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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A-1
Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: November 22, 1996
BLACKHAWK BANKCORP, INC.
WISCONSIN
0-18599 39-1659424 (I.R.S. Employer
(Commission File No.) Identification No.)
400 Broad Street
Beloit, WI 53511
(608) 364-8911
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Item 7. Financial Statements and Exhibits
Exhibit 99.1
Filed herewith is the amended merger agreement and stock purchase agreement
for the previously reported transaction to be consumated April 30, 1997.
AMENDED
MERGER AGREEMENT
This Agreement and Plan of Reorganization (the "Agreement") dated as
of November 6, 1996, is entered into by and among Blackhawk Bancorp, Inc.,
a Wisconsin corporation (hereinafter referred to as "Blackhawk"), Blackhawk
Acquisition Corp., an Illinois corporation and wholly owned subsidiary of
Blackhawk (hereinafter referred to as Acquisition Corp.), Rochelle Bancorp,
Inc., an Illinois corporation (hereinafter referred to as "Rochelle") and Roch-
elle Savings and Loan Association, an Illinois Savings association (hereinafter
referred to as "Savings").
RECITALS
A. Blackhawk is a bank holding company registered with the Federal
Reserve under the Bank Holding Company Act of 1956 and owns one hundred
percent (100%) of the issued and outstanding stock of Blackhawk State Bank,
a state bank organized under the laws of the State of Wisconsin (hereinafter
referred to as "Blackhawk Bank"). Blackhawk also owns one hundred percent
of the issued and outstanding stock of Acquisition Corp. Blackhawk's principal
office is located at 400 Broad Street, Beloit, Wisconsin 53511.
B. Rochelle is a savings and loan holding company registered with the
Office of Thrift Supervision under the Home Owner's Loan Act, as amended,
and owns one hundred percent (100%) of Rochelle Savings and Loan
Association, savings and loan association organized under the laws of
the State of Illinois ("Savings"). Its principal office is located at 422
Cherry Street, Rochelle, Illinois 61068. Savings owns 100% of a subsidiary
corporation, RSL, Inc., an Illinois corporation. RSL, Inc. owns 50% of Midland
Financial Corporation which in turn owns 100% of Midland Acceptance
Corporation. When used herein, the term "Savings" includes such subsidiary
corporations, unless the context otherwise requires.
C. At least a majority of the entire Boards of Directors of Blackhawk,
Acquisition Corp., Rochelle and Savings, respectively, have approved the
entering into of this Agreement and have authorized the execution and delivery
of this Agreement. The Boards of Directors of Blackhawk, Acquisition Corp.,
Rochelle and Savings agree that it is in the best interests of their respective
corporations and stockholders that Acquisition Corp. merge with and into
Rochelle.
D. From and after the time of the merger of Acquisition Corp. with and into
Rochelle (the "Merger") shall become effective and as and when required by this
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Agreement, Blackhawk will pay cash in exchange for all of the issued and
outstanding shares of Rochelle Common Stock ("Rochelle Common Stock").
It is understood by each of the parties hereto that Blackhawk seeks to acquire
Rochelle and all of the assets of Rochelle including Savings and its subsid-
iaries through the Merger and that after such transaction, and the subsequent
merger of Rochelle with and into Blackhawk, Savings will become a wholly owned
savings and loan subsidiary of Blackhawk. The parties will
exert their best efforts to obtain such regulatory approvals and to take such
other actions as are necessary or appropriate to accomplish such goal.
AGREEMENT
In consideration of mutual covenants and premises herein contained,
Blackhawk, Acquisition Corp., Rochelle and Savings hereby make this
Agreement and prescribe the terms and conditions of the Merger and the mode
of carrying them into effect as follows:
1. Merger. Subject to the terms and conditions hereinafter set
forth, Acquisition Corp. shall be merged with and into Rochelle under the
Articles of Incorporation of Rochelle pursuant to and in accordance with
the applicable provisions of the laws of the State of Illinois.
2. Conversion and Exchange of Shares. Subject to the provisions
of this Section 2, the manner of converting and exchanging the shares of
Rochelle Common Stock at the effective time of the Merger shall be as
follows:
(a) At the time the Merger shall become effective:
(i) Each of the outstanding shares of Rochelle Common
Stock shall, subject to statutory appraisal rights, and
subject to a potential reduction in the purchase price as
set forth in Section 15(c)(vii) hereof, be exchanged for
cash in an amount equal to $4,172,660 divided by
554,875, representing the total number of shares of
Rochelle Common Stock to be outstanding at the
effective time of the Merger (i.e. $7.52 per share). All
fees and expenses incurred or to be incurred by Rochelle
or Savings in connection with the Merger and payable by
Rochelle or Savings pursuant to this Agreement,
including but not limited to all professional fees and
expenses incurred in connection with the transactions
contemplated in this Agreement, any expenses incurred
or to be incurred by
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Savings or Rochelle in connection with salary contin-
uation agreements for Richard K. Ohlinger and Edward J.
Hickey, and the remediation of the environmental issues
set forth in Section 15(c)(vii) hereof, shall be paid or
accrued as of the end of the month immediately prior to
the effective time of the Merger (the "Final Statement
Date"), and shall be calculated in accordance with
Generally Accepted Accounting Principles, consistently
applied.
(ii) The shares of Rochelle Common Stock issued and
outstanding immediately prior to the time the Merger
shall become effective shall continue to be issued and
outstanding shares of the surviving corporation and shall
be owned by Blackhawk.
(iii) The shares of Acquisition Corp. Common Stock issued
and outstanding immediately prior to the effective time
of the Merger and held by Blackhawk shall be deemed
canceled.
(b) As soon as practicable after the time the Merger shall
become effective, Blackhawk, or an Exchange Agent designated thereby,
will distribute to the former holders of Rochelle Common Stock
in exchange for and upon surrender for cancellation by such
holders of a certificate or certificates formerly representing
shares of Rochelle Common Stock, cash in accordance with the
provisions regarding the exchange of shares of Rochelle
Common Stock set forth in Section 1(a)(i) of this Agreement.
Each certificate formerly representing Rochelle Common Stock
(other than certificates representing shares of Rochelle Common
Stock subject to the rights of dissenting shareholders) shall be
deemed for all purposes to represent the right to receive the cash
per share calculated in accordance with Section 2(a)(i) of this
Agreement. Until surrender of the certificate or certificates
formerly representing shares of Rochelle Common Stock, the
holder thereof shall not be entitled to receive the cash payment
described herein. After the time the Merger shall become
effective, the holders of certificates formerly representing shares
of Rochelle Common Stock shall cease to have rights with
respect to such shares, except such rights, if any, for appraisal
and their right to exchange said certificates for cash in
accordance with this Agreement.
Certificates formerly representing shares of Rochelle Common
Stock surrendered for cancellation by each shareholder entitled
to exchange shares of Rochelle Common Stock for cash by
reason of the Merger
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shall be accompanied by such appropriate instruments of transfer
as Blackhawk may reasonably require, provided, however, that
if there be delivered to Blackhawk by any person who is unable
to produce any such certificate formerly representing shares of
Rochelle Common Stock for transfer (i) evidence to the
reasonable satisfaction of Blackhawk that any such certificate
has been lost, wrongfully taken or destroyed, and (ii) such
indemnity agreement (including a requirement for the posting of
an appropriate bond) as reasonably may be requested by
Blackhawk to save it harmless, and (iii) evidence to the
reasonable satisfaction of Blackhawk that such person is the
owner of the shares theretofore represented by each certificate
claimed by him to be lost, wrongfully taken or destroyed and that
he is the person who would be entitled to present each such
certificate and to receive cash pursuant to this Agreement, then
Blackhawk, in the absence of actual notice to it that any shares
theretofore represented by any such certificate have been
acquired by a bona fide purchaser, shall deliver to such person
the cash which such person would have been entitled to receive
upon surrender of each such lost, wrongfully taken or destroyed
certificate representing shares of Rochelle Common Stock.
(c) After the effective time of the Merger, there shall be no
transfers on the stock transfer books of Rochelle of any certificates
representing shares of Rochelle Common Stock.
After the effective time of the Merger, upon presentation to
Blackhawk of certificates formerly representing capital stock of
Rochelle, such certificates shall be canceled.
3. Name/Subsequent Merger. The name of the surviving corporation
(hereinafter called the "Surviving Corporation" whenever reference is
made to it as of the time the Merger shall become effective and
thereafter) shall be "Rochelle Bancorp, Inc." The parties hereto
acknowledge that immediately subsequent to the Effective Time of the
Merger, Blackhawk intends that Rochelle shall be merged with and into
Blackhawk such that Savings shall become a wholly owned subsidiary
of Blackhawk.
4. Business. The business of Rochelle as the Surviving Corporation shall
be that of a holding company. The Surviving Corporation shall exist by
virtue of, and be governed by the laws of the State of Illinois, shall have
its registered office in Rochelle, Illinois at 422 Cherry Street 61068 and
shall have its principal office at that same location.
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5. Effective Time of Merger; Articles of Merger. The Merger shall become
effective upon the filing of the appropriate Articles of Merger with the
Illinois Secretary of State (the "time the Merger shall become effective"
or "the effective time of the Merger") in accordance with applicable
provisions of the laws of the State of Illinois. The Articles of
Incorporation of Rochelle in effect immediately prior to the time the
Merger shall become effective, shall be the Articles of Incorporation of
the Surviving Corporation, and the Bylaws of Rochelle in
effect immediately prior to the time the Merger shall become effective,
shall be the Bylaws of the Surviving Corporation.
6. Effect of Merger. At the time the Merger shall become effective, the
separate corporate existence of Acquisition Corp. and Rochelle,
respectively, shall, in accordance with applicable provisions of the laws
of the State of Illinois, be merged into and continued in Rochelle as the
Surviving Corporation with the effect as provided by the Illinois
Business Corporation Act of 1983, as amended (the "Illinois Act").
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7. Liabilities upon Merger. The Surviving Corporation shall be
responsible for all of the liabilities and obligations of each of the
corporations so merged in the same manner and to the same extent as if
such single corporation had itself incurred the same or contracted
therefore.
8. Discussions with Others. Rochelle and Savings shall not, and each shall
direct and use their best efforts to cause all officers, directors and
agents retained by either of them not to, solicit inquiries or proposals or
initiate any discussions or negotiations leading to any acquisition or
purchase of all or a substantial portion of the assets or stock of Rochelle
or Savings or any merger or consolidation of Rochelle or Savings with any
third party (an "Acquisition Proposal") without the prior written consent
from Blackhawk, so long as this Agreement is pending. In the event an
unsolicited Acquisition Proposal is received by Rochelle or Savings,
Rochelle and/or Savings shall immediately notify Blackhawk of such
Acquisition Proposal and shall not negotiate with any such third parties.
Notwithstanding the foregoing, Rochelle and/or Savings may furnish
information to or enter into discussions or negotiations with any person
or entity that makes an unsolicited bona fide Acquisition Proposal if the
Board of Directors of Rochelle and/or Savings shall conclude in good
faith that such action is necessary in order for such Board of Directors
to act in a manner which is consistent with its fiduciary obligations
under applicable law. In the event that the Merger is not consummated
as a result of any such negotiations or the execution of an agreement
with a third party, even if required to fulfill the directors' fiduciary
duty, Rochelle, Savings and their respective successors and assigns shall
be jointly and severally liable to pay promptly (and in any event within
two (2) days of receipt by Rochelle of written notice from Blackhawk) to
Blackhawk Five Hundred Thousand Dollars ($500,000) to reimburse Blackhawk
for its expenses incurred in connection with the proposed transaction and
liquidated damages, which the parties acknowledge is appropriate as actual
damages and expenses in such regard would be unable to be accurately
calculated. Such amounts due under this Section 8 shall be in lieu of any
payments required by Section 22(b) of this Agreement.
9. Undertakings of the Parties. Blackhawk and Rochelle further agree as
follows:
(a) This Agreement shall be submitted to the stockholders of
Rochelle for approval and adoption at a special meeting of
stockholders to be called and held in accordance with law and
the Articles of Incorporation and Bylaws of Rochelle.
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(b) Blackhawk, Rochelle and Savings will cooperate in the
preparation by Blackhawk of applications to the Federal Reserve
Board ("Federal Reserve"), the Illinois Commissioner of Banks
and Real Estate ("Commissioner"), the Office of Thrift
Supervision ("OTS"), and to any other state or federal regulatory
agency which may be required to facilitate the Merger. The
drafting of proxy materials to be used at the stockholders'
meetings of Rochelle shall be the obligation of counsel for
Rochelle, provided that such materials will be subject to review
and comment by
counsel to Blackhawk. Blackhawk shall provide Rochelle with
information with respect to Blackhawk or this transaction
reasonably necessary for the preparation of such proxy materials.
(c) Except as specifically provided in Section 8 or Section 22(b) of
this Agreement, each party will assume and pay all of its fees
and expenses incurred by it incident to the negotiation,
preparation and execution of this Agreement, obtaining of the
requisite stockholder consents and approvals and all other acts
incidental to, contemplated by or in pursuance of this
Agreement; provided, however, that Blackhawk shall promptly
prepare and file, and pay all costs associated with, any and all
required regulatory applications in connection with the
transactions contemplated by this Agreement.
(d) All information furnished by one party to another party in
connection with this Agreement and the transactions
contemplated hereby will be kept confidential by such other
party and will be used only in connection with this Agreement
and the transactions contemplated hereby, except to the extent
that such information: (i) is already known to such other party
when received; (ii) thereafter becomes lawfully obtainable from
other sources; or (iii) is required to be disclosed in any document
filed with the Federal Reserve, Commissioner, the OTS or any
other governmental agency or authority. In the event that this
Agreement is terminated, each party will return to the other party
or destroy any documents received by it from the other party that
contain any such confidential information.
(e) After (i) receipt of the Federal Reserve's, Commissioner's and
OTS's prior approval of Blackhawk's acquisition of Rochelle
and, indirectly, Savings; (ii) the approval of the stockholders of
Rochelle; and (iii) the expiration of regulatory waiting period(s),
Blackhawk shall designate the date and time as of which
Blackhawk desires the Merger to become effective and the
Merger shall become effective on such date
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and at such time. However, any date so specified shall not be
later than either (a) the first of the month immediately following
the month in which the last of the events described above (i-iii)
occurs if said event occurs before the sixteenth day of such
month or (b) the first day of the second month immediately
following such month if the last of the events described above
occurs after the fifteenth day of such month.
(f) Subject to the terms and conditions of this Agreement,
Blackhawk and Rochelle each agree that, subject to applicable
laws and to the fiduciary duties of its directors, each will
promptly take or cause to be taken all action, and promptly do or
cause to be done all things necessary, proper or advisable under
applicable laws and regulations to consummate and make
effective the Merger the transactions contemplated by this
Agreement.
10. Employees. As of the effective time of the Merger, it is intended that
employees of Savings shall continue as employees with no change in
employment solely as a result of the Merger; however, nothing contained
herein shall be interpreted as creating a contractual or other right to
continued employment of an employee subsequent to such effective time
and all such employees, except as set forth below, shall be considered "at
will" and subject to subsequent dismissal by Blackhawk.
Notwithstanding the foregoing, Blackhawk acknowledges that two
employees, Richard K. Ohlinger ("Ohlinger"), currently President of
Savings, and Edward J. Hickey ("Hickey"), currently Senior Vice
President of Savings, each have employment contracts with Savings
dated as of August 15, 1995, as amended. As a condition to closing,
Ohlinger and Hickey each hereby agree to terminate his contract with
Savings in exchange for: (i) a severance agreement providing for
payment of an amount equal to one half (1/2) of his then current annual
salary and benefits upon his termination by Savings for any reason other
than "just cause," which agreement(s) shall be effective from closing
through eighteen months after the Effective Date of the Merger; and (ii)
participation in the officers' bonus plan currently available at Blackhawk
Bank, but based upon performance of Savings. Such terms for the
agreement between Blackhawk and Ohlinger and Hickey are set forth in
agreements which have been negotiated by and between Blackhawk and
Ohlinger and Hickey, respectively. Such agreements will be executed
on or before November 26, 1996, and the performance of such
agreements shall be subject to the consummation of the Merger.
Blackhawk acknowledges that it has been provided copies of the
proposed form of Salary Continuation Agreements
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with Ohlinger and Hickey and the proposed cost of such agreements.
11. Dissenting Stockholders. Holders of Rochelle Common Stock who give
proper notice to Rochelle of their desire to dissent from the Merger and
do not vote their shares in favor of the Merger and otherwise comply in
all respects to perfect appraisal or dissenters' rights, will be en-
titled to such rights, if any, pursuant to and solely upon strict comp-
liance with, the applicable provisions of Section 11.70 of the Illinois
Act.
12. Representations and Warranties of Blackhawk. Blackhawk and
Acquisition Corp., jointly and severally, represent and warrant to
Rochelle and Savings as follows:
(a) Blackhawk is a corporation duly organized, and validly existing
and in good standing under the laws of the State of Wisconsin
and is a registered bank holding company under the Bank
Holding Company Act of 1956, as amended. Acquisition Corp.
is a corporation duly organized, validly existing and in good
standing under the laws of the State of Illinois. Each of
Blackhawk and Acquisition Corp. is qualified to do business and
in good standing in all jurisdictions where it is both required to
so qualify and the failure to so qualify would have material and
adverse consequences to Blackhawk or Acquisition Corp., as the
case may be. Each of Blackhawk and Acquisition Corp. has full
power and authority (including all licenses, franchises, permits
and other governmental authorizations which are legally
required) to engage in the businesses and activities now
conducted by it.
(b) Blackhawk has furnished to Rochelle copies of the following
financial statements relating to Blackhawk and its consolidated sub-
sidiaries: the audited Consolidated Balance Sheets of Blackhawk as of
December 31, 1995, and 1994, and the Consolidated Statements
of Income, Changes in Shareholders' Equity, and Cash Flows for
the three years ended December 31, 1995, 1994, and 1993,
together with the notes thereto, as audited by Lindgren, Callihan,
Van Osdol & Co., Ltd. , Certified Public Accountants. Each of
the aforementioned financial statements was prepared in
accordance with Generally Accepted Accounting Principles and
is true and correct in all material respects and together present
fairly the consolidated financial position and results of
operations of Blackhawk as of the dates and for the periods
therein set forth. Such financial statements do not, as of the date
thereof, include any material asset or omit any material liability,
absolute or contingent, or other fact, the inclusion or omission of
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which renders such financial statements, in light of the
circumstances under which they were made, misleading in any
material respect. Since December 31, 1995, there has not been
any material adverse change in the financial condition, results of
operations, business or prospects of Blackhawk and its
subsidiaries on a consolidated basis.
(c) The Board of Directors of Blackhawk has duly authorized
execution, delivery and performance of this Agreement and
approved the Merger as contemplated herein. The Board of
Directors of Acquisition Corp. has duly authorized the execution,
delivery and performance of this Agreement and approved the
Merger as contemplated herein. Blackhawk and Acquisition
Corp. each has all requisite power and authority to enter into this
Agreement and the authority to consummate the transactions
contemplated hereby. This Agreement constitutes the valid and
legally binding obligation of Blackhawk and Acquisition Corp.,
and this Agreement and the consummation of the transactions
contemplated herein have been duly authorized and approved on
behalf of Blackhawk and Acquisition Corp. by all requisite
corporate action. Provided the required approvals are obtained
from the Federal Reserve, the Commissioner and the OTS,
neither the execution and delivery of this Agreement nor the
consummation of the Merger will conflict with, result in the
breach of, constitute a default under or accelerate the
performance provided by the terms of any law, or any rule or
regulation of any governmental agency or authority or any
judgment, order or decree of any court or other governmental
agency to which Blackhawk may be subject, any contract,
agreement or instrument to which Blackhawk is a party or by
which Blackhawk is bound or committed, or the Articles of
Incorporation or Bylaws of Blackhawk or Acquisition Corp., or
constitute an event which with the lapse of time or action by a
third party, could, to the best of Blackhawk's knowledge, result
in the default under any of the foregoing or result in the creation
of any lien, charge or encumbrance upon any of the assets or
properties of Blackhawk or upon any of the stock of Blackhawk,
except, however, in the case of contracts, agreements or
instruments, such defaults, conflicts or breaches which either (i)
will be cured or waived prior to the time the Merger becomes
effective, or (ii) if not so cured or waived would not, in the
aggregate, have a material adverse effect on the financial
condition, results of operations or business of Blackhawk on a
consolidated basis.
(d) There is no litigation, action, suit, investigation or proceeding
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pending or, to the best of the knowledge after due inquiry of
Blackhawk and its executive officers, threatened, against or
affecting Blackhawk, Acquisition Corp. or Blackhawk Bank or
involving any of their respective properties or assets, at law or in
equity, before any federal, state, municipal, local or other
governmental authority, involving a material amount which, if
resolved adversely to the interest of Blackhawk, Acquisition
Corp. or Blackhawk Bank, would materially affect the financial
conditions or operations of Blackhawk, Acquisition Corp. or
Blackhawk Bank and/or its ability to perform under this
Agreement, and to the best of the knowledge and belief after due
inquiry of Blackhawk and its executive officers, no one has
asserted and no one has reasonable or valid grounds on which it
reasonably can be expected that anyone will assert any such
claims against Blackhawk, Acquisition Corp. or Blackhawk
Bank based upon the wrongful action or inaction of Blackhawk,
Acquisition Corp. or Blackhawk Bank or any of their respective
officers, directors or employees.
(e) Blackhawk has delivered to Rochelle copies of the Annual
Report of Blackhawk for its fiscal years ended December 31,
1995, 1994, and 1993, and the proxy materials disseminated by
Blackhawk to its stockholders in connection with the 1996
Annual Meeting of Stockholders of Blackhawk. Such Annual
Report and proxy materials do not misstate a material fact or
omit to state a material fact necessary in order to make the
statements contained therein, in light of the circumstances under
which they are made, not misleading.
13. Representations and Warranties of Rochelle and Savings. Rochelle
and Savings jointly and severally represent and warrant to Blackhawk
as follows:
(a) Rochelle is a corporation duly organized, validly existing and in
good standing under the laws of the State of Illinois, is a
registered savings and loan holding company under the Home
Owners' Loan Act, as amended, and is qualified to do business
and in good standing in all jurisdictions where it is both required
to so qualify and the failure to so qualify would have material
and adverse consequences to Rochelle. Rochelle has full power
and authority (including all licenses, franchises, permits and
other governmental authorizations which are legally required) to
engage in the businesses and activities now conducted by it.
Savings is a stock savings and loan association duly organized
and validly existing in good standing under the laws of the State
of Illinois. Each of RSL, Inc., ("RSL"), Midland Financial
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Corporation ("Midland"), and Midland Acceptance Corporation
("Acceptance") are duly organized, validly existing and in good
standing under the laws of the State of Illinois. RSL, Midland
and Acceptance are at times collectively referred to herein as the
"Subsidiaries." The representations and warranties of Savings
set forth herein shall, unless the context specifically requires
otherwise, be considered representations and warranties of each
of the Subsidiaries. Savings has full power and authority
(including all licenses, franchises, permits and other
governmental authorizations which are legally required) to
engage in the businesses and activities now conducted by it and
any of the Subsidiaries.
(b) As of the date of this Agreement, the authorized capital stock of
Rochelle consists of 1,000,000 shares of common stock with
$1.00 par value, of which a total of 554,875 shares are issued and
outstanding and none are shares of treasury stock owned by
Rochelle and 500,000 shares of preferred stock, $100.00 par
value, none of which shares are outstanding and none of which
are shares of treasury stock owned by Rochelle. All of the
outstanding shares of common stock are fully paid and
nonassessable and are not issued in violation of the preemptive
rights of any shareholder. There are no outstanding options,
warrants or commitments of any kind relating to Rochelle's
capital stock except as disclosed in the disclosure letter from
Rochelle and Savings to Blackhawk of even date herewith (the
"Disclosure Letter"). As of the date of this Agreement, the auth-
orized capital stock of Savings consists of 100,000 shares of common
stock each with $1.00 par value, of which a total of 1,000 shares are
issued and outstanding. Rochelle owns all 1,000 of such shares or
100% of the issued and outstanding shares. All of said shares of
common stock are fully paid and nonassessable and are not issued in
violation of the preemptive rights of any shareholder. There are
no outstanding options, warrants or commitments of any kind
relating to Saving's capital stock except as disclosed in the
Disclosure Letter. As of the date of this Agreement, the authorized
capital stock of RSL consists of 20,000 shares of common stock each
with $100.00 par value, of which a total of 10 shares are issued and
outstanding. Savings owns all 10 of such shares or 100% of the
issued and outstanding shares. All of said shares of common
stock are fully paid and nonassessable and are not issued in
violation of the preemptive rights of any shareholder. There are
no outstanding options, warrants
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or commitments of any kind relating to RSL's capital stock
except as disclosed in the Disclosure Letter.
As of the date of this Agreement, the authorized capital stock of
Midland consists of 100,000 shares of common stock, no par
value, of which a total of 1,000 shares are issued and
outstanding. RSL owns 500 of such shares or 50% of the issued
and outstanding shares. The remaining 500 shares or 50% are
owned by George Zannis of Rockford, Illinois. All of said
shares of common stock are fully paid and nonassessable and are
not issued in violation of the preemptive rights of any
shareholder. There are no outstanding options, warrants or
commitments of any kind relating to Midland's capital stock
except as disclosed in the Disclosure Letter.
As of the date of this Agreement, the authorized capital stock of
Acceptance consists of 100,000 shares of common stock, no par
value, of which a total of 1,000 shares are issued and
outstanding. Midland owns all 1,000 of such shares or 100% of
the issued and outstanding shares. All of said shares of common
stock are fully paid and nonassessable and are not issued in
violation of the preemptive rights of any shareholder. There are
no outstanding options, warrants or commitments of any kind
relating to Acceptance's capital stock except as disclosed in the
Disclosure Letter.
(c) Rochelle has furnished to Blackhawk copies of the following
financial statements relating to Rochelle and its consolidated
subsidiaries: the audited Consolidated Balance Sheets of
Rochelle as of July 31, 1996, and 1995, and the Consolidated
Statements of Income, Changes in Stockholders' Equity and
Cash Flows for the three years ended July 31, 1996, 1995, and
1994, together with the notes thereto, as audited by Lindgren,
Callihan, Van Osdol & Co., Ltd., Certified Public Accountants,
and interim, unaudited Consolidated Balance Sheets of Rochelle
dated as of December 31, 1995 and 1994 and August 31, 1996
and 1995. Each of the aforementioned financial statements was
prepared in accordance with Generally Accepted Accounting
Principles, and is true and correct in all material respects and
together present fairly the consolidated financial position and
results of operations of Rochelle and Savings as of the dates and
for the periods therein set forth. Savings has furnished to
Blackhawk copies of its balance sheets as of July 31, 1996 and
July 31, 1995, and its statements of income, changes in stockholders
equity and cash flows for the years then ended and its Thrift
Financial Report for the periods ended December 31, 1995,
March 31, 1996 and June
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30, 1996. Each of the aforementioned financial statements was
prepared in accordance with Generally Accepted Accounting
Principles, and each is true and correct in all material respects
and present fairly the financial position and results of operations
of Savings as of the dates and for the periods therein set forth.
The financial statements delivered pursuant to this Section 13 do
not, as of the date thereof, include any material asset or omit any
material liability, absolute or contingent, or other fact, the
inclusion or omission of which renders such financial statements,
in light of the circumstances under which they were made,
misleading in any material respect, except for those which are
disclosed in the Disclosure Letter. Except as described in the
Disclosure Letter, since July 31, 1996, there has not been any
material adverse change in the financial condition or results of
operations of Rochelle on a consolidated basis.
(d) The Boards of Directors of Rochelle and Savings have duly
authorized execution, delivery and performance of this
Agreement and approved the Merger as contemplated herein.
Subject to the approval by the stockholders of Rochelle,
Rochelle and Savings each has all requisite power and authority
to enter into this Agreement. Rochelle and Savings each has the
authority to consummate the transactions contemplated hereby
so that, provided all required corporate and
regulatory approvals are obtained, neither the execution and
delivery of this Agreement nor the consummation of the Merger
will conflict with, result in the breach of, constitute a default
under or accelerate the performance provided by the terms of any
law, or any material rule or regulation of any governmental
agency or authority or any judgment, order or decree of any court
or other governmental agency to which Rochelle or Savings may
be subject, any material contract, agreement or instrument to
which Rochelle or Savings is a party or by which Rochelle or
Savings is bound or committed, or the Articles of Incorporation
or Bylaws of Rochelle or Savings, or constitute an event which
with the lapse of time or action by a third party, could, to the best
knowledge of the executive officers of Rochelle or Savings,
result in a default under any of the foregoing or result in the
creation of any lien, charge or encumbrance upon any of the
assets, property or capital stock of Rochelle or Savings, except,
however, in the case of contracts, agreements or instruments,
such defaults, conflicts or breaches which either (i) will be cured
or waived prior to the time the Merger becomes effective, or (ii)
if not so cured or waived would not, in the aggregate, have any
material adverse effect on the financial
<PAGE> 15
condition or results of operations of Rochelle on a consolidated
basis.
(e) Except as disclosed in the Disclosure Letter, there is no lit-
igation, action, suit, investigation or proceeding pending or, to
the best knowledge of the executive officers of Rochelle or Savings,
after due inquiry, overtly threatened, against or affecting Rochelle
or Savings or involving any of their respective properties or assets,
at law or in equity, before any federal, state, municipal, local or
other governmental authority, and to the best of the knowledge
and belief, after due inquiry, of the executive officers of Rochelle
and Savings, no one has asserted and no one has reasonable or
valid ground on which it reasonably can be expected that anyone
will assert any such claims against Rochelle or Savings based
upon the wrongful action or inaction of Rochelle, Savings or
their respective officers, directors or employees.
(f) Rochelle and Savings each has good and marketable title to all
assets and properties, whether real or personal, tangible or
intangible reflected in their respective Balance Sheets of July 31,
1996 or acquired subsequent thereto (except to the extent that
such assets and properties have been disposed of for fair value in
the ordinary course of business since July 31, 1996) subject to no
liens, mortgages, security interests, encumbrances, pledges or
charges of any kind, except: (i) those items that secure liabilities
that are reflected in said Balance Sheets; (ii) statutory liens for
taxes not yet delinquent; and (iii) minor defects and irregularities
in title and encumbrances which do not materially impair the use
thereof for the purposes for which they are held; and such liens,
mortgages, security interests, encumbrances and charges are not
in the aggregate, material to the assets and properties of Rochelle
or Savings. Rochelle or Savings, as applicable, as lessee, has the
contractual right under valid leases to occupy, use, possess and
control all material property leased by Rochelle or Savings.
(g) To the best knowledge, after due inquiry, of the executive
officers of Rochelle and Savings, Rochelle and Savings each has
complied with all laws, regulations and orders applicable to it
and to the conduct of its business, including without limitation,
all statutes, rules and regulations pertaining to the conduct of
Saving's activities as a savings and loan, except for possible
technical violations which together with any penalty which
results therefrom are or will be of no material consequence to
Rochelle or Savings. Except as disclosed in the
<PAGE> 16
Disclosure Letter, neither Rochelle nor Savings is the subject of
nor is either a party to, any regulatory actions or agreements such
as letter agreements, memorandum of understanding, cease and
desist order or like agreements. Neither Rochelle nor Savings is
in default under, and no event has occurred which, with the lapse
of time or action by a third party, could, to the best knowledge
of the executive officers of Rochelle or Savings, result in the
default under the terms of any judgment, decree, order, writ, rule
or regulation of any governmental authority or court, whether
federal, state or local and whether at law or in equity, where the
default(s) could reasonably be expected to have a material
adverse effect on the financial condition, results of operations or
business of Rochelle on a consolidated basis.
(h) Except as disclosed in the Disclosure Letter, neither Rochelle nor
Savings has, since July 31, 1996 to the date hereof: (i) issued or
sold any of its capital stock or any corporate debt securities; (ii)
granted any option for the purchase of capital stock; (iii) directly
or indirectly, purchased, redeemed or otherwise acquired any
shares of such stock; (iv) incurred any obligation or liability
(absolute or contingent), except for obligations reflected in this
Agreement, and except for obligations or liabilities incurred in
the ordinary course of business, or mortgaged, pledged or
subjected to lien or encumbrance (other than in the ordinary
course of business and other than statutory liens for taxes not yet
delinquent) any of its assets or properties; (v) discharged or
satisfied any lien or encumbrance or paid any obligation or
liability (absolute or contingent), other than the current portion
of any long-term liabilities which become due after July 31,
1996, current liabilities included in its financial statements as of
July 31, 1996, current liabilities incurred since the date thereof
in the ordinary course of business and liabilities incurred in
carrying out the transactions contemplated by this Agreement;
(vi) sold, exchanged or otherwise disposed of any of its material
capital assets outside the ordinary course of business; (vii) made
any officers' salary increase or wage increase, entered into any
employment contract with any officer or salaried employee or,
instituted any employee welfare, bonus, stock option, profit-sharing,
retirement or similar plan or arrangement; (viii) suffered
any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting their respective
business, property or assets or waived (except for fair
consideration) any rights of value which are material in the
aggregate, considering
<PAGE> 17
their respective businesses taken as a whole; or (ix) entered or
agreed to enter into any agreement or arrangement granting any
preferential right to purchase any of its assets, properties or
rights or requiring the consent of any party to the transfer and
assignment of any such assets, properties or rights.
(i) Except as set forth in the Disclosure Letter, neither Rochelle nor
Savings is a party to or bound by any written or oral: (i)
employment or consulting contract which is not terminable by it
on 30 days or less notice, (ii) employee bonus, deferred
compensation, pension, stock bonus or money purchase, profit-sharing,
retirement or stock option plan, (iii) other employee
benefit or welfare plan, or (iv) other executory material
agreements which in any case obligate Rochelle or Savings to
make any payment(s) which in the aggregate exceed $10,000 per
year except for contracts terminable on 60 days notice. All such
pension, stock bonus or money purchase, profit-sharing, defined
benefit and retirement plans set forth under the caption
"Qualified Plans" in the Disclosure Letter (hereinafter referred to
collectively as the "plan") are the subject of favorable Internal
Revenue Service determinations with respect to tax
qualifications and are qualified plans under Section 401(a) of the
Internal Revenue Code and in compliance in all material respects
with ERISA. The plan is operationally in compliance with the
qualification requirements of the Internal Revenue Code and its
regulations. All material notices, reports and other filings
required under applicable law to be given or made to or with any
governmental agency with respect to the plan have been timely
filed or delivered where failure to file would result in a material
penalty and/or result in disqualification of the plan. Neither
Rochelle nor Savings has any knowledge either of any
circumstances which would adversely affect the qualification of
the plan or their compliance with ERISA, or of any unreported
"reportable event" (as such term is defined in Section 4043(b) of
ERISA) for which the thirty (30) day notice requirement has not
been waived, or, except as disclosed in the Disclosure Letter, any
"prohibited transaction" (as such term is defined in Section 406
of ERISA and Section 4975(c) of the Internal Revenue Code)
which has occurred since the date on which said sections became
applicable to the plans. The plans meet the minimum funding
standards set forth in Section 412 of the Internal Revenue Code
and Section 302 of ERISA, to the extent applicable. There are
no participants or beneficiaries in the plan with pending
litigation/action against the plan, Rochelle, or the trustee. The
plan has not received notice of and is not currently
<PAGE> 18
under examination by the Internal Revenue Service or
Department of Labor. All welfare benefit (i.e., group medical,
life, disability, etc.) and fringe benefit plans (i.e., all plans
covered under Internal Revenue Code Section 6039D)
maintained by Rochelle and Savings are in compliance with the
Internal Revenue Code and its regulations and ERISA. All
material notices, reports and other filings required under
applicable law to be given or made to or with any governmental
agency with respect to the welfare and fringe benefits plans have
been timely filed or delivered where failure to file would result
in a material penalty. Additionally, there are no participants of
the welfare and fringe benefit plans with pending
litigation/action against the welfare and fringe benefit plans or
Rochelle or Savings. There are no undisclosed uninsured
obligations to participants. There are no material unpaid
premiums on any of such plans. The welfare benefit plans
comply with the continuation health care coverage requirements
of Internal Revenue Code Section 4980B and ERISA Sections
601 through 608. Rochelle or Savings has identified all
employees and beneficiaries covered under the continuation
health care coverage requirements.
All nonqualified plans maintained by Rochelle and Savings are in
compliance with ERISA, to the extent applicable. All material
notices, reports and other filings required under applicable law
to be given or made to or with any governmental agency with
respect to the nonqualified plans have been timely filed or
delivered, where failure to file would result in a material penalty.
There are no unrecorded liabilities to pay benefits under any such
plans.
(j)Rochelle and Savings each has duly filed all federal, state, county
and local income, excise, real and personal property and other
tax returns and reports (including, but not limited to, social
security, withholding, unemployment insurance, and sales and
use taxes) required to have been filed by them up to the date
hereof, except where failure to file would not have a material
adverse effect on the financial condition, results of operations or
business of Rochelle on a consolidated basis.
Except as set forth in the Disclosure Letter, to the best knowledge
and belief of the executive officers of Rochelle and Savings, all
such returns are true and correct in all material respects, and
Rochelle or Savings, as the case may be, has paid or, prior to the
time the Merger shall become effective, will pay all taxes,
interest and penalties shown on such return or reports (other than
those claims being contested in
<PAGE> 19
good faith and which have been disclosed to Blackhawk) to be
due to any federal, state, county, local or other taxing authority,
and there is, and at the time the Merger shall become effective
will be, no basis for any additional claim or assessment which
might materially and adversely affect Rochelle on a consolidated
basis and for which an adequate reserve has not been established.
To the best of their respective executive officers' knowledge and
belief, Rochelle and Savings have paid or made adequate
provision in their financial statements or their respective books
and records for all taxes payable in respect of all periods ending
as of the date thereof. To the best of their respective executive
officers' knowledge and belief, Rochelle and Savings have, or at
the time the Merger shall become effective will have, no material
liability for any taxes, interest or penalties of any nature
whatsoever, except for those taxes which may have arisen up to
the time the Merger shall become effective in the ordinary course
of business and are properly accrued on the books of Rochelle or
Savings, as appropriate, as of the time the Merger shall become
effective.
(k) To the best of their respective executive officers' knowledge and
belief, but without having undertaken an environmental audit,
neither Rochelle nor Savings has any knowledge (except as
disclosed to Blackhawk in the Disclosure Letter) of any
underground storage tanks, any hazardous substances, hazardous
waste, pollutant or contaminant, including, but not limited to,
asbestos, PCB's or urea formaldehyde, having been generated,
released into, stored or deposited over, upon or below (in storage
tanks or otherwise) Rochelle's or Saving's premises or any other
real property owned or leased by Rochelle or Savings, or into
any water systems on or below the surface of the Rochelle or
Savings premises or any other real property owned or leased by
Rochelle or Savings. As used in this Agreement, the terms
"hazardous substance," "hazardous waste," pollutant" and
"contaminant" mean any substance, waste, pollutant or
contaminant included within such terms under any applicable
federal, state or local statute or regulation.
(l) Rochelle and/or Savings each has in effect insurance coverage
with reputable insurers, which in respect of amounts, premiums,
types and risks insured, constitutes reasonably adequate coverage
against all risks customarily insured against companies
comparable in size and operation to Rochelle and Savings.
<PAGE> 20
(m) Except as disclosed in the Disclosure Letter, Rochelle has not
incurred and will not incur any liability for brokerage, finders',
agents', or investment bankers' fees or commissions in
connection with this Agreement or the transactions contemplated
hereby. All selling expenses related to this Agreement and the
transactions anticipated
herein will be paid or properly accrued by Rochelle or Savings,
as appropriate, by the Final Statement Date. It is understood that
such expenses include professional fees and expenses and that
such selling expenses are not deductible for income tax purposes.
14. Action by Rochelle and Savings Pending Effective Time. Rochelle and
Savings agree that from the date of this Agreement until the time the
Merger shall become effective, except with prior written permission of
Blackhawk:
(a) Neither Rochelle nor Savings will issue, sell, grant any option
for, or acquire for value any shares of its capital stock or
otherwise effect any change in connection with their respective
capitalizations.
(b) Except as otherwise set forth in or contemplated by this
Agreement, Rochelle and Savings will carry on their respective
businesses in substantially the same manner as heretofore, keep
in full force and effect insurance comparable in amount and
scope of coverage to that now maintained by them, maintain the
loan loss reserve of Savings at historical levels and use their best
efforts to maintain and preserve the business organization intact.
Savings shall not decrease the loan loss reserve from its current
level prior to the effective time of the Merger; provided,
however, Savings shall be permitted to charge its loan loss
reserve an amount not to exceed $44,559 attributable to Savings
Loan Number 011-01-25220.
(c) Neither Rochelle nor Savings will: (i) enter into any transaction
other than in the ordinary course of business or incur or agree to
incur any obligation or liability except liabilities incurred and
obligations entered into in the ordinary course of business; (ii)
change its lending, investment, liability management and other
material Savings banking policies in any material respect except
as directed by Blackhawk; (iii) purchase any securities except
federal funds sold or fixed rate U.S. Government Treasury and/or
Agency securities with maturities of not more than three (3)
years; (iv) make any loans or commit to make any loans in
excess of $50,000 except for: (A) residential real estate loans
validly secured by a first mortgage lien having a loan to value
ratio of no more than 80% or not more than 95% with
appropriate PMI; and
<PAGE> 21
(B) renewals of outstanding loans where no new credit is
advanced, all interest is current, and the loans are renewed on the
same terms and conditions, including term, as the original loan
so renewed; (v) grant any increase in the rates of pay of officers
or directors or grant any pay increase to any employee except
increases to employees consistent with previous increases; (vi)
except as disclosed in the Disclosure Letter, incur or commit to
any capital expenditures in excess of $10,000 other than in the
ordinary course of business (which in no event shall include the
establishment of any new branch), or (vii) merge into,
consolidate with or sell its assets to any other corporation or
person, or permit any other corporation to be merged or
consolidated with it or acquire all of the assets of any other
corporation or person.
(d) Neither Rochelle nor Savings will change its method of
accounting in effect at July 31, 1996, except as required by
changes in generally accepted accounting principles and
concurred in by Rochelle's independent auditors, or change any
of its methods of reporting income and deductions for federal
income tax purposes from those employed in the preparation of
Rochelle's or Saving's federal income tax returns for the taxable
year ending July 31, 1996, except for changes required by law.
Rochelle and Savings will adequately accrue for all liabilities as
of the Final Statement Date and the effective time of the Merger,
both recurring services and matters related to the Agreement,
including but not limited to professional fees, data processing
costs, real estate taxes, vested vacation and sick pay and deferred
compensation plans. Neither Rochelle nor Savings will make
any adjustments, including, but not limited to, any adjustments
related to income taxes, relating to any prior periods to either of
their respective financial statements without the prior consent of
Blackhawk, except for the adjustment occasioned by the one
time charge accrued by Savings as of September 30, 1996 to pay
its assessment to recapitalize the Savings Association Insurance
Fund ("SAIF").
(e) To the extent permissible under law, Rochelle and Savings each
will, during normal business hours and with reasonable advance
notice to Rochelle, afford Blackhawk, its officers and other
authorized representatives, such access to all books, records, tax
returns, leases, contracts and documents of Rochelle and Savings
and will furnish to
<PAGE> 22
Blackhawk such information with respect to the assets and
business of Rochelle and Savings as Blackhawk may from time
to time reasonably request in connection with this Agreement
and the transactions contemplated hereby. Blackhawk will use
such information solely for the purpose of conducting business,
legal and financial reviews of Rochelle and Savings and for such
other purposes as may be related to this Agreement.
(f) Rochelle or Savings will promptly advise Blackhawk in writing
of all material actions taken by the Directors of Rochelle or
Savings and a representative of Blackhawk shall be entitled to
attend, but shall have no voting rights at, all meetings of the
Board of Directors and shareholders of Rochelle and Savings
after the date hereof. Rochelle and Savings will furnish
Blackhawk with copies of all interim financial statements of
Rochelle and Savings as they become available, and will notify
Blackhawk concerning all developments which may have a
material effect upon the business, properties or condition (either
financial or otherwise) of Rochelle on a consolidated basis.
15. Conditions to Obligations of Blackhawk. The obligations of Blackhawk
under this Agreement are subject, unless waived by Blackhawk, to the
satisfaction of the following conditions:
(a) Simultaneously with the execution of this Agreement George
Zannis ("Zannis"), the other 50% shareholder of Midland
Financial Corporation shall have entered into an agreement in the
form negotiated by and between Blackhawk, Savings and Zannis
providing for: (a) the purchase by Zannis, simultaneous with the
consummation of the Merger, of the 50% of Midland currently
owned by RSL at a purchase price equal to 50% of the book
value of Midland as of the Final Statement Date, calculated in
accordance with Generally Accepted Accounting Principles,
consistently applied, less $80,000; and (b) the sale by Midland
of 100% of Midland Acceptance Corporation ("Acceptance") to
RSL for an amount of cash equal to the book value of
Acceptance as of the Final Statement Date, calculated in
accordance with Generally Accepted Accounting Principles,
consistently applied.
(b) On or before November 26, 1996, Ohlinger and Hickey each
shall have entered into a severance agreement in the form agreed
to by Blackhawk, Ohlinger and Hickey as described in Section
10 hereof.
<PAGE> 23
(c) On or prior to the time the Merger shall become effective:
(i) There shall not have been any material adverse change, or
discovery of a condition or the occurrence of an event which has
or is likely to result in such a change, in the financial condition,
aggregate net assets, stockholders' equity, business or operating
results of Rochelle or Savings from July 31, 1996 to the time the
Merger shall become effective. Neither: (i) the required one time
payment to the SAIF Fund as directed by regulatory or
legislative mandate; nor (ii) the sale at less than book value of
50% of Midland to Zannis as provided for in Section 15(a)(ii)
hereof, shall be deemed to be a "material adverse change" under
this Section.
(ii) All representations by Rochelle and Savings contained in
this Agreement shall be true in all material respects at, or as of,
the time the Merger shall become effective as though such
representations were made at and as of said date, except for
changes contemplated by this Agreement and except also for
representations as of a specified time other than the time the
Merger shall become effective, which shall be true in all material
respects at such specified time.
(iii) Blackhawk shall have received the opinion of legal counsel
for Rochelle, dated the time the Merger shall become effective,
substantially to the effect set forth in Exhibit A hereto.
(iv) Rochelle and Savings shall have performed or satisfied in all
material respects all agreements and conditions required by this
Agreement to be performed or satisfied by either of them at or
prior to the time the Merger shall become effective.
(v) At the time the Merger shall become effective, no suit, action
or proceeding shall be pending or overtly threatened before any
court or other governmental agency by the federal or state
government in which it is sought to restrain or prohibit the
consummation of the Merger, and no other suit, action or
proceeding shall be pending or overtly threatened and no liability
or claim shall have been asserted against Rochelle or Savings
which Blackhawk shall in good faith determine, with advice of
counsel: (i) has a reasonable likelihood of being successfully
prosecuted and (ii) if successfully prosecuted, would materially
and adversely affect the benefits hereunder intended for
Blackhawk.
(vi) Rochelle shall not have declared or paid any cash or stock
dividend to its stockholders subsequent to September 1, 1996
through the effective date of the Merger.
(vii) An environmental engineering firm mutually acceptable to
<PAGE> 24
Blackhawk and Rochelle shall have "remedied" the environmental
problems noted in the report of Eder Associates dated November
1996. Blackhawk shall pay for the cost of a Phase II
environmental at the Oregon branch site of Rochelle and
Rochelle shall pay for the costs of remediation at the Oregon
branch site and all other remediation at the other properties of
Rochelle as shall be deemed necessary by Blackhawk in its
reasonable opinion. All costs incurred in connection with such
remediation shall be a direct reduction from the purchase price
set forth in Section 2 hereof and shall be expensed or accrued for
before the Effective Time of the Merger. Should the after-tax
cost of such remediation exceed $110,975, in the aggregate (i.e.
$0.20 per share of Rochelle outstanding), the Board of Directors
of Rochelle shall have the option of incurring such additional
costs or terminating the transaction. If the Rochelle Board of
Directors determines that it desires to terminate the Agreement
for this reason, it shall give written notice to Blackhawk not less
than 15 days before the Effective Time of the Merger. Upon
such notice, Blackhawk shall have the option of completing the
Merger accepting the burden of any after-tax cost for remediation
above $110,975, or agreeing to the termination of the
Agreement.
(viii) Rochelle and Savings shall have furnished Blackhawk
certificates, signed on its behalf by the Chairman or President
and the Secretary of Rochelle and Savings, respectively, dated
the time the Merger shall become effective, to the effect that to
the best of their knowledge, after due inquiry, the conditions
described in Sections (b)(i), (ii), (iv), (v), (vi) and (vii) of this
Section 15 have been fully satisfied.
16.Conditions to Obligations of Rochelle and Savings. The obligations
of Rochelle and Savings under this Agreement are subject, unless
waived by Rochelle or Savings, to the satisfaction on or prior to the
time the Merger shall become effective of the following conditions:
(a) All representations by Blackhawk and Acquisition Corp.
contained in this Agreement shall be true in all material respects
at, or as of, the time the Merger shall become effective as though
such representations were made at and as of said date, except for
changes contemplated by this Agreement and except also for
representations as of a specified time other than the time the
Merger shall become effective, which shall be true in all material
respects at such specified time.
(b) Rochelle and Savings shall have received the opinion of Counsel
for
<PAGE> 25
Blackhawk dated the time the Merger shall become effective
substantially to the effect set forth in Exhibit B hereto.
(c) Blackhawk and Acquisition Corp. shall have performed or
satisfied in all material respects all agreements and conditions
required by this Agreement to be performed or satisfied by it at
or prior to the time the Merger shall become effective.
(d) At the time the Merger shall become effective, no suit, action or
proceeding shall be pending or overtly threatened before any
court or other governmental agency of the federal or state
government in which it is sought to restrain, prohibit or set aside
consummation of the Merger and no other suit, action or
proceeding shall be pending or overtly threatened and no liability
or claim shall have been asserted against Blackhawk which
Rochelle and Savings shall in good faith determine, with advice
of counsel: (i) has a reasonable likelihood of being successfully
prosecuted and (ii) if successfully prosecuted, would materially
and adversely affect the benefits hereunder intended for
Rochelle, Savings and their respective stockholders.
(e) Blackhawk shall have furnished Rochelle and Savings a
certificate, signed by the President or Vice President and by the
Secretary or an Assistant Secretary of Blackhawk and dated the
time the Merger shall become effective to the effect that to the
best of their knowledge after due inquiry the conditions
described in Sections (a), (c), and (d) of this Section 16 have
been fully satisfied.
17.Conditions to Obligations of All Parties. In addition to the
provisions of Sections 15 and 16 hereof, the obligations of Blackhawk,
Acquisition Corp., Rochelle and Savings to cause the transactions
contemplated herein to be consummated shall be subject to the sat-
isfaction of the following conditions on or prior to the time the
Merger shall become effective:
(a) The parties hereto shall have received all necessary approvals of
governmental agencies and authorities of the transactions
contemplated by this Agreement and each of such approvals
shall remain in full force and effect at the time the Merger shall
become effective and such approvals and the transactions
contemplated thereby shall not have been contested by any
federal or state governmental authority by formal proceeding, or
contested by any other third party by formal proceeding which
the Board of Directors or the party asserting a failure of a
condition under this Section 17(a) shall in good faith determine,
with the advice of counsel: (i) has a
<PAGE> 26
reasonable likelihood of being successfully prosecuted; and (ii) if
successfully prosecuted, would materially and adversely affect
the benefits hereunder intended for such party. It is understood
that, if any contest as aforesaid is brought by formal proceedings,
Blackhawk may, but shall not be obligated to, answer and defend
such contest. Blackhawk shall notify Rochelle and Savings
promptly upon receipt of all necessary governmental approvals.
(b) This Agreement shall have been duly adopted, ratified and
confirmed by the requisite affirmative vote of the stockholders
of Rochelle.
18. No Survival of Representations and Warranties. The respective
representations and warranties of Blackhawk and Rochelle set
forth herein shall not survive the consummation of the Merger.
19. Voting Agreement. The Directors and significant shareholders of
Rochelle executing this Agreement shall vote the shares of
Rochelle held by them in favor of adoption of the Agreement and
in favor of the proposed Merger and shall use all reasonable
efforts to cause the adoption of the Agreement by all
shareholders of Rochelle.
20.Governing Law. This Agreement shall be construed and
interpreted according to the applicable federal laws of the United
States of America and the laws of State of Illinois.
21. Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties
hereto and thereto and their respective successors and permitted
assigns, but neither this Agreement nor any of the rights,
interests, or obligations hereunder or thereunder shall be
assigned by either of the parties hereto without the prior written
consent of the other party; provided, however, that Blackhawk
shall have the right to assign its rights under this Agreement to
a wholly owned subsidiary corporation.
22. Satisfaction of Conditions; Termination.
(a) Blackhawk agrees to use its best efforts to obtain satisfaction of
the conditions set forth herein insofar as they relate to
Blackhawk, and Rochelle and Savings each agrees to use its best
efforts to obtain the satisfaction of the conditions set forth herein
insofar as they relate to Rochelle or Savings. If any material
condition to the obligations of Blackhawk set forth in Section 15
or 17 is not substantially satisfied at the time or times
contemplated thereby and such condition is not
<PAGE> 27
waived by Blackhawk, or if any material condition to the
obligations of Rochelle or Savings set forth in Section 16 or 17
is not substantially satisfied at the time or times contemplated
thereby and such condition is not waived by Rochelle and
Savings, or if at any time prior to the time the Merger shall
become effective, it shall become reasonably certain that such
condition will not be substantially satisfied and such condition
is not waived by Blackhawk or Rochelle and Savings, as the case
may be, Blackhawk or Rochelle and Savings may terminate this
Agreement after the expiration of thirty (30) days' written notice
to the other party during which time such other party shall have
an opportunity to cure such defect in said condition. This
Agreement may be terminated and abandoned (either before or
after the meetings of stockholders contemplated hereby) by
mutual written consent of Blackhawk, Acquisition Corp.,
Rochelle and Savings authorized by their respective Boards of
Directors. In the event of such termination caused otherwise
than by breach of this Agreement by any of the parties hereto,
this Agreement shall cease and terminate, the acquisition of
Rochelle and Savings as provided herein shall not be
consummated, and none of Blackhawk, Acquisition Corp.,
Rochelle or Savings shall have any further liability under this
Agreement of any nature whatever, including any liability for
damages. In the event this Agreement is terminated, the duties
of all parties with respect to confidential information set forth in
Sections 9(d) shall survive any such termination. In addition to
the other grounds for termination of this Agreement set forth
herein, this Agreement can be terminated by written notice by
either party to the other, in each case authorized by its Board of
Directors, if the Merger shall not have been consummated by
June 30, 1997 or the date of such notice, whichever is later.
(b) If termination of this Agreement shall be judicially determined
to have been caused by breach of this Agreement by Rochelle or
Savings, then, in addition to other remedies at law or equity for
breach of this Agreement, Rochelle and Savings, jointly and
severally, shall indemnify Blackhawk and Acquisition for their
respective costs, fees and expenses of its counsel, accountants
and other experts and advisors as well as fees and expenses
incident to negotiation, preparation and execution of this
Agreement and related actions and its stockholders' meetings and
actions. If termination of this Agreement shall be judicially
determined to have been caused by breach of this Agreement by
Blackhawk or Acquisition, then Blackhawk and Acquisition
shall be jointly and severally liable to pay
<PAGE> 28
promptly (and in any event within two (2) days of receipt of
written notice from Rochelle) to Rochelle One Hundred Fifty
Thousand Dollars ($150,000) to reimburse Rochelle and Savings
for their respective expenses incurred in connection with the
proposed transaction and as liquidated damages, which the
parties acknowledge is appropriate as actual damages and
expenses in such regard would be unable to be accurately
calculated.
23. Waivers; Amendments. Any of the provisions of this Agreement may
be waived at any time by the party which is, or the stockholders of which
are, entitled to the benefit thereof, by resolution of the Board of
Directors of such party. This Agreement may be amended or modified
in whole or in part by an agreement in writing executed in the same
manner (but not necessarily by the same person) as this Agreement and
which makes reference to this Agreement, pursuant to a resolution,
adopted by the Boards of Directors of the respective parties, provided,
however, such amendment or modification may be made in this manner
by the respective Boards of Directors of Blackhawk, Acquisition Corp.,
Rochelle and Savings at any time prior to a favorable vote of such party's
stockholders, but may be made after a favorable vote by the stockholders
of such party, only if, in the opinion of its Board of Directors, such
amendment or modification will not have any material adverse effect on
the benefits intended under this Agreement for the stockholders of such
party and will not require resolicitation of any proxies from such
stockholders.
24. Entire Agreement. This Agreement supersedes any other agreement,
whether written or oral, that may have been made or entered into by
Blackhawk, Rochelle and Savings or by any officer or officers of such
parties relating to the acquisition of the business or the capital stock of
Rochelle and Savings by Blackhawk. Except for the Disclosure Letter and
the Exhibits attached hereto or specified in this Agreement, this Agreement
constitutes the entire agreement by the parties, and there are no
agreements or commitments except as set forth herein and therein.
25. Captions; Counterparts. The captions in this Agreement are for
convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Agreement. This
Agreement may be executed in several counterparts, each of which shall
constitute one and the same instrument.
<PAGE> 29
26. Notices. All notices and other communications hereunder shall be
deemed to have been duly given if delivered: (i) by hand; (ii) by certified
mail, return receipt requested; or (iii) by a nationally recognized
overnight courier service guaranteeing next day delivery and requiring
signature for acceptance. All notices and other communications
hereunder given to any party shall be deemed delivered when hand
delivered or the day after it is deposited with the U.S. mail or overnight
carrier. All such notices shall be addressed as follows or to such other
address as the other party hereto may specify in writing:
<PAGE> 30
(a) If to Blackhawk or Acquisition Corp., to: (b) If to Rochelle or
Savings, to:
Dennis M. Conerton Richard K. Ohlinger
President & CEO President
Blackhawk Bancorp, Inc. Rochelle Bancorp, Inc.
400 Broad Street 422 Cherry Street
Beloit, Wisconsin 53511 Rochelle, Illinois
61068
With copies to: With copies to:
Thomas C. Blank, Esq. James J. Kemp, Jr., Esq.
Werner & Blank Co., L.P.A. Kemp, Grezlakowski &
Lorenzini
7205 W. Central Avenue 1900 Spring Road
Toledo, Ohio 43617 Suite 500
Oak Brook, Illinois
60521
27.Publicity. Blackhawk, Rochelle and Savings agree to consult with and
obtain the consent of the other, prior to any media release or other public
disclosures as to the matters covered by this Agreement, except for
disclosures as may be required by law.
{SIGNATURES ON FOLLOWING PAGE}
<PAGE> 31
IN WITNESS WHEREOF, this Agreement has been executed the day and
year first above written.
ATTEST: Blackhawk Bancorp, Inc.
By: /s/ Dennis M. Conerton
By: /s/ James P. Kelley Dennis M. Conerton,
President & CEO
Its: Executive Vice President
ATTEST: Blackhawk Acquisition Corp.
By: /s/ Dennis M. Conerton
By: /s/ James P. Kelley Dennis M. Conerton,
President & CEO
Its: Executive Vice President
ATTEST: Rochelle Bancorp, Inc.
By: /s/ Richard K. Ohlinger
By: /s/ Edward J. Hickey Richard K. Ohlinger,
President
Its: Secretary
ATTEST: Rochelle Savings and Loan
Association
By: /s/ Richard K. Ohlinger
/s/ Edward J. Hickey Richard K. Ohlinger,
President
Its: Secretary
<PAGE>
<PAGE> 32
The undersigned Directors and/or shareholders of Rochelle Bancorp, Inc. have
executed this Agreement as individuals and with respect solely to the
understanding made in Section 19 of this Agreement.
/s/ Richard Ohlinger /s/ James K. Conour
/s/ Mark Leum /s/ Edward J. Hickey
/s/ Neil E. Holland /s/ James Tuneberg
/s/ John D. Basler /s/ Daniel J. Annold
/s/ Warren A. Seebach /s/ Ronald E. Swenson
/s/ Richard B. Conner /s/ Gerald H. Weber, Jr.
/s/ Catherine Zannis
/s/ George Zannis
/s/ Robert S. Brownson
<PAGE> 33
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into as of November 6, 1996, by
and among Blackhawk Bancorp. Inc. ("Blackhawk"), a Wisconsin corporation
registered under the Bank Holding Company Act of 1956, as amended, Rochelle
Savings and Loan Association, an Illinois savings and loan association
("Savings"), Rochelle Bancorp, Inc. ("Rochelle"), an Illinois corporation and
parent holding company of Savings, RSL, Inc, an Illinois corporation and
wholly owned subsidiary of Savings ("RSL"), Midland Financial Corporation,
an Illinois corporation ("Midland"), and George Zannis, an individual residing
in Rockford, Illinois ("Zannis").
RECITALS
A. Blackhawk has entered into a merger agreement dated November 6,
1996 (the "Merger Agreement"), for the acquisition (the "Merger") of all of the
issued and outstanding common stock of Rochelle for cash.
B. Savings owns 100% of the issued and outstanding common stock of
RSL. RSL owns 50% of Midland, the remaining 50% of which is owned by
Zannis. Midland is engaged in the mortgage brokerage business and in related
lending for construction loans. Zannis desires to purchase the 50% of the
common stock of Midland not currently owned by him (500 shares) and RSL
and Savings are willing to sell such shares to Zannis in connection with the
Merger pursuant to the terms and conditions set forth herein. Blackhawk is
willing to consent to such sale in connection with the Merger.
C. Midland owns 100% of the outstanding common stock of Midland
Acceptance Corporation, an Illinois corporation engaged in the finance company
business ("Acceptance"), which Savings and Blackhawk would like RSL to
purchase as a part of the transaction specified herein and in connection with
the Merger. Zannis and RSL, as the only shareholders of Midland, agree to the
sale of all of the shares of Acceptance to RSL in connection with the Merger
under the terms and conditions set forth in this Agreement.
D. The parties hereto desire to set forth the various rights and obli-
gations of each to the other and the terms and conditions upon which the consum-
mation of the transactions set forth in this Agreement and the Merger Agreement
are dependent.
<PAGE> 34
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, covenants, representations and warranties set forth below, the parties
hereto agree as follows:
ARTICLE I
STOCK PURCHASES
1.01. Purpose of Stock Purchases.
The purpose of this Agreement is to allow Zannis to acquire and
consolidate 100% of the ownership of Midland and to allow RSL, as a wholly
owned subsidiary of Savings, to acquire directly 100% of the ownership of
Acceptance. Following the consummation of the transaction specified herein,
Acceptance will be a wholly owned subsidiary of RSL and Zannis will own
100% of Midland.
1.02 Purchase Price for Midland Shares.
Upon delivery of a properly executed stock certificate(s) representing the
500 shares of common stock of Midland currently owned by RSL, Zannis shall
pay to RSL an amount equal to 50% of the total "book value" (as defined below)
of Midland as of the end of the month immediately prior to the effective time of
the Merger (the "Final Statement Date"), minus $80,000 (the "Credit"); provided
that the "stockholders' equity" of Midland on the Final Statement Date (as
defined in the Merger Agreement) is $560,000 or greater. In the event that the
"stockholders' equity" is less than $560,000, then the $80,000 Credit shall be
reduced $1.00 for every $2.00 that the "stockholders' equity" of Midland is less
than $560,000 as of such date. Book value shall be calculated in accordance
with Generally Accepted Accounting Principles as determined by Lindgren,
Callihan, Van Osdol & Co., Ltd., Certified Public Accountants, the accountants
currently serving Midland. In calculating such book value, the Accountant shall
make proper accruals for all expenses incurred or to be incurred in connection
with the transactions specified herein or in the Merger.
1.03 Purchase Price for Acceptance Shares.
Upon delivery of a properly executed stock certificate(s) representing the
1,000 shares (100%) of common stock of Acceptance currently owned by
Midland,
<PAGE> 35
RSL shall pay to Midland an amount equal to the total "book value" (as defined
below) of Acceptance as of the end of the month immediately prior to the
effective time of the Merger (the "Final Statement Date"). Book value shall be
calculated in accordance with Generally Accepted Accounting Principles as
determined by the Accountant. In calculating such book value, the Accountant
shall make proper accruals for all expenses incurred or to be incurred in
connection with the transactions specified herein or in the Merger.
1.04 Method of Payment of the Purchase Price.
The purchase prices established under Sections 1.02 and 1.03 shall be
payable in cash at Closing. As partial payment for the purchase price set forth
under Section 1.02, Zannis may cause
Midland to cancel and cause to be deemed paid the note receivable from
Acceptance to Midland in an amount of approximately $167,400 as of July 31,
1996. It is acknowledged that Zannis may use the funding to be made available
under the operating line of credit described in Section 6.02 hereof to pay a
portion of such purchase price.
1.05 Equipment Purchase.
Acceptance currently is using in its business, certain equipment owned
by Midland, including desks, chairs, phone system, etc. Midland desires to sell
such equipment to Acceptance and Acceptance is willing to consider buying
such equipment pursuant to the terms set forth herein. Within ten (10) days of
the date hereof, Midland shall prepare and provide to RSL an inventory of all
such equipment with the price believed in good faith by Midland to be the fair
market value of the equipment. Within sixty (60) days after receipt of the
inventory and price list, Acceptance will inform Midland in writing which
equipment, if any, it desires to purchase from Midland. Any such equipment to
be purchased by Acceptance will be paid for in cash at the closing of the
transaction specified herein and will be delivered on the Closing Date (as
defined below). Any equipment that Acceptance decides not to purchase will
be removed by Midland on the Closing Date.
1.06 Closing.
After receipt of (i) approval of the acquisition by Blackhawk of Rochelle
and Savings by all necessary regulatory authorities; and (ii) the expiration of
all regulatory waiting periods, RSL and Blackhawk shall designate the date and
time (the "Closing
<PAGE> 36
Date") as of which the closing of the transaction (the "Closing") shall occur.
Such Closing shall be simultaneous with the closing for the Merger. The parties
intend that the effective date and time of Closing for both financial and tax
reporting purposes shall be as of the close of business on the Closing Date.
On the Closing Date, RSL shall deliver to Zannis the certificate(s)
evidencing the 500 shares of Midland owned by RSL and Midland shall deliver
to RSL the certificate(s) evidencing 1,000 shares (100%) of the issued and
outstanding shares of Acceptance currently owned by Midland. In each such
instance, the certificates shall be delivered together with any and all executed
stock powers, executed in blank, necessary to transfer such shares to the
appropriate entity or person.
1.07 Board of Directors and Officers.
On the Closing Date, all of the existing Directors and Officers of each of
Midland and Acceptance shall submit their resignations except that Zannis
shall not resign as a director or officer of Midland. The entities controlling
Midland and Acceptance, respectively, will elect the Directors of such entities
and the Directors of such entities shall appoint its officers subsequent to the
Closing.
1.08 Right of First Refusal on Subsequent Resale of Midland.
Zannis and Midland hereby grant to Savings or any affiliate, a right of
first refusal to purchase the stock or substantially all of the assets of Mid-
land upon a proposed sale of the same or upon the proposed merger or consoli-
dation or similar transaction involving Midland. Such right of first refusal
shall remain in place for seven (7) years after the consummation of the Merger.
Zannis shall forward to Savings a copy of any bona fide offer for the stock of
Midland or its assets which Zannis or Midland desires to accept. Savings shall
have thirty (30) days after receipt of a copy of such bona fide offer to agree
to match the offer for the stock of Midland or its assets upon the same terms
and conditions set forth in the bona fide offer. If Savings does not respond
affirmatively within such thirty (30) day period, Zannis and Midland shall be
free to sell the stock or assets of Midland, as the case may be, but only upon
the same terms and conditions as set forth in the bona fide offer.
<PAGE> 37
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Zannis and Midland, jointly and severally, represent and warrant to RSL,
Blackhawk, Rochelle and Savings as follows:
2.01 Title to Acceptance Shares.
All 1,000 of the shares of Acceptance, representing 100% of the issued
and outstanding shares, are owned beneficially and of record by Midland and are
free and clear of any liens, encumbrances, security agreements, equities,
options, claims, charges and/or restrictions. Midland has the full power and
authority to sell and transfer such shares to RSL and will deliver to RSL on the
Closing Date good and marketable title to such shares, free and clear of any
claim, lien, option, equity, charge or encumbrance other than those incurred by
RSL.
2.02 Organization.
Acceptance is an Illinois corporation duly organized, validly existing and
in good standing under the laws of the State of Illinois. Acceptance has the
corporate power to carry on its business as it is now being conducted and to own
and operate all of its properties and assets.
2.03 Capitalization.
The authorized capital stock of Acceptance consists of 100,000 shares of
common stock, without par value, of which 1,000 shares are validly issued and
outstanding, and fully paid and nonassessable. No shares of Acceptance are
presently held by Acceptance as treasury stock. Acceptance does not have
outstanding any subscriptions, warrants, rights, options, or other agreements or
commitments obligating Acceptance to issue shares of its common stock.
2.04 Approval of Transaction.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated thereby have been duly and validly authorized by all
necessary corporate action on the part of the board of directors of Acceptance
and Midland and is a valid and binding obligation of Acceptance.
<PAGE> 38
2.05 Litigation or Adverse Events.
There is no suit, action, or legal or administrative proceeding pending, or
to the knowledge of Zannis or any officer of Acceptance, threatened against
Acceptance which, if adversely determined, would delay or prevent the
transactions contemplated by this Agreement or would materially and adversely
affect the financial condition or properties of Acceptance or the conduct of its
business.
2.06 Assets Unencumbered.
Acceptance has good and marketable title, free and clear of any mortgage,
pledge, lien, charge, or other encumbrance, to all of its property and other
assets except as reflected in its financial statements, or permitted under this
Agreement.
2.07 Taxes.
Acceptance has filed, or will file within the time prescribed by law, all
requisite consolidated federal, separate state and local tax returns, and all
other returns with respect to taxes which are required to be filed by it, and
has paid all taxes as set forth on such returns or any other assessments
received by it, or has made adequate provision for the payment thereof.
2.08 Employment and Other Contracts.
Acceptance has no written or oral contracts with any of its officers,
directors, employees, or agents which cannot be terminated immediately upon
Closing of the transaction. There are no other material contracts or agreements
binding upon Acceptance except for agreements in regard to a loan from Today's
Bank to Acceptance and inter company transactions Between Midland and
Acceptance.
2.09 No Employee Plans.
Acceptance has not established any employee benefit plan for its directors,
officers, or employees. Acceptance does currently provide health insurance for
its officers and employees and a copy of such plan has been provided to RSL.
2.10 Completeness of Disclosures.
No representation or warranty of Zannis or Midland in this Agreement, or
exhibits to this Agreement, and no statements, certificates, schedules, or
exhibits
<PAGE> 39
furnished or to be furnished by or on behalf of Zannis or Midland pursuant to
this Agreement contain or will contain any untrue statement of a material fact,
or omit or will omit to state any material fact necessary in order to make the
statements contained in this Agreement or those documents not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF RSL
RSL hereby represents and warrants to Zannis and Midland as follows:
3.01 Title to Midland Shares.
RSL owns beneficially and of record 500 of the shares of Midland,
representing 50% of the issued and outstanding shares, and all such shares are
free and clear of any liens, encumbrances, security agreements, equities,
options, claims, charges and/or restrictions. RSL has the full power and auth-
ority to sell and transfer such shares to Zannis and will deliver to Zannis on
the Closing Date good and marketable title to such shares, free and clear of any
claim, lien, option, equity, charge or encumbrance other than those incurred by
Zannis or Midland.
3.02 Approval of Transaction.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated thereby have been duly and validly authorized by all
necessary corporate action on the part of the board of directors of RSL and
Savings, as its sole shareholder, and is a valid and binding obligation of RSL .
3.03 Completeness of Disclosures.
No representation or warranty of RSL in this Agreement, or exhibits to
this Agreement, and no statements, certificates, schedules, or exhibits furn-
ished or to be furnished by or on behalf of RSL pursuant to this Agreement
contain or will contain any untrue statement of a material fact, or omit or will
omit to state any material fact necessary in order to make the statements
contained in this Agreement or those documents not misleading.
<PAGE> 40
ARTICLE IV
SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND
INDEMNIFICATION
The representations and warranties of the parties contained in or made
pursuant to this Agreement shall be deemed to have been repeated and
reaffirmed as of the Closing Date, and shall survive the Closing Date for a
period of seven (7) years. The
parities making such representation and warranties shall indemnify and hold
harmless the parties to whom such representations were made against any and
all damage, liability, or expense, including reasonable attorney's fees
(collectively hereinafter the "Loss") resulting from any breach of the
representations, warranties or covenants
contained in this Agreement, if written notice of the discovery of such breach
which results in the Loss is provided prior to the expiration of seven (7) years
from the Closing Date.
Each person or entity providing indemnity pursuant to the provisions of
this Article IV and its or their successors and assigns (at times collectively
referred to in this Article IV as "Indemnitors") shall be afforded timely notice
within twenty (20) days of the day the party entitled to indemnification
hereunder (at times collectively referred to herein as "Indemnitee") receives
actual notice of any such claim of assessment. Upon receipt of such notice of
claim of assessment, the Indemnitor shall have not more that seven (7) business
days in which to elect, by notice in writing to the Indemnitee, to assume,
direct and control the defense of any such claim or assessment, including the
right to select counsel reasonably satisfactory to the Indemnitor, who will
conduct the defense; provided, that the Indemnitee shall be entitled to take
such action as shall be necessary to prevent any such claim or assessment from
becoming a final judgment, lien, or charge prior to any such election by the
Indemnitor, and any such action taken by the Indemnitee shall be at the sole
expense of the Indemnitor. In the event the Indemnitor shall elect to assume
such defense, then: (i) all decisions relating to such defense shall be made by
the Indemnitor and; (ii) any costs incurred by the Indemnitee in joining in the
defense of any such claim or pursuing any counterclaim shall be the responsi-
bility of the Indemnitee; provided, however, that the Indemnitor shall not
settle any such claim of assessment without the consent thereto of the In-
demnitee, which consent shall not be unreasonably withheld. The Indemnitee
shall cooperate in contesting matters which might result in claims for which the
Indemnitor might become liable under this Agreement by promptly providing or
making available, at the sole expense of the Indemnitor, all documents and
personnel that may be reasonably necessary in contesting such matters.
<PAGE> 41
ARTICLE V
COVENANTS OF ZANNIS AND MIDLAND
Zannis and Midland, jointly and severally, hereby covenant and agree with
the other parties hereto as follows:
5.01 Existence.
Prior to the Closing Date, Midland will cause Acceptance to maintain its
corporate existence and will not amend its Articles of Incorporation or Bylaws.
5.02 Information For Applications and Statements.
Zannis will furnish RSL, Rochelle, Savings and Blackhawk with all
information concerning Zannis, Midland and Acceptance that may be required
for inclusion in any regulatory application or statement with respect to the
transactions contemplated by this Agreement or the Merger.
5.03 Correspondent Agreement.
Zannis and Midland agree to enter into the Correspondent Agreement in
the form attached hereto as Exhibit A. Zannis and Midland acknowledge that
the opportunity for Savings and/or one of its affiliate to purchase loans,
particularly mortgage and construction loans, generated by Midland and Zannis
is a significant inducement to Savings and Blackhawk and their respective
affiliates agreeing to entered into this Agreement.
5.04 Communications.
Zannis and/or Midland shall, prior to the Closing Date, promptly advise
RSL in writing of any material adverse change in the financial condition,
business, or affairs of Acceptance.
5.05 Operations Prior to Closing Date.
(a) Negative Covenants. Zannis and Midland hereby covenant to and
agree with the other parties hereto that, from the date of this Agreement to the
Closing Date, neither the Zannis nor Midland, except with prior written consent
of RSL, shall
<PAGE> 42
cause or allow Acceptance to:
(1) Issue, sell, or commit to issue or sell, any shares of capital
stock or other securities, or any other ownership interest in Acceptance.
(2) Loan funds or accept or enter into any commitments for such
loans, except in the ordinary course of business.
(3) Cancel, without payment in full, any notes, loans or other
obligations receivable from Zannis or any officer or director of
Acceptance, or any member of their families, or from any corporation,
partnership or other entity in which Zannis or any officer or director of
Acceptance, or any member of their families, has any direct or indirect
interest.
(4) Grant or commit to grant any option, warrant, or other right
to subscribe for or purchase or otherwise acquire any shares of capital
stock or other securities, or any other ownership interest in Acceptance.
(5) Enter into any employment, agency, or other contract or
arrangement for the performance of personal service.
(6) Except as may be otherwise specifically provided in this
Agreement, sell, transfer, lease, mortgage, pledge, or otherwise dispose
of or encumber any assets of Acceptance, except in the ordinary course
of business; repurchase or enter into any agreement to
repurchase all or any portion of any loan previously participated to any
other financial institution where the loan is in default.
(7) Make or agree to make any loan which would violate any state
or federal law or regulation.
(8) Allow Acceptance to incur any obligation or liability with
respect to capital expenditures.
(9) Pay or commit to pay any additional salary, bonus, fee or other
incentive compensation to any officer, director, or employee.
(10) Make any change in the accounting methods for Acceptance.
<PAGE> 43
(b) Affirmative Covenants. Zannis and Midland hereby jointly and
severally covenant and agree that, from the date of this Agreement to the
Closing Date, they will:
(1) Cause Acceptance to conduct its business in, and only in, the
usual, regular, and ordinary course and in substantially the same manner
as heretofore conducted in accordance with the terms and conditions of
this Agreement, and, to the extent consistent with such conduct, use all
reasonable efforts to preserve intact Acceptance's present business
organization, keep available the services of Acceptance's present
officers, directors, and employees, and preserve Acceptance's
relationships with customers and others having business dealings with
it, to the end that Acceptance's goodwill and going business will be
unimpaired as of the Closing Date.
(2) Cooperate with Blackhawk and Savings in the submission of
applications to secure regulatory approvals.
(3) Execute any and all documentation requested by RSL or an
affiliate to allow for the continued use of the name "Midland Acceptance
Corporation" by Acceptance after the Closing and to cooperate with
Acceptance to avoid any confusion in the minds of the public as to any
perceived affiliation between Acceptance and Midland.
(4) Furnish RSL within three (3) business days of the end of
each month with all internal reports and information, including financial
information pertinent to the operation of Acceptance's business.
ARTICLE VI
COVENANTS OF BLACKHAWK, ROCHELLE, SAVINGS AND RSL
Blackhawk, Rochelle, Savings and RSL hereby severally covenant
and agree with Midland and Zannis as follows:
6.01 Correspondent Agreement.
Savings shall enter into the Correspondent Agreement attached
hereto as Exhibit A which provides Savings and/or any affiliate the right
of first refusal
<PAGE> 44
to purchase loans, particularly mortgage and construction loans,
generated by Midland and Zannis. The opportunity for either Savings
or an affiliate to purchase such loans is a significant inducement to
Savings and Blackhawk and their respective affiliates agreeing to enter
into this Agreement. The agreement of Savings to enter into the
Correspondent Agreement is likewise a significant inducement to Zannis and
Midland agreeing to enter into this Agreement.
6.02 Future Financing Status.
Blackhawk agrees that it shall cause its wholly owned subsidiary,
Blackhawk State Bank, to provide financing to Midland pursuant to the
loan agreement, note, personal guarantee and security agreement, the
form of all of which are attached hereto as Exhibit B. Such documents
are intended to provide to Midland a warehousing line of credit in the
amount of $1,850,000 which Midland will use to initiate construction
and some mortgage loans.
Such loans will be offered for sale to Savings or an affiliate pursuant to
the Correspondent Agreement described in Section 6.01. Such
warehousing line shall be granted under similar terms and conditions
available to other borrowers of Blackhawk State Bank. The interest rate
for such loan shall be the "prime rate" plus 100 basis points. Such loan
shall have a term of one year with the opportunity to renew such line if
such loan is not in default and is in accordance with the loan policy of
Blackhawk State Bank at the time for such renewal. Such loan shall be
personally guaranteed by Zannis. In accordance with this type of loan,
the loans made by Midland shall be used as collateral for the loan from
Blackhawk State Bank to Midland.
In addition, Blackhawk shall cause Blackhawk State Bank to make
an additional loan to Midland in the form of an operating line of credit
for $150,000 pursuant to the terms and conditions set forth in the loan
agreement, note, personal guarantee and security agreement, all of which
are attached hereto as Exhibit C. Such line shall be secured by collateral
assignment of specific loans currently held by Midland and further
described in such documents as well as the personal guaranty of Zannis.
It is understood by Blackhawk that the proceeds of the operating line of
credit loan may be used to pay a portion of the purchase price for
Midland required under Section 1.02 hereof.
In consideration for the loans agreed to hereunder, Midland agrees
to move all of its operating checking and deposit accounts to Rochelle
or an
<PAGE> 45
affiliate as directed by Rochelle.
6.03 Payoff of Today's Bank Loan.
In connection with the transaction, Acceptance will cause the
guaranty
of Midland and Zannis of the line of credit loan at Today's Bank,
Freeport, Illinois to be released within three (3) business days of closing
of the transaction. Such loan had a balance outstanding of $570,000 as
of July 31, 1996.
ARTICLE VII
CONDITIONS TO OBLIGATIONS
7.01 Conditions to the Obligations of Zannis and Midland.
The obligations of Zannis and Midland to consummate and effect the
transaction contemplated by this Agreement shall be subject to the
satisfaction on or prior to the Closing Date of the following conditions:
(a) The representations and warranties of RSL contained in this
Agreement shall be true in all material respects as of and at the Closing
Date, and RSL, Rochelle, Savings and Blackhawk shall have performed
all agreements and covenants required by this Agreement to be
performed by them at or prior to the Closing Date.
(b) Simultaneous with the delivery of the certificates representing
the Acceptance common stock, RSL shall pay the purchase price as set
forth in Section 1.03 hereof.
(c) RSL shall have endorsed and delivered to Zannis the
certificate(s) representing the 500 common shares of Midland owned by
RSL and executed a stock power transferring such shares to Zannis in a
form reasonably acceptable to Zannis.
7.02 Conditions to the Obligations of RSL, Rochelle, Savings and
Blackhawk.
The obligations of RSL, Rochelle, Savings and Blackhawk to
consummate
<PAGE> 46
and effect the transactions contemplated by this Agreement shall be
subject to the satisfaction on or prior to the Closing Date of the
following conditions:
(a) The representations and warranties of Zannis and Midland
contained in this Agreement shall be true in all material respects as of
and at the Closing Date, and Zannis and Midland shall have performed all
agreements and covenants required by this Agreement to be performed
by them at or prior to the Closing Date.
(b) Zannis shall have paid to RSL the purchase price set forth in
Section 1.02 hereof.
(c) Midland shall have endorsed and delivered to RSL the
certificates representing all of the common shares of Acceptance and
executed a stock power transferring such shares to RSL in a form
reasonably acceptable to RSL.
(d) The Merger Agreement shall have been executed, delivered
and, to the extent called for therein at the Closing Date, performed by the
parties thereto.
(e) Representatives of RSL shall have completed a
comprehensive final purchase examination of Acceptance to determine
compliance with the representations, warranties and covenants of Zannis
and Midland contained in this Agreement. The examination performed
pursuant to this Section shall not affect the right of RSL, Rochelle,
Savings or Blackhawk to rely on the representations, warranties and
covenants of the Zannis and Midland contained in this Agreement.
7.03 Conditions to the Obligations of All Parties.
The respective obligations of all of the parties under this Agreement
are subject to the further conditions that Blackhawk, Rochelle and
Savings shall have received approval of the transactions contemplated
by this Agreement and the Merger Agreement from all necessary
governmental or regulatory agencies and authorities, and such approvals
and the transactions contemplated herein shall not have been contested
by any federal or state authority or any third party.
<PAGE> 47
ARTICLE VIII
TERMINATION OF AGREEMENT AND
ABANDONMENT OF TRANSACTION
Anything herein to the contrary notwithstanding, this Agreement, and
the transaction contemplated hereby, may be terminated at any time before
the Closing Date as follows:
(a) By mutual consent of Zannis, and the respective boards of
directors of the other parties hereto;
(b) By any of the parties hereto if the transaction contemplated by
this Agreement would result in the violation of any law; and
(c) By any of the parities hereto if the transactions contemplated
herein have not been consummated on or before June 30, 1997, subject
to extension of such date by the mutual consent of all the parties hereto.
ARTICLE IX
MISCELLANEOUS
9.01 Waivers.
Any of the terms or conditions of this Agreement may be waived at
any time by any party hereto, by Zannis personally or by action of any
corporate board of directors, if applicable, evidenced by a certificate
signed by the a duly authorized person.
9.02 Amendment.
To the extent permitted by law, this Agreement may be amended
(including amendments changing the Closing Date) or supplemented at
any time by a writing executed by all the parties hereto.
9.03 Entire Contract.
This Agreement and the instruments referred to herein constitute the
entire contract among the parties and supersede all other and prior
understandings
<PAGE> 48
with respect to the subject matter hereof.
9.04 Counterparts.
This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall be
deemed one and the same Agreement, and shall become binding on the parties
hereto when one or more counterparts have been signed by each of the
parties and delivered to the other parties.
9.05 Notices.
All notices, demands, or communications which are permitted or
required under this Agreement shall be made in writing, and shall be
hand delivered or sent by United States certified mail, return receipt
requested. All notices, demands, or communications directed to either
Zannis or Midland shall be addressed as follows:
George Zannis
President
Midland Financial Corporation
3910 N. Mulford Road
Rockford, Illinois 61114
All notices, demands, or communications directed to RSL, Rochelle, Savings
and Blackhawk shall be addressed as follows:
Richard K. Ohlinger Dennnis M. Conerton
President President & CEO
Rochelle Bancorp, Inc. AND Blackhawk Bancorp, Inc
422 Cherry Street 400 Broad Street
Rochelle, Illinois 61068 Beloit, Wisconsin 53511
With copies to:
Thomas C. Blank, Esq.
Werner & Blank Co., L.P.A.
7205 West Central Ave.
Toledo, Ohio 43617
<PAGE> 49
9.06 Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Illinois.
9.07 Headings.
The descriptive headings of the several articles, sections, and paragraphs of
this Agreement are inserted for convenience only and do not constitute a part of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Stock
Purchase Agreement to be signed individually or by their respective officers
thereunto duly authorized, all effective as of the date first above-written.
/s/ George Zannis
George Zannis, Individually
[Attest] Midland Financial Corporation
By: /s/ Richard Ohlinger By: /s/ George Zannis
Title: Secretary George Zannis, President
[Attest] Blackhawk Bancorp, Inc.
By: /s/James P. Kelley By: /s/ Dennis M. Conerton
Title: Secretary Dennis M. Conerton,
President & CEO
<PAGE> 50
[Attest] Rochelle Bancorp, Inc.
By: /s/ Edward Hickey By: /s/ Richard K. Ohlinger
Title: Secretary Richard K. Ohlinger,President
[Attest] Rochelle Savings & Loan Association
By /s/ Edward Hickey By: /s/ Richard K. Ohlinger
Title: Secretary Richard K. Ohlinger, President
[Attest] RSL, Inc.
By /s/ Edward Hickey By: /s/ Richard K. Ohlinger
Title: President Richard K. Ohlinger,
President
<PAGE> 51
EXHIBIT A
LOAN CORRESPONDENT AGREEMENT
This Agreement is made and entered into as of------------, 1997 by and between
Rochelle Savings and Loan Association, an Illinois charter savings and loan
association with its principal place of business in Rochelle, Illinois,
("Rochelle") and Midland Financial Corporation, an Illinois corporation with its
principal place of business in Rockford, Illinois ("Midland").
RECITALS
A. Midland engages in the business of originating and selling the mortgagee's
interest in loans secured by mortgages on real property.
B. Midland desires to sell to Rochelle and Rochelle desires to purchase from
Midland certain mortgage loans originated by Midland including the right to
service such mortgage loans and to receive compensation payable with respect
to such servicing.
C. Midland represents and warrants that it is a duly organized and validly
existing entity and that it is in good standing under applicable laws and
regulations of the United States and the State of Illinois.
D. Midland has the requisite corporate authority and capacity to enter into this
Agreement. Midland's compliance with terms and conditions of this Agreement
will not violate any provisions of Midland's Article of Incorporation or Bylaws,
any instrument relating to the conduct of its business, or any other agreement
to which it may be a party.
E.Midland and Rochelle desire to reduce to writing the terms of their
agreement relating to Rochelle's purchase of certain mortgage and other loans
originated by Midland.
AGREEMENT
In consideration of the mutual covenants and undertakings set forth in this
Agreement and other good and valuable consideration, the sufficiency of which
is
<PAGE> 52
acknowledged, Midland and Rochelle agree that the recitals set forth above are
a part of this Agreement and further agree as follows:
1. Notice of Loans to Purchase. From time to time, Rochelle will provide
a list of the types of loans it will purchase, which will include interest
rates, loan limits, loan-to-value ratios, points, and fees. Approvals to
purchase will be issued to Midland in accordance with Rochelle's then current
lending policy.
Such approvals will take the form of written commitments covering only the
particular loan or loans submitted by Midland for approval. Midland is
obligated to offer, but Rochelle is not obligated to purchase, all loans
originated by Midland meeting the general terms and conditions set forth in the
information described above. Upon request, Rochelle shall confirm to Midland,
on a daily basis, the terms and conditions, including interest rate, pursuant to
which it intends to purchase such loans. Rochelle shall respond to a request
from Midland in regard to the purchase of a particular loan within 24 hours of
receipt of a completed application. Rochelle shall have the right to match any
terms and conditions of other financial institutions purchasing loans from
Midland within 24 hours of written notice from Midland to a specific loan.
2. Warranties. Midland warrants that any loan it submits to Rochelle for
purchase will be in compliance and will remain in compliance with all
applicable federal, state, and local statutes, ordinances, and regulations,
including but not limited to the Real Estate Settlement Procedures Act, the
Equal Credit Opportunity Act, the Truth in Lending Act, the Fair Credit
Reporting Act, and the Flood Disaster Protection Act, and with regulations
issued pursuant thereto. Midland further warrants and represents that in the
processing of any loan submitted to Rochelle for purchase it will comply with
all federal, state, and local statutes, ordinances, and regulations, including
those governing the issuance of written and oral disclosures to borrowers,
lenders and other parties to the loan transaction. Rochelle will also comply
with such federal, state, and local statutes, ordinances, and regulations.
3. Sale to Secondary Market. Midland understands Rochelle intends to resell
closed mortgage loans to investors in the secondary market. Midland warrants
that in submitting applications to Rochelle, Midland and such applications are
and will remain in full compliance with all pertinent requirements of the
Federal National Mortgage Association, the Federal Home Loan Mortgage Corp-
oration or such other investor underwriting guidelines as Rochelle may identify.
4. Repurchase of Loans. Midland agrees that upon request it will
immediately repurchase from Rochelle any closed loan that is not in compliance
with the above statutes, ordinances, and regulations (Section 2); requirements
and warranties (Section 3). The repurchase price shall be equal to the greater
of the unpaid principal
<PAGE> 53
balance of the loan, or the original purchase price of the loan including the
accrued amount of any interest shortfall (negative amortization) due Rochelle,
plus any accrued but unpaid interest due Rochelle on the date of repurchase, and
minus the escrow balance held by Rochelle, as calculated by Rochelle on the
date of repurchase. If Midland does not immediately comply with Rochelle's
request, this agreement may, at the sole and absolute discretion of Rochelle, be
canceled, and Rochelle, upon such cancellation, shall have no further obligation
to Midland to purchase any other loans that have been submitted to, or approved
by Rochelle; provided, however, that the cancellation of this Agreement shall in
no way release or terminate Midland's obligation to repurchase noncomplying
loans. Midland's obligation pursuant to this paragraph shall survive cancel-
lation or termination of this Agreement. The right of Rochelle to terminate
this Agreement shall in no way limit the right of Rochelle to take any other
legal actions hereunder or provided at law for the breach of the agreement to
repurchase such loans.
5. Approval of Loans by Rochelle. Midland understands that Rochelle will
approve or decline loan applications on all loans submitted to it pursuant to
this Agreement in accordance with its then current underwriting policies and
then current secondary market standards. Rochelle alone, in its sole discretion,
shall make underwriting determinations.
6. Consummation of Loans. Upon compliance with all of Rochelle's
requirements and the issuances of Rochelle's commitment to purchase a loan,
Midland shall proceed to close such loan in Midland's name. Provided all terms
and conditions of Rochelle's commitment are honored, Midland shall make a
concurrent or subsequent assignment of such loan to Rochelle for which
Rochelle shall pay the sums called for in the commitment.
7. Financial Information on Midland. Within ninety (90) days of the close
of each fiscal year of Midland, Midland shall provide Rochelle a true and
complete copy of its annual audited financial statements as prepared by its
independent certified public accountants and such other statements and
documents as may be requested by Rochelle to establish to Rochelle's
satisfaction, the continued solvency and financial statility of Midland.
8. Audit of Files and Records. During regular business hours, Midland shall
permit Rochelle to audit its files and records pertaining to this Agreement. If
called upon to do so, Midland will assist in any such audit.
9. Independent Contractor. Midland is not an agent, partner or employee of
Rochelle, but is instead an independent contractor. Neither Midland nor any of
its
<PAGE> 54
employees has any authority, expressed or implied, to enter into commitments
or other agreements on behalf of Rochelle, or to in any other way contractually
bind or obligate Rochelle.
10. Costs and Expenses. All costs, expenses and charges of any kind or
nature relating to the offering of loans hereunder, the closing of any trans-
action hereunder, the discharge of all obligations of Midland incurred under
the terms of this Agreement, shall be borne by Midland.
11. Power of Attorney. Midland hereby appoints Rochelle its attorney in
fact for the purpose of placing its name on any document, including, but not
limited to, any note, check, draft, assignment or otherwise, when deemed
appropriate by Rochelle as to any transaction coming under this Agreement.
Midland will deliver a Power of Attorney in reasonable form for Rochelle at its
request.
12. Rights and Remedies. All rights and remedies provided for Rochelle are
cumulative and in addition to any rights or remedies which may be provided by
law and no failure to exercise, or delay in the exercise of any right, privilege
or option shall constitute a waiver by Rochelle of any such right, privilege or
option, and that no change in or modification of the terms of this Agreement
shall be valid unless in writing and executed by the parties hereto.
13. Governing Law. The existence, validity, construction and operational
effect of this Agreement shall be determined in accordance with the laws of the
State of Illinois.
14. Exclusivity. Nothing in this Agreement is intended to create an
exclusive agreement between the parties nor intended to prohibit Rochelle or
Midland from entering into other similar agreements with other
buyer(s)/correspondent(s) of mortgage loans; provided, however, that Rochelle
shall have a right of first refusal in regard to all mortgage and construction
loans initiated by Midland as set forth in Section 1 above.
15. Right of Setoff. At any time during the term of this Agreement and until
all matters between the parties have been completely and finally resolved, in
addition to any other rights it may have, Rochelle may, without notice to
Midland, hold indefinitely, retain and setoff against any amounts owed Midland
such sums in Rochelle's possession or control which are owed, or due Midland
by Rochelle or any other third party.
16. Term. This Agreement shall remain in effecty for a term of five (5) years
from
<PAGE> 55
the date hereof and may be renewed in a writing signed by Rochelle and
Midland subsequent to such initial term. This Agreement may be canceled before
the expiration of the initial term only upon the written consent of both parties
hereto.
17. Notices. All notices, demands, or communications which are permitted
or required under this Agreement shall be made in writing, and shall be hand
delivered or sent by United States certified mail, return receipt requested.
All notices, demands, or communications directed to Midland or Rochelle shall be
addressed as follows:
George Zannis Richard K.Ohlinger
President President
Midland Financial Corporation Rochelle Savings and Loan
Rockford, Illinois Association
422 Cherry Street
Rochelle, Illinois 61068
IN WITNESS WHEREOF, the parties hereto have caused this Correspondent
Agreement to be signed by their respective officers thereunto duly authorized,
all effective as of the date first above-written.
[Attest] Midland Financial Corporation
By -------------------------------- By: --------------------------
Title:----------------------------- George Zannis, President
[Attest] Rochelle Savings & Loan Association
By:-------------------------------- By:-----------------------------
Title:----------------------------- Richard K. Ohlinger, President
<PAGE> 56
EXHIBIT B
WAREHOUSING LINE OF CREDIT DOCUMENTATION
<PAGE> 57
EXHIBIT C
OPERATING LINE OF CREDIT DOCUMENTATION
<PAGE> 58
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 hereunto duly authorized.
Blackhawk Bancorp, Inc.
Date: April 25, 1997 /s/ Dennis M. Conerton
President & CEO
