UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number: 0-15123
FIRST NATIONAL BANCORP, INC.
(Exact name of registrant as specified in its charter)
Illinois 31-1182986
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(State of Incorporation) (IRS Employer
Identification No.)
78 North Chicago Street, Joliet, Illinois 60432
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (815) 726-4371
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, $10.00 par value None
Securities registered pursuant to Section 12(g) of None
the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such report(s), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of Common Stock held by non-affiliates on March 14,
1996 was $94,840,356. Based on the last reported price of an actual transaction
in registrant's Common Stock on March 14, 1996, and reports of beneficial
ownership filed by directors and executive officers of registrant and by
beneficial owners of more than 5% of the outstanding shares of Common Stock of
registrant; however, such determination of shares owned by affiliates does not
constitute an admission of affiliate status or beneficial interest in shares of
Common Stock of Registrant. At March 14, 1996 there were 1,215,902 shares of
registrant's sole class of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
There is incorporated by reference in Parts I and III of this Annual Report on
Form 10-K portions of the information contained in the registrant's proxy
statement for its annual meeting of stockholders to be held March 14, 1996, to
the extent indicated herein.
<PAGE>
TABLE OF CONTENTS
Page
PART I
ITEM 1. Business.......................................................
ITEM 2. Properties.....................................................
ITEM 3. Legal Proceedings............................................
ITEM 4. Submission of Matters to a Vote of Security Holders............
PART II
ITEM 5. Market for the Company's Common Stock and Related
Stockholder Matters.............................................
ITEM 6. Selected Financial Data.........................................
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................
ITEM 8. Financial Statements and Supplementary Data.....................
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure Matters....................
PART III
ITEM 10. Directors and Executive Officers of the Registrant............
ITEM 11. Executive Compensation........................................
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management....................................................
ITEM 13. Certain Relationships and Related Transactions................
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K.........................................
SIGNATURES ............................................................
<PAGE>
PART I
ITEM 1. BUSINESS
Overview
First National Bancorp, Inc. "First National" or the "Company" was formed and
became the parent holding company of First National Bank of Joliet ("FNB") on
September 30, 1986. Upon shareholders' approval, First National Bancorp, Inc.
issued 625,000 shares of its $10 par value common stock for all of the
outstanding common stock of FNB. The merger was accounted for as a pooling of
interests and thus all financial statements and data include the results of
operations of First National Bank of Joliet as a wholly-owned subsidiary.
On January 9, 1989, the Company acquired 100% of the outstanding shares of
Southwest Suburban Bank ("SWSB") located in Bolingbrook, Illinois at a total
cash purchase price of $4,681,000. The excess of acquisition cost over the fair
value of net assets acquired was $2,198,000. The acquisition has been accounted
for as a purchase.
On December 14, 1990, the Company acquired 100% of the outstanding shares of
Bank of Lockport ("BOL") located in Lockport, Illinois for $12,077,000 paid
through issuing 99,505 common shares of First National Bancorp, Inc. stock
valued at $7,167,000 plus cash of $4,910,000. The excess of acquisition cost
over the fair value of net assets acquired was $6,442,000. The acquisition has
been accounted for as a purchase.
On October 31, 1994, the Company acquired 100% of the outstanding shares of
Plano Bancshares, Inc. ("Bancshares") located in Plano, Illinois. Bancshares is
the parent holding company of Community Bank of Plano ("Plano"). The purchase
price of Bancshares was $10,737,000, paid through issuing debentures of
$3,776,000 plus cash of $6,961,000. The excess of acquisition cost over the fair
value of net assets acquired was $2,311,000. The acquisition has been accounted
for as a purchase with results of operations of Bancshares since October 31,
1994 included in the consolidated financial statements. FNB, SWSB, BOL and Plano
are sometimes referred to as the "Banks".
The Company has no employees and conducts no active business except through its
banking subsidiaries. The only significant asset of the Company is its stock
ownership of the Banks.
Subsidiary Descriptions
FNB is a commercial, national bank with its main office located at 78 North
Chicago Street, Joliet, Illinois 60431. FNB is located approximately 45 miles
southwest of Chicago and has Joliet and the western portion of Will County as
its primary service area. FNB was organized as a national banking organization
on June 6, 1933, and currently has seven branch locations.
SWSB is a state chartered, FDIC insured bank, located at 224 Lily Cache Lane in
Bolingbrook, Illinois. SWSB is located approximately 25 miles southwest of
Chicago and has Bolingbrook, Romeoville, Woodridge, and Lemont as its primary
service area. Southwest Suburban Bank was organized as a state bank on July 18,
1979.
BOL is a state chartered, FDIC insured bank, located at 826 East 9th Street in
Lockport, Illinois. The only branch of BOL is located at the intersection of
159th Street and Cedar Road, approximately 3 miles from the main office. BOL is
located approximately 35 miles southwest of Chicago and has Lockport, Joliet,
Homer Township, New Lenox, Romeoville and Lemont as its primary service area.
BOL was organized as a state bank on June 11, 1971.
<PAGE>
Bancshares is a bank holding company organized in Delaware in 1984 which owns
100% of the capital stock of Plano. Banchares has no other subsidiaries and
conducts no other operations. Plano is a state chartered, FDIC insured bank
located at 2005 West Route 34 in Plano, Illinois. Plano is located approximately
45 miles west of Chicago and has Plano, Sandwich and Yorkville as its primary
service area. Plano was organized as a state bank on October 1, 1943.
Competition
Active competition exists in all services offered by the Banks, not only with
other national and state banks, but also with savings and loan associations,
finance companies, personal loan companies, credit unions, money market mutual
funds, mortgage bankers and other financial institutions serving this market
area. The principal methods of competition in the financial services industry
are price, service and convenience.
Bank Deposits and Loans
No material portion of any of the Banks' deposits have been obtained from a
person or group that withdrawal of such deposits would have an adverse effect on
the business of the Company.
The loan portfolio is diversified so that slowdowns or problems in one specific
area would not cause a significant problem.
Seasonal
Business is not affected in a material manner by change of seasons.
Foreign Sources
Neither the First National Bancorp, Inc. nor its subsidiaries, the First
National Bank of Joliet, Southwest Suburban Bank, Bank of Lockport, and
Community Bank of Plano are involved with foreign investments.
Compliance
Compliance with federal, state, and local provisions relating to the protection
of the environment should not have a material effect upon the capital
expenditures, earnings and competitive position of the Company.
Employment
As of December 31, 1995, the Banks had 267 full-time and 96 part-time employees.
Services
The Banks offer varied savings and certificate of deposit options, commercial
lending, consumer lending, along with regular checking and savings services.
Supervision and Regulation
General
The growth and earnings performance of the Company can be affected not only by
management decisions and general economic conditions, but also by the policies
of various governmental regulatory authorities including, but not limited to,
the Office of the Comptroller of the Currency (the "OCC"), the Board of
Governors of the Federal Reserve System (the "FRB"), the FDIC, the Illinois
Commissioner of Banks and Trust Companies (the "Commissioner"), the Internal
Revenue Service and state taxing authorities and the Securities and Exchange
Commission (the "SEC"). Financial institutions and their holding companies are
extensively regulated under federal and state law. The effect of such statutes,
regulations and policies can be significant, and cannot be predicted with a high
degree of certainty.
Federal and state laws and regulations generally applicable to financial
institutions, such as the Company and its subsidiaries, regulate, among other
things, the scope of business, investments, reserves against deposits, capital
levels relative to operations, the nature and amount of collateral for loans,
the establishment of branches, mergers, consolidations and dividends. The system
of supervision and regulation applicable to the Company and its subsidiaries
establishes a comprehensive framework for their respective operations and is
intended primarily for the protection of the FDIC's deposit insurance funds and
the depositors, rather than the shareholders, of financial institutions.
The following references to material statutes and regulations affecting the
Company and its subsidiaries are brief summaries thereof and do not purport to
be complete, and are qualified in their entirety by reference to such statutes
and regulations. Any change in applicable law or regulations may have a material
effect on the business of the Company and its subsidiaries.
<PAGE>
Recent Regulatory Developments
On August 8, 1995, the FDIC amended its regulations to change the range of
deposit insurance assessments charged to members of the Bank Insurance Fund (the
"BIF"), such as FNB, SWSB, BOL and Plano (collectively, the "Banks"), from the
then-prevailing range of 0.23% to 0.31% of deposits, to a range of 0.04% to
0.31% of deposits. Additionally, because the change in BIF-assessments was
applied retroactively to June 1, 1995, BIF-member institutions, including the
Banks, received a refund of the difference between the amount of assessments
previously paid at the higher assessment rates for the period from June 30, 1995
through September 30, 1995, and the amount that would have been paid for that
period at the new rates. In the case of the Banks, this refund totalled
$339,428. The FDIC did not, however, change the assessment rates charged to
members of the Savings Association Insurance Fund (the "SAIF"), and SAIF-insured
institutions continue to pay assessments ranging from 0.23% to 0.31% of
deposits.
The deposit insurance assessments paid by BIF-member institutions will decrease
further in calendar year 1996. On November 14, 1995, the FDIC reduced the
deposit insurance assessments for BIF-member institutions by four basis points.
As a result, the range of BIF assessments for the semi-annual assessment period
commencing January 1, 1996 will be between 0% and 0.27% of deposits. BIF-member
institutions which qualify for the 0% assessment category will, however, still
have to pay the $1000 minimum semi-annual assessment required by federal
statute.
The FDIC was able to change the range for BIF-member deposit insurance
assessments to their current levels because the ratio of the insurance reserves
of the BIF to total BIF-insured deposits exceeds the statutorily designated
reserve ratio of 1.25%. Because the SAIF does not meet this designated reserve
ratio, the FDIC is prohibited by federal law from reducing the deposit insurance
assessments charged to SAIF-member institutions to the same levels currently
charged BIF-member institutions. Legislative proposals pending before the
Congress would recapitalize the SAIF to the designated reserve ratio by imposing
a special assessment against SAIF-insured institutions. In conjunction with the
proposed recapitalization of the SAIF, legislation has also been introduced in
the Congress that would, among other things, require federal thrift institutions
to convert to state or national banks and merge the BIF and the SAIF into a
single deposit insurance fund administered by the FDIC. At this time, it is not
possible to predict whether, or in what form, any such legislation will be
adopted or the impact, if any, such legislation would have on the Company and
the Banks.
The Company
General. The Company, as the sole shareholder of the Banks, is a bank holding
company. As a bank holding company, the Company is registered with, and is
subject to regulation by, the FRB under the Bank Holding Company Act, as amended
(the "BHCA"). In accordance with FRB policy, the Company is expected to act as a
source of financial strength to the Bank and to commit resources to support the
Bank in circumstances where the Company might not do so absent such policy.
Under the BHCA, the Company is subject to periodic examination by the FRB and is
required to file periodic reports of its operations and such additional
information as the FRB may require. Because SWSB, BOL and Plano (collectively,
the "State Banks") are chartered under Illinois law, the Company is also subject
to supervision and regulation by the Commissioner under the Illinois Bank
Holding Company Act.
Investments and Activities. Under the BHCA, a bank holding company must obtain
FRB approval before: (i) acquiring, directly or indirectly, ownership or control
of any voting shares of another bank or bank holding company if, after such
acquisition, it would own or control more than 5% of such shares (unless it
already owns or controls the majority of such shares); (ii) acquiring all or
substantially all of the assets of another bank or bank holding company; or
(iii) merging or consolidating with another bank holding company.
Prior to September 29, 1995, the BHCA prohibited the FRB from approving any
direct or indirect acquisition by a bank holding company of more than 5% of the
voting shares, or of all or substantially all of the assets, of a bank located
outside of the state in which the operations of the bank holding company's
banking subsidiaries are principally located unless the laws of the state in
which the bank to be acquired is located specifically authorize such an
acquisition. Pursuant to amendments to the BHCA which took effect September 29,
1995, the FRB may now allow a bank holding company to acquire banks located in
any state of the United States without regard to geographic restrictions or
reciprocity requirements imposed by state law, but subject to certain
conditions, including limitations on the aggregate amount of deposits that may
be held by the acquiring holding company and all of its insured depository
institution affiliates.
<PAGE>
The BHCA also prohibits the Company, with certain exceptions noted below, from
acquiring direct or indirect ownership or control of more than 5% of the voting
shares of any company which is not a bank and from engaging in any business
other than that of banking, managing and controlling banks or furnishing
services to banks and their subsidiaries, except that bank holding companies may
engage in, and may own shares of companies engaged in, certain businesses found
by the FRB to be "so closely related to banking ... as to be a proper incident
thereto." Under current regulations of the FRB, the Company and its non-bank
subsidiaries are permitted to engage in, among other activities, such banking-
related businesses as the operation of a thrift, sales and consumer finance,
equipment leasing, the operation of a computer service bureau, including
software development, and mortgage banking and brokerage. The BHCA does not
place territorial restrictions on the activities of non-bank subsidiaries of
bank holding companies.
Federal legislation also prohibits the acquisition of "control" of a bank or
bank holding company, such as the Company, without prior notice to certain
federal bank regulators. "Control" is defined in certain cases as the
acquisition of 10% of the outstanding shares of a bank or bank holding company.
Capital Requirements. The FRB uses capital adequacy guidelines in its
examination and regulation of bank holding companies. If capital falls below
minimum guideline levels, a bank holding company may, among other things, be
denied approval to acquire or establish additional banks or non-bank businesses.
The FRB's capital guidelines establish the following minimum regulatory capital
requirements for bank holding companies: a risk-based requirement expressed as a
percentage of total risk-weighted assets, and a leverage requirement expressed
as a percentage of total assets. The risk-based requirement consists of a
minimum ratio of total capital to total risk-weighted assets of 8%, of which at
least one-half must be Tier 1 capital (which consists principally of
stockholders' equity). The leverage requirement consists of a minimum ratio of
Tier 1 capital to total assets of 3% for the most highly rated companies, with
minimum requirements of 4% to 5% for all others.
The risk-based and leverage standards presently used by the FRB are minimum
requirements, and higher capital levels will be required if warranted by the
particular circumstances or risk profiles of individual banking organizations.
Further, any banking organization experiencing or anticipating significant
growth would be expected to maintain capital ratios, including tangible capital
positions (i.e., Tier 1 capital less all intangible assets), well above the
minimum levels.
As of December 31, 1995, the Company had regulatory capital in excess of the
FRB's minimum requirements, with a risk-based capital ratio of 13.0% and a
leverage ratio of 7.6%.
Dividends. The FRB has issued a policy statement on the payment of cash
dividends by bank holding companies. In the policy statement, the FRB expressed
its view that a bank holding company experiencing earnings weaknesses should not
pay cash dividends exceeding its net income or which could only be funded in
ways that weakened the bank holding company's financial health, such as by
borrowing. Additionally, the FRB possesses enforcement powers over bank holding
companies and their non-bank subsidiaries to prevent or remedy actions that
represent unsafe or unsound practices or violations of applicable statutes and
regulations. Among these powers is the ability to proscribe the payment of
dividends by banks and bank holding companies.
In addition to the restrictions on dividends imposed by the FRB, the Illinois
Business Corporation Act, as amended, prohibits the Company from paying a
dividend if, after giving effect to the dividend, the Company would be insolvent
or the net assets of the Company would be less than zero or less than the
maximum amount then payable to shareholders of the Company who would have
preferential distributions rights if the Company were liquidated.
Federal Securities Regulation. The Company's common stock is registered with the
SEC under the Securities Act of 1933, as amended, and the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Consequently, the Company is
subject to the information, proxy solicitation, insider trading and other
restrictions and requirements of the SEC under the Exchange Act.
The Banks
General. FNB is a national bank, chartered by the OCC under the National Bank
Act. The deposit accounts of the Bank are insured by the BIF of the FDIC, and it
is a member of the Federal Reserve System. As a BIF-insured national bank, the
Bank is subject to the examination, supervision, reporting and enforcement
requirements of the OCC, as the chartering authority for national banks, and the
FDIC, as administrator of the BIF.
<PAGE>
The State Banks are Illinois-chartered banks, the deposit accounts of which are
also insured by the BIF of the FDIC. As BIF-insured, Illinois-chartered banks,
the State Banks are subject to the examination, supervision, reporting and
enforcement requirements of the Commissioner, as the chartering authority for
Illinois banks, and the FDIC, as administrator of the BIF.
Deposit Insurance. As FDIC-insured institutions, the Banks are required to pay
deposit insurance premium assessments to the FDIC. The amount each institution
pays for FDIC deposit insurance coverage is determined in accordance with a
risk-based assessment system under which all insured depository institutions are
placed into one of nine categories and assessed insurance premiums based upon
their level of capital and supervisory evaluation. Institutions classified as
well-capitalized (as defined by the FDIC) and considered healthy pay the lowest
premium while institutions that are less than adequately capitalized (as defined
by the FDIC) and considered of substantial supervisory concern pay the highest
premium. For the semi-annual assessment period ended December 31, 1995, BIF
assessments ranged from 0.04% to 0.31% of deposits. Risk classification of all
insured institutions is made by the FDIC for each semi-annual assessment period.
The FDIC may terminate the deposit insurance of any insured depository
institution if the FDIC determines, after a hearing, that the institution has
engaged or is engaging in unsafe or unsound practices, is in an unsafe or
unsound condition to continue operations or has violated any applicable law,
regulation, order, or any condition imposed in writing by, or written agreement
with, the FDIC. The FDIC may also suspend deposit insurance temporarily during
the hearing process for a permanent termination of insurance if the institution
has no tangible capital. Management of the Company is not aware of any activity
or condition that could result in termination of the deposit insurance of any of
the Banks.
Capital Requirements. Under the regulations of the OCC (in the case of FNB) and
the FDIC (in the case of the State Banks), the Banks are subject to the
following minimum capital standards: a leverage requirement consisting of a
minimum ratio of Tier 1 capital to total assets of 3% for the most highly-rated
banks with minimum requirements of 4% to 5% for all others, and a risk-based
capital requirement consisting of a minimum ratio of total capital to total
risk- weighted assets of 8%, at least one-half of which must be Tier 1 capital.
The capital requirements described above are minimum requirements. Higher
capital levels will be required if warranted by the particular circumstances or
risk profiles of individual institutions. For example, the regulations of the
OCC provide that additional capital may be required to take adequate account of
the risks posed by concentrations of credit, nontraditional activities and the
institution's ability to manage such risks. Additionally, on August 2, 1995, the
federal banking regulators, including the OCC, published amendments to their
respective risk-based capital standards designed to take into account interest
rate risk ("IRR") exposure. The amendments provide that a bank's exposure to
declines in the economic value of its capital due to changes in interest rates
will be among the factors considered by the agencies in evaluating a bank's
capital adequacy. Management does not anticipate that this amendment will
adversely affect the ability of the Banks to maintain compliance with applicable
capital requirements.
The IRR amendments do not establish a system for measuring IRR exposure.
However, concurrently with the adoption of the amendments, the agencies issued a
proposed joint policy statement setting out a framework that would be used to
measure the IRR exposure of individual banks. The proposed policy statement
would generally require banks to quantify their level of IRR exposure using a
measurement system developed by the regulators that weights a bank's assets,
liabilities and off-balance sheet positions by risk factors designed to reflect
the approximate change in each instrument's value that would result from 200
basis point changes in interest rates. The level of IRR exposure reflected by
this measurement process, as well as the level of IRR exposure reflected by a
bank's own internal measurement system, would then be considered by the agencies
in assessing a bank's capital adequacy. Although it is not presently possible to
predict whether, or in what form, the proposed policy statement will be adopted,
management does not anticipate that the adoption of a policy statement
substantially in the form proposed would have a material adverse effect on the
ability of the Banks to maintain compliance with applicable capital
requirements.
During the year ended December 31, 1995, none of the Banks was required by
regulatory authorities to maintain capital in an amount in excess of the minimum
regulatory requirements. As of December 31, 1995, each of the Banks exceeded its
minimum regulatory capital requirements, as follows:
Risk-Based Capital Ratio Leverage Ratio
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FNB 14.7% 8.7%
SWSB 14.5% 8.4%
BOL 14.5% 8.6%
Plano 13.8% 8.7%
<PAGE>
Federal law provides the federal banking regulators with broad power to take
prompt corrective action to resolve the problems of undercapitalized
institutions. The extent of the regulators' powers depends on whether the
institution in question is "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" or "critically
undercapitalized," as defined by regulation. Depending upon the capital category
to which an institution is assigned, the regulators' corrective powers include:
requiring the submission of a capital restoration plan; placing limits on asset
growth and restrictions on activities; requiring the institution to issue
additional capital stock (including additional voting stock) or to be acquired;
restricting transactions with affiliates; restricting the interest rate the
institution may pay on deposits; ordering a new election of directors of the
institution; requiring that senior executive officers or directors be dismissed;
prohibiting the institution from accepting deposits from correspondent banks;
requiring the institution to divest certain subsidiaries; prohibiting the
payment of principal or interest on subordinated debt; and ultimately,
appointing a receiver for the institution.
Dividends. The National Bank Act imposes limitations on the amount of dividends
that a national bank, such as FNB, may pay without prior regulatory approval.
Generally, the amount is limited to the national bank's current year's net
earnings plus the adjusted retained earnings for the two preceding years.
Under the Illinois Banking Act, Illinois-chartered banks, such as the State
Banks, may not pay, without prior regulatory approval, dividends in excess of
their adjusted profits.
The payment of dividends by any financial institution or its holding company is
affected by the requirement to maintain adequate capital pursuant to applicable
capital adequacy guidelines and regulations. As described above, each of the
Banks exceeded its minimum capital requirements under applicable guidelines as
of December 31, 1995. As of December 31, 1995, approximately $9,116,000 million
was available to be paid as dividends to the Company by the Banks.
Insider Transactions. The Banks are subject to certain restrictions imposed by
the Federal Reserve Act on any extensions of credit to the Company and its
subsidiaries, on investments in the stock or other securities of the Company and
its subsidiaries and the acceptance of the stock or other securities of the
Company or its subsidiaries as collateral for loans. Certain limitations and
reporting requirements are also placed on extensions of credit by each of the
Banks to its directors and officers, to directors and officers of the Company
and its subsidiaries, to principal stockholders of the Company, and to "related
interests" of such directors, officers and principal stockholders. In addition,
such legislation and regulations may affect the terms upon which any person
becoming a director or officer of the Company or one of its subsidiaries or a
principal stockholder of the Company may obtain credit from banks with which one
of the Banks maintains a correspondent relationship.
Safety and Soundness Standards. On July 10, 1995, the federal banking
regulators, including the OCC and the FDIC, published final guidelines
establishing operational and managerial standards to promote the safety and
soundness of federally insured depository institutions. The guidelines, which
took effect on August 9, 1995, establish standards for internal controls,
information systems, internal audit systems, loan documentation, credit
underwriting, interest rate exposure, asset growth, and compensation, fees and
benefits. In general, the guidelines prescribe the goals to be achieved in each
area, and each institution will be responsible for establishing its own
procedures to achieve those goals. If an institution fails to comply with any of
the standards set forth in the guidelines, the institution's primary federal
regulator may require the institution to submit a plan for achieving and
maintaining compliance. The preamble to the guidelines states that the agencies
expect to require a compliance plan from an institution whose failure to meet
one or more of the standards is of such severity that it could threaten the safe
and sound operation of the institution. Failure to submit an acceptable
compliance plan, or failure to adhere to a compliance plan that has been
accepted by the appropriate regulator, would constitute grounds for further
enforcement action. The federal banking agencies have also published for comment
proposed asset quality and earnings standards which, if adopted, would be added
to the safety and soundness guidelines. This proposal, like the final
guidelines, would establish the goals to be achieved with respect to asset
quality and earnings, and each institution would be responsible for establishing
its own procedures to meet such goals.
State Bank Activities. Under federal law, as implemented by FDIC regulations,
FDIC insured state banks (such as the State Banks) are prohibited, subject to
certain exceptions, from making or retaining equity investments of a type, or in
an amount, that are not permissible for a national bank. Federal law, as
implemented by FDIC regulations, also prohibits FDIC insured state banks and
their subsidiaries, subject to certain exceptions, from engaging as principal in
any activity that is not permitted for a national bank or its subsidiary,
respectively, unless the bank meets, and continues to meet, its minimum
regulatory capital requirements and the FDIC determines the activity would not
pose a significant risk to the deposit insurance fund of which the bank is a
member. Impermissible investments and activities must be divested or
discontinued within certain time frames set by the FDIC. These restrictions have
not had, and are not currently expected to have, a material impact on the
operations of the State Banks.
<PAGE>
Branching Authority. Illinois-chartered banks, such as the State Banks, have the
authority under Illinois law to establish branches any where in the State of
Illinois, subject to receipt of all required regulatory approvals. Federal law
grants the same branching authority to national banks, such as FNB, which are
headquartered in Illinois. Effective June 1, 1997 (or earlier if expressly
authorized by applicable state law), the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 (the "Riegle-Neal Act") allows banks to
establish interstate branch networks through acquisitions of other banks,
subject to certain conditions, including certain limitations on the aggregate
amount of deposits that may be held by the surviving bank and all of its insured
depository institution affiliates. The establishment of de novo interstate
branches or the acquisition of individual branches of a bank in another state
(rather than the acquisition of an out-of-state bank in its entirety) is allowed
by the Riegle-Neal Act only if specifically authorized by state law. The
legislation allows individual states to "opt-out" of certain provisions of the
Riegle-Neal Act by enacting appropriate legislation prior to June 1, 1997.
Illinois has enacted legislation permitting interstate bank mergers beginning on
June 1, 1997.
Restrictions on Resale of First National Debentures
by Affiliates
Under Rule 145 of the 1933 Act, certain persons who receive First National
Debentures pursuant to the Community Bank of Plano merger and who were deemed to
be "affiliates" of Community Bank of Plano are limited in their right to resell
the debenture so received. The term "affiliate" is defined to include any person
who, directly or indirectly, controls, or is controlled by, or is under common
control with Community Bank of Plano at the time the merger was submitted to
shareholders' vote. Each affiliate of Community Bank of Plano (e.g. any director
or executive officer or shareholder of Community Bank of Plano who beneficially
owned a substantial number of outstanding common shares of Community Bank of
Plano) who desires to resell the First National Debenture received in the merger
must sell such First National Debenture either pursuant to an effective
Registration Statement or in accordance with the applicable provisions of Rule
145(d) under the 1933 Act.
Rule 145(d) requires that persons deemed to be affiliates resell their First
National Debenture pursuant to certain of the requirements of Rule 144 under the
1933 Act if such First National Debenture is sold within the first two years
after the receipt thereof. After two years if such person is not a former
affiliate of First National and First National is current in the filing of its
periodic securities law reports, a former affiliate of the Community Bank of
Plano may freely resell the First National Debenture received in the Merger
without limitation. After three years from the issuance of the First National
Debenture, if such person is not an affiliate of First National at the time of
sale or for at least three months prior to such sale, such person may freely
resell such First National Debenture, without limitation, regardless of the
status of First National's periodic securities law reports.
<PAGE>
Item 2. Properties
The two-story main building of the Company is located at 78 North Chicago
Street, Joliet, Illinois 60432. FNB owns this building. The land on which it is
located is owned by First National. Also owned by FNB are five additional
facilities in Joliet, which are located at Scott and Jefferson, Midland and
Campbell, Black and Essington Roads, 1590 North Larkin and 191 South Larkin, one
additional facility in Minooka at 207 Mondamin Street, one additional facility
in Channahon at 23841 West Eames and one additional facility in Shorewood at
Route 52 and Brookshore. SWSB owns their building located at 225 Lily Cache Lane
in Bolingbrook. BOL owns their main office at 826 East 9th Street and a branch
office at Cedar Road and 159th Street in Homer Township. Plano owns their
building at 2005 West Route 34 in Plano.
Approximate square footage of each location is as follows:
Approximate
Subsidiary Location Square Feet Status
- ---------- -------- ----------- ------
FNB 78 N. Chicago St., Joliet 25,000 Owned
FNB Scott and Jefferson, Joliet 1,600 Onwed
FNB Midland and Campbell, Joliet 4,200 Owned
FNB Black and Essington Rds, Joliet 12,000 Owned
FNB 1590 North Larkin, Joliet 1,100 Leased
FNB 191 South Larkin, Joliet 900 Leased
FNB 207 Mondamin St., Minooka 2,000 Owned
FNB 23841 W. Eames, Channahon 100 Leased
FNB Route 52 and Brookshore, Shorewood 1,200 Owned
SWSB 225 Lily Cache Lane, Bolingbrook 8,800 Owned
BOL 826 E. 9th Street, Lockport 27,000 Owned
BOL Cedar Rd and 59th St., Lockport 9,000 Owned
Plano 2005 W. Route 34, Plano 10,000 Owned
Item 3. Legal Proceedings
There are no material legal proceedings pending to which the Company or its
subsidiaries is a party other than ordinary routine litigation incidential to
their respective businesses.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II.
Item 5. Market for the Company's Common Stock and Related Stockholder Matters.
Market Information
First National Common Stock is traded primarily through the offices of Stofan,
Agazzi & Co., Richard B. Vance & Co., A. G. Edwards & Sons, Inc., Edward D.
Jones & Co. and the Chicago Corporation.
<PAGE>
Item 6. Selected Financial Data.
Financial Highlights
(Table dollar amounts in thousands except per share data)
<TABLE>
1995 1994 1993 1992 1991
- ---------------------------------------------------- ---------- --------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Statement of income:
Net interest income ............................. $ 29,451 $ 26,312 $ 25,096 $ 23,447 $ 19,906
Provision for loan losses ....................... 1,191 830 687 1,153 681
Net non-interest expense ........................ 21,419 18,540 17,730 15,884 14,492
Income before income taxes ...................... 11,965 10,780 10,449 9,893 8,059
Net income ...................................... 8,211 7,507 7,366 6,826 5,805
Balance sheet-end of year balances
Securities ...................................... 202,711 189,874 190,872 170,778 145,226
Loans, net ...................................... 427,917 418,918 333,243 295,810 301,362
Total assets .................................... 749,990 692,642 631,786 594,000 553,671
Deposits ........................................ 605,137 556,162 491,014 477,388 443,619
Stockholders' equity ............................ 66,425 61,657 57,442 53,118 49,332
Balance sheet-average balances:
Securities ...................................... 189,605 192,890 184,559 158,303 146,529
Loans, net ...................................... 426,523 371,442 303,578 293,216 284,278
Total assets .................................... 729,801 640,388 604,202 577,008 534,510
Deposits ........................................ 577,093 505,553 477,938 471,494 446,424
Stockholders' equity ............................ 63,741 59,090 55,068 49,547 47,604
Weighted average shares outstanding (1): ........... 1,215,902 1,215,902 1,215,902 1,215,902 1,215,902
Per share data (1):
Book value ......................................... 54.63 50.71 47.24 43.69 40.57
Earnings ........................................... 6.75 6.17 6.06 5.61 4.77
Cash dividends ..................................... 2.75 2.68 2.50 2.50 1.91
Selected financial ratios:
Average net loans to average deposits ........... 73.91% 73.47% 63.52% 62.19% 63.68%
Return on average assets ........................ 1.13 1.17 1.22 1.18 1.09
Return on average equity ........................ 12.88 12.70 13.38 13.78 12.19
Net interest margin (2) ......................... 4.62 4.72 4.78 4.73 4.38
Average equity to average assets ................ 8.73 9.23 9.11 8.59 8.91
Dividend payment ratio .......................... 40.73 43.40 41.29 44.53 40.00
<FN>
(1) Adjusted to reflect 7 for 5 stock split in 1994 and 20% stock dividend in
1991.
(2) Based on average interest earning assets with the computation on a fully
tax equivalent basis assuming an income tax rate of 35%.
</FN>
</TABLE>
The Company has no loans or investment concentrations nor are there any foreign
outstandings.
<PAGE>
Holders
As of December 31, 1995, the Company had 1,664 shareholders of common capital
stock.
Dividends
The Subsidiary Banks are limited as to the amount of dividends that can be paid
to the parent company without prior regulatory approval; therefore, the Company
is similarly limited in paying dividends to shareholders. For 1996, the
Subsidiary Banks have approximately $9,116,000, plus their net earnings in 1996,
available for paying dividends to First National.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Introduction
First National Bancorp, Inc. (the Company) is a multi-bank holding company
serving primarily the Will, Grundy and Kendall Counties, Illinois area. First
National Bancorp, Inc. originated with the merger of First National Bank of
Joliet on September 30, 1986. While the principal office of the Company and
First National Bank continues to be Joliet, Illinois, expansion has occurred
through the acquisition in January, 1989 of Southwest Suburban Bank, located in
Bolingbrook, Illinois (25 miles southwest of Chicago), and the acquisition in
December, 1990 of Bank of Lockport (35 miles southwest of Chicago). In March
1992, the First National Bank of Joliet acquired the Minooka facility of Morris
Federal Savings Bank. Plano Bancshares, Inc. (Community Bank of Plano) (45 miles
west of Chicago) was acquired in October, 1994. At December 31, 1995, the
Company with its four wholly-owned banking subsidiaries now has fourteen
customer banking locations and total assets of $749,990,000. These acquisitions
are part of the Company's strategic plan to expand in areas where the Company
either already has market penetration or where the Company's present customer
service area borders the new market.
Results of Operations
For the year ended December 31, 1995 the Company earned $8,211,000 or $6.75 per
share as compared to $7,507,000 or $6.17 per share and $7,366,000 or $6.06 per
share for the years ended December 31, 1994 and December 31, 1993, respectively.
On a percentage basis net income for 1995 increased by 9.38% over that of 1994
while a 1.91% increase was achieved in 1994 over reported net income for 1993.
The operating performance of bank holding companies is often measured, and
comparisons made, based on net income to average assets and net income to
average equity. The Company's returns on average assets and average equity for
the three years ended December 31, 1995 are as follows:
1995 1994 1993
- ------------------------------------------------------------------------------
Return on average assets 1.13% 1.17% 1.22%
Return on average equity 12.88 12.70 13.38
Net Interest Income
Net interest income, which is the difference between the interest and fees
earned on loans and investments and the interest paid on deposits and borrowed
funds, is the principal source of income for the Company. Net interest income is
influenced by changes in the volume and yield on interest earning assets as well
as changes in the volume and rates paid on interest bearing liabilities. The
Company attempts to favorably impact net interest income results through
managing the investment decisions on interest earning assets and monitoring
interest rates its banking subsidiaries offer, particularly rates for time
deposits and short-term borrowings. On a tax equivalent basis (35% income tax
rate), the Company's net interest income margin expressed as a percentage of
average interest earning assets was 4.62% for 1995 as compared to 4.72% in 1994
and 4.78% in 1993. Net interest income margin for the year ended December 31,
1995 increased by $3,075,000 as compared to 1994. The increase in interest
earning assets net of interest bearing liabilities produced $2,205,000 of the
net interest income margin increase with the remainder due to an increase in
interest rates.
<PAGE>
As the following table illustrates, the Company has maintained a high level of
interest earning assets to total average assets and to interest bearing
liabilities. The ratio of time deposits and borrowed funds to total liabilities
has fluctuated as shown.
1995 1994 1993
- ------------------------------------------------------------------------------
Interest earning assets to total assets 0.91 0.91 0.92
Interest earning assets to interest bearing
liabilities 1.18 1.20 1.20
Time deposits and borrowed funds to total
liabilities 0.46 0.42 0.42
In the three years ended December 31, 1995 the Company achieved a $78,633,000
increase in average interest earning assets. Approximately $55,081,000 or 70% of
this increase was due to growth in the lending area. The following table
illustrates the Company's average balance sheets and interest rates for the last
three years. The average balance sheet amounts for loans include balances for
non-performing loans.
<TABLE>
Average
Balance Interest
Sheets Rates
------------------------------ -----------------------
1995 1994 1993 1995 1994 1993
-------- -------- -------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Interest Earning Assets:
Interest-bearing deposits in other
financial institutions ....................... $ 70 $ 6,014 $ 23,364 4.29% 3.56% 3.43%
Taxable securities .............................. 149,884 150,036 141,620 6.29 5.45 6.02
Tax-exempt securities ........................... 39,721 42,854 42,939 8.93 8.96 9.42
Federal funds sold .............................. 47,572 14,791 41,988 5.89 3.78 3.00
Loans ........................................... 426,523 371,442 303,578 8.92 8.23 8.77
--------- -------- --------
Total interest earning assets .............. 663,770 585,137 553,489 8.11% 7.41% 7.45%
-------- -------- -------- ------ ------ ------
Noninterest Earning Assets:
Cash and due from banks ......................... 30,469 26,960 25,749
Premises & equipment ............................ 14,861 12,900 11,450
Other assets and intangibles .................... 20,701 15,391 13,514
-------- -------- --------
Total noninterest earning assets ........... 66,031 55,251 50,713
-------- -------- --------
Total assets ............................... $729,801 $640,388 $604,202
======== ======== ========
Interest Bearing Liabilities:
Deposits:
Demand .................................... $ 99,827 $ 91,237 $ 86,818 2.34% 2.18% 2.39%
Savings ................................... 153,661 152,383 145,815 2.52 2.48 2.77
Time ...................................... 224,427 170,939 161,904 5.35 4.21 4.05
Short-term borrowings ........................ 74,552 69,647 66,210 5.65 3.77 2.95
Long-term debt ............................... 7,966 2,235 1,812 8.56 7.16 7.67
-------- -------- --------
Total interest bearing liabilities....... 560,433 486,441 462,559 4.12% 3.24% 3.19%
-------- -------- -------- ----- ----- -----
Noninterest Bearing Liabilities:
Demand deposits .............................. 99,178 90,994 83,401
Other liabilities ............................ 6,449 3,863 3,174
Stockholders' equity ............................ 63,741 59,090 55,068
-------- -------- --------
Total liabilities and
stockholders' equity ................ $729,801 $640,388 $604,202
======== ======== ========
Net interest spread ............... 3.99% 4.17% 4.26%
===== ===== =====
Net interest margin to
average interest earning
assets........................... 4.62% 4.72% 4.78%
===== ===== =====
</TABLE>
<PAGE>
The following table presents the components of the Company's net interest margin
(tax equivalent basis) for the three years ended December 31, 1995:
<TABLE>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Interest Income
Interest earning assets:
Interest-bearing deposits in other financial institutions ................... $ 3 $ 214 $ 801
Taxable securities .......................................................... 9,428 8,177 8,524
Tax-exempt securities ....................................................... 3,549 3,841 4,043
Federal funds sold .......................................................... 2,800 559 1,258
Loans ....................................................................... 38,027 30,585 26,615
------- ------- -------
Total ....................................................................... 53,807 43,376 41,241
------- ------- -------
Interest Expense
Interest bearing liabilities:
Demand deposits ............................................................. 2,338 1,991 2,074
Savings deposits ............................................................ 3,872 3,778 4,037
Time deposits ............................................................... 12,012 7,205 6,565
Short-term borrowings ....................................................... 4,210 2,624 1,956
Long-term debt .............................................................. 682 160 139
------- ------- -------
Total ....................................................................... 23,114 15,758 14,771
------- ------- -------
Net interest margin ............................................................ $30,693 $27,618 $26,470
======= ======= =======
</TABLE>
Provision for Loan Losses
The provision for loan losses is based on management's judgment of the amount
necessary to maintain the allowance for loan losses at an adequate level. The
provision is determined through a historical evaluation of the risk inherent in
the present loan portfolio, the overall level of loans outstanding and the
current level of net charge-offs. On December 31, 1995, the allowance for loan
losses was at $3,931,000 or .91% of outstanding loans. The provision for loan
losses amounted to $1,191,000 for 1995 as compared to $830,000 and $687,000 in
1994 and 1993, respectively.
One measurement used by management in assessing the risk inherent in the loan
portfolio is the level of non-performing loans. Non-performing loans are
comprised of those loans on which interest income is not being accrued and those
loans which are contractually in arrears as to principal or interest for ninety
days or more. Non-performing assets, which include other real estate acquired in
satisfaction of loans due the subsidiary banks, at December 31 for each of the
past five years are as follows:
Non-Performing Assets
----------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ -------
Non-accrual loans ................... $ 169 $1,084 $ 449 $ 917 $1,045
Past due loans ...................... 981 985 1,168 1,034 1,304
Other real estate ................... 444 444 534 498 426
------ ------ ------ ------ ------
$1,594 $2,513 $2,151 $2,449 $2,775
====== ====== ====== ====== ======
Total non-performing assets to total
stockholders' equity ............. 2.40% 4.08% 3.74% 4.61% 5.63%
Total non-performing assets to
total assets ..................... 0.21 0.36 0.34 0.41 0.50
<PAGE>
For the five years presented, there were no restructured loans or leases to be
reported.
The management process for evaluating the adequacy of the allowance for loan
losses includes reviewing each month's loan committee reports which list all
loans that do not meet certain internally developed criteria as to collateral
adequacy, payment performance, economic conditions and overall credit risk.
These reports, in narrative form, also address the current status and actions in
process on each listed loan. From this information, adjustments are made to the
allowance for loan losses. Such adjustments include both specific loss
allocation amounts and general provisions by loan category based on present and
past collection experience and total loan dollars outstanding.
As of December 31, 1995 management has identified potential problem loans by
type of loan. This includes the non-accrual and past due loans listed above in
Non-Performing Assets.
Commercial $ 1,716
Agricultural 2,179
Real estate, mortgage 353
Consumer 389
--------
$ 4,637
========
Other Income
Other income consists primarily of service charges on customer deposit accounts
and fees earned on trust department and farm management services. A portion of
the increase in 1995 is the result of gains in 1995 from the sale of student
loans and other real estate owned of $115,000 and $53,000, respectively. A
comparison of the amount and relative significance of other income for the last
three years is as follows:
1995 1994 1993
------ ------ ------
Other income ................................ $5,124 $3,838 $3,770
Ratio of other income to income before
income taxes ............................. 43% 36% 36%
Other Expenses
Salaries and employee benefits, which represent the largest component of other
expenses, increased by $1,215,000 or 13.3% in 1995 primarily due to the
inclusion of the salaries and employee benefits of the Community Bank of Plano
for a full year, additional employees at the new branch banking location in
Shorewood and general pay increases of 4%. During 1995 the FDIC lowered deposit
insurance rates which reduced the Company's premium expense by $555,000 from the
expense incurred in 1994. Details of other expenses for the three years ended
December 31, 1995 are presented in the following schedule:
1995 1994 1993
------- ------- -------
Salaries and employee benefits .................... $10,372 $ 9,157 $ 8,863
Occupancy expense ................................. 1,548 1,387 1,269
Data processing ................................... 945 818 799
Equipment expense ................................. 1,356 1,002 988
FDIC insurance and bank examination assessments ... 893 1,249 1,192
Printing, stationery and supplies ................. 598 461 469
Postage ........................................... 391 342 368
Amortization of intangibles ....................... 1,070 553 469
All other expenses ................................ 4,246 3,571 3,313
------- ------- -------
$21,419 $18,540 $17,730
======= ======= =======
<PAGE>
Applicable Income Taxes
The Company's income tax expense was $3,754,000 for 1995 compared to $3,273,000
for 1994 and $3,083,000 in 1993. The increases in 1995 and 1994 are primarily
due to increased gross income.
The Financial Accounting Standards Board Statement No. 109, Accounting for
Income Taxes requires that deferred tax assets be recognized for deductible
temporary differences and operating loss and tax credit carryforwards and the
deferred tax liabilities be recognized for taxable temporary differences.
Temporary differences are the differences between the reported amounts of assets
and liabilities and their tax bases.
Liquidity
The primary objectives of the Company's asset/liability management program are
to achieve the optimum net interest margin, to follow prudent investment
strategies and to maintain adequate liquidity to meet the withdrawal
requirements of depositors and the financing needs of prospective borrowers. The
interest rates offered during 1995 caused an increase in deposit dollars placed
in time certificates. Management continually monitors the liquidity requirements
and rate sensitivity of its short-term source of funds. The accompanying
schedule illustrates the Company's rate sensitive asset and liability position
("GAP") by period and on a cumulative basis at December 31, 1995.
Less Than 90 To 1 to 5 Over
90 Days 365 Days Years 5 Years
--------- --------- -------- --------
Rate sensitive assets:
Current:
Securities ..................... $ 17,188 $ 91,399 $ 78,239 $ 15,885
Federal funds sold ............. 41,537 0 0 0
Loans .......................... 98,099 36,862 175,892 120,995
-------- --------- -------- --------
156,824 128,261 254,131 136,880
Cumulative ........................ 156,824 285,085 539,216 676,096
Rate sensitive liabilities:
Current:
Savings ......................... 152,128 0 0 0
Time deposits ................... 81,684 101,965 55,649 3
Other deposits and liabilities .. 157,279 7,915 6,026 925
-------- -------- -------- --------
391,091 109,880 61,675 928
Cumulative ......................... 391,091 500,971 562,646 563,574
"GAP":
Amount:
Current ........................ (234,267) 18,381 192,456 135,952
Cumulative ..................... (215,886) (23,430) 112,522
Percentage of total rate sensitive
assets:
Current ........................ (149.38)% 14.33% 75.73% 99.32%
Cumulative ..................... (75.73)% (4.35)% 16.64%
Included in "Less Than 90 Days" rate sensitive liabilities is $152,128,000 of
savings deposits which are more core deposit in nature and historically were not
classified as rate sensitive. While the shorter term negative GAP position
represents a potential adverse impact on the Company's net interest income
position in periods of rising interest rates, the same position generally
results in a favorable impact when interest rates remain constant or decline.
The Company manages its GAP position by taking into account actual prepayment
experience on its installment and mortgage loan portfolios.
At December 31, 1995 the securities portfolio included $2,498,000 in gross
unrealized gains and $603,000 in gross unrealized losses on securities intended
to be held to maturity. Such amounts are not expected to have a material effect
on future earnings, beyond the usual amortization of acquisition premium or
discount, because securities are intended to be held to maturity. Available for
sale securities included $71,000 of gross unrealized gains and $221,000 of gross
unrealized losses and are not expected to have a material effect on future
earnings.
<PAGE>
Capital Adequacy
In 1995 stockholders' equity increased by $4,768,000 to $66,425,000. The amounts
comprising this net increase were an addition for net earnings of $8,211,000
with decreases for dividends paid to stockholders of $3,344,000 and a $99,000
change in unrealized losses on securities available for sale. At December 31,
1995 stockholders' equity represented 8.86% of total assets compared to the year
earlier position of 8.90%.
Under rules adopted by all the federal bank regulatory agencies, financial
institutions are subject to "risk based" capital measurements. These regulations
establish minimum levels for "Tier 1 Capital", "Total Capital" and the "Leverage
Ratio". The following table presents the Company's actual Tier 1, Total Capital
and Leverage Ratio at December 31, 1995. For comparison purposes, the minimal
required amounts and ratios are also reported.
Tier 1:
Amount, actual ....................................... $56,203
Amount, minimum required ............................. 18,566
Ratio, actual ........................................ 12.11%
Ratio, minimum required .............................. 4.00
Total capital:
Amount, actual ....................................... $60,134
Amount, minimum required ............................. 37,132
Ratio, actual ........................................ 12.96%
Ratio, minimum required .............................. 8.00
Leverage ratio:
Actual ............................................... 7.56
Minimum required ..................................... 3.00
Effects of Inflation
The net monetary assets of a financial institution are affected more by the
general level of interest rates than by the prices of other goods and services.
High rates of inflation are generally accompanied by higher than normal interest
rates. Conversely, with a low inflation rate, or the anticipation of lower rates
of inflation, interest rates are usually lower than normal. The Company
generally is able to offset the higher cost of funds predominant in periods of
higher inflation with increased yields on loans and investments. When inflation
rates drop, and interest rates follow that pattern, the Company's cost of funds
and interest earned on assets are likely to be reduced proportionately.
Assets such as bank premises and equipment are considered non-monetary in nature
and are not directly affected by inflation in the normal flow of business. These
assets are directly affected by current rates of inflation only when purchased
or sold.
Impact of New Accounting Standards
FASB issued Statement 122 regarding accounting for mortgage servicing rights is
effective for years beginning after December 15, 1995. Retained mortgage
servicing rights for loans sold in the secondary markets after December 31, 1995
are to be valued and capitalized. The Company does not expect Statement 122 to
have a material impact on the financial statements.
<PAGE>
Item 8. Financial Statements and Supplementary Data.
Financial Statements
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
Consolidated balance sheets
Consolidated statements of income
Consolidated statements of changes in stockholders' equity
Consolidated statements of cash flows
Notes to consolidated financial statements
Supplementary data
- --------------------------------------------------------------------------------
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
First National Bancorp, Inc.
and Subsidiaries
Joliet, Illinois
We have audited the accompanying consolidated balance sheets of First National
Bancorp, Inc. and Subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of income, changes in stockholders' equity, and cash
flows for the years ended December 31, 1995, 1994 and 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of First National
Bancorp, Inc. and Subsidiaries as of December 31, 1995 and 1994, and the results
of their operations and their cash flows for the years ended December 31, 1995,
1994 and 1993, in conformity with generally accepted accounting principles.
/s/ McGladrey & Pullen, LLP
---------------------------
Joliet, Illinois
January 26, 1996
<PAGE>
FIRST NATIONAL BANCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
(In Thousands)
ASSETS 1995 1994
- --------------------------------------------------------------------------------
Cash and due from banks .................................. $ 42,979 $ 42,832
Interest-bearing deposits in other financial
institutions 0 4,198
Securities available for sale ............................ 17,337 0
Securities held to maturity .............................. 185,374 189,874
-------- --------
202,711 189,874
-------- --------
Federal funds sold ....................................... 41,537 0
Loans:
Commercial ............................................ 79,967 91,120
Agricultural .......................................... 8,815 8,485
Real estate, mortgage ................................. 210,631 184,795
Consumer .............................................. 134,344 141,611
-------- --------
433,757 426,011
Less unearned discount ................................ (1,909) (4,011)
-------- --------
431,848 422,000
Less allowance for loan losses ........................ (3,931) (3,082)
-------- --------
427,917 418,918
-------- --------
Premises and equipment, net .............................. 15,579 14,660
Accrued interest and other assets ........................ 7,687 9,510
Intangibles, net ......................................... 11,580 12,650
-------- --------
Total Assets ............................... $749,990 $692,642
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits:
Demand, non-interest bearing ....................... $114,035 $108,177
NOW accounts ....................................... 58,027 51,944
Money market accounts .............................. 41,646 43,796
Savings ............................................ 152,128 151,558
Time deposits, $100,000 and over ................... 34,781 25,552
Other time deposits ................................ 204,520 175,135
-------- --------
Total Deposits ............................. 605,137 556,162
Short-term borrowings ................................. 64,771 59,614
Long-term debt ........................................ 7,701 8,326
Accrued interest and other liabilities ................ 5,956 6,883
-------- --------
Total Liabilities .......................... 683,565 630,985
-------- --------
Commitments and Contingent Liabilities
Stockholders' Equity
Preferred stock, no par value, authorized 1,000,000
shares; none issued
Common stock, par value $10; authorized 2,750,000
shares; issued 1,215,902 shares .................... 12,159 12,159
Additional paid-in capital ............................ 8,846 8,846
Retained earnings ..................................... 45,519 40,652
Unrealized loss on securities available for sale, net . (99)
-------- --------
Total Stockholders' Equity ................. 66,425 61,657
-------- --------
Total Liabilities and Stockholders' Equity . $749,990 $692,642
======== ========
See Notes to Consolidated Financial Statements.
<PAGE>
FIRST NATIONAL BANCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 1995, 1994 and 1993
(In Thousands Except
for Earnings Per Share)
1995 1994 1993
- --------------------------------------------------------------------------------
Interest Income:
Interest and fees on loans $ 38,027 $ 30,585 $ 26,615
Interest on securities:
Taxable 9,428 8,177 8,524
Tax-exempt 2,307 2,535 2,669
------------------------------
11,735 10,712 11,193
------------------------------
Interest on federal funds sold 2,800 559 1,258
Interest on deposits in other financial
institutions 3 214 801
------------------------------
Total Interest Income 52,565 42,070 39,867
------------------------------
Interest Expense:
Interest on deposits 18,222 12,974 12,676
Interest on short-term borrowings 4,210 2,624 1,956
Interest on long-term debt 682 160 139
------------------------------
Total Interest Expense 23,114 15,758 14,771
------------------------------
Net Interest Income 29,451 26,312 25,096
Provision for loan losses 1,191 830 687
------------------------------
Net Interest Income After
Provision for Loan Losses 28,260 25,482 24,409
------------------------------
Other Income:
Trust department and farm management income 832 833 796
Service fees 2,884 2,365 2,125
Gain on sale of securities 309 336
Other 1,099 640 513
------------------------------
Total Other Income 5,124 3,838 3,770
------------------------------
Other Expenses:
Salaries and employee benefits 10,372 9,157 8,863
Occupancy expense 1,548 1,387 1,269
Data processing 945 818 799
Equipment expense 1,356 1,002 988
Other expenses 7,198 6,176 5,811
-----------------------------
Total Other Expenses 21,419 18,540 17,730
-----------------------------
Income Before Income Taxes 11,965 10,780 10,449
Applicable Income Taxes 3,754 3,273 3,083
-----------------------------
Net Income $ 8,211 $ 7,507 $ 7,366
=============================
Earnings Per Common Share $ 6.75 $ 6.17 $ 6.06
=============================
See Notes to Consoldiated Financial Statements.
<PAGE>
FIRST NATIONAL BANCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
Years Ended December 31, 1995, 1994 and 1993
<TABLE>
(In Thousands)
-------------------------------------------------------------------------
Unrealized
(Loss) on
Common Stock Additional Securities
--------------------- Paid-In Retained Available
Shares Par Value Capital Earnings For Sale Total
-------- ------------ ------------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 ....................... 869 $ 8,689 $ 12,350 $ 32,079 $ 0 $ 53,118
Net income .................................... 0 0 0 7,366 0 7,366
Cash dividends declared $2.50
per share .................................. 0 0 0 (3,042) 0 (3,042)
------------------------------------------------------------------------
Balance, December 31, 1993 ....................... 869 $ 8,689 $ 12,350 $ 36,403 $ 0 $ 57,442
Net income .................................... 0 0 0 7,507 0 7,507
Stock split of two additional
shares for each five shares
previously held, fractional
shares paid in cash ........................ 347 3,470 (3,504) 0 0 (34)
Cash dividends declared $1.43
per share prior to stock split
and $1.25 subsequent to stock
split ...................................... 0 0 0 (3,258) 0 (3,258)
------------------------------------------------------------------------
Balance, December 31, 1994 ....................... 1,216 $ 12,159 $ 8,846 $ 40,652 $ 0 $ 61,657
Net income .................................... 0 0 0 8,211 0 8,211
Cash dividends declared $2.75
per share .................................. 0 0 0 (3,344) 0 (3,344)
Net change in unrealized
(loss) on securities available
for sale ................................... 0 0 0 0 (99) (99)
------------------------------------------------------------------------
Balance, December 31, 1995 ....................... 1,216 $ 12,159 $ 8,846 $ 45,519 $ (99) $ 66,425
========================================================================
</TABLE>
See Notes to Consoldiated Financial Statements.
<PAGE>
FIRST NATIONAL BANCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1995, 1994 and 1993
<TABLE>
(In Thousands)
1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net income ....................................................... $ 8,211 $ 7,507 $ 7,366
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation .................................................. 1,288 984 856
Provision for loan losses ..................................... 1,191 830 687
Provision for deferred income taxes ........................... (190) (214) (227)
Amortization of bond premiums, net of accretion ............... 195 327 350
Amortization of intangibles ................................... 1,070 553 469
(Gain) on sale of securities .................................. (309) (336)
(Increase) decrease in accrued interest and
other assets ................................................ 2,946 (2,033) 1,137
Increase (decrease) in accrued interest and
other liabilities ........................................... (686) 675 868
---------------------------------------
Net Cash Provided by Operating
Activities ........................................ 13,716 8,629 11,170
---------------------------------------
Cash Flows From Investing Activities
Interest bearing deposits in other financial
institutions, net ............................................. 4,198 4,455 4,604
Proceeds from maturities of securities held to maturity .......... 58,051 66,469 58,961
Proceeds from sale of securities ................................. 11,533
Purchase of securities held to maturity .......................... (70,924) (48,971) (90,602)
Federal funds sold and securities purchased
under agreements to resell, net ............................... (41,537) 39,114 20,500
Loans made to customers, net of principal
collections ................................................... (11,313) (52,331) (38,504)
Purchase of Plano Bancshares, Inc. net of cash
acquired and debentures issued ................................ (4,644)
Proceeds from sale of equipment .................................. 15
Purchase of premises and equipment ............................... (2,207) (1,822) (1,794)
----------------------------------------
Net Cash Provided by (Used in) Investing
Activities ........................................ (63,732) 2,285 (35,302)
----------------------------------------
Cash Flows From Financing Activities
Net increase (decrease) in time deposits ......................... 38,614 26,056 (11,268)
Net increase (decrease) in all other deposit accounts ............ 10,361 (10,663) 24,894
Proceeds from securities sold under agreements
to repurchase ................................................. 160,229 104,906 120,830
Payments on securities sold under agreements
to repurchase ................................................. (150,038) (125,270) (100,333)
Other short-term borrowings, net ................................. (5,034) 1,941 96
Proceeds from long-term debt ..................................... 3,800
Principal paid on long-term debt ................................. (625) (250) (1,625)
Cash paid in lieu of fractional shares ........................... (34)
Dividends paid ................................................... (3,344) (3,258) (3,042)
----------------------------------------
Net Cash Provided by (Used in) Financing
Activities ........................................ 50,163 (2,772) 29,552
----------------------------------------
Net Increase in Cash and Due from Banks ............... 147 8,142 5,420
Cash and Due From Banks
Beginning ........................................................ 42,832 34,690 29,270
----------------------------------------
Ending ........................................................... $ 42,979 $ 42,832 $ 34,690
========================================
</TABLE>
See Notes to Consoldiated Financial Statements.
<PAGE>
FIRST NATIONAL BANCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
Years Ended December 31, 1995, 1994 and 1993
<TABLE>
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Supplemental Disclosures of Cash Flow Information
Cash payments for:
Interest paid to depositors $ 17,136 $ 12,754 $ 12,960
Interest paid on borrowings 4,660 2,775 2,097
Income taxes 4,091 3,503 3,276
Supplemental Schedule of Noncash Investing and
Financing Activities
Transfer of securities held to maturity to
securities available for sale 17,487
Unrealized loss on securities available for sale, net of
deferred income taxes of $51 99
Other real estate acquired in settlement of loans 1,123 384
Acquisition of Plano Bancshares, Inc.
Assets acquired:
Cash and due from banks 2,317
Securities 16,827
Federal funds sold 814
Loans, net 34,174
Premises and equipment 1,609
Accrued interest and other assets 753
Intangibles 6,127
--------------
62,621
--------------
Liabilities assumed:
Demand, NOW and Money Market deposits 6,106
Savings and time deposits 43,649
Deferred taxes 1,526
Other liabilities 603
--------------
51,884
--------------
Total purchase price 10,737
Debentures issued 3,776
--------------
Cash paid $ 6,961
=============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
FIRST NATIONAL BANCORP, INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Table Amounts in Thousands Except for Earnings Per Share)
- --------------------------------------------------------------------------------
Note 1. Nature of Business and Significant Accounting Policies
First National Bancorp, Inc. is a multi-bank holding company providing financial
and other banking services to customers located primarily in the Will, Grundy
and Kendall Counties, Illinois area.
The following summarizes the significant accounting policies used in the
preparation of the accompanying consolidated financial statements.
Basis of financial statement presentation: The accounting and reporting policies
of the Company conform to generally accepted accounting principles and general
practices within the financial services industry. In preparing the financial
statements, management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities as of the date of the balance
sheet and revenues and expenses for the year. Actual results could differ from
those estimates.
Principles of consolidation: The consolidated financial statements include the
accounts of First National Bancorp, Inc. and its wholly-owned subsidiaries,
First National Bank of Joliet, Southwest Suburban Bank, Bank of Lockport and
Plano Bancshares, Inc.. All material intercompany items and transactions have
been eliminated in consolidation.
Securities and accounting change: The Company elected to adopt the provisions of
FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity
Securities as of January 1, 1994. Statement 115 requires that management
determine the appropriate classification of securities at the date of adoption,
and thereafter at the date securities are acquired, and that the appropriateness
of such classification be reassessed at each statement of financial condition
date. The three classifications to be considered are securities held to
maturity, securities available for sale and trading securities. All the
Company's securities have been either classified as held to maturity or
available for sale.
Securities classified as held to maturity are those debt securities that 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 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 in income.
Prior to the adoption of Statement 115, investment securities were stated at
cost, adjusted for amortization of premiums and accretion of discounts, computed
by the interest method over their contractual lives. The adoption of Statement
115 did not have an effect on the financial statements.
<PAGE>
Loans and allowance for loan losses: Loans are reported at their unpaid
principal amount, reduced by unearned discount and an allowance for loan losses.
Interest on loans is calculated primarily by using the simple interest method on
daily balances of the principal amount outstanding. Nonrefundable loan fees, net
of related origination costs, are initially deferred with the resulting deferred
income (or deferred expense when costs exceed fees) recognized over the term of
the related loan as an adjustment to the yield.
The allowance for loan losses is established through a provision for loan losses
charged to expense. Loans are charged against the allowance for loan losses when
management believes that the collectibility of the principal is unlikely. The
allowance is an amount that management believes will be adequate to absorb
possible losses on existing loans that may become uncollectible, based on
evaluations of the collectibility of loans and prior loan loss experience. This
evaluation also takes into consideration such factors as changes in the nature
and volume of the loan portfolio, overall portfolio quality, review of specific
problem loans, and current economic conditions that may affect the borrower's
ability to pay. While management uses the best information available to make its
evaluation, future adjustments to the allowance may be necessary if there are
significant changes in economic conditions.
On January 1, 1995, the Company adopted FASB Statement No 114, Accounting by
Creditors for Impairment of a Loan as amended by Statement No. 118, Accounting
by Creditors for Impairment of a Loan - Income Recognition and Disclosures.
Loans are considered impaired when, based on current information and events, it
is probable that the Company will not be able to collect all amounts due
according to the contractual terms of the loan agreement. Under these
statements, the impairment is measured based on the present value of expected
future cash flows, or alternatively, the observable market price of the loans or
the fair value of the collateral. However, for those loans that are
collateral-dependent and for which management has determined foreclosure is
probable, the measure of impairment of those loans is to be based on the fair
value of the collateral. These statements also require certain disclosures about
impaired loans and the allowance for loan losses and interest income recognized
on those loans. The effect of adopting these statements was not material.
For impaired loans and other loans, accrual of interest is discontinued on a
loan when management believes, after considering collection efforts and other
factors, that the borrower's financial condition is such that collection of
interest is doubtful. Cash collections on impaired loans are credited to the
loan receivable balance, and no interest income is recognized on those loans
until the principal balance has been collected.
Depreciation: Premises and equipment are stated at cost less accumulated
depreciation computed primarily on the straight-line method for premises and
150% declining-balance method for equipment over the following estimated useful
lives of the assets:
In Years
------------
Land improvements 5-15
Buildings 15-40
Equipment 5-10
Intangibles: The portion of the purchase price of subsidiary banks which
represents value assigned to the existing deposit base for which the annual
interest and servicing costs are below market rates (core deposit intangibles)
is being amortized on the straight-line method over five to ten years. The
excess of cost over fair value of net assets acquired (goodwill) in the purchase
of subsidiary banks is being amortized on the straight-line method over fifteen
and twenty years. The Company reviews its intangible assets annually to
determine potential impairment by comparing the carrying value of the goodwill
with the anticipated future cash flows of the related banks.
<PAGE>
Pension Plan: The Company has a pension plan covering all full-time employees of
its subsidiary banks who have completed one year of service and meet specific
age requirements. The Company's funding policy is to make the minimum annual
contribution that is required by applicable regulations, plus such amounts as
the Company may determine to be appropriate.
Income taxes: Consolidated federal income tax returns are filed by the Company
and 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.
Earnings per share: Earnings per share are calculated on the basis of the
weighted average number of shares outstanding giving retroactive effect for the
stock split in 1994. Prior year per share information has also been restated.
Presentation of cash flows: Cash flows from interest-bearing deposits in other
financial institutions, loans, federal funds sold, short-term borrowings with
the U.S. Treasury and all customer deposit accounts are shown net.
Fair value of financial instruments: FASB Statement No. 107, Disclosures about
Fair Value of Financial Instruments, requires disclosure of fair value
information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate that value. In cases
where quoted market prices are not available, fair values are based on estimates
using present value or other valuation techniques. Those techniques are
significantly affected by the assumptions used, including the discount rate and
estimates of future cash flows. In that regard, the derived fair value estimates
cannot be substantiated by comparison to independent markets and, in many cases,
could not be realized in immediate settlement of the instrument. Statement 107
excludes certain financial instruments and all nonfinancial instruments from its
disclosure requirements. Accordingly, the aggregate fair value amounts presented
do not represent the underlying value of the Company.
The following methods and assumptions were used by the Company in estimating the
fair value of its financial instruments:
Cash and due from banks, deposits in other financial institutions and
federal funds sold: The carrying amounts reported in the consolidated
balance sheet for cash and due from banks, deposits in other financial
institutions and federal funds sold approximate their fair values.
Securities: Fair values for securities are based on quoted market prices,
where available. If quoted prices are not available, fair values are based
on quoted market prices of comparable instruments. The carrying amount of
accrued interest receivable approximates its fair value.
Loans: Most commercial loans, and some real estate mortgage loans, are
made on a variable rate basis. For those variable-rate loans that reprice
frequently, and with no significant change in credit risk, fair values are
based on carrying values. The fair values for fixed rate and all other
loans are estimated using discounted cash flow analyses, applying the
interest rates currently offered to borrowers for loans of similar credit
quality and comparable payment terms. The carrying amount of accrued
interest receivable approximates its fair value.
<PAGE>
Deposit liabilities: The fair values disclosed for non-interest bearing demand
deposits equal their carrying amounts which represents the amount payable on
demand. The carrying amounts for savings, NOW accounts and variable-rate
deposits approximate their fair values at the reporting date. Fair values for
fixed-rate time deposits are estimated using a discounted cash flow calculation
that applies interest rates currently being offered on certificates to a
schedule of aggregate expected monthly maturities on time deposits. The carrying
amount of accrued interest payable approximates its fair value.
Short-term borrowings: The carrying amounts of securities sold under
agreements to repurchase and other short-term borrowings approximate their
fair values.
Long-term debt: The fair value of long-term debt is equal to the
outstanding principal amount because the interest rate is variable based
on current interest rates and on the expected ability of the Company to be
able to borrow additional funds at the same rate and terms of the present
existing debt.
Loan commitments and letters of credit: The fair value of loan commitments
and letters of credit is equivalent to their recorded carrying value of
zero.
Accounting for mortgage servicing rights: Financial Accounting Standards Board
Statement No. 122, Accounting for Mortgage Servicing Rights, (FASB 122) requires
banks to recognize as separate assets rights to service mortgage loans for
others, however those servicing rights are acquired. If the Company acquires
mortgage servicing rights through either the purchase or origination of mortgage
loans and sells or securitizes those loans with servicing rights retained, the
Company should allocate the total cost of the mortgage loans to mortgage
servicing rights and the loans (without the mortgage servicing rights) based on
their relative fair values. The mortgage servicing rights should be amortized in
proportion to and over the period of estimated net servicing income.
The Company will be required to adopt FASB 122 for the fiscal year ending
December 31, 1996. The Company believes the adoption of FASB 122 will not have a
material effect on the financial statements.
Reclassifications: Certain amounts included in the consolidated balance sheet at
December 31, 1994 have been retroactively reclassified to conform to the
presentations adopted for December 31, 1995.
Note 2. Acquisition
On October 31, 1994 the Company acquired 100% of the outstanding shares of Plano
Bancshares, Inc. for $10,737,000 paid through issuing $3,776,000 of debentures
plus cash of $6,961,000. The excess of acquisition cost over the fair value of
net assets acquired was $7,574,000.
The acquisition has been accounted for as a purchase with the results of
operations of Plano Bancshares, Inc. since October 31, 1994 are included in the
consolidated financial statements. Unaudited proforma consolidated financial
operations for the years ended December 31, 1994 and 1993 as though Plano
Bancshares, Inc. had been acquired as of January 1, 1993 follow:
1994 1993
- --------------------------------------------------------------------------------
Net interest income ................. $ 27,878 $ 26,737
Net income .......................... 7,125 7,203
Earnings per common share ........... 5.86 5.92
The above amounts reflect adjustments for amortization and depreciation on
revalued purchased assets, interest expense on long-term debt and income taxes.
Note 3. Intangibles
Intangibles consist of goodwill, net of accumulated amortization, of $8,125,000
and $8,748,000 as of December 31, 1995 and 1994, respectively and core deposit
intangible, net of accumulated amortization, of $3,455,000 and $3,902,000 as of
December 31, 1995 and 1994, respectively.
<PAGE>
Note 4. Securities
The amortized cost and fair values of securities available for sale and held to
maturity at December 31, 1995 are as follows:
<TABLE>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
------------------------------------------
<S> <C> <C> <C> <C>
Available for Sale:
U.S. Treasury securities .................................. $ 12,638 $ 70 $ (65) $ 12,643
U.S. government agencies .................................. 4,549 1 (156) 4,394
Other ..................................................... 300 0 0 300
------------------------------------------
$ 17,487 $ 71 $ (221) $ 17,337
==========================================
Held to Maturity:
U.S. Treasury securities .................................. $ 40,968 $ 252 $ (144) $ 41,076
U.S. government agencies .................................. 106,661 896 (401) 107,156
Obligations of state and political
subdivisions ........................................... 37,745 1,350 (58) 39,037
------------------------------------------
$185,374 $ 2,498 $ (603) $187,269
==========================================
</TABLE>
During December 1995, the Company made a one time transfer of certain securities
from held to maturity to available for sale, as allowed by FASB Statement 115.
The amortized cost and fair value of securities held to maturity at December 31,
1994 are as follows:
<TABLE>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities .................................... $ 42,437 $ 9 $ (1,804) $ 40,642
U.S. government agencies .................................... 104,144 58 (3,729) 100,473
Obligations of state and political
subdivisions ............................................. 42,638 669 (871) 42,436
Corporate and other securities .............................. 655 1 (2) 654
------------------------------------------
$189,874 $ 737 $ (6,406) $184,205
==========================================
</TABLE>
The amortized cost and fair value of securities as of December 31, 1995, by
earliest contractual maturity date, are shown below. Actual maturities may
differ from the maturities presented because borrowers may, or may not, exercise
the rights to call or prepay their obligations.
<TABLE>
Available For Sale Held to Maturity
------------------ ------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Due in one year or less ................................. $ 4,808 $ 4,777 $103,810 $104,160
Due after one year through
five years ........................................... 11,879 11,835 66,404 67,531
Due after five years through
ten years ............................................ 500 425 13,980 14,413
Due after ten years ..................................... 300 300 1,180 1,165
----------------------------------------
$ 17,487 $17,337 $185,374 $187,269
========================================
</TABLE>
<PAGE>
Securities with a carrying value of approximately $122,000,000 and $110,000,000
at December 31, 1995 and 1994, respectively, were pledged to secure public
deposits, securities sold under agreements to repurchase and for other purposes
required or permitted by law.
Securities called before their contractual maturity date resulted in gains of
$309,000 during the year ended December 31, 1995.
Note 5. Loans
The subsidiary banks make loans to both individuals and commercial entities in a
wide variety of industries. Loan terms vary as to interest rate, repayment
period and collateral requirements based on the type of loan requested and the
credit worthiness of the prospective borrower. Credit risk tends to be
geographically concentrated in that the majority of the loan customers are
located in the markets served by the subsidiary banks.
Loans on which the accrual of interest has been discontinued or reduced amounted
to $169,000 and $1,084,000 at December 31, 1995 and 1994, respectively. If
interest on non-accrual loans had been accrued, such income would have
approximated $10,000, $88,000 and $72,000 for 1995, 1994 and 1993, respectively.
There was no interest income received on nonaccrual loans during the year ended
December 31, 1994. There was $4,000 and $4,800 of interest income received on
non-accrual loans during the years ended December 31, 1995 and 1993,
respectively.
There were no impaired loans at December 31, 1995.
Changes in the allowance for loan losses were as follows:
1995 1994 1993
- ----------------------------------------------------------------------------
Balance, beginning of year ........................ $3,082 $2,722 $2,649
Addition with purchase of Plano
Bancshares, Inc............................... 0 303 0
Provision charged to operations ................ 1,191 830 687
Loans charged off .............................. (646) (950) (776)
Recoveries ..................................... 304 177 162
----------------------
Balance, end of year .............................. $3,931 $3,082 $2,722
======================
At December 31, 1995 and 1994, certain officers and directors, and companies in
which they have management or beneficial ownership, were indebted to the Banks
in the aggregate amount of $4,968,000 and $4,782,000, respectively. In the
opinion of management, these loans have similar terms to other customer loans.
An analysis of the aggregate changes in these loans during 1995 and 1994 is as
follows:
1995 1994
------- -------
Balance, beginning of year ............ $ 4,782 $ 4,630
Loans .............................. 4,901 5,924
Principal repayments ............... (4,715) (5,772)
------- -------
Balance, end of year .................. $ 4,968 $ 4,782
======= =======
<PAGE>
Note 6. Premises and Equipment
Major classifications of these assets are summarized as follows:
December 31,
-------------------
1995 1994
- ------------------------------------------------------------------------------
Land and land improvement .............. $ 3,926 $ 3,668
Buildings .............................. 13,285 12,249
Equipment .............................. 8,111 7,198
-------------------
25,322 23,115
Accumulated depreciation ............... (9,743) (8,455)
-------------------
$ 15,579 $ 14,660
===================
Total depreciation expense for years ended December 31, 1995, 1994 and 1993 was
$1,288,000, $984,000 and $856,000, respectively.
Note 7. Employee Benefit Plans
The amount charged to expense for the Company's pension plan totaled $314,000,
$311,000 and $301,000 for the years ended December 31, 1995, 1994 and 1993,
respectively. The components of the pension cost charged to expense each year
consisted of the following:
1995 1994 1993
- --------------------------------------------------------------------------------
Service cost ...................................... $ 272 $ 240 $ 226
Interest cost on projected benefit obligation ..... 341 370 363
Actual (return) loss on plan assets ............... (621) 62 (478)
Net amortization and deferral ..................... 322 (361) 190
-------------------------
$ 314 $ 311 $ 301
========================
The following table sets forth the plan's funding status as of October 31, 1995
and 1994, and the amount recognized in the accompanying consolidated balance
sheets as of December 31, 1995 and 1994:
1995 1994
- -------------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Vested benefits ................................. $ 3,135 $ 2,737
=====================
Accumulated benefits ............................ $ 3,217 $ 2,793
=====================
Projected benefits ................................. $ 5,138 $ 4,490
Plan assets at fair value .......................... 4,628 3,614
---------------------
Plan assets (less than) projected benefit obligation (510) (876)
Unrecognized net loss .............................. 1,165 1,131
Unrecognized prior service cost .................... (19) 265
Unrecognized net transition asset .................. (591) (623)
---------------------
Prepaid (accrued) pension asset (liability) ....... $ 45 $ (103)
=====================
<PAGE>
Assumptions used by the Company in the determination of pension plan information
consisted of the following as of October 31, 1995 and 1994:
1995 1994
- --------------------------------------------------------------------------------
Discount rate ............................................ 7.5% 8.3%
Rate of increase in compensation level ................... 4.5 4.5
Expected long-term rate of return on plan assets ......... 8.0 8.0
Plan assets consist primarily of investments in common stocks and U.S.
Government securities. Plan assets include common stock of the Company with a
market value of $665,000 and $544,000 at October 31, 1995 and 1994,
respectively.
Additionally, the Company has a defined contribution 401(k) plan. Substantially
all the Banks' employees are covered under the plan. Participants make tax
deferred contributions. The Banks make matching contributions equal to 50% of
each participant's contribution up to the first 6% of compensation that is
deferred. Contributions by the Banks to the 401(k) plan for the years ended
December 31, 1995, 1994 and 1993 were $147,000, $121,000 and $108,000,
respectively.
Note 8. Income Tax Matters
Net deferred tax assets (liabilities) consist of the following components as of
December 31, 1995 and 1994:
1995 1994
- --------------------------------------------------------------------------------
Deferred tax assets:
Securities available for sale .......... $ 51 $ 0
Allowance for loan losses .............. 1,503 1,112
Deferred loan fees ..................... 88 481
Other .................................. 184 220
-------------------
1,826 1,813
-------------------
Deferred tax liabilities:
Premises and equipment ................. 1,278 1,263
Intangibles ............................ 1,197 1,407
Other .................................. 82 115
-------------------
2,557 2,785
-------------------
Net deferred tax (liabilities) ......... $ (731) $ (972)
===================
Net deferred tax liabilities of $731,000 and $972,000 at December 31, 1995 and
1994 are included in accrued interest and other liabilities. No valuation
allowance was considered necessary.
The components of income tax expense are as follows:
Year Ended December 31,
------------------------------
1995 1994 1993
- -----------------------------------------------------------------------------
Currently paid or payable:
Federal ............................ $ 3,622 $ 3,136 $ 3,017
State .............................. 322 351 293
Deferred .............................. (190) (214) (227)
------------------------------
$ 3,754 $ 3,273 $ 3,083
==============================
<PAGE>
The income tax effect of the temporary differences on each of the years ended
December 31, 1995, 1994 and 1993 is as follows:
1995 1994 1993
- -----------------------------------------------------------------------------
Depreciation basis and methods ................. $ 15 $ (65) $ 74
Interest and loan fee income ................... 393 (29) (64)
Provision for loan losses ...................... (391) (239) (234)
Intangible amortization ........................ (210) 0 0
Other items, net ............................... 3 119 (3)
-----------------------
$ (190) $ (214) $ (227)
=======================
The reconciliation of the statutory income tax to income taxes included in the
consolidated statements of income for the years ended December 31, 1995, 1994
and 1993 is as follows:
<TABLE>
1995 1994 1993
----------------------- ----------------------- ----------------------
Amount % Amount % Amount %
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income tax at statutory rate ............. $ 4,188 35.0% $ 3,773 35.0% $ 3,553 34.0%
Increase (decrease) resulting
from:
State income taxes net of
federal income tax
benefit ............................ 199 1.7 239 2.2 193 1.8
Tax-exempt income ..................... (828) (6.9) (891) (8.3) (908) (8.7)
Goodwill amortization ................. 195 1.6 173 1.6 159 1.5
Nondeductible interest
expense ............................ 84 0.7 72 0.7 70 0.7
Other items, net ...................... (84) (0.7) (93) (0.8) 16 0.2
----------------------------------------------------------------------------------
$ 3,754 31.4 $ 3,273 30.4 $ 3,083 29.5
==================================================================================
</TABLE>
Note 9. Short-Term Borrowings
Short-term borrowings consisting of securities sold under agreements to
repurchase and U.S. Treasury note accounts are as follows at December 31 of each
year:
1995 1994 1993
- -------------------------------------------------------------------------
End of year:
Outstanding balance ................. $ 64,771 $ 59,614 $ 78,037
Weighted average interest rate 5.40% 5.31% 2.88%
During the year:
Average outstanding balance ......... 74,552 69,647 66,210
Maximum outstanding balance ......... 92,986 80,379 79,441
Weighted average interest rate 5.65% 3.77% 2.95%
Note 10. Long-Term Debt
The Company has a term note payable to another financial institution of
$3,425,000 which accrues interest at the London Interbank Offered Rate plus 175
basis points (7.703% at December 31, 1995) and requires quarterly principal
payments of $125,000 plus interest until October 1999, when the remaining
principal is due. The note is unsecured.
<PAGE>
The Company also has a term note payable to another financial institution of
$500,000 which accrues interest at the national prime interest rate (8.5% at
December 31, 1995) and requires semi-annual principal payments of $125,000 plus
interest. All the outstanding common stock of the Bank of Lockport is pledged as
collateral on the note.
The Company has debentures payable of $3,776,000 to certain former stockholders
of Plano Bancshares, Inc. The debentures require semi-annual interest payments
at the national prime interest rate and require that one-third of the
outstanding principal be paid annually October 1997, 1998 and 1999. The
debentures are unsecured.
Aggregate maturities of the note and debentures payable are due as follows:
Year Ending Notes Debentures
December 31, Payable Payable
- --------------------------------------------------------------------------------
1996 $ 750,000 $ 0
1997 750,000 1,259,000
1998 500,000 1,259,000
1999 1,925,000 1,258,000
---------- ----------
$3,925,000 $3,776,000
========== ==========
Note 11. Financial Instruments With Off-Balance-Sheet Risk
The Banks are a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of their customers.
These financial instruments include commitments to extend credit and standby
letters of credit, which to varying degrees, involve elements of credit risk in
excess of the amount recognized in the balance sheet.
The Banks' exposure to credit loss in the event of nonperformance by the
customer on commitments to extend credit and standby letters of credit is
represented by the contractual amount of those instruments. The Banks use the
same credit policies in making commitments and conditional obligations as for
on-balance-sheet instruments.
A summary of the contract amounts of the Banks' exposure to off-balance-sheet
risk as of December 31, 1995 and 1994 is as follows:
1995 1994
- --------------------------------------------------------------------------------
Financial instruments whose contract
amount represents credit risk:
Firm loan commitments $ 81,272 $ 55,700
Standby letters of credit 16,000 14,956
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. Firm loan
commitments include approximately $12,900,000 and $9,800,000 of unused home
equity and credit card lines of credit as of December 31, 1995 and 1994,
respectively. 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 commitment
amounts do not necessarily represent future cash requirements. The Banks
evaluate each customer's credit worthiness on a case-by-case basis. The amount
of collateral obtained is based on management's credit evaluation of the
customer.
Standby letters of credit written are conditional commitments issued by the
Banks to guarantee the performance of a customer to a third party. Those
guarantees are primarily issued to support public and private borrowing
arrangements, including commercial paper, bond financing, and similar
transactions. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan commitments to
customers. The extent of collateral held for those commitments varies with the
average amount collateralized being 71% and 83% as of December 31, 1995 and
1994, respectively.
<PAGE>
Note 12. Regulatory Restrictions
The Banks are required by law to maintain non-interest earning deposits with the
Federal Reserve Bank or correspondent banks. The average reserve balance for the
year ended December 31, 1995 was $1,786,000.
The Banks are also limited in the amount of dividends that can be paid without
prior approval of the banking regulatory agencies. In 1996, the Banks could pay
dividends to the Company of as much as $9,116,000 plus their net earnings in
1996, without obtaining prior approval of the bank regulatory agencies.
The Banks are subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory actions by regulators that, if undertaken, could have
a direct material effect on the Company's financial statements. Shown below is a
comparison of the Company's actual regulatory capital ratios as of December 31,
1995, with minimum requirements as defined by regulation for capital adequacy
purposes and to be considered "well capitalized" under the regulatory framework
for prompt corrective action.
Regulatory Requirements
------------------------
1995 Capital Well
Actual Adequacy Capitalized
--------------------------------------
Tier 1 risk-based capital 12.11% 4% 6%
Total risk-based capital 12.96 8 10
Leverage ratio 7.56 3 5
Note 13. Fair Value of Financial Instruments and Interest Rate Risks
The estimated fair value of financial instruments is as follows:
<TABLE>
1995 1994
------------------------- ------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial Assets
Cash and due from banks .............................. $ 42,979 $ 42,979 $ 42,832 $ 42,832
Interest bearing deposits in other
financial institutions ............................ 0 0 4,198 4,198
Securities available for sale ........................ 17,337 17,337 0 0
Securities held to maturity .......................... 185,374 187,269 189,874 184,205
Federal funds sold ................................... 41,537 41,537 0 0
Loans ................................................ 427,917 427,836 418,918 411,427
Accrued interest receivable .......................... 6,138 6,138 5,842 5,842
Financial Liabilities
Deposits ............................................. 605,137 606,203 556,162 555,719
Short-term borrowings ................................ 64,771 64,771 59,614 59,614
Long-term debt ....................................... 7,701 7,701 8,326 8,326
Accrued interest payable ............................. 3,379 3,379 2,061 2,061
Off-balance-sheet instruments, loan commitments and
standby letters of credit ............................ 0 0 0 0
</TABLE>
<PAGE>
The Company assumes interest rate risk (the risk that general interest rate
levels will change) as a result of its normal operations. As a result, fair
values of the Company's financial instruments will change when interest rate
levels change and that change may be either favorable or unfavorable to the
Company. Management attempts to match maturities of assets and liabilities to
the extent believed necessary to minimize interest rate risk. However, borrowers
with fixed rate obligations are more likely to prepay in a rising rate
environment and less likely to repay in a falling rate environment. Conversely,
depositors who are receiving fixed rates are more likely to withdraw funds
before maturity in a rising rate environment and less likely to do so in a
falling rate environment. Management monitors rates and maturities of assets and
liabilities and attempts to minimize interest rate risk by adjusting terms of
new loans and deposits and by investing in securities with terms that mitigate
the Company's overall interest rate risk.
Note 14. Condensed Parent Company Financial Information
The condensed financial statements of First National Bancorp, Inc. (parent
company only) are presented below:
Balance Sheets
Assets 1995 1994
- ------------------------------------------------------------------------
Cash ................................................ $ 291 $ 315
Investments in subsidiaries ......................... 74,124 69,971
Premises ............................................ 106 106
Other assets ........................................ 37 40
-----------------
Total assets ............................. $74,558 $70,432
-----------------
Liabilities and Stockholders' Equity
Liabilities:
Long-term debt ................................... $ 7,701 $ 8,326
Other liabilities ................................ 432 449
Stockholders' Equity ................................ 66,425 61,657
-----------------
Total liabilities and stockholders' equity $74,558 $70,432
=================
Statements of Income
Years Ended December 31,
-------------------------
1995 1994 1993
- --------------------------------------------------------------------------------
Dividends from subsidiaries ................. $4,649 $5,019 $6,876
Interest and other expenses ................. 1,126 394 176
------------------------
Income before income tax credits
and equity in undistributed net
income of subsidiaries ........ 3,523 4,625 6,700
Income tax credits .......................... (436) (92) (68)
------------------------
Income before equity in
undistributed net income of
subsidiaries .................. 3,959 4,717 6,768
Equity in undistributed net income of
subsidiaries ............................. 4,252 2,790 598
------------------------
Net income ....................... $8,211 $7,507 $7,366
========================
<PAGE>
Statements of Cash Flows
<TABLE>
Years Ended December 31,
-------------------------
1995 1994 1993
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net income ................................................... $8,211 $7,507 $7,366
Adjustments to reconcile net income to
net cash provided by operating
activities:
Undistributed (earnings) of subsidiaries .................. (4,252) (2,790) (598)
Change in other assets and other
liabilities ............................................. (14) 9 0
--------------------------
Net cash provided by operating
activities ....................................... 3,945 4,726 6,768
--------------------------
Cash Flows From Investing Activities,
purchase of Plano Bancshares, Inc.,
net cash (used in) investing activities ...................... 0 (6,961) 0
--------------------------
Cash Flows From Financing Activities
Proceeds from long-term debt ................................. 0 3,800 0
Principal payments on long-term debt ......................... (625) (250) (1,625)
Cash dividends paid .......................................... (3,344) (3,258) (3,042)
Cash paid in lieu of fractional shares ....................... 0 (34) 0
--------------------------
Net cash provided by (used in)
financing activities ............................. (3,969) 258 (4,667)
---------------------------
Net increase (decrease) in cash ...................... (24) (1,977) 2,101
Cash:
Beginning .................................................... 315 2,292 191
---------------------------
Ending ....................................................... $ 291 $ 315 $2,292
===========================
</TABLE>
<PAGE>
Supplementary Data
Quarterly Financial Information 1995-1994 (Unaudited)
<TABLE>
1995 1994
-------------------------------- ---------------------------------
In thousands except per share data 4th 3rd 2nd 1st 4th 3rd 2nd 1st
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net interest income $ 7,281 $ 7,390 $ 7,147 $ 7,633 $ 6,975 $ 6,490 $ 6,578 $ 6,269
Provision for losses 354 279 279 279 269 262 178 121
Total noninterest revenue 1,326 1,430 1,294 1,074 1,048 923 942 925
Total noninterest expense 6,734 4,871 5,111 4,703 6,292 4,279 4,068 3,901
-------------------------------------------------------------------
Income before income tax expense 1,519 3,670 3,051 3,725 1,462 2,872 3,274 3,172
Income tax expense 418 1,188 928 1,220 421 829 1,039 984
-------------------------------------------------------------------
Net income $ 1,101 $ 2,482 $ 2,123 $ 2,505 $ 1,041 $ 2,043 $ 2,235 $ 2,188
-------------------------------------------------------------------
Net income per common share $ 0.90 $ 2.04 $ 1.75 $ 2.06 $ 0.85 $ 1.68 $ 1.84 $ 1.80
-------------------------------------------------------------------
Average common shares and
equivalents outstanding 1,216 1,216 1,216 1,216 1,216 1,216 1,216 1,216
</TABLE>
Income for the fourth quarter of 1995 and 1994 is less than the first three
quarters due to discretionary contributions, pension and other compensation
expenses.
Stock-Price Range, Dividends 1995-1994 (Unaudited)
<TABLE>
1995 1994
-------------------------------- ---------------------------------
4th 3rd 2nd 1st 4th 3rd 2nd 1st
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common stock (1):
Price Range
High $ 77 $ 76 $ 73 $ 71 $ 64 $ 63 $ 60 $ 58
Low 76 73 71 69 63 60 58 57
Cash dividends declared per share 1.50 1.25 1.25 1.43
<FN>
(1) Adjusted to reflect 7 for 5 stock split in 1994.
</FN>
</TABLE>
<PAGE>
Interest differential
The following table sets forth the change in interest income and interest
expense attributable to rate and volume variances. These calculations have been
made on the basis that loan fees are not material and have been included and
that there are no out of period adjustments. The interest earned is assumed to
be on a tax equivalent basis using an income tax rate of 35%. Changes in income
due to volume have been calculated by multiplying the change in volume times the
average rate for the preceding year. The changes in income due to changes in
rate have been determined by multiplying current volume by the change in average
rate.
<TABLE>
1995 Compared to 1994 1994 Compared to 1993
----------------------------- ---------------------------
Changes Due to: Changes Due to:
----------------------------- ---------------------------
Volume Rate Change Volume Rate Change
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest earned on:
Deposits in other financial institutions $ (212) $ 1 $ (211) $ (595) $ 8 $ (587)
Securities:
Taxable (8) 1,259 1,251 507 (854) (347)
Tax-exempt (281) (11) (292) (8) (194) (202)
Federal funds sold 1,239 1,002 2,241 (816) 117 (699)
Loans 4,533 2,909 7,442 5,952 (1,982) 3,970
-------------------------------------------------------------
Total interest income 5,271 5,160 10,431 5,040 (2,905) 2,135
-------------------------------------------------------------
Interest expense on:
Deposits
Demand 187 160 347 106 (188) (82)
Savings 32 62 94 182 (441) (259)
Time 2,252 2,555 4,807 366 273 639
Short-term borrowings 185 1,401 1,586 101 568 669
Long-term debt 410 112 522 32 (11) 21
-------------------------------------------------------------
Total interest expense 3,066 4,290 7,356 787 201 988
-------------------------------------------------------------
Net interest income $ 2,205 $ 870 $ 3,075 $ 4,253 $ (3,106) $ 1,147
============================================================
</TABLE>
Securities
The following table shows the carrying value of the securities of the Company by
category at year end for the past three years.
<TABLE>
1995 1994 1993
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury securities ......................................... $ 53,611 $ 42,437 $ 62,677
U.S. government agencies ......................................... 111,055 104,144 86,502
Obligations of states and political subdivisions ................. 37,745 42,638 40,869
Corporate and other securities ................................... 300 655 824
-----------------------------
$202,711 $189,874 $190,872
=============================
</TABLE>
At December 31, 1995, there were no concentrations of securities in any state or
local governmental unit.
<PAGE>
Securities Maturities
The following table shows the relative maturities of securities available for
sale and held to maturity (at book value) held by the Company at December 31,
1995 and the weighted average interest rate for each range of maturities. The
yields on tax-exempt obligations are stated on a fully tax-equivalent basis,
assuming a federal income tax rate of 35%.
<TABLE>
Available for Sale Held to Maturity
------------------------------------------ --------------------------------------------
Weighted Obligations Weighted
U.S. U.S. Average U.S. U.S. of State Average
Treasury Government Other Interest Treasury Government and Interest
Securities Agencies Securities Rate Securities Agencies Subdivision Rate
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Under 1 year ................. $ 4,286 $ 491 $ 0 4.90% $20,480 $ 77,612 $ 5,718 6.56%
1 to 5 years ................. 8,357 3,478 0 5.59 20,488 27,481 18,435 7.01
5 to 10 years ................ 0 425 0 3.49 0 488 13,492 8.50
Over 10 years ................ 0 0 300 6.00 0 1,080 100 6.86
------------------------------ -------------------------------
Total .................. $12,643 $4,394 $ 300 $40,968 $106,661 $37,745
============================== ===============================
</TABLE>
Types of Loans
Set forth below are major categories of the Company's loan portfolio at December
31:
<TABLE>
1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial ................................. $ 79,967 $ 91,120 $ 82,942 $ 73,375 $ 62,029
Agricultural ............................... 8,815 8,485 6,907 6,319 6,184
Real estate, mortgage ...................... 210,631 184,795 126,208 110,852 126,829
Consumer ................................... 134,344 141,611 126,273 115,438 116,790
-------------------------------------------------
Total Gross* ............................... 433,757 426,011 342,330 305,984 311,832
Less:
Unearned discount ....................... (1,909) (4,011) (6,365) (7,525) (8,555)
Allowance for loan losses ............... (3,931) (3,082) (2,722) (2,649) (1,915)
-------------------------------------------------
Net loans .................................. $427,917 $418,918 $333,243 $295,810 $301,362
=================================================
Ratio of net loans to total assets ......... 57.06% 60.48% 52.75% 49.80% 54.43%
<FN>
* During 1995 the Company changed its method of classifying loans. The change
has been retroactively applied to this schedule.
</FN>
</TABLE>
<PAGE>
Loan Maturity and Rate Sensitivity
The following sets forth the maturity distribution and interest sensitivity of
commercial and agricultural loans at December 31, 1995.
<TABLE>
One Year One to Over
Or Less Five Years Five Years Total
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial & Agricultural ................................. $ 67,377 $ 18,059 $ 3,346
==============================
Interest rate sensitivity:
Fixed rate ............................................. $ 25,299 $ 17,264 $ 3,346 $ 45,909
Floating with prime .................................... 42,078 795 0 42,873
------------------------------------------
$ 67,377 $ 18,059 $ 3,346 $ 88,782
==========================================
</TABLE>
Allocation of Allowance for Loan Losses
The following table sets forth the allocation of the Company's allowance for
loan losses and percent of each category to the Gross Loans less any Unearned
Discount for the period shown. The consumer loan allowance has increased due to
an increase of approximately $2,091,000 in credit card loans during 1995. The
allowance for loan losses is available to absorb losses in any particular
category of loans, notwithstanding management's allocation of the allowance.
<TABLE>
1995 1994 1993 1992 1991
-------------- --------------- ------------- --------------- --------------
Loan Type Amount % Amount % Amount % Amount % Amount %
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial $ 871 18 $ 912 21 $ 610 24 $ 617 24 $ 339 20
Agriculture 150 2 186 2 69 2 67 2 29 2
Real estate, mortgage 1,645 49 1,029 43 946 37 891 36 634 41
Consumer 1,265 31 956 34 1,038 37 993 38 635 37
Unallocated 59 81 279
-----------------------------------------------------------------------------
Total $ 3,931 100 $ 3,083 100 $ 2,722 100 $ 2,649 100 $ 1,916 100
============================================================================
</TABLE>
<PAGE>
Summary of Loan Loss Activity
The following table details the component changes in the Company's allowance for
loan losses for the past five years.
<TABLE>
1995 1994 1993 1992 1991
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance, beginning of year .................... $3,082 $2,722 $2,649 $1,915 $1,646
--------------------------------------------------------------
Loans charged off:
Commercial and agricultural ................... (60) (592) (398) (274) (43)
Real estate, mortgage ......................... 0 0 (105) 0 0
Consumer ...................................... (586) (358) (273) (352) (526)
--------------------------------------------------------------
Total loan charge offs ........................... (646) (950) (776) (626) (569)
--------------------------------------------------------------
Loan recoveries:
Commercial and agricultural ................... 145 21 15 54 21
Real estate, mortgage ......................... 10 0 0 0 0
Consumer ...................................... 149 156 147 153 136
--------------------------------------------------------------
Total loan recoveries ............................ 304 177 162 207 157
--------------------------------------------------------------
Net loans charged off ............................ (342) (773) (614) (419) (412)
--------------------------------------------------------------
Provision for loan losses ........................ 1,191 830 687 1,153 681
--------------------------------------------------------------
Other additions (1) .............................. 0 303 0 0 0
--------------------------------------------------------------
Allowance, end of year ........................... 3,931 3,082 2,722 2,649 1,915
==============================================================
Net loans charged off to average
loans outstanding ............................. 0.08% 0.21% 0.20% 0.14% 0.14%
Allowance for loan losses to ending
loans outstanding ............................. 0.91% 0.73% 0.81% 0.89% 0.63%
<FN>
(1) Represents increase with purchase of Plano Bancshares, Inc. in 1994.
</FN>
</TABLE>
Deposits
The following table provides a breakdown by category of deposits of the
Company's subsidiary banks on an average balance basis for the five years ended
December 31:
1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------
Noninterest bearing demand $ 99,178 $ 90,994 $ 83,401 $ 77,833 $ 70,941
Interest bearing demand .. 99,827 91,237 86,818 89,423 85,139
Savings .................. 153,661 152,383 145,815 140,863 111,032
Time ..................... 224,427 170,939 161,904 163,375 179,312
------------------------------------------------
Total deposits ........... $577,093 $505,553 $477,938 $471,494 $446,424
================================================
<PAGE>
The following shows the maturity schedule and amounts for the Company's time
deposits of $100,000 or more at December 31, 1995.
Under 3 months $ 15,672
3 to 12 months 13,346
Over 12 months 5,763
--------
$ 34,781
========
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure Matters.
No disclosure on Form 8-K, of a change of accountants or disagreement on
accounting and financial disclosure matters, has occurred for the 24 months
prior to, or in months subsequent to, December 31, 1995.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information appearing on pages 2 through 4 of the Notice of Annual Meeting
of Stockholders and Proxy Statement is incorporated herein by reference.
Item 11. Executive Compensation.
The information appearing on pages 4 through 8 of the Notice of Annual Meeting
of Stockholders and Proxy Statement is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information appearing on pages 2 through 4 of the Notice of Annual Meeting
of Stockholders and Proxy Statement is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
The information appearing on pages 2 through 4 of the Notice of Annual Meeting
of Stockholders and Proxy Statement is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
1. All schedules are omitted because they are not applicable, the data is
not significant, or the required information is shown in the
Consolidated Financial Statements or Notes thereto.
2. Exhibits
3.1a Articles of Incorporation of First National Bancorp, Inc.
(incorporated by reference to Appendix III of Registration
Statement Form S-4, File No. 0-15123, dated February 17, 1986.
3.1b Amendment to the Articles of Incorporation dated March 9, 1988
(Incorporated by reference to Part IV of Form 10-K for the year
ended December 31, 1987, File No. 0-15123).
3.2 By-laws of First National Bancorp, Inc. (incorporated by
reference to Part IV of Form 10-K for the year ended December
31, 1986, File No. 0-15123)
4 Instruments defining rights of security holders (incorporated by
reference to pages 31 through 33 of Registration Statement Form
S-4, File No. 0-15123, dated February 17, 1986.
10.1a First National Bank of Joliet Retirement Plan & Trust
(incorporated by reference to Part IV of Form 10-K for the year
ended December 31, 1986, File No. 0-15123)
<PAGE>
10.1b First National Bank of Joliet Retirement Plan & Trust as
Amended.
10.3a First National Bancorp, Inc. 401(k) plan, (incorporated by
reference to Part IV of Form 10-K for the year ended December
31, 1993, File No. 0-15123).
10.3b Amendment of the First National Bancorp, Inc. 401(K) Plan,
(incorporated by reference to Part IV of Form 10-K for the year
ended December 31, 1994, File No. 0-15123).
10.4 First National Bancorp, Inc. Employees' Cafeteria Plan.
11 Statement re: computation of per share earnings
20 Notice of Annual Shareholders Meeting of First National
Bancorp, Inc.
21 Subsidiaries of the Registrant
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Joliet, State of
Illinois, on this 14th day of March, 1996.
FIRST NATIONAL BANCORP, INC.
(Registrant)
By: /S/ Kevin T. Reardon
-----------------------------------
Kevin T. Reardon
Chairman of the Board
& Chief Executive Officer
By: /s/ Albert G. D'Ottavio
------------------------------------
Albert G. D'Ottavio
President & Director
(Chief Financial Officer)
Principal Accounting Officer
Pursuant to the requirements of the Securities Act of 1934, this report has been
signed below on the 14th day of March, 1996 by the following persons on behalf
of the registrant in the capacities indicated.
Name Title
/s/ Kevin T. Reardon
- ------------------------------
Chairman of the Board
and
Chief Executive Officer
/s/ Albert G. D'Ottavio
- ------------------------------
President and Director
(Chief Operating Officer)
(Chief Financial Officer)
/s/ George H. Buck Director
- ------------------------------
/s/ Howard E. Reeves Director
- ------------------------------
/s/ Charles R. Peyla Director
- ------------------------------
/s/ Walter F. Nolan Director
- ------------------------------
/s/ Louis R. Peyla Director
- ------------------------------
First National Bank of Joliet
Retirement Plan & Trust
(As Amended and Restated Effective
November 1, 1995)
<PAGE>
First National Bank of Joliet Retirement Plan & Trust
(As Amended and Restated Effective November 1, 1995)
Contents
Section Page
Article I. Establishment and Name of Plan 1.
1.1 Establishment and Name of Plan
1.2 Purpose of Plan
1.3 Provisions of Plan
Article II. Definitions
2.1 Definitions
2.2 Gender and Number
Article III. Eligibility and Participation
3.1 Eligibility and Participation
3.2 Application for Participation
3.3 Effective Date of Participation
3.4 Election not to Participate
3.5 Duration of Participation
3.6 Transferred or Rehired Employees
3.7 Employee of Nonparticipating Affiliate Who Becomes a
Participant Following Break in Service
Article IV. Service
4.1 Hour of Service
4.2 Eligibility Service
4.3 Vesting Service
4.4 Benefit Service
4.5 Break in Service
4.6 One-Year Break in Service
4.7 Repayments
4.8 No Duplication of Service
Article V. Contribution and Valuation
5.1 Payment of Contributions
5.2 Actuarial Methods
Article VI. Benefits
6.1 Normal Retirement Benefits
6.2 Disability Retirement Benefits
6.3 Deferred Vested Retirement Benefits
6.4 Limitation of Benefits
6.5 Distribution of Annuity Contract
6.6 Reemployment After Benefit Commencement but Prior to
Normal Retirement Age
6.7 Reemployment After Benefit Commencement and After
Attaining Normal Retirement Age
6.8 Suspension of Benefits Notice and Procedures
6.9 Distribution for Minor Beneficiary
6.10 Effect of Social Security Act
<PAGE>
First National Bank of Joliet Retirement Plan & Trust
(As Amended and Restated Effective November 1, 1995)
Contents
Section Page
Article VII. Distribution
7.1 Normal Form of Payment
7.2 Waiver of Normal Form of Payment.
7.3 Optional Forms of Payment
7.4 Payment of Small Amounts
7.5 Consent to Early Distribution
7.6 Direct Rollovers of Eligible Rollover Distributions
7.7 Required Distributions and Restrictions on Distributions
7.8 Withholding Taxes
7.9 Notice of Address
Article VIII. Preretirement Death Benefits
8.1 Preretirement Death Benefits--Married Participants
8.2 Preretirement Death Benefit--Unmarried Participants
Article IX. Beneficiary Designation
9.1 Beneficiary Designation 37
Article X. Trustee
10.1 General Responsibilities of Trustee
10.2 Investment Powers and Duties of Trustee
10.3 Other Powers of Trustee
10.4 Duties of Trustee Regarding Payments
10.5 Trustee's Compensation and Expenses and Taxes
10.6 Annual Report of Trustee
10.7 Audit
10.8 Resignation, Removal, and Succession of Trustee
10.9 Transfer of Interest
10.10 Nonreversion
Article XI. Appointment of Fiduciaries and Administration
of the Plan and the Trust Fund
11.1 Powers and Responsibilities of Company
11.2 Assignment and Designation of Administrative Authority
11.3 Allocation and Delegation of Responsibilities
11.4 Powers, Duties, and Responsibilities of Administrator
11.5 Records and Reports
11.6 Appointment of Advisers
11.7 Information from Employer
11.8 Payment of Expenses
11.9 Majority Actions
11.10 Claims Procedure
11.11 Claims Review Procedure
Article XII. Amendment and Termination
12.1 Amendment and Termination of the Plan
12.2 Distribution on Termination
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First National Bank of Joliet Retirement Plan & Trust
(As Amended and Restated Effective November 1, 1995)
Contents
Section Page
12.3 Merger or Consolidation or Transfer
12.4 Effect of Contingencies Affecting Company
12.5 Amendment of Vesting Schedule
Article XIII. Temporary Restrictions on Benefits
13.1 Temporary Restrictions on Benefits Payable to
Certain Highly Compensated Participants
Article XIV. Participation in and Withdrawal from the
Plan by an Employer
14.1 Participation in the Plan
14.2 Withdrawal from the Plan
Article XV. Miscellaneous
15.1 Member's Rights
15.2 Alienation
15.3 Unclaimed Amounts
15.4 Construction of Plan
15.5 Legal Action
15.6 Prohibition Against Diversion of Funds
15.7 Bonding
15.8 Company's and Trustee's Protective Clause
15.9 Insurer's Protective Clause
15.10 Receipt and Release for Payments
15.11 Action by Company
15.12 Named Fiduciaries and Allocation of Responsibility
15.13 Illegality of Particular Provision
15.14 Effect of Mistake
15.15 Absence of Guaranty
15.16 Headings
15.17 Uniformity
Article XVI. Top-Heavy Provisions
16.1 Top-Heavy Rules
<PAGE>
Article I. Establishment and Name of Plan
1.1 Establishment and Name of Plan
Effective November 1, 1963, First National Bank of Joliet (hereinafter referred
to as the "Company") established a defined benefit pension plan for the
exclusive benefit of its eligible employees which, as last amended effective as
of November 1, 1984, has been known as the "First National Bank of Joliet
Retirement Plan & Trust" (hereinafter referred to as the "Plan"). The Plan is
hereby further amended and restated as set forth herein effective as of November
1, 1995 (except as otherwise specifically provided).
1.2 Purpose of Plan
The purpose of this Plan is to provide payments to Members of their
Beneficiaries upon their retirement, death, or other separation from service.
1.3 Provisions of Plan
The provisions of this Plan shall apply only to Employees who are eligible to
participate in the Plan on or after November 1, 1995. Except as otherwise
specifically provided herein, the November 1, 1995 amendment and restatement of
the Plan shall not, in any way, affect the rights of former Employees who
retired or otherwise terminated their employment with the Company prior to
November 1, 1995.
Employees who retired with benefits commencing prior to November 1, 1991 or who
separated from the employ of the Company prior to such date (or Beneficiaries of
such Employees), shall be entitled to the benefits, if any, under the Plan as it
existed immediately prior to such date. Except in the case of reemployment after
October 31, 1995, the benefits under the November 1, 1995 amendment and
restatement of the Plan shall not apply to Employees who retired or separated
from the employ of the Company prior to November 1, 1995, or beneficiaries of
such Employees.
Article II. Definitions
2.1 Definitions
Whenever used in the Plan, the following terms shall have the respective
meanings set forth below unless otherwise expressly provided herein, and when
the defined meaning is intended, the term shall be capitalized.
(a) "Accrued Benefit" means the benefit payable under the Plan in the form of a
ten-year certain-and-life annuity upon a Member's attainment of Normal
Retirement Age, as determined under section 6.1.
(b) "Act" means the Employee Retirement Income Security Act of 1974, as it may
be amended from time to time.
(c) "Actuarial Equivalent" means a form of benefit differing in time, period, or
manner of payment from the normal form of benefit provided under the Plan,
but having the same value as the benefit which such Actuarial Equivalent
replaces. The bases of an Actuarial Equivalent shall be--
(1) Actuarial Assumptions. Except as otherwise provided hereinafter, the
Actuarial Equivalent shall be based on the 1984 Unisex Pension Mortality
Table applicable on the date on which benefits under the Plan become
payable and a 6 percent interest rate.
(2) Lump Sum Distributions. For purposes of determining lump sum cash
distributions, the interest rate used shall be the lesser of--
(A)the interest rate specified in (1) above, or
(B)the immediate and deferred rates which would be used (as of the first
day of the Plan Year of the distribution) by the Pension Benefit
Guaranty Corporation for purposes of determining the present value
of a lump sum distribution on termination of a defined benefit plan.
(3) Maximum Benefits. For purposes of determining the limitation on annual
benefits pursuant to section 6.4, the interest rate used in Actuarial
Equivalent shall be that as specified in such section.
<PAGE>
Notwithstanding the foregoing, the event that this subsection (c) is
amended, the Actuarial Equivalent of a Member's Accrued Benefit on or after
the effective date of such amendment shall be the greater of the Actuarial
Equivalent of the Member's Accrued Benefit as of the effective date of such
amendment, computed on the prior Actuarial Equivalent basis, and the
Actuarial Equivalent of the Member's total Accrued Benefit, computed on the
new Actuarial Equivalent basis.
(d) "Actuary" means a person (or a firm of which he is a member) who is
qualified through membership in the Society of Actuaries or its
successors, who is an "enrolled actuary" under the Act, and who is
chosen by but is independent of the Company.
(e)"Administrator" means the person or entity designated by the Company
pursuant to section 11.2 to administer the Plan.
(f) "Affiliate" means--
(1) any corporation other than the Company, i.e., either a subsidiary
corporation or an affiliated or associated corporation of the
Company, which together with the Company is a member of a
"controlled group of corporations" (as defined in Code section
1563(a), determined without regard to Code section 1563(a)(4) and
Code section 1563(e)(3)(C));
(2) any organization which together with the Company is under "common
control" (as defined in Code section 414(c));
(3) any organization which together with the Company is an "affiliated
service group" (as defined in Code section 414(m)); or
(4) any other entity required to be aggregated with the Company pursuant
to regulations under Code section 414(o).
(g) "Annuity Starting Date" means the first day of the first period for
which a Member's normal or deferred vested retirement benefit is due to
commence under the terms of the Plan, as described in Article VI.
(h) "Anniversary Date" means November 1.
(i) "Average Monthly Compensation" means the average monthly Compensation of
a Participant during the five consecutive complete Calendar Years within
the last ten consecutive complete calendar years preceding his
termination of employment as an Employee in which his Compensation was
the highest.
If a Participant completes fewer than five complete calendar years from
his date of employment to his date of termination as an Employee, his
Average Monthly Compensation shall mean his monthly Compensation during
his months of Service from his date of employment to his date of
termination.
In computing a Participant's Average Monthly Compensation, Compensation
subsequent to a Participant's termination of participation in the Plan
shall not be recognized.
(j) "Beneficiary" means the person designated pursuant to section 9.1 to
receive the benefits which are payable under the Plan upon or after a
Member's death.
(k) "Benefit Service" means a period of service for benefit accrual
purposes, as described in section 4.4.
(l) "Break in Service" means an absence from employment, as defined in
section 4.5.
(m) "Code" means the Internal Revenue Code of 1986, as it may be amended
from time to time.
(n) "Company" means the First National Bank of Joliet, a corporation with
its principal offices in the State of Illinois, and any successor which
may maintain this Plan and any predecessor which has maintained this
Plan.
<PAGE>
(o) "Compensation" means--
(1) the total compensation paid to a Participant by the Employer for a
Calendar Year, including regular salary and wages, overtime pay,
bonuses, and commissions, and
(2) any amounts contributed on a Participant's behalf under a cash or
deferred arrangement that is maintained by the Employer and
qualified under Code section 401(k) or a payroll deduction under
Code section 125.
Any amounts contributed by the Employer to this Plan and any nontaxable
fringe benefits provided to a Participant by the Employer shall be not
be included in a Participant's Compensation.
Effective November 1, 1994, the Compensation of each Participant that
may be taken into account under paragraphs (1) and (2) above shall not
exceed the first $150,000 of a Participant's Compensation (as adjusted
by the Secretary of the Treasury under Code section 401(a)(17) and
415(d)).
Effective November 1, 1989, the Compensation of each Participant that
may be taken into account under paragraphs (1) and (2) above shall not
exceed the first $200,000 of a Participant's Compensation (as adjusted
by the Secretary of the Treasury under Code sections 401(a)(17) and
415(d)).
In determining the Compensation of a Participant for purposes of the
aforementioned limitations, the rules of Code section 414(q)(6) shall
apply, except that in applying such rules, the term "family" shall
include only the Participant's spouse and any lineal descendants of the
Participant who have not attained age 19 before the close of the Plan
Year. (p) "Contract" or "Policy" means a life insurance policy or
annuity contract (group or individual) issued by any insurer selected by
the Company.
All Contracts or Policies issued pursuant to section 6.5 shall be
acquired on a uniform and nondiscriminatory basis with respect to the
face amount of the death benefit stated in such Contract or Policy.
(q) "Covered Compensation" means, for any Plan Year, the average (without
indexing) of the Social Security Wage Bases in effect for each calendar
year during the 35-year period ending with the last day of the calendar
year a Member attains (or will attain) his Social Security Retirement
Age. In determining a Member's Covered Compensation for a Plan Year, the
Social Security Wage Base for the current Plan Year and any subsequent
Plan Year shall be assumed to be the same as the Social Security Wage
Base in effect as of the beginning of the Plan Year for which the
determination is being made. A Member's Covered Compensation shall be
automatically adjusted for each Plan Year.
A Member's Covered Compensation for a Plan Year after the 35-year period
described above shall be the Member's Covered Compensation for the Plan
Year during which the Member attained his Social Security Retirement
Age.
A Member's Covered Compensation for a Plan Year before the 35-year
period described above shall be the Social Security Wage Base in effect
as of the beginning of the Plan Year. (r) "Effective Date" means
November 1, 1963. (s) "Eligible Employee" means any Employee who has
satisfied the eligibility requirements of section 3.1. (t) "Eligibility
Service" means a period of service for eligibility purposes, as
described in section 4.2. (u) "Employee" means any person who is
employed by the Company or an Affiliate and any person who is a leased
employee to the extent required by Code section 414(n).
<PAGE>
(v) "Employer" means the Company or any Affiliate which elects to become a
party to the Plan, with the approval of the Company, by adopting the
Plan for the benefit of its eligible Employees in a manner prescribed in
Article XIV.
(w) "Fiduciary" means any person who--
(1) exercises any discretionary authority or discretionary control with
respect to the management of the Plan or who exercises any authority
or control with respect to the management or disposition of the
Plan's assets,
(2) renders investment advice for a fee or other compensation, direct or
indirect, with respect to any monies or other property of the Plan
or has any authority or responsibility to do so, or
(3) has any discretionary authority or discretionary responsibility in
the administration of the Plan, including, but not limited to, the
Trustee, an Employer and its representative body, and the
Administrator.
(x) "Fiscal Year" means the Company's accounting year of 12 consecutive
months commencing on November 1 of each year and ending the following
October 31.
(y) "Funding Policy and Method" means the Company's determination of the
Plan's funding goals, based on the Company's acknowledgment of the
Plan's needs at any given time to balance the liquidity, investment
growth, and stability of the Plan's assets. The Company may, in its
discretion, appoint a qualified person or entity to assist it in
determining the Plan's Funding Policy and Method.
(z) "Hour of Service" means a period of employment, as described in section
4.1.
(aa)"Inactive Participant" means an Employee who was a Participant but who
is transferred to and is in a position of employment as an Employee
where he is not eligible to participate in the Plan.
(bb)"Investment Manager" means any person, firm, or corporation that-- (1)
is a registered investment adviser under the Investment Advisers Act of
1940, a bank, or an insurance company, (2) has the power to manage,
acquire, or dispose of Plan assets, and (3) acknowledges in writing its
fiduciary responsibility to the Plan.
(cc)"Member" means a Participant, an Inactive Participant, a Retired
Participant, a Terminated Participant, or any other former Employee who
is receiving or entitled to receive benefits under the Plan.
(dd)"One-Year Break in Service" means a period of absence from employment,
as described in section 4.6.
(ee)"Participant" means any Employee who satisfies the requirements of
section 3.1 and who elects to participate in the Plan pursuant to
sections 3.2 and 3.3.
(ff)"Plan Year" means the Plan's accounting year of 12 consecutive months
commencing on November 1 of each year and ending the following October
31. The provisions of this section 2.1(ff) shall also be deemed to apply
to any period prior to the Plan's Effective Date.
(gg)"Present Value" means the Actuarial Equivalent present value of a
Member's Accrued Benefit on the date of valuation; provided, however,
that for purposes of determining if the Plan is top-heavy, the
provisions of Article XVI shall apply in determining the Present Value
of a Member's Accrued Benefit.
(hh)"Qualified Joint and Survivor Annuity" means an annuity that is payable
on the Member's Annuity Starting Date and that provides monthly payments
for the lifetime of a Member and a survivor annuity for the lifetime of
the spouse to whom the Member was married on his Annuity Starting Date,
with 120 monthly payments guaranteed. Such survivor annuity shall be 50
percent of the amount of the annuity that is payable during the joint
lives of the Member and the Member's spouse.
(ii)"Qualified Preretirement Survivor Annuity" means an annuity that is
payable over the life of a Member's surviving spouse, the payments of
which are not less than the amounts that would have been payable under
the Qualified Joint and Survivor Annuity if such Member had retired with
an immediate Qualified Joint and Survivor Annuity on the day before his
death.
<PAGE>
(jj)"Reemployment Commencement Date" means the first day following a Break
in Service for which an Employee is entitled to be credited with an Hour
of Service.
(kk)"Retired Participant" means a person who has been a Participant but who
has become entitled to retirement benefits under the Plan.
(ll)"Retirement Age" means a Member's Normal Retirement Age or Vested
Retirement Age, whichever is applicable, as follows:
(1) "Normal Retirement Age" means a Member's age when he has both
attained his sixty-fifth birthday and the fifth anniversary of his
participation in the Plan.
(2) "Vested Retirement Age" means, for a Member who completes at least
one Hour of Service on or after November 1, 1995, a Member's age
when he has completed at least three years of Vesting Service.
(mm)"Retirement Date" means a Member's Normal Retirement Date, Late
Retirement Date, Disability Retirement Date, or Vested Retirement Date,
whichever is applicable, as follows:
(1) "Normal Retirement Date" means the Anniversary Date nearest the date
a Member attains his Normal Retirement Age.
(2) "Late Retirement Date" means the Anniversary Date nearest the date a
Member's employment with the Employer or a nonparticipating
Affiliate terminates because of his normal retirement after the
occurrence of his Normal Retirement Date.
(3) "Disability Retirement Date" means the Anniversary Date nearest the
date on which--
(A) a Member's disability benefits end under the long-term
disability plan of the Employer or a nonparticipating
Affiliate, or
(B) a Member's employment with the Employer or a nonparticipating
Affiliate terminates on account of Total and Permanent
Disability.
(4) "Vested Retirement Date" means, for a Member who has attained his
Vested Retirement Age and whose employment with the Employer or a
nonparticipating Affiliate terminates for reasons other than normal
retirement or death, the Anniversary Date nearest the date a Member
attains his Vested Retirement Age.
(nn)"Social Security Wage Base" means, with respect to any Plan Year, an
amount equal to the maximum compensation on which federal Social
Security taxes (under the Federal Insurance Contributions Act and
applicable regulations) would be applicable on the first day of such
Plan Year, whether or not compensation is in fact subject to such tax.
(oo)"Terminated Participant" means a person who has been a Participant but
whose employment has been terminated other than by death, Total and
Permanent Disability, or retirement.
(pp)"Total and Permanent Disability" means a physical or mental condition of
a Participant which-- (1) results from bodily injury, disease, or mental
disorder; (2) renders the Participant incapable of continuing any
gainful occupation; (3) constitutes total disability under the federal
Social Security Act; (4) continues for a period of six consecutive
months; and (5) causes the Participant's status as an Employee to cease.
(qq)"Trust Agreement" means any agreement in the nature of a trust
established to form a part of this Plan to receive, hold, invest, and
dispose of the Trust Fund.
(rr)"Trustee" means the corporation, individual, individuals, or any
combination of such entities or individuals, named and acting as trustee
under this Plan or any trust agreement forming a part of the Plan at any
time of reference.
(ss)"Trust Fund" means the assets of every kind and description held for the
Plan under any Trust Agreement forming a part of this Plan.
(tt)"Vesting Service" means a period of service for vesting purposes, as
described in section 4.3.
2.2 Gender and Number
Whenever used in the Plan, singular words shall include the plural and masculine
words shall include the feminine unless the context clearly indicates a
distinction.
<PAGE>
Article III. Eligibility and Participation
3.1 Eligibility and Participation
(a) Each Employee of an Employer on November 1, 1995 who was a "participant"
as defined in and covered by the Plan on October 31, 1995, and any other
person receiving or eligible to receive any benefits under the Plan on
October 31, 1995, shall automatically continue to be a Participant, a
Retired Participant, or a Beneficiary, as the case may be, on November
1, 1995.
(b) An Employee on or after November 1, 1995 (other than a leased employee
as defined under Code section 414(n)) shall become an Eligible Employee
on the latest of-- (1) the date he attains age 21; (2) the date he
becomes an Employee of an Employer; or (3) the date he is credited with
one year of Eligibility Service.
3.2 Application for Participation
In order to become a Participant in the Plan, an Eligible Employee must file an
application with the Employer and agree to the Plan's terms. In the event that
an Eligible Employee fails to file such application, the Employer shall file
such application on behalf of the Employee on a nondiscriminatory basis. Upon
his acceptance of any benefits under this Plan, such Employee shall
automatically be bound by the terms and conditions of the Plan and all
amendments to the Plan.
3.3 Effective Date of Participation
Except as otherwise provided under section 3.6, an Eligible Employee who applies
for participation under section 3.2 shall become a Participant--
(a) if the Employee met the eligibility requirements specified in section
3.1 during the first six months of the Plan Year, as of the first day of
the Plan Year in which the Employee met such eligibility requirements;
or
(b) if the Employee met the eligibility requirements specified in section
3.1 during the last six months of the Plan Year as of the first day of
the next succeeding Plan Year.
3.4 Election not to Participate
Any Eligible Employee may, subject to the Company's approval, voluntarily elect
not to participate in the Plan. Such election must be communicated to the
Company in writing at least 30 days before the beginning of a Plan Year.
An Eligible Employee who elects not to participate in the Plan shall have the
right to modify or revoke such election during a subsequent Plan Year. However,
in no event shall such Eligible Employee's Accrued Benefit be reduced. Benefit
decreases as a result of such election shall be recognized notwithstanding the
provisions of section 6.1(d). Benefit increases as a result of the revocation or
modification of such election in any Plan Year subsequent to a Plan Year in
which benefits have been decreased pursuant to such election shall be treated as
benefit increases resulting from a Plan amendment. The funding for such benefit
increases shall be based upon reasonable actuarial assumptions which are
commonly utilized to fund benefit increases resulting from a Plan amendment.
Further, any such benefit increases shall be subject to the restrictions on
annual benefits specified in Article XIII upon early termination of the Plan.
3.5 Duration of Participation
Except as expressly provided in section 3.4 above, no Participant shall have any
right to revoke, modify, or discontinue his participation in the Plan, or to
withdraw from the Plan. An Eligible Employee who becomes a Participant shall
continue to be a Participant or Inactive Participant until he terminates from
employment, and also shall continue to be a Member thereafter for as long as he
is entitled to receive any benefits under the Plan if he thereupon becomes
eligible to receive (then or thereafter) a benefit under the Plan. After
receiving all benefits to which he is entitled under the Plan, he shall cease to
be a Member unless and until he thereafter becomes eligible to again become a
Participant.
<PAGE>
3.6 Transferred or Rehired Employees
The following rules shall be applicable to Employees who become Participants
because of transfer to a status qualifying for participation in the Plan or who
become Inactive Participants:
(a) Any Employee who is transferred from a nonparticipating Affiliate into
employment where he becomes a Participant shall be credited with Vesting
Service computed as provided in section 4.3 for all his employment with
an Employer and nonparticipating Affiliates, before and after such
transfer. Except as provided in section 4.4, he shall not be credited
with Benefit Service for employment prior to such transfer.
(b) Any Participant who is transferred into employment as an Employee where
he becomes an Inactive Participant shall continue to accrue Vesting
Service (but not Benefit Service) under this Plan during the period he
is an Inactive Participant. Any benefit to which he may become entitled
under this Plan shall be determined on the bases of his Vesting Service
before and after the date of such transfer, on the Benefit Service he
had prior to the date of such transfer, and on his Average Monthly
Compensation and the Covered Compensation under the Plan in effect at
the time of his transfer to status as an Inactive Participant.
(c) Any Employee who has a Break in Service and is subsequently reemployed
by the Company or an Affiliate shall be considered a new Employee for
purposes of section 3.1, unless--
(1) he was credited with at least one year of Eligibility Service prior
to his Break in Service. In such case, he shall become a Participant
under the Plan on the date he is reemployed as an Employee; or
(2) if paragraph (1) is not applicable, he is reemployed prior to
incurring a One-Year Break in Service. In such case, the period
commencing on the Break in Service and ending on the date of
reemployment shall be credited as Eligibility Service.
3.7 Employee of Nonparticipating Affiliate Who Becomes a Participant Following
Break in Service
An Employee of a nonparticipating Affiliate who incurs a Break in Service and
who thereafter becomes a Participant under this Plan shall have his benefit
calculated in the same manner as a transferred Employee, provided that he is
eligible to have his prior employment recognized under section 3.6.
<PAGE>
Article IV. Service
4.1 Hour of Service
An Employee's Hours of Service shall be used to determine credit for eligibility
to participate in the Plan, eligibility to receive benefits, and amount of
benefits. Hours of Service shall be determined as follows:
(a) An Employee shall receive an Hour of Service for each hour for which he
is paid or entitled to payment by an Employer or nonparticipating
Affiliate for the performance of duties.
(b) An Employee shall receive an Hour of Service for each hour for which he
is directly or indirectly paid or entitled to payment by an Employer or
nonparticipating Affiliate on account of a period of time during which
no duties are performed (irrespective of whether the employment
relationship has terminated) due to vacation, holidays, illness,
incapacity (including disability), layoff, jury duty, military duty, or
leave of absence. No more than 501 Hours of Service shall be credited
under this subsection for any single continuous period during which the
Employee performs no duties, and no Hour of Service shall be credited
based on any payment under a plan maintained solely to comply with
applicable workers' compensation, unemployment compensation, or
disability insurance laws, or which solely reimburses an Employee for
medical or medically-related expenses incurred by the Employee.
(c) An Employee shall receive an Hour of Service for each hour for which
back pay, irrespective of mitigation of damages, is either awarded or
agreed to by an Employer or nonparticipating Affiliate, with no
duplication of credit for hours under subsections (a) or (b) and this
subsection (c). With respect to periods described in subsection (b)
above, crediting of back pay hours shall be subject to the limitations
set forth in that subsection. No more than 501 Hours of Service shall be
credited under this subsection for any single continuous period during
which the Employee did not or would not have performed duties.
(d) Solely for purposes of determining whether a One-Year Break in Service
has occurred, but not for purposes of determining an Employee's Vesting
Service or Benefit Service, an Employee shall receive an Hour of Service
for each hour which would have been credited to such Employee but for--
(1) an approved leave of absence from employment by reason of--
(A)pregnancy,
(B)placement of a child with the Employee in connection with the
adoption of such child,
(C)birth of a child, or
(D)caring for a child for a period immediately following such birth
or placement; or
(2) effective August 8, 1993, leave of absence authorized under the
Family Medical Leave Act of 1993.
If the number of hours which would have been credited to the Employee
cannot be determined, eight Hours of Service shall be credited per day
of such absence. No more than 501 Hours of Service shall be credited
under this subsection (d) for any such absence. Hours of Service under
this subsection (d) shall be credited in the Plan Year in which the
absence from employment commences if the crediting is necessary in order
to prevent a One-Year Break in Service except that in the case of Hours
of Service credited pursuant to paragraph (1) of this subsection (d),
Hours of Service shall be credited in the Plan Year in which the absence
from employment commences if the crediting is necessary in order to
prevent a One-Year Break in Service, otherwise, in all other cases, such
Hours of Service shall be credited in the following Plan Year.
(e) An Employee shall receive an Hour of Service for each hour of the
normally-scheduled workweek for each week during any period he is on any
absence from work with the Employer or nonparticipating Affiliate for
voluntary or involuntary military service with the United States Armed
Forces, but not to exceed the period required under the law pertaining
to veterans' reemployment rights; provided, however, that if he fails to
report for work at the end of such absence during which he has
reemployment rights under law, he shall not receive credit for hours on
such leave.
(f) An Employee shall receive an Hour of Service for each hour of the
normally-scheduled workweek for each week of authorized leave of absence
granted by the Employer or nonparticipating Affiliate for which he is
not compensated; provided, however, if he fails to report for work at
the end of such authorized leave of absence, he shall not receive credit
for hours on such leave.
For purposes of crediting hours under (b) and (c) above, the Administration
shall observe and follow Department of Labor regulation section 2530.200b-2(b)
and (c).
<PAGE>
4.2 Eligibility Service
Eligibility Service shall be used to determine an Employee's eligibility to
participate in the Plan. An Employee shall receive credit for Eligibility
Service, determined as follows:
(a) An Employee shall receive credit for one year of Eligibility Service if
he completes at least 1,000 Hours of Service in the 12-month period
beginning with his date of hire.
(b) An Employee shall also receive credit for a year of Eligibility Service
for each Plan Year beginning after his date of hire in which he
completes at least 1,000 Hours of Service.
4.3 Vesting Service
Vesting Service shall be used to determine an Employee's eligibility to receive
benefits and to determine whether an Employee's Vesting Service and Benefit
Service prior to a Break in Service shall be reinstated upon reemployment. An
Employee shall receive credit for Vesting Service as follows:
(a) For employment prior to November 1, 1995, an Employee shall receive
credit for Vesting Service equal to the years of service for purposes of
determining vesting he had under the Plan as of October 31, 1995.
(b) In addition to Vesting Service under subsection (a) a participant shall
receive credit for Benefit Service as follows:
(1) For Plan Years beginning on or after November 1, 1995, an Employee
shall receive credit for a year of Vesting Service for each Plan
Year beginning on or after such date in which he is age 18 or older
and credited with at least 1,000 Hours of Service.
(2) Vesting Service shall include any period of employment with an
entity prior to the date such entity becomes an Affiliate.
(3) An Employee who has had a Break in Service and is subsequently
reemployed by an Employer or a nonparticipating Affiliate as an
Employee shall be considered a new Employee, unless--
(A) he had at least three years of Vesting Service at such Break in
Service, the Vesting Service (and Benefit Service) he had at
such Break in Service shall be reinstated, retroactive to his
Reemployment Commencement Date, upon his completion of a year of
Vesting Service following his reemployment;
(B) he is reemployed before he has incurred a One-Year Break in
Service. In such case, his prior Vesting Service (and Benefit
Service) shall be reinstated upon his reemployment; or
(C) (if neither (A) nor (B) above is applicable) the Employee
incurred no more than five consecutive One-Year Breaks in
Service prior to his reemployment. In such case, his prior
Vesting Service (and Benefit Service) shall be reinstated
retroactive to his Reemployment Commencement Date upon his
completion of a year of Vesting Service following his
reemployment.
4.4 Benefit Service
Benefit Service shall be used to determine the amount of a Participant's
benefit. A Participant shall receive credit for Benefit Service, determined as
follows:
(a) For employment prior to November 1, 1995, a Participant shall receive
credit for Benefit Service equal to the years of service for purposes of
determining benefits he had as of October 31, 1995.
(b) In addition to Benefit Service under subsection (a), a Participant shall
receive credit for Benefit Service as follows:
(1) For Plan Years beginning on or after November 1, 1995, a
Participant's Benefit Service shall be calculated on a monthly
basis. A Participant shall receive Benefit Service credit for each
calendar month during a Plan Year in which he is both an Employee
and receives credit for at least 83 Hours of Service.
(2) Except for service in the United States Armed Forces, a Participant
shall not be credited with more than six months of Benefit Service
during a period in which he is on authorized leave of absence unless
the Participant continues to receive Compensation as an Eligible
Employee from an Employer for such period.
<PAGE>
(3) Benefit Service shall not include any period of employment with an
entity prior to the date such entity becomes an Affiliate unless the
Company acts to grant Benefit Service for such employment. If the
Company acts to grant Benefit Service for pre-Affiliate employment,
the number of years of Benefit Service so granted shall not exceed
five.
(4) Former employees of the Bank of Lockport who become Participants in
the Plan shall not receive Benefit Service credit for employment
with the Employer prior to January 1, 1992.
(5) Former employees of Southwest Suburban Bank who become Participants
in the Plan shall not receive Benefit Service credit for employment
with the Employer prior to November 1, 1989.
(6) Former employees of Community Bank of Plano who become Participants
in the Plan shall not receive Benefit Service credit for employment
with the Employer prior to November 1, 1994.
4.5 Break in Service
A Break in Service shall occur for any one of the following reasons:
(a) if the Employee quits;
(b) if the Employee is discharged;
(c) if the Employee fails to report for work within the period required
under the law pertaining to veteran's reemployment rights, after he is
released from military service with the armed forces of the United
States;
(d) if the Employee fails to report for work on or prior to the first day
after a leave of absence which has been granted to him other than for
military service or fails to report to work upon recall after a layoff;
or
(e) if the Employee retires hereunder or dies.
The fact that an Employee who is a Participant becomes an Inactive
Participant shall not constitute a Break in Service, but the foregoing rules
shall continue to apply to any such Employee during the period he is an
Inactive Participant.
4.6 One-Year Break in Service
A One-Year Break in Service shall occur when an Employee who has had a Break in
Service receives credit for fewer than 501 Hours of Service during a Plan Year.
4.7 Repayments
If a Participant has a Break in Service and receives a lump sum cashout of his
benefit under section 7.3(b) or 7.4, his Benefit Service completed before the
Break in Service shall be disregarded upon his reemployment unless the
Participant repays the benefit to the Plan.
Repayment must be made before the earlier of--
(a) the fifth anniversary of his reemployment; or
(b) the completion of five consecutive One-Year Breaks in Service following
the date of distribution.
Such repayment shall include the amount of the cashout plus interest, compounded
annually from the date of the distribution.
A Participant or an Inactive Participant who has a Break in Service and does not
have any Vested interest in his Accrued Benefit shall be deemed to have received
a lump sum cashout of such benefit on the date of his Break in Service. If such
Participant or an Inactive Participant is rehired, he shall be treated as having
repaid such benefit on his date of rehire.
The interest rate used shall be 120 percent of the federal mid-term rate in
effect for the first month of the Plan Year for which interest is being
computed. Any benefits attributable to Benefit Service restored under this
section 4.7 shall be entitled to all applicable subsidies and optional forms of
payment relating to the restored benefits.
4.8 No Duplication of Service
A Member shall not receive any duplicative Benefit Service or Vesting Service
for the same period of employment.
<PAGE>
Article V. Contribution and Valuation
5.1 Payment of Contributions
No Participant shall be required to make any contribution to the Plan. The
Employer shall pay to the Trustee from time to time such amounts, in cash or in
property, acceptable to the Trustee as the Administrator and the Employer shall
determine, by the application of accepted actuarial methods and assumptions, to
be necessary to provide the benefits payable under the Plan. The method of
funding such benefits shall be consistent with the Plan's objectives.
5.2 Actuarial Methods
In establishing the Plan's liabilities and contributions, the Actuary shall use
such methods and assumptions as will reasonably reflect the cost of the benefits
to be provided by the Plan. The Plan's assets are to be valued on the basis of
any reasonable method of valuation that takes into account fair market value
pursuant to regulations prescribed by the Secretary of the Treasury. The Plan
shall be subject to an actuarial valuation at least once every three years.
Article VI. Benefits
6.1 Normal Retirement Benefits
(a) Eligibility. A Participant who incurs a Break in Service on or after he
has attained his Normal Retirement Age shall be eligible to receive a
normal retirement benefit under the Plan. Such Member's right to his
Accrued Benefit shall be 100 percent vested and nonforfeitable (except
for reasons of death or reemployment) upon his attainment of his Normal
Retirement Age if he is employed by the Company or an Affiliate on such
date.
(b) Amount. For Plan Years beginning on or after November 1, 1991, the
monthly normal retirement benefit payable to a Member who is eligible to
receive such benefit pursuant to (a) above shall be an amount equal to
the sum of (1) plus (2) below--
(1) the product of--
(A) the sum of 1.25 percent of his Average Monthly Compensation not
in excess of Covered Compensation plus .625 percent of his
Average Monthly Compensation in excess of Covered Compensation;
and
(B) his years of Benefit Service not in excess of 30 years; and
(2) the product of--
(A) .5 percent of his Average Monthly Compensation; and
(B) his years of Benefit Service in excess of 30 but not in excess
of 35 years.
For Plan Years prior to November 1, 1991, the monthly normal retirement
benefit payable to a Member who is eligible to receive such benefit
shall be computed in accordance with the terms of the Plan document in
effect at such time.
(c) Commencement. Monthly normal retirement benefit payments shall begin as
of a Member's Normal Retirement Date, unless the Member elects to defer
the commencement of benefit payments to his Late Retirement Date. This
subsection (c) shall be subject to the provisions of section 7.7.
(d) Minimum Benefit. The retirement benefits payable to a Member under this
section 6.1 shall not be less than the largest normal retirement benefit
accrued by the Member under the terms of the Plan as in effect as of
October 31, 1989, based on the Member's "Years of Service" and "Average
Monthly Compensation" as of October 31, 1989.
6.2 Disability Retirement Benefits
(a) Eligibility. A Participant who incurs a Total and Permanent Disability
while an Employee shall be eligible to receive a disability retirement
benefit under the Plan.
(b) Amount. The monthly amount of the disability retirement benefit payable
to a Participant who is eligible to receive such benefit pursuant to (a)
above shall be his Accrued Benefit, computed as of his Disability
Retirement Date.
<PAGE>
(c) Commencement and Duration. Monthly disability retirement benefit
payments shall begin as of a Participant's Disability Retirement Date
and shall be paid monthly thereafter in the form of a single life
annuity as of the first day of each succeeding month until the first to
occur of (1), (2), or (3) below:
(1) the cessation of the Participant's Total and Permanent Disability,
at which time the provisions of subsection (d) below shall apply;
(2) the Participant's death, at which time--
(A) if the Participant is unmarried, a preretirement death benefit
shall become payable to the Participant's beneficiary pursuant
to section 8.2; or
(B) if the Participant is married and satisfies the one-year
marriage requirement specified in section 8.1(b), a
Preretirement Survivor Annuity shall become payable to the
Participant's surviving spouse pursuant to section 8.1; or
(3) the Participant's attainment of his Normal Retirement Age, at which
time the provisions of section 6.1 shall apply. No additional
Benefit Service shall be credited to the Participant after his
Disability Retirement Date.
(d) Cessation of Total and Permanent Disability. Upon the cessation of a
Participant's Total and Permanent Disability, his disability retirement
benefit shall cease, and the following provisions shall apply:
(1) If a Participant's Total and Permanent Disability ceases prior to
his Normal Retirement Age and he is reemployed by the Employer upon
the cessation of his Total and Permanent Disability, he shall have
his prior Vesting and Benefit Service reinstated. Upon any
subsequent Break in Service, his eligibility for a benefit and the
amount of the benefit shall be determined, calculated, and paid as
if he were first retired based upon his Vesting and Benefit Service
at such Break in Service. However, his benefit at his subsequent
retirement shall be appropriately adjusted in a uniform and
nondiscriminatory manner to take into account the value of the
disability retirement benefit which he previously received.
(2) If a Participant's Total and Permanent Disability ceases (for any
reason except death) prior to his Normal Retirement Age and he is
not reemployed by the Employer upon the cessation of his Total and
Permanent Disability, he shall assume the status of a terminated
Participant eligible to receive a deferred vested retirement
benefit, and any deferred vested retirement benefit for which he may
be eligible shall be calculated and paid based on his Average
Monthly Compensation, the Covered Compensation, his Benefit Service,
and the benefit formula in effect at his Disability Retirement Date.
However, his benefit at his subsequent retirement shall be
appropriately adjusted in a uniform and nondiscriminatory manner to
take into account the value of the disability retirement benefit
which he previously received.
6.3 Deferred Vested Retirement Benefits
(a) Eligibility. A Member who incurs a Break in Service on or after he has
attained his Vested Retirement Age shall be eligible to receive a
deferred vested retirement benefit under the Plan.
(b) Amount. The monthly amount of the deferred vested retirement benefit
payable to a Member who is eligible to receive such benefit pursuant to
(a) above shall be an amount computed in the same manner as a normal
retirement benefit under section 6.1(b) based on his Average Monthly
Compensation, the Covered Compensation, and his Benefit Service at the
time of his Break in Service, but adjusted in accordance with paragraphs
(1) and (2) below.
(1) Such amount shall be multiplied by the applicable vested percentage
of the Member's benefit, determined as follows:
Member's Years Vested
of Vesting Service Percentage
less than 3 0%
3 20%
4 40%
5 60%
6 80%
7 or more 100%
(2) If the Member elects to have his deferred vested retirement benefit
payments begin prior to his Normal Retirement Date, such amount
shall be reduced by--
<PAGE>
(A) 1/150 for each complete calendar month (but not more than 60
months), and
(B) 1/300 for each complete calendar month (but not more than 60
months) beyond the first 60 months under paragraph (1) above,
by which his first deferred vested retirement benefit payment
precedes his Normal Retirement Date.
If the Member elects to have his deferred vested retirement benefit
payments begin prior to his attainment of age 55, such amount shall
be reduced on the basis of the applicable Actuarial Equivalent
factors.
(c) Commencement and Duration. Monthly deferred vested retirement benefit
payments shall begin as of a Member's Normal Retirement Date, unless he
elects to have such payments begin earlier pursuant to subsection (b)(2)
above. This subsection (c) shall be subject to the provisions of section
7.7.
6.4 Limitation of Benefits
(a) Limitation on Benefits. Notwithstanding any other provisions of this
Plan to the contrary, effective January 1, 1987, the annual benefit
under "any defined benefit plan" payable to a Member shall not exceed
the lesser of--
(1) $90,000 or such higher amount as may be permitted by the Secretary
of the Treasury pursuant to section 415(b)(1)(A); or
(2) 100 percent of the annual average of the highest three consecutive
calendar years of compensation paid to him by the Employer during
his active participation in this Plan.
If such annual benefit is payable in a form other than a single-life
annuity, the limitation of this subsection (a) shall be adjusted so that
it is an Actuarial Equivalent, using the assumptions in subsection (c),
to a single-life annuity. For the purposes of the preceding sentence,
any ancillary benefit which is not directly related to retirement income
benefits shall not be taken into account; and that portion of a joint
and survivor annuity which constitutes a Qualified Joint and Survivor
Annuity shall not be taken into account.
(b) Adjustment to Limitations.
(1) If a Member has less than ten years of participation in the Plan,
then the limitation prescribed in subsection (a)(1) shall be
adjusted by multiplying such limitation by a fraction, the numerator
of which equals the period of time that the Member participated in
the Plan and the denominator of which equals ten. A similar
reduction shall be made to the limitation prescribed in subsection
(a)(2) for Members with less than ten Years of Service under the
Plan.
(2) The amount of the limitation in subsection (a)(1) shall be further
adjusted with respect to benefit commencement prior to the Member's
attainment of Social Security Retirement Age so that the limitation
(as so adjusted) equals an annual benefit (beginning when the
Member's benefit begins) which is the actuarial equivalent to an
annual benefit equal to the amount of the limitation in subsection
(a)(1) commencing at Social Security Retirement Age.
(3) If the Member's benefit commences after social security retirement
age, the amount of the limitation in subsection (a)(1) shall be
adjusted so that the limitation (as so adjusted) equals an annual
benefit (beginning when the Member's benefit begins) which is the
actuarial equivalent of an annual benefit equal to the amount of the
limitation in subsection (a)(1) commencing at Social Security
Retirement Age.
(c) Required Actuarial Assumptions. In determining actuarial equivalence and
making adjustments for purposes of this section 6.4--
(1) the limit for benefits payable prior to Social Security Retirement
Age shall be adjusted by--
(A) five-ninths of one percent for each of the first 36 months,
(B) five-twelfths of one percent for each of the next 24 months, and
(C) the monthly actuarial adjustment factor for each month
thereafter based on the mortality assumption specified in
section 2.1(c) and an interest rate equal to the greater of five
percent or the applicable interest rate specified in section
2.1(c);
(2) the interest rate assumption used for adjusting any limitation for
benefits payable after Social Security Retirement Age shall not be
greater than the lesser of five percent or the applicable interest
rate specified in section 2.1(c); and
<PAGE>
(3) the interest rate assumption used for adjusting any limitation for
benefits payable in a form other than a straight-life annuity shall
not be less than the greater of five percent or the interest rate
specified in section 2.1(c).
(d) Additional Limitation. If in any Plan Year a Member is covered both
under any defined contribution plan and under any defined benefit plan,
the sum of the defined benefit plan fraction (as defined in Code section
415(e)(2)) and the defined contribution plan fraction (as defined in
Code section 415(e)(3)) for such Plan Year shall not exceed one. It is
intended to reduce the benefits payable under any defined benefit plan
to the extent necessary to prevent the sum of such fractions for any
Plan Year from exceeding one before reducing contributions to any
defined contribution plan.
(e) Right to Higher Accrued Benefit Preserved. Notwithstanding the
foregoing, the limitations under subsection (a) and the factor included
in the defined benefit plan fraction denominator under subsection (d)
above for any person--
(1) who was a Participant on or before December 31, 1986 shall not be
lower than the amount of such Participant's Accrued Benefit under
the terms of the Plan as of December 31, 1986;
(2) who was a Participant on or before December 31, 1982 shall not be
lower than the amount of such Participant's Accrued Benefit, not to
exceed $136,425, under the terms of the Plan as of December 31,
1982; or
(3) who was a Participant in the Plan on or before October 2, 1973 shall
not be lower than such person's retirement benefit determined under
the terms of the Plan provisions as in effect on October 2, 1973
based upon Compensation as of such date and Service as of
termination of employment.
(f) Additional Definitions. For the purpose of this section 4.6, the
following terms shall have these meanings:
(1) "Affiliate" shall have the meaning prescribed in section 2.1(c),
except that in applying Code section 414(b) and (c), the phrase
"more than 50 percent" shall be substituted for the phrase "at least
80 percent" each place it appears in Code section 1563(a)(1).
(2) "Any defined benefit plan" means this Plan and any other defined
benefit plans of the Employer and Affiliates considered as one plan.
(3) "Any defined contribution plan" means all defined contribution plans
of the Employer and Affiliates considered as one plan.
(4) The "limitation year" for the purposes of Treasury regulation
section 1.415-2(a) shall be the Plan Year.
(5) "Compensation" means a Participant's earned income, including wages,
salaries, fees for professional services, other amounts received for
personal services actually rendered in the course of employment with
the Employer or an Affiliate, and other amounts of earned income
delineated under Treasury regulation section 1.415-2(d).
(6) "Social Security Retirement Age" means the age under section 216(l)
of the Social Security Act, except that such section shall be
applied without regard to the age increase factor and as if early
retirement age under section 216(l)(2) of such Act is 62.
The above limitations are intended to comply with the provisions of section 415
of the Code, so that the maximum benefits provided by plans of the Employer and
Affiliates shall be exactly equal to the maximum amounts allowed under section
415 of the Code and regulations thereunder.
6.5 Distribution of Annuity Contract
The Administrator may, in its sole discretion, direct the distribution of a
Contract to any Member who has retired or whose employment has terminated. Any
such Contract shall provide for payments in an amount equal to the benefits due
the Member under the Plan. Delivery of any such Contract to a Member shall be in
full satisfaction of the Member's rights under the Plan, and upon the delivery
of such Contract to a Member, the Member shall have no further interest in the
Trust Fund, but shall look solely to the insurer issuing such Contract for the
payment of his benefits.
<PAGE>
6.6 Reemployment After Benefit Commencement but Prior to Normal Retirement Age
If a Member whose benefits under the Plan have commenced is reemployed as an
Employee before his Normal Retirement Age, his benefit payments shall be
discontinued and shall not be paid or accrue during the period of such
reemployment, his previous election of form of payment shall be cancelled, and
he shall have the Vesting Service and Benefit Service he had at the time of his
retirement reinstated. Upon his subsequent retirement, his eligibility for a
benefit and the amount of the benefit shall be determined, calculated, and paid
as if he were then first retired based upon such reinstated Vesting Service and
Benefit Service, plus Vesting Service and Benefit Service earned following the
date of reemployment, but such benefit shall be actuarially reduced to account
for any retirement benefit payments he may have received prior to his
reemployment. In no event will a Member's retirement benefit at his subsequent
retirement (prior to reduction for any benefit payments he may have received
prior to his reemployment) be less than his benefit at his prior retirement.
The foregoing notwithstanding, if a Member who is reemployed as described above
subsequently reaches his Normal Retirement Age and is employed at a rate of
fewer than 40 Hours of Service per month, he shall be entitled to receive a
normal retirement benefit during such period of reemployment. Such payments
shall continue every month thereafter until his rate of employment equals at
least 40 Hours of Service per month, at which time his benefits shall be
suspended under the terms and conditions described in section 6.7.
6.7 Reemployment After Benefit Commencement and After Attaining Normal
Retirement Age
If a Member whose benefits under the Plan have commenced is reemployed as an
Employee after his Normal Retirement Age at a rate of at least 40 Hours of
Service per month, his benefit payments shall be discontinued and shall not be
paid or accrue during the period of such reemployment, his previous election of
form of payment shall be cancelled, and he shall have the Vesting Service and
Benefit Service he had at the time of his retirement reinstated. Such suspension
of benefits shall be done in accordance with Department of Labor regulation
section 2530.203-3 and shall include the notice described in section 6.8. Upon
his subsequent retirement, his eligibility for a benefit and the amount of the
benefit shall be determined, calculated, and paid as if he were then first
retired based upon such reinstated Vesting Service and Benefit Service plus
Vesting Service and Benefit Service earned following the date of reemployment,
but such benefit shall be actuarially reduced to account for any retirement
benefit payments he may have received prior to his reemployment. In no event
will a Member's retirement benefit at subsequent retirement (prior to reduction
for any benefit payments he may have received prior to his reemployment) be less
than his benefit at his prior retirement.
If a Member is reemployed as an Employee after his Normal Retirement Age and his
rate of employment is for less than 40 Hours of Service per month, he shall
receive the same type and amount of benefit payment he was entitled to receive
preceding his reemployment during such period of reemployment. Such payments
shall continue every month thereafter until his rate of employment equals at
least 40 Hours of Service per month, at which time his benefits shall be
suspended as described above.
6.8 Suspension of Benefits Notice and Procedures
If an Employee's benefits are to be suspended after age 65, the Plan shall
notify the Employee, by personal delivery or first class mail during the first
calendar month in which the Plan withholds payments, that benefits are
suspended. The notice shall contain--
(a) a general description of the reasons why payments are suspended;
(b) a general description of the Plan provisions relating to the suspension
of benefits;
(c) a copy of such Plan provisions;
(d) a statement that applicable Department of Labor regulations may be found
in section 2530.203-3 of the Code of Federal Regulations;
(e) a statement that a review of the suspension may be requested under the
claims procedure prescribed in section 11.11;
(f) if the Plan requires a benefit resumption notice, the procedure and
forms; and
(g) if the Plan requires verification by the Employee that his benefits
should not be suspended, the procedure and forms for such verification.
The Plan shall adopt a procedure whereby an individual may request a
determination of whether specific contemplated employment after age 65 will
result in a suspension of benefits.
<PAGE>
6.9 Distribution for Minor Beneficiary
In the event that a distribution is to be made to a minor Beneficiary, the
Administrator may, in its sole discretion, direct that such distribution be paid
to the Beneficiary's legal guardian, or if none, to a parent of such Beneficiary
or a responsible adult with whom the Beneficiary maintains his residence, or to
the custodian for such Beneficiary under the Uniform Transfers to Minors Act or
Transfers to Minors Act, if such is permitted by the laws of the state in which
the Beneficiary resides. Such a payment to the legal guardian or parent of a
minor Beneficiary shall fully discharge the Trustee, Employer, and Plan from
further liability on account thereof.
6.10 Effect of Social Security Act
Benefits being paid to a Participant or Beneficiary under the terms of this Plan
may not be decreased by reason of any post-separation Social Security benefit
increases or by reason of any increase in the Social Security Wage Base.
Benefits in which an Inactive Participant has a Vested interest may not be
decreased by reason of an increase in a benefit level or in the Social Security
Wage Base.
Article VII. Distribution
7.1 Normal Form of Payment
(a) Unmarried Members. The normal form of payment for a Member who has a
nonforfeitable right to all or a portion of his Accrued Benefit and who
is not married on the Annuity Starting Date shall be a ten-year
certain-and-life annuity.
(b) Married Members. The normal form of payment for a Member who has a
nonforfeitable right to all or a portion of his Accrued Benefit and who
is married on the Annuity Starting Date shall be the Actuarial
Equivalent of a ten-year certain-and-life annuity payable as a Qualified
Joint and Survivor Annuity.
7.2 Waiver of Normal Form of Payment.
(a) Election to Waive. Each Member may elect to waive, or revoke an election
to waive, the normal form of benefit prescribed under section 7.1. Any
such election to waive or revocation of such election may be made at any
time during the 90-day period ending on the Member's Annuity Starting
Date.
(b) Spousal Consent. An election to waive the Qualified Joint and Survivor
normal form of benefit under section 7.1(b) shall not take effect unless
the spouse of the Member consents in writing to such election and such
consent acknowledges the effect of such election, the specific nonspouse
Beneficiary or Beneficiaries, if any, the specific optional form of
benefit chosen, and is witnessed by a person designated by the
Administrator or a notary public. Spousal consent to a waiver of the
Qualified Joint and Survivor Annuity form of benefit shall be effective
only with respect to the spouse signing the consent and shall not be
required if the Member establishes to the satisfaction of the
Administrator that such consent may not be obtained because of reasons
described in the Code or regulations thereunder.
<PAGE>
(c) Notice Requirement. The Administrator shall provide to each Member (by
mail or personal delivery), no less than 30 days nor more than 90 days
before the Member's Annuity Starting Date, a written explanation with
respect to the normal form of benefits. Such explanation shall provide
the information required pursuant to subsection (d).
(d) Written Explanation. The written explanation required pursuant to
subsection (c) shall describe the terms and conditions of the normal
form of benefit, the Member's right to make (and the effect of) an
election to waive such annuity, the right of the Member's spouse to
consent in writing to such waiver, and the right to make (and the effect
of) a revocation of an election to waive such annuity. In addition, such
notice shall describe the eligibility conditions and other material
features and relative values of optional forms of benefits.
7.3 Optional Forms of Payment
(a) Election. In lieu of the normal form of payment prescribed under section
7.1, a Member may elect to receive the Actuarial Equivalent of his
Accrued Benefit under an optional form of payment described under
subsection (b). A Member's election to receive his Accrued Benefit under
an optional form of benefit must be in writing in accordance with
section 7.2 and filed with the Administrator within a reasonable time
(as determined by the Administrator) before the Annuity Starting Date.
If the Present Value of a Member's nonforfeitable Accrued Benefit
exceeds $3,500 (or such greater amount as promulgated by law or
regulations), any election to receive a lump sum payment shall include a
waiver of an immediately payable benefit in the normal form pursuant to
section 7.2.
(b) Optional Forms of Payment. The Actuarial Equivalent of a Member's
Accrued Benefit under this Plan to which the Member is or will become
entitled shall be payable in an optional form as follows:
(1) Benefits Commencing Prior to Age 55. For Members whose benefits
commence prior to age 55, the only optional form of payment
available shall be a lump sum payment equal to the Present Value of
the Member's nonforfeitable Accrued Benefit.
(2) Benefit Commencing At or After Age 55. Except as otherwise provided,
for Members whose benefits commence at or after age 55, the
following optional forms of payment shall be available:
(A) a joint and survivor annuity providing reduced monthly
retirement benefits payable to the Member for life and to a
surviving named Beneficiary in an amount equal to 100 percent,
75 percent, or 50 percent of the retired Member's reduced
benefit;
(B) a single life annuity providing monthly retirement benefits
payable to the Member for life provided that such Member
commenced participation in the Plan prior to November 1, 1992,
and then, only with respect to that portion of the Member's
Accrued Benefit determined as of October 31, 1992;
(C) payments over a period certain in monthly, quarterly,
semiannual, or annual installments; or
(D) a lump sum payment, equal to the Present Value of the Member's
nonforfeitable Accrued Benefit.
7.4 Payment of Small Amounts
If the Present Value of the nonforfeitable portion of a Member's Accrued Benefit
does not exceed $3,500 (or such greater amount as promulgated by law or
regulation), the Administrator shall direct that such amount be paid to the
Member in a lump sum payment as soon as administratively feasible following the
Member's Break in Service.
7.5 Consent to Early Distribution
In order for a Member's election to begin receiving benefits prior to his Normal
Retirement Age to be valid, the Member must consent in writing to such
distribution.
A Member's consent under this section 7.5 shall not be valid unless the Member
received the written notice and explanation provided under section 7.2(c).
Notwithstanding the foregoing, a Member's consent shall not be required if an
immediate lump sum distribution is made pursuant to section 7.4.
<PAGE>
7.6 Direct Rollovers of Eligible Rollover Distributions
Effective for Plan Years beginning on or after November 1, 1993 a Member who
receives a distribution under the Plan that qualifies as an "eligible rollover
distribution" under Code section 402(c)(4) may elect, in a manner prescribed by
the Administrator to directly rollover of all of part such distribution to an
"eligible retirement plan" as defined under Code section 402(c)(8)(B).
7.7 Required Distributions and Restrictions on Distributions
(a) General Rule. Notwithstanding anything in the Plan to the contrary,
unless the Member otherwise elects in writing, distribution to such
Member shall not commence later than the sixtieth day after the close of
the Plan Year in which occurs the latest of the following events:
(1) the Member attains Normal Retirement Age;
(2) the Member attains the tenth anniversary of the date on which he
became a Participant under the Plan; or
(3) the Member's Break in Service.
(b) Latest Allowable Commencement Dates. Notwithstanding anything contained
in the Plan to the contrary, except as provided under paragraphs (2) and
(3), a Member's benefits under the Plan shall commence no later than
April 1 following the calendar year in which he attains age 70 1/2,
regardless of whether his employment with the Company and its Affiliates
has terminated.
Notwithstanding the foregoing, a Member who is a Five-Percent Owner at
any time during the Plan Year ending in or with the calendar year in
which such Participant attains age 66 1/2, or during any subsequent Plan
Year, shall in any event commence to have his benefits distributed to
him no later than the April 1 following the calendar year in which such
Member attains age 70 1/2, regardless of whether he has incurred a Break
in Service.
(c) Periodic Benefit Payments. No election of an optional form of payment
under the Plan will be effective unless the Member's total benefit will
be distributed over a period that will not exceed--
(1) the life of the Member;
(2) the lives of the Member and the Member's designated Beneficiary; or
(3) a period certain not extending beyond the joint life and last
survivor expectancy of the Member and the Member's designated
Beneficiary.
(d) Required Distributions Where Member Dies Before Entire Interest is
Distributed.
(1) If benefits have commenced and the Member dies prior to receiving
his entire interest under the Plan, the remaining portion of such
interest shall be distributed to his designated Beneficiary at least
as rapidly as under the method of distribution selected by the
Member.
(2) If the Member dies prior to the commencement of benefits under the
Plan and the Member has not designated a Beneficiary, any such
remaining interest payable shall be fully paid within the five-year
period following his death.
(3) If--
(A) any portion of the Member's benefits are payable to a designated
Beneficiary,
(B) such portion will be distributed over the life of such
designated Beneficiary or over a period not extending beyond the
life expectancy of the Beneficiary, and
(C) such distributions begin not later than one year after the date
of the Member's death, or such later date as the Secretary of
the Treasury may by regulations prescribe, the portion referred
to in paragraph (3)(A) shall be treated as distributed within
the time required under paragraph (2).
(4) If the designated Beneficiary referred to in paragraph (3)(A) is the
surviving spouse of the Member, the date on which distributions are
required to begin under paragraph (3)(C) shall not be earlier than
the date on which the Member would have attained age 70 1/2.
(e) Distributions to be Made in Accordance with Treasury Regulations.
Distributions under the Plan shall be made in accordance with Treasury
regulations under Code section 401(a)(9), including Treasury regulation
section 1.401(a)(9)-2.
<PAGE>
7.8 Withholding Taxes
The Trustee may withhold from any payment under this Plan any taxes required to
be withheld with respect to contributions or benefits under this Plan and such
sum as the Employer or Trustee may reasonably estimate as necessary to cover any
taxes for which they may be liable and which may be assessed with respect to
contributions or benefits under this Plan.
7.9 Notice of Address
Each person entitled to benefits from the Plan must file with the Administrator,
in writing, his post office address and each change of post office address. A
communication, statement, or notice addressed to any such person at his latest
reported post office address will be binding upon him for all purposes of the
Plan, and neither the Administrator, the Company, nor the Trustee shall be
obliged to search for or ascertain his whereabouts.
Article VIII. Preretirement Death Benefits
8.1 Preretirement Death Benefits--Married Participants
(a) Eligibility. In the case of a Member who has a nonforfeitable right to
all or a portion of his Accrued Benefit, who has a surviving spouse, and
who dies prior to his Annuity Starting Date (whether or not such Member
is employed by the Company or an Affiliate), there shall be payable to
his surviving spouse a Qualified Preretirement Survivor Annuity.
(b) Marriage Requirement. Notwithstanding subsection (a), a Qualified
Preretirement Survivor Annuity shall not be provided unless the Member
and his spouse were married through the one-year period ending on the
date of the Member's death.
(c) Commencement. Payment of the Qualified Preretirement Survivor Annuity
shall commence on the date selected by the surviving spouse, but no
later than the date that would have been the Member's Normal Retirement
Date.
If a Member's spouse elects to have the Qualified Preretirement Survivor
Annuity begin prior to the date that would have been the Member's Normal
Retirement Date, the amount of benefit payable under the Qualified
Preretirement Survivor Annuity shall be reduced in accordance with the
reductions for early commencement of deferred vested retirement benefit
payments specified in section 6.3(b)(2).
If a Member's spouse elects to defer the commencement of the Qualified
Preretirement Survivor Annuity, the amount of the benefit payable under
the Qualified Preretirement Survivor Annuity shall be increased (as if
the Member had deferred commencement of his benefit) to reflect such
deferred commencement.
(d) Election to Waive. Each Member eligible for a Preretirement Survivor
Annuity under this section 8.1 may elect to waive, or revoke an election
to waive, the Qualified Preretirement Survivor Annuity. Any such
election to waive, or revocation of such election, may be made at any
time within the period beginning on the first day of the Plan Year in
which the Member attains age 35 and ending on the date of the Member's
death. In the case of a Member whose termination of employment with the
Employer and all nonparticipating Affiliates occurs prior to the first
day of the Plan Year in which the Member attains age 35, the election
and revocation period with respect to benefits accrued before such
termination of employment shall begin on the date of such termination.
An election to waive the Qualified Preretirement Survivor Annuity under
this subsection 8.1 shall not take effect unless the spouse of the
Member consents in writing to such election and such consent
acknowledges the effect of such election, the specific nonspouse
Beneficiary or Beneficiaries, if any, the specific optional form of
benefit chosen, and is witnessed by a person designated by the
Administrator or a notary public. Spousal consent to a waiver of the
Qualified Preretirement Survivor Annuity shall be effective only with
respect to the spouse signing the consent and shall not be required if
the Member establishes to the satisfaction of the Administrator that
such consent may not be obtained because of reasons described in the
Code or regulations thereunder.
<PAGE>
(e) Notice Requirements. The Administrator shall provide to each Member (by
mail or personal delivery), within the period beginning with the first
day of the Plan Year in which the Member attains age 32 and ending with
the close of the Plan Year preceding the Plan Year in which the Member
attains age 35, a written explanation with respect to the Qualified
Preretirement Survivor Annuity. If a Member enters the Plan after the
first day of the Plan Year in which he attains age 32, the Administrator
shall provide the explanation no later than the close of the third Plan
Year following the Member's entry into the Plan. Such explanation shall
provide the information required pursuant to section 7.2(d).
(c) Lump Sum Form of Payment. If the Present Value of the Qualified
Preretirement Survivor Annuity payable under this section 8.1--
(1) does not exceed $3,500 (or such greater amount as promulgated by law
or regulations), the Administrator shall direct that such amount be
paid in a lump sum; or
(2) exceeds $3,500, the Member's spouse may elect to have such amount
paid in a lump sum as soon as administratively feasible following
the Member's death.
8.2 Preretirement Death Benefit--Unmarried Participants
(a) Eligibility. In the case of a Member who has a nonforfeitable right to
all or a portion of his Accrued Benefit, who is unmarried, and who dies
prior to his Annuity Starting Date (whether or not such Member is
employed by the Company or an Affiliate), there shall be payable to his
Beneficiary a preretirement death benefit.
(b) Amount. The amount of the preretirement death benefit shall equal 50
percent of the Member's Accrued Benefit as of his date of death.
(c) Form of Payment. The preretirement death benefit payable under this
section 8.2 shall be paid in the form of an immediate lump sum payment
equal to the Present Value of the amount payable pursuant to subsection
(b) above.
(d) Commencement. Payment of the preretirement death benefit to the Member's
Beneficiary shall be made as soon as is administratively practical
following the Member's death.
Article IX. Beneficiary Designation
9.1 Beneficiary Designation
Each Member may designate, upon such forms as shall be provided for that purpose
by the Administrator, a Beneficiary or Beneficiaries to receive his interest in
the Plan in the event of his death, but the designation of a Beneficiary or
Beneficiaries shall not be effective for any purpose unless and until it has
been filed by the Member with the Administrator. Notwithstanding the foregoing,
in the case of a married Member, the Beneficiary shall be the Member's spouse
unless the Member has designated another person as Beneficiary, the spouse has
consented in writing to such designation, such consent acknowledges the effect
of such election, and the designation of the specific nonspouse beneficiary
(including any class of beneficiaries or any contingent beneficiaries), and such
consent is witnessed by a plan representative or a notary public. The spouse's
consent shall not be required if the spouse cannot be located or because of
other circumstances specified by Treasury regulations.
Subject to the above, in the event that a Member does not designate a
Beneficiary or Beneficiaries in the same manner as heretofore stated, or if for
any reason such designation is legally ineffective, or if such Beneficiary or
Beneficiaries predecease the Member or die simultaneously with him or die prior
to the complete distribution of the Participant's benefits under the Plan, then,
for purposes of the Plan, distribution shall be made by the Trustee in the
following order of priority to:
(a) the Participant's surviving spouse;
(b) the Participant's surviving children, including adopted children, in
equal shares;
(c) the Participant's surviving parents, in equal shares; or
(d) the Participant's estate.
<PAGE>
Article X. Trustee
10.1 General Responsibilities of Trustee
The Trustee shall have the following general responsibilities with respect to
the Plan:
(a) Consistent with the Plan's Funding Policy and Method, the Trustee shall
invest, manage, and control the Plan's assets. However, if the Company
appoints an Investment Manager pursuant to section 11.1(c), the
Trustee's responsibility over the Plan's assets shall be subject to the
Investment Manager's direction with respect to the portion of the Plan's
assets managed by the Investment Manager.
(b) At the direction of the Administrator, the Trustee shall pay any
benefits that are owing from the Plan--
(1) to the Member to whom such benefits are payable, or
(2) in the event of the Member's death, to the Member's Beneficiary.
(c) The Trustee shall maintain records of its receipts and disbursements
relating to the Plan, and shall furnish to the Company and/or
Administrator a written annual report for each Fiscal Year pursuant to
section 10.6.
(d) If the Company appoints more than one Trustee, the Trustees shall act by
a majority of their number, but the Company may authorize one or more
Trustees to execute any documents relating to the Plan on behalf of all
of the Trustees.
10.2 Investment Powers and Duties of Trustee
(a) The Trustee shall invest and reinvest the Trust Fund to keep the Trust
Fund invested without distinction between principal and income and in
such securities or property, real or personal, wherever situated, as the
Trustee shall deem advisable, including, but not limited to, stocks,
common or preferred, bonds and other evidences of indebtedness or
ownership, and real estate or any interest in such real estate. In
making investments of the Trust Fund, the Trustee shall at all times
consider, on the basis of information furnished by the Employer, the
Plan's short- and long-term financial needs; among other factors. In
making such investments, the Trustee shall not be restricted to
securities or other property of the character expressly authorized by
the applicable law for trust investments; however, the Trustee shall
give due regard to any limitations imposed by the Code or the Act so
that at all times this Plan may meet the requirements of a qualified
retirement plan.
(b) The Trustee may employ a bank or trust company in accordance with the
terms of its usual and customary bank agency agreement, pursuant to
which the duties of such bank or trust company shall be of a custodial,
clerical, and recordkeeping nature.
(c) The Trustee may, from time to time, with the consent of the Company,
transfer to a common, collective, or pooled trust fund maintained by any
corporate Trustee hereunder, all or such part of the Trust Fund as the
Trustee may deem advisable, and such part or all of the Trust Fund so
transferred shall be subject to all the terms and provisions of the
common, collective, or pooled trust fund which contemplate the
commingling for investment purposes of such trust assets with trust
assets of other trusts. The Trustee may, from time to time, with the
consent of the Company, withdraw from such common, collective, or pooled
trust fund all or such part of the Trust Fund as the Trustee may deem
advisable.
(d) If any Policies have been issued under the Plan to insure the death
benefits to be provided by the Plan, the Trustee, at the direction of
the Administrator, shall apply for, own, and pay premiums on such
Policies. All such Policies shall, at the direction of the
Administrator, be surrendered to the insurer for their cash value or
transferred to the Member under the terms of this Plan. The Trustee
shall convert the entire value of Policies at retirement into cash or
provide for a periodic income (under the terms of this Plan) so that no
portion of such value may be used to continue life insurance protection.
<PAGE>
10.3 Other Powers of Trustee
The Trustee, in addition to all powers and authorities under common law,
statutory authority, including the Act, and other provisions of this Plan, shall
have the following powers and authorities, to be exercised in the Trustee's sole
discretion.
(a) To purchase or subscribe for any securities or other property, and to
retain such securities. In purchasing any securities, margin accounts
may be opened and maintained.
(b) To sell, exchange, convey, transfer, grant options to purchase, or
otherwise dispose of any securities or other property held by the
Trustee, by private contract or at public auction. No person dealing
with the Trustee shall be bound to see to the application of the
purchase money or to inquire into the validity, expediency, or propriety
of any such sale or other disposition, with or without advertisement.
(c) To vote upon any stocks, bonds, or other securities; to give general or
special proxies or powers of attorney with or without power of
substitution; to exercise any conversion privileges, subscription
rights, or other options, and to make any payments incidental to such
actions; to oppose, or to consent to, or otherwise participate in,
corporate reorganizations or other changes affecting corporate
securities, to delegate discretionary powers, and to pay any assessments
or charges in connection with such actions; and generally to exercise
any of the powers of an owner with respect to stocks, bonds, securities,
or other property.
(d) To cause any securities or other property to be registered in the
Trustee's own name or in the name of one or more of the Trustee's
nominees, and to hold any investments in bearer form; however, the books
and records of the Trustee shall at all times show that all such
investments are part of the Trust Fund.
(e) To borrow or raise money for the purposes of the Plan in such amount,
and upon such terms and conditions, as the Trustee shall deem advisable;
and for any sum so borrowed, to issue a promissory note as Trustee, and
to secure the repayment of such note by pledging all, or any part, of
the Trust Fund. No person lending money to the Trustee shall be bound to
see to the application of the money lent or to inquire into the
validity, expediency, or propriety of any borrowing.
(f) To keep such portion of the Trust Fund in cash or cash balances as the
Trustee may, from time to time, deem to be in the best interests of the
Plan, without liability for interest on such amounts.
(g) To accept and retain for such time as the Trustee may deem advisable any
securities or other property received or acquired as Trustee, whether or
not such securities or other property would normally be purchased as
investments under the Plan.
(h) To make, execute, acknowledge, and deliver any documents of transfer and
conveyance, and any other instruments that may be necessary or
appropriate to carry out the powers granted in such documents.
(i) To settle, compromise, or submit to arbitration any claims, debts, or
damages due or owing to or from the Plan; to commence or defend suits or
legal or administrative proceedings; and to represent the Plan in all
suits and legal and administrative proceedings.
(j) To employ suitable agents and counsel, and to pay their reasonable
expenses and compensation. Such agent or counsel may or may not be agent
or counsel for the Company.
(k) To apply for and procure from responsible insurance companies, to be
selected by the Administrator, as an investment of the Trust Fund, such
annuity or other Contracts (on the life of any Participant) as the
Administrator shall deem proper; to exercise, at any time or from time
to time, whatever rights and privileges may be granted under such
annuity or other Contracts; to collect, receive, and settle for the
proceeds of all such annuity or other Contracts as and when entitled to
do so under the provisions of such annuity or other Contracts.
(l) To invest funds of the Trust in time deposits or savings accounts
bearing a reasonable rate of interest in the Trustee's bank.
(m) To invest in Treasury Bills and other forms of United States Government
obligations.
(n) To deposit monies in federally insured savings accounts or certificates
of deposit in banks or savings and loan associations.
(o) To pool all or any of the Trust Fund, from time to time, with assets
belonging to any other qualified employee pension benefit trust created
by the Employer or an affiliated company of the Employer, and to
commingle such assets and make joint or common investments and carry
joint accounts on behalf of this Plan and such other trust or trusts,
allocating undivided shares or interests in such investments or accounts
or any pooled assets of the two or more trusts in accordance with their
respective interests.
(p) To do all such acts and exercise all such rights and privileges,
although not specifically mentioned in the Plan, as the Trustee may deem
necessary to carry out the purposes of the Plan.
<PAGE>
Except as otherwise authorized, the Trustee shall be prohibited from selling or
purchasing stock options. The Trustee shall be expressly authorized to write and
sell call options under which the holder of the option has the right to purchase
shares of stock held by the Trustee as part of the Trust's assets; provided,
however, that such options are traded and sold through a national securities
exchange registered under the Securities Exchange Act of 1934, as amended; and
provided further, that the exchange through which such options are traded and
sold is authorized to provide a market for option contracts pursuant to Rule
9B-1 of the Securities Exchange Act of 1934, as amended; and provided further,
that the Trustee at all times up to and including the time of exercise or
expiration of any such option holds sufficient stock among the Trust's assets to
meet the obligations under such option if exercised.
In addition, the Trustee shall be expressly authorized to purchase and acquire
call options for the purchase of shares of stock covered by such options if the
options are traded and purchased through a national securities exchange
registered under the Securities Exchange Act of 1934, as amended; provided,
however, that any such call option is purchased solely in a "closing purchase
transaction." For purposes of this section 10.3, a closing purchase transaction
shall mean the purchase of an exchange-traded call option, the effect of which
is to reduce or eliminate the Trustee's obligations with respect to a stock
option contract which the Trustee has previously written and sold in a
transaction authorized above.
10.4 Duties of Trustee Regarding Payments
At the direction of the Administrator, the Trustee shall, from time to time, in
accordance with the Plan's terms, make payments out of the Trust Fund. The
Trustee shall not be responsible in any way for the application of such
payments.
10.5 Trustee's Compensation and Expenses and Taxes
The Trustee shall be paid such reasonable compensation as the Company and the
Trustee shall from time to time agree upon in writing. An individual serving as
Trustee who already receives full-time pay from the Employer shall not receive
compensation from this Plan. In addition, the Trustee shall be reimbursed for
any reasonable expenses, including reasonable counsel fees incurred by it as
Trustee. Such compensation and expenses shall be paid from the Trust Fund unless
paid or advanced by the Company. All taxes of any kind that may be levied or
assessed under existing or future laws upon, or in respect of, the Trust Fund or
the Trust Fund's income, shall be paid from the Trust Fund.
10.6 Annual Report of Trustee
Within 60 days after the later of the Anniversary Date or the receipt of the
Employer's contribution for each Fiscal Year, the Trustee shall furnish to the
Employer and the Administrator a written statement of account with respect to
the Fiscal Year for which such contribution was made, setting forth--
(a) the net income, or loss, of the Trust Fund;
(b) the gains, or losses, realized by the Trust Fund upon sales or other
disposition of the assets;
(c) the increase, or decrease, in the value of the Trust Fund;
(d) all payments and distributions made from the Trust Fund; and
(e) such further information as the Trustee and/or Administrator deems
appropriate. The Employer, forthwith upon its receipt of each such
statement of account, shall acknowledge receipt of such statement in
writing and shall advise the Trustee and/or Administrator of its
approval or disapproval of such statement. Failure by the Employer to
disapprove any such statement within 30 days after its receipt shall be
deemed an approval of such statement. The approval by the Employer of
any statement of account shall be binding as to all matters contained in
such statement as between the Employer and the Trustee to the same
extent as if the account of the Trustee had been settled by judgment or
decree in an action for a judicial settlement of its account in a court
of competent jurisdiction in which the Trustee, the Employer, and all
persons having or claiming an interest in the Plan were parties;
provided, however, that nothing in this subsection (e) shall deprive the
Trustee of its right to have its accounts judicially settled if the
Trustee so desires.
<PAGE>
10.7 Audit
(a) If either the Act or the regulations under the Act require the Plan's
records to be audited for any Plan Year, the Administrator shall direct
the Trustee to engage an independent qualified public account for such
purpose on behalf of all Members. Such accountant shall, after an audit
of the books and records of the Plan in accordance with generally
accepted auditing standards, within a reasonable period after the close
of the Plan Year, furnish to the Administrator and the Trustee a report
of the audit setting forth the accountant's opinion as to whether each
of the following statements, schedules, or lists, or any others that are
required by section 103 of the Act or the Secretary of Labor to be filed
with the Plan's annual report, are presented fairly in conformity with
generally accepted accounting principles applied consistently:
(1) statement of the assets and liabilities of the Plan;
(2) statement of changes in net assets available to the Plan;
(3) statement of receipts and disbursements, a schedule of all assets
held for investment purposes, and a schedule of all loans or fixed
income obligations in default at the close of the Plan Year;
(4) a list of all leases in default or uncollectible during the Plan
Year;
(5) the most recent annual statement of assets and liabilities of any
bank common or collective trust fund in which Plan assets are
invested or such information regarding separate accounts or trusts
with a bank or insurance company as the Trustee and Administrator
deem necessary; and
(6) a schedule of each transaction or series of transactions involving
an amount in excess of three percent of Plan assets. All auditing
and accounting fees shall be an expense of the Trust Fund and may,
at the election of the Administrator, be paid from the Trust Fund.
(b) If some or all of the information necessary to enable the Administrator
to comply with section 103 of the Act is maintained by a bank, insurance
company, or similar institution, regulated and supervised and subject to
periodic examination by a state or federal agency, it shall transmit and
certify the accuracy of that information to the Administrator as
provided in section 103(b) of the Act within 120 days after the end of
the Plan Year or such other date as may be prescribed under regulations
of the Secretary of Labor.
10.8 Resignation, Removal, and Succession of Trustee
(a) The Trustee may resign at any time by delivering to the Company, at
least 30 days before its effective date, a written notice of
resignation.
(b) The Company may remove the Trustee by mailing by registered or certified
mail, addressed to such Trustee at its last known address, at least 30
days before its effective date, a written notice of removal.
(c) Upon the death, resignation, incapacity, or removal of any Trustee, a
successor may be appointed by the Employer. Such successor, upon
acceptance of its appointment in writing and delivery of its acceptance
to the Company, shall, without further act, become vested with all the
estate, rights, powers, discretions, and duties of its predecessor with
like respect as if it were originally named as a Trustee. Until such a
successor is appointed, the remaining Trustee or Trustees shall have
full authority to act under the terms of this Plan.
(d) The Company may designate one or more successors prior to the death,
resignation, incapacity, or removal of a Trustee. In the event a
successor is so designated by the Employer and accepts such designation,
the successor shall, without further act, become vested with all the
estate, rights, powers, discretions, and duties of its predecessor with
the like effect as if it were originally named as Trustee immediately
upon the death, resignation, incapacity, or removal of its predecessor.
(e) Whenever any Trustee under the Plan ceases to serve as Trustee, it shall
furnish to the Employer and the Administrator a written statement of
account with respect to the portion of the Fiscal Year during which it
served as Trustee. This statement shall be either--
(1) included as part of the annual statement of account for the Fiscal
Year required under section 10.6; or
(2) set forth in a special statement, which shall be submitted to the
Employer no later than the due date of the annual statement of
account for the Fiscal Year.
<PAGE>
The procedures set forth in section 10.6 for the approval by the Employer of
annual statements of account shall apply to any special statement of account
rendered pursuant to this subsection (e), and approval by the Employer of any
such special statement in the manner provided in section 10.6 shall have the
same effect upon the statement as the Employer's approval of an annual statement
of account. No successor to the Trustee shall have any duty or responsibility to
investigate the acts or transactions of any predecessor that has rendered all
statements of account required by section 10.6 and this subsection (e).
10.9 Transfer of Interest
Notwithstanding any other provision contained in this Plan, the Trustee, at the
request of a Participant and the direction of the Administrator, shall transfer,
upon a Member's One-Year Break in Service, any vested interest of such Member in
his Accrued Benefit to another trust forming part of a pension, profit sharing,
or stock bonus plan maintained by such Participant's new employer and
represented by such employer in writing as meeting the requirements of Code
section 401(a); provided, however, that the trust to which such transfer is made
is legally authorized to receive such transfers and that such transfer qualifies
for rollover treatment pursuant to Code section 402(a).
10.10 Nonreversion
The Company shall not have any right, title, or interest in the contributions
made to the Trust Fund under the Plan, and no part of the Trust Fund shall
revert to the Company, except that--
(a) Upon complete termination of the Plan and the allocation and
distribution of the Trust Fund as provided in the Plan, any funds
remaining in the Trust Fund because of an erroneous actuarial
computation after the satisfaction of all fixed and contingent
liabilities under the Plan with respect to the Company may revert to
the Company.
(b) If a contribution is made to the Trust Fund by the Company by a
mistake of fact, then such contribution may be returned to the
Company within one year after the payment of the contribution. Any
contribution by the Company to the Trust Fund shall be expressly
conditioned upon the deductibility of such contribution by the
Company, and if any part or all of a contribution is disallowed as a
deduction under Code section 404, then to the extent such
contribution is disallowed as a deduction, it may be returned to the
Company within one year after the disallowance.
(c) If the Internal Revenue Service initially determines that the Plan
does not meet the requirements of Code section 401(a), the Plan
shall be null and void from the Effective Date, and any
contributions shall be returned to the Company within one year
following the determination that the Plan does not meet such
requirements, unless the Company elects to make the changes to the
Plan necessary to receive a determination from the Internal Revenue
Service that the requirements of Code section 401(a) are met.
Article XI. Appointment of Fiduciaries and Administration of the Plan and the
Trust Fund
11.1 Powers and Responsibilities of Company
(a) The Company shall have the sole power to appoint and remove, as it
deems necessary, the Trustee and the Administrator in order to--
(1) properly administer the Plan, and
(2) assure that the Plan is being operated for the exclusive benefit
of the Members and their Beneficiaries in accordance with the
Plan's terms, the Code, and the Act.
(b) The Company shall establish a Funding Policy and Method. The Company
may, in its discretion, appoint a qualified person or entity to
assist it in establishing a Funding Policy and Method.
The Company shall communicate its Funding Policy and Method to the
Trustee, which shall coordinate the Funding Policy and Method with
the Trustee's investment policy. Any such communication shall not,
however, constitute a directive to the Trustee regarding the
investment of Trust Funds.
The Funding Policy and Method shall be consistent with the
objectives of the Plan and with the requirements of Title I of the
Act.
<PAGE>
(c) The Company may, in its discretion, appoint an Investment Manager to
manage all or a designated portion of the assets of the Plan. In such
event, the Trustee shall follow the directive of the Investment Manager
in investing the assets of the Plan managed by the Investment Manager.
(d) The Company shall periodically review the performance of any Fiduciary
or other person to whom duties have been delegated or allocated by it
under the provisions of this Plan or pursuant to procedures established
under this Plan. This requirement may be satisfied by formal periodic
review by the Company or by a qualified person specifically designated
by the Company, through day-to-day conduct and evaluation, or through
other appropriate ways.
11.2 Assignment and Designation of Administrative Authority
The Company shall appoint one or more Administrators. Any person, including, but
not limited to, the Employees of the Employer, shall be eligible to serve as an
Administrator. Any person so appointed shall signify his acceptance by filing
written acceptance with the Company. An Administrator may resign by delivering
his written resignation to the Company or be removed by the Company by delivery
of written notice of removal, to take effect at a date specified in such
resignation or notice, or upon delivery to the Administrator if no date is
specified.
Upon the resignation or removal of an Administrator, the Company shall promptly
designate in writing a successor to the vacated position. If the Company does
not appoint an Administrator, the Company shall function as the Administrator.
11.3 Allocation and Delegation of Responsibilities
If more than one person is appointed as Administrator, the responsibilities of
each Administrator may be specified by the Company and accepted in writing by
each Administrator. In the event that no such delegation is made by the Company,
the Administrators may allocate the responsibilities among themselves, in which
event the Administrators shall notify the Company and the Trustee in writing of
such action and specify the responsibilities of each Administrator. The Trustee
thereafter shall accept and rely upon any documents executed by the appropriate
Administrator until such time as the Company or the Administrators file with the
Trustee a written revocation of such designation.
11.4 Powers, Duties, and Responsibilities of Administrator
The Administrator's primary responsibility shall be to administer the Plan for
the exclusive benefit of the Members and their Beneficiaries, subject to the
specific terms of the Plan. The Administrator shall administer the Plan in
accordance with its terms and shall have the exclusive right and the
discretionary authority to determine all questions arising in connection with
the administration, interpretation, and application of the Plan. Any such
determination by the Administrator shall be conclusive and binding upon all
persons. The Administrator may establish procedures, correct any defect, supply
any information, or reconcile any inconsistency in such manner and to such
extent as shall be deemed necessary or advisable to carry out the purpose of the
Plan; provided, however, that any procedure, discretionary act, interpretation,
or construction shall be done in a nondiscriminatory manner based upon uniform
principles consistently applied; shall be consistent with the intent that the
Plan continue to be a qualified plan under the terms of Code section 401(a); and
shall comply with the terms of the Act and all regulations issued pursuant to
the Act. The Administrator shall have all powers necessary or appropriate to
accomplish its duties under this Plan.
The Administrator shall have the exclusive right and the discretionary authority
to perform all duties relating to the Plan's general administration, including,
but not limited to, the following:
(a) to determine all questions relating to the eligibility of Employees to
participate or remain a Participant in the Plan;
(b) to compute, certify, and direct the Trustee with respect to the amount
and the kind of benefits to which any Participant shall be entitled
under the Plan;
<PAGE>
(c) to authorize and direct the Trustee with respect to all nondiscretionary
or otherwise directed disbursements from the Trust;
(d) to maintain all necessary records for the administration of the Plan;
(e) to interpret the provisions of the Plan and to make and publish such
rules for regulation of the Plan as are consistent with the Plan's
terms;
(f) to determine the size and the type of any Contract to be purchased from
any insurer, and to designate the insurer from which such Contract shall
be purchased. All policies shall be issued on a uniform basis as of each
Anniversary Date with respect to all Members under similar
circumstances;
(g) to compute and certify to the Employer and to the Trustee from time to
time the sums of money necessary or desirable to be contributed to the
Trust Fund;
(h) to consult with the Employer and the Trustee regarding the short- and
long-term liquidity needs of the Plan in order that the Trustee can
exercise any investment discretion in a manner designed to accomplish
specific objectives;
(i) to prepare and distribute to Employees a notice for Members and their
Beneficiaries regarding the form in which benefits under the Plan are
paid; and
(j) to assist any Member regarding his rights, benefits, or elections
available under the Plan.
11.5 Records and Reports
The Administrator shall keep a record of all actions taken in connection with
the Plan's administration and shall keep all other books of account, records,
and other data that may be necessary for proper administration of the Plan and
shall be responsible for supplying all information and reports to the Internal
Revenue Service, Department of Labor, Members, Beneficiaries, or any other
required by law.
11.6 Appointment of Advisers
The Administrator, or the Trustee with the consent of the Administrator, may
appoint counsel, specialists, advisers, and other persons as the Administrator
or the Trustee deems necessary or desirable in connection with the
administration of this Plan.
11.7 Information from Employer
To enable the Administrator to perform its functions, the Employer shall supply
full and timely information to the Administrator on all matters relating to the
Compensation of all Participants, their Hours of Service, their Years of
Service, their retirement, death, disability, or termination of employment, and
such other pertinent facts as the Administrator may require. The Administrator
shall advise the Trustee of any relevant information that may be pertinent to
the Trustee's duties under the Plan. The Administrator may rely upon such
information as is supplied by the Employer and shall have no duty or
responsibility to verify such information.
11.8 Payment of Expenses
All expenses of administration may be paid out of the Trust Fund unless paid by
the Employer. Such expenses shall include any expenses incident to the
functioning of the Administrator, including, but not limited to, fees of
accountants, counsel, and other specialists and their agents, and other costs of
administering the Plan. Until paid, the expenses shall constitute a liability of
the Trust Fund. However, the Employer may reimburse the Trust Fund for any
administration expense incurred. Any administration expense paid to the Trust
Fund as a reimbursement shall not be considered an Employer contribution.
11.9 Majority Actions
If the Company appoints more than one Administrator, the Administrators shall
act by a majority of their number, but the Company may authorize one or more
Administrators to execute any documents relating to the Plan on behalf of all of
the Administrators.
11.10 Claims Procedure
Claims for benefits under the Plan may be filed with the Administrator on forms
supplied by the Employer. Written notice of the disposition of a claim shall be
furnished to the claimant within 90 days after the application is filed. In the
event the claim is denied, the reasons for the denial shall be specifically set
forth in the notice in language calculated to be understood by the claimant,
pertinent provisions of the Plan shall be cited, and, where appropriate, an
explanation as to how the claimant can perfect the claim will be provided. In
addition, the claimant shall be furnished with an explanation of the Plan's
claims review procedure.
<PAGE>
11.11 Claims Review Procedure
Any Employee, Member, or Beneficiary who has been denied a benefit on the basis
of a decision of the Administrator pursuant to section 11.10 shall be entitled
to request the Administrator to give further consideration to his claim by
filing with the Administrator (on a form which may be obtained from the
Administrator) a request for a hearing. Such request, together with a written
statement of the reasons why the claimant believes his claim should be allowed,
shall be filed with the Administrator no later than 60 days after receipt of the
written notification provided for in section 11.10. The Administrator shall then
conduct a hearing within the next 60 days, at which hearing the claimant may be
represented by an attorney or any other representative of his choosing and at
which hearing the claimant shall have an opportunity to submit written and oral
evidence and arguments in support of his claim. At the hearing (or prior to such
hearing upon five business days' written notice to the Administrator), the
claimant or his representative shall have an opportunity to review all documents
in the possession of the Administrator which are pertinent to the claim at issue
and its disallowance. Either the claimant or the Administrator may cause a court
reporter to attend the hearing and record the proceedings. In such event, a
complete written transcript of the proceedings shall be furnished to both
parties by the court reporter. The full expense of any such court reporter and
such transcripts shall be borne by the party causing the court reporter to
attend the hearing. A final decision as to the allowance of the claim shall be
made by the Administrator within 60 days of receipt of the appeal (unless there
has been an extension of 60 days due to special circumstances, provided the
delay and the special circumstances occasioning it are communicated to the
claimant within the 60-day period). Such communication shall be written in a
manner calculated to be understood by the claimant and shall include specific
reasons for the decision and specific references to the pertinent Plan
provisions on which the decision is based.
Article XII. Amendment and Termination
12.1 Amendment and Termination of the Plan
(a) The Company expects the Plan to be permanent, but since future
conditions affecting the Company cannot be anticipated or foreseen, the
Company does hereby expressly and specifically reserve the sole and
exclusive right at any time to amend, modify, or terminate the Plan by
formal action of its board of directors. The Company's right of
amendment, modification, or termination of the Plan shall not require
the assent, concurrence, or any other action by any Employer
notwithstanding that such action by the Company may relate in whole or
in part to persons in the employ of an Employer. No amendment of the
Plan shall cause any part of the Trust Fund to be used for or diverted
to purposes other than for the exclusive benefit of the Members or their
Beneficiaries covered by the Plan. Retroactive Plan amendments may not
decrease the Accrued Benefit of any Member (determined as of the time
the amendment was adopted), except as provided in Code section 412(c)(8)
or Act section 4281. Similarly, no Plan amendment shall have the effect
of eliminating or reducing an early retirement benefit or a
retirement-type subsidy or eliminating an optional form of benefit with
respect to benefits attributable to service before the amendment.
(b) Upon termination or partial termination of the Plan in whole or in part,
after expenses incident to such termination are deducted, the rights of
each Member to benefits accrued to the date of such termination or
partial termination shall become 100 percent vested and nonforfeitable
to the extent such benefits are funded as of such date.
12.2 Distribution on Termination
Upon termination of the Plan, that portion of any assets then held in the Trust
Fund shall be allocated, after payment of all expenses of administration or
liquidation, in accordance with amendments to the Plan adopted prior to such
allocation and in accordance with section 4044(a) of the Act; provided that any
assets remaining after the satisfaction of all benefits accrued to the
termination date with respect to Members, and their surviving spouses and
Beneficiaries, shall revert to and be distributed to the Company.
<PAGE>
Notwithstanding the foregoing, in no event shall assets held in the Trust Fund
be used to pay benefits on account of such termination of the Plan to a Member
who is a highly compensated employee within the meaning of Code section 414(q)
in excess of a benefit that is nondiscriminatory under Code section 401(a)(4).
12.3 Merger or Consolidation or Transfer
In the case of any merger or consolidation of the Plan with, or in the case of
any transfer of assets or liabilities of the Plan to or from, any other plan,
each Member in the Plan shall (if the Plan then terminated) receive a benefit
immediately after the merger, consolidation, or transfer which is equal to or
greater than the benefit he would have been entitled to receive immediately
before the merger, consolidation, or transfer (if the Plan had then terminated).
The Trustee possesses the specific authority to enter merger agreements or
direct transfer of asset agreements with trustees of any other retirement plans
described in Code section 401(a), including an elective transfer, and to accept
the direct transfer of plan assets, or to transfer plan assets, as a party to
any such agreement.
12.4 Effect of Contingencies Affecting Company
The merger, consolidation, or reorganization of the Company, or the sale by it
of all or substantially all of its assets, shall not terminate the Plan if there
is delivery to the Company by the successor to the Company, or by the purchaser
of all or substantially all of its assets, a written instrument requesting that
it be substituted for the Company and agreeing to perform all the provisions
hereof which the Company is required to perform. Subject to the provisions of
the Act, upon the receipt of said instrument the successor or the purchaser
shall be substituted for the Company herein, and the Company shall be relieved
and released from any obligations of any kind, character, or description herein
or in any Trust Agreement imposed upon it.
12.5 Amendment of Vesting Schedule
If the Plan is amended to provide a different vesting schedule, each person
adversely affected--
(a) who is a Participant during the election period below; and
(b) who has completed at least three years of Vesting Service may elect to
have such amendment disregarded in determining the vested percentage of
his Accrued Benefit. That election must be in writing and delivered to
the Administrator within the election period. Upon delivery, his
election will be irrevocable. The election period shall begin on the
date such amendment is adopted and shall end 60 days after the latest of
the date--
(1) the amendment is adopted;
(2) the amendment becomes effective; or
(3) the Administrator delivers a written notice of the amendment to the
Participant.
No amendment to the Plan's vesting schedule may decrease the vested Accrued
Benefit which any Participant or Inactive Participant has earned as of the date
of the amendment.
<PAGE>
Article XIII. Temporary Restrictions on Benefits
13.1 Temporary Restrictions on Benefits Payable to Certain Highly Compensated
Participants
(a) Plan Termination Restrictions. In the event the Plan is terminated, the
benefit of any highly compensated employee, as defined by Code section
414(q), and any highly compensated former employee, shall be limited to
a benefit that is nondiscriminatory under Code section 401(a)(4) and the
regulations thereunder.
(b) Pretermination Restrictions. Notwithstanding any other provision in the
Plan to the contrary effective November 1, 1993, the Plan shall not make
annual payments in excess of the amount that a Participant would have
received during the year if such Participant's Accrued Benefit were to
be paid in the form of a straight-life annuity if such Participant is--
(1) a highly compensated employee, as defined under Code section 414(q)
and
(2) is among the 25 Participants in the Plan with the greatest
compensation (as defined under Code section 414(q)(7)). The
restriction in subsection (b) shall not apply if--
(A) after the Plan makes an annual payment otherwise restricted
under subsection (a), the value of all remaining assets in the
Trust Fund is at least 110 percent of the value of the Plan's
current liabilities, as defined under Code section 412(l)(7);
(B) the value of the benefit otherwise restricted under subsection
(a) is less than one percent of the value of the Plan's current
liabilities, as defined under Code section 412(l)(7); or
(C) the value of the benefits otherwise restricted under subsection
(a) does not exceed $3,500.
Article XIV. Participation in and Withdrawal from the Plan by an Employer
14.1 Participation in the Plan
Any Affiliate which desires to become an Employer hereunder may elect, with the
consent of the Company, to become a party to the Plan and Trust Agreement by
adopting the Plan for the benefit of its eligible Employees, effective as of the
date specified in such adoption--
(a) by filing with the Company a certified copy of a resolution of
its board of directors to that effect, and such other
instruments as the Company may require; and
(b) by the Company's filing with the then Trustee or insurance
company a copy of such resolution, together with a certified
copy of the Company's approval of such adoption.
The adoption resolution or decision may contain such specific changes and
variations in Plan or Trust Agreement terms and provisions applicable to such
adopting Employer and its Employees as may be acceptable to the Company and the
Trustee or insurance company. However, the sole, exclusive right of any other
amendment of whatever kind or extent to the Plan or Trust Agreement is reserved
by the Company. The Company may not amend specific changes and variations in the
Plan or Trust Agreement terms and provisions as adopted by the Employer in its
adoption resolution without the consent of such Employer. The adoption
resolution or decision shall become, as to such adopting organization and its
employees, a part of this Plan as then amended or thereafter amended and the
related Trust Agreement. It shall not be necessary for the adopting organization
to sign or execute the original or then amended Plan and Trust Agreement
documents. The coverage date of the Plan for any such adopting organization
shall be that stated in the resolution or decision of adoption, and from and
after such effective date, such adopting organization shall assume all the
rights, obligations, and liabilities of an individual employer entity hereunder
and under the Trust Agreement. The administrative powers and control of the
Company, as provided in the Plan and Trust Agreement, including the sole right
to amendment, and of appointment and removal of the Administrator, the Trustee,
and their successors, shall not be diminished by reason of the participation of
any such adopting organization in the Plan and Trust Agreement.
<PAGE>
14.2 Withdrawal from the Plan
Any participating Employer, by action of its board of directors or other
governing authority, may withdraw from the Plan and Trust Agreement after giving
90 days' notice to the Company, provided the Company consents to such
withdrawal. In the event such withdrawal constitutes a partial termination of
this Plan, the Administrator shall direct that the assets of the Trust Fund
shall be allocated to all Participants in accordance with section 12.2. In the
event of such partial termination of the Plan, only the affected Participants in
that part of the Plan which is terminated shall have fully vested and
nonforfeitable rights in the benefits to be provided by the allocations (unless
they were already fully vested prior to the partial termination). Distribution
may be implemented through continuation of the Trust Fund, or transfer to
another trust fund exempt from tax under Code section 501, or to a group annuity
contract qualified under Code section 401, or distribution may be made as an
Actuarial Equivalent immediate cash payment in accordance with the directions of
the Administrator; provided, however, that no such action shall divert any part
of such fund to any purpose other than the exclusive benefit of the Employees of
such Employer, prior to the satisfaction of all liabilities under the Plan as
provided under section 12.2.
Article XV. Miscellaneous
15.1 Member's Rights
This Plan shall not be deemed to constitute a contract between the Employer and
any Member or to be a consideration or an inducement for the employment of any
Member or Employee. Nothing contained in this Plan shall be deemed to give any
Member or Employee the right to be retained in the service of the Employer or to
interfere with the right of the Employer to discharge any Member or Employee at
any time, regardless of the effect which such discharge shall have upon his
status as a Participant.
15.2 Alienation
(a) Subject to the exceptions provided below, no benefit which shall be
payable out of the Trust Fund to any person (including a Member or his
Beneficiary) shall be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, or charge, and any
attempt to anticipate, alienate, sell, transfer, assign, pledge,
encumber, or charge the same shall be void; and no such benefit shall in
any manner be liable for, or subject to, the debts, contracts,
liabilities, engagements, or torts of any such person, nor shall it be
subject to attachment or legal process for or against such person, and
the name shall not be recognized by the Trustee, except to such extent
as may be required by law.
(b) The provisions of this section 15.2 shall not apply to the extent a
Member or Beneficiary is indebted to the Plan, for any reason, under any
provision of the Plan. At the time a distribution is to be made to or
for a Member's or Beneficiary's benefit, the proportion of the amount
distributed commensurate with such indebtedness shall be paid by the
Trustee to the Trustee or the Administrator, at the direction of the
Administrator, to apply against or discharge such indebtedness. Prior to
making a payment, however, the Member or Beneficiary must be given
written notice by the Administrator that such indebtedness is to be so
paid in whole or part from the Member's Vested Accrued Benefit. If the
Member or Beneficiary does not agree that the indebtedness is a valid
claim against the Member's Vested Accrued Benefit, the Member or
Beneficiary shall be entitled to a review of the validity of the claim
in accordance with procedures provided in sections 11.10 and 11.11.
<PAGE>
(c) Notwithstanding the foregoing, the Plan shall make all payments required
by a qualified domestic relations order within the meaning of Code
section 414(p). The Plan Administrator shall establish a procedure to
determine the qualified status of a domestic relations order and to
administer distributions under a qualified order. In no event shall a
domestic relations order be determined to be a qualified domestic
relations order if it requires the Plan to make distributions to an
alternate payee prior to the date that a Participant attains "earliest
retirement age." Notwithstanding the foregoing, the Plan may make a
distribution to an alternate payee prior to the date that a Participant
attains "earliest retirement age" if the qualified domestic relations
order provides that the Plan and the alternate payee may agree in
writing to the earlier distribution, and the distribution is made
pursuant to such a written agreement. For purposes of this section
15.2(c), "earliest retirement age" means the date on which the earliest
to occur of--
(1) the date the Member terminates employment with the Company or an
Affiliate,
(2) the date the Member attains age 50, or
(3) the date the Member dies.
15.3 Unclaimed Amounts
Should the whereabouts of any person entitled to a distribution under the Plan
be unknown to the Administrator for a period of five years after the mailing of
a notice by registered mail, the interest of such person shall be disposed of in
accordance with applicable controlling laws.
15.4 Construction of Plan
This Plan and Trust shall be construed and enforced according to the Act and the
laws of the State of Illinois, other than its laws respecting choice of law, to
the extent not preempted by the Act.
15.5 Legal Action
In the event that any claim, suit, or proceeding is brought which relates to the
Trust or the Plan and to which the Trustee or the Administrator may be a party,
and such claim, suit, or proceeding is resolved in favor of the Trustee or the
Administrator, they shall be entitled to be reimbursed from the Trust Fund for
any costs, attorney's fees, and other expenses pertaining to such claim, suit,
or proceeding incurred by them for which they shall have become liable.
15.6 Prohibition Against Diversion of Funds
Except as provided below and otherwise specifically permitted by law, it shall
be impossible by operation of the Plan or of the Trust, by termination of
either, by power of revocation or amendment, by the happening of any
contingency, by collateral arrangement, or by any other means, for any part of
the corpus or income of any trust fund maintained pursuant to the Plan or any
funds contributed to the Trust Fund to be used for, or diverted to, purposes
other than the exclusive benefit of the Members or their Beneficiaries.
15.7 Bonding
Every Fiduciary, except a bank or an insurance company, unless exempted by the
Act and regulations thereunder, shall be bonded in an amount not less than ten
percent of the amount of the funds such Fiduciary handles; provided, however,
that the minimum bond shall be $1,000 and the maximum bond, $500,000. The amount
of funds handled shall be determined at the beginning of each Plan Year by the
amount of funds handled by such person, group, or class to be covered and their
predecessors, if any, during the preceding Plan Year, or if there is no
preceding Plan Year, then by the amount of the funds to be handled during the
then current year. The bond shall provide protection to the Plan against any
loss by reason of acts of fraud or dishonesty by the Fiduciary alone or in
connivance with others. The surety shall be a corporate surety company (as such
term is used in section 412(a)(2) of the Act), and the bond shall be in a form
approved by the Secretary of Labor. Notwithstanding anything in this Plan to the
contrary, the cost of such bonds shall be an expense of and may, at the election
of the Administrator, be paid from the Trust Fund or by the Company.
<PAGE>
15.8 Company's and Trustee's Protective Clause
Neither the Company nor the Trustee, nor their successors, shall be responsible
for the validity of any Contract issued under the Plan or for the failure on the
part of the insurer to make payments provided by any such Contract, or for the
action of any person which may delay payment or render a Contract null and void
or unenforceable in whole or in part.
15.9 Insurer's Protective Clause
Any insurer who issues Contracts under this Plan shall not be legally
responsible for the validity of this Plan or for the tax or legal aspects of
this Plan. Any such insurer shall be protected and held harmless in acting in
accordance with any written direction of the Trustee, and shall have no duty to
see the application of any funds paid to the Trustee, nor be required to
question any actions directed by the Trustee. Regardless of any provision of
this Plan, the insurer shall not be required to take or permit any action or
allow any benefit or privilege contrary to the terms of any Contract which it
issues under the Plan, or the rules of the insurer.
15.10 Receipt and Release for Payments
Any payment to a Member, his legal representative, a Beneficiary, or a guardian
or committee appointed for such Member or Beneficiary in accordance with the
provisions of this Plan, shall, to the extent of such payment, be in full
satisfaction of all claims under the Plan against the Trustee and the Company,
either of whom may require such Member, legal representative, Beneficiary,
guardian, or committee, as a condition precedent to such payment, to execute a
receipt and a release for such payment in such form as shall be determined by
the Trustee or Company.
15.11 Action by Company
Whenever the Company under the terms of this Plan is permitted or required to do
or perform any act or matter of thing, such act or matter shall be done and
performed by a person duly authorized by its legally constituted authority.
15.12 Named Fiduciaries and Allocation of Responsibility
The "named Fiduciaries" of this Plan are--
(a) the Employer,
(b) the Administrator,
(c) the Trustee, and
(d) any Investment Manager appointed under the Plan.
The named Fiduciaries shall have only those specific powers, duties,
responsibilities, and obligations as are specifically given them under this
Plan. In general, the Employer shall have the sole responsibility for making all
contributions to the Plan and shall have the sole authority to appoint and
remove the Trustee, the Administrator, and any Investment Manager which may be
designated under this Plan, to formulate the Plan's Funding Policy and Method,
and to amend or terminate, in whole or in part, this Plan. The Administrator
shall have the sole responsibility for the administration of this Plan, which
responsibility is specifically described in this Plan. The Trustee shall have
the sole responsibility of managing the assets held under the Trust, except
those assets for which the management has been assigned to an Investment
Manager. In such case, the Investment Manager shall be solely responsible for
the management of the assets assigned to it pursuant to the applicable
provisions of this Plan. Each named Fiduciary warrants that any directions
given, information furnished, or action taken by it shall be in accordance with
the provisions of this Plan, authorizing or providing for such direction,
information, or action. Further, each named Fiduciary may rely upon any such
direction, information, or action of another named Fiduciary as being proper
under this Plan, and the named Fiduciary shall not be required under this Plan
to inquire into the propriety of any such direction, information, or action. It
is intended that each named Fiduciary will be responsible for the proper
exercise of its own powers, duties, responsibilities, and obligations under the
Plan. No named Fiduciary shall guarantee the Trust Fund in any manner against
investment loss or depreciation in asset value. Any person or group may serve in
more than one Fiduciary capacity.
15.13 Illegality of Particular Provision
The illegality of any particular provision of this Plan shall not affect the
Plan's other provisions, but the Plan shall be construed in all respects as if
such invalid provision were omitted.
<PAGE>
15.14 Effect of Mistake
In the event of a mistake or misstatement as to the age, eligibility,
Compensation, Service, or participation of a Member, or as to the amount of any
distribution made or to be made to a Member or other person, the Administrator
shall, to the extent it deems possible, cause to be withheld or accelerated, or
otherwise make adjustment of, such amounts as will in its judgment accord to
such Member or other person the distribution to which he is properly entitled
under the Plan.
15.15 Absence of Guaranty
The Company does not guarantee or promise to pay, or cause to be paid any of the
benefits provided by this Plan. Each Member, Beneficiary, or any other person
who claims the right to any payment or benefit under this Plan shall be entitled
only to look to the Trust Fund for such payment or benefit and shall not have
any right, claim, or demand for payment against the Company.
15.16 Headings
The headings and subheadings of this Plan have been inserted for convenience of
reference and are to be ignored in any construction of the Plan's provisions.
15.17 Uniformity
All provisions of this Plan shall be interpreted and applied in a uniform,
nondiscriminatory manner.
Article XVI. Top-Heavy Provisions
16.1 Top-Heavy Rules
The following provisions shall become effective in any Plan Year after 1983 in
which the Plan is determined to be a top-heavy plan.
(a) Determination of Top-Heavy. The Plan will be considered a top-heavy plan
for the Plan Year if as of the last day of the preceding Plan Year--
(1) the present value of the Accrued Benefits of Participants who are
key employees (as defined in Code section 416(i)) exceeds 60 percent
of the present value of the Accrued Benefits of all Participants
(the "60 Percent Test"), or
(2) the Plan is part of a required aggregation group and the required
aggregation group is top-heavy.
However, and notwithstanding the results of the 60 Percent Test, the
Plan shall not be considered a top-heavy plan for any Plan Year in which
the Plan is a part of a required or permissive aggregation group which
is not top-heavy. The top-heavy ratio shall be computed pursuant to
section 416(g) of the Code and the regulations issued thereunder. A
required aggregation group is each plan of the Employer in which a key
employee is a participant and each other plan of the Employer, if any,
which enables such plan to meet the requirements of Code section
401(a)(4) or 410. The Employer may treat any plan not required to be
included in an aggregation group as being part of a permissive
aggregation group if such group would continue to meet the requirements
of Code sections 401(a)(4) and 410 with such plan being taken into
account.
(b) Minimum Benefit. If the Plan is determined to be top-heavy with respect
to a Plan Year under the provisions of section 16.1(a), a Participant's
Accrued Benefit, adjusted to be an Actuarial Equivalent of an annual
benefit payable in the form of a straight life annuity commencing at age
65, shall not be less than the difference between (1) and (2) below:
(1) subject to the last paragraph of this subsection (b), the product
of--
(A) two percent of the Participant's average annual compensation
during his five highest-paid consecutive years of Benefit
Service in which the Plan was a top-heavy plan; and
(B) the Participant's years of Benefit Service after November 1,
1983 in which the Plan was a top-heavy plan; less
<PAGE>
(2) the sum payable to the Participant, adjusted to be an Actuarial
Equivalent of an annual benefit payable in the form of a straight
life annuity commencing at age 65, from such Participant's account
balance attributable to Employer contributions under a defined
contribution plan which is included in the required aggregation
group as defined above in section 16.1(a).
Notwithstanding the foregoing, the benefit determined under paragraph
(1) above of this subsection (b) shall not exceed 20 percent of the
Participant's Compensation.
(c) Minimum Vesting. If the Plan is determined to be top-heavy with respect
to a Plan Year under the provisions of section 16.1(n) then a Member's
interest in his Accrued Benefit shall become vested in accordance with
the following table:
Years of Credited Service Vested Percentage
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 or more 100%
(d) Impact on Maximum Benefits. Subject to the exceptions provided in Code
section 416(h), for any Plan Year in which the Plan is a top-heavy plan,
section 6.4 shall be administered recognizing that paragraphs (2)(B) and
(3)(B) of section 415(e) of the Code will be applied by substituting
"1.0" for "1.25."
* * * * * * * * * *
<PAGE>
In Witness Whereof, First National Bank of Joliet has caused this Plan to be
signed and its corporate seal to be hereunto affixed by its duly authorized
officers, effective as of November 1, 1995, on this ____ day of _______________,
1995.
First National Bank of Joliet
Attest:
By /s/
--------------------------
Its
-------------------------
By /s/
-------------------------------
Its (Corporate Seal)
FIRST NATIONAL BANCORP, INC.
EMPLOYEES' CAFETERIA PLAN
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
ARTICLE II
PARTICIPATION
2.1 ELIGIBILITY
2.2 EFFECTIVE DATE OF PARTICIPATION
2.3 APPLICATION TO PARTICIPATE
2.4 TERMINATION OF PARTICIPATION
2.5 CHANGE OF EMPLOYMENT STATUS
2.6 TERMINATION OF EMPLOYMENT
2.7 DEATH
ARTICLE III
CONTRIBUTIONS TO THE PLAN
3.1 SALARY REDIRECTION
3.2 APPLICATION OF CONTRIBUTIONS
3.3 PERIODIC CONTRIBUTIONS
ARTICLE IV
BENEFITS
4.1 BENEFIT OPTIONS
4.2 DEPENDENT CARE ASSISTANCE PROGRAM BENEFIT
4.3 HEALTH INSURANCE BENEFIT
4.4 CASH BENEFIT
4.5 NONDISCRIMINATION REQUIREMENTS
ARTICLE V
PARTICIPANT ELECTIONS
5.1 INITIAL ELECTIONS
5.2 SUBSEQUENT ANNUAL ELECTIONS
5.3 FAILURE TO ELECT
5.4 CHANGE OF ELECTIONS
<PAGE>
ARTICLE VI
DEPENDENT CARE ASSISTANCE PROGRAM
6.1 ESTABLISHMENT OF PROGRAM
6.2 DEFINITIONS
6.3 DEPENDENT CARE ASSISTANCE ACCOUNTS
6.4 INCREASES IN DEPENDENT CARE ASSISTANCE ACCOUNTS
6.5 DECREASES IN DEPENDENT CARE ASSISTANCE ACCOUNTS
6.6 ALLOWABLE DEPENDENT CARE ASSISTANCE REIMBURSEMENT
6.7 ANNUAL STATEMENT OF BENEFITS
6.8 FORFEITURES
6.9 LIMITATION ON PAYMENTS
6.10 NONDISCRIMINATION REQUIREMENTS
6.11 COORDINATION WITH CAFETERIA PLAN
6.12 DEPENDENT CARE ASSISTANCE PROGRAM CLAIMS
ARTICLE VII
ERISA PROVISIONS
7.1 CLAIM FOR BENEFITS
7.2 APPLICATION OF BENEFIT PLAN SURPLUS
7.3 NAMED FIDUCIARY
7.4 GENERAL FIDUCIARY RESPONSIBILITIES
7.5 NONASSIGNABILITY OF RIGHTS
ARTICLE VIII
ADMINISTRATION
8.1 PLAN ADMINISTRATION
8.2 EXAMINATION OF RECORDS
8.3 PAYMENT OF EXPENSES
8.4 INSURANCE CONTROL CLAUSE
8.5 INDEMNIFICATION OF ADMINISTRATOR
ARTICLE IX
AMENDMENT OR TERMINATION OF PLAN
9.1 AMENDMENT
9.2 TERMINATION
ARTICLE X
MISCELLANEOUS
10.1 PLAN INTERPRETATION
10.2 GENDER AND NUMBER
10.3 WRITTEN DOCUMENT
10.4 EXCLUSIVE BENEFIT
10.5 PARTICIPANT'S RIGHTS
10.6 ACTION BY THE EMPLOYER
10.7 EMPLOYER'S PROTECTIVE CLAUSES
10.8 NO GUARANTEE OF TAX CONSEQUENCES
10.9 INDEMNIFICATION OF EMPLOYER BY PARTICIPANTS
10.10 FUNDING
10.11 GOVERNING LAW
10.12 SEVERABILITY
10.13 CAPTIONS
10.14 CONTINUATION OF COVERAGE
<PAGE>
FIRST NATIONAL BANCORP, INC.
EMPLOYEES' CAFETERIA PLAN
INTRODUCTION
The Employer has adopted this Plan effective January 1, 1995 to
recognize the contribution made to the Employer by its Employees. Its purpose is
to reward them by providing benefits for those Employees who shall qualify
hereunder and their dependents and beneficiaries. The concept of this Plan is to
allow Employees to choose among different types of benefits based on their own
particular goals, desires and needs. The Plan shall be known as First National
Bancorp, Inc. Employees' Cafeteria Plan (the "Plan").
The intention of the Employer is that the Plan qualify as a "Cafeteria
Plan" within the meaning of Section 125 of the Internal Revenue Code of 1986, as
amended, and that the benefits which an Employee elects to receive under the
Plan be includable or excludable from the Employee's income under Section 125(a)
and other applicable sections of the Internal Revenue Code of 1986, as amended.
ARTICLE 1.
DEFINITIONS
1.1. "Administrator" means the individual(s) or corporation appointed
by the Employer to carry out the administration of the Plan. In the event the
Administrator has not been appointed, or resigns from a prior appointment, the
Employer shall be deemed to be the Administrator.
1.2. "Affiliated Employer" means the Employer and any corporation which
is a member of a controlled group of corporations (as defined in Code Section
414(b)) which includes the Employer; any trade or business (whether or not
incorporated) which is under common control (as defined in Code Section 414(c))
with the Employer; any organization (whether or not incorporated) which is a
member of an affiliated service group (as defined in Code Section 414(m)) which
includes the Employer; and any other entity required to be aggregated with the
Employer pursuant to Treasury regulations under Code Section 414(o).
1.3. "Benefit" means any of the optional benefit choices available to a
Participant as outlined in Section 4.1.
1.4. "Cafeteria Plan Benefit Dollars" means the amount available to
Participants, pursuant to Article III, to purchase Benefits. Each dollar
contributed to this Plan shall be converted into one Cafeteria Plan Benefit
Dollar.
1.5. "Code" means the Internal Revenue Code of 1986, as amended or
replaced from time to time.
1.6. "Compensation" means the total cash remuneration received by the
Participant from the Employer during a Plan Year prior to any reductions
pursuant to a Salary Redirection Agreement authorized hereunder. Compensation
shall include overtime, commissions and bonuses.
1.7. "Dependent" means any individual who qualifies as a dependent
under an Insurance Contract or under Code Section 152 (as modified by Code
Section 105(b)).
1.8. "Effective Date" means January 1, 1995.
1.9. "Election Period" means the 30 day period immediately preceding
the beginning of each Plan Year. However, an Employee's initial Election Period
shall be determined pursuant to Section 5.1.
1.10. "Eligible Employee" means any Employee who has satisfied the
provisions of Section 2.1.
Also, any Employee or former Employee shall not be eligible to
participate in this Plan unless he is eligible to receive medical benefits
pursuant to a group medical plan sponsored by the Employer.
1.11. "Employee" means any person who is employed by the Employer, but
excludes any person who is employed as an independent contractor. The term
Employee shall include leased employees within the meaning of Code Section
414(n)(2).
1.12. "Employer" means First National Bancorp, Inc. and any Affiliated
Employer (as defined in Section 1.2) which shall adopt this Plan; any successor
which shall maintain this Plan; and any predecessor which has maintained this
Plan. First National Bank of Joliet, Southwest Suburban Bank, Community Bank of
Plano and Bank of Lockport are Affiliated Employers who will adopt this Plan.
<PAGE>
1.13. "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
1.14. "Highly Compensated Employee" means an Employee described in Code
Section 414(q) and the Treasury regulations thereunder.
1.15. "Insurance Contract" means any contract issued by an Insurer
underwriting a Benefit.
1.16. "Insurance Premium Payment Plan" means the plan of benefits
contained in Section 4.1 of this Plan, which provides for the payment of Premium
Expenses.
1.17. "Insurer" means any insurance company that underwrites a Benefit
under this Plan.
1.18. "Key Employee" means an Employee described in Code Section
416(i)(1) and the Treasury regulations thereunder.
1.19. "Participant" means any Eligible Employee who elects to become a
Participant pursuant to Section 2.3 and has not for any reason become ineligible
to participate further in the Plan.
1.20. "Plan" means this instrument, including all amendments thereto.
1.21. "Plan Year" means the 12-month period beginning January 1st and
ending December 31st. The Plan Year shall be the coverage period for the
Benefits provided for under this Plan. In the event a Participant commences
participation during a Plan Year, then the initial coverage period shall be that
portion of the Plan Year commencing on such Participant's date of entry and
ending on the last day of such Plan Year.
1.22. "Premium Expenses" or "Premiums" mean the Participant's cost for
the Benefits described in Section 4.1.
1.23. "Premium Reimbursement Account" means the account established for
a Participant pursuant to this Plan to which part of his Cafeteria Plan Benefit
Dollars may be allocated and from which Premiums of the Participant shall be
paid or reimbursed. If more than one type of insured Benefit is elected,
sub-accounts shall be established for each type of insured Benefit.
1.24. "Salary Redirection" means the contributions made by the Employer
on behalf of Participants pursuant to Section 3.1. These contributions shall be
converted to Cafeteria Plan Benefit Dollars and allocated to the funds or
accounts established under the Plan pursuant to the Participants' elections made
under Article V.
1.25. "Salary Redirection Agreement" means an agreement between the
Participant and the Employer under which the Participant agrees to reduce his
Compensation or to forego all or part of the increases in such Compensation and
to have such amounts contributed by the Employer to the Plan on the
Participant's behalf. The Salary Redirection Agreement shall apply only to
Compensation that has not been actually or constructively received by the
Participant as of the date of the agreement (after taking this Plan and Code
Section 125 into account) and, subsequently does not become currently available
to the Participant.
1.26. "Spouse" means the legally married husband or wife of a
Participant, unless legally separated by court decree.
<PAGE>
ARTICLE 2.
PARTICIPATION
2.1.ELIGIBILITY
Any Eligible Employee shall be eligible to participate
hereunder as of the date he satisfies the eligibility conditions for the
Employer's group medical plan, the provisions of which are specifically
incorporated herein by reference.
If a former Participant is rehired during the same Plan Year
in which termination of employment occurs, and such former Participant had
revoked existing Benefit elections and terminated the receipt of Benefits at the
time of termination of employment, then such rehired former Participant shall be
prohibited from making new Benefit elections for the remaining portion of the
Plan Year.
2.2.EFFECTIVE DATE OF PARTICIPATION
An Eligible Employee shall become a Participant effective as
of the entry date under the Employer's group medical
plan, the provisions of which are specifically incorporated
herein by reference.
2.3.APPLICATION TO PARTICIPATE
An Employee who is eligible to participate in this Plan shall, during
the applicable Election Period, complete an application to participate and
election of benefits form which the Administrator shall furnish to the Employee.
The election made on such form shall be irrevocable until the end of the
applicable Plan Year unless the Participant is entitled to change his Benefit
elections pursuant to Section 5.4 hereof.
An Eligible Employee shall also be required to execute a Salary
Redirection Agreement during the Election Period for the Plan Year during which
he wishes to participate in this Plan. Any such Salary Redirection Agreement
shall be effective for the first pay period beginning on or after the Employee's
effective date of participation pursuant to Section 2.2.
Notwithstanding the foregoing, an Employee who is eligible to
participate in this Plan and who is covered by the Employer's insured Benefits
under this Plan shall automatically become a Participant to the extent of the
Premiums for such insurance unless the Employee elects, during the Election
Period, not to participate in the Plan.
2.4.TERMINATION OF PARTICIPATION
A Participant shall no longer participate in this Plan upon the
occurrence of any of the following events:
(a) His termination of employment, subject to the provisions of Section
2.6;
(b) The end of the Plan Year during which he became a limited
Participant because of a change in employment status pursuant to Section
2.5;
(c) His death, subject to the provisions of Section 2.7; or
(d) The termination of this Plan, subject to the provisions of Section
9.2.
<PAGE>
2.5.CHANGE OF EMPLOYMENT STATUS
If a Participant ceases to be an Eligible Employee because of a change
in employment status or classification (other than through termination of
employment), the Participant shall become a limited Participant in this Plan for
the remainder of the Plan Year in which such change of employment status occurs.
As a limited Participant, no further Salary Redirection may be made on behalf of
the Participant, and, except as otherwise provided herein, all further Benefit
elections shall cease, subject to the limited Participant's right to continue
coverage under any Insurance Contracts. However, any balances in the limited
Participant's Dependent Care Assistance Account may be used during such Plan
Year to reimburse the limited Participant for any allowable Employment-Related
Dependent Care Expenses incurred during the Plan Year. Subject to the provisions
of Section 2.6, if the limited Participant later becomes an Eligible Employee,
then the limited Participant may again become a full Participant in this Plan,
provided he otherwise satisfies the participation requirements set forth in this
Article II as if he were a new Employee and made an election in accordance with
Section 5.1.
2.6.TERMINATION OF EMPLOYMENT
If a Participant terminates employment with the Employer for any reason
other than death, his participation in the Plan shall be governed in accordance
with the following:
(a) With regard to Benefits which are insured, the Participant's
participation in the Plan shall cease, subject to the Participant's right
to continue coverage under any Insurance Contract for which premiums have
already been paid.
(b) With regard to the Dependent Care Assistance Program, the
Participant's participation in the Plan shall cease and no further Salary
Redirection contributions shall be made. However, such Participant may
submit claims for employment related Dependent Care Expense reimbursements
for the remainder of the Plan Year in which such termination occurs, based
on the level of his Dependent Care Assistance Account as of his date of
termination.
(c) This Section shall be applied and administered consistent with such
further rights a Participant and his Dependents may be entitled to pursuant
to Code Section 4980B and Section 10.14 of the Plan.
2.7.DEATH
If a Participant dies, his participation in the Plan shall cease.
However, such Participant's beneficiaries, or the representative of his estate,
may submit claims for expenses or benefits for the remainder of the Plan Year or
until the Cafeteria Plan Benefit Dollars allocated to each specific benefit are
exhausted. A Participant may designate a specific beneficiary for this purpose.
If no such beneficiary is specified, the Administrator may designate the
Participant's Spouse, one of his Dependents or a representative of his estate.
<PAGE>
ARTICLE 3.
CONTRIBUTIONS TO THE PLAN
3.1.SALARY REDIRECTION
Benefits under the Plan shall be financed by Salary Redirections
sufficient to support Benefits that a Participant has elected hereunder and to
pay the Participant's Premium Expenses. The salary administration program of the
Employer shall be revised to allow each Participant to agree to reduce his pay
during a Plan Year by an amount determined necessary to purchase the elected
Benefit. The amount of such Salary Redirection shall be specified in the Salary
Redirection Agreement and shall be applicable for a Plan Year. Notwithstanding
the above, for new Participants, the Salary Redirection Agreement shall only be
applicable from the first day of the pay period following the Employee's entry
date up to and including the last day of the Plan Year. However, in no event
shall a Participant's Salary Redirection exceed 95% of the Participant's
Compensation. These contributions shall be converted to Cafeteria Plan Benefit
Dollars and allocated to the funds or accounts established under the Plan
pursuant to the Participants' elections made under Article V.
Any Salary Redirection shall be determined prior to the beginning of a
Plan Year (subject to initial elections pursuant to Section 5.1) and prior to
the end of the Election Period and shall be irrevocable for such Plan Year.
However, a Participant may revoke a Benefit election or a Salary Redirection
Agreement after the Plan Year has commenced and make a new election with respect
to the remainder of the Plan Year, if both the revocation and the new election
are on account of and consistent with a change in family status and such other
permitted events as determined under Article V of the Plan and consistent with
the rules and regulations of the Department of the Treasury. Salary Redirection
amounts shall be contributed on a pro rata basis for each pay period during the
Plan Year. All individual Salary Redirection Agreements are deemed to be part of
this Plan and incorporated by reference hereunder.
3.2. APPLICATION OF CONTRIBUTIONS
As soon as reasonably practical after each payroll period, the Employer
shall apply the Salary Redirection to provide the Benefits elected by the
affected Participants. Any contributions made or withheld for the Dependent Care
Assistance Account shall be credited to such fund or account. Amounts designated
for the Participant's Premium Expense Reimbursement Account shall likewise be
credited to such account for the purpose of paying Premium Expenses.
3.3. PERIODIC CONTRIBUTIONS
Notwithstanding the requirement provided above and in other Articles of
this Plan that Salary Redirections be contributed to the Plan by the Employer on
behalf of an Employee on a level and pro rata basis for each payroll period, the
Employer and Administrator may implement a procedure in which Salary
Redirections are contributed throughout the Plan Year on a periodic basis that
is not pro rata for each payroll period.
ARTICLE 4. BENEFITS
4.1.BENEFIT OPTIONS
Each Participant may elect to have the amount of his Cafeteria Plan
Benefit Dollars applied to any one or more of the following optional Benefits:
(1) Dependent Care Assistance Program
(2) Cash Benefit
<PAGE>
In addition, each Participant shall have a sufficient portion of his
Cafeteria Plan Benefit Dollars applied to the following insured benefits unless
the Participant elects not to receive such benefits:
(3) Health Insurance Benefit
4.2. DEPENDENT CARE ASSISTANCE PROGRAM BENEFIT
Each Participant may elect coverage under the Dependent Care Assistance
Program option, in which case Article VI shall apply.
4.3. HEALTH INSURANCE BENEFIT
(a) Each Participant may elect to be covered under a health and
hospitalization Insurance Contract for the Participant, his or her spouse,
and his or her Dependents.
(b) The Employer may select suitable health and hospitalization
Insurance Contracts for use in providing this health insurance benefit,
which policies will provide uniform benefits for all Participants electing
this Benefit.
(c) The rights and conditions with respect to the benefits payable from
such health and hospitalization Insurance Contract shall be determined
therefrom, and such Insurance Contract shall be incorporated herein by
reference.
4.4. CASH BENEFIT
If a Participant elects not to participate in the Plan, such
Participant shall be deemed to have chosen the Cash Benefit as his sole Benefit
option.
4.5. NONDISCRIMINATION REQUIREMENTS
(a) It is the intent of this Plan to provide benefits to a
classification of employees which the Secretary of the Treasury finds not
to be discriminatory in favor of the group in whose favor discrimination
may not occur under Code Section 125.
(b) It is the intent of this Plan not to provide qualified benefits as
defined under Code Section 125 to Key Employees in amounts that exceed 25%
of the aggregate of such Benefits provided for all Eligible Employees under
the Plan. For purposes of the preceding sentence, qualified benefits shall
not include benefits which (without regard to this paragraph) are
includable in gross income.
(c) If the Administrator deems it necessary to avoid discrimination or
possible taxation to Key Employees or a group of employees in whose favor
discrimination may not occur in violation of Code Section 125, it may, but
shall not be required to, reduce contributions or non-taxable Benefits in
order to assure compliance with this Section. Any act taken by the
Administrator under this Section shall be carried out in a uniform and
nondiscriminatory manner. If the Administrator decides to reduce
contributions or non-taxable Benefits, it shall be done in the following
manner. First, the non-taxable Benefits of the affected Participant (either
an employee who is highly compensated or a Key Employee, whichever is
applicable) who has the highest amount of non-taxable Benefits for the Plan
Year shall have his non-taxable benefits reduced until the discrimination
tests set forth in this Section are satisfied or until the amount of his
non-taxable Benefits equals the non-taxable Benefits of the affected
Participant who has the second highest amount of non-taxable Benefits. This
process shall continue until the nondiscrimination tests set forth in this
Section are satisfied. With respect to any affected Participant who has had
Benefits reduced pursuant to this Section, the reduction shall be made
proportionately among non-insured Benefits, and once all non-insured
Benefits are expended, proportionately among insured Benefits.
Contributions which are not utilized to provide Benefits to any Participant
by virtue of any administrative act under this paragraph shall be forfeited
and deposited into the benefit plan surplus.
<PAGE>
ARTICLE 5.
PARTICIPANT ELECTIONS
5.1. INITIAL ELECTIONS
An Employee who meets the eligibility requirements of Section 2.1 on
the first day of, or during, a Plan Year may elect to participate in this Plan
for all or the remainder of such Plan Year, provided he elects to do so before
his effective date of participation pursuant to Section 2.2. However, if such
Employee does not complete an application to participate and benefit election
form and deliver it to the Administrator before such date, his Election Period
shall extend 30 calendar days after such date, or for such further period as the
Administrator shall determine and apply on a uniform and nondiscriminatory
basis. However, any election during the extended 30-day election period pursuant
to this Section 5.1 shall not be effective until the first pay period following
the later of such Participant's effective date of participation pursuant to
Section 2.2 or the date of the receipt of the election form by the
Administrator, and shall be limited to the Benefit expenses incurred for the
balance of the Plan Year for which the election is made.
Notwithstanding the foregoing, an Employee who is eligible to
participate in this Plan and who is covered by the Employer's insured benefits
under this Plan shall automatically become a Participant to the extent of the
Premiums for such insurance unless the Employee elects, during the Election
Period, not to participate in the Plan.
5.2. SUBSEQUENT ANNUAL ELECTIONS
During the Election Period prior to each subsequent Plan Year, each
Participant shall be given the opportunity to elect, on an election of benefits
form to be provided by the Administrator, which spending account Benefit options
he wishes to select and purchase with his Cafeteria Plan Benefit Dollars. Any
such election shall be effective for any Benefit expenses incurred during the
Plan Year which follows the end of the Election Period. With regard to
subsequent annual elections, the following options shall apply:
(a) A Participant or Employee who failed to initially elect to
participate may elect different or new Benefits under the Plan during the
Election Period;
(b) A Participant may terminate his participation in the Plan by
notifying the Administrator in writing during the Election Period that he
does not want to participate in the Plan for the next Plan Year, or by not
electing any Benefit options;
(c) An Employee who elects not to participate for the Plan Year
following the Election Period will have to wait until the next Election
Period before again electing to participate in the Plan, with respect to
non-insured Benefits.
5.3. FAILURE TO ELECT
Any Participant failing to complete an election of benefits form
pursuant to Section 5.2 by the end of the applicable Election Period shall be
deemed to have elected not to participate in the Plan for the upcoming Plan
Year. No further Salary Redirections shall therefore be authorized for such
subsequent Plan Year.
<PAGE>
5.4. CHANGE OF ELECTIONS
(a) Any Participant may change a Benefit election after the Plan Year
(to which such election relates) has commenced and make new elections with
respect to the remainder of such Plan Year if the changes are necessitated
by and are consistent with a change in family status which is acceptable
under rules and regulations adopted by the Department of the Treasury.
Benefit election changes are consistent with family status changes only if
the election changes are necessary or appropriate as a result of the family
status change. Any new election under this Section 5.4 shall be effective
at such time as the Administrator shall prescribe, but not earlier than the
first pay period beginning after the election form is completed and
returned to the Administrator. For the purposes of this paragraph, the
following events shall be considered examples of a change in family status:
(1) the marriage or divorce of the Participant;
(2) the birth or adoption of a child by the Participant;
(3) the death of the Participant's spouse or a Dependent;
(4) the termination or commencement of employment of the Participant's
spouse;
(5) the switching from part-time to full-time employment status (or
from full-time to part-time status) by the Participant or the
Participant's spouse;
(6) the taking of an unpaid leave of absence by the Participant or the
Participant's spouse; or
(7) a significant change in health coverage attributable to the
spouse's employment.
(b) If the Premium Expense under a health insurance Benefit provided by
an independent, third-party provider under the Plan increases or decreases
during a Plan Year, then the Plan shall automatically increase or decrease,
as the case may be, the Salary Redirections of all affected Participants
for such health insurance Benefit. Alternatively, if the Premium Expense
increases significantly, the Administrator shall permit the affected
Participants to either make corresponding changes in their Premium payments
or revoke their elections and, in lieu thereof, receive on a prospective
basis coverage under another health plan with similar coverage. In
addition, if the coverage under a health insurance Benefit provided by an
independent, third-party provider is significantly curtailed or ceases
during a Plan Year, affected Participants may revoke their elections of
such health insurance Benefit and, in lieu thereof, elect to receive on a
prospective basis coverage under another health plan with similar coverage.
ARTICLE 6.
DEPENDENT CARE ASSISTANCE PROGRAM
6.1. ESTABLISHMENT OF PROGRAM
This Dependent Care Assistance Program is intended to qualify as a
program under Code Section 129 and shall be interpreted in a manner consistent
with such Code Section. Participants who elect to participate in this program
may submit claims for the reimbursement of Employment-Related Dependent Care
Expenses. All amounts reimbursed under this Dependent Care Assistance Program
shall be paid from amounts allocated to the Participant's Dependent Care
Assistance Account.
<PAGE>
6.2. DEFINITIONS
For the purposes of this Article and the Cafeteria Plan the terms below
shall have the following meaning:
(a) "Dependent Care Assistance Account" means the account established
for a Participant pursuant to this Article to which part of his Cafeteria
Plan Benefit Dollars may be allocated and from which Employment-Related
Dependent Care Expenses of the Participant may be reimbursed.
(b) "Dependent Care Assistance Program" means the program of benefits
contained in this Article, which provides for the reimbursement of eligible
expenses for the care of the Qualifying Dependents of Participants.
(c) "Earned Income" means earned income as defined under Code Section
32(c)(2), but excluding such amounts paid or incurred by the Employer for
dependent care assistance to the Participant.
(d) "Employment-Related Dependent Care Expenses" means the amounts paid
for expenses of a Participant for those services which if paid by the
Participant would be considered employment related expenses under Code
Section 21(b)(2). Generally, they shall include expenses for household
services or for the care of a Qualifying Dependent, to the extent that such
expenses are incurred to enable the Participant to be gainfully employed
for any period for which there are one or more Qualifying Dependents with
respect to such Participant. The determination of whether an amount
qualifies as an Employment-Related Dependent Care Expense shall be made
subject to the following rules:
(1) If such amounts are paid for expenses incurred outside the
Participant's household, they shall constitute Employment-Related
Dependent Care Expenses only if incurred for a Qualifying Dependent as
defined in Section 6.2(f)(1) (or deemed to be, as described in Section
6.2(f)(1) pursuant to Section 6.2(f)(3)), or for a Qualifying Dependent
as defined in Section 6.2(f)(2) (or deemed to be, as described in
Section 6.2(f)(2) pursuant to Section 6.2(f)(3)) who regularly spends
at least 8 hours per day in the Participant's household;
(2) If the expense is incurred outside the Participant's home at a
facility that provides care for a fee, payment, or grant for more than
6 individuals who do not regularly reside at the facility, the facility
must comply with all applicable state and local laws and regulations,
including licensing requirements, if any; and
(3) Employment-Related Dependent Care Expenses of a Participant shall
not include amounts paid or incurred to a child of such Participant who
is under the age of 19 or to an individual who is a dependent of such
Participant or such Participant's Spouse.
(e) "Highly Compensated Employee" means an Employee who is a highly
compensated employee within the meaning of Code Section 414(q) and the
Treasury regulations thereunder.
(f) "Qualifying Dependent" means, for Dependent Care Assistance Program
purposes,
(1) a Dependent of a Participant who is under the age of 13, with
respect to whom the Participant is entitled to an exemption under Code
Section 151(c);
(2) a Dependent or the Spouse of a Participant who is physically or
mentally incapable of caring for himself or herself; or
(3) a child that is deemed to be a Qualifying Dependent described in
paragraph (1) or (2) above, whichever is appropriate, pursuant to Code
Section 21(e)(5).
(g) The definitions of Article I are hereby incorporated by reference
to the extent necessary to interpret and apply the provisions of this
Dependent Care Assistance Program.
<PAGE>
6.3. DEPENDENT CARE ASSISTANCE ACCOUNTS
The Administrator shall establish a Dependent Care Assistance Account
for each Participant who elects to apply Cafeteria Plan Benefit Dollars to
Dependent Care Assistance Program benefits.
6.4. INCREASES IN DEPENDENT CARE ASSISTANCE ACCOUNTS
A Participant's Dependent Care Assistance Account shall be increased
each pay period by the portion of Cafeteria Plan Benefit Dollars that he has
elected to apply toward his Dependent Care Assistance Account pursuant to
elections made under Article V hereof.
6.5. DECREASES IN DEPENDENT CARE ASSISTANCE ACCOUNTS
A Participant's Dependent Care Assistance Account shall be reduced by
the amount of any Employment-Related Dependent Care Expense reimbursements paid
or incurred on behalf of a Participant pursuant to Section 6.12 hereof.
6.6. ALLOWABLE DEPENDENT CARE ASSISTANCE REIMBURSEMENT
Subject to limitations contained in Section 6.9 of this Program, and to
the extent of the amount contained in the Participant's Dependent Care
Assistance Account, a Participant who incurs Employment-Related Dependent Care
Expenses shall be entitled to receive from the Employer full reimbursement for
the entire amount of such expenses incurred during the Plan Year or portion
thereof during which he is a Participant.
6.7. ANNUAL STATEMENT OF BENEFITS
On or before January 31st of each calendar year, the Employer shall
furnish to each Employee who was a Participant and received benefits under
Section 6.6 during the prior calendar year, a statement of all such benefits
paid to or on behalf of such Participant during the prior calendar year.
6.8. FORFEITURES
The amount in a Participant's Dependent Care Assistance Account as of
the end of any Plan Year (and after the processing of all claims for such Plan
Year pursuant to Section 6.12 hereof) shall be forfeited and credited to the
benefit plan surplus. In such event, the Participant shall have no further claim
to such amount for any reason.
6.9. LIMITATION ON PAYMENTS
Notwithstanding any provision contained in this Article to the
contrary, amounts paid from a Participant's Dependent Care Assistance Account in
or on account of any taxable year of the Participant shall not exceed the lesser
of the Earned Income limitation described in Code Section 129(b) or $5,000
($2,500 if a separate tax return is filed by a Participant who is married as
determined under the rules of paragraphs (3) and (4) of Code Section 21(e)).
<PAGE>
6.10. NONDISCRIMINATION REQUIREMENTS
(a) It is the intent of this Dependent Care Assistance Program that
contributions or benefits not discriminate in favor of Highly Compensated
Employees or their Dependents, as prohibited by Code Section 129(d).
(b) It is the intent of this Dependent Care Assistance Program that not
more than 25 percent of the amounts paid by the Employer for dependent care
assistance during the Plan Year will be provided for the class of
individuals who are shareholders or owners (or their Spouses or
Dependents), each of whom (on any day of the Plan Year) owns more than 5
percent of the stock or of the capital or profits interest in the Employer.
(c) If the Administrator deems it necessary to avoid discrimination or
possible taxation to Highly Compensated Employees defined under Section
6.2(e) or to principal shareholders or owners as set forth in this Section,
it may, but shall not be required to, reject any elections or reduce
contributions or non-taxable benefits in order to assure compliance with
this Section. Any act taken by the Administrator under this Section shall
be carried out in a uniform and nondiscriminatory manner. If the
Administrator decides to reject any elections or reduce contributions or
Benefits, it shall be done in the following manner. First, the Benefits
designated for the Dependent Care Assistance Account by the Highly
Compensated Employee that elected to contribute the highest amount to such
account for the Plan Year shall be reduced until the nondiscrimination
tests set forth in this Section are satisfied, or until the amount
designated for the account equals the amount designated for the account of
the Highly Compensated Employee who has elected the second highest
contribution to the Dependent Care Assistance Account for the Plan Year.
This process shall continue until the nondiscrimination tests set forth in
this Section are satisfied. Contributions which are not utilized to provide
Benefits to any Participant by virtue of any administrative act under this
paragraph shall be forfeited.
6.11. COORDINATION WITH CAFETERIA PLAN
All Participants under the Cafeteria Plan are eligible to receive
Benefits under this Dependent Care Assistance Program. The enrollment and
termination of participation under the Cafeteria Plan shall constitute
enrollment and termination of participation under this Dependent Care Assistance
Program. In addition, other matters concerning contributions, elections and the
like shall be governed by the general provisions of the Cafeteria Plan.
6.12. DEPENDENT CARE ASSISTANCE PROGRAM CLAIMS
The Administrator shall direct the payment of all such Dependent Care
Assistance claims to the Participant upon the presentation to the Administrator
of documentation of such expenses in a form satisfactory to the Administrator.
However, in the Administrator's discretion, payments may be made directly to the
service provider. In its discretion in administering the Plan, the Administrator
may utilize forms and require documentation of costs as may be necessary to
verify the claims submitted. At a minimum, the form shall include a statement
from an independent third party as proof that the expense has been incurred and
the amount of such expense. In addition, the Administrator may require that each
Participant who desires to receive reimbursement under this Program for
Employment-Related Dependent Care Expenses submit a statement which may contain
some or all of the following information:
<PAGE>
(a) The Dependent or Dependents for whom the services were performed;
(b) The nature of the services performed for the Participant, the cost
of which he wishes reimbursement;
(c) The relationship, if any, of the person performing the services to
the Participant;
(d) If the services are being performed by a child of the Participant,
the age of the child;
(e) A statement as to where the services were performed;
(f) If any of the services were performed outside the home, a statement
as to whether the Dependent for whom such services were performed spends at
least 8 hours a day in the Participant's household;
(g) If the services were being performed in a day care center, a
statement
(1) that the day care center complies with all applicable laws and
regulations of the state of residence,
(2) that the day care center provides care for more than 6 individuals
(other than individuals residing at the center), and
(3) of the amount of fee paid to the provider.
(h) If the Participant is married, a statement containing the
following:
(1) the Spouse's salary or wages if he or she is employed, or
(2) if the Participant's Spouse is not employed, that
(i) he or she is incapacitated, or
(ii) he or she is a full-time student attending an educational
institution and the months during the year which he or she attended
such institution.
(i) If a Participant fails to submit a claim within the 60 day period
immediately following the end of the Plan Year, those claims shall not be
considered for reimbursement by the Administrator.
ARTICLE 7.
ERISA PROVISIONS
7.1. CLAIM FOR BENEFITS
(a) Any claim for Benefits underwritten by an Insurance Contract shall
be made to the Insurer. If the Insurer denies any claim, the Participant or
beneficiary shall follow the Insurer's claims review procedure. Any other
claim for Benefits shall be made to the Administrator. If the Administrator
denies a claim, the Administrator may provide notice to the Participant or
beneficiary, in writing, within 90 days after the claim is filed unless
special circumstances require an extension of time for processing the
claim. If the Administrator does not notify the Participant of the denial
of the claim within the 90 day period specified above, then the claim shall
be deemed denied. The notice of a denial of a claim shall be written in a
manner calculated to be understood by the claimant and shall set forth:
(1) specific references to the pertinent Plan provisions on which the
denial is based;
<PAGE>
(2) a description of any additional material or information necessary
for the claimant to perfect the claim and an explanation as to why such
information is necessary; and
(3) an explanation of the Plan's claim procedure.
(b) Within 60 days after receipt of the above material, the claimant
shall have a reasonable opportunity to appeal the claim denial to the
Administrator for a full and fair review. The claimant or his duly
authorized representative may:
(1) request a review upon written notice to the Administrator;
(2) review pertinent documents; and
(3) submit issues and comments in writing.
(c) A decision on the review by the Administrator will be made not
later than 60 days after receipt of a request for review, unless special
circumstances require an extension of time for processing (such as the need
to hold a hearing), in which event a decision should be rendered as soon as
possible, but in no event later than 120 days after such receipt. The
decision of the Administrator shall be written and shall include specific
reasons for the decision, written in a manner calculated to be understood
by the claimant, with specific references to the pertinent Plan provisions
on which the decision is based.
(d) Any balance remaining in the Participants' Dependent Care
Assistance Account as of the end of each Plan Year shall be forfeited and
deposited in the benefit plan surplus of the Employer pursuant to Section
6.8, unless the Participant had made a claim for such Plan Year, in
writing, which has been denied or is pending; in which event the amount of
the claim shall be held in his account until the claim appeal procedures
set forth above have been satisfied or the claim is paid. If any such claim
is denied on appeal, the amount held beyond the end of the Plan Year shall
be forfeited and credited to the benefit plan surplus.
7.2. APPLICATION OF BENEFIT PLAN SURPLUS
Any forfeited amounts credited to the benefit plan surplus by virtue of
the failure of a Participant to incur a qualified expense or seek reimbursement
in a timely manner may, but need not be, separately accounted for after the
close of the Plan Year (or after such further time specified herein for the
filing of claims) in which such forfeitures arose. In no event shall such
amounts be carried over to reimburse a Participant for expenses incurred during
a subsequent Plan Year for the same or any other Benefit available under the
Plan; nor shall amounts forfeited by a particular Participant be made available
to such Participant in any other form or manner, except as permitted by Treasury
regulations. Amounts in the benefit plan surplus shall first be used to defray
any administrative costs and experience losses and thereafter be distributed to
Participants on a per capita basis as soon as administratively feasible.
7.3. NAMED FIDUCIARY
The Administrator shall be the named fiduciary pursuant to ERISA
Section 402 and shall be responsible for the management and control of the
operation and administration of the Plan.
<PAGE>
7.4. GENERAL FIDUCIARY RESPONSIBILITIES
The Administrator and any other fiduciary under ERISA shall discharge
their duties with respect to this Plan solely in the interest of the
Participants and their beneficiaries and
(a) for the exclusive purpose of providing Benefits to Participants and
their beneficiaries and defraying reasonable expenses of administering the
Plan;
(b) with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent man acting in like capacity
and familiar with such matters would use in the conduct of an enterprise of
a like character and with like aims; and
(c) in accordance with the documents and instruments governing the Plan
insofar as such documents and instruments are consistent with ERISA.
7.5. NONASSIGNABILITY OF RIGHTS
The right of any Participant to receive any reimbursement under the
Plan shall not be alienable by the Participant by assignment or any other
method, and shall not be subject to the rights of creditors, and any attempt to
cause such right to be so subjected shall not be recognized, except to such
extent as may be required by law.
ARTICLE 8.
ADMINISTRATION
8.1. PLAN ADMINISTRATION
The operation of the Plan shall be under the supervision of the
Administrator. It shall be a principal duty of the Administrator to see that the
Plan is carried out in accordance with its terms, and for the exclusive benefit
of Employees entitled to participate in the Plan. The Administrator shall have
full power to administer the Plan in all of its details, subject, however, to
the pertinent provisions of the Code. The Administrator's powers shall include,
but shall not be limited to the following authority, in addition to all other
powers provided by this Plan:
(a) To make and enforce such rules and regulations as the Administrator
deems necessary or proper for the efficient administration of the Plan;
(b) To interpret the Plan, the Administrator's interpretations thereof
in good faith to be final and conclusive on all persons claiming benefits
under the Plan;
(c) To decide all questions concerning the Plan and the eligibility of
any person to participate in the Plan and to receive benefits provided
under the Plan;
(d) To reject elections or to limit contributions or Benefits for
certain highly compensated participants if it deems such to be desirable in
order to avoid discrimination under the Plan in violation of applicable
provisions of the Code;
(e) To provide Employees with a reasonable notification of their
benefits available under the Plan;
(f) To approve reimbursement requests and to authorize the payment of
benefits; and
(g) To appoint such agents, counsel, accountants, consultants, and
actuaries as may be required to assist in administering the Plan.
Any procedure, discretionary act, interpretation or construction taken
by the Administrator shall be done in a nondiscriminatory manner based upon
uniform principles consistently applied and shall be consistent with the intent
that the Plan shall continue to comply with the terms of Code Section 125 and
the Treasury regulations thereunder.
8.2. EXAMINATION OF RECORDS
The Administrator shall make available to each Participant, Eligible
Employee and any other Employee of the Employer such records as pertain to their
interest under the Plan for examination at reasonable times during normal
business hours.
<PAGE>
8.3. PAYMENT OF EXPENSES
Any reasonable administrative expenses shall be paid by the Employer
unless the Employer determines that administrative costs shall be borne by the
Participants under the Plan or by any Trust Fund which may be established
hereunder. The Administrator may impose reasonable conditions for payments,
provided that such conditions shall not discriminate in favor of highly
compensated employees.
8.4. INSURANCE CONTROL CLAUSE
In the event of a conflict between the terms of this Plan and the terms
of an Insurance Contract of an independent third party Insurer whose product is
then being used in conjunction with this Plan, the terms of the Insurance
Contract shall control as to those Participants receiving coverage under such
Insurance Contract. For this purpose, the Insurance Contract shall control in
defining the persons eligible for insurance, the dates of their eligibility, the
conditions which must be satisfied to become insured, if any, the benefits
Participants are entitled to and the circumstances under which insurance
terminates.
8.5. INDEMNIFICATION OF ADMINISTRATOR
The Employer agrees to indemnify and to defend to the fullest extent
permitted by law any Employee serving as the Administrator or as a member of a
committee designated as Administrator (including any Employee or former Employee
who previously served as Administrator or as a member of such committee) against
all liabilities, damages, costs and expenses (including attorney's fees and
amounts paid in settlement of any claims approved by the Employer) occasioned by
any act or omission to act in connection with the Plan, if such act or omission
is in good faith.
ARTICLE 9.
AMENDMENT OR TERMINATION OF PLAN
9.1. AMENDMENT
The Employer, at any time or from time to time, may amend any or all of
the provisions of the Plan without the consent of any Employee or Participant.
Any such amendment shall be adopted by formal action of the Employer's board of
directors and executed by an officer authorized to act on behalf of the
Employer. No amendment shall have the effect of modifying any benefit election
of any Participant in effect at the time of such amendment, unless such
amendment is made to comply with Federal, state or local laws, statutes or
regulations.
9.2. TERMINATION
The Employer is establishing this Plan with the intent that it will be
maintained for an indefinite period of time. Notwithstanding the foregoing, the
Employer reserves the right to terminate this Plan, in whole or in part, at any
time. In the event the Plan is terminated, no further contributions shall be
made. Benefits under any Insurance Contract shall be paid in accordance with the
terms of the Contract.
No further additions shall be made to the Dependent Care Assistance
Account, but all payments from such fund shall continue to be made according to
the elections in effect until the end of the Plan Year in which the Plan
termination occurs (and for a reasonable period of time thereafter, if required
for the filing of claims), or until the balances of all accounts have been
reduced to zero, whichever occurs first. Any amounts remaining in any such fund
or account as of the end of the Plan Year in which Plan termination occurs shall
be forfeited and deposited in the benefit plan surplus after the expiration of
the filing period.
<PAGE>
ARTICLE 10.
MISCELLANEOUS
10.1. PLAN INTERPRETATION
All provisions of this Plan shall be interpreted and applied in a
uniform, nondiscriminatory manner. This Plan shall be read in its entirety and
not severed except as provided in Section 10.12.
10.2. GENDER AND NUMBER
Wherever any words are used herein in the masculine, feminine or neuter
gender, they shall be construed as though they were also used in another gender
in all cases where they would so apply, and whenever any words are used herein
in the singular or plural form, they shall be construed as though they were also
used in the other form in all cases where they would so apply.
10.3. WRITTEN DOCUMENT
This Plan, in conjunction with any separate written document which may
be required by law, is intended to satisfy the written Plan requirement of Code
Section 125 and any Treasury regulations thereunder relating to cafeteria plans.
10.4. EXCLUSIVE BENEFIT
This Plan shall be maintained for the exclusive benefit of the
Employees who participate in the Plan.
10.5. PARTICIPANT'S RIGHTS
This Plan shall not be deemed to constitute an employment contract
between the Employer and any Participant or to be a consideration or an
inducement for the employment of any Participant or Employee. Nothing contained
in this Plan shall be deemed to give any Participant or Employee the right to be
retained in the service of the Employer or to interfere with the right of the
Employer to discharge any Participant or Employee at any time regardless of the
effect which such discharge shall have upon him as a Participant of this Plan.
10.6. ACTION BY THE EMPLOYER
Whenever the Employer under the terms of the Plan is permitted or
required to do or perform any act or matter or thing, it shall be done and
performed by a person duly authorized by its legally constituted authority.
10.7. EMPLOYER'S PROTECTIVE CLAUSES
(a) Upon the failure of either the Participant or the Employer to
obtain the insurance contemplated by this Plan (whether as a result of
negligence, gross neglect or otherwise), the Participant's Benefits shall
be limited to the insurance premium(s), if any, that remained unpaid for
the period in question and the actual insurance proceeds, if any, received
by the Employer or the Participant as a result of the Participant's claim.
(b) The Employer's liability to the Participant shall only extend to
and shall be limited to any payment actually received by the Employer from
the Insurer. In the event that the full insurance Benefit contemplated is
not promptly received by the Employer within a reasonable time after
submission of a claim, then the Employer shall notify the Participant of
such facts and the Employer shall no longer have any legal obligation
whatsoever (except to execute any document called for by a settlement
reached by the Participant). The Participant shall be free to settle,
compromise or refuse to pursue the claim as the Participant, in his sole
discretion, shall see fit.
(c) The Employer shall not be responsible for the validity of any
Insurance Contract issued hereunder or for the failure on the part of the
Insurer to make payments provided for under any Insurance Contract. Once
insurance is applied for or obtained, the Employer shall not be liable for
any loss which may result from the failure to pay Premiums to the extent
Premium notices are not received by the Employer.
<PAGE>
10.8. NO GUARANTEE OF TAX CONSEQUENCES
Neither the Administrator nor the Employer makes any commitment or
guarantee that any amounts paid to or for the benefit of a Participant under the
Plan will be excludable from the Participant's gross income for federal or state
income tax purposes, or that any other federal or state tax treatment will apply
to or be available to any Participant. It shall be the obligation of each
Participant to determine whether each payment under the Plan is excludable from
the Participant's gross income for federal and state income tax purposes, and to
notify the Employer if the Participant has reason to believe that any such
payment is not so excludable. Notwithstanding the foregoing, the rights of
Participants under this Plan shall be legally enforceable.
10.9. INDEMNIFICATION OF EMPLOYER BY PARTICIPANTS
If any Participant receives one or more payments or reimbursements
under the Plan that are not for a permitted Benefit, such Participant shall
indemnify and reimburse the Employer for any liability it may incur for failure
to withhold federal or state income tax or Social Security tax from such
payments or reimbursements. However, such indemnification and reimbursement
shall not exceed the amount of additional federal and state income tax (plus any
penalties) that the Participant would have owed if the payments or
reimbursements had been made to the Participant as regular cash compensation,
plus the Participant's share of any Social Security tax that would have been
paid on such compensation, less any such additional income and Social Security
tax actually paid by the Participant.
10.10. FUNDING
Unless otherwise required by law, contributions to the Plan need not be
placed in trust or dedicated to a specific Benefit, but may instead be
considered general assets of the Employer. Furthermore, and unless otherwise
required by law, nothing herein shall be construed to require the Employer or
the Administrator to maintain any fund or segregate any amount for the benefit
of any Participant, and no Participant or other person shall have any claim
against, right to, or security or other interest in, any fund, account or asset
of the Employer from which any payment under the Plan may be made.
10.11. GOVERNING LAW
This Plan is governed by the Code and the Treasury regulations issued
thereunder (as they might be amended from time to time). In no event shall the
Employer guarantee the favorable tax treatment sought by this Plan. To the
extent not preempted by Federal law, the provisions of this Plan shall be
construed, enforced and administered according to the laws of the State of
Illinois.
10.12. SEVERABILITY
If any provision of the Plan is held invalid or unenforceable, its
invalidity or unenforceability shall not affect any other provisions of the
Plan, and the Plan shall be construed and enforced as if such provision had not
been included herein.
<PAGE>
10.13. CAPTIONS
The captions contained herein are inserted only as a matter of
convenience and for reference, and in no way define, limit, enlarge or describe
the scope or intent of the Plan, nor in any way shall affect the Plan or the
construction of any provision thereof.
10.14. CONTINUATION OF COVERAGE
Notwithstanding anything in the Plan to the contrary, in the event any
benefit under this Plan subject to the continuation coverage requirement of Code
Section 4980B becomes unavailable, each Participant will be entitled to
continuation coverage as prescribed in Code Section 4980B.
<PAGE>
IN WITNESS WHEREOF, this Plan document is hereby executed as of the 1st
day of January, 1995.
First National Bancorp, Inc.
an Illinois Corporation
ATTEST:
/s/ Albert G. D'Ottavio, Secretary By /s/ Kevin T. Reardon
- ---------------------------------- -----------------------------------
Albert G. D'Ottavio, Secretary Kevin T. Reardon, Chairman of the
Board
<PAGE>
CERTIFICATE OF CORPORATE RESOLUTION
The undersigned Secretary of First National Bancorp, Inc. (the
Corporation) hereby certifies that the following resolutions were duly adopted
by the board of directors of the Corporation on ______________________, and that
such resolutions have not been modified or rescinded as of the date hereof:
RESOLVED, that the form of Cafeteria Plan including a Dependent Care
Assistance Program effective January 1, 1995, presented to this meeting is
hereby approved and adopted and that the proper officers of the Corporation are
hereby authorized and directed to execute and deliver to the Administrator of
the Plan one or more counterparts of the Plan.
RESOLVED, that the Administrator shall be instructed to take such
actions that are deemed necessary and proper in order to implement the Plan, and
to set up adequate accounting and administrative procedures to provide benefits
under the Plan.
RESOLVED, that the proper officers of the Corporation shall act as soon
as possible to notify the employees of the Corporation of the adoption of the
Cafeteria Plan by delivering to each employee a copy of the summary description
of the Plan in the form of the Summary Plan Description presented to this
meeting, which form is hereby approved.
The undersigned further certifies that attached hereto as Exhibits A
and B, respectively, are true copies of First National Bancorp, Inc. Employees'
Cafeteria Plan and the Summary Plan Description approved and adopted in the
foregoing resolutions.
--------------------------------
Secretary
Date: __________________________
EXHIBIT 11
Statement Re Computation of Earnings per Share
Year ended December 31,
1995 1994 1993
- --------------------------------------------------------------------------------
Weighted average number of shares outstanding 1,215,902 1,215,902 1,215,902
--------------------------------
Net income (in thousands) ................... $ 8,211 $ 7,507 $ 7,366
--------------------------------
Earnings per share .......................... $ 6.75 $ 6.17 $ 6.06
--------------------------------
Note: Earnings per common share have been retroactively restated to reflect the
7 for 5 stock split in 1994.
FIRST NATIONAL BANCORP, INC.
78 North Chicago Street
Joliet, Illinois 60432
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation
of proxies to be voted at the Annual Shareholders Meeting of First National
Bancorp, Inc. (the "Company") to be held on Thursday, March 14, 1996, at 3:00
p.m. at 78 N. Chicago Street, Joliet, Illinois, and any adjournments or
postponements thereof and further to inform the Shareholders concerning the use
of the proxy and the business to be transacted at the meeting.
This proxy statement and form of proxy were first mailed to the
Shareholders on or about Thursday, February 22, 1996.
The proxy may be revoked at any time before it is voted whether in
writing delivered to the Company stating that the proxy is revoked or by a
subsequent proxy executed by or attendance at the meeting and voting in person
by the person executing the proxy. The items enumerated herein constitute the
only business which the Board of Directors intends to present or is informed
that others will present at the meeting. If any other matters are properly
presented at the meeting for action, the persons name in the enclosed form of
proxy and acting thereunder will have the discretion to vote on such matters in
accordance with their best judgement.
The enclosed proxy is solicited on behalf of the Board of Directors of
the Company. The expenses in connection with the solicitation of proxies will be
borne by the Company. Solicitation will be made by mail, but may in some cases
also be made by telephone or personal calls by officers, directors or regular
employees of First National Bank of Joliet who will not be specially compensated
for such solicitation.
On the record date, the Company had issued and outstanding and entitled
to vote 1,215,902 shares of $10.00 par value common stock, except that 2,683
shares, or .22%, are held by the Trust Department of First National Bank of
Joliet as sole Trustee and may not be voted. Only Shareholders of record at the
close of business of the Company on Friday, February 16, 1996, are entitled to
notice of and to vote at the Shareholders meeting. Each share of common stock
entitles the holder to one (1) vote on any matter brought before the meeting
except for the election of directors.
A quorum of Shareholders is necessary to take action at the Annual
Shareholders Meeting. A majority of the outstanding shares of common stock of
the Company, represented in person or by proxy, will constitute a quorum of
Shareholders at the Annual Shareholders Meeting. Abstentions will be considered
as present for purposes of a quorum and will be considered as a no vote on any
matter brought before the Shareholders. If a broker indicates on the proxy that
it does not have discretionary authority to vote certain shares of common stock
on a particular matter, those shares will not be considered as present for
purposes of a quorum and therefore not entitled to vote with respect to that
matter. Votes cast by proxy or in person at the Annual Shareholders Meeting will
be tabulated by the inspectors of election appointed for the Annual Shareholders
Meeting.
In the election for directors, each Shareholder shall have the right to
vote the number of shares owned by such Shareholder for as many persons as there
are directors to be elected or to cumulate such votes and give one (1) person as
many votes as shall equal the number of directors to be elected multiplied by
the number of such shares or to distribute such cumulative votes in any
proportion among any number of persons. The eleven (11) persons receiving a
plurality of the votes cast for director shall be elected as directors. For any
other proposal brought before the Shareholders, a simple majority of the votes
cast is required for the proposal to be approved.
A copy of the 1995 Annual Report of the Company and its wholly owned
subsidiaries, the First National Bank of Joliet ("FNB"), Southwest Suburban Bank
("SWSB"), the Bank of Lockport ("BOL") and Plano Bancshares, Inc. and its
subsidiary the Community Bank of Plano ("CBP"), is enclosed and accompanies this
Proxy Statement.
<PAGE>
Election of Directors
The eleven (11) persons named below are the persons whom the Board of
Directors recommends for election as directors of the Company for a term ending
at the next Annual Shareholders Meeting in 1997. All of the nominees are members
of the current Board of Directors of the Company.
It is intended that all shares of common stock represented by a proxy
in the accompanying form will be voted for the election of the persons listed
below as directors unless authority to vote for the election of directors is
withheld in such proxy. The Board of Directors has no reason to believe that any
of the nominees will refuse or be unable to serve, but if any of the nominees
will refuse or be unable to serve, proxies may be voted for election of other
persons selected by the Board of Directors. Certain information with respect to
the nominees is set forth below.
<TABLE>
NOMINEES FOR DIRECTOR
Principal Occupation for Director of Company or
Name and Age the Past Five Years(1) Subsidiary Since
- ------------ ------------------------ ----------------------
<S> <C> <C>
Sheldon C. Bell President, Coldwell Banker Bell 1973
(Age 61) (Real Estate)
George H. Buck President, Werden Buck Company 1980
(Age 47) (Face Brick-Masonry Materials)
Albert G. D'Ottavio President, Secretary/Treasurer, and COO, 1980
(Age 52) First National Bancorp, Inc.; President
and COO, First National Bank of Joliet
Watson A. Healy Achitect 1976
(Age 71)
Paul A. Lambrecht Retired Chairma, Brown & Lambrecht 1976
(Age 72) Construction, Inc. (Earthmoving)
Harvey J. Lewis Farmer 1973
(Age 71)
Walter F. Nolan Partner, Clifton, Gunderson & Co. 1991
(Age 55) (Certified Public Accountant)
Charles R. Peyla (2) President, Illinois Securities Company 1973
(Age 63) (Insurance)
Louis R. Peyla (2) Chairman of the Board, Illinois Securities 1983
(Age 65) Company (Insurance)
Kevin T. Reardon Chairman of the Board and CEO, First 1973
(Age 60) National Bancorp, Inc. and First National
Bank of Joliet
Howard E. Reeves President, HOW Enterprises, Inc. 1980
(Age 62) (Land Development)
<FN>
(1) All of the above named directors have been engaged in the principal
occupation specified for more than five years unless otherwise noted.
(2) Charles R. and Louis R. Peyla are brothers
</FN>
</TABLE>
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock at December 31, 1995, by each
person known by the Company to be the beneficial owner of more than 5% of the
outstanding Common Stock, by each director or nominee, by each executive officer
named in the Summary Compensation Table, and by all directors and executive
officers of the Company as a group.
Name of Individual or Amount and Nature of Percent
Number of Individuals in Group Beneficial Ownership (1) of Class
- ------------------------------ ------------------------ --------
Directors
- ---------
Sheldon C. Bell ............................. 10,752 0.88%
George H. Buck .............................. 7,898 0.65%
Albert G. D'Ottavio ......................... 8,013 0.66%
Watson A. Healy ............................. 5,247 0.43%
Paul A. Lambrecht ........................... 20,473 1.68%
Harvey J. Lewis ............................. 4,240 0.35%
Walter F. Nolan ............................. 19,045 1.56%
Charles R. Peyla ............................ 24,424 2.00%
Louis R. Peyla .............................. 21,257 1.74%
Kevin T. Reardon ............................ 27,515 2.26%
Howard E. Reeves ............................ 18,657 1.53%
All directors and executive officers
of the Company and the Bank as a
group (14 persons)........................... 175,056 14.40%
(1) All of the listed directors and executive officers exercise sole voting and
investment control over the shares indicated and own the shares directly,
except for the following shares: Sheldon C. Bell--jointly with spouse 1,560
shares, as Trustee of the Company's Profit Sharing Trust 8,586 shares;
George H. Buck--custodian 42 shares; Albert G. D'Ottavio--spouse 406
shares; Watson A. Healy--trust 4,724 shares; Paul A. Lambrecht--jointly
with spouse 6,858 shares and trust 13,092 shares; Harvey J. Lewis--trustee
3,075 shares, spouse trustee 955 shares; Walter F. Nolan--jointly with
spouse 7,665 shares; Charles R. Peyla--agent for the Illinois Securities
Company 5,511 shares, co-trustee 17,624 shares, spouse 42 shares; Louis R.
Peyla--co-trustee 17,624 shares; Kevin T. Reardon--trust 13,265 shares,
spouse trust 10,000 shares, trustee 4,050 shares; Howard E. Reeves--spouse
3,935 shares, trust 5,982 shares, trustee of the Company Profit Sharing
Trust 8,400 shares; Jack A. Podlesny--jointly with spouse 648 shares,
jointly with other relatives 168 shares, individually 386 shares; James T.
Limacher--trustee 99 shares, individually 3,522 shares; John J.
Keigher--jointly with spouse 2,712 shares.
<PAGE>
Transactions with Management
Directors and officers of the Company and its subsidiaries and their
associates, were customers of and had transactions with the Company and its
subsidiaries during 1995. Additional transactions may be expected to take place
in the future. All loans, commitments to loan, transactions in repurchase
agreements and certificates of deposit and depository relationships, in the
opinion of management, were made in the ordinary course of business, on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons and did
not involve more than the normal risk of collectability or present other
unfavorable features.
Charles R. And Louis R. Peyla each own more than a 10% interest in the
Illinois Securities Company. FNB, SWSB, BOL, and CBP have purchased insurance
policies through the Illinois Securities Company for a number of years and the
Company and its subsidiaries will continue to do so in 1996. In 1995 FNBJ, SWSB,
BOL and CBP paid approximately $456,600 in insurance premiums for various
policies to the Illinois Securities Company.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act requires that the Company's
directors, executive officers and persons who own more than 10% of the Company's
Common Stock file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Such persons are also required to furnish
the Company with copies of all Section 16(a) forms they file. Based solely on
the Company's review of the copies of such forms and, if appropriate,
representations made to the Company by any such reporting person concerning
whether a Form 5 was required to be filed for the 1995 fiscal year, the Company
is not aware that any of its directors and executive officers or 10%
stockholders failed to comply with the filing requirements of Section 16(a)
during the period commencing January 1, 1995 through December 31, 1995.
Board of Directors and Committees of the Company
The Board of Directors of the Company had twelve (12) meetings in 1995. No
director attended less than 80% of all such meetings. The directors of the
Company do not receive any compensation for attendance at meetings of the
directors of the Company. All directors of the Company also serve as directors
of FNB and only receive compensation as directors of FNB. Messrs. Reardon and
D'Ottavio also serve as directors of the Company's other subsidiaries, without
additional compensation.
The Company's Board of Directors did not have any committees in 1995. The
full Board of Directors considers matters pertaining to nominations to the
Board.
Compensation of Directors
Directors of the Company are not paid a fee for serving on the Company's
Board. Directors of FNB receive a fee of $1,500 per meeting of the FNB Board and
$100 for each committee meeting attended.
Report of the Compensation Committee on Executive Compensation
Officers of the Company are not compensated separately from their
respective positions at FNB. The Compensation Committee of FNB is responsible
for recommending salaries to the Board of Directors of FNB and establishing
compensation plans and policies for the executive officers and members of
management of FNB. The Board of Directors of FNB review and act upon the
recommendations of the Compensation Committee.
<PAGE>
The compensation Committee has in the past set annual compensation
recommendations by evaluating the responsibilities of the positions and the
individuals' experience, performance, career progress and development. The
Compensation Committee utilized Sheshunoff, Illinois Bank Administration and
Bank Administration Institute surveys in the analysis of compensation levels of
similarly employed individuals. The compensation of the executive officers as
established by the Compensation Committee and approved by the Board of Directors
of FNB are generally targeted in the middle of the compensation levels in these
surveys. In addition, the compensation of its chief executive officer and chief
operating officer are reviewed with respect to their very active roles in the
performance and management of the Company and its four subsidiary banks, FNB,
SWSB, BOL and CBP. With respect to Mr. Kevin T. Reardon, the Compensation
Committee of FNB recommended and the Board of Directors of FNB approved an
increase in his base cash compensation for 1995 from $222,000 to $230,000. With
respect to Mr. Albert G. D'Ottavio, the Compensation Committee of FNB
recommended and the Board of Directors of FNB approved an increase in his base
cash compensation for 1995 from $177,000 to $185,000.
In reaching a decision with respect to bonuses to be awarded, the
Committee gave significant consideration to the individual contributions of the
officer, the favorable operating results of the Company 1995 and the continued
success of FNB, SWSB, BOL and CBP with respect to earnings, return on equity,
return on assets, total return to Shareholders and financial condition. No
precise weighting was assigned to any of these factors and the Committee
believes that the performance of the Company in each area has compared favorably
with similar sized bank holding companies in this geographic area. The bonuses
reflect the view of the Compensation Committee that the awards were appropriate
in light of the excellent performance over the past three years of the Company
and its subsidiary banks. The Compensation Committee recognized achievements of
the chief executive officer and the chief operating officer in the areas of
customer service, technology use and innovation and management efficiency but
did not assign a weighting factor to any specific area. With respect to Mr.
Kevin T. Reardon, Chief Executive officer, the Compensation Committee of FNB
recommended and its Board of Directors approved an increase in his bonus for
1995 from $168,000 to $180,000. With respect to Mr. Albert G. D'Ottavio, Chief
Operating Officer, the Compensation Committee of FNB recommended and its Board
of Directors approved an increase in his bonus for 1995 from $105,000 to
$112,000.
Neither Mr. Reardon nor Mr. D'Ottavio participated in discussions of the
Compensation Committee regarding either of their respective compensation.
This report is submitted on behalf of the members of the Committee:
Charles R. Peyla
Paul A. Lambrecht
Kevin T. Reardon
Albert G. D'Ottavio
Howard E. Reeves
The incorporation by reference of this Proxy Statement into any document
filed with the Securities and Exchange Commission by the Company shall not be
deemed to include the preceding report unless such report is specifically stated
to be incorporated by reference into such document.
Compensation Committee Interlocks and Insider Participation
The Company does not have a Compensation Committee and no compensation is
paid by the Company to any officer. However, Kevin T. Reardon and Albert G.
D'Ottavio, Chief Executive Officer and Chief Operating Officer respectively, do
serve on the Compensation Committee of FNB. They do not participate in any
discussions and they abstain from any vote of the Compensation Committee
regarding either of their compensation as officers of FNB. The Company's Board
of Directors had no compensation committee interlocks with any other entity.
<PAGE>
Executive Compensation
The following table sets forth information concerning the compensation
paid or granted for the past three fiscal years to the Company's Chief Executive
Officer and to each of the other four most highly compensated executive officers
of the Company whose aggregate salary and bonus exceeded $100,000 for the 1995
fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Securities
Annual Restricted Underlying All Other
Name and Principal Compen- Stock Options/ LTIP Compen-
Position Year Salary($) Bonus($) sation($) Award(s) SARs(#) Payouts($) sation ($)
- ------------------ ---- --------- -------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kevin T. Reardon ....................... 1995 230,000 180,000 -0- -0- -0- -0- 4,593.86
Chairman of the Board, CEO ............ 1994 222,000 168,000 -0- -0- -0- -0- 4,616.88
and Director of First National ......... 1993 210,000 160,000 -0- -0- -0- -0- 3,936.63
Bank of Joliet
Albert G. D'Ottavio .................... 1995 185,000 112,000 -0- -0- -0- -0- 4,509.19
President, COO and Director ............ 1994 177,000 105,000 -0- -0- -0- -0- 4,620.00
of First National Bank of Joliet ....... 1993 168,000 100,000 -0- -0- -0- -0- 4,497.02
Jack A. Podlesny ....................... 1995 100,000 20,000 -0- -0- -0- -0- 3,565.00
Vice-President and Cashier ............. 1994 93,000 17,500 -0- -0- -0- -0- 3,285.00
of First National Bank of Joliet ....... 1993 87,000 17,500 -0- -0- -0- -0- 3,110.00
John J. Keigher ........................ 1995 100,000 20,000 -0- -0- -0- -0- 3,565.00
Vice-President of ...................... 1994 93,000 15,000 -0- -0- -0- -0- 3,210.00
First National Bank of Joliet .......... 1993 87,000 15,000 -0- -0- -0- -0- 3,035.00
James T. Limacher ...................... 1995 89,000 15,000 -0- -0- -0- -0- 3,120.00
Vice-President of ...................... 1994 89,000 15,000 -0- -0- -0- -0- 2,970.00
First National Bank of Joliet .......... 1993 89,000 10,000 -0- -0- -0- -0- 2,950.00
</TABLE>
Pension Plan
FNB maintains the First National Bank of Joliet Retirement Plan (the
"Plan") to provide retirement benefits to eligible employees of the Company's
subsidiary banks. Prior to November 1, 1991, only employees of FNB were covered
by the Plan. Commencing on November 1, 1991, the Plan coverage was extended to
employees of SWSB, on January 1, 1992 Plan coverage was extended to employees of
BOL, and on November 1, 1994 Plan coverage was extended to employees of CBP.
Each year employer contributions to the Plan are required in amounts which are
actuarially determined and are dependent upon participant age, service and
compensation, benefit payments, and investment gains or losses of the trust
fund. Upon attainable normal retirement age under the Plan (sixty-five (65) with
at least 5 years of participation in the Plan), an eligible employee will be
entitled to a monthly pension benefit. The benefit shall be equal to 1.25% of
final average pay plus .625% of final average pay over the covered compensation
amount (based on date of birth) times years of service (maximum 30 years), plus
.5% of final average pay times years of service in excess of 30 years (maximum 5
years).
Employees are eligible to participate in the Plan upon reaching age
twenty-one (21) and the completion of a year of service. A year of service is
(i) the first twelve (12) consecutive months; or (ii) the first Plan year
(November through October) thereafter, during which an employee completes at
least 1,000 hours of service of employment with one or more of the subsidiary
banks.
<PAGE>
Any participant in the Plan who terminates his employment for any reason
other than retirement, disability or death, will be entitled to a percentage of
his accrued benefits according to the following vesting schedule:
Years of Service Vested %
---------------- --------
1 0%
2 0%
3 20%
4 40%
5 60%
6 80%
7 100%
Pension Plan Table
The following Pension Plan Table shows the estimated annual benefits
payable upon retirement in 1995 for participants in Plan at the specified
compensation and years of service levels:
Years of Service
- --------------------------------------------------------------------------------
Compensation 15 20 25 30 35
- --------------------------------------------------------------------------------
20,000 3,750 5,000 6,250 7,500 8,000
40,000 8,820 11,760 14,700 17,640 18,640
60,000 14,445 19,260 24,075 28,890 30,390
80,000 20,070 26,760 33,450 40,140 42,140
100,000 25,695 34,260 42,825 51,390 53,890
120,000 31,320 41,760 52,200 62,640 65,640
140,000 36,945 49,260 61,575 73,890 77,390
150,000 39,758 53,010 66,263 79,515 83,265
The normal retirement benefit for a retired eligible employee is based
upon final average pay. Final average pay is determined by the average of the
highest sixty (60) consecutive months compensation within the last ten (10)
completed years of employment. Compensation greater than $150,000 exceeds the
current qualified plan compensation limits. Special transition rules apply to
benefits based on compensation above this level. Table benefits are computed
based upon a life annuity and ten-year certain payment form.
The years of credited service for named executive officers is as follows:
Years of Credited Service
Name of Individual Towards Plan
------------------ -------------------------
Kevin T. Reardon 34
Albert G. D'Ottavio 31
Jack A. Podlesny 22
John J. Keigher 34
James T. Limacher 24
<PAGE>
The incorporation by reference of this Proxy Statement into any document
filed with the Securities and Exchange Commission by the Company shall not be
deemed to include the following performance graph and related information unless
such graph and related information is specifically stated to be incorporated by
reference into such document.
Shareholder Return Performance Presentation
The graphical presentation omitted herein compares the cumulative total return
over the eight year period from January 1, 1988 through December 31, 1995 based
on a $100 investment made as of December 31, 1987. For purposes of the $100
invested in Company common stock, it is assumed the dividends received during
the eight year measurement period were reinvested at the then current trading
price for Company common stock. The cumulative total return also reflects the
change in share price between the beginning and end of the measurement period.
Changes in the Nasdaq Stock Market Composite and Nasdaq Bank indices over the
same eight year measurement period using an equal $100 investment made as of
December 31, 1987 are presented to provide general comparisons to both a broad
equity market index and a specific industry (banking) index.
The following data points were utilized in preparation of the omitted graph.
<TABLE>
Cumulative Total Return (measured as of 12/31)*
------------------------------------------------------------------------------------
1987 1988 1989 1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First National Bancorp. $100 $117 $148 $180 $202 $236 $279 $327 $409
Nasdaq Bank Index 100 111 100 65 90 136 176 178 257
Nasdag Composite 100 115 138 113 177 205 233 226 316
<FN>
* Total return assumes reinvestment of dividends
</FN>
</TABLE>
<PAGE>
Independent Public Accountants
The appointment of independent public accountants is approved annually by
the Board of Directors. The Board of Directors has authorized the engagement of
McGladrey & Pullen, LLP as its independent public accountants for the fiscal
year 1996. McGladrey & Pullen, LLP was retained in 1995 by the Company under a
one (1) year contract for the purpose of performing, in accordance with
generally accepted auditing standards, the audit of the Company's consolidated
financial statements and will continue to serve in 1996 under similar terms.
McGladrey & Pullen, LLP has served as the independent public accountants of the
Company since 1986. If the appointment of McGladrey & Pullen, LLP is not
ratified, the matter of the appointment of independent public accountants will
be considered by the Board of Directors.
The Examining and Audit Committee and the Trust Audit Committee of FNB met
with representatives of McGladrey & Pullen, LLP and the internal auditors
quarterly during 1995 to review the results of all audit work performed in that
period.
A representative of the firm of McGladrey & Pullen, LLP is expected to be
present at the Annual Shareholders Meeting, will have the opportunity to make a
statement if he or she desires to do so and will be available to respond to
appropriate questions.
Shareholder Proposals for the 1997 Annual Meeting of Shareholders
Any proposals of Shareholders intended to be presented at the 1997
Annual Meeting of Shareholders must be received by the Chairman of the Company
at its principal executive officers at 78 North Chicago Street, Joliet, Illinois
60432 on or before October 24, 1996, to be considered for inclusion in the
Company's Proxy Statement and proxy relating to such meeting.
Other Business
The Board of Directors know of no other matters to be brought before the
Annual Shareholders Meeting. If any other matters should properly come before
the meeting, the persons named in the proxy will have the discretion to vote the
proxy in accordance with their best judgment on those matters.
By Order of the Board of Directors
/s/ Kevin T. Reardon
--------------------
Kevin T. Reardon
Chairman of the Board
and Chief Executive Officer
Joliet, Illinois
February 22, 1996
A COPY OF THE 1995 FORM 10-K (THE ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION) IS AVAILABLE FREE OF CHARGE TO ANY SHAREHOLDER UPON WRITTEN REQUEST
TO: MR. KEVIN T. REARDON, CHAIRMAN OF THE BOARD, FIRST NATIONAL BANCORP, INC.,
78 NORTH CHICAGO STREET, JOLIET, ILLINOIS 60432.
<PAGE>
NOTICE OF THE ANNUAL SHAREHOLDERS MEETING OF
FIRST NATIONAL BANCORP, INC.
To the Shareholders of First National Bancorp, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Shareholders Meeting of First National
Bancorp, Inc., (the "Company"), will be held on Thursday, March 14, 1996 at 3:00
p.m. at the main office of the First National Bank of Joliet, 78 North Chicago
Street, Joliet, Illinois, for the purpose of considering and voting upon the
following matters:
1. The election of eleven (11) directors of the Company.
2. The transaction of such other business as may properly be brought
before the meeting or any adjournments or postponements thereof.
The Board of Directors knows of no other business to be brought before the
meeting. The close of business of the Company on Friday, February 16, 1996, has
been fixed by the Board of Directors as the record date for the determination of
Shareholders of the Company entitled to notice of and to vote at the Annual
Shareholders Meeting and any adjournments or postponements thereof.
Dated: February 22, 1996
By Order of the Board of Directors
/s/ Kevin T. Reardon
--------------------
Kevin T. Reardon
Chairman of the Board
and Chief Executive Officer
IMPORTANT
Whether you expect to attend the meeting or not, please mark, sign, date and
promptly return the enclosed proxy in the enclosed, self-addressed envelope.
<PAGE>
February 22, 1996
To Our Shareholders:
On behalf of the Board of Directors and management, I cordially invite you to
attend the Annual Shareholders Meeting of First National Bancorp, Inc. to be
held on Thursday, March 14, 1996, at 3:00 p.m. at the main office of First
National Bank of Joliet at 78 North Chicago Street, Joliet, Illinois.
The notice of meeting and proxy statement accompanying this letter describe the
specific business to be acted upon.
In addition to the specific matters to be acted upon, there will be a report on
the progress of First National Bancorp, Inc. and its subsidiaries, First
National Bank of Joliet, Southwest Suburban Bank, Bank of Lockport and Plano
Bancshares, Inc. and its subsidiary the Community Bank of Plano.
It is important that your shares be represented at the meeting. Whether or not
you plan to attend in person, you are requested to please mark, sign, date and
promptly return the enclosed BLUE proxy in the envelope provided.
Sincerely,
/s/ Kevin T. Reardon
- --------------------
Kevin T. Reardon
Chairman of the Board
and Chief Executive Officer
KTR:kgg
<PAGE>
FIRST NATIONAL BANCORP, INC.
78 North Chicago Street, Joliet, Illinois 60432
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
AND MAY BE REVOKED PRIOR TO ITS EXERCISE
PLEASE SIGN ON REVERSE SIDE AND RETURN IMMEDIATELY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Shareholder or Shareholders
of First National Bancorp, Inc., ("Company"), do hereby nominate, constitute and
appoint KEVIN T. REARDON and ALBERT G. D'OTTAVIO or any one of them (with
substitution, for me or us and in my or our name, place and stead) to vote all
the shares of common stock of the Company, standing in my or our name, on the
Company's books as of the close of its business on Friday, February 16, 1996 at
the Annual Meeting of Shareholders of the Company to be held at the office of
First National Bank of Joliet, 78 North Chicago Street, Joliet, Illinois, on
Thursday, March 14, 1996 at 3:00 p.m., or any adjournment thereof, with all the
powers the undersigned would possess if personally present. The shares are to be
voted in accordance with my or our directions as follows:
1. The election of the eleven (11) persons listed below and in the Company's
Proxy Statement dated February 22, 1996, as directors of the Company:
FOR ( ) WITHHOLD ( )
Sheldon C. Bell Paul A. Lambrecht Louis R. Peyla
George H. Buck Harvey J. Lewis Kevin T. Reardon
Albert G. D'Ottavio Walter F. Nolan Howard E. Reeves
Watson A. Healy Charles R. Peyla
(over)
YOU MAY INDICATE YOUR DESIRE TO WITHHOLD AUTHORITY TO VOTE FOR ANY PERSON BY
LINING THROUGH OR OTHERWISE STRIKING OUT THE NAME OF ANY PERSON.
The Board of Directors recommends a vote "FOR" the election of the above
listed persons as directors of the Company.
2. Such other business as may be properly brought before the meeting or any
adjournment thereof.
If any other business is properly brought before said meeting, this proxy
shall be voted in accordance with the recommendations of the Board of
Directors.
(Signature of Shareholder or Shareholders)
(Signature of Shareholder or Shareholders)
When signing as attorney, executor, administrator, trustee or guardian, please
give full title. If more than one trustee, all should sign. All joint owners
must sign.
DATED: , 1996
-----------------------------
(1) All of the above named directors have been engaged in the principal
occupation specified for more than five years unless otherwise noted.
(2) Charles R. and Louis R. Peyla are brothers.
EXHIBIT 21
Subsidiaries of the Registrant
Jurisdiction of Percent of Capital Stock
Name of Subsidiary Organization Owned at December 31, 1995
- ------------------ --------------- --------------------------
First National Bank
of Joliet United States 100%
Southwest Suburban
Bank United States 100%
Bank of Lockport United States 100%
Community Bank of Plano United States 100%
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FOR THE DECEMBER
31, 1995 10-K OF FIRST NATIONAL BANCORP, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 42,979
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 41,537
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 17,337
<INVESTMENTS-CARRYING> 185,374
<INVESTMENTS-MARKET> 187,269
<LOANS> 431,848
<ALLOWANCE> 3,931
<TOTAL-ASSETS> 749,990
<DEPOSITS> 605,137
<SHORT-TERM> 64,771
<LIABILITIES-OTHER> 5,956
<LONG-TERM> 7,701
0
0
<COMMON> 12,159
<OTHER-SE> 54,266
<TOTAL-LIABILITIES-AND-EQUITY> 749,990
<INTEREST-LOAN> 38,027
<INTEREST-INVEST> 11,735
<INTEREST-OTHER> 2,803
<INTEREST-TOTAL> 52,565
<INTEREST-DEPOSIT> 18,222
<INTEREST-EXPENSE> 23,114
<INTEREST-INCOME-NET> 29,451
<LOAN-LOSSES> 1,191
<SECURITIES-GAINS> 309
<EXPENSE-OTHER> 21,419
<INCOME-PRETAX> 11,965
<INCOME-PRE-EXTRAORDINARY> 8,211
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,211
<EPS-PRIMARY> 6.75
<EPS-DILUTED> 6.75
<YIELD-ACTUAL> 4.62
<LOANS-NON> 169
<LOANS-PAST> 981
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 3,487
<ALLOWANCE-OPEN> 3,082
<CHARGE-OFFS> 646
<RECOVERIES> 304
<ALLOWANCE-CLOSE> 3,931
<ALLOWANCE-DOMESTIC> 3,931
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
