<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 June 30, 1996
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 July 31, 1996 was 14,215,949 shares.
Index of Exhibits on Page 12 Page 1 of 107
<PAGE> 2
AMCORE FINANCIAL, INC.
Form 10-Q Table of Contents
<TABLE>
<S> <C>
PART I Page Number
- ------ -----------
ITEM 1 Financial Statements
Consolidated Balance Sheets as of June 30, 1996 and
December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Income for the Three and Six
Months Ended June 30, 1996 and 1995 . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1996 and 1995 . . . . . . . . . . . . . . . 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
2
<PAGE> 3
AMCORE Financial, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
(in thousands, except share data) 1996 1995
=======================================================================================================================
<S> <C> <C> <C>
Assets Cash and cash equivalents............................................... $112,456 $101,082
Interest earning deposits in banks...................................... 450 260
Federal funds sold and other short-term investments..................... 2,971 9,050
Mortgage loans held for sale............................................ 10,043 15,801
Securities available for sale........................................... 1,143,146 884,044
Securities held to maturity (fair value of $13,481 in 1996;
$24,967 in 1995)...................................................... 13,449 24,625
------------------------
Total securities................................................... $1,156,595 $908,669
Loans and leases, net of unearned income................................ 1,365,535 1,285,961
Allowance for loan and lease losses..................................... (13,802) (13,061)
------------------------
Net loans and leases............................................... $1,351,733 $1,272,900
Premises and equipment, net............................................. 47,391 49,670
Intangible assets, net.................................................. 13,273 14,314
Other real estate owned................................................. 766 2,116
Other assets............................................................ 60,553 44,670
------------------------
TOTAL ASSETS....................................................... $2,756,231 $2,418,532
========================
Liabilities LIABILITIES
And Deposits:
Stockholders' Interest bearing...................................................... $1,571,291 $1,512,473
Equity Non-interest bearing.................................................. 253,215 265,232
------------------------
Total deposits..................................................... $1,824,506 $1,777,705
Short-term borrowings................................................... 525,080 292,042
Long-term borrowings.................................................... 174,227 107,803
Other liabilities....................................................... 34,038 31,120
------------------------
TOTAL LIABILITIES.................................................. $2,557,851 $2,208,670
------------------------
STOCKHOLDERS' EQUITY
Preferred stock, $1 par value: authorized 10,000,000 shares;
issued none........................................................... $ - $ -
Common stock, $.33 par value: authorized 30,000,000 shares;
June 30, December 31,
1996 1995
Issued............14,926,695 14,926,695
Outstanding.......14,217,265 14,174,183 4,976 4,976
Additional paid-in capital.............................................. 56,583 56,412
Retained earnings....................................................... 156,870 149,315
Treasury stock and other................................................ (6,363) (6,659)
Net unrealized gain (loss) on securities available for sale............. (13,686) 5,818
------------------------
TOTAL STOCKHOLDERS' EQUITY......................................... $198,380 $209,862
------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......................... $2,756,231 $2,418,532
========================
</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 SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
( in thousands, except per share data) 1996 1995 1996 1995
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
INTEREST Interest and fees on loans and leases............................. $29,287 $26,962 $57,837 $52,338
INCOME Interest on securities:
Taxable......................................................... 14,924 9,552 27,038 18,844
Tax-exempt...................................................... 3,512 3,020 6,532 6,000
---------------------------- -------------------
TOTAL INCOME FROM SECURITIES................................. $18,436 $12,572 $33,570 $24,844
---------------------------- -------------------
Interest on federal funds sold and other short-term investments... 68 88 259 226
Interest and fees on mortgage loans held for sale................. 709 749 1,467 1,214
Interest on deposits in banks..................................... 5 - 9 9
---------------------------- -------------------
TOTAL INTEREST INCOME........................................ $48,505 $40,371 $93,142 $78,631
---------------------------- -------------------
INTEREST Interest on deposits.............................................. $17,971 $17,276 $35,240 $32,363
EXPENSE Interest on short-term borrowings................................. 6,225 3,132 10,722 6,382
Interest on long-term borrowings.................................. 2,649 414 4,815 876
Other............................................................. 134 78 243 204
---------------------------- -------------------
TOTAL INTEREST EXPENSE....................................... $26,979 $20,900 $51,020 $39,825
---------------------------- -------------------
NET INTEREST INCOME............................................... $21,526 $19,471 $42,122 $38,806
Provision for loan and lease losses.......................... 967 871 1,856 1,600
---------------------------- -------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES..... $20,559 $18,600 $40,266 $37,206
---------------------------- -------------------
OTHER Trust and asset management income................................. $3,539 $2,977 $6,781 $5,827
INCOME Service charges on deposits....................................... 1,720 1,695 3,400 3,427
Mortgage revenues................................................. 968 1,002 1,701 1,563
Collection fee income............................................. 564 469 1,146 922
Other............................................................. 1,960 1,787 3,913 3,618
---------------------------- -------------------
TOTAL OTHER INCOME, EXCLUDING NET REALIZED SECURITY GAINS.... $8,751 $7,930 $16,941 $15,357
Net realized security gains....................................... 255 427 1,019 1,046
---------------------------- -------------------
TOTAL OTHER INCOME........................................... $9,006 $8,357 $17,960 $16,403
OPERATING Compensation expense.............................................. $9,154 $9,511 $18,150 $18,149
EXPENSES Employee benefits................................................. 2,645 2,629 5,575 5,316
Net occupancy expense............................................. 1,271 1,139 2,656 2,505
Equipment expense................................................. 1,852 2,802 3,731 4,440
Professional fees................................................. 595 1,020 1,203 1,587
Advertising and business development.............................. 660 721 1,214 1,231
Amortization of intangible assets................................. 511 646 1,023 1,288
Impairment of long-lived assets................................... - 3,269 - 3,269
Insurance expense................................................. 204 1,163 401 2,297
Other............................................................. 3,781 3,737 7,708 7,227
---------------------------- -------------------
TOTAL OPERATING EXPENSES..................................... $20,673 $26,637 $41,661 $47,309
---------------------------- -------------------
INCOME BEFORE INCOME TAXES........................................ $8,892 $320 $16,565 $6,300
Income taxes...................................................... 2,435 (820) 4,478 543
---------------------------- -------------------
NET INCOME................................................... $6,457 $1,140 $12,087 $5,757
============================ ===================
EARNINGS PER COMMON SHARE.................................... $0.45 $0.08 $0.85 $0.41
DIVIDENDS PER COMMON SHARE................................... 0.16 0.15 0.32 0.30
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING................... 14,207 14,069 14,199 14,059
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
AMCORE Financial, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
( in thousands) 1996 1995
==========================================================================================================================
<S> <C> <C> <C>
CASH FLOWS NET INCOME.............................................................. $12,087 $5,757
FROM Adjustments to reconcile net income to net
OPERATING cash provided by operating activities:
ACTIVITIES Depreciation and amortization of premises and equipment............ 2,351 2,420
Amortization and accretion of securities, net...................... 2,231 (28)
Provision for loan and lease losses................................ 1,856 1,600
Amortization of intangible assets.................................. 1,023 1,288
Gain on sale of securities available for sale...................... (1,101) (1,132)
Loss on sale of securities available for sale...................... 82 86
Gain on sale of trading securities ................................ - (1)
Loss on sale of trading securities ................................ - 5
Purchase of trading securities..................................... (536) (6,016)
Proceeds from sale of trading securities........................... 536 6,012
Impairment of long-lived assets.................................... - 3,269
Write-down of other real estate owned.............................. - 53
Non-employee directors compensation expense........................ 236 143
Deferred income taxes.............................................. 1,193 (2,321)
Net decrease (increase) in mortgage loans held for sale............ 5,758 (8,234)
Other, net......................................................... 1,859 5,537
-------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES....................... $27,575 $8,438
-------------------------
CASH FLOWS Proceeds from maturities of securities.................................. $99,234 $63,988
FROM Proceeds from sales of securities available for sale.................... 105,527 99,810
INVESTING Purchase of securities held to maturity................................. (142) (13,496)
ACTIVITIES Purchase of securities available for sale............................... (486,157) (159,189)
Net decrease in federal funds sold and other short-term investments..... 6,079 1,770
Net (increase) decrease in interest earning deposits in banks........... (190) 38
Net increase in loans and leases........................................ (81,239) (76,008)
Proceeds from the sale of premises and equipment........................ 560 199
Premises and equipment expenditures..................................... (1,753) (4,830)
-------------------------
NET CASH REQUIRED FOR INVESTING ACTIVITIES...................... ($358,081) ($87,718)
-------------------------
CASH FLOWS Net decrease in demand deposits and savings accounts.................... ($27,605) ($7,340)
FROM Net increase in time deposits........................................... 74,406 94,078
FINANCING Net increase in short-term borrowings................................... 227,038 15,597
ACTIVITIES Proceeds from long-term borrowings...................................... 74,500 -
Payment of long-term borrowings......................................... (2,158) (4,616)
Dividends paid.......................................................... (4,532) (4,164)
Proceeds from exercise of incentive stock options....................... 231 189
-------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES....................... $341,880 $93,744
-------------------------
Net change in cash and cash equivalents................................. $11,374 $14,464
-------------------------
Cash and cash equivalents:
Beginning of year..................................................... 101,082 92,201
-------------------------
End of period......................................................... $112,456 $106,665
=========================
SUPPLEMENTAL Cash payments for:
DISCLOSURES OF Interest paid to depositors........................................... $34,296 $29,816
CASH FLOW Interest paid on borrowings........................................... 14,381 7,395
INFORMATION Income taxes paid..................................................... 3,937 3,412
NON-CASH Other real estate acquired in settlement of loans....................... 550 2,245
INVESTING
ACTIVITIES
See accompanying notes to consolidated financial statements.
</TABLE>
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.
Operating results for the three and six month periods ended June 30, 1996 are
not necessarily indicative of the results that may be expected for the fiscal
year ending December 31, 1996. 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, 1995.
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, adjusted for
common stock equivalents. Common stock equivalents consist of shares issuable
under options granted pursuant to stock plans. The fully dilutive effect of
common stock equivalents on earnings per share was less than three percent for
all periods presented.
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 June 30, 1996, the
balance was $15.3 million at an interest rate of 6.90%.
The Agreement contains several restrictive covenants, including limitations on
dividends to stockholders, maintenance of various capital adequacy levels, and
certain restrictions with regard to other indebtedness. All capital adequacy
ratios remained well above the required minimums per the Agreement during the
reported periods.
In late 1995 and early 1996, several of the Company's subsidiary banks borrowed
a total of $162,750,000 from the Federal Home Loan Bank (FHLB) in connection
with the purchase of mortgage-backed securities. The average maturity of these
borrowings is 2.2 years, with a weighted average borrowing rate of 5.68%.
Scheduled reductions of long-term borrowings are as follows:
<TABLE>
<CAPTION>
=============================================================================================================
(in thousands) Total
- -------------------------------------------------------------------------------------------------------------
<S> <C>
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,631
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,218
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,726
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,001
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,780
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 871
- -------------------------------------------------------------------------------------------------------------
SUB-TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 180,227
Less current portion of FHLB borrowings . . . . . . . . . . . . . . . . . . . . . . . . . (6,000)
- -------------------------------------------------------------------------------------------------------------
TOTAL LONG-TERM BORROWINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 174,227
=============================================================================================================
</TABLE>
Other long-term borrowings include a non-interest bearing note from the January
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 significant factors which
affected AMCORE Financial, Inc. and subsidiaries (the "Company") financial
condition as of June 30, 1996 as compared to December 31, 1995 and the results
of operations for the three and six months ended June 30, 1996 as compared to
the same periods in 1995. 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 second quarter of 1996 totaled a record $6.5 million, an
increase of $5.3 million from the second quarter of 1995. Excluding a $3.5
million after-tax charge recorded in 1995, the increase was $1.9 million, or
40.2%. This prior year charge was related to the impairment of certain
long-lived assets required by a new accounting rule and costs associated with
increased merger activity. Through the first six months of 1996, net income
was $12.1 million as compared to $5.7 million in 1995. Excluding the prior
year impairment and merger-related charges, net income increased $2.9 million,
or 31.1%.
On a per share basis, net earnings in the second quarter of 1996 were a record
$.45 versus $.33 in 1995, exclusive of the impairment and merger-related
charges. On a year-to-date basis, earnings per share totaled $.85 versus $.66,
after excluding the $.25 per share impairment and merger-related charges, an
increase of 28.8%.
The record earnings were primarily the result of higher net interest income,
which rose $2.1 million or 10.6%. This increase was caused by strong loan
growth and the impact of an investment leveraging program as discussed in the
Net Interest Income Section. A $562,000, or 18.9%, increase in trust and asset
management income also elevated earnings, and resulted from a combination of
favorable investment performance and new accounts.
The return on average equity (ROE) was 12.76% in the second quarter of 1996 as
compared to 9.73% in 1995 and the return on average assets (ROA) for the
quarter was .96% versus .83% a year earlier, both excluding the impact of the
prior year impairment and merger-related charges. On a year-to-date basis, ROE
and ROA were 11.75% and .94% in 1996, respectively, versus 9.89% and .85% in
1995, exclusive of the impairment and merger-related charges.
NET INTEREST INCOME
Net interest income, the Company's primary source of earnings, totaled $21.5
million in the second quarter of 1996, an increase of $2.1 million or 10.6%
when compared with $19.5 million in 1995. On a year-to-date basis, net
interest income increased $3.3 million or 8.5% and totaled $42.1 million. In
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.
As shown in the following table, tax equivalent net interest income rose by
$2.3 million in the second quarter of 1996 as compared to 1995, the increase
almost entirely due to higher loan and investment volumes. The net interest
margin, which is computed by dividing the annualized tax equivalent net
interest income by the average earning assets, declined by 45 basis points to
3.70% as compared to 4.15% for the second quarter of 1995. The net interest
margin on a year-to-date basis reflected a similar decline falling to 3.77%
from 4.21% in the prior year. These declines were caused by the impact of an
investment leveraging program and a shift in the deposit mix to higher rate
time deposits. Growth in average loan volumes helped to mitigate some of the
interest margin compression.
The investment leveraging program is designed to better deploy underutilized
capital at affiliate banks and improve the return on equity. The program is
funded through repurchase agreements and Federal Home Loan Bank (FHLB)
borrowings, the proceeds of which are principally invested in mortgage-backed
7
<PAGE> 8
securities. While this program results in additional net interest income, it
also lowers the net interest margin due to the smaller interest rate spread
associated with these transactions. This program added approximately $1.5
million to net interest income in the second quarter of 1996 as compared to
$484,000 in the same quarter for 1995, resulting in a net increase of
approximately $1.0 million. On a year-to-date basis, the impact was $2.4
million in 1996 versus $897,000 a year earlier, a net increase of $1.5 million.
Excluding the impact of this program, the core net interest margin for the
second quarter of 1996 declined 13 basis points from the prior year to 4.24%
and, on a year-to-date basis, declined 18 basis points to 4.20%. In comparison
to the first quarter of 1996, however, the core net interest margin improved by
8 basis points.
ANALYSIS OF NET INTEREST INCOME-TAX EQUIVALENT BASIS
Unaudited Quarters Ended June 30,
(in thousands)
<TABLE>
<CAPTION>
Average Balance Average Rate
- -----------------------------------------------------
1996 1995 1996 1995
- -----------------------------------------------------
<S> <C> <C> <C>
$903,472 $527,309 6.53% 7.17%
260,318 260,362 8.21% 7.06%
- -----------------------------------------------------
$1,163,790 $787,671 6.91% 7.13%
- -----------------------------------------------------
$10,335 $10,392 8.11% 7.69%
1,330,409 1,214,870 8.73% 8.80%
5,462 4,849 5.29% 7.18%
----------------------------------------------------
$2,509,996 $2,017,782 7.95% 8.25%
- -----------------------------------------------------
$441,579 $404,710 2.55% 2.73%
151,276 170,073 2.18% 2.60%
986,813 935,002 5.85% 5.76%
- -----------------------------------------------------
$1,579,668 $1,509,785 4.58% 4.59%
- -----------------------------------------------------
$464,984 $215,195 5.38% 5.84%
174,937 22,915 6.09% 7.25%
5,924 5,067 9.10% 6.17%
- -----------------------------------------------------
$2,225,513 $1,752,962 4.88% 4.78%
----------------------------------------------------
3.07% 3.47%
----------------------------------------------------
3.70% 4.15%
----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1996/1995
Interest Earned Change
or Paid Due to
-----------------------------------------------------
1996 1995 Volume Rate
-----------------------------------------------------
INTEREST EARNING ASSETS:
<S> <C> <C> <C> <C>
Taxable securities............................. $14,924 $9,552 $6,280 ($908)
Tax-exempt securities (1)...................... 5,403 4,646 (1) 758
- ----------------------------------------------------------------------------------------------------
Total securities............................... $20,327 $14,198 $6,279 ($150)
- ----------------------------------------------------------------------------------------------------
Mortgage loans held for sale (3)............... $212 $202 ($1) $11
Loans (1) (2).................................. 29,360 27,019 2,552 (211)
Other earning assets........................... 73 88 10 (25)
Fees on mortgage loans held for sale (3)....... 497 547 47 (97)
- ----------------------------------------------------------------------------------------------------
TOTAL EARNING ASSETS (FTE) $50,469 $42,054 $8,887 ($472)
- ----------------------------------------------------------------------------------------------------
INTEREST BEARING LIABILITIES:
Interest-bearing demand deposits............... $2,795 $2,755 $244 ($204)
Savings deposits............................... 821 1,101 (115) (165)
Time deposits.................................. 14,355 13,420 763 172
- ----------------------------------------------------------------------------------------------------
Total interest-bearing deposits.............. $17,971 $17,276 $892 ($197)
- ----------------------------------------------------------------------------------------------------
Short-term borrowings.......................... $6,225 $3,132 $3,418 ($325)
Long-term borrowings........................... 2,649 414 2,351 (116)
Other.......................................... 134 78 15 41
- ----------------------------------------------------------------------------------------------------
TOTAL INTEREST-BEARING
LIABILITIES................................. $26,979 $20,900 $6,676 ($597)
- ----------------------------------------------------------------------------------------------------
INTEREST RATE SPREAD (FTE).....................
- ----------------------------------------------------------------------------------------------------
NET INTEREST MARGIN/
NET INTEREST INCOME (FTE)................... $23,490 $21,154 $2,211 $125
- ----------------------------------------------------------------------------------------------------
</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 absoulute 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 second quarter of 1996 were $2.51 billion,
an increase of $492.2 million or 24.4% over 1995. Average loans grew by $115.5
million or 9.5%, primarliy the result of growth in commercial real estate and
consumer loan portfolios. Average total securities increased $376.1 million to
$1.16 billion as a result of the investment leveraging program mentioned
earlier.
Average total interest-bearing liabilities were $2.23 billion in the second
quarter of 1996, an increase of $472.6 million or 27.0%. Average interest-
bearing deposits rose by $69.9 million or 4.6% during the second quarter of
1996, the increase mostly due to a $51.8 million growth in average time
deposits.
8
<PAGE> 9
Average interest-bearing demand deposits also grew by $36.9 million, but were
partially offset by an $18.8 million decline in average savings deposits. For
the second quarter of 1996, average short-term borrowings increased to $249.8
million over the prior year quarter, and totaled $465.0 million. Average
long-term borrowings also increased $152.0 million from the prior year quarter
and totaled $174.9 million. The large increases in borrowings were due to the
use of repurchase agreements and FHLB borrowings for the funding of the
investment leveraging program. Average earning assets as a percentage of total
average assets was 93.2% and 90.8%, respectively, for the second quarters of
1996 and 1995. The increase was the result of management's focus on reducing
non-earning assets and a 22.0% increase in average earning assets due to the
leveraging strategy.
The yield on average earning assets for the second quarter of 1996 was 7.95%, a
decline of 30 basis points from the yield in 1995. The average rate paid on
interest bearing liabilities rose by 10 basis points to 4.88%. As a result,
the net interest spread dropped 40 basis points to 3.07%.
The yield on loans for the second quarter of 1996 was 8.73%, a 7 basis point
decline from 1995. The yield on total securities dropped 22 basis points to
6.91% in comparison to the second quarter of 1995, due to additional
amortization caused by accelerated paydowns of mortgage-backed securities. The
yield on mortgage loans held for sale increased 42 basis points to 8.11% due to
the recent rise in long-term interest rates.
The average rate paid on interest-bearing deposits was stable at 4.58% versus
4.59% in the second quarter of 1995. The rate paid on time deposits in the
second quarter of 1996 was 5.85%, an increase of 9 basis points over 1995.
Both interest-bearing demand deposit rates and savings deposit rates, however,
declined by 18 basis points and 42 basis points, respectively.
The average rate paid on short-term borrowings was 5.38% as compared to 5.84%
for the second quarter of 1995, the decline due mainly to lower prevailing
short-term rates. The average rate paid on long-term borrowings also declined
from 7.25% to 6.09%. This decline was mainly due to the lower rates associated
with FHLB borrowings, which have an average rate of 5.68% and an average
maturity of 2.2 years.
On a year-to-date basis, tax equivalent net interest income was $45.8 million
in 1996, which represents an increase over 1995 of $3.6 million or 8.6%. This
increase was caused by strong loan growth and the investment leveraging
program. Earning assets for the first six months of 1996 yielded 7.97%, a 21
basis point decline from 1995. At the same time, the average rate paid on
interest bearing liabilities increased by 21 basis points to 4.86%. The result
was a 42 basis point compression in the net interest spread to 3.11%, which was
primarily caused by increased premium amortization from the prepayment of
mortgage-backed securities and a larger mix of higher rate time deposits.
PROVISION AND ALLOWANCE FOR LOAN AND LEASE LOSSES
For the second quarter of 1996, the provision for loan and lease losses was
$967,000 as compared to $871,000 for the same period last year. Total net
charge-offs for the quarter were $420,000 versus $1.0 million in 1995. The
decline in net charge-offs was due to a $595,000 write-down of a commercial
real estate property in 1995, which was since reclassified into other real
estate and sold. On a year-to-date basis, net charge-offs totaled $1.1 million
in 1996, a decline from the $1.3 million recorded in 1995. The annualized
ratio of second quarter net charge-offs to average loans and leases was .13% in
1996 versus .33% a year earlier, and the year-to-date ratio was .17% in 1996 as
compared to .21% in 1995.
Total non-performing loans were $14.2 million at June 30, 1996, an increase of
$3.8 million since December 31, 1995 due primarily to a local commercial loan.
Total other real estate owned was $766,000 at the end of the second quarter, a
decline of $1.4 million when compared with the $2.1 million at December 31,
1995. Accordingly, total non-performing assets were $15.0 million at June 30,
1996, an increase of $2.4 million since December 31, 1995.
The allowance for loan and lease losses as a percentage of total non-performing
loans and leases was 97.3% at June 30, 1996 versus 101.1% at December 31, 1995.
Total non-performing assets as a percentage of total loans, leases and other
real estate owned, was 1.09% at June 30, 1996 versus .97% at December 31, 1995.
The allowance as a percentage of total net loans and leases was 1.01% at June
30, 1996 versus 1.02% at the end of 1995.
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OTHER INCOME
Non-interest income, exclusive of net security gains, totaled $8.8 million for
the second quarter of 1996, an increase of $821,000 or 10.4% over the prior
year quarter. On a year-to-date basis, non-interest income, exclusive of net
security gains, totaled $16.9 million, a $1.6 million or 10.3% increase over
1995.
Trust and asset management income totaled $3.5 million for the second quarter
of 1996, which represents a $562,000 or 18.9% increase over the comparable
period last year. Through the first six months of 1996, trust and asset
management income rose to $6.8 million, an increase of $954,000 or 16.4% over
the prior year. These increases were the result of favorable market
performance of trust assets, growth in the AMCORE Vintage Funds proprietary
mutual fund family and the addition of new trust accounts. Other non-interest
income increased $173,000 or 9.7% for the quarter and $295,000 or 8.2% on a
year-to-date basis. This increase was the result of strong insurance
commission growth and higher credit card income.
Mortgage revenues totaled $968,000 for the second quarter of 1996, a decline of
3.4% from the second quarter of 1995 due to a drop in mortgage loan volumes.
This was partially offset by increased servicing income from a larger servicing
portfolio. On a year-to-date basis, mortgage revenues totaled $1.7 million, a
$138,000 or 8.8% increase over 1995 as a result of higher refinancing activity
in early 1996 caused by lower mortgage rates.
Net security gains for the second quarter of 1996 were $255,000 versus $427,000
a year earlier. For the first six months of 1996, net security gains were $1.0
million, virtually unchanged from the same period of 1995.
OPERATING EXPENSES
Total operating expenses for the second quarter of 1996 were $20.7 million, a
$6.0 million decline over the same period in 1995. Approximately $5.6 million
of this decline related to the impairment and merger-related charges recorded
in 1995. Excluding these charges, total operating expenses for the quarter
declined $372,000 or 1.8%. A major factor for the decline was the elimination
of FDIC deposit insurance premiums in 1996, which lowered quarterly expenses by
$959,000 in comparison to the second quarter of 1995. On a year-to-date basis
and exclusive of the $5.6 million in prior year charges, total operating
expenses declined $56,000. Without the impact of the elimination of $1.9
million in FDIC deposit insurance premiums, total operating expenses would have
increased by $1.8 million or 4.4%.
Personnel costs, which includes compensation expense and employee benefits, is
the largest component of operating expense. Exclusive of $749,000 in 1995
merger-related charges, total personnel costs in the second quarter of 1996
increased $408,000 or 3.6% over the prior year quarter. On a year-to-date
basis, personnel costs totaled $23.7 million and increased $1.0 million or 4.4%
over 1995, excluding the merger-related charges. The increases were primarily
due to normal salary adjustments and higher insurance commission expense.
Total equipment expense for the second quarter of 1996 was $1.9 million versus
$2.8 million a year earlier. Exclusive of $1.2 million in 1995 merger-related
charges, total equipment expense would have increased $233,000 or 14.4% over
the second quarter of 1995. On a year-to-date basis, equipment expense totaled
$3.7 million, an increase of $474,000 or 14.6% over 1995, exclusive of the
prior year merger-related charges. These increases were principally caused by
the upgrade in information systems hardware and software and various PC
networks. These upgrades were associated with the installation of a new teller
automation product delivery system and the expansion of this system throughout
the entire customer service platform. Equipment costs should continue to be at
or above prior year levels, but it is expected that operational productivity
will be improved and cross-selling capabilities will be enhanced.
Professional fees totaled $595,000 for the second quarter of 1996 and $1.2
million for the year-to-date, declines of $163,000 or 21.5% and $122,000 or
9.2%, respectively, over the prior year periods, exclusive of $262,000 in
merger-related charges.
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Intangibles amortization expense totaled $511,000 in the second quarter of
1996, a decline of $135,000 or 20.9% from 1995; and on a year-to-date basis,
totaled $1.0 million, a decline of $265,000 or 20.6% from the prior year. The
declines in amortization expense were due mainly to lower levels of collection
agency intangibles caused by a $1.7 million impairment charge in the second
quarter of 1995, which resulted from the early adoption of Statement of
Financial Accounting Standards (FAS) No. 121 - "Accounting for the Impairment
of Long-Lived Assets". The total impact of this new accounting standard in
1995 was $3.3 million, as shown on the Consolidated Statements of Income, and
also included a $1.6 million charge for the reduction of carrying values
assigned to certain bank facilities.
Other operating expense includes loan processing costs, printing and supplies,
communication expense, credit card expense, other real estate expense, external
data processing costs, correspondent bank fees, and other miscellaneous
expenses. This category of expense totaled $3.8 million for the second quarter
of 1996, an increase of $44,000 or 1.2% from the prior year quarter. On a
year-to-date basis, other operating expense totaled $7.7 million, an increase
of $481,000 or 6.7% over 1995 due to a combination of higher loan processing
costs and additional credit card expenses.
Income tax expense for the second quarter of 1996 totaled $2.4 million, a $3.3
million increase over the prior year benefit of $820,000 due to a higher level
of earnings. For the first six months, the effective tax rate was 27.0% versus
24.9% in the prior year, excluding the impact of the impairment and
merger-related charges and tax credits recorded in the first quarter of 1995.
This effective rate increase was caused by the higher level of earnings and,
accordingly, the lower relative value associated with tax-exempt income.
SUMMARY OF FINANCIAL CONDITION
Total assets at June 30, 1996 were $2.76 billion, a $337.7 million or 14.0%
increase since December 31, 1995. As mentioned earlier, loan growth and the
purchase of securities in connection with the investment leveraging program
accounted for much of the increase. At June 30, 1996, total loans outstanding
were $1.37 billion, an increase of $79.6 million or 6.2% since the end of 1995.
Total securities at June 30, 1996 were $1.16 billion versus $908.7 million at
the end of 1995, an increase of $247.9 million or 27.3%.
The funding for the investment leveraging program caused short-term borrowings
to increase $233.0 million over the previous year-end to total $525.1 million
at June 30, 1996. The increased FHLB borrowings also caused long-term
borrowings to rise $66.4 million since the end of 1995 to $174.2 million at
June 30, 1996. Total deposits at the end of the quarter were $1.82 billion, an
increase of $46.8 million or 2.6% since the end of 1995. A $58.8 million
increase in interest bearing deposits, particularly in certificates of deposit,
was partially offset by a $12.0 million decline in non-interest bearing
deposits.
CAPITAL
Stockholders' equity was $198.4 million at June 30, 1996, a decline of $11.5
million or 5.5% since December 31, 1995. This decline was due to a $19.5
million after-tax reduction in the fair value of the securities available for
sale portfolio, which was caused by an increase in market interest rates.
Without the impact of this change in the net unrealized loss, total
stockholders' equity would have increased $8.0 million, or 3.9%. At June 30,
1996, the risk-based capital ratio was 13.29% and the Tier 1 risk-based capital
ratio was 12.43% in comparison to 13.26% and 12.40%, respectively, at December
31, 1995. The leverage ratio at June 30, 1996 was 7.42%, well above the
required minimum of 4.00%. Dividends per share for the second quarters of 1996
and 1995 were $.16 and $.15, respectively, an increase of 6.7%.
OTHER MATTERS
On August 2, 1996, the Company combined four of its banks in the southern
region into one national bank charter. The banks in Princeton, Peru and
Gridley were merged into the Mendota bank to form a new bank named AMCORE Bank
N.A., North Central, with assets totaling approximately $432 million. This
merger is intended to increase operating efficiencies and reduce costs. It is
also expected to improve customer service and allow for consistent product
offerings to customers in this economic region, which is in proximity to the
intersection of Interstates I-39 and I-80.
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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, 1996 (File No. 0-13393)
ITEM 6. Exhibits and Reports on Form 10-Q Page
(a) 3 Amended and Restated Articles of Incorporation of AMCORE
Financial, Inc. dated May 1, 1990 (Incorporated by reference to
Exhibit 23 of AMCORE's Annual Report on Form 10-K for the year
ended December 31, 1989).
3.1 By-laws of AMCORE Financial, Inc. as amended May 17, 1990
(Incorporated by reference to Exhibit 3.1 of AMCORE's Annual
Report of Form 10-K for the year ended December 31, 1994).
4 Rights Agreement dated February 21, 1996, between AMCORE
Financial, Inc. and Firstar Trust Company (Incorporated by
reference to AMCORE's Form 8-K as filed with the Commission on
February 28, 1996).
10.1* 1995 Stock Incentive Plan (Incorporated by reference to
Exhibit 22 of AMCORE's Annual Report on Form 10-K for the year
ended December 31, 1994).
10.2* AMCORE Financial, Inc. 1994 Stock Option Plan for
Non-Employee Directors (Incorporated by reference to Exhibit 23
of AMCORE's Annual Report on Form 10-K for the year ended
December 31, 1993).
10.3A* Amended and Restated Transitional Compensation Agreement 15
dated June 1, 1996 between AMCORE Financial, Inc. and Robert
J. Meuleman.
10.3B* Amended and Restated Transitional Compensation Agreement 39
dated June 1, 1996 between AMCORE Financial, Inc. and the
following individuals: F. Taylor Carlin, John R. Hecht, and
James S. Waddell.
10.3C* Transitional Compensation Agreement dated June 1, 1996 60
between AMCORE Financial, Inc. and the following individuals:
Charles E. Gagnier and Gerald W. Lister.
10.3D* Transitional Compensation Agreement dated June 1, 1996 81
between AMCORE Financial, Inc. and the following individuals:
Kenneth E. Edge, William J. Hippensteel, Alan W. Kennebeck and
James F. Warsaw.
10.4 Loan Agreement for $17,000,000 Term Loan and $25,000,000
Line of Credit Note dated November 10, 1995 with M&I Marshall &
Ilsley Bank (Incorporated by reference to Exhibit 10.5 to
AMCORE's Annual Report on Form 10-K for the year ended December
31, 1995).
10.5 Commercial Paper Placement Agreement dated November 10,
1995 with M&I Marshall and Ilsley Bank (Incorporated by
reference to Exhibit 10.6 to AMCORE's Annual Report on Form
10-K for the year ended December 31, 1995).
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10.6* Executive Insurance Agreement dated March 1, 1996 between
AFI and the following executives: Robert J. Meuleman, F.
Taylor Carlin and James S. Waddell (Incorporated by
reference to Exhibit 10.6 of the Company's Form 10-Q for
the quarter ended March 31, 1996).
11 Statement Re-Computation of Per Share Earnings 102
22 1996 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, 1995).
27 Financial Data Schedule 103
99 Additional exhibit - Earnings release dated July 22, 1996. 104
(b) No reports on Form 8-K were filed during this quarter.
*These exhibits are management contracts or compensatory plans or arrangements
required to be filed as exhibits to this Form 10-Q.
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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: August 9, 1996
/s/ John R. Hecht
--------------------------
John R. Hecht
Senior Vice President and Chief Financial Officer
(Duly authorized officer of the registrant
and principal financial officer)
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(Version A: May 30, 1996)
AMENDED AND RESTATED
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 1st day
of June, 1996. This Agreement amends, restates and supersedes any and all
prior agreements between the Company and the Executive relating to the subject
matter of this Agreement, including (but not by way of limitation) the
Transitional Compensation Agreement dated September 25, 1995.
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. The Board believes that, in connection with such compensation
and benefit arrangements, it is appropriate to provide for a "Gross-Up Payment"
to the Executive to cover certain special taxes which might result from his
receipt of other compensation and benefits but that such a "Gross-Up Payment"
is appropriate only
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<PAGE> 2
because of the extraordinary circumstance that, because of the Executive's
voluntary deferrals of substantial amounts of compensation from the Company in
recent years, the Executive's base amount of compensation under the "golden
parachute" provisions of Section 280G of the Internal Revenue Code is
unreasonably low in relation to the base amount of other key executives of the
Company. 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:
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
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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 which
commenced on September 25, 1995 and ending on the third anniversary of
such date; provided, however, that on September 25, 1996, 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) 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,
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<PAGE> 4
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 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
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<PAGE> 5
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.
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
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<PAGE> 6
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 and may suspend the Executive from his
duties with full pay and benefits if the Executive is indicted for a felony
involving moral turpitude; provided, however, that the Executive will repay all
amounts paid by the Company from the date of such suspension if the Executive
is convicted of such felony. 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 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:
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<PAGE> 7
(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 more than twenty (20) miles from that in effect
immediately prior to the Effective Date;
(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.
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<PAGE> 8
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.
(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,
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<PAGE> 9
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 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
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<PAGE> 10
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 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
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<PAGE> 11
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
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
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<PAGE> 12
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 effect generally from time to time
thereafter with respect to other peer executives of the Company and its
affiliated
26
<PAGE> 13
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 for (i) the Accrued Obligations and (ii) the timely
payment or provision of Other Benefits. In such case, all Accrued
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<PAGE> 14
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 shall
provide detailed supporting calculations both to the Company and the Executive
within fifteen (15)
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<PAGE> 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.
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<PAGE> 16
(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;
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<PAGE> 17
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 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
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<PAGE> 18
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.
(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
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<PAGE> 19
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.
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
upon receipt of proper invoices, to the fullest extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest 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; provided,
however, that in the event that it is finally judicially determined that the
Executive was terminated for Cause, then the Executive shall be obligated to
repay to the Company the full amount of all such legal fees and expenses paid
for the Executive by the Company in connection with that contest, plus interest
at the rate described above.
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<PAGE> 20
(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 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
34
<PAGE> 21
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
(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
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<PAGE> 22
(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:
If to the Executive:
Robert J. Meuleman
5329 Gingeridge Lane
Rockford, IL 61114
If to the Company:
Amcore Financial, Inc.
501 Seventh Street
P.O. Box 1537
Rockford, Illinois 61110-0037
Attention: Mr. 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.
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<PAGE> 23
(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 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, including (but not by way of limitation) the Transitional Compensation
Agreement dated September 25, 1995.
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<PAGE> 24
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/ James S. Waddell
----------------------------------------------------------
James S. Waddell
Its Executive Vice President and Chief Administrative Officer
----------------------------------------------------------
/s/ Robert J. Meuleman
------------------------------------------
Robert J. Meuleman
("Executive")
38
<PAGE> 1
AMENDED AND RESTATED
TRANSITIONAL COMPENSATION AGREEMENT
AGREEMENT by and between Amcore Financial, Inc., a Nevada corporation
(the "Company"), and (the "Executive"), dated as of the
1st day of June, 1996. This Agreement amends, restates and supersedes any and
all prior agreements between the Company and the Executive relating to the
subject matter of this Agreement, including (but not by way of limitation) the
Transitional Compensation Agreement dated September 25, 1995.
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:
1. Certain Definitions
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<PAGE> 2
(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 which
commenced on September 25, 1995 and ending on the third anniversary of such
date; provided, however, that on September 25, 1996, 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) days prior
to the Renewal Date the Company shall
40
<PAGE> 3
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 the then outstanding
voting
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<PAGE> 4
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
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<PAGE> 5
Company, or (iii) the sale or other disposition of all or substantially all of
the assets of the Company.
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.)
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<PAGE> 6
(b) Cause. The Company may terminate the Executive's employment
during the Effective Period for Cause and may suspend the Executive from his
duties with full pay and benefits if the Executive is indicted for a felony
involving moral turpitude; provided, however, that the Executive will repay all
amounts paid by the Company from the date of such suspension if the Executive
is convicted of such felony. 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 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
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<PAGE> 7
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 more than twenty (20) miles from that in effect
immediately prior to the Effective Date;
(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
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<PAGE> 8
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.
(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:
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(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 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
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<PAGE> 10
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 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
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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
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
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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 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.
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(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 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
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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 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.
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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.
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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
upon receipt of proper invoices, to the fullest extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest 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; provided,
however, that in the event that it is finally judicially determined that the
Executive was terminated for Cause, then the Executive shall be obligated to
repay to the Company the full amount of all such legal fees and expenses paid
for the Executive by the Company in connection with that contest, plus interest
at the rate described above.
(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
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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 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
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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
(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
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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:
If to the Executive:
If to the Company:
Amcore Financial, Inc.
501 Seventh Street
P.O. Box 1537
Rockford, Illinois 61110-0037
Attention: Mr. 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.
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(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 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, including (but not by way of limitation) the Transitional Compensation
Agreement dated September 25, 1995.
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.
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AMCORE FINANCIAL, INC.
By: /s/ James S. Waddell
-------------------------------------------------------
James S. Waddell
Its Executive Vice President & Chief Administrative Officer
-------------------------------------------------------
------------------------------------------
("Executive")
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<PAGE> 1
TRANSITIONAL COMPENSATION AGREEMENT
AGREEMENT by and between Amcore Financial, Inc., a Nevada corporation (the
"Company"), and (the "Executive"), dated as of the
1st day of June, 1996. This Agreement amends, restates and
supersedes any and all prior agreements between the Company and the Executive
relating to the subject matter of this Agreement, including (but not by way of
limitation) a letter agreement dated March 5, 1993, providing for severance
compensation in certain specified circumstances.
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:
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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 September 25, 1998; provided,
however, that on September 25, 1996, 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) days prior to the Renewal Date the Company
shall
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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 the then outstanding
voting
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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
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Company, or (iii) the sale or other disposition of all or substantially all of
the assets of the Company.
3. Effective Period. This Agreement shall be in effect for the period
commencing on the Effective Date and ending on the first 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.)
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(b) Cause. The Company may terminate the Executive's employment
during the Effective Period for Cause and may suspend the Executive from his
duties with full pay and benefits if the Executive is indicted for a felony
involving moral turpitude; provided, however, that the Executive will repay all
amounts paid by the Company from the date of such suspension if the Executive
is convicted of such felony. 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 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
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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 more than twenty (20) miles from that in effect
immediately prior to the Effective Date;
(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
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<PAGE> 8
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.
(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:
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<PAGE> 9
(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 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 (1) the
Executive's then current monthly base salary by (2) the number of months
determined in accordance with Exhibit A attached to this Agreement, which
Exhibit A describes a method of determining a specific number of months on the
basis of the Executive's then current (a) completed years of service with the
Company and its
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<PAGE> 10
affiliates, (b) annual base salary and (c) age; 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 continuation to be received by
the Executive, upon such termination of employment, under any other severance
plan, policy or arrangement of the Company.
(ii) After the Date of Termination, for twenty-four (24) months
or for the number of months determined pursuant to part (2) of Section
5(a)(i)(B), above, whichever period is shorter, or for 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) After the Date of Termination, for twenty-four (24) months
or for the number of months determined pursuant to part (2) of Section
5(a)(i)(B), above, whichever period is shorter, or for 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
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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 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
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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 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
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<PAGE> 13
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 of the Code.
In the event that the Accounting Firm is serving as accountant or auditor for
the individual, entity or
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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.
8. Full Settlement; Resolution of Disputes
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(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
upon receipt of proper invoices, to the fullest extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest 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; provided,
however, that in the event that it is finally judicially determined that the
Executive was terminated for Cause, then the Executive shall be obligated to
repay to the Company the full amount of all such legal fees and expenses paid
for the Executive by the Company in connection with that contest, plus interest
at the rate described above.
(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,
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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 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
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constitute a basis for deferring or withholding any amounts otherwise payable
to the Executive under this Agreement.
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
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<PAGE> 18
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:
If to the Executive:
If to the Company:
Amcore Financial, Inc.
501 Seventh Street
P.O. Box 1537
Rockford, Illinois 61110-0037
Attention: Mr. 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.
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(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 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, including (but not by way of limitation) a letter agreement dated March
5, 1993 providing for severance compensation in certain specified
circumstances.
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.
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AMCORE FINANCIAL, INC.
By: /s/ James S. Waddell
-------------------------------------------------------
James S. Waddell
Its Executive Vice President & Chief Administrative Officer
-------------------------------------------------------
------------------------------------------
("Executive")
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Exhibit A
1. The number of months to be used in calculating the Severance Amount
under Section 5(a)(i)(B) of the Agreement to which this Exhibit A is attached
is to be determined by multiplying (a) the number of months determined under
paragraph 2, below, by (b) the Applicable Percentage determined under paragraph
3, below.
2. The following matrix shall be used to determine a specific number of
months on the basis of the Executive's completed years of service with the
Company and its affiliates ("Years of Service") and the Executive's annual base
salary ("Base Salary"):
<TABLE>
<CAPTION>
Years of Service
Base Salary 0-2 3-5 6-10 11-20 21-30 Over 30
- ----------- --- --- ---- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C>
$100,000 and Over 14 16 18 20 24 28
$75,000 to $99,999 10 12 14 16 20 24
$50,000 to $74,999 6 8 10 12 16 20
$30,000 to $49,999 3 4 6 8 10 12
Less than $30,000 2 3 4 5 6 8
Number of Months
</TABLE>
3. The Applicable Percentage shall be determined according to the
following chart on the basis of Executive's age on the Date of Termination,
with that age being determined as of the Executive's most recent birth
anniversary date preceding the Date of Termination:
<TABLE>
<CAPTION>
Age at Date of Termination Applicable Percentage
- -------------------------- ---------------------
<S> <C>
Under 40 Years 100%
40 to 54 Years 125%
55 to 59 Years 150%
60 Years and Over 200%
</TABLE>
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TRANSITIONAL COMPENSATION AGREEMENT
AGREEMENT by and between Amcore Financial, Inc., a Nevada corporation
(the "Company"), and (the "Executive"), dated as of the
1st day of June, 1996. 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:
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<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 September 25, 1998; provided,
however, that on September 25, 1996, 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) days prior to the Renewal Date
the Company shall
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<PAGE> 3
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 the then outstanding
voting
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<PAGE> 4
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
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<PAGE> 5
Company, or (iii) the sale or other disposition of all or substantially all of
the assets of the Company.
3. Effective Period. This Agreement shall be in effect for the period
commencing on the Effective Date and ending on the first 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.)
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<PAGE> 6
(b) Cause. The Company may terminate the Executive's employment
during the Effective Period for Cause and may suspend the Executive from his
duties with full pay and benefits if the Executive is indicted for a felony
involving moral turpitude; provided, however, that the Executive will repay all
amounts paid by the Company from the date of such suspension if the Executive
is convicted of such felony. 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 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
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<PAGE> 7
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 more than twenty (20) miles from that in effect
immediately prior to the Effective Date;
(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
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<PAGE> 8
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.
(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:
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<PAGE> 9
(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 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 (1) the Executive's
then current monthly base salary by (2) the number of months determined in
accordance with Exhibit A attached to this Agreement, which Exhibit A describes
a method of determining a specific number of months on the basis of the
Executive's then current (a) completed years of service with the Company and
its
89
<PAGE> 10
affiliates, (b) annual base salary and (c) age; 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 continuation to be received by
the Executive, upon such termination of employment, under any other severance
plan, policy or arrangement of the Company.
(ii) After the Date of Termination, for twenty-four (24) months
or for the number of months determined pursuant to part (2) of Section
5(a)(i)(B), above, whichever period is shorter, or for 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) After the Date of Termination, for twenty-four (24) months
or for the number of months determined pursuant to part (2) of Section
5(a)(i)(B), above, whichever period is shorter, or for 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
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<PAGE> 11
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 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
91
<PAGE> 12
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 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
92
<PAGE> 13
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
of the Code. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or
93
<PAGE> 14
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.
8. Full Settlement; Resolution of Disputes
94
<PAGE> 15
(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
upon receipt of proper invoices, to the fullest extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest 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; provided,
however, that in the event that it is finally judicially determined that the
Executive was terminated for Cause, then the Executive shall be obligated to
repay to the Company the full amount of all such legal fees and expenses paid
for the Executive by the Company in connection with that contest, plus interest
at the rate described above.
(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,
95
<PAGE> 16
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 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
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<PAGE> 17
constitute a basis for deferring or withholding any amounts otherwise payable
to the Executive under this Agreement.
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
97
<PAGE> 18
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:
If to the Executive:
If to the Company:
Amcore Financial, Inc.
501 Seventh Street
P.O. Box 1537
Rockford, Illinois 61110-0037
Attention: Mr. 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.
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<PAGE> 19
(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 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.
99
<PAGE> 20
AMCORE FINANCIAL, INC.
By: /s/ James S. Waddell
-------------------------------------------------------
James S. Waddell
Its Executive Vice President & Chief Administrative Officer
-------------------------------------------------------
------------------------------------------
("Executive")
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<PAGE> 21
Exhibit A
1. The number of months to be used in calculating the Severance Amount
under Section 5(a)(i)(B) of the Agreement to which this Exhibit A is attached
is to be determined by multiplying (a) the number of months determined under
paragraph 2, below, by (b) the Applicable Percentage determined under paragraph
3, below.
2. The following matrix shall be used to determine a specific number
of months on the basis of the Executive's completed years of service with the
Company and its affiliates ("Years of Service") and the Executive's annual base
salary ("Base Salary"):
<TABLE>
<CAPTION>
Years of Service
Base Salary 0-2 3-5 6-10 11-20 21-30 Over 30
- ----------- --- --- ---- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C>
$100,000 and Over 14 16 18 20 24 28
$75,000 to $99,999 10 12 14 16 20 24
$50,000 to $74,999 6 8 10 12 16 20
$30,000 to $49,999 3 4 6 8 10 12
Less than $30,000 2 3 4 5 6 8
Number of Months
</TABLE>
3. The Applicable Percentage shall be determined according to the
following chart on the basis of Executive's age on the Date of Termination,
with that age being determined as of the Executive's most recent birth
anniversary date preceding the Date of Termination:
<TABLE>
<CAPTION>
Age at Date of Termination Applicable Percentage
- -------------------------- ---------------------
<S> <C>
Under 40 Years 100%
40 to 54 Years 125%
55 to 59 Years 150%
60 Years and Over 200%
</TABLE>
101
<PAGE> 1
AMCORE Financial, Inc. and Subsidiaries
EXHIBIT 11
Statement Re Computation of Per Share Earnings
<TABLE>
<CAPTION>
Quarter Ended June 30, Year-to-Date Ended June 30,
(in 000's) 1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE:
EARNINGS
Income applicable to common stock $6,457 $1,140 $12,087 $5,757
SHARES
Weighted average number of common shares 14,207 14,069 14,199 14,059
Dilutive effect of outstanding options (as
determined by application of the treasury
stock method) 185 174 201 182
-------- -------- -------- --------
Weighted average number of shares, as adjusted 14,392 14,243 14,400 14,241
======== ======== ======== ========
PRIMARY EARNINGS PER SHARE* $0.449 $0.080 $0.839 $0.404
======== ======== ======== ========
FULLY DILUTED EARNINGS PER SHARE:
EARNINGS
Income applicable to common stock $6,457 $1,140 $12,087 $5,757
SHARES
Weighted average number of shares, as adjusted
per primary computation above 14,392 14,243 14,400 14,241
Additional dilutive effect of outstanding options
(as determined by application of the treasury
stock method) - - - -
-------- -------- -------- --------
Weighted average number of shares, as adjusted 14,392 14,243 14,400 14,241
======== ======== ======== ========
FULLY DILUTED EARNINGS PER SHARE* $0.449 $0.080 $0.839 $0.404
======== ======== ======== ========
</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%.
102
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 112,456
<INT-BEARING-DEPOSITS> 450
<FED-FUNDS-SOLD> 2,971
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,153,189
<INVESTMENTS-CARRYING> 13,449
<INVESTMENTS-MARKET> 13,481
<LOANS> 1,365,535
<ALLOWANCE> 13,802
<TOTAL-ASSETS> 2,756,231
<DEPOSITS> 1,824,506
<SHORT-TERM> 525,080
<LIABILITIES-OTHER> 34,038
<LONG-TERM> 174,227
<COMMON> 4,976
0
0
<OTHER-SE> 193,404
<TOTAL-LIABILITIES-AND-EQUITY> 2,756,231
<INTEREST-LOAN> 29,287
<INTEREST-INVEST> 18,436
<INTEREST-OTHER> 782
<INTEREST-TOTAL> 48,505
<INTEREST-DEPOSIT> 17,971
<INTEREST-EXPENSE> 26,979
<INTEREST-INCOME-NET> 21,526
<LOAN-LOSSES> 967
<SECURITIES-GAINS> 255
<EXPENSE-OTHER> 20,673
<INCOME-PRETAX> 8,892
<INCOME-PRE-EXTRAORDINARY> 6,457
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,457
<EPS-PRIMARY> .45
<EPS-DILUTED> .45
<YIELD-ACTUAL> 3.70
<LOANS-NON> 12,465
<LOANS-PAST> 1,873
<LOANS-TROUBLED> 1,726
<LOANS-PROBLEM> 18,870
<ALLOWANCE-OPEN> 13,255
<CHARGE-OFFS> 887
<RECOVERIES> 467
<ALLOWANCE-CLOSE> 13,802
<ALLOWANCE-DOMESTIC> 10,007
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 3,795
</TABLE>
<PAGE> 1
[AMCORE FINANCIAL, INC. NEWS RELEASE]
Date: July 22, 1996
Contact: Ben Rubendall
815-961-7164
AMCORE REPORTS RECORD EARNINGS
UP 36.4 PERCENT OVER NORMALIZED 1995 QUARTERLY EARNINGS
ROCKFORD, ILL. - AMCORE Financial, Inc. posted record earnings of $6.5
million, or 45 cents per share for the quarter ended June 30, 1996, up 36.4
percent from the 1995 quarter, excluding special charges in the 1995 quarter.
Return on equity was 12.76 percent, up from 9.73 percent, and return on
assets was .96 percent, up from .83 percent, from the second quarter of 1995,
excluding the special charges.
"We are pleased with our progress toward the intermediate goal of a 15
percent return on equity," said Robert J. Meuleman, president and chief
executive officer of AMCORE Financial, Inc.
"Our results reflect the success of programs we have implemented to
generate loan volume and new strategies in the marketing of our diversified
financial services products. Also contributing to the record quarter were a
combination of favorable market factors, business growth, and the first results
of an on-going, corporate wide revenue-enhancement, cost-containment program,"
Meuleman said.
Earnings for the second quarter of 1995 would have been $4.6 million, or
33 cents per share, except for the impact of special charges totaling $3.5
million, which lowered second quarter 1995 earnings by 25 cents per share.
Those charges were associated with merger costs and the adoption of a new
accounting rule.
Net interest income for the quarter was $21.5 million, up 10.6 percent,
from $19.5 million in the same quarter of 1995. Average loans grew 9.5 percent
to $1.3 billion on a year to year basis. "The growth in our loan portfolio
reflects both the strength of the northern Illinois economy and success in
marketing efforts, particularly with our home equity-based loan programs," said
Meuleman.
While net interest income was up, the net interest margin fell 45 basis
points to 3.70 percent, down from 4.15 percent in the 1995 quarter. "The
decline in the margin was primarily due to an investment leveraging program
begun in mid-1995. We are making better use of capital through this program,
which is improving our total interest income and return on equity," Meuleman
said, adding that the return on assets improved, but was held down somewhat by
the impact of the leveraging program.
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<PAGE> 2
Fee-based income for the quarter was $8.8 million up 10.4 percent, or
$821,000, excluding security gains. Much of the increase was due to a $562,000,
or 18.9 percent increase in trust revenues. The higher trust revenues are due
to the favorable investment performance of trust assets and increases in new
accounts.
Insurance revenues totaled $371,000 an increase of $227,000 over the 1995
quarter. "We remain confident in the future of our start-up insurance
operation, and expect increasing revenues as we develop new product lines and
offer insurance services at more of our banking locations," Meuleman said.
Total operating expenses for the quarter declined 1.8 percent or $372,000
from the 1995 quarter, exclusive of special charges, primarily due to a
reduction in FDIC insurance premiums. The efficiency ratio, which measures
operating expenses as a percentage of total revenues, was 63.6 percent, down
from 71.3 percent in the second quarter of 1995, excluding the special charges.
"We are continuing to expand our customer service capabilities," Meuleman
said. "During the quarter we opened our ninth in-store, supermarket branch and
announced plans to open a tenth branch later this year. We have also
implemented a computer system that allows tellers to more effectively recommend
products customers are likely to need."
AMCORE Financial, Inc. is a northern Illinois-based bank holding company
with assets of approximately $2.76 billion. Its holdings include eight
subsidiary banks operating in 38 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".
AMCORE Financial may be reached on the Internet at: HTTP://www.amcore.com/
###
105
<PAGE> 3
AMCORE FINANCIAL, INC.
CONSOLIDATED KEY FINANCIAL DATA SUMMARY
<TABLE>
<CAPTION>
TRAILING TWELVE MONTHS
(IN THOUSANDS, EXCEPT SHARE DATA) QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, ENDED JUNE 30,
----------------------------- --------------------------------- -------------------------
PERCENT PERCENT PERCENT
FINANCIAL HIGHLIGHTS 1996 1995 CHANGE 1996 1995 CHANGE 1996 1995 CHANGE
- -------------------------------------------------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues, including security gains. $30,532 $27,828 9.7% $60,082 $55,209 8.8% $118,292 $110,658 6.9%
Operating expenses..................... 20,673 26,637 -22.4% 41,661 47,309 -11.9% 81,791 87,289 -6.3%
Net income............................. 6,457 1,140 466.4% 12,087 5,757 110.0% 24,601 16,785 46.6%
Net income per share................... 0.45 0.08 462.5% 0.85 0.41 107.3% 1.73 1.19 45.4%
Cash dividends per share............... 0.16 0.15 6.7% 0.32 0.30 6.7% 0.62 0.59 5.1%
Book value per share................... 13.95 13.81 1.0%
QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------ ---------------------------------
PERCENT PERCENT
KEY FINANCIAL RATIOS (A) 1996 1995 CHANGE 1996 1995 CHANGE
- --------------------------------------------------------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Return on average assets............... 0.96% 0.83% 16.2% 0.94% 0.85% 10.6%
Return on average equity............... 12.76% 9.73% 31.2% 11.75% 9.89% 18.8%
Net interest margin (FTE).............. 3.70% 4.15% -10.8% 3.77% 4.21% -10.5%
Net operating expense/average assets... 1.74% 2.29% -23.9% 1.85% 2.33% -20.7%
Average total equity to average assets. 7.56% 8.55% -11.6% 8.02% 8.59% -6.7%
Other income/net revenues (1).......... 28.9% 28.9% -0.1% 28.7% 28.4% 1.2%
Efficiency Ratio (FTE)................. 63.6% 71.3% -10.8% 65.4% 71.2% -8.2%
(A) All 1995 ratios have been adjusted to exclude special charges recorded in second quarter.
INCOME STATEMENT
- ------------------------------------------------------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest income............................ $48,505 $40,371 20.1% $93,142 $78,631 18.5%
Interest expense........................... 26,979 20,900 29.1% 51,020 39,825 28.1%
------------------------------- ------------------------------
Net interest income...................... 21,526 19,471 10.6% 42,122 39,806 8.5%
Provision for loan losses.................. 967 871 11.0% 1,856 1,600 16.0%
Other Income:
Trust and asset management income........ 3,539 2,977 18.9% 6,781 5,827 16.4%
Service charges on deposits.............. 1,720 1,695 1.5% 3,400 3,427 -0.8%
Mortgage revenues........................ 968 1,002 -3.4% 1,701 1,563 8.8%
Collection fee income.................... 564 469 20.3% 1,146 922 24.3%
Other.................................... 1,960 1,787 9.7% 3,913 3,618 8.2%
------------------------------- ------------------------------
Total other income.................... 8,751 7,930 10.4% 16,941 15,357 10.3%
Net security gains......................... 255 427 -40.3% 1,019 1,046 -2.6%
Operating expenses:
Personnel costs.......................... 11,799 12,140 -2.8% 23,725 23,465 1.1%
Net occupancy expense.................... 1,271 2,734 -53.5% 2,656 4,100 -35.2%
Equipment expense........................ 1,852 2,802 -33.9% 3,731 4,440 -16.0%
Professional fees........................ 595 1,020 -41.7% 1,203 1,587 -24.2%
Amortization of intangible assets........ 511 2,320 -78.0% 1,023 2,962 -65.5%
Insurance expense........................ 204 1,163 -82.5% 401 2,297 -82.5%
Other.................................... 4,441 4,458 -0.4% 8,922 8,458 5.5%
------------------------------- ------------------------------
Total operating expenses............. 20,673 26,637 -22.4% 41,661 47,309 -11.9%
------------------------------- ------------------------------
Income before income taxes................. 8,892 320 N/M 16,565 6,300 162.9%
Income taxes............................... 2,435 (820) N/M 4,478 543 N/M
------------------------------- ------------------------------
Net income............................ $ 6,457 $ 1,140 466.4% $12,087 $ 5,757 110.0%
=============================== ==============================
Average shares outstanding (000)........... 14,207 14,069 1.0% 14,199 14,059 1.0%
Ending shares outstanding (000)............ 14,217 14,087 0.9% 14,217 14,087 0.9%
N/M = Not meaningful
</TABLE>
106
<PAGE> 4
AMCORE FINANCIAL, INC.
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30,
(in thousands) 1996 1995
- ------------------------------------------------------- -----------------------------------------------
ENDING AVERAGE YIELD/ AVERAGE YIELD/
BALANCE BALANCE RATE BALANCE RATE
- ------------------------------------------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Taxable securities...................... $886,427 $903,472 6.53% $527,309 7.17%
Tax-exempt securities (FTE)............. 270,168 260,318 8.21% 260,362 7.06%
Other earning assets.................... 3,421 5,462 5.29% 4,849 6.93%
Mortgage loans held for sale............ 10,043 10,335 8.11% 10,392 7.69%
Loans, net of unearned income (FTE)..... 1,365,535 1,330,409 8.73% 1,214,870 8.80%
----------- ---------------------------------------------
Total Earning Assets................. $2,535,594 $2,509,996 7.95% $2,017,782 8.25%
Intangible assets.................... 13,273 13,615 16,682
Other non-earning assets............. 207,364 168,906 187,788
----------- ---------------------------------------------
TOTAL ASSETS......................... $2,756,231 $2,692,517 $2,222,252
========== ============================================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest bearing deposits............... $1,571,291 $1,579,668 4.58% $1,509,785 4.59%
Non-interest bearing deposits........... 253,215 236,711 255,154
----------- ---------------------------------------------
Total Deposits....................... $1,824,506 $1,816,379 $1,764,939
----------- ---------------------------------------------
Short-term borrowings................... 525,080 464,984 5.38% 215,195 5.84%
Long-term borrowings.................... 174,227 174,937 6.09% 22,915 7.25%
Other................................... 6,036 5,924 9.10% 5,067 6.17%
----------- ---------------------------------------------
Total Interest Bearing Liabilities... 2,276,634 2,225,513 4.88% 1,752,962 4.78%
Other liabilities.................... 28,002 26,810 24,225
----------- ---------------------------------------------
Total Liabilities.................... $2,557,851 $2,489,034 $2,032,341
Stockholders' Equity................. 198,380 203,483 189,911
----------- ---------------------------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY................. $2,756,231 $2,692,517 $2,222,252
========== ============================================
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
(in thousands) 1996 1995
- ------------------------------------------------------------------------------------------------
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE RATE BALANCE RATE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Taxable securities........................ $825,275 6.48% $521,557 7.19%
Tax-exempt securities (FTE)............... 245,104 8.11% 258,012 7.12%
Other earning assets...................... 9,656 5.49% 7,273 6.26%
Mortgage loans held for sale.............. 10,399 7.55% 8,718 8.08%
Loans, net of unearned income (FTE)....... 1,311,055 8.75% 1,197,232 8.71%
--------------------------------------------
Total Earning Assets................... $2,401,489 7.97% $1,992,792 8.18%
Intangible assets...................... 13,877 17,322
Other non-earning assets............... 164,856 177,730
--------------------------------------------
TOTAL ASSETS........................... $2,580,222 $2,187,844
============================================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest bearing deposits................. $1,552,956 4.56% $1,491,459 4.38%
Non-interest bearing deposits............. 235,372 250,744
--------------------------------------------
Total Deposits......................... $1,788,328 $1,742,203
--------------------------------------------
Short-term borrowings..................... 401,479 5.37% 207,678 6.20%
Long-term borrowings...................... 151,670 6.38% 23,215 7.61%
Other..................................... 5,859 8.34% 4,975 8.27%
--------------------------------------------
Total Interest Bearing Liabilities..... 2,111,964 4.86% 1,727,327 4.65%
Other liabilities...................... 26,008 21,821
--------------------------------------------
Total Liabilities...................... $2,373,344 $1,999,892
Stockholders' Equity................... 206,878 187,952
--------------------------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY................... $2,580,222 $2,187,844
============================================
</TABLE>
<TABLE>
<CAPTION>
-------------------------------- ---------------------------------
QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
-------------------------------- ---------------------------------
PERCENT PERCENT
ASSET QUALITY (IN THOUSANDS) 1996 1995 CHANGE 1996 1995 CHANGE
- ----------------------------------------------------------------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ending allowance for loan losses.............. $13,802 $13,645 1.2%
Net charge-offs............................... 420 1,004 -58.2% $1,115 $1,258 -11.4%
Net charge-offs to average loans (2).......... 0.13% 0.33% -60.6% 0.17% 0.21% -19.0%
Non-performing assets:
Nonaccrual................................. $12,465 $8,185 52.3%
Restructured............................... 1,726 2,661 -35.1%
-----------------------------------
Non-performing loans.................... 14,191 10,846 30.8%
Other real estate owned (OREO)............. 766 2,550 -70.0%
-----------------------------------
Total non-performing assets............. $14,957 $13,396 11.7%
===================================
KEY ASSET QUALITY RATIOS
- ----------------------------------------------
Allowance to ending loans.................. 1.01% 1.11% -8.9%
Allowance to non-performing loans.......... 97.3% 125.8% -22.7%
Non-performing loans to loans.............. 1.04% 0.88% 18.1%
Non-performing assets to loans & OREO...... 1.09% 1.08% 1.4%
CAPITAL ADEQUACY
- -----------------------------------------------------------------------------------
Total risk-based capital................... 13.29% 13.04% 1.9%
Tier 1 risk-based capital.................. 12.43% 12.12% 2.6%
Leverage ratio............................. 7.42% 8.11% -8.5%
</TABLE>
FOOTNOTES
- ---------
(1) Excluding net security gains.
(2) On an annualized basis.
107
