 0.22% 0.17% 29.4%
Non-performing assets:
Nonaccrual........................................... $9,674 $11,364 -14.9%
Restructured......................................... 2,597 765 239.5%
---------------------------
Non-performing loans.............................. 12,271 12,129 1.2%
Other real estate owned (OREO)....................... 2,502 1,359 84.1%
---------------------------
Total non-performing assets....................... $14,773 $13,488 9.5%
---------------------------
KEY ASSET QUALITY RATIOS
---------------------------------------------------------
Allowance to ending loans............................ 1.04% 1.21% -14.1%
Allowance to non-performing loans.................... 107.5% 113.2% -5.0%
Non-performing loans to loans........................ 0.96% 1.07% -9.6%
Non-performing assets to loans & OREO................ 1.16% 1.18% -2.2%
</TABLE>
FOOTNOTES
- ---------
(1) Excluding net security gains.
(2) On an annualized basis.
N/M = Not meaningful
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