<PAGE>
As filed with the Securities and Exchange Commission on June 17, 1997
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
---------------------------
NATIONAL CITY BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
---------------------------
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INDIANA 6711 35-1632155
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
227 Main Street
P.O. Box 868
Evansville, Indiana 47705-0868
(812) 464-9677
(Address, including zip code and telephone number, including area code, of
Registrant's principal executive offices)
---------------------------
ROBERT A. KEIL
National City Bancshares, Inc.
227 Main Street
P.O. Box 868
Evansville, IN 47705-0868
(812) 464-9677
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------------
Copies to:
David C. Worrell, Esq. Robert S. Cohen, Esq.
Baker & Daniels Giffin, Winning, Cohen & Bodewes, P.C.
300 North Meridian Street 1 West Old State Capitol Plaza
Suite 2700 Suite 600 Myers Building
Indianapolis, Indiana 46204 Springfield, Illinois 62705
(317) 237-0300 (217) 525-1571
---------------------------
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after the effective date of this Registration
Statement.
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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
- ------------------------------------------------------------------------------------------------------------------------------------
Proposed Proposed
Maximum Maximum
Title of Each Class of Amount to be Offering Price Aggregate Amount of
Securities to be Registered Registered Per Unit Offering Price Registration Fee
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Common Stock, without par value 450,000(1) (2) $6,467,716(2) $1,960
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(1) Based on the maximum number of shares of National City Bancshares, Inc. Common Stock that may be issued in the Merger.
(2) Calculated pursuant to Rule 457(f)(2) under the Securities Act of 1933 based on the book value per share of the common stock of
Bridgeport Bancorp, Inc. as of March 31, 1997.
- ------------------------------------------------------------------------------------------------------------------------------------
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until
the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective
on such date as the Commission, acting pursuant to said Section 8(a), may determine.
</TABLE>
<PAGE>
[Bridgeport Bancorp, Inc. Letterhead]
_____ __, 1997
Dear Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders of
Bridgeport Bancorp, Inc. ("BBI") to be held at 11:00 a.m., local time, on
______, 1997 at the office of First National Bank of Bridgeport located at 201
North Main Street, Bridgeport, Illinois. At the Special Meeting you will be
asked to consider and vote upon a proposal to approve an Agreement and Plan of
Merger (the "Merger Agreement") dated as of April 21, 1997, which provides for
the merger (the "Merger") of BBI with and into National City Bancshares, Inc.
("NCBE").
If the Merger is approved and consummated, each issued and outstanding
share of common stock of BBI ("BBI Common"), other than shares held by
shareholders properly exercising dissenters' rights, will be converted into the
right to receive from NCBE a number of shares of NCBE common stock ("NCBE
Common") equal to the number of shares of NCBE Common having an aggregate Market
Value (as defined in the Merger Agreement) of $13,500,000, but not less than
375,000 or more than 450,000 shares divided by the number of shares of BBI
Common outstanding on the date of the closing of the Merger. Based on the number
of shares of BBI Common expected to be outstanding, each share of BBI Common
will be converted into the right to receive not less than 49.5273 and not more
than 59.4328 shares of NCBE Common. The provisions for converting shares of BBI
Common into NCBE Common and cash in lieu of fractional shares are set forth in
the Merger Agreement and described in the accompanying Prospectus/Proxy
Statement.
After careful review and consideration, your Board of Directors believes
that the proposed Merger is in the best interests of BBI and its shareholders.
ACCORDINGLY, YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE
MERGER AGREEMENT.
Please read the accompanying Prospectus/Proxy Statement which describes the
Merger and related matters in more detail. Your participation in the Special
Meeting, in person or by proxy, is important. Therefore, please mark, sign and
date the enclosed proxy card and mail it as soon as possible in the enclosed
postage-paid envelope so that your shares will be represented at the Special
Meeting. If you attend the Special Meeting, you may revoke your proxy and vote
your shares in person if you wish, even if you have previously mailed in your
proxy card.
Sincerely,
William A. Tillmann
Chief Executive Officer
<PAGE>
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
BRIDGEPORT BANCORP, INC.
To be held on _____, 1997
TO THE SHAREHOLDERS OF BRIDGEPORT BANCORP, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "Special
Meeting") of Bridgeport Bancorp, Inc., an Illinois corporation ("BBI"), will be
held on _____ __, 1997, at 11:00 a.m., local time, at the office of First
National Bank of Bridgeport located at 201 North Main Street, Bridgeport,
Illinois, for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement and Plan
of Merger (the "Merger Agreement"), dated as of April 21, 1997, between
BBI and National City Bancshares, Inc., an Indiana corporation
("NCBE"), and the transactions contemplated thereby, pursuant to which,
among other things, BBI will be merged (the "Merger") with and into
NCBE, upon the terms and conditions set forth in the Merger Agreement,
as more fully described in the accompanying Prospectus/Proxy Statement.
2. Such other matters as may properly come before the Special Meeting or
any adjournments or postponements thereof.
A copy of the Merger Agreement is attached as Appendix A to the
accompanying Prospectus/Proxy Statement and is incorporated by reference in this
Notice.
The Board of Directors of BBI has fixed the close of business on
_______, 1997, as the record date for determination of shareholders entitled to
notice of and to vote at the Special Meeting or at any adjournments or
postponements thereof.
THE BOARD OF DIRECTORS OF BBI HAS APPROVED THE MERGER AGREEMENT AND
BELIEVES THAT THE MERGER IS IN THE BEST INTERESTS OF ITS SHAREHOLDERS. THE
BOARD, THEREFORE, RECOMMENDS THAT THE SHAREHOLDERS OF BBI VOTE "FOR" APPROVAL OF
THE MERGER AGREEMENT.
THE ACCOMPANYING PROSPECTUS/PROXY STATEMENT DESCRIBES THE RIGHTS OF BBI
SHAREHOLDERS TO DISSENT FROM THE MERGER AND THE PROCEDURES WHICH MUST BE
FOLLOWED IN ORDER TO PERFECT SUCH RIGHTS.
By Order of the Board of Directors,
Bridgeport, Illinois
______, 1997 Secretary
<PAGE>
BRIDGEPORT BANCORP, INC.
PROXY STATEMENT
FOR
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD _______, 1997
-------------------------
NATIONAL CITY BANCSHARES, INC.
PROSPECTUS
UP TO 450,000 SHARES OF COMMON STOCK
-------------------------
This Prospectus/Proxy Statement relates to the proposed acquisition of
Bridgeport Bancorp, Inc., an Illinois corporation ("BBI"), by NCBE Bancshares,
Inc., an Indiana corporation ("NCBE"), by means of the merger (the "Merger") of
BBI with and into NCBE, pursuant to the terms of an Agreement and Plan of Merger
(the "Merger Agreement") dated as of April 21, 1997, between BBI and NCBE. A
copy of the Merger Agreement is attached hereto as Appendix A and is
incorporated by reference herein.
This Prospectus/Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of BBI to be used at the
Special Meeting of Shareholders (the "Special Meeting") of BBI to be held on
_______, 1997. At the Special Meeting, holders of shares of BBI's common stock,
$25.00 par value per share (the "BBI Common"), will be asked to consider and
vote upon approval of the Merger Agreement and the transactions contemplated
thereby. Any proxy given pursuant to this solicitation may be revoked at any
time prior to the voting thereof at the Special Meeting. Shareholders of BBI are
entitled to dissenters' rights in connection with the Merger as described
herein. See "SPECIAL MEETING" and "THE MERGER -- Dissenters' Rights." Statement
and the accompanying form of proxy are first being mailed to shareholders of BBI
on or about ______, 1997.
Pursuant to the Merger Agreement and in connection with the Merger, each
issued and outstanding share of BBI Common, other than shares held by
shareholders properly exercising dissenters' rights, will be converted into the
right to receive shares of common stock, $1.00 stated value per share, of NCBE
(the "NCBE Common") and cash in lieu of fractional shares. Each share of BBI
Common will be converted to a number of shares of NCBE Common equal to: (i) the
number of shares of NCBE Common which have an aggregate Market Value (as defined
in the Merger Agreement) of $13,500,000, subject to a minimum of 375,000 shares
and a maximum of 450,000 shares; (ii) divided by the number of shares of BBI
Common outstanding on the date of the closing of the Merger (the "Closing"). See
"THE MERGER -- Conversion of BBI Common." This Prospectus/Proxy Statement also
constitutes the prospectus of NCBE with respect to up to 450,000 shares of NCBE
Common issuable in the Merger.
The outstanding shares of NCBE Common are traded on the Nasdaq National
Market tier of the Nasdaq Stock Market. The last reported sale price of NCBE
Common on ______, 1997, was $__________.
-------------------------------
THE SHARES OF NCBE COMMON HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------------------
THE SHARES OF NCBE COMMON OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR
SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE
FUND OR ANY OTHER GOVERNMENTAL AGENCY.
-------------------------------
The date of this Prospectus/Proxy Statement is _______, 1997
<PAGE>
THIS PROSPECTUS/PROXY STATEMENT INCORPORATES DOCUMENTS RELATING TO NCBE BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS
(EXCLUDING UNINCORPORATED EXHIBITS) ARE AVAILABLE, WITHOUT CHARGE, TO ANY
PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROSPECTUS/PROXY STATEMENT
IS DELIVERED, UPON WRITTEN OR ORAL REQUEST, TO HAROLD A. MANN, SECRETARY,
NATIONAL CITY BANCSHARES, INC., 227 MAIN STREET, P.O. BOX 868, EVANSVILLE,
INDIANA 47705-0868 (TELEPHONE NUMBER (812) 464-9675). IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY [FIVE BUSINESS DAYS
PRIOR TO MEETING DATE] __________, 1997.
-------------------------
TABLE OF CONTENTS
Page
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AVAILABLE INFORMATION............................................... 5
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..................... 5
SUMMARY............................................................. 6
Parties to the Merger............................................. 6
Special Meeting of BBI Shareholders............................... 6
The Merger........................................................ 7
Summary Comparative Historical and Per Share Data................. 10
Stock Price Data.................................................. 11
Comparison of Shareholder Rights.................................. 11
SPECIAL MEETING..................................................... 12
Date, Time, Place and Purpose..................................... 12
Record Date....................................................... 12
Vote Required..................................................... 12
Voting and Revocation of Proxies.................................. 12
Solicitation of Proxies........................................... 13
THE MERGER.......................................................... 13
General........................................................... 13
Background of the Merger.......................................... 13
Reasons for the Merger; Recommendation of
BBI's Board of Directors.......................................... 14
Closing and Effective Time........................................ 14
Conversion of BBI Common.......................................... 14
Procedures for Exchange of Certificates........................... 15
Regulatory Approvals.............................................. 16
Dissenters' Rights................................................ 16
Representations and Warranties.................................... 17
Covenants......................................................... 18
Conditions to the Merger.......................................... 18
Termination and Waiver............................................ 19
No Solicitation; Fees and Expenses................................ 19
Certain Federal Income Tax Consequences........................... 20
Accounting Treatment.............................................. 21
2
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Resale of NCBE Common............................................... 21
Increase in Outstanding Shares of BBI Common........................ 22
Interests of Certain Persons in the Merger.......................... 22
VOTING AGREEMENT...................................................... 23
SELECTED FINANCIAL DATA............................................... 23
PRO FORMA CONDENSED CONSOLIDATED
COMBINED FINANCIAL STATEMENTS....................................... 26
COMPARATIVE STOCK PRICES AND DIVIDENDS................................ 33
INFORMATION CONCERNING NCBE........................................... 35
Business............................................................ 35
Recent Developments................................................. 35
Security Ownership of Certain Beneficial Owners
and Management................................................... 36
INFORMATION CONCERNING BBI............................................ 37
Business............................................................ 37
Selected Financial Data of BBI...................................... 37
Management's Discussion and Analysis of
Financial Conditions and Results of Operations.................... 38
Security Ownership of Certain Beneficial Owners
and Management.................................................... 47
DESCRIPTION OF NCBE CAPITAL STOCK..................................... 48
Authorized Shares................................................... 48
Dividend, Voting, Liquidation and Other Rights...................... 48
Certain Provisions of Articles of Incorporation and By-laws......... 48
Certain Provisions of the Indiana Law............................... 49
Transfer Agent...................................................... 49
COMPARISON OF SHAREHOLDER RIGHTS...................................... 49
Classified Board of Directors....................................... 49
Business Combinations Not Involving
an Interested Shareholder......................................... 49
Business Combinations Involving an
Interested Shareholder............................................ 50
Removal of Directors................................................ 50
Amendments to Articles of Incorporation............................. 50
Voting Rights....................................................... 51
Special Meetings of Shareholders.................................... 51
Shareholder Action by Written Consent............................... 51
Dissenters' Rights.................................................. 52
Control Share Acquisitions.......................................... 52
Indemnification..................................................... 52
Limitation of Liability of Directors................................ 53
Consideration of Non-Shareholder Interests.......................... 54
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3
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LEGAL MATTERS............................................................................... 54
EXPERTS..................................................................................... 54
INDEX TO BBI FINANCIAL STATEMENTS........................................................... F-1
APPENDIX A - Agreement and Plan of Merger dated as of April 21, 1997 between National City A-1
Bancshares, Inc. and Bridgeport Bancorp, Inc.
APPENDIX B - Excerpts of the Illinois Business Corporation Act (Dissenters' Rights) B-1
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS/PROXY STATEMENT IN CONNECTION
WITH THE OFFERING DESCRIBED HEREIN AND ANY SUCH INFORMATION OR REPRESENTATION,
IF GIVEN OR MADE, MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY NCBE OR
BBI. THIS PROSPECTUS/PROXY STATEMENT DOES NOT CONSTITUTE A SOLICITATION OR AN
OFFERING OF ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES OR IN ANY JURISDICTION TO ANY PERSON TO WHOM IT WOULD BE UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. THE DELIVERY OF THIS
PROSPECTUS/PROXY STATEMENT AT ANY TIME DOES NOT IMPLY THAT ANY INFORMATION
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
4
<PAGE>
AVAILABLE INFORMATION
NCBE 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"). The reports, proxy
statements and other information can be inspected and copied at the public
reference facilities of the Commission, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission located at
Seven World Trade Center, New York, New York 10048, and Suite 1400, Citicorp
Center, 500 West Madison Street, Chicago, Illinois 60661, and copies of such
materials can be obtained from the public reference section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission also maintains an Internet web site that contains reports, proxy and
information statements and other information regarding issuers who file
electronically with the Commission. The address of that site is
http://www.sec.gov. In addition, the NCBE Common is included in the Nasdaq
National Market and reports, proxy statements and other information concerning
NCBE are available for inspection at the office of the National Association of
Securities Dealers, Inc., at 1735 K Street, Washington, D.C. 20006.
NCBE has filed with the Commission a Registration Statement on Form S-4
(together with any amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
NCBE Common to be issued pursuant to the Merger described herein. This
Prospectus/Proxy Statement does not contain all the information set forth in the
Registration Statement and the exhibits thereto. Such additional information may
be obtained from the Commission's principal office in Washington, D.C.
Statements contained in this Prospectus/Proxy Statement or in any document
incorporated in this Prospectus/Proxy Statement by reference as to the contents
of any contract or other document referred to herein or therein are not
necessarily complete, and in each instance where reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement or such other document, each such statement is qualified in all
respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by NCBE (File No.
0-13585) pursuant to the Exchange Act are incorporated by reference in this
Prospectus/Proxy Statement:
1. NCBE's Annual Report on Form 10-K for the year ended December 31, 1996;
2. NCBE's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997; and
3. The description of the NCBE Common contained in the Registration
Statement on Form 8-A under the Exchange Act, filed with the Commission
on May 13, 1985, including any amendments or reports filed for the
purpose of updating such description.
All documents and reports filed by NCBE pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus/Proxy
Statement and prior to the date of the Special Meeting shall be deemed to be
incorporated by reference in this Prospectus/Proxy Statement and to be a part
hereof from the dates of filing of such documents or reports. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus/Proxy Statement to the extent that a statement contained herein or in
any other subsequently filed document which also is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus/Proxy Statement.
5
<PAGE>
SUMMARY
The following summary is not intended to be complete and is qualified in
all respects by the information appearing elsewhere herein or incorporated by
reference into this Prospectus/Proxy Statement, the Appendices hereto and the
documents referred to herein. All information contained in this Prospectus/Proxy
Statement relating to NCBE and its subsidiaries has been supplied by NCBE and
all information relating to BBI and its subsidiary has been supplied by BBI.
Shareholders are urged to read this Prospectus/Proxy Statement and the
Appendices hereto in their entirety.
PARTIES TO THE MERGER
NCBE
National City Bancshares, Inc. is a bank holding company headquartered in
Evansville, Indiana. As of March 31, 1997, NCBE had consolidated assets of $1.1
billion, deposits of $858 million, net loans of $756 million and shareholders'
equity of $117 million. NCBE currently has 12 financial institution subsidiaries
which serve 26 communities from 35 locations. NCBE's subsidiaries provide a wide
range of banking services in the tri-state area of Southwestern Indiana, Western
Kentucky and Southeastern Illinois.
NCBE is an Indiana corporation. Its principal offices are located at 227
Main Street, Evansville, Indiana 47708 (telephone number (812) 464-9677).
BBI
Bridgeport Bancorp, Inc. is a one-bank holding company headquartered in
Bridgeport, Illinois. As of March 31, 1997, BBI, together with its banking
subsidiary, First National Bank of Bridgeport ("FNBB"), a national banking
association, had total assets of $39.9 million, total net loans of $22.4
million, total deposits of $33.0 million, and total stockholders' equity of $6.4
million. FNBB has one banking office in Bridgeport, Illinois.
BBI is an Illinois corporation. Its principal offices are located at 201
North Main Street, Bridgeport, Illinois 62417 (telephone number (618) 945-2451).
SPECIAL MEETING OF BBI SHAREHOLDERS
Date, Time, Place and Purpose
The Special Meeting of BBI shareholders will be held at the office of FNBB
located at 201 North Main Street, Bridgeport, Illinois on ____ __, 1997, at
11:00 a.m., local time to consider and vote to approve the Merger Agreement and
the transactions contemplated thereby, including the Merger. A copy of the
Merger Agreement is attached hereto as Appendix A.
Record Date; Vote Required
The record date (the "Record Date") for the Special Meeting is _____ __,
1997. There were 7,511 shares of BBI Common outstanding on the Record Date.
The presence, in person or by proxy, of holders of a majority of the issued
and outstanding shares of BBI Common entitled to vote on the Record Date is
necessary to constitute a quorum at the Special Meeting. Pursuant to the
Illinois Business Corporation Act of 1983, as amended (the "Illinois Law"), the
affirmative vote of the holders of at least two-thirds of all of the issued and
outstanding shares of BBI Common or 5,008 shares is required to adopt the Merger
Agreement and the transactions contemplated thereby.
6
<PAGE>
Security Ownership of BBI Management; Voting Agreement
As of the close of business on the Record Date, 7,511 shares of BBI Common
were issued and outstanding and 6,264 shares of BBI Common, or 83.4%, of all
outstanding shares were beneficially owned by directors and executive officers
of BBI and their affiliates. Certain directors of BBI owning an aggregate of
6,178 shares of BBI Common (82.3% of all outstanding shares) have entered into
an agreement (the "Voting Agreement") with NCBE to vote the shares of BBI Common
they beneficially own in favor of the Merger. As a result, approval of the
Merger Agreement by the BBI shareholders is assured.
THE MERGER
The following summary is qualified in its entirety by reference to the full
text of the Merger Agreement, which is attached as Appendix A hereto and
incorporated by reference herein.
Effective Time of the Merger
Subject to the terms and conditions of the Merger Agreement and in
accordance with the Illinois Law and the Indiana Business Corporation Law, as
amended (the "Indiana Law"), the Merger will become effective at the hour and on
the date (the "Effective Time") specified in the Articles of Merger to be filed
pursuant to the Illinois Law and the Indiana Law with the Secretaries of State
of Illinois and Indiana following the closing (the "Closing") of the Merger. At
the Effective Time, BBI will merge with and into NCBE, and NCBE will be the
surviving corporation in the Merger and the separate corporate existence of BBI
will terminate.
Reasons for the Merger and Recommendation of Board of Directors
The recommendation of BBI's Board of Directors is based upon a number of
factors, including, but not limited to: (i) the Merger Consideration; (ii) the
terms of other reported acquisitions of financial institutions in the Midwestern
United States; (iii) information concerning the business, financial condition,
results of operations, and prospects of BBI and NCBE; (iv) recent market prices
for the shares of NCBE Common; (v) the tax-free nature of the Merger; and (vi)
the active trading market for the shares of NCBE Common.
THE BOARD OF DIRECTORS OF BBI RECOMMENDS APPROVAL OF THE MERGER
AGREEMENT AND THE MERGER.
For a discussion of the background of the Merger and the factors considered
by the Board of Directors of BBI in reaching its decision to approve the Merger
Agreement, see "MERGER -- Background of the Merger" and "-- Reasons for the
Merger; Recommendation of BBI's Board of Directors."
Conversion of BBI Common
As a result of the Merger, each share of BBI Common issued and outstanding
immediately prior to the Effective Time, other than shares whose holders have
properly exercised their dissenters' rights under the Illinois Law, will be
converted into the right to receive the number of shares of NCBE Common
specified in the Merger Agreement and cash in lieu of fractional shares
(collectively the "Merger Consideration"). The Merger Agreement provides that
each share of BBI Common will be converted into the right to receive that number
of shares of NCBE Common equal to: (i) the number of shares of NCBE Common
having an aggregate Market Value of $13,500,000, subject to a minimum of 375,000
shares and a maximum of 450,000 shares; (ii) divided by the number of
outstanding shares of BBI Common outstanding as of the Closing. The Merger
Agreement defines the Market Value of the NCBE Common as the average of the
weighted average trading prices of a share of NCBE Common as reported by the
Nasdaq National Market for the 10 trading days ended 3 days prior to the
Closing; however, the Market Value used for computing the number of shares of
NCBE Common in the Merger Consolidation may not be less than $30.00 per share or
more than $36.00 per share.
7
<PAGE>
BBI will have no obligation to consummate the Merger if the Market Value as
computed without giving effect to the minimum amount is less than $30.00. See
"THE MERGER -- Conversion of BBI Common".
The number of outstanding shares of BBI Common on the Record Date is 7,511.
BBI has agreed to issue an additional 60.5726 shares of BBI Common (0.8% of
outstanding shares after giving effect to such issuance) to the holder of the 80
shares of FNBB common stock (0.8% of the outstanding shares of FNBB common
stock) not currently owned by BBI. See "THE MERGER -- Increase in Outstanding
Shares of BBI Common".
No fractional shares of NCBE Common will be issued in the Merger and, in
lieu thereof and as part of the Merger Consideration, each holder of shares of
BBI Common who would otherwise be entitled to a fractional share interest (after
taking into account all shares of BBI Common held by such holder) will be paid
an amount in cash equal to the product of such fractional share interest and the
Market Value.
Based upon the number of shares of BBI Common expected to be outstanding as
of the Closing, each share of BBI Common will be converted into the right to
receive not less than 49.5273 and not more than 59.4328 shares of NCBE Common.
It is not possible, as of the date of this Prospectus/Proxy Statement, to
determine the actual number of shares of NCBE Common into which each share of
BBI Common will be converted. Assuming, however, for purposes of illustration,
that the Closing occurred on _____ __, 1997 and there were 7,571.5726 shares of
BBI Common then outstanding, each share of BBI Common would have been converted
into ______ shares of NCBE Common.
For information on how shareholders of BBI will be able to exchange
certificates representing shares of BBI Common for certificates representing
shares of NCBE Common after the Effective Time, see "THE MERGER -- Procedures
for Exchange of Certificates."
Certain Provisions of the Merger Agreement
The Merger Agreement contain various customary representations and
warranties of the parties and covenants that the parties will take or refrain
from taking certain actions prior to the Effective Date. See "THE MERGER --
Representations and Warranties" and "-- Covenants."
In addition to the approval of BBI shareholders, the obligations of both
parties to consummate the Merger are subject to the satisfaction or waiver of
certain conditions. The obligations of NCBE are further conditioned upon, among
other things, (i) the absence of any material adverse change prior to Closing in
the business, assets, properties, financial condition or results of operations
of BBI or FNBB; (ii) the absence of any breach of any obligations of the parties
to the Voting Agreement; (iii) the receipt of opinions of counsel to BBI as to
certain matters relating to BBI and the Merger; and (iv) the receipt of
assurances satisfactory to NCBE from its independent auditors that the Merger
may be accounted for using the "pooling of interests" method. The obligations of
BBI are further conditioned upon, among other things, (i) the receipt of
opinions of counsel to NCBE as to certain matters relating to NCBE and the
Merger and as to the treatment of the Merger as a tax-free reorganization; and
(ii) that the Market Value of the NCBE Common is not less than $30.00 per share
at the Closing, unless such condition is waived by the BBI Board of Directors
before or after approval of the Merger Agreement by the BBI shareholders. See
"THE MERGER -- Conditions."
The Merger Agreement may be terminated and the Merger abandoned prior to
the Effective Time, before or after approval of the Merger Agreement by the BBI
shareholders: (i) by mutual consent of BBI and NCBE; (ii) by BBI, if any of the
conditions to its obligation to consummate the Merger have not been satisfied by
September 30, 1997; or (iii) by NCBE, if any of the conditions to its obligation
to consummate the Merger have not been satisfied by September 30, 1997. See "THE
MERGER -- Termination and Waiver."
In the Merger Agreement, BBI has agreed not to solicit or conduct
negotiations or discussions with third parties regarding an acquisition of BBI
or FNBB except where such actions are required by fiduciary duties of the BBI
Board of Directors. If the Merger Agreement is terminated in certain
circumstances upon the occurrence of a Triggering Event, BBI is required to pay
NCBE a fee equal to $250,000 plus all out-of-pocket expenses incurred by NCBE in
connection
8
<PAGE>
with the transactions contemplated by the Merger Agreement. "Triggering Event"
means the termination of the Merger Agreement for any reason other than certain
specified conditions and (i) the failure of BBI shareholders to approve the
Merger Agreement after announcement of a Competing Transaction; (ii) the
recommendation of a Competing Transaction by the BBI Board of Directors; (iii)
the entering into of an agreement with a third party for a Competing
Transaction; or (iv) the withdrawal or modification of the recommendation of the
Merger Agreement by the BBI Board of Directors. "Competing Transaction" means
any of the following (other than the transactions contemplated by the Merger
Agreement): (i) an offer for 25% or more of the outstanding capital stock of BBI
or FNBB; (ii) a proposal for a merger, share exchange, business combination or
similar transaction involving BBI; or (iii) a proposal for the sale, lease,
exchange or other disposition of 25% or more of BBI's assets. See "THE MERGER --
No Solicitation; Fees and Expenses."
Regulatory Approvals
The Merger is subject to approval by the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") under the Bank Holding Company Act
of 1956, as amended. The Federal Reserve Board approved the Merger on June 12,
1997. See "THE MERGER -- Regulatory Approvals."
Accounting Treatment
The Merger is expected to qualify as a "pooling of interests" for
accounting and financial reporting purposes. The qualification of the Merger for
pooling of interests accounting is a condition to NCBE's obligation to
consummate the Merger. If such condition is not met, the Merger will not be
consummated unless the condition is waived by NCBE. See "THE MERGER --
Accounting Treatment."
Certain Federal Income Tax Consequences
Baker & Daniels, counsel to NCBE, has delivered its opinion that if the
Merger is consummated in accordance with the terms set forth in the Merger
Agreement and conditioned upon the accuracy of certain representations made by
NCBE, BBI and certain shareholders of BBI, the Merger will constitute a
"reorganization" under Section 368(a)(1) of the Internal Revenue Code of 1986,
as amended (the "Code") and no gain or loss will be recognized by the holders of
shares of BBI Common upon receipt of the Merger Consideration (except for cash
received in lieu of fractional shares and by shareholders properly exercising
their dissenters' rights).
EACH SHAREHOLDER OF BBI SHOULD CONSULT HIS OR HER OWN TAX ADVISOR REGARDING THE
SPECIFIC TAX CONSEQUENCES OF THE MERGER TO HIM OR HER, INCLUDING THE APPLICATION
AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN LAWS AND THE POSSIBLE EFFECT OF
CHANGES IN FEDERAL AND OTHER TAX LAWS. See "THE MERGER -- Certain Federal Income
Tax Consequences."
Dissenters' Rights
The rights of dissenting shareholders of BBI are governed by the Illinois
Law. Under the Illinois Law, the applicable portions of which are attached
hereto as Appendix B, a shareholder will be entitled to receive, in cash, the
fair value of his or her shares of BBI Common held immediately before the Merger
is consummated if such shareholder delivers to BBI, prior to the Special
Meeting, a written demand for payment for his or her shares if the Merger is
consummated and the shareholder does not vote in favor of the Merger Agreement
and the transactions contemplated thereby. If holders of more than approximately
9% of the outstanding shares of BBI Common should properly exercise their
dissenters' rights, the Merger would not qualify as a "pooling of interests" for
accounting and financial reporting purposes, which qualification is a condition
to the obligation of NCBE to proceed with the Merger. See "THE MERGER --
Dissenters' Rights".
9
<PAGE>
SUMMARY COMPARATIVE HISTORICAL AND COMBINED PER SHARE DATA
(Unaudited)
The following summary presents, for the periods indicated, selected
comparative historical, pro forma combined and pro forma equivalent unaudited
per share data for NCBE and BBI. The pro forma amounts assume that the Merger
had been effective during the periods presented and had been accounted for under
the pooling of interests method of accounting. For a description of the pooling
of interests method of accounting, see "THE MERGER -- Accounting Treatment."
The data presented is not necessarily indicative of the results of the
future operation of the combined organization or the actual results that would
have occurred if the Merger had been consummated prior to the periods indicated.
The data presented should be read in conjunction with the more detailed
information and financial statements included herein or incorporated by
reference in this Prospectus/Proxy Statement and with the unaudited pro forma
financial statements included elsewhere in this Prospectus/Proxy Statement. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE," "SELECTED FINANCIAL DATA,"
"PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS," "INFORMATION CONCERNING
BBI" and "INDEX TO BBI FINANCIAL STATEMENTS."
<TABLE>
<CAPTION>
Three Months
Ended March 31, Year Ended December 31,
---------------- --------------------------
1997 1996 1996 1995 1994
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net income per common share:
Historical:
NCBE $ .46 $ .41 $ 1.59 $ 1.34 $ .99
BBI 19.31 25.16 63.84 65.87 51.27
Pro forma combined per NCBE share .46 .41 1.58 1.34 1.00
Equivalent pro forma per BBI share (1) 22.78 20.31 78.25 66.37 49.53
Dividends per common share
Historical:
NCBE .16 .12 .58 .42 .42
BBI 1.00 1.00 8.00 8.00 8.00
Pro forma combined per NCBE share .15 .12 .56 .41 .41
Equivalent pro forma per BBI share (1) 7.43 5.94 27.74 20.31 20.31
Book value per common share:
Historical:
NCBE 12.55 11.99 12.48 12.10 10.81
BBI 854.35 808.85 842.23 784.88 675.14
Pro forma combined per NCBE share 12.73 12.16 12.64 12.23 10.92
Equivalent pro forma per BBI share (1) 630.48 602.25 626.03 605.72 540.84
</TABLE>
- ---------------------
(1) Equivalent pro forma per share data represents the pro forma per share data
for NCBE multiplied by the minimum number of shares of NCBE Common to be
issued in the Merger for each share of BBI Common (49.5273).
10
<PAGE>
STOCK PRICE DATA
The following table sets forth as of April 18, 1997 (the last trading day
before the public announcement of the proposed Merger), the last sale price per
share for the NCBE Common and the pro forma equivalent for a share of BBI
Common. There is no public trading market for the BBI Common. See "COMPARATIVE
STOCK PRICES AND DIVIDENDS."
<TABLE>
<CAPTION>
Pro Forma
NCBE BBI Common
Common BBI Common Equivalent
------- ---------- ----------
<S> <C> <C> <C>
Price Per Share
(as of April 18, 1997) $32.125 N/A $1,782.98*
</TABLE>
- ---------------------
*Assumes that each share of BBI Common is converted into 55.5 shares of NCBE
Common.
COMPARISON OF SHAREHOLDER RIGHTS
The rights of the holders of BBI Common and NCBE Common differ in certain
respects. The rights of the shareholders of BBI who receive shares of NCBE
Common in the Merger will be governed by the Indiana Law and by the Articles of
Incorporation and Bylaws of NCBE. The governing law and constituent documents of
NCBE differ, in several respects, from those which apply to BBI. As a result,
there are material differences between the rights of the holders of the BBI
Common and the NCBE Common, including shareholder votes required for certain
business combinations, removal of directors, amendments to Articles of
Incorporation, the circumstances under which a shareholder may dissent from
corporate action and receive fair value for his or her shares, and the rights of
NCBE and its shareholders pursuant to Indiana statutory takeover provisions. See
"COMPARISON OF SHAREHOLDER RIGHTS."
11
<PAGE>
SPECIAL MEETING
Date, Time, Place and Purpose
This Prospectus/Proxy Statement is being furnished to shareholders of BBI
in connection with the solicitation of proxies by the Board of Directors of BBI
for use at the Special Meeting to be held at the office of FNBB located at 201
North Main Street, Bridgeport, Illinois, on _____ __, 1997, at 11:00 a.m., local
time, and at any adjournment or postponement thereof.
At the Special Meeting, the shareholders of BBI will be asked to consider
and vote upon the approval of the Merger Agreement and the transactions
contemplated thereby, including the Merger of BBI with and into NCBE.
This Prospectus/Proxy Statement, the attached Notice of Special Meeting and
the Proxy Card are first being sent to shareholders of BBI on or about _____ __,
1997.
Record Date
The Board of Directors of BBI has fixed ________ __, 1997, as the Record
Date for the determination of shareholders of BBI to receive notice of and to
vote at the Special Meeting. As of the close of business on the Record Date,
there were 7,511 shares of BBI Common issued and outstanding. Only holders of
shares of BBI Common of record at the close of business on the Record Date are
entitled to notice of and to vote at the Special Meeting. No shares of BBI
Common can be voted at the Special Meeting, unless the record holder is present
in person or represented by proxy at the Special Meeting.
Vote Required
The presence, in person or by proxy, of holders of a majority of the issued
and outstanding shares of BBI Common entitled to vote on the Record Date is
necessary to constitute a quorum at the Special Meeting. Pursuant to the
Illinois Law, the affirmative vote of the holders of at least two-thirds (66.7%)
of all of the issued and outstanding shares of BBI Common is required to approve
the Merger Agreement and the transactions contemplated thereby, including the
Merger. Each holder of BBI Common is entitled to one vote per share of BBI
Common held at the close of business on the Record Date.
Voting and Revocation of Proxies
Proxies for use at the Special Meeting accompany this Prospectus/Proxy
Statement. A shareholder may use his or her proxy if he or she is unable to
attend the Special Meeting in person or wishes to have his or her shares voted
by proxy even if he or she does attend the Special Meeting. Shares of BBI Common
represented by a proxy properly signed and returned to BBI at, or prior to, the
Special Meeting, unless subsequently revoked, will be voted at the Special
Meeting in accordance with instructions thereon. If a proxy is properly signed
and returned and the manner of voting is not indicated on the proxy, any shares
of BBI Common represented by such proxy will be voted FOR approval of the Merger
Agreement and the transactions contemplated thereby, including the Merger. Any
proxy given pursuant to this solicitation may be revoked at any time prior to
the voting thereof on the matters to be considered at the Special Meeting by
filing with the Secretary of BBI a written revocation or a duly executed proxy
bearing a later date. All written notices of revocation and other communications
with respect to revocation of BBI proxies should be addressed to Bridgeport
Bancorp, Inc., 201 North Main Street, Bridgeport, Illinois 62417, Attention:
Corporate Secretary. A holder of BBI Common who previously signed and returned a
proxy and who elects to attend the Special Meeting and vote in person may
withdraw his or her proxy at any time before it is exercised by giving notice of
such revocation to the Secretary of BBI at the Special Meeting and voting in
person by ballot at the Special Meeting; however, attendance at the Special
Meeting will not in and of itself constitute a revocation of the proxy.
12
<PAGE>
BBI intends to count holders of shares of BBI Common present in person at
the Special Meeting but not voting, and holders of shares of BBI Common for
which BBI has received proxies but with respect to which holders of shares have
abstained, as present at the Special Meeting for purposes of determining the
presence or absence of a quorum for the transaction of business. Brokers, if
any, who hold shares in street name for customers who are the beneficial owners
of such shares are prohibited from giving a proxy to vote shares held for such
customers with respect to the approval of the Merger Agreement and the
transactions contemplated thereby, including the Merger, without specific
instructions from such customers. Since the affirmative vote of the holders of
at least two-thirds of the issued and outstanding shares of BBI Common entitled
to vote at the close of business on the Record Date is required to approve the
Merger Agreement and the transactions contemplated thereby, including the
Merger, such non-voting shares and abstentions and the failure of such customers
to provide specific instructions with respect to their shares of BBI Common will
have the effect of a vote against the approval of the Merger Agreement.
Solicitation of Proxies
In addition to solicitation of proxies from shareholders of BBI Common by
use of the mail, proxies also may be solicited personally or by telephone by
directors, officers and employees of BBI, who will not be specifically
compensated for such services.
NCBE has agreed to bear the entire cost of printing this Prospectus/Proxy
Statement and all filing fees paid to the Commission and other regulatory filing
fees incurred in connection with the Merger.
THE MERGER
General
This section of the Prospectus/Proxy Statement describes certain aspects of
the proposed Merger, including the principal provisions of the Merger Agreement.
The following information is qualified in its entirety by reference to the other
information contained elsewhere in this Prospectus/Proxy Statement, including
the Appendices hereto and the documents incorporated herein by reference. A copy
of the Merger Agreement (excluding the Disclosure Schedule thereto) is attached
hereto as Appendix A and is incorporated by reference herein and reference is
made thereto for a complete description of the terms of the Merger. Shareholders
of BBI are urged to read the Merger Agreement in its entirety.
Background of the Merger
On March 3, 1997, management of NCBE spoke by telephone informally with
certain members of management of BBI regarding NCBE's possible interest in
acquiring BBI. Subsequently, on March 5, 1997 and March 14, 1997, additional
conferences were held between NCBE and BBI management.
In these discussions, NCBE indicated its willingness to negotiate a
business combination with BBI in which NCBE would issue NCBE Common with an
aggregate value of approximately $13.5 million, assuming that 100% of the
ownership of FNBB was acquired.
On March 7, 1997, the BBI Board of Directors met and authorized a committee
of the Board to enter into discussions with prospective merger partners and
report back to the Board with the committee's recommendations.
Between March 18, 1997 and April 18, 1997, NCBE, BBI and their respective
advisors negotiated the terms of definitive agreements relating to the merger
and the agreement by which certain directors would agree to vote their shares of
BBI Common in favor of the Merger. During this period of time, NCBE and BBI each
conducted investigations into the other party's operations.
13
<PAGE>
On April 21, 1997, the committee of the Board of Directors of BBI reported
to the Board on its discussions with NCBE and the terms of NCBE's proposal. The
Board reviewed the definitive agreements and discussed the terms of the proposed
business combination and voted to authorize execution of the Merger Agreement
and recommended that BBI shareholders approve the Merger Agreement and the
Merger.
Reasons for the Merger; Recommendation of BBI's Board of Directors
Among the factors considered by the Board of Directors of BBI in
recommending to BBI shareholders the approval of the Merger Agreement and Merger
were: (i) the amount and form of the Merger Consideration; (ii) the terms of
other reported acquisitions of other financial institutions in the Midwestern
United States; (iii) information concerning the business, financial condition,
results of operations and prospects of BBI and NCBE; (iv) recent market prices
for the shares of NCBE Common; (v) the tax-free nature of the Merger; and (vi)
the active trading market for the shares of NCBE Common. The BBI Board of
Directors did not assign any relative weights to the foregoing factors.
For the foregoing reasons, the Board of Directors of BBI concluded that the
affiliation through the Merger of BBI with NCBE is in the best interest of BBI
and its shareholders and in the best interest of the customers and communities
that FNBB serves.
THE BOARD OF DIRECTORS OF BBI RECOMMENDS THAT HOLDERS OF BBI COMMON VOTE
"FOR" APPROVAL OF THE MERGER AGREEMENT AND THE MERGER.
Certain members of the management and Board of Directors of BBI have
interests in the Merger that are in addition to the interests of shareholders of
BBI generally. See "--Interests of Certain Persons in the Merger."
Closing and Effective Time
The Merger Agreement provides that, unless otherwise agreed and assuming
all conditions have been satisfied or waived, the closing of the Merger (the
"Closing") will be held on the date fixed by agreement of NCBE and BBI as soon
as practicable following the date on which all required approvals are received
and any required waiting periods have expired.
If the Merger Agreement is approved by the requisite vote of BBI
shareholders, all other conditions of the Merger Agreement are satisfied or
waived and the Closing is held, the Merger will become effective at the date and
time (the "Effective Time") specified in the Articles of Merger which are
required by the Merger Agreement to be filed with the Offices of the Secretaries
of State of the States of Illinois and Indiana. It is presently contemplated
that the Effective Time will occur during the third calendar quarter of 1997.
The Merger Agreement may be terminated by either party if, among other things,
the Closing does not occur on or before September 30, 1997. See "--Termination
and Waiver."
Conversion of BBI Common
As a result of the Merger, each share of BBI Common issued and outstanding
immediately prior to the Effective Time, other than shares whose holders have
properly exercised their dissenters' rights under the Illinois Law, will be
converted into the right to receive the number of shares of NCBE Common
specified in the Merger Agreement and cash in lieu of fractional shares of NCBE
Common. The Merger Agreement provides that each eligible share of BBI Common
will be converted into the right to receive a number of shares of NCBE Common
equal to: (i) the number of shares of NCBE Common having an aggregate Market
Value of $13,500,000, subject to a minimum of 375,000 shares and a maximum of
450,000 shares; (ii) divided by the number of outstanding shares of BBI Common
outstanding as of the Closing. The Merger Agreement defines the Market Value of
the NCBE Common as the average of the weighted average trading prices of a
share of NCBE Common as reported by the Nasdaq National Market for the 10
trading days ended 3 days prior to the Closing; however, the Market Value used
for computing the number of shares of NCBE Common in the Merger Consideration
may not be less than $30.00 per share or more than $36.00 per share. BBI will
14
<PAGE>
have no obligation to consummate the Merger if the Market Value as computed
without giving effect to the minimum amount is less than $30.00. See
"--Conditions to the Merger."
No fractional shares of NCBE Common will be issued in the Merger and, in
lieu thereof and as part of the Merger Consideration, holders of shares of BBI
Common who would otherwise be entitled to a fractional share interest (after
taking into account all shares of BBI Common held by such holder) will be paid
an amount in cash equal to the product of such fractional share interest and the
Market Value.
Based upon the number of shares of BBI Common expected to be outstanding as
of the Closing, each share of BBI Common will be converted into the right to
receive not less than 49.5273 and not more than 59.4328 shares of NCBE Common.
It is not possible, as of the date of this Prospectus/Proxy Statement, to
determine the actual number of shares of NCBE Common into which each share of
BBI Common will be converted. Assuming, however, for purposes of illustration,
that the Closing occurred on ____ __, 1997 and there were 7,571.5726 shares of
BBI Common then outstanding, each share of BBI Common would have been converted
into _______ shares of NCBE Common.
Procedures for Exchange of Certificates
The conversion of BBI Common into NCBE Common (other than any shares as to
which dissenters' rights are properly exercised; see "--Dissenters' Rights")
will occur by operation of law at the Effective Time. After the Effective Time,
certificates theretofore evidencing shares of BBI Common which may be exchanged
for shares of NCBE Common will be deemed, for all corporate purposes other than
the payment of dividends and other distributions on such shares, to evidence
ownership of and entitlement to receive such shares of NCBE Common.
As soon as reasonably practicable following the Effective Time, The
National City Bank of Evansville, the exchange agent in the Merger (the
"Exchange Agent"), will send a transmittal letter and instructions to each
record holder of certificates for BBI Common whose shares were converted into
the right to receive the Merger Consideration, advising such holder of the
number of shares of NCBE Common, such holder is entitled to receive pursuant to
the Merger, of the amount of cash such holder is due in lieu of a fractional
share of NCBE Common, and of the procedures for surrendering such certificates
in exchange for a certificate for the number of whole shares of NCBE Common, and
a check for the cash amount (if any) such holder is entitled to receive in lieu
of a fractional share. The letter of transmittal will also specify that delivery
will be effected, and risk of loss and title to the certificates for BBI Common
will pass, only upon proper delivery of the certificates for BBI Common to the
Exchange Agent and will be in such form and have such other provisions as NCBE
may reasonably specify. After the receipt by the Exchange Agent of a holder's
certificates for BBI Common, together with a letter of transmittal duly executed
and any other required documents, the Exchange Agent will deliver to such holder
the Merger Consideration such holder is entitled to receive under the Merger
Agreement. SHAREHOLDERS OF BBI ARE REQUESTED NOT TO SURRENDER THEIR CERTIFICATES
FOR EXCHANGE UNTIL SUCH LETTER OF TRANSMITTAL AND INSTRUCTIONS ARE RECEIVED. The
shares of NCBE Common into which BBI Common will be converted in the Merger will
be deemed to have been issued at the Effective Time. Unless and until the
certificates for BBI Common are surrendered, together with a letter of
transmittal duly executed and any other required documents, dividends on the
shares of NCBE Common issuable with respect to such BBI Common which would
otherwise be payable will not be delivered to the holders of such certificates
and, in such case, upon surrender of the certificates for BBI Common, together
with a letter of transmittal duly executed and any other required documents,
there will be delivered any dividends on such shares of NCBE Common which became
payable between the Effective Time and the time of such surrender. No interest
on any such dividends will accrue or be paid.
If a certificate for BBI Common has been lost, stolen or destroyed, the
Exchange Agent will issue the Merger Consideration properly payable in
accordance with the Merger Agreement upon receipt of an affidavit as to such
loss, theft or destruction and, if required by NCBE, the posting of a bond in an
amount reasonably determined by NCBE.
15
<PAGE>
Regulatory Approvals
NCBE agreed, in the Merger Agreement, to file all regulatory applications
to obtain the requisite regulatory approvals from the Federal Reserve Board. The
Merger cannot proceed in the absence of such regulatory approvals.
The Merger is subject to approval by the Federal Reserve Board under the
Bank Holding Company Act of 1956, as amended (the "BHC Act"). The BHC Act
provides that the Federal Reserve Board may not approve any transaction (i) that
would result in a monopoly, or that would 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 (ii) the effect of which in any section of
the country may be substantially to lessen competition, or to tend to create a
monopoly, or that in any other manner would be in restraint of trade, unless the
Federal Reserve Board finds that the anticompetitive effects of the proposed
transaction 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. In conducting its review of any application for approval, the Federal
Reserve Board is required to consider the financial and managerial resources and
future prospects of the company or companies and the banks concerned, and the
convenience and needs of the communities to be served. Under the BHC Act as
interpreted by the Federal Reserve Board and the courts, the Federal Reserve
Board may deny any application if it determines that the financial or managerial
resources of the acquiring bank holding company are inadequate.
The Federal Reserve Board approved the Merger on June 12, 1997.
The Merger may not be consummated until 30 days after Federal Reserve Board
approval, during which time the Department of Justice ("DOJ") may challenge the
Merger on antitrust grounds and seek the divestiture of certain assets and
liabilities. With the approval of the Federal Reserve Board and the DOJ, the
waiting period may be reduced to no less than fifteen days. The approval of the
Federal Reserve Board provided that the Merger may not be consummated before
July __, 1997. The commencement of an antitrust action by the DOJ would stay the
effectiveness of Federal Reserve Board approval of the Merger unless a court
specifically orders otherwise. In reviewing the Merger, the DOJ could analyze
the effect of the Merger on competition differently than the Federal Reserve
Board and, thus, it is possible that the DOJ could reach a different conclusion
than the Federal Reserve Board regarding the competitive effects of the Merger.
Dissenters' Rights
The rights of BBI shareholders who choose to dissent from the Merger are
governed by the provisions of the Illinois Law. An excerpt of the Illinois Law
(Sections 11.65 and 11.70) governing dissenters' rights is attached hereto as
Appendix B.
Pursuant to Section 11.70 of the Illinois Law, a shareholder may assert
dissenters' rights only if the shareholder delivers to BBI prior to the vote
taken with respect to the Merger at the Special Meeting a written demand for
payment for his or her shares of BBI Common if the Merger is consummated and the
shareholder does not vote in favor of the Merger.
Within ten days after the Effective Time, or 30 days after the shareholder
delivers to BBI the written demand for payment, whichever is later, NCBE will
send each shareholder who has delivered a written demand for payment a statement
setting forth the opinion of NCBE as to the estimated value of the shares of BBI
Common, BBI's balance sheet as of the most recently completed fiscal year ending
not earlier than sixteen months prior to delivery of the statement, together
with the statement of income for that year and the latest available interim
financial statements, and a commitment to pay the estimated value for the shares
of BBI Common of the dissenting shareholder upon transmittal to NCBE of the
certificate(s), or other evidence of ownership, with respect to such shares of
BBI Common.
If the dissenting shareholder does not agree with the opinion of NCBE as to
the estimated value of the shares, the shareholder, within 30 days after the
delivery of the statement of value, must notify NCBE in writing of his or her
16
<PAGE>
estimate of value and demand payment for the difference between the
shareholder's estimate of value and the amount of the payment by NCBE. If,
within 60 days from delivery to NCBE of the shareholder notification of estimate
of value of the shares, NCBE and the dissenting shareholder have not agreed in
writing upon the value of the shares of BBI Common, NCBE must either pay the
difference in value demanded or file a petition in the circuit court of Lawrence
County, Illinois requesting the court to determine the fair value of the shares.
NCBE must make all dissenters, whether or not residents of Illinois, whose
demands remain unsettled parties to such proceeding and all parties will be
served with a copy of the petition. Failure of NCBE to commence an action will
not limit or affect the right of dissenting shareholders to otherwise commence
an action as permitted by law. In an appraisal proceeding, the court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value.
Each dissenter made a party to an appraisal proceeding is entitled to
judgment for the amount, if any, by which the court finds that the fair value of
the shares exceeds the amount paid by NCBE. The judgment will include an
allowance for interest at such rate as the court may find to be fair and
equitable from the Effective Time to the date of payment.
The court, in an appraisal proceeding, will determine all costs of the
proceeding, including the reasonable compensation and expenses of the
appraisers, if any, but will exclude the fees and expenses of counsel and
experts for any party. If the fair value of the shares as determined by the
court materially exceeds the amount offered by NCBE, or if no offer was made,
then all or any part of such expenses may be assessed against NCBE. If the
amount by which any dissenter estimated the value of the shares materially
exceeds the value as determined by the court, then all or any part of the costs
may be assessed against the dissenter.
If the holders of more than approximately 9% of the outstanding shares of
BBI Common properly exercise their dissenters' rights, the Merger would not
qualify as a "pooling of interests" for accounting and financial reporting
purposes, which qualification is a condition to the obligation of NCBE to
proceed with the Merger. See "-- Accounting Treatment".
THE FOREGOING SUMMARY DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE
PROVISIONS OF THE ILLINOIS LAW RELATING TO THE RIGHTS OF DISSENTING SHAREHOLDERS
OF BBI, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE EXCERPTS FROM THE
ILLINOIS LAW INCLUDED HEREIN AS APPENDIX B.
Representations and Warranties
The Merger Agreement contains various customary representations and
warranties of the parties. The representations and warranties made by NCBE
relate to, among other things: (i) the organization and corporate power of NCBE,
the authorization, execution and delivery of the Merger Agreement and the Merger
Agreement's noncontravention of charter documents, material agreements, laws and
regulations; (ii) capitalization; (iii) organization of subsidiaries; (iv)
delivery of reports filed by NCBE under the Exchange Act and the conformity of
financial statements in such reports to generally accepted accounting principles
("GAAP"); (v) the absence of any undisclosed material liabilities and no
material adverse change in NCBE's financial condition, results of operations or
business; and (vi) the absence of any untrue statements or omissions of material
fact on the part of NCBE in the Merger Agreement and related documents.
The representations and warranties made by BBI relate to, among other
things: (i) the organization, good standing and corporate power of BBI, the
capitalization of BBI, the organization and good standing of FNBB, and the
capitalization of FNBB; (ii) the authorization, execution and delivery of the
Merger Agreement and the Merger Agreement's noncontravention of charter
documents of BBI and FNBB; (iii) ownership and organization of subsidiaries;
(iv) delivery of financial statements of BBI and FNBB and the conformity of such
financial statements to GAAP; (v) the filing of tax returns and payment of
taxes; (vi) contracts, commitments or other agreements in excess of $25,000 to
which BBI or FNBB is a party; (vii) ownership of real estate; (viii) the absence
of any material adverse change in BBI's financial condition, properties, results
of operations or capitalization of BBI or FNBB; (ix) the absence of any
investigations, actions or other legal proceedings which, if adversely
determined, would have a material adverse effect
17
<PAGE>
on the business or financial condition of BBI or FNBB and the absence of any
investigations, actions or other legal proceedings involving any director,
officer or employee of BBI or FNBB; (x) insurance; (xi) substantial compliance
with applicable laws and regulations; (xii) the absence of any obligation to pay
broker's or finder's fees in connection with the Merger; (xiii) the compliance
of employee benefit plans with applicable laws, rules and regulations; (xiv)
labor-related matters; (xv) the absence of knowledge of certain environmental
related conditions or events; (xvi) the absence of enforcement actions and other
regulatory related matters; and (xvii) the absence of any untrue statements or
omissions of material fact on the part of BBI in the Merger Agreement and
related documents.
Covenants
The Merger Agreement contains covenants that the parties will take or
refrain from taking certain actions prior to the Effective Time. As to NCBE,
these covenants include, among other things, agreements to: (i) take all steps
to provide the Exchange Agent with the Merger Consideration; (ii) file, at its
sole expense, and prepare all regulatory applications required to consummate the
Merger and keep BBI informed of the status of such applications; (iii) file a
Registration Statement on Form S-4 with the Commission relating to the shares of
NCBE Common to be issued in the Merger and obtain all approvals required under
state securities or "Blue Sky" laws; (iv) provide BBI with access during regular
business hours to books and records relating to NCBE's assets, properties,
operations and liabilities; and (v) certain covenants regarding the operation of
FNBB after the Merger. See "--Interests of Certain Persons in the Merger."
The covenants made by BBI include, among other things, agreements by BBI
and FNBB to: (i) conduct their business in the ordinary course, not default in
any obligations under material contracts, maintain insurance and existing
business organization and relationships; and comply with applicable laws; (ii)
notify NCBE of any event that may have a material adverse effect on the
financial condition, operations, business or assets of BBI and FNBB or would
interfere with BBI's ability to satisfy any conditions to its obligation to
consummate the Merger; (iii) not incur any obligation or liability other than in
the ordinary course of business, amend any material contract, acquire any
interest in another entity, sell or dispose of real property, expand or enhance
its data processing system, make any loan, commitment or line of credit to a
single borrower in excess of $400,000, make any capital expenditures except for
repairs, renewals or replacement, issue, sell or redeem any capital stock of BBI
or FNBB, pay cash dividends on the BBI Common or FNBB stock in excess of $8.00
per share in any year, such dividends to be payable on a quarterly basis
(however, holders of BBI Common may for any given quarter only receive cash
dividends attributable either to BBI or NCBE, not both), amend the articles of
incorporation or by-laws or similar documents of BBI or FNBB, enter into or
amend an employment agreement, compromise or settle a tax claim, open a new
office, close any existing office, or take any action that would adversely
affect the ability to account for the Merger using the "pooling of interests"
method of accounting; (iv) pay and discharge current liabilities when they
become due; (v) enter into any transaction that would create goodwill under
GAAP; (vi) not modify its practices relating to loans to directors, officers and
employees; (vii) not knowingly violate any laws, regulations, judgments or
orders; (viii) not materially increase operating expenses; (ix) maintain all
books and records in accordance with GAAP; (x) provide NCBE with access during
regular business hours to books and records relating to BBI's and FNBB's assets,
properties, operations and liabilities; (xi) provide NCBE with copies of certain
reports to the Board of Directors of BBI or FNBB and monthly financial
statements and confer with NCBE on the general status of ongoing operations;
(xii) notify NCBE of any material change in the operations or certain
complaints, investigations or threatened litigation; (xiii) furnish NCBE with
the information in BBI's possession that is required for any regulatory
applications in connection with the Merger; (xiv) obtain and deliver to NCBE at
least 31 days prior to the Closing, an agreement from each person who may
reasonably be deemed an "affiliate" of BBI for purposes of Rule 145 under the
Securities Act, an agreement regarding compliance with Rule 145 and restricting
transfers of NCBE Common following the Merger. See "--Resale of NCBE Common."
Conditions to the Merger
In addition to the approval of BBI shareholders, the obligations of both
parties to consummate the Merger are subject to the satisfaction or waiver of
certain other conditions, including, among others: (i) that all required
regulatory approvals have been obtained; (ii) that no action or proceeding has
been commenced to restrain the Merger; (iii) the
18
<PAGE>
absence of any notice from any governmental agency indicating that the Merger
would violate any law; (iv) the effectiveness of the Registration Statement and
the absence of a stop order with respect thereto; and (v) the receipt of all
state securities or "Blue Sky" permits and authorizations to issue the NCBE
Common in the Merger.
The obligation of NCBE to consummate the Merger is further conditioned on
the following: (i) the continued accuracy in all material respects of the
representations and warranties of BBI in the Merger Agreement, the performance
or satisfaction in all material respects of all covenants to be performed by BBI
under the Merger Agreement, the absence of any material adverse change prior to
Closing in the business, assets, properties, financial condition or results of
operations of BBI or FNBB; (ii) the absence of any breach of any obligations of
the parties to the Voting Agreement; (iii) the receipt of opinions of counsel to
BBI as to certain matters relating to BBI and the Merger; (iv) the receipt of
assurances satisfactory to NCBE from its independent auditors that the Merger
may be accounted for using the "pooling of interests" method; and (v) the
resignation of George J. Abel as a director of FNBB effective as of the Closing.
The obligation of BBI to consummate the Merger is further conditioned on
the following: (i) the continued accuracy in all material respects of the
representations and warranties of NCBE in the Merger Agreement and the
performance or satisfaction in all material respects of all covenants to be
performed by NCBE under the Merger Agreement; (ii) the receipt of opinions of
counsel to NCBE as to certain matters relating to NCBE and the Merger and as to
the treatment of the Merger as a tax-free reorganization; and (iii) that the
Market Value of the NCBE Common is not less than $30.00 per share, unless such
condition is waived by the BBI Board of Directors before or after approval of
the Merger Agreement by the BBI shareholders.
Termination and Waiver
The Merger Agreement may be terminated and the Merger abandoned prior to
the Effective Time, before or after approval of the Merger Agreement by the BBI
shareholders: (i) by mutual consent of BBI and NCBE; (ii) by BBI, if any of the
conditions to its obligation to consummate the Merger have not been satisfied by
September 30, 1997; or (iii) by NCBE, if any of the conditions to its obligation
to consummate the Merger have not been satisfied by September 30, 1997.
BBI and NCBE may, by written instrument, amend or modify the Merger
Agreement in whole or in part, or waive compliance with any of the covenants or
conditions of the Merger Agreement, before or after approval of the Merger
Agreement by the BBI shareholders, to the extent authorized by applicable law.
No Solicitation; Fees and Expenses
The Merger Agreement prohibits BBI, FNBB and their officers, directors and
representatives, from soliciting or authorizing the solicitation of inquiries or
proposals from third parties regarding an acquisition of BBI, FNBB, or all or
substantially all of their assets, unless BBI's Board of Directors has
reasonably determined, based on the written advice of counsel, that the failure
to do so would breach their fiduciary duties. The foregoing prohibition also
extends to conducting discussions or negotiations with third parties or
furnishing confidential information to any person relating to an acquisition
proposal. BBI is required to communicate to NCBE the terms of any such proposal.
Except as described below or as otherwise expressly provided in the Merger
Agreement, each party is to pay its own fees and expenses incurred in connection
with the Merger, the Merger Agreement and the transactions contemplated therein.
However, upon the occurrence of a Triggering Event, BBI is required to pay
NCBE a fee equal to $250,000 plus all out-of-pocket expenses incurred by NCBE in
connection with the transactions contemplated by the Merger Agreement.
"Triggering Event" means the termination of the Merger Agreement for any reason
other than certain specified conditions to the Merger and the occurrence of any
of the following events: (i) the failure of BBI shareholders to approve the
Merger Agreement after announcement of a Competing Transaction; (ii) the
recommendation of a Competing Transaction by the BBI Board of Directors; (iii)
the entering into of an agreement with a third party for a
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<PAGE>
Competing Transaction; or (iv) the withdrawal or modification of the
recommendation of the Merger Agreement by the BBI Board of Directors. "Competing
Transaction" means any of the following (other than the transactions
contemplated by the Merger Agreement): (i) an offer for 25% or more of the
outstanding capital stock of BBI or FNBB; (ii) a proposal for a merger, share
exchange, business combination or similar transaction involving BBI; or (iii) a
proposal for the sales, lease, exchange or other disposition of 25% or more of
BBI's assets.
Certain Federal Income Tax Consequences
The following discussion is based upon an opinion of Baker & Daniels,
counsel to NCBE ("Counsel"), and except as otherwise indicated, reflects
Counsel's opinion. The discussion is a summary of the material United States
federal income tax ("federal income tax") consequences of the Merger to certain
BBI shareholders and does not purport to be a complete analysis or listing of
all potential tax considerations or consequences relevant to a decision whether
to vote for the approval of the Merger Agreement. The discussion does not
address all aspects of federal income taxation that may be applicable to BBI
shareholders in light of their status or personal investment circumstances, nor
does it address the federal income tax consequences of the Merger that are
applicable to BBI shareholders subject to special federal income tax treatment
including, without limitation, foreign persons, insurance companies, tax-exempt
entities, retirement plans, dealers in securities, persons who acquired their
BBI Common pursuant to the exercise of employee stock options or otherwise as
compensation. In addition, the discussion does not address the effect of any
applicable state, local or foreign tax laws, or the effect of any federal tax
laws other than those pertaining to the federal income tax. As a result, each
BBI shareholder is urged to consult his or her own tax advisor to determine the
specific tax consequences of the Merger to such shareholder. The discussion
assumes that shares of BBI Common are held as capital assets (within the meaning
of Section 1221 of the Code) at the Effective Time.
BBI has received an opinion from Counsel to the effect that, assuming the
Merger occurs in accordance with the Merger Agreement, the Merger will
constitute a "reorganization" for federal income tax purposes under Section
368(a)(1) of the Code, with the following federal income tax consequences:
(i) BBI shareholders will recognize no gain or loss as a result of the
exchange of their BBI Common solely for shares of NCBE Common pursuant to
the Merger, except with respect to cash received in lieu of fractional
share interests, if any, as discussed below.
(ii) The aggregate adjusted tax basis of the shares of NCBE Common
received by each BBI shareholder in the Merger (including any fractional
share of NCBE Common deemed to be received, as described in paragraph (iv)
below) will be equal to the aggregate adjusted tax basis of the shares of
BBI Common surrendered.
(iii) The holding period of the shares of NCBE Common received by each
BBI shareholder in the Merger (including any fractional share of NCBE
Common deemed to be received, as described in paragraph (iv) below) will
include the holding period of the shares of BBI Common exchanged therefor.
(iv) A BBI shareholder who receives cash in lieu of a fractional share
of NCBE Common will be treated as if the fractional share had been received
by such shareholder in the Merger and then redeemed by NCBE in return for
the cash amount. The receipt of such cash will cause the recipient to
recognize capital gain or loss equal to the difference between the amount
of cash received and the portion of such holder's adjusted tax basis in the
shares of NCBE Common allocable to the fractional shares.
(v) Cash received by BBI shareholders exercising dissenters' rights
will be treated as (a) a distribution in full payment of such shares,
resulting in capital gain or loss, or (b) ordinary income, as the case may
be, depending upon such shareholder's individual situation.
Counsel's opinion is subject to the conditions and customary assumptions
that are stated therein and relies upon various representations made by NCBE,
BBI and certain shareholders of BBI. If any of these representations or
assumptions is inaccurate, the tax consequences of the Merger could differ from
those described herein. Counsel's
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<PAGE>
opinion is also based upon the Code, regulations proposed or promulgated
thereunder, judicial precedent relating thereto, and current administrative
rulings and practice, all of which are subject to change. Any such change, which
may or may not be retroactive, could alter the tax consequences discussed
herein. The receipt of Counsel's opinion again as of the date of the closing of
the Merger is a condition to the consummation of the Merger. An opinion of
counsel, unlike a private letter ruling from the Internal Revenue Service
("Service"), has no binding effect. The Service could take a position contrary
to Counsel's opinion and, if the matter were litigated, a court could reach a
decision contrary to the opinion. Neither NCBE nor BBI has requested an advance
ruling as to the federal income tax consequences of the Merger, and the Service
is not expected to issue such a ruling.
THE FOREGOING IS A GENERAL SUMMARY OF THE MATERIAL FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER TO SHAREHOLDERS OF BBI WITHOUT REGARD TO THE
PARTICULAR FACTS AND CIRCUMSTANCES OF EACH SHAREHOLDER'S TAX SITUATION AND
STATUS. EACH SHAREHOLDER OF BBI SHOULD CONSULT HIS OR HER OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO HIM OR HER, INCLUDING
THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX LAWS AND THE
POSSIBLE EFFECT OF CHANGES IN FEDERAL AND OTHER TAX LAWS.
Accounting Treatment
The Merger is expected to qualify as a "pooling of interests" for
accounting and financial reporting purposes. Under this method of accounting,
the assets and liabilities of NCBE and BBI will be carried forward after the
Effective Time into the consolidated financial statements of NCBE at their
recorded amounts, the consolidated income of NCBE will include income of NCBE
and BBI for the entire fiscal year in which the Merger occurs, the separately
reported income of NCBE and BBI for prior periods will be combined and restated
as consolidated income of NCBE, and no goodwill will be recognized.
The Merger Agreement provides that a condition to the obligation of NCBE to
consummate the Merger is that NCBE shall have received assurances satisfactory
to it from its independent auditors that the Merger will qualify for "pooling of
interests" accounting treatment under Accounting Principles Board Opinion No.
16. In the event such condition is not met, the Merger would not be consummated
unless the condition was waived by NCBE. As of the date of this Prospectus/Proxy
Statement, NCBE and BBI are not aware of any existing facts or circumstances
which would preclude the Merger from qualifying for "pooling of interests"
accounting treatment.
The unaudited pro forma financial information contained in this
Prospectus/Proxy Statement has been prepared using the pooling of interests
accounting method to account for the Merger. See "PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS".
Resale of NCBE Common
The shares of NCBE Common issuable pursuant to the Merger will be freely
transferable under the Securities Act except for shares issued to any BBI
shareholder who may be deemed to be an "affiliate" of NCBE for purposes of Rule
144 under the Securities Act or an "affiliate" of BBI for purposes of Rule 145
under the Securities Act. Persons who may be deemed to be affiliates of BBI or
NCBE generally include individuals who, or entities which, control, are
controlled by or are under common control with BBI or NCBE and will include
directors and certain officers of BBI and NCBE and may include principal
shareholders of BBI and NCBE, if any.
Rules 144 and 145 under the Securities Act will restrict the sale of NCBE
Common received in the Merger by affiliates and certain of their family members
and related interests. Generally, during the first year following the Effective
Time, those persons who are affiliates of BBI at the time of the Special
Meeting, provided they are not affiliates of NCBE at or following the Effective
Time, may publicly resell any NCBE Common received by them in the Merger,
subject to certain limitations as to, among other things, the amount of NCBE
Common sold by them in any three-month period and as to the manner of sale.
After the one year period, such affiliates may resell their shares
21
<PAGE>
without such restrictions so long as there is adequate current public
information with respect to NCBE as required by Rule 144 under the Securities
Act.
The ability of affiliates to resell shares of NCBE Common received in the
Merger under Rule 144 or 145 under the Securities Act as summarized herein
generally will be subject to NCBE's having satisfied its Exchange Act reporting
requirements for specified periods prior to the time of sale. Affiliates also
would be permitted to resell shares of NCBE Common received in the Merger
pursuant to an effective registration statement under the Securities Act or
another available exemption from the Securities Act registration requirements.
Guidelines of the Commission regarding qualifying for the pooling of
interests method of accounting also limit sales of shares of the acquiring and
acquired company by affiliates of either company in a business combination.
Guidelines of the Commission indicate further that the pooling of interests
method of accounting will generally not be challenged on the basis of sales by
affiliates of the acquiring or acquired company if they do not dispose of any of
the shares of the corporation they own or shares of a corporation they receive
in connection with a merger during the period beginning 30 days before the
merger and ending when financial results covering at least 30 days of post-
merger operations of the combined entity have been published.
The Merger Agreement provides that BBI will obtain and deliver to NCBE an
agreement from each person who may reasonably be deemed an affiliate of BBI
providing that such affiliate will not transfer any shares of NCBE Common
received in the Merger except in compliance with the Securities Act and in
compliance with the requirements described in the preceding paragraph regarding
the non-disposition of any shares of BBI Common or NCBE Common (or any interest
therein) during the period commencing 30 days prior to the Effective Time
through the date on which financial results covering at least 30 days of
combined operations of NCBE and BBI after the Merger have been published.
This Prospectus/Proxy Statement does not cover resales of shares of NCBE
Common received by any person who may be deemed to be an affiliate of BBI or
NCBE.
Increase in Outstanding Shares of BBI Common
BBI has entered into an agreement with the holder of the 80 shares (0.8% of
outstanding shares) of FNBB common stock (the "Minority Shares") not owned by
BBI, contingent upon the consummation of the Merger, to issue 60.5726 shares of
BBI Common in exchange for the Minority Shares immediately prior to the Closing.
If the Merger is not consummated, the additional shares of BBI Common will not
be issued and the Minority Shares will remain outstanding. NCBE has agreed that
there will be no reduction to the Merger Consideration in respect of the
Minority Shares and to waive any condition to its obligation to consummate the
Merger based on or arising out of the issuance of such shares of BBI Common to
the holder of the Minority Shares.
Interests of Certain Persons in the Merger
Certain members of the BBI Board of Directors have certain interests in the
transactions contemplated by the Merger Agreement that are in addition to their
interests as BBI shareholders, including those referred to below.
In the Merger Agreement, NCBE has agreed that until April 21, 1998, it will
operate FNBB as a separately chartered financial institution subsidiary with its
own Board of Directors consisting of seven members. During such period, FNBB
directors who are not full-time employees will receive directors' fees of $600
per month. NCBE has also agreed that during such period Clifford C. Gray and
John R. Wolfe will serve as Chairman of the Board and President, respectively,
of FNBB but that NCBE may designate a person to serve as FNBB's Vice President
and Chief Executive Officer.
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<PAGE>
In addition, NCBE has agreed that if, after April 21, 1998, FNBB is merged
with another NCBE subsidiary, any members of the Wolfe family who are then
serving as FNBB directors may designate up to three persons to serve as
directors of the subsidiary which succeeds to FNBB's operations.
VOTING AGREEMENT
Clifford C. Gray, John R. Wolfe, R. Tony Wolfe, Jeffrey R. Wolfe, Daniel T.
Wolfe, Edward L. Edmonson and William A. Tillmann, each of whom is a director of
BBI, have entered into an agreement with NCBE to vote the shares of BBI Common
in favor of approval of the Merger Agreement at the Special Meeting. The
foregoing persons owned, as of the Record Date, an aggregate of 6,178 shares of
BBI Common, representing 82.3% of all issued and outstanding shares of BBI
Common on such date. As a result of the Voting Agreement, approval of the Merger
Agreement by the BBI shareholders is assured.
Selected Financial Data
(Unaudited)
The following tables present selected unaudited consolidated historical
financial data for NCBE and pro forma combined amounts reflecting the Merger.
The pro forma amounts assume that the Merger had been effective during the
periods presented. The data presented is derived from the consolidated financial
statements of NCBE and BBI and should be read in conjunction with the more
detailed information and financial statements included herein or incorporated by
reference in this Prospectus/Proxy Statement and with the unaudited pro forma
financial statements included elsewhere in this Prospectus/Proxy Statement. The
pro forma amounts may not be indicative of the results that actually would have
occurred if the Merger had been in effect on the dates indicated. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE," "PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS," "INFORMATION CONCERNING BBI" AND "INDEX TO
BBI FINANCIAL STATEMENTS."
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<PAGE>
NCBE - HISTORICAL
(Dollar amounts other than per share data in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31, Years Ended December 31,
------------------------ ------------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ---------- ----------
SUMMARY OF OPERATIONS
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income $ 11,401 $ 10,736 $ 44,141 $ 40,167 $ 36,008 $ 34,427 $ 34,513
Provision for loan losses 321 316 2,491 294 18 581 1,327
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 11,080 10,420 41,650 39,873 35,990 33,846 33,186
Noninterest income 2,455 1,751 8,311 6,724 4,945 6,453 6,000
Noninterest expense 7,209 6,386 27,311 26,343 26,101 25,853 25,025
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes 6,326 5,785 22,650 20,254 14,834 14,446 14,161
Income taxes 1,958 2,015 7,404 7,139 5,155 4,519 4,395
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income $ 4,368 $ 3,770 $ 15,246 $ 13,115 $ 9,679 $ 9,927 $ 9,766
========== ========== ========== ========== ========== ========== ==========
PER SHARE DATA
Net income $ 0.46 $ 0.41 $ 1.59 $ 1.34 $ 0.99 $ 1.01 $ 0.99
Book value 12.55 11.99 12.48 12.10 10.81 10.60 9.84
Cash dividends declared 0.16 0.12 0.58 0.42 0.42 0.40 0.38
SUMMARY OF FINANCIAL CONDITION
Total assets $1,122,902 $ 988,888 $1,069,086 $ 979,440 $ 906,506 $ 897,831 $ 913,964
Investment securities 273,674 247,941 264,675 241,287 248,660 245,793 256,195
Loans, net 755,504 667,020 717,033 658,962 570,119 511,091 494,841
Total deposits 858,000 781,319 825,371 774,720 764,451 760,729 784,529
Shareholders' equity 117,448 115,084 117,711 119,311 104,635 104,458 97,503
SELECTED FINANCIAL RATIOS
Net income to average assets 1.64% 1.54% 1.50% 1.41% 1.08% 1.11% 0.99%
Net income to average equity 14.99% 12.91% 13.08% 11.70% 9.24% 9.84% 9.90%
Dividend payout ratio 34.78% 30.77% 36.48% 31.34% 42.42% 40.00% 38.38%
Average equity to average
assets 10.96% 11.95% 11.49% 12.06% 11.74% 11.30% 10.01%
Weighted average shares
(primary) 9,532,345 9,270,598 9,569,810 9,809,640 9,758,011 9,858,368 9,909,484
Weighted average shares
(fully diluted) 9,534,572 9,270,598 9,569,810 9,809,640 9,758,011 9,858,368 9,909,484
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
NCBE - BBI PRO FORMA
(Dollar amounts other than per share data in thousands)
Three Months Ended March 31, Years Ended December 31,
---------------------------- ---------------------------------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
SUMMARY OF OPERATIONS
<S> <C> <C> <C> <C> <C>
Net interest income 11,803 11,153 45,792 41,681 37,474
Provision for loan losses 366 331 2,706 336 78
---------- ---------- ---------- ----------- -----------
Net interest income after provision
for loan losses 11,437 10,822 43,086 41,345 37,396
Noninterest income 2,493 1,784 8,439 6,843 5,083
Noninterest expense 7,418 6,598 28,278 27,289 27,072
---------- ---------- ---------- ----------- -----------
Income before income taxes 6,512 6,008 23,247 20,899 15,407
Income taxes 2,000 2,047 7,523 7,286 5,283
---------- ---------- ---------- ----------- -----------
Net income $ 4,512 $ 3,961 $ 15,724 $ 13,613 $ 10,124
========== ========== ========== =========== ===========
PER SHARE DATA
Net Income $ 0.46 $ 0.41 $ 1.58 $ 1.34 $ 1.00
Book value 12.73 12.16 12.64 12.23 10.92
Cash dividends declared 0.15 0.12 0.56 0.41 0.41
SUMMARY OF FINANCIAL CONDITION
Total assets $1,162,765 $1,030,264 $1,109,178 $ 1,018,946 $ 944,982
Investment securities 287,525 261,536 278,339 255,451 265,476
Loans, net 777,879 688,726 738,547 680,209 587,216
Total deposits 891,039 816,108 858,688 805,482 795,549
Shareholders' equity 123,865 121,224 124,037 125,269 109,787
SELECTED FINANCIAL RATIOS
Net income to average assets 1.63% 1.56% 1.49% 1.40% 1.09%
Net income to average equity 14.68% 12.91% 12.81% 11.55% 9.13%
Dividend payout ratio 33.94% 28.26% 35.66% 30.71% 41.09%
Average equity to average assets 11.13% 12.06% 11.62% 12.15% 11.89%
Weighted average shares (primary) 9,907,345 9,645,598 9,944,810 10,184,640 10,133,011
Weighted average shares
(fully diluted) 9,909,572 9,645,598 9,944,810 10,184,640 10,133,011
End of period shares outstanding 9,730,797 9,972,685 9,810,432 10,239,116 10,056,342
NCBE only 9,355,797 9,597,685 9,435,432 9,864,116 9,681,342
NCBE dividend declared $ 0.16 $ 0.12 $ 0.58 $ 0.42 $ 0.42
BBI pro forma shares 375,000 375,000 375,000 375,000 375,000
BBI dividend on pro forma shares $ 0.02 $ 0.02 $ 0.16 $ 0.16 $ 0.17
Pro forma combined dividend $ 0.15 $ 0.12 $ 0.56 $ 0.41 $ 0.41
</TABLE>
25
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED
COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated combined balance
sheet as of March 31, 1997, and the pro forma condensed consolidated combined
statements of income for the three months ended March 31, 1997 and 1996, and for
each of the years in the three-year period ended December 31, 1996, give effect
to the Merger based on the historical consolidated financial statements of NCBE
and BBI and their respective subsidiaries under the assumptions and adjustments
set forth in the accompanying notes to the pro forma financial statements.
The pro forma financial statements have been prepared based upon the
historical consolidated financial statements of NCBE and BBI. The pro forma
financial statements, which include results of operations as if the Merger had
been effected on the first day of the periods presented and had been accounted
for under the pooling of interests method of accounting, may not be indicative
of the results that actually would have occurred if the Merger had been in
effect on the dates indicated or which may be obtained in the future. The pro
forma financial statements should be read in conjunction with the historical
consolidated financial statements and notes thereto of NCBE incorporated by
reference herein and the historical consolidated financial statements of BBI
contained elsewhere in this Prospectus/Proxy Statement. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE" and "INDEX TO BBI FINANCIAL STATEMENTS."
26
<PAGE>
<TABLE>
<CAPTION>
NATIONAL CITY BANCSHARES, INC.
Pro Forma Condensed Consolidated Combined Balance Sheets
as of March 31, 1997
(Unaudited)
(Amounts in thousands)
Pro Forma Pro Forma
NCBE BBI Adjustments Combined
----------- ------- ----------- --------
<S> <C> <C> <C> <C>
Assets
- ------
Cash & cash equivalents $ 36,396 $ 2,341 $ $ 38,737
Securities available for sale 273,674 13,851 - 287,525
Fed Funds Sold 3,740 675 - 4,415
Loans 762,030 22,659 - 784,689
Allowance for loan losses (6,526) (284) - (6,810)
---------- ------- ----- ----------
Net loans 755,504 22,375 - 777,879
Premises & equipment 25,044 73 - 25,117
Other real estate owned 42 - - 42
Intangible assets 10,523 - 56 (1) 10,579
Other assets 17,979 548 - 18,527
---------- ------- ----- ----------
Total Assets $1,122,902 $39,863 $ 56 $1,162,821
========== ======= ===== ==========
Liabilities
Deposits
Noninterest bearing demand $ 99,759 $ 8,606 $ - $ 108,365
Interest bearing 758,241 24,432 - 782,673
---------- ------- ----- ----------
Total deposits 858,000 33,038 - 891,038
Fed funds sold & securities sold
under agreements to repurchase 76,923 200 - 77,123
Other borrowings 59,237 - - 59,237
Dividends payable 1,498 - - 1,498
Other liabilities 9,796 156 - 9,952
---------- ------- ----- ----------
Total Liabilities 1,005,454 33,394 - 1,038,848
Minority interest - 52 (52) (1) -
Shareholders' Equity
Common stock 9,356 188 2 (1) 9,731
185 (2)
Surplus 53,925 338 106 (1) 54,184
(185) (2)
Retained earnings 54,649 5,890 - 60,539
Unrealized gain (loss) on (482) 1 - (481)
securities available for sale ---------- ------- ----- ----------
Total Shareholders' Equity 117,448 6,417 108 123,973
---------- ------- ----- ----------
Total Liabilities & $1,122,902 $39,863 $ 56 $1,162,821
Shareholders' Equity ========== ======= ===== ==========
</TABLE>
27
<PAGE>
NATIONAL CITY BANCSHARES, INC.
Pro Forma Condensed Consolidated Combined Income Statement
for the Three Months Ended March 31, 1997
(Unaudited)
(Amounts in thousands)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
NCBE BBI Adjustments Combined
-------- ------- ----------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 16,365 $ 450 $ 16,815
Interest and dividends on securities 4,015 226 4,241
Other interest income 68 42 110
-------- ------ ------------ -------
Total interest income 20,448 718 0 21,166
INTEREST EXPENSE
Interest on deposits 7,563 313 7,876
Interest on borrowed funds 1,484 3 1,487
-------- ------ ------------ -------
Total interest expense 9,047 316 - 9,363
Net interest income 11,401 402 - 11,803
-------- ------ ------------ -------
Provision for loan losses 321 45 366
-------- ------ ------------ -------
Net interest income after 11,080 357 - 11,437
provision for loan losses
NONINTEREST INCOME
Trust income 426 0 426
Service charges on deposit accounts 868 10 886
Securities gains (losses) 465 0 465
Other 696 20 716
-------- ------ ------------ -------
Total noninterest income 2,455 38 - 2,493
NONINTEREST EXPENSE
Salaries, wages and other
employee benefits 4,117 104 4,221
Occupancy expenses 1,011 14 1,025
Other 2,081 91 2,172
-------- ------ ------------ -------
Total noninterest expense 7,209 209 - 7,418
Income before taxes 6,326 186 - 6,512
Income taxes 1,958 41 1 (4) 2,000
-------- ------ ------------ -------
NET INCOME $ 4,368 $ 145 $ (1) $ 4,512
======== ====== ============ =======
Earnings per common share $ .46 $19.31 $ .46
======== ====== =======
</TABLE>
28
<PAGE>
NATIONAL CITY BANCSHARES, INC.
Pro Forma Condensed Consolidated Combined Income Statement
for the Year Ended December 31, 1996
(Unaudited)
(Amounts in thousands)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
NCBE BBI Adjustments Combined
---- --- ----------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $63,467 $1,930 $65,397
Interest and dividends on securities 14,871 841 15,712
Other interest income 302 186 488
------- ------ ----------- -------
Total interest income 78,640 2,957 0 81,597
INTEREST EXPENSE
Interest on deposits 29,658 1,290 30,948
Interest on borrowed funds 4,841 16 4,857
------- ------ ----------- -------
Total interest expense 34,499 1,306 - 35,805
Net interest income 44,141 1,651 - 45,792
------- ------ -------
Provision for loan losses 2,491 215 2,706
------- ------ ----------- -------
Net interest income after provision 41,650 1,436 - 43,086
for loan losses
NONINTEREST INCOME
Trust income 1,739 0 1,739
Service charges on deposit accounts 3,451 64 3,515
Securities gains (losses) 40 0 40
Other 3,081 64 3,145
------- ------ ----------- -------
Total noninterest income 8,311 128 - 8,439
NONINTEREST EXPENSE
Salaries, wages and other
employee benefits 15,108 530 15,638
Occupancy expenses 3,954 50 4,004
Other 8,249 387 8,636
------- ------ ----------- -------
Total noninterest expense 27,311 967 - 28,278
Income before taxes 22,650 597 - 23,247
Income taxes 7,404 116 3 (4) 7,523
NET INCOME $15,246 $ 481 $ (3) $15,724
======= ====== =========== =======
Earnings per common share $ 1.59 $63.84 $ 1.58
======= ====== =======
</TABLE>
29
<PAGE>
NATIONAL CITY BANCSHARES, INC.
Pro Forma Condensed Consolidated Combined Income Statement
for the Year Ended December 31, 1995
(Unaudited)
(Amounts in thousands)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
NCBE BBI Adjustments Combined
-------- ------- ------------ ---------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 55,973 $ 1,631 $ 57,604
Interest and dividends on securities 14,030 957 14,987
Other interest income 1,212 199 1,411
-------- ------- ------------ ---------
Total interest income 71,215 2,787 0 74,002
INTEREST EXPENSE
Interest on deposits 29,005 1,163 30,168
Interest on borrowed funds 2,043 110 2,153
-------- ------- ------------ ---------
Total interest expense 31,048 1,273 - 32,321
Net interest income 40,167 1,514 - 41,681
-------- ------- ------------ ---------
Provision for loan losses 294 42 336
-------- ------- ------------ ---------
Net interest income after provision
for loan losses 39,873 1,472 - 41,345
NONINTEREST INCOME
Trust income 1,494 0 1,494
Service charges on deposit accounts 2,775 59 2,834
Securities gains (losses) 26 0 26
Other 2,429 60 2,489
-------- ------- ------------ ---------
Total noninterest income 6,724 119 - 6,843
NONINTEREST EXPENSE
Salaries, wages and other
employee benefits 15,041 507 15,548
Occupancy expenses 3,685 47 3,732
Other 7,617 392 8,009
-------- ------- ------------ ---------
Total noninterest expense 26,343 946 - 27,289
Income before taxes 20,254 645 - 20,899
Income taxes 7,139 143 4 (4) 7,286
-------- ------- ------------ ---------
NET INCOME $ 13,115 $ 502 $ (4) $ 13,613
======== ======= ============ =========
Earnings per common share $ 1.34 $ 65.87 $ 1.34
======== ======= =========
</TABLE>
30
<PAGE>
NATIONAL CITY BANCSHARES, INC.
Pro Forma Condensed Consolidated Combined Income Statement
for the Year Ended December 31, 1994
(Unaudited)
(Amounts in thousands)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
NCBE BBI Adjustments Combined
------- ------ ----------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $45,083 $1,438 $ 46,521
Interest and dividends on securities 14,169 840 15,009
Other interest income 1,516 230 1,746
------- ------ ----------- ---------
Total interest income 60,768 2,508 0 63,276
INTEREST EXPENSE
Interest on deposits 23,650 969 24,619
Interest on borrowed funds 1,110 73 1,183
------- ------ ----------- ---------
Total interest expense 24,760 1,042 - 25,802
Net interest income 36,008 1,466 - 37,474
------- ------ ----------- ---------
Provision for loan losses 18 60 78
------- ------ ----------- ---------
Net interest income after provision 35,990 1,406 - 37,396
for loan losses
NONINTEREST INCOME
Trust income 1,253 0 1,253
Service charges on deposit accounts 2,197 75 2,272
Securities gains (losses) (470) 0 (470)
Other 1,965 63 2,028
------- ------ ----------- ---------
Total noninterest income 4,945 138 - 5,083
NONINTEREST EXPENSE
Salaries, wages and other
employee benefits 14,074 503 14,577
Occupancy expenses 3,839 40 3,879
Other 8,188 428 8,616
------- ------ ----------- ---------
Total noninterest expense 26,101 971 - 27,072
Income before taxes 14,834 573 - 15,407
Income taxes 5,155 124 4 (4) 5,283
------- ------ ----------- ---------
NET INCOME $ 9,679 $ 449 $ (4) $ 10,124
======= ====== =========== =========
Earnings per common share $ .99 $51.27 $ 1.00
======= ====== =========
</TABLE>
31
<PAGE>
Notes to Pro Forma Condensed Consolidated Combined Financial Statements
1. The adjustment reflects acquisition of 80 shares of FNBB common stock
not owned by BBI through the exchange of 60.5726 shares of BBI Common.
2. The adjustment reflects NCBE's issuance of 375,000 shares of NCBE
Common for all of the shares of BBI Common, at an exchange rate of
49.5273 shares of NCBE Common per share of BBI Common.
3. The exchange ratio of NCBE Common for BBI Common is determined based
upon the market price of NCBE stock. The pro forma number of shares of
NCBE Common to be issued in the Merger is 375,000, reflecting an
exchange rate of 49.5273 shares of NCBE Common for each share of BBI
Common based upon the current market price of NCBE Common, which is in
excess of $36 per share. The Merger Agreement calls for each share of
BBI Common to be converted into a number of shares of NCBE Common,
subject to a minimum of 375,000 and a maximum of 450,000. Assuming the
average price of NCBE Common is $30 per share or less the number of
shares of NCBE Common exchanged for BBI Common would be 450,000. If
450,000 shares of NCBE Common were exchanged for BBI Common, the pro
forma earnings per share would be $0.45 for the three months ended
March 31, 1997, $0.41 for the three months ended March 31, 1996, $1.57
for the year ended December 31, 1996, $1.33 for the year ended December
31, 1995 and $0.99 for the year ended December 31, 1994.
4. The adjustment reflects an increase in the tax rate of BBI to 35%, the
rate applicable to NCBE and its subsidiaries.
32
<PAGE>
COMPARATIVE STOCK PRICES AND DIVIDENDS
Shares of NCBE Common are traded on the Nasdaq National Market tier of the
Nasdaq Stock Market under the symbol NCBE. The following table sets forth the
high and low sales prices of NCBE Common and cash dividends declared for the
periods indicated. Prices and dividends have been adjusted to reflect stock
dividends and splits. There is no established public trading market for the
shares of BBI Common. The following table only sets forth information regarding
those transactions as to which management of BBI has knowledge of the prices
paid. Because of the lack of a public trading market for shares of BBI Common,
the prices indicated may not reflect the prices which would be paid for such
shares on such a market.
<TABLE>
<CAPTION>
NCBE Common BBI Common
------------------------- -----------------------------
Cash Cash
Dividend Dividends
High Low Declared High Low Declared
------ ------ --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
1995
First Quarter $21.32 $19.16 $ 0.10 (1) (1) $ 1.00
Second Quarter 19.27 18.14 0.10 (1) (1) 1.00
Third Quarter 19.39 17.91 0.10 $500.00 $500.00 1.00
Fourth Quarter 23.10 18.59 0.12 500.00 500.00 5.00
1996
First Quarter 28.45 22.62 0.12 (1) (1) 1.00
Second Quarter 28.10 26.43 0.15 500.00 500.00 1.00
Third Quarter 27.74 26.43 0.15 (1) (1) 1.00
Fourth Quarter 30.00 26.67 0.16 (1) (1) 5.00
1997
First Quarter 33.88 29.25 0.16 (1) (1) 1.00
Second Quarter (2) - - 0.16 (1) (1) -
</TABLE>
- --------------
(1) Although there may have been private transactions involving BBI Common
during these periods that are not reflected in the table, neither BBI nor
any members of its management were parties to such transactions.
(2) Through June _____, 1997
On April 18, 1997, the last trading day before the announcement of the
execution of the Merger Agreement, the closing sale price of NCBE Common, was
$32.125 per share. Based upon the per share price of NCBE Common on such date,
the equivalent per share price of BBI Common was $1,782.98. The equivalent per
share price for BBI Common is calculated by multiplying the specified closing
sale price of NCBE Common by the number of shares of NCBE Common to be issued
for each share of BBI Common in the Merger. The foregoing illustration was
determined based upon the assumption that the Closing occurred on April 18,
1997, there were 7,571.5726 shares of BBI Common then outstanding and each share
of BBI Common would be converted into 55.5 shares of NCBE Common. The number of
shares of NCBE Common issuable in the Merger, as described elsewhere herein, is
subject to adjustment. See "THE MERGER -- Conversion of BBI Common".
On _________ __, 1997, the closing sale price of NCBE Common was $_______
per share. Based on the per share price of NCBE Common on such date, the
equivalent per share price for BBI Common was $___________. The equivalent per
share price for BBI Common is calculated by assuming that each share of BBI
Common would be converted into _____ shares of NCBE Common in the Merger (which
assumes that the Closing occurred on ________ __, 1997 and there were 7,571.5726
shares of BBI Common then outstanding).
33
<PAGE>
As of ______ __, 1997, there were _____ and 41 holders of record of NCBE
Common and BBI Common, respectively.
Both NCBE and BBI depend upon dividends from their financial institution
subsidiaries to pay dividends to their shareholders. The ability of the
financial institution subsidiaries to pay such dividends is limited by
applicable banking laws and regulations.
Shareholders of BBI are advised to obtain current market quotations for
NCBE Common.
34
<PAGE>
INFORMATION CONCERNING NCBE
Business
NCBE was organized in 1985 as a bank holding company for The National City
Bank of Evansville ("NCB") which remains NCBE's principal banking subsidiary. As
of March 31, 1997, NCBE owned 100% of ten commercial banks, including NCB, two
savings banks, a leasing subsidiary, a property management company, and had
consolidated assets of $1.1 billion, deposits of $858 million, net loans of $756
million and shareholders' equity of $117 million. NCBE's 12 financial
institution subsidiaries serve 26 communities from 35 locations and provide a
wide range of banking services in the tri-state area of Southwestern Indiana,
Western Kentucky, and Southeastern Illinois.
Recent Developments
On June 2, 1997, NCBE entered into an agreement in principle to merge with
Fourth First Bancorp, a one-bank holding company that owns First Bank of
Huntingburg, Indiana. As of March 31, 1997, Fourth First Bancorp had total
assets of $105 million, deposits of $90 million, loans of $80 million and
shareholders' equity of $12 million. First Bank of Huntingburg has two offices
in Huntingburg, Indiana and one in Ferdinand, Indiana.
The agreement contemplates the conversion of the outstanding shares of
Fourth First Bancorp into shares of NCBE Common, at an aggregate average value
of $26.5 million, but not less than 757,142 shares or more than 883,833 shares
of NCBE common. The transaction is subject to execution of definitive
agreements, regulatory approval and approval by Fourth First Bancorp
shareholders and is expected to close during the fourth quarter of 1997.
35
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth the number of shares of NCBE Common
beneficially owned as of the Record Date by (i) each person or group of persons
known to NCBE to be the beneficial owner of more than five percent (5%) of the
issued and outstanding shares of NCBE Common and (ii) each director and
executive officer of NCBE. Also set forth below is such information adjusted for
the Merger (assuming the issuance of 450,000 shares of NCBE Common). Except as
otherwise noted, each person or group identified below holds sole voting and
sole investment power with respect to the shares identified as beneficially
owned.
<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership
Prior to the Merger After the Merger
---------------------- ---------------------
Name Shares Percent Shares Percent
- ---- -------- --------- ------- ---------
<S> <C> <C> <C> <C>
Janice L. Beesley 53,087(1) * 53,087 *
Benjamin W. Bloodworth 32,411(2) * 32,411 *
Michael F. Elliott 307,176(3) 3.3% 307,176 3.1%
Susanne R. Emge 22,770(4) * 22,770 *
Donald G. Harris 11,230 * 11,330 *
H. Ray Hoops 469 * 469 *
Robert A. Keil 41,939(5) * 41,939 *
John D. Lippert 72,488(6) * 72,488 *
Harold A. Mann 31,588(7) * 31,588 *
Ronald G. Reherman 8,453(8) * 8,453 *
Lawrence R. Steenberg 27,756 * 27,756 *
All directors and executive
officers as a group (11 persons) 609,367(9) 6.4% 609,367 6.1%
</TABLE>
- -------------
* Less than 1%.
(1) All shares with shared voting and investment power with spouse.
(2) Includes 52 shares with sole voting and investment power; 2,959 shares
with sole voting and investment power by spouse; and 29,400 shares subject
to options exercisable within 60 days.
(3) Includes 238,820 shares with sole voting and investment power; 14,264
shares with shared voting and investment power with spouse; 17,924 shares
with sole voting and investment power by spouse; 3,093 shares held by a
trust with shared voting and investment power; and 33,075 shares subject to
options exercisable within 60 days.
(4) Includes 1,855 shares with sole voting and investment power; 13,829
shares with shared voting and investment power with spouse; and 7,086
shares with sole voting and investment power by spouse.
(5) Includes 8,864 shares with shared voting and investment powers with
spouse; and 33,075 shares subject to options exercisable within 60 days.
(6) Includes 23,814 shares with sole voting and investment power; 2,082
shares with shared voting and investment power with spouse; 13,125 shares
with sole voting and investment power by spouse; and 33,467 shares subject
to options exercisable within 60 days.
(7) Includes 192 shares with sole voting and investment power; 1,996 shares
with shared voting and investment power with spouse; and 29,400 shares
subject to options exercisable within 60 days.
(8) Includes 2,140 shares with sole voting and investment power; and 6,313
shares with shared voting and investment power with spouse.
(9) Includes 158,417 shares subject to options exercisable within 60 days.
36
<PAGE>
INFORMATION CONCERNING BBI
Business
BBI was incorporated under the laws of the State of Illinois on February 4,
1993, to serve as a bank holding company for FNBB. FNBB is a national banking
association that commenced business in 1906. The business of BBI consists solely
of the ownership, supervision and control of FNBB. FNBB has one banking office
in Bridgeport, Illinois. As of March 31, 1997, BBI had, on a consolidated basis,
total assets of $39.9 million, total net loans of $22.4 million, total deposits
of $33.0 million, and total stockholders' equity of $6.4 million.
Selected Financial Data of BBI
The selected consolidated data as of and for the two fiscal years ended
September 30, 1996 and 1995 have been derived from financial statements audited
by Kemper CPA Group, LLC, independent public accountants, whose report can be
found elsewhere in this Proxy Statement/Prospectus. The selected consolidated
financial data as of and for the six month periods ended March 31, 1997 and
March 31, 1996 have been derived from unaudited consolidated financial
statements of BBI, and reflect, in management's opinion, all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation of
such data. This data should be read in conjunction with BBI's Consolidated
Financial Statements and the Notes thereto and "-- Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
Six Months
(Dollar amounts other than Ended March 31, Year Ended September 30,
per share data in thousands) ----------------------- ----------------------------------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net interest income $ 815 $ 815 $ 1,636 $ 1,484 $ 1,456
Provision for loan losses (120) (25) (151) (47) (75)
Noninterest income $ 69 66 130 125 131
Noninterest expense (544) (537) (957) (933) (986)
--------- --------- --------- --------- ---------
Income before income taxes 220 319 658 629 526
Income taxes 34 52 145 128 115
--------- --------- --------- --------- ---------
Net income $ 186 $ 267 $ 513 $ 501 $ 411
========= ========= ========= ========= =========
Per Common Share
Net income $ 24.75 $ 35.16 $ 67.90 $ 65.67 $ 44.03
Book value 854.21 808.85 833.98 777.03 686.54
Cash dividends declared 6.00 6.00 8.00 8.00 8.00
Totals
Loans $ 22,659 $ 22,035 $ 23,131 $ 19,802 $ 17,791
Allowance for loan losses (284) (328) (442) (303) (283)
Securities 13,851 13,595 14,284 15,780 16,110
Total assets 39,863 41,376 40,416 39,926 39,298
Deposits 33,038 34,788 33,696 31,488 31,544
Shareholders' equity 6,417 6,140 6,264 5,914 5,239
Selected Financial Ratios
Net income to average assets 0.93% 1.29% 1.28% 1.24% 1.04%
Net income to average equity 6.22% 8.70% 8.43% 8.82% 6.85%
Cash dividend payout 24.24% 17.06% 11.78% 12.40% 18.17%
Average equity to average assets 15.46% 14.84% 15.16% 14.08% 15.25%
Tangible equity to tangible assets 16.10% 14.84% 15.50% 14.81% 13.33%
Total capital to risk weighted assets 26.61% 21.69% 24.88% 26.64% 25.92%
Other Data
Weighted average shares 7,511 7,592 7,555 7,629 9,335
Risk weighted assets $ 24,113 $ 28,313 $ 25,179 $ 22,202 $ 20,211
</TABLE>
37
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The following discussion and analysis is presented to facilitate the
understanding of the financial position of BBI and its subsidiary, First
National Bank of Bridgeport (the "Bank"). It identifies trends and material
changes that occurred during the reported periods and should be read in
conjunction with the consolidated financial statements and accompanying notes.
Overview of Operations. The primary goal of management of BBI over the
past few years has been to consistently improve earnings, with improvement in
net interest income as the major component thereof. The emphasis has been to
redirect funds from BBI's investment securities portfolio into its loan
portfolio. Consequently between September 30, 1995 and March 31, 1997,
investment securities, including federal funds sold, have declined by $3.1
million, or 17.6%, while loans have increased by $2.9 million, or 14.7%. From
September 30, 1996, to March 31, 1997, loans decreased by $314,000, or 1.4%,
representing a usual seasonal shift in demand related to agricultural lending.
Management has obtained most of its loan growth by working through loan
brokers to obtain participation loans with other community banks in Southern
Illinois and Southern Indiana. These have included commercial real estate loans
in larger areas in Southern Illinois and Southern Indiana, as well as other
participation loans in commercial loan packages. These participations have given
the Bank an opportunity to build its loan portfolio and related interest income.
Net Interest Income. These activities have had the desired effects. Net
interest income has increased by $152,000, or 10.2%, from September 30, 1995 to
September 30, 1996. Principally, this increase comes from a planned reduction in
money employed in interest earning deposits, Federal Funds Sold, and
investments, and an increase in money invested in loans. Income from loans
increased by $344,000, or 22.2%, from the period ended September 30, 1995 to
September 30, 1996.
Provision for Loan Losses. During the year ended September 30, 1996, BBI
recorded a provision for loan losses of $151,000 compared with $47,000 for year
ended September 30, 1995. The increased provision related to the need to
increase the allowance for loan and lease losses as a result of BBI's loss
connected with the Bennett Funding Group, Inc. Chapter 11 Bankruptcy filing in
March of 1996. Plans were laid to immediately address the matter, and bolster
the allowance for loan and lease losses. A total of $260,000 was charged off for
this credit in fiscal 1996.
During the six months ended March 31, 1997, BBI recorded a provision for
loan losses of $120,000 compared to $25,000 for the same period in 1996. The
increased provision related to the loss BBI incurred in connection with the
Bennett Funding Group, Inc. Chapter 11 bankruptcy filing in March 1996, as
discussed above. Management made the decision to increase the allowance for loan
and lease losses based on additional information concerning probable collections
obtained in December 1996.
BBI adopted SFAS 114 and 118 during the year ended September 30, 1996. The
change in accounting principle had no impact on BBI's operations. See note 1 to
the consolidated financial statements. The provision represents management's
assessment of the total risk in its loan portfolio and growth in the portfolio,
which consists primarily of commercial and residential real estate loans, and
standard commercial business and agricultural loans, and was made to maintain
the allowance for loan losses at a level management deemed adequate.
Management will continue to monitor its allowance for loan losses and make
additions to the allowance through the provision for loan losses as economic
conditions and other factors dictate. Although BBI maintains its allowance for
loan losses at a level which it believes to be adequate to provide for loan
losses, there can be no assurance that future losses will not exceed estimated
amounts or that additional provisions for loan losses will not be required in
the future.
Non-Interest Income. Non-interest income has also increased for both the
year ended September 30, 1996 compared with the year ended September 30, 1995,
and for the six months ended March 31, 1997 compared with the
38
<PAGE>
six months ended March 31, 1996. Non-interest income for the year ended
September 30, 1996 was $130,000 compared to $125,000 for the prior year. This
represents a $5,000, or 4.0% increase. The increase was due primarily to added
funds collected on checking account service charges, and increased fees on
loans, as well as a significant increase in credit life insurance premium income
during the period. Non interest income for the six months ended March 31, 1997,
was up $3,000, or 4.5%, to $69,000 from $66,000 for the six months ended March
31, 1996. The increase was primarily due to increased fee income on commercial
and real estate loans, as well as service charges on demand deposit accounts.
Non-Interest Expense. Noninterest expense has remained fairly constant
during the periods with the most significant increase due to normal pay
increases for employees.
Income Taxes. Changes in income taxes are a direct result of changes in
net income before taxes.
Net Income. Net income for the year ended September 30, 1996 was $513,000,
up $12,000, or 2.4%, from $501,000 for the year ended September 30, 1995. The
increase was due to increased net interest income discussed above offset
partially by the increased provision for loan losses incurred in fiscal 1996.
Net income for the six months ended March 31, 1997, was $186,000, down
$81,000, or 30.3%, from the same period in 1996 when net income was $267,000.
The decrease was due to the additional provision for loan losses discussed above
net of the resulting income tax benefit.
Overview of Financial Condition. Total assets have remained fairly
constant at approximately $40 million for all periods, while loans have
increased as discussed above funded by decreases in BBI's investment portfolio.
Total deposits have also remained fairly stable at approximately $34 million.
Equity has been consistently above peer group averages increasing from $5.9
million at September 30, 1995, to $6.4 million at March 31, 1997, or 14.8% of
total assets at September 30, 1995, and 16.1% of total assets at March 31, 1997.
The increase is due to retaining approximately 88% of earnings for each period,
low growth in total assets, and minimal fluctuations in the fair values of BBI's
investment portfolio.
39
<PAGE>
The following table sets forth, for the periods indicated, information
regarding the average balances of interest-earning assets and interest-bearing
liabilities, the dollar amounts of interest income and interest expense and the
resulting yields on interest earning assets and rate on interest bearing
liabilities. Average balances are also provided for non-interest earning assets,
non-interest bearing liabilities and equity.
<TABLE>
<CAPTION>
Year Ended September 30,
----------------------------------------------------------------
1996 1995
------------------------------ ------------------------------
Average Average Average Average
(In Thousands) Balance Interest Rate Balance Interest Rate
------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest Earning Assets:
Interest earning deposits $ 941 $ 58 6.16% $ 1,375 $ 83 6.04%
Federal Funds Sold 2,230 136 6.10% 1,721 115 6.68%
Investment securities - taxable 10,460 587 5.61% 11,278 690 6.12%
Investment securities - tax exempt (1) 4,800 408 8.50% 4,821 411 8.53%
Loans, net of unearned income (2) 21,467 1,892 8.81% 18,797 1,548 8.24%
------- ------ ----- ------- ------ -----
Total interest earning assets 39,898 3,081 7.72% 37,992 2,847 7.49%
------ ----- ------ -----
Non-earning Assets:
Cash and due from banks 1,133 - 1,430 -
Other nonearning assets 610 - 624 -
Allowance for loan losses (372) - (292) -
------- -------
Total Assets 41,269 39,754
======= =======
Liabilities & Equity
Interest Bearing Liabilities:
Deposits 31,975 1,264 3.95% 29,516 1,120 3.79%
Repurchase agreements 901 42 4.66% 2,312 103 4.46%
------- ------ ----- ------- ------ -----
Total Interest Bearing
Liabilities 32,876 1,306 3.97% 31,828 1,223 3.84%
------- ------ ----- ------- ------ -----
Non-Interest Bearing
Demand deposits 2,089 - 2,142 -
Other liabilities 240 - 208 -
Stockholders' equity 6,064 - 5,576 -
------- -------
Total Liabilities and Equity 41,269 39,754
======= =======
Net Interest Income $1,775 $1,624
====== ======
Net Interest Spread 3.75% 3.65%
==== =====
Net Interest Margin (3) 4.45% 4.27%
===== =====
</TABLE>
- ----------
(1) Stated at tax equivalent using 34% statutory income tax rate for all
periods.
(2) Average total loans include non-accrual loans and loan interest includes
loan fee income on loans in portfolio.
(3) Calculated by dividing net interest income by average earning assets.
40
<PAGE>
<TABLE>
<CAPTION>
Years Ended September 30,
--------------------------------------------------------
1996-1995 1995-1994
-------------------------- --------------------------
Change Change Change Change
Total Due To Due To Total Due To Due To
(In Thousands) Change Volume Rate Change Volume Rate
------ ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest Earning Assets:
Interest earning deposits $ (25) $ (26) 1 $ (33) $ (58) $ 25
Federal Funds Sold 21 34 (13) (14) (32) 18
Investment securities - taxable (103) (50) (53) 110 28 82
Investment securities - tax exempt (1) (3) (2) (1) 49 (7) 56
Loans, net of unearned income (2) 344 220 124 125 163 (38)
------ ------- ------ ------ ------ ------
Total interest earnings assets 234 176 58 237 94 143
------ ------- ------ ------ ------ ------
Liabilities
Interest Bearing Liabilities:
Deposits 144 93 51 153 2 151
Repurchase agreements (61) (63) 2 38 69 (31)
------ ------- ------ ------ ------ ------
Total Interest Bearing Liabilities 83 30 53 191 71 120
------ ------- ------ ------ ------ ------
Net Interest Income $ 151 $ 146 $ 5 $ 46 $ 23 $ 23
====== ======= ====== ====== ====== ======
</TABLE>
(1) Stated at tax equivalent using 34% statutory income tax rate for all
periods.
(2) Average total loans include non-accrual loans and loan interest includes
loan fee income on loans in portfolio.
Note: Change due to volume calculated using prior period's average rate
multiplied by the change in average balance. The change due to rate is
calculated using the difference between the total change and the change
calculated due to volume.
Asset/Liability Management. One of BBI's principal financial objectives is
to achieve long-term profitability while reducing its exposure to fluctuations
in interest rates. BBI has sought to reduce exposure of its earnings to changes
in market interest rates by managing the mismatch between asset and liability
maturities and interest rates. The principal element in achieving this objective
has been to increase the interest rate sensitivity of BBI's assets by
originating loans with interest rates subject to repricing to market conditions.
Accordingly, BBI has emphasized the origination of short-term commercial loans,
consumer loans, and real estate loans with 3 to 5 year balloon payments.
An asset or liability is interest rate sensitive within a specific time
period if it will mature or reprice within that time period. If BBI's assets
mature or reprice more frequently or to a greater extent than its liabilities,
BBI's net portfolio value and net interest income would tend to increase during
periods of rising interest rates but decrease during periods of falling interest
rates. Conversely, if BBI's assets mature or reprice more slowly or to a lesser
extent than its liabilities, BBI's net portfolio value and net interest income
would tend to decrease during periods of rising interest rates but increase
during periods of falling interest rates.
BBI's Board of Directors has formulated an Asset/Liability Management
Policy designed to promote long-term profitability while managing interest rate
risk. BBI recognizes the inherent risk in its portfolio, particularly in periods
of fluctuating interest rates. Management's principal strategy has been to
maintain short and medium term assets in its portfolio in an effort to be very
flexible and capable of repricing loan rates and deposit rates quickly, during
period of rate fluctuations. BBI does not engage in hedging activities.
41
<PAGE>
<TABLE>
<CAPTION>
Investments are reported at their fair values (see Note 1 to the financial statements.) Following are BBI's investments and
their contractual maturities for the periods noted.
1 Year 1 to 5 5 to 10 After
(In Thousands) or Less Years Years 10 Years Total
-------- ------ ------- -------- -----
<S> <C> <C> <C> <C> <C>
September 30, 1996
Obligations of the U.S. Treasury $ 998 $ 1,397 $ - $ - $ 2,395
Obligations of U.S. Agencies
and Corporations 1,215 5,554 100 - 6,869
Obligations of States
and subdivisions 1,308 3,303 269 - 4,880
Other securities 140 - - - 140
---------- -------- -------- --------- --------
Total investments $ 3,661 $ 10,254 $ 369 $ - $ 14,284
========== ======== ======== ========= ========
Weighted average yield at
the end of the period 6.03% 6.38% 9.18% 0.00% 6.36%
========== ======== ======== ========= ========
September 30, 1995
Obligations of the U.S.
Treasury $ 704 $ 2,025 $ - $ - $ 2,729
Obligations of U.S. Agencies
and Corporations 3,723 4,378 105 - 8,206
Obligations of States
and subdivisions 1,219 3,234 275 - 4,728
Other securities 136 - - - 136
---------- -------- -------- --------- --------
Total investments $ 5,782 $ 9,637 $ 380 $ - $ 15,799
========== ======== ======== ========= ========
Weighted average yield at
the end of the period 6.12% 6.36% 9.18% 0.00% 6.34%
========== ======== ======== ========= ========
Note: Weighted average yield on tax exempt securities has been calculated using the statutory rate of 34% at the
end of each period.
</TABLE>
42
<PAGE>
The following table illustrates the repricing opportunities, or rate
sensitivity, of interest earning assets and interest bearing liabilities as of
September 30, 1996. The difference, or "GAP," is indicated as a percentage of
total assets. The information reflects the repricing opportunities for variable,
or floating, rate assets and liabilities and the maturities and/or estimated
cash flows for fixed rate assets and liabilities.
<TABLE>
<CAPTION>
Maturity or Repricing Within
--------------------------------------------------------------------------
0-3 3-6 6 Months 1 Year Over
(In Thousands) Months Months to 1 Year to 5 Years 5 Years Total
------ ------ --------- ---------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Interest Earning Assets:
Loans $ 2,127 $ 2,200 $ 2,188 $14,824 $1,793 $23,132
Securities 996 786 1,879 10,254 369 14,284
Federal Funds Sold 875 - - - - 875
Interest Earning deposits with -
financial institutions 198 495 198 198 - 1,089
-------- ------- ------- ------- ------ -------
Total Interest Earning Assets $ 4,196 $ 3,481 $ 4,265 $25,276 $2,162 $39,380
======== ======= ======= ======= ====== =======
Interest Bearing Liabilities:
Savings and NOW accounts $ 9,791 $ - $ - $ - $ - $ 9,791
Time deposits 5,592 2,173 3,367 8,882 - 20,014
Repurchase agreements - - - 200 - 200
-------- ------- ------- ------- ------ -------
Total Interest Bearing Liabilities $ 15,383 $ 2,173 $ 3,367 $ 9,082 $ - $30,005
======== ======= ======= ======= ====== =======
Asset (liability) GAP (11,187) 1,308 898 16,194 2,162 9,375
Cumulative asset (liability) GAP (11,187) (9,879) (8,981) 7,213 9,375 9,375
Cumulative GAP to total assets -27.7% -24.5% -22.3% 17.9% 23.2% 23.2%
Total Assets $40,416
=======
</TABLE>
Lending Activities. BBI's loan portfolio consists primarily of commercial
and residential real estate loans, and commercial business and agriculture
related loans.
As of September 30, 1996, BBI had concentrations, greater than 10% of total
loans outstanding, in the following industries or types of loans: conventional
1-4 family residential mortgage loans-$3.6 million, or 15.7% of total loans and
commercial business loans-$7.6 million, or 32.7% of total loans.
As of March 31, 1997, concentrations were in the following industries or
types of loans: conventional 1-4 family residential mortgage loans-$3.5 million,
or 15.6% of total loans and commercial business loans-$7.3 million, or 32.0% of
total loans.
43
<PAGE>
The following table sets forth loans, by category, at the dates indicated.
<TABLE>
<CAPTION>
March 31, September 30,
----------------- ------------------------------------
(In Thousands) 1997 % 1996 % 1995 %
---- - ---- - ---- -
<S> <C> <C> <C> <C> <C> <C>
Commercial loans $ 8,552 37.7% $ 9,276 40.1% $ 6,645 33.6%
Real estate loans 12,364 54.6% 12,170 52.6% 11,514 58.1%
Installment loans 1,742 7.7% 1,686 7.3% 1,642 8.3%
------- ----- ------- ----- ------- -----
Total Loans $22,658 100.0% $23,132 100.0% $19,801 100.0%
======= ===== ======= ===== ======= =====
</TABLE>
Contractual maturities or repricing opportunities were as follows at the end of
each period indicated:
<TABLE>
<CAPTION>
March 31, 1997
------------------------------------
(In Thousands) 1 Year 1 to 5 After
or Less Years 5 Years Total
------- ------- ------- --------
<S> <C> <C> <C> <C>
Commercial loans $2,570 $ 4,005 $1,977 $ 8,552
Real estate loans 3,100 9,264 - 12,364
Installment loans 700 1,042 - 1,742
------ ------- ------ -------
Total Loans $6,370 $14,311 $1,977 $22,658
====== ======= ====== =======
September 30, 1996
-----------------------------------
Commercial loans $2,790 $ 4,693 $1,793 $ 9,276
Real estate loans 3,050 9,120 - 12,170
Installment loans 675 1,011 - 1,686
------ ------- ------ -------
Total Loans $6,515 $14,824 $1,793 $23,132
====== ======= ====== =======
September 30, 1995
-----------------------------------
Commercial loans $2,310 $ 3,917 $ 418 $ 6,645
Real estate loans 2,726 8,788 - 11,514
Installment loans 654 988 - 1,642
------ ------- ------ -------
Total Loans $5,690 $13,693 $ 418 $19,801
====== ======= ====== =======
</TABLE>
Note: Demand loans and loans having no stated maturity are reported as due
in one year or less.
Allowance for Loan Losses. The allowance for loan losses is maintained at
a level which, in management's judgment, is adequate to absorb credit losses
inherent in the loan portfolio. The amount of the allowance is based on
management's evaluation of the collectibility of the loan portfolio, including
the nature of the portfolio, credit concentrations, trends in historical loan
loss experience, specific impaired loans and economic conditions. Allowances for
impaired loans are generally determined based on collateral values or the net
present value of estimated cash flows. BBI has classified all installment loans
as smaller balance, homogeneous loans. Absent evidence to the contrary, the
allowance for these loans is based on historical loan loss experience.
Although management believes that it uses the best information available to
determine the allowance, unforeseen market conditions could result in
adjustments and net earnings could be significantly affected if circumstances
differ substantially from the assumptions used in making the final
determination. Future additions to BBI's allowance for loan losses will be the
result of periodic loan, property, and collateral reviews and thus cannot be
predicted in advance. In
44
<PAGE>
addition, federal regulatory agencies, as an integral part of the examination
process, periodically review the Bank's allowance for loan losses. Such agencies
may require the Bank to increase the allowance based upon their judgment of the
information available to them at the time of their examination.
For all periods presented, BBI had no real estate properties acquired
through foreclosure.
The following table sets forth the composition of non-performing loans at
the dates indicated.
<TABLE>
<CAPTION>
September 30,
March 31, --------------------
(In Thousands) 1997 1996 1995
---------- --------- ---------
<S> <C> <C> <C>
Non-accrual loans $ 261 $ 520 $ 81
Accruing loans contractually past due 90 or more 1 - 85
------- ------- -------
Total non-performing loans $ 262 $ 520 $ 166
======= ======= =======
Non-performing loans as a percent of total loans 1.16% 2.25% 0.84%
======= ======= =======
Non-performing loans as a percent of total assets 0.66% 1.29% 0.42%
======= ======= =======
Total Loans $22,658 $23,132 $19,801
======= ======= =======
Total Assets $39,862 $40,416 $39,926
======= ======= =======
</TABLE>
Allowance for Loan Losses. The gross amount of income which would have
been recorded on non-accrual loans had they not been on non-accrual status was
$24,000, $23,000 and $0 for the six months ended March 31, 1997, and the years
ended September 30, 1996 and 1995, respectively.
See notes to the financial statements for explanation of placing loans on
non-accrual status. There were no other loans which would be considered
potential problem loans at March 31, 1997.
45
<PAGE>
The following table presents activity in allowance for loan losses for the
periods indicated.
<TABLE>
<CAPTION>
Six Months Years Ended
ended September 30,
(In Thousands) ----------- ------------------
3/31/97 1996 1995
-------- ------- -------
<S> <C> <C> <C>
Beginning Balance $ 442 $ 303 $ 283
------- ------- -------
Loans charged off:
Commercial loans 284 - 31
Real estate loans - - -
Installment loans 7 15 2
------- ------- -------
Total Charge Offs 291 15 33
------- ------- -------
Recoveries of charged-off loans:
Commercial loans 9 - 2
Real estate loans - - -
Installment loans 4 3 4
------- ------- -------
Total Recoveries 13 3 6
------- ------- -------
Net (Charge offs) recoveries (278) (12) (27)
Provision charged to operations 120 151 47
------- ------- -------
Ending Balance $ 284 $ 442 $ 303
======= ======= =======
Allowance as a percent of total loans 1.25% 1.91% 1.53%
======= ======= =======
Allowance as a percent 108.40% 85.00% 182.53%
of non-performing loans ======= ======= =======
Total loans $22,658 $23,132 $19,801
======= ======= =======
Total non-performing loans $ 262 $ 520 $ 166
======= ======= =======
</TABLE>
The following table sets forth the allocation of BBI's allowance for loan
losses to the various categories of loans at the following dates:
<TABLE>
<CAPTION>
March 31, September 30,
(In Thousands) ------------------- ---------------------------------
1997 % 1996 % 1995 %
---------- ------- -------- ------- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Commercial loans $ 10 3.5% $ 270 61.1% $ 83 27.4%
Real estate loans 20 7.0% 35 7.9% - 0.0%
Installment loans 3 1.1% - 0.0% - 0.0%
Unallocated 251 88.4% 137 31.0% 220 72.6%
------- ----- ------- ----- ------ -----
Total Allowance for Loan Losses $ 284 100.0% $ 442 100.0% $ 303 100.0%
======= ===== ======= ===== ====== =====
</TABLE>
46
<PAGE>
<TABLE>
The following table provides information regarding the Bank's capital
ratios at the dates indicated.
September 30,
March 31, -----------------
(In Thousands) 1997 1996 1995
---------- ------- -------
<S> <C> <C> <C>
Total assets $39,847 $40,363 $39,964
Risk based assets 24,113 25,179 25,205
Tier I capital 6,456 6,310 5,940
Total capital 6,755 6,620 6,243
Total capital to risk-weighted assets 28.0% 26.3% 24.8%
Tier I risk based capital ratio 26.8% 25.1% 23.6%
Tier I capital to total assets 16.2% 15.6% 14.9%
</TABLE>
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth the number of shares of BBI Common
beneficially owned as of the Record Date by (i) each person or group of persons
known to BBI to be the beneficial owner of more than five percent (5%) of the
issued and outstanding shares of BBI Common and (ii) each director and executive
officer of BBI. Except as otherwise noted, each person or group identified below
holds sole voting and sole investment power with respect to the shares
identified as beneficially owned.
<TABLE>
<CAPTION>
Number of Percentage of
of Shares Outstanding Shares
Name Beneficially Owned Beneficially Owned
---- ------------------ -------------------
<S> <C> <C>
Patricia Schofield 44 *
Tena Seed 2 *
John R. Wolfe(1) 1,620 21.5%
R. Tony Wolfe(2) 1,620 21.5%
Jeffrey R. Wolfe(3) 1,195 15.9%
Edward L. Edmonson(4) 450 6.0%
George J. Abel 40 *
Clifford C. Gray(5) 300 4.0%
William A. Tillmann 200 2.7%
Daniel T. Wolfe(6) 793 10.6%
All directors and executive
officers as a group (10 persons) 6,264 83.4%
</TABLE>
- --------------
* Less than 1%.
(1) Includes 410 shares owned by spouse. The address of this shareholder is 985
Madison, Bridgeport, Illinois 62417.
(2) Includes 410 shares owned by spouse. The address of this shareholder is
Rural Route 1, Bridgeport, Illinois 62417.
(3) The address of this shareholder is 5644 North Cypress, South Broadview
Estates, Newburgh, Indiana 47630.
(4) Represents shares held as trustee f/b/o Edward L. Edmondson. The
address of this shareholder is 166A East Chestnut Street, Bridgeport,
Illinois 62417.
(5) Includes 100 shares held jointly with spouse.
(6) The address of this shareholder is 1701 Margaret Avenue, Terre Haute,
Indiana 47802.
47
<PAGE>
DESCRIPTION OF NCBE CAPITAL STOCK
Authorized Shares
NCBE's Articles of Incorporation presently authorize the issuance of
20,000,000 shares of common stock, $1.00 stated value per share. As of May 31,
1997, there were 9,355,797 shares of NCBE Common issued and outstanding.
Dividends, Voting, Liquidation and Other Rights
Holders of NCBE's Common are entitled to receive dividends when, as and if
declared by NCBE's Board of Directors out of funds legally available therefor.
The ability of the financial institution subsidiaries of NCBE to pay cash
dividends, which are expected to be NCBE's principal source of income, is
restricted by applicable banking laws and regulations. Such dividends have
previously been NCBE's principal source of income.
Holders of NCBE Common are entitled to one vote per share on all matters to
be voted upon by the shareholders other than the election of directors. NCBE
shareholders are entitled to cumulative voting on election of directors.
Cumulative voting permits a shareholder to cast a number of votes equal to the
number of shares owned multiplied by the number of directors to be elected. Such
votes may be cast for one nominee or spread among designated nominees.
In the event of liquidation, dissolution or winding up of NCBE, whether
voluntary or involuntary, the holders of NCBE Common would be entitled to share
ratably in any of its assets or funds that are available for distribution to its
shareholders after the satisfaction of its liabilities (or after adequate
provision is made therefor).
Holders of shares of NCBE Common do not have the preemptive right to
subscribe on a pro-rata basis for any presently or subsequently authorized
shares of NCBE Common.
The shares of NCBE Common presently outstanding are, and the shares of NCBE
Common to be issued pursuant to the Merger will be, when issued and delivered
pursuant to the Merger Agreement and as described herein, duly authorized,
validly issued, fully paid and non-assessable.
Certain Provisions of Articles of Incorporation and By-Laws
Certain provisions of NCBE's Articles of Incorporation and By-Laws may
delay or make more difficult unsolicited acquisitions or changes of control of
NCBE. Such provisions could have the effect of discouraging third parties from
making proposals involving an unsolicited acquisition or change in control of
NCBE, although such proposals, if made, might be considered desirable by a
majority of NCBE's shareholders. Such provisions may also have the effect of
making it more difficult for third parties to cause the replacement of the
current management of NCBE without the concurrence of the Board of Directors.
These provisions include: (i) the classification of the Board of Directors into
three classes, each class serving "staggered" terms of office of three years
(see "COMPARISON OF SHAREHOLDER RIGHTS --Classified Board of Directors"); and
(ii) requirements for advance notice for making nominations at shareholders'
meetings.
NCBE's By-Laws establish an advance notice procedure with regard to the
nomination, other than by or at the direction of the Board of Directors, of
candidates for election as directors. Although NCBE's By-Laws do not give the
Board of Directors any power to approve or disapprove shareholder nominations
for the election of directors or proposals for action, they may have the effect
of precluding a contest for the election of directors or the consideration of
shareholder proposals if the proper procedures are not followed, and of
discouraging or deterring a third party from conducting a solicitation of
proxies to elect its own slate of directors or to approve its proposals without
regard to whether consideration of such nominees or proposals might be harmful
or beneficial to NCBE and its shareholders.
48
<PAGE>
Certain Provisions of the Indiana Law
The Indiana Law applies to NCBE as an Indiana corporation. Certain
provisions of the Indiana Law may delay, prevent or make more difficult changes
of control of NCBE. Such provisions also may have the effect of preventing
changes in the management of NCBE. It is possible that such provisions could
make it more difficult to accomplish transactions which shareholders may
otherwise deem to be in their best interests. See "COMPARISON OF SHAREHOLDER
RIGHTS -- Business Combinations Involving Interested Shareholder" and
"COMPARISON OF SHAREHOLDER RIGHTS -- Control Share Acquisitions."
Transfer Agent
The National City Bank of Evansville, Evansville, Indiana is the transfer
agent for shares of NCBE Common.
COMPARISON OF SHAREHOLDER RIGHTS
The rights of holders of shares of NCBE Common are governed by the Indiana
Law and by NCBE's Articles of Incorporation and By-laws. The rights of holders
of shares of BBI Common are governed by the Illinois Law and by BBI's Articles
of Incorporation and By-laws. The rights of holders of shares of BBI Common
differ in certain respects from the rights which they would have as shareholders
of NCBE. A summary of the material differences between the respective rights of
the shareholders of NCBE and BBI is set forth below.
Classified Board of Directors
NCBE. The Articles of Incorporation and By-laws of NCBE divide the Board
of Directors into three classes, as nearly equal in number as possible, with
each class of directors serving a staggered term of three years. Directors are
elected by a plurality of votes cast by shares entitled to vote. Presently there
are three directors in each of NCBE's three classes of directors. The purpose of
a classified Board of Directors is to promote stability and continuity within
the Board. However, a classified Board of Directors also has the effect of
decreasing the number of directors that may otherwise be elected by holders of
NCBE Common and, therefore, may have the effect of precluding a contest for the
election of directors or delay, prevent or make more difficult changes in
control of NCBE.
BBI. BBI does not have a classified Board of Directors. The Articles of
Incorporation and By-laws of BBI provide for a Board of Directors of not less
than five nor more than fifteen members, with each member serving a term until
the next annual meeting of shareholders. Presently, there are eight BBI
directors.
Business Combinations Not Involving an Interested Shareholder
NCBE. Under the Indiana Law, a majority of the shares entitled to vote is
generally required to effectuate a merger or exchange. However, the vote of the
shareholders of the surviving corporation on a plan of merger is not required if
(i) the articles of incorporation of the surviving corporation will not differ
from its articles before the merger, (ii) each shareholder of the surviving
corporation whose shares were outstanding immediately before the effective date
of the merger will hold the same proportionate number of shares held by all such
shareholders (except for shares of the surviving corporation received solely as
a result of the shareholder's proportionate shareholdings in the other
corporations party to the merger), with identical designations, preferences,
limitations and relative rights, immediately after the merger, (iii) the number
of voting shares outstanding immediately after the merger, plus the number of
voting shares issuable as a result of the merger (either by the conversion of
securities issued pursuant to the merger or the exercise of rights and warrants
issued pursuant to the merger), will not exceed by more than 20% the total
number of voting shares of the surviving corporation outstanding immediately
before the merger, and (iv) the number of participating shares outstanding
immediately after the merger, plus the number of participating shares issuable
as a result of the merger (either by the conversion of securities issued
pursuant to the merger or the exercise of rights and warrants issued pursuant to
the merger), will not exceed by more than 20% the total number of participating
shares of the surviving corporation outstanding immediately before the merger.
NCBE's Articles of Incorporation require the
49
<PAGE>
affirmative vote of 80% of the shares entitled to vote on any merger,
consolidation or other business combination transaction with another corporation
that is not approved by a majority of the members of NCBE's Board of Directors.
BBI. Under the Illinois Law, the affirmative vote of at least two-thirds
of the shares entitled to vote on a proposed plan of merger is required for
approval unless any class or series of shares is entitled to vote as a class on
the plan. If any class is entitled to vote on the plan, the proposed plan must
be approved by an affirmative vote of (i) at least two-thirds of the shares of
each class or series of shares entitled to vote as a class and (ii) at least
two-thirds of the total number of shares entitled to vote on the proposed plan.
The articles of incorporation of any corporation may supersede the two-thirds
vote requirement by specifying any smaller or larger vote requirement; provided,
however, that the vote requirement may not be less than a majority of the shares
entitled to vote. BBI's Articles of Incorporation and By-laws do not contain
such provisions.
Business Combinations Involving an Interested Shareholder
NCBE. The Indiana Law restricts the ability of a "resident domestic
corporation" to engage in any combination with an "interested shareholder" for
five years after the interested shareholder's date of acquiring shares unless
the combination or the purchase of shares by the interested shareholder on the
interested shareholder's date of acquiring shares is approved by the board of
directors of the resident domestic corporation before that date. If the
combination was not previously approved, the interested shareholder may effect a
combination after the five-year period only if such shareholder receives
approval from a majority of the disinterested shares or the offer meets certain
fair price criteria. A "resident domestic corporation" means an Indiana
corporation that has 100 or more shareholders. "Interested shareholder" means
any person, other than the resident domestic corporation or its subsidiaries,
who is (i) the beneficial owner, directly or indirectly, of 10% or more of the
voting power of the outstanding voting shares of the resident domestic
corporation or (ii) an affiliate or associate of the resident domestic
corporation and at any time within the five-year period immediately before the
date in question was the beneficial owner of 10% or more of the voting power of
the outstanding shares of the resident domestic corporation. The above
provisions do not apply to a corporation that so elects in an amendment to its
articles of incorporation approved by a majority of the disinterested shares.
Such an amendment, however, would not become effective for 18 months after its
passage and would apply only to stock acquisitions occurring after its effective
date. NCBE's Articles of Incorporation do not exclude it from the restrictions
imposed by such provisions.
BBI. Although there are corresponding provisions under the Illinois Law
regarding business combinations with an "interested shareholder", such
provisions do not apply to BBI because BBI does not have a class of equity
securities registered under Section 12 of the Exchange Act and is not subject to
Section 15(d) of the Exchange Act.
Removal of Directors
NCBE. Under the Indiana Law, directors may be removed in any manner
provided in the corporation's articles of incorporation. In addition, unless the
articles of incorporation provide otherwise, the shareholders or directors may
remove one or more directors with or without cause. A director may be removed by
the shareholders, if they are otherwise authorized to do so, only at a meeting
called for that purpose, and such purpose must be stated in the notice of the
meeting. A director elected by a voting group of shareholders may be removed
only by that voting group. NCBE's Articles of Incorporation do not contain any
provisions relating to the removal of directors.
BBI. BBI's By-Laws provide that a majority of shareholders may remove a
director with or without cause if the notice of the meeting names the director
or directors to be removed at such meeting. None of BBI's Articles of
Incorporation, By-Laws or the Illinois Law defines what constitutes "cause."
Amendments to Articles of Incorporation
NCBE. The Indiana Law provides that, unless a greater vote is required
under a specific provision of the Indiana Law or by a corporation's articles of
incorporation or its board of directors, a corporation may amend its articles of
incorporation upon the affirmative vote of the holders of a greater number of
shares cast in favor of the amendment than the holders of shares cast against
the amendment, unless the amendment would create dissenters' rights in which
case
50
<PAGE>
a favorable vote of the holders of a majority of the outstanding shares is
required. Under the Indiana Law, a corporation's board of directors may
condition its submission of a proposed amendment to the shareholders of the
corporation on any basis, including the requirement of the affirmative vote of
holders of a greater percentage of the voting shares of the corporation than
otherwise would be required under the Indiana Law. NCBE's Articles of
Incorporation provide that amendments must be approved by the holders of a
majority of the outstanding voting shares; except that any amendment to the
provisions concerning business combinations must be approved by the holders of
eighty percent (80%) of the outstanding voting shares.
BBI. The Illinois Law provides that, unless a greater or lesser vote
(provided that it is not less than holders of a majority of the shares entitled
to vote) is required by the corporation's articles of incorporation, a
corporation may amend its articles of incorporation upon receiving the
affirmative vote of at least two-thirds of its voting shares. BBI's Articles of
Incorporation do not contain a greater or lesser vote requirement.
Voting Rights
NCBE. On all matters other than the election of directors, NCBE
shareholders are entitled to cast one vote per share of NCBE Common. NCBE
shareholders are entitled to cumulative voting on election of directors.
Cumulative voting permits a shareholder to cast a number of votes equal to the
number of shares owned multiplied by the number of directors to be elected. Such
votes may be cast for one nominee or spread among designated nominees.
BBI. Holders of shares of BBI Common are entitled to one vote per share on
all other matters to be voted upon by the shareholders other than the election
of directors. BBI shareholders are entitled to cumulative voting on election of
directors. This means that every shareholder has the right to vote the number of
shares owned by such shareholder for as many persons as there are directors
multiplied by the number of such shares or to distribute such cumulative votes
in any proportion among any number of candidates.
Special Meetings of Shareholders
NCBE. The Indiana Law provides that a corporation with more than 50
shareholders must hold a special meeting of shareholders on demand of its board
of directors or the persons specifically authorized to do so by the
corporation's articles or by-laws. NCBE's By-laws provide that a special meeting
of shareholders must be held upon the request of the Chairman of the Board, the
President, a majority of the Board of Directors or the holders of 25% or more of
the outstanding shares of voting stock.
BBI. BBI's By-Laws provide that special meetings of the shareholders of a
corporation may be called at any time, for any purpose or purposes, by the Board
of Directors or by ten or more shareholders who own an aggregate or 35% or more
of all the outstanding shares entitled to vote on the matter for which the
meeting is called.
Shareholder Action by Written Consent
NCBE. Under the Indiana Law, any action required or permitted to be taken
at a meeting of shareholders may be taken without a meeting if a written consent
to such action is signed by all shareholders entitled to vote thereon.
BBI. Under the Illinois Law and BBI's By-laws, any action required to be
taken at a meeting of shareholders, or any other action which may be taken at a
meeting of shareholders, may be taken without a meeting if a consent in writing,
setting forth the action so taken, is signed by: (i) the holders of outstanding
shares having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voting; or (ii) all of the shareholders entitled
to vote with respect to the subject matter. If such consent is signed by less
than all of the shareholders entitled to vote, then such consent will become
effective only if at least five days prior to the execution of the consent a
notice in writing is delivered to all the shareholders entitled to vote with
respect to the subject matter thereof. After the effective date of the consent,
prompt notice of the taking of the action without a meeting by less than
unanimous written consent must be delivered in writing to those shareholders who
have not consented in writing.
51
<PAGE>
Dissenters' Rights
NCBE. Under the Indiana Law, a shareholder of a corporation is entitled
(subject to certain exceptions) to receive payment for the fair value of his
shares if, among other things, such shareholder dissents from a plan of share
exchange, sale or exchange of all or substantially all of the property of the
corporation, or a merger or control share acquisition to which such corporation
is a party. NCBE's shareholders are not required to vote on the Merger nor are
they entitled to exercise dissenters' rights in connection with the Merger.
BBI. Under the Illinois Law, a shareholder of a corporation who dissents
from, among other things, a plan of merger, consolidation, plan of share
exchange, or sale, lease or exchange of all or substantially all of the property
of the corporation has the right (subject to certain exceptions) to demand
payment of the fair value of such shareholder's stock. Shareholders of BBI are
entitled to exercise such rights in connection with the Merger. See
"THE MERGER -- Dissenters' Rights."
Control Share Acquisitions
NCBE. Pursuant to the Indiana Law, an "acquiring person" who makes a
"control share acquisition" in an "issuing public corporation" may not exercise
voting rights on any "control shares" unless such voting rights are conferred by
a majority vote of the disinterested shareholders of the issuing corporation at
a special meeting of such shareholders held upon the request and at the expense
of the acquiring person. Unless otherwise provided in a corporation's articles
of incorporation or by-laws before a control share acquisition has occurred, in
the event that control shares acquired in a control share acquisition are
accorded full voting rights and the acquiring person acquires control shares
with a majority or more of all voting power, all shareholders of the issuing
corporation have dissenters' rights to receive the fair value of their shares.
"Control shares" means shares acquired by a person that, when added to all other
shares of the issuing public corporation owned by that person or in respect of
which that person may exercise or direct the exercise of voting power, would
otherwise entitled that person to exercise voting power of the issuing public
corporation in the election of directors within any of the following ranges: (i)
one-fifth or more but less than one-third, (ii) one-third or more but less than
a majority or (iii) a majority or more. "Control share acquisition" means,
subject to certain exceptions, the acquisition, directly or indirectly, by any
person of ownership of, or the power to direct the exercise of voting power with
respect to, issued and outstanding control shares. Shares acquired within 90
days or pursuant to a plan to make a control share acquisition are considered to
have been acquired in the same acquisition. "Issuing public corporation" means a
corporation which is organized in Indiana, has 100 or more shareholders, its
principal place of business, its principal office or substantial assets within
Indiana and either (i) more than 10% of its shareholders resident in Indiana,
(ii) more than 10% of its shares owned by Indiana residents or (iii) 10,000
shareholders resident in Indiana. The above provisions do not apply if, before a
control share acquisition is made, the corporation's articles of incorporation
or by-laws (including a board adopted by-law) provide that said provisions do
not apply. NCBE's Articles of Incorporation and By-laws do not exclude NCBE from
the restrictions imposed by such provisions.
BBI. There is no corresponding provision under the Illinois Law.
Indemnification
NCBE. Pursuant to the Indiana Law, NCBE is obligated to indemnify certain
officers and directors in connection with liabilities arising from legal
proceedings resulting from such person's service to NCBE in certain
circumstances. NCBE may also voluntarily undertake to indemnify certain persons
acting on NCBE's behalf in certain circumstances. The Indiana Law provides for
mandatory indemnification of directors and officers of Indiana corporations and
permissive indemnification of directors, officers, employees and agents of
corporations who are made parties to proceedings as a result of their
relationship with such corporation. The Indiana Law also applies to individuals
who are serving at such corporation's request as directors, officers, employees
and agents of such corporation's subsidiaries. The Indiana Law requires
corporations, unless limited by their articles of incorporation, to indemnify
any director or officer against reasonable expenses incurred in connection with
any proceeding to which such person was a party if the individual is wholly
successful on the merits. The Indiana Law authorizes corporations to indemnify
any director, officer, employee or agent against liability incurred in such a
proceeding generally if the individual's conduct was in good faith and the
individual reasonably believed, in the case of conduct in the individual's
official capacity, that his
52
<PAGE>
or her conduct was in the corporation's best interests and in all other cases
that his or her conduct was not opposed to the best interests of such
corporation. The Indiana Law further authorizes any court of competent
jurisdiction, unless the articles of incorporation provide otherwise, to order
indemnification generally if the court determines a director or officer of a
corporation is entitled to mandatory indemnification or is otherwise fairly and
reasonably entitled to indemnification in view of all the relevant
circumstances. The Indiana Law also authorizes corporations to advance
reasonable expenses in advance of final disposition of a proceeding generally if
the individual affirms in writing a good faith belief that he satisfies the
standard of conduct for permissive indemnification, the individual undertakes in
a signed writing to repay the advance if it is determined he does not satisfy
the standard of conduct for permissive indemnification and the corporation
determines that the facts then known do not preclude indemnification. Finally,
the Indiana Law authorizes further indemnification to the extent that the
corporation may provide in its articles of incorporation, by-laws, a resolution
of the board of directors or the shareholders or any other authorization,
whenever adopted, after notice, by a majority vote of holders of all the voting
shares then issued and outstanding. NCBE's Articles of Incorporation generally
provide for the indemnification of NCBE's directors, officers, employees and
agents to the extent permitted by the Indiana Law.
BBI. The Illinois Law permits a corporation to indemnify a person who, by
reason of his or her relationship with the corporation, was or is a party, or is
threatened to be made a party, to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
including any action by or in the right of the corporation, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding, if such person acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful; provided, however,
that in the case of actions by or in the right of the corporation, no
indemnification may be made in respect of any claim, issue or matter as to which
such person has been adjudged to be liable to the corporation unless, and only
to the extent, that the court in which such action or suit was brought
determines upon application that despite the adjudication of liability, but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses as the court deems proper.
Notwithstanding the foregoing, the Illinois Law provides that, to the extent
that such person has been successful, on the merits or otherwise, in the defense
of any action, suit or proceeding referred to above, or in defense of any claim,
issue or matter therein, such person must be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection therewith. The Illinois Law also authorizes corporations to pay
expenses in advance of final disposition of a proceeding if the person in
question undertakes to repay such amount, if it shall ultimately be determined
that he or she is not entitled to be indemnified by the corporation. The
Illinois Law provides that the indemnification and advancement of expenses
provided for therein is not exclusive of any other rights to which those seeking
indemnification and advancement of expenses may be entitled under any by-law,
agreement, vote of shareholders or disinterested directors, or otherwise. The
By-laws of BBI include indemnification provisions that are generally similar to
those contemplated by the Illinois Law.
Limitation of Liability of Directors
NCBE. The Indiana Law provides that a director is not liable for any
action taken as a director, or any failure to act, unless the director has
breached or failed to perform the duties of the director's office in compliance
with the Indiana Law and the breach or failure to perform constitutes willful
misconduct or recklessness. Subject to this standard, a director who votes or
assents to distributions in violation of the Indiana Law is personally liable to
the corporation for the amount of the illegal distribution and is entitled to
contribution from the other directors who voted for or assented to such
distribution and the shareholders who received the distribution.
BBI. The Illinois Law provides that a corporation may include in its
articles of incorporation a provision eliminating or limiting the personal
liability of a director to the corporation or its shareholders for monetary
damages for breach of fiduciary duty as a director, provided that the provision
does not eliminate or limit the liability of a director: (i) for any breach of
the director's duty of loyalty to the corporation or its shareholders; (ii) for
acts or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law; (iii) under certain provisions of the Illinois Law; or
(iv) for any transaction in which the director derived an improper personal
benefit. No such provision may eliminate or limit the liability of any director
for any act or omission occurring before the date
53
<PAGE>
when the provision is included in the articles of incorporation. The Articles of
Incorporation of BBI do not contain provisions limiting the liability of
directors.
Consideration of Non-Shareholder Interests
NCBE. The Indiana Law specifically authorizes directors, in considering
the best interests of a corporation, to consider the short-term and long-term
interests of the corporation as well as the effects of any action on
shareholders, employees, suppliers and customers of the corporation and
communities in which offices or other facilities of the corporation are located,
and any other factors the directors consider pertinent. Under the Indiana Law,
directors are not required to approve a proposed corporate action if the
directors determine in good faith after considering and weighing as they deem
appropriate the effect of such action on the corporation's constituents that
such approval is not in the best interest of the corporation. In addition, the
Indiana Law states that directors are not required to redeem any rights under or
render inapplicable a shareholder rights plan or to take or decline to take any
other action solely because of the effect such action might have on a proposed
acquisition of control of a corporation or the amounts to be paid to
shareholders under such an acquisition. The Indiana Law explicitly provides that
the different or higher degree of scrutiny imposed under the Delaware General
Corporation Law with respect to Delaware corporations and certain other
jurisdictions upon director actions taken in response to potential changes in
control will not apply. Any determination made with respect to the foregoing by
a majority of the disinterested directors will conclusively be presumed to be
valid unless it can be demonstrated that such determination was not made in good
faith.
BBI. The Illinois Law provides that, in discharging the duties of their
respective positions, the board of directors and individual directors may, in
considering the best long-term and short-term interests of the corporation,
consider the effects of any action upon employees, suppliers and customers of
the corporation or its subsidiaries, communities in which offices or other
establishments of the corporation or its subsidiaries are located, and all other
pertinent factors.
LEGAL MATTERS
The legality of the securities offered hereby and certain tax consequences
of the Merger will be passed upon by Baker & Daniels, Indianapolis, Indiana.
Certain matters on behalf of BBI in connection with the Merger will be passed
upon by Giffin, Winning, Cohen & Bodewes, P.C., Springfield, Illinois.
EXPERTS
The consolidated financial statements of NCBE and subsidiaries as of
December 31, 1996 and 1995 and each of the three years in the three-year period
ended December 31, 1996, incorporated by reference to NCBE's Annual Report on
Form 10-K, have been audited by McGladrey & Pullen, LLP, independent certified
public accountants, as set forth in their report and incorporated herein by
reference. The financial statements referred to above are incorporated herein by
reference in reliance upon such reports and upon the authority of such firm as
experts in auditing and accounting.
The consolidated financial statements of BBI for the two years ended
September 30, 1996, included in their Prospectus/Proxy Statement have been
audited by Kemper CPA Group, LLC, independent auditors, as set forth in a report
thereon appearing elsewhere herein and are included in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
54
<PAGE>
INDEX TO BBI FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
AUDITED FINANCIAL STATEMENTS:
<S> <C>
Independent Auditor's Report................................ F-2
Consolidated Statements of Financial Condition
as of September 30, 1996 and 1995......................... F-3
Consolidated Statements of Income for the Years
Ended September 30, 1996 and 1995......................... F-4
Consolidated Statements of Changes in Shareholders' Equity
for the Years Ended September 30, 1996 and 1995........... F-5
Consolidated Statements of Cash Flows for the
Years Ended September 30, 1996 and 1995................... F-6
Notes to Consolidated Financial Statements.................. F-7
UNAUDITED FINANCIAL STATEMENTS:
Consolidated Statements of Financial Condition
as of March 31, 1997 and September 30, 1996............... F-19
Consolidated Statements of Income for the
Six Months Ended March 31, 1997 and 1996.................. F-20
Consolidated Statements of Changes in
Shareholders' Equity for the Six Months
Ended March 31, 1997 and 1996............................. F-21
Consolidated Statements of Cash Flows for the
Six Months ended March 31, 1997 and 1996.................. F-22
Notes to Consolidated Financial Statements.................. F-23
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Bridgeport Bancorp, Inc.
Bridgeport, Illinois
We have audited the accompanying consolidated statements of financial condition
of Bridgeport Bancorp, Inc. as of September 30, 1996 and 1995, and the related
statements of income, changes in stockholders' equity, and cash flows for the
years then ended. These financial statements are the responsibility of the
Bank'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 consolidated financial position of
Bridgeport Bancorp, Inc. as of September 30, 1996 and 1995, and the consolidated
results of its operations and its cash flows for the years then ended, in
conformity with generally accepted accounting principles.
As discussed in Note 1, the Bank adopted Statement of Financial Accounting
Standards (SFAS) No. 114, "Accounting by Creditors for Impairment of a Loan," as
amended by SFAS 118, during 1996.
\S\Kemper CPA Group LLC
CERTIFIED PUBLIC ACCOUNTANTS
AND CONSULTANTS
Mt. Carmel, Illinois
November 4, 1996
F-2
<PAGE>
BRIDGEPORT BANCORP, INC.
BRIDGEPORT, ILLINOIS
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
ASSETS
------
<S> <C> <C>
Cash and due from banks $ 786,167 $ 1,481,640
Interest-bearing deposits with banks 1,089,000 792,000
Federal funds sold 875,000 1,825,000
Securities available for sale 14,284,139 15,799,524
Loans, net of allowance for loan losses of
$442,267 in 1996 and $302,659 in 1995 22,689,315 19,499,688
Accrued interest receivable 448,541 406,431
Premises and equipment 90,494 93,419
Other assets 153,519 28,602
----------- -----------
Total assets $40,416,175 $39,926,304
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities
Demand deposits $ 8,122,967 $ 8,185,539
Savings and NOW deposits 5,558,678 5,898,289
Other time deposits 20,014,387 17,404,020
----------- -----------
Total deposits 33,696,032 31,487,848
----------- -----------
Securities sold under agreement to repurchase 200,000 2,302,694
Accrued interest payable 103,224 97,514
Accrued expenses and other liabilities 100,654 75,588
----------- -----------
Total liabilities 34,099,910 33,963,644
----------- -----------
Minority Interest 51,870 48,788
----------- -----------
Shareholders' Equity
Common stock, $25 par value; 10,000 shares
authorized; 7,511 & 7,611 shares issued
and outstanding at September 30, 1996 and
1995, respectively 187,775 190,275
Additional paid-in capital 337,995 342,495
Retained earnings 5,750,640 5,341,408
Net unrealized gain (loss) on available for
sale securities, net of tax of $6,190 in
1996 and $20,448 in 1995 (12,015) 39,694
----------- -----------
Total shareholders' equity 6,264,395 5,913,872
----------- -----------
Total liabilities and shareholders' equity $40,416,175 $39,926,304
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
BRIDGEPORT BANCORP, INC.
BRIDGEPORT, ILLINOIS
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED SEPTEMBER 30, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Interest Income
Loans receivable $1,892,232 $1,547,648
Securities available for sale 855,871 960,688
Federal funds sold 135,939 115,144
Deposits with banks 58,168 82,542
---------- ----------
Total interest income 2,942,210 2,706,022
---------- ----------
Interest Expense
Deposits 1,264,227 1,119,591
Other borrowed funds 42,182 102,563
---------- ----------
Total interest expense 1,306,409 1,222,154
---------- ----------
Net interest income 1,635,801 1,483,868
Provision for loan losses 150,500 46,500
---------- ----------
Net interest income after provision
for loan loss 1,485,301 1,437,368
---------- ----------
Noninterest Income
Service charges on deposit accounts 62,597 58,854
Other income 66,802 65,847
---------- ----------
Total other income 129,399 124,701
---------- ----------
Noninterest Expense
Salaries and employee benefits 522,427 498,133
Occupancy expense 107,111 78,107
Other operating expenses 323,212 353,171
---------- ----------
Total other expenses 952,750 929,411
---------- ----------
Income Before Income Taxes and Minority Interest 661,950 632,658
Income Taxes 145,128 127,556
Minority Interest 4,022 3,972
---------- ----------
Net Income $ 512,800 $ 501,130
========== ==========
Net income per weighted average shares
of common stock of 7,555 shares and 7,629
shares in 1996 and 1995, respectively $ 68 $ 66
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
BRIDGEPORT BANCORP, INC.
BRIDGEPORT, ILLINOIS
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
Net
Unrealized
Gain (Loss)
Additional on Available- Total
Common Paid-In Retained for-Sale Shareholders
Stock Capital Earnings Securities Equity
----- ------- -------- ---------- ------
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1994 $190,775 $343,395 $4,909,916 ($205,470) $5,238,616
Net income for the year ended
September 30, 1995 - - 501,130 - 501,130
Purchase and retirement of
20 shares of common stock (500) (900) (8,600) - (10,000)
Net changes in unrealized
appreciation on available-
for-sale securities, net of
taxes of $126,297 - - - 245,164 245,164
Cash dividends declared,
$8.00 per share - - (61,038) - (61,038)
-------- -------- ---------- --------- ----------
Balance at September 30, 1995 190,275 342,495 5,341,408 39,694 5,913,872
Net income for the year ended
September 30, 1996 - - 512,800 - 512,800
Purchase and retirement of
100 shares of common stock (2,500) (4,500) (43,000) - (50,000)
Net changes in unrealized
appreciation on available-
for-sale securities, net of
taxes of $26,637 - - - (51,709) (51,709)
Cash dividends declared,
$8.00 per share - - (60,568) - (60,568)
-------- -------- ---------- --------- ----------
Balance at September 30, 1996 $187,775 $337,995 $5,750,640 ($12,015) $6,264,395
======== ======== ========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
BRIDGEPORT BANCORP, INC.
BRIDGEPORT, ILLINOIS
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 512,800 $ 501,130
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 43,725 45,144
Provision for loan losses 150,500 46,500
Net amortization and accretion of
premiums and discounts 15,367 (21,716)
Minority interest in net income 4,022 3,972
Increase in accrued interest receivable (42,110) (46,168)
(Increase) decrease in other assets (77,909) 101,003
Increase in other liabilities 45,512 29,554
----------- -----------
Total adjustments 139,107 158,289
----------- -----------
Net cash provided (used) by operating activities 651,907 659,419
----------- -----------
Cash flows from investing activities:
Net (increase) decrease in interest bearing
deposits with other banks (297,000) 1,188,000
Net (increase) decrease in federal funds sold 950,000 (225,000)
Net (increase) decrease in loans (3,340,127) (2,038,150)
Net purchases of premises and equipment (81,718) (36,908)
Purchases of available for sale securities (4,474,181) (4,378,042)
Maturities of available for sale securities 5,895,854 5,075,618
----------- -----------
Net cash provided (used) by investing activities (1,347,172) (414,482)
----------- -----------
Cash flows from financing activities:
Purchase and retirement of common stock (50,000) (10,000)
Net decrease in demand, savings, and NOW
deposit accounts (402,183) (2,206,198)
Net decrease in repurchase agreements (2,102,694) (18,516)
Net increase in time deposits 2,610,367 2,149,865
Net increase in other borrowed funds 5,710 -
Dividends to minority shareholders (840) (224)
Purchase of minority interest in subsidiary
net of donated capital of $9,424 in 1995 - 3,824
Dividends paid (60,568) (61,038)
----------- -----------
Net cash provided (used) by financing activities (208) (142,287)
----------- -----------
Net increase (decrease) in cash and equivalents (695,473) 102,650
Cash and due from banks, beginning of year 1,481,640 1,378,990
----------- -----------
Cash and due from banks, end of year $ 786,167 $ 1,481,640
=========== ===========
Interest paid $ 1,312,119 $ 1,203,418
=========== ===========
Income taxes paid $ 222,885 $ 85,429
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
BRIDGEPORT BANCORP, INC.
BRIDGEPORT, ILLINOIS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial statements include
the accounts of Bridgeport Bancorp, Inc. and The First National Bank of
Bridgeport (the Bank). All significant intercompany transactions and
balances have been eliminated in consolidation.
Cash Equivalents - For the purpose of presentation in the consolidated
statements of cash flows, cash and cash equivalents are defined as those
amounts included in the balance-sheet caption "cash and due from banks."
Securities Available for Sale - Available for sale securities consist of
bonds, notes, stocks, and mortgage backed securities.
Unrealized holding gains and losses, net of tax, on available for sale
securities are reported as a net amount in a separate component of
shareholders' equity until realized.
Gains and losses on the sale of available-for-sale securities are
determined using the specific identification method.
Declines in the fair value of individual available-for-sale securities
below their cost that are other than temporary result in write-downs of the
individual securities to their fair value. Stock in the Federal Home Loan
Bank is carried at cost.
Premiums and discounts are recognized in interest income using the interest
method over the period to maturity.
Loans Receivable - Loans receivable that management has the intent and
ability to hold for the foreseeable future or until maturity or pay-off are
reported at their outstanding principal adjusted for any charge-offs, the
allowance for loan losses, and any deferred fees or costs on originated
loans and unamortized premiums or discounts on purchased loans.
The Bank adopted Statement of Financial Accounting Standards (SFAS) No.
114, "Accounting by Creditors for Impairment of a Loan," as amended by SFAS
118, during 1996. The adoption of this statement did not have a material
effect on the financial position or results of operations of the Bank.
Discounts on purchased, first mortgage loans are amortized to income using
the interest method over the remaining period to contractual maturity,
adjusted for anticipated prepayments. Unearned discounts on installment
loans are recognized as income over the terms of the loans by the Rule of
78's method which approximates the interest method.
F-7
<PAGE>
BRIDGEPORT BANCORP, INC.
BRIDGEPORT, ILLINOIS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Loans Receivable (continued) - Loan origination fees and direct costs
related to loan originations are recorded as income and charged to expense
during the period received or incurred. The Bank has determined that
deferring these items would have an immaterial impact on the Bank's results
of operation.
The accrual of interest on impaired loans is discontinued when, in
management's opinion, the borrower may be unable to meet payments as they
become due. When interest accrual is discontinued, all unpaid accrued
interest is reversed. Interest income is subsequently recognized only to
the extent cash payments are received.
The allowance for loan losses is increased by charges to income and
decreased by charge-offs (net of recoveries). Management's periodic
evaluation of the adequacy of the allowance is based on the Bank's past
loan loss experience, known and inherent risks in the portfolio, adverse
situations that may affect the borrower's ability to repay, the estimated
value of any underlying collateral, and current economic conditions.
Income Taxes - Deferred tax assets and liabilities are reflected at
currently enacted income tax rates applicable to the period in which the
deferred tax assets or liabilities are expected to be realized or settled.
As changes in tax laws or rates are enacted, deferred tax assets and
liabilities are adjusted through the provision for income taxes.
Premises and Equipment - Land is carried at cost. Bank premises, vehicles,
and furniture and equipment are carried at cost, less accumulated
depreciation and amortization computed principally by the straight-line
method and accelerated methods over the estimated useful lives of the
assets.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
A material estimate that is particularly susceptible to significant change
relates to the determination of the allowance for losses on loans. In
connection with the determination of the allowances for losses on loans,
management obtains independent appraisals for significant properties.
F-8
<PAGE>
BRIDGEPORT BANCORP, INC.
BRIDGEPORT, ILLINOIS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Use of Estimates, (continued) - While management uses available information
to recognize losses on loans, future additions to the allowances may be
necessary based on changes in local economic conditions. In addition,
regulatory agencies, as an integral part of their examination process,
periodically review the Bank's allowance for losses on loans. Such agencies
may require the Bank to recognize additions to the allowance based on their
judgments about information available to them at the time of their
examination. Because of these factors, it is reasonably possible that the
allowance for losses on loans may change materially in the near term.
Financial Instruments - In the ordinary course of business the Bank has
entered into off-balance-sheet financial instruments consisting of
commitments to extend credit and commercial letters of credit. Such
financial instruments are recorded in the financial statements when they
are funded or related fees are incurred or received.
Fair Values of Financial Instruments
------------------------------------
The following methods and assumptions were used by the Bank in estimating
fair values of financial instruments as disclosed in Note 7:
Cash and short term instruments. The carrying amounts of cash and short
term instruments approximate their fair value.
Available-for-sale. Fair values for securities are based on quoted market
prices.
Loans receivable. For variable-rate loans that reprice frequently and have
no significant change in credit risk, fair values are based on carrying
values. Fair values for mortgage loans and other consumer loans are based
on quoted market prices of similar loans sold in conjunction with
securitization transactions, adjusted for differences in loan
characteristics. Fair values for commercial real estate loans are estimated
using discounted cash flow analyses, using interest rates currently being
offered for loans with similar terms to borrowers of similar credit
quality. Fair values for impaired loans are estimated using discounted cash
flow analyses or underlying collateral values, where applicable.
Deposit liabilities. The fair values disclosed for demand deposits are, by
definition, equal to the amount payable on demand at the reporting date
(that is, their carrying amounts). The carrying amounts of variable-rate,
fixed-term money-market accounts and certificates of deposit (CD's)
approximate their fair values at the reporting date. Fair values for fixed-
rate CD's are estimated using a discounted cash flow calculation that
applies interest rates currently being offered on certificates to a
schedule of aggregated expected monthly maturities on time deposits.
F-9
<PAGE>
BRIDGEPORT BANCORP, INC.
BRIDGEPORT, ILLINOIS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Short-term borrowings. The carrying amounts of federal funds purchased,
and other short-term borrowings maturing within 90 days approximate their
fair value. Fair values of short-term borrowings are estimated using
discounted cash flow analyses on the Bank's current incremental borrowing
rates for similar types of borrowing arrangements.
Accrued interest. The carrying amounts of accrued interest approximate
their fair values.
Off-balance-sheet instruments. Fair values for off-balance-sheet lending
commitments are based on fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and
the counterparties' credit standings.
NOTE 2 - DEBT AND EQUITY SECURITIES
Debt and equity securities have been classified as available for sale in
the consolidated statements of financial condition according to
management's intent. The carrying amount of securities available-for-sale
and their approximate fair values at September 30 follow.
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Market
September 30, 1996 Cost Gains Losses Value
- ------------------ --------- ---------- ---------- ------
<S> <C> <C> <C> <C>
U.S. Government
and agency securities $ 7,998,156 $ - $(55,608) $ 7,942,548
State and municipal
securities 4,886,645 57,745 - 4,944,390
Mortgage backed
securities 1,278,043 - (20,342) 1,257,701
FHLB stock 118,500 - - 118,500
Other securities 21,000 - - 21,000
----------- -------- -------- -----------
$14,302,344 $57,745 $(75,950) $14,284,139
=========== ======== ======== ===========
September 30, 1995
- ------------------
U.S. Government
and agency securities $ 9,037,573 $ - $(12,434) $ 9,025,139
State and municipal
securities 4,710,655 91,224 - 4,801,879
Mortgage backed
securities 1,854,754 - (18,648) 1,836,106
FHLB stock 115,400 - - 115,400
Other securities 21,000 - - 21,000
----------- -------- -------- -----------
$15,739,382 $91,224 $(31,082) $15,799,524
=========== ======== ======== ===========
</TABLE>
F-10
<PAGE>
BRIDGEPORT BANCORP, INC.
BRIDGEPORT, ILLINOIS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - DEBT AND EQUITY SECURITIES, CONTINUED
The Bank had no realized gains or losses for the year ended September 30,
1996.
The scheduled maturities of securities available-for-sale at September 30,
1996, were as follows:
<TABLE>
<CAPTION>
1996
------------------------------
Amortized Market
Cost Value
----------- -----------
<S> <C> <C>
Due in one year or less $ 3,354,914 $ 3,356,334
Due from one to five years 9,369,609 9,352,336
Due from five to ten years 1,438,321 1,435,969
Due after ten years - -
Federal Reserve Stock 139,500 139,500
----------- -----------
Total $14,302,344 $14,284,139
=========== ===========
</TABLE>
For purposes of the maturity table, mortgage backed securities, which are
not due at a single maturity date, have been allocated over maturity
groupings based on the weighted-average contractual maturities of
underlying collateral. The mortgage backed securities may mature earlier
than their weighted-average contractual maturities because of principal
prepayments.
Assets, principally securities, carried at approximately $4,357,953 at
September 30, 1996, and $2,100,000, at September 30, 1995 were pledged to
secure repurchase agreements and deposits.
NOTE 3 - LOANS RECEIVABLE
The components of loans in the consolidated statements of financial
condition were as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Commercial $ 9,276,197 $ 6,409,748
Real estate construction 1,115,043 257,766
Commercial real estate 7,428,793 7,678,402
Residential real estate 3,625,547 3,813,597
Consumer 1,724,386 1,750,499
----------- -----------
Subtotal 23,169,966 19,910,012
Net deferred loan fees, and
unearned discount (38,384) (107,665)
Allowance for loan losses (442,267) (302,659)
----------- -----------
$22,689,315 $19,499,688
=========== ===========
</TABLE>
An analysis of the change in the allowance for loan losses follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Balance at October 1 $ 302,659 $ 282,668
Loans charged off (13,726) (32,551)
Recoveries 2,834 6,042
----------- -----------
Net loans charged off (10,892) (26,509)
Provision for loan losses 150,500 46,500
----------- -----------
Balance, September 30 $ 442,267 $ 302,659
=========== ===========
</TABLE>
F-11
<PAGE>
BRIDGEPORT BANCORP, INC.
BRIDGEPORT, ILLINOIS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - LOANS RECEIVABLE, CONTINUED
Impairment of loans having recorded investments of $520,446 at September
30, 1996 and $0 at September 30, 1995 has been recognized in conformity
with FASB Statement 114, as amended by FASB Statement 118. The average
recorded investment in impaired loans during 1996 and 1995 was $260,223 and
$0, respectively. The total allowance for loan losses related to these
loans was $260,000 and $0 on September 30, 1996 and 1995, respectively.
Interest income from impaired loans was $0 at September 30, 1996 and 1995,
respectively.
The Bank is not committed to lend additional funds to debtors whose loans
have been modified.
NOTE 4 - PREMISES AND EQUIPMENT
Components of properties and equipment included in the consolidated
statements of financial condition at September 30, 1996 and 1995 were as
follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cost:
Land and bank premises $ 159,453 $ 155,396
Furniture and equipment 237,605 243,203
Vehicle 24,488 29,921
Computer equipment & software 213,393 203,620
--------- ---------
Total Cost 634,939 632,140
Less accumulated depreciation (544,445) (538,721)
--------- ---------
Net book value $ 90,494 $ 93,419
========= =========
</TABLE>
NOTE 5 - DEPOSITS
The aggregate amount of short-term jumbo CD's, each with a minimum
denomination of $100,000, was approximately $4,606,364 and $2,025,361 at
September 30, 1996 and 1995, respectively.
At September 30, 1996, the scheduled maturities of CD's are as follows:
<TABLE>
<CAPTION>
<S> <C>
3 months or less $2,599,282
Over 3 through 6 months 100,000
Over 6 through 12 months 403,842
Over 12 months 1,503,240
----------
$4,606,364
==========
</TABLE>
NOTE 6 - OTHER BORROWED FUNDS
Borrowed funds, consisting of agreements to repurchase securities sold, at
September 30, 1996 totaled $200,000. The agreements at September 30, 1996
mature within twelve months.
Information concerning these borrowings is summarized as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Average balance during the year $ 829,096 $2,311,952
Average interest rate during the year 5.40% 4.42%
Maximum month end balance during the year 2,505,467 2,302,694
</TABLE>
F-12
<PAGE>
BRIDGEPORT BANCORP, INC.
BRIDGEPORT, ILLINOIS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - OTHER BORROWED FUNDS, CONTINUED
Mortgage backed securities underlying the agreements at year end:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Carrying value $ 199,953 $ 2,400,000
Estimated fair value $ 200,188 $ 2,350,000
</TABLE>
NOTE 7 - FINANCIAL INSTRUMENTS
The Bank is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers
and to reduce its own exposure to fluctuations in interest rates. These
financial instruments include commitments to extend credit and lines of
credit. Those instruments involve, to varying degrees, elements of credit
and interest-rate risk in excess of the amount recognized in the
consolidated statements of financial condition. The contract or notional
amounts of these instruments reflect the extent of the Bank's involvement
in particular classes of financial instruments.
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit
and lines of credit is represented by the contractual notional amount of
those instruments. The Bank uses the same credit policies in making
commitments and conditional obligations as it does for on-balance-sheet
instruments.
Commitments to Extend Credit. Commitments to extend credit are agreements
to lend to a customer as long as there is no violation of any condition
established in the contract. Commitments generally have fixed expiration
dates or other termination clauses and may require payment of a fee. Since
many of the commitments are expected to expire without being drawn upon,
the total commitment amounts do not necessarily represent future cash
requirements. The Bank's experience has been that approximately 75 percent
of loan commitments are drawn upon by customers. While approximately 10
percent of commercial letters of credit are utilized, a significant portion
of such utilization is on an immediate payment basis. The bank evaluates
each customer's creditworthiness on a case-by-case basis. The amount of
collateral obtained, if it is deemed necessary by the Bank upon extension
of credit, is based on management's credit evaluation of the counterparty.
Collateral held varies but may include accounts receivable; inventory,
property, plant, and equipment; and income-producing commercial properties.
Lines of credit are conditional commitments issued by the Bank to guarantee
the performance of a customer to a third party. The credit risk involved in
issuing lines of credit is essentially the same as that involved in
extending loan facilities to customers. The Bank holds inventory and
accounts receivable as collateral supporting those commitments for which
collateral is deemed necessary. The extent of collateral held for those
commitments at September 30, 1996 varies from 0% to 100%; the average
amount collateralized is 50 percent.
F-13
<PAGE>
BRIDGEPORT BANCORP, INC.
BRIDGEPORT, ILLINOIS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - FINANCIAL INSTRUMENTS, CONTINUED
The estimated fair values of the Bank's financial instruments were as
follows:
<TABLE>
<CAPTION>
Carrying Fair
September 30, 1996 Value Value
------------------ ----------- -----------
<S> <C> <C>
Financial assets:
Cash and cash equivalents $ 1,875,167 $ 1,875,167
Securities available for sale 14,284,139 14,284,139
Loans receivable 22,689,315 21,982,609
Accrued interest receivable 448,541 448,541
Financial liabilities:
Deposit liabilities 33,696,032 33,983,808
Short term borrowings 200,000 203,130
Accrued interest payable 103,224 103,224
Off-balance-sheet assets (liabilities):
Commitments to extend credit - -
Lines of Credit - -
</TABLE>
The notional amounts of the Bank's financial instruments with off-balance
sheet risk at September 30, 1996, follows:
<TABLE>
<CAPTION>
Notional
Amount
---------
<S> <C>
Commitments to extend credit 1,664,629
Lines of credit 1,783,401
</TABLE>
NOTE 8 - CONCENTRATIONS OF CREDIT RISK
Due to the general nature of the banking industry, substantially all of the
bank's loans are within Lawrence and surrounding counties. Thus, the risk
of its loan portfolio is directly affected by the economic well-being of
this primarily agricultural area. In addition, the Bank has approximately
$720,000 of revenue bonds from a health care facility as of September 30,
1996.
F-14
<PAGE>
BRIDGEPORT BANCORP, INC.
BRIDGEPORT, ILLINOIS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - INCOME TAXES
The Bank and Subsidiary file consolidated federal income-tax returns on a
calendar-year basis. The provision for income taxes consisted of the
following for the years ended September 30:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Current expense $195,532 $153,527
Deferred benefit (50,404) (25,971)
-------- --------
$145,128 $127,556
======== ========
</TABLE>
Total income tax expense differed from the amounts computed by applying the U.S.
federal income tax rate of 34 percent to income before income taxes as a
result of the following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Expected income tax expense at
federal tax rate $225,063 $211,900
Nontaxable income net of
disallowed interest expense (79,935) (84,344)
-------- --------
Total $145,128 $127,556
======== ========
</TABLE>
Deferred tax assets and liabilities included in other assets at September 30
consist of the following:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $115,470 $ 68,457
Net unrealized loss on available
for sale securities 6,190 --
Other -- 911
-------- --------
121,660 69,368
-------- --------
Deferred tax liabilities:
Accumulated depreciation (6,979) (7,393)
Net unrealized gain on
available-for-sale securities -- (20,448)
Cash to accrual conversion (2,623)
Other (1,359) --
-------- --------
(8,338) (30,464)
-------- --------
Net deferred tax asset $113,322 $ 38,904
======== ========
</TABLE>
F-15
<PAGE>
BRIDGEPORT BANCORP, INC.
BRIDGEPORT, ILLINOIS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - RETIREMENT PLANS
Substantially all of the employees of the Bank are covered by a profit
sharing plan and a money purchase pension plan. There are no unfunded
accrued liabilities for plan contributions at September 30, 1996. Total
expense charged to income was $39,972 and $38,918 for 1996 and 1995
respectively. The annual contributions into the profit sharing plan are
based on current profits and retained earnings of the Bank. The money
purchase pension plan requires the Bank to contribute five percent of
eligible salaries into the plan annually.
NOTE 11 - RELATED PARTIES
The Bank has entered into transactions with its directors, significant
shareholders, and their affiliates (related parties). The aggregate amount
of the loans to such related parties at September 30, 1996 was $471,826.
During 1996, new loans to such related parties amounted to $311,770 and
repayments amounted to $509,211.
NOTE 12 - RESTRICTIONS ON RETAINED EARNINGS
The Bank is subject to certain restrictions on the amount of dividends that
it may declare without prior regulatory approval. At September 30, 1996,
approximately $50,000 of retained earnings were available for dividend
declaration without regulatory approval.
NOTE 13 - CORRECTION OF ERROR
Subsequent to the issuance of the audited consolidated financial statements
for the year ended September 30, 1995, it was determined that income from
the purchase of minority shareholder interest was understated. As a result,
the 1995 financial statements have been restated. The restatement resulted
in an increase in net income in the amount of $9,424.
NOTE 14 - REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory -and possibly additional
discretionary- actions by regulators that, if undertaken, could have a
direct material effect on the Bank's financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Bank must meet specific capital guidelines that
involve quantitative measures of the Bank's assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. The Bank's capital amounts and classification are also subject
to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier I capital (as defined) to average assets (as
defined). Management believes, as of September 30, 1996, that the Bank
meets all capital adequacy requirements to which it is subject.
F-16
<PAGE>
BRIDGEPORT BANCORP, INC.
BRIDGEPORT, ILLINOIS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 - REGULATORY MATTERS, CONTINUED
As of August 28, 1995, the most recent notification, the Office of the
Comptroller of the Currency categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized the Bank must maintain total risk-based, Tier I risk-based, and Tier
I leverage ratios as set forth in the table. There are no conditions or events
since that notification that management believes have changed the institution's
category.
The Bank's actual capital amounts and ratios are also presented in the table.
REGULATORY CAPITAL RATIOS
<TABLE>
<CAPTION>
For Capital For Capital
Actual Adequacy Purposes: Adequacy Purposes:
------------------ -------------------------------------- --------------------------------------
As of September 30, 1996: Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Total Capital
(to Risk-Weighted Assets) $6,620,000 26.3% (Greater or 1,970,000 (Greater or 8.0% (Greater- 2,462,500 (Greater or 10.0%
equal) equal) than) equal)
Tier I Capital
(to Risk-Weighted Assets) $6,310,000 25.1% (Greater or 985,000 (Greater or 4.0% (Greater- 1,477,500 (Greater or 6.0%
equal) equal) than) equal)
Tier I Capital
(to Average Assets) $6,310,000 15.6% (Greater or 1,667,800 (Greater or 4.0% (Greater- 2,084,750 (Greater or 5.0%
equal) equal) than) equal)
</TABLE>
F-17
<PAGE>
BRIDGEPORT BANCORP, INC.
BRIDGEPORT, ILLINOIS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 - PARENT ONLY FINANCIAL STATEMENTS
Summarized financial information concerning Bridgeport Bancorp, Inc., only
as of September 30, 1996, is as follows:
<TABLE>
<S> <C>
ASSETS
------
Cash $ 4,447
Investment in subsidiary 6,285,571
Other assets 14,236
-----------
Total assets $ 6,304,254
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities 7,511
Minority interest 51,870
Common stock, $25 par value; 10,000 shares authorized, 7,511 outstanding 187,775
Additional paid-in capital 337,995
Retained earnings 5,731,118
Unrealized loss on available for sale securities net of tax of $6,190 (12,015)
-----------
Total liabilities and shareholders' equity $ 6,304,254
===========
Income from sub $ 511,336
Expenses 8,816
-----------
Income before income tax 502,520
Income tax expense (benefit) (10,281)
-----------
Net income $ 512,801
===========
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities
Decrease in other assets 4,592
Increase in other liabilities 3,923
Dividends received from sub 104,160
Income from sub (511,336)
-----------
Total adjustments (398,661)
-----------
Net cash provided by operating activities 114,140
-----------
Cash flows from financing activities
Purchase and retirement of common stock (50,000)
Dividends paid (60,568)
-----------
Net cash used by financing activities (110,568)
-----------
Net increase in cash 3,572
Cash at beginning of period $ 875
-----------
Cash at end of period $ 4,447
===========
</TABLE>
Cash dividends paid to the Company from the Bank for the three years ended
September 30,
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
$ 104,160 $ 76,278 $1,755,484
========== ========== ==========
</TABLE>
F-18
<PAGE>
BRIDGEPORT BANCORP, INC.
BRIDGEPORT, ILLINOIS
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
March 31, 1997 September 30,
(Unaudited) 1996
--------------- --------------
<S> <C> <C>
ASSETS
- ------
Cash and due from banks $ 1,148,743 $ 786,167
Interest-bearing deposits with banks 1,192,000 1,089,000
Federal funds sold 675,000 875,000
Securities available for sale 13,850,766 14,284,139
Loans, net of allowance for loan losses of
$284,186 in 1997 and $328,826 in 1996
22,374,955 22,689,315
Accrued interest receivable 441,512 448,541
Premises and equipment 73,634 90,494
Other assets 105,978 153,519
----------- -----------
Total assets $39,862,588 $40,416,175
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Liabilities
Demand deposits $ 8,606,375 $ 8,122,967
Savings and NOW deposits 6,114,813 5,558,678
Other time deposits 18,317,323 20,014,387
----------- -----------
Total deposits 33,038,511 33,696,032
----------- -----------
Securities sold under agreement to repurchase 200,000 200,000
Accrued interest payable 112,080 103,224
Accrued expenses and other liabilities 44,024 100,654
----------- -----------
Total liabilities 33,394,615 34,099,910
----------- -----------
Minority Interest 51,954 51,870
----------- -----------
Shareholders' Equity
Common stock, $25 par value; 10,000 shares authorized;
7,511 & 7,591 shares issues and outstanding at
March 31, 1997 and 1996, respectively 187,775 187,775
Additional paid-in capital 337,995 337,995
Retained earnings 5,889,450 5,750,640
Net unrealized gain (loss) on available for sale securities,
net of tax of $412 and $32,160 at March 31, 1997 & 1996,
respectively 799 (12,015)
----------- -----------
Total shareholders' equity 6,416,019 6,264,395
----------- -----------
Total liabilities and shareholders' equity $39,862,588 $40,416,175
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-19
<PAGE>
BRIDGEPORT BANCORP, INC.
BRIDGEPORT, ILLINOIS
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED MARCH 31, 1997 and 1996
<TABLE>
<CAPTION>
Six months ended March 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
(Unaudited)
Interest Income
Loans receivable $ 941,859 $ 942,102
Securities available for sale 428,778 421,051
Federal funds sold 55,307 75,504
Deposits with banks 31,623 30,410
---------- ----------
Total interest income 1,457,567 1,469,067
---------- ----------
Interest Expense
Deposits 636,394 616,251
Other borrowed funds 6,000 37,586
---------- ----------
Total interest expense 642,394 653,837
---------- ----------
Net interest income 815,173 815,230
Provision for loan losses 120,000 25,500
---------- ----------
Net interest income after provision for loan loss 695,173 789,730
---------- ----------
Noninterest Income
Service charges on deposit accounts 34,120 30,492
Other income 35,013 35,400
---------- ----------
Total other income 69,133 65,892
---------- ----------
Noninterest Expense
Salaries and employee benefits 318,639 307,384
Occupancy expense 36,307 63,675
Other operating expenses 187,237 163,508
---------- ----------
Total other expenses 542,183 534,567
---------- ----------
Income Before Income Taxes and Minority Interest 222,123 321,055
Income Taxes 33,914 52,003
Minority Interest 2,295 2,109
---------- ----------
Net Income $ 185,914 $ 266,943
========== ==========
Net income per weighted average shares of common stock
of 7,511 shares and 7,592 shares during period ended
March 31, 1997 and 1996, respectively $ 24.75 $ 35.16
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-20
<PAGE>
BRIDGEPORT BANCORP, INC.
BRIDGEPORT, ILLINOIS
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED MARCH 31, 1997 AND 1996 (Unaudited)
<TABLE>
<CAPTION>
Net
Unrealized
Gain (Loss)
on
Additional Available- Total
Common Paid-In Retained For-Sale Shareholders'
Stock Capital Earnings Securities Equity
--------- ---------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1995 $ 190,275 $ 342,495 $ 5,341,408 $ 39,694 $ 5,913,872
Net income for the six months
ended March 31, 1996 - - 266,943 - 266,943
Purchase and retirement of
20 shares of common stock (500) (900) (8,600) (10,000)
Net changes in unrealized
appreciation on available-
for-sale securities, net of
taxes of $10,786 - - - 20,032 20,032
Cash dividends declared - - (50,497) - (50,497)
--------- ---------- ----------- ------------ -------------
Balance at March 31, 1996 $ 189,775 $ 341,595 $ 5,549,254 $ 59,726 $ 6,140,350
========= ========== =========== ============ =============
Balance at September 30, 1996 187,775 337,995 5,750,640 (12,015) 6,264,395
Net income for the six months
ended March 31, 1997 - - 185,914 - 185,914
Net changes in unrealized
appreciation on available-
for-sale securities, net of
taxes of $6,899 - - - 12,814 12,814
Cash dividends declared - - (47,104) - (47,104)
--------- ---------- ----------- ------------ -------------
Balance at March 31, 1997 $ 187,775 $ 337,995 $ 5,889,450 $ 799 $ 6,416,019
========= ========== =========== ============ =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-21
<PAGE>
BRIDGEPORT BANCORP, INC.
BRIDGEPORT, ILLINOIS
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
Six months ended March 31,
----------------------------
1997 1996
------------- -------------
<S> <C> <C>
(Unaudited)
Cash flows from operating activities:
Net income $ 185,914 $ 266,943
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 20,551 23,265
Provision for loan losses 120,000 25,500
Minority interest in net income 2,295 2,109
(Increase) decrease in accrued interest receivable 7,029 (14,949)
(Increase) decrease in other assets 40,939 (30,043)
Decrease in other liabilities (47,774) (25,437)
----------- -----------
Total adjustments 143,040 (19,555)
----------- -----------
Net cash provided (used) by operating activities 328,954 247,388
----------- -----------
Cash flows from investing activities:
Net (increase) decrease in interest bearing
deposits with other banks (103,000) (396,000)
Net (increase) decrease in federal funds sold 200,000 (425,000)
Net (increase) decrease in loans 194,360 (2,231,998)
Purchases of premises and equipment (3,691) (33,968)
Purchases of available for sale securities (1,785,862) (584,348)
Maturities of available for sale securities 2,236,808 2,819,987
----------- -----------
Net cash provided (used) by investing activities 738,615 (851,327)
----------- -----------
Cash flows from financing activities:
Purchase and retirement of common stock - (10,000)
Net increase in demand, savings, and NOW deposit accounts 1,039,543 2,770,221
Net decrease in repurchase agreements - (2,052,694)
Net increase (decrease) in time deposits (1,697,064) 530,355
Dividends to minority shareholders (368) (460)
Dividends paid (47,104) (50,497)
----------- -----------
Net cash provided (used) by financing activities (704,993) 1,186,925
----------- -----------
Net increase in cash and equivalents 362,576 582,986
Cash and due from banks, beginning of period 786,167 1,481,640
----------- -----------
Cash and due from banks, end of period $ 1,148,743 $ 2,064,626
=========== ===========
Interest paid $ 633,538 $ 643,973
=========== ===========
Income taxes paid $ 42,000 $ 96,885
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-22
<PAGE>
BRIDGEPORT BANCORP, INC.
BRIDGEPORT, ILLINOIS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Bridgeport
Bancorp, Inc. and its subsidiary First National Bank of Bridgeport. Upon
consolidation, all significant intercompany accounts and transactions have
been eliminated.
NOTE 2 - GENERAL
The financial statements were prepared in accordance with the instructions
for Form 10-QSB and, therefore, do not include all of the disclosures
necessary for a complete presentation of financial position, results of
operations and cash flows in conformity with generally accepted accounting
principles. The March 31, 1997 and 1996 financial statements have been
prepared on a basis consistent with the annual financial statements and
include, in the opinion of management, all adjustments which consist of
only normal recurring adjustments, necessary for a fair presentation of the
results of operations and financial position for and at the end of such
interim periods.
NOTE 3 - PROPOSED ACQUISITION OF THE COMPANY
On April 21, 1997, the Company entered into a definitive agreement to merge
with National City Bancshares, Inc. ("NCBE"). Pursuant to the agreement,
each issued and outstanding share of stock of the Company will be converted
into the right to receive from NCBE a specified number of shares of NCBE
common stock. The exchange ratio will be determined by dividing the number
of shares of NCBE Common which have an aggregate Market Value of
$13,500,000, subject to a minimum of 375,000 and a maximum of 450,000, by
the number of shares of BBI Common outstanding on the date of the closing
of the Merger. Consummation of the merger requires the approval of
Bridgeport Bancorp shareholders and various regulatory agencies.
F-23
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is entered into as of
the 21st day of April, 1997, by and among National City Bancshares, Inc., an
Indiana corporation ("NCBE"), and Bridgeport Bancorp, Inc., an Illinois
corporation ("BBI").
W I T N E S S E T H:
WHEREAS, BBI owns 99.2% of First National Bank of Bridgeport, a national
banking association (the "Bank"); and
WHEREAS, the parties desire that BBI merge in a transaction to be accounted
for as a pooling-of-interests with and into NCBE (the "Merger") upon the terms
and conditions contained herein; and
WHEREAS, the Board of Directors of BBI deems the Merger advisable and in
the best interests of BBI and its stockholders and has adopted a resolution
approving this Agreement and directing that this Agreement be submitted for
consideration at a meeting of BBI's stockholders; and
WHEREAS, the Board of Directors of NCBE has adopted a resolution approving
this Agreement; and
WHEREAS, simultaneously with the execution of this Agreement, the members
of the Board of Directors of BBI have executed an agreement (the "Stockholders
Agreement") providing for, among other things, the agreement of such persons to
vote the shares of capital stock of BBI that they beneficially own in favor of
the Merger.
NOW, THEREFORE, for and in consideration of the premises and the mutual
agreements, representations, warranties and covenants herein contained and for
the purpose of prescribing the terms and conditions of the Merger, the mode of
carrying the Merger into effect, the manner of converting the capital stock of
BBI into shares of capital stock of NCBE, and such other provisions as are
deemed desirable in connection with the Merger, the parties, intending to be
bound, hereby agree as follows:
1. THE MERGER.
(a) Merger. Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the Indiana Business Corporation Law (the
"IBCL") and the Business Corporation Act of Illinois (the "BCA" and, together
with the IBCL, the "Statutes"), at the Effective Time (as hereafter defined),
BBI will be merged with and into NCBE. BBI shall be the merging corporation
under the Merger and its separate corporate existence shall cease as of the
Effective Time (as hereafter defined). NCBE shall be the surviving corporation
under the Merger (the "Surviving Corporation") and shall succeed to and assume
all rights and obligations of BBI in accordance with the Statutes.
(b) Regulatory Approvals. The parties acknowledge that certain approvals
must be received from or notices must be given to federal and state banking
regulatory agencies including, but not limited to, (i) the Board of Governors of
the Federal Reserve System (the "Federal Reserve Board"); and (ii) any other
banking regulatory authorities having jurisdiction over the parties or the
Merger (the governmental agencies referred to in items (i)-(ii) above are
collectively referred to herein as the "Applicable Governmental Authorities").
(c) Closing; Effective Time. The delivery of the certificates and opinions
called for by this Agreement shall take place at the offices of NCBE, 227 Main
Street, Evansville, Indiana, at a closing (the "Closing") fixed by agreement of
NCBE and BBI as promptly as practicable following the latest of (i) approval by
all the Applicable
A-1
<PAGE>
Governmental Authorities; (ii) the expiration of any waiting period imposed by
law; and (iii) satisfaction or waiver (to the extent legally permissible) of the
conditions set forth in Sections 11, 12 and 13 of this Agreement. The parties
shall execute and file prior to the Closing, with the Indiana Secretary of State
and the Illinois Secretary of State, articles of merger in forms which comply
with the Statutes (the "Articles of Merger") relating to the Merger. The time at
which the Merger becomes effective shall be specified in the Articles of Merger
and is hereafter referred to as the "Effective Time".
2. EFFECTS OF THE MERGER.
(a) Effects of the Merger. The Merger shall have the effects set forth in
the Statues.
(b) Articles of Incorporation and By-Laws. The Articles of Incorporation
and the By-Laws of NCBE as in effect at the Effective Time shall be the Articles
of Incorporation and By-Laws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
(c) Directors. The directors of NCBE at the Effective Time shall be the
directors of the Surviving Corporation until the earlier of their resignation or
removal or until their respective successors are duly elected and qualified, as
the case may be.
(d) Officers. The officers of NCBE at the Effective Time shall be the
officers of the Surviving Corporation until the earlier of their resignation or
removal or until their respective successors are duly elected and qualified, as
the case may be.
3. EFFECT OF MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS.
By virtue of the Merger and without any action on the part of the
holder of any of BBI's shares of Common Stock, $25.00 par value per
share ("BBI Common"), or any shares of capital stock of NCBE:
(a) Cancellation of Treasury Stock. As of the Effective Time, each share
of BBI Common that is owned by BBI shall automatically be canceled and retired
and shall cease to exist, and no consideration shall be delivered in exchange
therefor.
(b) Conversion of BBI Common. As of the Effective Time, each issued and
outstanding share of BBI Common (other than shares to be canceled in accordance
with Section 3(a) or Dissenting Shares (as hereafter defined)) shall be
converted into the right to receive from NCBE the following (the "Merger
Consideration"): (i) (x) that number of shares of Common Stock, $1.00 stated
value per share, of NCBE ("NCBE Common") having an aggregate Market Value (as
hereafter defined) of $13,500,000; (y) minus the Minority Share Adjustment (as
hereafter defined), if any; and (ii) divided by the number of shares of BBI
Common outstanding on the date of the Closing; provided, however, that not less
than 375,000 shares nor more than 450,000 shares of NCBE Common shall be
issuable in the Merger (without taking into consideration shares not issued
because of Dissenting Shares, fractional interests of shares of NCBE Common or
the Minority Share Adjustment). The Market Value of a share of NCBE Common shall
be equal to the average of the weighted average trading prices as reported by
the Nasdaq National Market System for the ten (10) trading days ended three (3)
days prior to the Closing; however, the Market Value shall not be less than
$30.00 per share (the "Minimum Value") or more than $36.00 per share. The
Minority Share Adjustment shall be equal to: (A) if the 80 shares of common
stock, $25.00 par value per share, of the Bank (the "Bank Stock") not owned by
BBI on the date hereof (the "Minority Shares") are acquired by NCBE before the
Closing, the amount paid for the Minority Shares plus any additional filing,
legal, accounting or other out-of-pocket expenses incurred as a result of the
acquisition of the Minority Shares but in any event not more than $133,000, or
(B) if the Minority Shares are not acquired by NCBE before the Closing, the sum
of $133,000.
A-2
<PAGE>
(c) NCBE to Provide Merger Consideration. NCBE shall take all steps to
provide to the Exchange Agent (as hereafter defined) on or before the Closing
with the shares of NCBE Common issuable pursuant to subsection (b) and the cash
payable in lieu of fractional shares pursuant to subsection (d).
(d) No Fractional Shares.
(i) No certificates or scrip representing fractional shares of NCBE
Common shall be issued upon the surrender for exchange of certificates
evidencing BBI Common, and such fractional share interests shall not
entitle the owner thereof to vote, to receive dividends or to any other
rights of a shareholder of NCBE.
(ii) Notwithstanding any other provision of this Agreement, each
holder of shares of BBI Common exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of NCBE
Common (after taking into account all certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a share of NCBE Common multiplied
by the Market Value.
(e) Dissenting Shares. "Dissenting Shares" shall mean shares of BBI Common
held by any person who properly exercises and perfects rights under the BCA as a
dissenting stockholder. The holder of any Dissenting Shares shall only have the
rights accorded a dissenting shareholder under the BCA and shall not receive any
part of the Merger Consideration.
4. EXCHANGE OF CERTIFICATES.
(a) Surrender of Certificate(s). As soon as practicable after the Effective
Time, The National City Bank of Evansville, as exchange agent (the "Exchange
Agent"), shall deliver to each record holder of BBI Common (except for holders
of Dissenting Shares) converted into the right to receive the Merger
Consideration pursuant to Section 3, who has validly surrendered to the Exchange
Agent (or any forwarding agent which may be appointed by NCBE) the
certificate(s) evidencing such shares of BBI Common together with a letter of
transmittal and other documentation that reasonably may be required by NCBE or
the Exchange Agent, the Merger Consideration and the certificate(s) so
surrendered shall be forthwith canceled. No interest shall accrue or be paid
with respect to the Merger Consideration. The letter of transmittal shall
specify how surrender of the certificate(s) evidencing shares of BBI Common
shall be effected. There shall be no obligation to deliver the Merger
Consideration in respect of any shares of BBI Common until (and then only to the
extent that) the holder thereof validly surrenders certificate(s) representing
the shares of BBI Common for exchange as provided in this Section 4, or, in lieu
thereof, delivers to the Exchange Agent an appropriate affidavit of loss and an
indemnity agreement as may be required in any such case by NCBE in its
reasonable discretion. If any payment for shares of BBI Common is to be made in
a name other than the registered holder of a surrendered certificate, it shall
be a condition to the payment that the certificate shall be properly endorsed or
otherwise in proper form for transfer, that all signatures shall be guaranteed
by a member of the Medallion Signature Guarantee Program that is either a member
firm of any national securities exchange in the United States or the National
Association of Securities Dealers, Inc., or a commercial bank or trust company
having an office in the United States, and that the person requesting the
payment shall either (i) pay to the Exchange Agent any transfer or other taxes
required by reason of the payment to a person other than the registered holder
of a surrendered certificate or (ii) establish to the satisfaction of the
Exchange Agent that such taxes have been paid or are not payable.
(b) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions with respect to NCBE Common with a record date after the Effective
Time shall be delivered to the holder of any unsurrendered certificate(s)
evidencing shares of BBI Common with respect to the shares of NCBE Common
evidenced thereby, and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to Section 3(d), in each case until the
surrender of such certificate(s) in accordance with this Section 4. Subject to
the effect of applicable escheat laws, following surrender of any such
certificate(s) there shall be paid to the holder of such certificate(s), without
interest, (i) at the time of such surrender, the amount of any cash payable in
lieu of any fractional share of NCBE Common to which such holder is entitled
pursuant to Section 3(d) and (ii) if such certificate(s) is(are) exchangeable
for one or more
A-3
<PAGE>
whole shares of NCBE Common, (x) at the time of such surrender the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of NCBE Common and (y) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time but prior to such surrender and with a
payment date subsequent to such surrender payable with respect to such whole
shares of NCBE Common.
(c) Escheat. Notwithstanding anything in this Section 4 or elsewhere
in this Agreement to the contrary, neither the Exchange Agent nor any party
hereto shall be liable to a former holder of BBI Common for any cash delivered
to a public official pursuant to applicable escheat or abandoned property laws.
(d) No Further Ownership Rights in Common Stock. All Merger
Consideration paid upon the surrender of a certificate evidencing shares of BBI
Common in accordance with the terms of this Section 4 (and any cash paid
pursuant to Section 3(d)) shall be deemed to have been paid in full satisfaction
of all rights pertaining to the shares of BBI Common theretofore represented by
such certificate(s), subject, however, to the Surviving Corporation's obligation
to pay any dividends or make any other distributions with a record date prior to
the Effective Time which may have been declared or made by BBI on such shares of
BBI Common in accordance with the terms of this Agreement or prior to the date
of this Agreement and which remain unpaid at the Effective Time and have not
been paid prior to such surrender, and there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the shares
of BBI Common which were outstanding immediately prior to the Effective Time.
(e) Withholding Rights. NCBE shall be entitled to deduct and withhold
from the Merger Consideration or any dividends payable on the NCBE Common
included in the Merger Consideration to any holder of shares of BBI Common such
amounts as NCBE is required to deduct and withhold with respect to the making of
such payment under the Code (as hereafter defined). Such withheld amounts shall
be treated as having been paid by any such holder of shares of BBI Common.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF NCBE. NCBE
represents and warrants to, and covenants with, BBI that:
(a) Organization, Authorization, No Violations, Et Cetera. NCBE is a
corporation duly organized and validly existing under the laws of the State of
Indiana. NCBE has all necessary corporate power to own its properties and assets
and to carry on its business as now conducted. Subject to receipt of approvals
from the Applicable Governmental Authorities and except as limited by (i)
bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance laws
and other similar laws affecting creditors' rights generally, and (ii) general
principles of equity, regardless of whether asserted in a proceeding in equity
or law, the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by NCBE have been duly authorized by all
necessary corporate action on the part of NCBE and this Agreement constitutes
the legal, valid and binding obligation of NCBE, enforceable against NCBE in
accordance with its terms. The execution and delivery of this Agreement by NCBE
and the consummation of the transactions contemplated by this Agreement, will
not violate the provisions of, or constitute a breach or default under, the
articles of incorporation or by-laws of NCBE or any material agreement to which
NCBE is a party or is bound, or any other material license, law, order, rule,
regulation or judgment to which NCBE is a party. NCBE is duly registered with
the Federal Reserve Board as a bank holding company under the Bank Holding
Company Act of 1956, as amended.
(b) Capital Stock. The authorized capital stock of NCBE consists of
20,000,000 shares of NCBE Common, of which 9,433,046 shares were issued and
outstanding as of February 28, 1997. All of the issued and outstanding shares of
NCBE Common are duly and validly issued and outstanding and are fully paid and
non-assessable. None of the shares of NCBE Common have been issued in violation
of any preemptive rights and there are no outstanding options, warrants, rights
to subscribe for, calls, or commitments of any character whatsoever relating to,
or securities or rights convertible into or exchangeable for, such shares or
contracts, commitments, understandings or arrangements by which NCBE is or may
be obligated to issue additional shares of capital stock or other equity
securities of NCBE other than outstanding options to purchase shares of NCBE
Common pursuant to NCBE's Incentive Stock
A-4
<PAGE>
Option Plan. The shares of NCBE Common to be issued in the Merger shall, when
issued and delivered in accordance with the terms of this Agreement, be duly
authorized, validly issued, fully paid and non-assessable.
(c) Subsidiaries. Each of NCBE's significant subsidiaries (as such
term is defined under regulations of the Securities and Exchange Commission (the
"SEC")) is duly organized, validly existing and in good standing (if applicable)
under the laws of the jurisdiction of its incorporation and has the corporate
power to own its respective properties and assets and to carry on its respective
business as now being conducted.
(d) SEC Documents; Financial Information. In accordance with the
Securities Exchange Act of 1934, as amended, NCBE files certain reports,
schedules, forms and other documents with the Securities and Exchange Commission
(the "Commission"). NCBE shall provide BBI with copies of all such documents
that are required to be filed by NCBE with the Commission after December 31,
1996 and through the Closing (the "SEC Documents"). The consolidated balance
sheets of NCBE and its subsidiaries as of December 31, 1996 and 1995 and related
consolidated statements of income, changes in shareholders' equity and cash
flows for the three (3) years ended December 31, 1996, together with the notes
thereto, included in the SEC Documents, have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
(except as may be disclosed therein) and fairly present in all material respects
the consolidated financial position and the consolidated results of operations,
changes in shareholders' equity and cash flows of NCBE and its consolidated
subsidiaries as of the dates and for the periods indicated.
(e) Absence of Changes. Except as disclosed in the SEC Documents,
since December 31, 1996, NCBE has not incurred any obligation or liability
(absolute or contingent), except normal trade or business obligations or
liabilities incurred in the ordinary course of business, and there has not been
any material adverse change in the financial condition, the results of
operations or the business of NCBE and its subsidiaries taken as whole, nor have
there been any events or transactions having such a material adverse effect
which should be disclosed in order to make the financial statements described in
subsection (d) not misleading.
(f) Regulatory Approvals. NCBE shall, at its sole expense, be
responsible for the preparation and filing of all regulatory applications
required in order to consummate the Merger, including but not limited to the
necessary applications for the prior approval of the Applicable Governmental
Authorities. NCBE shall keep BBI reasonably informed as to the status of such
applications and make available to BBI, upon reasonable require by BBI from time
to time, copies of such applications and any supplementally filed materials.
(g) Registration Statement. NCBE shall file with the Commission a
Registration Statement on Form S-4 (the "Registration Statement") relating to
the shares of NCBE Common to be issued pursuant to the Merger, and shall use its
best efforts to cause the Registration Statement to become effective. At the
time the Registration Statement becomes effective, the Registration Statement
shall comply in all material respects with the provisions of the Securities Act
of 1933, as amended (the "Securities Act") and the published rules and
regulations thereunder, and shall not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
not make the statements therein not false or misleading, and at the time of
mailing thereof to the stockholders of BBI, at the time of the BBI stockholders
meeting and at the Effective Time the Proxy Statement/Prospectus included as
part of the Registration Statement, as amended or supplemented by any amendment
or supplement, shall not contain any untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein not false or
misleading. NCBE shall timely file all documents required to obtain all
necessary permits and approvals under state securities or "Blue Sky" laws that
are required to carry out the transactions contemplated by this Agreement, shall
pay, all expenses incident thereto and shall use its reasonable efforts to
obtain such permits and approvals on a timely basis.
(h) Access to Information. NCBE shall permit BBI reasonable access
during regular business hours to its properties. NCBE shall disclose and make
available to BBI and shall use its best efforts to cause its agents and
authorized representatives to disclose and make available to BBI, all books,
papers and records relating to its assets, properties, operations, obligations
and liabilities, including, but not limited to, all books of account, tax
records, minute books of directors' and shareholders' meetings, organizational
documents, material contracts and agreements, loan files,
A-5
<PAGE>
filings with any regulatory authority, accountants' workpapers (if available and
subject to the respective independent accountants' consent), litigation files
(but only to the extent that such review would not result in a material waiver
of the attorney-client or attorney work product privileges under the rules of
evidence), plans affecting employees, and any other business activities or
prospects in which BBI may have a reasonable and legitimate interest in
furtherance of the transactions contemplated by this Agreement.
(i) Operation of the Bank Following the Merger. NCBE agrees that for a
period of one (1) year from the date of this Agreement, it will operate the Bank
as a separately chartered financial institution subsidiary with its own Board of
Directors. After the Effective Time, the number of members of the Board of
Directors shall be reduced to six members. During such period, directors of the
Bank who are not full-time employees of the Bank shall be entitled to receive
directors' fees of $600 per month. In addition, during such period, Clifford C.
Gray and John R. Wolfe shall continue to serve as Chairman of the Board and
President, respectively, of the Bank. NCBE shall be able to designate a person
to serve as Vice President and Chief Executive Officer of the Bank. If, after
such one (1) year period, the Bank is merged with or combined into another
subsidiary of NCBE, NCBE agrees that the members of the Wolfe family who are
then serving as directors of the Bank shall be entitled to designate at least
three (3) persons who will be elected directors of the subsidiary which succeeds
to the operations of the Bank.
(j) True and Complete Information. No representation or warranty made by
NCBE contained in this Agreement and no statement contained in any certificate,
list, exhibit or other instrument specified in this Agreement, whether
heretofore furnished to BBI or hereinafter required to be furnished to BBI,
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
therein nor misleading.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BBI. BBI represents and
warrants to, and covenants with, NCBE that, except as disclosed in the writing
delivered to NCBE concurrently with the execution of this Agreement (the
"Disclosure Schedule"):
(a)(i) Organization and Good Standing of BBI. BBI is duly organized,
validly existing and in good standing under the laws of the State of
Illinois and has all necessary corporate power to own its properties and
assets and to carry on its business as now conducted. BBI is duly qualified
to conduct its business and is in good standing in each jurisdiction in
which the nature of the business transacted by BBI requires such
qualification.
(ii) Capital Stock. On the date hereof, BBI has 10,000 shares of BBI
Common authorized, of which 7,511 shares are issued and outstanding and
2,489 shares are held in the treasury. All of the issued and outstanding
shares of BBI Common are duly and validly authorized and issued, fully paid
and nonassessable. None of the issued and outstanding shares of BBI Common
have been issued in violation of any preemptive rights. There are no (nor
will there be prior to the Effective Time) shares of any class of capital
stock or equity securities of BBI outstanding other than the BBI Common and
there are no (nor will there be prior to the Effective Time) outstanding,
options, warrants, rights to subscribe for, calls, or commitments of any
character whatsoever relating to, or securities convertible into or
exchangeable for, such shares or contracts, commitments, understandings or
arrangements by which BBI is or may be obligated to issue additional shares
of any class of capital stock or other equity securities of BBI.
(iii) Organization and Good Standing of the Bank. The Bank is a
national banking association duly organized, validly existing and in good
standing under the laws of the United States. The deposits of the Bank are
insured by the Bank Insurance Fund administered by the FDIC up to
applicable limits.
(iv) Capital Stock of the Bank. On the date hereof, the Bank has
10,000 shares of Bank Stock, of which 10,000 shares are issued and
outstanding and no shares are held in the treasury. BBI is the record and
beneficial owner of 9,920 shares of Bank Stock. All of the issued and
outstanding shares of Bank Stock are duly and validly authorized and
issued, fully paid and non-assessable. None of the issued and outstanding
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shares of Bank Stock have been issued in violation of any preemptive
rights. There are no (nor will there be prior to the Effective Time) shares
of any class of capital stock or equity securities of the Bank outstanding
other than the Bank Stock and there are no (nor will there be prior to the
Effective Time) outstanding options, warrants, rights to subscribe for,
calls, or commitments of any character whatsoever relating to, or
securities convertible into or exchangeable for, such shares or contracts,
commitments, understandings or arrangements by which the Bank is or may be
obligated to issue additional shares of any class of capital stock or other
equity securities of the Bank.
(b) Authorization, No Violation, Et Cetera. Subject only to approval by
the stockholders of BBI of the Merger, the execution and delivery of this
Agreement by BBI and the consummation of the transactions contemplated by this
Agreement have been duly and validly authorized by all necessary corporate
action on the part of BBI and this Agreement constitutes the legal, valid and
binding obligations of BBI, enforceable against BBI in accordance with their
terms, except as limited by (x) bankruptcy, insolvency, moratorium,
reorganization, fraudulent conveyance laws and other similar laws affecting
creditors' rights generally, and (y) general principles of equity, regardless of
whether asserted in a proceeding in equity or at law. The execution of this
Agreement by BBI and the consummation of the transactions contemplated by this
Agreement will not violate the provisions of, or constitute a breach or default
under (i) the articles of incorporation or by-laws of BBI or the articles of
association and by-laws of the Bank, (ii) any Material Contract (as defined in
Section 6(f)) of BBI or any of the BBI Subsidiaries (as hereafter defined) or
(iii) any other material license, law, order, rule, regulation or judgment to
which BBI or any BBI Subsidiary is a party, is bound or by which any of their
respective properties or assets is subject.
(c) Subsidiaries. The Disclosure Schedule contains a true and correct list
of all entities (including, without limitation, corporations, partnerships,
limited liability companies, joint ventures, and inactive corporations) in which
BBI has a 5% or greater direct or indirect equity or ownership interest,
including the Bank and any subsidiary of the Bank (each, a "BBI Subsidiary" and,
collectively, the "BBI Subsidiaries"). Each of the BBI Subsidiaries is validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all necessary corporate power to own its
properties and assets and to carry on its business as now conducted. Each of the
BBI Subsidiaries is duly qualified to conduct its business and is in good
standing in each other jurisdiction in which the nature of the business
transacted by it requires such qualification. All of the issued and outstanding
shares of capital stock, other equity securities, preemptive rights and other
agreements, commitments and obligations relating to the issuance of additional
shares of capital stock, other equity securities or other ownership interests of
any of the BBI Subsidiaries other than the Minority Shares, are owned by BBI or
another BBI Subsidiary, free and clear of all liens, security interests,
charges, claims and encumbrances. There are no shares of any other class of
capital stock, other equity securities or other ownership interests of any of
the BBI Subsidiaries outstanding and there are no outstanding or existing
subscriptions, options, warrants, convertible securities, preemptive rights or
other agreements, commitments or obligations relating to the issuance of
additional shares of any class of capital stock, other equity securities or
other ownership interests of any of the BBI Subsidiaries.
(d) Financial Statements. BBI has delivered to NCBE consolidated
statements of financial condition of BBI and the related consolidated statements
of income, stockholders' equity and cash flows for the fiscal years ended
September 30, 1996 and 1995. Such financial statements have been audited by
Kemper CPA Group, LLC, independent auditors, whose report thereon is included
with such financial statements. BBI has also delivered to NCBE the call report
as filed with the Comptroller of the Currency for the period ended December 31,
1996. All such financial statements have been prepared in conformity with GAAP
applied on a consistent basis (except for changes, if any, required by GAAP and
disclosed therein), and the statements of income present fairly the results of
operations for the respective periods covered and the statements of condition
present fairly the consolidated financial condition of BBI as of their
respective dates except that BBI's interim financial statements are subject to
normal year-end adjustments. At the dates of such consolidated statements of
condition, there were no material liabilities of BBI or any of the BBI
Subsidiaries (actual, contingent or accrued) which, in accordance with GAAP
applied on a consistent basis, should have been shown or reflected in such
statements of condition or the notes thereto, but which are not so shown or
reflected.
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(e) Taxes and Tax Returns.
(i) BBI and each BBI Subsidiary has duly filed all federal and state
tax information and tax returns (the "Returns") required to be filed by it
(all such returns being accurate and complete in all material respects) and
has duly paid or made provision for the payment of all material taxes and
other governmental charges which have been incurred and are shown to be due
on said Returns or are otherwise due or claimed to be due from it or
imposed on it or its respective properties, assets, income, franchises,
licenses, sales or use, by any federal, state or local taxing authorities
(collectively, the "Taxes") on or prior to the date hereof other than Taxes
which are being contested in good faith and by appropriate proceedings and
as to which BBI and the BBI Subsidiaries either singly or in the aggregate
have set aside adequate reserves. The amounts recorded as reserves for
Taxes on the September 30, 1996 financial statements, are sufficient in the
aggregate for the payment by BBI of all unpaid Taxes (including any
interest or penalties thereon) whether or not disputed or accrued, for the
period ended September 30, 1996 or for any year or period prior thereto.
The federal and state Returns of BBI and the BBI Subsidiaries have been
examined by the Internal Revenue Service ("IRS") or other appropriate tax
authority or closed without audit and any liability with respect thereto
has been satisfied for all years to and including the year ended December
31, 1993 and, if required, the appropriate tax authorities have been
apprised of such liabilities and the satisfaction thereof. There are no
material disputes pending, or claims asserted, for Taxes upon BBI or any
BBI Subsidiary. Neither BBI nor any BBI Subsidiary has been required to
give any currently effective waivers extending the statutory period of
limitation applicable to any federal, state or local Return for any period.
Neither BBI nor any BBI Subsidiary has in effect any power of attorney or
authorization to anyone to represent it with respect to any Taxes. BBI has
not filed any consolidated federal income tax return with an "affiliated
group" (within the meaning of Section 1504 of the Internal Revenue Code of
1986, as amended (the "Code")), where BBI was not the common parent of the
group. Neither BBI nor any BBI Subsidiary is, or has been, a party to any
tax allocation agreement or arrangement pursuant to which it has any
contingent or outstanding liability to anyone other than BBI or a BBI
Subsidiary. Neither BBI nor a BBI Subsidiary has filed a consent under
Section 341(f) of the Code. BBI has made available to NCBE or its
representatives complete and correct copies of its federal and state income
tax returns filed on or prior to March 15, 1997, and all examination
reports, if any, relating to the audit of such returns by the IRS or other
tax authority for each taxable year beginning on or after January 1, 1994.
(ii) All monies required to be withheld from employees of BBI and
each BBI Subsidiary for income taxes, social security and unemployment
insurance taxes or collected from customers or others as sales, use or
other taxes have been withheld or collected and paid, when due, to the
appropriate governmental authority, or if such payment is not yet due, a
reserve, which in the opinion of BBI management is adequate, has been
established.
(f) Material Contracts. All executory contracts, indentures, commitments,
and other agreements in excess of $25,000 to which BBI or any of the BBI
Subsidiaries is a party or to which BBI or any of the BBI Subsidiaries or any of
their properties are subject (collectively, the "Material Contracts" and each a
"Material Contract") were entered into in the ordinary course of business. BBI
and each of the BBI Subsidiaries has duly performed all its obligations
thereunder to the extent that such obligations to perform have accrued, and no
breach or default thereunder by BBI or any of the BBI Subsidiaries or, to the
best knowledge of BBI management, any other party thereto has occurred which
will impair the ability of BBI or any of the BBI Subsidiaries to enforce any
material rights thereunder.
(g) Real Estate. BBI and each of the BBI Subsidiaries has good title to
all of the assets reflected as owned by any of them in the September 30, 1996
consolidated financial statements of BBI, and in the case of real property,
transferable and insurable title in fee simple, and in all cases free and clear
of any material liens or other encumbrances. As of the date hereof, the real
properties, structures, buildings, equipment, and the tangible personal property
owned, operated or leased by BBI or any BBI Subsidiary are (i) to the best
knowledge of BBI management, in good repair, order and condition, except for
depletion, depreciation and ordinary wear and tear, and (ii) to the best BBI's
knowledge, free from any known structural defects. As of the date hereof, there
are no laws, conditions of record or other impediments
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which materially interfere with the intended uses by BBI or any BBI Subsidiary
of the real property or tangible personal property owned or leased by it.
(h) No Material Adverse Change. Since September 30, 1996, there has been
no material adverse change in the business, financial condition, properties,
results of operation, or capitalization of BBI and the BBI Subsidiaries.
(i) Investigations; Litigation. Except as set forth on the Disclosure
Schedule, there is no investigation by any federal, state or local governmental
agency of which BBI is aware, or any action, suit, proceeding or claim pending
or, to the knowledge of BBI, threatened, against or adversely affecting BBI or
any of the BBI Subsidiaries (including, without limitation, any investigation,
action, or proceeding with respect to taxes), or the assets or business of BBI
or any of the BBI Subsidiaries, which would, if adversely determined, have a
material adverse effect on the business or financial condition of BBI and the
BBI Subsidiaries. No director, officer, employee or agent of BBI or any BBI
Subsidiary in their respective capacities as directors, officers, employees or
agents, is a party to any, and there are no pending or, to the best of BBI's
knowledge threatened, legal, administrative, arbitral or other proceedings,
claims, suits, actions or governmental investigations of any nature against any
such director, officer, employee or agent of BBI or any BBI Subsidiary in their
respective capacities as directors, officers, employees or agents. There is no
outstanding order, writ, injunction or decree of any court, government or
governmental agency against or, affecting BBI or any of the BBI Subsidiaries, or
the assets or business of BBI or any of the BBI Subsidiaries, which could
reasonably be expected to have a material adverse effect on the business of
financial condition of BBI and the BBI Subsidiaries, or which challenges the
validity or propriety of the transactions contemplated by this Agreement.
(j) Insurance. BBI and each BBI Subsidiary has in effect insurance
coverage with reputable insurers, which in respect to amounts, types and risks
insured, is adequate in the opinion of BBI for the business in which BBI and the
BBI Subsidiaries are engaged. All policies of fire, product or other liability,
worker's compensation and other similar forms of insurance owned or held by BBI
or any BBI Subsidiary are in full force and effect, all material premiums with
respect thereto covering all periods up to and including the date as of which
this representation is being made have been paid (other than retrospective
premiums which may be payable with respect to worker's compensation insurance
policies), and no notice of cancellation or termination has been received with
respect to any such policy. The insurance policies to which BBI and each BBI
Subsidiary is a party are sufficient in the opinion of BBI for compliance with
all requirements of law and of all agreements to which BBI and each BBI
Subsidiary is a party and provide adequate insurance coverage in the opinion of
BBI management for the assets and operations of BBI and any BBI Subsidiary.
Neither BBI nor any BBI Subsidiary has been refused any insurance with respect
to any assets or operations, nor has any coverage been limited in any material
respect to any operations by any insurance carrier to which it has applied for
any such insurance or with which it has carried insurance during the last five
years.
(k) Compliance with Laws, Regulations. BBI and each of the BBI
Subsidiaries has conducted its business in substantial compliance with all
applicable federal, state and local laws, regulations and orders including,
without limitation, disclosure, usury, equal credit opportunity, equal
employment, fair credit reporting, lender liability, and other laws, regulations
and orders, and the forms, procedures and practices used by BBI and each of the
BBI Subsidiaries, to the best knowledge of BBI management, are in compliance
with such laws, regulations and orders except to the extent that non-compliance
with any such law, regulation or order would not have a material adverse effect
on BBI and the BBI Subsidiaries, taken as a whole.
(l) Broker's and Finder's Fees. Neither BBI nor any of the BBI
Subsidiaries has incurred any obligation or liability, contingent or otherwise,
for any brokers or finders in respect of the matters provided for in this
Agreement.
(m) Employee Benefit Plans.
(i) Except for BBI and the BBI Subsidiaries, there are no other
trades or businesses, whether or not incorporated, which, together with
BBI or any BBI Subsidiary, would be deemed to be a "single employer"
within the meaning of Section 414(b), (c) or (m) of the Code.
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<PAGE>
(ii) The Disclosure Schedule sets forth a true and a complete list of
(A) each employee benefit plan, as defined in Section 3 (3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") that BBI or
any BBI Subsidiary currently maintains or has maintained within the three
year period preceding the Effective Date (the "ERISA Plans"), and (B) each
other plan, arrangement, program and agreement providing employee benefits,
including, but not limited to, deferred compensation, bonuses, severance
pay or fringe benefits, and consulting or employment agreements, that are
presently maintained for the benefit of any current or former employees of
BBI or any BBI Subsidiary (the ERISA Plans and such other plans are
collectively referred to as the "Plans"). BBI has made available to NCBE
copies of all Plans and any related documents or instruments establishing
the Plans or any related trusts or funding arrangements; the most recent
determination letter, or any outstanding request for a determination
letter, from the IRS with respect to each ERISA Plan intended to satisfy
the requirements of Section 401(a) of the Code and a copy of the
application on which the determination letter or request for determination
letter is based; fidelity bonds; actuarial valuations, if applicable, for
the most recent three plan years for which such valuations are available;
current summary plan descriptions; annual returns/reports on Form 5500 and
summary annual report for the three most recent plan years; Form 5310 and
any related filings with the IRS, the Department of Labor ("DOL") or the
Pension Benefit Guaranty Corporation ("PBGC") within the last year
preceding the date of this Agreement; and any material correspondence to or
from the IRS, DOL or PBGC within the last three years preceding the
Effective Date in connection with any Plan.
(iii) Neither BBI nor any BBI Subsidiary currently maintains or
contributes to, or has ever maintained or contributed to, a "multi-employer
plan" as defined in Section 3(37) of ERISA.
(iv) No Plan provides benefits, including without limitation death or
medical benefits (whether or not insured), with respect to current or
former employees for any period extending beyond their retirement or other
termination of service other than (A) continuation group health coverage
pursuant to Section 4980B of the Code or applicable state law; (B)
benefits, the full cost of which is borne by the current or former employee
(or his or her beneficiary); or (C) benefits which in the aggregate are not
material.
(v) Each ERISA Plan intended to be qualified under Section 401(a) of
the Code has received a favorable determination letter from the IRS that
the Plan is qualified and satisfies all legal requirements, including the
requirements of the Tax Reform Act of 1986. To the best knowledge of BBI
management, nothing has occurred since the dates of the respective IRS
favorable determination letters that could adversely affect the
qualification of the Plans and their related trusts.
(vi) All of the Plans, and any related trust agreement, group annuity
contract, insurance policy or other funding arrangement are in substantial
compliance with all applicable laws, rules and regulations, including
without limitation, the rules and regulations promulgated by the DOL, PBGC
or IRS pursuant to the provisions of ERISA and the Code, and each of such
Plans has been administered in substantial compliance with such
requirements and its own terms.
(vii) Neither BBI nor any BBI Subsidiary currently maintains or
contributes to, or has ever maintained or contributed to, a Plan that is
subject to Title IV of ERISA.
(viii) With respect to each ERISA Plan subject to the minimum funding
requirements of Section 412 of the Code, and if applicable, Title IV of
ERISA, BBI and each BBI Subsidiary has or will have, as of the Effective
Date, made all contributions or payments to or under the Plan required by
law or by the terms of the Plan.
(ix) Neither BBI or any BBI Subsidiary, nor any of the Plans, nor any
trust created thereunder, nor any trustee or administrator thereof has
engaged in a transaction in connection with which BBI or any BBI
Subsidiary, any of the Plans, any such trust, or any trustee or
administrator thereof, or any party dealing with the Plans or related
trusts could be subject to either a civil penalty assessed pursuant to
Sections 409 or 502
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of ERISA or a tax imposed pursuant to Sections 4975 or 4976 of the Code.
Neither BBI or any BBI Subsidiary is, or, as a result of any actions,
omissions, occurrences or state of facts existing prior to or at the
Effective Time, may become liable for any tax imposed under Sections 4978
or 4978(B) of the Code.
(x) There are no (A) actions, suits, arbitrations or claims (other
than routine claims for benefits), (B) legal, administrative or other
proceedings or governmental investigations or audits, or (C) complaints to
or by any governmental entity, which are pending, anticipated or
threatened, against any Plan or its assets, or against any Plan fiduciary
or administrator, or against BBI or any BBI Subsidiary or their officers or
employees with respect to any Plan.
(xi) Each Plan may be terminated directly or indirectly by the
Surviving Corporation, in its discretion, at any time after the Effective
Time, in accordance with its terms, without any liability to the Surviving
Corporation, NCBE, BBI or any BBI Subsidiary, to any person, entity or
government agency for any conduct, practice or omission of BBI or any BBI
Subsidiary which occurred prior to the Effective Time, except for
liabilities to and the rights of the employees thereunder accrued prior to
the Effective Time, or if later, the time of termination.
(xii) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (A) result in any
material payment (including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any director
or any employee of BBI or any BBI Subsidiary from BBI or any BBI Subsidiary
under any Plan or otherwise; (B) materially increase any benefits otherwise
payable under any Plan; or (C) result in any acceleration of the time of
payment or vesting of any such benefits to any material extent.
(n) Labor Matters. Neither BBI nor any of the BBI Subsidiaries is a party
to or has in effect any organized labor contract or collective bargaining
agreement.
(o) Environmental Liability. "Properties" as used in this Section
6(o)(i)-(iv) inclusive, shall include all of the following: (x) all real
property owned and/or operated by BBI or each BBI Subsidiary, (y) all Real
Estate Owned by BBI and each BBI Subsidiary and (z) all real property which
serves as collateral ("Collateral Property") for any loan or other indebtedness
held by BBI or any BBI Subsidiary, provided however, that the representations
and warranties of BBI with regard to any Collateral Property shall be to the
best knowledge of BBI management.
(i) With regard to the real property on which the Bank's offices are
located, such real property shall be acquired by NCBE by virtue of the
Merger on an "as is" basis.
(ii) With regard to any of the Collateral Property, there are, to the
best knowledge of BBI management, no past, present or known events,
conditions, circumstances, or plans which may interfere with or prevent
substantial compliance or continued substantial compliance with the laws
relating to emissions, discharges, releases or threatened releases of
hazardous or toxic substances, or which may give rise to any material
liability, including, but not limited to, liability under the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA") or which
otherwise may form the basis of any claim, action, demand, proceeding,
notice of violation or investigation, based on or related to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling or the emission, discharge, release or threatened
release into the environment of hazardous or toxic substances, pollutants,
contaminants, wastes, chemicals, waters, industrial materials or
substances, or petroleum (including any petroleum products or byproducts).
Without in any way limiting the foregoing, to the best of knowledge of BBI
management, no release, emission, or discharge into the environment of any
hazardous substance (as that term is currently defined under CERCLA or any
applicable similar state law) or petroleum or petroleum-based substances
(as those terms are defined in the Federal Storage Tank Regulations, 40
C.F.R. Part 280) which would give rise to liability under any Environmental
Laws has occurred in connection with the ownership or operation of any
Collateral Properties.
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(p) Regulatory Compliance. Neither BBI nor any BBI Subsidiary is a party
to any enforcement action instituted by or any memorandum of understanding or
cease and desist order with any federal or state regulatory agency, and no such
action, memorandum or order has, to the best knowledge of BBI management, been
threatened, and BBI has not received any report of examination from any federal
or state regulatory agency which requires that BBI or the Bank address any
material problem or take any material action which has not already been
addressed or taken in a manner satisfactory to the regulatory agency.
(q) True and Complete Information. No representation or warranty made by
BBI or any BBI Subsidiary contained in this Agreement and no statement contained
in the Disclosure Schedule or any certificate, list, exhibit or other instrument
specified in this Agreement, whether heretofore furnished to NCBE or hereinafter
required to be furnished to NCBE, contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary to
make the statements contained therein not misleading.
7. AGREEMENTS WITH RESPECT TO CONDUCT OF BBI AND THE BBI SUBSIDIARIES
AFTER THE DATE HEREOF. BBI covenants and agrees with NCBE that BBI and each of
the BBI Subsidiaries will or, to the extent not within its sole control, will
use its best efforts to, from and after the date of this Agreement and until the
Effective Time, act as follows:
(a) Ordinary Course, Insurance, Preservation of Business, Et Cetera. BBI
and each of the BBI Subsidiaries will do the following, except as otherwise
agreed to in writing by NCBE.
(i) carry on its business only in the ordinary course and consistent
with the respective policies, procedures and practices of BBI and each BBI
Subsidiary in substantially the same manner as heretofore conducted;
(ii) except as they may terminate in accordance with their terms or
in accordance with the terms of this Agreement, keep in full force and
effect, and not cause a default of any of its obligations under, any
Material Contracts;
(iii) keep in full force and effect the insurance coverage in effect
on the date hereof to the extent that such insurance continues to be
reasonably available;
(iv) use its best efforts to maintain, renew, keep in full force and
effect and preserve its business organization and material rights and
franchises, permits and licenses and to retain its present employee force
so that it will be available to NCBE on and after the Effective Time, and
to maintain its existing, or substantially equivalent, credit arrangements
with banks and other financial institutions and to use its best efforts to
maintain the continuance of its general customer relationships; and
(v) take such action as may be necessary to maintain, preserve,
renew and keep in full force and effect its corporate existence and
material rights and franchises; and duly comply in all material respects
with all laws applicable to it and to the conduct of its business.
(b) Notice. BBI will promptly notify NCBE of any event of which
hereafter becomes known to BBI management which may reasonably have a material
adverse effect on the financial condition, operations, business or assets of BBI
and the BBI Subsidiaries or if BBI determines that it may be unable to fulfill
the conditions set forth in Section 11 or 12 hereof.
(c) Prohibited Action Without Approval. Neither BBI nor any of the BBI
Subsidiaries will do the following, except with the prior written consent of
NCBE and as otherwise required or permitted by this Agreement:
(i) incur or agree to incur any obligation or liability (absolute or
contingent) other than the taking of deposits and other liabilities
incurred in the ordinary course of business and consistent with prior
practice,
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and liabilities arising out of, incurred in connection with, or related to
the consummation of this Agreement; make or permit any amendment or
termination of any Material Contract; acquire (by merger, consolidation, or
acquisition of stock or assets) any corporation, partnership, limited
liability company or other business organization or division or substantial
part thereof; sell or otherwise dispose of any substantial part of its
assets; enter into, dispose or divest itself of any joint venture or
partnership or cause any business entity to become a subsidiary or
affiliate; sell or otherwise dispose of any real property owned or operated
by BBI or any BBI Subsidiary; enhance, expand, modify, replace or alter any
computer or data processing system owned, leased or licensed by BBI or any
BBI Subsidiary (including any software associated with any such computer or
system); make, originate or otherwise acquire one or more loans, or one or
more loan commitments for one or more loans, or one or more lines of
credit, in an aggregate amount in excess of $400,000 to any person; or
enter into any contract, agreement, commitment or arrangement with respect
to any of the foregoing; or
(ii) make any capital expenditure, except for ordinary repairs,
renewals and replacements; or
(iii) issue, sell, redeem or acquire for value, or agree to do so,
any debt securities or any shares of the capital stock or other equity
securities, options or other ownership interests of BBI or of any of the
BBI Subsidiaries (other than an acquisition of the Minority Shares in
accordance with Section 10), or declare, issue or pay any dividend or other
distribution of assets, whether consisting of money, other personal
property, real property or other things of value, to its stockholders other
than (A) cash dividends on the BBI Common and the Bank Stock in an amount
not to exceed $8.00 per share on an annual basis, payable on a quarterly
basis; provided, however, that holders of BBI Common may for any given
quarter, receive cash dividends attributable to that quarter only from BBI
or NCBE, but not from both, (B) cash dividends payable by any BBI
Subsidiary which is wholly owned by BBI to BBI or another BBI Subsidiary
which is wholly owned by BBI, (C) sinking fund or other mandatory payments
required under the terms of any indenture or loan agreement or repurchases
of any outstanding debt securities to be applied against any such sinking
fund payments in amounts which do not exceed, with respect to any series or
class of debt securities, the sinking fund payments required within the
next twelve-month period, (D) the payment of any debt security upon the
maturity thereof, and (E) obligations or liabilities permitted to be
incurred pursuant to Section 7(c)(i) hereof; or
(iv) (A) sell or pledge or otherwise encumber any stock owned by it
in any BBI Subsidiary; (B) amend its articles of incorporation or by-laws
or permit any BBI Subsidiary to amend its articles of association, by-laws
or any other constitutive, organic or governing document; (C) split,
combine or reclassify any shares of its capital stock; or (D) enter into
any agreement, commitment or arrangement with respect to any of the
foregoing; or
(v) enter into or amend any employment agreement; or
(vi) enter into any transactions other than in the ordinary course
of business; or
(vii) compromise or otherwise settle or adjust any assertion or
claim of a deficiency in taxes (or interest thereon or penalties in
connection therewith) or file any appeal from an asserted deficiency,
except in a form previously approved by NCBE, which approval shall not be
unreasonably withheld, or file any federal or state tax return before
furnishing a copy to NCBE and affording NCBE an opportunity to consult with
the filing entity;
(viii) open any new office or close any current office of the Bank
or any of the BBI Subsidiaries at which business is conducted; or
(ix) take any actions that would adversely affect the ability of the
Merger to be accounted for using the pooling-of-interests method.
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(d) No Solicitation.
(i) Neither BBI nor any of the BBI Subsidiaries nor any officer,
director or any representative thereof shall solicit or authorize the
solicitation of, or, unless BBI's Board of Directors has reasonably
determined in good faith based upon the written advice of counsel that the
failure to do so would cause the Board of Directors to breach their
fiduciary duties under applicable law, enter into or authorize any
discussions with any third party concerning, or furnish or authorize the
furnishing of any confidential information relating to BBI or any of the
BBI Subsidiaries to any third party for the purpose of studying,
considering, soliciting or inducing, any offer or possible offer by any
such third party or any other third party to acquire BBI or any or all of
the capital stock, other equity securities or other ownership interests, or
all or substantially all of the assets, of BBI or any of the BBI
Subsidiaries. BBI will promptly communicate to NCBE the terms of any
proposal or contract it may receive with respect to any such transactions.
(ii) Upon the execution of this Agreement, BBI shall immediately
terminate all discussions then existing with any third parties regarding
any possible offer to acquire BBI or any ownership interest whatsoever in
BBI and promptly arrange for the return from or destruction by any such
third party or such third party's authorized representatives of all
documents provided by BBI or its authorized representatives pursuant to any
applicable confidentiality agreement between BBI and any such third party
or otherwise.
(e) No Action to Interfere. BBI will take no action, and will use its
best efforts to prevent any action from being taken, which would result in the
imposition of special stockholder, Board of Directors or other approval
requirements with respect to the Merger or other transaction contemplated hereby
which would frustrate or interfere with the Merger or any such transaction.
(f) Liabilities. BBI and the BBI Subsidiaries shall pay or discharge
their current liabilities when the same become due and payable, except for such
liabilities as may be subject to a good faith dispute or counterclaim.
(g) Goodwill. Neither BBI nor any BBI Subsidiary shall enter into any
transaction which will create goodwill on its books and records under GAAP.
(h) Insider Lending. The Bank shall not change or modify any of its
current practices relating to the lending of money, secured or unsecured, to its
affiliated persons, including but not limited to its directors, officers and
employees.
(i) No Violation. Neither BBI nor any BBI Subsidiary will take any action
which knowingly violates any statute, code, ordinance, rule, regulation or
judgment, order, writ, arbitral award, injunction or decree of any court,
governmental agency or body or arbitrator, domestic or foreign, having
jurisdiction over its properties.
(j) Operating Expenses. Except for fees and expenses incurred in
connection with the transactions contemplated hereby (as discussed more fully in
Section 15 hereof), neither BBI nor any BBI Subsidiary shall increase the level
of its operating expenses in any material respect.
(k) Accounting. BBI and each BBI Subsidiary will maintain its books,
accounts and records in accordance with GAAP. Neither BBI nor any BBI Subsidiary
shall make any change in any method of accounting or accounting practice, or any
change in the method used in allocating income, charging costs or accounting for
income, except as may be required by law, regulation or GAAP. Neither BBI nor
any BBI Subsidiary shall change any practice or policy with respect to the
charging off or loans or the maintenance of its reserve for possible loan
losses, except as required by law, regulation or GAAP.
8. ADDITIONAL AGREEMENTS. BBI hereby covenants and agrees with NCBE that
BBI will or, to the extent not within its sole control, will use its best
efforts to, act as follows:
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(a) Continuing Access to Information. From the date hereof through the
Effective Time, BBI shall permit NCBE and its authorized representatives
reasonable access during regular business hours to BBI's properties and those of
the BBI Subsidiaries. BBI shall make its and the BBI Subsidiaries' directors,
management and other employees and agents and authorized representatives
(including counsel and independent public accountants) available to confer with
NCBE and its authorized representatives at reasonable times and upon reasonable
request, and BBI shall, and shall cause the BBI Subsidiaries to, disclose and
make available to NCBE, and shall use its best efforts to cause its agents and
authorized representatives to disclose and make available to NCBE, all books,
papers and records relating to the assets, properties, operations, obligations
and liabilities of BBI and the BBI Subsidiaries, including, but not limited to,
all books of account, tax records, minute books of directors' and stockholders'
meetings, organizational documents, material contracts and agreements, loan
files, filings with any regulatory authority, accountants' workpapers (if
available and subject to the respective independent accountants' consent),
litigation files (but only to the extent that such review would not result in a
material waiver of the attorney-client or attorney work product privileges under
the rules of evidence), plans affecting employees, and any other business
activities or prospects in which NCBE may have a reasonable and legitimate
interest in furtherance of the transactions contemplated by this Agreement.
(b) Management Reports. BBI will provide to NCBE, on or before the 25th
day of each calendar month, (i) any report by management to the Board of
Directors of BBI or the Bank for the prior month, including delinquency
schedules, additions to loan loss reserves, minutes of all meetings of the Board
of Directors of BBI and the Bank and each committee thereof during the prior
month and the payroll report for the prior month, and (ii) monthly financial
statements prepared by BBI or the Bank for the preceding calendar month,
including a statement of financial condition and an income statement. Throughout
the period prior to the Effective Time, the Bank will cause one or more of its
designated representatives to confer on a regular and frequent basis with
representatives of NCBE and to report the general status of the ongoing
operations of the Bank.
(c) Notification of Change. BBI promptly will notify NCBE of any
material change in the ordinary course of business or in the operation of the
properties of BBI or any of the BBI 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 litigation
involving BBI or the BBI Subsidiaries which is material to, or which might have
a material adverse effect on, or of any breach by BBI or any BBI Subsidiary of
any representation, warranty, covenant or agreement set forth in this Agreement,
and will keep NCBE promptly and fully informed of such events.
(d) Information for Regulatory Filings. BBI promptly shall furnish NCBE
with any information within its possession which relates to BBI or the BBI
Subsidiaries and which is required under any applicable law or regulation for
inclusion in any filing that NCBE is required to make with any regulatory or
supervisory authority in order to consummate the transactions contemplated by
this Agreement. BBI represents, warrants and covenants to NCBE that all
information so furnished shall be true and correct in all material respects
without omission of any material fact required to be stated therein or necessary
to make the information stated therein not misleading.
(e) Restriction on Resales. BBI shall obtain and deliver to NCBE, at
least thirty-one (31) days prior to the Closing, the signed agreement, in the
form of Exhibit A hereto, of each person who may reasonably be deemed an
"affiliate" of BBI within the meaning of such term as used in Rule 145 under the
Securities Act, regarding compliance with the provisions of such Rule 145.
(f) Operation of the Bank After Effective Time. BBI acknowledges that
following the Effective Time, the operation of the Board of Directors of the
Bank will be brought into conformity with NCBE's policies for its other
subsidiary banks except as otherwise provided in Section 5(i) hereof.
9. STOCKHOLDERS' APPROVAL. BBI shall cause to be duly called and held a
special meeting of the holders of BBI Common for submission of this Agreement
and the Merger for approval of such stockholders as required by the Statutes. In
connection with such stockholders' meeting, (i) BBI shall cooperate and assist
NCBE in preparing and filing the Registration Statement, and any amendments or
supplements thereto, including a Proxy Statement/Prospectus (the "Proxy
Statement/Prospectus") with the SEC and applicable state securities authorities,
and
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BBI shall mail the Proxy Statement/Prospectus to its stockholders; (ii) BBI
shall furnish NCBE all information within its possession concerning itself that
NCBE may reasonably request in connection with such Proxy Statement/Prospectus;
and (iii) the Board of Directors of BBI (subject to compliance with its
fiduciary duties as advised in writing by counsel) shall recommend to its
stockholders the approval of this Agreement and the Merger contemplated hereby
and use its best efforts to obtain such stockholder approval.
10. ACQUISITION OF MINORITY SHARES.
(a) Direct Acquisition by NCBE. NCBE may reach an agreement with the holder
of the Minority Shares regarding an acquisition of the Minority Shares
prior to the Closing; provided, however, that:
(i) the holder of the Minority Shares shall be given full disclosure
of the terms of this Agreement; and
(ii) any consideration payable to the holder of the Minority Shares
shall be not less favorable and not significantly more favorable from a
financial point of view than the Merger Consideration on a per-share basis.
(b) Acquisition by NCBE in Concurrent Transaction. If requested by NCBE,
BBI shall cause the Bank to enter into a merger agreement with an interim
banking subsidiary of NCBE in order to acquire the Minority Shares in a merger
transaction that will become effective at approximately the same time as the
Merger (the "Concurrent Transaction"). The consummation of the Concurrent
Transaction shall be conditioned upon the Merger becoming effective under this
Agreement. BBI shall take all actions required as a shareholder of the Bank to
approve the Concurrent Transaction and shall cooperate with NCBE in obtaining
any approvals of the Concurrent Transaction from the Comptroller of the Currency
or any Applicable Governmental Authorities.
11. CONDITIONS TO OBLIGATIONS OF BOTH PARTIES. The respective
obligations of each party to effect the Merger is subject to the satisfaction or
waiver on or prior to the Effective Time of the following conditions:
(a) Stockholder Approval. The Merger shall have been approved by the
holders of BBI Common in accordance with the Statutes.
(b) Regulatory Approval. The transactions contemplated by this Agreement
shall have been approved by all Applicable Governmental Authorities. Such
approvals, and the transactions contemplated hereby, shall not have been
contested by any federal or state governmental authority.
(c) No Action to Prevent Consummation.
(i) No action or proceeding shall have been instituted before a court
or other governmental body, agency or authority or other person to restrain
or prohibit the transactions contemplated by this Agreement or to obtain
damages or other relief in connection with the execution of this Agreement
or the consummation of the transactions contemplated hereby;
(ii) No governmental agency shall have notified either party in
writing to the effect that consummation of the transactions contemplated by
this Agreement would constitute a violation of any law and that it intends
to commence proceedings to restrain consummation of the Merger; and
(iii) No statute, rule, regulation or policy shall have been
promulgated or enacted by any governmental or regulatory agency of
competent jurisdiction which shall prevent or declare the Merger illegal.
(d) Registration Statement. The Registration Statement shall have become
effective under the Securities Act and shall not be subject of any stop
order or proceeding seeking a stop order.
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<PAGE>
(e) Blue Sky Laws. NCBE shall have received all state securities or "Blue
Sky" permits and other authorizations to issue the shares of NCBE Common
comprising the Merger Consideration.
12. CONDITIONS TO OBLIGATIONS OF NCBE. The obligation of NCBE to effect
the Merger is subject to the satisfaction or waiver on or prior to the Effective
Time of the following conditions:
(a) Status as of Closing. At and as of the Closing:
(i) The representations and warranties of BBI contained in this
Agreement shall have been true in all material respects as of the date of
this Agreement and shall continue to be true in all material respects as
though made at and as of the Closing;
(ii) BBI shall have performed and satisfied or otherwise complied
with, or caused such performance and satisfaction of and compliance with,
in all material respects, all covenants, terms and conditions required by
this Agreement to be performed and satisfied or otherwise complied with by
BBI or any BBI Subsidiary on or prior to the Closing;
(iii) During the period from the date hereof to the Closing, there
shall not have occurred any material adverse change in the business,
assets, properties, financial condition or results of operations of BBI and
the BBI Subsidiaries; and
(iv) There shall be delivered to NCBE a certificate (dated the Closing
and signed by the chief executive officer of BBI) stating that to the best
of his knowledge the conditions set forth in clauses (i) through (iii)
above have been satisfied.
(b) Stockholders Agreement. The Stockholders Agreement shall not have
been breached by any of the parties thereto.
(c) Attorney's Opinion. NCBE shall have received an opinion, dated the
Closing, of Giffin, Winning, Cohen & Bodewes, P.C., counsel for BBI in
substantially the form of Exhibit B attached hereto.
(d) Pooling-of-Interests. NCBE shall have received assurances
satisfactory to it from its independent auditors that the Merger may be
accounted for using the pooling-of-interests method.
(e) Resignations of Directors. George J. Abel and Edward L. Edmonson
shall have tendered their resignations as directors of the Bank effective as of
the Closing.
13. CONDITIONS TO OBLIGATIONS OF BBI. The obligation of BBI to effect
the Merger is subject to the satisfaction or waiver on or prior to the Effective
Time of the following conditions:
(a) True Representations and Warranties. All representations and
warranties of NCBE contained in this Agreement shall be true in all material
respects at and as of the Closing, as though such representations and warranties
were made at and as of the Closing, and NCBE shall have performed and satisfied
in all material respects all covenants, conditions and agreements required by
this Agreement to be performed and satisfied on or prior to the Closing, and at
the Closing there shall be delivered to BBI a certificate (dated the Closing and
signed by the President of NCBE) stating that to the best of his knowledge such
conditions have been satisfied.
(b) Attorney's Opinion. BBI shall have received an opinion, dated the
Closing, of Baker & Daniels, in substantially the form of Exhibit C attached
hereto.
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<PAGE>
(c) Federal Tax Opinion. BBI shall have received an opinion of Baker
& Daniels to the effect that, if the Merger is consummated in accordance with
the terms hereof, the Merger will constitute a reorganization within the meaning
of Section 368(a) of the Code.
(d) Minimum Value. The Market Value as computed pursuant to Section
3(b) shall be equal to or greater than the Minimum Value. If between the date
hereof and the determination of the Market Value, a share of NCBE Common shall
be changed into a different number of shares by stock split or dividend (a
"Share Adjustment"), then the Minimum Value shall be appropriately adjusted to
reflect such Share Adjustment. It is understood that the Board of Directors of
BBI may waive the foregoing condition before or after approval of the Merger by
the stockholders of BBI. In the event that the foregoing condition is waived,
the Minimum Value shall be used to compute the Merger Consideration under
Section 3(b).
14. INFORMATION. The parties acknowledge the confidential and
proprietary nature of the "Information" (as hereafter defined) which has
heretofore been exchanged and which will be received from each other hereunder
and agree to hold and keep the same confidential. Such Information shall include
any and all financial, technical, commercial, marketing, customer or other
information concerning the business, operations and affairs of a party that may
be provided to the other, irrespective of the form of the communication, by such
party's employees or authorized representatives. Such Information shall not
include information which is or becomes generally available to the public other
than as a result of a disclosure by a party or its authorized representatives in
violation of this Agreement. The parties agree that the Information will be used
solely for the purposes contemplated by this Agreement and that such Information
will not be disclosed to any person other than employees and authorized
representatives of a party who are directly involved in evaluating the Merger.
The Information shall not be used in any way detrimental to a party, including
use directly or indirectly in the conduct of the other party's business or any
business or enterprise in which such party may have an interest, now or in the
future, and whether or not now in competition with such other party. Upon
termination of this Agreement without the Merger becoming effective, each party
shall (a) deliver to the other originals and all copies of all Information made
available to such party; (b) not retain any copies, extracts or other
reproductions in whole or in part of such Information; and (c) destroy all
memoranda, notes and other writings prepared by any party or its authorized
representatives based on the Information.
15. PAYMENT OF EXPENSES; TERMINATION FEE.
(a) Expenses Generally. Except as otherwise provided in Section
15(b) below, each party hereto shall pay its own fees and expenses incident to
preparing for, entering into, and carry out this Agreement and the transactions
contemplated hereby.
(b) Termination Fee. Upon the occurrence of a Triggering Event (as
defined hereafter), BBI shall pay to NCBE the sum of $250,000 plus all out-of-
pocket expenses, including fees of accountants and attorneys, incurred by NCBE
in connection with the transactions contemplated by this Agreement. As used
herein, the term "Triggering Event" shall mean the termination of this Agreement
for any reason other than a failure of any of the conditions set forth in
Sections 11(b), 11(c), 11(d), 11(e) or Section 13 hereof and the occurrence of
any of the following: (i) the failure of BBI's stockholders to approve this
Agreement following the announcement of a Competing Transaction, (ii) the Board
of Directors of BBI recommends a Competing Transaction to BBI's stockholders,
(iii) BBI enters into an agreement with a third party with respect to a
Competing Transaction, or (iv) the Board of Directors of BBI shall have
withdrawn or modified in any manner materially adverse to NCBE its approval or
recommendation of the Merger or this Agreement. The term "Competing Transaction"
means any of the following: (x) an offer by any person or group of persons
(other than NCBE) to acquire ownership of twenty-five percent (25%) or more of
the BBI Common or the Bank Stock; or (y) a proposal for a merger, consolidation,
share exchange, business combination, or similar transaction involving BBI; or
(z) a proposal for a sale, lease, exchange, transfer or other disposition of
twenty-five percent (25%) or more of the assets of BBI shall occur. The terms
"person" and "group of persons" shall have the meanings conferred thereon by
Sections 3(a) (9) and 13(d)(3) of the Exchange Act and the regulations
promulgated thereunder.
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<PAGE>
16. PUBLICITY AND REPORTS. NCBE and BBI shall coordinate all
publicity relating to the transactions contemplated by this Agreement and,
except as otherwise required by law, neither party shall issue any press
release, publicity statement or other public notice relating to this Agreement
or any of the transactions contemplated hereby without obtaining the prior
consent of the other, which consent shall not be unreasonably withheld. BBI
shall obtain the prior consent of NCBE to the content of any communication to
its stockholders.
17. BINDING EFFECT. Neither this Agreement nor any rights, duties or
obligations hereunder shall be assignable by BBI, in whole or in party, and any
attempted assignment in violation of this prohibition shall be null and void.
This Agreement may be assigned by NCBE to a subsidiary of NCBE without the
consent of BBI provided that NCBE remains bound by its obligations in this
Agreement. Subject to the foregoing, all of the terms and provisions hereof
shall be binding upon, and inure to the benefit of, the successors and assigns
of the parties hereto.
18. LAW GOVERNING. This Agreement will be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Indiana.
19. COUNTERPARTS. This Agreement may be executed in several
counterparts and one or more separate documents, all of which together shall
constitute one and the same instrument with the same force and effect as though
all of the parties had executed the same documents.
20. AMENDMENT AND WAIVER. Any of the terms or conditions of this
Agreement may be waived, amended or modified in whole or in part at any time
before or after the approval of this Agreement by the stockholders of BBI, to
the extent authorized by applicable law, by a writing signed by BBI and NCBE.
21. TERMINATION OF AGREEMENT. Notwithstanding any provision to the
contrary herein, and notwithstanding the fact that the stockholders of BBI have
approved this Agreement, this Agreement may be terminated at any time on or
prior to the Closing:
(a) Mutual Consent. By mutual consent of the respective Boards of
Directors of BBI and NCBE, or
(b) Otherwise. (i) By the Board of Directors of BBI, upon written
notice to NCBE, if by September 30, 1997, any of the conditions set forth in
Sections 11 or 13 shall not have been satisfied; or (ii) by the Board of
Directors of NCBE, upon written notice to BBI, if by September 30, 1997, any of
the conditions set forth in Sections 11 or 12 shall not have been satisfied.
(c) Effect of Termination. Upon termination of this Agreement by
either NCBE or BBI pursuant to this Section 21, except for Sections 14, 15 and
16, which shall survive to the extent permitted by applicable statutes of
limitation, this Agreement shall be void and of no further effect, and there
shall be no liability by reason of this Agreement, or the termination thereof on
the part of NCBE or BBI or the respective directors, officers, employees, agents
or stockholders of either of them, unless such rightful termination results from
a party's intentional or reckless misrepresentation or intentional or reckless
breach of any covenant contained herein. In such event, the terminating party
shall have all the remedies available to it at law or in equity.
22. SURVIVAL. Except for the covenants contained in Sections 3, 4,
5(i), 14, 15 and 16 which will survive for the periods provided therein, the
respective representations, warranties, covenants and agreements of the parties
shall terminate as of the Effective Time.
23. NOTICES. Any notice of communication required or permitted
hereunder shall be sufficiently given if in writing and (a) delivered in person;
(b) sent by facsimile transmission (with confirmation of receipt by the
recipient) or express delivery service; or (c) mailed by certified or registered
mail, postage prepaid, as follows:
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If to NCBE, addressed to:
National City Bancshares, Inc.
227 Main Street
P. O. Box 868
Evansville, Indiana 47705-0868
Attn: Robert A. Keil
Fax No. (812) 464-9825
With a copy addressed to:
Baker & Daniels
300 North Meridian Street, Suite 2700
Indianapolis, Indiana 46204-1782
Attn: David C. Worrell
Fax No. (317) 237-1000
If to BBI, addressed to:
Bridgeport Bancorp, Inc.
201 North Main Street
Bridgeport, Illinois 62417-1521
Attn: William Tillmann
Fax No. (618) 945-9225
With a copy addressed to:
Robert S. Cohen
Giffin, Winning, Cohen & Bodewes, P.C.
1 West Old State Capitol Plaza
Suite 600 Myers Building
P.O. Box 2117
Springfield, Illinois 62705
Fax No. (217) 525-1710
24. ENTIRE AGREEMENT. All exhibits and the Disclosure Schedule
referred to in this Agreement are integral parts hereof, and this Agreement,
such exhibits and Disclosure Schedule, constitute the entire agreement among the
parties hereto with respect to the matters contained herein and therein, and
supersede all prior agreements and understandings between the parties with
respect thereto.
25. REMEDIES. Subject to the terms hereof, in the event of any
willful breach of this Agreement in any material respect by any of the parties
hereto, any other party hereto damaged shall have all the rights, remedies and
causes of action available at law or in equity.
26. HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
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<PAGE>
NATIONAL CITY BANCSHARES, INC.
By: /S/ ROBERT A. KEIL
---------------------------------
Robert A. Keil, President
ATTEST:
/S/ HAROLD A. MANN
- -----------------------------------
Harold A. Mann, Secretary
BRIDGEPORT BANCORP, INC.
By: /S/ JOHN R. WOLFE
---------------------------------
John R. Wolfe, President
ATTEST:
/S/ PATRICIA SCHOFIELD
- -----------------------------------
Patricia Schofield, Secretary
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<PAGE>
EXHIBIT A
FORM OF AFFILIATE LETTER
Gentlemen:
In connection with the merger (the "Merger") of Bridgeport Bancorp, Inc.,
an Illinois corporation ("BBI"), with and into National City Bancshares, Inc.,
an Indiana corporation ("NCBE"), pursuant to the Agreement and Plan of Merger
dated as of ______________ __, 1997 (the "Agreement"), I have been advised that
I may be deemed to be an "affiliate" within the meaning of Rule 145 promulgated
by the Securities and Exchange Commission ("SEC") under the Securities Act of
1933, as amended (the "1933 Act"), for the purposes of any resales of shares of
the common stock, $1.00 stated value, of NCBE to be issued to me in the Merger
(the "Shares"). I have also been advised that I may be deemed an "affiliate" of
BBI for purposes of qualifying the Merger for pooling of interests accounting
treatment under Opinion 16 of the Accounting Principles Board. Based on such
advice and in order to induce NCBE and BBI to cause the Merger to be
consummated, I hereby represent and warrant to, and agree with NCBE and BBI as
follows:
A. I hereby consent to the placing of a legend on the certificate or
certificates evidencing the Shares referring to the issuance thereof in a
transaction to which Rule 145 under the 1933 Act is applicable and to the
giving of stop transfer instructions to the transfer agent for the Shares
with respect to such certificate or certificates. The legend will state in
substance:
The shares represented by this certificate were issued in a
transaction to which Rule 145 under the Securities Act of 1933 applies
and may be sold or otherwise transferred only in compliance with the
terms of such Rule.
B. I understand that NCBE is under no obligation to take any action to
facilitate the sale, transfer, or other disposition by me or on my behalf
of any of the Shares.
C. In the event of any sale or transfer of any of the Shares in a
transaction not involving a sale pursuant to Rule 145 or a sale in a
registered public offering, I will obtain from each transferee of the
Shares in such transaction a letter agreement substantially similar hereto,
or a letter containing such other information reasonably required by NCBE
to evidence an exception from the applicable registration requirements of
federal or state securities laws, which is binding and enforceable by NCBE
against the transferee.
It is understood and agreed that the legend set forth in Paragraph A above
shall be removed, and the related stock transfer restrictions shall be lifted
forthwith (i) if the sale or other transfer by me or on my behalf of my Shares
shall have been registered under the 1933 Act, (ii) if the sale or other
transfer by me or on my behalf of my Shares is not so registered, such sale is
exempt from the registration requirements of the 1933 Act, or (iii) upon the
expiration of the period specified in Rule 145 (d) (3) under the 1933 Act, as it
may be amended from time to time.
I further represent to and covenant with NCBE that I have not, within the
preceding 30 days, sold, transferred or otherwise disposed of any shares of BBI
Common Stock held by me and that I will not sell, transfer or otherwise dispose
of any of the Shares received by me in the Merger until after such time as
results covering at least 30 days of combined operations of BBI and NCBE have
been published by NCBE, in the form of a quarterly earnings report, an effective
registration statement filed with the SEC, a report to the SEC on Form 10-K,
10-Q or 8-K, or any other public filing or announcement which includes such
combined results of operations.
Very truly yours,
-------------------------------------
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<PAGE>
EXHIBIT B
FORM OF OPINION OF COUNSEL FOR BBI
Capitalized terms used and not otherwise defined herein have the meanings
given them in the Plan and Agreement of Merger (the "Agreement").
1. BBI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Illinois. The Bank is the only BBI
Subsidiary and a national banking association duly organized, validly existing
and in good standing under the laws of the United States of America.
2. BBI and the Bank have all requisite corporate power and authority
necessary to carry out their respective businesses as currently conducted.
3. The authorized capital stock of BBI consists of 10,000 shares of
common stock, $25.00 par value per share. Based on BBI's stock transfer
records, on the date hereof, there are 7,511 shares of BBI Common issued and
outstanding and 2,489 shares in the treasury.
4. The authorized capital stock of the Bank consists of 10,000 shares of
common stock, $25.00 par value per share. Based on the Bank's stock transfer
records, on the date hereof, there are 10,000 shares of Bank Stock issued and
outstanding, of which 9,920 are owned of record by BBI.
5. All the outstanding shares of BBI Common and Bank Stock have been duly
authorized and validly issued and are fully paid and non-assessable and were not
issued in violation of any preemptive rights.
6. The Agreement has been duly executed and delivered by BBI and
constitutes a valid and binding obligation of BBI, enforceable against BBI in
accordance with its terms, except to the extent limited by general principles of
equity and by bankruptcy, insolvency, reorganization, liquidation, fraudulent
conveyance, moratorium, readjustment of debt or other laws of general
application relating to or affecting the enforcement of creditors' rights. The
Agreement contains a provision to the effect that the Agreement is to be
construed by and governed in accordance with the laws of the State of Indiana
(the "Governing Law Provision"). Our opinion in this paragraph means that the
Agreement, with the exception to the Governing Law Provision, is enforceable
under the laws of the State of Illinois, subject to the exceptions provided
above, and, furthermore, that an Illinois court or court applying Illinois law
would enforce the Governing Law Provision.
7. All consents or approvals of any Applicable Governmental Authorities
required to be obtained by BBI in connection with the Merger have been obtained.
8. The execution and delivery by BBI of, and the performance by BBI of
its agreements in, the Agreement do not: (a) violate its articles of
incorporation or by-laws or the articles of association or by-laws of the Bank,
or (b) to our knowledge, and except as set forth in the Disclosure Schedule,
violate, result in a breach of or constitute a default under any material
contract, agreement or other instrument to which BBI is a party or by which its
properties are bound.
9. The meeting of stockholders of BBI held on ________ __, 1997, was duly
held in accordance with all applicable requirements, and the Agreement was duly
adopted by the affirmative vote of the holders of two-thirds of the outstanding
shares of BBI Common, which is the only vote on the part of the holders of any
class of BBI capital stock required in order to approve the Merger.
A-23
<PAGE>
10. Upon the filing and acceptance of the Articles of Merger under
the BCA as required by the Agreement, and assuming that the Merger
simultaneously becomes effective under the laws of the State of Indiana, the
Merger will become effective under the laws of the State of Illinois.
A-24
<PAGE>
EXHIBIT C
FORM OF OPINION OF COUNSEL FOR NCBE
Capitalized terms used and not otherwise defined herein have the meanings
given them in the Plan and Agreement of Merger (the "Agreement").
1. NCBE is incorporated and validly existing under the laws of Indiana
and is registered with the Federal Reserve Board as a bank holding company under
the Bank Holding Company Act of 1956, as amended.
2. The authorized capital stock of NCBE consists of 20,000,000 shares of
common stock, $1.00 stated value per share. All shares of NCBE Common issuable
to stockholders of BBI as part of the Merger Consideration will be, when so
issued, duly authorized, fully paid and non-assessable.
3. The Agreement has been duly executed and delivered by each NCBE and
constitutes a valid and binding obligation of NCBE, enforceable against NCBE in
accordance with its terms, except to the extent limited by general principles of
equity and by bankruptcy, insolvency, reorganization, liquidation, fraudulent
conveyance, moratorium, readjustment of debt or other laws of general
application relating to or affecting the enforcement of creditors' rights.
4. All consents or approvals of any Applicable Governmental Authorities
required to be obtained by NCBE in connection with the Merger have been
obtained.
5. The execution and delivery by NCBE of, and the performance by NCBE of
its agreements in, the Agreement do not: (a) violate its articles of
incorporation or by-laws; or (b) to our knowledge, violate, result in a breach
or constitute a default under any material contract, agreement or other
instrument to which NCBE is a party or by which its respective properties are
bound.
6. Upon the filing and acceptance of the Articles of Merger under the
IBCL as required by the Agreement, and assuming that the Merger simultaneously
becomes effective under the laws of the State of Illinois, the Merger will
become effective under the laws of the State of Indiana.
7. The Registration Statement has become effective under the Securities
Act and, to our knowledge, is not the subject of any stop order or proceedings
seeking a stop order.
A-25
<PAGE>
APPENDIX B
EXCERPTS OF THE ILLINOIS BUSINESS CORPORATION ACT
(DISSENTERS' RIGHTS)
5/11.65 RIGHT TO DISSENT.--(a) A shareholder of a corporation is entitled
to dissent from, and obtain payment for his or her shares in the event of any of
the following corporate actions:
(1) consummation of a plan of merger or consolidation or a plan of share
exchange to which the corporation is a party if (i) shareholder authorization is
required for the merger or consolidation or the share exchange by Section 11.20
or the articles of incorporation or (ii) the corporation is a subsidiary that is
merged with its parent or another subsidiary under Section 11.30;
(2) consummation of a sale, lease or exchange of all, or substantially all,
of the property and assets of the corporation other than in the usual and
regular course of business;
(3) an amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(i) alters or abolishes a preferential right of such shares;
(ii) alters or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
such shares;
(iii) in the case of a corporation incorporated prior to January 1,
1982, limits or eliminates cumulative voting rights with respect to such
shares; or
(4) any other corporate action taken pursuant to a shareholder vote if the
articles of incorporation, by-laws, or a resolution of the board of directors
provide that shareholders are entitled to dissent and obtain payment for their
shares in accordance with the procedures set forth in Section 11.70 or as may be
otherwise provided in the articles, by-laws or resolution.
(b) A shareholder entitled to dissent and obtain payment for his or her
shares under this Section may not challenge the corporate action creating
his or her entitlement unless the action is fraudulent with respect to the
shareholder or the corporation or constitutes a breach of a fiduciary duty
owed to the shareholder.
(c) A record owner of shares may assert dissenters' rights as to fewer
than all the shares recorded in such person's name only if such person
dissents with respect to all shares beneficially owned by any one person
and notifies the corporation in writing of the name and address of each
person on whose behalf the record owner asserts dissenters' rights. The
rights of a partial dissenter are determined as if the shares as to which
dissent is made and the other shares recorded in the names of different
shareholders. A beneficial owner of shares who is not the record owner may
assert dissenters' rights as to shares held on such person's behalf only
if the beneficial owner submits to the corporation the record owner's
written consent to the dissent before or at the same time the beneficial
owner asserts dissenters' rights.
5/11.70 PROCEDURE TO DISSENT.--(a) If the corporate action giving rise to
the right to dissent is to be approved at a meeting of shareholders, the notice
of meeting shall inform the shareholders of their right to dissent and the
procedure to dissent. If, prior to the meeting, the corporation furnishes to the
shareholders material information with respect to the transaction that will
objectively enable a shareholder to vote on the transaction and to determine
whether or not to exercise dissenters' rights, a shareholder may assert
dissenters' rights only if the shareholder delivers to the
B-1
<PAGE>
corporation before the vote is taken a written demand for payment for his or her
shares if the proposed action is consummated, and the shareholder does not vote
in favor of the proposed action.
(b) If the corporate action giving rise to the right to dissent is not
to be approved at a meeting of shareholders, the notice to shareholders
describing the action taken under Section 11.30 or Section 7.10 shall
inform the shareholders of their right to dissent and the procedure to
dissent. If, prior to or concurrently with the notice, the corporation
furnishes to the shareholders material information with respect to the
transaction that will objectively enable a shareholder to determine whether
or not to exercise dissenters' rights, a shareholder may assert dissenter's
rights only if he or she delivers to the corporation within 30 days from
the date of mailing the notice a written demand for payment for his or her
shares.
(c) Within 10 days after the date on which the corporate action giving
rise to the right to dissent is effective or 30 days after the shareholder
delivers to the corporation the written demand for payment, whichever is
later, the corporation shall send each shareholder who has delivered a
written demand for payment a statement setting forth the opinion of the
corporation as to the estimated fair value of the shares, the corporation's
latest balance sheet as of the end of a fiscal year ending not earlier than
16 months before the delivery of the statement, together with the statement
of income for that year and the latest available interim financial
statements, and either a commitment to pay for the shares of the dissenting
shareholder at the estimated fair value thereof upon transmittal to the
corporation of the certificate or certificates, or other evidence of
ownership, with respect to the shares, or instructions to the dissenting
shareholder to sell his or her shares within 10 days after delivery of the
corporation's statement to the shareholder. The corporation may instruct
the shareholder to sell only if there is a public market for the shares at
which the shares may be readily sold. If the shareholder does not sell
within that 10 day period after being so instructed by the corporation, for
purposes of this Section the shareholder shall be deemed to have sold his
or her shares at the average closing price of the shares, if listed on a
national exchange, or the average of the bid and asked price with respect
to the shares quoted by a principal market maker, if not listed on a
national exchange, during that 10 day period.
(d) A shareholder who makes written demand for payment under this
Section retains all other rights of a shareholder until those rights are
canceled or modified by the consummation of the proposed corporate action.
Upon consummation of that action, the corporation shall pay to each
dissenter who transmits to the corporation the certificate or other
evidence of ownership of the shares the amount the corporation estimates to
be the fair value of the shares, plus accrued interest, accompanied by a
written explanation of how the interest was calculated.
(e) If the shareholder does not agree with the opinion of the
corporation as to the estimated fair value of the shares or the amount of
interest due, the shareholder, within 30 days from the delivery of the
corporation's statement of value, shall notify the corporation in writing
of the shareholder's estimated fair value and amount of interest due and
demand payment for the difference between the shareholder's estimate of
fair value and interest due and the amount of the payment by the
corporation or the proceeds of sale by the shareholder, whichever is
applicable because of the procedure for which the corporation opted
pursuant to subsection (c).
(f) If, within 60 days from delivery to the corporation of the
shareholder notification of estimate of fair value of the shares and
interest due, the corporation and the dissenting shareholder have not
agreed in writing upon the fair value of the shares and interest due, the
corporation shall either pay the difference in value demanded by the
shareholder, with interest, or file a petition in the circuit court of the
county in which either the registered office or the principal office of the
corporation is located, requesting the court to determine the fair value of
the shares and interest due. The corporation shall make all dissenters,
whether or not residents of this State, whose demands remain unsettled
parties to the proceeding as an action against their shares and all parties
shall be served with a copy of the petition. Nonresidents may be served by
registered or certified mail or by publication as provided by law. Failure
of the corporation to commence an action pursuant to this
B-2
<PAGE>
Section shall not limit or affect the right of the dissenting shareholders to
otherwise commence an action as permitted by law.
(g) The jurisdiction of the court in which the proceeding is commenced
under subsection (f) by a corporation is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the power described
in the order appointing them, or in any amendment to it.
(h) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds that the fair value of his or
her shares, plus interest, exceeds the amount paid by the corporation or the
proceeds of sale by the shareholder, whichever amount is applicable.
(i) The court, in a proceeding commenced under subsection (f), shall
determine all costs of the proceeding, including the reasonable compensation and
expenses of the appraisers, if any, appointed by the court under subsection (g),
but shall exclude the fees and expenses of counsel and experts for the
respective parties. If the fair value of the shares as determined by the court
materially exceeds the amount which the corporation estimated to be the fair
value of the shares or if no estimate was made in accordance with subsection
(c), then all or any part of the costs may be assessed against the corporation.
If the amount which any dissenter estimated to be the fair value of the shares
materially exceeds the fair value of the shares as determined by the court, then
all or any part of the costs may be assessed against that dissenter. The court
may also assess the fees and expenses of counsel and experts for the respective
parties, in amounts the court finds equitable, as follows:
(1) Against the corporation and in favor of any or all dissenters if
the court finds that the corporation did not substantially comply with the
requirements of subsections (a), (b), (c), (d), or (f).
(2) Against either the corporation or a dissenter and in favor of any
other party if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this Section.
If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated and that the
fees for those services should not be assessed against the corporation, the
court may award to that counsel reasonable fees to be paid out of the
amounts awarded to the dissenters who are benefitted. Except as otherwise
provided in this Section, the practice, procedure, judgment and costs shall
be governed by the Code of Civil Procedure.
(j) As used in this Section:
(1) "Fair value", with respect to a dissenter's shares, means the
value of the shares immediately before the consummation of the corporate
action to which the dissenter objects excluding any appreciation or
depreciation in anticipation of the corporate action, unless exclusion
would be inequitable.
(2) "Interest" means interest from the effective date of the
corporate action until the date of payment, at the average rate currently
paid by the corporation on its principal bank loans or, if none, at a rate
that is fair and equitable under all the circumstances.
B-3
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The Indiana Business Corporation Law provides in regard to indemnification
of directors and officers as follows:
23-1-37-8. [BASIS.] (a) A corporation may indemnify an individual made a
party to a proceeding because the individual is or was a director against
liability incurred in the proceeding if:
(1) the individual's conduct was in good faith; and
(2) the individual reasonably believed:
(A) in the case of conduct in the individual's official
capacity with the corporation, that the individual's
conduct was in its best interest; and
(B) in all other cases, that the individual's conduct was
at least not opposed to its best interests; and
(3) in the case of any criminal proceeding, the individual
either:
(A) had reasonable cause to believe the individual's
conduct was lawful; or
(B) had no reasonable cause to believe the individual's
conduct was unlawful.
(b) A director's conduct with respect to an employee benefit plan for
a purpose the director reasonably believed to be in the interests of the
participants in and beneficiaries of the plan is conduct that satisfies the
requirement of subsection (a)(2)(B).
(c) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plead of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of conduct
described in this section.
23-1-37.9. [AUTHORIZED.] Unless limited by its articles of incorporation, a
corporation shall indemnify a director who was wholly successful, on the merits
or otherwise, in the defense of any proceeding to which the director was a party
because the director is or was a director of the corporation against reasonable
expenses incurred by the director in connection with the proceeding.
23-1-37-13. [OFFICERS, EMPLOYEES OR AGENTS.] Unless a corporation's
articles of incorporation provide otherwise:
(1) An officer of the corporation, whether or not a director, is
entitled to mandatory indemnification under section 9 of this chapter, and
is entitled to apply for court-ordered indemnification under section 11 of
this chapter, in each case to the same extent as a director;
(2) The corporation may indemnify and advance expenses under this
chapter to an officer, employee or agent of the corporation, whether or not
a director, to the same extent as to a director; and
S-1
<PAGE>
(3) A corporation may also indemnify and advance expenses to an
officer, employee or agent whether or not a director, to the extent,
consistent with public policy, that may be provided by its articles of
incorporation, bylaws, general or specific action of its board of
directors, or contract.
23-1-37-15. [REMEDY NOT EXCLUSIVE OF OTHER RIGHTS.] (a) The indemnification
and advance for expenses provided for or authorized by this chapter does not
exclude any other rights to indemnification and advance for expenses that a
person may have under:
(1) A corporation's articles of incorporation or bylaws;
(2) A resolution of the board of directors or of the
shareholders; or
(3) Any other authorization whether adopted, after notice, by a
majority vote of all the voting shares then issued and
outstanding.
(b) If the articles of incorporation, bylaws, resolutions of the
board of directors or of the shareholders, or other duly adopted authorization
of indemnification or advance for expenses limit indemnification or advance for
expenses, indemnification and advance or expenses are valid only to the extent
consistent with the articles, bylaws, resolutions of the board of directors or
of the shareholders, or other duly adopted authorization of indemnification or
advance for expenses;
(c) This chapter does not limit a corporation's power to pay or
reimburse expenses incurred by a director, officer, employee, or agent in
connection with the person's appearance as a witness in a proceeding at a time
when the person has not been made a named defendant or respondent to the
proceeding.
The Registrant's Articles of Incorporation generally provide for the
indemnification of NCBE's directors, officers, employees and agents to the
extent permitted by the foregoing provisions of the Indiana Business Corporation
Law.
In addition, the Registrant has a directors' and officers' liability and
company reimbursement policy that insures against certain liabilities, including
liabilities under the Securities Act, subject to applicable retentions.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits: The list of exhibits is incorporated by reference to
the Index to Exhibits on page S-7.
(b) Financial Statement Schedules: All financial statements schedules
are omitted since the required information is not applicable or is not
present in amounts sufficient to require submission of the schedules.
S-2
<PAGE>
Item 22. Undertakings.
1. The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b), if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) 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.
2. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
3. The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities hereunder through use of a prospectus
which is a part of this Registration Statement, by a person or party who is
deemed to be an underwriter within the making 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
other Items of the applicable form.
4. The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (3) 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, 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.
S-3
<PAGE>
5. Insofar as indemnification by the Registrant for liabilities arising
under the Securities act of 11933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable, in the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
6. The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
7. The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
S-4
<PAGE>
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 Evansville, State of
Indiana, on June 16, 1997.
National City Bancshares, Inc.
By: /s/ JOHN D. LIPPERT
-------------------
John D. Lippert, Chairman of the Board
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature appears
below constitutes and appoints John D. Lippert and Robert A. Keil and each of
them, his true and lawful attorneys-in-fact and agents with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and all documents in connection therewith, with the Securities and Exchange
Commission, granting unto said 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, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/S/ JOHN D. LIPPERT Chairman of the Board, Chief Executive June 16, 1997
- ---------------------------- Officer and Director (Principal Executive
John D. Lippert Officer)
/S/ ROBERT A. KEIL President, Chief Financial Officer and June 16, 1997
- ---------------------------- Director (Principal Financial Officer)
Robert A. Keil
/S/ MICHAEL F. ELLIOTT Executive Vice President and Director June 16, 1997
- ----------------------------
Michael F. Elliott
/S/ HAROLD A. MANN Secretary and Treasurer (Principal June 16, 1997
- ---------------------------- Accounting Officer)
Harold A. Mann
/S/ JANICE L. BEESLEY Director June 16, 1997
- ----------------------------
Janice L. Beesley
/S/ SUSAN R. EMGE Director June 16, 1997
- ----------------------------
Susan R. Emge
/S/ DONALD G. HARRIS Director June 16, 1997
- ----------------------------
Donald G. Harris
</TABLE>
S-5
<PAGE>
<TABLE>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/S/ DR. H. RAY HOOPS
- ---------------------------- Director June 16, 1997
Dr. H. Ray Hoops
/S/ RONALD G. REHERMAN Director June 16, 1997
- ----------------------------
Ronald G. Reherman
/S/ LAWRENCE R. STEENBERG Director June 16, 1997
- ----------------------------
Lawrence R. Steenberg
</TABLE>
S-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- --------------------------------------------------------------
<C> <S>
2 Agreement and Plan of Merger dated April 21, 1997 between the
Registrant and Bridgeport Bancorp, Inc. (incorporated by
reference to Appendix A to the Proxy Statement/Prospectus
included in this Registrant Statement).
3(a) Articles of Incorporation of the Registrant, as amended
(incorporated by reference to Exhibit (3)(i) to Form 10-K for
the year ending December 31, 1996).
3(b) By-Laws of the Registrant, as amended (incorporated by reference
to Exhibit 3(ii) to Form 10-K for the year ending December 31,
1994).
5* Opinion of Baker & Daniels, counsel for Registrant, regarding
legality of securities offered hereby.
8* Opinion of Baker & Daniels, counsel for Registrant, regarding
tax matters.
10(a) Term Loan Agreement, dated as of June 26, 1996 between Twenty-
One Southeast Third Corporation, the Registrant and The Northern
Trust Company (incorporated by reference to Exhibit 10(a) to
Form 10-Q for the period ending June 30, 1996).
10(b) Incentive Stock Option Plan (incorporated by reference to
Exhibit 10(b) to Form 10-Q for the period ending June 30, 1996).
10(c) Incentive Stock Option Plan, First Amendment, dated as of
December 18, 1996 (incorporated by reference to Exhibit 10(c) to
Form 10-K for the year ending December 31, 1996).
10(d) Incentive Stock Option Plan, Second Amendment, dated as of March
19, 1997 (incorporated by reference to Exhibit 10(d) to Form 10-
K for the year ending December 31, 1996).
10(e) Supplemental Retirement Benefit Agreement between John D.
Lippert and the Registrant (incorporated by reference to Exhibit
10(e) to Form 10-K for the year ending December 31, 1996).
10(f) Term Loan Agreement, First Amendment, dated as of January 31,
1997 (incorporated by reference to Exhibit 10(f) to Form 10-K
for the year ending December 31, 1996).
21 Subsidiaries of Registrant.
23(a) Consent of McGladrey & Pullen, LLP.
23(b) Consent of Kemper CPA Group, LLC.
23(c)* Consent of Baker & Daniels - included in its opinion filed as
Exhibit 5.
24 Power of Attorney - included on page S-5.
99(a) Form of BBI Proxy.
</TABLE>
- -----------
* To be filed by amendment.
S-7
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
NAME JURISDICTION OF INCORPORATION
- ---- -----------------------------
<S> <C>
The National City Bank of Evansville United States
Evansville, Indiana
The Peoples National Bank of Grayville United States
Grayville, Illinois
First Federal Savings Bank of Leitchfield United States
Leitchfield, Kentucky
First Kentucky Bank Commonwealth of Kentucky
Sturgis, Kentucky
Lincolnland Bank State of Indiana
Dale, Indiana
The Bank of Mitchell State of Indiana
Mitchell, Indiana
Pike County Bank State of Indiana
Petersburg, Indiana
The State Bank of Washington State of Indiana
Washington, Indiana
White County Bank State of Illinois
Carmi, Illinois
United Federal Savings Bank United States
Vincennes, Indiana
The First National Bank of Wayne City United States
Wayne City, Illinois
NCBE Leasing Corp. State of Indiana
Evansville, Indiana
Twenty-One Southeast Third Corporation State of Indiana
Evansville, Indiana
</TABLE>
<PAGE>
EXHIBIT 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Prospectus/Proxy
Statement forming a part of the Registration Statement on Form S-4 filed by
National City Bancshares, Inc. of our report dated January 31, 1997, on our
audit of the consolidated statements of financial position of National City
Bancshares, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the three years ended December 31, 1996, which are incorporated by
reference in the December 31, 1996 Form 10-K of National City Bancshares, Inc.
and to the reference of our firm under the heading "Experts" in the Proxy
Statement/Prospectus.
McGLADREY & PULLEN, LLP
Champaign, Illinois
June 16, 1997
<PAGE>
EXHIBIT 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in the Prospectus/Proxy Statement forming a
part of the Registration Statement on Form S-4 filed by National City
Bancshares, Inc. of our report dated November 4, 1996, on our audit of the
consolidated statements of financial condition of Bridgeport Bancorp, Inc. as of
September 30, 1996 and 1995, and the related statements of income, changes in
stockholders' equity, and cash flows for the years thus ended. We also consent
to the reference to our firm under the caption "Experts" in the Prospectus/Proxy
Statement.
KEMPER CPA GROUP, LLC
Mt. Carmel, Illinois
June 16, 1997
<PAGE>
EXHIBIT 99
REVOCABLE PROXY
BRIDGEPORT BANCORP, INC.
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
SPECIAL MEETING OF SHAREHOLDERS
___________ __, 1997
The undersigned, a shareholder of BRIDGEPORT BANCORP, INC. ("BBI") hereby
constitutes and appoints ________________________ and ____________________ and
each of them acting individually as the attorney and proxy of the undersigned,
with full power of substitution, for and in the name and stead of the
undersigned to attend the Special Meeting of Shareholders of BBI to be held on
__________ __, 1997 at 10:00 a.m., and any adjournment or postponement thereof,
to vote all shares which the undersigned would be entitled to cast if personally
present, upon such business as may properly come before the meeting, including
the following items, as set forth in the notice of meeting and proxy statement.
1. A proposal to approve an Agreement
and Plan of Merger between BBI and
National City Bancshares, Inc., as more
fully described in the accompanying For Against Abstain
Proxy Statement/Prospectus. [ ] [ ] [ ]
2. To transact such other business as
may properly come before the meeting.
If not otherwise specified, the shares will be voted FOR Proposal 1. The
undersigned hereby revokes all previous proxies for such meeting, and hereby
acknowledges receipt of the notice of the meeting and the Proxy
Statement/Prospectus furnished herewith.
Please be sure to sign and date Date ______________, 1997
this Proxy in the box below.
______Shareholder sign above_________ Co-holder (if any) sign above _________
* Detach above card, sign, date and mail in postage paid envelope provided. *
BRIDGEPORT BANCORP, INC.
NOTE: If shares are registered in more than one name, all owners should sign.
If signing in a fiduciary or representative capacity, please give full
title and attach evidence of authority. Corporations please sign with
full corporate name by a duly authorized officer and affix the corporate
seal.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
