<PAGE> 1
As filed with the Securities and Exchange Commission on June 23, 1995
Registration No. 33-__________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ASSOCIATED BANC-CORP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
WISCONSIN 6711 39-1098068
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD (I.R.S. EMPLOYER
OF INCORPORATION OR INDUSTRIAL CLASSIFICATION IDENTIFICATION
ORGANIZATION) CODE NUMBER) NO.)
112 NORTH ADAMS STREET
P.O. BOX 13307
GREEN BAY, WISCONSIN 54307-3307
(414) 433-3166
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
HARRY B. CONLON
ASSOCIATED BANC-CORP
112 NORTH ADAMS STREET
P.O. BOX 13307
GREEN BAY, WISCONSIN 54307-3307
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES OF ALL COMMUNICATIONS TO BE SENT TO:
SHELDON I. SAITLIN, ESQ. DANIEL O'ROURKE, ESQ.
ROBERT J. WILD, ESQ. CATHERINE A. LEMMER, ESQ.
SAITLIN, PATZIK, FRANK & SAMOTNY LTD. VEDDER, PRICE, KAUFMAN & KAMMHOLZ
150 SOUTH WACKER DRIVE, SUITE 900 222 NORTH LASALLE STREET, SUITE 2600
CHICAGO, ILLINOIS 60606 CHICAGO, ILLINOIS 60601
(312) 551-8300 (312) 609-7500
(312) 551-1101 (FACSIMILE) (312) 609-5005 (FACSIMILE)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement is declared effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED (1) REGISTERED (2) PER SHARE OFFERING PRICE REGISTRATION FEE
-------------------------------- --------------- ----------------- ---------------- ----------------
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Shares of Common Stock, $.01 par 887,500
value per share . . . . . . . . . shares Not Applicable Not Applicable $4,017 (3)
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(1) This Registration Statement relates to securities of the registrant
issuable to holders of Common Stock of GN Bancorp, Inc. (the "Company")
in the proposed merger of the Company with and into a subsidiary of the
registrant (the "Merger").
(2) Subject to increase in accordance with Rule 416(a) and (b) under the
Securities Act of 1933, as amended, pursuant to stock splits or stock
dividends.
(3) Pursuant to Rule 457(f)(2), the registration fee was computed on the
basis of $11,649,000, the book value of the Company Common Stock to be
exchanged in the Merger as of March 31, 1995, the latest practicable
date.
________________
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 SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE> 2
ASSOCIATED BANC-CORP
Cross Reference Sheet
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FORM S-4 ITEM NUMBER AND CAPTION PROXY STATEMENT/PROSPECTUS CAPTION
-------------------------------- ----------------------------------
PART I
Information Required in the Prospectus
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A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus . Facing Page of Registration Statement; Cross
Reference Sheet; Cover Page of Proxy
Statement/Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus . . . . . . . . . . . . . Table of Contents; Available Information;
Incorporation of Certain Documents by Reference
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information . . . . . Prospectus Summary
4. Terms of the Transaction . . . . . . . . The Merger; Certain Provisions of the Merger
Agreement; Stock Option Agreement
5. Pro Forma Financial Information . . . . Not Applicable
6. Material Contacts With the Company Being
Acquired . . . . . . . . . . . . . . . . Summary; The Merger; Certain Provisions of the
Stock Option Agreement
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters . . . . . . . . . . . Not Applicable
8. Interests of Named Experts and Counsel . Not Applicable
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities . . . . . . . . . . . . . . Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information With Respect to S-3
Registrants . . . . . . . . . . . . . . Available Information; Prospectus Summary;
Associated Banc-Corp; Certain Information
Concerning Associated
11. Incorporation of Certain Information by
Reference . . . . . . . . . . . . . . . Incorporation of Certain Documents by Reference
12. Information with Respect to S-2 or S-3
Registrants . . . . . . . . . . . . . . Not Applicable
13. Incorporation of Certain Information by
Reference . . . . . . . . . . . . . . . Not Applicable
</TABLE>
i
<PAGE> 3
<TABLE>
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14. Information with Respect to Registrants
other than S-2 or S-3 Registrants . . . . . . . . . Not Applicable
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies . . . . . Not Applicable
16. Information with Respect to S-2 or S-3
Companies . . . . . . . . . . . . . . . . . . . . . Not Applicable
17. Information with Respect to Companies
other than S-2 or S-3 Companies . . . . . . . . . . Prospectus Summary; Certain Information Concerning
the Company; Exhibit E
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited . . . . . . . . . Cover Page of Proxy Statement/Prospectus;
Prospectus Summary; The Special Meeting; The
Merger; Certain Information Concerning the Company
19. Information if Proxies, Consents or
Authorizations are not to be Solicited or
in an Exchange Offer . . . . . . . . . . . . . . . . Not Applicable
</TABLE>
ii
<PAGE> 4
GN BANCORP, INC.
5200 NORTH CENTRAL AVENUE
CHICAGO, ILLINOIS 60630
June _____, 1995
Dear Fellow Shareholder:
Following this letter is a notice of a Special Meeting of the
Shareholders of GN Bancorp, Inc. (the "Company"), a Proxy Statement/Prospectus
and a proxy card for the Special Meeting. The Special Meeting will commence at
___________.m. on July ________, 1995 at ______________________.
The Company shareholders will be asked to approve an Agreement and
Plan of Merger among Associated Banc-Corp ("Associated"), Associated Illinois
Banc Corp. ("Associated Illinois"), a wholly-owned subsidiary of Associated,
and the Company. Associated is a Wisconsin bank holding company owning all of
the capital stock of seven commercial banks located in Wisconsin and Illinois.
If the Company shareholders approve the Agreement and Plan of Merger,
subject to receipt of regulatory approval and satisfaction of other conditions,
the Company will combine its business and operations with those of Associated
Illinois through a statutory merger (the "Merger"), and will thereafter operate
its banking business as "Associated/Gladstone-Norwood Trust & Savings Bank."
On April 26, 1995, Associated declared a five-for-four stock split to
be effected as a stock dividend paid on June 15, 1995 to Associated
shareholders of record on June 1, 1995. All references herein to Associated
Common Stock prices and per share amounts have been adjusted to reflect this
stock split.
If the Merger becomes effective, each share of the Company Common
Stock will be converted into 8.75 shares of Associated Common Stock subject to
possible reduction as discussed in the accompanying Proxy Statement/
Prospectus. See "The Merger - Merger Consideration" in the accompanying Proxy
Statement/Prospectus. Associated Common Stock trades on The Nasdaq Stock
Market and the shares of Associated Common Stock to be issued to you in the
Merger will offer greater liquidity than that of the Company Common Stock which
you presently own.
The Merger is intended to be tax-free for federal income tax purposes
to Company shareholders who receive Associated Common Stock in exchange for
Company Common Stock, except as discussed in "The Merger-Certain Material
Federal Income Tax Consequences" in the accompanying Proxy
Statement/Prospectus. No fractional shares of Associated Common Stock will be
issued in the Merger. Company shareholders entitled to a fractional share of
Associated Common Stock will receive cash equal to the applicable market value
of the fractional share. Company shareholders are advised to consult their tax
advisors with respect to income tax consequences of the transaction. Details
of the Merger are set forth in the accompanying Proxy Statement/Prospectus. We
encourage you to read it carefully.
The Board of Directors of the Company has unanimously approved the
Merger Agreement as being in the best interest of the Company and its
shareholders. Your Board recommends that the Company shareholders vote to
approve the Agreement and Plan of Merger. The Board has also received the
opinion of its financial advisor, Robert W. Baird & Co. Incorporated, that as
of the date hereof, and subject to the assumptions stated in the opinion, the
Exchange Ratio is fair from a financial point of view to the shareholders of
the Company.
Whether or not you plan to attend the Special Meeting, holders of the
Company Common Stock are asked to please complete, date and sign the enclosed
proxy card, which is solicited by the Board of Directors of the Company, and
return it promptly in the accompanying envelope, which requires no postage if
mailed in the United States. If you later find that you may be present at the
Special Meeting or for any other reason desire to revoke your proxy, you may do
so at any time before it is voted.
IN ORDER TO APPROVE THE AGREEMENT AND PLAN OF MERGER, IT IS NECESSARY
THAT HOLDERS OF AT LEAST TWO-THIRDS OF THE OUTSTANDING SHARES OF THE COMPANY
VOTE IN FAVOR OF THE AGREEMENT AND PLAN OF MERGER.
Very truly yours,
/s/ Eugene P. Mroz
----------------------
Chairman and President
Enclosure
<PAGE> 5
GN BANCORP, INC.
5200 NORTH CENTRAL AVENUE
CHICAGO, ILLINOIS 60630
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JULY ___, 1995
TO THE SHAREHOLDERS OF GN BANCORP, INC.
A Special Meeting of Shareholders of GN Bancorp, Inc. (the "Company")
will be held at __________________________________, on July ______, 1995 at
___________ .m. for the purpose of voting on the following matters:
1. To approve the Agreement and Plan of Merger dated as of March
22, 1995 among Associated Banc-Corp ("Associated"), Associated
Illinois Banc Corp., a wholly-owned subsidiary of Associated
("Associated Illinois"), and the Company providing for the
merger of the Company with and into Associated Illinois ("the
Merger") (a copy of the Agreement and Plan of Merger is
attached as Exhibit A hereto).
2. To transact such other business as may properly come before
the meeting.
THE DIRECTORS OF THE COMPANY HAVE UNANIMOUSLY APPROVED THE AGREEMENT
AND PLAN OF MERGER AND RECOMMEND THAT THE SHAREHOLDERS APPROVE THE AGREEMENT
AND PLAN OF MERGER.
Company Shareholders who comply with the requirements of Sections
11.65 and 11.70 of the Illinois Business Corporation Act of 1983, as amended,
may exercise dissenters' rights with respect to the Merger and obtain payment
for their shares. Generally, to preserve dissenters' rights, a Company
shareholder must (i) before the vote at the Special Meeting is taken, deliver
to the Company a written demand for payment for his or her shares of the
Company Common Stock if the Merger is consummated, and (ii) not vote in favor
of the proposal to approve the Agreement and Plan of Merger. A copy of
Sections 11.65 and 11.70 of the Illinois Business Corporation Act of 1983, as
amended, is attached as Exhibit D to the Proxy Statement/Prospectus. See "The
Merger-Dissenters' Rights" in the accompanying Proxy Statement/Prospectus.
The Board of Directors has fixed the close of business on June
_______, 1995 as the record date for the determination of Company shareholders
entitled to notice of and to vote at the Special Meeting and any adjournment
thereof.
Whether or not you plan to attend the Special Meeting, holders of the
Company Common Stock are asked to please complete, date and sign the enclosed
proxy card, which is solicited by the Board of Directors of the Company, and
return it promptly in the accompanying envelope. No postage is required if
mailed in the United States. The giving of such proxy does not affect your
right to vote in person in the event you attend the Special Meeting. You may
revoke the proxy at any time prior to its exercise in the manner described in
the Proxy Statement/Prospectus.
The Special Meeting may be postponed or adjourned from time to time
without any notice other than by announcement at the Special Meeting of any
postponements or adjournments thereof, and any and all business for which
notice is hereby given may be transacted at such postponed or adjourned Special
Meeting.
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THE AFFIRMATIVE VOTE OF THE HOLDERS OF AT LEAST TWO-THIRDS OF THE
OUTSTANDING SHARES OF THE COMPANY COMMON STOCK IS REQUIRED FOR APPROVAL OF THE
AGREEMENT AND PLAN OF MERGER. YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER
OF SHARES YOU OWN.
Shareholders are invited to attend the Special Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Eugene P. Mroz
----------------------
Chairman and President
Chicago, Illinois
June ____, 1995
PLEASE DO NOT SEND YOUR STOCK CERTIFICATES AT THIS TIME. IF THE MERGER IS
CONSUMMATED, YOU WILL BE SENT INSTRUCTIONS REGARDING THE SURRENDER OF YOUR
STOCK CERTIFICATES.
<PAGE> 7
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, JUNE 23, 1995
PRELIMINARY COPY
PROXY STATEMENT
GN BANCORP, INC.
SPECIAL MEETING OF SHAREHOLDERS
------------
PROSPECTUS
ASSOCIATED BANC-CORP
COMMON STOCK
------------
This Proxy Statement/Prospectus is being furnished to the shareholders
of GN Bancorp, Inc., an Illinois corporation (the "Company"), in connection
with the solicitation of proxies by the Board of Directors of the Company for
use at its special meeting of shareholders (including any adjournments or
postponements thereof) to be held on __________, July ____, 1995 (the "Special
Meeting"). This Proxy Statement/Prospectus relates to the proposed merger (the
"Merger") of the Company with and into Associated Illinois Banc Corp.
("Associated Illinois"), an Illinois corporation and a wholly-owned subsidiary
of Associated Banc-Corp, a Wisconsin corporation ("Associated"), pursuant to
the Agreement and Plan of Merger dated as of March 22, 1995 (the "Merger
Agreement"), a copy of which is attached hereto as Exhibit A. FOR A MORE
COMPLETE DESCRIPTION OF THE MERGER, THE MERGER AGREEMENT AND CERTAIN RISK
FACTORS ASSOCIATED THEREWITH, SEE "THE MERGER-CERTAIN CONSIDERATIONS" AND
"CERTAIN PROVISIONS OF THE MERGER AGREEMENT."
This Proxy Statement/Prospectus constitutes a prospectus of Associated
with respect to shares of Associated Common Stock, par value $0.01 per share
("Associated Common Stock") issuable to holders of the Company Common Stock,
par value $8.00 per share ("Company Common Stock") pursuant to the Merger
Agreement. Associated declared a five-for-four stock split to be effected as a
stock dividend paid on June 15, 1995 to Associated shareholders of record on
June 1, 1995 (the "Stock Split"). Pursuant to the Merger Agreement, each of
the outstanding shares of the Company Common Stock will be converted into 8.75
shares of Associated Common Stock as adjusted for the Stock Split. However,
the actual number of shares of Associated Common Stock into which each share of
the Company Common Stock is to be converted will be reduced as set forth in the
Merger Agreement if the average of the daily closing prices of a share of
Associated Common Stock as reported on The Nasdaq Stock Market during the 10
consecutive trading days ending on the third trading day before the Effective
Time of the Merger (the "Associated Average Price") is greater than $30.40 per
share. The Merger Agreement may be terminated by the Company if the Associated
Average Price is less than $26.40 per share. See "The Merger - Merger
Consideration."
This Proxy Statement/Prospectus and the accompanying proxy materials
are first being mailed to shareholders on or about July ____, 1995.
Associated Common Stock trades on The Nasdaq Stock Market under the
symbol ASBC. The closing price of Associated Common Stock on The Nasdaq Stock
Market on June 21, 1995 was $30.38.
------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS JUNE _____, 1995
<PAGE> 8
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED OR INCORPORATED IN THIS PROXY
STATEMENT/PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY ASSOCIATED OR THE
COMPANY. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
EXCHANGE OR SELL, OR A SOLICITATION OF AN OFFER TO EXCHANGE OR PURCHASE, THE
SECURITIES OFFERED BY THIS PROXY STATEMENT/PROSPECTUS, OR THE SOLICITATION OF A
PROXY, IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR TO OR FROM ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. THE INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS
SPEAKS AS OF THE DATE HEREOF UNLESS OTHERWISE SPECIFICALLY INDICATED.
INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS REGARDING ASSOCIATED
HAS BEEN FURNISHED BY ASSOCIATED, AND INFORMATION HEREIN REGARDING THE COMPANY
HAS BEEN FURNISHED BY THE COMPANY.
AVAILABLE INFORMATION
Associated is subject to the informational reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference room of the Commission, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and copies of such materials can be obtained by mail
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, at prescribed rates. In addition, copies
of such materials are available for inspection and reproduction at the public
reference facilities of the Commission at its New York regional office, 75 Park
Place, 14th Floor, New York, New York 10007; and at its Chicago regional
office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60621. The
principal market on which Associated Common Stock is traded, under the symbol
"ASBC," is The Nasdaq Stock Market. Material filed by Associated with the
Commission can also be inspected at the offices of the National Association of
Securities Dealers, Inc., Reports Section, 1735 K Street, N.W., Washington,
D.C. 20006 ("NASD").
Associated 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"), relating
to the Associated Common Stock to be issued pursuant to the Merger Agreement.
This Proxy Statement/Prospectus 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 Proxy Statement or in any
document incorporated in this Proxy Statement/Prospectus 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 reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement or such other documents. Each such statement being qualified in all
respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by
Associated (File No. 0-5519) pursuant to Section 13 of the Exchange Act are
hereby incorporated by reference in this Proxy Statement/Prospectus:
(1) Associated's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994;
(2) Associated's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1995; and
2
<PAGE> 9
(3) The description of the Associated Common Stock set forth in
Associated's Registration Statement pursuant to Section 12 of
the Exchange Act, and any amendment or report filed for the
purpose of updating any such description.
In addition, all documents subsequently filed by Associated pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof
and prior to the date of the Special Meeting are hereby deemed to be
incorporated by reference in this Proxy Statement/Prospectus and to be a part
hereof from the dates of filing of such documents or reports. Any statements
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this Proxy
Statement/Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Proxy Statement/Prospectus.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF THESE
DOCUMENTS (OTHER THAN EXHIBITS THERETO, UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE INTO SUCH INCORPORATED DOCUMENTS) ARE AVAILABLE
WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS
PROXY STATEMENT/PROSPECTUS IS DELIVERED, ON WRITTEN OR ORAL REQUEST FROM
ASSOCIATED BANC-CORP, 112 NORTH ADAMS STREET, P.O. BOX 13307, GREEN BAY,
WISCONSIN 54307-3307 (TELEPHONE NUMBER (414) 433-3166), ATTENTION: BRIAN R.
BODAGER, ESQ., GENERAL COUNSEL & SECRETARY. IN ORDER TO ENSURE TIMELY DELIVERY
OF THE DOCUMENTS PRIOR TO THE SPECIAL MEETING, REQUESTS SHOULD BE MADE BY JULY
_____, [5 business days prior to Special Meeting] 1995. PERSONS REQUESTING
COPIES OF EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY
REFERENCE IN SUCH DOCUMENTS WILL BE CHARGED THE COSTS OF REPRODUCTION AND
MAILING.
________________________
3
<PAGE> 10
ASSOCIATED BANC-CORP
AND
GN BANCORP, INC.
PROXY STATEMENT/PROSPECTUS
TABLE OF CONTENTS
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AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Status of Associated Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The Special Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Reasons for the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Recommendation of the Company's Board of Directors . . . . . . . . . . . . . . . . . . . . . . 8
Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Conditions to the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Regulatory Approvals Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Certain Material Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . 10
Anticipated Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Dissenting Shareholders' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
The Inducement Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
The Stock Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Certain Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SELECTED FINANCIAL DATA OF ASSOCIATED BANC-CORP AND THE COMPANY . . . . . . . . . . . . . . . . . . . . 13
COMPARATIVE STOCK PRICES AND DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Associated Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
The Company Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
COMPARATIVE UNAUDITED PER SHARE DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ASSOCIATED BANC-CORP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
THE SPECIAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Matters to Be Considered at the Special Meeting . . . . . . . . . . . . . . . . . . . . . . . 16
Required Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Voting of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Revocability of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Record Date; Stock Entitled to Vote; Quorum . . . . . . . . . . . . . . . . . . . . . . . . . 17
Solicitation of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
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THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Background of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Reasons for the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Recommendations of the Board of Directors of the Company . . . . . . . . . . . . . . . . . . . . . . . . 22
Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Certain Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Regulatory Approvals Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
The Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Conversion of Shares; Procedures for Exchange of Certificates; Fractional Shares . . . . . . . . . . . . . 29
Description of Associated Common Stock Issuable in the Merger . . . . . . . . . . . . . . . . . . . . . . 31
Comparison of Shareholder Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Buy-Sell Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Authorized Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Appraisal Rights and Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Assessability; Potential Liability for Wages . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Required Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Action Without a Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Liability of Directors; Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Classified Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Removal of Directors For "Cause" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Newly Created Directorships and Vacancies on the Board of Directors . . . . . . . . . . . . . . . 35
Certain Business Combinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Advance Notice of Proposals to Be Brought at the Annual Meeting . . . . . . . . . . . . . . . . . 36
Advance Notice of Nominations of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Resale of Associated Common Stock Issued Pursuant to the Merger . . . . . . . . . . . . . . . . . . . . . 36
Pre-Merger Dividend Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Post-Merger Dividend Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Conduct of Business Pending the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Certain Material Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Anticipated Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
The Inducement Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
The Stock Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Other Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Management After the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
CERTAIN PROVISIONS OF THE MERGER AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Certain Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
No Solicitation of Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Conditions to Consummation of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
The Inducement Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
</TABLE>
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Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
CERTAIN PROVISIONS OF THE STOCK OPTION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
The Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Exercise of the Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Expiration of the Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Adjustment of Number of Shares Subject to Option . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Termination Option of Associated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Repurchase Option of Associated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Registration Rights of Associated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Right of First Refusal of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
CERTAIN INFORMATION CONCERNING ASSOCIATED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
CERTAIN INFORMATION CONCERNING THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Ownership of the Company Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
LEGAL OPINIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SHAREHOLDER PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Exhibit A: Agreement and Plan of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Exhibit B: Stock Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
Exhibit C: Opinion of Robert W. Baird & Co. Incorporated . . . . . . . . . . . . . . . . . . . . C-1
Exhibit D: Sections 11.65 and 11.70 of the Illinois Business Corporation Act of 1983, as amended D-1
Exhibit E: GN Bancorp, Inc. and Subsidiaries Consolidated Financial Statements
and Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . E-1
</TABLE>
6
<PAGE> 13
PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere
in this Proxy Statement/Prospectus and is not intended to be complete. All
information concerning Associated included in this Proxy Statement/Prospectus
has been provided by Associated, and all information concerning the Company has
been provided by the Company. On April 26, 1995, Associated declared a
five-for-four stock split to be effected as a stock dividend paid on June 15,
1995 to Associated shareholders of record on June 1, 1995 (the "Stock Split").
All references herein to Associated Common Stock prices and per share amounts
have been adjusted to reflect the Stock Split. Reference is made to, and this
summary is qualified in its entirety by, the more detailed information
contained or incorporated by reference in this Proxy Statement/Prospectus and
the Exhibits attached hereto. Shareholders are urged to read this Proxy
Statement/Prospectus and the Exhibits attached hereto in their entirety.
Cross-references in this summary are to captions in this Proxy
Statement/Prospectus.
THE COMPANIES: Associated. Associated Banc-Corp ("Associated") is a
diversified multi-bank holding company which owns
seven commercial banks located in Wisconsin and
Illinois. Associated Illinois Banc Corp. ("Associated
Illinois") is a wholly-owned subsidiary of
Associated. Associated's banking activities in
Illinois are conducted by a subsidiary of Associated
Illinois. As of March 31, 1995, Associated had total
assets of $3.23 billion. Associated Common Stock
trades on The Nasdaq Stock Market. The principal
executive offices of Associated are located at 112
North Adams Street, P.O. Box 13307, Green Bay,
Wisconsin 54307-3307 and its telephone number is
(414) 433-3166. See "Certain Information Concerning
Associated."
The Company. GN Bancorp, Inc. (the "Company") is
a one-bank holding company which owns 100% of the
stock of the Gladstone-Norwood Trust & Savings Bank
(the "Bank") and 100% of the stock of GN Realty, Inc.
("Realty"). As of March 31, 1995, the Company had
total assets of $128.1 million. The principal
executive offices of the Company are located at 5200
N. Central Avenue, Chicago, Illinois 60630 and its
telephone number is (312) 792-0440. See "Certain
Information Concerning the Company."
THE MERGER: Following the approval of the Merger Agreement by the
shareholders of the Company and the satisfaction
or waiver of the other conditions to the Merger, the
Company will be merged with and into Associated
Illinois, and each outstanding share of the Company
Common Stock will be converted into the right to
receive 8.75 shares of Associated Common Stock (the
"Exchange Ratio"), provided, however, that if the
average of the daily closing prices of a share of
Associated Common Stock as reported on The Nasdaq
Stock Market during the 10 consecutive trading days
ending on the third trading day before the Effective
Time (the "Associated Average Price") is greater than
$30.40 per share, the Exchange Ratio will be reduced
and shall be determined by dividing $266.00 by the
Associated Average Price (rounded to the nearest
thousandth of a share). The Merger will be effective
on the date the Articles of Merger are filed with the
Secretary of State of the State of Illinois (the
"Effective Time"). At the Effective Time, the Company
will be merged with and into Associated Illinois and
will not continue its separate existence or
operations, to which Associated Illinois as the
surviving corporation will succeed. See "The Merger -
The Effective Time."
STATUS OF ASSOCIATED Other than shares of Associated Common Stock issued
COMMON STOCK: to "affiliates" of the Company (as defined under the
federal securities laws), shares of Associated
7
<PAGE> 14
Common Stock will be freely tradeable. See "The
Merger - Resale of Associated Common Stock Issuable in
the Merger."
THE SPECIAL MEETING: A Special Meeting of the Shareholders of the Company
will be held at _________________ on July ___,
1995 at ___ __.m. (the "Special Meeting"). At the
Special Meeting, holders of the Company Common Stock
entitled to vote at the meeting will consider and vote
upon a proposal to approve the Merger Agreement.
Shareholders of Associated are not required to approve
the Merger Agreement. See "The Merger" and "Certain
Provisions of the Merger Agreement." The affirmative
vote of the holders of two-thirds of the outstanding
shares of the Company Common Stock entitled to vote at
the Special Meeting is required to approve the Merger
Agreement under the Illinois Business Corporation Act
of 1983, as amended (the "BCA"). The record date for
the Special Meeting is June ___, 1995 (the "Record
Date"). As of the Record Date, directors and
executive officers of the Company had voting power
with respect to a total of 47,027 shares, or
approximately 52% of the Company Common Stock entitled
to vote at the Special Meeting. See "The Special
Meeting - Required Vote" and "Certain Information
Concerning the Company; Ownership of the Company
Common Stock."
REASONS FOR THE MERGER: The Board of Directors of the Company believes that
the Merger will have a positive impact on the
shareholders of the Company by providing overall
financial strength to the banking business of the Bank
with the attendant positive impact on the shareholders
of the Company as a result of the enhanced liquidity,
marketability and dividend paying capacity of the
Associated Common Stock to be received in the Merger.
The Board of Directors of Associated believes the
Merger will enable Associated to strengthen its
Illinois operations by providing service to the
northwest side of Chicago, a community in Chicago that
currently has no Associated banking facilities. See
"The Merger - Reasons for the Merger."
RECOMMENDATION OF THE The Board of Directors of the Company, after
COMPANY'S BOARD OF consideration of the terms and conditions of the
DIRECTORS: Merger Agreement and other factors deemed
relevant by the Board of Directors, including the
opinion of Robert W. Baird & Co. Incorporated
("Baird"), the Company's financial advisor, believes
that the Merger and the Exchange Ratio are fair to and
in the best interests of the shareholders of the
Company. The Board of Directors of the Company has
approved the Merger Agreement and the transactions
contemplated thereby. See "The Merger-Background of
the Merger," "- Reasons for the Merger" and "-
Recommendations of the Board of Directors of the
Company."
OPINION OF FINANCIAL The Company's financial advisor, Baird, has rendered
ADVISOR: and delivered its written opinion to the Board of
Directors of the Company that the Exchange Ratio
is fair from a financial point of view to the holders
of the Company Common Stock. Associated has not
retained a financial advisor to opine as to fairness
from a financial point of view to Associated.
For information on the assumptions made, matters
considered and limits of the review by Baird, see "The
Merger - Opinion of Financial Advisor." SHAREHOLDERS
ARE URGED TO READ IN ITS ENTIRETY THE OPINION OF BAIRD
ATTACHED AS EXHIBIT C TO THIS PROXY
STATEMENT/PROSPECTUS.
CONDITIONS TO THE The obligations of Associated and the Company to
MERGER: consummate the Merger are subject to various
conditions, including, among other things, obtaining
requisite
8
<PAGE> 15
shareholder and regulatory approvals, the
absence of any materially burdensome restriction or
condition imposed in connection with obtaining such
regulatory approvals, receipt of an opinion of special
counsel to the Company at the closing of the Merger in
respect of certain federal income tax consequences of
the Merger and receipt of an opinion from the
independent public accountants of Associated that the
Merger qualifies for "pooling of interests" accounting
treatment. Furthermore, the Merger is conditioned on
the aggregate of (i) the fractional shares of
Associated Common Stock paid in cash, and (ii) the
number of shares of Associated Common Stock that is
not issued in the Merger due to the exercise of
dissenters' rights, not being more than 10% of the
shares of Associated Common Stock which would
otherwise have been issued pursuant to the Merger.
See "Certain Provisions of the Merger Agreement -
Conditions to Consummation of the Merger."
TERMINATION: The Merger Agreement may be terminated by the
applicable Board of Directors at any time prior
to the Effective Time (whether before or after
approval of the Merger by the shareholders of the
Company): (i) by mutual consent of Associated and the
Company; (ii) by Associated or the Company if there
has been a breach by the other party in any material
respect of any representation, warranty, covenant or
agreement in the Merger Agreement, or if any
representation or warranty of the Company or
Associated shall be discovered to have become untrue
in any material respect, in either case which breach
has not been cured within 10 business days following
receipt by the non-terminating party of notice of such
breach; (iii) by Associated or the Company if any
permanent injunction preventing the consummation of
the Merger shall have become final and nonappealable;
(iv) by Associated or the Company if the Merger shall
not have been consummated before November 30, 1995 for
a reason other than the failure of the terminating
party to comply with its obligations under the Merger
Agreement; (v) by Associated or the Company if the
Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") or the Illinois Commissioner
of Banks and Trust Companies (the "Commissioner") have
denied approval of the Merger, and neither Associated
nor the Company has, within 30 days after the entry of
such order, filed a petition seeking review of such
order as provided by applicable law; or (vi) by either
Associated or the Company if any event occurs prior to
the Effective Time which will or is likely to have a
change or effect that is or is reasonably likely to be
materially adverse to a party's business, operations,
properties (including intangible properties),
condition (financial or otherwise), assets or
liabilities (including contingent liabilities) (a
"Material Adverse Effect") on the business or
financial condition of the Company or Associated and
such Material Adverse Event has not been cured within
10 business days following receipt by the
nonterminating party of notice of such Material
Adverse Event. See "Certain Provisions of the Merger
Agreement - Termination."
The Merger Agreement also provides that it may
be terminated by the Company if the Associated Average
Price is less than $26.40 per share, and if the
Company and Associated are unable to agree upon the
rate at which shares of Associated Common Stock would
be converted into shares of the Company Common Stock
in the Merger within 15 days after the date the
Associated Average Price was determined.
REGULATORY APPROVALS The Merger is subject to prior approval by the
REQUIRED: Federal Reserve Board and the Illinois Commissioner.
See "The Merger - Regulatory Approvals Required."
CERTAIN MATERIAL The Merger is conditioned upon Associated and the
Company receiving an
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<PAGE> 16
FEDERAL INCOME opinion of Vedder, Price, Kaufman & Kammholz,
TAX CONSEQUENCES: special counsel to the Company, subject to customary
assumptions and representations, to the effect
that the Merger will be a tax-free reorganization for
federal income tax purposes. Such opinion, however,
is not binding on the Internal Revenue Service. In
the event that the Merger qualifies as a tax-free
reorganization, no gain or loss will be recognized by
holders of the Company Common Stock upon conversion of
their shares of stock into shares of Associated Common
Stock, except to the extent they receive cash in lieu
of fractional share interests of Associated Common
Stock, and no gain or loss will be recognized by
Associated, Associated Illinois or the Company. See
"The Merger - Certain Material Federal Income Tax
Consequences."
ANTICIPATED ACCOUNTING The Merger is expected to qualify as a "pooling of
TREATMENT: interests" for accounting and financial reporting
purposes. The receipt of an opinion from KPMG
Peat Marwick LLP, the independent public accountants
of Associated, confirming that the Merger will qualify
for "pooling of interests" accounting treatment is a
condition to consummation of the Merger. See "The
Merger - Anticipated Accounting Treatment."
DISSENTING SHAREHOLDERS' Company shareholders who dissent to the Merger have
RIGHTS: the right to demand payment for their shares and to
receive in cash, if the Merger is consummated,
the fair value of their shares as determined by an
Illinois court, but only if they follow the procedures
under Sections 11.65 and 11.70 of the BCA. Generally,
to preserve dissenters' rights, a Company shareholder
must (i) before the vote at the Special Meeting,
deliver to the Company a written demand for payment
for his or her shares of Company Common Stock if the
Merger is consummated, and (ii) not vote in favor of
the proposal to adopt the Agreements. See "The Merger
- Dissenters' Rights" and Exhibit D hereto.
THE INDUCEMENT FEE: Pursuant to the Merger Agreement, and provided that
Associated has not breached in any material
respect its obligations under the Merger Agreement,
the Company is obligated to pay Associated a cash fee
of $1,250,000 if prior to termination of the Merger
Agreement certain events occur. Included among such
events is the failure of shareholders of the Company
to approve the Merger. In addition, such events
generally include the following: (i) the withdrawal,
modification or amendment of approval or
recommendation of the Merger by the Company's Board of
Directors; (ii) if prior to termination of the Merger
Agreement, the Board accepts, approves, does not
reject, expresses no opinion or remains neutral with
respect to a Competing Transaction (as defined herein)
which generally includes an acquisition of control of,
or a significant equity interest in or significant
assets of, the Company by a third party in the form of
a merger, consolidation, share exchange, business
combination or other similar transaction, acquisition
of assets or shares or otherwise, or certain
announcements, proposals or offers with respect
thereto; or (iii) termination of the Merger Agreement
following a willful and material breach. For a
definition of Competing Transaction, see "Certain
Provisions of the Merger Agreement - No Solicitation
of Transactions." The Inducement Fee was a condition
to Associated entering into the Merger Agreement.
None of such events has occurred as of the date
hereof. The Inducement Fee shall be reduced by
amounts payable by the Company to Associated under the
Merger Agreement for expenses incurred by Associated
in connection with the Merger Agreement and any
consideration received by Associated in respect of the
Stock Option Agreement (as defined below). See "The
Merger - The Inducement Fee" and "Certain Provisions
of the Merger Agreement - The Inducement Fee."
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<PAGE> 17
THE STOCK OPTION Pursuant to the Stock Option Agreement dated as of
AGREEMENT: March 22, 1995, between the Company as grantor and
Associated as grantee (the "Stock Option
Agreement"), attached hereto as Exhibit B, the Company
has granted to Associated an option to purchase up to
18,011 shares of the Company Common Stock, subject to
adjustment, representing 16.37% of the issued and
outstanding shares of Company Common Stock on a
when-issued basis (including shares reserved under the
Company Stock Option Plan) (the "Option"), at a price
of $225.00 per share. At the date such price was
established, the value of shares of Company Common
Stock calculated based upon the lowest Associated
Average Price pursuant to the Merger Agreement at
which the Merger could be consummated was $231.00 per
share. The execution and delivery of the Stock Option
Agreement was a condition to Associated entering into
the Merger Agreement. The Option may only be
exercised by Associated upon the occurrence of a
Competing Transaction and may be exercisable for a
period of up to twelve months after such occurrence.
A Competing Transaction has not occurred as of the
date hereof. See "Certain Provisions of the Stock
Option Agreement."
The Inducement Fee and the Stock Option
Agreement may have the effect of discouraging persons
who might now or in the future be interested in
acquiring all of or a significant interest in the
Company from considering or proposing such an
acquisition, even if such persons were prepared to pay
a higher price per share for the Company Common Stock
than the price per share implicit in the Exchange
Ratio. The sum of the amounts payable by the Company
as expenses and the Inducement Fee pursuant to the
Merger Agreement and as consideration under the Stock
Option Agreement is limited to a total of $1,250,000.
Associated may, however, elect to retain its rights
under the Stock Option Agreement in lieu of receipt of
all or a portion of the Inducement Fee. If Associated
elects to exercise the Option, such exercise is
intended to inhibit any acquiror of the Company (other
than Associated) from accounting for any acquisition
of the Company using the "pooling of interests"
accounting method. Such method is often preferred by
an acquiror proposing a merger. The Inducement Fee
and the Stock Option Agreement are intended to
increase the likelihood that the Merger will be
consummated. See "The Merger - The Stock Option
Agreement."
CERTAIN CONSIDERATIONS: In deciding whether to approve and adopt the Merger
Agreement, shareholders of the Company should
carefully evaluate the matters set forth in the
section herein entitled "The Merger - Certain
Considerations." Factors to be considered include the
changing legislative and regulatory environment
affecting the banking and financial services
businesses in which Associated and the Company engage.
INTERESTS OF CERTAIN Associated has generally agreed to succeed to the
PERSONS IN THE MERGER: Company's obligations with respect to
indemnification or exculpation existing at the time
of execution of the Merger Agreement in favor of the
directors, officers, employees and agents of the
Company and its subsidiaries ("Indemnified Parties")
as provided in the Articles of Incorporation, Bylaws,
or otherwise in effect as of the date of the Merger
Agreement with respect to matters occurring prior to
the Effective Time and not to initiate or join in any
claim, action, suit, proceeding or investigation
against the Indemnified Parties arising out of, or
pertaining to, the management or operation of the
Company or subsidiaries prior to the Effective Time
unless required by bank regulators or applicable
fiduciary duties. Associated has also agreed, from
and after the Effective Time, to use its best efforts
to maintain for a period of five years an insurance
policy for directors' and officers' liabilities,
11
<PAGE> 18
subject to certain conditions provided that
Associated's cost to maintain such insurance is
limited to $100,000.
Associated (through the Bank as employer) will
enter into a three year employment agreement with Mr.
Eugene P. Mroz and a one year employment agreement
with each of Messrs. Robert O. Walcott, Morris Gertz
and Bruno J. Marczyk commencing at the Effective
Time. See "The Merger - Interests of Certain Persons
in the Merger."
12
<PAGE> 19
SELECTED FINANCIAL DATA OF ASSOCIATED BANC-CORP AND THE COMPANY
(In thousands, except per share amounts)
The following table sets forth selected historical data as of and for
each of the years in the five year period ended December 31, 1994 derived from
the audited consolidated financial statements of Associated and the Company
including the respective notes thereto, incorporated by reference and attached
hereto as Exhibit E, respectively, to this Proxy Statement/Prospectus which
should be read in conjunction therewith. See "Incorporation of Certain
Documents by Reference." The selected historical data as of and for the three
months ended March 31, 1995 and 1994 are derived from the unaudited
consolidated financial statements of Associated and the Company incorporated
herein by reference and attached hereto as Exhibit E, respectively. In the
opinion of their respective managements, the accompanying unaudited
consolidated financial statements contain all adjustments necessary to present
fairly Associated's and the Company's financial position and results of
operations for the periods presented. All adjustments necessary to the fair
presentation of the financial statements are of a normal recurring nature.
Results for the three months ended March 31, 1995 are not necessarily
indicative of the results which may be expected for the year as a whole.
<TABLE>
<CAPTION>
AS OF AND FOR THE
THREE MONTHS
ENDED MARCH 31, AS OF AND FOR THE YEAR ENDED DECEMBER 31,
--------------- -------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSOCIATED:
CONDENSED STATEMENT OF INCOME:
Interest Income . . . . . . . . . . . $ 60,375 $ 47,711 $ 210,951 $ 200,491 $ 216,121 $ 236,382 $ 238,981
Interest Expense . . . . . . . . . . 25,957 17,512 79,680 76,913 98,197 129,851 142,307
Less: Provision for Possible Loan
Losses . . . . . . . . . . . . . . 981 725 2,788 5,475 8,087 19,822 6,922
---------- ---------- ---------- ---------- ---------- ---------- -------
Net Interest Income After Provision
for Possible Loan Losses . . . . . 33,437 29,474 128,483 118,103 109,837 86,709 89,752
Plus: Non-Interest Income . . . . . . 12,532 13,003 47,813 48,579 47,023 40,133 34,332
Less: Non-Interest Expense . . . . . 29,682 28,482 113,818 111,836 111,460 106,152 93,089
---------- ---------- ---------- ---------- ---------- ---------- -------
Net Non-Interest Expense . . . . . . 17,150 15,479 66,005 63,257 64,437 66,019 58,757
Net Income . . . . . . . . . . . . . $ 10,428 $ 9,411 $ 40,428 $ 36,249 $ 31,967 $ 12,671 $ 22,377
========== ========== ========== ========== ========== ========== ==========
PER COMMON SHARE DATA:
Net Income Per Share (1) . . . . . . $ 0.66 $ 0.60 $ 2.57 $ 2.31 $ 2.05 $ 0.83 $ 1.47
Cash Dividends Per Share (1) . . . . 0.22 0.20 0.85 0.74 0.61 0.57 0.50
SELECTED BALANCE SHEET DATA:
Total Assets . . . . . . . . . . . . $3,226,279 $2,948,023 $3,284,318 $2,981,606 $2,965,047 $2,931,970 $2,731,429
Long-Term Borrowings . . . . . . . . 3,866 4,667 3,866 5,347 17,925 39,841 45,687
THE COMPANY:
CONDENSED STATEMENT OF INCOME:
Interest Income . . . . . . . . . . . $ 2,207 $ 2,086 $ 8,400 $ 8,955 $ 10,696 $ 11,289 $ 11,050
Interest Expense . . . . . . . . . . 823 755 3,121 3,359 4,772 6,273 6,307
Less (Plus): Provision for Possible
Loan Losses . . . . . . . . . . . . (50) (450) (577) 225 2,494 1,946 280
Net Interest Income After Provision
for Possible Loan Losses . . . . . 1,434 1,781 5,856 5,371 3,430 3,070 4,463
Plus: Non-Interest Income . . . . . 229 299 1,237 1,401 1,426 1,716 1,174
Less: Non-Interest Expense . . . . . 1,196 1,206 5,208 5,186 5,583 4,554 3,823
---------- ---------- ---------- ---------- ---------- ---------- -------
Net Non-Interest Expense . . . . . . 967 907 3,971 3,785 4,157 2,838 2,649
Net Income (Loss) . . . . . . . . . . $ 341 $ 547 $ 1,234 $ 1,149 $ (345) $ 247 $ 1,383
========== ========== ========== ========== ========== ========== ==========
PER COMMON SHARE DATA:
Net Income (Loss) Per Share . . . . . $ 3.81 $ 6.66 $ 14.11 $ 16.58 $ (8.22) $ 5.79 $ 31.96
Cash Dividends Per Share . . . . . . -- -- -- -- 1.20 1.15 1.10
SELECTED BALANCE SHEET DATA:
Total Assets . . . . . . . . . . . . $ 128,105 $ 130,655 $ 133,801 $ 132,704 $ 135,832 $ 134,433 $ 122,894
Long-Term Borrowings . . . . . . . . -- -- -- -- -- -- --
</TABLE>
- ----------------------
(1) Per share data adjusted retroactively for the Stock Split and stock
dividends declared in 1993 and 1990. Earnings per share are
calculated based upon the weighted average shares outstanding.
13
<PAGE> 20
COMPARATIVE STOCK PRICES AND DIVIDENDS
ASSOCIATED COMMON STOCK
Associated Common Stock trades on The Nasdaq Stock Market. The
following table sets forth, for the periods indicated, the high and low sales
prices per share as reported on The Nasdaq Stock Market and the regular cash
dividends declared for Associated Common Stock as adjusted to reflect the Stock
Split.
<TABLE>
<CAPTION>
ASSOCIATED COMMON STOCK
--------------------------------------------
HIGH LOW DIVIDENDS
-------- -------- ----------
<S> <C> <C> <C>
1993
- ----
First Quarter . . . . . . . . . . . . . . . $ 26.73 $ 23.46 $ 0.18
Second Quarter . . . . . . . . . . . . . . 28.00 25.64 0.18
Third Quarter . . . . . . . . . . . . . . . 32.00 26.00 0.18
Fourth Quarter . . . . . . . . . . . . . . 31.00 26.00 0.20
1994
- ----
First Quarter . . . . . . . . . . . . . . . $ 28.80 $ 25.00 $ 0.20
Second Quarter . . . . . . . . . . . . . . 30.60 25.00 0.22
Third Quarter . . . . . . . . . . . . . . . 30.20 28.00 0.22
Fourth Quarter . . . . . . . . . . . . . . 28.40 25.00 0.22
1995
- ----
First Quarter . . . . . . . . . . . . . . . $ 30.10 $ 27.40 $ 0.22
Second Quarter (through June 21, 1995) . . 31.00 28.40 0.22
</TABLE>
On March 22, 1995, the last trading day before the announcement of the
Merger Agreement, the last sale price of Associated Common Stock as reported on
The Nasdaq Stock Market was $28.60 per stock share. On June 21, 1995, the last
sale price of Associated Common Stock as reported on The Nasdaq Stock Market
was $30.38 per share. Shareholders are urged to obtain current market prices
for Associated Common Stock.
On the Record Date, there were approximately 5,000 holders of record of
Associated Common Stock.
THE COMPANY COMMON STOCK
The Company Common Stock is not listed on any exchange nor quoted in
the over-the-counter market, and no established "bid" or "ask" price is
available. All shares of the Company Common Stock are subject to the terms and
provisions of a Buy-Sell Agreement by and among all the shareholders of the
Company and the Company dated as of April 25, 1983, as amended as of January
20, 1993 (the "Buy-Sell Agreement") which provides a right of first refusal by
the Company and shareholders of the Company with certain exceptions. The
Buy-Sell Agreement does not establish a value for the Company Common Stock.
See "The Merger - Comparison of Shareholder Rights - Buy-Sell Agreement." In
April 1993, the Company completed an offering of 40,000 shares of Company
Common Stock at $100 per share. The determination of such offering price was
based upon the advice of a financial advisor that such price was fair from a
financial point of view to the Company and its shareholders. On February 23,
1993 and January 25, 1994, options to purchase 3,000 shares and 7,000 shares,
respectively, were granted to key employees at an exercise price of $100 per
share and $110 per share, respectively. Options to purchase 8,082 shares have
been exercised as of March 31, 1995. In the first quarter of 1994, options to
purchase 6,250 shares were exercised by key employees of the Company: (i)
3,000 shares at an exercise price of $100 per share; and (ii) 3,250 shares at
an exercise price of $110 per share. The Company is not aware of any more
recent transactions in which the Company Common Stock was valued.
The Board of Directors of the Company did not declare any dividends
during 1993 and 1994. Pursuant to the Merger Agreement, the ability of the
Company to pay dividends on the Company Common Stock prior to the Effective
Time has been restricted. See "The Merger - Pre- Merger Dividend Policy."
On the Record Date, there were 117 holders of record of the Company
Common Stock.
14
<PAGE> 21
COMPARATIVE UNAUDITED PER SHARE DATA
The following table sets forth for Associated Common Stock and the
Company Common Stock certain unaudited historical, pro forma and pro forma
equivalent per share financial information as of and for the three months ended
March 31, 1995 and each of the three years ended December 31, 1994. The
following data assumes that each outstanding share of the Company Common Stock
will be converted into 8.75 shares of Associated Common Stock. The information
presented herein should be read in conjunction with the financial statements of
Associated incorporated by reference into this Proxy Statement/Prospectus, and
with the financial statements of the Company, including the notes thereto,
attached hereto as Exhibit E. See "Incorporation of Certain Documents By
Reference."
<TABLE>
<CAPTION>
AS OF AND FOR THE
THREE MONTHS AS OF AND FOR THE YEAR
ENDED MARCH 31, ENDED DECEMBER 31,
------------------ ---------------------------------------------
1995 1994 1993 1992
------------------ ----------- ------------- ------------
<S> <C> <C> <C> <C>
ASSOCIATED
Net Income Per Common Share (1):
Historical . . . . . . . . . . . . . $ 0.66 $ 2.57 $ 2.31 $ 2.05
Pro forma (2) . . . . . . . . . . . . 0.65 2.52 2.29 1.99
Dividends Per Common Share (1):
Historical . . . . . . . . . . . . . $ 0.22 $ 0.85 $ 0.74 $ 0.61
Pro forma (3) . . . . . . . . . . . . 0.22 0.85 0.74 0.61
Book Value Per Common Share:
Historical . . . . . . . . . . . . . $ 18.05 $ 17.42 $ 16.33 $ 14.33
Pro forma (2) . . . . . . . . . . . . 17.89 17.27 16.18 14.27
THE COMPANY
Net Income (Loss) Per Common Share:
Historical . . . . . . . . . . . . . $ 3.81 $ 14.11 $ 16.58 $ (8.22)
Pro forma equivalent (4) . . . . . . 5.69 22.05 20.04 17.41
Dividends Per Common Share:
Historical . . . . . . . . . . . . . $ 0.00 $ 0.00 $ 0.00 $ 1.20
Pro forma equivalent (4) . . . . . . 1.93 7.42 6.51 5.32
Book Value Per Common Share:
Historical . . . . . . . . . . . . . $ 129.33 $ 123.70 $ 113.69 $ 101.26
Pro forma equivalent (4) . . . . . . 156.54 151.11 141.58 124.86
- ----------------------
</TABLE>
(1) Per share data adjusted retroactively for the Stock Split and the
stock dividend declared in 1993. Earnings per share are calculated
based upon the weighted average shares outstanding.
(2) The Associated pro forma per share amounts give effect to the Merger.
(3) The Associated pro forma dividends per share amounts represent
historical dividends of Associated as adjusted retroactively for the
Stock Split and the stock dividend declared in 1993.
(4) The Company pro forma equivalent per share amounts are calculated by
multiplying the Associated pro forma per share amounts by the Exchange
Ratio of 8.75 shares and assume that there will be no change to the
Exchange Ratio based upon the Associated Average Price.
15
<PAGE> 22
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to holders of the
Company Common Stock in connection with the solicitation of proxies by the
Company's Board of Directors for use at the Special Meeting of Shareholders of
the Company and at any adjournment or postponement thereof. The Company
Meeting will be held at _________________________, on July ____, 1995. The
Special Meeting will commence at _______ __m.
At the Special Meeting, the shareholders of the Company will be asked
to approve the Agreement and Plan of Merger dated as of March 22, 1995 among
Associated, Associated Illinois and the Company attached hereto as Exhibit A,
as more fully described herein. See "The Special Meeting," "The Merger," and
"Certain Provisions of the Agreement." The approximate date on which this
Proxy Statement/Prospectus is first being mailed to shareholders of the Company
is on or about June _____, 1995.
ASSOCIATED BANC-CORP
Associated is a diversified multi-bank holding company registered with
the Federal Reserve Board pursuant to the Bank Holding Company Act of 1956, as
amended (the "BHC Act"). Associated owns directly or indirectly all of the
capital stock of seven commercial banks located in Wisconsin and Illinois, and
all of the capital stock of subsidiaries engaged in the following non-banking
businesses: personal property lease financing, commercial mortgage banking,
residential mortgage banking, trust services, reinsurance and general insurance
agency activities. As of March 31, 1995, Associated had total assets of $3.23
billion. The principal executive offices of Associated are located at 112
North Adams Street, P.O. Box 13307, Green Bay, Wisconsin 54307-3307 and its
telephone number is (414) 433-3166. See "Certain Information Concerning
Associated."
THE SPECIAL MEETING
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, holders of the Company Common Stock will
consider and vote upon a proposal to approve the Merger Agreement and any other
matters that may properly come before the Special Meeting. For a detailed
description of the Merger and the Merger Agreement, see "The Merger" and
"Certain Provisions of the Merger Agreement."
REQUIRED VOTE
The affirmative vote of the holders of two-thirds of the outstanding
shares of the Company Common Stock entitled to vote at the Special Meeting is
required to approve the Merger Agreement. Each share of the Company Common
Stock outstanding on the Record Date (as defined herein) is entitled to one
vote. Shareholders of Associated are not required to approve the Merger
Agreement and no further corporate authorization by Associated is required to
consummate the Merger.
As of the Record Date, the Company's directors and executive officers
had voting power with respect to a total of 47,027 shares or approximately 52%
of the Company Common Stock entitled to vote at the Special Meeting. The
directors and executive officers of the Company have indicated their intention
to vote their shares FOR approval of the Merger Agreement. See "Certain
Information Concerning the Company - Ownership of the Company Common Stock."
16
<PAGE> 23
VOTING OF PROXIES
Shares represented by all properly executed proxies for the Company
Common Stock received in time for the Special Meeting will be voted at the
Special Meeting in the manner specified by the holders thereof. Proxies which
do not contain voting instructions will be voted FOR approval of the Merger
Agreement.
It is not expected that any matter other than that referred to herein
will be brought before the Special Meeting. If, however, other matters are
properly presented, the persons named as proxies will vote in accordance with
their judgment with respect to such matters.
REVOCABILITY OF PROXIES
The grant of a proxy on the enclosed form of proxy does not preclude a
shareholder from voting in person. A shareholder may revoke a proxy at any
time prior to its exercise by delivering to the Secretary of the Company a duly
executed proxy or revocation of proxy bearing a later date or by voting in
person at the Special Meeting. Attendance at the Special Meeting will not of
itself constitute revocation of a proxy.
RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM
Only holders of record of the Company Common Stock at the close of
business on June ____, 1995 (the "Record Date") will be entitled to receive
notice of and to vote at the Special Meeting.
At the Record Date, 90,071 shares of the Company Common Stock were
outstanding. Shares representing a majority of the outstanding shares of the
Company Common Stock entitled to vote must be represented in person or by proxy
at the Company Meeting in order for a quorum to be present. Abstentions will
be treated as shares that are present and entitled to vote for purposes of
determining the presence of a quorum but as unvoted for purposes of determining
the approval of the Merger Agreement. If a broker indicates on the proxy that
it does not have discretionary authority as to certain shares to vote on a
particular matter, those shares will not be considered as present and entitled
to vote with respect to that matter.
SOLICITATION OF PROXIES
The Company will bear the cost of the solicitation of proxies from its
shareholders, except that Associated and the Company will share equally the
cost of printing this Proxy Statement/Prospectus. In addition to solicitation
by mail, the directors, officers and employees of the Company may solicit
proxies from shareholders of the Company by telephone or telegram, or in
person, but will receive no additional compensation for such services.
SHAREHOLDERS SHOULD NOT RETURN THEIR STOCK CERTIFICATES WITH THEIR
PROXY CARDS. AS SOON AS PRACTICABLE FOLLOWING THE EFFECTIVE TIME, THE COMPANY
SHAREHOLDERS WILL BE PROVIDED WITH MATERIALS RELATING TO THE EXCHANGE OF THEIR
STOCK CERTIFICATES. SEE "THE MERGER - CONVERSION OF SHARES; PROCEDURES FOR
EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES."
THE MERGER
This section of the Proxy Statement/Prospectus describes certain
aspects of the proposed Merger. To the extent that it relates to the Merger
Agreement, the following description does not purport to be complete and is
qualified in its entirety by reference to the Merger Agreement which is
attached hereto as Exhibit A and is incorporated herein by reference. All
shareholders are urged to read the Merger Agreement and the other exhibits to
this Proxy Statement/Prospectus in their entirety.
17
<PAGE> 24
BACKGROUND OF THE MERGER
In April 1993, the Company completed a $4 million offering of the
Company's Common Stock (the "Offering") pursuant to the requirements of federal
and Illinois banking regulatory orders to increase the capital of the Bank.
All shares of the Company Common Stock, including the shares of Company Common
Stock sold in the Offering, are held subject to the terms and provisions of the
Buy-Sell Agreement. See "The Merger - Comparison of Shareholder Rights -
Buy-Sell Agreement."
The Buy-Sell Agreement as originally executed provided in relevant
part that upon the earlier of November 25, 1993 or the date of repayment
without refinancing of the Bank stock acquisition debt (the "Liquidation
Date"), the Company was to purchase or redeem Company Common Stock from those
of its shareholders who wished to sell their stock. If the Company elected at
its option not to purchase or redeem such shares, the Company would attempt to
sell the Bank stock owned by the Company pursuant to a plan of liquidation. In
connection with the Offering and recapitalization of the Company, the Buy-Sell
Agreement was amended as of January 20, 1993 to extend the Liquidation Date to
March 31, 1995. See "The Merger - Comparison of Shareholder Rights - Buy-Sell
Agreement." The Board of Directors of the Company determined that it would be
more beneficial to the shareholders of the Company to attempt to sell or merge
the Company rather than to sell the Bank stock as provided in the Buy-Sell
Agreement and began to entertain unsolicited indications of interest from
prospective buyers during 1994.
In May 1994, the Company consulted with and retained Vedder, Price,
Kaufman & Kammholz ("Vedder Price") as special counsel, a law firm with
extensive experience in representing financial institutions, to assist the
Board of Directors in responding to and negotiating with prospective buyers. On
May 24, 1994, Vedder Price met with the Board to discuss the Board's
responsibilities in responding to and evaluating acquisition proposals and
certain tax, accounting and securities matters involved in the potential sale
of the Company.
Although there was no public dissemination of notice that the Company
was seeking offers from potential buyers, the Company's Board believes such
interest became widely known through traditional channels in the banking
community in Chicago and beyond. During the first half of 1994, the Board
responded to inquiries from a number of prospective buyers, one of which
performed a preliminary due diligence review of the Company in May 1994.
However, no prospective buyer presented the Board of Directors with an offer to
purchase the Company during such time.
During August 1994, the Chairman of the Company reported to the Board
of Directors that five prospective buyers, including Associated, had expressed
an interest in acquiring the Company. The Board of Directors authorized the
Chairman to pursue discussions with, and delivery of certain financial and
other information, to each of prospective buyers. Each of the prospective
buyers was informed that it would be required to execute a "non-binding letter
of intent" and submit certain financial and other materials to the Company for
review to continue acquisition discussions. In addition, each prospective buyer
was informed that if such prospective buyer intended to perform a due diligence
review of the Company it would be required to execute and deliver a
"non-disclosure" agreement. Based on information supplied by, and further
discussions with the prospective buyers, the Company determined that two of the
prospective buyers were not viable merger partners. One such prospective buyer
indicated it was not prepared to proceed with negotiations on a timely basis
and the other prospective buyer proposed to offer an amount which was
substantially less than the bids discussed below. The Board ceased discussions
with these two organizations.
On August 23, 1994, Robert C. Gallagher, Executive Vice President, of
Associated met with the Board of Directors of the Company at its invitation.
At such meeting, Associated's philosophies and business practices were
discussed and Associated provided certain financial and other information to
the Board of Directors of the Company for its review. Associated also
presented to the Board of Directors the terms of an initial indication of
interest, which among other things, included a proposal to exchange six shares
of Associated Common Stock for each share of Company Common Stock. After
review of Associated's initial indication of interest, the Board of
18
<PAGE> 25
Directors concluded and informed Associated that the initial indication of
interest was unacceptable because, among other things, the preliminary exchange
ratio of Associated Common Stock was inadequate.
At the September 27, 1994 Board of Directors meeting, the Board of
Directors met separately with representatives of two Chicago-based
organizations ("CBO-1" and "CBO-2," respectively) which were among the five
prospective buyers referenced above. Each of the two parties discussed with
and presented the Board of Directors with an initial indication of interest.
The two parties also presented information regarding their respective
organizations to the Board for its review and consideration. Subsequent to
each of the presentations, the Board of Directors reviewed each initial
indication of interest and informed the representatives that the initial
indications of interest were unacceptable. CBO-2's indication of interest was
a cash offer which was ultimately raised to $21.5 million (approximately
$234.00 per share) for all outstanding shares of the Company Common Stock. The
offer, which would have been currently taxable to the holders of the Company
Common Stock, was conditional upon successful completion of a due diligence
review by CBO-2 and was subject to customary conditions and regulatory
approvals.
In October 1994, the Chairman reported to the Board of Directors that
discussions were continuing with each CBO. CBO-1 submitted an improved
indication of interest on October 24, 1994. The offer by CBO-1 was stated to
be $230.00 per share in cash, plus Company operating earnings after April 1995
through closing, but was subject to numerous contingencies and assumptions
bearing on its value. Also, the proposed transaction would not have closed
until April 30, 1996. The exact value of the offer was difficult to determine
because its stated value was to be reduced by factors outside the Company's
control. For example, to achieve the stated value of the offer, the Company
was required to sell certain of its real estate at a specified profit. The
proposed transaction would have been accomplished pursuant to a tender offer
for all but not less than 51% of the outstanding shares of the Company. At the
October 25, 1994 Board of Directors meeting, the Board authorized a due
diligence review of the Company by CBO-1 and delayed authorization of a due
diligence review of the Company by CBO-2 pending the Company's receipt and
review of the due diligence materials of CBO-2 to be submitted to the Company's
Board of Directors by CBO-2. The Chairman also informed the Board of Directors
that Associated had declined to increase its initial indication of interest at
such time. In November 1994, the Company concluded its preliminary due
diligence review of CBO-1 and CBO-1 commenced its due diligence review of the
Company.
In November 1994, Associated increased the proposed exchange ratio to
seven shares of Associated Common Stock for each share of Company Common Stock.
The range of values implicated by Associated's offer was $219.00 to $240.00 per
share based on Associated's then current trading prices. At such time, the
Company allowed Associated to begin preliminary due diligence.
At the January 24, 1995 Board of Directors meeting, the Board
determined that CBO-2 was not a potential merger partner of choice based on the
Board of Directors' view that a tax-free reorganization of the nature proposed
by Associated was preferable for the vast majority of the shareholders of the
Company and the Board's belief that the management and operational philosophies
of Associated were more closely aligned with those of the Company. The Board
authorized the Chairman to inform CBO-2 that the Company had determined not to
proceed further with discussions with CBO-2 at such time.
During January and February 1995, Associated and CBO-1 completed their
due diligence of the Company and the Company completed its due diligence of
Associated. Subsequently, the Company declined to proceed with further
discussions with CBO-1. The Board of Directors reviewed and rejected the
October 24, 1994 indication of interest presented by CBO-1 because of the
numerous contingencies and assumptions bearing on its value as well as its
taxable nature, regulatory concerns associated with the offer and the fact that
the closing would have been deferred until April 1996.
On February 15, 1995, Associated delivered a first draft of a proposed
Merger Agreement and Voting Agreement to the Company for review. On February
21, 1995, the Board of Directors met to discuss the proposed Merger Agreement
and the Voting Agreement. At the meeting, Vedder Price discussed and reviewed
with the
19
<PAGE> 26
Board the merger proposal and proposed Merger Agreement and Voting Agreement.
Vedder Price concluded its presentation by noting that there were several
issues that required additional negotiation, the more significant being (i)
Associated's request for a Voting Agreement and a termination fee; (ii) the
need for a fairness opinion to the effect that the Exchange Ratio is fair from
a financial point of view to the shareholders of the Company; (iii) the
mechanism for establishing the termination right and exchange ratio based on
Associated's stock price; (iv) the limitation of the Company's Board of
Directors to take certain steps in the event of a competing third party offer;
and (v) certain social issues. After significant discussion and consideration,
the Board authorized Vedder Price to contact Associated's counsel in an
expeditious manner to determine if there was sufficient common ground on which
to continue the negotiations.
On February 28, 1995, the Board of Directors met with representatives
of Associated and Vedder Price to discuss the merger proposal and first drafts
of the proposed Merger Agreement and Voting Agreement. At the meeting, the
Chairman outlined for Associated the significant issues requiring resolution.
After lengthy discussion, during which Associated informed the Company that it
required as a condition to entering into the Merger Agreement that the Company
agree to grant Associated the option to purchase shares of the Company and to
pay Associated a termination fee in the event that the Merger was not
consummated as a result of certain events, the parties reached agreement that,
among other things, (i) the Company's termination right based upon a decline in
the share price of Associated Common Stock coupled with its decline relative to
an index of publicly-traded bank holding companies' shares prices would be
replaced with a fixed minimum share price for Associated Common Stock and a
formula for reducing the number of Associated's shares to be issued in the
event that the Associated share price exceeded a certain share price; (ii) the
Voting Agreement would not be part of the transaction; (iii) a Stock Option
Agreement would be prepared by Associated's counsel for review by the Company
and Vedder Price and a termination fee would be negotiated; (iv) the parties
would use their reasonable efforts to close the transaction in a manner that
would make the Company's shareholders eligible to receive the dividend
Associated anticipated declaring and paying in the third quarter of 1995; and
(v) the consummation of the transaction would be subject to receipt of the
Fairness Opinion. The Company informed Associated that it had retained Baird
to issue the Fairness Opinion and the parties also discussed various employee
issues. At the conclusion of the meeting, the parties agreed to proceed in a
timely manner to negotiate and resolve the remaining open issues.
On March 14, 1995, the Board met with Vedder Price to review the
revised merger proposal and proposed Merger Agreement that had been negotiated
between the parties and their representatives during the preceding weeks.
Vedder Price advised the Board that, although progress had been made during the
negotiations with Associated there were still a number of issues to be
resolved, the more significant being: (i) the terms of the Stock Option
Agreement and the amount of the related termination fee; (ii) certain
termination rights including environmental reviews; and (iii) employee issues.
Vedder Price then reviewed the principal changes to the proposed Merger
Agreement and Stock Option Agreement with the Board of Directors reporting that
(i) the Exchange Ratio would be adjusted downward if the Associated Average
Price was greater than $30.40 per share subsequent to the Stock Split (ii) the
"drop dead" date for the consummation of the Merger was November 30, 1995;
(iii) the non-solicitation clause of the Merger Agreement did not prohibit the
directors from complying with their fiduciary duties provided certain
conditions were satisfied; (iv) if the Fairness Opinion could not be obtained
within fifteen days of the execution of the Merger Agreement, the Company had
the right to terminate the Merger Agreement; and (v) unexercised Company stock
options outstanding under the Company's stock option plan would convert to
options to purchase shares of Associated Common Stock. At the conclusion of
the presentation, the Board of Directors authorized the Chairman, with the
assistance of Vedder Price, to continue to negotiate with Associated.
At a special meeting of the Board of Directors on March 22, 1995,
Vedder Price met with the Board of Directors to consider the final merger
proposal and Merger Agreement, Stock Option Agreement, form of employment
agreement and employee benefits letter. At the meeting, Vedder Price reviewed
in detail with the Board the revised Merger Agreement. In particular, Vedder
Price reviewed and discussed (i) that the Stock Option Agreement and
termination fee payable under the Merger Agreement would work in tandem to
provide that the aggregate maximum amount Associated may receive in the event
of a third party transaction is $1,250,000; (ii) that because of ambiguity as
to whether the right of first refusal pursuant to the Buy-Sell Agreement
applied to a merger
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<PAGE> 27
or sale of the Company, the Company should request a waiver of the requisite
number of shareholders and percentage of shares outstanding; and (iii) certain
employee benefits matters. Vedder Price concluded its presentation by stating
that although there were a few matters requiring some further negotiation and
consideration, it was hoped such matters could be resolved later that day.
Vedder Price then discussed with the Board of Directors various issues relating
to the tax opinion Vedder Price was retained to render in connection with the
Merger.
After the conclusion of the Vedder Price presentation, a
representative of Baird followed with a detailed presentation during which the
terms and nature of the Fairness Opinion to be issued by Baird, and the
analyses which Baird employed in arriving at its opinion, were discussed.
Baird closed its presentation by stating that it had concluded, based on its
review and analysis, that the Exchange Ratio was fair from a financial point of
view to the shareholders of the Company. After receipt of the oral opinion of
Baird, the Board of Directors discussed and reviewed the remaining open issues.
At the conclusion of the review of the open issues, the Board of Directors
unanimously approved the Merger, Merger Agreement, Stock Option Agreement, form
of employment agreement and benefits letter and authorized the execution of
such agreements subject to the resolution of the remaining issues by the
Chairman.
Final modifications were made to the Merger Agreement, Stock Option
Agreement, form of employment and benefits letter as a result of negotiations
during the afternoon of March 22, 1995. The Merger Agreement and Stock Option
Agreement were executed by the respective parties on March 22, 1995. Assuming
no adjustment to the Exchange Ratio based upon the Associated Average Price,
the consideration based upon the closing price of Associated Common Stock on
March 22, 1995 was $23.0 million (or approximately $250 per share). Prior to
the opening of business on March 23, 1995, the Company and Associated issued a
joint press release announcing the execution of the Merger Agreement.
REASONS FOR THE MERGER
The Company. In considering the Merger, the directors of the Company
reviewed the terms and conditions of the proposed Merger Agreement, along with
certain business and financial information relating to Associated and the
Company. The Board of Directors of the Company determined to approve the
proposed transaction primarily because the Merger will increase the financial
strength of the Bank by enabling it to better serve its depositors and
customers and to be more competitive with other bank subsidiaries of large bank
holding companies doing business in the northwest side of Chicago or which
might locate in the community (including Associated). Consequently, the
directors of the Company concluded that the Merger will enhance both the
long-term and short-term value of the Company shareholders' investments. Among
the additional factors important to the directors of the Company in
determining to approve the Merger, were: (i) the marketability and liquidity of
the Associated Common Stock and the consistent dividend history and rate of
dividends of the Associated Common Stock to be received in the Merger as
compared to the illiquidity and lack of marketability of the Company Common
Stock and the dividend history of the Company Common Stock; (ii) the
possibility that Associated itself might be acquired at a premium price
offering shareholders of the Company who receive Associated shares in the
Merger potentially even greater value for their investment; (iii) the tax-free
nature of the Merger for federal income tax purposes which would permit the
Company shareholders who receive shares of Associated Common Stock to defer
federal income taxation under certain circumstances; (iv) the potential for
future appreciation of Associated Common Stock due to Associated's greater
market presence and financial resources; (v) the financial advice rendered by
Baird to the Company's Board of Directors and the opinion rendered by Baird
that the Exchange Ratio was fair from a financial point of view to the
shareholders of the Company (See "The Merger - Opinion of Financial Advisor");
(vi) the financial terms of other recent business combinations in the financial
services industry; and (vii) the possibility for career enhancement which
employees of the Company and the Bank might be provided as a result of the
Merger. See "The Merger - Certain Material Federal Income Tax Consequences."
While each member of the Company's Board of Directors evaluated each
of the foregoing as well as other factors, the Board of Directors collectively
did not assign any specific or relative weights to the factors considered
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<PAGE> 28
and did not make any determination with respect to any individual factor. The
Company's Board of Directors collectively made its determination with respect
to the Merger based on its unanimous conclusion that the Merger, in light of
the factors that each of them individually considered as appropriate, is fair
and in the best interests of the Company's shareholders.
Associated. Prior to approving the terms of the Merger, Associated's
Board of Directors considered, among other things, the improving financial
performance and condition, business operations, capital levels, asset quality
and future growth prospects of the Company. The Board also considered the
benefits to Associated of expanding into the northwest side of Chicago by
acquisition of the Company as opposed to the opening of a new branch bank, the
positive impact of the Merger on Associated by establishing a banking presence
in an established business community of Chicago and the terms of the Merger
Agreement.
Associated's Board of Directors believes the Merger will, (i) result
in operational and managerial efficiencies which will better enable the Company
to contain costs and grow more rapidly than historic growth rates; (ii) result
in the Company having greater financial strength, increased competitiveness and
market diversification, thereby also benefiting Associated and its customers;
and (iii) result in an increase in long-term shareholder value for the
shareholders of Associated.
RECOMMENDATIONS OF THE BOARD OF DIRECTORS OF THE COMPANY
The Board of Directors of the Company has determined that the terms of
the Merger are fair to, and in the best interests of, the Company, and its
shareholders for the reasons stated immediately above.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE
MERGER AGREEMENT AND RECOMMENDS A VOTE FOR APPROVAL OF THE MERGER
AGREEMENT.
OPINION OF FINANCIAL ADVISOR
The investment banking firm of Robert W. Baird & Co. Incorporated has
rendered its opinion to the Company's Board of Directors to the effect that the
Exchange Ratio is fair from a financial point of view. The following is a
summary of certain matters relating to Baird's opinion and is qualified by
reference to Baird's opinion, attached to this Proxy Statement/Prospectus as
Exhibit C. SHAREHOLDERS ARE ENCOURAGED TO READ SUCH OPINION IN ITS ENTIRETY.
Summary of Baird's Analysis of Associated Proposal. The following is
a summary of selected analyses presented by Baird to the Company Board on March
22, 1995 in connection with its opinion.
In connection with its opinion, Baird reviewed, among other things,
the Merger Agreement, certain publicly available financial information
concerning the Company and Associated including the Annual Reports to
Shareholders and the Annual Reports on Form 10-K for Associated and audited
consolidated financial statements for the Company for the five years ended
December 31, 1994. Baird also held discussions with members of the senior
managements of the Company and Associated regarding the past and current
business operations, results of regulatory examinations, financial conditions
and future prospects of their respective companies. In addition, Baird has
reviewed the reported prices and trading activity for the Associated Common
Stock, compared certain stock market information for Associated and financial
information for the Company and Associated with similar public information for
the common stock of Midwest-based bank holding companies, reviewed the terms of
certain recent merger and acquisition transactions of bank holding companies
and reviewed such other information as Baird considered appropriate.
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<PAGE> 29
Baird relied, without independent verification, upon the accuracy and
completeness of all of the financial and other information reviewed by it for
purposes of its opinions. Baird also relied upon the managements of the
Company and Associated as to the reasonableness of the financial and operating
forecasts provided to it (and the assumptions and bases therefor). In that
regard, Baird assumed with the Company's consent that such forecasts,
including, without limitation, projected cost savings and operating synergies
resulting from the merger and projections regarding under-performing and
non-performing assets, net charge-offs and the adequacy of loan loss reserves,
reflect the best currently available estimates and judgments of such respective
managements. The Company instructed Baird that, for the purposes of its
opinions, Baird should assume that such projections and forecasts will be
realized in the amounts and in the time periods currently estimated by the
management of the Company and Associated. Baird also assumed, with the
Company's consent, that the aggregate allowances for loan losses for each of
the Company and Associated are adequate to cover such losses. In addition,
Baird has not made an independent evaluation or appraisal of the assets and
liabilities of the Company and Associated or any of their subsidiaries and
Baird has not been furnished with any such evaluation or appraisal. Baird is
not an expert in the evaluation of allowances for loan losses and has not
reviewed any individual credit file. Moreover, the Company has informed Baird
and it has assumed with the Company's consent that the business combination
resulting from the Merger is expected to qualify as a "pooling of interests"
for accounting and financial reporting purposes.
General. Pursuant to a letter agreement dated February 28, 1995
("Engagement Letter"), the Company engaged Baird to represent the Company in
connection with a potential merger or acquisition involving the Company. Under
the terms of the Engagement Letter, Baird agreed to: (i) review proposals
received by the Company; (ii) assist the Company Board in analyzing the
financial merits of proposals received and based on this analysis and other
factors considered relevant to Baird, to make recommendations as to the
adequacy of the proposal and if acceptable to establish a basis for
negotiations with any proposed acquiror on the price and structure of a
proposed transaction, as well as other related terms and conditions; (iii)
provide a written opinion to the Company Board of Directors stating that the
consideration to be paid by Associated or any other proposed acquiror is fair
from a financial point of view to the shareholders of the Company (provided
Baird's analysis of the transaction supports this conclusion); and (iv) advise
the Company Board from the acceptance of a proposal by Associated or any other
proposed acquiror through consummation of such transaction.
Pursuant to the terms of the Engagement Letter, Baird will receive a
fee in the range of $30,000 to $35,000 upon the closing of the Merger for its
services. The Engagement Letter also provides that the Company will reimburse
Baird for its reasonable out-of-pocket expenses and will indemnify Baird and
hold Baird harmless against any and all losses, claims, damages or liabilities
and to reimburse Baird for related legal fees and other expenses ("Losses")
that might arise in connection with Baird's engagement, with the exception of
Losses resulting primarily from actions taken or omitted to be taken by Baird
in bad faith or from its negligence or willful misconduct.
The Company Board selected Baird as its financial advisor because of
Baird's familiarity with financial institutions that might become potential
acquirors of the Company and Baird's experience in representing financial
institutions like the Company in merger and acquisition transactions. As part
of its investment banking business, Baird is regularly engaged in the valuation
of businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, secondary distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and other
purposes. No limitations were imposed by the Company Board of Directors upon
Baird with respect to the investigations made or procedures followed by it in
rendering its opinion.
Baird, in the ordinary course of its business, acts as a market maker
with respect to the trading of the Associated Common Stock on The Nasdaq Stock
Market and may actively trade securities of Associated for its own account or
for the accounts of customers and thus may hold long or short positions in such
securities at any time. Baird has from time to time in the past been, and may
in the future be, considered or employed by Associated to provide investment
banking and securities brokerage services. These relationships are considered
by Associated to be in the ordinary course of business and to be immaterial to
Baird's engagement by the Company relative to the Merger.
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<PAGE> 30
At the March 22, 1995 meeting of the Company Board, Baird rendered its
oral opinion to the Company Board to the effect that, as of that date, the
Exchange Ratio was fair from a financial point of view to the holders of the
Company Common Stock. In addition, Baird delivered its written opinion to the
Company Board dated March 31, 1995 and as of the date of this Proxy
Statement/Prospectus, stating that, as of March 31, 1995, and as of the date of
this Proxy Statement/Prospectus, the Exchange Ratio is fair from a financial
point of view to the holders of the Company Common Stock. The full text of
Baird's opinion dated as of the date of this Proxy Statement/Prospectus is
attached hereto as Exhibit C and is incorporated herein by reference. The
description of the opinion set forth herein is qualified in its entirety by
reference to Exhibit C. Holders of the Company Common Stock are urged to read
the Opinion in its entirety for a description of the procedures followed,
assumptions and qualifications made, matters considered, and limitations
undertaken by Baird.
Baird's opinions are directed to the Company Board of Directors only
and are directed only to the Exchange Ratio and do not constitute a
recommendation to any Company shareholder as to how such shareholder should
vote at the Special Meeting. The terms of the Merger (including the Exchange
Ratio) were determined through arms-length negotiation between the Company and
Associated and their respective advisers.
Transaction Analysis. The following is a summary of the analysis on
which Baird based its opinion that the Exchange Ratio is fair from a financial
point of view to the holders of the Company Common Stock.
Baird summarized the offer made by Associated to the Company analyzing
the potential effect of the proposed Exchange Ratio and the other financial
terms of the Merger on earnings per share of the Associated Stock, returns on
average assets and equity, capital ratios and cash flow based on pro forma
combined earnings for the Company and Associated as of December 31, 1994. This
analysis shows an earnings dilution on a historical basis of approximately 2%
per share, and equity dilution of approximately 1% per share, no change in the
ratio of equity to assets, and a slight decrease for returns on average assets
and equity.
The Company has not paid a cash dividend since March 1992. Subsequent
to consummation of the Merger, the shareholders of the Company will receive an
indicated annual cash dividend based upon $1.08 for each share of Associated
Common Stock. Based on an exchange ratio of 8.75 shares for each share, each
share of the Company represents an annual indicated dividend of $9.45.
Analysis of Selected Comparable Companies. Baird reviewed the
following comparable publicly traded Midwest bank holding companies' earnings
history and valuation using price/earnings and price/equity multiples. AMCORE
Financial, Inc. (Rockford, IL), Brenton Banks, Inc. (Des Moines, IA), CNB
Bancshares, Inc. (Evansville, IN), Chemical Financial Corporation (Midland,
MI), Citizens Banking Corporation (Flint, MI), Cole Taylor Financial Group,
Inc. (Wheeling, IL), First Michigan Bank Corporation (Holland, MI), First
Midwest Bancorp, Inc. (Naperville, IL), Firstbank of Illinois Co. (Springfield,
IL) and Hawkeye Bancorporation (Des Moines, IA). Baird then compared the
valuation ratios of Associated to the comparable financial institutions as a
group. At March 16, 1995, the price/earnings multiples of the comparable
financial institutions ranged from a low of 11 to a high of 16, with an average
of 13.3. Associated's price/earnings multiple is 11.1. Using market prices of
March 16, 1995 to equity as of December 31, 1994, the price/equity multiples of
the comparable financial institutions ranged from a low of 130% to a high of
197% with an average of 163.9%. Associated's price/equity multiple is 163%.
There have been no recent transactions in the Company Common Stock.
The last reported sale of the Company Common Stock occurred in April, 1993,
when the Company completed an offering of 40,000 shares at $100 per share. On
February 23, 1993 and January 25, 1994, options to purchase 3,000 shares and
7,000 shares, respectively, were granted to key employees at an exercise price
of $100 per share and $110 per share, respectively.
Analysis of Recent Mergers and Acquisitions. Baird reviewed numerous
pending and completed mergers and acquisitions since January 1, 1994. Baird
then selected acquisitions of bank holding companies in which price
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<PAGE> 31
and financial information was available, to ascertain if such acquisitions are
comparable to the Merger and thus pertinent to Baird's fairness opinion.
Information reviewed included asset size of the acquiree, equity to assets,
return on average assets, deal value, structure of the deal (cash or stock) and
price paid as a multiple of earnings per share and equity per share. The
transactions selected for comparison were (Acquiror/Acquiree): AMBANC
Corp./First Robinson Bancorp; AMCORE Financial Inc./NBM Bancorp; AMCORE
Financial Inc./NBA Holding Company; CNB Bancshares, Inc./Harrisburg Bancshares;
First Mid-Illinois Bancshare/Downstate Bancshares; First National
Bancorp./Plano Bancshares; Heritage Financial Services, Inc./Midlothian State
Bank; Mercantile Bancorporation, Inc./Wedge Bank; National City Bancshares,
Inc./White County Bank; Old Second Bancorp, Inc./Bank of Sugar Grove; and
Pinnacle Banc Group, Inc./Acorn Financial Corp. Several of the announced
mergers have not yet been consummated and there can be no assurance that they
will be completed.
A review of such comparable transactions yielded the following
information:
<TABLE>
<CAPTION>
UNWEIGHTED
AVERAGE
TRANSACTION RANGE OF TRANSACTIONS COMPANY (1)
-------------------- ------------------------------- --------------------
<S> <C> <C> <C> <C>
Assets ($ millions) . . . . . . $ 107.20 $ 42.90 to $ 209.70 $ 133.80 (2)
Equity to Assets . . . . . . . 9.09 % 7.45 % to 11.44 % 8.30 % (2)
Return on Average Assets . . . 1.13 % 0.49 % to 2.24 % 0.93 % (3)
Deal Value ($ millions) . . . . $ 18.40 $ 7.60 to $ 36.50 $ 22.40
Price/Equity Multiple . . . . . 190.40 x 161.70 x to 238.40 x 201.02 x (2)
Price/Earnings Multiple . . . . 14.40 x 9.80 x to 23.60 x 18.10 x (3)
- ----------------------
</TABLE>
(1) Based upon an exchange ratio of 8.75 shares and price of $28.40 per
share for Associated Common Stock.
(2) At December 31, 1994.
(3) For the fiscal year ended December 31, 1994.
The above comparison shows that the Company's ratio of equity to
assets is lower than the average and in the lower end of the range; and the
return on average assets is below the middle of the range. The Company's
price/equity multiple is above the average and in the upper end of the range,
and the Company's price/earnings multiple is above the average and in the upper
end of the range.
No company or transaction used in any comparable analysis as a
comparison is identical to the Company, Associated or to the Merger.
Accordingly, an analysis of the results is not mathematical; rather, it
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the comparable companies to which
they are being compared. The preparation of a fairness opinion is a complex
process and not necessarily susceptible to partial analyses or summary
description. Baird believes that its analyses must be considered as a whole
and the singling out portions of these analyses and the individual factors
considered in reaching its opinion is inappropriate. The analyses of Baird are
not necessary indicative of actual values, which may be significantly more or
less favorable than as set forth therein. Analyses relating to the value of
companies do not support the appraisals or necessarily reflect the price at
which companies may actually be sold.
Although the summary set forth above does not purport to be a complete
description of the analyses performed by Baird, the material analyses performed
by Baird in rendering its opinion have been summarized above. In performing
its analyses, Baird made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many
of which are beyond the control of the Company and Associated. The analyses
performed by Baird are not necessarily indicative of actual value or actual
future results, which may be significantly more or less favorable than
suggested by such analyses. Such analyses were prepared solely as part of
Baird's analysis of the fairness of the Exchange Ratio from a financial point
of view to the holders of the Company Common Stock. The projections are based
on numerous variables and assumptions which are inherently unpredictable and
must be considered not certain of occurrence as projected. Accordingly, actual
results could vary significantly from those assumed in the projections and any
related analyses. Baird's opinion does not address the
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<PAGE> 32
relative merits of the Merger as compared to any alternative business
strategies that might exist for the Company or the effect of any other business
combination in which the Company might engage. In addition, as described
above, Baird's opinion to the Board was one of many factors taken into
consideration by the Company Board of Directors in making its determination to
approve the Merger Agreement.
CERTAIN CONSIDERATIONS
In deciding whether to approve the Merger, the Company shareholders
should consider the following factors, in addition to the other matters set
forth herein:
Uncertain Legislative and Regulatory Environment. The banking and
financial services businesses in which the Company and Associated engage are
highly regulated. The laws and regulations affecting such businesses may be
changed dramatically in the near future. Such changes could affect the ability
of banks to engage in nationwide branch banking and the ability of bank holding
companies to engage in non-banking businesses, such as securities underwriting
and insurance, in which they have been allowed to engage only on a limited
basis. Such changes may also affect the capital that banks and bank holding
companies are required to maintain, the premiums paid for or the availability
of deposit insurance or other matters directly affecting earnings. Neither the
Company nor Associated can predict what changes will occur or the effect that
any such changes would have on the ability of the combined entity to compete
effectively or to take advantage of new opportunities after the Merger.
Competition. The markets in which the Company and Associated operate
are highly competitive. Competition in such markets is likely to increase in
light of the changing legislative and regulatory environment in which the
Company and Associated operate. In addition, consolidation and mergers in the
banking industry are expected to continue, resulting in stronger and more
effective competitors. Neither the Company nor Associated can predict the
degree to which competition in the industry will increase in the future or the
effect any such increased competition will have on the combined entity.
Rapid Technological Changes. Evolving technology will play a major
role in the processing and delivery of financial services. The effective use
of new technology will enable banking and financial service businesses to
improve information concerning their customers and markets. It will also
enable them to reduce overhead expenses while improving the quality of service
to customers. Communications technology will substantially improve the ability
of financial institutions to exchange information with their customers and
employees. Banks and financial institutions that are unwilling or unable to
access this evolving new technology could experience lower earnings and a loss
of competitiveness.
Uncertain Economic Environment. Until recently, banks and financial
service companies in the Midwest have experienced a relatively long period of
price stability and a growing economy. Price stability enables banks to better
protect themselves against interest rate risks. A strong economy enhances the
opportunity of the commercial sector of the economy to improve earnings and
performance. It also provides an environment for financial institutions to
experience positive and profitable growth. Recent economic changes present
additional risks for all banks and financial service companies.
Nature of Business. The financial performance of the Company results
primarily from its retail banking activities located on the northwest side of
Chicago. Company shareholders who receive shares of Associated Common Stock
will own an interest in a diversified multi-bank holding company with 87
banking offices, substantially all of which are located in various communities
in Wisconsin, which is engaged in several non-banking businesses including
personal property lease financing, commercial and residential mortgage banking,
trust services, reinsurance and general insurance agency activities. Financial
performance of Associated is accordingly dependent on its activities and the
economic factors in such markets and businesses. See "Certain Information
Concerning Associated."
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<PAGE> 33
Business Combinations. Associated seeks additional expansion
opportunities and accordingly may enter into business combinations with banking
and non-banking entities involving the issuance of its shares or payment of
cash consideration which may not require a vote of holders of Associated Common
Stock.
Share Price Fluctuation. The price of shares of Company Common Stock
is based upon the financial condition of the Company and the market value for
similar non-publicly traded bank holding companies and other factors. The
share price of Associated Common Stock on The Nasdaq Stock Market is by nature
subject to the general price fluctuations in the market for of publicly-traded
equity securities. Such fluctuations are not necessarily related to a change
in the financial performance or condition of Associated.
Ancillary Agreements. In connection with the Merger, the Company has
provided Associated an Inducement Fee and Stock Option Agreement. The Merger
Agreement provides that Associated may receive a cash payment in certain
circumstances including failure of the Company shareholders to approve the
Merger. In addition, the Stock Option Agreement provides Associated options to
purchase shares of the Company under certain circumstances. See "The Merger -
The Inducement Fee" and "- The Stock Option Agreement."
MERGER CONSIDERATION
Upon consummation of the Merger, each share of the Company Common
Stock outstanding at the Effective Time will be converted (subject to the
provisions with respect to fractional shares described below) into the right to
receive 8.75 shares of Associated Common Stock (the "Exchange Ratio"),
provided, however, that if the Associated Average Price is greater than $30.40
per share, the Exchange Ratio will be reduced and shall be determined by
dividing $266.00 by the Associated Average Price (rounded to the nearest
thousandth of a share). In the event that the Associated Average Price is less
than $26.40 per share, the Merger Agreement may be terminated by the Company.
See "Certain Provisions of the Merger Agreement - Termination."
Based upon the capitalization of Associated and the Company as of the
Record Date, the shareholders of the Company will own Associated Common Stock
representing approximately 5.1% of the outstanding voting shares of Associated
following consummation of the Merger (assuming no exercise of dissenters'
rights and no adjustment to the conversion ratios).
REGULATORY APPROVALS REQUIRED
Federal. The Merger is subject to prior approval by the Federal
Reserve Board under the BHC Act, which requires that the Federal Reserve Board
take into consideration, among other factors, the financial and managerial
resources and future prospects of the respective institutions and the
convenience and needs of the communities to be served. The BHC Act prohibits
the Federal Reserve Board from approving the Merger if it would result in a
monopoly or be in furtherance of any combination or conspiracy to monopolize or
to attempt to monopolize the business of banking in any part of the United
States, or if its effect in any section of the country may be to substantially
lessen competition or to tend to create a monopoly, or if it would in any other
manner be a restraint of trade, unless the Federal Reserve Board finds that the
anticompetitive effects of the Merger are clearly outweighed in the public
interest by the probable effect of the transaction in meeting the convenience
and needs of the communities to be served. It is highly improbable that the
Merger poses any antitrust issues. The Federal Reserve Board also has the
authority to deny an application if it concludes that the combined organization
would have an inadequate capital position. Furthermore, the Federal Reserve
Board must also assess the records of the bank subsidiaries of Associated and
the Company under the Community Reinvestment Act of 1977, as amended (the
"CRA"). The CRA requires that the Federal Reserve Board analyze, and take into
account when evaluating an application, each bank's record of meeting the
credit needs of its local communities, including low and moderate income
neighborhoods, consistent with safe and sound operation.
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<PAGE> 34
Under the BHC Act, the Merger may not be consummated until up to 30
days following the date of Federal Reserve Board approval, during which time
the United States Department of Justice may challenge the Merger on antitrust
grounds. Although a challenge is highly improbable, there can be no assurance
that the Department of Justice will not challenge the Merger or, if such a
challenge is made, as to the result thereof. The commencement of an antitrust
action would stay the effectiveness of the Federal Reserve Board's approval
unless a court specifically orders otherwise. The BHC Act provides for the
publication of notice and public comment on the applications and authorizes the
regulatory agency to permit interested parties to intervene in the proceedings.
Associated filed an application with the Federal Reserve Bank of
Chicago (the "Federal Reserve Bank") that was accepted for filing by the
Federal Reserve Bank on May 25, 1995.
Associated anticipates that it will be advised that the Federal
Reserve Bank has accepted the application for processing under delegated
authority from the Federal Reserve Board. Under the regulations of the Federal
Reserve Board, the Federal Reserve Bank will act on the application within the
30-day period that began on the date the application was accepted for filing (a
period that will be tolled by any public comments or other circumstances that
may trigger further requests for information from the Federal Reserve Bank).
There can be no assurance that the Federal Reserve Bank will continue
processing the application under delegated authority.
There can be no assurance that the Federal Reserve Board will approve
the Merger, and if the Merger is approved, there can be no assurance as to the
date of such approval.
Illinois. The Merger is also subject to the prior approval by the
Illinois Commissioner of Banks and Trust Companies (the "Illinois
Commissioner") under the Illinois Bank Holding Company Act of 1957, as amended
(the "Illinois Act"), which requires that the Illinois Commissioner take into
consideration whether (i) the proposed transaction will promote the safety and
soundness of the institution to be acquired, (ii) the banks already controlled
by the applicant meet the convenience and needs of the communities served by
them in accordance with the CRA, (iii) the applicant intends to adequately meet
the convenience and needs of the communities serviced by the institution to be
acquired in accordance with the CRA, and (iv) the transaction will bring net
new benefits to the state of Illinois. Under the Illinois Act, the Merger may
be consummated immediately following an approval from the Illinois Commissioner
(subject to the foregoing federal approvals).
Associated filed an application with the Illinois Commissioner on June
21, 1995. Associated anticipates that it will be advised that the Illinois
Commissioner has accepted the application for processing. There can be no
assurance that the Illinois Commissioner will approve the Merger, and if the
Merger is approved, there can be no assurance as to the date of such approval.
General. The Merger cannot proceed in the absence of all requisite
regulatory approvals. See "Conditions to Consummation of the Merger." In the
Merger Agreement, Associated and the Company have agreed to take all reasonable
actions necessary to comply promptly with all legal requirements which may be
imposed with respect to the Merger, including furnishing information to the
Federal Reserve Board or in connection with approvals or filings with other
governmental entities. Associated and the Company have also agreed to take all
reasonable action necessary to obtain approvals of the Federal Reserve Board,
the Illinois Commissioner and other governmental entities. However, the
obligation to take reasonable actions is not to be construed as including an
obligation to accept any terms or conditions to an agreement or other approval
of, or any exemption by, any party that are not customarily contained in
approvals of similar transactions granted by such regulators or if Associated
in good faith determines that such terms or conditions would have a material
adverse effect on its business or financial condition or would materially
detract from the value of the Company to Associated. There can be no assurance
that any regulatory approvals will not contain a term or condition that causes
such approvals to fail to satisfy the conditions described above under
"Conditions to Consummation of the Merger."
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Associated and the Company are not aware of any other governmental
approvals or actions that are required for consummation of the Merger except as
described above. Should any other approval or action be required, it is
presently contemplated that such approval or action would be sought. There can
be no assurance that any such approval or action, if needed, could be obtained
and, if such approvals or actions are obtained, there can be no assurance as to
the timing thereof.
THE EFFECTIVE TIME
The Merger will be consummated and will become effective as of the
date Articles of Merger are filed with the Secretary of State of the State of
Illinois (the "Effective Time"). The filing with respect to the Merger will
occur as promptly as practicable after the satisfaction or, if permissible,
waiver of the conditions to the Merger as set forth in the Merger Agreement.
The Merger Agreement may be terminated by either party if, among other reasons,
the Merger shall not have been consummated on or before November 30, 1995.
Upon consummation of the Merger, the Company will be merged into Associated
Illinois and will not continue its separate existence or operations, to which
Associated Illinois as the surviving corporation will succeed. See "Certain
Provisions of the Merger Agreement - Conditions to Consummation of the Merger"
and "Certain Provisions of the Merger Agreement - Termination."
CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES; FRACTIONAL
SHARES
At the Effective Time and without any action on the part of
Associated, the Company or the holders of the Company Common Stock, each share
of the Company Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares held by Company shareholders exercising their
dissenters' rights under Illinois law) shall be converted into the right to
receive shares of Associated Common Stock. See "The Merger - Dissenters'
Rights." All such shares of the Company Common Stock shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease to
exist, and each stock certificate previously representing any such shares of
the Company Common Stock (other than shares held by dissenting shareholders as
described above) shall thereafter represent the right to receive a certificate
representing shares of Associated Common Stock into which such the Company
Common Stock has been converted. Certificates previously representing shares
of the Company Common Stock shall be exchanged for certificates representing
whole shares of Associated Common Stock upon the surrender of such certificates
as provided below. No fractional share of Associated Common Stock shall be
issued, and, in lieu thereof, a cash payment shall be made as provided below.
As of the Effective Time, Associated shall deposit, or cause to be
deposited, with a bank or trust company designated by Associated (the "Exchange
Agent"), for the benefit of the holders of shares of the Company Common Stock
and for exchange in accordance with the terms of the Merger Agreement,
certificates representing the shares of Associated Common Stock (such
certificates for shares of Associated Common Stock to be exchanged for the
Company Common Stock, together with any dividends or distributions with respect
thereto (the "Company Exchange Fund") issuable pursuant to the terms of the
Merger Agreement in exchange for outstanding shares of the Company Common
Stock. It is anticipated that Harris Trust & Savings Bank, Chicago, Illinois
will serve as the Exchange Agent.
As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of a certificate which
immediately prior to the Effective Time represented outstanding shares of the
Company Common Stock whose shares were converted into the right to receive
shares of Associated Common Stock, (i) a letter of transmittal and (ii)
instructions for use in effecting the surrender of the Company Certificates in
exchange for certificates representing shares of Associated Common Stock. Upon
surrender of a certificate previously representing shares of the Company Common
Stock to the Exchange Agent together with such duly executed letter of
transmittal, the holder of such certificate shall receive in exchange therefor
a certificate representing that number of whole shares of Associated Common
Stock to which such holder is entitled and the certificate so surrendered shall
forthwith be cancelled. In the event of a transfer of ownership of shares
which is not registered in the transfer records of the Company, a certificate
representing the proper number of shares of
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Associated Common Stock may be issued to a transferee if the certificate
representing such shares is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence that
any applicable stock transfer taxes have been paid. Until surrendered, each
certificate previously representing shares of the Company Common Stock shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender a certificate representing shares of Associated
Common Stock and cash in lieu of any fractional shares of Associated Common
Stock as described below.
THE COMPANY SHAREHOLDERS SHOULD NOT FORWARD THEIR STOCK CERTIFICATES
TO THE EXCHANGE AGENT WITHOUT A LETTER OF TRANSMITTAL NOR RETURN THEIR STOCK
CERTIFICATES WITH THE ENCLOSED PROXY.
No dividends or other distributions declared or made after the
Effective Time with respect to Associated Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered certificate
with respect to the shares of Associated Common Stock represented thereby, and
no cash payment in lieu of fractional shares shall be paid to any such holder,
until such certificate is surrendered. Subject to the effect of applicable
laws, following surrender of any such certificate, there shall be paid to the
holder of said certificate, which represent whole shares of Associated Common
Stock issued in exchange therefor, without interest, (i) promptly, the amount
of cash payable with respect to a fractional share of Associated Common Stock
to which such holder is entitled and the amount of dividends or other
distributions with a record date after the Effective Time paid with respect to
such whole shares of Associated Common Stock, and (ii) at the appropriate
payment date, the amount of dividends or other distributions, with a record
date after the Effective Time, but prior to surrender and a payment date
occurring after surrender, payable with respect to such whole shares of
Associated Common Stock.
All shares of Associated Common Stock issued upon conversion of the
shares of the Company Common Stock (including any cash paid for fractional
shares) shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of the Company Common Stock.
No certificates or scrip representing fractional shares of Associated
Common Stock shall be issued upon the surrender for exchange of the
certificates, and such fractional share interest will not entitle the owner
thereof to vote or to any rights of a shareholder of Associated. Each holder
of a fractional share interest shall be paid an amount in cash equal to the
product obtained by multiplying such fractional share interest to which such
holder would otherwise be entitled by the Associated Average Price, as
hereinabove defined. As soon as practicable after the determination of the
amount of cash, if any, to be paid to holders of fractional share interests,
the Exchange Agent shall notify Associated and Associated shall make available
such amounts to such holders of such factional share interests subject to and
in accordance with the terms of the Merger Agreement, as relevant.
Any portion of the Exchange Fund which remains undistributed to the
shareholders of the Company for six months after the Effective Time shall be
delivered to Associated, upon demand, and any shareholders of the Company who
have not theretofore complied with the procedures described above shall
thereafter look only to Associated for payment of their claim for Associated
Common Stock, any cash in lieu of fractional shares of Associated Common Stock
and any dividends or distributions with respect to Associated Common Stock.
Neither Associated nor the Company shall be liable to any holder of
shares of the Company Common Stock for any such shares of the Company Common
Stock (or dividends or distributions with respect thereto) or cash delivered to
a public official pursuant to any abandoned property, escheat or similar law.
Associated shall be entitled to deduct and withhold from any cash
consideration payable pursuant to the Merger Agreement to any holder of shares
of the Company Common Stock such amounts as Associated is required to deduct
and withhold with respect to the making of such payment under the Internal
Revenue Code of 1986, as amended (the "Code"), or any provision of state, local
or foreign tax law.
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At the Effective Time, the stock transfer books of the Company shall
be closed, and there shall be no further registration of transfers of shares of
the Company Common Stock, thereafter on said record books. From and after the
Effective Time, the holders of certificates shall cease to have any rights with
respect to such shares of the Company Common Stock except as otherwise provided
in the Merger Agreement, or by law. On or after the Effective Time, any
certificates presented to the Exchange Agent or Associated for any reason shall
be converted into shares of Associated Common Stock in accordance with the
terms of the Merger Agreement as described above.
DESCRIPTION OF ASSOCIATED COMMON STOCK ISSUABLE IN THE MERGER
The following description of Associated Common Stock issuable in the
Merger is a summary and is qualified in its entirety by reference to the terms
of such security, which is incorporated by reference herein and is set forth in
full in Article III of Associated's Articles of Incorporation (the "Associated
Articles"). The description set forth below is subject in all respects to the
Wisconsin Business Corporation Law ("WBCL") and the Associated Articles.
Harris Trust & Savings Bank of Chicago is the transfer agent and
registrar for all outstanding Associated Common Stock.
THE FOLLOWING DESCRIPTION OF ASSOCIATED COMMON STOCK SHOULD BE READ
CAREFULLY BY THE COMPANY SHAREHOLDERS SINCE, AT THE EFFECTIVE TIME, EACH ISSUED
AND OUTSTANDING SHARE OF THE COMPANY COMMON STOCK WILL BE CONVERTED INTO THE
RIGHT TO RECEIVE SHARES OF ASSOCIATED COMMON STOCK AT THE EXCHANGE RATIO.
General. Associated has one class of common stock, the Associated
Common Stock. Of the 48,000,000 shares of Associated Common Stock authorized,
15,752,841 shares were outstanding as of the Record Date, exclusive of shares
held in its treasury. Of the 750,000 shares of Associated preferred stock with
a par value of $1.00 per share authorized, none were issued and outstanding as
of the Record Date.
Dividend Rights. Dividends on Associated Common Stock will be payable
out of the assets of Associated legally available therefor as, if and when
declared by the Associated Board of Directors. No share of Associated Common
Stock is entitled to any preferential treatment with respect to dividends.
Voting Rights. Each holder of Associated Common Stock will be
entitled at each shareholders' meeting of Associated, as to each matter to be
voted upon, to cast one vote, in person or by proxy, for each share of
Associated Common Stock registered in his or her name on the stock transfer
books of Associated. Such voting rights are not cumulative.
Rights Upon Liquidation. Subject to the rights of holders of any
Associated preferred stock which may be issued from time to time, in the event
of liquidation, dissolution or winding up of Associated, whether voluntary or
involuntary, the holders of Associated Common Stock will be entitled to receive
all assets of Associated remaining for distribution to its shareholders, on a
pro rata basis.
Miscellaneous. Shares of Associated Common Stock are not convertible
into shares of any other class of capital stock. Shares of Associated Common
Stock are not and will not be entitled to any preemptive or subscription
rights. The issued and outstanding shares of Associated Common Stock are fully
paid and nonassessable (except as otherwise provided under the WBCL).
COMPARISON OF SHAREHOLDER RIGHTS
The Company is incorporated under the laws of the State of Illinois
and Associated is incorporated under the laws of the State of Wisconsin.
Shareholders of the Company, whose rights are governed by the Company's
Articles of Incorporation, By-laws, the Buy-Sell Agreement and the BCA will, on
consummation of the Merger,
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become shareholders of Associated. Their rights as Associated shareholders
will then be governed by Associated's Articles of Incorporation and By-laws and
by the WBCL. The following is a summary of the material differences between
the rights of shareholders of the Company and the rights of shareholders of
Associated.
BUY-SELL AGREEMENT
The Company. The Company and each shareholder of the Company are
subject to the Buy-Sell Agreement which provides that except as to gifts to
Permitted Transferees (as defined below) or with the prior written consent of a
majority (both in number and in number of shares owned) of the shareholders of
the Company, an option exists on the part of the Company to redeem and the
Company and its shareholders to purchase, on the same terms as to which a
Company shareholder desires to sell, transfer or dispose of shares of Company
Common Stock. If the Company allows such option to expire unexercised after
notice of a proposed sale, transfer or disposition, the option becomes
available to Company shareholders on the same terms as offered to the Company.
In the event that more than one Company shareholder desires to exercise an
option, such shareholder shall be entitled to exercise the option in proportion
to such shareholder's ownership. If the option is not exercised, shares of
Company Common Stock sold, transferred or disposed of (other than to an
existing shareholder of the Company) are no longer subject to the Buy-Sell
Agreement.
As of April 15, 1995, 95 shareholders representing 81.2% of the
shareholders of the Company and 88.7% of the outstanding shares of the Company
constituting the requisite majority (both in number and in number of shares
owned) executed a waiver of any right which the Company or any shareholder
would have under the Buy-Sell Agreement as a result of any merger or sale of
assets of the Company. Accordingly, any such right pursuant to the Buy-Sell
Agreement would not apply to the Merger and Merger Agreement.
Permitted Transferees are defined as: (i) members of a Company
shareholder's direct family, i.e. any spouse, children, other lineal
descendants and their respective spouses and trusts established, in the
judgment of the Board of Directors of the Company, for the benefit of such
persons and (ii) individuals or entities who at the time of the transfer are
officers, directors or shareholders of a corporation, or beneficiaries of a
trust, which is a holder of the Company Common Stock.
The Buy-Sell Agreement may be terminated or amended at any time with
the consent of all shareholders upon whom it is binding at the date of such
consent. The Buy-Sell Agreement provides that on or before March 31, 1995, the
Company will, on terms and conditions acceptable at the time to its Board of
Directors, attempt to sell the Bank stock owned by the Company pursuant to a
plan of liquidation to be implemented promptly thereafter.
Associated. The Associated Common Stock is freely tradeable (except
for shares issued to "affiliates") and not subject to a shareholder agreement.
AUTHORIZED CAPITAL STOCK
The Company. Under the Company's Articles of Incorporation, the
aggregate number of shares which it is authorized to issue is 110,000 shares of
one class of common stock, $8.00 par value. All shares of the Company Common
Stock are identical in rights and have one vote. The holders of the Company
Common Stock are entitled to such dividends as may be declared from time to
time by the Board of Directors of the Company from funds available therefor and
upon liquidation are entitled to receive pro rata all assets of the Company
available for distribution to such holders. The Company's Articles provide
that the holders of its Common Stock have no preemptive rights to subscribe to
any newly issued shares and have cumulative voting rights with respect to the
election of directors.
Associated. Under Associated's Articles of Incorporation, Associated
is authorized to issue 48,000,000 shares of common stock, par value $0.01 per
share and 750,000 shares of preferred stock, $1.00 par value. All
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shares of Associated Common Stock are identical in rights and have one vote.
For a description of Associated Common Stock, see "Description of Associated
Common Stock Issuable in the Merger." The preferred stock shall be cumulative
and dividends shall accrue thereon. The Board of Directors may divide the
preferred stock into series and establish the relative rights and preferences
of preferred stock issued in the future as specified in the Articles without
shareholder action and issue such stock in series. As of the date hereof, no
shares of any series of Associated preferred stock are issued and outstanding.
APPRAISAL RIGHTS AND DISSENTERS' RIGHTS
The Company. Under the BCA, a shareholder of a corporation is
generally entitled to receive payment of the fair value of such shareholder's
stock if such shareholder dissents in the manner required by the BCA from a
proposed merger or share exchange or 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, or an amendment of the articles of
incorporation that materially and adversely affects rights in respect of the
dissenter's shares.
Associated. Under the WBCL, a shareholder of a corporation is
generally entitled to receive payment of the fair value of such shareholder's
stock if such shareholder dissents from a proposed merger or share exchange or
a sale or exchange of all or substantially all of the property and assets of
the corporation. However, dissenters' rights are not available to holders of
shares, such as shares of Associated Common Stock, which are registered on a
national securities exchange or quoted on Nasdaq on the record date fixed to
determine shareholders entitled to notice of the meeting at which shareholders
are to vote on the proposed corporate action. Associated Common Stock is
quoted on the Nasdaq National Market.
ASSESSABILITY; POTENTIAL LIABILITY FOR WAGES
The Company. Shares of stock of an Illinois corporation are
nonassessable under the BCA. The BCA does not impose personal liability on
holders of the Company Common Stock for debts owing to employees or otherwise.
Associated. Associated Common Stock is subject to possible assessment
in certain circumstances. Section 180.0622(2)(b) of the WBCL provides that
shareholders of Wisconsin corporations are personally liable to an amount equal
to the par value of shares owned by them (and to the consideration for which
shares without par value were issued) for debts owing to employees of the
corporation for services performed for such corporation, but not exceeding six
months' service in any one case. The liability imposed by the predecessor to
this statute was interpreted in a trial court decision to extend to the
original issue price for shares, rather than the stated par value. Although
affirmed by the Wisconsin Supreme Court, the case offers no precedential value
due to the fact that the decision was affirmed by an equally divided court.
Associated Common Stock is not otherwise subject to call or assessment.
REQUIRED VOTE
The Company. The BCA requires a two-thirds vote of shareholders to
authorize organic changes, such as mergers, sale of assets and dissolution
unless an Illinois corporation provides in its Articles of Incorporation for a
larger or smaller vote (but not less than a majority of the outstanding shares
entitled to vote). The Company does not have a provision in its Articles of
Incorporation modifying the statutory two-thirds voting requirement.
Associated. Pursuant to 180.1706(1) of the WBCL, except as otherwise
provided in a corporation's articles of incorporation or bylaws, any amendment
to the articles of incorporation, merger or certain other extraordinary events
involving a corporation organized before January 1, 1973, which did not
expressly elect before January 1, 1991 to be governed by a majority or greater
voting requirement, must be approved by the affirmative vote of two-thirds of
the shares entitled to vote at a meeting called for that purpose. The
Associated Articles were amended in 1992 to reduce the vote required pursuant
to 180.1706(1) of the WBCL to a majority vote. Thus, the affirmative
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vote of a majority of the shares of Associated is required to adopt amendments
to the Associated Articles which create dissenters' rights or approve mergers
and certain other extraordinary transactions other than those in "Comparison of
Shareholder Rights - Takeover Provisions."
ACTION WITHOUT A MEETING
The Company. Under the BCA, except as otherwise provided in the
corporation's articles, any action required or permitted to be taken at a
meeting of shareholders may be taken without a meeting and without a vote if a
consent in writing, setting forth the action taken, is signed by holders of not
less than the minimum number of shares necessary to authorize or approve such
action, provided written notice of the subject matter of the consent is
provided to all shareholders entitled to vote at least five days prior to
execution of the consent and prompt notice of the action taken is given to all
shareholders who do not sign a consent.
Associated. Under the WBCL, except as otherwise provided in the
corporation's articles, such action without a meeting is allowed only if the
consent is signed by all of the shareholders entitled to vote with respect to
the subject matter.
LIABILITY OF DIRECTORS; INDEMNIFICATION
The Company. In accordance with the BCA, the Company in its Articles
and By-laws has indemnified its directors and officers against liabilities
arising because the indemnified individual is or was a director or officer if
the individual acted in good faith, reasonably believed his or her conduct was
in the corporation's best interests (or in certain cases at least not opposed
to the corporation's best interests) and, in the case of any criminal
proceeding, the individual had no reasonable cause to believe the individual's
conduct was unlawful. However, under the BCA, a corporation cannot indemnify a
director or officer in connection with a proceeding by or in the right of the
corporation in which the director or officer was adjudged liable to the
corporation or in connection with any other proceeding charging improper
personal benefit in which the individual was adjudged liable on the basis that
personal benefit was improperly received. Further, the BCA allows a
corporation, by amendment to its articles of incorporation, to eliminate or
limit the personal liability of a director to the corporation or its
shareholders for monetary damages for breach of fiduciary duty as a director,
except that the provision cannot eliminate or limit the liability of a director
for a breach of the director's duty of loyalty to the corporation or its
shareholders, for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, for a transaction from
which the director derives an improper personal benefit or with respect to
liability relating to a distribution to shareholders made in violation of law.
The Company has adopted an amendment to its Articles to eliminate personal
liability for directors under this provision.
Associated. Under Associated's By-laws and the WBCL, Associated
indemnifies its directors and officers against liability incurred by the
director or officer in a proceeding to which the indemnified person was a party
because he or she is a director or officer to the extent that he or she was
successful on the merits or otherwise in the defense of a proceeding and in all
other actions, unless liability was incurred because a director or officer
breached or failed to perform a duty that he or she owed to the corporation and
the breach or failure constitutes a willful failure to deal fairly with the
corporation or its shareholders in connection with a matter in which the
director or officer has a material conflict of interest, a violation of
criminal law (unless the director or officer had reasonable cause to believe
that his or her conduct was lawful or no reasonable cause to believe that his
or her conduct was unlawful), a transaction from which the director or officer
derived an improper personal benefit or willful misconduct. In addition, under
the WBCL, a director of Associated is not liable to the corporation, its
shareholders or any person asserting rights on behalf of the corporation or its
shareholders for liabilities arising from a breach of, or failure to perform,
any duty resulting solely from his or her status as a director, unless the
person asserting liability proves that the breach or failure to perform
constitutes any of the circumstances under which indemnification would not be
provided as described above. Associated's By-laws provide the indemnification
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described above to employees or agents including individuals who are officers,
directors, employees and agents of controlled subsidiaries of Associated and
fiduciaries of ERISA plans.
CLASSIFIED BOARD OF DIRECTORS
The Company. The Company's Board of Directors consists of a single
class of nine directors, each of whom serves for one year or until his or her
successor is elected and qualified.
Associated. The Board of Directors of Associated is divided into
three classes as nearly equal in number as possible, with the directors in each
class serving for staggered three-year terms. However, the By-laws require
that a director retire as of the first annual meeting of shareholders
subsequent to the director's 65th birthday unless such director's term is
extended for a one-year term by a two-thirds vote of Associated's Board. At
each annual meeting of Associated's shareholders, the successors to the class
of directors whose term expires at the time of such meeting are elected by a
majority of the votes cast, assuming a quorum is present. Associated's Board
consists of ten directors.
REMOVAL OF DIRECTORS FOR "CAUSE"
The Company. Under the BCA, no director may be removed from office,
with or without "cause," if the votes cast against such director's removal
would be sufficient to elect such director if then cumulatively voted at an
election of the entire board of directors.
Associated. Shareholders of Associated may remove a director only for
"cause." "Cause" is defined as conviction of a felony, declaration of unsound
mind by an order of a court of competent jurisdiction, gross dereliction of
duty or commission of an action which constitutes intentional misconduct or a
knowing violation of law and that results in both an improper substantial
personal benefit and a material injury to Associated.
NEWLY CREATED DIRECTORSHIPS AND VACANCIES ON THE BOARD OF DIRECTORS
The Company. The Company's By-laws authorize the Board of Directors,
by the affirmative vote of a majority of the directors then in office to fill
vacancies on the Company's Board of Directors until the next succeeding
election of directors. The number of Directors may be increased by the
affirmative vote of a majority of the directors then in office or an
affirmative vote of holders of a majority of the Common Stock at an annual or
special meeting and vacancies created thereby may be filled by shareholder vote
or in the absence thereof, by director vote.
Associated. Pursuant to 180.0810 of the WBCL, unless otherwise
provided in a corporation's Articles, shareholders may fill vacancies on a
corporation's Board of Directors. The Associated Articles provide that newly
created directorships and any vacancies on Associated's Board of Directors may
only be filled by the Board of Directors.
CERTAIN BUSINESS COMBINATIONS
The Company. The BCA contains provisions which require substantially
equal treatment of shareholders in connection with tender offers and which
regulate a broad range of "business combinations" involving an Illinois
corporation. However, these provisions are applicable only to Illinois
corporations which have a class of securities registered under the Exchange Act
or have affirmatively elected such provisions in their Articles. The Company
is not subject to such provisions nor has it included such provisions in its
Articles. The BCA also contains a provision stating directors may consider the
effects of their decisions involving a change of control of a corporation (such
as the Merger) on its employees, suppliers, customers and communities. All
shareholders of the Company have executed the Buy-Sell Agreement. The Buy-Sell
Agreement restricts the purchase of shares in the Company
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and accordingly may be viewed to limit a change in control of the Company. See
"The Merger - Comparison of Shareholder Rights."
Associated. Article VII of Associated's Articles provides that an
affirmative vote of 80% of Associated's outstanding shares is required to
approve a merger or other business combination involving a beneficial owner of
10% or more of Associated's outstanding voting shares (an "interested
shareholder"). In addition, if the consideration offered in connection with
such transaction does not satisfy certain "fair price" requirements, the
affirmative vote of 80% of the "non-interested outstanding shares" (defined as
voting shares not beneficially owned by an interested shareholder) of
Associated will also be required to approve such a transaction. These
requirements do not apply if (a) the board of directors approves the
transaction and a majority of the directors voting to approve the transaction
are "continuing directors" (defined as a director who was either (i) a director
at the time the interested shareholder became "interested" and who is not
otherwise affiliated with such shareholder, or (ii) a director designated
(prior to his or her initial election as a director) as a continuing director
by a majority of the then continuing directors) or (b) the transaction is
between Associated and a subsidiary of Associated and no interested shareholder
(together with such shareholder's affiliates and associates) owns any of the
outstanding shares of the subsidiary. The foregoing provision may only be
amended, modified or repealed by the affirmative vote of not less than 80% of
the outstanding shares of Associated.
ADVANCE NOTICE OF PROPOSALS TO BE BROUGHT AT THE ANNUAL MEETING
The Company. The Company's Articles and By-laws do not contain any
provisions relating to advance notice of proposals to be brought before an
annual meeting.
Associated. Pursuant to Article II, Section 5 of Associated's
By-laws, any shareholder who intends to bring business before an annual meeting
of shareholders (other than nominations for directors) must provide Associated
with notice of such intention, the nature of such proposal and certain other
information regarding the shareholder bringing the proposal, not less than 60
nor more than 75 days prior to the meeting, or within 10 days from the date
notice or public disclosure of the date of such meeting is given, if such
announcement date is less than 70 days before the meeting date.
ADVANCE NOTICE OF NOMINATIONS OF DIRECTORS
The Company. The Company's Articles and By-laws do not contain any
provisions relating to advance notice of nominations of directors.
Associated. Pursuant to Article II, Section 6 of Associated's
By-laws, any shareholder who intends to nominate directors for election at a
meeting called for that purpose must provide Associated with notice of such
intention, certain information regarding the proposed nominee and
certain information regarding the nominating shareholder, not less than 60 days
nor more than 75 days prior to the meeting, or within 10 days from the date
notice or public disclosure of the date of such meeting is publicly announced,
if such announcement date is less than 70 days before the meeting date.
RESALE OF ASSOCIATED COMMON STOCK ISSUED PURSUANT TO THE MERGER
The Associated Common Stock issued pursuant to the Merger will be
registered under the Securities Act and be freely tradeable under the
Securities Act except for shares issued to any shareholder of the Company who
may be deemed to be an "affiliate" of the Company for purposes of Rule 145
under the Securities Act. Each affiliate identified by the Company will enter
into an agreement with Associated providing that such affiliate will be subject
to Rule 145(d) of the Securities Act, shall not transfer any Associated Common
Stock received in the Merger except in compliance with the Securities Act and
in order to comply with pooling of interests requirements,
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such persons shall agree to make no disposition of any shares of the Company
Common Stock or Associated Common Stock (or any interests therein) during the
period beginning 30 days before the Effective Time and ending when the
financial results for at least 30 days of combined operations of the Company
and Associated after the Effective Time have been published. This Proxy
Statement/Prospectus does not cover resales of Associated Common Stock received
by any person who may be deemed to be an affiliate of the Company.
PRE-MERGER DIVIDEND POLICY
The Company. Pursuant to the Merger Agreement, the Company is
prohibited from declaring or paying any dividend on, or making any other
distribution in respect of, its outstanding shares of capital stock without the
prior written consent of Associated. The Company does not anticipate paying
any dividends on shares of the Company Common Stock prior to the Effective
Time.
Associated. Associated expects to continue to declare, until the
Effective Time, its regularly scheduled dividends. Pursuant to the Merger
Agreement, Associated agreed to use its reasonable efforts to take all steps
necessary to consummate the Merger on or prior to the record date of the
dividend to be declared and paid by Associated in the third quarter of 1995
thereby entitling the Company shareholders to receive such Associated dividend.
However, there can be no assurance that Company shareholders will be holders of
record of Associated Common Stock on such record date and accordingly, Company
shareholders shall have no claim or right to such dividend. Receipt of such
dividend should not be a consideration in the approval of the Merger Agreement
by the Company shareholders.
POST-MERGER DIVIDEND POLICY
It is the current intention of the Board of Directors of Associated to
continue to declare cash dividends on the Associated Common Stock following the
Merger. Associated's dividend subsequent to the Stock Split is currently
anticipated to be $0.27 per quarter or $1.08 per year, in each case per share.
Shareholders should note that no such dividends payable following the date
hereof have currently been declared and that future dividends will be
determined by the Associated Board of Directors in light of the earnings and
financial condition of Associated and its subsidiaries and other factors,
including applicable governmental regulations and policies. In that regard,
Associated is a legal entity separate and distinct from its banking and
non-banking subsidiaries, and the principal sources of Associated's income are
dividends and interest from such subsidiaries. The payment of dividends by
Associated's banking subsidiaries is subject to certain restrictions under
applicable governmental regulations. See also "The Merger - Pre-Merger
Dividend Policy."
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Merger Agreement, the Company has agreed to carry on
its business, and the business of its subsidiaries, in the usual, regular and
ordinary course in substantially the same manner as conducted prior to the
execution of the Merger Agreement, subject to certain covenants and other
agreements agreed to by the Company in the Merger Agreement. See "Certain
Provisions of the Merger Agreement - Certain Covenants."
CERTAIN MATERIAL FEDERAL INCOME TAX CONSEQUENCES
Associated and the Company have received an opinion of Vedder Price
that the Merger will qualify as a tax-free reorganization under Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code. Accordingly, the Company,
Associated and Associated Illinois will recognize no gain or loss for federal
income tax purposes as a result of the Merger and no gain or loss will be
recognized by any holder of the Company Common Stock upon receipt of Associated
Common Stock pursuant to the Merger (except upon the receipt of cash in lieu of
fractional shares of Associated Common Stock). This discussion of federal
income tax consequences of the Merger assumes that none of the holders of
Company Common Stock will exercise dissenters' rights. The Internal Revenue
Service
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("Service") has not been asked to rule upon the tax consequences of the Merger
and such request will not be made. The opinion of Vedder Price is based
entirely upon the Code, regulations now in effect thereunder, current
administrative rulings and practice, and judicial authority, all of which are
subject to change. Unlike a ruling from the Service, an opinion of counsel is
not binding on the Service and there can be no assurance, and none is hereby
given, that the Service will not take a position contrary to one or more
positions reflected herein or that the opinion will be upheld by the courts if
challenged by the Service. EACH SHAREHOLDER OF THE COMPANY IS URGED TO CONSULT
HIS OR HER OWN TAX AND FINANCIAL ADVISORS AS TO THE EFFECT OF SUCH FEDERAL
INCOME TAX CONSEQUENCES ON HIS OR HER OWN PARTICULAR FACTS AND CIRCUMSTANCES
AND ALSO AS TO ANY STATE, LOCAL, FOREIGN OR OTHER TAX CONSEQUENCES ARISING OUT
OF THE MERGER.
Based upon the opinion of Vedder Price, which in turn is based upon
various representations and subject to various assumptions and qualifications,
the following federal income tax consequences to the shareholders of the
Company will result from the Merger:
(i) Provided that the Merger of the Company with and into
Associated Illinois qualifies as a statutory merger under applicable
law, the Merger will qualify as a reorganization within the meaning of
Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code, and the Company,
Associated and Associated Illinois will each be "a party to a
reorganization" within the meaning of Section 368(b) of the Code for
purposes of this reorganization.
(ii) No gain or loss will be recognized by the holders of
the Company Common Stock upon the exchange of the Company Common Stock
solely for Associated Common Stock pursuant to the Merger, except with
respect to cash received in lieu of fractional shares of Associated
Common Stock.
(iii) A Company shareholder's aggregate basis in the
Associated Common Stock (including any fractional share interest to
which he or she may be entitled) received in the Merger will be the
same as the aggregate basis of the Company Common Stock exchanged
therefor.
(iv) The holding period of the Associated Common Stock
received by a holder of Company Common Stock pursuant to the Merger
will include the period during which the Company Common Stock
exchanged therefor was held, provided that the Company Common Stock
surrendered was held as a capital asset as of the time of the Merger.
(v) A holder of Company Common Stock receiving cash in
lieu of fractional share interests of Associated Common Stock in the
Merger will be treated as if he or she actually received such
fractional share interests which were subsequently redeemed by
Associated. The cash a holder of Company Common Stock receives will
be treated as having been received as full payment in exchange for the
stock redeemed as provided in Section 302(a) of the Code.
The foregoing is only a general description of certain material
federal income tax consequences of the Merger for holders of the Company Common
Stock who are citizens or residents of the United States and who hold their
shares as capital assets, without regard to the particular facts and
circumstances of the tax situation of each holder of the Company Common Stock.
It does not discuss all of the consequences that may be relevant to holders of
the Company Common Stock entitled to special treatment under the Code (such as
insurance companies, financial institutions, dealers in securities, tax-exempt
organizations or foreign persons). The summary set forth above does not
purport to be a complete analysis of all potential tax effects of the
transactions contemplated by the Merger Agreements or the Merger itself. No
information is provided herein with respect to the tax consequences, if any, of
the Merger under state, local or foreign tax laws.
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ANTICIPATED ACCOUNTING TREATMENT
The business combination resulting from the Merger is expected to
qualify as a "pooling of interests" for accounting and financial reporting
purposes. Under this method of accounting, the recorded assets and liabilities
of Associated and the Company will be carried forward to the combined
corporation at their recorded amounts; income of the combined corporation will
include income of Associated and the Company for the entire fiscal year in
which the combination occurs; and the reported income of the separate
corporations for the prior periods will be combined and restated as income of
the combined corporation.
The Merger Agreement provides that a condition to the consummation of
the Merger is the receipt of the opinion of the independent public accountants
of Associated to the effect that the Merger qualifies for "pooling of
interests" accounting treatment. IN THE EVENT SUCH CONDITION IS NOT MET, THE
MERGER WOULD NOT BE CONSUMMATED UNLESS THE CONDITION WERE WAIVED BY ASSOCIATED.
DISSENTERS' RIGHTS
Any holder of Company Common Stock as of the Record Date has the right
to dissent to the approval of the Merger pursuant to Section 11.65 of the BCA
and the right to be paid the "fair value" of his or her shares of Company
Common Stock in cash by complying with the procedures set forth in Section
11.70 of the BCA. A holder of Company Common Stock must dissent with respect
to all of the shares beneficially owned by him or her. A record owner of
shares may assert dissenter's 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 Company 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 remaining shares were recorded in
the names of different holders. A beneficial owner of shares who is not the
record owner may assert dissenters' right as to shares held on such person's
behalf only if the beneficial owner submits to the Company the record owner's
written consent to the dissent before or at the same time the beneficial owner
asserts dissenters' rights. A copy of Sections 11.65 and 11.70 of the BCA is
attached to this Proxy Statement/Prospectus as Exhibit D and those sections are
incorporated herein by reference. Set forth below is a summary of the
procedures relating to the exercise of dissenters' rights. This summary does
not purport to be a complete statement of the provisions of Sections 11.65 and
11.70 of the BCA and is qualified in its entirety by reference to Exhibit D.
To be entitled to a cash payment upon exercise of dissenters' rights,
a holder of Company Common Stock must (i) before the vote at the Special
Meeting, deliver to the Company a written demand for payment for his or her
shares if the Merger is consummated, and (ii) not vote his or her shares in
favor of the adoption of the Merger Agreement at the Special Meeting. The
written demand must be made in addition to, and separate from, any proxy or
vote against the approval of the Merger Agreement; neither a proxy nor a vote
against approval of the Merger Agreement shall constitute such a written
demand. It is recommended that the written demand be sent in advance of the
Special Meeting by registered or certified mail, return receipt requested, to
GN Bancorp, Inc., 5200 North Central Avenue, Chicago, Illinois 60630,
Attention: Mr. Morris Gertz, Secretary. The written demand may also be
delivered to the Company before or at the Special Meeting, so long as it is
delivered before the vote is taken on the proposal to approve the Merger
Agreement. With respect to condition (ii), a dissenting holder of Company
Common Stock must either vote by proxy or in person against the Merger
Agreement or abstain from voting. Holders of Company Common Stock who return a
proxy but do not indicate their vote will be deemed to have voted for approval
of the Merger Agreement and will not have satisfied condition (ii).
If a holder of Company Common Stock has satisfied conditions (i) and
(ii) above, then such holder will be entitled only to payment in cash of the
fair value of his or her shares as provided Section 11.70 of the BCA. If such
holder withdraws the written demand to be paid the fair value of his or her
shares, or if the Merger is abandoned or terminated, or if a court determines
that the holder of Company Common Stock is not entitled to
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<PAGE> 46
receive payment for his or her shares, or if the holder otherwise loses his or
her dissenters' rights, then such holder shall be reinstated to all his or her
rights as a holder of Company Common Stock as of the filing of his or her
written demand. If the Merger is consummated, these rights would include the
right to receive the Associated Common Stock and any cash payment, if
applicable, into which his or her shares of the Company Common Stock were
converted pursuant to the Merger Agreement. In addition, these rights would
include the right to receive an intervening dividend or other distribution or,
in lieu of any such right which has expired or any such dividend or
distribution other than in cash which has been completed, at the election of
the Company, the fair value thereof in cash as of the time of the expiration or
completion.
Within ten days after the Effective Time or thirty days after the
dissenting holder of Company Common Stock who complies with conditions (i) and
(ii) noted above delivers to the Company his or her written demand for payment,
whichever is later, Associated Illinois, as successor to the Company, shall
send to each such holder: (a) a statement setting forth the opinion of the
Company as to the estimated value of the shares of the Company Common Stock,
(b) the Company's latest balance sheet as of the end of the fiscal year ending
not earlier than sixteen months before delivery of the statement, together with
the statement of income for such year and the latest interim financial
statements, and (c) a commitment to pay for the shares of the dissenting holder
of Company Common Stock at the estimated value thereof upon transmittal to
Associated Illinois of the certificate or certificates, or other evidence of
ownership, with respect to such shares.
If the dissenting holder of Company Common Stock does not agree with
the opinion of Associated Illinois as to the estimated value of his or her
shares of the Company Common Stock, the holder, within thirty days of the
delivery of Associated Illinois' statement of estimated value, shall notify
Associated Illinois in writing of the holder's estimate of value and demand
payment for the difference between the holder's estimate of value and the
amount of the proposed payment by Associated Illinois.
If, within sixty days from delivery of the holder's notification of
the estimate of value of the shares of the Company's Common Stock, Associated
Illinois and the dissenting holder have not agreed in writing upon the value of
the shares, Associated Illinois has the right to either (i) pay the difference
in value demanded by the holder or (ii) file a petition in the Circuit Court of
Cook County, Illinois, requesting the court to determine the "fair value" of
the shares of the Company Common Stock. If Associated Illinois commences such
a proceeding, it must make all dissenters, whether or not residents of the
State of Illinois, whose demands remain unsettled, parties to the proceeding as
an action against their shares and all parties must be served with a copy of
the petition. Non-resident holders may be served by registered or certified
mail or by publication as provided by law. The failure of Associated Illinois
to commence an action pursuant to Section 11.70 of the BCA shall not limit or
affect the right of dissenting holders to otherwise commence an action as
permitted by law.
Each dissenting holder of Company Common Stock who is 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 of the Company Common
Stock exceeds the amount committed to be paid by Associated Illinois. The
judgment may include an allowance for interest as the court may find fair and
equitable in the circumstances from the Effective Time to the date of payment.
If the fair market value of the shares as determined by the court materially
exceeds the amount which Associated Illinois offered to pay for the shares, or
if no offer was made, then all or any part of the expenses of the proceeding,
including the reasonable compensation and expenses of appraisers and experts
employed by the dissenting holder of Company Common Stock but excluding
expenses of counsel, may be assessed against Associated Illinois. On the other
hand, if the fair value of the shares as determined by the court does not
materially exceed the amount which Associated Illinois offered to pay for the
shares, then the dissenting holder may be responsible for paying his or her own
expenses of the proceeding.
ANY HOLDER OF THE COMPANY COMMON STOCK CONTEMPLATING THE EXERCISE OF
DISSENTERS' RIGHTS WITH RESPECT TO HIS OR HER SHARES OF THE COMPANY COMMON
STOCK IS URGED TO REVIEW CAREFULLY THE PROVISIONS OF EXHIBIT D SINCE
DISSENTERS' RIGHTS
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MAY BE LOST IF THE REQUIREMENTS OF SECTIONS 11.65 AND 11.70 OF THE BCA ARE NOT
FULLY AND PRECISELY SATISFIED.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Indemnification and Exculpation. The Merger Agreement provides that,
by virtue of the occurrence of the Merger, Associated shall from and after the
Effective Time succeed to the Company's obligations with respect to
indemnification or exculpation existing at the time the Merger Agreement was
executed in favor of the directors, officers, employees and agents of the
Company and its subsidiaries as provided in the Articles of Incorporation,
Bylaws or otherwise in effect as of the date of the Merger Agreement with
respect to matters occurring prior to the Effective Time and not initiate or
join in any claim, action, suit, proceeding or investigation against the
Indemnified Parties arising out of, or pertaining to, the management or
operation of the Company or subsidiaries prior to the Effective Time unless
required by bank regulators or applicable fiduciary duties.
Pursuant to the Merger Agreement, Associated agreed, from and after
the Effective Time, to use its best efforts to maintain an insurance policy for
directors' and officers' liabilities for all present and former directors and
officers of the Company covered by the Company's current insurance policies on
the date of the Merger Agreement; provided, however, that such obligation shall
be completely satisfied at such time as Associated shall have satisfied either
of the following conditions: (i) Associated shall have maintained such an
insurance policy for a period of five years from and after the Effective Time
or (ii) Associated shall have incurred costs to maintain such insurance equal
to or exceeding $100,000.
Employment Agreements. In connection with the Merger, Associated
(through the Bank as employer) will enter into an Employment and
Non-Competition Agreement with Eugene P. Mroz (the "Mroz Agreement") providing
for the employment of Mr. Mroz by the Bank after the Merger as an executive
employee of the Bank, or in such other management capacity as may be determined
by Associated, for the period commencing on the closing date of the Merger and
continuing, unless sooner terminated as provided in the Mroz Agreement, until
the third anniversary of such date. Pursuant to the Mroz Agreement, Mr. Mroz
will receive a base annual salary of $150,000 together with employee benefits
generally made available to the Chairman by the Bank. During the three year
term, unless terminated prior thereto, and for two years following termination
of the Mroz Agreement, Mr. Mroz has agreed not to compete with any commercial
banking operations of the Bank within twenty-five miles of the Bank's main
banking office.
Associated (through the Bank as employer) will enter into an
Employment and Non-Competition Agreement with Robert O. Walcott (the "Walcott
Agreement") providing for the employment of Mr. Walcott by the Bank as an
executive employee, for the period commencing on the closing date of the Merger
and continuing, unless sooner terminated as provided in the Walcott Agreement,
until the first anniversary of said date. Pursuant to the Walcott Agreement,
Mr. Walcott will receive a base annual salary of $135,000 together with
employee benefits generally made available to the President by the Bank.
During the term of the Walcott Agreement, unless terminated pursuant to its
provisions prior thereto, and for two years following the termination of the
Walcott Agreement, Mr. Walcott has agreed not to compete with any commercial
banking operations of the Bank within five miles of the Bank's main banking
office.
In addition, Associated (with the Bank as employer) will enter into an
Employment and Non-Competition Agreement with each of Messrs. Morris Gertz and
Bruno J. Marczyk (the "Executive Employment Agreements") providing for the
employment of Messrs. Gertz and Marczyk, respectively, by the Bank as executive
employees for the period commencing on the closing date of the Merger and
continuing, unless sooner terminated as provided in the Executive Employment
Agreements, until the first anniversary of said date. Pursuant to the
Executive Employment Agreements, Messrs. Gertz and Marczyk will receive base
annual salaries of $65,000 and $75,000, respectively, together with employee
benefits generally made available by the Bank. During the term, unless
terminated pursuant to their provisions prior thereto, and for two years
following the termination of the Executive
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Employment Agreements, Messrs. Gertz and Marczyk have agreed not to compete
with any commercial banking operations of the Bank within a five mile radius of
the Bank's main banking office and Associated has agreed not to unreasonably
withhold its consent if, subsequent to termination of employment, Messrs. Gertz
or Marczyk seek a position at a commercial banking organization within such
radius which does not involve customer contact.
Retirement and Welfare Benefits. Associated has agreed that following
the closing date of the Merger through calendar year 1997 it will provide
(though the Bank) retirement and welfare benefits to continuing employees of
the Bank which in the aggregate are on terms no less favorable than those
currently provided by the Bank. Associated has also stated that it is its
current intention to provide continuing employees of the Bank following such
date with retirement and welfare benefits which in the aggregate are on terms
no less favorable than those provided to other similarly situated employees of
Associated and its subsidiaries. Associated has agreed to provide (through the
Bank and subject to restrictions on contributions) continuing employees a
minimum guaranteed contribution to the employee's 401(k) plan account of 3% of
base compensation of each eligible employee and additional contributions based
upon the earnings performance of the Bank. Associated is providing a severance
program for employees of the Bank whose employment is terminated through
integration of operations. Severance benefits are calculated based upon
position and length of employment.
Employee Stock Options. At the Effective Time, each option to
purchase a share of Company Common Stock (each, a "Company Stock Option") under
the Company's Stock Benefit Plan (the "Stock Plan") shall constitute an option
to acquire, on the same terms and conditions as were applicable under such
Company Stock Option, a number of shares of Associated Common Stock equal to
the product of the Exchange Ratio and the number of shares subject to such
Company Stock Option, at a price per share (rounded up to the nearest whole
cent) equal to the exercise price per share of Company Common Stock subject to
such Company Stock Option divided by the Exchange Ratio. Pursuant to the terms
of the Stock Plan, upon effectiveness of the Merger all Company Stock Options
become immediately exercisable.
Bank's Board of Directors. Associated has agreed that the members of
the Bank's Board of Directors immediately prior to the closing date shall
remain on the Bank's Board of Directors following the Merger until their
successors shall have been duly elected and qualified.
Information relating to the security ownership of directors and
officers of the Company is set forth under "Certain Information Concerning the
Company."
THE INDUCEMENT FEE
Pursuant to the Merger Agreement, the Company has granted to
Associated the right to receive payment of an Inducement Fee from the Company
in an amount of $1,250,000 upon the occurrence of certain events. Included
among such events is the failure of shareholders of the Company to approve the
Merger. In addition, such events generally relate to (i) the withdrawal,
modification or amendment of approval or recommendation of the Merger by the
Company's Board of Directors; (ii) the Board accepts, approves, does not
reject, expresses no opinion or remains neutral with respect to a Competing
Transaction; or (iii) termination of the Merger Agreement following a willful
and material breach. None of such events has occurred as of the date hereof.
The Inducement Fee shall be reduced by amounts payable by the Company to
Associated under the Merger Agreement for expenses incurred by Associated in
connection with the Merger Agreement and any consideration paid by the Company
under the Stock Option Agreement. See "Certain Provisions of the Merger
Agreement - The Inducement Fee."
The Inducement Fee may discourage persons who might now or in the
future be interested in acquiring all or a significant interest in the Company
from considering or proposing such an acquisition, even if such persons were
prepared to pay a higher price per share for the Company Common Stock than the
price per share implicit in the Exchange Ratio. Certain attempts to acquire
the Company or an interest in the Company would cause the fee to become
payable, thereby increasing the overall cost to a potential acquiror of
acquiring the Company
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compared to its cost had the Inducement Fee not been incurred. Such increased
cost might discourage a potential acquiror from considering or proposing an
acquisition or might result in a potential acquiror proposing to pay a lower
per share price to acquire the Company than it might otherwise have proposed to
pay.
THE STOCK OPTION AGREEMENT
Pursuant to the Stock Option Agreement, attached hereto as Exhibit B,
the execution of which was a condition to Associated entering into the Merger
Agreement, the Company has granted to Associated an option to purchase up to
18,011 shares of Company Common Stock, subject to adjustment, representing
16.37% of the issued and outstanding shares of the Company Common Stock on a
when-issued basis (including shares reserved under the Company Stock Option
Plan) at a price of $225.00 per share, subject to the terms and conditions and
period set forth therein (the "Option"). The Option price was established
based upon the value of shares of Company Common Stock calculated based upon
the lowest Associated Average Price pursuant to the Merger Agreement at which
the Merger could be consummated which was $231.00 per share. The amount of any
consideration to be received under the Stock Option Agreement, based upon the
economic value of the option, together with the Inducement Fee is limited to
$1,250,000. The Option may only be exercised by Associated upon the occurrence
of a Competing Transaction. None of such events has occurred as of the date
hereof. See "Certain Provisions of the Stock Option Agreement."
Anti-Takeover Effect of the Stock Option Agreement. Certain aspects
of the Stock Option Agreement may have the effect of discouraging persons who
might now or in the future be interested in acquiring all of or a significant
interest in the Company from considering or proposing such an acquisition, even
if such persons were prepared to pay a higher price per share for the Company
Common Stock than the price per share implicit in the Exchange Ratio. Certain
attempts to acquire the Company or an interest in the Company would cause the
Option to become exercisable as described above and would trigger Associated's
right to receive any premium offered to holders of the Company Common Stock and
Associated's reasonable out-of-pocket expenses incurred in connection with the
Merger Agreement and the Stock Option Agreement which in the aggregate,
including the Inducement Fee, may not exceed $1,250,000. Such right would
increase the cost to a potential acquiror of acquiring the Company compared to
its cost had the Stock Option Agreement not been executed. Such increased cost
might discourage a potential acquiror from considering or proposing an
acquisition or might result in a potential acquiror proposing to pay a lower
per share price to acquire the Company than it might otherwise have proposed to
pay. In addition, the exercise of the Stock Option is likely to prohibit any
acquiror of the Company (other than Associated) from accounting for any
acquisition of the Company using the "pooling of interests" accounting method.
This could act as a deterrent to a potential acquiror making a competing offer
for the Company. In addition, exercise of the Option would increase the
ability of the holder to obtain the approval of the common shareholders of the
Company to consummate the Merger and adversely affect the ability of a third
party to obtain the approval of such common shareholders to consummate an
alternative transaction.
OTHER RELATED PARTY TRANSACTIONS
In the ordinary course of conducting their banking and financial
services businesses, each of Associated, the Company and their respective
subsidiaries, may do business and engage in banking transactions with the other
party and its subsidiaries, which may include but not be limited to interests
or participations in loans and interbank advances.
MANAGEMENT AFTER THE MERGER
In the Merger, the Company will be merged into Associated Illinois and
the separate corporate existence of the Company will cease. Associated will
thereby acquire control of the Bank through Associated Illinois and the Bank
will operate under the name "Associated/Gladstone-Norwood Trust & Savings
Bank."
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The officers and directors of Associated Illinois prior to the Merger
will continue as officers and directors of the surviving corporation. The
directors of the Bank prior to the Effective Time will continue as directors
after the Effective Time until their successors shall have been duly elected
and qualified. Two individuals nominated by Associated Illinois shall be
elected to the Board of the Bank subsequent to the Effective Time.
CERTAIN PROVISIONS OF THE MERGER AGREEMENT
The following is a brief summary of certain provisions of the Merger
Agreement, which is attached as Exhibit A to this Proxy Statement/Prospectus
and is incorporated herein by reference. Such summary is qualified in its
entirety by reference to the Merger Agreement.
THE MERGER
The Merger Agreement provides that, following the approval of the
Merger Agreement by the shareholders of the Company and the satisfaction or
waiver of the other conditions to the Merger, the Company will be merged with
and into Associated Illinois. If the Merger Agreement is approved by the
shareholders of the Company, the Merger will become effective upon the
Effective Time.
At the Effective Time, pursuant to the Merger Agreement, each
outstanding share of the Company Common Stock will be converted into the right
to receive that certain number of shares of Associated Common Stock determined
pursuant to "The Merger - Merger Consideration." With regard to the
treatment of fractional share interests, see "The Merger - Conversion of
Shares; Procedures for Exchange of Certificates; Fractional Shares."
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains customary representations and warranties
relating to, among other things, (i) each of Associated's and the Company's and
their respective subsidiaries' organization and similar corporate matters; (ii)
each of Associated's and the Company's capital structure; (iii) authorization,
execution, delivery, performance and enforceability of the Merger Agreement and
other related matters; (iv) documents filed by Associated with the Commission
and each of Associated and the Company with the Federal Reserve Board and the
accuracy of information contained therein; (v) the accuracy of information
supplied by each of Associated and the Company in connection with the
Registration Statement and this Proxy Statement/Prospectus; (vi) compliance
with law; (vii) no material pending or threatened litigation except as
otherwise disclosed in filings with the Commission or otherwise as provided in
the Merger Agreement; (viii) filing of tax returns and payment of taxes; (ix)
certain contracts relating to certain employment, consulting and benefits
matters; (x) retirement and other employee plans and matters relating to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"); (xi) the
absence of any burdensome contracts, agreements or restrictions; (xii) absence
of certain material changes or events since December 31, 1994, relating to the
incurrence of a material adverse effect in the business operations, properties
(including intangible properties), condition (financial or otherwise), assets
or liabilities (including contingent liabilities) of Associated or its
subsidiaries, taken as a whole, and the Company or its subsidiaries, taken as a
whole; (xiii) no action taken that would prevent using the "pooling of
interests" method to account for the Merger or which would prevent the Merger
from qualifying as a tax-free reorganization under the Code; (xiv) certain
environmental matters; (xv) good title to the properties of the Company and its
subsidiaries, free of liens except as specified; and (xvi) certain insurance
matters.
CERTAIN COVENANTS
Pursuant to the Merger Agreement, Associated and the Company have each
agreed that prior to the Effective Time (and unless the prior written consent
of the other shall have been obtained) each of them and their
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respective subsidiaries will operate their respective businesses in a manner
that does not violate any law. In addition, the Company has agreed that prior
to the Effective Time, the Company will not propose or adopt any amendments to
its corporate charter or bylaws in any way materially adverse to Associated.
Pursuant to the Merger Agreement, the Company has also agreed that
prior to the Effective Time (and unless the prior written consent of Associated
shall have been obtained) the Company and its subsidiaries will (i) carry on
business in the usual, regular and ordinary course consistent with past
practice, (ii) use reasonable efforts to preserve intact their business
organization and assets (and all rights associated therewith), (iii) use
reasonable efforts to maintain and keep their properties in good repair and
condition, (iv) use reasonable efforts to keep all insurance and bonds in full
force and effect, (v) perform in all material respects all obligations under
all material contracts, leases and documents relating to or affecting the
assets, properties and business of the Company and its subsidiaries, and (vi)
comply with and perform in all material respects all obligations and duties
imposed by all applicable laws. The Company has also agreed that prior to the
Effective Time (and unless the prior written consent of Associated shall have
been obtained), neither the Company nor its subsidiaries will: (i) grant any
general increase any compensation or retirement benefits to any employee or
otherwise adopt, enter into, amend or modify any employee benefit plan, or
enter into or amend any employment, severance or similar agreement with any
director or officer (other than as is consistent with the normal severance
policy of the Company); (ii) declare or pay any dividend on its outstanding
shares of capital stock; (iii) redeem, purchase or otherwise acquire any shares
of the Company capital stock; (iv) merge or consolidate with or into any other
corporation or bank; (v) purchase or otherwise acquire any assets or stock of
any corporation, bank or other business; (vi) liquidate, sell, dispose of, or
encumber any assets or acquire any assets, other than in the ordinary course of
business consistent with past practice; (vii) split, combine or reclassify any
of the capital stock of the Company or issue, authorize or propose the issuance
of any other securities in respect of, in lieu of or in substitution for shares
of its capital stock; (viii) issue, deliver, award, grant or sell, or authorize
or propose the issuance, delivery, award, grant or sale of, any shares of any
class of the Company Common Stock or any rights, warrants or options to
acquire, any such shares; (ix) purchase any shares of Associated Common Stock
(except in a fiduciary capacity for the account of its customers); (x) change
any of its methods of accounting, or methods of reporting income or deductions
for federal income tax purposes, in effect at December 31, 1994; (xi) change
any lending, investment, liability management or other material policies
concerning the business or operations of the Company or any subsidiary in any
material respect; (xii) organize any new subsidiaries or enter into any new
non-bank line of business or make any material changes in its operations;
(xiii) take any action which is or is reasonably likely to adversely effect the
ability of Associated or Associated Illinois to obtain any necessary approvals
of governmental authorities required for the transactions contemplated hereby,
adversely affect the Company's ability to perform its covenants and agreements
under the Merger Agreement or result in any of the conditions to the Merger not
being satisfied; (xiv) incur or assume any material obligation or liability, or
make any loan (excluding loan renewals of a loan not then classified as
"substandard," "doubtful," "loss," "other loans especially mentioned" or any
comparable classifications by the Company, the Bank or banking regulators) or
investment in an amount greater than $100,000; (xv) assume, guarantee, endorse
or otherwise become liable or responsible for the obligations of any other
person or entity; (xvi) mortgage, license, pledge or grant a security interest
in any of its material assets or allow to exist any material lien thereon,
except (A) liabilities and obligations incurred in the ordinary course of
business consistent with past practices and in amounts not material to the
Company or its subsidiaries taken as a whole, and (B) as may be required under
existing agreements to which the Company or any subsidiary is a party; (xvii)
acquire a material amount of assets or securities; (xviii) pay, discharge, or
satisfy any debts or claims not in the ordinary course of business and
consistent with past practices and in no event with a value in excess of
$20,000 individually; (xix) settle any claim, action, suit, litigation,
proceeding, arbitration, investigation or controversy of any kind, for any
amount in excess of $25,000 or in any manner which would restrict in any
material respect the operations or business of the Company or its subsidiaries;
(xx) purchase any financial product or instrument which involves entering into
a contract with a term of six months or longer; or (xxi) take any action or
fail to take any action which individually or in the aggregate can be expected
to have a material adverse effect (as defined in the Merger Agreement) on the
Company or its subsidiaries, taken as a whole.
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NO SOLICITATION OF TRANSACTIONS
The Merger Agreement provides that the Company and its respective
subsidiaries will not initiate, solicit or encourage (including by way of
furnishing information or assistance), or take any other action to facilitate,
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to any Competing Transaction or negotiate with any person
in furtherance of such inquiries or to obtain a Competing Transaction, or agree
to or endorse any Competing Transaction, or authorize or permit any of its
officers, directors or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it or any of its
subsidiaries to take any such action. The Company must promptly notify
Associated orally and in writing of all of the relevant details relating to all
inquiries and proposals which it may receive relating to any of such matters.
Notwithstanding the foregoing, the Board of Directors of the Company is not
prohibited from (i) furnishing or permitting any of its officers, directors,
employees, investment bankers, financial advisors, attorneys, accountants or
other representatives to furnish information to any party that requests
information as to the Company if the Board of Directors of the Company, after
consultation with and based upon the written advice of independent legal
counsel, determines that such action is required for the Board of Directors of
the Company to comply with its fiduciary duties to shareholders imposed by law,
and if prior to furnishing such information to such party, the Company receives
from such party an executed confidentiality agreement in reasonably customary
form or (ii) complying with Rules 14d-2 and 14e-2 promulgated under the
Exchange Act with regard to a Competing Transaction.
For purposes of the Merger Agreement, a "Competing Transaction" shall
mean any of the following involving the Company or any of the Company's
subsidiaries: (i) any merger, consolidation, share exchange, business
combinations, or other similar transactions; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of 10% or more of assets in a
single transaction or series of transactions, excluding from the calculation of
such percentage any such transactions undertaken in the ordinary course of
business and consistent with past practice; (iii) any sale of 10% or more of
shares of capital stock (or securities convertible or exchangeable into or
otherwise evidencing, or any agreement or instrument evidencing, the right to
acquire capital stock); (iv) any tender offer or exchange offer for 10% or more
of outstanding shares of capital stock; (v) any solicitation of proxies in
opposition to approval by the Company's shareholders of the Merger; (vi) the
filing of an acquisition application (or the giving of acquisition notice)
whether in draft or final form under the BHC Act or the Change in Bank Control
Act with respect to the Company; (vii) any person shall have acquired
beneficial ownership or the right to acquire beneficial ownership of, or any
"group" (as such term is defined under Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of, 10% or
more of the then outstanding shares of capital stock; or (viii) any public
announcement of a proposal, plan or intention to do any of the foregoing.
CONDITIONS TO CONSUMMATION OF THE MERGER
The respective obligations of each party to effect the Merger is
subject to various conditions which include, in addition to other customary
closing conditions, the following: (i) the Merger shall have been approved by
the holders of the Company Common Stock; (ii) the Registration Statement shall
have been declared effective by the Commission under the Securities Act (and no
stop order suspending the effectiveness of the Registration Statement shall
have been issued) and Associated shall also have received all other federal and
state securities permits and authorizations necessary to issue Associated
Common Stock pursuant to the Merger Agreement; (iii) the Merger shall have been
approved by the Federal Reserve Board, which approval shall not contain any
condition which is not reasonably satisfactory to Associated or the Company,
and any waiting periods with respect to the Merger shall have expired; and (iv)
there shall not be any injunction or restraining order preventing the
consummation of the Merger in effect.
In addition, Associated's or the Company's respective obligation to
effect the Merger is subject to one or more of the following additional
conditions (any of which may be waived by such party): (i) the representations
and warranties of the other party to the Merger Agreement shall be true and
correct in all material respects and the other party shall have performed in
all material respects all agreements and covenants required to be performed by
it
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under the Merger Agreement and any agreements entered into in connection
therewith, and the other party shall have obtained all material consents and
approvals required to consummate the Merger; (ii) there shall not be any
pending action, proceeding or investigation before any court or administrative
agency or by any government agency or any other person (a) challenging or
seeking material damages in connection with the Merger, or the conversion of
the Company Common Stock into Associated Common Stock pursuant to the Merger,
or (b) seeking to restrain, prohibit or limit the exercise of full rights of
ownership or operation by Associated or its subsidiaries of all or any portion
of the business or assets of the Company or any of its subsidiaries, which in
either case is reasonably likely to have a material adverse effect on either
the Company and its subsidiaries, taken as a whole, or Associated and its
subsidiaries, taken as a whole; (iii) the parties shall have received the
opinion of Vedder Price that the Merger will be treated for federal income tax
purposes as a "reorganization" within the meaning of Section 368(a) of the Code
(see "The Merger - Certain Material Federal Income Tax Consequences," above);
(iv) Associated shall have received (x) an opinion from KPMG Peat Marwick LLP
to the effect that the Merger qualifies for "pooling of interests" accounting
treatment and (y) a letter from McGladrey & Pullen, LLP with respect to the
financial condition of the Company dated (a) the date of the mailing of the
Proxy Statement/Prospectus and (b) the Effective Time; (v) the aggregate of (a)
fractional share interests in Associated Common Stock to be paid in cash
pursuant to the Merger Agreement and (b) the number of shares of Associated
Common Stock which would have been issuable pursuant to the Merger Agreement
that will not be issued due to the exercise of dissenters' rights is not more
than 10% of the maximum aggregate number of shares of Associated Common Stock
which could be issuable as a result of the Merger; (ix) Associated and the
Company shall have received the opinion of counsel regarding certain issues
under the Securities Act, the WBCL and the BCA; and (x) Associated shall have
received from each affiliate of the Company a signed letter regarding certain
restrictions on the resale of Associated Common Stock under Rule 145 of the
Securities Act.
The Merger Agreement contained the following conditions which have
been satisfied. The respective obligations of each party to the Merger were
subject to the shareholders of the Company on or before April 15, 1995 taking
all necessary action waiving any right of redemption by the Company or right of
shareholders to purchase shares of the Company Common Stock arising out of the
Merger Agreement as might arise under the Buy-Sell Agreement. The obligations
of the Company were subject to receipt of the Fairness Opinion within fifteen
days of the execution and delivery of the Merger Agreement.
TERMINATION
The Merger Agreement may be terminated at any time prior to the
Effective Time by the applicable Board of Directors, whether before or after
approval of the matters presented in connection with the Merger by the
shareholders of the Company: (i) by mutual consent of Associated and the
Company; (ii) by either the Company or Associated (x) if there has been a
breach in any material respect of any representation, warranty, covenant or
agreement on the part of the Company, on the one hand, or Associated, on the
other hand, respectively, set forth in the Merger Agreement, or (y) if any
representation or warranty of the Company, on the one hand, or Associated, on
the other hand, respectively, shall be discovered to have become untrue in any
material respect, in either case which breach or other condition has not been
cured within 10 business days following receipt by the non-terminating party of
notice of such breach or other condition (provided that the Merger Agreement
may not be terminated by the breaching party or party making any representation
or warranty which shall have become untrue in any material respect); (iii) by
either Associated or the Company if any permanent injunction preventing the
consummation of the Merger shall have become final and nonappealable; (iv) by
either Associated or the Company if the Federal Reserve Board or the Illinois
Commissioner denied approval of the Merger and neither Associated nor the
Company has, within 30 days after the entry of such order denying approval,
filed a petition seeking review of such order as provided by applicable law;
(v) by either Associated or the Company if any event occurs prior to the
Effective Time which will or is likely to have a change or effect that is or is
reasonably likely to be materially adverse to a party's business, operations,
properties (including intangible properties), condition (financial or
otherwise), assets or liabilities (including contingent liabilities) (a
"Material Adverse Effect") on the business or financial condition of the
Company or Associated including, without limitation, the cancellation or
termination of any insurance if the Company is unable to procure a reasonable
replacement therefor and a failure to procure such replacement is likely
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to be a Material Adverse Effect on the Company and such Material Adverse Event
has not been cured within 10 business days following receipt by the
nonterminating party of notice of such Material Adverse Event; or (vi) by
either Associated or the Company if the Merger has not been consummated by
November 30, 1995 for a reason other than the failure of the terminating party
to comply with its obligations under the Merger Agreement.
The Merger Agreement also provides that it may be terminated by the
Company if the Associated Average Price is less than $26.40 per share, and if
the Company and Associated are unable to agree upon the rate at which shares of
Associated Common Stock would be exchanged into shares of the Company Common
Stock in the Merger within 15 days after the date the Associated Average Price
was determined. If the foregoing condition was applied as of June 21, 1995,
the applicable Associated Average Price would be $29.77 per share. Thus, if
the condition were applied as of the date of this Proxy Statement/Prospectus,
the Company would not have the right to terminate the Merger Agreement based
upon this provision. However, if this provision becomes operative prior to the
Effective Time, then the Board of Directors of the Company, depending upon the
circumstances, will exercise the Company's rights under the provisions of the
Merger Agreement. The exercise of these rights may lead to actions, including,
without limitation, termination of the Merger Agreement, amendment of its terms
or waiver of the Company's right to terminate the Merger Agreement. Any
decision the Board of Directors may make in this regard may depend on certain
factors, including, without limitation (a) the Average Price; (b) any action
that Associated may offer to take to induce the Company to consummate the
Merger (this is not to imply that Associated will take any such action or that
the Company would require such action as a condition to waiving its rights);
(c) the factors the Board of Directors of the Company considered in approving
the Merger Agreement and the Merger; (d) Baird's view as to the fairness of the
Exchange Ratio from a financial point of view; and (e) such other economic and
noneconomic factors as the Board of Directors may deem relevant. See "Reasons
for the Merger."
Though the following condition has been satisfied, the Merger
Agreement was terminable by either the Company or Associated, on the 15th day
following the execution and delivery of the Merger Agreement if the Company was
unable to obtain the Fairness Opinion. The Merger Agreement also provided
Associated the right to terminate the Merger Agreement at any time prior to
June 6, 1995 (as extended), if certain environmental conditions were found to
exist with respect to certain real estate owned or leased by the Company or its
subsidiaries. Such environmental conditions were not found to exist.
In the event of termination of the Merger Agreement by either the
Company or Associated, other than as a result of a material breach by the
non-terminating party or by an event as a result of which the Inducement Fee is
payable, each party will pay its own expenses and the Merger Agreement will
become void and there will be no liability or obligation on the part of
Associated or the Company other than under certain specified provisions of the
Merger Agreement dealing with confidential treatment of non-public information.
In the event of termination of the Merger Agreement by a material breach, in
addition to other remedies at law or equity for breach, the party to have
breached will reimburse the non-breaching parties their expenses under the
Merger Agreement.
THE INDUCEMENT FEE
The Company has granted to Associated the right to receive a
$1,250,000 payment from the Company upon the occurrence of certain events. See
"The Merger - The Inducement Fee." No such event has occurred as of the date
of this Proxy Statement/Prospectus. The Merger Agreement provides that the
Inducement Fee is to be reduced by amounts payable by the Company to Associated
for expenses incurred by Associated in connection with the Merger Agreement and
any consideration received by Associated in respect of the Stock Option
Agreement. Associated's right to be reimbursed by the Company for fees and
expenses is provided in Section 8.02(b) of the Merger Agreement. For a
discussion of the potential anti-takeover effects of the Inducement Fee, see
"The Merger - The Inducement Fee" and "The Merger - The Stock Option
Agreement."
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AMENDMENT AND WAIVER
The Merger Agreement may be amended at any time prior to the Effective
Time by action taken or authorized by the respective Boards of Directors of
Associated and the Company (except that after the Merger Agreement shall have
been approved by the shareholders of the Company, no amendment may be entered
into which would reduce the amount or change the consideration into which each
share of the Company Common Stock shall be converted upon consummation of the
Merger without further shareholder approval). At any time prior to the
Effective Time, the parties, may extend the time for the performance of any of
the obligations or other acts of the other party hereto, waive any inaccuracies
in the representations and warranties contained in the Merger Agreement or in
any document delivered pursuant to the Merger Agreement and waive compliance
with any of the agreements or conditions contained in the Merger Agreement.
EXPENSES
Whether or not the Merger is consummated, all costs and expenses
incurred in connection with the Merger Agreement and the transactions
contemplated thereby shall be paid by the party incurring such expense (except
that the parties shall share equally in the expense of printing and reproducing
for filing the Registration Statement and this Proxy Statement/Prospectus and
all Commission and other state securities regulatory filing fees incurred in
connection with the Merger Agreement), except (i) if the Merger Agreement is
terminated due to the breach of the Merger Agreement by either party thereto,
then, in addition to other remedies at law or equity for breach of the Merger
Agreement, the party so found to have breached the Merger Agreement shall
indemnify the other parties for their respective expenses, and (ii) the Company
shall immediately pay Associated the Inducement Fee under the circumstances in
which such fee is otherwise payable. The Inducement Fee shall be considered
liquidated damages and shall be reduced by amounts payable by the Company to
Associated for expenses incurred by Associated in connection with the Merger
Agreement and any consideration received by Associated in respect of the Stock
Option Agreement. In addition, if the Merger Agreement is terminated by
Associated other than because of a breach of the Merger Agreement by the
Company or terminated by the Company provided the Inducement Fee has not become
payable, Associated is required to reimburse the Company amounts related to
real property owned by Realty. Associated is required to reimburse the Company
for the amount that interest on acquisition financing, real estate taxes,
insurance and such other reasonable out-of-pocket expenses actually incurred
exceed rent and fees received by Realty on such property.
CERTAIN PROVISIONS OF THE STOCK OPTION AGREEMENT
The following is a brief summary of certain provisions of the Stock
Option Agreement, which is attached as Exhibit B to this Proxy
Statement/Prospectus and is incorporated herein by reference. The following
summary is qualified in its entirety by reference to the Stock Option
Agreement.
THE OPTION
Pursuant to the Stock Option Agreement, the Company has granted to
Associated an option to purchase up to 18,011 shares of the Company Common
Stock (subject to adjustment) representing 16.37% of the issued and outstanding
shares of the Company Common Stock on a when-issued basis (including shares
reserved under the Company Stock Option Plan) at a price of $225.00 per share
(the "Purchase Price"). The aggregate amount of consideration of any kind
which Associated (or any holder of the Option) can receive in connection with
the Stock Option Agreement, its expenses incurred in connection with the Merger
Agreement and the Inducement Fee is limited to $1,250,000 (the "Limit"). In
the event any amounts are payable pursuant to the Stock Option Agreement in
excess of the Limit, such amounts are to be held in constructive trust for the
benefit of the Company and immediately paid to the Company in the form
received.
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EXERCISE OF THE OPTION
The Option is exercisable only upon the occurrence of a Competing
Transaction (an "Exercise Event"). See "Certain Provisions of the Merger
Agreement - No Solicitation of Transactions."
EXPIRATION OF THE OPTION
The Option expires upon the earliest to occur of (i) the Effective
Time, (ii) 12 months after the first occurrence of an Exercise Event, and (iii)
12 months after termination of the Merger Agreement. Associated's right to
terminate the Stock Option Agreement and to demand payment of the Termination
fee (as defined below) or request the Company to repurchase any shares of the
Company Common Stock purchased by Associated pursuant to the exercise of the
Option and to demand payment of the Repurchase Fee (as defined below) shall not
terminate upon expiration of Associated's right to exercise the Option. The
closing of a purchase of shares pursuant to the Stock Option Agreement is
subject to any necessary governmental approvals, including those under the BHC
Act. The consummation of a purchase or a repurchase pursuant to the Stock
Option agreement and the payment by the Company to Associated of the
Termination Fee or Repurchase Fee is subject to, among other things, obtaining
all required regulatory approvals. In no event shall the closing of a purchase
of shares pursuant to the Stock Option Agreement occur more than 18 months
after the requisite notice to purchase such shares is given. In the event,
however, that the period for exercising the right to acquire shares pursuant to
the Stock Option Agreement expires during the pendency of any application to
obtain regulatory approval for (i) the purchase of shares, (ii) the payment of
the Termination Fee, or (iii) the payment of the Repurchase Fee, the period for
exercising such right is tolled and, if such approval is denied, the holder has
an additional 30 days to exercise its purchase rights to Registration Rights
(as defined below) as the case may be, under the Stock Option Agreement.
ADJUSTMENT OF NUMBER OF SHARES SUBJECT TO OPTION
The number and type of securities subject to the Option and the
purchase price of the shares will be adjusted for any change in the Company
Common Stock by reason of a stock dividend, stock split, recapitalization,
combination, exchange of shares or similar transaction, such that Associated
will receive (upon exercise of the Option) the same number and type of
securities as if the Option had been exercised immediately prior to the
occurrence of such event (or the record date therefor). The number of shares
of common stock subject to the Option will also be adjusted in the event the
Company issues additional shares of common stock, such that the number of
shares of the Company Common Stock subject to the Option represents 16.37% of
the issued and outstanding shares of the Company Common Stock on a when-issued
basis (including shares reserved under the Company Stock Option Plan). In the
event the Company enters into any agreement to (i) merge or consolidate with
any person other than Associated or one of its subsidiaries such that the
Company is not the surviving corporation, (ii) permit any person other than
Associated to merge into the Company such that the Company shall be the
surviving corporation, but, in connection with such merger, the then
outstanding shares of the Company Common Stock shall be changed into or
exchanged for (x) stock or other securities of the Company or any other person
or (y) cash or any other property, or the outstanding shares of the Company
Common Stock after such merger represent less than 50% of the outstanding
shares and share equivalents of the merged company, or (iii) sell or otherwise
transfer all or substantially all of its assets to a person other than
Associated or one of its subsidiaries, then the agreement governing such
transaction, in each such case, must provide that, upon consummation of such
transaction, the Option will be converted into or exchanged for an option to
purchase securities of either the acquiring person, a person that controls the
acquiring person or the Company (if the Company is the surviving entity).
TERMINATION OPTION OF ASSOCIATED
Associated has the right to terminate the Option, to the extent not
exercised, and demand from the Company the Termination Fee (as defined below),
in the following circumstances: (i) upon the first occurrence of and for 12
months following an Exercise Event and (ii) for 30 business days following (x)
Associated's receipt of notice that
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a regulatory authority would not issue or grant an approval necessary to the
exercise of the Option or (y) 18 months after the date upon which Associated
notified the Company that it intended to exercise the Option, if Associated did
not close on the purchase of such shares pursuant to the Option as a result of
a failure to obtain the necessary regulatory approval.
Subject to the Limit, the Termination Fee (the "Termination Fee")
shall be equal to the sum of the following: (i) the excess, if any, of (x) the
Applicable Price (as defined below) for each share of the Company Common Stock
over (y) the Purchase Price (subject to adjustment), multiplied by the number
of shares of the Company Common Stock with respect to which the Option has not
been exercised and, where the Option has been exercised, in whole or in part,
but the closing has not occurred, the number of shares which would have been
distributed at such closing, and (ii) the amount of all expenses of Associated
incurred in connection with the Merger and the Stock Option Agreement (to the
extent not previously paid pursuant to the Merger Agreement).
For purposes of the Stock Option Agreement, "Applicable Price" means
the highest of (i) the highest price at which a tender offer or exchange offer
has been made for shares of the Company Common Stock and, (ii) the price per
share paid by a third party for shares of the Company Common Stock in
connection with a merger or other business combination.
REPURCHASE OPTION OF ASSOCIATED
Associated has the right to require the Company to repurchase any
shares acquired by exercise of the Option and demand from the Company the
Repurchase Fee (as defined below) in the following circumstances: (i) upon the
first occurrence of and for 12 months following an Exercise Event and (ii) for
30 business days following (x) Associated's receipt of notice that a regulatory
authority would not issue or grant an approval necessary to the exercise of the
Option, or (y) 18 months after the date upon which Associated notified the
Company that it intended to exercise the Option, if Associated did not close on
the purchase of such shares pursuant to the Option as a result of a failure to
obtain necessary regulatory approval.
Subject to the Limit, the Repurchase Fee (the "Repurchase Fee") shall
be equal to the sum of the following: (i) the aggregate exercise price paid by
Associated for any shares of the Company Common Stock acquired pursuant to the
Option with respect to which Associated then has beneficial ownership and (ii)
the excess, if any, of the Applicable Price over the Purchase Price (subject to
adjustments) paid by Associated for each share of the Company Common Stock with
respect to which the Option has been exercised and with respect to which
Associated then has beneficial ownership, multiplied by the number of such
shares.
REGISTRATION RIGHTS OF ASSOCIATED
If the Company (or its successors) shall have one or more classes of
stock registered under the Exchange Act, Associated has the right within three
years of the first exercise of the Option (or within 30 business days following
(i) the denial of regulatory approval for Associated to purchase shares
pursuant to the Option or (ii) a failure to obtain regulatory approval for such
purchase during an 18-month period beginning with the requisite notice of
exercise of the Option) to require the Company to prepare and file up to two
registration statements under the Securities Act for the shares issued or
issuable upon exercise of the Option and to use its best efforts to qualify the
shares under any applicable state securities laws if necessary for Associated
to be able to sell the shares.
RIGHT OF FIRST REFUSAL OF THE COMPANY
In the event Associated proposes to sell to a third party the shares
acquired by exercise of the Option, the Company has the right, at any time
prior to the later of 18 months after the first exercise of the Option and the
expiration of the Option, to purchase such shares at the price and on the terms
at which Associated proposed to sell such shares to such third party. The
Company will not have such a right of first refusal in the case of certain
proposed transfers more fully described in the Stock Option Agreement.
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CERTAIN INFORMATION CONCERNING ASSOCIATED
Associated is a registered bank holding company pursuant to the BHC
Act. It was incorporated in Wisconsin in 1964 and was inactive until 1969,
when permission was received from the Federal Reserve Board to acquire three
banks. Associated currently owns seven commercial banks located in Wisconsin
and Illinois serving their local communities and, measured by total assets held
at March 31, 1995, was the third largest commercial bank holding company
headquartered in Wisconsin. Associated also owns all of the capital stock of
subsidiaries engaged in the following non-banking businesses: personal property
lease financing, commercial and residential mortgage banking, trust services,
reinsurance and general insurance agency activities.
Associated provides advice and specialized services to its bank and
nonbank subsidiaries (the "Associated Affiliates") in various areas of banking
policy and operations, including auditing, data processing,
marketing/advertising, investments, personnel services, trust services and
other financial services functionally related to banking. Responsibility for
the management of the Associated Affiliates remains with their respective
Boards of Directors and officers. Services rendered to the Associated
Affiliates by Associated are intended to assist the local management of these
banks to expand the scope of the banking services offered by them. At March
31, 1995, the Associated Affiliates operated a total of 87 full-service banking
offices in 55 communities throughout Wisconsin and in Chicago, Illinois.
Associated, through the Associated Affiliates, provides a complete
range of retail banking services to individuals and small-to-medium-size
businesses. These services include checking and savings accounts, NOW, Super
NOW and money market deposit accounts, business loans, personal loans,
residential and condominium mortgage loans, loans for education, MasterCard,
VISA and other consumer-oriented financial services, including IRA and Keogh
accounts, safe deposit and night depository facilities. Automated teller
machines, which provide 24 hour banking services to customers of the Associated
Affiliates, have been installed in many locations in the Associated Affiliates'
service areas. The Associated Affiliates are members of an interstate shared
automated teller machine ("ATM") network which allows their customers to
perform banking transactions from their checking, savings or credit card
accounts at ATM terminals in a multi-state environment. Among the services
designed specifically to meet the needs of small- and medium-size businesses
are various types of specialized financing, cash management services and
transfer/collection facilities.
The Associated Affiliates provide lending, depository and related
financial services to commercial, industrial, financial and governmental
customers. In the lending area, these include term loans, revolving credit
arrangements, letters of credit, inventory and accounts receivable financing
and real estate construction lending.
Additional emphasis is given to non-credit services for commercial
customers, such as advice and assistance in the placement of securities,
corporate cash management and financial planning. The Associated Affiliates
make available check clearing, safekeeping, loan participations, lines of
credit, portfolio analyses, data processing and other services to over 140
correspondent banking institutions.
Five of the Associated Affiliates offer a wide variety of fiduciary,
investment management, advisory and corporate agency services to individuals,
corporations, charitable trusts, foundations and institutional investors. They
also administer (as trustee and in other fiduciary and representative
capacities) pension, profit sharing and other employee benefit plans, and
personal trusts and estates.
The Associated Affiliates also provide certain mortgage banking
services including the origination, underwriting, closing, and the temporary
warehousing of mortgage loans and the sale of loans to investors. The primary
focus is on one-to-four-family residential and multi-family properties, all of
which the mortgage loans are saleable into the secondary mortgage market.
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Associated and the Associated Affiliates are not dependent upon a
single or a few customers, the loss of which would have a material adverse
effect on Associated. No material portion of Associated's or the Associated
Affiliates' business is seasonal.
At March 31, 1995, Associated and the Associated Affiliates, as a
group, employed approximately 1,666 full-time equivalent employees.
CERTAIN INFORMATION CONCERNING THE COMPANY
The Company is a bank holding company incorporated under the laws of
the State of Illinois with its principal office in Chicago, Illinois. The
Company owns all the issued and outstanding stock of the Bank, an Illinois
banking corporation and Realty, an Illinois corporation. As of March 31, 1995,
the Company had total assets of approximately $128.1 million and the Bank had
deposits of approximately $112.8 million.
The Bank is a full service bank serving the banking needs of the
northwest Chicago metropolitan area. The Bank provides commercial banking
services and products, including savings and demand deposits, real estate,
commercial and consumer loans, collection and safe deposit facilities and other
services tailored to meet the needs of the individual and business customer.
The Company owns the Bank's main banking premises located at 5200 North Central
Avenue, Chicago, Illinois and leases its drive-in facility located at 6355
North Central Avenue, Chicago, Illinois.
The Company and the Bank are not dependent upon a single or a few
customers, the loss of which would have a material adverse effect on the
Company or the Bank. No material portion of the Company or the Bank's business
is seasonal.
At March 31, 1995, the Company and Bank employed approximately 53
full-time and 17 part-time employees.
OWNERSHIP OF THE COMPANY COMMON STOCK
The following table sets forth information regarding the beneficial
ownership of the Company Common Stock as of the Record Date by each director,
certain executive officers, all directors and officers of the Company as a
group and each person who is known by the Company to be the beneficial owner of
more than 5% of the Company Common Stock. For purposes of computing the number
of shares of Common Stock and percent of outstanding shares of Common Stock,
officers are deemed to own all shares of Company Common Stock which are
purchasable by exercise of options under the Company Stock Plan as such options
become fully vested upon the Merger. In addition, some shares may be owned in
joint tenancy, by a spouse, in the names of minor children or in revocable
trusts for which the individual has voting and investment power. The address
for Messrs. Muck, Mroz, Baer and Walcott is the executive offices of the
Company.
53
<PAGE> 60
<TABLE>
<CAPTION>
NAME OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
-------------------- -------------------- ------
<S> <C> <C>
Ronald H. Muck . . . . 18,759 20.83%
Eugene P. Mroz . . . . 8,817 9.79%
E. Robert Baer . . . . 6,450 7.16%
Robert O. Walcott . . . 6,000 6.67%
Sr. Charlene Endecavage 0 -
John J. King, Sr. . . . 3,500 3.89%
Josef F. Klingler . . . 0 -
Patrick J. Levar . . . 0 -
Robert Lustbader . . . 250 *
All directors and
executive officers as a
group (12 persons) . . 48,045 (1) 52.75%
</TABLE>
- ----------------------
* Less than 1%
(1) Includes a total of 1,018 shares of Company Common Stock that may be
purchased by executives within sixty days pursuant to stock options
issued under the Company Stock Plan.
EXPERTS
The consolidated financial statements and schedules of Associated as
of December 31, 1994 and 1993, and for each of the years in the three-year
period ended December 31, 1994, have been incorporated by reference herein and
in the registration statement in reliance upon the report of KPMG Peat Marwick
LLP, independent certified public accountants, incorporated herein by
reference, and upon the authority of said firm as experts in accounting and
auditing.
The consolidated financial statements of the Company and its
subsidiaries as of and for the years ended December 31, 1994 and 1993 included
in this Proxy Statement/Prospectus and in the registration statement have been
audited and reported upon by McGladrey & Pullen, LLP, independent certified
public accountants. The consolidated statement of operations, changes in
stockholders' equity and cash flows for the year ended December 31, 1992
included in this Proxy Statement/Prospectus and in the registration statement
have been audited and reported upon by Grant Thornton LLP, independent
certified public accountants. Such consolidated financial statements have been
included in the registration statement in reliance upon the reports of
McGladrey & Pullen, LLP and Grant Thornton LLP, respectively, included herein
and upon the authority of said firms as experts in accounting and auditing.
LEGAL OPINIONS
Certain legal matters, including the validity of the shares issued in
connection with the Merger will be passed upon for Associated by Saitlin,
Patzik, Frank & Samotny Ltd., Chicago, Illinois and certain legal matters in
connection with the Merger will be passed upon for the Company by Vedder,
Price, Kaufman & Kammholz, Chicago, Illinois.
54
<PAGE> 61
SHAREHOLDER PROPOSALS
If the Merger is consummated, shareholders of the Company will become
shareholders of Associated. Pursuant to Rule 14a-(8) promulgated under the
Exchange Act, Associated shareholders may present proper proposals for
inclusion in Associated's proxy statement for consideration at the next annual
meeting of its shareholders by submitting their proposals to Associated in a
timely manner. As noted in Associated's proxy statement relating to the 1995
Annual Meeting of Associated shareholders, in order to be so included for the
1996 Annual Meeting, shareholder proposals must have been received by
Associated no later than November 24, 1995.
55
<PAGE> 62
EXHIBIT A
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER
AMONG
ASSOCIATED BANC-CORP,
ASSOCIATED ILLINOIS BANC CORP.
AND
GN BANCORP, INC.
MARCH 22, 1995
<PAGE> 63
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I: THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-2
SECTION 1.01. The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-2
SECTION 1.02. Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-2
SECTION 1.03. Effect of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-3
SECTION 1.04. Articles of Incorporation and By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . A-3
SECTION 1.05. Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-3
SECTION 1.06. Conversion of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-3
SECTION 1.07. Effect on Options to Purchase Company Common Stock . . . . . . . . . . . . . . . . . . . . A-4
SECTION 1.08. Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-5
SECTION 1.09. Stock Transfer Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-7
SECTION 1.10. Anti-Dilution Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-7
ARTICLE II: REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . A-8
SECTION 2.01. Organization and Qualification of the Company; Subsidiaries . . . . . . . . . . . . . . . A-8
SECTION 2.02. Articles of Incorporation and By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . A-9
SECTION 2.03. Capitalization of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-9
SECTION 2.04. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-9
SECTION 2.05. No Conflict; Required Filings and Consents . . . . . . . . . . . . . . . . . . . . . . . . A-10
SECTION 2.06. Compliance; Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-10
SECTION 2.07. Banking Reports and Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . A-11
SECTION 2.08. Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . A-11
SECTION 2.09. Absence of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-12
SECTION 2.10. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-12
SECTION 2.11. Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-13
SECTION 2.12. Registration Statement; Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . A-13
SECTION 2.13. Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-14
SECTION 2.14. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-14
SECTION 2.15. Absence of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-16
SECTION 2.16. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-16
SECTION 2.17. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-17
SECTION 2.18. Absence of Adverse Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-17
SECTION 2.19. Internal Controls and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-17
SECTION 2.20. Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-18
SECTION 2.21. Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-18
SECTION 2.22. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-18
SECTION 2.23. Accounting and Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-18
SECTION 2.24. Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-18
</TABLE>
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<TABLE>
<S> <C>
SECTION 2.25. Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-19
ARTICLE III: REPRESENTATIONS AND WARRANTIES OF ASSOCIATED ILLINOIS AND ASSOCIATED . . . . . . . . . . . A-19
SECTION 3.01. Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-19
SECTION 3.02. Articles of Incorporation and By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . A-19
SECTION 3.03. Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-20
SECTION 3.04. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-20
SECTION 3.05. No Conflict; Required Filings and Consents . . . . . . . . . . . . . . . . . . . . . . . . A-20
SECTION 3.06. Compliance; Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-21
SECTION 3.07. Securities Reports; Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . A-21
SECTION 3.08. Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . A-22
SECTION 3.09. Absence of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-23
SECTION 3.10. Registration Statement; Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . A-23
SECTION 3.11. Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-23
SECTION 3.12. Absence of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-24
SECTION 3.13. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-24
SECTION 3.14. Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-25
SECTION 3.15. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-25
SECTION 3.16. Accounting and Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-25
SECTION 3.17. Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-26
SECTION 3.18. Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-26
ARTICLE IV: COVENANTS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-26
SECTION 4.01. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-26
SECTION 4.02. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-27
SECTION 4.03. Letter of the Company's Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . A-30
SECTION 4.04. Access and Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-30
SECTION 4.05. Affiliates; Accounting and Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . . A-31
SECTION 4.06. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-31
SECTION 4.07. Delivery of Shareholder List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-32
SECTION 4.08. Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-32
ARTICLE V: COVENANTS OF ASSOCIATED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-34
SECTION 5.01. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-34
SECTION 5.02. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-34
SECTION 5.03. Access and Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-34
SECTION 5.04. Accounting and Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-35
SECTION 5.05. Eligibility for Dividend. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-35
</TABLE>
A-ii
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<TABLE>
<S> <C>
ARTICLE VI: ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-35
SECTION 6.01. Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-35
SECTION 6.02. Meeting of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-36
SECTION 6.03. Appropriate Action; Consents; Filings . . . . . . . . . . . . . . . . . . . . . . . . . . A-36
SECTION 6.04. Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-37
SECTION 6.05. Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-37
SECTION 6.06. Inducement Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-37
SECTION 6.07. Directors' and Officers' Indemnification and Insurance . . . . . . . . . . . . . . . . . . A-39
SECTION 6.08. Special Reimbursement Related to Realty Property . . . . . . . . . . . . . . . . . . . . . A-40
SECTION 6.09. Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-40
SECTION 6.10. Employee Benefit Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-40
ARTICLE VII: CONDITIONS OF MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-41
SECTION 7.01. Conditions to Obligation of Each Party to Effect the Merger . . . . . . . . . . . . . . . A-41
SECTION 7.02. Additional Conditions to Obligations of Associated . . . . . . . . . . . . . . . . . . . . A-42
SECTION 7.03. Additional Conditions to Obligations of the Company. . . . . . . . . . . . . . . . . . . . A-44
ARTICLE VIII: TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-45
SECTION 8.01. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-45
SECTION 8.02. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-48
SECTION 8.03. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-48
SECTION 8.04. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-48
ARTICLE IX: GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-49
SECTION 9.01. Non-Survival of Representations, Warranties and Agreements . . . . . . . . . . . . . . . . A-49
SECTION 9.02. Disclosure Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-49
SECTION 9.03. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-49
SECTION 9.04. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-50
SECTION 9.05. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-51
SECTION 9.06. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-51
SECTION 9.07. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-51
SECTION 9.08. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-51
SECTION 9.09. Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-52
SECTION 9.10. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-52
SECTION 9.11. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-52
</TABLE>
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 22, 1995 (the
"Agreement"), among ASSOCIATED BANC-CORP, a Wisconsin corporation
("Associated"), ASSOCIATED ILLINOIS BANC CORP., an Illinois corporation and
a wholly-owned subsidiary of Associated ("Associated Illinois") and GN
BANCORP, INC., an Illinois corporation ("Company").
W I T N E S S E T H:
WHEREAS, the Company is a bank holding company, the wholly-owned
subsidiaries of which are GLADSTONE-NORWOOD TRUST AND SAVINGS BANK, an Illinois
state chartered bank located in Chicago, Illinois (the "Bank") and GN REALTY,
INC., an Illinois corporation ("Realty"). The Bank and Realty are sometimes
individually referred to herein as a "Subsidiary" and collectively as the
"Subsidiaries;" and
WHEREAS, the Company upon the terms and subject to the conditions of
this Agreement and in accordance with the Illinois Business Corporation Act
("Illinois Law"), will merge with and into Associated Illinois (the "Merger");
and
WHEREAS, the Company and its Board of Directors have determined that the
Merger will enhance the ability of the Bank to better serve its existing
depositors and customers in the Chicago, Illinois metropolitan area, and
increase the financial strength of the Bank; and
WHEREAS, the Board of Directors of the Company believes that the Merger
with Associated Illinois will benefit the shareholders and the employees of the
Company and the Bank; and
WHEREAS, the respective Boards of Directors of Associated, Associated
Illinois and the Company have (i) determined that the Merger and the exchange of
newly issued shares of Associated Common Stock (as defined in Section 1.06) for
shares of the Company's Common Stock (as defined in Section 1.06) pursuant and
subject to the terms and conditions of this Agreement is fair to and in the best
interests of the respective corporations and their shareholders, and (ii)
approved and adopted this Agreement and the transactions contemplated hereby;
and
WHEREAS, the Board of Directors of the Company has, subject to its
fiduciary duties under applicable law, resolved to recommend approval of the
Merger by the shareholders of the Company; and
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WHEREAS, simultaneously herewith, the Company and Associated shall
execute and deliver a Stock Option Agreement; and
WHEREAS, Associated Illinois and the Company intend to effect a merger
that qualifies for pooling-of-interests accounting treatment and as a tax-free
reorganization under the Internal Revenue Code of 1986, as amended (the "Code");
and
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Associated, Associated Illinois and the Company hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with Illinois Law, at the
Effective Time (as defined in Section 1.02) the Company shall be merged with and
into Associated Illinois. As a result of the Merger, the separate corporate
existence of the Company shall cease and Associated Illinois shall continue as
the surviving corporation of the Merger (the "Surviving Corporation").
SECTION 1.02. Effective Time. The parties hereto shall cause the
Merger to be consummated by filing Articles of Merger (the "Articles of Merger")
with the Secretary of State of the State of Illinois, in such form as required
by, and executed in accordance with the relevant provisions of Illinois Law (i)
after the satisfaction, or if permissible, waiver of conditions set forth in
Article VII, and (ii) as promptly as possible within the fifteen (15) day period
commencing with the latest of the following dates:
(a) The 30th or 15th calendar day, as the case may be, after the
date of approval of the Merger by the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board");
(b) Such date as may be prescribed by the Federal Reserve Board or
any other agency or authority pursuant to applicable law, rules or
regulations, prior to which consummation of the transaction described and
referred to herein may not be effected;
(c) The date of the shareholders meeting of the Company to vote upon
the Merger pursuant to Section 6.02; or
(d) If the transaction contemplated by this Agreement is being
contested in any legal proceeding and Associated or the Company has
elected to contest the same, the date
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that such legal proceeding has been brought to a conclusion favorable,
in the judgment of Associated or the Company, to the consummation of the
transaction contemplated hereby.
The date and time of the filing of the Articles of Merger is hereinafter
referred to as the "Effective Time."
SECTION 1.03. Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of Illinois Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, except as otherwise provided herein, all the property, rights,
privileges, powers and franchises of Associated Illinois and the Company shall
vest in the Surviving Corporation, and all debts, liabilities and duties of
Associated and the Company shall become the debts, liabilities and duties of the
Surviving Corporation.
SECTION 1.04. Articles of Incorporation and By-Laws. At the Effective
Time, the Articles of Incorporation and the By-Laws of Associated Illinois, as
in effect immediately prior to the Effective Time, shall be the Articles of
Incorporation and the By-Laws of the Surviving Corporation.
SECTION 1.05. Directors and Officers. The directors of Associated
Illinois immediately prior to the Effective Time shall be the initial directors
of the Surviving Corporation, each to hold office in accordance with the
Articles of Incorporation and By-Laws of the Surviving Corporation, and the
officers of Associated Illinois immediately prior to the Effective Time shall be
the initial officers of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed and qualified.
SECTION 1.06. Conversion of Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of Associated,
Associated Illinois, the Company or the holders of any of the following
securities:
(a) each share of common stock, par value $8.00 per share, of the
Company (the "Company Common Stock") (all issued and outstanding shares
of the Company Common Stock being hereinafter collectively referred to as
the "Shares") issued and outstanding immediately prior to the Effective
Time (other than any Shares to be cancelled pursuant to Section 1.06(b)
and other than any Dissenting Shares, as defined in Section 1.06(c))
shall be converted, in accordance with Section 1.08, into the right to
receive 7.00 shares (the "Exchange Ratio") of common stock par value $.01
per share, of Associated ("Associated Common Stock"); provided, however,
that if the Associated Average Price (as defined in Section
8.01(a)(vi)(A)) shall be greater than $38.00, then the Exchange Ratio
shall be determined by dividing $266.00 by the Associated Average Price;
provided, further, that the number of shares of Associated Common Stock
to be issued pursuant to the Exchange Ratio shall be rounded to the
nearest thousandth of a
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share. As of the Effective Time, all such shares of the Company Common
Stock shall no longer be outstanding and shall automatically be cancelled
and retired and shall cease to exist, and each certificate previously
representing any such shares shall thereafter represent the right to
receive a certificate representing shares of Associated Common Stock into
which such Company Common Stock is convertible. Certificates previously
representing shares of Company Common Stock shall be exchanged for
certificates representing whole shares of Associated Common Stock issued
in consideration therefor upon the surrender of such certificates in
accordance with the provisions of Section 1.08, without interest. No
fractional share of Associated Common Stock shall be issued, and, in lieu
thereof, a cash payment shall be made pursuant to Section 1.08 hereof.
(b) each Share held in the treasury of the Company and each Share
owned by Associated or any direct or indirect wholly-owned subsidiary of
Associated immediately prior to the Effective Time shall be cancelled and
extinguished without any conversion thereof and no payment shall be made
with respect thereto.
(c) each Share of the Company Common Stock which shall be issued and
outstanding as of the Effective Time and held by a shareholder who has
validly perfected dissenter's rights in accordance with Illinois Law,
shall not be converted into and shall not become Associated Common Stock
hereunder (all such shares of the Company Common Stock are hereinafter
called "Dissenting Shares"). The Company shall give Associated prompt
notice upon receipt by the Company of any written notice from any such
shareholder of the Company ("Dissenting Shareholder"). The Company
agrees that prior to the Effective Time, it will not, except with prior
written consent of Associated, voluntarily make any payment with respect
to, or settle or offer to settle, any request for withdrawal pursuant to
the exercise of dissenter's rights. Each Dissenting Shareholder who
becomes entitled, pursuant to the provisions of applicable law, to
payment for his or her shares of the Company Common Stock shall receive
payment therefor from Associated (but only after the amount thereof shall
be agreed upon or finally determined pursuant to the provisions of
applicable law). If any Dissenting Shareholder shall fail to perfect or
shall effectively withdraw or lose his or her right to receive the value
of his or her shares of Associated Common Stock, his or her shares shall
be thereupon converted into Associated Common Stock in accordance with
the provisions of Section 1.06(a) and, if applicable, cash under Section
1.08(e).
SECTION 1.07. Effect on Options to Purchase Company Common Stock. Each
issued but unexercised option under the Company's Stock Benefit Plan dated March
28, 1990 (the "Stock Plan") (a "Company Stock Option") which is outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, become and represent an
option to purchase the number of shares of Associated Common Stock (an
"Associated Stock Option") (decreased to the nearest full share) determined by
multiplying (a) the number of shares Company
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Common Stock subject to the Company Stock Option immediately prior to
the Effective Time by (b) the Exchange Ratio, at an exercise price per share of
Associated Common Stock (rounded up to the nearest whole cent) equal to the
exercise price per share of Company Common Stock under the Company Stock Option
immediately prior to the Effective Time divided by the Exchange Ratio.
Associated shall pay cash to holders of Associated Stock Options in lieu of
issuing fractional shares of Associated Common Stock upon exercise of an
Associated Stock Option. After the Effective Time, and except as provided in
this Section 1.07, each Associated Stock Option shall be exercisable on the same
terms and conditions as were applicable under the Company Stock Option as the
Effective Time, giving effect to the acceleration of the exercisability of such
Company Stock Option as a result of the Merger. The Company agrees to use its
best efforts to cause the holders of each Company Stock Option to exercise such
Company Stock Option prior to the Effective Time.
SECTION 1.08. Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Associated shall
deposit, or shall cause to be deposited, with a bank or trust company designated
by Associated and acceptable to the Company (the "Exchange Agent"), and such
deposit shall be solely for the benefit of the holders of Shares, for exchange
in accordance with this Article I through the Exchange Agent, certificates
representing the shares of Associated Common Stock (such certificates for shares
of Associated Common Stock, and cash in lieu of fractional shares (if any),
together with any dividends or distributions with respect thereto, being
hereinafter referred to as the "Exchange Fund") issuable pursuant to Section
1.06 in exchange for outstanding Shares.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail or personally deliver to each
holder of record (or his or her attorney-in-fact) of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding Shares (the "Certificates"), whose Shares were converted into the
right to receive shares of Associated Common Stock pursuant to Section 1.06 and
cash in lieu of fractional shares (if any), (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the certificates to the Exchange
Agent and shall be in such form and have such other provisions as Associated may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the certificates in exchange for certificates representing shares of Associated
Common Stock. Upon surrender of a Certificate for cancellation to the Exchange
Agent, together with such letter of transmittal, duly executed, the holder of
such Certificate shall be entitled to receive in exchange therefor a certificate
representing that number of whole shares of Associated Common Stock, which such
holder has the right to receive in respect of the certificate surrendered
pursuant to the provisions of this Article I (after taking into
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account all Shares then held by such holder) and cash in lieu of
fractional shares (if any), and the Certificate so surrendered shall forthwith
be cancelled. In the event of a transfer of ownership of Shares which is not
registered in the transfer records of the Company, a certificate representing
the proper number of shares of Associated Common Stock may be issued to a
transferee if the Certificate representing such Shares is presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer taxes have been
paid. Certificates surrendered for exchange by any affiliate of the Company
shall not be exchanged for certificates representing shares of Associated Common
Stock until Associated has received a written agreement from such person as
provided in Section 4.05 hereof. Until surrendered as contemplated by this
Section 1.08, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the certificate
representing shares of Associated Common Stock and cash in lieu of any
fractional shares of Associated Common Stock as contemplated by Section 1.08(e).
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect to
Associated Common Stock with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Certificate with respect to the shares
of Associated Common Stock represented thereby, and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section 1.08(e),
until the holder of such Certificate shall surrender such Certificate. Subject
to the effect of applicable laws, following surrender of any such Certificate,
there shall be paid to the holder of the certificates representing whole shares
of Associated Common Stock issued in exchange therefor, without interest, (i)
promptly, the amount of any cash payable with respect to a fractional share of
Associated Common Stock to which such holder is entitled pursuant to Section
1.08(e) and the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole shares of
Associated Common Stock, and (ii) at the appropriate payment date, the amount of
dividends or other distributions, with a record date after the Effective Time
but prior to surrender and a payment date occurring after surrender, payable
with respect to such whole shares of Associated Common stock.
(d) No Further Rights in the Shares. All shares of Associated Common
Stock issued upon conversion of the Shares in accordance with the terms hereof
(including any cash paid pursuant to Section 1.08(e)) shall be deemed to have
been issued in full satisfaction of all rights pertaining to such Shares.
(e) No Fractional Shares. No certificates or scrip representing
fractional shares of Associated Common Stock shall be issued upon the surrender
for exchange of Certificates, and such fractional share interest will not
entitle the owner thereof to vote
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or to any rights of a shareholder of Associated. Each holder of
a fractional share interest shall be paid an amount in cash equal to
the product obtained by multiplying such fractional share interest to
which such holder (after taking into account all fractional share
interests then held by such holder) would otherwise be entitled by the
Daily Average Price.
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the shareholders of the Company for
six months after the Effective Time shall be delivered to Associated,
upon demand, and any shareholders of the Company who have not
theretofore complied with this Article I shall thereafter look only to
Associated for payment of their claim for Associated Common Stock, any
cash in lieu of fractional shares of Associated Common Stock and any
dividends or distributions with respect to Associated Common Stock.
(g) No Liability. Neither Associated nor the Company shall be
liable to any holder of Shares for any such Shares (or dividends or
distributions with respect thereto) or cash delivered to a public
official pursuant to any abandoned property, escheat or similar law.
(h) Withholding Rights. Associated shall be entitled to
deduct and withhold from any cash consideration payable pursuant to
this Agreement to any holder of Shares such amounts as Associated is
required to deduct and withhold with respect to the making of such
payment under the Code, or any provision of State, local or foreign tax
law. To the extent that amounts are so withheld by Associated, such
withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the Shares in respect of which such
deduction and withholding was made by Associated.
SECTION 1.09. Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of the Company's Common Stock thereafter on
the records of the Company. From and after the Effective Time, the holders of
certificates evidencing ownership of shares of the Company's Common Stock
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such Shares except as otherwise provided herein or by
law. On or after the Effective Time, any Certificates presented to the Exchange
Agent or Associated for any reason shall be converted into shares of Associated
Common Stock in accordance with this Article I.
SECTION 1.10. Anti-Dilution Adjustment. If, subsequent to the date
hereof and prior to the Effective Time, Associated shall pay a stock dividend or
make a distribution on Associated Common Stock in shares of Associated Common
Stock or any security convertible into Associated Common Stock or shall combine
or subdivide its stock, then in each such case, from and after the record date
for determining the shareholders entitled to receive such dividend
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or distribution or the securities resulting from such combination or
subdivision, an appropriate adjustment shall be made to the conversion ratio
set forth in Section 1.06 above, for purposes of determining the number of
shares of Associated Common Stock into which the Company's Common Stock shall
be converted. For purposes hereof, the payment of a dividend in Associated
Common Stock, or the distribution on Associated Common Stock in securities
convertible into Associated Common Stock, shall be deemed to have effected an
increase in the number of outstanding shares of Associated Common Stock equal
to the number of shares of Associated Common Stock into which such securities
shall be initially convertible without the payment by the holder thereof of any
consideration other than the surrender for cancellation of such convertible
securities. Notwithstanding the foregoing, this Section shall not apply to any
stock options issued under option plans of Associated existing as of the date
of this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Disclosure Schedule attached hereto (the
"Company Disclosure Schedule"), the Company hereby represents and warrants to
Associated that:
SECTION 2.01. Organization and Qualification of the Company;
Subsidiaries. The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Illinois. The Bank is duly
organized, validly existing and in good standing. Each of the Company and its
Subsidiaries has the requisite corporate power and authority and is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, consents, certificates, approvals and orders ("Company Approvals")
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted, except where the failure to be so organized,
existing and in good standing or to have such power, authority and Company
Approvals would not, individually or in the aggregate, have a Material Adverse
Effect (as defined below) on the Company and its Subsidiaries, taken as a
whole. The term "Material Adverse Effect" as used in this Agreement shall mean
any change or effect that is or is reasonably likely to be materially adverse
to a party's business, operations, properties (including intangible properties),
condition (financial or otherwise), assets or liabilities (including contingent
liabilities). The Company has not received any notice of proceedings relating
to the revocation or modification of any Company Approvals. The Company is duly
qualified or licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing that would not, either individually
or in the aggregate, have a Material Adverse Effect on the Company and its
Subsidiaries taken as a whole. The Company is registered with the Federal
Reserve Board as a one bank holding company under the Bank Holding Company Act
of 1956, as amended (the "BHCA"). Except for the Bank and the
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Company's ownership of all of the issued and outstanding stock of Realty, the
Company holds no interest, either directly or indirectly, in any subsidiaries.
SECTION 2.02. Articles of Incorporation and By-Laws. The Company has
heretofore furnished to Associated a complete and correct copy of the Articles
of Incorporation and the By-Laws, as amended or restated, of the Company and its
Subsidiaries and such Articles of Incorporation and By-laws of the Company and
its Subsidiaries are in full force and effect and neither the Company nor its
Subsidiaries is in violation of any of the provisions of its Articles of
Incorporation or By-Laws.
SECTION 2.03. Capitalization of the Company. The authorized capital
stock of the Company consists of 110,000 shares Common Stock, par value $8.00
per share. As of the date of this Agreement, (i) 90,071 shares of the Company's
Common Stock are issued and outstanding, all of which are validly issued, fully
paid and non-assessable, and all of which have been issued in compliance with
applicable securities laws, and (ii) no shares of the Company's Common Stock are
held in the Company's treasury. Under the Company's Stock Plan 1,918 shares of
the Company's Common Stock are reserved for issuance under the Stock Plan as of
the date of this Agreement. Except as set forth in the Company's Disclosure
Schedule at Section 2.03, as of the date of this Agreement there are no
additional options, warrants or other rights, agreements, arrangements or
commitments of any character relating to the issued or unissued capital stock of
the Company or obligating the Company to issue or sell any shares of capital
stock of, or other equity interests in the Company. There are no obligations,
contingent or otherwise, of the Company to repurchase, redeem or otherwise
acquire any shares of the Company's Common Stock or to provide funds to or make
any investment (in the form of a loan, capital contribution or otherwise) in any
other entity.
SECTION 2.04. Authority. The Company has the requisite corporate power
and authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby have been duly and
validly authorized by all necessary corporate action and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby (other than, with respect
to the Merger, the approval and adoption of this Agreement by the holders of
two-thirds (66.67%) of the outstanding shares of the Company's Common Stock in
accordance with Illinois Law and the Company's Articles of Incorporation and
By-Laws). This Agreement has been duly and validly executed and delivered by
the Company and, assuming the due authorization, execution and delivery by
Associated, constitutes the legal, valid and binding obligation of the Company
enforceable in accordance with its terms.
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SECTION 2.05. No Conflict; Required Filings and Consents.
(a) To the best knowledge of the Company, after inquiry of its
executive officers, the execution and delivery of this Agreement by the
Company does not, and the performance of this Agreement by the Company
shall not, (i) conflict with or violate the Articles of Incorporation
or By-Laws of the Company or the comparable organizational documents of
the Bank, (ii) conflict with or violate any domestic (federal, state or
local) or foreign law, statute, ordinance, rule, regulation, order,
judgment or decree (collectively, "Laws") applicable to the Company or
the Bank, or by which its or any of their respective properties is
bound or affected, or (iii) result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would
become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation
of a lien or encumbrance on any of the properties or assets of the
Company or the Bank pursuant to any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or the Bank is a party or
by which the Company or the Bank or its or any of their respective
properties is bound or affected, except for any such conflicts,
breaches, defaults or other occurrences that would not, individually or
in the aggregate, have a Material Adverse Effect on the Company and the
Bank, taken as a whole.
(b) To the best knowledge of the Company, after inquiry of its
executive officers, the execution and delivery of this Agreement by the
Company does not, and the performance of this Agreement by the Company
shall not, require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental or regulatory
authority, domestic or foreign, except (i) for applicable requirements,
if any, of the Securities Act of 1933, as amended (the "Securities
Act"), and the Securities Exchange of 1934, as amended (the "Exchange
Act"), state securities or blue sky laws ("Blue Sky Laws"), BHCA, the
banking laws and regulations of the State of Illinois (the "IBL"), and
the filing and recordation of appropriate merger or other documents as
required by Illinois Law and (ii) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings
or notifications, would not prevent or delay consummation of the
Merger, or otherwise prevent the Company from performing its
obligations under this Agreement, and would not have a Material Adverse
Effect on the Company and its Subsidiaries, taken as a whole.
SECTION 2.06. Compliance; Permits. To the best knowledge of the
Company after inquiry of its executive officers, neither the Company nor any
Subsidiary is in conflict with, or in default or violation of, (i) any law
applicable to the Company or the Subsidiary or by which its or any of their
respective properties is bound or affected, or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any Subsidiary is a party or by
which the Company or any Subsidiary
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or its or any of their respective properties is bound or affected, except for
any such conflicts, defaults or violations which would not, individually or in
the aggregate, have a Material Adverse Effect on the Company and the
Subsidiaries, taken as a whole.
SECTION 2.07. Banking Reports and Financial Statements.
(a) The Company and its Subsidiaries have timely filed all
forms, reports and documents required to be filed with the Federal
Reserve Board, the Illinois Commissioner and any other applicable
federal or state securities or banking authorities (all such reports
and statements are collectively referred to as the "Company Reports").
The Company Reports, including all Company Reports filed after the date
of this Agreement, (i) were or will be prepared in accordance with the
requirements of applicable law and (ii) did not at the time they were
filed, or will not at the time they are filed, contain any untrue
statement of material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading.
(b) Each of the consolidated financial statements (including,
in each case, any related notes thereto) contained in the Company
Reports, including any Company Reports filed since the date of this
Agreement and prior to or on the Effective Time, have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods involved (except as may be
indicated in the notes thereto) and each fairly presents the
consolidated financial position of the Company and its Subsidiaries as
of the respective dates thereof and the consolidated results of its
operations and changes in financial position for the periods indicated,
except that any unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which were not or
are not expected to be material in amount.
(c) Except as and to the extent set forth on the consolidated
balance sheet of the Company and its Subsidiaries as of December 31,
1994 including all notes thereto (the "Company Balance Sheet") or in
the Disclosure Schedule at Section 2.07, neither the Company nor any of
the Subsidiaries has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) that would be
required to be reflected on a balance sheet, or in the notes thereto,
prepared in accordance with generally accepted accounting principles,
except (i) for liabilities or obligations incurred in the ordinary
course of business since December 31, 1994 that would not, individually
or in the aggregate have a Material Adverse Effect on the Company and
the Subsidiaries, taken as a whole, or (ii) as otherwise reflected in
the reports referred to in Section 2.07(a) hereof.
SECTION 2.08. Absence of Certain Changes or Events. Except as
disclosed in the Company Reports filed prior to the date of this Agreement or in
the Company Disclosure
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Schedule at Section 2.08, since December 31, 1994 to the date of this
Agreement, the Company and its Subsidiaries have conducted their businesses
only in the ordinary course and in a manner consistent with past practice and,
since December 31, 1994, there has not been (i) any change in the financial
condition, results of operations or business of the Company or its Subsidiaries
having a Material Adverse Effect on the Company and its Subsidiaries, taken as
a whole, (ii) any damage, destruction or loss (whether or not covered by
insurance) with respect to any assets of the Company or its Subsidiaries having
a Material Adverse Effect on the Company and its Subsidiaries, taken as a
whole, (iii) any change by the Company or its Subsidiaries in their accounting
methods, principles or practices, except for compliance with applicable new
requirements of the Financial Accounting Standards Board, (iv) any revaluation
by the Company or its Subsidiaries of any of their material assets in any
material respect, (v) any entry by the Company or any Subsidiary into any
commitment or transactions material to the Company and its Subsidiaries, taken
as a whole, (vi) any declaration, setting aside or payment of any dividends or
distributions in respect of shares of the Company's Common Stock or any
redemption, purchase or other acquisition of any of its securities or any of
the securities of any Subsidiary or (vii) any increase in or establishment of
any bonus, insurance, severance, deferred compensation, pension, retirement,
profit sharing, stock option (including, without limitation, the granting of
stock options, stock appreciation rights, performance awards, or restricted
stock awards), stock purchase or other employee benefit plan, or any other
increase in compensation payable or to become payable to any officers or key
employees of the Company or any of its Subsidiaries.
SECTION 2.09. Absence of Litigation. Except as disclosed in the
Company Reports filed prior to the date of this Agreement: (a) neither the
Company nor any Subsidiary is subject to any continuing order of, or written
agreement or memorandum of understanding with, or continuing material
investigation by, any federal or state banking authority or other governmental
entity, or any judgment, order, writ, injunction, decree or award of any
governmental entity or arbitrator, including, without limitation,
cease-and-desist or other orders of any bank regulatory authority, (b) there is
no claim of any kind, action, suit, litigation, proceeding, arbitration,
investigation, or controversy affecting the Company or any Subsidiary pending
or, to the knowledge of the Company, threatened, except for matters which
individually seek damages not in excess of $20,000 and which otherwise will not
have, and cannot reasonably be expected to have, a Material Adverse Effect on
the Company and its Subsidiaries taken as a whole, and (c) there are no uncured
material violations, or violations with respect to which material refunds or
restitutions may be required, cited in any compliance examination report to the
Company or the Bank as a result of the examination by any bank regulatory
authority.
SECTION 2.10. Employee Benefit Plans. As of the date of this
Agreement, the Company has delivered to Associated complete and correct copies
of all employee benefit plans and similar arrangements (including, without
limitation, pension, retirement, deferred compensation, profit-sharing, bonus,
retainer, consulting time, welfare, incentive compensation, stock option,
medical insurance plans) maintained by the Company or the Bank or affecting the
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employees of the Company or the Bank (the "Employee Benefit Plans") including,
without limitation, all plans within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended, ("ERISA"). No
Employee Benefit Plan maintained by or affecting the Company or the Bank is a
multi-employer plan within the meaning of Section 414(f) of the Code. No
Employee Benefit Plan which is subject to Title IV of ERISA has been terminated
by the plan administrator thereof or by the Pension Benefit Guarantee
Corporation. No proceedings to terminate any such plan have been instituted
within the meaning of said Title, and no reportable event within the meaning of
Section 4043 of ERISA has occurred with respect to any such plan which would
result in any material liability. No Employee Benefit Plan or any trust
created thereunder has any "accumulated funding deficiencies" as such term is
defined in Section 412 of the Code under the actuarial valuation and
assumptions employed by each plan (whether or not waived) and the assets of
each plan are at least equal to the present value of the accrued benefits under
the plan as determined by the actuaries of that plan. There have been no
violations of the fiduciary responsibility rules of Part 4 of Title B of Title
I of ERISA or the prohibited transaction rules of Section 4975 of the Code with
respect to any Employee Benefit Plan which would result in any material
liability. No material liability for the failure to discharge any duty has
arisen in connection with the administration of any Employee Benefit Plan which
would result in any material liability. All pension plans and related trusts
are qualified plans and trusts within the meaning of Sections 401 and 501 of
the Code; determination letters have been received by the Internal Revenue
Service confirming such status; and all reports to government agencies and
disclosures to participants with respect to each Employee Benefit Plan have
been made on a complete basis and all requests for determination letters have
been correctly and timely filed.
SECTION 2.11. Material Contracts. Except as set forth in the Company
Disclosure Schedule at Section 2.11, neither the Company nor any Subsidiary is a
party to or bound by (a) any employment or consulting contract that is not
terminable without penalty by the Company or such Subsidiary on 60 days' or less
notice, (b) any contract or commitment for capital expenditures in excess of
$10,000.00 for any one (1) project, or (c) contracts or commitments for the
purchase of materials or supplies or for the performance of services over a
period of more than 60 days from the date of this Agreement.
SECTION 2.12. Registration Statement; Proxy Statement. None of the
information supplied or to be supplied by the Company for inclusion in (a) the
Registration Statement (as defined in Section 6.01), (b) the Proxy
Statement/Prospectus (as defined in Section 6.01), or (c) any other document to
be filed with the Securities and Exchange Commission (the "SEC") or other
regulatory authority in connection with the transactions contemplated hereby, at
the respective times such documents are filed and, in the case of the
Registration Statement, when it becomes effective and at the Effective Time, and
with respect to the Proxy Statement/Prospectus, when mailed, shall be false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements therein not misleading. In the case
of the Proxy Statement/Prospectus or any amendment thereof or
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supplement thereto, none of such information at the time of the Company's
shareholders meeting (pursuant to Section 6.02) (the "Meeting") shall contain
any untrue statement of a material fact or omit to state any material fact
necessary, in light of the circumstances under which it was provided, in order
to make the statements made therein not misleading.
SECTION 2.13. Title to Property. The Company Disclosure Schedule at
Section 2.13 correctly identifies all real property owned and leased by the
Company and its Subsidiaries. Except as disclosed in Note 5 to the Company
Balance Sheet and the Company Disclosure Schedule at Section 2.13, the Company
and each of its Subsidiaries has good and defensible title to all of their
properties and assets, real and personal, tangible and intangible free and clear
of all mortgage liens, and free and clear of all other liens, charges and
encumbrances except liens for taxes not yet due and payable, pledges to secure
deposits and such minor imperfections of title, if any, as to not materially
detract from the value of or interfere with the present use of the property
affected thereby or which, individually or in the aggregate, would not have a
Material Adverse Effect on the Company and its Subsidiaries, taken as a whole;
and all leases pursuant to which the Company or any Subsidiary lease from others
real or personal property including, without limitation, leases for branch
offices are in good standing, valid and effective in accordance with their
respective terms, and there is not, under any of such leases, any existing
material default or event of default (or event which with notice or lapse of
time, or both, would constitute a material default and in respect of which the
Company or any Subsidiary has not taken adequate steps to prevent such a default
from occurring). The Company's and each Subsidiary's buildings and equipment in
regular use have been reasonably maintained and are in good and serviceable
condition, reasonable wear and tear excepted. None of the buildings, structures
or appurtenances owned or leased by the Company or any Subsidiary for their
operation or maintenance as now operated or maintained, contravenes any zoning
ordinances or other administrative regulations (whether or not permitted because
of prior non-conforming use) or violates any restrictive covenant or any
provision of law, the effect of which would materially interfere with or prevent
the continued use of such properties for the purposes for which they are now
being used or would materially and adversely affect the value thereof.
SECTION 2.14. Environmental Matters.
(a) Except as disclosed in the Company Disclosure Schedule at
Section 2.14, the Company represents and warrants to Associated that,
to the best of the Company's knowledge: (i) Hazardous Materials (as
defined below) have not been stored, released or disposed of on or from
the Company's Property (as defined below) or, to the best knowledge of
the Company, any property adjoining the Company's Property; (ii)
Environmental Permits (as defined below) have been obtained and are in
effect for the operations conducted at the Company's Property, (iii)
the Company and its Subsidiaries are in compliance in all material
respects with the requirements of all of their Environmental Permits;
and (iv) there are no circumstances with respect to any
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Company Property that could reasonably be anticipated (A) to form the
basis of an Environmental Claim (as defined below) against the Company
or any Subsidiary or Company's Property that individually or in the
aggregate could have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole, or (B) to cause the Company's Property
to be subject to any restrictions on ownership, occupancy, use or
transferability under any applicable Environmental Law (as defined
below).
(b) As used herein and in Section 3.14 hereof, the following
terms shall be defined as follows:
(i) "Company's Property" means any real property and
improvements currently owned, leased, used, operated or occupied
by the Company or any Subsidiary, including properties acquired
by foreclosure, properties which the Bank has a present right to
acquire upon foreclosure and which are owned by customers of the
Bank who have received written notification of default, or
properties held or operated in a fiduciary or managerial
capacity;
(ii) "Hazardous Materials" means (A) any petroleum or
petroleum products, radioactive materials, asbestos in any form
that is or could become friable, urea formaldehyde foam
insulation, transformers or other equipment that contain
dielectric fluid containing levels of polychlorinated biphenyls
and radon gas; (B) any chemicals, materials or substances
defined as or included in the definition of "hazardous
substances," or words of similar import, under any applicable
Environmental Law and (C) any other chemical, material or
substance, exposure to which is prohibited, limited or regulated
by any governmental authority;
(iii) "Environmental Law" means any federal, state,
local or foreign statute, law, rule, regulation, ordinance,
code, policy or rule of common law in effect and in each case as
amended as of the Effective Time, and any judicial or
administrative interpretation thereof as of the Effective Time,
including any judicial or administrative order, consent, decree
or judgment, relating to the environment, health, safety or
Hazardous Materials;
(iv) "Environmental Claims" means any and all
administrative, regulatory or judicial actions, suits, demands,
demand letters, claims, liens, notices of noncompliance or
violation, investigations or proceedings relating in any way to
any Environmental Law or Environmental Permit; and
(v) "Environmental Permits" means all permits,
approvals, identification numbers, licenses and other
authorizations required under any applicable Environmental Law.
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SECTION 2.15. Absence of Agreements. Neither the Company nor any
Subsidiary is a party to any written agreement or memorandum of understanding
with, or a party to any commitment letter or similar undertaking to, or is
subject to any order or directive by, or is a recipient of any extraordinary
supervisory letter which restricts materially the conduct of its business
(including any contract containing covenants which limit the ability of the
Company or any Subsidiary to compete in any line of business or with any person
or which involve any restriction of the geographical area in which, or method by
which, the Company or any Subsidiary may carry on its business), or in any
manner relates to its capital adequacy, its credit policies or its management
nor has the Company been advised that any federal, state or governmental agency
is contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such order, decree, agreement, memorandum of
understanding, extraordinary supervisory letter commitment letter or similar
submission.
SECTION 2.16. Taxes. The Company and its Subsidiaries have timely
filed all Tax Returns (as defined below) required to be filed by them, and the
Company and its Subsidiaries have timely paid and discharged all Taxes (as
defined below) due in connection with or with respect to the filing of such Tax
Returns and have timely paid all other Taxes as are due, except such as are
being contested in good faith by appropriate proceedings and with respect to
which the Company is maintaining reserves adequate for their payment. To the
best knowledge of the Company, the liability for Taxes set forth on each such
Tax Return adequately reflects the Taxes required to be reflected on such Tax
Return. For purposes of this Agreement, "Tax" or "Taxes" shall mean taxes,
charges, fees, levies, and other governmental assessments and impositions of any
kind, payable to any federal, state, local or foreign governmental entity or
taxing authority or agency, including, without limitation, (i) income,
franchise, profits, gross receipts, estimated, ad valorem, value added, sales,
use, service, real or personal property, capital stock, license, payroll,
withholding, disability, employment, social security, workers compensation,
unemployment compensation, utility, severance, production, excise, stamp,
occupation, premiums, windfall profits, transfer and gains taxes, (ii) customs
duties, imposts, charges, levies or other similar assessments of any kind, and
(iii) interest, penalties and additions to tax imposed with respect thereto, and
"Tax Returns" shall mean returns, reports, and information statements with
respect to Taxes required to be filed with the United States Internal Revenue
Service (the "IRS") or any other governmental entity or taxing authority or
agency, domestic or foreign, including, without limitation, consolidated,
combined and unitary tax returns. Neither the IRS nor any other governmental
entity or taxing authority or agency is now asserting, either through audits,
administrative proceedings, court proceedings or otherwise, or, to the best of
the Company's knowledge, threatening to assert against the Company or any
Subsidiary any deficiency or claim for additional Taxes. Neither the Company
nor any Subsidiary has granted any waiver of any statute of limitations with
respect to, or any extension of a period for the assessment of, any Tax. There
are no tax liens on any assets of the Company or any Subsidiary. Neither the
Company nor any Subsidiary has received a ruling or entered into an agreement
with the IRS or any other governmental entity or taxing authority or agency that
would have a Material Adverse Effect on the Company and its Subsidiaries, taken
as a whole, after the
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Effective Time. The accruals and reserves for taxes reflected in the Company's
Balance Sheet are substantially adequate to cover all Taxes accruable by the
Company and its Subsidiaries on a consolidated basis through the date thereof
(including Taxes being contested) in accordance with generally accepted
accounting principles. Except as may be set forth in the Company Disclosure
Schedule at Section 2.16, no agreements relating to allocating or sharing of
Taxes exist among the Company and its Subsidiaries.
SECTION 2.17. Insurance. Complete and correct copies of all material
policies of fire, product or other liability, workers' compensation and other
similar forms of insurance owned or held by the Company and its Subsidiaries
have been delivered to Associated. Subject to expirations and renewals of
insurance policies in the ordinary course of business, all such policies are in
full force and effect, all 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 workers' compensation insurance or similar policies), and no notice of
cancellation or termination has been received with respect to any such policy.
Such policies are and shall remain valid, outstanding and enforceable policies,
and will not be terminated by the Company prior to the Effective Time. To the
best knowledge of the Company, the insurance policies to which the Company or
its Subsidiaries are parties are sufficient for compliance with all material
requirements of law and all material agreements to which the Company and its
Subsidiaries are parties and will be maintained by the Company and its
Subsidiaries until the Effective Time. Neither the Company nor any Subsidiary
has been refused any insurance with respect to any material assets or
operations, nor has coverage been limited in any respect material to their
operations by any insurance carrier to which they have applied for any such
insurance or with which they have carried insurance during the last five (5)
years.
SECTION 2.18. Absence of Adverse Agreements. Neither the Company nor
any Subsidiary is a party to any agreement or instrument or any judgment, order
or decree or any rule or regulation of any court or other governmental agency or
authority which materially and adversely affects or in the future may have a
Materially Adverse Effect on the financial condition, results or operations,
assets or business of the Company and its Subsidiaries, taken as a whole.
SECTION 2.19. Internal Controls and Records. The Company and each
Subsidiary maintain books of account which accurately and validly reflect, in
all material respects, all loans, mortgages, collateral and other business
transactions and maintain accounting controls sufficient to ensure that all such
transactions are (a) in all material respects, executed in accordance with its
management's general or specific authorization, and (b) recorded in conformity
with generally accepted accounting principles. There is no material amendment
to any lending agreement, collateral document or security which is not fully
reflected in the books and records of the Company and the Bank.
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SECTION 2.20. Loans. Except as disclosed in the Company Disclosure
Schedule at Section 2.20, (a) the Bank is not a party to any written or oral
loan agreement, note or borrowing arrangement which has been classified as
"substandard," "doubtful," "loss," "other loans especially mentioned" or any
comparable classifications by the Company or the Bank or banking regulators; (b)
the Bank is not a party to any written or oral loan agreement, note, or
borrowing arrangement, including any loan guaranty, with any director or
executive officer of the Company or the Bank, or any person, corporation or
enterprise controlling, controlled by or under common control with any of the
foregoing; or (c) to the best knowledge of the Company, after due inquiry, the
Bank is not a party to any written or oral loan agreement, note or borrowing
arrangement in violation of any law, regulation or rule of any governmental
authority and which violation could have a Material Adverse Effect on the
Company and the Bank, taken as a whole.
SECTION 2.21. Labor Matters. Except as will not cause a Material
Adverse Effect to the Company or its Subsidiaries (a) the Company and its
Subsidiaries are in compliance with all applicable laws respecting employment
and employment practices, terms and conditions of employment and wages and
hours, and are not engaged in any unfair labor practice; (b) there is no unfair
labor practice complaint against the Company or any Subsidiary pending before
the National Labor Relations Board, (c) there is no labor strike, dispute,
slowdown, representation campaign or work stoppage actually pending or
threatened against or affecting the Company or any Subsidiary; (d) no grievance
or arbitration proceeding arising out of or under collective bargaining
agreements is pending and no claim therefor has been asserted against the
Company or any Subsidiary and (e) neither the Company nor any Subsidiary is
experiencing any material work stoppage.
SECTION 2.22. Brokers. Except for Robert W. Baird & Co. Incorporated
("Baird"), no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company or its Subsidiaries. Prior to the date of this Agreement, the
Company has furnished to Associated a complete and correct copy of all
agreements between Baird and the Company pursuant to which such firm would be
entitled to any payment relating to the transaction contemplated hereunder.
SECTION 2.23. Accounting and Tax Matters. To the best knowledge of the
Company, after due inquiry, neither the Company nor any of its affiliates has
through the date of this Agreement taken or agreed to take any action that would
prevent Associated from accounting for the business combinations to be effected
by the Merger as a pooling-of-interests or would prevent the Merger from
qualifying as a reorganization under Section 368(a)(1)(A) of the Code.
SECTION 2.24. Full Disclosure. No statement contained in any document,
certificate, or other writing furnished or to be furnished by or at the
direction of the Company to Associated in, or pursuant to the provisions of,
this Agreement contains or shall contain any untrue
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statement of a material fact or omits or shall omit to state any material fact
necessary, in light of the circumstances under which it was made, in order to
make the statements herein or therein not misleading.
SECTION 2.25. Vote Required. The affirmative vote of two-thirds
(66.67%) of the votes that holders of the outstanding shares of the Company's
Common Stock are entitled to cast is the only vote of the holders of any class
or series of the Company's capital stock necessary to approve the Merger.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ASSOCIATED ILLINOIS
AND ASSOCIATED
Except as set forth in the Disclosure Schedule attached hereto (the
"Associated Disclosure Schedule"), Associated hereby represents and warrants to
the Company that:
SECTION 3.01. Organization and Qualification. Associated Illinois and
Associated are bank holding companies duly organized, validly existing and in
good standing under the laws of the State of Illinois and State of Wisconsin,
respectively. Associated Illinois and Associated are each registered with the
Federal Reserve Board as a bank holding company under the BHCA. Each of
Associated Illinois and Associated have the requisite corporate power and
authority and are in possession of all franchises, grants, authorizations,
licenses, permits, easements, consents, certificates, approvals and orders (the
"Associated Approvals") necessary to own, lease and operate its properties and
to carry on its business as it is now being conducted, including appropriate
authorizations from the Federal Reserve Board, except where the failure to be so
organized, existing and in good standing or to have such power, authority and
Associated Approvals would not, individually or in the aggregate, have a
Material Adverse Effect on Associated and its subsidiaries, taken as a whole.
Associated has not received any notice of proceedings relating to the revocation
or modification of any such Associated Approvals. Associated is duly qualified
or licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing that would not, either individually or in the aggregate, have a
Material Adverse Effect on Associated and its subsidiaries taken as a whole.
SECTION 3.02. Articles of Incorporation and By-Laws. Associated
Illinois and Associated have heretofore furnished to the Company a complete and
correct copy of respective Articles of Incorporation and the By-Laws, as amended
or restated. Such Articles of
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Incorporation and By-Laws are in full force and effect. Neither Associated
Illinois nor Associated is in violation of any of the provisions of its
Articles of Incorporation or By-Laws.
SECTION 3.03. Capitalization.
(a) The authorized capital stock of Associated consists of (i)
48,000,000 shares of Associated Common Stock of which, as of the date
of this Agreement, 12,826,752 shares were issued and outstanding,
220,244 shares were held in treasury, and 385,687 shares were reserved
for issuance pursuant to outstanding employee stock options; and (ii)
750,000 shares of Preferred Stock, par value $1.00 per share
("Associated Preferred Stock"), of which, as of the date of this
Agreement, no shares of Associated Preferred Stock were issued and
outstanding. All of the outstanding shares of Associated's capital
stock have been duly authorized and validly issued and are fully paid
and non-assessable, except pursuant to Section 180.0622(2)(b) of
Wisconsin Law. Except as set forth in clause (i) above and the
Associated SEC Reports, as of the date of this Agreement there are no
options, warrants or other rights, agreements, arrangements or
commitments of any character relating to the issued or unissued capital
stock of Associated or any of its subsidiaries or obligating Associated
or any of its subsidiaries to issue or sell any shares of capital stock
of, or other equity interests in, Associated or any of its
subsidiaries.
(b) The shares of Associated Common Stock to be issued
pursuant to the Merger will be duly authorized, validly issued, fully
paid and non-assessable, except as otherwise provided by Section
180.0622(2)(b) of Wisconsin Law.
SECTION 3.04. Authority. Associated Illinois and Associated have the
requisite corporate power and authority to execute and deliver this Agreement
and to perform their obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Associated
Illinois and Associated and the consummation by Associated Illinois and
Associated of the transactions contemplated hereby has been duly and validly
authorized by all necessary corporate action on the part of Associated Illinois
and Associated and no other corporate proceedings on the part of Associated
Illinois and Associated are necessary to authorize this Agreement or to
consummate the transactions so contemplated hereby. This Agreement has been
duly and validly executed and delivered by Associated Illinois and Associated
and, assuming the due authorization, execution and delivery by the Company,
constitutes the legal, valid and binding obligation of Associated Illinois and
Associated.
SECTION 3.05. No Conflict; Required Filings and Consents.
(a) To the best knowledge of Associated Illinois and
Associated, after due inquiry, the execution and delivery of this
Agreement by Associated Illinois and Associated does not, and the
performance of this Agreement by Associated Illinois and Associated
shall not, (i) conflict with or violate the Articles of Incorporation
or By-Laws
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of Associated Illinois or Associated, (ii) conflict with or
violate any laws applicable to Associated Illinois or Associated or by
which its properties are bound or affected, or (iii) result in any
breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of,
or result in the creation of a lien or encumbrance on any of the
properties or assets of Associated Illinois or Associated pursuant to,
any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which
Associated Illinois or Associated is a party or by which Associated
Illinois or Associated or its properties is bound or affected, except
for any such breaches, defaults or other occurrences that would not,
individually or in the aggregate, have a Material Adverse Effect on
Associated Illinois or Associated.
(b) To the best knowledge of Associated Illinois and
Associated, after due inquiry, the execution and delivery of this
Agreement by Associated Illinois and Associated does not, and the
performance of this Agreement by Associated Illinois and Associated
shall not, require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental or regulatory
authority, domestic or foreign, except (i) for applicable requirements,
if any, of the Securities Act, the Exchange Act, Blue Sky Laws, the
BHCA, the IBL, and the filing and recordation of appropriate merger or
other documents as required by Illinois Law and (ii) where the failure
to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or delay
consummation of the Merger, or otherwise prevent Associated Illinois or
Associated from performing its obligations under this Agreement, and
would not have a Material Adverse Effect on Associated Illinois and
Associated.
SECTION 3.06. Compliance; Permits. To the best knowledge of
Associated, after due inquiry, it is not in conflict with, or in default or
violation of (i) any Law applicable to Associated or by which its property is
bound or affected, or (ii) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Associated is a party or by which Associated or any of its properties
is bound or affected, except for any such conflicts, defaults or violations
which would not, individually or in the aggregate, have a Material Adverse
Effect on Associated and its subsidiaries, taken as a whole.
SECTION 3.07. Securities Reports; Financial Statements.
(a) As of the date of this Agreement, Associated has delivered
to the Company in the form filed with the SEC (x)(i) its Annual Reports
on Form 10-K for the fiscal years ended December 31, 1991, 1992, 1993
and 1994, respectively, (ii) its Quarterly Reports on Form 10-Q for the
periods ended March 31, 1994, June 30, 1994, and September 30, 1994,
(iii) all definitive proxy statements relating to Associated's meetings
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of shareholders (whether annual or special) held since December 31,
1990, (iv) all Reports on Form 8-K filed by Associated with the SEC
since December 31, 1990, (v) all other reports or registration
statements (other than Reports on Form 10-Q not referred to in clause
(ii) above and registration statements on Form S-8 filed by Associated
with the SEC since December 31, 1990) and (vi) all amendments and
supplements to all such reports and registration statements filed by
Associated with the SEC since December 31, 1990 (collectively, the
"Associated SEC Reports"). The Associated SEC Reports, including all
Associated SEC Reports filed after the date of this Agreement, (y)(i)
were or will be prepared in accordance with the requirements of
applicable law and (ii) did not at the time they were filed, or will
not at the time they are filed, contain any untrue statement of
material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements (including,
in each case, any related notes thereto) contained in the Associated
SEC Reports, including any Associated SEC Reports filed since the date
of this Agreement and prior to or on the Effective Time, have been
prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods involved (except
as may be indicated in the notes thereto) and each fairly presents the
consolidated financial position of Associated and its subsidiaries as
of the respective dates thereof and the consolidated results of its
operations and changes in financial position for the periods indicated,
except that any unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which were not or
are not expected to be material in amount.
(c) Except as and to the extent set forth on the consolidated
balance sheet of Associated and its subsidiaries as of December 31,
1994, including all notes thereto (the "Associated Balance Sheet"),
neither Associated nor its subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or
otherwise) that would be required to be reflected on a balance sheet,
or in the notes thereto, prepared in accordance with generally accepted
accounting principles, except (i) for liabilities or obligations
incurred in the ordinary course of business since December 31, 1994
that would not, individually or in the aggregate, have a Material
Adverse Effect on Associated and its subsidiaries, taken as a whole, or
(ii) as otherwise reflected in the reports referred to in clause
(x)(ii) of Section 3.07(a) hereof.
SECTION 3.08. Absence of Certain Changes or Events. Except as
disclosed in the Associated SEC Reports filed prior to the date of this
Agreement, since December 31, 1994 to the date of this Agreement, Associated and
its subsidiaries have conducted their businesses only in the ordinary course and
in a manner consistent with past practice and, since December 31, 1994, there
has not been (i) any change in the financial condition, results of operations or
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business of Associated or its subsidiaries having a Material Adverse Effect on
Associated and its subsidiaries, taken as a whole, (ii) any damage, destruction
or loss (whether or not covered by insurance) with respect to any assets of
Associated or its subsidiaries having a Material Adverse Effect on Associated
or its subsidiaries, taken as a whole, (iii) any change by Associated in its
accounting methods, principles or practices, (iv) any revaluation by Associated
of any of its material assets in any material respect, or (v) to the date of
this Agreement, any entry by Associated or any of its subsidiaries into any
commitment or transactions material to Associated and its subsidiaries taken as
a whole.
SECTION 3.09. Absence of Litigation. Except as disclosed in Section
3.09 of the Associated Disclosure Schedule and in the Associated SEC Reports
filed prior to the date of this Agreement, there is no claim, action, suit,
litigation, proceeding, arbitration, investigation, or controversy of any kind
affecting Associated or any of Associated's subsidiaries pending or, to the best
knowledge of Associated, after due inquiry, threatened, except for matters which
individually seek damages not in excess of $100,000 and which otherwise will not
have, and cannot reasonably be expected to have, a Material Adverse Effect on
Associated and its subsidiaries taken as a whole, and there are no uncured
material violations, or violations with respect to which material refunds or
restitutions may be required, cited in any compliance examination report to
Associated or any of Associated's subsidiaries as a result of an examination by
any bank regulatory authority.
SECTION 3.10. Registration Statement; Proxy Statement. None of the
information supplied or to be supplied by Associated for inclusion in (a) the
Registration Statement (as defined in Section 6.01) (b) the Proxy
Statement/Prospectus (as defined in Section 6.01), or (c) any other document to
be filed with the SEC or other regulatory authority in connection with the
transactions contemplated hereby, at the respective time such documents are
filed and, in the case of the Registration Statement, when it becomes effective
and at the Effective Time, and with respect to the Proxy Statement/Prospectus,
when mailed, shall be false or misleading with respect to any material fact, or
omit to state any material fact necessary in order to make the statements
therein not misleading. In the case of the Proxy Statement/Prospectus or any
amendment thereof or supplement thereto, none of such information at the time of
the Meeting (as provided for in Section 6.02) shall be false or misleading with
respect to any material fact, or omit to state any material fact necessary to
correct any statement in any earlier communication with respect to the
solicitation of any proxy for the Meeting. All documents filed with the SEC or
other regulatory authority by Associated Illinois and Associated in connection
with the Merger shall comply as to form in all material respects with the
provisions of applicable law.
SECTION 3.11. Title to Property. Associated and each of its
subsidiaries have good and defensible title to all of their properties and
assets, real and personal, free and clear of all mortgage liens, and free and
clear of all other liens, charges and encumbrances except liens for taxes not
yet due and payable and such minor imperfections of title, if any, as do not
materially
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detract from the value of or interfere with the present use of the property
affected thereby or which, individually or in the aggregate, would not have a
Material Adverse Effect on Associated and its subsidiaries, taken as a whole;
and all leases pursuant to which Associated or any of its subsidiaries lease
from others material amounts of real or personal property are in good standing,
valid and effective in accordance with their respective terms, and there is
not, under any of such leases, any existing material default or event of
default (or event which with notice or lapse of time, or both, would constitute
a material default and in respect of which Associated or such subsidiary has
not taken adequate steps to prevent such a default from occurring).
Substantially all of Associated's and each of Associated's subsidiaries'
buildings and equipment in regular use have been reasonably maintained and are
in good and serviceable condition, reasonable wear and tear excepted.
SECTION 3.12. Absence of Agreements. Neither Associated Illinois nor
Associated is a party to any written agreement or memorandum of understanding
with, or a party to any commitment letter or similar undertaking to, or is
subject to any order or directive by, or is a recipient of any extraordinary
supervisory letter which restricts materially the conduct of its business
(including any contract containing covenants which limit the ability of
Associated Illinois or Associated to compete in any line of business or with any
person or which involve any restriction of the geographical area in which, or
any method by which, Associated may carry on its business (other than as may be
required by Law or applicable regulatory authorities)), or in any manner relates
to its capital adequacy, its credit policies or its management, except for those
the existence of which has been disclosed to the Company prior to the date of
this Agreement, nor has Associated been advised that any federal, state or
governmental agency is contemplating issuing or requesting (or is considering
the appropriateness of issuing or requesting) any such order, decree, agreement,
memorandum of understanding, extraordinary supervisory letter, commitment letter
or similar submission, except as may be disclosed by Associated in Section 3.12
of the Associated Disclosure Schedule.
SECTION 3.13. Taxes. Associated and its subsidiaries have timely filed
all Tax Returns required to be filed by them, and Associated and its
subsidiaries have timely paid and discharged all Taxes due in connection with or
with respect to the filing of such Tax Returns and have timely paid all other
Taxes as are due, except such as are being contested in good faith by
appropriate proceedings and with respect to which Associated is maintaining
reserves adequate for their payment. To the best knowledge of Associated, after
due inquiry, the liability for Taxes set forth on each such Tax Return
adequately reflects the Taxes required to be reflected on such Tax Return. For
purposes of this Section 3.13, references to Associated and its subsidiaries
include former subsidiaries of Associated for the periods during which any such
corporations were owned, directly or indirectly, by Associated. Neither the IRS
nor any other governmental entity or taxing authority or agency is now
asserting, either through audits or administrative proceedings, court
proceedings or otherwise, or, to the best of Associated's knowledge, after due
inquiry, threatening to assert against Associated or any of its subsidiaries any
deficiency or claim for additional Taxes. Neither Associated nor any of its
subsidiaries has granted any
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waiver of any statute of limitations with respect to, or any extension of a
period for the assessment of, any Tax. There are no tax liens on any assets of
Associated or any of its subsidiaries. Neither Associated nor any of its
subsidiaries has received a ruling or entered into an agreement with the IRS or
any other governmental entity or taxing authority or agency that would have a
Material Adverse Effect on Associated or its subsidiaries, taken as a whole,
after the Effective Time. The accruals and reserves for taxes reflected in the
Associated Balance Sheet are adequate to cover all Taxes accruable through the
date thereof (including Taxes being contested) in accordance with generally
accepted accounting principles. No agreements relating to allocating or
sharing of Taxes exist among Associated and its subsidiaries and no tax
indemnities given by Associated or its subsidiaries in connection with a sale
of stock or assets remain in effect. Neither Associated nor any of its
subsidiaries is required to include in income either (i) any amount in respect
of any adjustment under Section 481 of the Code, or (ii) any installment sale
gain. Neither Associated nor any of its subsidiaries has made an election
under Section 341(f) of the Code.
SECTION 3.14. Environmental Matters.
(a) Associated represents and warrants that, to the best of
Associated's knowledge, after due inquiry: (i) Hazardous Materials
have not been stored, released or disposed of on or from Associated's
Property (as defined below) or, to the best knowledge of Associated,
after due inquiry, any property adjoining Associated's Property; (ii)
Environmental Permits have been obtained and are in effect for the
operations conducted at Associated's Property; (iii) Associated and its
subsidiaries are in compliance in all material respects with the
requirements of all of their Environmental Permits; and (iv) there are
no circumstances with respect to any Associated Property that could
reasonably be anticipated (A) to form the basis of an Environmental
Claim against Associated and its subsidiaries or Associated's Property
that individually or in the aggregate could have a Material Adverse
Effect on Associated and its subsidiaries, taken as a whole, or (B) to
cause Associated's Property to be subject to any restrictions on
ownership, occupancy, use or transferability under any applicable
Environmental Law.
(b) As used herein "Associated's Property" means any real
property and improvements currently owned, leased, used, operated or
occupied by Associated or any of its subsidiaries, including properties
acquired by foreclosure or held or operated in a fiduciary or
managerial capacity.
SECTION 3.15. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Associated.
SECTION 3.16. Accounting and Tax Matters. To the best knowledge of
Associated, after due inquiry, neither Associated nor any of its affiliates has
through the date of this
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Agreement taken or agreed to take any action that would prevent Associated from
accounting for the business combinations to be effected by the Merger as a
pooling-of-interests or would prevent the Merger from qualifying as a
reorganization under Section 368(a)(1)(A) of the Code.
SECTION 3.17. Employee Benefits. None of the "employee benefit plans"
within the meaning of Section 3(3) of ERISA, for the benefit of employees of
Associated and each of its subsidiaries (the "Associated Plans") is a
"multiemployer plan" as defined in Section 3(37) of ERISA. All Associated Plans
are in compliance in all material respects with the requirements prescribed by
any and all applicable statutes, orders or governmental rules or regulations
currently in effect with respect thereto, and Associated has performed all
material obligations required to be performed by it under, and is not in any
material respect in default under or in violation of, any of the Associated
Plans. Each Associated Plan intended to be qualified under Section 401(a) of
the Code has heretofore been determined by the IRS to so qualify, and each
trust created thereunder has heretofore been determined by the IRS to be exempt
from tax under the provisions of Section 501(a) of the Code and, to the
knowledge of Associated, after due inquiry, nothing has occurred since the date
of the most recent determination that would be reasonably likely to cause any
such Associated Plan or trust to fail to qualify under Section 401(a) or 501(a)
of the Code. Associated has not incurred any material liability to the Pension
Benefit Guaranty Corporation or any material "withdrawal liability" within the
meaning of Section 4201 of ERISA.
SECTION 3.18. Full Disclosure. No statement contained in any document,
certificate, or other writing furnished or to be furnished by or at the
direction of Associated to the Company, in or pursuant to the provisions of,
this Agreement contains or shall contain any untrue statement of a material fact
or omits or shall omit to state any material fact necessary, in the light of the
circumstances under which it has made, in order to make the statements herein or
therein not misleading.
ARTICLE IV
COVENANTS OF THE COMPANY
SECTION 4.01. Affirmative Covenants. The Company hereby covenants and
agrees with Associated that prior to the Effective Time, unless the prior
written consent of Associated shall have been obtained (which consent shall not
be unreasonably withheld or delayed) and except as otherwise contemplated
herein, it will and it will cause each Subsidiary to:
(a) operate its business only in the usual, regular and
ordinary course consistent with past practices;
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(b) use reasonable efforts to preserve intact its business
organization and assets, maintain its rights and franchises, retain the
services of its officers and key employees and maintain its relationships
with customers;
(c) use reasonable efforts to maintain and keep its properties in as
good repair and condition as at present, ordinary wear and tear excepted;
(d) use reasonable efforts to keep in full force and effect insurance
and bonds comparable in amount and scope of coverage to that now
maintained by it;
(e) perform in all material respects all obligations required to be
performed by it under all material contracts, leases, and documents
relating to or affecting its assets, properties, and business;
(f) comply with and perform in all material respects all obligations
and duties imposed upon it by all applicable laws; and
(g) obtain an independent audit of its financial statements for the
year ended December 31, 1994.
SECTION 4.02. Negative Covenants. Except as specifically contemplated by
this Agreement, from the date of this Agreement until the Effective Time, the
Company shall not do, or permit any of its Subsidiaries to do, without the
prior written consent of Associated (which consent shall not be unreasonably
withheld or delayed), any of the following:
(a) (i) grant any general increase in compensation to its employees
as a class, or to its officers or directors, except in accordance with
past practice or as required by Law or increases which are not material,
(ii) effect any change in retirement benefits to any class of employees or
officers (unless any such change shall be required by applicable law)
which would increase its retirement benefit liabilities, (iii) adopt,
enter into, amend or modify any Plan or make any adjustments pursuant to
any Plan, or (iv) except as set forth in the Company Disclosure Schedule
at Section 4.02(a), enter into or amend any employment, severance or
similar agreements or arrangements with any directors or officers, other
than as is consistent with the normal severance policies of the Company
and its Subsidiaries in effect on the date of this Agreement;
(b) declare or pay any dividend on, or make any other distribution in
respect of, its outstanding shares of capital stock;
(c) (i) redeem, purchase or otherwise acquire any shares of its
capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock, or any options,
warrants, conversion or other rights to acquire any shares
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of its capital stock or any such securities or obligations; (ii) merge
with or into any other corporation or bank, permit any other corporation
or bank to merge into it or consolidate with any other corporation or
bank, or effect any reorganization or recapitalization; (iii) purchase or
otherwise acquire any assets or stock of any corporation, bank or other
business; (iv) liquidate, sell, dispose of, or encumber any assets or
acquire any assets, other than in the ordinary course of its business
consistent with past practice, including, without limitation, except as
set forth in the Company Disclosure Schedule at Section 4.02(c), certain
real estate owned by Realty; or (v) split, combine or reclassify any of
its capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for shares
of its capital stock;
(d) except as set forth in the Company Disclosure Schedule at Section
4.02(d), issue, deliver, award, grant or sell, or authorize or propose the
issuance, delivery, award, grant or sale of, any shares of any class of
its capital stock (including shares held in treasury) or any rights,
warrants or options to acquire, any such shares;
(e) initiate, solicit or encourage (including by way of furnishing
information or assistance), or take any other action to facilitate, any
inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Competing Transaction (as such term
is defined below), or negotiate with any person in furtherance of such
inquiries or to obtain a Competing Transaction, or agree to or endorse any
Competing Transaction, or authorize or permit any of its officers,
directors or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it or any
Subsidiary to take any such action, and the Company shall promptly notify
Associated orally and in writing of all of the relevant details relating
to all inquiries and proposals which it may receive relating to any of
such matters; provided, however, that nothing contained in this subsection
(e) shall prohibit the Board of Directors of the Company from (1) taking
any such action or permitting any of its representatives to take any such
action if (i) the Board of Directors of the Company is required to take
such action to comply with its fiduciary duties to shareholders imposed by
law and such Board of Directors receives an opinion of counsel confirming
such requirement prior to taking or permitting the action and (ii) prior
to furnishing any information to any person, the Company receives from the
person an executed confidentiality agreement in reasonably customary form
or (2) complying with Rules 14d-2 and 14e-2 promulgated under the Exchange
Act with regard to a Competing Transaction. For purposes of this
Agreement, "Competing Transaction" shall mean any of the following
involving the Company or any Subsidiary: (i) any merger, consolidation,
share exchange, business combination, or other similar transactions; (ii)
except as set forth in the Company Disclosure Schedule at Section 4.02(e),
any sale, lease, exchange, mortgage, pledge, transfer or other disposition
of ten percent or more of assets in a single transaction or series of
transactions, excluding from the calculation of the percentage hereunder
any such transactions undertaken in the ordinary course of
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business and consistent with past practice; (iii) any sale of ten percent
or more of shares of capital stock (or securities convertible or
exchangeable into or otherwise evidencing, or any agreement or instrument
evidencing, the right to acquire capital stock); (iv) any tender offer or
exchange offer for ten percent or more of outstanding shares of capital
stock; (v) any solicitation of proxies in opposition to approval by the
Company's shareholders of the Merger; (vi) the filing of an acquisition
application (or the giving of acquisition notice) whether in draft or
final form under the BHCA or the Change in Bank Control Act with respect
to the Company or the Bank; (vii) any person shall have acquired
beneficial ownership or the right to acquire beneficial ownership of, or
any "group" (as such term is defined under Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder) shall have been
formed which beneficially owns or has the right to acquire beneficial
ownership of, 10% or more of the then outstanding shares of capital stock;
or (viii) any public announcement of a proposal, plan or intention to do
any of the foregoing);
(f) propose or adopt any amendments to the corporate charter or
by-laws in any way materially adverse to Associated;
(g) except in their fiduciary capacities for the account of
customers, purchase any shares of Associated Common Stock;
(h) change any of its methods of accounting in effect at December 31,
1994, or change any of its methods of reporting income or deductions for
federal income tax purposes from those employed in the preparation of the
federal income tax returns for the taxable year ending December 31, 1994,
except as may be required by law or generally accepted accounting
principles;
(i) change any lending, investment, liability management or other
material policies concerning the business or operations of the Company or
any Subsidiary in any material respect; organize any new subsidiaries or
enter into any new non-banking line of business whether or not permissible
under applicable Federal or state law, or make any material changes in its
operations;
(j) (i) incur or assume any material obligation or liability,
including without limitation any obligation for borrowed money, whether or
not evidenced by a note, bond, debenture or similar instrument and whether
or not being incurred to reduce other existing liabilities, or make any
loan (not including any loan renewal of a loan not then classified as
"substandard," "doubtful," "loss," "other loans especially mentioned" or
any comparable classifications by the Company, the Bank or banking
regulators) or investment (including U.S. Treasury Securities) in an
amount greater than $100,000.00, (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingent or
otherwise) for the obligations of any other person or entity;
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(iii) mortgage, license, pledge or grant a security interest in any of its
material assets or allow to exist any material lien thereon; except (A)
for liabilities and obligations (including corporate debt issuances)
incurred in the ordinary course of business consistent with past practices
and in amounts not material to the Company and its Subsidiaries taken as a
whole; and (B) as may be required under existing agreements to which the
Company or any Subsidiary is a party; (iv) acquire a material amount of
assets or securities; (vi) pay, discharge, or satisfy any debts or claims
not in the ordinary course of business and consistent with past practices
and in no event with a value in excess of $20,000.00 individually; (vii)
settle any claim, action, suit, litigation, proceeding, arbitration,
investigation or controversy of any kind, for any amount in excess of
$25,000.00 or in any manner which would restrict in any material respect
the operations or business of the Company or its Subsidiaries; (viii)
purchase any financial product or instrument which involves entering into
a contract with a term of six months or longer, or (ix) take any action or
fail to take any action which individually or in the aggregate can be
expected to have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole;
(k) take any action which is or is reasonably likely to (i) adversely
effect the ability of Associated or Associated Illinois to obtain any
necessary approvals of governmental authorities required for the
transactions contemplated hereby; (ii) adversely affect the Company's
ability to perform its covenants and agreements under this Agreement; or
(iii) result in any of the conditions to the Merger set forth in Article
VII not being satisfied; or
(l) agree in writing or otherwise to do any of the foregoing.
SECTION 4.03. Letter of the Company's Accountants. The Company shall use
its best efforts to cause to be delivered to Associated "cold comfort" letters
of McGladrey & Pullen LLP, the Company's independent public accountants, dated
the date on which the Registration Statement shall become effective and the
Effective Time, respectively, and addressed to Associated, in form and
substance substantially similar to that attached hereto as Annex C and
reasonably satisfactory to Associated.
SECTION 4.04. Access and Information.
(a) Upon reasonable notice, and without unreasonable disruption to
the business carried on by the Company or its Subsidiaries, the Company
shall (and shall cause its Subsidiaries to) afford to Associated's
officers, employees, accountants, legal counsel and other representatives
access, during normal business hours, to all its properties, books,
contracts, commitments and records. Prior to the Effective Time, the
Company shall (and shall cause each Subsidiary to) furnish promptly to
Associated (i) a copy of each the Company Report filed by it (to the
extent permitted by Law) after the
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date of this Agreement and prior to the Effective Time pursuant to the
requirements of federal or state securities laws, the BHCA, any other
federal or state banking laws or any other applicable laws promptly after
such documents are available, (ii) the quarterly unaudited consolidated
financial statements of the Company and monthly unaudited financial
statements of the Bank; (iii) the audited consolidated financial
statements of the Company and the Bank for the year ended December 31,
1994; (iv) a summary of any action taken by the Board of Directors, or any
committee thereof, of the Company and its Subsidiaries; and (v) all other
information concerning the business, properties and personnel of the
Company or its Subsidiaries as Associated may reasonably request.
(b) Any information provided to Associated by the Company or its
Subsidiaries, whether prior to or subsequent to the date of this
Agreement, shall be kept confidential by the representatives of Associated
(and shall be used by them only in connection with this Agreement and the
transactions contemplated hereby) except to the extent that (i) it was
already known to such representatives when received, (ii) it hereafter
becomes lawfully obtainable from other sources, or (iii) it is required to
be disclosed by Associated in any document required to be filed with any
government agency. Upon any termination of this Agreement pursuant to
Section 8 hereof, Associated agrees to promptly return all information and
documents that it has obtained from the Company in connection herewith.
SECTION 4.05. Affiliates; Accounting and Tax Treatment. Within thirty
(30) days after the date of this Agreement, (a) the Company shall deliver to
Associated a letter identifying all persons who are then "affiliates" of the
Company, including, without limitation, all directors and executive officers of
the Company for purposes of Rule 145 promulgated under the Securities Act and
(b) the Company shall advise the persons identified in such letter of the
resale restrictions imposed by applicable securities laws and required to cause
the Merger to qualify for pooling-of-interests accounting treatment, and shall
use reasonable efforts to obtain from each person identified in such letter a
written agreement, substantially in the form attached hereto as Exhibit 4.05.
The Company shall use reasonable efforts to obtain from any person who becomes
an affiliate of the Company after the Company's delivery of the letter referred
to above, and on or prior to the Effective Time, a written agreement
substantially in the form attached hereto as Exhibit 4.05 as soon as
practicable after attaining such status. The Company will use its best efforts
to cause the Merger to qualify for pooling-of-interests accounting treatment
and as a reorganization under Section 368(a)(1)(A) of the Code.
SECTION 4.06. Expenses.
(a) Except as provided in Section 8.02(b), below, all Expenses (as
described below) incurred by Associated and the Company shall be borne
solely and entirely by the party which has incurred the same, except that
the parties shall share equally in the expense of printing or reproducing
for filing the Registration Statement and the Proxy
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Statement/Prospectus and all SEC and states securities filing fees
incurred in connection herewith.
(b) "Expenses" as used in this Agreement shall include all reasonable
out-of-pocket expenses (including without limitation, all fees and
expenses of counsel, accountants, investment bankers, experts and
consultants to the party and its affiliates) incurred by a party or on its
behalf in connection with or related to the authorization, preparation and
execution of this Agreement, the solicitation of shareholder approvals and
all other matters related to the closing of the transactions contemplated
hereby.
SECTION 4.07. Delivery of Shareholder List. The Company shall arrange to
have its transfer agent deliver to Associated or its designee, immediately
prior to the Effective Time, a true and complete list setting forth the names
and addresses of the shareholders of the Company and the Bank, their holdings
of stock as of the latest practicable date, and such other shareholder
information as Associated may reasonably request.
SECTION 4.08. Environmental Matters.
(a) The Company previously engaged the environmental consulting firm
of Chicago Environmental Survey to conduct a preliminary ("Phase I")
environmental assessment of customary scope of that certain real property
together with all improvements thereon owned by Realty commonly known as
5310-30 North Milwaukee Avenue and 5259 Northwest Highway, Chicago,
Illinois ("Realty Property"). Based on such Phase I assessments, the
parties have agreed to obtain from one or more mutually acceptable
consultants or contractors, as appropriate, recommendations as to any
further environmental investigation, sampling, analysis, remediation, or
other follow-up work that may be necessary to address those conditions
existing on Realty's Property in a manner sufficient to obtain a "no
further action letter" or similar letter from state environmental
authorities and estimates of the cost thereof. The parties will agree to
any investigation of Company Property not owned by Realty.
(b) Upon receipt of the estimates of the costs of all follow-up work
to the Phase I assessments or any subsequent investigation phases that may
be conducted and any investigation of Company Property not owned by
Realty, the parties shall attempt to agree upon a course of action for
further investigation and remediation of any environmental condition
suspected, found to exist, or that would tend to be indicated by the
report of the consultant. All work plans for any post-Phase I assessments
or remediation, and any removal or remediation actions that may be
performed, shall be mutually satisfactory to the Company and Associated,
except that (i) Associated shall be entitled to cause to be performed such
"Phase II" assessments as Associated shall reasonably request, in each
case having a scope reasonable under the circumstances, taking into
account among other things the recommendations set forth in the Phase I
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assessments and (ii) the parties shall share equally the costs of any
measures taken under this Section 4.08. The Company and Associated shall
thereafter cooperate in the review, approval, and implementation of all
work plans. If the work plans or removal or remediation actions with
respect to all of the Company's Property would entail an aggregate cost to
complete that would be reasonably likely to exceed $250,000 in the
aggregate, the Company and Associated shall discuss a mutually acceptable
modification to this Agreement under the standards of fair dealing and
objective good faith.
(c) If (i) the parties are unable to agree upon a course of action
for further investigation and remediation of all environmental conditions
and/or issues raised by environmental assessments with respect to all of
Company's Property and/or a mutually acceptable modification of this
Agreement within 45 days following the date of this Agreement and (ii) the
conditions and/or issues are not such that it can be determined to a
reasonable degree of certainty within such 45-day period, based upon
information then available to the Company and Associated, that the risk
and expense to which Associated and its subsidiaries would be subject as
the owner and/or operator of the Company's Property involved can be
quantified and limited to an amount that would not be reasonably likely to
exceed $250,000 in the aggregate (including costs incurred prior to the
Effective Time), then Associated may terminate this Agreement pursuant to
Section 8.01(a)(vii).
(d) The specified time limitations on the rights of Associated under
this Section 4.08 and under Section 8.01(a)(vii) shall be conditioned upon
the prompt and full cooperation of the Company and its representatives in
connection with the matters herein involving the choice of mutually
acceptable environmental consultants or contractors.
(e) During the period prior to the Effective Time, the Company shall
cause each of its Subsidiaries that proposes to acquire ownership or
possession of any real property, through foreclosure or repossession or
otherwise, to conduct a Phase I environmental assessment of such real
property and any further environmental investigation, sampling or analysis
reasonably required to ensure that such Subsidiary shall not acquire
ownership or possession of any real property that is reasonably likely to
cause the Subsidiary to be subject to or incur any liabilities, damages,
penalties or removal, remediation or other costs as a result of its
ownership or control of the property that will exceed the value of the
property.
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ARTICLE V
COVENANTS OF ASSOCIATED
SECTION 5.01. Affirmative Covenants. Associated hereby covenants and
agrees with the Company that prior to the effective Time, unless the prior
written consent of the Company shall have been obtained, and except as
otherwise contemplated herein it will:
(a) maintain its and Associated Illinois' corporate existence in
good standing and maintain all books and records in accordance with
accounting principles and practices as utilized in Associated's financial
statements applied on consistent basis;
(b) conduct its and Associated Illinois' business in a manner that
does not violate any law, except for possible violations which
individually or in the aggregate do not, and insofar as reasonably can be
foreseen, in the future will not, have a Material Adverse Effect on
Associated and its subsidiaries, taken as a whole; and
(c) will, to the best of its ability and in all material respects,
(i) comply with applicable Blue Sky Laws and regulations, the Securities
Act, and the Exchange Act, and (ii) remain qualified under the Exchange
Act and the rules and regulations thereunder.
SECTION 5.02. Negative Covenants. Except as specifically contemplated by
this Agreement, from the date hereof until the Effective Time, Associated shall
not do, or agree or commit to do, or permit any of its subsidiaries to do,
without the prior written consent of the Company (which shall not be
unreasonably withheld or delayed) any of the following:
(a) propose or adopt any amendments to its Articles of Incorporation
or By-Laws in any way materially adverse to the Company;
(b) take action which would or is reasonably likely to (i) adversely
affect the ability of either of Associated or the Company to obtain any
necessary approvals of governmental authorities required for the
transactions contemplated hereby; (ii) adversely affect Associated's
ability to perform its covenants and agreements under this Agreement; or
(iii) result in any of the conditions to the Merger set forth in Article
VII not being satisfied; or
(c) agree in writing or otherwise to do any of the foregoing.
SECTION 5.03. Access and Information.
(a) After the date of this Agreement and prior to the Effective Time,
upon reasonable notice, Associated shall (and shall cause each of its
subsidiaries to) furnish
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promptly to the Company (i) a copy of each Associated SEC Report filed by
it or received by it (to the extent permitted by law) after the date of
this Agreement and prior to the Effective Time pursuant to the
requirements of federal or state securities laws, the BHCA, any other
federal or state banking laws or any other applicable laws promptly after
such documents are available and (ii) all other information concerning the
business, properties and personnel of Associated or its subsidiaries as
the Company may reasonably request.
(b) Any information provided to the Company by Associated whether
prior to or subsequent to the date of this Agreement shall be kept
confidential by the representatives of the Company (and shall be used by
them only in connection with this Agreement and the transactions
contemplated hereby) except to the extent that (i) it was already known to
such representatives when received, (ii) it hereafter becomes lawfully
obtainable from other sources, or (iii) it is required to be disclosed by
the Company in any document required to be filed with the Company or any
government authority or agency.
SECTION 5.04. Accounting and Tax Treatment. Associated will use its best
efforts to cause the Merger to qualify for pooling-of-interests accounting
treatment and as a reorganization under Section 368(a)(1)(A) of the Code.
SECTION 5.05. Eligibility for Dividend. Associated agrees to use
reasonable efforts to take all steps necessary to consummate the Merger on or
before the close of business on the date the Board of Directors of Associated
determines to be the record date for purposes of establishing those
shareholders eligible to receive the dividend to be declared and paid by
Associated in the third calendar quarter of 1995; the intent of this provision
being that the Merger will be consummated prior to such date thereby entitling
the holders of shares of the Company's Common Stock to receive such Associated
dividend.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Registration Statement. Associated shall use its best
efforts to promptly prepare and file a registration statement on Form S-4 (the
registration statement together with the amendments thereto are defined as the
"Registration Statement" and the prospectus and proxy materials contained
therein are defined as the "Proxy Statement/Prospectus") with the SEC covering
the Associated Common Stock to be issued in the Merger (subject to the
immediately following sentence), with a view toward permitting the Registration
Statement to become effective as soon as reasonably practicable. Associated
does not undertake to file post-effective amendments to Form S-4 or to file a
separate registration statement to register the sale of Associated Common Stock
by affiliates of the Company pursuant to Rule 145 promulgated under
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the Securities Act. The Company will furnish to Associated all information
concerning the Company and its Subsidiaries required to be set forth in the
Registration Statement and Associated will provide the Company and its counsel
and accountants the opportunity to review and approve such information as set
forth in the Registration Statement and Proxy Statement/Prospectus. Associated
and the Company will each render to the other its full cooperation in
preparing, filing, prosecuting the filing of, and amending the Registration
Statement such that it comports at all times with the requirements of the
Securities Act and the Exchange Act. Specifically, but without limitation,
each will promptly advise the other if at any time before the Effective Time
any information provided by it for inclusion in the Registration Statement
appear to have been, or shall have become, incorrect or incomplete and will
furnish the information necessary to correct such misstatements or omissions.
As promptly as practicable after the effective date of the Registration
Statement, the Company will mail to its shareholders (a) the Proxy
Statement/Prospectus and (b) as promptly as practicable after approval thereof
by Associated, such other supplementary proxy materials as may be necessary to
make the Proxy Statement/Prospectus comply with the requirements of the
Securities Act and the Exchange Act. Except as provided above and except with
the prior written consent of Associated, the Company will not mail or otherwise
furnish or publish to shareholders of the Company any proxy solicitation
material or other material relating to the Merger that constitutes a
"prospectus" within the meaning of the Securities Act. Associated shall also
take any action required to be taken under any applicable Blue Sky Laws in
connection with the issuance of the shares of Associated Common Stock to be
issued as set forth in this Agreement and the Company shall furnish all
information concerning the Company, its Subsidiaries and the holders of the
Company's Common Stock and other assistance as Associated may reasonably
request in connection with such action.
SECTION 6.02. Meeting of Shareholders. The Company and its officers and
directors shall: cause the Company's shareholders Meeting to be duly called
and held as soon as practicable to consider and vote upon the Merger and any
related matters in accordance with the applicable provisions of applicable law.
Subject to the applicable fiduciary duties of directors of the Company, as
determined by such directors after consultation with independent legal counsel,
the Company shall use its best efforts to solicit from shareholders of the
Company proxies in favor of the Merger and shall take all other action
necessary or advisable to secure the vote or consent of shareholders required
by Illinois Law to approve the Merger.
SECTION 6.03. Appropriate Action; Consents; Filings. Subject to the
terms and conditions hereof, the Company and Associated shall use all
reasonable efforts to (i) take, or cause to be taken, all appropriate action,
and do, or cause to be done, all things necessary, proper or advisable under
applicable law to consummate and make effective the transactions contemplated
by this Agreement, (ii) obtain all consents, licenses, permits, waivers,
approvals, authorizations or orders required under Law (including, without
limitation, all foreign and domestic (federal, state and local) governmental
and regulatory rulings and approvals and parties to contracts) in connection
with the authorization, execution and delivery of this Agreement and
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the consummation by them of the transactions contemplated hereby and thereby,
including, without limitation, the Merger, (iii) make all necessary filings,
and thereafter make any other required submissions, with respect to this
Agreement and the Merger required under (A) the Securities Act and the Exchange
Act and the rules and regulations thereunder, and any other applicable federal
or state securities laws, (B) any applicable federal or state banking laws and
(C) any other applicable law; provided that Associated and the Company shall
cooperate with each other in connection with the making of all such filings,
including providing copies of all such documents to the non-filing party and
its advisors prior to filing and, if requested, to accept all reasonable
additions, deletions or changes suggested in connection therewith. The Company
and Associated shall furnish all information required for any application or
other filing to be made pursuant to the rules and regulations of any applicable
law (including all information required to be included in the Proxy
Statement/Prospectus and the Registration statement) in connection with the
transactions contemplated by this Agreement. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and directors of each party to
this Agreement shall use all reasonable efforts to take all such necessary
action.
SECTION 6.04. Notification of Certain Matters. The Company shall give
prompt notice to Associated, and Associated shall give prompt notice to the
Company, of (i) the occurrence, or non-occurrence, of any event the occurrence,
or non-occurrence, of which would be likely to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate and (ii) any
failure of the Company or Associated, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 6.04 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION 6.05. Public Announcements. Associated and the Company shall
consult with each other before issuing any press release or otherwise making
any public statements with respect to the Merger and shall not issue any such
press release or make any such public statement prior to such consultation and
with mutual consent of both parties, except as may be required by law or any
listing agreement with the National Association of Securities Dealers.
SECTION 6.06. Inducement Fee.
(a) Provided that Associated has not breached in any material respect
its obligations under this Agreement, as a condition and inducement to
Associated's willingness to enter into and perform this Agreement, the
Company shall pay Associated a fee of $1,250,000 (the "Inducement Fee")
subject to Section 6.06(b) within five (5) business days subsequent to the
following:
(i) (A) the Board of Directors of the Company (1) shall have
withdrawn, modified or amended in any respect its approval or
recommendation
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of this Agreement or the transactions contemplated thereby, or
(2) shall not at the appropriate time have recommended or shall have
withdrawn, modified or amended in any respect its recommendation that
its shareholders vote in favor of this Agreement, or (3) shall not
have included such recommendation in the Proxy Statement/Prospectus,
or (B) the Board of Directors of the Company shall have resolved to
do any of the foregoing;
(ii) if prior to termination of this Agreement a proposal for
a Competing Transaction (as defined in Section 4.02(e) hereof) other
than one involving Associated, is accepted, approved or not rejected
by the Board of Directors of the Company, or the Board of Directors
expresses no opinion and is remaining neutral toward a Competing
Transaction, regardless of whether it is consummated;
(iii) termination of this Agreement following a wilful and
material breach thereof by the Company; or
(iv) termination of this Agreement as a result of the failure
of the Company's shareholders to approve the Merger at the Meeting.
(b) The Inducement Fee shall be reduced dollar for dollar by the sum
of (i) the aggregate amount of any consideration paid to Associated
(including any successor-in-interest, subsidiary, affiliate and permitted
transferee) (singularly or collectively, the "Holder") as consideration
for the Option Shares or the Option (as those terms are defined in the
Stock Option Agreement) from any Person (as defined in the Stock Option
Agreement), including the Company (whether in a single transaction or any
number of transactions) less the Purchase Price (as defined in the Stock
Option Agreement) actually paid by the Holder and (ii) by Expenses paid to
Associated pursuant to Section 8.02(b). Notwithstanding the foregoing, in
the event that Associated does not exercise the Option within five (5)
business days following such time as the Inducement Fee becomes payable
pursuant to Section 6.06(a), the Option Shares or the Option (including
without limitation, any payments in the form of the Termination Fee or
Repurchase Fee) (as those terms are defined in the Stock Option Agreement)
shall be deemed in such event to have a value equal to $108,000 (the
"Stock Option Consideration") (regardless of the actual amount of
potential or realized consideration under the Stock Option Agreement) and
the Inducement Fee as reduced by Expenses and by the Stock Option
Consideration shall be due and payable pursuant to Section 6.06(a). The
Stock Option Consideration shall be payable pursuant to the provisions of
the Stock Option Agreement at such times as provided therein. The
Inducement Fee shall be payable in immediately available funds and shall
be considered liquidated damages.
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(c) It is the intention of the parties that the Inducement Fee be
reduced for Expenses and any consideration payable pursuant to the Stock
Option Agreement (as Stock Option Consideration, Termination Fee,
Repurchase Fee or otherwise) whether Associated exercises the Option prior
to or subsequent to the date the Inducement Fee is required to be paid,
although payment of any consideration under the Stock Option Agreement
shall be pursuant to the provisions of the Stock Option Agreement. Upon
payment of consideration under the Stock Option Agreement, such agreement
shall terminate pursuant to its provisions.
SECTION 6.07. Directors' and Officers' Indemnification and Insurance.
(a) By virtue of the occurrence of the Merger, Associated shall from
and after the Effective Time succeed to the Company's obligations with
respect to indemnification or exculpation now existing in favor of the
directors, officers, employees and agents of the Company and its
Subsidiaries as provided in the Articles of Incorporation, Articles of
Association, By-Laws, or indemnification agreements of the Company or its
Subsidiaries with respect to matters occurring prior to the Effective
Time. Section 6.07 of the Company Disclosure Schedule contains a complete
list of all indemnification arrangements to which the Company or its
Subsidiaries is a party to on the date of this Agreement. The Company
agrees not to amend or enter into new arrangements or agreements from and
after the date hereof.
(b) From and after the Effective Time, Associated agrees to use its
best efforts to maintain an insurance policy for directors' and officers'
liabilities for all present and former directors and officers of the
Company covered by the Company's current insurance policies on the date of
this Agreement; provided, however, that Associated's obligation under this
subsection (b) shall be completely satisfied at such time as Associated
shall have satisfied either of the following conditions: (i) Associated
shall have maintained an insurance policy in accordance with the
subsection (b) for a period of five (5) years from and after the Effective
Time or (ii) Associated shall have incurred costs to maintain insurance in
accordance with this subsection equal to or exceeding $100,000.
(c) The provisions of this Section 6.07 are intended to be for the
benefit of, and shall be enforceable by, each person who is now, or has
been at any time prior to the date of this Agreement or who becomes prior
to the Effective Time, an officer or director of the Company or any of its
Subsidiaries (the "Indemnified Parties") and his or her heirs and estate
representatives. In the event Associated Illinois, as the surviving
corporation in the Merger, or any of its respective successors or assigns
(i) consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties or
assets to any person, then in each such case, proper provisions
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shall be made so that the successors and assigns of Associated shall
assume the obligations of Associated under this Section 6.07.
(d) Associated, Associated Illinois and the Board of Directors of the
Bank after the Effective Time, agree that, unless required by the Bank's
regulator and subject to applicable fiduciary duties of the directors of
Associated and the Bank and applicable laws and regulations, they will not
initiate or join in any claim, action, suit, proceeding or investigation,
whether formal or informal and whether civil, administrative or criminal,
including, without limitation, in which any of the Indemnified Parties is,
or is threatened to be, made a party or witness, based in whole or in part
on, or arising out of, or pertaining to, the management or operation of
the Company or its subsidiaries prior to the Effective Time.
SECTION 6.08. Special Reimbursement Related to Realty Property. In the
event the Merger does not occur and this Agreement is thereafter terminated by
(i) Associated for reasons other than pursuant to Section 8.01(a)(ii); or (ii)
by the Company and provided the Inducement Fee pursuant to Section 6.06 has not
become due and payable, then Associated agrees to reimburse the Company in an
amount equal to the positive difference between (a) the interest on the
acquisition financing, real estate taxes, insurance and such other reasonable
out-of-pocket expenses actually incurred and payable by the Company or Realty
in respect of Realty's Property and (b) the rent and other fees received by the
Company or Realty in respect of the Realty Property, in each case for the
period commencing as of the date of this Agreement and continuing until the
date of the termination of this Agreement. Associated shall promptly pay
amounts required to be paid pursuant to this Section 6.08 upon the Company's
presentation to Associated of evidence reasonably satisfactory to Associated of
the amounts required to be so paid hereunder.
SECTION 6.09. Board of Directors. The parties agree that the Board of
Directors of the Bank immediately prior to the Effective Time shall remain the
Board of Directors of the Bank following the Effective Time until their
successors shall have been duly elected and qualified. The Board of Directors
of the Bank (or Associated Illinois, as the sole shareholder of the Bank) shall
promptly take all necessary action to elect two individuals nominated by
Associated Illinois to the Board of Directors of the Bank subsequent to the
Effective Time.
SECTION 6.10. Employee Benefit Matters. On or before the Effective Time,
the Company and Associated shall enter into a letter agreement setting forth
certain agreements with respect to certain key officers of the Company and
certain employee benefit matters.
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ARTICLE VII
CONDITIONS OF MERGER
SECTION 7.01. Conditions to Obligation of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Effectiveness of the Registration Statement. The Registration
Statement shall have been declared effective by the SEC under the
Securities Act. No stop order suspending the effectiveness of the
Registration Statement shall have been issued by the SEC and no
proceedings for that purpose shall, on or prior to the Effective Time,
have been initiated or, to the knowledge of Associated or the Company,
threatened by the SEC. Associated shall have received all other federal
or state securities permits and other authorizations necessary to issue
Associated Common Stock in exchange for the Company Common Stock and to
consummate the Merger.
(b) Shareholder Approvals. This Agreement and the Merger shall have
been approved and adopted by the requisite vote of the shareholders of the
Company.
(c) Regulatory Approvals. The Merger shall have been approved by the
Federal Reserve Board, which approval shall not contain any condition
which is not reasonably satisfactory to Associated or the Company, all
conditions required to be satisfied prior to the Effective Time imposed by
the terms of such approvals shall have been satisfied and all waiting
periods relating to such approvals shall have expired.
(d) No Order. No federal or state governmental or regulatory
authority or other agency or commission, or federal or state court of
competent jurisdiction, shall have enacted, issued, promulgated, enforced
or entered any statute, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent)
which is in effect restricting, preventing or prohibiting consummation of
the transactions contemplated by this Agreement.
(e) Buy-Sell Consent. On or before April 15, 1995, the shareholders
of the Company shall have taken all necessary action waiving any right of
redemption by the Company or right of shareholders to purchase shares in
the Company arising out of the transactions contemplated by this Agreement
as may otherwise arise under that certain Buy-Sell Agreement dated as of
April 25, 1983 by and among the shareholders of the Company and the
Company, as amended by Amendment No. 1 thereto dated as of January 20,
1993 (the "Buy-Sell Agreement"). Nothing contained therein or
contemplated by this Agreement shall be deemed to create any right of
shareholders of the Company to purchase shares of the Company under the
Buy-Sell Agreement.
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SECTION 7.02. Additional Conditions to Obligations of Associated. The
obligations of Associated to effect the Merger are also subject to the
following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Company and its Subsidiaries contained in this Agreement
shall be complete and correct in all material respects (except that where
any statement in a representation or warranty expressly includes a
standard of materiality, such statement shall be true and correct in all
respects) as of the Effective Time as though made at the Effective Time
with the same force and effect as if made on and as of the Effective Time.
Associated shall have received a certificate of the Chief Executive
Officer of the Company to that effect.
(b) Agreements and Covenants. The Company and its Subsidiaries shall
have performed or complied in all material respects with all agreements
and covenants required by this Agreement to be performed or complied with
by it on or prior to the Effective Time.
(c) Consents Obtained. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required
to be made by the Company for the authorization, execution and delivery of
this Agreement and the consummation by it of the transactions contemplated
hereby shall have been obtained and made by the Company.
(d) No Challenge. There shall not be pending any action, proceeding
or investigation before any court or administrative agency or by any
government agency or any other person (i) challenging or seeking material
damages in connection with the Merger or the conversion of the Company
Common Stock into Associated Common Stock pursuant to the Merger, or (ii)
seeking to restrain, prohibit or limit the exercise of full rights of
ownership or operation by Associated or its subsidiaries of all or any
portion of the business or assets of the Company or any of its
Subsidiaries, which in either case is reasonably likely to have a Material
Adverse Effect on either the Company and its Subsidiaries, taken as a
whole, or Associated and its subsidiaries, taken as a whole.
(e) Opinion of Counsel. Associated shall have received from Vedder,
Price, Kaufman & Kammholz ("Vedder, Price") or other independent counsel
for the Company reasonably satisfactory to Associated, an opinion dated
the Effective Time, in form and substance reasonably satisfactory to
Associated, covering the matters set forth in Annex A hereto, which
opinion shall be based on such assumptions and containing such
qualifications and limitations as are appropriate and reasonably
satisfactory to Associated.
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(f) Tax Opinion. An opinion of Vedder, Price, special counsel, to
the effect that the Merger will be treated for federal income tax purposes
as a reorganization within the meaning of Section 368(a) of the Code, and
that Associated, Associated Illinois and the Company will each be a party
to that reorganization within the meaning of Section 368(b) of the Code,
dated on or about the date that is two business days prior to the date the
Proxy Statement/Prospectus is first mailed to shareholders of the Company,
shall have been delivered and shall not have been withdrawn or modified in
any material respect, which opinion shall be based on such assumptions and
representations and contain such qualifications and limitations as
appropriate. Vedder, Price shall deliver such supplemental tax opinions
as Associated shall reasonably request.
(g) Accountant Letters. Associated shall have received from the
Company a copy of the letters of McGladrey & Pullen LLP dated (i) the date
of the mailing of the Proxy Statement/Prospectus and (ii) the Effective
Time, in standard industry form with respect to transactions of this
nature and otherwise in form and substance satisfactory to Associated with
respect to the Company's financial condition.
(h) Pooling Opinions. Associated shall have received an opinion from
KPMG Peat Marwick LLP to the effect that the Merger qualifies for
pooling-of-interests accounting treatment if consummated in accordance
with this Agreement.
(i) Affiliate Agreements. Associated shall have received from each
person who is identified in the affiliate letter as an "affiliate" of the
Company a signed affiliate agreement in the form attached hereto as
Exhibit 4.05.
(j) Burdensome Condition. There shall not be any action taken, or
any statute, rule, regulation or order enacted, entered, enforced or
deemed applicable to the Merger, by any federal or state governmental
entity which, in connection with the grant of any regulatory approval,
imposes any condition or restriction upon the Company or Associated or
their respective subsidiaries (or the Surviving Corporation or its
subsidiaries after the Effective Time), including, without limitation, any
requirement to raise additional capital, which would so materially
adversely impact the economic or business benefits of the transactions
contemplated by this Agreement as to render inadvisable the consummation
of the Merger.
(k) Fractional Shares; Dissenters. The aggregate of (i) the
fractional share interests in Associated Common Stock to be paid in cash
pursuant to Section 1.07 of this Agreement and (ii) the shares of
Associated Common Stock that would be issuable by virtue of the Merger
with respect to shares of the Company's Common Stock outstanding on the
record date for the meeting of the Company's shareholders to consider the
Merger that will not be converted into Associated Common Stock due,
directly or indirectly, to the exercise of dissenters' rights, if
available under Illinois Law, shall not be more than
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10% of the maximum aggregate number of shares of Associated Common Stock
which could be issued as a result of the Merger.
(l) Stock Option Agreement. Concurrently with the execution and
delivery of this Agreement, Associated and the Company shall have executed
and delivered the Stock Option Agreement in the form attached hereto as
Annex D.
SECTION 7.03. Additional Conditions to Obligations of the Company. The
obligation of the Company to effect the Merger is also subject to the following
conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Associated and Associated Illinois contained in this
Agreement shall be complete and correct in all material respects (except
that where any statement in a representation or warranty expressly
includes a statement of materiality, such statement shall be true and
correct in all respects) as of the Effective Time as though made on and as
of the Effective Time with the same force and effect as if made on and as
of the Effective Time. The Company shall have received a certificate of
the President of Associated to that effect.
(b) Agreements and Covenants. Associated shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Effective Time.
(c) Consents Obtained. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required
to be made by Associated for the authorization, execution and delivery of
this Agreement and the consummation by it of the transactions contemplated
hereby shall have been obtained and made by Associated.
(d) Opinion of Counsel. The Company shall have received from
Saitlin, Patzik, Frank & Samotny Ltd. or other independent counsel for
Associated reasonably satisfactory to the Company, an opinion dated the
Effective Time, in form and substance reasonably satisfactory to the
Company, covering the matters set forth in Annex B, which opinions shall
be based on such assumptions and contain such qualifications and
limitations as are appropriate and reasonably satisfactory to the Company.
(e) Tax Opinion. An opinion of Vedder, Price to the effect that the
Merger will be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code, and that Associated,
Associated Illinois and the Company will each be a party to that
reorganization within the meaning of Section 368(b) of the Code, dated on
or about the date that is two business days prior to the date the Proxy
Statement/Prospectus is first mailed to shareholders of the Company, shall
have been
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delivered and shall not have been withdrawn or modified in any material
respect, which opinion shall be based on such assumptions and
representations and contain such qualifications and limitations as
appropriate.
(f) Fairness Opinion. Within fifteen (15) days of the execution and
delivery of this Agreement, the Company shall have received an opinion
from Baird or another nationally recognized investment firm to the effect
that, in the opinion of such firm, the Exchange Ratio is fair from a
financial point of view to the shareholders of the Company and such
opinion shall not have been withdrawn or modified in any material respect
prior to the date of the mailing of the Proxy Statement/Prospectus (the
"Fairness Opinion"). A copy of the Fairness Opinion will be delivered to
Associated for inclusion in the Proxy Statement/Prospectus.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination.
(a) This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the matters presented
in connection with the Merger by the shareholders of the Company:
(i) by mutual written consent of Associated and the Company;
(ii) by the Company or Associated (A) if there has been a
breach in any material respect (except that where any statement in a
representation or warranty expressly includes a standard of
materiality, such statement shall have been breached in any respect)
of any representation, warranty, covenant or agreement on the part of
the Company, on the one hand, or Associated, on the other hand,
respectively, set forth in this Agreement, or (B) if any
representation or warranty of the Company, on the one hand, or
Associated, on the other hand, respectively, shall be discovered to
have become untrue in any material respect (except that where any
statement in a representation or warranty expressly includes a
standard of materiality, such statement shall have become untrue in
any respect), in either case which breach or other condition has not
been cured within 10 business days following receipt by the
nonterminating party of notice of such breach or other condition;
provided, however, this Agreement may not be terminated pursuant to
this clause (ii) by the breaching party or party making any
representation or warranty which shall have become untrue in any
material respect;
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(iii) by either Associated or the Company if any permanent
injunction preventing the consummation of the Merger shall have
become final and nonappealable;
(iv) by either Associated or the Company if the Merger shall
not have been consummated before November 30, 1995, for a reason
other than the failure of the terminating party to comply with its
obligations under this Agreement;
(v) by either Associated or the Company if the Federal Reserve
Board or the Illinois Commissioner has denied approval of the Merger
and neither Associated nor the Company has, within thirty (30) days
after the entry of such order denying approval, filed a petition
seeking review of such order as provided by applicable law; provided,
however, that in no event will the term of this Agreement extend
beyond November 30, 1995 if the Merger has not been consummated by
such date;
(vi) by the Company, if all the following conditions are
satisfied:
(A) the average of the daily closing prices of a share of
Associated Common Stock as quoted on the NASDAQ National
Market during the Ten-Day Calculation Period as defined
below (the "Associated Average Price") is less than
$33.00; and
(B) in the event (A) above is satisfied, Associated and the
Company are not able to successfully renegotiate the
rate at which shares of Associated Common Stock would be
exchanged for the Company Common Stock in the Merger
within fifteen (15) days after the Associated Average
Price is determined.
For purposes of this Section 8.01, the "Ten-Day Calculation
Period" shall mean the ten (10) consecutive trading days ending on
the third trading day before the date of the Effective Time. If
Associated declares a stock dividend or effects a reclassification,
recapitalization, split-up, combination, exchange of shares or
similar transaction between the date of this Agreement and the
Effective Time, the closing price for the common stock of Associated
shall be appropriately adjusted for the purposes of the definition
above so as to be comparable to the price on the date of this
Agreement;
(vii) by Associated if (A) any environmental conditions are
found, suspected, or indicated by the environmental assessments
obtained pursuant to the
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investigation under Section 4.08 which, if known by the Company
to be existing on the date hereof, would be contrary to the Company's
representations and warranties set forth in Section 2.14; (B) the
parties are unable to agree upon a course of action for further
investigation and remediation of all environmental conditions and/or
issues raised by environmental assessments with respect to all of the
Company's Property and/or a mutually acceptable modification to this
Agreement within 45 days following the date of this Agreement; (C)
the conditions and/or issues are not such that it can be determined
to a reasonable degree of certainty within such 45-day period, based
upon information then available to the Company and Associated, that
the risk and expense to which Associated and its subsidiaries would
be subject as owner and/or operator of the Company's Property
involved can be quantified and limited prior to the Effective Time to
an amount that would not be reasonably likely to exceed $250,000; and
(D) Associated provides the Company written notice of its intent to
terminate this Agreement pursuant hereto not less than five days
prior to the effective date of such termination. Notwithstanding the
foregoing, Associated may, pursuant to a written instrument signed by
it (which shall not be deemed to be an amendment or modification to
this Agreement) terminate its rights to terminate this Agreement
pursuant to this Section as of any date specified in such written
instrument that is prior to the date such rights would otherwise
expire. Notwithstanding any other provision of this Agreement to the
contrary, Associated shall not be entitled to terminate this
Agreement by virtue of any environmental matter relating to the
Company's Property on which any assessment is conducted pursuant to
Section 4.08, including but not limited to a breach of Section 2.14,
effective at any time that is later than the 50th day following the
date of this Agreement;
(viii) by Associated or the Company, respectively, if any event
occurs after the date hereof which will or is likely to have a
Material Adverse Effect on the business or financial condition of the
Company and its Subsidiaries or Associated and its subsidiaries,
respectively, in each case taken as a whole including, without
limitation, the cancellation or termination of any insurance referred
to Section 2.17 hereof if the Company is unable to procure a
reasonable replacement therefor and a failure to procure such
replacement is likely to be a Material Adverse Effect on the Company
and its Subsidiaries taken as a whole and such Material Adverse Event
has not been cured within 10 business days following receipt by the
nonterminating party of notice of such Material Adverse Event; or
(ix) by the Company or Associated, on the fifteenth (15th)
day following the execution and delivery of this Agreement if the
Company is unable to obtain the Fairness Opinion, such election to
terminate to be exercised by
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either the Company or Associated within five (5) business days
following the expiration of such fifteen (15) day period.
(b) In the event of termination and abandonment by any party as
provided above, written notice shall forthwith be given to the other
parties, which notice shall specifically describe the basis for such
termination.
SECTION 8.02. Effect of Termination.
(a) If the Merger is not consummated as the result of termination
of this Agreement pursuant to the reasons provided for herein other than
(i) under the circumstances set forth in Section 8.01(a)(ii); or (ii)
under the circumstances provided in Section 6.06 hereof, the Company and
Associated each shall pay its own Expenses (as defined in Section 4.06
above) and this Agreement shall immediately terminate, except as set forth
in Section 9.01 hereof, and neither the Company nor Associated shall have
any liability under this Agreement for damages or otherwise.
(b) If termination of this Agreement shall have been caused (i)
under the circumstances set forth in Section 8.01(a)(ii); or (ii) under the
circumstances provided in Section 6.06 hereof, then, in addition to other
remedies at law or equity for breach of this Agreement, in the case of the
foregoing clause (i), the party so found to have breached this Agreement
and, in the case of the foregoing clause (ii), the Company, subject to the
provisions of Section 6.06, shall indemnify and reimburse the other parties
for their respective Expenses.
SECTION 8.03. Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; provided, however, that, after
approval of the Merger by the shareholders of the Company, no amendment may be
made which would reduce the amount or change the type of consideration into
which each Share shall be converted pursuant to this Agreement upon
consummation of the Merger. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
SECTION 8.04. Waiver. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other party hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid if
set forth in an instrument in writing signed by the party or parties to be
bound thereby.
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ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties and Agreements.
The representations, warranties and agreements in this Agreement shall
terminate at the Effective Time or upon the termination of this Agreement
pursuant to Article VIII, except that the agreements set forth in Article I
shall survive the Effective Time indefinitely and those set forth in Sections
4.04(b), 4.06, 5.03(b), 6.07, 6.08, 8.02 and Article IX hereof shall survive
termination indefinitely. The termination of this Agreement shall not affect
any right that vested prior to such termination including the rights of
Associated.
SECTION 9.02. Disclosure Schedules. The schedules and information set
forth in the Disclosure Schedules specifically refer to the section (and
paragraph, if applicable) of this Agreement to which such schedule and
information is responsive. The Disclosure Schedules shall not vary, change or
alter the literal meaning of the representations and warranties of the parties
contained in this Agreement, other than creating exceptions thereto which are
directly responsive to the language of the representations and warranties
contained in this Agreement.
SECTION 9.03. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered or mailed if delivered personally or mailed by
registered or certified mail (postage prepaid, return receipt requested) to the
parties at the following addresses (or at such Other address for a party as
shall be specified by like changes of address) and shall be effective upon
receipt:
(a) If to Associated or Associated Illinois:
Associated Banc-Corp
112 North Adams Street
P.O. Box 13307
Green Bay, WI 54307-3307
Telecopier: (414) 433-3261
Attention: Mr. H. B. Conlon
With a copy to:
Saitlin, Patzik, Frank & Samotny Ltd.
150 South Wacker Drive, Suite 900
Chicago, Illinois 60606
Telecopier: (312) 551-1101
Attention: Sheldon I. Saitlin, Esq.
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(b) If to GN Bancorp, Inc.:
GN Bancorp, Inc.
5200 North Central Avenue
Chicago, Illinois 60630
Telecopier: (312) 792-0789
Attention: Mr. Eugene P. Mroz
With a copy to:
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street, Suite 2600
Chicago, Illinois 60601
Telecopier: (312) 609-5005
Attention: William L. Conaghan, Esq. and
Daniel O'Rourke, Esq.
SECTION 9.04. Certain Definitions. For purposes of this Agreement, the
term:
(a) "AFFILIATE" means a person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control
with, the first mentioned person; including, without limitation, any
partnership or joint venture in which the person (either alone, or through
or together with any other person) has, directly or indirectly, an interest
of 5% or more;
(b) "BENEFICIAL OWNER" with respect to any Shares, means a person who
shall be deemed to be the beneficial owner of such Shares (i) which such
person or any of its affiliates or associates beneficially owns, directly or
indirectly, (ii) which such person or any of its affiliates or associates
(as such term defined in Rule 12b-2 of the Exchange Act) has, directly or
indirectly, (A) the right to acquire (whether such right is exercisable
immediately or subject only to the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
consideration rights, exchange rights, warranties or options, or otherwise,
or (B) the right to vote pursuant to any agreement, arrangement or
understanding, (iii) which are beneficially owned, directly or indirectly,
by any other persons with whom such person or any of its affiliates or
associates has any agreement, arrangement or understanding for the purposes
of requiring, holding, voting or disposing of any Shares or (iv) pursuant to
Section 13(d) of the Exchange Act and any rules or regulations promulgated
thereunder;
(c) "BUSINESS DAY" means any day other than a day on which banks in
Illinois are required or authorized to be closed;
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(d) "CONTROL" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock or as trustee
or executor, by contract or credit arrangement or otherwise;
(e) "DUE INQUIRY" means the designated party's inquiry of those executive
and senior officers and other executive officers or senior most employee of
such party who are responsible for the operations of Associated, the
Company, the Bank and Realty, as the case may be, or are otherwise be
expected to have knowledge of the matters as to which the inquiry relates;
(f) "PERSON" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as defined in
Section 13(d) of the "Exchange Act); and
(g) "TRADING DAY" means any day for which sales prices are reported on the
Nasdaq National Market.
SECTION 9.05. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.06. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
SECTION 9.07. Entire Agreement. This Agreement together with the
Disclosure Schedules and Exhibits hereto constitutes the entire agreement of
the parties and supersedes all prior agreements and undertakings, both written
and oral, between the parties, or any of them, with respect to the subject
matter hereof and, except as otherwise expressly provided herein, are not
intended to confer upon any other person any rights or remedies hereunder.
SECTION 9.08. Assignment. This Agreement shall not be assigned by
operation of law or otherwise, except that Associated may assign all or any of
its rights hereunder to any affiliate provided that no such assignment shall
relieve the assigning party of its obligations hereunder, and the assignee
agrees to be bound by the terms and conditions of this Agreement including the
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requirement of conversion and delivery of shares of Associated Common Stock
pursuant to Section 1.06 hereof.
SECTION 9.09. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement except as herein specifically provided.
SECTION 9.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Wisconsin, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of law.
SECTION 9.11. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, Associated, Associated Illinois and the Company have
caused this Agreement to be executed as of the date first written above by
their respective officers thereunto duly authorized.
ASSOCIATED BANC-CORP
By: /s/ Robert C. Gallagher
--------------------------------
Name: Robert C. Gallagher
Title: Executive Vice President
ASSOCIATED ILLINOIS BANC CORP.
By: /s/ Robert C. Gallagher
--------------------------------
Name: Robert C. Gallagher
Title: Executive Vice President
GN BANCORP, INC.
By: /s/ Eugene P. Mroz
--------------------------------
Name: Eugene P. Mroz
Title: Chairman and Chief
Executive Officer
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EXHIBIT B
CONFORMED COPY
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of March 22, 1995 (the "Agreement"),
by and between GN BANCORP, INC., an Illinois corporation (the "Company"), and
ASSOCIATED BANC-CORP, a Wisconsin corporation ("Associated").
WHEREAS, Associated, Associated Illinois Banc Corp., an Illinois
corporation and a wholly-owned subsidiary of Associated ("Associated
Illinois"), and the Company propose to enter into an Agreement and Plan of
Merger dated as of the date hereof (the "Merger Agreement"; capitalized terms
not defined herein shall have the meanings set forth in the Merger Agreement),
providing for, among other things, the merger of the Company with and into
Associated Illinois with Associated Illinois as the surviving corporation; and
WHEREAS, as a condition and inducement to Associated's willingness to
enter into the Merger Agreement, Associated has requested that the Company
agree, and the Company has agreed, to grant Associated the Option (as defined
below);
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Merger Agreement, the Company and Associated agree as follows:
1. Grant of Option. (a) Subject to the terms and conditions set
forth herein, the Company hereby grants to Associated an irrevocable option
(the "Option") to purchase up to 18,011 (as adjusted as set forth in Section 6
hereof) shares (the "Option Shares") of Common Stock, par value $8.00 per share
(the "Company Common Stock"), of the Company at a purchase price of $225.00 per
Option Share (the "Purchase Price").
(b) Notwithstanding anything contained herein or the Merger
Agreement to the contrary, the amount Associated (including any
successor-in-interest, subsidiary affiliate and permitted transferee)
(singularly or collectively the "Holder") shall be entitled to receive, whether
as (i) consideration for the Option Shares or the Option (including, without
limitation, any payments in the form of the Termination Fee or Repurchase Fee,
as those terms are defined below) from any Person (as defined below), including
the Company (whether in a single transaction or any number of transactions)
less the Purchase Price actually paid by the Holder; (ii) the Inducement Fee
payable under the Merger Agreement; or (iii) Expenses of Associated paid
pursuant to Section 8.02(b) of the Merger Agreement, shall not exceed
$1,250,000 in the aggregate (the "Limit"). In the event that the Holder
receives or is entitled to receive consideration and/or payments described in
(i), (ii) and (iii) of this Section 1(b) in an aggregate amount in excess of
the Limit, such excess amount shall be (x) deemed to be held in constructive
trust by the Holder for the benefit of the Company and (y) immediately paid by
the Holder to the Company in the form received. Each certificate evidencing
Option Shares received by the Holder pursuant to the exercise of the Option
shall bear a legend in form and substance acceptable to the Company to the
effect that such shares are subject to the Limit as set forth in this
Agreement. The foregoing restrictions with respect to the Limit shall expire
and be of no further force and effect on the day after the second anniversary
date of the exercise of the
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Option. As used in this Agreement, "Person" shall mean any individual, firm,
corporation or other entity and shall include any syndicate or group of persons
deemed to be a "person" by Section 13(d)(3)(e) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act").
2. Exercise of Option. (a) Associated may exercise the Option,
in whole or in part, at any time and from time to time following the occurrence
of an Exercise Event (as defined below); provided that, except as otherwise
provided in this Section 2(a), the right to exercise the Option pursuant to
this Section 2 shall expire and be of no further force and effect upon the
earliest to occur of (i) the Effective Time, (ii) 12 months after the first
occurrence of an Exercise Event or (iii) 12 months after termination of the
Merger Agreement; and provided further that any purchase of shares upon
exercise of the Option shall be subject to compliance with applicable law,
including the Bank Holding Company Act of 1956, as amended. Associated's
rights under Sections 7 or 8 shall not terminate upon expiration of the right
to exercise the Option pursuant to this Section 2, but shall continue until
such rights may otherwise terminate in accordance with the terms of Sections 7
or 8. Any date Associated exercises its rights under Sections 7 or 8 shall be
referred to herein as an "Election Date". Notwithstanding the expiration of
the Option, Associated shall be entitled to purchase those Option Shares with
respect to which it has exercised the Option in accordance with the terms
hereof prior to the expiration of the Option.
(b) As used herein, an "Exercise Event" shall mean the occurrence
of a Competing Transaction (as such term is defined in the Merger Agreement).
(c) In the event Associated wishes to exercise the Option, it
shall send to the Company a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of Option
Shares it intends to purchase pursuant to such exercise and (ii) a place and
date not earlier than three business days nor later than 15 business days from
the Notice Date for the closing of such purchase (the "Closing Date"); provided
that, if the closing of the purchase and sale pursuant to the Option (the
"Closing") cannot be consummated by reason of any applicable judgment, decree,
order, law or regulation, the period of time that otherwise would run pursuant
to this sentence shall run instead from the date on which such restriction or
consummation has expired or been terminated; and provided further, without
limiting the foregoing, that if prior notification to or approval of the
Federal Reserve Board or any other regulatory authority is required in
connection with such purchase, Associated shall promptly file the required
notice or application for approval and shall expeditiously process the same
(and the Company shall cooperate with Associated in the filing of any such
notice or application and the obtaining of any such approval), and the period
of time that otherwise would run pursuant to this sentence shall run instead
from the date on which, as the case may be, (i) any required notification
period has expired or been terminated or (ii) such approval has been obtained,
and in either event, any requisite waiting period has passed.
(d) Notwithstanding Section 2(c), in no event shall any Closing
Date be more than 18 months after the related Notice Date, and if the Closing
Date shall not have occurred within 18 months after the related Notice Date due
to the failure to obtain any such required approval, the exercise of the Option
effected on the Notice Date shall be deemed to have expired. In the event (i)
Associated receives official notice that an approval of the Federal Reserve
Board or any
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other regulatory authority required for the purchase of Option Shares would not
be issued or granted or (ii) a Closing Date shall not have occurred within 18
months after the related Notice Date due to the failure to obtain any such
required approval, Associated shall be entitled to exercise its rights as set
forth in Sections 7 and 8 or to exercise the Option in connection with the
resale of the Company Common Stock or other securities pursuant to a
registration statement as provided in Section 9.
3. Payment and Delivery of Certificates. (a) On each Closing
Date, Associated shall pay to the Company in immediately available funds by
wire transfer to a bank account designated by the Company an amount equal to
the Purchase Price multiplied by the number of Option Shares to be purchased on
such Closing Date.
(b) At each Closing, simultaneously with the delivery of
immediately available funds as provided in Section 3(a), the Company shall
deliver to Associated a certificate or certificates representing the Option
Shares to be purchased at such Closing, which Option Shares shall be free and
clear of all liens, claims, charges and encumbrances of any kind whatsoever,
and Associated shall deliver to the Company a letter agreeing that Associated
shall not offer to sell or otherwise dispose of such Option Shares in violation
of applicable law or the provisions of this Agreement.
(c) Certificates for the Option Shares delivered at each Closing
shall be endorsed with a restrictive legend which shall read substantially as
follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND PURSUANT TO THE TERMS OF A STOCK OPTION
AGREEMENT DATED AS OF MARCH 22, 1995. A COPY OF SUCH
AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE
UPON RECEIPT BY THE COMPANY OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if Associated shall have
delivered to the Company a copy of a letter from the staff of the Securities
and Exchange Commission (the "SEC"), or an opinion of counsel in form and
substance reasonably satisfactory to the Company and its counsel, to the effect
that such legend is not required for purposes of the Securities Act of 1933, as
amended (the "Securities Act").
4. Representations and Warranties of the Company. The Company
hereby represents and warrants to Associated as follows:
(a) Due Authorization. The Company has all requisite corporate
power and authority to enter into this Agreement and, subject to any approvals
referred to herein, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all
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necessary corporate action on the part of the Company. This Agreement has been
duly executed and delivered by the Company and constitutes a valid and binding
obligation of the Company, enforceable in accordance with its terms.
(b) Authorized Stock. The Company has taken all necessary
corporate and other action to authorize and reserve and, subject to obtaining
the governmental and other approvals and consents referred to herein, to permit
it to issue, and, at all times from the date hereof until the obligation to
deliver the Company Common Stock upon the exercise of the Option terminates,
will have reserved for issuance, upon exercise of the Option, shares of the
Company Common Stock necessary for Associated to exercise the Option, and the
Company will take all necessary corporate action to authorize and reserve for
issuance all additional shares of the Company Common Stock or other securities
which may be issued pursuant to Section 6 upon exercise of the Option. The
shares of the Company Common Stock to be issued upon due exercise of the
Option, including all additional shares of the Company Common Stock or other
securities which may be issuable pursuant to Section 6, upon issuance pursuant
hereto, shall be duly and validly issued, fully paid and nonassessable, and
shall be delivered free and clear of all liens, claims, charges and
encumbrances of any kind or nature whatsoever, including any preemptive rights
of any shareholder of the Company.
(c) No Conflicts. Except as disclosed pursuant to the Merger
Agreement, the execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, conflict with,
or result in any violation of the Articles of Incorporation or Bylaws of the
Company or any subsidiary of the Company or, subject to obtaining any approvals
or consents contemplated hereby, result in any violation of any loan or credit
agreement, note, mortgage, indenture, lease, plan or other agreement,
obligation, instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to the
Company or any subsidiary of the Company or their respective properties or
assets which violation would have a Material Adverse Effect (as defined in the
Merger Agreement) on the Company.
5. Representations and Warranties of Associated. Associated
hereby represents and warrants to the Company that:
(a) Due Authorization. Associated has all requisite corporate
power and authority to enter into this Agreement and, subject to any approvals
or consents referred to herein, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Associated. This Agreement has been duly
executed and delivered by Associated and constitutes a valid and binding
obligation of Associated, enforceable in accordance with its terms.
(b) No Conflicts. The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated hereby will
not, result in any violation of the Articles of Incorporation or By-laws of
Associated or any subsidiary of Associated or, subject to obtaining any
approvals or consents contemplated hereby, result in any violation of any loan
or credit agreement, note, mortgage, indenture, lease, plan or other agreement,
obligation,
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instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Associated or any
subsidiary of Associated or their respective properties or assets which
violation would have a Material Adverse Effect on Associated.
(c) Purchase Not for Distribution. The Option is not being taken,
and any Option Shares or other securities acquired by Associated upon exercise
of the Option will not be taken, with a view to the public distribution thereof
and will not be transferred or otherwise disposed of except in a transaction
registered or exempt from registration under the Securities Act.
6. Adjustment upon Share Issuances,Changes in Capitalization,
Etc. (a) In the event of any change in the Company Common Stock by reason of,
without limitation, a stock dividend, split-up, recapitalization, combination,
exchange of shares or similar transaction, the type and number of shares or
securities subject to the Option, and the Purchase Price therefor, shall be
adjusted appropriately, and proper provision shall be made in the agreements
governing such transaction, so that Associated shall receive upon exercise of
the Option the number and class of shares or other securities or property that
Associated would have received in respect of the Company Common Stock if the
Option had been exercised immediately prior to such event, or the record date
therefor, as applicable.
(b) In the event that the Company shall enter into an agreement
(i) to consolidate with or merge into any person, other than Associated
Illinois, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than Associated
Illinois, to merge into the Company and the Company shall be the continuing or
surviving corporation, but, in connection with such merger, the then
outstanding shares of the Company Common Stock shall be changed into or
exchanged for stock or other securities of the Company or any other person or
cash or any other property or then outstanding shares of the Company Common
Stock shall after such merger represent less than 50% of the outstanding shares
and share equivalents of the merged company, or (iii) to sell or otherwise
transfer all or substantially all of its assets to any person, other than
Associated or one of its subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provisions so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an
option, at the election of Associated, of either (I) the Acquiring Corporation
(as defined below), (II) any person that controls the Acquiring Corporation, or
(III) in the case of a merger described in clause (ii), the Company.
(c) For purposes hereof, "Acquiring Corporation" means (i) the
continuing or surviving corporation of a consolidation or merger with the
Company (if other than the Company), (ii) the Company in a merger in which the
Company is the continuing or surviving corporation and (iii) the transferee of
all or substantially all of the Company's assets. The provisions of this
Agreement, including, Sections 1, 2, 6, 7, 8, 9, 10 and 11 shall apply with
appropriate adjustments to any securities for which the Option becomes
exercisable pursuant to this Section 6.
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7. Termination Election by Associated. (a) At the request of
Associated at any time and from time to time (i) commencing upon the first
occurrence of an Exercise Event and ending 12 months immediately thereafter or
(ii) prior to or on the thirtieth (30th) business day following the occurrence
of either of the events set forth in clauses (i) and (ii) of Section 2(d), the
right to exercise the Option pursuant to Section 2 hereof, to the extent not
exercised, shall terminate and the Company (or any successor entity thereof)
shall pay to Associated the Termination Fee. The "Termination Fee" for
purposes of this Agreement shall be equal to the excess, if any, of (x) the
Applicable Price (as defined below) for each share of the Company Common Stock
over (y) the Purchase Price (subject to adjustment pursuant to Section 6),
multiplied by the number of Option Shares with respect to which the Option has
not been exercised and, where the Option has been exercised, in whole or in
part, but the Closing Date has not occurred, the number of Option Shares which
would have been distributed at the Closing Date.
(b) If Associated exercises its rights under this Section 7, the
Company shall, within 10 business days after such Election Date, pay the
Termination Fee to Associated in immediately available funds, and, as of the
date of such payment, the right to exercise the Option pursuant to Section 2
hereof shall terminate. Notwithstanding the foregoing, to the extent that
prior notification to or approval of the Federal Reserve Board or other
regulatory authority is required in connection with the payment of all or any
portion of the Termination Fee, the Company shall deliver from time to time
that portion of the Termination Fee that it is not then so prohibited from
paying and shall promptly file the required notice or application for approval
and shall expeditiously process the same (and Associated shall cooperate with
the Company in the filing of any such notice or application and the obtaining
of any such approval), and the period of time that otherwise would run pursuant
to the preceding sentence for the payment of the portion of the Termination Fee
requiring such notification or approval shall run instead from the date on
which, as the case may be, (i) any required notification period has expired or
been terminated or (ii) such approval has been obtained and, in either event,
any requisite waiting period shall have passed. If the Federal Reserve Board
or any other regulatory authority prohibits payment of any part of the
Termination Fee, the Company shall promptly give notice of such fact to
Associated and Associated shall thereafter have the right to exercise the
Option as to the number of Option Shares for which the Option was exercisable
at such Election Date less the number of shares as to which a Termination Fee
has been delivered pursuant to Section 7(a); provided that, if the Option shall
have expired pursuant to Section 2 hereof prior to the date of such notice or
shall be scheduled to expire at any time before the expiration of a period
ending on the thirtieth (30) business day after such date, Associated shall
nonetheless have the right so to exercise the Option pursuant to Section 2
hereof until the expiration of such period of 30 business days.
(c) For purposes of this Agreement, the "Applicable Price" means
the highest of (i) the highest price per share at which a tender or exchange
offer has been made for shares of the Company Common Stock after the date of
this Agreement and on or prior to such Election Date, or (ii) the price per
share to be paid by any third party for shares of the Company Common Stock or,
the consideration per share to be received by holders of the Company Common
Stock, in each case pursuant to an agreement for a merger or other business
combination transaction with the Company entered into on or prior to such
Election Date. If the consideration to be offered, paid or received pursuant
to either of the foregoing clauses (i) or
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(ii) shall be other than in cash, the value of such consideration shall be
determined in good faith by an independent investment banking firm selected by
Associated and reasonably acceptable to the Company, which determination shall
be conclusive for all purposes of this Agreement.
8. Repurchase Election by Associated. (a) At the request of
Associated at any time and from time to time (i) commencing upon the first
occurrence of an Exercise Event and ending 12 months immediately thereafter or
(ii) prior to or on the thirtieth (30th) business day following the occurrence
of either of the events set forth in clauses (i) and (ii) of Section 2(d), the
Company (or any successor entity thereof) shall pay to Associated the
Repurchase Fee. The Repurchase Fee (the "Repurchase Fee") shall be equal to
the sum of the following:
(i) the aggregate exercise price paid by Associated for any shares
of the Company Common Stock acquired pursuant to the Option with respect to
which Associated then has beneficial ownership; and
(ii) the excess, if any, of the Applicable Price over the Purchase
Price (subject to adjustment pursuant to Section 6) paid by Associated for each
share of the Company Common Stock with respect to which the Option has been
exercised and with respect to which Associated then has beneficial ownership,
multiplied by the number of such shares.
(b) If Associated exercises its rights under this Section 8, the
Company shall, within 10 business days after such Election Date, pay the
Repurchase Fee to Associated in immediately available funds, and Associated
shall surrender to the Company the certificates evidencing the shares of the
Company Common Stock purchased thereunder with respect to which Associated then
has beneficial ownership, and Associated shall warrant that it has sole record
and beneficial ownership of such shares and that the same are then free and
clear of all liens, claims, charges and encumbrances of any kind whatsoever.
Notwithstanding the foregoing, to the extent that prior notification to or
approval of the Federal Reserve Board or other regulatory authority is required
in connection with the payment of all or any portion of the Repurchase Fee, the
Company shall deliver from time to time that portion of the Repurchase Fee that
it is not then so prohibited from paying and shall promptly file the required
notice or application for approval and shall expeditiously process the same
(and Associated shall cooperate with the Company in the filing of any such
notice or application and the obtaining of any such approval), and the period
of time that otherwise would run pursuant to the preceding sentence for the
payment of the portion of the Repurchase Fee requiring such notification or
approval shall run instead from the date on which, as the case may be, (i) any
required notification period has expired or been terminated or (ii) such
approval has been obtained and, in either event, any requisite waiting period
shall have passed. If the Federal Reserve Board or any other regulatory
authority prohibits payment of any part of the Repurchase Fee, the Company
shall promptly give notice of such fact to Associated and Associated shall
nonetheless have the right to exercise its rights under Section 9.
9. Registration Rights. If the Company (or, in the case of any
transaction described in Section 6(b) hereof, the Acquiring Corporation, all
references to the Company in this Section 9, and Section 11 to include an
Acquiring Corporation as applicable) shall have one or more of its classes of
stock registered under the Exchange Act, the Company shall, if requested by
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Associated at any time and from time to time (a) within three years of the
first exercise of the Option or (b) for 30 business days following the
occurrence of either of the events set forth in clauses (i) and (ii) of Section
2(d) or receipt by Associated of official notice that an approval of the
Federal Reserve Board or any other regulatory authority required to complete
the transactions contemplated by Sections 7 or 8 hereof would not be issued or
granted, as expeditiously as possible prepare and file up to two registration
statements under the Securities Act if such registration is necessary in order
to permit the sale or other disposition of any or all shares of the Company
Common Stock or other securities that have been acquired by or are issuable to
Associated upon exercise of the Option in accordance with the intended method
of sale or other disposition stated by Associated, including (if available for
use by the Company) a "shelf" registration statement under Rule 415 under the
Securities Act or any successor provision, and the Company shall use its best
efforts to qualify such shares or other securities under any applicable state
securities laws. Associated agrees to use all reasonable efforts to cause, and
to cause any underwriters of any sale or other disposition to cause, any sale
or other disposition pursuant to such registration statement to be effected on
a widely distributed basis so that upon consummation thereof no purchaser or
transferee shall own beneficially 5% or more of the then outstanding voting
power of the Company. The Company shall use all reasonable efforts to cause
each such registration statement to become effective, to obtain all consents or
waivers of other parties which are required therefor and to keep such
registration statement effective for such period not in excess of 120 days from
the day such registration statement first becomes effective as may be
reasonably necessary to effect such sale or other disposition. In the event
that Associated requests the Company to file a registration statement following
the failure to obtain a required approval for an exercise of the Option as
described in Section 2(d), the closing of the sale or other disposition of the
Company Common Stock or other securities pursuant to such registration
statement shall occur substantially simultaneously with the exercise of the
Option. The obligations of the Company hereunder to file a registration
statement and to maintain its effectiveness may be suspended for one or more
periods of time not exceeding 90 days in the aggregate for all such periods if
the Board of Directors of the Company shall have determined that the filing of
such registration statement or the maintenance of its effectiveness would
require disclosure of non-public information that would materially and
adversely affect the Company. Any registration statement prepared and filed
under this Section 9; and any sale covered thereby, shall be at the Company's
expense except for underwriting discounts or commissions, brokers' fees and the
fees and disbursements of Associated's counsel related thereto. Associated
shall provide all information reasonably requested by the Company for inclusion
in any registration statement to be filed hereunder. If, during the time
periods referred to in the first sentence of this Section 9, the Company
effects a registration under the Securities Act of the Company Common Stock for
its own account or for any other shareholders of the Company (other than on
Form S-4 or Form S-8, or any successor form), it shall allow Associated the
right to participate in such registration, and such participation shall not
affect the obligation of the Company to effect two registration statements for
Associated under this Section 9; provided that, if the managing underwriters of
such offering advise the Company in writing that in their opinion the number of
shares of the Company Common Stock requested to be included in such
registration exceeds the number which can be sold in such offering, the Company
shall include the shares requested to be included therein by Associated
pro-rata with the shares intended to be included therein by the Company. In
connection with any registration pursuant to this Section 9, the Company and
Associated shall
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provide each other and any underwriter of the offering with customary
representations, warranties, covenants, indemnification and contribution in
connection with such registration.
10. First Refusal. At any time after the first occurrence of an
Exercise Event and prior to the later of (a) the expiration of 18 months
immediately following the first purchase of shares of the Company Common Stock
pursuant to the Option and (b) the expiration of the Option pursuant to Section
2(a), if Associated shall desire to sell, assign, transfer or otherwise dispose
of all or any of the shares of the Company Common Stock or other securities
acquired by it pursuant to the Option, it shall give the Company written notice
of the proposed transaction (an "Offeror's Notice"), identifying the proposed
transferee and setting forth the terms of the proposed transaction. An
Offeror's Notice shall be deemed an offer by Associated to the Company, which
may be accepted within 10 business days of the receipt of such Offeror's
Notice, on the same terms and conditions and at the same price at which
Associated is proposing to transfer such shares or other securities to such
transferee. The purchase of any such shares or other securities by the Company
shall be settled within 20 business days of the date of the acceptance of the
offer and the purchase price shall be paid to Associated in immediately
available funds; provided that, if prior notification to or approval of the
Federal Reserve Board or any other regulatory authority is required in
connection with such purchase, the Company shall promptly file the required
notice or application for approval and shall expeditiously process the same
(and Associated shall cooperate with the Company in the filing of any such
notice or application and the obtaining of any such approval) and the period of
time that otherwise would run pursuant to this sentence shall run instead from
the date on, which, as the case may be, (a) any required notification period
has expired or been terminated or (b) such approval has been obtained and, in
either event, any requisite waiting period shall have passed. In the event of
the failure or refusal of the Company to purchase all the shares or other
securities covered by an Offeror's Notice or if the Federal Reserve Board or
any other regulatory authority disapproves the Company's proposed purchase of
such shares or other securities, Associated may, within 90 days from the date
of the Offeror's Notice (subject to any necessary extension for regulatory
notification, approval or waiting periods), sell all, but not less than all, of
such shares or other securities to the proposed transferee at no less than the
price specified and on terms no more favorable than those set forth in the
Offeror's Notice. The requirements of this Section 10 shall not apply to (v)
any disposition as a result of which the proposed transferee would own
beneficially less than 5% of the outstanding voting power of the Company, (w)
any disposition of the Company Common Stock or other securities by a person to
whom Associated has assigned its rights under the Option with the consent of
the Company, (x) any sale by means of a public offering registered under the
Securities Act in which steps are taken to reasonably assure that no purchaser
will acquire securities representing 5% or more of the outstanding voting power
of the Company, (y) any transfer to any affiliate of Associated which agrees in
writing to be bound by the terms hereof or (z) any sale or transfer to any
party engaging in a Competing Transaction which has been approved by the Board
of Directors of the Company.
11. Listing. If the Company Common Stock or any other securities
to be acquired upon exercise of the Option are then listed on any recognized
securities exchange or other recognized securities quotation system, the
Company, upon the request of Associated, will promptly file an application to
list the shares of the Company Common Stock or other securities
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to be acquired upon exercise of the Option on such exchange or quotation system
and will use its best efforts to obtain approval of such listing as soon as
practicable.
12. Division of Option. This Agreement (and the Option granted
hereby) are exchangeable, without expense, at the option of Associated, upon
presentation and surrender of this Agreement at the principal office of the
Company for other Agreements providing for Options of different denominations
entitling the holder thereof to purchase in the aggregate the same number of
shares of the Company Common Stock purchasable hereunder. The terms
"Agreement" and "Option" as used herein include any other Agreements and
related Options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by the Company of evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of this Agreement, and (in the
case of loss, theft or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Agreement, if mutilated, the
Company will execute and deliver a new Agreement of like tenor and date. Any
such new Agreement executed and delivered shall constitute an additional
contractual obligation on the part of the Company, whether or not the Agreement
so lost, stolen, destroyed or mutilated shall at any time be enforceable by
anyone.
13. Miscellaneous. (a) Expenses. Except as otherwise provided in
Sections 7 and 9, or in the Merger Agreement, each of the parties hereto shall
bear and pay all costs and expenses incurred by it or on its behalf in
connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
(c) Entire Agreement; No Third-Party Beneficiary; Severability.
Except as otherwise set forth in the Merger Agreement, this Agreement
(including the Merger Agreement and the other documents and instruments
referred to herein or therein) (i) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof, (ii) and is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or a federal or state
regulatory agency to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
If for any reason such court or regulatory agency determines that the Option
does not permit Associated to acquire, or does not require the Company to
comply with Sections 7 or 8 hereof with respect to the full number of shares of
the Company Common Stock as provided in Sections 2, 7 and 8 (as adjusted
pursuant to Section 6), it is the express intention of the Company to allow
Associated to acquire or to require the Company to comply with Sections 7 and 8
hereof with respect to such lesser number of shares as may be permissible
without any amendment or modification hereof.
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(d) Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Wisconsin without regard to any
applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained
herein are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(with confirmation) or mailed by registered or certified mail return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
If to the Company to:
GN Bancorp, Inc.
5200 North Central Avenue
Chicago, Illinois 60630
Telecopier: (312) 792-0789
Attention: Mr. Eugene P. Mroz
with a copy to:
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street, Suite 2600
Chicago, Illinois 60601
Telecopier: (312) 609-5005
Attention: William L. Conaghan, Esq.
and Daniel O'Rourke, Esq.
If to Associated to:
Associated Banc-Corp
112 North Adams Street
P.O. Box 13307
Green Bay, WI 54307-3307
Telecopier: (414) 433-3261
Attention: Mr. H. B. Conlon
with a copy to:
Saitlin, Patzik, Frank & Samotny Ltd.
150 South Wacker Drive, Suite 900
Chicago, Illinois 60606
Telecopier: (312) 551-1101
Attention: Sheldon I. Saitlin, Esq.
B-11
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(g) Counterparts. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the
same agreement and shall become effective when both counterparts have been
signed by each of the parties and delivered to the other party, it being
understood that both parties need not sign the same counterpart.
(h) Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party, except that Associated may assign
this Agreement to any affiliate of Associated. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
(i) Further Assurances. In the event of any exercise of the
Option by Associated, the Company and Associated shall execute and deliver all
other documents and instruments and take all other action that may be
reasonably necessary in order to consummate the transactions provided for by
such exercise.
(j) Specific Performance. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection
with the obtaining of any such equitable relief and that this provision is
without prejudice to any other rights that the parties hereto may have for any
failure to perform this Agreement.
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IN WITNESS WHEREOF, the Company and Associated have caused this Stock
Option Agreement to be signed by their respective officers thereunto duly
authorized, all as of the day and year first written above.
GN BANCORP, INC.
By: /s/ Eugene P. Mroz
-------------------------------
Name: Eugene P. Mroz
Title: Chairman and Chief Executive
Officer
ASSOCIATED BANC-CORP
By: /s/ Robert C. Gallagher
---------------------------------
Name: Robert C. Gallagher
Title: Executive Vice President
B-13
<PAGE> 132
EXHIBIT C
March 31, 1995
Board of Directors
GN Bancorp, Inc.
5200 North Central Avenue
Chicago, IL 60630
Members of the Board:
GN Bancorp, Inc. ("Company") and Associated Banc-Corp ("Associated")
and Associated Illinois Banc Corp., a wholly-owned subsidiary of Associated
("Associated Illinois") have entered into an Agreement and Plan of Merger (the
"Agreement") dated as of March 22, 1995. Under the terms of the Agreement,
each share of common stock, par value $8.00 per share of the Company (the
"Company Common Stock") shall be converted into the right to receive 7.00
shares (the "Exchange Ratio") of common stock par value $.01 per share of
Associated ("Associated Common Stock"); provided, however, that if the
Associated Average Price (as defined in the Agreement) shall be greater than
$38.00, then the Exchange Ratio shall be determined by dividing $266.00 by the
Associated Average Price; provided further that the number of shares of
Associated Common Stock to be issued pursuant to the Exchange Ratio shall be
rounded to the nearest thousandth of a share. Additionally, the Company may
terminate the Agreement at any time prior to the Effective Time (as defined in
this agreement) if all of the following conditions are satisfied:
(A) the average of the daily closing prices of a share of
Associated Common Stock as quoted on the Nasdaq National
Market during the Ten-Day Calculation Period (as defined in
the Agreement) is less than $33.00; and
(B) in the event (A) above is satisfied, Associated and the
Company are not able to successfully renegotiate the rate at
which shares of Associated Common Stock would be exchanged for
the Company Common Stock in the Merger within fifteen (15)
days after the Associated Average Price is determined.
You have requested our opinion, as investment bankers, as to the fairness of
the proposed terms of the Exchange Ratio to the Company's shareholders from a
financial point of view. Robert W. Baird & Co. Incorporated, as part of its
investment banking business, is continually engaged in the evaluation of
businesses and securities in connection with mergers and acquisitions,
negotiated underwritings, secondary distributions of listed and unlisted
securities, private
C-1
<PAGE> 133
Board of Directors
GN Bancorp, Inc.
March 31, 1995
Page 2
placements and valuations of estates, corporate and other purposes. We are
familiar with the markets for common stocks of publicly-traded Midwestern based
banks and bank holding companies. In the ordinary course of our business as a
broker-dealer, we may, from time to time, purchase securities from, and sell
securities to, Associated and as a market maker in securities we may from time
to time have a long or short position in, and buy or sell, equity securities of
Associated for our own account and for the accounts of our customers.
In arriving at our opinion, we have reviewed, studied, or considered, among
other things, the following:
1. The Agreement;
2. Certain information concerning the Company including the
audited financial statements of the Company for each year in
the five year period ended December 31, 1994;
3. Annual reports to stockholders and annual reports on Form 10-K
for the five years ended December 31, 1994 for Associated;
4. Various aspects of the Company's and Associated's current
operations and business histories;
5. The market for common stock of Midwest-based bank holding
companies and the historical prices and trading activity for
the Company's stock and Associated's stock;
6. Discussions with management and legal counsel for the Company
and Associated;
7. Certain information with respect to certain other publicly
traded bank holding companies and the nature of terms of
their merger and acquisition transactions that we consider
similar;
8. The pro forma effect of the merger on Associated's
capitalization ratios, and earnings and book value per share;
and
9. Such other information as we deemed relevant to our analysis.
In such review, we have not examined any contracts entered into by the Company
or Associated; we have not made an independent evaluation of any of the assets
of the Company or Associated; nor did we make an inspection of any potential
environmental issues liability, or of the properties
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<PAGE> 134
Board of Directors
GN Bancorp, Inc.
March 31, 1995
Page 3
or physical facilities of the Company or Associated. Neither did we make
inquiries of customers, competitors, regulatory bodies or others.
We have relied upon and assumed without independent verification, the accuracy
and completeness of the aforementioned available information of the Company and
Associated and other information provided to us by the Company and Associated.
Based upon the foregoing and other matters that we deemed pertinent, and our
general knowledge of the valuation of businesses and their securities, it is
our opinion that at the date hereof, the Exchange Ratio in the Merger is fair
from a financial point of view to the Company's shareholders.
Very truly yours,
ROBERT W. BAIRD & CO.
Incorporated
/s/ Bernard E. Adee
--------------------------------
Bernard E. Adee
First Vice President
BEA:tmb
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<PAGE> 135
EXHIBIT D
SECTIONS 11.65 AND 11.70 OF THE
ILLINOIS BUSINESS CORPORATION ACT
805 ILCS ACT 5, SECTION 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.
(a) 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.
(b) 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.
805 ILCS ACT 5, SECTION 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
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<PAGE> 136
dissenters' rights only if the shareholder delivers to the corporation before
the vote is taken a written demand for payment for his or her shares if the
proposed action is consummated, and the shareholder does not vote in favor of
the proposed action.
(b) If the corporate action giving rise to the right to dissent is
not to be approved at a meeting of shareholders, the notice to shareholders
describing the action taken under Section 11.30 or Section 7.10 shall inform
the shareholders of their right to dissent and the procedure to dissent. If,
prior to or concurrently with the notice, the corporation furnishes to the
shareholders material information with respect to the transaction that will
objectively enable a shareholder to determine whether or not to exercise
dissenters' rights, a shareholder may assert dissenter's rights only if he or
she delivers to the corporation within 30 days from the date of mailing the
notice a written demand for payment for his or her shares.
(c) Within 10 days after the date on which the corporate action
giving rise to the right to dissent is effective or 30 days after the
shareholder delivers to the corporation the written demand for payment,
whichever is later, the corporation shall send each shareholder who has
delivered a written demand for payment a statement setting forth the opinion of
the corporation as to the estimated fair value of the shares, the corporation's
latest balance sheet as of the end of a fiscal year ending not earlier than 16
months before the delivery of the statement, together with the statement of
income for that year and the latest available interim financial statements, and
either a commitment to pay for the shares of the dissenting shareholder at the
estimated fair value thereof upon transmittal to the corporation of the
certificate or certificates, or other evidence of ownership, with respect to
the shares, or instructions to the dissenting shareholder to sell his or her
shares within 10 days after delivery of the corporation's statement to the
shareholder. The corporation may instruct the shareholder to sell only if
there is a public market for the shares at which the shares may be readily
sold. If the shareholder does not sell within that 10 day period after being
so instructed by the corporation, for purposes of this Section the shareholder
shall be deemed to have sold his or her shares at the average closing price of
the shares, if listed on a national exchange, or the average of the bid and
asked price with respect to the shares quoted by a principal market maker, if
not listed on a national exchange, during that 10 day period.
(d) A shareholder who makes written demand for payment under this
Section retains all other rights of a shareholder until those rights are
cancelled or modified by the consummation of the proposed corporate action.
Upon consummation of that action, the corporation shall pay to each dissenter
who transmits to the corporation the certificate or other evidence of ownership
of the shares the amount the corporation estimates to be the fair value of the
shares, plus accrued interest, accompanied by a written explanation of how the
interest was calculated.
(e) If the shareholder does not agree with the opinion of the
corporation as to the estimated fair value of the shares or the amount of
interest due, the shareholder, within 30 days from the delivery of the
corporation's statement of value, shall notify the corporation in writing of
the shareholder's estimated fair value and amount of interest due and demand
payment for the difference between the shareholder's estimate of fair value and
interest due and the amount of the payment by the corporation or the proceeds
of sale by the shareholder, whichever is applicable because of the procedure
for which the corporation opted pursuant to subsection (c).
(f) If, within 60 days from delivery to the corporation of the
shareholder notification of estimate of fair value of the shares and interest
due, the corporation and the dissenting shareholder have not agreed in writing
upon the fair value of the shares and interest due, the corporation shall
either pay the difference in value demanded by the shareholder, with interest,
or file a petition in the circuit court of the county in which either the
registered office or the principal office of the corporation is located,
requesting the court to determine the fair value of the shares and interest
due. The corporation shall make all dissenters, whether or not residents of
this State, whose demands remain unsettled parties to the proceeding as an
action against their shares and all parties shall be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law. Failure of the corporation to commence an
action pursuant to this Section shall not limit or affect the right of the
dissenting shareholders to otherwise commence an action as permitted by law.
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<PAGE> 137
(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 the dissenter. The
court may also assess the fees and expenses of counsel and experts for the
respective parties, in amounts the court finds equitable, as follows:
(1) Against the corporation and in favor of any or all dissenters if
the court finds that the corporation did not substantially comply with the
requirements of subsections (a), (b), (c), (d), or (f).
(2) Against either the corporation or a dissenter and in favor of any
other party if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this Section.
If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated and that the fees
for those services should not be assessed against the corporation, the court
may award to that counsel reasonable fees to be paid out of the amounts awarded
to the dissenters who are benefited. Except as otherwise provided in this
Section, the practice, procedure, judgment and costs shall be governed by the
Code of Civil Procedure.
(j) As used in this Section:
(1) "Fair value," with respect to a dissenter's shares, means the
value of the shares immediately before the consummation of the corporate action
to which the dissenter objects excluding any appreciation or depreciation in
anticipation of the corporate action, unless exclusion would be inequitable.
(2) "Interest" means interest from the effective date of the
corporate action until the date of payment, at the average rate currently paid
by the corporation on its principal bank loans or, if none, at a rate that is
fair and equitable under all the circumstances.
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EXHIBIT E
GN BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion addresses the significant factors affecting GN
Bancorp, Inc. (the "Company") and its subsidiaries consolidated financial
position and results of operations. Consolidated earnings are derived
primarily from the operations of its wholly-owned subsidiaries,
Gladstone-Norwood Trust and Savings Bank (the "Bank") and GN Realty, Inc. The
purpose of this discussion is to focus on information about the Company's
financial condition and results of operations that are not otherwise apparent
from the consolidated financial statements included in this Proxy
Statement/Prospectus. The following should be read in conjunction with the
consolidated financial statements and notes thereto of the Company included
herein.
EARNINGS SUMMARY AND SELECTED FINANCIAL DATA
(In thousands, except per share and ratio data)
<TABLE>
<CAPTION>
As of and for the
Three Months
Ended March 31, As of and for the Year Ended December 31,
--------------- -------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest Income . . . . . . . . . $ 2,207 $ 2,086 $ 8,400 $ 8,955 $ 10,696 $ 11,289 $ 11,050
Interest Expense . . . . . . . . . 823 755 3,121 3,359 4,772 6,273 6,307
------ ------ --------- --------- --------- ---------- ----------
Net Interest Income . . . . . . 1,384 1,331 5,279 5,596 5,924 5,016 4,743
Provision for Loan Losses . . . . (50) (450) (577) 225 2,494 1,946 280
Security Gains, Net . . . . . . . -- -- -- 11 155 412 143
Other Operating Income . . . . . . 229 299 1,237 1,390 1,271 1,304 1,031
Other Operating Expenses . . . . . 1,196 1,206 5,208 5,186 5,583 4,554 3,823
-------- -------- --------- --------- --------- --------- ----------
Net Income (Loss) before
Income Taxes . . . . . . . . 467 874 1,885 1,586 (727) 232 1,814
Income Tax Expense (Credit) . . 126 327 651 437 (382) (15) 431
------- -------- --------- --------- --------- --------- ----------
Net Income (Loss) . . . . . . . $ 341 $ 547 $ 1,234 $ 1,149 $ (345) $ 247 $ 1,383
======== ======== ========= ========= ========= ========= ==========
PER COMMON SHARE DATA:
Net Income (Loss) Per Share . . . $ 3.81 $ 6.66 $ 14.11 $ 16.58 $ (8.22) $ 5.79 $ 31.96
Cash Dividends Per Share . . . . . -- -- -- -- 1.20 1.15 1.10
Weighted Average Shares
Outstanding . . . . . . . . . . . 89,557 82,056 87,495 69,277 42,004 42,651 43,279
BALANCE SHEET DATA:
Average Total Assets . . . . . . . $ 129,755 $ 133,629 $ 132,732 $ 132,954 $ 135,037 $ 127,555 $ 117,590
Loans, Net of Unearned Discount . 55,133 60,518 56,803 62,885 83,868 100,033 84,127
Allowance for Loan Losses . . . . 1,442 1,669 1,594 1,608 1,927 916 748
Total Deposits . . . . . . . . . . 112,812 114,697 115,806 117,575 125,496 121,442 111,622
Average Stockholders' Equity . . . 11,356 9,476 10,384 7,440 4,476 4,633 3,926
KEY FINANCIAL RATIOS:
Return on Average Assets . . . . . 1.05% 1.64% 0.93% 0.86% (0.26%) 0.19% 1.18%
Return on Average Equity . . . . . 12.01% 23.09% 11.88% 15.44% (7.71%) 5.33% 35.23%
Average Equity to Average Total
Assets . . . . . . . . . . . . . 8.75% 7.09% 7.82% 5.60% 3.31% 3.63% 3.34%
Book Value Per Share . . . . . . . $ 129.33 $ 118.66 $ 123.70 $ 113.69 $ 101.26 $ 110.86 $ 106.34
Dividend Payout Ratio . . . . . . -- -- -- -- (14.6%) 19.86% 3.44%
</TABLE>
E-1
<PAGE> 139
RESULTS OF OPERATIONS AND FINANCIAL CONDITION FOR THE THREE MONTHS ENDED MARCH
31, 1995
The Company reported net income for the first quarter ended March 31,
1995 of $341,000 ($3.81 per share) down 37.5% from the 1994 first quarter net
income of $547,000 ($6.66 per share) due primarily to a significant asset
recovery recorded as a negative provision for loan losses of $450,000 in
January, 1994. Total stockholders' equity as of March 31, 1995 increased by
11.6% to $11.7 million, or $129.33 per share, compared to $10.4 million, or
$118.66 per share a year earlier. Return On Average Assets ("ROA") for the
first quarter of 1995 was 1.05%, down from 1.64%, a decrease of 36.0% during
the same period last year. ROA was down because first quarter 1995 net income
decreased 37.5%, compared with 1994, while average assets decreased 2.9%
resulting in a 59 basis point decrease in ROA. Return On Average Equity
("ROE") for the first quarter was 12.01%, down from 23.09% during the same
period last year. ROE decreased in the first quarter of 1995 over 1994 because
average equity grew 19.8% resulting primarily from lower earnings and higher
average stockholders' equity. Total consolidated assets were $128.1 million at
March 31, 1995, down 1.8% from March 31, 1994. Loans, net of unearned discount
and allowance for loan loss, were $53.7 million at the end of the 1995 first
quarter, down 8.8% from the $58.8 million reported a year earlier. Total
deposits at March 31, 1995 were $112.8 million, down 1.6% from the $114.7
million a year earlier. The Company made a $1.8 million principal payment on
the $4.0 million of notes payable. See below for a discussion of the Company's
financial condition.
OVERVIEW
For the year ended December 31, 1994, the Company recognized net income
of $1.2 million, compared to net income of $1.1 million and a net loss of
$345,000 in 1993 and 1992, respectively. The net income for the year ended
December 31, 1994 was primarily due to a negative loan loss provision of
$577,000. As more fully discussed below, the 1992 reported loss was due
primarily to increased loan loss provisions, professional fees and other real
estate ("ORE") expenses.
Beginning in early 1992 in response to regulatory orders, Company
management initiated a strategy to achieve controlled asset growth with
emphasis on restructuring the balance sheet in order to maintain not greater
than a 65% loan to deposit ratio and to improve the overall quality of the loan
portfolio. See "Capital & Regulatory Matters" below. To offset the decrease
in loan levels, management established an investment policy of purchasing U.S.
Treasury and government agency securities with 2 - 3 year maturities with a
"laddered" maturity date approach. Consequently, the loan portfolio decreased
to $57.0 million as of December 31, 1994 from $63.2 million and $84.4 million
in 1993 and 1992, respectively. Conversely, the securities portfolio increased
to $63.4 million as of December 31, 1994 from $51.7 million and $34.7 million
in 1993 and 1992, respectively.
NET INTEREST INCOME
Net Interest Income is the amount by which interest generated from
interest-earning assets exceeds the expenses associated with funding those
assets. Net interest income for the year ended December 31, 1994 was $5.3
million, compared to $5.6 million, for the same period of 1993, a decrease of
5%, as net interest margins contracted. Net interest income for the year ended
December 31, 1992 was $5.9 million. The decrease from 1992 in net interest
income was largely due to the emphasis placed on restructuring the balance
sheet which replaced higher earning loans with lower yield securities, the lag
in timing between the lower interest rates paid on deposits versus the existing
rates, substantial mortgage refinancing activity occurring while the Bank
placed emphasis on asset quality improvement and the repricing of loans within
the period. Interest rate spread (the difference between average rates earned
and paid) decreased from 4.49% in 1992 to 4.29% in 1993 and to 3.81% in 1994.
E-2
<PAGE> 140
AVERAGE INTEREST-EARNING ASSETS AND INTEREST-BEARING LIABILITIES
(In thousands, except ratios)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------------
1994 1993 1992
--------------------------- --------------------------- ---------------------------
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
------- ------- ---- ------- ------- ---- ------- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-Earning Assets:
Interest-Bearing Balances
with Banks . . . . . . . . $ 926 $ 33 3.56% $ 375 $ 13 3.47% $ 290 $ 13 4.48%
Investment Securities:
Taxable . . . . . . . . . . 54,080 2,647 4.89% 35,995 1,824 5.07% 19,045 1,133 5.95%
Non-Taxable . . . . . . . . 3,735 255 6.83% 5,614 437 7.78% 6,017 475 7.89%
Federal Funds Sold . . . . . 3,425 136 3.97% 4,813 143 2.97% 2,583 113 4.37%
Gross Average Loans (1) . . . 58,468 5,329 9.11% 71,953 6,538 9.09% 93,131 8,962 9.62%
------- ------ ----- ------- ------ ----- ------- ------ -----
Total Interest-Earning
Assets . . . . . . . . . . $120,634 $ 8,400 6.96% $118,750 $ 8,955 7.54% $121,066 $10,696 8.83%
======= ====== ===== ======= ====== ===== ======= ====== =====
LIABILITIES
Interest-Bearing Liabilities:
Interest-Bearing Deposits:
Savings Deposits . . . . . $ 47,033 $ 1,299 2.76% $ 46,979 $ 1,362 2.90% $ 43,962 $ 1,734 3.94%
Money Market & NOW
Accounts . . . . . . . . 21,664 479 2.21% 21,467 474 2.21% 21,801 728 3.34%
Time Deposits over
$100,000 . . . . . . . . . 4,979 190 3.82% 4,519 188 4.16% 6,094 458 7.52%
Other Time Deposits . . . . 21,434 826 3.85% 25,965 1,025 3.95% 32,899 1,527 4.64%
Notes Payable and Other . . . 4,010 327 8.15% 4,525 310 6.85% 5,179 325 6.28%
------- ------- ----- ------- ------ ----- ------- ------ -----
Total Interest-Bearing
Liabilities . . . . . . . . $ 99,120 $ 3,121 3.15% $103,455 $ 3,359 3.25% $109,935 $ 4,772 4.34%
======= ====== ===== ======= ====== ===== ======= ====== =====
Net Interest-Earning Assets . . $ 21,514 $ 15,295 $ 11,131
======= ======= =======
Net Interest Income . . . . . . $ 5,279 $ 5,596 $ 5,924
====== ====== ======
Net Interest Rate Spread . . . 3.81% 4.29% 4.49%
===== ===== =====
Net Yield on Interest-Earning
Assets . . . . . . . . . . 4.38% 4.71% 4.89%
===== ===== =====
- ----------------------
</TABLE>
(1) Non-accruing loans have been included in the average balances
E-3
<PAGE> 141
The following table reflects the change in interest income and interest
expense due to both rate and volume allocated in proportion to the relationship
to the dollar amounts of the change in each.
RATE/VOLUME ANALYSIS
(In thousands)
<TABLE>
<CAPTION>
1994 compared to 1993, 1993 compared to 1992,
increase (decrease) due to increase (decrease) due to
--------------------------- --------------------------------
Volume Rate Net Volume Rate Net
-------- ------- -------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Interest Income:
Loans . . . . . . . . . . . . . . . $ (1,229) $ 20 $ (1,209) $ (1,947) $ (477) $ (2,424)
Investment Securities:
Taxable . . . . . . . . . . . . . 887 (64) 823 880 (189) 691
Tax-Exempt . . . . . . . . . . . (133) (49) (182) (31) (7) (38)
Interest-Bearing Deposits
with Other Banks . . . . . . . . 20 0 20 3 (3) 0
Federal Funds Sold . . . . . . . . . (48) 41 (7) 75 (45) (30)
-------- ------- ------ -------- ------ ---------
Total Earning Assets . . . . . . $ (503) $ (52) $ (555) $ (1,020) $ (721) $ (1,741)
-------- ------- ------ -------- ------ ---------
Interest Expense:
Savings Deposits . . . . . . . . . . $ 2 $ (65) $ (63) $ 113 $ (485) $ (372)
Money Market and NOW Accounts . . . 4 1 5 (11) (243) (254)
Time Deposits over $100,000 . . . . 18 (16) 2 (99) (171) (270)
Other Time Deposits . . . . . . . . (175) (24) (199) (294) (208) (502)
Notes Payable and Other . . . . . . (38) 55 17 (43) 28 (15)
-------- ------- ------ -------- ------ ---------
Total Interest-Bearing Liabilities
$ (189) $ (49) $ (238) $ (334) $(1,079) $ (1,413)
-------- ------- ------ -------- ------- ---------
Net Interest Earnings . . . . . . . . . $ (314) $ (3) $ (317) $ (686) $ 358 $ (328)
-------- ------- ------ -------- ------ ---------
</TABLE>
PROVISION FOR LOAN LOSS
The allowance for possible loan losses is maintained to cover estimated
losses in the loan portfolio based on management's assessment of factors
affecting the loan portfolio in light of circumstances known or anticipated at
that time. In evaluating and establishing the allowance, consideration is
given to such factors as management's evaluation of specific loans, historical
loss experience, asset quality and delinquency trends, current and anticipated
economic conditions and their impact on particular industries and borrowers,
results of examinations by regulatory agencies and internal loan review
personnel, level and composition of classified loans, loan concentration and
other factors.
Since 1992 management has used a loan loss reserve methodology that
incorporates the historical as well as current review process within the
calculation. The Bank's internal Loan Review Department conducts periodic
examinations in order to make evaluations of the effectiveness of the Bank's
loan review and loan administration functions and makes periodic reports to the
Board of Directors. As the Loan Review Department examines the loan portfolio,
loans are assigned a risk grading which is used to determine the reserve that
might be required for each specified loan. In addition to these specific
allocations of reserve, an amount is provided which is deemed appropriate to
recognize the likelihood that there are loans in the portfolio which present a
risk of becoming uncollectible, but which risks cannot yet be specifically
identified.
E-4
<PAGE> 142
The following schedule presents an analysis of the allocation of the
allowance for loan losses for the three years ended December 31, 1994.
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
(In thousands, except ratios)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------------------
1994 1993 1992
-------------------------- --------------------------- ---------------------------
% of loans in % of loans in % of loans in
Balance at end of each category each category each category
period applicable to: Amount to total loans Amount to total loans Amount to total loans
-------------------- ------ -------------- ------ -------------- ------ --------------
<S> <C> <C> <C> <C> <C> <C>
Commercial Loans (1) . . . . $ 849 79.7% $ 1,211 78.8% $ 1,637 72.8%
Real Estate - Residential . . 514 17.1% 300 18.1% 171 21.7%
Installment Loans and Other . 84 3.2% 95 3.1% 93 5.5%
Unallocated . . . . . . . . . 147 N/A 2 N/A 26 N/A
--------- -------- -------- -------- --------- --------
$ 1,594 100.0% $ 1,608 100.0% $ 1,927 100.0%
========= ======== ======== ======== ========= ========
</TABLE>
- ----------------------
(1) Commercial Loans include Commercial and Commercial Real Estate
Prior to July, 1992, Bank management analyzed the adequacy of the
allowance for loan losses by reviewing loans 90 or more days delinquent and
determined the amount of reserve as a percent of net loans less overdrafts.
Loans past due less than 90 days and loans that were current were not part of
the analysis. The relative risk associated with any particular type of loan
concentration was not considered. The analysis resulted in a comparison of the
current allowance with an arbitrarily set 1% of the net loan and lease
portfolio balance plus management's estimate of potential loss on a subjective
"worst case" scenario. In response to a regulatory order, an expanded
methodology described above was implemented.
Management currently reviews the loan portfolio and market conditions on
a regular basis and makes appropriate adjustments to the allowance, which
adjustments are reflected in the results of operations on a current basis. As
loans are determined to be uncollectible, they are charged against the
allowance for loan losses. Recoveries of loans previously charged-off are
added back to the allowance. Provisions are charged as appropriate against
current operations to restore the allowance to an appropriate level.
E-5
<PAGE> 143
The following schedule presents an analysis of the allowance for loan
losses for the five years ended December 31, 1994.
SUMMARY OF LOAN LOSS EXPERIENCE
(In thousands, except ratios)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------
1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at beginning of period . . . . . . . . . . . $ 1,608 $ 1,927 $ 916 $ 748 $ 833
Loans Charged-off:
Commercial Loans (1) . . . . . . . . . . . . . . . 184 279 1,415 1,581 233
Real Estate - Residential . . . . . . . . . . . . 64 416 -- -- --
Installment Loans and Other . . . . . . . . . . . 5 105 184 209 173
----------- ---------- ---------- ---------- ----------
Total Loans Charged-off . . . . . . . . . . . . $ 253 $ 800 $ 1,599 $ 1,790 $ 406
----------- ---------- ---------- ---------- ----------
Recoveries of loans previously charged-off:
Commercial Loans (1) . . . . . . . . . . . . . . . $ 706 $ 197 61 $ 4 $ 9
Real Estate - Residential . . . . . . . . . . . . 19 1 -- -- --
Installment Loans and Other . . . . . . . . . . . 91 58 55 8 32
----------- ---------- ---------- ---------- ----------
Total Recoveries . . . . . . . . . . . . . . . . . $ 816 $ 256 $ 116 $ 12 $ 41
----------- ---------- ---------- ---------- ----------
Net (Charge-Offs) Recoveries . . . . . . . . . . . . $ 563 $ (544) $ (1,483) $ (1,778) $ (365)
----------- ---------- ---------- ---------- ----------
Period Provision for Loan Losses . . . . . . . . . . $ (577) $ 225 $ 2,494 $ 1,946 $ 280
----------- ---------- ---------- ---------- ----------
Balance at End of Period . . . . . . . . . . . . . . $ 1,594 $ 1,608 $ 1,927 $ 916 $ 748
=========== ========== ========== ========== ==========
Gross Loans at Period End . . . . . . . . . . . . . . $ 56,958 $ 63,151 $ 84,377 $ 100,804 $ 86,971
Gross Average Loans for the Period . . . . . . . . . 56,468 71,953 93,131 92,879 77,647
Ratio of Net (Charge-offs) Recoveries During the
Period to Gross Average Loans (For the Period) . . 1.00% (0.76%) (1.59%) (1.91%) (0.47%)
Percent of Allowance for Loan Losses to
Gross Loans (at Period End) . . . . . . . . . . . 2.80% 2.55% 2.28% 0.91% 0.86%
Ratio of Allowance for Loan Losses
to Net (Charge-offs) Recoveries . . . . . . . . . 283% (296%) (130%) (52%) (205%)
</TABLE>
- ----------------------
(1) Commercial Loans includes Commercial and Commercial Real Estate
At December 31, 1994, the allowance for loan losses was $1.6 million, or
2.8% of gross loans, compared to $1.6 million, $1.9 million, $916,000 and
$748,000, or 2.55%, 2.28%, 0.91% and 0.86% to gross loans, at December 31,
1993, 1992, 1991 and 1990, respectively. For the years ended December 31, 1994
and 1993, due to significant recoveries of loans previously charged off, net
charge-offs were $(563,000), or (0.99%) of the $57.0 million gross loans
outstanding, and $544,000, or 0.86% of $63.2 million gross loans outstanding,
respectively.
As of December 31, 1992, in recognition of the depletion of the loan loss
reserve by the loan charge-offs, the continuing deterioration of certain loans
which were held by the Bank, and the continuing weakness in the economic
condition of those borrowers, $2.5 million was added to the loan loss
allowance. In July 1992, the Bank had implemented steps to improve its loan
loss review procedures, as noted previously.
E-6
<PAGE> 144
NON-PERFORMING LOANS
As a result of the asset quality stabilization efforts described above,
and improving economic conditions, including the general decrease in interest
rates experienced by the Bank's customers, non-performing loans have decreased
significantly. Non-performing loans at December 31, 1994, were $1.5 million,
or 2.7% of gross loans, compared to $2.2 million, or 3.5% of gross loans at
December 31, 1993 and $3.9 million or 4.6% of total gross loans at December 31,
1992. These loans are subject to heightened management scrutiny and their
classifications are reviewed on a regular basis.
Non-accrual loans are those of which the recognition of interest has been
suspended. Loans are placed on non-accrual status when they become 90 or more
days past due and are not well collateralized and in the process of collection
or when, in the judgment of management, the ability to collect the loans or
accrued interest thereon becomes doubtful. As of December 31, 1994, management
believes that there are no potential problem loans which would require
disclosure. The following schedule presents a summary of the non-performing
loans at the end of each of the five years preceding December 31, 1994.
PAST DUE AND NON-PERFORMING LOANS AT YEAR END
(In thousands, except ratios)
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------------------------------
1994 1993 1992 1991 1990
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Gross Loans . . . . . . . . . . . . . . . . . $ 56,958 $ 63,151 $ 84,377 $ 100,804 $ 86,971
============ =========== =========== ============ ============
Non-Performing Loans
Non-Accrual Loans . . . . . . . . . . . . $ 1,479 $ 1,902 $ 3,853 $ 645 $ 1,632
Accrual Loans Over 90 Days Past Due . . . 28 318 -- 2,925 1,551
------------ ----------- ----------- ------------ ------------
Total Non-Performing Loans . . . . . . . . . $ 1,507 $ 2,220 $ 3,853 $ 3,570 $ 3,183
============ =========== =========== ============ ============
Ratio of Non-Performing Loans to Total
Loans at Period End . . . . . . . . . . . 2.65% 3.52% 4.57% 3.54% 3.66%
Ratio of Allowance for Loan Losses
to Non-Performing Loans at Period End . . 105.77% 72.43% 50.01% 25.66% 23.50%
------------ ----------- ----------- ------------ ------------
Allowance for Loan Losses . . . . . . . . . . $ 1,594 $ 1,608 $ 1,927 $ 916 $ 748
ORE Owned . . . . . . . . . . . . . . . . . . $ 786 $ 1,556 $ 897 $ 1,036 $ 628
</TABLE>
Non-accrual of interest on non-accrual loans had the effect of reducing
interest income by $144,000, $262,000 and $234,000 for the years ended December
31, 1994, 1993 and 1992, respectively. Interest income on these loans, which
is recorded only when received, amounted to $0, $39,000 and $44,000 for the
years ended December 31, 1994, 1993 and 1992, respectively.
OTHER INCOME
Other income is composed primarily of deposit account service charges, fees
for trust services, rental income from the holdings of Realty, gains from
disposition of assets, including investment securities, and other various fees
and commissions. Other income was $1.2 million for the year ended December 31,
1994, compared to $1.4 million for the year ended December 31, 1993, a decrease
of $164,000 or 11.7% resulting primarily from a decrease of $84,000 in service
charge income. Other income of $1.4 million for 1993 showed little change from
the $1.4 million in 1992, although decreases in service charge income on
transaction accounts and investment security gains were offset by an increase
in Realty income and other operating income.
E-7
<PAGE> 145
The following is a summary of the other income components for the three
years ending December 31, 1994.
OTHER INCOME
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Trust Department Income . . . . . . . . $ 54 $ 52 $ 57
Service Charges on Deposit Accounts . . 648 732 785
Rental Income . . . . . . . . . . . . . 198 230 195
Other Operating Income . . . . . . . . 337 376 234
Security Gains . . . . . . . . . . . . - 11 155
----------- ------------ ------------
Total Expense . . . . . . . . . . . $ 1,237 $ 1,401 $ 1,426
=========== ============ ============
</TABLE>
OTHER EXPENSE
Other expense showed minimal increase from 1993 to 1994. The largest changes
in other expenses related to increased costs experienced with the sale of ORE,
non-recurring legal and consulting expenses associated with resolving Bank
regulatory difficulties and decreases in the premium costs of FDIC insurance
and other operating expenses. Each ORE property is periodically monitored by
management and is reappraised by an independent appraiser at least annually
with an appropriate write down to the asset value, if warranted. ORE expenses
increased 116.8% from $149,000 in 1993 to $323,000 in 1994. The increase of
$174,000 was related to property taxes due and payable and to costs associated
with the sale of ORE owned. Total other expenses decreased by $397,000 (7.1%)
from $5.6 million in 1992 to $5.2 million in 1993. The decrease in occupancy
expense of $168,000, ORE expenses of $247,000 and professional and consulting
fees of $228,000 more than offset the increase in salaries and employee
benefits of $189,000 and the FDIC insurance assessment increase of $81,000 due
to the regulatory orders agreed to in 1992.
OTHER EXPENSE
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C>
Salaries & Employee benefits . . . . $ 2,511 $ 2,304 $ 2,115
Occupancy Expense . . . . . . . . . . 379 424 592
Equipment Expense . . . . . . . . . . 169 180 164
ORE Owned Expense . . . . . . . . . . 323 149 396
Professional & Consulting Fees . . . 378 330 558
Data Processing Fees . . . . . . . . 175 233 242
FDIC Insurance Premium . . . . . . . 293 353 272
Other Operating Expenses . . . . . . 980 1,213 1,244
----------- ----------- ----------
Total Other Expense . . . . . . . $ 5,208 $ 5,186 $ 5,583
=========== =========== ==========
</TABLE>
INCOME TAXES
The Company files a consolidated federal income tax return. Income tax
expense increased from $437,000 in 1993 to $651,000 in 1994, primarily due to
the maturity of tax exempt obligations of states and municipal subdivisions
which were not replaced with tax exempt obligations in the investment portfolio
as a result of management's repositioning of the portfolio.
E-8
<PAGE> 146
FINANCIAL CONDITION
GENERAL
The Bank assets increased $1.1 million or 1.0% from 1993 to 1994 and
decreased $3.1 million or 2.3% from 1992 to 1993 due in part to the factors
discussed above.
INVESTMENT SECURITIES
The following schedule summarizes the Company's investment securities
portfolio as of December 31, 1994. The weighted average yields for tax-exempt
obligations have not been computed on a tax equivalent basis.
INVESTMENT PORTFOLIO
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31, 1994
------------------------------------------------
Weighted
Amortized Average
Cost Fair Value Interest Rate
-------------- ---------- -------------
<S> <C> <C> <C> <C>
U.S. Treasury and Government Agency Securities:
Within One Year . . . . . . . . . . . . . . . . . $ 28,949 $ 28,533 5.08%
After One but within Five Years . . . . . . . . . 25,546 24,566 5.51%
After Five but within Ten Years . . . . . . . . . 1,000 913 5.00%
After Ten Years . . . . . . . . . . . . . . . . . -- -- --
--------------- -------------- --------
Total U.S. Treasury and Government Agency
Securities . . . . . . . . . . . . . . . . . . . . $ 55,495 $ 54,012 5.28%
--------------- -------------- -----
Obligations of State and Political Subdivisions:
Within One Year . . . . . . . . . . . . . . . . . $ 2,029 $ 2,051 7.93%
After One but within Five Years . . . . . . . . . 1,096 1,072 4.48%
After Five but within Ten Years . . . . . . . . . 428 406 5.26%
After Ten Years . . . . . . . . . . . . . . . . . 100 105 7.50%
--------------- -------------- -----
Total Obligations of State and Political Subdivisions $ 3,653 $ 3,634 6.36%
--------------- -------------- -----
Total Collateralized Mortgage Obligations . . . . . . $ 3,710 $ 3,416 6.58%
--------------- -------------- -----
Total Mortgage Backed Securities . . . . . . . . . . $ 982 $ 934 3.62%
--------------- -------------- -----
Total Securities . . . . . . . . . . . . . . . . . . $ 63,840 $ 61,996 5.39%
=============== ============== =====
Total Securities:
Within One Year . . . . . . . . . . . . . . . . . $ 30,978 $ 30,584 5.27%
After One but within Five Years . . . . . . . . . 26,642 25,638 5.47%
After Five but within Ten Years . . . . . . . . . 1,428 1,319 5.08%
After Ten Years . . . . . . . . . . . . . . . . . 100 105 7.50%
Collateralized Mortgage Obligations . . . . . . . 3,710 3,416 6.58%
Mortgage Backed Securities . . . . . . . . . . . . 982 934 3.62%
--------------- -------------- -----
$ 63,840 $ 61,996 5.39%
=============== ============== =====
</TABLE>
E-9
<PAGE> 147
The amortized cost of U.S. Treasury and government agency securities,
including collateralized mortgage obligations of $3.7 million at December 31,
1994, increased to $59.2 million, or 29.8% from $45.6 million, including
collateralized mortgage obligations of $5.9 million, at December 31, 1993. As
noted previously, the Company's assets were restructured in 1993 and 1994 to
provide for additional liquidity and to reposition the Company's investment
portfolio in accordance with guidelines adopted in 1992.
Obligations of states and political subdivisions were $3.7 million at
December 31, 1994, down from $4.8 million at December 31, 1993, a decrease of
23% and down from $5.8 million as of December 31, 1992, a decrease of 17.2%.
At December 31, 1994, the Company's investment portfolio did not contain
securities, other than U.S. Treasury and government agency securities, of any
single issuer that were payable from and secured by the same source of revenue
or taxing authority where the aggregate book value of such securities exceeded
10% of stockholders' equity or $1.2 million.
LOANS
Gross loans were $57.0 million at December 31, 1994, compared to $63.2
million and $84.4 million at December 31, 1993 and 1992, respectively. The
decrease reflects management's intention to downsize the loan portfolio as
previously discussed, and the virtual elimination of leveraged leases from the
portfolio. Gross loans continue to decrease as repayments exceed loan
originations in the ordinary course of business.
The following table summarizes the categories of loans outstanding at the
end of each of the five years preceding December 31, 1994 and indicates the
portfolio's sensitivity to interest rate changes, based upon the loan maturity
date and repricing terms as of December 31, 1994.
ANALYSIS OF LOAN PORTFOLIO
(In thousands, except ratios)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
----------------- ------------------ ----------------- ----------------- -----------------
Amount % Amount % Amount % Amount % Amount %
------ - ------ - ------ - ------ - ------ -
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LOAN CATEGORY
Commercial Loans (1) $ 45,388 79.7% $49,772 78.8% $ 61,451 72.8% $69,449 68.9% $ 53,580 61.6%
Real Estate
Residential . . . . . 9,732 17.1% 11,419 18.1% 18,262 21.7% 23,755 23.6% 25,912 29.8%
Installment Loans . 1,521 2.7% 1,317 2.1% 2,204 2.6% 3,089 3.0% 3,677 4.2%
Other . . . . . . . 317 0.5% 643 1.0% 2,460 2.9% 4,511 4.5% 3,802 4.4%
------- ------ ------ ------ ------- ------ ------ ------ ------- ------
Gross Loans . . . $ 56,958 100.0% $63,151 100.00% $ 84,377 100.0% $100,804 100.0% $ 86,971 100.0%
======= ====== ====== ======= ======= ====== ======= ====== ======= ======
</TABLE>
- ----------------------
(1) Commercial Loans include Commercial and Commercial Real Estate.
E-10
<PAGE> 148
LOAN MATURITY DISTRIBUTION
(In thousands, except ratios)
<TABLE>
<CAPTION>
At December 31, 1994
------------------------------------------------------
Under 1 Year to Over
1 Year 5 Years 5 Years Total
------ --------- ------- -----
<S> <C> <C> <C> <C>
MATURITY PERIOD (1)
Fixed Rate . . . . . . . . . $ 12,119 $ 24,023 $ 3,576 $ 39,718
Variable Rate . . . . . . . 12,038 3,652 1,550 17,240
----------- ----------- ----------- -------------
Total for Period . . . . $ 24,157 $ 27,675 $ 5,126 $ 56,958
=========== =========== =========== =============
42.4% 48.6% 9.0% 100.0%
</TABLE>
- ----------------------
(1) Demand loans, past due loans and overdrafts are reported in the Under 1
Year category.
ALLOWANCE FOR LOAN LOSS
At December 31, 1994, the allowance for loan losses was $1.6 million, or
2.80% of gross loans, compared to $1.6 million, $1.9 million, $916,000 and
$748,000, or 2.55%, 2.28%, 0.91% and 0.86%, to gross loans, at December 31,
1993, 1992, 1991 and 1990, respectively. Changes noted during the periods
reflect management's response to internal loan review, regulatory
classifications and the current loan loss methodology results.
DEPOSITS
Year end deposits for December 31, 1994 were $115.8 million, a decrease of
$1.8 million or 1.5% from $117.6 million in 1993 and a decrease of $7.9 million
or 6.3% from $125.5 million in 1992 to 1993.
The change in total deposits was caused primarily by decreases of $1.3
million in savings deposits, $1.1 million in demand deposits, $1.3 million in
other time deposits and $766,000 in NOW and Money Market accounts which were
somewhat offset by the $2.8 million increase in time deposits over $100,000.
At December 31, 1994, time certificates of deposit in denominations of $100,000
or more were $6.7 million, which represents 5.8% of total deposits. These time
deposits are rate-sensitive. The Bank's policy is to pay competitive rates in
the markets it serves.
Average total deposits in 1994 were $116.7 million, a decrease of 2.3% or
$2.7 million from 1993. This followed a decrease of 3.2% in 1993. The
decrease in deposits was primarily attributable to a decrease in other time
deposits.
<TABLE>
<CAPTION>
AVERAGE DEPOSITS DISTRIBUTION
(In thousands)
Year Ended December 31,
-----------------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C>
Noninterest Bearing Demand Deposits . . . $ 21,626 $ 20,539 $ 18,661
Savings Deposits . . . . . . . . . . . . 47,033 46,979 43,962
Money Market and NOW Deposits . . . . . . 21,664 21,467 21,801
CD's over $100,000 . . . . . . . . . . . 4,979 4,519 6,094
Other Time Deposits . . . . . . . . . . . 21,434 25,965 32,899
---------- ----------- -----------
Total Deposits . . . . . . . . . . . . . $ 116,736 $ 119,469 $ 123,417
========== =========== ===========
</TABLE>
E-11
<PAGE> 149
Average noninterest-bearing demand deposits in 1994 were up 5.3% following a
10.1% increase in 1993. The 1993 and 1994 increases related primarily to
general economic factors.
Average savings deposits were relatively unchanged from 1993 following an
increase of 6.9% one year earlier.
CD's over $100,000 reversed their shift from last year's decline by
increasing an average of 10.2% in 1994, reflecting a late year return to the
attractiveness of time deposit products. Other time deposits decreased 17.5%
following a decrease of 21.1% in 1993 reflecting a declining interest rate
environment and reduction in balance from public funds.
<TABLE>
<CAPTION>
AVERAGE RATES
PAID ON DEPOSITS
Year Ended December 31,
-----------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Savings Deposits . . . . . . . . . . . . 2.76% 2.90% 3.94%
Money Market and NOW Deposits . . . . . . 2.21% 2.21% 3.34%
CD's over $100,000 . . . . . . . . . . . 3.82% 4.16% 7.52%
Other Time Deposits . . . . . . . . . . . 3.85% 3.95% 4.64%
Total Interest Bearing Deposits . . . . . 2.94% 3.08% 4.25%
</TABLE>
<TABLE>
<CAPTION>
MATURITY OF TIME
DEPOSITS OVER $100,000
At December 31, 1994
(In thousands)
<S> <C>
Due within Three Months . . . . $ 3,307
Three to Six Months . . . . . . 1,918
Six to Twelve Months . . . . . 1,156
After Twelve Months . . . . . . 348
-------
$ 6,729
=======
</TABLE>
The Bank continues to experience strong competition for deposits in its
markets. This is true for both the business and retail segments of the market.
During 1994, the Bank offered a number of different products with specific
features and competitive pricing. The deposit products were designed to retain
core deposit accounts, attract new customers, and create opportunities for
providing other bank services or relationships.
NOTES PAYABLE
Notes payable decreased by $550,000 to $4.0 million as of December 31, 1994
as a result of scheduled principal repayments. Notes payable were $4.5 million
at December 31, 1993, which was the maximum amount outstanding during the two
years ended December 31, 1994. The average amount of Notes Payable was $4.2
million and $4.5 million during the years ended December 31, 1994 and 1993,
respectively. The weighted average interest rate was 8.15% and 6.85% during
the years ended December 31, 1994 and 1993, respectively. Following the
receipt of the $1.0 million dividend from the Bank on January 24, 1995, the
Company determined that further principal reduction was warranted in light of
the circumstances facing the Company, particularly the rising interest rates.
As a result, a principal payment of $1.8 million was made which decreased the
notes payable to $2.2 million as of March 31, 1995. The Company was in
compliance with certain ratios and covenants required by these loans at
December 31, 1994 and management believes that the Company was
E-12
<PAGE> 150
in compliance at March 31, 1995. The Notes were due May 1, 1995 and were
renewed for another one year term. The Notes bear interest at the prime rate
and are secured by the Company's stock in the Bank and real estate owned by
Realty.
COMMON STOCK ISSUED
In 1992 and early 1993, the Company sold a total of 40,000 shares and raised
$4.0 million. This issuance was in response to the Company's need for
additional capital. See "Capital & Regulatory Matters" below.
The Company shareholders adopted an employee stock benefit plan in 1990.
Under the plan, the Company may award up to 10,000 shares of the Company's
Common Stock to employees of the Company or its subsidiaries. For information
regarding the plan, see Note 7 of the Notes to the Company's Consolidated
Financial Statements attached hereto.
LIQUIDITY
The overall liquidity of the Bank is maintained through the continual review
and control of the maturity structure of the balance sheet. Liquidity is
obtained through access to financial markets and by holding appropriate amounts
of liquid assets, which provide the Company with the ability to meet financial
obligations to depositors and loan customers.
Liquid assets are composed of cash and near-cash items, including deposits
with other banks, Federal Reserve funds sold, obligations of the U.S. Treasury
and government agency securities, obligations of states and political
subdivisions, and short-term investments which can be readily converted to
cash.
The fair value of the Bank's investment securities portfolio was $62.0
million at December 31, 1994, which included securities classified as available
for sale with a fair value of $32.5 million that were available to meet
liquidity needs. Prior to the adoption on January 1, 1994, of Financial
Accounting Standards Board Statement No. 115 "Accounting for Certain
Investments in Debt and Equity Securities," the Bank's entire investment
securities portfolio, with a fair value of $52.1 million at December 31, 1993,
could have been available to meet liquidity needs. The fair value of the
Bank's securities available for sale was $28.8 million at March 31, 1995, a
decrease of $3.7 million, or 11.4% from December 31, 1994, due to maturities of
securities and the subsequent reinvestment of the proceeds in federal funds
sold.
The Bank continually monitors its funding and liquidity needs. Management
has developed an alternative funding contingency plan, whereby the Bank may
borrow from the Federal Reserve Bank of Chicago. In addition, the Bank
maintains contingency funding arrangements with each of its correspondent banks
reflecting an $8.5 million borrowing capability. As of March 31, 1995,
liquidity resources were sufficient to meet the Company's needs for cash when
necessary. There were no material commitments for capital expenditures, i.e.
to purchase fixed assets.
ASSET AND LIABILITY MANAGEMENT
Net interest income is subject to wide fluctuations arising from changes in
market interest rates because the average yield on assets responds differently
to such changes than does the average cost of funds. In an effort to minimize
the effects of changes in the general level of market interest rates, the Bank
actively manages the repricing characteristics of its assets and liabilities to
control net interest rate sensitivity. For purposes of measurement of rate
sensitive deposit balances, management has determined that transaction accounts
of $16.7 million and Other Savings of $46.0 million, as of December 31, 1994,
should be considered as core deposits and are subject to repricing as 50%,
based on movement due to rate change within a 6 month duration or less horizon
and the remaining 50% subject to repricing within the 1-5 year duration.
Management has further determined that the rate sensitivity ratio should be
maintained between 80% and 120% of rate sensitive assets to rate sensitive
liabilities through all the measured horizons.
An interest rate sensitivity ratio position is a relative measure of the
differences in the repricing of assets and liabilities within specified time
periods. A positive rate sensitivity ratio exists when rate-sensitive assets
exceed rate-sensitive liabilities. Generally, when a positive gap position
exists, net interest income should increase during periods of rising interest
rates. When a negative gap position exists (when rate-sensitive liabilities
exceed rate-sensitive assets), net interest income generally should increase
during periods of declining interest rates. The interest rate sensitivity table
as of December 31, 1994 shows that the cumulative position was positive for all
of the reporting periods.
E-13
<PAGE> 151
The Bank's relative position of interest rate-sensitive assets and
liabilities as of December 31, 1994 is shown in the following table.
INTEREST RATE SENSITIVITY ANALYSIS
(In thousands)
<TABLE>
<CAPTION>
December 31, 1994
-------------------------------------------------------------
Interest Sensitivity Period
-------------------------------------------------------------
6 Months 6 Months 1 Year 5 Years
or Less to 1 Year to 5 Years and Over Total
------- --------- ---------- -------- -----
<S> <C> <C> <C> <C> <C>
INTEREST SENSITIVE ASSETS
Loans . . . . . . . . . . . . . . . . . $ 22,849 $ 5,705 $ 24,828 $ 3,576 $ 56,958
Investment Securities - HTM . . . . . . 5,487 2,831 21,047 1,528 30,893
Investment Securities - AFS . . . . . . 32,490 32,490
---------- --------- ------------ -------- ----------
Total Earning Assets . . . . . . . . $ 60,826 $ 8,536 $ 45,875 $ 5,104 $ 120,341
---------- --------- ------------ -------- ----------
Cumulative . . . . . . . . . . . . . $ 60,826 $ 69,362 $ 115,237 $ 120,341
---------- --------- ------------ --------
INTEREST SENSITIVE LIABILITIES
NOW Accounts . . . . . . . . . . . . . $ 8,385 $ -- $ 8,385 $ -- $ 16,770
Money Market Deposits . . . . . . . . . 4,124 -- -- -- 4,124
Other Savings Accounts . . . . . . . . 23,020 -- 23,019 -- 46,039
Other Time $100,000 and Over . . . . . 5,225 1,156 348 -- 6,729
Other Time Deposits . . . . . . . . . . 11,276 5,748 3,646 -- 20,670
Federal Funds Purchased . . . . . . . . 1,500 -- -- -- 1,500
---------- --------- ------------ -------- ----------
Total Liabilities . . . . . . . . . $ 53,530 $ 6,904 $ 35,398 $ --
---------- --------- ------------ --------
Cumulative . . . . . . . . . . . . . $ 53,530 $ 60,434 $ 95,832 $ 95,832 $ 95,832
---------- --------- ------------ -------- ----------
Net Position per Period . . . . . . . . $ 7,296 $ 1,632 $ 10,477 $ 5,104
---------- --------- ------------ --------
Net Asset Position - Cumulative . . . . $ 7,296 $ 8,928 $ 19,405 $ 24,509 $ 24,509
========== ========= ============ ======== ==========
Rate Sensitive Assets as a %
of Rate Sensitive Liabilities . . . . . 113.63% 114.77% 120.25% 125.57%
</TABLE>
CAPITAL & REGULATORY MATTERS
On September 19, 1992, the Federal Deposit Insurance Corporation ("FDIC")
entered into a Cease and Desist Order (the "FDIC Order") with the Bank from
which the Bank was released by the FDIC as of August 22, 1994. In addition, on
June 23, 1992, the Company entered into a Memorandum of Understanding with the
Federal Reserve Bank of Chicago ("Reserve Bank") from which the Company was
released by the Reserve Bank as of March 22, 1995. The Bank had previously
adopted a Corrective Action Plan proposed by the Commissioner of Banks and
Trust Companies for the State of Illinois ("Commissioner") in 1991 which the
Bank rescinded on January 25, 1994 with the approval of the Commissioner. As a
result of these regulatory actions, the Bank was required to increase its
capital by $2.0 million and maintain its Tier 1 leverage capital ratio at a
minimum of 7.0%. In addition, no dividends were permitted by the Bank or
Company except with regulatory approval. The regulatory actions also required
maintenance of certain operating and other ratios and placed limits on
additional borrowing and growth by the Bank. Management was also required to
meet certain other non-financial requirements. At March 31, 1995 the Bank's
Tier 1 leverage capital ratio was 9.3%.
E-14
<PAGE> 152
C O N T E N T S
<TABLE>
<S> <C>
INDEPENDENT AUDITORS' REPORTS E-16
FINANCIAL STATEMENTS
Consolidated balance sheets E-18
Consolidated statements of income E-19
Consolidated statements of stockholders' equity E-20
Consolidated statements of cash flows E-21
Notes to consolidated financial statements E-23
</TABLE>
E-15
<PAGE> 153
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
GN Bancorp, Inc.
Chicago, Illinois
We have audited the accompanying consolidated balance sheets of GN Bancorp,
Inc. as of December 31, 1994 and 1993, and the related consolidated statements
of income, stockholders' equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the 1994 and 1993 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of GN
Bancorp, Inc. and subsidiaries as of December 31, 1994 and 1993, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
As discussed in Note 2, the Company changed its method of accounting for
securities in 1994.
McGLADREY & PULLEN, LLP
Schaumburg, Illinois
February 17, 1995
E-16
<PAGE> 154
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
GN Bancorp, Inc.
We have audited the consolidated statements of operations, changes in
stockholders' equity, and cash flows of GN Bancorp, Inc. and Subsidiaries for
the year ended December 31, 1992. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the 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 disclosures in the financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated results of operations and
cash flows of GN Bancorp, Inc. and Subsidiaries for the year ended December 31,
1992 in conformity with generally accepted accounting principles.
GRANT THORNTON LLP
Chicago, Illinois
February 12, 1993
E-17
<PAGE> 155
GN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
MARCH 31, 1995 AND 1994 (UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
--------------------- -------------------
ASSETS 1995 1994 1994 1993
- ------ ---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Cash and due from banks $ 4,436,136 $ 7,365,586 $ 8,192,595 $ 6,873,885
Federal funds sold 3,650,000 - - 4,350,000
------------ ------------ ------------ ------------
Cash and cash equivalents 8,086,136 7,365,586 8,192,595 11,223,885
Interest-bearing deposits with banks - - - 375,000
Securities:
Investment - - - 51,699,134
Held to maturity 30,639,166 32,419,431 30,892,799 -
Available for sale 28,817,230 23,468,901 32,490,330 -
Loans, net 53,690,936 58,848,596 55,208,587 61,276,808
Premises and equipment 4,458,935 4,672,842 4,503,480 4,713,597
Other real estate owned 871,111 1,711,354 786,493 1,556,166
Accrued interest receivable and other
assets 1,541,769 2,168,312 1,726,638 1,859,076
------------ ------------ ------------ ------------
$128,105,283 $130,655,022 $133,800,922 $132,703,666
============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities
Deposits:
Demand deposits $ 21,227,805 $ 19,971,494 $ 21,472,868 $ 22,573,565
Savings 42,198,528 47,228,521 46,039,306 47,342,725
Money market and NOW accounts 19,972,571 20,925,346 20,894,363 21,659,530
Time deposits, $100,000 and over 6,167,325 4,337,257 6,728,548 3,951,315
Other time deposits 23,245,470 22,234,547 20,670,422 22,047,568
------------ ------------ ------------ ------------
TOTAL DEPOSITS 112,811,699 114,697,165 115,805,507 117,574,703
Federal funds purchased - - 1,500,000 -
Accrued interest payable and other liabilities 1,419,630 1,342,269 1,456,716 1,282,355
Notes payable 2,225,000 4,175,000 3,975,000 4,525,000
------------ ------------ ------------ ------------
TOTAL LIABILITIES 116,456,329 120,214,434 122,737,223 123,382,058
------------ ------------ ------------ ------------
Commitments and Contingent Liabilities
Stockholders' Equity
Common stock, par value $8 per share; authorized
110,000 shares; issued and outstanding March 31,
1995 and 1994 90,071 and 87,989 shares,
respectively; December 31, 1994 and 1993 89,439
and 81,989 shares, respectively 720,568 703,912 715,512 655,912
Additional paid-in capital 4,709,613 4,477,249 4,645,149 3,895,249
Retained earnings 6,346,012 5,317,264 6,004,564 4,770,447
Unrealized loss on securities available
for sale, net (127,239) (57,837) (301,526) -
------------ ------------ ------------ ------------
11,648,954 10,440,588 11,063,699 9,321,608
------------ ------------ ------------ ------------
$128,105,283 $130,655,022 $133,800,922 $132,703,666
============ ============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
E-18
<PAGE> 156
GN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
THREE MONTHS ENDED MARCH 31, 1995 AND 1994 (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31, Years Ended December 31,
---------------------------- ---------------------------------------
1995 1994 1994 1993 1992
---- ---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 1,328,708 $ 1,414,588 $ 5,328,517 $ 6,538,408 $ 8,961,886
Investment securities:
Taxable 807,707 567,957 2,647,512 1,823,813 1,132,939
Exempt from federal income taxes 46,349 72,083 254,539 437,432 475,389
Interest-bearing deposits with banks - - 32,670 12,598 13,107
Federal funds sold 24,324 31,842 136,291 142,682 112,796
----------- ----------- ----------- ----------- -----------
TOTAL INTEREST INCOME 2,207,088 2,086,470 8,399,529 8,954,933 10,696,117
Interest expense:
Deposits 760,914 681,567 2,793,482 3,049,033 4,465,398
Notes payable and other 61,566 73,716 327,263 309,697 306,634
----------- ----------- ----------- ----------- -----------
NET INTEREST INCOME 1,384,608 1,331,187 5,278,784 5,596,203 5,924,085
Provision for loan losses (50,000) (450,000) (577,000) 225,000 2,493,534
----------- ----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,434,608 1,781,187 5,855,784 5,371,203 3,430,551
----------- ----------- ----------- ----------- -----------
Other income:
Trust department income 12,885 12,500 53,303 51,656 57,451
Service charges on deposit accounts 135,879 169,977 648,561 731,812 784,835
Rental income 59,262 60,397 197,906 229,702 194,840
Other operating income 21,135 56,434 337,502 376,323 233,849
Security gains - - - 11,272 154,739
----------- ----------- ----------- ----------- -----------
TOTAL OTHER INCOME 229,161 299,308 1,237,272 1,400,765 1,425,714
Other expenses:
Salaries and employee benefits 587,486 546,675 2,510,927 2,304,563 2,114,520
Occupancy expense 138,584 133,170 378,592 423,972 592,327
Equipment expense 52,622 61,145 168,867 179,619 164,206
Other real estate owned expense 21,866 86,034 323,007 149,068 396,062
Professional and consulting fees 39,716 67,518 378,138 329,757 557,798
Data processing fees 42,070 47,486 175,425 233,064 241,676
FDIC insurance premium 64,256 72,939 293,225 353,247 272,242
Other operating expenses 249,530 191,369 979,712 1,212,760 1,244,431
----------- ----------- ----------- ----------- -----------
TOTAL OTHER EXPENSES 1,196,130 1,206,336 5,207,893 5,186,050 5,583,262
----------- ----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES 467,639 874,159 1,885,163 1,585,918 (726,997)
Income tax expense (credit) 126,191 327,342 651,046 437,355 (381,741)
----------- ----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 341,448 $ 546,817 $ 1,234,117 $ 1,148,563 $ (345,256)
=========== =========== =========== =========== ===========
Earnings (loss) per common share $ 3.81 $ 6.66 14.11 $ 16.58 $ -8.22
Weighted average shares outstanding 89,557 82,056 87,495 69,277 42,004
</TABLE>
See Notes to Consolidated Financial Statements.
E-19
<PAGE> 157
GN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
THREE MONTHS ENDED MARCH 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
Unrealized
Loss on
Securities
Additional Available
Common Paid-In Retained For
Stock Capital Earnings Sale, Net Total
------ ---------- -------- ---------- -----
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1991 $ 339,192 $ 296,817 $ 4,064,677 $ - $ 4,700,686
Dividends Paid ($1.20 Per Share) - - (50,387) - (50,387)
Purchase of 410 shares of
common stock (3,280) (2,870) (47,150) - (53,300)
Net (loss) - - (345,256) - (345,256)
--------- ----------- ------------ ----------- ------------
Balance, December 31, 1992 335,912 293,947 3,621,884 - 4,251,743
Issuance of 40,000 shares of
common stock 320,000 3,601,302 - - 3,921,302
Net income - - 1,148,563 - 1,148,563
--------- ----------- ------------ ----------- ------------
Balance, December 31, 1993 655,912 3,895,249 4,770,447 - 9,321,608
Unrealized gain on securities
available for sale, net - - - 30,493 30,493
Exercise of 7,450 shares of
stock options 59,600 749,900 - - 809,500
Net income - - 1,234,117 - 1,234,117
Net change in unrealized gains
and losses on securities
available for sale, net - - - (332,019) (332,019)
--------- ----------- ------------ ----------- ------------
Balance, December 31, 1994 715,512 4,645,149 6,004,564 (301,526) 11,063,699
Exercise of 632 shares of
stock options (unaudited) 5,056 64,464 - - 69,520
Net income (unaudited) - - 341,448 - 341,448
Net change in unrealized gains
and losses on securities available
for sale, net (unaudited) - - - 174,287 174,287
--------- ----------- ------------ ----------- ------------
Balance, March 31, 1995 (unaudited) $ 720,568 $ 4,709,613 $ 6,346,012 $ (127,239) $ 11,648,954
========= =========== ============ =========== ============
</TABLE>
See Notes to Consolidated Financial Statements.
E-20
<PAGE> 158
GN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
THREE MONTHS ENDED MARCH 31, 1995 AND 1994 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, YEARS ENDED DECEMBER 31,
------------------------------- -------------------------------------------------
1995 1994 1994 1993 1992
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash Flows From Operating Activities
Net income (loss) $ 341,448 $ 546,817 $ 1,234,117 $ 1,148,563 $ (345,256)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation 55,040 54,009 215,362 242,225 273,624
Amortization of goodwill - 15,000 43,027 60,000 60,000
Amortization of premiums and
discounts, net 5,789 138,604 401,968 549,103 166,079
Provision for loan losses (50,000) (450,000) (577,000) 225,000 2,493,534
Provision for losses on other real
estate owned - 50,000 95,000 75,000 -
Deferred income taxes 32,000 (51,000) 62,000 23,000 (501,000)
Gain/loss on sale of equipment - - 7,304 4,678 (2,694)
Gain/loss on sale of other real
estate - (10,000) 52,420 - -
Security gains - - - (11,272) (154,739)
(Increase) decrease in accrued
interest receivable and other
assets 36,893 (313,110) 48,189 589,715 4,792
Increase (decrease) in accrued
interest payable and other
liabilities (37,086) 59,914 174,361 56,335 (494,885)
------------ -------- -------------- ------------- -------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 384,084 40,234 1,756,748 2,962,347 1,499,455
------------ -------- -------------- ------------- -------------
Cash Flows From Investing Activities
Proceeds from maturities of
securities held to maturity 1,400,194 3,168,836 8,033,518 - -
Purchase of securities held to
maturity (1,152,350) (2,200,000) (5,801,414) - -
Proceeds from sales and maturities
of securities available for sale 7,974,613 2,000,000 11,400,000 - -
Purchase of securities available for
sale (4,011,250) (7,383,507) (26,174,924) - -
Purchase of investment securities - - - (29,077,320) (33,063,445)
Proceeds from sales and maturities
of investment securities - - - 11,579,645 13,214,340
Net (increase) decrease in interest-
bearing deposits with banks - 375,000 375,000 (375,000) 500,000
Net decrease in loans 1,567,651 2,383,024 5,619,378 18,399,927 14,820,882
Additions to premises and equipment (10,495) (13,254) (26,049) (70,448) (56,487)
Proceeds from sale of equipment - - 13,500 16,500 68,511
Additions to other real estate owned (84,618) - (25,588) (49,935) -
Proceeds from sale of other real
estate owned - 300,000 1,306,543 217,534 -
Proceeds from other assets - 68,906 501,694 660,387 -
------------ -------- -------------- ------------- -------------
NET CASH PROVIDED BY (USED
IN) INVESTING ACTIVITIES 5,683,745 (1,300,995) (4,778,342) 1,301,290 (4,516,199)
------------ -------- -------------- ------------- -------------
</TABLE>
(CONTINUED)
E-21
<PAGE> 159
GN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
THREE MONTHS ENDED MARCH 31, 1995 AND 1994 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, YEARS ENDED DECEMBER 31,
--------------------------------- -------------------------------------------
1995 1994 1994 1993 1992
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash Flows From Financing Activities
Net increase (decrease) in time deposits $ 2,013,825 $ 572,921 $ 1,400,087 $ (9,555,038) $ (6,523,867)
Net increase (decrease) in other deposits (5,007,633) (3,450,459) (3,169,283) 1,633,584 10,577,625
Net increase (Decrease) in federal
funds purchased (1,500,000) - 1,500,000 - -
Proceeds from exercise of stock options 69,520 630,000 809,500 - -
Principal payments on notes payable (1,750,000) (350,000) (550,000) - (550,000)
Proceeds from issuance of common stock - - - 3,587,740 333,562
Purchases of common stock - - - - (53,300)
Dividends paid - - - - (50,387)
----------- ------------ ------------ ------------- ------------
NET CASH PROVIDED BY (USED
IN) FINANCING ACTIVITIES (6,174,288) (2,597,538) (9,696) (4,333,714) 3,733,633
----------- ------------ ------------ ------------- ------------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (106,459) (3,858,299) (3,031,290) (70,077) 716,889
Cash and cash equivalents:
Beginning 8,192,595 11,223,885 11,223,885 11,293,962 10,577,073
----------- ------------ ------------ ------------- ------------
Ending $ 8,086,136 $ 7,365,586 $ 8,192,595 $ 11,223,885 $ 11,293,962
=========== ============ ============ ============= ============
Supplemental Disclosures of Cash Flow
Information
Cash payments for:
Interest paid to depositors $ 712,374 $ 672,430 $ 2,768,221 $ 3,114,723 $ 4,645,032
Interest paid on notes payable
and other 61,128 109,448 360,433 254,464 469,997
Income taxes - - 465,000 455,000 80,000
Supplemental Schedules of Noncash
Investing Activities
(Increase) decrease in unrealized loss
on securities available for sale 264,071 (87,632) (456,857) - -
Increase (decrease) in deferred income
taxes attributable to the unrealized
loss on securities available for sale (89,784) 29,795 155,331 - -
Real estate acquired in settlement
of loans - 495,188 658,702 902,103 396,508
Transfers from loans to other assets - - 367,141 1,066,415 -
</TABLE>
See Notes to Consolidated Financial Statements.
E-22
<PAGE> 160
GN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994, IS
UNAUDITED.
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of business: The operations of GN Bancorp, Inc. and subsidiaries
(Company) consist primarily of those financial activities common to the
commercial banking industry.
The Company conducts substantially all of its lending activities throughout
Northeastern Illinois. Loans granted to businesses are primarily secured by
business assets, owner-occupied real estate or personal assets of commercial
borrowers. Loans to individuals are primarily secured by automobiles,
residential real estate or other personal assets. Since the Company's borrowers
and its loan collateral have geographic concentration in the greater Chicago
metropolitan area, the Company could have exposure to a decline in the local
economy and real estate market. However, management believes that the diversity
of its customer base and local economy, its knowledge of the local market, and
its proximity to customers limits the risk of exposure to adverse economic
conditions.
Significant accounting policies:
Principles of consolidation: The consolidated financial statements include the
accounts of GN Bancorp, Inc. and its wholly-owned subsidiaries,
Gladstone-Norwood Trust and Savings Bank (Bank) and GN Realty, Inc. All
significant intercompany accounts and transactions have been eliminated.
Unaudited financial statements: The unaudited financial statements as of and
for the three months ended March 31, 1995 and 1994, furnished by management
reflect all adjustments, consisting solely of normal recurring accruals, which
are, in the opinion of management, necessary for a fair presentation of the
financial position as of March 31, 1995 and 1994, and the results of operations
and cash flows for the three months then ended. The results of operations for
the three months ended March 31, 1995 and 1994, are not necessarily indicative
of the operating results of the Company for the entire year.
Securities: Effective January 1, 1994, the Company adopted Financial
Accounting Standards Board Statement No. 115 "Accounting for Certain
Investments in Debt and Equity Securities." Statement 115 requires investments
in debt and equity securities be classified as securities held to maturity,
securities available for sale or trading securities.
Securities classified as held to maturity are those debt securities the Company
has both the intent and ability to hold to maturity regardless of changes in
market conditions, liquidity needs or changes in general economic conditions.
These securities are carried at cost adjusted for amortization of premium and
accretion of discount, computed by the interest method over their contractual
lives.
Securities classified as available for sale are those debt securities that the
Company intends to hold for an indefinite period of time, but not necessarily
to maturity. Any decision to sell a security classified as available for sale
would be based on various factors, including significant movements in interest
rates, changes in the maturity mix of the Company's assets and liabilities,
liquidity needs, regulatory capital considerations and other similar factors.
Securities available for sale are carried at fair value. Unrealized gains or
losses are reported as increases or decreases in stockholders' equity, net of
the related deferred tax effect. Realized gains or losses, determined on the
basis of the cost of specific securities sold, are included as a component of
net income.
E-23
<PAGE> 161
GN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994, IS
UNAUDITED.
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Securities classified as trading securities are those debt and equity
securities that are purchased and held for sale in the near term. Trading
securities are carried at fair value with unrealized gains and losses included
in income. The Company has no trading securities.
Prior to the adoption of Statement 115, all of the Company's securities were
classified as investment securities and were carried at amortized cost.
Loans: Loans are stated at the principal amount outstanding net of unearned
discount, deferred loan origination fees, and allowance for loan losses.
Unearned discount on installment loans is recognized as income over the terms
of the loans using methods which approximate the interest method. Interest on
other loans is accrued on the principal amount outstanding during the period.
Loan origination fees are being deferred and amortized as an adjustment of the
related loan's yield over the loan's contractual life.
Loans are placed on nonaccrual (cash) basis for recognition of interest income
when, in the opinion of management, there is reasonable doubt as to the
collectibility of interest or principal. Nonaccrual loans are returned to an
accrual status when, in the opinion of management, there is no longer any
reasonable doubt as to the timely payment of principal and interest. The
nonrecognition of interest income does not constitute forgiveness of the
interest.
Allowance for loan losses: The allowance for loan losses is maintained through
a provision for loan losses charged to expense. The allowance represents an
amount which, in management's judgment, will be adequate to absorb possible
losses on loans that may become uncollectible. Management's judgment in
determining the adequacy of the allowance is based on evaluations which take
into consideration such factors as the risks inherent in the loan portfolio,
current and prospective economic conditions that may affect the borrowers'
ability to pay, and such other factors as, in management's judgment, deserve
recognition in estimating loan losses.
Premises and equipment: Premises and equipment are stated at cost less
accumulated depreciation. For financial reporting purposes, depreciation is
charged to operating expense by the straight-line method at rates calculated to
amortize the cost over the estimated useful life of the asset.
Other real estate owned: Other real estate owned represents properties
acquired through foreclosure proceedings or receipt of a deed in lieu of
foreclosure. At the time of obtaining title, the properties are stated at the
lower of cost or fair market value based on appraised values. Subsequent
declines in estimated market value and costs incurred in the ownership and
maintenance of the properties are recognized as expense when incurred.
Income taxes: The Company files consolidated income tax returns with its
subsidiaries.
Deferred taxes are provided on a liability method whereby deferred tax assets
are recognized for deductible temporary differences and operating loss and tax
credit carryforwards and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.
E-24
<PAGE> 162
GN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994, IS
UNAUDITED.
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash flows: For purposes of presenting cash flows, cash and cash equivalents
include cash on hand, amounts due from banks, and federal funds sold.
Generally, federal funds are sold for one-day periods. Cash flows from
interest-bearing deposits with banks, loans, deposits and federal funds
purchased are shown net.
Current accounting developments: The Financial Accounting Standards Board has
issued Statement No. 114, "Accounting by Creditors for Impairment of a Loan,"
which became effective for years beginning after December 15, 1994. The
Statement generally requires impaired loans to be measured on the present value
of expected future cash flows discounted at the loan's effective interest rate
or, as an expedient, at the loan's observable market price or the fair value of
the collateral if the loan is collateral-dependent. A loan is impaired when it
is probable that the creditor will be unable to collect all contractual
principal and interest payments due in accordance with the terms of the loan
agreement. In October 1994, the Financial Accounting Standards Board issued
Statement No. 118, "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures" which amends Statement 114 to allow a creditor to
use existing methods for recognizing interest income on impaired loans. The
adoption of these statements on January 1, 1995 did not have a material impact
on the Company.
In October 1994, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 119, "Disclosures about Derivative Financial
Instruments and Fair Value of Financial Instruments." This Statement requires
disclosures about the amounts, nature and terms of derivative financial
instruments that are not subject to Statement 105, "Disclosures of Information
about Financial Instruments and Off-Balance-Sheet Risk and Financial
Instruments with Concentrations of Credit Risk," because they do not result in
off-balance-sheet risk of accounting loss. It requires that a distinction be
made between financial instruments held or issued for trading purposes
(including dealing and other trading activities measured at fair value with
gains and losses recognized in earnings) and financial instruments held or
issued for purposes other than trading. Statement 119 is effective for
financial statements issued for fiscal years ending after December 15, 1995.
Management does not expect an impact from the adoption of this standard.
The Financial Accounting Standards Board has issued Statement No. 107,
"Disclosures About Fair Value of Financial Instruments," which became effective
for years beginning after December 15, 1994. The Statement generally requires
disclosure of fair value information about financial instruments, whether or
not recognized on the balance sheet, for which it is practicable to estimate
that value. Statement 107 excludes certain financial instruments and all
nonfinancial instruments from its disclosure requirements.
Earnings (loss) per common share: Earnings (loss) per common share are based
on the weighted average number of common shares outstanding during each year.
The options discussed in Note 7 have not been included in the computation of
earnings (loss) per common share since their inclusion would not have a
material dilutive effect.
E-25
<PAGE> 163
GN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994, IS
UNAUDITED.
NOTE 2. INVESTMENT SECURITIES
As discussed in Note 1, the Company adopted Financial Accounting Standards
Board Statement No. 115 effective January 1, 1994. The adoption of Statement
115 had the effect of increasing stockholders' equity as of January 1, 1994, by
approximately $30,000, net of related deferred income tax of $16,000.
Amortized cost and fair values of securities are summarized as follows:
<TABLE>
<CAPTION>
March 31, 1995
----------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Approximate
Securities held to maturity Cost Gains Losses Fair Value
--------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 3,007,801 $ - $ 112,481 $ 2,895,320
U.S. Government agencies and corporations 20,520,466 27,120 383,661 20,163,925
Obligations of state and political
subdivisions 2,549,430 45,609 32,168 2,562,871
Collateralized mortgage obligations 3,606,672 6,680 190,043 3,423,309
Mortgage-backed securities 954,797 - 34,861 919,936
------------ ----------- ---------- ------------
$ 30,639,166 $ 79,409 $ 753,214 $ 29,965,361
============ =========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
March 31, 1994
----------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Approximate
Securities held to maturity Cost Gains Losses Fair Value
--------- ---------- ---------- ------------
<S> <C> <C> <C>
U.S. Treasury securities $ 3,012,126 $ 34,949 $ 50,825 $ 2,996,250
U.S. Government agencies and corporations 19,615,730 87,248 203,673 19,499,305
Obligations of state and political
subdivisions 3,857,751 115,428 25,194 3,947,985
Collateralized mortgage obligations 4,793,607 12,168 93,566 4,712,209
Mortgage-backed securities 1,140,217 10,785 7,583 1,143,419
------------ --------- --------- ------------
$ 32,419,431 $ 260,578 $ 380,841 $ 32,299,168
============ ========= ========= ============
</TABLE>
E-26
<PAGE> 164
GN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994, IS
UNAUDITED.
NOTE 2. INVESTMENT SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
December 31, 1994
-------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Approximate
Securities held to maturity Cost Gains Losses Fair Value
--------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 3,008,866 $ - $ 197,606 $ 2,811,260
U.S. Government agencies and corporations 19,539,475 1,038 829,652 18,710,861
Obligations of state and political
subdivisions 3,652,575 35,075 53,859 3,633,791
Collateralized mortgage obligations 3,709,702 2,331 295,716 3,416,317
Mortgage-backed securities 982,181 - 48,498 933,683
------------ -------- ----------- ------------
$ 30,892,799 $ 38,444 $ 1,425,331 $ 29,505,912
============ ======== =========== ============
</TABLE>
<TABLE>
<CAPTION>
March 31, 1995
-------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Approximate
Securities available for sale Cost Gains Losses Fair Value
--------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 29,010,016 $ 33,070 $ 225,856 $ 28,817,230
============ ======== ========= ============
</TABLE>
<TABLE>
<CAPTION>
March 31, 1994
-------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Approximate
Securities available for sale Cost Gains Losses Fair Value
--------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 23,556,533 $ 24,768 $ 112,400 $ 23,468,901
============ ======== ========= ============
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
-------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Approximate
Securities available for sale Cost Gains Losses Fair Value
--------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 32,947,187 $ - $ 456,857 $ 32,490,330
============ ======== ========= ============
</TABLE>
E-27
<PAGE> 165
GN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994, IS
UNAUDITED.
NOTE 2. INVESTMENT SECURITIES (CONTINUED)
The amortized cost and fair value of securities as of December 31, 1994, by
contractual maturity are shown below. Maturities may differ from contractual
maturities in mortgage-backed securities and collateralized mortgage
obligations because the mortgages underlying the securities may be called or
repaid without any penalties. Therefore, these securities are not included in
the maturity categories in the following maturity summary.
<TABLE>
<CAPTION>
Securities Held Securities Available
to Maturity for Sale
-------------------------------------------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Due in one year or less $ 7,061,870 $ 6,835,318 $ 23,916,581 $ 23,748,760
Due after one year through five years 17,611,335 16,896,954 9,030,606 8,741,570
Due after five years through ten years 1,427,711 1,318,931 - -
Due after ten years 100,000 104,709 - -
Collateralized mortgage obligations 3,709,702 3,416,317 - -
Mortgage-backed securities 982,181 933,683 - -
------------ ------------ ------------ ------------
$ 30,892,799 $ 29,505,912 $ 32,947,187 $ 32,490,330
============ ============ ============ ============
</TABLE>
The amortized cost and fair values of securities as of December 31, 1993, are
as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----
<S> <C> <C> <C> <C>
U.S. Treasury $ 22,089,159 $ 118,912 $ 13,005 $ 22,195,066
U.S. Government agencies 17,642,532 184,149 8,181 17,818,500
State and political subdivisions 4,804,202 168,593 2,255 4,970,540
Corporate bonds and other securities 25,000 - - 25,000
Collateralized mortgage obligations 5,902,169 11,468 32,668 5,880,969
Mortgage-backed securities 1,236,072 14,294 4,088 1,246,278
------------ ------------ ------------ ------------
$ 51,699,134 $ 497,416 $ 60,197 $ 52,136,353
============ ============ ============ ============
</TABLE>
There were no sales of securities for the years ended December 31, 1994 and
1993, or for the three months ended March 31, 1995 and 1994; however in 1993,
the Company realized a gain of $11,000 due to a security being called.
Proceeds from the sale of investment securities during 1992 were $6,544,000
with gross gains of $155,000 realized on these sales.
Investment securities with a carrying amount of $500,000 were pledged on public
deposits and for other purposes as required or permitted by law at December 31,
1994 and 1993, and at March 31, 1995 and 1994.
E-28
<PAGE> 166
GN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994, IS
UNAUDITED.
NOTE 3. LOANS
A summary of loans by major category is as follows:
<TABLE>
<CAPTION>
March 31, December 31,
-------------------------- ---------------------------
1995 1994 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Commercial loans $ 23,965,808 $ 29,215,737 $ 26,160,586 $ 30,259,006
Commercial real estate 19,914,018 19,365,487 19,226,960 19,512,586
Residential real estate 9,431,361 10,129,774 9,732,075 11,418,798
Installment loans 1,542,979 1,195,212 1,520,929 1,316,756
Other 406,038 841,479 317,115 643,773
-------------- ------------- ------------- --------------
55,260,204 60,747,689 56,957,665 63,150,919
Deferred loan origination fees (80,820) (130,438) (94,912) (153,107)
Unearned discount (46,106) (100,134) (60,024) (112,811)
Allowance for loan losses (1,442,342) (1,668,521) (1,594,142) (1,608,193)
-------------- ------------- ------------- --------------
Loans, net $ 53,690,936 $ 58,848,596 $ 55,208,587 $ 61,276,808
============== ============= ============= ==============
</TABLE>
The principal balances of nonperforming loans outstanding at December 31, 1994
and 1993, were approximately $1,507,000 and $2,220,000, respectively.
Nonaccrual of interest loans had the effect of reducing interest income by
$144,000, $262,000 and $234,000 for the years ended December 31, 1994, 1993 and
1992, respectively. Interest income on these loans, which is recorded only
when received, amounted to none, $39,000 and $44,000 for the years ended
December 31, 1994, 1993, and 1992, respectively.
Changes in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31, Years Ended December 31,
--------------------------- -------------------------------------
1995 1994 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Balance, beginning $ 1,594,142 $ 1,608,193 $ 1,608,193 $ 1,926,899 $ 916,460
Provision for loan losses (50,000) (450,000) (577,000) 225,000 2,493,534
Recoveries on loans
previously charged off 21,844 633,322 816,205 255,918 116 000
Loans charged off (123,644) (122,994) (253,256) (799,624) (1,599,095)
------------ ------------ ------------ ----------- ------------
Balance, ending $ 1,442,342 $ 1,668,521 $ 1,594,142 $ 1,608,193 $ 1,926,899
============ ============ ============ =========== ============
</TABLE>
E-29
<PAGE> 167
GN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994, IS
UNAUDITED.
NOTE 4. PREMISES AND EQUIPMENT
Premises and equipment consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
----------------------- ------------------------
1995 1994 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Land $ 1,108,365 $ 1,108,365 $ 1,108,365 $ 1,108,365
Buildings and improvements 2,731,497 2,731,497 2,731,497 2,731,497
Furniture and equipment 1,858,495 1,892,576 1,877,668 1,879,322
Leasehold improvements 12,082 12,082 12,082 12,082
Property held for sale:
Land 827,160 827,160 827,160 827,160
Building and improvements 586,252 586,252 586,252 586,252
----------- ----------- ----------- -----------
7,123,851 7,157,932 7,143,024 7,144,678
Accumulated depreciation 2,664,916 2,485,090 2,639,544 2,431,081
----------- ----------- ----------- -----------
$ 4,458,935 $ 4,672,842 $ 4,503,480 $ 4,713,597
=========== =========== =========== ===========
</TABLE>
Land, buildings and improvements include various parcels of land and buildings
adjacent to the Bank which are held for sale. The property is currently being
leased. The future minimum rent receivable under the lease agreements at
December_31, 1994, is as follows:
<TABLE>
<CAPTION>
Year Ending
<S> <C>
1995 $ 145,567
1996 39,000
1997 39,000
1998 39,000
1999 39,000
Thereafter 364,000
---------
$ 665,567
=========
</TABLE>
NOTE 5. NOTES PAYABLE
The notes payable represent two loans from a commercial bank. The note issued
to GN Bancorp, Inc. is due May 1, 1995, bears interest at the prime rate (8.5%
and 9% at December 31, 1994 and March 31, 1995, respectively) and is
collateralized by all of the outstanding stock of the Bank. The balance of this
note at December 31, 1994 and March 31, 1995, was $2,975,000 and $1,225,000,
respectively. The note issued to GN Realty, Inc. is due May 1, 1995, bears
interest at the prime rate and is collateralized by a mortgage on the property
owned by GN Realty, Inc. The balance of this note was $1,000,000 at December
31, 1994 and March 31, 1995. Both loans are also collateralized by any other
assets owned by the borrowers. These loans require the maintenance of certain
ratios which the Company was in compliance with at December 31, 1994.
E-30
<PAGE> 168
GN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994, IS
UNAUDITED.
NOTE 6. INCOME TAXES
Effective January 1, 1992, the Company adopted Financial Accounting Standards
Board Statement No. 109 "Accounting for Income Taxes." The adoption of
Statement 109 changes the Company's method of accounting for income taxes from
the deferred method to a liability method. Under the deferred method, the
Company deferred the past tax effects of timing differences between financial
reporting and taxable income. As explained in Note 1, the liability method
requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between the reported
amounts of assets and liabilities and their tax bases. The effect of adopting
FAS 109 was not material.
The components of income tax expense (credit) are as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31, Years Ended December 31,
------------------------------ -------------------------------------------
1995 1994 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Current $ 94,191 $ 378,342 $ 589,046 $ 414,355 $ 119,259
Deferred 32,000 (51,000) 62,000 23,000 (501,000)
--------- --------- --------- --------- ----------
$ 126,191 $ 327,342 $ 651,046 $ 437,355 $ (381,741)
========= ========= ========= ========= ==========
</TABLE>
Deferred tax assets and liabilities consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
---------------------- --------------------------
1995 1994 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Deferred tax assets:
Allowance for loan losses $ 124,000 $ 254,000 $ 144,000 $ 367,000
Other real estate owned 128,000 163,000 129,000 145,000
Securities 75,000 34,000 177,000 -
State net operating loss carryforward 86,000 54,000 86,000 36,000
--------- --------- ---------- ----------
413,000 505,000 536,000 548,000
Less valuation allowance (87,000) (70,000) (104,000) (41,000)
--------- --------- ---------- ----------
326,000 435,000 432,000 507,000
--------- --------- ---------- ----------
Deferred tax liabilities:
Loans 266,000 291,000 257,000 454,000
Bond accretion 51,000 18,000 42,000 15,000
Other 2,000 10,000 5,000 3,000
--------- --------- ---------- ----------
319,000 319,000 304,000 472,000
--------- --------- ---------- ----------
NET DEFERRED TAX ASSETS $ 7,000 $ 116,000 $ 128,000 $ 35,000
========= ========= ========== ==========
</TABLE>
The net deferred tax assets are included in other assets.
E-31
<PAGE> 169
GN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994, IS
UNAUDITED.
NOTE 6. INCOME TAXES (CONTINUED)
The income tax expense (credit) was less than the amounts computed by applying
the federal statutory rate of 34% because of the following:
<TABLE>
<CAPTION>
Three Months Ended March 31, Years Ended December 31,
---------------------------- ---------------------------------------
1995 1994 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income tax expense (credit) computed
at statutory rate $ 158,997 $ 297,214 $ 640,955 $ 539,212 $ (247,179)
Increase (decrease) in taxes resulting from:
Tax exempt interest (15,759) (24,508) (77,673) (124,997) (147,580)
Other, net (17,047) 54,636 87,764 23,140 13,018
---------- ------------ ------------ ----------- -------------
Total income tax expense (credit) $ 126,191 $ 327,342 $ 651,046 $ 437,355 $ (381,741)
========== ============ ============ ============ =============
</TABLE>
NOTE 7. STOCKHOLDERS' EQUITY
During 1990, the Company adopted a stock benefit plan to permit certain key
employees to acquire stock. There are 10,000 shares reserved under this plan
which, if issued, would be issued at a price not less than the greater of fair
market value or book value at the date of grant. On February 23, 1993, 3,000
shares were granted to an officer at an exercise price of $100 per share. On
January 25, 1994, the remaining 7,000 shares reserved were granted to
directors, officers, and employees at an exercise price of $110 per share.
During 1994, 7,450 shares were exercised leaving 2,550 exercisable as follows
at December 31, 1994:
On or after
February 22, 1994 1,825
February 22, 1995 363
February 22, 1996 362
Upon a merger or acquisition of the Company into or by another company, all of
the options become exercisable. All options expire November 30, 2002.
During the three months ended March 31, 1995, an additional 632 shares were
exercised.
In April 1993, the Company completed a private offering of 40,000 shares of
common stock at $100 per share. The net proceeds of this offering were
approximately $3,921,000, including subscriptions collected of $333,562 as of
December 31, 1992.
NOTE 8. DEFINED CONTRIBUTION RETIREMENT PLAN
The Company had a contributory profit sharing plan covering substantially all
full-time employees. On January 25, 1993, the Board of Directors voted to
terminate the plan. The Company's contribution to the plan was approximately
$40,000 for the year ended December 31, 1992.
E-32
<PAGE> 170
GN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994, IS
UNAUDITED.
NOTE 8. DEFINED CONTRIBUTION RETIREMENT PLAN (CONTINUED)
In December 1993, the Company adopted a defined contribution retirement plan
covering substantially all full-time employees. Participants may elect to
contribute a percentage of their annual compensation up to limits established
by the IRS. The Company may, at its discretion, make contributions to the
plan. The expense for the Company's contributions to the plan was
approximately $54,000 each for the years ended December 31, 1994 and 1993,
respectively.
NOTE 9. RELATED PARTY TRANSACTIONS
Loans to directors, officers and their related interests at March 31, 1995 and
March 31, 1994, totaled approximately $653,000 and $901,000, respectively, and
at December 31, 1994 and 1993, totaled approximately $761,000 and $881,000,
respectively. In the opinion of management, these loans were made in the
normal course of business, do not involve more than a normal risk of
collectibility, and are on the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other customers.
NOTE 10. COMMITMENTS AND CONTINGENT LIABILITIES
Financial instruments. The Company 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. These financial instruments include commitments to
extend credit and standby letters of credit. These instruments involve
elements of credit risk in excess of the amounts recognized in the balance
sheets. The contract amounts of these instruments reflect the extent of
involvement the Company has in particular classes of financial instruments.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual amount of those
instruments. The Company uses the same credit policies in making commitments
and conditional obligations as it does for on-balance sheet instruments.
Financial instruments whose contract amounts represent credit risk are as
follows:
<TABLE>
<CAPTION>
March 31, December 31,
---------------------- -------------------------
1995 1994 1994 1993
---- ----- ---- -----
<S> <C> <C> <C> <C>
Commitments to extend credit $ 3,600,000 $ 4,297,000 $ 5,044,000 $ 5,520,000
Standby letters of credit 302,000 778,000 330,000 727,000
</TABLE>
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 Company evaluates each
customer's creditworthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by the Company upon extension of credit, is based
on management's credit evaluation of the borrower. Collateral held varies, but
may include securities, accounts receivable, inventory, property, plant and
equipment, and income-producing commercial properties.
E-33
<PAGE> 171
GN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994, IS
UNAUDITED.
NOTE 10. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
Standby letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers. The Company obtains various
collateral supporting those commitments for which collateral is deemed
necessary.
Litigation. Because of the nature of its activities, the Company is subject to
pending and threatened legal actions incidental to the normal course of
business. In the opinion of management, and based upon the opinion of legal
counsel, the disposition of all legal actions will not have a material effect
on the financial position of the Company.
NOTE 11. DIVIDEND RESTRICTIONS AND REGULATORY CAPITAL REQUIREMENTS
Provisions of Illinois banking laws place restrictions upon the amount of
dividends that can be paid to the Company by the bank. The availability of
dividends may be further limited because of the need to maintain capital ratios
satisfactory to applicable regulatory agencies.
Federal regulatory agencies have adopted various capital standards for
financial institutions, including risk-based capital standards. The primary
objectives of the risk-based capital framework are to provide a more consistent
system for comparing capital positions of financial institutions and to take
into account the different risks among financial institutions' assets and
off-balance-sheet items.
Risk-based capital standards have been supplemented with requirements for a
minimum Tier I capital to assets ratio (leverage ratio). In addition,
regulatory agencies consider the published capital levels as minimum levels and
may require a financial institution to maintain capital at higher levels. The
Company is not subject to risk-based capital standards since consolidated
assets do not exceed $150 million. However, the Bank subsidiary is subject to
these standards on a stand-alone basis.
According to regulatory capital guidelines, the Bank subsidiary is considered
to be "Well Capitalized."
A comparison of the Bank subsidiary's capital as of December 31, 1994, with the
regulatory requirements is presented below.
<TABLE>
<CAPTION>
FDIC Requirements
for
Actual "Well Capitalized"
------ ----------------
<S> <C> <C>
Tier I Risk-based Capital 16.9% 6.0%
Total Risk-based Capital 18.2% 10.0%
Leverage Ratio 9.4% 5.0%
</TABLE>
NOTE 12. SUBSEQUENT EVENT
On March 22, 1995, the Board of Directors approved the Agreement and Plan of
Merger among Associated Banc-Corp (Associated), Associated Illinois Bank Corp.,
a wholly-owned subsidiary of Associated (Associated Illinois) and the Company
providing for the merger of the Company with and into Associated Illinois.
E-34
<PAGE> 172
GN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994, IS
UNAUDITED.
PARENT COMPANY ONLY FINANCIAL INFORMATION
NOTE 13. CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
-------------------- ------------------------
ASSETS 1995 1994 1994 1993
- ------ ---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash $ 447,650 $ 157,014 $ 1,283,330 $ 37,687
Interest-bearing deposits with banks 225,000 800,000 225,000 375,000
Investment securities - - - 903,703
Investment in subsidiaries:
Gladstone-Norwood Trust and Savings Bank 11,749,568 11,335,322 12,185,674 10,794,910
GN Realty, Inc. 349,369 191,422 363,775 195,294
Other assets 107,287 1,024,830 87,421 395,246
----------- ----------- ----------- -----------
$12,878,874 $13,508,588 $14,145,200 $12,701,840
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Notes payable $ 1,225,000 $ 2,975,000 $ 2,975,000 $ 3,325,000
Accrued interest payable and other liabilities 4,920 93,000 106,500 55,232
----------- ----------- ----------- -----------
1,229,920 3,068,000 3,081,500 3,380,232
----------- ----------- ----------- -----------
Stockholders' Equity 11,648,954 10,440,588 11,063,700 9,321,608
----------- ----------- ----------- -----------
$12,878,874 $13,508,588 $14,145,200 $12,701,840
=========== =========== =========== ===========
</TABLE>
E-35
<PAGE> 173
GN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994, IS
UNAUDITED.
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended March 31, Years Ended December 31,
---------------------------------- -----------------------------------------------
1995 1994 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income:
Dividends from subsidiaries $ 1,000,000 $ - $ - $ - $ 825,000
Other income 7,125 9,630 33,378 31,660 -
------------ ------------ ------------ ------------ -----------
1,007,125 9,630 33,378 31,660 825,000
------------ ------------ ------------ ------------ -----------
Expenses:
Interest expense on notes payable 39,066 54,216 236,311 230,613 233,867
Other expenses 19,199 25,179 424,593 101,382 107,045
------------ ------------ ------------ ------------ -----------
58,265 79,395 660,904 331,995 340,912
------------ ------------ ------------ ------------ -----------
INCOME (LOSS) BEFORE INCOME
TAX (CREDITS) AND
UNDISTRIBUTED EARNINGS
OF SUBSIDIARIES 948,860 (69,765) (627,526) (300,335) 494,088
Income tax (credits) (17,388) (20,063) (198,730) (103,000) (175,097)
------------ ------------ ------------ ------------ -----------
INCOME (LOSS) BEFORE
UNDISTRIBUTED EARNINGS
OF SUBSIDIARIES 966,248 (49,702) (428,796) (197,335) 669,185
Equity in undistributed earnings
(loss) of subsidiaries (624,800) 596,519 1,662,913 1,345,898 (1,014,441)
------------ ------------ ------------ ------------ -----------
NET INCOME (LOSS) $ 341,448 $ 546,817 $ 1,234,117 $ 1,148,563 $ (345,256)
============ ============ ============ ============ ===========
</TABLE>
E-36
<PAGE> 174
GN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994, IS
UNAUDITED.
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended March 31, Years Ended December 31,
---------------------------- --------------------------------------
1995 1994 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Cash Flows From Operating Activities
Net income (loss) $ 341,448 $ 546,817 $ 1,234,117 $1,148,563 $ (345,256)
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Equity in undistributed (earnings)
loss of subsidiaries 624,800 (596,519) (1,662,913) (1,345,898) 1,014,441
Amortization - 16,602 46,730 8,422 60,000
Changes in operating assets and liabilities:
Other assets (19,868) (640,341) 266,941 (136,958) (245,098)
Other liabilities (101,580) 37,768 51,268 52,386 (168,564)
---------- --------- ----------- ---------- ----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 844,800 (635,673) (63,857) (273,485) 315,523
---------- --------- ----------- ---------- ----------
Cash Flows From Investing Activities
Capital contribution to GN Realty, Inc. - - (200,000) - (200,000)
Capital contribution to Gladstone-
Norwood Trust and Savings Bank - - - (2,000,000) -
Purchase of investment securities - - - (912,125) -
Maturity of investment securities - 900,000 900,000 - -
Net (increase) decrease in interest-
bearing deposits with banks - (425,000) 150,000 (375,000) -
---------- --------- ----------- ---------- ----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES - 475,000 850,000 (3,287,125) (200,000)
---------- --------- ----------- ---------- ----------
Cash Flows From Financing Activities
Proceeds from issuance of common stock - - - 3,587,740 333,562
Exercise of options on common stock 69,520 630,000 809,500 - -
Principal payments on note payable (1,750,000) (350,000) (350,000) - (350,000)
Purchase of common stock - - - - (53,300)
Dividends paid - - - - (50,387)
---------- --------- ----------- ---------- ----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (1,680,480) 280,000 459,500 3,587,740 (120,125)
---------- --------- ----------- ---------- ----------
NET INCREASE (DECREASE) IN CASH (835,680) 119,327 1,245,643 27,130 (4,602)
Cash:
Beginning 1,283,330 37,687 37,687 10,557 15,159
---------- --------- ----------- ---------- ----------
Ending $ 447,650 $ 157,014 $ 1,283,330 $ 37,687 $ 10,557
========== ========= =========== ========== ==========
</TABLE>
E-37
<PAGE> 175
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant is incorporated under the Wisconsin Business
Corporation Law (the "WBCL"). Under Section 180.0851 of the WBCL, the
Registrant shall indemnify a director or officer, to the extent such person is
successful on the merits or otherwise in the defense of a proceeding, for all
reasonable expenses incurred in the proceeding, if such person was a party to
such proceeding because he or she was a director or officer of the Registrant.
In all other cases, the Registrant shall indemnify a director or officer
against liability incurred in a proceeding to which such person was a party
because he or she was a director or officer of the Registrant; unless liability
was incurred because he or she breached or failed to perform a duty owed to the
Registrant and such breach or failure to perform constitutes: (i) a willful
failure to deal fairly with the Registrant or its shareholders in connection
with a matter in which the director or officer has a material conflict of
interest; (ii) a violation of criminal law, unless the director or officer had
reasonable cause to believe his or her conduct was lawful or no reasonable
cause to believe his or her conduct was unlawful; (iii) a transaction from
which the director or officer derived an improper personal profit; or (iv)
willful misconduct. Section 180.0858 of the WBCL provides that subject to
certain limitations, the mandatory indemnification provisions do not preclude
any additional right to indemnification or allowance of expenses that a
director or officer may have under the Registrant's articles of incorporation,
bylaws, a written agreement between the director or officer and the Registrant
or a resolution of the Board of Directors or adopted by majority vote of the
Registrant's shareholders.
Section 180.0859 of the WBCL provides that it is the public policy of
the State of Wisconsin to require or permit indemnification, allowance of
expenses and insurance to the extent required or permitted under Sections
180.0850 to 180.0858 of the WBCL for any liability incurred in connection with
a proceeding involving a federal or state statute, rule or regulation
regulating the offer, sale or purchase of securities.
The Registrant's Articles of Incorporation contains no provisions in
relation to the indemnification of directors and officers of the Registrant.
Article XI of the Registrant's By-laws ("Article XI") authorizes
indemnification of officers and directors of the Registrant consistent with the
description of the indemnification provisions in Section 180.0851 of the WBCL
as described above. Article XI provides that the Registrant shall indemnify a
director, officer, employee or agent of the Registrant to the extent such
individual has been successful on the merits or otherwise in the defense of any
threatened, pending or completed civil, criminal, administrative or
investigative action, suit, arbitration or other proceeding, whether formal or
informal (including, but not limited to, any act or failure to act alleged or
determined (i) to have been negligent, (ii) to have violated the Employee
Retirement Income Security Act of 1974; or (iii) to have violated Sections
180.0832, 180.0833 and 180.1202 of the WBCL, or any successor thereto,
regarding loans to directors, unlawful distributions and distributions of
assets, which involves foreign, federal, state or local law and which is
brought by or in the right of the Registrant or by any other person or entity,
to which the director, officer, employee or agent was a party because he or she
is a director, officer, employee or agent. In all other cases, the Registrant
shall indemnify a director, officer, employee or agent of the Registrant
against liability and expenses incurred by such person in a proceeding unless
it shall have been proven by final judicial adjudication that such person
breached or failed to perform a duty owed to the Registrant under the
circumstances described above as set forth in Section 180.0851 of the WBCL.
Article XI defines a "director, officer, employee or agent" as (i) a natural
person who, is or was a director, officer, employee or agent of the Registrant,
(ii) a natural person who, while a director, officer, employee or agent of the
Registrant, is or was serving either pursuant to the Registrant's specific
request or as a result of the nature of such person's duties to the Registrant
as a director, officer, partner, trustee, member of any governing or decision
making committee, employee or agent of another corporation or foreign
corporation, partnership, joint venture, trust or other enterprise and (iii) a
person who, while a director,
II-1
<PAGE> 176
officer, employee or agent of the Registrant, is or was serving an employee
benefit plan because his or her duties to the Registrant also impose duties on,
or otherwise involve services by, the person to the plan or to participants in
or beneficiaries of the plan. Unless the context requires otherwise, Article
XI indemnification extends to the estate or personal representative of a
director, officer, employee or agent.
All officers, directors, employees and agents of controlled
subsidiaries of the Registrant shall be deemed for purposes of Article XI to be
serving as such officers, directors, employees and agents at the request of the
Registrant. The right to indemnification granted to such officers and
directors by Article XI is not subject to any limitation or restriction imposed
by any provision of the Articles of Incorporation or Bylaws of a controlled
subsidiary. For purposes of Article XI, a "controlled subsidiary" means any
corporation at least 80% of the outstanding voting stock of which is owned by
the Registrant or another controlled subsidiary of the Registrant.
Upon written request by a director, officer, employee or agent who is
a party to a proceeding, the Registrant shall pay or reimburse his or her
reasonable expenses as incurred if the director, officer, employee or agent
provides the Registrant with: (i) a written affirmation of his or her good
faith belief that he or she is entitled to indemnification under Article XI;
and (ii) a written undertaking to repay all amounts advanced without interest
to the extent that it is ultimately determined that indemnification under
Article XI is prohibited. The Registrant shall have the power to purchase and
maintain insurance on behalf of any person who is a director, officer, employee
or agent against any liability asserted against or incurred by the individual
in any such capacity arising out of his or her status as such, regardless of
whether the Registrant is required or authorized to indemnify or allow expenses
to the individual under Article XI.
The right to indemnification under Article XI may be amended only by a
majority vote of the shareholders and any reduction in the right to
indemnification may only be prospective from the date of such vote.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
Exhibit No.
2(a) Agreement and Plan of Merger dated as of March 22,
1995 by and among the Registrant, Associated Illinois
Banc Corp. and GN Bancorp, Inc., incorporated by
reference to Exhibit A to the Proxy
Statement/Prospectus of the Registrant and GN
Bancorp, Inc. (the "Proxy Statement/Prospectus").
2(b) Stock Option Agreement dated as of March 22, 1995 by
and between GN Bancorp, Inc. and the Registrant
incorporated by reference to Exhibit B to the Proxy
Statement/Prospectus.
3(a) Articles of Incorporation, as amended and restated,
incorporated by reference to Exhibit 3 of the
Registrant's Quarterly Report on Form 10-Q filed for
the quarter ended June 30, 1993, SEC File No. 0-5519.
3(b) Bylaws, as amended, incorporated by reference to
Exhibit 3(b) of the Registrant's Quarterly Report on
Form 10-Q filed for the quarter ended September 30,
1991, SEC File No. 0-5519.
4 The Registrant has outstanding certain long term
debt. None of such debt exceeds 10% of the total
assets of the Registrant and its consolidated
subsidiaries. Thus, copies of the constituent
instruments defining the rights of the holders of
such debt are not included as
II-2
<PAGE> 177
exhibits to this Registration Statement. The
Registrant agrees to furnish copies of such
instruments to the Commission upon request.
5 Opinion of Saitlin, Patzik, Frank & Samotny Ltd.
regarding legality of issuance of the Registrant's
securities.
8 Opinion of Vedder, Price, Kaufman & Kammholz
regarding certain federal income tax matters.
10(a) The 1982 Incentive Stock Option Plan of the
Registrant incorporated by reference to Exhibit 10 to
Annual Report on Form 10-K for fiscal year ended
December 31, 1987.
10(b) The Restated Long-Term Incentive Stock Option Plan of
the Registrant incorporated by reference to Exhibit
10 filed with Associated's registration statement
(33-86790) on Form S-8 filed under the Securities Act
of 1933.
10(c) Deferred Compensation Agreement dated November 1,
1986 between Associated Bank Green Bay, National
Association and Robert C. Gallagher incorporated by
reference to Exhibit 10(c) of the Registrant's Annual
Report on Form 10-K for fiscal year ended December
31, 1992, SEC. File No. 0-5519.
10(d) Change of Control Plan of the Registrant effective
April 25, 1994 incorporated by reference to Exhibit
10(d) of the Registrant's Annual Report on Form 10-K
for fiscal year ended December 31, 1994, SEC File No.
0-5519.
10(e) Deferred Compensation Plan and Deferred Compensation
Trust effective as of December 16, 1993, and Deferred
Compensation Agreement of the Registrant dated
December 31, 1994 incorporated by reference to
Exhibit 10(e) of the Registrant's Annual Report on
Form 10-K for fiscal year ended December 31, 1994,
SEC File No. 0-5519.
11 Statement Re Computation of Per Share Earnings
incorporated by reference to Exhibit 11 of the
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994 and Exhibit 11 of
the Registrant's Quarterly Report on Form 10-Q filed
for the quarter ended March 31, 1995, SEC File No.
0-5519.
21 List of Subsidiaries of the Registrant incorporated
by reference to Exhibit 21 of the Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1994, SEC File No. 0-5519.
23(a) Consent of KPMG Peat Marwick LLP as to the financial
statements of the Registrant.
23(b) Consent of McGladrey & Pullen, LLP as to the
financial statements of GN Bancorp, Inc.
23(c) Consent of Grant Thornton LLP as to the financial
statements of GN Bancorp, Inc.
23(d) Consent of Robert W. Baird & Co. Incorporated.
23(e) Consent of Saitlin, Patzik, Frank & Samotny Ltd.
incorporated by reference to Exhibit 5.
23(f) Consent of Vedder, Price, Kaufman & Kammholz
incorporated by reference to Exhibit 8.
24 Powers of Attorney.
II-3
<PAGE> 178
(b) No financial statement schedules are required to be filed herewith
pursuant to Item 21(b) or (c) of this Form.
ITEM 22. UNDERTAKINGS.
(a)(1) The undersigned Registrant hereby undertakes:
(i) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement: (x) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended (the
"Securities Act"); (y) 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; (z) 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.
(ii) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at such time shall be deemed to be the initial bona
fide offering thereof.
(iii) 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,
each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (and, where applicable, each filing of an
employee benefit plan's annual report to Section 15(d) of the Exchange
Act), 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
registered hereunder through use of a prospectus which is a part of
this registration statement, by any person or party who is deemed to
be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the
applicable form.
(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
Securities 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, 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.
(5) Insofar as indemnification for liabilities arising
under the Securities Act 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 Securities Act and is,
therefore,
II-4
<PAGE> 179
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 Securities Act and
will be governed by the final adjudication of such issue.
(b) 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.
(c) The undersigned registrant hereby undertakes to supply by
means of a post-effective amendment all information concerning a transaction,
and the company being acquired involved therein, that was not the subject of
and included in the registration statement when it became effective.
II-5
<PAGE> 180
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 Green Bay,
State of Wisconsin, on this 23rd day of June, 1995.
ASSOCIATED BANC-CORP
By: /s/ Harry B. Conlon
----------------------------
Harry B. Conlon,
Chairman, President and
Chief Executive Officer
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/ Harry B. Conlon Chairman, President, Chief June 23, 1995
--------------------------- Executive Officer and a Director
Harry B. Conlon (Principal Executive Officer)
/s/ Robert C. Gallagher Executive Vice President and a June 23, 1995
--------------------------- Director
Robert C. Gallagher
/s/ Joseph B. Selner Senior Vice President, Chief June 23, 1995
---------------------------- Financial Officer, and Principal
Joseph B. Selner Financial and Accounting Officer
* Director June 23, 1995
---------------------------------
Robert Feitler
* Director June 23, 1995
---------------------------------
Ronald R. Harder
* Director June 23, 1995
---------------------------------
John S. Holbrook, Jr.
* Director June 23, 1995
---------------------------------
William R. Hutchinson
</TABLE>
II-6
<PAGE> 181
<TABLE>
<S> <C> <C>
* Director June 23, 1995
---------------------------------
James F. Janz
* Director June 23, 1995
---------------------------------
William J. Lawson
* Director June 23, 1995
---------------------------------
John C. Meng
* Director June 23, 1995
---------------------------------
J. Douglas Quick
</TABLE>
*Brian R. Bodager hereby signs this registration statement on June 23,
1995 on behalf of each of the indicated persons for whom he is attorney-in-fact
pursuant to a power of attorney filed herewith.
*By:/s/ Brian R. Bodager
---------------------------
Brian R. Bodager
II-7
<PAGE> 182
EXHIBIT INDEX
EXHIBIT NO.
2(a) Agreement and Plan of Merger dated as of March 22,
1995 by and among the Registrant, Associated Illinois
Banc Corp. and GN Bancorp, Inc., incorporated by
reference to Exhibit A to the Proxy
Statement/Prospectus of the Registrant and GN
Bancorp, Inc. (the "Proxy Statement/Prospectus").
2(b) Stock Option Agreement dated as of March 22, 1995 by
and between GN Bancorp, Inc. and the Registrant
incorporated by reference to Exhibit B to the Proxy
Statement/Prospectus.
3(a) Articles of Incorporation, as amended and restated,
incorporated by reference to Exhibit 3 of the
Registrant's Quarterly Report on Form 10-Q filed for
the quarter ended June 30, 1993, SEC File No. 0-5519.
3(b) Bylaws, as amended, incorporated by reference to
Exhibit 3(b) of the Registrant's Quarterly Report on
Form 10-Q filed for the quarter ended September 30,
1991, SEC File No. 0-5519.
4 The Registrant has outstanding certain long term
debt. None of such debt exceeds 10% of the total
assets of the Registrant and its consolidated
subsidiaries. Thus, copies of the constituent
instruments defining the rights of the holders of
such debt are not included as exhibits to this
Registration Statement. The Registrant agrees to
furnish copies of such instruments to the Commission
upon request.
5 Opinion of Saitlin, Patzik, Frank & Samotny Ltd.
regarding legality of issuance of the Registrant's
securities.
8 Opinion of Vedder, Price, Kaufman & Kammholz
regarding certain federal income tax matters.
10(a) The 1982 Incentive Stock Option Plan of the
Registrant incorporated by reference to Exhibit 10 to
Annual Report on Form 10-K for fiscal year ended
December 31, 1987.
10(b) The Restated Long-Term Incentive Stock Option Plan of
the Registrant incorporated by reference to Exhibit
10 filed with Associated's registration statement
(33-86790) on Form S-8 filed under the Securities Act
of 1933.
10(c) Deferred Compensation Agreement dated November 1,
1986 between Associated Bank Green Bay, National
Association and Robert C. Gallagher incorporated by
reference to Exhibit 10(c) of the Registrant's Annual
Report on Form 10-K for fiscal year ended December
31, 1992, SEC. File No. 0-5519.
10(d) Change of Control Plan of the Registrant effective
April 25, 1994 incorporated by reference to Exhibit
10(d) of the Registrant's Annual Report on Form 10-K
for fiscal year ended December 31, 1994, SEC File No.
0-5519.
10(e) Deferred Compensation Plan and Deferred Compensation
Trust effective as of December 16, 1993, and Deferred
Compensation Agreement of the Registrant dated
December 31,
<PAGE> 183
1994 incorporated by reference to Exhibit 10(e) of
the Registrant's Annual Report on Form 10-K for
fiscal year ended December 31, 1994, SEC File No.
0-5519.
11 Statement Re Computation of Per Share Earnings
incorporated by reference to Exhibit 11 of the
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994 and Exhibit 11 of
the Registrant's Quarterly Report on Form 10-Q filed
for the quarter ended March 31, 1995, SEC File No.
0-5519.
21 List of Subsidiaries of the Registrant incorporated
by reference to Exhibit 21 of the Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1994, SEC File No. 0-5519.
23(a) Consent of KPMG Peat Marwick LLP as to the financial
statements of the Registrant.
23(b) Consent of McGladrey & Pullen, LLP as to the
financial statements of GN Bancorp, Inc.
23(c) Consent of Grant Thornton LLP as to the financial
statements of GN Bancorp, Inc.
23(d) Consent of Robert W. Baird & Co. Incorporated.
23(e) Consent of Saitlin, Patzik, Frank & Samotny Ltd.
incorporated by reference to Exhibit 5.
23(f) Consent of Vedder, Price, Kaufman & Kammholz
incorporated by reference to Exhibit 8.
24 Powers of Attorney.
<PAGE> 1
EXHIBIT 5
SAITLIN, PATZIK, FRANK & SAMOTNY LTD.
150 SOUTH WACKER DRIVE
SUITE 900
CHICAGO, ILLINOIS 60606
(312) 551-8300
(312) 551-8300 June 23, 1995 1169-030-A
The Board of Directors of
Associated Banc-Corp
112 North Adams Street
Green Bay, Wisconsin 54307
Re: ASSOCIATED BANC-CORP: REGISTRATION STATEMENT ON FORM S-4
Gentlemen:
We have acted as legal counsel to Associated Banc-Corp, a Wisconsin
corporation (the "Registrant"), in connection with the preparation of the
Registration Statement filed on June 23, 1995 on Form S-4 with exhibits with
the Securities and Exchange Commission (the "Registration Statement"), relating
to the registration of 887,500 shares of the Registrant's common stock $0.01
par value ("Common Stock"). The shares of Common Stock are being issued in
connection with the merger of GN Bancorp, Inc. with and into Associated
Illinois Banc Corp., a wholly-owned subsidiary of the Registrant. We have
reviewed such records, documents and matters of law as we have deemed necessary
to render this opinion. We have also participated in conversations with
officers of the Registrant during which facts material to the opinions
expressed herein were discussed. We have assumed such factual matters to be
true and correct.
In making our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
conformity to originals of all documents submitted to us as certified or
photostatic copies and the capacity of each party executing a document to so
execute such document.
An opinion of counsel is predicated upon all of the facts and conditions
as set forth therein and is based upon counsel's analysis of the statutes,
regulatory interpretations and case law in effect as of the date of this
opinion. It is neither a guarantee of the current status of the law nor should
it be accepted as a guarantee that a court of law or an administrative agency
will concur in the opinion.
Based upon the foregoing and assuming the accuracy of the statements
regarding the Registrant and the conduct of its business all as set forth in
its Registration Statement, it is our opinion that the Common Stock, when
issued as provided under applicable Wisconsin law, the Registration Statement,
and the Registrant's Articles of Incorporation, will be validly issued, fully
paid and non-assessable except as such shares may be subject to Section
180.0622(2)(b) of Wisconsin Business Corporation Law.
We do not find it necessary for the purpose of this opinion, and
accordingly we do not purport to cover herein, the application of the
securities or "Blue Sky" laws of the various states to the issuance of the
Common Stock.
This opinion is furnished to you in connection with the filing of the
Registration Statement, and is not to be used, circulated, quoted or otherwise
relied upon for any other purpose.
We are licensed to practice only in Illinois and no opinion is expressed
by us herein as to laws of other jurisdictions. This opinion is limited to the
matters expressly set forth herein, and no opinion is to be implied or may be
inferred beyond the others expressly so stated.
We hereby consent to the references to this firm and the inclusion of the
legality opinion as an exhibit to the Registration Statement.
Very truly yours,
/s/ Saitlin, Patzik, Frank & Samotny Ltd.
SAITLIN, PATZIK, FRANK & SAMOTNY LTD.
SPFS:tsf
<PAGE> 1
EXHIBIT 8
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, Illinois 60601-1003
312/609-7500
June 22, 1995
Board of Directors Board of Directors
GN Bancorp, Inc. Associated Illinois Banc Corp.
5200 North Central Avenue 112 North Adams Street
Chicago, Illinois 60630 P.O. Box 13307
Green Bay, Wisconsin 54307-3307
Board of Directors
Associated Banc-Corp
112 North Adams Street
P.O. Box 13307
Green Bay, Wisconsin 54307-3307
Gentlemen:
In connection with the solicitation of proxies relating to the
proposed merger ("Merger") of GN Bancorp, Inc., an Illinois corporation (the
"Company"), into Associated Illinois Banc Corp., an Illinois corporation
("Associated Illinois") and a wholly-owned subsidiary of Associated Banc-Corp,
a Wisconsin corporation ("Associated"), you have requested our opinion with
respect to certain federal income tax consequences of the Merger. The Merger
contemplates the acquisition by Associated Illinois of all the assets and
liabilities of the Company in exchange for common stock, $0.01 par value, of
Associated ("Associated Common Stock") pursuant to an Agreement and Plan of
Merger, dated as of March 22, 1995 (the "Agreement"), entered into by the
Company, Associated and Associated Illinois.
The opinion expressed in this letter is based on the Internal Revenue
Code of 1986, as amended (the "Code"), the Income Tax Regulations promulgated
by the Treasury Department thereunder and judicial authority reported as of the
date hereof. We have also considered the position of the Internal Revenue
Service (the "Service") reflected in published and private rulings. Although
we are not aware of any pending changes to these authorities that would alter
our opinions, there can be no assurance that future legislative or
administrative changes, court decisions or Service interpretations will not
significantly modify the statements or opinions
<PAGE> 2
Board of Directors
June 22, 1995
Page 2
expressed herein. Although the conclusions contained herein are based upon our
best interpretation of existing sources of law and express what we believe a
court would properly conclude if presented with these issues, no assurance can
be given that such interpretations would be followed if they were to become the
subject of judicial or administrative proceedings. We express no opinion
herein as to any issue of federal law other than those specifically considered
herein. We also do not express any opinion as to any issue of state or local
law.
For the purposes indicated above, and based upon our review, the
conditions set forth below, and representations made to us by the Company,
Associated and Associated Illinois, it is our opinion that:
(1) Provided the Merger qualifies as a statutory merger under
applicable law, the merger of the Company into Associated
Illinois, pursuant to the Agreement, will constitute a
reorganization within the meaning of section 368(a)(1)(A) and
section 368(a)(2)(D) of the Code. The Company, Associated and
Associated Illinois will each be considered "a party to a
reorganization" within the meaning of section 368(b) of the Code
for purposes of this reorganization;
(2) No gain or loss will be recognized by the Company on the
transfer of substantially all its assets to Associated Illinois
in exchange for shares of Associated Common Stock, cash to be
paid to the shareholders of the Company in lieu of fractional
share interests of Associated Common Stock, and the assumption
by Associated Illinois of the liabilities of the Company (Code
sections 361(a) and 357(a));
(3) The basis of the Company assets to be received by Associated
Illinois will be the same as the basis of such assets in the
hands of the Company immediately prior to the Merger (Code
section 362(b));
(4) The holding period of the Company assets in the hands of
Associated Illinois will include the period during which such
assets were held by the Company (Code section 1223(2));
(5) No gain or loss will be recognized by Associated or Associated
Illinois upon the receipt by Associated Illinois of
substantially all the Company assets in exchange for shares of
Associated Common Stock, cash to be paid to the shareholders of
the Company in lieu of fractional share interests of Associated
Common Stock, and the assumption by Associated Illinois of the
liabilities of the Company (Code section 1032(a); Rev. Rul.
57-278, 1957-1 C.B. 124);
<PAGE> 3
Board of Directors
June 22, 1995
Page 3
(6) No gain or loss will be recognized by the holders of Company
common stock, $8.00 par value per share, upon the exchange of
such stock for shares of Associated Common Stock, except with
respect to cash received in lieu of fractional share interests
of Associated Common Stock (Code section 354(a)(1));
(7) The basis of the Associated Common Stock (including any
fractional share interests deemed to be transferred) which is
received by Company shareholders will be the same as the basis
of the Company common stock surrendered in exchange therefor
(Code section 358(a)(1));
(8) The holding period of Associated Common Stock (including any
fractional share interests deemed to be transferred) which is
received by a Company shareholder will include the period during
which the Company common stock surrendered in exchange therefor
was held, provided that the Company common stock is held as a
capital asset in the hands of the Company shareholder on the
date of the exchange (Code section 1223(1));
(9) The payment of cash in lieu of fractional share interests of
Associated Common Stock will be treated as if the fractional
shares were distributed as part of the exchange and then
redeemed by Associated. These cash payments will be treated as
having been received as distributions in full payment in
exchange for the fractional shares redeemed, subject to the
provisions and limitations of section 302(a) of the Code (Rev.
Rul. 66-365, 1966-2 C.B. 116; Rev. Proc. 77-41, 1977-2 C.B.
574); and
(10) Associated Illinois will succeed to and take into account, as of
the effective date of the Merger, the items of the Company
described in section 381(c) of the Code, subject to the
conditions and limitations of sections 381, 382, 383 and 384 of
the Code, and the regulations thereunder.
In rendering this opinion, we have examined the Agreement and such
other documents as we have deemed necessary or appropriate. We have assumed
the genuineness of all signatures, the legal capacity of all natural persons,
the authenticity of all documents submitted to us as originals, the conformity
to original documents of all documents submitted to us as copies, the
authenticity of the originals of such copies, and that the Merger will be
consummated pursuant to the applicable states' laws in the manner set forth in
the Agreement. We have also assumed that any written representations and
covenants of the Company, Associated and Associated Illinois made in connection
with rendering our opinion will be accurate and complete in all respects as of
the time they are provided to us and as of the closing of the Merger. Any
changes in these
<PAGE> 4
Board of Directors
June 22, 1995
Page 4
facts, or in the accuracy of these assumptions, representations or covenants,
may necessitate reconsideration of our opinion and possibly result in a
different conclusion.
Our opinion is limited to those federal income tax issues specifically
considered herein and is addressed to and is only for the benefit of the
Company, Associated and Associated Illinois. The opinion is furnished to you
pursuant to sections 7.02(f) and 7.03(e) of the Agreement and may not be used
or relied upon for any other purpose, and may not be circulated or otherwise
referred to for any other purpose, without our express written consent.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement relating to the Merger and to the use of our name under
the captions "The Merger - Certain Material Federal Income Tax Consequences"
and "Legal Opinions" in the Joint Proxy Statement - Prospectus contained in
such Registration Statement. In giving such consent, we do not thereby concede
that we are within the category of persons whose consent is required under
section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Vedder, Price, Kaufman & Kammholz
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
<PAGE> 1
EXHIBIT 23(A)
CONSENT OF KPMG PEAT MARWICK LLP
AS TO THE FINANCIAL STATEMENTS OF THE REGISTRANT
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
Associated Banc-Corp:
We consent to the use of our reports incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
Chicago, Illinois
June 23, 1995
<PAGE> 1
EXHIBIT 23(B)
CONSENT OF MCGLADREY & PULLEN, LLP
AS TO THE FINANCIAL STATEMENTS OF GN BANCORP, INC
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
GN Bancorp, Inc.
Chicago, Illinois
We hereby consent to the use in this Proxy Statement/Prospectus Registration
Statement of our report, dated February 17, 1995, relating to the consolidated
financial statements of GN Bancorp, Inc. and subsidiaries, and to the reference
to our Firm under the caption "Experts" in this Proxy Statement/Prospectus.
/s/ MCGLADREY & PULLEN, LLP
Schaumburg, Illinois
June 23, 1995
<PAGE> 1
EXHIBIT 23(c)
CONSENT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
We have issued our report dated February 12, 1993, accompanying the
consolidated statements of operations, changes in stockholders' equity, and
cash flows of GN Bancorp, Inc. and Subsidiaries for the year ended December 31,
1992 contained in the Registration Statement on Form S-4 and Proxy
Statement/Prospectus included therein of Associated Banc-Corp. We consent to
the use of the aforementioned report in the Registration Statement and Proxy
Statement/Prospectus, and to the use of our name as it appears under the
caption "Experts."
GRANT THORNTON LLP
Chicago, Illinois
June 23, 1995
<PAGE> 1
EXHIBIT 23(d)
CONSENT OF ROBERT W. BAIRD & CO. INCORPORATED
In connection with the proposed merger of GN Bancorp, Inc., Chicago, Illinois
and Associated Banc-Corp, Green Bay, Wisconsin, the undersigned, acting as an
independent financial advisor to the Board of Directors of GN Bancorp, Inc.,
hereby consents to the reference to our firm in the Registration Statement of
Form S-4 and Proxy Statement\Prospectus included therein and to the inclusion
of our fairness opinion as an exhibit to the Registration Statement and Proxy
Statement\Prospectus.
Dated: June 23, 1995
ROBERT W. BAIRD & CO.
Incorporated
By: /s/ Bernard E. Adee
-------------------------
Bernard E. Adee,
First Vice President
<PAGE> 1
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Associated Banc-Corp, a Wisconsin corporation (the "Corporation") hereby
constitutes and appoints Brian R. Bodager his true and lawful attorney-in-fact
and agent to sign on his behalf a Registration Statement on Form S-4 in
connection with the issuance of shares of common stock to shareholders of GN
Bancorp, Inc.
Said attorney-in-fact and agent shall have full power to act for him
and in his name, place and stead in any and all capacities, to sign such Form
S-4 Registration Statement and any and all amendments thereto (including
post-effective amendments), with power where appropriate to affix the corporate
seal of the Corporation thereto and to attest such seal, and to file such Form
S-4 and each amendment (including post-effective amendments) so signed, with
all exhibits thereto, and any and all documents in connection therewith, with
the SEC, and to appear before the SEC in connection with any matter relating to
such Form S-4 and to any and all amendments thereto (including post-effective
amendments).
The undersigned hereby grants such attorney-in-fact and agent full
power and authority to do and perform any and all acts and things requisite and
necessary to be done as he might or could do in person, and hereby ratifies and
confirms all that such attorney-in-fact and agent may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney as of the 21st day of June, 1995.
/s/ Robert Feitler
---------------------------------
Robert Feitler
Director
<PAGE> 2
DIRECTOR'S POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Associated Banc-Corp, a Wisconsin corporation (the "Corporation") hereby
constitutes and appoints Brian R. Bodager his true and lawful attorney-in-fact
and agent to sign on his behalf a Registration Statement on Form S-4 in
connection with the issuance of shares of common stock to shareholders of GN
Bancorp, Inc.
Said attorney-in-fact and agent shall have full power to act for him
and in his name, place and stead in any and all capacities, to sign such Form
S-4 Registration Statement and any and all amendments thereto (including
post-effective amendments), with power where appropriate to affix the corporate
seal of the Corporation thereto and to attest such seal, and to file such Form
S-4 and each amendment (including post-effective amendments) so signed, with
all exhibits thereto, and any and all documents in connection therewith, with
the SEC, and to appear before the SEC in connection with any matter relating to
such Form S-4 and to any and all amendments thereto (including post-effective
amendments).
The undersigned hereby grants such attorney-in-fact and agent full
power and authority to do and perform any and all acts and things requisite and
necessary to be done as he might or could do in person, and hereby ratifies and
confirms all that such attorney-in-fact and agent may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney as of the 21st day of June, 1995.
/s/ Ronald R. Harder
---------------------------------
Ronald R. Harder
Director
<PAGE> 3
DIRECTOR'S POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Associated Banc-Corp, a Wisconsin corporation (the "Corporation") hereby
constitutes and appoints Brian R. Bodager his true and lawful attorney-in-fact
and agent to sign on his behalf a Registration Statement on Form S-4 in
connection with the issuance of shares of common stock to shareholders of GN
Bancorp, Inc.
Said attorney-in-fact and agent shall have full power to act for him
and in his name, place and stead in any and all capacities, to sign such Form
S-4 Registration Statement and any and all amendments thereto (including
post-effective amendments), with power where appropriate to affix the corporate
seal of the Corporation thereto and to attest such seal, and to file such Form
S-4 and each amendment (including post-effective amendments) so signed, with
all exhibits thereto, and any and all documents in connection therewith, with
the SEC, and to appear before the SEC in connection with any matter relating to
such Form S-4 and to any and all amendments thereto (including post-effective
amendments).
The undersigned hereby grants such attorney-in-fact and agent full
power and authority to do and perform any and all acts and things requisite and
necessary to be done as he might or could do in person, and hereby ratifies and
confirms all that such attorney-in-fact and agent may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney as of the 21st day of June, 1995.
/s/ John S. Holbrook, Jr.
---------------------------------
John S. Holbrook, Jr.
Director
<PAGE> 4
DIRECTOR'S POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Associated Banc-Corp, a Wisconsin corporation (the "Corporation") hereby
constitutes and appoints Brian R. Bodager his true and lawful attorney-in-fact
and agent to sign on his behalf a Registration Statement on Form S-4 in
connection with the issuance of shares of common stock to shareholders of GN
Bancorp, Inc.
Said attorney-in-fact and agent shall have full power to act for him
and in his name, place and stead in any and all capacities, to sign such Form
S-4 Registration Statement and any and all amendments thereto (including
post-effective amendments), with power where appropriate to affix the corporate
seal of the Corporation thereto and to attest such seal, and to file such Form
S-4 and each amendment (including post-effective amendments) so signed, with
all exhibits thereto, and any and all documents in connection therewith, with
the SEC, and to appear before the SEC in connection with any matter relating to
such Form S-4 and to any and all amendments thereto (including post-effective
amendments).
The undersigned hereby grants such attorney-in-fact and agent full
power and authority to do and perform any and all acts and things requisite and
necessary to be done as he might or could do in person, and hereby ratifies and
confirms all that such attorney-in-fact and agent may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney as of the 21st day of June, 1995.
/s/ William R. Hutchinson
---------------------------------
William R. Hutchinson
Director
<PAGE> 5
DIRECTOR'S POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Associated Banc-Corp, a Wisconsin corporation (the "Corporation") hereby
constitutes and appoints Brian R. Bodager his true and lawful attorney-in-fact
and agent to sign on his behalf a Registration Statement on Form S-4 in
connection with the issuance of shares of common stock to shareholders of GN
Bancorp, Inc.
Said attorney-in-fact and agent shall have full power to act for him
and in his name, place and stead in any and all capacities, to sign such Form
S-4 Registration Statement and any and all amendments thereto (including
post-effective amendments), with power where appropriate to affix the corporate
seal of the Corporation thereto and to attest such seal, and to file such Form
S-4 and each amendment (including post-effective amendments) so signed, with
all exhibits thereto, and any and all documents in connection therewith, with
the SEC, and to appear before the SEC in connection with any matter relating to
such Form S-4 and to any and all amendments thereto (including post-effective
amendments).
The undersigned hereby grants such attorney-in-fact and agent full
power and authority to do and perform any and all acts and things requisite and
necessary to be done as he might or could do in person, and hereby ratifies and
confirms all that such attorney-in-fact and agent may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney as of the 21st day of June, 1995.
/s/ James F. Janz
---------------------------------
James F. Janz
Director
<PAGE> 6
DIRECTOR'S POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Associated Banc-Corp, a Wisconsin corporation (the "Corporation") hereby
constitutes and appoints Brian R. Bodager his true and lawful attorney-in-fact
and agent to sign on his behalf a Registration Statement on Form S-4 in
connection with the issuance of shares of common stock to shareholders of GN
Bancorp, Inc.
Said attorney-in-fact and agent shall have full power to act for him
and in his name, place and stead in any and all capacities, to sign such Form
S-4 Registration Statement and any and all amendments thereto (including
post-effective amendments), with power where appropriate to affix the corporate
seal of the Corporation thereto and to attest such seal, and to file such Form
S-4 and each amendment (including post-effective amendments) so signed, with
all exhibits thereto, and any and all documents in connection therewith, with
the SEC, and to appear before the SEC in connection with any matter relating to
such Form S-4 and to any and all amendments thereto (including post-effective
amendments).
The undersigned hereby grants such attorney-in-fact and agent full
power and authority to do and perform any and all acts and things requisite and
necessary to be done as he might or could do in person, and hereby ratifies and
confirms all that such attorney-in-fact and agent may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney as of the 21st day of June, 1995.
/s/ William J. Lawson
---------------------------------
William J. Lawson
Director
<PAGE> 7
DIRECTOR'S POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Associated Banc-Corp, a Wisconsin corporation (the "Corporation") hereby
constitutes and appoints Brian R. Bodager his true and lawful attorney-in-fact
and agent to sign on his behalf a Registration Statement on Form S-4 in
connection with the issuance of shares of common stock to shareholders of GN
Bancorp, Inc.
Said attorney-in-fact and agent shall have full power to act for him
and in his name, place and stead in any and all capacities, to sign such Form
S-4 Registration Statement and any and all amendments thereto (including
post-effective amendments), with power where appropriate to affix the corporate
seal of the Corporation thereto and to attest such seal, and to file such Form
S-4 and each amendment (including post-effective amendments) so signed, with
all exhibits thereto, and any and all documents in connection therewith, with
the SEC, and to appear before the SEC in connection with any matter relating to
such Form S-4 and to any and all amendments thereto (including post-effective
amendments).
The undersigned hereby grants such attorney-in-fact and agent full
power and authority to do and perform any and all acts and things requisite and
necessary to be done as he might or could do in person, and hereby ratifies and
confirms all that such attorney-in-fact and agent may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney as of the 21st day of June, 1995.
/s/ John C. Meng
---------------------------------
John C. Meng
Director
<PAGE> 8
DIRECTOR'S POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Associated Banc-Corp, a Wisconsin corporation (the "Corporation") hereby
constitutes and appoints Brian R. Bodager his true and lawful attorney-in-fact
and agent to sign on his behalf a Registration Statement on Form S-4 in
connection with the issuance of shares of common stock to shareholders of GN
Bancorp, Inc.
Said attorney-in-fact and agent shall have full power to act for him
and in his name, place and stead in any and all capacities, to sign such Form
S-4 Registration Statement and any and all amendments thereto (including
post-effective amendments), with power where appropriate to affix the corporate
seal of the Corporation thereto and to attest such seal, and to file such Form
S-4 and each amendment (including post-effective amendments) so signed, with
all exhibits thereto, and any and all documents in connection therewith, with
the SEC, and to appear before the SEC in connection with any matter relating to
such Form S-4 and to any and all amendments thereto (including post-effective
amendments).
The undersigned hereby grants such attorney-in-fact and agent full
power and authority to do and perform any and all acts and things requisite and
necessary to be done as he might or could do in person, and hereby ratifies and
confirms all that such attorney-in-fact and agent may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney as of the 21st day of June, 1995.
/s/ J. Douglas Quick
---------------------------------
J. Douglas Quick
Director
