<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 8, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMCORE FINANCIAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
NEVADA 6022 36-3183870
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
501 SEVENTH STREET
ROCKFORD, ILLINOIS 61104
(815) 968-2241
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JOHN R. HECHT
SENIOR VICE PRESIDENT
AMCORE FINANCIAL, INC.
501 SEVENTH STREET
ROCKFORD, ILLINOIS 61104
(815) 968-2241
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
PETER C. KRUPP
WILLIAM R. KUNKEL JOHN P.C. DUNCAN
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS) JONES, DAY, REAVIS & POGUE
333 WEST WACKER DRIVE 77 WEST WACKER DRIVE
CHICAGO, ILLINOIS 60606 CHICAGO, ILLINOIS 60601
(312) 407-0700 (312) 782-3939
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
TITLE OF EACH PROPOSED MAXIMUM PROPOSED MAXIMUM
CLASS OF SECURITIES AMOUNT OFFERING PRICE AGGREGATE AMOUNT OF
BEING REGISTERED BEING REGISTERED (1) PER UNIT OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
Common Stock ($0.33
par value)........... 1,884,284 shares (2) $75.35 (2) $18,830,342 (2) $5,707(3)
- ---------------------------------------------------------------------------------------------------------------------
Share Purchase
Rights............... 1,884,284 (4) (4) (4)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee. The
amount being registered represents the number of shares of common stock of
AMCORE Financial, Inc. ("AMCORE") and associated share purchase rights that
will be issued in connection with the conversion and exchange of all
outstanding shares of common stock of First National Bancorp, Inc. ("FNB"),
subject to adjustment pursuant to the Merger Agreement, as described herein.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f)(2) based upon the book value per share of FNB Common Stock on
November 30, 1996 ($75.35) and the 249,905 shares of FNB Common Stock which
are to be received by the Registrant or cancelled in the transaction
discussed herein.
(3) In accordance with Rule 457(b), the registration fee paid herewith has been
reduced by $3,766 which is the amount of the fee previously paid in
connection with the Registrant's Schedule 14A filed with the Commission on
December 27, 1996.
(4) The value attributable to the share purchase rights is reflected in the
market price of the AMCORE Common Stock to which the Rights are attached.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
FIRST NATIONAL BANCORP, INC.
1625 TENTH STREET
MONROE, WISCONSIN 53566
-------------------------
NOTICE OF SPECIAL MEETING OF FIRST NATIONAL BANCORP, INC. STOCKHOLDERS
FEBRUARY 10, 1997
-------------------------
TO THE STOCKHOLDERS OF FIRST NATIONAL BANCORP, INC.:
YOU ARE HEREBY NOTIFIED of and invited to attend a special meeting
("Special Meeting") of stockholders of First National Bancorp, Inc., a Wisconsin
corporation ("FNB"), to be held at the principal offices of FNB at 1625 Tenth
Street, Monroe, Wisconsin 53566, on February 10, 1997, at 4:00 p.m., local time,
for the purpose of considering and voting upon the following:
(1) A proposal ("Proposal") to approve and adopt the Agreement and Plan of
Merger, dated as of October 30, 1996 (the "Merger Agreement"), among AMCORE
Financial, Inc., a Nevada corporation ("AMCORE"), FNB Acquisition, Inc., a
Wisconsin corporation and a wholly-owned subsidiary of AMCORE ("Newco"), and
FNB and the transactions contemplated thereby, pursuant to which, among
other things, (i) Newco will merge with and into FNB, with FNB being the
surviving corporation in the merger (the "Merger"), and (ii) each
outstanding share of Common Stock, par value $1.00 per share, of FNB ("FNB
Common Stock") (other than shares of FNB Common Stock held by FNB as
treasury stock immediately prior to the Effective Time (as defined in the
Merger Agreement) and shares of FNB Common Stock held by AMCORE, Newco, or
any direct or indirect subsidiary of AMCORE, which shares will be cancelled,
and other than shares of FNB Common Stock held by stockholders of FNB who
have properly exercised their dissenters' rights under Wisconsin law) will
be cancelled and converted into the right to receive 7.54 shares of common
stock, par value $0.33 per share, of AMCORE, subject to certain adjustments,
all as more fully described in the accompanying FNB Proxy Statement and
AMCORE Prospectus ("Proxy Statement/Prospectus").
(2) Such other business as may properly come before the Special Meeting or any
postponements or adjournments thereof.
A copy of the Merger Agreement is attached as Annex II to the Proxy
Statement/Prospectus that accompanies this Notice of Special Meeting of First
National Bancorp, Inc. Stockholders.
Stockholders of FNB ("FNB Stockholders") have the statutory right to assert
dissenters' rights under Sections 180.1301 to 180.1331 of the Wisconsin Business
Corporation Law (the "WBCL"). In order to perfect this right, a stockholder must
not vote in favor of the Merger (this may be done by marking the proxy either to
vote against the Merger or to abstain from voting thereon or by not voting at
all) and must take such other action as is required by such statute, including
delivery of, prior to the vote upon the Merger, written notice of intent to
demand the "fair value" of such stockholder's shares of FNB Common Stock.
Sections 180.1301 et seq. of the Wisconsin Business Corporation Law are attached
to the accompanying Proxy Statement/Prospectus as Annex III.
FNB'S BOARD OF DIRECTORS HAS DETERMINED THAT THE TERMS OF THE MERGER ARE
FAIR TO, AND IN THE BEST INTERESTS OF, FNB AND ITS STOCKHOLDERS, HAS APPROVED
AND ADOPTED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, AND
RECOMMENDS THAT THE FNB STOCKHOLDERS VOTE "FOR" THE APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
The Board of Directors of FNB has fixed the close of business on January
10, 1997, as the record date (the "Record Date") for determination of the
stockholders entitled to receive notice of, and to vote at, the Special Meeting.
The Special Meeting may be postponed or adjourned from time to time without any
notice other than by announcement at the Special Meeting of any postponements or
adjournments thereof, and any and all business for which notice is hereby given
may be transacted at such postponed or adjourned Special Meeting.
(continued on next page)
<PAGE> 3
The affirmative vote of the holders of a majority of the shares of FNB
Common Stock outstanding on the Record Date is required to approve the above
proposal. Please complete, date, sign and promptly return the enclosed proxy
card, which is solicited by the Board of Directors of FNB, in the enclosed
envelope, whether or not you expect to attend the Special Meeting. The giving of
such proxy does not affect your right to vote in person in the event you attend
the Special Meeting. You may revoke the proxy at any time prior to its exercise
by filing a written notice of revocation to FNB, delivering to FNB a duly
executed proxy bearing a later date, or by voting in person at the Special
Meeting. Failure to return a properly executed proxy card, or to vote at the
Special Meeting, will have the same effect, in most cases, as a vote against the
Merger.
January 10, 1997 By Order of the Board of Directors
Thomas J. Wilkinson
President and Chief Executive Officer
IMPORTANT
PLEASE DO NOT SEND YOUR COMMON STOCK CERTIFICATES AT THIS TIME. IF THE MERGER IS
CONSUMMATED, YOU WILL BE SENT INSTRUCTIONS REGARDING THE SURRENDER OF YOUR STOCK
CERTIFICATES
<PAGE> 4
LOGO LOGO
AMCORE FINANCIAL, INC.
PROSPECTUS
FIRST NATIONAL BANCORP, INC.
PROXY STATEMENT
COMMON STOCK
This Proxy Statement/Prospectus ("Proxy Statement/Prospectus") constitutes
a prospectus of AMCORE Financial, Inc., a Nevada corporation ("AMCORE"), with
respect to shares of common stock of AMCORE to be issued pursuant to an
Agreement and Plan of Merger, dated as of October 30, 1996 (the "Merger
Agreement"), providing for the merger (the "Merger") of FNB Acquisition, Inc., a
Wisconsin corporation and a wholly-owned subsidiary of AMCORE ("Newco"), with
and into First National Bancorp, Inc., a Wisconsin corporation ("FNB"). The
Merger Agreement is set forth in Annex II and incorporated herein by reference.
This Proxy Statement/Prospectus also serves as a Proxy Statement of FNB for
the special meeting of stockholders of FNB to be held on February 10, 1997, and
any adjournments or postponements thereof (the "Special Meeting"). At the
Special Meeting, holders of shares of common stock of FNB will consider and vote
upon the approval and adoption of the Merger Agreement.
Under the Merger Agreement, each outstanding share of common stock, $1.00
par value per share, of FNB ("FNB Common Stock"), other than shares held by any
stockholder of FNB ("FNB Stockholder") who properly exercises and preserves his
or her statutory dissenters' rights, will be converted into the right to receive
7.54 shares of common stock, $0.33 par value per share, of AMCORE, and
associated share purchase rights (collectively referred to herein as "AMCORE
Common Stock"), subject to certain potential adjustments relating to changes in
the market price of AMCORE Common Stock and certain estimated environmental
remediation costs, if any, relating to certain real properties. See "THE MERGER
AGREEMENT -- Conversion of Shares and Exchange Ratio."
AMCORE Common Stock is quoted on the Nasdaq National Market (the "NASDAQ").
The composite closing price of AMCORE Common Stock on the NASDAQ on January 3,
1997 was $25.75 per share.
All information herein with respect to AMCORE and Newco has been furnished
by AMCORE and all information with respect to FNB and its subsidiaries has been
furnished by FNB.
This Proxy Statement/Prospectus does not cover any resale of the securities
to be received by stockholders of FNB upon consummation of the Merger and no
person is authorized to make any use of this Proxy Statement/Prospectus in
connection with any such resale.
Stockholders of record at the close of business on the record date, January
10, 1997 (the "Record Date"), are entitled to notice of, and to vote at, the
Special Meeting. As of the Record Date 242,455 shares of FNB Common Stock were
issued and outstanding and entitled to vote at the Special Meeting. Each share
of FNB Common Stock is entitled to one vote on each matter to be voted upon at
the Special Meeting.
A list of FNB Stockholders of record as of the Record Date will be
available at FNB's executive offices beginning two (2) business days after the
notice of the Special Meeting is given and continuing to the date of the Special
Meeting and will also be available at the Special Meeting. Such list may be
examined during ordinary business hours by any FNB Stockholders of record for
any purpose germane to the meeting.
FNB STOCKHOLDERS SHOULD NOT SEND THEIR FNB COMMON STOCK CERTIFICATES AT THIS
TIME. IF THE MERGER IS CONSUMMATED, FNB STOCKHOLDERS WILL BE SENT INSTRUCTIONS
REGARDING THE SURRENDER OF THEIR STOCK CERTIFICATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSIONER NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
THE SHARES OF AMCORE COMMON STOCK OFFERED HEREBY ARE NOT DEPOSITS OR SAVINGS
ACCOUNTS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
The date of this Proxy Statement/Prospectus is January 10, 1997.
<PAGE> 5
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS AND, IF GIVEN OR MADE, THE
INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY AMCORE, NEWCO OR FNB. THIS PROXY STATEMENT/PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO PURCHASE THE
SECURITIES OFFERED HEREBY, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION
TO OR FROM ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION
OF AN OFFER OR PROXY IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY
STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF THE SECURITIES TO WHICH THIS PROXY
STATEMENT/PROSPECTUS RELATES SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF AMCORE, NEWCO OR FNB
SINCE THE DATE OF THIS PROXY STATEMENT/PROSPECTUS.
AVAILABLE INFORMATION
AMCORE is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, or at its regional offices at Citicorp Center, Suite
1400, 500 West Madison Street, Chicago, Illinois 60661 and Seven World Trade
Center, 13th Floor, New York, New York 10048. Copies of such material may also
be obtained at prescribed rates by writing to the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
maintains a World Wide Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission and the address of such site is http://www.sec.gov.
AMCORE has filed a Registration Statement on Form S-4 (the "Registration
Statement") with the Commission under the Securities Act of 1933, as amended
(the "Securities Act") relating to the shares of AMCORE Common Stock to be
issued in connection with the Merger. This Proxy Statement/Prospectus does not
contain all the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. Such additional information may be obtained from the Commission's
principal office in Washington, D.C., as set forth above. Reference is hereby
made to the Registration Statement and related exhibits for further information
with respect to AMCORE, Newco, FNB and the securities offered hereby. Statements
contained in this Proxy Statement/Prospectus as to the contents of any document
are not necessarily complete, and in each instance reference is made to such
document itself, each such statement being qualified in all respects by such
reference.
FNB is not subject to the informational requirements of the Exchange Act
and does not file reports and other information with the Commission.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS RELATING TO AMCORE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS, EXCLUDING
EXHIBITS UNLESS SPECIFICALLY INCORPORATED BY REFERENCE HEREIN, ARE AVAILABLE
WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM A PROXY
STATEMENT/PROSPECTUS IS DELIVERED, UPON ORAL OR WRITTEN REQUEST TO MR. JOHN R.
HECHT, SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER, AMCORE FINANCIAL, INC.,
501 SEVENTH STREET, ROCKFORD, ILLINOIS 61104 (TELEPHONE: 815/968-2241). IN ORDER
TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
FEBRUARY 3, 1997.
The following documents filed by AMCORE with the Commission are
incorporated herein by reference:
1. AMCORE's Annual Report on Form 10-K and Form 11-K, for the year ended
December 31, 1995;
2. AMCORE's Quarterly Reports on Form 10-Q for each of the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996;
2
<PAGE> 6
3. AMCORE's Current Reports on Form 8-K dated February 28, 1996, October
17, 1996 and November 6, 1996; and
4. the description of AMCORE Common Stock (including the share purchase
rights) contained in AMCORE's registration statements filed pursuant to
Section 12 of the Exchange Act and any amendment or report filed for the
purpose of updating such description.
All reports and other documents filed by AMCORE pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof and prior
to the date of the Special Meeting will be deemed to be incorporated by
reference into this Proxy Statement/Prospectus and to be a part hereof from the
date of filing of such reports and other documents.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Proxy
Statement/Prospectus to the extent that a statement contained herein (or in any
subsequently filed document which also is incorporated by reference herein)
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed to constitute a part hereof except as so modified or
superseded.
FORWARD-LOOKING STATEMENTS
THIS PROXY STATEMENT/PROSPECTUS CONTAINS AND INCORPORATES BY REFERENCE
CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995 WITH RESPECT TO THE RESULTS OF OPERATIONS AND
BUSINESSES OF AMCORE AND FNB. THESE FORWARD-LOOKING STATEMENTS INVOLVE CERTAIN
RISKS AND UNCERTAINTIES. FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE CONTEMPLATED OR PROJECTED, FORECAST, ESTIMATED OR BUDGETED
IN SUCH FORWARD-LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE FOLLOWING
POSSIBILITIES: (i) HEIGHTENED COMPETITION, INCLUDING SPECIFICALLY THE
INTENSIFICATION OF PRICE COMPETITION, THE ENTRY OF NEW COMPETITORS AND THE
FORMATION OF NEW PRODUCTS BY NEW AND EXISTING COMPETITORS; (ii) ADVERSE STATE
AND FEDERAL LEGISLATION AND REGULATION; (iii) FAILURE TO OBTAIN NEW CUSTOMERS OR
RETAIN EXISTING CUSTOMERS; (iv) INABILITY TO CARRY OUT MARKETING AND/OR
EXPANSION PLANS; (v) LOSS OF KEY EXECUTIVES; (vi) CHANGES IN INTEREST RATES;
(vii) GENERAL ECONOMIC AND BUSINESS CONDITIONS WHICH ARE LESS FAVORABLE THAN
EXPECTED; (viii) UNANTICIPATED CHANGES IN INDUSTRY TRENDS; AND (ix) CHANGES IN
FEDERAL RESERVE BOARD MONETARY POLICIES. IN ADDITION, FACTORS THAT COULD CAUSE
ACTUAL RESULTS OF FNB (ASSUMING CONSUMMATION OF THE MERGER) TO DIFFER MATERIALLY
FROM THOSE CONTEMPLATED BY OR PROJECTED, FORECAST, ESTIMATED OR BUDGETED IN
FORWARD-LOOKING STATEMENTS RELATING TO THE RESULTS OF OPERATIONS AND BUSINESS OF
FNB FOLLOWING THE MERGER, INCLUDING (A) COST SAVINGS THAT WILL BE REALIZED FROM
THE MERGER (SEE "THE MERGER -- REASONS FOR THE MERGER; RECOMMENDATION OF THE
BOARD") AND (B) COSTS ASSOCIATED WITH THE MERGER (SEE "PRO FORMA COMBINING
FINANCIAL DATA"), INCLUDE, AMONG OTHERS, THE FOLLOWING POSSIBILITIES: (i) THE
EXPECTED COST SAVINGS TO BE REALIZED THROUGH COMBINING CERTAIN FUNCTIONS OF BOTH
AMCORE AND FNB CANNOT BE FULLY REALIZED BECAUSE THE CHANGES ARE NOT MADE OR
UNANTICIPATED OFFSETTING COSTS ARE INCURRED; AND (ii) COSTS OR DIFFICULTIES
RELATED TO THE INTEGRATION OF THE BUSINESSES OF AMCORE AND FNB ARE GREATER THAN
EXPECTED.
3
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
AVAILABLE INFORMATION................... 2
INCORPORATION OF CERTAIN INFORMATION BY
REFERENCE............................. 2
FORWARD-LOOKING STATEMENTS.............. 3
SUMMARY................................. 5
FNB SPECIAL MEETING..................... 16
General............................... 16
Date, Place and Time.................. 16
Matters to be Considered at the
Meeting............................ 16
Record Date; Vote Required............ 16
Solicitation, Revocation and Use
of Proxies......................... 17
Independent Public Accountants........ 17
Other Matters......................... 17
THE MERGER.............................. 17
Background of the Merger.............. 17
Reasons for the Merger; Recommendation
of the FNB Board................... 19
Opinion of FNB's Financial Advisor.... 21
Interests of Certain Persons in the
Merger............................. 24
Stockholder Voting Agreements......... 26
Management and Operations of FNB after
the Merger......................... 27
Regulatory Approval................... 27
Certain Federal Income Tax
Consequences....................... 27
Accounting Treatment of the Merger.... 28
Rights of Dissenting Stockholders..... 29
Resale of AMCORE Common Stock......... 30
THE MERGER AGREEMENT.................... 30
Terms................................. 30
Date of Merger........................ 31
Conversion of Shares and Exchange
Ratio.............................. 31
Certain Representations and
Warranties......................... 32
Conduct of Business Pending the
Merger............................. 33
Dividends............................. 34
Employee Benefits..................... 35
Conditions to the Merger.............. 35
Termination........................... 36
Termination Fees and Expenses......... 36
Amendment and Waiver.................. 37
COMPARISON OF STOCKHOLDERS' RIGHTS...... 37
General............................... 37
Merger, Consolidation and Sales of
Assets............................. 37
Preferred Stock....................... 39
Directors............................. 39
Dividends............................. 40
Amendments to the Charter............. 40
Amendments to the Bylaws.............. 40
Cumulative Voting..................... 40
Structure of Board of Directors....... 41
Removal of Directors.................. 41
<CAPTION>
PAGE
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<S> <C>
Rights of Dissenting Stockholders..... 41
Special Meetings of Stockholders...... 41
Action Without a Meeting.............. 42
Preemptive Rights..................... 42
Liquidation and Dissolution........... 42
Indemnification and Personal Liability
of Directors and Officers.......... 42
Share Purchase Rights................. 43
AMCORE FINANCIAL, INC................... 45
General............................... 45
FIRST NATIONAL BANCORP, INC............. 46
General............................... 46
Corporate Structure................... 46
Products.............................. 47
Competition........................... 47
Employees............................. 47
Properties............................ 47
Legal Proceedings..................... 48
Selected Financial Data............... 48
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 50
Market for and Dividends on FNB's
Common Equity and Related
Stockholder Matters................ 58
Additional Financial Data on
Operations and Financial
Condition.......................... 59
SUPERVISION AND REGULATION.............. 67
General............................... 67
Certain Transactions with
Affiliates......................... 67
Payment of Dividends.................. 67
Capital Adequacy...................... 67
The Interstate Banking and Community
Development Legislation............ 68
FDIC Insurance Assessments............ 69
FIRREA and FDICIA..................... 69
Principal Stockholders, Directors and
Officers........................... 70
OPINIONS................................ 71
EXPERTS................................. 71
PRO FORMA COMBINING FINANCIAL
STATEMENTS............................ 72
INDEX TO FIRST NATIONAL BANCORP, INC.
CONSOLIDATED FINANCIAL STATEMENTS..... 78
LIST OF ANNEXES
Annex I Opinion of FNB's Financial
Advisor
Annex II Agreement and Plan of Merger
Annex III Sections 180.1301 et seq. of the
Wisconsin Business Corporation
Law
</TABLE>
4
<PAGE> 8
SUMMARY
The following is a brief summary of certain information contained or
incorporated by reference elsewhere in this Proxy Statement/Prospectus. This
summary is not intended to be complete and is qualified in its entirety by
reference to the more detailed information contained elsewhere herein and in the
documents incorporated by reference herein. The Merger Agreement is set forth in
Annex II to this Proxy Statement/ Prospectus, and reference is made thereto for
a complete description of the terms of the Merger. FNB Stockholders are urged to
review carefully the entire Proxy Statement/Prospectus, each of the Annexes
hereto and the documents incorporated by reference herein. As used in this Proxy
Statement/Prospectus, the terms "AMCORE" and "FNB" refer to such corporations,
respectively, and, where the context requires, such corporations and their
respective subsidiaries.
GENERAL
FNB and AMCORE have entered into an Agreement and Plan of Merger, dated as
of October 30, 1996 (the "Merger Agreement"), among AMCORE, FNB Acquisition,
Inc., a Wisconsin corporation and a wholly-owned subsidiary of AMCORE ("Newco"),
and FNB, pursuant to which, among other things, (i) Newco will merge with and
into FNB, with FNB being the surviving corporation in the Merger, and (ii) each
outstanding share of common stock, par value $1.00 per share, of FNB ("FNB
Common Stock") (other than shares of FNB Common Stock held by FNB as treasury
stock immediately prior to the Effective Time (as defined below) and shares of
FNB Common Stock held by AMCORE, Newco or any direct or indirect subsidiary of
AMCORE, which shares will be cancelled, and other than shares of FNB Common
Stock held by FNB Stockholders who have properly exercised their dissenters'
rights under Wisconsin law) will be cancelled and converted into the right to
receive 7.54 shares of common stock (the "Exchange Ratio"), par value $0.33 per
share, of AMCORE, and associated share purchase rights (collectively referred to
herein as "AMCORE Common Stock," unless otherwise required by context), subject
to certain adjustments described below. See "THE MERGER AGREEMENT -- Conversion
of Shares and Exchange Ratio." Upon the consummation of the Merger, the rights
of AMCORE stockholders will be governed by Nevada law and the Restated Articles
of Incorporation and Bylaws of AMCORE.
The Merger Agreement provides for an adjustment of the fixed Exchange Ratio
in certain circumstances. One such circumstance would be in the event that the
average of the daily closing prices per share of AMCORE Common Stock as reported
on the NASDAQ during the 20-day trading period ending on the third trading day
prior to the date of the Special Meeting (the "AMCORE Average Price") (i) is
less than $18.00 and FNB notifies AMCORE of its intent to terminate the Merger
Agreement within 15 days following the date of the Special Meeting, and AMCORE
cancels such termination by electing to adjust the Exchange Ratio to equal a
number obtained by dividing (A) the amount equal to 135.72 less the
Environmental Reduction Amount (as hereinafter defined), if any, by (B) the
AMCORE Average Price or (ii) exceeds $23.00 and AMCORE notifies FNB of its
intent to terminate the Merger Agreement within 15 days following the date of
the Special Meeting, and FNB cancels such termination by electing to adjust the
Exchange Ratio to equal a number obtained by dividing (A) the amount equal to
173.42 less the Environmental Reduction Amount, if any, by (B) the AMCORE
Average Price. There can be no assurance that the closing price for AMCORE's
Common Stock on the Effective Date will be equal to the AMCORE Average Price.
See "THE MERGER AGREEMENT -- Termination." In addition, subject to certain
conditions, if AMCORE's good-faith estimate of environmental remediation costs
related to certain real properties held or previously held by FNB exceeds
$200,000, AMCORE may adjust the Exchange Ratio to equal a number equal to (i)
154.57 less an amount equal to (A) the amount of such estimate in excess of
$200,000 divided by (B) 249,905 (such difference is referred to herein as the
"Environmental Reduction Amount") divided by (ii) 20.5. See "THE MERGER
AGREEMENT -- Conversion of Shares and Exchange Ratio" and "-- Conduct of
Business Until the Merger."
The proposed Merger is conditioned upon, among other matters, the approval
of FNB Stockholders of the Merger.
5
<PAGE> 9
THE COMPANIES
AMCORE FINANCIAL, INC.
AMCORE is a multi-bank holding company incorporated under the laws of the
State of Nevada in 1982. AMCORE has five banks operating in 42 locations and
eight financial services companies. AMCORE's primary region of operations
includes the Illinois cities of Rockford, Elgin, Woodstock, Carpentersville,
Crystal Lake, Sterling, Dixon, Princeton, Aledo, Rochelle, Ashton, Gridley, Mt.
Morris, Mendota and Peru. At September 30, 1996, AMCORE and its subsidiaries had
total assets of $2.9 billion, total deposits of $1.9 billion and stockholders'
equity of $208 million. The principal executive offices of AMCORE are located at
501 Seventh Street, Rockford, Illinois 61104, and its telephone number is (815)
968-2241.
On October 3, 1996, AMCORE signed a letter of intent to acquire Country
Bank Shares Corporation ("CBSC") located in Mt. Horeb, Wisconsin. CBSC is a
four-bank holding company which in turn has entered into a merger agreement with
Belleville Bancshares Corporation located in Belleville, Wisconsin.
Additional information concerning AMCORE is included in the AMCORE reports
and documents incorporated by reference herein. See "INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE."
FIRST NATIONAL BANCORP, INC.
FNB is a one-bank holding company incorporated under the laws of Wisconsin
in 1983. Its headquarters are in Monroe, Wisconsin. FNB owns all of the
outstanding common stock of First National Bank and Trust (the "Bank"). The Bank
has five branch locations. Through its bank subsidiary, FNB offers transaction,
savings and investment accounts to their customers in addition to providing
commercial and consumer loan and trust services in southern Wisconsin and
northern Illinois communities. The primary region of FNB operations includes the
cities of Monroe, New Glarus, Belleville and Madison, Wisconsin. At September
30, 1996, FNB and its subsidiaries had total assets of $216.5 million, total
deposits of $193.1 million and stockholders' equity of $17.9 million. The
principal executive offices of FNB are located at 1625 10th Street, Monroe,
Wisconsin 53566, and its telephone number is (608) 328-5100. See "FIRST NATIONAL
BANCORP, INC."
THE MERGER
Subject to the satisfaction of the terms and conditions set forth in the
Merger Agreement, Newco will be merged with and into FNB. Upon consummation of
the Merger, Newco's corporate existence will terminate and FNB will continue as
the surviving corporation. As a result of the Merger, AMCORE will directly own
100% of the stock of the surviving corporation, FNB, and indirectly own all of
the issued and outstanding shares of common stock of the Bank. See "THE MERGER."
Subject to certain limitations and dissenters' rights provided by law and
certain adjustments set forth in the Merger Agreement which relate to changes in
the average market price for AMCORE Common Stock and certain potential
environmental remediation costs, simultaneously with the effectiveness of the
Merger, each outstanding share of FNB Common Stock will be converted into the
right to receive 7.54 shares of AMCORE Common Stock. Upon consummation of the
Merger, the rights of AMCORE stockholders will be governed by Nevada law and the
Restated Articles of Incorporation and Bylaws of AMCORE. See "THE MERGER
AGREEMENT -- Conversion of Shares and Exchange Ratio" and "-- Terms."
The Merger will become effective upon the filing of the Articles of Merger
with the State of Wisconsin (the "Effective Time"). Promptly after the Effective
Time, a letter of transmittal containing instructions with respect to the
surrender of stock certificates for FNB Common Stock will be furnished to each
holder of FNB Common Stock outstanding as of the Effective Time of the Merger
for use in exchanging such stock certificates for shares of AMCORE Common Stock
in connection with the Merger. See "THE MERGER AGREEMENT -- Conversion of Shares
and Exchange Ratio."
6
<PAGE> 10
THE SPECIAL MEETING
The Special Meeting will be held at the offices of FNB, located at 1625
10th Street, Monroe, Wisconsin, on February 10, 1997, at 4:00 p.m. (local time)
(the "Special Meeting Date"). At the Special Meeting, FNB Stockholders will
consider and vote upon a proposal to approve the Merger Agreement and transact
such other business as may properly come before the Special Meeting. Only
holders of record of FNB Common Stock at the close of business on January 10,
1997 (the "Record Date") will be entitled to notice of and to vote at the
Special Meeting. At such date, there were outstanding and entitled to vote
242,455 shares of FNB Common Stock. Each share of FNB Common Stock is entitled
to one vote. For additional information relating to the Special Meeting, see
"THE SPECIAL MEETING."
RECORD DATE; VOTE REQUIRED
The Wisconsin Business Corporation Law (the "WBCL") requires that the
Merger Agreement be approved by the affirmative vote of a majority of the
outstanding shares of FNB Common Stock. At the Record Date, the directors and
executive officers of FNB and their affiliates beneficially owned 67,481 shares
of FNB Common Stock. At the Record Date, the directors and executive officers of
AMCORE and its subsidiaries did not beneficially own any shares of FNB Common
Stock. At the Record Date, subsidiaries of FNB and subsidiaries of AMCORE,
acting as fiduciaries, custodians or agents, had voting power over no
outstanding shares of FNB Common Stock. Each of the directors and executive
officers of FNB has entered into voting agreements with AMCORE and FNB (the
"Stockholder Voting Agreements"), pursuant to which such stockholders have
agreed to vote all of their shares of FNB Common Stock in favor of the Merger
Agreement, constituting in the aggregate approximately 27% of the outstanding
shares of FNB Common Stock. See "THE SPECIAL MEETING -- Record Date; Vote
Required" and "THE MERGER -- Stockholder Voting Agreements."
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF FNB RECOMMENDS THAT FNB STOCKHOLDERS VOTE "FOR"
APPROVAL OF THE MERGER AGREEMENT. The FNB Board believes that the terms of the
Merger Agreement are fair and that the Merger is in the best interest of FNB and
its stockholders. In making its recommendation, the FNB Board has sought the
advice of an independent financial advisor. See "THE MERGER -- Background of the
Merger"; "-- Reasons for the Merger; Recommendation of the Board" and "--
Opinion of FNB's Financial Advisor."
OPINION OF FINANCIAL ADVISOR
FNB's financial advisor, Robert W. Baird and Company Incorporated
("Baird"), rendered a verbal opinion on October 30, 1996 and a written opinion
on November 6, 1996 to the FNB Board to the effect that, as of the date of such
opinion, the consideration to be received by the holders of FNB Common Stock
upon consummation of the Merger was fair, from a financial point of view, to
such holders. The opinion of Baird, attached to this Proxy Statement/Prospectus
as Annex I, sets forth the assumptions made, the matters considered and the
limitations in the review undertaken in rendering such opinion. See "THE MERGER
- -- Opinion of FNB's Financial Advisor."
DISSENTERS' RIGHTS
Under the provisions of the WBCL, any FNB Stockholders who assert
dissenters' rights will have a statutory right to demand payment of the "fair
value" of their FNB Common Stock in cash. To perfect this right, an FNB
Stockholder must not vote such shares in favor of the Merger Agreement at the
Special Meeting (this may be done by marking the proxy either to vote against
the Merger Agreement or to abstain from voting thereon or by not voting at all)
and must take such other action as is required by the provisions of Sections
180.1301 to 180.1331 of the WBCL, including delivering written notice of intent
to demand the "fair value" of FNB Common Stock. A copy of Sections 180.1301 to
180.1331 of the WBCL is attached hereto as Annex III. See "THE MERGER -- Rights
of Dissenting FNB Stockholders."
7
<PAGE> 11
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The consummation of the Merger is conditioned, among other things, upon the
receipt by FNB of an opinion of Jones, Day, Reavis & Pogue, special counsel to
FNB, to the effect that the Merger will be treated as a tax-free reorganization
under Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"). Such opinion will be dated the date of the closing of the Merger, will
be based upon certain customary representations, and will be subject to certain
customary assumptions and limitations set forth therein. No ruling will be
sought from the Internal Revenue Service (the "IRS") regarding the Merger, and
the IRS may disagree with the conclusions expressed in such opinion of counsel.
In accordance with such opinion, no gain or loss will be recognized by an
FNB Stockholder upon the conversion of such holder's shares of FNB Common Stock
into shares of AMCORE Common Stock pursuant to the Merger (except to the extent
that cash is received in lieu of fractional shares of AMCORE Common Stock). See
"THE MERGER -- Certain Federal Income Tax Consequences."
EACH FNB STOCKHOLDER IS ADVISED TO CONSULT SUCH HOLDER'S OWN TAX ADVISOR AS
TO THE SPECIFIC TAX CONSEQUENCES TO SUCH HOLDER OF THE MERGER UNDER FEDERAL,
STATE, LOCAL, FOREIGN INCOME AND OTHER APPLICABLE TAX LAWS.
ACCOUNTING TREATMENT
AMCORE anticipates that the Merger will be accounted for as a
"pooling-of-interests." See "THE MERGER -- Accounting Treatment of the Merger."
It is a condition to the Merger that independent public accountants deliver an
opinion to the effect that, on the basis of a review of the Merger Agreement and
the transactions contemplated thereby, the Merger will be accounted for as a
pooling-of-interests. See "THE MERGER AGREEMENT -- Conditions to the Merger."
RESALES OF AMCORE COMMON STOCK BY AFFILIATES
Resales of AMCORE Common Stock issued to "affiliates" of FNB have not been
registered under applicable securities laws in connection with the Merger. Such
shares may only be sold (a) under a separate registration for distribution
(which AMCORE has not agreed to provide), (b) pursuant to Rule 145 under the
Securities Act, or (c) pursuant to some other exemption from registration. For
AMCORE to be able to account for the Merger as a pooling-of-interests, certain
additional restrictions have been placed on affiliates of FNB and AMCORE with
respect to dispositions of FNB Common Stock and AMCORE Common Stock during the
period beginning 30 days before the Merger and ending once the results of at
least 30 days of post-Merger combined operations have been published. See "THE
MERGER -- Resale of AMCORE Common Stock."
DATE OF THE MERGER
The Merger Agreement provides that the Merger will be consummated on a date
no later than five business days after the satisfaction or waiver of the
conditions to the Merger Agreement, including the receipt of all necessary
approvals of governmental agencies and authorities and expiration of the
statutory 30-day waiting period following approval by the Board of Governors of
the Federal Reserve System (the "Federal Reserve Board") or on another mutually
agreed upon date (the "Closing Date"). With the approval of the Federal Reserve
Board and the Department of Justice, the waiting period may be reduced to no
less than 15 days. See "THE MERGER AGREEMENT -- Terms"; "-- Date of Merger"; and
"-- Conditions to the Merger."
TERMS AND CONDITIONS OF THE MERGER; REGULATORY APPROVAL
The Merger is conditioned upon approval by the FNB Stockholders and the
Federal Reserve Board and upon the satisfaction of other terms and conditions of
the Merger Agreement, including treatment of the Merger as a
pooling-of-interests for accounting purposes. There can be no assurance that the
Federal Reserve
8
<PAGE> 12
Board will approve the Merger and, if the Merger is approved, there can be no
assurance concerning the date of any such approval. See "THE MERGER --
Regulatory Approval"; "THE MERGER AGREEMENT -- Terms" and "-- Conditions to the
Merger."
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Certain executive officers of FNB and the directors of Newco prior to the
Merger will continue as officers and directors of the surviving corporation. FNB
has entered into an agreement with the president and chief executive officer of
FNB whereby such executive officer's employment with FNB shall be terminated
immediately prior to the Effective Time of the Merger. See "THE MERGER --
Interests of Certain Persons in the Merger." Following the Merger, FNB will
survive as a separate wholly-owned subsidiary holding company of AMCORE. AMCORE
intends that FNB will continue to operate the Bank at its present location and
that FNB will expand its products and services by providing certain products and
services offered by AMCORE affiliates. See "THE MERGER -- Management and
Operations of FNB After the Merger."
TERMINATION; TERMINATION FEES AND EXPENSES
The Merger Agreement may be terminated under certain circumstances,
including at any time before the Closing Date (i) by mutual written consent of
the Board of Directors of AMCORE and FNB, (ii) by either AMCORE or FNB if (a)
any condition set forth in Articles VIII, IX or X of the Merger Agreement has
not been substantially satisfied or waived in writing by June 30, 1997, (b) any
warranty or representation made by the other party in the Merger Agreement is
discovered to have become untrue, incomplete or misleading in any material
respect, where such change has not been cured within ten business days of
notice, (c) the other party commits one or more material breaches of the Merger
Agreement considering all such breaches in the aggregate, where such breach has
not been cured within 20 business days of notice, or (d) AMCORE's good-faith
estimate of environmental remediation costs relating to certain real properties
is equal to $700,000 or more, (iii) by FNB if (a) the AMCORE Average Price is
less than $18.00 and FNB notifies AMCORE of its intent to terminate the Merger
Agreement within 15 days following the Special Meeting Date, unless AMCORE
cancels such termination by electing to adjust the Exchange Ratio to equal a
number obtained by dividing (A) the amount equal to 135.72 less the
Environmental Reduction Amount, if any, by (B) the AMCORE Average Price or (b)
the FNB Board receives a Superior Proposal (as hereinafter defined) and promptly
thereafter, after providing notice and certain information to AMCORE, enters
into a definitive acquisition, merger or similar agreement to effect such
proposal, (iv) by AMCORE if (a) the AMCORE Average Price is more than $23.00 and
AMCORE notifies FNB of its intent to terminate the Merger Agreement within 15
days following the Special Meeting Date, unless FNB cancels such termination by
electing to adjust the Exchange Ratio to equal a number obtained by dividing (A)
the amount equal to 173.42 less the Environmental Reduction Amount, if any, by
(ii) the AMCORE Average Price or (B) the FNB Board withdraws or modifies in a
manner adverse to AMCORE its approval or recommendation of the Merger or fails
to reconfirm such recommendation within five business days of a reasonable
written request for such confirmation by AMCORE. There can be no assurance that
the closing price for AMCORE's Common Stock on the Effective Date will be equal
to the AMCORE Average Price. See "THE MERGER AGREEMENT -- Conversion of Shares
and Exchange Ratio." In the event the Merger Agreement is terminated under
certain circumstances, FNB will be obligated to pay AMCORE a fee of $1 million
plus AMCORE's out-of-pocket expenses (not to exceed $400,000) in connection with
the Merger Agreement. See "THE MERGER AGREEMENT -- Termination;" and "--
Termination Fees and Expenses."
WAIVERS AND AMENDMENTS
AMCORE and FNB may amend, modify or waive certain terms and conditions of
the Merger Agreement. Any such action taken by FNB following a favorable vote by
its stockholders may be taken only if, in the opinion of the FNB Board, the
action will not have a material adverse effect on the benefits intended for its
stockholders. See "THE MERGER AGREEMENT -- Amendment and Waiver."
9
<PAGE> 13
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of FNB management and the FNB Board may be deemed to have
certain interests in the Merger in addition to their interests as stockholders
of FNB. Certain executive officers of FNB will be executive officers of the
surviving corporation following the Merger. See "THE MERGER -- Management and
Operations of FNB After the Merger." AMCORE has agreed to take certain actions
regarding the existing arrangement of an executive officer of FNB who will be
provided severance benefits following the Merger. Certain directors and officers
will receive shares of FNB Common Stock or cash in lieu of shares with respect
to any deferred directors' fees and deferred compensation under the deferred
compensation retirement plans. AMCORE has agreed to indemnify the executive
officers and directors of FNB and its subsidiaries for a period of six years
after the Effective Time to the same extent such persons are currently
indemnified pursuant to FNB's Articles of Incorporation and Bylaws. AMCORE has
agreed to provide directors' and officers' liability insurance for a period of
three years after the Merger that provides coverage for events occurring prior
to the Effective Time and is in the aggregate no less favorable than FNB's
existing policy, provided that AMCORE will not be required to pay annual
premiums in excess of $20,000. See "THE MERGER -- Interests of Certain Persons
in the Merger."
MARKETS AND MARKET PRICES
There is no established public trading market for FNB Common Stock. In the
ordinary course of its business, Baird may from time to time trade the
securities of FNB or AMCORE for its own account or the accounts of its customers
and accordingly, may at any time hold long or short positions of such
securities. AMCORE Common Stock is quoted on the NASDAQ.
The following table sets forth the closing price per share of AMCORE Common
Stock as reported on the NASDAQ on the dates set forth, which includes October
29, 1996, the last trading day preceding public announcement of the Merger,
October 30, 1996, the day on which the Merger was publicly announced and October
31, 1996, the day following the public announcement of the Merger, as well as
the equivalent per share prices for FNB Common Stock. The equivalent per share
price of FNB Common Stock at each specified date represents the closing price of
a share of AMCORE Common Stock on such date multiplied by the unadjusted
Exchange Ratio of 7.54. See "THE MERGER AGREEMENT -- Terms" and "-- Conversion
of Shares and Exchange Ratio."
<TABLE>
<CAPTION>
EQUIVALENT FNB
AMCORE PER SHARE
COMMON STOCK PRICE
------------ --------------
<S> <C> <C>
Market Value Per Share at:
January 3, 1997............................... $ 25.750 $ 194.155
October 29, 1996.............................. $ 21.250 $ 160.2250
October 30, 1996.............................. $ 21.125 $ 159.2825
October 31, 1996.............................. $ 20.750 $ 156.4550
</TABLE>
Because the market price of AMCORE Common Stock is subject to fluctuation
and the Exchange Ratio is fixed (subject to adjustment to increase or decrease
such Exchange Ratio as described herein), the market value of the shares of
AMCORE Common Stock that holders of FNB Common Stock will receive in the Merger
may increase or decrease prior to the Merger. FNB Stockholders are advised to
obtain current market quotations for AMCORE Common Stock and current trading
prices, if any, of FNB Common Stock. FNB has the right to abandon the Merger
under certain circumstances if the average of the daily closing prices of a
share of AMCORE Common Stock during the 20-day trading period ending three days
prior to the date of the Special Meeting is less than $18.00, and AMCORE has the
right to abandon the Merger under certain circumstances if the average of the
daily closing prices of a share of AMCORE Common Stock during the 20-day trading
period ending three days prior to the date of the Special Meeting is greater
than $23.00. See "THE MERGER AGREEMENT -- Terms," "-- Conversion of Shares and
Exchange Ratio" and "-- Termination."
10
<PAGE> 14
The following table sets forth the market value of AMCORE Common Stock for
the periods indicated as reported on the NASDAQ:
<TABLE>
<CAPTION>
HIGH LOW
------ -------
<S> <C> <C>
1997:
First quarter (through January 3, 1997)................. $27.25 $24.75
1996:
First quarter........................................... $21.75 $20.25
Second quarter.......................................... 21.25 19.50
Third quarter........................................... 21.25 18.875
Fourth quarter.......................................... 27.25 20.375
1995:
First quarter........................................... $21.25 $18.25
Second quarter.......................................... 19.75 17.00
Third quarter........................................... 23.25 18.50
Fourth quarter.......................................... 24.00 19.75
1994:
First quarter........................................... $20.25 $16.25
Second quarter.......................................... 21.75 15.75
Third quarter........................................... 22.75 20.00
Fourth quarter.......................................... 21.25 16.00
</TABLE>
In 1994, FNB paid aggregate annual dividends of $2.15 per share; in 1995,
aggregate annual dividends of $2.35 per share were paid; in 1996, prior to
execution of the Merger Agreement, FNB paid aggregate annual dividends of $2.65
per share. Between execution of the Merger Agreement and the Closing Date, FNB
can pay cash dividends, for the quarter ending December 31, 1996, and each
quarter thereafter ending prior to the consummation of the Merger provided such
dividends are paid prior to the consummation of the Merger and do not exceed for
any quarter $0.725 per share; and further provided, that FNB cannot declare or
pay any dividends in any amount on FNB Common Stock in any calendar quarter in
which the Effective Time is expected to occur and in which the FNB Stockholders
entitled to receive dividends on the shares of AMCORE Common Stock into which
their shares of FNB Common Stock will be converted. There can be no assurance as
to the amount of future dividends on FNB Common Stock prior to the Closing Date,
because the dividend policy of FNB is subject to the discretion of the Board of
Directors of FNB, cash needs and general business conditions.
11
<PAGE> 15
COMPARATIVE PER SHARE DATA
The following table presents selected comparative unaudited per share data
for AMCORE Common Stock on a historical and pro forma combined basis and for FNB
Common Stock on a pro forma equivalent basis giving effect to the Merger on a
pooling-of-interests accounting basis. For a description of the pooling-of-
interests accounting basis with respect to the Merger and the related effects on
the historical financial statements of AMCORE, see "THE MERGER -- Accounting
Treatment of the Merger." The information is derived from the consolidated
historical financial statements of AMCORE, including the related notes thereto,
incorporated by reference into this Proxy Statement/Prospectus. This information
should be read in conjunction with such historical and pro forma financial
statements and the related notes thereto. See "INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE" and "PRO FORMA COMBINING FINANCIAL STATEMENTS."
This information is not necessarily indicative of the results of the future
operations of the combined entity or the actual results that would have occurred
had the Merger been consummated prior to the periods indicated.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- -----------------------------
1996 1995 1995 1994 1993
------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Per Share of AMCORE Common Stock:
Book Value:
Historical............................. $ 14.59 $ 14.14 $ 14.81 $13.26 $12.68
Pro forma*............................. 14.00 13.45 14.07 12.57 11.97
Cash dividends:
Historical............................. $ 0.48 $ 0.45 $ 0.58 $ 0.55 $ 0.41
Pro forma*............................. 0.52 0.46 0.61 0.57 0.43
Net income:
Historical............................. $ 1.34 $ 0.85 $ 1.30 $ 1.55 $ 1.53
Pro forma*............................. 1.30 0.86 1.30 1.51 1.48
Per Share of FNB Common Stock:
Book Value:
Historical............................. $ 73.81 $ 65.27 $ 68.89 $60.44 $54.97
Pro forma equivalent*.................. 105.56 101.41 106.09 94.78 90.25
Cash dividends:
Historical............................. $ 2.65 $ 2.35 $ 2.35 $ 2.15 $ 1.85
Pro forma equivalent*.................. 3.92 3.47 4.60 4.30 3.24
Net income:
Historical............................. $ 7.90 $ 7.26 $ 10.07 $ 9.04 $ 8.40
Pro forma equivalent*.................. 9.80 6.48 9.80 11.39 11.16
</TABLE>
- -------------------------
* Based upon an exchange ratio of 7.54 shares of AMCORE Common Stock for each
share of FNB Common Stock. The exchange ratio is subject to adjustment.
12
<PAGE> 16
SELECTED FINANCIAL DATA
The following tables set forth certain historical consolidated financial
information for AMCORE and FNB, and certain unaudited combined selected
financial data, giving effect to the Merger under the pooling-of-interests
method of accounting. See "THE MERGER -- Accounting Treatment of the Merger."
The selected financial data included for the nine months ended September 30,
1996 and September 30, 1995 are derived from unaudited financial statements of
AMCORE and FNB. The selected financial data for the five years ended December
31, 1995 are derived from audited consolidated financial statements of AMCORE
and from audited financial statements of FNB. This information should be read in
conjunction with the respective historical financial statements of AMCORE and
FNB, including the respective notes thereto, incorporated by reference herein
with respect to AMCORE and set forth herein with respect to FNB, and with the
unaudited pro forma combined financial information, including the notes thereto,
appearing elsewhere herein. See "AVAILABLE INFORMATION," "INCORPORATION OF
CERTAIN INFORMATION BY REFERENCE," "INDEX TO FIRST NATIONAL BANCORP, INC.
CONSOLIDATED FINANCIAL STATEMENTS" and "PRO FORMA COMBINING FINANCIAL
STATEMENTS."
AMCORE FINANCIAL, INC.
SELECTED CONSOLIDATED FINANCIAL DATA (HISTORICAL)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------------ ------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME:
Net interest income........... $ 64,284 $ 58,887 $ 79,406 $ 77,760 $ 77,556 $ 73,399 $ 65,866
Provision for loan losses..... 4,090 1,920 2,692 628 2,124 5,547 7,932
Non-interest income........... 29,104 24,856 34,013 31,034 29,605 25,695 21,417
Operating expense............. 63,230 67,260 87,440 78,690 76,136 67,132 60,098
Income before income taxes.... 26,068 14,563 23,287 29,476 28,901 26,415 19,253
Net income.................... $ 18,993 $ 11,997 $ 18,271 $ 21,801 $ 21,440 $ 18,566 $ 14,949
PER COMMON SHARES
Net income.................... $ 1.34 $ 0.85 $ 1.30 $ 1.55 $ 1.53 $ 1.36 $ 1.10
Cash dividends................ 0.48 0.45 0.58 0.55 0.41 0.35 0.30
Book value.................... 14.59 14.14 14.81 13.26 12.68 11.59 10.60
Dividend payout ratio......... 35.8% 52.9% 44.6% 35.4% 26.9% 25.6% 27.4%
Average Common Shares
Outstanding (in
thousands).................. 14,205 14,069 14,083 14,023 13,972 13,659 13,604
BALANCE SHEET -- AVERAGE
BALANCES:
Total assets.................. $2,639,168 $2,210,602 $2,245,895 $2,062,597 $1,977,407 $1,754,653 $1,686,229
Loans and leases, net of
unearned income............. 1,342,725 1,212,098 1,228,175 1,088,206 1,000,759 927,354 955,786
Securities.................... 1,093,031 798,437 812,174 764,758 728,754 607,023 538,448
Deposits...................... 1,809,140 1,759,028 1,764,427 1,706,175 1,665,807 1,501,006 1,464,383
Long-term borrowings.......... 152,693 23,071 29,458 27,598 33,724 16,384 16,322
Stockholders' equity.......... 205,487 190,574 194,546 183,171 168,739 151,469 138,860
SELECTED FINANCIAL RATIOS(1):
Return on average assets...... 0.96% 0.94% 0.97% 1.06% 1.08% 1.06% 0.89%
Return on average equity...... 12.35% 10.85% 11.17% 11.90% 12.71% 12.25% 10.77%
Net interest margin(2)........ 3.73% 4.16% 4.18% 4.51% 4.62% 4.78% 4.49%
Average equity to average
assets...................... 7.79% 8.62% 8.66% 8.88% 8.53% 8.63% 8.23%
BALANCE SHEET INFORMATION:
Total assets.................. $2,890,782 $2,334,458 $2,418,532 $2,151,983 $1,987,267 $1,958,475 $1,710,870
Loans and leases, net of
unearned income............. 1,435,562 1,273,050 1,285,961 1,161,870 1,035,841 996,277 931,904
Securities.................... 1,174,122 847,360 908,669 784,457 722,837 727,542 561,579
Deposits...................... 1,937,989 1,826,863 1,777,705 1,707,559 1,643,683 1,649,767 1,431,022
Long-term borrowings.......... 148,761 22,013 107,803 26,487 31,975 32,442 13,066
Stockholders' equity.......... 207,588 199,271 209,862 186,159 177,615 160,296 142,696
</TABLE>
- -------------------------
(1) Nine month returns are annualized.
(2) On a fully tax equivalent basis.
13
<PAGE> 17
FIRST NATIONAL BANCORP, INC.
SELECTED CONSOLIDATED FINANCIAL DATA (HISTORICAL)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
UNAUDITED
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME:
Net interest income........ $ 6,013 $ 5,684 $ 7,683 $ 7,560 $ 7,259 $ 6,415 $ 5,127
Provision for loan
losses.................. 90 44 61 -- -- -- --
Other income............... 1,016 976 1,318 1,380 1,201 1,318 1,147
Other expenses............. 4,242 4,180 5,558 5,893 5,822 5,376 4,241
Income before income
taxes................... 2,697 2,437 3,382 3,047 2,638 2,357 2,033
Net income................. $ 1,943 $ 1,762 $ 2,446 $ 2,222 $ 2,060 1,760 1,433
PER COMMON SHARE:
Net income................. $ 7.90 $ 7.26 $ 10.07 $ 9.04 $ 8.40 7.23 6.10
Cash dividends............. 2.65 2.35 2.35 2.15 1.85 1.55 1.30
Book value................. 73.81 65.27 68.89 60.44 54.97 48.61 42.55
Dividend payout ratio...... 33.5% 31.2% 23.4% 23.8% 22.0% 20.0% 20.3%
Average Common Shares
Outstanding
(in thousands).......... 246 243 243 246 245 243 235
BALANCE SHEET -- AVERAGE
BALANCES:
Total assets............... $209,070 $196,835 $198,644 $182,491 $169,668 154,419 153,688
Loans, net of allowance for
loan losses............. 143,795 135,940 137,791 120,818 106,478 96,721 92,989
Securities................. 53,779 51,190 50,936 51,162 48,114 44,367 37,229
Deposits................... 187,333 182,538 178,474 164,781 152,877 144,342 122,314
Notes payable(1)........... 2,386 1,700 2,836 2,350 2,850 3,000 3,000
Stockholders' equity....... 17,014 14,895 15,130 13,562 12,515 10,270 8,854
SELECTED FINANCIAL RATIOS(2):
Return on average assets... 1.24% 1.19% 1.23% 1.22% 1.21% 1.14% .93%
Return on average equity... 15.23% 15.77% 16.17% 16.38% 16.46% 17.14% 16.18%
Net interest margin(3)..... 4.01% 4.04% 4.06% 4.38% 4.54% 4.55% 3.94%
Average equity to average
assets.................. 8.14% 7.57% 7.62% 7.43% 7.38% 6.65% 5.76%
BALANCE SHEET INFORMATION:
Total assets............... $216,494 $201,985 $206,531 $192,075 $178,337 162,973 156,780
Loans...................... 147,999 141,735 142,169 128,661 111,423 102,411 93,324
Securities................. 54,109 50,481 49,846 51,157 50,588 42,820 45,913
Deposits................... 193,126 174,833 182,278 172,929 161,018 146,715 141,969
Notes payable(1)........... 2,811 1,947 4,246 2,000 2,700 3,000 3,000
Stockholders' equity....... 17,895 15,646 16,145 14,059 12,675 11,020 9,521
</TABLE>
- -------------------------
(1) Includes long-term and short-term borrowings.
(2) Nine month returns are annualized.
(3) On a fully tax-equivalent basis.
14
<PAGE> 18
AMCORE FINANCIAL, INC. AND SUBSIDIARIES
FIRST NATIONAL BANCORP, INC. AND SUBSIDIARIES
SELECTED PRO FORMA COMBINED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
------------------------ --------------------------------------
1996 1995 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME:
Net interest revenue............. $ 70,297 $ 64,572 $ 87,089 $ 85,320 $ 84,815
Provision for loan losses........ 4,180 1,964 2,753 628 2,124
Non-interest income.............. 30,120 25,832 35,331 32,414 30,806
Operating expense................ 67,472 71,440 92,998 84,583 81,958
Income before income taxes....... 28,765 17,000 26,669 32,523 31,539
Net income....................... $ 20,914 $ 13,739 $ 20,689 $ 23,999 $ 23,483
PER COMMON SHARE:
Net income....................... $ 1.30 $ 0.86 $ 1.30 $ 1.51 $ 1.48
Cash dividends................... 0.52 0.46 0.61 0.57 0.43
Book value....................... 14.00 13.45 14.07 12.57 11.97
Dividend payout ratio............ 40.0% 53.4% 46.9% 37.7% 29.1%
Average Common Shares Outstanding
(in thousands)................ 16,089 15,953 15,967 15,907 15,856
BALANCE SHEET -- AVERAGE BALANCES:
Total assets..................... $2,848,238 $2,407,437 $2,444,539 $2,245,088 $2,147,075
Loans and leases, net of unearned
income........................ 1,486,520 1,348,038 1,365,966 1,209,024 1,107,237
Securities....................... 1,146,810 849,627 863,110 815,920 776,868
Deposits......................... 1,996,473 1,941,566 1,942,901 1,870,956 1,818,684
Long-term borrowings............. 154,039 23,616 29,998 29,198 36,024
Stockholders' equity............. 222,501 205,469 209,676 196,733 181,254
SELECTED FINANCIAL RATIOS (1):
Return on average assets......... 0.98% 0.76% 0.85% 1.07% 1.09%
Return on average equity......... 12.53% 8.92% 9.87% 12.20% 12.96%
Net interest margin (2).......... 3.75% 4.14% 4.17% 4.50% 4.62%
Average equity to average
assets........................ 7.81% 8.53% 8.58% 8.76% 8.44%
BALANCE SHEET INFORMATION:
Total assets..................... $3,107,254 $2,536,443 $2,625,035 $2,344,034 $2,165,587
Loans and leases, net of unearned
income........................ 1,583,348 1,414,785 1,428,130 1,290,531 1,147,264
Securities....................... 1,228,231 897,841 958,515 835,614 773,425
Deposits......................... 2,131,115 2,001,696 1,959,983 1,880,488 1,804,701
Long-term borrowings............. 150,107 22,558 108,343 28,087 34,275
Stockholders' equity............. 225,461 214,917 225,979 200,194 190,273
</TABLE>
- -------------------------
(1) Nine month returns are annualized.
(2) On a fully tax-equivalent basis.
15
<PAGE> 19
FNB SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished in connection with the
solicitation on behalf of the FNB Board of Directors of proxies to be voted at
the Special Meeting to be held at the principal offices of FNB, 1625 Tenth
Street, Monroe, Wisconsin 53566, on February 10, 1997, at 4:00 p.m. local time,
and any adjournment or postponements thereof.
This Proxy Statement/Prospectus is also furnished by AMCORE to FNB
Stockholders as a prospectus in connection with the issuance by AMCORE of shares
of AMCORE Common Stock upon consummation of the Merger. This Proxy
Statement/Prospectus, the attached Notice of Special Meeting of First National
Bancorp, Inc. Stockholders, and the form of proxy enclosed herewith are first
being mailed to stockholders of FNB on or about January 10, 1997.
DATE, PLACE AND TIME
The Special Meeting will be held at the principal offices of FNB, 1625
Tenth Street, Monroe, Wisconsin 53566, on February 10, 1997, at 4:00 p.m., local
time (the "Special Meeting Date").
MATTERS TO BE CONSIDERED AT THE MEETING
At the Special Meeting, holders of shares of FNB Common Stock as of the
Record Date will be asked to consider and vote upon a proposal to approve and
adopt the Merger Agreement and the transactions contemplated thereby. See "THE
MERGER AGREEMENT." The description of the Merger and the Merger Agreement in
this Proxy Statement/Prospectus is, of necessity, selective and is, therefore,
qualified in its entirety by reference to the Merger Agreement. A copy of the
full text of the Merger Agreement is attached to this Proxy Statement/Prospectus
as Annex II.
RECORD DATE; VOTE REQUIRED
The FNB Board of Directors has fixed January 10, 1997 as the Record Date
for the determination of the FNB Stockholders entitled to notice of and to vote
at the Special Meeting. On the Record Date, 242,455 shares of FNB Common Stock
were outstanding. Shares of FNB Common Stock are the only outstanding voting
securities of FNB. Each holder of record of shares of FNB Common Stock on the
Record Date is entitled to cast one vote per share, exercisable in person or by
properly executed proxy, upon each matter properly submitted for the vote of the
FNB Stockholders at the Special Meeting. The presence, in person or by properly
executed proxy, of the holders of a majority of the shares of FNB Common Stock
outstanding and entitled to vote at the Special Meeting is necessary to
constitute a quorum at the Special Meeting.
THE FNB BOARD OF DIRECTORS HAS DETERMINED THAT THE TERMS OF THE MERGER ARE
FAIR TO, AND IN THE BEST INTERESTS OF, FNB AND THE FNB STOCKHOLDERS, HAS
APPROVED AND ADOPTED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, AND RECOMMENDS THAT THE FNB STOCKHOLDERS VOTE "FOR" THE APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
Holders of shares of FNB Common Stock on the Record Date will be entitled
to dissenters' rights under the WBCL in connection with the Merger. FNB
Stockholders who vote in favor of the Merger, however, will waive their
dissenters' rights. See "THE MERGER -- Rights of Dissenting FNB Stockholders"
and Annex III -- Sections 180.1301 et seq. of the WBCL.
The affirmative vote of the holders of a majority of the outstanding shares
of FNB Common Stock is required under applicable law to approve and adopt the
Merger Agreement. All shares of FNB Common Stock which are entitled to vote and
are represented at the Special Meeting by properly executed proxies received and
not duly and timely revoked will be voted at the Special Meeting in accordance
with the instructions contained therein. In the absence of contrary
instructions, such shares will be voted "FOR" the approval and adoption of the
Merger Agreement. The directors and executive officers of FNB, who collectively
beneficially own 67,481 shares of FNB Common Stock (approximately 27.0% of the
outstanding
16
<PAGE> 20
shares of FNB Common Stock as of the Record Date) have entered into Stockholder
Voting Agreements with FNB and AMCORE. Pursuant to such Stockholder Voting
Agreements, the directors and executive officers of FNB have agreed to vote
their shares in favor of the Merger Agreement and the transactions contemplated
thereby, provided that the Merger Agreement has not been terminated. In
addition, such directors and officers have agreed not to transfer shares in
violation of the pooling-of-interests rules. See "THE MERGER -- Stockholder
Voting Agreements."
SOLICITATION, REVOCATION AND USE OF PROXIES
FNB will bear all expenses of the solicitation, including the cost of
mailing this Proxy Statement/ Prospectus. In addition to solicitation by use of
the mails, proxies may be solicited by directors, officers and employees of FNB
in person or by telephone, facsimile or by other means of communication. Such
directors, officers and employees will not be additionally compensated, but may
be reimbursed for reasonable out of pocket expenses, in connection with such
solicitation. Arrangements will be made with banks and brokerage firms and other
custodians, nominees and fiduciaries for forwarding of proxy solicitation
materials to the beneficial owners of shares held of record by such custodians,
nominees and fiduciaries, and FNB will reimburse such custodians, nominees and
fiduciaries for reasonable expenses incurred in connection therewith.
A stockholder may revoke any proxy given pursuant to this solicitation at
any time prior to its exercise by the execution of a proxy signed at a later
date or by the giving of written notice of revocation to the Secretary of FNB at
any time before the taking of the vote at the Special Meeting. Any written
notice of revocation should be delivered to First National Bancorp., Inc., 1625
Tenth Street, Monroe, Wisconsin 53566, Attention: Gary Culp, Secretary, before
the taking of the vote at the Special Meeting. Furthermore, a stockholder giving
a proxy may revoke such proxy by attending the Special Meeting and voting the
stockholder's shares in person.
HOLDERS OF FNB COMMON STOCK ARE REQUESTED TO COMPLETE, DATE AND SIGN THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO FNB IN THE ENCLOSED ENVELOPE. FNB
STOCKHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXY CARDS. IF THE
MERGER IS CONSUMMATED, FNB STOCKHOLDERS WILL BE SENT INSTRUCTIONS REGARDING THE
SURRENDER OF THEIR STOCK CERTIFICATES.
INDEPENDENT PUBLIC ACCOUNTANTS
Representatives of McGladrey & Pullen, LLP, independent public accountants
to FNB, are expected to be present at the Special Meeting to respond to
appropriate questions of the FNB Stockholders and to make a statement if they
desire to do so.
OTHER MATTERS
As of the date of this Proxy Statement/Prospectus, the FNB Board does not
intend to bring any other business before the Special Meeting of FNB
Stockholders and, so far as is known to the FNB Board, no matters are to be
brought before the Special Meeting except as specified in the Notice of Special
Meeting of FNB Stockholders. However, as to any other business that may properly
come before the meeting, the proxy holders intend to vote the proxies in respect
thereof in accordance with their judgment and discretion.
THE MERGER
The following description of the Merger does not purport to be complete and
is qualified in its entirety by reference to the Merger Agreement, which is
incorporated by reference into this Proxy Statement/Prospectus. All FNB
Stockholders are urged to read the Merger Agreement in its entirety.
BACKGROUND OF THE MERGER
The past several years have been a period of substantial and rapid change
in the banking industry, characterized by, among other things, intensifying
competition and increasing consolidation of the financial services industry.
This consolidation is an outgrowth in part of the removal of many interstate
barriers limiting
17
<PAGE> 21
expansion of banking institutions. During this period, the Boards of Directors
of both AMCORE and FNB have periodically reviewed their strategic alternatives
and taken various steps to maintain and enhance their long term competitive
positions and profitability in the face of these changing regulatory and market
conditions.
During the first half of 1996, the FNB Board members who ultimately became
the Special Committee of the FNB Board initiated a series of discussions by the
FNB Board concerning strategic alternatives available to FNB in light of the
significant changes affecting the industry. The FNB Board believed that bank
consolidations would continue and that competitive and regulatory forces would
make it increasingly difficult for smaller banking companies, such as FNB, to
price their loan and deposit services competitively and to gain significant
market shares. The FNB Board determined that it would be in the best interest of
FNB Stockholders to solicit proposals for a business combination. In this
regard, the FNB Board retained Baird, as its financial advisor, to solicit the
interest of bank holding companies with suitable financial strength, stock price
performance and prospects, geographical location and other factors. Baird
prepared a Confidential Informational Memorandum, dated February 9, 1996, with
which it solicited expressions of interest from bank holding companies. Baird
identified eight companies as the most likely merger candidates.
During the same period, the Board of Directors of AMCORE (the "AMCORE
Board") continued to review its long term business goals and explore means to
maintain its competitiveness in the banking industry and to enhance stockholder
value. In this regard, AMCORE considered strategic alternatives, including a
number of opportunities in the Wisconsin area. AMCORE reviewed recent
combinations of Wisconsin banking companies as well as the potential for
increased competition resulting from future combinations in Wisconsin, the
prospect for future growth of AMCORE through future mergers and acquisitions in
Wisconsin and other states, and the ability of AMCORE to develop new customers
on a profitable basis. In light of the foregoing, throughout the remainder of
1995 and early 1996, AMCORE considered several possible acquisitions in the
Wisconsin area.
In early 1996, Mr. Kent of Baird contacted Mr. Meuleman and Mr. Gagnier at
AMCORE to discuss a possible business combination between FNB and AMCORE. Baird
had informed the Special Committee of the FNB Board that AMCORE had expressed an
interest in acquiring a bank serving communities in Wisconsin. Mr. Kent provided
Mr. Gagnier with a copy of the Confidential Informational Memorandum prepared by
Baird on behalf of FNB.
During the first four months of 1996, representatives of Baird and the
Special Committee of the FNB Board met to discuss FNB's interest in a
combination with AMCORE, as well as possible values in light of recent bank
merger and acquisition trends and the responses from other prospects. FNB
authorized Baird to indicate its interest in meeting with AMCORE.
In late April and early May 1996, the Special Committee of the FNB Board
and senior management of AMCORE held preliminary discussions relating to a
potential combination between the companies which culminated in representatives
of AMCORE visiting FNB's Monroe facility and surveying the local community.
On May 15, 1996, the AMCORE Board reviewed the terms of the Merger with FNB
with senior management. Following discussions between the directors, the AMCORE
Board authorized Messrs. Robert J. Meuleman and John R. Hecht, with the
assistance of AMCORE's legal advisors, to negotiate a definitive merger
agreement.
On May 16, 1996, AMCORE sent a letter to Mr. Kent of Baird expressing its
interest in a transaction with FNB. During the months of June and July 1996, the
Special Committee of the FNB Board and senior management of AMCORE continued
discussions regarding the possible combination of FNB and AMCORE.
On July 9, 1996, the Executive Committee of the AMCORE Board (the
"Executive Committee") reviewed with the AMCORE Board the preliminary
discussions that had taken place to date with FNB. At that time, the AMCORE
Board also reviewed its potential affiliation with other Wisconsin bank holding
companies, including its potential acquisition of CBSC. The AMCORE Board
determined that senior management should pursue further discussions with FNB and
CBSC.
18
<PAGE> 22
During mid-July and August, the Special Committee of the FNB Board and
senior management of AMCORE held informal discussions concerning the proposed
merger, including the prospects for AMCORE's future performance and the
advisability of the proposed merger in light of existing business, economic,
competitive and regulatory conditions.
On August 29, 1996, FNB and AMCORE entered into an exclusivity agreement
that required FNB to negotiate exclusively with AMCORE until October 31, 1996,
with respect to a possible acquisition of FNB. Following execution of this
letter agreement, discussions continued to be held by senior management of
AMCORE and FNB with respect to the terms of the proposed merger.
On September 20, 1996, FNB and AMCORE entered into a confidentiality
agreement relating to, among other things, the information to be provided by
each company to the other and the conditions under which each party would be
allowed to acquire such information. Following the execution of the
confidentiality agreement, the parties began their mutual due diligence review.
On October 21, 1996 the FNB Board met with FNB's senior management to
review the discussions that had been held with AMCORE and to consider the terms
and conditions of the proposed Merger. At the conclusion of the meeting, the FNB
Board determined to continue to finalize the terms of the Merger with AMCORE.
On October 24, 1996, the Executive Committee, together with its legal
advisors, reviewed the discussions which senior management had with FNB, certain
environmental issues discovered during the due diligence investigation and the
proposed terms of the Merger Agreement. Upon completion of its review, the
Executive Committee approved the Merger Agreement and the other documents
contemplated by the Merger, pending resolution of the environmental issues to
the satisfaction of AMCORE's senior management.
On October 29, 1996, the FNB Board entered into an amended and restated
severance agreement with Thomas J. Wilkinson, president and chief executive
officer of FNB, providing for the resignation of Mr. Wilkinson immediately prior
to the Effective Time of the Merger in consideration of severance benefits to be
paid to Mr. Wilkinson. See "THE MERGER -- Interests of Certain Persons in the
Merger."
On October 30, 1996, upon completion of the negotiations, Baird rendered
its oral opinion to the FNB Board that the consideration to be received by the
FNB Stockholders was fair to such stockholders from a financial point of view.
See "THE MERGER -- Opinion of FNB's Financial Advisor." Following the delivery
of such opinion, the FNB Board unanimously determined that the Merger was in the
best interests of the FNB Stockholders and unanimously recommended approval of
the Merger Agreement.
The Merger Agreement and other documents contemplated by the Merger were
executed by authorized officers of AMCORE and FNB on October 30, 1996.
The execution of the Merger was publicly announced on October 30, 1996.
REASONS FOR THE MERGER; RECOMMENDATION OF THE FNB BOARD
REASONS FOR MERGER -- AMCORE
The AMCORE Board and Executive Committee considered a number of factors,
including, among other things, the financial condition of FNB and projected
synergies which are anticipated to result from the Merger. The Executive
Committee concluded that the Merger presents an unique opportunity for AMCORE to
increase its presence in Wisconsin through the acquisition of an established
banking organization having operations in the targeted area. AMCORE's decision
to pursue discussions with FNB was primarily a result of AMCORE's assessment of
the value of FNB's banking franchise, its substantial asset base within the
Wisconsin area, the potential of other acquisitions in the Wisconsin area and
the compatibility of the businesses of the two banking organizations. The AMCORE
Board and Executive Committee believes that the Merger will benefit AMCORE's
stockholders.
The AMCORE Board and Executive Committee considered that the Merger would
be effective in fulfilling AMCORE's long-term objective of enhancing its market
presence in Wisconsin. The AMCORE Board and Executive Committee also considered
that the Merger would extend AMCORE's advanced
19
<PAGE> 23
consumer banking technology and customer services to FNB's retail customer base,
while similarly extending a broader range of corporate and private banking
services to its Wisconsin customer.
The AMCORE Board further considered the gains to be achieved through the
application of AMCORE's Acquisition Integration Policy that is used as a
framework for the integration and consolidation of institutions which it
acquires. Integration involves the process of including a new subsidiary in the
products, services, practices, and general operating philosophies of AMCORE
thereby employing the combined resources of AMCORE and FNB to better serve the
communities and offer a broad array of products and services through an expanded
branch network. The AMCORE Board and Executive Committee considered that such
gains may be further enhanced with the potential acquisition of CBSC.
The AMCORE Board and Executive Committee also considered corporate
governance issues related to the transaction, including the resignation of FNB's
president and chief executive officer and qualifications with respect to senior
management of the combined entity following the Merger.
The foregoing discussion of the information and factors considered by the
AMCORE Board and the Executive Committee is not intended to be exhaustive, but
includes the material factors considered by the AMCORE Board and the Executive
Committee in approving the Merger.
REASONS FOR MERGER -- FNB
FNB's Board of Directors believes that the proposed Merger between FNB and
AMCORE is fair and in the best interests of FNB and the FNB Stockholders. In
approving the Merger Agreement, the FNB Board considered a variety of factors,
although it did not assign any relative or specific weight to any factor. Among
the factors considered were the following material factors:
(1) Consolidation of the banking industry has made it increasingly
difficult for the smaller financial institutions, such as FNB, to compete.
Larger institutions continue to hold the competitive advantages of
efficiencies of size, broad range of products, and the effective use of
technology. The strategy of trying to be all things to all customers is
beyond the means of smaller institutions.
(2) The constant changes within the technology environment require
significant investment of capital to keep abreast of changes. The technical
requirements in personnel and required investment in fixed assets may
continue to grow at a rate that could overwhelm small institutions'
resources. Larger institutions, such as AMCORE, can provide more capital to
invest in technology to provide the products and efficiency gains that are
needed in the financial industry. AMCORE has made a significant investment
in technology over the last two years and appears poised to see the
benefits of this investment. These benefits should include better customer
service, higher customer retention, increased sales and improved earnings
for shareholders.
(3) Regulatory requirements continue to reduce the time that
management can devote to the process of operating the financial institution
for the benefit of its customers and shareholders. Larger institutions can
more readily spread the cost of the necessary expertise over a large base
and thereby reduce proportionate regulatory expenses to an acceptable level
for the institution and the shareholder.
(4) Growth of smaller financial institutions is also limited by the
lack of access to financial markets. Capital is more costly and more
difficult to obtain for the smaller institution. Stockholders need not only
be concerned with cost of capital to institutions in which they invest, but
also with the existence of a broad, liquid market for their stock. AMCORE
provides access to private capital markets and through the NASDAQ, to the
stock market.
(5) The solicitation and bid process undertaken by FNB to identify the
most desirable bidders for FNB was comprehensive and thorough and, the FNB
Board believes, provides a reasonable basis to conclude that the
consideration offered by AMCORE represents fair value to the FNB
Stockholders. FNB received and evaluated bids from three potential
acquirors before selecting AMCORE's proposal.
(6) The FNB Board received an oral opinion on October 30, 1996 and a
written opinion dated November 6, 1996 from Baird, the financial advisor to
FNB, stating that, subject to the matters set forth
20
<PAGE> 24
therein, the consideration to be received by the FNB Stockholders in the
Merger is fair to the FNB Stockholders from a financial point of view.
Annex I of this Proxy Statement/Prospectus contains a copy of Baird's
written opinion as updated and reconfirmed by Baird on January 10, 1997.
(7) The Merger Agreement permits the FNB Board, in the exercise of its
fiduciary duties, to terminate the Merger Agreement, upon payment by FNB of
a termination fee, as described herein, if FNB were to receive and accept a
more favorable offer submitted by another party prior to the Effective Time
of the Merger.
THEREFORE, THE BOARD OF DIRECTORS OF FNB HAS UNANIMOUSLY APPROVED THE
MERGER AND RECOMMENDS APPROVAL OF THE MERGER BY FNB STOCKHOLDERS.
OPINION OF FNB'S FINANCIAL ADVISOR
In arriving at its recommendation, the FNB Board sought and obtained the
advice of Baird regarding the fairness, from a financial point of view, of the
aggregate consideration to be received by the FNB Stockholders pursuant to the
Merger Agreement. In connection with the review by the FNB Board of the Merger
Agreement, and the consideration to be received by the FNB Stockholders pursuant
thereto, Baird rendered a verbal opinion on October 30, 1996 and a written
opinion on November 6, 1996 (the "Opinion"), to the effect that as of the date
of such opinions, based on Baird's review and assumptions and subject to the
limitations described therein, the consideration to be paid to the FNB
Stockholders pursuant to the Merger Agreement was fair from a financial point of
view to the FNB Stockholders. Baird updated and reconfirmed its Opinion on
January 10, 1997.
A COPY OF THE UPDATED AND RECONFIRMED BAIRD OPINION, WHICH SETS FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE SCOPE OF REVIEW
UNDERTAKEN BY BAIRD, IS ATTACHED AS ANNEX I TO THIS PROXY STATEMENT/PROSPECTUS.
THE BAIRD OPINION IS DIRECTED ONLY TO THE FAIRNESS OF THE EXCHANGE FROM A
FINANCIAL POINT OF VIEW AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY FNB
STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE FNB SPECIAL MEETING.
THE SUMMARY OF THE BAIRD OPINION SET FORTH IN THIS PROXY STATEMENT/PROSPECTUS IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE BAIRD OPINION
ATTACHED AS ANNEX I HERETO. STOCKHOLDERS OF FNB SHOULD READ THE BAIRD OPINION
CAREFULLY AND IN ITS ENTIRETY.
The FNB Board selected Baird as its financial advisor on the basis of
Baird's reputation, substantial experience in transactions similar to the Merger
and familiarity with FNB and its business. Baird is an investment banking firm
which provides financial services in connection with a wide range of business
transactions. As part of its business, it provides investment banking and
financial advisory (including valuation) services in various transactions,
including mergers and acquisitions, negotiated underwriting, competitive
bidding, secondary distributions of listed and unlisted securities, private
placements, and valuations for estate, corporate and other purposes.
In connection with its Opinion, Baird reviewed a draft of the Merger
Agreement and stock option agreements; audited financial statements and
management's discussion and analysis of the financial condition and results of
operation of each FNB and AMCORE for the three fiscal years ended December 31,
1995, December 31, 1994 and December 31, 1993 respectively; AMCORE's proxy
statement dated March 28, 1996; AMCORE's unaudited interim financial statements
on form 10-Q and financial estimates and analysis prepared by management of
AMCORE and FNB. Additionally, Baird held discussions with management of AMCORE
and FNB concerning their view regarding past and future business operations and
their subsidiaries. Baird also reviewed reported price and trading history for
AMCORE Common Stock including a comparison of certain financial and stock market
information for AMCORE with similar information for certain other companies, the
securities of which are publicly traded. In developing its Opinion, Baird
performed a number of analyses. These analyses included but were not limited to
an analysis of FNB's audited financial statements for the past five years, an
analysis of comparable prices and terms governing recent
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business combinations in the financial institutions industry, a comparison of
earnings forecasts and budgets of FNB, a comparison of the contribution made by
each company to the pro-forma combined institution in terms of assets, deposits
and income and dilution analyses. Baird believes, based on its experience as an
investment banking firm and its specific expertise valuing financial
institutions, that its methods are the most effective means of establishing the
fairness of a transaction from a financial point of view.
Baird has relied on the completeness and accuracy of the financial records
and other information reviewed by it for purposes of the Opinion, and has not
independently verified such information or conducted or ordered or been
furnished with any independent appraisals of AMCORE's or FNB's assets or
liabilities, including real property. Baird's Opinion is based on the economic
and market data that prevailed as of the date of its Opinion and the date of its
updated and reconfirmed Opinion.
The Opinion was rendered without regard to the necessity for, or level of,
any restrictions, obligations or undertakings which may be imposed or required
in the course of obtaining regulatory approvals for the Merger.
In connection with its Opinion on the consideration to be received pursuant
to the Merger Agreement and the presentation of that opinion to the FNB Board,
Baird performed several analyses with respect to FNB. They included:
- A Peer Group Analysis of AMCORE.
- Stock trading history of AMCORE.
- Analysis of FNB's value compared to comparative prices and terms of three
separate groups of comparative transactions.
- Analysis of earnings per share and book value of the pro forma combined
entity as compared to AMCORE and FNB.
- A comparison of the resulting ownership of FNB's and AMCORE's
shareholders in the resulting institution against each company's
contribution in terms of Assets, Deposits and Income.
- A discounted cash flow analysis for FNB.
The following presents a summary of the material analysis used in
connection with providing its Opinion to FNB. This summary is not intended to be
a complete description of all of the analysis performed by Baird.
Peer Group Comparison and Trading History of AMCORE. Comparative financial
statistics were reviewed in order to compare AMCORE to 30 of its midwestern
peers with assets between $1 and $5 billion. In addition, Baird reviewed the
trading price and volume of AMCORE's stock. Particular attention was given to
the two-year period, at monthly intervals, leading up to the date of the
fairness opinion. Baird evaluated AMCORE against all NASDAQ banking stocks as a
group.
Comparative Transaction Analysis. Baird performed three analyses of
premiums paid for selected banks with comparable characteristics to FNB.
- Wisconsin Comparative Group -- Selected Wisconsin bank transactions
announced since 1/1/93 (28 transactions).
- Midwestern Comparative Group -- Selected midwestern bank transactions
with assets between $150-$300 million in assets announced since 1/1/94
(25 transactions).
- National Comparative Group -- Selected bank transactions with assets
between $150-$300 million in assets announced since 1/1/96 (28
transactions).
Baird used price to book, price to tangible book, price to earnings and
premium to core deposit multiples from these comparative groups to analyze
pricing ranges for FNB.
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The following briefly summarizes the general trends of each comparative
group of transactions.
Wisconsin Comparative Group. For this group of transactions, the median
transaction value was 166.5% of book value and the average was 172.9% of book
value. The transaction values ranged from a high of 234.4% of book value to a
low of 120.6% of book value. Price to tangible book multiples ranged from 120.6%
to 288.7% with a median of 165.2% and an average of 174.8%. The median price to
earnings multiple was 14.03x trailing 12 month earnings and the average was
14.83x trailing 12 month earnings. The high price-earnings multiple was 29.84x
trailing 12 month earnings and the low was 6.70x. As a premium to core deposits,
the median premium was 8.57% and average was 8.67%. Premium to core deposits
values ranged from a high of 17.83% to a low of 2.21%.
Midwestern Comparative Group. The median price-book ratio of the
consideration paid was 169.6% and the average was 177.5%. Price-book ratios
ranged from a high of 258.7% to a low of 131.5%. Price to tangible book
multiples ranged from 134.4% to 322.4% with a median of 173.5% and an average of
188.0%. The median price to earnings multiple was 14.68x trailing 12 month
earnings and the average was 17.12x. Pricing ranged from a high price-earnings
multiple of 53.55x to a low of 9.71x. Core deposit premium ratios ranged from
4.74% to 20.43% with a median value of 8.79% and an average of 9.14%.
National Comparative Group. The median price-book ratio of the
consideration paid was 184.4% and the average was 187.9%. Price-book ratios
ranged from a high of 251.9% to a low of 90.0%. Price to tangible book multiples
ranged from 121.7% to 256.0% with a median of 187.1% and an average of 190.1%.
The median price to earnings multiple was 17.26x trailing 12 month earnings and
the average was 19.46x. Pricing ranged from a high price-earnings multiple of
52.86x to a low of 5.43x. Core deposit premium ratios ranged from 2.01% to
28.77% with a median value of 10.67% and an average of 11.01%.
By comparison, the consideration paid for FNB in the transaction
represented, assuming a share price for AMCORE Common Stock of $20.50, is 203.7%
of book value, 208.5% of tangible book value, 14.71x trailing 12 month earnings,
and an 11.20% premium to core deposits.
As no comparative group or transaction from any comparative group is
identical to the Merger, Baird indicated to the FNB Board that the analyses
described above are not mathematical, but rather involve complex considerations
and judgments concerning differences in operating and financial characteristics
including, among other things, differences in revenue composition and earnings
performance among FNB and AMCORE and the selected companies and transactions
reviewed.
Pro Forma Merger Analysis. Baird performed a pro forma merger analysis
which combined FNB's and AMCORE's income statements and balance sheets.
Operating assumptions, estimated merger synergies and other adjustments were
made based on discussions with management of FNB and AMCORE and assumptions and
analysis regarding the economic environment and assumptions regarding
identifiable trends, including regulatory trends, in the financial service
business were made to assess the pro forma combined institution. Baird noted
slight earnings per share dilution for AMCORE shareholders in the first year,
disregarding cost saving assumptions. Baird also noted slight book value and
tangible book value dilution to AMCORE as a consequence of this transaction.
Assumptions regarding trends in the financial services businesses, actual
results may vary from Baird's analysis due to actual deviation from these
assumptions.
The annual indicated dividend of AMCORE is 0.64 per share. Based upon an
exchange ratio of 7.54 shares of AMCORE for each share of FNB, the annual
indicated dividend will be $4.83 compared with $2.65 per share for FNB in 1996,
an increase of $2.18 per FNB share.
Discounted Cash Flow Analysis. Baird calculated FNB's value based upon a
discounted cash flow analysis at discount rates ranging from 9.00% to 11.00%
based on a cost of capital of 9.84%. The cost of capital, and thus the discount
rates, are lower than is typical of the banking industry because of a low beta
for FNB due to the lack of liquidity of FNB Common Stock. The analysis was based
on FNB's earnings of $2,626,000 for the last twelve months and an income growth
rate of 7.0% annually. Terminal values were calculated based upon mean and
median price to earnings ratios of 14.03x and 14.83x applied to year nine
projected earnings. This analysis yields per share values of between $176.15 and
$202.28 for FNB Common Stock.
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<PAGE> 27
In performing its analyses, Baird made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of FNB. These analyses are not
necessarily indicative of actual values or actual future results, which may be
significantly more or less favorable than suggested by such analyses. Such
analyses were prepared solely as part of Baird's analysis of the fairness to FNB
Stockholders from a financial point of view and are provided to the FNB Board in
connection with the delivery of the Opinion. The analyses do not purport to be
appraisals or to reflect the prices at which a company might actually be sold or
the prices at which any securities may trade at the present time or at any time
in the future. In addition, as described above, the Opinion and presentation to
the FNB Board is just one of the many factors taken into consideration by the
FNB Board.
The summary of the Opinion set forth above provides a description of the
material elements of Baird's discussion with the FNB Board. It does not purport
to be a complete description of the presentation of Baird to the FNB Board or
the analyses performed by Baird. The preparation of a fairness opinion is not
necessarily susceptible to partial analysis or summary description. Baird
believes that its analyses and the summary set forth above must be considered as
a whole and that selecting portions of its analyses, without considering all
analyses, or selecting part or all of the above summary, without considering all
factors and analyses would create an incomplete view of the procedures
underlying the analysis set forth in the Baird presentation and the Opinion. In
addition, the ranges of valuations resulting from any particular analysis
described above should not be taken to be Baird's view of the actual value of
FNB. The fact that any specific analysis has been referred to in the summary
above is not meant to indicate that such analysis was given more weight than any
other analysis.
In its analyses, Baird made numerous assumptions with respect to FNB,
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of FNB. The
estimates contained in such analyses are not necessarily indicative of actual
values or predicative of future results or values, which may be significantly
more or less favorable than those suggested by such analyses. In addition,
analyses relating to the value of businesses or securities do not purport to be
appraisals or to reflect the price at which business or securities actually may
be sold. Accordingly, such analyses and estimates are inherently subject to
substantial uncertainty.
Based on these measurements and other analyses conducted by Baird, Baird
concluded that the Merger is fair from a financial point of view to the FNB
Stockholders. Baird's Opinion does not address the relative merits of the Merger
and any other potential transactions or business strategies considered by the
FNB Board, and does not constitute a recommendation to any FNB Stockholder as to
how any such FNB Stockholder should vote with respect to the Merger.
Pursuant to an agreement dated April 4, 1996 between FNB and Baird, FNB has
agreed to pay Baird $35,000 as a fairness opinion fee. If the Merger is
consummated, FNB will pay Baird a transaction fee of $40,000 plus 125 basis
points of the value of the transaction exceeding $34,000,000. Baird also is to
receive reimbursement for its out of pocket expenses related to this
transaction. Additionally, FNB has agreed to indemnify Baird against certain
liabilities, including liabilities under the federal securities laws, incurred
in connection with the engagement of Baird by FNB.
In the ordinary course of its business, Baird may from time to time trade
the securities of FNB or AMCORE for its own account or the accounts of its
customers and accordingly, may at any time hold long or short positions in such
securities.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain directors and officers of FNB may be deemed to have interests in
the Merger in addition to their interest solely as FNB Stockholders, as
described below.
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OFFICERS OF THE SURVIVING CORPORATION
The Merger Agreement provides that the directors of Newco and the officers
of FNB immediately prior to the Effective Time, with the exception of Thomas J.
Wilkinson, will become the officers of the surviving corporation. See "THE
MERGER -- Management and Operations of FNB after the Merger."
WILKINSON AGREEMENT
FNB has in effect a severance agreement with Thomas J.Wilkinson, president
and chief executive officer of FNB. Pursuant to the Amended Agreement and
Release, dated October 29, 1996, among FNB, the Bank, their respective Boards
and Mr. Wilkinson (the "Wilkinson Agreement"), Mr. Wilkinson's employment with
FNB will be terminated immediately prior to the Effective Time of the Merger.
The Wilkinson Agreement provides severance benefits to Mr. Wilkinson in the
event of termination in a lump sum cash payment equal to (i) one year's salary
of $160,000, less any amount paid to Mr. Wilkinson since July 31, 1996, provided
that such lump sum amount shall be at least $80,000, plus (ii) any accrued and
unpaid 1996 bonus due Mr. Wilkinson. Mr. Wilkinson's salary, bonuses and other
benefits shall terminate upon termination of his employment, subject to any
applicable requirements of law.
STOCK OPTIONS
FNB has a stock option plan covering certain key employees as designated by
the FNB Board. The option price per share is an amount at least equal to the
book value per share at year-end immediately preceding the date the option is
granted. The maximum term of an option may not exceed five years after the date
on which the option becomes exercisable. A tax bonus may also be granted in
conjunction with the option that is payable to the participant upon exercise of
the option. Currently, there are 5,000 awarded but unexercised options, all held
by Mr. Wilkinson.
The Merger Agreement provides that each option awarded and unexercised must
be exercised prior to the Effective Time. Any options unexercised prior to the
Effective Time will lapse at the Effective Time. Pursuant to the Wilkinson
Agreement, Mr. Wilkinson, the sole holder of stock options, has agreed to
exercise all options prior to the Effective Time and has acknowledged that any
options not so exercised will lapse at the Effective Time. See "THE MERGER
AGREEMENT -- Conversion of Shares and Exchange Ratio." No stock options are
being granted in connection with the Merger.
DEFERRED COMPENSATION PLANS FOR OFFICERS AND DIRECTORS
FNB maintains a deferred compensation plan (the "FNB Director Deferred
Compensation Plan") under which directors of FNB are entitled to defer receipt
of directors fees until a termination of service as a director. Under the terms
of the FNB Director Deferred Compensation Plan, each participating director's
fees are credited to an account under the plan. Each such participating director
may elect (subject to the FNB Board's discretion) to have his or her account
denominated in shares of FNB Common Stock ("Restricted Stock") or in cash. Upon
distribution, the portion of each participating director's account denominated
in shares of FNB Common Stock are distributable in the form of such stock, and
the portion of such account denominated in cash is distributable in cash. Cash
and shares of FNB Common Stock sufficient to fund benefits under the plan are
contributed to and held by a trust for the benefit of the participating
directors. The trust held 8,748 shares of FNB Common Stock as of September 30,
1996.
Similarly, the Bank maintains a deferred compensation retirement plan (the
"FNB&T Deferred Compensation Retirement Plan") under which certain eligible Bank
officers denominated by the Bank's board of directors are entitled to defer
receipt of incentive compensation until termination of employment. Amounts
deferred under the plan for each participating officer are based on the return
on average assets of the Bank. Under the terms of the FNB&T Deferred
Compensation Retirement Plan, each participating officer's account is credited
with an incentive compensation which, at the participant's election (subject to
the Bank's board of directors), is denominated in shares of FNB Common Stock or
in cash. Upon distribution, the portion of each participating officer's account
denominated in shares of FNB Common Stock are distributable in the form of such
stock, and the portion of such account denominated in cash is distributable in
cash. Cash and shares of
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FNB Common Stock sufficient to fund benefits under the plan in the form of FNB
Common Stock are contributed to and held by a trust for the benefit of
participating officers. The trust held 6,665 shares of FNB Common Stock as of
September 30, 1996.
Pursuant to amendments to the FNB Director Deferred Compensation Plan and
the FNB&T Deferred Compensation Retirement Plan, each dated October 25, 1996,
deferral amounts credited after October 25, 1996, will be expressed either in
dollars, or an equivalent number of shares of FNB Common Stock, based on the
lesser of the year-end book value of FNB on a fully diluted basis or the fair
market value of the FNB Common Stock, as determined at the FNB Board's
discretion with respect to the FNB Directors Deferred Compensation Plan, and the
Bank's board of directors with respect to the FNB&T Deferred Compensation
Retirement Plan. The Merger Agreement provides that the aggregate number of
shares of FNB Common Stock that may be credited to participant accounts as of
December 31, 1996, under both Plans may not exceed a total of 2,450 shares.
Accordingly, any shares remaining after the available shares are first credited
to participant accounts under the FNB&T Deferred Compensation Retirement Plan
shall then be credited to participant accounts under the FNB Director Deferred
Compensation Plan on a pro rata basis, and any remaining amounts required to be
credited to participant accounts under the FNB Directors Deferred Compensation
Plan shall be denominated in cash. Effective January 1, 1997, all deferred
amounts under both plans shall be denominated exclusively in cash.
INDEMNIFICATION
Pursuant to the Merger Agreement, AMCORE has agreed to indemnify the
executive officers and directors of FNB and its subsidiaries for a period of six
years after the Effective Time to the same extent such persons are currently
indemnified pursuant to FNB's Articles of Incorporation and Bylaws. AMCORE has
agreed to provide directors' and officers' liability insurance for a period of
not less than three years after the Merger that provides coverage for events
occurring prior to the Effective Time and is in the aggregate no less favorable
than FNB's existing policy, provided that AMCORE will not be required to pay
annual premiums in excess of $20,000.
The AMCORE Board and the FNB Board were each aware of these interests and
considered them, among other matters, in approving the Merger Agreement and the
transactions contemplated thereby. Neither AMCORE nor FNB is aware of any other
manner in which directors or executive officers of AMCORE or FNB will benefit
from consummation of the Merger other than in their capacities as stockholders
of the respective companies to the extent that it will affect their stock of
FNB.
STOCKHOLDER VOTING AGREEMENTS
Concurrent with the execution of the Merger Agreement, AMCORE, FNB and each
of the directors and executive officers of FNB executed a separate Stockholder
Voting Agreement (each a "Voting Agreement," and collectively, "Voting
Agreements") by which each such person agreed that he will vote all shares of
FNB Common Stock owned or subsequently acquired in favor of the Merger and the
Merger Agreement at any meeting of FNB Stockholders. Additionally, until the
earliest to occur of the Effective Time of the Merger, the termination of the
Voting Agreements or the abandonment of the Merger, each such person agreed that
he will not vote any such shares in favor of the approval of any other action,
proposal or agreement which would result in conditions under the Merger
Agreement not being fulfilled or against any extraordinary corporate
transaction, or sale or transfer of subsidiaries. Each such stockholder also
agreed not to transfer shares of FNB Common Stock owned by such person without
the prior written consent of AMCORE and to the entry of stop transfer
instructions with FNB against the transfer of such shares. The Voting Agreements
are also intended to govern the rights of the directors and executive officers
to instruct the trustees of the trusts established pursuant to the FNB Director
Deferred Compensation Plan and the FNB&T Deferred Compensation Retirement Plan
in voting the shares of FNB Common Stock which are held in such trusts and which
are attributable to the accounts of such directors and executive officers under
such plans. The Voting Agreements will terminate upon the termination of the
Merger Agreement or at the Effective Time. As of the Record Date, persons who
had executed Voting Agreements owned beneficially an aggregate of 67,481 shares
of FNB Common Stock, or approximately 27.0% of the issued and outstanding
shares.
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The foregoing summary of the Voting Agreements is qualified in its entirety
by the text of the Voting Agreements, the form of which is attached as Exhibit B
to Annex II hereto and which is incorporated herein by reference.
MANAGEMENT AND OPERATIONS OF FNB AFTER THE MERGER
The Merger Agreement provides that, on the Closing Date, Newco will be
merged with and into FNB. The surviving entity will be FNB and the separate
corporate existence of Newco will terminate. As a result of the Merger, the
surviving corporation will become and be operated as a wholly-owned subsidiary
by AMCORE, and the Bank, which is now owned by FNB, will be controlled by
AMCORE.
The directors of Newco and the officers of FNB immediately prior to the
Merger, with the exception of Thomas J. Wilkinson, will continue as the
directors and officers of the surviving corporation following the Merger. After
the Merger, AMCORE contemplates that FNB will continue to maintain its separate
corporate identity and name, and that the officers of the surviving corporation
will be the same individuals who currently serve as FNB's officers. Following
the Merger, AMCORE will manage and direct the operations of the Bank as it
manages and directs its present bank subsidiaries.
REGULATORY APPROVAL
The Merger is subject to prior approval by the Federal Reserve Board under
the BHCA, which requires that the Federal Reserve Board take into consideration
the financial and managerial resources and future prospects of the respective
institutions and the convenience and needs of the communities to be served. The
BHCA prohibits the Federal Reserve Board from approving the Merger if it would
result in a monopoly or be in furtherance of any combination or conspiracy to
monopolize or to attempt to monopolize the business of banking in any part of
the United States, or if its effect in any section of the country may be
substantially to lessen competition or to tend to create a monopoly, or if it
would in any other manner be a restraint of trade, unless the Federal Reserve
Board finds that the anti-competitive effects of the Merger are clearly
outweighed in the public interest by the probable effect of the transaction in
meeting the convenience and needs of the communities to be served. The Federal
Reserve Board has the authority to deny an application if it concludes that the
combined organizations would have an inadequate capital position. Furthermore,
the Federal Reserve Board must also assess the records of the depository
subsidiaries of AMCORE and FNB under the Community Reinvestment Act of 1977, as
amended (the "CRA"). The CRA requires that the Federal Reserve Board analyze,
and take into account when evaluating an application, each depository
institution's record of meeting the credit needs of its local communities,
including low and moderate-income neighborhoods, consistent with safe and sound
operation. See "SUPERVISION AND REGULATION."
Under the BHCA, the Merger may not be consummated until the 30th day
following the date of Federal Reserve Board approval, during which time the
United States Department of Justice may challenge the Merger on antitrust
grounds. The commencement of an antitrust action would stay the effectiveness of
the Federal Reserve Board's approval unless a court specifically orders
otherwise. With the approval of the Federal Reserve Board and the Department of
Justice, the waiting period may be reduced to no less than fifteen days. The
BHCA provides for the publication of notice and public comment on the
application and authorizes the regulatory agency to permit interested parties to
intervene in the proceedings. See "SUPERVISION AND REGULATION."
The Merger is also subject, under the Wisconsin Statutes, to the approval
of the State of Wisconsin, Department of Financial Institutions, Division of
Banking.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary description of the material federal income tax
consequences of the Merger to the FNB Stockholders. The discussion is based upon
the provisions of the Code, applicable Treasury Regulations promulgated
thereunder, judicial decisions and administrative rulings and practices, all as
in effect on the date of this Proxy Statement/Prospectus and all of which are
subject to possible prospective or
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<PAGE> 31
retroactive change. The discussion does not address any state, local or foreign
income or other tax consequences of the Merger.
The following discussion is not a complete description of all of the
federal income tax consequences of the Merger to FNB Stockholders, and, in
particular, does not address all aspects of federal income taxation that may be
relevant to a particular FNB Stockholder in light of such holder's personal
investment or tax circumstances, or to an FNB Stockholder that is subject to
special treatment under the federal income tax laws (including life insurance
companies, foreign persons, tax-exempt entities, financial institutions, broker-
dealers, or holders who acquired FNB Common Stock pursuant to the exercise of
employee stock options or otherwise as compensation). In addition, no
information is provided as to the tax consequences of the Merger to any FNB
Stockholder who exercises and perfects dissenters' rights. The discussion
further assumes that the FNB Common Stock will be held as capital assets by the
FNB Stockholders at the Effective Time of the Merger. EACH FNB STOCKHOLDER IS
ADVISED TO CONSULT SUCH HOLDER'S OWN TAX ADVISOR AS TO THE SPECIFIC TAX
CONSEQUENCES TO SUCH HOLDER OF THE MERGER, INCLUDING THE APPLICATION AND EFFECT
OF STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
The consummation of the Merger is conditioned, among other things, upon the
receipt by FNB of an opinion of Jones, Day, Reavis & Pogue, special counsel to
FNB, to the effect that the Merger will be treated as a tax-free reorganization
under Section 368(a) of the Code. Such opinion, which will be dated the Closing
Date, will be based upon certain customary representations that are expected to
be made at the Effective Time of the Merger by executives of FNB and AMCORE and
by certain FNB Stockholders, and will be subject to certain customary
assumptions and limitations set forth therein. It should be noted that a ruling
will not be sought from the IRS regarding the Merger. The opinion of counsel
referred to above will not be binding on the IRS, and the IRS may disagree with
the conclusions expressed in such opinion.
Jones, Day, Reavis & Pogue, special counsel to FNB, has advised FNB that,
in accordance with its opinion referred to above, the material federal income
tax consequences of the Merger to the FNB Stockholders will be as follows:
(i) No gain or loss will be recognized by an FNB Stockholder upon the
conversion of the holder's shares of FNB Common Stock solely into shares of
AMCORE Common Stock pursuant to the Merger. An FNB Stockholder that
receives cash in lieu of a fractional share of AMCORE Common Stock will
recognize gain or loss, which will be capital gain or loss, equal to the
difference between the amount of cash received and the ratable portion of
the holder's tax basis in the shares of FNB Common Stock being converted
pursuant to the Merger that is allocable to such fractional share.
(ii) The aggregate tax basis of the shares of AMCORE Common Stock
received by a former FNB Stockholder pursuant to the Merger will be the
same as the holder's aggregate tax basis in the shares of FNB Common Stock
being converted pursuant to the Merger, reduced by the ratable portion of
such tax basis that is allocable to any fractional share of AMCORE Common
Stock with respect to which cash is being received.
(iii) The holding period of the shares of AMCORE Common Stock received
by a former FNB Stockholder pursuant to the Merger will include the
holder's holding period with respect to the shares of FNB Common Stock
being converted pursuant to the Merger.
ACCOUNTING TREATMENT OF THE MERGER
It is anticipated that the acquisition of FNB will be accounted for as a
"pooling-of-interests" transaction under generally accepted accounting
principles. Under such accounting method, holders of FNB Common Stock will be
deemed to have combined their existing voting common stock interest with that of
holders of AMCORE Common Stock. Accordingly, the book value of the assets,
liabilities and stockholders' equity of FNB will be carried over to the
consolidated balance sheet of AMCORE and no goodwill will be created. In order
for the Merger to qualify for pooling-of-interests accounting treatment, among
other criteria, substantially all (90% or more) of the outstanding FNB Common
Stock must be exchanged for AMCORE Common Stock.
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The Merger is conditioned upon the receipt by AMCORE of a letter from
McGladrey and Pullen, LLP to the effect that the Merger qualifies for
pooling-of-interests accounting treatment. See "THE MERGER AGREEMENT --
Conditions to the Merger."
The unaudited pro forma combined financial information contained in this
Proxy Statement/Prospectus has been prepared using the pooling-of-interests
accounting method to account for the Merger. See "PRO FORMA COMBINING FINANCIAL
INFORMATION."
RIGHTS OF DISSENTING STOCKHOLDERS
Under the provisions of Section 180.1301 et seq. of the WBCL, a copy of
which is attached to this Proxy Statement/Prospectus as Annex III, any holder of
record or beneficial stockholder of FNB Common Stock has the statutory right to
dissent from the Merger and obtain payment of the fair value of his or her
shares in cash. However, certain stockholders of FNB have contractually agreed
with AMCORE to vote in favor of the Merger. See "THE MERGER -- Stockholder
Voting Agreements." Any holder electing to exercise his or her statutory
dissenters' rights must deliver written notice of his or her intent to demand
payment for his or her shares to FNB and not vote in favor of the Merger
Agreement. Such notice must be delivered to FNB before the vote on the Merger
Agreement is taken. Further, AMCORE's obligations under the Merger Agreement are
conditioned upon holders of not more than six percent of FNB Common Stock
outstanding as of the Record Date having undertaken steps to perfect their right
to object under the WBCL. A stockholder may object as to less than all of the
shares registered in his or her name only if the stockholder dissents with
respect to all shares beneficially owned by any one person and notifies FNB in
writing of the name and address of each person on whose behalf he or she asserts
dissenters' rights, subject to the provisions of Section 180.1303 of the WBCL.
A PROXY OR VOTE AGAINST THE MERGER AGREEMENTS WILL NOT, OF ITSELF, BE
REGARDED AS A WRITTEN NOTICE OF INTENT TO DEMAND PAYMENT FOR PURPOSES OF
ASSERTING DISSENTERS' RIGHTS.
The Effective Time of the Merger will occur upon the filing with of the
Articles of Merger with the Department of Financial Institutions of the State of
Wisconsin. Within 10 days of the Effective Time, FNB will give a written
dissenters' notice to each dissenting stockholder who has made demand in
accordance with Section 180.1321(1), containing a form for demanding payment, a
statement indicating where the holder must send the payment demand, an
explanation of the extent to which the transfer of shares will be restricted
after the payment demand is received and a date by which the payment demand must
be received by FNB. A holder to whom a dissenters' notice is sent, must demand
payment in writing and certify whether he or she acquired beneficial ownership
of the shares before the date specified in the dissenters' notice.
As soon as the Merger is effected or upon receipt of a demand for payment,
whichever is later, FNB will pay each holder who has complied with the
provisions of Section 180.1301 et seq. the amount that the corporation estimates
to be the fair value of the holder's shares, plus accrued interest. Such payment
will be accompanied by a copy of FNB's latest available financial statement, a
statement of the corporation's estimate of the fair value of the shares, an
explanation of how the interest was calculated, a statement of the dissenter's
right to demand payment under Section 180.1328 of the WBCL if he or she is
dissatisfied with the payment and a copy of Sections 180.1301 to 180.1331 of the
WBCL.
FNB may elect to withhold the payment required by Section 180.1325 from a
dissenter unless the dissenter was the beneficial owner of the shares before the
date specified in the dissenter's notice under Section 180.1322(2)(c) as the
date of the first announcement to news media or to stockholders of the terms of
the Merger. To the extent FNB makes such an election, it must estimate the fair
value of the shares, plus accrued interest and pay that amount to each dissenter
who agrees to accept it in full satisfaction of his or her demand. FNB will send
with its offer a statement of its estimate of the fair value of the shares, an
explanation of how the interest was calculated and a statement of the
dissenter's right to demand payment under Section 180.1328 if the dissenter is
dissatisfied with the offer.
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Any dissenter may notify the corporation of his or her estimate of the fair
value of his or her shares and demand payment of such estimate less any payment
received from the corporation or reject the corporation's payment or offer of
payment for any one of the following reasons: (i) the dissenter believes that
the amount paid or offered by the corporation is less than the fair value of his
or her shares or that the accrued interest is incorrectly calculated; (ii) the
corporation fails to make the payment within 60 days after the date for
demanding payment set out in the dissenters' notice; or (iii) FNB fails to
effect the Merger and does not return the deposited shares within 60 days of the
date set for demand of payment.
In the event any holder of FNB Common Stock fails to comply strictly with
the applicable statutory requirements, he or she will be bound by the terms of
the Merger Agreement and will not be entitled to payment for his or her shares
under such statute. ANY HOLDER OF FNB COMMON STOCK WHO WISHES TO OBJECT TO THE
MERGER AND DEMAND PAYMENT FOR HIS OR HER SHARES OF FNB COMMON STOCK SHOULD
CONSIDER CONSULTING HIS OR HER OWN LEGAL ADVISOR.
Since an executed proxy relating to FNB Common Stock on which no voting
direction is made will be voted at the Special Meeting in favor of the Merger
Agreement, an objecting stockholder who wishes to have his or her shares of FNB
Common Stock represented by proxy at the Special Meeting but preserve his or her
rights of appraisal must mark his or her proxy either to vote against the Merger
Agreement or to abstain from voting thereon, make the required objection and
demand, and make the required submission of stock certificates as described
herein.
The foregoing, while a summary of all material provisions of Section
180.1301 et seq. of the WBCL, is qualified in its entirety by reference to the
text of such statutory provision, which is set forth in Annex III hereto.
RESALE OF AMCORE COMMON STOCK
The shares of AMCORE Common Stock to be issued in the Merger to holders of
FNB Common Stock will be issued pursuant to a Registration Statement under the
Securities Act, and thus may be freely traded by holders of FNB Common Stock,
who are not "affiliates" of FNB (and are not affiliates of AMCORE at the time of
the proposed resale). Pursuant to the Merger Agreement, AMCORE has received a
written undertaking from each person FNB identified to AMCORE as a shareholder
who is an executive officer or director of FNB or a holder of 5% or more of the
outstanding FNB Common Stock, to the effect that (a) such person will not sell
or dispose of AMCORE Common Stock acquired by such person in the Merger, except
(i) under a separate registration for distribution (which AMCORE has not agreed
to provide), or (ii) pursuant to Rule 145 promulgated under the Securities Act,
or (iii) pursuant to some other exemption from registration; and (b) such person
will not otherwise dispose of the AMCORE Common Stock or otherwise reduce his or
her risk relative to the AMCORE Common Stock (i) during the 30-day period
immediately preceding the Effective Time or (ii) prior to the publication by
AMCORE of an earnings statement covering at least 30 days of combined operations
after the Closing Date.
THE MERGER AGREEMENT
TERMS
At the Effective Time, Newco will merge with and into FNB, with FNB as the
surviving corporation, and FNB will become a wholly-owned subsidiary of AMCORE.
At the Effective Time, each outstanding share of FNB Common Stock will be
converted into 7.54 shares of AMCORE Common Stock, subject to adjustment in
certain circumstances as described herein and subject to statutory dissenters'
rights. See "THE MERGER AGREEMENT -- Conversion of Shares and Exchange Ratio"
and "THE MERGER -- Rights of Dissenting Stockholders."
The Articles of Incorporation and the By-Laws of Newco in effect at the
Effective Time will govern the surviving corporation until amended or repealed
in accordance with applicable law. The directors of Newco and the officers of
FNB (other than Mr. Wilkinson) immediately prior to the Effective Time will be
the directors and officers of the surviving corporation, each of such directors
and officers to hold office in
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accordance with the Articles of Incorporation and By-laws of the surviving
corporation. The terms of the Merger were determined on the basis of
arm's-length negotiations. See "THE MERGER -- Management and Operations of FNB
After the Merger."
DATE OF MERGER
Under the BHCA, the Merger requires the prior approval of the Federal
Reserve Board. The Merger cannot take effect before the 30th calendar day or,
absent an extension granted by the Federal Reserve Board, later than three
months following the date of approval by the Federal Reserve Board. With the
approval of the Federal Reserve Board and the Department of Justice, the waiting
period may be reduced to no less than fifteen days. In addition, the Merger must
be approved by the State of Wisconsin, Department of Financial Institutions. See
"THE MERGER -- Regulatory Approval"; and "THE MERGER AGREEMENT -- Conditions to
the Merger."
Under the Merger Agreement, the Merger will occur within five days of
satisfaction of all of the conditions to the Merger, including the expiration of
the statutory waiting period after Federal Reserve Board approval, or on such
date as AMCORE and FNB may both agree to, and will take effect upon the date
Newco and FNB file the Articles of Merger. There can be no assurances as to if
or when such approvals will be obtained or that the Merger will be consummated.
If the Merger is not effected on or before June 30, 1997, the Merger Agreement
may be terminated by either AMCORE or FNB. See "THE MERGER -- Conditions to the
Merger" and "-- Termination."
The Merger will become effective upon the filing of the Articles of Merger
to be filed with the Department of Financial Institutions of the State of
Wisconsin. It is anticipated that such filing will be made immediately after the
closing under the Merger Agreement.
CONVERSION OF SHARES AND EXCHANGE RATIO
At the Effective Time of the Merger, all the issued and outstanding shares
of FNB Common Stock, except any Dissenting Shares, will be acquired in exchange
for AMCORE Common Stock or cash in lieu of any fractional shares of AMCORE
Common Stock. Each outstanding share of FNB Common Stock will be converted into
7.54 shares of AMCORE Common Stock, subject to adjustment in certain
circumstances as described below and subject to statutory dissenters' rights.
See "THE MERGER -- Rights of Dissenting Stockholders." The shares of AMCORE
Common Stock issued and outstanding immediately prior to the Effective Time will
remain issued and outstanding.
Each option granted by FNB to acquire FNB Common Stock that is outstanding
and unexercised immediately prior the Effective Time will cease to represent a
right to acquire shares of FNB Common Stock. At the Effective Time all such
options will be cancelled and all rights thereunder will be extinguished. See
"THE MERGER -- Interests of Certain Persons in the Merger."
No fractional shares of AMCORE Common Stock will be issued in the Merger.
Each holder of FNB Common Stock who would otherwise be entitled to receive a
fractional share will receive cash in an amount equal to the cash value of the
fraction, which cash value will be based upon the average market value of AMCORE
Common Stock on the NASDAQ for the five trading days immediately preceding the
date of the Effective Time.
The Merger Agreement provides for an adjustment of the fixed Exchange Ratio
in certain circumstances. In the event that the AMCORE Average Price is less
than $18.00 and FNB notifies AMCORE of its intent to terminate the Merger
Agreement within 15 days following the Special Meeting Date, AMCORE may cancel
such termination by electing to adjust the Exchange Ratio to equal a number
obtained by dividing (i) the amount equal to 135.72 less the Environmental
Reduction Amount, if any, by (ii) the AMCORE Average Price. In the event that
the AMCORE Average Price exceeds $23.00 and AMCORE notifies FNB of its intent to
terminate the Merger Agreement within 15 days following the Special Meeting
Date, FNB may cancel such termination by electing to adjust the Exchange Ratio
to equal a number obtained by dividing (i) the amount equal to 173.42 less the
Environmental Reduction Amount, if any, by (ii) the AMCORE
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Average Price. There can be no assurance that the closing price for AMCORE's
Common Stock on the Effective Date will be equal to the AMCORE Average Price.
Further, pursuant to the terms of the Merger Agreement, if AMCORE's good-faith
estimate of environmental remediation costs related to certain real properties
held or previously held by FNB exceeds $200,000, AMCORE shall have the right to
adjust the Exchange Ratio to equal a number equal to (i)(A) 154.57 less (B) an
amount equal to (1) the amount of such estimate in excess of $200,000 divided by
(2) 249,905 (such difference is referred to herein as the "Environmental
Reduction Amount"), divided by (ii) 20.5. See "THE MERGER AGREEMENT --
Termination."
Within five business days after the Effective Time, FNB or an agent acting
on its behalf (the "Exchange Agent") will send to each holder of FNB Common
Stock a letter of transmittal containing instructions with respect to the
surrender of stock certificates of FNB Common Stock for exchange into one or
more certificates evidencing AMCORE Common Stock, as provided in the Merger
Agreement. Until so surrendered, each outstanding certificate which prior to the
Effective Time represented shares of FNB Common Stock will be deemed for all
purposes to evidence only the right to receive the shares of AMCORE Common Stock
into which such shares of FNB Common Stock have been converted; provided,
however, unless and until such certificates representing FNB Common Stock are so
surrendered, no stock certificates representing the shares of AMCORE Common
Stock, nor any dividends or other distributions of any kind payable in respect
of shares of AMCORE Common Stock into which such FNB Common Stock has been
converted, shall be paid or delivered to the holder of an unsurrendered
certificate and no interest shall be earned on such cash dividend amounts. After
the Effective Time, upon surrender of certificates representing shares of FNB
Common Stock, there shall be delivered to the record holder of the certificates
representing AMCORE Common Stock issued in exchange therefor, on or as soon as
practicable after such date of surrender, the amount of any such dividends, or
other distributions, and the certificates representing the FNB Common Stock,
which as of any date subsequent to the Effective Time, but prior to the
surrender of FNB certificates, became payable or deliverable and were not paid
or delivered to such holder with respect to such shares.
CERTAIN REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains representations and warranties of AMCORE,
Newco and FNB customary for transactions of this nature. These include, among
other things, representations and warranties of AMCORE and Newco as to (i) their
respective due organization, existence, good standing, organizational documents
and similar corporate matters, (ii) their respective capital structures, (iii)
their authority relative to the execution and delivery of, and performance of
their respective obligations under the Merger Agreement, (iv) no prior
activities of Newco, (v) their compliance with applicable laws and the absence
of any (A) conflict with their organizational documents, applicable law or
certain contracts, or (B) governmental or regulatory authorization, consent or
approval required to consummate the Merger, (vi) reports and other documents,
including financial statements, filed by AMCORE with the Commission, (vii) the
absence of material adverse changes since June 30, 1996, (viii) litigation; (ix)
the accuracy of the information supplied for inclusion in this Proxy
Statement/Prospectus, (x) the absence of actions that would jeopardize the
pooling-of-interests treatment, (xi) no current plan to liquidate, merge or sell
the stock of FNB after the consummation of the Merger, and (xii) the absence of
ownership of FNB Common Stock by certain persons.
FNB's representations and warranties with respect to itself and its
subsidiaries include, among other things, those as to (i) their due
organization, existence, good standing, organizational documents and similar
corporate matters, (ii) their respective capital structures, (iii) their
authority relative to the execution and delivery of, and performance of their
obligations under the Merger Agreement, (iv) their compliance with applicable
laws and the absence of any (A) conflict with their organizational documents,
applicable law or certain contracts, or (B) governmental or regulatory
authorization, consent or approval required to consummate the Merger; (v) FNB's
audited consolidated financial statements, (vi) the absence of certain changes
or events since December 31, 1995, (vii) litigation, (viii) the accuracy of
information supplied in this Proxy Statement/Prospectus, (ix) the absence of
actions that would jeopardize the pooling-of-interests treatment; (x) title and
condition of properties, (xi) intellectual property, employee benefit plans, and
insurance matters, (xii) certain contracts and commitments, (xiii) opinion of
financial advisor; (xiv) certain environmental
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matters, (xv) the absence of undisclosed liabilities, (xvi) Affiliate's
Undertakings and Stockholder Voting Agreements, (xvii) tax matters, (xviii)
continuity of interest in FNB Common Stock, (xix) administration of trust
accounts, (xx) allowance for loan and lease losses and non-performing assets,
(xxi) the absence of undisclosed agreements between FNB and directors, officers
and stockholders, and (xxii) certain interest rate management instruments.
CONDUCT OF BUSINESS PENDING THE MERGER
The Merger Agreement provides that FNB and AMCORE will take or refrain from
taking certain actions prior to the Closing Date.
Pursuant to the Merger Agreement, unless AMCORE's prior written consent is
obtained, FNB will, and will cause each of its subsidiaries to, operate its
business only in accordance with sound banking and business practices and in the
usual, regular and ordinary course as conducted prior to the date of the Merger
Agreement. FNB will (i) preserve intact its business organization and assets
taken as a whole, (ii) use its best efforts to retain the services of its
officers and key employees and to maintain its relationships with its customers,
(iii) upon AMCORE's request, subject to certain conditions, modify certain of
its procedures and practices and will regularly confer with representatives of
AMCORE on the general status of its operations, (iv) advise AMCORE of actions
taken at meetings, furnish monthly financial statements and inform AMCORE of any
proposed action to be taken with respect to loans of $800,000 or more that are
non-performing assets and (v) promptly notify AMCORE of any material change in
the normal course of its business.
In addition, FNB has agreed that it and its subsidiaries will not, among
other things, (i) declare or pay dividends or make any other distribution on, or
directly or indirectly redeem, purchase or otherwise acquire, any shares of its
capital stock or the capital stock of its subsidiaries or any securities or
obligations convertible into or exchangeable for any shares of its capital stock
or issue any additional shares of capital stock or capital stock of its
subsidiaries, except pursuant to certain exceptions set forth in the Merger
Agreement, including that FNB Stockholders shall receive either payment of cash
dividends on their shares of FNB Common Stock or the payment of cash dividends
as holders of shares of AMCORE Common Stock received in the Merger for the
calendar quarter during which the Effective Time shall occur, though not both;
(ii) sell, lease, license or dispose of any of its properties or assets or make
any acquisition or investment except in the ordinary course of business
consistent with past practice; (iii) amend its certificate of incorporation,
by-laws or similar organizational documents; (iv) split, combine or reclassify
any of its outstanding capital stock; (v) merge or consolidate with another
entity; (vi) acquire or purchase (A) any shares of AMCORE Common Stock except in
its fiduciary capacity or (B) any business, other than passive instruments in
the ordinary course of business and consistent with past practice; (vii) enter
into, renew, amend or terminate any material contract, commitment or transaction
(other than renewals in the ordinary course of business after consultation with
AMCORE); (viii) incur, assume or prepay any indebtedness or become otherwise
responsible for the obligations of any other party; (ix) adopt, terminate or
amend (except as may be required to comply with applicable law) any employee
benefit plan or benefit or welfare of any director; (x) grant an increase in the
compensation or fringe benefits of, or pay any bonus to, any director or any
employee, except for normal increases in compensation in the ordinary course of
business and consistent with past practice or as required by law; (xi) make any
change in methods of accounting in effect at December 31, 1995 unless to comply
with generally accepted accounting principles; (xii) make any equity investment
in real estate, except foreclosure and debt restructuring in the ordinary course
of business consistent with prudent banking practices; (xiii) enter into any new
line of business; or (xiv) agree in writing or otherwise to do any of the
foregoing.
In the Merger Agreement, FNB has agreed not to solicit, initiate or
encourage (including by way of furnishing information) or take any other action
to facilitate any inquiries or the making of any proposal that constitutes or
may lead to any Transaction Proposal (as hereinafter defined). However, FNB may
engage in discussions with a third party in response to an unsolicited Superior
Proposal (as hereinafter defined) if the FNB Board determines (i) in good faith
on the basis of advice of its financial advisors and an opinion of outside
counsel that failure to take such action could reasonably be expected to violate
the fiduciary obligations of the FNB Board; (ii) FNB requires such third party
to execute a confidentiality agreement with
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terms no less favorable than those contained in the confidentiality agreement
between FNB and AMCORE; and (iii) FNB promptly notifies AMCORE of all relevant
details of such proposal (including such third party's identity) and provides
AMCORE with copies of all materials delivered to such person. "Transaction
Proposal" means, in general, any of the following involving FNB or the Bank: a
bona fide proposal to acquire more than 25% of the outstanding shares of FNB
Common Stock or shares of the Bank; any merger or other business combination
involving FNB or the Bank; a sale or other disposition of a substantial portion
of assets of FNB or the Bank; the acquisition by any person (other than AMCORE
or any subsidiary of FNB) of beneficial ownership of 25% or more of the
outstanding shares of FNB Common Stock; any reclassification of securities or
recapitalization of FNB or the Bank that effectively changes control of either;
any transaction having an effect similar to the foregoing, or a public
announcement with respect to a proposal, plan of intention by any person to
effect any of the foregoing transactions. "Superior Proposal" means, in general,
a bona fide, written and unsolicited proposal or offer made with respect to a
Transaction Proposal (i) on terms which the FNB Board determines in good faith,
and in the exercise of reasonable judgment, to be more favorable to FNB and the
FNB Stockholders than the transactions contemplated hereby.
FNB and AMCORE have agreed to use their reasonable best efforts to promptly
prepare and file all necessary documentation to effect all applications,
notices, petitions and filings, and to obtain and to cooperate in obtaining
permits, consents, approvals and authorizations of all third parties and
governmental entities necessary or advisable to consummate the transactions
contemplated by the Merger Agreement and to comply with the terms and conditions
of all such permits, consents, approvals and authorizations. FNB and AMCORE
have, subject to the restrictions set forth in the Merger Agreement, each
agreed, upon request, to furnish to the other party all information concerning
themselves and their subsidiaries, directors, officers and shareholders and such
other matters as may be necessary in furtherance of the Merger. FNB and AMCORE
have also agreed, subject to the terms and conditions of the Merger Agreement,
to use their best efforts to take, or cause to be taken, all actions necessary,
proper or advisable to comply promptly with all legal requirements which may be
imposed on such party or its subsidiaries and to consummate the Merger. AMCORE
has further agreed to use all reasonable efforts to cause the shares of AMCORE
Common Stock to be issued in the Merger to be approved for listing on the
NASDAQ, subject to official notice of issuance.
The Merger Agreement contemplates that, prior to the Effective Time, the
parties will continue to conduct environmental site assessments of certain real
properties held or previously held by FNB. In the event that AMCORE's good-faith
estimate of environmental remediation costs related to such real properties
exceeds $200,000, AMCORE may choose to reduce the number of shares of AMCORE
Common Stock to be issued in the Merger by adjusting the Exchange Ratio such
that the aggregate consideration received by FNB Stockholders is equal to the
value they would have received less the amount of such remediation costs in
excess of $200,000. In the event that AMCORE's good-faith estimate of such
environmental remediation costs is equal to $700,000 or more, AMCORE may choose
to terminate the Merger Agreement by notifying FNB of such termination on or
prior to the Special Meeting Date. FNB may choose to terminate the Merger
Agreement in the event that AMCORE provides written notice to FNB setting forth
estimated environmental remediation costs equal to $700,000 or more.
DIVIDENDS
Under the Merger Agreement, FNB cannot declare or pay any dividend on, or
make any other distribution in respect of, its outstanding shares of FNB Common
Stock, except for (i) cash dividends on FNB Common Stock for the quarter ending
December 31, 1996, and each quarter thereafter ending prior to the Effective
Time, each of which dividends shall be paid prior to the Effective Time and
shall not exceed for any quarter $0.725 per share. Further, FNB cannot declare
or pay any dividends or make any distributions in any amount on FNB Common Stock
for any calendar quarter in which the Effective Time is expected to occur and in
which the stockholders of FNB Common Stock will be entitled to receive dividends
on the shares of AMCORE Common Stock into which their shares of FNB Common Stock
will be converted. The intent is that the holders of FNB Common Stock will not
receive and will not become entitled to receive for the same calendar quarter
period a payment of cash dividends both as holders of FNB Common Stock and as
holders of AMCORE Common Stock.
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EMPLOYEE BENEFITS
The Merger Agreement requires AMCORE to honor all employment, severance and
other compensation agreements disclosed to AMCORE in the Merger Agreement in
accordance with their terms. "THE MERGER -- Interests of Certain Persons in the
Merger." The Merger Agreement provides that AMCORE will honor and assume all
employee benefit plans and other similar agreements of FNB for all current or
former FNB employees as of the Closing Date. In the event that AMCORE amends or
terminates an existing employee benefit plan or similar agreement of FNB, prior
to the first anniversary of the Closing Date, AMCORE agrees to provide to such
employee benefits which in the aggregate are comparable to the employee benefits
provided by FNB as of the Closing Date. Employees of FNB will be given credit
for service at FNB for purposes of determining the eligibility and vesting of
such employees in the plans of AMCORE in which such employees participate.
CONDITIONS TO THE MERGER
The obligations of AMCORE, Newco and FNB to consummate the Merger are
subject to the satisfaction or waiver of certain conditions, including (i)
approval of the Merger Agreement by the requisite holders of FNB Common Stock,
(ii) receipt and continued effectiveness of all regulatory approvals necessary
to consummate the Merger and expiration of all applicable statutory waiting
periods, (iii) the Registration Statement shall have become effective by an
order of the Commission and the AMCORE Common Stock issued in the Merger shall
have been qualified or exempted under all state securities laws, and (iv)
absence of any suit or proceeding pending or overtly threatened by any
governmental agency to restrain or prohibit the consummation of the Merger and
(v) the Merger Agreement not having been earlier terminated.
The obligations of AMCORE and Newco to consummate the Merger are also
subject to the satisfaction or waiver by AMCORE of certain conditions, including
(i) each obligation of FNB under the Merger Agreement must have been performed
in all material respects, FNB's representations and warranties contained in the
Merger Agreement must be true in all material respects as of the Effective Time
(except to the extent such representations and warranties refer to an earlier
date) and AMCORE having received certificates signed by the chief executive
officer of FNB to such effect, (ii) the absence of any material adverse change
since December 31, 1995 to the Closing Date, in the condition (financial or
otherwise), assets, liabilities, reserves, results of operations or business of
FNB and its Subsidiaries taken as a whole, (iii) the absence of any suit, action
or proceeding pending or overtly threatened involving the assets or business of
FNB or its subsidiaries that would reasonably be expected to have a material
adverse effect, (iv) the receipt by AMCORE, within five days prior to the
Closing Date, of a letter from McGladrey & Pullen, LLP to the effect that the
Merger will be accounted for as a pooling-of-interests, (v) the receipt by
AMCORE of certain letter agreements from FNB affiliates, (vi) the receipt of all
consents or approvals from third parties required under agreements between FNB
and such third parties, other than those agreements for which failure to obtain
such consents or approvals would not, in the reasonable opinion of AMCORE, have
a material adverse effect on AMCORE, individually or in the aggregate, (vii)
holders of not more than 6% of the outstanding shares of FNB Common Stock
perfecting their dissenters' rights, (viii) in the event that the Closing Date
shall occur on or after February 15, 1997, receipt by AMCORE of audited
consolidated financial statements for the fiscal year ended December 31, 1996 of
FNB and its subsidiaries, (ix) receipt of good standing certificates from the
states of Nevada and Wisconsin and a statement from the Office of the
Comptroller of the Currency (the "OCC") within 15 days prior to the Closing
Date, and (x) delivery by McGladrey & Pullen, LLP of letters addressed to AMCORE
covering matters reasonably requested by AMCORE and Newco with respect to FNB's
financial condition.
The obligations of FNB to consummate the Merger are also subject to
satisfaction or waiver by FNB of certain conditions, including (i) each
obligation of AMCORE and Newco under the Merger Agreement must have been
performed in all material respects, AMCORE's and Newco's representations and
warranties contained in the Merger Agreement must be true in all material
respects as of the Effective Time (except to the extent such representations and
warranties refer to an earlier date) and FNB having received certificates signed
by the chief financial officer of AMCORE to such effect, (ii) the absence of any
material adverse change in the consolidated condition (financial or otherwise),
assets, liabilities, results of operation or business
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of AMCORE from December 31, 1995 to the Closing Date, and (iii) the receipt by
FNB of an opinion from Jones, Day, Reavis and Pogue that the Merger will be
treated as a reorganization within the meaning of Section 368(a) of the Code.
TERMINATION
The Merger Agreement is terminable (i) by the mutual consent of the
parties, (ii) by either party after June 30, 1997 if the Merger has not occurred
as a result of failure to satisfy any condition to the Merger, (iii) by either
party upon material breach of a representation, warranty or covenant by the
other party, which breach is not cured within twenty (20) business days of
receipt of notice, (iv) by AMCORE if the AMCORE Average Price is greater than
$23.00 and AMCORE provides FNB with written notice of its intent to terminate
the Merger Agreement within 15 days following the Special Meeting Date, unless
FNB cancels such termination by electing to adjust the Exchange Ratio to equal a
number obtained by dividing (A) the amount equal to 135.72 less the
Environmental Reduction Amount, if any, by (B) the AMCORE Average Price, based
on the AMCORE Average Price, (v) by FNB if the AMCORE Average Price is less than
$18.00 and FNB provides AMCORE with written notice of its intent to terminate
the Merger Agreement within 15 days following the Special Meeting Date, unless
AMCORE cancels such termination by electing to adjust the Exchange Ratio to
equal a number equal to a number obtained by dividing (A) the amount equal to
173.42 less the Environmental Reduction Amount, if any, by (B) the AMCORE
Average Price, (vi) by AMCORE if AMCORE's good-faith estimate of environmental
remediation costs relating to certain real properties held or previously held by
FNB is equal to $700,000 or more, (vii) by FNB in the event that AMCORE provides
written notice to FNB setting forth estimated environmental remediation costs
relating to certain real properties held or previously held by FNB of $700,000
or more (viii) by FNB, subject to certain conditions, if the FNB Board
determines to accept a Superior Proposal pursuant to its fiduciary duties, or
(ix) by AMCORE if the FNB Board rescinds its recommendation of the transactions
contemplated by the Merger Agreement, or fails to recommend such transactions,
or takes any action or public position consistent with approving a competing
transaction. There can be no assurance that the closing price for AMCORE Common
Stock on the Effective Date will be equal to the AMCORE Average Price. See "THE
MERGER AGREEMENT -- Conversion of Shares and Exchange Ratio." Termination of the
Merger Agreement pursuant to its terms will not relieve any party from liability
for any intentional breach of the Merger Agreement.
TERMINATION FEES AND EXPENSES
FNB has agreed to pay AMCORE a $1 million termination fee if the Merger
Agreement is terminated as a result of: (i) the determination by the FNB Board
of the existence of a Superior Proposal, where FNB terminates the Merger
Agreement after giving AMCORE full information on the competing proposal and
after five business days still determines the competing proposal to be a
Superior Proposal and promptly thereafter enters into a definite agreement for
such Superior Proposal; (ii) the FNB Board failing to recommend the Merger to
the FNB Stockholders, or modifying or rescinding its prior recommendation of the
Merger to the FNB Stockholders; (iii) FNB taking any action or public position
consistent with the approval of a competing proposal; or (iv) as a result of (1)
(A) the failure of FNB to satisfy its conditions to the Merger by June 30, 1997,
(B) upon material breach of a representation, warranty or covenant by FNB, which
breach is not cured within twenty (20) business days of receipt of notice from
AMCORE (other than FNB's failure to obtain an opinion letter from its accountant
that the transaction qualifies for treatment as a pooling-of-interests or
AMCORE's failure to obtain approval of the Commission) or (C) FNB terminating
the Merger Agreement upon receipt of AMCORE's notice that certain estimated
environmental remediation costs are $700,000 or more and, (2) without the prior
approval of AMCORE and, (x) prior to or contemporaneously with such termination
another Transactional Proposal for FNB is made and (y) prior to or within 12
months after the termination of the Merger Agreement, FNB enters into a
definitive agreement for or consummates another Transaction Proposal.
The Merger Agreement contains a provision that provides for fees and
expenses to be paid by one party to the other in the event the Merger Agreement
is terminated for certain specified reasons. Each party has agreed to pay up to
$400,000 of the other party's expenses if the Merger Agreement is terminated (i)
as a result of
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the failure of such party to satisfy its conditions to the Merger by June 30,
1997 or (ii) upon material breach of a representation, warranty or covenant by
such party, which breach is not cured within twenty (20) business days of
receipt of notice from the other party (other than as a result of material
governmental litigation regarding the transaction or FNB's failure to obtain an
opinion letter from its accountant that the transaction qualifies for treatment
as a pooling-of-interests). In addition, FNB has agreed to pay up to $400,000 of
AMCORE's expenses if the Merger Agreement is terminated (i) by AMCORE if certain
estimated environmental remediation costs related to certain real properties
held or previously held by FNB are $700,000 or more, (ii) by FNB if such
estimated environmental remediation costs are $700,000 or more and, without the
prior approval of AMCORE, (1) prior to or contemporaneously with such
termination another Transactional Proposal for FNB is made and (2) prior to or
within 12 months after the termination of the Merger Agreement, FNB enters into
a definitive agreement for or consummates another Transaction Proposal, (iii) by
FNB if the FNB Board decides to accept a Superior Proposal pursuant to its
fiduciary duties, or (iv) by AMCORE if, without the prior approval of AMCORE,
the FNB Board rescinds its recommendation of the transactions under the Merger
Agreement, or fails to recommend such transactions.
AMENDMENT AND WAIVER
AMCORE and FNB may each waive, as to the other, performance of any of the
obligations and compliance with any of the covenants or conditions of the Merger
Agreement (other than items (i), (ii) and (iii) in the first paragraph of the
"Conditions to the Merger" section above) and may amend or modify the Merger
Agreement. Any such action by FNB taken following a favorable vote on or consent
to the Merger by its stockholders may be taken only if, in the opinion of the
FNB Board, the action would not have a material adverse effect on the benefits
intended for its stockholders under the Merger Agreement.
COMPARISON OF STOCKHOLDERS' RIGHTS
GENERAL
AMCORE is incorporated under the laws of the State of Nevada. Accordingly,
the rights of AMCORE stockholders are governed by AMCORE's Restated Articles of
Incorporation (the "AMCORE Charter"), its Bylaws and Nevada law. FNB is
incorporated under the laws of the State of Wisconsin and, accordingly, the
rights of FNB Stockholders are governed by FNB's Articles of Incorporation (the
"FNB Charter"), its Bylaws and Wisconsin law. The Nevada and Wisconsin
corporation laws differ in many respects, as do the respective Charters and
Bylaws of AMCORE and FNB. AMCORE and FNB are both bank holding companies
regulated by the Federal Reserve Board under the BHCA. Newco is chartered under
the laws of the State of Wisconsin and is therefore subject to regulation under
such laws and to regulation and examination by the Wisconsin Commissioner of
Banking.
Upon consummation of the Merger, FNB Stockholders will become stockholders
of AMCORE and, as such, all of their rights will be governed by the AMCORE
Charter, Bylaws and Nevada law.
The following summary of the material differences that may affect the
rights and interests of FNB Stockholders is not intended to be an all-inclusive
discussion of such differences.
MERGER, CONSOLIDATION AND SALES OF ASSETS
Nevada law requires that certain extraordinary corporate actions, such as
most mergers, consolidations, dissolutions or sales of substantially all of a
corporation's assets, be approved by the vote of a majority of the corporation's
outstanding shares and by a majority of each class entitled to vote thereon
unless a higher percentage is required by the corporation's charter.
Nevada law also contains a "control share" statute that would require the
acquiror of a "controlling interest" of certain Nevada corporations (an "Issuing
Corporation") to obtain the approval of the holders of a majority of the
outstanding shares of the Issuing Corporation not owned by such acquiror and
officers and employee-directors of the Issuing Corporation in order to receive
voting rights for (i) shares acquired or proposed to be acquired in an
acquisition in which such acquiror obtained or proposed to acquire a
"controlling interest" in the Issuing Corporation, and (ii) all shares acquired
within 90 days immediately preceding the
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date the acquiror obtained or proposed to acquire a "controlling interest" in
the Issuing Corporation. Under this statute, a person is deemed to have acquired
a "controlling interest" in an Issuing Corporation if, subject to certain
exceptions, such person acquires voting power equal to or more than 20% of the
outstanding voting power of the Issuing Corporation.
This statute applies only to corporations organized in Nevada having 200 or
more stockholders, at least 100 of whom are stockholders of record and residents
of Nevada, that do business in Nevada directly or through an affiliated
corporation. The provisions of this statute are applicable to any acquisition of
a controlling interest in an issuing corporation unless, before an acquisition
is made, the articles of incorporation or bylaws of the corporation in effect on
the 10th day following the acquisition of a controlling interest by an acquiring
person provide that the provisions of those sections do not apply. The AMCORE
Charter and Bylaws do not provide that such sections of the statute do not apply
to AMCORE, though AMCORE does not believe this statute is currently applicable
to AMCORE.
The AMCORE Charter requires the approval of at least 70% of the outstanding
shares of AMCORE Common Stock entitled to vote if a transaction involves a
Business Combination (as hereinafter defined) with, or proposed by or on behalf
of, any Interested Stockholder (as hereinafter defined) or any Affiliate or
Associate (as hereinafter defined) of any Interested Stockholder or any person
who thereafter would be an Affiliate or Associate of such Interested
Stockholder, unless certain fair price criteria and procedural requirements are
satisfied or the transaction is approved by a majority of Continuing Directors
(as hereinafter defined).
An "Interested Stockholder" is any person who is or has announced or
publicly disclosed an intention to become the beneficial owner of 30% or more of
the voting stock of AMCORE. The terms "Affiliate" and "Associate" have the same
meanings ascribed for such terms in Rule 12b-2 under the Exchange Act as in
effect on February 12, 1986. A "Business Combination" includes certain
transactions with or proposed by or on behalf of an Interested Stockholder or
related parties, including, among others, (i) a merger or consolidation of
AMCORE or any subsidiary; (ii) the sale or disposition by AMCORE or any
subsidiary of any assets or securities having an aggregate value of $5 million
or more or constituting more than 10% of the book value of the total assets or
of the stockholders' equity of the entity in question; (iii) the adoption of any
plan or proposal for the liquidation or dissolution of AMCORE or for any
amendment of AMCORE's bylaws; or (iv) any reclassification of securities,
recapitalization, merger or other transaction with the effect, directly or
indirectly, of increasing an Interested Stockholder's proportionate share of the
outstanding capital stock of AMCORE or a subsidiary. A "Continuing Director" is
a member of the Board of Directors who is not affiliated with an Interested
Stockholder or was a director before any Interested Stockholder became an
Interested Stockholder or was recommended or elected by a majority of Continuing
Directors.
The Business Combination provisions of the AMCORE Charter are intended to
prevent certain of the potential inequities of Business Combinations that are
part of "two-step" transactions. In the absence of such provisions, a purchaser
who acquired control of AMCORE could subsequently, by virtue of such control,
force the remaining stockholders to sell or exchange their shares at a price
that would not reflect any premium such purchaser may have paid in order to
acquire its controlling interest. Such provisions may also discourage the
accumulation of large blocks of AMCORE's stock which could be disruptive to the
stability of AMCORE'S important relationships with its employees, customers and
the communities that it serves. Such an accumulation could precipitate a change
of control of AMCORE on terms unfavorable to AMCORE's other stockholders.
The Business Combination provisions of the AMCORE Charter may render more
difficult or discourage a merger with or takeover of AMCORE, the acquisition of
control of AMCORE by a large stockholder and the removal of incumbent
management. Such provisions would also discourage some takeover attempts by
persons who intend to acquire AMCORE in two steps and eliminate remaining
stockholder interests by means of a Business Combination involving less
consideration per share than the acquiring person would propose to pay for its
initial interest in AMCORE equal to or greater than 30% (but less than 100%) of
the outstanding voting stock of AMCORE. To the extent that this provision
discourages certain business combinations, AMCORE's stockholders may be deprived
of higher market prices for their stock that often prevail as a result of such
events.
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Section 180.1150 of the WBCL provides that in particular circumstances the
voting of shares of a Wisconsin "issuing public corporation" (a Wisconsin
corporation which has at least 100 Wisconsin resident stockholders, 500 or more
stockholders of record and total assets exceeding $1 million) held by any person
in excess of 20% of the voting power is limited to 10% of the full voting power
of such excess shares. Full voting power may be restored under Section 180.1150
if a majority of the voting power of shares represented at a meeting, including
those held by the party seeking restoration, are voted in favor of such
restoration.
In addition, Section 180.1132 of the WBCL sets forth certain fair price
provisions which govern mergers and share exchanges with, or sales of
substantially all a Wisconsin issuing public corporation's assets to, a 10%
stockholder, mandating that any such transaction meet one of two requirements.
The first requirement is that the transaction be approved by 80% of all
stockholders and two-thirds of "disinterested" stockholders, which generally
exclude the 10% stockholder. The second requirement is the payment of a
statutory fair price, which is intended to insure that stockholders in the
second step merger, share exchange or asset sale receive at least what
stockholders received in the first step.
Further, Section 180.1134 of the WBCL requires stockholder approval for
certain transactions in the context of a tender offer or similar action for in
excess of 50% of a Wisconsin issuing public corporation's stock. Stockholder
approval is required for the acquisition of more than 5% of the corporation's
stock at a price above market value, unless the corporation makes an equal offer
to acquire all shares. Stockholder approval is also required for the sale or
option of assets which amount to at least 10% of the market value of the
corporation, but this requirement does not apply if the corporation meets
certain minimum outside director standards.
Sections 180.1140 through 180.1144 of the WBCL prohibit certain "business
combinations" between a "resident domestic corporation" and a person
beneficially owning 10% or more of the outstanding voting stock of such
corporation (an "interested shareholder") within three years after the date such
person became a 10% beneficial owner (the "acquisition date"), unless the
business combination or the acquisition of such stock has been approved before
the acquisition date by the corporation's board of directors. After such three
year period, a business combination with the interested shareholder may be
consummated only with the approval of the holders of a majority of the voting
stock not beneficially owned by the interested shareholder, unless the
combination satisfied certain adequacy-of-price standards intended to provide a
fair price for shares held by disinterested shareholders. FNB presently meets
the definition of a "resident domestic corporation."
PREFERRED STOCK
The AMCORE charter authorizes the AMCORE Board to issue up to 10 million
shares of AMCORE preferred stock from time to time or in series, without any
action on the part of Amcore's stockholders, and to determine the designation of
each series, the number of shares to be issued, dividend rates, redemption
provisions, sinking fund provisions, liquidation preferences and such other
provisions and rights as the Board of Directors may deem advisable. The
dividends fixed by the Board of Directors will be in preference to dividends on
any other class of stock of AMCORE. The preferred dividends may or may not be
cumulative. The preferred stock may also be entitled to a preference upon
dissolution or liquidation if AMCORE's Board of Directors so designates. The
preferred stock may not have any voting rights and cannot be convertible or
exchangeable for shares of AMCORE Common Stock. There is no preferred stock
issued or outstanding at the present time.
FNB has no authorized shares of preferred stock and, accordingly, the
rights of holders of FNB Common Stock to receive dividends or payment in the
event of voluntary or involuntary dissolution, liquidation or winding up of FNB
are not subject to the prior satisfaction of the rights of any other
stockholders.
DIRECTORS
The AMCORE Board is divided into three classes as nearly equal in number as
possible, with the directors in each class serving for staggered three-year
terms. At each annual meeting of AMCORE's stockholders, the successors to the
class of directors whose term expires at the time of such meeting are elected by
a majority of the votes cast, assuming a quorum is present.
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All the directors of FNB are elected at the annual meeting of stockholders
by a plurality of the votes entitled to vote in the election, at a meeting at
which a quorum is present. A director of FNB may be removed, with or without
cause, by the affirmative vote of the holders of a majority of the then issued
and outstanding stock of FNB cast at a special meeting of stockholders called
for that purpose.
Holders of FNB Common Stock are not entitled to any preemptive rights,
except in certain circumstances required by Wisconsin law. FNB Common Stock is
fully paid and not liable to any calls or assessments by FNB, except in the
event of a capital impairment of FNB, and under Section 180.0622(2)(b) of the
WBCL.
DIVIDENDS
Under Nevada law, a corporation may authorize and make a distribution to
its stockholders unless, after giving effect to such distribution, (i) the
corporation would be unable to pay its debts as they become due, or (ii) except
as specifically allowed by the corporation's charter, the corporation's total
assets would be less than the sum of its total liabilities plus the amount
necessary, if the corporation were dissolved at the time of distribution, to
satisfy the preferential rights of stockholders whose preferential rights are
superior to those receiving the distribution.
Subject to any restrictions contained in a corporation's charter, Wisconsin
law generally provides that a corporation may issue share dividends.
There are no provisions in the AMCORE Charter or Bylaws allowing
distributions in a manner other than that prescribed by Nevada law or in the FNB
Charter or Bylaws restricting the declaration or payment of dividends. In
addition, the ability of both AMCORE and FNB to pay dividends is dependent upon
their ability to receive dividends from their respective subsidiaries. The bank
subsidiaries of AMCORE and FNB are subject to federal and state regulations that
impose restrictions on the payment of dividends.
AMENDMENTS TO THE CHARTER
Unless a higher vote is required by a corporation's charter or bylaws,
Nevada law requires that a proposed charter amendment be approved by a majority
of the voting power entitled to vote upon the amendment and, under certain
circumstances, a majority of the outstanding stock of each class entitled to
vote thereon. The AMCORE Charter provides that certain amendments require the
affirmative vote of 70% of the outstanding shares, including amendments that
affect the provisions related to the size and structure of the Board of
Directors, the provision governing the nomination of directors contained in
AMCORE'S Bylaws, the prohibition of stockholder action by written consent, and
the Business Combination provisions discussed above.
Under Wisconsin law, unless a higher vote is required by a corporation's
charter, an amendment to the charter of a Wisconsin corporation may be approved
by a majority of the outstanding shares entitled to vote upon the proposed
amendment and a majority of the outstanding stock of each group entitled to vote
thereon as a group. The FNB Charter does not require a higher vote for amendment
of the FNB Charter, and thus the charter may be amended in the manner specified
by the Wisconsin statute.
AMENDMENTS TO THE BYLAWS
The AMCORE Bylaws may be altered or repealed and new bylaws adopted by the
AMCORE Board, but any bylaws adopted by the AMCORE Board may be altered or
repealed, and new bylaws adopted, by the stockholders entitled to vote thereon.
The FNB Bylaws may be altered, amended, repealed or adopted by either the
FNB Board or the stockholders, and such action may be taken at either an annual
or special meeting.
CUMULATIVE VOTING
The AMCORE Charter specifically precludes cumulative voting for the
election of directors. The FNB Charter does not provide for cumulative voting
rights.
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STRUCTURE OF BOARD OF DIRECTORS
The AMCORE Charter provides for a Board of Directors divided into three
classes, with the term of one class expiring each year. The AMCORE Charter
further requires that the Board consist of between three and fourteen directors
with each class consisting of as near to one-third the total number of directors
as possible. The AMCORE Board currently consists of 12 members divided into
classes of three, four and five directors, respectively.
The AMCORE Bylaws require that to nominate a person for election to the
Board of Directors a stockholder must provide notice to AMCORE that is delivered
or mailed to and received at the principal executive offices of AMCORE not less
than 50 nor more than 75 days prior to the meeting. The stockholder's notice
must identify each person whom the stockholder proposes to nominate, provide
information regarding the nominee's principal occupation, the class and number
of shares of AMCORE capital stock beneficially owned by the nominee, and any
other information required to be disclosed in solicitations for proxies pursuant
to Regulation 14A of the Exchange Act. The notice must also set forth the
nominating stockholder's identity and the class and number of shares of AMCORE
capital stock that are beneficially owned by the stockholder. AMCORE may also
require the proposed nominee to furnish such reasonable additional information
as may be required to determine the eligibility of the proposed nominee to serve
as director.
The FNB Charter provides for only one class of directors. The FNB Charter
further requires that the FNB Board consist of between three and ten directors.
The FNB Board is presently composed of seven members.
REMOVAL OF DIRECTORS
Under Nevada law, unless a higher vote is required by a corporation's
charter, a director may be removed from office, with or without cause, by the
affirmative vote of stockholders representing at least two-thirds of the issued
and outstanding voting stock. The AMCORE Charter does not require a higher
percentage for removal of directors.
Under Wisconsin law, any director or the entire board of directors may be
removed with or without cause by stockholders representing a majority of the
shares entitled to vote at an election of directors, unless the corporation's
charter or bylaws provide that director's may be removed only for cause. Under
the FNB Bylaws, a director may be removed from office with or without cause.
RIGHTS OF DISSENTING STOCKHOLDERS
If a stockholder dissents from a merger or consolidation in the manner
provided by Nevada law, the Nevada statute entitles such holder to appraisal
rights unless the shares received in connection with the transaction are
registered on a securities exchange on the record date fixed to determine the
stockholders entitled to vote on the agreement of merger or consolidation. The
AMCORE Charter and Bylaws do not confer any additional appraisal rights.
Under the provisions of Wisconsin law, any shareholders who assert
dissenters' rights will have a statutory right to demand payment of the "fair
value" of their Stock in cash. To perfect this right, a shareholder must not
vote such shares in favor of the Merger Agreement at the Special Meeting (this
may be done by marking the proxy either to vote against the Merger Agreement or
to abstain from voting thereon or by not voting at all) and must take such other
action as is required by the provisions of Section 180.1301 to 180.1331 of the
WBCL, including delivering written notice of intent to demand the "fair value"
of FNB Common Stock.
SPECIAL MEETINGS OF STOCKHOLDERS
The AMCORE Bylaws permit a special meeting of stockholders to be called by
the Chairman of the Board, the President or a majority of the AMCORE Board. A
meeting is required to be held upon the written request of the holders of not
less than 10% of outstanding AMCORE Common Stock entitled to vote at the
meeting.
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The FNB Bylaws require a special meeting of the stockholders be called by
the FNB Board or the President or by the person designated in the written
request of the stockholders owning at least 10% of all of the votes entitled to
be cast on any issue proposed to be considered at the meeting.
ACTION WITHOUT A MEETING
The AMCORE Charter prohibits stockholder action by written consent.
The FNB Bylaws allow action to be taken without a meeting and without
action by the FNB Board if a written consent, describing the action to be taken,
is signed by all of the shareholders entitled to vote with respect to the
subject matter thereof.
Wisconsin law permits any action which may be taken at an annual or special
stockholder meeting to be taken without a meeting and without a vote if written
consents are obtained from holders of the outstanding stock having the minimum
number of votes necessary to authorize the action at a meeting at which all
shares entitled to vote thereon were present and voted.
PREEMPTIVE RIGHTS
Although both Nevada and Wisconsin law permit the designation of preemptive
rights in a corporation's charter, neither the AMCORE Charter nor the FNB
Charter provides holders of common stock preemptive rights to acquire any
securities of AMCORE or FNB, respectively.
LIQUIDATION AND DISSOLUTION
Under both Nevada and Wisconsin law, voluntary dissolution of a corporation
requires the adoption of a resolution by a majority of the board of directors
and the affirmative vote of a majority of the outstanding shares entitled to
vote thereon. The AMCORE Charter requires the approval of 70% of the votes
entitled to be cast by the holders of all outstanding shares of voting stock for
the adoption of any plan or proposal for the liquidation or dissolution of the
company that is proposed by an Interested Stockholder. The FNB Charter and
Bylaws do not contain any provision relating to dissolution procedures.
INDEMNIFICATION AND PERSONAL LIABILITY OF DIRECTORS AND OFFICERS
AMCORE is required, pursuant to the AMCORE Charter, to indemnify all
persons who may be indemnified under Nevada law to the fullest extent permitted
by such law. Similarly, FNB is required, pursuant to FNB Bylaws to indemnify all
persons who may be indemnified under the Wisconsin indemnification statute to
the fullest extent permitted thereunder. Generally, under Nevada and Wisconsin
law, a corporation may indemnify officers, directors, employees and agents of a
corporation against all expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by them in
connection with any threatened, pending or completed civil, criminal,
administrative or investigative proceeding (other than derivative actions) if
they acted in good faith and in a manner they reasonably believed to be in or
not opposed to the best interests of the corporation and, with respect to any
criminal action, they had no reasonable cause to believe their conduct was
unlawful. With respect to derivative actions, officers, directors, employees and
agents of a corporation may be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by them in connection with the
defense or settlement of such action if they acted in good faith and in a manner
they reasonably believed to be in or not opposed to the best interests of the
corporation, except that no such indemnification may be made in respect of any
claim as to which such person shall have been adjudged to be liable to the
corporation, unless and only to the extent that the court in which the action
was brought determines that such person is entitled to indemnification despite
the adjudication of liability. To the extent that an officer, director, employee
or agent is successful on the merits or otherwise in defense of any action, suit
or proceeding referred to above, the corporation shall indemnify such officer,
director, employee or agent against expenses (including attorneys' fees)
actually and reasonably incurred in connection therewith.
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The AMCORE Charter and the FNB Charter also each permit each respective
corporation to purchase and maintain insurance or make other financial
arrangements to insure its directors, officers, employees and agents against
liabilities, whether or not AMCORE or FNB, respectively, are themselves
permitted to indemnify against such liabilities.
As permitted by Nevada law, the AMCORE Charter eliminates, to the fullest
extent permitted by Nevada law, the personal liability of directors and officers
to AMCORE for breaches of fiduciary duty. Under the AMCORE Charter, directors
and officers are not indemnified for acts or omissions involving intentional
misconduct, fraud or a knowing violation of law or for violations of Section
78.300 of the Nevada General Corporation Law regarding unlawful payment of
dividends. The FNB Charter also does not indemnify directors and officers for
negligence or misconduct in the performance of their fiduciary duties.
AMCORE has entered into indemnification contracts (the "Indemnification
Agreements") with its directors and officers. The Indemnification Agreements
provide for indemnification of directors and officers to the fullest extent
permitted by law. These agreements cover all expenses, judgments, fines and
penalties incurred and amounts paid in settlement in connection with
investigating, defending, being a witness or participating in or preparing to
defend, be a witness in or participate in any threatened, pending or completed
action, suit or proceeding or any inquiry or investigation, whether civil,
criminal, administrative or otherwise, related to the fact that such director or
officer was a director or officer, employee, agent or fiduciary of AMCORE or was
serving as such at the request of AMCORE. The Indemnification Agreements impose
upon AMCORE the burden of proving that the director or officer is not entitled
to indemnification.
FNB is not a party to indemnification contracts with FNB's directors and
officers.
Insofar as the foregoing provisions may permit indemnification of
directors, officers or persons controlling AMCORE for liabilities arising under
the Securities Act, AMCORE understands that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and therefore is unenforceable.
SHARE PURCHASE RIGHTS
The AMCORE Common Stock Purchase Rights Plan provides that each share of
AMCORE Common Stock issued in the Merger will have attached thereto one Right.
Each Right, when exercisable, entitles the registered holder to purchase from
AMCORE one share of AMCORE Common Stock at a purchase price of $70.00 per share
(the "Purchase Price"), subject to adjustment. The description and terms of the
Rights are set forth in the Rights Agreement (the "Rights Agreement") dated as
of February 21, 1996, between AMCORE and Firstar Trust Company, as Rights Agent.
Initially, the Rights are attached to all Common Stock certificates
representing shares then outstanding, and no separate certificates representing
the Rights ("Rights Certificates") will be distributed. The Rights will separate
from the Common Stock and a Distribution Date (as hereinafter defined) will
occur upon the earlier of (i) 10 days following a public announcement that a
person or group of affiliated or associated persons (an "Acquiring Person") has
acquired, or obtained the right to acquire, beneficial ownership of 15% or more
of the outstanding AMCORE Common Stock (the date of such announcement being the
"Stock Acquisition Date"), (ii) 10 business days (or such later date as the
AMCORE Board shall determine) following the commencement of a tender offer or
exchange offer that would result in a person or group beneficially owning 15% or
more of such outstanding AMCORE Common Stock or (iii) 10 business days after the
AMCORE Board shall declare any person to be an "Adverse Person." In order to
declare a person to be an Adverse Person the AMCORE Board must determine that
such person, alone or together with its affiliates and associates, has become
the beneficial owner of an amount of AMCORE Common Stock which the AMCORE Board
determines to be substantial (which amount shall in no event be less than 10% of
the AMCORE Common Stock then outstanding) and, after reasonable inquiry and
investigation, including consultation with such persons as such directors shall
deem appropriate, that (a) such beneficial ownership by such person is intended
to cause AMCORE to repurchase the AMCORE Common Stock beneficially owned by such
person or to cause pressure on AMCORE to take action or enter into a transaction
or series of transactions intended to provide such person with short-term
financial gains under circumstances where the
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AMCORE Board determines that the best long-term interests of AMCORE would not be
served by taking such action or entering into such transaction or series of
transactions at that time or (b) such beneficial ownership is causing or
reasonably likely to cause a material adverse impact (including, but not limited
to, impairment of relationships with customers or impairment of AMCORE's ability
to maintain its competitive position) on the business or prospects of AMCORE, on
AMCORE's employees, customers or suppliers or on the communities in which AMCORE
operates or is located.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the AMCORE Common Stock as of the close
of business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. All shares of AMCORE Common Stock
issued prior to the Distribution Date will be issued with Rights. Shares of
AMCORE Common Stock issued after the Distribution Date will be issued with
Rights if such shares are issued pursuant to the exercise of stock options or
under an employee benefit plan, or upon the conversion of securities issued
after adoption of the Rights Agreement. Except as otherwise determined by the
AMCORE Board, no other shares of AMCORE Common Stock issued after the
Distribution Date will be issued with Rights.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on February 27, 2006, unless earlier redeemed by AMCORE
as described above.
In the event that (i) a person becomes the beneficial owner of more than
15% of the then outstanding AMCORE Common Stock (except pursuant to an offer for
all outstanding shares of AMCORE Common Stock which the independent directors
determine to be fair to and otherwise in the best interests of AMCORE and its
shareholders) or (ii) the AMCORE Board declares a person to be an Adverse
Person, following the Distribution Date, each holder of a Right will thereafter
have the right to receive, upon exercise, AMCORE Common Stock (or, in certain
circumstances, cash, property or other securities of AMCORE) having a value
equal to two times the Exercise Price of the Right. The Exercise Price is the
Purchase Price multiplied by the number of shares of AMCORE Common Stock
issuable upon exercise of a Right prior to any of the events described in this
paragraph (initially, one). Notwithstanding any of the foregoing, following the
occurrence of any of the events set forth in this paragraph, all Rights that
are, or (under certain circumstances specified in the Rights Agreement) were,
beneficially owned by any Acquiring Person or Adverse Person will be null and
void. However, Rights are not exercisable following the occurrence of any of the
events set forth above until such time as the Rights are no longer redeemable by
AMCORE as set forth below.
In the event that, at any time following the Stock Acquisition Date, (i)
AMCORE is acquired in a share exchange, merger or other business combination
transaction, (other than a merger which follows an offer described in the second
preceding paragraph), or (ii) 50% or more of AMCORE's assets or earning power is
sold or transferred, each holder of a Right (except Rights which previously have
been voided as set forth above) shall thereafter have the right to receive, upon
exercise, common stock of the acquiring company having a value equal to two
times the exercise price of the Right. The events set forth in this paragraph
and in the second preceding paragraph are referred to as the "Triggering
Events."
The Purchase Price payable, and the number of shares of AMCORE Common Stock
or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
AMCORE Common Stock, (ii) if holders of the AMCORE Common Stock are granted
certain rights or warrants to subscribe for shares of AMCORE Common Stock or
convertible securities at less than the current market price of the AMCORE
Common Stock, or (iii) upon the distribution to holders of the AMCORE Common
Stock of evidences of indebtedness or assets (excluding regular quarterly cash
dividends) or of subscription rights or warrants (other than those referred to
above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional shares of AMCORE Common Stock will be issued and, in lieu
thereof, an adjustment in cash will be made based on the market price of the
AMCORE Common Stock on the last trading date prior to the date of exercise.
44
<PAGE> 48
At any time prior to the earlier of (i) ten days following the Stock
Acquisition Date, and (ii) the Expiration Date, AMCORE may redeem the Rights in
whole, but not in part, at a price of $.01 per Right, subject to adjustment.
Notwithstanding the foregoing, the AMCORE Board may not redeem the Rights
following a determination that any person is an Adverse Person. AMCORE may, at
its option, pay the redemption price in cash, shares of AMCORE Common Stock
(based on the current market price of the AMCORE Common Stock at the time of
redemption) or any other form of consideration deemed appropriate by the AMCORE
Board. Immediately upon the action of AMCORE's Board of Directors electing to
redeem the Rights, the right to exercise the Rights will terminate and the only
right of the holders of Rights thereafter will be to receive the applicable
redemption price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of AMCORE, including, without limitation, the right to
vote or to receive dividends.
The provisions of the Rights Agreement may be amended by the AMCORE Board
prior to the Distribution Date without the approval of the holders of the
Rights. After the Distribution Date, the provisions of the Rights Agreement may
be amended by the AMCORE Board in order to cure any ambiguity, defect or
inconsistency, to make changes which do not adversely affect the interests of
holders of Rights (excluding the interests of any Acquiring Person or Adverse
Person), or to shorten or lengthen any time period under the Rights Agreement;
provided, however, that no amendment to adjust the time period governing
redemption shall be made at such time as the Rights are not redeemable.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire AMCORE
without conditioning the offer on a substantial number of Rights being acquired.
Accordingly, the existence of the Rights may deter certain acquirors from making
takeover proposals or tender offers. However, the Rights are not intended to
prevent a takeover, but rather are designed to enhance the ability of the AMCORE
Board to negotiate with an acquiror on behalf of all of the shareholders. In
addition, the Rights should not interfere with a proxy contest.
FNB does not have a similar common stock purchase rights plan in place.
AMCORE FINANCIAL, INC.
GENERAL
AMCORE, a Nevada corporation, is a multi-bank holding company registered
under the federal BHCA. AMCORE is headquartered in Rockford, Illinois, and
operates five banks in 42 locations and eight financial services companies.
AMCORE is a primary supplier of financial services in the Rockford area and a
number of northern Illinois communities. The primary region includes the cities
of Rockford, Elgin, Woodstock, Carpentersville, Crystal Lake, Sterling, Dixon,
Princeton, Aledo, Rochelle, Ashton, Gridley, Mt. Morris, Mendota and Peru.
AMCORE owns all of the outstanding common stock of AMCORE Bank N.A., Rockford;
AMCORE Bank N.A., Northwest; AMCORE Bank N.A., Rock River Valley; AMCORE Bank
N.A., North Central; AMCORE Bank Aledo. AMCORE owns directly or indirectly, all
of the outstanding common stock of AMCORE Mortgage, Inc.; AMCORE Investment
Group, N.A.; AMCORE Consumer Finance Company, Inc.; AMCORE Financial Life
Insurance Company; Rockford Mercantile Agency, Inc.; AMCORE Investment Services,
Inc.; AMCORE Capital Management, Inc.; AMCORE Insurance Group, Inc. At September
30, 1996, AMCORE and its subsidiaries had total assets of $2.8 billion, total
deposits of $1.9 billion and stockholders' equity of $207 million. During the
past decade, AMCORE's total assets have grown from $950 million in 1985 to $2.8
billion in 1996 and the number of shares outstanding has risen from 2.2 million
to more than 14 million.
AMCORE provides various personal banking, commercial banking and related
financial services. AMCORE also conducts banking business through ten
supermarket branches which gives the customer convenient access to bank services
seven days a week and offers three electronic banking services to commercial and
retail customers and facilities access to commercial customers' accounts via
personal computers.
45
<PAGE> 49
Through AMCORE Mortgage, Inc., AMCORE provides each bank affiliate and
correspondent lenders with a variety of mortgage lending products to meet their
customer needs. AMCORE Investment Group, N.A. includes the former trust
departments of AMCORE's subsidiary banks and provides personal trust services,
employee benefit plan and estate administration and various other services to
corporations and individuals. AMCORE Consumer Finance Company, Inc. provides
installment and real estate loans to a segment of the market not served by
AMCORE's banks. AMCORE Insurance Group, Inc. offers both consumer and commercial
insurance products. AMCORE Investment Services, Inc. is a full service brokerage
company that offers a full range of investment alternatives including annuities,
mutual funds, stocks and bonds.
AMCORE Financial Life Insurance Company ("AFLIC"), a wholly-owned
subsidiary, was incorporated under the laws of the State of Arizona in 1984.
Through AFLIC, AMCORE is engaged in reinsuring credit life and accident and
health insurance in conjunction with the lending activities of AMCORE's
affiliate banks.
AMCORE Capital Management, Inc. ("ACMI") was incorporated under the laws of
the State of Illinois as a wholly-owned subsidiary of ROCKFORD in December 1992.
ACMI is comprised of the former ROCKFORD Investment department staff, and
manages the assets of AMCORE's Vintage Fund family, which were introduced in
December 1992. In addition to serving as investment advisor to these funds, ACMI
manages the investment portfolios for AMCORE Investment Group, N.A. and other
unaffiliated institutions.
Rockford Mercantile Agency, Inc. ("RMA"), a local collection agency, was
acquired in January 1993. RMA has been in business in the Rockford area since
1908 and works with many nationally-known clients. RMA was incorporated under
the laws of the State of Illinois in January 1993 as a wholly-owned subsidiary
of AMCORE.
On October 3, 1996, AMCORE entered into a letter of intent to acquire CBSC,
headquartered in Mt. Horeb, Wisconsin. CBSC is a four-bank holding company with
one merger now in progress with Belleville Bancshares Corporation.
The principal executive offices of AMCORE are located at 501 Seventh
Street, Rockford, Illinois 61104 and its telephone number is (815) 968-2241.
Additional information concerning AMCORE is included in the AMCORE documents
incorporated herein by reference. See "INCORPORATION OF CERTAIN INFORMATION BY
REFERENCE."
FIRST NATIONAL BANCORP, INC.
GENERAL
FNB, a Wisconsin corporation, is a one-bank holding company registered
under the federal BHCA. FNB operates the Bank at its main office in Monroe,
Wisconsin, and at branch locations in Green County, Wisconsin, in Monroe and New
Glarus, and in Dane County, Wisconsin, in Belleville and Madison. The Bank
operates FNI Corporation, a Nevada subsidiary utilized for investment portfolio
purposes. At September 30, 1996, FNB and its subsidiaries had total assets of
$216.5 million, total deposits of $193.1 million and stockholders' equity of
$17.9 million. FNB has increased its net income by 71.33% from $1.43 million in
1991 to $2.45 million in 1995. Since 1991, year-end assets have increased
annually at a 7.1% rate from $156.8 million to $206.5 million in 1995. In order
to expand in its market, FNB acquired Citizens State Bank in 1991 and
subsequently merged it into the Bank in 1993. The principal offices of FNB are
located at 1625 Tenth Street, Monroe, Wisconsin 53566, telephone number (608)
328-5100.
CORPORATE STRUCTURE
FIRST NATIONAL BANK AND TRUST
The Bank was organized as a national banking association under the laws of
the United States in 1856. The main office of the bank is located at 1625 Tenth
Street, Monroe, Wisconsin 53566. The Bank has branch locations in Monroe and New
Glarus, two branches in Madison and a branch at the location of its former
46
<PAGE> 50
subsidiary, Citizens State Bank, in Belleville. In addition to being well
positioned in the Monroe market, FNB is positioned to take advantage of the
Madison area's vibrant growth and strong income levels as population continues
to move southward from Madison into FNB's primary market area.
FNI
FNI Corporation was organized as a Nevada corporation in 1991 and is a
wholly-owned investment subsidiary of the Bank. FNI was developed to enhance the
yield and returns on its investment portfolio through tax savings.
PRODUCTS
FNB through its subsidiary, the Bank, is engaged in general commercial
banking business. Full service banking is offered to individuals and small to
medium-sized businesses, including checking accounts, savings accounts, time
deposits, non-deposit retail investment products, commercial loans, consumer
loans, agricultural loans, real estate loans, safe deposit facilities,
transmitting of funds, trust and other fiduciary services, and such other
banking services as are usual and customary for commercial banks under the
banking laws of the United States.
COMPETITION
Monroe, Wisconsin, a community of approximately 10,500 people, and Green
County, which has a population of approximately 30,300 people, provide FNB with
its headquarters and primary market area. In addition to its position in Green
County, FNB is positioned to take advantage of the Madison area's vibrant
growth. The population in Dane County, in which the Bank's Madison and
Belleville offices are located, is approximately 370,000 people.
Factors affecting competition for FNB include office locations, customer
convenience, and the various types of banking and financial services provided by
FNB and its competitors. The commercial banking business in southern Wisconsin
and nearby northern Illinois is very competitive. Numerous financial
institutions are located in these areas, including Bank One, Monroe, Bank of New
Glarus and Belleville State Bank, several regional institutions in Madison, and
regional and national financial institutions operating by mail, telephone and
other electronic means. FNB's strategy has been to focus on meeting the
financing needs of individuals and small and medium-sized businesses in markets
not served effectively by competitors or larger institutions. The vast majority
of the Bank's loans and the majority of all of its deposits are from customers
in Green County and Dane County, Wisconsin.
EMPLOYEES
FNB and its subsidiaries employ 86 full-time and 16 part-time employees.
FNB considers its relations with its employees to be good. Each employee who
meets eligibility requirements is entitled to participate in FNB's qualified
employees benefit plans, including retirement plans, employee group life
insurance, accidental death and dismemberment, hospital, medical and dental
insurance plans, long-term and short-term disability programs and vacation and
sick leave benefits. The First National Bank of Monroe Wisconsin Pension Plan
was terminated effective December 31, 1991, and the Internal Revenue Service
issued a favorable determination letter dated February 27, 1992, with respect to
such termination. FNB offers eligible employees participation in the First
National Bancorp Nonstandard 401(k) Plan and Profit Sharing Plan, as amended. In
addition, certain members of the FNB Board of Directors and certain FNB officers
of the Bank are parties to Deferred Compensation Agreements that allow the
issuance of FNB Common Stock as part of their compensation pursuant to the FNB
Directors Deferred Compensation Plan and the FNB&T Deferred Compensation
Retirement Plan, respectively. See "THE MERGER -- Interests of Certain Persons
in the Merger."
PROPERTIES
FNB's operations are conducted from its main office located at 1625 Tenth
Street, Monroe, Wisconsin 53566, which also serves as the main offices of the
Bank. The building is a modern brick, concrete and steel
47
<PAGE> 51
building containing 32,000 square feet of floor space on two floors, completed
in 1983. The Bank owns both the building and the underlying real estate. All
administrative functions of FNB are conducted at this main facility.
The Bank operates five branches. The Bank owns the buildings and underlying
real estate of each of the following four branch locations: 1919 10th Street,
Monroe, Wisconsin; 1 West Main Street, Belleville, Wisconsin; 512 West Highway
69, New Glarus, Wisconsin; and 6698 Odana Road, Madison, Wisconsin. Since April
15, 1992, the Bank has leased property located at 3609 University Avenue,
Madison, Wisconsin, for a branch office. The Bank also owns a property located
at 7 West Main Street, Belleville, Wisconsin, which it leases to a company.
A preliminary environmental investigation conducted in connection with the
Merger revealed that the Monroe main bank office and the Monroe motor bank
branch may be affected by leaking underground storage tanks on or near these
properties. Further investigations will be conducted to assess these matters and
to estimate the potential remediation costs to correct them, if any.
LEGAL PROCEEDINGS
Neither FNB nor the Bank is a party to any pending legal proceeding. The
management of FNB believes that there is no litigation threatened or pending in
which FNB or its subsidiaries face potential loss or exposure which will
materially affect shareholders' equity.
SELECTED FINANCIAL DATA
The following table sets forth selected historical consolidated financial
data of FNB for each of its last five fiscal years. The following financial
information should be read in conjunction with the historical consolidated
financial statements and notes thereto of FNB included, elsewhere in this Proxy
Statement/Prospectus and in conjunction with "FIRST NATIONAL BANCORP,
INC. -- Management's Discussion and Analysis of Financial Condition and Results
of Operations."
48
<PAGE> 52
SELECTED CONSOLIDATED FINANCIAL DATA OF FNB
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
The financial statement data included in the selected financial data for
the three and nine months ended September 30, 1996 and 1995 are derived from
unaudited financial statements of FNB. The selected financial data for the five
years ended December 31, 1995 are derived from audited consolidated financial
statements of FNB.
The following table sets forth certain historical consolidated financial
information for FNB. This information should be read in conjunction with
consolidated financial statements of FNB, and the related notes thereto and in
conjunction with the unaudited pro forma condensed combined financial
information, including the notes thereto, appearing elsewhere in this Proxy
Statement/Prospectus. See "INDEX TO FIRST NATIONAL BANCORP, INC. CONSOLIDATED
FINANCIAL STATEMENTS" and "PRO FORMA COMBINING FINANCIAL STATEMENTS."
<TABLE>
<CAPTION>
UNAUDITED
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME:
Net interest income........ $ 6,013 $ 5,684 $ 7,683 $ 7,560 $ 7,259 $ 6,415 $ 5,127
Provision for loan
losses.................. 90 44 61 -- -- -- --
Other income............... 1,016 976 1,318 1,380 1,201 1,318 1,147
Other expenses............. 4,242 4,180 5,558 5,893 5,822 5,376 4,241
Income before income
taxes................... 2,697 2,437 3,382 3,047 2,638 2,357 2,033
Net income................. $ 1,943 $ 1,762 $ 2,446 $ 2,222 $ 2,060 1,760 1,433
PER COMMON SHARE:
Net income................. $ 7.90 $ 7.26 $ 10.07 $ 9.04 $ 8.40 7.23 6.10
Cash dividends............. 2.65 2.35 2.35 2.15 1.85 1.55 1.30
Book value................. 73.81 65.27 68.89 60.44 54.97 48.61 42.55
Dividend payout ratio...... 33.5% 31.2% 23.4% 23.8% 22.0% 20.0% 20.3%
Average Common Shares
Outstanding (in
thousands).............. 246 243 243 246 245 243 235
BALANCE SHEET -- AVERAGE
BALANCES:
Total assets............... $209,070 $196,835 $198,644 $182,491 $169,668 154,419 153,688
Loans, net of allowance for
loan losses............. 143,795 135,940 137,791 120,818 106,478 96,721 92,989
Securities................. 53,779 51,190 50,936 51,162 48,114 44,367 37,229
Deposits................... 187,333 182,538 178,474 164,781 152,877 144,342 122,314
Notes payable (1).......... 2,386 1,700 2,836 2,350 2,850 3,000 3,000
Stockholders' equity....... 17,014 14,895 15,130 13,562 12,515 10,270 8,854
SELECTED FINANCIAL RATIOS
(2):
Return on average assets... 1.24% 1.19% 1.23% 1.22% 1.21% 1.14% .93%
Return on average equity... 15.23% 15.77% 16.17% 16.38% 16.46% 17.14% 16.18%
Net interest margin (3).... 4.01% 4.04% 4.06% 4.38% 4.54% 4.55% 3.94%
Average equity to average
assets.................. 8.14% 7.57% 7.62% 7.43% 7.38% 6.65% 5.76%
BALANCE SHEET INFORMATION:
Total assets............... $216,494 $201,985 $206,531 $192,075 $178,337 162,973 156,780
Loans...................... 147,999 141,735 142,169 128,661 111,423 102,411 93,324
Securities................. 54,109 50,481 49,846 51,157 50,588 42,820 45,913
Deposits................... 193,126 174,833 182,278 172,929 161,018 146,715 141,969
Notes payable (1).......... 2,811 1,947 4,246 2,000 2,700 3,000 3,000
Stockholders' equity....... 17,895 15,646 16,145 14,059 12,675 11,020 9,521
</TABLE>
- -------------------------
(1) Includes long-term and short-term borrowings.
(2) Nine month returns are annualized.
(3) On a fully tax-equivalent basis.
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<PAGE> 53
SELECTED INTERIM FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, YEAR ENDED
-------------- -------------- DECEMBER 31,
1996 1995 1996 1995 1995
----- ----- ----- ----- ------------
<S> <C> <C> <C> <C> <C>
Income Summary
Net interest income............................... 2,025 1,953 6,013 5,684 $7,683
Provision for loan losses......................... 30 17 90 44 61
Net interest income after loan loss provision..... 1,955 1,936 5,923 5,640 7,622
Other income...................................... 354 321 1,016 976 1,318
Other expenses.................................... 1,418 1,350 4,242 4,180 5,558
Income before income taxes........................ 931 907 2,697 2,437 3,382
Income tax expense................................ 262 255 754 675 936
Net income........................................ 669 652 1,943 1,762 $2,446
===== ===== ===== ===== ======
Per common share:
Net income........................................ $2.71 $2.68 $7.90 $7.26 $10.07
Dividends......................................... 1.45 1.20 2.65 2.35 2.35
</TABLE>
SELECTED INTERIM BALANCE SHEET DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
Total assets....................................................... $ 216,494 $206,531
Loans, net of allowance for loan losses............................ 146,306 140,526
Deposits........................................................... 193,126 182,278
Notes payable...................................................... 2,811 4,246
Stockholders' equity............................................... 17,895 16,145
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following is a discussion and analysis of the consolidated financial
condition and results of operations for FNB for the three and nine months ended
September 30, 1995 and 1996 and the years ended December 31, 1993 through 1995
and of certain factors that may affect FNB's prospective financial condition and
results of operations. The following should be read in conjunction with the
consolidated financial statements and related notes appearing elsewhere in this
Proxy Statement/Prospectus and in the information under "FIRST NATIONAL BANCORP,
INC. -- Selected Financial Data."
The consolidated financial statements include the accounts of FNB and its
wholly-owned subsidiary, the Bank. All significant intercompany transactions and
balances have been eliminated in consolidation.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEARS ENDED DECEMBER 31, 1994 AND 1993
FNB has a history of consistent earnings and excellent asset quality over
the last several years, which management attributes to an emphasis on quality
relationship banking and disciplined credit analysis. For December 31, 1995, FNB
recorded total assets of $206.5 million, net loans of $140.5 million, total
deposits of $182.3 million, and shareholders' equity of $16.1 million. FNB
earned net income of $2.4 million for fiscal year 1995, compared with $2.2
million for fiscal year 1994. For the twelve months ending December 31, 1995,
FNB's return on average assets was 1.23%, compared with FNB's return on average
assets of 1.22% for fiscal
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<PAGE> 54
years 1994 and 1.21% for 1993. For 1995, FNB's ratio of average equity to
average assets was 7.62%. FNB's ratio of nonperforming assets to total loans was
.25% at December 31, 1995.
Average interest earning assets reached record levels in each of the past
three years, growing to $189.3 million in 1995 from $172.6 million in 1994, a
percentage increase of 9.7%, and growing 8.1% in 1994 from $159.7 million in
1993. The major contribution to the increase in average interest earning assets
has been the steady growth in average loan volume. Average loans increased 14.1%
to $137.8 million in 1995 from $120.8 million in 1994 and increased 15.5% in
1994 from $106.5 million in 1993.
The year-end federal funds sold as of December 31, 1995, 1994 and 1993 were
$3.5 million, $290 thousand, and $5.6 million, respectively. While these figures
reflect the variability of the amount of federal funds sold by the Bank during
this period, they do not necessarily reflect the Bank's relative dependency on
federal funds for each preceding year. This is better demonstrated by average
federal funds sold for a fiscal year, which for 1995, 1994 and 1993 were $528
thousand, $632 thousand, and $5.1 million, respectively. The average repurchase
agreements for fiscal year 1995, 1994 and 1993 were $2.8 million, $2.6 million
and $36,000, respectively, which averages reflect the relative need in each year
of the Bank to obtain funds on a short term basis. As shown by both sets of
averages, the Bank's need for short term funding increased from 1993 to 1994
largely due to increases in loan demand, and the Bank since 1994 has reduced its
reliance on federal funds sold for investing funds not required to meet loan
demand.
Prior to 1994 when the Financial Accounting Standards Board issued
Statement No. 115 on Accounting for Certain Investments in Debt and Equity
Securities, for-profit entities were not required to differentiate between
held-to-maturity securities and available-for-sale securities when accounting
for securities. The amount of $49.7 million listed in the Investment Portfolio
table under "FIRST NATIONAL BANCORP, INC. -- Additional Financial Data on
Operations and Financial Condition" represents all of the debt securities held
by FNB at December 31, 1993. Since 1994, FNB has reduced the amount of its
portfolio comprised of held-to-maturity securities and increased the amount of
available-for-sale securities in order to increase the liquidity of its
investment portfolio. Between December 31, 1994 and 1995, held-to-maturity
securities dropped $4.1 million or 9.8% from $41.7 million to $37.6 million
while available-for-sale securities correspondingly increased $2.8 million, or
29.8% from $9.4 million to $12.2 million.
The principal increase in source of funds has been in interest bearing
deposits, which have increased by over $10 million annually for the past three
years. Interest bearing deposits increased 7.0% in 1995 to $163.2 million from
$152.5 million in 1994 and increased 6.0% in 1994 from $143.9 million in 1993.
These increases were the results of the Bank's pricing of deposits to
economically generate funds in order to meet increased loan demand within the
FNB market area and general interest rate increases.
The following are various ratios for FNB for the nine months ended
September 30, 1996 and the years ended December 31, 1995, 1994 and 1993.
RETURN ON EQUITY AND ASSETS
<TABLE>
<CAPTION>
FOR THE
NINE MONTHS FOR THE YEARS ENDED
ENDED DECEMBER 31,
SEPTEMBER 30, -----------------------
1996 1995 1994 1993
------------- ----- ----- -----
<S> <C> <C> <C> <C>
Return on average assets................................... 1.24% 1.23% 1.22% 1.21%
Return on average equity................................... 15.23% 16.17% 16.38% 16.46%
Average equity to average assets........................... 8.14% 7.62% 7.43% 7.38%
Dividend payout rates...................................... 33.5% 23.4% 23.8% 22.0%
</TABLE>
The return on average assets was constant over the past three years at
1.23% for 1995 and at 1.22% for 1994 and 1.21% in 1993. The return on average
equity over the past three years declined slightly to 16.17% in 1995 from 16.38%
in 1994 from 16.46% in 1993. This decline was due to increases in equity and the
desire to retain earnings to provide for potential future growth in assets.
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<PAGE> 55
The return on average assets remained relatively constant at 1.24% and
1.19% for the periods through September 30, 1996 and 1995, respectively. The
return on average equity for the nine months through September 30 declined to
15.23% in 1996 from 15.77% in 1995.
LIQUIDITY
Liquidity relates to the ability of the Bank to provide adequate funds to
meet its cash requirements, primarily for loans, deposit withdrawals, and
maturing liabilities. The liquidity to meet these demands is provided by
maturing assets, short-term liquid assets, and the ability to raise funds when
required from external money market sources. FNB includes cash and due from
banks, federal funds sold, held-to-maturity securities, available-for-sale
securities and accrued interest receivable in its calculation of total
liquidity. The Bank seeks to maintain a balance between short term assets and
short term liabilities by targeting a ratio of 0.8 to 1.2. This policy is
intended to stabilize the long run earnings power of the Bank and to allow
flexibility to take advantage of changes in interest rates.
Year-end total liquidity for 1995, 1994, and 1993 were $47.4 million, $47.9
million and $55.0 million, respectively. Total liquidity as a percentage of
total assets was 22.9%, 24.9% and 30.8% for the same periods. The decline in
total liquidity as a percentage of total assets to 24.9% in 1994 from 30.8% in
1993 was caused by the significant increase in FNB's funding needs for loan
growth and the competition for deposits. Nevertheless, total liquid assets as a
percentage of total assets exceeded the guidelines set by the Board of Directors
for these periods, which was 20%.
CAPITAL.
The Federal Reserve Board and the OCC have set standards for measuring the
capital adequacy of bank holding companies and national banks, respectively,
based on risk-related guidelines that require banks and bank holding companies
to maintain capital based on the level of risk corresponding to a particular
category of assets. Categories of assets with potentially higher credit risk
require more capital backing than categories with lower credit risk. For a
fuller discussion of the Federal Reserve Board's standards, see "SUPERVISION AND
REGULATION -- Capital Adequacy." The primary objective of FNB management is to
maintain a conservative capital position in order to merit the confidence of
customers, stockholders and financial markets.
Stockholder's equity increased by $2.0 million in 1995 to $16.1 million
after increasing approximately $1.4 million in 1994 to $14.1 million from $12.7
million in 1993. Stockholders' equity was increased through retained earnings,
sales of treasury stock, and a net unrealized gain on available-for-sale
securities. Dividends declared in 1995, 1994, and 1993 totalled $550,738,
$503,503 and $426,551, respectively.
FNB has consistently exceeded the minimum requirements for well capitalized
banks established by federal banking regulators. As indicated in the table
below, the Tier 1 risk-capital ratio, the total risk-based capital ratio and the
leverage ratio have remained relatively constant between 1993 and 1995.
<TABLE>
<CAPTION>
DECEMBER 31, MINIMUM WELL-
SEPTEMBER 30, ------------------------------------------ CAPITAL CAPITALIZED
1996 1995 1994 1993 RATIOS RATIOS
------------- ----------- ----------- ------------ ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Tier I risk-based capital... $ 19,065,000 $17,388,000 $15,594,000 $ 14,745,000
Tier II risk-based
capital................... 1,693,000 1,642,000 1,584,000 1,428,000
Total capital............... 20,758,000 19,030,000 17,178,000 16,173,000
Risk-weighted assets........ 137,733,000 131,473,000 126,705,000 114,035,000
Capital ratios:
Tier I risk-based
capital................. 13.84% 13.23% 12.31% 12.93% 4.00% 6.00%
Tier II risk-based
capital................. 15.07 14.47 13.56 14.18 8.00 10.00
Leverage ratio............ 8.98 8.54 8.22 8.41 3.00 5.00
</TABLE>
RESULTS OF OPERATIONS.
FNB's net income totaled $2.4 million ($10.07 per share) in 1995, up 9.1%
from $2.2 million ($9.04 per share) in 1994, which was up 4.8% from $2.1 million
in 1993 ($8.40 per share). The increase in net income
52
<PAGE> 56
from 1993 to 1995 was primarily due to the growth in interest earning assets,
higher percentage of loans to total assets and replacement of other borrowings
with lower cost deposits.
Net Income Before Income Taxes
Net income before income taxes was $3.4 million for 1995 compared to $3.0
million for 1994 and $2.6 million for 1993.
Net Interest Income.
Net interest income is a key factor underlying earnings growth. It is
defined as the difference between total interest from earning assets and
interest expense on funds used to support those assets. Net interest income
totaled $7.7 million for the year ended December 31, 1995, compared with $7.6
million for the year ended December 31, 1994 and $7.3 million for the year ended
December 31, 1993. Interest income on securities has remained relatively
constant over the past three years. Interest income on taxable securities was
$2.1 million in 1995, a 1.7% increase, over $2.0 million in 1994, which was down
1.2% from the $2.1 million earned in 1993. Interest on tax exempt securities
grew steadily over the same three year period from $826,210 in 1993 to $863,434
in 1994 to $895,527 in 1995. Interest expense increased sharply in 1995, up
30.7% to $8.1 million from $6.2 million in 1994, which in turn was only a minor
increase of 3.3% over the interest expense of $6.0 million in 1993. This
substantial rise in interest expense for 1995 was due to increases in interest
rates and significant growth in deposits.
The average net interest margin, which is computed by dividing the
annualized tax equivalent net interest income by the average earning assets,
declined 48 basis points to 4.06% on year ended December 31, 1995 from 4.54% on
year ended December 31, 1993. The average net interest spread, which represents
the difference between earning assets and costs of funds, also declined over the
same period to 3.41% on year ended December 31, 1995 from 4.04% on year ended
December 31, 1993. These figures reflect the higher interest rates that the Bank
was paying in order to increase deposits to meet its loan demand.
The total average interest earning assets for 1995 increased 9.7% to $189.3
million from $172.6 million in 1994, which was an 8.1% increase compared with
$159.7 million in 1993. Average interest earning assets growth primarily was
supported by loan growth. Average loans grew to $137.8 million in 1995, up 14.1%
from $120.8 million in 1994, which was up 13.5% from $106.5 million in 1993.
This increase primarily reflected growth in commercial and real estate loan
portfolios.
Average total interest-bearing deposits increased in 1995 by 9.0% to $161.6
million from $148.2 million, which was an increase of 7.5% over the average
interest-bearing deposits of $137.9 million in 1993. Average interest-bearing
demand deposits decreased to $24.6 million for 1995, down 11.8% from $27.9
million for 1994, and the average interest-bearing demand deposits for 1994 were
4.1% higher than the $26.8 million of average interest-bearing demand deposits
for 1993. Average other liabilities increased at December 31, 1995 to $2.2
million from $1.8 million at December 31, 1994 and $1.4 million at December 31,
1993. The amount of average notes payable rose to $2.8 million for 1995 from
$2.4 million for 1994.
53
<PAGE> 57
The following table sets forth for each category of interest-earning assets
and interest-bearing liabilities the average amounts outstanding, the interest
earned or paid on such amounts and the average rate paid for the three years
ended December 31, 1995, 1994 and 1993. The table also sets forth the average
rate earned on all interest-earning assets, the average rate paid on all
interest-bearing liabilities, and the net yield on average interest-earning
assets for the same period.
AVERAGE BALANCE SHEET
AND ANALYSIS OF NET INTEREST INCOME
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------------
1995 1994 1993
------------------------------------ ------------------------------------ --------------------------
INTEREST INTEREST INTEREST
AVERAGE INCOME/ AVERAGE AVERAGE INCOME/ AVERAGE AVERAGE INCOME/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE
------------ ----------- ------- ------------ ----------- ------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-bearing
assets:
Federal funds
sold............. $ 528,000 $ 30,000 5.68% $ 632,000 $ 20,000 3.16% $ 5,104,000 $ 153,000
Securities:
Taxable(1)....... 35,284,000 2,064,000 5.85% 36,070,000 2,030,000 5.63% 33,723,000 2,055,000
Nontaxable(1)(2)... 15,652,000 896,000 8.67% 15,092,000 864,000 8.67% 14,391,000 826,000
Loans(3)(4)........ 137,791,000 12,758,000 9.26% 120,818,000 10,863,000 8.99% 106,478,000 10,194,000
Total interest
earning
assets....... 189,255,000 15,748,000 8.32% 172,612,000 13,777,000 7.98% 159,696,000 13,228,000
------------ ----------- ----- ------------ ----------- ----- ------------ -----------
Less: Allowance for
loans losses....... (1,634,000) (1,603,000) (1,640,000)
Cash and due from
banks.............. 4,520,000 4,951,000 4,764,000
Premises and
equipment, net..... 3,471,000 3,629,000 3,732,000
Other assets........ 3,032,000 2,902,000 3,116,000
------------ ------------ ------------
Total assets..... $198,644,000 $182,491,000 $169,668,000
============ ============ ============
LIABILITIES
Interest-bearing
liabilities:
Interest-bearing
demand
deposits......... $ 24,621,000 477,000 1.94% $ 27,865,000 427,000 1.53% $ 26,768,000 491,000
Savings deposits... 19,055,000 675,000 3.54% 20,889,000 769,000 3.68% 19,748,000 730,000
Time deposits...... 115,052,000 6,635,000 5.77% 96,810,000 4,771,000 4.93% 91,338,000 4,580,000
Repurchase
Agreements....... 2,835,000 76,000 2.68% 2,621,000 77,000 2.94% 36,000 2,000
------------ ----------- ----- ------------ ----------- ----- ------------ -----------
Total
interest-bearing
deposits....... 161,563,000 7,863,000 4.87% 148,185,000 6,044,000 4.08% 137,890,000 5,803,000
------------ ----------- ----- ------------ ----------- ----- ------------ -----------
Notes Payable...... 2,836,000 203,000 7.16% 2,350,000 173,000 7.36% 2,850,000 166,000
------------ ----------- ----- ------------ ----------- ----- ------------ -----------
Total
interest-bearing
liabilities.... 164,399,000 8,066,000 4.91% 150,535,000 6,217,000 4.13% 140,740,000 5,969,000
------------ ----------- ----- ------------ ----------- ----- ------------ -----------
Noninterest-bearing
deposits......... 16,911,000 16,596,000 14,987,000
Other
liabilities...... 2,204,000 1,798,000 1,426,000
------------ ------------ ------------
Total
liabilities.... 183,514,000 168,929,000 157,153,000
Stockholders'
equity............. 15,130,000 13,562,000 12,515,000
------------ ------------ ------------
Total liabilities
and equity..... $198,644,000 $182,491,000 $169,668,000
============ ============ ============
Net interest
income............. $ 7,683,000 $ 7,560,000 $ 7,259,000
=========== =========== ===========
Net interest 3.41% 3.85%
spread............. ===== =====
Net interest 4.06% 4.38%
margin............. ===== =====
<CAPTION>
AVERAGE
RATE
-------
<S> <<C>
ASSETS
Interest-bearing
assets:
Federal funds
sold............. 3.00%
Securities:
Taxable(1)....... 6.09%
Nontaxable(1)(2)... 8.70%
Loans(3)(4)........ 9.57%
Total interest
earning
assets....... 8.28%
-----
Less: Allowance for
loans losses.......
Cash and due from
banks..............
Premises and
equipment, net.....
Other assets........
Total assets.....
LIABILITIES
Interest-bearing
liabilities:
Interest-bearing
demand
deposits......... 1.83%
Savings deposits... 3.70%
Time deposits...... 5.01%
Repurchase
Agreements....... 5.56%
-----
Total
interest-bearing
deposits....... 4.21%
-----
Notes Payable...... 5.82%
-----
Total
interest-bearing
liabilities.... 4.24%
-----
Noninterest-bearing
deposits.........
Other
liabilities......
Total
liabilities....
Stockholders'
equity.............
Total liabilities
and equity.....
Net interest
income.............
Net interest 4.04%
spread............. =====
Net interest 4.54%
margin............. =====
</TABLE>
- -------------------------
(1) Average balance and average rate on securities classified as available for
sale is based on historical amortized cost balances.
(2) Interest income and yield on nontaxable securities are reflected on a tax
equivalent basis based upon a statutory Federal income tax rate of 34%.
(3) Loans on nonaccrual status have been included in the computation of average
balances.
(4) The interest income on loans includes loan fees. Loan fees were $603,000,
$656,000 and $849,000 for the years ended December 31, 1995, 1994 and 1993,
respectively.
54
<PAGE> 58
Provision for Loan Losses.
Management periodically reviews the loan portfolio to determine an adequate
level for the allowance of loan losses. The evaluation of FNB's management of
amounts to provide to cover material loan losses takes into consideration such
factors as the changes in the nature and volume of the loan portfolio, overall
portfolio quality, review of specific problem loans, and current economic
conditions that may affect borrowers' ability to pay. The amount of the
provision, which is charged against current earnings, may be greater than or
less than actual net charged off loans.
FNB has attempted to maintain the quality of its loan portfolio while
growing its balance sheet. FNB did not make any provision for loan losses in
1994 and 1993 and only made a small provision of $60,500 in 1995. This allowance
for possible loan losses as a percentage of total loans equaled 1.15% in 1995.
This allowance was based upon management's review of the loan portfolio and was
considered to be an adequate level. The actual amount of nonperforming loans as
a percentage of total loans was 0.25%, 0.25% and 0.17% for 1995, 1994, and 1993,
respectively. The increase in nonperforming loans and the reestablished loan
loss provision in 1995 were due to the Bank's general loan growth. This loan
growth resulted in a decline in the Bank's ratio of allowance to total loans. In
order to increase the level of the loan loss allowance as a percentage of the
portfolio, the Bank decided to make loan loss provisions in 1995. The Bank has
consistently maintained a ratio of reserves to total loans in accordance with
management's estimation of loan loss allowance. Loan loss allowances are
estimated in a survey format on a quarterly basis and approved by the Board of
Directors.
Other Income.
Other income amounted to $1.3 million in 1995, down 7.1% from $1.4 million
reported for 1994 which was an increase over $1.2 million reported for 1993.
This decline was due to increased competition in services being provided in the
FNB market area. While service charges on deposits rose to $424,816 in 1995 from
$364,315 in 1994, trust fees dropped to $459,852 in 1995 from $611,884 in 1994.
Other Expenses.
Other expenses declined 5.7% in 1995 to $5.6 million from $5.9 million in
1994. Personnel costs, which includes salaries and employee benefits, is the
largest component of other expenses. Personnel costs dropped to $3.3 million in
1995 from $3.4 million in 1994. This decline was due to efficiency gains from
the automation of various loan origination functions. Occupancy expenses
continued to decline to $769,079, a 7.1% decline from $827,664 in 1994, which
was down 2.0% from $844,734 in 1993.
Income Taxes
FNB and the Bank file a consolidated federal income tax return and separate
Wisconsin income tax returns. FNB recorded income tax expense of $936,135,
$824,869 and $578,354 on income before taxes of $3.4 million, $3.1 million and
$2.6 million for the years ended December 31, 1995, 1994 and 1993, respectively.
Effective tax rates were 27%, 27% and 22% for such periods. FNB's effective tax
rates varied from the statutory tax rate primarily due to tax-exempt interest on
certain investments.
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996
COMPARED TO THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995
Average interest earning assets continued to increase during the nine
months ended September 30, 1996, reaching a total of $199.8 million, a 6.5%
increase over the nine months ending September 30, 1995. The major contribution
to the increase in earning assets remains the steady growth in the average loan
volume. Average loans increased from $135.9 million for the nine months through
September 30, 1995 to $143.8 million, for an increase of 5.8%. Average federal
funds sold equaled $2.2 million for the nine months ended September 30, 1996,
compared to $429 thousand for the nine months ended September 30, 1995. Average
securities rose from $51.2 million for the nine months ended September 30, 1995
to $53.8 million for the nine months ended September 30, 1996, a 5.1% increase.
Both increases were due to the substantial increase in deposits described below
under "Liquidity."
55
<PAGE> 59
LIQUIDITY.
Total liquidity as a percentage of total assets was 23.2% for the nine
months ended September 30, 1996, compared with 19.3% for the nine months ended
September 30, 1995. Total liquidity improved during the first nine months of
1996 as deposits increased by over $10.8 million from the same period in 1995 to
$193.1 million on September 30, 1996 from $174.6 million on September 30, 1995,
while net loans, increased by only $10.4 million from $135.9 million on
September 30, 1995 to $146.3 million on September 30, 1996. Deposits increased
because the Bank continued to raise interest rates on deposits to generate funds
for loan growth and to reduce reliance on federal funds sold.
CAPITAL.
Stockholder's equity grew to $17.9 million at September 30, 1996, up 20.1%
from $14.9 million for the nine month period at September 30, 1995. The increase
in capital predominately resulted from retained earnings.
RESULTS OF OPERATIONS.
Net Income
FNB's net income totalled $1.9 million ($7.90 per share) for the nine
months ended September 30, 1996, up 5.6% from $1.8 million ($7.26 per share) for
the same period in 1995. The increase in net income for the nine months ended
September 30, 1996 from the nine months ended September 30, 1995 was due to the
continued increase in the percentage of loans to total assets and the
replacement of other borrowings with lower cost deposits.
Net Income Before Income Taxes
Net income before income taxes was $2.7 million for the nine months ended
September 30, 1996, compared with $2.4 million for the nine months ended
September 30, 1995, a 12.5% increase. This increase was slightly greater than
the increase of FNB's after tax net income for the same period because its
effective tax rate rose. FNB recorded income tax expense of $753,700 for the
nine months ended September 30, 1996, an effective tax rate of 27.9%, as
compared with an income tax expense of $674,544 for the nine months ended
September 30, 1995, an effective tax rate of 27.7%.
Net Interest Income.
Earnings growth continues to be supported by net interest income growth,
rising from $5.7 million through September 30, 1995 to $6.0 million through
September 30, 1996. This performance reflected a 6.5% increase in average
interest earning assets in 1996 to $199.8 million compared with $187.6 million
through September 30, 1995. Average interest earning assets were represented
primarily by loan growth. Average loans grew to $143.8 million through September
30, 1996, up 5.8% from $135.9 million through September 30, 1995. Interest
expense also increased, to $6.6 million for the nine months ended September 30,
1996, from $5.9 million for the nine months ended September 30, 1995.
The average net interest spread and the average net interest margin
declined to 3.33% and 4.01%, respectively, for the nine months ended September
30, 1996 from 3.40% and 4.04%, respectively, for the nine months ended September
30, 1995. These figures reflect the continuing increase in the Bank's cost of
funds largely due to the higher interest rates that the Bank is paying to
attract deposits.
Between December 31, 1995 and September 30, 1996, one type of time deposit
increased substantially, time deposits of $100,000 or more for three months or
less rose to $7.1 million at September 30, 1996 from $2.3 million at December
31, 1995. This increase was due to short term investments by government and
commercial establishments.
56
<PAGE> 60
The following table sets forth for each category of interest-earning assets
and interest-bearing liabilities the average amounts outstanding, the interest
earned or paid on such amounts and the average rate paid for the nine months
ended September 30, 1996 and 1995. The table also sets forth the average rate
earned on all interest-earning assets, the average rate paid on all
interest-bearing liabilities, and the net yield on average interest-earning
assets for the same period.
AVERAGE BALANCE SHEET
AND ANALYSIS OF NET INTEREST INCOME
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
1996 1995
-------------------------------------- --------------------------------------
INTEREST INTEREST
AVERAGE INCOME/ AVERAGE AVERAGE INCOME/ AVERAGE
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------------ ----------- ------- ------------ ----------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-bearing assets:
Federal funds sold............. $ 2,232,000 $ 89,000 5.32% $ 429,000 $ 19,000 5.91%
Securities
Taxable(1)................... 37,771,000 1,685,000 5.95% 35,765,000 1,544,000 5.76%
Nontaxable(1)(2)............... 16,008,000 672,000 5.60% 15,425,000 669,000 5.78%
Loans(3)(4).................... 143,795,000 10,118,000 9.38% 135,940,000 9,382,000 9.20%
------------ ----------- ----- ------------ ----------- -----
Total interest earning
assets.................. 199,806,000 12,564,000 8.38% 187,559,000 11,614,000 8.26%
------------ ----------- ----- ------------ ----------- -----
Less: Allowance for loan
losses......................... (1,649,000) (1,633,000)
Cash and due from banks.......... 4,539,000 4,410,000
Premises and equipment - net..... 3,295,000 3,493,000
Other assets..................... 3,079,000 3,006,000
------------ ------------
Total assets............... $209,070,000 $196,835,000
============ ============
LIABILITIES
Interest-bearing liabilities:
Interest-bearing demand
deposits..................... $ 23,253,000 377,000 2.16% $ 25,188,000 402,000 2.13%
Savings deposits............... 18,813,000 479,000 3.39% 19,000,000 510,000 3.58%
Time deposits.................. 127,241,000 5,570,000 5.84% 113,946,000 4,818,000 5.64%
Repurchase Agreements.......... 1,420,000 4,000 5.33% 2,938,000 75,000 5.88%
------------ ----------- ----- ------------ ----------- -----
Total interest-bearing
deposits................ 170,727,000 6,430,000 5.06% 166,072,000 5,805,000 4.84%
------------ ----------- ----- ------------ ----------- -----
Notes Payable.................. 2,386,000 121,000 6.76% 1,700,000 125,000 5.88%
------------ ----------- ----- ------------ ----------- -----
Total interest-bearing
liabilities............. 173,113,000 6,551,000 5.05% 162,672,000 5,930,000 4.86%
------------ ----------- ----- ------------ ----------- -----
Noninterest-bearing deposits... 16,626,000 16,466,000
Other liabilities.............. 2,317,000 2,702,000
------------ ------------
Total liabilities.......... 192,056,000 181,940,000
Stockholders' equity............. 17,014,000 14,895,000
------------ ------------
Total liabilities and
equity.................. $209,070,000 $196,835,000
============ ============
Net interest income.............. $ 6,013,000 $ 5,684,000
=========== ===========
Net interest spread.............. 3.33% 3.40%
===== =====
Net interest margin.............. 4.01% 4.04%
===== =====
</TABLE>
- -------------------------
(1) Average balance and average rate on securities classified as available for
sale is based on historical amortized cost balances.
(2) Interest income and yield on nontaxable securities are reflected on a tax
equivalent basis based upon a statutory Federal income tax rate of 34%.
(3) Loans on nonaccrual status have been included in the computation of average
balances.
(4) The interest income on loans includes loan fees. Loan fees were $493,000 and
$449,000 for the nine months ended September 30, 1996 and 1995,
respectively.
57
<PAGE> 61
Provision for Loan Losses.
The percentage of nonperforming loans to total loans of FNB rose to 0.50%
at September 30, 1996, from 0.25% at December 31, 1995. In addition, growth in
the Bank's loan portfolio reduced the level of the loan loss reserves as a
percentage of the portfolio. As a result, though still in line with peer group
averages, management increased the provision for loan losses from $44,000 for
the nine months ended September 30, 1995 to $90,000 for the nine months ended
September 30, 1996. It is management's position that the higher level of loan
loss provision will support the Bank's future expected loan growth.
Other Income.
Other income increased to $1.0 million for the nine months ended September
30, 1996 from $0.9 million for the nine months ended September 30, 1995. This
increase was primarily due to service charges on deposits. Service charges on
deposits grew to $349,082 for the nine month period ended September 30, 1996
from $302,636 for the nine month period ended September 30, 1995.
Other Expenses.
Other expenses remained steady at approximately $4.2 million for the nine
months ended September 30, 1995 and 1996. Net occupancy expenses increased to
$593,665 from $585,314 for the nine month periods ended September 30, 1996 and
1995 respectively.
MARKET FOR AND DIVIDENDS ON FNB'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
FNB is a privately held company for which there is no established public
trading market. For this reason, FNB management is not aware of the prices at
which FNB stock has been traded in many instances. Trading in shares of FNB
Common Stock of which management is aware is infrequent. In the ordinary course
of its business, Baird may from time to time trade the securities of FNB for its
own account or the accounts of its customers and accordingly, may at any time
hold long or short positions in such securities. Baird reported 5 arms-length
transactions in FNB Common Stock in 1994, involving a total of 520 shares, at
prices ranging from $75.50 to $80.50 per share, and 1 arms-length transaction in
1995, involving 100 shares, at a price of $83.50 per share. Baird reported 4
arms-length transactions to date in 1996, involving a total of 357 shares, at
prices ranging from $100.00 to, most recently, $140.75. The book value of FNB
Common Stock has steadily grown from $60.44 per share as of year end December
31, 1994 to $73.81 per share as of September 30, 1996. In light of the absence
of a public trading market, no assurance can be given that the reported
transaction prices reflect actual market values for FNB Common Stock.
58
<PAGE> 62
Dividends may be paid by FNB to FNB Stockholders or by the Bank to FNB
generally from the current year's income plus the retained earnings from the
prior two years, subject to maintaining adequate capital ratios under regulatory
guidelines. As reflected in the table below, FNB has gradually increased the
annual amount of cash dividends declared from $2.15 per share as of December 31,
1994 to $2.65 per share as of September 30, 1996.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
NINE MONTHS ENDED 31,
SEPTEMBER 30, ---------------------
1996 1995 1994
----------------- -------- --------
<S> <C> <C> <C>
Cash dividends declared per share.................... $ 2.65 $ 2.35 $ 2.15
Average Common Shares Outstanding.................... 246,036 242,963 245,692
Net income (loss) per share.......................... $ 7.90 $ 10.07 $ 9.04
Book value per share................................. $ 73.81 $ 68.89 $ 60.44
</TABLE>
The Merger Agreement limits the dividends FNB may pay between the execution
of the Merger Agreement and the Closing Date, to aggregate cash dividends in
amounts not to exceed $0.725 per share for the quarter ending December 31, 1996
and each quarter thereafter ending prior to the consummation of the Merger;
provided that FNB cannot declare or pay any dividends in any amount on FNB
Common Stock in any calendar quarter in which the Effective Time is expected to
occur and in which the stockholders of FNB Common Stock will be entitled to
receive dividends on the shares of AMCORE Common Stock into which their shares
of FNB Common Stock will be converted. The amount of future dividends on FNB
Common Stock either during or after the pendency of the Merger is uncertain
because the dividend policy of FNB is subject to the discretion of the Board of
Directors of FNB, cash needs, general business conditions and whether the Merger
occurs.
ADDITIONAL FINANCIAL DATA ON OPERATIONS AND FINANCIAL CONDITION
The following tables present additional financial information concerning
FNB's interest-earning assets, interest-bearing liabilities, loan portfolio,
stated loan maturities, loan repricing, nonperforming assets, allowance for loan
losses, investment portfolio and deposits. This information supplements the
information provided above under "FIRST NATIONAL BANCORP, INC. -- Selected
Financial Data" and "-- Management's Discussion and Analysis of Financial
Condition and Results of Operations." This information also should be read in
conjunction with the consolidated financial statements and related notes
appearing elsewhere in this Proxy Statement/Prospectus.
FIRST NATIONAL BANCORP, INC.
INTEREST-RATE SENSITIVE ASSETS AND LIABILITIES
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS TO SIX MONTHS TO ONE YEAR TO OVER FIVE
OR LESS SIX MONTHS ONE YEAR FIVE YEARS YEARS TOTAL
------------ --------------- ------------- ----------- ----------- ------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Federal funds sold.............. $ 1,735,000 $ -- $ -- $ -- $ -- $ 1,735,000
Investment securities........... 4,009,000 1,659,000 4,545,000 24,019,000 19,877,000 54,109,000
Loans........................... 26,197,000 18,623,000 29,204,000 72,709,000 1,266,000 147,999,000
----------- ----------- ----------- ---------- ---------- ------------
Interest-earning assets........... $ 31,941,000 $ 20,282,000 $ 33,749,000 $96,728,000 $21,143,000 $203,843,000
----------- ----------- ----------- ---------- ---------- ------------
Interest-bearing liabilities:
Interest-bearing demand
deposits...................... $ 15,954,000 $ -- $ -- $ -- $ -- $ 15,954,000
Savings deposits................ 24,962,000 -- -- -- -- 24,962,000
Time deposits................... 30,313,000 25,771,000 31,050,000 45,390,000 7,000 132,531,000
Notes payable................... 800,000 546,000 1,346,000
Repurchase agreements........... 1,242,000 223,000 1,465,000
----------- ----------- ----------- ---------- ---------- ------------
Interest-bearing liabilities...... $ 72,471,000 $ 25,771,000 $ 32,073,000 $45,390,000 $ 553,000 $176,258,000
=========== =========== =========== ========== ========== ============
Period interest sensitivity gap... $(40,530,000) $ (5,489,000) $ 1,676,000 $51,338,000 $20,590,000 $ 27,585,000
=========== =========== =========== ========== ========== ============
Cumulative interest sensitivity
gap............................. $(40,530,000) $ (46,019,000) $(44,343,000) $ 6,995,000 $27,585,000 $ 27,585,000
=========== =========== =========== ========== ========== ============
Cumulative gap as a percent of
assets.......................... (18.72)% (21.26)% (20.48)% 3.23% 12.74%
=========== =========== =========== ========== ==========
Cumulative interest-sensitive
assets as a percent of
cumulative interest-sensitive
liabilities..................... 44.07% 78.70% 105.23% 213.10% 3,823.33%
=========== =========== =========== ========== ==========
</TABLE>
59
<PAGE> 63
LOAN PORTFOLIO ANALYSIS
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ---------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
------------- ------------ ------------ ------------ ------------ -----------
AGGREGATE PRINCIPAL AMOUNT
<S> <C> <C> <C> <C> <C> <C>
Loan:
Agriculture.......... $ 22,686,000 $ 22,287,000 $ 21,783,000 $ 21,852,000 $ 26,685,000 $23,235,000
Commercial........... 52,957,000 51,556,000 54,677,000 35,624,000 26,873,000 22,427,000
Municipal............ 688,000 1,064,000 1,092,000 1,093,000 1,440,000 753,000
Residential.......... 63,439,000 59,567,000 43,859,000 45,671,000 40,677,000 30,119,000
Installment.......... 8,229,000 7,694,000 7,250,000 7,183,000 6,736,000 7,790,000
----------- ----------- ----------- ----------- ----------- -----------
147,999,000 142,160,000 128,661,000 111,423,000 102,411,000 93,324,000
Less allowance for
loan losses........ (1,693,000) (1,642,000) (1,609,000) (1,626,000) (1,657,000) (1,772,000)
----------- ----------- ----------- ----------- ----------- -----------
$ 146,306,000 $140,526,000 $127,052,000 $109,797,000 $100,754,000 $91,552,000
=========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL LOAN PORTFOLIO
<S> <C> <C> <C> <C> <C> <C>
Loan:
Agriculture............. 15.33% 15.68% 16.93% 19.61% 26.06% 24.90%
Commercial.............. 35.78 36.26 42.50 31.97 26.24 24.03
Municipal............... 0.47 0.75 0.85 0.98 1.40 0.80
Real estate............. 42.86 41.90 34.09 40.99 39.72 41.92
Installment............. 5.56 5.41 5.63 6.45 6.58 8.35
------ ------ ------ ------ ------ ------
100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
====== ====== ====== ====== ====== ======
</TABLE>
STATED LOAN MATURITIES
<TABLE>
<CAPTION>
WITHIN ONE YEAR TO AFTER
ONE YEAR FIVE YEARS FIVE YEARS TOTAL
----------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
September 30, 1996
Stated Loan Maturities/Floating Rates
Reset:
Agriculture............................. $13,216,000 $ 9,309,000 $ 161,000 $ 22,686,000
Commercial.............................. 28,710,000 24,247,000 0 52,957,000
Municipal............................... 338,000 300,000 50,000 688,000
Residential............................. 31,785,000 30,626,000 1,028,000 63,439,000
Installment............................. 1,555,000 6,656,000 18,000 8,229,000
---------- ---------- --------- -----------
Total.............................. $75,604,000 $71,138,000 $1,257,000 $147,999,000
========== ========== ========= ===========
December 31, 1995
Stated Loan Maturities/Floating Rates
Reset:
Agriculture............................. $12,793,000 $ 9,242,000 $ 252,000 $ 22,287,000
Commercial.............................. 29,123,000 22,433,000 0 51,556,000
Municipal............................... 652,000 39,000 373,000 1,064,000
Residential............................. 21,510,000 37,009,000 1,048,000 59,567,000
Installment............................. 1,604,000 6,063,000 27,000 7,694,000
---------- ---------- --------- -----------
Total.............................. $65,682,000 $74,786,000 $1,700,000 $142,168,000
========== ========== ========= ===========
</TABLE>
LOAN REPRICING
<TABLE>
<CAPTION>
WITHIN ONE YEAR TO AFTER
ONE YEAR FIVE YEARS FIVE YEARS TOTAL
----------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
September 30, 1996
Fixed rate................................ $57,457,000 $71,138,000 $1,257,000 $129,852,000
Variable rate............................. 17,672,000 0 0 17,672,000
Nonaccrual................................ 475,000 0 0 475,000.....
---------- ---------- --------- -----------
Total.............................. $75,604,000 $71,138,000 $1,257,000 $147,999,000
========== ========== ========= ===========
December 31, 1995
Fixed rate................................ $46,440,000 $74,786,000 $1,700,000 $122,926,000
Variable rate............................. 18,969,000 0 0 18,969,000
Nonaccrual................................ 273,000 0 0 273,000
---------- ---------- --------- -----------
Total.............................. $65,682,000 $74,786,000 $1,700,000 $142,168,000
========== ========== ========= ===========
</TABLE>
60
<PAGE> 64
NONPERFORMING ASSETS
<TABLE>
<CAPTION>
SEPTEMBER DECEMBER 31,
30, -------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Nonaccrual loans..... $475,000 $273,000 $83,000 $140,000 $208,000 $241,000
Loans 90 days past
due and still
accruing
interest........... 270,000 80,000 238,000 48,000 10,000 167,000
----------- ----------- ----------- -----------
Total nonperforming
loans.............. 745,000 353,000 321,000 188,000 218,000 408,000
Other real estate
owned and other
assets............. 0 0 0 100,000 206,000 329,000
----------- ----------- ----------- -----------
Total nonperforming
assets............. $745,000 $353,000 $321,000 $288,000 $424,000 $737,000
=========== ===========
----------- -----------
Nonperforming assets
to total assets.... 0.34% 0.17% 0.17% 0.16% 0.26% 0.47%
Nonperforming loans
to total loans..... 0.50% 0.25% 0.25% 0.17% 0.21% 0.44%
Nonperforming assets
to total loans..... 0.50% 0.25% 0.25% 0.26% 0.41% 0.79%
Total loans.......... 147,999,000 142,168,000 128,661,000 111,423,000 102,411,000 93,324,000
Total assets......... 216,494,000 206,531,000 192,075,000 178,337,000 162,973,000 156,780,000
</TABLE>
61
<PAGE> 65
ALLOWANCES FOR LOAN LOSSES
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ---------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
------------- ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Beginning balance.... $ 1,642,000 $ 1,609,000 $ 1,626,000 $ 1,657,000 $ 1,772,000 1,456,000
------------ ------------ ------------ ------------ ------------ -----------
Charge-offs:
Agricultural....... 32,000 2,000 53,000 67,000 63,000 32,000
Commercial......... 33,000 29,000 0 7,000 123,000 64,000
Municipal.......... 0 0 0 0 0 0
Residential........ 0 0 0 0 1,000 18,000
Installment........ 15,000 14,000 17,000 16,000 43,000 57,000
------------ ------------ ------------ ------------ ------------ -----------
Total charge-offs.... 80,000 45,000 70,000 90,000 230,000 171,000
------------ ------------ ------------ ------------ ------------ -----------
Recoveries:
Agricultural....... 27,000 2,000 47,000 34,000 35,000 10,000
Commercial......... 9,000 12,000 1,000 18,000 52,000 4,000
Municipal.......... 0 0 0 0 0 0
Residential........ 0 0 0 0 16,000 3,000
Installment........ 6,000 3,000 5,000 7,000 12,000 13,000
------------ ------------ ------------ ------------ ------------ -----------
Total recoveries..... 41,000 17,000 53,000 59,000 115,000 30,000
------------ ------------ ------------ ------------ ------------ -----------
Net charge-offs...... 39,000 28,000 17,000 31,000 115,000 141,000
Bank Acquisition..... 0 0 0 0 0 457,000
Provision for loan
losses............. 90,000 61,000 0 0 0 0
------------ ------------ ------------ ------------ ------------ -----------
Ending balance....... $ 1,693,000 $ 1,642,000 $ 1,609,000 $ 1,626,000 $ 1,657,000 $ 1,772,000
============ ============ ============ ============ ============ ===========
Period end total
loans, net of
unearned
interest........... $ 147,999,000 $142,168,000 $128,661,000 $111,423,000 $102,411,000 $83,324,000
============ ============ ============ ============ ============ ===========
Average loans........ $ 143,795,000 $137,791,000 $120,818,000 $106,478,000 $ 96,721,000 $92,989,000
============ ============ ============ ============ ============ ===========
Ratio of net
charge-offs to
average loans...... 0.03% 0.02% 0.01% 0.03% 0.12% 0.15%
============ ============ ============ ============ ============ ===========
Ratio of provision
for loan losses to
average loans...... 0.06 0.04 0.00 0.00 0.00% 0.00%
============ ============ ============ ============ ============ ===========
Ratio of allowance
for loan losses to
ending total
loans.............. 1.14 1.15 1.25 1.46 1.62 1.90
============ ============ ============ ============ ============ ===========
Ratio of allowance
for loan losses to
total nonperforming
loans.............. 227.25 465.16 501.25 864.89 760.09 434.31
============ ============ ============ ============ ============ ===========
Ratio of allowance
for loan losses to
total nonperforming
assets............. 227.25 465.16 501.25 564.58 390.80 240.43
============ ============ ============ ============ ============ ===========
</TABLE>
62
<PAGE> 66
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994
----------------------------- ----------------------------- -----------------------------
PERCENT OF LOANS PERCENT OF LOANS PERCENT OF LOANS
IN EACH CATEGORY IN EACH CATEGORY IN EACH CATEGORY
AMOUNT TO TOTAL LOANS AMOUNT TO TOTAL LOANS AMOUNT TO TOTAL LOANS
---------- ---------------- ---------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Agricultural....... $ 199,000 11.75% $ 258,000 15.71% $ 272,000 16.90%
Commercial......... 366,000 21.62 357,000 21.74 345,000 21.44
Municipal.......... 8,000 0.47 12,000 0.73 14,000 0.87
Residential........ 1,029,000 60.78 926,000 56.40 887,000 55.13
Installment
loans............ 91,000 5.38 89,000 5.42 91,000 5.66
---------- ------- ---------- ------- ---------- -------
Total......... $1,693,000 100.00% $1,642,000 100.00% $1,609,000 100.00%
========== ======= ========== ======= ========== =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1993 DECEMBER 31, 1992 DECEMBER 31, 1991
----------------------------- ----------------------------- -----------------------------
PERCENT OF LOANS PERCENT OF LOANS PERCENT OF LOANS
IN EACH CATEGORY IN EACH CATEGORY IN EACH CATEGORY
AMOUNT TO TOTAL LOANS AMOUNT TO TOTAL LOANS AMOUNT TO TOTAL LOANS
---------- ---------------- ---------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Agricultural....... $ 319,000 19.62% $ 432,000 26.07% 462,000 26.07%
Commercial......... 356,000 21.89 435,000 26.25 465,000 26.24
Municipal.......... 16,000 0.98 23,000 1.39 25,000 1.41
Residential........ 830,000 51.05 658,000 39.71 704,000 39.73
Installment
loans............ 105,000 6.46 109,000 6.58 116,000 6.55
---------- ------- ---------- ------- ---------- -------
Total......... $1,626,000 100.00% $1,657,000 100.00% $1,772,000 100.00%
========== ======= ========== ======= ========== =======
</TABLE>
INVESTMENT PORTFOLIO
HELD TO MATURITY
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, -----------------------------------------
1996 1995 1994 1993(1)
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government agencies................. $ 19,765,000 $20,990,000 $28,025,000 $32,393,000
Obligations of state and political
subdivisions............................. 17,117,000 15,624,000 12,647,000 15,766,000
Collateralized Mortgage Obligations........ 1,000,000 1,000,000 1,045,000 1,505,000
----------- ----------- ----------- -----------
Total................................. $ 37,882,000 $37,614,000 $41,717,000 $49,664,000
=========== =========== =========== ===========
</TABLE>
AVAILABLE FOR SALE
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, -------------------------------------
1996 1995 1994 1993(1)
------------- ----------- ---------- --------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government agencies..................... $ 15,403,000 $11,453,000 $6,108,000 --
Obligations of state and political
subdivisions................................. -- -- 2,130,000 --
Collateralized Mortgage Obligations............ -- -- 458,000 --
Equity Securities.............................. 824,000 779,000 744,000 924,100
----------- ----------- ----------
--
Total..................................... $ 16,227,000 $12,232,000 $9,440,000
$924,100
=========== =========== ==========
==
</TABLE>
- -------------------------
(1) FNB adopted Financial Accounting Standards Board (FASB) Statement No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" effective
January 1, 1994 and classified securities as held to maturity or available
for sale. For purposes of this table, all debt securities as of December 31,
1993 are classified as held to maturity.
63
<PAGE> 67
INVESTMENT PORTFOLIO MATURITY/REPRICING SCHEDULE
<TABLE>
<CAPTION>
MATURING OR REPRICING
-------------------------------------------------------------------------------------------
AFTER 1 YEAR BUT AFTER 5 YEARS BUT
WITHIN 1 YEAR WITHIN 5 YEARS WITHIN 10 YEARS AFTER 10 YEARS
------------------- -------------------- -------------------- -------------------- EQUITY
SEPTEMBER 30, 1996 AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD SECURITIES
- --------------------- ---------- ----- ----------- ----- ----------- ----- ----------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HELD-TO-MATURITY
U.S. Government
agencies........... $1,623,000 5.57% $ 6,977,000 6.57 % $ 2,243,000 7.92 % $ 8,923,000 -- %
States and political
subdivisions....... 2,874,000 8.97% 5,531,000 8.41 % 8,711,000 8.01 % -- -- %
Collateralized
mortgage
obligations........ -- -- 1,000,000 7.34% -- -- -- --
----------- ----------- ----------- -----------
Total.......... $4,497,000 $13,508,000 $10,954,000 $ 8,923,000
=========== =========== =========== ===========
AVAILABLE-FOR-SALE
U.S. Treasury........ $4,894,000 5.33% $ 5,401,000 6.79 % $ -- -- $ -- --
U.S. Government
agencies........... -- -- 5,108,000 6.02% -- -- -- --
----------- ----------- ----------- -----------
Equity Securities.... 824,000
----------- ----------- ----------- ----------- -------
Total.......... $4,894,000 $10,509,000 $ 0 $ 0 824,000
=========== =========== =========== =========== =======
</TABLE>
INVESTMENT PORTFOLIO MATURITY/REPRICING SCHEDULE
<TABLE>
<CAPTION>
MATURING OR REPRICING
--------------------------------------------------------------------------------------------
AFTER 1 YEAR BUT AFTER 5 YEARS BUT
WITHIN 1 YEAR WITHIN 5 YEARS WITHIN 10 YEARS AFTER 10 YEARS
-------------------- -------------------- -------------------- -------------------- EQUITY
DECEMBER 31, 1995 AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD SECURITIES
- -------------------- ----------- ----- ----------- ----- ----------- ----- ----------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HELD-TO-MATURITY
U.S. Government
agencies.......... $ 7,342,000 6.07% $13,648,000 6.98 % $ -- -- % $ -- -- %
States and political
subdivisions...... 2,727,000 8.07% 7,768,000 8.53 % 4,879,000 7.77 % 250,000 7.82 %
Collateralized
mortgage
obligations....... -- -- 1,000,000 7.34% -- -- -- --
----------- ----------- ----------- -----------
Total......... $10,069,000 $22,416,000 $ 4,875,000 $ 250,000
=========== =========== =========== ===========
AVAILABLE-FOR-SALE
U.S. Treasury....... $ 2,997,000 4.73% $ 7,362,000 6.42 % $ -- -- $ -- --
U.S. Government
agencies.......... -- -- 1,094,000 5.59% -- -- -- --
----------- ----------- ----------- -----------
Equity Securities... 779,000
----------- ----------- ----------- ----------- -------
Total......... $ 2,997,000 $ 8,456,000 $ 0 $ 0 779,000
=========== =========== =========== =========== =======
</TABLE>
TIME DEPOSITS OF $100,000 OR MORE
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
Three months or less................................ $ 7,050,000 $ 2,286,000
Three through six months............................ 2,726,000 2,918,000
Six through twelve months........................... 4,122,000 4,089,000
Over twelve months.................................. 3,782,000 4,925,000
------- -------
Total.......................................... $ 17,680,000 $ 14,218,000
</TABLE>
64
<PAGE> 68
RATE/VOLUME ANALYSIS OF NET INTEREST INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1996 YEARS ENDED YEARS ENDED
COMPARED WITH NINE MONTHS ENDED DECEMBER 31, 1995 DECEMBER 31, 1994 COMPARED WITH
SEPTEMBER 30, 1995 COMPARED WITH DECEMBER 31, 1994 DECEMBER 31, 1993
-------------------------------- ------------------------------------ ---------------------------------
INCREASE (DECREASE) DUE TO INCREASE (DECREASE) DUE TO INCREASE (DECREASE) DUE TO
-------------------------------- ------------------------------------ ---------------------------------
VOLUME RATE NET VOLUME RATE NET VOLUME RATE NET
-------- -------- -------- -------- ---------- ---------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:
Taxable
securities(1)...... $ 29,062 $116,938 $146,000 $(11,463) $ 45,463 $ 34,000 $ 35,216 $(60,218) $ (25,000)
Tax-exempt
securities(1)(2)... 8,965 (11,965) (3,000) 8,192 24,808 33,000 10,247 26,753 37,000
Loans(3)(4)......... 186,283 550,717 737,000 399,580 1,495,420 1,895,000 338,143 332,857 671,000
Other earnings
assets............. 24,526 45,474 70,000 (956) 10,956 10,000 (38,051) (96,949) (135,000)
-------- ---------- -------- -------- ---------- -------- --------- -------- --------
TOTAL INTEREST
INCOME............. $248,836 $701,164 $950,000 $395,353 $1,576,647 $1,972,000 $345,557 $202,443 $ 548,000
INTEREST EXPENSE
Interest-bearing
demand
deposits........... (10,657) (13,343) (24,000) (13,733) 63,733 50,000 4,973 (86,973) (62,000)
Savings deposits.... (1,701) (29,299) (31,000) (16,793) (77,207) (94,000) 10,734 26,268 39,002
Time deposits....... 198,615 555,385 754,000 250,329 1,613,671 1,864,000 69,200 121,800 191,000
Repurchase
agreements......... (21,976) (48,024) (70,000) 2,795 45,205 48,000 31,767 92,233 124,000
Notes payble........ (4,420) (3,580) (8,000) (9,606) (9,394) (19,000) (6,964) (38,038) (45,002)
-------- ---------- -------- -------- ---------- -------- --------- -------- --------
TOTAL INTEREST
EXPENSE............ $159,861 $461,139 $621,000 $212,992 $1,636,008 $1,849,000 $109,710 $137,290 $ 247,000
NET INTEREST
MARGINS............ $ 88,975 $240,025 $329,000 $182,361 $ (59,361) $ 122,000 $235,847 $ 65,153 $ 301,000
======== ========== ======== ======== ========== ======== ========= ======== ========
</TABLE>
- -------------------------
(1) Average balance and average rate on securities classified as available for
sale is based on historical authorized cost balances.
(2) Interest income and yield on nontaxable securities are reflected on a tax
equivalent basis upon a statutory Federal income tax rate of 34%.
(3) Loans on nonaccrual status have been included in the computation of average
balances.
(4) The interest income on loans includes loan fees. Loans fees were $603,000,
$656,000 and $849,000 for the years ended December 31, 1995, 1994 and 1993
respectively. Loan fees were $173,000 and $449,000 for the nine months ended
September 30, 1996 and 1995, respectively.
65
<PAGE> 69
ACCOUNTING MATTERS
During March 1995, the Financial Accounting Standards Board issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" (Statement No. 121), Statement No. 121
generally requires long-lived assets and certain identifiable intangibles to be
held and used by an entity be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. In performing the review for recoverability, the entity should
estimate the future cash flows expected to result from the use of the asset and
its eventual disposition. If the sum of the expected future cash flows
(discounted and without interest charges) is less than the carrying amount of
the asset, an impairment is recognized. First National Bancorp, Inc. adopted
Statement No. 121 effective January 1, 1996. There was no cumulative effect upon
the adoption of Statement No. 121.
In May 1995, the Financial Accounting Standards Board issued Statement No.
122, "Accounting for Mortgage Servicing Rights" (Statement No. 122). Statement
No. 122 requires First National Bancorp, Inc. to recognize as separate assets
rights to service mortgage loans for others, however those servicing rights are
acquired. If First National Bancorp, Inc. acquires mortgage servicing rights
through either the purchase or origination of mortgage loans and sells or
securitizes those loans with servicing rights retained, First National Bancorp,
Inc. should allocate the total cost of the mortgage loans to mortgage servicing
rights and the loans (without the mortgage servicing rights) based on their
relative fair values. The mortgage servicing rights should be amortized in
proportion to and over the period of estimated net servicing income. This
statement, which is applied prospectively, was adopted effective January 1,
1996. As noted below, this statement was superseded by Statement No. 125.
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, "Accounting for Stock Based Compensation" (Statement No. 123).
Statement No. 123 establishes a fair value based method of accounting for stock
options and other equity instruments. Statement No. 123 permits the continued
use of the intrinsic value method included in Accounting Principle Board Opinion
25, "Accounting for Stock Issued to Employees" (APB 25), but regardless of the
method used to account for the compensation cost associated with stock option or
similar plans, it requires employers to disclose information required by
Statement No. 123. First National Bancorp, Inc. plans to continue to measure
compensation cost using APB 25; therefore, Statement No. 123 will not have any
impact on First National Bancorp, Inc.'s financial condition or results of
operations.
In June 1996, the Financial Accounting Standards Board issued Statement No.
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" (Statement No. 125), Statement No. 125 broadened
the measurement concept of Statement No. 122 to servicing assets and other
retained interests in transferred assets. This Statement is effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996, and is to be applied prospectively.
66
<PAGE> 70
SUPERVISION AND REGULATION
GENERAL
As bank holding companies, AMCORE and FNB are subject to regulation under
the BHCA and its examination and reporting requirements. Under the BHCA, a bank
holding company may not directly or indirectly acquire the ownership or control
of more than 5% of the voting shares or substantially all of the assets of any
company, without the prior approval of the Federal Reserve Board. In addition,
bank holding companies are generally prohibited under the BHCA from engaging in
nonbanking activities, subject to certain exceptions.
Under current regulations of the Federal Reserve Board, a holding company
and its non-bank subsidiaries are permitted, among other activities, to engage
in such banking-related businesses as sales and consumer finance, equipment
leasing, mortgage banking, computer service bureau and software operations and
financial advisory services. The BHCA does not place territorial restrictions on
the activities of non-bank subsidiaries of bank holding companies. In addition,
federal legislation prohibits acquisition of "control" of a bank or bank holding
company without prior notice to certain federal bank regulators. "Control" is
defined in certain cases as acquisition of ten percent or more of the
outstanding shares of a bank or bank holding company.
Federal and state laws and regulations of general application to banks
regulate, among other things, the scope of business, investments, reserves
against deposits, capital levels relative to assets and risk and the
establishment of branches, mergers, consolidations and the payment of dividends.
AMCORE and certain of AMCORE's subsidiary banks are supervised and examined
by the Federal Reserve Board. Nationally chartered affiliate banks are
supervised and regularly examined by the OCC and are subject to examination by
the Federal Reserve Board. In addition, all affiliate banks are subject to
periodic examinations by the Federal Deposit Insurance Corporation ("FDIC").
CERTAIN TRANSACTIONS WITH AFFILIATES
There are various legal restrictions on the extent to which a bank holding
company and certain of its nonbank subsidiaries can borrow or otherwise obtain
credit from its bank subsidiaries. In general, these restrictions require that
any such extensions of credit must be on non-preferential terms and secured by
designated amounts of specified collateral and be limited, as to any one of the
holding company or such nonbank subsidiaries, to 10% of the lending bank's
capital stock and surplus, and as to the holding company and all such nonbank
subsidiaries in the aggregate, to 20% of such capital stock and surplus.
PAYMENT OF DIVIDENDS
AMCORE and FNB are legal entities separate and distinct from their banking
and other subsidiaries. The principal source of AMCORE's and FNB's revenues are
dividends from their national and state banking subsidiaries. Various federal
and state statutory provisions limit the amount of dividends the affiliate banks
can pay to AMCORE or FNB without regulatory approval. The approval of the
appropriate bank regulator is required for any dividend by a national bank or
state member bank if the total of all dividends declared by the bank in any
calendar year would exceed the total of its net profits, as defined by
regulatory agencies, for such year combined with its retained net profits for
the preceding two years. In addition, a national bank or a state member bank may
not pay a dividend in an amount greater than its net profits then on hand. The
payment of dividends by any affiliate bank may also be affected by other
factors, such as the maintenance of adequate capital for such affiliate bank.
CAPITAL ADEQUACY
The Federal Reserve Board has issued standards for measuring capital
adequacy for bank holding companies. These standards are designed to provide
risk-responsive capital guidelines and to incorporate a consistent framework for
use by financial institutions operating in major international financial
markets. The
67
<PAGE> 71
banking regulators have issued standards for banks that are similar to, but not
identical with, the standards for bank holding companies.
In general, the risk-related standards require banks and bank holding
companies to maintain capital based on "risk adjusted" assets so that categories
of assets with potentially higher credit risk will require more capital backing
than categories with lower credit risk. In addition, banks and bank holding
companies are required to maintain capital to support off-balance sheet
activities such as loan commitments.
The standards classify total capital for this risk-based measure into two
tiers referred to as Tier 1 and Tier 2. Tier 1 capital consists of common
shareholders' equity, certain non-cumulative and cumulative perpetual preferred
stock, and minority interests in equity accounts of consolidated subsidiaries;
Tier 2 capital consists of the allowance for loan and lease losses (within
certain limits), perpetual preferred stock not included in Tier 1, hybrid
capital instruments, term subordinated debt, and intermediate-term preferred
stock. Bank holding companies are required to meet a minimum ratio of 8% of
qualifying total capital to risk-adjusted assets, and a minimum ratio of 4% of
qualifying Tier 1 capital to risk-adjusted assets. Capital that qualifies as
Tier 2 capital is limited in amount to 100% of Tier 1 capital in testing
compliance with the total risk-based capital minimum standards.
In addition, the Federal Reserve Board has established minimum leverage
ratio guidelines for bank holding companies. These guidelines provide for a
minimum ratio of Tier 1 capital to adjusted average total assets (the "leverage
ratio") of 3% for bank holding companies that meet certain specified criteria,
including having the highest regulatory rating. Other bank holding companies
generally are required to maintain a leverage ratio of at least 3% plus 100 to
200 basis points. The guidelines also provide that bank holding companies
experiencing internal growth or making acquisitions will be expected to maintain
strong capital positions substantially above minimum supervisory levels, without
significant reliance on intangible assets. Furthermore, the Federal Reserve
Board has indicated that it may consider other indicia of capital strength in
evaluating proposals for expansion or new activities.
The federal bank regulatory agencies have issued various proposals to amend
the risk-based capital guidelines for banks and bank holding companies. Under
one proposal, banks would be required to give explicit consideration to interest
rate risk as an element of capital adequacy by maintaining capital to compensate
for such risk in an amount measured by the bank's exposure to interest rate risk
in excess of a regulatory threshold. Another proposal would revise the treatment
given to (i) low-level recourse arrangements to reduce the amount of capital
required and (ii) certain direct credit substitutes provided by banking
organizations to require that capital be maintained against the value of the
assets enhanced or the loans protected. A proposal recently issued by the
Federal Reserve Board and expected to be joined in by the other bank regulatory
agencies increases the amount of capital required to be carried against certain
long-term derivative contracts; in addition, the proposal recognizes the effect
of certain bilateral netting arrangements in reducing potential future exposure
under these contracts. AMCORE and FNB believe that these changes will not, if
adopted, have a material effect on their compliance with capital adequacy
requirements.
THE INTERSTATE BANKING AND COMMUNITY DEVELOPMENT LEGISLATION
In September 1994, legislation was enacted that may have a significant
effect in restructuring the banking industry in the United States. The
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 facilitates
the interstate expansion and consolidation of banking organizations by
permitting (i) bank holding companies that are adequately capitalized and
managed to acquire banks located in states outside their home states regardless
of whether such acquisitions are authorized under the law of the host state,
(ii) the interstate merger of banks after June 1, 1997, subject to the right of
individual states to "opt in" or to "opt out" of this authority before that
date, (iii) banks to establish new branches on an interstate basis provided that
such action is specifically authorized by the law of the host state, (iv)
foreign banks to establish, with approval of the regulators in the United
States, branches outside their home states to the same extent that national or
state banks located in the home state would be authorized to do so, and (v)
banks to receive deposits, renew time deposits, close loans, service loans and
receive payments on loans and other obligations as agent for any bank or thrift
affiliate, whether the affiliate is located in the same state or a different
state. One effect of this
68
<PAGE> 72
legislation is to permit AMCORE to acquire banks located in any state and to
permit bank holding companies located in any state to acquire banks and bank
holding companies in Wisconsin. Overall, this legislation is likely to have the
effects of increasing competition and promoting geographic diversification in
the banking industry.
The Riegle Community Development and Regulatory Improvement Act of 1994,
also enacted in September 1994, is intended to (i) increase the flow of loans to
businesses in distressed communities by providing incentives to lenders to
provide credit within those communities, (ii) remove impediments to the
securitization of small business loans, (iii) provide for a reduction in
paperwork and to streamline bank regulation through, for example, the
coordination of examinations in a bank holding company context, a reduction in
the number of currency transaction reports required and improvements to the
National Flood Insurance Program that include enabling lenders to force place
flood insurance and (iv) increase the level of consumer protection provided to
customers in banking transactions. AMCORE and FNB believes that these provisions
of the new law will not have a material effect on their operations.
FDIC INSURANCE ASSESSMENTS
The subsidiary banks of AMCORE and FNB are subject to FDIC deposit
insurance assessments based on a risk-based premium schedule. Under this
schedule, the annual premiums ranged from $.04 to $.31 for every $100 of
deposits with an average assessment rate of $.045. Beginning in 1996, the FDIC
announced it would reduce the deposit assessment premiums for 92% of its members
that are assessed in the highest capital and supervisory categories to $2,000
per year. Each financial institution is assigned to one of three capital
groups -- well capitalized, adequately capitalized or undercapitalized -- and
further assigned to one of three subgroups within a capital group, on the basis
of supervisory evaluations by the institution's primary federal and, if
applicable, state supervisors and on the basis of other information relevant to
the institution's financial condition and the risk posed to the applicable
insurance fund. The actual assessment rate applicable to a particular
institution will, therefore, depend in part upon the risk assessment
classification so assigned to the institution by the FDIC. See "SUPERVISION AND
REGULATION -- FIRREA and FDICIA."
FIRREA AND FDICIA
In recent years Congress has enacted significant legislation which has
substantially changed the federal deposit insurance system and the regulatory
environment in which depository institutions and their holding companies
operate. The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA"), the Comprehensive Thrift and Bank Fraud Prosecution and Taxpayer
Recovery Act of 1990 and the Federal Deposit Insurance Corporation Improvement
Act of 1991 ("FDICIA") have significantly increased the enforcement powers of
the federal regulatory agencies having supervisory authority over AMCORE and its
subsidiaries. Certain parts of such legislation, most notably those which
increase deposit insurance assessments and authorize further increases to
recapitalize the bank deposit insurance fund, increase the cost of doing
business for depository institutions and their holding companies. FIRREA also
provides that all commonly controlled FDIC insured depository institutions may
be held liable for any loss incurred by the FDIC resulting from a failure of, or
any assistance given by the FDIC, to any of such commonly controlled
institutions. Federal regulatory agencies have implemented provisions of FDICIA
with respect to taking prompt corrective action when a depository institution's
capital falls to certain levels. Under the new rules, five capital categories
have been established which range from "critically undercapitalized" to "well
capitalized." Failure of a depository institution to maintain a capital level
within the top two categories will result in specific actions from the federal
regulatory agencies. These actions could include the inability to pay dividends,
restricting new business activity, prohibiting bank acquisitions, asset growth
limitations and other restrictions on a case by case basis.
In addition to the impact of regulation, commercial banks are affected
significantly by the actions of the Federal Reserve Board as it attempts to
control the money supply and credit availability in order to influence the
economy. Changes to such monetary policies have had a significant effect on
operating results of financial institutions in the past and are expected to have
such an effect in the future; however, the effect of possible future changes in
such policies on the business and operations of the subsidiary banks cannot be
determined.
69
<PAGE> 73
PRINCIPAL STOCKHOLDERS, DIRECTORS AND OFFICERS
The following table shows the ownership of shares of FNB Common Stock as of
January 6, 1997 by (i) each person known to FNB to own beneficially more than 5%
of the outstanding shares of FNB Common Stock, (ii) each director and officer of
FNB and (iii) all directors and executive officers as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF PERCENTAGE
BENEFICIAL OWNER(1) SHARES(2) OF CLASS(2)
-------------------------------------------------------- --------- -----------
<S> <C> <C>
Robert L. Ableman(3).................................... 3,511
Nathan F. Brand(4)...................................... 15,840 6.3%
John T. Bridger(5)...................................... 1,097 *
Gary L. Culp(6)......................................... 234 *
Charles J. Dearth(7).................................... 4,265
Richard L. Feller(8).................................... 6,651
Richard Hong(9)......................................... 465 *
Clark W. Kepplinger(10)................................. 2,714
Rudolph Regez(11)....................................... 4,017
Frederick E. Studer(12)................................. 2,739
Thomas J. Wilkinson(13)................................. 23,498 9.4%
Subtotal of Directors and Officers...................... 65,031
1996 Deferred Compensation of Directors and
Officers(14).......................................... 2,450
------ -----
Total of Directors and Officers (11 persons)............ 67,481 27.0%
====== =====
</TABLE>
- -------------------------
* Represents less than 1% of the outstanding shares in the class.
(1) The information contained in this column is based upon information
furnished by the persons named above or obtained from records of FNB. The
nature of beneficial ownership for shares shown in this column is sole
voting and investment power unless otherwise indicated herein.
(2) Based on 249,905 shares of FNB Common Stock issued and outstanding and
including shares of FNB Common Stock beneficially owned. For purposes of
this table, a person or group of persons is deemed to have "beneficial
ownership" of any shares as of January 6, 1997 that such person or group of
persons has the right to acquire within 60 days after such date. The
249,905 shares of FNB Common Stock includes 2,450 shares which is the
maximum amount of shares available under the Merger Agreement for
allocation under the FNB Directors Deferred Compensation Plan and the FNB&T
Deferred Compensation Retirement Plan, respectively, for fiscal year 1996.
The actual number of shares to be allocated under such Plans to each
director and officer for 1996 will not be determined until FNB closes its
books and determines the book value of the FNB Common Stock for 1996.
(3) Includes 1,523 shares with respect to which Mr. Ableman has the right to
acquire beneficial ownership by virtue of his participation in the FNB
Directors Deferred Compensation Plan, as amended. It does not include
shares to which he is entitled by virtue of his participation in such plan
for 1996. The actual amount of such shares are to be determined in early
1997.
(4) Includes 1,199 shares with respect to which Mr. Brand has the right to
acquire beneficial ownership by virtue of his participation in the FNB
Directors Deferred Compensation Plan, as amended. It does not include
shares to which he is entitled by virtue of his participation in such plan
for 1996. The actual amount of such shares are to be determined in early
1997.
(5) Includes 1,087 shares with respect to which Mr. Bridger has the right to
acquire beneficial ownership by virtue of his participation in the FNB&T
Deferred Compensation Retirement Plan, as amended. It does not include
shares to which he is entitled by virtue of his participation in such plan
for 1996. The actual amount of such shares are to be determined in early
1997.
(6) Includes 234 shares with respect to which Mr. Culp has the right to acquire
beneficial ownership by virtue of his participation in the FNB&T Deferred
Compensation Retirement Plan, as amended. It does not include shares to
which he is entitled by virtue of his participation in such plan for 1996.
The actual amount of such shares are to be determined in early 1997.
(7) Includes 4,265 shares with respect to which Mr. Dearth has beneficial
ownership.
70
<PAGE> 74
(8) Includes 2,497 shares with respect to which Mr. Feller has the right to
acquire beneficial ownership by virtue of his participation in the FNB
Directors Deferred Compensation Plan, as amended. It does not include
shares to which he is entitled by virtue of his participation in such plan
for 1996. The actual amount of such shares are to be determined in early
1997.
(9) Includes 465 shares with respect to which Mr. Hong has the right to acquire
beneficial ownership by virtue of his participation in the FNB&T Deferred
Compensation Retirement Plan, as amended. It does not include shares to
which he is entitled by virtue of his participation in such plan for 1996.
The actual amount of such shares are to be determined in early 1997.
(10) Includes 1,390 shares with respect to which Mr. Kepplinger has the right to
acquire beneficial ownership by virtue of his participation in the FNB&T
Deferred Compensation Retirement Plan, as amended. It does not include
shares to which he is entitled by virtue of his participation in such plan
for 1996. The actual amount of such shares are to be determined in early
1997.
(11) Includes 1,287 shares with respect to which Mr. Regez has the right to
acquire beneficial ownership by virtue of his participation in the FNB
Directors Deferred Compensation Plan, as amended. It does not include
shares to which he is entitled by virtue of his participation in such plan
for 1996. The actual amount of such shares are to be determined in early
1997.
(12) Includes 758 shares with respect to which Mr. Studer has the right to
acquire beneficial ownership by virtue of his participation in the FNB
Directors Deferred Compensation Plan, as amended. It does not include
shares to which he is entitled by virtue of his participation in such plan
for 1996. The actual amount of such shares are to be determined in early
1997.
(13) Includes 5,000 shares with respect to which Mr. Wilkinson has the right to
acquire beneficial ownership by virtue of outstanding vested options and
3,489 shares by virtue of his participation in the FNB&T Deferred
Compensation Retirement Plan, as amended. It does not include shares to
which he is entitled by virtue of his participation in such plan for 1996.
The actual amount of such shares are to be determined in early 1997.
(14) This 2,450 shares of FNB Common Stock represents shares that the directors
and executive officers of FNB will be allocated under the FNB Directors
Deferred Compensation Plan and the FNB&T Deferred Compensation Retirement
Plan for 1996, but which cannot be allocated until FNB closes its books and
determines the book value of FNB Common Stock for fiscal year 1996.
OPINIONS
Certain legal matters in connection with the Merger will be passed upon for
AMCORE by Skadden, Arps, Slate, Meagher & Flom (Illinois), Chicago, Illinois,
relying as to all matters of Nevada law upon Marshall, Hill, Cassas & de Lipkau,
Reno, Nevada and for FNB by Jones, Day, Reavis and Pogue, Chicago, Illinois.
EXPERTS
The consolidated financial statements of AMCORE and its subsidiaries as of
December 31, 1995 and 1994, and for each of the years in the three-year period
ended December 31, 1995, incorporated by reference herein and elsewhere in the
Registration Statement have been incorporated by reference herein and in the
Registration Statement in reliance on the report of McGladrey & Pullen, LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of FNB and its subsidiary as of
December 31, 1995 and for the year ended December 31, 1994, included herein and
elsewhere in the Registration Statement, have been included herein and in the
Registration Statement in reliance upon the report of McGladrey & Pullen, LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
71
<PAGE> 75
PRO FORMA COMBINING FINANCIAL STATEMENTS
The following unaudited pro forma combining balance sheet and statement of
income are based upon the historical results of AMCORE and FNB giving effect to
the Merger accounted for as a pooling-of-interests. Pro forma adjustments, and
the assumptions on which they are based, are described in the accompanying
footnotes to the pro forma combining financial statements. These financial
statements should be read in conjunction with the historical financial
statements of AMCORE incorporated by reference into this Proxy
Statement/Prospectus and the historical financial statements of FNB included
elsewhere herein. The pro forma combining financial statements are not
necessarily indicative of the results that actually would have occurred had the
companies constituted a single entity during the respective periods, nor are
they indicative of future results of operations.
72
<PAGE> 76
AMCORE FINANCIAL, INC. AND SUBSIDIARIES
FIRST NATIONAL BANCORP, INC.
PRO FORMA CONSOLIDATED COMBINING BALANCE SHEETS
AS OF SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AMCORE FNB ADJUSTMENTS COMBINED
---------- ---------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents.................... $ 106,681 $ 8,211 $ 114,892
Interest earning deposits in banks........... 384 13 397
Federal funds sold and other short-term
investments............................... 60,317 1,735 62,052
Mortgage loans held for sale................. 9,378 213 9,591
Securities available for sale................ 1,162,613 16,227 1,178,840
Securities held to maturity.................. 11,509 37,882 49,391
---------- ---------- ----------
Total securities........................ 1,174,122 54,109 1,228,231
Loans and leases, net of unearned income..... 1,435,562 147,786 1,583,348
Allowance for loan and lease losses.......... (15,078) (1,693) (16,771)
---------- ---------- ----------
Net loans and leases.................... 1,420,484 146,093 1,566,577
Premises and equipment, net.................. 46,433 3,187 49,620
Intangible assets, net:
Core deposit intangibles.................. 2,062 -- 2,062
Goodwill.................................. 10,704 434 11,138
Other intangibles......................... 5,415 -- 5,415
---------- ---------- ----------
Total intangible assets, net............ 18,181 434 18,615
Other assets.............................. 54,802 2,499 $ (22)(2) 57,279
---------- ---------- ----- ----------
TOTAL ASSETS............................ $2,890,782 $ 216,494 $ (22) $3,107,254
========== ========== ===== ==========
LIABILITIES
Deposits:
Interest bearing............................. $1,677,181 $ 173,447 $1,850,628
Non-interest bearing......................... 260,808 19,679 280,487
---------- ---------- ----------
Total deposits.......................... 1,937,989 193,126 2,131,115
Short-term borrowings........................ 559,246 1,465 560,711
Long-term borrowings......................... 148,761 1,346 150,107
Other liabilities............................ 37,198 2,662 39,860
---------- ---------- ----------
TOTAL LIABILITIES....................... 2,683,194 198,599 2,881,793
STOCKHOLDERS' EQUITY
Preferred stock ($1 par value)............... -- -- --
Common stock ($.33 par value)................ 4,976 242 $ 378 (1) 5,596
Additional paid-in capital................... 56,639 3,378 (378)(1) 59,639
Retained earnings............................ 161,010 14,289 (22)(2) 175,277
Net unrealized loss on securities available
for sale.................................. (8,840) (14) (8,854)
Treasury stock and other..................... (6,197) -- (6,197)
---------- ---------- ----- ----------
TOTAL STOCKHOLDERS' EQUITY.............. 207,588 17,895 (22) 225,461
---------- ---------- ----- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY............................... $2,890,782 $ 216,494 $ (22) $3,107,254
========== ========== ===== ==========
</TABLE>
- -------------------------
Notes:
(1) AMCORE issuance of 1,884,284 common shares in exchange for all the
outstanding shares of FNB common stock. The transaction is based on an
exchange ratio of 7.54 AMCORE shares for each FNB share.
(2) Reflects the impact of pro forma statements of income adjustments.
73
<PAGE> 77
AMCORE FINANCIAL, INC. AND SUBSIDIARIES
FIRST NATIONAL BANCORP, INC.
PRO FORMA CONDENSED COMBINING STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AMCORE FNB ADJUSTMENTS COMBINED
-------- ------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans and leases............ $ 88,773 $10,091 $ 98,864
Interest on securities:
Taxable....................................... 42,093 1,685 43,778
Tax-exempt.................................... 10,183 672 10,855
-------- ------- -------
Total Income from Securities................ 52,276 2,357 54,633
Interest on federal funds sold and other
short-term investments........................ 529 88 617
Interest and fees on mortgage loans held for
sale.......................................... 2,043 28 2,071
Interest on deposits in banks.................... 28 -- 28
-------- ------- -------
Total Interest Income....................... 143,649 12,564 156,213
INTEREST EXPENSE
Interest on deposits............................. 53,889 6,426 60,315
Interest on short-term borrowings................ 18,103 53 18,156
Interest on long-term borrowings................. 7,005 72 7,077
Other............................................ 368 -- 368
-------- ------- -------
Total Interest Expense...................... 79,365 6,551 85,916
-------- ------- -------
Net Interest Income.............................. 64,284 6,013 70,297
Provision for loan and lease losses.............. 4,090 90 4,180
-------- ------- -------
Net Interest Income After Provision for Loan and
Lease Losses.................................. 60,194 5,923 66,117
OTHER INCOME
Trust Income..................................... 10,211 386 10,597
Service charges on deposits...................... 5,044 349 5,393
Mortgage revenues................................ 2,641 -- 2,641
Insurance revenues............................... 1,519 15 1,534
Collection fee income............................ 1,647 -- 1,647
Gain on sale of merchant bankcard processing
accounts...................................... 1,400 -- 1,400
Other............................................ 5,271 266 5,537
-------- ------- -------
Total Other Income, Excluding Security
Gains.................................... 27,733 1,016 28,749
-------- ------- -------
Net security gains............................... 1,371 -- 1,371
OPERATING EXPENSES
Compensation and employee benefits expense....... 35,108 2,549 37,657
Net occupancy and equipment expense.............. 9,697 594 10,291
Professional fees................................ 1,758 171 1,929
Advertising and business development............. 1,762 89 1,851
Amortization of intangible assets................ 1,523 34 1,557
Insurance expense................................ 846 39 885
Other............................................ 12,536 766 13,302
-------- ------- -------
Total Operating Expenses.................... 63,230 4,242 67,472
-------- ------- -------
Income Before Income Taxes....................... 26,068 2,697 28,765
Income taxes..................................... 7,075 754 $ 22(1) 7,851
-------- ------- ------- -------
NET INCOME....................................... $ 18,993 $ 1,943 (22) $ 20,914
======== ======= ======= =======
EARNINGS PER COMMON SHARE........................ $ 1.34 $ 7.90 $ 1.30
</TABLE>
- -------------------------
Note: (1) Reflects an increase of FNB's Federal marginal rate from 34% to 35%.
74
<PAGE> 78
AMCORE FINANCIAL, INC. AND SUBSIDIARIES
FIRST NATIONAL BANCORP, INC.
PRO FORMA CONDENSED COMBINING STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AMCORE FNB ADJUSTMENTS COMBINED
-------- ------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans and leases............. $109,488 $12,730 $ 122,218
Interest on securities:
Taxable........................................ 39,530 2,064 41,594
Tax-exempt..................................... 11,984 896 12,880
-------- ------- --------
Total Income from Securities................. 51,514 2,960 54,474
Interest on federal funds sold and other
short-term investments......................... 490 30 520
Interest and fees on mortgage loans held for
sale........................................... 2,971 29 3,000
Interest on deposits in banks..................... 23 -- 23
-------- ------- --------
Total Interest Income........................ 164,486 15,749 180,235
INTEREST EXPENSES
Interest on deposits.............................. 68,062 7,864 75,926
Interest on short-term borrowings................. 14,574 174 14,748
Interest on long-term borrowings.................. 2,050 28 2,078
Other............................................. 394 -- 394
-------- ------- --------
Total Interest Expense....................... 85,080 8,066 93,146
-------- ------- --------
Net Interest Income............................... 79,406 7,683 87,089
Provision for loan and lease losses............... 2,692 61 2,753
-------- ------- --------
Net Interest Income After Provision for Loan and
Lease Losses................................... 76,714 7,622 84,336
OTHER INCOME
Trust Income...................................... 11,401 460 11,861
Service charges on deposits....................... 6,986 425 7,411
Mortgage revenues................................. 3,584 -- 3,584
Insurance revenues................................ 1,015 31 1,046
Collection fee income............................. 1,831 -- 1,831
Other............................................. 6,898 402 7,300
-------- ------- --------
Total Other Income, Excluding Security
Gains..................................... 31,715 1,318 33,033
Net security gains................................ 2,298 -- 2,298
OPERATING EXPENSES
Compensation and employee benefits expense........ $ 45,662 $ 3,275 $ 48,937
Net occupancy and equipment expense............... 13,297 769 14,066
Professional fees................................. 2,733 160 2,893
Advertising and business development.............. 2,437 132 2,569
Amortization of intangible assets................. 2,331 45 2,376
Insurance expense................................. 2,765 246 3,011
Impairment of long-lived assets................... 3,269 -- 3,269
Other............................................. 14,946 931 15,877
-------- ------- --------
Total Operating Expenses..................... 87,440 5,558 92,998
-------- ------- --------
Income Before Income Taxes........................ 23,287 3,382 26,669
Income Taxes...................................... 5,016 936 $ 28(1) 5,980
-------- ------- ---- --------
NET INCOME........................................ $ 18,271 $ 2,446 $ (28) $ 20,689
======== ======= ==== ========
EARNINGS PER COMMON SHARE......................... $1.30 $10.07 $1.30
</TABLE>
- -------------------------
Note: (1) Reflects an increase of FNB's Federal marginal rate from 34% to 35%.
75
<PAGE> 79
AMCORE FINANCIAL, INC. AND SUBSIDIARIES
FIRST NATIONAL BANCORP, INC.
PRO FORMA CONDENSED COMBINING STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AMCORE FNB ADJUSTMENTS COMBINED
-------- -------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans and leases............ $ 90,719 $ 10,837 $ 101,556
Interest on securities:
Taxable....................................... 32,030 2,030 34,060
Tax-exempt.................................... 12,552 863 13,415
-------- -------- --------
Total Income from Securities................ 44,582 2,893 47,475
Interest on federal funds sold and other
short-term investments........................ 585 20 605
Interest and fees on mortgage loans held for
sale.......................................... 2,893 27 2,920
Interest on deposits in banks.................... 176 -- 176
-------- -------- --------
Total Interest Income....................... 138,955 13,777 152,732
INTEREST EXPENSE
Interest on deposits............................. 53,202 6,044 59,246
Interest on short-term borrowings................ 5,595 126 5,721
Interest on long-term borrowings................. 2,058 47 2,105
Other............................................ 340 -- 340
-------- -------- --------
Total Interest Expense...................... 61,195 6,217 67,412
-------- -------- --------
Net Interest Income.............................. 77,760 7,560 85,320
Provision for loan and lease losses.............. 628 -- 628
-------- -------- --------
Net Interest Income After Provision for Loan and
Lease Losses.................................. 77,132 7,560 84,692
OTHER INCOME
Trust Income..................................... 10,910 612 11,522
Service charges on deposits...................... 6,742 364 7,106
Mortgage revenues................................ 3,687 -- 3,687
Insurance revenues............................... 845 26 871
Collection fee income............................ 1,700 -- 1,700
Other............................................ 6,242 378 6,620
-------- -------- --------
Total Other Income, Excluding Security
Gains.................................... 30,126 1,380 31,506
Net security gains............................... 908 -- 908
OPERATING EXPENSES
Compensation and employee benefits expense....... 41,385 3,372 44,757
Net occupancy and equipment expense.............. 11,015 828 11,843
Professional fees................................ 3,370 161 3,531
Advertising and business development............. 2,377 128 2,505
Amortization of intangible assets................ 2,585 45 2,630
Insurance expense................................ 4,528 393 4,921
Other............................................ 13,430 966 14,396
-------- -------- --------
Total Operating Expenses.................... 78,690 5,893 84,583
-------- -------- --------
Income Before Income Taxes....................... 29,476 3,047 32,523
Income taxes..................................... 7,675 825 $ 24(1) 8,524
-------- -------- ---- --------
NET INCOME....................................... $ 21,801 $ 2,222 $ (24) $ 23,999
======== ======== ==== ========
EARNINGS PER COMMON SHARE........................ $1.55 $9.04 $1.51
</TABLE>
- -------------------------
Note: (1) Reflects an increase of FNB's Federal marginal rate from 35% to 35%.
76
<PAGE> 80
AMCORE FINANCIAL, INC. AND SUBSIDIARIES
FIRST NATIONAL BANCORP, INC.
PRO FORMA CONDENSED COMBINING STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1993
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AMCORE FNB ADJUSTMENTS COMBINED
-------- ------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans and leases............. $ 84,894 $10,121 $ 95,015
Interest on securities:
Taxable........................................ 34,788 2,055 36,843
Tax-exempt..................................... 10,209 826 11,035
-------- ------- ---- --------
Total Income from Securities................. 44,997 2,881 47,878
Interest on federal funds sold and other
short-term investments......................... 1,289 153 1,442
Interest and fees on mortgage loans held for
sale........................................... 5,854 73 5,927
Interest on deposits in banks..................... 150 -- 150
-------- ------- ---- --------
Total Interest Income........................ 137,184 13,228 150,412
INTEREST EXPENSE
Interest on deposits.............................. 54,205 5,803 60,008
Interest on short-term borrowings................. 3,008 1 3,009
Interest on long-term borrowings.................. 2,119 165 2,284
Other............................................. 296 -- 296
-------- ------- ---- --------
Total Interest Expense....................... 59,628 5,969 65,597
-------- ------- ---- --------
Net Interest Income............................... 77,556 7,259 84,815
Provision for loan and lease losses............... 2,124 -- 2,124
-------- ------- ---- --------
Net Interest Income After Provision for Loan and
Lease Losses................................... 75,432 7,259 82,691
OTHER INCOME
Trust Income...................................... 10,158 543 10,701
Service charges on deposits....................... 6,455 332 6,787
Mortgage revenues................................. 4,048 -- 4,048
Insurance revenues................................ 470 18 488
Collection fee income............................. 1,913 -- 1,913
Other............................................. 5,398 308 5,706
-------- ------- ---- --------
Total Other Income, Excluding Security
Gains..................................... 28,442 1,201 29,643
Net security gains................................ 1,163 -- 1,163
OPERATING EXPENSES
Compensation and employee benefits expense........ 40,825 3,248 44,073
Net occupancy and equipment expense............... 9,434 844 10,278
Professional fees................................. 2,384 258 2,642
Advertising and business development.............. 2,079 136 2,215
Amortization of intangible assets................. 3,561 45 3,606
Insurance expense................................. 4,492 384 4,876
Other............................................. 13,361 907 14,268
-------- ------- ---- --------
Total Operating Expenses..................... 76,136 5,822 81,958
-------- ------- ---- --------
Income Before Income Taxes........................ 28,901 2,638 31,539
Income Taxes...................................... 7,461 578 $ 17(1) 8,056
-------- ------- ---- --------
NET INCOME........................................ $ 21,440 $ 2,060 $ (17) $ 23,483
======== ======= ==== ========
EARNINGS PER COMMON SHARE......................... $1.53 $8.40 $1.48
</TABLE>
- -------------------------
Note: (1) Reflects an increase of FNB's Federal marginal rate from 34% to 35%.
77
<PAGE> 81
INDEX TO FIRST NATIONAL BANCORP, INC.
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AUDITED CONSOLIDATED FINANCIAL STATEMENTS:
Independent Auditor's Report....................................................... F-1
Consolidated Balance Sheets as of December 31, 1995 and 1994....................... F-2
Consolidated Statements of Income for the Years Ended December 31, 1995, 1994 and
1993............................................................................ F-3
Consolidated Statements of Stockholders' Equity for the Years Ended December 31,
1995, 1994 and 1993............................................................. F-4
Consolidated Statements of Cash Flows for the Years Ended December 31,
1995, 1994 and 1993............................................................. F-5
Notes to Consolidated Financial Statements......................................... F-6
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS:
Unaudited Consolidated Balance Sheet as of September 30, 1996 and December 31,
1995............................................................................ F-18
Unaudited Consolidated Statements of Income for the Three Months Ended September
30, 1996 and 1995 and Nine Months Ended September 30, 1996 and 1995............. F-19
Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September
30, 1996 and 1995............................................................... F-20
Condensed Notes to Unaudited Consolidated Financial Statements..................... F-22
</TABLE>
78
<PAGE> 82
LOGO
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
First National Bancorp, Inc.
Monroe, Wisconsin
We have audited the accompanying consolidated balance sheets of First
National Bancorp, Inc. and subsidiary as of December 31, 1995 and 1994, and the
related consolidated statements of income, stockholders' equity, and cash flows
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of First
National Bancorp, Inc. and subsidiary as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ MCGLADREY & PULLEN, LLP
Madison, Wisconsin
January 31, 1996
F-1
<PAGE> 83
FIRST NATIONAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Cash and due from banks........................................... $ 6,754,728 $ 7,623,082
Federal funds sold................................................ 3,505,000 290,000
Held-to-maturity securities -- fair value $38,216,510 in 1995;
$40,661,325 in 1994............................................. 37,613,696 41,717,390
Available-for-sale securities..................................... 12,231,990 9,440,104
Loans -- net...................................................... 140,526,382 127,051,793
Premises and equipment -- net..................................... 3,393,495 3,561,383
Accrued interest receivable....................................... 1,814,604 1,604,595
Other assets...................................................... 691,066 786,431
------------ ------------
Total assets............................................ $206,530,961 $192,074,778
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Non interest-bearing......................................... $ 19,116,113 $ 20,424,445
Interest-bearing............................................. 163,162,372 152,504,691
------------ ------------
Total deposits.......................................... 182,278,485 172,929,136
------------ ------------
Notes payable................................................... 4,246,111 2,000,000
Repurchase agreements........................................... 1,243,193 1,100,000
Accrued interest payable........................................ 1,098,528 894,725
Other liabilities............................................... 1,519,562 1,092,260
------------ ------------
Total liabilities....................................... 190,385,879 178,016,121
------------ ------------
Commitments, contingencies and credit risk
Stockholders' equity
Common stock -- authorized, 300,000 shares of $1 par value;
issued, 239,700 shares....................................... 239,700 239,700
Additional paid-in capital...................................... 3,575,081 3,644,085
Retained earnings............................................... 12,636,611 10,741,738
Unrealized gain (loss) on available-for-sale securities, net.... 94,340 (181,961)
------------ ------------
16,545,732 14,443,562
Treasury stock -- at cost; 5,342 and 7,099 shares in 1995 and
1994, respectively........................................... (400,650) (384,905)
------------ ------------
Total stockholders' equity.............................. 16,145,082 14,058,657
------------ ------------
Total liabilities and stockholders' equity.............. $206,530,961 $192,074,778
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
F-2
<PAGE> 84
FIRST NATIONAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Interest income
Interest and fees on loans............................ $12,757,931 $10,863,336 $10,193,294
Interest on securities................................
Taxable............................................ 2,064,410 2,029,730 2,055,129
Exempt from federal income taxes................... 895,527 863,434 826,210
Interest on federal funds sold........................ 30,352 20,026 153,323
----------- ----------- -----------
15,748,220 13,776,526 13,227,956
----------- ----------- -----------
Interest expense
Deposits.............................................. 7,863,552 6,043,528 5,803,109
Borrowings............................................ 202,517 173,201 165,859
----------- ----------- -----------
8,066,069 6,216,729 5,968,968
----------- ----------- -----------
Net interest income........................... 7,682,151 7,559,797 7,258,988
Provision for loan losses............................... 60,500 -- --
----------- ----------- -----------
Net interest income after provision for loan
losses...................................... 7,621,651 7,559,797 7,258,988
----------- ----------- -----------
Other income
Trust fees............................................ 459,852 611,884 543,177
Service charges on deposits........................... 424,816 364,315 332,468
Other................................................. 433,421 403,749 325,331
----------- ----------- -----------
1,318,089 1,379,948 1,200,976
----------- ----------- -----------
Other expenses
Salaries and employee benefits........................ 3,274,587 3,372,471 3,248,122
Occupancy expenses.................................... 769,079 827,664 844,734
Other................................................. 1,514,328 1,692,687 1,729,095
----------- ----------- -----------
5,557,994 5,892,822 5,821,951
----------- ----------- -----------
Income before income taxes.................... 3,381,746 3,046,923 2,638,013
----------- ----------- -----------
Income taxes
Current............................................... 920,135 848,869 762,354
Deferred.............................................. 16,000 (24,000) (184,000)
----------- ----------- -----------
936,135 824,869 578,354
----------- ----------- -----------
NET INCOME.................................... $ 2,445,611 $ 2,222,054 $ 2,059,659
=========== =========== ===========
Earnings per share of common stock...................... 10.07 9.04 8.40
=========== =========== ===========
Weighted average number of shares outstanding........... 242,963 245,692 245,270
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE> 85
FIRST NATIONAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS)
ON
ADDITIONAL AVAILABLE-
COMMON PAID-IN RETAINED FOR-SALE TREASURY
STOCK CAPITAL EARNINGS SECURITIES, NET STOCK TOTAL
-------- ---------- ----------- --------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 31,
1992........................ $239,700 $3,844,516 $ 7,390,079 $ -- $(454,300) $11,019,995
Net income.................... -- -- 2,059,659 -- -- 2,059,659
Dividends declared -- $1.85
per share................... -- -- (426,551) -- -- (426,551)
Effects of deferred
compensation plans.......... -- (137,394) -- -- -- (137,394)
Sale of treasury
stock -- 3,848 shares....... -- 24,481 -- -- 134,680 159,161
-------- ---------- ----------- -------- --------- -----------
BALANCES AT DECEMBER 31,
1993........................ 239,700 3,731,603 9,023,187 -- (319,620) 12,674,870
Net income.................... -- -- 2,222,054 -- -- 2,222,054
Dividends declared -- $2.15
per share................... -- -- (503,503) -- -- (503,503)
Effects of deferred
compensation plans.......... -- (143,205) -- -- -- (143,205)
Sale of treasury
stock -- 5,444 shares....... -- 55,687 -- -- 190,540 246,227
Purchase of treasury stock --
3,411 shares................ -- -- -- -- (255,825) (255,825)
Unrealized loss on
available-for-sale
securities, net............. -- -- -- (181,961) -- (181,961)
-------- ---------- ----------- -------- --------- -----------
BALANCES AT DECEMBER 31,
1994........................ 239,700 3,644,085 10,741,738 (181,961) (384,905) 14,058,657
Net income.................... -- -- 2,445,611 -- -- 2,445,611
Dividends declared -- $2.35
per share................... -- -- (550,738) -- -- (550,738)
Effects of deferred
compensation plans.......... -- (71,823) -- -- -- (71,823)
Sale of treasury
stock -- 5,169 shares....... -- 2,819 -- -- 240,155 242,974
Purchase of treasury stock --
3,412 shares................ -- -- -- -- (255,900) (255,900)
Unrealized gain on
available-for-sale
securities, net............. -- -- -- 276,301 -- 276,301
-------- ---------- ----------- -------- --------- -----------
BALANCES AT DECEMBER 31,
1995........................ $239,700 $3,575,081 $12,636,611 $ 94,340 $(400,650) $16,145,082
======== ========== =========== ======== ========= ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE> 86
FIRST NATIONAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1995 1994 1993
----------- ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received................................... $15,032,665 $ 13,026,760 $ 13,592,076
Fees and commissions received....................... 1,908,978 2,010,184 1,188,302
Interest paid....................................... (7,862,266) (6,226,125) (6,086,593)
Cash paid to suppliers and employees................ (5,109,159) (5,498,470) (5,301,889)
Income taxes paid................................... (790,048) (801,258) (632,267)
----------- ------------ ------------
Net cash provided by operating activities... 3,180,170 2,511,091 2,759,629
----------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of held-to-maturity securities............ (7,665,082) (38,863,119) --
Purchases of available-for-sale securities.......... (2,996,555) (2,009,375) (25,649,644)
Proceeds from sales of available-for-sale
securities....................................... -- 17,500 288,550
Proceeds from maturities of held-to-maturity
securities....................................... 8,698,806 36,521,337 --
Proceeds from maturities of available-for-sale
securities....................................... 3,649,799 3,304,965 17,383,029
Maturities of interest-bearing deposits with
banks............................................ -- 400,000 627,522
Net (increase) decrease in federal funds sold....... (3,215,000) 5,270,000 (2,575,000)
Net increase in loans............................... (13,535,089) (17,254,627) (9,042,579)
Purchases of premises and equipment................. (160,392) (190,165) (366,521)
Proceeds from sales of other real estate............ -- 114,000 106,205
----------- ------------ ------------
Net cash used in investing activities....... (15,223,513) (12,689,484) (19,228,438)
----------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits............................ 9,349,349 11,910,923 14,302,910
Proceeds from borrowings on notes payable........... 3,050,000 -- --
Payments on notes payable........................... (803,889) (700,000) (300,000)
Increase in repurchase agreements................... 143,193 1,100,000 --
Proceeds from sales of treasury stock............... 242,974 246,227 159,161
Purchase of treasury stock.......................... (255,900) (255,825) --
Dividends paid...................................... (550,738) (503,503) (426,551)
----------- ------------ ------------
Net cash provided by financing activities... 11,174,989 11,797,822 13,735,520
----------- ------------ ------------
Net increase (decrease) in cash and due from
banks..................................... (868,354) 1,619,429 (2,733,289)
Cash and due from banks at beginning of year.......... 7,623,082 6,003,653 8,736,942
----------- ------------ ------------
Cash and due from banks at end of year................ $ 6,754,728 $ 7,623,082 $ 6,003,653
=========== ============ ============
RECONCILIATIONS OF NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Net income for the year............................. $ 2,445,611 $ 2,222,054 $ 2,059,659
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation..................................... 322,265 363,995 396,970
Amortization..................................... 44,902 44,902 44,902
Deferred compensation............................ 56,188 (8,870) 210,487
Provision for loan losses........................ 60,500 -- --
Gain on sale of securities....................... (11,688) (3,250) (12,674)
Net amortization of premiums and accretion of
discounts on securities........................ 97,031 158,818 222,809
(Gain) loss on disposition of premises and
equipment...................................... 6,015 (8,863) --
Gain on sale of other real estate................ -- (14,000) --
Deferred income taxes............................ 16,000 (24,000) (184,000)
Increase in accrued interest receivable.......... (210,009) (252,235) 141,311
(Increase) decrease in other assets.............. (86,845) 123,650 205,016
Increase (decrease) in accrued interest
payable........................................ 203,803 (9,396) (117,625)
Increase (decrease) in other liabilities......... 236,397 (81,714) (207,226)
----------- ------------ ------------
Net cash provided by operating activities... $ 3,180,170 $ 2,511,091 $ 2,759,629
=========== ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE> 87
FIRST NATIONAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
First National Bancorp, Inc., through its subsidiary First National Bank
and Trust, provides financial and other banking services to its customers
located primarily in southern Wisconsin and northern Illinois from its offices
in Monroe, Madison, New Glarus and Belleville, Wisconsin. A summary of the
significant accounting policies consistently applied in the preparation of the
accompanying consolidated financial statements follows.
A. BASIS OF FINANCIAL STATEMENT PRESENTATION AND ACCOUNTING ESTIMATES
The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles. In preparing the financial statements,
management is required to make estimates and assumptions that affect the
financial statements and accompanying notes. Actual results could differ from
these estimates.
B. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of First
National Bancorp, Inc. and its wholly-owned subsidiary, First National Bank and
Trust (Bank). These entities are collectively referred to herein as the Company.
All significant intercompany transactions and balances have been eliminated in
consolidation.
C. PRESENTATION OF CASH FLOWS
For purposes of reporting cash flows, cash and due from banks includes cash
on hand and amounts due from banks (including cash items in the process of
clearing), and money market investments. Cash flows from loans, deposits and
federal funds sold are reported net.
The Company maintains amounts due from banks which, at times, may exceed
federally insured limits. The Company has not experienced any losses on such
accounts.
D. TRUST ASSETS
Assets of the trust department, other than trust cash on deposit at the
Bank, are not included in these financial statements because they are not assets
of the Company.
E. INVESTMENT IN DEBT AND EQUITY SECURITIES
Financial Accounting Standards Board (FASB) Statement No. 115, Accounting
for Certain Investments in Debt and Equity Securities, requires that management
determine the appropriate classification of securities at the date of adoption
and thereafter as each individual security is acquired. In addition, the
appropriateness of such classification should be reassessed at each balance
sheet date. The classifications and related accounting policies under Statement
No. 115 are as follows:
Held-to-Maturity: Securities classified as held-to-maturity are those debt
securities the Bank has both the intent and the ability to hold to maturity
regardless of changes in market conditions, liquidity needs or changes in
general economic conditions. These securities are carried at cost adjusted for
amortization of premium and accretion of discount, computed by the interest
method over their contractual lives.
Available-for-Sale Securities: Securities classified as available-for-sale
are those debt securities the Bank intends to hold for an indefinite period of
time but not necessarily to maturity. Any decision to sell a security classified
as available-for-sale would be based on various factors, including significant
movements in interest rates, changes in the maturity mix of the Bank's assets
and liabilities, liquidity needs, regulatory capital considerations, and other
similar factors. Securities available-for-sale are carried at fair value.
Unrealized gains or losses, net of the related deferred tax effect are reported
as increases or decreases in stockholders'
F-6
<PAGE> 88
FIRST NATIONAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
E. INVESTMENT IN DEBT AND EQUITY SECURITIES -- CONTINUED
equity. Realized gains or losses, determined on the basis of the cost of
specific securities sold, are included in earnings.
Transfers of debt securities transferred into available-for-sale
classification from held-to-maturity are made at fair value on the date of the
transfer. The unrealized holding gain or loss on the date of transfer is
recognized in a separate component of stockholders' equity net of related
deferred taxes.
F. LOANS
Loans are reported at the amount of unpaid principal. Interest on loans is
calculated using the simple interest method on daily principal balances
outstanding. Accrual of interest on a loan is discontinued when management
believes, after considering economic and business conditions and collection
efforts, that the borrower's financial condition is such that collection of
interest is doubtful. Cash collections on impaired loans are credited to the
loan balance and no interest income is recognized until the principal balance
has been collected.
G. ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is an amount that management believes will be
adequate to absorb estimated losses on existing loans that may become
uncollectible, based on evaluation of the collectibility of loans and prior loan
loss experience. This evaluation also takes into consideration such factors as
changes in the nature and volume of the loan portfolio, overall portfolio
quality, review of specific problem loans, and current economic conditions that
may affect the borrower's ability to pay. While management uses the best
information available to make its evaluation, future adjustments to the
allowance may be necessary if there are significant changes in economic
conditions. Impaired loans are measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate or, as a
practical expedient, at the loan's observable market price or the fair value of
the collateral if the loan is collateral dependent. A loan is impaired when it
is probable the creditor will be unable to collect all contractual principal and
interest payments due in accordance with the terms of the loan agreement.
H. PREMISES AND EQUIPMENT
Premises and equipment are stated at cost, net of accumulated depreciation,
which has been provided in amounts sufficient to relate the cost of the assets
to operations over the estimated service lives, 5 to 40 years for buildings and
improvements and 3 to 10 years for furniture and equipment, principally by the
straight-line method.
I. INCOME TAXES
Deferred taxes are provided on the liability method whereby deferred tax
assets are recognized for deductible temporary differences and operating loss
and tax credit carryforwards and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the difference between
the reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax law and rates on the date of enactment.
J. PER SHARE DATA
Earnings per share are calculated on the weighted average number of shares
outstanding, including common stock equivalents, outstanding during the year.
Shares held by stock ownership plans are considered to be outstanding shares
regardless of whether they are allocated to participants or held as unallocated
shares.
F-7
<PAGE> 89
FIRST NATIONAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
K. FAIR VALUE OF FINANCIAL INSTRUMENTS
FASB Statement No. 107, Disclosures About Fair Value of Financial
Instruments, requires disclosure of fair value information about financial
instruments, whether or not recognized in the balance sheet, for which it is
practicable to estimate that value. In cases where quoted market prices are not
available, fair values are based on estimates using present value or other
valuation techniques. Those techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value cannot be substantiated by
comparison to independent markets and, in many cases, could not be realized in
immediate settlement of the instrument. Statement No. 107 excludes certain
financial instruments and all nonfinancial instruments from its disclosure
requirements. Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Company.
The following methods and assumptions were used by the Company in
estimating the fair value of its financial instruments:
Cash and due from banks and federal funds sold: The carrying amounts
reported in the accompanying consolidated balance sheets for cash and due from
banks and federal funds sold approximate their fair values.
Securities (including mortgage-backed securities): Fair values for
investment securities are based on the quoted market prices, where available. If
quoted market prices are not available, fair values are based on quoted market
prices of comparable securities.
Loans: The fair values of loans are estimated based on discounted cash flow
analysis, using rates currently being offered for loans with similar terms to
borrowers with similar credit quality. For variable rate loans that reprice
frequently and that have experienced no significant change in credit risk, fair
values approximate carrying value.
Off-balance sheet commitments: Fair values for the Company's off-balance
sheet commitments are based on outstanding amounts, which approximate fair
value.
Deposits: The carrying amounts of interest-bearing deposits are estimated
using a discounted cash flow calculation that applies interest rates currently
being offered on similar deposits. Fair values for non-interest bearing deposits
equal their carrying amounts, which represent the amount payable on demand.
Notes payable: The fair value of the Company's notes payable approximates
its carrying value.
Repurchase agreements: The carrying amounts reported in the accompanying
consolidated balance sheets for repurchase agreements approximate their fair
values.
Accrued interest receivable and payable: The carrying amounts of both
accrued interest receivable and payable approximate their fair values.
L. MORTGAGE SERVICING RIGHTS
FASB Statement No. 122, Accounting for Mortgage Servicing Rights,
establishes a new standard for capitalizing mortgage servicing rights. This
standard will require the Company to record an asset for mortgage servicing
rights when it sells mortgages and retains the servicing, and then amortize this
asset over the period during which servicing income is expected to be received.
This statement is to be applied prospectively effective January 1, 1996. In
management's opinion this statement will not have a material impact on the
Company's financial statements.
F-8
<PAGE> 90
FIRST NATIONAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
M. RECLASSIFICATIONS
Various items in the 1993 and 1994 consolidated financial statements have
been reclassified to conform to the classifications used in the 1995
consolidated financial statements, with no effect on previously reported net
income or stockholders' equity.
NOTE 2 -- CASH AND NONINTEREST BEARING DEPOSITS
The Bank, which is a member of the Federal Reserve System, is required to
maintain certain daily reserve balances in accordance with Federal Reserve Board
requirements. These reserves averaged $771,000 and $846,000 in 1995 and 1994,
respectively.
NOTE 3 -- HELD-TO-MATURITY SECURITIES
The amortized costs and estimated fair values of held-to-maturity
securities are summarized as follows at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
GROSS UNREALIZED
AMORTIZED -------------------- FAIR
1995 COST GAINS LOSSES VALUE
- ----------------------------------------------- ----------- -------- -------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government agencies..................... $20,989,855 $233,061 $170,310 $21,052,606
Obligations of state and political
subdivisions................................. 15,623,841 534,522 35,059 16,123,304
Collateralized mortgage obligations............ 1,000,000 40,600 -- 1,040,600
----------- -------- -------- -----------
$37,613,696 $808,183 $205,369 $38,216,510
=========== ======== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
GROSS UNREALIZED
AMORTIZED ---------------------- FAIR
1994 COST GAINS LOSSES VALUE
- ---------------------------------------------- ----------- -------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government agencies.................... $28,025,287 $ 36,695 $1,115,220 $26,946,762
Obligations of state and political
subdivisions................................ 12,647,103 165,950 123,674 12,689,379
Collateralized mortgage obligations........... 1,045,000 284 20,100 1,025,184
----------- -------- ---------- -----------
$41,717,390 $202,929 $1,258,994 $40,661,325
=========== ======== ========== ===========
</TABLE>
The amortized cost and estimated fair value of held-to-maturity securities
at December 31, 1995 are summarized according to anticipated maturity dates as
follows:
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
----------- -----------
<S> <C> <C>
Due within one year................................................ $10,068,786 $10,087,739
Due after one year through five years.............................. 22,415,721 22,892,807
Due after five years through ten years............................. 4,879,189 4,982,564
Due after ten years................................................ 250,000 253,400
----------- -----------
$37,613,696 $38,216,510
=========== ===========
</TABLE>
Actual maturities of mortgage-backed obligations are anticipated to differ
from the distribution indicated above because the mortgages underlying the
securities may be prepaid without penalties.
F-9
<PAGE> 91
FIRST NATIONAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 3 -- HELD-TO-MATURITY SECURITIES -- CONTINUED
Held-to-maturity securities with a carrying amount of $623,000 at December
31, 1995 were pledged to secure public deposits and for other purposes as
required by law.
During 1995, Financial Accounting Standards Board Special Report -- A Guide
to Implementation of Statement No. 115 on Accounting for Certain Investments in
Debt and Equity Securities allowed a one-time reassessment of the
appropriateness of the classification of securities under certain circumstances.
Held-to-maturity securities with an amortized cost of $2,983,935 and a fair
value of $3,102,000 were reclassified as available-for-sale on November 20, 1995
in accordance with the guidance provided by the report.
NOTE 4 -- AVAILABLE-FOR-SALE SECURITIES
The amortized costs and estimated fair values of available-for-sale
securities are summarized as follows at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
GROSS UNREALIZED
AMORTIZED --------------------- FAIR
1995 COST GAINS LOSSES VALUE
---- ----------- -------- -------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government agencies................... $11,295,656 $179,517 $ 22,283 $11,452,890
Equity securities............................ 779,100 -- -- 779,100
----------- -------- -------- -----------
$12,074,756 $179,517 $ 22,283 $12,231,990
=========== ======== ======== ===========
1994
----
U.S Treasury securities and obligations of
U.S. government agencies................... $ 6,302,316 $ 96 $193,752 $ 6,108,660
Obligations of states and political
subdivisions............................... 2,240,599 -- 110,922 2,129,677
Collateralized mortgage obligations.......... 457,250 617 -- 457,867
Equity securities............................ 743,900 -- -- 743,900
----------- -------- -------- -----------
$ 9,744,065 $ 713 $304,674 $ 9,440,104
=========== ======== ======== ===========
</TABLE>
The amortized costs and estimated fair value of available-for-sale
securities at December 31, 1995 are summarized according to anticipated maturity
dates as follows:
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
----------- -----------
<S> <C> <C>
Due within one year.................................................. $ 3,011,196 $ 2,996,900
Due after one year through five years................................ 8,284,460 8,455,990
Equity securities.................................................... 779,100 779,100
----------- -----------
$12,074,756 $12,231,990
=========== ===========
</TABLE>
Available-for-sale securities with a carrying amount of $4,279,000 at
December 31, 1995 were pledged to secure treasury tax and loan accounts, public
deposits and for other purposes as required by law.
F-10
<PAGE> 92
FIRST NATIONAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 5 -- LOANS -- NET
The loan portfolio is summarized as follows at December 31:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Agricultural..................................................... $ 22,287,439 $ 21,783,462
Commercial and financial
Secured by real estate......................................... 20,684,444 27,101,098
Secured by other collateral.................................... 30,871,143 27,575,418
Municipal........................................................ 1,064,417 1,092,419
Residential...................................................... 59,567,423 43,859,174
Installment...................................................... 7,693,754 7,249,455
------------ ------------
142,168,620 128,661,026
Less allowance for loan losses................................... (1,642,238) (1,609,233)
------------ ------------
$140,526,382 $127,051,793
============ ============
</TABLE>
Loans to officers, directors, significant stockholders (more than 10%
ownership) and entities in which such persons have significant interests
aggregated approximately $6,952,000 and $5,901,000 at December 31, 1995 and
1994, respectively. In management's opinion, such loans are made at
substantially the same terms and rates as those extended to other borrowing
customers.
Changes in such loans during the year ended December 31, 1995 are as
follows:
<TABLE>
<S> <C>
Balance at beginning of year...................................... $5,901,000
New loans, extensions and modifications......................... 1,181,000
Repayments...................................................... (130,000)
----------
Balance at end of year............................................ $6,952,000
==========
</TABLE>
Additionally, the Company has loans sold to investors which it continues to
service of approximately $67,955,000 at December 31, 1995.
Following is a summary of the transactions affecting the allowance for loan
losses for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Balance at the beginning of the year..................... $1,609,233 $1,626,333 $1,656,743
Provision for loans losses............................... 60,500 -- --
Loans charged off........................................ (44,598) (69,911) (89,787)
Recoveries on loans previously charged off............... 17,103 52,811 59,377
---------- ---------- ----------
$1,642,238 $1,609,233 $1,626,333
========== ========== ==========
</TABLE>
NOTE 6 -- PREMISES AND EQUIPMENT -- NET
Premises and equipment are summarized as follows at December 31:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Buildings and improvements........................................... $3,921,063 $3,890,690
Furniture and equipment.............................................. 2,649,591 2,543,283
---------- ----------
6,570,654 6,433,973
Less accumulated depreciation and amortization....................... 3,679,518 3,374,948
---------- ----------
2,891,136 3,059,025
Land................................................................. 502,359 502,358
---------- ----------
$3,393,495 $3,561,383
========== ==========
</TABLE>
F-11
<PAGE> 93
FIRST NATIONAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 7 -- DEPOSITS
Interest-bearing deposits consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Savings accounts.................................. $ 18,410,010 $ 19,333,474
NOW accounts...................................... 16,590,173 18,157,621
Money market accounts............................. 7,547,733 9,303,928
Certificates of deposit........................... 106,396,327 94,031,976
Certificates of deposit greater than $100,000..... 14,218,129 11,677,692
------------ ------------
$163,162,372 $152,504,691
============ ============
</TABLE>
NOTE 8 -- NOTES PAYABLE
Notes payable consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Note payable to M & I Bank, collateralized by all shares of Bank
stock, monthly payments of interest are at prime (8.5% at December
31, 1995), due and renewable June, 1996............................ $1,200,000 $2,000,000
6.03% note payable to the Federal Home Loan Bank, collateralized by
1-to-4 family real estate mortgages, interest payable monthly, due
January, 1996...................................................... 2,500,000 --
6.69% note payable to the Federal Home Loan Bank, collateralized by
1-to-4 family real estate mortgages, monthly principal and interest
payments of $3,545, due July, 2010................................. 546,111 --
---------- ----------
$4,246,111 $2,000,000
========== ==========
</TABLE>
Aggregate principal maturities of the notes payable as of December 31, 1995
are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------------------------------------------------
<S> <C>
1996.............................................................. $3,706,100
1997.............................................................. 6,500
1998.............................................................. 7,000
1999.............................................................. 7,500
2000.............................................................. 8,000
Thereafter........................................................ 511,011
----------
$4,246,111
==========
</TABLE>
NOTE 9 -- EMPLOYEE BENEFIT PLANS
The Company has a 401(k) salary deferral plan covering substantially all
employees. Employer contributions are based on a percentage of employee
contributions. The expense under this plan was $155,000, $156,000 and $140,000
for the years ended December 31, 1995, 1994 and 1993, respectively.
The Company has deferred compensation retirement plans covering certain key
employees as designated by the Board of Directors. Employer contributions are
based on the return on assets of the Bank. Deferred compensation expense was
$57,000, $55,000 and $54,000 for the years ended December 31, 1995, 1994 and
1993, respectively. Shares of the Company's common stock are owned by a trust
for the benefit of the
F-12
<PAGE> 94
FIRST NATIONAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 9 -- EMPLOYEE BENEFIT PLANS -- CONTINUED
participating key employees. The trusts owned 5,624, 5,025 and 4,042 shares as
of December 31, 1955, 1994 and 1993, respectively.
The Company has a stock option plan covering certain key employees as
designated by the Board of Directors. The option price per share is an amount at
least equal to the book value per share at the end of the year immediately
preceding the date the option is granted. The maximum term of an option may not
exceed five years after the date on which the option becomes exercisable. A tax
offset bonus may also be granted in conjunction with the option that is payable
to the participant upon exercise of the option.
Deferred compensation expense under the stock option plan was $106,000,
$104,000 and $106,000 for the years ended December 31, 1995, 1994 and 1993,
respectively. Of these amounts, $69,000, $80,000 and $71,000, respectively,
relate to the difference between the book value per share at the end of the year
and the option price, and $35,000, $24,000 and $35,000, respectively, relate to
the tax offset bonus feature.
The following options were outstanding and exercisable at December 31,
1995:
<TABLE>
<CAPTION>
SHARE YEAR OF
NUMBER OF OPTIONS PRICE EXPIRATION
-------------------------------------------------------- ------ ----------
<S> <C> <C>
2,000.................................................. $32.17 1996
3,000.................................................. 37.16 1997
4,000.................................................. 42.55 1998
</TABLE>
Options to purchase 1,000 shares at $32.17, 1,000 shares at $37.16 and
1,000 shares at $42.55 were exercised in 1995 and options to purchase 1,000
shares at $37.16 and 1,000 shares at $42.55 were exercised in January, 1996. All
related shares were issued at exercise.
NOTE 10 -- COMMITMENTS AND CONTINGENCIES AND CREDIT RISK
In the normal course of business, the Bank has various outstanding
commitments and contingent liabilities, such as guarantees and commitments to
extend credit, which are not reflected in the accompanying consolidated
financial statements. Included in this category are commitments under standby
letters of credit and undisbursed portions of lines of credit. The Bank's
exposure to credit loss in the event of nonperformance by the other parties to
the financial instrument for these commitments is represented by the contractual
amounts of those instruments. The Bank does not anticipate any losses as a
result of these transactions.
Commitments approximated the following at December 31:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Letters of credit................................... $ 1,091,708 $ 1,688,000
Lines of credit..................................... 13,504,993 15,112,000
----------- -----------
$14,596,701 $16,800,000
=========== ===========
</TABLE>
Substantially all of the Bank's loans, commitments and standby letters of
credit have been granted to customers in the Bank's market area. Standby letters
of credit were granted primarily to commercial borrowers.
The Company has a deferred director fee plan under which the directors will
be entitled to receive shares of stock in lieu of cash for their services as
directors. Shares are owned by a trust for the benefit of participating
directors. The trust owned 5,762 shares, 4,613 shares and 3,152 shares as of
December 31, 1995, 1994 and 1993, respectively.
F-13
<PAGE> 95
FIRST NATIONAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 10 -- COMMITMENTS AND CONTINGENCIES AND CREDIT RISK -- CONTINUED
Although the Bank's loan portfolio is well diversified, a significant
portion of the loans are to customers in the agricultural industry. Credit
losses from agricultural loans approximate losses that the Bank experiences in
the remainder of its portfolio.
As a matter of policy, the Bank does not extend credit to any single
borrower or group of borrowers in excess of its legal lending limit.
Approximately $13,329,000 of the investments in obligations of state and
political subdivisions at December 31, 1995 involves governmental entities
within the State of Wisconsin.
NOTE 11 -- REGULATORY MATTERS
Dividends may be paid by the Company to its stockholders or by the Bank to
the Company generally from the current year's income plus the retained earnings
from the prior two years, subject to maintaining adequate capital ratios under
the regulatory guidelines.
Following is a comparison of the Bank's 1995 actual results with the
minimum requirements for well capitalized and adequately capitalized banks as
defined by the Federal Reserve Board:
<TABLE>
<CAPTION>
MINIMUM REQUIREMENTS
--------------------------
1995 WELL ADEQUATELY
ACTUAL CAPITALIZED CAPITALIZED
------ ----------- -----------
<S> <C> <C> <C>
Tier 1 risk-based capital ratio................................. 13% 6% 4%
Total risk-based capital ratio.................................. 14% 10% 8%
Leverage ratio.................................................. 9% 5% 3%
</TABLE>
NOTE 12 -- FAIR VALUES OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments are as
follows as of December 31:
<TABLE>
<CAPTION>
1995 1994
---------------------------- ----------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Financial assets
Cash and cash equivalents........... $ 6,754,728 $ 6,755,000 $ 7,623,082 $ 7,623,000
Federal funds sold.................. 3,505,000 3,505,000 290,000 290,000
Securities.......................... 49,845,686 50,449,000 51,157,494 50,101,000
Loans -- net........................ 140,526,382 141,040,000 127,051,793 124,556,000
Financial liabilities
Deposits............................ 182,278,485 182,427,000 172,929,136 172,779,000
Notes payable....................... 4,246,111 4,098,000 2,000,000 2,000,000
Repurchase agreements............... 1,243,193 1,243,000 1,100,000 1,100,000
</TABLE>
F-14
<PAGE> 96
FIRST NATIONAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 13 -- INCOME TAXES
Net deferred tax assets (liabilities) included in other assets and other
liabilities consist of the following components as of December 31:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Deferred tax assets:
Available-for-sale securities......................................... $ -- $122,000
Deferred compensation................................................. 421,000 363,000
Allowance for loan losses............................................. 144,000 120,000
Other................................................................. 13,000 36,000
-------- --------
578,000 641,000
-------- --------
Deferred tax liabilities:
Premises and equipment................................................ 534,000 458,000
Available-for-sale securities......................................... 63,000 --
-------- --------
597,000 458,000
-------- --------
Net deferred tax asset (liability)................................. $(19,000) $183,000
======== ========
</TABLE>
No valuation allowance was considered necessary.
A reconciliation of the expected income tax expense to the income taxes
included in the consolidated statements of income is presented below for the
years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
----------------------- ----------------------- ----------------------
PERCENT PERCENT PERCENT
OF PRE-TAX OF PRE-TAX OF PRE-TAX
AMOUNT EARNINGS AMOUNT EARNINGS AMOUNT EARNINGS
---------- ---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Provision computed at the
statutory federal rate.......... $1,149,794 34% $1,035,954 34% $ 896,924 34%
Increase (reduction) in taxes
resulting from:
Tax-exempt interest............. (324,627) (10) (320,087) (11) (309,394) (12)
State income taxes, net of
federal income tax benefit... 202,263 6 139,667 5 118,266 4
Tax effect of other
differences.................. (91,295) (3) (30,665) (1) (127,442) (5)
---------- --- ---------- --- --------- ---
$ 936,135 27% $ 824,869 27% $ 578,354 21%
========== === ========== === ========= ===
</TABLE>
The Company and its wholly-owned subsidiary file a consolidated federal
income tax return and separate Wisconsin income tax returns. For income tax
reporting purposes, the Company has Wisconsin net operating loss carryforwards
of approximately $1,373,000 at December 31, 1995, expiring in varying amounts
through the year 2009.
F-15
<PAGE> 97
FIRST NATIONAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 14 -- FIRST NATIONAL BANCORP, INC. (PARENT COMPANY ONLY)
FINANCIAL INFORMATION
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
Cash............................................................... $ 141,465 $ 526,862
Other assets....................................................... 18,630 33,340
Investment in subsidiary bank...................................... 17,893,889 15,913,903
----------- -----------
Total assets................................................ $18,053,984 $16,474,105
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Note payable..................................................... $ 1,200,000 $ 2,000,000
Other liabilities................................................ 708,902 415,448
----------- -----------
Total liabilities........................................... 1,908,902 2,415,448
----------- -----------
Stockholders' equity
Common stock..................................................... 239,700 239,700
Additional paid-in capital....................................... 3,575,081 3,644,085
Retained earnings................................................ 12,636,611 10,741,738
Unrealized gain (loss) on available-for-sale securities, net..... 94,340 (181,961)
Treasury stock................................................... (400,650) (384,905)
Total stockholders' equity....................................... 16,145,082 14,058,657
----------- -----------
Total liabilities and stockholders' equity.................. $18,053,984 $16,474,105
=========== ===========
</TABLE>
STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Income
Dividends from subsidiary.............................. $ 880,000 $1,655,000 $ 597,028
Interest income........................................ 500 2,003
---------- ---------- ----------
Total income...................................... 880,500 1,657,003 597,028
Expenses
Interest expense....................................... 147,641 173,201 165,444
Other expenses......................................... 53,310 54,961 48,877
---------- ---------- ----------
Total expenses.................................... 200,951 228,162 214,321
Net income before tax benefit and equity in
undistributed income of subsidiary............. 679,549 1,428,841 382,707
Income tax benefit....................................... 60,000 67,000 60,000
---------- ---------- ----------
Net income before equity in undistributed income of
subsidiary.......................................... 739,549 1,495,841 442,707
Undistributed net income of subsidiary................... 1,706,062 726,213 1,616,952
---------- ---------- ----------
NET INCOME........................................ $2,445,611 $2,222,054 $2,059,659
========== ========== ==========
</TABLE>
F-16
<PAGE> 98
FIRST NATIONAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 14 -- FIRST NATIONAL BANCORP, INC. (PARENT COMPANY ONLY)
FINANCIAL INFORMATION -- CONTINUED
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income........................................... $ 2,445,611 $ 2,222,054 $ 2,059,659
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Undistributed net income of subsidiary............ (1,706,062) (726,213) (1,616,952)
Deferred compensation............................. 727 23,330 8,000
Amortization of acquisition costs................. 14,710 27,624 27,624
(Increase) decrease in other assets............... -- 13,771 71,699
Increase (decrease) in other liabilities.......... 223,281 (24,091) (20,532)
----------- ----------- -----------
Net cash provided by operating activities......... 978,267 1,536,475 529,498
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on note payable............................. (800,000) (700,000) (300,000)
Dividends paid....................................... (550,738) (503,503) (426,551)
Purchase of treasury stock........................... (255,900) (255,825) --
Proceeds from sales of treasury stock................ 242,974 246,227 159,161
----------- ----------- -----------
Net cash (used in) financing activities......... (1,363,664) (1,213,101) (567,390)
Net Increase (Decrease) in Cash................. (385,397) 323,374 (37,892)
Cash at beginning of year.............................. 526,862 203,488 241,380
----------- ----------- -----------
Cash at end of year.................................... $ 141,465 $ 526,862 $ 203,488
=========== =========== ===========
</TABLE>
F-17
<PAGE> 99
FIRST NATIONAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
1995
SEPTEMBER 30, ------------
1996
-------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and due from banks........................................... $ 8,223,773 $ 6,754,728
Federal funds sold................................................ 1,735,000 3,505,000
Held-to-maturity securities -- fair value $38,212,000 in 1996 and
$38,217,000 in 1995............................................. 37,881,872 37,613,696
Available-for-sale securities..................................... 16,227,330 12,231,990
Loans -- net...................................................... 146,306,270 140,526,382
Premises and equipment -- net..................................... 3,186,609 3,393,495
Accrued interest receivable....................................... 2,136,537 1,814,604
Other assets...................................................... 796,588 691,066
------------- -------------
Total assets............................................ $ 216,493,979 $206,530,961
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Non interest-bearing......................................... $ 19,678,502 $ 19,116,113
Interest-bearing............................................. 173,447,127 163,162,372
------------- -------------
Total deposits.......................................... 193,125,629 182,278,485
------------- -------------
Notes payable................................................... 1,346,017 4,246,111
Repurchase agreements........................................... 1,464,869 1,243,193
Accrued interest payable........................................ 1,188,002 1,098,528
Other liabilities............................................... 1,474,454 1,519,562
------------- -------------
Total liabilities....................................... 198,598,971 190,385,879
------------- -------------
Commitments, contingencies and credit risk
Stockholders' equity
Common stock -- authorized, 300,000 shares of $1 par value;
issued 239,700 shares........................................ 242,455 239,700
Additional paid-in capital...................................... 3,378,221 3,575,081
Retained earnings............................................... 14,288,363 12,636,611
Unrealized gain (loss) on available-for-sale securities, net.... (14,031) 94,340
------------- -------------
17,895,008 16,545,732
Treasury stock -- at cost; 5,342 shares in 1995................. (400,650)
------------- -------------
Total stockholders' equity.............................. 17,895,008 16,145,082
------------- -------------
Total liabilities and stockholders' equity.............. $ 216,493,979 $206,530,961
============= =============
</TABLE>
See accompanying Condensed Notes to Unaudited Consolidated Financial Statements
F-18
<PAGE> 100
FIRST NATIONAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ----------------------------
1996 1995 1996 1995
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans.............. $3,429,697 $3,299,132 $10,118,109 $ 9,381,723
Interest on securities
Taxable.............................. 566,544 488,000 1,685,184 1,544,237
Exempt............................... 245,358 245,287 672,063 669,544
Interest on federal funds sold.......... 15,382 0 88,285 19,029
----------- -----------
4,256,981 4,032,419 12,563,641 11,614,533
----------- -----------
Interest expense
Deposits................................ 2,202,982 2,036,717 6,425,561 5,727,653
Borrowings.............................. 28,831 42,778 125,456 202,450
----------- -----------
2,321,813 2,079,495 6,551,017 5,930,103
----------- -----------
Net interest income.................. 2,025,168 1,952,924 6,012,626 5,684,430
Provision for loan losses................. 30,000 16,500 90,000 44,000
----------- -----------
Net interest income after provision
for loan losses.................... 1,995,168 1,936,424 5,922,624 5,640,430
Other income
Trust fees.............................. 112,681 106,851 386,057 370,624
Service charges on deposits............. 121,877 77,077 349,082 302,636
Other income............................ 119,569 137,221 280,489 303,073
----------- -----------
354,127 321,149 1,015,628 976,333
----------- -----------
Other expense
Salaries and employee benefits.......... 827,815 833,411 2,549,436 2,455,869
Occupancy expenses...................... 199,135 194,117 593,665 585,314
Other expense........................... 391,459 322,827 1,098,753 1,138,701
----------- -----------
1,418,409 1,350,355 4,241,854 4,179,884
----------- -----------
Income before income taxes........... 930,886 907,218 2,696,400 2,436,879
Income taxes............................
Current.............................. 261,487 255,374 772,700 674,544
Deferred............................. -- -- (19,000) --
----------- -----------
261,487 255,374 753,700 674,544
----------- -----------
NET INCOME........................... $ 669,399 $ 651,844 $ 1,942,700 $ 1,762,335
=========== ===========
Earnings per share of common stock........ 2.71 2.68 $ 7.90 $ 7.26
=========== ===========
Weighted average number of shares
outstanding............................. 247,455 243,358 246,036 242,830
=========== ===========
</TABLE>
See accompanying Condensed Notes to Unaudited Financial Statements
F-19
<PAGE> 101
FIRST NATIONAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received................................................ $11,841,647 $10,900,049
Fees and commissions received.................................... 1,509,120 1,425,044
Interest paid.................................................... (6,461,543) (5,659,726)
Cash paid to suppliers and employees............................. (4,546,631) (3,990,041)
Income taxes paid................................................ (642,613) (457,457)
----------- -----------
Net cash provided by operating activities................ 1,699,980 2,217,869
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of held-to-maturity securities......................... (6,022,815) (6,384,268)
Purchases of available-for-sale securities....................... (5,206,638) (35,200)
Proceeds from maturities of held-to-maturity securities.......... 5,695,393 4,825,053
Proceeds from maturities of available-for-sale securities........ 996,494 2,515,694
Net decrease in federal funds sold............................... 1,770,000 290,000
Net increase in loans............................................ (5,869,888) (13,093,875)
Purchases of premises and equipment.............................. (31,671) (127,168)
----------- -----------
Net cash used in investing activities.................... (8,669,125) (12,009,764)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits......................................... 10,847,144 1,903,780
Proceeds from borrowings on notes payable........................ -- 3,050,000
Payments on notes payable........................................ (2,900,094) (602,504)
Increase in repurchase agreements................................ 221,676 376,921
Increase in federal funds purchased.............................. -- 2,683,000
Proceeds from issuance of common stock........................... 192,400 --
Proceeds from sales of treasury stock............................ 368,010 242,974
Purchase of treasury stock....................................... -- (255,900)
Dividends paid................................................... (290,946) (269,509)
----------- -----------
Net cash provided by financing activities................ 8,438,190 7,128,762
----------- -----------
Net increase (decrease) in cash and due from banks....... 1,469,045 (2,663,133)
Cash and due from banks at beginning of year....................... 6,754,728 7,623,082
----------- -----------
Cash and due from banks at end of year............................. $ 8,223,773 $ 4,959,949
=========== ===========
</TABLE>
F-20
<PAGE> 102
FIRST NATIONAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS -- CONTINUED
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
------------------------
1996 1995
---------- ----------
<S> <C> <C>
RECONCILIATIONS OF NET INCOME TO NET CASH PROVIDED BY OPERATING
ACTIVITIES:
Net income for the period............................................ $1,942,698 $1,762,335
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation....................................................... 238,557 240,435
Amortization....................................................... 33,676 33,676
Deferred compensation.............................................. (399,025) (112,291)
Provision for loan losses.......................................... 90,000 44,000
Net amortization of premiums and accretion of discounts on
securities...................................................... 93,431 75,263
Loss on disposition of premises and equipment...................... -- 6,217
Deferred income taxes.............................................. (19,000) 87,000
Increase in accrued interest receivable............................ (321,933) (341,036)
Increase in other assets........................................... (47,950) (257,910)
Increase in accrued interest payable............................... 89,474 270,377
Increase in other liabilities...................................... 52 409,803
---------- ----------
Net cash provided by operating activities..................... $1,699,980 $2,217,869
========== ==========
</TABLE>
See accompanying Condensed Notes to Unaudited Consolidated Financial Statements
F-21
<PAGE> 103
FIRST NATIONAL BANCORP, INC. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- BASIS OF PRESENTATION
The financial information of First National Bancorp, Inc. and subsidiary
included herein, as of and for the period ended September 30, 1996, is
unaudited; however, such information reflects all adjustments (consisting of
normal recurring adjustments) which are, in the opinion of management, necessary
for a fair statement of results for the interim periods. The results of the
interim period ended September 30, 1996 are not necessarily indicative of the
results expected for the year ended December 31, 1996.
Amounts included herein have been rounded to the nearest thousandth.
NOTE 2 -- SECURITIES
Amortized costs and fair values of securities are summarized as follows:
HELD TO MATURITY
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-------------------------------------------------
GROSS UNREALIZED
AMORTIZED ------------------- FAIR
COST GAINS LOSSES VALUE
----------- -------- ------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of U.S.
government agencies........................... $19,765,000 $ -- $69,000 $19,696,000
Obligations of state and political
subdivisions.................................. 17,117,000 399,000 -- 17,516,000
Collateralized mortgage obligations............. 1,000,000 -- -- 1,000,000
----------- -------- ------- -----------
$37,882,000 $399,000 $69,000 $38,212,000
=========== ======== ======= ===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995
----------------------------------------------------
GROSS UNREALIZED
AMORTIZED ---------------------- FAIR
COST GAINS LOSSES VALUE
----------- -------- -------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government agencies................... $20,990,000 $233,000 $170,000 $21,053,000
Obligations of state and political
subdivisions............................... 15,624,000 534,000 35,000 16,123,000
Collateralized mortgage obligations.......... 1,000,000 41,000 -- 1,041,000
----------- -------- -------- -----------
$37,614,000 $808,000 $205,000 $38,217,000
=========== ======== ======== ===========
</TABLE>
AVAILABLE FOR SALE
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-------------------------------------------------
GROSS UNREALIZED
AMORTIZED ------------------- FAIR
COST GAINS LOSSES VALUE
----------- -------- ------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of U.S.
government agencies........................... $15,427,000 $ -- $24,000 $15,403,000
Equity securities............................... 824,000 -- -- 824,000
----------- -------- ------- -----------
$16,251,000 $ -- $24,000 $16,227,000
=========== ======== ======= ===========
</TABLE>
F-22
<PAGE> 104
FIRST NATIONAL BANCORP, INC. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 2 -- SECURITIES -- CONTINUED
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------------------------------------
GROSS UNREALIZED
AMORTIZED ------------------- FAIR
COST GAINS LOSSES VALUE
----------- -------- ------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of U.S.
government agencies........................... $11,296,000 $180,000 $23,000 $11,453,000
Equity securities............................... 779,000 -- -- 779,000
----------- -------- ------- -----------
$12,075,000 $180,000 $23,000 $12,232,000
=========== ======== ======= ===========
</TABLE>
The amortized cost and fair value of investment securities as of September
30, 1996 and December 31, 1995, by contractual maturity, are shown. Actual
maturities of mortgage-backed obligations are anticipated to differ from the
distribution indicated below because the mortgages underlying the securities may
be prepaid without penalties.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 DECEMBER 31, 1995
-------------------------- --------------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
HELD-TO-MATURITY
Due within one year or less............... $ 4,497,000 $ 4,636,000 $10,069,000 $10,088,000
Due after one year through five years..... 13,508,000 13,737,000 22,416,000 22,893,000
Due after five years through ten years.... 19,877,000 19,839,000 4,879,000 4,983,000
Due after ten years....................... -- -- 250,000 253,000
----------- ----------- ----------- -----------
$37,882,000 $38,212,000 $37,614,000 $38,217,000
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 DECEMBER 31, 1995
-------------------------- --------------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE
Due within one year or less............... $ 4,897,000 $ 4,892,000 $ 3,011,000 $ 2,997,000
Due after one year through five years..... 10,530,000 10,511,000 8,285,000 8,456,000
Equity securities......................... 824,000 824,000 779,000 779,000
----------- ----------- ----------- -----------
$16,251,000 $16,227,000 $12,075,000 $12,232,000
=========== =========== =========== ===========
</TABLE>
Securities with carrying values of approximately $4,664,000 and $4,902,000
at September 30, 1996 and December 31, 1995, respectively, were pledged to
secure public deposits as permitted or required by law.
F-23
<PAGE> 105
FIRST NATIONAL BANCORP, INC. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 3 -- LOANS
The major classifications of loans follow:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1996 DECEMBER 31,
(UNAUDITED) 1995
------------- ------------
<S> <C> <C>
Agricultural..................................................... $ 22,686,000 $ 22,287,000
Commercial....................................................... 52,957,000 51,556,000
Municipal........................................................ 688,000 1,064,000
Residential...................................................... 63,439,000 59,567,000
Installment...................................................... 8,229,000 7,694,000
------------ ------------
147,999,000 142,168,000
Less allowance for loan losses................................. (1,693,000) (1,642,000)
------------ ------------
$ 146,306,000 $140,526,000
============ ============
</TABLE>
NOTE 4 -- ALLOWANCE FOR LOAN LOSSES
An analysis of activity in the allowance for loan losses follows:
<TABLE>
<CAPTION>
NINE MONTHS YEAR
ENDED ENDED
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
Balance, January 1............................................... $ 1,642,000 $1,609,000
Provision for loan losses........................................ 90,000 61,000
Recoveries on loans previously charged off....................... 41,000 17,000
Loans charged off................................................ (80,000) (45,000)
---------- ----------
Balance, end of period........................................... $ 1,693,000 $1,642,000
========== ==========
</TABLE>
NOTE 5 -- REPURCHASE AGREEMENTS AND FEDERAL FUNDS PURCHASED
Average and maximum balances and rates on federal funds purchased and
securities sold under agreements to repurchase were as follows:
<TABLE>
<CAPTION>
NINE MONTHS YEAR
ENDED ENDED
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
Maximum month end balance........................................ $ 6,569,000 $6,582,000
Average month end balance........................................ 2,395,000 3,556,000
Weighted average interest rate for the period.................... 5.38% 6.21%
Weighted average interest rate at end of period.................. 5.31% 6.15%
</TABLE>
NOTE 6 -- CONTINGENT LIABILITIES
At September 30, 1996 and December 31, 1995, loan commitments and standby
letters of credit, were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------ -----------------
<S> <C> <C>
Lines-of-credit............................................. $ 15,665,000 $13,505,000
Letters of credit........................................... 1,010,000 1,092,000
</TABLE>
F-24
<PAGE> 106
FIRST NATIONAL BANCORP, INC. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 7 -- NEW ACCOUNTING RULES AND REGULATIONS
During March 1995, the Financial Accounting Standards Board issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" (Statement No. 121). Statement No. 121
generally requires long-lived assets and certain identifiable intangibles to be
held and used by an entity be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. In performing the review for recoverability, the entity should
estimate the future cash flows expected to result from the use of the asset and
its eventual disposition. If the sum of the expected future cash flows
(discounted and without interest charges) is less than the carrying amount of
the asset, an impairment is recognized. The Bank adopted Statement No. 121
effective January 1, 1996. There was no cumulative effect upon the adoption of
Statement No. 121.
In May 1995, the Financial Accounting Standards Board issued Statement No.
122, "Accounting for Mortgage Servicing Rights" (Statement No. 122). Statement
No. 122 requires the Bank to recognize as separate assets rights to service
mortgage loans for others, however those servicing rights are acquired. If the
Bank acquires mortgage servicing rights through either the purchase or
origination of mortgage loans and sells or securitizes those loans with
servicing rights retained, the Bank should allocate the total cost of the
mortgage loans to mortgage servicing rights and the loans (without the mortgage
servicing rights) based on their relative fair values. The mortgage servicing
rights should be amortized in proportion to and over the period of estimated net
servicing income. This statement, which is applied prospectively, was adopted
effective January 1, 1996. As noted below, this statement was superseded by
Statement No. 125.
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, "Accounting for Stock Based Compensation" (Statement No. 123).
Statement No. 123 establishes a fair value based method of accounting for stock
options and other equity instruments. Statement No. 123 permits the continued
use of the intrinsic value method included in Accounting Principle Board Opinion
25, "Accounting for Stock Issued to Employees" (APB 25), but regardless of the
method used to account for the compensation cost associated with stock option or
similar plans, it requires employers to disclose information required by
Statement No. 123. First National Bancorp, Inc. plans to continue to measure
compensation cost using APB 25; therefore, Statement No. 123 will not have any
impact on the Company's financial condition or results of operations.
In June 1996, the Financial Accounting Standards Board issued Statement No.
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" (Statement No. 125). Statement No. 125 broadened
the measurement concept of Statement No. 122 to servicing assets and other
retained interests in transferred assets. This Statement is effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996, and is to be applied prospectively.
NOTE 8 -- SUBSEQUENT EVENT
In October 1996, the Company entered into an agreement and plan of merger
which would merge the Company with FNB Acquisition, Inc., a wholly-owned
subsidiary of Amcore Financial, Inc. in which First National Bancorp, Inc. would
be the surviving entity.
F-25
<PAGE> 107
ANNEX I
LOGO
January 10, 1997
Board of Directors
First National Bancorp, Inc.
1625 Tenth Street
Monroe, WI 53566
Gentlemen:
First National Bancorp, Inc. (the "Company") has entered into an Agreement
and Plan of Merger (the "Agreement") with AMCORE Financial, Inc. ("AMCORE") and
FNB Acquisition, Inc., a wholly owned subsidiary of AMCORE ("Newco"). Pursuant
to the Agreement, at the Effective Time (as defined in the Agreement), Newco
will be merged with and into the Company and each outstanding share of common
stock, par value $1.00 per share ("Company Common Stock") of the Company (other
than shares held in the Company's treasury or owned by the Company, AMCORE, any
of their respective subsidiaries, or holders perfecting dissenters' rights) will
be converted solely into the right to receive the number of shares of common
stock, par value $0.33 per share of AMCORE ("AMCORE Common Stock") equal to the
Exchange Ratio (as hereinafter defined).
The "Exchange Ratio" means 7.540; provided that in the event the AMCORE
Average Price (as hereinafter defined) is greater than $23.00 (and the Company
shall have delivered the notice contemplated under the Agreement in such
circumstances), the Exchange Ratio shall mean an amount equal to $173.42,
divided by the AMCORE Average Price and (ii) in the event the AMCORE Average
Price is less than $18.00 (and AMCORE shall have delivered the notice
contemplated under the Agreement in such circumstances), the Exchange Ratio
shall mean an amount equal to $135.72, divided by the AMCORE Average Price. The
"AMCORE Average Price" means the average of the daily closing prices of AMCORE
Common Stock, on an ex-dividend basis, as reported on the consolidated tape of
the Nasdaq National Market during the twenty trading days ending on the third
trading day immediately preceding the date of the meeting of the Company's
stockholders to vote with respect to the Merger.
You have asked for our opinion as to the fairness, from a financial point
of view, of the Exchange Ratio to the holders of Company Common Stock (other
than AMCORE and its affiliates).
Robert W. Baird & Co. Incorporated ("Baird"), as part of its investment
banking business, is engaged in the evaluation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements, and valuations for estate, corporate
and other purposes.
In conducting our investigation and analysis and in arriving at our opinion
herein, we have reviewed such information and taken into account such financial
and economic factors as we have deemed relevant under the circumstances. In that
connection, we have, among other things: (i) reviewed certain internal
information, primarily financial in nature, concerning the business and
operations of the Company furnished to us by or on behalf of the Company for
purposes of the analysis, as well as publicly available information including
but not limited to the Company's consolidated financial statements for recent
years and interim periods; (ii) reviewed certain internal information, primarily
financial in nature, including projections, concerning the business and
operations of AMCORE furnished to us for purposes of our analysis, as well as
publicly available information including but not limited to AMCORE's
consolidated financial statements for recent years and interim periods and other
filings with the Securities and Exchange Commission (the "SEC"); (iii) reviewed
the Agreement;
I-1
<PAGE> 108
First National Bancorp, Inc.
January 10, 1997
Page 2
(iv) compared the historical market prices and trading activity of the Company
Common Stock and AMCORE Common Stock with those of certain other publicly traded
companies; (v) compared the respective financial positions and operating results
of the Company and AMCORE with those of other publicly traded companies we
deemed relevant; (vi) compared the proposed financial terms of the Merger with
the financial terms of certain other business combinations we deemed relevant;
and (vii) reviewed the potential pro forma effects of the Merger. We have held
discussions with certain members of the Company's and AMCORE's senior management
concerning the Company's and AMCORE's respective historical and current
financial condition and operating results, as well as the future prospects of
the Company and AMCORE, respectively. We have also considered such other
information, financial studies, analysis and investigations and financial,
economics and market criteria which we deemed relevant for the preparation of
this opinion.
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of all of the financial and other information provided us by or
on behalf of the Company and AMCORE, or publicly available, and have not
attempted independently to verify any such information. We have also assumed,
with your consent, that (i) the Merger will be accounted for as a pooling of
interest and (ii) all material assets and liabilities (contingent or otherwise,
known or unknown) of the Company and AMCORE are as set forth in the consolidated
financial statements of the Company and AMCORE, respectively. We have assumed
that the projections examined by us have been reasonably prepared and represent
the best available estimates and good faith judgments of the senior managements
of the Company and AMCORE, respectively, as to future performance of their
respective companies. In conducting our review, we have not made nor obtained an
independent evaluation or appraisal of any of the assets or liabilities
(contingent or otherwise) of the Company or AMCORE nor have we made a physical
inspection of the properties or facilities of the Company or AMCORE. Our opinion
necessarily is based upon economic, monetary and market conditions as they exist
and can be evaluated on the date hereof, and does not predict or take into
account any changes which may occur, or information which may become available,
after the date hereof.
Our opinion has been prepared at the request and for the information of the
Company's Board of Directors, and shall not be reproduced, summarized, described
or referred to without the prior written consent of Baird; provided, however,
that this letter may be reproduced in full in the Proxy Statement/Prospectus
relating to the Merger. This opinion does not address the relative merits of the
Merger and any other potential transactions or business strategies considered by
the Company's Board of Directors, and does not constitute a recommendation to
any shareholder of the Company as to how any such shareholder should vote with
respect to the Merger. Baird will receive a fee for rendering this opinion. We
have also acted as financial advisor to AMCORE in the past and may provide
financial advisory or other investment banking services to AMCORE or its
affiliates in the future.
In the ordinary course of our business, we may from time to time trade the
securities of the Company or AMCORE for our own account or the accounts of our
customers and accordingly, may at any time hold long or short positions in such
securities.
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Exchange Ratio is fair, from a financial point of view, to
the holders of the Company Common Stock (other than AMCORE and its affiliates).
Very truly yours,
/s/ ROBERT W. BAIRD & CO. INCORPORATED
I-2
<PAGE> 109
ANNEX II
AGREEMENT AND PLAN OF MERGER
DATED AS OF OCTOBER 30, 1996
BY AND AMONG
AMCORE FINANCIAL, INC.,
FNB ACQUISITION, INC.
AND
FIRST NATIONAL BANCORP, INC.
AND RELATED DOCUMENTS
<PAGE> 110
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
ARTICLE I
THE MERGER
1.1 The Merger..................................................................... II-1
1.2 Effective Time of the Merger................................................... II-1
1.3 Articles of Incorporation...................................................... II-1
1.4 By-laws of the Surviving Corporation........................................... II-2
1.5 Board of Directors and Officers of the Surviving Corporation................... II-2
1.6 Closing........................................................................ II-2
ARTICLE II
EFFECT OF THE MERGER ON COMPANY COMMON STOCK
2.1 Effect on Common Stock......................................................... II-2
2.2 Adjustments for Dilution and Other Matters..................................... II-3
2.3 Dissenting Shares.............................................................. II-3
2.4 Stock Options.................................................................. II-3
2.5 Exchange of Certificates....................................................... II-3
2.6 No Fractional Shares........................................................... II-4
2.7 Return of Exchange Fund........................................................ II-5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AMCORE AND NEWCO
3.1 Corporate Organization......................................................... II-5
3.2 Capitalization................................................................. II-5
3.3 Authorization.................................................................. II-5
3.4 No Violation................................................................... II-6
3.5 AMCORE Reports and Financial Statements........................................ II-6
3.6 Absence of Certain Changes..................................................... II-6
3.7 Legal Proceedings.............................................................. II-6
3.8 Consents and Approvals......................................................... II-7
3.9 Registration Statement......................................................... II-7
3.10 Newco.......................................................................... II-7
3.11 Post-Merger Transactions....................................................... II-7
3.12 AMCORE Ownership of Company Common Stock....................................... II-7
3.13 Accounting and Tax Matters..................................................... II-7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
4.1 Corporate Organization......................................................... II-8
4.2 Capitalization................................................................. II-8
4.3 Organization of Company Subsidiaries........................................... II-8
4.4 Capitalization of the Subsidiaries............................................. II-9
4.5 Authorization.................................................................. II-9
4.6 No Violation; Consents and Approvals........................................... II-9
4.7 Financial Statements........................................................... II-9
4.8 Absence of Certain Changes..................................................... II-10
4.9 Legal Proceedings.............................................................. II-11
</TABLE>
i
<PAGE> 111
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
4.10 Company Information............................................................ II-11
4.11 Agreements with Regulatory Agencies............................................ II-11
4.12 Intellectual Property.......................................................... II-11
4.13 Fairness Opinion............................................................... II-11
4.14 Employee Benefit Matters....................................................... II-12
4.15 Tax Matters.................................................................... II-13
4.16 Title and Condition............................................................ II-13
4.17 Insurance...................................................................... II-15
4.18 Compliance with Laws and Orders................................................ II-15
4.19 Governmental Regulation........................................................ II-15
4.20 Contracts and Commitments...................................................... II-16
4.21 Affiliate's Undertakings and Stockholder Voting Agreements..................... II-16
4.22 Agreements with Directors, Officers, and Stockholders.......................... II-16
4.23 Accuracy of Information........................................................ II-16
4.24 No Undisclosed Liabilities..................................................... II-17
4.25 Continuity of Interest......................................................... II-17
4.26 Investment and Loan Portfolios................................................. II-17
4.27 Certain Loans.................................................................. II-17
4.28 Administration of Trust Accounts............................................... II-18
4.29 Accounting Matters............................................................. II-18
4.30 Interest Rate Risk Management Instruments...................................... II-18
ARTICLE V
COVENANTS OF AMCORE
5.1 Affirmative Covenants.......................................................... II-18
5.2 Negative Covenants............................................................. II-19
5.3 Full Disclosure................................................................ II-19
ARTICLE VI
COVENANTS OF THE COMPANY
6.1 Affirmative Covenants.......................................................... II-20
6.2 Current Information............................................................ II-20
6.3 Certain Revaluations, Changes, and Adjustments................................. II-20
6.4 Negative Covenants............................................................. II-20
6.5 Full Disclosure................................................................ II-23
6.6 Letter of the Company's Accountant............................................. II-23
6.7 Report to AMCORE............................................................... II-24
6.8 Breaches....................................................................... II-24
6.9 Stockholders Meeting........................................................... II-24
6.10 Supplement to Company Letter................................................... II-24
6.11 Dissent Process................................................................ II-24
6.12 Delivery of Shareholder List................................................... II-24
6.13 Affiliates; Accounting and Tax Treatment....................................... II-24
6.14 Expenses and Fees.............................................................. II-25
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Preparation of Registration Statement and the Proxy Statement.................. II-26
7.2 Legal Conditions to Merger..................................................... II-26
</TABLE>
ii
<PAGE> 112
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
7.3 Indemnification; Directors and Officers Insurance.............................. II-27
7.4 Brokers or Finders............................................................. II-27
7.5 Environmental Audits........................................................... II-27
7.6 Additional Agreements; Reasonable Efforts...................................... II-28
7.7 Release of Information......................................................... II-28
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF AMCORE AND NEWCO
8.1 No Material Adverse Change..................................................... II-28
8.2 Representations and Warranties................................................. II-28
8.3 Performance and Compliance..................................................... II-29
8.4 No Proceeding or Litigation.................................................... II-29
8.5 Pooling Letter................................................................. II-29
8.6 Letters from the Company Affiliates............................................ II-29
8.7 Consents Under Agreements...................................................... II-29
8.8 Dissenters..................................................................... II-29
8.9 1996 Audited Financial Statements.............................................. II-29
8.10 Certificate of the Company Officer............................................. II-29
8.11 Good Standing Certificates..................................................... II-29
8.12 Accountant's Letter............................................................ II-29
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
9.1 No Material Adverse Change..................................................... II-30
9.2 Representations and Warranties................................................. II-30
9.3 Performance and Compliance..................................................... II-30
9.4 No Proceeding or Litigation.................................................... II-30
9.5 Certificate of Financial Officer............................................... II-30
9.6 Tax Opinion.................................................................... II-30
ARTICLE X
CONDITIONS TO THE OBLIGATIONS OF ALL PARTIES
10.1 Governmental Approvals......................................................... II-30
10.2 Securities Law Compliance...................................................... II-31
10.3 Stockholder Approval........................................................... II-31
ARTICLE XI
TERMINATION
11.1 Reasons for Termination........................................................ II-31
11.2 Effect of Termination.......................................................... II-33
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE XII
MISCELLANEOUS
12.1 Non-survival of Representations, Warranties and Agreements..................... II-33
12.2 Expenses....................................................................... II-33
12.3 Waivers; Amendments............................................................ II-33
12.4 Assignment; Parties in Interest................................................ II-34
12.5 Entire Agreement............................................................... II-34
12.6 Captions and Counterparts...................................................... II-34
12.7 Certain Definitions............................................................ II-34
12.8 Governing Law.................................................................. II-35
12.9 Notices........................................................................ II-35
</TABLE>
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT DESCRIPTION PAGE
- ------ ---------------------------------------------------------------------- ------------
<C> <C> <S> <C>
A -- Form of Affiliate's Undertaking II-37
B -- Form of Stockholder Voting Agreement II-41
C -- Forms of Agreements Amending Certain Benefit Plans
D -- Form of Severance Agreement
</TABLE>
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<PAGE> 115
INDEX TO DEFINED TERMS
<TABLE>
<CAPTION>
TERM SECTION
- ------------------------------------------------------------------------- --------------------
<S> <C>
"affiliate".............................................................. 6.13
Affiliate's Undertakings................................................. 4.21
Agreement................................................................ Introduction
AMCORE................................................................... Introduction
AMCORE Average Price..................................................... 11.1(d)
AMCORE Common Stock...................................................... First Recital
AMCORE Letter............................................................ 3.4
AMCORE Reports........................................................... 12.7(b)
Articles of Merger....................................................... 1.2
Audited Properties....................................................... 7.5
Baird.................................................................... 4.13
Bank..................................................................... 4.1
BHCA..................................................................... 3.1
Board.................................................................... 6.4(d)
CERCLA................................................................... 4.16(c)
Certificate.............................................................. 2.1(b)
Citizens................................................................. 4.1
Closing.................................................................. 1.6
Closing Date............................................................. 1.6
Code..................................................................... Third Recital
Company.................................................................. Introduction
Company Common Stock..................................................... First Recital
Company Financial Statements............................................. 4.7
Company Interested Property.............................................. 4.16(d)
Company Letter........................................................... 4.8
Company Principal........................................................ 4.22
Company Reports.......................................................... 12.7(c)
Company Restricted Shares/Options........................................ 4.2
Company Subsidiary....................................................... 4.1
Company Subsidiary Principal............................................. 4.22
Confidentiality Agreement................................................ 5.3
Current Real Properties.................................................. 4.16(a)
Department of Financial Institutions..................................... 1.2
Dissenting Shares........................................................ 2.3
D&O Insurance............................................................ 7.3
Effective Time........................................................... 1.2
Environmental Audits..................................................... 7.5
Environmental Laws....................................................... 4.16(c)
Environmental Reduction Amount........................................... 2.1(d)
Environmental Reports.................................................... 7.5
ERISA.................................................................... 4.14(a)
ERISA Affiliate.......................................................... 4.14(a)
Exchange Act............................................................. 3.9
Exchange Agent........................................................... 2.5(a)
Exchange Fund............................................................ 2.5(a)
Exchange Ratio........................................................... 2.1(a)
Expenses................................................................. 6.14(c)(i)
FDIC..................................................................... 4.1
FNB&T.................................................................... 4.1
FNI...................................................................... 4.3(b)
</TABLE>
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<TABLE>
<CAPTION>
TERM SECTION
- ------------------------------------------------------------------------- --------------------
<S> <C>
FRA...................................................................... 3.8
Federal Reserve Board.................................................... 4.1
Former Real Properties................................................... 4.16(c)
GAAP..................................................................... 3.5
Governmental Entity...................................................... 3.8
HSR Act.................................................................. 3.8
IRS...................................................................... 4.14(b)
Jones Day................................................................ 6.4(d)
LLC...................................................................... 4.1
Latest Company Financial Statements...................................... 4.7
Latest Statement Date.................................................... 4.7
Loan Property............................................................ 4.16(c)
Material Adverse Effect.................................................. 12.7(d)
Meeting Date............................................................. 6.9
Merger................................................................... First Recital
Multi-employer Plan...................................................... 4.14(i)
Newco.................................................................... Introduction
OCC...................................................................... 4.3
Person................................................................... 6.14(c)(ii), 12.7(e)
Plans.................................................................... 4.14(b)
Prohibited Transaction................................................... 4.14(b)
Proxy Statement/Prospectus............................................... 7.1
Real Properties.......................................................... 4.16(c)
Registration Statement................................................... 7.1
Regulatory Agreement..................................................... 4.11
Remediation Action....................................................... 7.5
Remediation Costs........................................................ 7.5
Rights................................................................... 2.1(a)
Rights Agreement......................................................... 2.1(a)
SEC...................................................................... 3.5
SEC Filings.............................................................. 3.5
Securities Act........................................................... 3.9
Stockholder Voting Agreements............................................ Second Recital
Subsidiary............................................................... 12.7(f)
Superior Proposal........................................................ 6.4(d)
Surviving Corporation.................................................... 1.1
To the Company's Knowledge............................................... 12.7(g)
Termination Date......................................................... 11.1(b)(i)
Termination Fee.......................................................... 6.14(b)
Transaction Proposal..................................................... 6.14(c)(ii)
Trust Account Shares..................................................... 2.1(c)
WBCL..................................................................... 1.1
</TABLE>
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER dated as of October 30, 1996 (the
"Agreement"), is entered into by and among AMCORE Financial, Inc., a Nevada
corporation ("AMCORE"), FNB Acquisition, Inc., a Wisconsin corporation and a
wholly-owned subsidiary of AMCORE ("Newco") and First National Bancorp, Inc., a
Wisconsin corporation (the "Company").
WITNESSETH:
WHEREAS, the respective Boards of Directors of AMCORE, Newco and the
Company have determined that the merger of Newco with and into the Company (the
"Merger") upon the terms and conditions set forth in this Agreement, would be
fair and in the best interests of their respective stockholders, and such Boards
of Directors have approved such Merger, pursuant to which each share of common
stock, par value $1.00 per share, of the Company ("Company Common Stock") issued
and outstanding immediately prior to the Effective Time (as defined in Section
1.2 hereof) of the Merger, will be converted into the right to receive the
number of shares of common stock, par value $0.33 per share, of AMCORE ("AMCORE
Common Stock") as provided in Section 2.1 hereof; and
WHEREAS, as a condition and inducement to AMCORE's and Newco's willingness
to enter into this Agreement, concurrently with the execution hereof, (i)
certain beneficial and record stockholders of the Company are entering into
agreements (collectively, "Stockholder Voting Agreements") to vote in favor of
or consent to the Merger, substantially in the form attached hereto as Exhibit
B; (ii) the Company and its directors are entering into agreements amending
certain benefit plans with respect to such parties, substantially in the forms
attached hereto as Exhibit C; and (iii) the chief executive officer of the
Company is entering into a certain severance agreement, substantially in the
form attached hereto as Exhibit D; and
WHEREAS, the parties hereto desire and intend that the Merger qualify for
federal income tax purposes as a tax-free reorganization under Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
thereunder, and be accounted for as a "pooling of interests" in accordance with
generally accepted accounting principles.
NOW, THEREFORE, in consideration of the premises and the mutual covenants,
representations, warranties, and agreements herein contained and in order to set
forth the conditions upon which the foregoing Merger will be carried out, the
parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement, and
in accordance with the provisions of the Wisconsin Business Corporation Law (the
"WBCL"), at the Effective Time, Newco will merge with and into the Company, the
separate corporate existence of Newco shall thereupon cease, and the Company
will be the surviving corporation (the "Surviving Corporation") and shall
continue its corporate existence under the laws of the State of Wisconsin, as a
wholly-owned subsidiary of AMCORE.
1.2 Effective Time of the Merger. Subject to the provisions of this
Agreement, articles of merger (the "Articles of Merger") shall be duly prepared
and executed by Newco and the Company and thereafter delivered to the Department
of Financial Institutions of the State of Wisconsin (the "Department of
Financial Institutions") for filing, as provided in the WBCL, as soon as
practicable on or after the Closing Date (as defined in Section 1.6 hereof). The
Merger shall become effective upon the filing of the Articles of Merger with the
Department of Financial Institutions or at such other time as may be specified
therein (the "Effective Time"). The Merger shall have the effects set forth in
Section 180.1106 of the WBCL.
1.3 Articles of Incorporation. At the Effective Time, the Articles of
Incorporation of Newco shall be the Articles of Incorporation of the Surviving
Corporation.
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1.4 By-laws of the Surviving Corporation. At the Effective Time, the
By-laws of Newco shall be the By-laws of the Surviving Corporation until
thereafter amended in accordance with its terms, the Articles of Incorporation
of the Surviving Corporation and as provided by law.
1.5 Board of Directors and Officers of the Surviving Corporation. At the
Effective Time, (i) the directors of Newco and (ii) the officers of the Company,
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation, each of such directors and officers to hold office in
accordance with the Articles of Incorporation and By-laws of the Surviving
Corporation.
1.6 Closing. Subject to the terms and conditions herein set forth, the
closing of the transactions contemplated by this Agreement (the "Closing") will
be effected on a date specified by AMCORE and the Company that shall be not
later than the fifth business day of the satisfaction or waiver of the last of
the conditions set forth in Articles VIII, IX and X hereof and the expiration of
any waiting periods in connection with necessary regulatory approvals or on such
other date as shall be mutually agreed upon by the parties (the "Closing Date").
It is anticipated that the Closing will take place on the Closing Date at the
offices of Jones, Day, Reavis & Pogue, 77 West Wacker Drive, Chicago, Illinois
60601, or at such other place as shall be mutually agreeable to AMCORE and the
Company. Notwithstanding the foregoing, if the Closing does not take place on
the date referred to above because any condition under this Agreement to the
obligations of AMCORE and Newco, on the one hand, or the Company, on the other
hand, is not met on such date, the other party may postpone the Closing from
time to time to any designated subsequent business day not more than ten (10)
business days after the original or postponed date on which the Closing was to
occur, but in no event later than June 30, 1997, by delivering prompt notice of
such postponement not later than the second business day prior to the original
or postponed date of Closing.
ARTICLE II
EFFECT OF THE MERGER ON COMPANY COMMON STOCK
2.1 Effect on Common Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of Company
Common Stock, but subject to the provisions of Section 180.1302 of the WBCL with
respect to the rights of dissenting stockholders of the Company:
(a) Conversion of Company Common Stock. Subject to adjustment
pursuant to Sections 2.1(d), 11.1(d) and 11.1(e), each issued and
outstanding share of Company Common Stock (other than shares of Company
Common Stock held (x) in the Company's treasury or (y) directly or
indirectly held by AMCORE or the Company or any of their respective
subsidiaries) shall be exchanged for and converted into 7.540 (the
"Exchange Ratio") fully paid and nonassessable shares of AMCORE Common
Stock. There shall be included with each share of AMCORE Common Stock
issued in the Merger an equal number of any share purchase rights
("Rights"), issued pursuant to the Rights Agreement dated as of February
21, 1996, between AMCORE and Firstar Trust Company, as rights agent (the
"Rights Agreement"). All references in this Agreement to the AMCORE Common
Stock to be received pursuant to the Merger shall be deemed to include the
Rights.
(b) Cancellation of Shares. All shares of Company Common Stock issued
and outstanding immediately prior to the Effective Time that are to be
converted into shares of AMCORE Common Stock pursuant to Section 2.1(a)
shall no longer be outstanding and shall automatically be cancelled and
retired and shall cease to exist. After the Effective Time, until
surrendered, each outstanding certificate (a "Certificate") which prior to
the Effective Time represented any such shares of Company Common Stock
shall be deemed to evidence ownership of the number of shares of AMCORE
Common Stock and cash in lieu of fractional shares of AMCORE Common Stock
as provided in Section 2.6 into which the same shall have been so
converted; provided, however, that each holder of a Certificate shall cease
at the Effective Time to have any rights with respect thereto, except the
right to receive dividends as provided in Section 6.4(a) hereof and the
right to receive a Certificate representing the shares of AMCORE Common
Stock and cash in lieu of fractional shares to be issued in consideration
therefor upon the surrender of such Certificate in accordance with this
Section 2.1, without interest; and provided further,
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that no dividends declared with respect to shares of AMCORE Common Stock
shall be paid to the holder of any unsurrendered Certificate until such
holder shall surrender such Certificate, at which time the holder shall be
paid the amount of any dividends, without interest, that theretofore became
payable with respect to the shares evidenced by such Certificate.
(c) Stock Held by the Company. At the Effective Time, all shares of
Company Common Stock that are owned by Company as treasury stock and all
shares of Company Common Stock that are owned directly or indirectly by
AMCORE or the Company or any of their respective subsidiaries (other than
shares of Company Common Stock held directly or indirectly in trust
accounts, managed accounts and the like or otherwise held in a fiduciary or
other representative capacity that are beneficially owned by third parties
(any such shares, and shares of AMCORE Common Stock which are similarly
held, whether held directly or indirectly by AMCORE or the Company, as the
case may be, being referred to herein as "Trust Account Shares")) shall be
cancelled and shall cease to exist and no stock of AMCORE or other
consideration shall be delivered in exchange therefor. All shares of AMCORE
Common Stock that are owned by the Company or its subsidiary (other than
Trust Account Shares) shall become treasury stock of AMCORE.
(d) If AMCORE's good-faith estimate of the Remediation Costs (as
defined in Section 7.5 hereof) exceeds $200,000 upon AMCORE's delivery, on
or prior to the Meeting Date, of written notice to the Company of such
estimated amount (or such lower amount as AMCORE may determine in its sole
discretion), AMCORE shall have the right to adjust the Exchange Ratio
otherwise provided in Section 2.1(a) to a number equal to (i) (A) 154.57
less (B) an amount equal to (1) the amount of such estimate in excess of
$200,000 divided by (2) 249,905 (such difference shall be referred to as
the "Environmental Reduction Amount"), divided by (ii) 20.5. AMCORE agrees
to provide the notice referred to in this Section 2.1(d) as soon as
reasonably practicable after the date on which it receives sufficient
information pursuant to Section 7.5 in order for it to reasonably estimate
any Remediation Cost.
2.2 Adjustments for Dilution and Other Matters. If prior to the Effective
Time, AMCORE shall declare a stock dividend or distribution upon or subdivide,
split up, reclassify, combine its shares of AMCORE Common Stock or declare a
dividend or make a distribution on AMCORE Common Stock of any security
convertible into AMCORE Common Stock, then the Exchange Ratio shall be
appropriately adjusted to reflect such dividend, distribution, subdivision,
reclassification or combination.
2.3 Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, shares of the Company which immediately prior to the Effective Time
are held by stockholders who have properly exercised and perfected dissenters'
rights under Section 180.1301 et seq. of the WBCL (the "Dissenting Shares")
shall not be converted into the right to receive shares of AMCORE Common Stock
as provided in Section 2.1(a) hereof, but the holders of Dissenting Shares shall
be entitled to receive consideration as shall be determined pursuant Section
180.1328 of the WBCL; provided, however, that if any such holder shall have
failed to perfect or shall withdraw or lose his dissenter's rights, such
holder's shares shall thereupon be deemed to have been converted into shares of
AMCORE Common Stock as of the Effective Time, without any interest thereon, as
provided in Section 2.1(a), and such shares shall no longer be Dissenting
Shares.
2.4 Stock Options. The Company shall cause the holders of all outstanding
Company Restricted Shares/Options (as defined in Section 4.2 hereof) to agree to
exercise in full or terminate (with no cost to the Company) all of the Company
Restricted Shares/Options held by such Persons prior to the Effective Time. At
the Effective Time, each Company Restricted Share/Option to purchase shares of
Company Common Stock which is outstanding and unexercised immediately prior
thereto, shall be cancelled and all rights thereunder shall be extinguished.
2.5 Exchange of Certificates. (a) Exchange Agent. At or prior to the
Effective Time, AMCORE shall deposit, or shall cause to be deposited, with a
bank or trust company selected by AMCORE (which may be a bank or trust company
subsidiary of AMCORE ) (the "Exchange Agent"), for the benefit of the holders of
Certificates, for exchange in accordance with this Section 2.5, certificates
representing the shares of AMCORE Common Stock and the cash in lieu of
fractional shares (such cash and certificates for shares of AMCORE Common Stock,
being hereinafter referred to as the "Exchange Fund") to be issued pursuant to
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Section 2.1(a) and paid pursuant to Section 2.6 in exchange for outstanding
shares of Company Common Stock.
(b) Exchange Procedures. As soon as practicable after the Effective Time,
but in no event later than five (5) business days thereafter, the Exchange Agent
shall mail to each holder of record of a Certificate or Certificates (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent) and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for certificates representing the
shares of AMCORE Common Stock. Upon surrender of a Certificate for cancellation
to the Exchange Agent, together with such letter of transmittal, duly executed,
the holder of such Certificate(s) shall be entitled to receive in exchange
therefor (x) an AMCORE certificate representing that number of whole shares of
AMCORE Common Stock into which the shares of Company Common Stock have been
converted pursuant to Section 2.1(a) hereof and (y) cash in lieu of fractional
shares of AMCORE Common Stock to which such holder is entitled pursuant to
Section 2.6 hereof, and the Certificate so surrendered shall be cancelled. No
interest will be paid or accrued on the cash in lieu of fractional shares and
unpaid dividends and distributions, if any, payable to holders of Certificates.
If any certificate representing shares of AMCORE Common Stock is to be issued in
a name other than that in which the Certificate surrendered in exchange therefor
is registered, it shall be a condition of the issuance thereof that the
Certificate so surrendered shall be properly endorsed (or accompanied by an
appropriate instrument of transfer) and otherwise in proper form for transfer,
and that the person requesting such exchange shall pay to the Exchange Agent in
advance any transfer or other taxes required by reason of the issuance of a
certificate representing shares of AMCORE Common Stock in any name other than
that of the registered holder of the Certificate surrendered, or required for
any other reason, or shall establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not payable. Until surrendered as contemplated
by this Section 2.5, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
certificate representing shares of AMCORE Common Stock and cash in lieu of any
fractional shares of AMCORE Common Stock as contemplated by Section 2.6 hereof.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions declared with respect to AMCORE Common Stock and payable to
the holders of record thereof after the Effective Time shall be paid to the
holder of any unsurrendered Certificate until the holder thereof shall surrender
such Certificate in accordance with this Article II. After the surrender of a
Certificate in accordance with this Article II, the record holder thereof shall
be entitled to receive any such dividends or other distributions, without any
interest thereon, which theretofore had become payable with respect to shares of
AMCORE Common Stock represented by such Certificate. No holder of an
unsurrendered Certificate shall be entitled, until the surrender of such
Certificate, to vote the shares of AMCORE Common Stock into which Company Common
Stock shall have been converted.
(d) Lost or Stolen Shares. In the event any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by AMCORE, the posting by such person of a bond in such amount as
AMCORE may reasonably direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate the shares of AMCORE
Common Stock and cash in lieu of fractional shares deliverable in respect
thereof pursuant to this Agreement.
(e) No Further Ownership Rights in Company Common Stock. After the
Effective Time, there shall be no transfers on the stock transfer books of the
Company of the shares of Company Common Stock which were issued and outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates representing such shares are presented for transfer to the Exchange
Agent, they shall be cancelled and exchanged for certificates representing
shares of AMCORE Common Stock as provided in this Article II.
2.6 No Fractional Shares. Notwithstanding anything to the contrary
contained herein, no certificates or scrip representing fractional shares of
AMCORE Common Stock shall be issued upon the surrender for exchange of
Certificates, no dividend or distribution with respect to AMCORE Common Stock
shall be
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payable on or with respect to any fractional share, and such fractional share
interests shall not entitle the owner thereof to vote or to any other rights of
a shareholder of the Company. In lieu of the issuance of any such fractional
share, AMCORE shall pay to each former stockholder of the Company who otherwise
would be entitled to receive a fractional share of AMCORE Common Stock an amount
in cash determined by multiplying (i) the average of the closing-sale prices of
AMCORE Common Stock on the Nasdaq National Market reported by The Wall Street
Journal for the five (5) trading days immediately preceding the date of the
Effective Time by (ii) the fraction of a share of AMCORE Common Stock to which
such holder would otherwise be entitled to receive pursuant to Section 2.1(a)
hereof.
2.7 Return of Exchange Fund. Any portion of the Exchange Fund that remains
unclaimed by the stockholders of the Company for twelve (12) months after the
Effective Time shall be paid to AMCORE. Any stockholders of the Company who have
not theretofore complied with this Article II shall thereafter look only to
AMCORE for payment of their shares of AMCORE Common Stock, cash in lieu of
fractional shares pursuant to Section 2.6 hereof and unpaid dividends and
distributions on the AMCORE Common Stock deliverable in respect of each share of
Company Common Stock such stockholder holds as determined pursuant to this
Agreement, in each case, without any interest thereon. Notwithstanding the
foregoing, none of AMCORE, the Company, the Exchange Agent or any other person
shall be liable to any former holder of shares of Company Common Stock for any
amount properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AMCORE AND NEWCO
AMCORE and Newco represent and warrant to the Company as follows:
3.1 Corporate Organization. AMCORE is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Nevada.
Newco is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Wisconsin. Both AMCORE and Newco have all
requisite corporate power and authority to own, operate, and lease their
properties as presently owned, operated, and leased and to engage in the
activities and business now being conducted. AMCORE and Newco are qualified to
do business in each jurisdiction in which the nature of business conducted or
assets owned or leased makes such qualification necessary and where failure to
do so would have a Material Adverse Effect (as defined in Section 12.7 hereof).
AMCORE is duly registered as a bank holding company under the Bank Holding
Company Act of 1956, as amended ("BHCA"). AMCORE has heretofore delivered to the
Company true, accurate and complete copies of the currently effective
Certificate of Incorporation of AMCORE, the Articles of Incorporation of Newco
and the By-laws of AMCORE and Newco, including all amendments thereto.
3.2 Capitalization. As of the date hereof, the authorized capital stock of
AMCORE consists of 30,000,000 shares of AMCORE Common Stock, par value $0.33 per
share, and 10,000,000 shares of preferred stock, par value $1.00 per share. As
of September 30, 1996, there were issued and outstanding 14,224,578 shares of
AMCORE Common Stock and no shares of preferred stock. As of September 30, 1996,
a total of 191,721 shares of AMCORE Common Stock were reserved for issuance
under various warrants, options, or similar agreements and 702,117 shares of
AMCORE Common Stock were held in AMCORE's treasury. All of such issued and
outstanding shares of capital stock are validly issued, fully paid, and
nonassessable and not issued in violation of any person's preemptive rights. The
shares of AMCORE Common Stock to be issued pursuant to Article II hereof will,
upon issuance, be validly issued, fully paid, nonassessable, and free of
preemptive rights.
3.3 Authorization. AMCORE and Newco have full corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The respective Boards of Directors of AMCORE and Newco, and
AMCORE as the sole stockholder of Newco, have unanimously approved the Agreement
and the transactions contemplated hereby and have, respectively, authorized the
execution, delivery, and performance by AMCORE and Newco of this Agreement. No
other corporate proceeding on the part of AMCORE and Newco is necessary to
authorize this Agreement or to consummate the transactions
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contemplated hereby. This Agreement has been duly and validly executed and
delivered by AMCORE and Newco and constitutes the valid and binding obligations
of AMCORE and Newco, enforceable against them in accordance with their terms,
subject to (a) all applicable bankruptcy, insolvency, moratorium, or other
similar laws affecting the enforcement of creditors' rights generally, and (b)
the application of equitable principles if equitable remedies are sought.
3.4 No Violation. Neither the execution and delivery of this Agreement by
AMCORE or Newco nor the consummation by AMCORE or Newco of the transactions
contemplated hereby, nor compliance by AMCORE or Newco with any of the terms or
provisions hereof, will (i) violate any provision of the Certificate of
Incorporation of AMCORE, the Articles of Incorporation of Newco or the By-Laws
of AMCORE or Newco, or (ii) assuming that the consents and approvals referred to
in Section 3.8 hereof are duly obtained, (x) violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to AMCORE or any of its Subsidiaries or any of their respective
properties or assets, or (y) except as set forth in Section 3.8 of the written
statement signed by the Chief Financial Officer of AMCORE and delivered by
AMCORE to the Company at or before the date hereof (the "AMCORE Letter"),
violate, conflict with, result in a breach of any provision of or the loss of
any benefit under, constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, result in the termination
of or a right of termination or cancellation under, accelerate the performance
required by, or result in the creation of any lien, pledge, security interest,
charge or other encumbrance upon any of the respective properties or assets of
AMCORE or any of its Subsidiaries under the terms, conditions or provisions of,
any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which AMCORE or any of its Subsidiaries is a
party, or by which they or any of their respective properties or assets may be
bound or affected, except (in the case of clause (ii) above) for such
violations, conflicts, breaches or defaults which either individually or in the
aggregate will not have a Material Adverse Effect on AMCORE.
3.5 AMCORE Reports and Financial Statements. AMCORE has heretofore
delivered to the Company true, complete and correct copies of all reports,
registration statements and other filings made by AMCORE with the Securities and
Exchange Commission (the "SEC") since January 1, 1995 through the date hereof
(such reports, registration statements and other filings, together with any
amendments thereto, are sometimes collectively referred to as the "SEC
Filings"). As of their respective dates, the SEC Filings did not contain any
untrue statements of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. The audited
financial statements and unaudited interim financial statements included in the
SEC Filings fairly present, in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis except as disclosed in the
footnotes thereto, the consolidated financial position and results of operations
of AMCORE and its Subsidiaries as of the dates and for the periods then ended
(subject to normal year end adjustments).
3.6 Absence of Certain Changes. Except as may be set forth in Section 3.6
of the AMCORE Letter or as disclosed in the SEC Filings made after June 30,
1996, since June 30, 1996, (i) neither AMCORE nor any of its Subsidiaries has
incurred any material liability, except in the ordinary course of their
businesses consistent with their past practices, and (ii) no event has occurred
which has had, individually or in the aggregate, a Material Adverse Effect on
AMCORE.
3.7 Legal Proceedings. Except as set forth in Section 3.7 of the AMCORE
Letter or in AMCORE's Quarterly Report on Form 10-Q for the quarter ended June
30, 1996, neither AMCORE nor any of its Subsidiaries is a party to any and there
are no pending or, to the best of AMCORE's knowledge, threatened, material
legal, administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against AMCORE or any of
its Subsidiaries or challenging the validity or propriety of the transactions
contemplated by this Agreement as to which there is a reasonable probability of
an adverse determination and which, if adversely determined, would have a
Material Adverse Effect on AMCORE. There is no injunction, order, judgment,
decree, or regulatory restriction imposed upon AMCORE, any of its Subsidiaries
or the assets of AMCORE or any of its Subsidiaries which has had a Material
Adverse Effect on AMCORE.
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3.8 Consents and Approvals. Except for the consents and approvals of or
filings or registrations with (i) the Federal Reserve Board under the BHCA, the
Bank Merger Act and the Federal Reserve Act (the "FRA"), (ii) applicable state
banking authorities, (iii) the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and (iv) the SEC, if any, and the filing of
the Articles of Merger with the Department of Financial Institutions pursuant to
the WBCL and the requirements of state securities or "Blue Sky" laws and
otherwise in Section 3.8 of the AMCORE Letter, no consent or approval of or
filing or registration with any court, administrative agency, or commission, or
other governmental authority or instrumentality, domestic or foreign
("Governmental Entity") or with any third party are necessary in connection with
the execution and delivery by AMCORE and Newco of this Agreement and the
consummation by AMCORE and Newco of the Merger and the other transactions
contemplated hereby.
3.9 Registration Statement. The Registration Statement to be filed
pursuant to Section 7.1 hereof and the Proxy Statement/Prospectus included
therein (a) will comply in all material respects with the requirements of the
Securities Act of 1933 (the "Securities Act"), and the Securities Exchange Act
of 1934 (the "Exchange Act"), and (b) will not, at the date the Proxy
Statement/Prospectus is first mailed or delivered to the Company stockholders,
and will not, at the date or dates of the meeting of the Company's stockholders
referred to in Section 6.9 hereof, as then amended or supplemented, contain any
untrue statement of any material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not false or misleading. Notwithstanding the foregoing,
AMCORE and Newco make no representation or warranty and shall have no
responsibility for the truth or accuracy of any information with respect to the
Company or its affiliates or associates contained in the Registration Statement
or the Proxy Statement/Prospectus (as defined in Section 7.1 hereof) that was
provided by the Company, its affiliates, or associates.
3.10 Newco. Newco was formed by AMCORE solely for the purpose of engaging
in the transactions contemplated hereby. As of the date hereof and at the
Effective Time, the capital stock of Newco is and will be 100% owned by AMCORE
directly. Further, there are not as of the date hereof and there will not be at
the Effective Time any outstanding or authorized options, warrants, calls,
rights, commitments or any other agreements of any character to which Newco is a
party, or by which it may be bound, requiring it to issue, transfer, sell,
purchase, redeem or acquire any shares of its capital stock or any securities or
rights convertible into, exchangeable for, or evidencing the right to subscribe
for or acquire any shares of its capital stock. As of the date hereof and at the
Effective Time, except for obligations or liabilities incurred in connection
with its incorporation or organization and the transactions contemplated hereby,
Newco has not and will not have incurred, directly or indirectly through any
Affiliate, any obligations or liabilities or engaged in any business or
activities of any type or kind whatsoever or entered into any agreements or
arrangements with any Person. AMCORE will take all action necessary to ensure
that Newco at no time prior to the Effective Time owns any asset other than an
amount of cash necessary to incorporate Newco and to pay the expenses of the
Merger attributable to Newco if the Merger is consummated.
3.11 Post-Merger Transactions. AMCORE has no current plan or intention
after the Effective Time of the Merger (i) to liquidate the Company or any
Company Subsidiary, (ii) to merge the Company or any Company Subsidiary with or
into another corporation, (iii) to sell or otherwise dispose of the stock of the
Company or any Company Subsidiary except for transfers of any such stock to a
Subsidiary of AMCORE, or (iv) to cause the Company or any Company Subsidiary to
sell or otherwise dispose of any of their respective assets or of any of the
assets acquired by the Company from Newco except for dispositions made in the
ordinary course of business or transfers of assets to a Subsidiary of the
Company. AMCORE has no plan or intention to reacquire any shares of AMCORE
Common Stock issued in the Merger.
3.12 AMCORE Ownership of Company Common Stock. Neither AMCORE nor any
Subsidiary or Affiliate of AMCORE currently owns, or has at any time during the
past five years owned, any shares of Company Common Stock or any other capital
stock of the Company or any Company Subsidiary.
3.13 Accounting and Tax Matters. Neither AMCORE nor any of its
Subsidiaries, nor to the knowledge of AMCORE, any of its Affiliates, has taken
or agreed to take, or has current plans or intention to take, any actions that
would prevent (i) AMCORE from accounting for the business combination to be
effected by the
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Merger as a "pooling of interests," or (ii) the Merger from qualifying as a
tax-free reorganization within the meaning of Section 368(a) of the Code.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to AMCORE and Newco as follows:
4.1 Corporate Organization. The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Wisconsin
and has all requisite corporate power and authority to own, operate, and lease
its properties as presently owned, operated, or leased and to engage in the
activities and business now conducted by it. The Company is qualified to do
business in each jurisdiction in which the nature of business conducted or
assets owned or leased make such qualification necessary and where a failure to
do so would have a Material Adverse Effect on the Company. The Company is duly
registered as a bank holding company under the BHCA. The Company's acquisition
of the capital stock of First National Bank and Trust (the "Bank" or "FNB&T")
and Citizens State Bank ("Citizens") and subsequent merger of Citizens into the
Bank were duly approved by the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board") pursuant to applicable sections of the BHCA. The
Company has heretofore delivered to AMCORE, true, accurate, and complete copies
of the currently effective Articles of Incorporation and Bylaws of the Company,
including all amendments thereto. Except for shares of the Bank and FNI
Corporation (each a "Company Subsidiary"), the Company and its Subsidiaries do
not own beneficially, directly or indirectly, five percent (5%) or more of any
class of equity securities, partnership interests, limited liability company
("LLC") interests or similar interests of any other corporation, bank,
partnership, LLC, business trust, association, or similar organization.
4.2 Capitalization. The authorized capital stock of the Company consists
of (a) 300,000 shares, par value $1.00 per share, of Company Common Stock, of
which 242,455 shares are issued and outstanding and 7,450 shares are reserved
for or subject to issuance under various warrants, options, or similar
agreements ("Company Restricted Shares/Options") and no shares were held in the
Company's treasury except, in each case for shares of Company Common Stock
issued pursuant to Company Restricted Shares/Options exercised after the date
hereof; and (b) no shares of preferred stock. All such issued and outstanding
shares of the Company capital stock are validly issued, fully paid, and
non-assessable and not issued in violation of any person's preemptive rights
(except as provided in Section 180.06-22(2)(b) of the WBCL and judicial
interpretations thereof). Except for Company Restricted Shares/Options, the
Company does not have any arrangements or commitments obligating the Company to
issue or sell or otherwise dispose of, or to purchase or redeem shares of its
capital stock or any securities convertible into or having the right to purchase
shares of its capital stock.
4.3 Organization of Company Subsidiaries. (a) FNB&T is a national banking
association duly organized, validly existing, and in good standing under the
laws of the United States. The Company has delivered to AMCORE, as Section 4.3
of the Company Letter (as defined in Section 4.8 hereof) true, accurate, and
complete copies of the currently effective Articles of Association and By-laws
of the Bank, including all amendments thereto. The Bank (a) is duly authorized
to conduct a general banking business, subject to the supervision of the Office
of the Comptroller of Currency (the "OCC"), at its offices identified in Section
4.3(a) of the Company Letter; (b) is an insured bank as defined in the Federal
Deposit Insurance Act; (c) has full power and authority to engage in the
business and activities now conducted by it; and (d) possesses and is in full
compliance with all licenses, franchises, permits, and other governmental
authorizations that are legally required except to the extent that
non-possession and non-compliance would not have a Material Adverse Effect.
(b) FNI Corporation ("FNI") is a corporation duly organized and validly
existing and in good standing under the laws of Nevada with full power and
authority to engage in the activities and business now conducted by it. The
Company has delivered to AMCORE true, accurate and complete copies of the
currently effective Articles of Incorporation and By-laws of FNI. FNI possesses
and is in full compliance with all licenses,
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franchises, permits and other governmental authorizations that are legally
required except to the extent that non-possession and non-compliance would not
have a Material Adverse Effect.
4.4 Capitalization of the Subsidiaries. The Company owns 100% of the
outstanding capital stock of each Company Subsidiary. All such capital stock is
owned free and clear of all liens, claims, pledges, assignments, security
interests and other encumbrances, except as set forth in Section 4.4 of the
Company Letter. All of the shares of the capital stock of each Company
Subsidiary are validly issued, fully paid, and nonassessable (except pursuant to
12 U S.C. Section 55), and not issued in violation of any person's preemptive
rights. The Company is not a party to or bound by any commitment or obligation
to issue or sell or otherwise dispose of, or to purchase or redeem, any capital
stock or any other security convertible into or having the right to purchase
such shares of capital stock of its Subsidiaries.
4.5 Authorization. The Board of Directors of the Company has unanimously
approved this Agreement and the transactions contemplated hereby and has
authorized the execution, delivery and performance by the Company of this
Agreement and will recommend approval of this Agreement by the Company's
stockholders at the special meeting described in Section 6.9 hereof. No other
corporate proceeding on the part of the Company is necessary to authorize this
Agreement or to consummate the transactions contemplated hereby other than the
approval and adoption of this Agreement by stockholders holding a majority of
the outstanding Company Common Stock entitled to vote thereon. The Company has
full corporate power and authority to enter into this Agreement and, upon
approval of its stockholders in accordance with the law and subject to the
conditions set forth in Article IX of this Agreement, to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Company and constitutes the valid and binding
obligations of the Company, enforceable in accordance with its terms, subject to
(a) all applicable bankruptcy, insolvency, moratorium, or other similar laws
affecting the enforcement of creditors' rights generally, and (b) the
application of equitable principles if equitable remedies are sought.
4.6 No Violation; Consents and Approvals. (a) Neither the execution and
delivery of this Agreement by the Company nor the consummation by the Company of
the transactions contemplated hereby, nor compliance by the Company with any of
the terms or provisions hereof, will (i) violate any provision of the Articles
of Incorporation or By-Laws of the Company or its Subsidiaries, or (ii) assuming
that the consents and approvals referred to in this Section 4.6 are duly
obtained, (x) violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to the Company or any of its
Subsidiaries or any of their respective properties or assets, or (y) except as
set forth in Section 4.6(a) of the Company Letter, violate, conflict with,
result in a breach of any provision of or the loss of any benefit under,
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the respective properties or assets of the Company or
any of its Subsidiaries under the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which the Company or any of its Subsidiaries is a
party, or by which they or any of their respective properties or assets may be
bound or affected, except (in the case of clause (ii) above) for such
violations, conflicts, breaches or defaults which either individually or in the
aggregate will not have a Material Adverse Effect on the Company or its
Subsidiaries.
(b) Except for the consents and approvals of or filings or registrations
with (i) the Federal Reserve Board under the BHCA, the Bank Merger Act and the
FRA, (ii) applicable state banking authorities, (iii) the HSR Act, and (iv) the
SEC, if any, and the filing of the Articles of Merger with the Department of
Financial Institutions pursuant to the WBCL and the requirements of state
securities or "Blue Sky" laws and otherwise set forth in Section 4.6(b) of the
Company Letter, no consent or approval of or filing or registration with any
Governmental Entity or with any third party (other than the Company's
stockholders) are necessary in connection with the execution and delivery by the
Company of this Agreement and the consummation by the Company of the Merger and
the other transactions contemplated hereby.
4.7 Financial Statements. The Company has furnished to AMCORE as Section
4.7 of the Company Letter copies of the following financial statements: (a) the
audited Consolidated Balance Sheet of the
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Company as of December 31, 1994 and 1995, and the Consolidated Statements of
Earnings, Stockholders'
Equity, and Cash Flows for each of the years in the three-year period ended
December 31, 1995 (the "Latest Statement Date"), together with the notes
thereto, and the unqualified opinion of McGladrey & Pullen, LLP, the Company's
independent auditors (the "Latest Company Financial Statements"); (b) the
Consolidated Balance Sheet of the Company and the Consolidated Statement of
Earnings for each quarter ended between the Latest Statement Date and September
30, 1996; and (c) Report of Condition of the Bank as of June 30, 1996, together
with the related Reports of Income for the period then ended, as included in the
call report of the Bank as of said date as filed with the OCC (collectively, the
"Company Financial Statements"). The Company Financial Statements fairly present
the financial position and results of operation of the Company and its
Subsidiaries as of the dates and for the periods then ended. Each of the
financial statements referred to in clauses (a) and (b) of the first sentence of
this Section 4.7 has been prepared in accordance with GAAP (applied on a
consistent basis except as disclosed in the footnotes thereto) and, with respect
to the financial statements referred to in clause (b), subject to normal year
end adjustments. The financial statements referred to in clause (c) of this
Section 4.7 have been prepared in accordance with the applicable regulations and
standards of the OCC. The Company Financial Statements do not, as of the date
thereof, include any material assets or omit to state any material liability,
absolute or contingent, or other facts, the inclusion or omission of which
renders such financial statements, in light of the circumstances under which
they were made and taken as a whole, misleading in any material respect. Except
as reflected in the financial statements referred to in clause (b) in the first
sentence of this Section 4.7 and as set forth in Section 4.7 of the Company
Letter, since the Latest Statement Date, there has been no change in the
financial condition, results of operation, assets, or business of the Company or
its Subsidiaries (other than changes in the ordinary course of business, none of
which, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect), nor has there been any other event or condition of any
character that has had a Material Adverse Effect, and to the Company's
knowledge, no fact or condition exists that would reasonably be expected to have
such a Material Adverse Effect in the future. The Company Financial Statements
pursuant to GAAP reflect adequate provision for, or reserves against, the
possible credit losses of the Company and its Subsidiaries as of such dates.
There are no facts, circumstances, trends, or expectations known to the Company
that could be reasonably expected to cause the Company to restate the level of
such allowance for loan losses. The books and records of the Company and its
Subsidiaries have been, and are being, maintained in all material respects in
accordance with applicable legal and accounting requirements and reflect only
actual transactions, except to the extent required by applicable legal or
accounting requirements.
4.8 Absence of Certain Changes. Since the Latest Statement Date, neither
the Company nor any of its Subsidiaries has, except as set forth in Section 4.8
of the written statement signed by the Chief Executive Officer of the Company
and delivered by the Company to AMCORE at or before the date hereof (the
"Company Letter") or as reflected in the financial statements referred to in
clause (b) in the first sentence of Section 4.7, (a) issued or sold any
corporate debt securities (except documents and instruments issued in the
ordinary course of the banking business of the Bank); (b) granted any option for
the purchase of its capital stock; (c) declared or set aside or paid any
dividend or other distribution in respect of its capital stock; (d) incurred any
material obligation or liability (absolute or contingent) except obligations or
liabilities incurred in the ordinary course of business, (e) mortgaged, pledged,
or subjected to lien or encumbrance (other than statutory liens for taxes not
yet delinquent) any of its assets or properties, except pledges to secure
government deposits and in connection with repurchase or reverse repurchase
agreements; (f) discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent), other than current liabilities
included in the Company's and its Subsidiaries' consolidated balance sheet as of
the Latest Statement Date, and current liabilities incurred since the date
thereof in the ordinary course of business; (g) sold, exchanged, or otherwise
disposed of any of its capital assets other than in the ordinary course of
business; (h) made or modified any general wage or salary increase, entered into
or modified any employment contract with any officer or salaried employee, or
instituted any employee welfare, fringe benefit, bonus, stock option, profit
sharing, retirement, or similar plan or arrangement and has not contributed any
amounts, funds or property to any trust in respect of any obligations under any
plans or arrangements of the Company or its Subsidiaries, including but not
limited to any trusts under any deferred compensation plan; (i) suffered any
damage, destruction, or loss, whether or not covered by insurance, having a
Material Adverse Effect, or waived
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any rights of value that are material in the aggregate, considering its business
taken as a whole; (j) except in the ordinary course of business, entered, or
agreed to enter, into any agreement or arrangement granting any preferential
right to purchase any of its assets, properties, or rights or requiring the
consent of any party to the transfer and assignment of any such assets,
properties, or rights; (k) entered into any transaction outside the ordinary
course of its business, except as expressly contemplated by this Agreement; (l)
except in the ordinary course of business sold or otherwise disposed of any of
its loans and investment securities; or (m) except, after the date hereof, as
required by GAAP, changed accounting principles utilized by the Company or its
Subsidiaries.
4.9 Legal Proceedings. (a) Except as set forth in Section 4.9 of the
Company Letter, neither the Company nor any of its Subsidiaries is a party to
any, and there are no pending or, to the best of the Company's knowledge,
threatened, legal, administrative, arbitral or other proceedings, claims,
actions or governmental or regulatory investigations of any nature against the
Company or any of its Subsidiaries or challenging the validity or propriety of
the transactions contemplated by this Agreement.
(b) Except as otherwise disclosed in Section 4.9(b) of the Company Letter,
there is no injunction, order, judgment or decree imposed upon the Company, its
Subsidiaries or the assets of the Company or its Subsidiaries which has had, or
might reasonably be expected to have, a Material Adverse Effect on the Company.
(c) Section 4.9(c) of the Company Letter sets forth all pending litigation
involving any claim against the Company, whether directly or by counterclaim,
involving a "lender liability" cause of action.
4.10 Company Information. The information relating to the Company and its
Subsidiaries to be contained in a proxy statement of the Company or furnished to
AMCORE for the Registration Statement (as defined in Section 7.1 hereof) which
such proxy statement will be included as a prospectus, or in any other document
filed with any other regulatory agency in connection herewith by the Company,
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading. The proxy statement of the
Company (except for such portions thereof that relate only to AMCORE or any of
its Subsidiaries) will comply in all material respects with any applicable
provisions of the Exchange Act and the rules and regulations thereunder.
4.11 Agreements with Regulatory Agencies. Except as disclosed in the
Company Reports or as set forth in Section 4.11 of the Company Letter, neither
the Company nor any of its Subsidiaries is subject to any cease-and-desist or
other order issued by, or is a party to any written agreement, consent agreement
or memorandum of understanding with, or is a party to any commitment letter or
similar undertaking to, or is subject to any order or directive by, or is a
recipient of any extraordinary supervisory letter from, or has adopted any board
resolutions since December 31, 1993, at the express specific request of (each,
whether or not set forth in Section 4.11 of the Company Letter, a "Regulatory
Agreement"), any Regulatory Agency or other Governmental Entity that restricts
the conduct of its business or that in any manner relates to its capital
adequacy, its credit policies, its management or its business, nor has the
Company or any of its Subsidiaries been advised by any Regulatory Agency or
other Governmental Entity that it is considering issuing or requesting any
Regulatory Agreement.
4.12 Intellectual Property. The Company and its Subsidiaries owns or
possesses valid and binding licenses and other rights to use without payment all
material patents, copyrights, trade secrets, tradenames, servicemarks and
trademarks used in its businesses and neither the Company nor any of its
Subsidiaries has received any notices of conflict with respect thereto that
asserts the right of others. The Company and its Subsidiaries have in all
material respects performed all the obligations required to be performed by them
and are not in default in any material respect under any contract, agreement,
arrangement or commitment relating to any of the foregoing, except where such
nonperformance or default would not, individually, or in the aggregate, have a
Material Adverse Effect on the Company.
4.13 Fairness Opinion. The Company has received an opinion from Robert W.
Baird & Co. Incorporated ("Baird") to the effect that, subject to the terms,
conditions and qualifications set forth therein the consideration to be received
by the stockholders of the Company pursuant to the Merger is fair to such
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stockholders from a financial point of view and will use its best efforts to
obtain an update of such opinion on or about the date that is three (3) business
days prior to the date that the Proxy Statement/Prospectus will be mailed to
stockholders of the Company.
4.14 Employee Benefit Matters. (a) The Company Letter sets forth in
Section 4.14(a) a true and complete list of each bonus, deferred compensation,
incentive compensation, stock purchase, stock option, restricted stock,
severance or termination pay, hospitalization or other medical, life or other
insurance, supplemental unemployment benefits, profit-sharing, pension, savings
or retirement plan, program, agreement or arrangement, and each other employee
benefit plan, program, agreement or arrangement, sponsored, maintained or
contributed to or required to be contributed to by the Company or by any trade
or business,
whether or not incorporated (an "ERISA Affiliate"), that together with the
Company would be deemed a "single employer" within the meaning of section
4001(b) of the Employee Retirement Income Security Act of 1974, as amended, and
the rules and regulations promulgated thereunder ("ERISA"), for the benefit of
any current or former employee, officer, director, consultant or agent of the
Company or any of its ERISA Affiliates.
(b) All of the plans, programs, and arrangements described in this Section
4.14 or listed in the Company Letter (hereinafter referred to as the "Plans")
have been operated and administered in accordance with their respective
provisions and are in material compliance with all applicable requirements of
ERISA, the Code and all other applicable federal and state laws, including the
reporting and disclosure requirements of Part I of Title I of ERISA and the
continuation coverage requirements of Sections 601 through 608 of ERISA. Except
as provided in Section 4.14(b) of the Company Letter, each of the Plans that is
intended to be qualified under Section 401(a) of the Code has been determined by
the Internal Revenue Service (the "IRS") to qualify under Section 401(a) of the
Code (except for changes required by legislation subsequent to the Tax Reform
Act of 1986 and subsequent legislation), and there exist no circumstances that
may adversely affect the qualified status of any such Plan. Except as set forth
in the Company Letter, there is no pending or, to the Company's knowledge,
threatened litigation, governmental proceeding, or investigation against or
relating to any Plan, and there is no reasonable basis for any material
proceedings, claims, actions, or proceedings against any Plan. No Plan (or Plan
fiduciary) has engaged in a "Prohibited Transaction" (as defined in Section 406
of ERISA or Section 4975(c) of the Code) or breach of fiduciary standards (as
described in Section 404 of ERISA or other applicable law). All payments due
from any Plan (or from the Company or any ERISA Affiliate with respect to any
Plan) have been made, and all amounts properly accrued to date as liabilities of
the Company or any ERISA Affiliate that have not yet been paid have been
properly recorded on the books of the Company or any ERISA Affiliate.
(c) Except as set forth in Section 4.14(c) of the Company Letter, neither
the Company nor any ERISA Affiliate maintains or contributes to (or is required
to contribute to) or previously maintained or contributed to (or was required to
contribute to) a plan, fund, or program that is subject to Title IV of ERISA.
(d) Except as set forth in Section 4.14(d) of the Company Letter, neither
the Company nor any ERISA Affiliate nor any Plan maintained or contributed to by
the Company or any ERISA Affiliate provides or has any obligation to provide (or
contribute toward the cost of) post-retirement welfare benefits with respect to
current or former employees, officers, directors, agents, or consultants of the
Company or any ERISA Affiliate or any other entity, including, without
limitation, post-retirement medical, dental, life insurance, severance, or any
other similar benefit, whether provided on an insured or self-insured basis.
(e) The Company has heretofore delivered to AMCORE (i) a true and correct
copy of each Plan (or, in the case of any Plan that is not in written form, a
complete and accurate description of the material provisions of the Plan); (ii)
complete and current copies of summary plan descriptions of each Plan that is
subject to ERISA; (iii) each trust agreement, insurance policy, or other
instrument relating to the funding of any Plan; (iv) the two most recent Annual
Reports (Form 5500 series) and accompanying schedules filed with the IRS or
United States Department of Labor with respect to each Plan that is subject to
ERISA, if applicable; (v) the most recent determination letter issued by the IRS
with respect to each Plan that is intended to qualify under Section 401(a) of
the Code; (vi) the most recent available financial statements for each Plan that
has assets; (vii) the most recent audited financial statements for each Plan for
which audited financial statements
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are required by ERISA; and (viii) the most recent actuarial report for each Plan
that is a defined benefit pension plan.
(f) Neither the Company nor any ERISA Affiliate maintains or has maintained
any employee stock ownership plan within the meaning of Code Section 4975(e)(7)
or similar retirement plan.
(g) Except as set forth in Section 4.14(g)(i) of the Company Letter, the
consummation of the transactions contemplated by this Agreement will not entitle
any current or former employee, officer, director, consultant, or agent of the
Company or any ERISA Affiliate to severance pay, unemployment compensation, or
any other payment, or accelerate the time of payment or vesting, or increase the
amount of compensation due to any such current or former employee, officer,
director, consultant, or agent. Further, except as set forth in Section
4.14(g)(i) of the Company Letter, neither the Company nor any ERISA Affiliate
has announced any type of plan or binding commitment to create any additional
Plan or to amend or modify any existing Plan, except as required by applicable
law.
(h) No amounts payable under the Plans or any other agreement or
arrangement to which the Company or any ERISA Affiliate is a party will, as a
result of the transaction contemplated hereby, fail to be deductible for federal
income tax purposes by virtue of section 280G of the Code.
(i) No Plan is nor does the Company or any ERISA Affiliate have any
liability under a "multi-employer plan," as such term is defined in section
4001(a)(3) of ERISA.
4.15 Tax Matters. (a) Except as set forth in Section 4.15(a) of the
Company Letter, the Company and the Company Subsidiaries have duly and timely
filed with the appropriate governmental agencies all federal, state, local, and
foreign tax returns and reports (including information returns and reports) that
are required to be filed, or requests for extensions to file such returns and
reports have been timely filed and granted and have not expired. The Company and
the Company Subsidiaries have paid all taxes currently due and payable by them,
including those relating to income, withholding, social security, unemployment,
workers compensation, franchise, ad valorem, premium, excise, use, and sales
taxes. There are included in the Company Financial Statements adequate reserves
for the payment of all federal, state, and local taxes of the Company and the
Company Subsidiaries, including interest, additions and penalties, whether or
not disputed, for the applicable fiscal years covered thereby and all fiscal
years prior thereto. Neither the Company nor any of the Company Subsidiaries has
executed or filed with the IRS, the Wisconsin Department of Revenue, or any
other taxing authority any agreement extending the period for assessment and
collection of any federal, state or local tax, nor is the Company or any of the
Company Subsidiaries a party to any action or proceeding by any taxing authority
for assessment or collection of taxes, except tax liens or levies against
customers of the Company Subsidiaries and liens for taxes not yet due and
payable.
(b) Neither the Company nor any of the Company Subsidiaries has, during the
past five (5) years, except as disclosed in Section 4.15(b) of the Company
Letter, received any notice of deficiency or proposed deficiency from the IRS or
any other taxing authority with respect to any federal, state or local taxes,
and to the Company's knowledge, no circumstances exist that reasonably could be
expected to result in assessments. No federal, state or local tax return of the
Company or any of the Company Subsidiaries is currently the subject of any audit
by the IRS or any other taxing authority. Except as disclosed in Section 4.15(b)
of the Company Letter, neither the Company nor any of the Company Subsidiaries
is a party to any agreement providing for allocation or sharing of taxes.
Neither the Company nor any of the Company Subsidiaries has ever been a member
of an affiliated group of corporations (within the meaning of Section 1504(a) of
the Code) filing federal consolidated income tax returns or state unitary
combined, consolidated or similar income tax returns, other than the affiliated
group of which the Company is the common parent.
4.16 Title and Condition. (a) Each of the Company and its Subsidiaries has
good, valid, and marketable title to all assets and properties, whether real or
personal, tangible or intangible, that it purports to own, including without
limitation all assets and properties reflected in the Company Financial
Statements or acquired subsequent thereto (except to the extent that such assets
and properties have been disposed of for fair value in the ordinary course of
business since the Latest Statement Date), subject to no liens, mortgages,
security interests, encumbrances, or charges of any kind, except (i) as noted in
said financial statements or the
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notes thereto; (ii) statutory liens for taxes not yet delinquent; (iii) securing
interests granted to secure deposits of funds by federal, state, or other
governmental agencies granted in connection with repurchase or reverse
repurchase agreements or otherwise incurred in the ordinary course of business;
(iv) minor defects and irregularities title and encumbrances that do not
materially impair the use thereof for the purposes for which they are held, and
such liens, mortgage, security interests,encumbrances, and charges as are not in
the aggregate material to the assets and properties of the Company or any of its
Subsidiaries; (v) assets subject to repurchase agreements, securing FHLB losses
or advances or securing governmental deposits, each as described in Section 4.16
of the Company Letter and (vi) as noted in Section 4.4 of the Company Letter.
The Company or any of its Subsidiaries, as lessee, has the right under valid and
subsisting leases to occupy, use, possess, and control all property leased by
the Company or any of its Subsidiaries, qualified only by the written terms of
such leases, copies of which have been provided to AMCORE as Section 4.16 of the
Company Letter. A legal description of all real property currently owned or
leased by the Company and its Subsidiaries, including properties held by the
Company Subsidiaries as a result of foreclosure or repossession or carried on
the Company Subsidiaries' books as "other real estate owned" (the "Current Real
Properties"), has been provided as Section 4.16(a) of the Company Letter. The
Current Real Properties and all tangible properties therein are in generally
good condition and have been well maintained in accordance with reasonable and
prudent business practices applicable to like facilities.
(b) Except as set forth in Section 4.16(c)(i) of the Company Letter, there
are no proceedings, claims, disputes, or conditions affecting any of the Current
Real Properties of the Company or its Subsidiaries that could reasonably be
expected to curtail or interfere with use of such property.
(c) To the Company's knowledge, except as described in Section 4.16(c)(i)
of the Company Letter, the Current Real Properties and the Loan Property (as
defined below) are in material compliance with all Environmental Laws, as
hereinafter defined, and there are not conditions existing currently or likely
to exist at the Current Real Properties, the Loan Property, and to the Company's
knowledge all other real properties owned, leased, held or administered in any
capacity by the Company or its Subsidiaries at any time in the past (the "Former
Real Properties" and together with Current Real Properties and the Loan
Property, the "Real Properties") that would subject the Company or any of its
Subsidiaries to damages, penalties, injunctive relief, or cleanup costs under
any Environmental Laws or assertions thereof, or which require or are likely to
require cleanup, removal, remedial action, or other response pursuant to
Environmental Laws by the Company or any of its Subsidiaries; neither the
Company nor any of its Subsidiaries (either in its own capacity or as trustee or
fiduciary) has violated Environmental Laws, nor is the Company or any of its
Subsidiaries (either in its own capacity or as trustee or fiduciary) required to
clean up, remove, or take remedial or other responsive action at any property
due to the disposal, for disposal, treating, depositing, discharge, leaking, or
other release of any hazardous substances or materials. No material permits,
licenses or approvals are required under Environmental Laws relative to the
Current Real Properties; and, except as disclosed in Section 4.16(c)(ii) of the
Company Letter, there are not now nor, to the Company's knowledge, have there
ever been materials (including, without limitation, asbestos) stored, deposited,
treated, recycled, used, or disposed of on, under, or at the Real Properties (or
tanks or other facilities thereon containing such materials), which materials,
if known to be present on the Real Properties or present in soils or ground
water, would require material cleanup, removal, or some other remedial action
under Environmental Laws. The term "Environmental Laws" shall mean all
applicable federal, state, and local environmental laws relating to pollution,
protection of the environment, or protection of human health and safety, as now
or at any time hereinafter in effect (except for purposes of this Article IV,
shall mean such laws in effect as of the date on which a representation
incorporating such term is made or deemed to be made), including, without
limitation, the Solid Waste Disposal Act, the Hazardous Materials Transportation
Act, the Clean Water Act, the Clean Air Act, the Resource Conservation and
Recovery Act, the Toxic Substances Control Act, the Occupational Safety and
Health Act and the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), any so-called "Superfund" or
"Superlien" laws, their state and local laws, their state and local law
counterparts, all rules and regulations promulgated thereunder, relevant common
law standards and any order, judgment, or injunction issued, entered
promulgated, or approved thereunder applicable to the Company or any of its
Subsidiaries. For purposes of this Section 4.16(c), "Loan Property" means any
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property in which the Company or any of its Subsidiaries holds a security
interest, and where required by the context, said term meaning the owner or
operator of such property.
(d) Except as set forth in Section 4.16(c)(i) of the Company Letter, with
respect to each facility in which the Company and/or its Subsidiaries has held
or currently holds indicia of ownership to protect a security interest in the
facility ("Company Interested Property"), to the Company's knowledge, the
Company and/or its Subsidiaries has at all times conducted its operations such
that it did not "participate in the management of the facility" or otherwise
become liable under any Environmental Laws with respect to such facilities.
(e) Except as described in Section 4.16(e) of the Company Letter, no claim,
action, suit, demand, investigation, or proceeding is pending or to the
Company's knowledge, threatened against the Company or any of its Subsidiaries
relating to any Real Property or otherwise involving any Real Property, before
any court or other governmental authority or arbitration tribunal relating to
pollution, Environmental Laws, or the environment; there is no outstanding
judgment, order, writ, injunction, decree, or award against or affecting the
Company or any of its Subsidiaries with respect to Real Property or, to the
Company's knowledge, with respect to Company Interested Property, other than
liens on such Company Interested Property in the ordinary course; and neither
the Company nor its Subsidiaries have been identified, to the Company's
knowledge, as a potentially responsible party by any Governmental Entity in a
matter arising under any Environmental Laws. Section 4.16(e) of the Company
Letter includes a list of all environmental reports, investigations, or audits
relating to any Real Property or Company Interested Property, whether conducted
by or on behalf of the Company or any of its Subsidiaries or a third party, and
whether done at the initiative of the Company or any of its Subsidiaries or
directed by a Governmental Entity or other third party. The Company has
delivered to AMCORE complete and accurate copies of each such report, or the
results of each such investigation or audit, in each case to the extent
reasonably available to the Company.
4.17 Insurance. The Company has heretofore delivered to AMCORE true,
complete and correct copies of all insurance polices and fidelity bonds of the
Company and its Subsidiaries and has delivered to AMCORE as Section 4.17(a) of
the Company Letter, true, accurate and complete copies of all declaration
statements for all such insurance policies and fidelity bonds. Since December
31, 1993, there have been no claims with respect to the Company or any of its
Subsidiaries under such bonds and insurance policies except as stated in Section
4.17(b) of the Company Letter, and neither the Company nor any of its
Subsidiaries is aware of any acts of dishonesty or losses that would form the
basis of a material claim under such bonds or insurance coverage. Each such
policy is in full force and effect, with all premiums due thereon on or prior to
the Closing Date having been paid as and when due. Neither the Company nor any
of its Subsidiaries has been notified that its fidelity or insurance coverage
will not be renewed by its carrier on substantially the same terms as its
existing coverage.
4.18 Compliance with Laws and Orders. The Company and its Subsidiaries
have complied with all laws, regulations, and orders (including zoning
ordinances) applicable to it and to the conduct of its respective businesses,
including without limitation, all statutes, rules, and regulations pertaining to
the conduct of the Company Subsidiaries' banking activities, and neither the
Company nor any of its Subsidiaries is in default under, and no event has
occurred that, with the lapse of time or action by a third party or both, could
result in the default under the terms of any judgment, decree, order, writ,
rule, or regulation of any governmental authority or court, whether federal,
state, or local and whether at law or in equity, except where the failure to be
in full compliance or default would not reasonably be expected to result in
damages, costs, or expenses of more than $50,000 in the aggregate or to
otherwise have a Material Adverse Effect.
4.19 Governmental Regulation. Each of the Company and its Subsidiaries
holds all licenses, certificates, permits, franchises, and rights from all
appropriate federal, state, and other public authorities necessary for the
conduct of their respective businesses except where the failure to hold such
would not have a Material Adverse Effect, and, between the date hereof and the
Closing Date, the Company will, and will cause each Company Subsidiary to use
its best efforts to, maintain all such licenses, certificates, permits,
franchises and rights in effect except where such failure to maintain would not
have a Material Adverse Effect. The Bank is a member of the Bank Insurance Fund
administered by the FDIC; and has never been party to a "conversion
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transaction" within the meaning of 12 U.S.C. Section 1815(d)(2)(B). Since
January 1, 1993, each of the Company and its Subsidiaries have timely filed all
Company Reports and amendments thereto that it was required to file and as of
their respective dates, and such Reports were correct in all material respects.
Neither the Company nor any of its Subsidiaries is a party or subject to any
agreement with, or directive or order issued by, the Federal Reserve Board, the
OCC or any other bank regulatory authority, which imposes any restrictions or
requirements not applicable generally to bank holding companies (in the case of
the Company), or national banking association (in the case of the Bank), with
respect to the conduct of its business.
4.20 Contracts and Commitments. Except as set forth in Section 4.20 of the
Company Letter, neither the Company nor any of its Subsidiaries is a party to or
bound by any written or oral (a) lease or license with respect to any property,
real or personal, involving payments in excess of $25,000 per annum, whether as
lessor, lessee, licensor, or licensee; (b) contract or commitment for capital
expenditures in excess of $25,000 for any one project or $100,000 in the
aggregate; (c) contract or option for the purchase or sale of any real or
personal property other than in the ordinary course of business; (d) contract,
commitment, or agreement made outside the ordinary course of business; (e)
employment or consulting contract requiring payments in excess of $25,000 per
annum, and not terminable without penalty by the Company or any of its
Subsidiaries on sixty (60) days notice or less; (f) agreement, option, or
contract relating to or involving the merger, consolidation, or sale of assets
or stock of the Company or any of its Subsidiaries; (g) union contract or
collective bargaining agreement; or (h) other executory agreement which is
material to the Company and its Subsidiaries. Each of the Company and its
Subsidiaries has performed in all material respects all obligations required to
be performed by it to date and is not in default under, and no event has
occurred that, with the lapse of time or action by a third party or both, could
result in a default resulting in damages, costs, or expenses of more than
$50,000 in the aggregate or other material default under any outstanding
mortgage, lease, contract, commitment, or agreement to which the Company or any
of its Subsidiaries is a party or by which the Company or any of is Subsidiaries
is bound or under any provision of their respective charter documents or bylaws.
Each such outstanding, material mortgage, lease, contract, commitment, or
agreement is a valid and legally binding obligation of the Company or any of its
Subsidiaries and, to the Company's knowledge, constitutes a valid and legally
binding obligation of the other party or parties thereto, subject to all
applicable bankruptcy, insolvency, moratorium or other similar laws affecting
the enforcement of creditors' rights generally, and the application of equitable
principles if equitable remedies are sought.
4.21 Affiliate's Undertakings and Stockholder Voting Agreements. The
Company has heretofore furnished to AMCORE current stockholder lists that set
forth the record name and the address and number of shares held by each holder
of Company Common Stock, and has furnished to AMCORE, (i) as Section 4.21 of the
Company Letter, a current list of each stockholder who is an executive officer
(as defined under applicable SEC rules and regulations) or director of the
Company or any of its Subsidiaries or a holder of five percent (5%) or more of
the outstanding Company Common Stock; (ii) written undertakings, in the form
attached hereto as Exhibit A ("Affiliate's Undertakings"), of all of the
stockholders of the Company referred to in clause (i) above; (iii) a Stockholder
Voting Agreement, in the form attached as Exhibit B, executed by each
stockholder of the Company identified in Section 4.21 of the Company Letter; and
(iv) other agreements executed by certain directors and executive officers of
the Company pursuant to this Agreement.
4.22 Agreements with Directors, Officers, and Stockholders. Except as set
forth in Section 4.22 of the Company Letter, no director, executive officer, or
holder of five percent (5%) or more of the outstanding capital stock of the
Company, nor any director or executive officer of any of its Subsidiaries, nor
any "related interest" (as such term is defined in section 215 of Regulation O),
of any such person (a "Company Principal or Company Subsidiary Principal") is or
has during the period subsequent to December 31, 1994, been a party (other than
as a depositor) to any transaction with the Company or any of its Subsidiaries.
Except as disclosed in Section 4.22 of the Company Letter, to the Company's
knowledge, no Company Principal or Company Subsidiary Principal holds any
position with or owns more than five percent (5%) of the outstanding shares of
any class of voting stock of any depository organization other than the Company.
4.23 Accuracy of Information. The statements contained in the Company
Letter are true and correct in all material respects, and such Company Letter
does not omit any material fact necessary to make the statements contained
therein not materially misleading. The statements contained in such Company
Letter
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will be deemed to constitute representations and warranties of the Company under
this Agreement to the same extent as if set forth herein in full.
4.24 No Undisclosed Liabilities. Neither the Company, nor any of its
Subsidiaries, nor any of their respective properties is subject to any liability
or obligation (absolute, accrued, contingent, or otherwise), including without
limitation, any lease, contract, commitment, or purchase or sale agreement,
except: (a) as specifically disclosed and adequately reserved against in
accordance with GAAP in the Company Financial Statements; (b) as disclosed in
Section 4.24(b) of the Company Letter; (c) liabilities or obligations arising or
incurred in the ordinary course of business of the Company or any of its
Subsidiaries since the Latest Statement Date, and consistent with past
practices, none of which would reasonably be expected to have individually or in
the aggregate a Material Adverse Effect on the Company and its Subsidiaries
taken as a whole; or (d) liabilities or obligations that are not material to the
business, operations, prospects, properties, or assets of the Company and its
Subsidiaries taken as a whole.
4.25 Continuity of Interest. To the Company's knowledge, there is no plan
or intention on the part of the holders of Company Common Stock to sell,
exchange, or otherwise dispose of a number of shares of AMCORE Common Stock
received in the Merger that would reduce the ownership of AMCORE Common Stock by
all such former holders of Company Common Stock to a number of shares having a
value, as of the Closing Date, of less than 50% of the value of all of the
formerly outstanding stock of the Company as of the same date. For purposes of
this representation, shares of Company Common Stock surrendered by dissenters or
exchanged for cash in lieu of fractional shares of AMCORE Common Stock will be
treated as outstanding Company Common Stock on the date of the Merger. In
addition, shares of Company Common Stock and shares of AMCORE Common Stock held
by Company stockholders and otherwise sold, redeemed, or disposed of prior or
subsequent to the Merger as part of an overall plan pursuant to which the Merger
is also being consummated shall be considered in making the foregoing
representation.
4.26 Investment and Loan Portfolios. All United States Treasury
securities, obligations of other United States Government agencies and
corporations, obligations of states and political subdivisions of the United
States, and other investment securities held by the Company and its
Subsidiaries, as reflected in the latest consolidated balance sheet of the
Company included in the Company Financial Statements, are accounted for in
accordance with generally accepted accounting principles. All loans and
discounts shown on the Company Financial Statements at the Latest Statement
Date, or that were entered into after the Latest Statement Date, were made in
all material respects for good, valuable, and adequate consideration in the
ordinary course of the business of the Company and its Subsidiaries, in
accordance in all material respects with sound banking practices, and the notes
or other evidences of indebtedness evidencing them are in all material respects,
enforceable (subject to all applicable bankruptcy, insolvency, moratorium, or
other similar laws affecting the enforcement of creditors' rights generally and
the applicability of equitable principles), valid, true, and genuine. The
Company and its Subsidiaries have complied and will prior to the Closing Date
comply with all laws and regulations relating to such loans, or to the extent
there has not been such compliance, such failure to comply would not reasonably
be expected to materially interfere with the collection of any such loan.
4.27 Certain Loans. Except as set forth in Sections 4.27(a) and (b),
respectively, of the Company Letter, (a) as of September 30, 1996, the Company
Subsidiaries were not a party to any written or oral loan agreement, note, or
borrowing arrangement under the terms of which the obligor is sixty (60) days
past due in payment of principal or interest or, to the Company's knowledge, in
default of any other provision as of the dates shown thereon other than credit
card loans and other loans the unpaid balance of which does not exceed $25,000
per loan; and (b) as of September 30, 1996, the Company Subsidiaries were not a
party to any written or oral loan agreement, note, or borrowing arrangement
which has been classified as "substandard," "doubtful," "loss," or any
comparable classifications by the Company, its subsidiary, or any banking
regulator. The aggregate amount of all loans made by the Company and its
Subsidiaries which, as of the date hereof were ninety (90) days or more past due
in payment of principal or interest, including any nonaccrued loans, did not
exceed 1.0% of the gross amount of all such loans. For the purposes of this
Section 4.27, a loan shall be deemed to be past due if it is in fact past due
more than sixty (60) or ninety (90) days, as the case may be, or if it would
have been past due more than sixty (60) or ninety (90) days, as the case may be,
under the terms of the agreement under which it was originally created but for a
refinancing of such loan or a waiver,
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modification, or amendment of such original agreement if such refinancing,
waiver, modification, or amendment was effectuated principally because of the
borrower's actual or anticipated failure or inability to comply with the terms
of such agreement.
4.28 Administration of Trust Accounts. Each of the Company and its
Subsidiaries have properly administered all accounts for which it acts as
fiduciary, including but not limited to accounts for which it serves as a
trustee, agent, custodian, personal representative, guardian, or investment
advisor, in accordance with the terms of the governing documents and applicable
state and federal law and regulations and common law, except for such failures
to administer as would not result in a material liability to the Company and its
Subsidiaries taken as a whole. None of the Company, its Subsidiaries, and, to
the Company's knowledge, any director, officer, or employee of the Company and
its Subsidiaries have committed any breach of trust with respect to any such
fiduciary account, and the accounting for each such fiduciary account is true
and correct in all respects and accurately reflects the assets of such fiduciary
account.
4.29 Accounting Matters. Neither the Company nor any of the Company
Subsidiaries, nor to the Company's knowledge, any of its Affiliates, has taken
or agreed to take, or has current plans or intention to take, any actions that
would prevent (i) AMCORE from accounting for the business combination to be
effected by the Merger as a "pooling of interests," or (ii) the Merger from
qualifying as a tax-free reorganization within the meaning of Section 368(a) of
the Code.
4.30 Interest Rate Risk Management Instruments. (a) The Company has
heretofore delivered to AMCORE, the Investment Portfolio Securities List, dated
September 30, 1996, which includes a true, correct, and complete list of all
interest rate swaps, caps, floors, and option agreements and other interest rate
risk management arrangements (including the names of all parties and
counterparties thereto) to which the Company or any of its Subsidiaries is a
party or by which any of their properties or assets may be bound. The Company
has delivered or made available to AMCORE true, correct, and complete copies of
all such interest rate risk management agreements and arrangements.
(b) All interest rate swaps, caps, floors, and option agreements to which
the Company is subject and other interest rate risk management arrangements to
which the Company or any of its Subsidiaries is a party or by which any of their
properties or assets may be bound were entered into in the ordinary course of
business and, in accordance with prudent banking practice and applicable rules,
regulations, and policies of the regulators to which the Company is subject and
with counterparties believed to be financially responsible at the time; are
legal, valid, and binding obligations enforceable in accordance with their
terms, subject to (i) all applicable bankruptcy, insolvency, moratorium, or
other similar laws affecting the enforcement of creditors' rights generally, and
(ii) the application of equitable principles if equitable remedies are sought;
and are in full force and effect. The Company and its Subsidiaries have duly
performed in all material respects all of their obligations thereunder to the
extent that such obligations to perform have accrued; and there are no breaches,
violations, or defaults or allegations or assertions of such by the Company or
any of its Subsidiaries or to the Company's knowledge, by any other party
thereunder.
ARTICLE V
COVENANTS OF AMCORE
AMCORE agrees that from the date of this Agreement until the Effective
Time:
5.1 Affirmative Covenants. (a) AMCORE will, except insofar as deviations
from the following covenants would not reasonably be expected to have a Material
Adverse Effect on AMCORE: (a) conduct its business and operate only in
accordance with sound banking and business practices; (b) maintain its corporate
existence in good standing and file all material AMCORE Reports; (c) as soon as
practicable following issuance, furnish the Company copies of all AMCORE's
periodic reports on Forms 10-K, 10-Q, and 8-K and any other documents filed with
the SEC and all press releases made public, subsequent to the date hereof and
(d) use its reasonable best efforts to cause the Merger to qualify (x) for
"pooling-of-interests" accounting treatment and (y) as a reorganization within
the meaning of Section 368(a) of the Code.
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(b) Employee Benefits. AMCORE agrees to cause the Company and its
Subsidiaries to honor and assume, and the Company agrees to honor and assume,
the Company's employee benefit plans and employee programs, arrangements and
agreements listed in Section 5.1(b) of the Company Letter, copies of which have
previously been made available to AMCORE. Nothing in this Agreement shall
prohibit AMCORE, the Company or its Subsidiaries from amending or terminating
any such plan, program, arrangement or agreement at any time after the Closing
Date in accordance with applicable law (except as to benefits already vested
thereunder) and subject to the terms of such plans, programs or arrangements or
other agreements between the Company and its current and former employees;
provided, however, that any such amendment or termination prior to the first
anniversary of the Closing Date shall not result in employee benefit plans and
employee programs, arrangements and agreements for the benefit of its current
and former employees of the Company which are less favorable, in the aggregate,
than the Company's employee benefit plans and employee programs, arrangements
and agreements listed in Section 5.1(b) of the Company Letter. AMCORE shall take
all actions required so that each current and former employee will receive
credit for his periods of service with the Company prior to the Effective Time
under any employee benefit plans, programs or arrangements established,
maintained, continued or made available by AMCORE to the Company in which any
such current and former employee is eligible to participate.
5.2 Negative Covenants. Except as specifically contemplated by this
Agreement or Section 5.2 of the AMCORE Letter, from the date hereof to the
Effective Time, AMCORE will not do, or agree or commit to do, or permit any of
its Subsidiaries to do, without the prior written consent of the Company (which
shall not be unreasonably withheld) any of the following:
(a) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect, or in any of
the conditions to the Merger set forth in Article IX hereof not being
satisfied or in a violation of any provision of this Agreement except, in
every case, as may be required by applicable law;
(b) take any other action that would materially adversely affect or
materially delay the ability of AMCORE or the Company to obtain the
necessary regulatory approvals or otherwise materially adversely affect
AMCORE's ability to consummate the transactions contemplated by this
Agreement;
(c) take or cause to be taken any actions that would, or would be
reasonably likely to (i) prevent AMCORE from accounting for the Merger as a
"pooling of interests" for accounting purposes or (ii) adversely affect the
status of the Merger as a tax-free reorganization under Section 368(a) of
the Code; or
(d) agree to do any of the foregoing.
5.3 Full Disclosure. (a) AMCORE will afford the Company, its executive
officers, accountants, counsel, and other authorized representatives, reasonable
access to all books, records, and documents of AMCORE and its Subsidiaries, and
will furnish to the Company such information with respect to the assets and
business of AMCORE and its Subsidiaries as the Company may from time to time
reasonably request in connection with this Agreement as permitted by law in each
case for purposes of its investigation of AMCORE, provided that such access or
investigation shall not interfere unnecessarily with the normal operations of
AMCORE and its Subsidiaries. The Company will hold all such information in
confidence to the extent required by, and in accordance with, the provisions of
the confidentiality agreement, dated September 20, 1996, between the Company and
AMCORE (the "Confidentiality Agreement").
(b) In the event of termination of this Agreement for any reason, the
Company shall promptly return all non-public documents obtained from
AMCORE, and any copies made of such documents, to AMCORE. In addition, in
the event of such termination, all documents, memoranda, notes and other
writing whatsoever prepared by or for the Company based on the information
in such material shall be destroyed (and the Company shall use its best
efforts to cause its advisors and their representatives to similarly
destroy their respective documents, memoranda and notes), and such
destruction (and best efforts) shall be certified in writing to AMCORE by
an authorized officer supervising such destruction.
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ARTICLE VI
COVENANTS OF THE COMPANY
The Company agrees that from the date of this Agreement until the Effective
Time:
6.1 Affirmative Covenants. Unless the prior written consent of AMCORE
shall have been obtained, the Company will and will cause its Subsidiaries to:
(a) operate its business only in accordance with sound banking and
business practices and in the usual, regular and ordinary course consistent
with past practices; and
(b) preserve intact its business organization and assets taken as a
whole, maintain all material rights, licenses, permits and franchises, use
its best efforts to retain the services of its officers and key employees
(except that it shall have the right to terminate the employment of any
officer or key employee in accordance with established employment
procedures), and use its best efforts to maintain its relationships with
customers.
6.2 Current Information. During the period from the date of this Agreement
to the Effective Time, the Company will cause one or more of its designated
representatives to confer on a regular and frequent basis (not less than
monthly) with representatives of AMCORE and to report (i) the general status of
the ongoing operations of the Company and its Subsidiaries and (ii) the status
of, and the action proposed to be taken with respect to, those Loans held by the
Company or any of its Subsidiaries which, individually or in combination with
one or more other Loans to the same borrower thereunder, have an original
principal amount of $800,000 or more and are non-performing assets. The Company
will promptly notify AMCORE of any material change in the normal course of
business or in the operation of the properties of the Company or any of the
Company Subsidiaries and of any governmental complaints, investigations or
hearings (or communications indicating that the same may be contemplated), or
the institution or the threat of significant litigation involving the Company or
any of its Subsidiaries, and will keep AMCORE fully informed of such events.
6.3 Certain Revaluations, Changes, and Adjustments. On or before the
Effective Time, upon the request of AMCORE, the Company shall, consistent with
GAAP, modify and change its loan, litigation and real estate valuation policies
and practices (including loan classifications and levels of reserves) so as to
be applied consistently on a mutually satisfactory basis with those of AMCORE
and establish such accruals and reserves as shall be necessary to reflect
Merger-related expenses and costs incurred by the Company, provided, however,
that the Company shall not be required to take such action (A) more than five
(5) days prior to the Effective Time; (B) unless AMCORE agrees in writing that
all conditions to closing set forth in Article VIII have been satisfied or
waived; and (C) unless the Company shall have received a written waiver by
AMCORE of its right to terminate this Agreement, and no accrual or reserve made
by the Company or any of its Subsidiaries pursuant to this Section 6.3, or any
litigation or regulatory proceeding arising out of any such accrual or reserve,
shall constitute or be deemed to be a breach, violation of or failure to satisfy
any representation, warranty, covenant, condition or other provision of this
Agreement or otherwise be considered in determining whether any such breach,
violation or failure to satisfy shall have occurred.
6.4 Negative Covenants. Except as specifically contemplated by this
Agreement or the Company Letter, from the date hereof until the Effective Time,
the Company shall not do, or permit its Subsidiaries to do, without the prior
written consent of AMCORE any of the following:
(a) (i) subject to clause (ii) below, declare or pay any dividend on,
or make any other distribution in respect of, its outstanding shares of
capital stock, except for (A) cash dividends on the Company Common Stock
for the quarter ending December 31, 1996, and each quarter thereafter
ending prior to the Effective Time, each of which dividends shall be
declared for a record date on or after the record date for payment of
dividends by AMCORE on AMCORE Common Stock for such quarter, shall be paid
prior to the Effective Time, and shall not exceed for any quarter $0.725
per share; and (B) dividends by a Company Subsidiary;
(ii) except as herein provided, declare or pay any dividends or make
any distributions in any amount on Company Common Stock in any calendar
quarter in which the Effective Time is expected to occur
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and in which the shareholders of Company Common Stock will be entitled to
receive dividends on the shares of AMCORE Common Stock into which the
shares of Company Common Stock have been converted; it is the intent of
this clause (ii) to provide that the holders of Company Common Stock will
receive either the payment of cash dividends on their shares of Company
Common Stock permitted pursuant to clause (i) above or the payment of cash
dividends as the holders of shares of AMCORE Common Stock received in the
Merger for the calendar quarter during which the Effective Time shall
occur, but will not receive and will not become entitled to receive for the
same calendar quarter both the payment of a cash dividend as shareholders
of Company Common Stock and the payment of a cash dividend as the holders
of the shares of AMCORE Common Stock received in the Merger; and if the
Company does not declare and pay cash dividends in a particular calendar
quarter because of the Company's reasonable expectation that the Effective
Time was to have occurred in such calendar quarter, and the Effective Time
does not in fact occur in such calendar quarter then, as a result thereof,
the Company shall be entitled to declare and pay a cash dividend (within
the limitations of this Section 6.4, on such shares of Company Common
Stock) for such calendar quarter by the declaration and payment of such
cash dividends as soon as reasonably practicable;
(b) (i) redeem, purchase, or otherwise acquire any shares of its
capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock, or any options, warrants,
conversion or other rights to acquire any shares of its capital stock or
any such securities or obligations; (ii) merge with or into any other
corporation or bank, permit any other corporation or bank to merge into it
or consolidate with any other corporation or bank, or effect any
reorganization or recapitalization; (iii) purchase or otherwise acquire any
of the assets, or any class of stock, of any corporation, bank, or other
business (other than purchases of passive investments in the ordinary
course of business consistent with past business practices); (iv)
liquidate, sell, dispose of, or encumber any assets or acquire any assets,
other than in the ordinary course of its business consistent with past
practice; (v) sell any intangible rights, including but not limited to
mortgage servicing rights; (vi) split, combine, or reclassify any of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of, or in substitution for shares of its
capital stock; or (vii) release or relinquish any material contract rights
not in the ordinary course of business;
(c) issue, deliver, award, grant, or sell, or authorize or propose the
issuance, delivery, award, grant, or sale of, any shares of its capital
stock of any class (including shares held in treasury), any debt instrument
having a right to vote or any securities convertible into, or any rights,
warrants, or options to acquire, any such shares, voting debt, or
convertible securities;
(d) initiate, solicit, or encourage (including by way of furnishing
information or assistance), or take any other action to facilitate, any
inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Transaction Proposal (as such term is defined
in Section 6.14 hereof), or discuss or negotiate with any person in
furtherance of such inquiries or to obtain a Transaction Proposal, or agree
to or endorse any Transaction Proposal, or authorize or permit any of its
officers, directors, or employees or any investment banker, financial
advisor, attorney, accountant, or other representative retained by it or
any of its Subsidiaries to take any such action, provided, however, that
the Board of Directors of the Company (the "Board") may, in response to an
unsolicited written proposal from a third party regarding a Superior
Proposal, furnish or cause to be furnished information to and engage in
discussions with such third party, but only if (A) the Board determines in
good faith, after consultation with its independent financial advisors and
based upon the written opinion of Jones, Day, Reavis & Pogue ("Jones Day"),
that failure to take such action could reasonably be expected to result in
a breach of the fiduciary duties of such Board under applicable law and (B)
prior to furnishing such non-public information to, or entering into
discussions or negotiations with such third party, the Company receives
from such third party an executed confidentiality agreement with terms no
less favorable than those contained in the Confidentiality Agreement. As
used herein, "Superior Proposal" means a bona fide, written and unsolicited
proposal or offer made by any person (or group) (other than AMCORE or any
of its Subsidiaries) with respect to a Transaction Proposal (i) on terms
which the Board determines in good faith, and in the exercise of reasonable
judgment (based on the advice of independent financial
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advisors and legal counsel), to be more favorable to the Company and its
stockholders than the transactions contemplated hereby (including taking
into account the financing thereof). The Company will immediately cease and
cause to be terminated any existing activities, discussions or negotiations
previously conducted with any third parties other than AMCORE with respect
to any of the foregoing. The Company will take all actions necessary or
advisable to inform the appropriate individuals or entities referred to in
the first sentence hereof of the obligations undertaken in this Section
6.4(d). In the event that the Board furnishes information to or engages in
such discussions with any person, the Company shall promptly notify AMCORE
orally and in writing of all of the relevant details relating to all
inquiries and proposals that it may receive relating to any of such matters
(including the identity of the person making such inquiry or proposal) and
provide AMCORE with copies of all materials delivered to such person;
(e) propose or adopt any amendments to its corporate charter or
by-laws;
(f) except in its fiduciary capacity, purchase any shares of AMCORE
Common Stock;
(g) take action which, or fail to take action which failure, would or
is reasonably likely to (i) adversely affect the ability of either of
AMCORE or the Company to obtain any necessary approvals of governmental
authorities required for the transactions contemplated hereby; (ii)
adversely affect the Company's ability to perform its covenants and
agreements under this Agreement; (iii) result in any of its representation
and warranties set forth in this Agreement being or becoming untrue in any
material respect; (iv) result in any of the conditions to the Merger set
forth in Article VIII and Article X hereof not being satisfied; or (v)
result in a violation of any provisions of this Agreement except, in every
case, as may be required by applicable law;
(h) change the lending, investment, liability management, and other
material policies concerning the banking business of the Company or any of
its Subsidiaries, unless required by law or regulation and such change does
not cause a Material Adverse Effect;
(i) enter into any new line of business;
(j) change its methods of accounting in effect at December 31, 1995,
except as required by changes in GAAP or regulatory accounting principles
as concurred to by the Company's independent auditors;
(k) (i) except as required by applicable law or to maintain
qualification pursuant to the Code, adopt, amend, renew or terminate any
Plan or any agreement, arrangement, plan or policy between the Company or
any of its Subsidiaries and one or more of its current or former directors,
officers or employees or (ii) except for normal increases in the ordinary
course of business consistent with past practice or except as required by
applicable law, increase in any manner the compensation or fringe benefits
of any director, officer or employee or pay any benefit not required by any
plan or agreement as in effect as of the date hereof (including, without
limitation, the granting of stock options, stock appreciation rights,
restricted stock, restricted stock units or performance units or shares) or
(iii) enter into, modify or renew any contract, agreement, commitment or
arrangement providing for the payment to any director, officer or employee
of such party of compensation or benefits contingent, or the terms of which
are materially altered, upon the occurrence of any of the transactions
contemplated by this Agreement or (iv) except as provided in Section 6.4(k)
of the Company Letter, contribute any amounts, funds or property to any
trust in respect of any obligations under any plans or arrangements of the
Company or its Subsidiaries, including but not limited to any trusts under
any deferred compensation plan and (v) except as provided in Section 6.4(k)
of the Company Letter, permit any participant account under any deferred
compensation plan of the Company or its Subsidiaries to be invested
(whether by account transfer or new investment) in any account based on the
equity of the Company;
(l) take or cause to be taken any actions that would, or would be
reasonably likely to (i) prevent AMCORE from accounting for the Merger as a
"pooling of interests" for accounting purposes or (ii) adversely affect the
status of the Merger as a tax-free reorganization under Section 368(a) of
the Code;
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(m) other than activities in the ordinary course of business
consistent with prior practice, sell, lease, encumber, assign or otherwise
dispose of, or agree to sell, lease, encumber, assign or otherwise dispose
of, any of its material assets, properties or other rights or agreements;
(n) other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money, assume, guarantee,
endorse or otherwise as an accommodation become responsible for the
obligations of any other individual, corporation, or other entity;
(o) file any application to relocate or terminate the operations of
any banking office of it or any of its Subsidiaries;
(p) make any equity investment or commitment to make such an
investment in real estate or in any real estate development project, other
than in connection with foreclosures, settlements in lieu of foreclosure or
troubled loan or debt restructuring in the ordinary course of business
consistent with prudent banking practices;
(q) create, renew, amend or terminate or give notice of a proposed
renewal, amendment or termination of, any material contract, agreement or
lease for goods, services or office space to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or their respective properties is bound except that the
Company may renew contracts, agreements or leases in the ordinary course of
business after consultation with AMCORE; or
(r) agree in writing or otherwise to do any of the foregoing.
6.5 Full Disclosure. (a) The Company will afford AMCORE, its officers,
accountants, counsel, and other authorized representatives, such access to all
books, records, tax returns, leases, contracts, and documents of the Company and
its Subsidiaries, to any work papers of the Company's independent auditors, and
to the buildings, structures, fixtures, and appurtenances of the Company and its
Subsidiaries for purposes of inspecting their condition, and will furnish to
AMCORE such information with respect to the assets and business of the Company
and its Subsidiaries as AMCORE may from time to time reasonably request in
connection with this Agreement as permitted by law; and will instruct and
request the Company's directors, officers, employees, counsel and financial
advisors to cooperate with AMCORE in its investigation of the business of the
Company and its Subsidiaries and in the planning for the combination of the
businesses of the Company and AMCORE following the consummation of the Merger,
provided that such access or investigation shall not interfere unnecessarily
with the normal operations of the Company and its Subsidiaries. AMCORE will hold
all such information in confidence to the extent required by, and in accordance
with, the provisions of the Confidentiality Agreement.
(b) In the event of termination of this Agreement for any reason, AMCORE
shall promptly return all non-public documents obtained from the Company, and
any copies made of such documents, to the Company. In addition, in the event of
such termination, all documents, memoranda, notes and other writing whatsoever
prepared by AMCORE based on the information in such material shall be destroyed
(and AMCORE shall use its best efforts to cause its advisors and their
representatives to similarly destroy their respective documents, memoranda and
notes), and such destruction (and best efforts) shall be certified in writing to
the Company by an authorized officer supervising such destruction. All
non-public information obtained pursuant to this Section 6.5 shall be governed
by the Confidentiality Agreement.
6.6 Letter of the Company's Accountant. At the request of AMCORE, the
Company shall use its best efforts to cause to be delivered to AMCORE "cold
comfort" letters of McGladrey & Pullen, LLP, the Company's independent public
accountant, dated the date on which the Registration Statement shall become
effective and the Effective Time, respectively, and addressed to AMCORE,
reasonably customary in form, scope, and substance for letters delivered by
independent public accountants in connection with the procedures undertaken by
them with respect to the financial statements and other financial information of
the Company contained in the Registration Statement and the other matters
contemplated by AICPA Statement No. 72 and customarily included in comfort
letters relating to transactions similar to those contemplated by the Agreement.
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6.7 Report to AMCORE. The Company will promptly advise AMCORE in writing
of all actions taken by the directors and stockholders of the Company at
meetings or in connection with written consents filed with the Company and will
furnish AMCORE with copies of all monthly and other interim financial statements
of the Company and its Subsidiaries as they become available. The Company will
use its best efforts to keep AMCORE fully informed concerning all trends and
developments of which it becomes aware that may have a material effect upon the
business, any properties, or condition (either financial or otherwise) of the
Company or its Subsidiaries.
6.8 Breaches. The Company shall, in the event it becomes aware of the
impending or threatened occurrence of any event or condition which would cause
or constitute a material breach (or would have caused or constituted a breach
had such event occurred or been known prior to the date hereof) of any of its
representations or agreements contained or referred to herein, give prompt
written notice thereof to AMCORE and use its best efforts to prevent or promptly
remedy the same.
6.9 Stockholders Meeting. The Company shall call a meeting of its
stockholders to be held as promptly as practicable for the purpose of voting
upon this Agreement and related matters. The Company will, through its Board of
Directors, unanimously recommend to the Company stockholders approval of such
matters, will not withdraw, modify, or amend such recommendations, and will use
its best efforts to obtain such stockholder approval. The Company shall
coordinate and cooperate with AMCORE with respect to the timing of such meeting
and shall use its best efforts to hold such meeting as soon as practicable after
the date hereof. The Company shall not, at its stockholder meeting, submit any
other matter for approval of its stockholders (except with the prior written
consent of AMCORE, which consent shall not be unreasonably withheld). The date
on which the Company stockholders vote upon the Agreement and related matters
shall be referred to as the "Meeting Date".
6.10 Supplement to Company Letter. The Company will promptly supplement or
amend the Company Letter with respect to any matter hereafter arising that, if
existing or occurring at the date of this Agreement, would have been required to
be set forth or described in the Company Letter. No supplement or amendment to
the Company Letter will have any effect for the purpose of determining
satisfaction of the conditions set forth in Article VIII hereof.
6.11 Dissent Process. The Company will give to AMCORE prompt notice of any
written notice relating to the exercise of dissenters' rights granted under the
WBCL, including the name of the dissenting stockholder and the number of shares
of Company Common Stock to which the dissent relates. AMCORE will have the right
to participate in all negotiations and proceedings relating thereto, and
exceptions required by law. The Company will not make any payment with respect
to, or settle or offer to settle, any appraisal demands without AMCORE's prior
written consent.
6.12 Delivery of Shareholder List. The Company shall arrange to have its
transfer agent deliver to AMCORE or its designee, immediately prior to the
Closing Date, a true and complete list setting forth the names and addresses of
the Company stockholders. From time to time prior to the Closing Date, the
Company shall deliver to AMCORE such information as AMCORE may request regarding
the holdings of stock of persons who may be affiliates of the Company and such
other stockholder information as AMCORE may reasonably request.
6.13 Affiliates; Accounting and Tax Treatment. As soon as practicable
after the meeting of the Company stockholders held pursuant to Section 6.9
hereof, (a) the Company shall deliver to AMCORE a letter identifying all persons
who are then known to be "affiliates" of the Company for purposes of Rule 145
under the Securities Act, and (b) the Company shall cause each person identified
in such letter who is not also identified as an affiliate in the Company Letter
to deliver to AMCORE an Affiliate's Undertaking. The Company shall use its
reasonable best efforts to cause any person who to the Company's knowledge
becomes an affiliate of the Company after the Company's delivery of the letter
referred to above, and on or prior to the Closing Date, to deliver to AMCORE an
Affiliate Undertaking as soon as practicable after attaining such status. The
Company will use its reasonable best efforts to cause the Merger to qualify (x)
for "pooling-of-interests" accounting treatment and (y) as a reorganization
within the meaning of Section 368(a) of the Code.
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6.14 Expenses and Fees. (a) Expenses. If this Agreement or the
transactions contemplated hereby are terminated:
(i) (A) By AMCORE (1) because any condition set forth in Article VIII
hereof (other than the failure to satisfy the condition set forth in
Section 8.4(b) hereof or Section 8.5 if such failure is a result of any
action or inaction taken by AMCORE) or the condition set forth in Section
10.3 hereof has not been satisfied or waived in accordance with Section
11.1 (b)(i) hereof, or (2) pursuant to Section 11.1(b)(ii), 11.1(b)(iii),
11.1(f), 11.1(g) or 11.1(h) or (B) by the Company pursuant to Section
11.1(i) or 11.1(j), then the Company shall promptly (and in any event
within five (5) days after such termination, except as provided in Section
11.1(i)) pay AMCORE all Expenses (as defined in clause (c) of this Section
6.14) of AMCORE, not to exceed a total of $400,000; or
(ii) By the Company (A) because any condition set forth in Article IX
hereof (other than the failure to satisfy the condition set forth in
Section 9.4 hereof) has not been satisfied or waived in accordance with
Section 11.1(c)(i) hereof, or (B) pursuant to Section 11. l(c)(ii) or (iii)
hereof, then AMCORE shall promptly (and in any event within five (5) days
after such termination) pay the Company all Expenses of the Company, not to
exceed a total of $400,000.
(b) Fees. If this Agreement or the transactions contemplated hereby are
terminated and if any one of the following conditions has been met, then the
Company shall promptly (and in any event within five (5) business days after the
later to occur of such termination and the date on which one of the following
conditions is met, except as provided in 11.1(i)) pay AMCORE a fee equal to
$1,000,000 (the "Termination Fee"):
(i) this Agreement is terminated by the Company pursuant to Section
11.1(i) hereof; or
(ii) this Agreement is terminated by AMCORE pursuant to Section
11.1(g) or 11.1(h) hereof; or
(iii) this Agreement is terminated (A) by AMCORE for any reason
pursuant to Section 11.1(b) (other than the failure to satisfy the
conditions set forth in Section 8.2, 8.5 or 10.2 hereof) or (B) by the
Company pursuant to Section 11.1(j) and without the prior approval of
AMCORE and (1) prior to or contemporaneously with such termination there is
a Transaction Proposal (other than the Merger) and (2) prior to or within
twelve (12) months after the termination of this Agreement, the Company
shall have directly or indirectly entered into a definitive agreement for,
or shall have consummated, a Transaction Proposal.
(c) (i) "Expenses" of either party as used in this Section 6.14 shall
include all reasonable out-of-pocket expenses (including all fees and expenses
of counsel, accountants, investment bankers, experts, and consultants to the
party and its affiliates) incurred by it or on its behalf in connection with the
transactions contemplated by this Agreement and, as to AMCORE, the internal cost
of any due diligence performed by AMCORE with respect to the Company in
connection with such transactions, calculated at AMCORE's standard audit rates.
(ii) "Transaction Proposal" as used in this Agreement means (A) a bona fide
tender offer or exchange offer for 25% or more of the then outstanding shares of
the Company which shall have been publicly proposed to be made or shall have
been commenced or made by any corporation (excluding AMCORE or any of its
Subsidiaries or Affiliates), partnership, person, other entity, or group (as
defined in Section 13(d)(3) of the Exchange Act) (each, for purposes of this
Section 6.14(c)(ii), a "Person"); (B) a merger, consolidation, or other business
combination with the Company, or with any of its Subsidiaries, shall have been
effected by any Person, or an agreement relating to any such transaction shall
have been entered into; (C) any sale, lease, exchange, mortgage, pledge,
transfer, or other disposition (whether in one transaction or a series of
related transactions) involving a substantial part of the Company's consolidated
assets (including stock of the Bank), or all or a substantial part of the assets
of any of its Subsidiaries, to any Person shall have been effected, or any
agreement relating to such transaction shall have been entered into; (D) the
acquisition by any Person (other than AMCORE or any Company Subsidiary in a
fiduciary capacity for third parties, none of whom beneficially owns 10% or more
of the outstanding Company Common Stock) of beneficial ownership (within the
meaning of Rule 13d-3 under the Exchange Act, which will be deemed for purposes
hereof to provide that
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a Person beneficially owns any shares of Company Common Stock that may be
acquired by such person pursuant to any right, option, warrant, or other
agreement, regardless of when such acquisition would be permitted by the terms
thereof) of 25% or more of the outstanding shares of Company Common Stock
(including Company Common Stock currently beneficially owned by such Person);
(E) any reclassification of securities or recapitalization of the Company or
other transaction that has the effect, directly or indirectly, of increasing the
proportionate share of any class of equity security (including securities
convertible into equity securities) of the Company that is owned by any Person
shall have been effected, or any agreement relating to such transaction shall
have been entered into or plan with respect thereto adopted; (F) any transaction
having an effect similar to those described in (A) through (E) above; or (G) a
public announcement with respect to a proposal, plan, or intention by the
Company or another Person to effect any of the foregoing transactions (which may
include publication of notice of filing or any similar notice under applicable
law).
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Preparation of Registration Statement and the Proxy Statement. (a)
AMCORE shall prepare and file with the SEC under the Securities Act a
registration statement on Form S-4 with respect to the shares of AMCORE Common
Stock to be issued in the Merger (the "Registration Statement"). The
Registration Statement shall include, in a form reasonably acceptable to AMCORE
and the Company, the Proxy Statement of the Company for use in connection with
the stockholders' meeting referenced in Section 6.9 hereof (the "Proxy
Statement/Prospectus"). AMCORE shall use all reasonable efforts to have the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing and shall use all reasonable efforts to cause
the shares of AMCORE Common Stock issuable in the Merger to be approved for
listing on the Nasdaq National Market. AMCORE shall also take any action (other
than qualifying to do business in any jurisdiction in which it is now not so
qualified) required to be taken under any applicable state securities laws or
"Blue Sky" permits and approvals in connection with the issuance of AMCORE
Common Stock in the Merger and the Company shall furnish all information
concerning the Company and the holders of Company Common Stock as may be
reasonably requested in connection with any such action and shall cooperate
fully with AMCORE in the preparation of the Proxy Statement/Prospectus and the
obtaining of all necessary approvals and consents required by this Agreement.
7.2 Legal Conditions to Merger. (a) Each of the Company, AMCORE, and Newco
will take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on itself with respect to the transactions
contemplated hereby (including furnishing all information required by the
Federal Reserve Board or in connection with approvals of or filings with the
Federal Reserve Board and any other governmental entity) and to obtain all
necessary consents and approvals from governmental entities or public or private
third parties, and will promptly cooperate with and furnish information to each
other in connection with any such requirements, consents, and approvals. The
obligation to take all reasonable actions shall not be construed as including an
obligation to accept any terms of or conditions to a consent, authorization,
order, or approval of, or any exemption by, any party that are not acceptable to
AMCORE, in its sole discretion, or to change the business practices of AMCORE or
any AMCORE Subsidiary. In the event of a restraining order or injunction that
prevents the Closing by reason of the operation of Section 8.4(b) or 9.4 hereof,
the Company, AMCORE, and Newco shall use their respective best reasonable
efforts to cause such order or injunction to be lifted and the Closing
consummated as soon as reasonably practicable.
(b) The parties hereto shall cooperate with each other and use all
reasonable efforts to promptly prepare and file all necessary documentation, to
effect all applications, notices, petitions and filings, and to obtain as
promptly as practicable all permits, consents, approvals and authorizations of
all third parties and Governmental Entities which are necessary or advisable to
consummate the transactions contemplated by this Agreement (it being understood
that any amendments to the Registration Statement or a resolicitation of proxies
as consequence of an acquisition agreement by AMCORE or any of its Subsidiaries
shall not violate this covenant). The Company and AMCORE shall have the right to
review in advance, and to the extent practicable each will consult the other on,
in each case subject to applicable laws relating to the exchange of
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information, all the information relating to the Company or AMCORE, as the case
may be, and any of their respective Subsidiaries, which appear in any filing
made with, or written materials submitted to, any third party or any
Governmental Entity in connection with the transactions contemplated by this
Agreement; provided, however, that nothing contained herein shall be deemed to
provide either party with a right to review any information provided to any
Governmental Entity on a confidential basis in connection with the transactions
contemplated hereby. In exercising the foregoing right, each of the parties
hereto shall act reasonably and as promptly as practicable. The parties hereto
agree that they will consult with each other with respect to the obtaining of
all permits, consents, approvals and authorizations of all third parties and
Governmental Entities necessary or advisable to consummate the transactions
contemplated by this Agreement and each party will keep the other apprised of
the status of matters relating to completion of the transactions contemplated
herein.
(c) AMCORE and the Company shall, upon request, furnish each other with all
information concerning themselves, their Subsidiaries, directors, officers and
stockholders and such other matters as may be reasonably necessary or advisable
in connection with the Proxy Statement/Prospectus, the Registration Statement or
any other statement, filing, notice or application made by or on behalf of
AMCORE, the Company or any of their respective Subsidiaries to any Governmental
Entity in connection with the Merger and the other transactions contemplated by
this Agreement.
(d) AMCORE and the Company shall promptly advise each other upon receiving
any communication from any Governmental Entity whose consent or approval is
required for consummation of the transactions contemplated by this Agreement
which causes such party to believe that there is a reasonable likelihood that
the necessary regulatory approval will not be obtained or that the receipt of
any such approval will be materially delayed.
7.3 Indemnification; Directors and Officers Insurance. From and after the
Effective Time, AMCORE agrees for a period of six (6) years to indemnify and
hold harmless all past and present officers and directors of the Company and its
Subsidiaries to the same extent such persons are currently indemnified by the
Company and its Subsidiaries pursuant to the Company's Articles of Incorporation
and By-laws for acts or omissions occurring prior to the Effective Time. AMCORE
will provide, or cause to be provided, for one or more periods which, in the
aggregate, will be not less than three years from the Effective Time, the
Company's current directors and officers an insurance and indemnification policy
that provides such officers and directors coverage for events occurring prior to
the Effective Time (the "D&O Insurance") that is in the aggregate no less
favorable than the existing policy or, if substantially equivalent insurance
coverage is commercially unavailable, the best available coverage; provided,
however, that AMCORE shall not be required to pay annual premiums for the D&O
Insurance required under this Section 7.3 in excess of $20,000, but in such case
shall purchase as much coverage as possible for such amount; provided further,
that AMCORE shall have the right to merge the Company into any other corporate
entity so long as the directors and officers of the Company shall be entitled to
such rights to indemnification as are enjoyed by the directors and officers of
any such corporate entity into which the Company may be merged.
7.4 Brokers or Finders. Each of AMCORE and the Company represents, as to
itself, its Subsidiaries, and its affiliates, that no agent, broker, investment
banker, financial advisor, or other firm or person is or will be entitled to any
broker's or finder's fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement, except Baird, whose
fees and expenses will be paid by the Company in accordance with the letter
agreement between Baird and the Company Agreement.
7.5 Environmental Audits. AMCORE shall have the right to engage, at the
Company's expense not to exceed $10,000 in the aggregate, an environmental
consulting engineering firm, reasonably acceptable to the Company, to perform
environmental site assessments of the Real Properties of the Company or its
Subsidiaries (collectively, the "Audited Properties") which shall satisfy the
American Society of Testing and Materials "Standard Practice for Environmental
Site Assessments: Phase I Environmental Site Assessment Process" (ASTM
Designation: E-1527-93), except that such assessment shall also include a review
of compliance with Environmental Laws (the "Environmental Audits"), and render
reports of the Environmental Audits (the "Environmental Reports") to determine,
to AMCORE's satisfaction, whether there are any
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indications or evidence that (i) any toxic substance has been stored, deposited,
treated, recycled, used or accidentally or intentionally disposed of,
discharged, spilled, released, dumped, emitted or otherwise placed on, under or
at, or used in any construction on, any such Audited Property, (ii) any such
Audited Property is contaminated by or contains any toxic substance or (iii) any
violations of Environmental Laws have occurred or are likely to occur on any
Audited Property. The scope of the Environmental Audits may also include any
testing or sampling of materials to determine, to AMCORE's reasonable
satisfaction, whether any clean up, removal, remedial action or other response
("Remediation Action") is required to bring the Audited Properties into material
compliance with Environmental Laws or to eliminate any condition that could
result in a material liability as a result of the ownership, lease, operation or
use of any Audited Property, and the estimated cost of such Remediation Action
(the "Remediation Costs"). All Environmental Audits shall initially be provided
to AMCORE and the Company in draft form. AMCORE shall require that the
environmental consulting firm not disclose (except as required by law) any
information in the Environmental Audits to anyone other than AMCORE and the
Company. AMCORE will use reasonable efforts to engage an environmental
consulting engineering firm within ten (10) days of the date hereof and AMCORE
and the Company will use reasonable efforts to cause the Environmental Audits to
be completed within forty-five (45) days of the date hereof. The Company shall
use reasonable efforts to cause the Remediation Action to be completed within
six months of the date hereof, if possible.
7.6 Additional Agreements; Reasonable Efforts. Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper, or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, subject to the appropriate vote of the stockholders of the
Company described in Section 10.3 hereof, including cooperating fully with the
other party. In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers and directors of each party to this Agreement shall take all such
necessary action.
7.7 Release of Information. The Company, the Bank or any Company
Subsidiary and AMCORE will consult with each other before issuing any press
release or otherwise making any public statements with respect to the Merger or
this Agreement and shall not issue any such press release or make any such
public statement prior to such consultation, except as may be required by law.
If no agreement on such release is reached despite such efforts the party
determining to release such information shall provide the other party with
twenty-four (24) hours notice before releasing such information.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF AMCORE AND NEWCO
The obligations of AMCORE and Newco under this Agreement to cause the
transactions contemplated therein to be consummated shall be subject to the
satisfaction of the following conditions:
8.1 No Material Adverse Change. There shall not have been any
material adverse change, or discovery of a condition or the occurrence of
any event that has resulted or is likely to result in such a change, in the
condition (financial or otherwise), assets, liabilities, reserves, results
of operation, or business of the Company and its Subsidiaries taken as a
whole from the Latest Statement Date to the Closing Date.
8.2 Representations and Warranties. Each of the representations and
warranties by the Company contained in this Agreement shall be true and
correct in all material respects (or where any statement in a
representation or warranty expressly contains a standard of materiality,
such statement shall be true and correct in all respects) (a) at, or as of,
the date of this Agreement and (b) (except to the extent such
representation speaks as of an earlier date) as of the Closing Date as
though such representations and warranties were made on and as of said
date, except with respect to changes expressly contemplated in this
Agreement; provided that the knowledge qualification set forth in the first
sentence of Section 4.16(c) and Section 4.16(d) shall not be applicable for
purposes of this Section 8.2.
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8.3 Performance and Compliance. The Company shall have performed or
complied in all material respects with all covenants and agreements
required by this Agreement to be performed and satisfied by it on or prior
to the Closing Date.
8.4 No Proceeding or Litigation. At the Closing Date, no suit,
action, or proceeding shall be pending or overtly threatened, and no
liability or claim shall have been asserted against the Company, the Bank
or any Company Subsidiary that has not been disclosed in the Company Letter
(a) involving any of the assets, properties, business, or operations of the
Company or its Subsidiaries that would reasonably be expected to have a
Material Adverse Effect, or (b) before any court or other governmental
agency by the federal or any state government in which it is or will be
sought to restrain or prohibit the consummation of the Merger.
8.5 Pooling Letter. AMCORE shall have confirmation from McGladrey &
Pullen, LLP that the Merger will be accounted for as a "pooling of
interests" in accordance with generally accepted accounting principles, as
of a date no more than five (5) business days prior to the Closing Date.
8.6 Letters from the Company Affiliates. AMCORE shall have received
from (a) each person named in the Company Letter, as updated pursuant to
Section 6.13 hereof, and (b) from any person who to the Company's knowledge
becomes an Affiliate of the Company after the Company Letter is so updated,
an executed copy of an Affiliate's Undertaking.
8.7 Consents under Agreements. The Company shall have obtained the
consent or approval of each person whose consent or approval shall be
required in order to permit consummation of the Merger under any loan or
credit agreement, note, mortgage, indenture, lease, or other agreement or
instrument, except those for which failure to obtain such consents and
approvals would not, in the reasonable opinion of AMCORE, individually or
in the aggregate, have a Material Adverse Effect on AMCORE whether prior to
or following the consummation of the transactions contemplated hereby.
8.8 Dissenters. Holders of not more than six percent (6%) of the
Company Common Stock outstanding as of the record date for the meeting of
the Company stockholders shall have undertaken steps to perfect their right
to object in accordance with Section 180.1302 of the WBCL and not lost or
abandoned such right.
8.9 1996 Audited Financial Statements. If the Closing Date shall
occur on or after February 15, 1997, the Company shall have delivered to
AMCORE audited consolidated financial statements as of and for the fiscal
year ended December 31, 1996, that (i) are prepared in accordance with GAAP
consistently applied, (ii) fairly reflect the financial positions of the
Company and its Subsidiaries, as of such date, and the results of
operations of the Company and its Subsidiaries, for the period ended on
such date, and (iii) reflect in accordance with GAAP consistently applied,
adequate provision for, or reserves against, the possible loan losses of
the Company and its Subsidiaries.
8.10 Certificate of the Company Officer. The Company shall have
furnished to AMCORE a certificate, signed by its Chief Executive Officer,
dated the Closing Date, to the effect that the conditions described in
Sections 8.1, 8.2, 8.3, 8.4, 8.7 and 8.8 of this Agreement have been fully
satisfied.
8.11 Good Standing Certificates. AMCORE and Newco shall have received
statements from the appropriate officials of the State of Wisconsin and
State of Nevada, certifying that the Company and FNI, respectively, is a
corporation in good standing, and a statement from the OCC stating that the
Bank is in good standing under the laws of the United States, each dated
within fifteen (15) business days prior to the Closing Date.
8.12 Accountant's Letter. The Company shall have caused to be
delivered to AMCORE letters from the Company's independent public
accountants dated the date on which the Registration Statement or last
amendment thereto shall become effective, and dated the date of the
Closing, and addressed to AMCORE and the Company, with respect to the
Company's consolidated financial position and results of operation,
reasonably customary in form, scope, and substance for letters delivered by
independent public accountants in connection with the procedures undertaken
by them with respect to the financial
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statements and other financial information of the Company contained in the
Registration Statement and the other matters contemplated by AICPA
Statement No. 72 and customarily included in comfort letters relating to
transactions similar to those contemplated by the Agreement.
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
The obligations of the Company under this Agreement to cause the
transactions contemplated herein to be consummated shall be subject to the
satisfaction of the following conditions:
9.1 No Material Adverse Change. There shall not have been any
material adverse change, or discovery of a condition or the occurrence of
any event that has resulted or is likely to result in such a change, in the
consolidated condition (financial or otherwise), assets, liabilities,
results of operation, or business of AMCORE from the Latest Statement Date
to the Closing Date.
9.2 Representations and Warranties. Each of the representations and
warranties of AMCORE and Newco contained in this Agreement shall be true
and correct in all material respects (or where any statement in a
representation or warranty expressly contains a standard of materiality
such statement shall be true and correct in all respects) at, or as of, the
date of this Agreement and (except to the extent such representation speaks
as of an earlier date) as of the Closing Date as though such
representations were made on and as of said date.
9.3 Performance and Compliance. AMCORE shall have performed or
complied in all material respects with all covenants and agreements
required by this Agreement to be performed and satisfied by it on or prior
to the Closing Date.
9.4 No Proceeding or Litigation. At the Closing Date, no suit,
action, or proceeding shall be pending or overtly threatened before any
court or other governmental agency by the federal or any state government
in which it is sought to restrain or prohibit the consummation of the
Merger.
9.5 Certificate of Financial Officer. AMCORE shall have furnished to
the Company a certificate, signed by its chief financial officer and dated
the Closing Date, to the effect that the conditions described in Sections
9.1, 9.2, 9.3, and 9.4 of this Agreement have been fully satisfied.
9.6 Tax Opinion. The Company shall have received an opinion from
Jones Day, special tax counsel to the Company, satisfactory to the Company
opining that the Merger will be treated for federal income tax purposes as
a reorganization within the meaning of Section 368(a) of the Code, dated
the Closing Date.
In rendering such opinion, Jones Day shall be entitled to rely on
appropriate and customary representations contained in certificates of officers
of AMCORE and the Company, certain holders of Company Common Stock and others,
and AMCORE and the Company shall each use their reasonable best efforts to
deliver or cause to be delivered such certificates to Jones Day and to ensure
that all of the representations contained therein are true and correct as of the
date of such opinion and at the Effective Time.
ARTICLE X
CONDITIONS TO THE OBLIGATIONS OF ALL PARTIES
In addition to the provisions of Articles VIII and IX hereof, the
obligations of the Company, AMCORE, and Newco under this Agreement to cause the
transactions contemplated herein to be consummated, shall be subject to the
satisfaction of the following conditions:
10.1 Governmental Approvals. The parties hereto shall have received
all necessary approvals of governmental agencies and authorities, on
conditions satisfactory to AMCORE, of the transactions contemplated by this
Agreement, each of such approvals shall remain in full force and effect and
all statutory waiting periods in connection therewith shall have expired
prior to the Closing Date, and such
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approvals and the transactions contemplated thereby shall not have been
contested by any federal or state governmental authority nor by any other
third party by formal proceeding. If any contest as aforesaid is brought by
formal proceedings, any party may, but shall not be obligated to, answer
and defend such contest.
10.2 Securities Law Compliance. The Registration Statement shall have
become effective by an order of the SEC, the AMCORE Common Stock to be
issued in the Merger shall have been qualified or exempted under all
applicable state securities or blue sky laws, there shall have been no stop
order issued or threatened by the SEC that suspends the effectiveness of
the Registration Statement, and no proceeding shall have been commenced,
pending, or overtly threatened for such purpose.
10.3 Stockholder Approval. The Merger shall have been duly approved
by consent or the requisite affirmative votes of the stockholders of the
Company.
ARTICLE XI
TERMINATION
11.1 Reasons for Termination. This Agreement may be terminated and the
Merger abandoned at any time before the Closing Date, notwithstanding the
approval or adoption of this Agreement by the stockholders of the Company and
subject to the payment obligations of Section 6.14 hereof:
(a) By mutual written consent of the Board of Directors of the Company
and the Board of Directors of AMCORE.
(b) By written notice from AMCORE to the Company if:
(i) any condition set forth in Article VIII or X of this Agreement
has not been substantially satisfied or waived in writing by June 30,
1997 (the "Termination Date"); or
(ii) any warranty or representation made by the Company shall be
discovered to be or to have become untrue, incomplete, or misleading in
any way that has resulted, or would reasonably be expected to result, in
a Material Adverse Effect on the Company or upon the consummation of the
transactions contemplated hereby, where any such breach has not been
cured within twenty (20) business days following receipt by the Company
of notice of such discovery; or
(iii) the Company shall have breached one or more provisions of
this Agreement in any way that has resulted, or would reasonably be
expected to result, in a Material Adverse Effect on the Company
considering all such breaches in the aggregate or upon the consummation
of the transactions contemplated hereby, where such breach has not been
cured within twenty (20) business days following receipt by the Company
of notice of such breach.
(c) By written notice from the Company to AMCORE, authorized by the
Board of Directors of the Company, if:
(i) any condition set forth in Article IX or X of this Agreement
has not been substantially satisfied or waived in writing by the
Termination Date; or
(ii) any warranty or representation made by AMCORE shall be
discovered to be or to have become untrue, incomplete or, misleading in
any way that has resulted or would reasonably be expected to result, in
a Material Adverse Effect on AMCORE or upon the consummation of the
transactions contemplated hereby, where any such breach has not been
cured within twenty (20) business days following receipt by AMCORE of
notice of such discovery; or
(iii) AMCORE shall have breached one or more provisions of this
Agreement in any way that has resulted, or would reasonably be expected
to result, in a Material Adverse Effect on AMCORE considering all such
breaches in the aggregate or upon the consummation of the transactions
contemplated hereby, where such breach has not been cured within twenty
(20) business days following receipt by AMCORE of notice of such breach.
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(d) By written notice from the Company to AMCORE delivered not later
than fifteen (15) days after the Meeting Date, if on the Meeting Date, the
average of the daily closing prices on an ex-dividend basis of a share of
AMCORE Common Stock as reported on the consolidated tape of the Nasdaq
National Market during the period of twenty (20) trading days ending at the
end of the third trading day immediately preceding the Meeting Date (the
"AMCORE Average Price") is less than $18.00 unless on or before the fifth
business day after its receipt of such written notice of termination from
the Company, AMCORE shall have delivered written notice to the Company of
its agreement to adjust the Exchange Ratio to the number obtained by
dividing (i) the amount equal to 135.72 less the Environmental Reduction
Amount, if any, by (ii) the AMCORE Average Price. Upon receipt of such
notice by the Company, the Exchange Ratio shall be deemed to be equal to
such quotient.
(e) By written notice from AMCORE to the Company delivered not later
than fifteen (15) days following the Meeting Date if on the Meeting Date,
the AMCORE Average Price is greater than $23.00 unless on or before the
fifth business day after its receipt of such written notice of termination
from AMCORE, the Company shall have delivered written notice to AMCORE of
its agreement to adjust the Exchange Ratio to the number obtained by
dividing (i) the amount equal to 173.42 less the Environmental Reduction
Amount, if any, by (ii) the AMCORE Average Price. Upon receipt of such
notice by the Company, the Exchange Ratio shall be deemed to be equal to
such quotient.
(f) By written notice from AMCORE to the Company delivered not later
than the Meeting Date, if AMCORE's good-faith estimate of Remediation Costs
based upon the Environmental Audits is $700,000 or more.
(g) By AMCORE, if without the prior approval of AMCORE (A) the Company
(1) shall have withdrawn, modified, or amended in any respect its approval
or recommendation of this Agreement or the transactions contemplated
hereby, or (2) shall not at the appropriate time have recommended or shall
have withdrawn, modified, or amended in any respect its recommendation that
its shareholders vote in favor of this Agreement, or (3) shall not have
included such recommendation in the Proxy Statement/ Prospectus (as defined
in Section 7.1 hereof), or (4) shall have taken any action or public
position inconsistent with such approval or recommendation; (B) the Board
of Directors of the Company shall have resolved to do any of the foregoing,
or (C) any director of the Company shall take any action inconsistent with
such approval or recommendation and such action has not been renounced by
the Board of Directors of the Company.
(h) By AMCORE, if (A) there is a Transaction Proposal initiated or
made by or relating to the Company which is approved of or agreed to by the
Board of Directors of the Company; (B) any person shall have solicited
proxies in opposition to the approval of the Merger, and the Board of
Directors of the Company has taken action or a public position consistent
with approving of such person's proxy solicitation; or (C) any person
(other than AMCORE or any AMCORE Subsidiary or any entity under the control
of AMCORE) shall have filed an application under the BHCA or the Change in
Bank Control Act, as amended, with respect to the acquisition by such
person of any shares of Company Common Stock or the capital stock of the
Bank, and the Board of Directors of the Company has taken action or a
public position consistent with both approving of such person's application
and approving of such person's attempt to gain control of the Company or
the Bank.
(i) By the Company, if the Board shall reasonably determine that a
proposal for a Transaction Proposal constitutes a Superior Proposal and the
Board shall have received a written opinion of Jones Day that the failure
to accept such Superior Proposal could reasonably be expected to result in
a breach of the fiduciary duties of such Board under applicable law;
provided, however, that the Company may not terminate this Agreement
pursuant to this clause (i) unless (A) five (5) business days shall have
elapsed after delivery to AMCORE of a written notice of such determination
by such Board and, during such 5-business-day period, the Company shall
have informed AMCORE of the material terms and conditions and financing
arrangements of such proposal for a Transaction Proposal and the identity
of the person or group making such proposal for a Transaction Proposal and
(B) at the end of such 5-day-business period, such Board shall continue
reasonably to believe that such proposal for a Transaction Proposal
constitutes
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a Superior Proposal and promptly thereafter the Company shall enter into a
definitive acquisition, merger or similar agreement to effect such Superior
Proposal. Notwithstanding the foregoing, the Company shall not have the
right to terminate this Agreement pursuant to this subsection (i) unless it
has simultaneously or previously paid the $1,000,000 fee owed to AMCORE
pursuant to Section 6.14(b)(i) and confirms its obligation to reimburse
AMCORE for its Expenses pursuant to Section 6.14(a)(i).
(j) By written notice from the Company to AMCORE delivered not later
than the Meeting Date, if the amount of Remediation Costs set forth in
AMCORE's written notice to the Company delivered pursuant to Section 2.1(d)
hereof is $700,000 or more.
11.2 Effect of Termination. (a) In the event of termination of this
Agreement by either the Company or AMCORE as provided in Section 11.1 hereof,
this Agreement shall forthwith become void and, except with respect to claims by
the terminating party for damages for breaches described in Sections 11.1(b) and
11.1(c) hereof, there shall be no liability or obligation on the part of AMCORE
or the Company or their respective officers or directors except with respect to
Sections 6.5 and 6.14 hereof; provided that the payment of the Termination Fee
to AMCORE shall be deemed to constitute full payment for any damages incurred by
AMCORE as a result of breaches described in Section 11.1(b) with respect to
which the Termination Fee was paid to AMCORE.
(b) In the event AMCORE terminates this Agreement pursuant to Section
11.1(b) and is be entitled to the Termination Fee, the parties agree that AMCORE
would suffer direct and substantial damages, which damages cannot be determined
with reasonable certainty. To compensate AMCORE for such damages, the Company
has agreed to pay to AMCORE such Termination Fee as liquidated damages. It is
specifically agreed that the amount to be paid pursuant to Section 6.14 hereof
represents liquidated damages and not a penalty.
(c) Notwithstanding the foregoing, no party hereto shall be relieved from
liability for any willful or intentional breach of this Agreement.
ARTICLE XII
MISCELLANEOUS
12.1 Non-survival of Representations, Warranties and Agreements. None of
the representations, warranties, and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time, except for the agreements of the "affiliates" of the Company delivered
pursuant to Section 6.13 hereof and the agreements of AMCORE in Sections 5.1(b)
and 7.3 hereof.
12.2 Expenses. Except as otherwise provided herein, all expenses incurred
by AMCORE and the Company in connection with or related to the authorization,
preparation, and execution of this Agreement, the solicitation of stockholder
approvals, and all other matters related to the closing of the transactions
contemplated thereby, including, without limitation of the generality of the
foregoing, all fees and expenses of agents, representatives, counsel, and
accountants employed by either such party or its affiliates, shall be borne
solely and entirely by the party that has incurred the same.
12.3 Waivers; Amendments. At any time prior to the Closing Date, either
AMCORE, by action taken by its Board of Directors, or any committee or officers
hereunto authorized, or the Company, by action taken by its Board of Directors,
or any committee or officers hereunto authorized, may waive the performance of
any of the obligations of the other or waive compliance by the other with any of
the covenants or conditions contained in this Agreement or agree to the
amendment or modification of this Agreement by an agreement in writing executed
in the same manner as this Agreement; provided, however, that after consent of
or a favorable vote by the stockholders of the Company pursuant to Section 6.9
of this Agreement, any such action shall be taken by the Company only if, in the
opinion of its Board of Directors, such waiver, amendment, or modification will
not have any material adverse effect on the stockholders of the Company and will
not require resolicitation of any proxies from such stockholders.
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12.4 Assignment; Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of the parties hereto and their respective
successors and assigns, but shall not be assigned by the parties hereto, by
operation of law or otherwise, without the prior written consent of the other
parties. Nothing in this Agreement, express or implied, is intended to confer
upon any other person any rights or remedies of any nature whatsoever under or
by reason of this Agreement.
12.5 Entire Agreement. This Agreement, together with the Confidentiality
Agreement, the Stockholders' Agreement, and the Affiliate's Undertakings
supersede any other agreement, whether written or oral, that may have been made
or entered into by the Company or AMCORE or Newco or by any officer or officers
of such parties relating to the acquisition of the business or the capital stock
of the Company by AMCORE or Newco. The aforementioned agreements constitute the
entire agreement by the respective parties, and there are no agreements or
commitments except as set forth herein and therein.
12.6 Captions and Counterparts. The captions in this Agreement are for
convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Agreement. This
Agreement may be executed in several counterparts, each of which shall
constitute one in the same instrument.
12.7 Certain Definitions. For purposes of this Agreement, the term:
(a) "Affiliate" means a person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, another person;
(b) "AMCORE Reports" shall mean all reports, registrations, and
statements, together with any amendments required to be made with respect
thereto, that were or are required to be filed with the SEC, the Federal
Reserve Board, the OCC, FDIC, and any applicable state securities or
banking authorities;
(c) "Company Reports" shall mean all reports, registrations, and
statements, together with any amendments required to be made with respect
thereto, that were and are required to be filed with the Federal Reserve
Board, the OCC, the FDIC, and any applicable state securities authorities;
and
(d) "Material Adverse Effect" shall mean any condition of, change in,
or effect on the business, operations, properties, condition (financial or
otherwise), assets, or liabilities of the Company and its Subsidiaries
taken as a whole, on the one hand, or AMCORE and its Subsidiaries taken as
a whole, on the other hand, as applicable, that is or would reasonably be
expected to be materially adverse to the business, operations, properties,
condition (financial or otherwise), assets, or liabilities of the Company
and its Subsidiaries taken as a whole, on the one hand, or AMCORE and its
Subsidiaries taken as a whole, on the other hand, respectively;
(e) "Person" shall mean an individual, corporation, partnership,
association, trust, LLC, unincorporated organization or, as applicable, any
other entity, unless otherwise indicated;
(f) "Subsidiary" shall mean any corporation or other organization
whether incorporated or unincorporated (i) of which a party or any
subsidiary of such party is a general partner (excluding partnerships, the
general partnership interest of which held by such party or any subsidiary
of such party does not have a majority of the voting interest in such
partnership) or (ii) at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority
of the Board of Directors or others performing similar functions with
respect to such corporation or other organization is directly or indirectly
owned or controlled by such party or by any one or more of its
subsidiaries; and
(g) "To the Company's knowledge" as used in this Agreement means to
the knowledge of the executive officers of the Company, the Bank or any
Company Subsidiary as reflected in the recollection of such officers after
due inquiry of persons whose normal job responsibilities give them
knowledge of the matters covered by the representations and warranties made
by the Company, the Bank or any Company Subsidiary in this Agreement or in
the books and records of the Company, the Bank or any Company Subsidiary.
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12.8 Governing Law. This Agreement shall be construed and interpreted in
accordance with the laws of the State of Illinois without regard to the
conflicts of laws rules.
12.9 Notices. All notices given hereunder shall be in writing (including a
telecopy) and shall be mailed by first class mail, postage prepaid, or sent by
facsimile transmission or by nationally recognized overnight delivery service,
addressed as follows:
(a) If to AMCORE or Newco, to:
Mr. John R. Hecht
AMCORE Financial, Inc.
Senior Vice President
501 Seventh Street
Rockford, Illinois 61104
Telecopy No. (815) 961-3443
with a copy to:
William R. Kunkel, Esq.
Skadden, Arps, Slate,
Meagher & Flom (Illinois)
333 West Wacker Drive
Suite 2100
Chicago, Illinois 60606
Telecopy No. (312) 407-0411
(b) If to the Company to:
Mr. Rudolph F. Regez
Mr. Thomas J. Wilkinson
First National Bancorp, Inc.
1625 Tenth Street
P.O. Box 98
Monroe, Wisconsin 53566
Telecopy No. (608) 328-5100
with a copy to:
John P.C. Duncan, Esq.
Jones, Day, Reavis & Pogue
77 W. Wacker Drive
Chicago, Illinois 60601
Telecopy No. (312) 782-8585
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Merger to be duly executed as of the date first above written.
AMCORE FINANCIAL, INC.
By: /s/ ROBERT J. MEULEMAN
--------------------------------------
Attest: /s/ MARY POHL
--------------------------------------
FNB ACQUISITION, INC.
By: /s/ JOHN R. HECHT
--------------------------------------
Attest: /s/ MARY POHL
--------------------------------------
FIRST NATIONAL BANCORP, INC.
By: /s/ THOMAS J. WILKINSON
--------------------------------------
/s/ RUDOLPH REGEZ
--------------------------------------
Attest: /s/ GARY L. CULP
--------------------------------------
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EXHIBIT A
FORM OF AFFILIATE'S UNDERTAKING
OCTOBER 30, 1996
AMCORE Financial, Inc.
501 Seventh Street
P.O. Box 1537
Rockford, Illinois 61110-0037
Gentlemen:
I am a holder of shares of common stock, par value $1.00 per share
("Company Common Stock"), of First National Bancorp, Inc., a Wisconsin
corporation (the "Company"). I am aware that pursuant to the terms of the
Agreement and Plan of Merger, dated as of October , 1996 (the "Agreement")
among the Company, AMCORE Financial, Inc., a Nevada corporation ("AMCORE"), and
FNB Acquisition, Inc., a Wisconsin corporation ("Newco"), Newco will be merged
(the "Merger") with and into the Company with the Company continuing as the
surviving corporation, and each of the shares of Company Common Stock owned by
me as of the time of such Merger shall be converted into shares of common stock,
par value $0.33 per share ("AMCORE Common Stock"), of AMCORE.
I understand and agree that it is intended that the Merger will be treated
as a tax free "reorganization" for federal income tax purposes and as a
"pooling-of-interests" in accordance with generally accepted accounting
principles and the applicable General Rules and Regulations ("Rules and
Regulations") published by the Securities and Exchange Commission ("SEC"). I
have been advised that as of the date hereof, I may be deemed an "affiliate" of
the Company, (i) for application of the pooling-of-interests requirements and
(ii) within the meaning of Rule 145 ("Rule 145") promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), although nothing
contained herein should be construed as an admission of either such fact.
If in fact I am deemed an "affiliate" under the Securities Act, my ability
to sell, assign or transfer AMCORE Common Stock received by me in exchange for
any shares of Company Common Stock pursuant to the Merger may be restricted
unless such transaction is registered under the Securities Act or an exemption
from such registration is available. I understand that such exemptions are
limited and I have obtained advice of counsel as to the provisions of this
letter agreement as well as the nature and conditions of such exemptions,
including information with respect to the applicability to the sale of such
securities of Rule 145(d) promulgated under the Securities Act, to the extent
applicable.
I have been informed and understand that the treatment of the Merger as a
pooling-of-interests for financial accounting purposes is dependent upon the
accuracy of my representations and warranties set forth herein, and upon my
compliance with the covenants set forth herein. I understand that the
representations and warranties and covenants set forth herein will be relied
upon by the Company, AMCORE, their respective counsel and accounting firms and
stockholders of the Company and AMCORE.
In connection with the above transactions, I represent and warrant to
AMCORE and agree that:
A. I have full power and authority to execute this agreement, to make
the representations, warranties and covenants herein contained and to
obligations hereunder.
B. I have been advised that the issuance of AMCORE Common Stock to me
pursuant to the Merger will be registered with the SEC under the Securities
Act on a Registration Statement on Form S-4. However, I have also been
advised that because I may be deemed to have been an "affiliate" of the
Company at the time the Merger was submitted for a vote of the stockholders
of the Company, and because any distribution by me of AMCORE Common Stock
has not been registered under the Securities Act, I may not sell, transfer,
exchange, pledge, or otherwise dispose of, or make any offer or agreement
relating to any of the foregoing with respect to, any Restricted
Securities, or any option, right or other interest with respect to any
Restricted Securities, unless (i) such transaction is permitted
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pursuant to Rules 145(c) and 145(d) under the Securities Act, (ii) counsel
reasonably satisfactory to AMCORE, shall have advised AMCORE in a written
opinion letter satisfactory to AMCORE and AMCORE's legal counsel, and upon
which AMCORE and its legal counsel may rely, that no registration under the
Securities Act would be required in connection with the proposed sale,
transfer or other disposition, (iii) a registration statement under the
Securities Act covering the Restricted Securities proposed to be sold,
transferred or otherwise disposed of, describing the manner and terms of
the proposed sale, transfer or other disposition, and containing a current
prospectus, shall have been filed with the SEC and made effective under the
Securities Act, or (iv) an authorized representative of the SEC shall have
rendered written advice to me (sought by me or counsel representing me,
with a copy thereof and all other related communications delivered to
AMCORE) to the effect that the SEC would take no action, or that the Staff
of the SEC would not recommend that the SEC take action, with respect to
the proposed disposition if consummated.
C. I have no present plan or intent to dispose of the AMCORE Common
Stock acquired by me pursuant to the Merger, or any securities that may be
paid as a dividend or otherwise distributed thereon or with respect thereto
or issued or delivered in exchange or substitution therefor (all such
shares and other securities of AMCORE being herein sometimes collectively
referred to as "Restricted Securities") and I shall not formulate prior to
the Effective Time any such plan or intent to dispose of such Restricted
Securities.
D. I will not make any sale, transfer or other disposition of
Restricted Securities in violation of the Securities Act or the Rules and
Regulations.
E. I understand that AMCORE is under no obligation to register the
sale, transfer or other disposition of Restricted Securities by me or on my
behalf under the Securities Act or to take any other action necessary in
order to make compliance with an exemption from such registration
available.
F. Notwithstanding any other provision of this Agreement to the
contrary, except as otherwise permitted by the Merger Agreement, I will not
sell, transfer, exchange, pledge or otherwise dispose of, or in any other
way reduce my risk of ownership or investment in, or make any offer or
agreement relating to any of the foregoing with respect to any Restricted
Securities or other securities of AMCORE (i) during the 30-day period
immediately preceding the Effective Time and (ii) until such time after the
Effective Time as AMCORE has publicly released a report including the
combined financial results of AMCORE and for a period of at least 30 days
of combined operations of AMCORE and the Company within the meaning of
Accounting Series Release No. 135, as amended, of the SEC.
G. From and after the Effective Time and for so long as is necessary
in order to permit me to sell the Restricted Securities held by and
pursuant to Rule 145 and, to the extent applicable, Rule 144 under the
Securities Act, AMCORE will use its best efforts to file on a timely basis
all reports required to be filed by it pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended, referred to in paragraph
(c)(1) of Rule 144 under the Securities Act. AMCORE is under no obligation
to register the sale, transfer or other disposition of any Restricted
Securities by me or on my behalf or to take any other action necessary in
order to make compliance with an exemption from registration available.
H. I understand that, in addition to the restrictions imposed under
this agreement, the provisions of Rule 145 limit any public resale by me of
Restricted Securities and that the restrictive legends described below will
be placed upon the Restricted Securities.
1. I understand that stop transfer instructions will be given to
the registrar of the certificates for the shares of AMCORE Common Stock
and that there will be placed on the certificates for the shares of
AMCORE Common Stock, or any substitutions therefore, a legend stating in
substance:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION (THE ACQUISITION OF FIRST NATIONAL BANCORP, INC.) TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), APPLIES AND MAY BE SOLD OR OTHERWISE TRANSFERRED
ONLY IN COMPLIANCE WITH THE LIMITATIONS OF SUCH
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RULE 145, OR UPON RECEIPT BY AMCORE FINANCIAL, INC., OF AN OPINION OF
COUNSEL ACCEPTABLE TO IT THAT SOME OTHER EXEMPTION FROM REGISTRATION
UNDER THE ACT IS AVAILABLE, OR PURSUANT TO A REGISTRATION STATEMENT
UNDER THE ACT. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED PRIOR TO THE PUBLICATION BY AMCORE
FINANCIAL, INC., OF AN EARNINGS STATEMENT COVERING AT LEAST 30 DAYS
OF OPERATIONS SUBSEQUENT TO THE EFFECTIVE DATE OF THE MERGER.
AMCORE agrees to remove such legend to the extent that shares
evidenced by such certificates may properly be sold by me pursuant to
this agreement.
2. I also understand that unless a sale or transfer is made in
conformity with the provisions of Rule 145, or pursuant to a
registration statement, AMCORE reserves the right to put the following
legend on the certificates issued to my transferee:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN
ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN
CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933.
I. I hereby agree that, for a period of two (2) years following the
effective date of the Merger, I will obtain an agreement similar to this
agreement from each transferee of the shares of AMCORE Common Stock sold or
otherwise transferred by me, but only if such sale or transfer is effected
other than in a transaction involving a registered public offering or as a
sale pursuant to Rule 145.
It is understood and agreed that this agreement will terminate and be
of no further force and effect and the legends set forth in Paragraph H
above will be removed by delivery of substitute certificates without such
legends, and the related transfer restrictions shall be lifted forthwith,
if the period of time specified in Paragraph F of this agreement has passed
and (i) my shares of AMCORE Common Stock shall have been registered under
the Securities Act for sale, transfer, or other disposition by me or on my
behalf, (ii) I am not at the time an "affiliate" of AMCORE and have held
the shares of AMCORE Common Stock for at least two (2) years (or such other
period as may be prescribed by the Securities Act and the Rules and
Regulations) and AMCORE has filed with the SEC all of the reports it is
required to file under the Securities Exchange Act of 1934, as amended,
during the preceding 12 months, (iii) I am not and have not been for at
least three (3) months an "affiliate" of AMCORE and I have held the shares
of AMCORE Common Stock for at least three (3) years, or (iv) AMCORE shall
have received a letter from the staff of the SEC, or an opinion of counsel
acceptable to AMCORE, to the effect that the stock transfer restrictions
and the legend are not required.
This agreement may be executed in several counterparts, each of which shall
constitute one in the same instrument.
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This agreement shall be binding on my heirs, legal representatives, and
successors.
Very truly yours,
--------------------------------------
Name*:
Title:
Accepted this day of October, 1996
AMCORE FINANCIAL, INC.
By:
--------------------------------------------------------
- -------------------------
* In the event this undertaking covers shares held jointly or held individually
by related parties who will sign this together, each joint or related party
shall sign.
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EXHIBIT B
FORM OF STOCKHOLDER VOTING AGREEMENT
AGREEMENT, dated as of October 30, 1996 (this "Agreement"), by and among
(the "Stockholder"), First National Bancorp, Inc., a
Wisconsin Corporation (the "Company"), and AMCORE Financial, Inc., a Nevada
corporation ("AMCORE").
WHEREAS, AMCORE, FNB Acquisition, Inc., a Wisconsin corporation and wholly
owned subsidiary of AMCORE ("Merger Sub"), and the Company, have,
contemporaneously with the execution of this Agreement, entered into an
Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"), which provides, among other things, that Merger Sub shall be merged
with and into the Company pursuant to the merger contemplated by the Merger
Agreement (the "Merger"),
WHEREAS, as of the date hereof, the Stockholder is the Beneficial Owner (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") of shares of Common Stock, par value $1.00 per share, of
the Company (the "Company Common Stock") and of Company Restricted
Stock/Options (as defined in the Merger Agreement),
WHEREAS, the Stockholder and the Company desire to amend the terms of the
Stock Option Agreements in order to provide for the termination of the Options
held by the Stockholder at the Effective Date of the Merger, and
WHEREAS, as a condition to the willingness of AMCORE to enter into the
Merger Agreement, AMCORE has required that the Stockholder and the Company
agree, and in order to induce AMCORE to enter into the Merger Agreement, the
Stockholder and the Company have agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
ARTICLE I
VOTING OF SHARES
Section 1 Voting Agreement. The Stockholder hereby agrees to: (a) appear,
or cause the holder of record on the applicable record date (the "Record
Holder") to appear, at any annual or special meeting of stockholders of the
Company for the purpose of obtaining a quorum; (b) vote, or cause the Record
Holder to vote, in person or by proxy, all of the shares of the Company Common
Stock owned or with respect to which the Stockholder has or shares voting power
and shares of Company Common Stock which shall, or with respect to which voting
power shall, hereafter be acquired by the Stockholder (collectively, the
"Shares") in favor of the Merger, the Merger Agreement (as in effect on the date
hereof) and the transactions contemplated by the Merger Agreement; (c) vote, or
cause the Record Holder to vote, the Shares against any action, proposal or
agreement that could reasonably be expected to result in a breach in any
material respect of any covenant, representation or warranty or any other
obligation of the Company under the Merger Agreement, or which could reasonably
be expected to result in any of the conditions to the Company's obligations
under the Merger Agreement not being fulfilled; and (d) vote, or cause the
Record Holder to vote, such Shares against: (i) any extraordinary corporate
transaction (other than the Merger), such as a merger, consolidation, business
combination, reorganization, recapitalization or liquidation involving the
Company or any of its subsidiaries; and (ii) a sale or transfer of a material
amount of the assets of the Company or any of its subsidiaries (each of the
events described in (i) and (ii) above as an "Alternative Transaction"). Without
limiting the foregoing, the Stockholder will provide instructions to the trustee
for the trust established pursuant to the Directors Deferred Compensation Plan
or the Deferred Compensation Retirement Plan, as applicable, with respect to any
shares held in such trust for the benefit of the Stockholder to be voted as set
forth above. The Stockholder acknowledges receipt and review of a copy of the
Merger Agreement. Notwithstanding any other provision of this Section 1.1, the
provisions of such Section shall not prohibit or restrain the Stockholder from
complying with his fiduciary obligations as a director or officer of the
Company.
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Section 2 No Ownership Interest. Nothing contained in this Agreement shall
be deemed to vest in AMCORE any direct or indirect ownership or incidence of
ownership of or with respect to any Shares. All rights, ownership, and economic
benefits of and relating to the Shares or Company Restricted Stock/Options shall
remain and belong to the Stockholder, and AMCORE shall have no authority to
manage, direct, superintend, restrict, regulate, govern, or administer any of
the policies or operations of the Company or exercise any power or authority to
direct the Stockholder in the voting of any of the Shares, except as otherwise
expressly provided herein, or the performance of its duties or responsibilities
as a stockholder of the Company.
Section 3 Evaluation of Investment. The Stockholder, by reason of its
knowledge and experience in financial and business matters, believes itself
capable of evaluating the merits and risks of the investment in shares of Common
Stock, par value $.33 per share, of AMCORE ("AMCORE Common Stock"), contemplated
by the Merger Agreement.
Section 4 Documents Delivered. The Stockholder acknowledges receipt of
copies of the following documents:
(a) Merger Agreement and all exhibits thereto;
(b) AMCORE's 1995 Annual Report (including Annual Report on Form 10-K
for the year ended December 31, 1995);
(c) AMCORE's Proxy Statement dated March 28, 1996; and
(d) AMCORE's Quarterly Report for the quarter ended June 30, 1996
(including Report on Form 10-Q).
Section 5 Investment Purpose. The Stockholder hereby represents, warrants,
and agrees that it is acquiring the shares of AMCORE Common Stock pursuant to
the Merger Agreement solely for its own account, for investment, and not with a
view to the distribution or resale thereof.
Section 6 No Inconsistent Agreements. The Stockholder hereby covenants and
agrees that, except as contemplated by this Agreement and the Merger Agreement,
the Stockholder shall not enter into any voting agreement or grant a proxy or
power of attorney with respect to the Shares which is inconsistent with this
Agreement.
ARTICLE II
RESTRICTIONS ON TRANSFER
Section 1 Transfer of Title. The Stockholder hereby covenants and agrees
that the Stockholder will not, prior to the termination of this Agreement,
either directly or indirectly, offer, agree or otherwise sell, assign, pledge,
hypothecate, transfer, exchange, or dispose of any Shares or Options or any
other securities or rights convertible into or exchangeable for shares of
Company Common Stock, owned either directly or indirectly by the Stockholder or
with respect to which the Stockholder has the power of disposition, whether now
or hereafter acquired, other than pursuant to the Merger, without the prior
written consent of AMCORE.
(a) The Stockholder hereby agrees and consents to the entry of stop
transfer instructions with the Company against the transfer of any Shares
consistent with the terms of Section 2.1(a).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to AMCORE as follows:
Section 1 Authority Relative to This Agreement. The Stockholder is
competent to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated
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hereby. This Agreement has been duly and validly executed and delivered by the
Stockholder and, assuming the due authorization, execution and delivery by
AMCORE and the Company, constitutes a legal, valid and binding obligation of the
Stockholder, enforceable against the Stockholder in accordance with its terms
except that (i) the enforceability hereof may be subject to applicable
bankruptcy, insolvency or other similar laws, now or hereinafter in effect
affecting creditors' rights generally and (ii) the availability of the remedy of
specific performance or injunctive or other forms of equitable relief may be
subject to equitable defenses and would be subject to the discretion of the
court before which any proceeding therefor may be brought.
Section 2 No Conflict. The execution and delivery of this Agreement by the
Stockholder does not, and the performance of this Agreement by the Stockholder
shall not result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or result
in the creation of a lien or encumbrance on any of the Shares pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Stockholder is a party
or by which the Stockholder or the Shares or Options are bound or affected,
except, in the case of each of the foregoing, for any such conflicts,
violations, breaches, defaults or other occurrences which would not prevent or
delay the performance of the Stockholder of its obligations under this
Agreement.
Section 3 Title to the Shares. Except for the Shares held in trust pursuant
to the Directors Deferred Compensation Plan or the Deferred Compensation
Retirement Plan, as applicable, for the benefit of the Stockholder, (i) the
Shares held by the Stockholder are owned free and clear of all security
interests, liens, claims, pledges, options, rights of first refusal, agreements,
limitations on the Stockholder's voting rights, charges and other encumbrances
of any nature whatsoever and (ii) the Stockholder has not appointed or granted
any proxy, which appointment or grant is still effective, with respect to the
Shares.
ARTICLE IV
MISCELLANEOUS
Section 1 Termination. This Agreement shall terminate upon the earliest to
occur of (a) the termination of the Merger Agreement or (b) the Effective Time
(as defined in the Merger Agreement).
Section 2 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with its specified terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
specific performance of the terms and provisions hereof in addition to any other
remedy to which they are entitled at law or in equity.
Section 3 Successors and Affiliates. This Agreement shall inure to the
benefit of and shall be binding upon the parties hereto and their respective
heirs, legal representatives and assigns. If the Stockholder shall acquire
ownership of, or voting power with respect to, any additional Shares in any
manner, whether by the exercise of any Company Restricted Stock/Options or any
securities or rights convertible into or exchangeable for shares of Company
Common Stock, operation of law or otherwise, such Shares shall be held subject
to all of the terms and provisions of this Agreement. Without limiting the
foregoing, the Stockholder specifically agrees that the obligations of the
Stockholder hereunder shall not be terminated by operation of law, whether by
death or incapacity of the Stockholder or otherwise.
Section 4 Entire Agreement. This Agreement constitutes the entire agreement
among AMCORE, the Company and the Stockholder with respect to the subject matter
hereof and supersedes all prior agreements and understandings, both written and
oral, among AMCORE, the Company and the Stockholder with respect to the subject
matter hereof.
Section 5 Captions and Counterparts. The captions in this Agreement are for
convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Agreement. This
Agreement may be executed in several counterparts, each of which shall
constitute one in the same instrument.
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Section 6 Amendment. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
Section 7 Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
Section 8 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in a mutually acceptable manner in order that the
terms of this Agreement remain as originally contemplated to the fullest extent
possible.
Section 9 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made and shall be effective upon receipt, if delivered personally, mailed by
registered or certified mail (postage prepaid, return receipt requested) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like changes of address) or sent by electronic
transmission (provided that a confirmation copy is sent by another approved
means) to the telecopier number specified below:
If to Stockholder:
at the address set forth on the signature page hereto
If to AMCORE or Merger Sub:
Mr. John R. Hecht
AMCORE Financial, Inc.
Senior Vice President
501 Seventh Street
Rockford, Illinois 61104
Telecopy No. (815) 961-3443
with a copy to:
William R. Kunkel, Esq.
Skadden, Arps, Slate,
Meagher & Flom (Illinois)
333 West Wacker Drive
Suite 2100
Chicago, Illinois 60606
Telecopy No. (312) 407-0411
If to the Company:
Mr. Rudolph F. Regez
Mr. Thomas J. Wilkinson
First National Bancorp, Inc.
1625 Tenth Street
P.O. Box 98
Monroe, Wisconsin 53566
Telecopy No. (608) 328-5100
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with a copy to:
John P.C. Duncan, Esq.
Jones, Day, Reavis & Pogue
77 W. Wacker Drive
Chicago, Illinois 60601
Telecopy No. (312) 782-8585
Section 10 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Illinois regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law.
IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement
to be duly executed on the date hereof.
AMCORE Financial, Inc.
By:
--------------------------------------
Name:
Title:
First National Bancorp, Inc.
By:
--------------------------------------
Name:
Title:
By:
--------------------------------------
Name:
Title:
Address:
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ANNEX III
WISCONSIN BUSINESS CORPORATION LAW
SUBCHAPTER XIII
DISSENTERS' RIGHTS
180.1301 DEFINITIONS. IN SS. 180.1301 TO 180.1331:
(1) "Beneficial shareholder" means a person who is a beneficial owner
of shares held by a nominee as the shareholder.
(1m) "Business combination" has the meaning given in s. 180.1130(3).
(2) "Corporation" means the issuer corporation or, if the corporate
action giving rise to dissenters' rights under s.180.1302 is a merger or
share exchange that has been effectuated, the surviving domestic
corporation or foreign corporation of the merger or the acquiring domestic
corporation or foreign corporation of the share exchange.
(3) "Dissenter" means a shareholder or beneficial shareholder who is
entitled to dissent from corporate action under s.180.1302 and who
exercises that right when and in the manner required by ss. 180.1320 to
1328.
(4) "Fair value", with respect to a dissenter's shares other than in a
business combination, means the value of the shares immediately before the
effectuation of the corporate action to which the dissenter objects,
excluding any appreciation or depreciation in anticipation of the corporate
action unless exclusion would be inequitable. "Fair value", with respect to
a dissenter's shares in a business combination, means market value, as
defined in s.180.1130(9)(a) 1 to 4.
(5) "Interest" means interest from the effectuation date of the
corporate action until the date of payment, at the average rate currently
paid by the corporate on its principal bank loans or, if none, at a rate
that is fair and equitable under all the circumstances.
(6) "Issuer corporation" means a domestic corporation that is the
issuer of the shares held by a dissenter before the corporate action. (Last
amended by Act 16, L. '91, eff. 5-13-91.)
180.1302 RIGHT TO DISSENT. (1) Except as provided in sub (4) and s.
180.1008(3), a shareholder or beneficial shareholder may dissent from, and
obtain payment of the fair value of his or her shares in the event of, any of
the following corporate actions:
(a) Consummation of a plan of merger to which the issuer corporation
is a party if any of the following applies:
1. Shareholder approval is required for the merger by s. 180.1103
or by the articles of incorporation.
2. The issuer corporation is a subsidiary that is merged with its
parent under s. 180.1104.
(b) Consummation of a plan of share exchange if the issuer
corporation's shares will be acquired, and the shareholder or the
shareholder holding shares on behalf of the beneficial shareholder is
entitled to vote on the plan.
(c) Consummation of a sale or exchange of all, or substantially all,
of the property of the issuer corporation other than in the usual and
regular course of business, including a sale in dissolution, but not
including any of the following:
1. A sale pursuant to court order.
2. A sale for cash pursuant to a plan by which all or substantially
all of the net proceeds of the sale will be distributed to the
shareholders within one year after the date of sale.
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(d) Except as provided in sub. (2), any other corporate action taken
pursuant to a shareholder vote to the extent that the articles of
incorporation, bylaws or a resolution of the board of directors provides
that the voting or nonvoting shareholder or beneficial shareholder may
dissent and obtain payment for his or her shares.
(2) Except as provided in sub. (4) and s. 180.1008(3), the articles of
incorporation may allow a shareholder or beneficial shareholder to dissent from
an amendment of the articles of incorporation and obtain payment of the fair
value of his or her shares if the amendment materially and adversely affects
rights in respect of a dissenter's shares because it does any of the following:
(a) Alters or abolishes a preferential right of the shares.
(b) Creates, alters or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares.
(c) Alters or abolishes a preemptive right of the holder of shares to
acquire shares or other securities.
(d) Excludes or limits the right of the shares to vote on any matter
or to cumulate votes, other than a limitation by dilution through issuance
of shares or other securities with similar voting rights.
(e) Reduces the number of shares owned by the shareholder or
beneficial shareholder to a fraction of a share if the fractional share so
created is to be acquired for cash under s. 180.0604.
(3) Notwithstanding sub. (1)(a) to (c), if the issuer corporation is a
statutory close corporation under ss. 180.1801 to 180.1837, a shareholder of the
statutory close corporation may dissent from a corporate action and obtain
payment of the fair value of his or her shares, to the extent permitted under
sub. (1)(d) or (2) or s. 180.1803, 180.1813(1)(d) or (2)(b), 180.1815(3) or
180.1829(1)(c).
(4) Except in a business combination or unless the articles of
incorporation provide otherwise, subs. (1) and (2) do not apply to the holders
of shares of any class or series if the shares of the class or series are
registered on a national securities exchange or quoted on the national
association of securities dealers, inc., automated quotations system on the
record date fixed to determine the shareholders entitled to notice of a
shareholders meeting at which shareholders are to vote on the proposed corporate
action.
(5) Except as provided in s. 180.1833, a shareholder or beneficial
shareholder entitled to dissent and obtain payment for his or her shares under
ss. 180.1301 to 180.1331 may not challenge the corporate action creating his or
her entitlement unless the action is unlawful or fraudulent with respect to the
shareholder, beneficial shareholder or issuer corporation. (Last amended by Act
16, L. '91, eff. 5-13-91.)
180.1303 DISSENT BY SHAREHOLDERS AND BENEFICIAL SHAREHOLDERS. (1) A
shareholder may assert dissenters' rights as to fewer than all of the shares
registered in his or her name only if the shareholder dissents with respect to
all shares beneficially owned by any one person and notifies the corporation in
writing of the name and address of each person on whose behalf he or she asserts
dissenters' rights. The rights of a shareholder who under this subsection
asserts dissenters' rights as to fewer than all of the shares registered in his
or her name are determined as if the shares as to which he or she dissents and
his or her other shares were registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on his or her behalf only if the beneficial shareholder does all of the
following:
(a) Submits to the corporate the shareholder's written consent to the
dissent not later than the time that the beneficial shareholder assets
dissenters' rights.
(b) Submits the consent under par. (a) with respect to all shares of
which he or she is the beneficial shareholder.
180.1320 NOTICE OF DISSENTERS' RIGHTS. (1) If proposed corporate action
creating dissenters' rights under s. 180.1302 is submitted to a vote at a
shareholders' meeting, the meeting notice shall state that
III-2
<PAGE> 164
shareholders and beneficial shareholders are or may be entitled to assert
dissenters' rights under ss. 180.1301 to 180.1331 and shall be accompanied by a
copy of those sections.
(2) If corporate action creating dissenters' rights under s. 180.1302 is
authorized without a vote of shareholders, the corporation shall notify, in
writing and in accordance with s. 180.0141, all shareholders entitled to assert
dissenters' rights that the action was authorized and send them the dissenters'
notice described in s. 180.1322.
180.1321 NOTICE OF INTENT TO DEMAND PAYMENT. (1) If proposed corporate
action creating dissenters' rights under s. 180.1302 is submitted to a vote at a
shareholder's meeting, a shareholder or beneficial shareholder who wishes to
assert dissenters' rights shall do all of the following:
(a) Deliver to the issuer corporation before the vote is taken written
notice that complies with s. 180.0141 of the shareholder's beneficial
shareholder's intent to demand payment for his or her shares if the
proposed action is effectuated.
(b) Not vote his or her shares in favor of the proposed action.
(2) A shareholder or beneficial shareholder who fails to satisfy sub. (1)
is not entitled to payment for his or her shares under ss. 180.1301 to 180.1331.
180.1322 DISSENTERS' NOTICE. (1) If proposed corporate action creating
dissenters' rights under s. 180.1302 is authorized at a shareholders' meeting,
the corporation shall deliver a written dissenters' notice to all shareholders
and beneficial shareholders who satisfied s. 180.1321.
(2) The dissenters' notice shall be sent no later than 10 days after the
corporate action is authorized at a shareholders' meeting or without a vote of
shareholders, whichever is applicable. The dissenters' notice shall comply with
s. 180.0140 and shall include or have attached all of the following:
(a) A statement indicating where the shareholder or beneficial must
send the payment demand ad where and when certificates for certificated
shares must be deposited.
(b) For holders of uncertificated shares, an explanation of the extent
to which transfer of the shares will be restricted after the payment demand
is received.
(c) A form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action and that whether he or she acquired beneficial ownership
of the shares before that date.
(d) A date by which the corporation must receive the payment demand,
which may not be fewer than 30 days nor more than 60 days after the date on
which the dissenters' notice delivered.
(e) A copy of ss. 180.1301 to 180.1331.
180.1323 DUTY TO DEMAND PAYMENT. (1) A shareholder or beneficial
shareholder who is sent a dissenters' notice described in s. 180.1322, or a
beneficial shareholder whose shares are held by a nominee who is sent a
dissenters' notice described in s. 180.1322, must demand payment in writing and
certify whether he or she acquired beneficial ownership of the shares before the
date specified in the dissenters' notice under s. 180.1322(2)(c). A shareholder
or beneficial shareholder with certificated shares must also deposit his or her
certificates in accordance with the terms of the notice.
(2) A shareholder or beneficial shareholder with certificated shares who
demands payment and deposits his or her share certificates under sub. (1)
retains all other rights of a shareholder or beneficial shareholder until these
rights are canceled or modified by the effectuation of the corporate action.
(3) A shareholder or beneficial shareholder with certificated or
uncertificated shares who does not demand payment by the date set in the
dissenters' notice, or a shareholder or beneficial shareholder with certificated
shares who does not deposit his or her share certificates where required and by
the date set in the dissenters' notice is not entitled to payment for his or her
shares under ss. 180.1301 to 180.1331.
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<PAGE> 165
180.1324 RESTRICTIONS ON UNCERTIFICATED SHARES. (1) The issuer corporation
may restrict the transfer of uncertificated shares from the date that the demand
for payment for those shares is received until the corporate action is
effectuated or the restrictions released under s. 180.1326.
(2) The shareholder or beneficial shareholder who asserts dissenters'
rights as to uncertificated shares retains all of the rights of a shareholder or
beneficial shareholder, other than those restricted under sub. (1), until these
rights are canceled or modified by the effectuation of the corporate action.
180.1325 PAYMENT. (1) Except as provided in s. 180.1327, as soon as the
corporate action is effectuated or upon receipt of a payment demand, whichever
is later, the corporation shall pay each shareholder or beneficial shareholder
who has complied with s. 180.1323 the amount that the corporation estimates to
be the fair value of his or her shares, plus accrued interest.
(2) The payment shall be accompanied by all of the following:
(a) The corporation's latest available financial statements, audited
and including footnote disclosure if available, but including not less than
a balance sheet as of the end of a fiscal year ending not more than 16
months before the date of payment, an income statement for that year, a
statement of changes in shareholders' equity for that year and the latest
available interim financial statements, if any.
(b) A statement of the corporation's estimate of the fair value of the
shares.
(c) An explanation of how the interest was calculated.
(d) A statement of the dissenter's right to demand payment under s.
180.1328 if the dissenter is dissatisfied with the payment.
(e) A copy of ss. 180.1301 to 180.1331.
180.1326 FAILURE TO TAKE ACTION. (1) If an issuer corporation does not
effectuate the corporate action within 60 days after the date set under s.
180.1322 for demanding payment, the issuer corporation shall return the
deposited certificates and release the transfer restrictions imposed on
uncertified shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the issuer corporation effectuates the corporate action, the
corporation shall deliver a new dissenters' notice under s. 180.1322 and repeat
the payment demand procedure.
180.1327 AFTER-ACQUIRED SHARES. (1) A corporation may elect to withhold
payment required by s. 180.1325 from a dissenter unless the dissenter was the
beneficial owner of the shares before the date specified in the dissenters'
notice under s. 180.1322(2)(c) as the date of the first announcement to news
media or to shareholders of the terms of the proposed corporate action.
(2) To the extent that the corporation elects to withhold payment under
sub. (1) after effectuating the corporate action, it shall estimate the fair
value of the shares, plus accrued interest, and shall pay this amount to each
dissenter who agrees to accept it in full satisfaction of his or her demand. The
corporation shall send with its offer a statement of its estimate of the fair
value of the shares, an explanation of how the interest was calculated, and a
statement of the dissenter's right to demand payment under s. 180.1328 if the
dissenter is dissatisfied with the offer.
180.1328 PROCEDURE IF DISSENTER DISSATISFIED WITH PAYMENT OR OFFER. (1) A
dissenter may, in the manner provided in sub. (2), notify the corporation of the
dissenter's estimate of the fair value of his or her shares and amount of
interest due, and demand payment of his or her estimate, less any payment
received under s. 180.1325, or reject the offer under s. 180.1327 and demand
payment of the fair value of his or her shares and interest due, if any of the
following applies:
(a) The dissenter believes that the amount paid under s. 180.1325 or
offered under s. 180.1327 is less than the fair value of his or her shares
or that the interest due is incorrectly calculated.
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<PAGE> 166
(b) The corporation fails to make payment under s. 180.1325 within 60
days after the date set under s. 180.1322 for demanding payment.
(c) The issuer corporation, having failed to effectuate the corporate
action, does not return the deposited certificates or release the transfer
restrictions imposed on uncertificated shares within 60 days after the date
set under s. 180.1322 for demanding payment.
(2) A dissenter waives his or her rights to demand payment under this
section unless the dissenter notifies the corporation of his or her demand under
sub. (1) in writing within 30 days after the corporation made or offered payment
for his or her shares. The notice shall comply with s. 180.0141.
180.1330 COURT ACTION. (1) If a demand for payment under s. 180.1328
remains unsettled, the corporation shall bring a special proceeding within 60
days after receiving the payment demand under s. 180.1328 and petition the court
to determine the fair value of the shares and accrued interest. If the
corporation does not bring the special proceeding within the 60-day period, it
shall pay each dissenter whose demand remains unsettled the amount demanded.
(2) The corporation shall bring the special proceeding in the circuit court
for the county where its principal office or, if none in this state, its
registered office is located. If the corporation is a foreign corporation
without a registered office in this state, it shall bring the special proceeding
in the county in the state in which was located the registered office of the
issuer corporation that merged with or whose shares were acquired by the foreign
corporation.
(3) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the special proceeding.
Each party to the special proceeding shall be served with a copy of the petition
as provided in s. 801.14.
(4) The jurisdiction of the court in which the special proceeding is
brought under sub. (2) is plenary and exclusive. The court may appoint one or
more persons as appraisers to receive evidence and recommend decision on the
question of fair value. An appraiser has the power described in the order
appointing him or her or in any amendment to the order. The dissenters are
entitled to the same discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the special proceeding is entitled to
judgment for any of the following:
(a) the amount, if any, by which the court finds the fair value of his
or her shares, plus interest, exceeds the amount paid by the corporation.
(b) The fair value, plus accrued interest, of his or her shares
acquired on or after the date specified in the dissenter's notice under s.
180.1322(2)(c), for which the corporation elected to withhold payment under
s. 180.1327.
180.1331 COURT COSTS AND COUNSEL FEES. (1)(a) Notwithstanding ss. 814.01 to
814.04, the court in a special proceeding brought under s. 180.1330 shall
determine all costs of the proceeding, including the reasonable compensation and
expenses of appraisers appointed by the court and shall assess the costs against
the corporation, except as provided in par. (b).
(b) Notwithstanding ss. 814.01 and 814.04, the court may assess costs
against all or some of the dissenters, in amounts that the court finds to
be equitable, to the extent that the court finds the dissenters acted
arbitrarily, vexatiously or not in good faith in demanding payment under s.
180.1328.
(2) The parties shall bear their own expenses of the proceeding, except
that, notwithstanding ss. 814.01 to 814.04, the court may also assess the fees
and expenses of counsel and experts for the respective parties, in amounts that
the court finds to be equitable, as follows:
(a) Against the corporation and in favor of any dissenter if the court
finds that the corporation did not substantially comply with ss. 180.1320
to 180.1328.
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<PAGE> 167
(b) Against the corporation or against a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously or not in good faith
with respect to the rights provided by this chapter.
(3) Notwithstanding ss. 814.01 to 814.04, if the court finds that the
services of counsel and experts for any dissenter were of substantial benefit to
other dissenters similarly situated, the court may award to these counsel and
experts reasonable fees to be paid out of the amounts awarded the dissenters who
were benefited.
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<PAGE> 168
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
AMCORE has purchased for the benefit of its officers and directors, and
those of certain subsidiaries, insurance policies whereby the insurance
companies agree, among other things, that in the event any such officer or
director becomes legally obligated to make a payment (including legal fees and
expenses) in connection with an alleged wrongful act, such insurance companies
will pay AMCORE up to $5,000,000. Wrongful act means any breach of duty,
neglect, error, misstatement, misleading statement or other act done by an
officer or director of AMCORE or any subsidiary.
Reference is made to the caption "Comparison of Stockholders' Rights
Indemnification and Personal Liability of Directors and Officers" in the Proxy
Statement/Prospectus for a description of certain statutory and charter
provisions under which controlling persons, directors and officers of AMCORE are
afforded indemnification against liabilities which they may incur in such
capacities and for the statement of the Commission with respect thereto as to
the enforceability thereof.
Pursuant to the Merger Agreement, AMCORE has agreed to indemnify the
executive officers and directors of FNB and its subsidiaries for a period of six
years after the Effective Time to the same extent such persons are currently
indemnified pursuant to FNB's Articles of Incorporation and Bylaws. AMCORE has
agreed to provide directors' and officers' liability insurance for a period of
not less than three years after the Merger that provides coverage for events
occurring prior to the Effective Time and is in the aggregate no less favorable
than FNB's existing policy, provided that AMCORE will not be required to pay
annual premiums in excess of $20,000.
ITEM 21. EXHIBITS.
(a) The following exhibits have been filed (except where otherwise
indicated) as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- ---------------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Merger, dated as of October 30, 1996, among AMCORE
Financial, Inc., FNB Acquisition, Inc. and First National Bancorp, Inc. (included
as Annex II to the Proxy Statement/Prospectus)
3.1 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 23, 1989)
3.2 Bylaws of AMCORE Financial, Inc. as amended May 17, 1990 (Incorporated by
reference as Exhibit 3.1 of AMCORE's Annual Report on Form 10-K for the year
ended December 31, 1994)
4.1 Shareholder Rights Plan of AMCORE Financial, Inc. (incorporated by reference to
Exhibit 4.1 to the AMCORE Financial, Inc. Form 8-K dated February 21, 1996)
5.1 Opinion of Marshall, Hill, Cassas & de Lipkau
10.1 Form of Stockholder Voting Agreement, dated as of October 30, 1996, between
AMCORE Financial, Inc. and certain directors and officers of First National
Bancorp, Inc. (included as Exhibit B to Annex II to the Proxy
Statement/Prospectus)
23.1 Consent of McGladrey and Pullen, LLP
23.2 Consent of McGladrey and Pullen, LLP
23.3 Consent of Skadden, Arps, Slate, Meagher & Flom (Illinois)
23.4 Consent of Jones, Day, Reavis & Pogue
23.5 Consent of Marshall, Hill, Cassas & de Lipkau (included in Exhibit 5.1)
99 Form of Proxy for First National Bancorp, Inc.
</TABLE>
II-1
<PAGE> 169
(b) No financial statement schedules are required to be filed with regard
to AMCORE or FNB.
ITEM 22. UNDERTAKINGS.
(1) AMCORE hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, as amended, each filing of the
Registrant's Special report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, as amended, that is incorporated by reference
in the Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(2) AMCORE hereby undertakes that prior to any public reoffering of the
securities registered hereunder through use of a Prospectus which is a part of
this Registration Statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes that such
reoffering Prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(3) AMCORE undertakes that every Prospectus (i) that is filed pursuant to
paragraph (2) immediately preceding, or (ii) that purports to meet the
requirements of section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, as amended, each such post-effective amendment
shall be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(4) Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers and controlling
persons of AMCORE pursuant to the foregoing provisions, or otherwise, AMCORE has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by AMCORE of expenses incurred or paid
by a director, officer or controlling person or AMCORE in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, AMCORE
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
(5) AMCORE hereby undertakes to respond to requests for information that is
incorporated by reference into the Prospectus pursuant to Items 4, 10(b), 11 or
13 of Form S-4, within one business day of receipt of such request, and to send
the incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the Registration Statement through the date of responding to
the request.
(6) AMCORE hereby undertakes to supply by means of a post-effective
amendment all information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and included in the
Registration Statement when it became effective.
(7) AMCORE hereby undertakes to remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
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<PAGE> 170
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Rockford, State of
Illinois, on this 18th day of December 1996.
AMCORE FINANCIAL, INC.
By: /s/ JOHN R. HECHT
------------------------------------
John R. Hecht
Senior Vice President and
Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned officers and
directors of AMCORE Financial, Inc. hereby constitutes and appoints Robert J.
Meuleman and John R. Hecht, or either of them (with full power to each of them
to act alone), his true and lawful attorney-in-fact and agent, with full power
of substitution, for him and on his behalf and in his name, place and stead, in
any and all capacities, to sign, execute and file this Registration Statement
under the Securities Act of 1933, as amended, and any or all amendments
(including, without limitation, post-effective amendments and any amendment or
amendments or additional registration statements filed pursuant to Rule 462 of
the Securities Act increasing the amount of securities for which registration is
being sought), with all exhibits and any and all documents required to be filed
with respect thereto, with the Securities and Exchange Commission or any
regulatory authority, granting unto such attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same, as fully to all intents and purposes as he himself might or
could do if personally present, hereby ratifying and confirming that all such
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- --------------------------------- ------------------
<S> <C> <C>
/s/ ROBERT J. MEULEMAN Director and President and Chief December 18, 1996
- ---------------------------------------- Executive Officer (principal
Robert J. Meuleman executive officer)
/s/ JOHN R. HECHT Senior Vice President and Chief December 18, 1996
- ---------------------------------------- Financial Officer (principal
John R. Hecht financial officer and principal
accounting officer)
/s/ MILTON R. BROWN Director December 18, 1996
- ----------------------------------------
Milton R. Brown
/s/ CARL J. DARGENE Director December 18, 1996
- ----------------------------------------
Carl J. Dargene
/s/ ROBERT A. DOYLE Director December 18, 1996
- ----------------------------------------
Robert A. Doyle
/s/ LAWRENCE E. GLOYD Director December 18, 1996
- ----------------------------------------
Lawrence E. Gloyd
</TABLE>
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<PAGE> 171
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- --------------------------------- ------------------
<S> <C> <C>
/s/ TED ROSS Director December 18, 1996
- ----------------------------------------
Ted Ross
/s/ JACK D. WARD, ESQ. Director December 18, 1996
- ----------------------------------------
Jack D. Ward, Esq.
</TABLE>
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<PAGE> 172
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of October 30, 1996, among AMCORE
Financial, Inc., FNB Acquisition, Inc. and First National Bancorp, Inc. (included
as Annex II to the Proxy Statement/Prospectus)
3.1 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 23, 1989)
3.2 Bylaws of AMCORE Financial, Inc. as amended May 17, 1990 (Incorporated by
reference as Exhibit 3.1 of AMCORE's Annual Report on Form 10-K for the year
ended December 31, 1994)
4.1 Shareholder Rights Plan of AMCORE Financial, Inc. (incorporated by reference to
Exhibit 4.1 to the AMCORE Financial, Inc. Form 8-K dated February 21, 1996)
5.1 Opinion of Marshall, Hill, Cassas and de Lipkau
10.1 Form of Stockholder Voting Agreement, dated as of October 30, 1996, between
AMCORE Financial, Inc. and certain directors and officers of First National
Bancorp, Inc. (included as Exhibit B to Annex II to the Proxy
Statement/Prospectus)
23.1 Consent of McGladrey and Pullen, LLP
23.2 Consent of McGladrey and Pullen, LLP
23.3 Consent of Skadden, Arps, Slate, Meagher & Flom (Illinois)
23.4 Consent of Jones, Day, Reavis & Pogue
23.5 Consent of Marshall, Hill, Cassas and de Lipkau (included in Exhibit 5.1)
99 Form of Proxy for First National Bancorp, Inc.
</TABLE>
<PAGE> 1
EXHIBIT 5.1
[Marshall, Hill, Cassas & de Lipkau Letterhead]
January 8, 1997
AMCORE Financial, Inc.
501 Seventh Street
Rockford, Illinois 61104
Re: AMCORE Financial, Inc. -- Registration Statement
Form S-4 - First National Bancorp, Inc. Merger
Ladies and Gentlemen:
We have acted as special counsel to AMCORE Financial, Inc., a Nevada
corporation (the "Company"), in connection with the preparation of the
Registration Statement (as defined below) for the registration under the
Securities Act of 1933, as amended (the "Act"), of up to 1,884,284 shares (the
"Shares") of Common Stock, par value $0.33 per share (the "Common Stock"), of
the Company, together with the share purchase rights (the "Rights") associated
therewith.
The Shares are to be issued pursuant to the terms of the Agreement and
Plan of Merger, dated as of October 30, 1996 (the "Merger Agreement"), among
the Company, FNB Acquisition, Inc., a Wisconsin corporation and a wholly owned
subsidiary of the Company ("Newco"), the First National Bancorp, Inc., a
Wisconsin corporation ("FNB"), which provides for the merger (the "Merger") of
Newco with and into FNB, with FNB surviving as a wholly-owned subsidiary of the
Company.
This opinion is delivered in accordance with the requirements of Item
601(b)(5) of Regulation S-K promulgated under the Securities Act.
In connection with this opinion, we have examined and are familiar
with originals or copies, certified or otherwise identified to our satisfaction,
of the following:
(i) the Proxy Statement/Prospectus dated January 8, 1997 which
constitutes part of the Registration Statement on Form S-4
(Registration No. 333-____) (the "Registration Statement") filed with
the Securities and Exchange Commission (the "Commission") on January 8,
1997 under the Act;
<PAGE> 2
AMCORE Financial, Inc.
January 8, 1997
Page 2
(ii) the Registration Statement;
(iii) a specimen certificate representing the Common Stock;
(iv) the Merger Agreement;
(v) the Bylaws of the Company, as presently in effect;
(vi) certain resolutions of the Board of Directors of the
Company relating to the issuance of the Shares;
(vii) copies of the following charter documents of the Company
certified by the Nevada Secretary of State:
(a) Articles of Incorporation for Americorp Financial,
Inc. filed June 1, 1982;
(b) Certificate of Amendment changing
name from AMERICORP FINANCIAL, INC. to AMCORE FINANCIAL, INC.
filed December 12, 1985;
(c) Certificate of Amendment filed May 12, 1986;
(d) Certificate of Amendment filed May 28, 1986;
(e) Certificate of Amendment filed June 7, 1988;
(f) Certificate of Amendment filed May 10, 1990;
(g) Certificate of Ownership And Merger filed
December 17, 1990;
(h) Certificate of Stock Split Pursuant to NRS 78.207
filed December 13, 1993.
We have also examined originals or copies, certified or otherwise identified to
our satisfaction, of such other documents, certificates and records as we have
deemed necessary or appropriate as a basis for the opinions set forth herein.
In such examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic or telecopied copies
<PAGE> 3
AMCORE Financial, Inc.
January 8, 1997
Page 3
and the authenticity of the originals of such copies. We have assumed that all
documents submitted to us unsigned have been properly executed by the proper
parties and delivered in a timely manner. As to any facts material to this
opinion that we did not independently establish or verify, we have relied upon
the Registration Statement and statements and representations of the officers
and other representatives of the Company and others.
We are admitted to practice in the State of Nevada and we express no
opinion as to the laws of any other jurisdiction.
Based upon the foregoing, it is our opinion that, under Nevada law when
(i) the Registration Statement, as finally amended, becomes effective, (ii) the
Merger becomes effective under the Business Corporation law of the State of
Wisconsin pursuant to the terms of the Merger Agreement, and (iii) certificates
representing the Shares have been duly executed by an authorized officer of the
exchange agent for the Common Stock and registered by such exchange agent and
duly delivered in accordance with the terms of the Merger Agreement:
1. The Shares will be validly issued, fully paid and
nonassessable; and
2. Each Right associated with the Shares will be validly
issued when the associated Shares have been duly issued as set forth in
paragraph 1.
This opinion is limited to matters governed by the laws of the State of
Nevada, excluding any Nevada state "blue sky" law. We hereby consent to the
use of our name under the heading "Legal Matters" in the Proxy
Statement/Prospectus which forms a part of the Regisration Statement. We also
hereby consent to the filing of this opinion with the Commission as an exhibit
to the Registration Statement. In giving this consent, we do not thereby admit
that we are within the category of persons whose consent is required under
Section 7 of the Act or the rules and regulations of the Commission promulgated
thereunder. This opinion is expressed as of the date hereof unless otherwise
expressly stated and we disclaim any undertaking to advise you of the facts
stated or assumed herein or any subsequent changes in applicable law.
Very truly yours,
/s/ MARSHALL HILL CASSAS & de LIPKAU
JPF:kae
<PAGE> 1
EXHIBIT 23.1
[MCGLADREY & PULLEN,LLP LETTERHEAD]
INDEPENDENT AUDITORS' CONSENT
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated January 31, 1996, with respect to the consolidated
financial statements of First National Bancorp, Inc. included in this
Registration Statement (Form S-4) and the related Proxy Statement for the
offering of common stock of AMCORE Financial, Inc.
/s/ McGLADREY & PULLEN,LLP
January 3, 1997
Madison, Wisconsin
<PAGE> 1
EXHIBIT 23.2
[MCGLADREY & PULLEN, LLP LETTERHEAD]
The Board of Directors
AMCORE Financial, Inc.
We consent to incorporation by reference in the Registration Statement on Form
S-4 of AMCORE Financial, Inc. of our report dated January 19, 1996, relating
to the consolidated balance sheets of AMCORE Financial, Inc. and subsidiaries
as of December 31, 1995 and 1994, and the related consolidated statements of
income, stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1995, which report appears in the December
31, 1995 annual report on Form 10-K of AMCORE Financial, Inc. and to the
reference of our firm under the heading "Experts" in the Proxy
Statement-Prospectus.
/s/ McGladrey & Pullen, LLP
Rockford, Illinois
January 3, 1997
<PAGE> 1
EXHIBIT 23.3
[SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)]
January 7, 1997
AMCORE Financial, Inc.
501 Seventh Street
Rockford, Illinois 61104
Ladies & Gentlemen:
Reference is made to the Registration Statement on Form S-4 (the
"Registration Statement") of AMCORE Financial, Inc., a Nevada corporation
("AMCORE"), relating to the merger of FNB Acquisition, Inc., a Wisconsin
corporation and a wholly owned subsidiary of AMCORE, with and into First
National Bancorp, Inc., a Wisconsin corporation ("FNB") (the "Merger"). We
have acted as special counsel to AMCORE in connection with the Merger.
We hereby consent to the reference to our firm under the heading "OPINIONS"
in the Proxy Statement/ Prospectus that is part of the Registration Statement.
In giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of
1933, as amended, or the rules and regulations promulgated thereunder.
Very truly yours,
/s/ Skadden, Arps, Slate,
Meagher & Flom (Illinois)
<PAGE> 1
EXHIBIT 23.4
[JONES, DAY, REAVIS & POGUE LETTERHEAD]
January 7, 1997
First National Bancorp, Inc.
1625 Tenth Street
Monroe, Wisconsin 53566
Ladies & Gentlemen:
Reference is made to the Registration Statement on Form S-4 (the
"Registration Statement") of AMCORE Financial, Inc., a Nevada corporation
("AMCORE"), relating to the merger of FNB Acquisition, Inc., a Wisconsin
corporation and a wholly owned subsidiary of AMCORE, with and into First
National Bancorp, Inc., a Wisconsin corporation ("FNB") (the "Merger"). We
have acted as special counsel to FNB in connection with the Merger.
We hereby consent to the reference to our firm under the headings "THE
MERGER -- Certain Federal Income Tax Consequences" and "OPINIONS" in the Proxy
Statement/ Prospectus that is part of the Registration Statement. In giving
such consent, we do not thereby admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations promulgated thereunder.
Very truly yours,
/s/ Jones, Day, Reavis & Pogue
<PAGE> 1
EXHIBIT 99
LOGO JANUARY 10, 1997
PROXY
FIRST NATIONAL BANCORP, INC.
1625 TENTH STREET
MONROE, WISCONSIN 53566
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
FEBRUARY 10, 1997
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned hereby appoints Richard W. Rote and Gary L. Culp, and each
of them, as "Proxies," each with the power to appoint his substitute, and hereby
authorizes each of them to represent and to vote, as designated below, all of
the shares of stock of First National Bancorp, Inc. held of record by the
undersigned on January 10, 1997 at the Special Meeting of shareholders of First
National Bancorp, Inc. to be held on February 10, 1997 and at all adjournments
thereof.
The Board of Directors Recommend a Vote "FOR" the following Proposals:
(1) To approve and adopt the Agreement and Plan of Merger, dated as of October
30, 1996 (the "Merger Agreement"), among AMCORE Financial, Inc., a Nevada
corporation ("AMCORE"), FNB Acquisition, Inc., a Wisconsin corporation
("Newco") and a wholly-owned subsidiary of AMCORE, and First National
Bancorp, Inc. ("FNB") and the transactions contemplated thereby, pursuant
to which, among other things, (i) Newco will merge with and into FNB, with
FNB being the surviving corporation in the merger, and (ii) each
outstanding share of Common Stock, par value $1.00 per share, of FNB (other
than shares of Common Stock held by FNB as treasury stock immediately prior
to the Effective Time (as defined in the Merger Agreement) and shares of
Common Stock held by AMCORE, Newco, or any direct or indirect subsidiary of
AMCORE, which shares will be cancelled, and other than shares of Common
Stock held by stockholders of FNB who have properly exercised their
dissenters' rights under Wisconsin law) will be cancelled and converted
into the right to receive 7.54 shares of Common Stock, par value $.33 per
share, of AMCORE, subject to certain adjustments, all as more fully
described in the accompanying Proxy Statement/Prospectus.
<TABLE>
<S> <C> <C>
[ ]FOR approval and adoption [ ]AGAINST approval and adoption [ ]ABSTAIN from vote
of the Merger Agreement of the Merger Agreement on the Merger Agreement
</TABLE>
(2) In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before this meeting.
<TABLE>
<S> <C>
[ ]FOR such authorization [ ]AGAINST such authorization
</TABLE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE FOR A PROPOSAL, THIS PROXY WILL BE VOTED FOR THAT
PROPOSAL.
<TABLE>
<S> <C>
Dated: ----------------------------------------- ------------------------------------------------
Signature
------------------------------------------------
Signature, if held jointly
</TABLE>
Please sign exactly as name appears hereon. When shares are held by joint
tenants, each should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. When executed by a
corporation, the proxy should be signed by a duly authorized officer, including
title as such. If a partnership, please sign in partnership name by an
authorized person.
PLEASE SIGN, DATE AND MAIL THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
