<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 000-14553
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F & M Bancorporation, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Wisconsin 39-1365327
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Bank Avenue, Kaukauna, Wisconsin 54130
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(Address of principal executive offices) (Zip Code)
(920) 766-1717
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of November 10, 1998.
$1.00 par value common
15,558,611 shares
<PAGE> 2
F & M BANCORPORATION, INC.
AND SUBSIDIARIES
--------------------------
INDEX
-----
Page
Number
------
PART I. FINANCIAL INFORMATION:
- -------------------------------
Item l. Financial Statements 3
Condensed Consolidated Balance Sheets
as of September 30, 1998 and December 31,
1997 (Unaudited) 4
Condensed Consolidated Statements of Earnings
for the nine months ended September 30, 1998
and 1997 (Unaudited) 5
Condensed Consolidated Statements of Changes in
Stockholders' Equity for the nine months ended
September 30, 1998 and 1997 (Unaudited) 6
Condensed Consolidated Statements of Cash Flows
for the nine months ended September 30, 1998
and 1997 (Unaudited) 7
Notes to Condensed Consolidated Financial
Statements (Unaudited) 8
Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3. Quantitative and
Qualitative Disclosure about Market Risk 19
PART II. OTHER INFORMATION
- -----------------------------
Item 5. Other Matters 21
Item 6. Exhibits and Reports on Form 8-K 21
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<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
- ------- ---------------------
The condensed consolidated financial statements included herein have been
included by F & M Bancorporation, Inc. (the "Company") pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not
misleading. This information is unaudited but includes all adjustments
(consisting only of normal recurring accruals) which, in the opinion of Company
management, are necessary for a fair presentation of the results for such
periods.
The results of operations for interim periods are not necessarily indicative of
the results of operations for the entire year. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's 1997 Annual Report.
-3-
<PAGE> 4
F & M BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------ -----------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 59,738 $ 70,006
Investment securities (Note B)
Held to maturity 165,427 192,184
Available for sale - stated at fair value 324,053 293,450
Federal funds sold 84,139 39,222
Loans (Note C) 1,665,700 1,532,660
Less: Allowance for loan losses (23,125) (21,148)
---------- ----------
Net loans 1,642,575 1,511,512
Bank premises and equipment, net 48,320 43,818
Other real estate 3,392 2,283
Other assets 46,471 39,228
---------- ----------
TOTAL ASSETS $2,374,115 $2,191,703
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Non-interest bearing $241,907 $219,801
Interest bearing 1,700,297 1,600,166
---------- ----------
Total deposits 1,942,204 1,819,967
Short-term borrowing 75,509 74,770
Other borrowings 95,833 71,026
Accrued expenses and other liabilities 25,355 25,007
---------- ----------
Total liabilities 2,138,901 1,990,770
Shareholders' Equity
Common stock - $1 par value:
Authorized - 50,000,000 shares
Issued - 15,608,657 and
13,404,043 shares, respectively 15,609 13,404
Capital surplus 143,915 87,653
Retained earnings 72,647 98,472
Net unrealized gain on securities available for sale 4,774 1,796
Less-Common stock held in treasury at cost-
52,211 shares and 24,020, respectively (1,731) (392)
---------- ----------
Total shareholders' equity 235,214 200,933
---------- ----------
Total liabilities and shareholders' equity $2,374,115 $2,191,703
========== ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
-4-
<PAGE> 5
F & M BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans $37,582 $33,986 $111,588 $97,455
Interest on investment securities
Taxable 5,032 5,183 15,785 15,445
Exempt from federal tax 2,336 2,108 7,154 6,288
Other interest income 970 277 2,149 984
------- ------- ------- -------
Total interest income 45,920 41,554 136,676 120,172
------- ------- ------- -------
Interest expense
Interest on deposits 19,902 18,200 59,607 53,176
Interest on short-term borrowing 812 1,154 2,970 3,378
Interest on other borrowing 1,300 1,026 3,528 2,193
------- ------- ------- -------
Total interest expense 22,014 20,380 66,105 58,747
------- ------- ------- -------
Net interest income 23,906 21,174 70,571 61,425
Provision for loan losses 357 737 1,813 2,166
------- ------- ------- -------
Net interest income after
provision for loan losses 23,549 20,437 68,758 59,259
------- ------- -------- -------
Other income
Service charges on deposit accounts 1,628 1,504 4,681 4,357
Other operating income 2,599 1,524 7,336 4,707
Net securities gain (loss) 143 (3) 146 85
------- -------- -------- -------
4,370 3,025 12,163 9,149
------- -------- -------- -------
Other expenses
Salaries and employee benefits 8,583 7,503 25,400 21,884
Other operating expense 7,220 5,842 20,346 17,291
------- -------- -------- -------
15,803 13,345 45,746 39,175
------- -------- -------- -------
Income before income taxes 12,116 10,117 35,175 29,233
Income taxes 3,530 3,012 10,546 8,786
------- -------- -------- -------
NET INCOME $ 8,586 $ 7,105 $ 24,629 $ 20,447
======= ======== ======== =======
EARNINGS PER SHARE - BASIC $0.55 $0.48 $1.58 $1.39
EARNINGS PER SHARE - DILUTED $0.55 $0.48 $1.58 $1.39
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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<PAGE> 6
F&M BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, 1998 September 30, 1997
------------------ ------------------
Shares Equity Total Shares Equity Total
------ ------------ ------ ------------
<S> <C> <C> <C> <C>
Balance-beginning of
period 13,404,043 $200,933 11,798,168 $173,243
Acquisition of Financial Management
Services of Jefferson, Inc 641,854 12,599
Acquisition of Bank of South Wayne 143,792 4,451
Acquisition of East Troy 439,993 7,722
Acquisition of Green County 182,967 3,237
Acquisition of Clear Lake 161,040 1,952
Ten percent stock dividend 1,418,968 821,875
Comprehensive income:
Net Income 24,629 20,447
Other comprehensive
income - Change in net
unrealized gain (loss) on
securities available for
sale 2,914 1,482
-----------------------------------------------------
Total comprehensive
income 27,543 21,929
-----------------------------------------------------
Cash dividends (8,972) (5,370)
Purchase Treasury shares (1,985) (91)
Exercise of stock options 645 67
-----------------------------------------------------
Totals 15,608,657 $235,214 13,404,043 $202,689
-----------------------------------------------------
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
-6-
<PAGE> 7
F & M BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine months ended
September 30,
1998 1997
--------- ---------
<S> <C> <C>
Increase (decrease) in cash and cash equivalents:
Cash flows from operating activities:
Net income $ 24,629 $ 20,447
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for depreciation and net amortization 3,605 2,645
Provision for loan losses 1,813 2,166
Gain on sale of investment securities (146) (85)
Increase in other assets (2,052) (1,929)
Gain on sale of equipment (70) (238)
Increase in other liabilities (2,456) (991)
Provision for other real estate losses 2 3
Gain on sale of other real estate (401) (44)
------- -------
Net cash provided by operating activities 24,924 21,974
------- -------
Cash flows from investing activities:
Proceeds from sale of investment securities
available for sale 1,513 914
Proceeds from maturities of investment
securities available for sale 93,741 65,507
Purchase of investment securities
available for sale (63,258) (84,851)
Proceeds from maturities of investment
securities held to maturity 14,190 14,509
Purchase of investment securities
held to maturity (6,566) (18,049)
Net increase in loans (46,023) (134,669)
Capital expenditures (5,213) (6,380)
Proceeds from sale of equipment 553 322
Proceeds from sale of other real estate 420 1,300
Payment for purchase of stock of
subsidiary banks, net of cash received 6,302 44,929
-------- --------
Net cash used in investing activities (4,341) (116,468)
-------- --------
Cash flows from financing activities:
Net increase in deposits 3,273 50,532
Net increase in short-term borrowings 238 25,421
Dividends paid (9,159) (5,341)
Purchase of common stock (1,863) 0
Net increase in other borrowings 21,109 39,517
Net proceeds options exercised 468 58
-------- -------
Net cash provided by financing activities 14,066 110,187
-------- -------
Net increase in cash and cash equivalents 34,649 15,693
Cash and cash equivalents at beginning of period 109,228 87,616
------- -------
Cash and cash equivalents at end of period $143,877 $103,309
======= =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
-7-
<PAGE> 8
F & M BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements,
which include the accounts of F&M Bancorporation, Inc. and its subsidiaries,
have been prepared in accordance with generally accepted accounting principles
for interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. These statements have been restated to
reflect the acquisitions of Wisconsin Ban Corp, acquired on May 30, 1997,
Citizen's National Bancorporation, Inc., acquired August 14, 1997 and
BancSecurity Corporation, acquired on July 1, 1998. These transactions have been
accounted for using the pooling of interests method of accounting. The
acquisitions of East Troy Bancshares, acquired on January 10, 1997, Green County
Bank, acquired on February 27, 1997, Clear Lake Bancorp., acquired on August 12,
1997, Bank of South Wayne, acquired on February 9, 1998, and Financial
Management Services of Jefferson, Inc., acquired on May 28, 1998, accounted for
as pooling of interests, were not material to prior years' reported operating
results and, accordingly, previous years' results have not been restated. The
acquisitions of the Security office in Antigo, Wisconsin, acquired on September
29, 1997, and Sentry Bancorp, acquired on January 27, 1998, were accounted for
using the purchase method of accounting; accordingly, the financial data
includes results of operations only since the dates of acquisition. All per
share information has been adjusted to reflect the 10% stock dividends paid to
shareholders on June 9, 1997 and September 1, 1998. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for fair presentation have been included.
NOTE B - INVESTMENT SECURITIES
Carrying amounts and market values of investment securities held to
maturity at September 30, 1998 are as follows:
<TABLE>
<CAPTION>
Carrying Market
Amount Value
-------- ------
(in thousands)
<S> <C> <C>
Exempt obligations of states and political subdivisions $165,427 $175,543
======== ========
NOTE C - LOANS
At September 30, 1998, loans are as follows:
(in thousands)
Commercial and industrial $367,996
Agricultural 123,964
Real estate construction 50,010
Real estate mortgage 996,323
Installment and other consumer 127,407
----------
1,665,700
Less allowance for loan losses (23,125)
Net loans $1,642,575
==========
</TABLE>
NOTE D - EARNINGS PER SHARE OF COMMON STOCK
Earnings per share are based on weighted average number of common shares
outstanding restated to reflect the 10% stock dividends paid to stockholders on
June 9, 1997 and September 1, 1998. The following shows the computation of the
basic and diluted earnings per share for the nine months ended September 30,
1998 and 1997.
<TABLE>
<CAPTION>
Weighted
Average
Number of Earnings Per
Net Income Shares Share
- ------------------------------------------------------------------------------
(in Thousands)
1998
<S> <C> <C> <C>
Earnings per share-Basic $24,629 15,585,492 $1.58
Effect of Stock options 36,496
- ------------------------------------------------------------------------------
Earnings per share-Diluted $24,629 15,621,488 $1.58
==============================================================================
1997
Earnings per share-Basic $20,447 14,705,610 $1.39
Effect of stock options 52,828
- ------------------------------------------------------------------------------
Earnings per share-Diluted $20,447 14,758,438 $1.39
==============================================================================
</TABLE>
-8-
<PAGE> 9
NOTE E - NON-PERFORMING ASSETS
The following table sets forth the amount of non-performing loans, other
real estate owned and non-performing assets, and each of their percentages to
total loans at September 30, 1998:
<TABLE>
<S> <C> <C>
(in thousands)
Non-accrual loans $12,723 0.76%
Loans past due 90 days or more 1,587 0.10
Restructured loans 0 0.00
------ ----
Total non-performing loans 14,310 0.86
Other real estate owned 3,392 0.20
------ ----
Total non-performing assets $17,702 1.06%
======= ====
</TABLE>
NOTE F - SUMMARY OF LOAN LOSS EXPERIENCE
The following table summarizes loan balances at September 30, 1998; changes
in the allowance for loan losses arising from loans charged-off and recoveries
on loans previously charged-off, by loan category; and provisions for loan
losses which have been charged to expense:
<TABLE>
<S> <C>
(in thousands)
Average balance of loans year to date $1,644,453
==========
Allowance for loan losses at
beginning of period 21,148
Loans charged off
Commercial and Industrial 1,096
Real Estate - Mortgage 103
Installments and Other Consumer Loans 676
-----
Total charge offs 1,875
Recoveries on loans previously
charged off
Commercial and Industrial 152
Real Estate - Mortgage 10
Installment and Other Consumer Loans 176
-----
Total recoveries 338
Net loans charged off 1,537
Provisions for loan losses of banks
acquired at date of acquisition 1,701
Provisions for loan
losses 1,813
-----
Allowance for loan losses
at end of period $23,125
=======
Ratio of net charge offs
during period to average
loans outstanding (annualized) 0.12%
Allowance for loan
losses to total loans 1.39%
</TABLE>
-9-
<PAGE> 10
NOTE G - ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
The following table summarizes the allocation of allowances for loan
losses and gives a breakdown of the percentage of loans in each category at
September 30, 1998:
<TABLE>
<CAPTION>
Percent
of loans
Amount of in each
reserve category
for loan to total
(in thousands) losses loans
- ---------------------------------------------------------------------------
<S> <C> <C>
Commercial,
industrial, and
agricultural $10,639 29.5%
Real estate -
construction 374 3.0
Real estate - mortgage 8,199 59.8
Installment and other
consumer loans 3,913 7.7
------- -----
$23,125 100.0%
======= =====
</TABLE>
-10-
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
GENERAL
- -------
The following discussion and analysis provides information regarding the
Company's results of operations for the three and nine months ended September
30, 1998 and 1997 and financial condition at September 30, 1998. These
statements have been restated to reflect the acquisitions of Wisconsin Ban Corp
("WBC"), acquired on May 30, 1997, Citizens National Bancorporation, Inc.
("CNB"), acquired on August 14, 1997 and BancSecurity Corporation, acquired on
July 1, 1998. These transactions have been accounted for using the pooling of
interests method of accounting. The acquisition of East Troy Bancshares ("ETB"),
acquired on January 10, 1997, Green County Bank ("GCB"), acquired on February
27, 1997, Clear Lake Bancorp.("CLB"), Inc., acquired on August 12, 1997, Bank of
South Wayne, acquired on February 9, 1998, and Financial Management Services of
Jefferson, Inc., acquired on May 28, 1998, accounted for as pooling of
interests, were not material to prior years' reported operating results;
accordingly, previous years' results have not been restated. The acquisitions of
the Security office in Antigo, acquired on September 29, 1997 and Sentry
Bancorp, acquired on January 27, 1998, were accounted for using the purchase
method of accounting; accordingly, the Company's financial data includes results
of operations of these entities only since the dates of acquisition. All per
share information has been adjusted to reflect the 10% stock dividends paid to
shareholders on June 9, 1997 and September 1, 1998.
The Company has also announced one pending acquisition which, if
consummated, would affect the Company's future operations. In July 1998, the
Company announced that it had signed a definitive agreement to acquire Community
Bank of Elkhorn ("Bank"). The Bank, which has assets of approximately $100
million and one location in Elkhorn, Wisconsin, is a wholly owned subsidiary of
CBE, Inc. This acquisition will be accounted for using the pooling of interests
method of accounting. Although the pending acquisition is expected to be
consummated in the first half of 1999, it remains subject to conditions
precedent and there can be no assurance of completion.
Discussions in this Management's Discussion and elsewhere in the Annual
Report, that are not statements of historical fact (including statements in the
future tense or which include terms such as "believe", "expect", "anticipate" or
"may") are forward-looking statements that involve risks and uncertainties, and
Company's actual future results could materially differ from those discussed.
Factors that could cause or contribute to such differences include, but are not
limited to, the Company's future lending and collections experiences, the
effects of acquisitions, competition from other institutions, changes in the
banking industry and its regulation, needs for technological change, and other
factors, including those described in this Management's Discussion and Analysis
and elsewhere in this report.
RESULTS OF OPERATIONS
- ---------------------
For the three months ended September 30, 1998, net income increased $1.5
million, or 20.8%, to $8.6 million from $7.1 million in the third quarter of
1997. The annualized return on average assets was 1.45% for the third quarter of
1998 compared with 1.35% for the third quarter of 1997. Return on average
stockholders' equity on an annualized basis for the third quarter of 1998 and
1997 were 14.56% and 14.09%, respectively.
For the nine months ended September 30, 1998, net income increased $4.2
million, or 20.5%, to $24.6 million from $20.4 million in the first nine months
of 1997. The annualized return on average assets was 1.41% for the nine months
ended September 30, 1998 compared with 1.34% for the first nine months of 1997.
Return on average stockholders' equity on an annualized basis for the nine
months ended September 30, 1998 and 1997 were 14.48% and 14.11%, respectively.
-11-
<PAGE> 12
Net Interest Income
Net interest income for the three months ended September 30, 1998
increased $2.7 million, or 12.9%, to $23.9 million from $21.2 million in the
third quarter of 1997. Total interest income for the third quarter of 1998
increased $4.4 million, or 10.5%, to $45.9 million from $41.5 million in the
third quarter of 1997. Interest expense increased $1.6 million, or 8.0%, to
$22.0 million in the third quarter of 1998 from $20.4 million in the third
quarter of 1997.
Net interest income for the nine months ended September 30, 1998 increased
$9.1 million, or 14.9%, to $70.6 million from $61.4 million in the first nine
months of 1997. Total interest income for the nine months ended September 30,
1998 increased $16.5 million, or 13.7%, to $136.7 million from $120.2 million in
the first nine months of 1997, while interest expense increased $7.4 million, or
12.5%, to $66.1 million in the nine months ended September 30, 1998 from $58.7
million in 1997.
Increased net interest income for the three and nine month periods is
attributable to the increase in asset volume due to the Company's acquisitions,
internal growth, and relative stability of the Company's net interest margin
(4.51% vs 4.49% at September 30, 1998 and 1997, respectively). Total interest
income increased for the three and nine month periods in 1998 compared to the
same periods last year as a result of an increase in interest and fees on loans
due to acquisitions, increased loan activity, and generally stable interest
rates, while total interest expense increased for the three and nine month
periods in 1998 compared to 1997 as a result of increased levels of deposits
primarily due to acquisitions.
Provision for Loan Losses
The amount charged to provision for loan losses is based on Management's
evaluation of the loan portfolio. Management determines the adequacy of the
allowance for loan losses, both on a bank by bank basis and on an overall basis
for the Company, based on past loan loss experience, current economic
conditions, composition of the loan portfolio (including the historical
performance of, and the F&M subsidiary banks' evaluation of the prospects for,
each of the component loans, and the collateral value therefor) and the
anticipated potential for future loss. Management is also mindful of the
expectations of banking industry regulators for certain levels of allowances,
although no particular regulatory obligations have been imposed on the Company
in this regard.
The provision for loan losses for the three months ended September 30,
1998 decreased $380,000, to $357,000 from $737,000 in the third quarter of 1997.
The provision for loan losses for the nine months ended September 30, 1998 was
$1.8 million, a decrease from $2.2 million for the nine months ended June 30,
1997. Charge offs increased from $760,000 in the first nine months of 1997 to
$1.5 million in the first nine months of 1998. Despite the increases in charge
offs and the loan portfolio, the Company was able to increase the loan loss
reserve as a percentage of loans to 1.39% due to the allowances of banks
acquired in 1998, provisions during the period, and recovery activity. See
"Allowance for Loan Losses" for further discussion.
Non-Interest Income
The Company stresses the importance of growth in non-interest income as
one of its key long-term strategies. Non-interest income for the three months
ended September 30, 1998 increased $1.3 million, or 44.4%, to $4.4 million from
$3.0 million in the third quarter of 1997. Non-interest income for the nine
months ended September 30, 1998 increased $3.0 million, or 33.0%, to $12.2
million. The increase was due principally to increases in secondary market
commissions, service charges and other fee income. Purchase acquisitions and
acquisitions of banks for which prior period information was not restated also
contributed to the increase of non-interest income.
-12-
<PAGE> 13
Non-Interest Expense
Non-interest expense for the three months ended September 30, 1998
increased $2.5 million, or 18.5%, to $15.8 million from $13.3 million in the
third quarter of 1997. Non-interest expense for the nine months ended September
30, 1998 increased $6.6 million, or 16.8% to $45.8 million from $39.2 million in
the first nine months of 1997. The increase was primarily due to the
acquisitions in 1997 and 1998, resulting from both the cost of the acquisitions
and increases resulting from those with respect for which prior periods were not
restated (additional staffing, data processing fees, occupancy expense, etc.),
and the normal increases in salaries and employee benefits.
The overhead ratio, which is computed by subtracting non-interest income
from non-interest expense (excluding net securities transactions) and dividing
by average total assets, was 1.94% in the first nine months of 1998 compared
with 1.98% in the first nine months of 1997. The decrease in this ratio in the
first nine months of 1998 was the result of the factors set forth above.
Due to the sensitivity of the overhead ratio to changes in the balance
sheet, management also looks at trends in the efficiency ratio to assess the
changing relationship between operating expenses and income. The efficiency
ratio measures the amount of cost expended by the Company to generate a given
level of revenues in the normal course of business. It is computed by dividing
total operating expense by net interest income on a fully-taxable equivalent
basis and non-interest income from ongoing operations, excluding nonrecurring
items. The efficiency ratio was 53.0% in the first nine months of 1998 compared
with 53.1% in the first nine months of 1997. The slight decrease in this ratio
and the overhead ratio resulted from the various factors set forth above.
Provision for Income Taxes
The Company's provision for income taxes for the three months ended
September 30, 1998 increased $518,000, or 17.2%, to $3.5 million from $3.0
million in the third quarter of 1997. The increase in income tax provision was
principally due to increased taxable income.
The provision for income taxes for the nine months ended September 30,
1998 increased $1.8 million, or 20.0% to $10.5 million from $8.8 million in
1997. The increase in income tax provision was principally due to increased
taxable income.
Net Income
As a result of the preceding factors, net income for the third quarter of
1998 increased by $1.5 million, or 20.8% to $8.6 million from $7.1 million in
the same period for 1997. Net income for the first nine months of 1998 increased
by $4.2 million, or 20.5%, to $24.6 million from $20.4 million in the first nine
months of 1997.
Basic net income per common share was $0.55 for the third quarter of 1998
compared with $0.48 in the third quarter of 1997 an increase of 14.6%. The
Company maintains a stock option plans for officers and directors. Fully diluted
earnings per share are equal to the stated basic earnings per share numbers.
Basic net income per share was $1.58 for the first nine months of 1998,
compared with $1.39 in the same period for 1997, an increase of 13.7%. As of
September 30, 1998, fully diluted earnings per share are equal to the stated
basic earnings per share numbers.
-13-
<PAGE> 14
FINANCIAL CONDITION
- -------------------
Loan Portfolio
At September 30, 1998, total loans increased $133.0 million, or 8.7%, to
$1.666 billion from $1.533 billion at December 31, 1997. The loan mix in the
Company's portfolio at September 30, 1998 did not change in any material respect
compared with December 31, 1997. Approximately $89 million in loans, or 67% of
the first nine months of the year's growth, resulted from acquisitions in which
the Company did not restate its prior financial statements, and the remaining
balance resulted primarily from loan demand spread throughout the Company's
subsidiary banks.
Non-Performing Assets
Maintaining excellent credit quality continues to be a priority for the
Company. At September 30, 1998, non-performing assets amounted to $17.7 million,
compared to $19.3 million at December 31, 1997. Non-performing loans at
September 30, 1998 were $14.3 million, or 0.86% of total loans, compared to
$17.8 million at December 31, 1997. Other real estate owned ("OREO") at
September 30, 1998 was $3.4 million as compared to $2.3 million at December 31,
1997. The ratio of non-performing assets to total loans at September 30, 1998
was 1.06%. Management continues to work at reducing the level of non-performing
assets. Non-performing assets decreased the first nine months of 1998 because of
developments with respect to a number of separate loans, in different locations
and industries. Management does not believe that there is any common reason or
general trend which accounts for the decrease (or that it necessarily is an
indication of expected future developments). However, management continues to
take an aggressive collection effort on these assets, carefully monitors these
(and other) loans, and regularly reviews and evaluates the non-performing
credits to determine appropriate handling and action.
Summary of Loan Loss Experience
For the first nine months of 1998, total charge-offs were $1.9 million and
total recoveries were $338,000. The annualized ratio of net charge-offs to
average loans outstanding for the nine months ended September 30, 1998 was
0.12%. The charge-offs were not concentrated in any particular industry.
Allowance for Loan Losses
The allowance for loan losses as a percentage of total loans was 1.39% and
1.38% at September 30, 1998 and December 31, 1997, respectively. Management
continually reviews the loan portfolio, and other factors, to determine the
appropriate allowance. The allowance for loan losses 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. In determining the additions to the
allowance charged to operating expenses, management considered historical loss
experience, changes in the nature and volume of the loan portfolio, overall
portfolio quality, the reserve levels at acquired banks, and current economic
conditions that may affect the borrower's ability to pay. The ultimate recovery
of all loans is susceptible to future market and economic factors beyond the
Company's control as well as factors affecting particular borrowers. Also, the
process of setting loss reserves involves an estimation of future occurrences,
and is inherently uncertain. These factors may result in future losses or
recoveries differing significantly from the allowances and reserves provided in
the financial statements.
Investment Portfolio
At September 30, 1998, the investment portfolio increased $3.8 million, or
0.8%, to $489.5 million from $485.6 million at December 31, 1997. At September
30, 1998 and December 31, 1997, the investment portfolio represented 20.6% and
22.2% of total assets, respectively. Increases in the investment portfolio is
primarily attributed to acquisitions that have not been restated.
-14-
<PAGE> 15
Deposits
Total deposits at September 30, 1998 increased $122.2 million, or 6.7%, to
$1.942 billion from $1.820 billion at December 31, 1997. Interest-bearing
deposits at September 30, 1998 increased $100.1 million, or 6.3%, to $1.700
billion from $1.600 billion at December 31, 1997. The increase in deposits is
primarily attributable to the three acquisitions in the first nine months of
1998 representing approximately $115 million and a slight internal increase in
deposits of approximately $7 million. Historically, deposits have typically
increased at year end and then gradually returned to prior levels.
Borrowings
Short-term borrowings at September 30, 1998 were $75.5 million, as
compared to $74.8 million at December 31, 1997. Short-term borrowings consist
primarily of repurchase agreements and federal funds purchased. The Company has
used short-term borrowings to assist in funding its increasing loan demand.
Management has taken steps to monitor short-term borrowings and is comfortable
with the current level. Going forward, continued reliance on short-term funds
may be required if loan demand continues to outpace deposit growth, and,
therefore, short-term borrowings are expected to vary from time to time.
Several of the Company's subsidiary banks, as members of the Federal Home
Loan Bank (FHLB), had borrowings from the FHLB as of September 30, 1998. These
borrowings are secured by pledges of mortgage loans, and totaled $95.8 million
at September 30, 1998, compared to $71.0 million at December 31, 1997. These
FHLB borrowings had original maturities of three months to nine years at
September 30, 1998. The increase in other borrowings in 1997 and early 1998 was
due to attractiveness of longer term rates and the Company's implementation of a
leverage program in which FHLB borrowings are matched to securities purchased.
CAPITAL ADEQUACY
During the first nine months of 1998, stockholders' equity increased $34.3
million due to net income of $24.6 million in the first nine months of 1998 and
the acquisitions of Bank of South Wayne and Financial Management Services,
offset by dividends paid to stockholders. At September 30, 1998, the Company's
risk-based Tier 1 capital ratio was 12.04%. The total risk-based capital ratio
was 13.29% and the leverage ratio was 9.34%. All such ratios exceed regulatory
minimums of 4.0%, 8.0% and 3.0%, respectively. The average equity to average
assets ratio was 9.76% at September 30, 1998, compared with 9.52% at September
30, 1997.
F & M's common stock dividend payout ratio was 31.5% in the first nine
months of 1998 as compared to 24.2% in the comparable 1997 period. These numbers
do not include the dividends historically paid by acquisitions prior to their
acquisitions by the Company.
At September 30, 1998, each of the Company's subsidiary banks was in
compliance with all applicable capital requirements, and management believes
that the capitalization of those banks is adequate.
During the first nine months of the year the Company incurred normal
expense levels of capital expenditures for replacement and renovation of
facilities. The Company to date has not committed to any major commitments to
build or purchase in 1998, but also expects to finance any such expenditures
through earnings and existing capital resources. The Company financed the cash
purchase of Cannon Valley Bank through earnings and existing capital resources.
See "Year 2000" below for a discussion of projects relating to F&M's Year 2000
compliance efforts.
LIQUIDITY
As shown in the Company's Consolidated Statements of Cash Flows for the
nine months ended September 30, 1998, cash and cash equivalents increased by
$34.6 million during the period to $143.9 million at September 30, 1998. The
increase primarily reflected $24.9 million in net cash provided by operating
activities and $14.1 million in net cash provided by financing activities,
offset by $4.3 million in net cash used in investing activities. Net cash
provided by operating activities primarily consisted of the Company's net income
in the period increased by adjustments for non-cash credits. Net cash provided
by financing activities principally reflected an increase in other borrowings.
Net cash used in investing activities consisted primarily of a net increase in
loans plus necessary capital expenditures offset by net cash received in
acquisitions for which prior periods were not restated.
-15-
<PAGE> 16
The Company manages its liquidity to provide adequate funds to support the
borrowing requirements and deposit flow of its customers. Management views
liquidity as the ability to raise cash at a reasonable cost or with a minimum of
loss and as a measure of balance sheet flexibility to react to marketplace,
regulatory and competitive changes. The primary sources of the Company's
liquidity are investment securities available for sale and other marketable
assets maturing within one year. The Company attempts, when possible, to match
relative maturities of assets and liabilities, while maintaining the desired net
interest margin. The Company can also utilize borrowing capacities if
appropriate. Although the percentage of earning assets represented by loans is
increasing, management believes that its sources of liquidity are adequate.
YEAR 2000
Like other financial institutions (and businesses of all kinds), F&M must
assure that its computers and other systems are "Year 2000 compliant." "Year
2000 compliant" means being capable of operating, and accurately recognizing
dates and processing information, in and after the Year 2000, and recognizing
the leap year which will occur in 2000. To help assure that F&M's systems are
year 2000 compliant on a timely basis, F&M began a focused compliance program
primarily using F&M personnel. As the program has continued, F&M has identified
certain functions and roles in which the use of outside consultants or experts
would help F&M address year 2000 issues on a more expedited basis or in more
depth. Therefore, in addition to the designation of particular F&M employees to
coordinate F&M's year 2000 compliance efforts, F&M has retained outside
assistance.
Federal financial institution regulators, which are coordinating efforts
to assure year 2000 compliance, have identified five major phases to the Year
2000 compliance efforts. The phases are generally summarized as: Awareness,
Assessment, Renovation, Validation (testing) and Implementation. F&M is keying
its compliance efforts to those phases. Currently, F&M has completed its review
process, and has begun testing and implementing solutions where necessary.
Further information as to F&M's Year 2000 expected schedule for efforts by
phase, and its estimates of the percentage of completion of those phases, is set
forth in the following chart:
<TABLE>
<CAPTION>
Estimated
Completion Estimated Completion
Phase Schedule Percentage
----- ---------- --------------------
<S> <C> <C>
Awareness 09/30/97 100%
Assessment 09/30/97 100%
Renovation 12/31/98 75%
Validation 03/31/99 40%
Implementation 06/30/99 0%
</TABLE>
F&M has to date budgeted $1.5 million up from its original budget of
$500,000 for its compliance efforts, and expended $700,000 through September 30,
1998. To date, costs expended have been generally above the original budget;
differences have arisen primarily because of the use of outside consultants.
As part of its effort, F&M is monitoring year 2000 compliance efforts by
its suppliers, because many of F&M's affected systems (such as data processing)
are contracted from third parties. Therefore, a significant part of F&M being
year 2000 compliant requires such compliance by the third parties, and F&M is
subject to their achievement of appropriate Year 2000 compliance on a timely
basis. F&M regularly receives updates from its "mission-critical" suppliers
(such as data processors) as to their Year 2000 compliance efforts. F&M has
identified its data processing function as one particularly critical function.
Based upon information obtained from its two primary data processing suppliers,
F&M believes that these systems are Year 2000 compliant. In the event that one
or both of these processors would not achieve Year 2000 compliance on a timely
basis (which F&M believes unlikely), F&M has written business resumptions plans
to address possible problems in the future and expects to monitor developments
carefully and adjust and reform its plans accordingly. F&M's plans also include
contingency plans, developed by our outside processors, which provides
alternative operating procedures in the event unforeseen problems arise.
-16-
<PAGE> 17
In addition, F&M has completed its review of internal computers and data
processing equipment and systems. Based upon that review, F&M believes that all
problems have been identified and will be able to be corrected before the year
2000. As part of its remediation plans, F&M intends to transfer data processing
for its 12 bank subsidiaries which are not currently being processed by one of
the two primary data processing suppliers to one of its processors. F&M has
agreed with the processor to convert these banks over a period from 2/19/99 to
10/22/99. While data processing conversions have an inherent risk of
complications, F&M believes this to be the most sound means of addressing the
needs of these banks.
F&M's internal and third party reviews also include areas which are not
specifically "technology-related" but are also affected by year 2000 compliance
issues. For example, much of F&M's equipment (including building equipment and
systems such as security systems, HVAC, elevators, vaults and the like) includes
imbedded microchips which could be affected by Year 2000 related problems. As to
equipment owned by F&M, F&M has assessed and identified non-compliant equipment
and is in the process of working on solutions to correct them. As to services
supplied to F&M, F&M has contacted service providers and suppliers and obtained
assurance from them. Further testing with suppliers and providers will be done
in 1999. In particular, F&M has monitored compliance efforts by utilities and
others who provide services to large areas or customer groups including F&M. In
many of these cases, F&M is not sufficiently large a customer or user that it
can demand special treatment, assurances or information from the providers. In
those cases, F&M employees have monitored public statements by those providers
for their state of readiness, attempted to identify any clear issues, and
attempted to make appropriate arrangements to the extent any reasonable concerns
have been identified.
The credit-worthiness of F&M's customers could also be affected by the
year 2000 compliance efforts and failures. F&M loan officers and others are
reviewing year 2000 efforts and compliance levels of F&M's commercial credit
customers. The failure of these customers to be year 2000 compliant could
adversely affect those businesses, which would in turn pose credit risks which
could have a material effect on F&M. F&M has reviewed information obtained from
approximately 50% of its commercial credit customers. Specific guidelines were
used to identify which customers were selected for the review. Based upon that
review, F&M believes that further review and careful monitoring of customers
will be required in the future. While F&M also recognizes that loans to
individuals loans could be affected by year 2000 issues (for example, loss of
employment due to an employer's Year 2000 related failure), F&M does not believe
there is any practical means to gather such information, which would provide
little practical benefit even if it could be obtained. F&M is also attempting to
meet customer needs stemming from possible year 2000 related disruptions by
creating awareness now to help resolve their potential future problems.
Because of their concern for the integrity of the financial institutions
systems, federal regulators such as the Federal Reserve Board (which regulates
F&M and most of its subsidiary banks) and the FDIC (which insures deposits at
all F&M banks) have paid close attention to institutions' Year 2000 compliance
efforts. F&M and its subsidiaries have had such examinations, and have had to
address the personnel and other needs to facilitate the examinations. Because of
the regulators' stated desire that acquisition activity not interfere with Year
2000 readiness, F&M believes that it is possible that regulators may become more
reticent to approve additional acquisitions prior to 2000, which could
particularly affect F&M due to its historically active pattern of acquisitions.
Other than those possible effects, F&M does not believe that it has had, or is
likely to have, other material projects or initiatives delayed or affected
because of the need to focus on year 2000 compliance.
Like many businesses, F&M is making contingency plans for Year 2000
related disruptions. The precise plans utilized would, of course, depend upon
the exact problems which develop. Disruptions could range from discrete
application-specific problems which can be easily resolved to systematic
failures affecting the banking industry (or other industries) as a whole, or all
persons in large geographical areas. F&M cannot identify every disruption that
may affect it but it has identified critical problems that may arise. Loss of
electricity or disruption of computer systems if F&M is not able to successfully
complete its Year 2000 remediation plans are the most likely "worst case"
scenarios identified by F&M. F&M has developed and adopted business resumption
plans to operate off line or without certain services to minimize disruption of
services provided to our customers. Contingency plans of F&M would include,
depending upon the magnitude of the problems actually experienced, the
processing plans discussed above, additional vault
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<PAGE> 18
cash reserves, additional funding lines of credit for liquidity, preparing pre
2000 documents on paper to verify post 2000 validity of information, paper based
systems for the short-term until corrected. Occurrences such as area-wide
utility failures may cause businesses, including F&M, to temporarily cease
operations at affected locations until the problem is rectified.
F&M's Year 2000 compliance efforts are ongoing, and certain matters and
issues remain to be addressed, reviewed, tested and/or finally implemented.
However, based in part upon information being received from the third parties
providing services to F&M, F&M currently believes that it will be year 2000
compliant in a timely basis to avoid material operational disruptions and to
comply in material respects with the requirements of its regulators. To date,
F&M has not identified material extraordinary expenditures which will be
required to become Year 2000 compliant, although further expenditures remain to
be incurred and the use of outside personnel or other factors may increase the
costs of year 2000 compliance beyond F&M's current budget.
As indicated, certain year 2000 remediation efforts remain to be
completed. Some are under F&M's control, but many efforts are those of third
parties (such as suppliers or customers), which are not under F&M's control. The
failure to successfully complete year 2000 remediation efforts by F&M, or by
third parties, could materially adversely affect F&M. While F&M has attempted to
monitor efforts by others, those efforts may not ultimately be satisfactory, and
information given to F&M may not be accurate.
No one, including F&M, can conclusively predict exactly what Year 2000
related problems will eventually occur, or the degree of their impact. However,
it is all but certain that there will be at least some year 2000 related
problems that are not solved on a timely basis, and some of these will affect
F&M. The nature and the degree of impact on F&M would, of course, vary according
to the problem or problems which develop. For example, failure of mission
critical functions such as data processing or year 2000 failures affecting large
groups, such as utility failures or failures by others affecting the banking
industry as a whole, could cause F&M to limit (or even curtail) its operations
in affected areas until such time as the problems are cured. Similarly, failures
either particular to customers or affecting geographical areas or business
segments generally would affect customers, and the degree of disruption would
affect credit losses. F&M is unable to predict the magnitude of any such
disruptions, or the period of time during which they would affect F&M, although
it expects the effects would be most pronounced in the period of time shortly
after January 1, 2000.
Statements which are not historical fact (including completion schedules,
expectations of future developments, results or scenarios and cost estimates)
are forward-looking statements, and actual results may differ due to factors
including those discussed above.
OTHER
Accounting Changes
In June 1997, The FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." This statement establishes standards for
the way that public business enterprises report information about operating
segments in annual financial statements. This statement supersedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise," but retains the
requirement to report information about major customers. It also amends SFAS No.
94, "Consolidation of All Majority-Owned Subsidiaries," to remove the special
disclosure requirements for previously unconsolidated subsidiaries. The
statement is effective for fiscal years beginning after December 15, 1997. In
the initial year of application, comparative information for earlier years is to
be restated. The statement is not expected to have an effect on the financial
position or operating results of the Company, but may require additional
disclosures in the consolidated financial statements.
-18-
<PAGE> 19
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest rate risk is the most significant market risk affecting the
Company. Other types of market risk, such as foreign currency exchange rate risk
and commodity price risk do not arise in the normal course of the Company's
business activities. Managing interest rate risk is fundamental to banking.
Banking institutions manage the inherently different maturity and repricing
characteristics of the lending and deposit-taking lines of business to achieve a
desired interest rate sensitivity position and to limit their exposure to
interest rate risk, the Company manages its balance sheet to achieve maximum
shareholder value within the constraints of its interest rate risk discipline,
the maintenance of high credit quality, and sound leverage and liquidity
positions. Both the interest rate sensitivity and liquidity position of the
Company are reviewed regularly. The primary objective of interest rate
sensitivity management is to maintain net interest income growth while reducing
exposure to the risks inherent in interest rate movements.
The Company's Asset and Liability Management Committee ("ALCO") attempts
to structure the Company's balance sheet to provide for an approximately equal
amount of rate sensitive assets and rate sensitive liabilities. In addition to
facilitating liquidity needs, this strategy assists management in maintaining
relative stability in net interest income despite unexpected fluctuations in
interest rates. The Company believes its market risk exposure, based on the
potential of near-term losses in future earnings, fair values, and cash flows
from reasonably possible near-term changes in market rates or prices is
acceptable at this time.
The Company employs various strategies to reduce its exposure to interest
rate fluctuations. These strategies include: selling longer term maturity
mortgages to the secondary market, utilizing the Federal Home Loan Bank and
other sources to fund assets, and applying various asset positioning strategies
consistent with the overall needs of the Company at any given time. Management
has chosen to sell 15 year and 30 year mortgages to the secondary market as a
means of removing such a long original stated maturity asset off of the bank's
balance sheet and reduce the accompanying interest rate risk associated with the
assets. Instead, member banks are encouraged to retain adjustable rate mortgages
with 1-5 year rate locks on their balance sheets. Federal Home Loan Bank
membership by affiliate banks has enabled banks to diversify their funding
maturity options as well as employ match funding strategies for longer duration
assets. Depending on the interest rate risk position of the Company, the ALCO,
which meets quarterly, implements strategies to re-balance the Company to its
desired position. When the Company is overly liability sensitive,
floating/variable rate commercial loans by subsidiary banks are encouraged by
management. Furthermore, the purchase of floating/variable rate investment
securities are directly coordinated through the Company's Investment Department
when loan demand for this loan type is not present. To help offset longer
assumed maturity core deposits or to extend the duration of the Company's assets
at any given time, longer term securities are purchased directly through the
Company's Investment Department. In addition to these strategies, the Company
has chosen to offer a premium rate money market deposit product to customers
maintaining average balances exceeding $10,000. The rate on the product is tied
directly to the weekly average auction rate on the 3 month United States
Treasury Bill, which management believes positions the Company competitively in
the market.
The method of analysis presented is "earnings at risk" ("EAR"). While the
model employed by the Company is capable of both EAR and "value at risk"
("VAR"), it has chosen to place greater emphasis on EAR because the measurement
is believed to be of greatest concern to Company shareholders, as evidenced by
the marketplace's focus on quarterly and annual earnings. Furthermore, an
immediate rate shock of up or down 100-200 basis points is likely to have a more
visible immediate impact on the Company's earnings as compared to its market
value. Nevertheless, EAR has shortcomings inherent in its analysis. First,
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<PAGE> 20
the whole issue as to what maturity should be assigned to the Company's core
deposits is one that can vastly impact the results that the model produces. The
model employed assumes a longer duration assignment to these liabilities based
off of historical experience. Second, the model assumes a normal bell-shaped
curve distribution, although this assumption is elusive in volatile financial
markets. Frequently, the extreme may be the reality as evidenced by the
experience seen in the early 1980s. Third, the model assumes fairly normal
correlation patterns. In reality, however, correlation structures are unstable
over time. Fourth, most EAR approaches measure risk over less than two years.
However, this is likely not enough time to detect structural relationships
between variables. And fifth, the model assumes theoretical pricing based off of
a linear relationship between market rates and earnings. This relationship
actually has more of a curvature relationship based off of the inherent
convexity present in all fixed rate instruments having a defined maturity; in
other words, a fixed rate instrument will appreciate by a greater amount than it
will decline.
Based on the model utilized, the interest rate risk of the Company
expressed as a percentage change in net interest income over a one-year time
horizon due to changes in interest rates, at September 30, 1998, is as follows:
<TABLE>
<CAPTION>
Basis Point Change
----------------------------------
+200 +100 -100 -200
---- ---- ---- ----
<S> <C> <C> <C> <C>
Percentage change in net interest
income due to an immediate change
in interest over a one-year time
horizon (3.54%) (1.76%) 1.76% 3.54%
</TABLE>
Management continues to closely monitor the company's interest rate risk
position by utilizing both EAR and traditional RSA/RSL measurements. Because EAR
remains a relatively new measurement for the company, no target ranges have yet
been established. RSA/RSL target ranges are as follows: 0-6 months: .70 - 1.20
and 0-1 year: .80 - 1.20%
-20-
<PAGE> 21
PART II. OTHER INFORMATION
Item 5. Other Matters
-------------
The company recently adopted a revision to its bylaws providing for notice
by shareholders intending to propose a nominee for director, or a matter for
consideration at a shareholder meeting, in advance of a meeting. Notice,
together with specified information, must be given not less than 90 days, nor
more than 150 days, prior to the scheduled date of an annual meeting. (The 1999
annual meeting of shareholders is scheduled for April 27, 1999.) Similar notice
must be given within ten days of the announcement of a special meeting. Any
proposal not made in accordance with these provisions will not be considered at
a meeting.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits: See Exhibit Index, which follows the signature page
hereof.
(b) Reports on Form 8-K:
The Registrant filed one report on Form 8-K during
the second quarter of fiscal 1998. The Report on form 8-K,
dated July 1, 1998, related to the Company's acquisition of
BancSecurity Corporation on that date. That report included:
1. Audited financial statements of BancSecurity for the three
years ended December 31, 1997 and quarters ended March 31,
1998 and 1997;
2. Pro forma financial statements of the Company (at March
31, 1998, for three years ended December 31, 1997 and for
quarters ended March 31, 1998 and 1997) giving effect to
the acquisition.
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<PAGE> 22
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
F & M BANCORPORATION, INC.
-----------------------------------------
(Registrant)
Date November 12, 1998 /s/ John W. Johnson
------------------- -----------------------------------------
John W. Johnson
President and Chief Executive Officer
Date November 12, 1998 /s/ Daniel E. Voet
------------------- -----------------------------------------
Daniel E. Voet
Chief Financial Officer and Treasurer
<PAGE> 23
EXHIBIT INDEX
F & M BANCORPORATION, INC.
Form 10-Q for Quarter Ended September 30, 1998
Exhibit No. Description
----------- -----------
3(ii) Bylaws of F&M Bancorporation, Inc.
as amended through October 30, 1998
10.1 Employment Agreement dated as of
August 1, 1998 between the Company
and John W. Johnson
10.2 Employment Agreement dated as of
August 1, 1998 between the Company
and Daniel E. Voet
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 3(ii)
BY-LAWS
OF
F & M BANCORPORATION, INC.
(A WISCONSIN CORPORATION)
INTRODUCTION -
VARIABLE REFERENCES
0.01. Date of annual shareholders' meeting (See Section 2.01.):
7:00 p.m. 4th Tuesday April 1986
(Hour) (Week) (Day) (Month) (First Year)
0.02. Required notice of shareholders' meeting (See Section 2.04): not
less than ten (10) days.
0.03. Authorized number of directors (See Section 3.01.): Nine (9)
0.04. Required notice of directors' meetings (See Section 3.05.):
(a) not less than 72 hours if by mail, and
(b) not less than 24 hours if by telecopy, e-mail, overnight
courier, telegram or personal delivery.
0.05. Authorized number of Vice-Presidents (See Section 4.01.): Such
number and designation of vice presidents, (i.e., Executive Vice President,
Senior Vice President, Vice President, Vice President-__________, Assistant Vice
President), as may be designated from time to time by the Board of Directors.
[AMENDED 10/29/98]
<PAGE> 2
ARTICLE I. OFFICES
1.01. Principal and Business Offices. The corporation may have such
principal and other business offices, either within or without the State of
Wisconsin, as the Board of Directors may designate or as the business of the
corporation may require from time to time.
1.02. Registered Office. The registered office of the corporation
required by the Wisconsin Business Corporation Law to be maintained in the State
of Wisconsin may be, but need not be, identical with the principal office in the
State of Wisconsin, and the address of the registered office may be changed from
time to time by the Board of Directors or by the registered agent. The business
office of the registered agent of the corporation shall be identical to such
registered office.
ARTICLE II. SHAREHOLDERS
2.01. Annual Meeting. The annual meeting of the shareholders shall be
held at the date and hour in each year set forth in Section 0.01, or at such
other time and date within thirty days before or after said date as may be fixed
by or under the authority of the Board of Directors, for the purpose of electing
directors and for the transaction of such other business as may come before the
meeting. If the day fixed for the annual meeting shall be a legal holiday in the
State of Wisconsin, such meeting shall be held on the next succeeding business
day. If the election of directors shall not be held on the day designated
herein, or fixed as herein provided, for any annual meeting of the shareholders,
or at any adjournment thereof, the Board of Directors shall cause the election
to be held at a special meeting of the shareholders as soon thereafter as
conveniently may be.
2.02. Special Meeting. Special meetings of the shareholders, for any
purpose or purposes, unless otherwise prescribed by statute, may be called by
the President or the Board of Directors or by the person designated in the
written request of the holders of not less than one-tenth of all shares of the
corporation entitled to vote at the meeting.
2.03. Place of Meeting. The Board of Directors may designate any place,
either within or without the State of Wisconsin, as the place of meeting for any
annual meeting or for any special meeting called by the Board of Directors. A
waiver of notice signed by all shareholders entitled to vote at a meeting may
designate any place, either within or without the State of Wisconsin, as the
place for the holding of such meeting. If no designation is made, or if a
special
B-2-
<PAGE> 3
meeting be otherwise called, the place of meeting shall be the principal
business office of the corporation in the State of Wisconsin or such other
suitable place in the county of such principal office as may be designated by
the person calling such meeting, but any meeting may be adjourned to reconvene
at any place designated by vote of a majority of the shares represented thereat.
2.04. Notice of Meeting. Written notice stating the place, day and hour
of the meeting and, in case of a special meeting, the purpose or purposes for
which the meeting is called, shall be delivered not less than the number of days
set forth in Section 0.02 (unless a longer period is required by law or the
articles of incorporation) not more than fifty days before the date of the
meeting, either personally or by mail, by or at the direction of the President,
or the Secretary, or other officer or persons calling the meeting, to each
shareholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail,
addressed to the shareholder at his address as it appears on the stock record
books of the corporation, with postage thereon prepaid.
2.05. Closing of Transfer Books or Fixing of Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors may provide
that the stock transfer books shall be closed for a stated period but not to
exceed, in any case, seventy days. If the stock transfer books shall be closed
for the purpose of determining shareholders entitled to notice of or to vote at
a meeting of shareholders, such books shall be closed for at least ten days
immediately preceding such meeting. In lieu of closing the stock transfer books,
the Board of Directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than seventy
days and, in case of a meeting of shareholders, not less than ten days prior to
the date on which the particular action, requiring such determination of
shareholders, is to be taken. If the stock transfer books are not closed and no
record date is fixed for the determination of shareholders entitled to notice of
or to vote at a meeting of shareholders, or shareholders entitled to receive
payment of a dividend, the close of business on the date on which notice of the
meeting is mailed or on the date on which the resolution of the Board of
Directors declaring such dividend is adopted, as the case may be, shall be the
record date for such determination of shareholders. When a
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determination of shareholders entitled to vote at any meeting of shareholders
has been made as provided in this section, such determination shall be applied
to any adjournment thereof except here the determination has been made through
the closing of the stock transfer books and the stated period of closing has
expired.
2.06. Voting Records. The officer or agent having charge of the stock
transfer books for shares of the corporation shall, before each meeting of
shareholders, make a complete record of the shareholders entitled to vote at
such meeting, or any adjournment thereof, with the address of and the number of
shares held by each. Such record shall be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any shareholder
during the whole time of the meeting for the purposes of the meeting. The
original stock transfer books shall be prima facie evidence as to who are the
shareholders entitled to examine such record or transfer books or to vote at any
meeting of shareholders. Failure to comply with the requirements of this section
shall not affect the validity of any action taken at such meeting.
2.07. Quorum. Except as otherwise provided in the articles of
incorporation, a majority of the shares entitled to vote, represented in person
or by proxy, shall constitute a quorum at a meeting of shareholders. If a quorum
is present, the affirmative vote of the majority of the shares represented at
the meeting and entitled to vote on the subject matter shall be the act of the
shareholders unless the vote of a greater number or voting by classes is
required by law or the articles of incorporation. Though less than a quorum of
the outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified.
2.08. Conduct of Meeting. The Chairman of the Board, and in his absence,
the President, and in his absence, a Vice-President in the order provided under
Section 4.06, and in their absence, any person chosen by the shareholders
present shall call the meeting of the shareholder to order and shall act as
chairman of the meeting, and the Secretary of the corporation shall act as
secretary of all meetings of the shareholders, but, in the absence of the
Secretary, the presiding officer may appoint any other person to act as
secretary of the meeting.
2.09. Proxies. At all meetings of shareholders, a shareholder entitled
to vote may vote in person or by proxy appointed in writing by the shareholder
or by his duly authorized attorney
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in fact. Such proxy shall be filed with the Secretary of the corporation before
or at the time of the meeting. Unless otherwise provided in the proxy, a proxy
may be revoked at any time before it is voted, either by written notice filed
with the Secretary or the acting secretary of the meeting or by oral notice
given by the shareholder to the presiding officer during the meeting. The
presence of a shareholder who has filed his proxy shall not of itself constitute
a revocation. No proxy shall be valid after eleven months from the date of its
execution, unless otherwise provided in the proxy. The Board of Directors shall
have the power and authority to make rules establishing presumptions as to the
validity and sufficiency of proxies.
2.10. Voting of Shares. Each outstanding share shall be entitled to one
vote upon each matter submitted to a vote at a meeting of shareholders, except
to the extent that the voting rights of the shares of any class or classes are
enlarged, limited or denied by the articles of incorporation.
2.11. Voting of Shares by Certain Holders.
(a) Other Corporations. Shares standing in the name of another
corporation may be voted either in person or by proxy, by the president of such
corporation or any other officer appointed by such president. A proxy executed
by any principal officer of such other corporation or assistant thereto shall be
conclusive evidence of the signer's authority to act, in the absence of express
notice to this corporation, given in writing to the Secretary of this
corporation, of the designation of some other person by the board of directors
or the by-laws of such other corporation.
(b) Legal Representatives and Fiduciaries. Shares held by any
administrator, executor, guardian, conservator, trustee in bankruptcy, receiver,
or assignee for creditors may be voted by him, either in person or by proxy,
without a transfer of such shares into his name provided that there is filed
with the Secretary before or at the time of meeting proper evidence of his
incumbency and the number of shares held. Shares standing in the name of a
fiduciary may be voted by him, either in person or by proxy. A proxy executed by
a fiduciary, shall be conclusive evidence of the signer's authority to act, in
the absence of express notice to this corporation, given in writing to the
Secretary of this corporation, that such manner of voting is expressly
prohibited or otherwise directed by the document creating the fiduciary
relationship.
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(c) Pledgees. A shareholder whose shares are pledged shall be entitled
to vote such shares until the shares have been transferred into the name of the
pledgee, and thereafter the pledgee shall be entitled to vote the shares so
transferred.
(d) Treasury Stock and Subsidiaries. Neither treasury shares, nor shares
held by another corporation if a majority of the shares entitled to vote for the
election of directors of such other corporation is held by this corporation,
shall be voted at any meeting or counted in determining the total number of
outstanding shares entitled to vote, but shares of its own issue held by this
corporation in a fiduciary capacity, or held by such other corporation in a
fiduciary capacity, may be voted and shall be counted in determining the total
number of outstanding shares entitled to vote.
(e) Minors. Shares held by a minor may be voted by such minor in person
or by proxy and no such vote shall be subject to disaffirmance or avoidance,
unless prior to such vote the Secretary of the corporation has received written
notice or has actual knowledge that such shareholder is a minor.
(f) Incompetents and Spendthrifts. Shares held by an incompetent or
spendthrift may be voted by such incompetent or spendthrift in person or by
proxy and no such vote shall be subject to disaffirmance or avoidance, unless
prior to such vote the Secretary of the corporation has actual knowledge that
such shareholder has been adjudicated an incompetent or spendthrift or actual
knowledge of filing of judicial proceedings for appointment of a guardian.
(g) Joint Tenants. Shares registered in the names of two or more
individuals who are named in the registration as joint tenants may be voted in
person or by proxy signed by any one or more of such individuals if either (i)
no other such individual or his legal representative is present and claims the
right to participate in the voting of such shares or prior to the vote files
with the Secretary of the corporation a contrary written voting authorization or
direction or written denial of authority of the individual present or signing
the proxy proposed to be voted or (ii) all such other individuals are deceased
and the Secretary of the corporation has no actual knowledge that the survivor
has been adjudicated not to be the successor to the interests of those deceased.
2.12. Waiver of Notice by Shareholders. Whenever any notice whatever is
required to be given to any shareholder of the corporation under the articles of
incorporation or by-laws or any provision of law, a waiver thereof in writing,
signed at any time, whether before or after the
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time of meeting, by the shareholder entitled to such notice, shall be deemed
equivalent to the giving of such notice; provided that such waiver in respect to
any matter of which notice is required under any provision of the Wisconsin
Business Corporation Law, shall contain the same information as would have been
required to be included in such notice, except the time and place of meeting.
2.13. Unanimous Consent without Meeting. Any action required or
permitted by the articles of incorporation or by-laws or any provision of law to
be taken at a meeting of the shareholders, may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by all
the shareholders entitled to vote with respect to the subject matter thereof.
[THIS SECTION CREATED BY BOARD OF DIRECTORS ACTION ON 10/29/98:]
2.14. Prior Notice of Shareholder Nominations and/or Proposals.
(a) Prior Notice of Annual Meetings. Except with respect to
nominations or proposals adopted or recommended by the Board of Directors for
inclusion in the corporation's proxy statement for its annual meeting, a
shareholder entitled to vote at a meeting may nominate a person or persons for
election as directors or propose action(s) to be taken at a meeting only if
written notice of any shareholder nomination and/or proposal to be considered
for a vote at an annual meeting of shareholders is delivered personally or
mailed by certified mail return receipt requested at least ninety (90) days but
not more than one hundred fifty (150) days before the scheduled date of such
meeting to the Secretary of the corporation at the principal business office of
the corporation. If the corporation has not announced a scheduled meeting date,
such notice must be received at least ninety (90) days prior to the date of the
previous year's annual meeting.
(b) Nominations. With respect to shareholder nomination(s) for election
of directors, each such notice shall set forth:
(1) the name and address of the shareholder who intends to make the
nomination(s), of any beneficial owner of shares on whose behalf such nomination
is being made, and of the person(s) to be nominated;
(2) a representation that the shareholder is a holder of record of
stock of the corporation entitled to vote at such meeting (including the number
of shares the shareholder owns and the length of time the shares have been held)
and that the shareholder intends to appear in person or by proxy at the meeting
to nominate the person(s) specified in the notice;
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(3) a description of all arrangements and understandings between the
shareholder or any beneficial holder on whose behalf it holds such shares, and
their respective affiliates, of each nominee and any other person(s), naming
such person(s), pursuant to which the nominations(s) are to be made by the
shareholder;
(4) such other information regarding each nominee proposed by such
shareholder which would have been required to be included in the proxy statement
filed pursuant to the proxy rules of the Securities and Exchange Commission,
whether or not such rules are applicable, had such nominee been nominated by the
Board of Directors; and
(5) the consent of each nominee to serve as a director of the
corporation.
(c) Proposals. With respect to shareholder proposal(s) for action to be
taken at the annual meeting of shareholders, the notice shall clearly set forth;
(1) the name and address of the shareholder who intends to make the
proposal(s);
(2) a representation that the shareholder is a holder of record
of stock of the corporation entitled to vote at such meeting (including the
number of shares the shareholder owns and the length of time the shares have
been held) and that the shareholder intends to appear in person or by proxy at
the meeting to make the proposal(s) specified in the notice;
(3) the proposal(s) and a brief supporting statement of such
proposal(s); and
(4) such other information regarding the proposal(s) as would have
been required to be included in a proxy statement filed pursuant to the rules of
the Securities and Exchange Commission, whether or not such rules are
applicable.
(d) Prior Notice for Special Meetings. Except with respect to the
nomination(s) or proposal(s) adopted or recommended by the Board of Directors
for inclusion in the notice to shareholders for a special meeting of the
shareholders, a shareholder entitled to vote at a special meeting may nominate a
person or persons for election as director(s) and/or propose action(s) to be
taken at a special meeting only if written notice of any shareholder
nomination(s) and/or proposal(s) to be considered for a vote at the special
meeting is delivered personally or mailed by certified mail return receipt
requested to the Secretary of the corporation at the principal office of the
corporation so that it is received within ten (10) days after the announcement
of the special meeting and only if such nomination or proposal is within the
purposes described in the notice to shareholders of the special meeting. All of
the notice requirements regarding shareholder
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nominations and/or proposals applicable to annual meetings shall also apply to
nominations and/or proposals for special meetings.
(e) Role of Chair. The chair of the meeting may refuse to acknowledge
any nomination and/or proposal of any person made without compliance with the
foregoing procedures. This section shall not affect the corporation's rights or
responsibilities with respect to its proxies or proxy statement for any meeting.
(f) Adjournment. The adjournment of an annual meeting or a special
meeting of the shareholders shall not commence a new time period for the giving
of the notices by shareholders as set forth above.
ARTICLE III. BOARD OF DIRECTORS
3.01. General Powers and Number. The business and affairs of the
corporation shall be managed by its Board of Directors. The number of directors
of the corporation shall be as provided in Section 0.03.
3.02. Tenure and Qualifications. Each initial directors shall hold
office until the first annual shareholders' meeting to be held in 1981 and until
his successor shall have been elected or until his prior death, resignation or
removal. At the annual meeting of the shareholders to be held in 1981, the
directors shall be elected to staggered terms of up to three years to provide
for orderly changes in the membership of the board. The effect of the staggered
term shall be that the first class of directors shall consist of three
directors, the second class shall consist of three directors and the third class
shall consist of three directors. At the first annual meeting the first class
shall be elected for a one-year term, the second class shall be elected for a
two-year term and the third class shall be elected for a three-year term. Upon
the expiration of their initial terms as set forth above, each class of
directors shall be elected for three year terms. Each class of directors shall
hold office until their respective successors have been elected or until his
prior death, resignation or removal. A director may be removed from office by
affirmative vote of a majority of the outstanding shares entitled to vote for
the election of such director, taken at a meeting of shareholders called for
that purpose. A director may resign at any time by filing his written
resignation with the Secretary of the Corporation. Directors need not be
residents of the State of Wisconsin or shareholders of the corporation. Upon
reaching age 70, a director shall retire from the Board of Directors. Any
vacancy upon the Board of Directors created by this
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retirement, may be filled by the Board of Directors for the balance of the term
of the retiring director. This retirement policy shall be effective for
directors whose terms expire at or after the annual shareholders meeting to be
held in 1994. The directorship created by the amendment to the bylaws adopted
February 3, 1994, shall be part of the class of directors whose terms expire at
the annual shareholders meeting to be held in 1995.
3.03. Regular Meetings. A regular meeting of the Board of Directors
shall be held without other notice than this by-law immediately after the annual
meeting of shareholders, and each adjourned session thereof. The place of such
regular meeting shall be the same as the place of the meeting of shareholders
which precedes it, or such other suitable place as may be announced at such
meeting of shareholders. The Board of Directors may provide, by resolution, the
time and place, either within or without the State of Wisconsin, for the holding
of additional regular meetings without other notice than such resolution.
3.04. Special Meetings. Special meetings of the Board of Directors may
be called by or at the request of the President, Secretary or any two directors.
The President or Secretary calling any special meeting of the Board of Directors
may fix any place, either within or without the State of Wisconsin, as the place
for holding any special meeting of the Board of Directors called by them, and if
no other place is fixed the place of the meeting shall be the principal business
office of the corporation in the State of Wisconsin.
3.05 Notice; Waiver. Notice of each meeting of the Board of Directors
(unless otherwise provided in or pursuant to Section 3.03) shall be given by
written notice delivered personally or mailed or given by telegram to each
director at his business address or at such other address as such director shall
have designated in writing filed with the Secretary, in each case not less than
that number of hours prior thereto as set forth in Section 0.04. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail
so addressed, with postage thereon prepaid. If notice be given by telegram, such
notice shall be deemed to be delivered when the telegram is delivered to the
telegraph company. Whenever any notice whatever is required to be given to any
director of the corporation under the articles of incorporation or by-laws or
any provision of law, a waiver thereof in writing, signed at any time, whether
before or after the time of meeting, by the director entitled to such notice,
shall be deemed equivalent to the giving of such notice. The attendance of a
director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting and
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objects thereat to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the Board of Directors need be
specified in the notice or waiver of notice of such meeting.
3.06. Quorum. Except as otherwise provided by law or by the articles of
incorporation or these by-laws, a majority of the number of directors as
provided in Section 0.03 shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors, but a majority of the
directors present (though less than such quorum) may adjourn the meeting from
time to time without further notice.
3.07. Manner of Acting. The act of the majority of the directors present
at a meeting at which a quorum is present shall be the act of the Board of
Directors, unless the act of a greater number is required by law or by the
articles of incorporation or these by-laws.
3.08. Conduct of Meetings. The Chairman of the Board, and in his
absence, the President, and in his absence, a Vice-President in the order
provided under Section 4.06, and in their absence, any director chosen by the
directors present, shall call meetings of the Board of Directors to order and
shall act as chairman of the meeting. The Secretary of the corporation shall act
as secretary of all meetings of the Board of Directors but in the absence of the
Secretary the presiding officer may appoint any Assistant Secretary or any
director or other person present to act as secretary of the meeting.
3.09. Vacancies. Any vacancy occurring in the board of directors,
including a vacancy created by an increase in the number of directors, may be
filled for the balance of the unexpired term of the vacant directorship by the
affirmative vote of a majority of the directors then in office, though less than
a quorum of the board of directors; provided, that in case of vacancy created by
the removal of a director by vote of the shareholders, the shareholders shall
have the right to fill such vacancy at the same meeting or any adjournment
thereof.
3.10. Compensation. The Board of Directors, by affirmative vote of a
majority of the directors then in office, and irrespective of any personal
interest of any of its members, may establish reasonable compensation of all
directors for services to the corporation as directors, officers or otherwise,
or may delegate such authority to an appropriate committee. The Board of
Directors also shall have authority to provide for or delegate authority to an
appropriate committee to provide for reasonable pensions, disability or death
benefits, and other benefits or
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payments, to directors, officers and employes and to their estates, families,
dependents or beneficiaries on account of prior services rendered by such
directors, officers and employes to the corporation.
3.11. Presumption of Assent. A director of the corporation who is
present at a meeting of the Board of Directors or a committee thereof of which
he is a member at which action on any corporate matter is taken shall be
presumed to have assented to the action taken unless his dissent shall be
entered in the minutes of the meeting or unless he shall file his written
dissent to such action with the person acting as the secretary of the meeting
before the adjournment thereof or shall forward such dissent by registered mail
to the Secretary of the corporation immediately after the adjournment of the
meeting. Such right to dissent shall not apply to a director who voted in favor
of such action.
3.12. Committees. The Board of Directors by resolution adopted by the
affirmative vote of a majority of the number of directors as provided in Section
0.03 may designate one or more committees, each committee to consist of three or
more directors elected by the Board of Directors, which to the extent provided
in said resolution as initially adopted, and as thereafter supplemented or
amended by further resolution adopted by a like vote, shall have and may
exercise when the Board of Directors is not in session, the powers of the Board
of Directors in the management of the business and affairs of the corporation,
except action in respect to dividends to shareholders, election of the principal
officers or the filling of vacancies in the Board of Directors or committees
created pursuant to this section. The Board of Directors may elect one or more
of its members as alternate members of any such committee who may take the place
of any absent member or members at any meeting of such committee, upon request
by the President or upon request by the chairman of such meeting. Each such
committee shall fix its own rules governing the conduct of its activities and
shall make such reports to the Board of Directors of its activities as the Board
of Directors may request.
3.13. Unanimous Consent without Meeting. Any action required or
permitted by the articles of incorporation or by-laws or any provision of law to
be taken by the Board of Directors at a meeting or by resolution may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the directors then in office.
ARTICLE IV. OFFICERS
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4.01. Number. The principal officers of the corporation shall be a
Chairman of the Board, a President, the number of Vice-Presidents as provided in
Section 0.05, a Secretary, and a Treasurer, each of whom shall be elected by the
Board of Directors. Such other officers and assistant officers as may be deemed
necessary may be elected or appointed by the Board of Directors. Any two or more
officers may be held by the same person, except the offices of President and
Secretary and the offices of President and Vice-President.
4.02. Election and Term of Office. The officers of the corporation to be
elected by the Board of Directors shall be elected annually by the Board of
Directors at the first meeting of the Board of Directors held after each annual
meeting of the shareholders. If the election of officers shall not be held at
such meeting, such election shall be held as soon thereafter as conveniently may
be. Each officer shall hold office until his successor shall have been duly
elected or until his prior death, resignation or removal.
4.03. Removal. Any officer or agent may be removed by the Board of
Directors whenever in its judgment the best interests of the corporation will be
served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment shall not of
itself create contract rights.
4.04. Vacancies. A vacancy in any principal office because of death,
resignation, removal, disqualification or otherwise, shall be filled by the
Board of Directors for the unexpired portion of the term.
4.045.Chairman of the Board. The Chairman of the Board, when present,
shall preside over all meetings of the Board of Directors and shareholders. The
Chairman shall have such other duties as may be designated from time to time by
the Board of Directors.
4.05. President. The President shall be the principal executive officer
of the corporation and, subject to the control of the Board of Directors, shall
in general supervise and control all of the business and affairs of the
corporation. He shall, when present, and the Chairman of the Board is not,
preside at all meetings of the shareholders and of the Board of Directors. He
shall have authority, subject to such rules as may be prescribed by the Board of
Directors, to appoint such agents and employes of the corporation as he shall
deem necessary, to prescribe their powers, duties and compensation, and to
delegate authority to them. Such agents and employes shall hold office at the
discretion of the President. He shall have authority to sign, execute and
acknowledge, on behalf of the corporation, all deeds, mortgages, bonds, stock
certificates,
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contracts, leases, reports and all other documents or instruments necessary or
proper to be executed in the course of the corporation's regular business, or
which shall be authorized by resolution of the Board of Directors; and, except
as otherwise provided by law or the Board of Directors, he may authorize any
Vice-President or other officer or agent of the corporation to sign, execute and
acknowledge such documents or instruments in his place and stead. In general he
shall perform all duties incident to the office of the President and such other
duties as may be prescribed by the Board of Directors from time to time.
4.06. The Vice-Presidents. In the absence of the President or in the
event of his death, inability or refusal to act, or in the event for any reason
it shall be impracticable for the President to act personally, the
Vice-President (or in the event there be more than one Vice-President, the
Vice-Presidents in the order designated by the Board of Directors, or in the
absence of any designation, then in the order of their election) shall perform
the duties of the President, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the President. Any Vice-President
may sign, with the Secretary or Assistant Secretary, certificates for shares of
the corporation; and shall perform such other duties and have such authority as
from time to time may be delegated or assigned to him by the President or by the
Board of Directors. The execution of any instrument of the corporation by any
Vice-President shall be conclusive evidence, as to third parties, of his
authority to act in the stead of the President.
4.07. The Secretary. The Secretary shall: (a) keep the minutes of the
meeting of the shareholders and of the Board of Directors in one or more books
provided for the purpose; (b) see that all notices are duly given in accordance
with the provisions of these by-laws or as required by law; (c) be custodian of
the corporate records and of the seal of the corporation and see that the seal
of the corporation is affixed to all documents the execution of which on behalf
of the corporation under its seal is duly authorized; (d) keep or arrange for
the keeping of a register of the post office address of each shareholder which
shall be furnished to the Secretary by such shareholder; (e) sign with the
President, or a Vice-President, certificates for shares of the corporation, the
issuance of which shall have been authorized by resolution of the Board of
Directors; (f) have general charge of the stock transfer books of the
corporation; and (g) in general perform all duties incident to the office of
Secretary and have such other duties and exercise such authority as from time to
time may be delegated or assigned to him by the President or by the Board of
Directors.
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4.08. The Treasurer. The Treasurer shall: (a) have charge and custody of
and be responsible for all funds and securities of the corporation; (b) receive
and give receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with the provisions of Section 5.04; and (c) in general perform all of the
duties incident to the office of Treasurer and have such other duties and
exercise such other authority as from time to time may be delegated or assigned
to him by the President or by the Board of Directors. If required by the Board
of Directors, the Treasurer shall give a bond for the faithful discharge of his
duties in such sum and with such surety or sureties as the Board of Directors
shall determine.
4.09. Assistant Secretaries and Assistant Treasurers. There shall be
such number of Assistant Secretaries and Assistant Treasurers as the Board of
Directors may from time to time authorize. The Assistant Secretaries may sign
with the President or a Vice-President certificates for shares of the
corporation the issuance of which shall have been authorized by a resolution of
the Board of Directors. The Assistant Treasurers shall respectively, if required
by the Board of Directors, give bonds for the faithful discharge of their duties
in such sums and with such sureties as the Board of Directors shall determine.
The Assistant Secretaries and Assistant Treasurers, in general, shall perform
such duties and have such authority as shall from time to time be delegated or
assigned to them by the Secretary or the Treasurer, respectively, or by the
President or the Board of Directors.
4.10. Other Assistants and Acting Officers. The Board of Directors shall
have the power to appoint any person to act as assistant to any officer, or as
agent for the corporation in his stead, or to perform the duties of such officer
whenever for any reason it is impracticable for such officer to act personally,
and such assistant or acting officer or other agent so appointed by the Board of
Directors shall have the power to perform all the duties of the office to which
he is so appointed to be an assistant, or as to which he is so appointed to act,
except as such power may be otherwise defined or restricted by the Board of
Directors.
4.11. Salaries. The salaries of the principal officers shall be fixed
from time to time by the Board of Directors or by a duly authorized committee
thereof, and no officer shall be prevented from receiving such salary by reason
of the fact that he is also a director of the corporation.
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ARTICLE V. CONTRACTS, LOANS, CHECKS
AND DEPOSITS; SPECIAL CORPORATE ACTS
5.01. Contracts. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute or deliver any
instrument in the name of and on behalf of the corporation, and such
authorization may be general or confined to specific instances. In the absence
of other designation, all deeds, mortgages or instruments of assignment or
pledge made by the corporation shall be executed in the name of the corporation
by the President or one of the Vice-Presidents and by the Secretary, an
Assistant Secretary, the Treasurer or an Assistant Treasurer; the Secretary or
an Assistant Secretary, when necessary or required, shall affix the corporate
seal thereto; and when so executed no other party to such instrument or any
third party shall be required to make any inquiry into the authority of the
signing officer or officers.
5.02. Loans. No indebtedness for borrowed money shall be contracted on
behalf of the corporation and no evidences of such indebtedness shall be issued
in its name unless authorized by or under the authority of a resolution of the
Board of Directors. Such authorization may be general or confined to specific
instances.
5.03. Checks, Drafts, etc. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the corporation, shall be signed by such officer or officers, agent or agents of
the corporation and in such manner as shall from time to time be determined by
or under the authority of a resolution of the Board of Directors.
5.04. Deposits. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies or other depositories as may be selected by or under the
authority of a resolution of the Board of Directors.
5.05. Voting of Securities Owned by this Corporation. Subject always to
the specific directions of the Board of Directors, (a) any shares or other
securities issued by any other corporation and owned or controlled by this
corporation may be voted at any meeting of security holders of such other
corporation by the President of this corporation if he be present, or in his
absence by any Vice-President of this corporation who may be present, and (b)
whenever, in the judgment of the President, or in his absence, of any
Vice-President, it is desirable for this corporation to execute a proxy or
written consent in respect to any shares or other securities
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issued by any other corporation and owned by this corporation, such proxy or
consent shall be executed in the name of this corporation by the President or
one of the Vice-Presidents of this corporation, without necessity of any
authorization by the Board of Directors, affixation of corporate seal or
countersignature or attestation by another officer. Any person or persons
designated in the manner above stated as the proxy or proxies of this
corporation shall have full right, power and authority to vote the shares or
other securities issued by such other corporation and owned by this corporation
the same as such shares or other securities might be voted by this corporation.
ARTICLE VI. CERTIFICATES FOR SHARES AND
THEIR TRANSFER
6.01. Certificates for Shares. Certificates representing shares of the
corporation shall be in such form, consistent with law, as shall be determined
by the Board of Directors. Such certificates shall be signed by the President or
a Vice-President and by the Secretary or an Assistant Secretary. All
certificates for shares shall be consecutively numbered or otherwise identified.
The name and address of the person to whom the shares represented thereby are
issued, with the number of shares and date of issue, shall be entered on the
stock transfer books of the corporation. All certificates surrendered to the
corporation for transfer shall be canceled and no new certificate shall be
issued until the former certificate for a like number of shares shall have been
surrendered and canceled, except as provided in Section 6.06.
6.02. Facsimile Signatures and Seal. The seal of the corporation on any
certificates for shares may be a facsimile. The signature of the President or
Vice-President and the Secretary or Assistant Secretary upon a certificate may
be facsimiles if the certificate is manually signed on behalf of a transfer
agent, or a registrar, other than the corporation itself or an employee of the
corporation.
6.03. Signature by Former Officers. In case any officer, who has signed
or whose facsimile signature has been placed upon any certificate for shares,
shall have ceased to be such officer before such certificate is issued, it may
be issued by the corporation with the same effect as if he were such officer at
the date of its issue.
6.04. Transfer of Shares. Prior to due presentment of a certificate for
shares for registration of transfer the corporation may treat the registered
owner of such shares as the person
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exclusively entitled to vote, to receive notifications and otherwise to have and
exercise all the rights and power of an owner. Where a certificate for shares is
presented to the corporation with a request to register for transfer, the
corporation shall not be liable to the owner or any other person suffering loss
as a result of such registration of transfer if (a) there were on or with the
certificate the necessary endorsements, and (b) the corporation had no duty to
inquire into adverse claims or has discharged any such duty. The corporation may
require reasonable assurance that said endorsements are genuine and effective
and compliance with such other regulations as may be prescribed by or under the
authority of the Board of Directors.
6.05. Restrictions on Transfer. The face or reverse side of each
certificate representing shares shall bear a conspicuous notation of any
restriction imposed by the corporation upon the transfer of such shares.
6.06. Lost, Destroyed or Stolen Certificates. Where the owner claims
that his certificates for shares has been lost, destroyed or wrongfully taken, a
new certificate shall be issued in place thereof if the owner (a) so requests
before the corporation has notice that such shares have been acquired by a bona
fide purchaser, and (b) files with the corporation a sufficient indemnity bond,
and (c) satisfies such other reasonable requirements as may be prescribed by or
under the authority of the Board of Directors.
6.07. Consideration for Shares. The shares of the corporation may be
issued for such consideration as shall be fixed from time to time by the Board
of Directors, provided that any shares having a par value shall not be issued
for a consideration less than the par value thereof. The consideration to be
paid for shares may be paid in whole or in part, in money, in other property,
tangible or intangible, or in labor or services actually performed for the
corporation. When payment of the consideration for which shares are to be issued
shall have been received by the corporation, such shares shall be deemed to be
fully paid and nonassessable by the corporation. No certificate shall be issued
for any share until such share is fully paid.
6.08. Stock Regulations. The Board of Directors shall have the power and
authority to make all such further rules and regulations not inconsistent with
the statutes of the State of Wisconsin as it may deem expedient concerning the
issue, transfer and registration of certificates representing shares of the
corporation.
ARTICLE VII. SEAL
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7.01. The Board of Directors shall provide a corporate seal which shall
be circular in form and shall have inscribed thereon the name of the corporation
and the state of incorporation and the words, "Corporate Seal."
ARTICLE VIII. AMENDMENTS
8.01. By Shareholders. These by-laws may be altered, amended or repealed
and new by-laws may be adopted by the shareholders by affirmative vote of not
less than a majority of the shares present or represented at any annual or
special meeting of the shareholders at which a quorum is in attendance.
8.02. By Directors. These by-laws may also be altered, amended or
repealed and new by-laws may be adopted by the Board of Directors by affirmative
vote of a majority of the number of directors present at any meeting at which a
quorum is in attendance; but no by-law adopted by the shareholders shall be
amended or repealed by the Board of Directors if the by-laws so adopted so
provides.
8.03. Implied Amendments. Any action taken or authorized by the
shareholders or by the Board of Directors, which would be consistent with the
by-laws then in effect but is taken or authorized by affirmative vote of not
less than the number of shares or the number of directors required to amend the
by-laws so that the by-laws would be consistent with such action, shall be given
the same effect as though the by-laws had been temporarily amended or suspended
so far, but only so far, as is necessary to permit the specific action so taken
or authorized.
ARTICLE IX. FISCAL YEAR
9.01. The fiscal year of the corporation shall begin on the first day of
January and end on the 31st day of December in each year.
ARTICLE X. INDEMNIFICATION OF DIRECTORS AND OFFICERS
10.01. Mandatory Indemnification. The corporation shall, in accordance
with the provisions of Section 180.0851(1) of the Wisconsin Statutes, indemnify
a director or an officer of the corporation to the extent that he or she has
been successful on the merits or otherwise in the defense of a proceeding for
all reasonable expenses incurred in the proceeding if he or she was a
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party because he or she is a director or officer of the corporation. A director
or officer who seeks indemnification under this Article X shall make a written
request to the corporation.
10.02. Additional Indemnification. In cases not included under Section
10.01, the corporation shall, in accordance with Section 180.0851(2)(a) of the
Wisconsin Statutes, indemnify a director or officer of the corporation against
liability incurred by such director or officer in a proceeding to which such
director or officer was a party because he or she is a director or officer of
the corporation, unless liability was incurred because the director or officer
breached or failed to perform a duty he or she owes to the corporation and the
breach or failure to perform constitutes any of the following:
(1) A willful failure to deal fairly with the corporation in
connection with a matter in which the director, officer, employee or agent has a
material conflict of interest.
(2) A violation of criminal law, unless the director, officer,
employee or agent had reasonable cause to believe that his or her conduct was
lawful or no reasonable cause to believe that his or her conduct was unlawful.
(3) A transaction from which the director, officer, employee or
agent derived improper personal profit.
(4) Willful misconduct.
The determination of whether indemnification is required under Section
10.02 shall be made under Section 180.0855 of the Wisconsin Statutes. The
termination of a proceeding by judgment, order, settlement or conviction, or
upon a plea of no contest or an equivalent plea, does not, by itself, create a
presumption that indemnification of the director or officer is not required
under this Section 10.02.
10.03. Allowance of expenses as incurred. The corporation may, in
accordance with Section 180.0853 of the Wisconsin Statutes, make allowance for
reasonable expenses of a director or officer of the corporation as such expenses
are incurred provided the officer or director provides the corporation with all
of the following:
(1) A written affirmation of his or her good faith belief that he or
she has not breached or failed to perform his or her duties to the corporation.
(2) A written undertaking, executed personally or on his or her
behalf, to repay the allowance and, if required by the corporation, to pay
reasonable interest on the allowance to the extent that it is ultimately
determined under Section 180.0855 of the Wisconsin
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Statutes that indemnification under Section 180.0851(2) of the Wisconsin
Statutes is not required and that indemnification is not ordered by a court
under Section 180.0854(2)(b) of the Wisconsin Statutes. The undertaking shall be
an unlimited general obligation of the director or officer and may be accepted
without reference to his or her ability to repay the allowance. The undertaking
may be secured or unsecured.
10.04. Additional rights to indemnification and allowance of expenses.
The corporation may, in accordance with Section 180.0858 of the Wisconsin
Statutes, grant additional rights to indemnification and allowance of expenses.
10.05. Determination of right to indemnification. Unless otherwise
provided by the articles of incorporation or bylaws of the corporation or by
written agreement between the director or officer and the corporation, the
director or officer seeking indemnification under Section 180.0851(2) of the
Wisconsin Statutes shall select one of the following means for determining his
or her right to indemnification:
(1) By a majority vote or a quorum of the board of directors
consisting of directors who are not at the time parties to the same or related
proceedings. If a quorum of disinterested directors cannot be obtained, by
majority vote of a committee duly appointment by the board of directors and
consisting solely of 2 or more directors who are not at the time parties to the
same or related proceedings may participate in the designation of members of the
committee.
(2) By independent legal counsel selected by a quorum of the board
of directors or its committee in the manner prescribed in sub.(1) or, if unable
to obtain such a quorum or committee, by a majority vote of the full board of
directors, including directors who are parties to the same or related
proceedings.
(3) By a panel of three arbitrators consisting of one arbitrator
selected by those directors entitled under sub.(2) to select independent legal
counsel, one arbitrator selected by the director or officer seeking
indemnification and one arbitrator selected by the two arbitrators previously
selected.
The fees for the arbitrators shall be paid by the corporation. If the
officer or director is granted indemnification, the expenses and fees he or she
incurred in the arbitration shall be paid by the corporation.
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(4) By an affirmative vote of shares as provided in Section 180.0725
of the Wisconsin Statutes. Shares owned by or voted under the control of,
persons who are at the times parties to the same or related proceedings, whether
as plaintiffs or defendants or in any other capacity, may not be voted in making
the determination.
(5) By a court under Section 180.0854 of the Wisconsin Statutes.
(6) By any other method provided for in any additional right to
indemnification permitted under Section 180.0858 of the Wisconsin Statutes.
10.06. Insurance. As provided in Section 180.0857 of the Wisconsin
Statutes, the corporation may purchase and maintain insurance on behalf of an
individual who is a director or officer of the corporation against liability
asserted against or incurred by the individual in his or her capacity as a
director or officer of the corporation or arising from his or her status as a
director or officer of the corporation, regardless of whether the corporation is
required or authorized to indemnify or allow expenses to the individual against
the same liability under this Article X.
10.07. Extension of Indemnification. Indemnification shall extend to
those who, at the request of the corporation, act as or acted as a director,
officer, employee or agent of any other corporation, partnership, joint venture,
trust or other enterprise in which this corporation has an interest and all
references in this Article X shall be interpreted accordingly.
10.08. Definitions. Terms used in this Article X and which are
specifically defined in the Wisconsin Business Corporations Law as amended
(including, without limitation, the terms defined under Section 180.0850 of the
Wisconsin Statutes) shall have, for purpose of this Article X, the meaning
assigned to them under the Wisconsin Business Corporation Law as amended.
10.09. Intent. This Article X is intended to authorize indemnification
in accordance with the Wisconsin Business Corporations Law as amended and shall
be construed and applied to carry out such intent. An officer or director shall
not be entitled to indemnification if such indemnification rights are void or
unenforceable under applicable law.
10.10. Statutory Citations. Statutes cited are to the Wisconsin Statutes
of 1991-92 as amended from time to time.
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EXHIBIT 10.1
EMPLOYMENT AGREEMENT
AGREEMENT effective as of August 1, 1998, by and between F & M
Bancorporation, Inc., (hereafter referred to as "F & M"), and John W. Johnson,
of Kaukauna, Wisconsin (hereinafter referred to as "Employee"), witnesseth:
WHEREAS, Employee serves as F & M's President and CEO and F & M desires
to retain Employee in that position and to encourage his continued employment,
the parties desire by this Agreement to encourage Employee's continued
employment by F & M and to provide an incentive to Employee to remain in that
position.
NOW, THEREFORE, in consideration of the promises and covenants
contained herein, the parties mutually agree as follows:
1. Employment. F & M hereby employs Employee and Employee hereby
accepts such employment, upon the terms and conditions hereinafter set forth.
2. Duties and Responsibilities. During the term of this Agreement,
Employee shall act as President and Chief Executive Officer of F & M and shall
continue to engage in those activities and perform those services as may be
assigned to him by the Board of Directors, including, but not be limited to the
following: the day to day operations of F & M and its subsidiaries and for the
general supervision of the various departments and vice-presidents of F & M. In
addition, Employee hereby agrees to perform such other duties for F & M and
F & M's subsidiaries and divisions as may be assigned to him by the Board of
Directors of F & M. With regard to all duties and responsibilities provided for
in this paragraph, Employee shall devote his full time and best efforts to this
employment and to the success of F & M.
3. Scope of Authority. The Employee agrees to act in accordance with
the scope of authority previously delegated to him and as may be delegated to
him from time to time by F & M and pursuant to this Agreement in accordance
with the policies, procedures and authorizations given by F & M. The Employee
will observe and abide by any limitation placed upon such authority from time
to time by F & M. No latitude, indulgence, or forbearance granted by F & M to
the Employee shall be deemed a relinquishment of its right to direct his
activities or a waiver of their rights to require performance and fulfillment
of the duties and responsibilities of his employment and this Agreement.
4. Term. The term of Employee's employment under this Agreement shall
begin on February 1, 1998 and shall continue for a period of thirty-six (36)
full calendar months thereafter. Commencing on each subsequent February 1 (the
"Anniversary Date"), and continuing on each Anniversary Date thereafter, the
term of the Agreement shall renew for an additional year such that the
remaining term of the Agreement shall be three (3) years. This Agreement may be
terminated by either party by giving written notice that it will terminate
twenty-four (24) months from the next Anniversary Date. During the term of this
Agreement, the Board of Directors of F & M may
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conduct periodic comprehensive performance evaluations and review of the
Employee for purposes of determining compensation and other business related
purposes.
5. Compensation. During the first twelve months of the term of this
Agreement, F & M shall pay to the Employee a base annual salary of Two Hundred
Twenty-five Thousand and 00/100 Dollars ($225,000.00). This salary shall be
prorated for any partial years based on actual time worked in such partial
year. This salary may be adjusted at such intervals and in an amount to be
determined by F & M, consistent with adjustments received by other employees of
F & M and duties of Employee's position, based on, among other things, the
performance of the Employee, the performance of F & M and its subsidiaries,
competitive practices and economic conditions provided, however that such
salary shall not be reduced below its current level. The parties agree to
consider these factors and to endeavor in good faith to adjust Employee's
compensation to an appropriate level considering the salary for comparable
positions and Employee's performance. Employee will also be eligible to
participate in bonus, stock option or incentive plans of F & M for his
position, as may be established and modified from time to time by F & M.
6. Benefits. F & M will offer Employee the employee benefits, including
major medical and hospitalization insurance, disability benefits, life
insurance, vacation, severance pay and retirement benefits at levels
substantially equal to the levels currently provided by F & M to its executive
officers.
7. Expenses. The Employee may incur reasonable expenses for promoting
the F & M's business, including expenses for entertainment, travel, and similar
items. F & M will reimburse the Employee in accordance with F & M's policies
and procedures for all such expenses upon the Employee's periodic presentation
of an itemized account of such expenditures.
8. Extent of Services. The Employee shall devote his entire time,
attention and energies to the business of F & M and shall not during the term
of this Agreement be engaged in any other business activity, without the
written consent of F & M, whether or not such business activity is pursued for
gain, profit or other pecuniary advantage. This shall not be construed as
preventing the Employee from (a) serving charitable, civic or religious
organizations in a volunteer capacity which does not interfere with his ability
to perform his duties for F & M or create a conflict of interest with F & M,
(b) investing his assets in such a manner as will not require any services on
the part of the Employee in the operation of the affairs of the companies if
such investments are made, or (c) engaging in such other activities which are
expressly approved in advance by F & M's Board of Directors.
9. Years of Service. F & M agrees to count all prior years of service
of Employee to F & M Bank-Northeast and its predecessors as years of service
for eligibility purposes under the terms of such plan to the full extent
permitted by law and the terms of the plan. For purposes of vacation
eligibility, Employee shall be deemed to have eleven (11) years of service with
F & M as of January 1, 1998.
10. Termination. Employee's employment hereunder during the Term may be
terminated, subject to payment of the compensation and other benefits described
below, upon the occurrence of any of the events described below. In case of
such termination, the date on which Employee ceases to be employed under this
Agreement, after giving effect to any prior notice requirement set forth below,
is referred to as the "Termination Date."
(a) Death; Disability; Retirement. Employee's employment hereunder
shall terminate upon his death or Disability or retirement.
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As used in this Agreement, "Disability" shall mean Employee's
inability, as a result of physical or mental incapacity, to substantially
perform his duties with F & M for a period of one hundred eighty (180)
consecutive days. Any question as to the existence of Employee's Disability
upon which Employee and F & M cannot agree shall be determined by a qualified
independent physician mutually agreeable to Employee and F & M or, if the
parties are unable to agree upon a physician within ten (10) days after notice
from either to the other suggesting a physician, by a physician designated by
the then president of the medical society for Outagamie County, Wisconsin, upon
the request of either party. The costs of any such medical examination shall be
shared equally by F & M and Employee.
(b) Termination of Employee for Cause. F & M may terminate Employee's
employment under this Agreement for Cause (as hereinafter defined) at any time
and thereafter F & M's obligations pursuant to paragraphs 5 and 6 of this
Agreement shall cease and terminate. Notwithstanding anything to the contrary
contained in this Agreement, if Employee's employment is terminated for Cause,
Employee shall receive all compensation and other benefits to which he was
entitled under paragraphs 5 and 6 only through the Termination Date, and, shall
receive all accrued benefits available to him under F & M's benefit plans as in
effect on and effective through the Termination Date in accordance with their
terms.
As used herein, "Cause" shall mean (i) any willful act by Employee
which is fraudulent or illegal and which is materially injurious to F & M or
any of F & M's subsidiaries, monetarily or otherwise, (ii) the continued
failure by Employee to substantially perform his duties with F & M as may be
assigned to him from time to time or his obligations under this Agreement
(other than any such failure resulting from Employee's incapacity due to
Disability), or to follow the policies and procedures of F & M, (iii) the
dishonesty, fraud, or other conduct which constitutes a crime (except for
traffic or other violations which result in civil forfeitures) under laws,
statutes, regulations, rulings, administrative code, policy or procedure of the
State of Wisconsin or any local subdivision thereof or the United States of
America or of any administrative agency of the State of Wisconsin or any
subdivision thereof or of the United States of America, or (iv) "Misconduct" as
set forth in Wis. Stats. Section 108.04(5), the Wisconsin Unemployment
Compensation Law and the decisions thereunder.
Termination may be without notice for violations of subparts 10(b)(i),
(iii) or (iv). In the event of a proposed termination for the reasons set forth
in the subpart (ii) of subparagraph 10(b), the Employee shall be entitled to
written notice and thirty (30) days opportunity to explain and cure such breach
or failure to the satisfaction of F & M. If Employee has explained and/or cured
such breach or failure within such thirty (30) day period, the notice of
termination shall be rescinded and Employee shall remain employed hereunder,
subject to such further terms or conditions as the parties may establish by
mutual agreement.
(c) Voluntary Termination by Employee. Employee may voluntarily
terminate his employment under this Agreement at any time by giving at least
thirty (30) days and no more than ninety (90) days prior written notice to
F & M. In such event, Employee shall receive all compensation and other benefits
to which he was entitled under paragraphs 5 and 6 in the amount and at the times
provided in paragraph 5 through the date of voluntary termination set forth in
the Employee's notice and, in addition, shall receive all other benefits
available to him under F & M's benefit plans as in effect on the Termination
Date in accordance with their terms through such voluntary termination date.
F & M may elect not to use the services of Employee after notice of voluntary
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termination is given, but such election by F & M shall not relieve F & M of the
obligation to pay Employee in accordance with paragraphs 5 and 6 during such
notice period.
(d) Termination by F & M Without Cause. F & M may terminate this
Agreement without cause, provided F & M agrees to pay the Employee the
compensation and benefits (at the intervals paid to all other employees) as set
forth below. In effect, F & M may elect not to use the services of Employee
during the term of this Agreement, provided F & M pays the compensation and
provides the benefits hereunder. Employee acknowledges F & M's right to
terminate without cause and agrees that if such termination occurs that
Employee's sole and exclusive claim against F & M or its subsidiaries or their
respective officers, directors, employees or agents shall be for the payment of
the unpaid compensation and benefits under this Agreement as follows:
(i) In lieu of any further salary payments, severance pay
[including but not limited to any benefits under the Restated F & M
Bancorporation, Inc. Executive Severance Plan (the "Severance Plan")], or other
cash compensation to Employee, Employee will be paid his then current base
annual salary for a period of twenty-four (24) months from the date of F & M's
notice of termination in equal installments on F & M's regular payroll dates.
Such installment payments shall be reduced by fifty percent (50%) in the event
the Employee obtains comparable employment following the Termination Date of his
employment with F & M or its successor.
(ii) In addition, Employee shall continue to participate for
twenty-four (24) months following the Termination Date in F & M's group health
insurance plan provided the Employee (1) makes timely payment of the Employee's
portion of the premium to F & M or its successor for its employees, and (2) is
not eligible to participate in another employer-sponsored group health
insurance program. No cash payment will be made in lieu of this participation
if Employee elects not to receive this benefit. Employee shall not be eligible
for other benefits that Employee was receiving or was entitled to receive
immediately prior to the Termination Date, including, but not limited to paid
holiday or vacation benefits, other group insurance benefits, retirement
benefits or any other fringe benefits. The actual Termination Date shall be
used for purposes of determining the exercise date and/or expiration of any
outstanding stock options, not withstanding any continued payments received by
Employee after the Termination Date.
(iii) The payments under subparts (i) and (ii) shall be in lieu
of any other payments, claims or damages or other obligations by F & M to
Employee. F & M shall not be obligated for any bonus, incentive plan, stock
option or other payment or benefit for the year in which notice is given or
any subsequent year. As a condition of receiving the consideration described
in subparts (i) and (ii) above, Employee shall be required to sign F & M's
standard release as then utilized in connection with the Severance Plan.
(e) Termination Due to Change in Control. This subparagraph shall
apply to a Change in Control involving F & M or any successor to F & M.
(i) If Employee's employment is terminated within three (3)
months prior to the first public announcement of a transaction which would be
deemed a Change in Control transaction or within twelve (12) months following
the closing of a Change in Control transaction (which period shall be referred
to as the "Change in Control Window"), Employee shall be entitled to the
compensation and benefits described in this subparagraph (e), provided, however,
that during the Change in Control Window if Employee's employment is terminated
pursuant to subparagraphs 10(a), (b) or (c), Employee shall only be entitled to
the compensation and
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benefits set forth in subparagraphs 10(a), (b), or (c) as applicable, and
further provided that during the Change in Control Window, F & M may not
terminate the Employee under subparagraph 10(d).
(ii) Employee will be deemed to be entitled to the compensation
and benefits under this subparagraph 10(e) if any of the following occur:
(1) The termination of Employee by F & M or its successor of
Employee's employment during the Change in Control Window, except for a
termination pursuant to subparagraphs 10(a), (b), or (c).
(2) If Employee resigns within six (6) months after a
material change in Employee's function, duties, responsibilities or compensation
which occurs during the Change in Control Window and which causes Employee's
position to become one of lesser responsibility, importance or scope.
(3) If within three (3) months prior to a Change in Control,
Employee is removed from or is not reelected or reappointed to the offices of
President and CEO and Employee elects to resign within ten (10) days of such
change.
(4) If Employee's position is eliminated during the Change
in Control Window, and F & M or its successor does not, within thirty (30) days
after the elimination occurs, offer Employee a position with substantially
equivalent or greater functions, duties, responsibilities or compensation than
those provided to Employee under this Agreement.
(5) Regardless of the nature of the position, if Employee is
required to work at a location which is outside the State of Wisconsin and
Employee elects not to accept such position and resigns within ten (10) days
after the position is offered.
(6) The termination of this Agreement during the Change in
Control Window, except for a termination pursuant to subparagraphs 10(a), (b) or
(c), if Employee resigns within ten (10) days after he receives notice of the
termination of this Agreement.
(iii) If Employee is entitled to compensation and benefits under this
subparagraph (e), such compensation and benefits shall be payable as follows:
(1) Under subsections (e)(ii)(1), as of the date of
termination.
(2) Under subsections (e)(ii)(2), (3), (5) or (6), as of the
effective date of the Employee's resignation.
(3) Under subsection (e)(ii)(4), as of the expiration of
such thirty (30) day period.
(iv) A "Change in Control" of F & M shall occur as of the Closing
Date of one transaction or a series of transactions which result in the
acquisition of F & M: (1) by any person or group of persons acting in concert
who acquire beneficial ownership, directly or indirectly, of securities of F & M
representing 25% or more of the combined voting power of its then outstanding
securities; (2) through a combination (by merger, share exchange,
consolidation, or otherwise) with another entity and as a result of such
combination less than 50% of the outstanding voting securities of the surviving
or resulting corporation are owned in the aggregate by the former shareholders
of F & M; (3) through the sale, lease, or other transfer of all or
substantially all of its properties or assets not in the ordinary course of
business to another person or entity.
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(v) Under this subparagraph 10(e), Employee shall, at his option,
receive either a lump sum severance payment, or a series of installment
severance payments for a period of thirty-six (36) months commencing as of the
date set forth in subpart 10(e)(iii). The total payment in either case shall be
cash in an amount equal to 2.99 times the Employee's current annual base salary,
discounted to its present value in the case of a lump sum payment at a discount
rate equal to the imputed interest rate under the Internal Revenue Code for a
three (3) year term. If Employee elects to receive installment payments,
Employee shall receive the same amount as would be provided by a lump sum
payment, but payment shall be made in equal installments for a period of three
(3) years, commencing on the Termination Date, on the same dates as F & M's
regular payroll payments are made.
In addition, Employee shall continue to participate for twenty-four (24)
months following the Termination Date in F & M's group health insurance plan
provided the Employee (1) makes timely payment of the Employee's portion of the
premium to F & M or its successor for its employees, and (2) is not eligible to
participate in another employer-sponsored group health insurance program. No
cash payment will be made in lieu of this participation if Employee elects not
to receive this benefit. Employee shall not be eligible for other benefits that
Employee was receiving or was entitled to receive immediately prior to the
Termination Date, including, but not limited to paid holiday or vacation
benefits, other group insurance benefits, retirement benefits or any other
fringe benefits. The actual Termination Date shall be used for purposes of
determining the exercise deadline and/or expiration of any outstanding stock
options, notwithstanding any continued payments received by Employee after the
Termination Date.
The payments under subparagraph 10(e) shall be in lieu of any other
payments, claims or damages or other obligations by F & M to Employee. F & M
shall not be obligated for any bonus, incentive plan, stock option or other
payment or benefit for the year in which notice is given or any subsequent
year. As a condition of receiving the consideration described in subparagraph
10(e) above, Employee shall be required to sign F & M's standard release as
then utilized in connection with the Severance Plan.
Employee's death after a termination under subpart 10(e)(ii) shall not
affect F & M's or its successor's payment obligations under this subparagraph
10(e) and the compensation and benefits provided hereunder shall be in addition
to any and all other rights of Employee under any retirement plans or deferred
compensation agreements.
Regardless of any provision in this Agreement, neither F & M nor its
successor shall be required to compensate Employee according to the terms of
this Agreement if the compensation is prohibited or limited by a federal or
state bank regulatory agency acting under applicable federal or state law or
regulation, but shall compensate Employee according to the terms of the
Agreement to the extent compensation is not prohibited or limited by a federal
or state bank regulatory agency acting under applicable federal or state law or
regulation.
(vi) If the compensation and benefits payable to Employee under this
subparagraph 10(e) ("Change in Control Benefits"), or any other payments or
benefits received or to be received by Employee from F & M or its successor
(whether payable pursuant to the terms of this Agreement, any other plan,
agreement or arrangement with F & M, successor or any corporation affiliated
with F & M or its successor ("Affiliate") within the meaning of Section 1504 of
the Internal Revenue Code, as amended (the "Code"), in the opinion of tax
counsel selected by F & M's or successor's independent auditors and acceptable
to Employee constitute "parachute payments" within the meaning of Section
280G(b)(2) of the Code, and the present value of such "parachute
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payments" equals or exceeds three times the average of the annual compensation
payable to Employee by F & M or its successor (or an Affiliate), and includable
in Employee's gross income for federal income tax purposes for the five (5)
calendar years preceding the year in which a change in ownership or control
of F & M occurred (the "Base Amount"), such Change in Control Benefits shall
be reduced, in a manner determined by Employee, to an amount, the present value
of which (when combined with the present value of any other payments or
benefits otherwise received or to be received by Employee from F & M or its
successor (or an Affiliate) that are deemed "parachute payments") is
equal to 2.99 times the Base Amount, notwithstanding any other provision to the
contrary in this Agreement. The Change in Control Benefits shall not be reduced
if (1) Employee shall have effectively waived his receipt or enjoyment of any
such payment or benefit which triggered the applicability of this subpart
10(e)(vi), or (2) in the opinion of such tax counsel, the Change in Control
Benefits (in full amount or partially reduced, as the case may be) plus all
other payments or benefits which constitute "parachute payments" within the
meaning of Section 280G(b)(2) of the Code are reasonable compensation for
services actually rendered, within the meaning of Section 280G(b)(4) of the
Code, and such payments are deductible by F & M or its successor. The Base
Amount shall include every type and form of compensation includable in
Employee's gross income in respect of his employment by F & M or its successor
(or an Affiliate), except to the extent otherwise provided in temporary or
final regulations promulgated under Section 280G of the Code. For purposes of
this subpart 10(e)(vi), a "change in ownership or control" shall have the
meaning set forth in Section 280G(b) of the Code and any temporary or final
regulations promulgated thereunder. The present value of any non-cash benefit
or any deferred cash payment shall be determined by the Employers' independent
auditors in accordance with the principles of Sections 280G(b)(3) and (4) of
the Code.
In the event that Section 280G, or any successor statute is repealed,
this subparagraph 10(vi) shall cease to be effective on the effective date of
such repeal. The parties to this Agreement recognize that final regulations
under Section 280G of the Code may affect the amounts that may be paid under
this Agreement and agree that, upon issuance of such final regulations, this
Agreement may be modified as in good faith deemed necessary in light of the
provisions of such regulations to achieve the purposes of this Agreement, and
that consent to such modifications shall not be unreasonably withheld.
11. Waiver of Breach. The waiver by F & M of a breach of any provision of
this Agreement by the Employee shall not operate or be construed as a waiver of
any subsequent breach of the same or any other provision of this Agreement by
the Employee.
12. Assignment. The rights and obligations of F & M under this Agreement
may be assigned to any other subsidiary of F & M by a separate instrument
evidencing such assignment, provided, however, that no such assignment may be
made without Employee's prior written consent if the assignment is to be made to
a subsidiary which has its main office located outside a thirty (30) mile radius
of Kaukauna, Wisconsin. However, assignment by F & M shall not relieve it of the
responsibility to perform the duties of this Agreement. Employee may not assign
this Agreement.
13. Noncompete Agreement. Employee shall sign the Noncompete Agreement
attached hereto as Exhibit A.
14. Paragraph Headings. Paragraph headings are inserted primarily for
convenience, and if they conflict with the text in the construction of this
Agreement, the text shall control.
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15. Applicable Law. This Agreement shall be governed by the laws of the
State of Wisconsin.
16. Entire Agreement. This Agreement contains the entire agreement
between the parties. No representations, promises, understandings or agreements
exist except as expressly set forth herein. This Agreement supersedes all prior
representations, promises, understandings or agreements. This Agreement may only
be amended by a written amendment signed by both parties.
17. Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
beneficiaries, successors and assigns, specifically including any successor to
the F & M, whether arising by merger, consolidation or otherwise.
18. Pooling Accounting. In the event this Agreement disqualifies a
proposed Change in Control from treatment as a "Pooling of Interests" under
generally accepted accounting practices, the parties agree to act in good faith
to modify this Agreement to comply with such rules and provide to the fullest
extent its anticipated benefits to Employee and F & M.
F & M BANCORPORATION, INC.
By:___/s/ Gail E. Janssen___________________
Gail E. Janssen, Chairman of the Board
EMPLOYEE:
___/s/ John W. Johnson______________________
John W. Johnson
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EXHIBIT 10.2
EMPLOYMENT AGREEMENT
AGREEMENT effective as of August 1, 1998, by and between F & M
Bancorporation, Inc., (hereafter referred to as "F & M"), and Daniel E. Voet, of
Kaukauna, Wisconsin (hereinafter referred to as "Employee"), witnesseth:
WHEREAS, Employee serves as F & M's Treasurer and CFO and F & M desires
to retain Employee in that position and to encourage his continued employment,
the parties desire by this Agreement to encourage Employee's continued
employment by F & M and to provide an incentive to Employee to remain in that
position.
NOW, THEREFORE, in consideration of the promises and covenants
contained herein, the parties mutually agree as follows:
1. Employment. F & M hereby employs Employee and Employee hereby
accepts such employment, upon the terms and conditions hereinafter set forth.
2. Duties and Responsibilities. During the term of this Agreement,
Employee shall act as Treasurer and CFO of F & M and shall
continue to engage in those activities and perform those services as may be
assigned to him by the Board of Directors, including, but not be limited to the
following: oversight and responsibility for the day to day financial operations
of F & M, preparation of monthly financial reports, and Securities
and Exchange Commission, Federal Reserve Bank and Division of Financial
Institutions financial reports, cash and capital management, and the general
supervision of all accounting and financial activities for F & M.
In addition, Employee hereby agrees to perform such other duties for
F & M and F & M's subsidiaries and divisions as may
be assigned to him by the Board of Directors of F & M. With regard
to all duties and responsibilities provided for in this paragraph, Employee
shall devote his full time and best efforts to this employment and to the
success of F & M.
3. Scope of Authority. The Employee agrees to act in accordance
with the scope of authority previously delegated to him and as may be delegated
to him from time to time by F & M and pursuant to this Agreement in accordance
with the policies, procedures and authorizations given by F & M. The Employee
will observe and abide by any limitation placed upon such authority from time
to time by F & M. No latitude, indulgence, or forbearance granted by F & M to
the Employee shall be deemed a relinquishment of its right to direct his
activities or a waiver of their rights to require performance and fulfillment
of the duties and responsibilities of his employment and this Agreement.
4. Term. The term of Employee's employment under this Agreement
shall begin on February 1, 1998 and shall continue for a period of
thirty-six (36) full calendar months thereafter. Commencing on each subsequent
February 1 (the "Anniversary Date"), and continuing on each Anniversary Date
thereafter, the term of the Agreement shall renew for an additional year such
that the remaining term of the Agreement shall be three (3) years. This
Agreement may be terminated by either party by giving written notice that it
will terminate twenty-four (24)
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months from the next Anniversary Date. During the term of this Agreement, the
Board of Directors of F & M may conduct periodic comprehensive
performance evaluations and review of the Employee for purposes of determining
compensation and other business related purposes.
5. Compensation. During the first twelve months of the term of this
Agreement, F & M shall pay to the Employee a base annual salary of
One Hundred Thousand and 00/100 Dollars ($100,000.00). This salary shall be
prorated for any partial years based on actual time worked in such partial year.
This salary may be adjusted at such intervals and in an amount to be determined
by F & M, consistent with adjustments received by other employees
of F & M and duties of Employee's position, based on, among other
things, the performance of the Employee, the performance of F & M
and its subsidiaries, competitive practices and economic conditions provided,
however, that such salary shall not be reduced below its current level. The
parties agree to consider these factors and to endeavor in good faith to adjust
Employee's compensation to an appropriate level considering the salary for
comparable positions and Employee's performance. Employee will also be eligible
to participate in bonus, stock option or incentive plans of F & M
for his position, as may be established and modified from time to time by
F & M.
6. Benefits. F & M will offer Employee the employee
benefits, including major medical and hospitalization insurance, disability
benefits, life insurance, vacation, severance pay and retirement benefits at
levels substantially equal to the levels currently provided by
F & M to its executive officers.
7. Expenses. The Employee may incur reasonable expenses for
promoting the F & M's business, including expenses for entertainment, travel,
and similar items. F & M will reimburse the Employee in accordance
with F & M's policies and procedures for all such expenses upon
the Employee's periodic presentation of an itemized account of such
expenditures.
8. Extent of Services. The Employee shall devote his entire time,
attention and energies to the business of F & M and shall not
during the term of this Agreement be engaged in any other business activity,
without the written consent of F & M, whether or not such business
activity is pursued for gain, profit or other pecuniary advantage. This shall
not be construed as preventing the Employee from (a) serving charitable, civic
or religious organizations in a volunteer capacity which does not interfere with
his ability to perform his duties for F & M or create a conflict
of interest with F & M, (b) investing his assets in such a manner
as will not require any services on the part of the Employee in the operation of
the affairs of the companies if such investments are made, or (c) engaging in
such other activities which are expressly approved in advance by
F & M's Board of Directors.
9. Termination. Employee's employment hereunder during the Term may
be terminated, subject to payment of the compensation and other benefits
described below, upon the occurrence of any of the events described below. In
case of such termination, the date on which Employee ceases to be employed under
this Agreement, after giving effect to any prior notice requirement set forth
below, is referred to as the "Termination Date."
(a) Death; Disability; Retirement. Employee's employment
hereunder shall terminate upon his death or Disability or retirement.
As used in this Agreement, "Disability" shall mean Employee's
inability, as a result of physical or mental incapacity, to substantially
perform his duties with F & M for a period of one hundred eighty (180)
consecutive days. Any question as to the existence of Employee's Disability
upon which Employee and F & M
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<PAGE> 3
cannot agree shall be determined by a qualified independent physical mutually
agreeable to Employee and F & M or, if the parties are unable to
agree upon a physician within ten (10) days after notice from either to the
other suggesting a physician, by a physician designated by the then president of
the medical society for Outagamie County, Wisconsin, upon the request of either
party. The costs of any such medical examination shall be shared equally by
F & M and Employee.
(b) Termination of Employee for Cause. F & M may terminate
Employee's employment under this Agreement for Cause (as hereinafter defined)
at any time and thereafter F & M's obligations pursuant to paragraphs 5 and 6
of this Agreement shall cease and terminate. Notwithstanding anything to the
contrary contained in this Agreement, if Employee's employment is terminated
for Cause, Employee shall receive all compensation and other benefits to which
he was entitled under paragraphs 5 and 6 only through the Termination Date,
and, shall receive all accrued benefits available to him under F & M's benefit
plans as in effect on and effective through the Termination Date in accordance
with their terms.
As used herein, "Cause" shall mean (i) any willful act by
Employee which is fraudulent or illegal and which is materially injurious to
F & M or any of F & M's subsidiaries, monetarily or otherwise, (ii) the
continued failure by Employee to substantially perform his duties with F & M
as may be assigned to him from time to time or his obligations under this
Agreement (other than any such failure resulting from Employee's incapacity due
to Disability), or to follow the policies and procedures of F & M, (iii) the
dishonesty, fraud, or other conduct which constitutes a crime (except for
traffic or other violations which result in civil forfeitures) under laws,
statutes, regulations, rulings, administrative code, policy or procedure of the
State of Wisconsin or any local subdivision thereof or the United States of
America or of any administrative agency of the State of Wisconsin or any
subdivision thereof or of the United States of America, or (iv) "Misconduct" as
set forth in Wis. Stats. Section 108.04(5), the Wisconsin Unemployment
Compensation Law and the decisions thereunder.
Termination may be without notice for violations of subparts 9(b) (i),
(iii) or (iv). In the event of a proposed termination for the reasons set forth
in the subpart (ii) of subparagraph 9(b), the Employee shall be entitled to
written notice and thirty (30) days opportunity to explain and cure such breach
or failure to the satisfaction of F & M. If Employee has explained
and/or cured such breach or failure within such thirty (30) day period, the
notice of termination shall be rescinded and Employee shall remain employed
hereunder, subject to such further terms or conditions as the parties may
establish by mutual agreement.
(c) Voluntary Termination by Employee. Employee may voluntarily
terminate his employment under this Agreement at any time by giving at least
thirty (30) days and no more than ninety (90) days prior written notice to
F & M. In such event, Employee shall receive all compensation and other benefits
to which he was entitled under paragraphs 5 and 6 in the amount and at the times
provided in paragraph 5 through the date of voluntary termination set forth in
the Employee's notice and, in addition, shall receive all other benefits
available to him under F & M's benefit plans as in effect on the Termination
Date in accordance with their terms through such voluntary termination date.
F & M may elect not to use the services of Employee after notice of voluntary
termination is given, but such election by F & M shall not relieve F & M of the
obligation to pay Employee in accordance with paragraphs 5 and 6 during such
notice period.
(d) Termination by F & M Without Cause. F & M may terminate
this Agreement without cause, provided F & M agrees to pay the Employee the
compensation and benefits (at the intervals paid to all other
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<PAGE> 4
employees) as set forth below. In effect, F & M may elect not to
use the services of Employee during the term of this Agreement, provided
F & M pays the compensation and provides the benefits hereunder.
Employee acknowledges F & M's right to terminate without cause and
agrees that if such termination occurs that Employee's sole and exclusive claim
against F & M or its subsidiaries or their respective officers,
directors, employees or agents shall be for the payment of the unpaid
compensation and benefits under this Agreement as follows:
(i) In lieu of any further salary payments, severance pay
[including but not limited to any benefits under the Restated F & M
Bancorporation, Inc. Executive Severance Plan (the "Severance Plan")], or other
cash compensation to Employee, Employee still be paid his then current base
annual salary for a period of twenty-four (24) months from the date of F & M's
notice of termination in equal installments on F & M's regular payroll dates.
Such installment payments shall be reduced by fifty percent (50%) in the event
the Employee obtains comparable employment following the Termination Date of his
employment with F & M or its successor.
(ii) In addition, Employee shall continue to participate
for twenty-four (24) months following the Termination Date in F & M's group
health insurance plan provided the Employee (1) makes timely payment of the
Employee's portion of the premium to F & M or its successor for its employees,
and (2) is not eligible to participate in another employer-sponsored group
health insurance program. No cash payment will be made in lieu of this
participation if Employee elects not to receive this benefit. Employee shall
not be eligible for other benefits that Employee was receiving or was entitled
to receive immediately prior to the Termination Date, including, but not
limited to paid holiday or vacation benefits, other group insurance benefits,
retirement benefits or any other fringe benefits. The actual Termination Date
shall be used for purposes of determining the exercise date and/or expiration
of any outstanding stock options, not withstanding any continued payments
received by Employee after the Termination Date.
(iii) The payments under subparts (i) and (ii) shall be in
lieu of any other payments, claims or damages or other obligations by F & M to
Employee. F & M shall not be obligated for any bonus, incentive plan, stock
option or other payment or benefit for the year in which notice is given or any
subsequent year. As a condition of receiving the consideration described in
subparts (i) and (ii) above, Employee shall be required to sign F & M's
standard release as then utilized in connection with the Severance Plan.
(e) Termination Due to Change in Control. This subparagraph
shall apply to a Change in Control involving F & M or any successor to F & M.
(i) If Employee's employment is terminated within
three (3) months prior to the first public announcement of a transaction which
would be deemed a Change in Control transaction or within twelve (12) months
following the closing of a Change in Control transaction (which period shall be
referred to as the "Change in Control Window"), Employee shall be entitled to
the compensation and benefits described in this subparagraph (e), provided,
however, that during the Change in Control Window if Employee's employment is
terminated pursuant to subparagraphs 9(a), (b) or (c), Employee shall only be
entitled to the compensation and benefits set forth in subparagraphs 9(a), (b),
or (c) as applicable, and further provided that during the Change in Control
Window, F & M may not terminate the Employee under subparagraph 9(d).
(ii) Employee will be deemed to be entitled to the
compensation and benefits under this subparagraph 9(e) if any of the following
occur:
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(1) The termination of Employee by F & M or its
successor of Employee's employment during the Change in Control Window, except
for a termination pursuant to subparagraphs 9(a), (b), or (c).
(2) If Employee resigns within six (6) months
after a material change in Employee's function, duties, responsibilities or
compensation which occurs during the Change in Control Window and which causes
Employee's position to become one of lesser responsibility, importance or scope.
(3) If within three (3) months prior to a Change
in Control, Employee is removed from or is not reelected or reappointed to the
offices of Treasurer and CFO and Employee elects to resign within ten (10) days
of such change.
(4) If Employee's position is eliminated during
the Change in Control Window, and F & M or its successor does not, within
thirty (30) days after the elimination occurs, offer Employee a position with
substantially equivalent or greater functions, duties, responsibilities or
compensation than those provided to Employee under this Agreement.
(5) Regardless of the nature of the position, if
Employee is required to work at a location which is outside the State of
Wisconsin and Employee elects not to accept such position and resigns within ten
(10) days after the position is offered.
(6) The termination of this Agreement during the
Change in Control Window, except for a termination pursuant to subparagraphs
9(a), (b) or (c), if Employee resigns within ten (10) days after he receives
notice of the termination of this Agreement.
(iii) If Employee is entitled to compensation and benefits
under this subparagraph (e), such compensation and benefits shall be payable as
follows:
(1) Under subsections (e)(ii)(1), as of the date
of termination.
(2) Under subsections (e)(ii)(2), (3), (5) or (6),
as of the effective date of the Employee's resignation.
(3) Under subsection (e)(ii)(4), as of the
expiration of such thirty (30) day period.
(iv) A "Change in Control" of F & M shall occur as of the
Closing Date of one transaction or a series of transactions which result in the
acquisition of F & M: (1) by any person or group of persons acting in concert
who acquire beneficial ownership, directly or indirectly, of securities of F &
M representing 25% or more of the combined voting power of its then outstanding
securities; (2) through a combination (by merger, share exchange,
consolidation, or otherwise) with another entity and as a result of such
combination less than 50% of the outstanding voting securities of the surviving
or resulting corporation are owned in the aggregate by the former shareholders
of F & M; (3) through the sale, lease, or other transfer of all or
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substantially all of its properties or assets not in the ordinary course of
business to another person or entity.
(v) Under this subparagraph 9(e), Employee shall, at his
option, receive either a lump sum severance payment, or a series of installment
severance payments for a period of thirty-six (36) months commencing as of the
date set forth in subpart 9(e)(iii). The total payment in either case shall be
cash in an amount equal to 2.99 times the Employee's current annual base salary,
discounted to its present value in the case of a lump sum payment at a discount
rate equal to the imputed interest rate under the Internal Revenue Code for a
three (3) year term. If Employee elects to receive installment payments,
Employee shall receive the same amount as would be provided by a lump sum
payment, but payment shall be made in equal installments for a period of three
(3) years, commencing on the Termination Date, on the same dates as F & M's
regular payroll payments are made.
In addition, Employee shall continue to participate for twenty-four
(24) months following the Termination Date in F & M's group health insurance
plan provided the Employee (1) makes timely payment of the Employee's portion
of the premium to F & M or its successor for its employees, and (2) is not
eligible to participate in another employer-sponsored group health insurance
program. No cash payment will be made in lieu of this participation if Employee
elects not to receive this benefit. Employee shall not be eligible for other
benefits that Employee was receiving or was entitled to receive immediately
prior to the Termination Date, including, but not limited to paid holiday or
vacation benefits, other group insurance benefits, retirement benefits or any
other fringe benefits. The actual Termination Date shall be used for purposes
of determining the exercise deadline and/or expiration of any outstanding stock
options, notwithstanding any continued payments received by Employee after the
Termination Date.
The payments under subparagraph 9(e) shall be in lieu of any other
payments, claims or damages or other obligations by F & M to Employee. F & M
shall not be obligated for any bonus, incentive plan, stock option or other
payment or benefit for the year in which notice is given or any subsequent
year. As a condition of receiving the consideration described in subparagraph
9(e) above, Employee shall be required to sign F & M's standard release as then
utilized in connection with the Severance Plan.
Employee's death after a termination under subpart 9(e)(ii) shall not
affect F & M's or its successor's payment obligations under this
subparagraph 9(e) and the compensation and benefits provided hereunder shall be
in addition to any and all other rights of Employee under any retirement plans
or deferred compensation agreements.
Regardless of any provision in this Agreement, neither F & M nor its
successor shall be required to compensate Employee according to the terms of
this Agreement if the compensation is prohibited or limited by a federal or
state bank regulatory agency acting under applicable federal or state law or
regulation, but shall compensate Employee according to the terms of the
Agreement to the extent compensation is not prohibited or limited by a federal
or state bank regulatory agency acting under applicable federal or state law or
regulation.
(vi) If the compensation and benefits payable to Employee
under this subparagraph 9(e) ("Change in Control Benefits"), or any other
payments or benefits received or to be received by Employee from F & M or its
successor (whether payable pursuant to the terms of this Agreement, any other
plan, agreement or arrangement with F & M, successor or any corporation
affiliated with F & M or its successor ("Affiliate") within the meaning of
Section 1504 of the Internal Revenue Code, as amended (the "Code"), in the
opinion of tax counsel selected by F & M's or successor's independent auditors
and acceptable to Employee constitute "parachute payments" within the meaning
of Section 280G(b)(2) of the Code, and the present value of such "parachute
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payments" equals or exceeds three times the average of the annual
compensation payable to Employee by F & M or its successor (or an Affiliate),
and includable in Employee's gross income for federal income tax purposes for
the five (5) calendar years preceding the year in which a change in ownership
or control of F & M occurred (the "Base Amount"), such Change in Control
Benefits shall be reduced, in a manner determined by Employee, to an amount,
the present value of which (when combined with the present value of any other
payments or benefits otherwise received or to be received by Employee from F &
M or its successor (or an Affiliate) that are deemed "parachute payments") is
equal to 2.99 times the Base Amount, notwithstanding any other provision to the
contrary in this Agreement. The Change in Control Benefits shall not be reduced
if (1) Employee shall have effectively waived his receipt or enjoyment of any
such payment or benefit which triggered the applicability of this subpart
9(e)(vi), or (2) in the opinion of such tax counsel, the Change in Control
Benefits (in full amount or partially reduced, as the case may be) plus all
other payments or benefits which constitute "parachute payments" within the
meaning of Section 280G(b)(2) of the Code are reasonable compensation for
services actually rendered, within the meaning of Section 280G(b)(4) of the
Code, and such payments are deductible by F & M or its successor. The Base
Amount shall include every type and form of compensation includable in
Employee's gross income in respect of his employment by F & M or its successor
(or an Affiliate), except to the extent otherwise provided in temporary or
final regulations promulgated under Section 280G of the Code. For purposes of
this subpart 9(e)(vi), a "change in ownership or control" shall have the
meaning set forth in Section 280G(b) of the Code and any temporary or final
regulations promulgated thereunder. The present value of any non-cash benefit
or any deferred cash payment shall be determined by the Employers' independent
auditors in accordance with the principles of Sections 280G(b)(3) and (4) of
the Code.
In the event that Section 280G, or any successor statute is repealed,
this subparagraph 9(vi) shall cease to be effective on the effective date of
such repeal. The parties to this Agreement recognize that final regulations
under Section 280G of the Code may affect the amounts that may be paid under
this Agreement and agree that, upon issuance of such final regulations, this
Agreement may be modified as in good faith deemed necessary in light of the
provisions of such regulations to achieve the purposes of this Agreement, and
that consent to such modifications shall not be unreasonably withheld.
10. Waiver of Breach. The waiver by F & M of a breach of
any provision of this Agreement by the Employee shall not operate or be
construed as a waiver of any subsequent breach of the same or any other
provision of this Agreement by the Employee.
11. Assignment. The rights and obligations of F & M under
this Agreement may be assigned to any other subsidiary of F & M by
a separate instrument evidencing such assignment, provided, however, that no
such assignment may be made without Employee's prior written consent if the
assignment is to be made to a subsidiary which has its main office located
outside a thirty (30) mile radius of Kaukauna, Wisconsin. However, assignment by
F & M shall not relieve it of the responsibility to perform the
duties of this Agreement. Employee may not assign this Agreement.
12. Noncompete Agreement. Employee shall sign the Noncompete
Agreement attached hereto as Exhibit A
13. Paragraph Headings. Paragraph headings are inserted primarily for
convenience, and if they conflict with the text in the construction of this
Agreement, the text shall control.
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14. Applicable Law. This Agreement shall be governed by the laws of
the State of Wisconsin.
15. Entire Agreement. This Agreement contains the entire agreement
between the parties. No representations, promises, understandings or agreements
exist except as expressly set forth herein. This Agreement supersedes all prior
representations, promises, understandings or agreements. This Agreement may only
be amended by a written amendment signed by both parties.
16. Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
beneficiaries, successors and assigns, specifically including any successor to
the F & M, whether arising by merger, consolidation or otherwise.
17. Pooling Accounting. In the event this Agreement disqualifies a
proposed Change in Control from treatment as a "Pooling of Interests" under
generally accepted accounting practices, the parties agree to act in good faith
to modify this Agreement to comply with such rules and provide to the fullest
extent its anticipated benefits to Employee and F & M.
F & M BANCORPORATION, INC.
By: /s/ Gail E. Janssen
--------------------------------------
Gail E. Janssen, Chairman of the Board
EMPLOYEE:
/s/ Daniel E. Voet
-----------------------------------------
Daniel E. Voet
-8-
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<LEGEND>
RESTATED TO REFLECT THE 1997 ACQUISITIONS OF WISCONSIN BAN CORP. AND CITIZENS
NATIONAL BANCORPORATION INC. AND BANCSECURITY CORPORATION.
</LEGEND>
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